def14a
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities
Exchange Act of 1934 (Amendment No. )
|
|
|
Filed by the Registrant x
|
|
|
Filed by a Party other than the
Registranto
|
|
|
Check the appropriate box:
|
|
|
|
o Preliminary Proxy
Statement
|
|
|
|
x Definitive Proxy
Statement
|
|
|
|
o Definitive Additional
Materials
|
|
|
o Soliciting Material
Pursuant to Rule 14a-11(c) or Rule 14a-12 |
o Confidential, for the
Use of the Commission Only (as permitted by
Rule 14a-6(e)(2)) |
National Fuel Gas Company
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
x No
fee required.
o Fee
computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction
applies:
(2) Aggregate number of securities to which transaction
applies:
|
|
|
|
(3) |
Per unit price or other underlying value of transaction computed
pursuant to Exchange Act
Rule 0-11 (Set
forth the amount on which the filing fee is calculated and state
how it was determined): |
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
|
|
|
|
o |
Fee paid previously with
preliminary materials.
|
|
|
o |
Check box if any part of the fee
is offset as provided by Exchange Act
Rule 0-11(a)(2)
and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its
filing.
|
(1) Amount previously paid:
(2) Form, schedule or registration statement no.:
(3) Filing party:
(4) Date filed:
NATIONAL FUEL GAS
COMPANY
Notice of Annual
Meeting
and
Proxy Statement
Annual Meeting of
Stockholders
to be held on
February 15,
2007
NATIONAL
FUEL GAS COMPANY
6363 MAIN STREET
WILLIAMSVILLE, NEW YORK
14221
January 12, 2007
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. local time on Thursday,
February 15, 2007, at The Lodges at Deer Valley, 2900 Deer
Valley Drive East, Park City, Utah 84060. The matters on the
agenda for the meeting are outlined in the enclosed Notice of
Meeting and Proxy Statement.
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. 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
Trustee (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 with you at that time.
Please review the proxy statement and take advantage of your
right to vote.
Sincerely yours,
Philip C. Ackerman
Chairman of the Board of Directors,
and Chief Executive Officer
TABLE OF CONTENTS
NATIONAL
FUEL GAS COMPANY
6363 MAIN STREET
WILLIAMSVILLE, NEW YORK
14221
NOTICE OF
ANNUAL MEETING OF STOCKHOLDERS
to be held on February 15, 2007
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.
local time on Thursday, February 15, 2007, at The Lodges at
Deer Valley, 2900 Deer Valley Drive East, Park City, Utah 84060.
At the meeting, action will be taken with respect to:
(1) the election of directors;
(2) the appointment of an independent registered public
accounting firm;
(3) the approval of the Annual At Risk Compensation
Incentive Program;
(4) the approval of amendments to the 1997 Award and Option
Plan;
(5) the 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 18, 2006, will be entitled to vote at the meeting.
By Order of the Board of
Directors
Anna Marie Cellino
Secretary
January 12, 2007
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 Companys 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.
NATIONAL
FUEL GAS COMPANY
6363 MAIN STREET
WILLIAMSVILLE, NEW YORK 14221
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 15, 2007, or any adjournment thereof. This proxy
statement and the accompanying proxy/voting instruction card are
first being mailed to stockholders on or about January 12,
2007.
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 by mail, telephone, and electronic communication and
will be compensated in the estimated amount of $8,500 plus
reasonable
out-of-pocket
expenses. Approximately six (6) employees from
Morrow & Co., Inc. will assist in the solicitation of
proxies.
Only stockholders of record at the close of business on
December 18, 2006, will be eligible to vote at this meeting
or any adjournment thereof. As of that date,
82,482,190 shares of Common Stock were issued and
outstanding. The holders of 41,241,096 shares will
constitute a quorum at the meeting.
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 submitted to stockholders and therefore
will have no effect on the outcome of the votes.
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
(i) matters of which the Company did not have timely notice
but that may be presented at the meeting; (ii) approval of
the minutes of the prior meeting; (iii) the election of any
person as a director if a nominee is unable to serve or for good
cause will not serve; (iv) any shareholder proposal omitted
from this proxy statement pursuant to
Rule 14a-8
or 14a-9 of
the Securities and Exchange Commissions proxy rules, and
(v) 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 Companys Employee Stock
Ownership 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 Trustee of those Plans. All
shares of Company Stock for which the Trustee has not received
timely directions shall be voted by the Trustee in the same
proportion as the shares of Company Stock for which the Trustee
received timely directions, except in the case where to do so
would be inconsistent with the provisions of Title I of
ERISA. If the proxy/voter instruction card is returned signed
but without directions marked for one or more items, regarding
the unmarked items you are instructing the Trustee and the
Proxies to vote FOR items 1, 2, 3 and 4 and
vote AGAINST item 5. Participants in the Plan(s) may
also provide those voting instructions by telephone. Those
instructions may be revoked by written notice to Vanguard
Fiduciary Trust Company, Trustee for the Companys
Tax-Deferred Savings Plans and the Employee Stock Ownership
Plan, on or before February 12, 2007 at the following
address:
National Fuel Gas Company
c/o The Bank of New York
P.O. Box 11107
New York, NY
10203-0107
Enclosed is a copy of the Companys Annual Report and
Form 10-K
for the fiscal year ended September 30, 2006, which
includes financial statements. The Company will furnish any
exhibit to the
Form 10-K
upon request to the Secretary at the Companys principal
office, and upon payment of $5 per exhibit.
1. ELECTION
OF DIRECTORS
Five directors are to be elected at this Annual Meeting. The
nominees for the five directorships are: Philip C. Ackerman,
Stephen E. Ewing, Craig G. Matthews, Richard G. Reiten and David
F. Smith. Messrs. Ackerman, Matthews and Reiten are all
currently directors of the Company.
The Companys Certificate of Incorporation provides that
the Board of Directors shall be divided into three classes, and
that these three classes shall be as nearly equal in number as
possible. (A class of directors is the group of directors whose
terms expire at the same annual meeting of stockholders.)
Accordingly, Messrs. Ackerman, Mathews, Reiten and Smith
have been nominated for terms of three years, and Mr. Ewing
has been nominated for a term of two years.
It is intended that the Proxies will vote for the election of
Messrs. Ackerman, Ewing, Matthews, Reiten and Smith as
directors, unless they are otherwise directed by the
stockholders. Although the Board of Directors has no reason to
believe that any 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. Ackerman, Ewing, Matthews, Reiten and Smith have
consented to being named in this proxy statement and to serve if
elected.
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 five
nominees for director, as well as the five directors of the
Company whose current terms will continue after the 2007 Annual
Meeting, including information with respect to their principal
occupations and certain other positions held by them.
Last year all directors attended the Annual Meeting of
Stockholders, and they are expected to do so this year. A
meeting of the Board of Directors will take place on the same
day and at the same place as the Annual Meeting of Stockholders
this year (and probably future years), and directors are
expected to attend all meetings. If a director is unable to
attend a Board meeting in person, participation by telephone is
permitted, and in that event the director may not be physically
present at the Annual Meeting of Stockholders.
2
The Board
of Directors Recommends a Vote FOR the Election of
Messrs. Ackerman, Matthews, Reiten, Smith and
Ewing
|
|
|
|
|
|
|
Name and Year
|
|
|
|
|
Became a Director
|
|
|
|
|
of the Company
|
|
Age(1)
|
|
Principal Occupation
|
|
Nominees for Election as
Directors
For Three-Year Terms to Expire in 2010
|
Philip C. Ackerman
1994
|
|
|
63
|
|
|
Chief Executive Officer of the
Company since October 2001. Appointed as Chairman of the Board
effective January 3, 2002. President of the Company from
July 1999 until February 2006. Senior Vice President of the
Company from June 1989 until July 1999 and Vice President from
1980 to June 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) from
October 1994 to March 2002. 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 non-regulated subsidiaries of the Company since
prior to 1992.
|
Craig G. Matthews
2005
|
|
|
63
|
|
|
Former President, CEO and Director
of NUI Corporation, a diversified energy company acquired by AGL
Resources Inc. on November 30, 2004, from February 2004
until December 2004. Former Vice Chairman and Chief Operating
Officer and Director of KeySpan Corporation (previously Brooklyn
Union Gas Co.) until March 2002. Director of Hess Corporation
(formerly Amerada Hess Corporation) since 2002. Chairman of the
Board of Trustees, Polytechnic University, and Director since
1996.
|
Richard G. Reiten
2004
|
|
|
67
|
|
|
Chairman from September 2000
through February 2005 and Director since March 1996 of Northwest
Natural Gas Company, a natural gas local distribution company
headquartered in Portland, Oregon. Chief Executive Officer of
Northwest Natural Gas Company from January 1997 until December
2002 and President from January 1996 through May 2001. Director
of BlueCross BlueShield of Oregon and The Regence Group since
1995. Director of Associated Electric and Gas Insurance Services
Limited since 1997. Director of US Bancorp since 1998,
Building Materials Holding Corp. since 2001 and IDACORP Inc.
since January 2004.
|
David F. Smith
|
|
|
53
|
|
|
President and Chief Operating
Officer of the Company since February 2006, Vice President from
April 2005 until February 2006. President of National Fuel Gas
Supply Corporation (2) since April 2005, Senior Vice President
from June 2000 until April 2005. President of National Fuel Gas
Distribution Corporation (2) from July 1999 to April 2005,
Senior Vice President from January 1993 until July 1999. Also
president of Empire State Pipeline (2) and various non-regulated
subsidiaries of the Company.
|
|
|
|
(1) |
|
As of February 15, 2007. |
|
(2) |
|
Wholly-owned subsidiary of the Company. |
3
|
|
|
|
|
|
|
Name and Year
|
|
|
|
|
Became a Director
|
|
|
|
|
of the Company
|
|
Age(1)
|
|
Principal Occupation
|
|
Nominee for Election as
Director
For a Two-Year Term to Expire in 2009
|
Stephen E. Ewing
|
|
|
62
|
|
|
Vice Chairman of DTE Energy, a
Detroit-based diversified energy company involved in the
development and management of energy-related businesses and
services nationwide, from November 1, 2005 until
December 31, 2006. Group President, Gas Division, DTE
Energy from June 1, 2001 until November 1, 2005.
Former president and chief operating officer of MCN Energy
Group, Inc. Former president and chief executive officer of
Michigan Consolidated Gas Co. (MichCon), a natural gas utility.
MichCon is a principal operating subsidiary of DTE Energy as a
result of the 2001 merger of DTE Energy and MCN Energy Group,
Inc. Chairman of the Board of Directors of the American Gas
Association for 2006 and past chairman of the Midwest Gas
Association and the Natural Gas Vehicle Coalition.
|
|
|
|
|
|
|
|
Name and Year
|
|
|
|
|
Became a Director
|
|
|
|
|
of the Company
|
|
Age(1)
|
|
Principal Occupation
|
|
Directors Whose Terms Expire in
2009
|
R. Don Cash
2003
|
|
|
64
|
|
|
Chairman Emeritus since May 2003,
and Board Director since May 1978, of Questar Corporation
(Questar), an integrated natural gas company headquartered in
Salt Lake City, Utah. Chairman of Questar from May 1985 to May
2003. Chief Executive Officer of Questar from May 1984 to May
2002 and President of Questar from May 1984 to February 1,
2001. Director of Zions Bancorporation since 1982 and Associated
Electric and Gas Insurance Services Limited since 1993. Director
of Texas Tech University Foundation since November 2002 and
TODCO (The Offshore Drilling Company) since May 2004. Former
trustee, until September 2002, of the Salt Lake Organizing
Committee for the Olympic Winter Games of 2002.
|
George L. Mazanec
1996
|
|
|
70
|
|
|
Former Vice Chairman, from 1989
until October 1996, of PanEnergy Corporation, Houston, Texas, a
diversified energy company (now part of Duke Energy
Corporation). Advisor to the Chief Operating Officer of Duke
Energy Corporation from August 1997 to 2000. Director of TEPPCO,
LP from 1992 to 1997, Director of Northern Border Pipeline
Company Partnership from 1993 to 1998 and Director of Westcoast
Energy Inc. from 1998 to 2002. Director of Dynegy Inc. since May
2004. Director of the Northern Trust Bank of Texas, NA and
Associated Electric and Gas Insurance Services Limited. Former
Chairman of the Management Committee of Maritimes &
Northeast Pipeline, L.L.C. Member of the Board of Trustees of
DePauw University since 1996.
|
|
|
|
(1) |
|
As of February 15, 2007. |
4
|
|
|
|
|
|
|
Name and Year
|
|
|
|
|
Became a Director
|
|
|
|
|
of the Company
|
|
Age(1)
|
|
Principal Occupation
|
|
Directors Whose Terms Expire in
2008
|
Robert T. Brady
1995
|
|
|
66
|
|
|
Chairman of Moog Inc., a
manufacturer of motion control systems and components, since
February 1996. President and Chief Executive Officer of Moog
Inc. since 1988 and Board member since 1981. Director of
Astronics Corporation, M&T Bank Corporation and Seneca Foods
Corporation. Director of Acme Electric Corporation from 1989 to
November 2001.
|
Rolland E. Kidder
2002
|
|
|
66
|
|
|
Executive Director of the Robert
H. Jackson Center, Inc. in Jamestown, New York since 2002.
Former Chairman and President of Kidder Exploration, Inc.,
an independent Appalachian oil and gas company, from 1984 to
1994. An elected member of the New York State Assembly from 1975
to 1982. Trustee of the New York Power Authority from 1983 to
1993. On the Deans Advisory Council of the University at
Buffalo School of Law from 1996 to 2001. From 1994 until 2001,
Vice President and investment advisor for P.B.
Sullivan & Co., Inc.
|
John F. Riordan
2000
|
|
|
71
|
|
|
President and CEO from April 2000
to December 2005 of GTI (the Gas Technology Institute), a
not-for-profit research and educational institution, Des
Plaines, Illinois. Vice Chairman of KN Energy, Inc. from
February 1998 to February 1999. President and CEO of MIDCON
Corporation from October 1988 to January 1998. Director of Nicor
Inc. since 2001.
|
|
|
|
(1) |
|
As of February 15, 2007. |
Director
Independence
The Board of Directors has determined that directors Brady,
Cash, Kidder, Matthews, Mazanec, Reiten and Riordan are
independent, and that Mr. Ackerman, Chairman and Chief
Executive Officer of the Company, is not. The Boards
determinations of director independence were made in accordance
with the Director Independence Guidelines adopted by the Board
and included in this Proxy Statement as Appendix A.
Generally, Appendix A provides that, in order for a
director to be considered independent, the Board must
affirmatively determine that the director has no direct or
indirect material relationship with the Company or any
subsidiary, after consideration of all relevant facts and
circumstances not merely from the standpoint of the director,
but also from that of persons or entities with which the
director has an affiliation. Specifically, Appendix A sets
out seven specific circumstances in which a director will not be
considered independent, and three categorical types of
commercial or charitable relationships that will not be
considered material relationships for purposes of determining
whether a director is independent. Appendix A also sets out
four types of independence-related disclosures the Company will
continue to make. The Board is not aware of any circumstance
that would prevent the Board from determining, after his
election, that Mr. Ewing is independent. Mr. Smith, as
President and Chief Operating Officer of the Company, would not
be independent.
Non-management directors meet at regularly scheduled executive
sessions without management. The sessions are chaired by Robert
T. Brady. Communications to Mr. Brady, to the
non-management directors as a group, or to the entire Board,
should be addressed as follows: Robert T. Brady, Moog, Inc.,
P.O. Box 18, East Aurora, New York 14052. For the present,
all shareholder communications addressed in that manner will go
directly to the indicated directors. If the volume of
communication becomes such that the Board adopts a process for
determining which communications will be relayed to Board
members, that process will appear on the Companys website
at www.nationalfuelgas.com.
5
Meetings
of the Board of Directors and Standing Committees
During the Companys fiscal year ended September 30,
2006 (fiscal 2006), there were six meetings of the
Board of Directors and one additional meeting that was a
strategic planning session. In addition, certain directors
attended meetings of standing or pro tempore committees. The
Audit Committee held nine meetings, the Compensation Committee
held six meetings, the Executive Committee did not have any
meetings, and the Nominating/Corporate Governance Committee held
three meetings. During fiscal 2006, 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, except
for Robert T. Brady, who attended 73.3% of the meetings.
The table below shows the number of meetings conducted in fiscal
2006 and the Directors who currently serve on these committees.
|
|
|
|
|
|
|
|
|
|
|
BOARD COMMITTEES
|
|
|
|
|
Nominating/
|
|
|
|
|
DIRECTOR
|
|
Audit
|
|
Corporate Governance
|
|
Compensation
|
|
Executive
|
|
Philip C. Ackerman
|
|
|
|
|
|
|
|
X (Chair)
|
Robert T. Brady
|
|
|
|
X (Chair)
|
|
X
|
|
X
|
R. Don Cash
|
|
X
|
|
X
|
|
X
|
|
|
Rolland E. Kidder
|
|
X
|
|
|
|
|
|
|
Craig G. Matthews
|
|
X (Chair)
|
|
|
|
|
|
|
George L. Mazanec
|
|
X
|
|
|
|
X (Chair)
|
|
X
|
Richard G. Reiten
|
|
X
|
|
X
|
|
|
|
|
John F. Riordan
|
|
|
|
X
|
|
X
|
|
X
|
Fiscal 2006 Meetings
|
|
9
|
|
3
|
|
6
|
|
0
|
Audit
The Audit Committee is a separately-designated standing audit
committee established in accordance with
section 3(a)(58)(A) of the Securities Exchange Act of 1934.
The Audit Committee held nine meetings during fiscal 2006 in
order to review the scope and results of the annual audit, to
receive reports of the Companys independent registered
public accounting firm and chief internal auditor, and to
prepare a report of the committees findings and
recommendations to the Board of Directors. The members of the
committee are independent as independence for audit committee
members is defined in the New York Stock Exchanges (NYSE)
listing standards applicable to the Company, in Securities
Exchange Commission (SEC) regulations, and in the Companys
Director Independence Guidelines. No Audit Committee member
simultaneously serves on Audit Committees of more than three
public companies. The Board limits Audit Committees on which an
Audit Committee member serves to three, unless the Board has
determined that such simultaneous service would not impair the
ability of such members to serve effectively. The Companys
Board of Directors has determined that the Company has at least
two audit committee financial experts (as defined by Securities
and Exchange Commission (SEC) regulations) serving on its Audit
Committee, namely Messrs. Matthews and Mazanec.
In connection with its review of the Companys internal
audit function, the Audit Committee in 2006 had a Quality
Assessment performed by a consulting firm that concluded that
the Companys Audit Services Department conducts its audits
in accordance with the Institute of Internal Auditors
International Standards for the Professional Practice of
Internal Auditing (the Standards). Under the Standards,
external Quality Assessments should be conducted at least once
every five years.
Further information relating to the Audit Committee appears in
this proxy statement under the headings Audit Fees
and Audit Committee Report. A current copy of the
charter of the committee is included in this Proxy Statement as
Appendix B, and is also available to security holders on
the Companys website at www.nationalfuelgas.com, and in
print to stockholders who request a copy from the Companys
Secretary at its principal office.
6
Compensation
The Compensation Committee held six meetings during fiscal 2006
in order to review and determine the compensation of Company
executive officers, to review reports and to award stock options
and At Risk Program awards. The members of the committee are
independent as independence is defined in the NYSE Listing
Standards applicable to the Company, SEC regulations, and in the
Companys Director Independence Guidelines. The committee
also administers the Companys 1993 Award and Option Plan,
1997 Award and Option Plan, Annual At Risk Compensation
Incentive Program, and the National Fuel Gas Company Performance
Incentive Program. A current copy of the charter of the
committee is available to security holders on the Companys
website at www.nationalfuelgas.com and is available in print to
stockholders who request a copy from the Companys
Secretary at its principal office.
Executive
There were no meetings of the Executive Committee during fiscal
2006. The committee has and may exercise the authority of the
full Board except as prohibited by New Jersey corporate law
(N.J.S.A.§14A:6-9).
Nominating/Corporate
Governance
All the members of the Nominating/Corporate Governance Committee
are independent, as independence for nominating committee
members is defined in the NYSE listing standards applicable to
the Company, SEC regulations, and in the Companys Director
Independence Guidelines. The committee makes recommendations to
the full Board on nominees for the position of director. The
committee also has duties regarding corporate governance matters
as required by law, regulation or NYSE rules. Stockholders may
recommend individuals to the committee to consider as potential
nominees. Mr. Ewing was originally proposed as a nominee by
Mr. Ackerman, the Companys Chief Executive Officer,
and was recommended by several non-management directors.
The committees charter provides for the committee to
develop and recommend to the Board criteria for selecting new
director nominees and evaluating unsolicited nominations, which
are included in this proxy statement as part of the
Companys Corporate Governance Guidelines (included in this
proxy statement as Appendix C, available to security
holders on the Companys website at
www.nationalfuelgas.com, and available in print to stockholders
who request a copy from the Companys Secretary at its
principal office). A current copy of the charter of the
committee is available to security holders on the Companys
website at www.nationalfuelgas.com and is available in print to
stockholders who request a copy from the Companys
Secretary at its principal office. Appendix C also
addresses the qualifications and skills the committee believes
necessary for a director, and the committees consideration
of shareholder recommendations for director. Shareholder
recommendations identifying a proposed nominee and setting out
his or her qualifications should be delivered to the
Companys Secretary at its principal office no later than
September 10, 2007 to be eligible for consideration for the
February 2008 Annual Meeting of Stockholders.
Charitable
Contributions by Company
Within the preceding three years, the Company did not make any
contributions to any charitable organization in which a director
served as executive officer which exceeded the greater of
$1 million or 2% of the charitable organizations
consolidated gross revenues.
Compensation
Committee Interlocks and Insider Participation
There are no Compensation Committee interlocks or
insider participation which SEC regulations or NYSE
listing standards require to be disclosed in this proxy
statement.
Code of
Business Conduct and Ethics
The Companys Code of Business Conduct and Ethics is
available on the Companys website at
www.nationalfuelgas.com and is available in print to
stockholders who request it from the Companys Secretary at
its principal office.
7
Related
Party Transaction
In July of 1999, more than three years before the September 2002
election of Mr. Rolland Kidder to the Companys Board
of Directors, his son Mr. Jonathan Kidder was hired by a
subsidiary of the Company. Mr. Jonathan Kidder accepted a
non-executive supervisory position as an Associate Programmer in
the Information Services Department and was promoted twice
before his father joined the Board. He is a married adult who
does not reside in his fathers household, and a graduate
of Miami University in Ohio with a Bachelor of Science Degree in
Business with a dual major in General Business and Management
Information Systems. His current position is as a Systems
Analyst.
In fiscal 2006, the value of total compensation to
Mr. Jonathan Kidder (base salary, bonus and estimated value
of benefits) exceeded $60,000, but was less than $100,000. This
makes his continued employment a related party transaction for
purposes of SEC disclosure requirements. Mr. Rolland Kidder
is an independent director for all purposes under applicable
NYSE and SEC rules, and also under the Companys Director
Independence Guidelines included in this proxy statement as
Appendix A.
Directors
Compensation
The Retainer Policy for Non-Employee Directors (the
Retainer Policy), which replaced both the
Boards 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 or retired
employees do not participate in any of the Companys
employee benefit or compensation plans. Directors who are
current employees receive no compensation for serving as
directors. Only non-employee directors (including retired
employee directors, if there were any) are covered by the
Retainer Policy, under which directors are paid in money plus an
amount of common stock adjusted from time to time.
In fiscal 2006, pursuant to the current Retainer Policy,
non-employee directors were each paid an annual retainer of
$26,000 and 1,200 shares of Common Stock. Common Stock
issued to non-employee directors under the Retainer Policy is
nontransferable until the later of two years from issuance or
six months after the recipients cessation of service as a
director of the Company.
Non-employee directors were each paid a fee of $1,800 for each
Board meeting and $1,800 for each Committee meeting attended in
person or by telephone. Non-employee directors were each paid an
additional annual retainer fee of $7,500 if appointed as
Chairman of any committee; accordingly, Messrs. Brady,
Matthews and Mazanec each received an additional annual retainer
fee of $7,500 during fiscal 2006.
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. People who first become directors
after February 1997 are not eligible to receive benefits under
the Directors Retirement Plan. The Directors
Retirement Plan pays an annual retirement benefit equal to 10%
of the annual retainer in effect on December 31, 1996
($18,000/year) multiplied by the number of full years of service
prior to January 1, 1997, but not to exceed 100% of that
annual retainer. The retirement benefit would begin upon the
later of the date of the directors retirement or the date
the director turns age 70, and continue until the earlier
of the expiration of ten years or the death of the director.
AUDIT
FEES
In addition to retaining PricewaterhouseCoopers LLP to report
upon the annual consolidated financial statements of the Company
for 2006, the Company retained PricewaterhouseCoopers LLP to
provide
8
various non-audit services in 2006. The aggregate fees billed
for professional services by PricewaterhouseCoopers LLP for each
of the last two years were as follows:
|
|
|
|
|
|
|
|
|
|
|
2005
|
|
|
2006
|
|
|
Audit Fees(1)
|
|
$
|
1,048,437
|
|
|
$
|
1,213,093
|
|
Audit-Related Fees(2)
|
|
$
|
118,320
|
|
|
$
|
4,848
|
|
Tax Fees
|
|
|
|
|
|
|
|
|
Tax advice and planning(3)
|
|
$
|
73,459
|
|
|
$
|
5,500
|
|
Tax compliance(4)
|
|
$
|
124,800
|
|
|
$
|
86,949
|
|
Other Fees(5)
|
|
$
|
0
|
|
|
$
|
1,500
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
$
|
1,365,016
|
|
|
$
|
1,311,890
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Audit Fees include audits of consolidated financial statements
and internal control over financial reporting, reviews of
financial statements included in quarterly
Forms 10-Q,
comfort letters and consents, and audits of certain of the
Companys wholly owned subsidiaries to meet statutory or
regulatory requirements. |
|
(2) |
|
Audit-Related Fees include audits of certain of the
Companys wholly-owned subsidiaries not required by statute
or regulation, and consultations concerning technical financial
accounting and reporting standards and implementation of the
Sarbanes-Oxley Act. |
|
(3) |
|
Tax advice and planning includes consultations on various
federal, state and foreign tax matters. |
|
(4) |
|
Tax compliance includes tax return preparation and tax audit
assistance. |
|
(5) |
|
Other Fees relate to permissible fees other than those described
above and include the software licensing fee for an accounting
and financial reporting research tool. |
The Audit Committees charter (included in the Proxy
Statement as Appendix B and available on the Companys
website at www.nationalfuelgas.com and in print to stockholders
who request a copy from the Companys Secretary at its
principal office) includes its pre-approval policies and
procedures. The Companys Reporting Procedures for
Accounting and Auditing Matters are included in this Proxy
Statement as Appendix D.
For fiscal year 2006, none of the services provided by
PricewaterhouseCoopers LLP were approved by the Audit Committee
in reliance upon the de minimus exception contained
in Section 202 of the Sarbanes-Oxley Act and codified in
Section 10A(i)(1)(B) of the Securities Exchange Act of 1934
and in 17 CFR 210.2-01(c)(7)(i)(C).
9
AUDIT
COMMITTEE REPORT
The Companys Board of Directors has adopted a written
charter for the Audit Committee of the Board of Directors, a
copy of which is included in this Proxy Statement as
Appendix B and is also available on the Companys
website at www.nationalfuelgas.com and in print to stockholders
who request a copy from the Companys Secretary at its
principal office.
The Audit Committee has reviewed and discussed the
Companys audited financial statements for fiscal 2006 with
management. The Audit Committee has also reviewed with
management its evaluation of the Companys internal control
structure and procedures for financial reporting and reviewed
managements assessment about the effectiveness of the
Companys internal controls and procedures, including any
significant deficiencies in such controls and procedures. The
Audit Committee has discussed with the independent auditors the
matters required to be discussed by Statement on Auditing
Standards No. 61, Communication With Audit Committees
(Codification of Statements on Auditing Standards,
AU§380), as modified or supplemented. The Audit Committee
has received the written disclosures and the letter from the
independent auditors required by Independence Standards Board
Standard No. 1, Independence Discussions with Audit
Committees, as modified or supplemented, and has discussed
with the independent auditors the independent auditors
independence. The Audit Committee also has considered whether
the independent auditors provision of non-audit services
to the Company and its affiliates is compatible with the
independent auditors independence.
Based on the review, discussions and considerations referred to
in the preceding paragraph, the Audit Committee recommended to
the Board of Directors that the audited financial statements be
included in the Companys Annual Report on
Form 10-K
(17 CFR 249.310) for the last fiscal year for filing with
the SEC.
AUDIT COMMITTEE
Craig G. Matthews,
Chairman
R. Don Cash
Rolland E. Kidder
George L. Mazanec
Richard G. Reiten
10
SECURITY
OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
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 which is the only class of Company Stock
outstanding. Unless otherwise stated, to the best of the
Companys knowledge, each person has sole voting and
investment power with respect to the shares listed, including
shares which the individual has the right to acquire by
exercising stock options but has not done so. All information is
as of November 30, 2006 except as otherwise indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares Held in
|
|
|
|
|
|
|
|
|
|
|
Name of Beneficial
|
|
Exercisable Stock
|
|
|
Shares held
|
|
|
401(k)
|
|
|
Restricted
|
|
|
Shares Otherwise
|
|
|
Percent of
|
|
Owner
|
|
Options(1)
|
|
|
in ESOP(2)
|
|
|
Plan(3)
|
|
|
Stock(4)
|
|
|
Beneficially Owned(5)
|
|
|
Class(6)
|
|
|
Philip C. Ackerman
|
|
|
2,015,312
|
|
|
|
21,417
|
|
|
|
16,304
|
|
|
|
26,328
|
|
|
|
454,634
|
(7)
|
|
|
3
|
%
|
James A. Beck
|
|
|
0
|
|
|
|
306
|
|
|
|
4,989
|
|
|
|
0
|
|
|
|
36,351
|
|
|
|
*
|
|
Robert T. Brady
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
10,200
|
|
|
|
*
|
|
R. Don Cash
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
8,633
|
(8)
|
|
|
*
|
|
Stephen E. Ewing
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
1,000
|
(9)
|
|
|
*
|
|
Rolland E. Kidder
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
23,690
|
(10)
|
|
|
*
|
|
Craig G. Matthews
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
4,303
|
|
|
|
*
|
|
George L. Mazanec
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
11,000
|
(11)
|
|
|
*
|
|
John R. Pustulka
|
|
|
205,000
|
|
|
|
3,666
|
|
|
|
12,177
|
|
|
|
0
|
|
|
|
23,076
|
|
|
|
*
|
|
James D. Ramsdell
|
|
|
205,196
|
|
|
|
3,813
|
|
|
|
10,788
|
|
|
|
0
|
|
|
|
38,124
|
(12)
|
|
|
*
|
|
Richard G. Reiten
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
3,476
|
|
|
|
*
|
|
John F. Riordan
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
14,200
|
|
|
|
*
|
|
Dennis J. Seeley
|
|
|
210,000
|
|
|
|
4,357
|
|
|
|
0
|
|
|
|
0
|
|
|
|
78,087
|
(13)
|
|
|
*
|
|
David F. Smith
|
|
|
330,000
|
|
|
|
1,753
|
|
|
|
11,669
|
|
|
|
0
|
|
|
|
94,665
|
|
|
|
*
|
|
Ronald J. Tanski
|
|
|
230,200
|
|
|
|
2,826
|
|
|
|
14,501
|
|
|
|
0
|
|
|
|
46,371
|
(14)
|
|
|
*
|
|
Directors and Officers as a Group
(19 individuals)
|
|
|
3,659,793
|
|
|
|
39,348
|
|
|
|
99,382
|
|
|
|
26,328
|
|
|
|
939,065
|
|
|
|
5.54
|
%
|
|
|
|
* |
|
Represents beneficial ownership of less than 1% of issued and
outstanding Common Stock on November 30, 2006. |
|
(1) |
|
This column lists shares with respect to which each of the named
individuals, and all current directors and officers as a group
(19 individuals), have the right to acquire beneficial
ownership within 60 days of November 30, 2006, through
the exercise of stock options granted under the 1997 Award and
Option Plan. Stock options, until exercised, have no voting
power. |
|
(2) |
|
This column lists shares held in the Company and Subsidiaries
Employee Stock Ownership Plan (ESOP). The beneficial
owners of these shares have sole voting power with respect to
shares held in the ESOP, but do not have investment power
respecting most of those shares until they are distributed. |
|
(3) |
|
This column lists shares held in the Company Tax-Deferred
Savings Plan for Non-Union Employees (TDSP), a
401(k) plan. The beneficial owners of these shares have sole
voting power with respect to shares held in the TDSP, but do not
have investment power respecting most of those shares until they
are distributed. |
|
(4) |
|
This column lists shares of restricted stock, certain
restrictions on which had not lapsed as of November 30,
2006. Owners of restricted stock have power to vote the shares,
but have no investment power with respect to the shares until
the restrictions lapse. |
|
(5) |
|
This column includes shares held of record and any shares
beneficially owned through a bank, broker or other nominee. |
|
(6) |
|
This column lists the sum of the individuals (or
individuals) stock options and shares shown on this table,
expressed as a percent of the Companys outstanding shares
and that individuals (or individuals) exercisable
stock options at November 30, 2006. |
11
|
|
|
(7) |
|
Includes 1,000 shares held by Mr. Ackermans wife
in trust for her mother, as to which shares Mr. Ackerman
disclaims beneficial ownership, and 440 shares with respect
to which Mr. Ackerman shares voting and investment power
with his wife. |
|
(8) |
|
Includes 3,000 shares held by the Don Kay Clay Cash
Foundation, a Utah
not-for-profit
corporation, of which Mr. Cash, his wife, son and
daughter-in-law
are directors. Mr. Cash disclaims beneficial ownership of
these shares. |
|
(9) |
|
After he was nominated at the Board meeting in December 2006,
Mr. Ewing purchased 1,000 shares of Common Stock on
December 27, 2006. |
|
(10) |
|
Includes 11,600 shares owned by Mr. Kidders
wife, as to which Mr. Kidder shares voting and investment
power. |
|
(11) |
|
Includes 600 shares owned by Mr. Mazanecs wife,
as to which Mr. Mazanec shares voting and investment power. |
|
(12) |
|
Shares owned jointly with Mr. Ramsdells wife, as to
which Mr. Ramsdell shares voting and investment power. |
|
(13) |
|
Includes 40,674 shares owned by Mr. Seeleys wife
and 16,522 shares jointly owned, as to which
Mr. Seeley shares voting and investment power. |
|
(14) |
|
Includes 614 shares owned jointly with
Mr. Tanksis wife, as to which Mr. Tanski shares
voting and investment power. |
As of November 30, 2006, the Company knows of no one who
beneficially owns in excess of 5% of the Companys Common
Stock, which is the only class of Company Stock outstanding,
except as set forth in the table below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares Held as
|
|
|
|
|
|
|
|
|
|
Trustee for Company
|
|
|
Shares
|
|
|
Percent
|
|
|
|
Employee Benefit
|
|
|
Otherwise
|
|
|
of
|
|
Name and Address of Beneficial Owner
|
|
Plans(1)
|
|
|
Beneficially Held
|
|
|
Class(2)
|
|
|
Vanguard Fiduciary Trust Company
|
|
|
5,405,885
|
|
|
|
1,829,195
|
(3)
|
|
|
8.78
|
%
|
100 Vanguard Boulevard
Malvern, PA 19355
|
|
|
|
|
|
|
|
|
|
|
|
|
New Mountain Capital, LLC
|
|
|
0
|
|
|
|
6,802,014
|
(4)
|
|
|
8.26
|
%
|
787 7th Avenue,
49th floor
New York, NY 10091
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
This column lists the shares held by Vanguard Fiduciary Trust
Company in its capacity as trustee for certain employee benefit
plans. Vanguard Fiduciary Trust Company held
5,405,885 shares on behalf of the plans as of
November 30, 2006, all of which have been allocated to plan
participants. The plan trustee votes the shares allocated to
participant accounts as directed by those participants. Shares
held by the trustee on behalf of the plans as to which
participants have made no timely voting directions are voted by
the Trustee in the same proportion as the shares of Company
Stock for which the Trustee received timely directions, except
in the case where to do so would be inconsistent with provisions
of Title I of ERISA. Vanguard Fiduciary Trust Company
disclaims beneficial ownership of all shares held in trust by
the trustee that have been allocated to the individual accounts
of participants in the plans for which directions have been
received, pursuant to
Rule 13d-4
under the Securities Exchange Act of 1934. |
|
(2) |
|
This column lists the sum of the shares shown on this table,
expressed as a percent of the Companys outstanding shares
at November 30, 2006. |
|
(3) |
|
The Vanguard Group, which is affiliated with Vanguard Fiduciary
Trust Company, has sole investment and voting discretion with
respect to these shares of Company common stock, according to
its Form 13F for the period ended September 30, 2006. |
|
(4) |
|
As reported on Schedule 13D (Amendment No. 1), filed
with the SEC on November 27, 2006, by New Mountain Vantage
GP, L.L.C., a Delaware limited liability company (Vantage
GP), New Mountain Vantage, L.P., a Delaware limited
partnership (NMV), New Mountain Vantage
(California), L.P., a Delaware limited partnership
(NMVC), New Mountain Vantage (Texas), L.P., a
Delaware limited partnership (NMVT), New Mountain
Vantage Advisers, L.L.C., a Delaware limited liability company
(NMV Advisers), New Mountain Vantage (Cayman) Ltd.,
a Cayman Islands exempt limited company |
12
|
|
|
|
|
(NMV Offshore), New Mountain Vantage HoldCo Ltd., a
Cayman Islands exempt limited company (NMV Offshore
HoldCo), Mr. Steven B. Klinsky (collectively, the
NMV Entities), NMV Special Holdings, LLC, a Delaware
limited liability company (NMVSH), and the
California Public Employees Retirement System, a unit of
the California State and Consumer Services Agency charged with
oversight of the Public Employees Retirement Fund
(CalPERS), (NMV Entities, NMVSH and CalPERS,
collectively, the Reporting Persons). NMV, NMVC,
NMVT, NMV Offshore HoldCo, NMVSH and CalPERS are referred to
together as the Purchasers, and consider themselves
a group for purposes of Section 13(d) of the
Securities Exchange Act of 1934. The principal business address
of each of the Reporting Persons (other than NMV Offshore, NMV
Offshore HoldCo and CalPERS) is 787 Seventh Avenue,
49th Floor, New York, NY 10019. The principal business
address of each of NMV Offshore and NMV Offshore HoldCo is
c/o Walkers SPV Limited, PO Box 908GT, Walker House,
Mary Street, George Town, Grand Cayman, Cayman Islands. The
principal business address of CalPERS is Lincoln Plaza, 400 Q
Street, Sacramento, CA 95814. The Reporting Persons stated that
they have entered into a joint filing agreement, dated as of
October 30, 2006. Each of the Reporting Persons is
responsible for the completeness and accuracy of the information
concerning him or it contained in the Schedule 13D, but is
not responsible for the completeness and accuracy of the
information concerning the others, except to the extent that he
or it knows or has reason to believe that such information is
inaccurate. |
EQUITY
COMPENSATION PLAN INFORMATION
As of September 30, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of securities
|
|
|
|
|
|
|
|
|
|
remaining available for
|
|
|
|
Number of securities to be
|
|
|
Weighted-average exercise
|
|
|
future issuance under
|
|
|
|
issued upon exercise of
|
|
|
price of outstanding
|
|
|
equity compensation plans
|
|
|
|
outstanding options,
|
|
|
options, warrants and
|
|
|
(excluding securities
|
|
|
|
warrants and rights
|
|
|
rights
|
|
|
reflected in column (a))
|
|
Plan category
|
|
(a)
|
|
|
(b)
|
|
|
(c)
|
|
|
Equity compensation plans approved
by security holders
|
|
|
9,016,254
|
|
|
$
|
24.69
|
|
|
|
479,312
|
(1)
|
Equity compensation plans not
approved by security holders
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
9,016,254
|
|
|
$
|
24.69
|
|
|
|
479,312
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Of the 479,312 securities listed in column (c), 44,401 were
reserved at September 30, 2006 for issuance pursuant to the
Companys Retainer Policy for Non-Employee Directors. The
remaining 434,911 were available for future issuance under the
1997 Award and Option Plan, under which no awards can be made
after December 12, 2006 unless the shareholders approve the
amendments described beginning at page 31 of this Proxy
Statement. |
13
EXECUTIVE
COMPENSATION
Report of
the Compensation Committee
General
The Compensation Committee of the Board of Directors (the
Committee) sets the base salaries and bonuses of the
Companys executive officers. It also exercises authority
delegated to it by the shareholders or the Board with respect to
compensation plans. Plans under which shareholders have
delegated authority to the Committee include the National Fuel
Gas Company 1997 Award and Option Plan, as amended (the
1997 Award and Option Plan), and the Administrative
Rules with respect to At Risk Awards under the 1997 Award and
Option Plan (the At Risk Program). In addition, the
Committee makes recommendations to the Board with respect to the
development of incentive compensation plans and equity-based
plans and administers the National Fuel Gas Company Performance
Incentive Program (the Performance Incentive
Program). The Committee is comprised of the four directors
named below, all of whom have been determined by the Board to be
independent. No member of the Committee is permitted to receive
any award under any plan administered by the Committee.
Objective
The Committees 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 part of each executive officers
potential compensation depend on the price of the Companys
Common Stock on the open market and the officers own
performance. The retention of officers is encouraged by making a
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.
The Committee retains an independent compensation consulting
firm to assist it in evaluating and setting officer
compensation. The firm annually compares Company compensation
practices to both utility and general industry practices. It
also provides a proxy analysis of the Chief Executive Officer
position based on the latest proxy data for the Company and ten
energy companies in the peer group. In 2006 a similar analysis
was provided for the President & Chief Operating
Officer position at the Company and individuals with title
comparability at five of the peer companies. Based on 2005 proxy
data, the companies in the eleven member peer group range in
size from $10.7 billion in revenues to $1.1 billion in
revenues. The median size of the peer group is $2.9 billion
in revenues.
Specific components of executive officers compensation
earned or paid in fiscal 2006 are discussed below. The
Companys five most highly compensated executive officers,
as well as Mr. Seeley who retired in February 2006 and
Mr. Beck who retired in July 2006, are identified on the
Summary Compensation Table starting on page 18, and are
sometimes referred to as the named executive
officers.
Base
Salary
The Committee annually reviews base salaries for the
Companys executive officers and adjusts them as it deems
appropriate on a calendar year basis and as changes in
responsibility occur. The Committee generally targets a range of
the 50th percentile to the 75th percentile of the
survey data provided by its outside compensation consultant. The
Committee also considers an individuals specific
responsibilities, experience (including time in position), and
effectiveness in setting base salary.
The fiscal 2006 base salaries of the named executive officers
are shown on the Summary Compensation Table on page 18 in
the Base Salary column.
Annual At
Risk Incentive and Bonus
Under the At Risk Program, the Committee may make At Risk Awards
which grant an executive officer the opportunity to earn cash
payments depending on the achievement of goals set within the
first quarter of each fiscal year. Performance goals can be both
financial (for example, Company earnings per share or subsidiary
earnings per share) and non-financial (for example, customer
service).
14
The Committee reviews and approves corporate goals for
Mr. Ackerman under the At Risk Program and evaluates his
performance in light of these goals. It approves his
compensation based upon that evaluation. For fiscal 2006
Mr. Ackerman was the only participant in the At Risk
Program. At Risk Program goals for Mr. Ackerman, as Chief
Executive Officer, were a specified level of Company earnings
per share (weighted at 55% of the formula), a proved developed
and undeveloped reserves goal (weighted at 25% of the formula),
a long-term strategy goal (weighted at 10% of the formula) and
customer service and safety goals (weighted at 10% of the
formula). Company diluted earnings per share must reach a
pre-determined target in each of two consecutive fiscal years to
trigger the maximum annual incentive award to Mr. Ackerman.
The target award for Mr. Ackerman was set at 100% of base
salary with a maximum possible award of 200% of base salary. In
fiscal 2006, Mr. Ackerman was awarded a bonus of 95% of his
target amount for his performance on the goals set under the At
Risk Program.
The Summary Compensation Table starting on page 18 includes
in the LTIP (Long-Term Incentive Plan) Payouts
column the amounts earned by Mr. Ackerman in fiscal 2006
under the At Risk Program. The At Risk Award is considered by
the SEC to be a long-term incentive because payment
is based, in part, on a rolling average of performance during
the two fiscal years most recently completed. The range of
potential At Risk Program awards for fiscal 2006 for
Mr. Ackerman is set out in the Long-Term Incentive Plan
Award Table on page 21.
In furtherance of the Committees goal of emphasizing
incentive-based compensation for the Companys other
executive officers, most of the executive officers, including
Messrs. Smith, Tanski, Pustulka and Ramsdell were paid
amounts as bonuses in December 2006 (for performance in fiscal
2006). In December 2006, the Compensation Committee reviewed
with Mr. Ackerman the performance of Messrs. Smith and
Tanski with respect to individual goals set earlier in fiscal
2006. The target award for both Mr. Smith and
Mr. Tanski was set at 65% of base salary with a maximum
possible award of 130% of base salary. Mr. Smith was given
a corporate earnings per share goal (weighted at 55% of the
formula), a proved developed and undeveloped reserves goal
(weighted at 25% of the formula), a production volume goal
(weighted at 10% of the formula) and customer service and safety
goals (weighted at 10% of the formula). Mr. Tanski was
given a corporate earnings per share goal (weighted at 30% of
the formula), an earnings per share goal of the Companys
regulated subsidiaries (Supply Corporation, Empire and
Distribution Corporation) (weighted at 30% of the formula), a
safety goal (weighted at 10% of the formula), a customer service
standards goal (weighted at 10% of the formula), and goals
related to the Companys relationship with investors and
analysts (weighted at 20% of the formula).
For fiscal 2006, Messrs. Smith and Tanski were awarded
bonuses of 78% and 111%, respectively, of their target amounts
for performance on their goals.
Mr. Ackerman made recommendations for fiscal 2006 bonuses
for the other officers, including Mr. Pustulka, and
Mr. Ramsdell, which were accepted by the Committee. The
Summary Compensation Table starting on page 18 includes in
the LTIP Payouts column the amount earned by Mr. Smith in
fiscal 2006 because payment was based, in part, on a rolling
average of performance during 2005 and 2006. The Summary
Compensation Table on page 18 includes in the
Bonus column the amount earned by
Messrs. Tanski, Pustulka and Ramsdell in fiscal 2006 as
bonuses. These awards are considered by the SEC to be bonuses
because they are based on performance during a single fiscal
year.
In January 2006 the Committee awarded a bonus of $57,688 to
Mr. Seeley with respect to his performance on three goals
set in fiscal 2005 which extended into 2006. The goals related
to Appalachian exploration and production operations. In
addition, the Committee awarded him a bonus of $155,757 for his
performance in 2006. That bonus was arrived at by taking
one-third of the bonus paid for performance on his 2005 goals.
Mr. Seeley retired effective February 1, 2006.
In January 2006 the Company and Mr. Seeley also executed a
Noncompete and Restrictive Covenant Agreement (the
Agreement) which is described on pages 23-24 of
this Proxy Statement. Under the Agreement, the Company paid
Mr. Seeley a lump sum of $440,000 in February 2006. In
consideration for the promise of such payment, Mr. Seeley
agreed to various confidentiality and non-competition
provisions, and also released claims based on his participation
in the Companys Performance Incentive Program plus any
other claims he may have against the Company as of the date he
executed the Agreement regarding his employment and the
termination of his employment, including but not limited to any
claims for wages, bonuses or severance pay.
15
The Company, Seneca Resources Corporation and Mr. Beck
executed a Retirement Agreement (the Retirement
Agreement) in June 2006 and Mr. Beck retired
effective July 1, 2006.
Pursuant to the Retirement Agreement, in September the Company
paid Mr. Beck a lump sum of $465,000, less applicable taxes
and withholding. This payment did not constitute a bonus or
other compensation for purposes of calculating benefits under
the Retirement Plan or the Executive Retirement Plan.
Mr. Beck and the Company also agreed that 4,000 shares
of restricted stock awarded to Mr. Beck on January 31,
2000 be modified to vest on July 1, 2006. Mr. Beck
also waived all claims he might have against the Company as of
the date he executed the Retirement Agreement regarding his
employment and the termination of his employment, including for
benefits based on his participation in the Performance Incentive
Program, wages and bonuses.
The Company also entered into a Contract for Consulting Services
(the Consulting Contract) with Mr. Beck. Under
the terms of the Consulting Contract, Mr. Beck will provide
consulting services as an independent contractor for a period of
three years beginning July 1, 2006. As consideration for
his services, Seneca will pay Mr. Beck an annual fee of
$200,000, payable in monthly increments of one-twelfth (1/12) of
the annual fee. Seneca or another subsidiary of the Company may
request that Mr. Beck provide onshore geological and
geophysical consulting services. If Mr. Beck performs such
services, he will be paid an additional fee of $200 per
hour for each hour of requested onshore services performed.
Mr. Becks Retirement Agreement and Consulting
Contract are described at pages 24-25 of this Proxy
Statement.
Stock
Options, Restricted Stock and the Performance Incentive
Program
Stock options, restricted stock and the Performance Incentive
Program represent the longer-term incentive and retention
component of the executive compensation package. Such awards are
intended to focus attention on managing the Company from a
long-term investors perspective. In addition, the
Committee wishes to encourage officers and other managers to
have a significant, personal investment in the Company through
stock ownership. To emphasize the importance of stock ownership,
in fiscal 2002 Mr. Ackerman, after consultation with the
Compensation Committee, set Company Stock ownership guidelines
for officers. These guidelines range from one times base salary
for junior officers to four times base salary at the Chief
Executive Officer level. Other employees receiving options are
encouraged to retain their stock for long-term investment.
Awards of stock options and restricted stock are made by the
Committee under the 1997 Award and Option Plan. The Committee
awards stock options to buy Company Common Stock, which have
value only to the extent the market price of the Companys
Common Stock increases after the date of an award. The Committee
also on occasion awards restricted stock, usually as a retention
tool, which increases or decreases in value to the same extent
as the Companys 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
Companys Common Stock.
In 2002 the Committee reviewed its past practice of annual
option awards. In 2002 the Committee granted options to officers
which were intended to be a multi-year incentive. Option awards
were made to each named executive officer to buy stock in the
future at the market price on the award date. These options
vested over a three-year period and none could be exercised for
at least one year after the award date. All of them expire no
later than 10 years after the award date.
In fiscal 2005 the Committee, with the assistance of its
compensation consultant, evaluated its alternatives on long-term
incentive compensation including the use of incentives in
addition to options and restricted stock. The Committee
concluded that options remain an important component of
long-term compensation at the Company, but that the number
granted in the future would be more limited than in the past.
The Committee then recommended to the Board that a cash based
long-term incentive be adopted to complement the use of options.
The Board adopted the Performance Incentive Program and
delegated authority to the Committee to administer that program.
Under the Performance Incentive Program, the Compensation
Committee may establish a performance condition for a
performance period of at least one year. The default performance
condition is the Companys total return on capital as
compared to the same metric for peer companies in the Natural
Gas
16
Distribution and Integrated Natural Gas Companies group reported
in AUS Monthly Utility Reports. A cash bonus may be paid
following the end of the performance period based on the level
of performance.
In fiscal 2005 the Compensation Committee chose the
Companys total return on capital as the performance metric
for the performance period of October 1, 2004 to
September 30, 2007. The Committee approved a total of
$1,995,000 of target incentives for a group of seventeen
officers. As a result of the retirements of Messrs. Seeley
and Beck, discussed above, there is currently $1,255,000 of
target incentives outstanding related to that award.
In fiscal 2006 the Committee again chose the Companys
total return on capital as the performance metric. The
performance period selected was October 1, 2005 to
September 30, 2008. The Committee approved a total of
$1,895,000 of target incentive for a group of eighteen officers.
Based on the level of performance at the end of each of the
three-year performance periods, payment can range from 0% to
200% of the target incentives.
In awarding long-term incentive compensation in fiscal 2006, the
Committee generally adopted its compensation consultants
guidelines on the level of such compensation. Those levels
included a target of: 160% of base salary for the Chief
Executive Officer (Mr. Ackerman); 140% of base salary for
the Company President (Mr. Smith); 120% of base salary for
the Chief Financial Officer (Mr. Tanski) and 60% of base
salary for Senior Vice Presidents (Pustulka and Ramsdell). Using
the guidelines the Committee awarded 100,000 options and a
Performance Incentive Program target incentive of $650,000 to
Mr. Ackerman. In addition, the Committee granted long-term
incentives to other officers (including Messrs. Smith,
Tanski, Pustulka and Ramsdell) as either options, target
incentives under the Performance Incentive Program or a
combination of both. Option grants are described on the Option
Grants table on page 20, and other long-term incentives are
described on the Long-Term Incentive Plan Awards in
Fiscal 2006 table starting on page 21.
Compensation
of Chief Executive Officer
The bases for Mr. Ackermans fiscal 2006 base salary
and At Risk Program award including the Committees goals
and methodology, are discussed earlier in this report under the
headings Base Salary and Annual At Risk Incentive and Bonus.
Mr. Ackerman also received a grant of options and a
Performance Incentive Program target incentive in fiscal 2006,
as discussed earlier in this report under the heading Stock
Options, Restricted Stock and the Performance Incentive Program.
Based on the proxy analysis conducted by the independent
compensation consulting firm as discussed under Objective on
page 14, total direct compensation earned by
Mr. Ackerman was at the 51st percentile of the
compensation packages earned by officers in a peer group of
eleven energy companies, including the Company.
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
R. Don Cash
John F. Riordan
17
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, to each of the four other most highly
compensated active executive officers, and for the two executive
officers who retired, all for the fiscal year ended
September 30, 2006 (the named executive
officers).
SUMMARY
COMPENSATION TABLE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long Term Compensation
|
|
|
|
|
|
|
|
|
|
Annual Compensation
|
|
|
Awards
|
|
|
Payouts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Annual
|
|
|
Restricted
|
|
|
Securities
|
|
|
|
|
|
All Other
|
|
|
|
Fiscal
|
|
|
Base
|
|
|
|
|
|
Compensation
|
|
|
Stock
|
|
|
Underlying
|
|
|
LTIP
|
|
|
Compensation
|
|
Name and Principal Position
|
|
Year
|
|
|
Salary($)
|
|
|
Bonus($)
|
|
|
($)(1)
|
|
|
Awards($)(2)
|
|
|
Options
|
|
|
Payouts($)
|
|
|
($)(3)
|
|
|
Philip C. Ackerman
|
|
|
2006
|
|
|
|
825,000
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
100,000
|
|
|
|
783,750
|
|
|
|
1,135,147
|
|
Chief Executive Officer of the
|
|
|
2005
|
|
|
|
813,750
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
160,000
|
|
|
|
1,302,000
|
|
|
|
230,062
|
|
Company
|
|
|
2004
|
|
|
|
780,000
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
1,287,000
|
|
|
|
181,413
|
|
David F. Smith
|
|
|
2006
|
|
|
|
496,875
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
55,000
|
|
|
|
251,916
|
|
|
|
57,670
|
|
President and Chief Operating
|
|
|
2005
|
|
|
|
443,750
|
|
|
|
444,195
|
|
|
|
0
|
|
|
|
0
|
|
|
|
60,000
|
|
|
|
0
|
|
|
|
89,802
|
|
Officer of the Company and
|
|
|
2004
|
|
|
|
425,000
|
|
|
|
350,000
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
67,770
|
|
President of National Fuel Gas
Supply Corporation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dennis J. Seeley
|
|
|
2006
|
|
|
|
178,366
|
|
|
|
653,445
|
(4)
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
53,640
|
|
President of National Fuel Gas
|
|
|
2005
|
|
|
|
443,750
|
|
|
|
409,582
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
90,907
|
|
Gas Distribution Corporation
|
|
|
2004
|
|
|
|
425,000
|
|
|
|
350,000
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
82,963
|
|
until 2/1/06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James A. Beck
|
|
|
2006
|
|
|
|
339,423
|
|
|
|
465,000
|
(5)
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
23,000
|
|
President of Seneca Resources
|
|
|
2005
|
|
|
|
425,000
|
|
|
|
107,875
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
69,155
|
|
Corporation until 7/1/06
|
|
|
2004
|
|
|
|
425,000
|
|
|
|
100,000
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
32,294
|
|
Ronald J. Tanski
|
|
|
2006
|
|
|
|
372,500
|
|
|
|
268,759
|
|
|
|
0
|
|
|
|
0
|
|
|
|
36,000
|
|
|
|
0
|
|
|
|
47,384
|
|
Treasurer and Principal Financial
|
|
|
2005
|
|
|
|
311,250
|
|
|
|
150,000
|
|
|
|
0
|
|
|
|
0
|
|
|
|
40,000
|
|
|
|
0
|
|
|
|
49,522
|
|
Officer of the Company and
|
|
|
2004
|
|
|
|
278,500
|
|
|
|
85,000
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
32,472
|
|
President of National Fuel Gas
Distribution Corporation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John R. Pustulka
|
|
|
2006
|
|
|
|
265,250
|
|
|
|
115,005
|
|
|
|
0
|
|
|
|
0
|
|
|
|
12,000
|
|
|
|
0
|
|
|
|
39,418
|
|
Senior Vice President of National
|
|
|
2005
|
|
|
|
252,625
|
|
|
|
100,000
|
|
|
|
0
|
|
|
|
0
|
|
|
|
35,000
|
|
|
|
0
|
|
|
|
41,886
|
|
Fuel Gas Supply Corporation
|
|
|
2004
|
|
|
|
240,500
|
|
|
|
85,000
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
28,568
|
|
James D. Ramsdell
|
|
|
2006
|
|
|
|
265,250
|
|
|
|
115,005
|
|
|
|
0
|
|
|
|
0
|
|
|
|
12,000
|
|
|
|
0
|
|
|
|
39,534
|
|
Senior Vice President of National
|
|
|
2005
|
|
|
|
252,625
|
|
|
|
100,000
|
|
|
|
0
|
|
|
|
0
|
|
|
|
15,000
|
|
|
|
0
|
|
|
|
41,486
|
|
Fuel Gas Distribution Corporation
|
|
|
2004
|
|
|
|
240,500
|
|
|
|
85,000
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
25,199
|
|
|
|
|
(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
executives base salary and bonus, if any, for each fiscal
year listed. |
|
(2) |
|
As of September 30, 2006, 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 at September 29, 2006 of $36.35/share
are as follows: for Mr. Ackerman, 26,328 shares
($957,023); and none for the balance of the named executive
officers. Dividends are paid on all shares of restricted stock.
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. |
|
(3) |
|
In fiscal 2006, the Company paid, contributed or accrued for
Messrs. Ackerman, Smith, Seeley, Beck, Tanski, Pustulka and
Ramsdell $13,000, $13,000, $4,200, $10,800, $13,000, $13,000 and
$13,000, respectively, under the Tax-Deferred Savings Plan (the
Companys 401(k) plan); $120,770, $43,802, $44,581,
$12,200, $17,850, $9,305 and $9,305, 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; $6,556, $868,
$1,156, $0, $1,534, $2,113 and $2,229, respectively, under a
program that passes through to employees the Companys tax
savings associated with payment of dividends on Employee Stock
Ownership Plan shares; $25,916 for Mr. Ackerman and $3,703
for Mr. Seeley, as above-market interest under the Deferred
Compensation Plan. |
|
|
|
The Company has maintained a split dollar life insurance
arrangement with Mr. Ackerman since 1991, as amended from
time to time. The split dollar arrangement required that
(i) the Company would pay, until his retirement date, the
premiums on two life insurance policies owned by
Mr. Ackerman |
18
|
|
|
|
|
(ownership later transferred to a life insurance trust
established by Mr. Ackerman), (ii) the Company would
be repaid its premiums upon the earlier of his 70th birthday or
death, and (iii) if he died before age 70 his
beneficiaries would receive a death benefit from the policies of
no more than twice the sum of his most recent annual salary and
lump sum compensation. In light of certain changes of law, the
Company chose to stop paying premiums on those policies in 2002,
and all subsequent premiums on those policies have instead been
paid from the policies owned by Mr. Ackermans trust.
In fiscal 2006, the trust transferred to the Company one of its
insurance policies as a partial early repayment to the Company
of the insurance premiums previously paid by the Company, which
left one existing insurance policy covered by the split dollar
arrangement. To place Mr. Ackerman in approximately the
position he would have been in if the Company had actually
performed its obligations under the split dollar arrangement, in
fiscal 2006 the Company and Mr. Ackerman agreed that
(i) if Mr. Ackerman dies before his 70th birthday, the
Company will pay his beneficiaries a death benefit equal to the
sum of 24 times his base monthly salary in the month prior to
his death or retirement plus two times the most recent award, if
any, paid to him under the Companys lump sum payment
programs other than the Performance Incentive Program, reduced
by the amount received by his trust from the remaining insurance
policy pursuant to the split dollar arrangement, or (ii) if
Mr. Ackerman is living on his 70th birthday, the
Companys agreement to pay a death benefit will terminate,
and the Company will make a cash payment to Mr. Ackerman in
the amount of $968,905, which amount is included in this column.
That cash payment amount represents the previously expected cash
surrender value to Mr. Ackerman at age 70 of the two
insurance policies that underlay his split dollar arrangement
(after repayment to the Company of its previously expected
premium payments as required by the split dollar arrangement),
reduced by the expected cash surrender value to
Mr. Ackermans trust on his 70th birthday (after
repayment to the Company of its premiums actually paid) of the
remaining insurance policy owned by his trust. |
|
|
|
The Company provided to each of Mr. Pustulka,
Mr. Ramsdell and Mr. Tanski in fiscal 2006 $15,000 to
purchase one or more life insurance policies selected by each
officer. |
|
(4) |
|
Includes $57,688 based on achievement of performance goals
established in fiscal 2005 but which extended into 2006, plus
$155,757 bonus for service in the first four months of fiscal
2006, plus a lump sum of $440,000 paid under the Noncompete and
Restrictive Covenant Agreement described on pp. 23-24 of
this Proxy Statement in return for non-compete and
confidentiality promises and as settlement of any claim under
the 2005 Long Term Performance Incentive Program and as
severance plus a general release. The Noncompete and Restrictive
Covenant Agreement recites the entire amount simply as a lump
sum which shall not be treated as a bonus for purposes of any
benefit plans. |
|
(5) |
|
Includes $465,000 paid to Mr. Beck under the Retirement
Agreement described on pp. 24-25 of this Proxy Statement to
settle any claims for 2006 bonus and under the 2005 Long Term
Performance Incentive Program, and as severance, plus a general
release. The Retirement Agreement recites the entire amount
simply as a lump sum which shall not be treated as a bonus for
purposes of any benefit plans. |
19
Stock
Option Grant Table
The following table sets forth information with respect to
options to purchase shares of Common Stock awarded during fiscal
2006 to the named executive officers pursuant to plans approved
by the Companys stockholders.
OPTION
GRANTS IN FISCAL 2006(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individual Grants
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Percent of
|
|
|
Exercise
|
|
|
|
|
|
|
|
|
|
Securities
|
|
|
Total Options
|
|
|
or Base
|
|
|
|
|
|
|
|
|
|
Underlying
|
|
|
Granted to
|
|
|
Price Per
|
|
|
|
|
|
Grant Date
|
|
|
|
Options
|
|
|
Employees in
|
|
|
Share
|
|
|
Expiration
|
|
|
Present
|
|
Name
|
|
Granted(#)
|
|
|
Fiscal Year
|
|
|
($/Sh)
|
|
|
Date
|
|
|
Value($)(2)
|
|
|
Philip C. Ackerman
|
|
|
100,000
|
|
|
|
31.55
|
%
|
|
|
35.105
|
|
|
|
5/2016
|
|
|
|
666,990
|
|
David F. Smith
|
|
|
55,000
|
|
|
|
17.35
|
%
|
|
|
35.105
|
|
|
|
5/2016
|
|
|
|
366,845
|
|
Dennis J. Seeley
|
|
|
0
|
|
|
|
0
|
%
|
|
|
NA
|
|
|
|
NA
|
|
|
|
NA
|
|
James A. Beck
|
|
|
0
|
|
|
|
0
|
%
|
|
|
NA
|
|
|
|
NA
|
|
|
|
NA
|
|
Ronald J. Tanski
|
|
|
36,000
|
|
|
|
11.36
|
%
|
|
|
35.105
|
|
|
|
5/2016
|
|
|
|
240,116
|
|
John R. Pustulka
|
|
|
12,000
|
|
|
|
3.78
|
%
|
|
|
35.105
|
|
|
|
5/2016
|
|
|
|
80,039
|
|
James D. Ramsdell
|
|
|
12,000
|
|
|
|
3.78
|
%
|
|
|
35.105
|
|
|
|
5/2016
|
|
|
|
80,039
|
|
|
|
|
(1) |
|
The options shown on this table were granted under the 1997
Award and Option Plan and will vest on May 10, 2007.
Thereafter, they can be exercised any time prior to the
expiration date if the holder remains with the Company. These
options 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, the options may be exercised within five years
after termination of employment, and options held by the
Companys Chief Executive Officer or a President of a
principal subsidiary who retires at age 65 or later can be
exercised until the end of their original term. Payment of the
exercise price may be in cash or by tendering shares of Company
Common Stock. |
|
(2) |
|
This column shows the hypothetical value of these options
according to a Black-Scholes-Merton option pricing model. The
assumptions used in this model for the options granted in fiscal
2006 were: quarterly dividend yield of .826%, an annual standard
deviation (volatility) of 17.71% (calculation of volatility
based on average high/low price), a risk-free rate of 5.101%,
and an expected term before exercise of 7 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 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. |
20
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 stock
appreciation right (SAR) exercises during fiscal 2006 and the
number and value of unexercised options and SARs at
September 30, 2006. The named executive officers did not
exercise any SARs in 2006, and in fact have no SARs.
AGGREGATED
OPTION/SAR EXERCISES IN FISCAL 2006 AND OPTION/SAR VALUES
ON SEPTEMBER 30, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities
|
|
|
|
|
|
Number of Securities
|
|
|
|
|
|
|
|
|
|
Underlying
|
|
|
|
|
|
Underlying Unexercised
|
|
|
Value of Unexercised
|
|
|
|
Options/SAR
|
|
|
|
|
|
Options at
|
|
|
In-the-money
Options
|
|
|
|
Exercised
|
|
|
Value Realized
|
|
|
Fiscal Year-End(#)
|
|
|
at Fiscal Year-End($)(2)
|
|
Name
|
|
(#)
|
|
|
($)(1)
|
|
|
Exercisable
|
|
|
Unexercisable
|
|
|
Exercisable
|
|
|
Unexercisable
|
|
|
Philip C. Ackerman
|
|
|
314,558
|
|
|
|
5,813,032
|
|
|
|
2,015,312
|
|
|
|
100,000
|
|
|
|
24,677,333
|
|
|
|
142,000
|
|
David F. Smith
|
|
|
95,660
|
|
|
|
1,242,758
|
|
|
|
330,000
|
|
|
|
55,000
|
|
|
|
3,453,075
|
|
|
|
78,100
|
|
Dennis J. Seeley(3)
|
|
|
98,422
|
|
|
|
1,211,939
|
|
|
|
311,578
|
|
|
|
0
|
|
|
|
3,517,893
|
|
|
|
0
|
|
James A. Beck(4)
|
|
|
372,656
|
|
|
|
4,099,950
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Ronald J. Tanski
|
|
|
4,800
|
|
|
|
48,780
|
|
|
|
230,200
|
|
|
|
36,000
|
|
|
|
2,763,521
|
|
|
|
51,120
|
|
John R. Pustulka
|
|
|
20,000
|
|
|
|
353,775
|
|
|
|
205,000
|
|
|
|
12,000
|
|
|
|
2,496,341
|
|
|
|
17,040
|
|
James D. Ramsdell
|
|
|
10,236
|
|
|
|
141,017
|
|
|
|
205,196
|
|
|
|
12,000
|
|
|
|
2,554,208
|
|
|
|
17,040
|
|
|
|
|
(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. |
|
(3) |
|
Because Mr. Seeley retired after age 60 as the President of
a principal subsidiary, his outstanding stock options remain
exercisable for up to five years after his retirement. |
|
(4) |
|
Mr. Becks stock options would have terminated upon his
retirement before age 60 unless they were extended, which would
have triggered expenses to the Company. The Company did not
extend Mr. Becks outstanding stock options beyond his
retirement date of July 1, 2006, so he had to exercise in
fiscal 2006 all the outstanding stock options he had accumulated
over his 17 years of service to the Company. |
Long-Term
Incentive Plan Award Table
The following table sets forth information with respect to
long-term incentive plan awards [made during fiscal 2006] to the
named executive officers pursuant to the At Risk Program and the
Performance Incentive Program.
LONG-TERM
INCENTIVE PLANS AWARDS IN FISCAL 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Future Payouts Under
|
|
|
|
Performance Period
|
|
|
Non-Stock Price-Based Plans
|
|
Name
|
|
Until Maturation
|
|
|
Threshold($)
|
|
|
Target($)
|
|
|
Maximum($)
|
|
|
Philip C. Ackerman(1)
|
|
|
2 years ended 9/30/06
|
|
|
|
0
|
|
|
|
825,000
|
|
|
|
1,650,000
|
|
Philip C. Ackerman(2)
|
|
|
3 years ended 9/30/08
|
|
|
|
0
|
|
|
|
650,000
|
|
|
|
1,300,000
|
|
David F. Smith(3)
|
|
|
2 years ended 9/30/06
|
|
|
|
0
|
|
|
|
322,969
|
|
|
|
645,938
|
|
David F. Smith(2)
|
|
|
3 years ended 9/30/08
|
|
|
|
0
|
|
|
|
375,000
|
|
|
|
750,000
|
|
Ronald J. Tanski(2)
|
|
|
3 years ended 9/30/08
|
|
|
|
0
|
|
|
|
250,000
|
|
|
|
500,000
|
|
John R. Pustulka(2)
|
|
|
3 years ended 9/30/08
|
|
|
|
0
|
|
|
|
85,000
|
|
|
|
170,000
|
|
James D. Ramsdell(2)
|
|
|
3 years ended 9/30/08
|
|
|
|
0
|
|
|
|
85,000
|
|
|
|
170,000
|
|
|
|
|
(1) |
|
This line of the table describes the sole At Risk Program
opportunity which was made to any executive officer in fiscal
2006 based in part on the rolling two-year average of earnings
per share performance in |
21
|
|
|
|
|
fiscal 2005 and fiscal 2006. The actual amount awarded and paid
for fiscal 2006 under the At Risk Program is shown in the
Summary Compensation Table on page 18 in the LTIP Payouts
column. |
|
(2) |
|
This line of the table describes the National Fuel Gas Company
Performance Incentive Program under which awards were made to
selected officers of the Company in fiscal year 2006. The amount
paid will be based on a comparison of the Companys
Total Return on Capital (the average of the returns
on capital for each fiscal year ended during the Performance
Period) as compared to that of a group of peer companies
established by the Compensation Committee. |
|
|
(3) |
This line of the table describes Mr. Smiths bonus
which was based in part on the rolling two-year average of
earnings per share performance in fiscal 2005 and fiscal 2006.
The actual amount awarded and paid for fiscal 2006 is shown in
the Summary Compensation Table on page 18 in the LTIP
Payouts column.
|
Report on
Repricing of Options/SARs
The Company did not reprice any stock options or SARs in fiscal
2006.
Corporate
Performance Graph
The following graph compares the yearly cumulative stockholder
return on the Companys Common Stock against the cumulative
total return of the Standard & Poors 500
Composite Stock Price Index (S&P 500), and the
S&P Midcap Multiutility Index for a period of five years
commencing September 30, 2001, and ended September 30,
2006. The S&P Midcap Multiutility Index comprises the
cumulative total returns of 11 diversified energy companies,
including the Company.
1 Assumes
$100 invested on September 30, 2001, and reinvesting of
dividends
Source: Bloomberg
Employment
Contracts and Termination of Employment and
Change-in-
Control Agreements
Messrs. Ackerman, Smith, Tanski, Pustulka and Ramsdell
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. (Messrs. Beck and Seeley also
entered into such agreements but they terminated upon their
retirement July 1, 2006 and February 1, 2006,
respectively.)
22
These agreements 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. Unless an executive elects not 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 at the same time. In addition,
executives shall receive either continuation of certain employee
benefits for three years or the value of such benefits,
specifically any pension, retirement, deferred
compensation, savings, medical, dental, health, disability,
group life, accidental death and travel accident insurance plans
and programs of the Company and its affiliated companies at a
level that is commensurate with the Executives
participation in such plans immediately prior to the Effective
Date, or, if more favorable to the Executive, at the level made
effective to the Executive or other similarly situated officers
at any time thereafter. The Company will comply in good
faith with Section 409A of the Internal Revenue Code, which
may require the three-year benefit continuation period be
reduced to two years.
Mr. Smith entered into a retirement agreement with the
Company on September 22, 2003. The agreement is intended to
provide Mr. Smith with certain retirement benefits in the
event of an actual or constructive termination without cause
before March 1, 2011. In such a case, Mr. Smith would
receive a retirement benefit based on the percentage of
retirement benefits he would receive at March 1, 2011.
However, Mr. Smiths actual earnings and actual years
of service at termination would be used in the calculation of
his benefit based on the formulas in the Retirement Plan and the
Executive Retirement Plan. In order to comply with
Section 409A of the Internal Revenue Code, amendments to
the agreement impose a required six-month waiting period before
commencement of payments under the agreement and provide for the
payment of such six-month benefits in a lump sum in the seventh
month.
Also, in the event of certain types of termination of employment
within two years after a defined change in control of the
Company, the 1997 Award and Option Plan provides that
(i) all of the terms and conditions in effect on any of the
Participants outstanding awards would immediately lapse;
(ii) all of the Participants outstanding awards would
automatically become one hundred percent vested; and
(iii) all of the Participants outstanding stock
options, SARs and restricted stock would immediately vest and
the options and SARs would be immediately cashed out on the
basis of the Fair Market Value of the Common Stock on the
Acceleration Date (as defined in the Plan). 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 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 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, and the exercise price of outstanding
SARs, as deemed appropriate by the Compensation Committee.
On January 31, 2006, the Company and Mr. Seeley
executed a Noncompete and Restrictive Covenant Agreement (the
Noncompete Agreement). Mr. Seeley retired
effective February 1, 2006 from his positions as Vice
President of the Company and President of Distribution
Corporation. Under the Noncompete Agreement, the Company paid
Mr. Seeley a lump sum of $440,000 in February 2006. In
consideration for the promise of such payment, Mr. Seeley
agrees to hold in a fiduciary capacity all of the Companys
trade secrets and confidential and proprietary information in
his possession, and he agrees not to use or disclose such trade
secrets and information. Furthermore, during the period
beginning February 1, 2006 and ending January 31,
2009, Mr. Seeley will not, without the prior written
consent of the Company, engage in or be interested in (as owner,
partner, shareholder, employee, director, agent, consultant or
otherwise) any business which is a competitor of the Company. In
addition, Mr. Seeley releases all claims he may have
against the Company as of the date he executed the Noncompete
Agreement regarding his employment and the termination of his
employment, including but not limited to any claims for wages,
bonuses or severance pay, and any claims based on his
participation in the Companys Performance Incentive
Program.
The Company releases all claims it may have against
Mr. Seeley as of the date he executed the Noncompete
Agreement, except for claims for fraud or other intentional
misconduct discovered after execution of the Noncompete
Agreement. The Company will indemnify Mr. Seeley against
all liabilities and expenses in connection with any proceeding
in which he may become involved by reason of having
23
been a director or officer of the Company or its subsidiaries.
Mr. Seeley will not take any action with the intended
purpose of interfering with, damaging or disrupting the assets
or business operations or affairs of the Company or its
subsidiaries or affiliates. Mr. Seeley will not, without
the prior written consent of the Company, work for, consult
with, advise or represent any business which is a customer of
the Company, with respect to any matter or activity which would
tend to reduce the quantity or price of services or commodities
provided by the Company to that business.
On June 20, 2006, the Company, Seneca Resources
Corporation, a wholly owned subsidiary of the Company
(Seneca), and Mr. Beck executed a Retirement
Agreement (the Retirement Agreement) and a Contract
for Consulting Services (the Consulting Contract),
after approval of the terms by the Companys Board of
Directors. The following two paragraphs describe the terms of
the Retirement Agreement, and the next two paragraphs describe
the terms of the Consulting Contract.
Mr. Beck resigned from all of his positions with Seneca and
all other subsidiaries and affiliates of the Company effective
July 1, 2006. Mr. Beck is entitled to certain accrued
pension benefits under the National Fuel Gas Company Retirement
Plan (the Retirement Plan) and to certain
supplemental pension benefits under the National Fuel Gas
Company Executive Retirement Plan (the Executive
Retirement Plan). The Company paid Mr. Beck a lump
sum of $465,000, less applicable taxes and withholding, on or
about September 15, 2006. This payment did not constitute a
bonus or other compensation for purposes of calculating benefits
under the Retirement Plan or the Executive Retirement Plan. The
Company will pay Mr. Becks tax advisor for reasonable
assistance in the preparation and filing of his income tax
returns for tax year 2006, up to a maximum of $8,000. In
addition, from July 1, 2006 through June 30, 2009,
family medical coverage under the Companys Executive
Medical Plan, Prescription Drug Plan and Dental Plan will be
made available to Mr. Beck and his spouse at
Mr. Becks expense at the same monthly cost as paid by
an active Company executive during that time. Beginning
July 1, 2009, family medical coverage under the
Companys non-executive medical and prescription drug plan
will be made available to Mr. Beck and his spouse to the
same extent, if any, and in the same form, if any, as is then
being provided to non-executive supervisory employees of
National Fuel Gas Distribution Corporation (Distribution
Corporation), which conducts the Companys utility
operations. This coverage will be made available at
Mr. Becks expense at the same monthly cost as paid by
an active non-executive supervisory employee of Distribution
Corporation.
Mr. Beck is entitled to various benefits accrued under the
Companys Deferred Compensation Plan, Tophat Plan, Employee
Stock Ownership Plan, Tax-Deferred Savings Plan for Non-Union
Employees, 1993 Award and Option Plan, and 1997 Award and Option
Plan. Payments of benefits under these plans will be available
or begin no earlier than the first day such payments can be made
without triggering the additional taxes which would be required
if such payments were to be deemed deferred
compensation for purposes of Section 409A of the
Internal Revenue Code. The 4,000 shares of restricted stock
awarded to Mr. Beck on January 31, 2006 were modified
to vest on July 1, 2006, an acceleration of about seven
months. Mr. Beck waives all claims he might have under the
Employment Continuation and Noncompetition Agreement, dated
December 11, 1998, among Mr. Beck, the Company and
Seneca. Mr. Beck also waives all claims he might have
against the Company as of the date he executed the Retirement
Agreement regarding his employment and the termination of his
employment as a result of his retirement. Mr. Beck will not
compete against the Company for a period of three years (from
July 1, 2006 through June 30, 2009), and will not
interfere with the Companys operations or induce any
employee or officer of the Company to leave the Company.
Mr. Beck will not utilize, communicate or divulge any of
the Companys trade secrets or confidential and proprietary
information.
Under the terms of the Consulting Contract, Mr. Beck will
provide to the Company and its subsidiaries geological and
geophysical consulting services, including consultation on well
placement, well design and prospect evaluation, relating to
offshore oil and gas exploration and production, as requested by
Seneca or another subsidiary of the Company. Mr. Beck will
provide consulting services as an independent contractor for a
period of three years beginning July 1, 2006. The amount of
consulting to be requested and performed by Mr. Beck will
be no more than 1,000 hours in each consecutive
twelve-month period beginning July 1, 2006, nor more than
100 hours in any calendar month. In the event Mr. Beck
fails or refuses to perform consulting services as reasonably
requested (including any failure because of death or
disability), the Company may terminate the Consulting Contract
upon 30 days notice to Mr. Beck. As
consideration for his services, Seneca will pay Mr. Beck an
annual fee of $200,000, payable in monthly increments of
one-twelfth (1/12) of the annual fee. Seneca or another
subsidiary of the Company may request that Mr. Beck provide
onshore geological and geophysical consulting services. If
Mr. Beck
24
performs such services, he will be paid an additional fee of
$200 per hour for each hour of requested onshore services
performed. Mr. Beck may also perform certain consulting
services for third parties, provided that he may not accept
employment from, or provide services to, any party if that party
could be construed to be in competition with the Company or one
of its subsidiaries. In the event that Mr. Beck
independently generates or acquires rights to sell or farm-out a
prospect or a portion thereof, separate from his work under the
Consulting Contract, Seneca has a first right of refusal to
acquire all or a portion of the prospect or interest to be sold
or farmed-out, on terms at least as favorable as those offered
and/or sold
to any third parties.
Seneca or another subsidiary of the Company will reimburse
Mr. Becks
out-of-pocket
expenses incurred in connection with the performance of services
under the Consulting Contract. Mr. Beck will not incur
expenses in excess of $200 in any day without Senecas
prior written approval. Mr. Beck agrees to keep all
information gathered, developed or communicated to him by the
Company or any of its agents, or acquired in connection with the
work performed, strictly confidential. Any breach of the
Consulting Contract will also be considered a breach of the
Retirement Agreement.
Retirement
Benefits
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 at
the normal retirement age of 65 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.
PENSION
PLAN TABLE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Annual Retirement Benefits
|
|
Remuneration
|
|
|
For Years Of Benefit Service Credited(1)(2)
|
|
(3)
|
|
|
20
|
|
|
25
|
|
|
30
|
|
|
35
|
|
|
40
|
|
|
$
|
300,000
|
|
|
$
|
97,812
|
|
|
$
|
122,265
|
|
|
$
|
146,718
|
|
|
$
|
162,659
|
|
|
$
|
178,600
|
|
|
560,000
|
|
|
|
187,242
|
|
|
|
234,052
|
|
|
|
280,863
|
|
|
|
311,785
|
|
|
|
342,707
|
|
|
820,000
|
|
|
|
276,672
|
|
|
|
345,840
|
|
|
|
415,008
|
|
|
|
460,911
|
|
|
|
506,813
|
|
|
1,080,000
|
|
|
|
366,102
|
|
|
|
457,628
|
|
|
|
549,153
|
|
|
|
610,036
|
|
|
|
670,920
|
|
|
1,340,000
|
|
|
|
455,532
|
|
|
|
569,415
|
|
|
|
683,298
|
|
|
|
759,162
|
|
|
|
835,026
|
|
|
1,600,000
|
|
|
|
544,962
|
|
|
|
681,203
|
|
|
|
817,444
|
|
|
|
908,288
|
|
|
|
999,133
|
|
|
1,860,000
|
|
|
|
634,393
|
|
|
|
792,991
|
|
|
|
951,589
|
|
|
|
1,057,414
|
|
|
|
1,163,239
|
|
|
2,120,000
|
|
|
|
723,823
|
|
|
|
904,778
|
|
|
|
1,085,734
|
|
|
|
1,206,540
|
|
|
|
1,327,346
|
|
|
|
|
(1) |
|
The service credited for retirement benefit purposes to the
officers named in the Summary Compensation Table, as of
September 30, 2006 is as follows: Mr. Ackerman,
38 years, 2 months; Mr. Smith, 28 years,
2 months; Mr. Tanski, 27 years, 6 months,
Mr. Pustulka, 32 years, 3 months;
Mr. Ramsdell, 30 years, 3 months. For
Mr. Seeley, the service credited for retirement benefit
purposes as of February 1, 2006, his retirement date, was
40 years. For Mr. Beck, the service credited for
retirement benefit purposes as of July 1, 2006, his
retirement date, was 17 years. |
|
(2) |
|
Benefits described in this table reflect a partial offset for
Social Security benefits. |
|
(3) |
|
Compensation covered for retirement benefit purposes differs
from the amounts appearing in the three annual
compensation columns of the Summary Compensation Table on
page 18, because the retirement benefits are based on the
average of the annual cash compensation (including
At Risk Awards, other performance-related lump-sum compensation
and certain restricted stock) payable for the 60 consecutive
month period during the last ten years before retiring which
produces the highest average. Accordingly, the current
compensation covered by the plans (meaning the average
annual cash compensation for the 60 months
ending September 2006) for the above named executive
officers was: Mr. Ackerman, $1,734,960; Mr. Smith,
$759,597; Mr. Tanski, $415,378; Mr. Pustulka,
$334,851; and Mr. Ramsdell, $331,851. The final average
salary for both plans for Mr. Seeley was $749,938 and was
$483,575 for Mr. Beck. |
The officers named in the Summary Compensation Table are not
participants in any other defined benefit or actuarial plan.
They are participants in defined contribution plans which would
normally pay out after retirement, namely (i) the Tax
Deferred Savings Plan (a 401(k) plan); (ii) the Deferred
Compensation Plan (under which those executives and other
selected management employees previously deferred part
25
of salary earned in previous years); (iii) the Tophat Plan;
and (iv) the Employee Stock Ownership Plan. The
Companys fiscal 2006 contributions to those plans are
itemized in footnote 3 to the Summary Compensation Table
starting on page 18. The officers named in the Summary
Compensation Table may also receive other post-retirement
benefits (medical, prescription, life insurance) in the same
manner as non-union retirees from the Companys utility
subsidiary who were hired before January 1, 2003. Such
retirees currently pay the Company an amount equal to the
required active employee contribution for medical and
prescription benefits in effect on the date of retirement.
2. APPOINTMENT
OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
At the 2007 Annual Meeting, stockholders will be asked to
approve the Audit Committees appointment of
PricewaterhouseCoopers LLP, as the independent registered public
accounting firm for the Companys fiscal year ending
September 30, 2007 (fiscal 2007). If approved
by the stockholders, PricewaterhouseCoopers LLP will examine the
financial statements of the Company and its subsidiaries and
report upon the annual consolidated financial statements for
fiscal 2007, as they did for fiscal 2006.
Representatives of that firm will not be attending this
years Annual Meeting. Therefore, no representative will be
available to answer questions or make a statement.
The affirmative vote of a majority of the votes cast with
respect to the appointment of the independent registered public
accounting firm by the holders of shares of Common Stock
entitled to vote is required for the appointment of
PricewaterhouseCoopers LLP as the independent registered public
accounting firm.
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 another independent registered public accounting
firm. Unless they are otherwise directed by the stockholders,
the Proxies intend to vote for the appointment of
PricewaterhouseCoopers LLP as the independent registered public
accounting firm.
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 Companys executive
compensation package has been the performance-based compensation
paid in accordance with the Companys Annual At Risk
Compensation Incentive Program (AARCIP). The Company
is now seeking the shareholder approval necessary to receive the
maximum tax benefit of continuing to pay performance-based
compensation under a revised AARCIP. Approval by the
Companys shareholders at least every five years is
necessary for Companys AARCIP payments to qualify as
performance-based compensation for the
Companys income tax purposes, as described below.
Background
The Companys AARCIP was established in 1993 and approved
in various forms at the 1995, 2000 and 2002 Annual Meetings.
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). The purposes of an At Risk Award 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 Companys ability to
attract and retain highly qualified persons for the successful
conduct of its businesses.
The Company is now asking for approval by the shareholders, at
the 2007 Annual Meeting, of the AARCIP included in this Proxy
Statement as Appendix E (the At Risk Plan).
Under the At Risk Plan, cash would continue to 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. The principal change
from previous versions of the AARCIP is that At Risk Awards have
previously been granted as one of the types of awards permitted
under either the 1993 Award and Option Plan (which
26
expired in 2003) or the 1997 Award and Option Plan (which
was scheduled to expire in December 2006 but is proposed to be
extended at the 2007 Annual Meeting). At previous Annual
Meetings, the shareholders approved relatively brief
Administrative Rules under one or the other of the Award and
Option Plans, which automatically incorporated into the At Risk
Awards a great many provisions applicable to all the types of
awards made under those plans. To make the AARCIP a stand-alone
plan, it has been necessary to add to the At Risk Plan document
some of the definitions and other provisions that have been
applicable to At Risk Awards since the inception of the program
in 1993.
The Company could simply pay cash bonuses to its executives
based on their performance, without having the bonus program
approved by the shareholders. However, for the Company to
receive the maximum tax benefit from compensation paid to its
executives, shareholder approval of the At Risk Plan 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. However, that section also
creates an exception to the $1 million limit 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 At Risk Plan (and the previous AARCIPs) must be
approved by the Companys shareholders (and reapproved at
least every five years). Consequently, some future executive
compensation may not be deductible by the Company unless the At
Risk Plan is approved by shareholders at the 2007 Annual Meeting.
Therefore, in order to ensure that as much as possible of the
Companys future executive compensation will constitute
performance-based compensation, and thus will be
fully deductible to the Company on its federal income tax
returns, shareholder approval of the At Risk Plan is being
sought at this time. The Board of Directors of the Company has
determined that approval of the At Risk Plan by the shareholders
is in the best interests of the Company and the shareholders.
The affirmative vote of a majority of the shares of Common Stock
present and voting at the meeting is required for approval of
the At Risk Plan.
Summary
of the At Risk Plan
The following is a summary of the At Risk Plan. A copy of the At
Risk Plan is included in this Proxy Statement as
Appendix E. The following summary is qualified in its
entirety by reference to Appendix E.
At Risk
Awards
Under the At Risk Plan, At Risk Awards granted by the Committee
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 other Company benefit plans.
Administration
The At Risk Plan 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).
The Committee has full authority to: interpret the At Risk 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 other Company
benefit plans; grant waivers of At Risk 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
27
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 At
Risk Plan or awards under any other executive compensation or
stock option plan of the Company or a Subsidiary. Neither the
Committee nor any delegate thereof has the authority to take any
action under the At Risk Plan which would result in the
imposition of an additional tax under section 409A of the
Code on the Eligible Employee holding an At Risk Award granted
hereunder.
Under the At Risk Plan, all determinations of the Committee will
be made by a majority of its members, and its determinations
will be final, binding and conclusive. The At Risk Plan
authorizes the Committee, in its discretion, to delegate its
authority and duties under the At Risk Plan with respect to At
Risk Awards to the Companys 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 four
Eligible Employees. An Eligible Employee who holds an
outstanding At Risk Award is referred to as a Participant.
Effective
Date
Upon approval of the At Risk Plan by the shareholders of the
Company at the 2007 Annual Meeting, the At Risk Plan will become
effective as of December 7, 2006.
Objective
Performance Goals
The Performance Goals of the At Risk Plan 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 2006, the Committee granted only one At
Risk Award, pursuant to which Mr. Ackerman 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. Mr. Ackerman, as Chief Executive Officer,
received payment based upon attainment of specified levels of
Company earnings per share (weighted as 55% of the formula),
long-term strategy, succession planning and long-term incentive
compensation goals (weighted as 10% of the formula), proved
developed and undeveloped reserves goals (weighted as 25% of the
formula) and customer service and safety goals (weighted as 10%
of the formula).
Historically, the At Risk Awards made by the Company have
typically been based on the recipients performance over a
Performance Period of two fiscal years with respect to earnings
per share. The At Risk Award payment to Mr. Ackerman for
2006 was based on a two-year Performance Period, and is shown in
the Summary Compensation Table on page 18 in the column
headed LTIP Payouts. When the Compensation Committee
sets the Performance Goals for a specific At Risk Award, it also
sets the Performance Period over which performance will be
measured, which could be any time period permitted by
Section 162(m) of the Internal Revenue Code.
The At Risk Plan 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) twice that employees
base salary for that fiscal year, or (ii) two million
dollars.
Grant of
At Risk Awards
The At Risk Plan provides that At Risk Awards may be made for
each of the fiscal years of the Company commencing with fiscal
2007. The At Risk Awards for a fiscal year may be made only
within the time allowed under Section 162(m) of the Code.
Payment
of At Risk Awards
Under the At Risk Plan, 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
28
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 At Risk Plan provides that if an Eligible Employees
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 At Risk Plan.
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 At Risk Plan 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
Employees 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 At Risk Plan
Subject to the shareholder approval requirements of
Section 162(m), the Committee may, from time to time, amend
the At Risk Plan in any manner.
Change in
Control and Change in Ownership
The At Risk 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 shareholders approve either a merger that
substantially changes the shareholders proportionate
ownership of the surviving company or a transfer of
substantially all of the Companys 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 At Risk Plan also
defines a Change in Ownership as a change which
results directly or indirectly in the Companys Common
Share 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 At Risk Plan, paragraph 8 of the At Risk
Plan determines 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 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
29
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.
Noncompetition
Unless the Award Notice specifies otherwise, a Participant shall
forfeit all unearned,
and/or
unpaid At Risk Awards, including At Risk Awards earned but not
yet paid, and all interest, if any, accrued on the foregoing if,
in the opinion of the Committee, the Participant,
(i) without the written consent of the Company, engages in
any manner in any business or activity competitive with the
business conducted by the Company or any Subsidiary; or
(ii) performs any act or engages in any activity which is
inimical to the best interests of the Company.
Nonassignability
No Award under the At Risk 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 domestic
relations court order), assignment, pledge, or encumbrance.
Following a permitted transfer, any such Award 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 paragraph 5 shall continue to be applied with
reference to the original Participant and following the
termination of employment of the original Participant, the
transferred Award shall be payable to the transferee only to the
extent, and for the periods specified in paragraph 5, that
the original Participant could have received payment of such
Award. Except as expressly permitted by the At Risk Plan, an
Award is payable during the Participants lifetime only to
him.
No Right
to Continued Employment or Grants
Participation in the At Risk Plan does 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 the At Risk
Plan does not give any person any right to be selected as a
Participant or to be granted an At Risk Award.
No Right,
Title or Interest in Company Assets
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.
Savings
Provision
The At Risk Plan is 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 At Risk Plan 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.
30
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 2006 for
the
2005-2006
performance period (Payments in 2007 for
2006-2007
performance are not yet determinable).
NEW PLAN
BENEFITS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maximum
|
|
|
|
AARCIP
|
|
|
AARCIP
|
|
|
|
Performance-
|
|
|
Performance-
|
|
|
|
Based
|
|
|
Based
|
|
|
|
Compensation
|
|
|
Compensation
|
|
Name and Position
|
|
Paid for 2006(1)
|
|
|
Possible for 2006(2)
|
|
|
Philip C. Ackerman
|
|
$
|
783,750
|
|
|
$
|
1,650,000
|
|
Chief Executive Officer
|
|
|
|
|
|
|
|
|
David F. Smith
|
|
$
|
0
|
|
|
$
|
0
|
|
President and Chief Operating
Officer
|
|
|
|
|
|
|
|
|
Ronald J. Tanski
|
|
$
|
0
|
|
|
$
|
0
|
|
Treasurer and Principal Financial
Officer
|
|
|
|
|
|
|
|
|
James A. Beck
|
|
$
|
0
|
|
|
$
|
0
|
|
President of Seneca Resources
Corporation until 7/1/06
|
|
|
|
|
|
|
|
|
Dennis J. Seeley
|
|
$
|
0
|
|
|
$
|
0
|
|
President of National Fuel Gas
Distribution Corporation until 2/1/06
|
|
|
|
|
|
|
|
|
James D. Ramsdell
|
|
$
|
0
|
|
|
$
|
0
|
|
Senior Vice President of National
Fuel Gas Distribution Corporation
|
|
|
|
|
|
|
|
|
John R. Pustulka
|
|
$
|
0
|
|
|
$
|
0
|
|
Senior Vice President of National
Fuel Gas Supply Corporation
|
|
|
|
|
|
|
|
|
All current executive officers as
a group (9 persons)
|
|
$
|
783,750
|
|
|
$
|
1,650,000
|
|
All non-employee directors as a
group (8 persons) as of December 31, 2006
|
|
$
|
0
|
|
|
$
|
0
|
|
All other employees, including all
current officers who are not executive officers, as a group
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
|
(1) |
|
At Risk Awards under the AARCIP represent cash payments actually
made in 2006 for the
2005-2006
Performance Period. Payments for the
2006-2007
Performance Period under the AARCIP are not yet determinable. |
|
(2) |
|
The maximum At Risk Award Payment which could have been made
under the Amended AARCIP to all persons who received At Risk
Awards based on the
2005-2006
Performance Period, if the Amended AARCIP had been in effect. |
The Board
of Directors recommends a vote FOR this proposal
4. AMENDMENTS
TO THE COMPANYS 1997 AWARD AND OPTION PLAN
We are seeking your approval of amendments to our 1997 Award and
Option Plan (the 1997 Plan) (1) to extend the
term of the 1997 Plan until March 31, 2012, (2) to
increase the number of shares available to be issued under the
1997 Plan by one million shares, (3) to permit the
Compensation Committee to grant stock appreciation rights
settleable in stock to all eligible employees, (4) to
require generally a minimum three-year period between the grant
date and the vesting of any new awards of stock options and
stock appreciation rights that are to become vested without
regard to the achievement of specified performance criteria,
(5) to provide for the granting of performance-based stock
options and stock appreciation rights, (6) to no longer
recycle that is, make available for
future grants certain shares that are
surrendered to the Company in connection with the exercise or
vesting of awards.
31
Reasons
for and Summary of the Proposed Amendments
The 1997 Plan, which authorizes for issuance an aggregate of
12,509,100 shares, was initially scheduled to expire
December 12, 2006. The Board amended the 1997 Plan to
extend its term through February 15, 2007, the date of our
scheduled annual meeting of shareholders (and through any
adjournment of that meeting), so that we could seek your
approval of an approximately five-year extension of the term of
the 1997 Plan. We are asking for an extension to March 31,
2012 so that the extended term would be expected to expire just
after the annual shareholders meeting in 2012. While the Board
extended the 1997 Plan for about two months to enable you to act
on our request for a significant extension, no awards were
permitted to be granted after December 12, 2006. Thus, the
rights of the approximately 100 management employees and
retirees who hold outstanding stock options or restricted stock
have not been enhanced by this interim extension.
In connection with this extension we are also seeking your
approval to make available for additional awards under the 1997
Plan one million additional shares, of which no more than
250,000 shares can be issued as restricted stock.
We are asking for this extension and the additional shares
authorization because we strongly believe that a significant
part of management compensation should be in the form of equity
awards that directly align the interests of key executives and
other key management employees with the interests of the
Companys shareholders in growing the market value of the
Common Stock. Equity awards are especially important with
respect to the leadership of the Companys oil and gas
exploration and production business segment, which operates in
an environment where larger equity awards are necessary to
attract and retain key management employees than is customary
with the regulated pipeline and utility industries. The
consideration to be received by the Company for future grants of
options or stock appreciation rights is the services of the
officers and employees who will receive those grants.
We also strongly believe in tying a significant part of
management compensation to performance, and equity awards help
to achieve that objective. Moreover, the proposed amendments
contemplate that future awards of stock options and stock
appreciation rights will generally have their vesting and
exercisability linked to the achievement of specified
performance objectives. These performance-based awards will
generally not vest or become exercisable until the objective
performance goal or goals specified in the Award Notice have
been achieved. The proposed amendments contain a list of various
objective performance measures for the Compensation Committee to
choose from in setting the performance criteria that would be
applicable to these future awards. The Committee will still have
the power to grant stock options and stock appreciation rights
that are not performance based, but intends to use that
authority in limited circumstances.
In seeking your approval of these amendments, we have been
cognizant that such programs should not excessively dilute the
Common Stock by issuing too many additional shares. We have
carefully considered how best to reconcile these conflicting
concerns, and believe these amendments reflect a proper balance,
with the objective of utilizing most efficiently the shares
authorized by the shareholders. An important factor in our
analysis is the large number of stock options that will either
be exercised or will expire during each of the next five
calendar years:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Calendar Year
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
2010
|
|
|
2011
|
|
Options Scheduled to Expire
(calculated as of 12/18/06)
|
|
|
|
1,028,821
|
|
|
|
1,045,340
|
|
|
|
52,600
|
|
|
|
3,275,703
|
|
|
|
708,786
|
|
These option expirations will more than counterbalance the
dilutive effect of our proposed addition of one million shares
to the pool of shares available to be issued under the 1997 Plan.
Other proposed amendments are intended to make the best possible
use of the pool of shares available to be issued under the 1997
Plan. One proposed amendment requires that, to the extent that
any such award would become exercisable without regard to any
performance criteria, a minimum of three years of additional
service would be required for a Participant to realize the value
of that Award. This change is intended to assure that Awards
will serve as a long-term incentive rather than a source of
quick cash.
The proposed amendments that will allow us to issue stock
appreciation rights settled in stock will help us to use the
available pool of shares most efficiently in light of recent
changes to the accounting rules applicable to equity-based
compensation. In 2006, changes in the financial accounting rules
applicable to
32
equity-based compensation awards took effect that treat stock
options and stock appreciation rights settled in stock on
exactly the same basis. Previously, stock options granted
without a discount in the applicable exercise price could be
awarded without any financial accounting charge. But stock
appreciation rights, whether settled in cash or stock, were
treated as variable awards, resulting in the periodic
recognition of financial accounting charges that reflected any
increases in the value of our stock from the date of grant. So,
if the award worked to achieve its objective to
increase the value of our stock the Company suffered
an adverse financial accounting charge as compared to an
economically identical grant of a stock option. Shareholders may
recall that, because of the adverse accounting treatment
associated with stock appreciation rights, the Company called a
special shareholders meeting in 2001 to eliminate future grants
of such rights and to receive approval to convert outstanding
stock appreciation rights into non-qualified stock options. The
presently proposed amendments would reinstate the
Committees ability to grant stock appreciation rights,
except that the difference between the fair market value of our
Common Stock at the date of exercise of the rights and the fair
market value of the Common Stock at the date of grant will be
distributed in shares of Common Stock, rather than in cash.
Because of the difference in accounting treatment between stock
options and stock appreciation rights, a technique was developed
in the marketplace that enabled employees to receive cash from a
stock option on a basis substantially comparable to a
cash-settled stock appreciation right. This
technique commonly referred to as a cashless
exercise or same day
sale combined the exercise of a stock
option with an immediate market sale of the underlying stock,
resulting in the employee receiving the same net cash benefit.
Under this technique, however, the employer granting the option
was required to issue the full number of shares subject to the
option. Thus, to provide the same net benefit of a stock
appreciation right required that the Company incur the dilution
related to the entire stock option award. In other words, when
an employee does a cashless exercise of 1000 options, the
Company issues 1000 shares of stock, even though the net
benefit to the employee may equal the value of only a few
hundred shares.
With the change in accounting treatment to equate stock options
and stock settled stock appreciation rights, there is no
financial accounting advantage to using stock options and
issuing the greater number of shares. Accordingly, our
intention, on a going-forward basis, is to utilize stock settled
stock appreciation rights instead of granting new stock options,
so we are requesting approval to authorize such awards on the
terms and conditions set forth below. However, for purposes of
determining the number of shares that may be subject to Awards
granted under the 1997 Plan, we will still count the aggregate
number of stock appreciation rights awarded and not
just the net number of shares issued. Thus, the dilution
savings of using stock appreciation rights will run
directly to the benefit of shareholders.
Our proposed changes to the 1997 Plans share counting
rules are intended to eliminate some provisions that have been
in our stock option plans for many years, and that have commonly
been used in competitive practices, which are now called
recycling and opposed by some corporate governance
commentators. Under the 1997 Plan and most stock option plans, a
Participant can pay the option exercise price or his minimum tax
withholding by using shares of Company common stock, and the
Company would cancel those shares of stock. Before the currently
proposed amendments, the surrendered or canceled shares would be
added back to the shares available for issuance under the 1997
Plan. Similarly, if any shares subject to any such Award had
been otherwise settled for a payment in cash, the corresponding
shares would again have become available for grant under the
1997 Plan. Making these shares available to be granted as new
Awards did not increase the dilution of the outstanding stock,
because each share added back into the 1997 Plan was matched by
an actual share that was actually cancelled. Nevertheless, this
recycling process has come under criticism by some,
and we are responding by eliminating the practice with respect
to shares that are cancelled because they are used to pay the
exercise price or taxes.
We have also amended the 1997 Plan to eliminate the authority to
grant dividend equivalents in respect of stock options. We have
never used this authority with respect to any of the options
granted under the 1997 Plan, and believe that doing so would not
further the objectives of the 1997 Plan.
On December 7, 2006, the Board of Directors adopted the
amendments to the 1997 Plan summarized above subject to approval
by the common stockholders at this 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
into this Proxy Statement as Appendix F.
The principal terms of the 1997 Plan are summarized below.
33
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 administrative rules, regulations and procedures,
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 those
Plans, in certain circumstances, to the Chief Executive Officer
and other senior officers of the Company. Under the amended 1997
Plan, the Committee will no longer have the authority to grant
replacement or repriced awards except in the limited
circumstances described below under the heading Adjustment of
Shares Available.
Eligibility
for Participation
All Core Employees and Key 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. Under the 1997 Plan, Key Management
Employees (select highly compensated employees) are the
only people eligible to receive restricted stock.
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 or under the applicable
requirements of any exchange on which the stock is listed to
trade.
Shares Available
for Grant
As amended, the 1997 Plan authorizes the Committee to grant
awards through March 31, 2012. Subject to equitable
adjustment, 13,509,100 shares of Common Stock of the
Company would be authorized for issuance under the 1997 Plan
after the 2007 Annual Meeting if the shareholders approve the
proposed amendments. This is an increase of one million shares
over what the shareholders have authorized before the 2007
Annual Meeting. The total number of authorized shares reflects
the 3,800,000 shares originally authorized for issuance
under the 1997 Plan, as adjusted to reflect a stock split in
2001, and an amendment to the 1997 Plan to authorize 4,909,100
additional shares approved by shareholders in 2001.
Of the authorized shares, only 250,000 may be used for Awards of
restricted stock on or after February 15, 2007. The
remaining authorized shares may be used only in connection with
grants of stock option and stock appreciation rights. As of
December 18, 2006, there were outstanding unexercised 1997
Plan option awards in respect of 8,931,670 shares, and
156,373 shares were available for issuance in respect of
additional awards. As of December 18, 2006, the fair market
value of a share of our common stock, determined based on the
average of the high and low prices of the stock on that day, was
$39.89.
Before the 2007 Annual Meeting when a stock option was exercised
using previously owned shares, or the applicable tax withholding
was effected using shares that are issuable in respect of such
award, the surrendered or withheld shares were added back to the
shares available for issuance under the 1997 Plan. Similarly, if
any shares subject to any such prior award were settled for a
payment in cash, the corresponding shares would again have
become available for grant under the 1997 Plan. Following
approval of the proposed amendments at the 2007 Annual Meeting,
shares used to exercise options or to satisfy tax withholding
obligation, or related to awards settled in cash or for other
consideration will no longer become available for grants under
the 1997 Plan. However, any shares that relate to Awards that
lapse, expire or are forfeited for any other reason will again
be available for grants under the 1997 Plan.
34
No participant in the 1997 Plan may receive awards covering more
than 600,000 shares of Common Stock of the Company in any
fiscal year. This maximum limit is subject to equitable
adjustment in the event of a stock split, stock dividend,
merger, reorganization or other transaction affecting our
capital stock.
Type 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); and (3) restricted shares of our common
stock. Such awards may be granted singly or in combination, as
determined by the Committee.
Stock
Options
Under the 1997 Plan, the Committee may grant awards to Key
Employees or Core Employees in the form of stock options to
purchase shares of the Companys Common Stock. Stock
options granted under the 1997 Plan after February 15, 2007
will be non-qualified stock options. 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 options 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 Companys Common Stock on the
date of the stock options grant. Unless the award notice
provides a shorter period, each non-qualified stock option shall
expire on the day after the tenth anniversary of the grant. In
no event shall a non-qualified stock option be exercisable later
than the exercise period set forth in the award notice. Unless
the award notice provides otherwise, any non-qualified stock
option which has not previously expired shall terminate upon
termination of the Participants employment with the
Company by either (i) voluntary resignation before his or
her 60th birthday, or (ii) discharge for cause. A
Participant who resigns on or after his or her
60th birthday (a Retiree) may exercise all or
part of the Retirees non-qualified stock options as
described in this paragraph. A Retiree may exercise any
non-qualified stock option which the Retiree was entitled to
exercise on the date the Retirees employment terminates,
and may also exercise any non-qualified stock option which the
Retiree subsequently becomes eligible to exercise. A Retiree may
exercise non-qualified stock options no later than the fifth
anniversary of the Retirees resignation, or such later
date as the Committee, in its sole discretion, deems appropriate
(the Post-Termination Exercise Period). A
Participant whose employment is terminated not for cause is
treated the same as a Retiree for the purposes described in this
paragraph. 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, or otherwise engages in activity which in the
Committees opinion is inimical to the best interests 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 Post-Termination Exercise Period, the
Participants estate or the person to whom the
Participants 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 Participants
death while employed, or within the Post-Termination Exercise
Period, exercise all or part of the non-qualified stock option
which the Participant was entitled to exercise on the date of
death.
With some exceptions described below, each non-qualified option
issued on or after February 15, 2007 shall first become
exercisable on the third anniversary of its date of grant, or if
earlier (i) on the date of the Participants death
occurring after the date of grant; (ii) six months after
the date of grant, if the Participant is a Retiree who retired
after the date of grant, and before such six months; or
(iii) on the date of a Retirees retirement and at
least six months after the date of grant. The exceptions are
that, if an Award Notice so provides, stock options may become
exercisable on an earlier date if awarded on or after
February 15, 2007 (i) in connection with a merger or
acquisition to a Participant who joins the Company or a
Subsidiary as the result of a merger or acquisition, or
(ii) to a Participant as part of his initial inducement to
join the Company or a Subsidiary. Similarly, the minimum three
year service requirement would not apply in the event of a
change of control, or in the event that performance criteria
related to the exercise of any stock options are satisfied at an
earlier point in time. Subject to the exceptions described
earlier in this paragraph, unless the Award Notice provides
otherwise, stock options issued on or after February 15,
2007 shall be exercisable only upon attainment (as determined by
the Committee or its delegate) of performance goals during
performance periods established by the Committee. The
performance goals would
35
selected by the Committee from one or more of the performance
criteria discussed below under the heading Performance
Criteria. Upon exercise of a stock option 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. The 1997
Plan also allows options to be exercised using the so-called
cashless exercise of options by payment of the
exercise price from the sale proceeds of a portion of the shares
otherwise receivable upon exercise of the option.
No stock option issued under the 1997 Plan can be repriced by
reducing the exercise price after the options are granted,
except in the limited circumstances described below under the
heading Adjustment of Shares Available.
Stock
Appreciation Rights
A SAR is a right to receive payment in shares of Common Stock
equal to the appreciation in fair market value of a stated
number of shares of Common Stock from the SARs exercise
price to the fair market value on the date of its exercise. SARs
may not be repriced by decreasing the SARs exercise price
after the award date, except in the limited circumstances
described below under the heading Adjustment of
Shares Available. The 1997 Plan authorizes the Committee to
grant SARs to Key Management Employees or Core Employees.
With some exceptions described below, each SAR issued on or
after February 15, 2007 shall first become exercisable on
the third anniversary of its date of grant, or if earlier
(i) on the date of the Participants death occurring
after the date of grant; (ii) six months after the date of
grant, if the Participant is a Retiree who retired after the
date of grant, and before such six months; or (iii) on the
date of a Retirees retirement and at least six months
after the date of grant. The exceptions are that, if an Award
Notice so provides, SARs may become exercisable on an earlier
date if awarded on or after February 15, 2007 (i) in
connection with a merger or acquisition to a Participant who
joins the Company or a Subsidiary as the result of a merger or
acquisition, or (ii) to a Participant as part of his
initial inducement to join the Company or a Subsidiary.
Similarly, the minimum three year service requirement would not
apply in the event of a change of control, or in the event that
performance criteria related to the exercise of any SARs are
satisfied at an earlier point in time. Subject to the exceptions
described earlier in this paragraph, unless the Award Notice
provides otherwise, SARs issued on or after February 15,
2007 shall be exercisable only upon attainment (as determined by
the Committee or its delegate) of performance goals during
performance periods established by the Committee. The
performance goals would selected by the Committee from one or
more of the performance criteria discussed below under the
heading Performance Criteria. The Committee would
determine the number of shares subject to the SAR, the manner
and time of the SAR may be exercised, and the exercise price of
the SAR. However, the exercise price of a SAR will in no event
be less than the fair market value of the Common Stock on the
date of the grant of the SAR. Unless the Award Notice provides a
shorter period, each SAR shall expire ten years and one day
after its date of grant.
Restricted
Stock Awards
The 1997 Plan authorizes the Committee to grant awards to Key
Management Employees in the form of 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. Unless the Award Notice provides otherwise, any
restricted stock issued after February 16, 2007 shall be
conditioned upon attainment (as determined by the Committee) of
performance goals established pursuant to one or more of
performance criteria discussed below under the heading
Performance Criteria. 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. No more than 100,000
restricted shares can be issued from the 1997 Plan in a fiscal
year. The 1997 Plan gives the Committee the discretion to
accelerate the delivery of shares of such awards.
Performance
Criteria
The performance measure(s) to be used for purposes of stock
options, SARs and restricted stock issued after
February 15, 2007 shall include one or more measures chosen
from among the following, as applied to the Company or to any
Subsidiary or combination of Subsidiaries: (a) earnings per
share; (b) net
36
income (before or after taxes); (c) return measures
(including, but not limited to, return on assets, equity or
sales); (d) cash flow return on investments which equals
net cash flows divided by owners equity; (e) earnings
before or after taxes, depreciation
and/or
amortization; (f) gross revenues; (g) operating income
(before or after taxes); (h) total shareholder return;
(i) corporate performance indicators (indices based on the
level of certain expenses, certain objectively measurable
operational events or certain services provided to customers);
(j) cash generation, profit
and/or
revenue targets; (k) growth measures, including revenue
growth, reserve growth or reserve replacement, as compared to a
peer group or other benchmark;
and/or
(l) share price (including, but not limited to, growth
measures and total shareholder return). In setting performance
goals using these performance measures, the Committee may
exclude the effect of changes in accounting standards and
non-recurring unusual events specified by the Committee, such as
write-offs, capital gains and losses, and acquisitions and
dispositions of businesses.
Other
Terms of Awards
If an award is granted in the form of restricted stock, 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
Committees 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.
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 Companys 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 any 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.
For this purpose, the shares to be withheld shall be valued at
the fair market value on the date the award is exercised or, in
the case of restricted stock, vests.
Nonassignability
All awards under the 1997 Plan may not be transferred (except by
will or the laws of descent and distribution or pursuant to an
appropriate court order), and during a Participants
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
Participants 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.
37
Change in
Control/Change in Ownership
In the event of a Change in Control (as defined below), a
Participant whose employment is terminated within two years of
the date of such event for a reason other than death,
disability, Cause (as defined in the 1997 Plan), voluntary
resignation other than for Good Reason (as defined below) 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 Participants outstanding awards would
immediately lapse; (ii) all of the Participants
outstanding awards would automatically become one hundred
percent vested; and (iii) all of the Participants
outstanding stock options, SARs and restricted stock would
immediately vest and the options and SARs would be immediately
cashed out on the basis of the Fair Market Value of the Common
Stock on the Acceleration Date (as defined in the Plan). Such
payments would be made as soon as possible, but no later than
the 90th day following such event.
For purposes of the 1997 Plan, a Change in Control shall occur
whenever:
(i) any person, other than the Company, one of our
subsidiaries, or any employee benefit plan or plans sponsored by
the Company or any such subsidiary, is or has become the
beneficial owner 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,
(ii) our stockholders approve
(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,
(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 constituted 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 who has become a director subsequent to
January 1, 1997 or who hereafter becomes a director and
whose election, or nomination for election, was approved by a
vote of at least three-quarters ( 3/4) of the directors
comprising the Incumbent Board shall be considered as though
such person were a member of the Incumbent Board.
A participant in the 1997 Plan shall have Good
Reason to terminate employment if he or she shall make a
good faith determination that there has been any
(i) material change in the participants functions,
duties or responsibilities which change could significantly
impair the participants position with the Company;
(ii) assignment or reassignment of the participant, without
his or her consent, to another place of employment more than
30 miles from the participants prior place of
employment, or (iii) reduction in the participants
total compensation or benefits or any component thereof.
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 Companys 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.
38
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 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, and the exercise price of outstanding
SARs, 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 the
shares upon exercise, and (b) the amount of gain realized
on the sale. 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 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. The Company is entitled to a
corresponding deduction for the same amount.
The grant of a stock appreciation right will produce no federal
tax consequences for the Participant or the Company. The
exercise of a stock appreciation right results in taxable income
to the participant, equal to the difference between the exercise
price of the stock appreciation right and the fair market value
of a share on the date of exercise, and a corresponding
deduction to the Company.
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 subject to the limitations imposed under
Section 162(m) of the Code.
39
New Plan
Benefits Table
The 1997 Plan authorized the Compensation Committee to make
awards within the limits contained in the 1997 Plan, including a
limit on the number of shares available for such awards. The
Compensation Committee has made no preliminary determinations on
who would get how many awards under the 1997 Plan after the 2007
Annual Meeting. Information on option grants to the named
executive officers during fiscal 2006 is contained in the Option
Grants in Fiscal 2006 table on page 20 of this Proxy
Statement. The following table contains additional information
about grants of stock options under the 1997 Plan during fiscal
2006, the most recently completed fiscal year.
NEW PLAN
BENEFITS
|
|
|
|
|
|
|
|
|
Name and Position
|
|
Dollar Value
|
|
|
Number of Units
|
|
|
Philip C. Ackerman
|
|
$
|
666,690
|
|
|
|
100,000
|
|
Chief Executive Officer
|
|
|
|
|
|
|
|
|
David F. Smith
|
|
$
|
366,845
|
|
|
|
55,000
|
|
President and Chief Operating
Officer
|
|
|
|
|
|
|
|
|
Ronald J. Tanski
|
|
$
|
240,116
|
|
|
|
36,000
|
|
Treasurer and Principal Financial
Officer
|
|
|
|
|
|
|
|
|
James A. Beck
|
|
$
|
0
|
|
|
|
0
|
|
President of Seneca Resources
Corporation until 7/1/06
|
|
|
|
|
|
|
|
|
Dennis J. Seeley
|
|
$
|
0
|
|
|
|
0
|
|
President of National Fuel Gas
Distribution Corporation until 2/1/06
|
|
|
|
|
|
|
|
|
James D. Ramsdell
|
|
$
|
80,039
|
|
|
|
12,000
|
|
Senior Vice President of National
Fuel Gas Distribution Corporation
|
|
|
|
|
|
|
|
|
John R. Pustulka
|
|
$
|
80,039
|
|
|
|
12,000
|
|
Senior Vice President of National
Fuel Gas Supply Corporation
|
|
|
|
|
|
|
|
|
All current executive officers as
a group (9 persons)(1)
|
|
$
|
1,677,480
|
|
|
|
251,500
|
|
All non-employee directors as a
group (8 persons)
|
|
$
|
0
|
|
|
|
0
|
|
All other employees who are not
executive officers, including all current officers who are not
executive officers, as a group(2)
|
|
$
|
995,918
|
|
|
|
81,500
|
|
|
|
|
(1) |
|
The Companys executive officers are listed in the
Companys 2006 Annual Report and
Form 10-K
which accompanies this Proxy Statement. All the Companys
executive officers are eligible to receive awards under the 1997
Plan and therefore have a substantial interest in this matter. |
|
(2) |
|
Reflects 65,500 options issued and valued at $6.6699/share
Grant Date Present Value; and 16,000 restricted
stock valued at $34.94/share (fair market value at grant date). |
The Board
of Directors recommends a Vote FOR the above proposal
5. SHAREHOLDER
PROPOSAL
A shareholder (the Proponent) has indicated that he
or she will present the proposal set forth below for
consideration by the shareholders at the Annual Meeting. The
name, address and stock ownership of the Proponent will be
provided by the Companys Secretary to any shareholder
promptly upon receipt of any oral or written request. The
affirmative vote of a majority of the votes cast on this
proposal by the holders of Common Stock entitled to vote is
required to adopt this proposal.
The stockholders recommend that the Board undo the large
increases in compensation payable to non-employee directors, and
restore the compensation program in effect in fiscal 2003, for a
minimum of 3 years, and that these changes occur effective
beginning April 1, 2007. There is one exception
Committee chairmen would receive no extra compensation (and
certainly not the excessive $7,500 per year now in effect)
for service as such. This means that non-employee directors
would receive the following annual compensation:
|
|
|
|
|
Cash retainer of $20,000.
|
|
|
|
Company common stock retainer of 1,200 shares.
|
40
|
|
|
|
|
$1,500 per Board meeting attended.
|
|
|
|
$1,200 per Board Committee meeting attended.
|
|
|
|
$600 per special consultation at request of CEO.
|
Further, the stockholders recommend that any later increases in
non-employee director compensation not be payable until after
(if) directors are reelected.
My stockholder proposal is necessary for these reasons.
In December 2004, non-employee directors greatly increased their
own compensation, without seeking stockholder approval. The
annual cash retainer was increased by 30% to $26,000, and the
compensation paid per Board and committee meeting was increased
by 20% and 50% respectively, to $1,800. In fiscal 2005, the
annual compensation of non-employee directors who attend 6
meetings of the Board (the number held in 2005) as well as
8 meetings of the Compensation Committee (the number held in
2005) was approximately $95,000, an outrageous amount for
attending a few meetings and reading a few documents.
Some non-employee directors (e.g., Committee chairman) will
receive more than $100,000 in fiscal 2006.
These figures are computed using a recent Company stock price of
$37 per share.
Current compensation levels are even more outrageous when the
following are considered:
|
|
|
|
|
There is no public indication that anyone undertook any study
justifying these large compensation increases. Further, there is
no evidence that the Company has had difficulties attracting and
retaining directors. After all, who wouldnt want to
receive close to $100,000 per year for a few days
work?
|
|
|
|
The Board has been derelict. It permitted Bernard Kennedy,
recently retired CEO, to plunder the Company in the amount of
approximately $67 million. (This is approximately the total
value of the cash, benefits, stock, stock options etc. provided
and promised to Kennedy respecting his time as Company CEO and
retiree. These figures are derived from public filings.) Kennedy
was paid $23 million (cash) in 2004 alone.
|
|
|
|
The Board has been imprudent in maintaining and increasing
executives benefits, while the unfunded portion of
executive and employee benefits exceeds $483 million
(fiscal 2005 year end).
|
|
|
|
As the Companys February 9, 2006
10-Q
indicates (page 35), the Company recently settled
allegations of fraudulent conduct, by paying a large sum.
|
|
|
|
As the front page article in the July 2, 2006 edition of
the Buffalo News indicates, the Company has its own stock
option backdating scandal.
|
Thus, the directors allowed misconduct to flourish, were
derelict in their duties, and dont deserve reelection much
less such rich pay packages.
My Proposal will reduce waste and save the Company money, and
should be approved.
Statement
of the Board in Opposition to the Shareholder Proposal
Your Board of Directors recommends that you vote
AGAINST this proposal. The proposal is unnecessary,
unwise and is motivated by the personal grievances of the
Proponent, who is the life companion of a disgruntled
ex-employee who has repeatedly submitted similar proposals since
1998. This proposal is part of that ex-employees
long-running vendetta against the Company and certain of its
officers and directors. In the course of that campaign, that
ex-employee has violated numerous court orders, for which
various courts have found him guilty of more than 80 counts of
civil contempt of court and 35 counts of criminal contempt.
Nevertheless, the rules of the SEC require us to include the
Proponents proposal and supporting statement.
If the Proponents proposal had been in effect throughout
fiscal year 2006, the total savings to the Company would have
been less than $160,000, taken from among the seven individuals
who served as outside directors in fiscal 2006. The Boards
compensation is described on page 8 of this Proxy Statement.
Last year, the Proponents almost identical proposal
received only 9.7% of the votes cast on it. The recommendation
of Institutional Shareholders Services (ISS) published on
January 31, 2006 was to vote
41
against last years proposal. ISSs recommendation
noted that the Companys directors were paid less than the
median of the director compensation for the peer group selected
by ISS, and that it appears that director compensation was
not out of line with peers. The level of director fees for
compensation of the Companys outside directors has not
been changed since January 2005.
The compensation received by your outside directors was
marginally increased effective January 1, 2005 after a
review of the same peer group of 11 companies used for
evaluating executive compensation (see the Report of the
Compensation Committee on pages 14-17 of this Proxy
Statement). In December 2004, the Companys outside
directors were being paid below the median of the
11 companies in that peer group, ranking seventh among 11.
The modest increase effective January 1, 2005 moved the
Company up to sixth (exactly the median) among those 11 peer
companies. Comparing to a wider group of publicly traded
companies, in fiscal 2006 your outside directors were on average
paid only 64% of the 2005 median compensation for directors of
the 350 companies in the Mercer 350.
Contrary to the Proponents misconception, there are more
than a few days of work involved in being a director
of a publicly traded company in the post-Enron,
post-Sarbanes-Oxley era. In fiscal 2006, the Audit Committee met
nine times and the Compensation Committee met six times. One
outside director attended seven board meetings and 18 committee
meetings in fiscal 2006. Substantial preparation for these
meetings and substantial potential liability are integral parts
of public company board membership.
Your Board of Directors consists of individuals with many years
of successful experience in various segments of the natural gas
industry. Their skill, judgment and dedication are evidenced by
the performance of the Companys stock as shown by the
Corporate Performance Graph set forth on page 22 of this
Proxy Statement. Much of their compensation is in the form of
Company Stock which they must retain until after they leave the
Board, and their holdings of Company Stock are set forth on
pages 11-12 of this Proxy Statement. Their interests are
aligned with the stockholders, and they are well worth the
compensation they receive from the Company.
The Board of Directors recommends a vote AGAINST
this proposal.
SECTION 16(a)
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934
requires the Companys directors and officers, and persons
who own more than 10% of a registered class of the
Companys equity securities, to file reports of ownership
and changes in ownership with the SEC and the NYSE. 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/or
written representations that no Form 5 was required, the
Company believes that all Section 16(a) filing requirements
applicable to its officers, directors and greater-than 10%
beneficial owners were complied with during fiscal 2006, except
as described below.
All of the Section 16(a) reports filed by director Rolland
E. Kidder regarding transactions in fiscal 2005 and 2006 timely
and accurately disclosed the total number of shares of Company
stock owned by him. However, some filings have inadvertently
contained errors in designating the respective number of shares
held by him directly and indirectly. SEC
rules consider the Company stock held in the joint stock
brokerage account maintained by Mr. Kidder and his wife to
be directly owned by Mr. Kidder, and the
Company stock registered in Mrs. Kidders name or held
in her stock brokerage account to be indirectly
owned by Mr. Kidder. Mr. and Mrs. Kidder are a
happily married couple who file joint tax returns and generally
handle their finances as a joint pool of assets and expenses.
Miscommunication among the stockbroker, Mr. Kidder and the
Company personnel who prepare Mr. Kidders 16(a)
reports resulted in the necessary correction of some of his
16(a) reports, which are therefore considered not to have been
filed on a timely basis. Specifically,
Mr. Kidder filed on December 28, 2006,
Section 16(a) reports to report (i) the movement in
2005 of 8,500 shares from the joint account (direct) into
Mrs. Kidders account (indirect), and
2,165 shares from her account (indirect) into the joint
account (direct), both considered gifts because no
money or other consideration changed hands; and (ii) the
correction of a report disclosing sale into the market of 1,500
indirectly owned shares in 2006, which was corrected to report
that transaction as a sale of shares directly owned by
Mr. Kidder.
42
CODE OF
ETHICS
Pursuant to SEC Regulations, the Company has adopted a code of
ethics that applies to the Companys principal executive
officer, principal accounting officer, controller, other
officers and employees that is designed to deter wrongdoing and
to promote honest and ethical conduct. The text of the code of
ethics can be viewed by going to the Companys website
www.nationalfuelgas.com. Upon request, the Company will provide
to any person without charge a copy of the code of ethics.
Requests must be made to the Secretary at the principal offices
of the Company.
DELIVERY
OF PROXY MATERIALS TO HOUSEHOLDS
Only one copy of the Companys Proxy Statement for the 2007
Annual Meeting of Stockholders and one copy of the
Companys Annual Report and
Form 10-K
for the 2006 fiscal year are being delivered to multiple
stockholders who share an address unless the Company has
received contrary instructions from one or more of the
stockholders. A separate proxy card and a separate notice of the
meeting of stockholders are being included for each account at
the shared address.
Registered stockholders who share an address and would like to
receive a separate annual report to stockholders
and/or a
separate proxy statement for the 2007 Annual Meeting or in the
future, or have questions regarding the householding process,
may contact the Companys transfer agent, The Bank of New
York, by calling
1-800-648-8166
or by forwarding a written request addressed to The Bank of New
York, 101 Barclay St., 11 East, New York, NY 10286. Promptly
upon request, additional copies of the Companys Annual
Report and
Form 10-K
for the 2006 fiscal year
and/or
separate Proxy Statements for the 2007 Annual Meeting will be
sent. By contacting The Bank of New York, registered
stockholders sharing an address can also request delivery of a
single copy of annual reports to stockholders or proxy
statements in the future if registered stockholders at the
shared address are receiving multiple copies.
Many brokerage firms and other holders of record have also
instituted householding procedures. If your family has one or
more street name accounts under which you
beneficially own shares of Common Stock, you may have received
householding information from your broker, financial institution
or other nominee in the past. Please contact the holder of
record directly if you have questions, require additional copies
of the Proxy Statement or our Annual Report to Stockholders for
fiscal 2006 or wish to revoke your decision to household and
thereby receive multiple copies. You should also contact the
holder of record if you wish to institute householding. These
options are available to you at any time.
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.
PROPOSALS OF
SECURITY HOLDERS
Proposals that security holders intend to present at the 2008
Annual Meeting of Stockholders must be received by the Secretary
at the principal offices of the Company no later than
September 8, 2007, in order to be considered for inclusion
in the Companys 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 2008
Annual Meeting of Stockholders, shall be considered untimely
unless received by the Secretary at the Companys principal
office no later than September 17, 2007.
By Order of the Board of
Directors
Anna Marie Cellino
Secretary
January 12, 2007
43
APPENDIX A
TO PROXY STATEMENT
NATIONAL
FUEL GAS COMPANY
DIRECTOR INDEPENDENCE GUIDELINES
AS AMENDED DECEMBER 8, 2005
The following Director Independence Guidelines (the
Guidelines) have been adopted by the Board of
Directors (the Board) of National Fuel Gas Company
(National Fuel) to assist the Board in the exercise
of its responsibilities to National Fuel and its shareholders.
The Guidelines should be interpreted in the context of all
applicable laws and National Fuels other corporate
governance documents, and are intended to serve as a flexible
framework within which the Board may conduct its business. The
Guidelines are subject to modification from time to time, and
the Board shall be able, in the exercise of its discretion, to
deviate from the Guidelines from time to time, as the Board may
deem appropriate and as required or permitted by applicable laws
and regulations.
1. Effectiveness. The Guidelines will
become effective on January 1, 2004.
2. Implementation. The Board will
annually review the independence of all directors, affirmatively
make a determination as to the independence of each director and
disclose those determinations, in each case, consistent with the
requirements of the New York Stock Exchange (NYSE)
and the Securities and Exchange Commission (SEC), as
applicable.
3. Independence of at Least a Majority of the
Board. The Board will at all times have at least
a majority of directors who meet the criteria for independence
required by the NYSE and the SEC.
4. Absence of a Material Relationship. In
order for a director to be considered independent,
the Board must affirmatively determine, after consideration of
all relevant facts and circumstances, that the director has no
direct or indirect material relationship with National Fuel or
any subsidiary in a consolidated group with National Fuel
(together, the Company). When assessing the
materiality of a directors relationship with the Company,
the Board will consider the issue not merely from the standpoint
of the director, but also from that of persons or entities with
which the director has an affiliation.
5. Cooling-Off Period. A director will
not be considered independent if:
|
|
|
(i)
|
|
currently or within the preceding
three years the director is or was employed by the Company;
|
|
|
|
(ii)
|
|
currently or within the last three
years, an immediate family member of the director is or was
employed by the Company as an executive officer;
|
|
|
|
(iii)
|
|
the director or an immediate
family member of the director received during any twelve-month
period within the last three years more than $100,000 in
compensation from the Company (excluding (A) director and
committee fees, (B) pension and other deferred compensation
for prior service provided such compensation is not contingent
in any way on continued service and (C) compensation
received by such immediate family member for service as a
non-executive employee of the Company);
|
|
|
|
(iv)
|
|
the director (A) is a current
partner or employee of a firm that is the present auditor of the
Company or (B) within the past three years was a partner or
employee of such firm and worked on the Companys audit;
|
|
|
|
(v)
|
|
an immediate family member of the
director (A) is a current partner of a firm that is the
present auditor of the Company (B) is a current employee of
a firm that is the present auditor of the Company and
participates in such firms audit, assurance or tax
compliance practice or (C) within the past three years was
a partner or employee of such firm and worked on the
Companys audit;
|
|
|
|
(vi)
|
|
a present Company executive
officer currently serves or within the past three years served
on the compensation committee of an entity which employed the
director or an immediate family member of the director as an
executive officer (this three year cooling-off period shall
apply to both service and employment); or
|
A-1
|
|
|
|
|
|
(vii)
|
|
the director is an employee, or an
immediate family member of the director is an executive officer,
of an entity that in any of the last three fiscal years made
payments to, or received payments from, the Company for property
or services in excess of the greater of
(A) $1 million, or (B) 2% of the other
entitys consolidated gross revenues. Contributions to
tax-exempt organizations shall not be considered
payments.
|
6. Categorical Standards. Provided that
the independence criteria set forth in Paragraph 5 above
are met, the Board has determined that the following commercial
or charitable relationships will not be considered material
relationships for purposes of determining whether a director is
independent:
|
|
|
|
|
|
(i)
|
|
the director is a member, partner
or executive officer of, or of counsel to, an entity (excluding
any charitable organization) that makes annual payments to or
receives annual payments from the Company for property or
services in an amount less than the greater of
(A) $1 million, or (B) 2% of the others
consolidated gross revenues for its last completed fiscal year;
|
|
|
|
(ii)
|
|
the director is an executive
officer, trustee or director of an entity, and the
Companys discretionary charitable contributions to that
entity are less than 5% of that entitys total annual
charitable receipts for its last completed fiscal year; and
|
|
|
|
(iii)
|
|
the director is an executive
officer of an entity which is indebted to the Company, or to
which the Company is indebted, and the total amount of
eithers indebtedness to the other is less than 5% of its
own total consolidated assets, measured as of the last fiscal
year-end.
|
For purposes of the Guidelines:
|
|
|
|
|
immediate family
member means a persons spouse, parents, children,
siblings, mothers and
fathers-in-law,
sons and
daughters-in-law,
brothers and
sisters-in-law
and anyone (other than domestic employees) who shares such
persons home
|
For purposes of the Categorical Standards:
|
|
|
|
|
|
(i)
|
|
The calculation of payments to and
from the Company may exclude:
(A) payments determined by competitive bid or
authorized by, or in conformity with, law or governmental
authority and (B) payments arising solely from the
ownership of securities of the Company with no benefit being
received that is not shared on a pro rata basis by all holders
of the class of securities.
|
|
|
|
(ii)
|
|
The calculation of indebtedness
owed to or by the Company may exclude:
(A) debt securities publicly offered, traded on a national
exchange or quoted on an automated quotation system of a
registered securities association and (B) trade debt
subject to usual terms.
|
7. Relationships and Transactions Not Covered by the
Categorical Standards. Any determination by the
Board that a director who has a business or other relationship
that is not covered by the Categorical Standards set forth in
Paragraph 6 above is independent, will be disclosed by
National Fuel in its annual proxy statement, together with the
basis for such determination.
8. Affirmative Obligation of
Directors. Each director has an affirmative
obligation to inform the Board of any material change in his or
her business or other relationships that may impact the
Boards determination with regard to his or her
independence.
9. Disclosure by the Company. The Board
will cause National Fuel to disclose the following in its annual
proxy statement:
|
|
|
|
|
|
(i)
|
|
the Guidelines, including the
categorical standards adopted by the Board to assist it in
making determinations regarding the independence of a director;
|
|
|
|
(ii)
|
|
the identity of the independent
directors and the basis for the affirmative determinations of
the Board regarding the independence of each director;
|
A-2
|
|
|
|
|
|
(iii)
|
|
a specific explanation of any
determination by the Board that a director is independent
notwithstanding that the director does not meet the categorical
standards set forth in the Guidelines; and
|
|
|
|
(iv)
|
|
charitable contributions by the
Company to an entity that employs a director of the Company as
an executive officer if, within the preceding three years,
contributions by the Company in any fiscal year exceeded the
greater of (A) $1 million, or (B) 2% of the other
entitys consolidated gross revenues.
|
A-3
APPENDIX B
TO PROXY STATEMENT
National
Fuel Gas Company
Board of Directors
Audit Committee Charter
I. Organization
The Audit Committee (Committee) is a committee of
the Board of Directors (Board) of National Fuel Gas
Company (Company). Its primary function is to assist
the Board in fulfilling its oversight responsibilities.
II. Membership
of the Committee
|
|
|
|
A.
|
The Committee shall be appointed by the Board and shall be
comprised of not less than three members of the Board where at
least one Committee member has accounting or related financial
management expertise as the Board interprets in its business
judgment. The Board, in its discretion, may remove a member of
the Committee.
|
|
|
B.
|
Each member of the Committee shall meet the requirements of the
New York Stock Exchange listing standards (the Listing
Standards), and all other applicable laws and regulations,
with respect to audit committees, including
Section 10A(m)(3) of the Securities Exchange Act of 1934,
as amended (Act), and the rules and regulations of
the Securities and Exchange Commission (Commission),
as they may become applicable from time to time, as well as the
requirements of the Companys Corporate Governance
Guidelines.
|
|
|
C.
|
No member of the Committee may serve on the audit committees of
more than three public companies, including the Company, unless
the Board has determined that such simultaneous service would
not impair the ability of such member to serve effectively on
the Committee.
|
III. Committees
Purpose
The Committee shall provide assistance to the Board in
fulfilling its oversight responsibility to the shareholders,
potential shareholders, and investment community relating to the
integrity of the Companys financial statements, the
independent auditors qualifications and independence, the
Companys compliance with legal and regulatory
requirements, and the performance of the Companys internal
audit function and independent auditors. The Committee shall
also prepare an audit committee report required by the
Commissions proxy rules to be included in the
Companys annual proxy statement.
IV. Committees
Authority and Responsibilities
The Committee shall perform all duties required by the Listing
Standards, the Act and any other applicable laws and
regulations. The following shall be the principal recurring
processes of the Committee in carrying out its oversight
responsibilities.
|
|
|
|
A.
|
Oversight of Companys Relationship with the Independent
Auditors
|
|
|
|
|
(1)
|
Directly appoint, retain, compensate, evaluate, terminate and
oversee the work of the independent auditors for the purpose of
preparing or issuing an audit report or other related work.
|
|
|
(2)
|
Pre-approve all audit and non-audit services to be provided to
the Company by the independent auditors, including the adoption
by the Committee of any policies and procedures detailing
services that the independent auditors are permitted to provide
to the Company without specific advance approval by the
Committee (of which services the Committee shall be informed at
its next meeting), except that the Committees pre-approval
for non-audit services is not required to the extent such
non-audit services meet the de minimus exception
requirements of Section 10A(i)(1)(B) of the Act. The
Committee may delegate to one or more designated Committee
members the authority to grant pre-approvals, provided that the
decisions of any member to whom authority is delegated shall be
presented to the Committee at its next meeting.
|
B-1
|
|
|
|
(3)
|
Ensure that the lead audit partners assigned by the independent
auditor, as well as the audit partner responsible for reviewing
the Companys audit and all other audit partners assigned
by the independent auditor shall be rotated at appropriate
intervals in compliance with applicable laws, rules and
regulations.
|
|
|
(4)
|
Review and evaluate, at least annually,
|
|
|
|
|
(a)
|
The qualifications, performance, and independence of the
independent auditors;
|
|
|
(b)
|
A report by the independent auditor describing the independent
auditors internal quality-control procedures; any material
issues raised by the most recent internal quality-control
review, or peer review, of the independent auditors, or by any
inquiry or investigation by governmental or professional
authorities, within the preceding five years, respecting one or
more independent audits carried out by the independent auditors,
and any steps taken to deal with any such issues; and
|
|
|
(c)
|
A report by the independent auditor describing all relationships
between the independent auditors and the Company, in order to
assess the independent auditors independence.
|
|
|
|
|
(5)
|
Set clear policies for the hiring of employees or former
employees of the Companys independent auditors.
|
|
|
|
|
B.
|
Financial Statement and Disclosure Matters
|
|
|
|
|
(1)
|
Review and discuss with management and the independent auditors
the annual audited financial statements and quarterly financial
statements, including the Companys disclosures under
Managements Discussion and Analysis of Financial
Condition and Results of Operations.
|
|
|
(2)
|
Discuss the Companys earnings press releases, as well as
financial information and earnings guidance provided to analysts
and to rating agencies. This may be done generally (i.e.,
discussion of the types of information to be disclosed and the
type of presentation to be made). The Committee need not discuss
in advance each earnings release or each instance in which the
Company may provide earnings guidance.
|
|
|
(3)
|
Discuss policies with respect to risk assessment and risk
management in order to govern the process by which the
Companys exposure to risk is handled.
|
|
|
(4)
|
Review with management its evaluation of the Companys
internal control structure and procedures for financial
reporting and review periodically managements assessment
about the effectiveness of such internal controls and
procedures, including any significant deficiencies in, or
material non-compliance with such controls and procedures.
|
|
|
(5)
|
Review and discuss periodically with the independent auditors:
|
|
|
|
|
(a)
|
All critical accounting policies and practices used.
|
|
|
(b)
|
All alternative accounting treatments of financial information
within generally accepted accounting principles for policies and
practices related to material items that have been discussed
with management, including:
|
|
|
|
|
(i)
|
Ramifications of the use of such alternative disclosures and
treatments; and
|
|
|
(ii)
|
The treatment preferred by the independent auditors.
|
|
|
|
|
(c)
|
Other material written communications between the independent
auditors and management, such as any management letter.
|
|
|
|
|
(6)
|
Review with the independent auditors any audit problems or
difficulties and managements response.
|
|
|
|
|
C.
|
Internal Controls and Internal Audit
|
B-2
|
|
|
|
(1)
|
Receive and review a disclosure from the Chief Executive Officer
and Chief Financial Officer during their certification process
for the 10-K
and 10-Qs
regarding:
|
|
|
|
|
(a)
|
Any significant deficiencies in design or operation of internal
controls or material weaknesses therein, and
|
|
|
(b)
|
Any fraud, whether or not material, involving management or
other employees who have a significant role in the
Companys internal controls.
|
|
|
|
|
(2)
|
Review with the independent auditors, the Companys
internal auditor, and financial and accounting personnel, the
adequacy and effectiveness of the accounting and financial
controls of the Company, and elicit any recommendations for the
improvement of such internal control procedures or particular
areas where new or more detailed controls or procedures are
desirable.
|
|
|
(3)
|
Review the internal audit functions of the Company including the
proposed audit plans for the coming year and the coordination of
such plans with the independent auditors.
|
|
|
|
|
D.
|
Compliance Programs. Review the procedures established to
monitor and ensure compliance with the Companys Code of
Business Conduct and Ethics and review managements
response to any material violation of the Policy.
|
|
|
E.
|
Outside Advisors. The Committee, in discharging its oversight
role, is authorized to investigate any other matter brought to
its attention within the scope of its duties, including engaging
outside legal and other advisors as the Committee determines
necessary to carry out its duties.
|
|
|
F.
|
Funding. The Committee shall be provided adequate funding, as
determined by the Committee, for payment of compensation to the
independent auditor, any advisors engaged by the Committee under
Paragraph E, and ordinary administrative expenses necessary
or appropriate to carry out its duties.
|
|
|
G.
|
Complaint Procedures. Establish procedures for the receipt,
retention, and treatment of complaints received by the Company
regarding accounting, internal accounting controls, or auditing
matters, including procedures for the confidential, anonymous
submission by employees of the Company of concerns regarding
questionable accounting or auditing matters.
|
|
|
H.
|
Meetings
|
|
|
|
|
(1)
|
Meet as often as may be deemed necessary or appropriate in the
Committees judgment, at least quarterly each year, and at
such times and places as the Committee shall determine.
|
|
|
(2)
|
Meet separately and periodically with management, the internal
auditors and the independent auditors and discuss any matters
they wish to bring to the Committees attention.
|
|
|
(3)
|
Report regularly to the Board and review with the Board any
issues that arise with respect to the quality or integrity of
the Companys financial statements, the Companys
compliance with legal or regulatory requirements, the
performance and independence of the Companys independent
auditors, or the performance of the internal audit function.
|
|
|
(4)
|
Review and assess the adequacy of this Charter on an annual
basis and recommend any proposed changes, as the Committee deems
appropriate, to the Board for approval.
|
V. ANNUAL
PERFORMANCE EVALUATION
Conduct and present to the Board an annual performance
evaluation of the Committee.
B-3
APPENDIX C
TO PROXY STATEMENT
NATIONAL
FUEL GAS COMPANY
CORPORATE GOVERNANCE GUIDELINES
Amended:
December 7, 2006
The business of National Fuel Gas Company (the
Company) is conducted by its employees, managers and
officers, under the oversight of the Board of Directors (the
Board), in order to serve the long-term interests of
its shareholders. The Board and management recognize that the
long-term interests of shareholders are served by considering
the interests of customers, employees and the communities in
which the Company operates. In addition, the Board requires
directors, officers and employees to comply with all legal and
regulatory requirements and to adhere to the highest ethical
standards in the performance of their duties. To help discharge
its responsibilities, the Board has adopted the following
guidelines on corporate governance matters.
The Board shall consist of a number of directors, not less than
seven nor more than eleven, as determined by a majority vote of
the full Board.
A majority of the Board must qualify as independent directors
under the listing standards of the New York Stock Exchange
(NYSE). The Board will annually review the relationship that
each director has with the Company (either directly or as a
partner, shareholder or officer of an organization that has a
relationship with the Company). The Board has established
Director Independence Guidelines for purposes of this review.
All determinations of director independence will be disclosed in
the Companys annual proxy statement.
|
|
3.
|
Director
Qualifications
|
The Board, with input from the Nominating/Corporate Governance
Committee, is responsible for periodically determining the
appropriate skills, perspectives, experiences, and
characteristics required of Board candidates, taking into
account the Companys needs and current
make-up of
the Board. This assessment should include knowledge, experience,
and skills in areas critical to understanding the Company and
its business; personal characteristics, such as integrity and
judgment; and candidates commitments to the boards of
other publicly-held companies. Each Board member is expected to
ensure that other existing and planned future commitments do not
materially interfere with the members service as a
director and that he or she devotes the time necessary to
discharge his or her duties as a director.
The Nominating/Corporate Governance Committee is responsible for
periodically reviewing these qualification guidelines and
recommending modifications, as appropriate. The Board believes
the qualification guidelines included as Exhibit A are
currently appropriate, but it may change these guidelines as the
Companys and Boards needs warrant.
Directors are expected to carry out the functions of the Board
in a professional and diligent manner, and to spend the time and
effort necessary to properly discharge such responsibilities.
Accordingly, a director is expected to regularly attend meetings
of the Board and Committees on which such director sits, with
the understanding that on occasion a director may be unable to
attend a meeting. A director who is unable to attend a meeting
is expected to notify the Chairman of the Board or the Chair of
the appropriate Committee in advance of such meeting. A director
is also expected to review provided materials in advance of a
meeting.
|
|
4.
|
Selection
of New Directors
|
The Board is responsible for selecting its members and
nominating them for election by the stockholders and for filling
vacancies on the Board. The Nominating/Corporate Governance
Committee will recommend to the Board nominees for election,
including, as appropriate, incumbent directors for re-election.
Stockholders may propose candidates for consideration in
accordance with the Process for Identifying and Evaluating
Nominees for Director included as Exhibit B.
C-1
In selecting individuals for nomination, the Committee will seek
the input of the Chairman of the Board and Chief Executive
Officer and will evaluate candidates using the qualification
guidelines included as Exhibit A and the Process for
Identifying and Evaluating Nominees for Director included as
Exhibit B, as they may be supplemented from time to time.
Once a candidate is selected to join the Board, the Chairman of
the Board
and/or the
Chair of the Nominating/Corporate Governance Committee will
extend the invitation to join the Board on the Boards
behalf.
The Board does not believe it should limit the number of terms
for which an individual may serve as a director. While term
limits could help ensure fresh ideas, they also would force the
Board to lose the contributions of directors who have developed
an insight into the Company. This insight and continuity of
directors is an advantage, not a disadvantage. As an alternative
to term limits, the Nominating/Corporate Governance Committee
will review a directors continuation on the Board whenever
the director experiences a change in professional
responsibilities, as a way to assure that the directors
skills and experience continue to match the needs of the Board.
In addition, in connection with nomination of the slate of
directors that the Board proposes for election by stockholders
each year, the Nominating/Corporate Governance Committee will
consider re-nominated directors continuation on the Board
and take steps as may be appropriate to ensure that the Board
maintains an openness to new ideas.
Subject to paragraph 7, a director shall normally serve on
the Board for a three-year term, except that a director
appointed to fill a vacancy shall stand for election at the next
annual meeting of shareholders.
|
|
6.
|
Change in
Professional Responsibilities
|
It is the view of the Board that each director who experiences a
change in his or her business or professional affiliation or
responsibilities should bring this change to the attention of
the Board and should offer to resign. The Board does not believe
that each director who retires or has a change in position or
responsibilities should necessarily leave the Board. The
Nominating/Corporate Governance Committee will, however, review
the continued appropriateness of Board membership under these
circumstances and make a recommendation to the Board.
This same guideline applies to any inside directors, including
the Chief Executive Officer of the Company, in the event he or
she no longer serves in that position.
As a general rule, directors shall retire not later than the
date of the first Annual Meeting of Shareholders following the
date of their 72nd birthday.
A. Chairman
of the Board and Chief Executive Officer
1. The Chairman of the Board, who may also be the Chief
Executive Officer, shall be a director and preside at all
meetings of the Board and meetings of the shareholders. The
Chairman of the Board is chosen on an annual basis by at least a
majority vote of the remaining directors.
2. The Chief Executive Officer, who may also be the
Chairman of the Board, shall be appointed by the Board and serve
at the pleasure of the Board.
B. Succession
Planning and Leadership Development
Each year, the Chief Executive Officer will report to the
Compensation Committee on succession planning and his or her
recommendation as to a potential successor, along with a review
of any development plans recommended for such individuals. The
Committee will make an annual report to the Board on succession
planning, and the Board will work with the Committee to evaluate
potential successors to the Chief Executive Officer. When the
Compensation Committee and the Board review management
succession plans for the Chief Executive Officer, they will
consider succession in the event of an emergency or retirement
of the Chief Executive Officer. The Committee and the Board will
also review succession candidates for executive officers other
than the Chief Executive Officer and other senior managers as it
deems appropriate.
C-2
A. Number
of Committees
Currently there are four Committees: Executive, Audit,
Compensation and Nominating/Corporate Governance. The Board
believes the current Committee structure is appropriate. From
time to time, depending upon the circumstances, the Board may
form a new Committee or disband a current Committee.
B. Assignment
of Committee Members
The Board appoints members of the Committees on an annual basis.
Vacancies in the Committees will be filled by the Board. In
making assignments to the Committees, only Independent Directors
may serve on the Audit Committee, the Compensation Committee, or
the Nominating/Corporate Governance Committee, and at least one
member of the Audit Committee must have accounting or financial
management experience, as defined by the U.S. Securities
and Exchange Commission rules or as required under applicable
New York Stock Exchange listing requirements. Additionally, a
member of the Audit Committee may not sit on more than three
other Audit Committees of other public companies, unless the
Board determines that such commitments would not impair his or
her effective service to the Company.
The Board will take into account tenure on a Committee and give
consideration to rotating Committee members periodically, but
the Board does not feel that rotation should be mandated as a
policy.
C. Committee
Charters and Authority
The Audit Committee, Compensation Committee and
Nominating/Corporate Governance Committee, each have a written
charter, which has been approved by the Board. Each charter
delegates certain responsibilities to the respective Committee.
The Executive Committee may exercise Board authority with
respect to matters other than those for which action of the full
Board is required under applicable law.
Unless delegated to one of the Committees either in the Charter,
the Bylaws, a resolution of the Board or a vote of stockholders,
each Committee shall make recommendations to the Board and the
Board will consider and approve the recommendations. The
Committee charters may be changed from time to time by approval
of the Board.
A. Number
of Meetings
The Board has at least four scheduled meetings per year at which
it reviews and discusses reports by management on the
performance of the Company, its plans and prospects, as well as
immediate issues facing the Company.
B. Agenda
Items
The Chairman of the Board and the Chief Executive Officer shall
establish the agenda for Board meetings. Any director may
request inclusion of an item on the agenda. The Chairman of the
Board shall preside over Board meetings.
C. Distribution
of Board Materials in Advance
Materials for review, discussion
and/or
action of the Board should be distributed to Board members in
advance of meetings whenever practicable.
D. Non-Management
Director Meetings
The non-management directors will meet at regularly scheduled
executive sessions without management. The Audit Committee
Chair, Nominating/Corporate Governance Committee Chair and
Compensation Committee Chair may call the non-management
directors to additional sessions without management.
C-3
|
|
11.
|
Board
Performance Evaluation
|
The Board and each Committee will perform an annual
self-evaluation. Each year the directors will provide
assessments of the effectiveness of the Board and the Committees
on which they serve. These evaluations will be submitted to the
Nominating/Corporate Governance Committee which will review them
and determine if any additional evaluation is necessary. If the
Nominating/Corporate Governance Committee determines that
additional evaluation is necessary, it may elect to have such
evaluation performed internally, or by an independent corporate
governance expert. The Nominating/Corporate Governance Committee
will report all evaluation results to the Board and make
recommendations for areas which, in its judgment, require
improvement.
The Board has sought and received shareholder approval of the
current form of director compensation. The Boards
compensation philosophy is that directors (other than those who
are also salaried officers of the Company or any of its
subsidiaries) are entitled to receive reasonable compensation
for their services and reimbursement for certain expenses, as
may be determined by the Board. The Compensation Committee shall
have the responsibility for recommending to the Board changes in
compensation levels for non-employee directors. In discharging
this duty, the Committee shall be guided by four general
principles: compensation should fairly pay directors for work
required; compensation should attract and retain highly
qualified candidates for Board membership; compensation should
align directors interests with the long-term interests of
shareholders; and compensation should be transparent and as
simple as possible within the limitations of tax and legal
considerations.
Reasonable compensation also may be paid to any person (other
than a salaried officer or employee of the Company or any of its
subsidiaries) formally requested by the Board to attend a
meeting.
|
|
13.
|
Board
Access to Company Management and Employees
|
Board members will have access to all Company management.
Independent Board members may consult with managers without
senior corporate management present. Management is encouraged to
invite Company personnel to any Board meeting at which their
presence and expertise would help the Board to have a full
understanding of matters being considered and to introduce
managers with significant potential.
|
|
14.
|
Access to
Independent Advisors
|
The Board shall have the power at any time to retain independent
outside financial, legal or other advisors, at the
Companys expense.
|
|
15.
|
Director
Contact with the Companys Constituencies
|
Except as otherwise required by NYSE listing standards or
applicable law, communications with parties external to the
Company (including but not limited to shareholders, the media,
attorneys, vendors, service providers, etc.) shall be the
responsibility of the Chief Executive Officer or delegated by
the Chief Executive Officer to the appropriate area of the
Company. The directors will be consulted from time to time for
their advice, as the Chief Executive Officer so determines.
|
|
16.
|
Director
Orientation and Continuing Education
|
All directors, upon their initial appointment to the Board,
shall attend an educational session, thereby enabling them to
better perform their duties and recognize and deal with various
issues that may arise during their tenure as directors.
Subsequently, the directors shall attend ongoing educational
programs related to their Board service as the Board deems
appropriate.
|
|
17.
|
Amendment
and Interpretation
|
These Guidelines are in addition to and are not intended to
change or interpret any federal or state law or regulation, or
the Companys Certificate of Incorporation or Bylaws or any
Committee Charter reviewed and approved by the Board. The
Guidelines are subject to modification from time to time by the
Board.
C-4
EXHIBIT A
TO
NATIONAL FUEL GAS COMPANY
CORPORATE GOVERNANCE GUIDELINES
NATIONAL
FUEL GAS COMPANY
DIRECTOR QUALIFICATION GUIDELINES
The Board of Directors in considering qualifications of
directors standing for re-election and candidates for Board
membership will consider the following factors, in addition to
those other factors it may deem relevant:
1. Strong management experience, ideally with major public
companies.
2. Other areas of expertise or experience that are
desirable given the Companys business and the current
make-up of
the Board, such as expertise or experience in: the natural gas
industry, information technology businesses, manufacturing,
financial or investment banking, scientific research and
development, senior level government experience, and academic
administration or teaching.
3. Desirability of range in age, so that retirements are
staggered to permit replacement of directors of desired skills
and experience in a way that will permit appropriate continuity
of Board members.
4. Independence, as defined by the Board.
5. Diversity of perspectives brought to the Board by
individual members.
6. Knowledge and skills in accounting and finance, business
judgment, general management practices, crisis response and
management, industry knowledge and leadership.
7. Personal characteristics matching the Companys
values, such as integrity, accountability, financial literacy,
and high performance standards.
8. Additional characteristics, such as:
|
|
|
|
a.)
|
willingness to commit the time required to fully discharge their
responsibilities to the Board, including the time to prepare for
Board and Committee meetings by reviewing the material supplied
before each meeting;
|
|
|
b.)
|
commitment to attend a minimum of 75% of meetings;
|
|
|
c.)
|
ability and willingness to represent the stockholders long
and short-term interests;
|
|
|
d.)
|
awareness of the Companys responsibilities to its
customers, employees, suppliers, regulatory bodies, and the
communities in which it operates; and
|
|
|
e.)
|
willingness to advance their opinions, but once a decision is
made by a majority of the Board, a willingness to support the
majority decision assuming questions of ethics or propriety are
not involved.
|
9. The number of commitments to other entities, with one of
the more important factors being the number of other
public-company boards on which the individual serves.
10. In order to qualify for election as a director, a
nominee must be a shareholder of the Company.
C-5
EXHIBIT B
TO
NATIONAL FUEL GAS COMPANY
CORPORATE GOVERNANCE GUIDELINES
NATIONAL FUEL GAS COMPANY
NOMINATING/CORPORATE GOVERNANCE COMMITTEE
Process for Identifying and Evaluating Nominees for
Director
1. The Nominating/Corporate Governance Committee (the
Committee) will observe the following procedures in identifying
and evaluating candidates for election to the Companys
Board of Directors.
2. The Company believes that the continuing service of
qualified incumbents promotes stability and continuity in the
boardroom, contributing to the Boards ability to work as a
collective body, while giving the company the benefit of the
familiarity and insight into the Companys affairs that its
directors have accumulated during their tenure. Accordingly, the
process of the Committee for identifying nominees shall reflect
the Companys practice of re-nominating incumbent directors
who continue to satisfy the Boards criteria for membership
on the Board, whom the Committee believes continue to make
important contributions to the Board and who consent to continue
their service on the Board.
3. Consistent with this policy, in considering candidates
for election at annual meetings of stockholders, the Committee
will consider the incumbent directors whose terms expire at the
upcoming meeting and who wish to continue their service on the
Board.
4. The Board will evaluate the qualifications and
performance of the incumbent directors who desire to continue
their service. In particular, as to each such incumbent
director, the Committee will
|
|
|
|
(a)
|
consider if the director continues to satisfy the Director
Qualification Guidelines which are Exhibit A to the
Companys Corporate Governance Guidelines;
|
|
|
(b)
|
review any prior assessments of the performance of the director
during the preceding term made by the Committee; and
|
|
|
(c)
|
determine whether there exist any special, countervailing
considerations against re-nomination of the director.
|
5. If the Committee determines that:
|
|
|
|
(a)
|
an incumbent director consenting to re-nomination continues to
be qualified and has satisfactorily performed his or her duties
as a director during the preceding term; and
|
|
|
(b)
|
there exist no reasons, including considerations relating to the
composition and functional needs of the Board as a whole, why in
the Committees view the incumbent should not be
re-nominated, the Committee will, absent special circumstances,
propose the incumbent director for re-nomination.
|
6. The Committee will identify and evaluate new candidates
for election to the Board, including for the purpose of filling
vacancies arising by reason of the resignation, retirement,
removal, death or disability of an incumbent director or the
desire of the directors to expand the size of the Board.
7. The Committee will accept recommendations for nominees
from persons that the Committee believes are likely to be
familiar with qualified candidates. These persons may include
members of the Board, including members of the Committee, and
management of the Company. The Committee may also determine to
engage a professional search firm to assist in identifying
qualified candidates. If such a firm is engaged, the Committee
shall set its fees and the scope of its engagement.
8. As to each recommended candidate that the Committee
believes merits consideration, the Committee will:
|
|
|
|
(a)
|
cause to be assembled information concerning the background and
qualifications of the candidate;
|
|
|
(b)
|
determine if the candidate satisfies the Director Qualification
Guidelines which are Exhibit A to the Companys
Corporate Governance Guidelines; if so, then
|
C-6
|
|
|
|
(c)
|
consider the contribution that the candidate can be expected to
make to the overall functioning of the Board.
|
9. The Committee shall solicit the views of the Chief
Executive Officer and the Chairman of the Board, and the views
of such other persons as the committee deems appropriate,
regarding the qualifications and suitability of candidates to be
nominated as directors.
10. In its discretion, the Committee may designate one or
more of its members (or the entire Committee) to interview any
proposed candidate.
11. Based on all available information and relevant
considerations, the Committee will select a candidate who, in
the view of the Committee, is suited for membership on the
Board. The Committee will then recommend to the Board that the
candidate be nominated. The Board would then, if it chooses,
nominate the candidate by a resolution adopted by the Board at a
meeting or by unanimous written consent.
12. Stockholders may propose candidates for consideration
by the Committee by communication directed to the Companys
Secretary at its principal office, received no later than
165 days before the scheduled date of the next annual
meeting pursuant to the Companys bylaws, which
communication must include all information relating to such
person that is required to be disclosed in solicitations of
proxies for election of directors in an election contest, or is
otherwise required, in each case under applicable SEC
regulations, including such persons written consent to be
named in the proxy statement as a nominee and to serving as a
director if elected. In making its selection, the Committee will
evaluate candidates proposed by stockholders owning at least two
percent (2%) of the Companys outstanding common stock,
under criteria similar to the evaluation of other candidates.
The Committee shall have no obligation whatsoever to consider
other unsolicited recommendations received from stockholders
proposing candidates for the Board. The Committee may consider,
as one of the factors in its evaluation of stockholder
recommended nominees, the size and duration of the interest of
the recommending shareholder or shareholder group on the equity
of the Company, and the candidates relationship to that
stockholder or group, in order to determine whether the
candidate can effectively represent the interests of all
stockholders. The Committee may also consider the extent to
which the recommending stockholder or group intends to continue
holding its interest in the Company, including, in the case of
nominees recommended for election at an annual meeting of
stockholders, whether the recommending stockholder intends to
continue holding its interest at least through the time of such
annual meeting.
C-7
APPENDIX D
TO PROXY STATEMENT
NATIONAL FUEL GAS COMPANY
REPORTING PROCEDURES FOR ACCOUNTING AND AUDITING MATTERS
National Fuel Gas Company (Company) has a
longstanding commitment to comply with federal and state
securities laws and regulations, accounting standards,
accounting controls and audit practices. In furtherance of this
commitment, the Audit Committee of the Companys Board of
Directors has established these Reporting Procedures for
Accounting and Auditing Matters (Procedures), which
provide for (i) the receipt, retention, and treatment of
complaints received by the Company regarding accounting,
internal accounting controls, or auditing matters; and
(ii) the confidential, anonymous submission by employees of
the Company of concerns regarding accounting or auditing matters.
These Procedures apply to all employees of all divisions and
subsidiaries of the Company.
A. Making a Report of Accounting and Auditing Matters
|
|
|
|
1.
|
An employee with a concern or complaint regarding accounting,
internal accounting controls, or auditing matters (collectively
Accounting and Auditing Matters) may report such
concerns, on a confidential and anonymous basis if the employee
so desires, as follows:
|
|
|
|
|
a.
|
Via the Companys dedicated toll-free hotline
(1-800-605-1338)
operated by a third party service company; or
|
|
|
b.
|
In writing in a sealed envelope addressed to the Chairman of the
Audit Committee, National Fuel Gas Company, 6363 Main Street,
Williamsville, New York 14221. The sealed envelope should be
labeled with a legend such as: Submitted pursuant to
the Reporting Procedures for Accounting and Auditing
Matters.
|
|
|
|
|
2.
|
A sufficiently detailed description of the factual basis for the
report should be given in order to allow appropriate
investigation into the matter.
|
B. Treatment of Reports
|
|
|
|
1.
|
All reports will be forwarded to the Chairman of Audit
Committee, the Chief Auditor, and General Counsel.
|
|
|
2.
|
Upon receipt of a report, the Chief Auditor will determine
whether the complaint pertains to Accounting and Auditing
Matters. If the report does not pertain to Accounting and
Auditing Matters, the Chief Auditor and General Counsel will
decide together on the appropriate disposition.
|
|
|
3.
|
Reports relating to Accounting and Auditing Matters will be
promptly investigated by the Chief Auditor under the Audit
Committees direction and oversight, and may involve the
assistance of other Company resources as needed. To the fullest
extent possible, such investigations and reports will be kept
confidential.
|
|
|
4.
|
If the results of an investigation indicate that corrective
action is required, the Audit Committee will decide what steps
should be taken to rectify the problem and reduce the likelihood
of recurrence, and may also recommend appropriate discipline.
|
|
|
5.
|
No person making a report under these Procedures shall be
subject to retaliation because of making a good faith report. In
addition, any employee of the Company responsible for
retaliating against individuals who in good faith report
concerns regarding Accounting and Auditing Matters will be
subject to disciplinary action, up to and including termination.
Any employee making a bad faith report, including a report made
for the purpose of harassing or maliciously injuring the subject
of the report, will be subject to disciplinary action, up to and
including termination.
|
D-1
C. Retention of Reports and Investigation Documents
The Chief Auditor will maintain, in accordance with the
Companys document retention policy, a complete record of
all reports received (including those determined not to pertain
to Accounting and Auditing Matters), all records associated with
reports of Accounting and Auditing Matters, the treatment of
reports of Accounting and Auditing Matters under these
Procedures, and the ultimate disposition of Accounting and
Auditing Matters reports. In addition, the Chief Auditor shall
prepare an update on the status of (i) all reports of
Accounting and Auditing Matters under investigation, and
(ii) those reports of Accounting and Auditing Matters whose
investigation has been concluded since the previous status
update. Status updates shall be provided on a monthly basis for
the Chairman of the Audit Committee and shall be provided on a
quarterly basis for the entire Audit Committee.
|
|
IV.
|
Administration
of Procedures
|
The Audit Committee is the issuer and owner of these Procedures.
These Procedures shall be subject to periodic review and
revision by the Audit Committee as necessary or appropriate. The
Audit Committee, in consultation with the Companys Chief
Auditor, shall have the authority to make any interpretations
regarding the operation of these Procedures.
D-2
APPENDIX E
TO PROXY STATEMENT
NATIONAL
FUEL GAS COMPANY
2007 ANNUAL AT RISK COMPENSATION INCENTIVE PLAN
As used with respect to At Risk Awards, the following terms
shall have the following meanings:
(a) Acceleration Date means (i) in
the event of a Change in Ownership, the date on which such
change occurs, or (ii) with respect to an Eligible Employee
who is eligible for treatment under paragraph 8 hereof on
account of the termination of his employment following a Change
in Control, the date on which such termination occurs.
(b) 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 the terms and conditions
established by this Plan and by the Committees exercise of
its administrative powers.
(c) At Risk Award means an award granted
by the Committee to a Participant under this 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 this 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) twice that employees base salary for
that fiscal year, or (ii) two million dollars. An At Risk
Award may be granted singly, in combination or in the
alternative with other Awards granted under any Company benefit
plan.
(d) Board means the Board of Directors
of the Company.
(e) Cause means (i) the willful and
continued failure by a Participant 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
Participant in illegal conduct which is materially and
demonstrably injurious to the Company or a
Subsidiary.1
(f) 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 shareholders 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
shareholders 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 shareholders 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, 2007 (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, 2007 whose election, or nomination for election
by the Companys shareholders, 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
1 NOTE for
internal use: This definition was written so as to be a high
standard, not easy to prove. To give the Committee the greatest
possible flexibility, this could be amended for future awards to
a lower standard such as the inimical language in
paragraph 9, but that could not be applied to existing At
Risk awards because that would be an adverse change in an
existing award without the Participants consent.
E-1
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.
(g) Change in Ownership means a change
which results directly or indirectly in the Companys
Common Stock ceasing to be actively traded on a national
securities exchange or the National Association of Securities
Dealers Automated Quotation System.
(h) Code means the Internal Revenue Code
of 1986, and the rules, regulations and interpretations
promulgated thereunder, as amended from time to time.
(i) Committee means the Compensation
Committee of the Board, or such other committee designated by
the Board as authorized to administer this 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.
(j) Common Stock means the common stock
of the Company.
(k) Company means National Fuel Gas
Company.
(l) 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.
(m) Exchange Act means the Securities
Exchange Act of 1934, as amended from time to time.
(n) Good Reason means a good faith
determination made by a Participant that there has been any
(i) material change by the Company of the
Participants functions, duties or responsibilities which
change could cause the Participants 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 positions, (ii) assignment or reassignment by the
Company of the Participant without the Participants
consent, to another place of employment more than 30 miles
from the Participants current place of employment, or
(iii) reduction in the Participants 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.
(o) Participant means any individual who
is holding an At Risk Award granted by the Committee under this
Plan.
(p) 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.
(q) 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.
(r) Plan means this National Fuel Gas
Company 2007 Annual At Risk Compensation Incentive Plan, as
amended from time to time. Any reference in this Plan to a
paragraph number refers to that portion of this Plan.
(s) 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.
With respect to At Risk Awards the Committee is given full
authority to (a) make reasonable, good faith
interpretations of this 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
E-2
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 this Plan;
(d) determine whether At Risk Awards are to be granted
singly, in combination or in the alternative with other Awards
under any other Company benefit plans; (e) grant waivers of
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 also have the authority
to grant At Risk Awards in replacement of Awards previously
granted under this 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 this Plan with respect to At Risk
Awards to the Companys 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 this Plan or an Award Notice, under such
conditions as the Committee may establish. For the avoidance of
doubt, neither the Committee nor any delegate thereof shall take
any action under this Plan, including without limitation
pursuant to this paragraph 2 or paragraphs 6
or 7, which would result in the imposition of an additional
tax under section 409A of the Code on the Eligible Employee
holding an At Risk Award granted hereunder.
|
|
3.
|
Grant of
At Risk Awards
|
At Risk Awards may be made to any Eligible Employee for each of
the fiscal years of the Company commencing with the 2007 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. At Risk Awards are made by
means of an Award Notice.
|
|
4.
|
Payment
of at Risk Awards
|
Each At Risk Award granted to a Participant shall entitle such
Participant to receive a cash payment based upon the extent to
which such Participants 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 Participants Performance Goals have been
attained. Payment of earned At Risk Awards shall be made in cash
promptly after such certification. The Company shall be entitled
to deduct from any payment under this Plan 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.
|
|
5.
|
Termination
of Employment, Retirement, or Death of Participant
|
(a) General Rule. If a Participants
employment with the Company or a Subsidiary terminates for a
reason other than death, disability, retirement, or an 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 Employees 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 this Plan in the event of his death,
disability, retirement, or termination for an approved reason.
(b) In the event of the disability, retirement or
termination for an approved reason of a Participant 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 a Participant during a
Performance Period, the Participants designated
beneficiary (or if none, then the Participants 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.
E-3
|
|
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 Participant
shall require the Participants 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.
Subject to the shareholder approval requirements of
Section 162(m) of the Code, the Committee may, from time to
time, amend this Plan in any manner.
|
|
8.
|
Change in
Control and Change in Ownership
|
(a) Background. All Participants shall be
eligible for the treatment afforded by this paragraph 8 if
there is a Change in Ownership or if their employment terminates
within three years following a Change in Control, unless the
termination is due to (i) death; (ii) disability
entitling the Participant to benefits under his employers
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 employers retirement plan.
(b) Vesting. If a Participant is eligible
for treatment under this paragraph 8, 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 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 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 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 100% of the At Risk
Awards previously granted to him during each Performance Period.
(c) Payment of Awards. If a Participant
is eligible for treatment under this paragraph 8, 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 At Risk Awards.
(d) Miscellaneous. Upon a Change in
Control or a Change in Ownership, (i) the provisions of
paragraphs 5 and 9 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
this Plan with respect to any At Risk 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.
(e) 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.
E-4
|
|
9.
|
Noncompetition
Provision
|
Notwithstanding anything contained in this Plan to the contrary,
unless the Award Notice specifies otherwise, a Participant shall
forfeit all unearned,
and/or
unpaid At Risk Awards, including At Risk Awards earned but not
yet paid, 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.
No Award under this 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 domestic
relations court order), assignment, pledge, or encumbrance.
Following an approved transfer, any such Award 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 paragraph 5 shall continue to be applied with
reference to the original Participant and following the
termination of employment of the original Participant, the
transferred Award shall be payable to the transferee only to the
extent, and for the periods specified in paragraph 5, that
the original Participant could have received payment of such
Award. Except as expressly permitted by this paragraph, an Award
shall be payable during the Participants lifetime only to
him.
|
|
11.
|
No Right
to Continued Employment or Grants
|
Participation in this 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.
|
|
12.
|
No Right,
Title or Interest in Company Assets
|
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.
This Plan is 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 this Plan or any action by the
Committee fails to so comply, it shall be deemed null and void,
to the extent permitted by law.
Upon approval by the shareholders of the Company as required by
Section 162(m) of the Code, this Plan shall become
effective as of December 7, 2006.
E-5
APPENDIX F
TO PROXY STATEMENT
NATIONAL
FUEL GAS COMPANY
1997 AWARD AND OPTION PLAN
As
Amended and Restated As of February 15, 2007
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.
2.1 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 23 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 or Restricted Stock 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 terms and
conditions established by this Plan and by the Committees
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 Companys 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.
F-1
2.7 Change in Ownership means a change which
results directly or indirectly in the Companys Common
Stock ceasing to be actively traded on a national securities
exchange or the National Association of Securities Dealers
Automated Quotation System.
2.8 Code means the Internal Revenue Code of
1986, and the rules, regulations and interpretations promulgated
thereunder, as amended from time to time.
2.9 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.
2.10 Common Stock means the common stock of
the Company.
2.11 Company means National Fuel Gas Company.
2.12 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.
2.13 Exchange Act means the Securities
Exchange Act of 1934, as amended from time to time.
2.14 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
next-day
reports of the high and low sales prices of a share of Company
Common Stock, as reported on either www.bloomberg.com or
www.yahoo.com (or, if no such shares were publicly traded on
that date, the next preceding date that such shares were so
traded) 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.
2.15 Good Reason means a good faith
determination made by a Participant that there has been any
(i) material change by the Company of the
Participants functions, duties or responsibilities which
change could cause the Participants 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 positions, (ii) assignment or reassignment by the
Company of the Participant without the Participants
consent, to another place of employment more than 30 miles
from the Participants current place of employment, or
(iii) reduction in the Participants 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.
2.16 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.
2.17 Participant means any individual to whom
an Award has been granted by the Committee under this Plan.
2.18 Plan means the National Fuel Gas Company
1997 Award and Option Plan. Any reference in the Plan to a
paragraph number refers to that portion of the Plan.
2.19 Restricted Stock means an Award granted
pursuant to paragraph 10.
2.20 SAR means a stock appreciation right as
defined in paragraph 9.
F-2
2.21 Stock Option or Option
means an Incentive Stock Option or a Non-Qualified Stock
Option as defined in paragraph 8.
2.22 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.
The Plan shall be administered by the Committee. The Committee
shall have the authority to: (a) interpret the Plan;
(b) establish such administrative rules, regulations and
procedures 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, SAR or Restricted
Stock, the number of shares subject to the Award, all the terms
and conditions of an Award, including the time and conditions of
exercise or vesting, and any restrictions on transferability of
shares related to any Award; (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 when any such action would be in the best interest of the
Company; and (h) take any and all other action it deems
advisable for the proper administration of the Plan, including
but not limited to suspending the ability of a Participant to
exercise an Award while under investigation for engaging in
conduct in violation of paragraph 18. Notwithstanding the
foregoing, without the express approval of stockholders, the
Committee shall not have the authority to grant Awards in
replacement of Awards previously granted under the Plan. 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. For the avoidance of doubt,
neither the Committee nor any delegate thereof shall take any
action under the Plan, including without limitation pursuant to
this paragraph 3, which would result in the imposition of
an additional tax under Section 409A of the Code on the
Participant holding an Award granted hereunder.
Any Core Employee is eligible to become a Participant of the
Plan and receive Stock Options and SARs only. A Key Management
Employee is also eligible to become a Participant of the Plan
and receive Stock Options, SARs and Restricted Stock under the
Plan.
|
|
|
|
(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 13,509,100, subject to adjustment as
provided in paragraph 16. Awards covering no more than
600,000 shares of Common Stock of the Company may be
granted to any Participant in any fiscal year, subject to
adjustment as provided in paragraph 16. All of the shares
of Common Stock authorized may be used to grant Stock Options
and SARs. Of the shares authorized for issuance, only 250,000
may be used for Awards of Restricted Stock on or after
February 15, 2007. The shares of Common Stock available for
issuance under the Plan may be authorized and unissued shares or
treasury shares.
|
|
|
(b)
|
Shares of Common Stock related to Awards which, on or after
December 13, 2006, are (i) settled in cash in lieu of
Common Stock, or (ii) exchanged with the Committees
permission for Awards not involving Common Stock, will not be
available again for grant under the Plan. The number of shares
that are counted against the limit in Section 5(a) in
respect of any portion of a SAR that is exercised shall be the
gross number of shares related to that portion of the SAR
exercised, and not just the net shares issued upon such
exercise. Further, any shares of Common Stock that are used by a
Participant on or after December 13, 2006 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
|
F-3
|
|
|
|
|
to satisfy any withholding taxes due in respect of the exercise
or vesting of any Award, will not be again available for Awards
under the Plan.
|
|
|
|
|
(c)
|
Except as provided in paragraph 5(b) above, shares of
Common Stock related to any portion of any Award which expires
without the issuance of stock, or is cancelled or forfeited,
shall again be available for grant under the Plan.
|
The Plan became effective as of December 13, 1996 subject
to its approval by the Companys stockholders at the 1997
Annual Meeting of Stockholders. The Plan shall terminate on
February 16, 2007, except that if stockholders approve the
amendments to the Plan presented for approval at the annual
meeting held in February, 2007 (the 2007
Amendments), then the Plan shall terminate on
March 31, 2012, provided that no Awards shall be made under
the Plan after December 12, 2006, unless the stockholders
shall approve the 2007 Amendments, and provided further that the
Plan shall be considered still to be effective as to any Awards
that are outstanding on March 31, 2012.
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 any administrative rules,
regulations and procedures issued by the Committee.
|
|
|
|
(a)
|
Grants. Awards may be granted in the form of
Stock Options. The Stock Options granted under the Plan may be
Incentive Stock Options within the meaning of Section 422
of the Code if granted before December 12, 2006, or they
may be Non-Qualified Stock Options (i.e., Stock Options which
are not Incentive Stock Options), or a combination of both. Only
Non-Qualified Stock Options may be issued on or after
February 15, 2007.
|
|
|
(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
Options grant. The Committee shall not have the authority
to decrease such price after the date of the Stock Options
grant, except for adjustments appropriate to reflect a Change in
Stock or a Change in Capitalization pursuant to
paragraph 16. Unless the Award Notice provides a shorter
period, each Non-Qualified Stock Option shall expire on the day
after the tenth anniversary of its date of grant. Incentive
Stock Options and Non-Qualified Stock Options granted in
combination may be exercised separately. Unless the Award Notice
provides otherwise, and except as provided in
paragraphs 8(b)(i), 8(b)(ii) and 23 below, each Incentive
Stock Option shall first become exercisable on the first
anniversary of its date of grant, and each Non-Qualified Stock
Option issued on before December 12, 2006 shall first
become exercisable on the first anniversary of its date of
grant. Except as provided in paragraphs 8(b)(i), 8(b)(ii)
and 23, each Stock Option issued on or after
February 15, 2007 shall first become exercisable on the
third anniversary of its date of grant. The following exceptions
to the previous two sentences shall apply:
|
|
|
|
|
(i)
|
Each Non-Qualified Stock Option shall first become exercisable,
if earlier,
|
|
|
|
|
(1)
|
on the date of the Participants death occurring after the
date of grant,
|
|
|
(2)
|
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,
|
|
|
(3)
|
on the date of the Participants voluntary resignation on
or after his 60th birthday and at least six months after
the date of grant;
|
|
|
(4)
|
if the Award Notice so provides, on an earlier date for Options
awarded on or after February 15, 2007 to a Participant as
part of his initial inducement to join the Company or a
Subsidiary; or
|
F-4
|
|
|
|
(5)
|
if the Award Notice so provides, on an earlier date for Options
awarded on or after February 15, 2007 in connection with a
merger or acquisition to a Participant who joins the Company or
a Subsidiary as the result of a merger or acquisition.
|
|
|
|
|
(ii)
|
Subject to paragraph 8(b)(i), unless the Award Notice
provides otherwise, Options issued on or after February 15,
2007 shall be exercisable only upon attainment (as determined by
the Committee or its delegate) of performance goals established
by the Committee pursuant to one or more of performance criteria
listed in paragraph 13, with respect to such performance
period or periods (including periods of less than three years)
specified by the Committee and set out in the Award Notice.
|
|
|
|
|
(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 12,509,100.
|
|
|
(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 adopt administrative rules,
regulations or procedures establishing 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 adopt administrative rules, regulations
or 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, the Code and other 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 rules, regulations or procedures as it deems
appropriate. Such administrative rules, regulations or
procedures 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
shall be subject to paragraph 9(c). 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. Such payment shall
be in the form of shares of the Companys Common Stock,
with the number of shares to be delivered to be equal to the
amount of such appreciation divided by the Fair Market Value on
the date of exercise (with any fractional share to be paid in
cash). Once a SAR has been issued, the Committee shall not
reprice the SAR by changing the initial Fair Market Value from
which the payment is calculated except for adjustments
appropriate to reflect a Change in Stock or a Change in
Capitalization pursuant to paragraph 16. In the case of
SARs granted in combination with 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, each
SAR shall first become exercisable on the first anniversary of
its grant. Unless the Award Notice provides a shorter period,
each SAR shall expire ten years and one day after its date of
grant.
|
|
|
(b)
|
Terms and Conditions of SARs. 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 a SAR is measured shall also be determined by the
Committee; provided, however, that such price
|
F-5
|
|
|
|
|
shall not be less than the Fair Market Value of the Common Stock
on the date of the grant of the SAR. Each SAR issued on or after
February 15, 2007 shall first become exercisable on the
third anniversary of its date of grant, except that:
|
|
|
|
|
(i)
|
each SAR shall first become exercisable, if earlier,
|
|
|
|
|
(1)
|
on the date of the Participants death occurring after the
date of grant,
|
|
|
(2)
|
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,
|
|
|
(3)
|
on the date of the Participants voluntary resignation on
or after his 60th birthday and at least six months after
the date of grant;
|
|
|
(4)
|
upon a Change in Control or Change in Ownership pursuant to
paragraph 23;
|
|
|
(5)
|
if the Award Notice so provides, on an earlier date for SARs
awarded on or after February 15, 2007 to a Participant as
part of his initial inducement to join the Company or a
Subsidiary; or
|
|
|
(6)
|
if the Award Notice so provides, on an earlier date for SARs
awarded on or after February 15, 2007 in connection with a
merger or acquisition to a Participant who joins the Company or
a Subsidiary as the result of a merger or acquisition.
|
|
|
|
|
(ii)
|
Subject to paragraph 9(b)(i), unless the Award Notice
provides otherwise, SARs issued on or after February 15,
2007 shall be exercisable only upon attainment (as determined by
the Committee or its delegate) of performance goals established
by the Committee pursuant to one or more of performance criteria
listed in paragraph 13, with respect to such performance
period or periods (including periods of less than three years)
specified by the Committee and set out in the Award Notice.
|
|
|
|
|
(c)
|
Deemed Exercise. The Committee may provide
that a SAR not already exercised 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.
|
|
|
|
|
(a)
|
Grants. Awards may be granted in the form of
Restricted Stock. Shares of Restricted Stock may 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. Notwithstanding the previous sentence,
unless the Award Notice provides otherwise, the lapse of
restrictions on Restricted Stock issued on or after
February 16, 2007 shall be conditioned upon attainment (as
determined by the Committee or its delegate) of performance
goals established pursuant to one or more of performance
criteria listed in paragraph 13 and set out in the Award
Notice. No more than 100,000 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.
|
F-6
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.
|
|
12.
|
Dividends
and Dividend Equivalents
|
If an Award is granted in the form of Restricted Stock 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 Committees discretion, accrue
interest,
and/or be
reinvested into additional shares of Common Stock.
The performance measure(s) to be used for purposes of Stock
Options, SARs and Restricted Stock shall include one or more
measures chosen from among the following, as applied to the
Company or to any Subsidiary or combination of Subsidiaries:
(a) earnings per share; (b) net income (before or
after taxes); (c) return measures (including, but not
limited to, return on assets, equity or sales); (d) cash
flow return on investments which equals net cash flows divided
by owners equity; (e) earnings before or after taxes,
depreciation
and/or
amortization; (f) gross revenues; (g) operating income
(before or after taxes); (h) total shareholder return;
(i) corporate performance indicators (indices based on the
level of certain expenses, certain objectively measurable
operational events or certain services provided to customers);
(j) cash generation, profit
and/or
revenue targets; (k) growth measures, including revenue
growth, reserve growth or reserve replacement, as compared to a
peer group or other benchmark;
and/or
(l) share price (including, but not limited to, growth
measures and total shareholder return). In setting performance
goals using these performance measures, the Committee may
exclude the effect of changes in accounting standards and
non-recurring unusual events specified by the Committee, such as
write-offs, capital gains and losses, and acquisitions and
dispositions of businesses.
|
|
14.
|
Termination
of Employment
|
|
|
|
|
(a)
|
General Rule. Subject to paragraph 18, if
a Participants 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
Participants Award Notice. The Committee shall have the
authority to adopt administrative rules, regulations or
procedures not inconsistent with the Plan 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
Participants 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 14(b)(i), the Participants estate or the
person to whom the Participants 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
Participants 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.
|
F-7
Notwithstanding anything in this paragraph 14(b) to the
contrary, the Committee may at any time within the three-month
period after the date of termination of a Participants
employment, with the consent of the Participant, the
Participants estate or the person to whom the
Participants rights under the Incentive Stock Options are
transferred by will or the laws of descent and distribution,
extend the period for exercise of the Participants
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 14(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 Non-Qualified Stock Option which
has not theretofore expired shall terminate upon termination of
the Participants 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).
|
|
|
(ii)
|
Upon the death of a Participant while employed with the Company
or within the period referred to in paragraph 14(c)(i), the
Participants estate or the person to whom the
Participants 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 Participants
death while employed, or within the period referred to in
paragraph 14(c)(i), 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 14(c) shall authorize the
exercise of a Non-Qualified Stock Option later than the exercise
period set forth in the Award Notice.
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 domestic
relations court 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 Participants
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 or SARs 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 paragraph 14(c) shall continue to be applied
with reference to the original Participant, and following the
termination of employment of the original Participant, the
transferred Options or SARs shall be exercisable by the
transferee only to the extent, and for the periods specified in
paragraph 14(c), that the original Participant could have
exercised such Option or SAR. Except as expressly permitted by
this paragraph, an Award shall be exercisable during the
Participants lifetime only by him.
|
|
16.
|
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
|
F-8
|
|
|
|
|
of shares with respect to which Awards may be granted to any
Participant in any fiscal year, and the number of shares or
SARs, 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, and the exercise
price of outstanding SARs, in each case as deemed appropriate by
the Committee.
|
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 any administrative rules,
regulations or procedures 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.
|
|
18.
|
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.
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 Participants consent.
Notwithstanding the foregoing, the Committee may not amend an
Award in any manner that would result in the imposition of an
additional tax under Section 409A of the Code on the
Participant holding such Award.
|
|
20.
|
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.
F-9
21. 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.
22. 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 shall 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 or under the applicable requirements of
any exchange on which the Common Stock is listed to trade.
Notwithstanding the foregoing, the Board may not amend the Plan
in any manner that would result in the imposition of an
additional tax under section 409A of the Code on any
Participant.
23. Change
in Control and Change in Ownership
|
|
|
|
(a)
|
Background. All Participants shall be eligible
for the treatment afforded by this paragraph 23 if there is
a Change in Ownership or if their employment terminates within
three years following a Change in Control, unless the
termination is due to (i) death; (ii) disability
entitling the Participant to benefits under his employers
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 employers retirement plan.
|
|
|
(b)
|
Vesting and Lapse of Restrictions. If a
Participant is eligible for treatment under this
paragraph 23, (i) all of the terms and conditions in
effect on any unexercised, unearned, or unpaid 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 23, all unpaid dividends and dividend equivalents
and all interest accrued thereon, if any, shall be treated and
paid under this paragraph 23 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 23 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)
|
Payment of Awards. If a Participant is
eligible for treatment under this paragraph 23, 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 SARs and Stock Options
(including Incentive Stock Options), and any other outstanding
Awards, based on the Fair Market Value of the Common Stock on
the Acceleration Date.
|
|
|
(e)
|
Miscellaneous. Upon a Change in Control or a
Change in Ownership, (i) the provisions of
paragraphs 14, 18 and 19 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
paragraph 23(a); 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.
|
|
|
(f)
|
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
|
F-10
|
|
|
|
|
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.
|
24. 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, or SARs, until such rights are
granted to the Participant under paragraph 10(c). 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.
F-11
NATIONAL
FUEL GAS COMPANY
* * *
INVESTOR PROXY VOTING ALERT ***
As you may or may not know, the New York Stock Exchange (NYSE)
has issued a final rule eliminating broker discretionary voting
for the election of directors beginning January 1, 2008.
Broker discretionary voting allows your broker to vote on your
behalf for many management proposals (such as the election of
directors) if you fail to instruct your broker to vote your
shares.
Once the new NYSE rule goes into effect, your broker will no
longer be allowed to vote on your behalf on the election of
directors. It will be necessary for you to actually vote any
proxies you receive in order for your vote to be counted.
We are reaching out to all of our shareholders to inform them of
this important change to the broker voting rules. This change is
significant and could cost your company additional time and
money if you, our shareholders, do not take the time to vote
your proxies as soon as they are received.
We urge you to vote the enclosed proxy even though this year
your broker still has discretionary authority to vote your
uninstructed shares. And we request that you vote ANY
management proxies you receive in the future to help save us
time and money.
If you have any questions about this please fee free to call our
Proxy Solicitor, Morrow & Co., Inc. at
1-800-607-0088.
Morrow will be able to answer any questions you may have about
this topic.
Sincerely,
Your Board of Directors
|
|
|
|
|
|
|
VOTE BY TELEPHONE
24 HOURS A DAY, 7 DAYS A WEEK
|
|
|
TELEPHONE
|
|
|
|
|
Call toll free 1-866-509-2149
in the United States or Canada
anytime on a touch-tone
telephone. |
|
|
There is no charge to you for the call. |
|
|
Have your proxy card ready. |
|
|
Follow the simple instructions
provided by the recorded message. |
MAIL
|
|
|
|
|
Mark, sign and date your proxy card. |
|
|
Detach your proxy card. |
|
|
Return your proxy card in
the postage-paid envelope
provided. |
Your telephone vote authorizes the proxy holders named in the proxy to vote your shares in the
manner as if you marked, signed and returned the proxy card. If you have submitted your proxy by
telephone there is no need for you to mail back your proxy card. Proxies submitted by telephone
must be received by 1:00 A.M., Eastern Standard Time, on February 15, 2007.
THANK YOU FOR VOTING
|
|
|
|
|
|
|
|
|
|
|
Your vote is important.
|
|
|
|
|
Please vote immediately. |
|
|
|
|
|
|
|
|
1-866-509-2149
CALL TOLL-FREE TO VOTE
|
|
|
|
|
o
|
|
6 DETACH PROXY CARD HERE IF YOU ARE NOT VOTING BY TELEPHONE6
|
|
|
|
|
|
|
|
|
|
Please Vote, Date and Sign
Below and Return Promptly
in the Enclosed Envelope.
|
|
x
Votes MUST be indicated
(x) in Black or Blue ink. |
The Board of Directors recommends a vote FOR items 1, 2, 3 and 4. To vote in accordance with the
Boards recommendations, just sign below; no boxes need to be checked.
|
|
|
Item 1. |
|
Election of Directors for three year term which expires in 2010, or two year term which expires
in 2009, as indicated. |
|
|
|
|
|
|
|
|
|
|
|
FOR |
|
WITHHOLD |
|
EXCEPTIONS |
|
|
|
|
|
|
|
|
|
|
|
|
|
o
|
|
o
|
|
o
|
|
|
|
|
|
Nominees: |
|
01 - Philip C. Ackerman 3 years, 02 - Craig G. Matthews 3 years,
03 - Richard G. Reiten 3 years, 04 - David F. Smith 3 years,
05 - Stephen E. Ewing 2 years |
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, mark the Exceptions
box and write that nominees name in the space provided below.)
THIS PROXY (OR VOTING INSTRUCTIONS, IN THE CASE OF PLAN SHARES) WHEN PROPERLY
EXECUTED AND RETURNED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE
UNDERSIGNED STOCKHOLDER(S). This Proxy is solicited on behalf of The Board of Directors. Please
mark, sign, date and return this proxy card using the enclosed prepaid envelope. This Proxy must be
returned for your shares to be voted at the Meeting in accordance with your instructions if you do not
plan to attend the Meeting and vote in person. Please indicate any change in address.
|
|
|
|
|
|
|
|
|
|
|
|
|
FOR |
|
AGAINST |
|
ABSTAIN |
|
|
|
|
|
|
|
|
|
Item 2.
|
|
Appointment of PricewaterhouseCoopers LLP as the
Companys independent registered public accounting firm.
|
|
o
|
|
o
|
|
o |
|
|
|
|
|
|
|
|
|
Item 3.
|
|
Approval of the Annual At Risk Compensation Incentive
Program.
|
|
o
|
|
o
|
|
o |
|
|
|
|
|
|
|
|
|
Item 4.
|
|
Approval of Amendments to the 1997 Award and Option Plan.
|
|
o
|
|
o
|
|
o |
|
|
|
|
|
|
|
|
|
The Board of Directors recommends a vote AGAINST Item 5.
To vote in accordance with the Boards recommendations, just
sign below; no boxes need to be checked. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Item 5.
|
|
Adoption of, if presented at the Meeting, a shareholder
proposal.
|
|
o
|
|
o
|
|
o |
SEE THE REVERSE SIDE OF THIS CARD FOR IMPORTANT OTHER PROVISIONS
Please sign exactly as the name appears on this proxy
card. Joint owners should sign. When signing as an
attorney, executor, administrator, trustee or guardian,
please give your full title.
|
|
|
|
|
|
|
|
|
|
|
|
|
Date
|
|
Share Owner sign here
|
|
Co-Owner sign here |
Employee Benefit Plans. This card also provides voting instructions for shares held in the
National Fuel Gas Company Employee Stock Ownership Plans 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 Trustee of those plans as to the voting of such shares.
Trustees Authorization. The undersigned on the reverse side of this card authorizes and instructs
Vanguard Fiduciary Trust Company as Trustee of the National Fuel Gas Company Tax Deferred Savings
Plans and the National Fuel Gas Company Employee Stock Ownership Plans to vote all shares of the
Common Stock of the Company allocated to the undersigneds 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. All shares of Company stock for which the Trustee has not
received timely directions shall be voted or exercised by the Trustee in the same proportion as the
shares of Company Stock for which the Trustee received timely directions, except in the case where
to do so would be inconsistent with the provisions of Title I of ERISA. You may revoke your
instructions by notice to the Trustee as described on the first page of the enclosed Proxy
Statement.
This proxy, when properly executed, will be voted as directed by the stockholder. See below for
important provisions and additional instructions.
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 and
granting the Proxies discretion to vote FOR items 1, 2, 3 and 4 and AGAINST Item 5.
THIS PROXY/VOTING INSTRUCTION CARD IS CONTINUED ON THE REVERSE SIDE. PLEASE VOTE BY TELEPHONE, OR
SIGN ON THE REVERSE SIDE AND RETURN PROMPTLY.
PROXY NATIONAL FUEL GAS COMPANY
Proxy/Voting Instruction Card Solicited by the Board of Directors for Use at the
Annual Meeting of Stockholders, February 15, 2007
Place: The Lodges at Deer Valley, 2900 Dear Valley Drive East, Park City, UT 84060
The undersigned on the reverse side of this card hereby appoints P.C. Ackerman and A.M.
Cellino, or either 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 18, 2006, 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 of
Stockholders, or any adjournment thereof, respecting (i) matters of which the Company did not have
timely notice but that may be presented at the meeting; (ii) approval of the minutes of the prior
meeting; (iii) the election of any person as a director if a nominee is unable to serve or for good
cause will not serve; (iv) any shareholder proposal omitted from the enclosed proxy statement
pursuant to Rule 14a-8 or 14a-9 of the Securities and Exchange Commissions proxy rules, and (v)
all matters incident to the conduct of the meeting. This proxy may be revoked with the Secretary of
the meeting as described on the first page of the enclosed Proxy Statement.
THE BOARD RECOMMENDS A VOTE FOR ITEMS 1, 2, 3 and 4 AND AGAINST ITEM 5 DESCRIBED ON THE REVERSE
SIDE OF THIS CARD.
TO VOTE IN ACCORDANCE WITH THE BOARDS RECOMMENDATIONS, JUST SIGN ON THE REVERSE SIDE; NO BOXES
NEED TO BE MARKED. IF THIS PROXY (OR VOTING INSTRUCTIONS, IN THE CASE OF PLAN SHARES) IS EXECUTED
BUT NO INSTRUCTIONS ARE GIVEN AS TO ANY ITEMS SET FORTH IN THIS PROXY,THIS PROXY WILL BE VOTED FOR
ITEMS 1, 2, 3 and 4 AND AGAINST ITEM 5 DESCRIBED ON THE REVERSE SIDE OF THIS CARD.
|
|
|
|
|
|
Mark this box with an x if you do not want annual
meeting materials mailed to you for future Annual
Meetings of Stockholders.
|
|
o |
|
|
|
Mark this box with an x if you have made changes to
your name or address.
|
|
o |
|
|
|
Please mark this box with an x if you will attend
the meeting.
|
|
o |
NATIONAL FUEL GAS COMPANY
P.O. BOX 11107
NEW YORK, N.Y. 10203-0107