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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 Registrant [ ]
Check the appropriate box:
[x] Preliminary Proxy Statement
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential, for the Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
National Fuel Gas Company
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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DRAFT 07/12/01
NATIONAL FUEL GAS COMPANY
NOTICE OF SPECIAL MEETING
AND
PROXY STATEMENT
SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON
SEPTEMBER 19, 2001
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NATIONAL FUEL GAS COMPANY
10 LAFAYETTE SQUARE
BUFFALO, NEW YORK 14203
August 9, 2001
Dear Stockholder:
We are pleased to invite you to join us at the Special Meeting of
Stockholders of National Fuel Gas Company. The meeting will be held at 10:00
A.M. Eastern Time on Wednesday, September 19, 2001, at the offices of LeBoeuf,
Lamb, Greene & MacRae, 125 West 55th Street, New York, NY 10019-5389. The matter
on the agenda for the meeting is outlined in the enclosed Notice of Meeting and
Proxy Statement.
So that you may secure the representation of your interests at the
Stockholders 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 Stockholders 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
Trustees (as described on the first page of this Proxy Statement), and/or by
casting your ballot at the meeting.
Coffee will be served at 9:30 A.M. and I look forward to meeting you at
that time.
Please review the proxy statement and take advantage of your right to
vote.
Sincerely yours,
BERNARD J. KENNEDY
Chairman of the Board of Directors,
Chief Executive Officer
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NATIONAL FUEL GAS COMPANY
10 LAFAYETTE SQUARE
BUFFALO, NEW YORK 14203
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON SEPTEMBER 19, 2001
To the Stockholders of National Fuel Gas Company:
Notice is hereby given that a Special Meeting of Stockholders of National
Fuel Gas Company will be held at 10:00 A.M. Eastern Time on Wednesday, September
19, 2001, at the offices of LeBoeuf, Lamb, Greene & MacRae, 125 West 55th
Street, New York, NY 10019-5389. At the meeting, action will be taken with
respect to the approval of amendments to the National Fuel Gas Company 1997
Award and Option Plan and the National Fuel Gas Company 1993 Award and Option
Plan, and such other business as may properly come before the meeting or any
adjournment thereof.
Stockholders of record at the close of business on July 23, 2001, will be
entitled to vote at the meeting.
BY ORDER OF THE BOARD OF DIRECTORS
Anna Marie Cellino
Secretary
August 9, 2001
YOUR VOTE IS IMPORTANT
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, AND WHATEVER THE
NUMBER OF SHARES YOU OWN, PLEASE VOTE YOUR SHARES BY TELEPHONE AS
DESCRIBED ON THE PROXY/VOTING INSTRUCTION CARD AND REDUCE NATIONAL
FUEL GAS COMPANY'S EXPENSE IN SOLICITING PROXIES. ALTERNATIVELY, YOU
MAY COMPLETE, SIGN, DATE AND PROMPTLY RETURN THE ENCLOSED
PROXY/VOTING INSTRUCTION CARD. PLEASE USE THE ACCOMPANYING ENVELOPE,
WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
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NATIONAL FUEL GAS COMPANY
10 LAFAYETTE SQUARE
BUFFALO, NEW YORK 14203
PROXY STATEMENT
This proxy statement is furnished to the holders of National Fuel Gas
Company ("Company") common stock ("Common Stock") in connection with the
solicitation of proxies on behalf of the Board of Directors of the Company for
use at the Special Meeting of Stockholders to be held on September 19, 2001, or
any adjournment thereof. This proxy statement and the accompanying proxy/voting
instruction card are first being mailed to stockholders on or about August 9,
2001.
All costs of soliciting proxies will be borne by the Company. Morrow &
Co., Inc., 445 Park Avenue, New York, New York 10022, has been retained to
assist in the solicitation of proxies and will be compensated in the estimated
amount of $9,500 plus reasonable out-of-pocket expenses. In addition to
solicitation by that firm and by mail, a number of regular employees of the
Company and its subsidiaries may solicit proxies in person, by telephone or by
other methods.
Only stockholders of record at the close of business on July 23, 2001,
will be eligible to vote at this meeting. As of that date, ______________ shares
of Common Stock were issued and outstanding. On September 7, 2001, those shares
will split two-for-one, so there will be approximately ______ shares outstanding
on the meeting date, but votes will be cast using the pre-split outstanding
shares as of the record date.
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 shall be
counted in the number of shares represented and voting, and shall have the same
effect as a vote against the proposal.
The proxy also confers discretionary authority to vote on all matters that
may properly come before the Annual Meeting of Stockholders, or any adjournment
thereof, respecting matters of which the Board is not currently aware but that
may be presented at the meeting, and respecting all matters incident to the
conduct of the meeting.
Any stockholder giving a proxy may revoke it at any time prior to the
voting thereof by mailing a revocation or a subsequent proxy to Anna Marie
Cellino at the above address, by filing written revocation at the meeting with
Mrs. Cellino, Secretary of the meeting, or by casting a ballot.
If you are a participant in the Company's Employee Stock Ownership Plans,
Employees' Thrift Plan or Tax-Deferred Savings Plans, and the accounts are
registered in the same name, the proxy card will also serve as a voting
instruction for the Trustees of those Plans. Shares in these Plans are not voted
unless voting instructions are received. If this card is returned signed but
without directions marked for item 1, you are instructing the Trustee(s) and
granting the Proxies discretion to vote FOR item 1. Participants in the Plan(s)
may also provide those voting instructions by telephone. These instructions may
be revoked by written notice to The Chase Manhattan Bank, N.A., Trustee for the
Company's Employee Stock Ownership Plans and the Employees' Thrift Plan, or
Vanguard Fiduciary Trust Company, Trustee for the Company's Tax-Deferred Savings
Plans, on or before September 17, 2001. Addresses are as follows:
The Chase Manhattan Bank, N.A. Vanguard Fiduciary Trust Company
c/o Computershare Investor Services, LLC c/o Computershare Investor Services, LLC
Attn: Proxy Unit Attn: Proxy Unit
2 North LaSalle - 2nd Floor 2 North LaSalle - 2nd Floor
Chicago, IL 60602 Chicago, IL 60602
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ITEM 1. APPROVAL OF CERTAIN AMENDMENTS TO THE 1997 AWARD AND OPTION PLAN AND THE
1993 AWARD AND OPTION PLAN
The Board of Directors called this special meeting primarily to seek the
stockholders' approval of the conversion of certain outstanding securities of
the Company into a different kind of security, in order to change the accounting
treatment of these securities in the Company's favor. Specifically, approval of
this proposal would authorize the Compensation Committee to convert outstanding
stock appreciation rights (derivative securities called "SARs") into
non-qualified stock options (a different form of derivative security) having the
same terms as the SARs originally issued.
The accounting treatment required for SARs can distort the Company's
reported earnings and earnings per share, because all outstanding SARs are
"marked to market" at the end of each quarter. This means that, for each
outstanding SAR, the Company's pre-tax reported earnings are increased by a
dollar for each dollar decrease in the market price of the Company's common
stock since the end of the previous quarter (unless and until the market price
falls to the market price on the date the SAR was issued) for each outstanding
SAR. Conversely, for each outstanding SAR, the Company's pre-tax reported
earnings are reduced by a dollar for each dollar increase in the market price of
the Company's common stock since the end of the previous quarter. There were
1,578,586 outstanding SARs under the 1993 and 1997 Plans as of July 12, 2001, so
a stock market swing of $3/share from one quarter-end to the next would reduce
or inflate the Company's pre-tax earnings by over $4.7 million, all because of a
non-cash "event."
In the last year the Company's stock has become much more volatile than in
the past. The runup in stock price in December 2000 reduced the Company's
after-tax earnings by $0.19 per share. The market price decline in the following
quarter increased after-tax earnings by $0.25 per share. Because of the
resulting volatility in the Company's stated earnings, financial and other stock
analysts have complained about the difficulty this adds to predicting the
Company's earnings.
Converting SARs to non-qualified stock options would virtually eliminate
the effect the quarterly "mark to market" accounting entries would otherwise
have on future earnings. Instead, the converted securities would be accounted
for with the Company's other outstanding stock options, and be reflected in the
difference between earnings and "diluted" earnings. The proposed amendments
would also eliminate SARs from the types of awards that can be granted in the
future under the Company's current stock plans. There will remain outstanding
73,068 SARs issued under the 1984 Stock Plan, which will all terminate or be
exercised by June 16, 2003.
Approval of this proposal would also increase the number of shares
available for grant under the Company's 1993 Award and Option Plan (the "1993
Plan") and the Company's 1997 Award and Option Plan (the "1997 Plan"). The
authorized additional shares would total 6,000,000 shares, after giving effect
to the two-for-one stock split which will occur on September 7, 2001. Up to
3,157,172 shares (equivalent to 1,578,586 pre-split shares) would be issuable as
a result of converting SARs, leaving a net increase of 2,842,828 additional
shares (equivalent to 1,421,414 pre-split additional shares) available for
awards under the stock plans described below.
The Company's stock plans, and the proposed amendments to them, are
discussed in more detail in the appropriate section(s) below. The 1997 and 1993
Plans, as proposed to be amended, are attached to this Proxy Statement as
Exhibits A and B respectively. Information on the Company's executive
compensation generally is provided below under the heading "Executive
Compensation."
BACKGROUND OF THE 1993 AND 1997 AWARD AND OPTION PLANS
On December 13, 1996, the Board of Directors adopted the 1997 Plan,
subject to approval by the common stockholders at the 1997 Annual Meeting. On
December 9, 1999, the Board of Directors adopted amendments to the 1997 Plan,
subject to approval by the common stockholders at the 2000 Annual Meeting. On
June 14, 2001, the Board of Directors adopted amendments to the 1997 Plan,
subject to approval by the
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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 in
this Proxy Statement as Exhibit A.
On December 10, 1992, the Board of Directors adopted the 1993 Plan,
subject to approval by the common stockholders at the 1993 Annual Meeting. On
June 14, 2001, the Board of Directors adopted amendments to the 1993 Plan,
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 1993 Plan, as proposed to be amended, is attached
to and incorporated in this Proxy Statement as Exhibit B.
ADMINISTRATION
The 1993 and 1997 Plans provide 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 1993 or
1997 Plans. Among the powers granted to the Committee are the authority to
interpret the 1993 and 1997 Plans, establish rules and regulations for its
administration, select core employees of the Company and its subsidiaries to
receive awards, determine the form and amount and other terms and conditions of
an award, grant waivers of 1993 and 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 1993 and 1997 Plans. The 1993 and
1997 Plans authorize 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.
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 1993 and 1997 Plans. 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 the awards
authorized by the 1997 Plan other than stock options.
AMENDMENT OF PLAN
The Board may suspend or terminate the 1993 or 1997 Plan at any time, and
may also amend the 1993 or 1997 Plan at any time, but any such amendment may be
subject to stockholder approval (i) at the discretion of the Board; and (ii) to
the extent stockholder approval may be required by law, including, but not
limited to, the requirements of Rule 16b-3 under the Securities Exchange Act of
1934, as amended (the "Exchange Act").
SHARES AVAILABLE FOR GRANT
The 1993 Plan authorizes the Committee to grant awards during the period
from February 18, 1993 through February 17, 2003. Subject to equitable
adjustment, 1,600,000 shares of Common Stock of the Company were originally
available for grant under the 1993 Plan. See Adjustment of Shares Available
beginning on p. 8 regarding adjustments due to stock splits, mergers, spin-offs
and similar events. As a result of the two-for-one stock split which will occur
on September 7, 2001, the 1,600,000 shares originally available will become
3,200,000 shares.
The 1997 Plan authorizes the Committee to grant awards during the period
from December 13, 1996 through December 12, 2006. Subject to equitable
adjustment, 3,800,000 pre-split shares of Common Stock of the Company were
originally available for grant under the 1997 Plan as amended in February 2000.
As a
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result of the two-for-one stock split which will occur on September 7, 2001, the
3,800,000 shares originally available will become 7,600,000 shares.
Of the total of 5,400,000 shares that were originally available under the
1993 and 1997 Plans, approximately 5.1 million options and restricted stock have
been issued. This leaves [296,273] shares actually available under those plans
as of [August 1, 2001]. As a result of the two-for-one stock split which will
occur on September 7, 2001, the [296,273] shares actually available will become
[592,546] shares.
These proposed amendments represent an increase in the number of available
shares by 6,000,000 post-split shares, the equivalent of 3,000,000 pre-split
shares. 1,090,900 post-split shares would be added to the 1993 Plan, and
4,909,100 post-split shares would be added to the 1997 Plan. A share issued upon
the exercise of an option (including an option resulting from conversion of a
SAR) would reduce the number of shares available.
Shares of Common Stock related to awards which terminate by expiration,
forfeiture, cancellation or otherwise without the issuance of shares, or are
settled in cash in lieu of Common Stock, will again be available for grant under
the 1993 or 1997 Plan. Similarly, shares of Common Stock used by a Participant
with the Committee's consent to pay in full or in part the purchase price of
shares of Common Stock upon exercise of a stock option will again be available
for grant under the 1993 or 1997 Plan.
No one Participant in the 1993 Plan may receive awards covering more than
650,000 shares (equivalent to 325,000 pre-split shares) of Common Stock of the
Company in any fiscal year, subject to equitable adjustment. No one Participant
in the 1997 Plan may receive awards covering more than 600,000 shares
(equivalent to 300,000 pre-split shares) of Common Stock of the Company in any
fiscal year, subject to equitable adjustment. The conversion of a SAR into an
option will not count as an award granted in the fiscal year in which the
conversion takes place.
TYPES OF AWARDS
The 1993 and 1997 Plans provide for the grant of any or all of the
following types of awards: (1) stock options, including incentive stock options;
(2) stock appreciation rights ("SARs"), which may be granted singly, in
combination with stock options or in the alternative; (3) Common Stock of the
Company, including restricted Common Stock; (4) performance units; (5)
performance shares; (6) Common Stock units; and (7) any other award established
by the Committee which is consistent with the Plan's purposes. Such awards may
be granted singly, in combination or in the alternative, as determined by the
Committee.
Of the 1,900,000 pre-split shares authorized at the 2000 Annual Meeting to
be added to the 1997 Plan, 1,200,000 shares may be used only for stock options.
Of the 4,909,100 post-split shares proposed to be added to the 1997 Plan at this
Special Meeting, 4,000,000 shares may be used only for stock options. The
1,090,900 post-split shares proposed to be added to the 1993 Plan at this
Special Meeting may be used only for the award of stock options.
STOCK OPTIONS
Under the 1993 and 1997 Plans, the Committee may grant awards to Key
Employees or Core Employees in the form of stock options to purchase shares of
the Company's Common Stock. Unless the award notice provides otherwise, each
option shall be exercisable in whole or in part. The Committee will, with regard
to each stock option, determine the number of shares subject to the option, the
manner and time of the option's exercise, and the exercise price per share of
Common Stock subject to the option. In no event, however, may the exercise price
of a stock option be less than the fair market value of the Company's Common
Stock on the date of the stock option's grant, other than options issued upon
the conversion of SARs (see Stock Appreciation Rights, at p. 6 below). Unless
the award notice provides otherwise, each incentive stock option shall first
become exercisable on the first anniversary of its date of grant. Unless the
award notice provides for a shorter period, each incentive stock option shall
expire on the tenth anniversary of its date of grant. Incentive stock options
and nonqualified stock options granted in combination may be exercised
separately. Any stock option grant in the form of an incentive stock option will
satisfy the applicable
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requirements of Section 422 of the Internal Revenue Code of 1986, as amended,
(the "Code"). See Federal Income Tax Treatment beginning at page 9 for a
discussion of the differing federal tax treatment afforded to incentive and
non-qualified stock options.
Unless the award notice provides otherwise, any incentive stock option
which has not theretofore expired shall terminate upon termination of the
Participant's employment with the Company whether by death or otherwise, and no
shares of Common Stock may thereafter be purchased pursuant to such incentive
stock option, except that upon termination of employment (other than by death),
a Participant may, within three months after the date of termination of
employment, purchase all or part of any shares of Common Stock which the
Participant was entitled to purchase under such incentive stock option on the
date of termination of employment. Also, upon the death of any Participant while
employed with the Company or within the three-month period after the date of
termination of a Participant's employment, the Participant's estate or the
person to whom the Participant's rights under the incentive stock option are
transferred by will or the laws of descent and distribution may, within one year
after the date of the Participant's death, purchase all or part of any shares of
Common Stock which the Participant was entitled to purchase under such incentive
stock option on the date of death.
Notwithstanding the above, the Committee may at any time within the
three-month period after the date of termination of a Participant's employment,
with the consent of the Participant, the Participant's estate or the person to
whom the Participant's rights under the incentive stock options are transferred
by will or the laws of descent and distribution, extend the period for exercise
of the Participant's incentive stock options to any date not later than the date
on which such incentive stock options would have otherwise expired absent such
termination of employment. In no event shall an incentive stock option be
exercisable after the expiration of the exercise period therein provided, nor
later than ten years after the date of grant.
Unless the award notice provides otherwise, 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
Participant's 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 Retiree's 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 Retiree's 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 Retiree's
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, 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 Participant's estate or the person to
whom the Participant's rights under the non-qualified stock option are
transferred by will or the laws of descent and distribution may, within five
years after the date of the Participant's death while employed, or within the
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.
Unless the award notice provides otherwise, each non-qualified option
shall first become exercisable on the first anniversary of its date of grant, or
if earlier (i) on the date of the Participant's death occurring after the date
of grant; (ii) six months after the date of grant, if the Participant is a
Retiree who retired after the date of grant, and before such six months; or
(iii) on the date of a Retiree's retirement and at least six months after the
date of grant.
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Upon exercise, the exercise price may, at the discretion of the Committee,
be paid by a Participant in cash, shares of Common Stock, shares of restricted
stock, a combination thereof, or such other consideration as the Committee may
deem appropriate. An award may provide that a Participant who pays the option
exercise price with previously-owned shares of the Company's Common Stock shall
automatically be awarded a new stock option to purchase additional shares of
Common Stock equal to the number of shares used to pay the exercise price. The
1993 and 1997 Plans also allow for the so-called "cashless exercise" of options
by payment of the exercise price using a portion of the shares otherwise
receivable upon exercise of the option.
No stock option issued under the 1993 or 1997 Plan can be repriced by
reducing the exercise price after the options are granted.
STOCK APPRECIATION RIGHTS
A SAR is a right to receive a payment equal to the appreciation in fair
market value of a stated number of shares of Common Stock from the SAR's
exercise price to the fair market value on the date of its exercise. SARs may
not be repriced by decreasing the SAR's exercise price after the award date. The
1993 and 1997 Plans authorize the Committee to grant SARs to Key Management
Employees or Key Employees either singly ("Independent SARs"), in combination
with all or a portion of a related stock option ("Combination SARs") or in the
alternative ("Alternative SARs"). The Company has never issued any Independent
SARs or Alternative SARs. All the outstanding SARs are Combination SARs.
The proposed amendments would make all SARs convertible, in the
Committee's discretion and with the holder's consent, into non-qualified stock
options. Such an option will have the same exercise price and expiration date as
the converted SAR. The Committee intends to convert substantially all
outstanding SARs into options before the end of fiscal 2001, and has secured the
consent of the holders of substantially all the SARs. In addition, the proposed
amendments would eliminate the authority of the Committee to issue any SARs in
the future under the 1993 or 1997 Plan.
A Combination or Alternative SAR could have been granted either at the
time of the grant of the related stock option or at any time thereafter during
the term of the stock option. Combination SARs may be exercised either together
with the related stock option or separately. The exercise price of a Combination
SAR shall be the exercise price of the related stock option, and a Combination
SAR shall be exercisable only to the extent that the related stock option is
exercisable. If a Participant exercises a Combination SAR or a related stock
option, but not both, the other shall remain outstanding and exercisable. Unless
an award notice provides otherwise, SARs granted in conjunction with stock
options shall be Combination SARs.
An Alternative SAR would be exercisable to the extent its related stock
option is exercisable, and the exercise price of an Alternative SAR would be the
same as the exercise price of its related stock option. Upon the exercise of a
stock option as to some or all of the shares covered by the award, the related
Alternative SAR would be canceled automatically to the extent of the number of
shares covered by the stock option exercise. Upon exercise of an Alternative
SAR, the related stock option would be automatically canceled to the extent of
such exercise.
The Committee would, with regard to an Independent SAR, determine the
number of shares subject to the SAR, the manner and time of the SAR's exercise,
and the exercise price of the SAR. However, the exercise price of an Independent
SAR will in no event be less than the fair market value of the Common Stock on
the date of the grant of the Independent SAR.
STOCK AWARDS
The 1993 and 1997 Plans authorize the Committee to grant awards to Key
Management Employees or Key Employees in the form of shares of Common Stock,
restricted shares of Common Stock, and Common Stock units. Such awards will be
subject to such terms and conditions as the Committee deems appropriate,
including restrictions on transferability and continued employment. During any
restricted period, the Committee may grant to the Participant all or any rights
of a stockholder with respect to such shares, including the rights to vote and
to receive dividends. No more than 50,000 restricted shares can be issued from
the 1997
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Plan in a fiscal year. No more than 50,000 restricted shares can be issued from
the 1993 Plan in a fiscal year. The 1993 and 1997 Plans give the Committee the
discretion to accelerate the delivery of shares of such awards.
PERFORMANCE SHARES
The 1993 and 1997 Plans allow for the grant of "performance shares" to Key
Management Employees or Key Employees. For purposes of the 1993 and 1997 Plans,
"performance shares" means either shares of Common Stock of the Company or units
which are expressed in terms of Common Stock of the Company. Such awards will be
contingent upon the attainment over a period to be determined by the Committee
("Performance Period") of certain performance or service objectives. Such
objectives may be revised by the Committee during the Performance Period to take
into account unforeseen events or changed circumstances. The performance or
service objectives to be achieved during a Performance Period and the measure of
whether and to what degree such objectives have been attained will also be
determined by the Committee.
PERFORMANCE UNITS
Awards may also be granted to Key Management Employees or Key Employees in
the form of performance units, which are units valued by reference to criteria
chosen by the Committee, other than by reference to the Company's Common Stock.
Performance units are similar to performance shares in that they are
contingently awarded based on the attainment over a Performance Period of
certain performance. Such objectives may be revised by the Committee during the
Performance Period to take into account unforeseen events or changed
circumstances. The length of the Performance Period, the performance objectives
to be achieved during the Performance Period, and the measure of whether and to
what degree such objectives have been achieved will be determined by the
Committee. At Risk Awards are a type of performance unit.
OTHER TERMS OF AWARDS
Awards may be paid in cash, Common Stock, a combination of cash and Common
Stock, or any other form of property, and in a lump sum or in installments, as
the Committee shall determine. If an award is granted in the form of a stock
award, stock option, or performance share, or in the form of any other
stock-based grant, the Committee may include as part of such award an
entitlement to receive dividends or dividend equivalents. Dividends or dividend
equivalents which are not currently paid may, in the Committee's discretion,
accrue interest, be reinvested in additional shares of Common Stock, or be
credited as additional performance shares and paid to the Participant if and
when, and to the extent that, payment is made pursuant to such award. At the
discretion of the Committee, receipt of payment of a stock-based award,
performance unit, dividend or dividend equivalent may be deferred by a
Participant by the delivery of an irrevocable election prior to the time payment
would otherwise be made.
The 1993 and 1997 Plans provide 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
1993 and 1997 Plans authorize the Committee to promulgate administrative
guidelines for the purpose of determining what treatment will be afforded to a
Participant under the 1993 and 1997 Plans in the event of his or her death,
disability, retirement, or termination of employment for an approved reason.
Forfeiture is also required if, in the opinion of the Committee, the Participant
competes with the Company without its written consent, or if he or she acts in a
manner inimical to the Company's best interests.
Upon grant of any award, the Committee may, by way of an award notice or
otherwise, establish such other items and conditions governing the grant of such
award as are not inconsistent with the 1993 or 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 1993 or 1997 Plan
the amount of any applicable income and employment taxes, or may require the
Participant to pay such taxes as a condition to making such payment. A
Participant may pay the amount of such taxes required to be withheld from an
award, in whole or in part, by requesting that the Company withhold from any
payment of Common Stock
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due as a result of such award, or by delivering to the Company, shares of Common
Stock with a fair market value less than or equal to the amount of the
applicable withholding taxes.
NONASSIGNABILITY
All awards under the 1993 and 1997 Plans may not be transferred (except by
will or the laws of descent and distribution or pursuant to a qualified domestic
relations order), and during a Participant's lifetime may be exercised only by
the Participant except that, unless the Committee specifies otherwise, all
awards of nonqualified stock options or SARs will be transferable, subject to
all the terms and conditions to which such nonqualified stock options or SARs
are otherwise subject, to (i) members of a Participant's immediate family as
defined in Rule 16a-1 of the Exchange Act or any successor rule or regulation,
(ii) trusts for the exclusive benefit of the Participant or such immediate
family members or (iii) entities which are wholly-owned by the Participant or
such immediate family members, provided that (a) there is no consideration for
such transfer and (b) subsequent transfers of transferred options are prohibited
(except by will or the laws of descent and distribution). Following transfer,
any such options continue to be subject to the same terms and conditions as were
applicable immediately prior to transfer and, except for events related to the
termination of employment of the Participant, the term "Participant" will refer
to the transferee.
CHANGE IN CONTROL/CHANGE IN OWNERSHIP
In the event of a Change in Control (as defined in the 1993 and 1997
Plans), 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 1993 and 1997 Plans), voluntary resignation or other Good Reason (as
defined in the 1993 and 1997 Plans) or retirement, would be entitled to the
following treatment under the 1993 and 1997 Plans: (i) all of the terms and
conditions in effect on any of the Participant's outstanding awards would
immediately lapse; (ii) all of the Participant's outstanding awards would
automatically become one hundred percent vested; (iii) all of the Participant's
outstanding stock options, SARs, performance units, performance shares, and
other stock-based awards would be immediately cashed out on the basis of the
Change in Control Price (as defined in the Plan); and (iv) all of the
Participant's outstanding performance units would be cashed out on the same
basis and under the assumption that all performance criteria applicable to
Performance Periods completed or partially completed had been satisfied. Such
payments would be made as soon as possible, but no later than the 90th day
following such event.
The 1993 and 1997 Plans also provide that upon a Change In Ownership (as
defined in the 1993 and 1997 Plans), 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 1993 and 1997 Plans define a Change in Ownership as a change which
results in the Company's Common Stock ceasing to be actively traded on the New
York Stock Exchange, another national stock exchange or the National Association
of Securities Dealers Automated Quotation System.
ADJUSTMENT OF SHARES AVAILABLE
In the event of changes in the Common Stock by reason of a Common Stock
dividend, stock split, reverse stock split or other combination, appropriate
adjustment will be made by the Committee in the aggregate number of shares of
Common Stock available under the 1993 and 1997 Plans, 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
Committee made an equitable adjustment regarding the two-for-one split which
will occur on September 7, 2001, such that the number of options, SARs and
restricted shares were doubled, and the exercise price halved.
The 1993 and 1997 Plans also provide 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
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securities, or (ii) by appropriate adjustments, each as set forth under the Plan
and as deemed appropriate by the Committee.
FEDERAL INCOME TAX TREATMENT
The following is a brief summary of the federal income tax aspects of the
1993 and 1997 Plans, 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 an SAR will produce no federal tax consequences for the
Participant or the Company. The exercise of an SAR results in taxable income to
the Participant, equal to the difference between the exercise price of the SAR
and the fair market value of a share on the date of exercise, and a
corresponding deduction to the Company. The conversion of outstanding SARs into
non-qualified stock options as proposed in these amendments will produce no
federal tax consequences for the Participant or the Company. Upon exercising the
stock option resulting from the conversion, the Participant and the Company
would be taxed as described in the paragraph immediately above.
A Participant who has been granted either performance units or performance
shares expressed in the form of units of Common Stock generally will not be
required to recognize taxable income at the time of the grant, and the Company
will not be entitled to a deduction at such time. A Participant will be required
to recognize ordinary income either at the time the award vests or is paid,
depending upon the terms and conditions of the award, and the Company will have
a corresponding deduction.
A Participant who has been granted shares of restricted stock will not be
required to recognize taxable income at the time of the grant, and the Company
will not be entitled to a deduction at the time of the grant, assuming that the
restrictions constitute a substantial risk of forfeiture for federal income tax
purposes. When such restrictions lapse, the Participant will recognize taxable
income in an amount equal to the excess of the fair market value of the shares
at such time over the amount, if any, paid for such shares. The Company will be
entitled to a corresponding deduction subject to the limitations imposed under
Section 162(m) of the Code.
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The award of an outright grant of Common Stock to a Participant will
produce immediate tax consequences for both the Participant and the Company. The
Participant will be treated as having received taxable compensation in an amount
equal to the then fair market value of the Common Stock distributed to him. The
Company will receive a corresponding deduction for the same amount subject to
the limitations imposed under Section 162(m) of the Code.
MARKET PRICE OF THE COMMON STOCK
The closing price of the Company's Common Stock reported on the New York
Stock Exchange for [August ___, 2001] was [$______ per share]. As of such date
the aggregate market value of the shares of Common Stock underlying the
additional awards which would become available for issuance under the 1993 and
1997 Plans was [$____________]. The Company will cancel 3,157,172 post-split
SARs (equivalent to 1,578,586 pre-split SARs) which, if exercised on that date,
would have been worth $_____________.
EXECUTIVE COMPENSATION
The information under this heading "Executive Compensation" is the same as
was published under that caption in the Company's Proxy Statement for the Annual
Meeting of Stockholders on February 15, 2001. The Company is required to provide
this information with respect to the last completed fiscal year, which was
fiscal 2000 for both the 2001 Annual Meeting and this Special Meeting.
REPORT OF THE COMPENSATION COMMITTEE
General
The Compensation Committee (the "Committee") sets the base salaries and
bonuses (if any) of the Company's executive officers, makes awards and sets
goals for certain executive officers under the Annual At Risk Compensation
Incentive Program (the "At Risk Program"), and makes awards to executive
officers and others under various compensation plans as described below. The
Committee consists exclusively of non-employee independent directors, appointed
by resolution of the entire Board of Directors. No member of the Committee is
permitted to receive any award under any plan administered by the Committee.
The Committee's objective is to set executive compensation at levels
which (i) are fair and reasonable to the stockholders, (ii) link executive
compensation to long-term and short-term interests of the stockholders, and
(iii) are sufficient to attract, motivate, and retain outstanding individuals
for executive positions. The executive officers' compensation is linked to the
interests of the stockholders by making a significant part of each executive
officer's potential compensation depend on the price of the Company's Common
Stock on the open market, the Company's earnings per share, and the officer's
own performance. The retention of officers is encouraged by making a substantial
portion of the compensation package in the form of awards which either increase
in value, or only have value, if the executive officer remains with the Company
for specified periods of time.
Specific components of executive officers' compensation earned or paid in
fiscal 2000 are discussed below. The Company's five most highly compensated
executive officers are identified on the Summary Compensation Table on page 14,
and are sometimes referred to as the "named executive officers."
Base Salary
The Committee annually reviews base salaries for the Company's officers
and adjusts them on a calendar year basis and as promotions occur. The Committee
generally uses a range of the 50th percentile to the 75th percentile of its
survey data as the starting point. The Committee also takes into account an
individual's specific responsibilities, experience and effectiveness.
As part of the Committee's effort to emphasize the at risk and incentive
portions of executive officer compensation, the base salary of Mr. Kennedy has
remained the same since calendar 1996. The fiscal 2000
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base salaries of the named executive officers are shown on the Summary
Compensation Table on page 14 in the "Base Salary" column.
Annual At Risk Incentive and Bonus
Under the At Risk Program, the Committee makes At Risk Awards which grant
for certain named executive officers the opportunity to earn cash payments
depending on the achievement of goals set within the first quarter of each
fiscal year. Performance goals are both financial (for example, Company earnings
per share or subsidiary earnings) and non-financial (for example, customer
service).
The Summary Compensation Table on page 14 includes in the "LTIP
(Long-Term Incentive Plan) Payouts" column the amounts earned by Messrs. Kennedy
and Ackerman in fiscal 2000 under the At Risk Program. These payments are
considered by the SEC to be "long-term" incentives because payments are based on
the rolling average of performance during the two fiscal years most recently
completed. The range of potential At Risk Program awards for fiscal 2000 for
Messrs. Kennedy and Ackerman is set out in the Long-Term Incentive Plan Table on
page 17.
At Risk Program goals for Mr. Kennedy, as Chief Executive Officer, were a
specified level of Company earnings per share (weighted as 75% of the formula)
and customer service/other goals (weighted as 25% of the formula). Company
earnings per share (exclusive of non-cash asset write downs, non-cash cumulative
effect of changes in accounting methods, and certain other special items) must
reach a pre-determined target to trigger the maximum annual incentive award to
Mr. Kennedy.
In furtherance of the Committee's goal of emphasizing incentive-based
compensation for the Company's executive officers, most of the executive
officers, including Messrs. Beck, Seeley and Smith were paid amounts as bonuses
in December 2000 (for performance in fiscal 2000). These awards were based on
the performance of their respective subsidiaries and/or their effectiveness in
performing their respective responsibilities. Messrs. Kennedy and Ackerman made
recommendations for fiscal 2000 bonuses for the Company's executive officers and
other officers which were accepted by the Committee. The Summary Compensation
Table on page 12 includes in the "Bonus" column the amount earned by the named
executive officers in fiscal 2000 as bonuses. These awards are considered by the
SEC to be bonuses because they are based on performance during a single fiscal
year. As shown on that table, the Committee awarded to Mr. Kennedy
performance-based bonuses totaling $802,890 because the combination of his base
salary (frozen at the 1996 level) and maximum At Risk Award (limited to 100% of
his base salary) would have left him undercompensated in the Committee's
opinion.
Stock Options, SARs and Restricted Stock
Stock options, stock appreciation rights (SARs) and restricted stock
represent the longer-term incentive and retention component of the executive
compensation package. In fiscal 2000, the Committee awarded stock options to 94
employees, including the named executive officers. These awards are intended to
focus attention on managing the Company from a long-term investor's perspective
and encourage officers and other managers to have a significant, personal
investment in the Company through stock ownership. Employees are encouraged to
retain their stock for long-term investment, rather than sell option shares
after receiving them. Awards are made under plans such as the 1997 Award and
Option Plan which allow the Committee broad flexibility to use a wide range of
stock-based performance awards.
The Committee annually awards SARs and stock options to buy Company
Common Stock, both of which have value only to the extent the market price of
the Company's Common Stock increases after the date of an award. The Committee
also from time to time awards restricted stock, which increases or decreases in
value to the same extent as the Company's Common Stock. Dividends are paid on
restricted stock and on the shares held for employees (including executive
officers) in various employee benefit plans, so executive officers benefit
directly from dividends paid on the Company's Common Stock.
During fiscal 2000, the Committee awarded to each named executive officer
options to buy stock in the future at the market price on the award date. The
Committee also awarded to Mr. Kennedy and
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Mr. Ackerman an equal number of SARs with the same exercise price. None of the
options or SARs awarded can normally be exercised for at least one year after
the award date, and all of them expire no later than 10 years after the award
date. Awards to the named executive officers are shown on the Option/SAR Grants
in Fiscal 2000 table on page 16.
As a general rule, the Committee uses the prior year's grant as the
starting point for determining each subsequent year's grant. The Committee
changes the size of grants as (1) participants are promoted to new positions,
(2) surveys indicate that stock options should be adjusted, or (3) depending on
the Committee's perception of individual and Company performance.
Benefits Based on Retirement, Death, or Change in Control
Benefits based on retirement, death, or change in control are payable
under various arrangements which are applicable to the named executive officers
(as well as other core employees). The Committee is not generally authorized to
amend such arrangements, but makes recommendations to the Board of Directors to
amend such plans.
Neither the Company nor the Committee made any other material changes in
any of the plans described in this section, nor any material changes in any of
the "miscellaneous minor perquisites and personal benefits" discussed in
footnote (1) of the Summary Compensation Table on page 14.
Compensation of Chief Executive Officer
The bases for Mr. Kennedy's fiscal 2000 base salary and At Risk Program
award, and performance-based bonus, including the Committee's goals and
methodology, are discussed earlier in this report under the heading Base Salary
and Annual At Risk Incentive and Bonus. The bases for Mr. Kennedy's other fiscal
2000 longer-term incentive awards are discussed earlier in this report under the
heading Stock Options, SARs and Restricted Stock.
Based on a survey completed by an independent compensation consulting
firm in the first quarter of fiscal 2001, total direct compensation earned by
the four principal executive officers of the Company--Messrs. Kennedy, Ackerman,
Smith and Seeley, who became President of National Fuel Gas Supply Corporation
on April 1, 2000--equated to the 74th percentile of the compensation packages
earned by officers in a 12 company peer group selected for the survey. In light
of the Company's performance in fiscal 2000, the Committee believes this level
of executive compensation is appropriate.
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Policy With Respect to Qualifying Compensation Paid to Executive Officers
For Deductibility Under Section 162(m) of the Internal Revenue Code
The Committee intends that, whenever reasonably possible, compensation
paid to its managers, including its executive officers, should be deductible for
federal income tax purposes. Compensation paid under the At Risk Program
qualifies as performance-based compensation under Section 162(m) of the Internal
Revenue Code. The Committee may vote to award compensation, especially to a
chief executive officer, that is not fully deductible, if the Committee
determines that such award is consistent with its philosophy and is in the best
interests of the Company and its stockholders.
COMPENSATION COMMITTEE
GEORGE L. MAZANEC, CHAIRMAN
ROBERT T. BRADY
EUGENE T. MANN
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EXECUTIVE COMPENSATION SUMMARY TABLE
The following table sets forth information with respect to compensation
paid by the Company and its subsidiaries for services rendered during the last
three fiscal years to the Chief Executive Officer and each of the four other
most highly compensated executive officers for the fiscal year ended September
30, 2000 (the "named executive officers").
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG TERM COMPENSATION
--------------------------------- -----------------------------------
AWARDS PAYOUTS
------------------------- -------
SECURITIES
OTHER ANNUAL RESTRICTED UNDERLYING ALL OTHER
FISCAL BASE COMPENSA- STOCK OPTIONS/ LTIP COMPENSA-
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) TION($)(1) AWARDS($)(2) SARS(#) PAYOUTS($) TION($)(3)
--------------------------- ---- --------- -------- ---------- ------------ ------- ---------- ----------
Bernard J. Kennedy............. 2000 848,150 802,890 0 0 300,000 848,150 308,621
Chairman of the Board 1999 848,150 0 0 241,017 240,000 424,000 226,326
of Directors, Chief 1998 848,150 0 0 210,966 300,000 424,000 248,284
Executive Officer
Philip C. Ackerman............. 2000 570,000 0 0 0 220,000 530,100 156,463
President of the 1999 495,000 0 0 32,495 160,000 247,500 118,677
Company and President 1998 470,000 0 0 0 200,000 225,000 105,849
of Certain Subsidiaries
David F. Smith................. 2000 300,000 100,000 0 0 45,000 0 66,041
President of National 1999 250,750 75,000 0 0 25,000 0 61,196
Fuel Gas Distribution 1998 227,750 65,000 0 0 25,000 0 56,177
Corporation
Dennis J. Seeley............... 2000 281,500 100,000 0 0 40,000 0 55,463
President of National 1999 238,500 80,000 0 0 25,000 0 51,666
Fuel Gas Supply 1998 228,750 65,000 0 0 25,000 0 49,101
Corporation
James A. Beck.................. 2000 277,500 100,000 0 111,190 25,000 0 4,120
President of Seneca 1999 245,250 0 0 97,875 25,000 0 5,028
Resources Corporation 1998 209,708 25,000 0 92,125 25,000 0 2,832
(1) Excludes perquisites or personal benefits because, for each named
executive officer, the cost to the Company of all such items was less
than $50,000 and less than 10% of that executive's base salary and bonus,
if any, for each fiscal year listed.
(2) The dollar values shown in the Restricted Stock Awards column are based
on the fair market value of the Company's Common Stock on the date of the
restricted stock award. Restricted shares may not be transferred or
pledged, but such Company-imposed restrictions lapse with the passage of
time and continued employment with the Company.
As of September 30, 2000, the aggregate number of unvested shares of
restricted stock held by each named executive officer and the aggregate
fair market value of such shares using a closing market price as of
September 30, 2000 of $56.063 are as follows: for Mr. Kennedy, 24,987
shares ($1,400,846); Mr. Ackerman, 5,214 shares ($292,312); Mr. Smith,
6,500 shares ($364,409); Mr. Seeley, 6,500 shares ($364,409); and Mr.
Beck, 7,000 shares ($392,441). Dividends are paid on all shares of
restricted stock.
Mr. Kennedy's restricted stock awards reported in the table may vest, in
whole or in part, in under three years from the date of grant, together
with their vesting schedule, as follows: For fiscal 1999,
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4,925 restricted shares were granted on December 9, 1999 for performance
in fiscal 1999. For fiscal 1998, 4,580 restricted shares were granted on
December 10, 1998 for performance in fiscal 1998. Vesting restrictions on
Mr. Kennedy's fiscal 1999 and fiscal 1998 awards lapse on the first
January 15 which occurs after the year in which Mr. Kennedy retires as an
officer of the Company. These shares do not vest if both his employment
and Directorship with the Company and its subsidiaries terminate for any
reason prior to the expiration of vesting restrictions, unless such
termination is on account of death, disability or retirement.
Mr. Ackerman was awarded 664 shares of restricted stock on December 9,
1999 for performance in fiscal 1999. Vesting restrictions lapse on the
first January 15 which occurs after the year in which Mr. Ackerman
retires as an officer of the Company. These shares do not vest if both
his employment and Directorship with the Company and its subsidiaries
terminate for any reason prior to the expiration of vesting restrictions,
unless such termination is on account of death, disability or retirement.
On December 7, 2000, Mr. Beck was awarded 2,000 shares of restricted
stock for performance in fiscal 2000. He was also awarded 2,000 shares of
restricted stock on December 9, 1999 for performance in fiscal 1999 and
2,000 shares of restricted stock on December 10, 1998 for performance in
fiscal 1998. Vesting restrictions lapse on December 7, 2006, December 9,
2005 and December 10, 2005, respectively. These shares do not vest if Mr.
Beck's employment with the Company and its subsidiaries terminates for
any reason except death or prior to the expiration of the vesting
restrictions.
(3) In fiscal 2000, the Company paid, contributed or accrued for Messrs.
Kennedy, Ackerman, Smith, Seeley and Beck $0, $10,000, $10,000, $10,000
and $2,642, respectively, under the Tax-Deferred Savings Plan; $102,565,
$44,530, $12,986, $10,946 and $1,478, respectively, under the Tophat Plan
which pays all participants a sum intended to replace amounts which they
will not receive as Company-matching contributions under the Tax-Deferred
Savings Plan as a result of tax law limits or other tax considerations;
$0, $5,254, $696, $1,870 and $0, respectively, under a program that
passes through to employees the Company's tax savings associated with
payment of dividends on Employee Stock Ownership Plan shares; $44,408,
$16,780, $3,884, $7,641 and $0, respectively, as above-market interest
under the Deferred Compensation Plan (which amount, in the case of Mr.
Smith, could be forfeited); and $117,609, $56,149, $38,475, $25,006 and
$0 respectively, as the dollar value of split-dollar or other life
insurance benefits paid for by the Company. In addition, Messrs. Kennedy
and Ackerman were paid $44,039 and $23,750, respectively to reimburse
them for incremental taxes incurred as a result of errors by an
ex-employee.
STOCK OPTION GRANT TABLE
The following table sets forth information with respect to options to
purchase shares of Common Stock and Stock Appreciation Rights ("SARs") awarded
during fiscal 2000 to the named executive officers pursuant to plans approved by
the Company's stockholders.
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OPTION/SAR GRANTS IN FISCAL 2000(1)
INDIVIDUAL GRANTS
---- ----------------------------------------------
PERCENT OF TOTAL
NUMBER OF OPTIONS/SARS EXERCISE
SECURITIES GRANTED TO OR BASE
UNDERLYING EMPLOYEES PRICE PER GRANT DATE
OPTIONS/SARS IN FISCAL SHARE EXPIRATION PRESENT
NAME GRANTED(#) YEAR ($/SH) DATE VALUE($)(2)
---- ------------ ---------------- --------- ---------- ----------
Bernard J. Kennedy.......................... 150,000 options 13.1% $42.6563 2/2010 $1,213,500
150,000 SARs 13.1% 42.6563 2/2010 1,213,500
Philip C. Ackerman.......................... 110,000 options 9.6% 42.6563 2/2010 889,900
110,000 SARs 9.6% 42.6563 2/2010 889,900
David F. Smith.............................. 45,000 options 3.9% 42.6563 2/2010 364,050
Dennis J. Seeley............................ 40,000 options 3.5% 42.6563 2/2010 323,600
James A. Beck............................... 25,000 options 2.2% 42.6563 2/2010 202,250
(1) The options and SARs shown on this table were granted under the 1993
and 1997 Award and Option Plans and can be exercised at any time during
the nine years preceding the expiration date if the holder remains with
the Company. These options and SARs terminate upon termination of
employment, except that upon termination of employment for any reason
other than discharge for cause or voluntary resignation prior to age
60, most of such options and SARs may be exercised within five years
after termination of employment. Payment of the exercise price may be
in cash or by tendering shares of Company Common Stock.
(2) This column shows the hypothetical value of these options and SARs
according to a binomial option pricing model. The assumptions used in
this model for the options granted in fiscal 2000 were: quarterly
dividend yield of 1.0901%, an annual standard deviation (volatility) of
18.91%, a risk-free rate of 6.86%, and an expected term before exercise
of 5.5 years. Whether the assumptions used will prove accurate cannot
be known at the date of grant. The model produces a value based on
freely tradable securities, which the options and SARs are not. The
holder can derive a benefit only to the extent the market value of
Company Common Stock is higher than the exercise price at the date of
actual exercise.
STOCK OPTION EXERCISES AND FISCAL YEAR-END VALUE TABLE
The following table sets forth as to each named executive officer
information with respect to stock option and SAR exercises during fiscal 2000
and the number and value of unexercised options and SARs at September 30, 2000.
AGGREGATED OPTION/SAR EXERCISES IN FISCAL 2000
AND OPTION/SAR VALUES ON SEPTEMBER 30, 2000
NUMBER OF NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SECURITIES OPTIONS/SARS AT IN-THE-MONEY OPTIONS/SARS
UNDERLYING FISCAL YEAR-END(#) AT FISCAL YEAR-END($)(2)
OPTIONS/SARS VALUE ------------------------------ ---------------------------
NAME EXERCISED(#) REALIZED($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ -------------- ----------- ------------- ----------- -------------
Bernard J. Kennedy........... 14,000 364,250 1,344,421 300,000 25,131,388 4,022,025
Philip C. Ackerman........... 22,500 589,922 777,585 220,000 13,832,622 2,949,485
David F. Smith............... 1,135 27,666 94,458 45,000 1,311,477 603,304
Dennis J. Seeley............. 8,000 222,852 98,000 40,000 1,425,486 536,270
James A. Beck................ 4,779 114,869 100,421 25,000 1,450,766 335,169
(1) Market value of stock at exercise less exercise price or base price.
(2) Market value of stock at fiscal year-end less exercise price or base
price.
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LONG-TERM INCENTIVE PLAN AWARD TABLE
The following table sets forth information with respect to long-term
incentive plan awards made during fiscal 2000 to the named executive officers
pursuant to the At Risk Program.
LONG-TERM INCENTIVE PLAN--AWARDS IN FISCAL 2000
ESTIMATED FUTURE PAYOUTS UNDER
NON-STOCK PRICE-BASED PLANS(1)
PERFORMANCE PERIOD -------------------------------------------------------------
NAME UNTIL MATURATION THRESHOLD($) TARGET($) MAXIMUM($)
---- ------------------ ------------ -------------------------------- ----------
Bernard J. Kennedy......... 2 years ended 9/30/00 0 848,150 848,150
Philip C. Ackerman......... 2 years ended 9/30/00 0 285,000 570,000
(1) This table describes the sole At Risk Program opportunity which was made
to executive officers in fiscal 2000 based on the rolling two-year
average of performance in fiscal 1999 and fiscal 2000. The actual amounts
awarded and paid for fiscal 2000 under the At Risk Program are shown in
the Summary Compensation Table on page 14 in the LTIP Payouts column.
REPORT ON REPRICING OF OPTIONS/SARS
The Company did not reprice any stock options or SARs in fiscal 2000.
Under the 1997 Award and Option Plan, from which 99% of the current grants are
issued, options and SARs can not be repriced after they have been granted.
CORPORATE PERFORMANCE GRAPH
The following graph compares the yearly cumulative stockholder return on
the Company's Common Stock against the cumulative total return of the Standard &
Poor's 500 Composite Stock Price Index ("S&P 500") and the Standard & Poor's
Utilities Index ("S&P Utilities") for a period of five years commencing
September 30, 1995, and ended September 30, 2000.
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COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURNS*
FISCAL YEARS 1996-2000
[LINE GRAPH]
1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ----
National Fuel $100 $134 $167 $185 $194 $239
S&P 500 $100 $120 $184 $169 $235 $267
S&P Utilities $100 $108 $160 $123 $158 $228
* Assumes $100 invested on September 30, 1995, and reinvestment of dividends.
Source: Bloomberg
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
AGREEMENTS
Mr. Kennedy entered into an employment agreement with the Company on
September 17, 1981, which was most recently extended as of September 1, 1999.
The agreement is effective until September 1, 2002, subject to earlier
termination in the event of his death or disability. The agreement preserves, as
a minimum level of compensation, monthly compensation levels as are in effect
from time to time.
Messrs. Ackerman, Beck, Smith and Seeley entered into Employment
Continuation and Noncompetition Agreements with the Company dated December 11,
1998 that are to become effective in the event of a defined change of control of
the Company. They preserve as a minimum, for the three years following such
change of control, the annual salary levels and employee benefits as are then in
effect for these executives and provide that, in the event of certain
terminations of employment, these executives shall receive severance payments up
to 1.99 times their respective annual base salaries and annual bonuses prior to
termination. 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. In addition, executives shall receive
continuation of certain employee benefits for three years or receipt of the
value of such benefits.
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Also, in the event of a defined change in control, these executives shall
receive the above-market rate interest on certain deferrals under the Deferred
Compensation Plan, which otherwise could have been forfeited. At September 30,
2000, the above-market rate interest account balance for each of the named
executive officers were as follows: $261,969 for Mr. Kennedy, $106,615 for Mr.
Ackerman, $40,201 for Mr. Smith, $0 for Mr. Beck and $49,943 for Mr. Seeley.
PENSION PLAN TABLE
The following table shows annual 50% joint and survivor life annuity
total benefits payable under the Retirement Plan plus the Executive Retirement
Plan to eligible officers retiring on the later of the normal retirement age of
65 or their current age with a spouse of the same age. Forms of benefit payment
other than the 50% joint and survivor life annuity, or retirement at an age
earlier than 65, would result in different annual benefits to eligible officers.
ESTIMATED ANNUAL RETIREMENT BENEFITS
FOR YEARS OF BENEFIT SERVICE CREDITED (1)
-------------------------------------------------------------------
REMUNERATION
(2) (3) 20 25 30 35 40
------------ --------- ---------- ---------- ---------- ----------
$300,000 $ 99,436 $ 124,294 $ 149,153 $ 165,501 $ 181,848
700,000 237,020 296,275 355,531 394,925 434,319
1,100,000 374,605 468,256 561,908 624,349 686,791
1,500,000 512,190 640,237 768,285 853,774 1,155,975
1,900,000 649,775 812,218 974,662 1,083,198 1,403,530
2,100,000 718,567 898,209 1,077,851 1,197,910 1,527,307
(1) The service credited for retirement benefit purposes to the officers
named in the Summary Compensation Table, as of September 30, 2000, is as
follows: Mr. Kennedy, 40 years; Mr. Ackerman, 32 years, 2 months; Mr.
Smith, 22 years, 2 months; Mr. Seeley, 35 years, 3 months; Mr. Beck, 10
years, 4 months.
(2) Compensation covered for retirement benefit purposes differs from the
amounts appearing in the three "annual compensation" columns of the
Summary Compensation Table on page 14, because the retirement benefits
are based on the average of the "annual cash compensation" (including
At Risk Awards and some 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 2000) for each of the
named executive officers was: Mr. Kennedy, $1,692,103; Mr. Ackerman,
$778,419; Mr. Smith, $307,217; Mr. Seeley, $303,867; and Mr. Beck,
$261,450.
(3) Benefits described in this table reflect a partial offset for Social
Security benefits.
NEW PLAN BENEFITS TABLE
The benefits or amounts that will be received or allocated to specific
individuals as a result of approval of Proposal 1 are not determinable. For each
of the named executive officers and the various indicated groups, the following
table shows the benefits or amounts that would have been received by or
allocated to them for the last completed fiscal year if the proposed plan
amendments had been in effect.
Because Proposal 1 includes the adding of shares to existing plans which
have not yet run out of shares, having the plan amendments in effect last year
would not have changed the awards that were actually made, which are also
included on the following table. However, if the proposed plan amendments had
been in effect last year, all SARs outstanding under the 1997 and 1993 Plans
would have been converted into stock options, so the following table shows the
effect of those conversions as the cancellation of SARs and the issuance of
options having the same terms and value of the canceled SARs. All options and
SARs are shown before the two-for-one stock split effective September 7, 2001.
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93 Plan 97 Plan
----------------------------------- -----------------------------------------
Dollar Value Number of Dollar Value Number of
Name and Position (1) Units (1) Units
------------ ------------------ ---------------- --------------------
Bernard J. Kennedy................... $61,937 (2) 7,656 options (2) $241,017 (2) 4,925 R/S (2)
Chairman of the Board and $61,937 (2) 7,656 SARs (2) $1,151,563 (2) 142,344 options (2)
Chief Executive Officer (3) 390,568 options (4) $1,151,563 (2) 142,344 SARs (2)
(3) <390,568> SARs (4) (3) 562,344 options (4)
(3) <562,344> SARs (4)
Philip C. Ackerman................... $0 0 (3) $32,494 (2) 664 R/S (2)
President of the Company and (3) 180,674 options (4) $889,900 (2) 110,000 options (2)
President of certain subsidiaries (3) <180,674> SARs (4) $889,900 (2) 110,000 SARs (2)
(3) 415,000 options (4)
(3) <415,000> SARs (4)
David F. Smith....................... $0 0 $364,050 (2) 45,000 options (2)
President of National Fuel Gas
Distribution Corporation
Dennis J. Seeley..................... $0 0 $323,600 (2) 40,000 options (2)
President of National Fuel Gas
Supply Corporation
James A. Beck........................ $0 0 $97,875 (2) 2,000 R/S (2)
President of Seneca Resources $202,250 (2) 25,000 options (2)
Corporation
All current executive officers
as a group........................... $61,937 (2) 7,656 options (2) $371,386 (2) 7,589 R/S (2)
$61,937 (2) 7,656 SARs (2) $3,740,363 (2) 462,344 options (2)
(3) 571,242 options (4) $2,041,463 (2) 252,344 SARs (2)
(3) <571,242> SARs (4) (3) 977,344 options (4)
(3) <977,344> SARs (4)
All non-employee directors as
a group (7 persons) as of
July 12, 2001........................ $0 0 $0 0
All employees, including all
current officers who are not
executive officers, as a group....... $0 (2) 0 (2) $3,383,793 (2) 391,100 options
(3) 30,000 options
(3) <30,000> SARs
(1) This column reflects the dollar value of restricted shares at the fair
market value at grant date, and the grant date value of stock options and
SARs calculated as described in the table "Options/SAR Grants in Fiscal
2000" on page 16 (except as described in footnote (2) below).
(2) Reflects an award actually made in Fiscal 2000. "R/S" means shares of
restricted stock.
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25
(3) Because each outstanding SAR would have been converted into an option
having the same terms as the canceled SAR, the dollar value of the
canceled SARs would have been offset by the dollar value of the issued
options.
(4) Reflects the cancellation of SARs and the issuance of options that would
have occurred in Fiscal 2000 if the proposed plan amendments had been in
effect.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
OTHER BUSINESS
In accordance with applicable law, this Special Meeting of Stockholders
may not consider any matters other than those set out in the Notice of Meeting.
PROPOSALS OF SECURITY HOLDERS
Proposals that security holders intend to present at the 2002 Annual
Meeting of Stockholders must be received by the Secretary at the principal
offices of the Company no later than September 30, 2001, in order to be
considered for inclusion in the Company's proxy statement and proxy for that
meeting. Notice of a shareholder proposal submitted outside the processes of SEC
Rule 14a-8 under the Securities Exchange Act, for consideration at the 2002
Annual Meeting of Stockholders, shall be considered untimely unless received by
the Secretary at the Company's principal office no later than October 10, 2001.
BY ORDER OF THE BOARD OF DIRECTORS
ANNA MARIE CELLINO
Secretary
August __, 2001
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EXHIBIT A
UNDERLINED LANGUAGE WILL BE ADDED
"LINED-OUT" LANGUAGE WILL BE DELETED
NATIONAL FUEL GAS COMPANY
1997 AWARD AND OPTION PLAN
1. PURPOSE
The purpose of the Plan is to advance the interests of the Company and its
stockholders, by providing a long-term incentive compensation program that will
be an incentive to the Core Employees of the Company and its Subsidiaries whose
contributions are important to the continued success of the Company and its
Subsidiaries, and by enhancing their ability to attract and retain in their
employ highly qualified persons for the successful conduct of their businesses.
2. DEFINITIONS
2.1 "Acceleration Date" means (i) in the event of a Change in Ownership,
the date on which such change occurs, or (ii) with respect to a Participant who
is eligible for treatment under paragraph 25 hereof on account of the
termination of his employment following a Change in Control, the date on which
such termination occurs.
2.2 "Award" means any form of stock option, stock appreciation right,
Restricted Stock, performance unit, performance share or other incentive award
granted by the Committee to a Participant under the Plan pursuant to such terms
and conditions as the Committee may establish. An Award may be granted singly,
in combination or in the alternative.
2.3 "Award Notice" means a written notice from the Company to a
Participant that sets forth the terms and conditions of an Award in addition to
those established by this Plan and by the Committee's exercise of its
administrative powers.
2.4 "Board" means the Board of Directors of the Company.
2.5 "Cause" means (i) the willful and continued failure by a Core Employee
to substantially perform his duties with his employer after written warnings
specifically identifying the lack of substantial performance are delivered to
him by his employer, or (ii) the willful engaging by a Core Employee in illegal
conduct which is materially and demonstrably injurious to the Company or a
Subsidiary.
2.6 "Change in Control" shall be deemed to have occurred at such time as
(i) any "person" within the meaning of Section 14(d) of the Exchange Act, other
than the Company, a Subsidiary, or any employee benefit plan or plans sponsored
by the Company or any Subsidiary, is or has become the "beneficial owner," as
defined in Rule 13d-3 under the Exchange Act, directly or indirectly, of twenty
percent (20%) or more of the combined voting power of the outstanding securities
of the Company ordinarily having the right to vote at the election of directors,
or (ii) approval by the stockholders of the Company of (a) any consolidation or
merger of the Company in which the Company is not the continuing or surviving
corporation or pursuant to which shares of stock of the Company would be
converted into cash, securities or other property, other than a consolidation or
merger of the Company in which the common stockholders of the Company
immediately prior to the consolidation or merger have substantially the same
proportionate ownership of common stock of the surviving corporation immediately
after the consolidation or merger as immediately before, or (b) any
consolidation or merger in which the Company is the continuing or surviving
corporation but in which the common stockholders of the Company immediately
prior to the consolidation or merger do not hold at least a majority of the
outstanding common stock of the continuing or surviving corporation (except
where such holders of Common Stock hold at least a majority of the common stock
of the corporation which owns all of
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27
the Common Stock of the Company), or (c) any sale, lease, exchange or other
transfer (in one transaction or a series of related transactions) of all or
substantially all the assets of the Company, or (iii) individuals who constitute
the Board on January 1, 1997 (the "Incumbent Board") have ceased for any reason
to constitute at least a majority thereof, provided that any person becoming a
director subsequent to January 1, 1997 whose election, or nomination for
election by the Company's stockholders, was approved by a vote of at least
three-quarters ( 3/4) of the directors comprising the Incumbent Board (either by
specific vote or by approval of the proxy statement of the Company in which such
person is named as nominee for director without objection to such nomination)
shall be, for purposes of this Plan, considered as though such person were a
member of the Incumbent Board.
2.7 "Change in Control Price" means, in respect of a Change in Control,
the highest closing price per share paid for the purchase of Common Stock on the
New York Stock Exchange, another national stock exchange or the National
Association of Securities Dealers Automated Quotation System during the ninety
(90) day period ending on the date the Change in Control occurs, and in respect
of a Change in Ownership, the highest closing price per share paid for the
purchase of Common Stock on the New York Stock Exchange, another national stock
exchange or the National Association of Securities Dealers Automated Quotation
System during the ninety (90) day period ending on the date the Change in
Ownership occurs.
2.8 "Change in Ownership" means a change which results directly or
indirectly in the Company's Common Stock ceasing to be actively traded on a
national securities exchange or the National Association of Securities Dealers
Automated Quotation System.
2.9 "Code" means the Internal Revenue Code of 1986, as amended from time
to time.
2.10 "Committee" means the Compensation Committee of the Board, or such
other committee designated by the Board, authorized to administer the Plan. The
Committee shall consist of not less than two (2) members of the Board, each of
whom shall be a Disinterested Board Member. A "Disinterested Board Member" means
a member who (a) is not a current employee of the Company or a Subsidiary, (b)
is not a former employee of the Company or a Subsidiary who receives
compensation for prior services (other than benefits under a tax-qualified
retirement plan) during the taxable year, (c) has not been an officer of the
Company (d) does not receive remuneration from the Company or a Subsidiary,
either directly or indirectly, in any capacity other than as a director and (e)
does not possess an interest in any other transaction, and is not engaged in a
business relationship, for which disclosure would be required pursuant to Item
404(a) or (b) of Regulation S-K under the Securities Act of 1933, as amended.
The term Disinterested Board Member shall be interpreted in such manner as shall
be necessary to conform to the requirements of Section 162(m) of the Code and
Rule 16b-3 promulgated under the Exchange Act.
2.11 "Common Stock" means the common stock of the Company.
2.12 "Company" means National Fuel Gas Company.
2.13 "Core Employee" means an officer or other core management employee of
the company or a Subsidiary as determined by the Committee. Every Key Management
Employee is also a Core Employee.
2.14 "Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time.
2.15 "Fair Market Value" of a share of Common Stock on any date means the
average of the high and low sales prices of a share of Common Stock as reflected
in the report of consolidated trading of New York Stock Exchange-listed
securities for that date (or, if no such shares were publicly traded on that
date, the next preceding date that such shares were so traded) published in The
Wall Street Journal or in any other publication selected by the Committee;
provided, however, that if shares of Common Stock shall not have been publicly
traded for more than ten (10) days immediately preceding such date, then the
Fair Market Value of a share of Common Stock shall be determined by the
Committee in such manner as it may deem appropriate.
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28
2.16 "Good Reason" means a good faith determination made by a Participant
that there has been any (i) material change by the Company of the Participant's
functions, duties or responsibilities which change could cause the Participant's
position with the Company to become of less dignity, responsibility, importance,
prestige or scope, including, without limitation, the assignment to the
Participant of duties and responsibilities inconsistent with his positions, (ii)
assignment or reassignment by the Company of the Participant without the
Participant's consent, to another place of employment more than 30 miles from
the Participant's current place of employment, or (iii) reduction in the
Participant's total compensation or benefits or any component thereof, provided
in each case that the Participant shall specify the event relied upon for such
determination by written notice to the Board at any time within six months after
the occurrence of such event.
2.17 "Key Management Employee" means a management employee of the Company
or a Subsidiary (i) who has significant policymaking responsibilities, and (ii)
whose current base salary at the time an Award is issued is among the highest
two percent (2%) of the current base salaries of all the employees of the
Company or any Subsidiary, all as determined by the Committee.
2.18 "Participant" means any individual to whom an Award has been granted
by the Committee under this Plan.
2.19 "Plan" means the National Fuel Gas Company 1997 Award and Option
Plan.
2.20 "Pre-Split" and "Post-Split" means before and after giving effect to
the two-for-one stock split of all shares outstanding at close of business
August 24, 2001, to be effective on September 7, 2001.
2.21 "Restricted Stock" means an Award granted pursuant to paragraph 10
hereof.
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.
2.23 "Unit" means a bookkeeping entry used by the Company to record and
account for the grant of the following Awards until such time as the Award is
paid, cancelled, forfeited or terminated, as the case may be: Units of Common
Stock, performance units, and performance shares which are expressed in terms of
Units of Common Stock.
3. ADMINISTRATION
The Plan shall be administered by the Committee. The Committee shall have
the authority to: (a) interpret the Plan; (b) establish such rules and
regulations as it deems necessary for the proper administration of the Plan; (c)
select Key Management Employees and Core Employees to receive Awards under the
Plan; (d) determine the form of an Award, whether a stock option, stock
appreciation right, Restricted Stock, performance unit, performance share, or
other incentive award established by the Committee in accordance with (h) below,
the number of shares or Units subject to the Award, all the terms and conditions
of an Award, including the time and conditions of exercise or vesting; (e)
determine whether Awards would be granted singly, in combination or in the
alternative; (f) grant waivers of Plan terms and conditions, provided that any
such waiver granted to an executive officer of the Company shall not be
inconsistent with Section 16 of the Exchange Act and the rules promulgated
thereunder; (g) accelerate the vesting, exercise or payment of any Award or the
performance period of an Award when any such action would be in the best
interest of the Company; (h) establish such other types of Awards, besides those
specifically enumerated in paragraph 2.2 hereof, which the Committee determines
are consistent with the Plan's purposes; and (i) take any and all other action
it deems advisable for the proper administration of the Plan. The Committee
shall also have the authority to grant Awards in replacement of Awards
previously granted under this Plan or any other executive compensation or stock
option plan of the Company or a Subsidiary. All determinations of the Committee
shall be made by a majority of its members, and its determinations shall be
final, binding and conclusive. The Committee, in its discretion, may delegate
its authority and duties under the Plan to the Chief Executive Officer or to
other senior officers of the Company to the extent permitted by Section 16 of
the Exchange Act and notwithstanding any other provision of this Plan or an
Award Notice, under such
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29
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.
4. ELIGIBILITY
Any Core Employee is eligible to become a Participant of the Plan who
receives Stock Options only. A Key Management Employee is also eligible to
become a Participant of the Plan who receives other awards under the Plan.
5. SHARES AVAILABLE
(a) The maximum number of post-split 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
12,509,100, subject to adjustment as provided in paragraph 18. Awards covering
no more than 600,000 post-split shares of Common Stock of the Company may be
granted to any Participant in any fiscal year subject to adjustment as provided
in paragraph 18. Of the 1,900,000 pre-split shares which were made available by
the Plan amendment approved at the 2000 Annual Meeting of Stockholders,
1,200,000 of such shares will be available only for awards of stock options. Of
the 4,909,100 post-split shares which were made available by the Plan amendment
approved at the 2001 Special Meeting of Stockholders, 4,000,000 of such shares
will be available only for awards of stock options.
(b) Any shares of Common Stock related to Awards which terminate by
expiration, forfeiture, cancellation or otherwise without the issuance of such
shares, are settled in cash in lieu of Common Stock, or are exchanged with the
Committee's permission for Awards not involving Common Stock, shall be available
again for grant under the Plan, provided, however, that if dividends or dividend
equivalents pursuant to paragraph 14, or other benefits of share ownership (not
including the right to vote the shares) have been received by the Participant in
respect of an Award prior to such termination, settlement or exchange, the
shares which were the subject of the Award shall not again be available for
grant under the Plan. Further, any shares of Common Stock which are used by a
Participant for the full or partial payment to the Company of the purchase price
of shares of Common Stock upon exercise of a stock option, or for any
withholding taxes due as a result of such exercise, shall again be available for
Awards under the Plan. Similarly, shares of Common Stock with respect to which
an Alternative SAR has been exercised and paid in cash shall again be available
for grant under the Plan. Shares to which independent or combination SARs relate
shall not count against the 12,509,100 post-split share limit set forth in this
paragraph 5.
(c) The shares of Common Stock available for issuance under the Plan may
be authorized and unissued shares or treasury shares. The number of shares of
Common Stock issued under this Plan on or before August 24, 2001 was doubled
pursuant to the two-for-one stock split effective September 7, 2001. The
additional shares issued under this Plan as a result of that stock split count
against the 12,509,100 shares of post-split stock available as set forth in
paragraph 5(a) for grant of Awards under this Plan.
6. TERM
The Plan shall become effective as of December 13, 1996 subject to its
approval by the Company's stockholders at the 1997 Annual Meeting of
Stockholders and subject to the approval of the Securities and Exchange
Commission under the Public Utility Holding Company Act of 1935, as amended. No
Awards shall be exercisable or payable before these approvals of the Plan have
been obtained and all Awards made prior to approval of the Plan by the Company's
stockholders and approval of the Plan by the Securities and Exchange Commission
under the Public Utility Holding Company Act of 1935, as amended, are contingent
upon such approval. Awards shall not be granted pursuant to the Plan after
December 12, 2006.
7. PARTICIPATION
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The Committee shall select Participants, determine the type of Awards to
be made, and establish in the related Award Notices the applicable terms and
conditions of the Awards in addition to those set forth in this Plan and the
administrative rules issued by the Committee.
8. STOCK OPTIONS
(a) Grants. Awards may be granted in the form of stock options. These
stock options may be incentive stock options within the meaning of Section 422
of the Code or non-qualified stock options (i.e., stock options which are not
incentive stock options), or a combination of both.
(b) Terms and Conditions of Options. Unless the Award Notice provides
otherwise, an option shall be exercisable in whole or in part. The price at
which Common Stock may be purchased upon exercise of a stock option shall be
established by the Committee, but such price shall not be less than the Fair
Market Value of the Common Stock on the date of the stock option's grant. The
Committee shall not have the authority to decrease such price after the date of
the stock option's grant, except for adjustments appropriate to reflect a Common
Stock dividend, stock split, reverse stock-split or other combination pursuant
to Section 18(a). An Award Notice evidencing a stock option may, in the
discretion of the Committee, provide that a Participant who pays the option
price of a stock option by an exchange of shares of Common Stock previously
owned by the Participant shall automatically be issued a new stock option to
purchase additional shares of Common Stock equal to the number of shares of
Common Stock so exchanged. Such new stock option shall have an option price
equal to the Fair Market Value of the Common Stock on the date such new stock
option is issued and shall be subject to such other terms and conditions as the
Committee deems appropriate. Unless the Award Notice provides otherwise, each
incentive stock option shall first become exercisable on the first anniversary
of its date of grant, and each non-qualified stock option shall first become
exercisable on the first anniversary of its date of grant, or, if earlier (i) on
the date of the Participant's death occurring after the date of grant, (ii) six
months after the date of grant, if the Participant has voluntarily resigned on
or after his 60th birthday, after the date of grant, and before such six months,
or (iii) on the date of the Participant's voluntary resignation on or after his
60th birthday and at least six months after the date of grant. Unless the Award
Notice provides otherwise, each non-qualified stock option shall expire on the
day after the tenth anniversary of its date of grant, and incentive stock
options and non-qualified stock options granted in combination may be exercised
separately.
(c) Restrictions Relating to Incentive Stock Options. Stock options issued
in the form of incentive stock options shall, in addition to being subject to
all applicable terms and conditions established by the Committee, comply with
Section 422 of the Code. Accordingly, the aggregate Fair Market Value
(determined at the time the option was granted) of the Common Stock with respect
to which incentive stock options are exercisable for the first time by a
Participant during any calendar year (under this Plan or any other plan of the
Company or any of its Subsidiaries) shall not exceed $100,000 (or such other
limit as may be required by the Code). Unless the Award Notice provides a
shorter period, each incentive stock option shall expire on the tenth
anniversary of its date of grant. The number of post-split 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 establish appropriate methods for
accepting Common Stock, whether restricted or unrestricted, and may impose such
conditions as it deems appropriate on the use of such Common Stock to exercise a
stock option. The Committee, in its sole discretion, may establish procedures
whereby a Participant to the extent permitted by and subject to the requirements
of Rule 16b-3 under the Exchange Act, Regulation T issued by the Board of
Governors of the Federal Reserve System pursuant to the Exchange Act, federal
income tax laws, and other federal, state and local tax and securities laws, can
exercise an option or a portion thereof without making a direct payment of the
option price to the Company. If the Committee so elects to establish a cashless
exercise program, the Committee shall determine, in its sole discretion and from
time to time, such administrative procedures and policies as it deems
appropriate. Such procedures and policies shall be binding on any Participant
wishing to utilize the cashless exercise program.
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9. STOCK APPRECIATION RIGHTS
(a) Grants and Valuation. Awards may be granted in the form of stock
appreciation rights ("SARs") until June 15, 2001. SARs may be granted singly
("Independent SARs"), in combination with all or a portion of a related stock
option under the Plan ("Combination SARs"), or in the alternative ("Alternative
SARs"). Combination or Alternative SARs may be granted either at the time of the
grant of related stock options or at any time thereafter during the term of the
stock options. Combination SARs shall be subject to paragraph 9(b) hereof.
Alternative SARs shall be subject to paragraph 9(c) hereof. Independent SARs
shall be subject to paragraph 9(d) hereof. Unless this Plan or the Award Notice
provides otherwise, SARs shall entitle the recipient to receive a payment equal
to the appreciation in the Fair Market Value of a stated number of shares of
Common Stock from the award date to the date of exercise. Once a SAR has been
issued, the Committee shall not reprice the SAR by changing the initial Fair
Market Value from which the payment is calculated except for adjustments
appropriate to reflect a Common Stock dividend, stock split, reverse stock-split
or other combination pursuant to Section 18(a). In the case of SARs granted in
combination with, or in the alternative to, stock options, the appreciation in
value is from the option price of such related stock option to the Fair Market
Value on the date of exercise of such SARs. Unless this Plan or the Award Notice
provides otherwise, SARs granted in conjunction with stock options shall be
Combination SARs, and all SARs shall be exercisable between one year and ten
years and one day after the date of their award.
(b) Terms and Conditions of Combination SARs. Both the stock options
granted in conjunction with Combination SARs and the Combination SARs may be
exercised. Combination SARs shall be exercisable only to the extent the related
stock option is exercisable, and the base from which the value of the
Combination SARs is measured at its exercise shall be the option price of the
related stock option. Combination SARs may be exercised either together with the
related stock option or separately. If a Participant exercises a Combination SAR
or related stock option, but not both, the other shall remain outstanding and
shall remain exercisable during the entire exercise period.
(c) Terms and Conditions of Alternative SARs. Either the stock options
granted in the alternative to Alternative SARs or the Alternative SARs may be
exercised, but not both. Alternative SARs shall be exercisable only to the
extent that the related stock option is exercisable, and the base from which the
value of the Alternative SARs is measured at its exercise shall be the option
price of the related stock option. If related stock options are exercised as to
some or all of the shares covered by the Award, the related Alternative SARs
shall be cancelled automatically to the extent of the number of shares covered
by the stock option exercise. Upon exercise of Alternative SARs as to some or
all of the shares covered by the Award, the related stock option shall be
cancelled automatically to the extent of the number of shares covered by such
exercise, and such shares shall again be eligible for grant in accordance with
paragraph 5 hereof.
(d) Terms and Conditions of Independent SARs. Independent SARs shall be
exercisable in whole or in such installments and at such time as may be
determined by the Committee. The base price from which the value of an
Independent SAR is measured shall also be determined by the Committee; provided,
however, that such price shall not be less than the Fair Market Value of the
Common Stock on the date of the grant of the Independent SAR.
(e) Deemed Exercise. The Committee may provide that a SAR shall be deemed
to be exercised at the close of business on the scheduled expiration date of
such SAR, if at such time the SAR by its terms remains exercisable and, if so
exercised, would result in a payment to the holder of such SAR.
(f) Conversion of SARs to Non-Qualified Stock Options. Each unexercised
SAR shall be convertible to a non-qualified option to purchase one share of
Common Stock, at the option of the Committee and with the consent of the
Participant to whom that SAR was awarded (or his successor or assignee). Such an
option will have the same exercise price and expiration date as did the
converted SAR, and will have the same other terms and conditions as the other
non-qualified stock options issued to the same Participant and on the same day
as the converted SAR. A share issued upon exercise of such an option will count
against the 12,509,100 post-split shares available under paragraph 5(a). For
purposes of the limit set forth in paragraph 5(a) that Awards covering no more
than 600,000 post-split shares of Common Stock may be granted to a Participant
in
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a fiscal year, the conversion of a SAR into an option in accordance with this
paragraph 9(f) will not count as an Award granted in the fiscal year in which
the conversion takes place.
10. RESTRICTED STOCK
(a) Grants. Awards may be granted in the form of Restricted Stock. Shares
of Restricted Stock shall be awarded in such amounts and at such times during
the term of the Plan as the Committee shall determine.
(b) Award Restrictions. Restricted Stock shall be subject to such terms
and conditions as the Committee deems appropriate, including restrictions on
transferability and continued employment. No more than 50,000 restricted shares
may be issued in a single fiscal year. The Committee may modify or accelerate
the delivery of shares of Restricted Stock under such circumstances as it deems
appropriate.
(c) Rights as Stockholders. During the period in which any shares of
Restricted Stock are subject to the restrictions imposed under paragraph 10(b),
the Committee may, in its discretion, grant to the Participant to whom shares of
Restricted Stock have been awarded all or any of the rights of a stockholder
with respect to such shares, including, but not by way of limitation, the right
to vote such shares and to receive dividends.
(d) Evidence of Award. Any shares of Restricted Stock granted under the
Plan may be evidenced in such manner as the Committee deems appropriate,
including, without limitation, book-entry registration or issuance of a stock
certificate or certificates.
11. PERFORMANCE UNITS
(a) Grants. Awards may be granted in the form of performance units.
Performance units shall refer to the Units valued by reference to designated
criteria established by the Committee, other than Units which are expressed in
terms of Common Stock.
(b) Performance or Service Criteria. Performance units shall be contingent
on the attainment during a performance period of certain performance and/or
service objectives. The length of the performance period, the performance or
service objectives to be achieved, and the extent to which such objectives have
been attained shall be conclusively determined by the Committee in the exercise
of its absolute discretion. Performance and service objectives may be revised by
the Committee during the performance period, in order to take into consideration
any unforeseen events or changes in circumstances.
12. PERFORMANCE SHARES
(a) Grants. Awards may be granted in the form of performance shares.
Performance shares shall refer to shares of Common Stock or Units which are
expressed in terms of Common Stock, including shares of phantom stock.
(b) Performance or Service Criteria. Performance shares shall be
contingent upon the attainment during a performance period of certain
performance or service objectives. The length of the performance period, the
performance or service objectives to be achieved, and the extent to which such
objectives have been attained shall be conclusively determined by the Committee
in the exercise of its absolute discretion. Performance and service objectives
may be revised by the Committee during the performance period, in order to take
into consideration any unforeseen events or changes in circumstances.
13. PAYMENT OF AWARDS
At the discretion of the Committee, payment of Awards may be made in cash,
Common Stock, a combination of cash and Common Stock, or any other form of
property as the Committee shall determine.
14. DIVIDENDS AND DIVIDEND EQUIVALENTS
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If an Award is granted in the form of Restricted Stock, stock options, or
performance shares, or in the form of any other stock-based grant, the Committee
may, at any time up to the time of payment, include as part of an Award an
entitlement to receive dividends or dividend equivalents, subject to such terms
and conditions as the Committee may establish. Dividends and dividend
equivalents shall be paid in such form and manner (i.e., lump sum or
installments), and at such time as the Committee shall determine. All dividends
or dividend equivalents which are not paid currently may, at the Committee's
discretion, accrue interest, be reinvested into additional shares of Common
Stock or, in the case of dividends or dividend equivalents credited in
connection with performance shares, be credited as additional performance shares
and paid to the Participant if and when, and to the extent that, payment is made
pursuant to such Award.
15. DEFERRAL OF AWARDS
At the discretion of the Committee, the receipt of the payment of shares
of Restricted Stock, performance shares, performance units, dividends, dividend
equivalents, or any portion thereof, may be deferred by a Participant until such
time as the Committee may establish. All such deferrals shall be accomplished by
the delivery of a written, irrevocable election by the Participant prior to such
time payment would otherwise be made, on a form provided by the Company.
Further, all deferrals shall be made in accordance with administrative
guidelines established by the Committee to ensure that such deferrals comply
with all applicable requirements of the Code and its regulations. Deferred
payments shall be paid in a lump sum or installments, as determined by the
Committee. The Committee may also credit interest, at such rates to be
determined by the Committee, on cash payments that are deferred and credit
dividends or dividend equivalents on deferred payments denominated in the form
of Common Stock.
16. TERMINATION OF EMPLOYMENT
(a) General Rule. Subject to paragraph 20, if a Participant's employment
with the Company or a Subsidiary terminates for a reason other than death,
disability, retirement, or any approved reason, all unexercised, unearned or
unpaid Awards shall be cancelled or forfeited as the case may be, unless
otherwise provided in this paragraph or in the Participant's Award Notice. The
Committee shall have the authority to promulgate rules and regulations to (i)
determine what events constitute disability, retirement, or termination for an
approved reason for purposes of the Plan, and (ii) determine the treatment of a
Participant under the Plan in the event of his death, disability, retirement, or
termination for an approved reason.
(b) Incentive Stock Options. Unless the Award Notice provides otherwise,
any incentive stock option which has not theretofore expired, shall terminate
upon termination of the Participant's employment with the Company whether by
death or otherwise, and no shares of Common Stock may thereafter be purchased
pursuant to such incentive stock option, except that:
(i) Upon termination of employment (other than by death), a
Participant may, within three months after the date of termination of
employment, purchase all or part of any shares of Common Stock which the
Participant was entitled to purchase under such incentive stock option on
the date of termination of employment.
(ii) Upon the death of any Participant while employed with the
Company or within the three-month period referred to in paragraph 16(b)(i)
above, the Participant's estate or the person to whom the Participant's
rights under the incentive stock option are transferred by will or the
laws of descent and distribution may, within one year after the date of
the Participant's death, purchase all or part of any shares of Common
Stock which the Participant was entitled to purchase under such incentive
stock option on the date of death.
Notwithstanding anything in this paragraph 16(b) to the contrary, the
Committee may at any time within the three-month period after the date of
termination of a Participant's employment, with the consent of the Participant,
the Participant's estate or the person to whom the Participant's rights under
the incentive stock options are transferred by will or the laws of descent and
distribution, extend the period for exercise of the Participant's incentive
stock options to any date not later than the date on which such incentive stock
options would have otherwise expired absent such termination of employment.
Nothing in this paragraph 16(b) shall
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authorize the exercise of an incentive stock option after the expiration of the
exercise period therein provided, nor later than ten years after the date of
grant.
(c) Non-Qualified Stock Options. Unless the Award Notice provides
otherwise, any nonqualified stock option which has not theretofore expired shall
terminate upon termination of the Participant's employment with the Company, and
no shares of Common Stock may thereafter be purchased pursuant to such
non-qualified stock option, except that:
(i) Upon termination of employment for any reason other than death,
discharge by the Company for cause, or voluntary resignation of the
Participant prior to age 60, a Participant may, within five years after
the date of termination of employment, or any such greater period of time
as the Committee, in its sole discretion, deems appropriate, exercise all
or part of the non-qualified stock option which the Participant was
entitled to exercise on the date of termination of employment or
subsequently becomes eligible to exercise pursuant to paragraph 8(b)
above.
(ii) Upon the death of a Participant while employed with the Company
or within the period referred to in paragraph 16(c)(i) above, the
Participant's estate or the person to whom the Participant's rights under
the non-qualified stock option are transferred by will or the laws of
descent and distribution may, within five years after the date of the
Participant's death while employed, or within the period referred to in
paragraph 16(c)(i) above, exercise all or part of the non-qualified stock
option which the Participant was entitled to exercise on the date of
death.
Nothing in this paragraph 16(c) shall authorize the exercise of a
non-qualified stock option later than the exercise period set forth in the Award
Notice.
17. NONASSIGNABILITY
No Award under the Plan shall be subject in any manner to alienation,
anticipation, sale, transfer (except by will or the laws of descent and
distribution or pursuant to a qualified domestic relations order), assignment,
pledge, or encumbrance, except that, unless the Committee specifies otherwise,
all awards of non-qualified stock options or SARs shall be transferable without
consideration, subject to all the terms and conditions to which such
non-qualified stock options or SARs are otherwise subject, to (i) members of a
Participant's immediate family as defined in Rule 16a-1 promulgated under the
Exchange Act, or any successor rule or regulation, (ii) trusts for the exclusive
benefit of the Participant or such immediate family members or (iii) entities
which are wholly-owned by the Participant or such immediate family members,
provided that (x) there may be no consideration for any such transfer, and (y)
subsequent transfers of transferred options shall be prohibited except those by
will or the laws of descent and distribution. Following transfer, any such
options shall continue to be subject to the same terms and conditions as were
applicable immediately prior to transfer, and except as provided in the next
sentence, the term "Participant" shall be deemed to refer to the transferee. The
events of termination of employment of Section 16(c) hereof shall continue to be
applied with reference to the original Participant and following the termination
of employment of the original Participant, the options shall be exercisable by
the transferee only to the extent, and for the periods specified in Section
16(c), that the original Participant could have exercised such option. Except as
expressly permitted by this paragraph, an Award shall be exercisable during the
Participant's lifetime only by him.
18. ADJUSTMENT OF SHARES AVAILABLE
(a) Changes in Stock. In the event of changes in the Common Stock by
reason of a Common Stock dividend, stock split, reverse stock-split or other
combination, appropriate adjustment shall be made by the Committee in the
aggregate number of shares available under the Plan, the number of shares with
respect to which Awards may be granted to any Participant in any fiscal year,
and the number of shares, SARs, performance shares, Common Stock units and other
stock-based interests subject to outstanding Awards, without, in the case of
stock options, causing a change in the aggregate purchase price to be paid
therefor. Such proper adjustment as may be deemed equitable may be made by the
Committee in its discretion to give effect to any other change affecting the
Common Stock.
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(b) Changes in Capitalization. In case of a merger or consolidation of the
Company with another corporation, a reorganization of the Company, a
reclassification of the Common Stock of the Company, a spinoff of a significant
asset, or other changes in the capitalization of the Company, appropriate
provision shall be made for the protection and continuation of any outstanding
Awards by either (i) the substitution, on an equitable basis, of appropriate
stock or other securities or other consideration to which holders of Common
Stock of the Company will be entitled pursuant to such transaction or succession
of transactions, or (ii) by appropriate adjustment in the number of shares
issuable pursuant to the Plan, the number of shares covered by outstanding
Awards, the option price of outstanding stock options, the exercise price of
outstanding SARs, the performance or service criteria or performance period of
outstanding performance units, and the performance or service criteria or
performance period of outstanding performance shares, as deemed appropriate by
the Committee.
19. WITHHOLDING TAXES
The Company shall be entitled to deduct from any payment under the Plan,
regardless of the form of such payment, the amount of all applicable income and
employment taxes required by law to be withheld with respect to such payment or
may require the participant to pay to it such tax prior to and as a condition of
the making of such payment. Subject to the administrative guidelines established
by the Committee, a Participant may pay the amount of taxes required by law to
be withheld from an Award, in whole or in part, by requesting that the Company
withhold from any payment of Common Stock due as a result of such Award, or by
delivering to the Company, shares of Common Stock having a Fair Market Value
less than or equal to the amount of such required withholding taxes.
20. NONCOMPETITION PROVISION
Notwithstanding anything contained in this Plan to the contrary, unless
the Award Notice specifies otherwise, a Participant shall forfeit all
unexercised, unearned, and/or unpaid Awards, including Awards earned but not yet
paid, all unpaid dividends and dividend equivalents, and all interest, if any,
accrued on the foregoing if, (i) in the opinion of the Committee, the
Participant, without the written consent of the Company, engages directly or
indirectly in any manner or capacity as principal, agent, partner, officer,
director, employee, or otherwise, in any business or activity competitive with
the business conducted by the Company or any Subsidiary; or (ii) the Participant
performs any act or engages in any activity which in the opinion of the
Committee is inimical to the best interests of the Company. In addition, the
Committee may, in its discretion, condition the deferral of any Award, dividend,
or dividend equivalent under paragraph 15 hereof on a Participant's compliance
with the terms of this paragraph 20, and cause such a Participant to forfeit any
payment which is so deferred if the Participant fails to comply with the terms
hereof.
21. AMENDMENTS TO AWARDS
The Committee may at any time unilaterally amend any unexercised,
unearned, or unpaid Award, including Awards earned but not yet paid, to the
extent it deems appropriate; provided, however, that any such amendment which is
adverse to the Participant shall require the Participant's consent.
22. REGULATORY APPROVALS AND LISTINGS
Notwithstanding anything contained in this Plan to the contrary, the
Company shall have no obligation to issue or deliver certificates of Common
Stock evidencing Awards resulting in the payment of Common Stock prior to (a)
the obtaining of any approval from any governmental agency which the Company
shall, in its sole discretion, determine to be necessary or advisable, (b) the
admission of such shares to listing on the stock exchange on which the Common
Stock may be listed, and (c) the completion of any registration or other
qualification of said shares under any state or federal law or ruling of any
governmental body which the Company shall, in its sole discretion, determine to
be necessary or advisable.
23. NO RIGHT TO CONTINUED EMPLOYMENT OR GRANTS
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Participation in the Plan shall not give any Participant any right to
remain in the employ of the Company or any Subsidiary. The Company or, in the
case of employment with a Subsidiary, the Subsidiary, reserves the right to
terminate any Participant at any time. Further, the adoption of this Plan shall
not be deemed to give any person any right to be selected as a Participant or to
be granted an Award.
24. AMENDMENT
The Board may suspend or terminate the Plan at any time. In addition, the
Board may, from time to time, amend the Plan in any manner, provided however,
that any such amendment may be subject to stockholder approval (i) at the
discretion of the Board and (ii) to the extent that shareholder approval may be
required by law, including, but not limited to, the requirements of Rule 16b-3
under the Exchange Act, or any successor rule or regulation.
25. CHANGE IN CONTROL AND CHANGE IN OWNERSHIP
(a) Background. All Participants shall be eligible for the treatment
afforded by this paragraph 25 if there is a Change in Ownership or if their
employment terminates within two years following a Change in Control, unless the
termination is due to (i) death; (ii) disability entitling the Participant to
benefits under his employer's long-term disability plan; (iii) Cause; (iv)
resignation by the Participant other than for Good Reason; or (v) retirement
entitling the Participant to benefits under his employer's retirement plan.
(b) Vesting and Lapse of Restrictions. If a Participant is eligible for
treatment under this paragraph 25, (i) all of the terms and conditions in effect
on any unexercised, unearned, unpaid or deferred Awards shall immediately lapse
as of the Acceleration Date; (ii) no other terms or conditions shall be imposed
upon any Awards on or after such date, and in no event shall any Award be
forfeited on or after such date; and (iii) all of his unexercised, unvested,
unearned and/or unpaid Awards or any other outstanding Awards shall
automatically become one hundred percent (100%) vested immediately upon such
date.
(c) Dividends and Dividend Equivalents. If a Participant is eligible for
treatment under this paragraph 25, all unpaid dividends and dividend equivalents
and all interest accrued thereon, if any, shall be treated and paid under this
paragraph 25 in the identical manner and time as the Award under which such
dividends or dividend equivalents have been credited. For example, if upon a
Change in Ownership, an Award under this paragraph 25 is to be paid in a
prorated fashion, all unpaid dividends and dividend equivalents with respect to
such Award shall be paid according to the same formula used to determine the
amount of such prorated Award.
(d) Treatment of Performance Units and Performance Shares. If a
Participant holding either performance units or performance shares is eligible
for treatment under this paragraph 25, the provisions of this paragraph (d)
shall determine the manner in which such performance units and/or performance
shares shall be paid to him. For purposes of making such payment, each "current
performance period" (defined to mean a performance period or term of a
performance unit or performance share which period or term has commenced but not
yet ended), shall be treated as terminating upon the Acceleration Date, and for
each such "current performance period" and each "completed performance period"
(defined to mean a performance period or term of a performance unit or
performance share which has ended but for which the Committee has not, on the
Acceleration Date, made a determination as to whether and to what degree the
performance or service objectives for such period have been attained), it shall
be assumed that the performance or service objectives have been attained at a
level of one hundred percent (100%) or the equivalent thereof. If the
Participant is participating in one or more "current performance periods," he
shall be considered to have earned and, therefore, to be entitled to receive, a
prorated portion of the Awards previously granted to him for each such
performance period. Such prorated portion shall be determined by multiplying the
number of performance shares or performance units, as the case may be, granted
to the Participant by a fraction, the numerator of which is the total number of
whole and partial years (with each partial year being treated as a whole year)
that have elapsed since the beginning of the performance period, and the
denominator of which is the total number of years in such performance period. A
Participant in one or more "completed performance periods" shall be considered
to have earned and, therefore, be entitled to receive all the performance shares
and performance units previously granted to him during each performance period.
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(e) Valuation of Awards. If a Participant is eligible for treatment under
this paragraph 25, his Awards (including those earned as a result of the
application of paragraph 25(d) above) shall be valued and cashed out on the
basis of the Change in Control Price.
(f) Payment of Awards. If a Participant is eligible for treatment under
this paragraph 25, whether or not he is still employed by the Company or a
Subsidiary, he shall be paid, in a single lump sum cash payment, as soon as
practicable but in no event later than 90 days after the Acceleration Date, for
all outstanding Units of Common Stock, Independent and Combination SARs, stock
options (including incentive stock options), performance units (including those
earned as a result of the application of paragraph 25(d) above), and performance
shares (including those earned as a result of paragraph 25(d) above), and all
other outstanding Awards, including those granted by the Committee pursuant to
its authority under paragraph 3(h) hereof.
(g) Deferred Awards. If a Participant is eligible for treatment under this
paragraph 25, all deferred Awards for which payment has not been received as of
the Acceleration Date shall be paid in a single lump sum cash payment as soon as
practicable, but in no event later than 90 days after such date. For purposes of
making such payment, the value of all Awards which are stock-based shall be
determined by the Change in Control Price.
(h) Miscellaneous. Upon a Change in Control or a Change in Ownership, (i)
the provisions of paragraphs 16, 20 and 21 hereof shall become null and void and
of no force and effect insofar as they apply to a Participant who has been
terminated under the conditions described in (a) above; and (ii) no action shall
be taken which would affect the rights of any Participant or the operation of
the Plan with respect to any Award to which the Participant may have become
entitled hereunder on or prior to the date of the Change in Control or Change in
Ownership or to which he may become entitled as a result of such Change in
Control or Change in Ownership.
(i) Legal Fees. The Company shall pay all legal fees and related expenses
incurred by a Participant in seeking to obtain or enforce any payment, benefit
or right he may be entitled to under the Plan after a Change in Control or
Change in Ownership; provided, however, the Participant shall be required to
repay any such amounts to the Company to the extent a court of competent
jurisdiction issues a final and non-appealable order setting forth the
determination that the position taken by the Participant was frivolous or
advanced in bad faith.
26. NO RIGHT, TITLE OR INTEREST IN COMPANY ASSETS
No Participant shall have any rights as a stockholder as a result of
participation in the Plan until the date of issuance of a stock certificate in
his name, and, in the case of Restricted Stock, stock options, performance
shares or any other stock-based grant, such rights are granted to the
Participant under paragraph 10(c) hereof. To the extent any person acquires a
right to receive payments from the Company under this Plan, such rights shall be
no greater than the rights of an unsecured creditor of the Company.
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EXHIBIT B
UNDERLINED LANGUAGE WILL BE ADDED
"LINED-OUT" LANGUAGE WILL BE DELETED
NATIONAL FUEL GAS COMPANY
1993 AWARD AND OPTION PLAN
AS AMENDED OCTOBER 27, 1995
DECEMBER 11, 1996 AND DECEMBER 18, 1996
1. PURPOSE
The purposes of the Plan are 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 Key Employees of the Company and its
Subsidiaries whose contributions are important to the continued success of the
Company and its Subsidiaries, and by enhancing their ability to attract and
retain in their employ highly qualified persons for the successful conduct of
their businesses.
2. DEFINITIONS
2.1 "Acceleration Date" means (i) in the event of a Change in
Ownership, the date on which such change occurs, or (ii) with respect to a
Participant who is eligible for treatment under paragraph 25 hereof on account
of the termination of his employment following a Change in Control, the date on
which such termination occurs.
2.2 "Award" means any form of stock option, stock appreciation
right, Restricted Stock, performance unit, performance share or other incentive
award granted by the Committee to a Participant under the Plan pursuant to such
terms and conditions as the Committee may establish. An Award may be granted
singly, in combination or in the alternative.
2.3 "Award Notice" means a written notice from the Company to a
Participant that sets forth the terms and conditions of an Award in addition to
those established by this Plan and by the Committee's exercise of its
administrative powers.
2.4 "Board" means the Board of Directors of the Company.
2.5 "Cause" means (i) the willful and continued failure by a Key
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 Key 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
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39
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 February 17, 1993
(the "Incumbent Board") have ceased for any reason to constitute at least a
majority thereof, provided that any person becoming a director subsequent to
February 17, 1993 whose election, or nomination for election by the Company's
stockholders, was approved by a vote of at least three-quarters ( 3/4) of the
directors comprising the Incumbent Board (either by specific vote or by approval
of the proxy statement of the Company in which such person is named as nominee
for director without objection to such nomination) shall be, for purposes of
this Plan, considered as though such person were a member of the Incumbent
Board.
2.7 "Change in Control Price" means, in respect of a Change in
Control, the highest closing price per share paid for the purchase of Common
Stock on the New York Stock Exchange, another national stock exchange or the
National Association of Securities Dealers Automated Quotation System during the
ninety (90) day period ending on the date the Change in Control occurs, and in
respect of a Change in Ownership, the highest closing price per share paid for
the purchase of Common Stock on the New York Stock Exchange, another national
stock exchange or the National Association of Securities Dealers Automated
Quotation System during the ninety (90) day period ending on the date the Change
in Ownership occurs.
2.8 "Change in Ownership" means a change which results directly
or indirectly in the Company's Common Stock ceasing to be actively traded on a
national securities exchange or the National Association of Securities Dealers
Automated Quotation System.
2.9 "Code" means the Internal Revenue Code of 1986, as amended
from time to time.
2.10 "Committee" means the Compensation Committee of the Board,
or such other committee designated by the Board as authorized to administer the
Plan. The Committee shall consist of not less than two (2) members of the Board,
each of whom shall be a Disinterested Board Member. A Disinterested Board Member
means a member who (a) is not a current employee of the Company or a Subsidiary,
(b) is not a former employee of the Company or a Subsidiary who receives
compensation for prior services (other than benefits under a tax-qualified
retirement plan) during the taxable year, (c) has not been an officer of the
Company, (d) does not receive remuneration from the Company or a Subsidiary,
either directly or indirectly, in any capacity other than as a director and (e)
does not possess an interest in any other transaction, and is not engaged in a
business relationship, for which disclosure would be required pursuant to Item
404(a) or (b) of Regulation S-K under the Securities Act of 1933, as amended.
The term Disinterested Board Member shall be interpreted in such manner as shall
be necessary to conform to the requirements of Section 162(m) of the Code and
Rule 16b-3 promulgated under the Exchange Act.
2.11 "Common Stock" means the common stock of the Company.
2.12 "Company" means National Fuel Gas Company.
2.13 "Exchange Act" means the Securities Exchange Act of 1934,
as amended from time to time.
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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 report of consolidated trading of New York Stock
Exchange-listed securities for that date (or, if no such shares were publicly
traded on that date, the next preceding date that such shares were so traded)
published in The Wall Street Journal or in any other publication selected by the
Committee; provided, however, that if shares of Common Stock shall not have been
publicly traded for more than ten (10) days immediately preceding such date,
then the Fair Market Value of a share of Common Stock shall be determined by the
Committee in such manner as it may deem appropriate.
2.15 "Good Reason" means a good faith determination made by a
Participant that there has been any (i) material change by the Company of the
Participant's functions, duties or responsibilities which change could cause the
Participant's position with the Company to become of less dignity,
responsibility, importance, prestige or scope, including, without limitation,
the assignment to the Participant of duties and responsibilities inconsistent
with his positions, (ii) assignment or reassignment by the Company of the
Participant without the Participant's consent, to another place of employment
more than 30 miles from the Participant's current place of employment, or (iii)
reduction in the Participant's total compensation or benefits or any component
thereof, provided in each case that the Participant shall specify the event
relied upon for such determination by written notice to the Board at any time
within six months after the occurrence of such event.
2.16 "Key Employee" means an officer or other key employee of
the Company or a Subsidiary 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 1993 Award and
Option Plan.
2.19 "Pre-Split" and "Post-Split" means before and after giving
effect to the two-for-one stock split of all shares outstanding at close of
business August 24, 2001, to be effective on September 7, 2001.
2.20 "Restricted Stock" means an Award granted pursuant to
paragraph 10 hereof.
2.21 "Subsidiary" means a corporation or other business entity
in which the Company directly or indirectly has an ownership interest of eighty
percent (80%) or more.
2.22 "Unit" means a bookkeeping entry used by the Company to
record and account for the grant of the following Awards until such time as the
Award is paid, cancelled, forfeited or terminated, as the case may be: Units of
Common Stock, performance units, and performance shares which are expressed in
terms of Units of Common Stock.
3. ADMINISTRATION
The Plan shall be administered by the Committee. The Committee
shall have the authority to: (a) interpret the Plan; (b) establish such rules
and regulations as it deems necessary for the proper administration of the Plan;
(c) select Key Employees to receive Awards under the Plan; (d) determine the
form of an Award, whether a stock option, stock appreciation right, Restricted
Stock, performance unit, performance share, or other incentive award established
by the Committee in accordance with (h) below, the number of shares or Units
subject to the Award, all the terms and conditions of an Award, including the
time and conditions of exercise or vesting; (e) determine whether Awards would
be granted singly, in combination or in the alternative; (f) grant waivers of
Plan terms and conditions, provided that any such waiver granted to an executive
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officer of the Company shall not be inconsistent with Section 16 of the Exchange
Act and the rules promulgated thereunder; (g) accelerate the vesting, exercise
or payment of any Award or the performance period of an Award when any such
action would be in the best interest of the Company; (h) establish such other
types of Awards, besides those specifically enumerated in paragraph 2.2 hereof,
which the Committee determines are consistent with the Plan's purposes; and (i)
take any and all other action it deems advisable for the proper administration
of the Plan. The Committee shall also have the authority to grant Awards in
replacement of Awards previously granted under this Plan or any other executive
compensation or stock option plan of the Company or a Subsidiary. All
determinations of the Committee shall be made by a majority of its members, and
its determinations shall be final, binding and conclusive. The Committee, in its
discretion, may delegate its authority and duties under the Plan to the Chief
Executive Officer or to other senior officers of the Company to the extent
permitted by Section 16 of the Exchange Act and notwithstanding any other
provision of this Plan or an Award Notice, under such conditions as the
Committee may establish; provided, however, that only the Committee may select
and grant Awards and render other decisions as to the timing, pricing and amount
of Awards to Participants who are subject to Section 16 of the Exchange Act.
4. ELIGIBILITY
Any Key Employee is eligible to become a Participant of the
Plan.
5. SHARES AVAILABLE
The maximum number of post-split 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
4,290,900; subject to adjustment as provided in paragraph 18. Awards covering no
more than 650,000 post-split shares of Common Stock (subject to adjustment as
provided in paragraph 18) may be granted to any Participant in any fiscal year
of the Company. The 1,090,900 post-split shares made available by the Plan
Amendment approved at the 2001 Special Meeting of Shareholders will be available
only for Awards of stock options. Any shares of Common Stock related to Awards
which terminate by expiration, forfeiture, cancellation or otherwise without the
issuance of such shares, are settled in cash in lieu of Common Stock, or are
exchanged with the Committee's permission for Awards not involving Common Stock,
shall be available again for grant under the Plan, provided, however, that if
dividends or dividend equivalents pursuant to paragraph 14, or other benefits of
share ownership (not including the right to vote the shares) have been received
by the Participant in respect of an Award prior to such termination, settlement
or exchange, the shares which were the subject of the Award shall not again be
available for grant under the Plan. Further, any shares of Common Stock which
are used by a Participant for the full or partial payment to the Company of the
purchase price of shares of Common Stock upon exercise of a stock option, or for
any withholding taxes due as a result of such exercise, shall again be available
for Awards under the Plan. Similarly, shares of Common Stock with respect to
which an Alternative SAR has been exercised and paid in cash shall again be
available for grant under the Plan. Shares to which independent or combination
SARs relate shall not count against the 4,290,900 post-split limit set forth in
this paragraph 5. The shares of Common Stock available for issuance under the
Plan may be authorized and unissued shares or treasury shares. The number of
shares of Common Stock issued under this Plan on or before August 24, 2001 was
doubled pursuant to the two-for-one stock split effective September 7, 2001. The
additional shares issued under this Plan as a result of that stock split count
against the 4,290,900 shares of post-split stock available as set forth in
paragraph 5(a) for grant of Awards under this Plan.
6. TERM
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The Plan shall become effective as of February 18, 1993, subject
to its approval by the Company's stockholders at the 1993 Annual Meeting of
Stockholders and subject to the approval of the Securities and Exchange
Commission under the Public Utility Holding Company Act of 1935, as amended. No
Awards shall be exercisable or payable before these approvals of the Plan have
been obtained. Awards shall not be granted pursuant to the Plan after February
17, 2003; provided, however, that incentive stock options shall not be granted
pursuant to the Plan after December 9, 2002.
7. PARTICIPATION
The Committee shall select Participants, determine the type of
Awards to be made, and establish in the related Award Notices the applicable
terms and conditions of the Awards in addition to those set forth in this Plan
and the administrative rules issued by the Committee.
8. STOCK OPTIONS
(a) Grants. Awards may be granted in the form of stock options.
These stock options may be incentive stock options within the meaning of Section
422 of the Code or non-qualified stock options (i.e., stock options which are
not incentive stock options), or a combination of both.
(b) Terms and Conditions of Options. Unless the Award Notice
provides otherwise, an option shall be exercisable in whole or in part. The
price at which Common Stock may be purchased upon exercise of a stock option
shall be established by the Committee, but such price shall not be less than the
Fair Market Value of the Common Stock on the date of the stock option's grant.
An Award Notice evidencing a stock option may, in the discretion of the
Committee, provide that a Participant who pays the option price of a stock
option by an exchange of shares of Common Stock previously owned by the
Participant shall automatically be issued a new stock option to purchase
additional shares of Common Stock equal to the number of shares of Common Stock
so exchanged. Such new stock option shall have an option price equal to the Fair
Market Value of the Common Stock on the date such new stock option is issued and
shall be subject to such other terms and conditions as the Committee deems
appropriate. Unless the Award Notice provides otherwise, each incentive stock
option shall first become exercisable on the first anniversary of its date of
grant, and each non-qualified stock option shall first become exercisable on the
first anniversary of its date of grant, or, if earlier (i) on the date of the
Participant's death occurring after the date of grant, (ii) six months after the
date of grant, if the Participant has voluntarily resigned on or after his 60th
birthday, after the date of grant, and before such six months, or (iii) on the
date of the Participant's voluntary resignation on or after his 60th birthday
and at least six months after the date of grant. Unless the Award Notice
provides otherwise, each non-qualified stock option shall expire on the day
after the tenth anniversary of its date of grant, and incentive stock options
and non-qualified stock options granted in combination may be exercised
separately.
(c) Restrictions Relating to Incentive Stock Options. Stock
options issued in the form of incentive stock options shall, in addition to
being subject to all applicable terms and conditions established by the
Committee, comply with Section 422 of the Code. Accordingly, the aggregate Fair
Market Value (determined at the time the option was granted) of the Common Stock
with respect to which incentive stock options are exercisable for the first time
by a Participant during any calendar year (under this Plan or any other plan of
the Company or any of its Subsidiaries) shall not exceed $100,000 (or such other
limit as may be required by the Code). Unless the Award Notice provides a
shorter period, each incentive stock option shall expire on the tenth
anniversary of its date of grant. The number of post-split shares of Common
Stock that shall be available for incentive stock options granted under the Plan
is 4,290,900.
(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
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foregoing, or such other consideration as the Committee may deem appropriate.
The Committee shall establish appropriate methods for accepting Common Stock,
whether restricted or unrestricted, and may impose such conditions as it deems
appropriate on the use of such Common Stock to exercise a stock option. The
Committee, in its sole discretion, may establish procedures whereby a
Participant to the extent permitted by and subject to the requirements of Rule
16b-3 under the Exchange Act, Regulation T issued by the Board of Governors of
the Federal Reserve System pursuant to the Exchange Act, federal income tax
laws, and other federal, state and local tax and securities laws, can exercise
an option or a portion thereof without making a direct payment of the option
price to the Company. If the Committee so elects to establish a cashless
exercise program, the Committee shall determine, in its sole discretion and from
time to time, such administrative procedures and policies as it deems
appropriate. Such procedures and policies shall be binding on any Participant
wishing to utilize the cashless exercise program.
9. STOCK APPRECIATION RIGHTS
(a) Grants and Valuation. Awards may be granted in the form of
stock appreciation rights ("SARs") until June 15, 2001. SARs may be granted
singly ("Independent SARs"), in combination with all or a portion of a related
stock option under the Plan ("Combination SARs"), or in the alternative
("Alternative SARs"). Combination or Alternative SARs may be granted either at
the time of the grant of related stock options or at any time thereafter during
the term of the stock options. Combination SARs shall be subject to paragraph
9(b) hereof. Alternative SARs shall be subject to paragraph 9(c) hereof.
Independent SARs shall be subject to paragraph 9(d) hereof. Unless this Plan or
the Award Notice provides otherwise, SARs shall entitle the recipient to receive
a payment equal to the appreciation in the Fair Market Value of a stated number
of shares of Common Stock from the award date to the date of exercise. In the
case of SARs granted in combination with, or in the alternative to, stock
options granted prior to the grant of such SARs, the appreciation in value is
from the option price of such related stock option to the Fair Market Value on
the date of exercise. Unless this Plan or the Award Notice provides otherwise,
SARs granted in conjunction with stock options shall be Combination SARs, and
all SARs shall be exercisable between one year and ten years and one day after
the date of their award.
(b) Terms and Conditions of Combination SARs. Both the stock
options granted in conjunction with Combination SARs and the Combination SARs
may be exercised. Combination SARs shall be exercisable only to the extent the
related stock option is exercisable, and the base from which the value of the
Combination SARs is measured at its exercise shall be the option price of the
related stock option. Combination SARs may be exercised either together with the
related stock option or separately. If a Participant exercises a Combination SAR
or related stock option, but not both, the other shall remain outstanding and
shall remain exercisable during the entire exercise period.
(c) Terms and Conditions of Alternative SARs. Either the stock
options granted in the alternative to Alternative SARs or the Alternative SARs
may be exercised, but not both. Alternative SARs shall be exercisable only to
the extent that the related stock option is exercisable, and the base from which
the value of the Alternative SARs is measured at its exercise shall be the
option price of the related stock option. If related stock options are exercised
as to some or all of the shares covered by the Award, the related Alternative
SARs shall be cancelled automatically to the extent of the number of shares
covered by the stock option exercise. Upon exercise of Alternative SARs as to
some or all of the shares covered by the Award, the related stock option shall
be cancelled automatically to the extent of the number of shares covered by such
exercise, and such shares shall again be eligible for grant in accordance with
paragraph 5 hereof.
(d) Terms and Conditions of Independent SARs. Independent SARs
shall be exercisable in whole or in such installments and at such time as may be
determined by the Committee. The base price from which the value of an
Independent SAR is measured shall also
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be determined by the Committee; provided, however, that such price shall not be
less than the Fair Market Value of the Common Stock on the date of the grant of
the Independent SAR.
(e) Deemed Exercise. The Committee may provide that an SAR shall
be deemed to be exercised at the close of business on the scheduled expiration
date of such SAR, if at such time the SAR by its terms remains exercisable and,
if so exercised, would result in a payment to the holder of such SAR.
(f) Conversion of SARs to Non-Qualified Stock Options. Each unexercised
SAR shall be convertible to a non-qualified option to purchase one share of
Common Stock, at the option of the Committee and with the consent of the
Participant to whom that SAR was awarded (or his successor or assignee). Such an
option will have the same exercise price and expiration date as did the
converted SAR, and will have the same other terms and conditions as the other
non-qualified stock options issued to the same Participant and on the same day
as the converted SAR. A share issued upon exercise of such an option will count
against the 4,290,900 post-split shares available under paragraph 5(a). For
purposes of the limit set forth in paragraph 5(a) that Awards covering no more
than 600,000 post-split shares of Common Stock may be granted to a Participant
in a fiscal year, the conversion of a SAR into an option in accordance with this
paragraph 9(f) will not count as an Award granted in the fiscal year in which
the conversion takes place.
10. RESTRICTED STOCK
(a) Grants. Awards may be granted in the form of Restricted
Stock. Shares of Restricted Stock shall be awarded in such amounts and at such
times during the term of the Plan as the Committee shall determine.
(b) Award Restrictions. Restricted Stock shall be subject to
such terms and conditions as the Committee deems appropriate, including
restrictions on transferability and continued employment. No more than 50,000
restricted shares may be issued in a single fiscal year. The Committee may
modify or accelerate the delivery of shares of Restricted Stock under such
circumstances as it deems appropriate.
(c) Rights as Stockholders. During the period in which any
shares of Restricted Stock are subject to the restrictions imposed under
paragraph 10(b), the Committee may, in its discretion, grant to the Participant
to whom shares of Restricted Stock have been awarded all or any of the rights of
a stockholder with respect to such shares, including, but not by way of
limitation, the right to vote such shares and to receive dividends.
(d) Evidence of Award. Any shares of Restricted Stock granted
under the Plan may be evidenced in such manner as the Committee deems
appropriate, including, without limitation, book-entry registration or issuance
of a stock certificate or certificates.
11. PERFORMANCE UNITS
(a) Grants. Awards may be granted in the form of performance
units. Performance units shall refer to the Units valued by reference to
designated criteria established by the Committee, other than Units which are
expressed in terms of Common Stock.
(b) Performance or Service Criteria. Performance units shall be
contingent on the attainment during a performance period of certain performance
and/or service objectives. The length of the performance period, the performance
or service objectives to be achieved, and the extent to which such objectives
have been attained shall be conclusively determined by the Committee in the
exercise of its absolute discretion. Performance and service objectives may be
revised by the Committee during the performance period, in order to take into
consideration any unforeseen events or changes in circumstances.
12. PERFORMANCE SHARES
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(a) Grants. Awards may be granted in the form of performance
shares. Performance shares shall refer to shares of Common Stock or Units which
are expressed in terms of Common Stock, including shares of phantom stock.
(b) Performance or Service Criteria. Performance shares shall be
contingent upon the attainment during a performance period of certain
performance or service objectives. The length of the performance period, the
performance or service objectives to be achieved, and the extent to which such
objectives have been attained shall be conclusively determined by the Committee
in the exercise of its absolute discretion. Performance and service objectives
may be revised by the Committee during the performance period, in order to take
into consideration any unforeseen events or changes in circumstances.
13. PAYMENT OF AWARDS
At the discretion of the Committee, payment of Awards may be
made in cash, Common Stock, a combination of cash and Common Stock, or any other
form of property as the Committee shall determine.
14. DIVIDENDS AND DIVIDEND EQUIVALENTS
If an Award is granted in the form of Restricted Stock, stock
options, or performance shares, or in the form of any other stock-based grant,
the Committee may, at any time up to the time of payment, include as part of an
Award an entitlement to receive dividends or dividend equivalents, subject to
such terms and conditions as the Committee may establish. Dividends and dividend
equivalents shall be paid in such form and manner (i.e., lump sum or
installments), and at such time as the Committee shall determine. All dividends
or dividend equivalents which are not paid currently may, at the Committee's
discretion, accrue interest, be reinvested into additional shares of Common
Stock or, in the case of dividends or dividend equivalents credited in
connection with performance shares, be credited as additional performance shares
and paid to the Participant if and when, and to the extent that, payment is made
pursuant to such Award.
15. DEFERRAL OF AWARDS
At the discretion of the Committee, the receipt of the payment
of shares of Restricted Stock, performance shares, performance units, dividends,
dividend equivalents, or any portion thereof, may be deferred by a Participant
until such time as the Committee may establish. All such deferrals shall be
accomplished by the delivery of a written, irrevocable election by the
Participant prior to such time payment would otherwise be made, on a form
provided by the Company. Further, all deferrals shall be made in accordance with
administrative guidelines established by the Committee to ensure that such
deferrals comply with all applicable requirements of the Code and its
regulations. Deferred payments shall be paid in a lump sum or installments, as
determined by the Committee. The Committee may also credit interest, at such
rates to be determined by the Committee, on cash payments that are deferred and
credit dividends or dividend equivalents on deferred payments denominated in the
form of Common Stock.
16. TERMINATION OF EMPLOYMENT
(a) General Rule. Subject to paragraph 20, if a Participant's
employment with the Company or a Subsidiary terminates for a reason other than
death, disability, retirement, or any approved reason, all unexercised, unearned
or unpaid. Awards shall be cancelled or forfeited as the case may be, unless
otherwise provided in this paragraph or in the Participant's Award Notice. The
Committee shall have the authority to promulgate rules and regulations to (i)
determine what events constitute disability, retirement, or termination for an
approved reason for purposes of the
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Plan, and (ii) determine the treatment of a Participant under the Plan in the
event of his death, disability, retirement, or termination for an approved
reason.
(b) Incentive Stock Options. Unless the Award Notice provides
otherwise, any incentive stock option which has not theretofore expired, shall
terminate upon termination of the Participant's employment with the Company
whether by death or otherwise, and no shares of Common Stock may thereafter be
purchased pursuant to such incentive stock option, except that:
(i) Upon termination of employment (other than by death),
a Participant may, within three months after the date of termination of
employment, purchase all or part of any shares of Common Stock which the
Participant was entitled to purchase under such incentive stock option on the
date of termination of employment.
(ii) Upon the death of any Participant while employed
with the Company or within the three-month period referred to in paragraph
16(b)(i) above, the Participant's estate or the person to whom the Participant's
rights under the incentive stock option are transferred by will or the laws of
descent and distribution may, within one year after the date of the
Participant's death, purchase all or part of any shares of Common Stock which
the Participant was entitled to purchase under such incentive stock option on
the date of death.
Notwithstanding anything in this paragraph 16(b) to the
contrary, the Committee may at any time within the three-month period after the
date of termination of a Participant's employment, with the consent of the
Participant, the Participant's estate or the person to whom the Participant's
rights under the incentive stock options are transferred by will or the laws of
descent and distribution, extend the period for exercise of the Participant's
incentive stock options to any date not later than the date on which such
incentive stock options would have otherwise expired absent such termination of
employment. Nothing in this paragraph 16(b) shall authorize the exercise of an
incentive stock option after the expiration of the exercise period therein
provided, nor later than ten years after the date of grant.
(c) Non-Qualified Stock Options. Unless the Award Notice
provides otherwise, any non-qualified stock option which has not theretofore
expired shall terminate upon termination of the Participant's employment with
the Company, and no shares of Common Stock may thereafter be purchased pursuant
to such non-qualified stock option, except that:
(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, exercise all or part of the non-qualified stock
option which the Participant was entitled to exercise on the date of termination
of employment or subsequently becomes eligible to exercise pursuant to paragraph
8(b) above.
(ii) Upon the death of a Participant while employed with
the Company or within the period referred to in paragraph 16(c)(i) above, the
Participant's estate or the person to whom the Participant's rights under the
non-qualified stock option are transferred by will or the laws of descent and
distribution may, within five years after the date of the Participant's death
while employed, or within the period referred to in paragraph 16(c)(i) above,
exercise all or part of the non-qualified stock option which the Participant was
entitled to exercise on the date of death.
Nothing in this paragraph 16(c) shall authorize the
exercise of a non-qualified stock option later than the exercise period set
forth in the Award Notice.
17. NONASSIGNABILITY
No Award under the Plan shall be subject in any manner to
alienation, anticipation, sale, transfer (except by will or the laws of descent
and distribution or pursuant to a qualified
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domestic relations order), assignment, pledge or encumbrance, except that all
awards of nonqualified stock options or SAR's shall be transferable without
consideration, subject to all the terms and conditions to which such
nonqualified stock options or SARs are otherwise subject, to (i) members of a
Participant's immediate family as defined in Rule 16a-1 promulgated under the
Exchange Act, or any successor rule or regulation, (ii) trusts for the exclusive
benefit of the Participant or such immediate family members or (iii) entities
which are wholly-owned by the Participant or such immediate family members,
provided that (x) there may be no consideration for any such transfer, and (y)
subsequent transfers of transferred options shall be prohibited except those by
will or the laws of descent and distribution. Following transfer, any such
options shall continue to be subject to the same terms and conditions as were
applicable immediately prior to transfer, and except as provided in the next
sentence, the term "Participant" shall be deemed to refer to the transferee. The
events of termination of employment under Section 16(c) hereof shall continue to
be applied with reference to the original Participant and following the
termination of employment of the original Participant, the options shall be
exercisable by the transferee only to the extent, and for the periods specified
in Section 16(c), that the original Participant could have exercised such
option. Except as expressly permitted by this paragraph, an Award shall be
exercisable during the Participant's lifetime only by him.
18. ADJUSTMENT OF SHARES AVAILABLE
(a) Changes in Stock. In the event of changes in the Common
Stock by reason of a Common Stock dividend or stock split-up or combination,
appropriate adjustment shall be made by the Committee in the aggregate number of
shares available under the Plan and the number of shares, SARs, performance
shares, Common Stock units and other stock-based interests subject to
outstanding Awards, without, in the case of stock options, 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 spin-off of a
significant asset, or other changes in the capitalization of the Company,
appropriate provision shall be made for the protection and continuation of any
outstanding Awards by either (i) the substitution, on an equitable basis, of
appropriate stock or other securities or other consideration to which holders of
Common Stock of the Company will be entitled pursuant to such transaction or
succession of transactions, or (ii) by appropriate adjustment in the number of
shares issuable pursuant to the Plan, the number of shares covered by
outstanding Awards, the option price of outstanding stock options, the exercise
price of outstanding SARs, the performance or service criteria or performance
period of outstanding performance units, and the performance or service criteria
or performance period of outstanding performance shares, as deemed appropriate
by the Committee.
19. WITHHOLDING TAXES
The Company shall be entitled to deduct from any payment under
the Plan, regardless of the form of such payment, the amount of all applicable
income and employment taxes required by law to be withheld with respect to such
payment or may require the participant to pay to it such tax prior to and as a
condition of the making of such payment. A Participant may pay the amount of
taxes required by law to be withheld from an Award by requesting that the
Company withhold from any payment of Common Stock due as a result of such Award,
or by delivering to the Company, shares of Common Stock having a Fair Market
Value less than or equal to the amount of such required withholding taxes.
20. NONCOMPETITION PROVISION
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Notwithstanding anything contained in this Plan to the contrary,
unless the Award Notice specifies otherwise, a Participant shall forfeit all
unexercised, unearned, and/or unpaid Awards, including Awards earned but not yet
paid, all unpaid dividends and dividend equivalents, and all interest, if any,
accrued on the foregoing if, (i) in the opinion of the Committee, the
Participant, without the written consent of the Company, engages directly or
indirectly in any manner or capacity as principal, agent, partner, officer,
director, employee, or otherwise, in any business or activity competitive with
the business conducted by the Company or any Subsidiary; or (ii) the Participant
performs any act or engages in any activity which in the opinion of the
Committee is inimical to the best interests of the Company. In addition, the
Committee may, in its discretion, condition the deferral of any Award, dividend,
or dividend equivalent under paragraph 15 hereof on a Participant's compliance
with the terms of this paragraph 20, and cause such a Participant to forfeit any
payment which is so deferred if the Participant fails to comply with the terms
hereof.
21. AMENDMENTS TO AWARDS
The Committee may at any time unilaterally amend any
unexercised, unearned, or unpaid Award, including Awards earned but not yet
paid, to the extent it deems appropriate; provided, however, that any such
amendment which is adverse to the Participant shall require the Participant's
consent.
22. REGULATORY APPROVALS AND LISTINGS
Notwithstanding anything contained in this Plan to the contrary,
the Company shall have no obligation to issue or deliver certificates of Common
Stock evidencing Awards resulting in the payment of Common Stock prior to (a)
the obtaining of any approval from any governmental agency which the Company
shall, in its sole discretion, determine to be necessary or advisable, (b) the
admission of such shares to listing on the stock exchange on which the Common
Stock may be listed, and (c) the completion of any registration or other
qualification of said shares under any state or federal law or ruling of any
governmental body which the Company shall, in its sole discretion, determine to
be necessary or advisable.
23. NO RIGHT TO CONTINUED EMPLOYMENT OR GRANTS
Participation in the Plan shall not give any Key Employee 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 Key Employee at any time. Further, the adoption of this Plan
shall not be deemed to give any person any right to be selected as a Participant
or to be granted an Award.
24. AMENDMENT
The Board may suspend or terminate the Plan at any time. In
addition, the Board may, from time to time, amend the Plan in any manner,
provided, however, that any such amendment may be subject to stockholder
approval (i) at the discretion of the Board and (ii) to the extent that
shareholder approval may be required by law, including, but not limited to, the
requirements of Rule 16b-3 under the Exchange Act, or any successor rule or
regulation.
25. CHANGE IN CONTROL AND CHANGE IN OWNERSHIP
(a) Background. All Participants shall be eligible for the
treatment afforded by this paragraph 25 if there is a Change in Ownership or if
their employment terminates within two years following a Change in Control,
unless the termination is due to (i) death; (ii) disability entitling the
Participant to benefits under his employer's long-term disability plan; (iii)
Cause; (iv) resignation by the Participant other than for Good Reason; or (v)
retirement entitling the Participant to benefits under his employer's retirement
plan.
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(b) Vesting and Lapse of Restrictions. If a Participant is
eligible for treatment under this paragraph 25, (i) all of the terms and
conditions in effect on any unexercised, unearned, unpaid or deferred Awards
shall immediately lapse as of the Acceleration Date; (ii) no other terms or
conditions shall be imposed upon any Awards on or after such date, and in no
event shall any Award be forfeited on or after such date; and (iii) all of his
unexercised, unvested, unearned and/or unpaid Awards or any other outstanding
Awards shall automatically become one hundred percent (100%) vested immediately
upon such date.
(c) Dividends and Dividend Equivalents. If a Participant is
eligible for treatment under this paragraph 25, all unpaid dividends and
dividend equivalents and all interest accrued thereon, if any, shall be treated
and paid under this paragraph 25 in the identical manner and time as the Award
under which such dividends or dividend equivalents have been credited. For
example, if upon a Change in Ownership, an Award under this paragraph 25 is to
be paid in a prorated fashion, all unpaid dividends and dividend equivalents
with respect to such Award shall be paid according to the same formula used to
determine the amount of such prorated Award.
(d) Treatment of Performance Units and Performance Shares. If a
Participant holding either performance units or performance shares is eligible
for treatment under this paragraph 25, the provisions of this paragraph (d)
shall determine the manner in which such performance units and/or performance
shares shall be paid to him. For purposes of making such payment, each "current
performance period" (defined to mean a performance period or term of a
performance unit or performance share which period or term has commenced but not
yet ended), shall be treated as terminating upon the Acceleration Date, and for
each such "current performance period" and each "completed performance period"
(defined to mean a performance period or term of a performance unit or
performance share which has ended but for which the Committee has not, on the
Acceleration Date, made a determination as to whether and to what degree the
performance or service objectives for such period have been attained), it shall
be assumed that the performance or service objectives have been attained at a
level of one hundred percent (100%) or the equivalent thereof. If the
Participant is participating in one or more "current performance periods," he
shall be considered to have earned and, therefore, to be entitled to receive, a
prorated portion of the Awards previously granted to him for each such
performance period. Such prorated portion shall be determined by multiplying the
number of performance shares or performance units, as the case may be, granted
to the Participant by a fraction, the numerator of which is the total number of
whole and partial years (with each partial year being treated as a whole year)
that have elapsed since the beginning of the performance period, and the
denominator of which is the total number of years in such performance period. A
Participant in one or more "completed performance periods" shall be considered
to have earned and, therefore, be entitled to receive all the performance shares
and performance units previously granted to him during each performance period.
(e) Valuation of Awards. If a Participant is eligible for
treatment under this paragraph 25, his Awards (including those earned as a
result of the application of paragraph 25(d) above) shall be valued and cashed
out on the basis of the Change in Control Price.
(f) Payment of Awards. If a Participant is eligible for
treatment under this paragraph 25, whether or not he is still employed by the
Company or a Subsidiary, he shall be paid, in a single lump sum cash payment, as
soon as practicable but in no event later than 90 days after the Acceleration
Date, for all outstanding Units of Common Stock, Independent and Combination
SARs, stock options (including incentive stock options), performance units
(including those earned as a result of the application of paragraph 25(d)
above), and performance shares (including those earned as a result of paragraph
25(d) above), and all other outstanding Awards, including those granted by the
Committee pursuant to its authority under paragraph 3(h) hereof.
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(g) Deferred Awards. If a Participant is eligible for treatment
under this paragraph 25, all deferred Awards for which payment has not been
received as of the Acceleration Date shall be paid in a single lump sum cash
payment as soon as practicable, but in no event later than 90 days after such
date. For purposes of making such payment, the value of all Awards which are
stock-based shall be determined by the Change in Control Price.
(h) Miscellaneous. Upon a Change in Control or a Change in
Ownership, (i) the provisions of paragraphs 16, 20 and 21 hereof shall become
null and void and of no force and effect insofar as they apply to a Participant
who has been terminated under the conditions described in (a) above; and (ii) no
action shall be taken which would affect the rights of any Participant or the
operation of the Plan with respect to any Award to which the Participant may
have become entitled hereunder on or prior to the date of the Change in Control
or Change in Ownership or to which he may become entitled as a result of such
Change in Control or Change in Ownership.
(i) Legal Fees. The Company shall pay all legal fees and related
expenses incurred by a Participant in seeking to obtain or enforce any payment,
benefit or right he may be entitled to under the Plan after a Change in Control
or Change in Ownership; provided, however, the Participant shall be required to
repay any such amounts to the Company to the extent a court of competent
jurisdiction issues a final and non-appealable order setting forth the
determination that the position taken by the Participant was frivolous or
advanced in bad faith.
26. NO RIGHT, TITLE OR INTEREST IN COMPANY ASSETS
No Participant shall have any rights as a stockholder as a
result of participation in the Plan until the date of issuance of a stock
certificate in his name, and, in the case of Restricted Stock, stock options,
performance shares or any other stock-based grant, such rights are granted to
the Participant under paragraph 10(c) hereof. To the extent any person acquires
a right to receive payments from the Company under this Plan, such rights shall
be no greater than the rights of an unsecured creditor of the Company.
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