Exhibit 10.3



 





Exhibit 10.3




Administrative Rules

of the

Compensation Committee

of the

Board of Directors

of

National Fuel Gas Company




As amended and restated

effective September 9, 2004




 









 








TABLE OF CONTENTS




	 	 	 	 	 
	I. Meetings 
	 	 	1	 
	II. Quorum and Voting; Delegation 
	 	 	1	 
	III. Grants and Awards Under the Plans 
	 	 	2	 
	A. General Rules Regarding Awards Under
the 1997 and 1993 Plans 
	 	 	3	 
	1. Making of An Award 
	 	 	3	 
	2. Contemporaneous Awards 
	 	 	3	 
	3. Stock-Based Awards 
	 	 	3	 
	a. Source 
	 	 	3	 
	b. Cash Dividends and Cash Dividend Equivalents 
	 	 	3	 
	i. Stock Based Awards Other
Than Restricted Stock 
	 	 	3	 
	ii.Restricted Stock Awards 
	 	 	4	 
	c. Payment 
	 	 	4	 
	4. Withholding Taxes 
	 	 	4	 
	5. Deferral of Payment 
	 	 	5	 
	B. Stock Options Under the 1997 and 1993 Plans 
	 	 	5	 
	1. Designation 
	 	 	5	 
	2. Price 
	 	 	6	 
	3. Exercise Period/Duration 
	 	 	6	 
	a. Non-Qualified Stock Options Under
the 1997 and 1993 Plans 
	 	 	6	 
	b. Incentive
Stock Options Under the 1997 and 1993 Plans 
	 	 	6	 
	4. Death or Other Termination of Employment 
	 	 	6	 
	a. Definitions 
	 	 	6	 
	b. Non-Qualified Stock Options Under
the 1997 and 1993 Plans
	 	 	7	 
	c. Incentive Stock Options Under the
1997 and 1993 Plans
	 	 	7	 
	d. Extension of Incentive Stock Options Under the
1997 and 1993 Plans 
	 	 	8	 
	5. Mechanics of Exercise 
	 	 	10	 
	6. Reload Options 
	 	 	10	 
	C. SARs Under the 1997 Plan 
	 	 	10	 
	D. Restricted Stock Under the 1997 and 1993 Plans 
	 	 	11	 







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	1. Restrictions on Transferability; Vesting 
	 	 	11	 
	2. Mechanics of Grant 
	 	 	11	 
	E.
Performance Units and Performance Shares Under The 1997 Plan 
	 	 	11	 
	IV. Procedures For Exercising Stock Options 
	 	 	12	 
	A. Authority and Scope 
	 	 	12	 
	B. Notice of Exercise 
	 	 	12	 
	1. Form and Delivery 
	 	 	12	 
	2. Exercise Date 
	 	 	13	 
	C. Payment of Exercise Price 
	 	 	13	 
	1. Cash Payment 
	 	 	13	 
	2. Payment with Existing Company Stock 
	 	 	14	 
	3. Additional Time to Pay Exercise Price 
	 	 	14	 
	4. Cashless Exercise 
	 	 	15	 







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ADMINISTRATIVE

RULES OF THE

COMPENSATION COMMITTEE

OF THE

BOARD OF DIRECTORS

OF

NATIONAL FUEL GAS COMPANY




As amended and restated

effective September 9, 2004




I. MEETINGS




     Each meeting (“Meeting”) of the Compensation Committee (“Committee”) of
the Board of Directors of National Fuel Gas Company (“Company”) shall be held
as indicated in a notice made in accordance with these rules. Notice of each
Meeting, stating the place, date and hour thereof, shall be given to each
member of the Committee (“Member”) by mailing written notice not less than five
days before the Meeting to each Member, or by telegraphing, telephoning or
delivering oral or written notice to each Member personally not less than one
day before the Meeting.



     Any one or more Members of the Committee may participate in a Meeting by
means of a conference telephone or similar equipment. Participation by such
means shall constitute presence in person at a Meeting.



     The Committee may also take action by unanimous written consent.



II. QUORUM AND VOTING; DELEGATION




     At all Meetings, a quorum shall be required for the transaction of
business and shall consist of a majority of the entire Committee. The majority
vote of the Members at a Meeting at which a quorum is present shall decide any
question that may come before the meeting.



     Consistently with limitations imposed by the Plans, the Committee may
delegate in these rules or by resolution any or all of its authority to the
Chief Executive Officer, to the Secretary and to any other officer of the
Company (individually, “Delegate”), so long as the Delegate has no potential
conflict of interest which would cause him or her not to exercise his or her
good faith independent



 









 





business judgment in respect of a delegated matter, and so long as such
delegation would not result in the requirement under applicable law that the
Delegate’s name appear beneath the Committee’s report required to be included
in Company filings with the Securities and Exchange Commission. Subject to
such limitations, the Committee hereby delegates the power to implement its
decisions to appropriate officers of the Company.




III. GRANTS AND AWARDS UNDER THE PLANS




     The following rules and regulations shall apply with respect to grants and
awards of stock options, stock appreciation rights (“SARs”) and shares of
restricted stock (“Restricted Stock”) under the Company’s 1997 Award and Option
Plan (“1997 Plan”) and 1993 Award and Option Plan (“1993 Plan”) (together, the
“Plans”). These rules also address other Awards under the Plans.



     Any capitalized term not defined in these rules shall have the same
meaning as in the applicable Plan. The following rules are intended to
supplement the Plans and, to the extent that any rule is determined to be
inconsistent with any Plan, the Plan shall control.



     These rules may be amended by the Committee at any time and from time to
time. Except to the extent otherwise specified in the particular Award Notice
or at the time these rules are amended, any grant or award under the Plans
shall be subject to these rules as in effect on the date of the grant or award.



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     A. GENERAL RULES REGARDING AWARDS UNDER THE 1997 AND 1993 PLANS



          1. Making of An Award



               An Award within the meaning of these rules occurs upon the grant by the
Committee of any stock option, SAR, Restricted Stock, performance unit,
performance share or other incentive award. An Award Notice within the meaning
of these rules 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 in the applicable Plan and by the Committee’s exercise of its
administrative powers.



          2. Contemporaneous Awards



               An Award of one type granted contemporaneously with an Award of any other
type shall be treated as having been granted in combination, and not in the
alternative, with the Award of the other type.



          3. Stock-based Awards



               a. Source. Stock-based Awards, to the extent actually paid in Common
Stock, shall reduce treasury shares first and thereafter authorized but
unissued shares.



               b. Cash Dividends and Cash Dividend Equivalents.



                    (i) Stock-Based Awards Other Than Restricted Stock. No stock-based Award
carries with it the entitlement to receive cash dividends or cash dividend
equivalents until such stock-based Award is exercised (in the case of a stock
option) or earned. If a stock-based Award is exercised or earned prior to or
on the record date for determination of stockholders entitled to receive a cash
dividend, then such stock-based Award or the securities resulting from the
exercise thereof, as the case may be, shall be entitled to receive such cash
dividend.



                    (ii) Restricted Stock Awards. Notwithstanding clause (i) of this
paragraph (b) or §26 of the 1993 Plan or the 1997 Plan, dividends shall be
payable with respect to each



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outstanding Award of Restricted Stock whether or not the restrictions in such
Award have been satisfied or have lapsed.




               c. Payment. Payment of stock-based Awards (other than SARs and
performance shares, which shall be paid in cash) shall be made with Common
Stock.



          4. Withholding Taxes



               At the time a Participant is taxable with respect to Options, SARs or
Restricted Stock granted under the Plans, or the exercise or surrender of the
same, the Company shall have the right to withhold from amounts payable to the
Participant under the Plan or from other compensation payable to the
Participant in its sole discretion, or require the Participant to pay to it, an
amount sufficient to satisfy all federal, state and/or local withholding tax
requirements. A Participant may pay, in whole or in part, such tax withholding
amounts by requesting that the Company withhold such amounts of taxes from the
amounts owed to the Participant or by delivering as payment to the Company,
shares of Common Stock having a Fair Market Value less than or equal to the
amount of such required withholding taxes (with the remainder payable in cash).



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          5. Deferral of Payment



               The Committee intends to permit Participants to elect, at any time prior
to one year before the date of exercise, to defer the receipt of payment of
Awards that are payable in cash; provided, however, that (1) under the then
applicable income tax rules the Participant is not in constructive receipt of,
and subject to income tax on, the payment prior to its actual receipt, (2) such
deferral does not result in any of the Plans being subject to the Employee
Retirement Income Security Act of 1974, as amended, and (3) if the Participant
is an Executive Officer (i.e., is subject to Section 16 of the Securities
Exchange Act of 1934, including a retired officer who is, at the relevant time,
a director), such election shall comply with Rule 16b-3 promulgated pursuant to
the Securities Exchange Act of 1934, as then in effect.



     B. STOCK OPTIONS UNDER THE 1997 AND 1993 PLANS



          1. Designation



               The Award Notice setting forth the terms and conditions of a grant of a
stock option shall indicate the applicable Plan under which the stock option is
granted and whether the stock option is an incentive stock option (within the
meaning of Section 422 of the Code, an “ISO”) or a non-qualified stock option
(“NSO”). The Committee hereby delegates to the President and Chief Executive
Officer of the Company the authority to prepare, execute and deliver Award
Notices consistent with actions taken by the Committee. The Committee hereby
directs that any action taken by the Committee granting stock options without
specifying whether the stock options are ISOs be interpreted as follows:



               a. an award of stock options to a Participant who is younger than 60 on
the grant date shall be deemed to be an award of ISOs to the maximum extent
permitted in accordance with Section 422 of the Internal Revenue Code, with the
remainder awarded as NSOs; and



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               b. an award of stock options to a Participant who is 60 or older on the
grant date shall be deemed to be awards of NSOs only.



          2. Price



               The price at which Common Stock may be purchased upon exercise of a stock
option (the “exercise price”) shall be the Fair Market Value of the Common
Stock on the date of the Award.



          3. Exercise Period/Duration



               a. Non-Qualified Stock Options Under the 1997 and 1993 Plans. A
non-qualified stock option granted under the 1997 Plan or the 1993 Plan first
may be exercised twelve months after the date of grant, or, if earlier, on the
date of the optionee’s death.



               b. Incentive Stock Options Under the 1997 and 1993 Plans. An incentive
stock option granted under the 1997 Plan or the 1993 Plan first may be
exercised twelve months after the date of grant, or, if earlier, on the date of
the optionee’s death.



          4. Death or Other Termination of Employment



               a. Definitions. For purposes of these rules, the following terms shall
have the following meanings:



                    (i) “Disability” shall mean that the Participant is eligible to receive
disability benefits under Article 3 of The National Fuel Gas Company Retirement
Plan (“Retirement Plan”), as from time to time amended.



                    (ii) “Principal Subsidiary” shall mean a Subsidiary that has a net income
of at least $5,000,000 as of the end of the most recent fiscal year.



                    (iii) “Retirement” shall mean that the Participant has commenced receiving
retirement benefits under the Retirement Plan at or after attaining age 65.



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                    (iv) “Subsidiary” shall mean a corporation or other business entity in
which the Company directly or indirectly has an ownership interest of eighty
percent (80%) or more.



               b. Non-Qualified Stock Options Under the 1997 and 1993 Plans. With
respect to the President and Chief Executive Officer of the Company and the
Presidents of each Principal Subsidiary, if termination of employment occurs by
reason of death, Disability or Retirement, each non-qualified option awarded
under the 1997 Plan or the 1993 Plan shall remain exercisable for the balance
of its unexpired term. If termination occurs by reason of discharge by the
Company for cause or voluntary resignation of the Participant prior to age 60,
each such non-qualified option shall lapse unless extended by the Committee in
its discretion. If termination of any such officer occurs for any other
reason, each such non-qualified option shall remain exercisable for five years
from such termination (or in the case of non-qualified options awarded under
the 1997 Plan, such greater period as the Committee deems appropriate) or the
balance of its unexpired term, whichever is less.



               For all other Participants, if termination of employment occurs by reason
of death, Disability or retirement at or after age 60, each non-qualified
option awarded under the 1997 Plan or the 1993 Plan shall remain exercisable
for five years from such termination or the balance of its unexpired term,
whichever is less. If termination occurs for any other reason, each such
non-qualified option shall lapse unless extended by the Committee in its
discretion.



               c. Incentive Stock Options Under the 1997 and 1993 Plans. Pursuant to
§16(a) of the 1997 Plan and the 1993 Plan, the Committee hereby establishes
that, with respect to an incentive stock option granted under the 1997 Plan or
the 1993 Plan which has not theretofore expired, upon termination of employment
by reason of the optionee’s Disability, the optionee may within one year after
the date of termination of employment, exercise all or part of the incentive
stock option which the optionee was entitled to exercise on the date of
termination of employment.



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               d. Extension of Incentive Stock Options
Under the 1997 and 1993 Plans.



Pursuant to the last paragraph of §16(b) of the 1997 Plan and the 1993 Plan,
the Committee hereby determines that:





     (i) With respect to the President and Chief Executive Officer
of the Company and the Presidents of each Principal Subsidiary, if
termination of employment occurs by reason of death, Disability or
Retirement, another officer of the Company shall, within thirty days
of such termination, offer in writing to extend the period during
which any incentive stock option granted to such optionee under the
1997 Plan or the 1993 Plan may be exercised to the date on which the
incentive stock option would have otherwise expired absent such
termination of employment.




          If termination of any such officer’s employment occurs for any
other reason, another officer of the Company, if the Committee so
authorizes, shall, within thirty days of such termination, offer in
writing to extend the period during which any incentive stock option
granted to such optionee may be exercised to the date specified in
the offer, which shall not be later than the date on which the
incentive stock option would have otherwise expired absent such
termination of employment;




     (ii) With respect to all Participants other than the President
and Chief Executive Officer of the Company and the Presidents of
each Principal Subsidiary, if termination of employment occurs by
reason of death, Disability or Retirement, an officer of the Company
other than such Participant shall, within thirty days of such
termination, offer in writing to extend the period during which any
incentive stock option granted to such optionee under the 1997 Plan
or the 1993 Plan may be exercised,




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to the date which is the earlier of five years from such termination
or the balance of the unexpired term of such incentive stock option.




          If termination of such Participant’s employment occurs for any
other reason, an officer of the Company other than such Participant,
if the Committee so authorizes, shall, within thirty days of such
termination, offer to extend the period during which any incentive
stock option granted to such optionee may be exercised to the date
specified in the offer, which shall not be later than the earlier of
five years from such termination of employment or the date on which
the incentive stock option would have otherwise expired absent such
termination of employment.



     The written offer shall notify the optionee, or the optionee’s estate or
the person to whom the optionee’s rights under the incentive stock option are
transferred by will or the laws of descent and distribution, of the right to
accept the offer by consenting to the extension, in writing, within thirty days
of the offer. If such consent is timely received the incentive stock option
may be exercised during the period specified in the offer, but not later than
the expiration of the exercise period specified in the Award Notice.




	5.	 	Mechanics of Exercise





               To exercise a stock option, the Participant shall provide a signed
exercise notice to an appropriate officer or other designee of the Company,
which notice shall indicate which options are being exercised, how the exercise
price is to be paid and any other appropriate information. Appropriate
delivery of a signed notice of exercise binds the Participant to pay the
exercise price. Part IV of these Rules contains procedures for exercising
stock options.




	6.	 	Reload Options





               No optionee shall be issued a new stock option automatically upon exercise
of a stock option. However, if the Award Notice provides for the issuance of
such new stock option, the



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new stock option shall have an option price equal to the Fair Market Value of
the Common Stock on the date the new stock option is issued and shall otherwise
be subject, as nearly as possible, to the same terms and conditions as the
exercised stock option.




	C.	 	SARs UNDER THE 1997 PLAN





          All outstanding SARs granted under the 1997 Plan are Independent SARs as
described in the Plan. The Plan has been amended to eliminate future awards of
SARs.



               The base price of an Independent SAR shall be the Fair Market Value of the
Common Stock on the date of the grant of the Independent SAR, and shall
otherwise be subject to the terms and conditions imposed by the Award Notice
upon the Independent SAR, by the 1997 Plan, and by these Rules upon
non-qualified stock options. An Independent SAR shall be outstanding and
exercisable during the entire exercise period otherwise applicable to a
non-qualified stock option granted on the same day as the Independent SAR (as
adjusted in accordance with paragraph III.B.4 above in the event of death or
other termination of employment).



               To exercise a SAR, the Participant shall deliver a signed exercise notice
to an appropriate officer or other designee of the Company, which notice shall
indicate which SARs are being exercised, and any other appropriate information.
The Committee hereby delegates to appropriate officers of the Company the
authority to establish and revise appropriate procedures with respect to the
exercise of SARs.




	 	 	D. RESTRICTED STOCK UNDER THE 1997 AND 1993 PLANS






	1.	 	Restrictions on Transferability; Vesting





               The restrictions on transferability and vesting and all other terms and
conditions of Restricted Stock granted under the 1997 and 1993 Plans shall be
specified in the Award Notice. All shares of Restricted Stock shall be subject
to the Participant’s continued employment with the



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Company or a Subsidiary until vesting. The Committee may accelerate the
vesting of Restricted Stock on its own motion as it deems appropriate and in
the best interests of the Company.




	2.	 	Mechanics of Grant





               The Committee hereby delegates to appropriate officers of the Company the
authority to establish and revise appropriate procedures with respect to the
issuance of certificates representing Restricted Stock and the payment of
dividends thereon.




	E.	 	PERFORMANCE UNITS AND PERFORMANCE SHARES UNDER THE 1997 PLAN





               The performance period and performance objectives of a performance unit or
performance share granted under the 1997 Plan shall be specified in the Award
Notice.



          The Committee shall consider any written submission from a Participant,
regarding revision of the performance period and/or performance objectives of
an Award on the basis of events which may have been unforeseen by the
Committee, or circumstances which have changed since the Award, and may
consider such matters on its own motion. Upon such consideration, the
Committee shall revise such performance period and/or performance objectives
when such revision is determined to be in the best interests of the Company and
consistent with the purposes of the 1997 Plan or the 1993 Plan.



IV. PROCEDURES FOR EXERCISING STOCK OPTIONS





	A.	 	AUTHORITY AND SCOPE





          Notwithstanding any provision of any award letter issued before 1998,
these are the exercise procedures for Incentive Stock Options (“ISOs”) and
Non-Qualified Stock Options (“NSOs”) issued under the 1993 Plan, the 1997 Plan,
and (unless the Compensation Committee specifically orders otherwise) any other
compensation plan which in the future is adopted by the Company.




	B.	 	NOTICE OF EXERCISE






	1.	 	Form and Delivery




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               A Participant holding options granted under any of the Plans elects to
exercise options by delivering (by personal delivery or fax) to the office of
the Company’s Secretary or Assistant Secretary a Notice of Exercise. A Notice
of Exercise is a writing signed by the Participant indicating that the
Participant thereby elects to exercise options identified in the Notice
(including the quantity and exercise price), and describing the method by which
the Participant will pay the exercise price. Appropriate delivery of a Notice
of Exercise binds the Participant to pay the exercise price. An optional form
of Notice of Exercise is attached to these Rules (see Exhibit A).




	2.	 	Exercise Date





               The effective date of a Notice of Exercise is the “Exercise Date”. An
exercise will be effective as of the date the Notice of Exercise is received by
the office of the Secretary or Assistant Secretary; provided, however, that:




               (i) a Notice of Exercise received on a business day before
trading opens that day on the New York Stock Exchange may validly
designate the Exercise Date to be the preceding business day; and




               (ii) a Notice of Exercise may validly designate the Exercise
Date to be any date later than the date the Notice of Exercise is
received.




               (iii) if the exercise is accomplished through a “cashless
exercise” as described in Section IV (C)(4) below, the Exercise Date
shall be the date the broker sells Company stock into the market
regarding that exercise.




	C.	 	Payment of Exercise Price






	1.	 	Cash Payment





               To pay the exercise price in cash, a Participant must deliver to the
Secretary or Assistant Secretary payment in full, in cash or by check payable
in immediately available U.S. funds to the Company, within three business days
after the Exercise Date (except as additional time may be



12









 





allowed under Section IV (C)(3) below). Payment of the exercise price may be
partly in cash and partly in Company stock as described in Section IV (C)(2)
below, or may be accomplished through a “cashless exercise” as described in
Section IV (C)(4) below.




	2.	 	Payment with Existing Company Stock





               To pay the exercise price in shares of Company stock already owned by a
Participant, the Participant must surrender to the Company shares having a
total Market Value (as of the Exercise Date) of at least the total exercise
price, or pay any shortfall in cash. The Participant must, within three
business days after the Exercise Date (except as additional time may be allowed
under Section IV (C)(3) below) do one or both of the following:




a. regarding shares in the Company’s Direct Registration
System, comply with the Company’s procedures (including
signature guarantee requirements) for transferring book-entry
shares to the Company; or




b. regarding shares that are evidenced by a paper stock
certificate, deliver the certificate to the Secretary or
Assistant Secretary. Each certificate delivered must have a
guaranteed signature either on the back or on a stock power to
be attached. Recommended procedure for mailing certificates
is to mail the certificate and signed stock power separately.




	3.	 	Additional Time to Pay Exercise Price





               If, at any time the Participant’s payment of the exercise price would
otherwise be required pursuant to Section IV (C)(1) or (2) above, a Participant
is either



               a. traveling away from his or her usual place of Company employment, or



               b. “disabled”, as defined in the applicable Plan or these Administrative
Rules,



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               then the Participant may pay the exercise price on or before the first
business day after the Participant’s return to his or her usual place of NFG
employment, but no later than the tenth business day after the Exercise Date.
However, the President, Chief Executive Officer, or Treasurer of the Company
shall have the authority to grant such additional time to pay the exercise
price as is reasonably necessary to accommodate the travel or disability of the
Participant.




	4.	 	Cashless Exercise





          The broker-assisted method of exercising options described in this Section
IV (C)(4) (“cashless exercise”) requires no cash outlay by the Participant. A
Participant wishing to do a cashless exercise must first establish a trading
account with a registered securities broker-dealer. Establishing that trading
account will likely include the Participant’s commitment to pay the broker as
described in their agreement. Upon request by a Participant, the Secretary or
Assistant Secretary will provide information that may help the Participant find
a broker who has previously done cashless exercises with the Company and/or may
be willing to do so at a discounted commission rate. The Participant must
provide the Secretary or Assistant Secretary with the Participant’s broker’s
name, firm, address, telephone and fax numbers.



          To do a cashless exercise, the Participant must deliver a Notice of
Exercise as described in Section IV (B)(1), and notify the Participant’s broker
to proceed with the exercise. The Participant’s broker will sell Company stock
for the Participant’s account and pay to the Company the exercise price, plus
any necessary tax withholding. The Company will have share certificates
delivered to the Participant’s broker within three business days after the
Exercise Date, unless the Company elects to retain the certificates pending
receipt of the exercise price. The Participant will be required to pay the
Participant’s broker according to the agreement between them, typically a few
days’ interest on the exercise price plus a commission on the shares sold.




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