New Mountain, National Fuel end proxy contest

By Lisa Kerner

Charlotte, N.C., Jan. 28 - National Fuel Gas Co. and New Mountain Vantage GP, LLC, along with its affiliates including the California Public Employees' Retirement System, reached a settlement in the proxy contest for election of directors to National Fuel's board of directors.

The settlement calls for:

• National Fuel to increase the size of its board to 11 directors from 10;

• National Fuel to nominate Vantage candidate Frederic V. Salerno as a director; and

• Salerno, who elected not to receive compensation, to be added to the company's original slate of the following continuing directors: Robert T. Brady, Rolland E. Kidder and John F. Riordan.

Brady, a member of the National Fuel board since 1995, has been the chairman of Moog Inc. since February 1996.

Kidder, a National Fuel board member since 2002, was the executive director of Robert H. Jackson Center, Inc. and is the founder of Kidder Exploration, Inc., an independent Appalachian oil and gas company.

A member of National Fuel's board since 2002, Riordan was president and chief executive officer of the Gas Technology Institute and is the former president and CEO of MidCon Corp.

Salerno has been a senior adviser to New Mountain since 2006 and retired as vice chairman and chief financial officer of Verizon, Inc.

All four candidates will be nominated to serve for a term to expire in 2011, according to a schedule 13D filing with the Securities and Exchange Commission.

Salerno will join the compensation and the nominating/corporate governance committees.

In addition, National Fuel and New Mountain agreed to a standstill through September 2009. As a result, New Mountain will not acquire voting securities that would increase its beneficial ownership to more than 9.6% of the company's voting securities. New Mountain will not engage in any proxy solicitations or advance any shareholder proposals; attempt to control the board, management or policies; call a meeting of shareholders; obtain additional representation to the board; or effect the removal of any member of the board, the filing stated.

"We are pleased to announce this settlement and look forward to welcoming Fred Salerno to our board," National Fuel chairman and CEO Philip C. Ackerman stated in a company news release included in the SEC filing.

"We are confident that, in finding common ground where we can jointly focus our attention on continuing to grow shareholder value, National Fuel is very well positioned to maintain its long record of providing superior returns to all of our investors," Ackerman added.

Following the February annual meeting, Ackerman will continue as chairman of the board. David F. Smith will be named CEO of National Fuel.

New Mountain believes a focus on developing the company's Appalachian acreage, evaluating activities in the Gulf of Mexico and improving corporate governance will "successfully advance the company's interests," New Mountain managing director David DiDomenico said.

Earlier in the month, National Fuel had urged its shareholders to reject New Mountain's slate of directors in what it called a "disruptive proxy contest."

It was previously reported that New Mountain would nominate David DiDomenico, F. Fox Benton III and Salerno for election to the company's board of directors at National Fuel's 2008 annual meeting.

In November, New Mountain reiterated its recommendation that National Fuel sell its non-core operations for proceeds of an estimated $450 million as well as eliminate the 10% poison pill and its staggered board.

National Fuel is a Williamsville, N.Y., diversified energy company.

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