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:
[ ] Preliminary Proxy Statement
[ ] Confidential, for use of the Commission only (as permitted by Rule
14a-6(e)(2)
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
The United Illuminating Company
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(Name of Registrant as Specified in its Charter)
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(Name of Person(s) filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) 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:*
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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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* Set forth the amount on which the filing fee is calculated and state how it
was determined.
<PAGE>
THE UNITED ILLUMINATING COMPANY
NOTICE OF ANNUAL MEETING OF THE SHAREOWNERS
TO THE SHAREOWNERS:
Notice is hereby given that the Annual Meeting of the Shareowners of The
United Illuminating Company will be held at the New Haven Lawn Club, 193 Whitney
Avenue, New Haven, Connecticut, on Wednesday, May 21, 1997 at ten o'clock in the
forenoon, for the following purposes:
1. To elect a Board of Directors for the ensuing year.
2. To vote on the approval of the employment, by the Board of Directors, of
Price Waterhouse LLP as the firm of independent public accountants to audit
the books and affairs of the Company for the fiscal year 1997.
3. To transact such other business as may properly come before the meeting or
any adjournments thereof.
The Board of Directors has fixed the close of business on March 13, 1997 as
the record date for determination of the shareowners of the Company entitled to
notice of, and to vote at, the meeting and any adjournments thereof.
REGARDLESS OF WHETHER YOU PLAN TO ATTEND THE MEETING, PLEASE FILL IN, SIGN,
DATE AND RETURN PROMPTLY THE ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE, WHICH
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
Dated at New Haven, Connecticut, this 27th day of March, 1997.
By Order of the Board of Directors,
KURT MOHLMAN, Treasurer and Secretary
YOUR VOTE IS IMPORTANT
IN ORDER TO SAVE THE COMPANY THE EXPENSE OF FURTHER SOLICITATION TO ENSURE
THAT A QUORUM IS PRESENT AT THE ANNUAL MEETING, PLEASE MAIL YOUR PROXY
PROMPTLY - REGARDLESS OF THE NUMBER OF SHARES YOU OWN, AND REGARDLESS OF
WHETHER YOU PLAN TO ATTEND THE MEETING.
A diagram showing the location of the New Haven Lawn Club appears on the inside
of the back cover of the Proxy Statement.
D-1
<PAGE>
PROXY STATEMENT
This statement and the accompanying proxy form are furnished on or about
March 27, 1997, to security holders of record as of the close of business on
March 13, 1997, in connection with the solicitation of proxies for use at the
Annual Meeting of the Shareowners of The United Illuminating Company to be held
at the New Haven Lawn Club, 193 Whitney Avenue, New Haven, Connecticut, on
Wednesday, May 21, 1997 at 10:00 a.m. for the purposes set forth in the enclosed
Notice of Annual Meeting of the Shareowners. The mailing address of the
principal executive offices of the Company is 157 Church Street, P.O. Box 1564,
New Haven, Connecticut 06506. The solicitation is made by the Company, and the
expense of printing and mailing proxy material will be borne by the Company. The
Company will request banks, brokers and other custodians, nominees and
fiduciaries to send proxy material to beneficial owners of shares and to secure
their voting instructions, if necessary, and the Company will reimburse them for
their reasonable expenses in so doing. Directors, officers and employees of the
Company may also solicit proxies personally or by telephone, but no compensation
will be paid specifically for any such solicitation. In addition, Georgeson &
Company, Inc. of New York, New York, has been retained to aid in the
solicitation of proxies by similar methods at a cost to the Company of
approximately $11,500, plus expenses.
SHAREOWNERS ENTITLED TO VOTE:
At the close of business on March 13, 1997, the record date for the
meeting, 14,101,291 shares of Common Stock of the Company were outstanding and
will be entitled to vote at the meeting, each share being entitled to one vote,
on each matter coming before the meeting as set forth in the accompanying Notice
of Annual Meeting of the Shareowners and commented on in this Proxy Statement.
All votes on each matter coming before the meeting will be counted and tabulated
by Inspectors of Proxies and Tellers appointed by the President of the Company
pursuant to its Bylaws.
Common Stock shareowners who are participants in the Company's Automatic
Dividend Reinvestment and Common Stock Purchase Plan (DRP) will receive proxy
forms that will include the shares in their accounts under the DRP. The Bank of
New York, the Company's agent under the DRP, has authorized the Company to vote
shares held in the DRP according to the instructions received on such proxy
forms.
Shares of Common Stock for which a proxy in the form that accompanies this
Proxy Statement is properly signed and returned (a) will be voted or not voted,
in accordance with the choice indicated on the proxy, to fix the number of
directors for the ensuing year at twelve and elect as directors the twelve
persons named in this Proxy Statement (or such other person or persons as the
present Board of Directors shall determine, if one or more of the twelve persons
named is unable to serve); (b) will be voted for or against, or not voted, in
accordance with the choice indicated on the proxy, with respect to the proposal
to approve the employment of Price Waterhouse LLP as independent auditors for
the fiscal year 1997; and (c) will be voted in accordance with the discretion of
the person or persons voting them with respect to such other matters, if any, as
may come before the meeting. The Company is not aware of any such other matters
to be presented at the meeting.
Any proxy may be revoked by the shareowner at any time prior to its use. A
proxy may be revoked by filing with the Secretary of the Company a written
notice of revocation or a properly signed proxy bearing a later date. A
shareowner who attends the meeting in person may, if he or she wishes, vote by
ballot at the meeting, thereby canceling any proxy vote previously given.
D-2
<PAGE>
Under Connecticut law and the Company's Bylaws, shareowners holding a
majority of the shares of Common Stock represented at the meeting, in person or
by proxy, will constitute a quorum for purposes of considering and acting upon
the matters set forth in the accompanying Notice of Annual Meeting of the
Shareowners. Assuming that a quorum is present at the meeting, directors will be
elected by a plurality of the votes cast at the meeting. Withholding authority
to vote for a director nominee will not prevent that director nominee from being
elected. Cumulative voting for directors is not permitted under Connecticut law
unless a corporation's certificate of incorporation provides for cumulative
voting rights; and the Company's Certificate of Incorporation contains no
provision for such rights. Under Connecticut law, assuming that a quorum is
present at the meeting, action on approval of the employment of independent
auditors, and action on any other matter that may come before the meeting, will
be approved if the votes cast in favor of the action exceed the votes cast
against approval of the action. Proxies marked to abstain from voting with
respect to any such action will not have the legal effect of voting against
approval of such action.
PRINCIPAL SHAREOWNERS:
At the close of business on March 13, 1997, there was no shareowner known
to the Company to be the beneficial owner of more than 5% of the shares of its
Common Stock.
NOMINEES FOR ELECTION AS DIRECTORS:
It is intended that shares of Common Stock represented by proxies who are
authorized to vote for the election of a Board of Directors on the form that
accompanies this Proxy Statement will be voted to fix the number of directors at
twelve and (unless instructed otherwise on the form) in favor of the persons
listed below for election as directors of the Company. While it is not
anticipated that any of the persons listed below will be unable to serve as a
director, if that should occur, the proxies will be voted for such other person
or persons as the present Board of Directors shall determine. All of the
nominees listed below were elected directors at the last annual meeting.
<TABLE>
<CAPTION>
NAME, PRINCIPAL OCCUPATION, OTHER
CORPORATE AFFILIATIONS AND PRINCIPAL OCCUPATIONS DIRECTOR
DURING THE PAST FIVE YEARS OF NOMINEE AGE(1) SINCE
- -------------------------------------------------------------------------------- ------ -----
<S> <C> <C>
Thelma R. Albright 50 1995
President, Carter Products Division, Carter-Wallace, Inc., Cranbury, New Jersey.
From 1994 through 1995, Ms. Albright was General Manager and Executive Vice
President of Revlon Beauty Care Division. From 1992 through 1993 Ms. Albright
was Executive Vice President of Marketing of Carter-Wallace, Inc. Also,
Director, CTFA (Cosmetics, Toiletry and Fragrance Association) and NDMA
(National Drug Manufacturers Association).
Marc C. Breslawsky 54 1995
President and Chief Operating Officer, Pitney Bowes, Inc., Stamford,
Connecticut. Also, Director, Pitney Bowes, Inc., Pitney Bowes Credit Corp., C.R.
Bard, Inc., the Family Foundation of North America, CBIA (Connecticut Business
and Industry Association) and United Way of Eastern Fairfield County; Board of
Governors, the Landmark Club; and Trustee, Norwalk Hospital.
David E. A. Carson 62 1993
President, Chief Executive Officer and Director, People's Bank, Bridgeport,
Connecticut, and President, Chief Executive Officer and Trustee, People's Mutual
Holdings, Bridgeport, Connecticut. Also, Chairman, Bridgeport Public Education
Fund, Business Advisory Committee of Connecticut Commission on Children and
Bridgeport Area Foundation; Trustee, Connecticut Public Broadcasting; and
Director, Mass Mutual Institutional Funds, MML Series Investment Funds, American
Skandia Trust, Old State House, Hartford, Connecticut, The Bushnell, Hartford,
Connecticut, and Hartford Stage Company.
</TABLE>
D-3
<PAGE>
<TABLE>
<CAPTION>
NAME, PRINCIPAL OCCUPATION, OTHER
CORPORATE AFFILIATIONS AND PRINCIPAL OCCUPATIONS DIRECTOR
DURING THE PAST FIVE YEARS OF NOMINEE AGE(1) SINCE
- -------------------------------------------------------------------------------- ------ -----
<S> <C> <C>
John F. Croweak 60 1987
Chairman of the Board of Directors and Chief Executive Officer, Blue Cross &
Blue Shield of Connecticut, Inc., North Haven, Connecticut. Also, Chairman of
the Board of Directors, Connecticut American Insurance Company, ProMed Systems,
Inc., OPTIMED Medical Systems and Signal Medical Services, Inc.; and Director,
BCS Financial, The New Haven Savings Bank, Quinnipiac College and Opticare.
J. Hugh Devlin 54 1989
Managing Director and Consultant, Barr Devlin Associates, Incorporated, New
York, New York. From 1975 through 1988, Mr. Devlin was a Managing Director of
Morgan Stanley & Co., Inc., during which time he served as head of its Public
Utility Group. From January 1989 to April 1990 Mr. Devlin served as Advisory
Director of Morgan Stanley & Co., Inc. Also, Trustee, Meridian Health System.
Robert L. Fiscus 59 1992
President and Chief Financial Officer, The United Illuminating Company. Also,
Chairman of the Board of Directors, Bridgeport Regional Business Council and
Griffin Health Services Corporation; Director, The Aristotle Corporation,
Bridgeport Area Foundation, United Way of Greater New Haven and Susquehanna
University; Governor, University of New Haven; and Trustee, Central Connecticut
Coast Young Men's Christian Association, Inc.
Richard J. Grossi 61 1988
Chairman of the Board of Directors and Chief Executive Officer, The United
Illuminating Company. Also, Director, The New Haven Savings Bank, Blue Cross &
Blue Shield of Connecticut, Inc., Connecticut Business and Industry Association
and University of Connecticut Foundation; Trustee, Yale-New Haven Hospital; and
Chairman, North American Electric Reliability Council and Executive Committee of
the Seabrook Joint Owners.
Betsy Henley-Cohn 44 1989
Chairman of the Board of Directors, Joseph Cohn & Son, Inc., New Haven,
Connecticut. Also, Chairwoman of Birmingham Utilities, Inc.; Chairman, Board of
Commissioners, 9th Square Tax District, City of New Haven; and Director, The
Aristotle Corporation and Citizens Bank of Connecticut.
John L. Lahey 50 1994
President, Quinnipiac College, Hamden, Connecticut. Also, Director, Council for
the Advancement and Support of Education, Yale-New Haven Hospital and Long Wharf
Theater; Vice Chairman and Director, Regional Plan Association Board, New York,
New York; Co-Chairman, Connecticut Committee of the Regional Plan Association
Board; and Member, Greater New Haven Regional Leadership Council and
Accreditation Committee of the American Bar Association.
F. Patrick McFadden, Jr. 59 1987
President, Chief Executive Officer and Director, The Bank of New Haven and BNH
Bancshares, Inc., New Haven, Connecticut. Also, Chairman of the Board of
Directors, Yale-New Haven Health Services Corporation.
</TABLE>
D-4
<PAGE>
<TABLE>
<CAPTION>
NAME, PRINCIPAL OCCUPATION, OTHER
CORPORATE AFFILIATIONS AND PRINCIPAL OCCUPATIONS DIRECTOR
DURING THE PAST FIVE YEARS OF NOMINEE AGE(1) SINCE
- -------------------------------------------------------------------------------- ------ --------
<S> <C> <C>
Frank R. O'Keefe, Jr. 67 1989
Retired; former President, Long Wharf Capital Partners, Inc. 1988-1990; retired
Chairman, President and Chief Executive Officer, Armtek Corporation 1986-1988;
President and Chief Operating Officer, Armstrong Rubber Company 1980-1986; and
Director, Aetna Inc. and Southern New England Telecommunications Corporation.
James A. Thomas 58 1992
Associate Dean, Yale Law School. Also, Trustee, Yale-New Haven Hospital and
People's Mutual Holdings; Advisory Director, People's Bank; and Director, Sea
Research Foundation.
</TABLE>
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(1) Age at May 21, 1997. The Board of Directors has adopted a policy pursuant
to which a director will not be a candidate for re-election after his or
her 70th birthday.
The Board of Directors held 9 meetings during 1996. The average attendance
record of the directors was 97.7% for meetings of the Board of Directors and its
committees held during 1996.
Ms. Henley-Cohn and Messrs. Croweak, Grossi and McFadden serve on the
Executive Committee of the Board of Directors. The Executive Committee, a
standing committee that has and may exercise all the powers of the Board of
Directors when it is not in session, met once during 1996.
Ms. Albright and Messrs. Carson, Devlin, Lahey, McFadden, O'Keefe and
Thomas serve on the Audit Committee of the Board of Directors. The Audit
Committee, a standing committee that oversees the Company's financial accounting
and reporting practices; evaluates the reliability of the Company's system of
internal controls; assures the objectivity of independent audits; explores other
issues that it deems may potentially affect the Company and its employees; and
makes recommendations in these regards to the officers and to the Board of
Directors, held three meetings during 1996.
Ms. Henley-Cohn and Messrs. Breslawsky, Croweak, O'Keefe and Thomas serve
on the Compensation and Executive Development Committee of the Board of
Directors. The Compensation and Executive Development Committee, a standing
committee that reviews the performance of the officers of the Company; reviews
and recommends to the Board of Directors the levels of compensation and other
benefits paid and to be paid to the officers of the Company; reviews and
administers incentive compensation programs for the officers of the Company;
recommends to the Board of Directors changes in said programs; reviews the
recommendations of management for its succession planning and the selection of
officers of the Company; and reviews the investment standards, policies and
objectives established for, and the performance and methods of, the Company's
pension plan investment managers, held six meetings during 1996.
Ms. Albright and Messrs. Breslawsky, Carson, Croweak and Lahey serve on the
Strategic Direction Committee of the Board of Directors. The Strategic Direction
Committee, a standing committee that assists the Chief Executive Officer and
senior management with the development of an overall strategic plan for the
Company, taking into account the key strategic issues facing the Company and the
electric utility industry and providing a focus for defining and implementing
the annual goals and projects comprising the Company's corporate business and
operational plans, held two meetings during 1996.
D-5
<PAGE>
Ms. Henley-Cohn and Messrs. Carson, Devlin, McFadden, O'Keefe and Thomas
serve on the Committee on Directors. The Committee on Directors, a standing
committee that recommends policy with respect to the composition, organization,
practices and compensation of the Board of Directors and performs the nominating
function for the Board, held four meetings in 1996. The Committee on Directors
will consider nominees for election as directors recommended by shareowners upon
the timely submission of the names of such nominees with their qualifications
and biographical information forwarded to the Committee in care of the Treasurer
and Secretary of the Company.
CORPORATE GOVERNANCE STANDARDS
The Board of Directors has approved the following Corporate Governance
Standards for the discharge of its duties to the Company and its shareowners:
The Board of Directors (the "Board") of The United Illuminating Company
(the "Company") will discharge its duties in accordance with both the letter and
the spirit of all of the laws and governmental regulations that are applicable
to the Company and its operations, including the Standards of Conduct prescribed
for individual Directors by the Connecticut Business Corporation Act. This is
the Board's primary governance standard; and the following requirements and
proscriptions, which are reviewed by the Board annually and are subject to
revision from time to time, are intended to serve as supportive standards in
this regard.
BOARD MEMBERS
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. The entire Board will be elected annually.
. A Director will not be a candidate for reelection after his or her
seventieth birthday.
. As a general rule, former executive officers of the Company will not be
candidates for election as Directors.
. A Director will not be a candidate for election to a sixth term unless he
or she is the beneficial owner, directly or indirectly, of at least 1,200
shares of the Company's Common Stock.
BOARD COMMITTEES
- ----------------
. Committees of the Board, and members of committees of the Board, will be
appointed by affirmative vote of Directors holding a majority of the
Directorships.
. The membership of the Audit Committee and the Compensation and Executive
Development Committee will consist entirely of independent Directors.
. The Committee on Directors will assess, annually, the effectiveness of the
Board.
FUNCTIONING OF THE BOARD
- ------------------------
. Directors will receive materials relative to agenda items as far in advance
of Board meetings as feasible.
. When the Chief Executive Officer of the Company serves as the Chairman of
the Board, the senior independent Director, in terms of service, will
preside at meetings of the Board at which the Chairman of the Board and
Chief Executive Officer is not in attendance, and at executive sessions of
independent Directors of the Board, and will also serve as an ex officio
member of the Committee on Directors of the Board.
. The Board will review and approve, annually, a strategic plan and an
operating plan for the Company.
D-6
<PAGE>
OFFICERS
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. The Board will evaluate, annually, in an executive session of independent
Directors of the Board, the performance of the Chief Executive Officer of
the Company.
. The Chief Executive Officer will report, annually, to the Compensation and
Executive Development Committee of the Board, and to the Board, regarding
succession planning and management development.
. Acceptance by any Officer of the Company of a compensated appointment to
the governing body of another business entity will be subject to prior
approval by the Board.
. Officers of the Company will be required to be beneficial Owners, directly
or indirectly, of shares of the Common Stock of the Company in amounts and
within time periods determined by the Chief Executive Officer of the
Company.
. Incentive compensation plans will link compensation directly and
objectively to measurable goals set in advance by the Board on the
recommendation of the Compensation and Executive Development Committee of
the Board.
. Awarded stock options will not be repriced, except in the event of a
reorganization, recapitalization, stock split, stock dividend, combination
of shares, merger, consolidation, distribution of assets or other change in
the corporate structure or shares of the Company.
STOCK OWNERSHIP OF DIRECTORS AND OFFICERS:
The following table sets forth the number of shares of Common Stock of the
Company beneficially owned, directly or indirectly, by each director, by each of
the five most highly compensated officers during 1996 and by all directors and
officers as a group, as of March 13, 1997:
SHARES
NAME OF INDIVIDUAL OR BENEFICIALLY
NUMBER OF PERSONS IN OWNED DIRECTLY
GROUP OR INDIRECTLY(1)(2)(3)
- -------------------------------------------------------------------------------
Thelma R. Albright 733
Marc C. Breslawsky 2,149
David E.A. Carson 5,043
John F. Croweak 2,626
J. Hugh Devlin 4,576
Robert L. Fiscus 84,099
Richard J. Grossi 83,178
Betsy Henley-Cohn 3,098
John L. Lahey 1,172
F. Patrick McFadden, Jr. 2,563
Frank R. O'Keefe, Jr. 3,824
James A. Thomas 1,555
James F. Crowe 47,307
Albert N. Henricksen 10,166
Anthony J. Vallillo 3,829
22 Directors and Officers
as a group, including those named above 302,650
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(1) Based on reports furnished by the directors and officers. The shares
include, in some instances, shares held by the immediate families of
directors and officers or entities controlled by directors and officers,
the reporting of which is not to be construed as an admission of beneficial
ownership. Each of the persons included in the foregoing table has sole
voting and investment power as to the shares of Common Stock beneficially
owned, directly or indirectly, by him or her, except for the following (i)
as to which such powers are shared: 7,947 shares with respect to Mr.
Fiscus, 608 shares with respect to Mr. Grossi, 110 shares with respect to
Mr. Thomas, 614 shares with respect to Mr. Crowe, 405 shares with respect
to Mr. Henricksen and 10,014 shares
D-7
<PAGE>
with respect to all directors and officers as a group, (ii) as to which
such powers are held by other people or entities: 130 shares with respect
to Mr. Carson, 700 shares with respect to Mr. Fiscus, 5,723 shares with
respect to Mr. Grossi, 2,035 shares with respect to Ms. Henley-Cohn, 638
shares with respect to Mr. O'Keefe, 50 shares with respect to Mr. Thomas,
10 shares with respect to Mr. Crowe, and 10,402 shares with respect to all
directors and officers as a group.
(2) The number of shares includes those held for the benefit of officers in the
Company's Employee Stock Ownership Plan and, in the cases of Robert L.
Fiscus, 72,000 shares, Richard J. Grossi, 74,000 shares, James F. Crowe,
41,000 shares, Albert N. Henricksen, 7,600 shares, Anthony J. Vallillo,
2,000 shares and all directors and officers as a group, 229,400 shares,
that may be acquired currently or within 60 days through the exercise of
stock options under the Company's 1990 Stock Option Plan.
(3) Includes Stock Units, for which neither investment nor voting power is held
as follows: 520 shares with respect to Ms. Albright, 2,049 shares with
respect to Mr. Breslawsky, 4,664 shares with respect to Mr. Carson, 1,765
shares with respect to Mr. Croweak, 4,076 shares with respect to Mr.
Devlin, 347 shares with respect to Ms. Henley-Cohn, 194 shares with respect
to Mr. Lahey, 1,394 shares with respect to Mr. McFadden, 2,989 shares with
respect to Mr. O'Keefe and 683 shares with respect to Mr. Thomas. These
Stock Units are in stock accounts under the Company's Directors' Deferred
Compensation Plan, described below at "Director Compensation". Stock Units
in stock accounts under this plan are payable, in an equivalent number of
shares of the Company's Common Stock, upon termination of service on the
Board of Directors.
The number of shares of Common Stock beneficially owned by each of the
persons included in the foregoing table is less than 1% of the 14,101,291 shares
of Common Stock outstanding as of March 13, 1997. The number of shares of Common
Stock beneficially owned by all of the directors and officers as a group
represents approximately 0.4% of the outstanding shares of Common Stock as of
March 13, 1997.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and officers, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file with the Securities
and Exchange Commission (SEC) and The New York Stock Exchange initial reports of
ownership and reports of changes in ownership of Common Stock and other equity
securities of the Company. Directors, officers and greater-than-ten-percent
shareowners are required by SEC regulations to furnish the Company with copies
of all Section 16(a) forms they file.
To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended December 31, 1996 all
Section 16(a) filing requirements applicable to its directors, officers and
greater-than-ten-percent shareowners were complied with, except that James A.
Thomas sold 108 shares of Common Stock in April, 1996 and 259.028 shares of
Common Stock in December, 1996 and reported these sales in a year-end report for
1996 rather than in change of ownership reports for April and December, 1996.
D-8
<PAGE>
EXECUTIVE COMPENSATION
The following table shows the annual and long-term compensation, for
services in all capacities to the Company for the years 1996, 1995 and 1994, of
the only person who served as the chief executive officer during 1996 and of the
four other most highly compensated persons during 1996 who were serving as
executive officers at December 31, 1996:
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
----------------------
AWARDS
------
NAME AND ANNUAL COMPENSATION(1) SECURITIES UNDERLYING ALL OTHER
----------------------
PRINCIPAL POSITION YEAR SALARY($) BONUS($)(2) OPTIONS (#)(3) COMPENSATION(4)
------------------ ---- --------- ----------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
Richard J. Grossi 1996 $318,000 $125,000 $4,688
Chairman of the Board of Directors 1995 $318,000 $150,000 $4,500
and Chief Executive Officer 1994 $300,000 $75,200 7,000 $4,620
Robert L. Fiscus 1996 $218,400 $66,000 $4,688
President and Chief Financial 1995 $220,500 $80,000 $4,500
Officer 1994 $210,000 $43,600 3,500 $4,620
James F. Crowe 1996 $176,600 $51,000 $4,688
Group Vice President 1995 $178,000 $60,000 $4,500
1994 $169,500 $32,800 2,500 $4,620
Albert N. Henricksen 1996 $136,900 $37,000 $4,688
Group Vice President 1995 $130,000 $40,000 $4,500
1994 $123,600 $25,100 800 $4,620
Anthony J. Vallillo 1996 $125,875 $36,000 $4,688
Group Vice President 1995 $106,000 $31,000 $3,720
1994 $97,000 $18,000 800 $3,597
</TABLE>
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(1) None of the persons named received any cash compensation in any of the
years shown other than the amounts appearing in the columns captioned
"Salary," "Bonus" and "All Other Compensation." None of these persons
received, in any of the years shown, any cash-equivalent form of
compensation, other than through participation in the Company's group life,
health and hospitalization plans, which are available on a uniform basis to
all salaried employees of the Company and the dollar value of which,
together with the dollar value of all other non-cash perquisites and other
personal benefits received by such person, did not exceed 10% of the total
salary and bonus compensation received by him for such year.
(2) The amounts appearing in this column are awards earned in the years 1994,
1995 and 1996 pursuant to the Company's Executive Incentive Compensation
Program described below.
(3) The Company has never awarded restricted stock or stock appreciation rights
(SARs) to any employee. The stock options shown are for shares of the
Company's Common Stock. They were granted under the Company's 1990 Stock
Option Plan, under which the option price is the fair market value of the
Common Stock on the option grant date, no option may be exercised less than
one year, nor more than ten years, after the grant date, and an option is
exercisable only while the holder is a full-time employee of the Company or
within a prescribed period following termination of full-time employment.
Each of the stock options shown was granted in tandem with an equal number
of dividend equivalent units, which may provide a cash payment to the
option holder in 1998, depending upon the financial performance of the
Company during the three-year period 1995-1997 in comparison to a peer
group of electric utilities and dividend payments by the Company during
that period, to assist the option holder in exercising his or her options.
No stock options or dividend equivalent units were
D-9
<PAGE>
awarded in 1995 or 1996, and in 1996 the Board of Directors replaced these
long-term incentive programs with the Long-Term Incentive Program described
below.
(4) The amounts appearing in this column are cash contributions by the Company
to its 401(k) Plan on behalf of each of the persons named to match pre-tax
elective deferral contributions by him to that plan from his salary and
bonus compensation (included in the columns captioned "Salary" and
"Bonus").
The Company's Executive Incentive Compensation Program was established in
1985 for the purposes of (i) helping to attract and retain executives and key
managers of high ability, (ii) heightening the motivation of those executives
and key managers to attain goals that are in the interests of shareowners and
customers, and (iii) encouraging effective management teamwork among the
executives and key managers of the Company. Under this program, cash awards may
be made each year to officers and key employees based on their achievement of
pre-established performance levels with respect to specific shareowner goals,
customer goals and individual goals for the preceding year, and upon an
assessment of the officers' performance as a group with respect to strategic
opportunities during that year. Eligible officers and key employees, performance
levels and specific goals are determined each year by directors who are not
employees of the Company, and incentive awards are paid following action by the
Board of Directors after the close of the year. Incentive awards are made from
individual target incentive award amounts, which are prescribed percentages of
the individual participants' salaries, ranging from 20% to 35% depending on each
participant's payroll salary grade. A participant may, by achieving his or her
pre-established performance levels with respect to specific shareowner goals,
customer goals and individual goals for a year, become eligible for an incentive
award of up to 150% of his or her target incentive award amount for that year.
The Company's Long-Term Incentive Program was established in 1996 for the
purposes of (i) promoting the long-term success of the Company by attracting,
retaining and providing financial incentives to key employees who are in a
position to make significant contributions toward that success, (ii) linking the
interests of these key employees to the interests of the shareowners, and (iii)
encouraging these key employees to maintain proprietary interests in the Company
and achieve extraordinary job performance levels. Under the program, an initial
three-year Performance Period commenced on January 1, 1996, a second three-year
Performance Period commenced on January 1, 1997, and a series of three-year
Performance Periods will commence on January 1, 1998 and on each January 1
thereafter to and including January 1, 2005. The Board of Directors designates
the officers of the Company, if any, who will be participants in the program for
each Performance Period, the number of Contingent Performance Shares to be
awarded each officer-participant for that Performance Period, and a peer group
of companies comparable to the Company for that Performance Period. Each
Contingent Performance Share is a share unit, equivalent to one share of the
Company's Common Stock, credited to an officer-participant's performance share
account in the program on a conditional basis at the beginning of a Performance
Period. At the end of each Performance Period, the number of Performance Shares
earned for the Performance Period is calculated on the basis of the Company's
total shareowner return during the Performance Period relative to the peer group
of companies preselected by the Board of Directors for that Performance Period.
Total shareowner return for the Company, and for each member of the peer group,
for a Performance Period is measured by the formula:
Change in Market Price from plus Dividends Declared During the Period
Beginning to End of Period
If the Company's total shareowner return for the Performance Period ranks at the
ninetieth percentile among the total shareowner returns of the peer group
companies, the number of Performance Shares earned by the officer-participant is
equal to the number of Contingent Performance Shares awarded to that
officer-participant at the commencement of the Performance Period. If the
Company's total shareowner return ranks below the thirtieth percentile among
those of the peer group companies, no Performance Shares are earned for the
Performance Period. If the Company's total shareowner return ranks between the
thirtieth and the ninetieth percentiles, the number of Performance Shares earned
is calculated from a scale rising from 15% to 100%. On each dividend payment
date with respect to the Company's Common Stock, the earned Performance Shares
in an officer-participant's Performance Share account are credited with an
additional number of Performance Shares in an amount equal to the dividend
payable on the earned Performance Shares in the account divided by the market
price of the Company's Common Stock on the dividend payment date. Upon the
termination of an officer-participant's employment by the Company, the
officer-participant is paid, in cash, an amount equal to the number of earned
Performance Shares in
D-10
<PAGE>
his or her Performance Share account multiplied by the market price of the
Company's Common Stock on the employment termination date. An
officer-participant is also entitled to payment at any time, in cash, of the
value of the earned Performance Shares in his or her Performance Share account,
provided that the officer-participant is in compliance with the minimum stock
ownership requirement for such officer prescribed by the Board of Directors at
that time. For the 1996-1998 three-year Performance Period, the Board of
Directors has awarded Messrs. Grossi, Fiscus, Crowe, Henricksen and Vallillo
8,400, 6,500, 5,000, 2,400 and 1,800 Contingent Performance Shares,
respectively, under the Long-Term Incentive Program.
The Company has entered into employment agreements with Messrs. Grossi,
Fiscus and Crowe, each of which will continue in effect until terminated by the
Company on three years' notice or by the officer on six months' notice. These
agreements provide that the annual salary rates of Messrs. Grossi, Fiscus and
Crowe will be $318,000, $218,400 and $176,600, respectively, subject to upward
revision by the Board of Directors at such times as the salary rates of other
officers of the Company are reviewed by the directors, and subject to downward
revision by the Board of Directors contemporaneously with any general reduction
of the salary rates of other officers of the Company, except in the event of a
change in control of the Company. The salaries paid to Messrs. Grossi, Fiscus
and Crowe in 1994, 1995 and 1996, shown on the above table, were paid pursuant
to these agreements. Each of these agreements also provides that when the
officer's employment by the Company terminates after he has served in accordance
with its terms, the Company will pay him an annual supplemental retirement
benefit in an amount equal to the excess, if any, of (A) over (B), where (A) is
2.2% of his highest three-year average total compensation from the Company times
the number of years (not to exceed thirty) of his service deemed as an employee
of the Company, and (B) is the annual benefit payable to him under the Company's
pension plan. If the Company terminates the officer's employment without cause,
he will be paid the actuarial present value of this supplemental retirement
benefit and, if the termination occurs in connection with a change in control of
the Company, the officer will be entitled to either a severance payment of two
years compensation at his then-current salary and bonus rate, or an increase of
a total of six years of age and/or service in the calculation of his retirement
benefit, at his election.
The Company has also entered into employment agreements with Messrs.
Henricksen and Vallillo, each of which will continue in effect until terminated
by the Company at any time or by the officer on six months' notice. These
agreements provide that the annual salary rates of Messrs. Henricksen and
Vallillo will be $136,900 and $140,000, respectively, subject to upward revision
by the Board of Directors at such times as the salary rates for other officers
of the Company are reviewed by the Directors, and subject to downward revision
by the Board of Directors contemporaneously with any general reduction of the
salary rates of other officers of the Company, except in the event of a change
in control of the Company. Each of these agreements also provides that when the
officer's employment by the Company terminates after he has served in accordance
with its terms, the Company will pay him an annual supplemental retirement
benefit in an amount equal to the excess , if any, of (A) over (B), where (A) is
2.0% of his highest three-year average total compensation from the Company times
the number of years (not to exceed 30) of his service as an employee of the
Company, and (B) is the annual benefit payable to him under the Company's
pension plan. If the Company terminates the officer's employment without cause,
he will be paid the actuarial present value of this supplemental retirement
benefit and either a severance payment of two years compensation at his
then-current salary and bonus rate, or an increase of a total of six years of
age and/or service in the calculation of his retirement benefit, at his
election.
A trust fund has been established by the Company for the funding of the
supplemental retirement benefits accruing under the employment agreements with
Messrs. Grossi, Fiscus, Crowe, Henricksen and Vallillo, and to ensure the
performance of the Company's other payment obligations under each of these
employment agreements in the event of a change in control of the Company.
D-11
<PAGE>
STOCK OPTION EXERCISES IN 1996 AND YEAR-END OPTION VALUES
The following table shows aggregated Common Stock option exercises during
1996 by the chief executive officer and each of the other four most highly
compensated executive officers of the Company, including the aggregate value of
gains on the dates of exercise. In addition, this table shows the number of
shares covered by both exercisable and non-exercisable options as of December
31, 1996. Also reported are the values as of December 31, 1996 for
"in-the-money" options, calculated as the positive spread between the exercise
price of existing options and the year-end fair market value of the Company's
Common Stock. The Company has never awarded stock appreciation rights (SARs) to
any employee.
<TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES(1)
<CAPTION>
Number of Securities Value of Unexercised
Shares Underlying Unexercised In-the-Money Options
Acquired on Value Options at FY-End(#)(1) at FY-End ($)(4)
----------------------- ----------------
Name Exercise(#) Realized($)(2) Exercisable Not Exercisable(3) Exercisable Not Exercisable(3)
---- ----------- -------------- ----------- ------------------ ----------- ------------------
<S> <C> <C> <C> <C> <C> <C>
Richard J. Grossi........... 0 $ 0 67,000 14,000 $ 41,400 $10,080
Robert L. Fiscus............ 0 $ 0 68,500 7,000 $ 44,850 $ 5,040
James F. Crowe.............. 0 $ 0 38,500 5,000 $ 24,840 $ 3,600
Albert N. Henricksen........ 0 $ 0 6,800 1,600 $ 4,140 $ 1,152
Anthony J. Vallillo......... 0 $ 0 1,600 800 $ 828 $ 576
</TABLE>
- -------------------------
(1) The Company has never awarded stock or stock appreciation rights (SARs) to
any employee.
(2) Fair market value at exercise date less exercise price.
(3) The shares represented could not be acquired by the person named as of
December 31, 1996, and future exercisability of the options is subject to
the person remaining employed by the Company for varying periods of time,
absent retirement, death or total disability.
(4) Fair market value of shares at December 31, 1996 ($31.44) less exercise
price.
RETIREMENT PLANS
The following table shows the estimated annual benefits payable as a single
life annuity under the Company's qualified defined benefit pension plan on
retirement at age 65 to persons in the earnings classifications and with the
years of service shown. Retirement benefits under the plan are determined by a
fixed formula, based on years of service and the person's average annual
earnings from the Company during the three years during which the person's
earnings from the Company were the highest, applied uniformly to all persons.
<TABLE>
<CAPTION>
AVERAGE
ANNUAL EARNINGS DURING
THE HIGHEST 3 ESTIMATED ANNUAL BENEFITS PAYABLE AT AGE 65(3)
----------------------------------------------
YEARS OF SERVICE(1)(2) 20 YEARS(4) 25 YEARS(4) 30 YEARS(4) 35 YEARS(4) 40 YEARS(4)
---------------------- ----------- ----------- ----------- ----------- -----------
<C> <C> <C> <C> <C> <C>
$100,000 $ 37,117 $ 46,397 $ 46,997 $ 47,597 $ 48,197
$150,000 $ 57,117 $ 71,397 $ 71,997 $ 72,597 $ 73,197
$200,000 $ 74,929 $ 94,112 $114,432 $115,032 $115,632
$250,000 $ 87,831(2) $110,598(2) $114,432(2) $115,032(2) $115,632(2)
$300,000 $ 87,831(2) $110,598(2) $114,432(2) $115,032(2) $115,632(2)
$350,000 $ 87,831(2) $110,598(2) $114,432(2) $115,032(2) $115,632(2)
$400,000 $ 87,831(2) $110,598(2) $114,431(2) $115,032(2) $115,632(2)
$450,000 $ 87,831(2) $110,598(2) $114,431(2) $115,032(2) $115,632(2)
</TABLE>
- -------------------------
(1) Earnings include annual salary and cash bonus awards paid pursuant to the
Company's Executive Incentive Compensation Program. See "Executive
Compensation" above.
D-12
<PAGE>
(2) Internal Revenue Code Section 401(a)(17) limits earnings used to calculate
qualified plan benefits to $160,000 for 1997. This limit was used in the
preparation of this table. (In addition, qualified plan benefits cannot
exceed an Internal Revenue Code Section 415(b) limit of $125,000 for 1997).
The Board of Directors has adopted a supplemental executive retirement plan
that permits the Directors to award supplemental retirement benefits to
officers (other than Messrs. Grossi, Fiscus, Crowe, Henricksen and
Vallillo) individually selected by the Directors in amounts sufficient to
prevent these Internal Revenue Code limitations from adversely affecting
their retirement benefits determined by the pension plan's fixed formula.
(3) The amounts shown in the table are not subject to any deduction for Social
Security or other offset amounts.
(4) As of their last employment anniversary dates, Messrs. Grossi, Fiscus,
Crowe, Henricksen and Vallillo had accrued 39, 24, 32, 33 and 28 years of
service, respectively.
* * * *
BOARD OF DIRECTORS
COMPENSATION AND EXECUTIVE DEVELOPMENT COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
All of the members of the Compensation and Executive Development Committee
of the Board of Directors (the Committee) are non-employee Directors.
The Committee formulates all of the objectives and policies relative to the
compensation of the officers of the Company, subject to approval by the entire
Board of Directors; and the Committee recommends to the Board of Directors all
of the elements of the officers' compensation arrangements, including the design
and adoption of compensation programs, the identity of program participants,
salary grades and structure, annual payments of salaries and any awards under
the annual incentive compensation program and the long-term incentive program.
The Company's basic executive compensation program consists of three
components: annual salaries, bonuses under an annual incentive compensation
program, and long-term incentive program awards. The overall objective of this
program is to attract and retain qualified executives and to produce strong
financial performance for the benefit of the Company's shareowners while
providing a high level of customer service and value for its customers.
Accordingly, all of the Committee's decisions, in 1996 and in prior years, have
ultimately been based on the Committee's assessment of the Company's overall
performance relative to other electric utilities of comparable size, the
compensation practices and programs of other companies that are most likely to
compete with the Company for services of executive officers, the Company's
strategic objectives, and the challenges it faces.
The Committee formulates annual salary ranges for officers by periodic
comparisons to rates of pay for comparable positions in other electric utilities
as reported in the Edison Electric Institute's Executive Compensation Survey
(the EEI Survey). Within the applicable range, each individual officer's annual
salary is then set at a level that will compensate the officer for day-to-day
performance, in the light of the officer's level of responsibility, past
performance, prior year's salary and bonus, and potential future contributions
to the Company's strategic objectives.
As described in detail above at "Executive Compensation", the Company's
annual bonus program and its long-term incentive program have somewhat different
purposes. Under the annual Executive Incentive Compensation Program, cash awards
may be made each year to officers based on their achievement of performance
levels formulated by the Committee with respect to (1) specific shareowner
goals, (2) specific customer goals, (3) specific individual goals, and (4) a
qualitative assessment of the officers' performance as a group with respect to
strategic opportunities of the Company during that year. The Company's Long-Term
Incentive Program rewards officers for achieving a return to shareowners over
three-year periods of time. The Long-Term Incentive Program links long-term
incentive awards to total return to shareowners compared to a peer group of
electric utilities. Although this program is designed to provide strong
incentives for superior future performance, it also encourages officers to
continue serving the Company, because the earning of each incentive award is
conditioned upon the officer's continued service for the award's three-year
performance period.
D-13
<PAGE>
For 1996, the annual bonus opportunities of the Company's officers were
targeted by the Committee such that the combination of each officer's 1996
salary and annual Executive Incentive Compensation Program award, assuming that
pre-established performance goals were met, would approximate, on average, the
50th percentile of compensation for comparable positions as reported in the 1995
EEI Survey. Goals for the first half of the year, as in 1995, were established
to focus the officers' attention on specific corporate goals covering financial
and operating performance and customer satisfaction measures; and for the second
half of the year goals were modified to form a "balanced scorecard," covering
financial, operational, customer and human resource measures. Additionally, for
the second half of the year, each of the Company's Business Unit Leaders and the
Chief Executive Officer had goals tied to business unit measures and process
change milestones. A prerequisite threshold level of recurring earnings per
share on the Company's Common Stock was specified in order for any bonus to be
earned. For the first half of 1996, the pre-established performance goals
included measures of: recurring earnings per share, recurring free cash flow,
sales margin, utility costs and customer satisfaction. These first half
quantitative elements governed 80% of the Committee's bonus award for each
officer. For the second half of 1996, goals included, in addition to the
pre-established performance goals for the first half, measures of: reliability
of service, safety and innovation. These second half quantitative elements
governed 50% of the Committee's bonus award for each of the Business Unit
Leaders and the Chief Executive Officer, and 80% of the award for each other
officer. For each of the Business Unit Leaders and the Chief Executive Officer,
30% of the Committee's bonus award for the second half of 1996 was based on the
achievement of quantitative business unit and process change milestone goals.
The remaining 20% of each officer's bonus award for both the first and second
halves of 1996 was based on the Committee's qualitative assessment of the
performance of the Company's officers as a group with respect to 1996 strategic
opportunities. For 1996, this assessment focused on the officers' achievements
in preparing the Company to operate in a more competitive environment in three
principal areas: first, the process for transforming the Company into a more
cost-competitive business; second, the proposal to the Connecticut Department of
Public Utility Control to prepare the Company for competition in a deregulated
environment; and third, active and constructive participation in the Legislative
Task Force formed by the Connecticut Legislature to develop a set of legislative
recommendations by January 1, 1997 regarding restructuring the electric utility
industry in Connecticut.
Some of the officers' achievements with respect to 1996 pre-established
performance goals were especially strong, including 150% of the recurring
earnings per share goal, 150% of the sales margin goal, and 150% of the
recurring free cash flow goal. Utility cost and customer satisfaction goal
achievements were slightly below the 100% target levels. Business Unit Leader
and Chief Executive Officer achievements of business unit and process change
milestone goals ranged between 70% and 140% of the several goals.
Overall, the Committee's bonus awards for 1996 under the Executive
Incentive Compensation Program ranged between 104% and 122% of the
pre-established targeted awards, depending on the individual officer's
achievements, reflecting a strong performance by the Company's officers.
Under the Company's Long-Term Incentive Program, a total of 29,200
Contingent Performance Shares have been awarded to 11 officers of the Company
for the three-year Performance Period 1996-1998.
It is not expected that any compensation paid to an executive officer
during 1997 will become non-deductible under Internal Revenue Code Section
162(m) (the "million dollar pay cap").
CHIEF EXECUTIVE OFFICER COMPENSATION FOR 1996
In March of 1996, the Committee recommended, and the Board of Directors
approved, a 1996 annual salary of $318,000 for Mr. Grossi, as Chairman of the
Board of Directors and Chief Executive Officer of the Company. This annual
salary was below the median salary for this officership position at other
electric utilities of comparable size, as reported in the 1995 EEI Survey; but
it was consistent with the Committee's judgment that a greater proportion of the
targeted combination of base salary and targeted annual performance bonus should
be shifted to the performance bonus component of his compensation. Mr. Grossi's
annual bonus performance target for 1996 under the Executive Incentive
Compensation Program was set at $111,300, consisting of a recurring earnings per
share of Common Stock threshold and pre-established goals with respect to
recurring free cash flow, sales margin, utility costs,
D-14
<PAGE>
customer satisfaction, reliability of service, safety, innovation, business unit
and process change milestones, and strategic opportunities, as detailed above.
At the conclusion of 1996, the Committee recommended, and the Board of Directors
approved, a 1996 bonus award of $125,000 to Mr. Grossi, representing 112% of his
targeted annual performance bonus. As described above, recurring earnings per
share, recurring free cash flow and sales margin for 1996 were at 150% of target
goals, and utility costs and customer satisfaction were slightly below target
goals. The Committee's qualitative assessment of the performance of the officers
as a group with respect to strategic opportunities during 1996 was positive and,
in the judgment of the Committee, reflected favorably on Mr. Grossi's
leadership.
COMPENSATION AND EXECUTIVE
DEVELOPMENT COMMITTEE
Marc C. Breslawsky, Chair
John F. Croweak
Betsy Henley-Cohn
Frank R. O'Keefe, Jr.
James A. Thomas
* * * *
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No director of the Company who served as a member of the Compensation and
Executive Development Committee during 1996 was, during 1996 or at any time
prior thereto, an officer or employee of the Company. During 1996, no director
of the Company was an executive officer of any other entity on whose Board of
Directors an executive officer of the Company served, except that John F.
Croweak, a director of the Company and a member of the Compensation and
Executive Development Committee of the Company's Board of Directors, served as
Chairman of the Board of Directors, President and Chief Executive Officer of
Blue Cross & Blue Shield of Connecticut, Inc., and Richard J. Grossi, Chairman
of the Board of Directors and Chief Executive Officer of the Company, served as
a director of Blue Cross & Blue Shield of Connecticut, Inc.
DIRECTOR COMPENSATION
Directors who are employees of the Company receive no compensation for their
service as directors of the Company.
The remuneration of non-employee directors of the Company includes a
retainer fee of $4,000 per quarter year (the retainer fee for the first quarter
of the calendar year is payable in shares of Common Stock or by credit to a
stock account under the Directors' Deferred Compensation Plan described below),
plus a fee of $700 for each meeting of the Board of Directors or committee of
the Board of Directors attended. Committee chairpersons receive an additional
fee of $500 per quarter year. Non-employee directors are also provided
travel/accident insurance coverage in the amount of $200,000.
The Company's Directors' Deferred Compensation Plan has two features: a
mandatory Common Stock feature; and an optional Deferred Compensation feature.
Each non-employee director has two accounts in the Plan: a stock account, for
the accumulation of units that are equivalent to shares of Common Stock ("Stock
Units"), and on which amounts equal to cash dividends on the shares of Common
Stock represented by Stock Units in the account accrue as additional Stock
Units; and a cash account for the accumulation of director's fees payable in
cash that the director elects to defer, on which interest accrues at the prime
rate in effect at the beginning of each month at Citibank, N.A.
Under the Common Stock feature of the Plan, a credit of Stock Units to each
non-employee director's stock account in the Plan is made on or about the first
day of March in each year, unless the director elects to receive shares of
Common Stock in lieu of having an equivalent number of Stock Units so credited
to his or her stock
D-15
<PAGE>
account. Each annual credit consists of a number of whole and fractional Stock
Units equal to the sum of 200 plus the quotient resulting from dividing
one-fourth of the annual retainer fee by the market value of the Common Stock on
the date of the credit.
Under the Deferred Compensation feature of the Plan, a non-employee director
may elect to defer receipt of all or part of (i) three-quarters of his or her
annual retainer fee, (ii) his or her committee chairperson fees, and/or (iii)
his or her meeting fees, which are payable in cash. All amounts deferred are
credited when payable, at the director's election, to either the director's cash
account or to the director's stock account (in a number of whole and fractional
Stock Units based on the market value of the Common Stock on the date the fee is
payable) in the Plan.
All amounts credited to a non-employee director's cash account or stock
account in the Plan are at all times fully vested and nonforfeitable, and are
payable only upon termination of the director's service on the Board of
Directors. At that time, the cash account is payable in cash and the stock
account is payable in an equivalent number of shares of Common Stock of the
Company.
D-16
<PAGE>
SHAREOWNER RETURN PRESENTATION
Set forth below is a line graph comparing the yearly change in the Company's
cumulative total shareowner return on its Common Stock with the cumulative total
return on the S&P Composite-500 Stock Index, the S&P Public Utility Index and
the S&P Electric Power Companies Index for the period of five fiscal years
commencing 1992 and ending 1996.
COMPARISON OF FIVE-YEAR CUMULATIVE
TOTAL RETURN*
[GRAPH APPEARS HERE]
1991 1992 1993 1994 1995 1996
---- ---- ---- ---- ---- ----
UIL $100 $113 $117 $ 97 $133 $122
S&P 500 100 103 118 119 156 191
S&P PUB. UTY. 100 108 122 114 155 159
S&P EL. CO. 100 105 120 107 137 138
* ASSUMES THAT THE VALUE OF THE INVESTMENT IN THE COMPANY'S COMMON STOCK AND
EACH INDEX WAS $100 ON DECEMBER 31, 1991 AND THAT ALL DIVIDENDS WERE
REINVESTED. FOR PURPOSES OF THIS GRAPH, THE YEARLY CHANGE IN CUMULATIVE
SHAREOWNER RETURN IS MEASURED BY DIVIDING (I) THE SUM OF (A) THE CUMULATIVE
AMOUNT OF DIVIDENDS FOR THE YEAR, ASSUMING DIVIDEND REINVESTMENT, AND (B) THE
DIFFERENCE IN THE FAIR MARKET VALUE AT THE END AND THE BEGINNING OF THE YEAR,
BY (II) THE FAIR MARKET VALUE AT THE BEGINNING OF THE YEAR. THE CHANGES
DISPLAYED ARE NOT NECESSARILY INDICATIVE OF FUTURE RETURNS MEASURED BY THIS
OR ANY METHOD.
EMPLOYMENT OF INDEPENDENT PUBLIC ACCOUNTANTS:
The Board of Directors of the Company, at a meeting held on December 9,
1996, and in accordance with the recommendation of its Audit Committee, voted to
employ the firm of Price Waterhouse LLP to make an audit of the books and
affairs of the Company for the fiscal year 1997. One or more representatives of
Price Waterhouse LLP will attend the annual meeting, will be afforded the
opportunity to make a statement if they desire to do so, and will be available
to answer questions that may be asked by shareowners.
The engagement of Coopers & Lybrand L.L.P., which audited the books and
affairs of the Company for the fiscal year 1995, terminated with that firm's
audit of the Company's financial statements for the fiscal year 1995. The report
of Coopers & Lybrand L.L.P. on the Company's financial statements for the fiscal
year 1995 did not contain any adverse opinion or a disclaimer of opinion, and it
was not qualified or modified as to uncertainty, audit
D-17
<PAGE>
scope or accounting principles. During the fiscal year 1995, and through March
1, 1996, the Company had no disagreement with Coopers & Lybrand L.L.P. on any
matter of accounting principles or practices, financial statement disclosure, or
auditing scope or procedure, and none of the following kinds of events (each of
which would have been a "reportable event" under the regulations of the
Securities and Exchange Commission) occurred, i.e., Coopers & Lybrand L.L.P. did
not advise the Company: that internal controls necessary for the Company to
develop reliable financial statements did not exist; that information had come
to the attention of Coopers & Lybrand L.L.P. that led it to no longer be able to
rely on the representations of the Company's management or made it unwilling to
be associated with the financial statements prepared by management; that there
existed a need to expand significantly the scope of the audit of Coopers &
Lybrand L.L.P.; that information had come to the attention of Coopers & Lybrand
L.L.P. that if further investigated might (i) materially impact the fairness or
reliability of either an audit report previously issued by Coopers & Lybrand
L.L.P. or the financial statements underlying such report or the financial
statements to be issued covering the fiscal period subsequent to December 31,
1995 (including information that might prevent Coopers & Lybrand L.L.P. from
rendering an unqualified audit report on the Company's financial statements for
the fiscal year 1995), or (ii) cause Coopers & Lybrand L.L.P. to be unwilling to
rely on the representations of the Company's management or be associated with
the Company's financial statements; or that information had come to the
attention of Coopers & Lybrand L.L.P. that it had concluded materially impacted
the fairness or reliability of either (i) an audit report previously issued by
Coopers & Lybrand L.L.P. or the financial statements underlying such report, or
(ii) the Company's financial statements to be issued covering the fiscal period
subsequent to December 31, 1995 (including information that, unless resolved to
the satisfaction of Coopers & Lybrand L.L.P., would prevent that firm from
rendering an unqualified audit report of the Company's financial statements for
the fiscal year 1995).
Neither the Company, nor any other person acting on behalf of the Company,
at any time during the fiscal year 1995, or through March 1, 1996, consulted
Price Waterhouse LLP regarding either (i) the application of accounting
principles to a specified transaction, either completed or proposed, or the type
of audit opinion that might be rendered on the Company's financial statements,
or (ii) the subject matter of a disagreement with Coopers & Lybrand L.L.P. or a
reportable event.
If the shareowners do not, by the affirmative vote of a majority of the
shares of Common Stock represented at the meeting, approve the employment of
Price Waterhouse LLP as independent auditors, their employment will be
reconsidered by the Board of Directors.
DATE FOR SUBMISSION OF PROPOSALS BY SECURITY HOLDERS:
Shareowners who intend to present proposals for action at the 1998 Annual
Meeting of the Shareowners of the Company are advised that such proposals must
be received at the principal executive offices of the Company by November 28,
1997 in order to be included in the Company's proxy statement and form of proxy
for that meeting.
- -------------------------
THE COMPANY HAS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, PURSUANT
TO RULE 13A-1 OF THE COMMISSION UNDER SECTION 13 OF THE SECURITIES EXCHANGE ACT
OF 1934, AN ANNUAL REPORT (FORM 10-K) FOR THE FISCAL YEAR ENDED DECEMBER 31,
1996. THE COMPANY WILL PROVIDE A COPY OF SAID FORM 10-K, INCLUDING THE FINANCIAL
STATEMENTS AND THE SCHEDULE THERETO, WITHOUT CHARGE, TO EACH PERSON FROM WHOM
THE BOARD OF DIRECTORS HAS SOLICITED A PROXY FOR USE AT THE ANNUAL MEETING OF
THE SHAREOWNERS OF THE COMPANY AS SET FORTH IN THE FOREGOING PROXY STATEMENT, ON
THE WRITTEN REQUEST OF SUCH PERSON DIRECTED TO KURT MOHLMAN, TREASURER AND
SECRETARY, THE UNITED ILLUMINATING COMPANY, 157 CHURCH STREET, P.O. BOX 1564,
NEW HAVEN, CONNECTICUT 06506. COPIES OF SAID FORM 10-K FURNISHED WITHOUT CHARGE
WILL NOT INCLUDE ALL OF THE EXHIBITS THERETO. THE COMPANY WILL FURNISH A COPY OF
ANY SUCH EXHIBIT UPON THE PAYMENT OF A FEE TO DEFRAY THE COMPANY'S EXPENSE (10
CENTS PER PAGE, PLUS POSTAGE) OF FURNISHING IT.
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BY ORDER OF THE BOARD OF DIRECTORS
March 27, 1997 KURT MOHLMAN, Treasurer and Secretary
D-18
<PAGE>
THE UNITED ILLUMINATING COMPANY
NOTICE OF ANNUAL MEETING OF THE SHAREOWNERS
TO THE SHAREOWNERS:
Notice is hereby given that the Annual Meeting of the Shareowners of The
United Illuminating Company will be held at the New Haven Lawn Club, 193 Whitney
Avenue, New Haven, Connecticut, on Wednesday, May 21, 1997 at ten o'clock in the
forenoon, for the following purposes:
1. To elect a Board of Directors for the ensuing year.
2. To vote on the approval of the employment, by the Board of Directors,
of Price Waterhouse LLP as the firm of independent public accountants
to audit the books and affairs of the Company for the fiscal year
1997.
3. To transact such other business as may properly come before the
meeting or any adjournments thereof.
The Board of Directors has fixed the close of business on March 13, 1997 as
the record date for determination of the shareowners of the Company entitled to
notice of, and to vote at, the meeting and any adjournments thereof.
Regardless of whether you plan to attend the meeting, please fill in, sign,
date and return promptly the attached proxy in the accompanying envelope, which
requires no postage if mailed in the United States.
Dated at New Haven, Connecticut, this 27th day of March, 1997.
By Order of the Board of Directors
Kurt Mohlman, Treasurer and Secretary
YOUR VOTE IS IMPORTANT
In order to save the Company the expense of further solicitation to ensure that
a quorum is present at the Annual Meeting, please mail your proxy
promptly-regardless of the number of shares you own, and regardless of whether
you plan to attend the meeting.
A diagram showing the location of the New Haven Lawn Club appears on the inside
of the back cover of the Proxy Statement.
DETACH PROXY CARD HERE
- --------------------------------------------------------------------------------
(1) ELECTION OF A BOARD OF
DIRECTORS
FOR all nominees
listed below [_]
WITHHOLD AUTHORITY to vote
for all nominees listed below. [_]
*EXCEPTIONS [_]
Nominees: Thelma R. Albright, Marc C. Breslawsky, David E. A. Carson, John F.
Croweak, J. Hugh Devlin, Robert L. Fiscus, Richard J. Grossi, Betsy
Henley-Cohn, John L. Lahey, F. Patrick McFadden, Jr., Frank R. O'Keefe,
Jr., James A. Thomas,
and, in their discretion, such other person or persons as the
present Board of Directors shall determine, if one or more of said nominees is
unable to serve.
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, MARK
THE "EXCEPTIONS" BOX AND WRITE THAT NOMINEE'S NAME IN THE SPACE PROVIDED BELOW.)
*Exceptions
---------------------------------------------------------------------
(2) Approval of the employment of Price Waterhouse LLP as independent auditors
for fiscal year 1997. (Proposed by the Board of Directors.)
(3) In proxy's discretion on any other matters that may properly come before
said meeting or any adjournment thereof.
FOR [_] AGAINST [_] ABSTAIN [_]
Change of Address and/or
Comments Mark Here. [_]
When signing as attorney,
executor, administrator, trustee
or guardian, give title as such.
If the signer is a corporation,
sign in the corporate name by
duly authorized officer.
Dated: , 1997
--------------------
---------------------------------
---------------------------------
PLEASE SIGN HERE
Votes MUST be indicated
(x) in Black or Blue ink. [_]
PLEASE SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
<PAGE>
ADMISSION TICKET
THE UNITED ILLUMINATING COMPANY
ANNUAL MEETING OF SHAREOWNERS
MAY 21, 1997 AT 10:00 A.M.
NEW HAVEN LAWN CLUB
193 WHITNEY AVENUE
NEW HAVEN, CONNECTICUT
DIRECTIONS:
- ----------
FROM I-95:
Follow signs to I-91 and then follow directions below.
FROM I-91:
Take Exit #3 (Trumbull Street Exit). Go straight two blocks to Whitney Avenue.
Right on Whitney. Club sign and entrance on right.
FROM WILBUR CROSS PARKWAY (ROUTE 15):
Exit 61
Take Whitney Avenue Exit. Go towards New Haven approximately five miles. Club
sign and entrance on left.
FROM DOWNTOWN NEW HAVEN:
Take Church Street towards Hamden. Church Street becomes Whitney Avenue. The
club is on the right hand side (diagonally across from the Peabody Museum).
Small sign at Club's entrance.
Please note: The Club is set back on Whitney Avenue. (You must go down a long
driveway to see it.) There are buildings in front of it making it
difficult to see from Whitney Avenue.
THE UNITED ILLUMINATING COMPANY
COMMON STOCK PROXY
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Betsy Henley-Cohn, or John L. Lahey (in
the absence of Ms. Henley-Cohn), or F. Patrick McFadden, Jr. (in the absence of
Ms. Henley-Cohn and Mr. Lahey) as proxy, for and in the name of the undersigned
and with all powers the undersigned would possess if personally present, to vote
all shares of the Common Stock of The United Illuminating Company which the
undersigned is entitled to vote at the Annual Meeting of the Shareowners to be
held on Wednesday, May 21, 1997, and at any adjournments thereof.
THIS PROXY, WHEN PROPERLY SIGNED AND RETURNED TO THE COMPANY, WILL BE
VOTED IN THE MANNER INDICATED ON THE REVERSE SIDE. UNLESS OTHERWISE DIRECTED ON
THE REVERSE SIDE, THE UNDERSIGNED'S VOTE WILL BE CAST FOR THE ELECTION OF ALL
NOMINEES LISTED TO THE BOARD OF DIRECTORS AND FOR ITEM (2).
(Continued, and to be signed and dated, on reverse side.)
THE UNITED ILLUMINATING COMPANY
P.O. BOX 11031
NEW YORK, N.Y. 10203-0031
