SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
PROXY STATEMENT
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
[x] Filed by the Registrant
[x] Preliminary Proxy Statement
Central Vermont Public Service Corporation
(Exact name of registrant as specified in its charter)
Carole L. Root
(Name of Person Filing Proxy Statement)
Payment of Filing Fee
[x] $125 per Exchange Act 14a-6(i)(1). Paid by wire transfer
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3)
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)4 and 0-11
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exhange Act Rule 0-11
4) Proposed maximum aggregate value of transaction:
<PAGE>
March 3, 1994
Securities and Exchange Commission
Division of Corporation Finance
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Preliminary Proxy Materials for
1994 Annual Meeting of Stockholders
Gentlemen:
Pursuant to Rule 14a-4(a), we are filing electronically through EDGAR
Central Vermont Public Service Corporation, CIK #0000018808, our
preliminary proxy materials for the l994 Annual Meeting of Stockholders to
be held May 3, 1994. This filing includes the President's letter, the
Notice of Annual Meeting, Proxy Statement and Form of Proxy. The actual
graph is being sent under separate cover.
We also filed the Executive Compensation Report for separate review on
February 16, 1994 and wish for that review to continue. The reviewer
assigned to this Company is Linda Materese.
The filing fee of $125 has been paid by wire transfer to the lockbox
depository.
If you have any questions, you can reach me at (802) 747-5205 or you can
also fax information at (802) 747-1913.
Very truly yours,
/s/ Carole L. Root
Carole L. Root
Assistant Corporate Secretary
<PAGE>
CENTRAL VERMONT PUBLIC SERVICE CORPORATION
77 GROVE STREET
RUTLAND, VERMONT 05701
March 28, 1994
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Central Vermont Public Service Corporation at 10:00 a.m. on Tuesday, May 3,
1994 at the Holiday Inn, Route 7 South, Rutland, Vermont. Refreshments
will be served commencing at 9 a.m.
In addition to the election of Directors, this year we have three items of
particular importance for your consideration. First, you are being asked
to adopt a Fair Price Amendment to the Articles of Incorporation, which is
intended to help insure that if the Company is acquired or involved in a
takeover transaction, each stockholder will be treated fairly in comparison
to every other stockholder. The Fair Price Amendment is similar to the
fair price provision adopted in 1988 as a by-law amendment. However,
recent changes in Vermont's corporate statute now require that such
provisions be authorized instead in the Articles of Incorporation. Second,
you are being asked to approve an amendment to the Company's Articles of
Incorportion which is intended to limit the liability of Directors to the
fullest extent now permitted under Vermont's new corporate statute.
Finally, you are being asked to approve an amendment to the Company's By-
Laws to modify the provisions governing indemnification of Directors,
officers and employees in order to bring those provisions more fully into
compliance with the requirements of Vermont's new corporate statute. We
urge you to read the detailed explanations in the attached Proxy Statement.
Your Board of Directors and I urge you to vote in favor of these proposals.
Common and Preferred Stockholders are entitled to the Notice of Meeting.
However, only Common Stockholders of record at the close of business on
February 23, 1994, will be entitled to vote at the Meeting. Stockholders
who are unable to attend the Meeting in person and wish to have their stock
voted are requested to sign, date and return promptly the accompanying
proxy.
Thank you for your continued interest in the Company.
Sincerely,
THOMAS C. WEBB <PAGE>
CENTRAL VERMONT PUBLIC SERVICE CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held on May 3, 1994
To the Holders of Common and Preferred Stock of Central Vermont Public
Service Corporation:
You are hereby notified that the Annual Meeting of the Stockholders of
Central Vermont Public Service Corporation will be held at the Holiday Inn,
Route 7 South, Rutland, Vermont, on Tuesday, May 3, 1994, at ten o'clock in
the forenoon, Eastern Daylight Saving Time, for the Common Stockholders to
consider and act upon the following Articles:
Article 1. To amend the Articles of Incorporation to includethe Fair
Price Provision.
Article 2. To amend the Articles of Incorporation to limit liability
of Directors.
Article 3. To amend the By-Laws to modify the indemnification
protection afforded Directors, Officers and Employees.
Article 4. To elect that class of three directors whose terms commence
at the 1994 Annual Meeting of Stockholders and
expire at the 1997 Annual Meeting of Stockholders.
Article 5. To act upon any matters incidental to or in furtherance of
the foregoing and upon any matters which may properly come
before the meeting.
Any of the foregoing may be considered or acted upon at said meeting,
or at any and all adjournments thereof.
<PAGE>
The Board of Directors has fixed the close of business on February 23,
1994, as the record date for the determination of the holders of the
Company's capital stock entitled to notice of, and to vote at, the meeting
and any adjournments thereof. In accordance with applicable provisions of
the Company's Articles of Incorporation and Vermont law, the Preferred
Stockholders are entitled to Notice of Meeting, but are not entitled to
vote on any of the matters to be considered thereat.
By Order of the Board of Directors,
Joseph M. Kraus, Secretary
Rutland, Vermont
March 28, 1994
IMPORTANT
All holders of Common Stock, whether or not they plan to attend the
meeting in person, are urged to VOTE, SIGN, DATE AND RETURN THE ENCLOSED
PROXY in the envelope provided.
<PAGE>
CENTRAL VERMONT PUBLIC SERVICE CORPORATION
77 Grove Street
Rutland, Vermont 0570l
March , 1994
PROXY STATEMENT
Annual Meeting of Stockholders
This statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Central Vermont Public Service
Corporation ("CVPS", the "Company" or the "Corporation"), a Vermont
corporation. The proxies solicited hereby will be voted at the Annual
Meeting of Stockholders to be held at the Holiday Inn, Route 7 South,
Rutland, Vermont at 10:00 a.m. on May 3, 1994 and at any and all
adjournments thereof.
Proxies in the accompanying form, unless previously revoked, will be
voted as directed by the stockholders giving such proxy. Any proxy may be
revoked by written notice delivered to the Secretary of the Company at any
time before it is exercised. If no direction is given, proxies will be
voted FOR the amendments to the Company's Articles of Incorporation
relating to the Fair Price Provision and Limitation of Director Liability,
FOR the amendment to the Company's By-Laws relating to the Indemnificaton
Provisions and FOR the election, as Directors, of the three nominees listed
on the proxy.
In accordance with Securities and Exchange Commission ("SEC") rules,
boxes and a blank space are provided on the proxy card for stockholders to
designate whether they wish to vote "for", "against", or "abstain" on any
proposal, or to withhold authority to vote for one or more of the nominees
for Director. Under Vermont law, in order for action to be taken on a
matter, a quorum must exist as to that matter, which is defined for this
purpose as a majority of the outstanding shares entitled to vote on the
matter. While abstentions are counted in determining whether a quorum has
been reached on a particular matter, broker non-votes are not counted as
they are not deemed to be "entitled to vote" on such matter. A broker non-
vote will occur when a broker who holds shares in street name for a
customer does not have the authority under the rules of the New York Stock
Exchange ("NYSE") to cast a vote on a particular matter because the matter
is deemed by the NYSE to be non-discretionary and the broker's customer has
not furnished voting instructions on the matter.
The following tabulation rules will apply to broker non-votes and to
abstentions: (i) in matters requiring the approval of a majority of the
votes cast "for" and "against", neither broker non-votes nor abstentions
will be counted and they will not affect the outcome of the vote; (ii) in
matters requiring the approval of a majority of the Company's outstanding
Common Stock, broker non-votes and abstentions will have the effect of
votes "against" the proposal; and (iii) in the election of Directors, which
is by plurality of the votes cast, neither a nominee will affect the
outcome of the election except that votes to withhold authority to vote for
any of management's nominees in the case of a contested election would have
the effect of aiding the challenger.
The Company will bear the cost of solicitation hereunder. The
solicitation of proxies by mail may be followed by solicitation by officers
or other employees or representatives of the Company. In addition, the
Company has retained Morrow & Co., a proxy solicitation firm, to assist in
the solicitation of proxies for the meeting. The estimated fee for such
services is $11,500 plus reimbursement of reasonable out-of-pocket
expenses. The Company will request banks, brokers and other similar agents
or fiduciaries to forward these proxy materials to beneficial owners of
stock, and, if requested, will reimburse them for the costs thereof.
A copy of the Annual Report of the Company containing its audited
financial statements for 1993 was mailed to stockholders on March 16, 1994.
The Proxy Statement and form of Proxy were first sent to stockholders
on or about March 28, 1994.
VOTING SECURITIES
The Board of Directors has fixed the close of business on February 23,
1994 as the record date for determination of stockholders entitled to
notice of and to vote at the meeting. On February 23, 1994 the Company had
issued and outstanding 11,636,428 shares of Common Stock, each share being
entitled to one vote. In accordance with applicable provisions of the
Company's Articles of Incorporation and Vermont law, the Preferred
Stockholders are entitled to receive Notice of the Meeting due to the
proposals to amend the Articles of Incorporation, but are not entitled to
vote on those proposals or any other matter to be considered at the
meeting.
The following is a tabulation of equity securities of the Company
beneficially owned by all present Directors and Executive Officers of the
Company as a group (19 persons) as of January 31, 1994. Individual
shareholdings of each nominee and incumbent Director are shown in the table
under "Election of Directors" below. No Director, nominee for Director or
Executive Officer owns any shares of the various classes of the Company's
outstanding non-voting preferred stock.
<PAGE>
Title of Class Amount Beneficially Owned Percent of Class
Common Stock,
$6 Par Value 187,908 shares (1) 1.6%
(1) Includes 124,625 shares that the directors and executive officers have
a right to acquire pursuant to options granted under Stock Option plans.
The Company knows of no person, entity or group (within the meaning of
Section 13(d)(3) of the Securities Exchange Act of 1934) which owns
beneficially more than 5% of any class of the Company's outstanding equity
securities.
<PAGE>
ARTICLE 1.
THE "FAIR PRICE" AMENDMENT
Summary
In order to help ensure that all of the Company's stockholders are
treated fairly in the event of certain acquisitions of control of the
Company, the Board of Directors is proposing that a Fair Price Admendment
be adopted to the Company's Articles of Incorporation. The amendment is
substantially the same as the Fair Price provision contained in the
Company's By-Laws, except for modification of the supermajority voting
percentage. Recent changes in Vermont corporate law governing
supermajority voting requirements have necessitated the adoption of the
Fair Price provision as part of the Company's Articles of Incorporation
rather than as a By-law. If it is adopted, the amendment will supersede
the Fair Price provision in the By-Laws.
Introduction
Under recent amendments to Vermont's corporate statutes, provisions
requiring a higher percentage stockholder vote than would ordinarily
be required by applicable law must generally be authorized in a
corporation's Articles of Incorporation in order to become effective. In
1988 the stockholders adopted a so-called "Fair Price" provision (referred
to in this discussion as the "1988 Provision"), which included a
higher-than-majority vote requirement for approval of certain "Business
Combinations" involving an "Interested Stockholder" (as defined below).
However, the 1988 Provision was adopted in accordance with the corporate
law then in effect as a By-Law amendment, rather than as an amendment
to the Articles of Incorporation. Accordingly, in order to conform to
the current requirements of Vermont law, the Board of Directors is
recommending that the stockholders adopt a Fair Price amendment to the
Company's Articles of Incorporation (referred to in this discussion as the
"Fair Price Amendment" or the "Amendment") which would supersede the 1988
Provision in the Company's By-Laws. Except for the voting requirement, the
Fair Price Amendment is essentially the same as the 1988 Provision, and
like that provision is designed to provide reasonable assurances that
any attempt to acquire the Company will be made on terms that are fair to
all stockholders. The Amendment does this by requiring certain business
combinations involving a holder of more than 10% of the Company's
outstanding voting stock be approved by at least the specified
supermajority stockholder vote unless the transaction satisfies certain
minimum price, form-of-consideration and procedural requirements or the
transaction is approved by a majority of the Directors who are not
affiliated with the more than 10% owner.
The Fair Price Amendment, like the 1988 Provision, is intended to help
assure that if the Company is acquired or involved in a takeover
transaction, each stockholder will be treated fairly in comparison to every
other stockholder. The adoption of the Fair Price Amendment would not,
however, preclude the Board of Directors from either opposing or approving
a Business Combination, or imposing additional conditions on the approval
if permitted by law, regardless of whether the proposal satisfies the
minimum-price, form-of-consideration and procedural requirements of the
Fair Price Amendment described below. Rather, the Fair Price Amendment is
designed to supplement the Board's statutory authority in responding
to Business Combination proposals and to help ensure a minimum level of
stockholder protection in such transactions. (See "Statutory Authority of
the Board to Impose Conditions," below.)
The only significant difference between the Fair Price Amendment and
the 1988 Provision is in the minimum percentage vote required to approve a
Business Combination that has not either been approved by a majority of the
Disinterested Directors or that does not satisfy the specified procedural
and fairness criteria. The 1988 Provision required the affirmative vote of
at least 80% of the outstanding Voting Stock and also required that the 80%
vote include the affirmative vote of at least two-thirds of the Voting
Stock held by stockholders other than the 10% or more stockholder. The Fair
Price Amendment would instead require that the Business Combination in
those circumstances be approved by the same 80% vote requirement, or if
lesser, by the affirmative vote of at least the same percentage of the
outstanding Voting Stock as voted in favor of adopting the Fair Price
Amendment at the Annual Meeting. In addition, the Fair Price Amendment
requires that the vote approving the Business Combination contain the same
supermajority percentage of affirmative votes of all shares other than
those held by the Interested Stockholder.
The text of the proposed Amendment is contained in Exhibit I to this
Proxy Statement.
Definitions
Set forth below are definitions of certain terms used in the
discussion of the Amendment. These definitions are substantially the same
as those contained in the 1988 Provision, except for the addition of the
new term "Supermajority Percentage."
An "Interested Stockholder" is any person (other than the target
company or any subsidiary) who (1) is the beneficial owner of more than 10%
of the outstanding Voting Stock (as defined below); or (2) is an affiliate
of the Company and at any time during the two-year period preceding the
date in question owned more than 10% of the Company's outstanding Voting
Stock; or (3) is an assignee or other recipient of Voting Stock owned
within two years by any Interested Stockholder and transferred to such
assignee or other recipient in one or more transactions not involving a
public offering within the meaning of the Securities Act of 1933. The term
"beneficial owner" includes persons directly or indirectly owning or having
the right to acquire or vote the stock. At the present time management is
not aware of any person or group of persons who constitute an Interested
Stockholder with respect to the Company's Common Stock.
A "Business Combination" includes the following transactions: (i)
merger or consolidation of the Company or any subsidiary with or into an
Interested Stockholder, or with or into any other corporation which
is, or thereafter would be, an affiliate of the Interested Stockholder;
(ii) the sale or other disposition by the Company or a subsidiary to an
Interested Stockholder or any of its affiliates of assets having an
aggregate fair market value of $5,000,000 or more; (iii) the issuance or
transfer by the Company or a subsidiary to an Interested Stockholder or
any of its affiliates of any securities having an aggregate fair market
value of $5,000,000 or more in exchange for cash, securities or other
property (or a combination thereof); (iv) the adoption of any plan or
proposal for the liquidation or dissolution of the Company proposed by or
on behalf of an Interested Stockholder or any of its affiliates; or (v) any
transaction, including a reclassification of securities, recapitalization,
share exchange or any other transaction, which has the effect,
directly or indirectly, of increasing the proportionate share of the
outstanding shares of any class of equity securities of the Company or a
subsidiary, or of securities convertible into equity securities of the
Company or a subsidiary, beneficially owned by any Interested Stockholder
or any of its affiliates. This definition of Business Combination is the
same as that contained in the 1988 Provision, except for the addition of
the reference to share exchanges in clause (v). The new Vermont corporate
statute which became effective this year permits a corporation to acquire
control of another corporation through a direct exchange of stock, if
approved by vote of the stockholders. A share exchange would bind all
of the corporation's stockholders (subject to applicable dissenters'
rights) and would require all stockholders to exchange their shares for the
consideration specified in the share exchange plan.
"Disinterested Director" is defined as any member of the Company's
Board of Directors who is unaffiliated with, and not a nominee of, the
Interested Stockholder and was a member of the Board prior to the time that
the Interested Stockholder became an Interested Stockholder. The term
also includes any successor of a Disinterested Director who is
unaffiliated with, and not a nominee of, the Interested Stockholder and who
is recommended to succeed a Disinterested Director by a majority of
Disinterested Directors then on the Board of Directors.
"Voting Stock" means outstanding shares of the Company's capital stock
entitled to vote generally in the election of Directors. This would include
the Common Stock and in limited circumstances, the Preferred Stock.
"Announcement Date" means the date of the first public announcement of
the proposed Business Combination.
"Determination Date" means the date upon which the Interested
Stockholder became an Interested Stockholder.
The "Supermajority Percentage" is defined in the proposed Amendment as
the lesser of (1) that percentage of the Voting Stock that is equivalent to
the percentage of the outstanding shares of Voting Stock that voted in
favor of the Fair Price Amendment, as evidenced by a Certificate of the
Secretary of the Company to be filed with the Company's By-Laws, or (2)
eighty percent (80%) of the outstanding Voting Stock. As stated
above, 80% is the supermajority percentage contained in the 1988
Provision. The operation of the supermajority Percentage formula and
voting requirements of the Fair Price Provision is illustrated in the
following examples: If the Fair Price Amendment is approved at the Annual
Meeting by the affirmative vote of 60% of the Company's outstanding shares
of Voting Stock, a subsequent Business Combination involving an
Interested Stockholder must be approved by the affirmative vote of no less
than 60% of the Company's Voting Stock and the shares voting in favor of
the transaction must include no less than 60% of the affirmative vote of
all of the Voting Stock held by Stockholders other than the Interested
Stockholder. If the Amendment is approved by the affirmative vote of 85%
of the outstanding shares, the applicable Supermajority Percentage would be
80%, the maximum percentage specified in the Supermajority Percentage
definition.
Reasons for the Fair Price Amendment
As stated above, while the 1988 Provision was adopted under prior law
as an amendment to the Company's By-Laws, recent changes in Vermont's
corporate law now generally require that supermajority provisions be
authorized in a corporation's Articles of Incorporation. Vermont law
now also requires that an amendment to a corporation's Articles of
Incorporation containing a supermajority vote requirement must be approved
by an affirmative vote at least as high as the supermajority percentage
contained in the amendment. The Supermajority Percentage formula in the
Fair Price Amendment assures compliance with that legal requirement as the
percentage vote required under the Fair Price Amendment will be the same as
the percentage vote adopting the Amendment (assuming it is approved), up to
a maximum of 80%.
The Directors continue to believe that a fair price provision is in
the best interests of the Company and its stockholders. During the past
decade or so there have been a number of surprise takeovers of
publicly-owned corporations through sudden acquisitions of control
by means of tender offers or other purchases of a substantial
number of outstanding shares. Frequently such tender offers and other
share purchases have been followed by Business Combinations in which the
purchaser has paid a lower price for the remaining outstanding shares than
it paid in acquiring its original interest in the company or has paid in a
less desirable form-of-consideration. Federal securities laws may govern
the disclosure required in order to solicit the vote of the stockholders to
approve such a Business Combination, but do not assure the substantive
fairness of the transaction. In other instances, no stockholder vote may
be required.
Under Vermont law, stockholders have the right to dissent in
connection with a proposed merger, consolidation or share exchange, certain
prejudicial amendments to the Company's Articles of Incorporation, a
corporate dissolution, or a sale or exchange of all or substantially all of
the assets of a company other than in the usual and regular course of its
business. In the case of other transactions, such as the dilutive issuance
of Company securities to an Interested Stockholder, or the transfer of a
significant amount (but less than "substantially all") of the Company's
assets the statutory right of dissent may not be available at all.
Moreover, although a dissenting shareholder is entitled to receive the
"fair value" of his or her shares upon compliance with the statutory
requirements for demanding payment, the determination of such value is made
in the first instance by the corporation, with litigation likely resulting
if the parties cannot agree. If the issue is litigated, a court will
consider relevant factors, including concepts and methods customary in
determining the "fair value" of a dissenting stockholder's shares. There
can be no assurance, however, that a court would take into account certain
underlying and long-term values that a company's board of directors is in a
better position to evaluate. In addition, exercising the statutory right
of dissent may involve delay and expense.
The Fair Price Amendment is intended to mitigate these shortcomings by
requiring that in order to complete a Business Combination that is not
approved by a majority of the Disinterested Directors, an Interested
Stockholder must assure itself of obtaining the affirmative vote of
at least the Supermajority Percentage of the outstanding Voting Stock of
the Company prior to the implementation of the Business Combination, or be
prepared to meet specified minimum-price, form-of-consideration and
procedural requirements. Like the 1988 Provision, the Fair Price Amendment
is also designed to protect stockholders who have not tendered or otherwise
sold their shares to a purchaser who is attempting to acquire control of
the Company by ensuring that at least the same price and
form-of-consideration is paid to such stockholder in a Business Combination
as was paid to stockholders in the initial step of the acquisition. In the
absence of the Fair Price Amendment, a purchaser who acquired control of
the Company could subsequently, by virtue of such control, force other
stockholders to sell or exchange their shares at a price less than the
amount such purchaser paid to acquire its controlling interest or for some
form-of-consideration less desirable than cash. The Fair Price Amendment
will also protect stockholders who may not wish to participate in a tender
offer, but who might otherwise feel compelled to do so out of fear of the
consequences of becoming a minority holder in a company controlled by
another person or entity. In many situations, the minimum-price and
procedural requirements of the Fair Price Amendment could require
that an Interested Stockholder pay stockholders a higher price for
their shares and/or structure the transaction differently than would be the
case without the Fair Price Amendment. Accordingly, the Board of
Directors believes that, to the extent a Business Combination is involved
as part of a plan to acquire control of the Company, adoption of the Fair
Price Amendment would increase the likelihood that a purchaser would
negotiate directly with the Board of Directors for the benefit of all
stockholders.
The Board of Directors has no knowledge of any present effort to gain
control of the Company. However, in view of the current environment of
increasing stock accumulations and proxy contests facing public companies,
including electric utilities, the Board of Directors believes that it is
prudent and in the interests of stockholders generally to continue to
provide the greater assurance of fairness in such situations by
adopting the Fair Price Amendment. The adoption of the Fair Price
Amendment may deter certain mergers, tender offers or takeover attempts
that some or a majority of stockholders may deem to be in their best
interests. Nevertheless, the Board of Directors believes that the
advantages of adopting the Fair Price Amendment outweigh any disadvantages
that may result from discouraging potential acquirors from making
an effort to obtain control of the Company.
The Board of Directors of the Company does not presently anticipate
that any additional anti-takeover measures for the Company will be
presented for adoption in the future.
Price and Procedural Requirements of Fair Price Provision
Under the new Vermont corporate law which became effective this year,
a merger or consolidation, a share exchange, a sale of all or substantially
all of the assets of a company, or the adoption of a plan of dissolution
ordinarily requires the affirmative vote of the holders of at least a
majority of the outstanding shares entitled to vote on the matter.
In accordance with Article 22 of the Company's Articles of Incorporation,
reclassifications of securities and recapitalizations involving
amendments to the Articles of Incorporation would require the affirmative
vote of at least a majority of the Company's outstanding voting stock.
Certain other transactions, such as a dilutive issuance of securities or
the transfer of a substantial portion (but less than "substantially all")
of a company's assets, would not require stockholder approval.
Under prior Vermont law, extraordinary corporate transactions
generally required the affirmative vote of at least two-thirds of the
outstanding voting stock. By lowering the statutory vote requirement,
Vermont's new corporate law, has reduced the level of protection generally
afforded to corporations in the event of certain unwanted and unsolicitated
takeover attempts. The Fair Price Amendment would restore some of that
protection as it would require that certain transactions involving
Interested Stockholders must be approved by the affirmative vote of more
than a majority of the votes entitled to be cast and would require such a
vote whether or not a vote would otherwise be required under Vermont law
for such a transaction. In general, these Business Combination
transactions would have to be approved by the holders of shares
representing at least the applicable Supermajority Percentage of the
outstanding Voting Stock. In addition, the Fair Price Amendment would
require that the approval vote must include the affirmative vote of the
holders of at least the Supermajority Percentage of the outstanding Voting
Stock held by stockholders other than an Interested Stockholder.
The special voting requirements of the Fair Price Provision would not
apply to a proposed Business Combination if either the transaction is
approved by a majority of the Disinterested Directors or each of the
following four specified conditions is satisfied.
1. Minimum Price.
The first condition relates to the amount of consideration to be
paid to the stockholders. The aggregate cash consideration and the fair
market value of the non-cash consideration to be received by the
stockholders must be at least equal to the greater of (i) the highest per
share price paid by the Interested Stockholder to acquire any shares of
Voting Stock at any time during the two-year period preceding the
Announcement Date; or (ii) the highest per share price paid by the
Interested Stockholder in the transaction in which it became an Interested
Stockholder; or (iii) the higher of the fair market value of the Voting
Stock on the Announcement Date or the Determination Date; or (iv) an amount
which bears the same or greater percentage relationship to the fair market
value of the Voting Stock on the Announcement Date as the higher of the
price determined in clauses (i) and (ii) bears to the fair market value of
the Voting Stock on the first date that the Interested Stockholder acquired
any shares of Voting Stock.
The operation of the minimum price provision may be illustrated by the
following example: If an Interested Stockholder acquired its Voting
Stock interest by cash purchase in the open market and the highest price
paid by the Interested Stockholder during the previous two-year period was
$24 per share, and assuming that the fair market values per share of the
Voting Stock on the date of the Interested Stockholder's first purchase, on
the Determination Date and on the Announcement Date were $22, $23 and $25,
respectively, the amount required to be paid to the stockholders in a
Business Combination would be the amount per share in cash equal to the
highest of (i) $24 (the highest price paid), (ii) $25 (fair market value
on the Announcement Date) and (iii) $27.27 (being the same percentage of
$25 as $24 is of $22). Accordingly, to comply with the minimum price
criteria, the Interested Stockholder would be required to pay at least
$27.27 per share to the Company's stockholders in the Business Combination.
2. Form of Consideration.
The second condition is that the same form-of-consideration
must be paid, or the same choices among varying forms of consideration be
offered, to each stockholder in the Business Combination as was previously
paid by the Interested Stockholder in acquiring shares of the Company's
Voting Stock.
3. Restrictions Relating to Matters Precedinq the Business Combination.
The third condition that must be met by the Interested Stockholder is
that between the time the Interested Stockholder becomes an Interested
Stockholder and the time the Business Combination is consummated, (i)
the Interested Stockholder may not acquire additional shares of Voting
Stock (except pursuant to certain specified transactions such as pro rata
stock dividends or stock splits); (ii) the Interested Stockholder may not
receive any special monetary benefits, including tax benefits, from the
Company or any of its subsidiaries, in connection with or in anticipation
of the Business Combination (other than proportionately as a
stockholder); (iii) the Interested Stockholder may not cause any material
change in the Company's business or capital structure; (iv) the annual
rate of dividends on the Voting Stock may not be reduced, unless the
reduction is approved by a majority of the Disinterested Directors; and (v)
the annual rate of dividends must be increased if the number of
outstanding shares has been decreased due to a
reclassification, recapitalization, reorganization, self tender offer or
other similar transaction.
4. Proxy Solicitation.
The fourth condition that must be met by the Interested Stockholder is
that such Stockholder must send to stockholders a proxy or information
statement describing the proposed Business Combination which complies with
the requirements of the Securities Exchange Act of 1934. The document
must include (i) any recommendation that the Disinterested Directors
choose to make as to the advisability (or inadvisability) of the
Business Combination; and (ii) the opinion of a reputable investment
banking firm (to be engaged by the Company on behalf of its stockholders)
as to the fairness (or not) of the proposed Business Combination from the
point of view of the remaining stockholders.
If each of these four conditions (which are the same as those
contained in the 1988 Provision) is met by an Interested
Stockholder, or if the transaction has been approved by a majority of the
Disinterested Directors, the minimum vote requirements of the Fair Price
Provision would not apply and the Business Combination would
ordinarily require only such affirmative vote as is otherwise required or
permitted by law or the Company's Articles of Incorporation or any
agreement with any national securities exchange.
Nevertheless, as discussed below, the Directors under Vermont law
retain the inherent authority to impose conditions (including a
supermajority vote requirement) on the stockholder approval of certain
extraordinary transactions, whether or not they involve a Business
Combination, and whether or not the four conditions specified above have
been met.
Statutory Authority of the Board to Impose Conditions
Under Vermont's new corporate law, when a Board of Directors submits
a proposal for an extraordinary transaction (such as a merger, share
exchange or corporate dissolution, or an amendment to the Articles of
Incorporation) for vote of the stockholders, it may impose conditions on
that approval, including the requirement that the transaction be
approved by a supermajority vote of the stockholders. While this
statutory authority may provide some measure of protection to stockholders
in the event of a proposed Business Combination, the Management believes
that it is not alone sufficient to fully protect stockholder interests.
For example, not all Business Combination transactions are subject
to a stockholder vote under applicable provisions of Vermont law. As
stated above, a sale or other transfer of less than "substantially all" of
a corporation's assets does not require a stockholder vote, nor would
certain dilutive issuances of Company securities to an Interested
Stockholder. In addition, even if a Business Combination were subject to
stockholder approval, the Board's statutory authority to impose conditions
would not protect the interests of the remaining stockholders if the
Interested Stockholder had succeeded in gaining control of the Board, as
the Board under those circumstances would be unlikely to impose any
such special conditions on the stockholder approval. The Fair Price
Amendment would afford protection to stockholder interests in those
situations and would provide a "floor" for the vote required to approve all
Business Combination transactions that have not either been approved by a
majority of the Disinterested Directors or met the four minimum price and
procedural requirements described above.
The Fair Price Amendment is intended to supplement, but not to replace
or limit, the statutory powers otherwise available to the Board of
Directors to impose conditions on the approval of certain kinds of
extraordinary transactions involving an Interested Stockholder. Thus,
if the Fair Price Amendment is adopted, it would still be possible for the
Board to impose a percentage vote requirement greater (but not less)
than the Supermajority Percentage, with respect to a merger or share
exchange or other transaction involving an Interested Stockholder that
required a stockholder vote under Vermont law, regardless of whether the
four conditions specified in the Fair Price Amendment have been met and
regardless of whether a majority of the Disinterested Directors have
approved the transaction.
Amendment of Provision
In accordance with applicable provisions of Vermont law, the Fair
Price Amendment could be altered, amended or repealed only upon the
affirmative vote of the holders of at least the Supermajority Percentage of
the Voting Stock. In addition, if there is an Interested Stockholder on
the record date for the meeting at which the alteration, amendment or
repeal is voted on, the vote approving such change must include the
affirmative vote of at least the Supermajority Percentage of the shares of
Voting Stock held by stockholders other than the Interested Stockholder.
Potential Negative Effects
The Fair Price Amendment would tend to discourage purchasers who seek
control of the Company at a relatively inexpensive price, since acquiring
the remaining equity interest would not be assured unless (a) a majority of
the Disinterested Directors approved the transaction, (b) the minimum-price
and procedural requirements were satisfied, or (c) the special
Supermajority Percentage votes were obtained. The Fair Price Amendment
may also discourage the accumulation of large blocks of the Company's
voting stock. Moreover, because tender offers or other acquisitions of a
substantial block of a company's voting stock by persons attempting to gain
control of the company are usually made at prices above the prevailing
market price and may even cause a general increase in the market price (at
least temporarily) the Fair Price Amendment, by discouraging such
acquisition bids, may deprive stockholders of the opportunity to dispose of
their shares at a premium price.
Another effect of adoption of the Fair Price Amendment would be to
give veto power to the holders of less than a majority of the Voting Stock
of the Company with respect to a Business Combination that is opposed by
the Disinterested Directors, but that a majority of stockholders may
believe to be desirable and beneficial. In addition, since only the
Disinterested Directors will have the authority to eliminate the
Supermajority Percentage vote required for Business Combinations, the Fair
Price Amendment may tend to hinder removal of current management in the
event of a takeover bid involving an Interested Stockholder. Nevertheless,
it is the judgment of the Board of Directors that the benefits of the Fair
Price Amendment greatly outweigh these potential disadvantages.
Vote Required
In accordance with the Company's Articles of Incorporation, adoption
of the Fair Price Amendment will require the affirmative vote of at least a
majority of the outstanding shares of the Company's Common Stock. In
addition, because the Company is a regulated public utility the Amendment
may not become effective without the approval of the Vermont Public Service
Board and the issuance by the Board of a Certificate of Public Good.
The Directors recommend a vote FOR Article 1.
ARTICLE 2
LIMITATION OF LIABILITY OF DIRECTORS
Summary
The Board of Directors has proposed an amendment to the Company's
Articles of Incorporation which, if adopted, will limit the personal
liability of Directors to the Company for money damages for certain
breaches of their duties as Directors. However, it will not eliminate
personal liability for any financial benefit received by the Directors, for
a reckless or intentional infliction of harm, for an intentional or
reckless criminal act or for unlawful distributions. This Limitation of
Director Liability provision is expressly sanctioned in Vermont's new
corporate statute. Management believes that adoption of the amendment will
assist the Company in continuing to attract and retain individuals of high
caliber to serve on the Company's Board of Directors.
The text of the proposed Amendment is contained in Exhibit II to this
Proxy Statement.
Background
In recent years, litigation seeking to impose liability on, or
involving as witnesses, directors of publicly held corporations has become
increasingly common. Such proceedings are typically extremely expensive
whatever their eventual outcome. In view of the costs and uncertainties of
litigation in general, it is often prudent to settle proceedings in which
claims against a director or officer are made. Settlement amounts,
even if immaterial to the corporation involved and minor compared to the
enormous amounts frequently claimed, often exceed the financial resources
of most individual defendants. Even in proceedings in which a director is
not named as a defendant, such individual may incur substantial expenses or
attorney's fees if he or she is called as a witness or becomes involved in
the litigation in any other way.
As a result, an individual may conclude that potential exposure
to the costs and risks of litigation in which he or she may become involved
may exceed any benefit from serving as a director of a public corporation.
This problem has made it difficult for corporations to continue to attract
and retain capable individuals to serve as their directors.
Although as discussed under Article 3 - Indemnification of Directors,
Officers and Employees, the Company provides indemnification to its
Directors and others in some circumstances, the Company is prohibited
by law from indemnifying an individual in any action by or in right of the
Company if he or she is adjudged liable to the Company.
Compounding the problem has been the increasing difficulty and expense
of obtaining directors' and officers' liability insurance ("D&O
insurance"), which protects directors and officers from personal losses
resulting from litigation involving them by reason of their service as
directors and officers. Coverage under D&O insurance is no longer
routinely offered by competing insurers at a reasonable cost and is
frequently subject to severely restrictive terms.
Limitation of Director Liability
Vermont's new corporate law attempts to respond to the foregoing
concerns, in part, by permitting a corporation, upon receipt of
stockholder approval, to add a provision to its Articles of
Incorporation limiting the personal liability of its directors (but not
its officers) to the corporation or its stockholders for monetary
damages for certain breaches of fiduciary duty. The new statute does not,
however, permit the elimination or limitation of liability of a director
for (1) the amount of a financial benefit received by a Director to which
the Director is not entitled; (2) an intentional or reckless infliction of
harm on the Company or the stockholders; (3) a corporate distribution which
violates Section 8.33 of Title llA of the Vermont Statutes
Annotated; or (4) an intentional or reckless criminal act.
Although the Company has thus far been successful in attracting
individuals of high caliver to serve as Directors, the Board of Directors
believes that, in order to ensure the continued services of its Directors
and to attract other qualified and experienced individuals in the future,
the Company must provide the maximum possible protection available by law
to such persons. To that end, the Board proposes that the stockholders
adopt a new Section 24 as an amendment to the Company's Articles
of Incorporation, which is intended to give Directors of the Company the
full protection from liability now available under Vermont law.
The proposed Amendment would eliminate liability of Directors to the
Company and its stockholders for money damages for certain breaches of the
Directors' duties under Section 8.30 of Title llA of Vermont Statutes
Annotated. That section requires Directors to discharge their duties in
good faith and with the care an ordinarily prudent person in the same
position would exercise. Thus, stockholders are being asked to give up
their right to bring a cause of action against Directors for monetary
damages for breach of their fiduciary duties even if such Directors fail to
exercise ordinary care in their actions. As stated above, however, the
proposed amendment does not eliminate or limit personal liability for (1)
the receipt of a financial benefit by a Director to which the Director is
not entitled; (2) an intentional or reckless infliction of harm on the
Company or the stockholders; (3) a corporate distribution which violates
Section 8.33 of Title llA of the Vermont Statutes Annotated; or (4) an
intentional or reckless criminal act. In addition, nothing in the proposed
amendment will affect the right of the Company or its stockholders to
pursue equitable remedies, such as an action to enjoin or rescind a
transaction involving a breach of duty by a Director (although such
equitable remedies may not always be available) or a Director's liability
under the federal securities laws. The limitation of liability
provided by the proposed amendment will not affect Director liability to
third parties.
The proposed amendment may reduce the likelihood of derivative
litigation against Directors and may discourage or deter
stockholders or management from bringing a lawsuit against Directors
for breach of their duty, even though such an action, if successful, might
otherwise have benefitted the Company. Thus, the present Directors have a
personal interest in the adoption of the proposed amendment in that they
will receive the benefits of the added protection such an amendment
provides. The proposed amendment is prospective only and, therefore, it
will have no effect on the legal consequences or status of any actions
taken by the Directors prior to the time the amendment (if approved)
becomes effective. The Company is not aware of any currently pending or
threatened litigation or any recent past litigation which might have been
materially affected had this amendment been in effect at the time of such
litigation.
Since the new Vermont corporate statute permitting limitation of
Director liability was only recently enacted, there has been no judicial
guidance in Vermont as to the scope of the limitation on liability afforded
by the proposed amendment or its application in particular circumstances.
Any amendment or repeal of the liability-limiting amendment which has
the effect of increasing director liability will operate prospectively
only, and will not affect any action taken or failure to act prior to such
amendment or repeal.
Vote Required
In accordance with the Company's Articles of Incorporation, the
Limitation of Director Liability Amendment will require the affirmative
vote of at least a majority of the outstanding shares of the Company's
Common Stock. As stated above in connection with Article 1 - Fair Price
Amendment, amendments to the Company's Articles of Incorporation require
the approval of the Vermont Public Service Board and the issuance by the
Board of a Certificate of General Good before they may become effective.
The Directors recommend a vote FOR Article 2. <PAGE>
ARTICLE 3
AMENDMENT TO INDEMNIFICATION PROVISIONS
Summary
The indemnification provisions now contained in the Company's By-Laws
were adopted by the stockholders in 1988. At that time applicable Vermont
law did not address in detail the subject of indemnification of corporate
officers, directors and employees. Effective January 1, 1994, the Vermont
statute governing the internal affairs of Vermont corporations was entirely
rewritten. Among other things, the new law creates specific standards and
procedural requirements governing indemnification of directors, officers,
employees and agents. While the existing By-Law provisions generally
comply with the applicable requirements of the new law, they do differ in
some respects. The purpose of the proposed amendment is to eliminate any
inconsistencies between the Company's By-Law provisions and the
requirements of the new law.
The existing indemnification provisions and the provisions as they
are proposed to be amended are set forth at Exhibit III, Parts A and
B, respectively, and the principal substantive differences between the two
are explained below.
Proceedings Covered
Section 1 of the existing By-Laws excepts from the kinds of
proceedings for which indemnification may be available any action by or in
the right of the Company. That language has been deleted in the proposed
amended By-Laws, as limited indemnification for such actions is permitted
under the new corporate statute, assuming applicable standards of conduct
have been met. Under the new statute, a director or officer or employee or
agent may be indemnified in such a proceeding for his or her reasonable
costs, including reasonable attorney's fees, incurred in connection with
the proceeding, but not for other liabilities such as damages, fines,
penalties and judgments. However, such indemnification would not be
permitted in any proceeding by or in right of the corporation in which the
director was adjudged liable to the corporation, unless such
indemnification were ordered by a court in light of all of the relevant
facts and circumstances.
While indemnification for damages and other liabilities to the
Corporation and its stockholders is not permitted under Vermont law, such
liability may be limited or eliminated for Directors, in certain
circumstances, by amendment to the Articles of Incorporation. The adoption
of the proposed amendment described in Article 2 above would have that
effect.
Section l of the proposed amended By-Laws contains language making it
clear that indemnification may be available with respect to informal as
well as formal proceedings. That change is consistent with the broad
definition of "proceeding" contained in the new Act.
Standard of Conduct
Under the existing By-Laws, indemnification is proper only if the
individual to be indemnified acted in good faith and in a manner he or she
reasonably believed to be in, or not opposed to, the best interests of the
Company. While the new statute and proposed amended By-Laws also require
that the individual have acted in good faith, they distinguish between
actions taken in the individual's official capacity and those that are not.
In the case of conduct taken in the individual's official capacity, he or
she must have reasonably believed his or her conduct was in the Company's
best interests. In all other cases, the individual must have reasonably
believed that his or her conduct was at least not opposed to the Company's
best interests.
In the case of any criminal action or proceeding, the existing By-Laws
provide that the individual must have had no reasonable cause to believe
his or her conduct was unlawful. The new statute and the proposed
amendments retain that requirement but also require that the individual
have not been finally found to have been engaged in a reckless or
intentional unlawful act.
Procedural Requirements
The procedures in the existing By-Laws for determining whether
indemnification is appropriate in any particular circumstances differ in
some respects from the procedures required under the new law, which are
reflected in the proposed amendment. The existing provisions would permit
that determination to be made in one of three ways: (1) by a majority vote
of a quorum of Disinterested Directors; or (2) whether or not such a quorum
is obtainable, by a majority of the Disinterested Directors pursuant to a
written opinion of independent legal counsel to the effect that the
individual to be indemnified has met the applicable legal standard of
conduct; or (3) by the vote of a majority of the outstanding stock entitled
to vote in the election of directors, voting as a single class and
exclusive of stock owned by any interested director or officer. Consistent
with the requirements of the new statute, the proposed amendments retain
the first procedure, modify the second and third and add a fourth.
In lieu of the second procedure referred to above, the new law and the
proposed amendments provide that the determination on the permissibility of
indemnification may be made by a majority vote of a committee consisting of
two or more Disinterested Directors designated by the Board of Directors,
but only if a quorum of Disinterested Directors cannot be obtained.
Interested directors may participate in the designation of the committee.
The proposed amendments retain the concept of shareholder approval in the
third procedure referred to above but reflect the lower standard for
approval contained in the new Vermont law, that is, a majority of the total
number of shares voted for and against provided a quorum is present. Under
both the existing and proposed provisions shares owned by the individual to
be indemnified may not be voted on the determination, although the proposed
amendments also prohibit the voting of shares voted under the control of
the individual. As contemplated in the statute, a fourth procedure has
been added which permits the decision on the permissibility of
indemnification to be made by the written opinion of special legal counsel
selected by the Board of Directors or the committee as contemplated in the
first two clauses. If a quorum is not obtainable or a committee cannot be
designated, the special legal counsel may be selected by a majority vote of
the full Board of Directors. Interested directors may participate in that
vote.
In accordance with the new law the proposed amended By-Law provides
that, even if the issue of the permissibility of indemnification is
determined by special legal counsel, that individual may not make the
actual decision to authorize indemnification nor may the special legal
counsel make the determination as to the reasonableness of expenses.
Rather, those determinations must be made by those entitled to select the
special legal counsel.
Mandatory Indemnification
Section 2 of the By-Laws, governing mandatory indemnification, has
been revised to make it clear that the indemnified individual must be
"wholly" successful on the merits or otherwise in defense of the claim or
action. That standard conforms with the standard contained in the new
law.
Reliance on Information
Section 3, governing the right of certain directors, officers and
employees to rely on information, is proposed to be amended to incorporate
the standards contained in the new law. Under the new law and the proposed
amendments, directors, officers and employees are permitted to rely on
information, opinions, reports and statements prepared or presented by
employees of the Company whom the individual to be indemnified reasonably
believes to be reliable and competent in the matters presented, or legal
counsel, public accountants or other outside experts as to matters the
individual reasonably believes are within the person's professional or
expert competence, or a committee of the board of which the individual to
be indemnified is not a member if the individual believes the committee
merits confidence. Although the existing Section 3 permits similar
reliance on information, the standard for such reliance was less precise
than the statutory language, which is reflected in the proposed amendments.
Advance Payment of Expenses
The new statute imposes certain procedural requirements on the
decision to make advance payment of expenses with respect to any matter as
to which indemnification may be sought. Under the existing By-Laws a
person who may be entitled to indemnification is entitled to advance
payment of expenses upon request, provided he or she has executed an
undertaking to repay the amounts advanced if the individual is ultimately
determined not to be entitled to indemnification. The existing By-law
provision does not grant the Board of Directors discretion to deny the
request.
Under the new law and the proposed Amendments to Section 4, advance
payment of expenses is permissible, but it may be made only upon compliance
with all of the following conditions: (1) the individual to be indemnified
must furnish to the Company a written affirmation as to his or her good
faith belief that he or she has met the applicable standard of conduct; (2)
the individual must furnish to the Company a written undertaking to repay
the advances if he or she is ultimately determined to have violated the
applicable standards of conduct; and (3) a determination has been made
based on the facts then known and in accordance with the procedures
described above under the caption "Procedural Requirements", that
indemnification would be permissible.
Service in Other Organizations
A change is proposed to be made to Section 7 governing
indemnification of individuals serving in another organization at the
Company's request. As permitted under the new law, revised Section 7 would
add to the list of such other organizations employee benefit plans
sponsored by the Company.
Survival of Rights
Finally, a change has been made in Section 8 regarding the survival
of indemnification rights. The change excepts from that provision any
modifications required by applicable law.
Indemnity Agreements
Pursuant to the existing By-Laws, the Company has entered into
indemnity agreements with its directors and certain officers. The Company
expects that it will enter into amended agreements with those individuals,
which will reflect the changes in the applicable legal standards governing
indemnification by Vermont corporations.
Management is not presently aware of any pending or threatened
litigation or other proceedings that might give rise to a right of
indemnification under the By-Law provisions or the Indemnity Agreements.
Vote Required
Adoption of the amendments to the Indemnification By-Law will require
the affirmative vote of at least a majority of all of the votes cast "for"
and "against" the proposal.
The Directors recommend a vote FOR Article 3.
<PAGE>
ARTICLE 4.
ELECTION OF DIRECTORS
The Company's Articles of Incorporation and By-Laws provide for the
division of the Board of Directors into three classes having staggered
terms of office. In accordance with the Company's By-Laws, the Board of
Directors has fixed at 10 the number of Directors for the ensuing year.
The Directors whose terms will expire at the 1994 Annual Meeting of
Stockholders are Frederic H. Bertrand, Mary Alice McKenzie and Robert D.
Stout. Each of these Directors will stand for re-election to a three-year
term expiring in 1997. Proxies will be voted (unless otherwise instructed)
in favor of the election of the three nominees as indicated in the table
below.
The following table sets forth certain information regarding the three
nominees for Director, as well as all Directors presently serving on the
Board whose terms will expire after the 1994 Annual Meeting. Each of the
individuals listed in the table has been employed by the firm or has had
the occupation set forth under his or her name for the past five years. In
general, the business experience of each of these persons during this time
was typical of a person engaged in the principal occupation listed for
each.
Served as Shares of
Names and Principal Occupation Director Common Stock
of Nominees and Directors Age Since Beneficially
Owned(1)
Nominees whose terms will expire in 1997:
FREDERIC H. BERTRAND 57 1984 8,068 (2)(3)
Chairman of the Board and
Chief Executive Officer,
National Life Insurance Co.
Montpelier, Vermont
MARY ALICE MCKENZIE 36 1992 4,075 (4)
President,
John McKenzie Packing Co., Inc.
Burlington, Vermont
(Manufacturer of Meat Products)
ROBERT D. STOUT 67 1985 8,781 (5)
Retired President and
Chief Executive Officer,
Putnam Memorial Health Corporation
Bennington, Vermont
Directors whose terms will expire in 1996:
ROBERT P. BLISS, JR. 70 1973 8,323 (6)(5)
President,
Bob Bliss, Ltd.
St. Albans, Vermont
(Insurance Industry Consultants)
<PAGE>
ELIZABETH COLEMAN 56 1990 7,232 (7)
President,
Bennington College
Bennington, Vermont
PRESTON LEETE SMITH 63 1977 4,549 (4)
President and Chief Executive Officer,
S-K-I Ltd.
c/o Killington Ltd.
Killington, Vermont
(Ski Business)
THOMAS C. WEBB 59 1986 22,609 (8)
President and Chief Executive Officer,
Central Vermont Public Service Corporation
Rutland, Vermont
Directors whose terms will expire in 1995:
LUTHER F. HACKETT 60 1979 6,062 (9)(7)
President,
Hackett, Valine & MacDonald, Inc.
Burlington, Vermont
(Insurance Agents)
F. RAY KEYSER, JR. 66 1980 11,847 (10)(2)
Chairman of the Board of
Central Vermont Public
Service Corporation,
Of Counsel, Keyser,
Crowley, Meub, Layden,
Kulig & Sullivan, P.C.
Rutland, Vermont
(Lawyers)
GORDON P. MILLS 57 1980 27,356 (5)
Chairman,
EHV-Weidmann Industries, Inc.
St. Johnsbury, Vermont
(Manufacturer of Electric
Transformer Insulation)
(1) Shareholdings are as of January 31, 1994. Except as otherwise
indicated in the footnotes to the table, each of the named individuals
possesses sole voting and investment power over the shares listed. No
Director or nominee for Director owns beneficially in excess of 1% of CVPS'
outstanding Common Stock.
(2) Includes 6,750 shares that the named individual has a right to
acquire pursuant to options granted under the 1988 and 1993 Stock Option
Plans for Non-Employee Directors.
(3) Includes 1,318 shares held jointly with his wife.
(4) Includes 3,750 shares that the named individual has a right to
acquire pursuant to options granted under the 1988 and 1993 Stock Option
Plan for Non-Employee Directors.
(5) Includes 5,250 shares that the named individual has a right to
acquire pursuant to options granted under the 1988 and 1993 Stock Option
Plans for Non-Employee Directors.
(6) Includes 150 shares held jointly with his wife.
(7) Includes 2,250 shares that the named individual has a right to
acquire pursuant to options granted under the 1993 Stock Option Plan for
Non-Employee Directors.
(8) Includes 14,000 shares that the named individual has a right to
acquire pursuant to options granted under the 1988 Stock Option Plan for
Key Employees and 4,104 shares held under the Company's Employees' Stock
Investment and Employees' Stock Ownership Plans.
(9) Includes 1,500 shares owned by corporations controlled by Mr.
Hackett.
(10) Includes 1,347 shares held jointly with his wife and 3,750 shares
held in a Keough Trust.
Certain of the nominees and incumbent directors serve as officers
and/or directors of subsidiaries and other companies in which the Company
has substantial investments and of companies registered or filing reports
under the Securities Exchange Act of 1934, or investment companies
registered under the Investment Company Act of 1940, as follows:
Connecticut Valley Electric Company Inc., Mr. Webb (Director,
President and Chief Executive Officer), Mr. Mills (Director).
CV Energy Resources, Inc., Mr. Webb (Director, President), Messrs.
Hackett, Keyser, Mills and Smith (Directors).
Catamount Energy Corporation, Mr. Webb (Director, President), Messrs.
Hackett, Keyser, Mills and Smith (Directors).
Vermont Electric Power Company, Inc., ("VELCO") Mr. Hackett (Director
and Chairman), Messrs. Bliss, Keyser, Smith and Webb (Directors).
Vermont Electric Transmission Company, Inc., Messrs. Hackett and Webb
(Directors).
Vermont Yankee Nuclear Power Corporation, ("Vermont Yankee") Mr. Webb
(Director, Chairman) and Mr. Keyser (Director).
Mr. Webb is Director and President of CV Realty, Inc., Inc., Catamount
Rumford Corporation, Equinox Vermont Corporation Appomattox Vermont
Corporation, Catamount Williams Lake, Ltd., CVPSC-Bradford Hydroelectric
Company, Inc. and CVPSC-East Barnet Hydroelectric Company, Inc.. Mr. Webb
is also a Director of SmartEnergy Services, Inc., S-K-I Ltd. and Arrow
Financial Corporation.
Mr. Bertrand is also a Director of The Chittenden Corporation.
Mr. Hackett is also a Director of New England Telephone Company and
Chairman and Director of Banknorth Group, Inc.
Ms. McKenzie is also a Director of Eastern Bancorp.
Mr. Keyser is also a Director/Trustee of Keystone Group, Inc. and
S-K-I Ltd.
Mr. Smith is also a Director of S-K-I Ltd. and Arrow Financial
Corporation.
Vote Required
The election of a director requires the affirmative vote of a
plurality of the votes cast by the shares entitled to vote in the election.
The Directors recommend a vote FOR Article 4.
<PAGE>
MEETINGS OF THE BOARD
During 1993, the Directors held 12 regular meetings of the Board. No
special meeting was held. All Directors attended at least 75% of the
aggregate of all meetings of Directors and committees of which he or she
was a member except for Frederic H. Bertrand and Mary Alice McKenzie who
attended 69% and 71%, respectively, of the meetings.
COMMITTEES OF THE BOARD
The Company has standing executive, audit, compensation and nominating
committees of its Board of Directors. Members of the committees are
appointed annually by the Board of Directors.
The Executive Committee has substantially all powers of the Board of
Directors in the management of the business and affairs of the Company
between meetings of the Board of Directors. The present members of the
Executive Committee are F. Ray Keyser, Jr., Chairman, Robert P. Bliss, Jr.,
Luther F. Hackett, Preston Leete Smith and Thomas C. Webb. During 1993,
the Executive Committee did not meet.
The Audit Committee reviews and reports to the Board of Directors on
the findings and recommendations of the Company's independent public
accountants, the Company's internal audit procedures, examinations by
regulatory authorities and matters having material effect on the Company's
financial operations. The present members of the Audit Committee are
Luther F. Hackett, Chairman, Elizabeth Coleman, Mary Alice McKenzie, Gordon
P. Mills and Robert D. Stout. During 1993, the Audit Committee held four
meetings.
The Compensation Committee consists of non-employee directors and is
responsible for reviewing and making recommendations to the Board of
Directors concerning the compensation of officers of the Company and
certain subsidiaries. The members of the Compensation Committee are also
responsible for the administration of the Stock Option Plan for Key
Employees. The present members of the Compensation Committee are Preston
Leete Smith, Chairman, Frederic H. Bertrand, Elizabeth Coleman and F. Ray
Keyser, Jr. During 1993, the Compensation Committee held four meetings.
The Nominating Committee is responsible for recommending candidates
for election as Directors of the Company. The Nominating Committee will
consider recommendations by the stockholders for nomination as Directors.
Recommendations should be forwarded to the Secretary of the Company on or
before January 1 preceding the Annual Meeting for which such nomination is
sought. The present members of the Nominating Committee are Robert P.
Bliss, Jr., Chairman, F. Ray Keyser, Jr., Mary Alice McKenzie, Robert D.
Stout and Thomas C. Webb. During 1993, the Nominating Committee held one
meeting.
Compensation Committee Interlocks And Insider Participation
During 1993, Thomas C. Webb, President and Chief Executive Officer,
served as a member of the Board of Directors of S-K-I Ltd. Preston Leete
Smith, President and Chief Executive Officer of S-K-I Ltd., serves as a
Director of Central Vermont Public Service Corporation and as Chairman of
its Compensation Committee.
DIRECTORS' COMPENSATION
Directors of CVPS are paid an annual retainer of $9,000 and members of
the Executive Committee are paid an additional retainer of $500. The
Chairman of the Board receives an additional $30,000 retainer and the
Chairman of each committee receives an additional $2,000 retainer.
Directors are also paid $650 plus expenses for each Directors' meeting
attended and $325 for each committee meeting attended if held on the same
day as a meeting of the Board or held by telephone, and a fee of $650 plus
expenses for attendance at each other meeting of such Committee. As
President and Chief Executive Officer, Mr. Webb receives no Director's
retainer or other fees for serving on the Board or any of its committees or
for services performed for consolidated subsidiary companies.
Certain of the Directors have elected to defer receipt of all or a
portion of their fees pursuant to the Company's Deferred Compensation Plan
for Directors, described below under the caption entitled "Deferred
Compensation Plans".
STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
Under the 1993 Stock Option Plan for Non-employee Directors each of
the nine non-employee directors received during 1993 stock options with
respect to 2,250 shares of Common Stock. Optioned shares are reflected in
the individual stockholdings of the Directors set forth on pages ___ and
___ . The exercise price of the options issued to Participant Directors
in 1993 was $24.375 per share, which represents the Fair Market Value of
the Company's Common Stock on the date of grant. Stock options are
exercisable during the period beginning six months after the date of grant
and ending five years thereafter except in the event the option expires
when a limited trading period is in effect, in which case the exercise
period shall be extended for 30 days following termination of the limited
trading period. All stock options are exercisable at a fixed price equal
to the Fair Market Value of the Common Stock on the date the option is
granted. For purposes of the Plan, the Fair Market Value of stock is
defined as the average high and low trading prices reported on the
composite tape on the date specified, or if no sale takes place on such
date, the average of the bid and asked prices on such date. The total
number of shares that may be issued under the Plan may not exceed 150,000
in the aggregate and such shares may be either authorized but unissued
shares or shares previously issued and reacquired by the Company. All
shares awarded under the Plan have been adjusted for the 3 for 2 stock
split pursuant to anti-dilution provisions contained in the Plan. The Plan
is effective for five years, terminating in 1998.
During 1993, stock options granted under a prior Stock Option Plan,
were exercised by Directors Bliss (3,000 shares), Hackett (3,000 shares)
and Stout (1,500 shares). The average net realized value (fair market
value on date of exercise less the exercise price) was $7.938/share for Mr.
Bliss; $5.6459/share for Mr. Hackett; and $4.875/share for Mr. Stout.
REPORTS OF BENEFICIAL OWNERSHIP
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's Officers and Directors to file reports of ownership and changes
in ownership of Company securities with the Securities and Exchange
Commission and to furnish the Company with copies of all such reports. In
1993, Director Mary Alice McKenzie inadvertently failed to file with the
Securities and Exchange Commission on a timely basis one required report
involving one transaction in Common Stock of the Company which she
beneficially owns. Except for the foregoing, the Company believes that
during 1993 all filing requirements applicable to its Officers and
Directors have been met. In making this statement, the Company has relied
on copies of reports that have been filed with the Commission.
Section 16(a) of the Securities Exchange Act of 1934 also requires
executive officers and directors and persons who beneficially own more than
ten percent (10%) of the Company's stock to file initial reports of
ownership and subsequent reports of changes in ownership with the SEC and
the NYSE.
Based solely on a review of the copies of such forms prepared and
filed during 1993 on behalf of our executive officers and directors, and on
written representations that no other reports were required the Company
believes its directors and executive officers have complied with all
Section 16(a) filing requirements. The Company does not have a ten percent
holder.
DIRECTORS' ADVISORY COUNCIL
The Company has a Directors' Advisory Council composed of retired
members of the Company's Board of Directors. Members of the Council are
elected yearly by the Board of Directors to render advisory services to the
Board of Directors at Directors' meetings or otherwise as the Board may
request. Such members have no vote with respect to any matter acted upon
by the Board nor is their presence counted for purposes of determining a
quorum. Members are paid an annual retainer of $9,000. They receive no
meeting fee but are reimbursed for expenses for each meeting attended. The
current members of the Advisory Council are: Dr. Frances C. Hutner,
President of Frances Hutner Associates, economic consultants, of East
Middlebury, Vermont; Messrs. Allen O. Eaton, Esq., Of Counsel to the law
firm of Ropes & Gray, Boston, Massachusetts; Holmes H. Whitmore, Retired
President of Jones & Lamson, Springfield, Vermont; and Fred W. Yeadon, Jr.,
Retired Chairman of the Board, President and Chief Executive Officer of
Banknorth Group, Inc. and First Vermont Bank and Trust Company,
Brattleboro, Vermont. Mr. L. Douglas Meredith, Retired President, Chief
Executive Officer and Chairman of the Board of Central Vermont Public
Service Corporation was deceased on December 30, 1993.
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE OF
CENTRAL VERMONT PUBLIC SERVICE CORPORATION
During 1993 the Compensation Committee reviewed its program of
executive compensation and adopted the following as a guiding statement of
its philosophy:
To maintain a total compensation pay package which, by virtue of its
design and target levels, enables the Company to recruit the best talent
for our jobs, to retain high performing employees by strongly rewarding
exceptional performance, and to encourage employees to develop their skills
and abilities; and which encourages and supports performance and decisions
that strengthen the Company financially and strategically, including
service to the customer.
Base Annual Salary
It is the policy of the Committee to establish salaries within a range
that surrounds the 60th percentile of salaries of similar positions as
reported in the annual Executive Compensation Survey conducted by the
Edison Electric Institute, adjusted to reflect the size of the Company as
determined by revenues. The percentile was set in order to enable the
Company to attract and retain highly talented executives who would not
otherwise be available to the Company at lower levels of compensation.
Within this range the salary is determined based on an evaluation of
the individual's qualifications, experience and performance. Increases are
limited by a merit increase budget pool, which is established annually.
The size of the pool, which is then distributed among officers based on an
evaluation of their contribution, is based on published salary management
planning surveys, which report the planned merit increase budgets of other
companies. However, in 1993 because of the generally poor economic
climate in our service territory and in anticipation of further economic
changes, none of the top five executive officers received a performance
increase despite performance that would have otherwise justified a salary
increase. Two of the top five officers were promoted and did receive
increases associated with their promotions.
Although the Chief Executive Officer did not receive a base salary
increase in 1993 for the reason noted above, his performance was evaluated
by the Committee. A comparison of the five-year cumulative total return
shows that under Mr. Webb's leadership, Central Vermont Public Service
Corporation outperformed both the S&P 500 and the Edison Electric Institute
100 Electrics in dividend and shareholder value growth for two out of the
last three years.
Although there was a drop in 1993, over the last five years the
Company's performance has generally been on par with its peer group and the
S&P 500. As shown by the performance graph the Company achieved a
five-year return of 86.7% as compared with EEI 100 Electrics return of
102.8% and S&P 500 of 96.8%.
Among other effective management actions, Mr. Webb's cost control
initiatives enabled the Company to refrain from filing for a retail rate
increase in both 1992 and 1993. The Company's last retail rate increase
took effect in September 1991. Mr. Webb has also initiated a restructuring
of the Company designed to reduce costs, improve efficiency and enhance the
Company's competitiveness.
The Company also improved its service to customers, particularly as
regards service reliability, with average reliability, as measured by
duration and number of outages, improved by 31% since 1990. This measure
is sometimes affected by external causes beyond the Company's control,
which are individually evaluated by the Committee. In 1993 it also met its
allowed rate of return for its Vermont utility business and successfully
initiated diversification efforts with net income from diversified
activities contributing $1.5 million to the Company's total earnings of
$21.3 million. Mr. Webb has also led the Company in its commitment to the
economic development of the State as well as the communities it serves.
Management Incentive Compensation Plans
The Company's officers participate in the core utility Management
Incentive Plan. The purpose of the plan is to focus the efforts of the
executive team on the achievement of challenging and demanding corporate
objectives. When corporate performance reaches or exceeds the specified
annual performance objectives an award is granted. A well-directed
incentive plan, in conjunction with competitive salaries, provides a level
of compensation which fully rewards the skills and efforts of the
executives.
Participants are designated annually by the Board of Directors. In
1993 twelve officers were eligible to participate.
In 1993 there were five performance targets as follows:
1. a. An internal operating efficiency standard, which measured actual
operating and maintenance expense expressed as a percent of
kilowatt-hour sales, as compared to budgeted expense levels. This
standard represented 16.7% of the possible maximum plan payout.
b. An energy efficiency standard which measures the Company's
success in achieving specified levels of Mwh savings as a result of the
Company's various efficiency measures. This is a new measure added for
1993. It represents 5.5% of the maximum plan payout.
c. A standard, also newly added in 1993, which measures the
efficiency with which demand-side management ("DSM") programs are
delivered by dividing the cost of demand side management programs,
amortized over five years, by the number of Mwh saved as a result of
those programs. This standard represents 11.1% of the maximum plan
payout.
2. A return-on-equity ("ROE") shareholder's measure, which measured
the actual ROE for 1993 against the maximum allowable return permitted
by the Public Service Board. This standard represented one-third of the
possible maximum plan payout.
3. A retail customer satisfaction index, compiled by combining the
number and duration of outages in the year for such customers, which
measured the results for 1993 against the previous five-year average.
This standard represents one-third of the maximum plan payout.
If the maximum plan payout on all of the standards were to be
achieved, the total award would represent 30% of base salary for the Chief
Executive Officer, 25% of base salary for the Chief Operating Officer, 20%
for Senior Vice Presidents and Vice Presidents, and 15% for Assistant
Officers. To obtain the maximum award for the operating/maintenance cost
measure, costs must come in 5% under budget; there is no award if costs
exceed budget by 5%; and there is an interpolation if costs come in within
the range. The award range for the return on equity goal and the
efficiency of DSM delivery goal is 87.5% to 100%, with interpolation for
within-the-range results. The award range for the customer satisfaction
and Mwh saved indices is 95% to 100%, with interpolation for within-the
range results.
In 1993, the achievement level for each of the standards was as
follows:
1a. Operating/Maintenance Costs
per Kwh 73.60 x 16.7% = 12.29
b. Mwh Saved 49.77 x 5.5% = 2.74
c. Efficiency of DSM delivery 16.37 x 11.1% = 1.82
2. Return on Equity 87.37 x 33.33% = 29.12
3. Customer Satisfaction Index 100.00 x 33.3% = 33.30
Therefore, the Chief Executive Officer received 24% of base salary;
the Chief Operating Officer received 18% of base salary; Senior Vice
Presidents and Vice Presidents received 16% of base salary; and Assistant
Officers received 12% of base salary as incentive compensation from the
utility business.
Catamount Energy Corporation, a wholly-owned subsidiary of the
Company, also has an incentive program for officers of Catamount Energy
Corporation approved annually by the Catamount Board. Officers of Central
Vermont Public Service Corporation who are also officers of Catamount
Energy Corporation may be granted a discretionary award by the Board based
upon the performance of Catamount Energy Corporation and the Board's
subjective evaluation of each officer's individual contribution to that
performance. In 1993, the Chief Executive Officer, the Chief Operating
Officer, the Controller and Corporate Secretary of Central Vermont Public
Service Corporation were granted an award based on Catamount's exceeding
its earnings target. Amounts awarded for 1993 performance to the five most
highly compensated executive officers are set forth in the Summary
Compensation Table (Column d).
Long-Term Incentives
The Committee uses a long-term stock option plan, approved by the
stockholders, intended to attract and retain executives of high calibre, to
motivate them to increase shareholder value.
The options are granted to officers annually by the full Board on
recommendation of the Committee. In 1993 twelve officers received options.
The number of options is determined by reference to the annual Edison
Electric Institute Executive Compensation Survey, using regression analysis
to adjust for revenue size of the Company. This determination is further
validated by calculations made in accordance with the Black-Scholes option
pricing model. All awards are provided by means of non-qualified stock
options which have an exercise price equal to 100% of the fair market value
of the Common Stock of the Company on the date of grant. The options will
have value only if the Company's stock price increases. The Committee's
policy is that the exercise price of stock options should not be amended
after grant, except in the instance of a stock split.
The plan is effective for ten years terminating in 1997. Any new plan
will require stockholder approval.
Stock options are exercisable in whole or in part from the date of
grant for a period of ten years and one day. Options granted under the
plan are not transferrable except upon the death of the optionee and during
his or her lifetime are exercisable only by him or her. The options
terminate immediately upon termination of employment for cause or after a
specified period in the case of termination of employment for any other
reason.
It is the policy of the Committee not to compensate officers through
the use of perquisites. Cars are provided the Chief Executive Officer and
the Chief Operating Officer, and periodic medical examinations for
officers. There are no other perquisites provided to any officer.
The Company is eligible for tax deductions for compensation paid to
its officers, as each officer's compensation is less than the one million
dollar pay cap enacted by Congress as part of the Omnibus Budget
Reconciliation Act effective 1994.
The Committee retains the services of an independent expert to advise
it with respect to the extent to which its pay practices are consistent
with prevailing industry standards. With the assistance of its advisor, it
aggressively reviews its plans each year to assure that it competitively
pays and rewards executives to act in the interests of the ratepayers and
the shareholders.
Preston Leete Smith, Chairman
Frederic H. Bertrand
Elizabeth Coleman
F. Ray Keyser, Jr.
Gordon P. Mills
EXECUTIVE COMPENSATION AND OTHER TRANSACTIONS
The following table sets forth all cash compensation paid or to be
paid by the Company and its subsidiaries, as well as the number of stock
option awards earned during the last three fiscal years by the Company's
Chief Executive Officer and the Company's four other most highly
compensated policy making executive officers ("officer(s)") whose direct
cash compensation for services rendered to the Company and its subsidiaries
in all capacities exceeded $100,000.
<PAGE>
I. Summary Compensation Table
Long Term
Compensation
Annual Compensation Awards
(a) (b) (c) (d) (g) (i)
Name and Options/ All Other
Principal Salary Bonus SARS Compensation
Position Year ($) 1/ ($) 2/ (#) 3/ ($) 4/
A. Thomas C. Webb 1993 240,350 67,183 8,000/0 20,858
President and CEO 1992 244,694 73,000 6,000/0 17,850
1991 236,966 81,409 6,000/0 17,513
B. Robert H. Young, Jr. 1993 141,767 35,995 6,000/0 4,533
Executive Vice President 1992 130,667 34,073 4,500/0 4,363
and Chief Operating 1991 121,574 35,868 4,500/0 3,942
Officer
C. Robert de R. Stein 1993 114,677 16,804 4,500/0 3,988
Senior Vice President - 1992 105,473 18,728 3,000/0 3,472
Engineering and 1991 97,881 24,126 3,000/0 3,138
Energy Resources
D. Donald L. Rushford 1993 103,794 16,463 3,000/0 6,493
Vice President and 1992 104,001 18,700 3,000/0 4,620
General Counsel 1991 96,318 23,100 3,000/0 4,240
(Retired Effective 1/1/94)
E. Thomas J. Hurcomb 1993 98,382 15,606 3,000/0 4,996
Vice President 1992 98,649 17,766 3,000/0 1,467
Marketing and 1991 92,863 22,894 3,000/0 750
Public Affairs
1/ - 1992 calendar year includes 53 pay periods.
- Includes compensation for services performed by Mr. Webb for Vermont
Yankee and by Mr. Stein for VELCO for which the Company was reimbursed.
- 1991 includes salary increases earned in 1991 but deferred until 1992 as
follows: For A: $6,966; For B: $3,574; For C: $2,881; For D: $2,753; and For
E: $2,733.
2/ Includes incentive bonuses awarded by Catamount Energy Corporation in 1992
and 1993 and by CV Energy Resources, Inc. in 1991, both wholly-owned-
subsidiaries, as follows:
For A: 1993 - $10,000, 1992 - $5,000, 1991 - $12,409, for B: 1993 -
$10,000, 1992 - $5,000, 1991 - $6,368; for C: 1991 - $5,126; for D: 1991 -
$4,910; and for E: 1991 - $4,864.
3/ In 1991, the Board of Directors rescinded provisions of the 1988 Stock
Option Plan for Key Employees permitting grants of SAR's.
4/ The total amounts shown in this column for the last fiscal year are
comprised as follows:
(i) Company matching contributions to the Employee Savings and
Investment Plan includes for A: $8,185; for B: $4,253; for C: $$3,785; for D:
$2,784; for E: $3,250
(ii) Premium on executive split-dollar insurance. (An insurance plan
that gives both employer and employee an interest in a life insurance policy on
the employee's life.) for A: $1,801; for B: $280; for C: $203; for D: $791; for
E: $494.
(iii) Includes directors' retainers and fees earned from VELCO for A plus
accrued above-market interest on deferred compensation for A: $10,872; for D:
$2,918; and for E: $1,252.
STOCK OPTIONS
The following table sets forth stock options granted to the Company's
Chief Executive Officer and the Company's four other most highly compensated
executive officers during 1993 under the Company's 1988 Stock Option Plan.
Under SEC regulations, companies are required to project an estimate of
appreciation of the underlying shares of stock during the option term. The
Company has chosen the Black-Scholes model formula approved by the SEC.
However, the ultimate value will depend on the market value of the Company's
stock at a future date, which may or may not correspond to the projections
below.
II. Options/SAR Grants Table
Option/SAR Grants in Last Fiscal Year
Grant
Date
Individual Grants Value
(a) (b) (c) (d) (e) (f)
% of
Total
Options/
SARs
Options/ Granted to Exercise Grant
SARs Employees or Base Expira- Date
Granted in Fiscal Price tion Present
Name (#) 1/ Year ($/Sh) 2/ Date Value ($)3/
Thomas C. Webb 8,000/0 18.1% $24.375 5/4/03 $19,600
Robert H. Young, Jr. 6,000/0 13.5 24.375 5/4/03 14,700
Robert de R. Stein 4,500/0 10.2 24.375 5/4/03 11,025
Donald L. Rushford 3,000/0 6.8 24.375 5/4/03 7,350
Thomas J. Hurcomb 3,000/0 6.8 24.375 5/4/03 7,350
1/ A total of 44,300 shares were awarded to all plan participants in 1993.
2/ The exercise price reflects the post-split price and unexercised shares
have been adjusted for the 3 for 2 common stock split effective 2/11/93.
3/ Per Black-Scholes model as certified by independent consultant. The
assumptions used for the Model are as follows: Volatility-.18 based on
quarterly prices for the period of 3/31/87 to 12/31/93; Risk free rate of
return-6%; Dividend Yield-6.5% over period of 3/31/87 to 12/31/93; and Term of
Exercise-10 years.
The following table sets forth stock options exercised by the Company's
Chief Executive Officer and the Company's four other most highly compensated
executive officers during 1993, and the number and value of all unexercised
options at year-end. The value of "in-the-money" options refers to options
having an exercise price which is less than the market price of the Company's
stock on December 31, 1993.
III. Option/SAR Exercises and Year-end Value Table
Aggregated Option/SAR Exercises in Last Fiscal Year and FY-End Option/SAR Value
(a) (b) (c) (d) (e)
Value of
Number of Unexercised
Unexercised In-the-Money
Options/SARS at Options/SARs
FY-End (#) at FY-End ($)
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise (#) Realized($)1/ Unexercisable Unexercisable1/
Thomas C. Webb 6,000 $41,125 14,000/0 $ 3,500/0
Robert H. Young, Jr. - - 14,625/0 14,656/0
Robert de R. Stein - - 15,000/0 28,060/0
Donald L. Rushford 5,000 31,875 3,000/0 0/0
Thomas J. Hurcomb - - 15,000/0 35,120/0
1/ The dollar values are calculated by determining the difference between the
fair market value of the securities underlying the options and the exercise or
base price of the options.
<PAGE>
IV. Five-Year-Shareholder Return Comparison
The Securities and Exchange Commission requires that the Company include
in this proxy statement a line-graph presentation comparing cumulative, five-
year shareholder returns on an indexed basis with the S&P 500 Stock Index and
either a nationally recognized industry standard or an index of peer companies
selected by the Company. The Board of Directors has selected for its peer
group index a stock index compiled by the Edison Electric Institute ("EEI"),
because the Board feels it is the most comprehensive and representative in as
much as it includes stock performance data for 100 investor-owned electric
utility companies. A listing of those companies is included as Exhibit IV to
this Proxy Statement.
(LINE GRAPH TO BE SHOWN)
COMPARISON OF FIVE YEAR CUMULATIVE RETURN*
AMONG CENTRAL VERMONT, S & P 500 INDEX AND EEI 100 ELECTRICS INDEX
1988 1989 1990 1991 1992 1993
CVPS $100 $128.62 $131.14 $178.62 $207.00 $186.67
S&P 500 100 131.59 127.49 166.17 178.81 196.75
EEI 100 100 129.92 131.52 169.39 182.09 202.82
Assumes $100 Invested on December 31, 1988
*Total Return Assumes Quarterly Reinvestment of Dividends
<PAGE>
Deferred Compensation Plan
Employees of the Company who are officers are eligible to defer receipt of
a portion of their compensation pursuant to the Company's Deferred Compensation
Plan for Officers. Also, certain of the Directors of the Company have elected
to defer receipt of all or a portion of their fees under a similar plan for
Directors.
Under the Plan approved effective January 1, 1990 Directors and Officers
of the Company may elect to defer over a 5-year period receipt of a specified
amount of compensation or fees otherwise currently payable to them until
retirement at age 65 (age 70 for Directors), or until their death, disability,
or resignation. Officers may receive a reduced benefit beginning at age 60
with 10 years of service. Amounts deferred are not currently taxable for state
and federal income taxes. The benefit is equal to the compensation deferred
plus interest credited by the Company. This plan is a defined contribution
program under which the Company recovers any costs, including the cost of
capital, through the proceeds of the supporting life insurance policies. In
addition, if death of a Director occurs before age 70, an additional survivor
benefit equal to the annual amount deferred will be paid to the beneficiary
each year for fifteen years. This benefit is also financed by life insurance
proceeds.
Pension Plan
The Pension Plan of Central Vermont Public Service Corporation and Its
Subsidiaries (the "Plan") covers employees, among others, who are officers.
The Company pays the full cost of the Plan.
The table below shows the annual amounts payable under the present
provisions of the Plan as amended through December 31, 1993, based on Final
Average Earnings for various years of service, assuming the employee would
retire at age 65 in 1994.
Assumed
5-Year Final Years of Service
Average Earnings 10 20 30 40
80,000 $12,724 $25,447 $38,171 $42,171
100,000 16,224 32,447 48,671 53,671
120,000 19,724 39,447 59,171 65,171
140,000 23,224 46,447 69,671 76,671
160,000 26,724 53,447 80,171 88,171
180,000 30,224 60,447 90,671 99,671
220,000 37,088 74,176 111,263 118,700
260,000 37,088 74,176 111,263 118,700
300,000 37,088 74,176 111,263 118,700
340,000 37,088 74,176 111,263 118,700
Final Average Earnings is the highest five-year average of consecutive
years' Base Salary (item (c) from the Summary Compensation Table) over an
employee's career with the Corporation.
The amounts above are payable for the life of the retiree only, and
would be reduced on an actuarial basis if survivor options were chosen. In
addition, no Social Security offset applies to amounts above.
The credited years of service at December 31, 1993 under the Plan for
those individuals named in the Summary Compensation Table were as follows:
Mr. Webb, 9 years; Mr. Young, 6 years, 6 months; Mr. Stein, 5 years, 7
months; Mr. Rushford, 21 years, 6 months; and Mr. Hurcomb, 26 years.
Officers' Insurance and Supplemental Retirement Plan
The Officers' Insurance and Supplemental Retirement Plan (the "Plan")
is designed to supplement the retirement benefits available to the
Company's officers. The Plan is a part of the Company's overall strategy
for attracting and maintaining top managerial talent in the utility
industry. The Company pays the entire cost of the Plan.
Under the Plan, each officer is entitled to receive, upon his or her
retirement at age 65, fifteen annual payments in amounts equal to a
specified percentage of his or her final year's Base Salary (item (c) from
the Summary Compensation Table). A reduced benefit is available at age 60
with ten years of service. Since the percentages differ by individual,
these benefits have not been reflected in the pension table above.
The applicable percentages for the individuals named in Summary
Compensation Table are as follows: Mr. Webb, 44.5%; Mr. Young, 33%; Mr.
Stein, 33%; Mr. Rushford, 33%; and Mr. Hurcomb, 33%.
Predecessor Deferred Compensation Plan
Between 1986 and 1990, the Company allowed officers to defer receipt
of compensation in return for fifteen annual payments of a defined benefit
amount upon retirement. The Company will pay the difference, if any,
between the defined benefit cost and the accumulated value of deferred
compensation.
Shown below is the estimated Company-provided benefit, payable at age
65, for those individuals named in the Summary Compensation Table who
elected to participate. Since these benefits do not apply to all of the
named individuals, they have not been reflected in the foregoing pension
table.
Annual Company-
Provided Benefit
Name Payable at Age 65
Mr. Webb $29,800
Mr. Rushford 19,700
Mr. Hurcomb 13,900
Employee Savings and Investment Plan
Effective January 1, 1985 the Company adopted an Employee Savings and
Investment Plan (also known as a 401(k) Plan) which provides a means for
eligible employees to accumulate savings and investment income without
payment of current income taxes. Presently any employee of the Company who
has completed at least one year of service, as defined in the Plan, is
eligible to participate. An eligible employee who elects to participate in
the Plan may authorize the Company to contribute to the Plan for his or her
account between 1% and 15% of their pre-tax base compensation for each pay
period. For 1993, the Plan limits the maximum annual deferral to $8,994
per Participant. This maximum is adjusted annually for inflation by the
Internal Revenue Service. The Company matches 100% of the first 4% of the
compensation the Participant contributes to the Plan. A Participant may
direct the investment of his or her Plan account among five funds specified
in the Plan and is at all times fully vested in his or her Plan account.
Generally, distribution of employee contributions is deferred until the
Participant's death, disability, retirement or other termination of
employment, except in cases of financial hardship. Matching employer
contributions, however, may be withdrawn by the Participant at any time and
for any reason, provided either the amount withdrawn has been in the Plan
for at least two years or the Participant has been a member of the Plan for
at least 5 years. Such in-service withdrawals are generally subject to
ordinary income tax and an additional 10% tax plus a mandatory 20% rollover
tax withholding effective January 1, 1993. Distribution of Plan benefits
may be in the form of cash, an annuity, or in certain circumstances, Common
Stock of the Company. Amounts voluntarily deferred by the five highest
paid executive officers are included in compensation listed in Item (c) of
the Summary Compensation Table. Amounts credited to the Plan accounts of
the individuals referred to during 1993 are set forth in Column 4, Item (i)
in the Summary Compensation Table.
Contracts with Management
Effective January 1, 1994, the Board of Directors has severance
compensation agreements with Messrs. Webb, Young, Stein, Hurcomb and six
other officers of the Company. The agreements have a term of five years
provision for renewal. They provide that in the event of termination of
employment, or a significant change in employment status as defined in the
agreement, within three years following a change in control of the Company,
Messrs. Webb, Young, Stein, Hurcomb and three other executive officers will
receive 2.999 times and three other officers will receive two times their
average annual compensation for the preceding five or fewer years of
service and certain legal fees and expenses incurred as a result of
termination of employment. Mr. Rushford, who appears on the Summary
Compensation Table, retired effective January 1, 1994.
The provisions of the agreement do not apply if the officer retires,
dies, or is disabled, voluntarily resigns, or is dismissed for cause. In
exchange for agreeing to provide consulting services as requested by the
Company for one year and refraining from working in competition with, or
for a competitor of the Company for three years, the agreement permits
continued participation in and retention of benefits under the Deferred
Compensation Plan, Officers' Insurance and Supplemental Retirement Plans,
and health and disability plans. The extent of these provisions depends on
an individual's participation and circumstances, and is specified in each
agreement. Those seven officers with less than 10 years of service would
receive a payment actuarially equivalent to benefits received under the
Company's pension plan at age 65 with ten years of service, less any
benefit paid under the pension plan. The agreements also provide for the
payment to officers of an amount sufficient to offset any federal excise
tax on the termination payments under Section 4999 of the Internal Revenue
Code. Non-qualified stock options not immediately exercisable will become
unexercisable in the event of a change of control of the Company as defined
in the Plan.
A change of control occurs under the agreement when (1) any person,
corporation, partnership or group acquires 20% or more of the combined
voting power of the Company's outstanding securities; (2) if those members
constituting a majority of the Directors at any given date no longer
constitute a majority of the Directors at the end of a period of two
consecutive years thereafter (unless the nomination of each new director
was approved by a vote of at least two-thirds of the directors in office
who were directors at the beginning of the period); or (3) if a third party
acquires ownership or voting power of 10% or more of the outstanding voting
securities of the Company, and subsequently is a "public utility holding
company" within the meaning of the Public Utility Holding Company Act of
1935, or the Company loses its exemption from or is required to register
under that Act.
During 1989, the Board also approved a severance plan in the event of
a change of control for twenty key managers of the Company not covered by
the above plan. In the event of a change in control as described above and
a subsequent discharge from employment within eighteen months for reason
other than cause, the eligible manager will receive a severance payment
equal to one year's base salary, outplacement services, and coverage under
the Company's medical plan for one year at Company expense.
The Board of Directors believes that such agreements protect the
stockholders by ensuring officers and key managers can and will act in
stockholders' best interests without regard to personal situations or
concerns. The Board also believes that such agreements will better ensure
retention and recruitment of high caliber officers and key managers.
INDEPENDENT PUBLIC ACCOUNTANTS
The firm of Arthur Andersen & Co., independent public accountants, have
audited the accounts of CVPS for 1993. They have served as the Company's
independent public accountants since 1985. Representatives of Arthur
Andersen & Co. are expected to be present at the Annual Meeting, to be
available to respond to appropriate questions, and to have the opportunity
to make a statement if they so desire.
DATE FOR SUBMISSION OF STOCKHOLDER PROPOSALS
A stockholder desiring to present a proposal at the Company's 1994
Annual Stockholders' Meeting and to have such proposal considered for
inclusion in the proxy materials for such meeting should submit such
proposal addressed to the Secretary, Joseph M. Kraus, no later than
December 1, 1994. Any such proposal must comply with Rule 14a-8 of
Regulation 14A of the proxy rules of the Securities and Exchange Commission
and will be omitted from or included in the proxy material at the
discretion of the Board of Directors of the Company in accordance with such
applicable laws and regulations.
<PAGE>
DISCRETIONARY AUTHORITY
The only business to be presented to the meeting, by any persons, of
which the Company is aware is that which is specified in said Notice of
Meeting, and any action in connection with or for the purpose of affecting
the same. If any other matters properly and legally come before the
meeting, the persons named as Proxies will vote upon them in accordance
with their best judgment. The Proxies have no knowledge of any such other
matters which may be so presented for action at the meeting.
By Order of the Board of Directors
THOMAS C. WEBB
President and Chief Executive Officer
It is hoped that all of the Common Stockholders will be represented in
person or by proxy at the Annual Meeting. The Board of Directors earnestly
urges that you VOTE, SIGN AND DATE the enclosed proxy, whether or not you
are able to attend the meeting in person. PROXIES SHOULD BE MAILED IN THE
ADDRESSED RETURN ENVELOPE ENCLOSED FOR THAT PURPOSE IN ORDER TO REACH THE
OFFICE OF THE COMPANY NOT LATER THAN MAY 3, 1994. The giving of such proxy
will not affect your right to vote in person should it later be found
convenient for you to attend. Any proxy given is revocable at any time
prior to the voting of the share or shares represented thereby.
<PAGE>
EXHIBIT I
Text of proposed Fair Price Amendment to the Articles of Incorporation
A new Section 23 will be added to the Corporation's Articles of
Incorporation which reads as follows:
23. The vote of the stockholders of the Corporation required to approve
any Business Combination shall be as set forth in this Section 23. The
term "Business Combination" shall have the meaning ascribed to it in
Subsection 23A(a) of this Section 23. Each other capitalized term shall
have the meaning ascribed to it in Subsection 23C of this Section 23.
23A(a). In addition to any affirmative vote required by law or these
Articles of Incorporation and except as otherwise expressly provided in
Subsection 23B of this Section 23:
(1) any merger or consolidation of the Corporation or any
Subsidiary with (i) any Interested Stockholder or (ii) any other person
(whether or not itself an Interested Stockholder) which is, or after
such merger or consolidation would be, an affiliate of an Interested
Stockholder; or
(2) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of transactions) to or with
any Interested Stockholder or any Affiliate of any Interested
Stockholder of assets of the Corporation or any Subsidiary having an
aggregate Fair Market Value of $5,000,000 or more; or
(3) the issuance or transfer by the Corporation or any Subsidiary
(in one transaction or a series of transactions) of any securities of
the Corporation or any Subsidiary to any Interested Stockholder or an
Affiliate of any Interested Stockholder in exchange for cash,
securities or other property (or a combination thereof) having an
aggregate Fair Market Value of $5,000,0000 or more, other than the
issuance of securities upon the conversion of convertible securities of
the Corporation or any Subsidiary which were not acquired by such
Interested Stockholder (or such Affiliate) from the Corporation or a
Subsidiary; or
(4) the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation proposed by or on behalf of an
Interested Stockholder or any Affiliate of any Interested Stockholder;
or
(5) any transaction involving the Corporation or any Subsidiary
(whether or not with or into or otherwise involving an Interested
Stockholder), and including, without limitation, any reclassification
of securities (including any reverse stock split), or recapitalization
or reorganization of the Corporation, or of its Subsidiaries or any
self tender offer for or repurchase of securities of the Corporation by
the Corporation or any Subsidiary, or any share exchange involving the
Company or any Subsidiary, or any other transaction (whether or not
with or into or otherwise involving an Interested Stockholder) which in
any such case has the effect, directly or indirectly, of increasing the
proportionate share of the outstanding shares of any class of equity
securities or securities convertible into equity securities of the
Corporation or any Subsidiary which is directly or indirectly
beneficially owned by any Interested Stockholder or any affiliate of
any Interested Stockholder;
shall require no less than the affirmative vote of the holders of
at least the Supermajority Percentage (as defined in Subsection 23C of
this Section 23) of the combined voting power of the then outstanding
shares of the Voting Stock (for the purposes of this Section 23, each
share of the Voting Stock shall have the number of votes granted to it
pursuant to the Company's Articles of Incorporation), which vote shall
include the affirmative vote of at least the Supermajority Percentage
(as defined in Subsection 23C of this Section 23) of the combined
voting power of the outstanding shares of Voting Stock held by
stockholders other than the Interested Stockholder. Such minimum
affirmative vote shall be required notwithstanding any provision of law
or any other provision of these Articles of Incorporation or the By-
Laws, any agreement with any national securities exchange or otherwise
which might permit a lesser vote or no vote and in addition to any
affirmative vote required of the holders of any class or series of
Voting Stock pursuant to law or these Articles of Incorporation.
(b) The term "Business Combination" as used in this Section shall mean any
transaction that is referred to in any one or more clauses (1) through (5)
of Subsection 23A(a) of this Section 23.
23B. The provisions of Subsection 23A(a) of this Section 23 shall not
be applicable to any particular Business Combination, and, subject to
Subsection 23F of this Section 23, such Business Combination shall require
only such affirmative vote as is required by law, any other provision of
these Articles of Incorporation or the By-Laws, or any agreement with any
national securities exchange, if, in the case of a Business Combination
that does not involve any cash or other consideration being received by the
stockholders of the Corporation, solely in their respective capacities as
stockholders of the Corporation, the condition specified in Subsection
23B(a) is met, or, in the case of any other Business Combination, the
condition specified in the following Subsection 23B(a) or the conditions
specified in the following Subsection 23B(b) are met:
(a) such Business Combination shall have been approved by a majority
of the Disinterested Directors; or
(b) each of the conditions specified in the following clauses (1)
through (4) shall have been met:
(1) The aggregate amount of the cash and the Fair Market Value as of
the Consummation Date of any consideration other than cash to be received
per share by holders of Voting Stock in such Business Combination shall be
at least equal to the highest of the following (it being intended that the
requirements of this clause (b)(1) shall be required to be met with respect
to all shares of Voting Stock outstanding whether or not the Interested
Stockholder has acquired any shares of the Voting Stock):
(i) if applicable, the highest per share price (including any
brokerage commissions, transfer taxes and soliciting dealers' fees)
paid in order to acquire any shares of Voting Stock beneficially owned
by the Interested Stockholder which were acquired beneficially by such
Interested Stockholder within the two-year period immediately prior to
the Announcement Date or in the transaction in which it became an
Interested Stockholder, whichever is higher; or
(ii) the Fair Market Value per share of Voting Stock on the
Announcement Date or on the Determination Date, whichever is higher; or
(iii) an amount which bears the same or greater percentage
relationship to the Fair Market Value of the Voting Stock on the
Announcement Date as the highest per share price determined in clause
(b)(1)(i) above bears to the Fair Market Value of the Voting Stock on
the date of the commencement of the acquisition of the Voting Stock by
such Interested Stockholder; and
(2) the consideration to be received by the holders of a particular
class or series of outstanding Voting Stock shall be in cash or in the same
form as was previously paid in order to acquire beneficially shares of such
class or series of Voting Stock that are beneficially owned by the
Interested Stockholder and, if the Interested Stockholder beneficially owns
shares of any class or series of Voting Stock that were acquired with
varying forms of consideration, the form of consideration to be received by
each holder of such class or series of Voting Stock shall be, at the option
of such holder, either cash or the form used by the Interested Stockholder
to acquire beneficially the largest number of shares of such class or
series of Voting Stock beneficially acquired by it prior to the
Announcement Date; and
(3) after such Interested Stockholder has become an Interested
Stockholder and prior to the consummation of such Business Combination:
(i) such Interested Stockholder shall not have become the
beneficial owner of any additional shares of Voting Stock of the
Corporation, except as part of the transaction in which it became an
Interested Stockholder or upon conversion of convertible securities
acquired by it prior to becoming an Interested Stockholder or as a
result of a pro rata stock dividend or stock split; and
(ii) such Interested Stockholder shall not have received the
benefit, directly or indirectly (except proportionately as a
stockholder), of any loans, advances, guarantees, pledges or other
financial assistance or tax credits or other tax advantages provided by
the Corporation or any Subsidiary, whether in anticipation of or in
connection with such Business Combination or otherwise; and
(iii) such Interested Stockholder shall not have caused any
material change in the Corporation's business or capital structure,
including, without limitation, the issuance of shares of capital stock
of the Corporation to any third party; and
(iv) there shall have been (A) no reduction in the annual rate of
dividends paid on Voting Stock (except as necessary to reflect any
subdivision of the Voting Stock), except as approved by a majority of
the Disinterested Directors and (B) an increase in such annual rate of
dividends (as necessary to prevent any such reduction) in the event of
any reclassification (including any reverse stock split),
recapitalization, reorganization, self tender offer or any similar
transaction which has the effect of reducing the number of outstanding
shares of the Voting Stock, unless the failure so to increase such
annual rate was approved by a majority of the Disinterested Directors;
and
(4) a proxy or information statement describing the proposed Business
Combination and complying with the requirements of the Securities Exchange
Act of 1934 and the rules and regulations thereunder (or any subsequent
provisions replacing such Act, rules and regulations), whether or not the
Corporation is then subject to such requirements, shall be mailed by and at
the expense of the Interested Stockholder to the remaining stockholders of
the Corporation at least thirty days prior to the earlier of the
Consummation Date or the vote of stockholders on such Business Combination
(whether or not such proxy or information statement is required to be
mailed pursuant to such Act or subsequent provisions), and shall contain at
the front thereof in a prominent place (i) any recommendations as to the
advisability (or inadvisability) of the Business Combination that the
Disinterested Directors, if any, may choose to state, and (ii) the opinion
of a reputable national investment banking firm as to the fairness (or not)
of such Business Combination from the point of view of the remaining
stockholders of the Corporation (such investment banking firm to be engaged
solely on behalf of the remaining stockholders, to be paid a reasonable fee
for their services by the Corporation upon receipt of such opinion, to be
unaffiliated with such Interested Stockholder, and, if there are at the
time any Disinterested Directors, to be selected by a majority of the
Disinterested Directors).
23C. For the purposes of this Section 23:
(a) A "person" shall include, without limitation, any individual,
firm, corporation, group (as such term is used in Regulation 13d-3 of the
General Rules and Regulations under the Securities Exchange Act of 1934) or
other entity.
(b) "Interested Stockholder" shall mean any person (other than the
Corporation or any Subsidiary or any employee benefit plan of the
Corporation or any Subsidiary) who or which:
(1) is the beneficial owner, directly or indirectly of more than 10
percent of the combined voting power of the then outstanding shares of
Voting Stock; or
(2) is an Affiliate of the Corporation and at any time within the
two-year period immediately prior to the date in question was the
beneficial owner, directly or indirectly, of 10 percent or more of the
combined voting power of the then outstanding shares of Voting Stock;
or
(3) is an assignee of or has otherwise succeeded to the beneficial
ownership of any shares of Voting Stock that were at any time within
the two-year period immediately prior to the date in question
beneficially owned by an Interested Stockholder, if such assignment or
succession shall have occurred in the course of a transaction or series
of transactions not involving a public offering within the meaning of
the Securities Act of 1933.
(c) A person shall be a "beneficial owner" of any Voting Stock if:
(1) such person or any of its Affiliates or Associates beneficially
owns, directly or indirectly, Voting Stock; or
(2) such person or any of its Affiliates or Associates has (a) the
right to acquire voting stock (whether or not such right is exercisable
immediately) pursuant to any agreement, arrangement or understanding or
upon the exercise of conversion rights, exchange rights, warrants or
options, or otherwise, or (b) the right to vote or direct the vote
pursuant to any agreement, arrangement or understanding of the Voting
Stock; or
(3) the Voting Stock is beneficially owned, directly or indirectly,
by any other person with which such person or any of its Affiliates or
Associates has any agreement, arrangement or understanding for the
purpose of acquiring, holding, voting or disposing of any shares of
Voting Stock.
(d) For the purposes of determining whether a person is an Interested
Stockholder pursuant to Subsection 23C(b) of this Section 23, the number of
shares of Voting Stock deemed to be outstanding shall include shares deemed
owned by such Interested Stockholder through application of Subsection
23C(c) of this Section 23 but shall not include any other shares of Voting
Stock that may be issuable pursuant to any agreement, arrangement or
understanding, or upon exercise of conversion rights, warrants or options,
or otherwise.
(e) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations
under the Securities Exchange Act of 1934.
(f) "Subsidiary" shall mean any corporation more than 50 percent of
whose outstanding equity securities having ordinary voting power in the
election of directors is owned, directly or indirectly, by the Corporation
or by a Subsidiary or by the Corporation and one or more Subsidiaries;
provided, however, that for the purposes of the definition of Interested
Stockholder set forth in Subsection 23C(b) of this Section 23, the term
"Subsidiary" shall mean only a corporation of which a majority of each
class of Voting Stock is owned, directly or indirectly, by the Corporation.
(g) "Disinterested Director" shall mean any member of the Board of
Directors of the Corporation who is unaffiliated with, and not a nominee
of, the Interested Stockholder and was a member of the Board prior to the
time that the Interested Stockholder became an Interested Stockholder, and
any successor of a Disinterested Director who is unaffiliated with, and not
a nominee of, the Interested Stockholder and who is recommended to succeed
a Disinterested Director by a majority of Disinterested Directors then on
the Board of Directors.
(h) "Fair Market Value" shall mean: (1) in the case of stock, the
highest closing sale price during the 30-day period commencing on the 40th
day preceding the date in question of a share of such stock on the
Composite Tape for New York Stock Exchange-Listed Stocks, or, if such stock
is not quoted on the New York Stock Exchange-Composite Tape, on the
principal United States securities exchange registered under the Securities
Exchange Act of 1934 on which such stock is listed, or, if such stock is
not listed on any such exchange, the highest closing sale price or bid
quotation with respect to a share of such stock during the 30-day period
commencing on the 40th day preceding the date in question on the National
Association of Securities Dealers, Inc. Automated Quotations system or any
system then in use, or if no such quotations are available, the fair market
value on the date in question of a share of such stock as determined by a
majority of the Disinterested Directors in good faith; and (2) in the case
of property other than cash or stock the fair market value of such property
on the date in question as determined by a majority of the Disinterested
Directors in good faith.
(i) In the event of any Business Combination in which the Corporation
survives, the reference to any consideration other than cash to be received
in Subsections 23B(b)(1) and (2) of this Section 22 shall include the
shares of Voting Stock retained by the holders of such shares.
(j) "Announcement Date" shall mean the date of first public
announcement of the proposed Business Combination.
(k) "Determination Date" shall mean the date on which the Interested
Stockholder became an Interested Stockholder.
(l) "Consummation Date" shall mean the date of the consummation of the
Business Combination.
(m) "Voting Stock" shall mean all outstanding shares of capital stock
of all classes and series of the Corporation at the time entitled to vote
in the election of directors of the Corporation, in each case voting
together as a single class.
(n) "Supermajority Percentage" shall mean the lesser of (1) that
percentage of the Voting Stock that is equivalent to the percentage of the
outstanding shares of Voting Stock that voted in favor of adoption of this
Section 23 (as evidenced by a certificate of the Secretary of the
Corporation, filed with the By-laws of the Corporation), or (2) eighty
percent (80%) of the outstanding shares of Voting Stock.
23D. A majority of the Disinterested Directors shall have the power
and duty to determine, on the basis of information known to them after
reasonable inquiry, all facts necessary to determine compliance with this
Section 23, including, without limitation:
(a) whether a person is an Interested Stockholder;
(b) the number of shares of Voting Stock beneficially owned by any
person;
(c) whether a person is an Affiliate or Associate of another person;
(d) whether the requirements of Subsection 23B(b) of this Section 23
have been met with respect to any Business Combination;
(e) whether the assets which are the subject of any Business
Combination have, or the consideration to be received for the issuance or
transfer of securities by the Corporation or any Subsidiary in any Business
Combination has an aggregate Fair Market Value of $5,000,000 or more; and
(f) such other matters with respect to which a determination is
required under this Section 23.
The good faith determination of a majority of the Disinterested
Directors on such matters shall be conclusive and binding for all purposes
of this Section 23.
23E. Nothing contained in this Section 23 shall be construed to
relieve any Interested Stockholder from any fiduciary obligation imposed by
law.
23F. Notwithstanding anything herein to the contrary, nothing in this
Section 23 shall be deemed to limit, supersede or otherwise restrict the
power of the Board of Directors under Vermont law to establish conditions,
including without limitation a supermajority vote requiring a higher (but
not a lower) percentage of affirmative votes than would otherwise apply by
operation of Section 23A through 23E of this Section 23, in connection with
the submission by the Board of Directors to the stockholders for vote on
any Business Combination involving a merger, consolidation, exchange of
shares, sale of all or substantially all of the assets, amendment to the
Articles of Incorporation or corporate dissolution.
23G. Notwithstanding any other provisions of these Articles of
Incorporation or of law, the affirmative vote of the holders of at least
the Supermajority Percentage of the combined voting power of all of the
then outstanding shares of Voting Stock shall be required to alter, amend
or repeal this Section 23 or any provision hereof; provided, however, that
if there is an Interested Stockholder on the record date for the meeting at
which such action is submitted to the stockholders for their consideration,
such the Supermajority Percentage vote must include the affirmative vote of
at least the Supermajority Percentage of the combined voting power of all
of the outstanding shares of Voting Stock held by stockholders other than
the Interested Stockholder.
<PAGE>
EXHIBIT II
Text of proposed Limitation of Director Liability Amendment to the Articles
of Incorporation
A new Section 24 will be added to the Corporation's Articles of
Incorporation which reads as follows:
24. No Director of the Corporation shall be personally liable to the
Corporation or its stockholders for monetary damages for any action taken,
or any failure to take action, solely as a Director, based on a failure to
discharge his or her own duties in accordance with Section 8.30 of Title
11A of the Vermont Statutes Annotated. Notwithstanding the foregoing
sentence, a Director shall be liable to the extent provided by applicable
law for (A) the amount of a financial benefit received by a Director to
which the Director is not entitled; (B) an intentional or reckless
infliction of harm on the Corporation or the shareholders; (C) a corporate
distribution which violates Section 8.33 of Title 11A of the Vermont
Statutes Annotated; or (D) an intentional or reckless criminal act. This
Section 24 shall not be deemed to eliminate or limit the liability of a
Director for any act or omission occurring prior to the date this Section
becomes effective. No amendment or repeal of this Section 24 shall apply
to or have any effect on the liability or alleged liability of any Director
of the Corporation for or with respect to any acts or omissions of such
Director occurring prior to such amendment or repeal.
<PAGE>
EXHIBIT III
PART A. Text of Existing Indemnification By-Law Provision
ARTICLE Xl.
Indemnification of Directors, Officers and Employees
Section. 1. Indemnification Prior to Resolution.
A. Directors.
To the extent legally permissible, the Company may indemnify any of its
Directors who, as a result of such position, was or is a party or is
threatened to be made a party to any contemplated, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Company)
against expenses actually and reasonably incurred by him or her in
connection with such action, suit or proceeding. The term Expenses, as used
in this Article, includes reasonable attorney's fees, damages, judgments,
fines, amounts paid in settlement and costs including the costs of
investigation and defense. Such indemnification against Expenses shall be
payable only if the Director acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best interests of the
Company and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful.
Any indemnification under this Section (unless ordered by a court) shall
be made by the Company only upon a determination that indemnification of
the Director is proper because he or she has acted in good faith in
conformance with the applicable standard of conduct as set forth herein.
Such determination shall be made (a) by the Board of Directors by a
majority vote of a quorum consisting of Directors who are not parties to
such action, suit or proceeding or (b) if such a quorum is not obtainable,
or, even if obtainable, by a majority of disinterested Directors pursuant
to a written opinion of independent legal counsel that the Director appears
to have acted in good faith and in a manner he or she reasonably believed
to be in or not opposed to the best interests of the Company and, with
respect to any criminal action or proceeding, appears to have had no
reasonable cause to believe his or her conduct was unlawful; or (c) by the
holders of a majority of the then outstanding stock entitled to vote for
Directors, voting as a single class, exclusive of any stock owned by any
interested Director or officer.
Expenses incurred in connection with any matter disposed of by
settlement by such Director pursuant to a consent decree or otherwise,
shall not be subject to indemnification either for any amount paid in
settlement or for any other Expenses unless such settlement shall first
have been approved as in the best interests of the Company by (a), (b) or
(c) as set forth immediately above.
The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not of itself create a presumption that the person did
not act in good faith in conformance with the applicable standard of
conduct as set forth above.
B. Officers and Employees.
The Company shall extend the same rights of indemnification to any
officer or employee of the Company who, as a result of such position, was
or is a party or is threatened to be made a party to any contemplated,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of
the Company) against Expenses actually and reasonably incurred by him or
her in connection with such action, suit or proceeding as it does for its
Directors as described above provided however, that where it shall be found
that such officer or employee has acted in good faith and in conformance
with the applicable standard of conduct as set forth herein, the provision
by the Company of such indemnification prior to resolution of the matter
shall be mandatory.
Section 2. Indemnification Subsequent to Resolution. To the extent that
a Director, officer or employee of the Company has been successful on the
merits or otherwise in defense of any action, suit, proceeding, claim,
issue, or matter referred to in Section 1 of this Article, he or she shall
be indemnified to the extent legally permissible against expenses actually
and reasonably incurred by him or her in connection therewith.
Section 3. Right To Rely On Corporate Information. In discharging his or
her duty, any Director, officer or employee, when acting in good faith in
conformance with the applicable standard of conduct as set forth above, may
rely upon the books of accounts or any other records of the Company or upon
reports made to the Company by any of its officers or employees or by
counsel, accountants, appraisers or other experts selected with reasonable
care by the Board of Directors or trustees.
Section 4. Advance Payment of Expenses. Expenses incurred by a Director,
officer or employee in connection with any of the matters with respect to
which indemnification may be sought pursuant hereto shall be paid from time
to time by the Company in advance of the final disposition of any such
matter if an undertaking has been executed by or on behalf of such
individual to repay such amount if it shall ultimately be determined that
he or she is not entitled to be indemnified by the Company as authorized in
this Article. The Board of Directors may authorize counsel (which may be
either Company counsel or outside counsel) to represent such individual in
any action, suit or proceeding, whether or not the Company is a party to
such action, suit or proceeding.
Section 5. Procedure For Indemnification. Any indemnification of a
Director, officer or employee of the Company or advance of Expenses to such
an individual under the terms of this Article shall be made promptly, and
in any event within thirty (30) days, after the written request therefor of
such individual. If the Company is required by this Article to determine
whether the individual is entitled to indemnification pursuant hereto, but
fails to respond within thirty (30) days to a written request for
indemnity, then the Company shall be deemed to have approved such request.
If the Company unreasonably denies a written request for indemnity or the
advance payment of Expenses, either in whole or in part, or if payment in
full pursuant to such request is not made within thirty (30) days, the
right to indemnification or advances as granted by this Article shall be
enforceable by such individual in any court of competent jurisdiction. Such
individual's costs and expenses including reasonable attorney's fees
incurred in connection with successfully establishing his or her right to
indemnification in any such action shall also be indemnified by the
Company.
Section 6. Non-Exclusivity of Indemnification Rights. The right of
indemnification hereby provided shall not be deemed exclusive of or
otherwise affect any other rights to which any individual seeking
indemnification may be entitled under any agreement, vote of stockholders
or otherwise, both as to action in his or her official capacity and as to
action in another capacity while holding such office, and shall continue as
to a person who has ceased to be a Director, officer or employee and shall
inure to the benefit of the heirs, executors and administrators of such a
person.
Section 7. Other Organizations. The indemnification provisions of this
Article shall extend to any Director, officer or employee who serves at the
Company's request as director, officer or trustee of another organization
in which the Company has or had an interest as a stockholder, creditor or
otherwise. The right to rely on corporate information conferred in Section
3 of this Article shall also extend to the records, books of accounts and
reports of any such other organization of which the individual serves as
director, officer or trustee.
Section 8. Survival. The foregoing indemnification provisions shall be
deemed to be a contract between the Company and each individual who serves
in any capacity as a Director, officer or employee of the Company at any
time while these provisions are in effect and any repeal or modification
thereof shall not affect any right or obligation then existing. Such a
"contract right" may not be modified retroactively without the consent of
such Director, officer or employee.
EXHIBIT III
PART B.
Article XI of the By-Laws is proposed to be amended, to read in full as
follows:
ARTICLE XI
INDEMNIFICATION OF DIRECTORS, OFFICERS AND EMPLOYEES
Section 1. Permissive Indemnification. To the extent legally permissible,
the Company may indemnify any of its Directors, officers and employees who,
as a result of such position, was or is a party or is threatened to be made
a party to any contemplated, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative and
whether formal or informal against expenses, actually and reasonably
incurred by him or her in connection with such action, suit or proceeding.
The term Expenses, as used in this Article, includes reasonable attorney's
fees, damages, judgments, fines, amounts paid in settlement and costs
including the costs of investigation and defense. Such indemnification
against Expenses shall be payable only if (a) the Director, officer or
employee acted in good faith, (b) the Director reasonably believed: (A) in
the case of conduct in the Director's official capacity with the Company,
that the Director's conduct was in its best interests; and (B) in all other
cases, that the Director's conduct was at least not opposed to its best
interests; and (c) with respect to any proceeding brought by a governmental
entity, the Director had no reasonable cause to believe his or her conduct
was unlawful, and the Director is not finally found to have engaged in a
reckless or intentional unlawful act. Notwithstanding the foregoing and
except as otherwise provided by law, the Company may not indemnify any
Director, officer, or employee for any Expenses in any action by or in
right of the Company in which such individual is adjudged liable to the
Company.
Any indemnification under this section (unless ordered by a court)
shall be made by the Company only upon a determination that indemnification
of the Director, officer or employee is proper because he or she has acted
in good faith in conformance with the applicable standard of conduct as set
forth herein. Such determination shall be made (a) by the Board of
Directors by a majority vote of a quorum consisting of Directors who are
not parties to such action, suit or proceeding or (b) if such a quorum is
not obtainable, by majority vote of a committee duly designated by the
Board of Directors (in which designation Directors who are parties to the
action, suit or proceeding may participate), consisting solely of two or
more Directors not at the time parties to the action, suit or proceeding;
(c) by written opinion of special legal counsel: (A) selected by the Board
of Directors or its committee in the manner prescribed in clause (a) or
(b); or (B) if a quorum of the Board of Directors cannot be obtained under
clause (a) and a committee cannot be designated under clause (b), selected
by majority vote of the full Board of Directors (in which selection
Directors who are parties to the action, suit or proceeding may
participate); or (d) by the shareholders, but shares owned by or voted
under the control of Directors who are at the time parties to the action,
suit or proceeding may not be voted on the determination.
Authorization of indemnification and evaluation as to reasonableness of
Expenses shall be made in the same manner provided above as the
determination that indemnification is permissible, except that if the
determination is made by special legal counsel, authorization of
indemnification and evaluation as to reasonableness of Expenses shall be
made by those entitled under clause (c) above to select such counsel.
The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea no nolo contendere or its
equivalent, shall not of itself create a presumption that the person did
not act in good faith in conformance with the applicable standard of
conduct as set forth above.
Section 2. Mandatory Indemnification. To the extent that a Director,
officer or employee of the Company has been wholly successful on the merits
or otherwise in defense of any action, suit, proceeding, claim, issue, or
matter referred to in Section 1 of this Article, he or she shall be
indemnified to the extent legally permissible against Expenses reasonably
incurred by him or her in connection therewith.
Section 3. Right To Rely On Corporate Information. In discharging his or
her duty, any Director, when acting in good faith in conformance with the
applicable standard of conduct as set forth above, may rely upon
information, opinions, reports, or statements, including financial
statements and other financial data, if prepared or presented by: (a) one
or more officers or employees of the Company whom the Director reasonably
believes to be reliable and competent in the matters presented; (b) legal
counsel, public accountants, or other persons as to matters the Director
reasonably believes are within the person's professional or expert
competence; or (c) a committee of the Board of Directors of which the
Director is not a member if the Director reasonably believes the committee
merits confidence.
Section 4. Advance Payment of Expenses. Expenses incurred by a Director,
officer or employee in connection with any of the matters with respect to
which indemnification may be sought pursuant hereto may be paid from time
to time by the Company in advance of the final disposition of any such
matter if the following conditions are met: (a) the Director furnishes
the Company written affirmation of his or her good faith belief that he or
she has met the standard of conduct described in Section 1 of this Article;
(b) the Director furnishes the Company a written undertaking, executed
personally or on the Director's behalf, to repay the advance if it is
ultimately determined that the Director did not meet the standard of
conduct; and (c) a determination is made that the facts then known to those
making the determination would not preclude indemnification under this
subchapter.
Determinations and authorizations of payments under this Section 4
shall be made in the manner specified in Section 1 of this Article.
The Board of Directors may authorize counsel (which may be either
Company counsel or outside counsel) to represent such individual in any
action, suit or proceeding, whether or not the Company is a party to such
action, suit or proceeding.
Section 5. Procedure For Indemnification. Subject to compliance with any
applicable procedures in Sections 1 or 4, as the case may be, any
indemnification of a Director, officer or employee of the Company or
advance of Expenses to such an individual under the terms of this Article
shall be made promptly. If the Company unreasonably denies a written
request for indemnity or the advance payment of Expenses, either in whole
or in part, or if payment in full pursuant to such request is not made
promptly, the right to indemnification or advances as granted by this
Article shall be enforceable by such individual in any court of competent
jurisdiction. Such individual's costs and expenses including reasonable
attorney's fees incurred in connection with successfully establishing his
or her right to indemnification in any such action shall also be
indemnified by the Company.
Section 6. Non-Exclusivity of Indemnification Rights. The right of
indemnification hereby provided shall not be deemed exclusive of or
otherwise affect any other rights to which any individual seeking
indemnification may be entitled by law, or under any agreement, vote of
stockholders or otherwise, both as to action in his or her official
capacity and as to action in another capacity while holding such office,
and shall continue as to a person who has ceased to be a Director, officer
or employee and shall inure to the benefit of the heirs, executors and
administrators of such a person.
Section 7. Other Organizations. The indemnification provisions of this
Article shall extend to any Director, officer or employee who serves at the
Company's request as director, officer or trustee of another organization,
including, without limitation, an employee benefit plan, in which the
Company has or had an interest as a stockholder, creditor, sponsor or
otherwise. The right to rely on corporate information conferred in Section
3 of this Article shall also extend to the records, books of accounts and
reports of any such other organization of which the individual serves as
director, officer or trustee.
Section 8. Survival. The foregoing indemnification provisions shall be
deemed to be a contract between the Company and each individual who serves
in any capacity as a Director, officer or employee of the Company at any
time while these provisions are in effect. Except as may otherwise be
required as a result of changes in the law governing indemnification of
officers, directors and employees of Vermont corporations, any repeal or
modification of the foregoing provisions shall not affect any right or
obligation then existing and such "contract rights" may not be modified
retroactively without the consent of such Director, officer or employee.
<PAGE>
EXHIBIT IV
EEI 100 INDEX OF INVESTOR-OWNED ELECTRICS
(Companies in Index)
ALLEGHENY POWER SYSTEM, INC., AMERICAN ELECTRIC POWER, INC., ATLANTIC
ENERGY, INC., BALTIMORE GAS & ELEC CO., BANGOR HYDRO-ELEC CO., BLACK HILLS
CORP., BOSTON EDISON CO., CAROLINA POWER & LIGHT CO., CENTERIOR ENERGY
CORP., CENTRAL & SOUTH WEST CORP., CENTRAL HUDSON GAS & ELEC., CENTRAL
LOUISIANA ELECTRIC CO, INC., CENTRAL MAINE POWER CO., CENTRAL VERMONT PUB
SERV CORP., CILCORP INC., CINCINNATI GAS & ELEC CO., CIPSCO INC., CMS
ENERGY CORP., COMMONWEALTH EDISON CO., COMMONWEALTH ENERGY SYSTEM,
CONSOLIDATED EDISON CO OF NY., DELMARVA POWER & LIGHT CO., DETROIT EDISON
CO., DOMINION RESOURCES, INC., DPL INC., DQE INC., DUKE POWER CO., EASTERN
UTILITIES ASSOC., EL PASO ELECTRIC CO., EMPIRE DISTRICT ELECTRIC CO.,
ENTERGY CORP., ESELCO INC., FLORIDA PROGRESS CORP., FPL GROUP, INC.,
GENERAL PUBLIC UTILITIES CORP., GREEN MOUNTAIN POWER CORP., GULF STATES
UTILITIES CO., HAWAIIAN ELECTRIC INDS, INC., HOUSTON INDUSTRIES, INC.,
IDAHO POWER CO., IES INDUSTRIES INC., ILLINOIS POWER CO., INTERSTATE POWER
CO., IOWA-ILLINOIS GAS & ELEC CO., IPALCO ENTERPRISES INC., KANSAS CITY
POWER & LIGHT CO., KU ENERGY CORP., LG&E ENERGY CORP., LONG ISLAND LIGHTING
CO., MADISON GAS & ELECTRIC CO., MAINE PUBLIC SERVICE CO., MIDWEST
RESOURCES INC., MINNESOTA POWER., MONTANA POWER CO., NEVADA POWER CO., NEW
ENGLAND ELECTRIC SYSTEM, NEW YORK STATE ELEC & GAS CORP., NIAGARA MOHAWK
POWER CORP., NIPSCO INDUSTRIES, INC., NORTHEAST UTILITIES, NORTHERN STATES
POWER CO., NORTHWESTERN PUBLIC SERVICE CO., OHIO EDISON CO., OKLAHOMA GAS &
ELECTRIC CO., ORANGE & ROCKLAND UTLITES, INC., OTTER TAIL POWER CO.,
PACIFIC GAS & ELECTRIC CO., PACIFICORP., PENNSYLVANIA POWER & LIGHT CO.,
PHILADELPHIA ELECTRIC CO., PINNACLE WEST CAPITAL CORP., PORTLAND GENERAL
CORP., POTOMAC ELECTRIC POWER CORP., PSI RESOURCES, INC., PUBLIC SERVICE CO
OF COLORADO, PUBLIC SERVICE CO OF NEW MEXICO, PUBLIC SERVICE ENTERPRISE
GROUP, PUGET SOUND POWER & LIGHT CO., ROCHESTER GAS & ELECTRIC CORP., SAN
DIEGO GAS & ELECTRIC CO., SCANA CORP., SCECORP., SERRA PACIFIC RESOURCES,
SOUTHERN COMPANY, SOUTHERN INDIANA GAS & ELECTRIC CO., SOUTHWESTERN PUBLIC
SERVICE CO., ST JOSEPH LIGHT & POWER CO., TECO ENERGY INC., TEXAS UTILITIES
CO., TNP ENTERPRISES INC., TUCSON ELECTRIC POWER CO., UNION ELECTRIC CO.,
UNITED ILLUMINATING CO., UNITIL CORP., UPPER PENINSULA ENERGY CORP.,
UTILICORP UNITED, WASHINGTON WATER POWER CO., WESTERN RESOURCES, WISCONSIN
ENERGY CORP., WISCONSIN PUBLIC SERVICE, WPL HOLDINGS INC.
<PAGE>
FORM OF PROXY
CENTRAL VERMONT PUBLIC SERVICE CORPORATION
Proxy for Annual Meeting of Stockholders, May 3, 1994
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints ROBERT P. BLISS, JR., LUTHER F. HACKETT,
and F. RAY KEYSER, JR., as proxies, each with the power to appoint a
substitute, and hereby authorizes them to represent and to vote, as
designated below, all shares of Common Stock of Central Vermont Public
Service Corporation held of record by the undersigned on February 23, 1994
at the Annual Meeting of Stockholders to be held May 3, 1994, at The
Holiday Inn, Route 7 South, Rutland, Vermont, or at any and all
adjournments thereof.
1. AMENDMENT OF ARTICLES OF INCORPORATION to include the Fair Price
Provision (Directors recommend a vote FOR Article 1.)
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. AMENDMENT OF ARTICLES OF INCORPORATION to limit liability of Directors
(Directors recommend a vote FOR Article 2.)
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. AMENDMENT OF BY-LAWS to modify the indemnification protection afforded
Directors, Officers and Employees. (Directors recommend a vote FOR
Article 3.)
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. ELECTION OF DIRECTORS (Directors recommend a vote FOR Article 4.)
[ ] FOR Nominees listed to hold office [ ] WITHHOLD AUTHORITY
for the terms indicated to vote for all
except as nominees markedto listed below.
the contrary below).
Directors whose terms will expire in 1997:
Frederic H. Bertrand, Mary Alice McKenzie, Robert D. Stout
Instruction: To Withhold authority to vote for any individual
nominee, write nominee's name on space provided below:
(Continued, and to be signed on reverse side)
<PAGE>
(Reverse side)
In their discretion, the Proxies are authorized to vote upon such
other business as may properly come before the meeting. If any such
other business is presented for action at the meeting, it is the
intention of the Proxies to vote all such matters in accordance with
their best judgment.
This proxy when properly executed will be voted in the manner indicated
herein by the undersigned stockholder. If no direction is made, this proxy
will be voted FOR Articles 1, 2, 3 and 4.
Please vote, sign, date and return the Proxy Card promptly using the
enclosed envelope.
DATED 1994
Signature of Stockholder(s)
Please sign exactly as the name appears.
For shares held by joint tenants, both
should sign. When signing as attorney,
executor, administrator, trustee or guardian,
please give full title as such. If a
corporation, please sign in full corporate
name by President or other authorized
officer. If a partnership, please sign in
partnership name by authorized person.
