SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Central Vermont Public Service Corporation
(Name of Registrant as Specified In Its Charter)
...................................................
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(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 Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
................................................................
4) Proposed maximum aggregate value of transaction:
................................................................
5) Total fee paid:
................................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
.............................................
2) Form, Schedule or Registration Statement No.:
.............................................
3) Filing Party:
.............................................
4) Date Filed:
.............................................
</PAGE>
CENTRAL VERMONT PUBLIC SERVICE CORPORATION
Robert H. Young
PRESIDENT AND CHIEF EXECUTIVE OFFICER
March 21, 1997
Dear Stockholders:
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 6,
1997 at the Holiday Inn, Route 7 South, Rutland, Vermont. Refreshments
will be served at 9 a.m.
At this meeting you will be asked to elect four Directors to serve for a
three-year term and one Director to serve for a two-year term. Also, you
will be asked to approve a Stock Option Plan for Key Employees and a
Restricted Stock Plan for Non-employee Directors and Key Employees.
Your vote is very important to us. In order to ensure that your shares may
be represented at the meeting and to avoid additional expense of
solicitation, we urge that you promptly vote, sign and return the enclosed
proxy in the return envelope provided. If you do plan on attending the
Annual Meeting, which we hope you will, you may revoke your proxy and vote
your shares in person.
Thank you for your confidence and continued support.
Sincerely,
ROBERT H. YOUNG
President and
Chief Executive Officer
</PAGE>
CENTRAL VERMONT PUBLIC SERVICE CORPORATION
77 Grove Street
Rutland, Vermont 05701
______________________
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
Be Held on May 6, 1997
To the Holders of Common Stock:
The Annual Meeting of Stockholders of Central Vermont Public Service
Corporation will be held at the Holiday Inn, Route 7 South, Rutland,
Vermont, on Tuesday, May 6, 1997, at 10 A.M., (Eastern Daylight Saving
Time), for the following purposes:
1. To approve the Stock Option Plan for Key Employees.
2. To approve the Restricted Stock Plan for Non-employee Directors
and Key Employees.
3. To elect four directors for a term of three years and to elect
one director for a term of two years; and
4. To act upon any matters incidental to or in furtherance of the
foregoing and upon any matters which may properly come before the meeting
or at any adjournments thereof.
Each of the above items is described in the Proxy Statement which
accompanies this Notice.
The Board of Directors has fixed the close of business on February 26,
1997, as the record date for the determination of the holders of the
Company's Common Stock entitled to notice of, and to vote at, the meeting
and any adjournments thereof.
By Order of the Board of Directors,
Joseph M. Kraus, Vice President,
Secretary and General Counsel
Rutland, Vermont
March 21, 1997
YOUR VOTE IS 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 05701
______________________
March 21, 1997
PROXY STATEMENT
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 solicited proxies 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 6, 1997 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. If no direction
is given, proxies will be voted FOR the Stock Option Plan for Key
Employees, FOR the Restricted Stock Plan for Non-employee Directors and
Key Employees, and FOR the election, as directors, of the five nominees
listed on the proxy. Any proxy may be revoked by written notice or by a
duly executed proxy bearing a later date delivered to the Secretary of the
Company at any time before it is exercised, or by attending the Annual
Meeting and voting in person.
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 $6,500 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 1996 accompanies this Proxy Statement.
The Proxy Statement and form of Proxy were first sent to stockholders
on or about the date of this Notice.
VOTING SECURITIES
There were 11,519,748 outstanding shares of Common Stock, each share
being entitled to one vote, at the close of business on February 26, 1997,
the record date for determination of stockholders entitled to notice of and
to vote at the meeting.
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" 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 votes
entitled to be cast in person or by proxy on the matter. Abstentions are
counted in determining whether a quorum has been reached on a particular
matter. If a quorum exists, action on a matter is approved if the votes
cast favoring the action exceed the votes cast opposing the action.
Abstentions are not counted as opposing votes.
A plurality of the votes cast by the shares entitled to vote in the
election is required for the election of directors (i.e. the nominees
receiving the greatest number of votes will be elected at a meeting at
which a quorum is present). Abstentions are not counted for purposes of the
election of directors.
ARTICLE 1.
STOCK OPTION PLAN FOR KEY EMPLOYEES
In order to attract, retain and motivate talented key employees who
will exert their best efforts and work toward the long term best interests
of the Company and its subsidiaries, the Board of Directors has adopted,
subject to stockholder approval, the Stock Option Plan for Key Employees
("Key Employee Plan"). The Key Employee Plan is intended to strongly ally
the interest of Company management with that of stockholders and provide
significant incentives for management to increase stockholder value. The
Key Employee Plan is a successor to the plan adopted by the stockholders in
1988.
The text of the Key Employee Plan is included as Schedule A.
The Key Employee Plan
The Key Employee Plan provides to key employees of the Company and its
subsidiaries, options to purchase shares of Common Stock of the Company.
The key employees to whom options may be granted under this plan will be
determined from time to time by the Compensation Committee of the Board of
Directors. It is anticipated that approximately 15 individuals, including
the named executive officers in the Summary Compensation Table, will be
eligible to participate in the Key Employee Plan.
The total number of shares of Common Stock of the Company which may be
issued with respect to awards under the Key Employee Plan may not exceed
350,000 shares, subject to proportional adjustments to reflect certain
stock changes, such as stock dividends and stock splits. No options have
been granted under the Key Employee Plan.
Options granted under the Key Employee Plan will be non-qualified
stock options. The option price for all options granted under this plan
will not be less than the fair market value of a share of Common Stock on
the date of a grant. The number of stock option awards will be determined
by the Compensation Committee of the Board of Directors. The Compensation
Committee is comprised entirely of outside Directors.
The Compensation Committee has the sole authority to revise or amend
any provision of the Key Employee Plan, except that an option cannot be
amended to decrease a key employee's rights under such option without that
employee's consent. The Board of Directors of the Company may from time to
time amend or discontinue the granting of stock options or terminate the
Key Employee Plan, provided, however, that no such action may increase the
maximum number of shares of Common Stock available for awards under this
plan, or increase the time limits for granting or exercising previously
awarded stock options under this plan.
Federal Income Tax Treatment
The following brief summary of the effect of federal income taxation
upon the participant and the Company with respect to the exercise of
options under the Key Employee Plan does not purport to be complete and
reference should be made to the applicable provisions of the Code. In
addition, this summary does not discuss the provisions of the income tax
laws of any municipality, state or foreign country in which the participant
may reside. Because the following is only a brief summary of the general
federal income tax rules, recipients of options under the Key Employee Plan
should not rely solely on this summary for individual tax advice, as each
recipient's situation and the consequences of any particular transaction
will vary depending upon the specific facts and circumstances involved.
Each recipient is advised to consult with his or her own tax advisor for
particular federal, as well as state and local, income and any other tax
advice.
In general, there are no tax consequences to the optionee or to the
Company on the grant of a stock option which does not qualify as an
incentive stock option within the meaning of Section 422 of the Code (a
"non-qualified stock option"). On exercise, however, the optionee
generally will recognize ordinary income equal to the excess of the fair
market value of the shares as of the exercise date over the purchase price
paid for such shares, and the Company (subject to Section 162(m) of the
Code) will be entitled to a deduction equal to the amount of ordinary
income recognized by the optionee. Upon a subsequent disposition of the
shares received under a non-qualified stock option, the difference between
the amount realized on such disposition and the fair market value of the
shares on the date of exercise generally will be treated as a capital gain
or loss. In respect of any such disposition, the Company will not be
entitled to a tax deduction. Optionees subject to the Section 16(b)
insider trading rules generally are now subject to the same tax
consequences with respect to a non-qualified stock option as any other
optionee.
The Company will generally be required to make arrangements for
withholding applicable taxes with respect to any ordinary income recognized
by a recipient in connection with options exercised under the Key Employee
Plan.
Special rules will apply in cases where a recipient of an option pays
the exercise price by delivering previously owned shares of Common Stock.
The surrender of such shares will not result in the recognition of gain
with respect to such surrendered shares, but a like number of shares
acquired will have a carryover basis. If an optionee surrenders shares of
Common Stock to satisfy applicable withholding tax requirements, the
surrender of such shares may result in the recognition of gain or loss in
respect thereof.
The terms of the Key Employee Plan accelerate the ability of the
recipient to exercise the option in connection with a change in ownership
or control of the Company. In that event and depending upon the individual
circumstances of the recipient, certain amounts with respect to such
options may constitute "excess parachute payments" under the "golden
parachute" provisions of the Code. Pursuant to these provisions, a
recipient will be subject to a 20% excise tax on any "excess parachute
payments" and the Company will be denied any deduction with respect to such
"excess" payments. Recipients of options should consult their own tax
advisors as to whether accelerated vesting of an option in connection with
a change of ownership or control of the Company would give rise to an
excess parachute payment.
Under Section 162(m) of the Code, compensation paid by the Company in
excess of $1 million for any taxable year to "Covered Employees" generally
is deductible by the Company for federal income tax purposes only if such
compensation is based on the performance of the Company, is paid pursuant
to a plan approved by stockholders of the Company, and meets certain other
requirements. Generally, "Covered Employee" under Section 162(m) means the
Chief Executive Officer and the four other highest paid executive officers
of the Company as of the last day of the Company's taxable year.
Approval of the Plan
To become effective, the votes cast in favor of the Key Employee Plan
must exceed the votes cast opposing the Plan provided that a quorum is
present. Abstentions are not treated as votes against the proposal. In
addition, because the Company is a regulated utility, the Key Employee Plan
may not become effective without the approval of the Vermont Public Service
Board.
The Board of Directors recommends a vote FOR approval of this proposal. If
not otherwise specified, proxies will be voted FOR Article 1.
ARTICLE 2.
RESTRICTED STOCK PLAN FOR NON-EMPLOYEE DIRECTORS AND KEY
EMPLOYEES
The Board of Directors adopted a revised Management Incentive Plan
("Plan") to be effective in 1997. The Plan more strongly ties officer
compensation to stockholder fortunes, puts more officer compensation "at
risk" and utilizes the Key Employee Plan in addition to the Restricted
Stock Plan for Non-employee Directors and Key Employees ("Restricted Stock
Plan") in making these strong connections.
The text of the Restricted Stock Plan is included as Schedule B.
The short-term incentive portion of the Plan has a funding 'trigger'
which is the rate of return allowed by the Vermont Public Service Board.
If the targeted return on equity is achieved, an award pool is funded and
awards are allocated to eligible individuals based on three measures - (1)
Return on Equity, (2) Individual Performance and (3) Customer Satisfaction.
Performance measures must be met to receive an award. Each measure is
equally weighted. It is contemplated that the measures will change from
time to time to correspond to the Company's business objectives.
The achievement of the measures above determines the annual award. Any
award earned, as determined by the Board, will be paid out 50% in cash, and
50% in restricted Common Stock. Under the formerly approved plan, any
awards were paid exclusively in cash. The adoption of the Restricted Stock
Plan will permit the payment to include both a cash and a stock component.
In 1996, the Board of Directors adopted a compensation plan to further
strengthen the connection between the Company's long term performance,
stockholder interests and their own compensation. As part of that Plan,
non-employee directors will receive 50% of their annual retainer in
restricted Common Stock. Again, the adoption of the Restricted Stock Plan
will permit the retainer to be paid in both cash and restricted stock.
The Restricted Stock Plan
The Board of Directors of the Company has adopted, subject to
stockholder approval, the Restricted Stock Plan for Non-employee Directors
and Key Employees. The Restricted Stock Plan provides to non-employee
directors and key employees of the Company and its subsidiaries, Common
Stock with a three-year vesting restriction, in the place of a portion of
cash compensation they otherwise would receive. Recipients of restricted
stock awarded under the Restricted Stock Plan will receive dividends on a
current basis and will be entitled to vote these shares after they are
granted and before the restrictions lapse. Recipients do not receive the
shares (are not vested) until the restrictions lapse or they retire, become
disabled, or die.
It is anticipated that all non-employee directors (currently 10) and
15 key employees, including the named executive officers in the Summary
Compensation Table, will be eligible to participate in the Restricted Stock
Plan.
The total number of shares awarded under this Restricted Stock Plan
may not exceed 70,000 shares subject to proportional adjustments to reflect
certain stock changes, such as stock dividends and stock splits. The
purpose of this Restricted Stock Plan is to replace current cash
compensation with time-restricted Common Stock. The intent is to
strengthen the relationship between the directors, individual key employee
performance, Company performance and stockholder interests. No shares have
been awarded under the Restricted Stock Plan.
Approval of the Plan
To become effective, the votes cast in favor of the Restricted Stock
Plan must exceed the votes cast opposing this plan provided that a quorum
is present. Abstentions are not treated as votes against the proposal. In
addition, because the Company is a regulated utility, the Restricted Stock
Plan may not become effective without the approval of the Vermont Public
Service Board.
The Board of Directors recommends a vote FOR approval of this proposal. If
not otherwise specified, proxies will be voted FOR Article 2.
ARTICLE 3.
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 as nearly equal in number as possible. In order to meet the
changing needs of the Company, the Board of Directors has increased the
number of directors by resolution from nine to eleven. This will permit
the Company to expand the scope, expertise and diversity of its Board of
Directors.
The nominees for election at this Annual Meeting of Stockholders to
serve as directors for a term which expires at the year 2000 Annual Meeting
are: Robert L. Barnett, Frederic H. Bertrand, Robert G. Clarke and Mary
Alice McKenzie. Frederic H. Bertrand and Mary Alice McKenzie were elected
at the 1994 Annual Meeting and have served as directors since 1984 and
1992, respectively. Robert L. Barnett was appointed director of the
Company at the December 1996 meeting of the Board of Directors to serve
until the 1997 Annual Meeting to fill the vacancy created by the retirement
of Robert D. Stout. Robert G. Clarke is a new nominee to the Board of
Directors.
In order to keep the classes of directors as nearly equal in number as
possible, Patrick J. Martin is a new nominee for election at this Annual
Meeting to serve as a director for a two-year term which expires at the
1999 Annual Meeting.
Elizabeth Coleman resigned in December 1996 in order to devote more
time to her responsibilities as President of Bennington College. Pursuant
to the By-Laws, the Board of Directors appointed Rhonda L. Brooks to fill
her term which expires at the 1999 Annual Meeting.
A vacancy has been created in the class of directors whose terms will
expire at the 1998 Annual Meeting by the death of Gordon P. Mills on
January 16, 1997. The Board of Directors, which has authority to fill the
vacant position, is considering candidates to serve the remainder of Mr.
Mills' unexpired term.
Proxies will be voted (unless otherwise instructed) in favor of the
election of the five nominees as indicated in the table below. Each of the
nominees has consented to serve as a director if elected. While it is not
anticipated that any of the persons listed will be unable to serve as a
director, if any of the persons listed are unable to serve, then the
proxies will vote for such other person or persons as the present Board of
Directors shall determine.
The following sets forth certain information, including business
experiences during the past five years, regarding the nominees for
director, as well as all directors presently serving on the Board whose
terms will expire after the 1997 Annual Meeting.
<TABLE>
<CAPTION>
Director
Since
--------
Nominees for directors whose terms will expire in year 2000:
<S> <C>
Frederic H. Bertrand, age 60, Retired Chairman of the Board 1984
and Chief Executive Officer, National Life Insurance Co.,
Montpelier, Vermont effective February 7, 1997. Mr.
Bertrand is also a Director of Catamount Energy
Corporation and The Chittenden Corporation.
Mary Alice McKenzie, age 39, President, McKenzie of Vermont, 1992
Burlington, Vermont (Manufacturer of Meat Products).
Ms. McKenzie is also a Director of Vermont Electric
Power Company, Inc. and Eastern Bancorp, Inc.
Robert L. Barnett, age 56, Corporate Vice President, IDEN 1996
Group, Motorola, Schaumburg, Illinois (Communications
Equipment); President, Nexteps, Inc. (Telecommunications
Consulting Firm), Lake Forest, Illinois from 1993 to 1995;
President, Ameritech Bell Group, Chicago, Illinois from
1989 to 1992. Mr. Barnett is also a Director of Johnson
Controls, Inc., and U.S. Gypsum, Inc.
Robert G. Clarke, age 46, President, Vermont Technical
College, Randolph Center, Vermont. Mr. Clarke is also a
Director of the Granite Savings Bank.
Nominee for director whose term will expire in year 1999:
Patrick J. Martin, age 56, President, Canadian & Americas
Customer Operations from 1996 to present and President,
Office Document Products Division from 1993 to 1996
at Xerox Corporation, Rochester, New York (Office
Products); President and General Manager, Americas
Operations, Xerox Corporation, Stamford, Connecticut
from 1991 to 1993. Mr. Martin is also a Director of
Comptek Research.
Directors whose terms will expire in year 1999:
Rhonda L. Brooks, age 44, Vice President, Investor 1996
Relations since January 1997, and Vice President,
Marketing, Composites, Owens Corning, Toledo, Ohio,
1995 - 1996 (Building Materials and Fiberglass
Composites); Senior Vice President and General
Manager, PlyGem Industries, Inc. from 1994 to 1995;
Vice President, Oral Care and New Product Strategies,
Warner-Wellcome and Vice President, Marketing,
Warner-Lambert Company from 1990 to 1994.
Preston Leete Smith, age 66, Retired Chief 1977
Executive Officer, S-K-I Ltd. (Ski Business)
in 1996. Mr. Smith is also a Director of
Catamount Energy Corporation and until his resignation
on February 19, 1997 a Director of Vermont Electric
Power Company, Inc.
Robert H. Young, age 49, President and Chief Executive Officer 1995
of the Company; Executive Vice President and Chief
Operating Officer of the Company from 1993 to 1995;
Senior Vice President and Chief Financial Officer of
the Company from 1988 to 1993; Vice President and
Chief Financial Officer of the Company from 1987 to
1988. Mr. Young is also Director, President and
Chief Executive Officer of Connecticut Valley
Electric Company Inc., and Catamount Energy
Corporation; Director and Chairman of Vermont Yankee
Nuclear Power Corporation; Director of Vermont
Electric Power Company, Inc., Vermont Electric
Transmission Company, Inc. and Yankee Atomic Electric.
Directors whose terms will expire in year 1998:
Luther F. Hackett, age 63, President, Hackett, Valine & 1979
MacDonald, Inc., Burlington, Vermont (Insurance Agents).
Mr. Hackett is also Director of Catamount Energy
Corporation, Vermont Electric Transmission Company,
Inc., and Chairman and Director of Vermont Electric
Power Company, Inc. and Banknorth Group, Inc.
F. Ray Keyser, Jr., age 69, Chairman of the Board of the 1980
Company; Of Counsel, Keyser, Crowley, Meub, Layden,
Kulig & Sullivan, P.C., Rutland, Vermont (Lawyers).
Mr. Keyser is also Director of Catamount Energy
Corporation, Vermont Electric Power Company, Inc.,
Vermont Yankee Nuclear Power Corporation and
Director/Trustee of Keystone Group, Inc.
</TABLE>
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
at a meeting at which a quorum is present.
The Board of Directors recommends a vote FOR Article 3.
Meetings of the Board
During 1996, the directors held nine regular meetings and four special
meetings of the Board. Each director attended at least 75% of the
aggregate of all meetings of the Board and committees of which he or she
was a member.
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. The present members of the Executive
Committee are F. Ray Keyser, Jr., Chairperson, Frederic H. Bertrand, Luther
F. Hackett, Preston Leete Smith and Robert H. Young. No meeting was held
during 1996.
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, Chairperson, Robert L. Barnett, Rhonda L. Brooks, and
Mary Alice McKenzie. During 1996, the Audit Committee held five 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 December 1 preceding the Annual Meeting for which such nomination is
sought. The present members of the Nominating Committee are Mary Alice
McKenzie, Chairperson, Robert L. Barnett, F. Ray Keyser, Jr. and Robert H.
Young. During 1996, the Nominating Committee held four meetings.
Mr. Mills was a member of the Audit and Compensation Committees until
his death in January 1997. Mr. Stout was a member of the Audit and
Nominating Committees until his retirement in December 1996. Ms. Coleman
was a member of the Audit and Compensation Committees until her resignation
in December 1996.
Information regarding the Company's Compensation Committee is set
forth under the caption "Compensation Committee Interlocks and Insider
Participation".
Directors' Compensation
To further strengthen the connection between the Company's long term
performance, stockholder interests and their own compensation, the Board of
Directors adopted a new compensation plan, the Restricted Stock Plan for
Non-employee Directors and Key Employees (pending stockholder approval and
the Vermont Public Service Board). Under this plan, non-employee directors
will receive 50% of their annual retainer in Common Stock (instead of in
cash) with a three-year vesting restriction. As part of this effort to more
closely align interests and as part of the Company's effort to expand its
Board of Directors, the Board adjusted the annual retainer to $10,000 (from
$7,200 in 1996 and $9,000 prior to 1995). The Restricted Stock Plan for
Non-employee Directors and Key Employees is described in Article 2.
Members of the Executive Committee are paid an additional retainer of
$500. The Chair of each committee receives an additional $2,000 retainer.
Directors are also paid $700 for each Board meeting attended and $350 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 $700 for attendance at each other
meeting of such committee. The Chairman of the Board does not receive a
salary, however, is paid an annual retainer of $30,000. All directors are
reimbursed for expenses incident to their services as directors. As
President and Chief Executive Officer, Mr. Young 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. The
directors may elect to defer receipt of all or a portion of their fees
pursuant to a deferred compensation plan maintained by the Company.
Stock Option Plan for Non-Employee Directors
Under the 1993 Stock Option Plan for Non-employee Directors (the
"Plan"), each of the non-employee directors received during 1996 stock
options with respect to 2,250 shares of Common Stock. Optioned shares are
reflected in the individual stockholdings of the directors set forth below
under "Stock Ownership of Directors, Nominees and Executive Officers". The
exercise price of the options issued to Participant Directors in 1996 was
$14.125 per share, which represents the Fair Market Value of the Company's
Common Stock on the date of grant. 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.
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 during a limited trading period, 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. The total number of shares that may be issued under the Plan may
not exceed 150,000 in the aggregate, subject to proportional adjustments,
and such shares may be either authorized but unissued shares or shares
previously issued and reacquired by the Company. The Plan is effective for
five years, terminating in 1998.
During 1996, no stock options granted under this Stock Option Plan
were exercised by any of the directors.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers to file reports of ownership and
changes in ownership of Company securities with the SEC and to furnish the
Company with copies of all such reports. It also requires directors,
officers 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 New York Stock
Exchange. In making this statement, the Company has relied on copies of
reports that have been filed with the Commission.
Based solely on a review of the copies of such reports prepared and
filed with the Commission during 1996 by the Company's 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.
STOCK OWNERSHIP OF DIRECTORS, NOMINEES AND EXECUTIVE OFFICERS
The following table sets forth the number of shares of Common Stock of
the Company beneficially owned by each director and nominee director, each
of the executive officers named in the Summary Compensation Table and by
all the directors, nominee directors and executive officers as a group as
of February 26, 1997.
<TABLE>
<CAPTION>
Shares of Common Stock Percent
Name Beneficially Owned (1)(2)(3)(4) of Class
---- ------------------------------- --------
<S> <C> <C>
L. Douglas Barba 12,550
Robert L. Barnett 1,000
Frederic H. Bertrand 12,151 (5)
Francis J. Boyle 8,400
Rhonda L. Brooks 500
Robert G. Clarke 1,000 (6)
Luther F. Hackett 14,898 (7)
Thomas J. Hurcomb 25,830
F. Ray Keyser, Jr. 15,938 (8)
Joseph M. Kraus 12,380
Patrick J. Martin 1,000
Mary Alice McKenzie 10,869 (9)
Preston Leete Smith 12,799
Robert H. Young 35,282 (10)
All directors, nominee
directors and executive
officers as a group (18) 196,865 1.7%
</TABLE>
No director, nominee for director or executive officer owns any shares
of the various classes of the Company's outstanding non-voting preferred
stock.
(1) No director, nominee for director or executive officer owns
beneficially in excess of 1% of CVPS' outstanding Common Stock. 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.
(2) Includes shares that the named individuals have a right to acquire
pursuant to options granted under the 1988 and 1993 Stock Option Plans for
Non-employee Directors as follows: Mr. Hackett, 9,000 shares; Messrs.
Bertrand, Keyser, Smith and Ms. McKenzie, 10,500 shares.
(3) Includes shares that the named executive officers have a right to
acquire pursuant to options granted under the 1988 Stock Option Plan for
Key Employees as follows: Mr. Barba, 12,550 shares; Mr. Boyle, 5,900
shares; Mr. Hurcomb, 24,550 shares; Mr. Kraus, 11,050 shares; Mr. Young,
34,500 shares; and all executive officers as a group, 126,710 shares.
(4) Includes shares that the named executive officers hold indirectly
under the Company's Employee Savings and Investment (401(k)) and Employee
Stock Ownership Plans as follows: Mr. Hurcomb, 1,264 shares; Mr. Kraus, 105
shares; and Mr. Young, 415 shares.
(5) Includes 1,651 shares held jointly with his spouse over which Mr.
Bertrand has voting and investment power.
(6) Voting and investment power for all shares is shared with his spouse.
(7) Includes 3,000 shares owned by corporations over which Mr. Hackett has
voting and investment power.
(8) Includes 1,688 shares held jointly with his spouse and 3,750 shares
held in a Keogh Trust over which Mr. Keyser has voting and investment
power.
(9) Includes 150 shares held jointly with her spouse over which Ms.
McKenzie has voting and investment power.
(10) Includes one share held by Mr. Young's wife as custodian for his son
over which Mr. Young disclaims beneficial ownership.
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.
LEGAL PROCEEDINGS
On December 30, 1994, a lawsuit was filed in the United States
District Court for the District of Vermont, Civil Action No. 2:94-CV386, by
Bradford E. White, Michel J. Messier and John A. Wasik, against the
Company, its present directors and certain former directors. This lawsuit
(the "Shareholder Suit"), which purports to be on behalf of a class of
consumers as well as on behalf of the Company's stockholders in enforcing
the rights of the Company, alleges, among other things, (i) that F. Ray
Keyser, Jr., Chairman of the Company's Board of Directors, violated Section
8 of the Clayton Act, 15 U.S.C. Subchapter 19, which precludes certain
interlocking directorships, (ii) that Mr. Keyser violated his fiduciary
duties to the Company's stockholders by acquiring and operating a series of
businesses in competition with the Company without offering those business
opportunities to the Company, (iii) that the remaining individual
defendants violated their fiduciary duties to the Company's stockholders by
failing to analyze, or to cause management to analyze, diversification into
propane and fossil fuels, and by failing to make the Company an effective
competitor of alternative fuel companies, and (iv) that the Company
violated the applicable provision of the Vermont General Corporation Law by
failing to provide a list of the Company's stockholders. The Shareholder
Suit was seeking an unspecified amount of damages (including treble damages
against Mr. Keyser), attorneys' fees and costs, a list of the Company's
stockholders, and a court order to enjoin the defendants from alleged
continuing violations of the law. Each of the individual defendants and
the Company itself denied the allegations against them and filed a Motion
to Dismiss. In an Order dated September 20, 1996, the U.S. District Court
Judge dismissed all of the claims filed against the Company and its
directors.
Information regarding the Company's advancement of expenses incurred
by the Company's directors in connection with the Shareholder Suit is set
forth below under the captions "Report of Indemnification and Advancement
of Expenses" and "Compensation Committee Interlocks and Insider
Participation".
REPORT OF INDEMNIFICATION AND ADVANCEMENT OF EXPENSES
As described above under the caption "Legal Proceedings" each of the
directors and certain former directors of the Company were named defendants
in the Shareholder Suit. In accordance with Article XI of the Company's
By-Laws and applicable provision of the Vermont Business Corporation Act
("VBCA"), the Company during 1996 advanced funds to pay the cost of such
directors' defense of the Shareholder Suit, in the aggregate amount of
approximately $406,069. As required by the Company's By-Laws and the VBCA,
each of such directors has agreed to repay advances made by the Company on
his or her behalf if it is ultimately determined that such director did not
meet applicable standards of conduct. Such standards require that the
director has acted in good faith and in a manner that he or she reasonably
believed (as to actions in his or her official capacity with the Company)
was in the Company's best interests, or (in all other cases) was at least
not opposed to the Company's best interests.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board is composed entirely of
outside directors and is responsible for reviewing and making recom-
mendations 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. During 1996, the Compensation
Committee held four meetings.
The current members of the Compensation Committee are Preston Leete
Smith, Chairperson, Frederic H. Bertrand, Rhonda L. Brooks, F. Ray Keyser,
Jr. Gordon P. Mills, who died on January 16, 1997, was a member of the
Committee during 1996. Rhonda L. Brooks has been appointed to this
committee to replace Elizabeth Coleman who resigned from the Board of
Directors in December 1996.
Except for Rhonda L. Brooks, each of the members of the Compensation
Committee was a named defendant in the Shareholder Suit.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE
COMPENSATION
Compensation Philosophy
The philosophy of the Compensation Committee ("Committee"), with
regard to executive compensation, is 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, to encourage
employees to develop their skills and abilities; and encourages and
supports performance and decisions that strengthen the Company financially
and strategically, including service to the customer.
Executive Officers' Compensation
Base Annual Salary
It is the policy of the Committee to establish salaries for the Chief
Executive Officer and other executive officers within a range that
surrounds the 50th 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.
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 executive 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. The Chief Executive Officer recommends the
base salary, for those reporting to him, to the Committee.
Chief Executive Officer Compensation
Base Annual Salary
The Committee determines the base salary of the Chief Executive
Officer. Mr. Young's promotion from Chief Operating Officer to Chief
Executive Officer in 1996 and his current placement in the salary range was
determined by the Compensation Committee and approved by the Board of
Directors. His current salary is based upon factors such as his level of
experience in his position, Company performance and executive team
performance.
Management Incentive Compensation Plans
The Company's executive officers participate in the core utility
Management Incentive Plan (the "Incentive Plan"). The purpose of the
Incentive 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 incentive payment is earned. A well-directed Incentive
Plan, in conjunction with competitive salaries and benefits, 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
1996, eight executive officers were eligible to participate including the
named executive officers in the Summary Compensation Table.
There exists a financial performance threshold, below which no
incentive awards would be paid. The threshold is calibrated against the
allowed return on equity. The degree to which the allowed return on equity
is achieved generates a pool which is available to fund incentive payouts.
However, performance measures must also be met in the following areas
to receive an award. Each measure is equally weighted.
Return on equity. While this measure is used to establish the
incentive pool, it is also one of the measures which is assessed in
determining distribution of the pool.
Operating costs and efficiency. Measures the cost of operating and
maintenance expense expressed as a percent of kilowatt hour sales, as
compared to budgeted expense levels.
Retail customer satisfaction index. Measures service reliability by
compiling the combined number and duration of outages in the current
year, and the result of this calculation must be a 5% reduction as
measured against the previous five-year average.
Individual performance. Based on advice and recommendation from the
Chief Executive Officer ("CEO") for others reporting to him, the
Committee evaluates individual officer performance, and also evaluates
the performance of the CEO.
If the maximum payout on all of the standards were to be achieved, the
total incentive award would represent 30% of base salary for the Chief
Executive Officer, 20% for Senior Vice Presidents and Vice Presidents, and
15% for other designated officers. Amounts paid under the Company's
Incentive Plan for 1996 are set forth in the Bonus column of the Summary
Compensation Table.
Catamount Energy Corporation, a wholly owned subsidiary of the
Company, also has an Incentive Plan for officers of Catamount approved
annually by its Board of Directors. Officers of the Company who are also
officers of Catamount may be granted a discretionary award by the Board
based upon the performance of Catamount and the Board's subjective
evaluation of each officer's individual contribution to that performance.
Amounts paid under the Catamount Incentive Plan are set forth in the Bonus
column of the Summary Compensation Table.
Long-Term Incentives
The Committee views the Company's current long-term Stock Option Plan
for Key Employees ("Stock Option Plan"), approved by the stockholders, as
an important component in its strategy for attracting and retaining
executives of high caliber and helps to focus management attention on
increasing stockholder value.
The options are granted to executive officers annually by the full
Board on recommendation of the Committee. In 1996, nine of the Company's
executive officers received options including the named executive officers
in the Summary Compensation Table. The number of options is determined by
reference to the annual Edison Electric Institute Executive Compensation
Survey, with data statistically adjusted to reflect company size. 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 event of a stock dividend, stock split or other change in corporate
structure or capitalization affecting the Company's Common Stock.
The current Stock Option Plan is effective for ten years terminating
in 1997. The replacement plan, which requires stockholder approval, is
described in Article 1.
Stock options are exercisable in whole or in part from the date of
grant for a period of ten years and one day but in no event later than
three years after retirement from the Company. Options granted under the
Stock Option 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.
1997 Management Incentive Plan for Officers
The Board of Directors adopted a revised Management Incentive Plan to
be effective for the 1997 Plan (fiscal) year. The Plan more strongly ties
officer compensation to stockholder fortunes, puts more officer
compensation "at risk" and utilizes the "Stock Option Plan for Key
Employees" in addition to the "Restricted Stock Plan for Non-employee
Directors and Key Employees" in making these strong connections.
At the end of 1996, the Compensation Committee and the Board of
Directors of the Company and its subsidiaries approved changes to their own
compensation plan as well as to the executive officers' short and long-term
incentive plans. These changes will serve to more strongly align
stockholder returns with director and officer remuneration. These changes
are described in Articles 1 and 2. The "Stock Option Plan for Key
Employees" and the "Restricted Stock Plan for Non-employee Directors and
Key Employees" are both designed to strengthen this relationship.
It is the policy of the Committee not to compensate officers through
the use of perquisites. A car is provided to the Chief Executive Officer
and periodic medical examinations for all 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 Company maintains the tax treatment
applicable to other employee compensation.
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.
COMPENSATION COMMITTEE MEMBERS:
Preston Leete Smith, Chairperson
Frederic H. Bertrand
Rhonda L. Brooks
F. Ray Keyser, Jr.
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 published industry or line-of-business index
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 investor-owned electric utility companies.
<TABLE>
<CAPTION>
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
CENTRAL VERMONT, EEI 100 ELECTRICS, S & P 500
<S> <C> <C> <C> <C> <C> <C>
1991 1992 1993 1994 1995 1996
CVPS 100 115.89 104.51 73.99 77.77 74.39
EEI 100 107.59 119.58 105.74 138.55 140.22
S&P 500 100 107.61 118.41 120.01 164.95 202.73
Assumes $100 Invested on December 31, 1991
*Total Return Assumes Quarterly Reinvestment of Dividends
</TABLE>
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 four most highly compensated executive
officers whose salary and incentive awards for services rendered to the
Company and its subsidiaries in all capacities for 1996 exceeded $100,000.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long Term
Compensation
Annual Compensation Awards
------------------------------ -------------
Securities
Underlying
Option/ All Other
Name and Principal Salary Bonus SARs Compensation
Position (1) Year ($) (2) ($)(3) (#) ($) (4)
- - - ----------------------- ---- -------- ------- ------------ --------------
<S> <C> <C> <C> <C> <C>
A. Robert H. Young 1996 231,420 50,601 12,000/0 6,906
President and Chief 1995 178,423 51,298 6,000/0 5,876
Executive Officer 1994 153,756 0 6,000/0 4,927
B. Francis J. Boyle(5) 1996 150,550 23,312 5,900/0 482
Chief Financial 1995 25,529 4,917 - 164
Officer & Vice
President - Finance
and Administration
C. Joseph M. Kraus 1996 115,018 18,835 3,550/0 12,130
Vice President, 1995 102,485 33,070 3,000/0 8,820
Secretary and 1994 96,657 0 3,000/0 8,551
General Counsel
D. Thomas J. Hurcomb 1996 113,161 10,893 3,550/0 10,083
Vice President 1995 109,765 11,116 3,000/0 5,536
Marketing and 1994 104,115 0 3,000/0 4,534
Public Affairs
E. L. Douglas Barba 1996 128,389 27,946 3,550/0 5,490
Senior Vice President 1995 121,537 42,378 3,000/0 5,127
and General Manager 1994 116,223 53,262 3,000/0 5,149
Catamount Energy
Corporation
(Subsidiary of the Company)
</TABLE>
(1) - The principal positions listed were held as of December 31, 1996.
(2) - Includes compensation deferred at the election of executive officers
named, and includes for Mr. Young - directors' retainers and fees earned
from VELCO and compensation for services performed for Vermont Yankee for
which the Company was reimbursed.
(3) - Includes incentive awards by Catamount Energy Corporation, as follows
for: A: 1996 - $10,000, 1995 - $17,500; B: 1996 - $5,000; C: 1996 -
$5,000, 1995 - $17,500; E: 1996 - $27,946, 1995 - $42,378, 1994 - $53,262.
(4) - The total amounts shown in this column for 1996 are comprised as
follows:
- Company matching contributions to the Employee Savings and Investment
Plan (401(k)) includes for A: $6,125; C: $4,437; D: $4,526; E: $5,135.
- Taxable term cost on executive split-dollar insurance. (An insurance
plan that gives both employer and employee an interest in the policy death
benefit on the employee's life) for A: $781; B: $482; C: $174; D: $724; E:
$355.
- Includes accrued above-market interest on deferred compensation for
D: $438.
- Pay-in-lieu of taking vacation based on Company policy for employees
who qualify for C: $7,519 and D: $4,395.
(5) - Compensation data for Mr. Boyle is provided only for 1996 and a
portion of 1995 because he was employed by the Company commencing September
23, 1995.
STOCK OPTIONS
-------------
The following table sets forth stock options granted to the Company's
current most highly compensated executive officers during 1996 under the
Company's 1988 Stock Option Plan for Key Employees. Under SEC regulations,
companies are required to project an estimate of appreciation of the
underlying shares of stock during the option term. The Company has chosen
a binomial model approved by the SEC. However, the ultimate value will
depend on the market value of the Company's stock at a future date, which
may or may not correspond to the projections below. Under this plan, no
Stock Appreciation Rights ("SARs") have been granted.
Option/Stock Appreciation Rights Grants Table
<TABLE>
<CAPTION>
Option/SAR Grants in Last Fiscal Year
Individual Grants
---------------------------------------------
% of
Number of Total
Securities Options/
Underlying SARs
Options/ Granted to Exercise Grant
SARs Employees Or Base Expira- Date
Granted In Fiscal Price tion Present
Name (#) 1/ Year ($/Sh) Date Value 2/
- - - -------------------- ---------- --------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C>
Robert H. Young 12,000/0 28.6% $14.00 5/07/06 $22,730.
Francis J. Boyle 5,900/0 14.0 14.00 5/07/06 11,176.
Joseph M. Kraus 3,550/0 8.4 14.00 5/07/06 6,724.
Thomas J. Hurcomb 3,550/0 8.4 14.00 5/07/06 6,724.
L. Douglas Barba 3,550/0 8.4 14.00 5/07/06 6,724.
</TABLE>
1/ A total of 41,975 shares were awarded to all plan participants in
1996. Stock Options are exercisable in whole or in part from the date of
the grant for a period of ten years and one day.
2/ Per a binomial model as certified by an independent consultant. The
assumptions used for the Model are as follows: Volatility-.1756 based
on monthly stock prices for the period of July 1993 to July 1996; Risk
free rate of return-6.25%; Dividend Yield-6.93% over the period of July
1993 to July 1996; and a ten year exercise term.
The following table sets forth stock options exercised by the
Company's Chief Executive Officer and the four other most highly
compensated executive officers during 1996, and the number and value of
all unexercised options at year-end. The value of "in-the-money"
options refers to options having an exercise price which is less than
the market price of the Company's Common Stock on December 31, 1996.
Option/SAR Exercises and Year-end Value Table
- - - ---------------------------------------------
<TABLE>
<CAPTION>
Aggregated Option/SAR Exercises in Last Fiscal Year
and FY-End Option/SAR Value
---------------------------------------------------
(a) (b) (c) (d) (e)
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs Options/SARs
At FY-End (#) At FY-End ($)
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise (#) Realized($)1/ Unexercisable Unexercisable
- - - ------------------- --------------- ------------- ------------- ------------
<S> <C> <C> <C> <C>
Robert H. Young - - 34,500/0 -/-
Francis J. Boyle - - 5,900/0 -/-
Joseph M. Kraus - - 11,050/0 -/-
Thomas J. Hurcomb - - 24,550/0 -/-
L. Douglas Barba - - 12,550/0 -/-
</TABLE>
1/ The dollar values in columns (c) and (e) 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 at exercise or
fiscal year end, respectively.
Officers' Insurance and Supplemental Retirement Plan
The Officers' Insurance and Supplemental Retirement Plan (the "SERP")
is designed to supplement the retirement benefits available through the
Company Pension Plan to the Company's officers. The SERP is a part of the
Company's overall strategy for attracting and maintaining top managerial
talent in the utility industry. Under this SERP, the named executive
officers in the Summary Compensation Table are covered, while employed,
by life insurance at the following multiple of salary: Mr. Young, four
times; Messrs. Boyle, Hurcomb, Kraus and Barba, three times.
Under the SERP, each officer is entitled to receive, upon retirement
at age 65, fifteen annual payments in amounts equal to a specified
percentage of the officer's final year's Base Salary (not including
variable pay, options or other form of remuneration). The applicable
percentages for the named executive officers in the Summary Compensation
Table are as follows: Mr. Young, 44%; Messrs. Boyle, Hurcomb, Kraus and
Barba, 33%. A reduced benefit is available at age 60 for officers who
attain age 55 with ten years of service. A death benefit of $100,000
is also provided to vested retirees under this SERP. The SERP is
financed through the Company's acquisition of corporate-owned life
insurance.
Shown below is the estimated Company provided benefit payable under
the SERP for the named executive officers in the Summary Compensation
Table, assuming they were to retire at age 65, and based on assumed final
base pay amount:
<TABLE>
<CAPTION>
Assumed Final
Annual Base Pay 33% 44%
--------------- ---------- ---------
$ $ $
--------------- ---------- ---------
<S> <C> <C>
80,000 26,400 35,200
100,000 33,000 44,000
120,000 39,600 52,800
140,000 46,200 61,600
160,000 52,800 70,400
180,000 59,400 79,200
200,000 66,000 88,000
220,000 72,600 96,800
240,000 79,200 105,600
260,000 85,800 114,400
</TABLE>
Pension Plan
The Pension Plan of Central Vermont Public Service Corporation and
Its Subsidiaries (the "Pension Plan") is a defined benefit plan which
covers employees, among others, who are officers. The Company pays the
full cost of the Pension Plan.
The table below shows the annual amounts payable under the present
provisions of the Pension Plan as amended through December 31, 1996,
based on Final Average Earnings for various years of service, assuming
the employee would retire at age 65 in 1997.
<TABLE>
<CAPTION>
Assumed Years of Service
5-Year Final -----------------------------------------------------
Average Earnings 15 20 25 30 35
---------------- ---------- -------- ------- ------ ------
<S> <C> <C> <C> <C> <C>
$ 80,000 $18,692 $24,932 $31,154 $37,385 $39,385
100,000 23,942 31,923 39,904 47,885 50,385
120,000 29,192 38,923 48,654 58,385 61,385
140,000 34,442 45,923 57,404 68,885 72,385
160,000 (1) 39,692 52,923 66,154 79,385 83,385
</TABLE>
________
(1) Internal Revenue Code Section 401(a)(17) limits earnings used to
calculate qualified plan benefits to $150,000 for 1995 and 1996, and
$160,000 for 1997.
Final Average Earnings is the highest five-year average of
consecutive years' Base Salary as set forth in the Salary column of
the Summary Compensation Table over an employee's career with the
Company. Variable pay or other forms of compensation are not included.
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, 1996, under the
Pension Plan for the named executive officers in the Summary
Compensation Table were as follows: Mr. Young, 9.6 years; Mr. Boyle,
1.2 years; Mr. Kraus, 15.5 years; Mr. Hurcomb, 29 years; and Mr. Barba,
4.4 years.
Contracts with Management
The Company has entered into severance compensation agreements with
Messrs. Young, Boyle, Hurcomb, Kraus, Barba and four other executive
officers of the Company. The agreements have a five-year 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. Young, Boyle, Hurcomb, Kraus, Barba and one other
executive officer will receive 2.999 times and three other executive
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.
The provisions of the agreement do not apply if the executive
officer retires, dies, is disabled, voluntarily resigns, or is dismissed
for cause following a change in control. 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. The 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 executive 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 exercisable in the event of a change of control
of the Company.
A change of control occurs under the agreements 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 key managers of the Company. 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, certain
managers 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. Currently, seventeen managers are
subject to the plan.
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.
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.
Mr. Hurcomb, who elected to participate, will receive an estimated
annual Company-provided benefit, payable at age 65, of $13,900. Since
this benefit does not apply to all of the named executive officers, it
is not reflected in any of the pension tables.
INDEPENDENT PUBLIC ACCOUNTANTS
The firm of Arthur Andersen LLP, independent public accountants,
have audited the accounts of CVPS for 1996. They have served as the
Company's independent public accountants since 1985. Representatives of
Arthur Andersen LLP 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.
1998 ANNUAL MEETING
DATE FOR SUBMISSION OF STOCKHOLDER PROPOSALS
A stockholder desiring to present a proposal at the Company's 1998
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
November 27, 1997. 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.
OTHER MATTERS
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
effecting 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 judgement. 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
ROBERT H. YOUNG
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 6, 1997.
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>
SCHEDULE A
CENTRAL VERMONT PUBLIC SERVICE CORPORATION
STOCK OPTION PLAN FOR KEY EMPLOYEES
ARTICLE 1
Purpose and Establishment of the Plan
Section 1.1 Central Vermont Public Service Corporation (the
"Company") establishes this Stock Option Plan for Key Employees (the
"Plan") with the intent of advancing the best interests of the Company
and its subsidiaries by providing key employees who have substantial
responsibility for corporate management and growth with additional
incentives through the grant of options to purchase shares of the
Company's Common Stock, $6.00 par value, (the "Common Stock"), thereby
increasing the personal stake of such key employees in the continued
success and growth of the Company and encouraging them to remain in the
employ of the Company.
Section 1.2 Effective May 6, 1997, the Company establishes a Stock
Option Plan for Key Employees as described herein. The Plan provides
for the grant of stock options which are not intended to satisfy the
requirements of Section 422 of the Internal Revenue Code of 1986, as
amended from time to time (the "Code").
ARTICLE 2
Definitions
For the purposes of the Plan, the following terms shall have the
meanings provided herein:
Section 2.1 "Board" means the Board of Directors of the Company.
Section 2.2 "Code" means the Internal Revenue Code of 1986 as
amended from time to time, and regulations and rulings under the Code.
Section 2.3 "Committee" means the Compensation Committee of the
Board or such other committee as may be appointed by the Board to
administer the Plan; provided that the Committee shall consist of all
non-employee directors as contemplated by both Rule 16b-3 under the
Exchange Act and Section 162(m) of the Code.
Section 2.4 "Company" means Central Vermont Public Service
Corporation and its subsidiaries or any successor thereto.
Section 2.5 "Disability" means permanent and total disability as
defined by the Company's benefits program for disability insurance
coverage.
Section 2.6 "Exchange Act" means the Securities Exchange Act of
1934, as amended from time to time.
Section 2.7 "Fair Market Value" means the closing price for the
Common Stock as quoted in the Eastern Edition of the Wall Street Journal
or in a similarly readily available public source for the trading day
immediately prior to the applicable transaction date under the Plan. If
no trading of Shares occurred on such date, the closing price per share
for the preceding day on which sales of Shares occurred shall be used.
Section 2.8 "Option" means Stock Option.
Section 2.9 "Optionee" means the person or persons who have the
right to exercise the Option granted under this Plan.
Section 2.10 "Participant" means the key employee covered under
this Plan.
Section 2.11 "Retirement" means attaining the same age as defined
in the Pension Plan of Central Vermont Public Service Corporation and
Its Subsidiaries.
Section 2.12 "Share(s)" means the shares of the Company's Common
Stock, $6.00 par value.
Section 2.13 "Stock Option" means an option granted under the
Plan to purchase Shares and which is intended not to qualify as an
incentive stock option under Section 422 of the Code.
ARTICLE 3
Administration
Section 3.1 (a) The Plan shall be administered by the Committee.
The Committee shall have authority in its sole discretion, subject to
and not inconsistent with the express provisions of the Plan, to
administer the Plan and to exercise all the powers and authorities
either specifically granted to it under the Plan or necessary or
advisable in the administration of the Plan, including without
limitation, authority to select the Participants to be granted Options,
to determine the size and terms of the Options to be granted to each
participant selected, to determine the time or times when the Options
will be granted, the period or periods during which Options will be
exercisable, and to prescribe the form of the agreements embodying
Options granted under the Plan.
(b) The Committee shall be authorized to interpret the Plan and
establish, amend and rescind any rules and regulations relating to the
Plan, and to make any other determinations which it believes necessary
or advisable for the administration of the Plan. The Committee may
correct any defect, supply any omission or reconcile any inconsistency
in the Plan or in any Option in the manner and to the extent the
Committee deems necessary or desirable to carry it into effect.
(c) In no event, however, shall the Committee have the right to
grant dividend equivalents in respect of Options or to cancel
outstanding Options for the purpose of replacing or regranting such
Options with a purchase price that is less than the purchase price of
the original Option.
(d) The Committee shall maintain a written record of its
proceedings. Any decision of the Committee in the administration of the
Plan, as described herein, shall be final and conclusive and binding on
all persons affected by the decision, including the Company, any
Participant or Optionee or any person claiming any rights under the Plan
from or through any Participant or Optionee. The Committee may delegate
to one or more of its members or to any officer or officers of the
Company such administrative duties under the Plan as the Committee may
deem advisable.
ARTICLE 4
Eligibility and Participation
Section 4.1 Options may be granted to key employees as the
Committee may from time to time select. Any Participant shall be
eligible to receive one or more Options subject to the limitation set
forth in Article 5. In determining the persons to whom Options are to
be granted and the number of Shares subject to each Option grant, the
Committee shall take into consideration the person's present and
potential contribution to the success of the Company and such other
factors as the Committee may deem proper and relevant. For purposes of
participation in the Plan, the term Company shall include any entity
that is directly or indirectly controlled by the Company or any entity,
including an acquired entity, in which the Company has a significant
equity interest, as determined by the Committee.
ARTICLE 5
Limitations on Grants
Section 5.1 There may be delivered under the Plan an aggregate
number of Shares of not more than 350,000 Shares, subject to adjustment
as provided in Section 5.2. The aggregate number of Shares that may be
covered by Options granted to a single individual under the Plan shall
not exceed 350,000 Shares. Shares delivered pursuant to the Plan may
consist in whole or in part of authorized and unissued Shares or
reacquired Shares and held in treasury and no fractional Shares shall be
delivered under the Plan. Cash may be paid in lieu of any fractional
Shares in the exercise of Options under the Plan. In the event that
Options shall be forfeited or canceled, or Options which shall terminate
or expire without being exercised in whole or in part, new Options may
be granted covering the Shares that were either not purchased and as
such forfeited, canceled, terminated or expired. For purposes of this
Section, the number of Shares deemed to be delivered under the Plan upon
the exercise of an Option shall equal the number of Shares as to which
the Option is exercised less the number of Shares tendered, if any,
pursuant to Section 6.6. However, the number of Shares deemed exercised
by the Optionee under the applicable Option(s) shall be the full number
of Shares specified in the exercise notice required under Section 6.6.
Section 5.2 In the event of any change in the number of
outstanding Shares or Share price by reason of any stock split, stock
dividend, recapitalization, merger, consolidation, reorganization,
combination or exchange of equity securities or other distribution
(other than normal cash dividends) of the Company assets to
stockholders, or any other similar change, or if there are limitations
on the numbers or kinds of Shares that may be delivered as set forth in
Section 5.1 under the Plan, or in the exercise price per Share relating
thereto, an adjustment shall be made by the Committee to carry out the
intent of the Plan by providing each Participant with the same value of
the incentive Options as was intended through previous Option grant(s).
Any such adjustments shall be conclusive and binding for all purposes of
the Plan.
ARTICLE 6
Terms and Conditions of Stock Options
Section 6.1 An Option under the Plan shall be in such form as the
Committee may from time to time approve. Each Option shall be subject
to the terms and conditions provided in this Article 6 and shall contain
such other or additional terms and conditions as the Committee may deem
desirable, but in no event shall such terms and conditions be
inconsistent with the Plan and, in the case of Options, require the
Options to comply with the provisions of the Code applicable to
incentive stock options as described in Section 422 of the Code.
Section 6.2 The purchase price per Share under an Option shall be
determined by the Committee, but may not be less than 100 percent of the
Fair Market Value of a Share on the date the Option is granted; provided
however, that in the case of any Option granted hereunder prior to
either or both of the stockholder approval and authorization by the
Vermont Public Service Board contemplated by Article 8 hereof, for the
purpose of determining the purchase price per share, such Option shall
be deemed to have been granted on the date of the earlier to occur of
such approval and authorization.
Section 6.3 The period during which an Option may be exercised
shall be fixed by the Committee; provided that no Option shall be
exercisable after the expiration of ten years from the date such Option
is granted, except as otherwise provided.
Section 6.4 An Optionee's Options shall expire three months after
the termination of the Optionee's employment for any reason other than
death, Disability, or Retirement and shall be limited to the shares
which could have been purchased by the Optionee at the date of
termination of employment.
Section 6.5 (a) Upon the termination of an Optionee's employment
by reason of death, Disability, or Retirement, Options held on the
termination date by such Optionee shall be exercisable, irrespective of
whether the Options were fully exercisable on that date. The Optionee's
Options shall expire unless exercised within one year from the date of
such termination of employment.
(b) The Committee may, at any time on or before the termination of
the exercise period of an Optionee's Options, extend the exercise period
for any Optionee whose employment has terminated due to death,
Disability or Retirement. If so extended, the term of the exercise
period shall expire on the date specified by the Committee, which date
shall be no later than the date which is sixty (60) months following the
date of the Participant's termination of employment. In no event may
the term of an Option including extensions, exceed the term set forth in
Section 6.3 above.
Section 6.6 An Option may be exercised in whole or in part from
time to time during the Option period (or, if determined by the
Committee, in specified installments during the Option period) by giving
written notice of exercise to the Secretary of the Company specifying
the number of Shares to be purchased. Notice of exercise of an Option
must be accompanied by payment in full of the purchase price either by
cash or such other method as may be permitted by the Committee,
including but not limited to (i) personal check, (ii) tendering (either
actually or by attestation) Shares owned by the Optionee having a Fair
Market Value at the date of exercise equal to such purchase price, (iii)
a third-party exercise procedure, or (iv) in a combination of the
foregoing. An Optionee shall have the rights of a shareholder only with
respect to Shares for which certificates have been issued to such
person.
Section 6.7 (a) As a condition to the delivery of any Shares
pursuant to the exercise of an Option, the Committee may require that
the Optionee, at the time of such exercise, pay to the Company an amount
to satisfy any applicable tax withholding obligation or such greater
amount of withholding as the Committee shall determine from time to
time, or the Committee may take such other action as it may deem
necessary to satisfy any such withholding obligations.
(b) The Committee, in its sole discretion, may permit or require
an Optionee to satisfy all or a part of the tax withholding obligations
incident to the exercise of an Option by having the Company withhold a
portion of the Shares that would otherwise be issuable to the Optionee.
Such Shares shall be valued based on their Fair Market Value on the date
the tax withholding is required to be made. Any such Share withholding
with respect to an Optionee subject to Section 16(a) of the Exchange Act
shall be subject to such limitations as the Committee may impose to
comply with the requirements of Section 16 of the Exchange Act.
ARTICLE 7
General Provisions
Section 7.1 Each grant under the Plan shall be subject to the
requirement that if the Committee shall determine, at any time, that:
(a) the listing, registration or qualification of the Shares subject or
related thereto upon any securities exchange or under any state or
federal law, or (b) the consent or approval of any governmental
regulatory body, or (c) an agreement by the Participant with respect to
the disposition of Shares is necessary or desirable as a condition of,
or in connection with, the granting or the issuance or purchase of
Shares thereunder, such grant may not be consummated in whole or in part
unless such listing, registration, qualification, consent, approval or
agreement shall have been effected or obtained free of any conditions
not acceptable to the Committee.
Section 7.2 The Board of Directors may discontinue the Plan at any
time, and may amend it from time to time, but no amendment, without the
approval by stockholders, may (a) increase the total number of Shares
which may be issued under the Plan, except as provided in Section 5.2
hereof, (b) change the class of Participants of the Company to whom
options may be granted, or (c) cause the Plan to no longer comply with
the Exchange Act or any other federal or state statutory or regulatory
requirements.
Section 7.3 Subject to the terms of the Plan, the Committee may
modify outstanding grants under the Plan or accept the surrender of
outstanding grants and make new grants in substitution for them.
Notwithstanding the foregoing, no modification of any grant shall
adversely alter or impair any rights or obligations of the Participant
without the Participant's consent.
Section 7.4 Any grant under the Plan may be canceled at any time
with the consent of the Participant and a new grant may be provided to
such Participant in lieu thereof.
Section 7.5 Shares distributed pursuant to the Plan shall be made
available from authorized but unissued shares or from shares purchased
or otherwise acquired by the Company, as shall be determined from time
to time by the Committee.
Section 7.6 Participants under the Plan, unless otherwise provided
by the Plan, shall have no rights as shareholders by reason thereof
unless and until certificates for shares of stock are issued to them.
Section 7.7 Except as expressly provided in the Plan, no grant of
Options shall be transferable except by will, the laws of descent and
distribution or a qualified domestic relations order ("QDRO") as defined
by the Code or Title I of the Employee Retirement Income Security Act of
1974, as amended, or the rules thereunder. During the lifetime of the
Optionee, except as expressly provided in the Plan, grants under the
Plan shall be exercisable only by such Optionee or by the guardian or
legal representative of such Optionee or pursuant to a QDRO.
Section 7.8 Determinations by the Committee under the Plan
(including without limitation, determinations of the persons to receive
grants, the form, amount and timing of such grants, and the terms,
conditions and provisions of such grants and the agreements evidencing
the same) need not be uniform and may be made by it selectively among
persons who receive or are eligible to receive grants under the Plan,
whether or not such persons are similarly situated.
Section 7.9 No employee or other person shall have any claim or
right to be granted Options under the Plan. Neither the Plan nor any
action taken hereunder shall be construed as giving any Participant any
right to be retained in the employ of the Company or any subsidiary or
affect any right of the Company or any subsidiary to terminate any
Participant's employment.
Section 7.10 At the time of grant and by accepting any grant of
Options under the Plan, each Participant and each person claiming
through such Participant shall be conclusively deemed to have indicated
such Participant's acceptance and ratification of, and consent to, any
action taken under the Plan by the Company, the Board, or the Committee.
Section 7.11 The Plan shall become effective as of May 6, 1997
subject to approval by stockholders at the Company's Annual Meeting of
Stockholders. No grant may be given under the Plan after May 6, 2006,
but grants theretofore granted may extend beyond such date.
Section 7.12 Unless otherwise determined by the Committee, the
Plan shall be unfunded and shall not create (or be construed to create)
a trust or a separate fund or funds. The Plan shall not establish any
fiduciary relationship between the Company and any Participant, Optionee
or other person. To the extent any person holds any rights by virtue of
an Option granted under the Plan, such rights shall constitute general
unsecured liabilities of the Company and shall not confer upon such
person any right, title or interest in any assets of the Company.
Section 7.13 The Plan may be amended at any time and from time to
time by the Board and without the approval of stockholders of the
Company, except that no amendment which increases the aggregate number
of shares which may be delivered pursuant to the Plan or which, in the
absence of stockholder approval, would cause the Plan not to comply with
the Exchange Act or Section 162(m) of the Code shall be effective unless
and until the same is approved by the stockholders of the Company. No
amendment of the Plan shall materially adversely affect any of the
rights or obligations of any person, without such person's written
consent under any Option granted under the Plan.
Section 7.14 The Plan shall terminate upon the earlier of the
following dates or events to occur:
(a) upon the adoption of a resolution of the Board terminating the
Plan; or
(b) the tenth anniversary of obtaining stockholder approval.
After termination of the Plan, no Options may be granted. No
termination of the Plan shall materially adversely affect any of the
rights or obligations of any person, without such person's written
consent, under any Option theretofore granted under the Plan.
Section 7.15 The Plan shall be submitted to the stockholders of
the Company for approval. Shares may not be delivered under the Plan
unless and until such delivery is authorized by the Vermont Public
Service Board. Options may be granted hereunder prior to such approval
and authorization but shall be contingent upon obtaining such approval
and authorization. The stockholders of the Company shall be deemed to
have approved the Plan only if it is approved at a meeting of the
stockholders duly held by vote taken in the manner required by the laws
of the State of Vermont.
Section 7.16 The provisions of the Plan shall take precedence over
any conflicting provision contained in an Option. The Plan shall be
governed by and construed in accordance with the laws of the State of
Vermont. If any term or provision of the Plan is held by a court of
competent jurisdiction to be invalid, void or unenforceable, the
remainder of the term and provisions will remain in full force and
effect and will in no way be affected, impaired or invalidated.
ARTICLE 8
Acceleration and Change in Control
Section 8.1 Notwithstanding anything herein to the contrary, if a
change in control of the Company occurs, or if the Committee determines
in its sole discretion that an acceleration event has occurred, then all
Stock Options shall become fully exercisable as of the date such change
in control occurred or the Committee determines that an acceleration
event has occurred.
For the purposes of the Plan, an acceleration event may be deemed
to have occurred if the Board of Directors determines that a particular
event involving the Company has or will change the Company's (a) main
core of business, (b) nature of its products and/or services, or (c)
typical consumer of its products and/or services, or (d) business so
profoundly that the Board of Directors decides that an acceleration
event has occurred.
For purposes of the Plan a change in control of the Company shall
be deemed to have occurred if the conditions set forth in any one of the
following paragraphs shall have been satisfied:
(i) the acquisition, directly or indirectly, of securities of the
Company representing 20% or more of the combined voting power of the
Company's then outstanding securities by any third person including a
"Group" as that term is used in Section 13(d)(3) of the Securities
Exchange Act of 1934; or
(ii) a change in the membership of the Board of Directors over a
period of two consecutive years in which the members of the Board at the
beginning of the period cease for any reason to be at least two-thirds
of the Board at the end of the period; or
(iii) the acquisition by a third person either directly or
indirectly, of the right to own, control or hold with power to vote 10%
or more of the outstanding voting securities of the Company, if
immediately subsequent to the acquisition of the Company's voting
securities by such third person: (a) such third person shall be a
"public utility holding company" within the meaning of the 1935 Act,
whether or not exempt from registration thereunder, or (b) the Company
shall be in danger of losing its exemption under the 1935 Act or shall
otherwise be required to register under the 1935 Act.
<PAGE>
SCHEDULE B
CENTRAL VERMONT PUBLIC SERVICE CORPORATION
RESTRICTED STOCK PLAN FOR
NON-EMPLOYEE DIRECTORS
AND KEY EMPLOYEES
ARTICLE 1
Purpose and Establishment of the Plan
Section 1.1 Central Vermont Public Service Corporation (the
"Company") establishes this Restricted Stock Plan for Non-employee
Directors and Key Employees (the "Plan") with the intent of advancing
the best interests of the Company and its subsidiaries by providing key
employees and members of the Board of Directors who have substantial
responsibility for corporate management and growth with additional
incentives through the grant of Restricted Stock, thereby increasing the
personal stake of such key employees and members of the Board of
Directors in the continued success and growth of the Company.
Section 1.2 Effective May 6, 1997, the Company establishes a
Restricted Stock Plan for Non-employee Directors and Key Employees as
described herein. The Plan provides for the grant of Restricted Stock.
ARTICLE 2
Definitions
For the purposes of the Plan, the following terms shall have the
meanings provided herein:
Section 2.1 "Board" means the Board of Directors of the Company.
Section 2.2 "Code" means the Internal Revenue Code of 1986 as
amended from time to time, and regulations and rulings under the Code.
Section 2.3 "Committee" means the Compensation Committee of the
Board or such other committee as may be appointed by the Board to
administer the Plan, provided that the Committee shall consist of all
non-employee directors as contemplated by both Rule 16b-3 under the
Exchange Act and Section 162(m) of the Code.
Section 2.4 "Company" means Central Vermont Public Service
Corporation and its subsidiaries or any successor thereto.
Section 2.5 "Disability" means permanent and total disability as
defined by the Company's benefits program for disability insurance
coverage.
Section 2.6 "Exchange Act" means the Securities Exchange Act of
1934, as amended from time to time.
Section 2.7 "Participant" means the person whether a key employee
or Board member of the Company covered under this Plan.
Section 2.8 "Restricted Stock" means the Company's Common Stock
with terms and conditions granted to a Participant under this Plan.
Section 2.9 "Retirement" means for employees other than members of
the Board of Directors, attaining the same age as defined in the Pension
Plan of Central Vermont Public Service Corporation and Its Subsidiaries,
and for members of the Board of Directors normally attaining the age of
70 as defined in the By-laws of the Company.
Section 2.10 "Share(s)" means the shares of the Company's Common
Stock, $6.00 par value.
ARTICLE 3
Administration
Section 3.1 (a) The Plan shall be administered by the Committee.
The Committee shall have authority in its sole discretion, subject to
and not inconsistent with the express provisions of the Plan, to
administer the Plan and to exercise all the powers and authorities
either specifically granted to it under the Plan or necessary or
advisable in the administration of the Plan, including without
limitation, authority to select the Participants to be granted
Restricted Stock, to determine the amount and terms of the Restricted
Stock to be granted to each participant selected, to determine the time
or times when the Restricted Stock will be granted, the holding period
on the Restricted Stock, and to prescribe the form of the agreements to
the Restricted Stock granted under the Plan.
(b) The Committee shall be authorized to interpret the Plan and
the Restricted Stock granted under the Plan and to establish, amend and
rescind any rules and regulations relating to the Plan, and to make any
other determinations which it believes necessary or advisable for the
administration of the Plan. The Committee may correct any defect,
supply any omission or reconcile any inconsistency in the Plan or
Restricted Stock in the manner and to the extent the Committee deems
necessary or desirable to carry it into effect.
(c) In no event, however, shall the Committee have the right to
grant dividend equivalents in respect of Restricted Stock or to cancel
Restricted Stock for the purpose of replacing or regranting such
Restricted Stock or changing the holding period by requiring a longer
duration than originally declared or changing any of the conditions
which changes or prolongs the restrictions.
(d) The Committee shall maintain a written record of its
proceedings. Any decision of the Committee in the administration of the
Plan, as described herein, shall be final and conclusive and binding on
all persons affected by the decision, including the Company, any
Participant or any person claiming any rights under the Plan from or
through any Participant. The Committee may delegate to one or more of
its members or to any officer or officers of the Company such
administrative duties under the Plan as the Committee may deem
advisable.
ARTICLE 4
Eligibility and Participation
Section 4.1 Restricted Stock may be granted to key employees and
members of the Board of Directors as the Committee may from time to time
select. Any Participant shall be eligible to receive one or more Shares
of Restricted Stock, subject to the limitation set forth in Article 5.
In determining the persons to whom Restricted Stock are to be granted
and the number of Shares granted, the Committee shall take into
consideration the person's present and potential contribution to the
success of the Company and such other factors as the Committee may deem
proper and relevant. For purposes of participation in the Plan, the
term Company shall include any entity that is directly or indirectly
controlled by the Company or any entity, including an acquired entity,
in which the Company has a significant equity interest, as determined by
the Committee.
ARTICLE 5
Limitations on Grants
Section 5.1 There may be delivered under the Plan an aggregate
number of Restricted Stock of not more than 70,000 Shares, subject to
adjustment as provided in Section 5.2. The aggregate number of Shares
that may be covered by Restricted Stock granted to a single individual
under the Plan shall not exceed 70,000 Shares. Restricted Stock
delivered pursuant to the Plan may consist in whole or in part of
authorized and unissued Shares or reacquired Shares and held in treasury
and no fractional Shares shall be delivered under the Plan. In the
event that Restricted Stock shall be forfeited or canceled, new
Restricted Stock may be granted covering the Shares that were forfeited,
canceled, terminated or expired.
Section 5.2 In the event of any change in the number of
outstanding Shares or Share price by reason of any stock split, stock
dividend, recapitalization, merger, consolidation, reorganization,
combination or exchange of equity securities or other distribution
(other than normal cash dividends) of the Company assets to
stockholders, or any other similar change, then an adjustment shall be
made by the Committee to carry out the intent of the Plan by providing
each Participant with the same value of the incentive Shares as was
intended under the previous grant(s) of Restricted Stock. Any such
adjustments shall be conclusive and binding for all purposes of the
Plan.
ARTICLE 6
Terms and Conditions of Restricted Stock Grants
Section 6.1 Restricted Stock may be granted to the Participants as
the Committee may from time to time select. A Participant shall be
eligible to receive one or more Shares of Restricted Stock. In
determining the Participants to whom Restricted Stock is to be granted,
the number of Shares subject to the grant, and the conditions and terms
of the restrictions on the Shares, the Committee shall take into
consideration the Participant's present and potential contribution to
the success of the Company and such other factors as the Committee may
deem proper and relevant.
Section 6.2 The Restricted Stock shall have the restrictions noted
on the face of the certificates, and the Shares shall be issued in the
name of the Participant and deposited with the Company during the period
of restriction.
Section 6.3 The Restricted Stock shall be deemed to have been
earned by a Participant upon meeting the terms and conditions placed on
the stock at the time of grant. The Committee shall determine and
certify that the terms and conditions have been met by the Participant
and at such time the restrictions shall lapse for all or part of the
Shares granted upon such satisfaction by the Committee.
Section 6.4 During the period subject to the restrictions set
forth in this Article, the Participant shall be entitled to receive the
dividends and vote the Shares that have been issued in the name of that
Participant.
Section 6.5 If during the period of restriction, the Participant's
employment terminates other than by death, Disability or Retirement, the
Participant forfeits any right to the Restricted Stock.
Section 6.6 If during the period of restriction, the Participant's
employment with the Company terminates either due to death, Disability,
or Retirement, all restrictions on the Restricted Stock lapse and the
Participant shall be deemed to have earned all Restricted Stock on the
date of the Participant's death, disability or Retirement.
ARTICLE 7
General Provisions
Section 7.1 Each grant under the Plan shall be subject to the
requirement that if the Committee shall determine, at any time, that:
(a) the listing, registration or qualification of the Shares subject or
related thereto upon any securities exchange or under any state or
federal law, or (b) the consent or approval of any governmental
regulatory body, or (c) an agreement by the Participant with respect to
the disposition of Shares is necessary or desirable as a condition of,
or in connection with, the granting or the issuance or purchase of
Shares thereunder, such grant may not be consummated in whole or in part
unless such listing, registration, qualification, consent, approval or
agreement shall have been effected or obtained free of any conditions
not acceptable to the Committee.
Section 7.2 The Board of Directors may discontinue the Plan at any
time, and may amend it from time to time, but no amendment, without the
approval by stockholders, may (a) increase the total number of Shares
which may be issued under the Plan, except as provided in Section 5.2
hereof, (b) change the class of Participants of the Company to whom
grants may be granted, or (c) cause the Plan to no longer comply with
the Exchange Act or any other federal or state statutory or regulatory
requirements.
Section 7.3 Subject to the terms of the Plan, the Committee may
modify outstanding grants under the Plan or accept the surrender of
outstanding grants and make new grants in substitution for them.
Notwithstanding the foregoing, no modification of any grant shall
adversely alter or impair any rights or obligations of the Participant
without the Participant's consent.
Section 7.4 Any grant under the Plan may be canceled at any time
with the consent of the Participant and a new grant may be provided to
such Participant in lieu thereof.
Section 7.5 Restricted Stock distributed pursuant to the Plan
shall be made available from authorized and unissued Shares or
reacquired and held in treasury, as shall be determined from time to
time by the Committee.
Section 7.6 Except as expressly provided in the Plan, no grant of
Restricted Stock shall be transferable except by will, the laws of
descent and distribution or a qualified domestic relations order as
defined by the Code or Title I of the Employee Retirement Income
Security Act of 1974, as amended, or the rules thereunder.
Section 7.7 Determinations by the Committee under the Plan
(including without limitation, determinations of the persons to receive
grants, the form, amount and timing of such grants, and the terms,
conditions and provisions of such grants and the agreements evidencing
the same) need not be uniform and may be made by it selectively among
persons who receive or are eligible to receive grants under the Plan,
whether or not such persons are similarly situated.
Section 7.8 No employee or other person shall have any claim or
right to be granted Restricted Stock under the Plan. Neither the Plan
nor any action taken hereunder shall be construed as giving any
Participant any right to be retained in the employ of the Company or any
subsidiary or affect any right of the Company or any subsidiary to
terminate any Participant's employment.
Section 7.9 At the time of grant and by accepting any grant of
Restricted Stock under the Plan, each Participant and each person
claiming through such Participant shall be conclusively deemed to have
indicated such Participant's acceptance and ratification of, and consent
to, any action taken under the Plan by the Company, the Board, or the
Committee.
Section 7.10 The Plan shall become effective as of May 6, 1997
subject to approval by stockholders at the Company's Annual Meeting of
Stockholders. No grant may be given under the Plan after May 6, 2006,
but grants theretofore granted may extend beyond such date.
Section 7.11 Unless otherwise determined by the Committee, the
Plan shall be unfunded and shall not create (or be construed to create)
a trust or a separate fund or funds. The Plan shall not establish any
fiduciary relationship between the Company and any Participant or other
person. To the extent any person holds any rights by virtue of
Restricted Stock granted under the Plan, such rights shall constitute
general unsecured liabilities of the Company and shall not confer upon
such person any right, title or interest in any assets of the Company.
Section 7.12 The Plan may be amended at any time and from time to
time by the Board and without the approval of stockholders of the
Company, except that no amendment which increases the aggregate number
of Shares which may be delivered pursuant to the Plan or which, in the
absence of stockholder approval, would cause the Plan not to comply with
the Exchange Act or Section 162(m) of the Code shall be effective unless
and until the same is approved by the stockholders of the Company. No
amendment of the Plan shall materially adversely affect any of the
rights or obligations of any person, without such person's written
consent, under the Restricted Stock granted under the Plan.
Section 7.13 The Plan shall terminate upon the earlier of the
following dates or events to occur:
(a) upon the adoption of a resolution of the Board terminating the
Plan; or
(b) the tenth anniversary of obtaining stockholder approval.
After termination of the Plan, no Restricted Stock may be granted. No
termination of the Plan shall materially adversely affect any of the
rights or obligations of any person, without such person's written
consent, under any Restricted Stock theretofore granted under the Plan.
Section 7.14 The Plan shall be submitted to the stockholders of
the Company for approval. Shares may not be delivered under the Plan
unless and until such delivery is authorized by the Vermont Public
Service Board. Restricted Stock may be granted hereunder prior to such
approval and authorization but shall be contingent upon obtaining such
approval and authorization. The stockholders of the Company shall be
deemed to have approved the Plan only if it is approved at a meeting of
the stockholders duly held by vote taken in the manner required by the
laws of the State of Vermont.
Section 7.15 The provisions of the Plan shall take precedence over
any conflicting provision contained on the Restricted Stock. The Plan
shall be governed by and construed in accordance with the laws of the
State of Vermont. If any term or provision of the Plan is held by a
court of competent jurisdiction to be invalid, void or unenforceable,
the remainder of the term and provisions will remain in full force and
effect and will in no way be affected, impaired or invalidated.
ARTICLE 8
Acceleration and Change in Control
Section 8.1 Notwithstanding anything herein to the contrary, if a
change in control of the Company occurs, or if the Committee determines
in its sole discretion that an acceleration event has occurred, then all
restrictions on Restricted Stock grants shall expire as of the date such
change in control occurred or the Committee determines that an
acceleration event has occurred.
For the purposes of the Plan, an acceleration event may be deemed
to have occurred if the Board of Directors determines that a particular
event involving the Company has or will change the Company's (a) main
core of business, or (b) nature of its products and/or services, or
(c) typical consumer of its products and/or services, or (d) business
so profoundly that the Board of Directors decides that an acceleration
event has occurred.
For the purposes of the Plan a Change in Control of the Company
shall be deemed to have occurred if the conditions set forth in any one
of the following paragraphs shall have been satisfied:
(i) the acquisition, directly or indirectly, of securities of the
Company representing 20% or more of the combined voting power of the
Company's then outstanding securities by any third person including a
"Group" as that term is used in Section 13(d)(3) of the Securities
Exchange Act of 1934; or
(ii) a change in the membership of the Board of Directors over a
period of two consecutive years in which the members of the Board at the
beginning of the period cease for any reason to be at least two-thirds
of the Board at the end of the period; or
(iii) the acquisition by a third person either directly or
indirectly, of the right to own, control or hold with power to vote 10%
or more of the outstanding voting securities of the Company, if
immediately subsequent to the acquisition of the Company's voting
securities by such third person: (a) such third person shall be a
"public utility holding company" within the meaning of the 1935 Act,
whether or not exempt from registration thereunder, or (b) the Company
shall be in danger of losing its exemption under the 1935 Act or shall
otherwise be required to register under the 1935 Act.
<PAGE>
APPENDIX
CENTRAL VERMONT PUBLIC SERVICE CORPORATION
Proxy for Annual Meeting of Stockholders, May 6, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints F. RAY KEYSER, JR., PRESTON LEETE SMITH
AND ROBERT H. YOUNG as proxies, each with the power of substitution, 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 26, 1997, at the Annual
Meeting of Stockholders to be held May 6, 1997, at the Holiday Inn,
Route 7 South, Rutland, Vermont, or at any and all adjournments thereof.
(1) APPROVAL of Stock Option plan for Key Employees. (Directors
recommend a vote FOR Article 1)
FOR AGAINST ABSTAIN
(2) APPROVAL of Restricted Stock Plan for Non-employee Directors and
Key Employees. (Directors recommend a vote FOR Article 2)
FOR AGAINST ABSTAIN
(3) ELECTION OF DIRECTORS (Directors recommend a vote FOR Article 3)
FOR Nominees listed below (except as written WITHHOLD AUTHORITY
to the contrary on the line provided below) to vote for all
nominees.
Directors whose terms will expire in year 2000:
Frederic H. Bertrand, Mary Alice McKenzie, Robert L. Barnett, Robert
G. Clarke
Director whose term will expire in year 1999: Patrick J. Martin
Instruction: To Withhold authority to vote for any individual
nominee, print that nominee's name on the line provided below:
_____________________________________________________________________
(Continued, and to be signed on reverse side)
- - - ------------------------------------------------------------------------
Detach Card
IMPORTANT
Please send in your proxy today.
Please vote, sign, date and return the proxy card above in the envelope
provided. If you do so now, the Company will avoid the expense of
follow-up solicitations.
<PAGE>
(4) 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 and 3.
Please vote, sign, date and return the proxy card promptly using the
enclosed envelope.
DATED ___________________, 1997
_______________________________
_______________________________
Signature of Stockholder(s)
Please sign exactly as the name(s) appear. Joint owners each must sign.
When signing as attorney, trustee, executor, administrator or guardian,
please give full title as such. If a corporation, please sign in full
corporate name and indicate the signer's office. If a partnership,
please sign in partnership name by authorized person.
- - - ------------------------------------------------------------------------
Detach Card
IMPORTANT
Please send in your proxy today.
Please vote, sign, date and return the proxy card above in the envelope
provided. If you do so now, the Company will avoid the expense of
follow-up solicitations.
