<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [_]
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 (S)240.14a-11(c) or (S)240.14a-12
Providence Energy Corporation
------------------------------------------------
(Name of Registrant as Specified In Its Charter)
------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
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>
PROVIDENCE ENERGY CORPORATION
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
JANUARY 15, 1998
The annual meeting of the shareholders of Providence Energy Corporation will
be held at the Providence Biltmore Grand Heritage Hotel, 17th Floor Ballroom,
Providence, Rhode Island, on Thursday, January 15, 1998 at 10 o'clock a.m.,
for the following purposes:
(1) To elect four directors for terms expiring at the time of the 2001
annual meeting.
(2) To transact such other business as may properly come before the
meeting.
Only shareholders of record at the close of business on December 3, 1997
will be entitled to notice of and to vote at the annual meeting.
/s/ Alycia L. Goody
Alycia L. Goody, Secretary
Providence, Rhode Island
December 16, 1997
IF YOU ARE UNABLE TO ATTEND THE ANNUAL MEETING IN PERSON, YOU ARE URGED TO
EXECUTE AND PROMPTLY RETURN THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED.
<PAGE>
PROVIDENCE ENERGY CORPORATION
PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS
JANUARY 15, 1998
This proxy statement has been prepared in connection with the solicitation
on behalf of the Board of Directors of Providence Energy Corporation (the
"Corporation") of proxies in the accompanying form to be used at the annual
meeting of the shareholders of the Corporation to be held January 15, 1998.
The cost of such solicitation will be borne by the Corporation. Solicitation
of proxies will be by mail, except for some personal solicitations which may
be made by regular officers and employees of the Corporation, without special
compensation. Any shareholder giving a proxy will have the right to revoke it
at any time prior to the voting thereof, by giving the Secretary notice in
writing of such revocation. Any shareholder may also revoke his or her proxy
in person by so notifying the Secretary at the annual meeting. Unless a proxy
received by the Board of Directors is so revoked, the shares represented by
such proxy will be voted at the annual meeting in accordance with the
specifications made thereon.
The address of the principal offices of the Corporation is 100 Weybosset
Street, Providence, Rhode Island 02903. The approximate date upon which this
proxy statement and related proxies are first to be sent to shareholders is
December 16, 1997.
VOTING AT MEETING
Only shareholders of record at the close of business on December 3, 1997
will be entitled to notice of and to vote at the annual meeting, and each such
shareholder will be entitled to one vote for each share registered in such
shareholder's name. On December 3, 1997, there were 5,881,441 shares of the
common stock of the Corporation outstanding and entitled to be voted at the
annual meeting.
ELECTION OF DIRECTORS
The Board of Directors is divided into three classes, with the terms of
office of each class ending in successive years. The terms of office of Mrs.
M. Anne Szostak and Messrs. Gilbert R. Bodell, Jr., Paul F. Levy and W. Edward
Wood will expire at the time of the 1998 annual meeting. The Executive
Committee of the Board of Directors has nominated Mrs. Szostak and Messrs.
Bodell, Levy and Wood for reelection at the annual meeting, to serve for terms
expiring at the 2001 annual meeting.
It is intended that stock in respect of which proxies are given pursuant to
this solicitation will be voted for the election of Mrs. Szostak and Messrs.
Bodell, Levy and Wood as members of the Board of Directors for terms expiring
at the time of the 2001 annual meeting. In the event that any of such nominees
should become unavailable for election, which is not now expected, a
substitute nominee or nominees may be designated by the Board of Directors.
Cumulative voting is not permitted in the election of directors.
<PAGE>
Certain information with respect to the nominees to be presented at the
annual meeting and the directors whose terms of office will continue after the
annual meeting is as follows:
<TABLE>
<CAPTION>
DIRECTOR EXPIRATION
NAME AND AGE PRINCIPAL OCCUPATION SINCE(1) OF TERM
------------ -------------------- -------- ----------
<S> <C> <C> <C>
Gilbert R. Bodell, Jr. ...(67) Chairman and former Presi- 1980 1998
dent, Frontier Manufactur-
[picture of Mr. Bodell] ing Company (textiles)
James H. Dodge............(57) Chairman since January 1992 1991 2000
and President and Chief
[picture of Mr. Dodge] Executive Officer of the
Corporation since August
1990; director of Capital
Properties, Inc. (real es-
tate leasing)
John H. Howland...........(51) President and Chief Execu- 1993 1999
tive Officer, Original
[picture of Mr. Howland] Bradford Soap Works, Inc.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
DIRECTOR EXPIRATION
NAME AND AGE PRINCIPAL OCCUPATION SINCE(1) OF TERM
------------ -------------------- -------- ----------
<S> <C> <C> <C>
Douglas H. Johnson......(54) Since October 1991: President 1993 1999
and Managing Partner, Van
[picture of Mr. Johnson] Leesten & Johnson, Inc.
(business and urban planning
consultants)
William Kreykes.........(59) Since December 1994: President 1996 1999
and Chief Executive Officer,
Lifespan Corporation (health
[picture of Mr. Kreykes] care system); from 1990 to
1994, President and Chief Ex-
ecutive Officer, Rhode Island
Hospital
Paul F. Levy............(47) From 1992 to 1995, Visiting 1995 1998
Lecturer, and from September
1995 to present, Adjunct Pro-
[picture of Mr. Levy] fessor, Massachusetts Insti-
tute of Technology; from 1987
to 1992: Executive Director,
Massachusetts Water Resources
Authority (a public authori-
ty)
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
DIRECTOR EXPIRATION
NAME AND AGE PRINCIPAL OCCUPATION SINCE(1) OF TERM
------------ -------------------- -------- ----------
<S> <C> <C> <C>
Romolo A. Marsella......(56) President, Marsella Develop- 1993 1999
ment Corporation (real estate
[picture of Mr. Marsella] development)
M. Anne Szostak.........(47) Since May 1994: Senior Vice 1995 1998
President, Fleet Financial
Group; from 1991 to 1995:
Chairman, Fleet Bank of
[picture of Mrs. Szostak] Maine; from 1991 to 1994:
President and Chief Executive
Officer, Fleet Bank of Maine
Kenneth W. Washburn.....(60) Chairman and President, Union 1975 2000
Wadding Company (manufactur-
[picture of Mr. Washburn] ers of non-woven textiles)
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
DIRECTOR EXPIRATION
NAME AND AGE PRINCIPAL OCCUPATION SINCE(1) OF TERM
------------ -------------------- -------- ----------
<S> <C> <C> <C>
W. Edward Wood...........(56) Effective January 1998: Presi- 1995 1998
dent and Chief Executive Of-
ficer, Coaxial Communications
of Central Ohio and Coaxial
Communications of Southern
Ohio (cable television); from
1991 to 1997: President, BDS
[picture of Mr. Wood] Management Group (management
and consulting services to a
variety of private business-
es)
</TABLE>
- - ----------
(1) The dates before 1981 set forth in this table reflect the years in which
certain of the directors were elected directors of The Providence Gas
Company ("Providence Gas"), which became a wholly-owned subsidiary of the
Corporation on February 1, 1981.
None of the directors' employers (other than Providence Gas) is an affiliate
of the Corporation.
Except as noted in the foregoing table, all of the directors have been
engaged in their present principal occupations in the same or similar
capacities during the past five years.
The Board of Directors held a total of 10 meetings during the fiscal year
ended September 30, 1997.
The Board has a Finance and Audit Committee, consisting of Messrs. Bodell
(Chairman), Levy, Marsella and Wood. The Finance and Audit Committee has
responsibility for overseeing the establishment and maintenance of effective
internal financial and audit controls; for recommending to the Board the
engagement of, and thereafter evaluating the performance of, the Corporation's
independent auditors; for making recommendations to the Board with respect to
the maintenance of adequate working capital; and for monitoring compliance by
officers and employees with the Corporation's code of ethics.
The Board has an Executive Committee, consisting of Messrs. Washburn
(Chairman), Bodell, Dodge, Howland, Levy and Wood. The Executive Committee is
generally authorized to exercise all of the powers of the Board between
meetings of the Board, with certain exceptions. The Executive Committee also
makes recommendations to the Board with respect to the nomination of new
directors.
The Board also has a Human Resources and Planning Committee, consisting of
Mrs. Szostak and Messrs. Howland (Chairman), Johnson, Kreykes and Washburn.
The Human Resources and Planning Committee is responsible for ensuring the
maintenance by the Corporation of a human resources system which will attract
and retain high quality and experienced management; for monitoring compliance
by the Corporation's officers and employees with the highest standards of
fairness, honesty and integrity; for approving salary increases for officers
and employees; for overseeing arrangements for and making recommendations to
the Board with respect to management advancement and succession; and for
making recommendations to the Board with respect to the adoption of, and to
monitor the execution of, a strategic plan for the Corporation.
5
<PAGE>
Lastly, the Board has a Public Policy Committee, consisting of Messrs. Levy
(Co-Chairman), Wood (Co-Chairman), Johnson, Kreykes and Marsella, which is
responsible for reviewing and overseeing the implementation of the
Corporation's public policies, regulatory strategy and legislative
initiatives.
During the fiscal year ended September 30, 1997, the Finance and Audit
Committee held five meetings; the Executive Committee held two meetings; the
Human Resources and Planning Committee held five meetings and the Public
Policy Committee held four meetings. Each director, with the exception of Mr.
Kreykes, who was precluded from attending certain meetings due to scheduling
conflicts, attended at least 75 percent of the meetings of the Board of
Directors and of the committees upon which he or she served.
The members of the Board of Directors of the Corporation and of the
Executive, Finance and Audit and Human Resources and Planning Committees of
the Board also constitute the Board of Directors of Providence Gas and the
corresponding committees of that board. The directors of the Corporation (who
are also directors of Newport America Corporation, another wholly-owned
subsidiary of the Corporation) receive annual retainers of $7,000 (except for
Mr. Dodge) plus $600 for attendance at each meeting or committee meeting of
the boards of directors of the three corporations. The chairmen of the various
committees receive an additional $1,000 annually for serving in such capacity.
Commencing October 1, 1997, Directors who are not full-time employees of the
Corporation are awarded restricted stock on the first day of the Corporation's
fiscal year. A director shall be awarded that number of shares with a Market
Value, at the average of the closing prices for such shares on the New York
Stock Exchange on the last five trading days immediately preceding October 1,
equal to 25 percent of such director's aggregate Annual Fee, Meeting Fees and
Chairman Fees for the prior fiscal year provided, however, that no awards
shall be granted pursuant to the Non-Employee Director Restricted Stock Plan
after September 30, 2007. Prior to October 1, 1997, non-employee directors
received annual stock options granted on the first business day of each
calendar year based upon the director's compensation for services during the
prior fiscal year. Options for an aggregate of 7,449 and 8,042 shares of
common stock were granted during fiscal years 1996 and 1995, respectively, to
the Corporation's directors. The option exercise prices were $17.00 and
$15.625 per share, respectively.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Corporation and Providence Gas have established lines of credit with
four banks, including Fleet Bank. M. Anne Szostak, a director, is an officer
of Fleet Financial Group, the parent of Fleet Bank. The highest outstanding
borrowings during the year ended September 30, 1997 from Fleet Bank under the
lines of credit and under additional credit facilities were $20 million. The
terms of such lines of credit and of the borrowings under such additional
credit facilities were obtained in arm's length transactions.
6
<PAGE>
EXECUTIVE COMPENSATION
The following sets forth the compensation paid by the Corporation to the
Chief Executive Officer and the four other most highly compensated executive
officers of the Corporation for services rendered during the last three fiscal
years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
---------------------------------------------
AWARD(S)
----------
(A) (B) (C) (D) (E) (F)
NAME RESTRICTED
AND STOCK ALL OTHER
PRINCIPAL AWARD(S) COMPENSATION
POSITION YEAR SALARY BONUS (1) (1) (2)
--------- ---- ---------- --------------------- ------------
<S> <C> <C> <C> <C> <C>
James H. Dodge.......... 1997 $ 269,788 $ 62,600 $41,700 $13,300
Chairman, President and 1996 252,288 55,600 37,070 13,050
Chief Executive Officer 1995 248,843 40,200 26,800 12,401
James DeMetro........... 1997 154,849 38,941 16,689 6,062
Senior Vice President 1996 146,638 32,866 14,086 5,240
1995 142,518 23,877 10,233 3,719
Robert W. Owens......... 1997 152,700 33,714 14,449 6,624
Senior Vice President 1996 146,638 31,213 13,377 6,998
1995 142,518 23,877 10,233 7,063
Gary S. Gillheeney...... 1997 147,808 34,727 14,883 5,509
Senior Vice President, 1996 138,317 30,729 13,169 5,573
Chief
Financial Officer, 1995 112,311 18,670 8,002 4,912
Treasurer
and Assistant Secretary
Gerald A. Yurkevicz..... 1997 120,000 23,722 10,166 0
Vice President of 1996 6,923 0 0 0
Marketing
1995 NA NA NA NA
</TABLE>
- - ----------
(1) Represents the value of cash awards made (column (d)) and restricted stock
awards to be made (column (e)) under the Corporation's 1992 Performance
and Equity Incentive Plan (the "Plan"). The cash awards were paid in
December 1995, 1996 and 1997. The restricted stock awards for 1995 were
paid on April 11, 1996; the awards for 1996 were paid on April 16, 1997;
and the awards for 1997 were paid on December 2, 1997 in the form of
shares of common stock of the Corporation valued at the average of the
closing prices for such shares on the New York Stock Exchange on the first
five trading days of October. The stock portions of the awards will not
vest until the expiration of five years from the date of grant, and each
grant is subject to forfeiture in the event that the recipient is not
employed by the Corporation or a subsidiary throughout the five-year
period. Notwithstanding, earlier vesting may occur at the discretion of
the Board of Directors and will occur upon the happening of certain
events, including the termination of the recipient's employment by reason
of his death or disability, or a "change in control" of the Corporation,
as defined in the Plan. The number and value of restricted stock holdings
on September 30, 1997 (which excludes the grants with respect to the 1997
fiscal year) was: Mr. Dodge, 6,924 shares ($135,884); Mr. DeMetro, 2,758
shares ($54,126); Mr. Owens, 2,725 shares ($53,478); Mr. Gillheeney, 2,030
shares ($39,839); Mr. Yurkevicz, no shares ($0).
7
<PAGE>
(2) Consists of (i) premiums under a group life insurance plan for insurance
on officers' lives and attributable to term life insurance coverage, and
(ii) contributions to the Corporation's Voluntary Investment Plan. Such
premiums and contributions for fiscal year 1997 were as follows:
<TABLE>
<CAPTION>
LIFE INSURANCE PREMIUMS VOLUNTARY INVESTMENT PLAN
----------------------- -------------------------
<S> <C> <C>
Mr. Dodge.................. $8,550 $4,750
Mr. DeMetro................ 2,307 3,755
Mr. Owens.................. 2,307 4,317
Mr. Gillheeney............. 1,044 4,465
Mr. Yurkevicz.............. 0 0
</TABLE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION/SAR VALUES
During the last fiscal year, no options were granted or exercised by any of
the executive officers named in the Summary Compensation Table. No stock
appreciation rights have been issued by the Corporation. The following table
reflects the value of unexercised options held by the named executive officers
at fiscal year end:
<TABLE>
<CAPTION>
(A) (B) (C) (D) (E)
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
FY-END FY-END
------------------- -------------------
SHARES ACQUIRED EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE(#) VALUE REALIZED ($) UNEXERCISABLE(1)(#) UNEXERCISABLE(1)($)
- - ---- --------------- ------------------ ------------------- -------------------
<S> <C> <C> <C> <C>
Mr. Dodge............... None N/A 15,000 48,750
Mr. DeMetro............. None N/A 3,000 17,250
Mr. Owens............... None N/A 5,000 15,500
Mr. Gillheeney.......... None N/A None N/A
Mr. Yurkevicz........... None N/A None N/A
</TABLE>
- - ----------
(1) All options are exercisable. Value is based upon the closing price of
$19.625 reported on the New York Stock Exchange on September 30, 1997,
less the exercise price.
HUMAN RESOURCES AND PLANNING COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
1997 CEO COMPENSATION
Consistent with its approach to base salary levels for all executive
officers, the Committee arrived at the fiscal 1997 salary for Mr. Dodge by
reviewing published market compensation survey results provided by an
independent compensation consultant, reviewing prior year performance, and
considering Mr. Dodge's leadership success in advancing the Corporation's
strategic plan.
In addition, $104,300 has been or will be paid under the Performance and
Equity Incentive Plan (the "Plan") to Mr. Dodge for 1997 fiscal year results,
as set forth in the Summary Compensation Table. The Committee arrived at this
aggregate award by considering the five performance categories set forth in
the Plan. In respect to fiscal 1997 results, the Corporation's performance
produced the following results:
(1) Three-year average operations and maintenance expense per customer was
between target and maximum, about the same as fiscal 1996's results.
8
<PAGE>
(2) Cash flow relative to capital expenditures was below threshold.
(3) Total shareholder return was between target and maximum.
(4) Customer satisfaction was between target and maximum.
(5) The Committee evaluated Mr. Dodge's personal results at between target and
maximum for the Board discretion component.
In arriving at this assessment, the Committee noted several achievements in
fiscal 1997 which directly relate to specific goals the Committee approved for
Mr. Dodge at the beginning of the Plan year. These achievements included:
The establishment of Providence-Southern, LLC, a joint venture with a
subsidiary of The Southern Company, to market electricity and natural gas at
retail in New England;
The development and implementation of an innovative Price Stabilization Plan
for Providence Gas;
The implementation of a cultural transition within the Corporation from an
activity-oriented to a goal-oriented organization by emphasizing measurements
and results and holding leadership accountable for performance;
The continued focus within the Corporation on enhancing customer
satisfaction.
The total fiscal 1997 incentive award to Mr. Dodge represents 38.64 percent
of fiscal 1997 salary. This equates to 96.6 percent of the target award of 40
percent of salary. The Committee determined Mr. Dodge's fiscal 1997 award
would be divided 60-40 percent between cash compensation and restricted common
stock, which restrictions will lapse in five years.
John H. Howland, Chairman
Douglas H. Johnson
William Kreykes
M. Anne Szostak
Kenneth W. Washburn
9
<PAGE>
Set forth below is a graph comparing the total returns (assuming
reinvestment of all dividends) of investments in the Corporation's common
stock, the Standard & Poor's Composite Index of 500 Stocks and Edward Jones
Natural Gas Distribution Index. The graph assumes $100 invested on September
30, 1992 in the common stock and in each of the indices. On December 4, 1996,
the Corporation's common stock began trading on the New York Stock Exchange.
Prior thereto, the Corporation's common stock was traded on the American Stock
Exchange.
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------
1992 1993 1994 1995 1996 1997
- - --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Providence Energy $100.00 $134.90 $121.41 $120.56 $140.45 $167.14
- - --------------------------------------------------------------------------------
S&P 500 $100.00 $112.90 $117.08 $151.74 $182.54 $252.29
- - --------------------------------------------------------------------------------
Edward Jones $100.00 $125.10 $110.34 $125.13 $151.33 $178.96
- - --------------------------------------------------------------------------------
</TABLE>
CERTAIN COMPENSATION ARRANGEMENTS
The Corporation has entered into employment agreements with certain of its
executive officers, including Messrs. DeMetro, Dodge, Gillheeney, Owens and
Yurkevicz, which provide that during the term of the contract, their base
salary will not be reduced and they will remain eligible for participation in
the Corporation's executive compensation and benefit programs.
10
<PAGE>
Mr. Dodge's agreement provides for an initial five year period of
employment, which automatically shall be extended for three additional years
at the end of the initial five year term, and then again after each successive
year thereafter. The agreements of Messrs. DeMetro, Gillheeney and Owens
provide for an initial three year period of employment, which automatically
shall be extended for one additional year at the end of the initial three year
term, and then again after each successive year thereafter. Mr. Yurkevicz's
agreement provides for an initial one year period of employment, which
automatically shall be extended year to year thereafter.
All agreements provide that either party may terminate the agreement at the
end of the initial employment period, or at the end of any successive year
thereafter, by giving the other party written notice of intent not to renew,
delivered at least 90 calendar days prior to the end of such initial period or
successive term. In the event such notice of intent not to renew is properly
delivered by the Corporation, or the Corporation terminates the employment
relationship without cause, Mr. Dodge would be entitled to continuance of his
base salary and benefits for a period of 24 months, and Messrs. DeMetro,
Gillheeney, Owens and Yurkevicz would be entitled to continuance of their base
salaries and benefits for a period of 12 months. All of the agreements provide
the Corporation's obligation to continue the executive's base salary during
the applicable 24 and 12 months periods shall be reduced by the amount of
monthly compensation received by the executive from a subsequent employer and
further provide that any health and welfare benefits be discontinued prior to
the end of the applicable periods in the event the executive has available
substantially similar benefits from a subsequent employer.
Additionally, all agreements provide that the executive may terminate the
agreement at any time by delivering written notice of termination to the Board
at least 30 calendar days prior to the effective date of such termination, in
which case the executive would be entitled to payment of his base salary
through the effective date of termination, plus all other benefits to which
the executive has a vested right at that time. Finally agreements provide that
the executive may terminate the agreement for "Good Reason", which is defined
in the agreement, in general, as any substantial change in the nature of his
employment by the Corporation without his express written consent, including
any substantial change in his position, duties, responsibilities and status
with the Corporation (other than changes occasioned by his retirement,
permanent disability or death); the requirement that the executive be based at
a location at least 50 miles further from his current residence; any reduction
in his base salary; any material reduction in his level of participation in
any compensation, benefit or retirement plans (other than an across-the-board
reduction applicable to all executives); and any failure by the Corporation to
obtain a satisfactory agreement from any successor to assume the terms of the
agreement. Executives other than Mr. Dodge may only terminate the agreement
for Good Reason during the six full calendar months prior to, and the 24 month
period following the effective date of a "Change of Control", while Mr. Dodge
may terminate the agreement for Good Reason at any time. In the event of
termination for Good Reason, absent a "Change in Control", Mr. Dodge would be
entitled to receive, in a lump sum payment, an amount equal to two times his
annual base salary then in effect and continuance of his base salary and
benefits for a period of 24 months.
All the agreements provide that if, within six full calendar months prior to
the effective date of a Change in Control, or within 24 months following the
effective date of a Change in Control, the executive terminates for Good
Reason, as defined above, or is terminated without cause, the executive is
entitled to certain severance benefits. Mr. Dodge's agreement provides that,
in the event of termination of his employment in connection with a Change in
Control, Mr. Dodge is entitled to a lump sum payment consisting of the
following components: (i) an amount equal to three times the highest rate of
his annualized base salary in effect at any time up to and including the
effective date of termination; (ii) an amount equal to three times his target
incentive award established for the fiscal year in which the effective date of
termination occurs; (iii) an amount equal to his unpaid base salary and
accrued vacation pay through the effective date of termination; (iv) an amount
equal to a pro rata share of his unpaid targeted annual incentive payment,
established for the plan year in which termination
11
<PAGE>
occurs; and (v) a lump sum cash payment of the actuarial present value
equivalent of the aggregate benefits accrued by Mr. Dodge as of the effective
date of termination under the terms of the Corporation's Supplemental
Retirement Plan. Additionally, Mr. Dodge is entitled to a continuation of
medical, dental and life insurance for a period of three full years after the
effective date of termination.
The agreements of Messrs. DeMetro, Gillheeney, Owens and Yurkevicz provide
that, in the event of termination of employment in connection with a Change in
Control, these executives will be entitled to a lump sum payment consisting of
the following components: (i) an amount equal to two times the highest rate of
the executive's annualized base salary in effect at any time up to and
including the effective date of termination; (ii) an amount equal to two times
the executive's target incentive award established for the fiscal year in
which termination occurs; (iii) an amount equal to the executive's unpaid base
salary and accrued vacation pay through the effective date of termination;
(iv) an amount equal to a pro rata share of the executive's targeted annual
incentive payment, established for the plan year in which termination occurs;
and (v) a lump sum cash payment of the actuarial present value equivalent of
the aggregate benefits accrued by the executive as of the effective date of
termination under the terms of the Corporation's Supplemental Retirement Plan.
Additionally, the agreements provide for a continuation of medical, dental and
life insurance for a period of two full years after the effective date of
termination.
All of the employment agreements with the named executives provide that the
continuation of medical, dental and life insurance shall be discontinued prior
to the end of the applicable periods in the event the executive has available
substantially similar benefits from a subsequent employer. Additionally, all
of the agreements provide for excise tax equalization payments.
A Change in Control is defined in the agreements as, generally, the
occurrence of any one or more of the following conditions: (i) any transfer of
all or substantially all of the assets of Providence Gas; (ii) a merger or
other business combination involving the Corporation which results in holders
of the Corporation's common stock having less than 60 percent of the total
voting power for the election of directors of the surviving corporation; (iii)
the acquisition by any person of the beneficial ownership of 20 percent or
more of the voting power for the election of directors of the Corporation; and
(iv) a change in a majority of the Corporation's directors over any two year
period, unless the nomination of each new director was approved by a vote of
at least two-thirds of the directors in office since the beginning of the two
year period.
RETIREMENT PLAN
Providence Gas presently has in effect non-contributory retirement plans for
the benefit of its bargaining unit and non-bargaining unit employees,
respectively. The retirement plan for the non-bargaining unit employees (the
"Plan") provides for the payment of fixed benefits upon normal retirement at
age 65 on the basis of years of service and covered compensation of each
employee. Officers are eligible to participate in the Plan, but directors are
not eligible unless they are otherwise full-time employees of Providence Gas.
Covered compensation includes basic compensation, and does not include
overtime, premium pay or payments made pursuant to an incentive plan. All
covered compensation of executive officers for fiscal year 1997 is included in
the Summary Compensation Table set forth above. Annual retirement benefits are
equal to two percent of the employee's "average pay" (average of the total
annual compensation during the 36 consecutive months in which pay was the
highest out of the last 120 months with the company) less one and two-thirds
percent of the employee's primary Social Security benefit, multiplied by the
employee's years of credited service (not exceeding 30 years), plus one and
one-half percent of the employee's "average pay" times the number of the
employee's years of credited service in excess of 30 years.
12
<PAGE>
Examples of maximum annual full retirement benefits payable under the Plan
to employees, including officers, are set forth in the table below, and are
based on the assumption that an employee shall have retired at the normal
retirement age of 65.
YEARS OF SERVICE
<TABLE>
<CAPTION>
YEARS OF SERVICE
----------------------------------------
AVERAGE PAY 15 20 25 30 35
----------- ------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
$100,000........................... $26,055 $34,740 $43,425 $52,510 $ 59,610
$125,000........................... $33,555 $44,740 $55,925 $67,110 $ 76,485
$150,000........................... $41,055 $54,740 $68,425 $82,110 $ 93,360
$160,000*.......................... $44,055 $58,740 $73,425 $88,110 $100,110
$175,000........................... $44,055 $58,740 $73,425 $88,110 $100,110
$200,000........................... $44,055 $58,740 $73,425 $88,110 $100,110
$225,000........................... $44,055 $58,740 $73,425 $88,110 $100,110
$250,000........................... $44,055 $58,740 $73,425 $88,110 $100,110
$300,000........................... $44,055 $58,740 $73,425 $88,110 $100,110
$350,000........................... $44,055 $58,740 $73,425 $88,110 $100,110
$400,000........................... $44,055 $58,740 $73,425 $88,110 $100,110
</TABLE>
- - ----------
* The maximum permissible compensation which may be taken into consideration
in 1997 in establishing retirement benefits under a qualified plan.
For the fiscal year ended September 30, 1997, the years of service credited
for retirement benefits for the individuals named in the Summary Compensation
Table are as follows: James DeMetro--four years; James H. Dodge--five years;
Gary S. Gillheeney--16 years; Robert W. Owens--18 years; and Gerald A.
Yurkevicz--one year.
In addition to the Plan discussed above, Providence Gas maintains a
Supplemental Retirement Plan (the "Supplemental Plan") which, on an unfunded
basis, provides for additional retirement benefits for all executive officers,
including those named in the Summary Compensation Table. In the case of an
officer retiring at age 65, the annual benefits under the Supplemental Plan
are equal to 65 percent of one-third of the officer's highest total
compensation over any consecutive 36 months during the last 120 months of his
or her employment, less (i) the normal retirement benefits payable to the
officer under the Plan described above or under any other retirement plan of
any third party and (ii) the officer's annual Social Security benefit. A
participant who has reached age 60 with at least 10 years of employment by
Providence Gas is eligible for early retirement, in which case, if the
officer's early retirement date falls on or after his or her 62nd birthday and
the officer has attained 25 years of credited service, he or she is entitled
to receive his or her full unreduced benefit commencing on his or her actual
retirement date. If the officer's early retirement date falls prior to his or
her 62nd birthday, he or she is entitled to receive a benefit which is the
actuarial equivalent of the foregoing benefit, commencing on his or her actual
retirement date, plus a temporary annuity, commencing on the later of his or
her retirement and his or her 60th birthday and payable until his or her 62nd
birthday, of an amount equal to his or her Social Security benefit. If a
participant becomes disabled and thereafter receives monthly disability
payments under the Providence Gas long term disability insurance plan, he or
she will receive no retirement benefits until he or she reaches age 65, at
which time benefits will commence to be payable in the same amount as if the
participant had retired at age 65.
13
<PAGE>
VOLUNTARY INVESTMENT PLAN
Effective October 1, 1991, the Corporation adopted a Voluntary Investment
Plan (the "Plan") for the non-bargaining unit employees of the Corporation and
its subsidiaries. The Plan was extended to certain bargaining-unit employees
effective January 1, 1992. Each employee who has attained age 21 and has
earned at least 1,000 hours of service during his or her first 12 months of
employment, or during any calendar year thereafter, is eligible to participate
in the Plan.
A participating employee may contribute from one percent to 18 percent of
his or her compensation to the Plan, up to the $9,500 annual maximum currently
permitted by the Internal Revenue Service.
The Corporation will contribute $.50 for each $1.00 contributed by a
participating employee, up to six percent of the employee's compensation. At
the option of the employee, the contributions are invested in one or more of a
variety of funds, including a fund consisting solely of shares of the
Corporation's common stock.
14
<PAGE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
On December 3, 1997, to the best of the Corporation's knowledge, no person
(including any "group", as that term is used in Section 13(d)(3) of the
Securities Exchange Act of 1934) was the beneficial owner of more than five
percent of the Corporation's outstanding common stock, $1 par value (there
being no other voting securities of the Corporation outstanding).
The following table reflects as of December 3, 1997, the beneficial
ownership of shares of common stock of the Corporation (ignoring fractional
shares) by directors, nominees for director and executive officers of the
Corporation (all shares being owned directly, except as otherwise noted):
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED*
----------------------------
NAME OF INDIVIDUAL OR SHARES SUBJECT
IDENTIFICATION OF GROUP ISSUED SHARES TO OPTIONS**
- - ----------------------- ------------- --------------
<S> <C> <C>
Gilbert R. Bodell, Jr............................ 1,524(1) 7,079
James DeMetro.................................... 4,570 3,000
James H. Dodge................................... 10,610(2) 15,000
Gary S. Gillheeney............................... 3,933 none
John H. Howland.................................. 319 3,327
Douglas H. Johnson............................... 335 3,651
William Kreykes.................................. 390 915
Paul F. Levy..................................... 1,000(3) 1,852
Romolo A. Marsella............................... 329 3,242
Robert W. Owens.................................. 5,533(4) 5,000
M. Anne Szostak.................................. 444 1,650
Kenneth W. Washburn.............................. 736 7,622
W. Edward Wood................................... 726 1,580
Gerald A. Yurkevicz.............................. 517 none
All Directors, Nominees and Executive Officers as
a Group......................................... 44,436(5) 59,418
</TABLE>
* The beneficial ownership of shares of directors and executive officers of
the Corporation (including shares subject to options) in no individual case
exceeded one percent of the outstanding common stock of the Corporation. Such
ownership represented in the aggregate approximately one percent of the
outstanding common stock.
** To the extent exercisable within 60 days.
- - ----------
(1)Includes 888 shares held by Mr. Bodell's wife.
(2)Includes 1,100 shares held by Mr. Dodge's wife.
(3)Includes 550 shares held in Trust by Mr. Levy's mother.
(4)Includes 594 shares held by Mr. Owens' wife as custodian for their
children.
(5)Includes 38,154 shares held directly, and 6,282 shares held indirectly.
15
<PAGE>
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP acted as independent public accountants to audit the
books of the Corporation for the fiscal year ended September 30, 1997. It is
expected that a representative of Arthur Andersen LLP will be present at the
annual meeting with the opportunity to make a statement, if he or she so
desires, and that such representative will be available to respond to
appropriate questions. No accountants have yet been selected to audit the
books of the Corporation for the fiscal year ending September 30, 1998; the
Board of Directors is currently reviewing various alternatives in an effort to
secure the highest quality auditing services at the most reasonable costs.
ADDITIONAL INFORMATION
The Corporation will provide without charge to each shareholder entitled to
vote at the annual meeting, on the written request of any such shareholder, a
copy of the Corporation's annual report to the Securities and Exchange
Commission on Form 10-K for the year ended September 30, 1997. Requests for
copies of such report should be addressed to the Corporation at 100 Weybosset
Street, Providence, Rhode Island 02903, Attention: Investor Relations.
PROPOSALS FOR 1999 ANNUAL MEETING
If a shareholder intending to present a proposal at the 1999 annual meeting
(presently anticipated to be held during the month of January, 1999) wishes to
have such proposal included in the Corporation's proxy statement and form of
proxy relating to the meeting, the shareholder will be required to submit the
proposal to the Corporation not later than August 17, 1998.
OTHER MATTERS
No business other than that set forth in the attached notice of meeting is
expected to come before the annual meeting, but should any other matters
requiring a vote of shareholders arise, including a question of adjourning the
meeting, the persons named in the accompanying proxy will vote thereon
according to their best judgment in the interest of the Corporation. In the
event any of the nominees for the office of director should withdraw or
otherwise become unavailable for reasons not presently known, the persons
named as proxies will vote for other persons in their place in which they
consider the best interests of the Corporation.
You are urged to sign and return your proxy promptly to make certain your
shares will be voted at the meeting. You may revoke your proxy at any time
before it is voted.
By Order of the Board of Directors
/s/ Alycia L. Goody
Alycia L. Goody, Secretary
Dated: December 16, 1997
16
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