<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 14, 1999
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 14, 1999 at 10 o'clock a.m.,
for the following purposes:
(1) To elect four directors for terms expiring at the time of the 2002
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 2, 1998
will be entitled to notice of and to vote at the annual meeting.
/s/ Susann G. Mark
Susann G. Mark, Secretary
Providence, Rhode Island
December 16, 1998
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 14, 1999
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 14, 1999.
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, 1998.
VOTING AT MEETING
Only shareholders of record at the close of business on December 2, 1998
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 2, 1998, there were 5,988,624 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
Messrs. John H. Howland, Douglas H. Johnson, William Kreykes and Romolo A.
Marsella will expire at the time of the 1999 annual meeting. The Executive
Committee of the Board of Directors has nominated Messrs. John H. Howland,
Douglas H. Johnson, William Kreykes and Romolo A. Marsella for reelection at
the annual meeting, to serve for terms expiring at the 2002 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 Messrs. John H. Howland,
Douglas H. Johnson, William Kreykes and Romolo A. Marsella as members of the
Board of Directors for terms expiring at the time of the 2002 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. ...(68) Chairman and former 1980 2001
President, Frontier
[picture of Mr. Bodell] Manufacturing Company
(textiles)
James H. Dodge............(58) 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 estate leasing)
John H. Howland...........(52) President and Chief 1993 1999
Executive Officer,
[picture of Mr. Howland] Bradford Soap
International, Inc.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
DIRECTOR EXPIRATION
NAME AND AGE PRINCIPAL OCCUPATION SINCE(1) OF TERM
------------ -------------------- -------- ----------
<S> <C> <C> <C>
Douglas H. Johnson........(55) President and Managing 1993 1999
Partner, Van Leesten &
[picture of Mr. Johnson] Johnson, Inc. (business
and urban planning
consultants)
William Kreykes...........(60) From December 1994 to 1996 1999
September 1998: President
[picture of Mr. Kreykes] and Chief Executive
Officer, Lifespan
Corporation (health care
system); from 1990 to
1994, President and Chief
Executive Officer, Rhode
Island Hospital
Paul F. Levy..............(48) Since October 1998: 1995 2001
Executive Dean for
[picture of Mr. Levy] Administration, Harvard
Medical School, and Vice
President, Harvard Medical
Center; from 1992 to 1995:
Visiting Lecturer, and
from September 1995 to
December 1998, Adjunct
Professor, Massachusetts
Institute of Technology;
from 1987 to 1992:
Executive Director,
Massachusetts Water
Resources Authority
(a public authority)
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
DIRECTOR EXPIRATION
NAME AND AGE PRINCIPAL OCCUPATION SINCE(1) OF TERM
------------ -------------------- -------- ----------
<S> <C> <C> <C>
Romolo A. Marsella........(57) President, Marsella 1993 1999
Development Corporation
[picture of Mr. Marsella] (real estate development)
M. Anne Szostak...........(48) Since February 1998: 1995 2001
Executive Vice President
[picture of Mrs. Szostak] and from May 1994 to 1998,
Senior Vice President,
Fleet Financial Group,
Inc.; from 1991 to 1995:
Chairman, Fleet Bank of
Maine; from 1991 to 1994:
President and Chief
Executive Officer, Fleet
Bank of Maine; director of
New England Business
Systems, Inc.
Kenneth W. Washburn.......(61) Chairman and President, 1975 2000
Union Wadding Company
[picture of Mr. Washburn] (manufacturers 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.............(57) Since January 1998: 1995 2001
President and Chief
[picture of Mr. Wood] Executive Officer, Coaxial
Communications of Central
Ohio and Coaxial
Communications of Southern
Ohio (cable television);
from 1991 to 1997:
President, BDS Management
Group (management and
consulting services to a
variety of private
businesses)
</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 eight meetings during the fiscal
year ended September 30, 1998.
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 and Levy. 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
(Chairman), Johnson, Kreykes, Marsella and Wood, 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, 1998, the Finance and Audit
Committee held five meetings; the Executive Committee held four meetings; the
Human Resources and Planning Committee held four meetings and the Public
Policy Committee held three 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 are
also directors of Newport America Corporation, another wholly-owned subsidiary
of the Corporation. The directors of the Corporation, other than Mr. Dodge,
receive annual retainers of $7,000 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, pursuant to the 1997 Non-Employee Director Stock
Plan, 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.
Prior to October 1, 1997, pursuant to the 1989 Non-Employee Director Stock
Option Plan, 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 shares of common stock were granted during fiscal year 1996
to the Corporation's directors. The option exercise price was $17.00 per
share. No options were granted during fiscal years 1998 and 1997,
respectively. The plan expired by its terms on November 3, 1998.
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, Inc., the parent of Fleet Bank. The highest
outstanding borrowings during the year ended September 30, 1998 from Fleet
Bank under the lines of credit and other credit facilities were $20 million.
The terms of such lines of credit and other credit facilities provided by
Fleet Bank were obtained in arm's length transactions.
6
<PAGE>
EXECUTIVE COMPENSATION
The following table 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 (1) 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 (2) (2) (3)
--------- ---- ------------ ----------------------- ------------
<S> <C> <C> <C> <C> <C>
James H. Dodge.......... 1998 $ 287,192 $ 66,022 $44,014 $12,201
Chairman, President and 1997 269,788 62,600 41,700 13,300
Chief Executive Officer 1996 252,288 55,600 37,070 13,050
James DeMetro........... 1998 165,981 40,973 17,560 6,480
Senior Vice President 1997 154,849 38,941 16,689 6,062
1996 146,638 32,866 14,086 5,240
Robert W. Owens......... 1998 160,938 39,716 17,021 7,144
Senior Vice President 1997 152,700 33,714 14,449 6,624
1996 146,638 31,213 13,377 6,998
Gary S. Gillheeney...... 1998 157,846 37,932 16,256 5,677
Senior Vice President, 1997 147,808 34,727 14,883 5,509
Chief Financial 1996 138,317 30,729 13,169 5,573
Officer, Treasurer and
Assistant Secretary
James A. Grasso......... 1998 136,577 30,626 13,125 14,270(4)
Vice President, Public 1997 30,308 0 0 0
and Government Affairs 1996 0 0 0 0
</TABLE>
- --------
(1) Any perquisites or other personal benefits received from the Corporation
by any of the named executives were substantially less than the reporting
thresholds established by the Securities and Exchange Commission (the
lesser of $50,000 or 10 percent of the individual's cash compensation).
(2) Represents the value of cash awards (column (d)) and restricted stock
awards (column (e)) made under the Corporation's 1992 Performance and
Equity Incentive Plan (the "Plan"). The cash awards were paid in December
1996, 1997 and 1998. The restricted stock awards for 1996 were paid on
April 16, 1997; the awards for 1997 were paid on December 2, 1997; and the
awards for 1998 were paid on December 8, 1998 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, 1998 was: Mr. Dodge, 9,043 shares ($176,339); Mr. DeMetro,
3,606 shares ($70,317); Mr. Owens, 3,459 shares ($67,451); Mr. Gillheeney,
2,786 shares ($54,327); Mr. Grasso, no shares ($0).
7
<PAGE>
(3) 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 1998 were as follows:
<TABLE>
<CAPTION>
LIFE VOLUNTARY
INSURANCE INVESTMENT
PREMIUMS PLAN
--------- ----------
<S> <C> <C>
Mr. Dodge............................................ $7,320 $4,881
Mr. DeMetro.......................................... 2,444 4,036
Mr. Owens............................................ 2,371 4,773
Mr. Gillheeney....................................... 863 4,814
Mr. Grasso........................................... 1,265 1,005
</TABLE>
(4) Includes incentive payments in the amount of $12,568 made in connection
with Mr. Grasso's joining the Corporation.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION/SAR VALUES
During the last fiscal year, no options were granted pursuant to the 1989
Stock Option Plan, nor were any outstanding options exercised by any of the
executive officers named in the Summary Compensation Table. No stock
appreciation rights under the Plan have been issued by the Corporation. The
Plan expired by its terms on November 3, 1998. The following table reflects
the value of unexercised options held by the named executive officers at
fiscal year end:
<TABLE>
<CAPTION>
(A) (B) (C) (D) (E)
VALUE OF
UNEXER-
CISED IN-
NUMBER OF THE-MONEY
UNEXERCISED OPTIONS/
OPTIONS/ SARS AT
SARS AT FY-END FY-END
---------------- ----------------
SHARES ACQUIRED EXERCISABLE/ EXERCISABLE/
ON EXERCISE VALUE REALIZED UNEXERCISABLE(1) UNEXERCISABLE(1)
NAME (#) ($) (#) ($)
- ---- --------------- -------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Mr. Dodge............... None N/A 15,000/0 46,875/0
Mr. DeMetro............. None N/A 3,000/0 16,875/0
Mr. Owens............... None N/A 5,000/0 14,875/0
Mr. Gillheeney.......... None N/A None N/A
Mr. Grasso.............. None N/A None N/A
</TABLE>
- --------
(1) All options are exercisable. Value is based upon the closing price of
$19.50 reported on the New York Stock Exchange on September 30, 1998, less
the exercise price. The 1989 Stock Option Plan expired by its terms on
November 3, 1998
8
<PAGE>
HUMAN RESOURCES AND PLANNING COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
1998 CEO COMPENSATION
Consistent with its approach to base salary levels for all executive
officers, the Committee arrived at the fiscal 1998 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, $110,036 has been or will be paid under the Performance and
Equity Incentive Plan (the "Plan") to Mr. Dodge for 1998 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. With respect to fiscal 1998 results, the Corporation's performance
produced the following results:
(1) Three-year average operations and maintenance expense per customer was
between threshold and target.
(2) Cash flow relative to capital expenditures was between target and
maximum.
(3) Total shareholder return was below threshold.
(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 discretionary component.
In arriving at this assessment, the Committee noted that Mr. Dodge had done
a commendable job of managing the utility business and moving the non-
regulated business through a number of challenges, as well as resolving
organizational issues and proactively addressing the corporate strategy.
The total fiscal 1998 incentive award to Mr. Dodge represents 38.3 percent
of fiscal 1998 salary. This equates to 95.8 percent of the target award of 40
percent of salary. The Committee determined Mr. Dodge's fiscal 1998 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, 1993 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>
1993 1994 1995 1996 1997 1998
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Providence Energy $100.00 $ 90.00 $ 89.37 $104.12 $123.90 $129.85
- --------------------------------------------------------------------------------
S&P 500 $100.00 $103.70 $134.50 $161.80 $227.17 $247.84
- --------------------------------------------------------------------------------
Edward Jones $100.00 $ 87.10 $ 97.55 $117.16 $137.19 $154.34
- --------------------------------------------------------------------------------
</TABLE>
CERTAIN COMPENSATION ARRANGEMENTS
The Corporation has entered into employment agreements with certain of its
executive officers, including Messrs. DeMetro, Dodge, Gillheeney, Grasso and
Owens, which provide that during the term of the agreements, 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, Grasso 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.
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, Grasso and Owens 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 month 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 will 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, each agreement
provides 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 in Control, as defined in the agreement, 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 will 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 health and welfare
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 occurs; and (v) a lump sum
cash payment of the actuarial present value equivalent of the aggregate
benefits
11
<PAGE>
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, Grasso and Owens 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 the Corporation; (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 1998 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.
<TABLE>
<CAPTION>
YEARS OF SERVICE
---------------------------------------
AVERAGE PAY 15 20 25 30 35
----------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
$100,000......................... $25,974 $34,632 $43,290 $51,948 $59,448
$125,000......................... $33,474 $44,632 $55,790 $66,948 $76,323
$150,000......................... $40,974 $54,632 $68,290 $81,948 $93,198
$160,000*........................ $43,974 $58,632 $73,290 $87,948 $99,948
$175,000......................... $43,974 $58,632 $73,290 $87,948 $99,948
$200,000......................... $43,974 $58,632 $73,290 $87,948 $99,948
$225,000......................... $43,974 $58,632 $73,290 $87,948 $99,948
$250,000......................... $43,974 $58,632 $73,290 $87,948 $99,948
$300,000......................... $43,974 $58,632 $73,290 $87,948 $99,948
$350,000......................... $43,974 $58,632 $73,290 $87,948 $99,948
$400,000......................... $43,974 $58,632 $73,290 $87,948 $99,948
</TABLE>
- ----------
* The maximum permissible compensation which may be taken into consideration
in 1998 in establishing retirement benefits under a qualified plan.
For the fiscal year ended September 30, 1998, the years of service credited
for retirement benefits for the individuals named in the Summary Compensation
Table are as follows: James DeMetro--five years; James H. Dodge--six years;
Gary S. Gillheeney--17 years; James A. Grasso--zero years; and Robert W.
Owens--19 years.
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.
VOLUNTARY INVESTMENT PLAN
Effective October 1, 1991, the Corporation adopted a Voluntary Investment
Plan (the "VIP Plan") for the non-bargaining unit employees of the Corporation
and its subsidiaries. The Plan was extended to certain
13
<PAGE>
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 VIP Plan.
A participating employee may contribute from one percent to 22 percent of
his or her compensation to the VIP Plan, up to the $10,000 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 2, 1998, 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 2, 1998, 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. .................... 1,758(1) 7,079
James DeMetro.............................. 5,810 3,000
James H. Dodge............................. 10,610(2) 15,000
Gary S. Gillheeney......................... 4,262 none
James A. Grasso............................ 667 none
John H. Howland............................ 522 3,327
Douglas H. Johnson......................... 571 3,651
William Kreykes............................ 568 915
Paul F. Levy............................... 1,588(3) none
Romolo A. Marsella......................... 556 3,242
Robert W. Owens............................ 5,650(4) 5,000
M. Anne Szostak............................ 643 1,650
Kenneth W. Washburn........................ 999 7,622
W. Edward Wood............................. 956 1,580
All Directors, Nominees and Executive
Officers as a Group....................... 46,692(5) 52,566
</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 1,200 shares held by Mr. Dodge's wife.
(3) Includes 550 shares held in Trust by Mr. Levy's mother.
(4) Includes 627 shares held by Mr. Owens' wife as custodian for their
children.
(5) Includes 37,925 shares held directly, and 8,767 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, 1998. 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, 1999; 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, 1998. 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 2000 ANNUAL MEETING
If a shareholder intending to present a proposal at the 2000 annual meeting
(presently anticipated to be held during the month of January 2000) 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 16, 1999.
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 a manner which
they consider serves 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/ Susann G. Mark
Susann G. Mark, Secretary
Dated: December 16, 1998
16
<PAGE>
[PROVIDENCE ENERGY CORPORATION LOGO APPEARS HERE]
Providence Energy Corporation
100 Weybosset Street Providence,
Rhode Island 02903
[RECYCLED LOGO APPEARS HERE]
<PAGE>
- --------------------------------------------------------------------------------
[PROVIDENCE ENERGY CORPORATION LOGO APPEARS HERE] ----------------
First Class Mail
C/O THE BANK OF NEW YORK U.S. POSTAGE
CHURCH STREET STATION PAID
PO BOX 11002 Secaucus, NJ
NEW YORK, N.Y. 10288-1002 Permit No. 1
----------------
- -------------------------
- -------------------------
- --------------------------------------------------------------------------------
Change of Address and
or Comments Mark Here [_]
Sign exactly as name(s) appears on left.
When signing as attorney, executor,
administrator, trustee or guardian, please
give full title as such. If more than one
name is shown, including the case of joint
tenants, each party should sign.
Dated 199
--------------------------- ---
--------------------------------------
Signed
--------------------------------------
Signed
(Please sign, date and return
this proxy in the enclosed Votes must be included
prepaid enevelope.) (X) in Black or Blue Ink. [_]
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PROVIDENCE ENERGY CORPORATION
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS - JANUARY 14, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned, revoking all prior proxies, hereby constitutes and
appoints Mrs. M. Anne Szostak and Messrs. Gilbert R. Bodell and Kenneth W.
Washburn, or any one or more of them acting in the absence of the others, with
full power of substitution, the true and lawful attorneys and proxies of the
undersigned at the annual meeting of the shareholders of Providence Energy
Corporation to be held in Providence, Rhode Island on Thursday, January 14, 1999
at 10:00 a.m., to act with all powers of the undersigned with respect to all
shares of stock as to which the undersigned is entitled to act at such meeting
and at any adjournments thereof, and to vote as follows:
(Continued, and to be signed, on reverse side.)
PROVIDENCE ENERGY CORP.
