SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
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 [ ]
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[ ] Preliminary Proxy Statement
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14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
PROVIDENCE ENERGY CORPORATION
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
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[ ] Fee paid previously with preliminary materials.
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previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
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PROVIDENCE ENERGY CORPORATION
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
JANUARY 20, 2000
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 20,
2000 at 10 o'clock a.m., for the following purposes:
(1) To elect two directors for terms expiring at the time of the
2003 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 November 30,
1999 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 21, 1999
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.
PROVIDENCE ENERGY CORPORATION
PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS
JANUARY 20, 2000
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 20, 2000. 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 21, 1999.
VOTING AT MEETING
Only shareholders of record at the close of business on November 30,
1999 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 November 30, 1999, there were
6,140,771 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 term
of office of each class ending in successive years. The terms of office of
Messrs. James H. Dodge and Kenneth W. Washburn will expire at the time of
the 2000 annual meeting. The Executive Committee of the Board of Directors
has nominated Messrs. James H. Dodge and Kenneth W. Washburn for reelection
at the annual meeting, to serve for terms expiring at the 2003 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.
James H. Dodge and Kenneth W. Washburn as members of the Board of Directors
for terms expiring at the time of the 2003 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.
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 Age Principal Occupation Since(1) of Term
---- --- -------------------- -------- ----------
<S> <C> <C> <C> <C>
Gilbert R. Bodell, Jr. 69 Chairman and former President, 1980 2001
[picture of Mr. Bodell] Frontier Manufacturing
Company (textiles)
James H. Dodge 59 Chairman since January 1992 and 1991 2000
[picture of Mr. Dodge] President and Chief Executive
Officer of the Corporation
since August 1990; director
of Capital Properties, Inc.
(Real estate leasing)
John H. Howland 53 President and Chief Executive 1993 2002
[picture of Mr. Howland] Officer, Bradford Soap
International, Inc.
Douglas H. Johnson 56 President and Managing Partner, 1993 2002
[picture of Mr. Johnson] Heritage Consulting Group, Inc.
(business and urban planning
consultants)
William Kreykes 61 From December 1994 to 1996 2002
[picture of Mr. Kreykes September 1998: President and
Chief Executive Officer,
Lifespan Corporation (health
care system); from 1990 to
1994: President and Chief
Executive Officer, Rhode
Island Hospital
Paul F. Levy 49 Since October 1998: Executive 1995 2001
[picture of Mr. Levy] Dean for Administration,
Harvard Medical School; from 1992
to 1995, Visiting Lecturer, and
from September 1995 to
December 1998, Adjunct
Professor, Massachusetts
Institute of Technology
Romolo A. Marsella 58 President, Marsella Development 1993 2002
[picture of Mr. Marsella] Corporation (real estate
development)
M. Anne Szostak 49 Since October 1999: Executive 1995 2001
[picture of Mrs. Szostak] Vice President, FleetBoston
Financial Corporation; from
February 1998 to October 1999:
Executive Vice President and
from May 1994 to 1998: Senior
Vice President, Fleet Financial
Group, Inc.; from 1991 to 1994:
Chairman, Fleet Bank of Maine;
director of New England Business
Systems, Inc.
Kenneth W. Washburn 62 Chairman and President, 1975 2000
[picture of Mr. Washburn] Union Wadding Company
(manufacturer of non-woven
textiles)
W. Edward Wood 58 From January 1998 to September 1995 2001
[picture of Mr. Wood] 1999: President and Chief
Executive Officer of 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)
<FN>
- - - - - - - - - - - - - - - - - --------------------
<F1> 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.
</FN>
</TABLE>
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, 1999.
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 and the
independence of, the Corporation's independent auditors; for making
recommendations to the Board with respect to declarations of quarterly
dividends; for reviewing results of internal audits with the director of
internal audit; for monitoring compliance by officers and employees with
the Corporation's code of ethics; and for reporting activities and findings
of the Committee to the Board on a quarterly basis.
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 executive officers; 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.
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, 1999, 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. Wood, 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 chairs 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 retainer, meeting fees and chair 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. The
option exercise price was $17.00 per share. No options were granted during
fiscal years 1999, 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 National Bank and BankBoston, N.A. M. Anne
Szostak, a director, is an officer of FleetBoston Financial Corporation,
the parent of Fleet National Bank and BankBoston, N.A. The highest
outstanding borrowings during the year ended September 30, 1999 from Fleet
National Bank and BankBoston, N.A. under the lines of credit and other
credit facilities were $10.3 and $13.6 million, respectively. The terms of
such lines of credit and other credit facilities provided by Fleet National
Bank and BankBoston, N.A. were obtained in arm's length transactions.
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>
Long Term
Compensation
Annual Compensation(1) Award(s)
(a) ---------------------- ------------
Name (b) (c) (d) (e) (f)
and Restricted
Principal Stock All Other
Position Year Salary Bonus(2) Award(s)(2) Compensation(3)
--------- ---- ------ -------- ----------- ---------------
<S> <C> <C> <C> <C> <C>
James H. Dodge 1999 $310,423 $106,579 $71,053 $11,612
Chairman, President and 1998 287,192 66,022 44,014 12,201
Chief Executive Officer 1997 269,788 62,600 41,700 13,300
James DeMetro 1999 182,481 65,540 28,089 6,412
Executive Vice President 1998 165,981 40,973 17,560 6,480
1997 154,849 38,941 16,689 6,062
Robert W. Owens 1999 164,961 39,169 16,786 6,852
Senior Vice President, 1998 160,938 39,716 17,021 7,144
Providence Gas 1997 152,700 33,714 14,449 6,624
Gerald A. Yurkevicz 1999 145,942 40,688 17,437 5,401
Vice President, 1998 129,808 26,299 11,271 3,021
Business Development 1997 120,000 23,722 10,166 3,175
James A. Grasso 1999 139,000 37,421 16,038 6,634
Vice President, Public and 1998 136,577 30,626 13,125 14,270(4)
Government Affairs 1997 30,308 0 0 0
<FN>
- - - - - - - - - - - - - - - - - --------------------
<F1> Any perquisites or other personal benefits received from the
Corporation by any of the named executives were less than the
reporting thresholds established by the Securities and Exchange
Commission (the lesser of $50,000 or 10 percent of the individual's
annual salary and bonus).
<F2> 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 1997 and 1998 and in November 1999. The restricted stock
awards for 1997 were paid on December 2, 1997; the awards for 1998
were paid on December 8, 1998; and the awards for 1999 were paid on
November 30, 1999 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,
provided that 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, 1999 was: Mr. Dodge, 9,608
shares ($264,220); Mr. DeMetro, 3,858 shares ($106,095); Mr. Owens,
3,680 shares ($101,200); Mr. Grasso, 668 shares ($18,370); Mr.
Yurkevicz, 1,091 shares ($30,003).
<F3> 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 1999
were as follows:
Life Voluntary
Insurance Investment
Premiums Plan
--------- ----------
Mr. Dodge $6,466 $5,146
Mr. DeMetro 1,738 4,674
Mr. Owens 1,967 4,485
Mr. Yurkevicz 553 4,848
Mr. Grasso 1,606 5,028
<F4> Includes incentive payments in the amount of $12,568 made in
connection with Mr. Grasso's joining the Corporation.
</FN>
</TABLE>
Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year-End
Option/SAR Values
During the last fiscal year, no options were granted pursuant to the
1989 Stock Option Plan, nor were any outstanding options exercised by any
of the executive officers named in the Summary Compensation Table. No stock
appreciation rights under the Plan have been issued by the Corporation. The
Plan expired by its terms on November 3, 1998. The following table reflects
the value of unexercised options held by the named executive officers at
fiscal year end:
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e)
Value of
Number of Unexercised
Unexercised In-the-Money
Options/ Options/
SARs at SARs at
FY-End FY-End
---------------- ----------------
Shares Acquired Exercisable/ Exercisable/
on Exercise Value Realized Unexercisable(1) Unexercisable(1)
Name (#) ($) (#) ($)
---- --------------- -------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Mr. Dodge None N/A 15,000/0 170,625/0
Mr. DeMetro None N/A 3,000/0 41,625/0
Mr. Owens None N/A 5,000/0 56,125/0
Mr. Yurkevicz None N/A None N/A
Mr. Grasso None N/A None N/A
<FN>
- - - - - - - - - - - - - - - - - -------------------
<F1> All options are exercisable. Value is based upon the closing price of
$27.75 reported on the New York Stock Exchange on September 30, 1999,
less the exercise price. The 1989 Stock Option Plan expired by its
terms on November 3, 1998.
</FN>
</TABLE>
Long-Term Performance Incentive. In October 1998, the Company
established the Providence Energy Corporation Performance Share Plan, which
links annual awards to executive officers of Performance Shares to three-
year performance of the Company. Each Performance Share has a value equal
to the average closing sale price of the Company's common stock for the
five days prior to the conclusion of the established three-year performance
period. Two alternative performance measures are used to determine the
percentage of the Performance Shares earned by the holder at the end of the
relevant performance period. The first performance measure is based on
total shareholder return on the Company's common stock (based on share
price and dividends paid) relative to the average total shareholder return
for the Edward Jones Natural Gas Distribution Index. The percentage of
Performance Shares earned at the end of the performance period based on
this performance measure will be as follows:
<TABLE>
<CAPTION>
Relative Percent of
Performance Performance Shares
Within Peer Group Earned
----------------- ------------------
<S> <C>
Top Quintile 150%
2nd Quintile 125%
3rd Quintile 100%
4th Quintile 50%
Bottom Quintile 0%
</TABLE>
The second performance measure is based on the average closing sale
price of the Company's common stock for the five days prior to the end of
the performance period. The percentage of Performance Shares earned at the
end of the performance period based on this performance measure will be as
follows:
<TABLE>
<CAPTION>
Percent of
Common Stock Performance Shares
Share Price Earned
------------ ------------------
<S> <C>
$28 100%
$26 50%
</TABLE>
The percentage of the shares earned is based on the performance goal
which produces the greater award. For example, if the share price of the
Company's common stock is $26 at the end of the performance period,
resulting in 50% of the awarded Performance Shares being earned, and the
Company falls within the 2nd quintile of its peer group at the end of the
performance period, resulting in 125% of the Performance Shares being
earned, the amount payable will be based on 125% of the Performance Shares.
Payment for the Performance Shares is conditioned upon the Company's
achieving a minimum average annual total shareholder return (based on the
price of the Company's common stock and dividends paid to shareholders)
over the performance period equal to or greater than the total annual
return provided on 30-year United States Treasury Notes over the same
period. The payments of the value of the earned Performance Shares are made
within 90 days of the end of the performance period, 50% in shares of
common stock and 50% in cash. Upon the occurrence of a Change in Control
(as defined in the Plan), all outstanding awards are deemed fully earned.
The following table sets forth information with respect to the Performance
Shares awarded to each of the named executive officers for the performance
period ending September 30, 2001:
LONG-TERM INCENTIVE PLANS-AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Performance
Number of or other Estimated future payouts under
shares, units period until non-stock price-based plans
or other maturation ---------------------------------------
Name rights(#) or payout Threshold(2) Target(3) Maximum(4)
---- ------------- ------------ ------------ --------- ----------
<S> <C> <C> <C> <C> <C>
Mr. Dodge 16,000 (1) 8,000 16,000 24,000
Mr. DeMetro 5,500 (1) 2,750 5,500 8,250
Mr. Owens 5,500 (1) 2,750 5,500 8,250
Mr. Yurkevicz 0 (1) N/A N/A N/A
Mr. Grasso 0 (1) N/A N/A N/A
<FN>
- - - - - - - - - - - - - - - - - --------------------
<F1> The performance period commenced on October 1, 1998, and ends on
September 30, 2001.
<F2> Refers to the minimum amount payable for a certain level of
performance under the Performance Share Plan. If the Company does
not achieve this minimum average annual return, the minimum amount
payable for the Performance Shares is zero. Assuming achievement of
the minimum average annual return, the threshold percentage of 50% of
the Performance Shares awarded will be earned if either the share
price of the common stock is at least $26 at the end of the
performance period or total shareholder return is at least within the
4th quintile relative to the Company's peer group. Because the amount
payable for the Performance Shares is equal to the fair market value
of the Company's common stock determined at the end of the
performance period, the monetary value of the minimum amount payable
cannot presently be determined.
<F3> Refers to achieving either of the two measures which results in a
100% award, i.e., either the share price of the Company's common
stock is at least $28 at the end of the performance period or total
shareholder return is at least within the 3rd quintile relative to
the Company's peer group. Because the amount payable for the
Performance Shares is equal to the fair market value of the Company's
common stock determined at the end of the performance period, the
monetary value of the amount payable cannot presently be determined.
<F4> Refers to the maximum payout possible under the Plan. The maximum
percentage of 150% of the Performance Shares awarded will be earned
only if the Company's total shareholder return is within the 1st
quintile relative to the Company's peer group. Because the amount
payable for the Performance Shares is equal to the fair market value
of the Company's common stock determined at the end of the
performance period, the monetary value of the maximum amount payable
cannot presently be determined.
</FN>
</TABLE>
HUMAN RESOURCES AND PLANNING COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
Compensation Philosophy
The Human Resources and Planning Committee (the "Committee"), all of
whose members are disinterested outside directors, is charged by its
charter with assuring that human resources systems support the
Corporation's values, attract and contribute to the retention and
motivation of high quality and experienced management, provide for the
evaluation of management through a formal appraisal process, afford
training and development, and provide for key executive succession. The
Committee is responsible for assuring that ethics/conflict of interest
policies, procedures and systems establish high standards to govern the
conduct of employees based on principles of fairness, honesty, and
integrity; provide clear guidance for compliance with laws and regulations;
afford employees training, interpretive advice and assistance; and
establish internal controls to monitor compliance with the policies. The
Corporation's affirmative action plan and compliance have been reviewed and
will be reviewed annually by the Committee. Annually the Committee reviews
and makes recommendations to the Board for the adoption of a strategic plan
with a focus on annual performance and establishes specific objectives and
sets forth strategies, programs and the resources necessary to accomplish
the Corporation's objectives. The Committee monitors strategy execution and
performance versus the strategic plan.
Components of Executive Compensation
The compensation program for executive officers consists of the
following components:
Base Salary: Base salary is established by reference to annual survey
results provided by an independent consultant and is keyed to attracting
and retaining highly qualified executives.
Annual Incentive Compensation: incentive awards of cash and
restricted stock are earned annually under the 1992 Performance and Equity
Incentive Plan. This Plan is designed to recognize and reward success
relative to plan objectives and permit participants to acquire shares of
the Corporation's common stock, thereby attracting, retaining and
motivating employees who have relevant training, experience and ability.
Restricted stock awards are designed to provide long-term retention
incentives for certain key members of senior management. The restriction
period on the stock is five years. These awards are based upon performance
measures established annually by the Committee for the CEO and by the CEO
for all other executives. The performance measures may be based upon a
combination of goals for the individual executive and the Corporation. The
annual incentive target opportunity is established for each executive
officer based on quantitative and qualitative performance factors. Final
incentive amounts for the named executive officers are reported in the
Summary Compensation Table.
Long-Term Incentive Compensation: consists of long-term performance
incentives under the 1998 Performance Share Plan. The objective for these
awards is to advance the interests of the Corporation by providing long-
term financial incentives to selected key employees of the Corporation and
its subsidiaries to achieve enhanced shareholder value.
Awards under the Performance Share Plan enable the Corporation to
provide a competitive compensation package to the senior executives of the
Corporation, to promote further stock ownership among top management, and
to align executives' compensation with the interests of shareholders
through a direct link to total shareholder return. The Performance Share
Plan provides flexibility to the Corporation in its ability to motivate,
attract and retain executives who make significant contributions to and to
allow them to share in the Corporation's success. These equity-based awards
are highly selective and limited to a small group of executives. The
performance period is three years, so awards at the beginning of fiscal
1999 will be earned at the end of fiscal year 2001, based upon achieving
goals for total shareholder return and an increased stock price.
Basis for CEO Compensation
Consistent with its approach to base salary levels for all executive
officers, the Committee arrived at the fiscal 1999 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 to base salary, $177,632 has been or will be paid under
the Performance and Equity Incentive Plan (the "Plan") to Mr. Dodge for
1999 fiscal year results, as set forth in the Summary Compensation Table.
The Committee arrived at this aggregate award by considering the two
performance categories established pursuant to the Plan. With respect to
fiscal 1999 results, the Corporation's performance produced the following
results:
(1) Earnings per share were between threshold and target.
(2) Customer satisfaction was between target and maximum.
The Committee noted that Mr. Dodge had done a commendable job of
managing the utility business, restructuring the executive staff and moving
the unregulated operations towards profitability.
The total fiscal 1999 incentive award to Mr. Dodge represents 58
percent of fiscal 1999 salary. Mr. Dodge's target incentive award for
fiscal 1999 was 50 percent of fiscal 1999 salary. The Committee determined
Mr. Dodge's fiscal 1999 award will be divided 60 percent cash compensation
and 40 percent in restricted common stock, which restrictions will lapse in
five years.
The terms of Mr. Dodge's employment agreement are described in the
section entitled, "Certain Compensation Arrangements" on page 15.
John H. Howland, Chairman
Douglas H. Johnson
William Kreykes
M. Anne Szostak
Kenneth W. Washburn
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 ("NGDI"). The graph assumes $100 invested on
September 30, 1994 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.
Comparison of Five Year Cumulative Total Return
Providence Energy Corporation, S&P 500 Index and
Edward Jones Natural Gas Distribution Index
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Providence Energy Corporation $100.00 $ 99.30 $115.68 $137.66 $144.27 $215.68
Edward Jones NGDI $100.00 $113.36 $137.28 $162.12 $182.39 $194.79
S&P 500 $100.00 $129.71 $156.05 $219.09 $239.03 $305.47
<FN>
- - - - - - - - - - - - - - - - - --------------------
<F*> The universe of companies in the Edward Jones NGDI has changed over
the past year due to industry consolidations and now is comprised of
the following companies: AGL Resources Inc, Atmos Energy Corp,
Berkshire Energy Resources, Cascade Natural Gas Corp., Connecticut
Energy Corp., Corning Natural Gas Corp., CTG Resources Inc., Delta
Natural Gas Co. Inc., Energy West Inc., EnergyNorth Inc., Energy
South, Fall River Gas Co., Indiana Energy Inc., Laclede Gas Co., New
Jersey Resources, Northwest Natural Gas Co., NUI Corp., Pennsylvania
Enterprises Inc., Peoples Energy Corp., Piedmont Natural Gas Co.,
Providence Energy Corporation, Public Service Co. of N.C., RGC
Resources Inc., South Jersey Industries, Southern Union Co.,
Washington Gas Light Co., Yankee Energy Systems Inc.
</FN>
</TABLE>
Certain Compensation Arrangements
As of September 30, 1999, the Corporation had in effect employment
agreements with certain of its executive officers, including Messrs.
DeMetro, Dodge, Grasso, Owens and Yurkevicz, which provide that during the
term of the agreements, their base salaries will not be reduced and they
will remain eligible for participation in the Corporation's executive
compensation and benefit programs.
The agreements have three-year terms which are automatically extended
for one year, and then again after each successive year.
All agreements provide that either party may terminate the agreement
at the end of the initial term, or at the end of any successive term, 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 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 will be entitled to continuance of his base salary
and benefits for a period of 24 months, and Messrs. DeMetro, Grasso, Owens
and Yurkevicz will be entitled to continuance of their base salaries and
benefits for a period of 12 months. All of the agreements provide that any
health and welfare benefits are discontinued 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 than from his current residence than is such residence
from the Company's current headquarters; 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. 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
and each of Messrs. DeMetro, Grasso, Owens and Yurkevicz will be entitled
to receive, in a lump sum payment, an amount equal to his annual base
salary then in effect and continuance of his health and welfare benefits
for a period of twelve 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 is
terminated, he 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, he 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 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 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 health and welfare benefits for a period of three full
years after the effective date of termination.
The agreements of Messrs. DeMetro, Grasso, 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 health and
welfare benefits 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
The Corporation 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 the Corporation or its subsidiaries. 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 1999 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 employer) 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.
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 5 10 15 20 25 30
- - - - - - - - - - - - - - - - - ----------- - -- -- -- -- --
<S> <C> <C> <C> <C> <C> <C>
$100,000 $ 8,645 $17,290 $25,935 $34,580 $43,225 $51,870
$125,000 $11,145 $22,290 $33,435 $44,580 $55,725 $66,870
$150,000 $13,645 $27,290 $40,935 $54,580 $68,225 $81,870
$160,000* $14,645 $29,290 $43,935 $58,580 $73,225 $87,870
$175,000 $14,645 $29,290 $43,935 $58,580 $73,225 $87,870
$200,000 $14,645 $29,290 $43,935 $58,580 $73,225 $87,870
$225,000 $14,645 $29,290 $43,935 $58,580 $73,225 $87,870
$250,000 $14,645 $29,290 $43,935 $58,580 $73,225 $87,870
$300,000 $14,645 $29,290 $43,935 $58,580 $73,225 $87,870
$350,000 $14,645 $29,290 $43,935 $58,580 $73,225 $87,870
$400,000 $14,645 $29,290 $43,935 $58,580 $73,225 $87,870
<FN>
- - - - - - - - - - - - - - - - - --------------------
<F*> The maximum permissible compensation which may be taken into
consideration in 1999 in establishing retirement benefits under a
qualified plan.
</FN>
</TABLE>
For the fiscal year ended September 30, 1999, the years of service
credited for retirement benefits for the individuals named in the Summary
Compensation Table are as follows: James DeMetro-six years; James H. Dodge-
seven years; James A. Grasso-one year; Robert W. Owens-20 years; and Gerald
A. Yurkevicz-two years.
In addition to the Plan discussed above, the Corporation 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 the officer's Final
Average Compensation which is defined as one-third of total compensation
received during the highest paid 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 the Corporation 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 Corporation's 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
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.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
On November 30, 1999, 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 November 30, 1999, 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. 2,626(1) 6,373
James DeMetro 8,182 3,000
James H. Dodge 15,339(2) 15,000
James A. Grasso 3,283 None
John H. Howland 679 3,327
Douglas H. Johnson 755 3,651
William Kreykes 713 915
Paul F. Levy 1,761(3) None
Romolo A. Marsella 722 3,242
Robert W. Owens 7,213(4) 5,000
M. Anne Szostak 823 1,650
Kenneth W. Washburn 1,975 6,116
W. Edward Wood 1,099 1,580
Gerald A. Yurkevicz 1,764 None
All Directors, Nominees and
Executive Officers as a Group 58,115(5) 49,854
<FN>
- - - - - - - - - - - - - - - - - --------------------
<F*> 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.
<F**> To the extent exercisable within 60 days.
<F1> Includes 888 shares held by Mr. Bodell's wife.
<F2> Includes 2,876 shares held by Mr. Dodge's wife.
<F3> Includes 550 shares held in Trust by Mr. Levy's mother.
<F4> Includes 659 shares held by Mr. Owens' wife as custodian for their
children.
<F5> Includes 47,105 shares held directly, and 11,010 shares held
indirectly.
</FN>
</TABLE>
SECTION 16 COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires certain
persons, including directors of the Corporation, to file reports with the
Securities and Exchange Commission reflecting their transactions in shares
of the Corporation's common stock.
John H. Howland, a director of the Corporation, inadvertently failed
to file a timely Form 5 reflecting the award of 203 shares under the Non-
Employee Director Restricted Stock Plan. The transaction was subsequently
reported in his Form 5 filed on December 10, 1999. James H. Dodge's Form 5,
filed with respect to the fiscal year ended September 30, 1999, failed to
disclose a gift of 1,676 shares to his wife. An amended Form 5 disclosing
the gift was filed on December 10, 1999.
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, 1999.
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, 2000.
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, 1999.
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 2001 ANNUAL MEETING
If a shareholder intending to present a proposal at the 2001 annual
meeting (presently anticipated to be held during the month of January 2001)
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 24, 2000.
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 21, 1999
ProvEnergy Providence Energy Corporation
100 Weybosset Street Providence, Rhode Island 02903
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
PROVIDENCE ENERGY CORPORATION
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS - JANUARY 20, 2000
The undersigned, revoking all prior proxies, hereby constitutes and
appoints Mrs. M. Anne Szostak, and Messrs. Gilbert R. Bodell and John H.
Howland, 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 20, 2000 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.)
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
1. Election of Directors:
[ ] FOR ALL NOMINEES [ ] WITHHOLD *EXCEPTIONS
LISTED BELOW AUTHORITY to vote
for all nominees
listed below
James H. Dodge and Kenneth W. Washburn
(Names of each nominee)
(Instructions: To withhold authority to vote for any individual nominee,
mark the "Exceptions" box and write that nominee's name in the space
provided below.)
____________________________________________________________________________
2. In their discretion, upon such other matters as may properly come before
the meeting.
This proxy when properly executed will be voted in the manner directed
herein by the undersigned shareholder. If no direction is made, this proxy
will be voted FOR all nominees for director.
Dated __________________________
________________________________
Signed
________________________________
Signed
[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.]
