File No. 70-8583
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
AMENDMENT NO. 1
TO
APPLICATION OR DECLARATION
ON
FORM U-1
UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
ALLEGHENY POWER SYSTEM, INC.
12 EAST 49TH STREET
NEW YORK, NY 10017
(Name of company or companies filing this statement and addresses of
principal executive offices)
Allegheny Power System, Inc.
(Name of top registered holding company parent of each applicant or
declarant)
Nancy H. Gormley, Esq.
Vice President
Allegheny Power System, Inc.
Tower Forty-Nine
12 East 49th Street
New York, NY 10017
(Name and address of agent for service)
<PAGE>
1. Applicant hereby amends Item 6. Exhibits and Financial
Statements by filing the following:
(a) Exhibits:
I. Forms of Notice of Annual Meeting,
Proxy Statement and Proxy.
SIGNATURE
Pursuant to the requirements of the Public Utility Holding Company
Act of 1935, the undersigned company has duly caused this statement to be
signed on its behalf by the undersigned thereunto duly authorized.
ALLEGHENY POWER SYSTEM, INC.
By: CAROL G. RUSS
Carol G. Russ
Counsel
Dated: March 16, 1995
U:\DUMP\CVOTING\AMEND1
DRAFT
Exhibit I
Allegheny Power System, Inc.
ART WORK
Notice of Annual Meeting
of Stockholders
to be held on May 11, 1995
and Proxy Statement
<PAGE>
ART WORK
12 East 49th Street
New York, N.Y. 10017
April 7, 1995
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
NOTICE IS HEREBY GIVEN that the Annual Meeting of
Stockholders of ALLEGHENY POWER SYSTEM, Inc. will be held on
the third floor of 270 Park Avenue, between 47th and 48th
Streets, New York, N.Y., on Thursday, May 11, 1995, at
10:30 a.m., New York time, for the following purposes:
(1) To elect directors to hold office until the next
Annual Meeting of Stockholders and until their successors are
duly chosen and qualified;
(2) To consider and vote upon a proposal to eliminate
cumulative voting;
(3) To consider and vote upon a proposal to eliminate
preemptive rights;
(4) To approve the appointment of independent
accountants;
(5) To transact such other business as may properly come
before the meeting or any adjournment thereof.
Holders of record at the close of business on April 3,
1995, will be entitled to vote at the meeting.
By Order of the Board of Directors,
Eileen M. Beck
Secretary
<PAGE>
PROXY STATEMENT
Proxies in the form enclosed are solicited by the Board
of Directors of Allegheny Power System, Inc. (the Company),
12 East 49th Street, New York, New York 10017, for the Annual
Meeting of Stockholders to be held on May 11, 1995. The proxy
card provided each stockholder by the Company covers the total
number of shares registered in his or her name and, in the
case of participants in the Company's Dividend Reinvestment
and Stock Purchase Plan, the shares held for his or her
account under the Plan. A proxy may be revoked at any time
prior to its exercise by written notice to the Company, by
submission of another proxy bearing a later date or by voting
in person at the meeting.
At the close of business on April 3, 1995, there were
outstanding shares of Common Stock, each entitled to one
vote. In elections of directors, each holder entitled to vote
is entitled to as many votes as shall equal the number of
shares held multiplied by the number of directors to be
elected and may cast all of such votes for a single director
or may distribute them among the number of directors to be
elected or any two or more of them. There are no conditions
precedent to the exercise of such cumulative voting rights.
The presence in person or by proxy of the holders of
record of a majority of the outstanding shares of Common Stock
entitled to vote constitutes a quorum. The affirmative vote
of a majority of all the votes entitled to be cast is required
for the election of each director and for approval of the
appointment of Price Waterhouse as independent accountants.
Abstentions are counted only for purposes of determining
whether a quorum is present. Broker non-votes are not treated
as votes nor are they calculated in determining the existence
of a quorum. The affirmative vote of at least two-thirds of
all the votes entitled to be cast is required for approval of
the elimination of cumulative voting and preemptive rights.
The approximate date on which the proxy statement and
form of proxy are first being sent or given to stockholders is
April 7, 1995. The Annual Report for 1994 has already been
mailed to stockholders.
ELECTION OF DIRECTORS
At the meeting eleven directors are to be elected to hold
office until the next Annual Meeting of Stockholders and until
their respective successors are duly chosen and qualified.
The proxies received, unless marked to the contrary, will be
voted for the election of the following persons, all of whom
are now directors of the Company and are the nominees of the
Board of Directors at this election, or, if considered
desirable, cumulative voting rights will be exercised by the
proxy holders to elect as many of such nominees as possible.
The Board of Directors does not expect that any of the
nominees will become unable to serve as a director, but if
that should occur for any reason prior to the meeting, the
proxy holders reserve the right to name another person of
their choice.
Directors, Principal Occupation, Director
Other Directorships, of the
Business Experience, and 1994 Company
Board and Committee Meetings Attendance Age Since
ELEANOR BAUM 3 4 54 1988
Dean of The Albert Nerken School of Engineering of The
Cooper Union for the Advancement of Science and Art. Director
of Avnet, Inc. and United States Trust Company, Commissioner
of the Engineering Manpower Commission, a fellow of the
Institute of Electrical and Electronic Engineers, member of
Board of Governors, New York Academy of Sciences, and
President, American Society of Engineering Education.
Attendance: 22 of 22.
<PAGE>
WILLIAM L. BENNETT 1 5 45 1991
Chairman, Director, and Chief Executive Officer of Noel Group,
Inc., a holder of major equity interests in various
operating companies. Director of Belding Heminway Company,
Inc., Global Natural Resources Inc., Lincoln Snacks
Company, Simmons Outdoor Corporation, Sylvan, Inc. and
TDX Corporation. Formerly, general partner, Discovery Funds,
a venture capital affiliate of Rockefeller & Company,
Inc., an investment management company.
Attendance: 11 of 12.
KLAUS BERGMAN 2 3 5 63 1985
Chairman of the Board and Chief Executive Officer of the
Company and its principal subsidiaries.
Attendance: 14 of 14.
WENDELL F. HOLLAND 43 1994
Of Counsel, Law Firm of Reed, Smith, Shaw & McClay. Formerly,
Partner, Law Firm of LeBoeuff, Lamb, Greene & MacRae, and
Commissioner of the Pennsylvania Public Utility Commission.
Attendance: 3 of 3. 6
PHILLIP E. LINT 1 3 5 65 1989
Retired. Formerly partner, Price Waterhouse.
Attendance: 17 of 17.
EDWARD H. MALONE 3 70 1985
Retired. Formerly Vice President of General Electric
Company and Chairman, General Electric Investment Corporation.
Director of Fidelity Group of Mutual Funds, General Re
Corporation, and Mattel, Inc.
Attendance: 10 of 13.
FRANK A. METZ, JR.2 3 4 60 1984
Retired. Formerly Senior Vice President, Finance and
Planning, and Director of International Business Machines
Corporation, a manufacturer and distributor of information
systems equipment and services. Director of Monsanto
Company and Norrell Corporation.
Attendance: 20 of 22.
ALAN J. NOIA2 48 1994
President and Chief Operating Officer of the Company
and Allegheny Power Service Corporation. Director of
the Company's other principal subsidiaries. Formerly,
President
of The Potomac Edison Company.
Attendance: 3 of 3. 6
STEVEN H. RICE 2 3 4 5 51 1986
Bank consultant and attorney-at-law. Director and Vice
Chairman of
the Board of Stamford Federal Savings Bank. Formerly,
President
and Director of The Seamen's Bank for Savings and director
of Royal Group, Inc.
Attendance: 25 of 25.
<PAGE>
GUNNAR E. SARSTEN 5 58 1992
Chairman and Chief Executive Officer of MK International.
Formerly, President and Chief Operating Officer of
Morrison Knudsen Corporation, President and Chief Executive
Officer of United Engineers & Constructors International,
Inc., (now Raytheon Engineers & Constructors, Inc.), and
Deputy
Chairman of the Third District Federal Reserve Bank in
Philadelphia.
Attendance: 10 of 10.
PETER L. SHEA 1 63 1993
Managing Director of Hydrocarbon Energy, Inc., a privately
owned oil and gas development drilling and production company
and an Individual General Partner of Panther Partners,
L.P., a closed-end non-diversified management company.
Attendance: 12 of 12.
1 Member of Audit Committee.
2 Member of Executive Committee.
3 Member of Finance Committee.
4 Member of Management Review Committee.
5 Member of New Business Committee.
6 Elected September 8, 1994.
COMPENSATION OF DIRECTORS
Each of the directors is also a director of the following
subsidiaries of the Company: Monongahela Power Company, The
Potomac Edison Company, West Penn Power Company, and Allegheny
Power Service Corporation. In 1994, directors who were not
officers or employees of System companies (outside directors)
received for all services to System companies (a) $16,000 in
retainer fees, (b) $800 for each committee meeting attended,
except Executive Committee meetings for which such fees are
$200, and (c) $250 for each Board meeting of each company
attended. Under an unfunded deferred compensation plan, a
director may elect to defer receipt of all or part of his or
her director's fees for succeeding calendar years to be
payable with accumulated interest when the director ceases to
be such, in equal annual installments, or, upon authorization
by the Board of Directors, in a lump sum. Effective January 1,
1995, in addition to the foregoing compensation, (a) the
Chairperson of each committee other than the Executive
Committee will receive an additional fee of $4,000 per year;
(b) outside directors of the Company will receive 200 shares
of Common Stock pursuant to the Allegheny Power System, Inc.
Restricted Stock Plan for Outside Directors; and (c) under the
Allegheny Power System Board of Directors Retirement Plan,
outside directors will receive an annual pension equal to the
retainer fee paid to them at the time of their retirement,
providing the director has at least five years of service and,
except under special circumstances, serves until age 65.
BOARD OF DIRECTORS AND CERTAIN COMMITTEE MATTERS
The Board of Directors has Audit, Finance, Management
Review, and New Business Committees. The Audit Committee
makes recommendations to the Board with respect to auditing
matters, including the employment of independent accountants
and the handling of the annual audit of the books and accounts
of the Company and its subsidiaries. It met three times in
1994. The Management Review Committee, which is made up of
outside directors only, makes recommendations to the Board on
certain matters concerning directors and officers, including
compensation and management succession. This Committee serves
also as the nominating committee for directors and considers
recommendations sent by shareholders to the Company that are
<PAGE>
accompanied by a comprehensive written resume of the proposed
nominee's experience and background and a written consent of
such person to serve as a director if nominated and elected.
It met nine times in 1994. The total number of Board meetings
held in 1994 was nine.
PROPOSAL TO ELIMINATE CUMULATIVE VOTING
The Board of Directors has approved for submission to
shareholders an amendment to Article VII of the Articles of
Restatement of Charter of the Company (Articles) which would
eliminate the requirement of cumulative voting in the election
of directors. The Articles currently provide that at the
election of directors each holder of shares of stock entitled
to vote shall be entitled to as many votes as shall equal the
number of shares of such stock held multiplied by the number
of directors to be elected, and the stockholder may cast all
such votes for a single director or may distribute them among
the number of directors to be elected, or any two or more of
them as the stockholder may see fit. The Corporations and
Associations Article of Annotated Code of Maryland does not
require cumulative voting at elections of directors.
The Board of Directors believes that the benefits of
cumulative voting are much less important today than they were
when cumulative voting was originally included in the
Company's Articles of Restatement of Charter. At that time,
minority shareholders had few Federal and state remedies to
protect them from overreaching by majority shareholders and
therefore had a greater need for board representation. Today,
the Board of Directors believes that the disadvantages of
cumulative voting outweigh the advantages for a large,
extensively regulated and widely held Company such as the
Company. Of the shares of the Company's stock outstanding,
no shareholder today owns greater than %. Thus, cumulative
voting may allow a minority of shareholders to obtain
representation on a company's board of directors against the
wishes of the majority to further objectives which may be
contrary to those of the majority of the shareholders.
Furthermore, cumulative voting may enable a minority to elect
a director who represents interests intent on a takeover of
the Company or similar action on terms not equally beneficial
to all shareholders. For a board of directors to work
effectively for all of the shareholders, each director should
feel a responsibility to the shareholders as a whole and not
to any special group of minority shareholders. If the
proposed amendment is passed, and cumulative voting is
eliminated, the holders of a majority of shares entitled to
vote in an election of directors will be able to elect all of
the directors being elected at that time and no director will
be elected by any special interest group of minority
shareholders.
The Board of Directors recommends the elimination of
cumulative voting because it believes that non-cumulative
voting is more likely to lead to representation of the shared
interests of all shareholders.
The Board of Directors recommends a vote "FOR" the
proposed elimination of cumulative voting.
PROPOSAL TO ELIMINATE PREEMPTIVE RIGHTS
The Board of Directors has also approved for submission
to shareholders an amendment to Article VII of the Articles of
Restatement of Charter which would eliminate the limited
preemptive rights of shareholders to purchase additional
shares of the Company's Common Stock (preemptive rights).
Maryland law does not require that a corporation's charter
provide for preemptive rights. Also, unless the charter
provides otherwise, Maryland law prohibits preemptive rights
in many circumstances, especially where the application of
preemptive rights is impracticable.
<PAGE>
Article VII of the Company's Articles of Restatement of
Charter provides that shares of Common Stock, and any
securities convertible into Common Stock, may be issued,
without first being offered to shareholders, (a) if sold for
money either in a public offering or to or through
underwriters or investment bankers who agree to make a public
offering thereof; or (b) in payment for property. Under other
circumstances, shareholders are granted preemptive rights.
The Board of Directors believes that elimination of preemptive
rights will give the Board of Directors greater flexibility in
carrying out and reducing the cost of financings, including
the sale of new shares of Common Stock, or senior securities
convertible into Common Stock, through private placements,
because the Company would no longer be required to first offer
shares to existing shareholders. Under certain conditions,
such private forms of financing will enable the Company to
fund its capital requirements at a savings in time, expense
and overall costs when compared with other forms of financing.
The Board of Directors believes that the advantages to the
Company of elimination of preemptive rights derived from
having such private forms of financing available outweigh any
remaining benefits of preemptive rights to shareholders.
Preemptive rights originated at a time when corporations
were generally small, had relatively few shares of stock
outstanding, and those shares were not widely traded. As a
result, there was little opportunity to purchase additional
shares at a reasonable price except when a corporation had a
new issue and, therefore, these rights were needed to preserve
a shareholder's proportionate interest in voting rights in the
corporation. The Board of Directors believe that preemptive
rights have little significance today. Allegheny Power
System, Inc. has shares outstanding and listed for trading on
the New York, Chicago and Pacific stock exchanges, and it is
extremely unusual that shares of its stock do not trade each
and every trading day. As a result, shareholders may purchase
additional shares on any trading day at competitively based
costs. Furthermore, pursuant to the Company's Dividend
Reinvestment and Stock Purchase Plan, and the optional cash
payment provisions provided therein, shareholders may increase
their ownership of the Company's common stock at relatively
minor cost. While that Plan could be amended or terminated,
it has been in effect for over 17 years. For these reasons,
shareholders have continuous opportunities to preserve their
proportionate interest and voting rights in the Company by
acquiring additional shares of common stock.
The Board of Directors recommends a vote "FOR" the
proposed elimination of preemptive rights.
APPOINTMENT OF INDEPENDENT ACCOUNTANTS
Upon the recommendation of the Audit Committee, the Board
of Directors has appointed Price Waterhouse as independent
accountants for the Company to audit its consolidated
financial statements for 1994 and to perform other audit
related services. Such services include: review of the
Company's quarterly interim financial information; review of
periodic reports and registration statements filed by the
Company with the Securities and Exchange Commission; issuance
of special purpose reports covering such matters as employee
benefit plans and submissions to various governmental
agencies; and consultation in connection with various
accounting and financial reporting matters. Price Waterhouse
also performs non-audit services for the Company. Fees for
the 1994 audit and fees for audit services paid during the
year aggregated $770,200, and fees for non-audit services,
$33,260. The Board has directed that the appointment of Price
Waterhouse be submitted to the stockholders for approval. If
the stockholders should not approve, the Audit Committee and
the Board would reconsider the appointment. Representatives
of Price Waterhouse will be present at the annual meeting to
make a statement if they wish and to answer questions.
<PAGE>
The Board of Directors recommends a vote "FOR" the
approval of the appointment of Price Waterhouse as independent
accountants and will so vote proxies received that do not
otherwise specify.
MANAGEMENT REVIEW COMMITTEE REPORT
GENERAL
The compensation program for executive officers of the
Company and its subsidiaries is directed by the Management
Review Committee of the Company's Board of Directors. The
Committee recommends the annual compensation program for each
year to the Board of Directors of the Company and of each
subsidiary for its approval.
The executive compensation program is intended to meet
three objectives:
Create a strong link between executive compensation
and total return to stockholders, reliable and
economical service to customers which assures
customer satisfaction, environmental stewardship,
and System financial stability, integrity, and
overall performance.
Offer compensation opportunities that are
competitive with the median level of opportunity in
the marketplace, at expected levels of performance.
Ensure internal compensation equity--maintaining a
reasonable relationship between compensation and
the duties and responsibilities of each executive
position.
<PAGE>
EXECUTIVE COMPENSATION PROGRAM
The Company's executive compensation program has three
components: salary and short-term and long-term incentive
awards.
The Company's executive compensation is both market- and
performance-based. The Committee believes that it is
necessary to use both market- and performance-based
compensation to meet the challenges of intensifying
competitive, economic and regulatory pressures.
To ensure that the System's salary structure and total
compensation continue to be competitive, they are compared
each year through an annual compensation survey with those of
comparable electric utilities--over 30 companies in recent
years. The survey companies are either similar in type and
size to Allegheny, contiguous to our geographic territory, or
have a similar fuel mix.
In 1994, over 80% of these survey companies are included
in the Dow Jones Electric Index to which the Company's
performance is compared on page of this proxy statement.
This comparison, conducted by a national compensation
consulting firm, involves matching System positions, including
the Chairman and Chief Executive Officer (CEO), with those in
the survey companies that have comparable duties and
responsibilities. For 1994, the survey indicated that the
System's executive salary structure was slightly below the
median. As in prior years, this survey data became the basis
for the consulting firm's recommendations as to salary
structure position placement and total compensation, and 1994
base salary ranges for each position in line with the survey
average for comparable positions.
Base salary:
The base salaries of all executive officers, including
the CEO, are reviewed annually by the Committee, which makes
recommendations to the Boards of Directors. In recommending
base salary levels, the Committee gives most weight to the
performance of each executive. The Committee receives a
report from the CEO including (a) the performance rating of
each executive (other than himself) based on that executive's
position-specific responsibilities and performance evaluation
by his or her supervisor, and (b) a specific salary
recommendation for each. In determining its recommendations
to the Boards, the Committee also takes into consideration
operating performance, including such factors as safety,
efficiency, and customer satisfaction, and financial results,
including such things as total returns, earnings per share,
quality of earnings, dividends paid and dividend payout
ration.
Annual Performance Incentive Plan:
The Allegheny Power System Annual Performance Incentive
Plan (the "Incentive Plan") is designed to supplement base
salaries and provide cash incentive compensation opportunities
to attract, retain and motivate a senior group of managers of
Allegheny Power System, including executive officers selected
by the Management Review Committee. The Incentive Plan
provides for establishment of individual incentive awards
based on meeting specific predetermined performance targets.
The performance targets are based on net income available to
common shareholders, achieved shareholder return, and overall
corporate financial results (changes in earnings per share,
quality of earnings, dividends paid per share and dividend
payout ratios) as well as System operating results, quality
and cost of service to customers and System performance. In
addition, personal performance goals as to operating factors
such as efficiency and safety are set on a position specific
basis for participants.
Specific operating, management, or financial areas to be
emphasized, as well as performance targets, are determined
<PAGE>
each year by the Committee with the recommendations of the
CEO. If the performance targets are not met, no awards are
paid. The target awards under the Plan are a percent of base
compensation determined by the Committee, and participants may
earn up to 1 1/4 times the target award. For the CEO and
other named officers for the 1994 Plan the targets were 25%
and 20% of 1994 base compensation, respectively. Targets for
other participants were 20% or less. Incentive Plan awards
earned are paid in the year after the year for which they are
earned. Awards earned for performance in 1992, 1993 and 1994
are set forth in the Summary Compensation Table for those
years under the column "Incentive Award" for the individuals
named therein.
<PAGE>
Performance Share Plan:
The Allegheny Power System Performance Share Plan (the
"Performance Plan"), as approved by the stockholders at the
May 1994 Annual Meeting, is designed as an aid in attracting
and retaining individuals of outstanding ability and in
rewarding them for the continued profitable management of, and
continued providing of economical and reliable service to
customers by, the Company and its subsidiaries. Nine
executive officers of the Company were selected to participate
in the 1994 Performance Plan by the Management Review
Committee. The Performance Plan provides for the
establishment of corporate incentive awards based on meeting
specific stockholder and customer performance rankings (total
stockholder return ranking in the Dow Jones Electric Utility
Index and cost of customer service versus nine other
utilities).
The first cycle of the Performance Plan is based on three
years, the first being the period 1994-1996. The target
awards under the Plan for the named officers, other than
Mr. Hayes, are a flat dollar amount ranging from $55,000 to
$170,000 for the CEO. Targets for the other five participants
are less. Awards will be determined in 1997 after the
completion of the first cycle. The actual stockholder and
customer rankings will be determined and the awards
calculated. The actual awards will be paid in Company stock
and can range from 0% to 200% of target. The second cycle
became effective January 1, 1995 and will be for the period
1995-1997.
For the CEO, the Management Review Committee develops
salary and incentive award recommendations for the Board's
consideration. The base salary recommendation was based upon
the Committee's evaluation of the CEO's performance of his
responsibilities in the context of the Company's overall
performance, including the factors described in the next
sentence and the quality and cost of service rendered to its
customers. The incentive award recommendation was based on
1994 corporate results, including changes in earnings per
share, quality of earnings, dividends paid per share, and
dividend payout ratios; total shareholder return, as well as
the relative ranking of such return versus that of other
electric utilities; overall quality and cost of service
rendered to customers, and System operating performance.
Mr. Bergman's 1994 total compensation reflected the
Committee's evaluation of his performance and the described
1994 overall results.
The executive compensation program, which is annually
reviewed by the Committee and the Board, is intended to reward
the individual performance of each executive relative to the
overall performance of the Company, the service provided to
customers, and its cost. The program is further intended to
provide competitive compensation to help the Company attract,
motivate, and retain the executives needed to ensure continued
stockholder return and reliable and economical electric
service to customers.
Recently enacted Section 162(m) of the Internal Revenue
Code generally limits to $1 million the corporate deduction
for compensation paid to executive officers named in the Proxy
Statement, unless certain requirements are met. This
Committee has carefully considered the effect of this new tax
code provision on the current executive compensation program.
At this time, Allegheny's deduction for officer compensation
is not limited by the provisions of Section 162(m). The
Committee intends to take such actions with respect to the
executive compensation program, if necessary, to preserve the
corporate tax deduction for executive compensation paid.
No current member of the Management Review Committee is
or ever was an employee of the Company or any of its
subsidiaries.
Frank A. Metz, Jr., Chairman
Eleanor Baum
Steven H. Rice
<PAGE>
EXECUTIVE COMPENSATION
During 1994, and for 1993 and 1992, the annual compensation paid by the
Company and its operating subsidiaries directly or indirectly for services in
all capacities to such companies to their Chief Executive Officer and each
of the four most highly paid executive officers of the Company and its
subsidiaries whose cash compensation exceeded $100,000 was as follows:
<TABLE>
<CAPTION>
Annual Compensation Incentive All Other
Name and capacities in which served Year Salary Award(a)
Compensation(b)(d)
KLAUS BERGMAN
<S> <C> <C> <C> <C>
Chairman of the Board, and 1994 $485,000 $120,000 $91,458
Chief Executive Officer of the Company 1993 460,000 90,000 46,889
and of the Company's principal 1992 445,000 80,000 13,529
subsidiaries.
ALAN J. NOIA
President, Chief Operating Officer and 1994 $236,336 $ 57,000 $47,867
Director of the Company and Allegheny 1993 212,500 37,000 20,107
Power Service Corporation. Director 1992 200,000 38,000 7,975
of the Company's other principal subsidiaries.
STANLEY I. GARNETT, II
Senior Vice President, Finance of the 1994 $219,336 $ 47,000 $70,213
Company and Allegheny Power Service 1993 206,000 40,000 24,006
Corporation. Vice President and 1992 195,600 35,000 7,939
Director of the Company's other principal
subsidiaries.
PETER J. SKRGIC
Senior Vice President of the Company 1994 $213,336 $ 50,000 $57,253
and Allegheny Power Service 1993 200,000(c) 38,000 18,678
Corporation Vice President and 1992 190,000(c) 31,000 8,325
Director of the Company's other principal
subsidiaries.
BENJAMIN H. HAYES
President and Director of Monongahela 1994 $197,500 $ 58,000 $92,798(e)
Power Company. 1993 190,000 35,000 19,668
(Retired January 1, 1995) 1992 180,000 30,000 11,114
JAY S. PIFER
Senior Vice President of Allegheny 1994 $189,996 $ 39,000 $50,630
Power Service Corporation. President 1993 175,500 25,000 18,093
and Director of the Company's 1992 156,495 28,000 9,870
operating subsidiaries.
</TABLE>
(a) Incentive awards are based upon performance in the year in
which the figure appears but are paid in the second quarter of
the following year. The incentive award plan will be continued
for 1995.
(b) Effective January 1, 1992, the basic group life insurance
provided employees was reduced from two times salary during
employment, which reduced to one times salary after 5 years in
retirement, to a new plan which provides one times salary
until retirement and $25,000 thereafter. Executive officers
and other senior managers remain under the prior plan. In
order to pay for this insurance for these executives during
1992, insurance was purchased on the lives of each of them.
Effective January 1, 1993, the Company started to provide
funds to pay for the future benefits due under the
supplemental retirement plan (Secured Benefit Plan). To do
this, the Company purchased, during 1993, life insurance on
the lives of the covered executives. The premium costs of
both the 1992 and 1993 policies plus a factor for the use of
the money are returned to the Company at the earlier of
(a) death of the insured or (b) the later of age 65 or 10
<PAGE>
years from the date of the policy's inception. The figures in
this column include the present value of the executives' cash
value at retirement attributable to the current year's premium
payment for both the Executive Life Insurance and Secured
Benefit Plans (based upon the premium, future valued to
retirement, using the policy internal rate of return minus the
corporation's premium payment), as well as the premium paid
for the basic group life insurance program plan and the
contribution for the Employee Stock Ownership and Savings Plan
(ESOSP) established as a non-contributory stock ownership plan
for all eligible employees effective January 1, 1976, and
amended in 1984 to include a savings program. Under the ESOSP
for 1994, all eligible employees may elect to have from 2% to
7% of their compensation contributed to the Plan as pre-tax
contributions and an additional 1% to 6% as post-tax
contributions. Employees direct the investment of these
contributions into one or more of five available funds. Fifty
percent of the pre-tax contributions up to 6% of compensation
are matched with common stock of Allegheny Power System, Inc.
Effective January 1, 1994 the maximum amount of any employee's
compensation that may be used in these computations is
$150,000. Employees' interests in the ESOSP vest immediately.
Their pre-tax contributions may be withdrawn only upon meeting
certain financial hardship requirements or upon termination of
employment. For 1994, the figure shown includes amounts
representing (a) the aggregate of life insurance premiums and
dollar value of the benefit to the executive officer of the
remainder of the premium paid on the Group Life Insurance
program, the Executive Life Insurance, and Secured Benefit
Plans, and (b) ESOSP contributions respectively, as follows:
Mr. Bergman $86,958 and $4,500, Mr. Noia $43,367 and $4,500;
Mr. Garnett $66,253 and $3,960; Mr. Skrgic $52,753 and $4,500;
Mr. Hayes $47,798 and $4,500; and Mr. Pifer $46,130 and
$4,500, respectively.
(c) Salary includes a $15,000 housing allowance in 1992 and 1993.
(d) In 1994, the Boards of Directors of the Company and its
operating subsidiaries implemented a Performance Share Plan
(the "Plan") for senior officers which was approved by the
shareholders of the Company at the annual meeting in May 1994.
The first Plan cycle began on January 1, 1994 and will end on
December 31, 1996. After completion of that cycle,
performance share awards or cash may be granted if a
participant has met his or her performance criteria. Since
the Plan cycle will not be complete until 1997, no awards have
been granted and the amount which any named executive officer
will receive has not yet been determined.
(e) This amount includes $40,500, representing accrued vacation
for which he was paid.
In February 1995, the Company entered into employment
contracts with certain of the named executive officers
(Agreements). Each Agreement sets forth (i) the severance benefits
that will be provided to the employee in the event the employee is
terminated subsequent to a Change in Control of the Company (as
defined in the Agreements), and (ii) the employee's obligation to
continue his employment after the occurrence of certain
circumstances that could lead to a Change in Control. The
Agreements provide generally that unless employment is terminated
by the Company for Cause, Disability or Retirement or by the
employee for Good Reason (each as defined in the Agreements),
severance benefits will consist of a cash payment equal to 2.99
times the employee's annualized compensation together with the
Company maintaining existing benefits for the employee and the
employee's dependents for a period of three years. Each Agreement
initially expires on December 31, 1997 but will be automatically
extended for one year periods thereafter unless either the Company
or the employee gives notice otherwise. Notwithstanding the
delivery of such notice, the Agreements will continue in effect for
twenty-four months after a Change in Control.
<PAGE>
RETIREMENT PLAN
The Company maintains a Retirement Plan covering substantially
all employees. The Retirement Plan is a noncontributory, trusteed
pension plan designed to meet the requirements of Section 401(a) of
the Internal Revenue Code of 1986, as amended (the "Code"). Each
covered employee is eligible for retirement at normal retirement
date (age 65), with early retirement permitted. In addition,
executive officers and other senior managers participate in a
supplemental executive retirement plan ("Secured Benefit Plan").
Pursuant to the Secured Benefit Plan senior executives of
Allegheny Power System companies who retire at 60 or over with 40
or more years of service are entitled to a supplemental retirement
benefit in an amount that, together with the benefits under the
basic plan and from other employment, will equal 60% of the
executive's highest average monthly earnings for any 36 consecutive
months. The supplemental benefit is reduced for less than 40 years
service and for retirement age from 60 to 55. It is included in
the amounts shown where applicable. To provide funds to pay such
benefits, beginning January 1, 1993 the Company purchased insurance
on the lives of the participants in the Plan. The Plan has been
designed so that if the assumptions made as to mortality
experience, policy dividends, and other factors are realized, the
Company will recover all premium payments, plus a factor for the
use of the Company's money. The amount of the premiums for this
insurance to be deemed "compensation" by the SEC is described and
included in the "All Other Compensation" column on page xx of this
proxy. All executive officers are participants in the Plan. It
also provides for use of Average Compensation in excess of Code
maximums.
The following table shows estimated maximum annual benefits
payable following retirement (assuming payments on a normal life
annuity basis and not including any survivor benefit) to an
employee in specified remuneration and Years of Credited Service
classifications. These amounts are based on an estimated Average
Compensation (defined as average total earnings, excluding
incentive awards, during the highest-paid 36 consecutive calendar
months or, if smaller, the member's highest rate of pay as of any
July 1st"), retirement at 65 and without consideration of any
effect of various options which may be elected prior to retirement.
The benefits listed in the Pension Plan Table are not subject to
any deduction for Social Security or any other offset amounts.
<TABLE>
<CAPTION>
PENSION PLAN TABLE
Average Years of Credited Service
Compensation(a) 15 Years 20 Years 25 Years 30 Years 35 Years 40 Years
<C> <C> <C> <C> <C> <C> <C>
$200,000 $ 60,000 $ 80,000 $100,000 $110,000 $115,000 $120,000
250,000 75,000 100,000 125,000 137,500 143,750 150,000
300,000 90,000 120,000 150,000 165,000 172,500 180,000
350,000 105,000 140,000 175,000 192,500 201,250 210,000
400,000 120,000 160,000 200,000 220,000 230,000 240,000
450,000 135,000 180,000 225,000 247,500 258,750 270,000
500,000 150,000 200,000 250,000 275,000 287,500 300,000
550,000 165,000 220,000 275,000 302,500 316,250 330,000
600,000 180,000 240,000 300,000 330,000 345,000 360,000
</TABLE>
(a) The earnings of Messrs. Bergman, Noia, Garnett, Skrgic and
Pifer covered by the plan correspond substantially to such
amounts shown for them in the summary compensation table. As
of December 31, 1994, they had accrued 23, 25, 13, 30 and 30
years of credited service, respectively, under the Retirement
Plan. Mr. Hayes retired January 1, 1995 and receives an annual
pension benefit of $102,500.
<PAGE>
PERFORMANCE GRAPH
The graph set forth below compares the Company's cumulative
total shareholder return on its Common Stock with the Dow Jones
Electric Utility Index and the Standard & Poor's Midcap 400 Index
at each December 31 during the period beginning December 31, 1989
and ending December 31, 1994, and assumes the investment of $100 in
each on December 31, 1989 and the reinvestment of all dividends.
Comparison of Allegheny Power System, Inc.'s 5-Year Cumulative
Total Return vs. Dow Jones Electric Utility Index and S&P Midcap
400
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The table below shows the number of shares of Common Stock
that are beneficially owned, directly or indirectly, by each named
director and each named executive officer of the Company and its
subsidiaries, and by all directors and executive officers of the
Company and its subsidiaries as a group as of March 1, 1995. To
the best of the knowledge of the Company, there is no person who is
a beneficial owner of more than 5% of the outstanding shares of
Common Stock.
<TABLE>
<CAPTION>
Shares of
APS, Inc. Percent
Name Common Stock of Class
<S> <C> <C>
Eleanor Baum 2,000 Less than .01%
William L. Bennett 2,453 "
Klaus Bergman 10,463 "
Stanley I. Garnett, II 4,390 "
Benjamin H. Hayes 5,697 "
Wendell F. Holland 140 "
Phillip E. Lint 600 "
Edward H. Malone 1,468 "
Frank A. Metz, Jr. 1,936 "
Alan J. Noia 11,202 "
Jay S. Pifer 7,856 "
Steven H. Rice 2,148 "
Gunnar E. Sarsten 5,000 "
Peter L. Shea 1,500 "
Peter J. Skrgic 5,633 "
All directors and executive officers
of the Company and its subsidiaries
as a group (31 persons) 128,582 Less than .11%
</TABLE>
(a) Section 16(a) of the Securities and Exchange Act of 1934
requires the Company's officers and directors to file initial
reports of ownership and reports of changes in ownership with
the Securities and Exchange Commission ("SEC") and the New
York Stock Exchange. No director or officer failed to file
such reports on a timely basis.
<PAGE>
OTHER MATTERS
The Board of Directors is not aware of any other matters which
may come before the meeting. If any other matters properly come
before the meeting, it is the intention of the persons named in the
proxy to vote the proxy thereon in accordance with their judgment.
The Company will bear the cost of solicitation of proxies. In
addition to the use of the mails, proxies may be solicited by
officers, directors, and regular employees of the Company and its
subsidiaries personally, by telephone, or telegraph, and the
Company may reimburse persons holding stock in their names or in
the names of their nominees for their expenses in sending
soliciting material to their principals. Although there are no
plans to do so, the Company may also obtain the services of
additional persons in soliciting proxies. The cost of any such
additional solicitation, if undertaken, is not expected to
exceed $40,000.
It is important that proxies be returned promptly.
Stockholders are, therefore, urged to mark, date, sign, and return
the proxy immediately. No postage need be affixed if mailed in the
enclosed envelope in the United States.
DEADLINE FOR SHAREHOLDER PROPOSALS
The date by which shareholder proposals must be received by
the Company for inclusion in the proxy materials relating to the
next annual meeting is December 8, 1995.
Please mark, date, sign and return the enclosed proxy immediately.
No postage is necessary if mailed in the enclosed envelope in the
United States. If you attend the meeting, we shall be glad to
return it to you, so that you may vote in person.
