SCHEDULE 14A (Rule 14a-101)
Information Required in Proxy Statement
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant /x/
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Check the appropriate box:
/ / Preliminary Proxy Statement
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule
14a-12
/ / Confidential, For Use of the Commission (as permitted by
Rule 14a-6(e)(2))
GPU, INC.
------------------------------------------------------------
(Name of Registrant As Specified In Its Charter)
GPU, Inc.
------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the Appropriate Box):
/X/ No Fee Required
/ / Fee computed on table below per Exchange Act Rules 14a-
6(i)(1) and 0-11.
1) Title of each class of securities to which
transaction applies:
2) Aggregate number of securities to which
transaction applies:
3) Per unit price or other underlying value of
transaction computed pursuant to Exchange Act Rule 0-11
(set forth the amount on which the filing fee is
calculated and state how it was determined):<PAGE>
4) Proposed maximum aggregate value of transaction:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for
which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the
Form or Schedule and the date of its filing.
1) Amount previously paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:<PAGE>
GPU, INC.
100 Interpace Parkway Parsippany, New Jersey 07054-1149
Notice of Annual Meeting of Stockholders to be Held May 1, 1997
Notice is hereby given that the Annual Meeting of
Stockholders of GPU, Inc. will be held at The Morris Museum, Six
Normandy Heights Road, Morristown, New Jersey on Thursday, May 1,
1997 at 10:00 o'clock in the morning (local time):
1. To elect four directors of the Corporation to hold
office for three-year terms and to elect two directors
to hold office for two-year terms beginning upon their
election at the 1997 Annual Meeting.
2. To consider the adoption of a Deferred Stock Unit Plan
for Outside Directors as described in the accompanying
Proxy Statement.
3. To consider the ratification of the selection by the
Board of Directors of Coopers & Lybrand L.L.P. as
independent auditor for the year 1997.
4. To consider, if submitted, the stockholder proposal set
forth in the accompanying Proxy Statement.
March 12, 1997 i<PAGE>
5. To transact such other business as may properly come
before the meeting.
Only holders of record of issued and outstanding shares of
Common Stock of the Corporation at the close of business on
March 10, 1997 will be entitled to vote at the meeting. Such
stockholders may vote in person or by proxy. If your shares are
registered in the name of a brokerage firm or trustee and you
plan to attend the meeting, please obtain from the firm or
trustee a letter or other evidence of your beneficial ownership
of those shares to facilitate your admittance to the meeting.
The stock transfer books of the Corporation will not be closed.
By order of the Board of Directors,
MARY A. NALEWAKO, Secretary
March 26, 1997
The 1996 Annual Report was previously transmitted to
stockholders. It is expected that the annexed Proxy Statement
and enclosed form of Proxy will be first sent to stockholders on
or about March 26, 1997.
If you wish to receive, without charge, a copy of the GPU
System Statistics or the Corporation's 1996 Annual Report to the
Securities and Exchange Commission on Form 10-K, direct your
request to: Stockholder Relations, GPU, Inc., 100 Interpace
March 12, 1997 ii<PAGE>
Parkway, Parsippany, New Jersey 07054-1149, or call (201)
263-6600.
You Are Cordially Invited to Attend the Annual Meeting
If you plan to attend the meeting in person, please mark
your Proxy in the space provided for that purpose. Please bring
the lower portion of the form (the Speaker and Admission Card
sections) with you to the meeting.
Whether or not you attend the meeting, we hope that you will
sign and return the enclosed Proxy as promptly as possible. Your
vote is important.
March 12, 1997 iii<PAGE>
TABLE OF CONTENTS
Page
Number
PROXY STATEMENT
Stockholders Entitled to Vote 1
DIRECTORS' PROPOSALS
1. ELECTION OF DIRECTORS 3
Standing Committees of the Board of Directors 11
Security Ownership of Certain Beneficial
Owners and Management 15
Remuneration of Executive Officers 17
Personnel, Compensation and
Nominating Committee Report 17
Summary Compensation Table 27
Long-Term Incentive Plans - Awards
in Last Fiscal Year 29
Comparison of Five Year Cumulative Total Return 30
Employment, Termination and Change
in Control Arrangements 30
March 12, 1997 iv<PAGE>
Severance Arrangements 30
Lump Sum Distributions 32
Benefit Protection Trusts 35
Retirement Plans 35
Supplemental Pensions 38
Remuneration of Directors 40
Retirement Plan for Outside Directors 40
Restricted Stock Plan for Outside Directors 42
2. ADOPTION OF A DEFERRED STOCK UNIT PLAN FOR
OUTSIDE DIRECTORS 43
3. RATIFICATION OF SELECTION OF AUDITOR 47
STOCKHOLDER PROPOSAL 49
OTHER MATTERS 53
ANNEX A 56
March 12, 1997 v<PAGE>
GPU, INC.
100 Interpace Parkway Parsippany, New Jersey 07054-1149
Proxy Statement for Annual Meeting - May 1, 1997
STOCKHOLDERS ENTITLED TO VOTE
Holders of record at the close of business on March 10, 1997
of the outstanding Common Stock (consisting of $120,654,267
shares) are entitled to vote at the Annual Meeting of
Stockholders of the Corporation ("GPU").
Stockholders have cumulative voting rights for the election
of directors and one vote per share for all other purposes.
Cumulative voting means that each stockholder is entitled to as
many votes as are equal to the number of shares owned multiplied
by the number of directors to be elected and that the stockholder
may cast all of such votes for a single director or may
distribute them among the number to be voted for, or any two or
more of them, as the stockholder may see fit. Elections of
directors are determined by a plurality vote. Other matters are
determined by vote of the holders of a majority of the shares
present or represented at the meeting and voting on such matters.
The Proxies hereby solicited vest in the proxy holders
cumulative voting rights with respect to the election of
directors (unless the stockholder marks the Proxy so as to
March 12, 1997 1<PAGE>
withhold such authority) and all other voting rights of the
stockholders signing such Proxies. The shares represented by
each duly executed Proxy will be voted and, where a choice is
specified by the stockholder on the Proxy, the Proxy will be
voted in accordance with the specification so made. As provided
by Pennsylvania law and the Corporation's By-Laws, abstentions,
broker non-votes and withheld votes will not be included in the
total number of votes cast, and therefore will have no effect on
the election of directors, the adoption of the Deferred Stock
Unit Plan for Outside Directors, the ratification of the
selection of the auditor or other matters. Signed but unmarked
Proxies will be voted in accordance with the directors'
recommendations.
The Proxy is revocable, at any time before exercise, by a
written instrument signed in the same manner as the Proxy and
received by the Secretary of the Corporation at or before the
Annual Meeting. If you attend the meeting, you may, if you wish,
revoke your Proxy by voting in person.
You are encouraged to voice your preference by marking the
appropriate boxes on the enclosed Proxy. However, it is not
necessary to mark any boxes if you wish to vote in accordance
with the directors' recommendations; merely sign, date and return
the Proxy in the enclosed postpaid envelope.
March 12, 1997 2<PAGE>
DIRECTORS' PROPOSALS
1. ELECTION OF DIRECTORS
The Board of Directors consists of three classes of
directors with overlapping three-year terms. Each year a class
of directors is elected for a term expiring at the third
succeeding Annual Meeting after such election.
At the 1997 Annual Meeting, four Class III directors will be
elected to hold office for three-year terms beginning upon their
election at the 1997 Annual Meeting. In addition, two Class II
directors will be elected to hold office for two-year terms
beginning upon their election at the meeting.
The votes applicable to the shares represented by Proxies in
the accompanying form received from stockholders will be cast in
favor of the election of the six nominees listed below, except
that the proxy holders reserve the right to exercise cumulative
voting rights and to cast their votes in such manner and for such
lesser number of said nominees as they may deem best at the
meeting, in order, so far as possible, to secure the election of
said nominees. If any nominee should be unable to serve (an
event which is not anticipated), the proxy holders reserve the
right to vote for a substitute nominee or nominees designated by
the Personnel, Compensation and Nominating Committee of the Board
of Directors.
March 12, 1997 3<PAGE>
Information about the Nominees and Directors
Nominees for Class III Directors
for Terms Expiring in 2000
Name Age Year first elected a director
FRED D. HAFER 56 1996
Mr. Hafer became President and Chief Operating Officer of GPU,
Inc. and President and Chief Operating Officer of GPU Service,
Inc. (GPUS) in July 1996. He is also a director of Jersey
Central Power & Light Company (JCP&L), Metropolitan Edison
Company (Met-Ed) and Pennsylvania Electric Company (Penelec)
(which do business under the trade name of GPU Energy), GPUS, GPU
Nuclear, Inc. (GPUN), GPU Generation, Inc. and GPU International,
Inc., all subsidiaries of GPU. It is anticipated that Mr. Hafer
will be elected Chairman and Chief Executive Officer of GPU in
May 1997 upon Mr. Leva's retirement from these positions. Mr.
Hafer, who has been associated with the GPU Companies since 1962,
served as President of Met-Ed from 1986 to 1996, and as President
of Penelec from 1994 to 1996. Mr. Hafer is also a director of
Sovereign Bancorp, Inc., Sovereign Bank and Utilities Mutual
Insurance Company, a director and past president of the
Manufacturers Association of Berks County and a member of the
executive committee of the Pennsylvania Electric Association. He
is a director of Kutztown University Foundation, Leadership
March 12, 1997 4<PAGE>
Pennsylvania and the Reading Hospital and Medical Center. He is
also a trustee of the Caron Foundation and Chairman of the
Foundation for a Drug-Free Pennsylvania.
Name Age Year first elected a director
PAUL R. ROEDEL 69 1979
Mr. Roedel retired in 1992 as Chairman and Chief Executive
Officer of Carpenter Technology Corporation, manufacturers,
fabricators and marketers of specialty metals. He joined
Carpenter in 1949 and became Chief Executive Officer in 1981 and
Chairman in 1987. He is a director of Carpenter Technology
Corporation, P.H. Glatfelter Co. and Berks Packing Co., Inc. He
is Chairman of the Berks Business Education Coalition, Treasurer
of the Wyomissing Foundation and a member of ASM International.
Mr. Roedel is also Chairman of the Board of Gettysburg College,
Treasurer of the Reading Public Museum and a director of the
Pennsylvania Business Education Partnership.
CARLISLE A. H. TROST 67 1990
Admiral Trost served in the United States Navy from 1953 until
his retirement in 1990, including a four-year term from 1986 to
1990 as Chief of Naval Operations. Admiral Trost is also a
member of the Board of Directors of GPUN and the Chairman of that
Board's Nuclear Safety and Compliance Committee. He is Chairman
March 12, 1997 5<PAGE>
of the Board of Directors of Bird-Johnson Co. and a director of
General Dynamics Corporation, Louisiana Land & Exploration
Company, Precision Components Corporation and Lockheed Martin
Corporation.
Name Age Year first elected a director
PATRICIA K. WOOLF, Ph.D. 62 1983
Dr. Woolf is a consultant, author, and Lecturer in the Department
of Molecular Biology at Princeton University. Dr. Woolf is a
director of Crompton and Knowles Corporation and the National
Life Insurance Company of Vermont. She is also a trustee of the
New Economy Fund and a director of the American Balanced Fund,
the Income Fund of America, the Growth Fund of America and Small
Cap World Fund, all of The Capital Group of Los Angeles.
Nominees for Class II Directors
for Terms Expiring in 1999
Name Age Year first elected a director
THOMAS B. HAGEN 61 1997
Mr. Hagen is Chairman of Hagen & Company, a business consulting
firm and is also Chairman of the Team Pennsylvania Foundation.
Mr. Hagen served as Secretary of Commerce and then as Secretary
March 12, 1997 6<PAGE>
of Community & Economic Development of the Commonwealth of
Pennsylvania from January 1995 to March 1997. Mr. Hagen was
first elected as a director of GPU in 1988 and resigned upon his
appointment as Secretary of Commerce in 1995. He is the
immediate past Chairman of the Board of the Pennsylvania
Industrial Development Authority (PIDA), the Pennsylvania
Economic Development Financing Authority (PEDFA) and Ben
Franklin/Industrial Resource Centers Partnership. Mr. Hagen is a
director of the Erie Insurance Group - property, casualty and
life insurers - which he joined in 1953 and served as its
Chairman and Chief Executive Officer from 1990 to 1993. He is a
member and past chairman of the Council of Fellows of Penn State
- Erie, the Behrend College, President of the Pennsylvania
Society and a Director of the Athenaeum of Philadelphia.
Name Age Year first elected a director
BRYAN S. TOWNSEND 66 1996
Mr. Townsend retired as Chairman of Midlands Electricity plc, a
British regional electric company, in August 1996 following its
acquisition by Avon Energy Partners (Avon), in which the
Corporation owns a 50% interest. He served as Chairman of
Midlands since 1986, becoming Chairman and Chief Executive on
privatisation in 1990. He is a director of JBA International
Ltd. (a supplier of computer software business systems), a member
and past chairman of the British National Committee and a member
March 12, 1997 7<PAGE>
of the Scientific Directing and Organising Committee of CIRED
(International Conference on Electricity Distribution). Mr.
Townsend is also past chairman of the Birmingham Repertory
Theatre and West Midlands Confederation of British Industry.
Information concerning the other directors of the Corporation
whose terms do not expire at the Annual Meeting is as follows:
Class I Directors with
Terms Expiring in 1998
Name Age Year first elected a director
HENRY F. HENDERSON, JR. 68 1989
Mr. Henderson is President, Chief Executive Officer and a
director of H. F. Henderson Industries, designers and
manufacturers of process control and engineered systems for
government and industry, including industrial process controls
and defense electronics. He is also President and Chief
Executive Officer of Sanitec, Inc., manufacturer of medical waste
disinfecting systems for commercial and hospital use. He is a
Commissioner of the Port Authority of New York and New Jersey and
a director of the Partnership for New Jersey, the New Jersey
State Chamber of Commerce, Delta Dental Plan and the Port
Authority Trans-Hudson Corporation. He is also Chairman of the
World Trade Center Club Board of Advisors and a trustee of
March 12, 1997 8<PAGE>
Stevens Institute of Technology, New York Theological Seminary,
New Jersey State Employment and Training Commission, Drumthwacket
Foundation, Inc. and Paterson Economic Development Corporation,
and a member of the Defense Orientation Conference Association
and Business Executives for National Security.
Name Age Year first elected a director
JAMES R. LEVA 64 1992
Mr. Leva has served as Chairman and Chief Executive Officer of
GPU and GPUS (which he also serves as a director) since 1991. He
is also Chairman of the Board, Chief Executive Officer and a
director of JCP&L, Met-Ed and Penelec; Chairman of the Board and
a director of GPUN; Chairman, Chief Executive Officer and a
director of GPU Generation, Inc.; and Chairman and a director of
GPU International, Inc., GPU Power, Inc. and GPU Electric, Inc.,
all subsidiaries of GPU. He is also Chairman and a director of
Avon and of Midlands Electricity plc. Mr. Leva, who has been
associated with the GPU Companies since 1952, also served as
President of GPU and GPUS from 1991 to 1996. It is anticipated
that he will retire as Chairman and Chief Executive Officer of
the Corporation and other similar positions with the GPU
Companies (other than director of GPU) in May 1997. Mr. Leva is
also a director of Utilities Mutual Insurance Company, the New
Jersey Utilities Association, the New Jersey Chamber of Commerce
and Fairleigh Dickinson University. He is a trustee of St.
March 12, 1997 9<PAGE>
Clares-Riverside Foundation and Tri-County Scholarship Fund, and
a member of the Prosperity New Jersey Commission.
Name Age Year first elected a director
JOHN M. PIETRUSKI 64 1989
Mr. Pietruski served as Chairman of the Board and Chief Executive
Officer of Sterling Drug Inc. from 1985 until his retirement in
1988. He is Chairman of the Board of Texas Biotechnology
Corporation, a pharmaceutical research and development company.
He also serves as President of Dansara Company, a management
consulting firm. He is a director of Hershey Foods Corporation,
Lincoln National Corporation and McKesson Corporation. He is
also a Regent of Concordia College.
CATHERINE A. REIN 54 1989
Ms. Rein has been Executive Vice President - Corporate
Development and Services of Metropolitan Life Insurance Company
since 1989. Ms. Rein is a director of The Bank of New York,
Inc., Corning Inc., New England Investment Companies, Inc. and
INROADS, New York, Inc., a trustee emeritus of the National Urban
League and a trustee of the New York University Law Center
Foundation.
March 12, 1997 10<PAGE>
Class II Director with
Term Expiring in 1999
Name Age Year first elected a director
THEODORE H. BLACK 68 1988
Mr. Black is a director of Ingersoll-Rand Company, an industrial
machinery manufacturer, and served as its Chairman, President and
Chief Executive Officer from 1988 until his retirement in 1993.
He is also a director of CPC International Inc. and McDermott
International.
Standing Committees of the Board of Directors
There are four standing committees of the Board, namely, the
Audit Committee, the Corporate and Public Responsibilities
Committee, the Finance Committee and the Personnel, Compensation
and Nominating Committee. The membership and functions of these
Committees are as follows:
The Audit Committee recommends to the Board, subject to
ratification by the stockholders, the engagement of the
independent auditor and reviews with the independent auditor the
plan, scope and results of the audit and any comments by the
auditor on the internal accounting control systems of the
Corporation and its subsidiaries. All material non-audit
March 12, 1997 11<PAGE>
services proposed to be performed by the independent auditor are
reviewed by the Committee. The Committee also reviews with the
Corporation's internal auditor the plan, scope and results of
internal audits and its comments on the internal accounting
control systems. It reviews with the officers of the
Corporation, the independent auditor and the Corporation's
internal auditor the following: the accounting principles to be
applied in reporting the financial results of the Corporation as
contained in the financial statements and related footnotes
presented in the annual report to stockholders; the results of
audits by governmental agencies; and the reports on audit
procedures relating to possible corporate expenditures for
political purposes.
The Chairman of the Audit Committee is Mr. Roedel. The
other members are Messrs. Henderson and Townsend and Ms. Rein.
During 1996, the Committee held four meetings.
The Corporate and Public Responsibilities Committee reviews
the Corporation's policies on public issues having broad social
significance and the implementation of those policies and reports
relating to compliance with the Corporation's Code of Ethics and
the Corporation's conduct as a responsible corporate citizen.
The Chairman of the Corporate and Public Responsibilities
Committee is Mr. Henderson. The other members are Messrs. Black,
March 12, 1997 12<PAGE>
Hagen, Townsend and Trost. During 1996, the Committee held three
meetings.
The Finance Committee assists the Board in fulfilling the
Board's fiduciary responsibilities relating to the financial
policies, plans and programs of the Corporation and its
subsidiaries.
The Committee reviews a range of financial policies and
plans including dividend policy, capital structure and credit
quality goals, financing plans, and the Corporation's capital and
operating budgets. Additionally, the Committee reviews the
investment policies, funding and investment results of the
Corporation's trusteed plans.
The Chairman of the Finance Committee is Mr. Pietruski. The
other members are Messrs. Roedel and Trost and Dr. Woolf. During
1996, the Committee held four meetings.
The Personnel, Compensation and Nominating Committee
recommends to the Board the election of officers of the
Corporation and the presidents of the Corporation's direct
subsidiaries, and the compensation and other benefits of those
officers and of directors of the Corporation and its direct
subsidiaries. The Committee also reviews plans for management
succession and executive development, compensation and other
benefit goals for the GPU Companies.
March 12, 1997 13<PAGE>
The Personnel, Compensation and Nominating Committee also
recommends to the Board from time to time, the size and
composition of the Board and candidates for membership on the
Board. The Committee also recommends to the Board the
composition and membership of the various Board Committees.
A stockholder proposal for a nominee for election as a
director should be sent by mail, addressed to Secretary, GPU,
Inc., 100 Interpace Parkway, Parsippany, New Jersey 07054-1149.
All such proposals must be received by the Corporation not later
than 30 nor more than 75 days prior to the scheduled date of the
next annual meeting and must contain certain information
regarding the identity and background of the stockholder's
proposed nominee as required by Section 10(e) of the
Corporation's By-Laws, which also sets forth additional
requirements with respect to such stockholder proposals. A copy
of Section 10(e) of the By-Laws will be furnished to stockholders
upon request made to the Secretary of the Corporation.
The Committee will also consider recommendations by
stockholders of candidates for director nominees. Recommendations
should be sent to the Secretary of the Corporation.
The Chairman of the Personnel, Compensation and Nominating
Committee is Ms. Rein. The other members are Messrs. Black,
Hagen and Pietruski and Dr. Woolf. During 1996, the Committee
held seven meetings.
March 12, 1997 14<PAGE>
There were 10 regular meetings and one organization meeting
of the Board during 1996. All directors attended at least 75% of
the aggregate of (i) the total number of 1996 meetings of the
Board and (ii) the total number of 1996 meetings of all
committees of the Board on which he or she served.
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth, as of February 3, 1997, the
beneficial ownership of equity securities (and stock-equivalent
restricted units) of the GPU Companies of each of the GPU
directors, nominees for director and each of the executive
officers named in the Summary Compensation Table, and of all
directors and executive officers of GPU as a group. The shares
of Common Stock owned by all directors and executive officers as
a group constitute less than 1% of the total shares outstanding.
No person to the knowledge of the Corporation held beneficially
5% or more of the Corporation's outstanding Common Stock on such
date.
March 12, 1997 15<PAGE>
<TABLE>
<CAPTION>
Amount and Nature of Beneficial Ownership
Shares(1) Stock-Equivalent
Name Title of Security Direct Indirect Restricted Units(2)
<S> <C> <C> <C> <C>
Dennis Baldassari GPU Common Stock 1,081 10,839
Theodore H. Black GPU Common Stock 7,798
Fred D. Hafer GPU Common Stock 5,035 131 11,378
Thomas B. Hagen GPU Common Stock 10,041
Henry F. Henderson, Jr. GPU Common Stock 3,244 1,200
Ira H. Jolles GPU Common Stock 5,589 13,305
James R. Leva GPU Common Stock 4,450 100 44,905
Bruce L. Levy GPU Common Stock 1,349 6,995
John M. Pietruski GPU Common Stock 4,300
Catherine A. Rein GPU Common Stock 2,989
Paul R. Roedel GPU Common Stock 2,900
Bryan S. Townsend GPU Common Stock 604
Carlisle A. H. Trost GPU Common Stock 2,541
Patricia K. Woolf GPU Common Stock 3,624
All GPU Directors and
Executive Officers
as a Group GPU Common Stock 70,527 8,568 145,086
(1) The number of shares owned and the nature of such ownership, not being within the
knowledge of GPU, have been furnished by each individual.
(2) Restricted units, which do not have voting rights, represent rights (subject to
vesting) to receive shares of Common Stock under the 1990 Stock Plan for Employees
of GPU and Subsidiarires (the "1990 Stock Plan"). See Summary Compensation Table on
page 27.
</TABLE>
March 12, 1997 16<PAGE>
Remuneration of Executive Officers
Personnel, Compensation and Nominating Committee Report
The executive compensation program at GPU was modified in 1996 as a
continuation of efforts begun in 1995 to strengthen the link between executive
compensation and shareholder value. The overall program consists of three
interrelated programs - the Base Salary Program, the Incentive Compensation
Program and the 1990 Stock Plan. Modifications made in 1996 increased the
emphasis on portions of the overall program most directly linked to business
results and shareholder value.
Compensation Philosophy and Market Comparisons
Executive compensation programs continue to reflect the Corporation's
philosophy that increasing shareholder value requires the ability to attract
and retain high caliber executives and to reward them for the achievement of
business objectives. The program is designed to provide levels of
compensation that vary both with the achievement of business results and the
contribution of the individual executive to that achievement.
Executive pay levels are paid at the median or 50th percentile of the
competitive market when business results are at targeted levels. Actual pay
March 12, 1997 17
<PAGE>
levels may vary from the median in any given year or for any individual
executive based on actual business results and executive performance.
In order to ensure an objective analysis, GPU is assisted by a major
compensation consulting firm in determining median competitive levels.
Comparisons are made with other companies with positions similar to those at
GPU and employing executives with comparable skills and experience. These
companies are primarily other large electric utilities, including the
companies in the S&P Electric Utility Index shown on page 30. Because GPU
competes in a wider market for executive talent, however, other companies, not
included in the Index, are also considered.
Under Section 162(m) of the Internal Revenue Code of 1986, the amount
allowable as a tax deduction for compensation paid to the chief executive
officer and each of the four other highest paid officers of any publicly held
corporation generally is limited to $1 million per year for each such officer.
Although the Committee considers the effect of Section 162(m) in connection
with the Corporation's executive compensation programs, the Committee
considers it important to retain the flexibility to design compensation
programs that it believes are in the best interests of GPU and its
stockholders, even though the expense may not be fully deductible.
Base Salary Program
The Base Salary Program is designed to provide a range of salary
opportunities for each position with the middle of the range approximating the
market median for that position. Individual salaries within the established
March 12, 1997 18
<PAGE>
range are determined based on the incumbent's performance, experience and
contribution. Each year the Board reviews executive salaries and considers
market data, individual performance and the Corporation s financial resources
in determining if salary increases are appropriate. Prior to 1995, this
process, which involves subjective judgment, usually resulted in approval of
merit salary increases for most executives.
In 1995 the Board embarked on a two-year program to eliminate normal
merit salary increases in favor of increased incentive compensation
opportunities. As part of this effort, neither Mr. Leva nor any of the named
executives received normal salary increases in 1996, although market data and
the assessment of individual performance would, in the opinion of the Board,
have justified such increases. Salary adjustments were granted to Mr. Hafer
and Mr. Baldassari to reflect the increased responsibilities they assumed as
part of the reorganization of GPU and the need to provide an orderly
transition upon Mr. Leva's retirement. Mr. Levy also received a salary
adjustment to reflect increased responsibilities resulting from the expansion
of the activities of GPU International.
In lieu of the normal salary increases which would otherwise have been
granted, the Board increased the opportunity for executives to earn incentive
compensation but only to the extent that targeted business results were
achieved.
Incentive Compensation Program
March 12, 1997 19
<PAGE>
The Incentive Compensation Program, as indicated above, was modified in
1995 and 1996. The program is designed to provide executives with the
opportunity to earn additional compensation if business objectives are
achieved. Targeted levels of annual incentive compensation, which approximate
the market median, were again increased in 1996 to offset the elimination of
normal base salary increases.
For named executives other than Mr. Leva and Mr. Hafer, actual awards of
incentive compensation are based on the business results achieved by the GPU
Company to which the executive is assigned, the achievement of GPU s return on
equity objective, and the Board's assessment of the individual executive's
contribution. The Board uses subjective judgment in assessing individual
contribution.
Established objectives for GPU Energy were earnings (50%), management of
the capital expenditures budget (20%), all in price to customers per kilowatt-
hour sold (20%) and efforts to respond to the changing industry by
renegotiating non-utility generating (NUG) contracts and process improvement
efforts (10%). For GPU International, objectives were net income (50%),
operational performance of existing facilities (25%), pursuit of new business
(15%) and organizational development efforts (10%). Objectives for the
corporate functions of GPU Service were system-wide budget management (40%),
efforts to position the Corporation for the future (30%) and efforts to
position the Corporation with regard to energy supply (30%).
Business objectives used to determine the 1996 incentive compensation
awards for Mr. Leva and Mr. Hafer were return on equity (40%), nuclear safety
March 12, 1997 20
<PAGE>
(20%), efforts to position the Corporation for the changing and increasingly
competitive industry (20%) and future positioning of the Corporation with
regard to energy supply (20%). Some of these factors also are used in
determining incentive compensation for other named executives. The weightings
on these factors are different, however, reflecting Mr. Leva's and Mr. Hafer's
broader responsibility for the Corporation.
Achievement of 1996 Objectives
The Corporation's return on equity objective was exceeded in 1996 and,
in addition, each of the subsidiary companies exceeded its specific
objectives. At GPU Energy, the earnings objective was slightly below target
as was the all in price objective. Management of the capital expenditure
budget was significantly better than targeted and the achievements in managing
NUG contracts and process improvement efforts were also higher than expected.
GPU International achieved its organizational development goal and
exceeded each of its other objectives. For corporate functions at GPU
Service, each of the targeted objectives was significantly exceeded.
Award for Mr. Leva
Actual results for 1996 were above targeted levels for most of the
factors used to determine Mr. Leva's award, although the nuclear safety
objective was not fully achieved. As noted above, the Corporation's return on
equity objective was exceeded, reflecting an enhanced revenue stream and the
results of restructuring and cost reduction efforts.
March 12, 1997 21
<PAGE>
Efforts to position GPU for an increasingly competitive and unregulated
industry were assessed as exceeding expectations. A major accomplishment in
maximizing the new opportunities and preparing for the future was the
acquisition of Midlands Electricity plc in the United Kingdom. Mr. Leva's
leadership was a critical factor in this acquisition which provides
opportunities for enhanced revenue and profits and, in addition, brings into
the Corporation experience and expertise in dealing with a competitive market
for electricity. Also under his leadership, GPU took a major role in efforts
to shape the regulations which will influence the Corporation's business
environment. On both the state and federal levels, GPU worked proactively to
ensure a competitive market that is fair to all customers while protecting the
interests of our shareholders.
Cultural change efforts directed by Mr. Leva included increasing the use
of incentive pay for GPU employees to link a larger portion of total pay to
the achievement of business results. In 1996, incentive pay programs were
extended to some employees who are members of bargaining units.
Efforts to position the Corporation for the future with regard to energy
supply and its costs were also assessed as exceeding expectations. In 1996,
Mr. Leva led the Corporation's successful efforts to restructure or buy out
uneconomic contracts for purchase of NUG power, resulting in significant
future cost savings. Rigorous analysis of the Corporation s current
generating facilities was continued to ensure that decisions on the future of
these facilities is based on sound economic analysis and realistic
projections.
March 12, 1997 22
<PAGE>
Consistent with plan design, actual awards of incentive compensation for
1996 were above targeted levels and slightly above the competitive median
reflecting superior achievement of objectives for the year.
1990 Stock Plan
Under the terms of the 1990 Stock Plan, approved by stockholders, the
Board may use any of a number of different stock compensation vehicles based
on its judgment of which vehicles most appropriately link executive interests
to those of shareholders.
In 1996, the Board made grants of restricted performance units which
give executives the right to receive shares of GPU stock (or cash at the
discretion of the Committee) if established performance objectives are
achieved. The performance objective for the 1996 grants is GPU's total
shareholder return compared to the total return of the companies in the S&P
Electric Utility Index. The percentile ranking of GPU's total shareholder
return among the Index companies, calculated quarterly over the five- year
performance period and averaged, determines how many shares, if any, the
executive will receive at the end of the performance period.
Each executive who receives a grant is awarded a specific number of
units. Dividend equivalents are paid on these units and reinvested in
additional units. The number of units that will vest and be paid to the
executive at the end of the performance period, however, is not determined in
advance and may vary from the number initially awarded. If GPU's total return
is at the 55th percentile of the Index companies, the initially awarded number
March 12, 1997 23
<PAGE>
of units (plus reinvested dividend equivalents) will vest. If total return is
higher than the 55th percentile, additional units will vest and if total
return is lower, fewer units will vest. If total return is below the 40th
percentile, no units will vest.
The size of awards to individual executives reflects the Board's
assessment of individual performance, contribution and potential as well as
median competitive levels. The Board uses subjective judgment in determining
individual awards and the factors considered are not weighted.
Personnel, Compensation and Nominating
Committee Members
Theodore H. Black
Thomas B. Hagen
John M. Pietruski
Catherine A. Rein
Patricia K. Woolf
March 12, 1997 24
<PAGE>
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Annual Compensation Long-Term Compensation
Awards Payouts
Other
Name and Annual Restricted All Other
Principal Compen- Stock/Unit LTIP Compen-
Position Year Salary Bonus sation(1) Awards(2) Payouts(3) sation
<S> <C> <C> <C> <C> <C> <C> <C>
James R. Leva 1996 $585,000 $445,000 $ 2,510 $ - $ 81,978 $163,496(4)
Chairman and Chief 1995 585,000 333,450 1,499 - 44,131 125,032
Executive Officer, 1994 573,750 292,500 - 117,563 - 93,934
GPU, Inc.
Fred D. Hafer 1996 365,000 190,000 1,883 - 61,484 46,731(5)
President and Chief 1995 280,000 94,000 1,374 - 40,454 39,247
Operating Officer, 1994 275,250 77,000 - 39,841 - 32,935
GPU, Inc.
Ira H. Jolles 1996 331,000 120,000 2,510 - 91,087 52,673(6)
Senior Vice President 1995 331,000 116,000 1,749 - 57,207 47,388
and General Counsel, 1994 327,750 83,000 - 47,025 - 40,500
GPU, Inc.
Bruce L. Levy 1996 233,333 197,000 1,572(7) - 20,495 30,684(8)
President, GPU Int'l, 1995 188,750 131,000 1,148(7) - 8,826 21,572
Inc., GPU Power, Inc. and 1994 177,500 60,000 754(7) 18,026 - 15,848
GPU Electric, Inc.
Dennis Baldassari 1996 305,000 110,000 812(9) - 21,724 39,697(10)
President, Jersey Central 1995 275,000 86,000 431(9) - 9,930 32,345
Power & Light Company, 1994 271,250 62,000 17(9) 39,188 - 24,837
Metropolitan Edison Company,
and Pennsylvania Electric
Company (GPU Energy)
(1) Consists of earnings on "Long-Term Incentive Plan" ("LTIP") compensation paid in the
year the award vests.
(2) The restricted units issued in 1995 and 1996 under the 1990 Stock Plan are performance
based. The 1996 awards are shown in "Long-Term Incentive Plans - Awards in Last Fiscal
Year" table (the "LTIP table"). Dividends are paid or accrued on the aggregate
restricted stock/units awarded under the 1990 Stock Plan and reinvested.
The aggregate number and value (based on the stock price per share at December 31,
1996) of unvested stock-equivalent restricted units (including reinvested dividends)
includes the amounts shown on the LTIP table, and at the end of 1996 were:
Aggregate Units Aggregate Value
James R. Leva 44,905 $1,509,931
Fred D. Hafer 11,378 382,585
Ira H. Jolles 13,305 447,381
Bruce L. Levy 6,995 235,207
Dennis Baldassari 10,839 364,461
March 12, 1997 25
<PAGE>
(3) Consists of Performance Cash Incentive Awards paid on the 1990 and 1991 restricted
stock awards which have vested under the 1990 Stock Plan. These amounts are designed
to compensate recipients of restricted stock/unit awards for the amount of federal and
state income taxes that are payable upon vesting of the restricted stock/unit awards.
(4) Consists of the Corporation's matching contributions under the Savings Plan ($6,000),
matching contributions under the non-qualified deferred compensation plan ($30,738),
the benefit of interest-free use of the non-term portion of employer paid premiums for
split-dollar life insurance ($36,423), above-market interest accrued on the retirement
portion of deferred compensation
($6,291), and earnings on LTIP compensation not paid in the current year ($84,044).
(5) Consists of the Corporation's matching contributions under the Savings Plan ($6,000),
matching contributions under the non-qualified deferred compensation plan ($12,360),
the benefit of interest-free use of the non-term portion of employer paid premiums for
split-dollar life insurance ($9,188), above-market interest accrued on the retirement
portion of deferred compensation ($357), and earnings on LTIP compensation not paid in
the current year ($18,826).
(6) Consists of the Corporation's matching contributions under the Savings Plan ($6,000),
matching contributions under the non-qualified deferred compensation plan ($11,880),
the benefit of interest-free use of the non-term portion of employer paid premiums for
split-dollar life insurance ($12,161), above-market interest accrued on the retirement
portion of deferred compensation
($568), and earnings on LTIP compensation not paid in the current year ($22,064).
(7) In addition to the earnings on LTIP compensation noted in (1) above, these amounts
include the above-market interest accrued on the pre-retirement portion of deferred
compensation in the amounts of $944, $848 and $754 for the years 1996, 1995 and 1994
respectively.
(8) Consists of the Corporation's matching contributions under the Savings Plan ($6,000),
matching contributions under the non-qualified deferred compensation plan ($8,577), the
benefit of interest-free use of the non-term portion of employer paid premiums for
split-dollar life insurance ($5,510), above-market interest accrued on the retirement
portion of deferred compensation
($69), and earnings on LTIP compensation not paid in the current year ($10,528).
(9) In addition to the earnings on LTIP compensation noted in (1) above, these amounts
include the above-market interest accrued on the pre-retirement portion of deferred
compensation in the amounts of $147, $94 and $17 for the years 1996, 1995 and 1994
respectively.
(10) Consists of the Corporation's matching contributions under the Savings Plan ($6,000),
matching contributions under the non-qualified deferred compensation plan ($9,640), the
benefit of interest-free use of the non-term portion of employer paid premiums for
split-dollar life insurance ($5,981), above-market interest accrued on the retirement
portion of deferred compensation ($147), and earnings on LTIP compensation not paid in
the current year ($17,929).
NOTE: The split-dollar life insurance amounts reported in the "All Other Compensation"
column are equal to the present value of the interest-free use of the current year
Corporation paid premiums to the projected date the premiums will be refunded to the
Corporation.
</TABLE>
March 12, 1997 26
<PAGE>
<TABLE>
LONG-TERM INCENTIVE PLANS - AWARDS IN LAST FISCAL YEAR
<CAPTION>
Performance Estimated future payouts under
Number of or other non-stock price based plans(1)
shares, period until
units or maturation Threshold Target Maximum
Name other rights or payout (#) (#) (#)
<S> <C> <C> <C> <C> <C>
Fred D. Hafer 2,620 5 year vesting 0 2,620 5,240
Ira H. Jolles 3,010 5 year vesting 0 3,010 6,020
Bruce L. Levy 2,720 5 year vesting 0 2,720 5,440
Dennis Baldassari 2,500 5 year vesting 0 2,500 5,000
(1) The restricted units awarded in 1996 under the 1990 Stock Plan provide for a
performance adjustment to the aggregate number of units vesting for the
recipient, including the accumulated reinvested dividends, based on the
annualized GPU Total Shareholder Return (TSR) percentile ranking against all
companies in the Standard & Poor's Electric Utility Index for the period between
the award and vesting dates. With a 55th percentile ranking, the performance
adjustment would be 100% as reflected in the "Target" column. In the event that
the percentile ranking is below the 55th percentile, the performance adjustment
would be reduced in steps reaching 0% at the 39th percentile as reflected in the
"Threshold" column. Should the TSR percentile ranking exceed the 59th
percentile, then the performance adjustment would be increased in steps reaching
200% at the 90th percentile as reflected in the "Maximum" column. Under the
1990 Stock Plan, regular quarterly dividends are reinvested in additional units
that are subject to the vesting restrictions of the award. Actual payouts under
the Plan would be based on the aggregate number of units awarded and the units
accumulated through dividend reinvestment at the time the restrictions lapse.
</TABLE>
March 12, 1997 27
<PAGE>
[Tabular representation of Performance Graph is set forth below]
Comparison of Five Year Cumulative Total Return*
GPU, S&P 500 Index and S&P Electric Utility Index
($)
Amount
Invested
1/1/92 1992 1993 1994 1995 1996
GPU 100 108 127 115 159 166
S&P 500 100 108 118 120 165 203
S&P Electric Utility 100 106 119 104 136 136
* Assumes $100 invested in GPU Common Stock, S&P 500 Index and S&P
Electric Utility Index.
Cumulative Total Return includes reinvestment of dividends.
Employment, Termination and Change in Control Arrangements
Severance Arrangements
The Corporation has entered into Severance Protection Agreements with
Messrs. Leva, Hafer, Jolles, Levy and Baldassari which provide
certain severance benefits to the executive if his employment is
terminated following a change in control of GPU (as defined).
These agreements are intended to induce the executives to remain
in the employ of the Corporation and help ensure that the
Corporation will have the benefit of their services without
distraction in the face of a potential change in control.
March 12, 1997 28
<PAGE>
Under the agreements, benefits are paid if, in connection
with a change in control, the Corporation terminates the
employment of the executive for reasons other than cause or
disability or death, or if the executive resigns following
certain actions (specified in the agreements) by the Corporation
such as a reduction in salary or change in position. In addition,
Mr. Hafer receives severance benefits if he resigns for any
reason within six months following a change in control.
The benefits payable to all executives other than Mr. Leva
consist of, in general, (a) the executive's base salary through
the termination date and a pro rata portion of his target
incentive bonus; (b) severance compensation equal to twice the
sum of the executive's base salary and target incentive bonus,
provided that if the executive's normal retirement date is within
two years of his termination date, his benefits will be
proportionately reduced; (c) a continuation of insurance benefits
for up to two years; (d) reimbursement of certain expenses
subject to specified limitations; and (e) such additional amount
as is necessary to pay any excise tax under Section 4999 of the
Internal Revenue Code (and any related interest and penalties) on
amounts payable under the agreements. If Mr. Leva's employment
terminates prior to his scheduled retirement on May 31, 1997
following a change in control, he would receive a severance
payment equal to the base salary and bonus award which he would
have received had he remained employed through that date and the
payment described in (e) above.
March 12, 1997 29
<PAGE>
The agreements have an initial term of two years and
automatically renew annually unless earlier terminated by the
executive or GPU.
Under the Corporation's severance policy for employees, if
the employment of Messrs. Leva, Hafer, Jolles, Levy and
Baldassari is involuntarily terminated, as defined, other than in
connection with a change in control, he is entitled to receive,
in general, severance compensation equal to one week's pay for
each full year of service. Premium payments will also be made
under the executive's split-dollar life insurance policy for
specified periods following the executive s termination of
employment and following a change in control of GPU.
Lump Sum Distributions
If the executive's employment terminates in connection with a
change in control, the executive may elect to receive a lump sum
distribution of all amounts payable to him under GPU System
supplemental retirement and deferred compensation plans and
arrangements, including those described below for Mr. Jolles.
March 12, 1997 30
<PAGE>
Mr. Jolles
Retirement and Disability - If Mr. Jolles retires on or after
his normal retirement date (the last day of the month in which he
attains age 65), he will receive (in addition to his benefits
under GPUS employee retirement plans) a supplemental retirement
pension from GPU Company sources equal to the additional pension
he would have received under the GPUS employee retirement plans
as if he had an additional 20 years of past creditable service.
If Mr. Jolles reaches his normal retirement date while he is
receiving disability income under GPUS' disability income plans,
he will thereafter receive a supplemental retirement pension from
GPU Company sources equal to the additional pension he would have
been paid under GPUS' employee retirement plans as if he had an
additional 20 years of past creditable service. Upon retirement,
Mr. Jolles will also receive an extension of health insurance
benefits to the later of his 62nd birthday and the third
anniversary of retirement.
Termination - (i) If Mr. Jolles' employment with the GPU
Companies terminates "involuntarily," as defined, under
circumstances involving a "change in control" of GPU, as defined,
or without cause, he shall receive from GPU Company sources a
supplemental retirement pension which would have been paid to him
under GPUS' employee retirement plans as if he had an additional
20 years of past creditable service. (ii) If, however, his
employment terminates for any other reason (except upon
March 12, 1997 31
<PAGE>
retirement or death), he will receive from GPU System sources a
supplemental retirement pension equal to the additional pension
he would have been paid under GPUS employee retirement plans as
if he had additional years of creditable service ranging, as of
December 31, 1996, from eight and one-half years up to a maximum
of 20 years depending upon his years of actual employment by GPUS
at the time of termination.
Mr. Jolles will also be entitled to receive such additional
monthly payment, if any, to ensure that the aggregate monthly
pension amount otherwise payable to him under GPUS' retirement
plans is not less than: (a) $10,825.75 for each month beginning
after retirement and before the month beginning after Mr. Jolles'
62nd birthday or (b) $10,325.75 for each month beginning after
the later of his retirement date and his 62nd birthday.
Death - In the event of Mr. Jolles' death before he begins
receiving benefits under GPUS' employee retirement plans, his
surviving spouse, if any, shall receive such benefits during her
lifetime, together with the supplemental retirement pension
benefits which would have been payable to him as described in
paragraph (ii) above.
Other - To the extent relevant to the level of benefits
payable to Mr. Jolles under other benefit plans provided for
senior GPU executives, he will be treated as having the years of
creditable service as described in paragraph (ii) above.
March 12, 1997 32
<PAGE>
Benefit Protection Trusts
The Corporation has entered into benefit protection trust
agreements to be used to fund the Corporation's obligations to
executive officers and directors under deferred compensation and
incentive programs and agreements, and with respect to certain
retirement and termination benefits, in the event of a change in
control. The trusts may also be used for the purpose of paying
legal expenses incurred in pursuing benefit claims under such
programs and agreements following a change in control. The
trusts are currently partially funded.
Retirement Plans
The GPU Companies' pension plans provide for pension
benefits, payable for life after retirement, based upon years of
creditable service with the GPU Companies and the employee's
career average compensation as defined below. Federal law limits
the amount of an employee's pension benefits that may be paid
from a qualified trust established pursuant to a qualified
pension plan (such as the GPU Companies' plans). The GPU
Companies also have adopted non-qualified plans providing that
the portion of a participant's pension benefits which, by reason
of such limitations, cannot be paid from such a qualified trust
shall be paid directly on an unfunded basis by the participant's
employer.
March 12, 1997 33
<PAGE>
The following table illustrates the amount of aggregate
annual pension from funded and unfunded sources resulting from
employer contributions to the qualified trust and direct payments
payable upon retirement in 1997 (computed on a single life
annuity basis) to persons in specified salary and years of
service classifications:
March 12, 1997 34
<PAGE>
<TABLE>
ESTIMATED ANNUAL RETIREMENT BENEFITS (2) (3) (4) (5)
BASED UPON CAREER AVERAGE COMPENSATION
(1997 Retirement)
<CAPTION>
Career
Average
Compen- 10 Years 15 Years 20 Years 25 Years 30 Years 35 Years 40 Years 45 Years
sation(1) of Service of Service of Service of Service of Service of Service of Service of Service
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 50,000 $ 9,338 $ 14,007 $ 18,676 $ 23,345 $ 28,014 $ 32,684 $ 37,085 $ 41,085
100,000 19,338 29,007 38,676 48,345 58,014 67,684 76,685 84,685
150,000 29,338 44,007 58,676 73,345 88,014 102,684 116,285 128,285
200,000 39,338 59,007 78,676 98,345 118,014 137,684 155,885 171,885
250,000 49,338 74,007 98,676 123,345 148,014 172,684 195,485 215,485
300,000 59,338 89,007 118,676 148,345 178,014 207,684 235,085 259,085
350,000 69,338 104,007 138,676 173,345 208,014 242,684 274,685 302,685
400,000 79,338 119,007 158,676 198,345 238,014 277,684 314,285 346,285
450,000 89,338 134,007 178,676 223,345 268,014 312,684 353,885 389,885
500,000 99,338 149,007 198,676 248,345 298,014 347,684 393,485 433,485
550,000 109,338 164,007 218,676 273,345 328,014 382,684 433,085 477,085
600,000 119,338 179,007 238,676 298,345 358,014 417,684 472,685 520,685
650,000 129,338 194,007 258,676 323,345 388,014 452,684 512,285 564,285
700,000 139,338 209,007 278,676 348,345 418,014 487,684 551,885 607,885
750,000 149,338 224,007 298,676 373,345 448,014 522,684 591,485 651,485
800,000 159,338 239,007 318,676 398,345 478,014 557,684 631,085 695,085
</TABLE>
______________
(1) Career Average Compensation is the average annual
compensation received from January 1, 1984 to retirement and
includes Salary and Bonus. The career average compensation
amounts for the following named executive officers differ by
more than 10% from the three year average annual
compensation set forth in the Summary Compensation Table and
are as follows: Messrs. Leva - $461,795; Hafer - $272,949;
Levy - $159,435; and Baldassari - $193,587.
(2) Years of Creditable Service at December 31, 1996: Messrs.
Leva - 45 years; Hafer - 34 years; Jolles - 15 years; Levy -
12 years; and Baldassari - 27 years.
March 12, 1997 35
<PAGE>
(3) Certain of these executives have supplemental pension
arrangements. Based on assumed retirement in 1997 with
current years of creditable service, the total pension
benefit amounts payable to Mr. Leva are $609,852 ($400,382
basic pension per the above table and $209,470 under
supplemental pension agreements); and to Mr. Jolles are
$129,909 ($120,890 basic pension per the above table and
$9,019 under a supplemental pension agreement).
(4) Based on an assumed retirement at age 65 in 1997. To reduce
the above amounts to reflect a retirement benefit assuming a
continual annuity to a surviving spouse equal to 50% of the
annuity payable at retirement, multiply the above benefits
by 90%. The estimated annual benefits are not subject to
any reduction for Social Security benefits or other offset
amounts.
(5) Annual retirement benefits under the basic pension per the
above table cannot exceed 55% of the average compensation
during the highest paid 36 calendar months.
Supplemental Pensions
The Corporation has adopted supplemental pension programs
for Messrs. Leva and Jolles as described below. The supplemental
pension payments are not funded, but are payable from GPU Company
sources. The programs provide that supplemental pension payments
March 12, 1997 36
<PAGE>
are to be increased by 20% during the first year following
retirement.
Mr. Leva will receive an annual supplemental pension equal
to (a) 65% of his final average compensation (as defined),
reduced by (b) in general, the aggregate annual pension amount
payable to him under other GPUS retirement plans. "Final average
compensation" is defined as Mr. Leva's average annual salary and
bonus compensation paid for the three years prior to retirement.
Mr. Leva is retiring effective May 31, 1997. Accordingly, the
supplemental monthly pension payable to him is estimated to be
$17,145. Mr. Leva will also receive upon retirement a separate
supplemental pension payment of $3,726 annually.
Mr. Jolles will receive supplemental pensions as described
above. See "Employment, Termination and Change in Control
Arrangements--Mr. Jolles."
The supplemental pension payable to Mr. Leva will be paid in
the form of a single life annuity, provided that if he is married
on his retirement date, it will be payable to him at a reduced
rate, and, following his death, his surviving spouse, if any,
will receive an annuity payable for life equal to 50% of the
March 12, 1997 37
<PAGE>
supplemental pension payable to him. In addition, in the event
of his death before he retires, his surviving spouse, if any,
will receive an annuity payable for life equal to 50% of the
supplemental pension that would have been payable to him had he
retired on the last day of the month in which his death occurs.
Remuneration of Directors
Non-employee directors receive an annual retainer of
$20,000, a fee of $1,000 for each Board meeting attended and a
fee of $1,000 for each Committee meeting attended. Committee
Chairmen receive an additional retainer of $3,000 per year.
Retirement Plan for Outside Directors
Under the Corporation's Retirement Plan for Outside
Directors ("Retirement Plan"), an individual who completes
54 months of service as a non-employee director is entitled to
receive retirement benefits equal to the product of (A) the
number of months of service completed and (B) the monthly
compensation paid to the director at the date of retirement.
Retirement benefits under this plan are payable to the directors
(or, in the event of death, to designated beneficiaries) in
monthly installments of 1/12 of the sum of (x) the then annual
retainer paid at time of retirement plus (y) the cash value of
the last award under the Restricted Stock Plan for Outside
Directors per month, over a period equal to the director's
service as such, unless otherwise directed by the Personnel,
Compensation and Nominating Committee, commencing at the later of
March 12, 1997 38
<PAGE>
age 60 or upon retirement. As of December 31, 1996, the
following directors had at least 54 months of service:
Director Months of Service
Theodore H. Black 106
Thomas B. Hagen 87
Henry F. Henderson, Jr. 95
Paul R. Roedel 216
John M. Pietruski 95
Catherine A. Rein 95
Carlisle A. H. Trost 72
Patricia K. Woolf 161
If the proposed Deferred Stock Unit Plan for Outside
Directors is approved by stockholders at the 1997 Annual Meeting
(Proposal 2), no additional retirement benefits will be payable
to Outside Directors for service after June 30, 1997. Benefits
which have accrued for service up to that date, however, will be
payable in accordance with the terms and conditions of the
Retirement Plan. All directors (other than Mr. Townsend) are
currently vested in the Retirement Plan; Mr. Townsend s service
following June 30, 1997 will be applied toward the 54-month
vesting requirement but will not increase the amount of his
benefits. Mr. Hagen (who had retired as a director in 1995)
received benefits under the Retirement Plan until his re-election
to the Board in March 1997. Mr. Hagen will receive credit for
additional service through June 30, 1997, and his benefit
March 12, 1997 39
<PAGE>
payments will recommence upon his retirement in accordance with
the terms and conditions of the Retirement Plan.
Restricted Stock Plan for Outside Directors
Under the Corporation's Restricted Stock Plan for Outside
Directors ("Directors Plan"), each director who is not an
employee of the Corporation or any of its subsidiaries ("Outside
Director") is paid a portion of his or her annual compensation in
the form of 300 shares of GPU Common Stock.
A total of 40,000 shares of GPU Common Stock (subject to
adjustment for stock dividends, stock splits, recapitalizations
and other specified events) has been authorized for issuance
under the Directors Plan. Any shares awarded which are forfeited
as provided by the Directors Plan will again be available for
issuance.
Shares of Common Stock are awarded to Outside Directors on
the condition that the director serves or has served as an
Outside Director until (i) death or disability, (ii) failure to
stand for re-election at the end of the term upon reaching
age 70, (iii) resignation or failure to stand for re-election
with the consent of the Board, which is defined in the Directors
Plan to mean approval thereof by at least 80% of the directors
other than the affected director or (iv) failure to be re-elected
to the Board after being duly nominated. Termination of service
March 12, 1997 40
<PAGE>
for any other reason, including any involuntary termination
effected by action or inaction of the Board, other than that
following a change in control (as defined) of GPU, will result in
forfeiture of all shares awarded.
Until termination of service, an Outside Director may not
dispose of any shares of Common Stock awarded under the Directors
Plan, but has all other rights of a shareholder with respect to
such shares, including voting rights and the right to receive all
cash dividends paid with respect to awarded shares.
2. ADOPTION OF A DEFERRED STOCK UNIT PLAN FOR OUTSIDE DIRECTORS
On February 6, 1997, the Board of Directors adopted, subject to the
approval of stockholders at the 1997 Annual Meeting, The Deferred Stock Unit
Plan for Outside Directors of GPU ("Deferred Stock Unit Plan"). If approved
by stockholders, the Deferred Stock Unit Plan would replace the existing
Retirement Plan for Outside Directors effective July 1, 1997.
The Retirement Plan (which is described above) provides for a retirement
benefit based on each Outside Director s length of service on the Board and the
value of the annual cash retainer and annual grant of restricted stock at the
time of the director s retirement from the Board. This program provides a
significant portion of director compensation and is consistent with the
March 12, 1997 41
<PAGE>
practice of many corporations, both in the utility industry and elsewhere.
The Board has determined, however, that it is more appropriate to provide a
program that more directly links this portion of directors' compensation to
changes in shareholder value. Accordingly, it is proposed that the award of
units under the Deferred Stock Unit Plan replace future benefits under the
Retirement Plan. The proposed Deferred Stock Unit Plan is summarized below:
General
The Deferred Stock Unit Plan is intended to replace future benefits
which would otherwise have accrued under the Retirement Plan and to provide
Outside Directors with approximately equivalent compensation based on the
value of GPU Common Stock.
Each unit granted under the Deferred Stock Unit Plan will represent one
share of GPU Common Stock. Dividend equivalents paid on outstanding units
will be invested in additional units.
The Board believes that adoption of the Deferred Stock Unit Plan will
allow the Corporation to continue to attract and retain the highest caliber
individuals to serve as directors and will ensure that the value of these
directors' total compensation is appropriately linked to shareholder value.
March 12, 1997 42
<PAGE>
Size of Awards
Under the Deferred Stock Unit Plan, each Outside Director will receive
an annual grant of units representing shares of GPU Common Stock equal in
value at the time of grant to one and one-half times the value of the
directors' annual cash retainer in effect at the time of grant. The amount of
the cash retainer is determined by the Board from time to time. Changes in
the amount of the cash retainer will affect the number of units issuable to
the Outside Directors pursuant to the Deferred Stock Unit Plan.
Vesting and Payment
Outside Directors who have served at least 54 months will receive
payment of their deferred units upon their retirement from the Board. Payment
of units will be in the form of GPU Common Stock, or in cash if authorized by
the Personnel, Compensation and Nominating Committee of the Board.
All units will vest and be paid upon a "change in control" of GPU. The
Deferred Stock Unit Plan defines "change in control" as (1) the acquisition by
any person or group (as defined in Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934) of beneficial ownership of or the right to
vote, more than 20% of GPU's outstanding Common Stock, subject to certain
March 12, 1997 43
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exceptions such as acquisitions by employee benefit plans maintained by the
Corporation; (2) a change in the composition of GPU's Board of Directors which
results in the members of the Incumbent Board (as defined) ceasing to
constitute at least 70% of the members of the Board; or (3) certain mergers,
consolidations or reorganizations.
Administration; Amendment
The plan will be administered by the Personnel, Compensation and
Nominating Committee of the Board of Directors. The Board of Directors may
amend or terminate the Deferred Stock Unit Plan at any time, subject to
certain exceptions in the case of an actual or threatened change in control.
Authorization of Shares
A maximum of 200,000 shares of GPU Common Stock may be
issued to Outside Directors under the Deferred Stock Unit Plan.
If GPU declares a stock dividend, stock split or recapitalization
or in the event of a merger, consolidation or similar transaction
and the number of outstanding shares thereby changes, the number
of shares available under the Deferred Stock Unit Plan will be
equitably adjusted.
March 12, 1997 44
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If the Deferred Stock Unit Plan is adopted, Messrs. Black,
Hagen, Henderson, Pietruski, Roedel, Townsend and Trost and Mrs.
Rein and Dr. Woolf would initially each receive a number of
deferred units equal in value to $30,000 (one and one-half times
the current annual retainer of $20,000) or an aggregate value of
$270,000 for all directors, as a group.
The affirmative vote of a majority of the shares of Common
Stock present and voting at the Annual Meeting is required to
approve the adoption of the Deferred Stock Unit Plan. The
complete text of the Deferred Stock Unit Plan is set forth in
Annex A to the Proxy Statement.
3. RATIFICATION OF SELECTION OF COOPERS & LYBRAND L.L.P. AS
INDEPENDENT AUDITOR FOR THE YEAR 1997
The Board of Directors has selected the firm of Coopers &
Lybrand L.L.P. ("C&L"), independent certified public accountants,
to audit the accounts of the Corporation for 1997. Although
submission to stockholders of the appointment of the independent
auditor is not required by law, the Board, in accordance with its
long-standing policy of seeking annual stockholder ratification
of the selection of the auditor, believes it appropriate that
such selection be ratified by the stockholders. C&L has acted as
the auditor for the Corporation and its subsidiaries since 1946.
C&L has advised the Corporation that neither that firm nor any of
March 12, 1997 45
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its partners has any direct or indirect material relationship
with the Corporation or its subsidiaries.
The services rendered by C&L for 1996 included an audit of
the consolidated financial statements of the Corporation and its
subsidiaries for the year ending December 31, 1996 contained in
the annual report to stockholders and audits of the individual
and consolidated financial statements of the Corporation and its
subsidiaries and related schedules filed annually with the
Securities and Exchange Commission. C&L also performed audits as
necessary to report upon compliance with the accounting
requirements of the Federal Energy Regulatory Commission for
certain financial statements included in the reports which are
required to be filed annually with that Commission by the
subsidiary companies.
Fees paid to C&L for 1996 for services aggregated $1,320,000
excluding reimbursement for out-of-pocket expenses.
It is expected that representatives of C&L will be present
at the Annual Meeting, will be available to respond to
appropriate questions and will have an opportunity to make a
statement if they desire to do so.
March 12, 1997 46
<PAGE>
STOCKHOLDER PROPOSAL
4. STOCKHOLDER PROPOSAL
New Jersey Public Interest Research Group, Law & Policy
Center, 11 North Willow Street, Trenton, New Jersey 08608, and
the Congregation of the Sisters of St. Dominic, 1 Ryerson Avenue,
Caldwell, New Jersey 07006, the holders of 38 shares and 100
shares, respectively, of GPU Common Stock, have informed GPU that
they plan to present the following resolution for action by the
stockholders at the Annual Meeting:
UTILITIES, ENERGY CONSERVATION, CARBON DIOXIDE EMISSIONS AND
CLIMATE CHANGE
WHEREAS WE BELIEVE:
The U.S. performs poorly in energy efficiency, compared to
other industrialized countries, ranking 9th out of the 10 OECD
nations, and using nearly twice as much energy/$ GNP as Japan or
Sweden.
Electric utilities are the largest source of carbon dioxide
(CO2) accounting for 35% of all emissions. CO2, in turn, is the
most important greenhouse gas, trapping solar heat and causing a
'greenhouse' effect.
March 12, 1997 47
<PAGE>
The Intergovernmental Panel on Climate Change has concluded
that "the balance of evidence suggests a discernible human
influence on global climate." Environmental Ministers globally
have endorsed this assessment and an urgent strengthening of
actions to reduce greenhouse gas emissions.
The impacts of climate change - on economic welfare, public
health, environmental stability, agricultural production, and the
level of the sea - would affect many people in the U.S. and
elsewhere. Many scientists have called for 20% reductions in CO2
emissions. The U.S. ratified the 1994 UN treaty on climate
change, supporting plans to reduce CO2 emissions to 1990 levels by
the year 2000. Moreover, certain U.S. corporations have adopted
20% reduction goals for their own energy consumption and CO2
emissions.
Our Company's ranking on the Environmental Liability Index
released by the Natural Resources Defense Council further
underscores the need to reduce CO2 emissions. While sensitive to
the regulatory environment in which our company operates, we
believe GPU can play an important role in controlling CO2
emissions - through its choices of fuel, plant operation, and
investment in customer efficiency programs known as Demand-Side
Management (DSM).
Energy options which lower CO2 emissions can create financial
security for our Company by reducing or eliminating the need for
March 12, 1997 48
<PAGE>
new electricity-generating capacity. Integrating CO2 reductions
into planning now will also minimize possible large compliance
costs of future CO2 regulations, comparable to the large costs
that some companies face now with the 1990 Clean Air Act. DSM
can also result in lower costs and increased profits for the
utility and lower bills for the customer. GPU can achieve
financial and regulatory stability by taking leadership in this
area.
RESOLVED: Shareholders request the Company to make a report
publicly available by August 1997 (prepared at reasonable cost
and omitting proprietary information), describing: (a) plans and
commitments to action that will reduce carbon dioxide emissions;
(b) the financial implications of these plans, actions, or lack
thereof; and (c) the ensuing impact upon shareholders.
SUPPORTING STATEMENT
We believe an effective report should discuss costs and
savings for all feasible measures that would reduce CO2 emissions,
including DSM, development of renewable sources of energy, and
fuel switching to lower-carbon-content fuels. Beginning to make
cost-effective reductions in emissions now can make GPU more
competitive, help retain large customers, create jobs in the
local economy, protect both short-term and long-term financial
health, and increase shareholder value. Shareholders should vote
March 12, 1997 49
<PAGE>
FOR this resolution to minimize the costs of climate change -
both to the company and to society at large.
The Board of Directors recommends that stockholders vote AGAINST
this proposal.
The Board of Directors believes that preparation of a report
specifically addressed to the GPU Companies' carbon dioxide
emission reduction plans would be largely duplicative of
information already publicly available. In particular, the
Corporation's 1996 Annual Report to the Securities and Exchange
Commission on Form 10-K ("SEC Report") reported that the
Corporation had signed an Accord with the U.S. Department of
Energy ("DOE") as part of the DOE's Climate Challenge Program.
GPU is one of approximately 630 electric utilities which have
signed accords or are otherwise cooperating with the DOE under
that Program. The Climate Challenge Program is the electric
utility industry's response to the Clinton Administration's
Climate Change Action Plan which has an overall goal of reducing
through voluntary initiatives United States greenhouse gas
emissions to 1990 levels by the year 2000. GPU's Accord, which
is publicly available, describes the utility industry and GPU-
specific programs for the management of greenhouse gases. As
stated in the SEC Report, the GPU System's greenhouse gas
management program is expected to avoid or reduce the equivalent
of 8 million tons of carbon dioxide emissions between 1995 and
March 12, 1997 50
<PAGE>
2000. In light of the information contained in the SEC Report
and the Accord, as well as in annual resource plans filed by
GPU's electric operating subsidiaries with their state regulatory
commissions -- which plans identify generation requirements and
the proposed sources of energy and capacity to meet these
requirements (including demand-side management initiatives) --
the Board believes that preparation of a further report on this
subject would involve needless expense which should not be borne
by the stockholders at large.
For these reasons, the Board believes the proposal is not in
the best interests of the stockholders and recommends a vote
AGAINST the proposal.
OTHER MATTERS
The Board of Directors does not intend to bring any other
matters before the meeting and it is not informed of any other
business which others may bring before the meeting. However, if
any other matters should properly come before the meeting, or any
adjournment thereof, it is the intention of the persons named in
the accompanying Proxy to vote on such matters as they, in their
discretion, may determine.
GPU will pay all costs of soliciting Proxies in the
accompanying form. Solicitation will be made by mail, and
March 12, 1997 51
<PAGE>
directors and officers of GPU, and officers and employees of
GPUS, may also solicit Proxies by telephone, telegraph or
personal interview. The Corporation has also retained
ChaseMellon Shareholder Services, L.L.C. to aid in the
solicitation of Proxies, at an estimated cost of $8,000, plus
reimbursement of reasonable out-of-pocket expenses. In addition,
GPU will request persons who hold stock in their names for others
to forward copies of this proxy soliciting material to them, and
to request authority to execute Proxies on the accompanying form,
and will reimburse such persons for their out-of-pocket and
reasonable clerical expenses in doing this.
Deadline for Stockholder Proposals
If a stockholder wishes to submit a proposal for inclusion
in the Proxy Statement for the 1998 Annual Meeting of
Stockholders, such proposal must be received by the Corporation
not later than December 3, 1997.
By order of the Board of Directors,
MARY A. NALEWAKO, Secretary
March 26, 1997
March 12, 1997 52
<PAGE>
YOUR VOTE IS IMPORTANT
You are encouraged to voice your preference by marking the
appropriate boxes on the enclosed Proxy. However, it is not
necessary to mark any boxes if you wish to vote in accordance
with the directors' recommendations; merely sign, date and return
the Proxy in the enclosed postpaid envelope.
March 12, 1997 53
<PAGE>
Annex A
Deferred Stock Unit Plan for Outside Directors
of
GPU, Inc.
As Adopted Effective July 1, 1997
_____
1. Purpose
The purpose of the Plan is to more closely align the
interests of the outside directors of GPU, Inc. with those of
GPU, Inc.'s stockholders by providing for a significant portion
of the total annual compensation payable to such directors to be
paid in the form of units representing shares of GPU, Inc.'s
Common Stock.
2. Definitions
As used herein, the following terms shall have the following
meanings:
"Account" shall mean the account established for a
Participant pursuant to Section 5.
March 12, 1997 54
<PAGE>
"Award Date" shall mean July 1, 1997 and July 1 of each
calendar year thereafter.
"Beneficiary" shall mean the person or persons designated by
a Participant in accordance with Section 11 to receive any
amount, or any shares of Common Stock, payable under the Plan
upon the Participant's death.
"Board of Directors" shall mean the Board of Directors of
the Corporation.
"Change in Control" shall mean the occurrence of any of the
following events:
(1) An acquisition (other than directly from the
Corporation of any Common Stock or other voting securities of the
Corporation entitled to vote generally for the election of
directors (the "Voting Securities") by any "Person" (as the term
person is used for purposes of Section 13(d) or 14(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange
Act")), immediately after which such Person has "Beneficial
Ownership" (within the meaning of Rule 13d-3 promulgated under
the Exchange Act) of twenty percent (20%) or more of the then
outstanding shares of Common Stock or the combined voting power
of the Corporation's then outstanding Voting Securities;
provided, however, in determining whether a Change in Control has
occurred, Voting Securities which are acquired in a "Non-Control
March 12, 1997 55
<PAGE>
Acquisition" (as hereinafter defined) shall not constitute an
acquisition which would cause a Change in Control. A "Non-
Control Acquisition" shall mean an acquisition by (A) an employee
benefit plan (or a trust forming a part thereof) maintained by
(i) the Corporation or (ii) any corporation or other Person of
which a majority of its voting power or its voting equity
securities or equity interest is owned, directly or indirectly,
by the Corporation (for purposes of this definition, a
"Subsidiary"), (B) the Corporation or its Subsidiaries, or (C)
any Person in connection with a "Non-Control Transaction" (as
hereinafter defined);
(2) The individuals who, as of August 1, 1996, are members
of the board of directors of the Corporation (the "Incumbent
Board"), cease for any reason to constitute at least seventy
percent (70%) of the members of the board of directors of the
Corporation; provided, however, that if the election, or
nomination for election by the Corporation's shareholders, of any
new director was approved by a vote of at least two-thirds of the
Incumbent Board, such new director shall, for purposes of this
Plan, be considered as a member of the Incumbent Board; provided
further, however, that no individual shall be considered a member
of the Incumbent Board if such individual initially assumed
office as a result of either an actual or threatened "Election
Contest" (as described in Rule 14a-11 promulgated under the
Exchange Act) or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than the
March 12, 1997 56
<PAGE>
board of directors of the Corporation (a "Proxy Contest")
including by reason of any agreement intended to avoid or settle
any Election Contest or Proxy Contest; or
(3) The consummation of:
(a) A merger, consolidation or reorganization with or into
the Corporation or in which securities of the Corporation are
issued, unless such merger, consolidation or reorganization is a
"Non-Control Transaction." A "Non-Control Transaction" shall
mean a merger, consolidation or reorganization with or into the
Corporation or in which securities of the Corporation are issued
where:
(i) the shareholders of the Corporation, immediately
before such merger, consolidation or reorganization, own
directly or indirectly immediately following such merger,
consolidation or reorganization, at least sixty percent
(60%) of the combined voting power of the outstanding voting
securities of the corporation resulting from such merger or
consolidation or reorganization (the "Surviving
Corporation") in substantially the same proportion as their
ownership of the Voting Securities immediately before such
merger, consolidation or reorganization,
(ii) the individuals who were members of
the Incumbent Board immediately prior to the execution of the
March 12, 1997 57
<PAGE>
agreement providing for such merger, consolidation or
reorganization constitute at least seventy percent (70%) of
the members of the board of directors of the Surviving
Corporation, or a corporation, directly or indirectly,
beneficially owning a majority of the Voting Securities of
the Surviving Corporation, and
(iii) no Person other than (w) the
Corporation, (x) any Subsidiary, (y) any employee benefit
plan (or any trust forming a part thereof) that, immediately
prior to such merger, consolidation or reorganization, was
maintained by the Corporation or any Subsidiary, or (z) any
Person who, immediately prior to such merger, consolidation or
reorganization had Beneficial Ownership of twenty percent
(20%) or more of the then outstanding Voting Securities or
Common Stock of the Corporation, has Beneficial Ownership of
twenty percent (20%) or more of the combined voting power of
the Surviving Corporation's then outstanding voting
securities or its Common Stock.
(b) A complete liquidation or dissolution of the
Corporation; or
(c) The sale or other disposition of all or substantially
all of the assets of the Corporation to any Person (other than a
transfer to a Subsidiary).
March 12, 1997 58
<PAGE>
Notwithstanding the foregoing, a Change in Control shall not
be deemed to occur solely because any Person (the "Subject
Person") acquired Beneficial Ownership of more than the permitted
amount of the then outstanding Common Stock or Voting Securities
as a result of the acquisition of Common Stock or Voting
Securities by the Corporation which, by reducing the number of
shares of Common Stock or Voting Securities then outstanding,
increases the proportional number of shares Beneficially Owned by
the Subject Persons, provided that if a Change in Control would
occur (but for the operation of this sentence) as a result of the
acquisition of shares of Common Stock or Voting Securities by the
Corporation, and after such share acquisition by the Corporation,
the Subject Person becomes the Beneficial Owner of any additional
shares of Common Stock or Voting Securities which increases the
percentage of the then outstanding shares of Common Stock or
Voting Securities Beneficially Owned by the Subject Person, then
a Change in Control shall occur.
"Committee" shall mean the Personnel, Compensation and
Nominating Committee of the Board of Directors.
"Common Stock" shall mean the shares of Common Stock of the
Corporation.
"Corporation" shall mean GPU, Inc.
March 12, 1997 59
<PAGE>
"Deferred Stock Unit" shall mean a unit of measurement equi-
valent to one share of Common Stock, with none of the attendant
rights of a shareholder of such share, including, without
limitation, the right to vote such share and the right to receive
dividends thereon, except to the extent otherwise specifically
provided herein.
"Outside Director" shall mean a member of the Board of
Directors who, as of any date of reference, is not an employee of
the Corporation or any subsidiary thereof.
"Participant" shall mean any Outside Director for whom an
Account has been established, and is being maintained, pursuant
to Section 5.
"Plan" shall mean the Deferred Stock Unit Plan for Outside
Directors of GPU, Inc., as set forth herein and as amended from
time to time.
"Retirement" shall mean, with respect to any Participant,
the Participant s ceasing to be a member of the Board of
Directors for any reason.
"Vesting Date" shall mean, with respect to any Participant,
the earliest to occur of the following dates:
March 12, 1997 60
<PAGE>
(1) the date as of which the Participant has completed at
least 54 months of service, whether or not continuous, as an
Outside Director;
(2) the date of the Participant s death; or
(3) the date on which a Change in Control occurs.
3. Maximum Number of Shares of Common Stock Available
The number of shares of Common Stock that may be distributed
with respect to Deferred Stock Units awarded under the Plan shall
be limited to 200,000 shares of Common Stock. If any Deferred
Stock Units credited to a Participant's Account shall be
forfeited, the number of shares of Common Stock no longer payable
with respect to the Deferred Stock Units so forfeited shall
thereupon be released and shall thereafter be available for
distribution with respect to new awards of Deferred Stock Units
under the Plan. The limitation provided under this Section 3
shall be subject to adjustment as provided in Section 9.
The shares of Common Stock distributed under the Plan may be
authorized and unissued shares, or shares purchased on the open
market by the Corporation at such time or times and in such
manner as it may determine.
March 12, 1997 61
<PAGE>
4. Annual Awards
As of each Award Date, the Account maintained hereunder for
each member of the Board of Directors who is an Outside Director
on such date shall be credited with a number of Deferred Stock
Units determined by first multiplying the amount of his or her
Annual Cash Retainer by 1.5, and then dividing the resulting
product by the per share closing price of the Common Stock as
reported on the New York Stock Exchange Composite Tape for such
Award Date, or if there are no sales of Common Stock on such
date, for the next preceding day on which there were sales of
Common Stock. An Outside Director's "Annual Cash Retainer" shall
mean, as of any Award Date, the annual rate of cash retainer in
effect for the Outside Director as of the day preceding such
Award Date.
5. Accounts
There shall be established on the books and records of the
Corporation, for bookkeeping purposes only, a separate Account
for each member of the Board of Directors who is an Outside
Director on July 1, 1997, and for each individual who becomes an
Outside Director thereafter, to reflect such Participant's
interest under the Plan. The Account so established shall be
maintained in accordance with the following provisions:
March 12, 1997 62
<PAGE>
(a) As of each Award Date, each Participant's Account shall
be credited with the number of Deferred Stock Units required to
be credited pursuant to Section 4.
(b) Each Participant's Account shall be adjusted to reflect
all additional Deferred Stock Units required to be credited to
such Account pursuant to Section 6, and the cancellation of all
Deferred Stock Units with respect to which payments are made
pursuant to Section 7.
(c) A Participant's interest in his or her Account shall
become fully vested and nonforfeitable upon his or her Vesting
Date.
6. Crediting of Dividend Equivalents
Until payment with respect to a Participant s Account has
been made in full in accordance with Section 7, a Participant s
Account shall be credited, as of each date on which the
Corporation pays a dividend on its Common Stock ("Dividend
Payment Date"), with additional Deferred Stock Units, the number
of which shall be determined by multiplying (i) the number of
Deferred Stock Units standing to the Participant's credit in his
or her Account immediately prior to such Dividend Payment Date by
(ii) the quotient resulting from dividing (A) the per share
amount of the dividend so paid by (B) the price per share used
for the reinvestment of dividends paid on such Dividend Payment Date
March 12, 1997 63
<PAGE>
under the provisions of the Corporation's Dividend Reinvestment
and Stock Purchase Plan.
7. Payment of Account Balances
Payment with respect to a Participant's Account shall be
made in accordance with the following provisions:
(a) A Participant's Account shall become payable upon the
Participant's Retirement on or after his or her Vesting Date. If
a Participant ceases to serve as a member of the Board of
Directors for any reason prior to his or her Vesting Date, all of
the Deferred Stock Units standing to the Participant's credit in
his or her Account shall be forfeited as of the date of such
cessation of the Participant's service.
(b) Except as otherwise provided in (c) below, payment with
respect to a Participant's Account shall be made in the form of a
single lump sum payment. Such payment shall be made to the
Participant or, if the Participant's Account becomes payable by
reason of his or her death, to the Participant's Beneficiary.
Payment shall be made on the first business day of the second
calendar month following the month in which the Participant's
Retirement occurs.
(c) A Participant may elect to have payment with respect to
his or her Account made to the Participant, or in the event of
March 12, 1997 64
<PAGE>
the Participant's death, to his or her Beneficiary, in the form
of annual installments payable over a period of five years, or
such greater number of years as the Participant specifies in his
or her election. An election under this Section 7(c) shall be
made in writing, on a form that is provided by the Committee for
such purpose and that is filed by the Participant with the
Committee at least one year prior to the date of the
Participant's Retirement or death. Any election so made may be
revoked, and a new election may be made hereunder after such
revocation. Any such revocation or new election shall be made in
the same manner, and by the same date, as described in the second
preceding sentence. If a Participant's Account becomes payable
in the form of annual installments, payments shall be made in
accordance with the following provisions:
(i) The first installment payment shall be made on the
first business day of the second calendar month following
the month in which the Participant's Retirement occurs, and
the remaining installment payments shall be made on the
anniversary of such payment commencement date in each
succeeding year.
(ii) With each annual installment,
payment shall be made with respect to a number of Deferred
Stock Units equal to the quotient resulting from dividing
(A) the total number of Deferred Stock Units included in
the balance of the Participant's Account as of the last day
March 12, 1997 65
<PAGE>
of the calendar month preceding the date on which such
payment is to be made, by (B) the number of installment
payments remaining to be made.
(iii) If the Participant should die before receiving all
installment payments required to be made hereunder with
respect to the Participant's Account, any installment
payments remaining to be made at the date of the
Participant's death shall be made to the Participant's
Beneficiary in the same form, at the same times and in the
same amounts, as such payments would have been made to the
Participant if he or she had not died.
(d) Payment with respect to any Deferred Stock Units
included in the balance of a Participant's Account shall be made
(i) by the issuance of one share of Common Stock for each whole
Deferred Stock Unit with respect to which payment is being made,
and (ii) in cash, with respect to any fractional part of a
Deferred Stock Unit with respect to which payment is being made.
Notwithstanding the foregoing, the Committee, in its sole
discretion, may determine that payment with respect to any or all
of the Deferred Stock Units included in the balance of a
Participant's Account shall be made in cash instead of in shares
of Common Stock. The amount of the cash payment to be made with
respect to any Deferred Stock Unit shall be equal to (and the
amount of the cash payment to be made with respect to any
fractional part of a Deferred Stock Unit shall be based upon) the
March 12, 1997 66
<PAGE>
per share closing price of the Common Stock as reported on the
New York Stock Exchange Composite Tape for the last business day
immediately preceding the date on which such cash payment is to
be made.
(e) Notwithstanding any other provision in this Section 7
to the contrary, payment with respect to any part or all of the
Participant's Account may be made to the Participant or, if the
Participant has died, to the Participant's Beneficiary, on any
date earlier than the date on which such payment is to be made
pursuant to such other provisions of this Section 7 if (i) the
Participant, or his or her Beneficiary, requests such early pay-
ment and (ii) the Committee, in its sole discretion, determines
that such early payment is necessary to help the Participant, or
his or her Beneficiary, meet an "unforeseeable emergency" within
the meaning of Section 1.457-2(h)(4) of the Federal Income Tax
Regulations. The amount that may be so paid may not exceed the
amount necessary to meet such emergency.
8. Change in Control
Notwithstanding any other provision of the Plan to the
contrary or any other optional form of distribution otherwise
elected or provided for hereunder, each Participant shall be
permitted to make a special distribution election to have the
entire balance of his or her Account distributed in the form of a
single lump sum payment in the event of the Participant's
March 12, 1997 67
<PAGE>
Retirement following a Change in Control; provided, however, that
such election shall be effective only if it is made at least
twelve months prior to such Change in Control. Any special
election made hereunder may be revoked, and a new special
election may be made at any time; provided, however, that any
such revocation or new election shall be effective only if it is
made twelve months prior to a Change in Control. Any special
election, or revocation of a special election, that may be made
hereunder shall be made in the manner set forth in Section 7(c).
The lump sum payment to be made pursuant to a Participant's
special distribution election hereunder shall be made no later
than 30 days after the date of the Participant's Retirement.
Such payment shall be made in the manner provided in Section 7(d)
and in an amount determined as follows:
(i) To the extent that the payment for any of the
Participant's Deferred Stock Units is to be made in cash
pursuant to Section 7(d), the amount of cash to be paid for
such Deferred Stock Units shall be equal to the product of
(A) the number of such Deferred Stock Units, multiplied by
(B) the highest closing price per share of the Common Stock,
as reported on the New York Stock Exchange Composite Tape,
occurring during the 90-day period preceding and the 90-day
period following the Change in Control (the "Multiplication
Factor").
March 12, 1997 68
<PAGE>
(ii) To the extent that payment for any of the
Participant's Deferred Stock Units is to be made in shares
of Common Stock pursuant to Section 7(d), the number of
shares of Common Stock to be issued with respect to such
Deferred Stock Units shall be determined by dividing (A) the
product of (y) the number of such Deferred Stock Units
multiplied by (z) the Multiplication Factor, by (B) the per
share closing price of the Common Stock as reported on the
New York Stock Exchange Composite Tape for the day preceding
the payment date, or if there are no sales of Common Stock
on such date, for the next preceding day on which there were
sales of Common Stock.
9. Certain Adjustments to Plan Shares
In the event of any change in the shares of Common Stock by
reason of any stock dividend, stock split, recapitalization,
reorganization, merger, consolidation, split-up, combination or
exchange of shares, or any rights offering to purchase Common
Stock at a price substantially below fair market value, or any
similar change affecting the shares of Common Stock, the number
and kind of shares represented by Deferred Stock Units shall be
appropriately adjusted consistent with such change in such manner
as the Committee, in its sole discretion, may deem equitable to
prevent substantial dilution or enlargement of the rights granted
to, or available for, the Participants hereunder. The Committee
shall give notice to each Participant of any adjustment made
March 12, 1997 69
<PAGE>
pursuant to this Section and, upon such notice, such adjustment
shall be effective and binding for all purposes.
10. Listing and Qualification of Common Shares
The Corporation, in its discretion, may postpone the
issuance, delivery, or distribution of shares of Common Stock
with respect to any Deferred Stock Units until completion of such
stock exchange listing or other qualification of such shares
under any state or federal law, rule or regulation as the
Corporation may consider appropriate, and may require any
Participant or Beneficiary to make such representations and
furnish such information as it may consider appropriate in con-
nection with the issuance or delivery of the shares in compliance
with applicable laws, rules and regulations.
11. Designation and Change of Beneficiary
Each Participant shall file with the Committee a written
designation of one or more persons as the Beneficiary who shall
be entitled to receive any amount, or any shares of Common Stock,
payable under the Plan upon his or her death. A Participant may,
from time to time, revoke or change his or her Beneficiary
designation without the consent of any previously designated
Beneficiary by filing a new designation with the Committee. The
last such designation received by the Committee shall be
controlling; provided, however, that no designation, or change or
March 12, 1997 70
<PAGE>
revocation thereof, shall be effective unless received by the
Committee prior to the Participant's death, and in no event shall
it be effective as of a date prior to such receipt. If at the
date of a Participant's death, there is no designation of a
Beneficiary in effect for the Participant pursuant to the
provisions of this Section 11, or if no Beneficiary designated by
the Participant in accordance with the provisions hereof survives
to receive any amount, or any shares of Common Stock, payable
under the Plan by reason of the Participant's death, the
Participant's estate shall be treated as the Participant's
Beneficiary for purposes of the Plan.
12. Rights of Participants
A Participant's rights and interests under the Plan shall be
subject to the following provisions:
(a) A Participant shall have the status of a general
unsecured creditor of the Corporation with respect to his or her
right to receive any payment under the Plan. The Plan shall
constitute a mere promise by the Corporation to make payments in
the future of the benefits provided for herein. It is intended
that the arrangements reflected in this Plan be treated as
unfunded for tax purposes.
(b) A Participant's rights to payments under the Plan shall
not be subject in any manner to anticipation, alienation, sale,
March 12, 1997 71
<PAGE>
transfer, assignment, pledge, encumbrance, attachment, or
garnishment by creditors of the Participant or his or her
Beneficiary.
(c) Neither the Plan nor any action taken hereunder shall
be construed as giving any Participant any right to be retained
as a member of the Board of Directors.
13. Administration
The Plan shall be administered by the Committee. A majority
of the members of the Committee shall constitute a quorum. The
Committee may act at a meeting, including a telephone meeting, by
action of a majority of the members present, or without a meeting
by unanimous written consent. In addition to the
responsibilities and powers assigned to the Committee elsewhere
in the Plan, the Committee shall have the authority, in its
discretion, to establish from time to time guidelines or
regulations for the administration of the Plan, interpret the
Plan, and make all determinations considered necessary or
advisable for the administration of the Plan. The Committee may
delegate any ministerial or nondiscretionary function pertaining
to the administration of the Plan to any one or more officers of
the Corporation.
All decisions, actions or interpretations of the Committee
under the Plan shall be final, conclusive and binding upon all
March 12, 1997 72
<PAGE>
parties. Notwithstanding the foregoing, any determination made
by the Committee after the occurrence of a Change in Control that
denies in whole or in part any claim made by any individual for
benefits under the Plan shall be subject to judicial review,
under a "de novo", rather than a deferential, standard.
14. Amendment or Termination
The Board of Directors may, with prospective or retroactive
effect, amend, suspend or terminate the Plan or any portion
thereof at any time; provided, however, that Section 7(a),
Section 8, the last sentence of Section 13, this Section 14, and
the definitions of Change in Control and Vesting Date in Section
2, may not be amended, and the Plan may not be suspended or
terminated, (i) at the request of a third party who has indicated
an intention or taken steps to effect a Change in Control and who
effectuates a Change in Control, (ii) within six months prior to,
or otherwise in connection with, or in anticipation of, a Change
in Control which has been threatened or proposed and which
actually occurs, or (iii) following a Change in Control, if the
amendment, suspension or termination adversely affects the rights
of any Participant under the Plan. In addition, no amendment,
suspension or termination of the Plan shall deprive any
Participant of any rights with respect to Deferred Stock Units
previously credited to his or her Account under the Plan without
his or her written consent.
March 12, 1997 73
<PAGE>
15. Successor Corporation
The obligations of the Corporation under the Plan shall be
binding upon any successor corporation or organization resulting
from the merger, consolidation or other reorganization of the
Corporation, or upon any successor corporation or organization
succeeding to substantially all of the assets and business of the
Corporation. The Corporation agrees that it will make appropriate
provision for the preservation of Participants' rights under the
Plan in any agreement or plan which it may enter into or adopt to
effect any such merger, consolidation, reorganization or transfer
of assets.
March 12, 1997 74
<PAGE>
GPU, INC.
Proxy Solicited by the Board of Directors
for Annual Meeting to be held at 10:00 A.M. May 1, 1997
The Morris Museum
Six Normandy Heights Road
Morristown, New Jersey
The undersigned hereby appoints J. G. Graham,
F. A. Donofrio, and M. A. Nalewako, and each or any of them,
proxies to represent the undersigned at the Annual Meeting of
Stockholders, and at any adjournment thereof, and thereat to
vote all the shares of stock which the undersigned would be
entitled to vote, with all the power the undersigned would
possess if personally present, with full power of substitution,
upon the following items as set forth in the Notice of Annual
Meeting and Proxy Statement, each dated March 26, 1997 (receipt
of which is hereby acknowledged), and in their discretion upon
such other matters, if any, as may properly come before the
meeting.
March 12, 1997 75
<PAGE>
Said proxies are instructed to vote for or against
proposals, as indicated by the undersigned (or, if no indication
is given, for Proposals 1, 2, 3 and against Proposal 4).
You are encouraged to voice your preference by marking the
appropriate boxes on the other side. However, you need not mark
any boxes if you wish to vote in accordance with the directors'
recommendations; just sign on the other side.
(continued and to be signed on the other side)
March 12, 1997 76
<PAGE>
<TABLE>
___ Please mark
| | your votes
| X | as this.
CHECK HERE __
IF YOU PLAN TO |__|
The Directors Recommend a Vote "FOR" Proposals 1, 2 and 3: ATTEND THE MEETING.
<CAPTION>
1 - Election of four Class III Directors and two Class II
Directors.
<S> <C> <C>
FOR all nominees listed on WITHHOLD AUTHORITY NOMINEES:
the right (except as marked to vote for all nominees
to the contrary on the right) listed on the right Hafer, Hagen, Roedel,
Townsend, Trost and Woolf
__ __ (Instruction:
| | | | To withhold authority to
|__| |__| vote for any individual
nominee, print that
nominee s name in the space
provided below.)
2 - Adoption of a Deferred Stock Unit Plan for Outside
Directors as set forth in the accompanying Proxy ___________________________
Statement.
Dated__________________1997
FOR AGAINST ABSTAIN Signature__________________
__ __ __ Signature if held jointly
| | | | | | ___________________________
|__| |__| |__| Please date and sign
In case of joint owners, EACH
3 - Ratification of the selection of Coopers & joint owner should sign.
Lybrand L.L.P. as auditor. When signing as attorney,
executor, administrator,
trustee, guardian, corporate
FOR AGAINST ABSTAIN officer, etc., give full
__ __ __ title.
| | | | | |
|__| |__| |__|
The Directors Recommend a Vote "AGAINST" Proposal 4:
77
<PAGE>
4 - Stockholder Proposal as set forth in the
accompanying Proxy Statement.
FOR AGAINST ABSTAIN
__ __ __
| | | | | |
|__| |__| |__|
DETACH HERE AND MAIL IN THE ENCLOSED ENVELOPE
------------------------------------------------------------------------------------------
IF YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE BRING THIS ENTIRE LOWER PORTION OF THIS
CARD (SPEAKER CARD AND ADMISSION CARD) WITH YOU.
If you plan to speak at the Annual Meeting, please complete the following:
Stockholder Name __________________________________________________________ SPEAKER
(Please print clearly) CARD
City ______________________________________ State _________________________
PLEASE DO NOT DETACH
------------------------------------------------------------------------------------------
GPU 1997 ANNUAL MEETING OF STOCKHOLDERS
MAY 1, 1997 - 10:00 A.M.
The Morris Museum
Six Normandy Heights Road ADMISSION
Morristown, New Jersey CARD
78
<PAGE>
Please bring this card with you
to the meeting. Its presentation
will assure your prompt admittance.
This card is not transferable
79
<PAGE>
___ Please mark
| | your votes
| X | as this.
CHECK HERE __
IF YOU PLAN TO |__|
The Directors Recommend a Vote "FOR" Proposals 1, 2 and 3: ATTEND THE MEETING.
<CAPTION>
1 - Election of four Class III Directors and two Class II
Directors.
<S> <C> <C>
FOR all nominees listed on WITHHOLD AUTHORITY NOMINEES:
the right (except as marked to vote for all nominees
to the contrary on the right) listed on the right Hafer, Hagen, Roedel,
Townsend, Trost and Woolf
__ __ (Instruction:
| | | | To withhold authority to
|__| |__| vote for any individual
nominee, print that
nominee s name in the space
provided below.)
2 - Adoption of a Deferred Stock Unit Plan for Outside
Directors as set forth in the accompanying Proxy ___________________________
Statement.
Dated__________________1997
FOR AGAINST ABSTAIN Signature__________________
__ __ __ Signature if held jointly
| | | | | | ___________________________
|__| |__| |__| Please date and sign
In case of joint owners, EACH
3 - Ratification of the selection of Coopers & joint owner should sign.
Lybrand L.L.P. as auditor. When signing as attorney,
executor, administrator,
trustee, guardian, corporate
FOR AGAINST ABSTAIN officer, etc., give full
__ __ __ title.
| | | | | |
|__| |__| |__| If you are planning to
attend the meeting,
remember to obtain from
The Directors Recommend a Vote "AGAINST" Proposal the record holder a letter
80
<PAGE>
or other evidence of your
4 - Stockholder Proposal as set forth in the beneficial ownership of
accompanying Proxy Statement. shares in GPU to facilitate
your admittance to the
FOR AGAINST ABSTAIN meeting.
__ __ __
| | | | | |
|__| |__| |__|
81
</TABLE>
<PAGE>
