<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
AQUARION COMPANY
------------------------------------------------
(Name of Registrant as Specified In Its Charter)
AQUARION COMPANY
------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
-------------------------------------------------------------------------
Notes:
<PAGE>
[LOGO OF AQUARION COMPANY APPEARS HERE]
NOTICE OF ANNUAL MEETING AND PROXY STATEMENT
APRIL 25, 1995
To The Shareholders:
The Annual Meeting of Shareholders of AQUARION COMPANY (the "Company") will
be held at 9:30 a.m. on Tuesday, April 25, 1995, in the Multi-purpose Room
(Second Floor), People's Bank, Bridgeport Center, 850 Main Street, Bridgeport,
Connecticut, for the purposes set forth below.
1. To elect three directors to Class I of the Board of Directors.
2. To ratify the selection of Price Waterhouse as the Company's
independent public accountants for the coming year.
3. To consider and vote upon a shareholder proposal relating to the
annual election of directors, as described in the proxy statement.
4. To transact such other business as may properly come before the
meeting.
Shareholders of record at the close of business on March 7, 1995 will be
entitled to vote at the meeting.
By Order of the Board of Directors
LARRY L. BINGAMAN
Secretary
- -------------------------------------------------------------------------------
ALL SHAREHOLDERS ARE CORDIALLY INVITED TO THE MEETING. WHETHER OR NOT YOU PLAN
TO ATTEND THE MEETING, HOWEVER, PLEASE SIGN AND DATE THE PROXY CARD AND PROMPTLY
MAIL IT IN THE ENCLOSED ENVELOPE. YOU MAY REVOKE YOUR PROXY AT ANY TIME PRIOR TO
THE MEETING AND VOTE IN PERSON.
- -------------------------------------------------------------------------------
<PAGE>
AQUARION COMPANY
835 MAIN STREET
BRIDGEPORT, CONNECTICUT 06601
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 25, 1995
The enclosed Proxy is solicited by the Board of Directors of the
Company for use at the Annual Meeting of Shareholders to be held on April 25,
1995, and any adjournment thereof.
Holders of the Common Stock of the Company of record at the close of
business on March 7, 1995 are entitled to notice of and to vote at the meeting.
On the record date, there were 6,632,132 outstanding shares of Common Stock,
which is the only class of capital stock of the Company entitled to vote at the
meeting. Each shareholder is entitled to one vote for each share of Common Stock
held.
A proxy may be revoked by a shareholder at any time before it is voted
by mailing his or her revocation or a subsequent proxy to the Secretary of the
Company at the above address or by filing a written revocation at the meeting
with the Secretary of the Company. Each valid proxy will be voted at the
meeting, and such vote will be cast in accordance with the shareholder's
direction specified in the proxy.
The cost of soliciting proxies, which will be borne by the Company, is
estimated to total $6,500. In addition to solicitation by mail, directors,
officers and regular employees of the Company may solicit proxies personally or
by telephone. Banks, brokerage houses and other custodians, nominees or
fiduciaries who hold stock in their names will be requested to solicit proxies
from the persons owning such stock. D.F. King & Co., Inc., 77 Water Street, New
York, New York 10005, has been retained by the Company to assist in such
solicitation.
The Proxy Statement and Proxy are being mailed to shareholders
beginning on March 22, 1995.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
NOMINEES AND BENEFICIAL OWNERSHIP
The Board of Directors of the Company is divided into three classes.
At the Annual Meeting, three directors will be elected to Class I for a three-
year term. At the 1996 Annual Meeting of Shareholders, directors will be elected
to Class II for a three-year term and at the 1997 Annual Meeting of
Shareholders, directors will be elected to Class III for a three-year term.
Information with respect to the three nominees proposed for election to Class I
and information with respect to the eight other directors is set forth below.
All nominees have been nominated by the Board of Directors for election as
directors. It is intended that the proxies will be voted for the three nominees
hereinafter named, all of whom have indicated their willingness to serve if
elected, unless otherwise indicated on any proxy. All nominees are presently
directors of the Company, except for Edgar G. Hotard, who has been nominated to
fill the position currently held by Norwick R. G. Goodspeed, who is retiring in
accordance with the retirement policy of the Board. Directors are elected by
plurality vote. Each nominee has held the principal occupation shown for the
past five years unless otherwise indicated. Abstentions and broker non-votes
will not have the effect of votes in opposition to a director.
While it is not anticipated that any of the nominees will be unable to
serve as a director, if that should occur, the proxies will be voted for such
other person or persons as the present Board of Directors shall determine, or
the Board of Directors may reduce the number of directors to eliminate the
vacancy.
1
<PAGE>
NOMINEES FOR ELECTION AS CLASS I DIRECTORS TO SERVE THREE-YEAR TERMS ENDING AT
THE 1998 ANNUAL MEETING OF SHAREHOLDERS
<TABLE>
<CAPTION>
DIRECTOR
AGE PRINCIPAL OCCUPATION SINCE
--- -------------------- -----
<S> <C> <C> <C>
GEOFFREY ETHERINGTON 66 President and Chairman of Etherington Industries, 1976
a group of six privately held industrial
companies.
EDGAR G. HOTARD 51 Director (since 1992) and President of Praxair, Inc.,
an industrial gases supplier and supplier
of metal and ceramic coatings and powders.
JACK E. MCGREGOR 60 President and Chief Executive Officer 1987
of the Company. Director of Bay State Gas
Company, People's Bank and Physicians Health
Services, Inc., President, Director and Chairman of
Executive Committee, National Association of Water
Companies. Trustee of Fairfield University and Mystic
Marinelife Aquarium.
</TABLE>
CLASS II DIRECTORS WHOSE THREE-YEAR TERMS END AT THE 1996 ANNUAL MEETING OF
SHAREHOLDERS
<TABLE>
<CAPTION>
DIRECTOR
AGE PRINCIPAL OCCUPATION SINCE
--- -------------------- -----
<S> <C> <C> <C>
JANET D. GREENWOOD 51 Partner, Heidrick and Struggles (since 1994); 1988
consultant 1992 to 1994. President
Emeritus (since 1991) and President and Professor
(1987 to 1991) of the University of Bridgeport.
Founding President of the Long Island Sound Foundation.
DONALD M. HALSTED, JR. 68 Independent businessman. Director 1975
of Bancroft Convertible Fund, Inc.
and Ellsworth Convertible Growth and
Income Fund, Inc.
LARRY L. PFLIEGER 71 Private Investor. Formerly President, Vice 1985
President- Finance and Treasurer of Warnaco, Inc.,
a diversified apparel manufacturer.
JOHN A. URQUHART 66 President, John A. Urquhart Associates, a 1990
management consulting firm (since 1991).
Vice Chairman of Enron Corp. (since 1991).
Formerly Senior Vice President, GE Industrial
& Power Systems of the General Electric Company
(1986-1990). Director of TECO Energy, Inc., Enron Corp.,
Hubbell Incorporated, and The Weir Group PLC.
</TABLE>
2
<PAGE>
CLASS III DIRECTORS WHOSE THREE-YEAR TERMS END AT THE 1997 ANNUAL MEETING OF
SHAREHOLDERS
<TABLE>
<CAPTION>
DIRECTOR
AGE PRINCIPAL OCCUPATION SINCE
--- --------------------- -----
<S> <C> <C> <C>
GEORGE W. EDWARDS, JR. 55 President and Chief Executive Officer (since 1988
1991) of Kansas City Southern Railway Co.
Chairman and Chief Executive Officer (1987 to
1991) of The United Illuminating Company,
an electric utility company. Director of
Hubbell Incorporated, Kansas City Southern
Industries and El Paso Electric Company.
EUGENE D. JONES 70 Senior Vice President of Greiner, 1992
Inc., a consulting engineering firm specializing
in transportation-related facilities. Trustee of
Northeast Utilities and Clarkson University.
G. JACKSON RATCLIFFE 59 Chairman, President and Chief Executive 1982
Officer of Hubbell Incorporated, a manufacturer
of electrical/electronic components and systems.
Director of Praxair, Inc. and Olin Corporation.
WILLIAM S. WARNER 70 Chairman of the Board of Directors 1956
of the Company. Director of The United
Illuminating Company.
</TABLE>
3
<PAGE>
STOCK OWNERSHIP OF DIRECTORS AND OFFICERS
The following table sets forth the number of shares of Common Stock of
the Company beneficially owned, directly or indirectly, by each director, by
each of the five most highly compensated executive officers, and by all
directors and executive officers as a group, as of March 7, 1995:
<TABLE>
<CAPTION>
========================================================================================
NAME OF INDIVIDUAL OR SHARES BENEFICIALLY OWNED PERCENT OF
NUMBER OF PERSONS IN GROUP DIRECTLY OR INDIRECTLY (1)(2) CLASS (3)
-------------------------- ----------------------------- ---------
========================================================================================
<S> <C> <C>
George W. Edwards, Jr. ........... 500 *
- ----------------------------------------------------------------------------------------
Geoffrey Etherington ............. 5,087 *
- ----------------------------------------------------------------------------------------
Norwick R. G. Goodspeed .......... 797 *
- ----------------------------------------------------------------------------------------
Janet D. Greenwood .............. 200 *
- ----------------------------------------------------------------------------------------
Donald M. Halsted, Jr. ........... 5,902 *
- ----------------------------------------------------------------------------------------
Eugene D. Jones .................. 343 *
- ----------------------------------------------------------------------------------------
Jack E. McGregor ................. 127,191 1.9%
- ----------------------------------------------------------------------------------------
Larry L. Pflieger ................ 2,832 *
- ----------------------------------------------------------------------------------------
G. Jackson Ratcliffe ............. 3,557 *
- ----------------------------------------------------------------------------------------
John A. Urquhart ................. 500 *
- ----------------------------------------------------------------------------------------
William S. Warner ................ 19,812 *
- ----------------------------------------------------------------------------------------
Larry L. Bingaman ................ 34,085 *
- ----------------------------------------------------------------------------------------
Janet M. Hansen .................. 20,103 *
- ----------------------------------------------------------------------------------------
James S. McInerney ............... 42,658 *
- ----------------------------------------------------------------------------------------
Richard K. Schmidt ............... 23,720 *
- ----------------------------------------------------------------------------------------
Directors and Officers as a group 287,287 4.3%
========================================================================================
</TABLE>
_____________________
4
<PAGE>
(1) Based on reports furnished by the directors and officers. The shares
include, in some instances, shares held by the immediate families of
directors and officers or entities controlled by directors and officers,
the reporting of which is not to be construed as an admission of
beneficial ownership. The number of shares includes options to purchase
shares that may be acquired within 60 days through the exercise of stock
options under the Company's stock option plan as follows: Jack E.
McGregor, 118,500 shares; Larry L. Bingaman, 33,250 shares; Janet M.
Hansen, 17,250 shares; James S. McInerney, 41,250 shares; Richard K.
Schmidt, 22,500 shares; and, directors and executive officers as a group,
232,750 shares. See "Compensation of Directors and Executive Officers"
below.
(2) Each of the directors and officers included in the foregoing table has
sole voting and investment power as to the shares of Common Stock
beneficially owned, directly or indirectly, by him or her, except for the
following: (i) as to which such powers are shared, 371 shares with respect
to Mr. Bingaman, 934 shares with respect to Mrs. Hansen, and 55 shares
with respect to Mr. Schmidt; (ii) as to which such powers are held by
other people or entities, 409 shares with respect to Mr. McGregor, 694
shares with respect to Mr. Goodspeed, 3,294 shares with respect to Mr.
Halsted, 18,460 shares with respect to Mr. Warner, 125 shares with respect
to Mr. McInerney; and, (iii) as to which there are restrictions as to the
disposition of shares, 2,240 shares with respect to Mr. McGregor, and 334
shares with respect to Mr. McInerney.
(3) Asterisk denotes percentage of beneficial stock ownership less than one
percent of the outstanding Common Stock of the Company.
COMPLIANCE WITH SECTION L6(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section l6(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers and directors to file initial reports of ownership and
reports of changes in ownership with the Securities and Exchange Commission and
the New York Stock Exchange. During fiscal 1994, Mr. McGregor filed an amendment
to Form 5 with respect to purchases during l994 under a Dividend Reinvestment
Plan on shares being held for him by his stockbroker.
BOARD OF DIRECTORS MEETINGS
Seven meetings of the Board of Directors were held during 1994. Average
attendance at Board and Committee meetings was approximately 96 percent.
COMMITTEES OF THE BOARD
The Board of Directors has four standing committees: an Audit Committee, a
Compensation Committee, an Environmental and Public Affairs Committee, and a
Finance Committee. All members of the Committees are nonemployee directors. The
Board does not have a standing Nominating Committee, as this function is handled
by the full Board. Shareholders desiring to recommend directors should
communicate with the Secretary of the Company.
5
<PAGE>
AUDIT COMMITTEE
The membership of the Audit Committee consisted of Messrs. Halsted,
Etherington, Jones, Pflieger and Dr. Greenwood. The Committee met three times
during 1994, each time with representatives of Price Waterhouse, the Company's
accountants, present. The functions of the Audit Committee are to review the
scope of the annual audit, consider specific problems and questions that may
arise in the course of the audit, monitor the adequacy of accounting and
auditing controls and report to the Board of Directors with respect to these
matters.
COMPENSATION COMMITTEE
The membership of the Compensation Committee consisted of Messrs.
Ratcliffe, Edwards, Goodspeed, Halsted, and Urquhart. The Committee met four
times in 1994. The functions of the Committee are to formulate executive
compensation policy of the Company, to consult with management with respect
thereto and to present recommendations relating thereto to the Board of
Directors, to administer the Company's incentive compensation plans, and to
formulate Company management succession plans.
ENVIRONMENTAL AND PUBLIC AFFAIRS COMMITTEE
The membership of the Environmental and Public Affairs Committee consisted
of Dr. Greenwood, and Messrs. Edwards, Goodspeed, Jones and Warner. The
Committee met twice in 1994. The functions of the Committee are to oversee the
Company's policies, practices and procedures as to compliance with environmental
laws and regulations; to assist management in formulating plans and programs to
develop and enhance public understanding of the Company; to monitor compliance
by the Company and its personnel with laws and regulations relating to lobbying
and the political process; and, to oversee the Company's community relations
programs.
FINANCE COMMITTEE
The membership of the Finance Committee consisted of Messrs. Urquhart,
Etherington, Pflieger, Ratcliffe, and Warner. The Committee met five times
during 1994. The functions of the Finance Committee are to administer the Trust
Fund of the Company's retirement plans, to review and monitor the financial
planning and financial structure of the Company and to render advice, counsel
and assistance to the corporate financial officer in the execution of her
responsibilities.
COMPENSATION OF DIRECTORS
Each director who is not an employee of the Company receives an annual
retainer of $10,000 plus $600 for each Board meeting and Committee meeting
attended. Committee chairmen are paid an additional annual retainer of $3,000.
Directors also receive $600 each time they render consulting services other than
part of a Board or Committee meeting. Directors who are employed by the Company
receive no additional compensation for their services as directors of the
Company. Pursuant to a deferred compensation plan approved by shareholders in
1994, any outside director may defer payment of his or her annual retainer and
meeting fees in cash or stock units. Interest equivalents on payments deferred
in the form of cash accrue quarterly (and on previously credited interest) at
the then prevailing prime rate. Dividend equivalents are paid on the stock units
and are converted into additional stock units. The deferred amounts plus
interest will be paid to such a director beginning with the calendar year
following the termination of his or her service as a director, in either a lump
sum or in any number of equal installments as the director elects. Amounts
credited to a director's stock unit account shall be paid in the form of one
share of Common Stock for each stock unit, with a cash payment with any final
installment for any fractions of a stock unit remaining.
6
<PAGE>
The Company has a directors' retirement plan related to service as a
nonemployee director. After five years of such service, a director earns an
annual retirement benefit equal to 50 percent of the amount of the annual
retainer in effect upon cessation of such director's services on the Board. The
amount of the retirement benefit earned by a nonemployee director increases for
each year of service thereafter by an amount equal to ten percent of the annual
retainer in effect upon the cessation of such director's service on the Board
until the director has earned, after ten years of nonemployee Board service, an
annual retirement benefit equal to the full amount of the retainer in effect
upon his or her cessation of Board service. The Board may from time to time
adjust the amount of the annual benefit, and any such adjustment would be
applicable to all individuals then receiving retirement benefits under the plan.
An annual retirement benefit equal to the full amount of such retainer and
subject to Board adjustment is also payable in the event of death or permanent
and total disability after five years as a nonemployee director or upon
termination as a director in the event of a change in control of the Company.
The benefit is payable for the lifetime of the director and thereafter to the
director's designated beneficiary, to the extent that the director did not
receive retirement benefits for a period at least equal to his or her years of
credited service as a nonemployee director. Except for death, disability or a
change in control of the Company, retirement benefits under the plan do not
become payable until age 65 or the later cessation of Board service. Such
benefits are unfunded.
Directors are covered under the Company's group health insurance plans as a
supplement to such insurance as may be applicable to the directors from other
sources. In 1994, group health insurance benefits provided to Messrs. Goodspeed,
Pflieger and Urquhart amounted to $594, $64 and $65 respectively.
In connection with his retirement as the Company's Chief Executive Officer
on January 1, 1990, Mr. Warner entered into an agreement with the Company
whereby Mr. Warner renders consulting services to the Company. The agreement,
which will expire in 1996, provides for payments of up to $50,000 annually.
7
<PAGE>
EXECUTIVE COMPENSATION
The following table shows annual and long-term compensation, for services
in all capacities to the Company and its subsidiaries for the years 1994, 1993,
and 1992, of those persons who were, for the fiscal year completed on December
31, 1994 (i) the Chief Executive Officer and (ii) the other four most highly
compensated executive officers of the Company:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
==========================================================================================
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION ---------------------------------------
AWARDS
---------------------------------------
ALL
RESTRICTED SECURITIES OTHER
STOCK UNDERLYING COMP.
SALARY TOTAL AWARDS (1) OPTIONS/SARS (2)
YEAR $ BONUS ($) $ (#) ($)
==========================================================================================
<S> <C> <C> <C> <C> <C> <C>
J. E. McGregor 1994 257,502 65,650 61,000 12,587
President and Chief -----------------------------------------------------------------
Executive Officer 1993 247,881 46,876 13,608 20,000 16,584
-----------------------------------------------------------------
1992 235,750 65,000 10,000 13,071
==========================================================================================
R. K. Schmidt (3) 1994 165,537 77,390 22,000 4,620
President and CEO, ------------------------------------------------------------------
Industrial and 1993 155,771 14,559 4,205 5,000 2,248
Environmental ------------------------------------------------------------------
Analysts 1992 124,309 67,120 7,500 3,677
==========================================================================================
J. S. McInerney 1994 153,252 31,233 22,000 8,062
President and COO, ------------------------------------------------------------------
Bridgeport Hydraulic 1993 145,506 25,906 9,662 5,000 8,100
Company -----------------------------------------------------------------
1992 135,979 34,500 7,500 6,546
==========================================================================================
J. M. Hansen (4) 1994 128,502 30,000 13,000 6,655
Senior Vice President,-----------------------------------------------------------------
CFO, and Treasurer 1993 121,194 19,379 6,071 5,000 6,722
-----------------------------------------------------------------
1992 104,900 28,188 2,250 4,974
==========================================================================================
L. L. Bingaman 1994 112,432 23,165 11,000 5,755
Vice President, -----------------------------------------------------------------
Corporate Relations 1993 109,750 17,971 4,489 5,000 6,216
-----------------------------------------------------------------
and Secretary 1992 106,500 25,888 7,500 4,793
==========================================================================================
</TABLE>
_________________________
8
<PAGE>
(1) In 1993, the named executive officers received shares of restricted stock
which vested upon the anniversary of the date of grant, February 2, 1994.
The dollar value of these awards, based on the closing price of the
Company's Common Stock of $23.625 on December 31, 1994, was: J. E.
McGregor---576 shares ($13,608); R. K. Schmidt---178 shares ($4,205); J.
S. McInerney---409 shares ($9,662); J. M. Hansen---257 shares ($6,071);
L.L. Bingaman---190 shares ($4,489). In addition to the restricted stock
granted in 1993, the number and dollar value of shares of previously
granted restricted stock held on December 31, 1994, based on a closing
price of the Company's Common Stock on December 31, 1994, was : J.E.
McGregor---2,240 shares ($52,920); J.S. McInerney---334 shares ($7,891).
Restricted stock is Common Stock of the Company and dividends are paid
thereon at the same rate as on unrestricted shares.
(2) The amount shown in 1994 under this column for Mr. McGregor included the
Company's contributions of $11,587 to The Employee Savings and Investment
Plan (the "Savings Plan"), and the Company's payment of the annual
premium of $1,000 on Company-owned life insurance. The amounts shown for
other named officers represent the Company's contribution to the Savings
Plan accounts for such officers.
(3) Mr. Schmidt's employment with the Company commenced April 1, 1992.
(4) Mrs. Hansen became Vice President and Chief Financial Officer of the
Company on April 28, 1992, having served previously as Treasurer of the
Company and as Vice President, Chief Financial Officer and Treasurer of
Bridgeport Hydraulic Company.
STOCK OPTIONS
The following table sets forth information with respect to all options
granted to the named executive officers during 1994, including the potential
realizable value of each grant assuming that the market value of the Company's
Common Stock appreciates in value from the date of the grant to the expiration
of the option at annualized rates of (a) five percent and (b) ten percent, in
each case compounded annually over the term of the option. These assumed rates
of appreciation have been specified by the Securities and Exchange Commission
for illustrative purposes only and are not intended to predict future prices of
the Company's Common Stock, which will depend upon market conditions and the
Company's future performance and prospects.
Based on the number and market price of the shares outstanding at year-
end 1994, the Company's market capitalization was $156,043,621, and assuming a
five percent and ten percent annualized increase, produce a corresponding market
capitalization of $254,178,616 and $404,736,966, respectively.
9
<PAGE>
<TABLE>
<CAPTION>
OPTIONS/SARS GRANTS IN LAST FISCAL YEAR
=====================================================================================================
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
STOCK PRICE
APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM
------------------------------------------------------------------------------
NUMBER
OF
SECURITIES
UNDERLYING % OF TOTAL
OPTIONS/ OPTIONS EXERCISE
NAME SARS GRANTED TO OR BASE
GRANTED EMPLOYEES PRICE EXPIRATION
(1) (2) IN FY 1994 ($/SH) DATE 5% ($) 10%($)
(#)
=========================================================================================================
<S> <C> <C> <C> <C> <C> <C>
J.E. McGregor 27,000 10% 27.125 2/2/04 460,587 1,167,217
- -------------------------------------------------------------------------------------------------------
34,000 13% 21.750 12/5/04 465,068 1,178,573
- -------------------------------------------------------------------------------------------------------
R.K. Schmidt 10,000 4% 27.125 2/2/04 170,588 432,303
- -------------------------------------------------------------------------------------------------------
12,000 4% 21.750 12/5/04 164,141 415,967
- -------------------------------------------------------------------------------------------------------
J. S. McInerney 10,000 4% 27.125 2/2/04 170,588 432,303
- -------------------------------------------------------------------------------------------------------
12,000 4% 21.750 12/5/04 164,141 415,967
- -------------------------------------------------------------------------------------------------------
J.M. Hansen 6,000 2% 27.125 2/2/04 102,353 259,382
- -------------------------------------------------------------------------------------------------------
7,000 3% 21.750 12/5/04 95,749 242,647
- -------------------------------------------------------------------------------------------------------
L.L. Bingaman 6,000 2% 27.125 2/2/04 102,353 259,382
- -------------------------------------------------------------------------------------------------------
5,000 2% 21.750 12/5/04 68,392 173,319
=========================================================================================================
</TABLE>
(1) During 1994, each of the listed executives received two grants representing
the 1993 stock option grant and the 1994 stock option grant.
(2) One-third of the stock options granted to the named executives become
exercisable on each of the first three anniversaries of the grant date, but
may be exercised earlier if there is a change in control of the Company as
defined under "Employment Contracts and Termination and Change of Control
Arrangements" below. The Company has not granted SARs.
10
<PAGE>
The following table sets forth the aggregated 1994 year-end option/SAR
values. During 1994, no options were exercised by the named officers.
AGGREGATED 1994 FISCAL YEAR-END OPTIONS/SARS VALUES
<TABLE>
<CAPTION>
================================================================================================
SHARES NUMBER OF SECURITIES VALUE OF UNEXERCISED
ACQUIRED UNDERLYING UNEXERCISED IN-THE-MONEY
ON VALUE OPTIONS/SARS AT FY- OPTIONS/SARS AT
EXERCISE REALIZED END (#) FY-YEAR END ($) (1)
-------------------------------------------------------------------------------
EXERCISABLE/ EXERCISABLE/UNEXERCISABLE
NAME UNEXERCISABLE
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
J. E. McGregor --- --- 91,500/61,000 $ 7,500/63,750
- --------------------------------------------------------------------------------------------
R. K. Schmidt --- --- 12,500/22,000 $22,500/22,500
- --------------------------------------------------------------------------------------------
J. S. McInerney --- --- 31,250/22,000 $ 2,500/22,500
- --------------------------------------------------------------------------------------------
J. M. Hansen --- --- 11,250/13,000 $ 8,750/13,125
- --------------------------------------------------------------------------------------------
L. L. Bingaman --- --- 27,250/11,000 $ 27,000/9,375
=================================================================================================
</TABLE>
(1) Market value of underlying securities at year-end, minus the exercise or
base price.
RETIREMENT PROGRAM
Under the Company's qualified retirement plan (the "Pension Plan") and the
Supplemental Benefit Plan (the "Supplemental Plan") for certain key executives,
an eligible employee will receive a benefit at retirement that is based upon the
employee's number of years of credited service and average pensionable
compensation (salary in case of the Pension Plan and salary plus annual bonus in
case of the Supplemental Plan, in each case as set forth in the Summary
Compensation Table) during, in the case of the Pension Plan, the highest five
consecutive years of the employee's final ten years of service. The benefits
under the Supplemental Plan are not subject to the Internal Revenue Code
provisions that limit benefits under the Pension Plan. For a single employee,
the benefits are straight life annuity amounts and for a married employee the
benefits are 50 percent joint and survivor annuity amounts. As of December 31,
1994, the years of credited service are 10 years for Mr. McGregor; for Mr.
McInerney 24 years; Mrs. Hansen, 19 years; and Mr. Bingaman, 5 years. The
following table illustrates, for representative average annual pensionable
compensation and years of credited service the annual retirement benefit payable
to employees under the Plans upon retirement in 1995 at age 65, based on the
straight life annuity form of benefit.
11
<PAGE>
PENSION PLAN TABLE
<TABLE>
<CAPTION>
====================================================================================
FIVE-YEAR AVERAGE YEARS OF CREDITED SERVICE
----------------------------------------------------------
COMPENSATION RECOGNIZED
UNDER THE PLAN 10 15 20 25 30
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$120,000 $19,704 $29,556 $ 39,408 $ 49,260 $ 59,112
- ------------------------------------------------------------------------------------
$180,000 $30,704 $46,056 $ 61,408 $ 76,760 $ 92,112
- ------------------------------------------------------------------------------------
$240,000 $41,704 $62,556 $ 83,408 $104,260 $125,112
- ------------------------------------------------------------------------------------
$300,000 $52,704 $79,056 $105,408 $131,760 $158,112
- ------------------------------------------------------------------------------------
$360,000 $63,704 $95,556 $127,408 $159,260 $191,112
====================================================================================
</TABLE>
EMPLOYMENT CONTRACTS AND TERMINATION AND CHANGE-IN-CONTROL ARRANGEMENTS
Messrs. McGregor, McInerney and Bingaman and Mrs. Hansen each have an
employment agreement with the Company. Mr. McGregor's agreement, which became
effective when he succeeded Mr. Warner as the Company's Chief Executive Officer
on January 1, 1990, has a term of three years and is extended monthly for an
additional month unless either the Company or Mr. McGregor elects otherwise, in
which case the agreement would expire at the end of the then remaining three-
year term. The agreements with Messrs. McInerney and Bingaman and Mrs. Hansen
each have a term of two years and are extended monthly for an additional month
unless either the Company or the employee elects otherwise, in which event the
agreement would expire at the end of the then remaining two-year term. Each
agreement provides for the payment of a minimum base salary which is subject to
increase by the Board in accordance with the Company's customary compensation
practice and for participation by the employee in the Company's benefits plans
and programs. The annual base salaries, effective April 1, 1995, for Messrs.
McGregor, McInerney and Bingaman and Mrs. Hansen are $270,000, $161,000,
$114,000 and $135,000, respectively. Mr. McGregor's agreement also provides
under certain circumstances for supplemental retirement income in the annual
amount of $33,200, partially funded by Company-owned life insurance, upon his
retirement at age 62.
In the event of either a material lessening of the employee's
responsibilities during the term of the agreement, or assignment or reassignment
to another geographic area, or liquidation, dissolution, consolidation,
acquisition or merger of the Company (except by a successor corporation of at
least equal net worth which assumes the agreement) or a reduction in
compensation and benefits, the agreement may be terminated and certain benefits
would be provided to the employee. Such benefits would essentially compensate
the employee for the salary (subject, in Mr. McGregor's case, to a limit of 2.9
times his annual salary, and as to Messrs. McInerney and Bingaman and Mrs.
Hansen, to a limit of 1.5 times each person's annual salary), benefits,
including the Company's share of contributions which would have been made on
behalf of the employee to the Company's Employee Savings and Investment Plan
(and the related Supplemental Benefit Plan) and pension rights he or she would
have had for the remainder of the primary term of the agreement. Therefore, if
any of the events listed above occur and result in a termination toward the end
of a non-renewed employment term, the value of such benefits would be minimal,
while such a termination earlier in the term of an agreement would, subject to
the application of the maximum limits specified above, result in proportionately
greater benefits. At present salary levels, the maximum termination benefits
relating to the salaries of Messrs. McGregor, McInerney and Bingaman and Mrs.
Hansen would be $783,000, $240,000, $171,000, and $202,500, respectively.
Coverage under the Company's health and welfare benefits plans would be extended
to these individuals for a period of 24 months after termination under the
circumstances described above.
12
<PAGE>
Mr. Schmidt has an employment agreement with the Company that has a term of
two years, which is extended monthly for an additional month unless either the
Company or Mr. Schmidt elects otherwise, in which event the agreement would
expire at the end of the then remaining two-year term. The agreement provides
for an annual base salary and yearly salary reviews, pursuant to which an annual
salary of $168,000 as of April 1, 1995 has been established for Mr. Schmidt, and
further provides for his participation in all IEA benefit plans and for certain
performance-based incentives through 1996 which, in the event of sale or merger,
will be not less than $150,000. In the event that Mr. Schmidt's employment is
terminated prior to December 31, 1996, his incentive compensation will be
calculated on the basis of results to the date of termination. The agreement
further provides for severance pay not to exceed 1.5 times the executive's
annual salary, or a maximum of $252,000 in the event of termination by the
Company without cause.
Unvested options will become exercisable in the event of a change of
control of the Company. For this purpose, a change of control shall be deemed to
have occurred in the following circumstances unless the event in question has
been approved in advance by the continuing directors: (i) the acquisition by any
person or group of 15 percent of the Company's outstanding shares; (ii) the
purchase of the Company's outstanding shares under a tender offer or exchange
offer; (iii) less than two-thirds of the Company's Board of Directors are
continuing directors; (iv) approval of the shareholders of a merger,
consolidation, liquidation or dissolution of the Company or the sale of its
assets. Continuing directors shall mean members of the Board on the date the
plan in question was adopted or who were recommended or elected to the Board by
a majority of continuing directors.
BOARD OF DIRECTORS COMPENSATION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION PHILOSOPHY
The objectives of Aquarion's executive compensation program are to link
executive compensation with creation of shareholder value, to attract and to
retain qualified executives, and to produce strong financial performance for the
benefit of our shareholders while providing a high level of customer service and
value for our customers. In order to meet these objectives, the compensation
program is designed to be competitive with compensation programs provided by
comparable businesses. For the water utility business, the comparison group
consists of water and other utilities (the "utility comparison group") with
comparable revenues as maintained in various databases, including some of the
companies in the Edward D. Jones water utility group displayed on the
performance graph. For the non-utility businesses, the comparison group consists
of companies with comparable revenues and lines of business as maintained in
various other databases (the "non-utility comparison group").
EXECUTIVE COMPENSATION PROGRAM
Each year, the Compensation Committee, which is comprised entirely of
outside directors, recommends to the Board of Directors compensation
arrangements for officers, including the salary structure and salary grade
assignments, individual salaries, annual and long-term incentive plan awards,
performance standards for new awards, payouts from past awards, and the overall
design of the executive compensation program.
Aquarion's executive compensation program in 1994 consisted of three
components: salary, annual incentive compensation, and stock options.
13
<PAGE>
Salary ranges are set by periodic comparison to rates of pay for comparable
positions within the utility comparison group for corporate and utility
positions and the non-utility comparison group for non-utility positions.
Individual salaries are generally considered for adjustment annually, based on
external salary levels, individual performance and potential, and/or changes in
duties and responsibilities. Based on salary data compiled by outside
consultants, officer salaries in the aggregate approximate the 50th percentile
salary reported for comparable positions.
Annual incentive compensation opportunities are targeted such that at
targeted performance levels, salary plus annual incentive awards for corporate
and water utility positions will be at or near the 50th percentile of companies
within the utility comparison group, and for non-utility positions, at or near
the 50th percentile of companies within the non-utility comparison group. Annual
objectives are established, subject to Compensation Committee approval, for
corporate, operating company, and individual performance, with earnings per
share being the criterion for corporate performance and pre-tax profit being the
criterion for operating company performance. These factors are weighted
differently for various positions, depending upon the responsibilities of each
position. The Chief Executive Officer's targeted award is based entirely on
corporate performance, while other officers' targets are allocated among
corporate, operating company and individual objectives. Targeted award levels
also vary according to magnitude of responsibility, with incentive awards
constituting a potentially greater portion of the Chief Executive Officer's
total annual compensation than they do for other officers.
Award opportunities under the stock option plan are targeted at 50th
percentile utility industry levels for the corporate and utility positions and
50th percentile general industry levels for non-utility positions (which levels
are reflected in databases maintained by the Company's compensation
consultants). The use of stock options is intended to encourage stock ownership
by management and to further assure alignment of management's compensation with
shareholder return. Option awards are determined each year based on the 50th
percentile annualized expected present value of long-term incentives, and are
made independent of an executive's balance of unexercised options.
In December 1993, the Internal Revenue Service (IRS) adopted a regulation,
applicable to publicly held corporations, which denies federal income tax
deductions for compensation in excess of $1 million paid in a taxable year to
any of its named executive officers. The Company does not anticipate that any of
its executives will exceed this limit on deductible compensation.
CEO COMPENSATION - 1994
Based on the advice of professional consultants independently employed by
the Committee and coupled with its members' individual business judgments, the
Compensation Committee reviewed and approved the level and form of compensation
for the Chief Executive Officer in 1994.
Aquarion exceeded targeted earnings per share and net income objectives for
1994. Increased revenues and earnings from the Company's public water supply
segment, coupled with continued effective control of operating costs,
contributed to Aquarion's net income of $12.2 million, a 10.9 percent gain from
1993.
Mr. McGregor received a salary of $257,502 during 1994, which approximated
the 50th percentile salary among Chief Executives within the utility comparison
group. The Committee recommended a 1994 annual incentive award of $65,650, 101
percent of Mr. McGregor's target bonus level, because Aquarion exceeded its
earnings per share objective for 1994. This award recognizes Aquarion's
achievements during 1994 and encourages continued improvement in total
shareholder return through partial payout in Company stock. Mr. McGregor also
received two stock option grants in 1994: 27,000 options in February,
representing the 1993 stock option grant, and 34,000 in December, representing
the 1994 stock option grant. Both grants
14
<PAGE>
are exercisable at a price equal to the market price of the stock at the date of
the grant. These grants are consistent with the Company's practice of
positioning stock option grants to the Chief Executive Officer at the 50th
percentile long-term incentive award level for comparably salaried utility
executives.
Compensation Committee
G. Jackson Ratcliffe, Chairman
George W. Edwards, Jr.
Norwick R. G. Goodspeed
Donald M. Halsted, Jr.
John A. Urquhart
SHAREHOLDER RETURN PRESENTATION
The following performance graph compares the yearly percentage change in
the Company's cumulative total shareholder return on its Common Stock with the
cumulative total return on the S&P 500 Index and the Edward D. Jones Water
Utility Industry Return Comparison, which includes the Company, for the five
years commencing 1990 and ended 1994. The Edward D. Jones Utility Industry peer
group provides a broad array of companies that are similar to Aquarion's market
capitalization. A majority of the Company's peer group uses the Edward D. Jones
Water Utility Industry Return Comparison.
<TABLE>
FIVE YEAR CUMULATIVE TOTAL RETURN -- S&P 500, EDWARD D. JONES
WATER UTILITY INDUSTRY, AND AQUARION
[GRAPH APPEARS HERE]
<CAPTION>
Measurement period Edward D. Aquarion S&P 500
(Fiscal year Covered) Jones Index Index
- --------------------- --------- --------- ---------
<S> <C> <C> <C>
Measurement PT -
12/89 $ 100 $ 100 $ 100
FYE 12/90 $ 92.8 $ 90.9 $ 96.9
FYE 12/91 $ 132.5 $ 112.7 $ 126.3
FYE 12/92 $ 146.8 $ 122.8 $ 135.9
FYE 12/93 $ 167.2 $ 148.9 $ 149.5
FYE 12/94 $ 155.8 $ 134 $ 151.6
</TABLE>
The Peer Group consists of American Water Works Company, Inc., Aquarion
Company, California Water Service Company, Connecticut Water Service, Inc.,
Consumers Water Company, Dominguez Services Corp., E'Town Corp., IWC Resources
Corporation, Middlesex Water Company, Philadelphia Suburban Corporation, SJW
Corp., Southern California Water Company, Southwest Water Company, and United
Water Resources.
15
<PAGE>
PROPOSAL NO. 2
RATIFICATION OF SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors of the Company has selected Price Waterhouse, 300
Atlantic Street, Stamford, Connecticut 06904 as its independent public
accountants for 1995. In accordance with a resolution of the Board of Directors,
this selection is being presented to shareholders for ratification at the Annual
Meeting.
If the foregoing proposal is not approved by the shareholders or if, prior
to the 1995 Annual Meeting, Price Waterhouse shall decline to act or otherwise
become incapable of acting, or if its employment shall be otherwise discontinued
by the Board of Directors, then the Board of Directors will appoint other
independent public accountants whose employment for any period subsequent to the
1995 Annual Meeting will be subject to ratification by the shareholders at that
meeting.
The firm of Price Waterhouse has audited the financial statements of the
Company annually since 1931. The Company has been advised that representatives
of Price Waterhouse will be present at the meeting with the opportunity to make
a statement if they desire to do so and will be available to respond to
appropriate questions.
Adoption of proposal 2 will require the affirmative vote of a majority of
the Common Stock present or represented at the meeting, and abstentions will
have the effect of votes in opposition, and broker non-votes will not have any
effect on the vote.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" RATIFICATION OF THE
SELECTION OF PRICE WATERHOUSE AS INDEPENDENT PUBLIC ACCOUNTANTS.
PROPOSAL NO. 3
SHAREHOLDER PROPOSAL
RELATING TO ANNUAL ELECTION OF DIRECTORS
Mr. William Steiner, 4 Radcliff Drive, Great Neck, New York 11024, who was
a holder of record of 150 shares of Aquarion Company Common Stock as of May 26,
1994, has submitted the following shareholder proposal:
"RESOLVED: That the stockholders of the Company request that the Board of
Directors take the necessary steps, in accordance with state law, to declassify
the Board of Directors so that all directors are elected annually, such
declassification to be effected in a manner that does not affect the unexpired
terms of directors previously elected."
SUPPORTING STATEMENT
"The election of directors is the primary avenue for stockholders to
influence corporate governance policies and to hold management accountable for
its implementation of those policies. I believe that the classification of the
Board of Directors, which results in only a portion of the Board being elected
annually, is not in the best interests of the Company and its stockholders.
The Board of Directors of the Company is divided into three classes serving
staggered three-year terms. I believe that the Company's classified Board of
Directors maintains the incumbency of the current Board and therefore of current
management, which in turn limits management's accountability to stockholders.
16
<PAGE>
The elimination of the Company's classified Board would require each new
director to stand for election annually and allow stockholders an opportunity to
register their views on the performance of the Board collectively and each
director individually. I believe this is one of the best methods available to
stockholders to insure that the Company will be managed in a manner that is in
the best interests of the stockholders.
As a founding member of the Investor Rights Association of America, I
believe that concerns expressed by companies with classified boards that the
annual election of all directors could leave companies without experienced
directors in the event that all incumbents are voted out by stockholders, are
unfounded. In my view, in the unlikely event that stockholders vote to replace
all directors, this decision would express stockholder dissatisfaction with the
incumbent directors and reflect the need for change.
I URGE YOUR SUPPORT, VOTE FOR THIS RESOLUTION."
BOARD OF DIRECTORS POSITION
The Board of Directors believes that the present method of electing
directors of Aquarion Company, under which directors are elected for
overlapping, staggered terms, is beneficial to the shareholders and the Company
and should not be changed.
At the 1985 Annual Meeting, the Company's shareholders voted in favor of
dividing the Board of Directors into three classes, with the number of directors
in each class being as nearly equal as possible. Each director serves a three-
year term, and directors for one of the three classes are elected each year.
This classified elections process is not unusual and has been adopted by many
major corporations. In fact, more than half the companies that comprise the
Standard's & Poor's 500 Stock Index and the Company's industry peer group
provide for the election of their directors in this manner.
The Company's directors, elected by the shareholders as their
representatives, oversee the Company's affairs to ensure that it is managed in
the best interests of all shareholders. The Directors are fully accountable to
serve the interests of shareholders, whether they are elected for three years or
one year. A classified Board facilitates continuity and stability of leadership
and policies by assuring that a majority of experienced personnel familiar with
the Company and its business will be on the Board of Directors at all times.
Board classification is also intended to encourage any person seeking to
acquire control of the Company to initiate such action through arm's-length
negotiations with management and the Board of Directors, who are in the best
position to negotiate a transaction that is fair to all shareholders of the
Company.
Adoption of proposal 3 will require the affirmative vote of a majority of
the Common Stock present or represented at the meeting, and abstentions will
have the effect of votes in opposition, and broker non-votes will not have any
effect on the vote.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "AGAINST" THIS PROPOSAL.
ANNUAL REPORT
Beginning on March 22, 1995 the Company is mailing to its shareholders of
record copies of its Annual Report for the year ended December 31, 1994. Such
Report is not a part of the proxy materials.
THE COMPANY WILL FURNISH TO ANY BENEFICIAL OWNER OF ITS COMMON STOCK UPON
WRITTEN REQUEST, WITHOUT CHARGE, A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM
10-K FOR 1994 FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. REQUESTS SHOULD
BE ADDRESSED TO CORPORATE COMMUNICATIONS, AQUARION COMPANY, 835 MAIN STREET,
BRIDGEPORT, CONNECTICUT 06601.
17
<PAGE>
SHAREHOLDER PROPOSALS FOR 1996 ANNUAL MEETING
Any proposal that a shareholder intends to present at the 1996 Annual
Meeting must be received at the Company's principal executive offices by
November 21, 1995 to be included in the proxy statement and form of proxy
relating to the meeting.
OTHER MATTERS
OTHER BUSINESS
Management knows of no other matters to be presented to the 1995 Annual
Meeting of Shareholders. If any additional matters should be properly presented,
it is the intention of the persons named in the proxy to vote with respect to
such matters in accordance with their best judgment.
By Order of the Board of Directors
Larry L. Bingaman
Secretary
18
<PAGE>
AQUARION COMPANY COMMON STOCK
Annual Meeting of Shareholders April 25, 1995 PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Donald M. Halsted, Jr., Jack E. McGregor and William S. Warner, or any of
them, with power of substitution, are hereby appointed proxies of the
undersigned to vote all common stock of Aquarion Company owned by the
undersigned at the annual meeting of shareholders to be held in Bridgeport,
Connecticut, on April 25, 1995 or any adjournment thereof, upon such business as
may properly come before the meeting, including the following items, as set
forth in the notice of meeting and proxy statement:
1. Election of Class I Directors
2. Ratification of selection of independent accountants
3. To consider a shareholder proposal relating to annual election of directors
The shares represented hereby will be voted in accordance with the directions
given by the shareholder. If not otherwise directed, the shares represented by
this proxy will be voted for the matters described on the reverse side.
(Continued and to be signed, on reverse side)
FOLD AND DETACH HERE
<PAGE>
I plan to attend the meeting [_]
The Board of Directors recommends a vote FOR Proposals 1 and 2 and AGAINST
Proposal 3:
FOR WITHHOLD
1. Election of Class I Directors [_] [_]
NOMINEES: Geoffrey Etherington, Edgar G. Hotard and Jack E. McGregor
(To withhold authority to vote for any individual nominee, write that
nominee's name on space provided below.)
---------------------------------------------------------------------
2. Ratification of selection of Price FOR AGAINST ABSTAIN
Waterhouse as independent accountants. [_] [_] [_]
3. To consider a shareholder proposal FOR AGAINST ABSTAIN
relating to annual election of directors. [_] [_] [_]
Dated: ___________________________, 1995
________________________________________
Signature of shareholder
________________________________________
Signature (if held jointly)
In their discretion, the proxies are
authorized to vote upon such other
business as may properly come before the
meeting. Please mark, date and sign and
return promptly in the enclosed
envelope, which requires no postage if
mailed in the U.S.A. When signing as
attorney, executor, trustee or guardian
or in other representative capacities,
please give full title as such.
"PLEASE MARK INSIDE BLUE BOXES SO THAT DATA
PROCESSING EQUIPMENT WILL RECORD YOUR VOTES"
FOLD AND DETACH HERE
AQUARION COMPANY
Annual Meeting of Shareholders
Tuesday, April 25, 1995
9:30 a.m.
People's Bank
850 Main Street
Multi-Purpose Room-2nd Floor
Bridgeport, Connecticut 06601
