<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [_]
Filed by a Party other than the Registrant [X]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
New York State Electric & Gas Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
R.R. Donnelley Financial
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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>
NEW YORK STATE ELECTRIC & GAS CORPORATION
BINGHAMTON, NEW YORK
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 10, 1996
----------------
To the Holders of Common Stock of
New York State Electric & Gas Corporation:
You are cordially invited to attend the Annual Meeting of Stockholders of
New York State Electric & Gas Corporation which will be held at the HERITAGE
COUNTRY CLUB & CONFERENCE CENTER, 4301 WATSON BOULEVARD, JOHNSON CITY, BROOME
COUNTY, NEW YORK, on May 10, 1996 at 10:30 A.M. (Eastern Daylight Saving
Time). For the convenience of our stockholders, we will begin registration at
9:00 A.M., after which refreshments will be available in the Heritage Room.
The meeting is being held for the following purposes:
(1) To elect three directors to serve in Class III for a term expiring at
the 1999 Annual Meeting and to elect one director to serve in Class I
for a term expiring at the 1997 Annual Meeting;
(2)To consider and act upon two stockholder proposals;
and for the transaction of any other business properly brought before the
meeting or any adjournment thereof.
Holders of record of Common Stock at the close of business on March 21, 1996
will be entitled to notice of and to vote at the meeting.
Whether or not you expect to be present at the Annual Meeting, the Board of
Directors requests you to mark, sign and date the accompanying form of proxy
and return it in the enclosed envelope. The proxy is revocable by you at any
time before the exercise thereof, and the giving of such proxy will not affect
your right to vote in person, if you attend the Annual Meeting.
By Order of the Board of Directors,
James A. Carrigg
Chairman, President and
Chief Executive Officer
Daniel W. Farley
Vice President and Secretary
Dated: March 29, 1996
Please mark, sign and date the enclosed proxy and return it in the envelope
enclosed for your convenience.
<PAGE>
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 10, 1996
----------------
This statement is furnished in connection with the solicitation of proxies
on behalf of the Board of Directors of New York State Electric & Gas
Corporation, to be used at the Annual Meeting of Stockholders of the
Corporation to be held on May 10, 1996 at the Heritage Country Club &
Conference Center, 4301 Watson Boulevard, Johnson City, Broome County, New
York. This statement and the form of proxy were first mailed to holders of
Common Stock on or about March 29, 1996. The mailing address of the
Corporation's principal executive office is P. O. Box 3607, Binghamton, NY
13902-3607.
ANNUAL REPORT
An Annual Report to Stockholders for the year ended December 31, 1995,
including consolidated financial statements, has been mailed to all
stockholders of record. The Annual Report is not a part of this Proxy
Statement.
OUTSTANDING VOTING SECURITIES OF THE CORPORATION
The close of business on March 21, 1996 has been fixed as the date for
determining the holders of Common Stock entitled to vote at the meeting.
As of March 21, 1996, the Corporation had outstanding 71,502,827 shares of
Common Stock. Holders of Common Stock have cumulative voting rights for the
election of directors and one vote per share for all other purposes.
Cumulative voting means that the total number of votes which a stockholder may
cast for the election of directors shall equal the number of directors to be
elected multiplied by the number of shares held, and the stockholder may cast
all of such votes for a single nominee for director or may distribute them
among all or several nominees, as the stockholder sees fit.
COMMON STOCK REPRESENTED BY YOUR PROXY
The proxy represents the number of shares registered in your name as well as
the number of whole shares credited to your account under the Corporation's
Dividend Reinvestment and Stock Purchase Plan. If you are an employee of the
Corporation and participate in the Tax Deferred Savings Plans, the proxy
constitutes an instruction for the trustee of such Plans to vote the whole
shares in your account in such Plans in the manner specified on the proxy. If
you are an employee of the Corporation and participate in the Tax Reduction
Act Employee Stock Ownership Plan, the proxy constitutes an instruction to
vote all your shares in such Plan in the manner specified on the proxy.
ELECTION OF DIRECTORS
The Board of Directors of the Corporation presently consists of twelve
directors divided into three classes, as nearly equal in number as possible.
One class of directors is elected at each annual meeting of stockholders for a
term expiring at the third succeeding annual meeting of stockholders. In
addition to electing three directors to serve in Class III, one director will
also be elected to serve in Class I.
<PAGE>
The nominees for election at this Annual Meeting to serve as directors in
Class III for a term expiring at the 1999 Annual Meeting of Stockholders and
thereafter until their successors shall be elected and shall qualify are:
Alison P. Casarett, Joseph J. Castiglia, and John M. Keeler. Alison P.
Casarett and John M. Keeler were elected to Class III at the 1993 Annual
Meeting of Stockholders for a term expiring at the 1996 Annual Meeting of
Stockholders. Joseph J. Castiglia was elected a director of the Corporation
effective for the November 1995 meeting of the Board of Directors to serve
until the 1996 Annual Meeting of Stockholders. Lois B. DeFleur is the nominee
for election at this Annual Meeting to serve as a director in Class I for a
term expiring at the 1997 Annual Meeting of Stockholders and thereafter until
her successor shall be elected and shall qualify. Dr. DeFleur was elected a
director of the Corporation effective for the October 1995 meeting of the
Board of Directors to serve until the 1996 Annual Meeting of Stockholders.
Robert A. Plane, who served on the Board of Directors for 13 years, retired as
a director of the Corporation in October 1995. David R. Newcomb, who served on
the Board of Directors for 17 years, is not standing for re-election because
he has reached the mandatory retirement age for directors.
Unless otherwise specified on the proxy, shares represented by proxies in
the accompanying form received on behalf of the Board of Directors will be
voted for the election of Alison P. Casarett, Joseph J. Castiglia, Lois B.
DeFleur, and John M. Keeler. Proxy holders reserve the right to exercise
cumulative voting rights and to cast the votes at the meeting in such manner,
and for such lesser number of said nominees, as they may deem best, in order,
so far as possible, to secure the election of said nominees. While it is not
anticipated that any of the nominees will be unable to qualify or accept
office, if one or more should be unable to do so, the proxy holders reserve
the right to vote for any substitute nominee or nominees designated by the
Board of Directors. The four nominees receiving the highest number of
affirmative votes cast by stockholders entitled to vote shall be elected to
serve as directors. Abstentions and broker non-votes are voted neither "for"
nor "against" and have no effect on the vote.
During 1995, there were eleven meetings of the Board of Directors. All of
the directors attended 75% or more of the total number of meetings of the
Board of Directors and the Committees of the Board on which they served.
The following sets forth information for each nominee for election at this
Annual Meeting and for each director continuing in office.
CLASS III
DIRECTORS NOMINATED FOR TERMS EXPIRING IN 1999
ALISON P. CASARETT
Dean Emeritus, Cornell University, Ithaca, NY. Emeritus
Professor of Radiation Biology, New York State College of
Veterinary Medicine, Cornell University. Dr. Casarett was
[PHOTO] Special Assistant to the President of Cornell University
from August 1, 1993 to June 30, 1995. Prior to that time,
Dr. Casarett was the Dean of The Graduate School at
Cornell University. Dr. Casarett, 65, has been a director
of the Corporation since 1979.
2
<PAGE>
JOSEPH J. CASTIGLIA
Former Vice Chairman, President and Chief Executive
Officer of Pratt & Lambert United, Inc., Buffalo, NY.
Chairman, Buffalo Branch of the Federal Reserve Bank of
New York, Buffalo, NY; Chairman, Buffalo Alliance for
Education, Buffalo, NY. Director of: Business Council of
New York State, Albany, NY; Blue Cross & Blue Shield of
Western New York, Inc., Buffalo, NY; Vision Group of
Funds and Vision Fiduciary Funds, Inc., Buffalo, NY;
Sevenson Environmental Services, Inc., Niagara Falls, NY;
[PHOTO] AAA Western and Central New York Automobile Association,
Buffalo, NY; Greater Buffalo Partnership, Buffalo, NY;
and Trustee, Sisters of Charity Hospital, Buffalo, NY.
Mr. Castiglia was Vice Chairman, President and Chief
Executive Officer of Pratt & Lambert United, Inc. from
February 1989 until his retirement in January 1996. Mr.
Castiglia, 61, has been a director of the Corporation
since 1995.
JOHN M. KEELER
Managing Partner, Hinman, Howard & Kattell(/1/),
Binghamton, NY; attorneys at law. Director of Security
Mutual Life Insurance Company of New York, Binghamton,
NY; Past Chairman, The Harpur Forum of Binghamton
[PHOTO] University Foundation, Binghamton, NY; Past President of
Broome County Bar Association, Binghamton, NY; Past
President of Broome County United Way. Mr. Keeler, 62,
has been a director of the Corporation since 1989.
CLASS I
DIRECTOR NOMINATED FOR TERM EXPIRING IN 1997
LOIS B. DEFLEUR
President of the State University of New York at
Binghamton, Binghamton, NY. Chairperson of the National
Association of State Universities and Land Grant
Colleges, Washington, DC. Director of: American Council
[PHOTO] on Education, Washington, DC; Consortium of Social
Science Associations, Washington, DC; University Industry
Public Partnership for Economic Growth (UnIPEG),
Binghamton, NY; Roberson Museum and Science Center,
Binghamton, NY; WSKG Public Television and Radio,
Binghamton, NY; Partnership 2000 Executive Committee,
Vestal, NY; Director's Advisory Council, M & T Bank--
Southern Division, Endicott and Ithaca, NY; and Trustee,
United Health Services Foundation, Binghamton, NY. Dr.
DeFleur, 59, has been President of the State University
of New York at Binghamton since 1990, and has been a
director of the Corporation since 1995.
3
<PAGE>
CLASS I
DIRECTORS WHOSE TERMS EXPIRE IN 1997
EVERETT A. GILMOUR
Chairman of the Board, The National Bank and Trust
Company of Norwich, Norwich, NY and N.B.T. Bancorp, Inc.,
Norwich, NY. Director of: Preferred Mutual Insurance
[PHOTO] Company, New Berlin, NY; Deposit Telephone Company,
Deposit, NY; Norwich Aero Products Corporation, Norwich,
NY; and Delaware Otsego Corporation, Cooperstown, NY. Mr.
Gilmour, 74, has been a director of the Corporation since
1980.
ALLEN E. KINTIGH
Former President and Chief Operating Officer of the
Corporation, Binghamton, NY. President, Royal Equipment,
Inc., Vestal, NY. Former President and Director of
[PHOTO] Somerset Railroad Corporation, a wholly-owned subsidiary
of the Corporation. Mr. Kintigh was President and Chief
Operating Officer of the Corporation from May 13, 1988 to
December 31, 1990. Mr. Kintigh was Executive Vice
President of the Corporation from December 1, 1987 to May
13, 1988. Prior to that time, Mr. Kintigh was Senior Vice
President-Generation of the Corporation. Mr. Kintigh, 71,
has been a director of the Corporation since 1987.
ALTON G. MARSHALL
President of Alton G. Marshall Associates, Inc., New
York, NY, a real estate investment corporation. Director
of EQK Partners, Atlanta, GA. Independent General Partner
[PHOTO] of Equitable Capital Partners and Equitable Capital
Partners (Retirement Fund), New York, NY; Trustee of
Hudson River Trust, New York, NY; and Governor of The
Real Estate Board of New York, Inc., New York, NY. From
March 1984 to December 31, 1990, Mr. Marshall was
Chairman and Chief Executive Officer of Lincoln Savings
Bank, FSB, Brooklyn, NY. Mr. Marshall, 74, has been a
director of the Corporation since 1971.
4
<PAGE>
CLASS II
DIRECTORS WHOSE TERMS EXPIRE IN 1998
JAMES A. CARRIGG
Chairman, President and Chief Executive Officer of the
Corporation, Binghamton, NY. Director and Past President
of Empire State Electric Energy Research Corporation, New
York, NY; Chairman, Board of Trustees of Broome Community
College, Binghamton, NY; Chairman, United MedManagement,
Inc., Binghamton, NY; Vice-Chairman, United Health
[PHOTO] Services Hospitals, Inc., Binghamton, NY. Director of:
Business Council of New York State, Albany, NY; Security
Mutual Life Insurance Company of New York, Binghamton,
NY; Home Mutual Insurance Company, Binghamton, NY;
Utilities Mutual Insurance Company, New York, NY; First
Empire State Corporation, Buffalo, NY; New York Business
Development Corporation, Albany, NY; United Health
Services, Inc., Binghamton, NY; and Chairman, Director's
Advisory Council, M & T Bank--Southern Division, Endicott
and Ithaca, NY. Mr. Carrigg has been Chairman, President
and Chief Executive Officer of the Corporation since
January 1, 1991. He was Chairman and Chief Executive
Officer of the Corporation from May 13, 1988 to December
31, 1990. Prior to that time, Mr. Carrigg was President
and Chief Operating Officer of the Corporation. Mr.
Carrigg, 62, has been a director of the Corporation since
1983.
PAUL L. GIOIA
Partner, LeBoeuf, Lamb, Greene & MacRae(/2/), Albany, NY;
attorneys at law. Director of Berkshire Gas Company,
Pittsfield, MA. Mr. Gioia was a Senior Vice President of
First Albany Corporation from May 1, 1987 to October 31,
[PHOTO] 1993. Prior to that time, Mr. Gioia served as a member
and was Chairman of the Public Service Commission of the
State of New York and also served as a member of the New
York State Energy Research and Development Authority. Mr.
Gioia, 53, has been a director of the Corporation since
1991.
BEN E. LYNCH
President of Winchester Optical Company, Elmira, NY. Past
Chairman of Arnot-Ogden Medical Center, Elmira, NY; Past
[PHOTO] President of Horseheads Board of Education, Horseheads,
NY. Mr. Lynch, 58, has been President of Winchester
Optical Company since 1965, and has been a director of
the Corporation since 1987.
5
<PAGE>
CHARLES W. STUART
Chairman and Chief Executive Officer of C. W. Stuart &
Co. Inc., Newark, NY; interstate trucking concern. Former
[PHOTO] Chairman of the Board, C. H. Stuart, Inc., Newark, NY;
diversified business, manufacturer of jewelry. Mr.
Stuart, 70, has been a director of the Corporation since
1971.
- --------
(1) The law firm of which Mr. Keeler is a member provided legal services to
the Corporation in 1995 and is expected to provide legal services to the
Corporation in 1996.
(2) The law firm of which Mr. Gioia is a member provided legal services to the
Corporation in 1995 and is expected to provide legal services to the
Corporation in 1996.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table indicates the amount and percentage of equity securities
of the Corporation beneficially owned by each person known to the Corporation
to be the owner of more than 5% of the Corporation's equity securities.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF COMMON STOCK PERCENT
BENEFICIAL OWNER BENEFICIALLY OWNED OF CLASS
------------------- ------------------ --------
<S> <C> <C>
Franklin Resources, Inc.* 4,746,570 6.6%
777 Mariners Island Blvd.
San Mateo, CA 94404
</TABLE>
- --------
* Based on an amendment to Schedule 13G filed with the Securities and
Exchange Commission for the period ended December 31, 1995. The shares were
acquired in the ordinary course of business and not for the purpose of
changing or influencing the control of the Corporation. Franklin Resources,
Inc., a mutual fund investment company, has sole voting power and shared
disposition power with respect to all of the shares.
6
<PAGE>
The following table indicates the number of shares of equity securities of
the Corporation beneficially owned by each director and nominee, each of the
executive officers named in the Summary Compensation Table included elsewhere
herein, and by the 22 current executive officers and directors as a group and
the percent of the outstanding securities so owned.
<TABLE>
<CAPTION>
COMMON STOCK
BENEFICIALLY OWNED PERCENT
NAME FEBRUARY 14, 1996 OF CLASS
---- ------------------ --------
<S> <C> <C>
James A. Carrigg .............................. 12,404 *
Alison P. Casarett ............................ 464 *
Joseph J. Castiglia ........................... 1,000 *
Lois B. DeFleur ............................... 300 *
Richard P. Fagan** ............................ 4,371 *
Michael I. German ............................. 2,091 *
Everett A. Gilmour ............................ 2,619 *
Paul L. Gioia ................................. 1,858 *
John M. Keeler ................................ 938 *
Allen E. Kintigh .............................. 980 *
Ben E. Lynch .................................. 1,165 *
Alton G. Marshall ............................. 200 *
David R. Newcomb .............................. 3,408 *
Gerald E. Putman .............................. 3,306 *
Jack H. Roskoz ................................ 5,459 *
Charles W. Stuart ............................. 400 *
22 current executive officers and directors as
a group ...................................... 59,738*** *
</TABLE>
- --------
* Less than 1/5 of 1% of the outstanding Common Stock.
** Mr. Fagan's stock ownership is reported as of February 1, 1996, the
effective date of his retirement.
*** Includes 3,625 shares held by an officer as nominee for the Employees'
Stock Purchase Plan.
SECTION 16 COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Corporation's directors and executive officers, and persons holding ten
percent or more of the Corporation's equity securities to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
(SEC) and the New York Stock Exchange. Such reporting persons are also
required to provide the Corporation with copies of all Section 16(a) forms
they file. Specific due dates for these reports have been established by SEC
regulations. Based solely on its review of the copies of the reports received
by it and certain written representations from certain reporting persons, the
Corporation believes that during 1995 all filing requirements were satisfied
by its directors and executive officers.
7
<PAGE>
EXECUTIVE COMPENSATION
Compensation for services to the Corporation for each of the last three
fiscal years of the chief executive officer and the next four highest
compensated executive officers of the Corporation who served in such
capacities on December 31, 1995, is shown by the following:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-------------------------------
NAME AND PRINCIPAL OTHER ANNUAL ALL OTHER
POSITION YEAR SALARY BONUS COMPENSATION(1) COMPENSATION(2)
- ------------------ ---- -------- ------- -------------- --------------
<S> <C> <C> <C> <C> <C>
James A. Carrigg........ 1995 $472,048 $46,147 $ 0 $2,490
Chairman, President and 1994 438,000 0 3,040 2,490
Chief Executive Officer 1993 413,123 0 0 2,429
Jack H. Roskoz.......... 1995 298,000 27,864 0 2,310
Executive Vice Presi-
dent 1994 259,250 0 1,392 2,310
1993 251,000 0 0 2,249
Michael I. German (3)... 1995 207,500 20,891 53,076 0
Senior Vice President 1994 15,256 0 0 0
1993 0 0 0 0
Richard P. Fagan (4).... 1995 198,500 18,801 0 2,042
Senior Vice President 1994 196,725 0 411 2,310
1993 191,400 0 0 2,249
Gerald E. Putman........ 1995 173,300 18,801 0 2,670
Senior Vice President 1994 134,875 0 0 2,310
1993 125,833 0 0 2,010
</TABLE>
- --------
(1) In 1995, the Corporation made payments of $30,165 to Mr. German to
reimburse him for moving expenses associated with his relocation related
to his employment with the Corporation. The Corporation also made a
payment of $22,911 to Mr. German under the Corporation's relocation
program which provides a relocation incentive to eligible employees for
the independent sale of an employee's former home.
(2) In 1995, the Corporation contributed for Messrs. Carrigg, Roskoz, Fagan,
and Putman, $2,310, $2,310, $2,042, and $2,310, respectively, under the
Tax Deferred Savings Plan. The Corporation has contributed for Messrs.
Carrigg and Putman, $180 and $360, respectively, under the Employees'
Stock Purchase Plan.
(3) Compensation data for Mr. German is provided only for 1995 and a portion
of 1994 because he was employed by the Corporation commencing December 5,
1994.
(4) Mr. Fagan retired effective February 1, 1996.
8
<PAGE>
The following table sets forth the maximum retirement benefits payable to
executive officers who retire at age 60 or later, in specified compensation
and years of service classifications, pursuant to the Corporation's Retirement
Benefit Plan and the Corporation's Supplemental Executive Retirement Plan as
they presently exist, and assuming no optional payment form is elected. The
amounts listed below reflect the deduction for Social Security benefits. There
are no other offset amounts.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
AVERAGE YEARS OF SERVICE
ANNUAL --------------------------------------------------------------
SALARY* 10 15 20 25 30 35 40**
- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
$650,000........ $292,100 $326,300 $360,400 $394,500 $428,600 $462,800 $496,900
600,000........ 268,500 300,000 331,500 363,000 394,500 426,000 457,500
550,000........ 244,900 273,800 302,600 331,500 360,400 389,300 418,100
500,000........ 221,300 247,500 273,800 300,000 326,300 352,500 378,800
450,000........ 197,600 221,300 244,900 268,500 292,100 315,800 339,400
400,000........ 174,000 195,000 216,000 237,000 258,000 279,000 300,000
350,000........ 150,400 168,800 187,100 205,500 223,900 242,300 260,600
300,000........ 126,800 142,500 158,300 174,000 189,800 205,500 221,300
250,000........ 103,100 116,300 129,400 142,500 155,600 168,800 181,900
200,000........ 79,500 90,000 100,500 111,000 121,500 132,000 142,500
150,000........ 55,900 63,800 71,600 79,500 87,400 95,300 103,100
100,000........ 32,300 37,500 42,800 48,000 53,300 58,500 63,800
</TABLE>
- --------
* Average of the salaries (not including amounts listed under "Bonus", "Other
Annual Compensation", and "All Other Compensation" in the Summary
Compensation Table) for the five highest paid consecutive years during the
last ten years of employment service. The average of the highest three
years of salary within the last ten years of employment for the
Supplemental Executive Retirement Plan was assumed to be 5% higher than
each salary shown.
** Maximum years of employment service for Retirement Benefit Plan and
Supplemental Executive Retirement Plan purposes.
The Corporation's Retirement Benefit Plan provides retirement benefits for
its hourly and salaried employees, including executive officers, based on
length of service and the average for the five highest paid consecutive years
during the last ten years of employment service. The Retirement Benefit Plan
is non-contributory and is funded under a trust arrangement and an insurance
contract. Amounts paid into the Retirement Benefit Plan are computed on an
actuarial basis. The Retirement Benefit Plan provides for normal or early
retirement benefits.
The Corporation's Supplemental Executive Retirement Plan provides that all
salaried employees, including executive officers, shall receive the full
benefits of the Corporation's Retirement Benefit Plan without regard to any
limitations imposed by the federal tax law and by including certain amounts
deferred under the Corporation's Deferred Compensation Plan for Salaried
Employees. In addition, it provides that officers and certain other key
employees, who have at least ten years of service, who have served in key
capacities for at least five years and who retire at age 60 or later, shall
receive a total retirement benefit (including benefits under the Retirement
9
<PAGE>
Benefit Plan and Social Security), based on years of service, of up to 75% of
the average of their highest three years of salary within the last ten years
of employment with the Corporation.
Mr. German has an agreement with the Corporation which provides that, for
the purposes of the Retirement Benefit Plan and the Supplemental Executive
Retirement Plan, respectively, he will be credited with two years of service
for each year actually worked at the Corporation for the first five years of
employment, provided that he is employed by the Corporation for at least five
years. Mr. German was employed by the Corporation commencing December 5, 1994.
Messrs. Carrigg, Roskoz, German, Fagan, and Putman have 37, 33, 2, 24, and
25 credited years of service, respectively, under the Retirement Benefit Plan
and Supplemental Executive Retirement Plan.
EMPLOYMENT AND CHANGE IN CONTROL ARRANGEMENTS
The Corporation has entered into an agreement with Mr. Carrigg which
provides for his employment as Chairman, President and Chief Executive Officer
of the Corporation for a term ending on December 31, 1997, with automatic one-
year extensions unless either Mr. Carrigg or the Corporation gives notice that
the agreement is not to be extended. The agreement was unanimously approved by
the Board of Directors and provides for a base salary, currently $500,000
subject to increase by the Board of Directors, and for Mr. Carrigg's continued
eligibility for participation in the Corporation's other compensation and
benefit plans. The agreement also provides that in the event of the
termination of Mr. Carrigg's employment by the Corporation without cause (as
defined in the agreement) prior to a change in control (as defined in the
agreement) of the Corporation, Mr. Carrigg will receive a lump sum amount
equal to the present value of the aggregate base salary otherwise payable to
Mr. Carrigg through the end of the term of the agreement. However, if within
two years following a change in control, or, if longer, within the two-year
period following consummation of a merger or consolidation, Mr. Carrigg's
employment is terminated either by the Corporation without cause or by Mr.
Carrigg for good reason, Mr. Carrigg will instead receive a lump-sum payment
equal to two times the sum of (i) his then-annual base salary and (ii) the
higher of the award he received pursuant to the Corporation's Annual Executive
Incentive Plan (AEIP) or predecessor plan, the Annual Executive Incentive
Compensation Plan (AEICP), as the case may be, in the fiscal year preceding
the date of termination or the average amount so paid in the three fiscal
years preceding the year in which the change in control occurs. In the event
of such termination, Mr. Carrigg will also be entitled to continuation of his
life, disability, accident and health insurance benefits for a period of
twenty-four months and shall receive an amount equal to all earned but unpaid
awards under the AEIP and a pro rata portion of any award under the AEIP with
respect to the year in which the termination occurs, calculated by assuming
that the target performance goals for such year have been met; provided,
however, that there shall be no duplication of payments made pursuant to the
agreement and the AEIP. Also, in the event of such termination, Mr. Carrigg
will be given an additional two years of age and service credit under the
Supplemental Executive Retirement Plan. Termination of employment by Mr.
Carrigg for good reason means Mr. Carrigg's termination of his own employment
following, among other things, a reduction in his compensation or benefits, a
diminution of his duties or responsibilities or the assignment to him of
duties inconsistent with his position. In the event Mr. Carrigg's employment
is terminated for cause, Mr. Carrigg is entitled to receive only amounts
earned through the date of termination. The agreement also provides for
payments in the event of the termination of Mr. Carrigg's employment due to
disability.
The Corporation has entered into severance agreements with Messrs. Roskoz,
German and Putman in order to provide for certain payments if within two years
following a change in control or, if longer, within the two-year period
following consummation of a merger or consolidation, the individual's
employment is
10
<PAGE>
terminated either by the Corporation without cause or by the individual for
good reason. The severance agreements have terms ending on December 31, 1997,
with automatic one-year extensions unless either the individual or the
Corporation gives notice that the agreement is not to be extended. The
agreements were unanimously approved by the Board of Directors. The benefits
consist of a lump-sum severance payment equal to one and one-half times the
sum of (i) the individual's then-annual base salary, and (ii) the higher of
the award the individual received pursuant to the AEIP or the AEICP, as the
case may be, in the fiscal year preceding the date of termination or the
average amount so paid in the three fiscal years preceding the year in which
the change in control occurs. In the event of such termination, the individual
will be entitled to continuation of his life, disability, accident and health
insurance benefits for a period of eighteen months and shall also receive an
amount equal to all earned but unpaid awards under the AEIP and a pro rata
portion of any award under the AEIP with respect to the year in which the
termination occurs, calculated by assuming that the target performance goals
for such year have been met; provided, however, that there shall be no
duplication of payments made pursuant to the agreement and the AEIP. Also, in
the event of such termination, the individual will receive outplacement
counseling and shall be given an additional one and one-half years of age and
service credit under the Supplemental Executive Retirement Plan.
In the event of a change in control (as defined in the AEIP), the
Corporation will pay participants in the AEIP, including executive officers,
an amount which includes all earned but unpaid awards, and a pro rata portion
of any award with respect to the year in which the change in control occurs,
calculated by assuming that the target performance goals for such year have
been met.
In the event of a change in control (as defined in the Long Term Executive
Incentive Share Plan), the Corporation will pay participants in the Long Term
Executive Incentive Share Plan, including executive officers, an amount which
includes all earned but unpaid awards and awards with respect to all then
existing three-year performance cycles, based on the Corporation's achieving
certain three-year average total stockholder returns as compared to the top
100 utilities by revenue.
After a change in control (as defined in the Supplemental Executive
Retirement Plan), officers and certain other key employees, who have at least
ten years of service, who have served in key capacities for at least five
years, and whose employment is terminated at age 55 or later, other than for
cause (as defined in the Supplemental Executive Retirement Plan), shall
receive a total retirement benefit (including benefits under the Retirement
Benefit Plan and Social Security), based on years of service, of up to 75% of
the average of their highest three years of salary during the last ten years
of employment with the Corporation. However, in the case of termination prior
to age 60, such total retirement benefit will be determined by applying the
same reduction in benefits as is applied to benefits upon retirement prior to
age 60 under the Retirement Benefit Plan.
DIRECTORS' COMPENSATION
Directors of the Corporation, other than officers, receive an annual
retainer of $18,000, plus $700 for each directors' meeting attended. Members
of the Executive Committee, other than officers, receive compensation of
$1,500 annually. Members of committees, including the Executive Committee,
other than officers, receive $600 for each committee meeting attended, except
that if the committee meeting is held on the same day and at the same location
as a directors' meeting, the fee is $500. If a directors' meeting or committee
meeting is held by means of a conference telephone, the fee is $250. The
Chairperson of each standing committee receives additional compensation of
$1,000 for serving as Chairperson of such committee. Under the terms of the
Corporation's Deferred Compensation Plan for Directors, directors can elect to
defer a portion or all of their compensation. Such deferred compensation,
together with interest thereon, is payable in a lump sum or over a period of
years following retirement as a director.
11
<PAGE>
The Corporation has a Retirement Plan for Directors (Plan) pursuant to which
eligible directors of the Corporation qualify for annual retirement benefits.
The Corporation amended the Plan in January 1996 to provide that the Plan not
provide retirement benefits to any person first elected a director after
December 31, 1995. An eligible director who serves on the Board of Directors
for a minimum of five years qualifies for annual retirement benefits equal to
50% of the highest annual retainer in effect for that director during the
period of the director's service on the Board of Directors. An eligible
director with ten years or more of service on the Board of Directors qualifies
for annual retirement benefits equal to 100% of the highest annual retainer in
effect for that director during the period of the director's service on the
Board of Directors, while an eligible director with between five and ten years
of service qualifies for pro rated amounts. Under the Plan, retirement benefit
payments generally commence upon the later of the eligible director's
attaining age 65 or retirement from the Board of Directors. The Plan provides
for the payment of annual retirement benefits to continue for a period equal
to the greater of the eligible director's life or ten years. Eligible
directors elected prior to the effective date of the Plan will have their
prior service as directors included in establishing their eligibility and the
amount of their retirement benefits. An eligible director who is also an
officer of the Corporation would qualify for retirement benefits only if the
director serves as a director after the director ceases to be an officer or
served as a director before election as an officer. In either case, the
director's service as a director while also an officer will be included in
establishing the amount of the director's retirement benefits.
The Corporation is planning to review later in 1996, with the assistance of
outside consultants, its policy regarding director compensation.
COMMITTEES
The Corporation's Board of Directors has an Audit Committee, a Nominating
Committee, and an Executive Compensation and Succession Committee.
The Audit Committee, which consists of Ben E. Lynch, Chairman, Joseph J.
Castiglia, Paul L. Gioia, and John M. Keeler, had four meetings in 1995.
Alison P. Casarett has been designated as an alternate member of the Audit
Committee and serves in the absence of any regular member. The Audit Committee
recommends the appointment of the independent accountants and reviews with
them the audit plan and results of the audit. It also meets with the
independent accountants, internal auditor, and management to discuss the
adequacy of the Corporation's system of internal controls and financial
reporting, and meets with the internal auditor to discuss the results of
completed internal audits.
The Nominating Committee, which consists of Alton G. Marshall, Chairman,
Alison P. Casarett, Everett A. Gilmour, and David R. Newcomb, had two meetings
in 1995. The Nominating Committee is responsible for recommending candidates
to fill vacancies on the Board of Directors. The Committee makes
recommendations to the Board of Directors regarding criteria for nomination as
a candidate to the Board of Directors. Stockholders wishing to recommend
candidates for consideration by the Nominating Committee should submit to the
Secretary of the Corporation the name, a statement of qualifications and the
written consent of the candidate. Recommendations will be brought to the
attention of the Nominating Committee.
The Executive Compensation and Succession Committee, which consists of
Everett A. Gilmour, Chairman, Alison P. Casarett, Ben E. Lynch, Alton G.
Marshall, and David R. Newcomb, had five meetings in 1995. That Committee,
among other things, recommends compensation for officers, awards under the
Annual Executive Incentive Plan, and candidates for election as officers.
12
<PAGE>
REPORT OF EXECUTIVE COMPENSATION AND SUCCESSION COMMITTEE ON EXECUTIVE
COMPENSATION
The Executive Compensation and Succession Committee reviews the compensation
levels of members of management, evaluates the performance of management, and
considers management succession and related matters. In addition, the
Committee administers the Corporation's incentive plans, which include an
annual incentive plan and a long-term incentive plan.
The compensation policy of the Committee is that executive compensation,
including compensation of the Chief Executive Officer, should consist of base
salary and annual and long-term incentive compensation and that executive
compensation, including compensation of the Chief Executive Officer, should be
structured to support the Corporation's overall objective of enhancing
stockholder value by attracting, motivating and retaining the talented
executives needed to manage and build the Corporation's business.
In determining base salaries for 1995 for executive officers, including the
Chief Executive Officer, the Committee considered its policy that, in general,
executive officers of the Corporation, including the Chief Executive Officer,
should be compensated at competitive levels to attract, motivate and retain
talented executives. To that end, the Committee reviewed certain compensation
data from New York State combination electric and gas utilities, fourteen
comparably-sized utility companies and several comparably-sized general
industry companies located in or near the Corporation's service area, as well
as a 1994 salary and data survey of New York State utility chief executive
officers and a 1995 Edison Electric Institute Executive Compensation survey in
order to assist in its decision-making. Some of these utility companies and
comparably-sized general industry companies are included in the comparison
indices in the Stock Performance Graph included elsewhere herein.
The Committee also considered the following factors subjectively in
determining base salaries for executive officers, including the Chief
Executive Officer: the individual's effectiveness in leading or helping the
Corporation to plan for changes in the competitive, rapidly changing utility
industry through the development of a strategic plan, the individual's
responsibilities, the depth of the individual's experience and the
individual's job performance, the Corporation's financial results for 1994,
the continued strengthening of the Corporation's financial condition and the
increase in its financial flexibility, the change in the Corporation's
dividend policy, the change in the Corporation's securities ratings by
Standard & Poor's and Moody's, the performance of the Corporation's Common
Stock compared to certain other utilities' common stock, the streamlining of
the field organization and continuing cost-cutting measures to meet
competition, the efficiency and reliability of the Corporation's generating
system, the service the Corporation provides to its customers, the
establishment of a Customer Service Business Unit, the development of flexible
rates for both existing and new load, the efforts to reduce the cost of
unnecessary and uneconomical electricity from non-utility generators, whether
certain rewards or penalties were earned or imposed under the three-year rate
settlement agreement with the PSC, the performance of the gas business under
FERC Order 636, the acquisition of Xenergy and the Corporation's other
diversification efforts, and the agreement with the International Brotherhood
of Electric Workers. The Committee also reviewed the Corporation's performance
with respect to the Annual Executive Incentive Compensation Plan and the
Performance Share Plan, as well as certain portions of the report of Williams,
Thacher & Rand for the Public Service Commission of the State of New York
(PSC) on the Executive Compensation Study of New York State Utilities. With
respect to Mr. Carrigg's base salary for 1995, the Committee also considered
Mr. Carrigg's employment agreement and the new three-year electric rate
settlement agreement with the PSC.
Taking into consideration all of the above factors, together with the policy
of the Committee that executive officers of the Corporation, including the
Chief Executive Officer, should be compensated at competitive levels, the
Committee targeted base salary at approximately the median level for the
comparably-sized utility company group, subject to adjustment depending on the
individual's performance. The 1995 base salaries for the named executive
officers, including Mr. Carrigg, were approximately at such median level.
13
<PAGE>
In order to further ensure the achievement of a link between corporate
performance and executive compensation, the Corporation had an Annual
Executive Incentive Compensation Plan (AEICP) pursuant to which executive
officers and other members of the executive team of the Corporation qualified
for cash incentive awards if goals which created benefits for stockholders and
customers of the Corporation were achieved during the year. Performance goals
were established each year on a corporate level. The AEICP was amended in 1995
to provide that earning incentive awards under the AEICP for 1995 depended on
the weighted cumulative performance of four performance goals. The individual
performance of each of the four performance goals could contribute either
positively or negatively to an award calculation and an award could be earned
if only some of the performance goals were met. The four performance goals
related to total shareholder return, customer service, electric retail sales
and natural gas deliveries, and total controllable expenditures, with total
shareholder return carrying the most weight and electric retail sales and
natural gas deliveries carrying the least weight. The total shareholder
return, customer service and total controllable expenditures goals were met
for 1995 and thus awards were made under the AEICP to certain persons,
including James A. Carrigg, Jack H. Roskoz, Michael I. German, Richard P.
Fagan, and Gerald E. Putman based on a percentage, ranging from 5.7% to 11.4%
of a participant's salary grade midpoint. Individual incentive awards were
approved by the Board of Directors after review and recommendation by the
Committee. Effective as of January 1, 1996, the Corporation adopted, with the
assistance of outside consultants, a new Annual Executive Incentive Plan which
provides for awards based on two performance measures--earnings available for
common stock and customer service goals.
While attaining established corporate goals is an important component of
earning incentive awards, the Committee believes that compensation should also
be based upon the Corporation's performance as compared to the performance of
a group of companies in the same industry. Thus, the Corporation had a
Performance Share Plan (Plan) pursuant to which executive and other officers
of the Corporation qualified for cash incentive awards if certain long-term
performance measures of the Corporation involving the Corporation's rank
within the top 100 utilities by revenue were achieved. No cash payments were
made under the Plan since its inception on January 1, 1991. Under the Plan,
certain amounts of Performance Shares were granted to participants depending
upon their position. Performance Shares granted earned dividend equivalents in
the form of additional Performance Shares. If the average of the Corporation's
rankings with respect to market-to-book ratio of the Corporation's Common
Stock and with respect to the three-year average total shareholder return of
the Corporation, in both cases compared to the top 100 utilities by revenue,
met or exceeded a certain level, cash payments representing the value of a
portion of the Performance Shares granted would have been made to
participants. The Plan provided that achievement of: an average ranking of
50th to 41st would have resulted in a cash payment representing 10% of the
Performance Shares granted; an average ranking of 40th to 31st would have
resulted in a cash payment representing an additional 20% of the Performance
Shares granted; an average ranking of 30th to 21st would have resulted in a
cash payment representing an additional 30% of the Performance Shares granted;
and an average ranking of at least 20th would have resulted in a cash payment
representing the remaining 40% of the Performance Shares granted. The value of
the Performance Shares was measured by reference to the average of the daily
closing prices of a share of the Corporation's Common Stock for twenty
consecutive trading days immediately preceding the date the Corporation's
average ranking was calculated. Effective as of January 1, 1996, the
Corporation adopted, with the assistance of outside consultants, a new Long
Term Executive Incentive Share Plan which provides for awards based on the
Corporation's achievement of certain three-year average total shareholder
returns compared to the top 100 utilities by revenues.
Executive Compensation and Succession
Committee
Everett A. Gilmour, Chairman Alton G.Marshall
Alison P. Casarett David R. Newcomb
Ben E. Lynch
14
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STOCK PERFORMANCE GRAPH
The yearly change in the cumulative total stockholder return on the
Corporation's Common Stock during the five years ending December 31, 1995,
compared with the cumulative total return on the Standard & Poor's Utilities
Index and Standard & Poor's 500 Index, assuming $100 was invested on December
31, 1990, and assuming reinvestment of dividends, is shown by the following:
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
NEW YORK STATE ELECTRIC & GAS CORPORATION, S&P UTILITIES, AND S&P 500
[CHART APPEARS HERE]
<TABLE>
<CAPTION>
12/31/90 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
New York State Electric & Gas Corp. ........ $100.00 $120.97 $145.92 $147.20 $ 98.53 $142.82
Standard & Poor's Utilities................. $100.00 $114.62 $123.89 $141.79 $130.52 $185.37
Standard & Poor's 500....................... $100.00 $130.47 $140.41 $154.56 $156.60 $215.46
</TABLE>
15
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INDEPENDENT ACCOUNTANTS
The Corporation has appointed Coopers & Lybrand L.L.P., a firm of
independent certified public accountants, as auditors for the year 1996.
Representatives of Coopers & Lybrand L.L.P. are expected to be present at the
meeting and will have an opportunity to make a statement if they desire to do
so. They will also be available to answer questions that may be asked by
stockholders. From time to time Coopers & Lybrand L.L.P. performs certain
management advisory services for the Corporation.
STOCKHOLDER PROPOSALS
The affirmative vote of the holders of a majority of the votes cast at the
meeting by stockholders entitled to vote is required to adopt either of the
following stockholder proposals. Abstentions and broker non-votes are voted
neither "for" nor "against" and have no effect on the vote in connection with
each of the proposals. If your proxy is signed and returned without specifying
a choice, the shares will be voted as recommended by the Board of Directors.
STOCKHOLDER PROPOSAL NUMBER 1
Mr. William Steiner, 4 Radcliff Drive, Great Neck, New York, 11024, who is
the beneficial owner of 800 shares of the Corporation's Common Stock has
advised the Corporation that he intends to present the following proposal at
the Annual Meeting of Stockholders:
"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."
The following statement was submitted by the proponent in support of the
proposal:
"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.
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.
I am a founding member of the Investors Rights Association of America and 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
dissatisfaction with the incumbent directors and reflect the need for
change.
I URGE YOUR SUPPORT, VOTE FOR THIS RESOLUTION."
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BOARD OF DIRECTORS' POSITION
The Board of Directors recommends a vote AGAINST adoption of stockholder
proposal number 1 for the following reasons:
This proposal seeks to reverse the action taken by the Corporation's
stockholders at the 1987 Annual Meeting at which the stockholders approved the
institution of a classified board. The Board of Directors believes that the
reasons supporting a classified board are as valid today as they were in 1987.
A classified board helps the Board of Directors to maintain stability and
continuity in the management of the Corporation's business and affairs since
the majority of directors at any given time will have experience with the
business operations of the Corporation. This stability and continuity
encourages more effective long-term strategic planning. In addition, a
classified board reduces the possibility of a sudden change in majority
control of the Board of Directors. In the event of a hostile takeover attempt,
the fact that approximately two thirds of the directors have terms of more
than one year would encourage any person seeking control of the Corporation to
initiate such action through arm's-length negotiations with management and the
Board of Directors, who are in a position to negotiate a transaction that is
most favorable to the Corporation's stockholders. The Board of Directors
believes that although a classified board enhances the ability to negotiate
favorable terms with the proponent of an unsolicited offer, it does not
necessarily discourage takeover offers.
The Board of Directors believes that a classified board continues to benefit
the Corporation and its stockholders and those with whom the Corporation does
business by permitting all who rely on the stability and continuity of
corporate policy to continue to do so. At the same time, annual elections, in
which approximately one third of the board is elected each year, offer
stockholders the opportunity to have a voice in corporate decision-making
while maintaining the basic integrity of corporate policy year to year.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THE ADOPTION OF STOCKHOLDER
-------
PROPOSAL NUMBER 1.
STOCKHOLDER PROPOSAL NUMBER 2
Mr. and Mrs. Edward Rudy, Box 7077, Yorkville Station, New York, New York,
10128, who are the record holders of 2,084 shares of the Corporation's Common
Stock have advised the Corporation that they intend to present the following
proposal at the Annual Meeting of Stockholders:
"RESOLVED: That the stockholders of New York State Electric & Gas
Corporation, assembled in annual meeting in person and by proxy, hereby
request that the Board of Directors take the steps necessary to provide for
an immediate reduction in stipends, fees, salaries, stock options, and/or
other remuneration being paid to members of the Board of Directors,
including NYSEG officers and executives who also serve as directors, to the
exact percentage reduction which has been approved by the Board of
Directors for dividends payable to the shareholders of the corporation and,
furthermore, said reduction shall not be restored nor payments to all NYSEG
directors increased except in the exact same percentages as are approved
for future increases in shareholder common stock dividends. Included are
any new dividend restorations or increases proposed and approved by the
Board of Directors prior to the approval of this shareholders' proposal by
the shareholder-owners of NYSEG."
17
<PAGE>
The following statement was submitted by the proponents in support of the
proposal:
"The shareholder-voters of NYSEG showed very strong support for this
proposal when it was originally presented at the 1995 annual meeting.
Shareholders who are the owners of New York State Electric & Gas
Corporation are the only investors in a major utility who have been
subjected to two large dividend reductions in less than a decade.
The most recent dividend reduction, of 36.37%, carried the explanation, by
NYSEG Chairman, President and C.E.O. James Carrigg, on behalf of the NYSEG
Board of Directors, that 'we understand the importance of the dividend.
While difficult, this action is a crucial step in positioning NYSEG for a
competitive environment.'
We believe that the Board of Directors should fully participate with the
non-director shareholder owners in this 'crucial step' which NYSEG
management and the Board of Directors determined was necessary. We do not
believe that shareholder dividends which are relied upon as investment
income by investors should be slashed ....... while the salaries, concurrent
pensions and other payments to the current NYSEG Board of Directors remain
intact . . . and may be increased.
It will require a 57.14% increase in the dividend rate for restoration only
to the level prior to the last dividend cut. We believe that the members of
the Board of Directors may look more favorably upon restoring the dividend
rate because, with the approval of this resolution, the directors will
benefit equally with the shareholder owners.
If you agree, please mark your ballot in favor of this resolution;
otherwise it is automatically cast in opposition to this shareholder
proposal, unless you have indicated that you wish to abstain from voting on
this proposal."
BOARD OF DIRECTORS' POSITION
The Board of Directors recommends a vote AGAINST adoption of stockholder
proposal number 2 for the following reasons:
A nearly identical proposal was presented at the 1995 Annual Meeting of
Stockholders by Mr. and Mrs. Rudy and was defeated by the votes of the
Corporation's stockholders.
The proposal calls for the immediate reduction of all forms of compensation
paid to directors by the same percentage as the Common Stock dividend was
reduced and would tie director compensation to the level of the Common Stock
dividend. The intent, as stated in the supporting statement, is to ensure that
the directors "fully participate with the non-director shareholder owners" in
the decision to reduce the dividend. Although the proponents are attempting to
link director compensation to the level of the Common Stock dividend, and
thus, tie director compensation to stockholder interests, the use of only the
dividend level as the linking factor would not ensure that director
compensation is properly tied to stockholder interests. Linking director
compensation to the level of dividends implies that the latter is the most
important measure in establishing director compensation whereas, to the
contrary, the Corporation considers many factors in establishing director
compensation. The Board of Directors continues to believe that no single
short-term result, whether it be stock price or dividend level or whether
favorable or unfavorable, should determine the level of director compensation,
because in making decisions it considers the best interests of the Corporation
and its stockholders over both the long-term and the short-term. The long-term
achievement of increased stockholder value requires more than merely tying
director compensation to a single short-term factor such as the level of
dividends. Under the proposal, all factors other than dividends would be
irrelevant in determining compensation paid to directors.
18
<PAGE>
The Board of Directors continues to believe that it is in the best interest
of the stockholders to attract and retain the most highly qualified
individuals as directors. To do this, it is important to pay directors fees
which are competitive with fees paid by other comparably-sized utility and
general industry companies. This is particularly critical now as the
Corporation plans for changes in the competitive, rapidly changing utility
industry. The proponent's resolution, if adopted, would not provide the Board
of Directors with the necessary flexibility in attracting and retaining the
most highly qualified individuals as directors. Such a restriction on
flexibility would make it extremely difficult for the Corporation to attract
qualified directors, particularly in a market where other comparably-sized
utility and general industry companies have no such restriction.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THE ADOPTION OF STOCKHOLDER
PROPOSAL NUMBER 2.
DEADLINE FOR STOCKHOLDER PROPOSALS
The date by which proposals of stockholders intended to be presented at the
1997 Annual Meeting must be received by the Corporation for inclusion in the
proxy statement and form of proxy relating to that meeting is November 29,
1996. Such proposals should be sent to the Secretary of the Corporation at
P.O. Box 3200, Ithaca, NY 14852-3200.
OTHER MATTERS
The Board of Directors does not know of any other matters of business to be
presented for action at the meeting. However, the enclosed form of proxy will
confer discretionary authority for the transacting of any such other and
further business if properly brought before the meeting or any adjournment
thereof. If any such business is so brought before the meeting, the persons
named in the enclosed form of proxy, or their substitutes, will vote according
to their discretion.
The proxy is revocable by you at any time before the exercise thereof, and
the giving of such proxy will not affect your right to vote in person, should
you later find it convenient to attend the meeting.
State law requires the Corporation to inform stockholders of the initiation
or renewal of insurance indemnifying itself and its officers and directors.
The Corporation's Pension Trust Liability Insurance, which is carried with
Federal Insurance Company, covering the Corporation and its directors and
those officers considered fiduciaries under the Employee Retirement Income
Security Act of 1974, has been renewed for one year beginning October 1, 1995
at a premium of $68,495.
COST OF SOLICITATION
The accompanying proxy is solicited on behalf of the Board of Directors. The
cost of this solicitation, including reimbursement of charges of brokerage
houses and others for their expenses in forwarding proxy materials to
beneficial owners of stock, will be paid by the Corporation. In addition,
directors, officers, and employees of the Corporation may solicit proxies by
telephone, telegram or in person, without additional compensation.
By Order of the Board of
Directors,
Daniel W. Farley
Vice President and Secretary
Dated: March 29, 1996
19
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(Map of Annual Meeting Location Here)
<PAGE>
PROXY
NEW YORK STATE ELECTRIC & GAS CORPORATION
PO BOX 3200, ITHACA, NY 14852-3200
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned appoints J.A. Carrigg, J.H. Roskoz, and D.W. Farley, or any one
or more of them, with power of substitution, proxies of the undersigned, to
vote, as specified, and in their discretion with respect to any other business
properly brought before the meeting, all shares of stock of New York State
Electric & Gas Corporation which the undersigned is entitled to vote at the
Annual Meeting of Stockholders of said Corporation to be held on May 10, 1996,
and at any adjournment thereof.
The Board Of Directors Recommends a vote "FOR" all nominees in Proposal 1
(1) Election of Directors
[ ] FOR all nominees listed below (except as written to the contrary on the line
provided below)
[ ] WITHOLD AUTHORITY to vote for all nominees
A.P. CASARETT, J.J. CASTIGLIA, L.B. DEFLEUR, J.M. KEELER
Instruction: To withold authority to vote for any individual nominee,
print that nominee's name on the line provided below.
---------------------------------------------------------------------
(THIS PROXY IS CONTINUED ON THE REVERSE SIDE)
(PLEASE SIGN AND DATE ON THE REVERSE SIDE)
<PAGE>
The Board of Directors Recommends a vote "AGAINST" Proposal 2 and Proposal 3
(2) The stockholder proposal relating to the elimination of a classified Board
of Directors.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(3) The stockholder proposal relating to a percentage reduction in director
remuneration based on a dividend reduction.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
The shares represented by this Proxy will be voted as specified. If no
specification is made, this Proxy will be voted FOR all the nominees and AGAINST
proposals (2) and (3).
Dated ______________________________, 1996
__________________________________________
__________________________________________
(Signatures/s)
(Joint owners each must sign. When signing as attorney, trustee,
administrator, executor or guardian, please give your full title as such.)
