[NM LOGO]
NOTICE OF ANNUAL MEETING
NIAGARA MOHAWK POWER CORPORATION
300 ERIE BOULEVARD WEST, SYRACUSE, NEW YORK 13202
Please take notice that the Annual Meeting of Shareholders of Niagara Mohawk
Power Corporation will be held at The Onondaga County Convention Center, 800
South State Street, Syracuse, New York 13202-3017 on Tuesday, May 6, 1997, at
10:30 a.m. for the following purposes:
(1) To elect four directors to serve in Class III for a term expiring at the
2000 Annual Meeting;
(2) To consider and act upon a shareholder proposal relating to an endorsement
by the Company of the CERES Principles;
(3) To consider and act upon a shareholder proposal relating to executive
compensation; and
(4) To transact such other business as may be properly brought before the
meeting or any adjournment thereof.
Shareholders entitled to vote at the meeting are the holders of Common Stock of
record at the close of business on March 18, 1997.
By Order of the Board of Directors
Kapua A. Rice
Secretary
Dated: April 7, 1997
<PAGE>
PROXY STATEMENT
The enclosed proxy is solicited by the Board of Directors (the "Board of
Directors" or the "Board") of Niagara Mohawk Power Corporation (the
"Corporation") for use at the Annual Meeting of Shareholders to be held on May
6, 1997, and at any adjournment thereof. This proxy statement and the form of
proxy, together with the 1996 Annual Report, are first being mailed to
shareholders on or about April 7, 1997.
VOTING RIGHTS AND VOTE REQUIRED
The close of business on March 18, 1997, has been fixed as the record date for
determining the holders of Common Stock entitled to vote at the meeting. Only
shareholders of Common Stock whose names appeared of record on the books of the
Corporation on the record date will be entitled to notice of and to vote at the
meeting and at any adjournment thereof. On the record date there were
144,390,619 shares of Common Stock outstanding and entitled to vote. Each share
of Common Stock is entitled to one vote.
Shareholders are urged to sign the accompanying form of proxy and return it
promptly in the envelope provided for that purpose. The proxy does not affect
the right to vote in person at the meeting and, if voted, may be revoked at any
time prior to the vote being taken at the meeting. Proxies will be voted in
accordance with the shareholders' directions. If no directions are given,
proxies will be voted for the election of the nominees for directors set forth
in this Proxy Statement. In the event any nominee withdraws or is for any reason
unable to serve, a contingency not presently anticipated, proxies will be voted
for any nominee that may be designated by the Board of Directors as a substitute
nominee.
A majority of the shares entitled to vote at the meeting shall constitute a
quorum. A plurality of the votes cast at the meeting is required for the
election of directors. Except where otherwise provided by law, an affirmative
vote of a majority of the votes cast at the meeting is required for approval of
any other matter. Abstentions and broker non-votes will not be considered as
votes cast with respect to a particular matter, but will be counted in the
number of shares present in person or represented by proxy for purposes of
determining whether a quorum is present.
Voting is confidential, in accordance with the provisions of Sections 8 and 9 of
Article II of the By-Laws of the Corporation. Tabulation of proxies and the
votes cast at the meeting is conducted by an independent agent and certified by
independent inspectors of election. Any information which would identify the
vote of any shareholder is held permanently confidential and will not be
disclosed to the Corporation, except in limited circumstances set forth in such
Sections of the By-Laws.
PROPOSAL 1: NOMINATION AND ELECTION OF DIRECTORS
At the meeting, four directors will be elected to Class III of the Board of
Directors for three-year terms expiring at the 2000 Annual Meeting or until
their respective successors are duly elected and qualified. All nominees are
members of the present Board of Directors.
Directors will be elected by a plurality of the votes cast at the meeting.
In accordance with the Corporation's Certificate of Incorporation, the Board of
Directors is divided into three classes, composed of as nearly equal a number of
directors as is possible, with staggered terms of office so that one class of
the directors must be elected at each annual meeting.
The Board of Directors currently consists of fifteen directors. Mr. John G.
Wick, who has served as director for 21 years, will retire from the Board of
Directors at the 1997 Annual Meeting due to the mandatory retirement age. In
addition, Mr. H. Eugene Lockhart, who has served on the Board since June 1996,
was recently selected for and has accepted the position of President, Bank of
America and accordingly, has tendered his resignation, effective May 6, 1997.
As a result, the Corporation will have thirteen directors as of the 1997 Annual
Meeting. The Board of Directors is deeply appreciative of the contributions
made by Mr. Wick and Mr. Lockhart.
As applicable to each nominee and continuing director, the name, age as of March
1, 1997, principal occupation, business experience for the last five years or
more, other directorships and the year in which first elected a director, are
set forth below.
BUSINESS BACKGROUND OF NOMINEES AND DIRECTORS
NOMINEES FOR CLASS III DIRECTORS - TERMS EXPIRING IN 2000
LAWRENCE BURKHARDT, III
Nuclear Consultant
Director since 1988
Chairperson of Nuclear Oversight Committee of the Board
Mr. Burkhardt, Age 64, independent consultant to the nuclear industry since
1990. Prior to his retirement in 1990, Mr. Burkhardt was employed by the
Corporation and served as Executive Vice President of Nuclear Operations.
Director of Management Analysis Company.
DOUGLAS M. COSTLE
Distinguished Senior Fellow and Chairman of the Board of the Institute for
Sustainable Communities
Director since 1991
Member of Executive, Corporate Public Policy & Environmental Affairs, and
Nuclear Oversight Committees of the Board
Mr. Costle, Age 57, Distinguished Senior Fellow and Chairman of the Board of the
Institute for Sustainable Communities, a non-profit organization located in
Montpelier, VT. Mr. Costle served as Dean of the Vermont Law School in South
Royalton, Vermont from 1987-1992. Former Administrator of the U.S.
Environmental Protection Agency. Independent Trustee of John Hancock Mutual
Funds.
DONALD B. RIEFLER
Financial Market Consultant
Director since 1978
Member of Executive, Audit, Finance (Chairperson), and Nuclear Oversight
Committees of the Board
Mr. Riefler, Age 69, financial market consultant and advisor to J. P. Morgan,
Florida FSB, Palm Beach, FL, a private banking concern affiliated with J. P.
Morgan & Co., Inc. Prior to his retirement in 1991, Mr. Riefler was Chairman of
the Market Risk Committee for J. P. Morgan & Co. Incorporated and Morgan
Guaranty Trust Company of New York. Director of Bank of Tokyo Mitsubishi Trust
Company.
STEPHEN B. SCHWARTZ
Retired Senior Vice President, International Business Machines Corporation
Director since 1992
Member of Executive, Compensation & Succession (Chairperson) and Finance
Committees of the Board
Mr. Schwartz, Age 62, retired as Senior Vice President, of International
Business Machines Corporation in 1992. Mr. Schwartz joined IBM in 1957 and was
elected Senior Vice President in 1990. Director of MFRI, Inc.
CONTINUING CLASS II DIRECTORS - TERMS EXPIRING IN 1999
WILLIAM F. ALLYN
President and Chief Executive Officer of Welch Allyn, Inc.
Director since 1988
Member of Audit, Compensation & Succession, and Nuclear Oversight Committees of
the Board
Mr. Allyn, Age 61, President and Chief Executive Officer of Welch Allyn, Inc.,
Skaneateles Falls, NY, a manufacturer of medical equipment. Mr. Allyn joined
Welch Allyn, Inc. in 1962 and was elected to his present position in 1980.
Director of ONBANCorp., Inc.; Oneida Limited; and Perfex Corporation.
WILLIAM E. DAVIS
Chairman of the Board and Chief Executive Officer, Niagara Mohawk Power
Corporation
Director since 1992
Chairperson of Executive Committee of the Board
Mr. Davis, Age 54, was elected Chairman of the Board and Chief Executive Officer
of the Corporation in 1993. Mr. Davis joined the Corporation in 1990 and was
elected Senior Vice President in April 1992, serving in that capacity until
elected Vice-Chairman of the Board of the Corporation in November 1992.
Director of Opinac Energy Corporation ("Opinac"), a wholly-owned subsidiary of
the Corporation, and of its subsidiaries, Canadian Niagara Power Company,
Limited, in which Opinac has a 50 percent interest, and Plum Street Enterprises,
Inc.; and Utilities Mutual Insurance Company. Mr. Davis also holds the position
of Chief Executive Officer, Plum Street Enterprises, Inc.
WILLIAM J. DONLON
Former Chairman of the Board and Chief Executive Officer, Niagara Mohawk Power
Corporation
Director since 1980
Mr. Donlon, Age 67, retired in 1993 as Chairman of the Board and Chief Executive
Officer of the Corporation with 45 years service as an active employee. Director
of Opinac Energy Corporation, a wholly-owned subsidiary of the Corporation, and
ONBANCorp., Inc.
ANTHONY H. GIOIA
Chairman and Chief Executive Officer of Gioia Management, Inc.
Director since 1996
Member of Compensation & Succession and Nuclear Oversight Committees of the
Board
Mr. Gioia, Age 55, Chairman and Chief Executive Officer of Gioia Management,
Inc., a holding company for several companies, including three packaging
companies located in Buffalo and Lockport, NY. Mr. Gioia has held his present
position since 1987.
DR. PATTI McGILL PETERSON
Senior Fellow of the Cornell Institute for Public Affairs
Director since 1988
Member of Audit and Corporate Public Policy & Environmental Affairs Committees
of the Board
Dr. Peterson, Age 53, Senior Fellow of the Cornell Institute for Public Affairs,
Cornell University, Ithaca, NY. Dr. Peterson served as President of St.
Lawrence University from 1987-1996. Prior to that, she was President of Wells
College. She holds the title President Emerita at both institutions. Director
of Security Mutual Life Insurance Company. Independent Trustee of John Hancock
Mutual Funds.
CONTINUING CLASS I DIRECTORS - TERMS EXPIRING IN 1998
ALBERT J. BUDNEY, JR.
President, Niagara Mohawk Power Corporation
Director since 1995
Mr. Budney, Age 49, was elected President of the Corporation in 1995. Mr.
Budney was previously employed by UtiliCorp United, Inc., an energy services
company, as Managing Vice President of the UtiliCorp Power Services Group and as
President of the Missouri Public Service Division. From 1990-1992, he held the
position of Vice President with Stone & Webster Inc., an engineering firm.
Director and President of Opinac Energy Corporation, a wholly-owned subsidiary
of the Corporation, and Director of its subsidiaries, Canadian Niagara Power
Company, Limited, in which Opinac has a 50 percent interest, and Plum Street
Enterprises, Inc.; and Director of Utilities Mutual Insurance Company.
EDMUND M. DAVIS
Attorney
Director since 1970
Member of Executive, Compensation & Succession, Corporate Public Policy &
Environmental Affairs (Chairperson), and Finance Committees of the Board
Mr. Davis, Age 67, retired in 1995 as of counsel to Hiscock & Barclay, LLP,
Syracuse, NY, Attorneys-at-Law. Mr. Davis was a partner and had been associated
with the law firm since 1957.
DR. BONNIE GUITON HILL
President and Chief Executive Officer of Times Mirror Foundation and Vice
President of Times Mirror
Director since 1991
Member of Executive, Audit and Corporate Public Policy & Environmental Affairs
Committees of the Board
Dr. Hill, Age 55, President and Chief Executive Officer of the Times Mirror
Foundation, a non-profit institution, and Vice President of Times Mirror, a news
and information company, located in Los Angeles, CA. Dr. Hill served as Dean
and Professor of Commerce of the McIntire School of Commerce at the University
of Virginia from 1992-1996. Prior to that, she served as the Secretary of
State and Consumer Services Agency for the State of California. Director of AK
Steel Corporation; Crestar Financial Corporation; Hershey Foods Corporation;
Louisiana-Pacific Corporation; and RREEF America, Inc.
HENRY A. PANASCI, JR.
Chairman, Cygnus Management Group, LLC
Director since 1988
Member of Compensation & Succession and Finance Committees of the Board
Mr. Panasci, Age 68, Chairman of Cygnus Management Group, LLC, a consulting firm
specializing in venture capital and private investments located in Syracuse, NY.
Mr. Panasci retired in 1996 as Chairman of the Board and Chief Executive Officer
of Fay's Incorporated, a drug store chain. Mr. Panasci co-founded Fay's Drug
Co., Inc. with his father in 1958. Director of National Association of Chain
Drug Stores.
BOARD OF DIRECTORS AND COMMITTEES
Meetings and Attendance During 1996, sixteen meetings of the Corporation's Board
of Directors were held. Each director, except for Mr. H. Eugene Lockhart,
attended more than 75 percent of the combined total of meetings of the Board of
Directors and the Committees on which he or she served.
There are six standing Committees of the Board: the Executive Committee, the
Audit Committee, the Compensation and Succession Committee, the Committee on
Corporate Public Policy and Environmental Affairs, the Finance Committee and the
Nuclear Oversight Committee. The Board does not have a standing Nominating
Committee to nominate candidates for Board membership, but functions as a
committee of the whole. Any nomination may be made from the floor by any
shareholder who has made a written request to the Corporation to have such
nomination considered at the annual meeting in accordance with the requirements
of the Corporation's By-Laws. Information with respect to the Audit Committee
and the Compensation and Succession Committee is set forth below.
Audit Committee
The Audit Committee, consisting of John G. Wick, Chairperson, William F. Allyn,
Bonnie Guiton Hill, H. Eugene Lockhart, Patti McGill Peterson and Donald B.
Riefler, all of whom are non-employee directors, met eleven times in 1996.
Duties performed by the Audit Committee include meeting with the independent
accountants, chief internal auditors and certain personnel of the Corporation to
discuss the planned scope of auditing examinations and the adequacy of internal
controls and interim and annual financial reporting; reviewing the results of
the annual examination of the consolidated financial statements and periodic
internal audit examinations; reviewing the services and fees of the
Corporation's independent accountants; overseeing matters involving compliance
with corporate business ethics policies; reviewing management's assessment of
financial risks; authorizing and participating in special projects and studies;
and performing any other duties or functions deemed appropriate by the Board.
Compensation and Succession
Committee
The Compensation and Succession Committee, consisting of Stephen B. Schwartz,
Chairperson, William F. Allyn, Edmund M. Davis, Anthony H. Gioia and Henry A.
Panasci, Jr., all of whom are non-employee directors, met nine times during
1996. The Committee evaluates the performance of the Corporation's Chief
Executive Officer and the other senior officers of the Corporation; reviews the
annual and incentive compensation of the elected officers of the Corporation,
the Corporation's compensation programs and benefit plans, and officer
development and succession plans; makes recommendations to the Board of
Directors with respect to these matters; and meets with the Corporation's
actuarial advisors to review the advisor's annual reports and progress toward
funding the pension, post-retirement health plans, and supplemental executive
retirement plan.
COMPENSATION AND SUCCESSION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Directors Allyn, Edmund Davis, Gioia, Panasci and Schwartz, all of whom are
non-employee directors, are members of the Compensation and Succession
Committee.
No person serving during 1996 as a member of the Compensation and Succession
Committee of the Board served as an officer or employee of the Corporation or
any of its subsidiaries during or prior to 1996.
No person serving during 1996 as an executive officer of the Corporation serves
or has served as a director or a member of the compensation committee of any
other entity that has an executive officer who serves or has served either as a
member of the Compensation and Succession Committee or as a member of the Board
of Directors of Niagara Mohawk Power Corporation.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table shows the persons (as the term is used in Section 13(d)(3)
of the Securities Exchange Act of 1934) known to the Corporation to beneficially
own more than five percent (5%) of the Corporation's Common Stock as of March 6,
1997. It also shows the same information for all directors of the Corporation,
the executive officers named in the Summary Compensation Table below and the
directors and executive officers of the Corporation as a group. The table also
lists the number of stock units credited to directors, named executive officers
and the directors and executive officers of the Corporation as a group as of
March 6, 1997, pursuant to the Corporation's compensation and benefit programs.
No voting rights are associated with stock units.
<TABLE>
<CAPTION>
Amount and Nature of Percent Number of
Title of Class Name and Address of Beneficial Owner Beneficial Ownership** of Class Stock Units Held
<S> <C> <C> <C> <S>
Common Stock Fidelity Management Trust Co. 12,230,956(1) 8.47%
82 Devonshire Street
Boston, Massachusetts 02109
Directors:
William F. Allyn 1,000 * 7,990(8)
Albert J. Budney, Jr. 500 * 55,000(9)
Lawrence Burkhardt, III 452 * 1,371(8)
Douglas M. Costle 500 * 8,149(8)
Edmund M. Davis 2,274 * 25,218(8)
William E. Davis 24,754(2) * 105,000(9)
William J. Donlon 15,343(3) * 0
Anthony H. Gioia 500 * 1,143(8)
Bonnie Guiton Hill 700 * 6,909(8)
H. Eugene Lockhart 375 * 1,143(8)
Henry A. Panasci, Jr. 2,500 * 1,143(8)
Patti McGill Peterson 500 * 9,797(8)
Donald B. Riefler 1,000 * 24,475(8)
Stephen B. Schwartz 500 * 9,802(8)
John G. Wick 1,320 * 1,371(8)
Named Executives:
B. Ralph Sylvia 17,285(4) * 35,350(9)
John W. Powers 23,220(5) * 25,750(9)
Darlene D. Kerr 12,228(6) * 25,750(9)
All Directors and Executive
Officers (23) as a group 141,305(7) * 430,961
</TABLE>
_______________
* Less than one percent.
** Based on information furnished to the Corporation by the Directors and
Executive Officers. Includes shares of Common Stock credited under the
Employees' Savings Fund Plan as of March 6, 1997.
(1)Fidelity Management Trust Company serves as Trustee. The above represents
shares in the Corporation's Non-Represented and Represented Employees' Savings
Fund Plans. The Trustee will vote all shares of Common Stock held in the Trusts
established for the Plans in accordance with the directions received from the
employees participating in the Plans. The Trustee will vote shares for which it
receives no instructions in the same proportion as it votes shares for which it
receives instructions.
(2)Includes presently exercisable options for 22,625 shares of Common Stock.
(3)Includes presently exercisable options for 13,333 shares of Common Stock.
(4)Includes presently exercisable options for 13,000 shares of Common Stock.
(5)Includes presently exercisable options for 9,000 shares of Common Stock.
(6)Includes presently exercisable options for 6,000 shares of Common Stock.
(7)Includes presently exercisable options for 89,083 shares of Common Stock.
(8)Represents deferred stock units granted pursuant to the Outside Director
Deferred Stock Unit Plan. No voting rights are associated with deferred stock
units. For additional information regarding deferred stock units, refer to page
II-16 ("Compensation of Directors").
(9)Represents stock units granted in 1995 pursuant to the 1995 Stock Incentive
Plan and in 1996 and 1997 pursuant to the Officer Long-Term Incentive Plan. No
voting rights are associated with stock units. For additional information
regarding stock units granted to named executives, refer to pages II-8-II-9
("1995 Stock Incentive Plan" and "Officer Long-Term Incentive Plan").
Section 16(a) Compliance
Section 16(a) of the Securities and Exchange Act of 1934 requires the
Corporation's directors and executive officers to file initial reports of
ownership and reports of changes in ownership of the Corporation's equity
securities with the Securities and Exchange Commission ("SEC") and the New York
Stock Exchange. Based solely on a review of the copies of such forms and written
representations from the Corporation's directors and executive officers, the
Company believes that during the preceding year the Corporation's directors and
executive officers have complied with all Section 16(a) filing requirements.
BOARD OF DIRECTORS' COMPENSATION AND SUCCESSION
COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation and Succession Committee of the Board of Directors (the
"Committee") is composed entirely of non-employee directors. The Committee has
responsibility for recommending officer salaries and for the administration of
the Corporation's officer incentive compensation plans as described in this
report. The Committee makes recommendations to the Board of Directors which
makes final officer compensation determinations.
This Committee report describes the Corporation's executive officer compensation
policies, the components of the compensation program, and the manner in which
1996 compensation determinations were made for the Corporation's Chairman of the
Board and Chief Executive Officer, Mr. William E. Davis.
The 1996 Executive Officer Compensation Program was composed entirely of base
salary, frozen at 1995 levels, and 1996 grants of stock units and stock
appreciation rights ("SARs") made pursuant to the new Officer Long-Term
Incentive Plan ("LTIP") adopted by the Board of Directors on September 25, 1996,
as described later in this report.
Base Salary
The Committee seeks to ensure that salaries of the Corporation's officers,
including executive officers, remain competitive with levels paid to comparable
positions among 23 Eastern Region investor-owned electric and gas utilities (the
same companies included in the peer group shown on the performance graph - the
Peer Group") together with other U.S. electric and gas utilities with comparable
revenues (collectively referred to as the "Comparator Utilities"). The
Committee believes that competitive salaries provide the foundation of the
Corporation's officer compensation program and are essential for the Corporation
to attract and retain qualified officers, especially in light of the increasing
competition within the industry. Each officer position has been assigned to a
competitive salary range. The Committee intends to administer salaries within
the 25th to 75th percentiles of practice with respect to those Comparator
Utilities. The 1996 salary of the Chief Executive Officer and the average salary
of the other four named executive officers fall below median (50th percentile)
competitive levels. Since executive officer salaries were frozen at 1995
levels, as a condition for receipt of 1995 stock incentive grants, the
competitiveness of 1996 executive officer compensation is based entirely on
stock-related incentives in the form of stock units and stock appreciation
rights granted under the 1995 Stock Incentive Plan ("SIP") and the Officer
Long-Term Incentive Plan adopted by the Board of Directors on September 25,
1996.
1995 Stock Incentive Plan
On December 14, 1995, the Board of Directors approved the SIP to promote the
success and enhance the value of the Corporation through the retention and
continued motivation of the Corporation's officers and to focus their efforts
toward the execution of business strategies directed toward improving financial
returns to shareholders. Awards under the SIP consisted of stock units and SARs.
The stock unit grants will be paid in cash in early 1998 based on the average
closing price of the Corporation's common stock during the last twelve
consecutive trading days in 1997. Dividends are credited (in an amount
equivalent to dividends paid, if any, on the Corporation's common stock) with
respect to all stock units granted. These credits are reinvested at the
prevailing stock price, thereby increasing the number of stock units payable at
the end of the period. The SARs first become exercisable on January 2, 1998 and
may be exercised until they expire on December 31, 2002.
The SIP was structured so that any compensation earned by officers during the
two-year period 1996 and 1997, other than base salary, will be based on the
Corporation's year-end 1997 stock price and total returns realized by
shareholders during this period. Accordingly, participants (including the
executive officers listed in the Summary Compensation Table) will not receive
any salary increases (except to reflect promotions), annual bonus payments or
stock option grants during 1996 and 1997. Participants have also surrendered
their rights to payment with respect to Performance Share Units (a
performance-based incentive plan first adopted in 1992) granted in 1995 for the
1995-1997 period as a condition of participation in the SIP. Generally speaking,
SIP grants were structured so that the Corporation's stock price would have to
more than double during this two-year period in order for the total compensation
of the participants to approximate median competitive levels.
The Committee does not intend to make further SIP grants other than the 1995
stock unit grants which become payable in early 1998 and the 1995 stock
appreciation rights grants which become exercisable on January 1, 1998 and
expire on December 31, 2002. Long-term incentive grants were made in 1996 and
1997 under the LTIP described below.
Officer Long-Term Incentive Plan
Since SIP stock unit grants will be paid in early 1998, when SIP SAR grants will
also first become exercisable, and the Committee seeks to provide a continuous
program of long-term stock incentives thereafter, on September 25, 1996 the
Board of Directors adopted the LTIP and approved stock unit and SAR grants for
the 1996-1998 period. These stock unit grants will be paid in cash in early
1999, one year after SIP stock unit grants have been paid. Dividends are
credited (in an amount equivalent to dividends paid, if any, on the
Corporation's common stock) with respect to the 1996-1998 stock unit grants,
which are reinvested at the prevailing stock price, thereby increasing the
number of stock units payable in early 1999. The payment value of the stock
units will be based on the average closing price of the Corporation's common
stock during the last twelve consecutive trading days in 1998. The 1996 LTIP
SAR grants first become exercisable on January 2, 1999, and may be exercised
until they expire on December 31, 2005.
On January 29, 1997, the Board of Directors approved the grant of LTIP stock
units and SARs for the 1997-1999 performance period. These stock units, and
accumulated dividend stock units, will be paid in early 2000 based on the
average closing price of the Corporation's common stock during the last twelve
consecutive trading days in 1999. The SARs first become exercisable on
January 2, 2000, and can be exercised until they expire on December 31, 2006.
The size of both the 1996-1998 and 1997-1999 LTIP stock unit and SAR grants were
determined, based on the price of the Corporation's common stock at the time
these grants were made, so that the combination of the officers' current
salaries plus the grant date present value of SIP, and LTIP grants for the
1996-1998 and 1997-1999 performance periods, would approximate the 50th
percentile of comparator utility total compensation practice for the three-year
period 1995 through 1997. The competitiveness of the actual compensation
realized from SIP and the 1996-1998 and 1997-1999 LTIP grants will depend on the
market value of the Corporation's common stock at the end of 1997, 1998, and
1999.
Compensation of William E. Davis, Chairman of the Board and Chief Executive
Officer Mr. Davis became CEO on May 1, 1993. In April 1996, Mr. Davis
voluntarily reduced his annual salary from a level of $490,000 to the current
level of $450,500. The Committee has been advised by its consultant that Mr.
Davis' 1996 salary falls below the median relative to the CEOs of the Comparator
Utilities. On December 13, 1995, the Board granted Mr. Davis 25,000 stock units
and 142,500 SARs, with an exercise price of $10.75, under the 1995 Stock
Incentive Plan. Mr. Davis' SIP stock unit and SAR grants were intended to
maintain the competitiveness of his total compensation during the 1996 and 1997
period, based on the Corporation's year-end 1997 stock price, considering that
his salary would not be increased and that he would receive no annual bonuses
and no stock options during this two-year period.
As previously indicated, the Committee and the Board of Directors seek to
provide a continuous program of long-term stock incentives beyond 1997 when SIP
stock unit grants are paid and SIP SAR grants become exercisable. Accordingly,
on September 25, 1996 the Board of Directors approved a grant of 45,000 stock
units and 90,000 SARs, with an exercise price of $8.00, for Mr. Davis for the
1996-1998 performance period. On January 29, 1997 the Board of Directors
approved a grant of 35,000 stock units and 70,000 SARs, with an exercise price
of $10.30, for the 1997-1999 performance period. Both the 1996-1998 and
1997-1999 grants were made under the terms of the LTIP. The size of the
1996-1998 and 1997-1999 LTIP grants for Mr. Davis was determined so that the
grant date present value of both grants, in combination with his current salary
and his SIP grants, would approximate the 50th percentile for comparator utility
chief executive officers during the 1995-1997 period. The competitiveness of
the compensation Mr. Davis actually realizes from the SIP and LTIP grants will
depend on the market value of the Corporation's common stock at the end of 1997,
1998, and 1999.
_____________________
The Committee is aware of the limitations that tax legislation has placed on the
tax deductibility of compensation in excess of $1 million which is paid in any
year to an executive officer. Currently none of the executive officers has
received compensation subject to such limitations. The Committee will continue
to monitor developments in this area and take appropriate actions to preserve
the tax deductibility of compensation paid to executive officers, should this
become necessary.
Through the combination of base salary, and during 1996 and 1997, the
combination of stock unit and stock appreciation right grants, the Committee
seeks to focus the efforts of officers toward improving, annually and over the
longer-term, the financial returns for its shareholders.
Submitted by the Compensation and Succession Committee of the Board of
Directors:
Stephen B. Schwartz, Chairperson
William F. Allyn
Edmund M. Davis
Anthony H. Gioia
Henry A. Panasci, Jr.
EXECUTIVE COMPENSATION
The table below sets forth all compensation paid by the Corporation and its
wholly-owned subsidiaries for services rendered in all capacities during the
fiscal years ended December 31, 1996, December 31, 1995 and December 31, 1994,
to the Chairman of the Board and Chief Executive Officer and to each of the
other four most highly compensated Executive Officers of the Corporation for the
fiscal year ended December 31, 1996.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Fiscal Years 1996, 1995 and 1994
Annual Compensation Long-Term Compensation
Other Restricted Securities All Other
Annual Stock Underlying Compensation
Name Position Year Salary(A) Bonus Compensation Awards($)(D) Options/SARs(#) (E)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
W. E. Davis Chairman of the 1996 $462,351 $ 0 $ 0 $360,000 90,000 $43,365
Board and Chief 1995 473,542 0 0 246,875 152,500 35,729
Executive Officer 1994 441,542 0 0 --- 20,000 44,916
A. J. Budney, Jr. President and 1996 315,002 0 2,956(C) $180,000 45,000 24,975
Chief Operating 1995 236,251 50,000(B) 32,727 148,125 76,000 48,541
Officer 1994 --- --- --- --- --- ---
B. R. Sylvia Executive Vice 1996 295,001 0 0 $114,000 28,500 10,174
President 1995 295,001 0 0 98,750 49,000 24,832
1994 290,834 0 0 --- 5,000 8,061
J. W. Powers Senior Vice 1996 211,002 0 0 $142,000 30,000 30,541
President 1995 209,251 0 0 0 22,000 58,466
1994 187,301 0 0 --- 3,000 27,836
D. D. Kerr Senior Vice 1996 210,001 0 0 $82,000 20,500 9,415
President 1995 191,085 0 0 74,063 31,500 7,338
1994 183,968 --- --- --- 3,000 6,829
</TABLE>
_______________
(A) Includes all employee contributions to the Employees' Savings Fund Plan.
(B) 1995 bonus for Mr. Budney represents a bonus for 1995 guaranteed at the time
he was hired if earnings per share thresholds were not met under the Officer
Incentive Compensation Plan (an annual incentive compensation plan adopted by
the Board of Directors on December 13, 1990, and suspended for 1996 and 1997 as
a condition of participation in the SIP).
(C) 1996 and 1995 Other Annual Compensation for Mr. Budney represents amounts
reimbursed for payment of taxes associated with relocation expenses.
(D) In 1995, stock units were granted pursuant to the SIP adopted by the Board
of Directors on December 14, 1995. These stock units vest and become payable on
December 31, 1997. Dividend equivalents, if any, will be credited on all stock
units and will be paid in cash when the related stock units are paid. The 1995
values listed in the table were calculated by multiplying the stock units
granted by the closing market price of the company's stock ($9.875) on the date
of the grant (December 31, 1995).
In 1996, stock units were granted pursuant to the LTIP adopted by the Board of
Directors on September 25, 1996. These grants were made for the three-year
period January 1, 1996, through December 31, 1998, and vest and become payable
on January 2, 1999. The 1996 values listed in the table were calculated by
multiplying the stock units granted by $8.00, the price at the time these stock
unit grants were determined. Dividend equivalents, if any, will be credited on
these grants and will be paid when the related stock units are paid. For Mr.
Powers, the value also includes the value of stock units granted in 1996 under
the 1995 SIP.
As of the end of the 1996 fiscal year, based on a closing market price of
$9.875, Mr. Davis held 70,000 stock units having a market value of $691,250; Mr.
Budney held 37,500 stock units having a market value of $370,313; Mr. Sylvia
held 24,250 stock units having a market value of $239,469; Mr. Powers held
17,750 stock units having a market value of $175,281; and Ms. Kerr held 17,750
stock units having a market value of $175,281.
(E) All Other Compensation for 1996 includes: Employer contributions to the
Corporation's Employees' Savings Fund Plan: Mr. Davis ($4,500), Mr. Sylvia
($4,500), Mr. Powers ($4,500), and Ms. Kerr ($4,500); Taxable portion of life
insurance premiums: Mr. Davis ($8,994), Mr. Budney ($1,472), Mr. Sylvia
($3,537), Mr. Powers ($3,528), and Ms. Kerr ($3,115); Employer contributions to
the Corporation's Excess Benefit Plan: Mr. Davis ($9,371), Mr. Sylvia ($2,137),
Mr. Powers ($1,513), and Ms. Kerr ($1,800); Payments under the Corporation's
Relocation Policy: Mr. Budney ($3,503). All Other Compensation for the three
years shown now include directors fees received from Opinac Energy Corporation,
which in prior proxy statements were reflected under Salary. In 1996, those
fees were: Mr. Davis ($20,500), Mr. Budney ($20,000), and Mr. Powers
($21,000).
The following table discloses, for the Chairman of the Board and Chief Executive
Officer, Mr. William E. Davis and the other named executives, the number and
terms of SARs granted during the fiscal year ended December 31, 1996.
<TABLE>
<CAPTION>
Option/SAR Grants in Last Fiscal Year
Individual Grants
Number of % of Total
Securities Options/SARs
Underlying Granted to
Options/SARs Employees Exercise or
Granted In Fiscal Base Price Expiration Grant Date
Name (#) (A) Year Per Share Date (B) Present Value(C)
<S> <C> <C> <C> <C> <C>
W. E. Davis 90,000 23.90% 8.00 12/31/2005 $174,600
A. J. Budney, Jr. 45,000 11.95% 8.00 12/31/2005 87,300
B. R. Sylvia 28,500 7.57% 8.00 12/31/2005 55,290
J. W. Powers 9,500 2.52% 8.00 12/31/2002 17,480
J. W. Powers 20,500 5.44% 8.00 12/31/2005 39,770
D. D. Kerr 20,500 5.44% 8.00 12/31/2005 39,770
</TABLE>
_______________
(A) The first grant listed for Mr. Powers represents a grant of SARs made under
the SIP, while the second grant for Mr. Powers and the grant to the other four
named executive officers represents SARs granted in 1996 under the LTIP.
(B) SARs granted in 1996 under the LTIP become exercisable January 2, 1999, and
those granted to Mr. Powers under the 1995 SIP become exercisable January 2,
1998. All SARs become exercisable upon a change in control.
(C) The grant date present value of SARs is calculated using the Black-Scholes
Option Pricing Model with the following assumptions: market price of the stock
at the September 25, 1996 grant date ($8.00); exercise price of rights that
expire on December 31, 2005 ($8.00); stock volatility (0.2867); dividend yield
(5.02%); risk free rate (6.50%); exercise term (10 years); Black-Scholes ratio
(0.2425); and Black-Scholes value ($1.94) for rights that expire on December 31,
2005. Stock volatility and dividend yield assumptions are based on 36 months of
results for the period ending December 31, 1996. The Black-Scholes assumptions
used to calculate the grant date present value for the rights provided to Mr.
Powers with an expiration date of December 31, 2002 were the same as noted
above, except for risk free rate (6.25%); exercise term (7 years); Black-Scholes
ratio (0.2303); and Black-Scholes value ($1.84).
The following table summarizes exercises of options by the Chairman of the Board
and Chief Executive Officer, Mr. William E. Davis, and the other named
executives, the number of unexercised options held by them and the spread (the
difference between the current market price of the stock and the exercise price
of the option, to the extent that market price at the end of the year exceeds
exercise price) on those unexercised options for fiscal year ended December 31,
1996.
<TABLE>
<CAPTION> Aggregated Option/SAR Exercises in Last Fiscal Year
and Fiscal Year-End Option Values
Number of
Securities Underlying Value of Unexercised
Unexercised Options/SARs Options/SARs At
At Fiscal Year End (#) Fiscal Year-End ($) (A)
Shares
Acquired on Value
Name Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C> <C> <C>
W. E. Davis 0 $0 12,625 262,500 $0 $168,750
A. J. Budney, Jr. 0 0 0 121,000 0 84,375
B. R. Sylvia 0 0 8,000 82,500 0 53,438
J. W. Powers 0 0 6,000 55,000 0 56,251
D. D. Kerr 0 0 3,000 55,000 0 38,438
</TABLE>
_________________
(A) Calculated based on the closing market price of the Corporation's common
stock on December 31, 1996 ($9.875).
NIAGARA MOHAWK POWER CORPORATION
Comparison of Five-Year Cumulative Total Return(1)
vs. S&P 500 and Peer Group of Eastern Region Utilities
[ILLUSTRATION OF PERFORMANCE GRAPH--ATTACHED]
<TABLE>
<CAPTION>
1991 1992 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C> <C>
NMPC 100.00 111.36 123.01 92.73 67.57 70.23
S&P 500 100.00 107.62 118.46 120.03 165.13 203.05
Peer Group 100.00 114.70 125.19 107.67 142.42 139.96
</TABLE>
Assumes $100 invested on 12-31-91 in Niagara Mohawk stock, S&P 500 and Eastern
Region utilities. All dividends assumed to be reinvested over the five-year
period.
PEER GROUP OF EASTERN REGION UTILITIES:
Allegheny Power System Inc. Long Island Lighting Co.
Atlantic Energy, Inc. National Fuel Gas Company
Baltimore Gas & Electric Company New England Electric System
Boston Edison Company New York State Electric & Gas Corp.
Brooklyn Union Gas Company Northeast Utilities
Central Hudson Gas & Electric Corp. Orange & Rockland Utilities Inc.
Central Maine Power Co. Pennsylvania Power & Light Co.
Consolidated Edison Co. of New York, Inc. PECO Energy Company
DQE, Inc. Public Service Enterprise Group Inc.
Delmarva Power & Light Co. Rochester Gas & Electric Corp.
Eastern Utilities Associates The United Illuminating Company
General Public Utilities Corp.
_______________
(1) Total returns for each Eastern Region Utility were determined in accordance
with the Securities and Exchange Commission's regulations, i.e., weighted
according to each issuer's stock market capitalization.
Retirement Benefits
The following table illustrates the maximum aggregate pension benefit, with
certain deductions for Social Security, payable by the Corporation under both
the Niagara Mohawk Pension Plan ("Basic Plan") and the Corporation's
Supplemental Executive Retirement Plan ("SERP") to an officer in specified
average salary and years-of-service classifications. Such benefit amounts have
been calculated as though each officer selected a straight life annuity and
retired on December 31, 1996 at age 65. The amount of compensation taken into
account under a tax-qualified plan is subject to certain annual limits (adjusted
for increases in the cost of living, $150,000 in 1995 and $150,000 in 1996).
This limitation may reduce benefits payable to highly compensated individuals.
Annual Retirement Allowance
3-Year Average 10 Years 20 Years 30 Years 40 Years 45 Years
Annual Salary Service* Service Service Service Service
150,000 $21,090 $ 82,134 $ 82,134 $ 82,134 $ 94,770
225,000 25,440 127,134 127,134 127,134 127,134
300,000 25,866 172,134 172,134 172,134 172,134
375,000 25,866 217,134 217,134 217,134 217,134
450,000 25,866 262,134 262,134 262,134 262,134
525,000 25,866 307,134 307,134 307,134 307,134
_____________
*Subject to five-year average annual salary.
The credited years of service under the Basic Plan and the SERP for the
individuals listed in the Summary Compensation Table are Mr. Davis, 7 years; Mr.
Budney, 2 years; Mr. Sylvia, 6 years; Mr. Powers, 33 years; Ms. Kerr, 23 years.
The Basic Plan, a noncontributory, tax-qualified defined benefit plan, provides
all employees of the Corporation with a minimum retirement benefit related to
the highest consecutive five-year average compensation. Compensation covered by
the Basic Plan includes only the participant's base salary or pay, subject to
the maximum annual limit noted above. Directors who are not employees are not
eligible to participate.
The SERP is a nonqualified, noncontributory defined benefit plan providing
additional benefits to certain officers of the Corporation upon retirement after
age 55 who have 20 or more years of employment. The Committee may grant
exceptions to these requirements. The SERP provides for payment monthly of an
amount equal to the greater of (I) 60% of monthly base salary averaged over the
final 36 months of employment, less benefits payable under the Basic Plan,
retirement benefits accrued during previous employment and one-half of the
maximum Social Security benefit to which the participant may be entitled at the
time of retirement, or (ii) benefits payable under the Basic Plan without regard
to the annual benefit limitations imposed by the Internal Revenue Code.
Participants in the SERP may elect to receive their benefit in a lump sum
payment provided certain established criteria are met.
Employee Agreements
The Corporation entered into employment agreements with Messrs. Davis, Budney,
Sylvia and Powers and Ms. Kerr, effective as of December 20, 1996, which
superseded their prior agreements with the Corporation. The agreements have a
three-year term, and, unless either party gives 60 days prior notice to the
contrary, the agreements are extended at the end of each year for an additional
year. In the event of a change in control (as defined in the agreement), the
agreement will remain in effect for a period of at least 36 months thereafter
unless a notice not to extend the term of the agreement was given at least 18
months prior to the change in control. The agreements provide that the
executive will receive a base salary at the executive's current annual salary or
such greater amount determined by the Corporation and that the executive will be
able to participate in the Corporation's incentive compensation plans according
to their terms. In addition, the executive is entitled to business expense
reimbursement, vacation, sick leave, perquisites, fringe benefits, insurance
coverage and other terms and conditions of the agreement as are provided to
employees of the Corporation with comparable rank and seniority.
The employment agreements also provide that the executive's benefits under the
SERP will be based on the executive's salary, annual incentive awards and SIP
awards, as applicable. Further, if the executive's employment is terminated by
the Corporation without cause (whether prior to or after a change in control),
or by the executive for good reason after a change in control, or after
completing eight years of service, the agreements provide that the executive
will be deemed fully vested under such plan without reduction for early
commencement. If the executive is under age 55 at the time of such termination,
the executive will be entitled to a fully vested benefit under the SERP upon
attaining age 55, without reduction for early commencement.
The agreements restrict under certain circumstances prior to a change in control
the executive's ability to compete with the Corporation and to use confidential
information concerning the Corporation. In the event of a dispute over an
executive's rights under the executive's agreement following a change in control
of the Corporation, the Corporation will pay the executive's reasonable legal
fees with respect to the dispute unless the executive's claims are found to be
frivolous.
If the executive's employment is terminated by the Corporation without cause
prior to a change in control (as defined in the agreement), the executive will
be entitled to a lump sum severance benefit in an amount equal to two times the
executive's base salary plus an amount equal to two times the greater of the
executive's (I) most recent annual incentive award or (ii) average annual
incentive award paid over the previous three years (a portion of the value of
the SIP awards to the executive will be treated as incentive awards for 1996 and
1997 for this purpose). In addition, the executive will receive a pro rata
portion of the incentive award which would have been payable to the executive
for the fiscal year in which termination of employment occurs provided that the
executive has been employed for 180 days in such fiscal year. In the event of
such termination of employment, the executive will also be entitled to continued
participation in the Corporation's employee benefit plans for two years,
coverage for the balance of the executive's life under a life insurance policy
providing a death benefit equal to 2.5 times the executive's base salary at
termination and payment by the Corporation of fees and expenses or any executive
recruiting or placement firm in seeking new employment.
If, following a change in control, the executive's employment is terminated by
the Corporation without cause or by the executive for good reason (as defined in
the agreement), the executive will be entitled to a lump sum severance benefit
equal to four times the executive's base salary. The executive will also be
entitled to the additional benefits referred to in the last sentence of the
preceding paragraph, except that employee benefit plan coverage for medical,
prescription drug, dental and hospitalization benefits will continue for the
remainder of the executive's life with all premiums therefor paid by the
Corporation and coverage under other employee benefit plans will continue for
four years. In the event that the payments to the executive upon termination of
employment following a change in control would subject the executive to the
excise tax on excess parachute payments under the Internal Revenue Code, the
Corporation will reimburse the executive for such excise tax (and the income tax
and excise tax on such reimbursement).
In November 1994, the Corporation entered into a supplemental agreement with Mr.
Powers in exchange for his foregoing retirement under the Corporation's
Voluntary Employee Reduction Program and continuing employment with the
Corporation until December 31, 1996. This agreement was modified by an
agreement between Mr. Powers and the Corporation entered into in October 1996 in
exchange for his foregoing retirement on December 31, 1996, and continuing
employment with the Corporation for up to twelve additional months. Under the
agreements, Mr. Powers became entitled to a lump sum payment following the
successful closing of the sale of HYDRA-CO Enterprises, Inc., and to a severance
allowance equal to one-half of his annual salary in effect on December 31, 1996,
which was paid to him in January 1997. The agreements also provide that Mr.
Powers would be entitled to (I) a SIP award of 7,500 stock units and 9,500 SARs,
which would be fully vested (assuming retirement during 1997) and payable (in
the case of stock units) or exercisable (in the case of SARs) on December 31,
1997, (ii) long-term incentive grants equivalent to those provided to other
senior vice presidents for the 1996-1998 and 1997-1999 cycles (prorated for his
period of service during those cycles), (iii) a lump sum payment for unused
vacation for 1995, 1996 and 1997 upon retirement and (iv) "grandfathered"
retiree medical coverages in effect on December 31, 1996. Under the agreements
Mr. Powers also is entitled to a benefit under the Corporation's SERP no less
than his benefit calculated as of November 1994, and to have the fees he
received as a member of the board of directors of Opinac Energy Corporation (or
would have received in the event that such fees are eliminated) taken into
account in calculating his benefit under this plan period. In January 1997, the
Committee agreed that if Mr. Powers elected to receive a lump sum payment of his
benefit under the SERP, it would be based on a discount rate no higher than the
applicable discount rate in effect under the plan on December 31, 1996.
COMPENSATION OF DIRECTORS
Directors who are not employees of the Corporation receive an annual retainer of
$20,000 and $1,000 per Board meeting attended. Directors who are not employees
and who chair any of the standing Board Committees receive an additional annual
fee of $3,000 and those who serve on any of the standing Board Committees,
including the chair, receive $850 per Committee meeting attended. The
Corporation also reimburses its directors for travel, lodging and related
expenses they incur in attending Board and Committee meetings.
The Corporation had an unfunded, nonqualified retirement plan for directors who
have not been employees of the Corporation. Under the plan, a director retiring
at age 65 or older after ten years of service as a director was entitled to an
annual benefit equal to such director's annual retainer, including Chairperson's
fee if applicable, at the time of retirement. If a director of such age retired
after serving less than ten years, but more than five years, such director would
receive a pro-rated benefit based on years of service. If a director served on
the Board less than five years or left before reaching age 65, no benefit was
available.
On December 2, 1996, the retirement plan for outside directors was terminated by
the Board of Directors, effective December 31, 1995. In its place, the Board of
Directors adopted the Outside Director Deferred Stock Unit Plan, under which
outside directors age 60 and older were given the alternative to: (1) continue
to receive plan benefits, based on the current retainer of $20,000 ($23,000 for
Committee Chairs), upon their retirement in accordance with the terms of the
plan as described above; (2) have the present value of their accrued plan
benefits, as of December 31, 1995, converted into deferred stock units based on
the Corporation's closing stock price of $8.75 on December 2, 1996; or (3)
receive payment of half their current retirement plan benefit and to have half
the present value of their accrued retirement benefit as of December 31, 1995,
converted into deferred stock units at a price of $8.75/share. The present
value of accrued retirement benefits as of December 31, 1995, was converted into
deferred stock units at a price of $8.75 for outside directors who were under
age 60.
Deferred Stock Units ("DSUs"), administered in accordance with the terms of the
Outside Director Deferred Stock Unit Plan adopted by the Board of Directors on
December 2, 1996, would be paid when a person ceases to be an outside director,
either in a lump sum or in five equal annual installments. The first DSU
installment payment would be made shortly after the director's service ends and
the other installments would be paid on the first through fourth anniversaries
of such date, based on the prevailing stock price at that time.
DSUs will be credited with respect to any dividends paid during the term of
their deferral. Such dividend credits would be reinvested into DSUs of
equivalent current value based on the prevailing price of the Corporation's
common stock at that time.
Commencing in 1996, and annually thereafter, each outside director will be
credited with DSUs equal in value to 50% of the prevailing year's annual
retainer (60% for Committee Chairs). Accordingly, all outside directors were
credited with 1,143 DSUs (1,371 for Committee Chairs) based on a closing stock
price of $8.75 on December 2, 1996, the date the Board adopted the Outside
Director Deferred Stock Unit Plan. The beneficial stock ownership table on page
II-7, shows the DSUs which have been credited to each of the outside directors
under this plan as of March 6, 1997.
The Corporation provides certain health and life insurance benefits to directors
who are not employees of the Corporation. During 1996, the following directors
received the indicated benefits under the foregoing arrangements: Mr. Allyn
($6,043), Mr. Burkhardt ($3,887), Mr. Costle ($3,684), Mr. Edmund Davis
($5,568), Mr. Donlon ($250), Dr. Hill ($432), Mr. Panasci ($182), Dr. Peterson
($3,305), Mr. Riefler ($6,313) and Mr. Wick ($5,848). Mr. Burkhardt received a
consulting fee of $18,000 during 1996. Effective January 1997, each outside
director covered under the Corporation's health care plans will contribute 20
percent of the monthly costs associated with these plans.
SHAREHOLDER PROPOSALS
PROPOSAL 2
The Benedictine Sisters, 3120 W. Ashby, San Antonio, Texas 78228, who own 205
shares of the Corporation's common stock have advised the Corporation that they
intend to present the following proposal at the 1997 Annual Meeting of
Shareholders. The proposed resolution and supporting statement are as follows:
"WHEREAS WE BELIEVE: Responsible implementation of a sound, credible
environmental policy increases long-term shareholder value by raising
efficiency, decreasing clean-up costs, reducing litigation, and enhancing public
image and product attractiveness;
Adherence to public standards for environmental performance gives a company
greater public credibility than standards created by industry alone. For
maximum credibility and usefulness, such standards should specifically meet the
concerns of investors and other stakeholders;
Companies are increasingly being expected by investors to do meaningful,
regular, comprehensive and impartial environmental reports. Standardized
environmental reports enable investors to compare performance over time. They
also attract investment from investors seeking companies which are
environmentally responsible and which minimize risk of environmental liability.
WHEREAS: The Coalition for Environmentally Responsible Economies (CERES) - which
includes shareholders of this Company; public interest representatives, and
environmental experts - consulted with corporations to produce the CERES
Principles as comprehensive public standards for both environmental performance
and reporting. Fifty-four companies, including Sun (Sunoco), General Motors,
H.B. Fuller, Polaroid, and Bethlehem Steel, have endorsed these principles to
demonstrate their commitment to public environmental accountability.
Fortune-500 endorsers say that benefits of working with CERES are public
credibility; value-added' for the company's environmental initiatives;
In endorsing the CERES Principles, a company commits to work toward:
1. Protection of the biosphere
2. Sustainable natural resource use
3. Waste reduction and disposal
4. Energy conservation
5. Risk reduction
6. Safe products & services
7. Environmental restoration
8. Informing the public
9. Management commitment
10. Audits and reports
(Full text of the CERES Principles and accompanying CERES Report Form obtainable
from CERES, 711 Atlantic Avenue, Boston MA 02110, tel: 617/451-0927).
CERES is distinguished from other initiatives for corporate environmental
responsibility, in being (1) a successful model of shareholder relations; (2) a
leader in public accountability through standardized environmental reporting;
and (3) a catalyst for significant and measurable environmental improvement
within firms.
RESOLVED: Shareholders request the Company to endorse the CERES Principles as a
part of its commitment to be publicly accountable for its environmental
impact."
Statement of Shareholders "Many investors support this resolution. Those
sponsoring similar resolutions at various companies have portfolios totaling $75
billion. The number of public pension funds and foundations supporting this
resolution increases every year. The objectives are: standards for
environmental performance and disclosure; methods for measuring progress toward
these goals; and a format for public reporting of progress. We believe this is
comparable to the European Community regulation for voluntary participation in
verified and publicly-reported eco-management and auditing, and fully compatible
with ISO 14000 certification. Your vote FOR this resolution will encourage
scrutiny of our Company's environmental policies and reports and adherence to
standards upheld by management and stakeholders alike."
Board of Directors' Response to the Shareholder Proposal
In 1991, the Corporation adopted a Corporate Policy on Protection of the
Environment which articulates the Corporation's proactive approach toward
environmental issues. The environmental policy takes the Corporation beyond
mere compliance with the law. In addition, its comprehensive environmental
management system has helped the Corporation stay in the forefront of progress
toward an environmentally sustainable energy future.
The Corporation carefully reviewed the CERES Principles and does not believe
that endorsement of a set of broad-based principles, in addition to the
Corporation's environmental policy and programs, would help the Corporation
better fulfill its continuing commitment to environmental excellence. The
Corporation believes that its environmental program provides the most specific
and focused approach to ensure that the Corporation is in compliance with all
applicable environmental regulations and to position itself as a recognized
leader for its environmental achievements.
Therefore, the Board of Directors recommends that you vote AGAINST this
proposal.
PROPOSAL 3
Edward S. George, 89 Corning Hill, Glenmont, New York 12077, who owns 5,000
shares of the Corporation's Common Stock, has advised the Corporation that he
intends to present the following proposal at the 1997 Annual Meeting of
Shareholders:
"Whereas the dividend is the first casualty in any economic downturn and the
stockholder is the first casualty and the last to benefit from an upturn, be it
Resolved: That when a dividend is cut, it is recommended that, with respect to
future contract obligations, no salaries will be increased or any stock options
allowed to executives or directors until the dividend is restored to its
original amount before the cut."
Statement of Shareholder
"The bullet must be large enough to enable the executives and directors as well
as the stockholders to get their teeth on it.
The administration will maintain that the increases in salary and stock options
are necessary to attract and hold good people. This cliche' belongs with the
one The check is in the mail', the New York State Legislature and certain
elected officials to justify an increase in their salaries, and I'm from the
government and I'm here to help.'"
Board of Directors' Response to the Shareholder Proposal
The suspension of dividend payments on the common stock was taken to help
stabilize the Corporation's financial condition and provide flexibility as the
Corporation addresses growing pressure from mandated power purchases and weaker
sales. While we recognize the unfavorable effect it has had on our
shareholders, the Corporation believes that the shareholders' long-term
financial interests would not be served by basing compensation decisions on
dividend payment levels.
The Corporation and the Compensation and Succession Committee of the Board of
Directors have made decisions regarding the compensation of officers and other
employees which we believe are appropriate to the circumstances the Corporation
faces. The Compensation and Succession Committee's Report on Executive
Compensation, which appears earlier in this Proxy Statement, describes the
decisions that have been made regarding the structure and administration of the
officer compensation program, including a freeze on salary increases during 1996
and 1997. These decisions will ensure the Corporation's ability to maintain a
group of qualified officers, in an increasingly competitive industry, and will
directly relate the payment of a significant component of their total
compensation to the future value of our stock and our shareholders' investment.
Adoption of a rigid, inflexible rule like that proposed by Dr. George could harm
the stockholders by making retention of qualified executives difficult, if not
impossible.
Therefore, the Board of Directors recommends that you vote AGAINST this
proposal.
ADDITIONAL INFORMATION
The directors and officers of the Corporation and its subsidiaries are insured
against obligations which may be incurred as a result of the Corporation's
indemnification of its directors and officers. The coverage also insures the
directors and officers against liabilities for which they may not be indemnified
by the Corporation or its subsidiaries, except a dishonest act or breach of
trust. The insurance was purchased from the National Union Fire Insurance
Company, Associated Electric & Gas Insurance Services, Ltd., Aetna Casualty and
Surety Company, Federal Insurance Company, CNA Insurance Company and ACE
Insurance Company, Ltd. for the term from January 31, 1997 to January 30, 1998
for an aggregate premium of $1,829,451.
INDEPENDENT ACCOUNTANTS
The Corporation has selected the independent accounting firm of Price Waterhouse
LLP to examine the financial statements of the Corporation and its subsidiaries
for the year ended December 31, 1997. Representatives of Price Waterhouse LLP
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.
QUARTERLY REPORTS
Shareholders who are not receiving quarterly reports directly from the
Corporation and who would like to receive the Corporation's quarterly reports
may write to Investor Relations, Niagara Mohawk Power Corporation, 300 Erie
Boulevard West, Building C-3, Syracuse, New York 13202-7904 to be included on
the Corporation's mailing list.
OTHER BUSINESS
Management does not know of any matters of business other than the foregoing to
be presented at the Annual Meeting. However, if other matters are properly
brought before the meeting or any adjournment thereof, the proxies will be voted
accordingly to the best judgment of the persons authorized thereby.
Expenses incurred in connection with this solicitation will be borne by the
orporation. The firm of D. F. King & Co., Inc. has been engaged to aid in the
solicitation of proxies for a fee of $10,500. Directors, officers or employees
of the Corporation may solicit proxies in person, by telephone, or by mail, but
without extra compensation. Upon request, brokerage houses or other nominees or
fiduciaries will be reimbursed by the Corporation for the expense of forwarding
proxy material to beneficial owners of stock.
SHAREHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
Proposals of shareholders intended to be presented at the 1998 Annual Meeting
must be received by the Corporation on or before December 2, 1997, to be
considered for inclusion in the Corporation's Proxy Statement and Form of Proxy
relating to that meeting. <PAGE>
By Order of the Board of Directors
Kapua A. Rice
Secretary
Dated: April 7, 1997
DIRECTIONS TO THE ONCENTER
800 S. STATE STREET
SYRACUSE, NY 13202-3017
(315) 435-8000
[MAP ILLUSTRATION]
FROM THE NYS THRUWAY (I90):
Take Exit 36, Rt. 81 South to Syracuse. Harrison Street Exit #18, right on
Harrison two blocks, turn left onto State Street, left into parking garage.
FROM THE NORTH:
Rt. 81 South to Harrison Street Exit #18, right on Harrison two blocks, turn
left onto State Street, left into parking garage.
FROM THE SOUTH:
Rt. 81 North to Adams Street Exit #18, straight one block, left onto Harrison
two blocks, turn left onto State Street, left into parking garage.
