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SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant /X/
Filed by a party other than the registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement / / Confidential, for Use of the Com-
mission Only (as permitted by
Rule 14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
OKLAHOMA GAS AND ELECTRIC COMPANY
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(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:
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(2) Aggregate number of securities to which transactions applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rules 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Oklahoma Gas and Electric Company
Proxy Statement
and
Notice of Annual Meeting
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May 18, 1995
[LOGO]
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Contents
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PAGE
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CHAIRMAN'S LETTER 1
NOTICE OF ANNUAL MEETING 2 NOTICE OF ANNUAL MEETING
PROXY STATEMENT 3 OF SHAREOWNERS
PROPOSAL NO. 1 - ELECTION OF DIRECTORS 4 AND PROXY STATEMENT
INFORMATION ABOUT DIRECTORS
AND NOMINEES 4 THURSDAY, MAY 18, 1995, AT 10:00 A.M.
INFORMATION CONCERNING THE
BOARD OF DIRECTORS 7 NATIONAL COWBOY HALL OF FAME
EXECUTIVE OFFICERS' REMUNERATION 8 1700 N.E. 63RD STREET
REPORT OF COMPENSATION OKLAHOMA CITY, OKLAHOMA
COMMITTEE ON EXECUTIVE
COMPENSATION 8
COMPENSATION COMMITTEE
INTERLOCKS AND INSIDER
PARTICIPATION 10
SUMMARY COMPENSATION
TABLE 11
PENSION PLAN TABLE 12
COMPANY STOCK PERFORMANCE 13
SECURITY OWNERSHIP 13
PROPOSAL NO. 2 - AMENDMENTS TO
COMPANY'S RESTATED CERTIFICATE
OF INCORPORATION REMOVING
LIMITS ON UNSECURED
INDEBTEDNESS 14
RELATIONSHIP WITH INDEPENDENT
PUBLIC ACCOUNTANTS 15
SHAREOWNER PROPOSALS 15
MAP 15
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Oklahoma Gas and Electric Company
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March 29, 1995
DEAR SHAREOWNER:
You are cordially invited to attend the annual meeting of Oklahoma Gas and
Electric Company at 10:00 a.m. on Thursday, May 18, 1995, at the National Cowboy
Hall of Fame, 1700 N.E. 63rd Street, Oklahoma City, Oklahoma.
In addition to the election of three directors, all shareowners will be
asked to consider and vote on proposed amendments to the Company's Restated
Certificate of Incorporation. The proposed amendments would give the Board of
Directors more flexibility in issuing unsecured indebtedness. For the reasons
stated in the accompanying Proxy Statement, the Board of Directors believes that
the proposed amendments are in the best interests of the Company and its
shareowners and recommends a vote "FOR" the proposed amendments.
Even though you may own only a few shares, your proxy is important in
making up the total number of shares necessary to hold the meeting. Whether or
not you plan to attend the meeting, please fill out, sign and return your proxy
card in the envelope provided as soon as possible. Your cooperation will be
appreciated.
Those arriving before the meeting will have the opportunity to visit
informally with the management of your Company. In addition to the business
portion of the meeting, there will be reports on the Company's current
operations and outlook.
Your continued interest in the Company is most encouraging and, on behalf
of the Board of Directors and employees of the Company, I want to express our
gratitude for your confidence and support.
Very truly yours,
/s/ JAMES G. HARLOW, JR.
JAMES G. HARLOW, JR.
Chairman of the Board
and President
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<PAGE> 5
Notice of Annual Meeting
of Shareowners
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The Annual Meeting of Shareowners of Oklahoma Gas and Electric Company will
be held on Thursday, May 18, 1995, at 10:00 a.m. at the National Cowboy Hall of
Fame, 1700 N.E. 63rd Street, Oklahoma City, Oklahoma, for the following
purposes:
(1) To elect three directors to serve for a three-year term;
(2) To consider amendments to the Company's Restated Certificate of
Incorporation that would remove limitations on the Company's issuance
of unsecured indebtedness; and
(3) To transact such other business as may properly come before the
meeting.
The map on page 15 will assist you in locating the National Cowboy Hall of Fame.
The Board of Directors has fixed the close of business on March 20, 1995,
as the record date for the determination of shareowners entitled to notice of
and to vote at this meeting or any adjournment of the meeting. A list of such
shareowners will be available, as required by law, at the principal offices of
the Company at 101 N. Robinson, Oklahoma City, Oklahoma 73102-3405.
/s/ IRMA B. ELLIOTT
Irma B. Elliott
Secretary
Dated: March 29, 1995
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IMPORTANT -- YOUR PROXY CARD IS ENCLOSED IN THIS ENVELOPE
Shareowners are requested to fill in, sign, date and return the proxy
promptly in the enclosed envelope. No postage is required for mailing in the
United States. Your cooperation will be greatly appreciated.
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Proxy Statement
March 29, 1995
The Annual Meeting of Shareowners of Oklahoma Gas and Electric Company will
be held at the National Cowboy Hall of Fame, 1700 N.E. 63rd Street, Oklahoma
City, Oklahoma, on May 18, 1995, at 10:00 a.m. For the convenience of those
shareowners who may attend the meeting, a map is printed on page 15 that gives
directions to the National Cowboy Hall of Fame. At the meeting, it is intended
that the first two items in the accompanying notice be presented. The Board of
Directors does not now know of any other matters to be presented at the meeting,
but, if any other matters are properly presented to the meeting for action, the
persons named in the accompanying proxy will vote upon them in accordance with
their best judgment.
The Board of Directors solicits your proxy for use at this meeting. You may
revoke your proxy at any time before it is exercised by giving written notice of
its revocation to the Secretary of the Company or filing with her another proxy
as provided by law. All proxies properly executed by shareowners and received by
the Company prior to the meeting will be voted in accordance with the directions
made on the proxy and, if no directions are made, the proxy will be voted in
favor of election of the Board's nominees for directors and the proposal to
amend the Company's Restated Certificate of Incorporation.
The cost of soliciting proxies will be borne by the Company. In addition to
the use of the mails, proxies may be solicited personally or by telephone or
telegram by officers and regular employees of the Company. Morrow & Co. Inc.,
New York, New York, will assist in solicitation of proxies and the Company will
pay Morrow & Co. Inc. for its proxy solicitation services approximately $
plus expenses. The Company does not expect to pay any additional compensation
for the solicitation of proxies; however, brokers and other custodians,
nominees, or fiduciaries may be reimbursed for their expenses in forwarding
proxy material to principals and obtaining their proxies.
On March 1, 1995, the Company had outstanding approximately
shares of Common Stock, par value $2.50 per share; 423,663
shares of 4% Cumulative Preferred Stock, par value $20 per share; and the
following shares of Cumulative Preferred Stock, par value $100 per share: 50,000
shares of the 4.20% series, 75,000 shares of the 4.24% series, 65,000 shares of
the 4.44% series, 75,000 shares of the 4.80% series and 150,000 shares of the
5.34% series.
The owners of the 4% Cumulative Preferred Stock and Common Stock are
entitled to one vote on each matter presented for a vote at the meeting for each
$2.50 of par value (eight votes per share as to the 4% Cumulative Preferred
Stock, $20 par value, and one vote per share as to the Common Stock, $2.50 par
value) of stock held by such owners of record at the close of business on March
20, 1995. Owners of record on March 20, 1995, of the Company's Cumulative
Preferred Stock, par value $100 per share, are entitled to one vote per share on
the proposal to amend the Company's Restated Certificate of Incorporation, but
are not entitled to vote on any other matter intended to be presented at the
meeting.
The Company's 1994 Annual Report to its shareowners, including financial
statements for the year 1994, was sent on or about March 29, 1995, to all
shareowners of the Company of record on March 20, 1995. The following portions
of the Company's 1994 Annual Report are incorporated herein and made a part of
this Proxy Statement: (1) the information on page under the caption
"Management's Discussion and Analysis," (2) the consolidated financial
statements and Report of Independent Public Accountants relating thereto, (3)
the information on page under the caption "Interim Consolidated Financial
Information (Unaudited)," and (4) the information on page under the caption
"Historical Data."
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PROPOSAL NO. 1 - ELECTION OF DIRECTORS
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The Board of Directors consists of nine members with terms expiring on
different Annual Meeting dates. Approximately one-third of the members of the
Board of Directors are nominated each year to serve as directors for a term of
three years. Directors are elected at the Annual Meeting for the terms specified
and continue in office until their successors are elected and qualified.
At the Annual Meeting to be held on May 18, 1995, three persons are to be
elected to the Board of Directors for a term expiring at the Annual Meeting in
1998. The following three persons are the nominees of the Board to be elected
for such three-year term: Messrs. James G. Harlow, Jr., Bill Swisher, and John
A. Taylor. Each of these individuals is currently a director of the Company
whose term as a director is scheduled to expire at the Annual Meeting. Each
director serves according to the Company's retirement policy for directors.
Accordingly, under the Company's current policy, it is expected that Mr. Taylor
will retire from the Board on or about his 70th birthday in April of 1996, at
which time the Board may elect a new director to serve the balance of Mr.
Taylor's term.
The enclosed proxy, unless otherwise specified, will be voted in favor of
the election as directors of the previously listed three nominees. The Board of
Directors does not know of any nominee who will be unable to serve, but if any
of them should be unable to serve, the proxy holder may vote for a substitute
nominee. No nominee or director owns more than 0.1% of any class of voting
securities of the Company.
For the nominees described herein to be elected as directors, they must
receive a plurality of the votes of shares of Common Stock and 4% Preferred
present in person or by proxy and entitled to vote. "Plurality" means that the
individuals who receive the largest number of votes are elected as directors up
to the maximum number of directors to be chosen at the meeting. Consequently,
any shares not voted (whether by withholding authority, broker non-vote, or
otherwise) have no impact on the election of directors, except to the extent the
failure to vote for an individual results in the individual receiving fewer
votes than another individual.
INFORMATION ABOUT DIRECTORS AND NOMINEES
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The following contains certain information as of March 1, 1995, concerning
the three nominees for directors, as well as the directors whose terms of office
do not expire at the Annual Meeting on May 18, 1995.
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NOMINEES FOR ELECTION FOR TERM EXPIRING AT 1998 ANNUAL
MEETING OF SHAREOWNERS
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JAMES G. HARLOW, JR., 60, is Chairman of the Board, President and Chief
Executive Officer of the Company, named to the position of President in
1973, named Chief Executive Officer in 1976, and named Chairman in 1982. He Picture
serves as a member of the Board of Directors of Fleming Companies, Inc., omitted
Massachusetts Mutual Life Insurance Company and Associated Electric & Gas
Insurance Services Limited. Mr. Harlow has been a director of Oklahoma Gas and
Electric Company since 1970. He beneficially owns, directly or indirectly,
shares of Common Stock of the Company.
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BILL SWISHER, 64, is Chairman of the Board and Chief Executive Officer of
CMI Corporation, a manufacturer of road construction equipment that is
located in Oklahoma City, Oklahoma. Mr. Swisher has been a director of
Oklahoma Gas and Electric Company since 1979, and is chairman of the Picture
compensation committee and a member of the audit committee of the Board. He omitted
beneficially owns, directly or indirectly, shares of Common Stock of
the Company. This does not include Mr. Swisher's economic interest in
shares of Common Stock of the Company under the Directors' Deferred
Compensation Plan. See "INFORMATION CONCERNING THE BOARD OF DIRECTORS."
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<TABLE>
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JOHN A. TAYLOR, 69, is President and majority stockholder of Hiawatha
Exploration Company, which is an oil and gas producing company engaged in
various oil and gas exploration ventures. He is also President of ComQuest
Exploration Company, a high-technology oil and gas exploration organization.
Both companies are headquartered in Oklahoma City, Oklahoma. Mr. Taylor also
has served as an outside director of GTS Corp., Houston, since 1989. At the
request of the Board of Directors of GTS Corp., due to the continuing
financial problems of GTS Corp., Mr. Taylor served as President of GTS Corp. Picture
from March 1992 to June 1993, for which he received no compensation other than omitted
the reimbursement of his expenses. In May 1992, GTS Corp. filed a voluntary
petition in bankruptcy. Mr. Taylor has been a director of Oklahoma Gas and
Electric Company since 1977, and is chairman of the nominating committee and a
member of the audit committee of the Board. He beneficially owns, directly or
indirectly, shares of Common Stock of the Company. This does not
include Mr. Taylor's economic interest in shares of Common Stock of
the Company under the Directors' Deferred Compensation Plan. See "INFORMATION
CONCERNING THE BOARD OF DIRECTORS."
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DIRECTORS WHOSE TERMS EXPIRE AT 1997 ANNUAL MEETING OF SHAREOWNERS
WILLIAM E. DURRETT, 64, is Chairman of the Board, President and Chief
Executive Officer of American Fidelity Corporation, an insurance holding
company, and numerous other subsidiaries of American Fidelity Corporation. He
serves as Chairman of the Board and director of American Fidelity Assurance
Company, an insurance company wholly-owned by American Fidelity Corporation.
He also serves as a director of BOK Financial Corporation and Oklahoma
Healthcare Corporation. Mr. Durrett has been a director of Oklahoma Gas and Picture
Electric Company since March 1991, and is a member of the audit and omitted
compensation committees of the Board. He beneficially owns, directly or
indirectly, shares of Common Stock of the Company. This does not
include Mr. Durrett's economic interest in shares of Common Stock of
the Company under the Directors' Deferred Compensation Plan. See "INFORMATION
CONCERNING THE BOARD OF DIRECTORS." This also does not include shares
of Common Stock of the Company held by a subsidiary of American Fidelity
Corporation, for which Mr. Durrett disclaims beneficial ownership. See
"COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION" for a
description of transactions in 1994 between the Company and American Fidelity
Assurance Company.
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H. L. HEMBREE, III, 63, is Chairman of the Executive Committee of
Merchants National Bank, Fort Smith, Arkansas. Prior to 1989, he was
Chairman and Chief Executive Officer of Arkansas Best Corporation, a
diversified holding company located in Fort Smith, Arkansas. He has been a Picture
director of Oklahoma Gas and Electric Company since 1985, and is a member of omitted
the compensation committee of the Board. He beneficially owns, directly or
indirectly, shares of Common Stock of the Company. This does not
include Mr. Hembree's economic interest in shares of Common Stock of
the Company under the Directors' Deferred Compensation Plan. See "INFORMATION
CONCERNING THE BOARD OF DIRECTORS."
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JOHN F. SNODGRASS, 69, is President Emeritus and Trustee of The Samuel
Roberts Noble Foundation, Inc. (a not-for-profit charitable organization) in
Ardmore, Oklahoma. He serves as a director of Noble Affiliates Inc., Noble
Drilling Corporation, Investors Trust Company and Exchange National Bank and Picture
Trust Company, Ardmore, Oklahoma and Centaur Pharmaceuticals, Inc., Sunnyvale, omitted
California. Mr. Snodgrass has been a director of Oklahoma Gas and Electric
Company since 1985, and is a member of the compensation and the nominating
committees of the Board. He beneficially owns, directly or indirectly,
shares of Common Stock, shares of 4% Cumulative Preferred
Stock and shares of 4.24% Cumulative Preferred Stock of the Company.
This does not include Mr. Snodgrass' economic interest in shares of
Common Stock of the Company under the Directors' Deferred Compensation Plan.
See "INFORMATION CONCERNING THE BOARD OF DIRECTORS."
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DIRECTORS WHOSE TERMS EXPIRE AT 1996 ANNUAL MEETING OF SHAREOWNERS
HERBERT H. CHAMPLIN, 57, is President of Champlin Exploration, Inc., an
independent oil producer, and President of Enid Data Systems, computer
marketers, both located in Enid, Oklahoma. Mr. Champlin has been a director of
Oklahoma Gas and Electric Company since 1982, and is chairman of the audit
committee and a member of the nominating committee of the Board. He Picture
beneficially owns, directly or indirectly, shares of Common Stock of omitted
the Company. This does not include Mr. Champlin's economic interest in
shares of Common Stock of the Company under the Directors' Deferred
Compensation Plan. See "INFORMATION CONCERNING THE BOARD OF DIRECTORS." Mr.
Champlin also was engaged separately during 1994 as a part of his principal
business occupation in the petroleum industry and had interests in oil and gas
wells. During 1994, under terms of gas purchase contracts, the Company paid
$185,765 to him and his family business interests. The terms of the contracts
were no less favorable to the Company than the terms that would have been
obtained from other independent producers.
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MARTHA W. GRIFFIN, 60, is Chairman of the Board of Griffin Television,
Inc., located in Oklahoma City, Oklahoma, and also serves as Chairman of the
Board of Griffin Food Company (a subsidiary of Griffin Television, Inc.). She
serves as a member of the Board of Directors of the Oklahoma Chamber of
Commerce and Industry and the Oklahoma Heritage Association. Mrs. Griffin has
been a director of Oklahoma Gas and Electric Company since 1987, and is a
member of the audit and nominating committees of the Board. She beneficially Picture
owns, directly or indirectly, shares of Common Stock of the Company. omitted
This does not include Mrs. Griffin's economic interest in shares of
Common Stock of the Company under the Directors' Deferred Compensation Plan.
See "INFORMATION CONCERNING THE BOARD OF DIRECTORS." Mrs. Griffin is also a
major stockholder of television station KWTV, Channel 9, Oklahoma City,
Oklahoma. During 1994, the Company paid an aggregate of approximately $107,635
to KWTV for showing television commercials of the Company. This television
time was purchased by contract with the station, and the rate paid was no less
favorable to the Company than the rate that would have been paid to similar
stations in the Oklahoma City area.
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RONALD H. WHITE, M.D., 58, is a practicing cardiologist and is President
of Cardiology, Inc. in Oklahoma City. He serves as a member of the Board of
Directors of Baptist Medical Center of Oklahoma City, and was a member of the
Board of Regents of the University of Oklahoma for 14 years. Dr. White has Picture
been a director of Oklahoma Gas and Electric Company since 1989, and is a omitted
member of the audit committee of the Board. He beneficially owns, directly or
indirectly, shares of Common Stock of the Company. This does not
include Dr. White's economic interest in shares of Common Stock of the
Company under the Directors' Deferred Compensation Plan. See "INFORMATION CON-
CERNING THE BOARD OF DIRECTORS."
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</TABLE>
The information set forth above on share ownership is based on information
furnished to the Company by the directors and all shares listed are beneficially
owned by the individuals or by members of their immediate family unless
otherwise indicated.
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INFORMATION CONCERNING THE BOARD OF DIRECTORS
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The Board of Directors of the Company met on 9 occasions during 1994. Each
director attended at least 92% of the total number of meetings of the Board of
Directors and the committees of the Board on which he or she served.
COMMITTEES. The committees of the Company's Board of Directors include a
compensation committee, an audit committee and a nominating committee. Members
of the compensation committee are Bill Swisher, chairman, and Messrs. Durrett,
Hembree and Snodgrass. During 1994, the committee met on three occasions to
review and make recommendations to the Board of Directors with respect to
compensation of principal officers, salary policy for the period, benefit
programs for employees, compensation for outside directors for service on the
Board and the Board committees, and future objectives and goals of the Company.
Members of the audit committee are Herbert H. Champlin, chairman, Mrs.
Griffin and Messrs. Durrett, Swisher, Taylor and Dr. White. During 1994, the
committee met on two occasions to review and make recommendations to the Board
of Directors with respect to internal audit procedures, engagement of
independent public accountants, their review with the independent accountants of
the results of the auditing engagement, and matters having a material effect
upon the Company's financial operations.
Members of the nominating committee are John A. Taylor, chairman, Messrs.
Champlin and Snodgrass and Mrs. Griffin. During 1994, the committee met on two
occasions to review and make recommendations to the Board of Directors with
respect to nominees for election as directors. Similarly, recommendations were
made concerning membership of the audit, compensation and nominating committees
and rotation of committee assignments among directors. It is expected that the
nominating committee will consider nominees recommended by shareowners in
accordance with the Company's By-laws. The Company's By-laws provide that a
shareowner intending to nominate director candidates for election at an Annual
Meeting of Shareowners must deliver written notice thereof to the Secretary of
the Company not later than 90 days in advance of the meeting. The notice must
set forth certain information concerning such shareowner and the nominee(s),
including each nominee's name and address, a representation that the shareowner
is entitled to vote at such meeting and intends to appear in person or by proxy
at the meeting to nominate the person or persons specified in the notice, a
description of all arrangements or understandings between the shareowner and
each nominee and any other person pursuant to which the nomination or
nominations are to be made by the shareowner, such other information as would be
required to be included in a proxy statement soliciting proxies for the election
of the nominee(s) of such shareowner and the consent of each nominee to serve as
a director of the Company if so elected. The chairman of the Annual Meeting may
refuse to acknowledge the nomination of any person not made in compliance with
the foregoing procedure.
DIRECTOR COMPENSATION. In November 1994, the Board of Directors amended the
Directors' Deferred Compensation Plan to permit a portion of the cash
compensation payable to non-officer directors to be paid in common stock units
pursuant to the Plan. This change will permit the Board to cause a significant
portion of each non-officer director's compensation to be tied directly to the
performance of the Company's Common Stock.
Compensation of non-officer directors consists of an annual retainer fee of
$27,500, of which $2,000 is payable monthly in cash (the same amount that has
been paid monthly since August 1994) and $3,500 was deposited in the director's
Stock Account under the Deferred Compensation Plan and converted to 106 common
stock units based on the closing price of the Company's Common Stock on November
30, 1994. In addition, all non-officer directors receive $1,000 for each Board
meeting and $1,000 for each committee meeting attended. Under the Directors'
Deferred Compensation Plan, non-officer directors also may defer payment of all
or part of their attendance fees and the cash portion of their annual retainer
fee, which deferred amounts are, at the election of the director, credited to a
Dollar Account or a Stock Account or a combination of both, on the date the
deferred amounts otherwise would have been paid.
Amounts credited to the Dollar Account accrue interest approximately equal
to the commercial paper rate for established companies. Amounts credited to the
Stock Account are converted into common stock units equal in number to the
number of shares of the Company's Common Stock which the amounts would purchase
based on the fair market value of the Company's Common Stock on the date the
amounts would otherwise be paid. The Stock Account is credited on each dividend
payment date for the Company's Common Stock with additional common stock units
by dividing the aggregate cash dividend which would have been paid if existing
common stock units were actual shares of the Company's Common Stock by the fair
market value of the Company's Common Stock as of the dividend payment date.
When an individual ceases to be a director of the Company, all amounts
credited under the Plan are paid in cash in a lump sum or installments, with the
value of common stock units based on the fair market value of the Company's
Common Stock at the time of payment. In addition, amounts that are credited to
the Stock Account are automatically transferred to a Dollar Account upon the
occurrence of certain mergers and related transactions in which the Company is
not the survivor. As an alternative to the foregoing investment options, the
Plan permits a non-officer director to have all or any deferred portion of the
attendance fees and the cash portion of the annual retainer fee applied to
purchase life insurance for the director.
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EXECUTIVE OFFICERS' REMUNERATION
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The Company's executive compensation program is administered by the
Compensation Committee of the Board of Directors of the Company (the
"Committee"). Set forth below is the Committee's report on compensation paid to
executive officers during 1994.
REPORT OF COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
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GENERAL. The primary goals of the Committee in setting executive
compensation in 1994 were: (i) to provide a total compensation package that
enables the Company to attract and retain key executives and (ii) to align the
executives' interests with those of shareowners and with Company performance.
Compensation of the Company's executive officers in 1994 was comprised
primarily of salary, awards under the Company's Annual Incentive Compensation
Plan, awards under the Company's Restricted Stock Plan, and benefits under the
Company's Employees' Retirement Savings Plan and pension plan. As discussed more
fully below, part of the compensation paid in 1994 also consisted of payouts
under the Annual Incentive Compensation Plan with respect to the Company's 1993
performance. Virtually all employees, including executive officers, are eligible
to participate in the Retirement Savings Plan and pension plan. Both the
Retirement Savings Plan and pension plan have a supplemental restoration plan
that enables executive officers to receive the same benefits that they would
have received in the absence of limitations imposed by the federal tax laws on
contributions or payouts. In addition, a Supplemental Executive Retirement Plan
(the "SERP"), which was adopted in 1993, offers attractive pension benefits to
lateral hires. The SERP is not expected to benefit present executive officers
generally. In reviewing the benefits under the SERP, Retirement Savings Plan,
pension plan and related restoration plans, the Committee's goal is to ensure
that participants receive benefits commensurate with what companies typically
offer. The restoration plans for the Retirement Savings Plan and pension plan
contain provisions requiring their immediate funding in the event of certain
mergers, consolidations or tender offers involving the Company.
The total compensation of the Company's executives generally is commensurate
with the compensation paid to similar executives at the approximately 120
electric utilities included in the Edison Electric Institute Survey (the "Survey
Group")(1). In recent years, the Committee has significantly altered the
structure of the Company's compensation system and the composition of the
individual compensation packages, shifting from a compensation system based in
large part on individual performance and continued employment to a compensation
system that places a significant portion of compensation at risk dependent on
Company performance.
The first step in the process of switching to a more incentive-based system
for executive officers occurred in 1992 with awards of Restricted Stock tied not
only to continued employment, but also to the achievement of specified
performance targets over a three-year period. The remaining step occurred in
1993 when the Committee froze the salaries of senior executives and implemented
the Annual Incentive Compensation Plan. The implementation of the Annual
Incentive Compensation Plan was a result of a study by Towers Perrin, at the
Committee's request, of the Survey Group that indicated that although the total
compensation of the Company's executive officers was commensurate with the total
compensation of similar officers within the Survey Group, the Company's
executive officers received a greater proportion of their compensation in salary
and a lesser proportion in incentive-based awards. Accordingly, in an effort to
bring the Company's compensation system more in line with the Survey Group, the
salaries of senior executives were frozen at 1992 levels, the Annual Incentive
Compensation Plan was implemented and executives received increased
incentive-based awards. This process continued in 1994 as salary levels
generally remained frozen at 1992 levels. As a result, the potential total cash
compensation of the Company's executives, as well as the makeup of that
compensation, is more consistent with the average compensation paid to similar
executives by corporations in the Survey Group.
As discussed in last year's Committee Report, the Committee, with the
approval of the Board, declined to authorize the payout of any awards under the
Annual Incentive Compensation Plan with respect to 1993 performance. The
decision to defer the payout of these awards was not the result of poor
performance by the Company, but rather resulted from the Company's rate refund
and reduction case then-pending before the Oklahoma Corporation Commission. The
Company had previously determined not to increase for 1994 the pay schedule for
its salaried and non-salaried employees until the rate case had been resolved.
The Committee believed it was inappropriate to authorize payments to the
executives under those conditions. The rate refund case was concluded in
February 1994 and the general salary freeze for salaried and non-salaried
employees was lifted in September, 1994. Following those two events, the Board
determined that it was appropriate to reconsider the payout of these awards and
directed the Committee to do so. Based on the same criteria and conditions
discussed more fully
- ---------------
(1) While similar, the utilities in the Survey Group are not the same utilities
in the Dow Jones Electric Utilities Index utilized in the Stock Performance
Graph on page . The Survey Group was selected by Towers Perrin and, in the
judgment of the Committee, is an appropriate peer group to use for
compensation purposes.
8
<PAGE> 12
below with respect to 1994 awards, on September 13, 1994 the Committee
authorized the payout of the 1993 awards. In 1993, the Company's earnings per
share ($2.78) and the Company's operating and maintenance expenses were above
the threshold or minimum levels, but below the target levels. As a result of the
Company's performance and the performance by executive officers of their
individual goals, payouts of the 1993 awards ranged from 95% to 105% of the
targeted award amounts and from 9.5% to 15% of base salary.
Due to the Company's rate refund order discussed above and ever-increasing
competition in the utility industry, in early 1994 the Company undertook a
complete review and redesign of its operations which resulted in downsizing and
other cost-cutting measures. As part of this overall effort, in April 1994, the
Board of Directors approved a voluntary early retirement program for employees
at least 50 years old with at least five years of service. The early retirement
program was accepted by three executive officers, including Mr. Bunce, the
former Senior Vice President -- Accounting and Administration, who retired from
the Company effective August 1, 1994. In order to compensate Mr. Bunce and two
other officers of the Company for benefits and other non-cash compensation that
they forfeited by accepting the early retirement offer, the Compensation
Committee and the Board of Directors authorized lump sum payments to such
individuals in amounts ranging from $49,000 to $105,000.
In 1993, a new Federal tax law was passed which limits the deductibility of
executive compensation in excess of $1,000,000 unless certain exceptions are
met. Under transition rules adopted by the Internal Revenue Service, this new
law is not expected to impact the Company with respect to executive compensation
paid in 1995. The Committee continues to review the new law and associated
regulations, as well as the structure of its salary and various compensation
programs, and its present intent is to take appropriate steps to ensure the
continued deductibility of its executive compensation.
ANNUAL INCENTIVE COMPENSATION PLAN. The Annual Incentive Compensation Plan
was adopted in late 1992. Through annual awards, the Plan is designed to provide
incentives to key management personnel to achieve Company objectives tied
directly to profitability. Awards with respect to 1994 performance were made
under the Plan to ten employees, including all executive officers, and specified
performance goals were established in February 1994. Awards with respect to 1994
performance also were made to five other individuals who were named executive
officers during 1994. Payouts of the awards are in cash and are dependent
primarily on the achievement of such specified performance goals. In 1994, these
goals were based 50% on earnings per share as compared to earnings goals set by
the Committee and 50% on operating and maintenance expense per kilowatt-hour, as
compared to approximately 25 electric utilities. The amount of the award for
each executive officer was expressed as a percentage of base salary (the
"targeted amount"), with the officer having the ability, depending upon
achievement of the Company goals, to receive from 0% to 150% of such targeted
amount. For 1994, the targeted amounts ranged from 15% to 25% of base salary.
The percentage of the targeted amount that an officer ultimately receives is
subject to being increased or decreased by up to 20% at the discretion of the
Committee, depending on the individual's achievement of pre-established personal
goals approved by the Committee. In no event, however, will any payouts be made
unless the specified minimum Company performance goals are satisfied. For 1994,
the Company's earnings per share ($3.01) exceeded the threshold, but were below
the target levels, while operating and maintenance expenses exceeded the target
levels. The Company's performance in 1994 and performance by individuals of
their pre-established personal goals resulted in payouts ranging from 121% to
131% of their target amounts and from 18.2% to 31.5% of base salary earned in
1994.
RESTRICTED STOCK AWARDS. The other significant component of executive
compensation in 1994 was awards under the Company's Restricted Stock Plan. The
Plan empowers the Committee to make contingent awards of Common Stock
("Restricted Stock") to key employees. Each share of Restricted Stock is subject
to a Restricted Period of three or four years during which the share is subject
to forfeiture if the recipient of the share ceases to render substantial
services to the Company for any reason (other than death, disability or normal
retirement) and during which the share may not be transferred. The Committee has
the power in the event of certain mergers, consolidations or tender offers
involving the Company to lapse all restrictions on shares of Restricted Stock.
Awards under the Restricted Stock Plan were made at the end of 1994 and were
based, as required by the Plan, on the individual's performance during 1994. In
evaluating an individual's performance, the Committee considered individual job
performance, experience and individual characteristics such as leadership and
dedication, with no particular weight given to one factor over another. The
Committee also considered the long-term incentives provided to executives in the
Survey Group and the amount of the 1994 awards made for each executive officer
generally represented the long-term incentives awarded to similar executives by
corporations in approximately the 50th percentile of the Survey Group. For 1994,
awards of Restricted Stock ranged from 10% to 30% of an executive's base salary.
As in prior years, each share of Restricted Stock awarded in 1994 is subject to
forfeiture during a Restricted Period. Moreover, as in 1992 and 1993, the shares
awarded in 1994 to eight key officers contained a significant additional
condition. Such officers generally will be entitled at the end of the Restricted
Period of three years to keep the full amount of the shares awarded to them only
if the Company during such period meets or exceeds a specific return on equity
target as compared to the return on
9
<PAGE> 13
average equity for the approximately 90 electric and combination utility
companies shown in the Standard & Poor's Compustat Services Inc. Utility
Compustat II, with the officer receiving fewer shares and possibly no shares if
such target is not achieved. The Committee's rationale for this additional
condition was to continue to reward past service and to align the officers'
interests with those of shareowners and, at the same time, to tie the Restricted
Stock awards directly to long-term performance by the Company. The amount of
shares awarded in 1994 that an officer will ultimately receive will not be
determined until the end of 1997. Prior awards of Restricted Stock were not
considered by the Committee in making awards in 1994.
CEO COMPENSATION. The 1994 compensation for Mr. Harlow, the Chief Executive
Officer of the Company, consisted of the same components as the compensation for
other executive officers. His salary remained frozen at 1992 levels for the same
reasons discussed above with respect to the other executive officers, namely
that his total potential cash compensation would approximate the average cash
compensation for chief executive officers of the companies in the Survey Group.
His targeted award under the Annual Incentive Plan was 20% of his base salary
(i.e. $100,000), and, as a result of the Company's performance as described
above, he received a payout of $131,000, representing 131% of his targeted
award, of which 111% was attributable to Company performance and 20% was
attributable to his individual performance. At the present time, it is the
intent of the Committee to keep Mr. Harlow's salary at its current level for
1995, and to increase his targeted award from 20% to 30% for 1995. Mr. Harlow's
Restricted Stock Award was based on his performance in 1994 and a comparison of
his award to the long-term compensation of other chief executive officers in the
Survey Group. Consideration also was given to Mr. Harlow's 18 years of
experience as Chief Executive Officer of the Company, his demonstrated
leadership skills and his positive reputation within the community and utility
industry. Based on these factors, the Committee determined to grant Mr. Harlow a
Restricted Stock award having an approximate value at the date of its grant of
30% of his base salary. As was the case with respect to awards of Restricted
Stock to other key officers, Mr. Harlow's ultimate receipt of the shares awarded
to him will be dependent upon the Company's achievement of specified return on
equity targets during 1995, 1996 and 1997.
CONCLUSION. The Committee believes that the Company's current executive
compensation system serves the interests of the Company and its shareowners
effectively. The Committee takes very seriously its responsibilities with
respect to the Company's executive compensation system. To this end, the
Committee will continue to monitor and revise the compensation policies as
necessary to ensure that the Company's compensation system continues to meet the
needs of the Company and its shareowners.
Compensation Committee
<TABLE>
<S> <C>
Bill Swisher, Chairman Hugh L. Hembree, III, member
William E. Durrett, member John F. Snodgrass, member
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
- --------------------------------------------------------------------------------
Bill Swisher is the Chairman and William E. Durrett, H.L. Hembree, III and
John F. Snodgrass are the members of the Compensation Committee. William E.
Durrett, also serves as Chairman of the Board and Chief Executive Officer of
American Fidelity Corporation and as Chairman of the Board of its subsidiary
American Fidelity Assurance Company. In 1994, the Company paid American Fidelity
Assurance Company $947,384 (which includes employee contributions) for a
long-term disability policy for its employees and $607,675 for services in
administering the Company's medical, health and similar benefit plans. The terms
of these transactions were no less favorable to the Company than the terms that
would have been obtained from similar insurance companies. It is expected that
similar transactions will occur in the future.
10
<PAGE> 14
SUMMARY COMPENSATION TABLE
- --------------------------------------------------------------------------------
The following table provides information regarding compensation to the
Company's Chief Executive Officer and four other most highly compensated
executive officers for the past three years, as well as one former executive
officer who would have been one of the four most highly compensated officers had
he not retired before the end of the year.
<TABLE>
<CAPTION>
Long Term Compensation
------------------------------------
Annual Compensation Awards Payouts
------------------------------------- ------------------------ -------
Other Restricted Securities
Annual Stock Underlying LTIP
Name and Principal Salary Bonus(1) Compensation Awards(2) Options/ Payouts
Position Year ($) ($) ($) ($) SAR (#) ($)
--------------------- ---- ------- -------- ------------ --------- ---------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
J.G. Harlow, Jr. 1994 500,000 131,000 0 149,976 0 0
Chairman, President 1993 500,000 52,500 0 149,976 0 0
and Chief Executive 1992 500,000 0 0 149,993 0 0
Officer
P.J. Ryan 1994 295,000 92,925 0 73,739 0 0
Vice Chairman 1993 295,000 36,875 0 73,728 0 0
1992 295,000 0 0 73,718 0 0
A.M. Strecker 1994 197,083 51,090 0 39,384 0 0
Senior Vice President 1993 195,000 20,475 0 38,988 0 0
Finance and Administration 1992 195,000 0 0 38,980 0 0
S.E. Moore 1994 162,917 41,920 0 32,579 0 0
Senior Vice President-Law 1993 160,000 16,800 0 31,968 0 0
and Public Affairs 1992 160,000 0 0 31,987 0 0
B.G. Bunce (4) 1994 113,750 28,665 0 0 0 0
Senior Vice President 1993 195,000 19,500 0 38,988 0 0
Accounting and 1992 195,000 0 0 38,980 0 0
Administration
D. L. Young 1994 112,083 27,720 0 22,388 0 0
Controller 1993 110,000 11,000 0 21,996 0 0
1992 110,000 0 0 21,983 0 0
<CAPTION>
All Other
Name and Principal Compensation(3)
Position ($)
--------------------- ---------------
<S> <C>
J.G. Harlow, Jr. 52,934
Chairman, President 55,296
and Chief Executive 50,621
Officer
P.J. Ryan 27,982
Vice Chairman 30,409
29,006
A.M. Strecker 19,557
Senior Vice President 20,216
Finance and Administration 19,868
S.E. Moore 15,334
Senior Vice President-Law 13,940
and Public Affairs 13,318
B.G. Bunce (4) 122,382
Senior Vice President 24,543
Accounting and 22,145
Administration
D. L. Young 11,726
Controller 11,837
18,154
</TABLE>
- ---------------
(1) As explained on page 8, on September 13, 1994, the Compensation Committee
and the Board of Directors approved the payment of bonuses based on 1993
performance which had been deferred pending the outcome of the Company's
rate refund case before the Oklahoma Corporation Commission. Accordingly,
amounts shown in the column for 1993 have not previously been reported.
(2) Amounts in this column reflect the market value of the shares of Restricted
Stock awarded under the Company's Restricted Stock Plan, based on the
closing price of the Company's Common Stock on the date the award was made.
The number of shares awarded in 1994, 1993 and 1992 was as follows: (i) Mr.
Harlow, 4,562 shares, 4,166 shares and 4,633 shares, respectively; (ii) Mr.
Ryan, 2,243 shares, 2,048 shares and 2,277 shares, respectively; (iii) Mr.
Strecker, 1,198 shares, 1,083 shares and 1,204 shares, respectively; (iv)
Mr. Moore, 991 shares, 888 shares and 988 shares, respectively; (v) Mr.
Bunce, 0 shares, 1,083 shares and 1,204 shares, respectively; and (vi) Mr.
Young, 681 shares, 611 shares and 679 shares, respectively. In the absence
of death, disability or normal retirement, the shares awarded to these
individuals in 1994, 1993 and 1992 are subject to forfeiture for three
years with the amount the recipient ultimately receives dependent on
Company performance, while the shares awarded in prior years vest as
follows: 20% at the end of each of the first three years following the year
in which granted and 40% at the end of the fourth year following the year
in which granted. The total number of shares and market value of Restricted
Stock held by each of the named individuals as of December 31, 1994, were
as follows: Mr. Harlow, 15,640 shares, $518,075; Mr. Ryan, 7,911 shares,
$262,052; Mr. Strecker 4,374 shares, $144,889; Mr. Moore, 3,592 shares,
$118,985; and Mr. Young, 2,352 shares, $77,910. Dividends are paid to these
individuals on the shares of Restricted Stock owned by them.
(3) Amounts in this column for 1994 reflect: (i) for Mr. Harlow, $22,500
(Retirement Savings Plan and Retirement Savings Restoration Plan) and
$30,434 (insurance premiums); (ii) for Mr. Ryan, $13,275 (Retirement
Savings Plan and Retirement Savings Restoration Plan) and $14,707
(insurance premiums); (iii) for Mr. Strecker, $8,841 (Retirement Savings
Plan and Retirement Savings Restoration Plan) and $10,716 (insurance
premiums); (iv) for Mr. Moore, $5,892 (Retirement Savings Plan and
Retirement Savings Restoration Plan) and $9,442 (insurance premiums); (v)
for Mr. Bunce, $5,119 (Retirement Savings Plan), $12,263 (insurance
premiums) and $105,000 for benefits and non-cash compensation (primarily
restricted stock) forfeited by his acceptance of the Company's early
retirement program; and (vi) for Mr. Young, $5,016 (Retirement Savings
Plan) and $6,710 (insurance premiums). A significant portion of the
insurance premiums reported for each of these individuals is for life
insurance policies and such premiums are recovered by the Company from the
proceeds of the policies.
(4) Mr. Bunce retired effective August 1, 1994.
To the extent the table shows zeros for bonuses, other annual compensation,
stock options, stock appreciation rights or payouts under long-term incentive
plans for a particular year, these forms of compensation were not provided to
executive officers in such year or, in the case of other annual compensation,
the amounts were below the threshold required for disclosure under the SEC's
rules.
11
<PAGE> 15
PENSION PLAN TABLE
- --------------------------------------------------------------------------------
The Company maintains a qualified non-contributory Retirement Plan covering
all employees of the Company who have completed one year's service. Subject to
limitations imposed by the Employee Retirement Income Security Act of 1974
("ERISA"), benefits under the Retirement Plan are based upon the five highest
consecutive years of cash compensation (which for the executives named in the
Summary Compensation Table prior to 1993 has consisted solely of salaries and
for 1993 and 1994 consists of salary and bonus) during an employee's last ten
years prior to retirement and length of service. Social Security benefits are
deducted in determining benefits payable under the Plan. Remuneration covered by
the Plan includes salaries, bonuses and overtime pay. Retirement benefits are
payable to participants upon normal retirement (at or after age 65) or early
retirement (at or after attaining age 55 and completing five or more years of
service), to former employees after reaching retirement age who have completed
five or more years of service before terminating their employment and to
participants after reaching retirement age upon total and permanent disability.
As indicated above, the benefits payable under the Plan are subject to maximum
limitations under ERISA. Should benefits at the time of retirement exceed the
then permissible limits of ERISA, the Retirement Restoration Plan will provide
benefits through a lump-sum distribution actuarially equivalent to the amounts
that would have been payable annually under the Retirement Plan but for the
ERISA limits. The Company funds the estimated benefits payable under the
Retirement Restoration Plan through contributions to a trust for the benefit of
those employees who will be entitled to receive payments under the Retirement
Restoration Plan.
The following table sets forth the estimated annual benefits payable upon
normal retirement under the Company's Retirement Plan and Retirement Restoration
Plan to persons in the remuneration classification specified.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AVERAGE YEARS OF SERVICE AT RETIREMENT
COMPENSATION ------------------------------------------------------------
5 HIGHEST YEARS 10 20 30 40 45
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------
$ 100,000 $ 13,601 $ 27,202 $ 40,802 $ 54,403 $ 61,204
$ 125,000 $ 17,351 $ 34,702 $ 52,052 $ 69,403 $ 78,079
$ 150,000 $ 21,101 $ 42,202 $ 63,302 $ 84,403 $ 94,954
$ 200,000 $ 28,601 $ 57,202 $ 85,802 $114,403 $128,704
$ 250,000 $ 36,101 $ 72,202 $108,302 $144,403 $162,454
$ 300,000 $ 43,601 $ 87,202 $130,802 $174,403 $196,204
$ 350,000 $ 51,101 $102,202 $153,302 $204,403 $229,954
$ 400,000 $ 58,601 $117,202 $175,802 $234,403 $263,704
$ 450,000 $ 66,101 $132,202 $198,302 $264,403 $297,454
$ 500,000 $ 73,601 $147,202 $220,802 $294,403 $331,204
$ 550,000 $ 81,101 $162,202 $243,302 $324,403 $364,954
$ 600,000 $ 88,601 $177,202 $265,802 $354,403 $398,704
$ 650,000 $ 96,101 $192,202 $288,302 $384,403 $432,454
$ 700,000 $103,601 $207,202 $310,802 $414,403 $466,204
$ 750,000 $111,101 $222,202 $333,302 $444,403 $499,954
</TABLE>
- --------------------------------------------------------------------------------
As of December 31, 1994, the credited years of service for the individuals
listed in the remuneration table on page 11 are as follows: J. G. Harlow,
Jr. - 33 years; P. J. Ryan - 33 years; A. M. Strecker - 23 years; S. E.
Moore - 20 years; and D. L. Young - 31 years. Mr. Bunce retired from the Company
effective August 1, 1994 after 44 years of service and received benefits under
the Retirement Restoration Plan.
In 1993, the Company adopted a Supplemental Executive Retirement Plan (the
"SERP"). The SERP is an unfunded supplemental plan that is not subject to the
benefits limit imposed by ERISA. The plan generally provides for an annual
retirement benefit at age 65 equal to 65% of the participant's average cash
compensation during his or her final 36 months of employment, reduced by Social
Security benefits, by amounts payable under the Company's Retirement and
Restoration Plans described above and by amounts received under pension plans
from other employers. None of the individuals listed in the remuneration table
on page 11 is expected to receive benefits under the SERP at normal retirement
as the benefits payable to such individuals under the Company's Retirement and
Restoration Plans are expected to exceed the benefits payable under the SERP.
12
<PAGE> 16
COMPANY STOCK PERFORMANCE
- --------------------------------------------------------------------------------
The following graph shows a five-year comparison of cumulative total returns
for the Company's Common Stock, the Dow Jones Equity Market Index and the Dow
Jones Electric Utilities Index. The graph assumes that the value of the
investment in the Company's Common Stock and each index was $100 at December 31,
1989, and that all dividends were reinvested.
<TABLE>
<CAPTION>
Measurement Period Dow Jones Eq- Dow Jones
(Fiscal Year Covered) uity Market In- Electric
December 31, OG&E dex Utilities Index
<S> <C> <C> <C>
1989 100 100 100
1990 107 96 102
1991 129 127 132
1992 108 138 141
1993 126 152 158
1994 122 153 138
</TABLE>
SECURITY OWNERSHIP
- --------------------------------------------------------------------------------
Information regarding ownership of the Company's stock by each of the
Directors of the Company is set forth under "INFORMATION ABOUT DIRECTORS AND
NOMINEES." The following table shows the number of shares of the Company's
Common Stock and Preferred Stock beneficially owned on March 1, 1995, by each of
the named Executive Officers and by all Executive Officers and Directors as a
group:
<TABLE>
<CAPTION>
Number of Common Shares(1) Number of Preferred Shares(1)
-------------------------- -----------------------------
<S> <C> <C>
J.G. Harlow, Jr.
P.J. Ryan
A.M. Strecker
S.E. Moore
B.G. Bunce
D.L. Young
All Executive Officers and
Directors as a group
(20 persons)
</TABLE>
(1) No more than of the class for each executive officer and of the
class for all executive officers and directors as a group. Amounts shown
include shares for which, in certain instances, an individual has disclaimed
beneficial interest. Amounts shown for executive officers include
shares of Common Stock representing their interest in shares held under the
Company's Employees' Stock Ownership Plan, Retirement Savings Plan and
Restricted Stock Plan, for which in certain instances they have voting power
but not investment power.
The foregoing information on share ownership is based on information
furnished to the Company by the individuals listed above and all shares listed
are beneficially owned by the individuals or by members of their immediate
family unless otherwise indicated.
13
<PAGE> 17
Under federal securities laws, the Company's directors and executive
officers are required to report, within specified monthly and annual due dates,
their initial ownership in the Company's common and preferred stocks and
subsequent acquisitions, dispositions or other transfers of interest in such
securities. The Company is required to disclose whether it has knowledge that
any person required to file such a report may have failed to do so in a timely
manner. To the Company's knowledge, all of the Company's directors and officers
subject to such reporting obligations have satisfied their reporting obligations
in full except for William E. Durrett, Donald R. Rowlett and James R. Hatfield.
Mr. Durrett filed one report after the due date relating to one transaction
involving Company securities which were owned by a corporation with which Mr.
Durrett is associated. Messrs. Rowlett and Hatfield became executive officers
this year and filed their required initial reports of ownership after the due
date for such reports.
PROPOSAL NO. 2 - AMENDMENTS TO RESTATED CERTIFICATE OF
INCORPORATION REMOVING LIMITS ON UNSECURED INDEBTEDNESS
- --------------------------------------------------------------------------------
Under Article VII of the Company's Restated Certificate of Incorporation
(the "Articles"), the holders of the Company's (i) Cumulative Preferred Stock,
par value $100 per share ("$100 Preferred"), (ii) Cumulative Preferred Stock,
par value $25 per share ("$25 Preferred"), and (iii) 4% Cumulative Preferred
Stock, par value $20 per share ("4% Preferred", and, together with the $100
Preferred and the $25 Preferred, the "Preferred Stock") have special voting
rights with respect to certain matters, including among others the amendment of
the Articles to authorize any prior ranking stock, the issuance of Preferred
Stock unless certain coverage tests are met, and the issuance of unsecured
indebtedness unless certain coverage tests are met.
Specifically, Article VII(5)(a) provides that the approval of a majority of
each of the $100 Preferred, $25 Preferred and 4% Preferred, each voting
separately as a class, is required for the Company to:
Issue or assume any unsecured notes, debenture or other securities
representing unsecured indebtedness for any purpose other than the
refunding of secured or unsecured indebtedness theretofore created or
assumed by the corporation and then outstanding, or the retiring, by
redemption or otherwise of shares of the [Preferred Stock], or shares of
any stock ranking prior thereto or pari passu with the [Preferred Stock]
as to dividends or liquidation rights, if immediately after such issue
or assumption the total principal amount of all unsecured notes,
debentures or other securities representing unsecured indebtedness
issued or assumed by the corporation and then outstanding would exceed
20% of the aggregate of (i) the total principal amount of all bonds or
other securities representing secured indebtedness issued or assumed by
the corporation and then outstanding, and (ii) the total of the capital
and surplus of the corporation, as then recorded on its books.
The proposed amendments would eliminate the special voting rights contained
in clause (a) and thereby enable the Company to incur unsecured indebtedness
without a shareowner vote. The amendments are intended to increase the
flexibility of the Board of Directors in obtaining financing on the best
possible terms for the Company. Historically, the Company's long-term debt
financing generally has been accomplished through the issuance of first mortgage
bonds (secured debt financing) pursuant to the Company's Trust Indenture (the
"First Mortgage Indenture"). All of the first mortgage bonds issued by the
Company pursuant to the First Mortgage Indenture are secured by a first priority
lien on substantially all of the Company's properties. In light of the
increasingly competitive pressures in the utility industry and the financial
markets, the Board of Directors believes it is in the Company's best interests
to have maximum flexibility with respect to obtaining future financing to meet
the Company's needs. The elimination of the special voting rights with respect
to the issuance or assumption of unsecured indebtedness would provide the
Company with the ability to obtain the best terms available in the debt markets.
This should result in long-term benefits for all the Company's shareowners,
including the owners of the Preferred Stock.
Even though removal of the special voting rights would permit the Company to
issue a greater amount of unsecured debt, the Company does not have any present
intention to issue an aggregate amount of debt greater than it otherwise would
be permitted to issue. In other words, the total amount of secured and unsecured
debt intended to be issued and outstanding would not exceed the total amount of
secured and unsecured debt currently permitted by the Articles and the First
Mortgage Indenture; instead, unsecured debt would become a more significant
component of the overall debt of the Company.
Moreover, adoption of the proposed amendments would not remove all
restrictions on the Company's issuance of debt securities. As a regulated
utility, the issuance of any securities by the Company would continue to be
subject to the prior approval of the Oklahoma Corporation Commission (with
respect to securities maturing in more than one year) or the Federal Energy
Regulatory Commission (with respect to securities maturing in one year or less).
Consequently, although the removal of the special voting rights will increase
the flexibility of the Company by removing a limitation on the amount of
unsecured debt that the Company is permitted to issue, it is not intended that
the overall debt capacity levels would be increased, and, in any event, the
issuance of any debt securities will continue to be reviewed by regulatory
agencies.
14
<PAGE> 18
VOTE REQUIRED. Currently there are no shares of $25 Preferred outstanding.
Therefore, adoption of the proposed amendments requires the affirmative vote of
the owners of: (i) at least a majority of the outstanding Common Stock, voting
separately as a class, (ii) two-thirds of the outstanding 4% Cumulative
Preferred Stock, par value $20 per share, voting separately as a class, and
(iii) two-thirds of the outstanding Cumulative Preferred Stock, par value $100
per share, voting separately as a class. Abstentions from voting are treated as
votes against, while broker nonvotes are treated as shares not voted.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE PROPOSED
AMENDMENTS.
RELATIONSHIP WITH INDEPENDENT
PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
During 1994, Oklahoma Gas and Electric Company engaged Arthur Andersen LLP
as its independent public accountants. The Board of Directors has appointed
Arthur Andersen LLP as the independent public accountants for the Company for
1995. Representatives of Arthur Andersen LLP will be present at the Annual
Meeting of Shareowners and will have the opportunity to make a statement if they
so desire. Such representatives will be available to respond to appropriate
questions from shareowners at the meeting.
SHAREOWNER PROPOSALS
- --------------------------------------------------------------------------------
Any shareowner proposal intended to be presented at the Annual Meeting in
1996 must be received by the Company on or before November 30, 1995, for
inclusion in the Company's proxy statement and form of proxy relating to that
meeting. Proposals received by that date, deemed to be proper for consideration
at the Annual Meeting and otherwise conforming to the rules of the Securities
and Exchange Commission, will be included in the 1996 proxy statement.
LOCATION OF NATIONAL COWBOY HALL OF FAME
- --------------------------------------------------------------------------------
[MAP]
15
<PAGE> 19
OG&E [LOGO] OKLAHOMA GAS AND ELECTRIC COMPANY
Annual Meeting of Shareowners
May 18, 1995
P The undersigned hereby appoints James G. Harlow, Jr., Herbert H.
Champlin, and Bill Swisher, and each of them severally, with full power of
substitution and with full power to act with or without the other, as the
proxies of the undersigned to represent and to vote all shares of stock of
R Oklahoma Gas and Electric Company held of record by the undersigned on
March 20, 1995, at the Company's Annual Meeting of Shareowners to be
held on May 18, 1995, and at all adjournments thereof, on all matters
coming before said meeting.
O
THIS PROXY, WHICH IS SOLICITED BY THE BOARD OF DIRECTORS, WILL BE
VOTED AS DIRECTED. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR
THE PROPOSALS NUMBERED 1 AND 2 ON THE REVERSE SIDE OF THIS PROXY CARD.
X
------------------------------------------------------------------------
Y PLEASE MARK, DATE, SIGN AND RETURN THIS PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE. Unless you attend and vote in person, you MUST sign
and return your proxy in order to have shares voted at the meeting.
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<PAGE> 20
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<CAPTION>
PLEASE DATE AND SIGN EXACTLY AS NAME APPEARS BELOW. EACH JOINT OWNER SHOULD SIGN. ATTORNEY, EXECUTOR, ADMINISTRATOR, TRUSTEE OR
OTHERS SIGNING IN A REPRESENTATIVE CAPACITY SHOULD GIVE THEIR FULL TITLES.
<S> <C>
- ------------------------------------------------------
PROXY TOTAL COMMON SHARES PREFERRED SHARES
NUMBER INCLUDING REINVESTMENT The Board recommends a vote FOR the proposals numbered
PLAN AND CUSTOMER STOCK 1 and 2 below.
PLAN
1. Election of Directors.
- ------------------------------------------------------ NOMINEES:
James G. Harlow, Jr.; Bill Swisher; John A. Taylor
X / / 95 / /FOR all nominees / /WITHHOLD AUTHORITY
- ------------------------------------------------------ (list exceptions below). to vote for all nominees.
Signature of Shareowner Date
--------------------------------------------------------------
X / / 95 Instruction: To withhold authority to vote for any individual
- ------------------------------------------------------ nominee, write that nominee's name on the line above.
Signature of Shareowner Date
2. Proposal to amend Restated Certificate of Incorporation
removing limits on unsecured indebtedness.
/ /For / /Against / /Abstain
3. In their discretion, the proxies are authorized to vote
upon such other business as may properly come before the
meeting.
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