<PAGE> 1
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:
<TABLE>
<S> <C>
/X/ Preliminary Proxy Statement
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
ORANGE & ROCKLAND UTILITES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
ORANGE & ROCKLAND UTILITES, INC.
- --------------------------------------------------------------------------------
(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).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
Set forth the amount on which the filing fee is calculated and state how it was
determined:
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE> 2
[Orange & Rockland Letterhead]
March 8, 1996
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders of
Orange and Rockland Utilities, Inc. to be held in the auditorium of the
Company's Operations Center, 390 West Route 59, Spring Valley, New York, on
Wednesday, April 10, 1996, at 10:30 A.M.
As always, your management looks forward to the Annual Meeting as an
opportunity to report to you with regard to all matters, and to hear your
comments and suggestions, which in the past have often proved valuable. If you
plan to attend the meeting, please mark the box provided on the enclosed proxy
card.
The vote of every shareholder is important. Whether or not you plan to
attend the meeting, please fill in, date, sign and return your proxy promptly.
Returning your completed proxy will not prevent you from voting in person at the
meeting if you wish to do so.
Sincerely yours,
[Vanderhoef Signature]
H. KENT VANDERHOEF
Chairman of the Board of Directors
<PAGE> 3
ORANGE AND ROCKLAND UTILITIES, INC.
ONE BLUE HILL PLAZA
PEARL RIVER, NEW YORK 10965
------------------------
NOTICE OF ANNUAL MEETING OF COMMON SHAREHOLDERS
TO THE COMMON SHAREHOLDERS:
You are hereby notified that the Annual Meeting of Common Shareholders of
Orange and Rockland Utilities, Inc. will be held at the Company's Operations
Center located at 390 West Route 59, Spring Valley, New York, on Wednesday,
April 10, 1996, at 10:30 A.M. for the following purposes:
1. To elect four Directors.
2. To authorize the appointment of the firm of Arthur Andersen LLP as
independent public accountants for the year 1996.
3. To authorize an amendment to Article Second of the Company's Certificate
of Incorporation to increase the authorized Common Stock of the Company
to 50,000,000 shares.
4. To act on such other matters as may properly come before the meeting or
any adjournments thereof.
The enclosed form of proxy has been prepared at the direction of the Board
of Directors of the Company and is sent to you at its request. The persons named
in said proxy have been designated by the Board of Directors.
IF YOU DO NOT EXPECT TO BE PRESENT PERSONALLY AND YOU WISH YOUR SHARES VOTED AT
THE MEETING, PLEASE SIGN, DATE AND RETURN THE PROXY BY MAIL IN THE POSTAGE-PAID
ENVELOPE SENT YOU HEREWITH FOR THAT PURPOSE. IF YOU LATER FIND THAT YOU CAN BE
PRESENT OR FOR ANY OTHER REASON DESIRE TO REVOKE OR CHANGE YOUR PROXY, YOU MAY
DO SO AT ANY TIME BEFORE IT IS VOTED.
The Board of Directors has fixed the close of business on March 1, 1996 as
the time when shareholders entitled to notice of and to vote at such meeting
shall be determined and all persons who are holders of record of Common Stock at
such time, and no others, shall be entitled to notice of and to vote at such
meeting and any adjournments thereof.
At the meeting of the Board of Directors held on June 29, 1995, the
Company's By-Laws were amended as follows: (a) Section 2.1 of Article II was
amended to allow the Board of Directors to set the date of the annual meeting of
shareholders, and (b) Section 3.16 of Article III was added to provide
procedures for shareholders to nominate directors to the Company's Board of
Directors. Amended Section 2.1 and new Section 3.16 are set forth in Schedule A
to this Notice.
By Order of the Board of Directors,
H. KENT VANDERHOEF
Chairman of the Board of Directors
G. D. CALIENDO
Vice President, General Counsel
and Secretary
March 8, 1996
<PAGE> 4
SCHEDULE A
Section 2.1 of the Company's By-Laws was amended to read in its entirety as
follows:
SECTION 2.1. Annual Meetings. An annual meeting of shareholders to elect
directors and transact such other business as may properly be presented to the
meeting shall be held on such date of each year and at such time as the Board of
Directors shall fix.
Section 3.16 was added to the Company's By-Laws and reads in its entirety
as follows:
SECTION 3.16. Nomination of Directors. (a) Only persons who are nominated
in accordance with the following procedures shall be eligible for election as
directors of the Corporation except as may be otherwise expressly provided in
the Restated Certificate of Incorporation of the Corporation with respect to the
right of holders of Cumulative Preferred Stock and Preference Stock to nominate
and elect a specified number of directors in certain circumstances. Nominations
of persons for election to the Board of Directors may be made at any annual
meeting of shareholders (i) by or at the direction of the Board of Directors (or
any duly authorized committee thereof) or (ii) by any shareholder of the
Corporation (1) who is a shareholder of record on the date of the giving of the
notice provided for in this Section 3.16 and on the record date for the
determination of shareholders entitled to vote at such annual meeting and (2)
who complies with the notice procedures set forth in this Section 3.16.
(b) In addition to any other applicable requirements, for a nomination to
be made by a shareholder, such shareholder must have given timely notice thereof
in proper written form to the Secretary of the Corporation.
(c) To be timely, a shareholder's notice to the Secretary pursuant to this
Section 3.16 must be delivered to or mailed and received at the principal
executive offices of the Corporation not less than 90 days nor more than 120
days prior to the date of the annual meeting of shareholders; provided, however,
that in the event that less than 100 days' notice of the date of the annual
meeting is given to shareholders or there is less than 100 days' prior public
disclosure of the date of the annual meeting, notice by the shareholder to be
timely must be so received not later than the close of business on the tenth day
following the day on which such notice of the date of the annual meeting was
mailed or such public disclosure of the date of the annual meeting was made,
whichever first occurs.
(d) To be in proper written form, a shareholder's notice to the Secretary
must set forth (i) as to each person whom the shareholder proposes to nominate
for election as a director (1) the name, age, business address and residence
address of the person, (2) the principal occupation or employment of the person,
(3) the class or series and number of shares of capital stock of the Corporation
that are owned beneficially or of record by the person and (4) any other
information relating to the person that would be required to be disclosed in a
proxy statement or other filings required to be made in connection with
solicitations of proxies for election of directors pursuant to Section 14 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules
and regulations promulgated thereunder; and (ii) as to the shareholder giving
the notice (1) the name and record address of such shareholder, (2) the class or
series and number of shares of capital stock of the Corporation that are owned
beneficially or of record by such shareholder, (3) a description of all
arrangements or understandings between such shareholder and each proposed
nominee and any other person or persons (including their names) pursuant to
which the nomination(s) are to be made by such shareholder, (4) a representation
that such shareholder intends to appear in person or by proxy at the meeting to
nominate the persons named in its notice and (5) any other information relating
to such shareholder that would be required to be disclosed in a proxy statement
or other filings required to be made in connection with solicitations of proxies
for election of directors pursuant to Section 14 of the Exchange Act and the
rules and regulations promulgated thereunder. Such notice must be accompanied by
a written consent of each proposed nominee to being named as a nominee and to
serve as a director if elected.
(e) No person shall be eligible for election as a director of the
Corporation unless nominated in accordance with the procedures set forth in this
Section 3.16. If the Chairman of the meeting determines that a nomination was
not made in accordance with the foregoing procedures, the Chairman shall declare
to the meeting that the nomination was defective and such defective nomination
shall be disregarded.
<PAGE> 5
ORANGE AND ROCKLAND UTILITIES, INC.
ONE BLUE HILL PLAZA
PEARL RIVER, NEW YORK 10965
March 8, 1996
PROXY STATEMENT
ANNUAL MEETING OF COMMON SHAREHOLDERS, APRIL 10, 1996
This proxy statement is furnished in connection with the solicitation by
the Board of Directors of proxies in the accompanying form for use at the 1996
Annual Meeting of Common Shareholders of Orange and Rockland Utilities, Inc.
("Company") and any and all adjournments thereof. Each proxy may be revoked at
any time before its exercise. Every properly signed proxy will be voted unless
previously revoked. A shareholder may revoke his proxy at any time before it is
voted by filing with the Company a written revocation or a duly executed proxy
bearing a later date. A shareholder attending the meeting in person may revoke
his proxy and vote in person if he desires to do so, but attendance at the
meeting will not itself revoke his proxy. Every properly signed proxy will be
voted (or not voted) in accordance with the shareholder's specifications thereon
and will be voted as recommended by the Board of Directors if no instructions
are indicated. Should any matter other than as indicated herein properly come
before the meeting for a vote (including any proposed adjournment), the persons
designated as proxies will vote thereon in accordance with their best judgment.
The annual report of the Company for the year 1995 containing financial
statements, which is not a part of this proxy statement, was mailed to
shareholders commencing February 23, 1996.
The voting securities of the Company issued and outstanding on March 1,
1996 consisted of shares of Common Stock, par value $5 per share
("Common Stock"), entitling the holders thereof to one vote per share. Holders
of Common Stock of record at the close of business on that date are entitled to
notice of and to vote at the Annual Meeting and any adjournments thereof.
IF A SHAREHOLDER PARTICIPATES IN A DIVIDEND REINVESTMENT AND STOCK PURCHASE
PLAN, ANY PROXY GIVEN BY SUCH SHAREHOLDER WILL ALSO GOVERN THE VOTING OF ALL
FULL SHARES OF COMMON STOCK HELD FOR THE SHAREHOLDER'S ACCOUNT UNDER SUCH PLAN,
UNLESS CONTRARY INSTRUCTIONS ARE RECEIVED.
A majority of the votes entitled to be cast at the Annual Meeting
constitutes a quorum. Abstentions, votes withheld from Director nominees and
broker non-votes will be included in determining whether a quorum is present.
The election of Director nominees requires a plurality of the votes cast.
Each other matter presented to the shareholders requires the affirmative vote of
a majority of the votes cast at the Annual Meeting, except the proposal to amend
the Company's Certificate of Incorporation to approve an increase in the amount
of Common Stock authorized (the "Common Stock Proposal") which requires the
affirmative vote of a majority of all shares of Common Stock of the Company
entitled to vote at the Annual Meeting. Abstentions, votes withheld from
Director nominees and broker non-votes will generally not be included in
determining the number of votes cast on a matter. However, because the Common
Stock Proposal requires approval of a majority of all shares of Common Stock
entitled to vote at the Annual Meeting, abstentions and broker non-votes with
respect to the Common Stock Proposal have the same legal effect as a vote
against the Common Stock Proposal.
<PAGE> 6
1. ELECTION OF DIRECTORS
Under the Company's Certificate of Incorporation and By-Laws, the members
of the Board of Directors are classified into three classes, one of which is
elected at each annual meeting of common shareholders to hold office for a
three-year term until successors of such class are elected and qualified. There
are currently ten Directors. At the 1996 Annual Meeting four Directors are to be
elected, three of whom shall be members of the class of 1999 and one of whom
shall be a member of the class of 1997.
The Board of Directors has designated Jon F. Hanson as a nominee for a
one-year term expiring at the 1997 Annual Meeting of Shareholders and Ralph M.
Baruch, Michael J. Del Giudice and Frederic V. Salerno as nominees for election
as Directors for three-year terms expiring at the 1999 Annual Meeting of
Shareholders. All nominees are presently Directors of the Company. Mr. Hanson
was elected to the Board of Directors on September 7, 1995 to fill a
newly-created directorship. Mr. Hanson's election became effective on December
4, 1995 upon receipt of Federal Energy Regulatory Commission approval, which was
required under the terms of the Federal Power Act. Mr. Baruch and Mr. Del
Giudice were each elected as members of the class of 1996 at the 1993 annual
meeting. Mr. Salerno was elected as a member of the class of 1996 at the 1995
annual meeting.
The persons named in the enclosed form of proxy, or their substitutes, will
vote, unless otherwise specified, shares represented by executed proxies for the
election as Directors of each of the four nominees. In the event that, due to
unforeseen circumstances, any nominee is unable to serve, the persons named in
the form of proxy, or their substitutes, may vote in their discretion for a
substituted nominee. The Board of Directors has no reason to believe that any
nominee will be unable to serve.
Shown below as to each nominee and each Director continuing in office is
the person's age as of February 1, 1996, business experience for the past five
years, membership on committees of the Board of Directors of the Company, as
applicable, and period of service as a Director of the Company.
NOMINEES FOR ELECTION AS DIRECTORS
ONE-YEAR TERM EXPIRING IN 1997
<TABLE>
<S> <C>
[Hanson Picture] JON F. HANSON, AGE 59, DIRECTOR SINCE SEPTEMBER 1995
Chairman, Hampshire Management Company, Hackensack,
New Jersey, a real estate investment and management
firm, since 1976.
Director, Prudential Insurance Company of America,
United Water Resources, Inc. and Neuman Distributors,
Inc.
Trustee, Prudential Foundation. Member of the Board of
Governors, Hackensack Medical Center. Chairman, The
National Football Foundation and College Football Hall
of Fame, Inc.
</TABLE>
2
<PAGE> 7
THREE-YEAR TERM EXPIRING IN 1999
<TABLE>
<C> <S>
Photo of Ralph M. RALPH M. BARUCH, AGE 72, DIRECTOR SINCE 1983
Baruch Consultant to Viacom International, Inc. ("Viacom"),
New York, New York, a diversified communications and
entertainment company, since 1987.
Mr. Baruch was President of Ralph M. Baruch, Inc., a
communications consulting firm, from 1987 to 1992.
Mr. Baruch was the founder of Viacom and served as
Viacom's Chief Executive Officer from 1971 to 1983 and
its Chairman of the Board of Directors from 1983 to
1987. Mr. Baruch was a Senior Fellow, Gannett Center
for Media Studies at Columbia University from 1987
until 1988.
Director, General Wireless Inc. and Visendus Inc.
Trustee, Carnegie Hall, Lenox Hill Hospital and
National Academy of Cable Programming. Member, New
York City Advisory Commission for Cultural Affairs.
Member, Compensation Committee and Executive
Committee.
Photo of Michael J. MICHAEL J. DEL GIUDICE, AGE 53, DIRECTOR SINCE 1988
Del Giudice Investment Banker, Lazard Freres & Co., LLC, New York,
New York, an investment banking firm. Managing
Director since 1987.
Member, Board of Trustees, The City University of New
York. Chairman, Hudson River Park Conservancy.
Chairman, Governor's Committee on Scholastic
Achievement.
Chairman, Audit Committee and Member, Executive Com-
mittee.
FREDERIC V. SALERNO, AGE 52, DIRECTOR SINCE FEBRUARY
Photo of Frederic 1995
V. Salerno Vice-Chairman -- Finance and Business Development and
a member of the Board of Directors of NYNEX
Corporation, New York, New York, a telecommunications
company, since 1991. President and Chief Executive
Officer of New York Telephone Company from 1987 to
1991.
Director, Avnet Inc., The Bear Stearns Companies Inc.,
Viacom Inc., Avenor Inc., Telecom Asia Corp. and
Orient Telephone and Telegraph. Chairman of the Board
of Directors, Bell Atlantic NYNEX Mobile.
Member, World Telecommunications Advisory Council of
the International Telecommunication Union.
Chairman of the Board of Trustees, State University of
New York. Trustee, Inner-City Scholarship Fund and
Local Initiatives Support Corporation.
Member, Audit Committee.
</TABLE>
3
<PAGE> 8
MEMBERS OF THE BOARD OF DIRECTORS CONTINUING IN OFFICE
TERM EXPIRING IN 1997
<TABLE>
<S> <C>
[Creamer Picture] J. FLETCHER CREAMER, AGE 69, DIRECTOR SINCE 1987
Chairman of the Board of Directors, J. Fletcher
Creamer & Son, Inc., Hackensack, New Jersey, a
construction company.
Commissioner, Palisades Interstate Park Commission.
Trustee, Hackensack Medical Center and 200 Club of
Bergen County. Director, Commerce and Industry
Association of Northern New Jersey and the New Jersey
Alliance for Action.
Member, Compensation Committee.
[McPherson Picture] KENNETH D. MCPHERSON, AGE 61, DIRECTOR SINCE 1993
Senior Partner, Waters, McPherson, McNeill, P.C.,
Secaucus, New Jersey, a law firm, since 1963.
Director, Rockland Electric Company ("Rockland
Electric"), a utility subsidiary of the Company, since
April 1995.
Commissioner, Port Authority of New York and New
Jersey, 1981 - 1983.
Member, Hudson County Bar Association, New Jersey
State Bar Association and American Bar Association.
Member, Compensation Committee.
[Taliaferro Picture] LINDA C. TALIAFERRO, AGE 48, DIRECTOR SINCE 1990
Member, Taliaferro & Associates, Harrisburg and
Philadelphia, Pennsylvania, established in 1991.
Ms. Taliaferro was a partner in the law firm of Reed
Smith Shaw & McClay, Harrisburg, Pennsylvania from
1988 to 1991.
Ms. Taliaferro was a Commissioner of the Pennsylvania
Public Utilities Commission from 1979 until 1988, and
served as its Chair from 1983 until 1987.
Director, Pike County Light & Power Company ("Pike"),
a utility subsidiary of the Company, since April 1995.
Member, American Bar Association, National Bar
Association, American Association of Blacks in Energy
and the Urban League of Washington, DC, 1992-1995.
Director, Resources of the Future, Washington, DC. Pro
bono Counsel to the Interfaith Coalition on Energy of
Philadelphia.
Member, Audit Committee.
</TABLE>
4
<PAGE> 9
THREE-YEAR TERM EXPIRING IN 1998
<TABLE>
<C> <S>
LOGO JAMES F. O'GRADY, JR., AGE 68, DIRECTOR SINCE 1980
President, O'Grady and Associates, Goshen, New York, a
media brokerage and consulting firm he founded in
1986.
Director, SFX Broadcasting, Inc., Video for Broadcast,
Inc. and The Insurance Broadcast System, Inc. Vice
President, Allcom Marketing Corp., Goshen, New York,
since 1987.
Mr. O'Grady, an attorney, has been Of Counsel to the
law firm of Cahill & Cahill, Brooklyn, New York, since
1986.
Trustee, St. John's University. Honorary Director,
Horton Memorial Hospital. Director, Coalition for
Lithuanian Development. Chairperson, Communications
Advisory Council for Marist College. Member,
Communication Arts Advisory Council of St. John's
University.
Chairman, Compensation Committee and Member, Executive
Committee.
LOGO D. LOUIS PEOPLES, AGE 55, DIRECTOR SINCE 1994
Vice Chairman of the Board of Directors and Chief
Executive Officer of the Company, Pearl River, New
York, and of Rockland Electric and Pike since July
1994.
Mr. Peoples was Executive Vice President and a member
of the Board of Directors of Madison Gas and Electric
Company, Madison, Wisconsin, an investor-owned
electric and gas utility, from 1992 to 1993. He was
Senior Vice President of RCG/Hagler, Bailly, Inc., San
Francisco, California, a management consulting firm
specializing in energy and environmental affairs, from
1991 to 1992, and was Senior Vice President and a
member of the Board of Directors of the Nuclear
Services Division of Tenera, L.P., Berkeley,
California, a consulting firm specializing in nuclear
power regulatory and management issues, from 1990 to
1991. Mr. Peoples was a Vice President of Bechtel
Power Corporation, San Francisco, California, an
international engineering-construction firm, from 1981
to 1990.
Vice Chairman, New York Power Pool. Director, The
Energy Association of New York State and Empire State
Electric Energy Research Corporation. Director,
Rockland Economic Development Corporation. Executive
Vice President, Boy Scouts of America -- Hudson Valley
Council.
Member, Executive Committee.
</TABLE>
5
<PAGE> 10
<TABLE>
<C> <S>
LOGO H. KENT VANDERHOEF, AGE 73, DIRECTOR SINCE 1976
Chairman of the Board of Directors of the Company,
Pearl River, New York since July 1994 and of Rockland
Electric and Pike since March 1994.
Mr. Vanderhoef was acting Chairman of the Board of
Directors of the Company from October 1993 to July
1994.
Chairman, Executive Committee and Member, Audit Com-
mittee.
</TABLE>
During 1995 the Board of Directors held 13 meetings. In addition, the
following Committees of the Board of Directors held the following meetings: the
Audit Committee held 6 meetings; the Compensation Committee held 9 meetings; and
the Executive Committee held 4 meetings.
The Audit Committee, composed of outside Directors, assists the Board of
Directors in fulfilling its oversight responsibilities by reviewing the
financial information to be provided to shareholders and others, the systems of
internal controls which management and the Board of Directors have established,
and the audit process. The Audit Committee is also responsible for oversight of
the Company's ethics program. The Compensation Committee, also composed of
outside Directors, reviews and recommends to the Board of Directors compensation
levels of all Company executive officers and designates participants,
establishes award opportunities and approves incentive awards to participants
under the Company's performance incentive program (as described below).
The Executive Committee of the Board of Directors acts as the Nominating
Committee. It evaluates candidates for nomination to the Board of Directors and
aids in attracting qualified candidates. The Executive Committee will consider
the names of qualified persons recommended in writing by shareholders.
Shareholders wishing to recommend a candidate to the Board of Directors for
nomination to the Board of Directors should submit the name, qualifications and
a written consent of the candidate to the Secretary of the Company, G. D.
Caliendo. Such submissions will be accepted at any time and will be considered
when vacancies occur.
COMPENSATION OF DIRECTORS
Directors who are not current or former officers of the Company or its
subsidiaries each are paid an annual retainer of $20,000 and a fee of $900 for
each meeting of the Board of Directors such Director attends, except that the
Chairman of the Board of Directors is paid a fee of $1,800 for each such meeting
attended. Each such Director is also paid a fee for each Committee meeting
attended in the amount of $700 if the Committee meeting is held on the same day
as a meeting of the Board of Directors, or $800 if held on a separate day, and
is entitled to compensation of $900 per day for each full day or major portion
of a day spent on the business of the Board or a Committee on days other than
days of Board or Committee meetings, plus reimbursement for out-of-pocket
expenses. Pursuant to a deferred compensation plan for non-employee Directors, a
Director may elect to defer receipt of all or part of his or her compensation
for services as a Director. The Company will credit the amount of such deferred
compensation to an interest-bearing account. Amounts credited to the
interest-bearing account accrue interest at a rate equal to the Company's
allowable rate of return in effect from time to time as set by the Department of
Public Service of the State of New York, compounded quarterly. The Company will
pay to the Director in cash the value of such accounts at such times, at or
following termination of the Director's service, as the Director may have
previously elected, except that the account will be paid out automatically in
the event of a change in control of the Company and in certain other
circumstances.
The Company has a Post-Director Service Retainer Continuation Program
("Program") for non-employee Directors. To be eligible for the Program, a
Director must have served on the Board of Directors for a period of at least
five years ("Eligible Director"). The Program provides for the continuation to
the Eligible Director of the annual Board service retainer and any annual
Committee service retainer for a period equal to the Eligible Director's years
of service on the Board. Payments commence (i) if the Eligible Director is
living,
6
<PAGE> 11
as of the later of the Eligible Director's attaining age 65 or ceasing to be a
member of the Board or (ii) in the case of the death of an Eligible Director
prior to the commencement of payments, following the 65th anniversary of the
Director's birth. Under the Company's By-Laws, a Director cannot be 70 years of
age or older upon election, except those Directors elected on or before April
11, 1990 and who were 60 years of age or older on that date cannot be 75 years
of age or older upon election. In the event of a change in control of the
Company, a Director's benefits would vest and be paid in a lump sum cash amount
equal to the present value of the payments that would otherwise have been made.
MANAGEMENT'S CARRIED INTEREST IN COMPANY STOCK
The following table shows, as of March 1, 1996, all of the Company's Common
Stock owned beneficially by each Director and each executive officer (including
one employee who is not an officer but performs policy-making functions) named
in the Summary Compensation Table ("named executive officers"), all Common Stock
equivalents held by the named individuals under compensation plan arrangements
and the total shares represented. Common Stock holdings of all Directors and
executive officers, including named executive officers, as a group are also
shown.
[Common Shares owned Beneficially are as of 1-31-95. Will need to update.]
<TABLE>
<CAPTION>
COMMON SHARE EQUIVALENTS
SHARES OWNED UNDER COMPENSATION TOTAL SHARES
NAME BENEFICIALLY(1)(2) PLAN ARRANGEMENTS(3) REPRESENTED(4)
------------------------ --------------------- ----------------------- --------------
<S> <C> <C> <C>
Ralph M. Baruch 4,612 0 4,612
Robert J. Biederman 0 2,375 2,375
G. D. Caliendo 200 2,999 3,199
J. Fletcher Creamer 6,353 0 6,353
Michael J. Del Giudice 1,000 0 1,000
R. Lee Haney 45 2,999 3,044
Jon F. Hanson 500 0 500
Kenneth D. McPherson 1,000 0 1,000
James F. O'Grady, Jr. 1,000 0 1,000
D. Louis Peoples 611 7,999 8,610
Frederic V. Salerno 500 0 500
Linda C. Taliaferro 261 0 261
Vincent R. Tummarello 601 1,700 2,301
H. Kent Vanderhoef 2,572 0 2,572
18 Directors and
executive officers as
a group
</TABLE>
- ---------------
(1) Based on information furnished to the Company by the Directors and
executive officers. Includes shares of Common Stock owned beneficially pursuant
to the Company's Management Employees' Savings Plan through December 31, 1995,
the latest date for which such information is available.
(2) As of March 1, 1996, no Director owned beneficially more than % of
the outstanding shares of Common Stock, no named executive officer owned more
than % of such shares, and Directors and executive officers as a group
owned % of such shares.
(3) This column shows the named individuals' Performance Share Units
("PSUs", as described below), which are "non-voting interests", accounted for as
units of Common Stock pursuant to the Long-Term Performance Share Unit Plan
(described below). The number of PSUs shown is an aggregate of PSUs earned for
the 1995 transitional performance period and PSUs granted for the 1995-96 and
1995-97 transitional performance periods. This column indicates the alignment of
the named individuals' financial interests with the interests of the Company's
shareholders because the value of their total holdings will increase or decrease
in line with the price of the Company's Common Stock as well as dividends paid
on the Common Stock.
(4) This column shows the named individuals' total stock-based holdings,
including the voting securities shown in the first column (as described in
footnotes 1 and 2), plus non-voting interests shown in the second column (as
described in footnote 3).
7
<PAGE> 12
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
Directors and executive officers to file with the Securities and Exchange
Commission ("SEC") reports on Forms 3, 4 and 5 disclosing ownership and changes
in ownership of Company stock. The Directors and executive officers are also
required to furnish the Company with copies of all Forms 3, 4 and 5 they file.
Based solely on the Company's review of the copies of reports furnished to
it or written representations of certain Directors and executive officers that
no reports were required with respect to their beneficial ownership of Company
stock during fiscal year 1995, the Company believes that during its 1995 fiscal
year all Section 16(a) filing requirements applicable to its Directors and
executive officers were complied with except that a transaction involving the
gift of one share of Company stock was reported late on a Form 5 filing by
George V. Bubolo, Jr., Director, Engineering and System Operations.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Company's compensation program for executive officers is established
and administered by the Compensation Committee of the Board of Directors. All
members of the Compensation Committee are independent, non-employee Directors
who are not eligible to participate in any part of the executive officer
compensation program.
In 1995, the Compensation Committee, working with independent compensation
consultants retained by it, implemented an executive officer compensation
program designed to:
- Establish compensation which is competitive with the practices of
Northeastern Peer Utilities (defined below);
- Provide a strong and direct link between executive pay and Company
performance on behalf of its shareholders and customers;
- Compensate executive officers for their successful long-term strategic
management of the Company; and
- Base actual compensation on the achievement of the Company's annual
goals, long-term strategic objectives, and performance relative to
National Comparison Utilities (defined below).
COMPENSATION PHILOSOPHY
The executive compensation program, as restructured in 1995, has been
aligned with the Company's vision and long-term operating objectives, in a
manner consistent with the objectives cited above, so as to strengthen the
linkage between executive officer compensation and shareholder value and
customer service by placing increased emphasis on performance incentives and
less on salary increases.
SALARY AND PERFORMANCE INCENTIVES
The Company's executive officer compensation program has three principal
components:
- Base Salary: Executive officer salaries are administered relative to
position rates which, at each grade level, represent the 50th percentile
of Northeastern Peer Utilities practice.
- Annual Team Incentive Plan: Incentive payments are currently based on a
formula giving equal weight to the Company's annual earnings per share,
management of operating and maintenance budgets, changes in the Company's
retail prices as compared to Regional Peer Utilities (defined below) and
the accomplishment of department-specific operating objectives such as
cost management, efficiency, productivity, safety and customer service.
- Long-Term Performance Share Unit Plan: Executive officers (and certain
key employees) are provided with the opportunity to earn cash and stock
payments (subject to the receipt of necessary approvals), at the end of a
three-year period, based on the Company's three-year earnings per share
8
<PAGE> 13
performance, measured relative to the Company's budget, and its
three-year total shareholder return (stock price appreciation plus
dividends), measured relative to National Comparison Utilities.
In order to establish total compensation as well as criteria for incentive
payments to be awarded under the Annual Team Incentive Plan and the Long-Term
Performance Share Unit Plan, three different utility peer groups are used for
comparison purposes. For purposes of determining the competitiveness of total
compensation for executive officers, a comparison group of 22 Northeastern peer
utilities ("Northeastern Peer Utilities") is used. In order to determine
payments under the Annual Team Incentive Plan, comparisons of pre-established
criteria are made to 20 regional peer utilities ("Regional Peer Utilities"), and
for the Long-Term Performance Share Unit Plan, comparisons are made to 18
national comparison utilities ("National Comparison Utilities").
Executive officer annual and long-term incentive opportunities are
configured so that total compensation approximates the 60th percentile of
Northeastern Peer Utilities practice, when targeted results are achieved, and
falls at or above 75th percentile levels when maximum awards are earned. Under
the executive officer compensation program, the competitiveness of salary ranges
and annual and long-term incentive award opportunities are evaluated annually
relative to the practices of Northeastern Peer Utilities as set forth in
compensation surveys prepared by the Edison Electric Institute, an electric
utility industry trade group (which also includes other combination gas and
electric companies).
The Northeastern Peer Utilities used for pay comparisons are a narrower
group of electric and gas utilities than in the Standard & Poor's Utilities
Index referenced in the performance graph on page 13 and, in addition, are a
different group of utilities than those used for pay comparison for 1994.
However, the Compensation Committee believes that the current Northeastern Peer
Utilities group more appropriately represents the competitive marketplace for
qualified executives and further believes that these utilities are
representative of the industry.
SALARY STRUCTURE AND SALARY INCREASES
Salary ranges comprise a minimum and a position rate. The position rate, at
each grade level, has been targeted to approximate the 50th percentile of
Northeastern Peer Utilities practice.
Commencing with merit salary adjustments effective March 1, 1996, no
executive officer received a salary increase which would have positioned the
officer's salary above the prevailing position rate of the grade to which the
position has been assigned. Any merit increase which would have caused the
officer's salary to exceed the position rate was paid in a lump sum.
ANNUAL TEAM INCENTIVE PLAN
Annual Team Incentive Plan ("Incentive Plan") target award opportunities
for executive officers for 1995 ranged from 25% to 45% of base salary at
December 31, 1995. The Incentive Plan has been structured so that maximum awards
cannot exceed 150% of target award opportunities.
Incentive Plan performance for 1995 was evaluated using four equally
weighted shareholder, customer, management and departmental performance
measures:
- Shareholder Measure: Earnings per share as against pre-established
threshold, target and outstanding levels. The chief executive officer,
chief financial officer and chief legal officer are evaluated on Company
earnings per share results. All other executive officers are measured on
utility earnings per share results. The Compensation Committee has
discretion to adjust earnings per share results for one-time,
non-operating gains or losses such as those resulting from accounting
changes, asset sales, early retirement/severance programs, investigation
related expenses and other extraordinary expenses. The Committee in an
exercise of this discretion adjusted the earnings per share measurement
by excluding the effects of the costs associated with the investigation
involving former officers and others.
- Customer Measure: The change in the Company's electric and gas retail
price ranking as compared to Regional Peer Utilities, with the objective
of reducing prices to the Company's customers.
9
<PAGE> 14
- Management Measure: Operating and maintenance expenditures as compared to
pre-established standards.
- Departmental Measure: Efficiency and productivity enhancements specific
to each division within the Company. The chief executive officer, chief
financial officer and chief legal officer are evaluated on the average
results of the divisions (weighted by number of participants). All other
executive officers are measured on results within their respective
divisions.
The Compensation Committee may, at its discretion and in consultation with the
Chief Executive Officer, adjust Incentive Plan awards plus or minus 25% to
reflect strategic and other factors affecting business operations and results.
During 1995, each of the shareholder customer and management measures was
achieved at 120% of targeted levels and departmental measures were achieved at
88 to 120% of targeted levels. The average of these factors combined to result
in awards ranging from 112 to 120% of targeted levels.
LONG-TERM PERFORMANCE SHARE UNIT PLAN
Participation
Designated executive officers (and certain key employees) participate in a
new Performance Share Unit Plan ("PSU Plan"), which became effective January 1,
1995. Participants were selected based on an evaluation of their position's
long-term strategic performance impact and influence on shareholder value --
i.e., future stock price appreciation and annual dividend payments.
PSU Grants
Under the PSU Plan, the Compensation Committee makes grants of performance
share units ("PSUs") to designated participants at the start of each year for a
three-year performance period. The size of these grants is based on the results
of the annual competitive compensation program evaluation. The number of PSUs
earned are based on the Company's performance during the ensuing three years
(i.e., the performance period) measured relative to pre-established performance
criteria. PSU Plan participants in the first three-year performance period
(1995-97) also received PSU grants for one- and two-year transitional
performance periods (i.e., 1995 and 1995-96) equal to one-third and two-thirds
of the three-year PSU grants.
Each PSU has a value equal to one share of the Company's Common Stock. The
maximum number of PSUs that can be earned with respect to the 1995-97
performance period and the 1995 and 1995-96 transitional periods is 150% of the
number of PSUs granted plus the value of dividend equivalents that have
accumulated during the performance period and are deemed to be reinvested in
additional PSUs. These dividend equivalent PSUs are calculated by multiplying
the number of PSUs granted by the dividend payments made during the performance
period on a share of Common Stock and dividing the resultant amounts by the
closing stock price on the date the dividends were paid. Dividend equivalent
PSUs are also credited with dividend equivalent PSUs during the performance
period.
Determinations Regarding Earning and Payment of PSUs
PSUs are earned based on two equally weighted performance criteria:
- Average annual total shareholder return (stock price appreciation plus
dividends) as compared to National Comparison Utilities using
pre-established ranking criteria.
- Earnings per share as compared to pre-established threshold, target and
maximum levels.
As soon as practicable following the close of a performance period
(including transitional periods), the Company's performance will be evaluated by
the Compensation Committee in consultation with its independent compensation
consultant relative to applicable pre-established performance criteria, and the
number of PSUs (and associated dividend equivalent PSUs) earned will be
determined for each participant.
The PSU Plan was designed to align management and shareholder financial
interests. The Plan accordingly provides for payment of PSUs earned to be made,
at the discretion of the Compensation
10
<PAGE> 15
Committee, in mandatorily deferred share units payable in cash at a specified
future date or dates; in cash or, subject to receipt of necessary shareholder
and other approvals, in shares of the Company's Common Stock; or in a
combination of such payment forms. Transitional (i.e., one- and two-year) PSU
awards that have been earned will be paid at the end of the first full
three-year performance period. Participants may also voluntarily elect to defer
payment of earned PSU awards that were otherwise payable in cash or shares. Such
deferrals will be credited in share units until such date or dates as the
participant elected at the time the deferred PSU payment election was made. PSU
payments deferred in share units, whether at the discretion of the Compensation
Committee or at the election of the participants, will be credited with
dividends which will be deemed reinvested in additional deferred share units
payable at the same time or times as the deferred share units in respect of
which they were originally credited.
The cash payment value of PSUs paid at the end of three-year performance
periods, and deferred share units paid at the end of specified deferral periods,
will be based on the average price of the Company's Common Stock during the
fourth quarter of the year immediately preceding the year in which payment is
made.
For 1995 performance, PSU Plan participants earned 92.5% of the PSUs
granted with respect to the 1995 transitional performance cycle. These earned
PSUs will be paid in early 1998 (when the 1995-96 and first full three-year
performance period awards that have been earned will also be paid).
CHIEF EXECUTIVE OFFICER COMPENSATION
The salary of Mr. Peoples, as Vice Chairman of the Board of Directors and
Chief Executive Officer of the Company, is based on a position rate that
approximates the 50th percentile for chief executive officers at Northeastern
Peer Utilities. Mr. Peoples' actual 1995 salary is still below the 50th
percentile of that group.
As a result of the Company's aforementioned performance in 1995 compared
with the Northeastern Peer Utilities, Mr. Peoples' annual compensation (salary
plus annual bonus) was above median levels. Since a substantial amount of Mr.
Peoples' total compensation is dependent upon the achievement of annual and
long-term incentive performance objectives, his total compensation is highly
performance-based.
Mr. Peoples' Incentive Plan award for 1995 was based, as described above,
on the Company's 1995 performance at 116.25% of target. The earning of Mr.
Peoples' PSU Plan award for the 1995 transitional performance period was based
upon performance at 92.5% of target. Mr. Peoples' attainment of the two-year
transitional period and 1995-1997 long-term performance criteria cannot be
determined until after 1996 and 1997, respectively.
POLICY WITH RESPECT TO SECTION 162(M)
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), provides that, unless an appropriate exemption applies, a tax deduction
for the Company for compensation of certain executive officers named in the
Summary Compensation Table will not be allowed to the extent such compensation
in any taxable year exceeds $1 million. As no executive officer of the Company
received compensation during the 1995 fiscal year approaching $1 million, the
Company has not developed an executive compensation policy with respect to
qualifying compensation paid to its executive officers for deductibility under
Section 162(m) of the Code.
COMPENSATION COMMITTEE
<TABLE>
<S> <C>
James F. O'Grady, Jr., Chairman J. Fletcher Creamer
Ralph M. Baruch Kenneth D. McPherson
</TABLE>
March 1, 1996
11
<PAGE> 16
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
James F. O'Grady, Jr., a member of the Compensation Committee, at the
request of the Board of Directors of the Company, assisted a subsidiary of the
Company in effecting the sale of the subsidiary's radio broadcasting properties.
The sale of such properties, which was completed during 1995, was for an
aggregate purchase price of approximately $6,725,000. Mr. O'Grady was paid
$79,100 with respect to such services performed during 1995.
PERFORMANCE GRAPH AND INFORMATION
Comparison of Five-Year Cumulative Total Return*
Orange and Rockland Utilities, Inc., Standard & Poor's 500 Index
and Standard & Poor's Utilities Index
<TABLE>
<CAPTION>
Measurement Period Orange and
(Fiscal Year Covered) Rockland 0 S&P 500 S&P Utilities
<S> <C> <C> <C>
1990 100.00 100.00 100.00
1991 131.85 130.47 114.62
1992 151.45 140.41 123.89
1993 156.42 154.56 141.78
1994 134.88 156.60 130.52
1995 160.33 215.45 184.20
</TABLE>
* Assumes $100 invested on December 31, 1990 and reinvestment of
dividends.
12
<PAGE> 17
SUMMARY COMPENSATION TABLE
The table below shows all compensation awarded to, earned by or paid to the
person serving as Chief Executive Officer in 1995 and the four other most highly
compensated executive officers (including one employee who is not an officer but
performed policy-making functions) of the Company for services rendered in all
capacities to the Company and its subsidiaries during the fiscal years ended
December 31, 1995, December 31, 1994 and December 31, 1993:
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
ANNUAL COMPENSATION
---------------------------------- PAYOUTS
OTHER ANNUAL ------------ ALL OTHER
SALARY BONUS COMPENSATION LTIP PAYOUTS COMPENSATION
NAME & PRINCIPAL POSITION YEAR ($) ($)(1) ($)(2) ($)(3) ($)(4)
- ----------------------------------- ----- ------- ------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
D. Louis Peoples(5) 1995 355,178 204,019 0 64,477 117,148(9)
Vice Chairman of the 1994 150,900 39,487 0 0 32,949
Board and Chief
Executive Officer
R. Lee Haney(6) 1995 198,487 95,325 0 21,713 42,080(10)
Vice President and 1994 59,830 10,530 0 0 58,977
Chief Financial Officer
G. D. Caliendo(7) 1995 158,791 86,025 0 17,856 121,259(11)
Vice President, General Counsel
and Secretary
Robert J. Biederman, Jr. 1995 157,400 62,720 0 26,831 1,739(12)
Vice President, Operations 1994 146,200 15,147 0 11,544 2,349
1993 134,500 0 0 2,751
Vincent R. Tummarello(8) 1995 138,397 899 17,856 4,022(13)
Division Vice President, 1994 117,879 8,303 0 8,172 1,416
Electric Production
</TABLE>
- ---------------
(1) Pursuant to the Incentive Plan (described in the Compensation Committee
Report on Executive Compensation) and a predecessor incentive plan, the amount
of annual awards depends upon performance relative to pre-established criteria.
No annual awards were paid for 1993.
(2) Interest in excess of 120% of the long-term federal rate, with
compounding, prescribed under Section 1274(d) of the Code, paid or payable on
compensation deferred at the executive officer's election.
(3) The LTIP Payouts shown for 1995 include PSUs earned pursuant to the PSU
Plan, which become payable in early 1998. The dollar values of PSUs earned for
1995 were calculated based on the price of the Company's Common Stock on
December 31, 1995. Also included in the LTIP Payouts shown are installments of
long-term incentive awards earned for the periods 1989-91 and 1992-94 under a
predecessor incentive plan and paid to participants in, respectively, 1994 and
1995.
(4) All Other Compensation includes (i) interest earned on long-term
incentive awards which were deferred under the terms of the predecessor
incentive plan and not at the election of the officer, (ii) term life insurance
premiums paid by the Company for the benefit of the named executive officers and
(iii) one-time payments for relocation expenses.
(5) Mr. Peoples joined the Company effective July 14, 1994 as Vice Chairman
of the Board and Chief Executive Officer.
(6) Mr. Haney joined the Company on September 8, 1994 as Vice President and
Chief Financial Officer.
(7) Mr. Caliendo joined the Company effective February 21, 1995 as Vice
President, General Counsel and Secretary.
(8) Mr. Tummarello was appointed Division Vice President, Electric
Production, on November 1, 1994.
(9) Included for Mr. Peoples is interest earned on long-term incentive
awards which were deferred under the terms of the predecessor incentive plan
($4,241), a term life insurance premium ($5,943) and relocation expenses
pursuant to the terms of his engagement by the Company ($106,964).
(10) Included for Mr. Haney is interest earned on long-term incentive
awards which were deferred under the terms of the predecessor incentive plan
($969), a term life insurance premium ($3,105) and relocation expenses pursuant
to the terms of his engagement by the Company ($38,006).
(11) Included for Mr. Caliendo is a term life insurance premium ($1,381)
and relocation expenses pursuant to the terms of his engagement by the Company
($119,878).
(12) Included for Mr. Biederman is interest earned on long-term incentive
awards which were deferred under the terms of the predecessor incentive plan.
(13) Included for Mr. Tummarello is interest earned on long-term incentive
awards which were deferred under the terms of the predecessor incentive plan.
13
<PAGE> 18
LONG-TERM INCENTIVE PLANS -- AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
ESTIMATED FUTURE
SHARE UNIT PAYMENTS
(C) ------------------------------
(B) PERFORMANCE OR
NUMBER OF SHARES, OTHER PERIOD UNTIL (D) (E) (F)
(A) UNITS OR OTHER MATURATION OR THRESHOLD TARGET MAXIMUM
NAME RIGHTS(1) PAYOUT (#) (#) (#)
- --------------------------------- ----------------- ------------------ --------- ------ -------
<S> <C> <C> <C> <C> <C>
D. Louis Peoples................. 1,333(2) 1995(2) 333 1,333 2,000
2,667 1995-96 667 2,667 4,000
4,000 1995-97 1,000 4,000 6,000
R. Lee Haney..................... 500(2) 1995(2) 125 500 750
1,000 1995-96 250 1,000 1,500
1,500 1995-97 375 1,500 2,250
G. D. Caliendo................... 500(2) 1995(2) 125 500 750
1,000 1995-96 250 1,000 1,500
1,500 1995-97 375 1,500 2,250
Robert J. Biederman, Jr.......... 375(2) 1995(2) 94 375 563
750 1995-96 188 750 1,125
1,250 1995-97 313 1,250 1,875
Vincent R. Tummarello............ 283(2) 1995(2) 71 283 425
567 1995-96 142 567 851
850 1995-97 213 850 1,275
</TABLE>
- ---------------
(1) The numbers shown in this column reflect the PSUs awarded in 1995 to each
named executive officer under the PSU Plan for the 1995 and 1995-96
transitional performance periods and for the first 1995-97 performance
period. The number of PSUs shown is exclusive of dividend equivalents which
will be credited during the performance period in additional PSUs.
(2) Pursuant to the PSU Plan, PSUs for the 1995 transitional period were earned
by the named executive officers but will not become payable until early
1998. The value of these PSUs at December 31, 1995 is disclosed in the
Summary Compensation Table under the column "LTIP Payouts".
14
<PAGE> 19
PENSION PLANS
The following table sets forth as of December 31, 1995 the estimated
aggregate annual benefit payable under the Company's non-contributory Employees'
Retirement Plan ("Retirement Plan") as well as under the Officers' Supplemental
Retirement Plan ("Supplemental Plan") to participants in the Supplemental Plan
upon retirement at age 65:
SUPPLEMENTAL PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
- ------------------------------------------------------------------------------------------------
REMUNERATION 5 10 15 20 25 30 35
- ------------ ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
100,000 20,000 40,000 50,000 60,000 62,500 65,000 67,500
125,000 25,000 50,000 62,500 75,000 78,125 81,250 84,375
150,000 30,000 60,000 75,000 90,000 93,750 97,500 101,250
175,000 35,000 70,000 87,500 105,000 109,375 113,750 118,125
200,000 40,000 80,000 100,000 120,000 125,000 130,000 135,000
225,000 45,000 90,000 112,500 135,000 140,625 146,250 151,875
250,000 50,000 100,000 125,000 150,000 156,250 162,500 168,750
300,000 60,000 120,000 150,000 180,000 187,500 195,000 202,500
400,000 80,000 160,000 200,000 240,000 250,000 260,000 270,000
450,000 90,000 180,000 225,000 270,000 281,250 292,500 303,750
500,000 100,000 200,000 250,000 300,000 312,500 325,000 337,500
</TABLE>
Compensation covered by the Retirement Plan consists of regular
compensation, which excludes any bonus, overtime, special pay or incentive
compensation. Compensation covered by the Supplemental Plan consists of regular
compensation and, in addition, for officers who have completed at least 11 years
of service, incremental portions of an amount equal to the targeted annual award
(the "Annual Award") under the Company's annual incentive plans, up to 100
percent of such amount for officers with 20 years or more of service. Directors
who are not employees of the Company are not covered by the Supplemental Plan.
Pursuant to arrangements with the Company, incremental portions of Mr. Peoples'
Annual Award, beginning with his date of election as an officer, are included in
his compensation covered by the Supplemental Plan and 100% of his Annual Award
will be included by the end of five years of service under the Supplemental
Plan. With respect to Messrs. Haney and Caliendo, upon completion of six years
of service under the Supplemental Plan, incremental portions of their Annual
Award will be included in their compensation covered by the Supplemental Plan.
With the exception of Mr. Peoples, whose pension benefit is addressed below, the
current compensation covered by the Supplemental Plan for each of the named
executive officers who is a participant in the Supplemental Plan is as follows:
Mr. Haney, $197,489; Mr. Caliendo, $185,000; and Mr. Biederman, $195,105. The
amounts shown in the Supplemental Plan Table are calculated on the basis of
years of credited service under the Supplemental Plan. The years of credited
service for each of the named executive officers who is a participant in the
Supplemental Plan is as follows: Mr. Peoples, 2 years; Mr. Haney, 4 years; Mr.
Caliendo, 2 years; and Mr. Biederman, 22 years.
The Retirement Plan provides for benefits based on modified career-average
earnings. The benefit formula is (1) an amount equal to 2% of compensation for
each year of credited service after December 31, 1987 (including two additional
years of credited service at the final rate of base pay limited to $150,000) and
(2) an additional amount equal to 1 1/2% of the annual rate of compensation as
of January 1, 1988 multiplied by the number of years of credited service prior
to that date. The Retirement Plan also provides a pension supplement of $600 per
month to employees between the ages of 60 and 62. This supplement becomes
payable on the retirement date of the individual and will remain in place until
the first of the month on or before attaining their 62nd birthday. A
participant's benefits become vested upon completion of five years of eligible
service or on reaching age 65. Benefits payable under the Retirement Plan at age
65 are reduced 1/3 of 1% for each month the participant is under 60 years of age
at the time benefits commence. However, participants may receive an unreduced
pension benefit at age 60 or between ages 55 and 60 if the sum of the
participant's age and years of service totals at least 90. Benefits under the
Retirement Plan are not subject to Social Security or any other offset amounts.
Directors who are not employees of the Company are not covered by the Retirement
Plan. In the event of a change in control of the Company, benefits would vest
immediately and could be increased to the extent there are surplus funds held
under the Retirement Plan. As of
15
<PAGE> 20
December 31, 1995, Mr. Tummarello, who is not a participant in the Supplemental
Plan, has 17 years of credited service under the Retirement Plan. His estimated
annual benefit payable under the Retirement Plan upon retirement at age 65 is
$32,436.
The Supplemental Plan is designed to provide additional retirement benefits
to officers of the Company who are participants in the Supplemental Plan and
have at least five years of service as officers. The Supplemental Plan provides
for benefits calculated by applying a percentage based on years of service to
average compensation over the three years of highest compensation, reduced by
the participant's Retirement Plan benefit. For unvested participants, benefits
would vest upon termination of employment following a change in control of the
Company. The Company has established a trust for the payment of benefits under
the Supplemental Plan. Notwithstanding the creation of the trust, the Company
continues to be primarily liable for the benefits payable under the Supplemental
Plan and will be obligated to make such payments to the extent the trust does
not.
Pursuant to agreements with the Company, Messrs. Peoples, Haney and
Caliendo became participants in the Supplemental Plan upon their appointment as
officers and are treated as having satisfied the five years of service as an
officer requirement for participation in the Supplemental Plan. Under his
agreement, Mr. Peoples' Supplemental Plan benefit percent is currently 28% of an
aggregate of his base salary and a specified percentage of his Annual Award, and
this benefit percent will increase in increments to 70% of the aggregate of his
base salary and his full Annual Award by the end of five years of service. As of
December 31, 1995, Mr. Peoples' estimated annual benefit payable under the
Supplemental Plan upon retirement at age 65 is $105,479. Under the agreements
with Messrs. Haney and Caliendo, they will receive credit under the Supplemental
Plan for two years of service for each of their first five years of service, and
their benefit formula will be calculated accordingly.
EMPLOYMENT AND SEVERANCE AGREEMENTS
The Company has entered into severance agreements with four of its named
executive officers which provide for certain payments in the event of an
involuntary termination other than for cause, or termination by the individual
for good reason, in the case of Messrs. Peoples, Haney and Caliendo, within 36
months, and in the case of Mr. Biederman, within 24 months following a change in
control of the Company. The principle benefits under the agreements entered into
with Messrs. Peoples, Haney and Caliendo consist of (i) a lump sum severance
payment equal to three times the individual's salary and average bonus, (ii) an
increase in the benefit provided under the Company's Supplemental Plan to an
amount equal to the benefit the individual would have earned thereunder had his
employment continued for three additional years, and (iii) continuation of life,
disability, accident and health insurance benefits for a period of 36 months
following such termination of employment. Under certain circumstances, the
amount payable under these agreements is reduced to avoid the imposition of any
tax under section 4999 of the Internal Revenue Code of 1986, as amended (the
"Code"). If the payments are not so reduced, an additional payment is made to
the individual to indemnify the individual for any such tax. The principal
benefits under the agreement entered into with Mr. Biederman consist of (i) a
lump-sum severance payment equal to three times his five-year average annual W-2
compensation, less one dollar, and (ii) continuation of his life, disability,
accident and health insurance benefits for a period of 24 months following such
termination of employment. Payments due under Mr. Biederman's agreement are
reduced, if necessary, in order to avoid the imposition of any tax under section
4999 of the Code. Amounts otherwise due under all of the severance agreements
are reduced to the extent of payments that the individual receives under the
Company's Severance Pay Plan (described below). The Company has established a
trust which, in the event of a change in control of the Company, will be used
for the payment of its obligations to its officers under these severance
agreements. Notwithstanding the creation of the trust, the Company continues to
be primarily liable for the compensation and benefits payable to its officers
(whether before or after any such change in control) and will be obligated to
make such payments to the extent that the trust does not.
The Company has a Severance Pay Plan ("Severance Plan") applicable to all
non-bargaining unit personnel with one or more years of service. The Severance
Plan provides eligible employees with specified severance pay upon a termination
of employment for the Company's convenience or following a change in
16
<PAGE> 21
control of the Company. An employee terminated for the convenience of the
Company or within two years after a change in control of the Company is entitled
to receive a severance payment calculated under formulas based on years of
service and salary grades, with higher benefits being paid to employees in
higher salary grades. Aggregate severance payments, which cannot exceed an
employee's annual compensation, are payable monthly at the employee's final rate
of compensation or, in the event of a change in control of the Company,
immediately. In addition, life and health insurance benefits are continued for
eligible employees following termination of employment for the severance period.
The Company maintains insurance providing for reimbursement, with certain
exclusions and deductions, to the Company for payments it makes to indemnify
directors, officers and certain other persons for losses, costs and expenses
incurred by them in actions brought against them in connection with their acts
in those capacities and to directors and officers for such losses, costs and
expenses for which they are not indemnified by the Company. In addition, such
insurance covers directors and officers and certain other persons against
certain liabilities which could arise in connection with the administration of
the Company's retirement and benefit plans. The Company's current contracts for
such insurance, which became effective May 16, 1995, are with Executive Re
Specialty Insurance Co., Columbia Casualty Co. and the Aetna Casualty and Surety
Company. The aggregate annual premium cost is $370,847.
During 1995, the Board of Directors adopted several resolutions providing
for indemnification of officers and directors following the conclusion of
several lawsuits and investigations. The proceedings that were concluded were:
- Feiner v. Orange and Rockland Utilities, Inc., a purported ratepayer
class action against the Company, Linda Winikow, others, and other
officers and directors of the Company identified only as "John Does". The
lawsuit was dismissed by the United States District Court for the
Southern District of New York for failure to state a claim. Pursuant to a
settlement at the appellate level, the Company paid $75,000 of the
plaintiff's attorneys fees and plaintiff dropped the appeal in December
1994. No finding of wrongdoing was made as to any party.
- Patents Management Corp. v. Orange and Rockland Utilities, Inc., a
shareholder derivative action against the Company, Linda Winikow, James
F. Smith, Victor J. Blanchet, Patrick J. Chambers, Ralph M. Baruch, J.
Fletcher Creamer, Frank A. McDermott, Linda C. Taliaferro, John F. White,
Richard L. Brickley, Michael J. Del Giudice, James F. O'Grady, Jr., H.
Kent Vanderhoef, Thomas A. Griffin and others. The lawsuit was settled
with the approval of the Supreme Court of the State of New York, New York
County, on February 23, 1995. Under the settlement, the Company agreed to
adopt certain remedial measures and paid $155,000 for the plaintiff's
attorneys fees. Again, no finding of wrongdoing was made as to any party.
- Gross v. Orange and Rockland Utilities, Inc. and Bernstein v. Orange and
Rockland Utilities, Inc., two class actions brought by shareholders of
the Company against the Company and James F. Smith. The cases were
settled before other officers and directors were added as defendants
(which the plaintiff had indicated an intention to do) with the approval
of the United States District Court for the Southern District of New York
on January 19, 1995. The settlement provided for the creation of a
settlement fund totaling $1,850,000, but no admission or finding of
wrongdoing was made as to any party.
- People of the State of New York v. James F. Smith, a criminal proceeding
against the Company's former Chairman and Chief Executive Officer, which
resulted in the acquittal of Mr. Smith on all charges on August 15, 1995.
- The investigations into certain conduct at the Company by the District
Attorney for Rockland County, New York and the Special Committee of the
Board of Directors of the Company, which came to an end at the end of
1994.
Under the Company's By-Laws, the Company is required to indemnify officers
and directors involved in or made or threatened to be made a party to litigation
or investigations unless a determination is made in the particular proceeding
that the officer or director acted in bad faith or engaged in deliberate
dishonesty or self-dealing. As a result of the conclusion of the proceedings
described above, the Company's Board of Directors,
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in accordance with the Company's By-Laws, indemnified officers and directors as
follows (dollar figures rounded off):
1. On May 4, 1995, in connection with the settlement of the Company's
claims against Linda Winikow in return for payments by her to the Company, the
Board of Directors resolved that she was entitled to indemnification for any and
all expenses, including attorneys fees, actually and reasonably incurred in
connection with the Feiner, Patents Management, Gross and Bernstein lawsuits,
all of which had concluded with no finding of wrongdoing by her. Payments
totaling $16,830 (some of which had previously been advanced as required by the
Company's By-Laws) were made to the law firm of Stillman, Friedman & Shaw, and a
payment of $3,690 was made to the law firm of Yaeger & Barrett, both Ms.
Winikow's attorneys, pursuant to this resolution.
2. On June 1, 1995, the Board of Directors resolved (a) that each current
or former officer or director named or threatened to be named in the Feiner,
Patents Management, Gross and Bernstein lawsuits was entitled to indemnification
for any and all expenses, including attorneys fees, actually and reasonably
incurred in connection with those lawsuits, and (b) that Linda C. Taliaferro,
Ralph M. Baruch, Victor J. Blanchet, Richard L. Brickley, J. Fletcher Creamer,
Michael J. Del Giudice, Frank A. McDermott, Jr., James F. O'Grady, Jr., H. Kent
Vanderhoef, John F. White, Robert J. Biederman, Jr., and Robert J. McBennett
were entitled to indemnification for any and all expenses, including attorneys
fees, actually and reasonably incurred in connection with these investigations.
The following amounts are encompassed by this resolution. Most of these
sums were actually paid in 1993 and 1994 as advancements (pursuant to the
Company's By-Laws), and were previously disclosed as expenses in the Company's
reports for those years.
- In connection with the defense of the Feiner case: $134,980 to the law
firm of Hughes Hubbard & Reed for the defense of the Company and the
officers and directors threatened to be made parties.
- In connection with the defense of the Patents Management case: $56,150 to
the law firm of Hughes Hubbard & Reed for the defense of the officers and
directors named as parties other than Mr. Smith; and $2,590 to the law
firm of Fischer, Weisinger, Calaguire & Porter for the defense of Mr.
Smith.
- In connection with the defense of the Gross and Bernstein cases: $354,060
to the law firm of Hughes Hubbard & Reed for the defense of the Company
and the officers and directors threatened to be made parties; and $15,590
to the law firm of Fischer, Weisinger, Calaguire & Porter for the defense
of Mr. Smith.
- In connection with the above lawsuits and related litigation generally:
$428,300 to the law firm of Hughes Hubbard & Reed for representation of
the Company and its officers and directors.
- In connection with the investigations by the District Attorney and the
Special Committee: $5,737,280 to the firm of Stier, Anderson & Malone for
conduct of the Special Committee's investigation: $2,312,150 to the
accounting firm of Price Waterhouse & Co. for its work for Stier, Anderson
& Malone; $552,230 to the law firm of LeBoeuf Lamb Leiby & McCrae and
$218,120 to the law firm of Sills Cummis Zuckerman; $1,014,440 to the law
firm of Hughes Hubbard & Reed for work for or related to the Special
Committee and $115,940 to the same firm for representation of the Company
and officers and directors involved in the investigations; $6,970 to the
law firm of Franklin, Weinrib, Rudell & Vasallo, P.C. for additional
independent representation of Mr. Baruch; $5,300 to the law firm of
Shanley & Fisher for additional independent representation of Mr.
Biederman; $31,860 to the law firm of Hellring Lindeman Goldstein & Siegel
for additional independent representation of Mr. Blanchet; $2,000 to the
law firm of Shanley & Fisher for additional independent representation of
Mr. McBennett; $26,800 to Gary Greenwald, Esq. for additional independent
representation of Mr. O'Grady; and $24,790 to the law firm of Patterson,
Belknap, Webb & Tyler for additional independent representation of Mr.
White.
3. On September 7, 1995, following the acquittal of Mr. Smith in People of
the State of New York v. James F. Smith, the Board of Directors resolved that
Mr. Smith was entitled to indemnification for any and all
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<PAGE> 23
expenses, including attorneys fees, actually and reasonably incurred in
connection with that proceeding. Payments totaling $489,700 were made to the law
firm of Fischer, Weisinger, Calaguire & Porter for the defense of Mr. Smith
pursuant to this resolution.
2. AS TO THE APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
In accordance with the recommendation of its Audit Committee, the Board of
Directors recommends that the shareholders authorize the appointment of the firm
of Arthur Andersen LLP, independent public accountants, to audit the books,
records and accounts of the Company and its subsidiaries for the year 1996.
Representatives of Arthur Andersen LLP will be present at the Annual
Meeting. They will be afforded the opportunity to make a statement, should they
desire to do so, and to respond to appropriate questions.
While there is no legal requirement that this proposal be submitted to a
vote of the shareholders, approval of the shareholders is being requested
because the Board of Directors believes that the selection of independent public
accountants to audit the books, records and accounts of the Company and its
subsidiaries is of sufficient importance to seek such approval. If this proposal
is rejected, the Board of Directors would, in due course and having regard for
the requirements of orderly procedure, select other independent public
accountants.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 2.
3. AS TO THE AMENDMENT OF THE COMPANY'S
CERTIFICATE OF INCORPORATION TO APPROVE AN INCREASE
IN COMMON STOCK AUTHORIZED
The Company's Certificate of Incorporation presently authorizes the
issuance of 15,000,000 shares of Common Stock, par value $5.00 per share. As of
March 1, 1996, [ ] shares of Common Stock were issued and outstanding,
[ ] shares were reserved for issuance under the Company's dividend
reinvestment and stock purchase plans, and [ ] shares were reserved for
issuance upon conversion into Common Stock of the Company's outstanding series
of Cumulative Preference Stock, leaving a balance of [ ] authorized,
unissued and unreserved shares of Common Stock.
The Board of Directors deems it advisable that the Certificate of
Incorporation of the Company, as restated, be amended to increase the number of
shares of authorized Common Stock to 50,000,000 shares.
Set forth below is the text of Article Second of the Company's Certificate
of Incorporation as proposed to be amended:
"SECOND. The amount of the capital stock of the Company, the number and
par value of the shares of which it is to consist, the number of shares to
be classified, the number of shares to be included in each class, and all
of the designations, preferences, privileges and voting powers of the
shares of each class, and the restrictions or qualifications thereof are as
follows:
The aggregate number of shares which the Company shall have authority
to issue is 52,500,000, of which 1,000,000 shares shall be Cumulative
Preferred Stock, issuable in series, of the par value of $100.00 each;
1,500,000 shares shall be Cumulative Preference Stock, issuable in series,
without par value; and 50,000,000 shares shall be Common Stock of the par
value of $5.00 each."
The additional shares of Common Stock would become part of the existing
class of Common Stock, and the additional shares, when issued, would have the
same rights and privileges as the shares of Common Stock now issued. There are
no preemptive rights relating to the Common Stock.
Although the Company has no present plans, agreements, or understandings
regarding the issuance of the proposed additional shares, the Board of Directors
believes that adoption of the amendment increasing the number of shares of
authorized Common Stock to 50,000,000 shares is advisable because it will
provide the Company with greater flexibility for capital raising, acquisitions
of other companies or business properties,
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<PAGE> 24
stock dividends or splits, funding of employee benefit plans and other proper
corporate purposes which may be identified in the future by the Board of
Directors, without the expense and delay of a special meeting of shareholders.
Authorized but unissued shares of Common Stock may be issued at such time for
such purposes and for such consideration as the Board of Directors may determine
to be appropriate without further authorization by the shareholders of the
Company, except as otherwise required by applicable law or stock exchange rules.
The issuance of additional shares of Common Stock may have a dilutive effect on
earnings per share and, for persons who do not purchase additional shares to
maintain their pro rata interest in the Company, on such shareholder's
percentage voting power.
While it is not the intent of the Board of Directors, adoption of the
proposed amendment could have the effect of discouraging a takeover attempt in
that the Board of Directors could consider issuing the additional shares of
Common Stock to impede any unsolicited bid for control of the Company which the
Board believed was not in the best interests of the Company and its
shareholders. Since the issuance of additional shares of Common Stock, other
than on a pro rata basis to all current shareholders, would dilute the ownership
interest of a person seeking to obtain control of the Company, such issuance
could be used to discourage a change in control of the Company by making it more
difficult or costly. The Company is not aware of anyone seeking to accumulate
Common Stock or obtain control of the Company, and has no present intention to
use the additional authorized shares to deter a change in control.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 3.
4. AS TO OTHER MATTERS TO COME BEFORE THE MEETING
The Board of Directors does not intend to bring any matters before the
meeting other than those referred to above and knows of no other matters which
may come before the meeting. If any other matters or motions properly come
before the meeting, it is the intention of the persons named in the accompanying
form of proxy to vote such proxy in accordance with their judgment on such
matters or motions, including any matters dealing with the conduct of the
meeting.
DEADLINE FOR SHAREHOLDER PROPOSALS AND OTHER MATTERS
November 8, 1996 is the date by which proposals of shareholders of the
Company intended to be presented at the 1997 Annual Meeting of Shareholders of
the Company must be received by the Company for inclusion in the Company's proxy
statement and form of proxy relating to that meeting.
MISCELLANEOUS
This solicitation is by the Board of Directors of the Company and the
expenses of solicitation, including reimbursement for postage and clerical
expenses to brokerage houses and other custodians, nominees or fiduciaries for
forwarding documents to beneficial owners of Common Stock held in their names,
will be borne by the Company. The Company has retained Kissel-Blake Inc. to
assist with the solicitation of proxies for a fee of $8,500, plus reimbursement
of out-of-pocket expenses. In addition, Directors, officers or employees of the
Company may solicit proxies by telephone or in person, the costs of which will
be nominal.
By Order of the Board of Directors,
H. KENT VANDERHOEF
Chairman of the Board of Directors
THE COMPANY WILL FURNISH WITHOUT CHARGE TO ANY SHAREHOLDER ENTITLED TO VOTE
AT THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD APRIL 10, 1996 A COPY OF ITS
ANNUAL REPORT ON FORM 10-K, INCLUDING FINANCIAL STATEMENTS AND SCHEDULES
THERETO, REQUIRED TO BE FILED WITH THE SECURITIES AND EXCHANGE COMMISSION FOR
THE YEAR 1995, UPON WRITTEN REQUEST TO THE OFFICE OF THE TREASURER, ORANGE AND
ROCKLAND UTILITIES, INC., ONE BLUE HILL PLAZA, PEARL RIVER, NEW YORK 10965.
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EVERY PROPERLY SIGNED PROXY WILL BE VOTED (OR NOT VOTED) IN ACCORDANCE WITH
SPECIFICATIONS MADE BELOW, AND WILL BE VOTED FOR THE ELECTION OF ALL PERSONS
NAMED AND FOR THE ACTIONS PROPOSED IF NO SPECIFICATIONS ARE INDICATED.
I Plan
to attend / /
Meeting
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE FOLLOWING PROPOSALS.
Item 1-To elect the following directors
1-Year Term Jon F. Hanson
3-Year Term Ralph M. Baruch
Michael J. Del Giudice
Frederic V. Salerno
To withhold authority to vote for any individual nominee(s), print that
nominee's name below:
-----------------------------------------------------------
Item 2-To appoint Arthur Andersen LLP as independent public accountants for
1996.
FOR AGAINST ABSTAIN
/ / / / / /
Item 3-To authorize an amendment to Article Second of the Company's Certificate
of Incorporation to increase the authorized Common Stock of the Company to
50,000,000 shares.
FOR AGAINST ABSTAIN
/ / / / / /
Item 4-In their discretion, the proxies are authorized to act on such other
matters as may properly come before the meeting or any adjournments thereof.
All powers may be exercised by a majority of said proxies or said substitutes
voting or acting or, if only one votes and acts, then by that one.
IMPORTANT: PLEASE DATE, SIGN AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
Signature(s) Date , 1996
---------------------------------- ----------------------
(NOTE: Signatures should agree with name imprinted hereon. Executors,
administrators, trustees, guardians and attorneys should so indicate when
signing. If stock is registered in more than one name, each joint owner should
sign.)
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<PAGE> 26
PROXY
ORANGE AND ROCKLAND UTILITIES, INC.
COMMON STOCK PROXY FOR ANNUAL MEETING, APRIL 10, 1996
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned, revoking all previous proxies, appoints H. KENT VANDERHOEF, D.
LOUIS PEOPLES and G.D. CALIENDO, and each of them, proxies, with power of
substitution to each to vote and act at the Annual Meeting of Shareholders of
ORANGE AND ROCKLAND UTILITIES, INC. to be held at 390 West Route 59, Spring
Valley, New York, on Wednesday, April 10, 1996, at 10:30 A.M., and at any
adjournments thereof, on and with respect to the Common Stock of the
undersigned, or on and with respect to which the undersigned is entitled to vote
or act, as indicated on the reverse side, and as set forth in the notice and
proxy statement dated March 8, 1996.
(CONTINUED, AND TO BE DATED AND SIGNED, ON OTHER SIDE)
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