<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>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-2.
</TABLE>
ORANGE AND ROCKLAND UTILITIES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-12.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
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<PAGE> 2
LOGO
March 7, 1997
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Common
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 9, 1997, at 10:30 AM.
Detailed information as to the business to be transacted at the meeting is
contained in the accompanying Notice of Annual Meeting and Proxy Statement. At
the conclusion of the formal meeting, there will be a discussion of the
Company's operations by your management team followed by a question and answer
period.
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.
We hope that you will be able to attend the meeting in person. If you plan
to attend, please mark the box provided on the enclosed proxy card. Proxy cards
for shareholders of record include a detachable admission ticket to the meeting.
Please detach the ticket from your proxy card and bring it with you to the
meeting.
As always, we look forward to seeing you at your Annual Meeting.
Sincerely yours,
/s/ H. KENT VANDERHOEF
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 9, 1997, at 10:30 A.M. for the purposes set forth below:
1. To elect five Directors.
2. To authorize the appointment of the firm of Arthur Andersen LLP as
independent public accountants for the year 1997.
3. 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 February 28, 1997
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.
By Order of the Board of Directors,
H. KENT VANDERHOEF
Chairman of the Board of Directors
G. D. CALIENDO
Senior Vice President, General Counsel
and Secretary
March 7, 1997
<PAGE> 4
ORANGE AND ROCKLAND UTILITIES, INC.
ONE BLUE HILL PLAZA
PEARL RIVER, NEW YORK 10965
March 7, 1997
PROXY STATEMENT
ANNUAL MEETING OF COMMON SHAREHOLDERS, APRIL 9, 1997
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 1997
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 for the election as Directors of each of the five nominees
named below for a term expiring at the specified Annual Meeting and for all
other proposals of the Board of Directors if no instructions are indicated. The
Board of Directors does not intend to bring before the meeting any matter other
than as indicated herein. 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 1996 containing financial
statements, which is not a part of this proxy statement, was mailed to
shareholders commencing February 21, 1997.
The voting securities of the Company issued and outstanding on February 28,
1997 consisted of 13,654,123 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 at
the Annual Meeting. The affirmative vote of a majority of the votes cast at the
Annual Meeting will be required for approval of Proposal 2 and all other matters
to be voted upon. 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.
<PAGE> 5
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 eleven Directors. At the 1997 Annual Meeting, five Directors are
to be elected, four of whom shall be members of the class of 2000 and one of
whom shall be a member of the class of 1998.
The Board of Directors has designated Robert E. Mulcahy III as a nominee
for a one-year term expiring at the 1998 Annual Meeting of Shareholders and J.
Fletcher Creamer, Jon F. Hanson, Kenneth D. McPherson and Linda C. Taliaferro as
nominees for election as Directors for three-year terms expiring at the 2000
Annual Meeting of Shareholders. All nominees are presently Directors of the
Company. Mr. Mulcahy was elected to the Board of Directors on January 9, 1997 to
fill a newly-created directorship. Mr. Creamer, Mr. McPherson and Ms. Taliaferro
were each elected as members of the class of 1997 at the 1994 annual meeting.
Mr. Hanson was elected as a member of the class of 1997 at the 1996 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 five 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, 1997, period of service as a Director of the
Company, membership on committees of the Board of Directors of the Company, as
applicable, and a brief biography, including business experience for at least
five years.
NOMINEES FOR ELECTION AS DIRECTORS
ONE-YEAR TERM EXPIRING IN 1998
<TABLE>
<C> <S>
Photo of Robert E. ROBERT E. MULCAHY III, AGE 60, DIRECTOR SINCE JANUARY 1997
Mulcahy President and Chief Executive Officer, New Jersey Sports and
Exposition Authority, East Rutherford, New Jersey, a competitive
sports and entertainment management organization, since 1979.
Director, First Morris Bank and Wickes Lumber Company.
Member, Board of Directors of The National Football Foundation and
College Hall of Fame, Inc. Chairman, Thoroughbred Racing
Communications.
Chairman, Board of Governors, Cathedral Healthcare System, Newark,
New Jersey. Member, Board of Trustees, Delbarton School.
</TABLE>
THREE-YEAR TERM EXPIRING IN 2000
<TABLE>
<C> <S>
Photo of J. J. FLETCHER CREAMER, AGE 70, DIRECTOR SINCE 1987
Fletcher Creamer Chairman of the Board of Directors, J. Fletcher Creamer & Son, Inc.,
Hackensack, New Jersey, a construction company, since 1982.
Director, Commerce Bank/North.
Trustee and Member of the Board of Governors, Hackensack University
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.
</TABLE>
2
<PAGE> 6
<TABLE>
<C> <S>
JON F. HANSON, AGE 60, DIRECTOR SINCE 1995
Photo of Jon F. Chairman, Hampshire Management Company, Hackensack, New Jersey, a
Hanson 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 University Medical Center. Chairman, The National Football
Foundation and College Hall of Fame, Inc.
Member, Audit Committee.
Photo of Kenneth D. KENNETH D. MCPHERSON, AGE 62, DIRECTOR SINCE 1993
McPherson 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 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.
Photo of Linda C. LINDA C. TALIAFERRO, AGE 49, DIRECTOR SINCE 1990
Taliaferro 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 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. Advisor,
Interfaith Coalition on Energy of Philadelphia.
Member, Audit Committee.
</TABLE>
3
<PAGE> 7
MEMBERS OF THE BOARD OF DIRECTORS CONTINUING IN OFFICE
TERM EXPIRING IN 1998
<TABLE>
<C> <S>
Photo of James F. JAMES F. O'GRADY, JR., AGE 69, DIRECTOR SINCE 1980
O'Grady, Jr. President, O'Grady and Associates, Goshen, New York, a media
brokerage and consulting firm, founded in 1986.
President, International Communications Management Corp., a
consulting and television and radio program production and
syndication firm, since 1996. Vice President, Allcom Marketing Corp.,
Goshen, New York, from 1987 until 1996. Director, SFX Broadcasting,
Inc., Video for Broadcast, Inc. and The Insurance Broadcast System,
Inc.
Mr. O'Grady, an attorney, has been Of Counsel to the law firm of
Cahill & Cahill, Brooklyn, New York, since 1986.
Honorary Director, Horton Memorial Hospital. Member, Communication
Arts Advisory Council of St. John's University.
Chairman, Compensation Committee and Member, Executive Committee.
Photo of D. Louis D. LOUIS PEOPLES, AGE 56, DIRECTOR SINCE 1994
Peoples 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 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.
Chairman, New York Power Pool. Director, The Energy Association of
New York State, Empire State Electric Energy Research Corporation,
New Jersey Utilities Association, Edison Electric Institute, Rockland
Economic Development Corporation, Boy Scouts of America--Hudson
Valley Council and The Boyd Foundation.
Member, Executive Committee.
Photo of H. Kent H. KENT VANDERHOEF, AGE 74, DIRECTOR SINCE 1976
Vanderhoef Chairman of the Board of Directors of the Company, Pearl River, New
York, and of Rockland Electric and Pike since 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, Compensation Committee.
</TABLE>
4
<PAGE> 8
TERM EXPIRING IN 1999
<TABLE>
<C> <S>
Photo of Ralph M. RALPH M. BARUCH, AGE 73, 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. Fellow, International Council of the National
Academy of Television Arts and Sciences.
Member, Compensation Committee and Executive Committee.
Photo of Michael J. MICHAEL J. DEL GIUDICE, AGE 54, DIRECTOR SINCE 1988
Del Giudice Managing Director, Millennium Capital Markets, LLC, New York, New
York, an investment banking firm, since 1996.
Mr. Del Giudice was a Managing Director and Partner of Lazard Freres
& Co., LLC, New York, New York, an investment banking firm, from 1985
to 1996, and Senior Vice President of Shearson Loeb Rhoades & Co.
from 1981 to 1983.
Chairman, Governor's Committee on Scholastic Achievement. Member,
Advisory Task Force on State University of New York.
Mr. Del Giudice was Chief of Staff to the Governor of New York from
1983 to 1985, Director of State Operations from 1979 to 1981, and
Chief of Staff to the New York Assembly Speaker from 1975 to 1979.
Chairman, Audit Committee and Member, Executive Committee.
Photo of Frederic FREDERIC V. SALERNO, AGE 53, DIRECTOR SINCE 1995
V. Salerno Vice Chairman-CFO/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.
Trustee, Inner-City Scholarship Fund.
Member, Audit Committee.
</TABLE>
5
<PAGE> 9
MEETINGS AND COMMITTEES OF THE BOARD
During 1996 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 11 meetings;
and the Executive Committee held 7 meetings. During 1996, no Director attended
less than 87% of the meetings of the Board of Directors and its committees. The
average aggregate attendance of Directors at Board and committee meetings was
over 96%.
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 serves as the principal
body on corporate responsibility and governance. The Executive Committee also
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 Executive
Committee of 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
("Directors' Plan"), a Director may elect to defer receipt of all or part of his
or her compensation for services as a Director. At the election of the Director,
the Company will credit the amount of such deferred compensation to either an
interest-bearing account or a phantom share unit 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. Amounts deferred
to the phantom share unit account are deemed to be invested in a number of
phantom share units equal to the dollar amount of such deferral divided by the
fair market value of the Company's Common Stock on the date the fees would have
been payable. Fair market value as defined in the Directors' Plan is the average
of the high and low sales prices for the Common Stock on such date. Phantom
share units vary in value with increases and decreases in the fair market value
of the Common Stock. Phantom share units are also credited with dividend
equivalents, with such dividend equivalents deemed reinvested in additional
phantom share units based upon the fair market value of Common Stock on the
dividend payment date. Directors have no voting rights with respect to the
phantom share units. 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 accounts
will be paid out automatically in the event of a change in control of the
Company and in certain other circumstances. Phantom share units will be paid out
in cash based upon the then-current fair market value of Common Stock.
6
<PAGE> 10
The Company has a Post-Director Service Retainer Continuation Program
("Directors' Program") for non-employee Directors. To be eligible for the
Directors' Program, a Director must have served on the Board of Directors for a
period of at least five years ("Eligible Director"). The Directors' Program
provides for the continuation to the Eligible Director of the annual Board
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, 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 under the Directors' Program 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, 1997, all of the Company's Common
Stock owned beneficially by each Director and each executive officer named in
the Summary Compensation Table, 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 as a
group are also shown.
<TABLE>
<CAPTION>
SHARES OF COMMON SHARE EQUIVALENTS
STOCK OWNED UNDER COMPENSATION TOTAL SHARES
NAME BENEFICIALLY(1)(2) PLAN ARRANGEMENTS(3) REPRESENTED(4)
----------------------------------- ------------------ -------------------- --------------
<S> <C> <C> <C>
Ralph M. Baruch 5,271 0 5,271
Robert J. Biederman, Jr. 0 4,034 4,034
Larry S. Brodsky 1,348 5,331 6,679
G. D. Caliendo 207 4,914 5,121
J. Fletcher Creamer 7,562 0 7,562
Michael J. Del Giudice 1,075 0 1,075
R. Lee Haney 312 4,914 5,226
Jon F. Hanson 961 478 1,439
Kenneth D. McPherson 1,000 547 1,547
Robert E. Mulcahy III 50 0 50
James F. O'Grady, Jr. 1,000 167 1,167
D. Louis Peoples 1,123 14,197 15,320
Frederic V. Salerno 500 0 500
Linda C. Taliaferro 417 0 417
H. Kent Vanderhoef 2,572 0 2,572
20 Directors and executive
officers as a group 24,395
</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 February 25, 1997,
the latest date for which such information is available.
(2) As of March 1, 1997, no Director owned beneficially more than .055% of
the outstanding shares of Common Stock, no named executive officer owned more
than .010% of such shares and Directors and executive officers as a group owned
.179% of such shares.
(3) This column shows the named individuals' Common Stock share equivalents
under compensation plans. Shown are the executive officers' Performance Share
Units ("PSUs", as described below) and deferred share units ("DSUs", 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
7
<PAGE> 11
share equivalents shown for executive officers is an aggregate of DSUs earned as
a result of PSUs earned, as applicable, for the 1995, 1996 and 1995-96
transitional performance periods and PSUs granted for the 1996-97 transitional
performance period and 1995-97 and 1996-98 three-year performance periods but
not yet earned, including dividend equivalents which have been credited with
respect to PSUs and DSUs and are deemed reinvested in additional PSUs or DSUs,
as applicable. Also shown are phantom share units, which are "non-voting
interests" accounted for as units of Common Stock, held by Directors who have
deferred compensation for services as a Director into the phantom share unit
account under the Directors' Plan. 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 increases or decreases 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).
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, after extensive discussion and work
with independent compensation consultants retained by it, implemented an
executive officer compensation program designed to:
- Establish compensation which is competitive with the practices of utility
industry peer groups (discussed 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 utility
industry peer groups (discussed below).
COMPENSATION PHILOSOPHY
The executive compensation program is 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,
shareholder value and customer service. By placing greater emphasis on
performance incentives and less on salary increases, the program thereby
enhances the alignment of management and shareholder interests.
SALARY AND PERFORMANCE INCENTIVES
The Company's executive officer compensation program has three principal
components:
- Salary: Executive officer salaries are administered relative to the
median of salary data for executive officers with comparable functional
responsibilities in utilities included in utility industry peer groups
(discussed below).
- Annual Team Incentive Plan ("Incentive Plan"): Incentive payments are
based on various Company objectives which focus on shareholder interests
and division-specific operating objectives such as cost management,
efficiency, productivity, safety and customer service. These objectives
are established annually.
8
<PAGE> 12
- Long-Term Performance Share Unit Plan ("PSU Plan"): Executive officers
(and certain key employees) are provided with the opportunity to earn
cash payments and, subject to the receipt of necessary approvals,
payments in stock at the end of a three-year period, based on the
Company's three-year earnings per share performance and its three-year
total shareholder return (stock price appreciation plus dividends),
measured relative to a group of national comparison utilities ("National
Comparison Utilities").
Under the executive officer compensation program, the competitiveness of
salary ranges and annual and long-term incentive award opportunities is
evaluated annually. In order to establish total compensation as well as criteria
for incentive payments to be awarded under the Incentive Plan and PSU Plan,
different utility peer groups are used for comparison purposes.
For purposes of determining the competitiveness of salary as well as total
compensation for executive officers in 1996, as in 1995, comparison was made to
a group of 22 Northeastern peer utilities ("Northeastern Peer Utilities"). After
extensive discussion and work with independent compensation consultants retained
by it, the Compensation Committee has determined that it is appropriate to
compare salaries and total compensation of executive officers to those of
executive officers in a larger number of companies and to adjust the data from
these companies to correlate more closely with the Company's size. Accordingly,
beginning in 1997, comparison will be made to data included in the compensation
survey ("EEI Survey") prepared by the Edison Electric Institute, an electric
utility industry trade group (which includes other combination gas and electric
companies). Compensation data in the EEI Survey is adjusted through regression
analysis to correlate utility company revenues with actual base salary and
incentives. Executive officer annual and long-term incentive opportunities will
be configured so that total compensation approximates the 60th percentile of the
revenue-adjusted EEI Survey data when targeted results are achieved.
The group of Northeastern Peer Utilities used for salary and total
compensation comparisons in 1996 is a narrower group of electric and gas
utilities than those included in either the Edison Electric Institute
Combination Gas and Electric Investor-Owned Utilities Index ("EEI Index") or the
Standard and Poor's Utilities Index ("S&P Index") referenced in the Stock
Performance Graph on page . The EEI Survey which will be used for salary and
total compensation comparisons beginning in 1997 includes a broader group of
electric and gas utilities than are included in either the EEI Index or the S&P
Index. The Compensation Committee believes the EEI Survey data will be a better
measure of executive compensation.
SALARY STRUCTURE AND SALARY INCREASES
Salary ranges reflect a minimum amount and a position rate which
approximates the 50th percentile of the distribution of salaries for executive
officers with comparable functional responsibilities in utilities included in
the utility industry peer group used for comparison purposes.
ANNUAL TEAM INCENTIVE PLAN
Incentive Plan target award opportunities for executive officers are
established annually. The target award opportunity is considered to be 100%
accomplishment of stated objectives. Actual awards may range from 0% to 120%
based on performance.
For 1996, Incentive Plan target award opportunities ranged from 25% to 45%
of salary at December 31, 1996. Incentive Plan performance for 1996 was
evaluated using shareholder, management and division-specific measures:
- Shareholder Measure (weight 50%): Earnings per share measured 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.
- Management Measure (weight 25%): Operating and maintenance expenditures
compared to pre-established standards.
9
<PAGE> 13
- Division-Specific Measure (weight 25%): 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 1996, the shareholder measure was achieved at 52% to 60% and the
management measure was achieved at 17.25% of targeted levels. Division-specific
measures were achieved at 10.6% to 30% of targeted levels. The average of these
factors combined to result in awards ranging from 88% to 107.25% of targeted
levels.
LONG-TERM PERFORMANCE SHARE UNIT PLAN
Participation
Designated executive officers (and certain key employees) participate in
the Long-Term Performance Share Unit Plan ("PSU Plan"), which became effective
January 1, 1995. Participants are 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 compensation program evaluation. The number of PSUs earned is
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 the 1995 and 1995-96 transitional performance periods
equal to one-third and two-thirds of the 1995-97 three-year PSU grants, and
executive officers whose participation in the PSU Plan commenced in 1996
received PSU grants for 1996 and 1996-97 transitional performance periods equal
to one-third and two-thirds of the 1996-98 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 1995-96 transitional period is 150% of the number of
PSUs granted. The maximum number of PSUs that can be earned with respect to the
1996-98 performance period and the 1996 and 1996-97 transitional periods is 120%
of the number of PSUs granted. In addition, the value of dividend equivalents
that have accumulated during the performance period 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 performance criteria which are determined annually
for the three-year performance period then commencing. For the 1995-97 and
1996-98 performance periods and the related transitional periods, these
performance criteria are:
- Average annual total shareholder return (stock price appreciation plus
dividends) compared to National Comparison Utilities using
pre-established ranking criteria.
- Earnings per share compared to pre-established threshold, target and
maximum levels.
These criteria are weighted 50%/50%, respectively, for the 1995-97 and related
transitional performance periods and 75%/25%, respectively, for the 1996-98 and
related transitional performance periods.
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.
10
<PAGE> 14
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 Committee, in mandatorily deferred share
units ("DSUs") 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
deferred in the form of DSUs and paid at the end of the applicable full
three-year performance period. Participants may also voluntarily elect to defer
payment of earned PSU awards that are otherwise payable. Such deferrals, at the
participant's election, will be credited to a non-qualified, interest-bearing
deferred compensation plan or will be credited in DSUs until such date or dates
as the participant elects at the time the deferred PSU payment election is made.
PSU payments deferred in DSUs, whether deferred, in the case of transitional
awards, until the end of the applicable three-year performance period or, in the
case of full three-year awards, deferred at the discretion of the Compensation
Committee or at the election of the participant, will be credited with dividends
which will be deemed reinvested in additional DSUs payable at the same time or
times as the DSUs in respect of which they were originally credited.
The cash payment value of PSUs paid at the end of three-year performance
periods, and DSUs 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 1996 performance, participants in the 1995-96 transitional performance
period earned between 109.7% and 120% of the PSUs granted and participants in
the 1996 transitional performance period earned 95% of the PSUs granted. The
earned 1995-96 and 1996 PSUs have been deferred in the form of DSUs and, in the
case of earned 1995-96 PSUs, will be paid in early 1998 (when the 1995 and
1995-97 awards that have been earned will also be paid) and, in the case of
earned 1996 PSUs, will be paid in 1999 (when the 1996-97 and 1996-98 awards that
have been earned will also be paid).
CHIEF EXECUTIVE OFFICER COMPENSATION
Mr. Peoples' 1996 salary, as Vice Chairman of the Board of Directors and
Chief Executive Officer of the Company, was based on a position rate that
approximates the 50th percentile for chief executive officers at Northeastern
Peer Utilities. Mr. Peoples' actual 1996 salary was below the position rate.
Mr. Peoples' Incentive Plan award for 1996 was based, as described above,
on the Company's 1996 performance at 90.25% of target. The earning of Mr.
Peoples' PSU Plan award for the 1995-96 transitional performance period was
based upon performance at 109.7% of target. Mr. Peoples' attainment of the
1995-97 and 1996-98 long-term performance criteria cannot be determined until
after 1997 and 1998, 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 1996 fiscal year approaching $1 million, and
the Company does not believe that any executive officer's compensation is likely
to exceed $1 million in 1997, the Company has not developed an executive
compensation policy with respect to qualifying compensation paid to its
executive officers for deductibility under Section 162(m) of the Code.
COMPENSATION COMMITTEE
<TABLE>
<S> <C>
James F. O'Grady, Jr., Chairman Kenneth D. McPherson
Ralph M. Baruch H. Kent Vanderhoef
J. Fletcher Creamer
</TABLE>
February 6, 1997
11
<PAGE> 15
SUMMARY COMPENSATION TABLE
The table below shows all compensation awarded to, earned by or paid to the
person serving as Chief Executive Officer in 1996 and the four other most highly
compensated executive officers of the Company for services rendered in all
capacities to the Company and its subsidiaries during the fiscal years ended
December 31, 1996, December 31, 1995 and December 31, 1994:
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
ANNUAL COMPENSATION
-------------------------------- PAYOUTS
OTHER ANNUAL ------------ ALL OTHER
SALARY BONUS COMPENSATION LTIP PAYOUTS COMPENSATION
NAME & PRINCIPAL POSITION YEAR ($) ($) ($) ($)(1) ($)(2)
- ------------------------------ ---- ------- ------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
D. Louis Peoples(3) 1996 394,583 164,250 0 130,073 27,735
Vice Chairman of the 1995 355,178 204,019 0 64,477 117,148
Board and Chief 1994 150,900 39,487 0 0 32,949
Executive Officer
Larry S. Brodsky(4) 1996 283,920 108,870 0 24,435 77,718
President and Chief Operating
Officer
R. Lee Haney(5) 1996 205,000 76,875 0 46,246 7,933
Senior Vice President 1995 198,487 95,325 0 21,713 42,080
and Chief Financial 1994 59,830 10,530 0 0 58,977
Officer
G. D. Caliendo(6) 1996 195,833 71,175 0 42,303 11,155
Senior Vice President, 1995 158,791 86,025 0 17,856 121,259
General Counsel and
Secretary
Robert J. Biederman, Jr. 1996 160,000 53,040 0 49,638 4,155
Vice President, 1995 157,400 62,720 0 26,831 2,276
Operations 1994 146,200 15,147 0 11,544 2,349
</TABLE>
- ---------------
(1) The LTIP Payouts shown for 1995 and 1996, respectively, include PSUs
earned pursuant to the PSU Plan with respect to those years. The dollar values
of earned PSUs shown for 1995 and 1996 were calculated based on the price of the
Company's Common Stock on, respectively, December 31, 1995 and 1996. 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, 1995 and 1996.
(2) Included in All Other Compensation for 1996 for the named executive
officers were the following:
(a) The Company's matching contribution to the individual's account
under the Company's Management Employees Savings Plan, as follows: Mr.
Peoples, $1,463; Mr. Brodsky, $2,138; Mr. Haney, $2,250; Mr. Caliendo,
$1,791; and Mr. Biederman, $2,250.
(b) A term life insurance premium for each individual, as follows: Mr.
Peoples, $6,645; Mr. Brodsky, $1,659; Mr. Haney, $3,240; Mr. Caliendo,
$3,033; and Mr. Biederman, $551.
(c) Interest on long-term incentive awards which were deferred under
the terms of the predecessor incentive plan for three individuals, as
follows: Mr. Peoples, $2,347; Mr. Haney, $536; and Mr. Biederman, $1,354.
(d) Relocation expenses pursuant to the terms of their engagement for
four individuals, as follows: Mr. Peoples, $17,281; Mr. Brodsky, $73,921;
Mr. Haney, $1,907; Mr. Caliendo, $6,330. Relocation expenses paid to
Messrs. Peoples, Haney and Caliendo in 1996 reflect corrections to tax
gross-up calculations for relocation expenses incurred in 1994 and 1995.
(3) Mr. Peoples joined the Company effective July 14, 1994.
(4) Mr. Brodsky joined the Company effective January 1, 1996.
(5) Mr. Haney joined the Company effective September 8, 1994.
(6) Mr. Caliendo joined the Company effective February 21, 1995.
12
<PAGE> 16
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..................... 5,000 1996-98 250 5,000 6,000
Larry S. Brodsky..................... 667 1996(2) 167 667 800
1,333 1996-97 333 1,333 1,600
3,000 1996-98 150 3,000 3,600
R. Lee Haney......................... 1,500 1996-98 75 1,500 1,800
G. D. Caliendo....................... 1,500 1996-98 75 1,500 1,800
Robert J. Biederman, Jr.............. 1,250 1996-98 63 1,250 1,500
</TABLE>
- ---------------
(1) The numbers shown in this column reflect the PSUs awarded in 1996 to each
named executive officer under the PSU Plan for the 1996-98 performance
period and, with respect to Mr. Brodsky, PSUs awarded for 1996 and 1996-97
transitional performance periods. 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 1996 transitional period were earned
by Mr. Brodsky but will not become payable until early 1999. The value of
these PSUs at December 31, 1996 is included in the Summary Compensation
Table under the column "LTIP Payouts".
PENSION PLANS
The following table sets forth as of December 31, 1996 the estimated
aggregate annual dollar 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 with the exception of Mr. Peoples
and Mr. Brodsky, whose pension benefits are addressed below:
RETIREMENT AND
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, up to $150,000 annually (with such limitation subject to cost of
living adjustment). Under the terms of the Supplemental Plan, covered
compensation 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. Pursuant to arrangements with the Company, incremental
portions of Mr. Peoples' and Mr. Brodsky's Annual Awards, beginning with their
respective dates of election as officers, are included in their compensation
covered by the Supplemental Plan. In the case of Mr. Peoples, 100 percent of his
Annual Award will be included by the end
13
<PAGE> 17
of five years of service under the Supplemental Plan and in the case of Mr.
Brodsky, 100 percent of his Annual Award will be included by the end of 10 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 100% of their Annual Award
included by the end of 15 years of service. With the exception of Mr. Peoples
and Mr. Brodsky, whose pension benefits are addressed below, the current
compensation covered by the Supplemental Plan for each of the named executive
officers is as follows: Mr. Haney, $200,595; Mr. Caliendo, $190,652; and Mr.
Biederman, $195,955. The amounts shown in the Retirement and Supplemental Plan
Table are calculated on the basis of years of service under the Supplemental
Plan. The years of credited service for each of the named executive officers are
as follows: Mr. Haney, 6 years; Mr. Caliendo, 4 years; and Mr. Biederman, 23
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 who retire at the age of 60 or 61. 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 prior
to 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.
Benefits under the Retirement Plan are subject to annual post-retirement
adjustment once the Consumer Price Index increases at least 20% since
retirement. 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.
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. Directors who are not employees
of the Company are not covered by the Supplemental Plan. 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. Benefits under the
Supplemental Plan are subject to annual post-retirement adjustment once the
Consumer Price Index increases at least 20% since retirement. For unvested
participants, benefits would vest upon termination of employment following a
change in control of the Company, and the named officers could receive credit
for additional years of service in the calculation of their benefit and the
percentage of Annual Award included in compensation. 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, Brodsky, 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 required for vesting in the Supplemental Plan. Under Mr. Peoples'
agreement, on the basis of his three years of service, his Supplemental Plan
benefit percent is currently 42% 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, 1996, Mr. Peoples'
estimated annual benefit payable under the Supplemental Plan upon retirement at
age 65 is $194,652. Under Mr. Brodsky's agreement, on the basis of his one year
of service, his Supplemental Plan benefit percent is currently 20% of an
aggregate of his base salary and a specified percent of his Annual Award, and
this benefit percent will increase in increments to 70% of the
14
<PAGE> 18
aggregate of his base salary and his full Annual Award during his 11th year of
service. As of December 31, 1996, Mr. Brodsky's estimated annual benefit payable
under the Supplemental Plan upon retirement at age 65 is $59,280. 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 under the Supplemental Plan will be
calculated accordingly.
EMPLOYMENT AND SEVERANCE AGREEMENTS
The Company has entered into agreements with Messrs. Peoples, Brodsky,
Haney and Caliendo setting forth the terms of their employment, including
position, base salary, opportunity for incentive compensation, relocation
allowance, retirement arrangements, and other benefits. Mr. Peoples' agreement
provides that he shall serve as Vice Chairman of the Board and Chief Executive
Officer of the Company, at a minimum base salary of $325,000, with participation
in the Company's incentive plans. Mr. Brodsky's agreement provides that he shall
serve as President and Chief Operating Officer, at a minimum base salary of
$285,000 per year. Mr. Haney's agreement provides that he shall serve as Vice
President and Chief Financial Officer of the Company, at a minimum base salary
of $195,000, with participation in the Company's incentive plans. Mr. Caliendo's
agreement provides that he shall serve as Vice President, General Counsel and
Secretary of the Company, at a minimum base salary of $185,000, with
participation in the Company's incentive plans. The relocation expenses paid to
each of these named executive officers are included in the Summary Compensation
Table under the column "All Other Compensation". Their participation in the
Company's retirement plans is described above under "Pension Plans".
Under the terms of their agreements, Messrs. Peoples, Brodsky, Haney and
Caliendo are also entitled to certain severance arrangements. Mr. Peoples'
agreement provides for a severance payment equal to two years' salary and annual
bonus in the event that he is terminated without cause (as defined) or pursuant
to an involuntary termination (as defined in the Company's Severance Pay Plan
("Severance Plan", as described below), with an offset for any amounts which he
receives under the Severance Plan. Under their agreements, Messrs. Brodsky,
Haney and Caliendo are each entitled to receive a severance payment under the
Severance Plan in the event that they are terminated by the Company for its
convenience other than for cause, which in Mr. Brodsky's case is a severance
payment equal to 24 months of compensation and in the case of Messrs. Haney and
Caliendo, respectively, is a payment equal to 12 months of compensation.
In addition, the Company has also entered into severance agreements with
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, Brodsky, 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 principal benefits under the agreements
entered into with Messrs. Peoples, Brodsky, Haney and Caliendo consist of (i) a
lump-sum severance payment equal to three times the individual's salary and
average annual bonus plus specified portions of long-term incentive
compensation, (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 36 additional months, 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 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 the severance agreements are reduced to the
extent of payments that the individual receives under the Severance Plan. 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 the individuals
under these severance agreements. Notwithstanding the creation of the trust, the
Company continues to be primarily liable for the compensation and benefits
payable
15
<PAGE> 19
to the individuals (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 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 the severance
period for eligible employees following termination of employment.
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, the
Company maintains insurance which 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, 1996, are
with Executive Risk Indemnity, Inc., Columbia Casualty Co. and the Aetna
Casualty and Surety Company. The aggregate annual premium cost is $334,693.
The Board of Directors took no formal action with respect to
indemnification of officers and directors of the Company in 1996. During 1995,
however, the Board of Directors adopted several resolutions providing for
indemnification of officers and directors, and some payments were made in 1996
pursuant to one of those 1995 resolutions. 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.
On June 1, 1995, the Board of Directors resolved that each current or
former officer or director named or threatened to be named in a number of
lawsuits was entitled to indemnification for any and all expenses, including
attorneys fees, actually and reasonably incurred in connection with those
lawsuits. Among those lawsuits were 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 its former Chief
Executive Officer, James 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.
In 1996, pursuant to the Board's June 1995 resolution, $27,075 was paid to
the law firm of Hughes Hubbard & Reed LLP for work on the final phases of the
settlement of the Gross and Bernstein cases. Hughes Hubbard & Reed LLP
represented the Company and the officers and directors threatened to be made
parties, other than Mr. Smith.
16
<PAGE> 20
STOCK PERFORMANCE GRAPH
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN*
Orange and Rockland Utilities, Inc. Common Stock, Standard & Poor's 500 Index,
Standard & Poor's Utilities Index and
Edison Electric Institute Combination Gas and Electric
Investor-Owned Utilities Index
<TABLE>
<CAPTION>
Measurement Period Orange and
(Fiscal Year Covered) Rockland S&P 500 S&P Utilities EEI Index
<S> <C> <C> <C> <C>
1991 $100.00 $100.00 $100.00 $100.00
1992 $114.87 $107.62 $108.09 $110.24
1993 $118.63 $118.46 $123.70 $123.10
1994 $102.30 $120.03 $113.87 $107.25
1995 $121.60 $165.13 $160.70 $136.60
1996 $131.32 $203.04 $165.93 $135.74
</TABLE>
* Assumes $100 invested on December 31, 1991 and reinvestment of
dividends.
For the five years ended December 31, 1996, the Company has selected the
Edison Electric Institute Combination Gas and Electric Investor-Owned Utilities
Index ("EEI Index") as its published industry index rather than the Standard &
Poor's Utilities Index ("S&P Utilities Index"), which the Company previously
used. The change is being made in order to benchmark the Company's performance
with an industry index which more closely resembles the Company's lines of
business. The EEI Index has been selected because it is composed entirely of
combination electric and natural gas utilities (41 companies), whereas the S&P
Utilities Index consists of 40 utilities only eight of which are combination
electric and natural gas utilities. For comparison purposes, the Stock
Performance Graph for the five years ended December 31, 1996 compares the
performance of the Company's Common Stock to the S&P Utilities Index as well as
the EEI Index.
17
<PAGE> 21
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 1997.
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 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 best judgment on such
matters or motions, including any matters dealing with the conduct of the
meeting.
DEADLINE FOR SHAREHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
November 7, 1997 is the date by which proposals of shareholders of the
Company intended to be presented at the 1998 Annual Meeting of Common
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.
METHOD AND EXPENSE OF SOLICITATION OF PROXIES
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 paid 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 COMMON SHAREHOLDERS TO BE HELD APRIL 9, 1997 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 1996, UPON WRITTEN REQUEST TO THE OFFICE OF THE TREASURER, ORANGE AND
ROCKLAND UTILITIES, INC., ONE BLUE HILL PLAZA, PEARL RIVER, NEW YORK 10965.
18
<PAGE> 22
LOGO
March 7, 1997
Dear Employee:
As a participant in the Orange and Rockland Utilities, Inc. Management
Employees' Savings Plan (the "Plan"), you have designated a portion of your
contributions to the Plan for investment in Common Stock of the Company. Such
stock is held in trust for you by Fidelity Management Trust Company, as Trustee.
You have the right to give instructions as to how you wish the Trustee to
vote your Plan shares on all matters presented to the Company's shareholders.
Accordingly, enclosed are copies of the Company's proxy material and proxy card
to be used in instructing the Trustee to vote your Plan shares at the Annual
Meeting of Shareholders of the Company to be held on April 9, 1997. The proxy
card must be received no later than April 4, 1997.
YOU MUST SIGN AND RETURN THE ENCLOSED PROXY CARD IF YOU WISH YOUR PLAN
SHARES TO BE VOTED, REGARDLESS OF WHETHER YOU HAVE EXECUTED A PROXY RELATING TO
OTHER COMPANY SHARES OWNED BY YOU. THE PROXY CARD FOR YOUR PLAN SHARES MUST BE
RECEIVED BY APRIL 4, 1997. IN THE EVENT YOU DO NOT RETURN THE PROXY CARD, THE
TRUSTEE WILL VOTE YOUR SHARES IN THE SAME PROPORTIONS ON EACH ISSUE AS THE
SHARES FOR WHICH THE TRUSTEE HAS RECEIVED INSTRUCTIONS.
I urge you to fill in, date, and sign and return this proxy promptly. Your
confidential voting instructions will be seen only by the Trustee and the
Trustee's authorized agent, The Bank of New York.
Sincerely yours,
/s/ D. LOUIS PEOPLES
D. LOUIS PEOPLES
Vice Chairman of the
Board of Directors and
Chief Executive Officer
<PAGE> 23
LOGO
March 7, 1997
Dear Employee:
As a participant in the Orange and Rockland Utilities, Inc. Hourly Group
Savings Plan (the "Plan"), you have designated a portion of your contributions
to the Plan for investment in Common Stock of the Company. Such stock is held in
trust for you by Fidelity Management Trust Company, as Trustee.
You have the right to give instructions as to how you wish the Trustee to
vote your Plan shares on all matters presented to the Company's shareholders.
Accordingly, enclosed are copies of the Company's proxy material and proxy card
to be used in instructing the Trustee to vote your Plan shares at the Annual
Meeting of Shareholders of the Company to be held on April 9, 1997. The proxy
card must be received no later than April 4, 1997.
YOU MUST SIGN AND RETURN THE ENCLOSED PROXY CARD IF YOU WISH YOUR PLAN
SHARES TO BE VOTED, REGARDLESS OF WHETHER YOU HAVE EXECUTED A PROXY RELATING TO
OTHER COMPANY SHARES OWNED BY YOU. THE PROXY CARD FOR YOUR PLAN SHARES MUST BE
RECEIVED BY APRIL 4, 1997. IN THE EVENT YOU DO NOT RETURN THE PROXY CARD, THE
TRUSTEE WILL VOTE YOUR SHARES IN THE SAME PROPORTIONS ON EACH ISSUE AS THE
SHARES FOR WHICH THE TRUSTEE HAS RECEIVED INSTRUCTIONS.
I urge you to fill in, date, and sign and return this proxy promptly. Your
confidential voting instructions will be seen only by the Trustee and the
Trustee's authorized agent, The Bank of New York.
Sincerely yours,
/s/ D. LOUIS PEOPLES
D. LOUIS PEOPLES
Vice Chairman of the
Board of Directors and
Chief Executive Officer
<PAGE> 24
[ORANGE AND ROCKLAND LETTERHEAD]
ADMISSION TICKET
1997 Annual Meeting of Common Shareholders
to be held at 10:30 AM on Wednesday, April 9, 1997
PRESENT THIS CARD AT THE DOOR
FOLD AND DETACH HERE
- ------------------------------------------------------------------------------
______
| |
|______|
The Board of Directors recommends a vote FOR each of the following proposals.
<TABLE>
<S> <C> <C> <C>
Item 1-To elect the following FOR ALL NOMINEES Withhold as to I Plan to
directors EXCEPT as noted in the [X] all Nominees [X] Attend Meeting [X]
space provided below
1-Year Term Robert E. 3-Year Term J. Fletcher Creamer Kenneth D. McPherson
Mulcahy III Jon F. Hanson Linda C. Taliaferro
Exceptions ________________________________
Item 2-To appoint Arthur Andersen LLP as Item 3-In their discretion, the proxies are authorized to act on such
independent public accountants for other matters as may properly come before the meeting or any adjournments
1997. thereof.
For [X] Against [X] Abstain [X] 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.
</TABLE>
EVERY PROPERLY SIGNED PROXY WILL BE VOTED (OR NOT VOTED) IN ACCORDANCE WITH
SPECIFICATIONS MADE ABOVE, AND WILL BE VOTED FOR THE ELECTION OF ALL PERSONS
NAMED AND FOR THE ACTIONS PROPOSED IF NO SPECIFICATIONS ARE INDICATED.
<TABLE>
<S> <C>
(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.)
Address Change and/or
Comments, Mark Here [X]
DATED ____________________________, 1997
SIGNED __________________________________
|
____| _________________________________________
Votes MUST be indicated
(x) in Black or Blue Ink. [X]
IMPORTANT: PLEASE DATE, SIGN AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
</TABLE>
<PAGE> 25
Orange and Rockland Utilities, Inc. Operations Center
390 West Route 59, Spring Valley, NY 10977
_______________________________________________________________________________
From New Jersey or Southern Rockland County
Take the Garden State Parkway-North to the New York State Thruway-South toward
New York City. Or, take the Palisades Parkway-North to Exit 9W (New York State
Thruway-North, toward Albany). Follow the Thruway to Exit 14 (Spring Valley).
Off the exit, make a right turn onto Route 59-West. Follow Route 59-West
approximately 2 1/4 miles. O&R Operations Center is on the right side of
the road.
From Orange County
Take the New York State Thruway-South to Exit 14B (Airmont Road). Make a right
turn onto Airmont Road and follow to Route 59. Turn left onto Route 59-East.
Follow Route 59-East approximately 3 miles. O&R Operations Center is on the
left side of the road.
_________________________________________________
| |
| |
[ORANGE AND ROCKLAND Logo] | |
| |
Annual Meeting | |
of | |
Common | M A P |
Shareholders | |
April 9, 1997 | |
10:30 a.m. | |
| |
|_________________________________________________|
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
PROXY
ORANGE AND ROCKLAND UTILITIES, INC.
COMMON STOCK PROXY FOR ANNUAL MEETING, APRIL 9, 1997
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 Common
Shareholders of ORANGE AND ROCKLAND UTILITIES, INC. to be held at 390 West
Route 59, Spring Valley, New York, on Wednesday, April 9, 1997, 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 7, 1997.
(Continued, and to be dated and signed, on other side)
ORANGE AND ROCKLAND UTILITIES, INC.
P.O. BOX 11254
NEW YORK, NY 10203-0254
