<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:
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(4) Date Filed:
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<PAGE> 2
LOGO
March 6, 1998
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 8, 1998, 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/ Michael J. Del Giudice
MICHAEL J. DEL GIUDICE
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 8, 1998, at 10:30 A.M. for the purposes set forth below:
1. To elect three Directors.
2. To authorize the appointment of the firm of Arthur Andersen LLP as
independent public accountants for the year 1998.
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 27, 1998
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,
MICHAEL J. DEL GIUDICE
Chairman of the Board of Directors
G. D. CALIENDO
Senior Vice President, General Counsel
and Secretary
March 6, 1998
<PAGE> 4
ORANGE AND ROCKLAND UTILITIES, INC.
ONE BLUE HILL PLAZA
PEARL RIVER, NEW YORK 10965
March 6, 1998
PROXY STATEMENT
ANNUAL MEETING OF COMMON SHAREHOLDERS, APRIL 8, 1998
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 1998
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 or her 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 or her proxy and vote in person if he or she desires to do so, but
attendance at the meeting will not itself revoke his or her 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 three 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 1997 containing financial
statements, which is not a part of this proxy statement, was mailed to
shareholders commencing February 20, 1998.
The voting securities of the Company issued and outstanding on February 27,
1998 consisted of 13,518,690 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. The Board of Directors, pursuant to the
Company's Certificate of Incorporation and By-Laws, has, effective at the 1998
Annual Meeting of Shareholders, fixed the number of Directors at 10. At the 1998
Annual Meeting, three Directors are to be elected, all of whom shall be members
of the class of 2001.
The Board of Directors has designated Robert E. Mulcahy III, James F.
O'Grady, Jr. and D. Louis Peoples as nominees for election as Directors for
three-year terms expiring at the 2001 Annual Meeting of Shareholders. All
nominees are presently Directors of the Company. Mr. Mulcahy was elected as a
member of the class of 1998 at the 1997 Annual Meeting. Messrs. James F.
O'Grady, Jr. and D. Louis Peoples were each elected as members of the class of
1998 at the 1995 Annual Meeting.
H. Kent Vanderhoef, in compliance with the Company's By-Laws, will retire
from the Board at the 1998 annual meeting and is not a candidate for reelection.
The Board of Directors is deeply appreciative of the contributions made by Mr.
Vanderhoef during his 22 years of service as a Director and his over four years
of service as Chairman. In accordance with the Board's succession plan, Mr.
Vanderhoef stepped down as Chairman at the Board's February 1998 meeting and
Michael J. Del Giudice was elected to succeed him in that position.
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 three 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 March 1, 1998, 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
THREE-YEAR TERM EXPIRING IN 2001
<TABLE>
<C> <S>
ROBERT E. MULCAHY III, AGE 61, DIRECTOR SINCE 1997
Photo of Robert E. Member, Compensation Committee.
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. Effective April 15, 1998, Director of
Athletics, Rutgers University, Piscataway, New Jersey.
Director, First Morris Bank and Wickes Lumber Company.
Member of the Board of Directors, National Football Foundation and College Hall
of Fame, Inc. Chairman, Thoroughbred Racing Communications. Chairman Emeritus and
member of the Board of Governors, Cathedral Healthcare System, Newark, New
Jersey. Member, Board of Trustees, Delbarton School. Member, Board of Governors,
New Jersey Historical Society. Mr. Mulcahy was Chief of Staff to the Governor of
New Jersey in 1978 and 1979.
</TABLE>
2
<PAGE> 6
<TABLE>
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JAMES F. O'GRADY, JR., AGE 70, DIRECTOR SINCE 1980
Photo of James F. Chairman, Compensation Committee and Member, Executive Committee.
O'Grady, Jr. President, O'Grady and Associates, Vero Beach, Florida, 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., SFX Entertainment Corp., 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.
D. LOUIS PEOPLES, AGE 57, DIRECTOR SINCE 1994
Photo of D. Louis Vice Chairman of the Board of Directors and Chief Executive Officer of the
Peoples Company, Pearl River, New York, and of Rockland Electric Company ("Rockland
Electric") and Pike County Light & Power Company ("Pike"), utility subsidiaries
of the Company, since 1994.
Member, Executive Committee.
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.
President and Director of the Hudson Valley Council, Boy Scouts of America.
Member, Executive Committee, New York Power Pool. Vice Chairman and Director, The
Energy Association of New York State and Empire State Electric Energy Research
Corporation. Director, Edison Electric Institute, Center for Clean Air Policy,
Electric Power Research Institute, Rockland Economic Development Corporation and
The Boyd Foundation.
</TABLE>
MEMBERS OF THE BOARD OF DIRECTORS CONTINUING IN OFFICE
TERM EXPIRING IN 1999
<TABLE>
<C> <S>
RALPH M. BARUCH, AGE 74, DIRECTOR SINCE 1983
Photo of Ralph M. Member, Compensation Committee and Executive Committee.
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.
Vice Chairman of the Board of Trustees, Carnegie Hall. Trustee, Lenox Hill
Hospital and National Academy of Cable Programming. Fellow, International Council
of the National Academy of Television Arts and Sciences.
</TABLE>
3
<PAGE> 7
<TABLE>
<C> <S>
MICHAEL J. DEL GIUDICE, AGE 55, DIRECTOR SINCE 1988
Photo of Michael J. Del Chairman of the Board of Directors of the Company, Pearl River, New York, since
Giudice February 1998.
Chairman, Audit Committee and Member, Executive Committee.
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.
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.
Member, Board of Advisors of Workbench, Inc. and Curran & Connors, Inc.
Chairman of the Governor's Committee on Scholastic Achievement.
FREDERIC V. SALERNO, AGE 54, DIRECTOR SINCE 1995
Photo of Frederic V. Senior Executive Vice President and Chief Financial Officer and a Member of the
Salerno Board of Directors of Bell Atlantic, New York, New York, a telecommunications
company, since August 1997, having previously served as Vice Chairman-
CFO/Business Development and a member of the Board of Directors of NYNEX
Corporation, New York, New York, a telecommunications company, from 1991 until
the merger of NYNEX and Bell Atlantic in 1997. 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.
Trustee, Inner-City Scholarship Fund.
Member, Audit Committee.
</TABLE>
TERM EXPIRING IN 2000
<TABLE>
<C> <S>
J. FLETCHER CREAMER, AGE 71, DIRECTOR SINCE 1987
Photo of J. Fletcher Member, Compensation Committee.
Creamer Chairman of the Board of Directors, J. Fletcher Creamer & Son, Inc., Hacken-
sack, 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.
</TABLE>
4
<PAGE> 8
<TABLE>
<C> <S>
JON F. HANSON, AGE 61, DIRECTOR SINCE 1995
Photo of Jon F. Hanson Member, Audit Committee.
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.,
Consolidated Delivery Logistics, Inc., Neuman Distributors, Inc. and Fleet Trust
and Investment Services Company, N.A.
Trustee of the Prudential Foundation. Member, Board of Governors, Hackensack
University Medical Center. Member of the Board of Managers, Bergen Pines County
Hospital. Member of the Board of Trustees, Hope College. Chairman, The National
Football Foundation and College Hall of Fame, Inc. and the Meland Foundation.
KENNETH D. MCPHERSON, AGE 63, DIRECTOR SINCE 1993
Photo of Kenneth D. Director, Rockland Electric since 1995.
McPherson Member, Compensation Committee and Executive Committee.
Senior Partner, Waters, McPherson, McNeill, P.C., Secaucus, New Jersey, a law
firm, since 1963.
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.
LINDA C. TALIAFERRO, AGE 50, DIRECTOR SINCE 1990
Photo of Linda C. Director, Pike since 1995.
Taliaferro Member, Audit Committee.
Member, Taliaferro & Associates, Harrisburg, 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 Com-
mission from 1979 until 1988, and served as its Chair from 1983 until 1987.
Director of Resources For The Future, Inc., Washington, D.C. Consultant to Coast
Partners Securities, Inc., San Francisco, California. Member, the Project Working
Group on "The Future of Nuclear Power in Asia" for The Atlantic Council of The
United States, Washington, D.C. A founder of the American Association of Blacks
in Energy, Washington, D.C. Member, Links, Inc., and the Urban League of
Washington, D.C.
</TABLE>
MEETINGS AND COMMITTEES OF THE BOARD
During 1997, the Board of Directors held 18 meetings. In addition, the
following Committees of the Board of Directors held the following meetings: the
Audit Committee held eight meetings; the Compensation Committee held 10
meetings; and the Executive Committee held seven meetings. During 1997, no
Director attended less than 85% 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
5
<PAGE> 9
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
Under the existing Board of Directors' compensation structure 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 attended, 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.
Directors are permitted to defer receipt of their retainer and meeting fees
under the Deferred Compensation Plan for Non-Employee Directors (the "Directors'
Deferred Compensation Plan"). In addition, the Post-Director Service Retainer
Continuation Program (the "Directors' Pension Program") provides for the
continued payment of the annual retainer to an Eligible Director (as defined
under the Directors' Pension Program) for a period equal to the Eligible
Director's years of service on the Board. Average total Director compensation in
1997, including the present value of benefits earned under the Directors'
Pension Program, was approximately $57,500.
Upon the recommendation of the Board of Directors' independent compensation
consultant, on February 5, 1998 the Board of Directors adopted a new
compensation structure (the "Compensation Program"), replacing the compensation
structure described above. The Compensation Program was designed by the Board's
independent compensation consultant to meet industry standards, and in
recognition of the general trend to align Director compensation with shareholder
interests.
Under the Compensation Program, which becomes effective April 1, 1998, the
annual $20,000 retainer, all meeting fees, and the $900 per diem payment for
each full day or major portion of a day spent on Board business will be
eliminated, and the Directors' Pension Program will be discontinued.
Furthermore, the cash component of Directors' annual compensation has been
significantly reduced.
Effective April 1, 1998, Directors who are not current or former officers
of the Company or its subsidiaries each will be paid an annual fee of $50,000,
of which $25,000 will be payable in cash and $25,000 will be deferred in phantom
share units and credited to a phantom share unit account under the Directors'
Deferred Compensation Plan until cessation of the Director's service on the
Board, as described below. Upon the advance request of a Director and the
approval of the Chairman of the Board, a greater percentage of a Director's
annual fees may be received in cash, rather than deferred and credited as
phantom share units to the Directors' Deferred Compensation Plan, in subsequent
calendar quarters. The Compensation Program has been instituted with the
expectation that each Director will attend at least 75% of the meetings of the
Board and its committees. A failure to meet this attendance threshold will
subject a Director to the forfeiture of 25%
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<PAGE> 10
of the fees payable in the following calendar year. The attendance requirement
may be waived, in the discretion of the Compensation Committee, for reasons of
health or other personal circumstances.
Under the Compensation Program, the Chairperson of each committee of the
Board of Directors will receive an additional annual cash fee of $1,600 for
service as Chairperson. The Chairman of the Board will receive an annual cash
fee of $20,000 for service in that capacity. This annual fee will be paid in
lieu of the enhanced meeting fee paid to the Chairman of the Board under the
discontinued compensation structure, which in 1997 resulted in the Chairman of
the Board receiving $16,200 in additional fees. All cash fees will now be paid
quarterly, all or a portion of which a Director may elect to defer under the
Directors' Deferred Compensation Plan, and phantom share units will be credited
to the Directors' Deferred Compensation Plan quarterly.
The Directors' Pension Program will be discontinued effective April 1,
1998. Any benefit due a former Director under the Directors' Pension Program
will be paid in accordance with the terms of the Directors' Pension Program in
effect at the time the Director left the Board. Upon the Board's adoption of the
new Compensation Program on February 5, 1998, the present value of each current
Director's accrued benefit under the Director's Pension Program, whether or not
vested, was calculated (by rounding Directors' years of service under the
Directors' Pension Program to the nearest complete year of service as of the
1998 Annual Meeting of Shareholders) and converted to equivalent deferred
phantom share units, based on the fair market value (as defined in the
Directors' Deferred Compensation Plan) of the Company's Common Stock on February
5, 1998. These deferred phantom share units were then credited to the Director's
phantom share unit account under the Directors' Deferred Compensation Plan, and
are subject to the terms of that Plan. In recognition of her valuable service on
the Board and its Special Committee, the accrued benefit for Ms. Taliaferro was
increased by 40% prior to its conversion to phantom shares. In recognition of
their many years of valuable service to the Company as members of the Board, the
accrued benefit under the Directors' Pension Program for Directors age 69 or
older as of December 31, 1997 was calculated based on a $25,000 annual benefit
level. For all other Directors, a $20,000 benefit level was used in the
calculation.
Pursuant to the Directors' Deferred Compensation Plan, a Director may elect
to defer receipt of all or part of his or her cash compensation for services as
a Director. Prior to January 1, 1998, if a Director elected to defer receipt of
compensation he or she could direct that those amounts be credited to either an
interest-bearing account or a phantom share unit account under the Directors'
Deferred Compensation Plan. Commencing with deferrals on or after January 1,
1998, Directors were no longer provided the option to have their future deferred
compensation credited to an interest-bearing account; rather Directors may elect
to defer future cash compensation either into a phantom share unit account or
into an investment account, in which Directors' deferred compensation would be
credited with returns based on the performance of one or more available
investment funds, as selected by the Director. Those Directors with an existing
deferred compensation balance in an interest-bearing account were provided a
one-time opportunity to transfer that balance into their investment account,
effective January 1, 1998. In addition, commencing January 1, 1998, and subject
to certain restrictions, the Directors' Deferred Compensation Plan permits
Directors to receive an in-service withdrawal from those amounts that they elect
to defer.
Amounts deferred to a Directors' phantom share unit account under the
Directors' Deferred Compensation Plan, either at the election of the Director or
pursuant to the terms of the Compensation Program, 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. 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. With the adoption of the
Compensation Program, Directors may, following the termination of their Board
service, switch amounts credited to their phantom share unit accounts into their
investment account. Upon termination of the Director's service, the Company will
pay to the Director in cash the value of his or her accounts under the
Directors' Deferred Compensation Plan, either in a lump sum or in up to 10
ratable annual installments, in accordance with the Director's previous
elections and the terms of the Directors' Deferred
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<PAGE> 11
Compensation Plan, 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.
MANAGEMENT'S CARRIED INTEREST IN COMPANY STOCK
The following table shows, as of March 1, 1998, all of the Company's Common
Stock owned beneficially by each Director and each executive officer named in
the Summary Compensation Table as well as Common Stock holdings of all Directors
and executive officers as a group. In addition, the table shows Common Stock
equivalents held by the named individuals under compensation plan arrangements
(representing, in the case of the named executive officers, primarily the
opportunity to earn long-term incentive compensation) and the total shares
represented.
<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 5,654 5,848 11,502
Robert J. Biederman, Jr. 0 4,102 4,102
Larry S. Brodsky 0 745 745
G. D. Caliendo 208 4,923 5,131
J. Fletcher Creamer 8,566 4,680 13,246
Michael J. Del Giudice 1,109 2,137 3,246
R. Lee Haney 596 4,923 5,519
Jon F. Hanson 3,009 2,726 5,735
Robert J. McBennett 248 3,282 3,530
Kenneth D. McPherson 1,000 3,819 4,819
Robert E. Mulcahy III 163 371 534
James F. O'Grady, Jr. 1,000 6,765 7,765
D. Louis Peoples 1,614 16,409 18,023
Frederic V. Salerno 1,500 754 2,254
Linda C. Taliaferro 504 2,060 2,564
H. Kent Vanderhoef 2,572 7,417 9,989
20 Directors and executive officers
as a group 27,980
</TABLE>
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(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 13, 1998,
the latest date for which such information is available.
(2) As of March 1, 1998, no Director owned beneficially more than .063% of
the outstanding shares of Common Stock, no named executive officer owned more
than .012% of such shares and Directors and executive officers as a group owned
.207% of such shares.
(3) This column shows the named individuals' Common Stock share equivalents
under compensation plans through February 23, 1998, the latest date for which
such information is available. 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 share equivalents shown for executive officers is an
aggregate of PSUs granted for the 1996-98, 1997-99 and 1998-2000 three-year
performance periods but not yet earned and, with respect to one executive
officer DSUs earned as a result of PSUs earned for the 1996 transitional
performance period, in each case 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' Deferred Compensation Plan
8
<PAGE> 12
as well as phantom share units credited to each Director's account under this
Plan as of February 5, 1998 in connection with the discontinuation of the
Directors' Pension Program. 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 than on salary increases, the program enhances the
alignment of management and shareholder interests.
SALARY AND PERFORMANCE INCENTIVES
The Company's executive 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 that focus on shareholder interests
and division-specific operating objectives, such as cost management,
efficiency, productivity, safety and customer service. These objectives
are established annually.
- 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 performance period, based on
the Company's earnings per share performance and its total shareholder
return (stock price appreciation
9
<PAGE> 13
plus dividends) during such performance period, 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. Utility peer groups are used for comparison purposes to
establish total compensation as well as criteria for incentive payments to be
awarded under the Incentive Plan and PSU Plan.
Specifically, comparison is 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 are
configured so that total compensation approximates the 60th percentile of the
revenue-adjusted EEI Survey data when targeted results are achieved.
SALARY STRUCTURE AND SALARY INCREASES
Salary ranges reflect a minimum amount and a position rate that
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 1997, Incentive Plan target award opportunities ranged from 25% to 45%
of salary at December 31, 1997. Incentive Plan performance for 1997 was
evaluated using shareholder, management, customer satisfaction and
division-specific measures:
- Shareholder Measure (weight 55%): 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 15%): Operating and maintenance expenditures
compared to pre-established standards.
- Customer Satisfaction Measure (weight 10%): Utility customer satisfaction
is measured based on the Company's annual customer satisfaction survey
results.
- Division-Specific Measure (weight 20%): 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 1997, the shareholder measure was achieved at 0% to 58%, the
management measure was achieved at 18% and the customer satisfaction measure was
achieved at 8%. Division-specific measures were achieved at 14% to 24%. The
average of these factors combined to result in awards ranging from 47.5% to 108%
of targeted levels.
10
<PAGE> 14
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"). 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.
Participants whose participation in the PSU Plan commenced in 1995 or 1996 also
received PSU grants for one-year and two-year transitional performance periods
equal to one-third and two-thirds of the corresponding three-year performance
period.
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 a performance period
is 120% of the number of PSUs granted. In addition, the value of dividend
equivalents that have accumulated during a performance period is 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 average of the high and low stock price on the date the dividends were
paid. Dividend equivalent PSUs are then also credited with dividend equivalent
PSUs on dividends declared subsequently during the performance period.
Determinations Regarding Earning and Payment of PSUs
PSUs are earned based on performance criteria that 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) and the
1997-99 performance period, 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 were weighted 50%/50%, respectively, for the 1995-97 and related
transitional performance periods. These criteria were weighted 75%/25%,
respectively, for the 1996-98 performance period (and related transitional
performance periods) and the 1997-99 performance period.
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
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 are
deferred in the form of deferred performance share units ("DSUs") and then 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 either (i) to the various investment fund options in which participants
may elect to place their deferred compensation under the terms of the PSU Plan;
or (ii) in DSUs until such future post-service date or dates as the participant
elects to begin receiving a distribution. PSU payments deferred in DSUs, whether
deferred, in the case of transitional awards,
11
<PAGE> 15
until the end of the applicable three-year performance period or, in the case of
full three-year awards, deferred at the election of the participant, will be
credited with dividend equivalents that 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.
Participants in the 1995-97 performance period earned between 34% and 109%
of the PSUs granted. Participants in the 1996-97 transitional performance period
earned 95% of the PSUs granted. The PSUs (and dividend equivalents attendant
thereto) earned with respect to the 1995 and 1995-96 transitional performance
periods and the 1995-97 performance period were paid, or further deferred, in
early 1998 in accordance with the terms of the PSU Plan. The earned 1996 and
1996-97 transitional performance period awards and the 1996-98 performance
period awards, if earned, will be payable in early 1999.
CHIEF EXECUTIVE OFFICER COMPENSATION
Mr. Peoples' 1997 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 officer positions included
in the EEI Survey. Mr. Peoples' actual 1997 salary was at the position rate.
Mr. Peoples' Incentive Plan award for 1997 was based, as described above,
on the Company's 1997 performance at 47.5% of target. The earning of Mr.
Peoples' PSU Plan award for the 1995-97 performance period was based upon
performance at 34% of target, reflecting the fact that while earnings per share
for utility operations were above target discontinued non-utility operations had
a negative impact on Company earnings per share results. Mr. Peoples' attainment
of the 1996-98 and 1997-99 long-term performance criteria cannot be determined
until after 1998 and 1999, 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 1997 fiscal year approaching $1 million, and
the Company does not believe that any executive officer's compensation is likely
to exceed $1 million in 1998, the Company has not developed an executive
compensation policy with respect to qualifying compensation paid to its
executive officers for deductibility under Section 162(m) of the Code.
COMPENSATION COMMITTEE
<TABLE>
<S> <C>
James F. O'Grady, Jr., Chairman Kenneth D. McPherson
Ralph M. Baruch Robert E. Mulcahy III
J. Fletcher Creamer H. Kent Vanderhoef
</TABLE>
February 5, 1998
12
<PAGE> 16
SUMMARY COMPENSATION TABLE
The table below shows all compensation awarded to, earned by or paid to the
person serving as Chief Executive Officer in 1997 and the five other most highly
compensated executive officers (including one former officer) of the Company for
services rendered in all capacities to the Company and its subsidiaries during
the fiscal years ended December 31, 1997, December 31, 1996 and December 31,
1995:
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL ------------
COMPENSATION PAYOUTS
-------------------- ------- ALL OTHER
SALARY BONUS LTIP PAYOUTS COMPENSATION
NAME & PRINCIPAL POSITION YEAR ($) ($) ($)(1) ($)(2)
------------------------- ---- ------ ----- ------------ ------------
<S> <C> <C> <C> <C> <C>
D. Louis Peoples 1997 404,659 87,638 83,288 13,449
Vice Chairman of the 1996 394,583 162,900 130,073 27,735
Board and Chief 1995 355,178 204,019 64,477 117,148
Executive Officer
R. Lee Haney 1997 205,000 49,200 28,707 6,606
Senior Vice President 1996 205,000 76,260 46,246 7,933
and Chief Financial 1995 198,487 95,325 21,713 42,080
Officer
G. D. Caliendo(3) 1997 204,009 45,810 24,764 5,598
Senior Vice President, 1996 195,833 71,676 42,303 11,155
General Counsel 1995 158,791 86,025 17,856 121,259
and Secretary
Robert J. Biederman, Jr. 1997 167,099 62,829 74,473 6,280
Vice President, 1996 160,000 53,040 49,638 4,155
Operations 1995 157,400 62,720 26,831 2,276
Robert J. McBennett 1997 138,531 50,232 64,366 5,202
Treasurer 1996 137,250 43,677 43,866 4,825
1995 127,875 48,600 0 32,806
Larry S. Brodsky(4) 1997 237,256 83,562 0 87,335(5)
Former President and 1996 283,920 108,870 24,435 77,718
Chief Operating Officer
</TABLE>
- ---------------
(1) The LTIP Payouts shown include PSUs earned pursuant to the PSU Plan in
the years 1995-1997. 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. The dollar values of PSUs paid with
respect to the 1995-1997 performance period and the DSUs paid for the 1995 and
1995-1996 transitional performance periods were based on the average price of
the Company's Common Stock during the fourth quarter of 1997. Also included in
the LTIP Payouts shown are installments of long-term incentive awards earned for
the period 1992-94 under a predecessor incentive plan and paid to participants
in, respectively, 1995, 1996 and 1997.
(2) Included in All Other Compensation for 1997 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, $2,400; Mr. Haney, $2,400; Mr. Caliendo, $2,400; Mr. Biederman,
$2,400; Mr. McBennett, $2,070; and Mr. Brodsky, $2,400.
(b) A term life insurance premium for each individual, as follows: Mr.
Peoples, $6,821; Mr. Haney, $3,240; Mr. Caliendo, $3,198; Mr. Biederman,
$963; Mr. McBennett, $2,034; and Mr. Brodsky, $1,810.
(c) Interest on long-term incentive awards which were deferred under
the terms of the predecessor incentive plan for four individuals, as
follows: Mr. Peoples, $4,228; Mr. Haney, $966; Mr. Biederman, $2,917; and
Mr. McBennett, $1,098.
(3) Mr. Caliendo joined the Company effective February 21, 1995.
(4) Mr. Brodsky joined the Company effective January 1, 1996 and resigned
from the Company effective August 8, 1997.
(5) With respect to Mr. Brodsky, included in "All Other Compensation" for
1997 were severance payments in the amount of $83,125.
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<PAGE> 17
LONG-TERM INCENTIVE PLANS--AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
ESTIMATED FUTURE
SHARE UNIT PAYMENTS
----------------------------
(A) (C) (D) (E) (F)
(B) PERFORMANCE OR
NUMBER OF SHARES, OTHER PERIOD UNTIL
UNITS OR OTHER MATURATION OR THRESHOLD TARGET MAXIMUM
NAME RIGHTS(1) PAYOUT (#) (#) (#)
---- ----------------- ------------------ --------- ------ -------
<S> <C> <C> <C> <C> <C>
D. Louis Peoples..................... 5,000 1997-99 250 5,000 6,000
R. Lee Haney......................... 1,500 1997-99 75 1,500 1,800
G. D. Caliendo....................... 1,500 1997-99 75 1,500 1,800
Robert J. Biederman, Jr.............. 1,250 1997-99 63 1,250 1,500
Robert J. McBennett.................. 1,000 1997-99 50 1,000 1,200
</TABLE>
- ---------------
(1) The numbers shown in this column reflect the PSUs awarded in 1997 to each
named executive officer (excluding a former executive officer) under the PSU
Plan for the 1997-99 performance period. The number of PSUs shown is
exclusive of dividend equivalents which will be credited during the
performance period in additional PSUs.
PENSION PLANS
The following table sets forth as of December 31, 1997 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 or special pay) and incentive
compensation earned under the Company's Annual Team Incentive Plan, up to
$160,000 annually (with such limitation subject to cost of living adjustment).
Under the terms of the Supplemental Plan, covered compensation consists of
regular compensation and an amount equal to the targeted annual award (the
"Targeted Annual Award") under the Company's Annual Team Incentive Plan. 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:
14
<PAGE> 18
Mr. Haney, $283,961; Mr. Caliendo, $273,389; Mr. McBennett, $174,688; and Mr.
Biederman, $214,830. 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, 8 years; Mr. Caliendo, 6 years; Mr. McBennett, 27 years;
and Mr. Biederman, 24 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, 1992 (including two additional
years of credited service at the final rate of compensation limited to $160,000)
and (2) an additional amount equal to 1 1/2% of the annual rate of compensation
as of January 1, 1993 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 while employed. Benefits payable under the
Retirement Plan for retirements after age 55 and prior to age 60 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 if the sum of the participant's age and years of service
totals at least 85 between ages 55 and 60. 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 (as defined in the
Retirement Plan) 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 (base salary and Targeted Annual Award) over the
three years of highest compensation during the 10 years immediately prior to
retirement, termination or cessation of officer status, reduced by the
participant's Retirement Plan benefit. Benefits payable under the Supplemental
Plan for retirements after age 55 and prior to age 60 are reduced 1/3 of 1% for
each month the participant is under 60 years of age at the time the benefits
commence. However, participants may receive an unreduced pension benefit at age
60, or if the sum of the participant's age and years of service totals at least
85 between ages 55 and 60. Benefits under the Supplemental Plan are subject to
annual post-retirement adjustment once the Consumer Price Index increases at
least 20% since retirement. For non-vested participants, benefits would vest
upon termination of employment following a change in control or potential change
in control of the Company, and the named officers could receive credit for
additional years of service in the calculation of their benefit. 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, Caliendo
and Brodsky 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 four years of service, his Supplemental Plan
benefit percent is currently 56% of an aggregate of his base salary and his
Targeted Annual Award, and this benefit percent will increase to 70% of the
aggregate of his base salary and his Targeted Annual Award by the end of five
years of service. As of December 31, 1997, Mr. Peoples' estimated annual benefit
payable under the Supplemental Plan upon
15
<PAGE> 19
retirement at age 65 is $311,202. Under Mr. Brodsky's agreement, on the basis of
his approximately one year and seven months of service, his Supplemental Plan
benefit percent is 28% of an aggregate of his base salary and his Targeted
Annual Award. Thus, the annual benefit payable to Mr. Brodsky under the
Supplemental Plan if his benefit begins at age 65 is $111,508. 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 two and one half years of service for the next six 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, 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. 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. Their participation in the
Company's retirement plans is described above under "Pension Plans."
Under the terms of their agreements, Messrs. Peoples, 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. Haney and
Caliendo are each entitled to receive a severance payment under the Severance
Plan equal to 12 months of compensation in the event that they are terminated by
the Company for its convenience other than for cause.
Mr. Brodsky left the Company's employ on August 8, 1997. In accordance with
the terms of his employment agreement, Mr. Brodsky will receive severance in
accordance with the Company's Severance Plan, up to a maximum benefit of
twenty-four months of salary continuation. Under the terms of Mr. Brodsky's
severance agreement with the Company, the Company conveyed to him his company
car and agreed to provide him with up to $50,000 of outplacement services in
return for Mr. Brodsky's waiver and release of any and all claims against the
Company.
In addition, the Company has also entered into severance agreements with
named executive officers that 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. McBennett and Mr. Biederman, within 24 months,
following a change in control of the Company. The principal 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 annual bonus plus specified portions of long-term incentive compensation
in accordance with the PSU Plan, (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.
16
<PAGE> 20
The principal benefits under the agreement entered into with Mr. Biederman and
Mr. McBennett consist of (i) a lump-sum severance payment equal to three times
their five-year average annual W-2 compensation, less one dollar, and (ii)
continuation of their 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 and Mr. McBennett'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 that, 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 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 for
reasons other than cause (as defined in the Severance Plan) 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 deductibles, 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 31, 1997, are
with Executive Risk Indemnity, Inc., Continental Casualty Co. and the Travelers
Casualty and Surety Company. The aggregate annual premium cost is $278,391.
17
<PAGE> 21
STOCK PERFORMANCE GRAPH
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN*
Orange and Rockland Utilities, Inc. Common Stock, Standard & Poor's 500 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 Index EEI Index
<S> <C> <C> <C>
1992 100.00 100.00 100.00
1993 103.28 110.08 111.66
1994 89.06 111.53 97.28
1995 105.86 153.45 123.91
1996 114.33 188.67 123.13
1997 159.89 251.61 159.17
</TABLE>
* Assumes $100 invested on December 31, 1992 and reinvestment of
dividends.
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 1998.
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.
18
<PAGE> 22
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 1999 ANNUAL MEETING
November 6, 1998 is the date by which proposals of shareholders of the
Company intended to be presented at the 1999 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,
MICHAEL J. DEL GIUDICE
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 8, 1998 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 1997, UPON WRITTEN REQUEST TO THE OFFICE OF THE TREASURER, ORANGE AND
ROCKLAND UTILITIES, INC., ONE BLUE HILL PLAZA, PEARL RIVER, NEW YORK 10965.
19
<PAGE> 23
LOGO
March 6, 1998
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 8, 1998. The proxy
card must be received no later than April 3, 1998.
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 3, 1998. 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,
[SIGNATURE]
D. LOUIS PEOPLES
Vice Chairman of the
Board of Directors and
Chief Executive Officer
<PAGE> 24
LOGO
March 6, 1998
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 8, 1998. The proxy
card must be received no later than April 3, 1998.
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 3, 1998. 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,
(Signature)
D. LOUIS PEOPLES
Vice Chairman of the
Board of Directors and
Chief Executive Officer
<PAGE> 25
[ORANGE AND ROCKLAND LETTERHEAD]
ADMISSION TICKET
1998 Annual Meeting of Common Shareholders
to be held at 10:30 AM on Wednesday, April 8, 1998
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 directors: FOR all nominees [X] WITHHOLD AUTHORITY to vote [X] *EXCEPTIONS [X]
listed below for all nominees listed below.
Nominees for a 3-year term: Robert E. Mulcahy III, James F. O'Grady, Jr. and D. Louis Peoples
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, mark the "Exceptions" box and write that nominee's
name in the space provided below).
*Exceptions ____________________________________________________
Item 2-To appoint Arthur Andersen LLP as independent public Item 3-In their discretion, the proxies are authorized to
accountants for 1998. act on such other matters as may properly come before the
meeting or any adjournments 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.
Change of Address and or Comments Mark Here
I plan to attend the meeting
<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.)
DATED: _________________________________________________________, 1998
SIGNED _______________________________________________________________
______________________________________________________________________
Votes MUST be indicated
(x) in Black or Blue ink. [X]
Please Sign, Date and Return the Proxy Promptly Using the Enclosed Envelope.
</TABLE>
<PAGE> 26
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 | MAP |
Common | |
Shareholders | |
April 8, 1998 | |
10:30 a.m. | |
|________________________________________________|
FOLD AND DETACH HERE
- -------------------------------------------------------------------------------
PROXY
ORANGE AND ROCKLAND UTILITIES, INC.
COMMON STOCK PROXY FOR ANNUAL MEETING, APRIL 8, 1998
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned, revoking all previous proxies, appoints MICHAEL J. DEL
GIUDICE, 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 8, 1998, 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 6, 1998.
(Continued, and to be dated and signed on other side)
ORANGE AND ROCKLAND UTILITIES, INC.
P.O. BOX 11135
NEW YORK, N.Y. 10203-0135
