SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c)
or Section 240.14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
E'TOWN CORPORATION
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement if other than
the 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)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11:
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[ ] Check box if any part of the fee is offset as provided by Exchange
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was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
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[COMPANY LOGO]
E'TOWN CORPORATION
600 SOUTH AVENUE, WESTFIELD, N.J. 07090
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
May 21, 1998
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To the Stockholders of E'town Corporation,
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of E'town
Corporation will be held at the Canal Road Water Treatment Plant, 701 Randolph
Road, Somerset, New Jersey 08876, on Thursday, May 21, 1998, at 10:00 A.M. for
the following purposes:
1. To elect four members to the Board of Directors for terms to expire
at the 2001 Annual Meeting of Stockholders.
2. To approve the adoption of the 1998 Stock Option Plan.
3. To approve the adoption of the 1998 Directors Stock Plan.
4. To ratify, confirm and approve the act of the Board of Directors,
on March 19, 1998, appointing Deloitte & Touche LLP, Parsippany, New
Jersey, as the auditors for the Corporation and its subsidiaries for the
year 1998.
5. To transact such other business as may properly be brought before
such meeting or any adjournment or adjournments thereof.
Action will be taken at the meeting for the election of Andrew M. Chapman,
Anne Evans Estabrook, Robert W. Kean, III and Barry T. Parker as Directors for
terms of three years.
The close of business on March 24, 1998, has been fixed as the time for the
determination of the stockholders entitled to vote at said meeting, or any
adjournments thereof, and only stockholders of record at such time will be
entitled to vote at such meeting, or at any adjournments thereof.
You are urged to sign, date and return the enclosed proxy promptly, using
the envelope enclosed for your convenience. You may revoke your proxy at any
time prior to the meeting and vote in person at the meeting.
By Order of the Board of Directors,
Walter M. Braswell
Secretary
Westfield, New Jersey
March 27, 1998
<PAGE>
E'TOWN CORPORATION
600 SOUTH AVENUE, WESTFIELD, N.J. 07090
March 27, 1998
PROXY STATEMENT
The following statement is furnished in connection with the solicitation by
the Board of Directors of E'town Corporation ("E'town" or the "Corporation") of
proxies to be used at the Annual Meeting of the holders of the Common Stock of
the Corporation, to be held May 21, 1998, at the hour and place set forth in the
Notice of Annual Meeting accompanying this Proxy Statement. This Proxy Statement
and the accompanying proxy were first sent to stockholders on March 27, 1998.
PERSONS MAKING THE SOLICITATION
This solicitation is made on behalf of the Board of Directors of the
Corporation. The cost of soliciting these proxies will be borne by the
Corporation. In addition to solicitation by mail, the Corporation may make
arrangements with brokerage houses and other custodians, nominees and
fiduciaries to send proxies and proxy material to their principals and may
reimburse them for their expenses in so doing. The solicitation will be
initially by mail, and it may later be decided to make further solicitations by
mail, telephone, telefax, or personal call by Directors, officers and regular
employees of the Corporation. The Corporation has retained Georgeson & Company
("Georgeson") to assist in the solicitation pursuant to which Georgeson will be
paid a fee of $5,500.00 plus expenses.
VOTING SECURITIES AND OWNERSHIP THEREOF
BY CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of March 24, 1998, there were outstanding 8,053,660 shares of the
Corporation's Common Stock, the only capital stock entitled to vote at the
Annual Meeting. Each share of Common Stock is entitled to one vote. As stated in
the Notice of Annual Meeting, only holders of record of the Common Stock at the
close of business on such date will be entitled to vote at the meeting or any
adjournment thereof.
Under current rules of the Securities and Exchange Commission (the "SEC"),
a person who directly or indirectly has or shares voting power and/or investment
power with respect to a security is considered a beneficial owner of the
security. Voting power is the power to vote or direct the vote of shares, and
investment power is the power to dispose of or direct the disposition of shares.
<PAGE>
The following table shows each person who, based upon their most recent
filings with the SEC, beneficially owns more than five percent (5%) of the
Corporation's common stock.
<TABLE>
<CAPTION>
Amount and Nature Percent
Title of Class Name and Address of Beneficial Owner of Beneficial Ownership of Class
- -------------- ------------------------------------ ----------------------- --------
<S> <C> <C> <C>
Common Stock J.P. Morgan & Co. Incorporated .................... 570,900 (1)(2) 7.1 (3)
60 Wall Street
New York, New York 10260
</TABLE>
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(1) A Schedule 13G was filed on February 13, 1998 by J.P. Morgan & Co.
Incorporated, stating that it holds such shares primarily for the benefit
of other persons, none of whom holds more than 5% of the Common Stock of
the Corporation.
(2) Of the 570,900 shares of Common Stock, J.P. Morgan & Co. Incorporated has
sole power to vote 447,400 shares.
(3) 447,400 shares represents approximately 5.5% of the outstanding shares of
Common Stock of the Corporation.
The following information pertains to the Common Stock of the Corporation
that, to the knowledge of the Corporation, is beneficially owned, directly or
indirectly, individually and as a group, by all Directors (including nominees)
and Executive Officers of the Corporation and its subsidiaries, Elizabethtown
Water Company ("Elizabethtown") and E'town Properties, Inc. ("Properties"), as
of March 19, 1998.
<TABLE>
<CAPTION>
Percent
Title of Class Name of Beneficial Owner No. of Shares (1) of Class
- -------------- ------------------------ ----------------- --------
<S> <C> <C>
Common Stock Walter M. Braswell ........................ 9,374 0.12
Edward F. Cash ........................... 12,450 0.16
Thomas J. Cawley .......................... 10,100 0.13
Andrew M. Chapman ........................ 30,432(2) 0.38
Anthony S. Cicatiello ..................... 250 0.00
Anne Evans Estabrook ..................... 83,254(3) 1.03
James W. Hughes ........................... 1,000 0.01
John Kean ................................ 189,198(4) 2.35
Robert W. Kean, Jr. ....................... 216,060(5) 2.68
Robert W. Kean, III ....................... 2,573(6) 0.03
Barry T. Parker ........................... 2,586 0.03
Hugo M. Pfaltz ........................... 9,668(7) 0.12
Chester A. Ring 3rd ....................... 17,331 0.22
Joan Verplanck ............................ 125 0.00
Norbert Wagner ............................ 21,132(8) 0.26
Directors and Executive Officers as a group 605,533 7.52
</TABLE>
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(1) Includes shares held for the Executive Officers under the Elizabethtown
Savings and Investment Plan-401 (k) (the "401 (k) Plan").
(2) Includes 27,000 shares subject to options which were granted to A.M.
Chapman and are presently exercisable under the Corporation's 1987 Stock
Option Plan.
(3) Includes 32,500 shares subject to options which were granted to A.E.
Estabrook of which 7,500 are presently exercisable and the remainder of
which will become exercisable as of May 1, 1998 under the Corporation's
1987 Stock Option Plan.
(4) Includes 119,532 shares held under two trusts for which J. Kean is a
co-trustee and J. Kean shares voting and investment power with respect to
these shares.
(5) Includes 197,567 shares held under a trust for which R.W. Kean, Jr. is a
co-trustee and R.W. Kean, Jr. shares voting and investment power with
respect to these shares.
(6) Includes 1,500 shares subject to options which were granted to R.W. Kean,
III and are presently exercisable under the Corporation's 1987 Stock Option
Plan.
(7) Includes 1,250 shares of Common Stock issuable upon conversion of
debentures held by a partnership of which H.M. Pfaltz is a general partner.
(8) Includes 8,000 shares subject to options which were granted to N. Wagner
and are presently exercisable under the Corporation's 1987 Stock Option
Plan.
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I. ELECTION OF DIRECTORS
The Board of Directors
The Board of Directors is divided into three classes of directorships, with
Directors in each class serving staggered three-year terms. At each Annual
Meeting of Stockholders, the terms of Directors in one of the three classes
expire. At that Annual Meeting of Stockholders, Directors are elected in a class
to succeed the Directors whose terms expire. The terms of the Directors so
elected will expire at the third Annual Meeting of Stockholders thereafter.
Accordingly, of the current Directors, four are in the class whose term expires
at the 1998 Annual Meeting of Stockholders, four are in the class whose term
expires at the 1999 Annual Meeting of Stockholders and three are in the class
whose term expires at the 2000 Annual Meeting of Stockholders.
Every stockholder entitled to vote shall have the right to vote the number
of shares owned by him or her for as many candidates for election as there are
Directors to be elected. Directors shall be elected by a plurality of the votes
cast at the election. With respect to election of Directors, approval of Stock
Option Plan, approval of Directors' Stock Plan, the approval of auditors and any
other matter submitted to a vote of stockholders, votes shall be counted by
designated agents and tabulated by inspectors, with abstentions and non-votes,
including broker non-votes, treated as votes not cast.
It is intended that the shares of Common Stock represented by the
accompanying proxy will be voted at the 1998 Annual Meeting of Stockholders for
the election of nominees ANDREW M. CHAPMAN, ANNE EVANS ESTABROOK, ROBERT W.
KEAN, III, and BARRY T. PARKER, who have been designated by the Board of
Directors as the four nominees who, if elected, shall serve as Directors in the
class of directorships whose members' terms will expire in 2001. All nominees
are currently Directors of the Corporation. While it is not anticipated that any
of the nominees will be unable to serve, if any such nominee is not a candidate
for election as a Director at the 1998 Annual Meeting of Stockholders, the proxy
will be voted in favor of such other person or persons in lieu thereof as the
present Board of Directors shall determine unless the proxy withholds authority
to vote for all nominees.
The following information relates to the nominees named herein and the
other persons whose terms as Directors will continue after the 1998 Annual
Meeting of Stockholders. There are currently eleven Directors on the
Corporation's Board of Directors.
Nominees:
<TABLE>
<CAPTION>
Name, Age and Other Positions Period Served as Director,
if any, with Registrant Business Experience During Past 5 Years Term Expires
- ----------------------------- --------------------------------------------------------- ------------
<S> <C> <C>
Andrew M. Chapman, 42 Served as Director of the Corporation and Elizabethtown 2001
President, E'town Corporation, President, since May 1995. Served as President of the Corporation
Elizabethtown Water Company, President, since May 1997. Served as Chief Financial Officer of the
E'town Properties, Inc. Corporation from August 1989 until May 1997 and Treasurer
of the Corporation from November 1990 until May 1997.
He was elected President of Elizabethtown in January 1996.
He served as Executive Vice President of Elizabethtown from
May 1994 to December 1995, Senior Vice President of
Elizabethtown from April 1993 to May 1994, Chief
Financial Officer of Elizabethtown from November 1990 to
December 1995, and Treasurer of Elizabethtown from August
1989 to May 1994. Served as Director of Properties since
May 1997. Prior to 1989, he was Director of the Office
of Financial Management of the State of New
Jersey, Department of Treasury. He is a member of the
Regional Advisory Board of PNC Bank, N.A., New Jersey.
</TABLE>
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<PAGE>
<TABLE>
<S> <C> <C>
ANNE EVANS ESTABROOK,53 Served as Director of the Corporation since March 1985, 2001
Chairman of the Board, E'town Elizabethtown since December 1982 and Properties since
Corporation and Elizabethtown Water July 1987. She served as Chairman of the Board of the
Company Corporation since May 1997, as a Vice President of the
Corporation from September 1987 to May 1997 and as
Chairman of the Board of Elizabethtown since May 1997.
She has been the owner of Elberon Development Co. (a real
estate holding company) since 1984 and is President of
David O. Evans, Inc. (a construction management
company). She is a Director of Summit Bancorp and its
subsidiary, Summit Bank. She is a Public Member of the
Governing Board, New Jersey Economic Development
Authority. She is a trustee of Cornell University.
ROBERT W. KEAN, III, 50 Served as Director of the Corporation since May 1989 and 2001
Executive Vice President, E'town Director and Executive Vice President of Properties since
Properties, Inc., Vice President, July 1987. Served as Vice President of the Corporation
E'town Corporation since May 1997.
Member of Elizabethtown's Pension
Investment Committee
BARRY T. PARKER, 65 Served as Director of Elizabethtown since January 1983 2001
Member of Audit, Executive Compensation and the Corporation since 1991. He is of counsel to the
and Stock Options, and Corporate Planning law firm of Parker, McCay & Criscuolo, P.C. since
Committees December 1997, where he had been a partner since 1967.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF ALL THESE NOMINEES.
OTHER DIRECTORS:
Name, Age and Other Positions, Period Served as Director
if any, with Registrant Business Experience During Past 5 Years Term Expires
- ----------------------- --------------------------------------- ------------
THOMAS J. CAWLEY, 67 In December 1996, he retired as Vice Chairman, 1999
Member of Corporate Planning and Elizabethtown. He served as Director of the Corporation
Elizabethtown's Pension Investment and Elizabethtown since August 1992, and Properties since
Committees July 1987. He was Vice Chairman of Elizabethtown since
January 1996. From August 1992 to January 1996 he served
as President of Elizabethtown. He served as
Executive Vice President of Elizabethtown from
1987 to 1992. He joined Elizabethtown in 1969 and
served in a variety of operating positions until elected
Executive Vice President in 1987.
ANTHONY S. CICATIELLO, 50 Served as a Director of the Corporation, Elizabethtown 1999
Member of Corporate Planning and and Member of Corporate Planning and Properties since
Executive Compensation and Stock May 1996. He is the Chairman of CN Executive Compensation
Options Committees and Stock Options Communications International, Inc.,
a public relations and Committees advertising firm. He
currently serves on the Rutgers University Board of Governors.
</TABLE>
4
<PAGE>
<TABLE>
<S> <C> <C>
JAMES W. HUGHES, 54 Served as Director of the Corporation and Elizabethtown 2000
Member of Audit and Corporate Planning since May 1997. Since 1995 he has been Dean of the Edward
Committees J. Bloustein School of Planning and Public Policy at
Rutgers University. He has been the Director of the
Rutgers Regional Report since 1988, and has been a member
of the Rutgers University Faculty since 1971.
JOHN KEAN, 68 Served as Director of the Corporation since March 1985 and 1999
Member of Corporate Planning and Elizabethtown since 1957. He is Chairman of the Board and
Executive Compensation and Stock a Director of NUI Corporation. He was President and Chief
Options Committees Committees Executive Officer of NUI Corporation until his
retirement retirement in April 1995, and until October 1994, Chairman
of the Board and Director of Elizabethtown Gas Company, which was
previously a subsidiary of NUI Corporation. He is also an
Honorary President of the International Gas Union
HUGH M. PFALTZ, 66 Served as Director of Elizabethtown since October 1980, 2000
Member of Executive Compensation and Corporation since June 1987 andProperties from July 1987
and Stock Options and until May 1996. He has been a principal of the law firm of Pfaltz &
Elizabethtown's Woller, P.A. since 1976.
Pension Investment
Committees
CHESTER A. RING, 3rd, 70 Served as Director of Elizabethtown since December 1982 and 1999
Member of Audit and Elizabethtown's the Corporation since June 1987. Effective August 1, 1992,
Pension Investment Committees he retired as President of Elizabethtown.
JOAN VERPLANCK, 51 Since December 1994 she has been President of the New 2000
Member of Audit and Elizabethtown's Jersey Chamber of Commerce. For eight years prior to that
Pension Investment Committees she served as President of the Morris County Chamber of
Commerce.
</TABLE>
Family Relationships. Robert W. Kean, Jr. (Director Emeritus) is a first
cousin of John Kean and the father of Robert W. Kean, III.
Certain Transactions. Utility Billing Services, Inc., a subsidiary of NUI
Corporation, of which John Kean is Chairman of the Board and a Director,
provides data processing and related services to Elizabethtown and other
subsidiaries of the Corporation. Certain of these services rendered to
Elizabethtown were pursuant to a contract which expired December 31, 1997. The
charges for all services totaled $717,030 for the year ended December 31, 1997.
A new contract has been entered into for the three years ending December 31,
2000.
In July 1994, Elizabethtown entered into a revolving credit agreement with
six banks. The agreement expired July 1997. Summit Bank, of which Anne Evans
Estabrook is a Director, was committed to lend a minimum of $5,000,000 under the
agreement. Elizabethtown also has a line of credit with Summit Bank. At December
31, 1997, there was $10,000,000 outstanding in loans from Summit Bank. Interest
charges paid to Summit Bank totaled $354,287 during 1997. Summit Bank also
serves as bond trustee for Elizabethtown for which it was paid fees of $23,113
in 1997.
Elizabethtown has a line of credit with PNC Bank, N.A., New Jersey, of
which Andrew M. Chapman serves on the Regional Advisory Board. At December 31,
1997, there were no loans outstanding with PNC Bank, N.A., New Jersey. Interest
charges paid to PNC Bank, N.A., New Jersey, totaled $372,850 during 1997. PNC
Bank, N.A., New Jersey, also serves as trustee and recordkeeper for the benefit
plans for which it was paid fees of $40,020.
5
<PAGE>
The law firm of Parker, McCay & Criscuolo, P.C., of which Barry T. Parker
was a partner and is now of counsel, provided legal services to the Corporation
and its subsidiaries which resulted in $60,844 in legal fees being paid to the
firm in 1997.
The law firm of Lindabury, McCormick & Estabrook, of which the husband of
Anne Evans Estabrook is of counsel, provided legal services to the Corporation
that resulted in $31,652 in legal fees being paid to the firm in 1997.
It is the opinion of management that the amounts charged for these services
were as favorable as those that would be charged for such services by comparable
unaffiliated sources. Management periodically reviews the terms of these
arrangements to ensure that the costs for these services are comparable to those
that would be charged in the general market.
Meetings and Committees. The Board of Directors of the Corporation held
eleven meetings in 1997, with an attendance record by Directors of 99%. There
are four committees of the Board of Directors. Unless otherwise indicated, these
committees perform the indicated functions for both the Corporation and
Elizabethtown.
The Audit Committee, which met four times in 1997, reviews the scope of the
annual audit by the Corporation's independent auditors, receives and reviews the
auditors' annual report, annually recommends to the Board of Directors the
appointment of independent auditors, subject to approval by the stockholders,
and oversees the activities of Elizabethtown's internal auditor. The Audit
Committee was composed in 1997 of Chester A. Ring, 3rd, Chairman, James W.
Hughes, Barry T. Parker and Joan Verplanck.
The Corporate Planning Committee, which met three times in 1997, reviews
and makes recommendations to the Board of Directors regarding the Corporation's
current and long-range strategic plans and objectives, and any other matters
that may be assigned by the Board of Directors to the Committee. The Committee
was composed in 1997 of Anthony S. Cicatiello, Chairman, Thomas J. Cawley, James
W. Hughes, John Kean and Barry T. Parker.
The Executive Compensation and Stock Options Committee met three times in
1997, reviews and recommends to the Board of Directors salaries and bonuses as
well as awards under incentive programs for officers of the Corporation and its
subsidiaries. During 1997, it was composed of Barry T. Parker, Chairman, Anthony
S. Cicatiello, John Kean and Hugo M. Pfaltz.
The Pension Investment Committee of Elizabethtown meets with the Investment
Managers for Elizabethtown's Employees' Retirement Plan Fund to review
investment policies and determine recommended investment objectives for the
Fund. The Committee also reviews the investment performance of participants'
investment options for Elizabethtown's Savings and Investment Plan-401(k) and
the investment performance for the trust funds for postretirement benefits. The
Committee met four times in 1997 and was composed of Hugo M. Pfaltz, Chairman,
Thomas J. Cawley, Robert W. Kean, III, Chester A. Ring, 3rd, and Joan Verplanck.
Executive Management Committee. The Boards of Directors of the Corporation
and Elizabethtown have established a joint Executive Management Committee to
review general policy and planning matters and make recommendations to the
Boards of Directors as to policy decisions. This Committee also serves as the
nominations committee for the Board of Directors of the Corporation. This
Committee, which usually meets semi-monthly, was composed in 1997 of Robert W.
Kean, Jr. (Director Emeritus), Chairman, Andrew M. Chapman, Anne Evans Estabrook
and Norbert Wagner. Robert W. Kean, Jr. will serve as Chairman of the Executive
Management Committee in an advisory, non-voting capacity for a twelve-month
period beginning May 15, 1997, subject to renewal by the Board of Directors.
Directors' Fees. Directors of the Corporation who are not officers are paid
by Elizabethtown an annual retainer of $15,000 and a fee of $550 for each
meeting of the Board of Directors of Elizabethtown which they attend. Such
Directors also receive the per-meeting attendance fee for each meeting of the
Board of the Corporation held on a day when there is not also a meeting of the
Board of Elizabethtown. For the two year period after their appointment,
Directors Emeriti receive the per-meeting Directors' fee for each Board meeting
which they attend. Properties Directors receive a $1,000 annual retainer and a
fee of $550 for a Board Meeting held on days not coincident with Board meetings
of Elizabethtown. Directors who are officers of the Corporation are paid a fee
of $300 for each Board meeting of Elizabethtown they attend. It is anticipated
that, subject to shareholder
6
<PAGE>
approval, the 1998 non-employee Directors' annual retainers will be paid in
Common Stock of the Corporation. Effective May 1997, Robert W. Kean, Jr. was
appointed Chairman of the Board - Emeritus and Director Emeritus and Brendan T.
Byrne and Henry S. Patterson, II were appointed Directors Emeriti.
Members of committees who are not officers of the Corporation are paid a
fee of $350 for participation at Committee meetings on the same day as Board
meetings and a fee of $550 for meetings held on days other than Board meetings.
No fees are paid to members of the Executive Management Committee for attendance
at meetings.
The Boards of Directors of the Corporation and Elizabethtown have
authorized such companies to negotiate consulting agreements with Robert W.
Kean, Jr. whereby he will serve as Chairman Emeritus of the Boards of both
companies and Chairman of the Executive Management Committee as described above,
and will render such other consulting services as the Chairman may reasonably
request. Robert W. Kean, Jr. and Henry S. Patterson, II were paid $46,875 and
$28,125, respectively, in consulting fees in 1997 in addition to their pensions.
Pursuant to a consulting arrangement with Elizabethtown, Thomas J. Cawley was
paid a consulting fee of $38,306 in 1997. The consulting arrangements with Henry
S. Patterson, II and Thomas J. Cawley terminated in June of 1997.
A Director cannot stand for re-election after his or her 72nd birthday. A
retired Director with 10 or more years' service on the Board of Directors (of
the Corporation or Elizabethtown) becomes eligible at age 72 to receive a
pension for life equal to the annual retainer in effect at the date the Director
becomes eligible for the pension. A retired Director with 5 to 9 years of
service will receive a pension equal to the annual retainer in effect at the
date the Director becomes eligible to receive the pension, payable for the same
number of years that the Director served on the Board.
Board of Directors' Compensation and Stock Options
Committee Report on Executive Compensation
E'town's Executive Compensation and Stock Options Committee (the
"Compensation Committee") consists of four Directors: Barry T. Parker, Chairman,
Anthony S. Cicatiello, John Kean and Hugo M. Pfaltz.
The Compensation Committee reviews and recommends to Elizabethtown's Board
of Directors the salaries and benefits for each of the officers of
Elizabethtown, including each executive officer named in the Summary
Compensation Table.
The Compensation Committee designs its executive compensation program to
enable E'town and Elizabethtown to attract, motivate and retain the caliber of
executives required to effectively attain E'town's and Elizabethtown's
objectives.
The Compensation Committee administers executive compensation to ensure
that the compensation remains competitive with levels paid to comparable
positions in comparably-sized companies in three groups: water utilities, other
utilities and general industry. The select group of water utilities used for
comparative purposes includes those set forth in Note 2 to the performance graph
entitled, "Comparison of Five-Year Cumulative Total Return vs. S&P 500 and Peer
Group of Water Utilities."
E'town's compensation program consists of (a) salaries which form the
foundation of each officer's compensation and (b) incentive awards which are
linked to earning goals of the company and specific objectives for each officer.
The Compensation Committee can also make restricted stock grants and recommend
the granting of stock options. Stock options and restricted stock grants are
used primarily to retain and motivate officers to improve the long-term stock
market performance of E'town Corporation.
The Compensation Committee positions salary levels at the median of the
comparative group, and annually evaluates the continued competitiveness of these
levels. The Compensation Committee adjusts salaries through annual merit
increases. Such changes are sufficiently variable that above-average performance
is adequately rewarded and below average performance, if it occurs, is not
rewarded.
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<PAGE>
To strengthen the link between employee performance and compensation, the
Compensation Committee instituted an incentive awards program in 1996. All
Officers of Elizabethtown (except the Chairman) participate in this program and
the President administers a similar program for all Elizabethtown employees who
do not receive overtime. The first awards were made in 1997. Under this program,
the Compensation Committee sets a target incentive award for each participant,
which is expressed as a percent of base salary. Approximately one third of a
participant's award is tied to financial performance and the balance is based on
goals specific to each participant. See Summary Compensation Table for the
awards made in 1997 under this program to the individuals listed in the table.
Current SEC regulations also require a discussion of the relationship
between the compensation of the Chief Executive Officer and company performance
for the last completed fiscal year.
Robert W. Kean, Jr. served as Chief Executive Officer until his retirement
on May 16, 1997. For that period, he received a pro rated portion of his salary
of $250,000 annually. Previously, he had disqualified himself from participation
in Elizabethtown's incentive plans. The Compensation Committee is of the opinion
that the value of his services exceeded his compensation and that he was
undercompensated compared to his peers at other water companies.
Effective May 16, 1997, Anne Evans Estabrook was elected Chairman of the
Board of E'town and Elizabethtown. Mrs. Estabrook serves on a part time basis
and manages all Board activities and provides overall input regarding strategic
development and implementation. Mrs. Estabrook is compensated for services
rendered as Chairman through a salary set annually by the Boards. She received a
pro rated portion of her annual compensation of $125,000, payable in cash and
restricted stock in 1997. The Compensation Committee believes that this level of
compensation is appropriate given the performance of the companies.
Effective May 16, 1997, Andrew M. Chapman was elected President of E'town.
Mr. Chapman continues to serve as President of Elizabethtown and is the senior
full time executive at the two companies. Mr. Chapman's annual compensation of
$210,000 was paid in a combination of cash and restricted stock in 1997. The
Compensation Committee believes that this level of compensation is appropriate
given the performance of the companies.
The Executive Compensation and
Stock Options Committee
Barry T. Parker, Chairman
Anthony S. Cicatiello
John Kean
Hugo M. Pfaltz
8
<PAGE>
The following performance graph illustrates the cumulative total return to
stockholders from the beginning of 1993 to the end of 1997 in comparison to the
Standard & Poor's ("S&P") 500 and a selected peer group of water utilities
("Water Utilities") (Note 2). This peer group is included in the statistical
survey used by the Compensation Committee for comparative purposes.
[GRAPHICAL REPRESENTATION OF CHART BELOW]
Water
E'town Utilities S&P 500
------ --------- -------
1992 10,000 10,000 10,000
1993 11,898 11,440 11,006
1994 10,807 10,529 11,151
1995 13,287 14,953 15,339
1996 14,961 15,419 18,859
1997 20,219 19,222 25,148
(1) Assumes $10,000 invested December 31, 1992 in E'town Corporation Common
Stock, S&P 500 and Water Utilities. All dividends are assumed to be
reinvested over the five year period. Total returns for each Water Utility
were determined in accordance with SEC regulations; i.e. weighted according
to each such issuer's stock market capitalzation
(2) Water Utilities: American Water Works, Aquarion, California Water Service,
Connecticut Water Service, Consumers Water, Dominguez Services, E'town
Corp., Middlesex Water, Philadelphia Suburban, SJW Corp., Southern
California Water, Southwest Water, United Water Resources.
9
<PAGE>
E'TOWN CORPORATION
Summary Compensation Table
The following table provides certain summary information concerning the
compensation for the past three years of the Chief Executive Officer and each of
the other four most highly compensated executive officers of the Corporation
(the "named executive officers").
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation Awards
------------------------------------ -------------------------
Restricted Securities
Name and Fiscal Salary Other Annual Stock Underlying All Other
Principal Position Year (1) & (2) Bonus Compensation Awards (6) Options Compensation
- --------------------------- ---- ---------- ----- ------------ ---------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Anne Evans Estabrook
Chairman of the Board, 1997 $ 84,262 - - $24,999 25,000 $10,326(3)(4)
E'town Corp. and 1996 63,800 - - - - 1,836(3)(4)
Elizabethtown Water Company 1995 62,950 - - - 10,000 1,584(3)(4)
Robert W. Kean, Jr.
CEO of E'town Corp. 1997 $132,694 - - - - $ 5,153(3)(4)
and Elizabethtown Water 1996 246,420 - - - - 6,574(3)(4)
Company (until 5/16/97) 1995 220,820 - - - - 5,494(3)(4)
Andrew M. Chapman 1997 $199,354 - - $20,953 - $15,351(3)(4)
President, E'town Corp. and 1996 185,508 - - - - 42,898(3)(4)(5)
Elizabethtown Water Company 1995 166,864 - - - 12,000 5,964(3)(4)
Norbert Wagner 1997 $135,774 - - $ 8,997 - $ 5,795(3)(4)
Senior Vice President, 1996 128,427 - - - - 5,604(3)(4)
Elizabethtown Water Company 1995 124,170 - - - 8,000 4,743(3)(4)
Edward F. Cash
Vice President - Customer 1997 $129,749 - - $ 7,472 - $ 5,537(3)(4)
Services, 1996 125,204 - - - - 4,764(3)(4)
Elizabethtown Water Company 1995 120,231 - - - 4,000 4,095(3)(4)
Walter M. Braswell
Secretary, E'town Corp. and
Vice President, General 1997 $121,230 - - $ 6,984 - $ 5,479(3)(4)
Counsel and Secretary, 1996 117,308 - - - - 16,606(3)(4)(5)
Elizabethtown Water Company 1995 113,512 - - - 4,000 4,745(3)(4)
</TABLE>
- -----------------
(1) All salaries are paid by Elizabethtown, the Corporation's principal
subsidiary. Salaries are reallocated to the Corporation, as appropriate.
(2) Includes pretax contributions to the 401(k) Plan. Also includes Director's
fees for 1997, 1996 and 1995, respectively, as follows: A.E. Estabrook
$8,650, $21,650, $20,800; R.W. Kean, Jr. $5,050, $3,000, $2,400; and A.M.
Chapman $3,300, $3,300, $2,100.
(3) Includes 401(k) Plan matching contributions by Elizabethtown for 1997, 1996
and 1995 respectively, as follows: R.W. Kean, Jr. $4,595, $5,700, $4,620;
A.E. Estabrook $2,952, $1,512, $1,260; A.M. Chapman $5,700, $5,700, $4,620;
N. Wagner $4,882, $4,618, $3,721; E.F. Cash $4,666, $3,802, $3,099; and
W.M.Braswell $4,303, $4,218, $3,401.
(4) Includes premiums for life insurance by Elizabethtown for 1997, 1996 and
1995, respectively, as follows: R.W. Kean, Jr. $558, $874, $874; A.E.
Estabrook $828, $324, $324; A.M. Chapman $1,176, $1,344, $1,344; N. Wagner
$912, $986, $1,022; E.F. Cash $872, $962, $996; and W.M. Braswell $1,176,
$1,344, $1,344.
(5) Includes premiums for 1995 Supplemental Executive Retirement Plan life
insurance by Elizabethtown for: A.M. Chapman $27,378 and W.M. Braswell
$11,044.
(6) Represents the value as of grant date of restricted stock awards granted in
1997 under the E'town Corporation 1990 Performance Stock Program. The
number of shares of restricted stock awarded to executive officers during
1997 and the value of such restricted stock based on the closing price of
Common Stock as reported on the New York Stock Exchange on December 31,
1997 is as follows: A.E. Estabrook, 823 shares, $33,074; A.M. Chapman, 687
shares, $27,609; N. Wagner, 295 shares, $11,855; E.F. Cash, 245 shares,
$9,846; W.M. Braswell, 229 shares, $9,203
10
<PAGE>
E'TOWN CORPORATION
Option/SAR Grants in Last Fiscal Year
The following table provides information on option and stock appreciation
right grants during 1997 to the persons named in the Summary Compensation Table.
<TABLE>
<CAPTION>
Individual Grants
-----------------------------------------------------------
% of Total Potential Realizable Value
Number of Options/SARs at Assumed Annual Rates of
Shares Granted to Stock Price Appreciation
Underlying Employees in Exercise or for Option Term (2)
Options/SARs Fiscal Base Price Expiration
Name Granted (1) Year ($/Sh) Date 5% 10%
---- ----------- ---- ------ --------- -- ---
<S> <C> <C> <C> <C> <C> <C>
Anne Evans Estabrook 25,000 100% $29.75 5/01/07 $468,563 $1,182,583
Robert W. Kean, Jr. (3) - - - - - -
Andrew M. Chapman - - - - - -
Norbert Wagner - - - - - -
Edward F. Cash - - - - - -
Walter M. Braswell - - - - - -
</TABLE>
- -------------------
(1) The options granted in 1997 are exercisable as of May 1, 1998. No Stock
Appreciation Rights were granted under the 1987 Stock Option Plan, which
expired in 1997.
(2) These values are not predictions of what the Corporation believes the
market value of its Common Stock will be in the next 10 years. They are
merely assumed values required to be calculated in accordance with SEC
rules.
(3) Mr. Kean disqualified himself from participation in Elizabethtown's
incentive plans.
E'TOWN CORPORATION
Aggregated Option/SAR Exercises in Last Fiscal Year
and Year-End Option/SAR Values
The following table provides information regarding the pre-tax value
realized from the exercise of options and stock appreciation rights during 1997
and the value of unexercised in-the-money options and stock appreciation rights
held at December 31, 1997 by the persons named in the Summary Compensation
Table.
<TABLE>
<CAPTION>
Shares
Acquired Aggregate Number of all Outstanding Value of all Outstanding
on Value Options/SARs at 12/31/97 In-the-Money Options/SARs at 12/31/97
Name Exercise Realized Exercisable/Unexercisable (1) Exercisable/ Unexercisable (1)(2)
---- -------- ------------------------------ -------------------------------------
<S> <C> <C> <C> <C>
Anne Evans Estabrook 2,500 $ 67,812 7,500/25,000 $97,969/$260,937
Robert W. Kean, Jr. (3) - - - -
Andrew M. Chapman - - 27,000/0 $374,513/0
Norbert Wagner - - 8,000/0 $104,500/0
Edward F. Cash 4,000 $ 108,500 - -
Walter M. Braswell 4,000 $ 108,500 - -
- -------------------
(1) No Stock Appreciation Rights were granted under the 1987 Stock Option Plan,
which expired in 1997.
(2) Based on the price of $40.1875 per share, the closing price of the Common
Stock on the New York Stock Exchange, Inc. on December 31, 1997.
(3) Mr. Kean disqualified himself from participation in Elizabethtown's
incentive plans.
</TABLE>
11
<PAGE>
Pensions. Elizabethtown's non-contributory defined benefit retirement plan
provides that a participant will receive an annual retirement benefit equal in
amount to 1.6% of the participant's final average compensation for the highest
four consecutive calendar years multiplied by the number of years of credited
service (up to a maximum of 40). Remuneration covered under the retirement plan
includes base wages only. Directors who are not also officers or employees do
not participate.
The following table shows annual pension benefits payable to employees,
including officers, upon retirement at age 65, in various remuneration and
years-of-service classifications. The compensation taken into account under a
tax-qualified plan is subject to a maximum annual limit under the Internal
Revenue Code of 1986, as amended, adjusted annually for cost of living increases
($150,000 in 1994, 1995 and 1996, and $160,000 in 1997 and 1998).
<TABLE>
<CAPTION>
Highest
Consecutive
Four Year
Average
Compensation Annual Benefits for Years of Service Indicated
------------ ----------------------------------------------
10 years 15 years 20 years 25 years 30 years 35 years 40 years
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 75,000 $12,000 $18,000 $24,000 $30,000 $36,000 $42,000 $48,000
100,000 16,000 24,000 32,000 40,000 48,000 56,000 64,000
125,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000
150,000 24,000 36,000 48,000 60,000 72,000 84,000 96,000
175,000 28,000 42,000 56,000 70,000 84,000 98,000 112,000
200,000 32,000 48,000 64,000 80,000 96,000 112,000 128,000
225,000 36,000 54,000 72,000 90,000 108,000 126,000 144,000
250,000 40,000 60,000 80,000 100,000 120,000 140,000 160,000
</TABLE>
The annual benefit amounts shown above are not subject to any deduction for
Social Security benefits or other offset amounts. The number of years of service
now credited under the retirement plan (and the supplemental plans described
below) are as indicated for the following officers: Anne Evans Estabrook, 10
years; Robert W. Kean, Jr., 40 years (as of May 16, 1997); Andrew M. Chapman, 8
years; Norbert Wagner, 34 years, Edward F. Cash, 39 years, and Walter M.
Braswell, 17 years. Robert W. Kean, Jr., who retired as Chief Executive Officer
and as Director of both the Corporation and Elizabethtown during 1997, received
pension benefits for Directors equal to $11,250 during 1997.
Executive officers of Elizabethtown, with the exception of the Chairman of
the Board, are entitled to either a Supplemental Executive Retirement Plan
benefit upon the attainment of the normal retirement age of 65, or a 1995
Supplemental Executive Retirement Plan benefit upon the attainment of the age of
62 with a minimum of 20 years service. The benefit payable under each of these
plans is an amount equal to the difference between 60% of the average annual
base salary for the thirty-six months prior to retirement and the regular
pension benefit shown in the table above. The 1995 Plan also provides life
insurance equal to two times compensation if death occurs before age 55. The
following table shows the annual benefit under each plan payable to executive
officers upon retirement at age 62 or 65.
Average Annual
Base Salary for 36 Annual Supplemental
Months Prior to Executive Retirement
Retirement Benefit(1)
---------- ----------
$ 75,000 $ 45,000
100,000 60,000
125,000 75,000
150,000 90,000
175,000 105,000
200,000 120,000
225,000 135,000
250,000 150,000
- ----------
(1) To be reduced by regular pension benefit shown in prior table.
12
<PAGE>
Change in Control Agreement. E'town has entered into agreements with Andrew
M. Chapman and Anne Evans Estabrook that provide them with certain extended
benefits in the event that their respective employments are terminated by the
Corporation (other than for cause) within three years following a change in
control of the Corporation. In the event of such a termination Mr. Chapman and
Mrs. Estabrook would be entitled, under the agreements, to receive salary,
medical and other benefits, at the rates in effect prior to such termination for
a period of thirty months thereafter. In addition, any incentive compensation
awards due to Mr. Chapman prior to the change in control but not yet paid would
be paid on the date of termination and any restricted stock due to Mr. Chapman
or Mrs. Estabrook, but not vested at the time of the change in control would
thereupon become vested. The amounts payable pursuant to the agreement will be
reduced, if necessary, to avoid excise tax applicable to "parachute payments"
under the Federal tax laws. The agreements expire on December 31, 1998, but are
subject to automatic annual renewal unless the Corporation gives prior notice.
Employment Agreements. E'town and Elizabethtown have each entered into an
employment agreement with Anne Evans Estabrook effective May 15, 1997. The
agreements continue until the earliest of (i) mutual agreement of termination,
(ii) resignation, and (iii) any date on which Mrs. Estabrook no longer stands
for re-election as Director. In addition, the respective companies may terminate
Mrs. Estabrook's employment for reasons of disability or cause (each as defined
in the agreements).
ELIZABETHTOWN WATER COMPANY
Elizabethtown is a wholly-owned subsidiary of the Corporation. The Board of
Directors of Elizabethtown currently numbers eleven individuals, consisting of
the Directors of the Corporation. Four of the Directors of Elizabethtown will
stand for election: Andrew M. Chapman, Anne Evans Estabrook, Robert W. Kean, III
and Barry T. Parker, and it is the intention of the Board of Directors of the
Corporation to cause the Corporation to elect all of such persons as Directors
of Elizabethtown. In addition, Robert W. Kean, Jr. was appointed Chairman
Emeritus and Director Emeritus in 1997 and Brendan T. Byrne and Henry S.
Patterson, II were appointed Directors Emeriti of Elizabethtown.
II. PROPOSED 1998 STOCK OPTION PLAN
On March 19, 1998, the Board of Directors of the Corporation unanimously
adopted, subject to stockholder approval, the E'town Corporation 1998 Stock
Option Plan (the "1998 Plan"). The 1998 Plan provides for the grant of stock
options qualifying as incentive stock options ("ISOs") satisfying the
requirements of Section 422 of the Internal Revenue Code of 1986, as amended,
stock options which do not qualify as incentive stock options ("NQOs"), and
related Stock Appreciation Rights ("SARs") to officers and key employees of the
Corporation and its subsidiaries. ISOs and NQOs are hereinafter collectively
referred to as Options. The 1998 Plan will terminate on May 20, 2008, unless
terminated earlier pursuant to a resolution adopted by the Board of Directors.
The purpose of the 1998 Plan, as was the case with the prior stock option
plan of the Corporation, which expired in 1997, is to retain and motivate key
employees responsible for major contributions to effective management of the
Corporation and its subsidiaries by encouraging their acquisition of an equity
interest in the Corporation.
The proposed 1998 Plan is attached as Exhibit A. Some of the more important
features of the 1998 Plan are summarized below, but the summary is qualified in
its entirety by express reference to the terms of the 1998 Plan as attached
hereto.
Shares to be Optioned -- The number of shares of Common Stock that may be
issued or reacquired to satisfy the requirements of the 1998 Plan is limited to
a total of 500,000 shares. Shares subject to lapsed or terminated Options will
be available for future options. In the event of a stock dividend, stock split
or other change in the corporate structure, the Compensation Committee may make
such adjustments in the number or kind of shares that will equitably reflect the
change.
Administration of the 1998 Plan -- The 1998 Plan is to be administered by
the Compensation Committee, none of the members of which will be eligible to
participate in the 1998 Plan. The Compensation
13
<PAGE>
Committee's powers under the 1998 Plan will include exclusive authority to
designate the participants, the number of shares subject to, and the terms of,
the Options granted, the period during which Options and SARs may be exercised,
and the form of Option and SAR grants. The Compensation Committee also has the
authority to, among other things, interpret the 1998 Plan, establish, amend and
rescind any rules and regulations relating to the 1998 Plan, and to make any
other determinations which it believes necessary or advisable for plan
administration.
Eligible Employees -- Officers and key employees of the Corporation and its
subsidiaries will be eligible for Options. More than one Option may be granted
to an employee. It is not possible at the present time to determine which
officers and key employees may be granted Options in the future under the 1998
Plan. It is expected that such determination will be made primarily on the basis
of an individual's present and potential contribution to the management of the
Corporation's business. Directors who are not full-time officers or employees
will not be eligible to receive Option grants.
Option Price -- The price at which shares may be purchased upon exercise of
an Option must be at least 100% of the fair market value of the Corporation's
Common Stock on the date the Option is granted. The purchase price for all
shares acquired pursuant to exercise of an Option granted under the 1998 Plan is
to be paid in full in cash on the date of exercise, except that in lieu of all
or part of the cash, the employee may tender to the Corporation shares of stock
of the Corporation owned by him and having a fair market value equal to the
exercise price (less any cash paid).
Exercise of Options -- An optionee must remain in the employ of the
Corporation or its subsidiary for not less than one year from the date the
Option is granted before any part of the Option and its related Stock
Appreciation Right can be exercised. Subject to the foregoing, each Option will
be exercisable at such time or times and with respect to such number of shares
as will be fixed by the Compensation Committee, provided that no ISO may be
exercised after the expiration of ten years from the date of grant and no NQO
may be exercised after the expiration of ten years and one day from the date of
grant.
Termination of Options -- If an optionee's employment terminates for any
reason other than death, disability or retirement, all Options and SARs granted
to such person shall expire one month following the termination date. If the
optionee retires, any unexercised ISOs held by such optionee shall be
exercisable for three months, and any unexercised NQOs and SARs held by such
optionee shall be exercisable for twelve months after the optionee's retirement
date. If the optionee's employment terminates by reason of death or disability,
the period in which the exercisable portion of the Option may be exercised will
be one year after such termination.
Stock Appreciation Rights -- An optionee granted Stock Appreciation Rights
together with related Options under the 1998 Plan may exercise such rights only
at a time when the related Option is otherwise exercisable and the fair market
value of a share of Corporation's Common Stock exceeds the option price for a
share.
Amendment of 1998 Plan -- The Board of Directors may amend the 1998 Plan at
any time without the approval of stockholders of the Corporation except that no
amendment which increases the aggregate number of shares that may be issued
pursuant to the 1998 Plan may be made effective until the same is approved by
the stockholders.
Tax Consequences of Grants Under the 1998 Plan -- The following discussion
is generally a summary of the principal United States federal income tax
consequences under current federal income tax laws relating to grants or awards
to employees under the 1998 Plan. This summary is not intended to be exhaustive
and, among other things, does not describe state, local or foreign income and
other tax consequences.
An optionee will not recognize any taxable income upon the grant of a NQO
and the Corporation will not be entitled to a tax deduction with respect to such
grant. Generally, upon exercise of a NQO, the excess of the fair market value of
Common Stock on the date of exercise over the option price will be taxable as
ordinary income to the optionee. If the Corporation complies with applicable
reporting and withholding requirements, the Corporation will be entitled to a
tax deduction in the same amount and at the same time as the optionee recognizes
ordinary income, subject to any deduction limitation under Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code") (which is discussed
below). The subsequent disposition of shares acquired upon the exercise of a NQO
will ordinarily result in capital gain or loss.
14
<PAGE>
Subject to the discussion below, an optionee will not recognize taxable
income at the time of grant or exercise of an ISO and the Corporation will not
be entitled to a tax deduction with respect to such grant or exercise.
Generally, if an optionee has held shares acquired upon the exercise of an ISO
for at lease one year after the date of exercise and for at least two years
after the date of grant of the ISO, upon disposition of the shares by the
optionee, the difference, if any, between the sales price of the shares and the
option price will be treated as capital gain or loss to the optionee. Generally,
upon a sale or other disposition of shares acquired upon the exercise of an ISO
within one year after the date of exercise or within two years after the date of
grant of the ISO (a "disqualifying disposition"), any excess of the fair market
value of the shares at the time of exercise of the option over the exercise
price of such option will constitute ordinary income to the optionee. Any excess
of the amount realized by the holder on the disqualifying disposition over the
fair market value of the shares on the date of exercise will generally be
capital gain. Subject to any deduction limitation under Section 162(m) of the
Code and the Corporation's compliance with applicable reporting requirements,
the Corporation will be entitled to a deduction equal to the amount of such
ordinary income recognized by the holder.
If an NQO or an ISO is exercised through the use of shares previously owned
by the holder, such exercise generally will not be considered a taxable
disposition of the previously owned shares and thus no gain or loss will be
recognized with respect to such shares upon such exercise. However, if the
option is an ISO, and the previously owned shares were acquired on the exercise
of an ISO and the holding period requirement for those shares is not satisfied
at the time they are used to exercise the option, such use will constitute a
disqualifying disposition of the previously owned shares resulting in the
recognition of ordinary income in the amount described above.
Section 162(m) -- Section 162(m) of the Code generally disallows a federal
income tax deduction to any publicly held corporation for compensation paid in
excess of $1 million in any taxable year to the chief executive officer and any
of the four most highly compensated executive officers who are employed by the
Corporation on the last day of the taxable year, but does allow a deduction for
"performance-based compensation" the material terms of which are disclosed to
and approved by stockholders. The Corporation has structured and intends to
implement the 1998 Plan so that compensation resulting therefrom would be
qualified "performance-based compensation." In addition to other requirements
under law, in order to allow the Corporation to qualify such compensation, the
Corporation is seeking stockholder approval of the 1998 Plan.
A favorable vote of a majority of the shares present at the meeting in
person or by proxy is required for approval of the 1998 Plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THIS PROPOSAL.
III. APPROVAL OF DIRECTORS' STOCK PLAN
On March 19, 1998, the Board of Directors of the Corporation unanimously
adopted, subject to stockholder approval, the E'town Corporation 1998 Directors
Stock Plan (the "Directors Plan") for the benefit of non-employee Directors of
the Board of Directors. The purpose of the plan is to motivate, reward and
retain Directors of the Corporation by providing an opportunity for meaningful
capital accumulation linked to the future success of the Corporation and
appreciation in stockholder value. An aggregate of 400,000 shares of Common
Stock will be available for awards of Restricted and Unrestricted Stock under
the Directors Plan, subject to adjustment as equitably required in the event of
a change in capitalization of the Corporation, as determined by the Compensation
Committee.
The proposed Directors Plan is attached as Exhibit B. Some of the more
important features of the Directors Plan are summarized below, but the summary
is qualified in its entirety by express reference to the terms of the Directors
Plan as attached hereto.
The Directors Plan provides for the annual retainer fee paid to Directors
to be provided in the form of either Restricted or Unrestricted Stock, as
elected by each Director. During a thirty-day election period prior to the
commencement of each plan year, each Director shall irrevocably elect to
allocate his or her entire annual retainer fee to either Restricted Stock or
Unrestricted Stock, but not to a combination thereof. The number of shares of
Restricted or Unrestricted Stock which shall be awarded each plan year to each
Director shall be a
15
<PAGE>
number of shares equal to the value of the Director's annual retainer fee
divided by the average closing price of the Common Stock as traded on the New
York Stock Exchange during each of the five trading days preceding the beginning
of each plan year (June 1 of each year). Certificates representing the
Restricted Stock or Unrestricted Stock awarded to a Director in accordance with
his or her election will be issued to the Director (and, if the award is of
Restricted Stock, retained by the Corporation) as soon as practicable following
the date on which annual retainer fees are payable. Upon the award of
Unrestricted Stock, Directors will have all the rights accorded to a stockholder
with respect to such shares. Directors awarded shares of Restricted Stock will
have the rights of a shareholder with respect to the Restricted Stock as of the
date of award, including the right to receive dividends, and will have all
rights of a stockholder upon the lapse of the restrictions on such shares.
Upon the termination of a Director's service on the Board for any reason,
or at such other time as may be determined by the Committee, any shares of
Restricted Stock held by the Director will be immediately converted to
Unrestricted Stock.
The Directors Plan is to be administered by the Committee which shall have
the authority under the plan to determine the terms of any awards of Restricted
Stock and Unrestricted Stock including the conditions on transferability or
forfeitability of Restricted Stock. In addition, the Committee shall also have
the authority to interpret all provisions of the plan, prescribe the form of
award agreements, adopt, amend and rescind rules and regulations pertaining to
the administration of the plan, and make all other determinations necessary or
advisable for the plan administration. The Board may amend or terminate the
Directors Plan at any time or from time to time; provided that no amendment may
become effective until stockholder approval is obtained if the amendment
increases the aggregate number of shares of Common Stock that may be issued
under the plan or changes the class of individuals eligible to receive awards
under the plan.
As a condition to issuance of shares of Common Stock under the Directors
Plan, each Director agrees to satisfy any tax obligations required under
federal, state, or local law as a result of the award of Common Stock.
Federal Income Tax Consequences -- The grant of Restricted Stock will
generally not result in the recognition of taxable income by the grantee, and
the recognition of income will be postponed until such shares are no longer
subject to restrictions or the risk of forfeiture. When either the restrictions
or the risk of forfeiture lapses, the grantee will recognize income equal to the
fair market value of the Restricted Stock at the time that such restrictions
lapse and, subject to satisfying applicable reporting and withholding
requirements under the Code, the Corporation will be entitled to a deduction.
Upon the grant of Unrestricted Stock, the grantee will recognize income equal to
the fair market value of the Unrestricted Stock at the time of grant and,
subject to satisfying applicable reporting and withholding requirements under
the Code, the Corporation will be entitled to a deduction.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THIS PROPOSAL.
16
<PAGE>
E'TOWN CORPORATION
New Plan Benefits
1998 Directors Stock Incentive Plan
The following table sets forth the shares underlying Restricted Stock and
Unrestricted Stock awards which the individuals and groups referred to below
could receive for the 1998-1999 plan year if the E'town Directors 1998 Stock
Incentive Plan is approved by the Corporation's stockholders at this Annual
Meeting. Only non-employee members of the Board of Directors are eligible to
participate in the Plan.
<TABLE>
<CAPTION>
Name and Position Dollar Value ($) No. of Shares
----------------- ---------------- -------------
<S> <C> <C>
Anne Evans Estabrook
Chairman of the Board, E'town Corporation
and Elizabethtown Water Company ................................. - -
Robert W. Kean, Jr.
Chief Executive Officer, E'town Corporation
and Elizabethtown Water Company ................................. - -
Andrew M. Chapman
President, E'town Corporation and
Elizabethtown Water Company ..................................... - -
Norbert Wagner
Senior Vice President,
Elizabethtown Water Company ..................................... - -
Edward F. Cash
Vice President - Customer Services
Elizabethtown Water Company ..................................... - -
Walter M. Braswell
Secretary, E'town Corporation
Vice President - General Counsel and
Secretary, Elizabethtown Water Company ........................... - -
Executive Officer Group .................................................. - -
Non-Executive Officer Director Group ..................................... 120,000 (1) 3,744 (2)
Non-Executive Officer Employee Group ..................................... - -
</TABLE>
(1) This amount represents the aggregate amount of the annual retainer fee
which was paid to the non-executive officer Directors as a group for the
1997 plan year.
(2) The total number of shares to be issued to the non-executive officer
Directors as a group in 1998 is dependent upon the future share price of
Corporation Common Stock and the amount of the annual retainer. However,
had the Plan been in effect during the 1997 fiscal year, the total number
of shares which would have been issued to this group of individuals, based
upon an annual retainer fee of $15,000 per Director and the average closing
price of the Common Stock as traded on the New York Stock Exchange during
each of the five trading days preceding June 1, 1997 (the date on which the
plan year would have commenced) would have been 3,744.
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IV. APPROVAL OF APPOINTMENT OF AUDITORS
Deloitte & Touche LLP, Two Hilton Court, Parsippany, New Jersey 07054,
independent certified public accountants, have been selected by the Board of
Directors, upon recommendation of the Audit Committee, to serve as independent
auditors of the Corporation for the year ending December 31, 1998.
The appointment of Deloitte & Touche LLP continues a relationship that
began in 1950. Stockholder approval of this appointment is requested. In the
event a majority of the votes cast is against approval, the Board of Directors
will reconsider the appointment.
It is expected that representatives of Deloitte & Touche LLP will be
present at the Annual Meeting, will have the opportunity to make a statement if
they so desire, and will be available to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THIS PROPOSAL.
VI. OTHER BUSINESS
Management does not intend to present and does not have any reason to
believe that others will present at the 1998 Annual Meeting of Stockholders any
item of business other than the proposals set forth herein. However, if other
matters are properly presented for a vote, the proxies will be voted upon such
matters in accordance with the judgment of the person acting under the proxies.
Dissenting stockholders have no rights of appraisal with respect to the
proposals set forth herein.
STOCKHOLDER PROPOSALS
Stockholders are entitled to submit proposals on matters appropriate for
stockholder action consistent with regulations of the SEC. Should a stockholder
intend to present a proposal at next year's annual meeting, it must be received
by the Secretary of the Corporation (at 600 South Avenue, Westfield, New Jersey
07090) by no later than December 1, 1998 in order to be included in the
Corporation's proxy statement and form of proxy relating to that meeting. Under
the rules of the SEC, a stockholder submitting a proposal is required to be a
record or beneficial owner of at least one percent or $1,000 in market value of
Common Stock for at least one year prior to the date of submission of the
proposal, and he or she must continue to own such securities through the date on
which the meeting is held.
On Behalf of the Board of Directors,
Walter M. Braswell
Secretary
Westfield, New Jersey
March 27, 1998
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EXHIBIT A
E'TOWN CORPORATION
1998 STOCK OPTION PLAN
ARTICLE 1
Establishment and Purpose
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Section 1.1 Establishment. Effective as of May 21, 1998 (subject to
approval by the Corporation's shareholders), E'town Corporation, a New Jersey
corporation (the "Corporation"), hereby establishes a stock option plan for the
benefit of certain employees as described herein which shall be known as the
E'TOWN CORPORATION 1998 STOCK OPTION PLAN (the "Plan"). The Plan is intended to
provide for the grant of stock options qualifying as incentive stock options
satisfying the requirements of Section 422 of the Internal Revenue Code of 1986,
as amended, for the grant of stock options which do not qualify as incentive
stock options, and for the grant of related Stock Appreciation Rights.
Section 1.2 Purpose. The purpose of the Plan is to promote the interests of
the Corporation by ensuring continuity of management and increased incentive on
the part of officers and other key employees of the Corporation and its
Subsidiaries responsible for major contributions to effective management,
through facilitating their acquisition of equity interests in the Corporation on
reasonable terms.
ARTICLE 2
Definitions
For purposes of the Plan, the following terms shall have the meanings
provided herein:
Section 2.1 "Board" means the board of directors of the Corporation.
Section 2.2 "Code" means the Internal Revenue Code of 1986, as amended.
Section 2.3 "Committee" means the committee provided in Section 3.1.
Section 2.4 "Disability" means disability as defined in Section 22(e)(3) of
the Code.
Section 2.5 "Incentive Option" means an option granted under the Plan to
purchase Shares and which is intended to qualify as an incentive stock option
under Section 422 of the Code.
Section 2.6 "Nonemployee Director" means a director of the Corporation who
is a "nonemployee director" within the meaning of Rule 16b-3 promulgated under
the Securities Exchange Act of 1934, as amended.
Section 2.7 "Nonqualified Option" means an option granted under the Plan to
purchase Shares and which is not intended to qualify as an Incentive Option.
Section 2.8 "Option" means an Incentive Option or a Nonqualified Option.
Section 2.9 "Outside Director" means a director of the Corporation who is
an "outside director" within the meaning of Section 162(m) of the Code and the
regulations promulgated thereunder.
Section 2.10 "Shares" means shares of the Corporation's common stock, no
par value.
Section 2.11 "Stock Appreciation Rights" means the right to receive cash or
stock as set forth in Article 7.
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Section 2.12 "Subsidiary" means any corporation which qualifies as a
"subsidiary corporation" of the Corporation under Section 424(f) of the Code or,
if applicable, as a "parent corporation" of the Corporation under Section 424(e)
of the Code.
ARTICLE 3
Administration
Section 3.1 Administration. The Plan shall be administered by the Executive
Compensation and Stock Options Committee appointed by and responsible to the
Board. The Committee shall consist of at least two Nonemployee Directors and to
the extent necessary for any Option or Stock Appreciation Right to qualify as
performance based compensation under Section 162(m) of the Code to so qualify,
each member of the Committee shall be an Outside Director.
Section 3.2 Powers of Committee. The Committee shall have all the powers
vested in it by the terms of the Plan, such powers to include exclusive
authority (within the limitations described herein) to select the employees to
be granted Options and related Stock Appreciation Rights, if any, to determine
the number of Shares subject to, and the terms of, the Options and related Stock
Appreciation Rights to be granted to each employee selected, to determine the
time when Options and related Stock Appreciation Rights, if any, will be
granted, the period during which Options and related Stock Appreciation Rights
will be exercisable, and to prescribe the form of the instruments, if any,
embodying Options and related Stock Appreciation Rights. The Committee shall be
authorized to interpret the Plan and the Options and related Stock Appreciation
Rights granted under the Plan, to establish, amend and rescind any rules and
regulations relating to the Plan, and to make any other determinations which it
believes necessary or advisable for the administration of the Plan. The
Committee may correct any defect, supply any omission or reconcile any
inconsistency in the Plan or in any Option or Stock Appreciation Right in the
manner and to the extent the Committee deems necessary or desirable to carry it
into effect. Any decision of the Committee in the administration of the Plan, as
described herein, shall be final and conclusive. The Committee may act only by a
majority of its members in office, except that the members thereof may authorize
any one or more of their number or any officer of the Corporation to execute and
deliver documents on behalf of the Committee.
ARTICLE 4
Eligibility and Participation
Options and Stock Appreciation Rights may be granted only to officers and
other key employees of the Corporation and its Subsidiaries. Any officer or key
employee of the Corporation or of a Subsidiary shall be eligible to receive one
or more Options and Stock Appreciation Rights; provided, however, that no
Incentive Option shall be granted to any person who at the time of grant owns
stock (including stock the ownership of which is attributed to such person
pursuant to Section 424(d) of the Code) possessing more than 10 percent of the
total voting power of all classes of stock of the Corporation or a Subsidiary;
and provided, further, that no officer or key employee of the Corporation or a
Subsidiary may be granted Options and Stock Appreciation Rights in respect of
more than 50,000 shares during each calendar year.
ARTICLE 5
Shares Subject to Plan
Section 5.1 Amount of Stock. There may be issued under the Plan an
aggregate of not more than 500,000 Shares, subject to adjustment as provided in
Section 5.2. Shares issued pursuant to the Plan may be unissued Shares or
reacquired Shares, as the Board may from time to time determine. In the event
that Options shall terminate or expire without being exercised in whole or in
part, new Options may be granted covering the Shares not purchased under such
lapsed Options.
Section 5.2 Dilution and Other Adjustments. In the event of any change in
the outstanding Shares by reason of any stock split, stock dividend,
recapitalization, merger, consolidation, reorganization, combination or
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exchange of shares or other similar event, if the Committee shall determine, in
its sole discretion, that such change equitably requires an adjustment in the
number or kind of shares that may be issued under the Plan, in the number or
kind of shares which are subject to outstanding Options, or in the purchase
price per share relating thereto, such adjustment shall be made by the Committee
and shall be conclusive and binding for all purposes of the Plan.
ARTICLE 6
Terms and Conditions of Options
Section 6.1 Terms and Options. An Option granted under the Plan shall be in
such form as the Committee may from time to time approve. Each Option shall be
subject to the terms and conditions provided in this Article 6 and shall contain
such additional terms and conditions as the Committee may deem desirable, but in
no event shall such terms and conditions be inconsistent with the Plan and, in
the case of Incentive Options, with the provisions of the Code (and regulations
promulgated thereunder) applicable to "incentive stock options" as described in
Section 422 of the Code.
Section 6.2 Option Price. The purchase price per Share under an Option will
be determined by the Committee but may be not less than the fair market value of
a Share at the date the Option is granted.
Section 6.3 Option Period. The period during which an Option may be
exercised shall be fixed by the Committee. No Incentive Option shall be
exercisable after the expiration of ten years from the date such Incentive
Option is granted and no Nonqualified Option shall be exercisable after the
expiration of ten years and one day from the date such Nonqualified Option is
granted.
Section 6.4 Consideration. As consideration for the grant of an Option, the
optionee shall agree to remain continuously in the employ of the Corporation or
a Subsidiary for at least one year from the date the Option is granted, and no
Option and related Stock Appreciation Right shall be exercisable until after the
expiration of such one-year period.
Section 6.5 Exercise of Option. (a) Except as provided in Sections 6.7, 6.8
and 6.9, the holder of an Option must be in the employ of the Corporation or a
Subsidiary at the time the Option is exercised. An optionee shall be deemed to
be in the employ of the Corporation or a Subsidiary during any period of
military, sick leave or other leave of absence meeting the requirements of
Section 1.421-7(h)(2) of the Federal Income Tax Regulations, or similar or
successor section.
(b) An Option and related Stock Appreciation Right may be exercised in
whole or in part from time to time during the option period (or, if determined
by the Committee, in specified installments during the option period) by giving
written notice of exercise to the Secretary or Treasurer of the Corporation
specifying the number of Shares to be purchased. Notice of exercise of an Option
must be accompanied by payment in full of the purchase price either by cash or
check or in Shares owned by the optionee having a fair market value at the date
of exercise (as determined by the Committee) equal to such purchase price, or in
a combination of the foregoing. No Shares shall be issued in connection with the
exercise of an Option until full payment therefor has been made. An optionee
shall have the rights of a shareholder only with respect to Shares for which
certificates have been issued to such person.
Section 6.6 Nontransferabilty of Options. No Option granted under the Plan
shall be transferable by the optionee otherwise than by will or by the laws of
descent and distribution or (except with respect to Incentive Options) pursuant
to a qualified domestic relations order as defined by Section 414(p) of the Code
or Section 206(d) of the Employee Retirement Income Security Act of 1974, as
amended, and such Option shall be exercisable, during such person's lifetime,
only by such person. Notwithstanding the foregoing, in the case of a
Nonqualified Option, the Committee may, in its sole discretion, provide in the
option agreement that all or any part of such Nonqualified Option may, subject
to the prior written consent of the Committee, be transferred to one or more
member of the following class of donees: a family member, a trust for the
benefit of a family member, a limited partnership whose partners are solely
family members or any other legal entity set up for the benefit of family
members.
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Section 6.7 Retirement and Termination of Employment. (a) If an optionee
retires pursuant to a tax-qualified retirement plan of the Corporation or a
Subsidiary, the Incentive Options granted to such person shall be exercisable by
such person to the extent provided in the Option Agreement during the
three-month period immediately following such person's retirement and
Nonqualified Options granted to such person shall be exercisable by such person
to the extent provided in the Option Agreement during the twelve-month period
immediately following such person's retirement.
(b) If an optionee's employment with the Corporation or a Subsidiary
terminates for any reason other than death, Disability or retirement, the Option
granted to such person shall be exercisable by such person to the extent
provided in the Option Agreement during the one-month period immediately
following the date of termination of such person's employment.
Section 6.8 Death of an Optionee. In the event of the death of an optionee
while in the employ of the Corporation or a Subsidiary, the Option granted to
such person shall be exercisable by the executors, administrators, legatees or
distributees of such person's estate, as the case may be. In such case, the
Option shall be exercisable to the extent provided in the option agreement, but
in no event shall such agreement provide that the number of Shares remaining
subject to the Option be less than the number of Shares purchasable by the
employee on the date of such person's death nor more than the total number of
Shares remaining under the Option. The period during which such Option may be
exercised shall end on the earlier of the date one year from the optionee's
death or expiration of the option period provided in the Option pursuant to
Section 6.3. In the event an Option is exercised by the executors,
administrators, legatees or distributees of the estate of a deceased optionee,
the Corporation shall be under no obligation to issue Shares thereunder unless
and until the Corporation is satisfied that the person or persons exercising the
Option are the duly appointed legal representatives of the deceased optionee's
estate or the proper legatees or distributees thereof.
Section 6.9 Disability of an Optionee. In the event of the termination of
the employment of an optionee due to Disability, the Options granted to such
person shall be exercisable by such person to the extent provided in the Option
Agreement during the twelve-month period immediately following such termination
of such person's employment.
Section 6.10 Annual Limitation. The aggregate fair market value of the
Shares determined on the date of grant, with respect to which Incentive Options
granted under the Plan and any other plan of the Corporation or its Subsidiary
which are exercisable for the first time by any optionee during any calendar
year shall not exceed $100,000.
ARTICLE 7
Stock Appreciation Rights
The Committee may also grant Stock Appreciation Rights to optionees granted
related Options under the Plan. A Stock Appreciation Right may be exercised only
at a time when the fair market value of a Share exceeds the option price for a
Share, the Option is otherwise exercisable, and at the time of such exercise the
optionee surrenders the privilege of exercising the related Option to the extent
that the optionee exercises the Stock Appreciation Right. Upon exercise of a
Stock Appreciation Right in accordance with Section 6.5(b) and surrender of the
related Option (or any portion of such Option), the optionee shall be entitled
to receive an amount equal to the excess of the fair market value of one Share
at the time of such surrender over the option price per Share specified in such
Option times the number of such Shares called for by the Option, or portion
thereof, which is so surrendered. Such payment shall be made as determined by
the Committee, in its sole discretion, either in (i) cash or (ii) Shares valued
at fair market value as of the date of exercise or (iii) partly in cash and
partly in Shares.
ARTICLE 8
Miscellaneous Provisions
Section 8.1 Witholding Obligations. As a condition to the delivery of any
Shares or cash pursuant to the exercise of an Option or Stock Appreciation
Right, the Committee may require that the optionee, at the time of such
exercise, pay to the Corporation an amount sufficient to satisfy any applicable
tax withholding obligations.
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Section 8.2 No Implied Rights. No employee or other person shall have any
claim or right to be granted an Option or Stock Appreciation Right under the
Plan. Neither the Plan nor any action taken hereunder shall be construed as
giving any employee any right to be retained in the employ of the Corporation or
any Subsidiary or affect any right of the Corporation or any Subsidiary to
terminate any employee's employment.
Section 8.3 Securities Law Compliance. No Shares shall be issued hereunder
unless counsel for the Corporation shall be satisfied that such issuance will be
in compliance with applicable federal and state securities laws.
Section 8.4 Ratification of Actions. By accepting any Option or Stock
Appreciation Right or other benefit under the Plan, each employee and each
person claiming under or through such person shall be conclusively deemed to
have indicated such person's acceptance and ratification of, and consent to, any
action taken under the Plan by the Corporation, the Board or the Committee.
ARTICLE 9
Amendments or Discontinuance
The Plan may be amended at any time and from time to time by the Board and
without the approval of shareholders of the Corporation, except that no
amendment which increases the aggregate number of Shares which may be issued
pursuant to the Plan shall be effective unless and until the same is approved by
the shareholders of the Corporation. No amendment of the Plan shall adversely
affect any right of any optionee with respect to any Option or Stock
Appreciation Right theretofore granted without such optionee's written consent.
ARTICLE 10
Termination
The Plan shall terminate upon the earlier of the following dates or events
to occur:
(a) upon the adoption of a resolution of the Board terminating the Plan;
or
(b) May 20, 2008.
No termination of the Plan shall alter or impair any of the rights or
obligations of any person, without such person's consent, under any Option or
Stock Appreciation Right theretofore granted under the Plan.
ARTICLE 11
Dissolution or Merger
Upon a dissolution or liquidation of the Corporation or a merger or
consolidation in which the Corporation is not to be the surviving corporation,
every Option and Stock Appreciation Right outstanding hereunder shall terminate,
except that in such event the Board may, in its absolute discretion, permit each
optionee to exercise such person's Options or Stock Appreciation Rights, in
whole or in part, prior to or simultaneously with such event except that no
Option and related Stock Appreciation Right shall be exercisable within six
months of the date of grant of such Option and related Stock Appreciation Right,
or in the case of such a merger or consolidation the surviving corporation may,
in its absolute discretion, substitute new options and stock appreciation rights
for the outstanding Options and Stock Appreciation Rights hereunder.
Notwithstanding anything to the contrary in the Plan, neither the Board nor the
Committee shall have any authority to take any action under the Plan where such
action would affect the Corporation's ability to account for any business
combination as a "pooling of interests."
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ARTICLE 12
Shareholder Approval and Adoption
The Plan shall be submitted to the shareholders of the Corporation for
their approval and adoption and Options and Stock Appreciation Rights hereunder
may be granted prior to such approval and adoption contingent upon such approval
and adoption. The shareholders of the Corporation shall be deemed to have
approved and adopted the Plan only if it is approved and adopted at a meeting of
the shareholders duly held by vote taken in the manner required by the laws of
the State of New Jersey.
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EXHIBIT B
E'TOWN CORPORATION
1998 DIRECTORS STOCK PLAN
ARTICLE I
Purpose
1.01 The Plan is intended to motivate, reward and retain non-employee Directors
of the Company for contributing to the long-term success of the Company and
its subsidiaries by providing an opportunity for meaningful capital
accumulation linked to the future success of the Company and appreciation
in shareholder value. The Plan is intended to permit the award of shares of
Restricted Stock and Unrestricted Stock. It is intended that, commencing on
the effective date of the Plan, the annual retainer fee paid to
non-employee members of the Board of Directors shall be provided in the
form of Restricted or Unrestricted Stock, in accordance with each
Director's election, as provided in Articles IV and VII hereof.
ARTICLE II
Definitions
2.01 AFFILIATE means any "subsidiary" or "parent" corporation (within the
meaning of Section 424 of the Code) of the Company.
2.02 AGREEMENT means a written agreement (including any amendment or supplement
thereto) between the Company and a Participant specifying the terms and
conditions upon which an award of Restricted Stock is granted to such
Participant.
2.03 BOARD means the Board of Directors of E'town Corporation and Elizabethtown
Water Company.
2.04 CODE means the Internal Revenue Code of 1986, and any amendments thereto.
2.05 COMMITTEE means the Executive Compensation and Stock Options Committee of
the Company.
2.06 COMMON STOCK means the Common Stock of the Company.
2.07 COMPANY means E'town Corporation, or any successor thereof.
2.08 DIRECTOR means a member of the Board who is not an employee of the Company,
any Subsidiary or Affiliate.
2.09 ELECTION PERIOD means the period from April 1 through April 30 immediately
preceding each Plan Year during which a Participant can make an election
pursuant to Section 7.02 of the Plan.
2.10 ELIZABETHTOWN means Elizabethtown Water Company, a wholly-owned subsidiary
of the Company, or any successor thereof.
2.11 PARTICIPANT means a Director of the Company who received an award of
Restricted Stock or Unrestricted Stock under the Plan.
2.12 PLAN means the E'town Corporation 1998 Directors' Stock Plan.
2.13 PLAN ADMINISTRATOR means the individual(s) appointed by the Committee to
administer the Plan in accordance with its terms.
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2.14 PLAN YEAR means the 12-month period beginning June 1 and ending May 31. The
initial Plan Year shall commence June 1, 1998.
2.15 RESTRICTED STOCK means Common Stock awarded to a Participant under Article
VII. Shares of Common Stock shall cease to be Restricted Stock when, in
accordance with the terms of the Plan and the applicable Agreement, they
become transferable and free of substantial risks of forfeiture.
2.16 UNRESTRICTED STOCK means Common Stock awarded to a Participant in
accordance with Article VII, which is not subject to restrictions regarding
ownership and transferability.
ARTICLE III
Administration
3.01 The Committee shall determine the terms of any award of Restricted Stock as
the Committee may consider appropriate, in a manner which is consistent
with the provisions of this Plan. No shares of Common Stock comprising an
award of Restricted Stock shall be transferable by the recipient thereof
prior to the time such recipient ceases to be a director, except upon
conversion of such Restricted Stock to Unrestricted Stock as provided in
Article VI. The terms of any award of Restricted Stock may include other
conditions, in addition to those contained in this Plan, on the
transferability or forfeitability of Restricted Stock. In addition, the
Committee shall have complete authority to interpret all provisions of this
Plan; to prescribe the form of Agreements; to adopt, amend, and rescind
rules and regulations pertaining to the administration of the Plan; and to
make all other determinations necessary or advisable for the administration
of this Plan. The express grant in the Plan of any specific power to the
Committee shall not be construed as limiting any power or authority of the
Board. Any decision made, or action taken, by the Committee or the Board in
connection with the administration of this Plan shall be final and
conclusive. The Board shall not be liable for any action, failure to act,
determination or interpretation made in good faith with respect to this
Plan, or any transaction hereunder. All expense of administering this Plan
shall be borne by the Company and/or Elizabethtown, as the Board shall
determine.
ARTICLE IV
Eligibility
4.01 GENERAL. Participation in the Plan will be limited to Directors who are not
employees of the Company.
4.02 AWARDS. Effective with the initial Plan Year beginning June 1, 1998, the
entire amount of any annual retainer payable to a member of the Board shall
be paid exclusively as an award of Restricted Stock or Unrestricted Stock.
The Plan Administrator will administer the award of shares of Restricted
Stock or Unrestricted Stock to each Director in accordance with the annual
election of the Director, and will calculate the number of shares of Common
Stock subject to each award. The number of shares of Restricted Stock or
Unrestricted Stock which shall be awarded to a Director shall be based on
the value of his or her retainer divided by the average closing price of
the Common Stock as traded on the New York Stock Exchange during each of
the five (5) trading days preceding the beginning of the Plan Year (June 1
of each year) for which the retainer is payable and the Director's election
is effective. The price of the shares of Common Stock, as calculated
pursuant to this formula, shall be applied to Restricted Stock and
Unrestricted Stock in the same manner. In the event the calculation results
in fractional shares, the award of shares of Common Stock shall round down
to the next whole number of shares.
All shares of Restricted Stock awarded under this Plan shall be evidenced
by Agreements which shall be subject to applicable provisions of this Plan
and to such other provisions as the Committee may determine.
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ARTICLE V
Stock Subject to Plan
5.01 Upon the award of shares of Restricted and Unrestricted Stock, the Company
may issue shares of Common Stock from its authorized but unissued Common
Stock, from shares held as treasury stock, or from Common Stock purchased
by or on behalf of the Company or Elizabethtown in the open market, subject
to all applicable provisions of the Federal and state securities laws. The
maximum aggregate number of shares of Common Stock that may be awarded as
Restricted and Unrestricted Stock under this Plan is 400,000 shares. Such
maximum aggregate number of shares of Common Stock that may be issued under
this Plan shall be subject to adjustment as provided in Article VIII.
ARTICLE VI
Restricted Stock/Unrestricted Stock
6.01 CONVERSION OF RESTRICTED STOCK. Restricted Stock held by a Participant
shall immediately be converted to Unrestricted Stock when the Participant
ceases to be a Director, or at such other time as may be determined by the
Committee.
6.02 NONALIENATION OR ASSIGNMENT. No right or interest of a Participant in
Restricted Stock shall be subject to any lien, obligation or liability of
such Participant.
6.03 SHAREHOLDER RIGHTS - RESTRICTED STOCK. A Participant will have the rights
of a shareholder with respect to Restricted Stock as of the date of award,
including the rights to receive dividends; provided, however, that (i) a
Participant may not sell, transfer, pledge, exchange, hypothecate, or
otherwise dispose of Restricted Stock, and (ii) the Company shall retain
custody of the certificates evidencing shares of Restricted Stock. The
limitations set forth in the preceding sentence shall not apply after the
shares cease to be Restricted Stock.
6.04 SHAREHOLDER RIGHTS - UNRESTRICTED STOCK. Upon the award of Unrestricted
Stock, a Participant will have all the rights accorded to an owner of
Common Stock with respect to his or her ownership of such Unrestricted
Stock.
ARTICLE VII
Election by a Director
7.01 AWARD. The Committee will determine whether a Director shall be awarded
Restricted Stock or Unrestricted Stock in accordance with the Director's
annual election. The Plan Administrator will calculate the number of shares
of Common Stock provided by the award in accordance with Article IV.
7.02 ANNUAL ELECTION. Each Director shall direct the Company to cause to be paid
his or her entire annual retainer for a given Plan Year, as either an award
of Restricted Stock or Unrestricted Stock, by filing an Election Form with
the Plan Administrator during each applicable Election Period. A Director's
meeting and committee fees shall continue to be paid to the Director in
cash.
7.03 RULES GOVERNING ANNUAL ELECTIONS. The annual election made by a Participant
shall be irrevocable for the Plan Year for which the election is made. The
certificates representing the Restricted Stock or Unrestricted Stock
awarded to a Participant in accordance with the annual election will be
issued to the Participant (and, if the award is of Restricted Stock,
retained by the Company) as soon as practicable following the date on which
annual retainer fees are payable.
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A Participant may request payment of his or her annual retainer for a
Plan Year entirely in Restricted Stock or Unrestricted Stock, but not to
a combination of Restricted Stock and Unrestricted Stock.
7.04 TAXES ON AWARDS OF COMMON STOCK. The Participant agrees to satisfy any
tax obligations under federal, state or local law as a result of the
award of Common Stock.
ARTICLE VIII
Adjustment Upon Change in Common Stock
8.01 The maximum aggregate number of shares that may be awarded as Restricted
Stock and Unrestricted Stock under this Plan (and the number of shares of
any particular award) shall be proportionately adjusted, and the terms of
any outstanding Restricted Stock awards may be adjusted, as the Committee
shall determine to be equitably required in the event that (a) the
Company effects one or more stock dividends, stock split-ups,
subdivisions or consolidations of shares or (b) there occurs any other
event that, in the judgment of the Committee, necessitates such action.
Any determination made under this Article VIII by the Committee shall be
final and conclusive.
The Issuance by the Company of shares of any class, or securities convertible
into shares of stock of any class, for cash or property, or for labor or
services, whether upon direct sale or upon the exercise of rights or
warrants to subscribe therefor, or upon conversion of shares or
obligations of the Company convertible into such shares or other
securities, shall not affect, and no adjustment by reason thereof shall
be made with respect to, outstanding awards of Restricted Stock or
Unrestricted Stock.
ARTICLE IX
Compliance with Law and Approval of Regulatory Bodies
9.01 No Common Stock shall be awarded and no certificates for shares of Common
Stock shall be delivered under this Plan except in compliance with all
applicable federal and state laws and regulations (including, without
limitation, withholding tax and securities laws requirements). The
Company shall have the right to rely on an opinion of its counsel as to
such compliance. Any share certificate issued to evidence Common Stock
for which shares of Restricted Stock or Unrestricted Stock are awarded
may bear such legends and statements as the Committee may deem advisable
to assure compliance with federal and state laws and regulations. No
Restricted Stock or Unrestricted Stock shall be awarded, no Common Stock
shall be issued, and no certificates for shares shall be delivered under
this Plan until the Company has obtained such consent or approval as the
Board of Directors may deem advisable from regulatory bodies having
jurisdiction over such matters.
ARTICLE X
General Provisions
10.01 EFFECT ON DIRECTORSHIP. Neither the adoption of this Plan, its operation,
any agreement hereunder, nor any documents describing appointment to the
Board or referring to this Plan (or any part thereof) shall confer upon
any individual any right to continue as a Director of the Company, nor
shall it affect the rights of the shareholders of the Company to remove a
Director from the Board, upon a proper vote thereon.
10.02 RULES OF CONSTRUCTION. Headings are given to the articles and sections of
this Plan solely as a convenience to facilitate reference. The reference
to any statute, regulation, or other provision of law shall be construed
to refer to any amendment to or successor of such provision of law.
B-4
<PAGE>
10.03 Obligation to Effect Registration. The Company agrees to take such steps
as shall be required by law to assure the free transferability of
Unrestricted Stock by Participants including, if necessary, using its
best efforts to register the Common Stock subject to this Plan under
the Securities Act of 1933, as amended.
ARTICLE XI
Amendment
11.01 The Board may amend or terminate this Plan at any time or from time to
time; provided, however, that no amendment may become effective until
shareholder approval is obtained if (i) the amendment increases the
aggregate number of shares of Common Stock that may be awarded under
the Plan, or (ii) the amendment changes the class of individuals
eligible to become Participants. No amendments shall, without a
Participant's consent, adversely affect any rights of such Participant
under any Restricted Stock or Unrestricted Stock award outstanding at
the time such amendment is made, in violation of the terms of this
Plan.
ARTICLE XII
Effective Date of Plan
12.01 Restricted Stock and Unrestricted Stock may only be awarded under this
Plan upon approval of the Plan by the shareholders of the Company.
B-5
<PAGE>
E'TOWN CORPORATION
Directions to the Annual Meeting at The Canal Road Water Treatment Plant
[MAP]
FROM ROUTE 287:
Take Exit #12 (Weston Canal Road). At end of off ramp, make a left onto Weston
Canal Road. Make third left onto Randolph Road. The entrance to the Plant is up
ahead on the right. Follow driveway to parking lot.
FROM THE SOUTH:
Take Garden State Parkway North to Exit #127 onto Route 287 North. Take Route
287 to Exit #12 (Weston Canal Road). Follow directions as in "From Route 287" at
left.
FROM THE NORTH:
Take Garden State Parkway South to Exit #129 onto Route 287 North. Take Route
287 to Exit #12 (Weston Canal Road). Follow directions as in "From Route 287" at
left.
FROM NEW JERSEY TURNPIKE:
(ROUTE 95) Take Exit #10 onto Route 287 North. Take Route 287 to Exit #12
(Weston Canal Road). Follow directions as in "From Route 287" at left.
<PAGE>
[FORM OF PROXY CARD]
E'TOWN CORPORATION
600 SOUTH AVENUE
WESTFIELD, NEW JERSEY 07090
Dear Stockholder:
The Annual Meeting of Stockholders of E'town Corporation will be held at 10:00
a.m. on Thursday, May 21, 1998 at the Canal Road Water Treatment Plant, 701
Randolph Road, Somerset, New Jersey, for the following purposes:
1. To elect four directors to the Board of Directors.
2. Approval of 1998 Stock Option Plan.
3. Approval of 1998 Directors' Stock Plan.
4. Approval of appointment of Deloitte & Touche LLP as independent
auditors.
5. To transact such other business as may properly be brought
before the meeting or any adjournment or adjournments thereof.
To be sure that your vote is counted, we urge you to complete and sign the
proxy/voting instruction card below, detach it from this letter and return it in
the postage paid envelope enclosed in this package. The giving of such proxy
does not affect your right to vote in person if you attend the meeting. The
prompt return of your signed proxy will aid the Company in reducing the expense
of additional proxy solicitation.
Sincerely,
WALTER M. BRASWELL
Secretary
March 27, 1998
- ------------------------------------------------------------------------
Detach Proxy Card Here
1. ELECTION OF DIRECTORS: FOR all nominees [ ]
listed below.
WITHHOLD AUTHORITY to vote [ ]
for all nominees listed below.
*EXCEPTIONS [ ]
Nominees: Andrew M. Chapman, Anne Evans Estabrook, Robert W. Kean, III
and Barry T. Parker.
(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 ____________________________________________________________
<PAGE>
2. Approval of 1998 Stock Option Plan.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. Approval of 1998 Directors' Stock Plan
FOR [ ] AGAINST [ ] ABSTAIN [ ]
4. Approval of appointment of Deloitte & Touche LLP as independent
auditors.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
5. In their discretion, the Proxies are authorized to vote upon such other
matters as may properly come before the meeting or any adjournment or
adjournments thereof.
I plan to attend the meeting [ ]
Change of Address and or Comments Mark Here [ ]
The signature on this Proxy should correspond exactly with stockholder's name as
printed to the left. In the case of joint tenancies, co-executors or
co-trustees, both should sign
Persons signing as Attorney, Executor, Administrator, Trustee or Guardian should
give their full title.
Dated: __________________________ 1998
--------------------------
Signature
--------------------------
Signature
Sign, Date and Return the Proxy Card Promptly Using the Enclosed Envelope
Votes must be indicated
in Black or Blue ink
<PAGE>
E'TOWN CORPORATION
This Proxy is Solicited by the Board of Directors
PROXY For Annual Meeting of Stockholders, May 21, 1998
The undersigned hereby appoints ANDREW M. CHAPMAN and ANNE EVANS ESTABROOK,
or any one of them with full power of substitution, attorneys, agents and
proxies to vote on behalf of the undersigned all shares of Common Stock of
E'TOWN CORPORATION which the undersigned would be entitled to vote if personally
present at the Annual Meeting of Stockholders to be held at the Canal Road Water
Treatment Plant, 701 Randolph Road, Somerset, New Jersey, on Thursday, May 21,
1998, at 10:00 A.M., or any adjournments thereof.
This proxy when properly executed will be voted in the manner directed
herein by the undersigned stockholders. If no direction is made, this proxy will
be voted FOR Proposals (1), (2), (3) and (4).
Continued, and to be signed and dated, on reverse side.
E'TOWN CORPORATION
P.O. BOX 11016
NEW YORK, N.Y. 10203-0016
