<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant / /
Filed by a party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
ESELCO, INC
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
ESELCO, INC
- - --------------------------------------------------------------------------------
(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:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE>
THE MANAGEMENT URGES STOCKHOLDERS TO SIGN AND RETURN
THE ENCLOSED BLUE PROXY CARDS AS PROMPTLY AS POSSIBLE
IN THE RETURN ENVELOPE PROVIDED FOR THAT PURPOSE.
[LOGO]
725 East Portage Avenue
Sault Ste. Marie, Michigan 49783
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 6, 1997
Notice is hereby given that the Annual Meeting of Stockholders of ESELCO,
Inc., a Michigan corporation (the "Company"), will be held on Tuesday, May 6,
1997, at 10:00 a.m. (Eastern Daylight Time), at the Cisler Center, located at
Lake Superior State University, 650 W. Easterday Avenue, Sault Ste. Marie,
Michigan, 49783, for the following purposes:
1. To elect two members of the Board of Directors for a three-year term
expiring in 2000.
These members are:
William R. Gregory
James S. Clinton
2. Considering and acting upon a proposal to amend the Restated Articles of
Incorporation to increase the number of authorized common shares from
3,000,000 to 9,840,000 shares.
3. To transact other business as may properly come before the meeting, or any
adjournment thereof.
The Board of Directors has fixed the close of business March 20, 1997, as
the record date for the determination of the Company's Stockholders entitled to
notice of, and to vote at, the meeting.
We cordially invite all Stockholders to attend the meeting.
By Order of the Board of Directors
Donald C. Wilson
Secretary
Dated: March 31, 1997
<PAGE>
PROXY STATEMENT
The Board of Directors of ESELCO, Inc. (the "Company"), solicits your proxy
for use at this Annual Meeting. You may revoke your proxy at any time before it
is exercised, provided that prior to exercise of the proxy the Company received
a written notice of such revocation or such revocation is made in open meeting.
Distribution of this Proxy Statement and the accompanying form of Proxy began on
or about March 31, 1997.
The presence in person, or by properly executed returned and unrevoked
proxies, of Shareholders entitled to cast a majority of votes shall constitute a
quorum for the transaction of business at the Annual Meeting. Shares with
respect to which votes are withheld, abstentions are cast, or there are broker
nonvotes will be considered present at the Annual Meeting for purposes of
determining a quorum.
ELECTION OF DIRECTORS
The Company's Articles of Incorporation provide for three classes of
Directors. The term of office of each class is three years, and the term of one
class expires each year. The Company's By-laws, like those of Edison Sault,
provide for a Board of Directors with at least five, but no more than seven,
members. The classes will comprise as nearly equal a number of Directors as
possible. The Board of Directors will assign any newly created directorship to
one of the classes so that the number of Directors in each class will remain as
nearly equal as possible. Therefore, approximately one-third of the Board of
Directors will be elected at each Annual Meeting of Shareholders.
The Company's Board of Directors is presently composed of five individuals.
Two Directors are to be elected at this Annual Meeting to hold office for a term
of three years or until their successors are fully elected and qualified. It
is the intention of the persons named in the enclosed Form of Proxy (unless
otherwise instructed by the Shareholder) to vote for the election of the persons
listed below who are presently Directors of the Company. Directors are elected
by a plurality of the votes cast. In case of a vacancy on the Board of
Directors, the remaining Directors (by a majority vote) could elect a successor
for a term of office continuing until the next election of Directors by
shareholders. Consequently, votes withheld and broker nonvotes with respect to
the election of Directors will have no impact on the election of Directors.
If a nominee is unable to serve or for good cause will not serve, or if a
vacancy should occur before the election (which events are not anticipated), the
proxies may be voted for a person selected by the Board of Directors. The only
equity security of the Company or Edison Sault owned by the people listed below
is the Common Stock of the Company.
2
<PAGE>
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------------------------------------------------
NAME, POSITION WITH THE COMPANY AMOUNT AND NATURE OF PERCENT
AND BUSINESS EXPERIENCE DURING DIRECTOR BENEFICIAL OWNERSHIP OF
THE PAST FIVE YEARS (1) AGE SINCE(1) FEBRUARY 17, 1997(2) CLASS
- - --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NOMINEES FOR DIRECTOR (TERM EXPIRING IN 2000)
- - --------------------------------------------------------------------------------------------------------------------------
WILLIAM R. GREGORY, Director 57 1972 40,224.85 Shares 2.6%(6)
President of ESELCO, Inc., and Edison Sault
Director - First of America, Michigan NA
Sault Ste. Marie, Michigan
- - --------------------------------------------------------------------------------------------------------------------------
JAMES S. CLINTON, Director 56 1975 8,942.00 Shares (3)(4)
Chairman, President, & CEO Leggoons, Inc.
(Consumer Products Manufacturer)
Omaha, Nebraska
- - --------------------------------------------------------------------------------------------------------------------------
(TERM EXPIRING IN 1998)
- - --------------------------------------------------------------------------------------------------------------------------
THOMAS S. NURNBERGER, Chairman 78 1977 33,537.78 Shares 2.2%
Chairman of the Board of ESELCO, Inc., and
Edison Sault Electric Company
Montague, Michigan
- - --------------------------------------------------------------------------------------------------------------------------
ALLAN L. GRAUER, Vice Chairman 66 1986 4,671.43 shares (3)
Vice Chairman of ESELCO, Inc., and Edison
Sault Electric Company
Counsel to the firm of Kutak Rock
Omaha, Nebraska
- - --------------------------------------------------------------------------------------------------------------------------
(TERM EXPIRING IN 1999)
- - --------------------------------------------------------------------------------------------------------------------------
DAVID K. EASLICK, Director 76 1986 2,660 shares (3)
Director of Michigan Bell Telephone Company
North Naples, Florida
- - --------------------------------------------------------------------------------------------------------------------------
NON-DIRECTOR
- - --------------------------------------------------------------------------------------------------------------------------
DONALD SAWRUK, Executive Vice President 49 * 17,465.91 shares 1.1% (6)
& COO
ESELCO, Inc., and Edison Sault Electric
Company
Sault Ste. Marie, Michigan
- - --------------------------------------------------------------------------------------------------------------------------
All Directors and Officers as a Group (13 persons) 162,183.59 Shares 10.5%(5)(6)
- - --------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes time as Director and Officer of subsidiary and predecessor -
Edison Sault.
(2) Inclusive of the individual's beneficial interest in common shares held by
the Employee Incentive Investment and Stock Ownership Plan because the
individuals have the right to vote such shares. Mr. Hubbard, Vice President
- Finance of the Company, as Trustee of the Bargaining Unit Savings Plan,
has the power to vote and the power to sell all 28,294.55 shares in the
plan per the direction of the Savings Plan Board. The shares held in the
Bargaining Unit Savings Plan are not included in this table. Mr. Hubbard
also votes the unallocated shares in the ESOP.
(3) Less than 1%.
(4) Includes 6,051 shares in C.E. Clinton Family Trust stock account for which
Mr. Clinton is the trustee.
(5) Includes the Vice President - Engineering, Assistant Vice President -
Engineering, Assistant Vice President - Operations, and Assistant Vice
President - Information Systems, who are officers of Edison Sault, but are
not officers of the Company, who collectively own 22,210 shares of Company
stock, which includes shares vested to their accounts in the Employee
Incentive Investment and Stock Ownership Plan.
(6) Includes shares administered and awarded through the Restricted Stock Bonus
Plan approved by shareholders at the 1996 ESELCO, Inc., Annual Meeting.
3
<PAGE>
The nominees for Directors are not employed by a company that was
affiliated with the Company (except as shown above for Edison Sault) during the
past five years.
Except as described above, each of the identified beneficial owners has
sole voting and investment power as to all of the shares shown as beneficially
owned, with the exception of those held jointly with their spouses or directly
by their spouses, minor children, or certain other relatives or relatives of
their spouses. None of the shares shown is a share as to which the person is
shown as beneficial owner because he has the right to acquire beneficial
ownership in the future.
There are no family relationships among the Directors and executive
officers.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has the responsibility for establishing broad
corporate policies and for the overall performance of the Company, although it
is not involved in day to day operating details. Members of the Board are kept
informed of the Company's business by various reports and documents sent to them
each month, and by operating and financial reports made at Board and Committee
meetings by the President and other officers. The Company and Edison Sault have
identical Boards of Directors. The Committees described below include
Committees of the Edison Sault Board.
The Board held five meetings in 1996. There was one Special Meeting of the
Board during 1996. Each Director attended 75% or more of the aggregate number
of meetings of the Board and Committees on which he served in 1996.
The Finance Committee has the responsibility of periodically reviewing the
financial needs of the Company and the methods of providing funds for such
needs. The Committee is composed of James S. Clinton (Chairman), Allan L.
Grauer, and William R. Gregory.
The Salary and Compensation Committee recommends salaries and compensation
for all officers to the Board of Directors. The Committee is composed of Thomas
S. Nurnberger as Chairman, Allan L. Grauer, David K. Easlick, and James S.
Clinton. The Committee held one meeting in 1996.
The Audit Committee meets with management to consider the adequacy of
internal controls and the objectivity of financial reporting. Both internal
personnel and the independent public accountants meet periodically with the
Audit Committee and always have unrestricted access to the Committee. The
Committee consists of the following non-employee Directors: David K. Easlick
(Chairman), James S. Clinton, and Allan L. Grauer. The Committee held one
meeting in 1996.
4
<PAGE>
The Pension Committee advises the Board of Directors in matters that
pertain to the Edison Sault pension plans. The Committee is composed of Allan
L. Grauer (Chairman), William R. Gregory, and David K. Easlick.
The Strategic Planning Committee is chaired by William R. Gregory, assisted
by Thomas S. Nurnberger, and has the purpose of identifying key operational
issues to the Board of Directors.
The Restricted Stock Bonus Plan Committee is responsible for administering
and implementing the Restricted Stock Bonus Plan approved by the shareholders of
ESELCO, Inc., at the 1996 Annual Shareholder Meeting. This Committee consists
of the following non-employee Directors: David K. Easlick (Chairman), Allan L.
Grauer, and James S. Clinton.
The Board of Directors does not have a Nominating Committee.
The information set forth as to the principal occupations during the past
five years of the Directors, as to their beneficial ownership of securities of
the Company, and as to other information not of record with the Company, is
based upon information furnished to the Company by said Directors.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth, as of February 17, 1997, information
concerning ownership of the voting securities (Common Stock) of the Company by
the only persons whom the Company knows to own of record or beneficially more
than 5% of any class of such securities:
- - --------------------------------------------------------------------------------
TITLE OF NAME AND ADDRESS OF AMOUNT AND NATURE PERCENT OF
CLASS BENEFICIAL OWNER (1) OF BENEFICIAL OWNERSHIP CLASS
- - --------------------------------------------------------------------------------
Common Cede & Co. 483,670 31.3%
Box 20
Bowling Green Station
New York NY 10004
- - --------------------------------------------------------------------------------
(1) CEDE & CO. IS THE NOMINEE FOR THE DEPOSITORY TRUST CO. IN NEW YORK. THE
COMPANY HAS BEEN ADVISED THAT NONE OF THESE SHARES ARE OWNED BENEFICIALLY
BY CEDE & CO., BUT ARE HELD FOR THE ACCOUNT OF ITS CUSTOMERS, INCLUDING
EDISON SAULT'S PENSION PLANS.
5
<PAGE>
SALARY AND COMPENSATION COMMITTEE REPORT
The Salary and Compensation Committee of the Board of Directors (the
"Committee") is composed of Chairman Thomas S. Nurnberger and outside Directors
Allan L. Grauer, James S. Clinton, and David K. Easlick. The Committee is
responsible for setting and administering the policies that govern both annual
compensation and other remuneration for the executive officer group within the
Company. The positions included in the executive officer group include the
Chairman of the Board, President, Executive Vice President, Corporate Secretary,
Vice President - Finance, Vice President - Engineering, Vice
President/Treasurer, Assistant Vice President - Engineering, Assistant Vice
President - Operations, and Assistant Vice President - Information Systems.
The Compensation Committee evaluates the President of the Company, along
with the other executive officers, concerning their quality of leadership.
Performance results are based on meeting goals within the financial, regulatory,
service, personnel, and community areas. Salary levels are established after
comparing the executive officer positions with comparable companies in industry
and the community.
By: Thomas S. Nurnberger By: Allan L. Grauer By: James S. Clinton
By: David K. Easlick
REMUNERATION OF DIRECTORS AND OFFICERS
The Company has three subsidiaries - Edison Sault Electric Company ("Edison
Sault"); Northern Tree Service, Inc.; and ESEG, Inc. The Company is a holding
company and does not engage in any business on its own. Officers' salaries and
Directors' fees are paid by Edison Sault only. Therefore, the following
information is provided with respect to Edison Sault.
6
<PAGE>
The base compensation for 1996 for each person whose cash compensation
exceeded $100,000 and for all executive officers as a group was as follows:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION
- - ---------------------------------------------------------------- -----------------------------------------------
AWARDS PAYOUT
---------------------- -----------
OTHER RE-
ANNUAL STRICTED SECURITIES ALL OTHER
NAME AND COMPEN- STOCK UNDERLYING LTIP COMPEN-
PRINCIPAL SALARY BONUS SATION AWARD(S) OPTIONS/ PAYOUT SATION
POSITION YEAR ($) ($) ($)(1) ($)(2) SARS(#) ($) ($)
(a) (b) -C- (d) (e) (f) (g) (h) (i)
- - ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- - ---------------------------------------------------------------------------------------------------------------------
W.R. Gregory
President & CEO 1996 $167,077 -0- $ 19,790(i) $222,960 -0- -0- -0-
- - ---------------------------------------------------------------------------------------------------------------------
W.R. Gregory
President & CEO 1995 $159,903 -0- $ 18,103 -0- -0- -0- -0-
- - ---------------------------------------------------------------------------------------------------------------------
W.R. Gregory
President & CEO 1994 $152,577 -0- $ 9,779 -0- -0- -0- -0-
- - ---------------------------------------------------------------------------------------------------------------------
D. Sawruk
Exec. V.P. & COO 1996 $116,538 -0- $ 10,637(ii) $222,960 -0- -0- -0-
- - ---------------------------------------------------------------------------------------------------------------------
D. Sawruk
Exec. V.P. & COO 1995 $106,538 -0- $ 10,923 -0- -0- -0- -0-
- - ---------------------------------------------------------------------------------------------------------------------
D. Sawruk
Exec. V.P. & COO 1994 $ 93,077 -0- $ 11,662 -0- -0- -0- -0-
- - ---------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Other includes group life insurance, transportation allotment, and
contributions to savings plans.
(1)(i) Of William R. Gregory's other compensation totaling $19,790 for 1996,
a vehicle allotment in an amount of $7,746 and an amount of $10,612 in
contributions to his savings plan are included in the total other
annual compensation.
(1)(ii) Of Donald Sawruk's other compensation totaling $10,637 for 1996, an
amount of $7,497 in contributions to his savings plan are included in
the total other annual compensation.
(2) The dollar value of shares listed in the table was based upon the
number of shares multiplied by the market value of the shares on the
date of award. The dollar value of the shares awarded to Messrs.
Gregory and Sawruk as of December 31, 1996, was $203,040 each.
The Company has established the Pension Plan for Management Employees of
Edison Sault Electric Company, for participants who retire at age 62, assuming
various combinations of service and compensation. The annual pension retirement
income after reduction for social security benefits may not exceed $90,000 for
someone retiring at age 65 (or social security retirement, if later), which
amount is subject to increases after 1987 to reflect increases in the cost of
living in accordance with regulations prescribed by the Secretary of the
Treasury.
7
<PAGE>
Employees of Edison Sault not covered by a collective bargaining contract
may become participants in the Pension Plan. To become a participant, such an
employee has also to complete one year of continuous service of at least 1,000
hours of service as a permanent full-time employee of Edison Sault. Under the
plan's current benefit formula, which applies to services beginning December 31,
1991, the annual normal retirement allowance payable to a member on his normal
retirement date will be equal to 1.2% of the member's final average
compensation, multiplied by his years of credit service up to 35 years
(including pre-1991 service) and .75% of the member's final average compensation
multiplied by his years of service over 35 years. Benefits attributable to
service prior to December 31, 1991, were calculated under the prior formula and
required transition rules for the 1989-1990 plan years and will reflect changes
in the final average compensation prior to retirement. The final average
compensation means the average of the highest five full years of compensation
paid to the member. For a member who retires with less than five years of
compensation, such final average compensation shall be the average of the
compensation for those lesser number of years. The compensation covered by the
Plan is the regular remuneration paid to an employee for services rendered to
Edison Sault during a Plan year, excluding any bonuses, pay for overtime, and
special pay. The normal retirement allowance is payable monthly to the member
during his life. After the member's death, an allowance of one-half the
unreduced normal retirement allowance is payable to the member's spouse under
most circumstances.
The following table contains maximum annual total projected pension
benefits, including amounts attributable to the Supplemental Plan for
participants retiring at age 62.
- - ----------------------------------------------------------------
Pension Benefits Payable at Age 62
- - ----------------------------------------------------------------
Final Average
Compensation Years of Credited Service
- - ----------------------------------------------------------------
20 25 30 35
- - ----------------------------------------------------------------
$ 60,000 $ 19,200 $ 22,800 $ 26,400 $ 30,000
- - ----------------------------------------------------------------
75,000 24,000 28,500 33,000 37,500
- - ----------------------------------------------------------------
90,000 28,800 34,200 39,600 45,000
- - ----------------------------------------------------------------
120,000 38,400 45,600 52,800 60,000
- - ----------------------------------------------------------------
150,000 50,100 59,600 69,200 78,700
- - ----------------------------------------------------------------
200,000 70,000 83,500 97,000 110,500
- - ----------------------------------------------------------------
(1) During 1996 Mr. Gregory and Mr. Sawruk were credited with 29 and 26 years
of service, respectively, to Edison Sault Electric Company.
8
<PAGE>
Edison Sault also maintains an unfunded non-qualified Supplemental
Executive Retirement Plan which covers all executive officers. The Supplemental
Plan provides three layers of benefits. The first layer pays the difference, if
any, between the maximum allowable benefit and the Pension Plan benefit. The
second layer preserves the benefit levels produced by the Pension Plan formula
in effect prior to December 31, 1991. The third layer provides up to five years
of prior service credit for related employment prior to joining Edison Sault.
Messrs. Nurnberger, Gregory, Hubbard, Beedy, Sawruk, Boeckman, Wilson, Maas,
Jirikovic, Schemanski are covered by the Supplemental Plan.
Edison Sault has an Employee Incentive Investment and Stock Ownership Plan
which is a qualified plan for federal tax purposes. The purposes of the Plan are
to stimulate interest in the improvement and progress of Edison Sault by
encouraging ownership of the Company Common Stock and to permit tax deferred
employee contributions under Section 401(k) of the Internal Revenue Code.
Subject to statutory limits, Plan participants may contribute on either a pre-
tax or a post-tax basis through payroll deduction from 2% to 12% of their
earnings to be invested at the employee's election among a number of investment
funds offered by the Plan. For any amount the employee contributes up to 8% of
earnings, Edison Sault may contribute an additional amount, depending on
profitability. Of the Edison Sault 1996 contributions, $10,612, $7,497, and
$46,398 were unconditionally vested for Mr. Gregory, Mr. Sawruk, and the
executive officers as a group, respectively.
Directors who are not officers of Edison Sault are compensated at the rate
of $1,367 per month. During 1996, there was one Special Meeting for which the
non-employee Directors of the Company were paid a fee of $1,000. Directors who
are officers of Edison Sault receive no fees for service on the Board of
Directors.
Directors who are not employees of ESELCO, Inc., or its subsidiaries, are
eligible to participate in the Directors' Retirement Plan. Each eligible
Director will receive one-twelfth (1/12) of a year of Credited Service for each
month during which he serves as a Director for at least fifteen (15) days. The
Directors' Retirement Plan provides each eligible participant with monthly
retirement payments equal in an amount to the monthly Directors' fee in effect
on the date that the Director retires, which such monthly retirement payment
shall continue for a number of months equal to the lesser of: (i) 120 months or
(ii) the retired Director's months of Credited Service. In lieu of receiving
these monthly retirement payments, any such Director may elect to receive an
alternative form of payment of equivalent actuarial value to the total of
monthly retirement payments that such Director would otherwise receive under the
formula described in the preceding sentence. The Board reserves the right to
amend or terminate the plan at any time and for any reason.
Effective December 23, 1988, and amended November 12, 1991; August 17,
1995; and August 15, 1996, Edison Sault entered executive severance agreements
with each of its nine executive officers. Under these agreements, Edison Sault
has agreed to make certain severance payments to any executive officer in case
of change in ownership or control of Edison Sault and
9
<PAGE>
the executive officer's subsequent termination of employment relating to, or
resulting from, such change.
INCREASE IN NUMBER OF AUTHORIZED COMMON SHARES
The Board of Directors of the Company, at its meeting held November 14,
1996, voted that the Annual Meeting of Stockholders scheduled for Tuesday, May
6, 1997, would be called for, in addition to other purposes, the purpose of
considering and acting upon a proposed amendment to the Articles of
Incorporation of the Company so as to increase the number of authorized Common
Shares from the existing 3,000,000 authorized shares to 9,840,000 authorized
shares.
Presently, the Company has 1,547,345 shares outstanding of 3,000,000 shares
authorized. The Company has had a history of increasing Shareholders' ownership
through Common Stock dividends. Future stock dividends would require sufficient
authorized but unissued Common Shares. Further, from time to time, additional
authorized but unissued Common Shares may be issued to employees or employee
benefit plans such as the Thrift Plan. If authorization of the proposal is
postponed until a specific situation arises, the time and expense incident to
obtaining Shareholder approval at that time might disadvantage the Company by
depriving it of the flexibility which could be important in facilitating
effective use of the shares.
The Board of Directors believes it would be in the best interest of the
Company to increase the authorized number of Common Shares, thereby assuring
that an ample number of authorized shares will be available for issuance if
desirable.
The additional authorized Common Shares would be issuable at the Board's
discretion, normally without further Stockholder action, for any proper
corporate purposes, unless required by law or any rules or regulations to which
the Company is subject. However, as long as the Common Stock is listed for
trading on NASDAQ, the flexibility that this amendment would provide the Board
of Directors will be limited by rules which, as presently in effect, would
generally require Stockholder approval for the issuance of shares when: (i) a
stock option or purchase plan is to be established or other arrangements made
pursuant to which stock may be acquired by Officers or Directors, except for
warrants or rights issued generally to security holders of the Company or
broadly-based plans or arrangements, including other employees; (ii) the
issuance would result in a change in control of the Company; (iii) stock or
assets of another company are to be acquired, if a Director, Officer, or
substantial Shareholder of the Company has a 5% or greater interest (10% or
greater, collectively), directly or indirectly, in the Company or assets to be
acquired or the consideration to be paid and the present or potential issuance
of Common Stock could result in a 5% or greater increase in outstanding shares
of Common Stock; (iv) Common Stock, or securities convertible into or
exercisable for Common Stock, are to be issued in any transaction or series of
related transactions, other than a public offering for cash, if (a) the Common
Stock to be issued has, or will have upon issuance, voting power equal to or in
10
<PAGE>
excess of 20% of the voting power outstanding before the issuance of such Common
Stock or securities convertible into or exercisable for Common Stock, or (b) the
number of shares of Common Stock to be issued is, or will be, equal to or in
excess of 20% of the number of shares of Common Stock outstanding before the
issuance of the Common Stock; (v) the Company sells or issues shares of Common
Stock, or securities convertible into or exercisable for Common Stock, in a
nonpublic offering for less than the greater of book or market value, which with
sales by Officers, Directors, or substantial Shareholders of the Company, equal
to 20% or more of the number of shares of Common Stock or 20% or more of the
voting power outstanding before the issuance; or (vi) the Company sells or
issues shares of Common Stock, or securities convertible into or exercisable for
Common Stock, in a nonpublic offering for less than the greater of book or
market value equal to 20% or more of the number of shares of Common Stock or 20%
or more of the voting power outstanding before the issuance.
The authorization of additional authorized shares may have an anti-takeover
effect. For example, such additional shares could be used to dilute the stock
ownership of persons seeking to obtain control of the Company. The Board of
Directors has no present plans to use such shares to inhibit any hostile
takeover, and the Board knows of no hostile takeover attempts for the Company.
Other than as indicated above, the Company's Board of Directors and
management have no plans or agreements for the issuance of any of the presently
authorized and unissued Common Shares or of the additional shares to be
authorized. Rather, it is the intention of the Board of Directors and
management to hold such authorized and unissued Common Shares in reserve for
such corporate needs as may develop.
No Shareholder of the Company has any preemptive rights to subscribe for or
to purchase any of the authorized and unissued Common Shares, including the
additional shares to be authorized.
The affirmative vote of the holders of at least a majority of Common Shares
of the Company outstanding as of the Record Date March 20, 1997, is required to
adopt the amendment.
The Board of Directors and management recommend that the Common
Shareholders vote FOR the proposal.
REPORT TO SHAREHOLDERS
The Annual Report of ESELCO, Inc., for 1996, including financial
statements, accompanied this Proxy Statement.
11
<PAGE>
PROPOSALS OF SHAREHOLDERS
Proposals by shareholders intended to be presented at the 1998 Annual
Meeting must be received by the Company for inclusion in the 1997 Proxy
Statement and Proxy on or before December 1, 1997.
SOLICITATION OF PROXIES
The accompanying Proxy is solicited on behalf of management.
The cost of soliciting proxies in the accompanying form has been, or will
be, borne by ESELCO. Officials and regular employees of Edison Sault may
solicit proxies personally, by telephone, or by telegram from some Stockholders.
OTHER MATTERS
The Company has not selected an independent auditor for 1997. This
selection usually occurs at the May Board Meeting pursuant to recommendations by
the Audit Committee. Representatives of Arthur Andersen & Co., the independent
auditors for 1996, are not expected to be present at the Annual Meeting.
The management knows of no other matters that may come before the meeting.
However, if any such other matters should properly come before the meeting, it
is the intention of the persons named in the enclosed proxy to vote the proxy in
accordance with their best judgment.
12
<PAGE>
The chart listed below is mandated by proxy disclosure rules that attempt to
measure the performance of ESELCO common stock against a) a broad stock index
(the Standard & Poor's 500) and b) an electric industry-specific index (the
Standard & Poor's Electric Utility Index). The methodology used to calculate
the five-year cumulative total return is prescribed by the proxy disclosure
rules. The total annual return is equal to the sum of a) the cash dividends
plus b) the increase (decrease) in the market price per share of stock.
[GRAPH]
ESELCO $100 $131 $150 $172 $177 $213
S & P ELECT. $100 $106 $119 $104 $136 $136
S & P 500 $100 $108 $118 $120 $165 $203
The Company's common stock trades on the NASDAQ system under the symbol
EDSE.
13
<PAGE>
Proxy for - ESELCO, Inc.
Sault Ste. Marie, MI 49783
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. If any other
matters arise, the proxies or substitutes may vote according to their best
judgement.
This proxy will be voted in the manner directed by the undersigned
stockholder.
IF NOT DIRECTED, THIS PROXY IS VOTED FOR DIRECTOR NOMINEES ON THE REVERSE SIDE.
Dated: __________________________
Signed: _________________________
_________________________
PLEASE SIGN EXACTLY AS NAME APPEARS AT LEFT
If stock is registered in the names of two or more persons, each person should
sign. Executors, Administrators, Guardians, and Corporate Officers should add
titles.
- - -------------------------------------------------------------------------------
The undersigned hereby appoints David K. Easlick, Allan L. Grauer, and
Thomas S. Nurnberger or any of them proxies with full power of substitution to
represent and vote all shares of common stock of Eselco, Inc. which the
undersigned is entitled to vote at the Annual Meeting of Shareholders to be
held at the Cisler Center, located at Lake Superior State University, 650 W.
Easterday Ave, Sault Sainte Marie, Michigan on Tuesday May 6, 1997 at 10:00
am and all adjournments thereof revoking any proxies heretofore given.
1. ELECTION OF TWO DIRECTORS -- You may vote as indicated below.
A - VOTE FOR BOTH NOMINEES - James S. Clinton and William R. Gregory
(Circle A)
B - VOTE FOR ONE NOMINEE - James S. Clinton William R. Gregory
(Circle Nominee)
C - WITHHOLD AUTHORITY - DO NOT VOTE FOR EITHER NOMINEE (Circle C)
2. AMENDMENT OF ARTICLES OF INCORPORATION. Amend the Articles of
Incorporation to increase the number of authorized shares of Common Stock
from 3,000,000 to 9,840,000.
/ / FOR / / AGAINST / /ABSTAIN
3. IN THEIR DISCRETION UPON SUCH OTHER MATTERS TO PROPERLY COME BEFORE THE
MEETING.
