SOUTH JERSEY INDUSTRIES, INC.
1 South Jersey Plaza
Folsom, New Jersey 08037
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
April 22, 1999
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of South
Jersey Industries, Inc. will be held at the office of the Company, 1 South
Jersey Plaza, Folsom, New Jersey, on Thursday, April 22, 1999, at 10:00 A.M.,
Eastern Time, for the following purposes:
1. To elect three Directors in Class I (Term expiring in 2002).
2. To approve the action of the Board of Directors in amending the
Stock-Based Compensation Plan.
3. To approve the action of the Board of Directors in appointing
Deloitte & Touche LLP as auditors for the year 1999.
4. To transact such other business that may come before the
meeting.
The Board of Directors has fixed the close of business on March 1, 1999 as
the record date for determining the shareholders of the Company entitled to
notice of and to vote at the Annual Meeting and any adjournments thereof, and
only holders of stock of the Company of record on that date are entitled to
notice of and to vote at the meeting and any adjournments.
If you do not expect to be personally present at the meeting, please fill in
and sign the enclosed form of proxy and return it promptly in the accompanying
business reply envelope.
By Order of the Board of Directors,
George L. Baulig
Secretary
Folsom, N.J. 08037
March 12, 1999
YOUR VOTE IS IMPORTANT
YOU ARE URGED TO VOTE, DATE, AND PROMPTLY RETURN
YOUR PROXY IN THE ENCLOSED ENVELOPE.
SOUTH JERSEY INDUSTRIES, INC.
PROXY STATEMENT
This statement is furnished in connection with the solicitation of proxies
to be used at the Annual Meeting of Shareholders of South Jersey Industries,
Inc. to be held on April 22, 1999, at the office of the Company, located at 1
South Jersey Plaza, Folsom, New Jersey 08037. The approximate date on which
proxy material will first be sent to shareholders is March 12, 1999.
This solicitation of proxies is made on behalf of the Board of Directors of
South Jersey Industries, Inc. and the Company will bear the cost of the
solicitation. The solicitation will be made by mail, and, in addition, the
Secretary of the Company and regular employees of the Company may solicit
proxies by telephone, telegram or in person. The Company may also employ a
professional proxy-soliciting firm, the cost of which will not exceed $7,500
plus expenses. The Company will furnish brokerage houses and other custodians,
nominees or fiduciaries with the number of additional copies of its proxy
material and Annual Report to Shareholders necessary to supply those materials
to the beneficial owners of stock of the Company.
Directors are elected by a plurality vote of all votes cast at the meeting.
Abstentions and broker non-votes will be treated as present for the purposes of
determining a quorum, but will not affect the election of directors and will not
be counted in tabulating the number of votes cast for approval of amendments to
the Stock-Based Compensation Plan or on the appointment of the independent
auditors.
Signed proxies in the accompanying form received by the Company will be
voted at the meeting or any adjournments thereof and, where such a proxy
contains a specific instruction as to any matter to be acted on, the shares
represented by the proxy will be voted accordingly. A shareholder who signs and
returns a proxy may revoke it at any time before it is voted. Attendance at any
meeting by a shareholder who has given a proxy does not revoke the proxy; to
revoke the proxy, the attending shareholder must so notify the secretary of the
meeting in writing prior to the voting of the proxy.
The Company had 10,780,042 shares of Common Stock outstanding as of March 1,
1999. The holders of Common Stock have one vote per share on each matter to be
acted upon. Only shareholders of record at the close of business on March 1,
1999 will be entitled to vote at the meeting.
ELECTION OF DIRECTORS
At the Annual Meeting, three directors are to be elected to the Board of
Directors in Class I to hold office for a term of three years. It is intended
that the votes of the persons designated a proxies in the accompanying form of
proxy will be cast f or Charles Biscieglia, Richard L. Dunham and W. Cary
Edwards. The Board of Directors now consists of nine members. Mr. Biscieglia,
President and Chief Executive Officer of the Company, was elected to that
position and as a director by the Board of Directors in October 1998 and is
standing for election as a director by the Company's shareholders for the first
time. While it is not anticipated that any of the nominees will be unable to
serve, if any should become unable to accept nomination or election, it is
intended that the persons designated as proxies in the accompanying form of
proxy will vote for the election of such other person as the Board of Directors
may recommend.
- 1 -
NOMINEES
Class I (Term Expiring in 2002)
Charles Biscieglia has been a director since 1998. Age 54. Member of the
Environmental Committee, the Executive Committee and the Nominating Committee.
President and Chief Executive Officer, (1998 to date) of the Company and South
Jersey Gas Company (Gas Company). Vice President (1997-1998), of the Company,
and Executive Vice President and Chief Operating Officer, (1991-1998) of Gas
Company; director of AtlantiCare Foundation, Atlantic City, NJ; director New
Jersey State Chamber of Commerce, Trenton, NJ; director New Jersey Utilities
Association, Trenton, NJ.
Richard L. Dunham, Chairman of the Board of the Company. Has been a director
since 1984. Age 69. Member of the Environmental Committee, the Executive
Committee and the Nominating Committee. Formerly Chairman (1988 - 1995),
President (1980 - 1988), of Zinder Companies, Inc. economic and regulatory
consulting firms, Washington, DC; Member (1986 -1995) of Advisory Council of Gas
Research Institute, Chicago, IL; Former Chairman (1975-1977) of the Federal
Power Commission (now FERC), Washington, DC.
W. Cary Edwards has been a director from April 1990 - January 1993 and September
1993 to date. Age 54. Member of the Environmental Committee, the Executive
Committee and the Compensation/Pension Committee. Commissioner, N.J. State
Commission on Investigation (1997 to date); Managing Partner, Edwards Caldwell &
Poff, Esqs. (1993 to date); Of Counsel (1993) and NJ Managing Partner (1990 -
1993), law firm of Mudge Rose Guthrie Alexander & Ferdon; Attorney General,
State of New Jersey (1986 - 1989); Chief Legal Counsel - Governor of NJ (1982 -
1986).
- 2 -
DIRECTORS CONTINUING IN OFFICE
Class III (Term expiring in 2001)
Thomas L. Glenn, Jr. has been a director since 1986. Age 64. Member of the Audit
Committee, the Executive Committee, and Chairman of the Environmental Committee.
Chairman (1984 to date) of Glenn Insurance, Inc. Absecon, NJ; trustee, of
AtlantiCare Foundation, Atlantic City, NJ; trustee and Chairman, Laurelwood, a
Lifecare Retirement Community, Pomona, NJ.
Herman D. James, Ph.D. has been a director since 1990. Age 55. Member of the
Compensation/Pension Committee, the Nominating Committee and Chairman of the
Audit Committee. Distinguished Professor, Rowan University (1998 to date)
President, Rowan University (1984 - 1998), Glassboro, NJ; director American
Association of State Colleges and Universities, Washington, DC; director New
Jersey State Chamber of Commerce, Trenton, NJ.
Frederick R. Raring has been a director since 1995. Age 61. Member of the Audit
Committee and the Environmental Committee. President, (1990 to date) of Seashore
Supply Company, Atlantic City, NJ, a major distributor of plumbing and heating
supplies a nd materials.
- 3 -
DIRECTORS CONTINUING IN OFFICE
Class II (Term expiring in 2000)
Anthony G. Dickson has been a director since 1995. Age 50. Member of the Audit
Committee, the Compensation/Pension Committee and the Environmental Committee.
President (1991 to date), of New Jersey Manufacturers Insurance Company, New
Jersey Re-Insurance Company; President (1998 to date) of New Jersey Casualty
Insurance Company and New Jersey Indemnity Insurance Company, and a director of
such companies, West Trenton, NJ; director Alliance of American Insurers,
Schaumburg, IL; trustee, Rider University.
Clarence D. McCormick has been a director since 1979. Age 69. Member of the
Nominating Committee, Chairman of the Compensation/Pension Committee and of the
Executive Committee. Chairman and CEO (1995 to date), Chairman, President and
CEO (1988 - 1995 ), of The Farmers and Merchants National Bank of Bridgeton, NJ;
Chairman and President of Southern Jersey Bancorp of Delaware (1989 to date);
director of such banks; director of the Cumberland Mutual Insurance Company;
director American Automobile Association of Southern New Jersey.
Shirli M. Vioni, Ph.D. has been a director since 1983. Age 58. Member of the
Audit Committee, the Executive Committee and Chairman of the Nominating
Committee. President, Billings-Vioni Management Associates (1990 to date),
Gahanna, OH, a human resource consulting firm; formerly Superintendent, Oberlin
City Schools (1994 to 1997), Oberlin, OH; former Director and Vice President,
Human Resource Development (1985-1990), Honeywell, Inc., Minneapolis, MN.
- 4 -
<TABLE>
SECURITY OWNERSHIP OF DIRECTORS AND MANAGEMENT
<CAPTION>
Number of Shares
of Common Stock
Owned Beneficially % of
Name as of Jan. 22, 1999 (1)(2) Class
- ---- -------------------------- -----
<S> <C> <C>
Charles Biscieglia 18,298 0.2%
Anthony G. Dickson 5,152
Richard L. Dunham 8,838 0.1%
W. Cary Edwards 2,930
Thomas L. Glenn, Jr. 6,934 0.1%
Herman D. James, Ph.D. 3,030
Clarence D. McCormick 6,868 0.1%
Frederick R. Raring 17,923 0.2%
Shirli M. Vioni, Ph.D. 5,092
15 directors, nominees and 118,514 1.1%
officers as a group
<FN>
(1) Based on information furnished to the Company by the respective directors,
nominees and officers of the Company. The Company is informed that these persons
have sole voting power and sole power of disposition with respect to the shares
of Common Stock shown opposite their names, with the following exception: 1,500
shares of the officers as a group are not now held by them but may be acquired
through the exercise of stock options, which are exercisable within sixty days.
(2)Includes 250 shares awarded to each director in 1998 under the Restricted
Stock Program For Directors. Owners of restricted stock have power to vote the
shares, but have no investment power with respect to the shares until the
restrictions lapse.
</FN>
</TABLE>
- 5 -
THE BOARD OF DIRECTORS
Certain Transactions
Gas Company and other subsidiaries of the Company have maintained banking
relationships for a number of years with The Farmers and Merchants National Bank
of Bridgeton, of which Mr. McCormick is Chairman and a director, and expect to
continue such relationships. The highest aggregate indebtedness of Gas Company
and other subsidiaries of the Company to that bank during 1998 was $5,675,102,
and the amount of such indebtedness at December 31, 1998 was $5,000,000. Loans
made to Gas Company an d other subsidiaries by that bank are made on terms that
are usual and customary at the time they are made. The bank is also trustee of
the Employee Thrift Plan and the Employee Stock Ownership Plan. During 1998 Gas
Company paid $220,013 for purchase s of pipe and fittings from Seashore Supply
Company of which Mr. Raring is President.
Meetings of the Board of Directors And Its Committees
The Board of Directors of the Company met eleven times in 1998. All
Directors attended 75% or more of the total of (i) the number of meetings of the
Board of Directors held during the period such director was in office and (ii)
the number of meetings of the committees of the Board on which he or she served.
The average attendance for all Board and Committee meetings in 1998 was 99%.
During 1998, each of the directors of the Company also served on the Boards of
one or more of Gas Company , South Jersey Energy Company (Energy), Energy &
Minerals, Inc. (EMI) or R&T Group, Inc. (R&T), the four direct subsidiaries of
the Company. In 1998, each of these Boards met nine times.
The Audit Committee of the Board of Directors, which met four times in 1998,
is composed of five directors who are not officers, namely, Dr. Herman D.
James, Chairman, Anthony G. Dickson, Thomas L. Glenn, Jr., Frederick R. Raring
and Dr. Shirli M. Vioni. The Audit Committee (1) annually recommends to the
Board a firm of independent public accountants for appointment as auditors of
the Company; (2) reviews with the independent auditors the scope and results of
each annual audit; (3) reviews with the independent auditors and the Company's
internal auditors suggestions or recommendations made by either of them; (4)
reviews with appropriate Company officers the performance of the independent
auditors and the internal auditors; (5) considers the possible effect on the
independence of the independent auditors of each professional service rendered
or to be rendered by such auditors; and (6) reviews and makes recommendations to
the Board of Directors regarding the Annual Report to Shareholders.
The Compensation/Pension Committee of the Board of Directors, which met five
times in 1998, is composed of four directors who are not officers, namely,
Clarence D. McCormick, Chairman, Anthony G. Dickson, W. Cary Edwards and Dr.
Herman D. James. The Compensation/Pension Committee (1) grants options and
otherwise administers the Stock-Based Compensation Plan; and (2) reviews and
makes recommendations to the Board of Directors on the operations, performance
and administration of the retirement plan, other employee benefit plans, and
employment policies and forms of compensation, including the performance and
levels of compensation of the officers of the Company.
- 6 -
The Environmental Committee of the Board of Directors, which met two times
in 1998, is composed of six directors, namely, Thomas L. Glenn, Jr., Chairman,
Charles Biscieglia, Anthony G. Dickson, Richard L. Dunham, W. Cary Edwards and
Frederick R. Raring. The Environmental Committee (1) reviews and evaluates
management activities with respect to the environmental remediation of the
Company's and its subsidiaries' current and former properties; and (2) oversees
litigation against the Companies' insurance carriers for the recovery of
remediation costs.
The Executive Committee of the Board of Directors, which met two times in
1998, is composed of six directors, namely, Clarence D. McCormick, Chairman,
Charles Biscieglia, Richard L. Dunham, W. Cary Edwards, Thomas L. Glenn, Jr.,
and Dr. Shirli M. Vioni. The Executive Committee (1) formulates policies to be
followed in planning and conducting the business and affairs of the Company; and
(2) may act on behalf of the Board of Directors during intervals between
meetings of the Board in the management of the business and affairs of the
Company.
The Nominating Committee of the Board of Directors met four times in 1998.
It is composed of five directors, namely, Dr. Shirli M. Vioni, Chairman, Charles
Biscieglia, Richard L. Dunham, Dr. Herman D. James and Clarence D. McCormick.
Among it s functions, the Nominating Committee (1) maintains a list of
prospective candidates for directors, including those recommended by
shareholders; (2) reviews the qualifications of candidates for directors; and
(3) makes recommendations to the Board of Directors to fill vacancies and for
nominees for election to the Board at the Annual Meeting of Shareholders. The
Nominating Committee will consider nominees for the Board of Directors
recommended by shareholders and submitted in writing to the Secretary of the
Company.
Compensation Of Outside Directors
Directors of the Company who are not officers of the Company and who are not
members of the Executive Committee of the Board are paid an annual retainer of
$7,500 plus 250 shares of restricted common stock and fees of $950 per meeting
for each meeting of the Boards of the Company, Gas Company, Energy, EMI and R&T,
respectively, that they attend, except that the maximum fee paid to any person
for attendance at one or more meetings of these Boards held on the same day is
$950. Members of t he Executive Committee of the Board who are not officers of
the Company are paid an annual retainer of $10,000 plus 250 shares of restricted
common stock and receive the same attendance fees as the other non-officer
directors. The Company has established a policy to recognize exceptional service
to the Company beyond that service normally provided by a board member. In 1998
no payments were made under this policy. Directors who are also officers of the
Company receive no compensation other than their regular compensation. Members
of all the Committees of the Company or of a subsidiary are paid $475 for each
meeting of those Committees that they attend if the meeting is held on the same
day as a Board meeting or $950 if the meeting is held o n any other day.
Chairmen of each of those committees are paid an additional $200 for each
meeting of their Committee that they attend. The Company has established a plan
whereby directors may elect to defer the receipt of fees until a specified date
or until retirement from the Board. The deferred amount, together with interest,
may be paid in a lump sum or in equal annual installments, as the director
elects.
- 7 -
<TABLE>
EXECUTIVE COMPENSATION
Summary Compensation Table
<CAPTION>
(a) (b) (c) (d) (e) (i)
Name Other
and Annual All Other
Principal Compen- Compen-
Position(s) Year Salary Bonus sation(2) sation(3)
- --------------------- ---- -------- ----- --------- ---------
<S> <C> <C> <C> <C> <C>
Richard L. Dunham,(1) 1998 $300,000 - $ - $ -
Chairman of the Board 1997 - - - -
1996 - - - -
Charles Biscieglia,(1) 1998 227,489 - 795 11,537
President & CEO of the 1997 169,500 - 658 9,534
Company and of South 1996 159,500 - - 9,294
Jersey Gas Company
Edward J. Graham, 1998 141,265 - - 4,799
Vice President, 1997 118,750 - - 4,042
President of South 1996 105,417 - - 3,434
Jersey Energy Company
and of SJ EnerTrade, Inc.
and Sr. Vice President of
South Jersey Gas Company
David A. Kindlick, 1998 158,780 - - 5,406
Vice President and Sr. 1997 125,000 - - 4,246
Vice President of 1996 101,500 - - 3,454
South Jersey Gas Company
Albert V. Ruggiero, 1998 139,598 - - 1,878
Vice President and Sr. 1997 121,250 - - 4,479
Vice President of 1996 114,000 - - 4,212
South Jersey Gas Company
<FN>
Footnotes to Summary Compensation Table
(1) Richard L. Dunham served as Chairman and Acting CEO until October 23,
1998. On that date Charles Biscieglia was elected President and CEO.
(2) The Internal Revenue Code limits the contributions that may be made by
or on behalf of an individual under defined contribution plans such as the
Company's Thrift Plan. The Company has adopted a policy of currently reimbursing
its executive officers with the amount of Company contributions that may not be
made because of this limitation (including the tax liability incurred by the
additional income). Amounts paid pursuant to this policy, are included in column
(e) of the Summary Compensation Table.
- 8 -
(3) Column (i) includes Employer Contributions to Thrift Plan, income value
of group life insurance and increase in vested benefit level of deferred
compensation contract. 1998 values for these items are:
Biscieglia Graham Kindlick Ruggiero
Thrift Plan $ 6,185 $4,238 $4,763 $ 313
Group Life Insurance 2,467 561 643 1,565
Deferred Compensation 2,885 - - -
$11,537 $4,799 $5,406 $1,878
</FN>
</TABLE>
<TABLE>
Aggregated Option Exercises in Last Fiscal
Year and Fiscal Year-End Option Values
<CAPTION>
(a) (b) (c) (d) (e)
Number of
Securities Value
Underlying of Unexercised
Unexercised In-The-Money
Shares Options at Options at
Acquired Value Fiscal Year-End Fiscal Year-End
Name on Exercise Realized (All Exercisable) (All Exercisable)
<S> <C> <C> <C> <C>
Charles
Biscieglia 4,000 $20,250 -0- -0-
Edward J.
Graham 1,510 11,375 -0- -0-
David A.
Kindlick 510 6,207 1,000 $1,500
Albert V.
Ruggiero - - 500 750
</TABLE>
In 1987, the Company adopted the Stock-Based Compensation Plan (then called
the stock option and stock appreciation rights plan) for its officers and other
employees. Of the 306,000 options authorized, 87,750 options have been awarded.
82,750 of these awarded options have been exercised. No options were granted
under the plan in 1998.
The Company has Employment Agreements with certain of its officers,
including Messrs. Biscieglia, Graham, Kindlick and Ruggiero. Each Agreement is
for a 3-year period ending September 30, 1999, and provides for a base salary
that will be reviewed periodically, but will be not less than what was being
paid at the beginning of the period. If a change of control (as defined in the
Agreement) occurs during the period of the Agreement, the Agreement is
automatically extended for 3 years fro m the date the change of control occurs.
If, during the extended term of the Agreement, the officer's employment is
terminated for other than cause, or he resigns after there has been a
significant adverse change in his employment arrangements with the Company, he
is entitled to a severance payment equal to 300% of his average annual
compensation during the preceding 5 calendar years. If the officer's employment
agreement is terminated for other than cause without a change of control, he is
en titled to a severance payment equal to 150% of his average annual
compensation during the preceding 5 calendar years.
- 9 -
Pension Plans For Executives
The following table illustrates the current retirement benefits under the
salaried employee pension plan, and the supplemental executive retirement plan,
assuming the executive retires at the normal retirement age of 60.
<TABLE>
<CAPTION>
Years of Service
Remuneration 15 20 25 30 35 40
<S> <C> <C> <C> <C> <C> <C>
$125,000 $ 43,750 $ 56,250 $ 68,750 $ 81,250 $ 81,250 $ 81,250
150,000 52,500 67,500 82,500 97,500 97,500 97,500
175,000 61,250 78,750 96,250 113,750 113,750 113,750
200,000 70,000 90,000 110,000 130,000 130,000 130,000
225,000 78,750 101,250 123,750 146,250 146,250 146,250
250,000 87,500 112,500 137,500 162,500 162,500 162,500
300,000 105,000 135,000 165,000 195,000 195,000 195,000
400,000 140,000 180,000 220,000 260,000 260,000 260,000
450,000 157,500 202,500 247,500 292,500 292,500 292,500
500,000 175,000 225,000 275,000 325,000 325,000 325,000
</TABLE>
As employees, the executive officers of the Company are eligible for
benefits under a tax-qualified pension plan for salaried employees provided by
the Company. Compensation considered under the pension plan consists of base
salary only, which in the case of the executive officers is included in the cash
compensation reported in column (c) of the Summary Compensation Table.
Employees do not make contributions to the plan, and the employer contributions
(which are based on aggregate actuarial calculations without individual
allocation) are held and invested by insurance companies of recognized standing
until they are used to provide retirement benefits. Under certain circumstances,
early retirement with reduced annual benefits is permitted (but not before age
55). Executive officers who are 50 years of age or older are also covered by an
unfunded supplemental retirement plan that is designed in general to provide the
officer with a minimum retirement benefit from the salaried employee pension
plan and the supplemental plan that aggregates 2% of the average of the highest
three of the final six years salary (as defined in the plan), for each year of
service, plus 5%. Assuming continued employment and retirement at age 60,
Messrs. Biscieglia, Graham, Kindlick and Ruggiero will have, respectively, 36,
36, 35 and 19 years of credited service. No credit is provided under the
supplemental plan for more than 30 years of service.
Compensation/Pension Committee Report on Executive Compensation
The Compensation/Pension Committee (the Committee) of the Board of Directors
consists of four outside, non-employee directors. Among other charges, the
Committee has the responsibility for making recommendations to the Board with
regard to the Company's executive compensation policies, practices and
objectives. The Committee also administers the Company's Stock-Based
Compensation Plan (the Plan), making grants and awards under such Plan to
selected key employees at its discretion and in discussion with the Chairman
and/or CEO as indicated. No bonuses were paid nor stock options granted in 1997
or 1998.
As part of the reorganization of senior management in 1998, the Committee,
drawing upon the varied business experience and knowledge of its members and
with the advice and counsel of an independent compensation expert (the
Consultant) reexamined its executive compensation
- 10 -
philosophy. In the past, executive compensation had been accomplished almost
exclusively by adjustments to base salary and use of the Plan had been limited.
This reexamination confirmed the overall purpose of the Company's
compensation policies, that being the ability to attract and retain qualified
executive management. As importantly, the executive compensation program should
be so designed as to closely align the interests of senior management with the
interests of Company shareholders. The Committee determined that this is best
accomplished by establishing objective based, incentive compensation structures
which directly link compensation levels to the Company's short-term and long-
term performance.
Accordingly, an executive compensation structure was established which
promotes the achievement of superior results in an emerging, competitive market.
The structure is such that when the Company achieves its annual performance
objectives, it s executives would receive a compensation package which
approximates the average level of compensation (50th percentile) paid to
executives of its peers. The program has three integral components which will be
phased-in over a three year period. These elements are designed to:
1. Achieve the objectives of attraction, retention and motivation through the
payment of competitive base salaries. In October, executive base salaries,
including that of Charles Biscieglia, the Chief Executive Officer, were adjusted
to reflect current market levels as were determined by the Consultant, using
comparative data from organizations of similar size, scope and industry. The
Consultant's findings were consistent with other executive compensation surveys
in which the Company or its subsidiaries participate. Base salaries are set
forth in the Summary Compensation Table on page 8 and also reflect two
promotions announced in March and October, of executives from South Jersey Gas
Company to hold positions with the Company in connection with the expansion in
non-regulated business and product lines.
2. Provide long-term incentives for enhancing shareholder value through
compensation using the Plan's equity based instruments. Such compensation is
earned upon the achievement of specific Company performance goals. To facilitate
this element of the program, in January of 1999, the Board of Directors approved
certain revisions to the Plan to provide a restricted stock component. Pending
shareholder approval, the January 2000 adjustment to executive compensation
would be made exclusively through restricted stock, with the value of the award
tied to 1999 earnings per share from continuing operations. The Committee
established at-risk threshold, target and maximum incentive levels based upon
this performance metric.
3. Provide short term incentives for individual and corporate performance
through the payment of cash bonuses. The Committee will engage its Consultant to
design this element of the compensation program in 1999, for implementation in
2000.
The Committee believes that at-risk compensation, both annual and long term,
should represent a significant portion of total executive compensation and has
designed its program accordingly. Further, that the use of a time restricted,
stock-based incentive compensation element strongly encourages executives and
managers to plan and act in a fashion which promotes an appreciation in stock
price.
Through October 1998, Mr. Richard L. Dunham served as Chairman and Acting
Chief Executive Officer and was compensated during that period, through base
salary alone, which was at a level below the median for this position in
comparable companies. In October, Charles
- 11 -
Biscieglia, formerly Vice President of Utility Operations, was elected President
and Chief Executive Officer; he continues to serve as President and Chief
Executive Officer of South Jersey Gas Company pursuant to his election to that
capacity in March. His compensation for 1998 reflects these elected capacities.
Mr. Biscieglia's base salary was set at the median base level for comparable
companies utilizing the data supplied by the Consultant. No annual or long-term
incentives were provided to either Mr. Dunham or Mr. Biscieglia in 1998.
Therefore their total compensation levels were well below the median for this
position when compared to comparable companies.
Clarance D. McCormick, Chairman
Anthony G. Dickson
W. Cary Edwards
Dr. Herman D. James
STOCK PERFORMANCE GRAPH
Set forth below is a graph that shows in the form of an index (1993 = 100),
for the 1993 - 1998 period, the cumulative total return on the Company's Common
Stock (consisting of the change in share price during each year plus dividends
receive d which are assumed to be reinvested) compared to the Standard & Poor's
500 Index and the Standard & Poor's Utility Index. The Standard & Poor's Utility
Index is a commonly used indicator of utility common stock performance based on
selected gas, electric and telephone companies. The compounded annual growth
rate for the Company on the graph is 8.68%. This compares to 24.02% for the
Standard & Poor's 500 Index and 13.95% for the Standard & Poor's Utility Index.
Indexed Total Return Assuming Dividends Reinvested Over a 5 Year Period
(Chart)
<TABLE>
<CAPTION>
1993 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C>
S&P 500 100 110.36 139.31 171.21 228.25 293.41
S&P UTIL 100 92.12 130.65 134.70 167.72 192.16
SJI 100 82.38 172.44 126.27 166.53 151.63
</TABLE>
- 12 -
PROPOSAL TO APPROVE AN AMENDMENT TO THE
1997 STOCK-BASED COMPENSATION PLAN
In January 1999, the Board of Directors of the Company amended the
Company's Stock-Based Compensation Plan (the Amended Plan) to provide for the
grant of restricted stock awards to officers and other employees. (The Stock-
Based Compensation Plan was originally adopted in 1987 and was amended in 1997.)
The Board of Directors believes the Amended Plan will help the Company attract,
retain and positively motivate employees and closely align their interests with
the interests of the Company's shareholders. The full text of the Amended Plan
is attached as Appendix A to this Proxy Statement.
Description of the Amendment
The Plan has been amended to provide for the grant of restricted stock
awards. Officers and other employees would be eligible to receive awards as
part of their annual compensation, based on the performance of the Company and
the individual. Restricted stock awards would be granted based on the
achievement of preestablished performance goals. Employees may not sell,
transfer, assign or pledge any awarded shares until the restrictions lapse.
Restricted stock awards may be credited with dividends during the restriction
period which shall be reinvested in additional restricted shares. Restricted
stock awards may vest over time and will generally be subject to forfeiture if
an awardee's employment terminates before the restricted period lapses.
Therefore the Amended Plan will help the Company retain, as well as motivate,
its employees. A maximum of 306,000 shares of Company stock can be awarded and
retained by employees under the Amended Plan, whatever the form of award.
Federal Income Tax Consequences
An employee recognizes no income and the Company receives no deduction for
federal income tax purposes until the restrictions lapse and the shares are
fully vested. Income to the employee is realized based on the value of the
shares at the time of vesting, and the Company receives a deduction in the same
amount.
Shareholder Vote Required
The Company is submitting the Amended Plan to shareholders for approval to
enable the Company to continue to grant "Incentive Stock Options" which are tax
qualified stock options eligible for favorable tax treatment under federal tax
law. Although the Company has never granted any Incentive Stock Options under
the Amended Plan, it wishes to preserve the flexibility to do so in the future
if that appears to be in the best interests of the Company and its shareholders.
If shareholder approval is not obtained, the Company will not be able to grant
Incentive Stock Options, but will continue to be able to grant non-tax qualified
stock options and stock appreciation rights as well as restricted stock grants
under the Amended Plan. The affirmative vote of a majority of the votes cast at
the Annual Meeting for the holders of Common Stock will be required to approve
the amendments to the Plan. The Plan presently has previously authorized shares
remaining and available for issue and therefore, no additional share
authorization is being requested.
The Board of Directors recommends a vote "FOR" approval of the Amended Plan,
and it is intended that, in the absence of contrary direction, the proxies will
be voted in favor of approval.
- 13 -
APPOINTMENT OF AUDITORS
Upon the recommendation of the Audit Committee, the Board of Directors,
subject to the approval of the shareholders, has appointed Deloitte & Touche
LLP, independent public accountants, as the auditors of the Company for the year
1999. Unless otherwise directed, it is proposed to vote proxies "FOR" approval
of this appointment.
Deloitte & Touche LLP served as the auditors of the Company during the year
1998. During 1998, the audit services performed by that firm for the Company
consisted of the audits of the financial statements of the Company and its
subsidiaries a nd the preparation of various reports based on those audits,
services related to filings with the Securities and Exchange Commission, the New
York Stock Exchange, and audits of employee benefit plans as required by the
Employee Retirement Income Security Act.
ANNUAL REPORT AND FINANCIAL INFORMATION
A copy of the Company's Annual Report to Shareholders for the year ended
December 31, 1998 accompanies this proxy statement. The Annual Report is not
proxy soliciting material or a communication by which any solicitation is made.
A representative of Deloitte & Touche LLP, whose report on the Company's
financial statements appears in the Annual Report, will be present at the Annual
Meeting and will have the opportunity to make a statement, if he desires to do
so, and to respond to questions from shareholders.
Upon written request of any person who on the record date for the Annual
Meeting was a record owner of the Company's Common Stock, or who represents in
good faith that he was on such date a beneficial owner of such stock entitled to
vote at the Annual Meeting, the Company will send to such person, without
charge, a copy of its Annual Report on Form 10-K for 1998, as filed with the
Securities and Exchange Commission. Requests for this report should be directed
to George L. Baulig, Secretary, South Jersey Industries, Inc., 1 South Jersey
Plaza, Folsom, New Jersey 08037.
OTHER MATTERS
Any proposal which a qualified shareholder of the Company wishes to include
in the Company's proxy statement to be released to shareholders in connection
with the 2000 Annual Meeting of Shareholders that is received by the Company
after November 12, 1999 will not be eligible for inclusion in the Company's
proxy statement and form of proxy for that meeting. To be a qualified
shareholder, a shareholder must have owned at least $2,000 in market value of
the Company's securities for at least one year before the date of submission of
the proposal to the Company. In compliance with the Company's bylaws,
stockholders must provide the Company with at least 60 days, but no more than 90
days, notice prior to an announced annual meeting date o f (i) business the
stockholder wishes to raise at the meeting and (ii) persons, if any, the
stockholder wishes to nominate for election as directors at that meeting.
The Board of Directors knows of no matters, other than those set forth in
the Notice of Annual Meeting of Shareholders, to come before the 1999 Annual
Meeting. If any other matters or motions properly come before the Meeting,
including any matters dealing with the conduct of the Meeting, it is the
intention of the persons named in the accompanying form of proxy to vote such
proxy in accordance with their judgment.
By Order of the Board of Directors,
George L. Baulig
Secretary
March 12, 1999
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APPENDIX A
SOUTH JERSEY INDUSTRIES, INC. 1997 STOCK-BASED COMPENSATION PLAN
(As Amended and Restated Effective January 1, 1999)
1. Purpose Of Plan
The purpose of the Plan, which was formerly known as the South Jersey
Industries, Inc. 1997 Stock Option and Stock Appreciation Rights Plan, is to
assist the Company in retaining the employment of valued officers and employees
by: (i) providing incentive compensation opportunities competitive with those
of other major companies; (ii) providing performance related incentives that
motivate superior performance on the part of the Company's officers and
employees; and (iii) providing the Company's officers and employees with the
opportunity to acquire an ownership interest in the Company and to thereby
acquire a greater stake in the Company and a closer identity with it.
2. Definitions
(a) "Award" means an award of Options, SARs, or Restricted Stock.
(b) "Board" means the board of directors of the Parent Company.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
(d) "Committee" means the committee described in Paragraph 5.
(e) "Company" means South Jersey Industries, Inc. and each of its Subsidiary
Companies.
(f) "Date of Grant" means the date on which an Option, SAR or Restricted Stock
Award is granted.
(g) "Dividend Equivalent" means the right to receive the equivalent value (in
Shares) of dividends that are paid on Restricted Stock and reinvested in Shares.
(h) "Fair Market Value" means on any given date the mean between the highest and
lowest prices of actual sales of Shares on the principal national securities
exchange on which the Shares are listed on such date or, if there are no such
sales on such date, the mean between the closing bid and asked prices of the
Shares on such exchange on such date.
(i) "Holder" means a person to whom (i) an SAR has been granted under the Plan,
which SAR has not been exercised and has not expired or terminated, or (ii) a
Restricted Stock Award has been granted, which Award has not become vested or
been forfeited .
(j) "Incentive Stock Option" means an Option granted under the Plan, designated
by the Committee at the time of such grant as an Incentive Stock Option and
containing the terms specified herein for Incentive Stock Options.
(k) "Non-Qualified Option" means an Option granted under the Plan, designated by
the Committee at the time of such grant as a Non-Qualified Option and containing
the terms specified herein for Non-Qualified Options.
(l) "Option" means any stock option granted under the Plan and described either
in Paragraph 3(a) or 3(b).
(m) "Optionee" means a person to whom an Option has been granted under the Plan,
which Option has not been exercised and has not expired or terminated.
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(n) "Parent Company" means South Jersey Industries, Inc.
(o) "Performance Goal" means the annual consolidated earnings per share from the
Company's continuing operations, or any other goal that is established at the
discretion of the Committee including, among other things: (i) the price of
Shares, (ii) the market share of the Company (or any business unit thereof),
(iii) sales by the Company (or any business unit thereof), (iv) return on equity
of the Company, or (v) costs of the Company (or any business unit thereof). The
Committee shall have sole discretion to determine specific targets within each
category of Performance Goals.
(p) "Restriction Period" means the period during which Restricted Stock awarded
under the Plan is subject to forfeiture.
(q) "Restricted Stock" means Shares awarded by the Company under Paragraph 11 of
the Plan and described in Paragraph 3(d).
(r) "SAR" means a stock appreciation right granted under the Plan and described
in Paragraph 3(c).
(s) "Share" or "Shares" means a share or shares of Common Stock of the Parent
Company.
(t) "Subsidiary Companies" means all corporations that, at the time in question,
are subsidiary corporations of the Parent Company within the meaning of section
425(f) of the Code.
(u) "Ten Percent Shareholder" means a person who on the Date of Grant owns,
either directly or within the meaning of the attribution rules contained in
section 425(d) of the Code, stock possessing more than ten percent of the total
combined voting power of all classes of stock of his or her employer corporation
or of its parent or subsidiary corporations, as defined respectively in sections
425(e) and (f) of the Code.
(v) "Value" of a SAR means the excess of the Fair Market Value of a Share on the
date of exercise of such SAR over the Fair Market Value of a Share on the Date
of Grant of such SAR.
3. Rights To Be Granted
Rights that may be granted under the Plan are:
(a) Incentive Stock Options, which give the Optionee the right for a specified
time period to purchase a specified number of Shares for a price not less than
their Fair Market Value on the Date of Grant;
(b) Non-Qualified Options, which give the Optionee the right for a specified
time period to purchase a specified number of Shares for a price determined by
the Committee on the Date of Grant;
(c) SARs, which give the Holder the right for a specified time period, without
payment to the Company, to receive the Value of such SARS, to be paid in cash or
Shares or a combination of cash and Shares, the number and amount of which shall
be determined pursuant to Paragraph 8(e) below.
(d) Restricted Stock Awards, which give the Holder a specific number of Shares
which are either (i) awarded upon the Company's achievement of Performance Goals
established by the Committee, or (ii) awarded, subject to forfeiture if the
Company fails to achieve Performance Goals established by the Committee.
- 2 -
4. Stock Subject To Plan
Not more than 306,000 Shares in the aggregate may be delivered pursuant to
the Plan upon exercise of Options or SARs, or pursuant to Restricted Stock
Awards. The Shares so delivered may, at the option of the Company, be either
treasury Shares or Shares originally issued for such purpose. If an Option or
an SAR covering Shares terminates or expires without having been exercised in
whole or in part, other Options or SARs may be granted covering the Shares as to
which the Option or SAR was not exercised. If a Restricted Stock Award is
forfeited, other Restricted Stock Awards may be granted covering the Shares
which were forfeited.
5. Administration Of Plan
The Plan shall be administered by a committee of the Board, which may be a
standing committee of the Board and which shall be composed of not less than
three directors of the Parent Company, appointed by the Board, none of whom
shall be eligible (or shall have been eligible within one year prior to the date
of his or her appointment) to be granted Options, SARs or Restricted Stock
Awards under the Plan. Additionally, no member of the Committee shall be
eligible (or shall have been eligible within one year prior to the date of his
or her appointment) to be selected as a participant under any other
discretionary plan of the Company or any of its affiliates entitling him or her
to acquire stock, stock options or stock appreciation rights of the Company or
any of its affiliates.
6. Grant of Rights
The Committee may grant Options, SARs, Restricted Stock Awards or all of the
foregoing to eligible employees of the Company.
7. Eligibility
(a) Eligible employees to whom Options and SARs may be granted shall be officers
and other key employees of the Company, including employees who are also
directors. Directors who are not employees of the Company shall not be eligible.
(b) An Incentive Stock Option shall not be granted to a Ten Percent Shareholder
except on such terms concerning the option price and period of exercise as are
provided in Paragraphs 8(a) and 8(f) with respect to such a person. A Non-
Qualified Option shall not be granted to a Ten Percent Shareholder.
(c) Restricted Stock Awards may be granted to those officers and other employees
of the Company who are designated by the Committee as eligible to receive
Restricted Stock Awards.
8. Option and SAR Agreements and Terms
All Options and SARs shall be granted within ten years from November 22, 1996
and be evidenced by Option agreements or SAR agreements which shall be executed
on behalf of the Parent Company and by the respective Optionees or Holders. The
terms of each such agreement shall be determined from time to time by the
Committee, consistent, however, with the following:
(a) Option Price. The option price per Share shall be determined by the
Committee but, in the case of Incentive Stock Option, shall not be less than
100% of the Fair Market Value of such Share on the Date of Grant. With respect
to any Incentive Stock Option granted to a Ten Percent Shareholder, the option
price per Share shall not be less than 110% of the Fair Market Value of such
Share on the Date of Grant.
- 3 -
(b) Restrictions on Transferability. No Option or SAR shall be transferable
otherwise than by will or the laws of descent and distribution and, during the
lifetime of the Optionee or Holder, shall be exercisable only by him or her.
Upon the death of an Optionee or Holder, the person to whom the rights shall
have passed by will or by the laws of descent and distribution may exercise any
Options or SARs only in accordance with the provisions of Paragraph 8(f).
(c) Payment Upon Exercise of Options. Full payment for Shares purchased upon
the exercise of an Option shall be made in cash or, at the election of the
Optionee and as the Committee may, in its sole discretion, approve, either (1)
by surrendering Shares with an aggregate Fair Market Value equal to the
aggregate option price, (2) by delivering such combination of Shares and cash as
the Committee may, in its sole discretion, approve or (3) at the election of the
Optionee, and if the Committee, in its sole discretion approves, by surrendering
the Option in exchange for issuance of a number of shares equal to the
difference between the exercise price of the Option and the Fair Market Value of
the Shares subject to the Option.
(d) Issuance of Certificates Upon Exercise of Options; Payment of Cash. Only
whole Shares shall be issuable upon exercise of Options. Any right to a
fractional Share shall be satisfied in cash. Upon payment of the option price,
a certificate for t he number of whole Shares and a check for the Fair Market
Value on the date of exercise of any fractional Share to which the Optionee is
entitled shall be delivered to such Optionee by the Parent Company, provided,
however, that in the case of the exercise of a Non-Qualified Option, the
Optionee has remitted to his employer an amount, determined by such employer,
necessary to satisfy applicable federal, state or local tax-withholding
requirements, or made other arrangements with his or her employer for the
satisfaction of such tax-withholding requirements. The Parent Company shall not
be obligated to deliver any certificates for Shares until such Shares have been
listed (or authorized for listing upon official notice of issuance) upon each
stock exchange upon which outstanding Shares of such class at the time are
listed nor until there has been compliance with such laws or regulations as the
Parent Company may deem applicable. The Parent Company shall use its best
efforts to effect such listing and compliance.
(e) Issuance of Certificates Upon Exercise of SARS; Payment of Cash. Upon
exercise of an SAR, its Value shall be payable in cash, Shares, or in such
combination of cash and Shares as is selected by the Holder and approved by the
Committee in its sol e discretion. Any Shares due upon exercise of an SAR shall
be delivered to the Holder by the Parent Company and any payment of cash shall
be made by the employer of the Holder. The employer of the Holder shall deduct
from the amount of any cash so payable an amount necessary to satisfy
applicable federal, state, or local tax-withholding requirements. If no cash is
payable (or if the amount of cash payable is insufficient to satisfy applicable
tax-withholding requirements), no Shares shall be delivered by the Parent
Company to the Holder until the Holder remits to his or her employer an amount,
determined by such employer, necessary to satisfy applicable federal, state, or
local tax-withholding requirements or makes other arrangements for the
satisfaction of such tax-withholding requirements. The Parent Company shall not
be obligated to deliver any certificates for Shares until such
- 4 -
Shares have been listed (or authorized for listing upon official notice of
issuance) upon each stock exchange upon which outstanding Shares of such class
at the time are listed nor until there has been compliance with such laws or
regulations as the Parent Company may deem applicable. The Parent Company shall
use its best efforts to effect such listing and compliance.
(f) Periods of Exercise Of Options and SARs. An Option or SAR shall be
exercisable in whole or in part at such time as may be determined by the
Committee and stated in the Option or SAR agreement, provided, however, that,
unless otherwise determined by the Committee, no Option or SAR shall be
exercisable before one year or after five years from the Date of Grant in the
case of an Option or SAR granted to a Ten Percent Shareholder, or before one
year or after ten years from the Date of Grant in all other cases, except as
provided below:
(i) In the event that an Optionee or Holder ceases to be employed by the Company
for any reason other than retirement, disability (as determined by the
Committee) or death, any Option or SAR held by such Optionee or Holder shall not
be exercisable after the date the Optionee or Holder ceases to be employed by
the Company unless otherwise determined by the Committee and set forth in the
Option or SAR agreement or a written amendment thereto; provided, however, that
in no event shall an Option or SAR be exercisable after five years from the Date
of Grant in the case of a Ten Percent Shareholder or after ten years from the
Date of Grant in all other cases;
(ii) If an Optionee or Holder ceases to be employed by the Company, and if such
cessation of employment is due to the disability (as determined by the
Committee) or the retirement of the Optionee or Holder, he or she shall have the
right to exercise his or her Options or SARs until the last day of the sixth
month following cessation of employment, or such longer period as the Committee
may determine and set out in writing, even if the date of exercise is within any
time period prescribed by t he Plan prior to which such Option or SAR shall not
be exercisable; provided, however, that in no event shall an Option or SAR be
exercisable after five years from the Date of Grant in the case of a Ten Percent
Shareholder or after ten years from the Date of Grant in all other cases;
(iii) In the event that an Optionee or Holder ceases to be employed by the
Company by reason of his or her death, any Incentive Stock Option, Non-Qualified
Option or SAR held by such Optionee or Holder shall be exercisable, the person
to whom the rights of the Optionee shall be passed by will or by the laws of
descent and distribution until the last day of the twelfth month following the
date of the Optionee's or Holder's death, or such longer period as the Committee
may determine and set out in writing, even if the date of exercise is within any
time period prescribed by the Plan prior to which such Option or SAR shall not
be exercisable; provided, however, that in no event shall an Option or SAR be
exercisable after five years from the Date of Grant in the case of a Ten Percent
Shareholder or after ten years from the Date of Grant in all other cases.
- 5 -
(g) Date of Exercise. The date of exercise of an Option or SAR shall be the
date on which written notice of exercise, addressed to the Parent Company at its
main office to the attention of its Secretary, is hand delivered, telecopied or
mailed, firs t class postage prepaid; provided, however, that the Parent Company
shall not be obligated to deliver any certificates for Shares pursuant to the
exercise of an Option or SAR until the Optionee shall have made payment in full
of the option price for such Shares. Each such exercise shall be irrevocable
when given. Each notice of exercise must (i) specify the Incentive Stock
Option, Non-Qualified Option, SAR, or combination thereof, being exercised; (ii)
must, in the case of the exercise of an Option, include a statement of
preference (which shall not be binding on the Committee) as to the manner in
which payment to the Parent Company shall be made (Shares or cash or a
combination of Shares and cash); and (iii) must, in the case of the exercise of
an SAR, include a statement of preference (which shall not be binding on the
Committee) as to the manner in which payment to the Holder shall be made (Shares
or cash or a combination of Shares and cash).
(h) Termination of Employment. For purposes of the Plan, a transfer of an
employee between two employers, each of which is a Company, shall not be deemed
a termination of employment.
(i) Multiple Grants of Incentive Stock Options, Non-Qualified Options and SARs.
The grant, exercise, termination or expiration of any Incentive Stock Option,
Non-Qualified Option or SAR shall have no effect upon any other Incentive Stock
Option, Non -Qualified Option or SAR held by the same Optionee or Holder;
provided, however, that the Committee may, in its sole discretion, provide in
the Option agreement or SAR agreement that the exercise of a certain number of
SARs is conditioned upon the exercise of a certain number of Options or provide
that an SAR shall otherwise be attached to Options granted under the Plan. All
SARs which are attached to Options shall be subject to the following terms:
(A) such SAR shall expire no later than the Option to which it is attached,
(B) such SAR shall be for an amount no more than the excess of the Fair Market
Value of the Shares subject to the attached Option on the date such SAR is
exercised over the option price of such Option,
(C) such SAR shall be subject to the same restrictions on transferability as the
Option to which it is attached,
(D) such SAR shall be exercisable only when the Option to which it is attached
is eligible to be exercised,
(E) such SAR shall be exercisable only when the Fair Market Value of the Shares
subject to the attached Option exceeds the option price of such Option, and
(F) such SAR shall expire upon the exercise of the Option to which it is
attached.
Upon exercise of an SAR which is attached to an Option, the Option to which
the SAR is attached shall expire.
9. Limitation on Grant of Incentive Stock Options
The aggregate Fair Market Value (determined as of the time options are
granted) of the shares for which any employee may be granted incentive stock
options that first become exercisable in any one calendar year under the Plan
and any other plan of his employer corporation and its
- 6 -
parent and subsidiary corporations, as defined respectively in sections 425(e)
and (f) of the Code, shall not exceed $100,000.
10. Rights As Shareholders With Respect to Options and SARs
Neither an Optionee nor a Holder shall have any right as a shareholder with
respect to any Shares subject to his or her Options or SARs until the date of
the issuance of a stock certificate to him or her for such Shares.
11. Restricted Stock Awards
The grant of Restricted Stock Award shall be subject to the following terms
and conditions:
(a) Grant of Restricted Stock Award. Any Restricted Stock granted under the Plan
shall be evidenced by an agreement executed by the Company and the Holder, which
agreement shall conform to the requirements of the Plan, and shall specify (i)
the number of Shares subject to the Award, (ii) the Restriction Period
applicable to each Award, (iii) the events that will give rise to a forfeiture
of the Award, (iv) the Performance Goals that must be achieved in order for the
restriction to be removed fro m the Award, (v) the extent to which the Holder's
right to receive the Shares under the Award will be forfeited if the Performance
Goals are not met, and (vi) whether the Restricted Stock is subject to a vesting
schedule. The agreement may contain such other provisions not inconsistent with
the terms of the Plan as the Committee shall deem advisable.
(b) Delivery of Restricted Stock. Upon determination of the number of shares of
Restricted Stock that are to be granted to the Holder, the Committee shall
direct that a certificate or certificates representing the number of Shares be
issued to the H older with the Holder designated as the registered owner. The
certificate(s) representing such shares shall be legended as to restrictions on
the sale, transfer, assignment, or pledge of the Restricted Stock during the
Restriction Period and deposit ed by the Holder, together with a stock power
endorsed in blank, with the Company.
(c) Dividend Equivalents. Notwithstanding any provision of the Plan to the
contrary, a Holder who has been granted a Restricted Stock Award pursuant to
this Paragraph 11 may, at the discretion of the Committee, be credited as of
dividend payment dates during the Restriction Period with Dividend Equivalents
with respect to the Shares underlying the Restricted Stock Award. Such Dividend
Equivalents shall be credited to an account established on behalf of the Holder
by the Company. The Dividend Equivalents credited under this Paragraph (c)
shall be notionally reinvested in Shares and shall be converted into additional
Shares under such formula, at such time, and subject to such limitations as may
be determined by the Committee.
(d) Receipt of Common Stock. At the end of the Restriction Period, the
Committee shall determine, in light of the terms and conditions set forth in the
Restricted Stock agreement, the number of shares of Restricted Stock with
respect to which the restrictions imposed hereunder shall lapse. The Restricted
Stock with respect to which the restrictions shall lapse shall be converted to
unrestricted Shares by the removal of the restrictive legends from the
Restricted Stock. Thereafter, Shares equal to the number of shares of the
Restricted Stock with respect to which the restrictions hereunder shall lapse
shall be delivered to the Holder. The Committee may, in its sole discretion,
modify or accelerate the vesting and delivery of shares of Restricted Stock.
- 7 -
(e) Termination By Reason of Death, Disability or Retirement. Unless otherwise
determined by the Committee at the time of grant, if a Holder ceases to be
employed by the Company and such cessation of employment is due to the Holder's
death, disability (as determined by the Committee) or retirement, the vested
portion of the Restricted Stock, if any, shall become nonforfeitable. The non-
vested portion of the Restricted Stock shall be forfeited as of the date of such
termination of employment.
(f) Other Termination. Unless otherwise determined by the Committee at the time
of grant, if a Holder ceases to be employed by the Company and such cessation of
employment is due to any reason other than for death, disability (as determined
by the Committee), or retirement, any Restricted Stock with respect to which the
Restriction Period has not expired shall be forfeited.
12. Changes in Capitalization
In the event of a stock dividend, stock split, recapitalization,
combination, subdivision, issuance of rights, or other similar corporate change,
the Board shall make full anti-dilution adjustments in the aggregate number of
Shares that may b e covered by Options issued pursuant to the Plan, the
aggregate number of SARs that may be granted, the aggregate number of Shares
covered by Restricted Stock Awards that may be granted pursuant to the Plan, the
number of Shares subject to, and the option price of, each then-outstanding
Option, the number of then-outstanding SARs and the Fair Market Value of Shares
upon which the Value of such SARs is based, and the number of Shares subject to
each then-outstanding Restricted Stock Award.
13. Mergers, Dispositions and Certain Other Transactions
If, during the term of any Option or SAR, or during the Restricted Period of
any Restricted Stock Award, the Parent Company or any of the Subsidiary
Companies shall be merged into or consolidated with or otherwise combined with
or acquired by another person or entity, or there is a divisive reorganization
or a liquidation or partial liquidation of the Parent Company, the Parent
Company may choose to take no action with regard to the Options, SARs or
Restricted Stock Awards outstanding or , notwithstanding any other provision of
the Plan, to take any of the following courses of action:
(a) Not less than 15 days or more than 60 days prior to any such transaction,
all Optionees and Holders shall be notified that their Options and SARs shall
expire on the 15th day after the date of such notice, in which event all
Optionees and Holders shall have the right to exercise all of their Options and
SARs prior to such new expiration date; or
(b) The Parent Company shall provide in any agreement with respect to any such
merger, consolidation, combination or acquisition that the surviving, new or
acquiring corporation shall grant options and stock appreciation rights to the
Optionees and Holders to acquire shares, or stock appreciation rights in shares
in such corporation with respect to which the excess of the fair market value of
the shares of such corporation immediately after the consummation of such
merger, consolidation, combination or acquisition over the option price, or the
value of such stock appreciation rights, shall not be greater than the excess of
the Fair Market Value of the Shares over the option price of Options (or, in the
case of an SAR, the Value of such SAR) , immediately prior to the consummation
of such merger, consolidation, combination or acquisition;
- 8 -
(c) The Parent Company shall provide that all Restricted Stock Awards that are
outstanding on the date of the merger, consolidation, combination or acquisition
shall become nonforfeitable and immediately payable in cash; or
(d) The Parent Company shall take such other action as the Board shall determine
to be reasonable under the circumstances in order to permit Optionees and
Holders to realize the value of rights granted to them under the Plan.
14. Plan Not To Affect Employment
Neither the Plan nor any Award shall confer upon any employee of the Company
any right to continue in the employment of the Company.
15. Interpretation
The Committee shall have the power to interpret the Plan and to make and
amend rules for putting it into effect and administering it. It is intended
that the Incentive Stock Options granted under the Plan shall constitute
incentive stock opt ions within the meaning of section 422A of the Code, that
the Non-Qualified Options and Restricted Stock Awards shall constitute property
subject to federal income tax pursuant to the provisions of section 83 of the
Code and that the Plan shall qualify for the exemption available under Rule 16b-
3 (or any similar rule) of the Securities and Exchange Commission. The
provisions of the Plan shall be interpreted and applied insofar as possible to
carry out such intent.
16. Amendments
The Plan may be amended by the Board, but any amendment that increases the
aggregate number of Shares that may be issued pursuant to the Plan upon exercise
of Options or SARs or upon the grant of a Restricted Stock Award (otherwise than
pursuant to Paragraph 12), that changes the class of eligible employees, or that
otherwise requires the approval of the shareholders of the Parent Company in
order to maintain the exemption available under Rule 16b-3 (or any similar rule)
of the Securities and Exchange Commission, shall require the approval of the
holders of such portion of the shares of the capital stock of the Parent Company
present and entitled to vote on such amendment as is required by applicable
state law and the terms of the Parent Company's Articles of Incorporation, as
then in effect, to make the amendment effective. No outstanding Option, SAR or
Restricted Stock Award shall be affected by any such amendment without the
written consent of the Optionee, Holder, or other person then entitled to
exercise such Option or SAR or receive Shares pursuant to such Restricted Stock
Award.
17. Securities Laws
The Committee shall have the power to make each Award under the Plan subject
to such conditions as it deems necessary or appropriate to comply with the then-
existing requirements of the Securities Act of 1933 or the Securities Exchange
Act of 1934, including Rule 16b-3 (or any similar rule) of the Securities and
Exchange Commission.
18. Effective Date and Term of Plan
The effective date of the Plan, for purposes of granting Options and SARs
hereunder, shall be November 22, 1996, which is the date on which the Plan was
adopted by the Board. The effective date of the Plan, for purposes of granting
Restricted Stock Awards hereunder shall be the date of adoption of this
amendment and restatement of the Plan. The Plan shall expire no later than 10
years from the date that the Plan was adopted by the Board, unless sooner
terminated by the Board. Any Incentive Stock Option granted before the approval
of the Plan by the Parent Company's shareholders shall be expressly conditioned
upon, and shall not be exercisable until, such approval.
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19. General
Each Option, SAR or Restricted Stock Award shall be evidenced by a written
instrument containing such terms and conditions not inconsistent with the Plan
as the Committee may determine. The issuance of Shares on the exercise of an
Option or SAR, or pursuant to a Restricted Stock Award, shall be subject to all
of the applicable requirements of the New Jersey Business Corporation Act and
other applicable laws, including federal or state securities laws, and all
Shares issued under the Plan shall be subject to the terms and restrictions
contained in the Articles of Incorporation of the Parent Company, as amended
from time to time. Among other things, the Optionee or Holder may be required
to deliver an investment representation to the Company in connection with any
exercise of an Option or SAR, or in connection with the receipt of Shares
pursuant to a Restricted Stock Award, or to agree to refrain from selling or
otherwise disposing of the Shares required for a specified period of time or on
specified terms.
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