SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant (X)
Filed by a Party other than the Registrant ( )
Check the appropriate box:
( ) Preliminary Proxy Statement ( ) Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
(X) Definitive Proxy Statement
( ) Definitive Additional Materials
( ) Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
BALTIMORE GAS AND ELECTRIC COMPANY
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
(X) No fee required
( ) Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
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:
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NOTICE OF
ANNUAL MEETING
AND PROXY STATEMENT
BALTIMORE GAS AND ELECTRIC COMPANY
ANNUAL MEETING OF SHAREHOLDERS
APRIL 24, 1998
MORRIS MECHANIC THEATRE
1 NORTH CHARLES STREET
BALTIMORE, MARYLAND 21201
[BGE LOGO]
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<S> <C>
CHRISTIAN H. POINDEXTER BALTIMORE GAS AND ELECTRIC COMPANY
CHAIRMAN OF THE BOARD 39 W. LEXINGTON STREET
AND CHIEF EXECUTIVE OFFICER BALTIMORE, MARYLAND 21201
</TABLE>
March 13, 1998
[BGE LOGO] Dear Shareholder:
I'd like to invite you to attend our annual meeting of
shareholders to be held April 24, 1998, at 10:00 a.m. at the
Morris Mechanic Theatre located at 1 North Charles Street in
downtown Baltimore. We have enclosed a copy of our 1997 annual
report to shareholders for your review.
At the meeting, I will review our 1997 performance and answer
shareholder questions. In addition, shareholders will be
voting on the following business matters: the annual election
of directors, the ratification of our independent accountants
for 1998, and one shareholder proposal.
We've enclosed a proxy card that lists all matters that
require your vote. PLEASE COMPLETE YOUR PROXY CARD AND RETURN
IT PROMPTLY IN THE PRE-ADDRESSED, POSTAGE PAID ENVELOPE
PROVIDED. This will allow your shares to be voted whether or
not you plan to attend the meeting. If you plan to be at the
meeting, please check the box on your proxy card.
The Morris Mechanic Theatre is handicapped-accessible. In
addition, if you need any other special accommodations, please
indicate them on your proxy card.
Thank you for your continued support of Baltimore Gas and
Electric Company.
Sincerely,
/s/ C. H. Poindexter
-------------------------
Chairman of the Board and
Chief Executive Officer
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BALTIMORE GAS AND ELECTRIC COMPANY
Notice of 1998 Annual Meeting of Shareholders
Our annual meeting of shareholders will be held on FRIDAY, APRIL 24, 1998
at 10:00 a.m., at the Morris Mechanic Theatre at 1 North Charles Street,
Baltimore, Maryland, for the following purposes:
1. To elect thirteen directors to serve on our board for the next year and
until their successors are elected and qualified.
2. To ratify our selection of Coopers & Lybrand L.L.P. as our independent
accountants for 1998.
3. To vote on a shareholder proposal, if such proposal is brought before
the meeting.
4. To transact any other business that properly comes before the meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ITEMS 1 AND 2 AND "AGAINST"
ITEM 3.
We discuss the above business matters in more detail in the attached Proxy
Statement.
The stock transfer books will not be closed before the annual meeting.
Common shareholders of record at the close of business on February 25, 1998 will
be entitled to vote.
David A. Brune
Secretary
March 13, 1998
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BALTIMORE GAS AND ELECTRIC COMPANY
Proxy Statement
TABLE OF CONTENTS
Questions & Answers........................................................ 1
Business Matters To Be Voted On............................................ 4
Board of Directors......................................................... 5
Nominees for the Board of Directors................................... 5
Committees of the Board of Directors.................................. 7
Meetings of the Board of Directors and its Committees................. 8
Directors' Compensation............................................... 8
Certain Relationships and Transactions................................ 9
Section 16(a) Beneficial Ownership Reporting Compliance............... 9
Compensation Committee Interlocks and Insider Participation........... 9
Security Ownership.......................................................... 10
Executive Compensation...................................................... 11
Summary Compensation Table............................................. 11
Long-Term Incentive Plan Table......................................... 12
Pension Benefits....................................................... 14
Severance Agreements................................................... 15
Common Stock Performance Graph.............................................. 16
Report of Committee on Management on Executive Compensation................. 17
Shareholder Proposal........................................................ 20
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QUESTIONS & ANSWERS
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Q: WHEN ARE THE ANNUAL REPORT TO SHAREHOLDERS AND THIS PROXY STATEMENT
FIRST BEING SENT TO SHAREHOLDERS?
A: The annual report to shareholders and this proxy statement are being
sent to shareholders beginning on or about March 13, 1998.
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Q: WHAT AM I VOTING ON?
A: 1. Election of 13 directors.
2. Ratification of Coopers & Lybrand L.L.P. as our independent
accountants.
3. A shareholder proposal (discussed on page 20).
4. Any other business that properly comes before the meeting for a vote.
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Q: HOW DO I VOTE?
A: You must be present, or represented by proxy, at the annual meeting in
order to vote your shares. Since many of our shareholders are unable to
attend the meeting in person, we send proxy cards to all of our
shareholders.
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Q: WHAT IS A PROXY?
A: A proxy is a person you appoint to vote on your behalf. Proxies are
solicited so that all common shares may be voted at the annual meeting.
You must complete and return the enclosed proxy card to have your shares
voted by proxy.
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Q: BY COMPLETING AND RETURNING THE PROXY CARD, WHO AM I DESIGNATING AS MY
PROXY?
A: You will be designating: Jerome W. Geckle, George V. McGowan, and
Christian H. Poindexter as your proxies.
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Q: HOW WILL MY PROXY VOTE MY SHARES?
A: Your proxy will vote according to the instructions on your proxy card.
If you complete and return your proxy card but do not indicate your vote
on the business matters, your proxy will vote "FOR" Items 1 and 2 and
"AGAINST" Item 3. Also, your proxy is authorized to vote, using his or
her best judgment, on any other business that properly comes before the
meeting.
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1
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Q: WHO IS ENTITLED TO VOTE AT THE ANNUAL MEETING, AND HOW MANY VOTES DO
THEY HAVE?
A: Common shareholders of record at the close of business on February 25,
1998 may vote at the meeting. Each share has one vote. There were
147,867,114 shares of common stock outstanding on February 25, 1998.
- --------------------------------------------------------------------------------
Q: HOW DO I VOTE USING MY PROXY CARD?
A: There are three steps.
1. Vote on each of the business matters as follows:
(Bullet) ITEM 1. THE ELECTION OF 13 DIRECTORS. The names of all the
directors to be elected are listed on your proxy card. You
have three options:
(Bullet) OPTION 1. To vote for all directors, you check the
box marked "FOR."
(Bullet) OPTION 2. To vote for some of the directors and
against the rest, you check the box marked "FOR" and
then line through the names of the directors that
you are voting against.
(Bullet) OPTION 3. To abstain from voting for all directors
(that is, not vote for or against any of the
directors), you check the box marked "WITHHOLD
AUTHORITY."
(Bullet) ITEMS 2 AND 3. RATIFICATION OF SELECTION OF COOPERS & LYBRAND
L.L.P. AS OUR INDEPENDENT ACCOUNTANTS FOR 1998 AND A
SHAREHOLDER PROPOSAL. You check the box "FOR," or "AGAINST,"
or "ABSTAIN" (to cast no vote).
2. Sign and date your proxy card. IF YOU DO NOT SIGN YOUR PROXY CARD,
YOUR SHARES CANNOT BE VOTED.
3. Mail your proxy card in the pre-addressed, postage paid envelope.
REMEMBER TO CHECK THE BOX ON YOUR PROXY CARD IF YOU PLAN TO ATTEND THE ANNUAL
MEETING.
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Q: HOW DO I REVOKE MY PROXY?
A: You may revoke your proxy at any time before your shares are voted at
the annual meeting by:
(Bullet) notifying our Corporate Secretary, David A. Brune, in writing
at P.O. Box 1475, Baltimore, Maryland 21203-1475, that you are
revoking your proxy;
(Bullet) executing a later dated proxy card; or
(Bullet) attending and voting by ballot at the annual meeting.
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Q: WHAT IS A QUORUM OF SHAREHOLDERS, AND HOW MANY VOTES DOES IT TAKE TO
PASS EACH BUSINESS MATTER?
A: A quorum is the presence at the annual meeting in person or by proxy of
shareholders entitled to cast a majority of all the votes entitled to be
cast. Since there were 147,867,114 shares of common stock outstanding on
February 25, 1998, 73,933,558 shares is a quorum. Broker non-votes,
abstentions and withhold-authority votes COUNT for purposes of
determining a quorum. Assuming a quorum of shareholders is present at
the meeting, the affirmative vote of a majority of all the votes cast is
needed to pass each business matter. Broker non-votes, abstentions and
withhold-authority votes DO NOT COUNT as votes cast.
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Q: WHY MIGHT I RECEIVE MORE THAN ONE PROXY CARD?
A: First, you may have various accounts with us that are registered
differently, perhaps in different names or different social security or
federal tax identification numbers. Second, you may own shares
indirectly through your broker or our employee savings plan. Your broker
or plan trustee will send you a proxy card for these shares.
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Q: CAN I VOTE BY PROXY EVEN IF I PLAN TO ATTEND THE ANNUAL MEETING?
A: Yes. If you vote by proxy, you do not need to fill out a ballot at the
annual meeting, unless you want to change your vote.
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Q: WHO IS SOLICITING MY PROXY, HOW IS IT BEING SOLICITED, AND WHO PAYS THE
COST?
A: BGE, on behalf of the Board of Directors, through its directors,
officers and employees, is soliciting proxies primarily by mail.
However, proxies may also be solicited in person, by telephone or
facsimile. Georgeson & Co. Inc., a proxy solicitation firm, will be
assisting us for a fee of approximately $13,500, plus out-of-pocket
expenses. BGE pays the cost of soliciting proxies.
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Q: WHEN IS THE DEADLINE FOR SHAREHOLDER PROPOSALS TO BE CONSIDERED FOR
INCLUSION IN BGE'S PROXY STATEMENT FOR ITS 1999 ANNUAL MEETING?
A: You must submit your proposal in writing to our Corporate Secretary,
David A. Brune, at P.O. Box 1475, Baltimore, Maryland 21203-1475, so
that he receives it by November 13, 1998. Proposals will not be accepted
by facsimile.
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3
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BUSINESS MATTERS TO BE VOTED ON
ITEM 1. ELECTION OF DIRECTORS.
Our entire Board of Directors is elected each year at the annual meeting.
Directors serve for one year and until a successor director is elected and
qualified. All of the nominees were elected a director at the 1997 annual
meeting. Each of the nominated directors agrees to serve if elected. However, if
for some reason one of them is unable to accept nomination or election, it is
intended that proxies will be voted for the election of a nominee designated by
the Board of Directors, unless the Board of Directors reduces the number of
directors. Biographical information for each of the nominees and other
information about them is presented beginning on page 5.
ITEM 2. RATIFICATION OF OUR SELECTION OF COOPERS & LYBRAND L.L.P. AS OUR
INDEPENDENT ACCOUNTANTS FOR 1998.
Coopers & Lybrand L.L.P., Certified Public Accountants, has been our
independent accountants since 1941. A member of their firm will be at the annual
meeting and will have the opportunity to make a statement and answer appropriate
questions.
Coopers & Lybrand audited our 1997 consolidated financial statements, as
well as the financial statements of our dividend reinvestment and stock purchase
plan and various employee benefit plans. As part of its audit function, they
also reviewed our 1997 annual report to shareholders and various filings with
the Securities and Exchange Commission and Federal Energy Regulatory Commission.
The Board's Audit Committee reviewed the non-audit services provided by
Coopers & Lybrand during 1997 and concluded that these services do not affect
Coopers & Lybrand's independence as our auditors.
ITEM 3. A SHAREHOLDER PROPOSAL.
A shareholder proposal and our Board of Directors' response are included
beginning on page 20.
ITEM 4. OTHER BUSINESS MATTERS.
The Board of Directors is not aware of any other business matters to be
presented for action at the annual meeting. However, (1) if any other matters
come before the meeting, (2) if any of the persons named to serve as directors
should be unable to serve or for good cause will not serve, (3) if any
shareholder proposal omitted from this proxy statement and the proxy card is
presented for action at the meeting, and (4) if any matters incident to the
conduct of the meeting are presented for action, shareholders present at the
meeting will vote on such items. If you are represented by proxy, your proxy
will vote your shares using his or her best judgment.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ITEMS 1 AND 2 AND A VOTE
"AGAINST" ITEM 3.
4
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BOARD OF DIRECTORS
NOMINEES FOR THE BOARD OF DIRECTORS
The following are brief biographical sketches for each of our nominated
directors:
H. FURLONG BALDWIN, age 66, is the Chairman of the Board and Chief Executive
Officer of Mercantile Bankshares Corporation (a bank holding company),
positions he has held since 1984 and 1976, respectively. In addition, he is
Chairman of the Board and Chief Executive Officer of Mercantile-Safe Deposit
& Trust Company, positions he attained in 1976. He is also a director of the
following BGE subsidiaries: Constellation Enterprises, Inc., and its direct
subsidiaries, and Constellation Energy Solutions, Inc. In addition, he is a
director of GRC International, Inc., USF&G Corporation, Consolidated Rail
Corp., Offitbank and Wills Group LLC. He has been a director of BGE since
1988, is a member of BGE's Executive Committee, the Chairman of BGE's Long
Range Strategy Committee and a member of the Audit Committee for BGE's
subsidiaries.
BEVERLY B. BYRON, age 65, served seven successive terms as a Maryland
Congresswoman in the United States House of Representatives from 1978 to
1992. She is a director of Blue Cross and Blue Shield of Maryland, Inc.,
Farmers & Mechanics National Bank and Logistics Management Institute. She
has been a director of BGE since 1993, is a member of the Audit Committee
and the Committee on Nuclear Power and is the Chairwoman of the Committee on
Workplace Diversity.
J. OWEN COLE, age 68, is a director of First Maryland Bancorp. (a bank holding
company) and The First National Bank of Maryland. At First Maryland Bancorp.
and The First National Bank of Maryland, he served as Chairman of the
Executive Committee from 1988 to 1994 and Chairman of the Trust Committee
from 1994 to 1997. In addition, from January 1995 to December 1996, he was
Chairman of the Board of Blue Cross and Blue Shield of Maryland, Inc. He has
been a director of the Company since 1977, is the Chairman of the Audit
Committee and a member of the Committee on Management.
DAN A. COLUSSY, age 66, in January, 1998 became the Chairman of the Board of
Care First, Inc., the holding company for Care First of Maryland, Inc.
(formerly Blue Cross and Blue Shield of Maryland, Inc.) and Group
Hospitalization and Medical Services, Inc., after serving as Chairman of the
Board of Blue Cross and Blue Shield of Maryland since January, 1997, and
Chairman-Elect in 1996. He retired as Chairman of the Board, President and
Chief Executive Officer of UNC Incorporated (aviation services) in November
1997. At UNC Incorporated, he was elected Chief Executive Officer and
President in 1984 and Chairman of the Board in 1989. He has been a director
of BGE since 1992, is a member of the Committee on Management and the
Chairman of the Committee on Nuclear Power.
EDWARD A. CROOKE, age 59, is the President and Chief Operating Officer of BGE.
He has been President of BGE since 1988 and Chief Operating Officer since
1992. In addition, he serves as Chairman of the Board of both of BGE's
principal subsidiaries: Constellation Enterprises, Inc. (formed in January
1998 as the parent company for Constellation Holdings, Inc. and BGE Home
Products & Services, Inc.), a position he attained in January 1998, and
Constellation Energy Solutions, Inc. (formerly, BGE Corp.), a position he
attained in March 1997.
He also serves on the Board of Directors of the subsidiaries of
Constellation Enterprises, Inc. and Constellation Energy Solutions, Inc. and
has served as Chairman of the Board of Constellation Holdings, Inc. since
1996 and Chairman of the Board of BGE Home Products & Services, Inc. since
1994.
5
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He is also a director of First Maryland Bancorp., The First National Bank of
Maryland, AEGIS Insurance Services, Inc., Associated Electric & Gas
Insurance Services, Limited, and Baltimore Equitable Society. He has been a
director of BGE since 1988 and is a member of the Executive Committee.
JAMES R. CURTISS, age 44, is a partner in the law firm of Winston & Strawn, a
position he attained in 1993. From 1988 to 1993, he served as a Commissioner
of the United States Nuclear Regulatory Commission. He is also a director of
Cameco Corporation. He has been a director of BGE since 1994, is a member of
the Committee on Nuclear Power, the Committee on Workplace Diversity and the
Long Range Strategy Committee.
JEROME W. GECKLE, age 68, was Chairman of the Board of PHH Corporation (vehicle,
relocation, and management services) from 1979 until he retired in 1989. He
is also a director of the following BGE subsidiaries: Constellation
Enterprises, Inc., and its direct subsidiaries, and Constellation Energy
Solutions, Inc. In addition, he is a director of First Maryland Bancorp. and
The First National Bank of Maryland. He has been a director of BGE since
1980, is the Chairman of BGE's Committee on Management, a member of BGE's
Long Range Strategy Committee and is the Chairman of the Committee on
Management for BGE's subsidiaries.
DR. FREEMAN A. HRABOWSKI, III, age 47, is the President of the University of
Maryland Baltimore County, a position he attained in 1993 after serving as
Interim President since 1992. He is also a director of the Baltimore
Equitable Society, McCormick & Company, Inc. and Mercantile Bankshares
Corporation. He has been a director of BGE since 1994, is a member of the
Audit Committee, the Executive Committee and the Committee on Workplace
Diversity.
NANCY LAMPTON, age 55, is the Chairman and Chief Executive Officer of American
Life and Accident Insurance Company of Kentucky, a position she attained in
1971. She is also a director of Bank One Kentucky, Brinly-Hardy Corporation,
and Duff & Phelps Utility Income Fund. She has been a director of BGE since
1994, is a member of the Long Range Strategy Committee and the Committee on
Workplace Diversity.
GEORGE V. MCGOWAN, age 70, has been Chairman of BGE's Executive Committee since
1993. He is also a director of the following BGE subsidiaries: Constellation
Enterprises, Inc., and its direct subsidiaries, and Constellation Energy
Solutions, Inc. In addition, he is a director of GTS Duratek Corp., Life of
Maryland, Inc., McCormick & Company, Inc., NationsBank, N.A., Organization
Resources Counselors, Inc., Scientech, Inc., and The Baltimore Life
Insurance Company. He has been a director of BGE since 1980 and is a member
of the Committee on Nuclear Power.
CHRISTIAN H. POINDEXTER, age 59, is the Chairman of the Board and Chief
Executive Officer of BGE, positions he attained in 1993, after serving as
Vice Chairman of the Board, a position he held since 1989. He is on the
Board of Directors of the following BGE subsidiaries: Constellation
Enterprises, Inc., and its subsidiaries, and Constellation Energy Solutions,
Inc., and a subsidiary. In addition, he served as Chairman of the Board of
Constellation Holdings, Inc. from 1993 to 1996.
He is also a director of Dome Corporation, Johns Hopkins Medicine Board,
Mercantile Bankshares Corporation, Mercantile Mortgage Corporation,
Mercantile-Safe Deposit & Trust Company, and Nuclear Electric Insurance
Limited. He has been a director of BGE since 1988 and is a member of the
Executive Committee.
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GEORGE L. RUSSELL, JR., age 68, is a partner in the law firm of Piper & Marbury
L.L.P., a position he attained in 1986. He is also a director of the Federal
Reserve Bank of Richmond -- Baltimore Branch. He has been a director of BGE
since 1988, is a member of the Audit Committee and the Executive Committee.
MICHAEL D. SULLIVAN, age 58, is the Chairman of the Board of Golf America
Stores, Inc. (golf apparel retailing), a position he attained in October
1996, and Chairman of the Board of Jay Jacobs, Inc. (specialty apparel
retailing), a position he attained in December 1997. Since 1995, he has been
Chairman of the Board of ProAxom International, LLC (hair care products and
restoration) and Chairman of the Board and Chief Executive Officer of
Lombardi Research Group, LLC, a holding company for ProAxom International,
LLC.
He was Chief Executive Officer and President of Merry-Go-Round Enterprises,
Inc. (specialty retailing) from 1982 to 1994. That company filed a
reorganization petition under Chapter XI of the Federal Bankruptcy law in
January 1994, and subsequently announced a bankruptcy liquidation.
He has been a director of BGE since 1992, is a member of the Committee on
Management and the Long Range Strategy Committee.
COMMITTEES OF THE BOARD OF DIRECTORS
EXECUTIVE COMMITTEE. The Executive Committee may exercise most of the powers of
the Board of Directors in the management of BGE's business and affairs between
meetings of the full board. The committee, however, may not declare dividends,
authorize the issuance of stock (unless the Board of Directors has already given
general authorization for such issuance), recommend to shareholders any action
requiring shareholder approval, amend the by-laws, or approve mergers or share
exchanges which do not require shareholder approval.
AUDIT COMMITTEE. The Audit Committee, made up of outside directors who are not
former BGE employees, recommends an independent accounting firm to be engaged,
discusses the scope of the examination with that firm, and reviews the annual
financial statements with the independent accounting firm and with BGE
management. Additionally, the committee meets with the manager of BGE's auditing
department to ensure that an adequate program of internal auditing is being
carried out, and invites comments and recommendations from the independent
accounting firm concerning the system of internal controls and accounting
procedures. The committee reports on its activities periodically to the Board of
Directors.
COMMITTEE ON NUCLEAR POWER. The Committee on Nuclear Power monitors the
performance and safety of BGE's Calvert Cliffs Nuclear Power Plant. The
committee meets periodically, usually on-site at the Calvert Cliffs plant, to
talk with management, senior plant management, and other nuclear oversight
personnel. Following each meeting, the committee reports the results of its
observations and findings to the Board of Directors and makes recommendations as
appropriate.
COMMITTEE ON MANAGEMENT. The Committee on Management's duties include
recommending to the Board of Directors nominees for officers and nominees for
election as directors of BGE and making recommendations concerning their
compensation. This committee, which is comprised of outside directors, considers
nominees for directors recommended by shareholders; such recommendations should
be submitted in writing to the attention of the Corporate Secretary, Baltimore
Gas and Electric Company, 39 W. Lexington Street, Baltimore, Maryland 21201.
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COMMITTEE ON WORKPLACE DIVERSITY. The Committee on Workplace Diversity provides
an ongoing Board of Directors' perspective of management's progress in achieving
employee diversity goals. The committee provides input to management in setting
goals and developing strategies to increase goal attainment, provides oversight
on implementation of strategies, and evaluates results. The committee reports on
its activities periodically to the Board of Directors.
LONG RANGE STRATEGY COMMITTEE. The Long Range Strategy Committee oversees the
development of BGE's long range strategic goals. The committee meets
periodically to review the continued appropriateness of these goals and to
approve presentations to the Board of Directors regarding the implementation of
significant strategic initiatives. This committee also reviews major regulatory,
environmental and public policy issues as well as technology advances which may
affect our operations. The committee periodically reports its activities to the
Board of Directors.
MEETINGS OF THE BOARD OF DIRECTORS AND ITS COMMITTEES
In 1997, the Board of Directors met ten times for regularly scheduled meetings.
In addition, the Audit Committee met three times, the Committee on Nuclear Power
met three times, the Committee on Management met seven times, and the Committee
on Workplace Diversity met two times. Each of the nominees attended 75% or more
of the total number of meetings of the board and of any committees on which they
served.
DIRECTORS' COMPENSATION
Directors who are employees of BGE or its subsidiaries receive no
additional compensation for serving on the Board of Directors or its committees.
Non-employee directors receive a $1,250 fee for each regular, committee, or
special board meeting attended. These directors may defer receipt of some or all
of their fees.
Non-employee directors also receive an annual $26,000 retainer. Each
committee chairperson receives an additional $3,500 annual retainer. Half of
these retainers are invested in deferred stock units (explained below). These
directors may elect to invest some or all of the other half of their retainers
in deferred stock units.
Deferred stock units are bookkeeping entries that track the performance of
BGE common stock and are not actual shares of stock. The bookkeeping entries
reflect fluctuation based on BGE common stock price changes, dividends, stock
splits and other capital changes. At the end of their board service, directors
receive cash based on the value of their deferred stock units.
Non-employee directors may also be reimbursed for reasonable travel
expenses incidental to attendance at meetings.
Mr. McGowan, our former Chairman of the Board and Chief Executive Officer,
continues to participate in civic and community activities on behalf of BGE. We
provide an automobile to him at an approximate yearly cost to us of $11,000.
Those non-employee directors who serve on the boards of BGE's subsidiaries
also receive a $1,250 aggregate fee for regular, committee or special subsidiary
board meetings attended. These directors may defer receipt of some or all of
their fees.
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Those non-employee directors who serve on the boards of BGE's subsidiaries
also receive a $20,000 aggregate annual retainer and an additional $3,500
aggregate annual retainer for chairing any committees. Similar to BGE's
directors' compensation program, half of these retainers are invested in
deferred stock units that track the performance of BGE common stock and are not
actual shares of stock. Each of these directors may elect to invest some or all
of the other half of their retainers in deferred stock units. At the end of
their subsidiary board service, these directors will receive cash based on the
value of their deferred stock units.
CERTAIN RELATIONSHIPS AND TRANSACTIONS
One of our directors, George L. Russell, Jr., is a partner at the law firm
of Piper & Marbury L.L.P. BGE and certain subsidiaries paid fees to this firm
for legal services rendered in 1997.
One of our directors, James P. Curtiss, is a partner at the law firm of
Winston & Strawn. BGE paid fees to this firm for legal services rendered in
1997.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Gregory C. Martin, an executive officer of BGE, due to a clerical error was
one day late in filing his Form 3 to report his beneficial ownership of BGE
common stock upon his appointment as a Vice President in November 1997.
George L. Russell, Jr., a director of BGE, did not timely report the
inheritance by his wife of shares of BGE common stock.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Christian H. Poindexter, Chairman of the Board and Chief Executive Officer
of BGE, serves on the Compensation Committee of Mercantile Bankshares
Corporation. H. Furlong Baldwin, a director of BGE, is Chairman of the Board and
Chief Executive Officer of Mercantile Bankshares Corporation.
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SECURITY OWNERSHIP
The following table shows as of January 23, 1998 the beneficial ownership
of BGE common stock of each nominee for director, the six executive officers
shown in the SUMMARY COMPENSATION TABLE on page 11, and all directors and
executive officers as a group. Each of the individuals listed in the table, as
well as all directors and executive officers as a group, beneficially owned less
than 1% of BGE's outstanding common stock. None of them beneficially own shares
of any other class of our equity securities.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP DEFERRED
NAME (SHARES OF COMMON STOCK)(1) STOCK UNITS(3)
- ---- --------------------------- ---------------
<S> <C> <C>
Bruce M. Ambler......................... 41,357 -0-
H. Furlong Baldwin...................... 750 2,120
Beverly B. Byron........................ 1,500 662
J. Owen Cole............................ 4,511 662
Dan A. Colussy.......................... 1,500 1,323
George C. Creel......................... 33,717(2) -0-
Edward A. Crooke........................ 69,949 -0-
James R. Curtiss........................ 300 1,166
Robert E. Denton........................ 29,959 -0-
Jerome W. Geckle........................ 7,366 1,380
Freeman A. Hrabowski, III............... 550 1,166
Nancy Lampton........................... 2,797 583
George V. McGowan....................... 105,457 1,076
Christian H. Poindexter................. 107,648 -0-
George L. Russell, Jr................... 1,874 1,166
Charles W. Shivery...................... 39,007 -0-
Michael D. Sullivan..................... 1,500 583
All Directors and Executive Officers
as a Group (27 Individuals)........... 614,861
</TABLE>
(1) If the individual participates in BGE's Dividend Reinvestment
and Stock Purchase Plan, BGE's Long-Term Incentive Plan or BGE's
Employee Savings Plan, those shares are included.
(2) Mr. Creel retired from BGE on November 1, 1997. Of these shares,
11,848 are held in the name of Mr. Creel's wife of which he
disclaims beneficial ownership.
(3) Deferred stock units are discussed under DIRECTORS' COMPENSATION
on page 8.
10
<PAGE>
EXECUTIVE COMPENSATION
The following table summarizes the compensation of certain of our executives as
of December 31, 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
----------------------------------------------
ANNUAL LONG-TERM
COMPENSATION COMPENSATION(1)
- ---------------------------------------------------------------------------------------------------------------------
INCENTIVE PLAN ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) PAYOUT ($) COMPENSATION ($)(3)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Christian H. Poindexter 1997 608,533 -0- 425,436(2) 42,283
Chairman of the Board and 1996 567,300 212,500 181,500 324,799
Chief Executive Officer 1995 537,233 247,400 N/A 31,611
Edward A. Crooke 1997 420,667 -0- 298,799(2) 40,658
President and Chief Operating 1996 403,400 150,000 118,800 252,504
Officer 1995 400,567 184,200 N/A 25,217
Bruce M. Ambler 1997 330,400 -0- 172,843(2) 27,841
President and Chief Executive 1996 315,100 120,000 180,000 117,101
Officer of Constellation 1995 298,933 108,600 N/A 17,033
Holdings, Inc.
Charles W. Shivery 1997 233,900 55,000 151,856(2) 13,982
President of Constellation 1996 218,700 77,000 33,000 38,302
Energy Solutions, Inc. and 1995 203,333 96,400 N/A 10,803
Constellation Power
Source, Inc.
George C. Creel 1997 284,566 -0- 246,758(2) 187,187
Retired Executive Vice 1996 316,600 118,000 72,600 138,842
President and Acting 1995 265,600 72,900 N/A 17,292
Chief Operating Officer
Robert E. Denton 1997 248,533 -0- 178,917(2) 18,786
Senior Vice President -- 1996 230,567 75,100 38,500 70,899
Generation 1995 196,933 55,000 N/A 10,785
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTES TO SUMMARY COMPENSATION TABLE:
(1) The following executives held shares of performance-based restricted stock
listed below at December 31, 1997:
SHARES MARKET VALUE
------ ------------
C. H. Poindexter 24,667 $841,758
E. A. Crooke 17,162 $585,663
B. M. Ambler 13,964 $476,512
C. W. Shivery 15,900 $542,584
G. C. Creel 17,162 $585,663
R. E. Denton 10,211 $348,464
During the performance period, dividends on performance-based restricted
stock are accumulated and used to purchase additional shares that are
reflected in the above share numbers and market values. The market value for
the shares held is based on the closing price per share for BGE common stock
as listed in the WALL STREET JOURNAL. Additional performance-based
restricted stock was granted early in 1998 as described in the LONG-TERM
INCENTIVE PLAN TABLE section beginning on page 12.
11
<PAGE>
NOTES TO SUMMARY COMPENSATION TABLE CONTINUED:
(2) These amounts were paid in BGE common stock for performance during the
1995-1997 period.
(3) For 1995, 1996 and 1997, the amounts in the ALL OTHER COMPENSATION column
include BGE's matching contributions under its savings plans, and the
interest on the cumulative corporate funds used to pay annual premiums on
policies providing split-dollar life insurance benefits (calculated at the
Internal Revenue Service's blended rate). For 1997, the amounts also include
the following benefits provided to Mr. Creel under his severance agreement
(described on page 15): the first two of the 24 monthly installments (for
November and December) and a one-time lump sum payment for medical and
dental benefits; and Mr. Creel's payment for accrued vacation and
supplemental pension benefits. For 1996, the amounts also include a
contribution by BGE to a trust securing the executives' supplemental pension
benefits, and a one-time contribution by BGE to fund a trust that was
established in 1996 to secure executives' deferred compensation plan
benefits. A breakdown of the 1997 amounts in the ALL OTHER COMPENSATION
column is shown below.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
SEVERANCE
SEVERANCE AGREEMENT
BGE'S SPLIT- AGREEMENT MEDICAL AND PAYMENT
MATCHING DOLLAR MONTHLY DENTAL FOR ACCRUED SUPPLEMENTAL
CONTRIBUTIONS AMOUNTS INSTALLMENTS PAYMENT VACATION PENSION BENEFITS TOTAL
------------- ------- ------------ ----------- ----------- ---------------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
C. H. Poindexter $18,085 $24,198 N/A N/A N/A N/A $ 42,283
E. A. Crooke $12,500 $28,158 N/A N/A N/A N/A $ 40,658
B. M. Ambler $ 9,825 $18,016 N/A N/A N/A N/A $ 27,841
C. W. Shivery $ 6,975 $ 7,007 N/A N/A N/A N/A $ 13,982
G. C. Creel $ 8,375 $20,993 $ 72,575 $ 1,230 $56,232 $ 27,782 $187,187
R. E. Denton $ 7,405 $11,381 N/A N/A N/A N/A $ 18,786
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
LONG-TERM INCENTIVE PLAN TABLE
The Committee on Management, early in 1998, made grants of restricted BGE
common stock under the Long-Term Incentive Plan. Grants under this plan were not
made during 1998 to Mr. Creel (who retired from BGE on November 1, 1997). The
grants are subject to both performance and time contingencies.
For each named executive, except for Mr. Ambler and Mr. Shivery,
performance will be measured over a three-year period by comparing BGE's total
shareholder return to the Dow Jones Electric Utilities Index. Both are shown in
the performance graph on page 16. A minimum award will be earned if the BGE
cumulative total shareholder return percentile rank is at the 50th percentile,
progressing to the maximum award if the return is at or above the 75th
percentile. Restricted shares granted were equal to the number of shares of BGE
common stock that will be earned if "target" performance (62.5th percentile) is
achieved.
For Mr. Ambler and Mr. Shivery, performance will be measured based on both
BGE's total shareholder return (as described above), and also by comparing
subsidiary business value appreciation to targets established by the Committee
on Management. For Mr. Ambler, the business value appreciation formula is based
on the cumulative net income, book value, and derived market value of
Constellation Power, Inc. For Mr. Shivery, the formula is based on the same
factors for Constellation Power Source. Restricted shares were granted equal to
the number of shares of BGE common stock that will be earned if "target"
performance is achieved, and there is no maximum award limit. However, no awards
will be made unless the subsidiary cumulative net income threshold is achieved
for the performance measurement period. The measurement period for grants to Mr.
Ambler and Mr. Shivery is three years, although Mr. Shivery will have the option
prior to the end of the three-year period to extend the performance measurement
period for an additional two years for the portion of his grant that is tied to
Constellation Power Source performance.
12
<PAGE>
For all named executives, all or a portion of these restricted shares will
be forfeited if performance is below target at the end of the performance
period. Additional shares will be awarded if performance is above target at the
end of the performance period. However, the total shares awarded will not exceed
any maximum noted in the table below.
During the performance period, dividends on restricted shares will be
accumulated and reinvested in additional shares. At the end of the performance
period, actual dividends awarded will be based upon performance and paid in BGE
common stock (except that the recipients may elect to have a portion of the
shares withheld to satisfy tax withholding requirements). Dividend equivalents
from the date of the grant will be paid in stock for any additional shares that
are awarded. Shares earned through reinvested dividends are not counted toward
any maximum award limit.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------
PERFORMANCE
NAME PERIOD MINIMUM TARGET MAXIMUM
------------------ --------------- ------- ------ -------
<S> <C> <C> <C> <C>
C. H. Poindexter 3 years 6,500 13,000 19,500
E. A. Crooke 3 years 4,500 9,000 13,500
B. M. Ambler 3 years N/A 7,700 N/A
C. W. Shivery 3 (or 5) years N/A 9,600 N/A
R. E. Denton 3 years 2,900 5,800 8,700
- ----------------------------------------------------------------------------
</TABLE>
13
<PAGE>
PENSION BENEFITS
The table below shows annual pension benefits payable at normal retirement
to executives, including the individuals named in the SUMMARY COMPENSATION TABLE
on page 11. Normal retirement occurs at age 65 for Messrs. Poindexter, Crooke,
and Ambler, and at age 62 for all other executives. Pension benefits are
computed at 60% of total final average salary plus bonus for Messrs. Poindexter,
Crooke and Ambler, without regard to years of service. Pension benefits are
computed at 50% of total final average salary plus bonus for Mr. Shivery and,
when he attains 30 years of service in 2001, will be computed at 55%. Pension
benefits are computed at 50% of total final average salary plus bonus for Mr.
Denton and, when he attains 30 years of service in 2000, will be computed at
55%.
When Mr. Creel retired on November 1, 1997, his pension benefits were
computed at 60% of total final average salary plus bonus, instead of 55%, in
recognition of his service since January 1996 as Executive Vice President and
Acting Chief Operating Officer.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
PERCENTAGE OF FINAL AVERAGE SALARY AND BONUS
TOTAL FINAL AVERAGE --------------------------------------------
SALARY AND BONUS 50% 55% 60%
- ----------------------------------------------------------------------
<S> <C> <C> <C>
$ 300,000 $ 150,000 $ 165,000 $ 180,000
325,000 162,500 178,750 195,000
350,000 175,000 192,500 210,000
400,000 200,000 220,000 240,000
425,000 212,500 233,750 255,000
450,000 225,000 247,500 270,000
475,000 237,500 261,250 285,000
500,000 250,000 275,000 300,000
550,000 275,000 302,500 330,000
575,000 287,500 316,250 345,000
600,000 300,000 330,000 360,000
650,000 325,000 357,500 390,000
700,000 350,000 385,000 420,000
750,000 375,000 412,500 450,000
800,000 400,000 440,000 480,000
825,000 412,500 453,750 495,000
850,000 425,000 467,500 510,000
900,000 450,000 495,000 540,000
950,000 475,000 522,500 570,000
1,000,000 500,000 550,000 600,000
1,025,000 512,500 563,750 615,000
- ----------------------------------------------------------------------
</TABLE>
Salary used to compute pension benefits is salary earned during the
preceding year. Salary is calculated in the same manner as shown in the SUMMARY
COMPENSATION TABLE on page 11. The bonus amount used to compute pension benefits
is the average of the two highest annual bonus percentages paid during the
preceding five years, multiplied by final annual salary. Bonus used in the
calculation is based on the amounts shown in the SUMMARY COMPENSATION TABLE on
page 11. There is no offset of pension benefits for social
14
<PAGE>
security or other amounts. Compensation used to compute pension benefits for the
individuals named in the SUMMARY COMPENSATION TABLE on page 11 as of December
31, 1997 is as follows:
C. H. Poindexter $846,156
E. A. Crooke $587,120
B. M. Ambler $469,388
C. W. Shivery $303,772
G. C. Creel $434,124
R. E. Denton $319,323
BGE has a program to secure the supplemental pension benefits for each
executive officer, and a program to secure deferred compensation of each
executive officer, including those listed in the SUMMARY COMPENSATION TABLE on
page 11. These programs do not increase the amount of supplemental pension
benefits or deferred compensation. To provide security, accrued supplemental
pension benefits and deferred compensation are funded through a trust at the
time they are earned. An executive officer's accrued benefits in the
supplemental pension trust become vested when any of these events occur:
retirement eligibility; termination, demotion or loss of benefit eligibility
without cause; a change of control of BGE followed within two years by the
executive's demotion, termination or loss of benefit eligibility; or reduction
of previously accrued benefits. As a result of becoming vested, the executive
would be entitled to a payout of the vested amount from the supplemental pension
trust upon the later of age 55 or employment termination. An executive's
benefits under the deferred compensation plan always are fully vested and are
payable at employment termination. Any payments to these trusts are included in
the SUMMARY COMPENSATION TABLE in the ALL OTHER COMPENSATION column.
SEVERANCE AGREEMENTS
During 1995, in connection with the proposed merger with Potomac Electric
Power Company (PEPCO), employment agreements were executed with Messrs.
Poindexter and Crooke, and severance agreements were executed with 15 key
employees.
Mr. Creel and 4 other key employees who had severance agreements terminated
their employment with BGE, which entitled them to benefits under their severance
agreements. The agreements provide benefits equal to two times the sum of (1)
annual base salary and (2) the average of the two highest annual incentive
awards paid in the last five years. The severance benefits are being paid in 24
monthly equal installments beginning on the first day of the month after
employment ceased. The agreements also provide for retirement, medical and
dental benefits that are computed without any penalty for early retirement.
The employment agreements with Messrs. Poindexter and Crooke, and the
severance agreements for the remaining 10 key employees, were terminated in
December, 1997, when BGE and PEPCO mutually terminated the proposed merger.
After these agreements were terminated, BGE entered into new severance
agreements in December, 1997 with Messrs. Poindexter, Crooke, Ambler, Shivery,
Denton, and one other key employee. The new severance agreements provide
benefits if (1) there is a change in control of BGE, and (2) within two years of
the change in control, the executive's employment is terminated without cause,
or the executive resigns for good reason.
The new severance agreements provide benefits to an executive who is
ineligible to retire equal to two and one-fourth times the sum of (1) the
executive's annual base salary and (2) the average of the executive's two
highest annual incentive awards paid in the last five years. These payments are
made in 24 equal monthly installments beginning on the first day of the month
after employment ceases. The agreements also
15
<PAGE>
provide for 36 months of medical and dental benefits on the same terms as those
benefits are provided to any actively employed executive, and further provide
for continued life insurance benefits. For an executive who is eligible to
retire, the severance agreements provide benefits equal to two times the sum of
(1) the executive's annual base salary and (2) the average of the executive's
two highest annual incentive awards paid in the last five years, also payable in
24 equal monthly installments after employment ceases. The executive's
retirement benefits will be computed without any penalty for early retirement,
and medical and dental benefits will be based on the same terms as any retiree
who is at least age 65 with 20 or more years of service. Further, for purposes
of other benefit plans, the executive will be treated as retiring at BGE's
request.
COMMON STOCK PERFORMANCE GRAPH
The following graph assumes $100 was invested on December 31, 1992 in BGE
common stock, the S&P 500 Index and the Dow Jones Electric Utilities Index.
Total return is computed assuming reinvestment of dividends.
5-Year Performance Graph
[GRAPH APPEARS HERE--SEE PLOT POINTS BELOW]
BGE S&P 500 DJ Elec. Util. Index
----- ------- --------------------
1992 100 100 100
1993 114.95 110.08 111.67
1994 107.19 111.53 97.92
1995 146.92 153.45 128.83
1996 146.24 188.68 130.15
1997 197.94 251.63 164.63
16
<PAGE>
REPORT OF COMMITTEE ON
MANAGEMENT ON EXECUTIVE
COMPENSATION
The members of the Committee on Management are all outside Directors. The
Committee is responsible for executive compensation policies. The Committee also
approves all compensation plans and recommends to the Board of Directors
specific salary amounts and other compensation awards for individual executives.
The Committee designs compensation policies to encourage executives to
manage BGE and its subsidiaries in the best long-term interests of shareholders
and to allow BGE to attract and retain executives best suited to lead BGE in a
changing industry. The Committee has retained an outside executive compensation
consultant since 1993. He provides information and advice on a regular basis. In
addition, internal compensation analysts (certified by the American Compensation
Association) use survey data, outside consultants, and other resources to make
recommendations to the Committee.
The Committee determined that the relevant labor market for BGE
executives is the utility industry. Utilities used for comparison in 1997 were
electric utilities and combination electric/gas utilities that have annual
revenues in the $2-5 billion range, analyzed using regression analysis to
account for BGE's size. These utilities are thought to best represent the
portion of the executive labor market in which BGE competes. All of these
utilities are included in the Dow Jones Electric Utilities Index shown on the
performance graph on page 16. For subsidiary executives, the Committee also used
labor market data from various industries that are similar to their diversified
businesses.
Total compensation is made up of three components: base salary,
short-term incentive awards, and long-term incentive awards. The Committee's
philosophy is that base salary should approximate the median level of the
relevant labor market. Base salary and short-term incentive awards should
approximate the median level of the relevant labor market for average
performance, and the 75th percentile for superior performance. Long-term
incentive awards for superior performance should bring total compensation to
approximately the 75th percentile of the labor market. As described below,
corporate and/or diversified business performance are among the criteria used by
the Committee in determining base salary, and are key components in determining
both short-term and long-term incentive awards.
Base salary range increases for Mr. Poindexter and the other named
executives in 1997 were based upon survey data and the policies mentioned above.
Base salary increases during 1997 for Mr. Poindexter and the other named
executives were determined by the Committee taking into account 1996 corporate
and/or diversified business performance, each executive's position in the salary
range, individual performance, and the corporate response to changes in the
industry and the regulatory environment. No specific weights were assigned to
the various factors. Mr. Poindexter's base salary increase of 6.0% maintained
his position in the middle third of his salary range.
Bonus amounts for Mr. Poindexter and other executives represent the
short-term incentive component of executive compensation. For 1997 short-term
incentive awards for Messrs. Poindexter, Crooke, Ambler, Creel and Denton, the
Committee determined that an earnings gate based on either consolidated
corporate earnings or utility earnings applicable to common stock would be used
to determine whether any award would be paid. Because applicable 1997 earnings
were below the gate amounts, no awards were paid to these executives. Mr.
Shivery was not subject to an earnings gate, due to the Committee's desire that
he focus his
17
<PAGE>
efforts on the successful start-up of Constellation Power Source, which was
formed in February, 1997. In recognition of Mr. Shivery's significant
accomplishments, an award was paid to him, as shown in the SUMMARY COMPENSATION
TABLE on page 11.
Shareholders approved the BGE Long-Term Incentive Plan at the 1995 Annual
Meeting of Shareholders. The Plan will be in effect until 2005. The Committee
included many features in the Plan to allow various types of awards keyed to
corporate performance, including performance shares and restricted stock subject
to performance-based contingencies. Performance-based restricted stock generally
with three-year performance periods was granted under the Plan in 1995, 1996,
1997 and 1998 to the named executives. The performance period for the 1995
grants ended in 1997 and the award payouts are described below. The 1996 and
1997 grants are shown in footnote 1 to the SUMMARY COMPENSATION TABLE on page
11. The 1998 grants are shown on the Long-Term Incentive Plan table on page 13.
The awards are subject to forfeiture if performance criteria are not satisfied
or if the executive's employment terminates for certain reasons during the
applicable performance period.
The performance criteria for the 1998 grants for all named executives
include a corporate total shareholder return measure for the three-year
performance period compared to total shareholder return for the other companies
included in the Dow Jones Electric Utilities Index (one of the indices used in
the performance graph). For this criterion, the award payout can range from a
threshold award at the 50th percentile, progressing to a maximum payout if
percentile rank for total shareholder return equals or exceeds the 75th
percentile. For BGE executives, total shareholder return has been the only
performance criterion since the 1995 grants.
For Mr. Shivery's 1995 and 1996 grants, corporate total shareholder
return was the sole performance criterion. For his 1997 and 1998 grants, the
Committee determined that it was also appropriate to establish a Constellation
Power Source (CPS) performance criterion for a portion of each award, to more
closely tie his long-term incentive compensation to CPS performance. The CPS
performance criterion is a business value appreciation formula, utilizing CPS
cumulative net income, book value, and derived market value. A cumulative net
income threshold will be established for each performance measurement period.
Since the business value appreciation formula is intended to measure a surrogate
market value, no maximum award amount will be established. The number of shares
granted at the beginning of each performance period equals the targeted value of
the long-term incentive award. Because of the potential volatility of
performance in a business such as CPS, Mr. Shivery will have the option before
the end of the three years to extend the performance measurement period for an
additional two years for the portion of his grants tied to CPS performance.
Since Mr. Shivery was previously granted restricted stock under the BGE
Long-Term Incentive Plan for 1997 reflecting his then-current role as BGE Chief
Financial Officer, his 1997 grant was retroactively increased to reflect the
higher level of targeted long-term compensation associated with his position as
President of CPS.
For Mr. Ambler's 1995 and 1996 grants, the performance criterion measures
improvement in Constellation Holdings' cumulative net income over each
three-year period. For his 1997 grant, the performance criteria measure
corporate total shareholder return and Constellation Holdings' average return on
equity over the three-year period. For his 1998 grant, the criteria include both
corporate total shareholder return, and a business value appreciation formula
for Constellation Power, Inc. (CPI), the largest Constellation Holdings'
subsidiary. The business value appreciation formula for CPI is similar to the
formula for CPS described above. No maximum award amount will be established for
Mr. Ambler's 1998 grant.
The named executives earned awards of BGE common stock under the BGE
Long-Term Incentive Plan, based on the 1995-1997 performance period. Awards for
Messrs. Poindexter, Crooke, Shivery, Creel and Denton were above target based on
BGE total shareholder return during the three-year performance
18
<PAGE>
period at the 64th percentile, which exceeded the target of the 62.5th
percentile. Mr. Creel and Mr. Denton were also awarded additional shares
reflecting their higher level executive responsibilities due to their promotions
during the performance period, and Mr. Creel's award was prorated to reflect his
November 1, 1997 retirement. Mr. Ambler's award was below target because
Constellation Holdings' cumulative net income over the three-year performance
period was below target. All awards included BGE stock purchased with dividends
paid on award shares throughout the performance period. These awards to the
named executives are shown in the column of the SUMMARY COMPENSATION TABLE on
page 11 titled LONG-TERM COMPENSATION -- LONG-TERM INCENTIVE PLAN PAYOUT.
Section 162(m) of the Internal Revenue Code limits tax deductions for
executive compensation to $1 million. There are several exemptions to Section
162(m), including one for qualified performance-based compensation. To be
qualified, performance-based compensation must meet various requirements,
including shareholder approval. The Committee has considered annually whether it
should adopt a policy regarding 162(m) and concluded it was not appropriate to
do so. One reason for the conclusion is that, assuming the current compensation
policies and philosophy remain in place, the limitations of Section 162(m) have
only minimal applicability currently and in the near future. The Committee also
notes that while generally it wishes to maximize the deductibility of
compensation, the Committee believes the 162(m) requirements are not fully
consistent with sound executive compensation policy and incentives to improve
shareholder value. Therefore, the Committee may approve incentive payments that
do not qualify for deduction if the recipient's compensation exceeds the $1
million limit.
Jerome W. Geckle, Chairman Dan A. Colussy
J. Owen Cole Michael D. Sullivan
19
<PAGE>
SHAREHOLDER PROPOSAL
We have been advised by Charles F. Dobry, Jr., 783 Riverdale Avenue,
Baltimore, Maryland 21237, a shareholder who beneficially owns common stock with
a market value of at least $1,000, that he intends to submit the following
proposal for action at the annual meeting.
THE BOARD OF DIRECTORS OPPOSES THE PROPOSAL AND RECOMMENDS A VOTE
"AGAINST" IT. The Board of Directors' objection is on page 21.
The following proposal is presented word-for-word as it was submitted to
us by the shareholder:
BALTIMORE GAS & ELECTRIC COMPANY (BGE)
SHAREHOLDER PROPOSAL CONCERNING
CONFIDENTIAL VOTING
BE IT RESOLVED: That the stockholders of Baltimore Gas & Electric Company
(BGE). ("Company"), recommend that our Board of Directors take the steps
necessary to adopt and implement a policy of CONFIDENTIAL VOTING at all meetings
of its stockholders, which includes the following provisions:
1. That the voting of all proxies, consents and authorizations be secret,
and that no such document shall be available for examination nor shall
the vote or identity of any shareholder be disclosed except to the
extent necessary to meet the legal requirements, if any, of the
Corporation's state of incorporation; and
2. That the receipt, certification and tabulation of such votes shall be
performed by independent election inspectors.
SUPPORTING STATEMENT:
It is the proponents' belief that it is vitally important that a system of
CONFIDENTIAL PROXY VOTING be established at BGE. Confidential balloting is a
basic tenet of our political electoral process ensuring its integrity. The
integrity of corporate board elections should also be protected against
potential abuses given the importance of corporate policies and practices to
corporate owners (stockholders) and our national economy.
The implementation of a CONFIDENTIAL VOTING SYSTEM would enhance
shareholder rights in several ways. First, in protecting the confidentiality of
the corporate ballot, shareholders would feel free to oppose management nominees
and issue positions without fear of retribution. This is especially important
for professional money managers whose business relationships can be jeopardized
by their voting positions.
A second important benefit of CONFIDENTIAL VOTING would be to invigorate
the corporate governance process at the Corporation. We believe that shareholder
activism would be promoted within the Corporation. It is our belief that
shareholders empowered with a free and protected vote would be more active in
the proposing of corporate policy resolutions and alternate board candidates.
Finally, it is our belief that the enhancement of the proxy voting process
would change the system where too often shareholders vote "with their feet," not
with their ballots. This change would help to develop a long-term investment
perspective where corporate assets could be deployed, and used in a more
effective and efficient manner.
THE VAST MAJORITY OF MAJOR CORPORATIONS HAVE ADOPTED a CONFIDENTIAL VOTING
POLICY and IT'S TIME FOR BGE TO JOIN THEM.
WE URGE YOU TO VOTE FOR THIS PROPOSAL.
20
<PAGE>
BOARD OF DIRECTORS' OBJECTIONS TO THE SHAREHOLDER PROPOSAL
BGE's Board of Directors and Management recommend that shareholders vote
AGAINST this proposal. A confidential voting policy would substantially limit
the ability of shareholders and BGE to communicate with each other, and would
not significantly enhance the confidentiality already available to shareholders.
BGE's existing proxy solicitation system allows shareholders the freedom to
choose whether to vote on a confidential basis. A shareholder who wants
anonymity and confidentiality may hold shares in street name through a bank,
broker, or other nominee who cannot disclose the names of the shareholder
without the shareholder's permission. Shares held by employees in BGE's employee
savings plan are held in trust and voted by the plan trustee. BGE has no access
to the voting instructions employees provide to the trustee. Under the terms of
a trust agreement, plan participants confidentially direct the trustee how to
vote.
Shareholders who choose not to vote on a confidential basis may openly
communicate with Management. Large institutional shareholders use their votes on
particular issues to send messages to Management. Other shareholders use proxy
cards to write comments to Management. The Board of Directors must be able to
use these extremely valuable sources of information to learn the viewpoints of
its shareholders.
A confidential voting policy would impair BGE's ability to contact
shareholders on issues that are important to BGE's success. The Board of
Directors must be able to clarify directly with shareholders issues of
importance to BGE and shareholders, and when necessary to counter false
statements in proxy contests. BGE may need to contact shareholders who have not
voted their proxies to encourage them to vote on important issues. BGE also may
contact shareholders whose proxy cards aren't correctly completed, so that their
shares will be voted as they intended. Contact with shareholders is critical in
these situations so that the Board of Directors can proceed in the best interest
of BGE and all of its shareholders, and a confidential voting policy would limit
the Board of Directors' ability to do this.
The proponent argues that confidential voting is necessary to ensure the
integrity of board elections and protect shareholders from retribution. This is
a farfetched notion for corporate governance and has no historical basis at BGE.
BGE is a good corporate citizen as many long-time shareholders know, and has
always conducted its shareholder solicitations in a fair and equitable manner,
without any threat of retribution. Further, contrary to the proponent's claim
that shareholder activism would be promoted with confidential voting, it has not
been the experience of BGE that its shareholders are reluctant to communicate
with Management because of the absence of confidential voting. Activist
shareholders want Management to know who they are and what they stand for.
BGE's existing proxy solicitation system encourages open communication with
shareholders. It permits confidentiality for those who desire it, but does not
mandate it for all shareholders. The existing system has served shareholders
fairly for many years, and has been a valuable tool to help the Board of
Directors and Management successfully run BGE.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THIS PROPOSAL. PROXIES
SOLICITED BY THE BOARD WILL BE SO VOTED UNLESS SHAREHOLDERS SPECIFY A CONTRARY
CHOICE ON THE PROXY CARD.
21
<PAGE>
[RECYCLE LOGO] This Statement was printed
entirely on recycled paper.
<PAGE>
TEAR HERE ALONG PERFORATION
- --------------------------------------------------------------------------------
[BGE LOGO] BALTIMORE GAS AND ELECTRIC COMPANY
P. O. BOX 1642, BALTIMORE, MARYLAND 21203-1642
Common Stock Proxy for Annual Meeting of Shareholders -- April 24, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
PLEASE VOTE AND SIGN ON THE REVERSE SIDE AND RETURN IN THE ENCLOSED ENVELOPE.
The undersigned appoints Jerome W. Geckle, George V. McGowan and Christian H.
Poindexter (or a majority of them or their substitutes, or one acting alone in
the absence of the others), as proxies, with power to each to appoint a
substitute and to revoke the appointment of such substitute, to vote all shares
of common stock of Baltimore Gas and Electric Company which the undersigned is
entitled to vote at the annual meeting to be held on April 24, 1998, and at any
adjournments thereof, in the manner specified on the reverse side of this card
with respect to each item identified thereon (as set forth in the Notice of
Annual Meeting and Proxy Statement), and in their discretion on any shareholder
proposal omitted from this proxy and such other business as may properly come
before the annual meeting.
SHARES REPRESENTED BY ALL PROPERLY EXECUTED PROXIES WILL BE VOTED AT THE ANNUAL
MEETING IN THE MANNER SPECIFIED. IF NO SPECIFICATION IS MADE, VOTES WILL BE CAST
"FOR" ITEMS 1 & 2 AND "AGAINST" ITEM 3 ON THE REVERSE OF THIS CARD.
(over)
<PAGE>
THIS IS YOUR PROXY CARD
TEAR HERE, VOTE, SIGN
AND RETURN IN THE PRE-ADDRESSED
POSTAGE PAID ENVELOPE
TEAR HERE ALONG PERFORATION
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ITEMS 1 & 2 AND "AGAINST" ITEM 3
<TABLE>
<S><C>
1. THE ELECTION OF 13 DIRECTORS FOR AGAINST ABSTAIN
| | FOR all nominees, except as | | WITHHOLD AUTHORITY 2. RATIFICATION OF THE SELECTION OF | | | | | |
lined through below. (To vote (ABSTAIN) from voting COOPERS & LYBRAND L.L.P. AS OUR
AGAINST any or all nominees for all nominees. INDEPENDENT ACCOUNTANTS FOR 1998
line through their names.)
H.F. Baldwin B.B. Byron J.O. Cole D.A. Colussy 3. SHAREHOLDER PROPOSAL REGARDING | | | | | |
E.A. Crooke J.R. Curtiss J.W. Geckle F.A. Hrabowski, III CONFIDENTIAL VOTING
N. Lampton G.V. McGowan C.H. Poindexter G.L. Russell, Jr.
M.D. Sullivan
| | Please check this box if you plan to attend the 1998 annual meeting.
Please sign below, exactly as name appears at left. Joint owners should EACH
sign. Attorneys, executors, administrators, trustees and corporate officials
should give title or capacity in which they are signing.
Signature ____________________________________ Date ________________________
BALTIMORE GAS AND ELECTRIC COMPANY Signature ____________________________________ Date ________________________
</TABLE>
<PAGE>
CHRISTIAN H. POINDEXTER Baltimore Gas and Electric Company
Chairman of the Board 39 W. Lexington Street
and Chief Executive Officer Baltimore, Maryland 21201
April 7, 1998
[LOGO]
Dear Shareholder:
As of April 3, 1998, we had not received your proxy card for the 1998 annual
shareholders meeting to be held April 24th.
We appreciate the support of our shareholders and encourage you to vote your
shares, regardless of the size of your holdings. We have, therefore, enclosed a
second proxy card so that you can vote your shares. Whether or not you plan to
attend the meeting, please complete and return the enclosed proxy card to ensure
that your vote will be counted at the meeting.
Our initial mailing to you also included a proxy statement and our 1997 annual
report to shareholders. If you would like to receive a duplicate copy of these
documents, simply contact one of our shareholder representatives in metropolitan
Baltimore at 410-783-5920, within Maryland at 1-800-492-2861, or outside
Maryland at 1-800-258-0499.
Sincerely,
/s/ C.H. Poindexter
Chairman of the Board
Enclosures
<PAGE>
Please fold and detach card at perforation before mailing
- --------------------------------------------------------------------------------
CONFIDENTIAL VOTING INSTRUCTIONS TO TRUSTEE
PLEASE VOTE AND SIGN ON REVERSE SIDE AND RETURN IN THE ENCLOSED ENVELOPE
These Voting Instructions are requested in conjunction with a proxy solicitation
by the Board of Directors of Baltimore Gas and Electric Company.
TO: T. ROWE PRICE TRUST COMPANY, AS TRUSTEE UNDER THE BALTIMORE GAS AND ELECTRIC
COMPANY EMPLOYEE SAVINGS PLAN
I hereby instruct T. Rowe Price Trust Company, as Trustee under the Baltimore
Gas and Electric Company Employee Savings Plan (Plan), to vote, by proxy, all
shares of common stock of Baltimore Gas and Electric Company (BGE) allocated to
me under the Plan at the annual meeting of the shareholders of BGE to be held on
April 24, 1998, and at any adjournments thereof, in the manner specified on the
reverse side of this form with respect to each item identified thereon (as set
forth in the Notice of Annual Meeting and Proxy Statement), and Jerome W.
Geckle, George V. McGowan and Christian H. Poindexter, in their discretion,
shall vote in person on any shareholder proposal omitted from this proxy and
such other business as may properly come before the annual meeting.
The Trustee will vote the shares represented by this Voting Instructions Card if
properly signed and received by April 17, 1998. IF NO INSTRUCTIONS ARE SPECIFIED
ON A SIGNED CARD, THE SHARES REPRESENTED THEREBY WILL BE VOTED IN ACCORDANCE
WITH THE RECOMMENDATIONS OF THE BOARD OF DIRECTORS OF BGE: "FOR" ITEMS 1 AND 2,
AND "AGAINST" ITEM 3. The Trustee is not permitted under the Plan to vote shares
of common stock unless voting instructions have been received.
(over)
<PAGE>
------------------
From: | First Class Mail |
T. ROWE PRICE RETIREMENT PLAN SERVICES, INC. | U.S. Postage |
BGE PST | PAID |
P.O. Box 17215 | Baltimore MD |
Baltimore, MD 21297-0354 | Permit #250 |
------------------
Please fold and detach card at perforation before mailing
- --------------------------------------------------------------------------------
PLEASE VOTE BY FILLING IN THE APPROPRIATE BOX(ES) BELOW.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ITEMS 1 AND 2.
<TABLE>
<S><C>
1. THE ELECTION OF 13 DIRECTORS FOR all nominees listed at WITHHOLD AUTHORITY
left, except as lined through (ABSTAIN) from voting
H.F. Baldwin, B.B. Byron, J.O. Cole, D.A. Colussy, E.A. Crooke, (To vote AGAINST any or all for all nominees.
J.R. Curtiss, J.W. Geckle, F.A. Hrabowski, III, N. Lampton, nominees line through their names.)
G.V. McGowan, C.H. Poindexter, G.L. Russell, Jr., M.D. Sullivan | | | |
2. RATIFICATION OF THE SELECTION OF FOR AGAINST ABSTAIN
COOPERS & LYBRAND L.L.P. AS OUR | | | | | |
INDEPENDENT ACCOUNTANTS FOR 1998
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "AGAINST" ITEM 3.
3. SHAREHOLDER PROPOSAL REGARDING CONFIDENTIAL VOTING | | | | | |
BALTIMORE GAS AND ELECTRIC COMPANY
Date _____________
Please sign below, exactly as your name appears to the left.
| |
| |
SIGNATURE
</TABLE>
<PAGE>
BALTIMORE GAS AND ELECTRIC COMPANY
TO PARTICIPANTS IN THE
EMPLOYEE SAVINGS PLAN (THE PLAN)
The enclosed Notice of Annual Meeting of Shareholders, Proxy Statement,
and Voting Instructions Card for the Annual Meeting of Shareholders, to be held
on April 24, 1998, are being furnished to you by Baltimore Gas and Electric
Company (BGE) on behalf of T. Rowe Price Trust Company, Trustee under the Plan.
In accordance with the Plan and the Trust Agreement between BGE and the
Trustee, you may instruct the Trustee how to vote the shares of common stock
held for you under the Plan. Therefore, please complete the enclosed Voting
Instructions Card and return it in the accompanying envelope by April 17, 1998.
After receipt of the properly executed Voting Instructions Card, the Trustee
will vote as directed by those instructions. The Trustee is not permitted to
vote your shares of common stock unless voting instructions have been received.
Each participant in the Plan who is a holder of record of other shares
of BGE stock will continue to receive, separately, a proxy card and accompanying
proxy material to vote the shares of common stock registered in his or her name.
Elaine W. Johnston
Plan Administrator
<PAGE>
BALTIMORE GAS AND ELECTRIC COMPANY
EMPLOYEE SAVINGS PLAN
T. Rowe Price Trust Company, Trustee of the Employee Savings Plan, has not
received a Voting Instructions Card for the 1998 meeting for the shares that you
hold in the Plan. The Trustee is not permitted to vote your shares of common
stock unless voting instructions have been received.
We appreciate the support of our shareholders and encourage you to vote your
Employee Savings Plan shares, regardless of the size of your holdings. We have,
therefore, enclosed a second Voting Instructions Card so that you can vote your
shares. Whether or not you plan to attend the meeting, please complete the
Voting Instructions Card and return it to the Trustee in the envelope provided
by April 17, 1998.
Our initial mailing to you included a proxy statement. If you would like to
receive a duplicate copy, please contact one of our shareholder representatives
in metropolitan Baltimore at 410-783-5920, within Maryland at 1-800-492-2861,
outside Maryland at 1-800-258-0499.
Elaine W. Johnston
Plan Administrator