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 Rule 14a-11(c) or Rule 14a-12
PROVIDENCE AND WORCESTER RAILROAD COMPANY
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i) (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:
PROVIDENCE AND WORCESTER RAILROAD COMPANY
75 Hammond Street
Worcester, Massachusetts 01610
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
April 24, 2002
PLEASE TAKE NOTICE that the 2002 annual meeting of the shareholders of
Providence and Worcester Railroad Company (the "Company") will be held at the
Crowne Plaza, 10 Lincoln Square, Worcester, Massachusetts, on Wednesday, April
24, 2002 at 10:00 o'clock A.M., local time, for the following purposes:
(1) To elect three directors (by the holders of Common Stock only) and six
directors (by the holders of Preferred Stock only) to serve for terms of
one year and until their successors are elected and qualified;
(2) To ratify the appointment of Deloitte & Touche LLP as independent
auditors of the accounts of the Company for 2002 (by the holders of Common
Stock and Preferred Stock, voting as separate classes);
(3) To transact such other business, if any, as may properly come before
the meeting or any adjournment or adjournments thereof (by the holders of
Common Stock and Preferred Stock, voting as separate classes).
Holders of record of the Common Stock or Preferred Stock on the books of
the Company as of the close of business on March 1, 2002 will be entitled to
vote.
By Order of the Board of Directors
MARY A. TANONA
Secretary and General Counsel
PROVIDENCE AND WORCESTER RAILROAD COMPANY
Worcester, Massachusetts
March 22, 2002
If you are the holder of record of only one class of the Company's capital
stock, only one proxy card is enclosed. If you are the holder of record of both
Common Stock and Preferred Stock, two proxy cards are enclosed. Kindly fill in,
date and sign the enclosed proxy card(s) and promptly return the same in the
enclosed addressed envelope, which requires no postage if mailed in the United
States. If you are personally present at the meeting, the proxy or proxies will
not be used without your consent.
PROVIDENCE AND WORCESTER RAILROAD COMPANY
PROXY STATEMENT
Annual Meeting of Shareholders
April 24, 2002
SOLICITATION AND REVOCATION OF PROXIES
The accompanying proxy or proxies are solicited by the Board of Directors
of Providence and Worcester Railroad Company (herein called the "Company") in
connection with the annual meeting of the shareholders to be held April 24,
2002; the Company will bear the cost of such solicitation. It is expected that
the solicitation of proxies will be primarily by mail. Proxies may also be
solicited personally by regular employees of the Company at nominal cost. The
Company may reimburse brokerage houses and other custodians, nominees and
fiduciaries holding stock for others in their names, or in those of their
nominees, for their reasonable out-of-pocket expenses in sending proxy materials
to their principals or beneficial owners and obtaining their proxies. Any
shareholder giving a proxy has the power to revoke it at any time prior to its
exercise, but the revocation of a proxy will not be effective until notice
thereof has been given to the Secretary of the Company. Notice of revocation may
be delivered in writing to the Secretary prior to the meeting or may be
transmitted orally to the Secretary at the meeting. Every properly signed proxy
will be voted in accordance with the specifications made thereon.
The Company's Annual Report for 2001, including financial statements, this
proxy statement and the accompanying proxy or proxies are expected to be first
sent to shareholders on or about March 22, 2002. Neither the Annual Report nor
the financial statements therein are incorporated in this Proxy Statement and do
not form any part of the material for the solicitation of proxies.
VOTING AT MEETING
Only shareholders of record at the close of business on March 1, 2002 will
be entitled to vote at the meeting. Under the Company's charter, the holders of
the Company's Common Stock, voting separately as a class, are entitled to one
vote for each share held in the election of one-third (1/3) of the Board of
Directors of the Company proposed to be elected at the meeting. The holders of
the Company's Preferred Stock, voting separately as a class, are entitled to one
vote for each share held in the election of the balance of the Board of
Directors proposed to be elected at the meeting. The holders of the Company's
Common Stock and the holders of the Company's Preferred Stock are entitled to
one vote per share, voting as separate classes and not together, upon all other
matters presented to the shareholders for their approval.
Common Stock directors will be elected in each case by vote of the holders
of a majority of the Common Stock present or represented at the meeting, and the
Preferred Stock directors will be similarly elected by vote of the holders of a
majority of the Preferred Stock.
Shares represented by proxies which are marked "withhold authority" with
respect to the election of any particular nominee for director, "abstain" with
respect to any other matter, or to deny discretionary authority on any other
matters will be counted as shares present and entitled to vote, and,
accordingly, any such marking of a proxy will have the same effect as a vote
against the proposal to which it relates.
Brokers who hold shares in street name may lack authority to vote such
shares on certain items, absent specific instructions from their customers.
Shares subject to such "broker non-votes" will not be treated as shares entitled
to vote on the matters to which they relate and therefore will be treated as not
present at the meeting for those purposes, but otherwise will have no effect on
the outcome of the voting on such matters.
On the record date, there were 4,411,576 shares of the Company's Common
Stock and 645 shares of the Company's Preferred Stock outstanding and entitled
to vote at the meeting.
ELECTION OF DIRECTORS
At the annual meeting, three Common Stock directors and six Preferred Stock
directors are to be elected, and each will hold office until the next annual
meeting and until his/her successor is elected and qualified. The proxies named
in the accompanying proxy or proxies, who have been designated by the Board of
Directors, intend to vote, unless otherwise instructed, for the election to the
Board of Directors of the persons named below, all of whom are now directors of
the Company. Certain information concerning such nominees is set forth below:
Principal Occupation Director
Name and Age During Past Five Years Since(a)
- ------------ ---------------------- --------
Common Stock Director Nominees:
-------------------------------
Richard W. Anderson Senior Vice President of Massachusetts Capital 1998
(54) Resource Company
Robert H. Eder (69) Chairman of the Company 1965
Merrill W. Sherman President and Chief Executive Officer of Bancorp 1999
(53) Rhode Island, Inc. and President, Director and Chief
Executive Officer of Bank Rhode Island
Preferred Stock Director Nominees:
----------------------------------
Frank W. Barrett Executive Vice President of Banknorth Massachusetts 1995
(62) (prior to January 2002, Executive Vice President of
First Massachusetts Bank, N.A., prior to June 2000,
Executive Vice President and Chief Lending Officer
of Family Bank and prior to January 1999, Executive
Vice President of Springfield Institution for Savings)
John H. Cronin (68) Retired 1986
J. Joseph Garrahy President of J. Joseph Garrahy & Associates, Inc. 1992
(71) (business consultants)
Orville R. Harrold President of the Company 1978
(69)
John J. Healy (66) President of Worcester Affiliated Mfg. L.L.C. 1991
(Mfg. Consultant) and President of Manufacturing
Assistance Center
Charles M. President of Bertha M. McCollam, Inc. (insurance) 1996
McCollam, Jr. (69) and President of McCollam Associates (consultant)
(a) Dates of directorships include directorships of the Company's predecessors.
2
Brief Biographies
Richard W. Anderson, Director. Mr. Anderson has been a Director of the
Company since 1998. He is Senior Vice President of Massachusetts Capital
Resource Company ("MCRC"), a private investment firm funded by major
Massachusetts based life insurance companies providing high risk growth capital
to Massachusetts businesses. He began working at MCRC in 1981. Mr. Anderson is
also a director of Matec Corporation, a company specializing in frequency
control devices.
Frank W. Barrett, Director. Mr. Barrett has been a Director of the Company
since 1995. From 1993 to 1998 he was Executive Vice President at Springfield
Institution for Savings ("SIS"). Effective January 1, 1999, he became Executive
Vice President and Chief Lending Officer of Family Bank. Family Bank is a
Massachusetts subsidiary of Peoples Heritage Financial Group and the acquirer of
SIS. Family Bank became First Massachusetts Bank, N.A. upon the acquisition of
Bank North Group by Peoples Heritage Financial Group (which then changed its
name to BankNorth Group). Effective June 2000, he became Executive Vice
President of First Massachusetts Bank, N.A. Effective January 2002, First
Massachusetts Bank, N.A. was merged into Banknorth Massachusetts. No change in
Mr. Barrett's responsibility was effected as a result of the merger. Mr. Barrett
is also a director of Dairy Mart Convenience Store, Inc.
John H. Cronin, Director. Mr. Cronin has been a Director of the Company
since 1986. From 1971 until his retirement in 1995, Mr. Cronin was owner and
President of Ideal Products, Inc., a wholesale restaurant supply company.
Robert H. Eder, Chairman of the Board and Chief Executive Officer. Mr. Eder
became President of the Company in 1966 and led the Company through its efforts
to become an independent operating company. He has been Chairman of the Board
since 1980. He is a graduate of Harvard College and Harvard Law School. He (with
his wife) is also majority owner and Chairman of the Board of Capital
Properties, Inc., a real estate holding company of which he is also a Director.
Mr. Eder is admitted to practice law in Rhode Island and New York.
J. Joseph Garrahy, Director. Mr. Garrahy has been a Director of the Company
since 1992. He is a former four term Governor of Rhode Island and, since 1990,
has been an independent business consultant in the State of Rhode Island. Mr.
Garrahy is also a director of Grove Real Estate Investment Trust.
Orville R. Harrold, President, Chief Operating Officer and Director. Mr.
Harrold has been with the Company since the commencement of independent
operations in February 1973. Over the past 28 years, he has held the positions
of Chief Engineer and General Manager, becoming President in 1980. Mr. Harrold
has a bachelors degree in mechanical engineering from the Pratt Institute,
Brooklyn, New York and has been employed in the railroad industry in various
capacities since 1960.
John J. Healy, Director. Mr. Healy has been a Director of the Company since
1991. He has been President of Worcester Affiliated Mfg. L.L.C., an independent
business consulting firm involved in efforts to revitalize manufacturing in
Massachusetts, since January 1997. Mr. Healy is also President of the
Manufacturing Assistance Center. Prior thereto, Mr. Healy was President and
Chief Executive Officer of HMA Behavioral Health, Inc., a behavioral health care
management service provider.
Charles M. McCollam, Jr., Director. Mr. McCollam has been a Director of the
Company since 1996. He owns and operates a number of insurance businesses in the
State of Connecticut, as well as McCollam Associates, a consulting firm. He was
the Chief of Staff to a former governor of Connecticut.
Merrill W. Sherman, Director. Ms. Sherman has been a Director of the
Company since 1999. She is President and Chief Executive Officer of Bancorp
Rhode Island, Inc. and has been President, Director and Chief Executive Officer
of its primary subsidiary, Bank Rhode Island, a community bank in the greater
Providence metropolitan area, since its formation in March 1996. Prior thereto,
from September 1993 to August 1995, Ms. Sherman was a partner in the corporate
and real estate departments of the law firm Brown, Rudnick, Freed & Gesmer where
she headed the firm's banking consulting group affiliate. She retired from her
position in August 1995 to devote full-time efforts to the creation of Bank
Rhode Island.
3
Committees of the Board of Directors
The Board of Directors has an Executive Committee, a Stock Option &
Compensation Committee and an Audit Committee. The Board of Directors does not
have a nominating committee. In accordance with the By-laws of the Company, the
Executive Committee, currently comprising Robert H. Eder, Chairman, John J.
Healy and Orville R. Harrold, exercises the authority of the Board of Directors
when formal Board action is required between meetings, subject to the
limitations imposed by law, the By-laws or the Board of Directors. The Executive
Committee acts on routine matters such as authorizing the execution of
government contracts for reimbursement for Company work on highway projects
adjacent to the railroad and grade crossing rehabilitation.
The Stock Option & Compensation Committee, currently comprising John H.
Cronin, Chairman, Richard W. Anderson and Charles M. McCollam, Jr., is
responsible for establishing the amount of option shares to be granted to the
Company's employees under the Stock Option Plan and for making recommendations
to the full Board concerning executive officer compensation.
The Audit Committee of the Board of Directors currently comprising J.
Joseph Garrahy, Chairman, Frank W. Barrett and Merrill W. Sherman, is
responsible for providing independent, objective oversight of the Company's
accounting functions and internal controls. The Audit Committee is composed of
three directors, all of whom are independent as defined by the American Stock
Exchange listing standards. The Audit Committee operates under a written charter
first adopted and approved by the Board of Directors on April 26, 2000. A copy
of the Audit Committee Charter is attached to this Proxy Statement as Appendix
A.
The Board of Directors held four meetings, the Audit Committee held six
meetings, the Stock Option & Compensation Committee held four meetings and the
Executive Committee held ten meetings during the fiscal year ended December 31,
2001.
Audit Committee Report
Management is responsible for the Company's internal controls and financial
reporting process. The independent accountants are responsible for performing an
audit of the Company's consolidated financial statements in accordance with
generally accepted auditing standards and to issue a report thereon. The Audit
Committee's responsibility is to monitor and oversee these processes.
The responsibilities of the Audit Committee include recommending to the
Board an accounting firm to be engaged as the Company's independent accountants.
Additionally, and as appropriate, the Audit Committee reviews and evaluates, and
discusses and consults with the Company's management and independent accountants
regarding, the scope of the audit plan, the results of the audit, the Company's
financial statement disclosure documents, the adequacy and effectiveness of the
Company's accounting and financial controls and changes in accounting
principles.
In connection with these responsibilities, the Audit Committee reviewed and
discussed the audited financial statements with management and the Company's
independent accountants, Deloitte & Touche LLP. The Audit Committee also
discussed with Deloitte & Touche LLP the matters required by Statement on
Auditing Standards No. 61. The Audit Committee received from Deloitte & Touche
LLP written disclosures and the letter regarding its independence as required by
Independence Standards Board Standard No. 1. The Audit Committee discussed this
information with Deloitte & Touche LLP and also considered the compatibility of
non-audit services provided by Deloitte & Touche LLP with its independence.
Based on the review of the audited financial statements and these various
discussions, the Audit Committee recommended to the Board of Directors that the
audited financial statements be included in the Company's Annual Report on Form
10-K, to be filed with the SEC.
Audit Committee:
J. Joseph Garrahy, Chairman
Frank W. Barrett
Merrill W. Sherman
4
Compensation of Directors
During the fiscal year ended December 31, 2001, each director who was not
an employee of the Company received a base fee of $500 for each attended meeting
of the Board of Directors plus $50 per attended meeting for each year of service
as a director, and each member of the Audit Committee and the Stock Option &
Compensation Committee received $300 for each attended meeting of the committee
(other than the Chairman of the Committee, who received $350).
During the month of January of each year, directors of the Company who were
serving as such on the preceding December 31 and are not full time employees of
the Company are granted options for the purchase of 100 shares of the Common
Stock of the Company, plus options for an additional ten shares for each full
year of service to the Company. The exercise price is the last sale price of the
Common Stock on the last business day of the preceding year, and the term of
each option is ten years (subject to earlier termination if the grantee ceases
to serve as a director), provided, however, that no option is exercisable within
six months following the date of grant.
Report on Executive Compensation
The Stock Option & Compensation Committee of the Board (the "Committee") is
composed entirely of independent, non-employee directors. From time to time Mr.
Harrold meets with the Committee to review the compensation program and make
recommendations for executive officers reporting to him. The Committee is
charged with the broad responsibility of seeing that executive officers are
effectively compensated in a manner which is internally equitable and externally
competitive.
Executive Compensation Philosophy. The Company's executive compensation
philosophy seeks to link executive officer compensation with the values,
objectives, business strategy, management initiatives and financial performance
of the Company. The overall objectives of the program are to attract and retain
highly qualified individuals in key executive positions, to motivate executives
to achieve goals inherent in the Company's business strategy, and to link
executives' and shareholders' interests. The Company also seeks to achieve a
balance of the compensation paid to a particular individual and the compensation
paid to other executives both inside the Company and at comparable railroad
companies.
Base Salary. Base salaries for executive officers are substantially
dependent upon the base salaries paid for comparable positions at similar
companies, the responsibilities of the position held, and the experience level
of the particular executive officer. The Committee sets the base salary for
executive officers by reviewing compensation for competitive positions in the
market and the historical compensation levels of the executives.
Bonus. All bonuses for executive officers are determined at the discretion
of the Committee, taking into consideration the Company's objectives and
profitability.
Stock Options. Total compensation at the executive level also includes
long-term incentives afforded by stock options granted under the 1993
Non-Qualified Stock Option Plan ("Plan"). The objectives of the program are to
align executive and shareholder long-term interests by creating a strong and
direct link between executive pay and total shareholder return, and to enable
executives to develop and maintain long-term stock ownership positions in the
Company's Common Stock. Annual grants of stock options are made in accordance
with the terms of the Plan. Options are granted at fair market value and have
ten year vesting schedules to encourage executives to continue in the employ of
the Company.
Simplified Employee Pension Plan ("SEPP"). Total compensation at the
executive level also includes a contribution by the Company on behalf of each
"eligible employee", as defined under the 1979 SEPP, as amended, of an amount
not to exceed 12% of said employee's "eligible compensation" for the preceding
year ending December 31. "Eligible compensation", as defined under the SEPP,
means all taxable compensation of an "eligible employee" paid by the Company in
any calendar year, excluding any contribution made by the Company under the
SEPP, provided, however, that "eligible compensation" shall be limited to no
more than $150,000, or such amount as permitted under Section 401(a)(17) of the
Internal Revenue Code. Such contribution is made directly to an individual
retirement account or individual retirement annuity as determined by the
"eligible employee".
5
Compensation of Chief Executive Officer. Mr. Eder is eligible to
participate in the same executive compensation plans available to other senior
executives other than the Company's Non-Qualified Stock Option Plan. Effective
in July 1999, his base salary was increased from $289,605 to $314,605
representing an 8.6% increase deemed consistent with salary levels among
executives in comparable positions within the railroad industry. Other than
periodic cost of living adjustments provided to all Company employees, Mr. Eder
had not received an increase in his base salary since 1995. Mr. Eder received a
bonus in October 1999 in the amount of $17,500 in recognition of Mr. Eder's
efforts in successfully undertaking the Company's two stock offerings in 1999.
Conclusion. The Committee believes that the compensation program for
executive officers is competitive and that the program effectively ties
executive compensation to the Company's performance and resultant stock price
performance.
Stock Option & Compensation Committee:
John H. Cronin, Chairman
Richard W. Anderson
Charles M. McCollam, Jr.
Summary Compensation Table
The following table summarizes the compensation paid or accrued by the
Company during the three year period ended December 31, 2001, to its Chief
Executive Officer and each of its executive officers who earned more than
$100,000 in salary and bonus in 2001 (the "Named Executive Officers"), for
services rendered in all capacities to the Company during 2001.
Long-Term
Annual Compensation Compensation
------------------- ------------
Securities
Underlying All
Other Options to Other
Annual Purchase Compen-
Salary Compen- Common sation
Name and Principal Position Year ($)(a) Bonus($) sation($) Stock ($)(b)
- ---------------------------- ---- ------ ------ -------- ------------ ------
Robert H. Eder.............. 2001 342,464 0 36,459(c) 0 45,236
Chairman of the Board and 2000 325,621 0 35,337(c) 0 47,302
Chief Executive Officer 1999 307,403 17,500 23,653(c) 0 48,024
Orville R. Harrold.......... 2001 293,955 0 0 1,128 37,758
President and Chief 2000 279,077 0 0 1,178 39,242
Operating Officer 1999 262,181 0 0 1,087 42,726
P. Scott Conti.............. 2001 114,192 0 0 223 7,993
Vice President Engineering 2000 105,546 0 0 232 7,916
1999 99,072 0 0 147 8,068
Robert J. Easton............ 2001 138,846 0 0 281 9,719
Treasurer 2000 133,304 0 0 301 9,998
1999 130,858 0 0 346 10,469
Mary A. Tanona.............. 2001 109,373 0 0 90 7,656
Secretary and General 2000 84,954 0 0 0 6,372
Counsel 1999 32,789(d) 0 0 0 0
(a) Includes amounts taxable to employees for personal use of Company-owned
vehicles, other than Mr. Eder, who does not have personal use of a
Company-owned vehicle.
(b) Includes amounts paid directly to the retirement accounts of management
staff under the Company's simplified employee pension plan, and, in the
case of Robert H. Eder and Orville R. Harrold, includes for 2001 premiums
paid for life insurance coverage in the amounts of $33,336 and $25,858,
respectively.
(c) Includes the cost of a vehicle for Mr. Eder.
(d) Date of hire, July 26, 1999. Appointed to the position of Secretary and
General Counsel effective October 2, 2000.
6
Option/SAR Grants in Last Fiscal Year
The following table contains information concerning the grant of stock
options under the Company's Non-Qualified Stock Option Plan to the Named
Executive Officers during the Company's last fiscal year. The Company does not
issue stock appreciation rights.
% of Total
Number of Options
Securities Granted To
Underlying Employees Grant Date
Options In Fiscal Exercise Expiration Present
Name Granted(a) 2001 Price($) Date Value($)(b)
------ ---------- --------- ------ -------- -----------
Robert H. Eder(c).... 0 0 0 0 0
Orville R. Harrold... 1,128 16.12 7.125 01/02/11 4,083
P. Scott Conti....... 223 3.18 7.125 01/02/11 807
Robert J. Easton..... 281 4.02 7.125 01/02/11 1,017
Mary A. Tanona....... 90 1.28 7.125 01/02/11 326
(a) All options were granted on January 2, 2001 and became exercisable on July
2, 2001.
(b) Amounts represent fair value of options and were estimated as of the date
of grant using Black-Scholes options - pricing model with the following
weighted average assumptions: expected volatility of 58%; expected life 7
years; and risk free interest rate of 4.97%. Dividends at the rate of 2.25%
per share were assumed for purposes of this estimate.
(c) Under the terms of the Company's Non-Qualified Stock Option Plan, Mr. Eder
is not eligible to receive a grant of stock options.
Aggregated Option/SAR Exercises In Last Fiscal Year
And Fiscal Year End Option Values
The following table sets forth individual exercises of stock options during
2001 and the year-end values of options to purchase Common Stock held by the
Named Executive Officers as of December 31, 2001.
Number of Securities
Underlying Unexercised Value of Unexercised
Options at In-the-Money at
December 31, 2001 December 31, 2001(b)
----------------- --------------------
Shares
Acquired on Value Exercisable/ Exercisable/
Name Exercise Realized($)(a) Unexercisable Unexercisable($)
---- ----------- -------------- ------------- ----------------
Robert H. Eder....... 0 0 0/0 0/0
Orville R. Harrold... 619 762 3,559/0 0/0
P. Scott Conti....... 0 0 734/0 0/0
Robert J. Easton..... 0 0 1,895/0 0/0
Mary A. Tanona....... 0 0 90/0 0/0
(a) Based on the last sale price of the Common Stock on the date of exercise
minus the exercise price.
(b) Based on the difference between the exercise price of each grant and the
closing price of the Company's Common Stock on the AMEX on December 31,
2001, which was $6.75.
7
Performance Graph
Prepared by Burnham Securities Inc. for Providence and Worcester Railroad
Company.
5-Year Cumulative Total Return
Providence and Worcester Railroad Company,
S&P Railroad Index and S&P Industrial Index
[OBJECT OMITTED]
Fiscal Years Ended December 31
------------------------------
1996 1997 1998 1999 2000 2001
- --------------------- --------- ---------- --------- --------- --------- -------
PWX 100 234.9 161.3 105.1 95.7 92.7
S&P Railroads 100 110.2 99.7 82.0 86.2 100.1
S & P Industrials 100 128.9 170.0 211.7 175.6 153.3
- --------------------- --------- ---------- --------- --------- --------- -------
The S&P Industrial Index is calculated using 379 industrial companies in the S&P
500. The index assumes dividends are reinvested. The S&P Railroad Index includes
4 railroad operating companies in the S&P 500, also assuming dividends are
reinvested. Total returns assume $100 invested on Jan 1, 1997 with reinvestment
of dividends.
The Board of Directors recognizes that the market price of stock is influenced
by many factors, only one of which is issuer performance. The Company's stock
price may also be influenced by market perception, economic conditions and
government regulation. The stock price performance shown in the graph is not
necessarily an indicator of future price performance.
8
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The table set forth below reflects the only persons (including any "group"
as that term is used in Section 13(d)(3) of the Securities Exchange Act of 1934)
who, to the best of the Company's knowledge, were on March 1, 2002 the
beneficial owners of more than five percent of the Company's outstanding Common
Stock, $.50 par value, or Preferred Stock, $50 par value. Each share of the
Company's outstanding Preferred Stock is convertible at any time, at the option
of the holder, into one hundred shares of Common Stock of the Company. The
footnote to the table below sets forth the percentages of the outstanding Common
Stock which would be held by the indicated owners if such owners' Preferred
Stock were converted in whole into Common Stock.
Percent
Name and Address Number of Shares Owned of Class
- ---------------- ---------------------- --------
Robert H. and Linda Eder 842,742 (Common) 19.1%(a)
2441 S.E. Bahia Way 500 (Preferred) 77.5%
Stuart, Florida 34996
Steinberg Priest Capital Management 447,100 (Common) 10.1%
Company, Inc.
Michael A. Steinberg & Company, Inc.
Michael A. Steinberg
12 East 49th Street
New York, New York 10017
Keeley Asset Management Corp. 250,560 (Common) 5.7%
Kamco Performance Limited Partnership
Kamco Limited Partnership No. 1
401 South LaSalle Street
Chicago, Illinois 60605
Franklin Resources, Inc. 245,000 (Common) 5.6%
One Franklin Parkway
San Mateo, CA 94403-1906
(a) Assuming no conversion of Preferred Stock. If their Preferred Stock
were converted in whole to Common Stock, Mr. and Mrs. Eder would own 20.0% of
the outstanding Common Stock.
Of the shares owned by Mr. and Mrs. Eder, 768,162 shares of Common Stock
and 500 shares of Preferred Stock were held directly by Mr. Eder, and 74,580
shares of Common Stock were held directly by Mrs. Eder. By reason of their
ownership, Mr. and Mrs. Eder may be deemed to be "control persons" with respect
to the Company.
9
The following table reflects, as of March 1, 2002, the beneficial ownership
of the Common Stock of the Company by directors, nominees for directors, Named
Executive Officers and all officers and directors as a group.
Name Number Percentage
- ---- ------ ----------
Richard W. Anderson(a) ........................... 201,030 4.5%
Frank W. Barrett(b)............................... 1,150 *
P. Scott Conti(c)................................. 3,112 *
John H. Cronin(d)................................. 2,230 *
Robert J. Easton(e) .............................. 4,042 *
Robert H. Eder(f)................................. 892,742 20.0%
J. Joseph Garrahy(g).............................. 1,330 *
Orville R. Harrold(h)............................. 32,400 *
John J. Healy(i).................................. 1,540 *
Charles M. McCollam, Jr.(j)....................... 900 *
Merrill W. Sherman(k)............................. 710 *
Mary A. Tanona(l)................................. 616 *
All executive officers and directors as a group
(13 persons)(m)................................ 1,142,109 25.5%
* Less than one percent
(a) Includes 200,000 shares of common stock held by Massachusetts Capital
Resource Company of which Mr. Anderson disclaims beneficial ownership. Mr.
Anderson is Senior Vice President of Massachusetts Capital Resource
Company. Also includes 330 shares of Common Stock issuable under stock
options exercisable within 60 days.
(b) Includes 650 shares of Common Stock issuable under stock options
exercisable within 60 days.
(c) Includes 734 shares of Common Stock issuable under stock options
exercisable within 60 days.
(d) Includes 900 shares of Common Stock issuable under stock options
exercisable within 60 days.
(e) Includes 118 shares of Common Stock held by Mr. Easton's wife in her name
and 1,895 shares of Common Stock issuable under stock options exercisable
within 60 days.
(f) Mr. Eder's business address is 75 Hammond Street, Worcester, Massachusetts
01610. Includes 74,580 shares of Common Stock owned by Mr. Eder's wife and
assumes the conversion of the 500 shares of Preferred Stock owned by Mr.
Eder.
(g) Includes 660 shares of Common Stock issuable under stock options
exercisable within 60 days.
(h) Includes (i) 1,700 shares of Common Stock held by Mr. Harrold's wife, (ii)
3,200 shares of Common Stock held by a custodian in an individual
retirement account for the benefit of Mr. Harrold and (iii) 3,371 shares of
Common Stock issuable under stock options exercisable within 60 days.
(i) Includes 1,240 shares of Common Stock issuable under stock options
exercisable within 60 days.
(j) Includes 110 shares of Common Stock issuable under stock options
exercisable within 60 days.
(k) Includes 210 shares of Common Stock issuable under stock options
exercisable within 60 days.
(l) Includes 90 shares of Common Stock issuable under stock options exercisable
within 60 days.
(m) Includes 307 shares of Common Stock owned by an officer of the Company who
is not a Named Executive Officer, 50,000 shares of Common Stock issuable
upon conversion of Preferred Stock and 10,190 shares of Common Stock
issuable under stock options exercisable within 60 days.
10
COMPLIANCE WITH SECTION 16 (a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's officers, directors and persons who
beneficially own more than ten percent of a registered class of the Company's
equity securities to file reports of securities ownership and changes in such
ownership with the Securities and Exchange Commission. Officers, directors and
greater than ten-percent beneficial owners also are required by rules
promulgated by the Securities and Exchange Commission to furnish the Company
with copies of all Section 16(a) forms they file.
Based solely upon a review of the copies of such forms furnished to the
Company or written representations that no Form 5 filings were required, the
Company believes that during 2001 its officers, directors and greater than
ten-percent beneficial owners complied with all applicable Section 16(a) filing
requirements.
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors, upon recommendation of its Audit Committee composed
of independent non-employee directors, has appointed Deloitte & Touche LLP, who
acted as independent auditors of the accounts of the Company for 2001, as
independent auditors of the accounts of the Company for the year 2002, subject
to ratification by the holders of Common Stock and Preferred Stock of the
Company, voting as separate classes. The shareholders will be asked to ratify
the appointment. The Company has recently been advised by Deloitte & Touche LLP
that they have no direct financial interest or any material indirect financial
interest in the Company, nor have they had any connection during the past four
years with the Company in the capacity of promoter, underwriter, voting trustee,
director, officer or employee.
It is expected that a representative of Deloitte & Touche LLP will be
present at the annual meeting with the opportunity to make a statement if he/she
so desires, and that such representative will be available to respond to
appropriate questions.
Audit Fees
The aggregate fees billed by Deloitte & Touche LLP for professional
services rendered for the audit of the Company's annual financial statements for
the fiscal year ended December 31, 2001 and the reviews of interim financial
statements included in the Company's Quarterly Reports on Form 10-Q for such
year were $113,514 (including estimated fees for the 2001 audit of $99,000).
Financial Information Systems Design and Implementation Fees
Deloitte & Touche LLP rendered no professional services to the Company
during 2001 for financial information systems design and implementation.
All Other Fees
The aggregate fees billed by Deloitte & Touche LLP for non-audit services
rendered during 2001 were $22,179. These services were principally for audits of
the Company's employee retirement plans and review of its federal and state
income and franchise tax returns. The Audit Committee has determined that the
provision of such services is compatible with maintaining Deloitte & Touche
LLP's independence.
The Audit Committee and the Board of Directors recommend the shareholders
vote "FOR" such ratification.
11
PROPOSALS FOR 2003 ANNUAL MEETING
The 2003 annual meeting of the shareholders of the Company is scheduled to
be held April 30, 2003. If a shareholder intending to present a proposal at that
meeting wishes to have a proper proposal included in the Company's proxy
statement and form of proxy relating to the meeting, the shareholder must submit
the proposal to the Company not later than November 22, 2002.
OTHER MATTERS
No business other than that described above and/or set forth in the
attached Notice of Meeting is expected to come before the annual meeting, but
should any other matters requiring a vote of shareholders arise, including a
question of adjourning the meeting, the persons named in the accompanying proxy
will vote thereon according to their best judgment in the interests of the
Company. In the event any of the nominees for the office of director should
withdraw or otherwise become unavailable for reasons not presently known, the
persons named as proxies will vote for other persons in their place in what they
consider the best interests of the Company.
By Order of the Board of Directors
MARY A. TANONA
Secretary and General Counsel
PROVIDENCE AND WORCESTER RAILROAD COMPANY
Dated: March 22, 2002
12
Appendix A
Providence and Worcester Railroad Company
Audit Committee Charter
PURPOSE
- -------
The primary function of the Providence and Worcester Railroad Company
(hereinafter "Company") Audit Committee is to assist, and to report to, the
Board of Directors in fulfilling its oversight responsibilities by reviewing:
the financial reports provided by the Company to its stockholders and the
general public; the Company's systems of internal controls regarding finance and
accounting; and the Company's auditing, accounting and financial reporting
process. The Audit Committee's primary duties and responsibilities are to:
1. Serve as an independent and objective party to monitor the Company's
financial reporting process and internal control system.
2. Recommend for selection, evaluate, and where appropriate recommend
replacement of the external auditors, who are accountable to the Audit
Committee and the Board of Directors, and oversee their independence.
3. Provide an open avenue of communication among the external auditors,
financial and senior management, and the Board of Directors.
ORGANIZATION
- ------------
The Audit Committee shall be comprised of at least three directors as
determined by the Board of Directors, each of whom shall be independent
directors and free from any relationship that, in the opinion of the Board,
would interfere with the exercise of his/her independent judgment as a member of
the Committee. All members shall be able, or shall become able within a
reasonable period of time after appointment to the Audit Committee, to read and
understand financial statements, including balance sheets, income statements,
and cash flow statements. At least one member of the Committee shall, by reason
of experience and background, demonstrate a reasonably high level of financial
sophistication including without limitation, being or having been a chief
executive officer, chief financial officer or other senior officer with
financial oversight responsibilities.
RESPONSIBILITIES AND DUTIES
- ---------------------------
1. Meet with the external auditors and financial management to review the
scope of the audit for the current year and the audit procedures to be
utilized. At the conclusion of the audit year, review the results of
the audit, including any comments or recommendations of the external
auditors.
2. Appraise with the external auditors and management the adequacy and
effectiveness of the accounting and financial controls of the Company
and the appropriateness of the Company's accounting principles. Elicit
any recommendations for the improvement of such internal controls
and/or accounting principles.
3. Prior to the release of the Company's Annual Report to the
shareholders and the public, review the financial statements contained
therein with management and the external auditors to determine that
the disclosures and content of the financial statements are
satisfactory. In addition, any changes in accounting principles should
be discussed.
4. Discuss with the external auditors and management, via telephone if
appropriate, the quarterly financial statements of the Company before
the results are released to the shareholders and the public.
5. Inquire of management (including the General Counsel), and the
external auditor, about significant risks or exposures that could
financially impact the Company and assess the steps management has
taken to minimize such risks.
13
6. Investigate any matter brought to its attention within the scope of
its duties, with the power to retain outside counsel for this purpose
if, in its judgment, that is appropriate.
7. Submit the minutes of all meetings of the Committee to, or discuss the
matters communicated at each meeting with, the full Board of
Directors.
8. On an annual basis, request and receive from the external auditors a
formal written statement delineating all relationships between the
external auditors and the Company.
ADOPTION AND EFFECTIVE DATE
- ---------------------------
This Audit Committee Charter was adopted by vote of the Board of Directors
of the Providence and Worcester Railroad Company on April 26, 2000 and became
effective immediately.
ANNUAL REVIEW
- -------------
Once a year on or about the twelfth month following the adoption of the
Audit Committee Charter, the members of the Audit Committee shall review the
terms and scope of the Audit Committee Charter to determine the adequacy of the
Charter. Such review and any recommendations which follow thereafter shall be
reflected in the minutes of the meeting of the Audit Committee during which such
review was undertaken.
14
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PROXY
PROVIDENCE AND WORCESTER RAILROAD COMPANY
Annual Meeting of Shareholders - April 24, 2002
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned, whose signature appears on the reverse side of this proxy,
hereby appoints Robert H. Eder, Orville R. Harrold and Robert J. Easton,
attorneys each with power of substitution and with all the powers the
undersigned would possess if personally present, to vote the Preferred Stock of
Providence and Worcester Railroad Company held of record by the undersigned on
March 1, 2002 at the annual meeting of shareholders to be held on April 24, 2002
in Worcester, Massachusetts, and at any adjournments thereof, as follows:
- ------------- -------------
SEE REVERSE SEE REVERSE
SIDE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SIDE
- ------------- -------------
X Please mark votes as in this example.
This proxy when properly executed will be voted in the manner directed herein by
the undersigned stockholder. If no direction is made, this proxy will be voted
for Proposals 1 and 2.
FOR AGAINST ABSTAIN
----- ----- ------
1. ELECTION OF DIRECTORS: 2. PROPOSAL TO RATIFY THE
Nominees: (01) O. Harrold, (02) F. Barrett, APPOINTMENT OF DELOITTE &
(03) J. Cronin, (04) J. Garrahy, TOUCHE LLP as independent
(05) J. Healy, (06) C. McCollam,Jr. auditors of the Company for
2002.
FOR WITHHELD
-------- -------
3. In their discretion, upon
such other matters as may
properly come before the
meeting.
______________________________________
To withhold authority to vote for any
individual nominee(s), write the name of such
nominee(s) in the space provided above.
MARK HERE FOR ADDRESS CHANGE
AND NOTE AT LEFT
PLEASE DATE, SIGN AND RETURN THIS PROXY USING THE ENCLOSED
ENVELOPE.
(Sign exactly as your name appears hereon. When signing as
attorney, executor, administrator, trustee or guardian,
please, or in a corporate capacity, please give full title
as such. If a corporation, please sign full corporate name
by duly authorized officer. If a partnership, please sign in
partnership name by authorized person. In case of joint
tenants or multiple owners, each party must sign.)
Signature: Date: Signature: Date:
------------ ------ --------------- ----------
PROXY
PROVIDENCE AND WORCESTER RAILROAD COMPANY
Annual Meeting of Shareholders - April 24, 2002
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned, whose signature appears on the reverse side of this proxy,
hereby appoints Robert H. Eder, Orville R. Harrold and Robert J. Easton,
attorneys each with power of substitution and with all the powers the
undersigned would possess if personally present, to vote the Common Stock of
Providence and Worcester Railroad Company held of record by the undersigned on
March 1, 2002 at the annual meeting of shareholders to be held on April 24, 2002
in Worcester, Massachusetts, and at any adjournments thereof, as follows:
- ------------- -------------
SEE REVERSE SEE REVERSE
SIDE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SIDE
- ------------- -------------
X Please mark votes as in this example.
This proxy when properly executed will be voted in the manner directed herein by
the undersigned stockholder. If no direction is made, this proxy will be voted
for Proposals 1 and 2.
FOR AGAINST ABSTAIN
----- ----- ------
1. ELECTION OF DIRECTORS: 2. PROPOSAL TO RATIFY THE
Nominees:(01) Richard Anderson (2) Robert APPOINTMENT OF DELOITTE &
Eder (03) Merrill Sherman TOUCHE LLP as independent
auditors of the Company for
2002.
FOR WITHHELD
-------- -------
3. In their discretion, upon
such other matters as may
properly come before the
meeting.
______________________________________
To withhold authority to vote for any
individual nominee(s), write the name of such
nominee(s) in the space provided above.
MARK HERE FOR ADDRESS CHANGE
AND NOTE AT LEFT
PLEASE DATE, SIGN AND RETURN THIS PROXY USING THE ENCLOSED
ENVELOPE.
(Sign exactly as your name appears hereon. When signing as
attorney, executor, administrator, trustee or guardian,
please, or in a corporate capacity, please give full title
as such. If a corporation, please sign full corporate name
by duly authorized officer. If a partnership, please sign in
partnership name by authorized person. In case of joint
tenants or multiple owners, each party must sign.)
Signature: Date: Signature: Date:
------------ ------ --------------- ----------