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)
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PROVIDENCE AND WORCESTER RAILROAD COMPANY
75 Hammond Street
Worcester, Massachusetts 01610
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
April 29, 2009
PLEASE TAKE NOTICE that the 2009 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
29, 2009 at 10:00 o'clock A.M., local time, for the following purposes:
(1) To elect four 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; and
(2) 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 February 27, 2009 will be entitled to
vote.
By Order of the Board of Directors
MARIE A. ANGELINI
Secretary and General Counsel
PROVIDENCE AND WORCESTER RAILROAD COMPANY
Worcester, Massachusetts
March 27, 2009
Proxy cards for Common Stock and Preferred Stock of the Company will be
mailed separately. If you are the holder of record of both Common Stock and
Preferred Stock of the Company, you will receive two packages, each containing a
proxy card. Kindly fill in, date and sign the enclosed proxy card 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.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL
MEETING OF SHAREHOLDERS TO BE HELD ON APRIL 29, 2009.
The Company's Proxy Statement, sample proxy card and 2008 Annual Report on
Form 10-K are available at: www.edocumentview.com/pwx.
PROVIDENCE AND WORCESTER RAILROAD COMPANY
PROXY STATEMENT
Annual Meeting of Shareholders
April 29, 2009
SOLICITATION AND REVOCATION OF PROXIES
The accompanying proxy is solicited by the Board of Directors of Providence
and Worcester Railroad Company (the "Company") in connection with the annual
meeting of the shareholders to be held April 29, 2009; 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 at Providence and Worcester Railroad Company, 75 Hammond Street,
Worcester, Massachusetts 01610, Attn: 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 2008, including financial statements, this
proxy statement and the accompanying proxy or proxies are expected to be first
sent to shareholders on or about March 27, 2009. 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 February 27, 2009
will be entitled to vote at the meeting. Under the Company's charter, the
holders of the Company's Common Stock, par value $.50 per share, 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 (or the nearest larger whole number, if such fraction
is not a whole number). The holders of the Company's Preferred Stock, par value
$50 per share, 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 by proxy 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" with respect to
the election of any particular nominee for director 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 election to which it relates.
2
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. It is not currently anticipated that
any matter that might be the subject of a "broker non-vote" will come before the
annual meeting.
On the record date, there were 4,803,900 shares of the Company's Common
Stock and 640 shares of the Company's Preferred Stock outstanding and entitled
to vote at the meeting.
COMPOSITION OF THE BOARD OF DIRECTORS
The Board of Directors has determined that all of the current directors of
the Company, which include each of the nominees standing for election at the
2009 annual meeting, other than Robert H. Eder and P. Scott Conti, are
independent of the Company in that such nominees have no material relationship
with the Company either directly, or as a partner, shareholder or affiliate of
an organization that has a relationship with the Company. The Board of Directors
has made this determination based on the following:
o Other than Messrs. Eder and Conti, no nominee for director is an
officer or employee of the Company or its subsidiaries or affiliates;
o No nominee for director has an immediate family member who is an
officer of the Company or its subsidiaries or has any current or past
material relationship with the Company;
o No nominee for director, other than Messrs. Eder and Conti, has worked
for, consulted with, been retained by, or received anything of
substantial value from the Company aside from his compensation as a
director;
o No nominee for director is, or was within the past three years,
employed by the independent auditors for the Company;
o Other than Mr. Eder, no executive officer of the Company serves on the
Board of Directors of any corporation that employs a nominee for
director or a member of the immediate family of any nominee for
director;
o No nominee for director is an executive officer of any entity which
the Company's annual sales to or purchases from exceeded one percent
of either entity's annual revenues for the last fiscal year; and
o No nominee for director serves as a director, trustee, executive
officer or similar position of a charitable or non-profit organization
to which the Company or its subsidiaries made charitable contributions
or payments in fiscal year 2008 in excess of five percent of the
organization's consolidated gross revenues, or $200,000, whichever is
more, at any time during the past three years.
3
ELECTION OF DIRECTORS
At the annual meeting, four 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 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. The Board of Directors anticipates that each of the nominees listed
below will be available to serve if elected. 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 (61) President and Chief Investment Officer of Massachusetts 1998
Capital Resource Company; Senior Vice President
from 1986 through 2007
Robert H. Eder (76) Chairman of the Company 1965
John J. Healy (73) Director of Manufacturing Advancement Center and 1991
Director of Operations for the Massachusetts
Manufacturing Extension Partnership; President
of Worcester Affiliated Mfg. L.L.C. (manufacturing
consultant) from 1997 to 2003
Paul F. Titterton (33) Vice President and Executive Director of Fleet Portfolio 2008
Management of GATX Corporation; Vice President
Strategic Growth from 2007 to 2008; Vice President,
Fleet Portfolio Management from 2005 to 2007; and
Director, Fleet Portfolio Management from 2002 to 2005
Preferred Stock Director Nominees:
----------------------------------
Frank W. Barrett (69) Retired; Executive Vice President of TD Bank North, 1995
N.A. (formerly Banknorth Massachusetts)
from 2002 through April 2006
P. Scott Conti (51) President of the Company; Vice President Engineering 2005
from 1999 through 2005
J. Joseph Garrahy (78) President of J. Joseph Garrahy & Associates, Inc. (business 1992
consultants)
James C. Garvey (52) President and CEO of Flagship Bank & Trust Company 2005
(n/k/a a division of Peoples United Bank) from 2001
through February 9, 2009
Charles M. McCollam, Jr. (76) President of Bertha M. McCollam, Inc.; Vice President 1996
and Secretary of Kronholm & McCollam (insurance
firms) and President of McCollam Associates (consultants)
Craig M. Scott (45) Partner of Scott & Bush, Ltd.; partner of Duffy, Sweeney 2004
& Scott, Ltd. from September 1998 through January 2009
(a) Dates of directorships include directorships of the Company's predecessors.
Brief Biographies
Richard W. Anderson, Director. Mr. Anderson has been a Director of the
Company since 1998. He is President and Chief Investment Officer 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,
serving as Vice President through 1985, and Senior Vice President from 1986
through December 2007. Mr. Anderson is also a director of Valpey Fisher
Corporation, a company specializing in frequency control devices.
Frank W. Barrett, Director. Mr. Barrett has been a Director of the Company
since 1995. In April 2006, Mr. Barrett retired from TD Bank North, N.A. as
Executive Vice President after working in the banking industry for over forty
years.
P. Scott Conti, President, Chief Operating Officer and Director. Mr. Conti
became the Company's President and Chief Operating Officer in November 2005, and
was elected to the Company's Board of Directors in April 2006. Mr. Conti began
working at the Company in June 1988, serving as Engineering Manager through
December 1997, Chief Engineer from 1998 until March 1999, and Vice President
Engineering from March 1999 until he was appointed to his current position.
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 of
Directors and Chief Executive Officer since 1980. He is a graduate of Harvard
College and Harvard Law School. He is also (with his wife) beneficial or direct
owner of a majority of the stock of Capital Properties, Inc., a real estate
holding company, of which he is also President, Chief Executive Officer and
Chairman of the Board of Directors. 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.
James C. Garvey, Director. Mr. Garvey has been a Director of the Company
since 2005. Mr. Garvey was President and CEO of Worcester-based Flagship Bank &
Trust Company (n/k/a a division of Peoples United Bank) from 2001 through
February 9, 2009, after serving as its Executive Vice President since 1999.
John J. Healy, Director. Mr. Healy has been a Director of the Company since
1991. Mr. Healy is Director of the Manufacturing Advancement Center and Director
of Operations for the Massachusetts Manufacturing Extension Partnership, an
independent consulting organization dedicated to assisting small manufacturing
enterprises in becoming globally competitive. He was President of Worcester
Affiliated Mfg. L.L.C. (manufacturing consultants) from 1997 to 2003.
Charles M. McCollam, Jr., Director. Mr. McCollam has been a Director of the
Company since 1996. He is President of Bertha M. McCollam, Inc. and Vice
President and Secretary of Kronholm & McCollam (insurance firms), as well as
owner and President of McCollam Associates, a consulting firm in the State of
Connecticut. He was the Chief of Staff to a former governor of Connecticut.
Craig M. Scott, Director. Mr. Scott has been a Director of the Company
since 2004. He has been a partner of the Providence law firm of Scott & Bush,
Ltd. since February 2009 and was previously a partner of the Providence law firm
of Duffy, Sweeney & Scott, Ltd., where he served as Managing Partner during
2004-2005.
Paul F. Titterton, Director. Mr. Titterton has been a Director of the
Company since 2008. Mr. Titterton is Vice President and Executive Director of
Fleet Portfolio Management of GATX Corporation. He began working at GATX
Corporation in 1997, serving as Director, Fleet Portfolio Management from 2002
until July 2005, Vice President, Fleet Portfolio Management from July 2005 until
April 2007, and Vice President, Strategic Growth from April 2007 until he was
appointed to his current position in 2008.
4
Recommendation of Board of Directors. The Board of Directors recommends that the
shareholders vote FOR approval of the slate of four (4) common stock director
nominees and six (6) preferred stock director nominees set forth above.
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 has no
other committees. Both the Stock Option & Compensation Committee and the Audit
Committee have a written charter approved by the Board of Directors. A copy of
the Second Amended and Restated Charter of the Stock Option & Compensation
Committee and the Amended and Restated Audit Committee Charter are attached to
this Proxy Statement as Appendix A and Appendix B, respectively.
In accordance with the By-laws of the Company, the Executive Committee,
currently comprising P. Scott Conti, Chairman, John J. Healy and James C.
Garvey, 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 sale of surplus real estate and 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 Charles M.
McCollam, Jr., Chairman, Craig M. Scott and James C. Garvey, all of whom are
independent (as defined by The Nasdaq Stock Market ("NASDAQ") Marketplace Rules
and Securities and Exchange Commission ("SEC") rules), non-employee directors.
The Committee is charged with the broad responsibility of seeing that executive
officers are effectively compensated in a manner which is internally equitable
based on such officer's responsibilities and length of service to the Company.
Because the Company is a "controlled" company as defined in Rule 4350(c)(5) of
the NASDAQ Marketplace Rules, the Company is not subject to the NASDAQ
Marketplace Rules requirement that compensation of the chief executive officer
and all other officers be determined, or recommended to the Board of Directors
for determination, either by a compensation committee comprised of independent
directors or by a majority of the independent directors of its Board of
Directors. However, the Company's Stock Option & Compensation Committee charter
provides that the Stock Option & Compensation Committee shall approve and report
to the Board of Directors the executive compensation plan (including incentive
awards) of the Chairman/Chief Executive Officer, the President and any other
officer who is a member of the Board of Directors.
The Audit Committee of the Board of Directors, currently comprising J.
Joseph Garrahy, Chairman, Frank W. Barrett and Richard W. Anderson, all of whom
are independent as defined by the NASDAQ Marketplace Rules, is responsible for
providing independent, objective oversight of the Company's accounting functions
and internal controls, evaluating the qualifications and independence of,
appointing and overseeing the external auditors, providing an open avenue of
communication among the external auditors, management, and the Board of
Directors, and overseeing the system of disclosure controls and system of
internal controls regarding finance, accounting, legal compliance and ethics.
The Board of Directors has determined that all three members of the Audit
Committee satisfy the financial literacy requirements of the NASDAQ Marketplace
Rules and are independent as defined under the applicable NASDAQ Marketplace
Rules and applicable rules of the SEC. The Board of Directors has determined
that Frank W. Barrett meets the standards set forth in Item 407(d)(5)(ii) of SEC
Regulation S-K to qualify as an audit committee financial expert, as that term
is defined in Item 407(d)(5)(ii).
The Company does not have a written procedure for shareholders to make
nominations to the Board of Directors, but the Company does consider such
nominations. The holders of the Preferred Stock elect a majority of the members
of the Board of Directors. Mr. Eder, who owns a majority of the Preferred Stock
and who serves as the Chairman of the Board of Directors of the Company,
involves himself in the screening and selection of directors of the Company when
vacancies occur on the Board of Directors, and the Board of Directors has voted
to sit as a committee of the whole to consider any recommendations made by
shareholders and/or other directors of persons to be directors of the Company
and in determining whether to nominate any such recommended person for election
by the shareholders. Thus, the Board of Directors has determined that (i) the
Company shall not have a nominating committee; and (ii) the Board of Directors
shall consider the competencies and experience of such recommended person as
they relate to the business of the Company, together with such person's age,
reputation and ability to carry out the requirements to serve as a director of
the Company. In addition, because the Company is a "controlled" company as
defined in Rule 4350(c)(5) of the NASDAQ Marketplace Rules, the Company is not
5
subject to the NASDAQ Marketplace Rules requirement that a listed company adopt
a formal written charter or board resolution addressing the nominations process.
The Board of Directors held six meetings, the Audit Committee held six
meetings, the Stock Option & Compensation Committee held two meetings and the
Executive Committee held one meeting during the fiscal year ended December 31,
2008. All directors attended at least 75% of all meetings of the Board of
Directors and the committee(s) on which each such director serves. The Board of
Directors has adopted a policy that requires members of the Board of Directors
to make every effort to attend each annual shareholders meeting. All then
current members of the Board of Directors attended the 2008 annual shareholders
meeting with the sole exception of John J. Healy.
Code of Ethics
The Company has adopted a Code of Ethics applicable to all directors,
officers and employees, which meets the requirements of a "code of ethics" as
defined in Item 406 of Regulation S-K.
Shareholder Communications
Shareholders of the Company may communicate directly with members of the
Board of Directors by writing directly to those individuals at the following
address: Providence and Worcester Railroad Company, 75 Hammond Street,
Worcester, Massachusetts 01610, and the Company shall forward, and not
intentionally screen, any mail received at the Company's corporate office that
is sent directly to an individual director or to the directors generally unless
the Company believes that the communication may pose a security risk. The Board
of Directors sits as a committee of the whole to address any inquiries made by
shareholders.
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 appoint, compensate, retain and oversee any
independent auditor engaged for the purpose of preparing or issuing an audit
report or performing other audit, review or attest services, and otherwise to
monitor and oversee these processes.
The responsibilities of the Audit Committee include engaging an accounting
firm 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, financial and internal controls and changes in accounting
principles, and the auditor's performance and independence. The Audit Committee
also oversees the receipt and processing of complaints by employees related to
accounting, internal controls or audit-related matters and reviews related-party
transactions.
In connection with these responsibilities, the Audit Committee reviewed and
discussed the audited financial statements for the fiscal year ended December
31, 2008 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. 114. 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
Richard W. Anderson
6
Compensation of Directors
The Board of Directors, upon recommendation of the Stock Option &
Compensation Committee, is responsible for determining compensation of the
directors. During the fiscal year ended December 31, 2008, 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 (other than the chairman of each
Committee, who received $350) for each attended meeting of such committee.
During the month of January of each year, directors of the Company who were
serving as such on the preceding December 31 and who 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 closing market price
of such shares 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.
On January 2, 2008, each director of the Company who was serving as such on
December 31, 2007 and was not a full-time employee of the Company was granted
options for the purchase of 100 shares of Common Stock of the Company, plus
options for an additional ten shares for each full year of service to the
Company. The exercise price for such options is $16.72.
The following table provides information regarding the compensation paid or
accrued by each individual who was a director during the 2008 fiscal year other
than the Chairman and the President.
- ------------------------------ ----------- --------------- ----------- ------------- ----------------- ----------------
Name Total Fees earned Stock Option Non-Stock All Other
($) or paid in Awards Awards ($) Incentive Plan Compensation
cash ($) ($) (a) Compensation ($)
- ------------------------------ ----------- --------------- ----------- ------------- ----------------- ----------------
- ------------------------------ ----------- --------------- ----------- ------------- ----------------- ----------------
Richard W. Anderson 11,505 9,500 N/A 2,005 N/A 0
- ------------------------------ ----------- --------------- ----------- ------------- ----------------- ----------------
- ------------------------------ ----------- --------------- ----------- ------------- ----------------- ----------------
Frank W. Barrett 11,521 9,200 N/A 2,321 N/A 0
- ------------------------------ ----------- --------------- ----------- ------------- ----------------- ----------------
- ------------------------------ ----------- --------------- ----------- ------------- ----------------- ----------------
P. Scott Conti (b), (c) (b) N/A N/A (c) N/A 0
- ------------------------------ ----------- --------------- ----------- ------------- ----------------- ----------------
- ------------------------------ ----------- --------------- ----------- ------------- ----------------- ----------------
Robert H. Eder (b) (b) N/A N/A N/A 0
- ------------------------------ ----------- --------------- ----------- ------------- ----------------- ----------------
- ------------------------------ ----------- --------------- ----------- ------------- ----------------- ----------------
J. Joseph Garrahy 14,988 12,350 N/A 2,638 N/A 0
- ------------------------------ ----------- --------------- ----------- ------------- ----------------- ----------------
- ------------------------------ ----------- --------------- ----------- ------------- ----------------- ----------------
James C. Garvey 5,716 4,450 N/A 1,266 N/A 0
- ------------------------------ ----------- --------------- ----------- ------------- ----------------- ----------------
- ------------------------------ ----------- --------------- ----------- ------------- ----------------- ----------------
John J. Healy 11,943 9,200 N/A 2,743 N/A 0
- ------------------------------ ----------- --------------- ----------- ------------- ----------------- ----------------
- ------------------------------ ----------- --------------- ----------- ------------- ----------------- ----------------
Charles M. McCollam, Jr. 11,215 9,000 N/A 2,216 N/A 0
- ------------------------------ ----------- --------------- ----------- ------------- ----------------- ----------------
- ------------------------------ ----------- --------------- ----------- ------------- ----------------- ----------------
Craig M. Scott 7,072 5,700 N/A 1,372 N/A 0
- ------------------------------ ----------- --------------- ----------- ------------- ----------------- ----------------
- ------------------------------ ----------- --------------- ----------- ------------- ----------------- ----------------
Paul F. Titterton 2,500(d) 2,500(d) N/A 0 N/A 0
- ------------------------------ ----------- --------------- ----------- ------------- ----------------- ----------------
(a) As of 12/31/08, each director had the following number of options
outstanding:
Richard W. Anderson - 1,350 shares
Frank Barrett - 1,620 shares
P. Scott Conti - 1,604 shares
J. Joseph Garrahy - 940 shares
James C. Garvey - 230 shares
John J. Healy - 1,980 shares
Charles M. McCollam, Jr. - 410 shares
Craig M. Scott - 360 shares
Paul F. Titterton - 0 shares
(b) The Company does not pay director fees to directors who are full-time
employees of the Company.
(c) Mr. Conti is awarded options in his capacity as President under the
Company's Non-Qualified Stock Option Plan, which options are disclosed in
the table under the section entitled Grants of Plan Based Awards set forth
herein.
(d) The terms of a Stock Purchase Agreement by and between the Company and GATX
Corporation ("GATX") dated January 10, 2008 provide that GATX is entitled
to one seat on the Company's Board of Directors. Directors fees payable to
Mr. Titterton, GATX's current designee, are paid to GATX.
7
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 February 27, 2009, 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 owner's 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) 17.5%(a)
130 Sunrise Avenue 500 (Preferred) 78.1%
Palm Beach, Florida 33480
Steinberg Asset Management, LLC 519,300 (Common) 10.8%
Michael A. Steinberg
12 East 49th Street
Suite 1202
New York, New York 10017
Keeley Asset Management Corp. 406,400 (Common) 8.5%
401 South LaSalle Street
Chicago, Illinois 60605
(a) Assuming no conversion of Preferred Stock. If their Preferred Stock
were converted in whole to Common Stock, Mr. and Mrs. Eder would own 18.4% 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.
8
The following table reflects, as of February 27, 2009, the beneficial
ownership of the Common Stock of the Company by directors, Named Executive
Officers and all officers and directors as a group.
Name Number Percentage
- ---- ------ ----------
Richard W. Anderson(a)......................... 202,150 4.2%
Marie A. Angelini(b)........................... 1,084 *
Frank W. Barrett(c)............................ 2,230 *
P. Scott Conti(d).............................. 8,896 *
Robert J. Easton(e)............................ 7,883 *
Robert H. Eder(f).............................. 892,742 18.3%
David F. Fitzgerald(g)......................... 6,519 *
J. Joseph Garrahy(h)........................... 1,340 *
James C. Garvey(i)............................. 530 *
John J. Healy(j)............................... 3,150 *
Charles M. McCollam, Jr.(k).................... 4,160 *
Frank K. Rogers(l)............................. 2,999 *
Craig M. Scott(m).............................. 1,360 *
Paul F. Titterton(n)........................... 239,523 4.9%
All executive officers and directors as a group
(14 persons)(o)............................. 1,374,566 28.2%
* 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 President and Chief Investment Officer of Massachusetts Capital
Resource Company. Also includes 1,350 shares of Common Stock issuable under
stock options exercisable within 60 days.
(b) Includes 196 shares of Common Stock issuable under stock options
exercisable within 60 days.
(c) Includes 1,620 shares of Common Stock issuable under stock options
exercisable within 60 days.
(d) Includes 1,604 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 3,386 shares of Common Stock issuable under stock options exercisable
within 60 days.
(f) Includes 74,580 shares of Common Stock held by Mr. Eder's wife in her name
and assumes the conversion of the 500 shares of Preferred Stock owned by
Mr. Eder.
(g) Includes 20 shares of Common Stock held by Mr. Fitzgerald's wife in her
name and 3,265 shares of Common Stock issuable under stock options
exercisable within 60 days.
(h) Includes 940 shares of Common Stock issuable under stock options
exercisable within 60 days.
(i) Includes 230 shares of Common Stock issuable under stock options
exercisable within 60 days.
(j) Includes 1,980 shares of Common Stock issuable under stock options
exercisable within 60 days.
(k) Includes 410 shares of Common Stock issuable under stock options
exercisable within 60 days.
(l) Includes 1,544 shares of Common Stock issuable under stock options
exercisable within 60 days.
(m) Includes 360 shares of Common Stock issuable under stock options
exercisable within 60 days.
(n) Includes 239,523 shares of Common Stock held by GATX Corporation of which
Mr. Titterton disclaims beneficial ownership. Mr. Titterton is Vice
President and Executive Director of Fleet Portfolio Management of GATX
Corporation.
(o) Includes 50,000 shares of Common Stock issuable upon conversion of
Preferred Stock and 16,885 shares of Common Stock issuable under stock
options exercisable within 60 days.
9
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 ("SEC"). Officers,
directors and greater than ten-percent beneficial owners also are required by
rules promulgated by the SEC 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 2008 its officers, directors and greater than ten-
percent beneficial owners complied with all applicable Section 16(a) filing
requirements.
COMPENSATION DISCUSSION & ANALYSIS
The Stock Option & Compensation Committee is charged with the
responsibility of setting the compensation for each of the Chairman/Chief
Executive Officer (the "Chairman") of the Company, the President/Chief Operating
Officer (the "President") of the Company, and any other officer who is also a
member of the Board of Directors, and consulting with the Chairman and the
President with respect to the compensation of other executive officers. Our
overall philosophy in connection with compensation is to provide a compensation
package which attracts and retains qualified people. We also seek to obtain
internal equity within the compensation structure by providing appropriate
salary levels to reflect the responsibilities of individual executives.
Historically, we have adjusted executive compensation each year semi-annually by
an amount approximately equal to the increase in the cost of living over the
previous six-month period, which has the effect of rewarding executives for
longevity with the Company. We do not give significant weight to the
compensation paid by comparable railroads as there are few similar railroads in
our region.
We have from time to time paid bonuses in connection with specific
situations requiring extraordinary effort. However, there is no formal plan. We
have not awarded a bonus to the Chairman since 1999 because we believe that his
stock ownership position sufficiently encourages him to perform in a way that
will maximize value to the Company and its shareholders.
To further align the interests of the executives of the Company with
shareholders, we have a Non-Qualified Stock Option Plan in which all of the
executives, other than the Chairman, may participate. The plan is designed to
make awards based upon compensation and longevity and, therefore, to encourage
executives to remain with the Company.
We have not had, and do not expect to have, employment contracts with any
of our executives. We do have change-in-control agreements, including a
severance policy, for all executives other than the Chairman. This plan
generally provides higher benefits for longer-tenured executives. In lieu of any
defined benefit or 401(k) plans, we contribute to each executive's Simplified
Employee Pension plan ("SEP") which is available to all non-union employees on a
non-discriminatory basis.
The Chairman is not subject to a change-in-control agreement. However, we
pay the insurance premiums on a life insurance policy for the Chairman which
provides a death benefit of $1,600,000. With the exception of this policy, all
other executive benefits are made available to all non-union employees on a
non-discriminatory basis.
Salaries
The Chairman's compensation was set many years ago and has been adjusted
from time to time to reflect increases in the cost of living. The President's
compensation was set in early 2006 and was increased in November 2007 following
his completion of approximately two (2) years as President and discussions
between the Stock Option & Compensation Committee and the President. We consult
with the Chairman and the President from time to time with respect to the
compensation of other executives. In general, their philosophy, which is shared
by us, is that the compensation of other executives should relate to their
responsibilities attendant to their offices and their lengths of service with
the Company. Accordingly, we believe that the Chairman's salary should represent
the highest salary paid and the salaries of other executive officers should be
less than the Chairman's salary and should be governed by their levels of
responsibility within the Company. The President of the Company, therefore, is
10
the next highest paid employee. Similarly, other employees are paid in
accordance with what the Chairman and the President perceive to be the other
executive officers' responsibilities and we concur with their assessment. We
reward length of service through annual increases in amounts approximate to
increases in the cost of living.
Bonus Plan
We maintain no formal bonus plan and, except for bonuses in de minimus
amounts paid to certain key employees in connection with the Company's secondary
public stock offerings in 1998 and a bonus to the Chairman in 1999, we have not
paid any bonuses to any employees.
Stock Option Plan
The Company maintains a Non-Qualified Stock Option Plan (the "Plan") for
its directors and executives, other than the Chairman. Pursuant to the terms of
the Plan, all employees of the Company who are not subject to a collective
bargaining agreement and have been an employee of the Company for more than one
year are eligible to participate in the Plan. Historically, we have allotted
seven thousand shares per year to be allocated among eligible employee
participants. By keeping the number constant, we eliminate year to year swings
and provide a consistent long-term incentive. Pursuant to the terms of the Plan,
each employee participant's compensation is multiplied by a longevity factor
which is 1.5 for executives with more than five years' service increasing
ratably, in five year increments, up to 3.5 for executives with more than 25
years' service. The sum of all of the products computed for all employee
participants then becomes the denominator. Each employee participant is then
awarded the number of options equal to the product of (a) the total shares
allocated for such year, and (b) the ratio that his/her compensation multiplied
by his/her longevity factor bears to the products for all employee participants.
The purchase price per share for options granted under the Plan is the closing
market price of such shares on the last business day of the preceding year, and
the term of each option is ten years in accordance with the Plan. Options may
not be exercised for the first six months following the grant date and,
thereafter, are exercisable at any time. Upon termination for any reason, the
options must be exercised within six months of the date of termination. As with
our other compensation, the option awards are designed to encourage longevity
with the Company.
Other Agreements
The Company has entered into change-in-control agreements with all its
executives, other than the Chairman, and all other management employees. The
terms of change-in-control agreements for executives are identical to those of
all other management employees. Under the terms of the change-in-control
agreements, a severance award is payable upon the termination of an employee
other than for cause following an event giving rise to a change-in-control and
upon the resignation of an executive following a significant reduction of such
executive's base salary occurring within two years following a
change-in-control. The amount of the severance award payable under the
change-in-control agreements is a function of salary and length of service. An
executive is entitled to a one-time severance payment equal to his/her then
current annual base salary if at the time of the event giving rise to the
change-in-control, he/she has been employed by the Company for fewer than ten
years. If employed by the Company for a period of ten through nineteen years,
the executive is entitled to receive a severance payment equal to one and
one-half times the executive's then current salary; and if employed by the
Company for a period of twenty through twenty-nine years, the executive is
entitled to a severance award of two times the executive's then current salary.
Finally, if an executive is employed by the Company for a period of thirty years
or more, the change-in-control agreements provide for a severance award of two
and one-half times the executive's then current salary. Notwithstanding the
above, no severance benefit is payable under the change-in-control agreements to
any executive who is a beneficial owner, directly or indirectly, of securities
which have the right to elect a majority of the Board of Directors or 50% of the
voting power of the entire capital stock of the Company.
In addition to the benefits outlined above, all management employees are
entitled to life and disability coverage under policies of insurance paid by the
Company. Life insurance benefits are in the amount of two times annual salary to
a maximum of $50,000 and disability benefits are equal to 60% of annual salary
up to a maximum of $8,000 per month.
11
Other than the life insurance benefit due Mr. Eder's designated beneficiary
upon death and the benefits described above, all benefits are available to both
our executive employees and other non-union employees on a non-discriminatory
basis.
STOCK OPTION & COMPENSATION COMMITTEE REPORT
The Stock Option & Compensation Committee has reviewed and discussed with
management the Compensation Discussion & Analysis included above. Based on these
reviews and discussions, the Stock Option & Compensation Committee has
recommended to the Board of Directors that the Compensation Discussion &
Analysis contained herein be included in the Company's Proxy Statement for the
fiscal year ended December 31, 2008 for filing with the SEC.
Stock Option & Compensation Committee:
Charles M. McCollam, Jr., Chairman
Craig M. Scott
James C. Garvey
12
EXECUTIVE COMPENSATION
Summary Compensation Table
The following Summary Compensation Table provides information regarding the
total compensation paid or accrued by the Company to each of its Chief Executive
Officer, Chief Financial Officer and the three most highly- compensated
executive officers other than the CEO and CFO who earned more than $100,000 in
total compensation during the fiscal year ended December 31, 2008 and were
employed by the Company on December 31, 2008 (the "Named Executive Officers").
- ------------------------- ------ ---------- ------- -------- -------- ---------- ------------ ----------- ----------
Name Year Salary Bonus Stock Option Non-Equity Change in All Other Total
and ($) ($) Awards Awards Incentive Pension Compen- ($)
Principal ($) ($) Plan Value and sation
Position (a) Compen- Non-Qualified ($)
sation Deferred
($) Compen-sation
Earnings
($)
- ------------------------- ------ ---------- ------- -------- -------- ---------- ------------ ----------- ----------
- ------------------------- ------ ---------- ------- -------- -------- ---------- ------------ ----------- ----------
Robert H. Eder, 2008 419,731 0 0 0(b) 0 0 37,218(c) 456,949
Chairman & CEO 2007 398,468 0 0 0(b) 0 0 40,535(d) 439,003
2006 388,179 0 0 0(b) 0 0 87,442(e) 475,621
- ------------------------- ------ ---------- ------- -------- -------- ---------- ------------ ----------- ----------
- ------------------------- ------ ---------- ------- -------- -------- ---------- ------------ ----------- ----------
P. Scott Conti, 2008 217,886 0 0 4,906 0 0 14,937(f) 237,729
President & Chief 2007 186,925 0 0 6,332 0 0 12,222(f) 205,479
Operating Officer 2006 175,949 0 0 4,098 0 0 12,120(f) 192,167
- ------------------------- ------ ---------- ------- -------- -------- ---------- ------------ ----------- ----------
- ------------------------- ------ ---------- ------- -------- -------- ---------- ------------ ----------- ----------
Robert J. Easton, 2008 174,133 0 0 5,264 0 0 11,944(f) 191,341
Treasurer 2007 165,312 0 0 7,037 0 0 10,929(f) 183,278
2006 160,685 0 0 4,494 0 0 11,224(f) 176,403
- ------------------------- ------ ---------- ------- -------- -------- ---------- ------------ ----------- ----------
- ------------------------- ------ ---------- ------- -------- -------- ---------- ------------ ----------- ----------
David F. Fitzgerald, 2008 145,881 0 0 5,148 0 0 10,449(f) 161,478
Vice President 2007 140,933 0 0 6,735 0 0 9,161(f) 156,829
2006 136,205 0 0 4,954 0 0 9,194(f) 150,353
- ------------------------- ------ ---------- ------- -------- -------- ---------- ------------ ----------- ----------
- ------------------------- ------ ---------- ------- -------- -------- ---------- ------------ ----------- ----------
Frank K. Rogers, 2008 145,698 0 0 2,870 0 0 10,107(f) 158,675
Vice President 2007 134,245 0 0 3,583 0 0 8,945(f) 146,773
2006 123,053 0 0 2,418 0 0 8,558(f) 134,029
- ------------------------- ------ ---------- ------- -------- -------- ---------- ------------ ----------- ----------
(a) The amounts reflect the dollar amount recognized for financial statement
reporting purposes for the fiscal year ended December 31, 2008, in
accordance with SFAS 123R.
(b) Under the terms of the Company's Non-Qualified Stock Option Plan, Mr. Eder
is not eligible to receive a grant of stock options.
(c) Includes $15,525 paid directly to Mr. Eder's retirement account under the
Company's SEP, $15,625 in life insurance premiums for 2008, and $6,068 in
car insurance and parking paid on Mr. Eder's behalf.
(d) Includes $14,625 paid directly to Mr. Eder's retirement account under the
Company's SEP, $21,657 in life insurance premiums for 2007, and $4,253 in
car insurance paid on Mr. Eder's behalf.
(e) Includes $14,850 paid directly to Mr. Eder's retirement account under the
Company's SEP, $27,433 in life insurance premiums for 2006, $40,918 for
purchase of a vehicle for use by Mr. Eder and $4,241 in car insurance and
parking paid on Mr. Eder's behalf.
(f) Reflects amounts paid directly to officer's retirement account under the
Company's SEP.
13
Grants of Plan Based Awards
The following table provides information on all plan-based awards by the
Company in 2008 to each Named Executive Officer.
**** fix this table
- ------------------------------------------------------------------------------------------
Name Grant Date All Other Option Exercise or Base Grant Date Fair Value
Awards: Number of Price of Option of Stock and Option
Securities Awards ($/Sh) Awards($) (a)
Underlying Options
(#)
- ------------------------------------------------------------------------------------------
Robert H. N/A N/A N/A N/A
Eder (b)
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
P. Scott 01/02/08 465 16.72 4,906
Conti
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
Robert J. 01/02/08 499 16.72 5,264
Easton
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
David F. 01/02/08 488 16.72 5,148
Fitzgerald
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
Frank K. 01/02/08 272 16.72 2,870
Rogers
- ------------------------------------------------------------------------------------------
(a) Amounts represent fair value of options and were estimated to be $10.55 per
share as of the date of grant using Black-Scholes options-pricing model
with the following weighted average assumptions: expected volatility of
75%; expected life 6 years; and risk free interest rate of 3.7%. Dividends
at the rate of 0.96% per share were assumed for purposes of this estimate.
(b) Under the terms of the Company's Non-Qualified Stock Option Plan, Mr. Eder
is not eligible to receive a grant of stock options.
14
Outstanding Equity Awards at Fiscal Year End
The following table provides information on all outstanding equity awards
held by each of the Named Executive Officers as of December 31, 2008.
- -------------------------- ------------------------------ ----------------------------- -----------------------------
Name Number of securities Option exercise price ($) Option expiration date
underlying unexercised
options (#) exercisable
- -------------------------- ------------------------------ ----------------------------- -----------------------------
- -------------------------- ------------------------------ ----------------------------- -----------------------------
Robert H. Eder(a) N/A N/A N/A
- -------------------------- ------------------------------ ----------------------------- -----------------------------
- -------------------------- ------------------------------ ----------------------------- -----------------------------
P. Scott Conti 316 13.490 01/03/15(b)
383 14.900 01/03/16(c)
440 19.500 01/02/17(d)
465 16.720 01/02/18(e)
- -------------------------- ------------------------------ ----------------------------- -----------------------------
- -------------------------- ------------------------------ ----------------------------- -----------------------------
Robert J. Easton 301 8.000 01/03/10(f)
281 7.125 01/02/11(g)
356 6.750 01/02/12(h)
353 7.750 01/02/13(i)
333 8.890 01/02/14(j)
354 13.490 01/03/15(b)
420 14.900 01/03/16(c)
489 19.500 01/02/17(d)
499 16.720 01/02/18(e)
- -------------------------- ------------------------------ ----------------------------- -----------------------------
- -------------------------- ------------------------------ ----------------------------- -----------------------------
David F. Fitzgerald 379 8.000 01/03/10(f)
364 7.125 01/02/11(g)
369 7.750 01/02/13(i)
357 8.890 01/02/14(j)
377 13.490 01/03/15(b)
463 14.900 01/03/16(c)
468 19.500 01/02/17(d)
488 16.720 01/02/18(e)
- -------------------------- ------------------------------ ----------------------------- -----------------------------
- -------------------------- ------------------------------ ----------------------------- -----------------------------
Frank K. Rogers 86 8.000 01/03/10(f)
127 7.125 01/02/11(g)
134 6.750 01/02/12(h)
136 7.750 01/02/13(i)
130 8.890 01/02/14(j)
184 13.490 01/03/15(b)
226 14.900 01/03/16(c)
249 19.500 01/02/17(d)
272 16.720 01/02/18(e)
- -------------------------- ------------------------------ ----------------------------- -----------------------------
(a) Under the terms of the Company's Non-Qualified Stock Option Plan, Mr. Eder
is not eligible to receive a grant of stock options.
(b) Vested January 3, 2005
(c) Vested January 3, 2006
(d) Vested January 2, 2007
(e) Vested January 2, 2008
(f) Vested January 3, 2000
(g) Vested January 3, 2001
(h) Vested January 2, 2002
(i) Vested January 2, 2003
(j) Vested January 2, 2004
15
Options Exercised and Stock Vested
The following table provides information on all exercises of options by the
Named Executive Officers during the Company's 2008 fiscal year.
- --------------------------------------------------------------------------------
Option Awards
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Name Number of Shares Acquired Value Realized on Exercise ($)
on Exercise (#)
- --------------------------------------------------------------------------------
Robert H. Eder (a) N/A N/A
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
P. Scott Conti 0 0
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Robert J. Easton 0 0
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
David F. Fitzgerald 604 5,918
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Frank K. Rogers 0 0
- --------------------------------------------------------------------------------
(a) Under the terms of the Company's Non-Qualified Stock Option Plan, Mr. Eder
is not eligible to receive a grant of stock options.
Pension Benefits
The Company makes payments directly to the retirement accounts of
management employees (including the Named Executive Officers) under the
Company's Simplified Employee Pension plan ("SEP"), a qualified defined
contribution plan.
Nonqualified Deferred Compensation Plans
There are no nonqualified deferred compensation plans for the Company's
management employees (including the Named Executive Officers).
Potential Payments Upon Termination or Change-in-Control
As of December 31, 2008, the Company was not obligated to any member of
management for any payments or benefits (including, without limitation,
insurance benefits for health, life, disability or any other matter,
outplacement services, tax gross ups or any other payment or benefit) upon the
event of termination from the Company, whether upon the basis of retirement
(including voluntary retirement, early retirement or retirement upon attaining
the age on which full retirement benefits are payable), involuntary termination
(including termination for cause, not for cause and for good reason, other than
change-in-control), disability or death.
In the event that a management employee's position with the Company is
terminated other than for cause as a result of a change-in-control of the
Company or a management employee resigns following a significant reduction of
such employee's base salary occurring within two years following a
change-in-control, such employee is eligible to receive a payment, as detailed
below. A change-in-control is deemed to have occurred upon (1) the occurrence of
a change in the beneficial ownership directly or indirectly of securities
representing more than 50% of the voting power of the Company's stock, (2) the
sale of all or substantially all of the Company's assets, (3) a transaction in
which the Company is not the surviving entity, or (4) complete liquidation of
the Company (each, a "Change-in-Control Event"). In such case the management
employee is entitled to a lump sum severance payment within two
16
years of the effective date of a Change-in-Control Event to be determined as of
the date of termination, as adjusted based on the Change-in-Control Event and
the date of termination, as follows:
Years of Service at
--------------------
Date of Termination Severance Benefit
------------------- -----------------
0-9 Years One (1) times Annual Base Salary
10-19 Years One and one-half (1-1/2) times Annual Base Salary
20-29 Years Two (2) times Annual Base Salary
30 Years or More Two and one-half (2-1/2) times Annual Base Salary
Annual Base Salary means the management employee's annual rate of base pay
in effect immediately prior to the effective date of the Change-in-Control
Event.
The management employee is entitled to a pro rata portion of the Severance
Benefit if the management employee is terminated other than for cause by the
Company at any time within two (2) years following a Change-in-Control Event.
In accordance with the terms set forth above, the following payments would
have been due the following management employees as of December 31, 2008 had a
Change-in-Control Event taken place.
P. Scott Conti - $435,772 (2 X Annual Base Salary)
Robert J. Easton - $348,266 (2 X Annual Base Salary)
Robert H. Eder - N/A
David F. Fitzgerald - $364,703 (2.5 X Annual Base Salary)
Frank K. Rogers - $218,547 (1.5 X Annual Base Salary)
Under the terms of the life insurance policy for the benefit of Mr. Eder,
Mr. Eder's designated beneficiary would have been entitled to receive $1,600,000
had a termination of his employment occurred on December 31, 2008 as a result of
his death.
TRANSACTIONS WITH MANAGEMENT
Potential conflicts of interest and related party transactions are referred
by the Board of Directors to the Audit Committee for review and approval. In
reviewing and evaluating potential conflicts of interest and related party
transactions, the Audit Committee uses applicable NASDAQ Marketplace Rules and
SEC rules as a guide.
INDEPENDENT PUBLIC ACCOUNTANTS
The Audit Committee of the Board of Directors has appointed Deloitte &
Touche LLP, who acted as independent auditors of the accounts of the Company for
2008, as independent auditors of the accounts of the Company for the year 2009.
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.
17
Audit Fees and Services
Aggregate fees for professional services rendered for the Company by
Deloitte & Touche LLP as of or for the fiscal years ended December 31, 2008 and
2007 are set forth below. The aggregate fees included in the Audit category are
billed for the fiscal years for the audit of the Company's annual financial
statements and review of financial statements or engagements. The aggregate fees
included in each of the other categories are fees billed in the fiscal years.
Fiscal Year 2008 Fiscal Year 2007
---------------- ----------------
Audit Fees $190,000 $181,500
Tax Fees $6,615 $6,300
All Other Fees --- ---
Audit Fees for the fiscal years ended December 31, 2008 and 2007 were for
professional services rendered for the audits of the financial statements of the
Company, quarterly review of the financial statements included in the Company's
Quarterly Reports on Form 10-Q, consents, compliance with Section 404 of the
Sarbanes-Oxley Act and other assistance required to complete the year-end audit
of the financial statements.
Tax Fees as of the fiscal years ended December 31, 2008 and 2007 were for
services rendered for review of tax returns and tax advice.
All Other Fees. As of the fiscal years ended December 31, 2008 and 2007,
there were no other fees.
The Audit Committee has determined that the provision of the above services
is compatible with maintaining Deloitte & Touche LLP's independence.
Policy on Audit Committee Pre-Approval. The Audit Committee pre-approves
all audit and non-audit services provided by the independent accountants prior
to the engagement of the independent accountants with respect to such services.
Unless a type of service to be provided by the independent auditor has received
general pre-approval, it will require specific pre-approval by the Audit
Committee. Any proposed services exceeding pre-approved cost levels require
specific pre-approval by the Audit Committee. The Audit Committee may delegate
pre-approval authority to one or more of its members and that member shall
report any pre-approval decisions to the Audit Committee at its next scheduled
meeting.
The Audit Committee has engaged Deloitte & Touche LLP for the calendar year
ending December 31, 2009.
PROPOSALS FOR 2010 ANNUAL MEETING
The 2010 annual meeting of the shareholders of the Company is scheduled to
be held on April 28, 2010. 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 14, 2009.
18
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 to choose not to fill the seat or to vote for
other persons in their place in what they consider the best interests of the
Company.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL
MEETING OF SHAREHOLDERS TO BE HELD ON APRIL 29, 2009.
The Company's Proxy Statement, sample proxy card and 2008 Annual Report on
Form 10-K are available at: www.edocumentview.com/pwx.
By Order of the Board of Directors,
MARIE A. ANGELINI
Secretary and General Counsel
PROVIDENCE AND WORCESTER RAILROAD COMPANY
Dated: March 27, 2009
19
Appendix A
Second Amended and Restated Charter of the Stock Option & Compensation Committee
of the Board of Directors of Providence and Worcester Railroad Company
The Board of Directors of Providence and Worcester Railroad Company
(the "Company") has constituted and established a Stock Option & Compensation
Committee (the "Committee") with authority, responsibility, and specific duties
as described in this Charter (the "Charter").
COMPOSITION
- -----------
The Committee shall consist of directors who are independent of
management in accordance with applicable Securities and Exchange Commission
("SEC") rules and the listing standards of the NASDAQ Stock Market and free from
any relationship that, in the opinion of the Board of Directors of the Company
(the "Board"), as evidenced by its election of such Committee members, would
interfere with the exercise of independent judgment as a Committee member.
Committee members shall be appointed by the Board. One member shall
serve as chairperson. He/she shall be responsible for leadership of the
Committee, including overseeing the agenda, presiding over the meetings and
reporting to the Board. If the Committee Chairperson is not present at a
meeting, the members of the Committee may designate a chairperson.
RESOURCES and AUTHORITY
- -----------------------
The Committee shall have the resources and authority it deems necessary
and appropriate to discharge its responsibilities, at the Company's expense. The
Committee shall have the power to adopt its own operating rules and procedures
and to call upon assistance from officers and employees of the Company and
outside counsel and other advisers without the consent of management.
The Committee, and each member of the Committee in his/her capacity as
such, shall be entitled to rely, in good faith, on information, opinions,
reports or statements, or other information prepared or presented to them by
officers and employees of the Company, whom such member believes to be reliable
and competent in the matters presented and on counsel, compensation consultants
or other persons as to matters which the member believes to be within the
professional competence of such person.
PRINCIPAL FUNCTIONS
- -------------------
The Committee's basic responsibility is to assure that the senior
executives of the Company and its wholly owned affiliates are compensated
effectively in a manner consistent with the stated compensation strategy of the
Company and the requirements of appropriate regulatory bodies. The Committee
shall also communicate to shareholders the Company's compensation policies and
the reasoning behind such policies as required by the Securities and Exchange
Commission. More specifically, the Committee shall be responsible for the
following:
o Reviews and approves with the Chairman of the Board, the Company's
compensation philosophy.
o Approves and reports to the Board, the executive compensation plans
and the compensation (including incentive awards) of the Chairman of
the Board and the President and any other officer who is a member of
the Board.
o Reviews and approves with the Chairman of the Board and President, the
executive compensation plans and compensation (including incentive
awards) of the officers of the Company other than the Chairman of the
Board and the President.
o Assures that the total compensation paid to the Company's principal
officers other than the Chairman of the Board and the President is
reasonable as it relates to such officer's responsibilities and length
of service with the Company and taking into account any cost of living
increases.
20
o Periodically reviews and approves stock ownership guidelines,
including granting or making recommendations to the Board concerning
employee stock options.
o Consults with the Chairman of the Board and makes recommendations to
the Board for new or material changes to existing employee benefit
plans.
o Reviews the status of and reports to the Board on the Company's
director compensation practices. Any changes in director compensation
should come upon the recommendation of the Committee but with full
discussion and concurrence by the Board.
o Oversees the preparation and review of, and discusses with management,
the Company's Compensation Discussion & Analysis ("CD&A") and related
disclosures required by the SEC.
o Reviews and decides whether to recommend the final CD&A to the Board
for inclusion in the Company's annual proxy statement.
o Conducts an annual evaluation of the adequacy of this Charter and
recommends any proposed amendments to the Board for approval.
o Reports to the Board on a regular basis so that the Board is informed
of the Committee's activities.
o Such other duties and responsibilities as may be assigned to the
Committee, from time to time, by the Board and/or the Chairman of the
Board, or as designated in plan documents.
MEETINGS
- --------
The Committee shall meet sufficiently often to discharge its
responsibilities hereunder, but at least as often as required by applicable SEC
rules and NASDAQ listing requirements. Meetings may be called by the Chairman of
the Board, the President of the Company or the Chairperson of the Committee.
Appropriate members of management and staff will prepare draft agendas and
related background information for each Committee meeting, which will be
reviewed and approved by the Committee Chairperson in advance of distribution to
the other Committee members. The Company's corporate Secretary or Assistant
Secretary will be present at all meetings. Any background materials, together
with such agenda, should be distributed to the Committee members, the President
and corporate Secretary in advance of the meeting for their review and
discussion. The corporate Secretary will maintain one set of all Committee
minutes, agendas and background information, and the like, to be filed with the
corporate records of the Company and will be provided a set of all Committee
correspondence. All meetings of the Committee shall be held pursuant to the
By-laws of the Company with regard to notice and waiver thereof, and written
minutes of each meeting shall be duly filed in the Company records. Reports of
meetings of the Committee shall be made to the Board at its next
regularly-scheduled meeting following the Committee meeting accompanied by any
recommendations to the Board approved by the Committee. In addition, all
Directors are to be furnished copies of each Committee meeting's minutes.
Adopted by the Board of Directors of the Company on October, 29, 2008, and was
made effective May 14, 2008.
21
Appendix B
PROVIDENCE AND WORCESTER RAILROAD COMPANY
AMENDED AND RESTATED AUDIT COMMITTEE CHARTER
PURPOSE
- -------
The primary function of the Providence and Worcester Railroad Company
(hereinafter "Company") Audit Committee is to report to and assist the Board of
Directors (hereinafter "Board") 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 and oversee the
integrity of the Company's financial reporting process and internal
control system.
2. Evaluate qualifications and independence of, appoint, oversee and,
where appropriate, replace the external auditors who are accountable to
the Audit Committee and the Board.
3. Provide an open avenue of communication among the external auditors,
financial and senior management, and the Board. 4. Oversee the system
of disclosure controls and system of internal controls regarding
finance, accounting, legal compliance
and ethics.
The Audit Committee is responsible for the duties set forth in this
charter but is not responsible for either the preparation of the financial
statements or the auditing of the financial statements. Management has the
responsibility of preparing the financial statements and implementing internal
controls and the independent accountants have the responsibility of auditing the
statements and monitoring the effectiveness of the internal controls. The review
of the financial statements by the Audit Committee is not of the same quality as
the audit performed by the independent accountants. In carrying out its
responsibilities, the Audit Committee believes its policies and procedures
should remain flexible in order to best react to a changing environment.
The Audit Committee, and each member of the Audit Committee in his or
her capacity as such, shall be entitled to rely, in good faith, on information,
opinions, reports or statements, or other information prepared or presented to
them by officers and employees of the Company, whom such member believes to be
reliable and competent in the matters presented and on counsel, public
accountants or other persons as to matters which the member believes to be
within the professional competence of such person.
ORGANIZATION
- ------------
The Audit Committee shall be comprised of at least three directors as
determined by the Board, each of whom shall satisfy the independence standards
specified by the NASDAQ Marketplace Rules of The NASDAQ Stock Market
(hereinafter "NASDAQ") including Rule 4200(a)(15) and Rule 4350(d), and Rule
10A-3 under the Securities Exchange Act of 1934 and all other legal
requirements. Each member shall be 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 Audit Committee. All members shall be financially
literate and able to read and understand financial statements, including balance
sheets, income statements, and cash flow statements. The Audit Committee
chairman 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.
Determination of independence, Audit Committee financial expertise,
financial literacy and accounting or related financial management expertise
shall be made by the Board as the Board interprets such qualifications in its
business judgment and in accordance with applicable law and the listing
requirements of NASDAQ.
The Audit Committee shall have the power to adopt its own operating
rules and procedures and to call upon assistance from officers and employees of
22
the Company and outside counsel and consultants without the consent of
management.
RESPONSIBILITIES AND DUTIES
- ---------------------------
1. Be directly responsible for the appointment, compensation, retention
and oversight of any independent auditor engaged for the purpose of
preparing or issuing an audit report or performing other audit, review
or attest services. The external auditors shall report directly to the
Audit Committee.
2 Meet at least once each quarter and meet at least annually in
executive session with the external auditors without management
present.
3. 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.
4. 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. In
connection therewith:
o Elicit any recommendations for the improvement of such internal
controls and/or accounting principles; and
o Review any deficiencies identified by management in the design
and operation of internal controls for financial reporting and at
least annually consider, in consultation with management and the
independent auditors, the adequacy of the Company's internal
controls for financial reporting, including the resolution of
identified material weaknesses and reportable conditions, if any.
5. Prior to 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 and review and
discuss:
o Changes in accounting standards or rules promulgated by the
Financial Accounting Standards Board or the SEC that have an
impact on the financial statements;
o Estimates made by management having a material impact on the
financial statements;
o The effect of alternative assumptions, estimates or GAAP methods
on the Company's financial statements;
o Any changes from prior years in accounting principles applied in
the preparation of such financial statements; and
o Any material written communications between the independent
auditor and the Company's management, including any management
letter provided by the independent auditor and the Company's
response to that letter.
6. Annually review with management and the independent auditors the basis
for the disclosures made in the Annual Report to shareholders regarding
the Company's internal controls for financial reporting.
7. Ensure that retention of the independent auditor to perform audit and
nonaudit services is properly disclosed in the Company's proxy
statement and filings with the SEC.
8. 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.
9. 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.
23
10. Investigate any matter brought to its attention within the scope of its
duties, with the power to compensate and obtain advice and assistance
from outside legal, accounting or other advisors for this purpose if,
in its judgment, that is appropriate. Resolve any disagreements between
the external auditors and management. Determine funding for the
appropriate compensation of the independent auditors and other advisors
that the Audit Committee chooses to engage, with such funding to be
provided by the Company.
11. Submit the minutes of all meetings of the Audit Committee to, or
discuss the matters communicated at each meeting with, the full Board.
12. Review, at least annually, with management and the independent auditor
the qualifications, performance, independence and objectivity of the
independent auditor. In connection with such review and evaluation, the
Audit Committee shall
o Obtain and review a written report from the independent auditor
at least annually regarding the auditor's internal
quality-control procedures and any material issues raised by the
most recent quality-control review;
o Obtain an annual written statement from the independent auditor
delineating all relationships, both direct and indirect, between
the independent auditor and the Company, including each non-audit
service provided to the Company and at least the matters set
forth in Independence Standards Board No. 1;
o Consider whether the provision of non-audit services is
compatible with maintaining the auditor's independence, taking
into account the opinions of management;
o Discuss any relationships that may impair the auditor's
independence and take such actions as it deems appropriate or
make recommendations to the Board regarding actions to be taken
to remedy such impairment; and
o Ensure appropriate audit and concurring partner rotation as
required by law.
13. Review and approve any related-party transactions entered into by the
Company.
14. Review and pre-approve the engagement of independent accountants to
perform permissible non-audit services in accordance with policies
adopted by the Audit Committee and applicable laws and regulations.
Review any non-audit services performed on behalf of the Company by the
independent accountants that meet the de minimis exception under
applicable laws and regulations.
15. Establish procedures for receipt and processing of complaints related
to accounting, internal controls or auditing-related matters, and the
confidential, anonymous submission by employees of concerns regarding
questionable accounting or auditing practices.
16. Administer the Company's Code of Ethics for Chief Executive Officer and
Senior Financial Officers, including consideration of any waivers and
investigation of any alleged violations thereof.
ADOPTION AND EFFECTIVE DATE
- ---------------------------
This Amended and Restated Audit Committee Charter was adopted by the
Board of the Company on October 28, 2008, and was made effective May 14, 2008.
ANNUAL REVIEW
- -------------
At least annually, 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.
24
[GRAPHIC OMITTED][GRAPHIC OMITTED]
- ------
X
- ------
Using a black ink pen, mark your votes with an X as shown in this example.
Please do not write outside the designated area.
PLEASE DATE, SIGN AND RETURN THIS PROXY USING THE ENCLOSED ENVELOPE.
================================================================================
Annual Meeting Proxy Card - Providence and Worcester Railroad Company
================================================================================
This Proxy is Solicited on Behalf of the Board of Directors.
April 29, 2009
The undersigned, whose signature appears below, hereby appoints Robert H. Eder,
P. Scott Conti, 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 February 27, 2009 at the annual meeting of
shareholders to be held on April 29, 2009 in Worcester, Massachusetts, and at
any adjournments thereof, as follows.
A. Election of Directors - The Board of Directors recommends a vote FOR the
listed nominees.
1. Nominees:
For Withhold For Withhold For Withhold
--- -------- --- -------- --- --------
01-Frank Barrett 02-Scott Conti 03-Joseph Garrahy
For Withhold For Withhold For Withhold
--- -------- --- -------- --- --------
04-James Garvey 05-Charles McCollam, Jr. 06-Craig Scott
2. In their discretion, upon such other matters as may properly come before the
meeting.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL
MEETING OF SHAREHOLDERS TO BE HELD ON APRIL 29, 2009.
The Company's Proxy Statement, sample proxy card and 2008 Annual Report on Form
10-K are available at: www.edocumentview.com/pwx.
B. Non-Voting Items
Change of Address - Please print new address below.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
C. Authorized Signatures - This section must be completed for your vote to be
counted. Date and Sign Below
Sign exactly as your name appears hereon. When signing as attorney, executor,
administrator, trustee or guardian, 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.
Date (mm/dd/yyyy) - Signature 1 - Please keep Signature 2 - Please keep
Please print date below. signature within the box. signature within the box.
- ------------------------- ------------------------- -------------------------
/ /
- ------------------------- ------------------------- -------------------------
[GRAPHIC OMITTED][GRAPHIC OMITTED]
- ------
X
- ------
Using a black ink pen, mark your votes with an X as shown in this example.
Please do not write outside the designated areas.
PLEASE DATE, SIGN AND RETURN THIS PROXY USING THE ENCLOSED ENVELOPE.
================================================================================
Annual Meeting Proxy Card - Providence and Worcester Railroad Company
================================================================================
This Proxy is Solicited on Behalf of the Board of Directors.
April 29, 2009
The undersigned, whose signature appears below, hereby appoints Robert H. Eder,
P. Scott Conti, 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 February 27, 2009 at the annual meeting of
shareholders to be held on April 29, 2009 in Worcester, Massachusetts, and at
any adjournments thereof, as follows.
A. Proposals - The Board of Directors recommends a vote FOR the listed nominees.
1. Election of Directors.
For Withhold For Withhold For Withhold
--- -------- --- -------- --- --------
01-Richard Anderson 02-Robert Eder 03-John Healy
For Withhold
--- --------
04-Paul Titterton
2. In their discretion, upon such other matters as may properly come before the
meeting.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL
MEETING OF SHAREHOLDERS TO BE HELD ON APRIL 29, 2009.
The Company's Proxy Statement, sample proxy card and 2008 Annual Report on Form
10-K are available at: www.edocumentview.com/pwx.
B. Non-Voting Items
Change of Address - Please print new address below.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
C. Authorized Signatures - This section must be completed for your vote to be
counted. Date and Sign Below
Sign exactly as your name appears hereon. When signing as attorney, executor,
administrator, trustee or guardian, 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.
Date (mm/dd/yyyy) - Signature 1 - Please keep Signature 2 - Please keep
Please print date below. signature within the box. signature within the box.
- ------------------------- ------------------------- -------------------------
/ /
- ------------------------- ------------------------- -------------------------