SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
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Rochester Gas and Electric Corporation
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David C. Heiligman
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3-SCHINF.PCD
[LOGO OF ROCHESTER GAS AND ELECTRIC CORPORATION]
ROCHESTER GAS AND ELECTRIC CORPORATION
89 East Avenue . Rochester, NY 14649-0001
(716) 546-2700
===========================
NOTICE OF ANNUAL MEETING
OF SHAREHOLDERS TO BE HELD
APRIL 20, 1994
===========================
You are cordially invited to attend the annual meeting of shareholders to be
held on Wednesday, April 20, 1994 at 11:00 A.M. at the Rochester Riverside
Convention Center, 123 East Main Street, Rochester, New York.
The meeting is being held to elect four Class II directors to serve for three-
year terms expiring in 1997 and to transact any other business that may
properly come before the meeting or at any adjournments thereof.
Shareholders of record at the close of business on March 1, 1994 are entitled
to notice of and to vote on all matters at the meeting.
The matters to be acted upon at the meeting are important to you as a
shareholder. Therefore, we urge you to review the accompanying proxy material,
promptly mark your vote, sign, date and return your proxy in the envelope
provided.
By order of the Board of Directors,
Roger W. Kober
Chairman of the Board, President and
Chief Executive Officer
David C. Heiligman
Vice President, Secretary
and Treasurer
March 7, 1994
=============================================
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING
PLEASE SIGN AND RETURN YOUR PROXY PROMPTLY
=============================================
ROCHESTER GAS AND ELECTRIC CORPORATION
89 East Avenue . Rochester, NY 14649-0001
(716) 546-2700
=================
PROXY STATEMENT
=================
GENERAL
The enclosed proxy is solicited by the Board of Directors of Rochester Gas and
Electric Corporation (Company) for voting at the annual meeting of shareholders
on April 20, 1994, or at any adjournments thereof. Shareholders may revoke
their proxies at any time before they are voted.
Common shareholders of record at the close of business on March 1, 1994 are
entitled to notice of the meeting. Each share is entitled to one vote on each
matter presented at the meeting. As of February 1, 1994, the Company had
outstanding 37,051,592 shares of Common Stock.
Duff & Phelps Investment Management Company, 55 East Monroe Street, Chicago,
Illinois, 60603, was the beneficial owner of 2,146,900 shares, or 5.8% of the
Company's Common Stock as of December 31, 1993. These shares are being held for
the account of Duff & Phelps Utilities Income Inc. (the "Fund"), a
closed-end, diversified management investment company that invests primarily
in equity and fixed income securities of companies in the public utilities
industry. Duff & Phelps Investment Management Company is under contract as the
Fund's investment advisor and in such capacity has the power to dispose of and
to vote all 2,146,900 shares. The Company is not aware of any other beneficial
owner of over 5% of the Common Stock outstanding.
VOTING OF PROXIES
The enclosed proxy is for shares of Common Stock held in your name. The proxy
includes any shares held for you under the Automatic Dividend Reinvestment and
Stock Purchase Plan as a shareholder, as well as your RG&E Savings Plus Plan or
Employee Stock Ownership Plan shares if you are an employee. Your shares will
be voted in accordance with your instructions on the proxy. If you sign and
return a proxy but do not provide voting instructions, your shares will be voted
FOR the election of nominees for directors. If you do not return a proxy and
you are an RG&E Savings Plus Plan participant, the trustee will vote your
Savings Plus shares FOR the election of nominees for directors. However, no
other shares will be voted unless you return a proxy.
Under the Company's bylaws, a majority of the shares entitled to vote must be
present in person or represented by proxy before any action can be taken at the
meeting. The election of the nominees for directors will be decided by plurality
vote. Shareholder proxies will be received and tabulated by an independent
agent, and the vote will be certified by an independent Inspector of Election.
Abstentions and broker non-votes will be counted in determining the quorum for
the meeting, but will not be considered votes cast at the meeting and,
therefore, will have no effect on the election of directors.
ELECTION OF DIRECTORS
The Board of Directors presently consists of twelve members, divided into
three equal classes, designated as Class II, Class III and Class I with terms
expiring at the 1994, 1995 and 1996 annual meetings, respectively.
The following identifies the nominees standing for election as Class II
directors at the 1994 annual meeting and the continuing Class III and Class I
directors, including each individual's principal occupation and business
experience for at least five years. The Class II directors will be elected
for a three-year term expiring at the 1997 annual meeting.
2
NOMINEES - CLASS II
FOR TERM EXPIRING IN 1997
ALLAN E. DUGAN, age 53, was named Senior Vice President, Corporate Strategic
Services, Xerox Corporation (office equipment and financial services) in
February 1992. Prior to joining Xerox Corporation in March 1990 as Senior Vice
President and General Manager, Manufacturing Operations Worldwide, he served as
Vice President of Manufacturing Transmission Systems, American Telephone and
Telegraph Company. Mr. Dugan has been a director of the Company since 1991.
THEODORE L. LEVINSON, age 60, was President and Chief Executive Officer of Star
Supermarkets, Inc. (former retail food chain) until 1982. He was appointed Vice
President of Peter J. Schmitt Co., Inc. in 1982 and President and Chief
Executive Officer of Martek Investors, Inc. (formerly Star Supermarkets, Inc.)
in 1983, positions he held until retiring in 1986. Mr. Levinson has been a
director of the Company since 1979.
ARTHUR M. RICHARDSON, age 67, has served as President of the Richardson Capital
Corporation (venture capital) since 1985. He previously held numerous executive
positions at Security Norstar Bank, Security New York State Corporation and its
predecessor banks before retiring as Chairman of the Board of Security Norstar
Bank in 1985. Mr. Richardson is a director of Goulds Pumps, Inc. and has been a
director of the Company since 1982.
M. RICHARD ROSE, age 61, was President of the Rochester Institute of Technology
from 1979 until his retirement in June 1992. Dr. Rose has been a director of the
Company since 1988.
CONTINUING DIRECTORS - CLASS III
TERM EXPIRING IN 1995
ANGELO J. CHIARELLA, age 60, serves as President and Chief Executive Officer of
Midtown Holdings Corp. (real estate development and leasing), a position he has
held since 1971. He has been a director of the Company since 1992.
JAY T. HOLMES, age 51, has served as Senior Vice President - Corporate Affairs
and Secretary of Bausch & Lomb Incorporated (healthcare and optics) since 1983.
He is a director of Bausch & Lomb Incorporated and has been a director of the
Company since 1992.
CORNELIUS J. MURPHY, age 63, has served as Senior Vice President of Goodrich &
Sherwood Company (management consulting and human resource services) since 1990.
Prior to assuming his current responsibilities, Mr. Murphy held a number of
senior management positions at Eastman Kodak Company, where he served as Senior
Vice President and Project Manager, Office of the Chief Executive until March
1989. He has been a director of the Company since 1981.
HARRY G. SADDOCK, age 64, was Chairman of the Board of the Company from December
1988 until his retirement in December 1991. He also served as Chief Executive
Officer from December 1988 to June 1991 and was previously President and Chief
Operating Officer. Mr. Saddock has been a director of the Company since 1984.
CONTINUING DIRECTORS - CLASS I
TERM EXPIRING IN 1996
WILLIAM BALDERSTON III, age 66, served as Executive Vice President of The Chase
Manhattan Corporation (bank holding company) from August 1991 until his
retirement in December 1993. Mr. Balderston previously held numerous executive
positions at Chase Lincoln First Bank, a former subsidiary of The Chase
Manhattan Corporation, serving as Vice Chairman to January 1993, as President
and Chief Executive Officer from January 1991 to September 1991 and as Chairman
of the Board, Chief Executive Officer and President from July 1986 to January
1991. He is a director of Bausch & Lomb Incorporated and has been a director of
the Company since 1982.
3
WILLIAM F. FOWBLE, age 55, was Senior Vice President and Executive Vice
President, Imaging, Eastman Kodak Company (photographic equipment and supplies,
chemicals and health products) from January 1992 until retirement in December
1993. He served as Group Vice President and General Manager, Photographic
Products, Eastman Kodak, from January 1990 to January 1992 and as Senior Vice
President and General Manager, Manufacturing, Distribution and Field Support
from June 1986 to January 1990. Mr. Fowble has been a director of the Company
since 1990.
ROGER W. KOBER, age 60, was named Chairman of the Board, President and Chief
Executive Officer of the Company in January 1992, after serving as President and
Chief Executive Officer from June 1991 to January 1992, as President and Chief
Operating Officer from December 1988 to June 1991 and as Senior Vice President,
Production and Engineering from January 1988 to December 1988. Mr. Kober has
been a director of the Company since 1988.
CONSTANCE M. MITCHELL, age 65, was Program Director of the Industrial Management
Council of Rochester, New York, Inc. until her retirement in June 1989. She
previously served as Community Relations Coordinator of the Industrial
Management Council. Mrs. Mitchell is a director of The Rochester Community
Savings Bank. She also serves as a board member or officer of numerous civic
and philanthropic organizations, including the Urban League of Rochester and
United Way of Greater Rochester. Mrs. Mitchell has been a director of the
Company since 1981.
SECURITY OWNERSHIP OF MANAGEMENT
The following table shows beneficial ownership of the Company's Common Stock
as of February 1, 1994 for each director and nominee, as well as each active
executive officer named in the Summary Compensation Table. No director, nominee
or executive officer beneficially owns over .01% of the outstanding shares, and
the total beneficially owned by all directors, nominees and executive officers
as a group represents .09% of the shares outstanding.
TOTAL SHARES OF
SHARES OF ACCRUED COMMON STOCK OR
COMMON STOCK COMMON STOCK COMMON STOCK
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED(1) EQUIVALENT UNITS(2) EQUIVALENT UNITS
William Balderston III 1,091 0 1,091
Angelo J. Chiarella 1,142 825 1,967
Allan E. Dugan 300 888 1,188
William F. Fowble 150 853 1,003
David C. Heiligman 2,891 2,252 5,143
Jay T. Holmes 600 900 1,500
Roger W. Kober 5,073 10,006 15,079
David K. Laniak 4,031 4,571 8,602
Theodore L. Levinson 1,100 0 1,100
Constance M. Mitchell 447 211 658
Cornelius J. Murphy 2,381 652 3,033
Thomas S. Richards 1,154 4,333 5,487
Arthur M. Richardson 200 355 555
M. Richard Rose 626 879 1,505
Harry G. Saddock 4,693 0 4,693
Robert E. Smith 2,532 4,577 7,109
All Directors, Nominees
and Executive Officers as
a Group (18 Individuals) 32,110 35,814 67,924
(1) Includes shares over which the director, nominee or executive officer has
direct or indirect voting or investment power, as well as indirect family
holdings of which the following persons disclaim beneficial ownership:
Mr. Chiarella, 203 shares; Mr. Heiligman, 108 shares; and Mr. Kober,
1,879 shares.
4
(2) Includes Common Stock equivalent units accrued under the Company's Long Term
Incentive Plan, 401k Restoration Plan and Directors' Deferred Compensation
Plan for which the director, nominee or executive officer does not have
voting rights.
MEETINGS AND STANDING COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors met 13 times during 1993. All directors attended at
least 75% of the total meetings of the Board and the committees on which they
served.
EXECUTIVE AND FINANCE COMMITTEE. The Executive and Finance Committee, with
certain exceptions, possesses all of the authority of the Board of Directors.
During 1993, the Committee met four times. Messrs. Balderston, Dugan, Kober,
Murphy, Richardson (Chairman) and Saddock are currently members of the
Committee.
AUDIT COMMITTEE. It is the function of the Audit Committee to monitor on
behalf of the Board of Directors the integrity of the Company's financial
statements and its financial reporting process. In pursuit of this function, the
Committee monitors the systems of internal control which management has
established to safeguard the assets of the Company and the internal policies and
procedures that exist to provide that the Company is in compliance with all
applicable laws, regulations and ethical business practices. The Committee also
recommends to the Board the independent accounting firm to be retained by the
Company for the ensuing year, reviews the results of the accounting firm's
examination of the Company's financial statements and recommends any action
deemed necessary. During 1993, the Committee met three times. Messrs. Chiarella,
Dugan, Fowble, Levinson, Rose and Mrs. Mitchell (Chairman) are currently members
of the Committee.
COMMITTEE ON MANAGEMENT. The Committee on Management is responsible for the
Company's compensation and benefits program, as discussed below in the Report of
the Committee on Management on Executive Compensation. During 1993, the
Committee met six times. Messrs. Balderston, Fowble, Murphy (Chairman),
Richardson and Rose are currently members of the Committee.
NOMINATING COMMITTEE. The Nominating Committee recommends to the Board of
Directors candidates to be nominated for election as directors at the annual
meeting and to fill any vacancies on the Board. During 1993, the Committee met
twice. Messrs. Balderston, Holmes (Chairman), Richardson, Saddock and Mrs.
Mitchell are currently members of the Committee. Shareholders wishing to
recommend candidates for nomination to the Board should submit in writing to the
Secretary of the Company the name of the nominee, a statement of qualifications
and the written consent of the person so named. Suggestions received prior to
November 1, 1994 will be considered by the Committee when recommending
nominees for election at the 1995 annual meeting of shareholders.
REPORT OF THE COMMITTEE ON MANAGEMENT ON EXECUTIVE COMPENSATION
The Committee on Management is appointed by the Board of Directors of the
Company. Its objective is to assure that executive compensation is fair and
reasonable to customers, shareholders and employees by providing competitive
compensation linked to the achievement of Company goals.
The Committee is responsible for the Company's executive compensation
and benefits program, including the administration of both the Company's annual
Executive Incentive Plan and the Long Term Incentive Plan. The Committee
reviews compensation levels of members of management, evaluates the
performance of management and considers management succession and related
matters, including Board compensation and performance. The Committee provides
to the Board a detailed review of all aspects of compensation for the senior
officer positions and the Executive Management Team. Members of the Committee
and of the Board are available to meet with the management team or with
individual members of management to discuss Company matters as needed.
The Company has retained the services of a compensation consulting firm from
time to time to advise the Committee on the reasonableness of compensation paid
to senior officers of the Company as compared to the external market for
5
executives, including both utility companies and general industry. To facilitate
this process, the Committee has sponsored two consultant studies regarding
executive compensation in the last five years. The studies indicated that
Company compensation levels were significantly below the average for comparable
utility companies, and based on the studies, the Committee adjusted the
Company's compensation objectives to the targets discussed below. The studies
also facilitated establishment of short and long term incentive programs.
COMPONENTS OF COMPENSATION. The executive compensation program consists of
three components. The first component is base salary, which is predicated on
competitive market conditions, positional qualifications, including years of
experience, and the individual performance level of the executive. The
Company's target base compensation objective for its top five executive
positions is to be fully competitive with $600 million to $2 billion revenue
class Edison Electric Institute (EEI) utility companies (51 companies) in the
second highest paid quartile. For comparative purposes, the average base pay
for RG&E's executives in 1993 was 4.4% below the quartile midpoint.
The second component is annual incentive compensation. A substantial
portion of the annual compensation of each officer relates to, and must be
contingent upon, the performance of the Company, as well as the individual
contribution of each officer. As a result, a portion of each officer's total
potential compensation is variable.
The Company established an Executive Incentive Plan in 1992, which
provides for the payment of annual performance bonus awards to key employees of
the Company if established performance objectives are met. Awards may range
from 5% to 25% of the midpoint of a participant's salary grade, and the
amount of an award earned, if any, will depend upon the level of the
performance goal met. If certain exceptional performance is achieved, awards
could be doubled. Performance goals are established annually by the Committee
on Management and approved by the Board of Directors. The annual award will be
paid in cash in the year following the year in which it was earned. The Plan is
largely self funded in that no payouts can be made unless the Company exceeds
the return on equity objective by an amount sufficient to cover the target level
of any incentive award.
The Executive Incentive Plan objectives for 1993, which were equally weighted,
consisted of three categories: (1) return on equity, (2) price of
product, and (3) five corporate operating objectives pertaining to customer
service, employee safety, employee productivity, and customer satisfaction which
were approved by the Committee. The Committee monitored the Company's
performance regarding these objectives throughout the year. Based upon the 1993
performance results, the computations of which were reviewed by the Company's
independent auditors, the Company achieved 123% of the combined financial, price
and corporate operating objectives set under the Plan. The financial objective
was evaluated excluding the $8.2 million cost related to the Company's
retirement enhancement program, since that program will have a long term
economic benefit to the Company. The bonus awards for 1993, as reported in the
Summary Compensation Table, reflect the achievement of earning 123% of the
Targeted Plan Award for 1993, as determined by the Committee and as approved by
the Board of Directors. Twenty percent of the bonus awards was based upon the
achievement of individual performance objectives.
The third component of executive compensation is long term incentive
compensation, which is designed to ensure the continuing success of the Company
and is directly tied to the Company's Common Stock performance. The Company
established a Long Term Incentive Plan (LTIP) in 1993. The Committee may grant
annual awards to key employees of 500 to 4,000 Performance Shares based on the
participant's salary grade. The Performance Shares are RG&E Common Stock
equivalents and will accumulate reinvested dividends over a three-year
performance cycle (for phase-in purposes, the first performance cycle will be
two years). At the end of the three-year performance cycle, the Company's
average total shareholder return on Common Stock will be ranked with the
twenty-four companies which comprise the Standard & Poor's 24 electric utilities
index. The Committee on Management may award from 0% to 200% of each
participant's Performance Share account based on the Company's ranking in the
peer comparison. The number of Performance Shares payable to a participant will
be valued based on the closing price of RG&E Common Stock at the end of the
cycle.
6
The Company's total executive compensation objective for its top five
executive positions is to be fully competitive at the target level of the
comparable group of EEI electric and combination companies previously
referenced. Total compensation is defined as the combination of base salary and
short and long term incentives. Assuming a 100% award for the Long Term
Incentive Plan in 1993 (no actual potential LTIP payout until 1996), the average
total compensation for RG&E's top five executives would be 2.4% below the
midpoint of the second highest paid quartile in the comparative group.
The combined EEI group of 51 companies and the Standard & Poor's 24 electric
utilities index include one company which is common to both comparative groups.
The commonality of the two groups is low primarily because the S & P companies
have significantly higher annual revenues (typically over $2 billion) than the
group of utility companies RG&E uses for competitive compensation comparison
purposes.
The Committee has examined the IRS regulation pertaining to the $1,000,000
compensation deductibility cap for each covered executive and has determined
that the regulation is not applicable to RG&E as the total compensation for any
one individual is significantly below the cap.
CHIEF EXECUTIVE OFFICER COMPENSATION. In recognition of Mr. Kober's overall
leadership of the Company, including the development and implementation of a
long range comprehensive business plan to appropriately position the Company in
the competitive environment of the 1990s and the successful achievement of
individual action plans regarding the Corporate Business Plan Goals relating to
financial objectives, customer service, price of product, employee achievement
and public acceptance, the Board of Directors, upon recommendation of the
Committee, increased his annual base salary from $310,603 to $329,603, effective
January 1, 1993. Although the Committee was favorably impressed by the
achievement of a variety of objective performance indicators, the increase was
subjectively determined. For comparative purposes, Mr. Kober's 1993 base salary
is 16.4% below the midpoint of the second highest paid quartile in the
comparative group of EEI electric and combination utilities previously
referenced.
As discussed above, a bonus award was paid to executives for achieving certain
performance goals under the Executive Incentive Plan. As 20% of the
potential award is based upon the achievement of individual performance
objectives, the Committee also specifically reviewed Mr. Kober's performance
during 1993. Mr. Kober met or exceeded all of his individual objectives for
1993. The Committee was also favorably influenced by Mr. Kober's
accomplishments affecting the Company's financial and operating results, as
described above, and for his leadership in developing and implementing corporate
initiatives regarding customer service, including customer partnerships,
Continuous Process Improvement, Facilities Strategic Plan, Business Strategy
Plan, workforce reduction via an early retirement program, internal
communications, and the Integrated Resource Plan. Based on this review, the
Committee granted Mr. Kober 100% of the potential award, or $108,844, which
represents approximately 25% of his total 1993 cash compensation. Although the
Committee was favorably influenced by the achievement of numerous performance
indicators and other objective measurements, 20% of the award was subjectively
determined.
Mr. Kober was granted 4,000 Performance Shares in 1993 under the new Long Term
Incentive Plan which was previously summarized. For comparative purposes, the
dollar equivalent value of the grant would be approximately 20% below the long
term incentive award paid in 1993 to the highest paid officer for the
comparative group of EEI electric and combination utilities.
Performance shares under the Long Term Incentive Plan link executive
compensation directly with shareholder interest since both the targets and the
payouts are measured in terms of shareholder value.
Committee on Management
Cornelius J. Murphy, Chairman
William Balderston III
William F. Fowble
Arthur M. Richardson
M. Richard Rose
7
EXECUTIVE COMPENSATION
EXECUTIVE OFFICERS. The following tables show the compensation earned by the
Company's chief executive officer and each of its five highest compensated
executive officers over the past three years.
SUMMARY COMPENSATION TABLE
- ------------------------------------------------------------------------------------------------------
ANNUAL
COMPENSATION
------------------------- ALL OTHER
NAME AND FISCAL SALARY BONUS COMPENSATION
PRINCIPAL POSITION YEAR ($) ($)(2) ($)(3)
- ------------------------------------------------------------------------------------------------------
ROGER W. KOBER 1993 329,603 108,844 8,240
Chairman of the Board, 1992 310,603 85,914 7,765
President and 1991 238,707 N/A 4,238
Chief Executive Officer (1)
ROBERT E. SMITH 1993 202,846 43,407 5,071
Senior Vice President, 1992 191,369 34,264 4,784
Production and Engineering 1991 165,737 N/A 4,143
DAVID K. LANIAK 1993 202,275 43,407 5,057
Senior Vice President, 1992 189,989 34,264 4,749
Gas and Electric Distribution 1991 164,622 N/A 4,116
and Customer Services
THOMAS S. RICHARDS 1993 173,567 33,174 3,945
Senior Vice President, 1992 159,000 23,492 3,975
Finance and General 1991 37,500 N/A 625
Counsel (4)
DAVID C. HEILIGMAN 1993 141,593 24,823 3,540
Vice President, 1992 133,248 19,593 3,331
Secretary and Treasurer 1991 122,263 N/A 3,057
ROBERT C. HENDERSON 1993 151,234 N/A 18,821
(former) Senior Vice President, 1992 174,501 34,264 3,990
Controller and 1991 151,740 N/A 0
Chief Financial Officer (5)
N/A - Not Applicable
(1) Effective July 1, 1991, Mr. Kober was promoted to Chief Executive Officer
while also retaining the position of President. Mr. Kober was promoted to
Chairman of the Board, effective January 1, 1992 and retained responsibility
for both President and Chief Executive Officer positions.
(2) Pursuant to the Executive Incentive Plan guidelines, the amount of annual
awards depends upon the level of achievement of one-year goals. If
performance is below a minimal level, no award is earned. Actual amounts of
annual awards earned under the plan are shown.
(3) Company contributions to RG&E Savings Plus Plan (401k).
(4) Mr. Richards was employed by the Company on October 1, 1991. In October
1993, Mr. Richards was promoted to Senior Vice President, Finance and
General Counsel from the position of General Counsel.
8
(5) Mr. Henderson resigned from the Company on October 31, 1993. Under a
severance agreement, he will receive a supplemental retirement benefit of
$7,500 per month until May 1, 1995; $3,882 per month from that date until
November 1, 2003; and $3,049 per month from that date until his death. If
Mr. Henderson should die, his present spouse would receive substantially
similar amounts until her death. A portion of this benefit would be paid to
his estate upon his or her death prior to November 1, 2003. The Summary
Compensation Table, All Other Compensation column, includes those benefits
paid in 1993. In accordance with the Agreement, Mr. Henderson will receive a
separation amount which substantially consists of one year's severance pay
and bonus equivalents and miscellaneous expense items. He received $64,113
on January 5, 1994 and the balance of $230,000 is payable on April 30, 2002.
RG&E will pay interest on the deferred amount at a rate equivalent to the
interest rate applied to customer deposits as prescribed by the Public
Service Commission of the State of New York. As part of the Agreement, Mr.
Henderson will continue to provide limited consulting services relating to
the areas of his previous employment for up to 24 hours per month, as
requested by the Company, until November 1, 1994. Mr. Henderson is entitled
to vested pension benefits calculated on an actuarial basis commencing at
his election after age 55.
LONG TERM INCENTIVE PLAN - AWARDS IN LAST FISCAL YEAR (1993)
- ------------------------------------------------------------------------------------------------------
ESTIMATED FUTURE PAYOUTS
UNDER NON-STOCK PRICE-BASED
PLANS
NUMBER OF PERFORMANCE
COMMON STOCK OR OTHER
EQUIVALENT PERIOD UNTIL
NAME AND UNITS MATURATION THRESHOLD TARGET MAXIMUM
PRINCIPAL POSITION (1) OR PAYOUT (NO.) (NO.) (NO.)
- ------------------------------------------------------------------------------------------------------
ROGER W. KOBER 4,000 2 Years 0 - 3,999 4,000 8,000
Chairman of the Board,
President and
Chief Executive Officer
ROBERT E. SMITH 2,000 2 Years 0 - 1,999 2,000 4,000
Senior Vice President,
Production and Engineering
DAVID K. LANIAK 2,000 2 Years 0 - 1,999 2,000 4,000
Senior Vice President,
Gas and Electric Distribution
and Customer Services
THOMAS S. RICHARDS 2,000 2 Years 0 - 1,999 2,000 4,000
Senior Vice President,
Finance and General
Counsel
DAVID C. HEILIGMAN 1,000 2 Years 0 - 999 1,000 2,000
Vice President,
Secretary and Treasurer
ROBERT C. HENDERSON 0 N/A 0 0 0
(former) Senior Vice President,
Controller and Chief
Financial Officer
N/A - Not Applicable
9
(1) Pursuant to the establishment of a Long Term Incentive Plan in 1993,
officers were granted a specific number of Performance Shares based upon
their salary grade. Each Performance Share is deemed to be equivalent to
one share of RG&E Common Stock. Dividend equivalents will be deemed to be
accrued and reinvested during the length of a performance cycle. The
Committee on Management may award from 0% to 200% of each officer's
Performance Share account at the end of a three-year performance cycle
(1994 and 1995 for the first cycle) based on the Company's ranking against
the Standard & Poor's 24 electric utilities index for total shareholder
return on a three-year average basis (two years for the first cycle). The
number of shares payable, if any, for the first cycle will be based on the
average closing price of RG&E Common Stock for December 1995. Any award
will be paid by March 1, 1996.
DIRECTORS. Directors receive an annual retainer of $15,000, plus $700 for each
Board or committee meeting attended. Committee chairmen and Executive and
Finance Committee members receive an additional retainer of $2,000 and $1,500,
respectively. If a director attends more than one Board or committee meeting on
the same day, the fee for each subsequent meeting is $600. Officers of the
Company receive no fees for their services as directors. The total amount of
compensation paid to directors is comparable to the total compensation paid to
directors of similar sized combination electric and gas utility companies.
The Company has deferral plans under which a director's fees may either be
deferred with interest in a cash account or deferred and converted to Common
Stock equivalent units which earn dividends equal to dividends declared on the
Company's Common Stock. In either case, deferred amounts are paid in cash, in a
lump sum or over a period of up to ten years commencing no later than the
director's 70th birthday.
SHAREHOLDER RETURN COMPARISON
The following graph compares the cumulative total shareholder return on the
Company's Common Stock with the Standard & Poor's 500 index and the Standard &
Poor's 24 electric utilities index for the past five years. Total return was
calculated assuming investment of $100 on December 31, 1988 and reinvestment of
all dividends.
Five-Year Cumulative Total Return Comparison
[GRAPH APPEARS HERE]
Measurement period Rochester Gas S&P 24 S&P 500
(Fiscal year Covered) & Electric Corporation Index Index
- --------------------- ---------------------- ------ -------
Measurement PT -
12/31/88 $100 $100 $100
FYE 12/31/89 $134.97 $133.17 $131.58
FYE 12/31/90 $132.36 $136.65 $127.42
FYE 12/31/91 $171.24 $177.89 $166.07
FYE 12/31/92 $193.95 $188.35 $178.64
FYE 12/31/93 $221.26 $212.08 $196.61
10
PENSION PLAN TABLE
The Company has a non-contributory, tax qualified, defined benefit pension
plan, the RG&E Retirement Plan, and an unfunded, non-qualified plan, the RG&E
Unfunded Retirement Income Plan. All employees, including executive officers,
are eligible to participate in these plans. The annual pension benefit under
the plans, taken together, is determined by years of service and salary. Under
the Internal Revenue Code of 1986, the annual benefit payable by the funded plan
was limited to $115,641 for 1993. The unfunded plan will provide those benefits
which cannot be fully provided by the funded plan. The table below may be used
to calculate the approximate annual benefits payable at normal retirement age
(65) under the two plans in specified remuneration and years-of-service
classifications. The benefits as shown may be subject to deduction for Social
Security benefits under the benefit formula.
AVERAGE RETIREMENT BENEFITS BASED ON YEARS OF SERVICE (2)
ANNUAL SALARY (1) 15 20 25 30 35 40 45
- ---------------- -------- -------- -------- -------- -------- -------- --------
$500,000 $240,400 $265,400 $290,400 $315,400 $340,400 $365,400 $390,400
450,000 216,100 238,600 261,100 283,600 306,100 328,600 351,100
400,000 191,800 211,800 231,800 251,800 271,800 291,800 311,800
350,000 167,600 185,100 202,600 220,100 237,600 255,100 272,600
300,000 143,300 158,300 173,300 188,300 203,300 218,300 233,300
250,000 119,000 131,500 144,000 156,500 169,000 181,500 194,000
200,000 94,800 104,800 114,800 124,800 134,800 144,800 154,800
150,000 70,500 78,000 85,500 93,000 100,500 108,000 114,000
(1) Based on average of three final years before retirement. The amounts shown
in the salary and bonus columns in the Summary Compensation Table (see page
8) constitute qualifying compensation under the plans.
(2) Table based on Retirement Plan formula pertaining to employees hired prior
to July 1, 1965. The actual pension benefit for employees hired after July
1, 1965 will be less than the table amounts. Messrs. Kober, Smith, Laniak,
Richards and Heiligman have been credited with 28, 34, 39, 10 and 30 years
of service, respectively, under the plans.
The RG&E Unfunded Retirement Income Plan will also pay Messrs. Kober and
Laniak $292 and $467 per month, respectively, during retirement to replace
retiree life insurance which the Company cancelled in 1985. These amounts are
payable only after retirement and are limited to a total of 120 monthly
payments, which will continue to be made to a designated beneficiary or to the
estate of a recipient who dies prior to expiration of the 120-month period.
MISCELLANEOUS
The Company has maintained directors and officers liability insurance since
1968. The Company believes that continued coverage is important to help assure
its ability to attract and retain competent directors and officers.
Associated Electric & Gas Insurance Services Limited (AEGIS) agreed to renew a
directors and officers liability insurance policy for a one-year term, effective
January 1, 1994. The annual premium for this policy is $1,244,031; however, the
Company received a member's continuity credit of $722,748 and a premium refund
of $74,239 which reduced the effective cost of coverage to $447,044 for 1994.
In addition, a policy with Energy Insurance Mutual Limited that provides excess
coverage for such insurance was renewed for a one-year term, effective January
1, 1994, at a premium of $534,375. These policies provide reimbursement to the
Company for any obligation which it incurs as a result of indemnification of
directors and officers, as permitted under the Company's bylaws or the New York
Business Corporation Law.
11
AEGIS also agreed to renew the Company's pension trust liability insurance
policy for a one-year term, effective May 1, 1993. The annual premium for this
policy is $31,200. Coverage is for directors and those officers and employees
considered fiduciaries under the Retirement Income Security Act of 1974.
INDEPENDENT PUBLIC ACCOUNTANTS
Price Waterhouse, the Company's independent certified public accounting firm
since 1958, was recommended by the Audit Committee and approved by the Board of
Directors to be the Company's independent accounting firm for the year 1994.
Representatives of Price Waterhouse are expected to be present at the meeting
and will have the opportunity to make a statement if they so desire. They will
also be available to answer appropriate questions from shareholders.
OTHER MATTERS
The Board of Directors does not know of any other matters to come before the
meeting. If any other matters are properly brought before the meeting, it is
the intention of the persons named in the proxy to vote in accordance with their
judgment.
Proxies will be solicited by mail, and Company employees may also solicit
proxies by telephone or other electronic means. Morrow & Co. has been retained
to assist in soliciting proxies at a fee of $7,500, plus reasonable
out-of-pocket expenses. The Company will pay all costs associated with
soliciting proxies for the meeting. Proxy material will be mailed to
shareholders on or about March 7, 1994.
In order to be eligible for inclusion in the proxy material for the Company's
1995 annual meeting, any shareholder proposal to take action at such meeting
must be received by the Company no later than November 7, 1994.
March 7, 1994
12
PROXY
ROCHESTER GAS AND ELECTRIC CORPORATION
89 EAST AVENUE, ROCHESTER, NEW YORK 14649-0001
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints R.W. Kober, T.S. Richards and D.C. Heiligman
and each of them as proxies, with power of substitution, to vote all Common
Stock of the undersigned, as directed on the reverse side, at the Rochester
Gas and Electric Corporation Annual Meeting of Shareholders to be held on
April 20, 1994 or any adjournments thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE LISTED NOMINEES.
---
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
SEE REVERSE SIDE
[X] PLEASE MARK VOTES AS IN THIS EXAMPLE.
1. ELECTION OF DIRECTORS
NOMINEES FOR CLASS II DIRECTORS:
A.E. Dugan, T.L. Levinson, A.M. Richardson and M.R. Rose
[_] FOR ALL NOMINEES
[_] WITHHELD FROM ALL NOMINEES
[_] For all nominees except as noted above
2. OTHER MATTERS
In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting. As of March 7, 1994 the
Board of Directors does not know of any other matters to come before the
meeting.
[_] MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED FOR THE ELECTION OF THE LISTED NOMINEES FOR DIRECTORS.
Signature: _________________________ Date ________________
Signature: _________________________ Date ________________
(PLEASE SIGN EXACTLY AS NAME APPEARS ABOVE)