SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Rochester Gas and Electric Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
-------------------------------------------------------------------------
Notes:
[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 16, 1997
======================================
We would like to invite you to attend our 1997 annual meeting of
shareholders. This year the meeting will be held at the Rochester Riverside
Convention Center on Wednesday, April 16, 1997 at 11 A.M. The convention center
is located at 123 East Main Street in downtown Rochester, New York.
The meeting is being held to consider and take action upon the following:
1. Election of four Class II directors to serve for three-year terms
expiring in 2000;
2. Approval of the 1996 Performance Stock Option Plan;
and to transact any other business properly brought before the meeting or any
adjournments.
Common shareholders of record at the close of business on February 25, 1997
are entitled to notice of and to vote on all matters at the meeting.
The proxy statement accompanying this notice contains information of
importance to you as a shareholder. We urge you to review this information and
sign and return your proxy in the enclosed envelope.
By order of the Board of Directors,
Roger W. Kober
Chairman of the Board and
Chief Executive Officer
David C. Heiligman
Vice President and
Corporate Secretary
March 4, 1997
===============================================
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 16, 1997, 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 February 25, 1997
are entitled to notice of the meeting. Each share is entitled to one vote on
each matter presented at the meeting. As of February 25, 1997, the Company had
outstanding 38,851,464 shares of Common Stock.
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 (ADRP) as a shareholder, as well as your RG&E Savings
Plus Plan or Employee Stock Ownership Plan (ESOP) 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 and for the proposal.
If you are an RG&E Savings Plus Plan participant and you do not vote the shares
credited to your Savings Plus account, the trustee will vote the shares in the
same proportion as shares voted by other participants in the Plan. If you are
an ADRP or ESOP participant, your shares will not 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. The 1996 Performance Stock Option Plan proposal requires the
affirmative vote of a majority of the votes cast at the meeting. Shareholder
proxies will be received and tabulated by an independent agent, and the vote
will be certified by an independent Inspector of Election. If a shareholder
withholds a vote for one or more directors, the shares will be counted in
determining the quorum for the meeting but will not be counted in determining
the votes for those directors. If a shareholder holds shares in a broker
account and has given specific instructions, the shares will be voted in
accordance with those instructions. If no voting instructions are given, under
New York Stock Exchange rules the broker may exercise discretionary authority
and vote for the Board of Directors nominees. However, the broker may not vote
on the proposal without instructions from the shareholder.
2
Election of Directors
The Board of Directors presently consists of fourteen members divided into
three classes designated as Class I, Class II and Class III with terms expiring
at the 1999, 1997 and 1998 annual meetings, respectively. Three incumbent Class
II directors, namely Messrs. Levinson, Richardson and Rose, will be retiring
from the Board at the annual meeting on April 16, 1997. After the meeting,
there will be four members each in Class I and Class II and three members in
Class III pursuant to a Bylaw requirement that the classes be as nearly equal in
number as possible.
There are four nominees standing for election as Class II directors for a
three-year term expiring at the 2000 annual meeting. The following identify the
nominees standing for election and the continuing directors, including principal
occupation and business experience for at least five years.
Nominees - Class II
For Term Expiring in 2000
Allan E. Dugan, age 56, has served as Senior Vice President, Corporate Strategic
Services, Xerox Corporation (provider of document products and services) since
February 1992. Prior to assuming his current position, Mr. Dugan was Senior
Vice President and General Manager, Manufacturing Operations Worldwide. Mr.
Dugan has been a director of the Company since 1991.
Charles I. Plosser, age 48, has served as Dean (since January 1993) and John M.
Olin Distinguished Professor of Economics and Public Policy (since 1991) of the
William E. Simon Graduate School of Business Administration, University of
Rochester. He has been a director of the Company since October 1996.
Thomas S. Richards, age 53, has been President and Chief Operating Officer of
the Company since March 1996. Mr. Richards was Senior Vice President, Energy
Services from August 1995 to March 1996, Senior Vice President, Corporate
Services and General Counsel from August 1994 to August 1995, Senior Vice
President, Finance and General Counsel from October 1993 to August 1994 and
General Counsel from October 1991 to October 1993. Previous to joining the
Company in October 1991, Mr. Richards was an attorney with the law firm of
Nixon, Hargrave, Devans & Doyle. He has been a director of the Company since
April 1996.
Nancy J. Woodhull, age 52, has been Senior Vice President of The Freedom Forum
(a journalism foundation) since January 1996. She was President of Nancy
Woodhull & Associates Inc. (a media education and management consulting
business) from January 1991 to January 1996. Ms. Woodhull previously held
several executive positions in the journalism field and was a founding editor of
USA TODAY. She has been a director of the Company since July 1996.
Continuing Directors - Class III
Term Expiring in 1998
Angelo J. Chiarella, age 63, serves as President and Chief Executive Officer of
Midtown Holdings Corp. (real estate development and leasing), a position he has
held since 1971. He is a director of Transmation, Inc. and has been a director
of the Company since 1992.
Jay T. Holmes, age 54, has been an attorney and commercial arbitrator since May
1996. He served as Executive Vice President and Chief Administrative Officer
of Bausch & Lomb Incorporated from March 1995 until his retirement in May 1996.
Mr Holmes previously held numerous executive
3
positions at Bausch & Lomb, serving as Senior Vice President and Chief
Administrative Officer from November 1994 to March 1995 and as Senior Vice
President - Corporate Affairs and Secretary from 1983 until November 1994. Mr.
Holmes has been a director of the Company since 1992.
Cornelius J. Murphy, age 66, 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 is a director of Transmation, Inc. and has been a director of the
Company since 1981.
Continuing Directors - Class I
Term Expiring in 1999
William Balderston III, age 69, 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 Home Properties of New
York, Inc. Mr. Balderston has been a director of the Company since 1982.
Samuel T. Hubbard, Jr., age 47, has served as President and Chief Executive
Officer of The Alling and Cory Company (a wholesale distributor of fine printing
paper, industrial and business products) since 1986. Prior to joining Alling
and Cory, Mr. Hubbard held various management positions with Chase Lincoln First
Bank, a former subsidiary of The Chase Manhattan Corporation. He is a director
of First Empire Corporation and the Genesee Corporation.
Roger W. Kober, age 63, has been Chairman of the Board and Chief Executive
Officer of the Company since March 1996. Mr. Kober served as Chairman of the
Board, President and Chief Executive Officer from January 1992 to March 1996.
He was President and Chief Executive Officer of the Company from June 1991 to
January 1992 and President and Chief Operating Officer from December 1988 to
June 1991. Mr. Kober is a director of Home Properties of New York, Inc. He has
been a director of the Company since 1988.
Constance M. Mitchell, age 68, 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 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.
4
Security Ownership of Management
The following table shows beneficial ownership of the Company's Common Stock
as of February 1, 1997 for each director and nominee, as well as each executive
officer named in the Summary Compensation Table. No director, nominee or
executive officer beneficially owns over .03% of the outstanding shares, and the
total beneficially owned by all directors, nominees and executive officers as a
group represents .12% of the shares outstanding.
Total Shares of
Shares of Accrued Common Stock and
Common Stock Common Stock Common Stock
Name of Beneficial Owner Beneficially Owned /(1)/ Equivalent Units /(2)/ Equivalent Units
William Balderston III 1,291 7,407 8,698
Angelo J. Chiarella 1,461 7,937 9,398
Allan E. Dugan 300 3,899 4,199
Jay T. Holmes 600 7,789 8,389
Samuel T. Hubbard, Jr. 400 1,248 1,648
Roger W. Kober 10,469 16,645 27,114
Theodore L. Levinson 1,100 8,606 9,706
Robert C. Mecredy 4,366 3,408 7,774
Constance M. Mitchell 210 8,879 9,089
Cornelius J. Murphy 3,058 10,461 13,519
Charles I. Plosser 100 1,352 1,452
Thomas S. Richards 3,654 8,092 11,746
Arthur M. Richardson 200 9,765 9,965
M. Richard Rose 804 9,841 10,645
Robert E. Smith 5,337 7,151 12,488
J. Burt Stokes 2,343 6,704 9,047
Nancy J. Woodhull 200 1,226 1,426
All Directors, Nominees
and Executive Officers as
a group (22 Individuals) 46,917 131,800 178,717
(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, 259 shares and Mr. Kober, 6,044 shares.
(2) Includes Common Stock equivalent units accrued under the Company's Long Term
Incentive Plan, 401(k) Restoration Plan, Directors' Deferred Compensation
Plan and Deferred Stock Unit Plan for Non-Employee Directors for which the
director, nominee or executive officer does not have voting rights.
Directors and officers of the Company are required by Section 16 of the
Securities Exchange Act of 1934 to file reports of their trading in Company
equity securities with the Securities and Exchange Commission. Based upon a
review of the records furnished to the Company for 1996, all required reports
were filed in a timely manner except for an inadvertent late filing relating to
the sale of 137 shares of Common Stock owned by the wife of Wilfred J.
Schrouder, an officer.
5
Meetings and Standing Committees of the Board of Directors
The Board of Directors met eleven times during 1996. All nominees 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 1996, the Committee met four times. Messrs. Balderston, Dugan, Kober,
Murphy, Richards and Richardson (Chairman) 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 1996, the Committee met four times. Messrs.
Chiarella, Dugan, Hubbard, Levinson, Rose and Mrs. Mitchell (Chairman) are
currently members of the Committee.
Committee on Management. The Committee on Management is responsible for the
review and recommendation to the Board of the Company's executive compensation
and benefits program, including awards under the Company's annual Executive
Incentive Plan, Long Term Incentive Plan and the Performance Stock Option Plan.
The Committee sets the compensation of the Chief Executive Officer and reviews
the compensation levels of members of management proposed by the Chief Executive
Officer. The Committee reviews organizational structure, corporate goals and
objectives and management development, including management succession. During
1996, the Committee met five times. Messrs. Balderston, Murphy (Chairman),
Richardson and Rose are currently members of the Committee.
Committee on Directors. The Committee on Directors is responsible for all
matters relating to directors, including evaluation of director performance,
director compensation, director succession and corporate governance issues. The
Committee recommends to the Board of Directors candidates to be nominated for
election as directors at the annual meeting of shareholders and to fill any
vacancies on the Board. During 1996, the Committee met four times. Messrs.
Balderston, Holmes (Chairman), Richardson 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 October 1, 1997 will be
considered by the Committee when recommending nominees for election at the 1998
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 provides
to the Board a detailed review of all aspects of compensation for the senior
officer positions and the Executive Leadership Team. Members of the Committee
and other members of the Board are available to meet with the management team or
with individual members of management to discuss Company matters as needed.
6
The Committee has procured the services of a compensation consulting firm to
advise the Committee on the reasonableness of compensation paid to senior
officers of the Company as compared to the external market for executives,
including both utility companies and general industry. To facilitate this
process, the Committee has sponsored three consultant studies regarding
executive compensation in the last nine years. The studies indicated that
Company executive compensation levels were 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
four 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 utility companies in the Edison
Electric Institute (EEI) revenue class of $600 million to $2 billion (29
companies) in the second highest paid quartile of this class. The average base
pay for RG&E's executives in 1996 was 1.7% below the median base pay of the
companies participating in the EEI salary comparison group.
The second component is annual incentive compensation. A substantial portion
of the annual compensation of each officer relates to, and is 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 Executive Incentive Plan objectives for 1996 consisted of three
categories: (1) Shareholder Satisfaction, (2) Customer Satisfaction, and (3)
Employee Effectiveness. Each category was given equal weight in the performance
objectives. The Committee monitored the Company's performance regarding the
Plan's objectives throughout the year. Based upon 1996 performance results, the
computations of which were reviewed by the Company's independent auditors, the
Company's achievement of its combined objectives set under the Plan: (1) Return
on Net Assets; (2) Residential and Business Customer Assessment scores; and (3)
Employee Effectiveness Index resulted in an Executive Incentive Plan payout.
Members of the Executive Management Team (four employees) and the Executive
Leadership Team (twenty employees) participated in the 1996 Plan. The bonus
awards for 1996, as reported in the Summary Compensation Table, reflect the
achievement of earning 72.2% of the Targeted Plan Award for 1996, 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
recommend to the Board of Directors the granting of annual awards to key
employees of 500 to 4,000 Performance Shares based on the participant's salary
grade. The
7
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 was two years). Modifications to the
LTIP to include a financial performance measurement were approved by the Board
of Directors in August of 1996. In addition to the Edison Electric Institute
100 Index of investor-owned electric utilities (EEI 100 Index), the Plan will
take into consideration the Company's performance with Return on Net Assets as
compared to a pre-established target goal identified in the Corporate Business
Plan. At the end of the three-year performance cycle, the Company's three-year
annualized shareholder return on Common Stock will be ranked with the companies
which comprise the EEI 100 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 and the Return on Net Assets results.
The number of Performance Shares payable to a participant will be valued based
on the average of the closing price of RG&E Common Stock during December of the
year prior to the awarding of such shares. Awards granted under the LTIP are
paid in cash. Participants are expected to invest the after-tax proceeds in
shares of the Company's Common Stock and to retain the shares for a period of
at least three years.
The second LTIP performance cycle concluded in December 1996. The total
shareholder return during the three-year performance cycle, as compared to the
EEI 100 Index, placed RG&E in 88th position out of 97 companies. Based upon
RG&E's relative performance compared to the EEI 100 Index, it was determined
that no payout be made based on the three-year annualized shareholder return on
Common Stock. However, the Company did achieve a Return on Net Assets of 10.0%,
which was above the target goal established in the Corporate Business Plan.
Therefore, the Committee on Management recommended to the Board of Directors a
41.5% payout be made for 1996 for Performance Shares that were granted in 1994.
These awards were grossed up to cover federal and state income taxes, as
reported in the Summary Compensation Table.
The Company's total executive compensation objective for its top five
executive positions is to be fully competitive at the target level of the
salary comparison group. Total compensation is defined as the combination of
base salary and short and long term incentives. With a 72.2% Executive
Incentive Plan payout in 1996 and a Long Term Incentive Plan payout of 41.5% for
the performance cycle ending in 1996, the average total compensation for RG&E's
top five executives is 14.6% below the median of the EEI salary comparison
group. Had a target Executive Incentive Plan award and 100% award for the Long
Term Incentive Plan been earned, the average total compensation for RG&E's top
five executives would have been 8.8% below the median of the same comparison
group.
In 1996, a fourth component to executive compensation, a Performance Stock
Option Plan, was established, subject to shareholder approval at the annual
meeting. The Stock Option Plan allows the granting of stock options to key
executives over a ten-year Plan period ending December 31, 2006. The stock
options are designed to further align management's incentives with the interests
of the Corporation's shareholders and to reward executives for significant
increases in shareholder value. The Stock Option Plan was designed to motivate
management to increase shareholder value over the long-term. The full benefit
of the compensation package to each executive cannot be realized unless stock
price appreciation occurs over a number of years. In determining the number of
options awarded, consideration is given to competitive practices and the duties
and scope of responsibilities of each executive position. In January 1997, the
Committee recommended to the Board of Directors the stock option awards as
reported in the 1996 Performance Stock Option Plan table.
8
Chief Executive Officer Compensation. With respect to Mr. Kober's base
salary for 1996, the Committee assessed his overall leadership of the Company,
including the continued implementation and adherence to a long range
comprehensive business plan to appropriately position the Company in the
competitive and rapidly changing utility environment of the 1990s, his
effectiveness in leading the corporation through this transition, continued
emphasis on employee effectiveness, the depth of his experience and his job
performance. Results reflecting improved overall customer satisfaction will be
a critical component in retaining and acquiring customers in the new competitive
marketplace. Mr. Kober has also led efforts to reorganize the Company to better
meet the competitive future. These efforts include the direct hiring of several
key senior executives as well as filling other critical leadership positions
throughout the Company.
The Board of Directors was favorably impressed with Mr. Kober's performance
and achievement in 1995. The Board opted to increase Mr. Kober's base pay for
1996 by 10.0%. This represented the first base pay increase since January of
1994 for Mr. Kober. As a result, Mr. Kober's base pay for 1996 is 9.4% below
the median of the EEI salary comparison group. Mr. Kober's 1996 performance
will be reviewed by the Board in March of 1997. Any approved base salary
adjustment will be made at that time and will be reported in the 1998 proxy
statement.
As Mr. Kober received an annual Executive Incentive Plan payout and a long
term bonus for 1996, his total compensation is 23.3% below the median of the EEI
salary comparison group. Had Mr. Kober received the target award for both of
these plans, his total compensation would have been 17.7% below the median of
the same comparison group.
Mr. Kober was granted 4,000 Performance Shares in 1996 under the Long Term
Incentive Plan which was previously summarized. The performance cycle for these
shares will end on December 31, 1998 and will be evaluated at end of cycle, as
previously summarized.
With shareholder approval of the 1996 Performance Stock Option Plan, Mr.
Kober will be granted 76,684 performance contingent stock options at $19.0625
per share based upon the average closing price of RG&E Common Stock on January
22, 1997. These options will become 50% vested at an exercise price of $25 per
share, 75% vested at $30 per share and 100% vested at $35 per share. The
maximum value of these options will be realized upon the achievement of a 75%
improvement in shareholder value. The vesting of these options will occur
incrementally as shareholder value increases.
Performance shares under the Long Term Incentive Plan and the Performance
Stock Option Plan link executive compensation directly with shareholder interest
since both the targets and the payouts are measured in terms of shareholder
value.
Committee on Management
Cornelius J. Murphy, Chairman
William Balderston III
Arthur M. Richardson
M. Richard Rose
9
Executive Compensation
Executive Officers. The following tables show the compensation earned by the
Company's chief executive officer and each of its four highest compensated
executive officers over the past three years.
Summary Compensation Table
- -----------------------------------------------------------------------------------------------------------
Annual Long Term
Compensation Compensation
----------------------------------------- All Other
Salary Bonus LTIP Payouts Compensation
Name and Principal Position Fiscal Year ($) ($) (1) ($) (2) ($) (3)
- -----------------------------------------------------------------------------------------------------------
ROGER W. KOBER 1996 391,735 68,467 83,707 9,793
Chairman of the Board and 1995 361,647 0 0 9,041
Chief Executive Officer (4) 1994 361,647 133,586 N/A 9,041
THOMAS S. RICHARDS 1996 223,825 37,265 41,853 5,596
President and 1995 191,852 0 0 4,796
Chief Operating Officer (5) 1994 191,852 53,274 N/A 4,796
ROBERT E. SMITH 1996 217,689 27,305 41,853 5,442
Senior Vice President, 1995 208,975 0 0 5,224
Energy Operations 1994 208,943 53,274 N/A 5,224
J. BURT STOKES 1996 190,000 27,305 41,853 4,750
Senior Vice President, 1995 N/A N/A N/A N/A
Corporate Services and 1994 N/A N/A N/A N/A
Chief Financial Officer (6)
ROBERT C. MECREDY 1996 151,330 15,302 20,927 3,783
Vice President, 1995 144,120 12,598 0 3,603
Nuclear Operations 1994 138,578 30,466 N/A 3,465
- -----------------------------------------------------------------------------------------------------------
N/A - Not Applicable
(1) 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.
(2) Pursuant to the Long Term Incentive Plan guidelines, the amount of annual
awards depends upon the total shareholder return over a three-year period
(two years in first performance cycle) ending in 1996, as compared to the
companies which comprise the Edison Electric Institute 100 Index of
investor-owned electric utilities. The Board of Directors approved a
modification to the Plan in August 1996. The Plan was modified to include a
financial performance measurement which compares the Company's Return on Net
Assets against a pre-established target goal identified in the Corporate
Business Plan. The table reports actual amounts earned at the end of the
performance cycle, grossed up to cover federal and state income taxes.
Awards granted under the Plan are paid in cash. Participants are expected
to invest the after-tax proceeds in shares of the Company's Common Stock and
to retain the shares for a period of at least three years.
10
(3) Company contributions to RG&E Savings Plus Plan, 401(k), and the 401(k)
Restoration Plan.
(4) In March 1996, Mr. Kober assumed the position of Chairman of the Board and
Chief Executive Officer.
(5) In March 1996, Mr. Richards was promoted to President and Chief Operating
Officer.
(6) Mr. Stokes was employed by the Company on January 2, 1996.
Long Term Incentive Plan - Grants in Last Fiscal Year (1996)
- ---------------------------------------------------------------------------------------------------
Estimated Future Payouts
Under Non-Stock Price-Based
Plans
- ---------------------------------------------------------------------------------------------------
Number of
Common Performance
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 3 Years 0 - 3,999 4,000 8,000
Chairman of the Board and
Chief Executive Officer
THOMAS S. RICHARDS 2,750 3 Years 0 - 2,749 2,750 5,500
President and
Chief Operating Officer (2)
ROBERT E. SMITH 2,000 3 Years 0 - 1,999 2,000 4,000
Senior Vice President,
Energy Operations
J. BURT STOKES 2,000 3 Years 0 - 1,999 2,000 4,000
Senior Vice President,
Corporate Services and
Chief Financial Officer
ROBERT C. MECREDY 1,000 3 Years 0 - 999 1,000 2,000
Vice President,
Nuclear Operations
- ---------------------------------------------------------------------------------------------------
(1) Pursuant to the Long Term Incentive Plan, in January 1996 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. Stock dividend equivalents will be deemed to be paid 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 (1998 for this cycle)
based on the Company's ranking against the Edison Electric Institute 100
Index of investor-owned electric utilities for total shareholder return on a
three-year annualized basis and the Company's Return on Net Assets
11
compared to a pre-established target goal identified in the Corporate
Business Plan. The number of shares payable, if any, will be based on the
average closing price of RG&E Common Stock for December 1998. Any award will
be paid in cash by March 1, 1999. Participants are expected to invest the
after-tax proceeds of any award in shares of this Company's Common Stock and
to retain the shares for a period of at least three years.
(2) Mr. Richards was granted 2,000 performance shares in January 1996. He was
granted an additional 750 performance shares in March 1996 as a result of
his promotion to President and Chief Operating Officer.
1996 Performance Stock Option Plan /(1)/
- --------------------------------------------------------------------------------
Number of
Name and Performance Contingent
Principal Position Options Awarded /(2)/
- --------------------------------------------------------------------------------
ROGER W. KOBER
Chairman of the Board
and Chief Executive Officer 76,684
THOMAS S. RICHARDS
President and
Chief Operating Officer 48,427
ROBERT E. SMITH
Senior Vice President,
Energy Operations 31,785
J. BURT STOKES
Senior Vice President,
Corporate Services and
Chief Financial Officer 31,785
ROBERT C. MECREDY
Vice President,
Nuclear Operations 19,171
All executive officers as a group (10 persons),
including the above five 291,994
All executive non-officers as a group (13 persons) 195,438
- --------------------------------------------------------------------------------
(1) Awards subject to shareholder approval at the annual meeting.
(2) Represents an exercise price of Common Stock at $19.0625/share, with 50%
vesting at $25/share, 75% vesting at $30/share and 100% vesting at
$35/share.
12
Employment Agreements. The Company has entered into change in control
agreements for an indefinite term with Messrs. Kober, Richards, Smith and
Stokes. The agreements provide that each of the officers that is a party to the
agreements is entitled to specified compensation if, within two years after a
change in control of the Company (as defined in the agreements), the officer's
employment is involuntarily terminated by the Company other than termination for
cause (as defined in the agreements) or by reason of death, disability or normal
retirement. Involuntary termination also includes the employee's resignation
following a change in duties or the employment relationship as defined in the
agreements. If an involuntary termination occurs within the two-year covered
period, Mr. Kober will receive a lump sum payment equal to three times his
annual salary and bonus (final year or final three-year average, whichever is
higher), and the other senior officers will receive two times their annual
salary and bonus, subject to reduction in order to maximize the after-tax effect
to the officer. If Mr. Kober were to reach his normal retirement (age 65) prior
to three years following his termination date (two years for the other
officers), the lump sum payment would be reduced pro-rata with a minimum payment
of one times annual salary and bonus. A payment of one times annual salary and
bonus would be payable in the case of voluntary termination during the two-year
period with a pro-rata reduction in the payment if termination occurs within one
year prior to normal retirement.
Directors. Directors receive an annual retainer of $18,000, plus $800 for
each Board or committee meeting attended. Committee chairmen and Executive and
Finance Committee members receive an additional retainer of $2,500 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.
The Company has a Deferred Stock Unit Plan for Non-Employee Directors (the
Plan), which serves to align the directors' financial interests with those of
the shareholders. Each director's deferred stock account is based on the amount
of the annual retainer, the number of years of Board service and the price of
the Company's Common Stock. Under the Plan, each director is credited annually
with deferred stock units equal to 75% of the annual retainer. Benefits under
the Plan become partially vested after five years of service and are fully
vested after ten years. Upon cessation of membership on the Board, deferred
amounts will be payable in cash in a lump sum or in up to ten annual
installments as determined by each director.
13
Shareholder Return Comparison
The following graph compares the cumulative total shareholder return on the
Company's Common Stock with the Edison Electric Institute 100 Index of
investor-owned electric utilities for the past five years. Total return was
calculated assuming investment of $100 on December 31, 1991 and reinvestment of
all dividends.
[GRAPH APPEARS HERE]
COMPARISON OF FIVE YEAR CUMULATIVE RETURN
AMONG RG&E, EEI 100 INDEX AND S&P 500 STOCK INDEX
Measurement period RG&E EEI 100 S&P 500
(Fiscal year Covered) Index Index
------ ------- -------
Measurement PT --
12/31/91 $100 $100 $100
FYE 12/31/92 $113 $108 $108
FYE 12/31/93 $129 $120 $118
FYE 12/31/94 $111 $106 $120
FYE 12/31/95 $131 $139 $165
FYE 12/31/96 $121 $140 $203
14
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 annual
compensation (salary and bonus). Under the Internal Revenue Code of 1986, the
annual benefit payable by the funded plan was limited to $120,000 for 1995. 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
- ----------------- -------- ------- ------- ------- ------- ------- -------
$150,000 70,200 77,700 85,200 92,700 100,200 104,500 108,200
200,000 94,500 104,500 114,500 124,500 134,500 143,200 148,200
250,000 118,700 131,200 143,700 156,200 168,700 181,200 188,200
300,000 143,000 158,000 173,000 188,000 203,000 218,000 228,200
350,000 167,300 184,800 202,300 219,800 237,300 254,800 268,200
400,000 191,500 211,500 231,500 251,500 271,500 291,500 308,200
450,000 215,800 238,300 260,800 283,300 305,800 328,300 348,200
500,000 240,000 265,100 290,100 315,100 340,100 365,100 388,200
550,000 264,300 291,900 319,400 346,900 374,400 401,900 428,200
(1) Average annual salary includes base pay (three highest consecutive years)
and annual bonus (three highest years) for the last ten years before
retirement. The amounts shown in the salary and bonus columns in the
Summary Compensation Table (see page 10) constitute qualifying compensation
under the plans.
(2) The table is based on Retirement Plan formula pertaining to employees hired
prior to December 31, 1975. The actual pension benefit for employees hired
after December 31, 1975 will be less than the table amounts. Messrs. Kober,
Richards, Smith, Stokes and Mecredy have been credited with 31, 13, 37,
1 and 25 years of service, respectively, under the plans.
The RG&E Unfunded Retirement Income Plan will also pay Mr. Kober $292 per
month, during retirement to replace retiree life insurance which the Company
canceled in 1985. This amount is payable only after retirement and is 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.
15
Approval of the 1996 Performance Stock Option Plan
General. On August 21, 1996, the Board of Directors adopted, subject to
shareholder approval, the Rochester Gas and Electric Corporation 1996
Performance Stock Option Plan (the "1996 Stock Option Plan" or the "Plan") which
provides for the granting of options to purchase up to 2,000,000 shares of
Common Stock to executive officers and other key employees of the Company who
occupy responsible managerial or professional positions and have the capability
of making a substantial contribution to the success of the Company.
Set forth below is a summary of the material terms of the Plan, a copy of
which may be obtained upon written request to the Corporate Secretary.
Purpose. The purpose of the 1996 Stock Option Plan is to improve the
Company's profitability by providing certain key employees with a greater stake
in the Company's success through the granting of options to purchase Common
Stock.
Eligibility. Eligible employees will be selected by the Committee from
executive officers and other key employees of the Company who have the
capability of making a substantial contribution to the success of the Company.
The Committee will select eligible employees who will be awarded options (an
"Award" or an "Option") and determine the form and amount of Awards in its sole
discretion based on any factors considered relevant by the Committee, including
but not limited to the functions and responsibilities of the employee, past and
potential contributions to profitability and the value of his or her service to
the Company. Initially, the Committee has selected 24 employees to participate
in the Plan ("Participants").
Term of Plan. If approved by the Company's shareholders, the 1996 Stock
Option Plan will become effective as of January 22, 1997. The Committee has
made Awards to eligible employees, subject to shareholder approval, as of that
date. The Committee may continue to make Awards pursuant to the Plan until the
last day of the Company's 2006 fiscal year. All Awards made on or prior to such
date shall remain in effect until satisfied or terminated in accordance with the
Plan.
Administration of the Plan. The Committee charged with administering the
Plan is the Committee on Management, which will consist of no less than two
members of the Board of Directors who are "disinterested persons" within the
meaning of Rule 16b-3 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") and "outside directors" under Section 162(m) of the Internal
Revenue Code of 1986, as amended (the "Code"). The Committee members will be
appointed from time to time by the Board and will serve in the sole discretion
of the Board. The Committee will have the discretion to designate the
executives or class of executives eligible to participate in the Plan, grant
Awards, impose limits, conditions and restrictions on any Award and take all
other action necessary or desirable in connection with the administration of the
Plan, including but not limited to the adoption of rules relating to the Plan.
All determinations made by the Committee pursuant to the Plan shall be final,
conclusive and binding on all persons. The Committee may delegate all or any
part of its authority under the Plan to one or more directors or officers of the
Company provided such delegation would not jeopardize the Plan's qualification
under Section 162(m) of the Code or Rule 16b-3 of the Exchange Act.
Issuance of Shares Subject to the Plan. Authorized but unissued shares or
treasury shares of Common Stock of the Company, par value $5 per share, will be
issued under the Plan in the maximum amount of 2,000,000 shares. Any shares
subject to an Award (or portion thereof) which is canceled, terminates, expires
or lapses for any reason will be eligible to be the subject of a subse-
16
quent Award. In the event of any merger, reorganization, consolidation,
recapitalization, separation, liquidation, stock dividend, stock split,
combination, distribution or other change in corporate structure of the Company,
the Committee will adjust the number and class of securities eligible to be
awarded under the Plan, the terms of any outstanding Award and the 2,000,000 cap
on the amount of shares available under the Plan in such manner as the Committee
shall decide in its sole discretion to be appropriate to prevent the dilution or
diminution of Awards.
Grant of Options. The Committee will, in its sole discretion, subject to the
terms and conditions of the Plan, determine which executives and other key
employees shall receive Awards and the number of shares subject to each Option
so awarded. During any calendar year no Participant shall be granted Options
for more then 200,000 shares of Common Stock. Each Award shall be evidenced by
an agreement (an "Award Agreement") specifying the number of shares of Common
Stock to which the Option so awarded applies, the exercise price, any conditions
to exercise of the Option, and any other terms and conditions as the Committee
shall determine in its sole discretion.
Exercise of Options. Options granted under the Plan shall be exercisable
during such period or periods as the Committee determines provided that no
Option will be exercisable more than ten (10) years after the date the Award of
such Option is made. The purchase price per share of Common Stock deliverable
upon the exercise of an Option cannot be less than the Fair Market Value of a
share of Common Stock on the date the Award is made, as determined by the
Committee in accordance with the Plan. Fair Market Value is defined under the
Plan to mean, with respect to any given day, the average of the highest and
lowest reported sales prices on the principal national stock exchange on which
the Common Stock is traded, or if such exchange was closed on such day or, if it
was open but the Common Stock was not traded on such day, then on the next
preceding day that the Common Stock was traded on such exchange, as reported by
such responsible reporting service as the Committee may select. Except as
summarized below with respect to the death, retirement or Disability of a
Participant or a Change in Control, Options shall vest and become exercisable
upon such terms as the Committee shall establish, including based on the
Company's publicly traded stock price, the passage of time or such other events
as the Committee may determine. The Committee may establish installment
exercise terms such that Options become exercisable in a series of cumulating
portions. Options were granted by the Board of Directors on January 22, 1997 at
an exercise price of $19.0625 per share, subject to shareholder approval. These
options are vested at 50% at $25 per share, 75% vested at $30 per share and
fully vested at $35 per share.
Payment Upon Exercise of Option. An Option, or portion thereof, may be
exercised upon delivery of a written notice of exercise to the Company and
payment for the shares of Common Stock being exercised. Payment may be made in
cash or check or, if approved by the Committee, upon the delivery of shares of
Common Stock of the Company, or a combination of the foregoing, with a value
equal to the exercise price for such Option as stated in the Award Agreement.
The Committee may impose such limitations and conditions upon tendering Common
Stock upon exercise of an Option as it deems appropriate. A Participant shall
receive a certificate or certificates evidencing its shares of Common Stock as
soon as practicable upon payment of the exercise price. A Participant will not
possess the rights and privileges of a shareholder with respect to the shares of
Common Stock subject to an Option until such time as payment is made and the
shares are issued or transferred to the Participant.
17
Termination of Employment. Except as provided below with respect to the
death, disability or retirement of a Participant, or a Change of Control of the
Company, or as the Committee may otherwise determine, all outstanding Options
terminate upon the termination of the Participant's employment.
Death, Disability, Retirement. If a Participant dies, any Option exercisable
on the date of death may be exercised by the Participant's estate or any person
who acquires the right to exercise such Options by reason of the death of the
Participant within one (1) year after the Participant's death, provided that
such exercise occurs within the remaining effective term of the Option. The
fact that the Participant may have been terminated prior to his or her death as
a result of his or her retirement or a Disability does not affect the
Participant's right to exercise any Options, or portion thereof, exercisable on
the date of death.
If a Participant retires at or after age 65 or, in the sole discretion of the
Committee, prior to age 65, the Participant (or the Participant's estate or
beneficiaries) will have the right to exercise any then exercisable Option
within three (3) months (or up to three (3) years in the discretion of the
Committee) after the date of the Participant's retirement, provided that such
exercise occurs within the remaining effective term of the Option.
If a Participant's employment terminates as a result of the Participant's
Disability, the Participant (or the Participant's estate or beneficiaries) will
have the right to exercise any Option exercisable on the date the Participant's
Disability arose within three (3) months (or up to one (1) year in the
discretion of the Committee) after the date the Participant's Disability arose,
provided that such exercise occurs within the remaining effective term of the
Option. A "Disability" for purposes of the Plan means a termination of
employment by reason of the Participant's becoming permanently and totally
disabled. A Participant shall be deemed to have become permanently and totally
disabled if (and only if) he or she has become permanently and totally disabled
under the long-term disability plan sponsored by the Company.
Change of Control. In the event of a Change of Control prior to the
termination of a Participant's employment by the Company, a Participant's right
to purchase 100% of any shares of Common Stock subject to an Option vests in its
entirety and remains exercisable for ninety (90) days following the occurrence
of such Change in Control. A "Change of Control" is deemed to have occurred for
purposes of the Plan upon the occurrence of any one or more of the following
events: (i) the acquisition (other than from the Company) by any person,
entity or "group" (within the meaning of Section 13(d)(3) or 14(d)(2) of the
Exchange Act but excluding for this purpose the Company or any employee benefit
plan of the Company which acquires beneficial ownership of voting securities of
the Company) of "beneficial ownership" (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of twenty percent (20%) or more of either
the then outstanding shares of Common Stock or the combined voting power of the
Company's then outstanding voting securities entitled to vote generally in the
election of directors; or (ii) individuals who, immediately prior to the
effectiveness of any reorganization, merger or consolidation of assets of the
Company (collectively, a "Business Combination"), constitute the Board (and for
purposes of this definition the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board; provided that any person becoming a
member of the Board subsequent to any Business Combination whose election or
nomination for election by the Company's shareholders (other than an election or
nomination of an individual whose initial assumption of office is in connection
with an actual or threatened election contest relating to the election of the
directors of the Company, as such terms are used
18
in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) was
approved by a vote of at least a majority of the directors then comprising the
Incumbent Board shall be, for purposes of this Agreement, considered a member of
the Incumbent Board; (iii) approval by the shareholders of the Company of any
Business Combination with respect to which persons who were the shareholders of
the Company immediately prior to such Business Combination do not, immediately
thereafter, own more than fifty percent (50%) of the combined voting power
entitled to vote generally in the election of directors of the reorganized,
merged or consolidated entity's then outstanding voting securities, or a
liquidation or dissolution of the Company, or the sale of all or substantially
all of the assets of the Company; or (iv) any other event or series of events
which is determined by a majority of the Incumbent Board to constitute a Change
of Control for the purposes of the Plan.
Restrictions on Share Transfers. The Committee may impose any restrictions
on any shares of Common Stock acquired pursuant to exercise of an Option as is
necessary to comply with applicable federal securities laws, the requirements of
any national securities exchange or any other system on which the Common Stock
of the Company is then listed or traded, or any blue sky or other state
securities laws.
Dividend Equivalent Rights. The Committee may, in its sole discretion, grant
to any Participant in connection with an Award a right to receive a cash payment
upon any exercise of an Option, or portion thereof, equal to the quarterly
dividend payment, if any, per share of Common Stock paid by the Company to its
shareholders from the date the Option was granted to the date of exercise of the
Option (a "DER"). At the Participant's election, any payment to be made with
respect to DERs may be offset against the purchase price of shares of Common
Stock to be purchased upon exercise of the Option. All DERs terminate upon
expiration of the Option to which they relate and the Participant is not
entitled to any payment with respect thereto.
Amendments. The Committee may amend, modify or terminate the Plan for any
reason at any time and from time to time in its sole discretion. However, the
Plan will not be amended without shareholder approval if shareholder approval is
required to maintain the Plan's qualification under Rule 16b-3 of the Exchange
Act and/or Section 162(m) of the Code. No termination, modification or
amendment of the Plan may, without the consent of a Participant, alter or impair
the rights or obligations under any Award previously granted to such
Participant.
Withholding Taxes. Whenever the Company issues or transfers shares of Common
Stock under the Plan, it has the right to require the Participant to remit to
the Company prior to the delivery of any certificate evidencing such shares an
amount sufficient to satisfy any federal, state or local withholding tax that
may apply with respect to such shares. A Participant may elect in writing on or
prior to the date of exercise of the Option to satisfy any obligation to pay
withholding tax by delivery of shares of Common Stock to the Company of a Fair
Market Value equal to the amount required to be withheld. The Fair Market Value
of the shares of Common Stock to be delivered in satisfaction of any withholding
requirement shall be determined as of the date that the taxes are required to be
withheld. The amount of the withholding requirement payable in stock will be
determined by the Committee at the time the Participant's election to pay in
shares of Common Stock is made, but will not exceed the amount determined by
using the maximum federal, state or local marginal income tax rates applicable
to the Participant at such time. Any cash payment to be made under the Plan
will be net of an amount sufficient to pay any federal, state or local
withholding tax applicable to such payment.
19
Miscellaneous. Nothing in the Plan or in any Award Agreement confers upon
any Participant the right to continue in the employment of the Company. No
Award granted under the Plan may be sold, transferred, pledged, assigned or
otherwise hypothecated, except by will or the laws of descent and distribution.
Awards may be exercised only by a Participant or a Participant's legal
representative during the life of the Participant.
The Plan will become effective upon its approval by the shareholders of the
Company. The affirmative vote of a majority of the shares present in person or
by proxy and entitled to vote at the meeting will constitute approval of the
Plan. Proxies solicited by the Board of Directors will be voted FOR the
foregoing proposal unless otherwise indicated.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE PLAN
Miscellaneous
The Company renewed a directors and officers liability insurance policy
provided by Associated Electric and Gas Insurance Services Limited (AEGIS) for a
one-year term, effective as of January 1, 1997. The policy insures the Company
against any obligations it may incur as a result of the indemnification of its
directors and officers. The effective cost of the insurance will be zero for
1997 as the Company received a member's continuity credit of $792,365, which
fully offset the premium for the policy. In addition, the Company has a policy
with Energy Insurance Mutual Limited that provides excess coverage for such
insurance. The premium cost was $240,796 for a one-year term, effective as of
January 1, 1997. The Company also renewed a fiduciary liability insurance
policy carried with AEGIS, effective as of May 1, 1996. The premium cost for
this policy was $31,240 for a one-year term.
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 1997.
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 $9,000, 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 4, 1997.
In order to be eligible for inclusion in the proxy material for the Company's
1998 annual meeting, any shareholder proposal to take action at such meeting
must be received by the Company no later than November 4, 1997.
March 4, 1997
20
[LOGO OF RG AND E] THIS IS YOUR PROXY.
YOUR VOTE IS IMPORTANT.
Rochester Gas and Electric Corporation's 1997 annual meeting of shareholders
will be held at the Rochester Riverside Convention Center on Wednesday, April
16 at 11 a.m. Issues to be decided on at the meeting are listed on the attached
proxy form and described in more detail in the proxy statement. To ensure that
your shares are voted at the meeting, please complete the form, detach at the
perforation and return to the tabulating agent in the enclosed envelope.
SHAREHOLDER COMMUNICATIONS
. RG&E Business and Financial Information. You can access RG&E business and
financial information as soon as it is made public by calling our automated
investor communications system at (800) 724-8833 or visiting our new Internet
site at http://www.rge.com.
. Shareholder Account Services. Shareholder services representatives are
available weekdays from 8 a.m. to 6 p.m. eastern standard time through Boston
EquiServe, RG&E's shareholder services agent, at (800) 736-3001.
Please Complete and Return the Proxy Form Below.
DETACH HERE RGE F
Please mark
[X] votes as in
this example.
1. ELECTION OF DIRECTORS
Nominees for Class II Directors:
A.E. Dugan, C.I. Plosser, T.S. Richards,
N.J. Woodhull
FOR WITHHELD
[_] [_]
[_]
--------------------------------------
For all nominees except as noted above
2. Approval of the 1996 FOR AGAINST ABSTAIN
Performance Stock Option Plan [_] [_] [_]
3. 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 4, 1997 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 and FOR
the proposal.
(Please sign exactly as name appears at left)
Signature: Date: Signature: Date:
--------------- --------- ------------- --------
DETACH HERE RGE F
ROCHESTER GAS AND ELECTRIC CORPORATION
89 East Avenue, Rochester, New York 14649-0001
P This Proxy is Solicited on Behalf of the Board of Directors
R
O
X The undersigned hereby appoints R.W. Kober, T.S. Richards and D.C.
Y 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 16, 1997 or any adjournments thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE
---
LISTED NOMINEES AND FOR THE PROPOSAL
---
CONTINUED AND TO BE SIGNED ON REVERSE SIDE [SEE REVERSE SIDE]