UNITIL [LOGO]
We deliver
It's that simple.
March 11, 2002
Dear Fellow Shareholder,
I am pleased to invite you to the Annual Meeting of Common Shareholders of
Unitil Corporation, scheduled to be held on Thursday, April 18, 2002, at 10:30
A.M., at the office of the Company, 6 Liberty Lane West, Hampton, New Hampshire.
Enclosed you will find a 2001 annual report, a notice of meeting, a proxy
statement and a proxy card to be used in connection with the meeting. This year,
shareholders are being asked to vote on the election of five Directors.
We hope that you are able to attend the Annual Meeting. Whether or not you plan
to be present, we urge you to vote your shares by completing and signing the
enclosed proxy card and returning it in the envelope provided. Your vote is
important whether you own one share or many.
Thank you for your continued interest in Unitil.
Sincerely,
/s/ Robert G. Schoenberger
- --------------------------
Robert G. Schoenberger
CHAIRMAN OF THE BOARD OF DIRECTORS
AND CHIEF EXECUTIVE OFFICER
UNITIL [LOGO]
We deliver.
It's that simple.
NOTICE OF ANNUAL MEETING OF COMMON SHAREHOLDERS
Hampton, New Hampshire
March 11, 2002
To the Common Shareholders:
You are hereby notified that the annual meeting of common shareholders of
Unitil Corporation will be held at the office of the Company, 6 Liberty Lane
West, Hampton, New Hampshire, on Thursday, April 18, 2002, at 10:30 A.M., for
the following purposes:
1. To elect five Directors.
2. To act on such other matters as may properly come before the meeting
and any adjournments thereof.
The enclosed form of proxy has been prepared at the direction of the Board
of Directors of Unitil and is sent to you at its request. The persons named in
said proxy have been designated by the Board of Directors.
The Board of Directors fixed February 21, 2002, as the date for determining
holders of record of Common Stock who are thereby entitled to notice of and to
vote at this meeting and any adjournments thereof.
REGARDLESS OF WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, YOU CAN BE
SURE YOUR SHARES ARE REPRESENTED AT THE MEETING BY PROMPTLY SIGNING, DATING AND
RETURNING THE ENCLOSED PROXY CARD IN THE POSTAGE-PAID ENVELOPE. IF FOR ANY
REASON YOU DESIRE TO REVOKE OR CHANGE YOUR PROXY, YOU MAY DO SO AT ANY TIME
PRIOR TO THE MEETING, OR IN PERSON AT THE MEETING.
By Order of the Board of Directors,
/s/ Mark H. Collin
-----------------------------------
Mark H. Collin
TREASURER & SECRETARY
UNITIL [LOGO]
We deliver.
It's that simple.
March 11, 2002
Proxy Statement
ANNUAL MEETING OF COMMON SHAREHOLDERS, APRIL 18, 2002
This proxy statement is furnished in connection with the solicitation by
the Board of Directors of proxies in the accompanying form for use at the 2002
annual meeting of common shareholders of Unitil Corporation ("Unitil" or "the
Company"). Each proxy can be revoked at any time before it is voted by written
notification to the Secretary of Unitil at the address listed on page 18 prior
to the meeting, or in person at the meeting. Every properly signed proxy will be
voted unless previously revoked.
Unitil presently has seven subsidiaries, Concord Electric Company ("CECo"),
Exeter & Hampton Electric Company ("E&H"), Fitchburg Gas and Electric Light
Company ("FG&E"), Unitil Power Corp. ("Unitil Power"), Unitil Realty Corp.
("Unitil Realty"), Unitil Resources, Inc. ("Unitil Resources") and Unitil
Service Corp. ("Unitil Service").
The annual report of Unitil for the year 2001 is enclosed and includes
consolidated financial statements that are not part of this proxy statement.
The voting securities of Unitil issued and outstanding on February 21,
2002, consisted of 4,743,696 shares of Common Stock, no par value, entitling the
holders thereof to one vote per share. Holders of Common Stock of record on such
date are entitled to notice of and to vote at the annual meeting and any
adjournments thereof. A majority of the outstanding shares of Common Stock
constitutes a quorum.
Name and Address Shares of Common Stock Percent of Shares
of Beneficial Owner Beneficially Owned Outstanding
---------------------------------------------------------------------------
Charles H. Tenney II
30 Cedar Road 270,542 (1) 5.70%
Chestnut Hill, MA 02167
- --------------------------------------------------------------------------------
NOTES:
(1) Based on information provided by Mr.Tenney.Total shares of Common Stock
owned by Mr.Tenney include 3,034 shares which are held in trust under the terms
of the Unitil Tax Deferred Savings and Investment Plan ("401(k)"). (See "Other
Compensation Arrangements"). Mr. Tenney has voting power only with respect to
the shares credited to his account. Mr. Tenney is the former Chairman and CEO
and a former Director of the Company. Mr. Tenney retired from the Board of
Directors in April, 1999. Mr. Tenney is current Director Charles H. Tenney III's
father. (See "Information About Directors Whose Terms of Office Continue.")
The eleven Directors and the officers of Unitil as a group have beneficial
ownership as of February 21, 2002, of 75,144 shares (1.58%) of Common Stock, of
which they have direct beneficial ownership of 55,993 shares (1.18%), which
excludes options to purchase 153,496 shares (3.24%) pursuant to the exercise of
those options, and indirect beneficial ownership of 19,151 shares (0.40%). To
the knowledge of Unitil, each Director and each officer has voting and
investment power with respect to the shares directly owned. With regard to
certain of the indirect beneficial ownership by said group, see the footnotes to
the table contained in the section of this proxy statement entitled "As to the
Election of Directors" setting forth certain information about the Directors of
Unitil.
Assuming a quorum is present, the favorable vote of a majority of the
shares of Common Stock represented and voting will be required for approval of
all matters, including the election of Directors, which may come before the
meeting.
AS TO THE ELECTION OF DIRECTORS
-----------------------------------
Unitil's By-Laws provide for a Board of between nine and fifteen Directors
divided into three classes, each class being as nearly equal in number as
possible, and each with their respective terms of office arranged so that the
term of office of one class expires in each year, at which time a corresponding
number of Directors is elected for a term of three years. Unitil currently has
eleven Directors.
The Board of Directors has a stock ownership policy that no person be
nominated as a candidate for Director for election to a second term as part of
the slate of Directors proposed by the Company unless he or she is a beneficial
owner, either directly or indirectly, of at least 1,000 shares of Unitil Common
Stock. The Board of Directors also has an age limitation policy that has been in
effect since January, 1999, such that no person be nominated as a candidate for
Director for reelection as part of the slate of Directors proposed for election
by the Company after he or she has reached age 70.
Information About Nominees for Directors
--------------------------------------------
Each nominee has been a member of the Board of Directors since the date
indicated. Proxies will be voted for the persons whose names are set forth below
unless instructed otherwise. If any nominee shall be unable to serve, the
proxies will be voted for such person as may be designated by management to
replace such nominee. Each of the nominees has consented to being named in this
proxy statement and to serve if elected. Unless otherwise indicated, all shares
shown represent sole voting and investment power.
2
NOMINEES FOR DIRECTORS WHOSE TERMS WILL EXPIRE IN THE YEAR 2005
- ---------------------------------------------------------------------------------------------------
Common Stock Owned
Beneficially on February 21, 2002 (1)
Director -------------------------------------
Since Shares
- ---------------------------------------------------------------------------------------------------
DAVID P. BROWNELL, AGE 58 2001(2) 429
- ----------------------------------------------
Senior Vice President of Tyco
International Ltd., ("Tyco")
(diversified global manufacturing and
service company) Exeter, NH. Mr.
Brownell has been with Tyco since 1984.
Mr. Brownell is also Volunteer Board
President of the United Way of the
Greater Seacoast, on the Board of the
University of New Hampshire Foundation
and the NH Junior Achievement Advisory
Council.
ALBERT H. ELFNER, III, AGE 57 1999 5,491
- ----------------------------------------------
Retired Chairman (1994-1999) and Chief
Executive Officer (1995-1999) of
Evergreen Investment Management Company,
Boston, MA. Mr. Elfner is also a Trustee
of the Memorial Drive Trust, Cambridge,
MA, and a Director of NGM Insurance
Company, Keene, NH.
ROSS B. GEORGE, AGE 69 1999 3,409
- ----------------------------------------------
Chairman of the Board, since 1999
(Director since 1988) of Simonds
Industries, Inc., ("Simonds") Fitchburg,
MA. Mr. George served as Chief Executive
Officer (1995-1999) and President and
Chief Operating Officer (1988-1995),
also at Simonds. (industrial cutting
tools manufacturing company)
MICHAEL B. GREEN, AGE 52 2001(2) 279
- ----------------------------------------------
President and Chief Executive Officer of
Capital Region Health Care and Concord
Hospital, Concord, NH, since 1992. Mr.
Green also serves on the Boards of the
Greater Concord Chamber of Commerce,
Foundation for Healthy Communities, and
Community Provider Network of Central
New Hampshire.
M. BRIAN O'SHAUGHNESSY, AGE 59 1998 1,975
- ----------------------------------------------
Chairman of the Board, Chief Executive
Officer and President of Revere Copper
Products, Inc., Rome, NY, since 1988. 3
GS Financial Printing 201-460-2200 27353
Unitil proxy statement Proof 4
Information About Directors Whose Terms
of Office Continue Common Stock Owned
Director Term to Beneficially on
February 21, 2002 (1) Since Expire
Shares
3
Common Stock Owned
Beneficially on February 21, 2002 (1)
Director Term to -------------------------------------
Since Expire Shares
- ------------------------------------------------------------------------------------------------------------
WILLIAM E. AUBUCHON, III, AGE 57 1999 2003 436
- ----------------------------------------------
Chairman and Chief Executive Officer of
W.E. Aubuchon Company, Inc. (retail
hardware company), Westminster, MA,
since 1993. Mr. Aubuchon is also a
Director of the North Central
Massachusetts Chamber of Commerce, since
1991, and a Director of the Mt.
Wachusett Community College Foundation,
Inc., Gardner, MA, since 1999.
MICHAEL J. DALTON, AGE 61 1984 2004 71,365(3)(4)(5)
- ----------------------------------------------
President and Chief Operating Officer of
Unitil. Mr. Dalton is also a Director,
since 1996, and Secretary, since 1997,
of the University of New Hampshire
Foundation.
EDWARD F. GODFREY, AGE 52 2002(6) 2004 1,000
- ----------------------------------------------
Retired Executive Vice President and
Chief Operating Officer (1997-1998) of
Keystone Investments, Incorporated
("Keystone"), Boston, MA. Also at
Keystone, Mr. Godfrey was Senior Vice
President, Chief Financial Officer and
Treasurer from 1988 until 1996.
EBEN S. MOULTON, AGE 55 2000 2004 436
- ----------------------------------------------
President of Seacoast Capital
Corporation, Danvers, MA (equity
investment company) since 1995. Mr.
Moulton is also a Director of IEC
Electronics (complex circuit boards
manufacturer), a Director of PartMiner,
Inc., (global distributor of computer
components), a Director of Home Market
Foods, and a Trustee of Colorado
College, Colorado Springs, CO.
ROBERT G. SCHOENBERGER, AGE 51 1997 2003 98,701(3)(7)(8)
- ----------------------------------------------
Chairman of the Board and Chief
Executive Officer of Unitil since 1997.
Prior to his employment with Unitil, Mr.
Schoenberger was President and Chief
Operating Officer at the New York Power
Authority (state owned public power
enterprise) from 1993 until 1997. Mr.
Schoenberger is also a Director of the
Greater Seacoast (NH) United Way since
1998, Director of Exeter Health
Resources, Exeter, NH, since 1998,
Director of Enermetrix, Inc., Maynard,
MA, since 1999, and a Director of the
New England Gas Association, since 1999.
4
Common Stock Owned
Beneficially on February 21, 2002 (1)
Director Term to -------------------------------------
Since Expire Shares
- ------------------------------------------------------------------------------------------------------------
CHARLES H. TENNEY III, AGE 54 (9) 1992 2003 3,321
- ----------------------------------------------
Former financial advisor (2001-2002) at
H&R Block Financial Advisors, Ashland,
MA. Mr. Tenney is also former Director
of Corporate Services (1999-2000), Log
On America, Inc., Providence, RI (New
England regional competitive local
exchange carrier and
information/Internet service provider).
Mr. Tenney is the former Secretary
(1997-1999) of NorthernUtilities, Inc.,
Portsmouth, NH (natural gas distributor)
and former Secretary (1997-1999) of
Granite State Gas Transmission, Inc.,
Portsmouth, NH. Mr. Tenney is also the
former Clerk (1991-1999) of Bay State
Gas Company, a subsidiary of NIPSCO
Industries, Inc., Merrillville, IN.
(utility holding company)
- --------------------------------------------------------------------------------
NOTES:
Except as otherwise noted, each of the persons named above has held
his present position (or another executive position with the same employer) for
more than the past five (5) years.
(1) Based on information furnished to Unitil by the nominees and continuing
Directors. No Director standing for election, no Director whose term is
continuing and no officer owns more than one percent of the total
outstanding shares.
(2) Mr. Brownell and Mr. Green are Director nominees elected to the Board by
the Board of Directors upon recommendation by the Executive Committee in
June, 2001. Neither Mr. Brownell nor Mr. Green have previously been elected
by the shareholders of the Company.
(3) Included are 2,636 and 4,921 shares that are held in trust for Messrs.
Schoenberger and Dalton, respectively, under the terms of the Unitil Tax
Deferred Savings and Investment Plan ("401(k)"). Messrs. Schoenberger and
Dalton have voting power only with respect to the shares credited to their
accounts. For further information regarding 401(k), see "Other Compensation
Arrangements - Tax-Qualified Savings and Investment Plan" below.
(4) Included are 30,000 options that Mr. Dalton has the right to purchase upon
the exercise of those options under the terms of the 1998 Stock Option Plan
("Option Plan"). See "Other Compensation Arrangements." Mr. Dalton was
granted 10,000 options in March, 1999, 10,000 options in January, 2000, and
10,000 options in January, 2001, all of which will vest at a rate of 25% in
year one, 25% in year two, and 50% in year three, following the dates of
the respective grants.
(5) Included are 9,211 shares held by a member of Mr. Dalton's family. He has
no voting rights or investment power with respect to, and no beneficial
interest in, such shares.
(6) Mr. Godfrey was elected by the Board in January, 2002, to fill the position
vacated by Bruce W. Keough. Article II of Unitil's By-Laws provides that a
Director elected by the Board to fill a vacancy, whether due to the death,
resignation, or other inability to serve of any Director previously
elected, shall be elected for the unexpired term of his predecessor in
office. Mr. Keough, who resigned from the Board in June, 2001, was elected
in April, 2001, for a term of three years.
(7) Included are 30,996 options that Mr. Schoenberger has the right to purchase
pursuant to the exercise of those options under the terms of the 1989 Key
Employee Stock Option Plan ("KESOP"). For further information regarding the
KESOP, see "Other Compensation Arrangements" below.
(8) Included are 60,000 options that Mr. Schoenberger has the right to purchase
upon the exercise of those options under the terms of the 1998 Stock Option
Plan ("Option Plan"). See "Other Compensation Arrangements." Mr.
Schoenberger was granted 20,000 options in March, 1999, 20,000 options in
January, 2000, and 20,000 options in January, 2001, all of which will vest
at a rate of 25% in year one, 25% in year two, and 50% in year three,
following the dates of the respective grants.
(9) Mr. Tenney is the son of Charles H. Tenney II, former Chairman and CEO of
the Company, and currently, 5.7% shareholder of the Company, as noted on
page 2.
The Board of Directors met nine times in 2001. During 2001, Directors
attended an average of 96% of all meetings of the Board of Directors held and of
all meetings held by all Committees of the Board on which they served, if any.
5
Section 17(a) of the Public Utility Holding Company Act of 1935 and Section
16(a) of the Securities Exchange Act of 1934 require the Company's officers and
directors, and persons who own more than ten percent of a registered class of
the Company's equity securities, to file certain reports of ownership and
changes in share ownership with the Securities and Exchange Commission and the
American Stock Exchange and to furnish the Company with copies of all Section
17(a) and Section 16(a) forms they file. Based solely on its review of the
copies of such forms received by it, or written representations from certain
reporting persons that such forms were not required for those persons, the
Company believes that all filing requirements applicable to its officers and
directors during 2001 and through February, 2002, were met.
Compensation of Directors
-----------------------------
In 2001, members of the Board of Directors who are not officers of Unitil
or any of its subsidiaries received an annual retainer fee of $7,000 in cash and
$5,500 in Unitil Common Stock, as well as $500 for each Board Meeting attended.
Members of the Executive Committee who are not officers of Unitil or any of its
subsidiaries received an annual retainer fee of $3,000 and $400 for each meeting
attended. The Chairman of the Executive Committee received an annual retainer
fee of $15,000, and $400 for each meeting attended. Members of the Audit
Committee and Compensation Committee received an annual retainer fee of $1,000
and $400 for each meeting attended. The Chairman of the Audit Committee and the
Chairman of the Compensation Committee received an annual retainer fee of
$2,000, respectively, and $400 for each meeting attended. Those Directors of
Unitil who also serve as Directors of CECo, E&H or FG&E and who are not officers
of Unitil or any of its subsidiaries received a meeting fee of $100 per
subsidiary meeting attended and no annual retainer fee from CECo, E&H or FG&E.
All Directors are entitled to reimbursement of expenses incurred in connection
with attendance at meetings of the Board of Directors and any Committee on which
they serve.
As part of the Company's overall support for charitable institutions, the
Company has a program that provides a perpetual gift of $1,000 annually to the
Greater Seacoast United Way ("United Way") on behalf of each Director who
retires from the Board. The Director(s) receive no financial benefit from this
program as the charitable deductions accrue solely to the Company. In 2001, two
Directors retired from the Board.
In 1999, the Board of Directors approved the Unitil Corporation Directors'
Deferred Compensation Plan ("Deferred Plan") for the purpose of allowing
non-employee members of the Board to defer payment of all or a specified part of
compensation for services performed as a Director. The Deferred Plan is
administered by the Compensation Committee and stipulates that eligible
Directors may elect to defer all or a portion of their cash retainer and meeting
fees. Separate accounts are maintained for each Director participant, which are
an unfunded liability of the Company. Additionally, accounts are credited
monthly with interest based on the current rate of 60-month Treasury bills.
Funds contributed and interest credited is tax deferred until withdrawn from the
Deferred Plan. Director participants may elect to withdraw funds from the
Deferred Plan after a fixed amount of time, upon resignation or retirement from
the Board, upon death or disability, or upon a Change in Control. Withdrawals
may be taken in cash, either in one lump sum or in a series of installments.
During 2001, no Directors participated in the Deferred Plan.
6
Committees of the Board of Directors
----------------------------------------
Executive Committee
-----------------------
The Executive Committee of the Board of Directors held seven meetings in
2001. Its members are Albert H. Elfner, III (Chairman), Eben S. Moulton, M.
Brian O'Shaughnessy, Robert G. Schoenberger, and Charles H. Tenney III. This
Committee's responsibility is to review and oversee corporate policies related
to the Company's long-range strategic business, financial and operating plans.
In addition, the Executive Committee also acts as a nominating committee. In its
function as a nominating committee, the Committee coordinates suggestions or
searches for potential nominees for Board members; reviews and evaluates
qualifications of potential Board members; and recommends to the Board of
Directors nominees for vacancies occurring from time to time on the Board of
Directors. The Committee will consider nominees recommended by shareholders upon
timely submission of the names of such nominees with qualifications and
biographical information forwarded to the Executive Committee of the Board of
Directors. The Executive Committee's duties also include the review and
recommendation of corporate governance standards and the annual review of Board
member and CEO performance.
Audit Committee
-------------------
The Audit Committee of the Board of Directors consists of three directors
who are not officers of the Company and are independent as defined by the
listing standards of the American Stock Exchange. The members of the Audit
Committee are: William E. Aubuchon, III, Ross B. George (Chairman) and Edward F.
Godfrey. The Audit Committee held six meetings in 2001 for the purpose of
overseeing management's responsibilities for accounting, internal controls and
financial reporting. After review and consideration, the Audit Committee also
recommended the appointment of an independent certified public accounting firm
for the following fiscal year, which was subsequently approved by the Board of
Directors. The Report of the Audit Committee, which appears below, and the Audit
Committee Charter, which appears in Appendix A, more fully describe the
activities and responsibilities of the Audit Committee.
Compensation Committee
--------------------------
The Compensation Committee of the Board of Directors, which held five
meetings in 2001, consists of David P. Brownell, Michael B. Green and Eben S.
Moulton (Chairman). The duties of this Committee include studying and making
recommendations to the Board of Directors with respect to base and incentive
compensation plans and payments and other benefits to be paid to the officers of
Unitil. The Compensation Committee's duties also include the annual review of
management succession planning, administration of the Company's Stock Option
Plans, administration of merit, incentive and commission compensation plans for
all appropriate personnel and administration of the Directors' Deferred
Compensation Plan.
7
Report of the Audit Committee
---------------------------------
During the fiscal year ended December 31, 2001, the Audit Committee of the
Board of Directors held six meetings. In accordance with the Charter, the Audit
Committee is responsible for providing independent and objective oversight of
the Company's accounting functions, internal controls and financial reporting.
The Audit Committee also reviews the Charter annually and adopts any amendments
necessary to reflect changes governing financial reporting and accounting
requirements or its responsibilities. A copy of the Audit Committee Charter is
attached to this Proxy Statement as Appendix A.
During 2001, the Audit Committee reviewed the audit plan and audit scope of
both the independent auditors (Grant Thornton, LLP) and the Internal Auditor.
The Audit Committee discussed the quality and adequacy of the Company's internal
controls with senior management, the Internal Auditor and the independent
auditors. These discussions also included a review of the results of the
internal audits performed including follow-up on previous internal and external
audit recommendations as well as an overview of ongoing compliance matters. In
addition, the Audit Committee retained the independent auditors to perform
non-audit services. In doing so, the Audit Committee felt assured that these
non-audit services would not impact the objectivity of the independent auditors.
The independent auditor's fees incurred for the fiscal year are itemized below:
AUDIT FEES (for quarterly and annual financial reports) $120,000
ALL OTHER FEES (includes review services for a subsidiary,
accounting services for investment activities, regulatory
services, tax services, and employee benefit plan audits) $144,186
In discharging its oversight responsibility regarding the audit process,
the Audit Committee received a written statement from the independent auditors
describing all relationships between the auditors and the Company that might
bear on their independence, consistent with Independence Standards Board
Standard No. 1 -"Independence Discussions with Audit Committees." In addition,
the Audit Committee discussed with the auditors any relationships that may
impact their objectivity and independence and satisfied itself as to the
auditors' independence. The Audit Committee also discussed and reviewed with the
independent auditors all communications required by generally accepted auditing
standards, including those described in Statement on Auditing Standards No. 61,
"Communication with Audit Committees."
Management is responsible for the preparation of the Company's financial
statements and the independent auditors are responsible for the audit of those
statements. In November 2001, the Audit Committee reviewed the financial
presentation and public disclosures regarding the accounting recognition of an
extraordinary non-cash charge resulting from Restructuring Orders issued by the
Massachusetts Department of Telecommunications and Energy. In addition, during
2001, the Audit Committee members received the quarterly financial information
for review and comment prior to the filing of Form 10-Q with the Securities and
Exchange Commission. In fulfilling its responsibilities for the financial
statements for fiscal year 2001, the Audit Committee also reviewed the audited
financial statements of the Company, for the fiscal year ended December 31,
2001, with management and the independent auditors. This review included a
discussion of the accounting recognition and financial presentation regarding a
charge to write down the book value of a non-utility investment resulting from a
decrease in market valuation as prescribed in FASB 115, "Accounting for Certain
Investments in Debt and Equity Securities." Based on the reviews with management
and the independent auditors, the Audit Committee recommended that the Board of
Directors include the audited financial statements in the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 2001, for filing with
the Securities and Exchange Commission.
Audit Committee Members
--------------------------------------------------------------------------
WILLIAM E. AUBUCHON, III, ROSS B. GEORGE (CHAIRMAN), AND EDWARD F. GODFREY
8
Report of the Compensation Committee
----------------------------------------
Upon the recommendation of the Compensation Committee, the Board of
Directors votes to approve the compensation of the Chief Executive Officer. The
Committee reports all of its decisions to the Board. The Board unanimously
accepted each of the recommendations, described below, made in 2001 and to date
in 2002. The Committee also approves the compensation of all other Company
executive officers listed in the Summary Compensation Table, as well as other
senior employees. The Board ratifies the compensation decision for these
executive officers.
The overall objective of the Company's Board of Directors, and specifically
this Compensation Committee, in setting compensation for Unitil's executive
officers, is to attract, retain and reward managers who are committed to solid
financial performance and foster excellence in the management of the assets of
the Company and who can successfully lead the Company as the industry undergoes
unprecedented change and restructuring. To help meet these objectives, the
Committee believes it is important for the Company to provide compensation to
its executive officers that varies directly with the performance of the Company.
The Company pays both "base" and "variable" compensation to its officers.
The base component of compensation is determined under Unitil's salary policy,
which is reviewed from time to time by outside consultants as to its
competitiveness. Variable compensation is based on factors that measure the
success of the Company for any given year and is governed by Unitil's Management
Incentive Plan ("Incentive Plan"). These performance factors are set the same
for both the general employee and management incentive programs to ensure that
all employees are focused on common bottom line business and operational
results. The factors under the Incentive Plan provide a cash incentive
opportunity if the Company meets certain targets for Core Utility Earnings
(normalized), Reliability, Low Distribution Costs, Customer Satisfaction, and
New Business Initiatives. The Plan also requires a subjective evaluation by the
Board, which rates management's performance in capitalizing on unplanned
opportunities and responding to unforeseen problems. The bonus opportunities are
set by level of the executive position according to other companies in the
utility industry. In 2001, certain objective targets for Core Utility Earnings
(normalized), Reliability, Distribution Costs, and Customer Satisfaction were
met. In addition, the Committee discussed and evaluated the subjective target of
the Incentive Plan to determine how well the Company met the Board's
expectations in dealing with challenges and opportunities in 2001. The Committee
took into consideration such factors as coping with extensive regulatory issues,
restructuring the Usource operation, and responding to other opportunities. Upon
consideration and evaluation of these and other factors, the Committee
determined that an incentive payout of 80% of target would be appropriate. The
payout for 2001 performance will be made during the first quarter of 2002, and
will therefore be reflected on the "Compensation of Officers" Table in the 2002
Proxy Statement.
In addition, to further align the interest of the Company's management with
shareholders and customers, the Company, in 1998, instituted a Stock Option Plan
("Option Plan"). The Option Plan provides grants of options to buy common shares
of Company Stock. The Option Plan anticipates the granting of options over a
period of five years, and each grant will vest over a three-year period. Each
option grant is priced at the market price on the date of the grant. This plan
emphasizes long-term growth of the price of the Company's Common Stock. In
January, 2001, the Committee granted a total of 60,000 options to the members of
senior management.
The compensation of the Chief Executive Officer ("CEO"), is governed by
these same plans and objectives. As Chairman of the Board and CEO,Mr.
Schoenberger was paid an annual base
9
salary of $292,000 in 2001. This amount, based on the terms of Mr.
Schoenberger's 2000-2003 employment agreement calling for $292,000 per annum
with an annual performance and salary review, was determined in accordance with
Unitil's salary policy. Mr. Schoenberger's employment agreement with the Company
is further detailed on pages 17 and 18. In connection with the Incentive Plan,
in February, 2002, Mr. Schoenberger was paid $116,800 for performance in meeting
goals set for 2001. Mr. Schoenberger's incentive compensation is evaluated using
the same factors as the executive participants in the Incentive Plan, as
discussed above.
The Committee periodically reviews each component of the Company's
executive compensation program to ensure that pay levels and incentive
opportunities are competitive and that incentive opportunities are linked to
Company performance. The Company engaged a nationally known compensation
consulting firm in 1998 to review the competitiveness of the total compensation
package for the CEO and other executive positions. As a result of this review,
the Company adopted a new salary policy, new base salary ranges, a new
Management Incentive Plan (see "Other Compensation Arrangements") and the Option
Plan described above (see also "Other Compensation Arrangements"). These new
policies and plans brought the Company's compensation practices into line with
current market conditions for competitive pay levels of utility executives, and
better support the achievement of the Company's mission and strategies.
Compensation Committee Members
------------------------------------------------------------------------
DAVID P. BROWNELL, MICHAEL B. GREEN, AND EBEN S. MOULTON (CHAIRMAN)
Stock Performance Graph and Information
-------------------------------------------
COMPARATIVE FIVE-YEAR TOTAL RETURNS
- --------------------------------------------------------------------------------
[PERFORMANCE GRAPH]
1996 1997 1998 1999 2000 2001
-------------------------------------------------------
UNITIL $100.00 $129.53 $143.16 $241.81 $167.20 147.6434
PEER $100.00 $118.61 $130.59 $114.29 $176035 118.9427
S & P $100.00 $131.01 $165.95 $198.35 $178.24 154.9856
- --------------------------------------------------------------------------------
THE GRAPH ABOVE ASSUMES $100 INVESTED ON DECEMBER 31, 1995, IN EACH CATEGORY AND
THE REINVESTMENT OF ALL DIVIDENDS DURING THE PERIOD. THE PEER GROUP IS COMPRISED
OF S&P 40 UTILITIES.
10
Compensation of Officers
----------------------------
The tabulation below shows the compensation Unitil, or any of its
subsidiaries, has paid to its Chief Executive Officer and its four most highly
compensated officers whose total annual salary and bonus were at least $100,000
during the year 2001.
- ------------------------------------------------------------------------------------------------------------------------------------
SUMMARY COMPENSATION TABLE
- ------------------------------------------------------------------------------------------------------------------------------------
LONG TERM COMPENSATION
ANNUAL COMPENSATION AWARDS PAYOUT
- ------------------------------------------------------------------------------------------------------------------------------------
OTHER
NAME AND ANNUAL RESTRICTED ALL OTHER
PRINCIPAL SALARY BONUS COMP. STOCK LTIP COMP.
POSITION (1) YEAR ($) ($)(2) ($) AWARDS ($) OPTIONS (#) PAYOUT ($)
- ------------------------------------------------------------------------------------------------------------------------------------
ROBERT G. SCHOENBERGER 2001 $292,000 $110,924 - - 20,000(3) - $6,574(6)
Chairman of the Board & 2000 278,004 80,115 - - 20,000(4) -
Chief Executive Officer 1999 267,048 109,415 - - 20,000(5) -
- ------------------------------------------------------------------------------------------------------------------------------------
MICHAEL J. DALTON 2001 $213,710 $65,910 - - 10,000(3) - $8,094(7)
President & Chief 2000 206,484 47,880 - - 10,000(4) -
Operating Officer 1999 199,500 67,882 - - 10,000(5) -
ANTHONY J. BARATTA, JR. 2001 $176,132 $46,631 - - 5,000(3) - $6,662(8)
Senior Vice President & 2000 167,098 33,390 - - 5,000(4) -
Chief Financial Officer 1999 159,078 33,606 - - 10,000(5) -
GEORGE R. GANTZ 2001 $144,602 $33,126 - - 2,500(3) - $5,001(9)
Senior Vice President, 2000 138,372 23,836 - - 2,500(4) -
Unitil Service 1999 132,420 32,261 - - 2,500(5) -
MARK H. COLLIN 2001 $117,000 $21,347 - - 2,000(3) - $4,371(10)
Treasurer & Secretary 2000 107,000 15,882 - - 1,500(4) -
1999 90,761 14,278 - - 1,500(5) -
- ------------------------------------------------------------------------------------------------------------------------------------
NOTES:
(1) Officers of the Company also hold various positions with subsidiary
companies. Compensation for those positions is included in the above table.
(2) Bonus amounts reflected are comprised of the Unitil Management Incentive
Plan ("Incentive Plan") cash awards paid in February, 2001, for 2000
results. The terms of the Incentive Plan provide a cash incentive
opportunity if the Company meets certain pre-established performance
targets (see "Other Compensation Arrangements").
(3) Options were granted in January, 2001, under the 1998 Stock Option Plan
("Option Plan"). Options will vest at a rate of 25% in year one, 25% in
year two, and 50% in year three, following the date of the grant. As of
February, 2002, 25% of options granted are vested and exercisable.
(4) Options were granted in January, 2000, under the 1998 Stock Option Plan
("Option Plan"). Options will vest at a rate of 25% in year one, 25% in
year two, and 50% in year three, following the date of the grant. As of
February, 2002, 50% of options granted are vested and exercisable.
(5) Options were granted in March, 1999, under the Option Plan. Options will
vest at a rate of 25% in year one, 25% in year two, and 50% in year three,
following the date of the grant. As of February, 2002, 50% of options
granted are vested and exercisable.
(6) All Other Compensation for Mr. Schoenberger for the year 2001 includes
401(K) company contribution, and Group Term Life Insurance payment valued
at $5,100 and $1,474, respectively.
(7) All Other Compensation for Mr. Dalton for the year 2001 includes 401(K)
company contribution, and Group Term Life Insurance payment valued at
$5,100 and $2,994, respectively.
(8) All Other Compensation for Mr. Baratta for the year 2001 includes, 401(K)
company contribution and Group Term Life Insurance payment, valued at
$5,100 and $1,562, respectively.
(9) All Other Compensation for Mr. Gantz for the year 2001 includes, 401(K)
company contribution and Group Term Life Insurance payment, and valued at
$4.338 and $662, respectively.
(10) All Other Compensation for Mr. Collin for the year 2001 includes 401(K)
company contribution and Group Term Life Insurance payment, valued at
$4,150 and $221, respectively.
11
Other Compensation Arrangements
-----------------------------------
The table below provides information with respect to options granted in
fiscal 2001 under the 1998 Stock Option Plan (See also "Other Compensation
Arrangements") to the named executive officers in the Summary Compensation
table. The Company has no compensation plan under which Stock Appreciation
Rights ("SARs") are granted and thus reference to SARs has been omitted from the
table.
- ------------------------------------------------------------------------------------------------------------------------------------
OPTION GRANTS IN LAST FISCAL YEAR
- ------------------------------------------------------------------------------------------------------------------------------------
POTENTIAL REALIZABLE
VALUE AT ASSUMED
INDIVIDUAL GRANTS ANNUAL RATES OF STOCK
PRICE APPRECIATION FOR
OPTION TERM
- ------------------------------------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f) (g)
- ------------------------------------------------------------------------------------------------------------------------------------
% OF TOTAL OPTION PRICE
NUMBER OF OPTIONS ----------------------
SECURITIES GRANTED TO MARKET
UNDERLYING EMPLOYEES EXERCISE OR PRICE ON
OPTIONS IN FISCAL BASE PRICE DATE OF EXP.
NAME GRANTED (#) YEAR ($/SH) GRANT DATE 5% ($) 10% ($)
- ------------------------------------------------------------------------------------------------------------------------------------
ROBERT G. SCHOENBERGER
Chairman of the Board & 20,000 33.3% $25.875 $25.875 1/16/11 $326,025 $824,740
Chief Executive Officer
- ------------------------------------------------------------------------------------------------------------------------------------
MICHAEL J. DALTON
President & 10,000 16.7% $25.875 $25.875 1/16/11 $163,013 $412,370
Chief Operating Officer
- ------------------------------------------------------------------------------------------------------------------------------------
ANTHONY J. BARATTA, JR.
Senior Vice President & 5,000 8.3% $25.875 $25.875 1/16/11 $81,506 $206,185
Chief Financial Officer
- ------------------------------------------------------------------------------------------------------------------------------------
GEORGE R. GANTZ
Senior Vice President 2,500 4.2% $25.875 $25.875 1/16/11 $40,753 $103,093
Unitil Service
- ------------------------------------------------------------------------------------------------------------------------------------
MARK H. COLLIN
Treasurer & Secretary 2,000 3.3% $25.875 $25.875 1/16/11 $32,603 $82,474
- ------------------------------------------------------------------------------------------------------------------------------------
12
The table below provides information with respect to the value of
unexercised options granted in prior years under the Key Employee Stock Option
Plan ("KESOP") and the value of unexercised options granted in prior years and
in 2001 under the 1998 Stock Option Plan ("Option Plan"), respectively, to the
named executive officers in the Summary Compensation Table and held by them as
of December 31, 2001.
- --------------------------------------------------------------------------------------------------------------
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR (FY)
AND FY-END OPTION VALUES (1)(2)
- --------------------------------------------------------------------------------------------------------------
NUMBER OF UNEXERCISED OPTIONS VALUE OF UNEXERCISED
SHARES AT IN-THE-MONEY OPTIONS
ACQUIRED FY-END (#) AT FY-END ($)
ON VALUE ---------------------------------------------------------------
EXERCISE REALIZED EXERCISABLE/ EXERCISABLE/
NAME (#) ($) UNEXERCISABLE UNEXERCISABLE
- --------------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e)
- --------------------------------------------------------------------------------------------------------------
ROBERT G. SCHOENBERGER
Chairman of the Board & - - exercisable 40,000 exercisable $175,125
Chief Executive Officer - - unexercisable 45,000 unexercisable $0
- --------------------------------------------------------------------------------------------------------------
MICHAEL J. DALTON
President & - - exercisable 7,500 exercisable $0
Chief Operating Officer - - unexercisable 22,500 unexercisable $0
- --------------------------------------------------------------------------------------------------------------
ANTHONY J. BARATTA, JR.
Senior Vice President & - - exercisable 6,250 exercisable $0
Chief Financial Officer - - unexercisable 13,750 unexercisable $0
- --------------------------------------------------------------------------------------------------------------
GEORGE R. GANTZ
Senior Vice President, - - exercisable 1,875 exercisable $0
Unitil Service - - unexercisable 5,625 unexercisable $0
- --------------------------------------------------------------------------------------------------------------
MARK H. COLLIN
Treasurer & - - exercisable 1,125 exercisable $0
Secretary - - unexercisable 3,875 unexercisable $0
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
NOTES:
(1) The KESOP authorizes the Compensation Committee to provide in the award
agreements that the participant's right to exercise the options provided
for therein will be accelerated upon the occurrence of a "Change in
Control" of Unitil. The term "Change in Control" is defined in
substantially the same manner as in the Severance Agreements as defined on
pages 15 and 16. Award agreements entered into with participants in the
KESOP contain such a "Change in Control" provision. Award agreements also
provide that, upon the exercise of an option on or after a Change in
Control, Unitil shall pay to the optionee, within five business days, a
lump sum cash amount equal to the economic benefit of the optionee's
outstanding options and associated dividend equivalents that the optionee
would have received had the option remained unexerciseduntil the day
preceding the expiration of the grant. Upon the exercise of any option by
an employee and upon payment of the option price for shares of Unitil
Common Stock as to which the option was granted (the "Primary Shares"),
Unitil will cause to be delivered to such employee (i) the Primary Shares
and (ii) the number of shares of Unitil Common Stock (the "Dividend
Equivalent Shares") equal to the dollar amount of dividends which would
have been paid on the Primary Shares (and previously accrued Dividend
Equivalent Shares) had they been outstanding, divided by the fair market
value of Unitil Common Stock determined as of the record date for each
dividend. All options, with the exception of Mr. Schoenberger's options
(see Note 3), associated with the KESOP were exercised as of March 7, 1999.
(2) The Option Plan authorizes the Compensation Committee to provide in the
award agreements that the participant's right to exercise the options
provided for therein will be accelerated upon the occurrence of a Change in
Control of Unitil, and will become 100% vested and fully exercisable. The
term "Change in Control" is defined in substantially the same manner as in
the Severance Agreements as defined on pages 15 and 16. All of the award
agreements entered into with participants in the Option Plan to date
contain such a "Change in Control" provision. The options reported in the
table were granted in March, 1999, January, 2000, and January, 2001, under
the Option Plan.
13
NOTES, continued:
(3) In accordance with the terms of Mr. Schoenberger's 1997 employment
agreement, on November 3, 1997, he received 25,000 options to purchase
shares of Company stock under the KESOP. The options granted to Mr.
Schoenberger became exercisable on November 3, 1998. In 1998, the
Compensation Committee extended the expiration date of Mr. Schoenberger's
options until November 3, 2007 (ten years from the date of the grant),
because the KESOP originally provided ten years between the grant and
expiration of options.
(4) Mr. Schoenberger's 25,000 exercisable KESOP options listed in column (d) in
the table above do not include non-preferential dividend equivalents earned
under the provisions of the KESOP and associated with options outstanding.
In December, 1998, the Unitil Board of Directors adopted the Unitil
Corporation 1998 Stock Option Plan ("Option Plan"). The Company intends to grant
stock options each year through March 1, 2004, under the plan to certain
employees and directors, for the purchase of up to 350,000 shares of Unitil
Common Stock. To date, grants were made to certain management employees in
March, 1999, January, 2000, and January 2001. Each option grant will vest over a
three year period and each grant will expire ten years after the date of grant.
The purpose of the Option Plan is to provide an incentive to key employees
and directors of Unitil and its affiliates who are in a position to contribute
materially to the long-term success of Unitil and/or its affiliates, to increase
their interest in the welfare of Unitil and its affiliates, and to attract and
retain employees and directors of outstanding ability. The Compensation
Committee administers the Option Plan. The Committee has the authority to
interpret the Option Plan and to designate recipients of the stock options.
Stock options granted under the Option Plan will entitle the holders of
those options to purchase up to the number of shares of common stock specified
in the grant at a price established by the Committee. All grants will be issued
at 100% of market value. Under the Option Plan, stock options for shares
constituting not more than five percent of the common stock may be issued in any
one year.
The Company adopted a new Management Incentive Plan and a new Employee
Incentive Plan in December, 1998, to provide cash incentive payments that are
tied directly to achievement of the Company's strategic goals. Annual goals are
established each year by the Board of Directors and payment of awards is made in
February of the year following achievement of the goals. Target incentive
payments have been established that vary based upon the grade level of each
position. Actual awards can be less than or greater than the target payout
depending upon actual results achieved.
Unitil maintains a tax-qualified defined benefit pension plan and related
trust agreement (the "Retirement Plan") that provides retirement annuities for
eligible employees of Unitil and its subsidiaries. Since the Retirement Plan is
a defined benefit plan, no amounts were contributed or accrued specifically for
the benefit of any officer of Unitil under the Retirement Plan. Directors of
Unitil who are not and have not been officers of Unitil or any of its
subsidiaries are not eligible to participate in the Retirement Plan.
14
The table below sets forth the estimated annual benefits (exclusive of
Social Security payments) payable to participants in the specified compensation
and years of service classifications, assuming continued active service until
retirement. The average annual earnings used to compute the annual benefits are
subject to a $200,000 limit.
------------------------------------------------------------------------------
PENSION PLAN TABLE
------------------------------------------------------------------------------
ANNUAL PENSION
-----------------------------------------------
AVERAGE ANNUAL EARNINGS 10 YEARS 20 YEARS 30 YEARS 40 YEARS
USED FOR COMPUTING PENSION OF SERVICE OF SERVICE OF SERVICE OF SERVICE
------------------------------------------------------------------------------
$100,000 20,000 40,000 50,000 55,000
125,000 25,000 50,000 62,500 68,750
150,000 30,000 60,000 75,000 82,500
200,000 40,000 80,000 100,000 110,000
The present formula for determining annual benefits under the Retirement
Plan's life annuity option is (i) 2% of average annual salary (average annual
salary during the five consecutive years out of the last twenty years of
employment that give the highest average salary) for each of the first twenty
years of benefit service, plus (ii) 1% of average annual salary for each of the
next ten years of benefit service and (iii) 1/2% of average annual salary for
each year of benefit service in excess of thirty, minus (iv) 50% of age 65
annual Social Security benefit (as defined in the Retirement Plan), and (v) any
benefit under another Unitil retirement plan of a former employer for which
credit for service is given under the Retirement Plan. A participant is eligible
for early retirement at an actuarially reduced pension upon the attainment of
age 55 with at least 15 years of service with Unitil or one of its subsidiaries.
A participant is 100% vested in his benefit under the Retirement Plan after five
years of service with Unitil or one of its subsidiaries. As of January 1, 2002,
Messrs. Schoenberger, Dalton, Baratta, Gantz and Collin had 4, 34, 4,18 and 13
credited years of service, respectively, under the Retirement Plan.
Unitil also maintains a Supplemental Executive Retirement Plan ("SERP"), a
non-qualified defined benefit plan. SERP provides for supplemental retirement
benefits to executives selected by the Board of Directors. At the present time,
Messrs. Schoenberger and Dalton are eligible for SERP benefits upon attaining
normal or early retirement eligibility. Annual benefits are based on a
participant's final average earnings less the participant's benefits payable
under the Retirement Plan, less other retirement income payable to such
participant by Unitil or any previous employer and less income that a
participant receives as a primary Social Security benefit. Early retirement
benefits are available to a participant, with the Unitil Board's approval, if
the participant has attained age 55 and completed 15 years of service. Should a
participant elect to begin receiving early retirement benefits under SERP prior
to attaining age 60, the benefits are reduced by 5% for each year that
commencement of benefits precedes attainment of age 60. If a participant
terminates employment for any reason prior to retirement, the participant will
not be entitled to any benefits. Under the SERP, Messrs. Schoenberger and Dalton
would be entitled to receive an annual benefit of $39,734 and $19,263,
respectively, assuming normal retirement at age 65 and that their projected
final average earnings are equal to the average of their respective three
consecutive years of highest compensation prior to retirement.
15
Unitil and certain subsidiaries maintain severance agreements (the
"Severance Agreements") with certain management employees, including Executive
Officers. The Severance Agreements are intended to help assure continuity in the
management and operation of Unitil and its subsidiaries in the event of a
proposed "Change in Control". Each Severance Agreement only becomes effective
upon the occurrence of a Change in Control of Unitil as defined in the Severance
Agreements. If an employee's stipulated compensation and benefits, position,
responsibilities and other conditions of employment are reduced during the
thirty-six month period following a Change in Control, the employee is entitled
to a severance benefit.
The severance benefit is a lump sum cash amount equal to (i) the present
value of three years' base salary and bonus; (ii) the present value of the
additional amount the employee would have received under the Retirement Plan if
the employee had continued to be employed for such thirty-six month period;
(iii) the present value of contributions that would have been made by Unitil or
its subsidiaries under the 401(k) if the employee had been employed for such
thirty-six month period; and (iv) the economic benefit on any outstanding Unitil
stock options and associated dividend equivalents, if applicable, assuming such
options remained unexercised until the day preceding the expiration of the
grant, including the spread on any stock options that would have been granted
under the Option Plan if the employee had been employed for such thirty-six
month period. Each Severance Agreement also provides for the continuation of all
employee benefits for a period of thirty-six months, commencing with the month
in which the termination occurred. In addition, pursuant to each Severance
Agreement, Unitil is required to make an additional payment to the employee
sufficient on an after-tax basis to satisfy any additional individual tax
liability incurred under Section 280G of the Internal Revenue Code of 1986, as
amended, with respect to such payments.
The Company entered into an initial employment agreement with Mr.
Schoenberger on November 1, 1997. The term of the agreement was for three years
with an expiration date of October 31, 2000. Under the terms of the 1997
employment agreement ("the 1997 Agreement"), Mr. Schoenberger received an annual
base salary of $245,000 which was subject to annual review by the Board for
discretionary periodic increases in accordance with the Company's compensation
policies. Mr. Schoenberger was entitled to participate in the Company's SERP,
Executive Supplemental Life Insurance Program and all other employee benefit
plans made available by the Company. On November 3, 1997, Mr. Schoenberger also
received 25,000 options to purchase shares of Company stock under the Company's
1989 Key Employee Stock Option Plan ("KESOP). In 1998, the Compensation
Committee extended the expiration date of the options granted to Mr.
Schoenberger under the KESOP until November 3, 2007. Said options were
originally set to expire on March 7, 1999. Mr. Schoenberger was reimbursed for
all reasonable interim living and reasonable travel expenses during 1997 and
1998. In addition, in 1998, Mr. Schoenberger was reimbursed for all direct
moving expenses and received $50,000 when he relocated to the area, as was
stipulated in the terms of the 1997 Agreement. The 1997 Agreement also provided
that the Company and Mr. Schoenberger enter into a Severance Agreement, more
fully described above. Mr. Schoenberger and the Company entered into said
Severance Agreement on February 6, 1998. According to the 1997 Agreement, the
Company, by action of the Board, may terminate Mr. Schoenberger's employment for
any reason. If Mr. Schoenberger's employment had been terminated by the Company
during the term of the 1997 Agreement for any reason other than Cause, death or
disability, the Company would have been obligated to pay Mr. Schoenberger's base
pay at the rate in effect on the date of employment termination and benefits
until the end of the term of the 1997 Agreement, or if employment termination
was after November 1, 1999, for one year.
16
Upon the expiration of the 1997 Agreement, the Company entered into a
second employment agreement ("the 2000 Agreement") with Mr. Schoenberger on
November 1, 2000. The term of the agreement is for three years with an
expiration date of October 31, 2003. Under the terms of the 2000 Agreement, Mr.
Schoenberger will receive an annual base salary of $292,000 which is subject to
annual review by the Board for discretionary periodic increases in accordance
with the Company's compensation policies. Mr. Schoenberger is entitled to
continued participation in the Company's SERP, Executive Supplemental Life
Insurance Program and all other employee benefit plans made available by the
Company. The 2000 Agreement provides that Mr. Schoenberger shall participate in
the Management Incentive Plan, which is described in the Compensation Committee
Report on page 9 and also on page 14, and the Option Plan, which is described on
page 14, or any stock option or similar plan of the Company. The agreement also
provides that the Severance Agreement, entered into on February 6, 1998, by and
between Mr. Schoenberger and the Company, remain in effect. The Severance
Agreement is more fully described on pages 15 and 16. The 2000 Agreement also
provides that the Company, by action of the Board, may terminate Mr.
Schoenberger's employment for any reason. If Mr. Schoenberger's employment is
terminated by the Company during the term of the agreement for any reason other
than Cause, death or disability, or if Mr. Schoenberger terminates his
employment because of Constructive Termination, the Company shall pay Mr.
Schoenberger a combination of (i) base pay at the rate in effect on the date of
employment termination, (ii) an annual amount equal to the average of the annual
bonus amounts received by Mr. Schoenberger in the two calendar years preceding
the year in which termination occurs, and (iii) benefits, in each case for a
period of two years following the date of termination. If during such two-year
period Mr. Schoenberger shall secure full-time employment, the Company's
obligation to provide benefits shall cease. All such payments described above
will be made in accordance with the Company's regular payroll policies.
As to Other Matters to Come Before the Meeting
--------------------------------------------------
The Board of Directors does not intend to bring before the meeting any
matters other than the one referred to above and knows of no other matters which
may properly come before the meeting. If any other matters or motions come
before the meeting, it is the intention of the persons named in the accompanying
form of proxy to vote such proxy in accordance with their judgment on such
matters or motions, including any matters dealing with the conduct of the
meeting.
The Board of Directors has selected and employed the firm of Grant Thornton
as Unitil's independent certified public accountants to audit Unitil's financial
statements for the fiscal year 2001. A representative of the firm will be
present at the meeting and will be available to respond to appropriate
questions. It is not anticipated that such representative will make a prepared
statement at the meeting; however, he will be free to do so if he so chooses.
Any proposal submitted by a shareholder of Unitil for inclusion in the
proxy material for the 2003 annual meeting of shareholders must be received by
Unitil at its Corporate Headquarters not later than November 13, 2002.
17
Solicitation, Revocation and Use of Proxies
-----------------------------------------------
Shares of Unitil Common Stock represented by properly executed proxies
received by Unitil prior to or at the meeting will be voted at the meeting in
accordance with the instructions specified on the proxies. If no instructions
are specified on such proxies, shares will be voted FOR the election of the
nominees for Directors. Abstentions and non-votes will have the same effect as
negative votes.
Any Unitil shareholder who executes and returns a proxy has the power to
revoke such proxy at any time before it is voted by filing with the Secretary of
Unitil, at the address of Unitil set forth above, written notice of such
revocation or a duly executed proxy bearing a later date, or by attending and
voting in person at the meeting. Attendance at the meeting will not in and of
itself constitute a revocation of a proxy.
Unitil will bear the costs of solicitation by the Board of Directors of
proxies from Unitil shareholders. In addition to the use of the mail, proxies
may be solicited by the Directors, officers and employees of Unitil by personal
interview, telephone, telegram or otherwise. Such Directors, officers and
employees will not be additionally compensated, but may be reimbursed for
out-of-pocket expenses in connection with such solicitation. Arrangements also
will be made with brokerage houses and other custodians, nominees and
fiduciaries for the forwarding of solicitation material to the beneficial owners
of stock held of record by such persons, and Unitil may reimburse such
custodians, nominees and fiduciaries for reasonable out-of-pocket expenses in
connection therewith.
By Order of the Board of Directors,
/s/ Mark H. Collin
-----------------------------------
Mark H. Collin
Treasurer & Secretary
- --------------------------------------------------------------------------------
UNITIL WILL FURNISH WITHOUT CHARGE TO ANY SHAREHOLDER ENTITLED TO VOTE AND TO
ANY BENEFICIAL OWNER OF SHARES ENTITLED TO BE VOTED AT THE ANNUAL MEETING OF
COMMON SHAREHOLDERS, TO BE HELD APRIL 18, 2002, A COPY OF ITS ANNUAL REPORT ON
FORM 10-K, INCLUDING FINANCIAL STATEMENTS AND SCHEDULES THERETO, REQUIRED TO BE
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION FOR THE FISCAL YEAR 2001, UPON
WRITTEN REQUEST TO MARK H. COLLIN, TREASURER, UNITIL CORPORATION, 6 LIBERTY LANE
WEST, HAMPTON, NH 03842-1720.
- --------------------------------------------------------------------------------
18
APPENDIX A
----------
Unitil Corporation
AUDIT COMMITTEE
CHARTER OF DUTIES AND RESPONSIBILITIES
------------------------------------------
The Audit Committee is a standing committee of the Board of Directors. The
committee is comprised of three non-management Directors and holds a minimum of
two scheduled meetings during each calendar year.
The principal functions of the Audit Committee are:
(a) To make recommendations to the Board of Directors regarding the
engagement of the Company's independent auditor after reviewing
management's evaluation and recommendation of the auditor and their
independence, and to review the arrangements for and scope of the
independent audit and the fees proposed for such audit, as well as the
scope and proposed fees for additional non-audit services.
(b) To ensure receipt from the independent auditor of a formal written
statement delineating all relationships between the independent
auditor and the Company, consistent with Independence Standards Board
Standard 1.
(c) To actively engage in a dialogue with the independent auditor with
respect to any disclosed relationships or services that may impact the
objectivity and independence of the independent auditor.
(d) To review the results of the audit engagement with the independent
auditor and their Memorandum of Advisory Comments and management's
responses thereon.
(e) To review with the Company's management and the independent auditor
the accounting principles applied or to be applied in financial
reporting, and to review and approve any major policy changes
affecting the Company's financial presentation.
(f) To review and approve the annual internal audit plan and to review the
results of internal audits and comments on the Company's system of
internal controls and compliance therewith.
(g) To review implementation and/or resolution of previous internal and
external audit recommendations.
(h) To report activities of the Committee to the Board of Directors and
make such recommendations and findings concerning any audit or related
matters as it deems appropriate.
(i) To meet periodically with the independent and/or internal auditors to
discuss any matters that the Committee and/or the auditors wish to
discuss in Executive session.
(j) To maintain final approval authority over any proposed terminations
involving the Internal Audit Services function.
(k) To review with management, the internal auditor and the independent
auditors, the adequacy of the accounting for, and disclosure of,
material contingencies in the Company's financial reporting.
(l) To prepare annually a Report of the Audit Committee for inclusion in
the Company's annual proxy statement.
A-1
(m) To review and assess the adequacy of the Audit Committee Charter on an
annual basis.
(n) To include the Audit Committee Charter as an appendix to the Company's
annual proxy statement at least once every three years, or more
frequently if substantive changes are made to the Charter.
The members of the Audit Committee are not employees of the Company and, in
accordance with the listing standards of the American Stock Exchange, are free
of any relationship that would interfere with the exercise of independent
judgment as a member of the Audit Committee.
The Audit Committee represents the Board of Directors, discharging its
responsibility of oversight of the financial reporting process by carrying out
the above functions. The existence and activities of the committee, however,
does not alter the traditional roles and responsibilities of the Company's
management and the independent auditor with respect to the accounting and
internal control functions and financial statement presentation.
A-2
DETACH HERE ZUTL52
PROXY
UNITIL CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned, revoking all previous proxies, hereby appoints ANTHONY J.
BARATTA, JR., MARK H. COLLIN, MICHAEL J. DALTON AND ROBERT G. SCHOENBERGER, and
each of them, proxies with power of substitution to each, to vote for the
undersigned at the Annual Meeting of Common Shareholders of Unitil Corporation
(the "Company") to be held at the office of the Company, 6 Liberty Lane West,
Hampton, New Hampshire on Thursday, April 18, 2002, at 10:30 A.M., and at any
and all adjournments thereof, with all powers the undersigned would possess if
personally present and voting and particularly with respect to the matters set
forth on the reverse side hereof.
PLEASE MARK, SIGN AND DATE THIS PROXY CARD ON THE REVERSE SIDE HEREOF AND
RETURN PROMPTLY USING THE ENCLOSED ENVELOPE.
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SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
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UNITIL [LOGO]
C/O EQUISERVE
P.O. BOX 43068
PROVIDENCE, RI 02940
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THIS IS YOUR PROXY. YOUR VOTE IS IMPORTANT.
Regardless of whether or not you plan to attend the Annual Meeting of
Shareholders, you can be sure your shares are represented at the Meeting by
promptly returning your proxy (attached below) in the enclosed envelope.
Thank you for your attention to this important matter.
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DIRECTIONS TO UNITIL'S CORPORATE HEADQUARTERS
6 LIBERTY LANE WEST
HAMPTON, NEW HAMPSHIRE
FROM ROUTE 95
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Take New Hampshire Exit 2. Immediately after the toll booth (50 cents)
bear left onto rte. 101 East. Cross back over Rte. 95, then take the
first right, follow signs for Liberty Lane/Rte. 27. Take the first left
to the Liberty Lane entrance. Stay right on the access road until it
crosses under Rte. 95, then turn left at the Liberty Lane West sign.
Continue straight, 1/2 mile to Unitil on the right.
FROM ROUTE 101 EAST
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Cross over Rte. 95, then take the first right, following signs for
Liberty Lane/Rte. 27. Take the first left to the Liberty Lane entrance.
Stay right on the access road until it crosses under Rte. 95, then turn
left at the Liberty Lane West sign. Continue straight, 1/2 mile to
Unitil on the right.
PLEASE CALL 800/999-6501 IF YOU WOULD LIKE ADDITIONAL INFORMATION
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DETACH HERE ZUTL51
PLEASE MARK
/X/ VOTES AS IN
THIS EXAMPLE.
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE INSTRUCTIONS GIVEN BELOW. IF NO
INSTRUCTIONS ARE GIVEN, THIS PROXY WILL BE VOTED IN FAVOR OF THE ELECTION OF THE
FIVE DIRECTORS LISTED IN ITEM 1.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE NOMINEES LISTED
BELOW.
1. To elect five Directors:
NOMINEES: (01) David P. Brownell, (02) Albert H. Elfner, III,
(03) Ross B. George, (04) Michael B. Green,
(05) M. Brian O'Shaughnessy
FOR WITHHELD
ALL / / / / FROM ALL
NOMINEES NOMINEES
/ /
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For all nominees except as noted above
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT / /
MARK HERE IF YOU PLAN TO ATTEND THE MEETING / /
Please sign exactly as your name appears hereon. When shares
are held by joint tenants, both should sign. When signing as
attorney, executor, administrator, trustee or guardian,
please give full title as such.
PLEASE RETURN THIS PROXY PROMPTLY.
Signature: Date: Signature: Date:
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