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DELMARVA POWER & LIGHT COMPANY
800 KING STREET
P.O. BOX 231
WILMINGTON, DELAWARE 19899
HOWARD E. COSGROVE
CHAIRMAN OF THE BOARD, PRESIDENT
AND CHIEF EXECUTIVE OFFICER
April 21, 1995
To The Holders of Common Stock of
Delmarva Power & Light Company:
You are cordially invited to attend the Annual Meeting of Stockholders of
Delmarva Power & Light Company (the "Company") to be held at the University
of Delaware's John M. Clayton Hall, located on Rt. 896 North, Newark,
Delaware, on Thursday, May 25, 1995 at 11:00 A.M.
The purpose of the meeting is:
1. To elect four members of the Board of Directors;
2. To appoint the Company's independent public accountants for the year
1995; and
3. To transact such other business as may properly come before the
meeting.
The close of business on April 17, 1995 has been fixed by the Board of
Directors as the time for determining the holders of Common Stock entitled to
vote at this meeting.
Please date, sign and mail the enclosed proxy as promptly as possible in
the enclosed return envelope. Stockholders who are present at the meeting may
withdraw their Proxy and vote in person if they so desire.
Yours very truly,
/s/ Howard Cosgrove
- - -------------------------------------------------------------------------------
Whether or not you expect to be present at the Annual Meeting, please sign,
date and return the accompanying proxy promptly so that your shares may be
represented and voted at the Meeting. You may revoke your proxy if you so
desire at any time before it is voted. A return envelope, which requires no
postage if mailed in the United States, is enclosed for your convenience.
- - -------------------------------------------------------------------------------
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DELMARVA POWER & LIGHT COMPANY
800 KING STREET
P.O. BOX 231
WILMINGTON, DELAWARE 19899
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PROXY STATEMENT
This statement is furnished in connection with the solicitation of proxies
on behalf of the Board of Directors of Delmarva Power & Light Company (the
"Company") to be used at the Annual Meeting of Stockholders of the Company to
be held on Thursday, May 25, 1995, and at any adjournments thereof. This
Proxy Statement and accompanying proxy will be mailed to holders of Common
Stock on or about April 21, 1995.
Properly executed proxies received in time for the meeting will be voted
in the manner set forth on the proxy unless specifically otherwise directed
by the stockholder. If the enclosed form of proxy is executed and returned,
it may nevertheless be revoked at any time by delivering notice of revocation
or a duly executed proxy bearing a later date to the Secretary of the Company
before the proxy is voted, and stockholders who are present at the meeting
may revoke their proxies and vote in person.
The Company's proxies are returned to its transfer agent who tabulates the
results of the voting and notifies the Company in writing. Proxies voted at
the Annual Meeting are counted by the Company's Inspectors of Election for
the Annual Meeting. The Inspectors of Election are Company officers who have
been appointed by the Board of Directors.
If a proxy card indicates an abstention or a broker non-vote on a
particular matter, then the shares represented by such proxy will be counted
for quorum purposes. If a quorum is present, an abstention will have the
effect of a vote against the matter and broker non-votes will have no effect.
The Annual Report of the Company for the year 1994, containing financial
statements, was mailed to all stockholders of record on or about March 10,
1995, and subsequently to all new stockholders through the close of business
on April 17, 1995.
On December 31, 1994, the Company had outstanding 59,542,006 shares of
Common Stock. All holders of record of outstanding Common Stock at the close
of business on April 17, 1995, are entitled to one vote per share at the
meeting.
PROPOSAL NO. 1 -- ELECTION OF DIRECTORS
The Board of Directors currently consists of ten members divided into
three classes. Four nominees are to be elected at the Annual Meeting to serve
for a term of three years or until their successors are elected and
qualified. The remaining six directors will continue to serve as set forth
herein, with three directors having terms expiring in 1996 and three
directors having terms expiring in 1997.
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Unless such authority is withheld, it is the intention of the persons
named in the accompanying proxy to vote such proxy for the nominees named
herein, who, with the exception of Weston E. Nellius, are currently serving
as directors. Each nominee has consented to being named in this Proxy
Statement and to serve if elected. Although it is contemplated that all of
the nominees will be able to serve, in the event the inability of one or more
to do so is made known prior to the meeting, the proxy holders will vote for
a substitute nominee or nominees as selected by the Board of Directors.
Effective May 25, 1995, James T. McKinstry, a director since 1987, is
retiring from the Company's Board of Directors.
Weston E. Nellius, President, Nellius Management Associates, Inc., located
in Dover, Delaware, has consented to have his name placed in nomination. Mr.
Nellius is very active in the community serving as a member of various
governmental agencies and on the board of a number of non-profit
organizations and businesses.
All of the nominees for director were recommended by the Nominating
Committee and were approved by the Board of Directors on February 23, 1995.
The election of directors requires the affirmative vote of the holders of
a majority of the shares present, in person or by proxy, and entitled to vote
at the Annual Meeting.
The nominees and directors are listed herein, together with their
principal occupation or employment, certain additional information as of
December 31, 1994, and their respective terms. Except as otherwise indicated,
nominees and directors have been engaged in their present occupations for at
least the past five years.
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SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
AS OF FEBRUARY 28, 1995
Shares of
Nominees for Director Common Stock(1)(2)
- - -------------------------------------- ------------------
CLASS II -- TERM EXPIRING IN 1998
HOWARD E. COSGROVE ................ 36,601(3)(4)
AUDREY K. DOBERSTEIN .............. 1,000
JAMES C. JOHNSON .................. 1,020
WESTON E. NELLIUS ................. 500*
Incumbent Directors
- - --------------------------------------
CLASS III -- TERM EXPIRING IN 1996
MICHAEL G. ABERCROMBIE ............ 700(5)
ROBERT D. BURRIS .................. 500
JAMES H. GILLIAM, JR. ............. 1,000
Incumbent Directors
- - --------------------------------------
CLASS I -- TERM EXPIRING IN 1997
MICHAEL B. EMERY .................. 1,000
SARAH I. GORE ..................... 1,000
H. RAY LANDON ..................... 26,271(3)(6)
Other Executive Officers
- - --------------------------------------
THOMAS S. SHAW .................... 10,449(3)
RALPH E. KLESIUS .................. 12,009(3)(4)
PAUL S. GERRITSEN ................. 11,049(3)
*Number of shares beneficially owned as of 3/10/95
As of February 28, 1995, all current executive officers and directors as a
group (20 persons) owned beneficially 162,164 shares of Common Stock,
representing 0.27% of the shares of Common Stock outstanding.
- - ------
(1) Each of the individuals listed beneficially owned less than 1% of the
Company's outstanding common stock.
(2) Includes shares owned beneficially by officers/directors and Other
Executive Officers of the Company pursuant to the Company's Savings &
Thrift Plan and Performance Based Employee Stock Ownership Plan.
(3) Includes 23,750, 11,770, 5,830, 5,830 and 4,990 shares of
performance-based restricted stock for Messrs. Cosgrove, Landon, Shaw,
Klesius and Gerritsen, respectively, which were granted as a part of the
Company's Long-Term Incentive Plan. The number of shares actually earned
will depend on the Company's performance, as measured by Total
Stockholder Return (stock appreciation and dividends paid), relative to
the Peer Group (as defined on page 11) at the end of a four-year period.
(4) Does not include 14,400 and 4,400 shares of Common Stock which Messrs.
Cosgrove and Klesius respectively, are deemed to have beneficial
ownership. These shares may be acquired upon the exercise of stock
options granted under the Company's Long-Term Incentive Plan.
(5) Does not include 300 shares of Common Stock owned by Mr. Abercrombie's
wife, beneficial ownership of which he disclaims.
(6) Does not include 4,200 shares of Common Stock owned by Mr. Landon's wife,
beneficial ownership of which he disclaims.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNER
The following table provides information with respect to the only person
who is known to Delmarva Power & Light Company to be the beneficial owner of
more than 5 percent of the outstanding common shares of the Company.
Name Shares
and Address of Beneficially Percent of
Beneficial Owner Owned(1) Class
- - ---------------------------------- ----------------- ---------------
Franklin Resources, Inc. 4,271,850 7.2%
777 Mariners Island Boulevard
P.O. Box 7777
San Mateo, California 94403
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(1) The share ownership shown above is based on amendment No. 2 to a Form
13G, dated February 14, 1995, filed with the Securities and Exchange
Commission.
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NOMINEES FOR CLASS II DIRECTORS WITH TERMS
EXPIRING IN 1998:
Howard E. Cosgrove, age 52. Director since 1986.
Chairman, President and Chief Executive Officer
of the Company (President and Chief Operating Officer PICTURE
1991 to 1992, Executive Vice President 1985 to 1991).
Director of Wilmington Trust Company, Wilmington,
Delaware. Mr. Cosgrove is also a Trustee of The
University of Delaware. Howard E. Cosgrove
Audrey K. Doberstein, age 62. Director since 1992.
President of Wilmington College, New Castle,
Delaware. Director of Mellon Bank Delaware (N.A.), PICTURE
Wilmington, Delaware. Dr. Doberstein also serves
as a member of the Board of Directors of
Blue Cross/Blue Shield of Delaware. Audrey K. Doberstein
James C. Johnson, age 60. Director since 1992.
President and member of the Board of Directors
of Loyola Capital Corporation and President of
its primary subsidiary, Loyola Federal Savings PICTURE
Bank, Baltimore, Maryland. Mr. Johnson is
also a member of the Board of Directors of
the Chesapeake Bay Trust. James C. Johnson
Weston E. Nellius, age 59. President, Nellius
Management Associates, Inc., Dover, Delaware.
Director of Nations Bank of Delaware (N.A.),
Dover, Delaware. Mr. Nellius also serves as PICTURE
a member of the Board of Directors of
The Delaware Family Foundation and the
Delaware Health Care Providers Association. Weston E. Nellius
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CLASS III DIRECTORS WITH TERMS
EXPIRING IN 1996:
Michael G. Abercrombie, age 55. Director
since 1993. President of Cato, Inc. (a
petroleum distributorship), Salisbury, PICTURE
Maryland. Mr. Abercrombie also serves as
President of The Community Foundation of
the Eastern Shore. Michael G. Abercrombie
Robert D. Burris, age 50. Director since
1993. President of Burris Foods, Inc. (a
refrigerated food distribution company), PICTURE
Milford, Delaware. Mr. Burris is also a
director of the Federal Reserve Bank of
Philadelphia. Robert D. Burris
James H. Gilliam, Jr., age 50. Director
since 1993. Director, Executive Vice
President and General Counsel of Beneficial
Corporation (a financial services company),
Wilmington, Delaware (Executive Vice President,
General Counsel and Secretary from 1989 to 1992). PICTURE
Director of Bell Atlantic Corporation,
Philadelphia, Pennsylvania. Mr. Gilliam is
also a Trustee of the Howard Hughes Medical
Institute and is Chairman of the Board of
Wilmington 2000, Inc. James H. Gilliam
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CLASS I DIRECTORS WITH TERMS
EXPIRING IN 1997:
Michael B. Emery, age 56. Director since
1994. Senior Vice President of E.I. duPont
deNemours & Company (a diversified chemical,
energy, and specialty products company),
Wilmington, Delaware (Vice President of PICTURE
Engineering 1989 to 1990). Mr. Emery also
serves as Chairperson of the Development
Council of Delaware Technical and Community
College. Michael B. Emery
Sarah I. Gore, age 60. Director since 1990.
Human Resources Associate, W. L. Gore &
Associates, Inc. (a high technology
manufacturing company), Newark, Delaware.
Director of Delaware Trust Company, PICTURE
Wilmington, Delaware. Mrs. Gore and her
family created the I Have a Dream
Foundation of Delaware for which she
serves as a director. Sarah I. Gore
H. Ray Landon, age 59. Director since 1988.
Executive Vice President of the Company.
Director of Artisans' Savings Bank, PICTURE
Wilmington, Delaware. Mr. Landon is the
Past Chairman of the Board of The Delaware
State Chamber of Commerce. H. Ray Landon
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BOARD OF DIRECTORS MEETINGS
The Board of Directors held ten regular meetings in 1994. All incumbent
directors attended more than seventy-five percent (75%) of the aggregate of
the total number of meetings of the Board of Directors and meetings of the
Committees of the Board on which they served.
COMMITTEES AND COMMITTEE MEETINGS
The Board of Directors has Audit, Executive, Investment, Nominating,
Compensation and Nuclear Oversight Committees. In 1994, the Audit Committee
held 2 meetings, the Executive Committee held no meetings, the Investment
Committee held no meetings, the Nominating Committee held 3 meetings, the
Compensation Committee held 4 meetings, and the Nuclear Oversight Committee
held 2 meetings.
The Audit Committee is comprised of three outside directors: James C.
Johnson, Chairperson, Robert D. Burris and Audrey K. Doberstein. The
Committee meets primarily to review and approve the scope of the annual audit
of financial statements by the independent certified public accountants and
to review and approve or disapprove the reports rendered by the independent
certified public accountants. The Audit Committee also recommends independent
certified public accountants for appointment by vote of the holders of shares
of Common Stock at the Company's Annual Meeting.
The Executive Committee is comprised of three outside directors and two
inside directors. The three outside directors are James T. McKinstry (who is
not standing for re-election as a director), Vice Chairperson, Sarah I. Gore
and James C. Johnson. Howard E. Cosgrove, Chairperson, and H. Ray Landon are
the inside director members of the Committee. During intervals between
meetings of the Board of Directors, the Executive Committee may exercise all
powers of the Board of Directors (except those powers specifically reserved
to the full Board of Directors by Delaware and Virginia law and the Company's
Restated Certificate and Articles of Incorporation, as amended, and By-Laws,
as amended) in the management of all affairs of the Company.
The Investment Committee is comprised of three outside directors and two
inside directors. The three outside directors are Audrey K. Doberstein, James
H. Gilliam, Jr. and James T. McKinstry (who is not standing for re-election
as a director). Howard E. Cosgrove, Chairperson, and H. Ray Landon are the
inside director members of the Committee. This Committee reviews financial
investments and policies encompassing matters beyond normal cash management
functions, including overseeing equity funding from the Company to its
subsidiary companies.
The Nominating Committee is comprised of two outside directors and one
inside director. The two outside directors are Audrey K. Doberstein,
Chairperson, and Michael G. Abercrombie. Howard E. Cosgrove is the inside
director member of the Committee. The Committee meets primarily to review and
screen all recommendations submitted to it and to select potential candidates
for vacancies that occur on the Board of Directors and to make
recommendations to the Board of Directors for candidates to fill those
vacancies. The Nominating Committee, in recommending candidates for election
as directors, endeavors to locate candidates for Board membership who have
attained prominent positions in their fields of endeavor and whose
backgrounds indicate that they have broad knowledge and experience and the
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ability to exercise sound business judgment. The Nominating Committee will
consider nominees recommended by stockholders for election as directors. The
name of any such nominee, together with the nominee's qualifications and consent
to be considered as a nominee, should be sent to the Secretary of the Company,
pursuant to the Company's By-Laws, as amended.
The Compensation Committee is comprised of four outside directors: Sarah
I. Gore, Chairperson, Michael B. Emery, James H. Gilliam, Jr. and James C.
Johnson. This Committee reviews the compensation programs, approves the
salaries of the principal officers, makes recommendations regarding
remuneration of the directors, designates appropriate programs to carry out
the purpose of the Long-Term Incentive Plan and approves the distribution of
payments under the Management Incentive Compensation Plan.
The Nuclear Oversight Committee is comprised of three outside directors
and one inside director. The three outside directors are James T. McKinstry
(who is not standing for re-election as a director), Chairperson, Michael G.
Abercrombie and Robert D. Burris. Howard E. Cosgrove is the inside director
member of the Committee. The Committee reviews the status of those nuclear
power stations of which the Company is a part owner and assesses the
Company's position in respect to related matters.
DIRECTOR'S COMPENSATION
Directors who are not officers of the Company receive an annual retainer
of $12,000 plus $700 for each Board meeting attended and $600 for each
Committee of the Board meeting attended. Chairpersons of the Audit,
Compensation, and Nuclear Oversight Committees receive an additional annual
retainer of $1,000. There have been no changes in Director's Compensation
since May 1, 1992.
CHANGES TO BY-LAWS
There were no changes to the By-Laws of the Company during 1994.
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DELMARVA POWER & LIGHT COMPANY
BOARD COMPENSATION COMMITTEE REPORT
PRINCIPLES OF EXECUTIVE COMPENSATION PROGRAM
OVERALL OBJECTIVES
The Company's executive compensation program is designed to motivate its
senior executives to achieve the Company's goals of providing its customers
with high quality service at a competitive price and providing the Company's
stockholders with a competitive return on their investment.
Toward that end, the program provides:
o Total compensation levels that are competitive with those provided by
other utilities from which the Company may compete for executive
talent;
o Base salary levels related to position and individual performance;
o Annual incentive compensation that varies based on corporate and
individual performance; and
o Long-term incentive compensation based on long-term performance that
increases stockholder value.
In administering the executive compensation program, the Compensation
Committee attempts to strike an appropriate balance among these objectives,
each of which is discussed in greater detail below.
COMPETITIVE COMPENSATION LEVELS
Compensation (base salary, annual incentive, and long-term incentive)
opportunities are developed for Company executives utilizing the Edison
Electric Institute ("EEI") Executive Compensation Survey Report and counsel
with the Company's outside consulting firm, Towers Perrin. In general,
executive compensation is targeted to the median of utility industry peers
contained in the EEI Executive Compensation Survey Report (the "Peer Group")
for each component of the compensation program. The compensation Peer Group
does not include all of the same companies as the published industry index in
the Comparison of Five Year Cumulative Total Return graph included in this
Proxy Statement. However, 44 out of the 47 companies (93.6%) in the Dow Jones
Electric Utilities Index are included in the EEI Executive Compensation
Survey Report.
Each component of the executive compensation program is reviewed on an
annual basis to ensure its alignment with the Company's compensation
philosophy. Annual base salary increases reflect the individual's performance
and contribution over several years in addition to the results for a single
year. Year-to-year changes in annual incentive awards vary with the Company's
annual performance results. Following the 1994 salary increases, the
Company's salary level for each of its five named executive officers was
below the median of the salary range defined by the Peer Group.
The Company has examined the IRS regulation pertaining to the $1,000,000
compensation deductibility cap for each of the five named executive officers
and has determined that the regulation is not applicable to the Company,
since the total compensation for any one individual is significantly below
the cap.
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ANNUAL INCENTIVE COMPENSATION
The Company's Management Incentive Compensation Plan is designed to
motivate participants to accomplish stretch financial and individual goals.
The corporate financial goals relate to both customer and stockholder
measurements. Two criteria must be met before there are any awards under this
plan: (1) at least half of specified corporate goals must be met; and (2)
actual earnings per share ("EPS") for the year must exceed 95% of the
Company's EPS goal.
The awards, upon satisfaction of these criteria, contain two components,
corporate performance and individual performance. Approximately 80% of the
maximum incentive opportunity for the Company's senior executives, including
those named in the compensation tables in this Proxy Statement, arises out of
corporate performance, which is measured by (a) the Company's EPS as compared
with the Company's EPS goal, and (b) the Company's net change in electric
rates per kilowatt hour as compared against the net change in the electric
rates of the Peer Group over a three-year period. Generally, the payout in
connection with corporate performance is determined in the following manner.
There is a basic incentive opportunity ("BIO") set at the beginning of each
year, which is expressed as a percentage of salary. The BIO is adjusted at
year-end based upon corporate performance. This adjusted amount may not
exceed 150% of the BIO. The adjustment is made based upon the EPS/Rates
multiplier (the "multiplier"), which takes corporate performance into
account. The BIO assumes that 100% of the annual EPS goal is met and the net
change in rates over a three-year period equals the industry average.
Therefore, the multiplier starts at 1.00, but it may be adjusted up or down
to reflect actual results. If actual EPS is higher than the goal, the
multiplier is increased by 5% for each 1% above the goal. If actual EPS is
lower than the goal, the multiplier is decreased by 20% for each 1% below the
goal. A second adjustment is made for the average change in rates over a
three-year period, as compared to the Peer Group. If the Company's rates go
down more, or increase less, than the Peer Group average, the multiplier is
increased by 5% for each 1% positive deviation. If the Company's rates
increase more, or decrease less than the industry average, the decrease is 2%
for each 1% negative deviation.
The remaining approximately 20% of the maximum incentive opportunity for
senior executives arises out of individual performance, with a particular
focus on achievement of individual goals, as evaluated at each January 1
merit review.
LONG-TERM INCENTIVE COMPENSATION
The Company's Long-Term Incentive Plan reinforces the importance of
providing investors with a competitive return on their investment.
Participants in the Plan are contingently awarded shares of the Company's
stock. Awards granted under this Plan consist entirely of shares of
performance-based restricted stock. Actual awards are made after the end of a
four-year performance cycle and are based on a comparison of the Company's
performance, as measured by Total Stockholder Return (stock appreciation and
dividends paid), to the Peer Group. The target number of shares will be
awarded if the Company's Total Stockholder Return Percentile (4-year
cumulative as compared to the Peer Group) is in the 50% to 59.9% range. The
threshold number will be awarded if the Total Stockholder Return Percentile
is in the 35% to 39.9% range and the maximum number will be awarded if the
Stockholder Return Percentile is in the 90% to 100% range. Formerly, the Plan
also provided for stock options and dividend rights, some of which are still
outstanding.
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SUMMARY OF ACTIONS TAKEN BY THE COMPENSATION COMMITTEE
The Compensation Committee, consisting entirely of outside directors,
reviews and approves each of the Company's executive compensation plans and
assesses the effectiveness of the program as a whole. This includes
activities such as reviewing the design of the Company's various incentive
plans and assessing the reasonableness of the overall executive compensation
program.
In addition, the Committee administers key aspects of the Company's salary
program and incentive plans, such as approving the annual salary increase
budget, setting the targets used in the annual incentive plan, approving the
size of the annual incentive pool and setting grant levels under the annual
and long-term incentive plans. With respect to the annual incentive pool,
individual awards are not limited by the size of the total pool. The awards
are limited by the Plan to 27% of base salary for each of the senior
executives, including the five named executive officers, and other specified
amounts for other employees covered by the Plan.
Finally, the Committee implements the Company's executive compensation
program, which includes the Chief Executive Officer and the Company's four
other most highly-compensated executives -- i.e., the five "named executive
officers."
Significant actions by the Committee for fiscal year 1994 included setting
salaries and reviewing criteria for and approving the awarding of annual
incentive awards, and long-term incentive grants. In addition, at its
December 1994 meeting, as a part of the Company's overall effort to minimize
1995 base salary increases and to more closely link total compensation with
corporate performance, members of the Committee made a decision that in lieu
of salary increases the Company's ten most highly compensated officers would
be granted additional compensation opportunities through an increase in
Long-Term Incentive grants for 1995. These grants consist entirely of shares
of performance-based restricted stock.
CHIEF EXECUTIVE OFFICER COMPENSATION
SALARY ACTION
Chief Executive Officer, Howard E. Cosgrove's salary was increased from
$320,000 in 1993 to $345,000 in 1994. In determining the salary adjustment,
the Committee took into consideration survey data contained in the EEI
Executive Compensation Survey Report which showed that Mr. Cosgrove's salary
was below the median of Utility Industry Peers, his strong performance in
completing the responsibilities of his position, and the fact that his salary
had not been increased since October 1, 1992, which is when he assumed the
position of Chairman of the Board, President and Chief Executive Officer. The
salary adjustment for 1994 placed Mr. Cosgrove's salary at approximately 92%
of the median for Chief Executive Officers in comparably-sized utilities.
ANNUAL INCENTIVE AWARD
Mr. Cosgrove's annual incentive award for 1994, as shown in the
compensation table contained in this Proxy Statement, was based upon the
following: (a) actual EPS for the year was 107% of the Company's EPS goal,
(b) of the eight corporate goals which were established for 1994 in the areas
of safety, cost, competitive pricing, customer relations, the environment and
service reliability, six were met or exceeded, and (c) the Company's average
kilowatt hour rate went down an average of 1.1% while its Peer Group
increased an average of 1.3%, for a net positive deviation of 2.4% during the
period of 1992-1994.
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LONG-TERM INCENTIVE PLAN
Long-term incentive grants represent an important component of the
compensation opportunity for the Chief Executive Officer. Consistent with the
Company's Long-Term Incentive Plan, the Committee determined the 1994 grants
of performance-based restricted stock (reflected in the compensation tables
contained in this Proxy Statement) made to Mr. Cosgrove. The initial award of
performance-based restricted stock is targeted at providing a long-term
opportunity consistent with similar awards made to other utility executives
from the Peer Group who earn similar salary levels. The number of shares
actually earned, if any, will be awarded in 1998 based on a comparison of the
Company's performance, as measured by Total Stockholder Return compared to
the Peer Group over the four-year period 1994-1997, as discussed under
"Long-Term Incentive Compensation" on page 11.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee is comprised solely of non-officer directors.
There are no Compensation Committee interlocks.
COMPENSATION COMMITTEE
S. I. Gore, Chairperson J. H. Gilliam, Jr.
M. B. Emery J. C. Johnson
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SUMMARY COMPENSATION TABLE
The following table sets forth information regarding compensation earned
during the past three years by the Company's Chief Executive Officer and by
each of the Company's four other most highly-compensated executive officers
based on compensation earned during 1994.
SUMMARY COMPENSATION TABLE
Long-Term Compensation
--------------------------------
Annual Compensation Awards Payouts
----------------------------- ---------------------- -------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other Restricted Securities All Other
Annual Com- Stock Underlying LTIP Com-
pensation Award(s) Options Payouts pensation
Name and Principal Position Year Salary($) Bonus($) $ $(1) (#) ($) ($)(2)
- - --------------------------------------- ------- ------- ------ ----------- ---------- ---------- ------- ---------
H. E. Cosgrove Chairman of the Board 1994 345,000 90,800 -0- -0- -0- -0- 24,118
President and Chief 1993 320,000 86,400 -0- -0- -0- -0- 28,584
Executive Officer 1992(3) 245,000 -0- -0- -0- 5,900 -0- 32,551
H. R. Landon Executive Vice President 1994 220,000 57,900 -0- -0- -0- -0- 21,984
1993 200,000 53,600 -0- -0- -0- -0- 25,998(4)
1992 185,000 -0- -0- -0- 4,800 -0- 24,464(4)
T. S. Shaw Senior Vice President/ 1994 165,000 42,600 -0- -0- -0- -0- 10,030
President, Delmarva 1993 150,000 39,800 -0- -0- -0- -0- 11,506
Capital Investments, Inc. 1992 139,900 -0- -0- -0- 1,300 -0- 12,740
R. E. Klesius Senior Vice President 1994 157,000 39,000 -0- -0- -0- -0- 9,672
1993 150,000 38,300 -0- -0- -0- -0- 10,890
1992 129,300 -0- -0- -0- 1,300 -0- 11,446
P.S. Gerritsen Vice President 1994 152,000 37,700 -0- -0- -0- -0- 14,326
1993 146,200 37,300 -0- -0- -0- -0- 17,108
1992 146,200 -0- -0- -0- 2,800 -0- 18,409
#--Number of units $--Dollar amounts
- - ------
(1) Dividends on shares of performance-based restricted stock are accrued at
the same rate as that paid to all holders of Common Stock. Restricted
stock awards are reported in the Long- Term Incentive Plan Table on page
16. As of December 31, 1994: Mr. Cosgrove held 12,180 shares of
restricted stock with a value of $269,775 (1,230, 4,880, and 6,070 shares
with a grant-date market price of $20.50, $22.75 and $22.00 per share
respectively); Mr. Landon held 5,900 shares of restricted stock with a
value of $130,010 (990, 2,260, and 2,650 shares with a grant-date market
price of $20.50, $22.75 and $22.00 per share respectively); Messrs. Shaw
and Klesius each held 2,960 shares of restricted stock with a value of
$65,697.50 (280, 1,330 and 1,350 shares with a grant-date market price of
$20.50, $22.75 and $22.00 per share respectively); and Mr. Gerritsen held
2,940 shares of restricted stock with a value of $64,545 (590, 1,000 and
1,350 shares with a grant-date market price of $20.50, $22.75 and $22.00
per share respectively).
(2) The amounts of All Other Compensation for each of the five named
executive officers for fiscal year 1994 include the following: for Mr.
Cosgrove, $5,896 in Company matching contributions to the Company's
Savings & Thrift Plan and an accrual of $18,018 for dividend rights
acquired through the Company's Long-Term Incentive Plan; for Mr. Landon,
$5,456 in Company matching contributions to the Company Savings & Thrift
Plan, and an accrual of $16,324 for dividend rights acquired through the
Company's Long-Term Incentive Plan; for Mr. Shaw, $4,128 in Company
matching contributions to the Company's Savings and Thrift Plan and an
accrual of $5,698 for dividend rights acquired through the Company's
Long-Term Incentive Plan; for Mr. Klesius, $3,924 in Company matching
contributions to the Company's Savings & Thrift Plan and an accrual of
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$5,544 for dividend rights acquired through the Company's Long-Term
Incentive Plan; and for Mr. Gerritsen, $3,804 in Company matching
contributions to the Company's Savings & Thrift Plan and an accrual of
$10,318 for dividend rights acquired through the Company's Long-Term
Incentive Plan. In addition, the amounts of All Other Compensation for each
of the five named executive officers includes $204 in term life insurance
premiums paid by the Company on such officer's behalf (which insurance is
provided on an equal basis to all employees of the Company).
(3) H. E. Cosgrove was elected Chairman of the Board and Chief Executive
Officer effective October 1, 1992. In accordance with the Proxy Rules of
the Securities and Exchange Commission ("SEC"), compensation amounts
include compensation for the fiscal year 1992 earned prior to his
becoming the Chairman of the Board and Chief Executive Officer.
(4) The amounts in the All Other Compensation column presented in this Proxy
Statement for Mr. Landon differ from the disclosures in the 1994 and 1993
Proxy Statements. In each of 1994 and 1993, the Company reported an
$80,000 deposit made by the Company to cover future pension liability
under the Company's Supplemental Executive Retirement Plan. These amounts
should not have been included as compensation in the Summary Compensation
Table under the SEC Proxy Rules and, therefore, have been removed.
OPTION EXERCISES DURING 1994 AND YEAR-END OPTION VALUES
The following table provides information related to options held by the
five named executive officers at fiscal year-end 1994. The Board of
Directors, at its January 1993 meeting, approved an amendment to the
Company's Long-Term Incentive Plan eliminating awards of Common Stock options
and dividend rights effective fiscal year 1993. The Company does not grant
stock appreciation rights.
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AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
(a) (b) (c) (d) (e)
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options at Options at
FY-End(#) FY-End ($)
Shares Acquired Value
Name on Exercise (#) Realized ($) Exercisable Exercisable(1)
- - ------------------- ------------------- -------------- --------------- ----------------
H. E. Cosgrove -- -- 14,400 -0-
H. R. Landon -- -- -- --
T. S. Shaw -- -- -- --
R. E. Klesius -- -- 4,400 -0-
P. S. Gerritsen -- -- -- --
- - ------
(1) The unexercised options were out of the money at fiscal year-end because
the closing price for the Company's common stock on December 31, 1994,
was $18.14, which was lower than the exercise price of the unexercised
options ($20.50 and $21.25).
PERFORMANCE-BASED RESTRICTED STOCK GRANTS CHART
The following table shows the number of shares of performance-based
restricted stock that were granted to the five named executive officers as
part of the Company's Long-Term Incentive Plan for 1994. It also shows the
number of shares of Common Stock that would be awarded if the threshold,
target or maximum performance is achieved at the end of the four-year
performance period.
LONG-TERM INCENTIVE PLANS -- AWARDS IN LAST FISCAL YEAR
Estimated Future
Payouts under Non-Stock
Price-Based Plans
-----------------------------------
(a) (b) (c) (d) (e) (f)
Number of Performance or
Shares, Units or Other Period Until Threshold Target Maximum
Name Other Rights(#) Maturation or Payout (#) (#) (#)
- - --------------- ---------------- -------------------- ----------- -------- ---------
H. E. Cosgrove 6,070 4 yrs. 1,518 6,070 9,105
H. R. Landon 2,650 4 yrs. 663 2,650 3,975
T. S. Shaw 1,350 4 yrs. 338 1,350 2,025
R. E. Klesius 1,350 4 yrs. 338 1,350 2,025
P. S. Gerritsen 1,350 4 yrs. 338 1,350 2,025
- - ------
(1) Shares of performance-based restricted stock were granted as a part of
the Company's Long- Term Incentive Plan. Actual awards are made after the
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end of a four-year performance cycle and are based on a comparison of the
Company's performance, as measured by Total Stockholder Return (stock
appreciation and dividends paid), to the Peer Group. The target number of
shares will be awarded if the Company's Total Stockholder Return Percentile
(4-year cumulative as compared to the Peer Group) is in the 50% to 59.9%
range. The threshold number will be awarded if the Total Stockholder Return
Percentile is in the 35% to 39.9% range and the maximum number will be
awarded if the Stockholder Return Percentile is in the 90% to 100% range.
RETIREMENT PLAN
PENSION PLAN TABLE
Annual Retirement Benefits to
Persons in Specified Remuneration
and Years of Service Classifications
Average Annual ---------------------------------------------------------------
Earnings for the 5
Consecutive Years Credited Years of Service
of Earnings that ---------------------------------------------------------------
result in the 15 20 25 30 35
Highest Average Yrs.(1) Yrs. Yrs. Yrs. Yrs.
- - ------------------ ------- ------- ------- ------- -------
$125,000 $21,914 $ 38,445 $ 48,056 $ 57,667 $ 67,278
200,000 35,594 62,445 78,056 93,667 109,278
300,000(2) 53,834 94,445 118,056 141,667(3) 165,278(3)
400,000(2) 72,074 126,445(3) 158,056(3) 189,667(3) 221,278(3)
500,000(2) 90,314 158,445(3) 198,056(3) 237,667(3) 277,278(3)
- - ------
(1) Represents reduced early retirement benefit payable at age 55.
(2) Effective January 1, 1995, annual compensation recognized in computing
Average Annual Earnings under the Retirement Plan may not exceed $235,840
as limited by Section 401(a)(17) of the Internal Revenue Code of 1986, as
amended (the "Internal Revenue Code"). With the exception of this
limitation, and the exclusion of dividend rights granted as part of the
Company's Long-Term Incentive Plan and Company contributions under the
Savings & Thrift Plan and Supplemental Executive Retirement Plan
("SERP"), Average Annual Earnings include substantially all cash
compensation shown in the Summary Compensation Table on page 14.
Compensation in excess of the limitation of Section 401(a)(17) is
recognized in computing the benefit payable under the SERP.
(3) For 1995, the limit on annual benefits payable under qualified, defined
benefit plans is $120,000. The amount in excess of $120,000 in the above
table would be payable under the Company's SERP.
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The Company has a trusteed, noncontributory Retirement Plan covering all
regular employees. Directors who are not employees of the Company do not
participate in the Plan. Subject to the maximum limitation on benefits
imposed by Section 415(b) of the Internal Revenue Code, the Retirement Plan
provides management employees, including all officers, a retirement income
equal to years of service times the sum of (a) plus (b) where (a) is 1.30% of
the Average Annual Earnings (for the five consecutive years of earnings that
result in the highest annual average) up to the Average Social Security
Earnings Base ($25,920 in 1995), and where (b) is 1.60% of such Average
Annual Earnings above the Average Social Security Earnings Base. Normal
retirement is age 65; however, employees may retire as early as age 55 with
an actuarial reduction in benefits and also at age 60 without such reduction,
provided they have completed the requisite number of years of service with
the Company. Aside from the integration feature of the above-described
benefit formula, retirement benefits are not subject to any reduction for
Social Security benefits or other offset amounts.
Annual benefits payable upon retirement will be in the form of a joint and
50% survivor annuity for married individuals and a straight life annuity for
single individuals. Both the straight life and joint and survivor forms are
paid to management employees in specified remuneration and years of service
classifications, as illustrated in the Pension Plan Table on page 17.
Messrs. Cosgrove, Landon, Shaw, Klesius and Gerritsen have, respectively,
28, 31, 23, 29 and 17 credited years of service under the Company's
Retirement Plan.
In the event of a change in control of the Company, as defined in the
Retirement Plan, the Plan's surplus assets are to be allocated to the extent
available to (i) satisfy all Plan liabilities, (ii) fund certain
post-retirement medical benefits and death benefits and (iii) subject to
certain limitations, increase the benefits payable to employees who were
active participants on the date of such change in control by crediting each
such participant with an additional five years of deemed credited service and
five years of deemed salary increases at 5% per year. If the Plan is
terminated or merged or benefits are reduced within five years of such change
in control, any remaining surplus assets would be allocated to the extent
available to (a) provide a 2% cost of living increase for retirees for each
year of retirement and (b) subject to certain limitations, increase the
benefits payable to employees who were active participants on the date of
such termination, merger or benefit curtailment by crediting each such
participant with additional years of deemed credited service for the ten-year
period following such change in control together with salary increases at 5%
per year for such period. The Retirement Plan requires that the obligations
described above that are assumed following such a change in control must be
funded by the purchase of a guaranteed annuity contract.
SEVERANCE AGREEMENTS AND OTHER PROVISIONS RELATING TO POSSIBLE CHANGE OF
CONTROL
The Company has entered into severance agreements with the five named
executive officers and forty-one other members of management. The severance
agreements are intended to encourage the continued dedication of members of
the Company's management. These agreements provide potential benefits for
such persons upon actual or constructive termination of employment (other
than for cause) following a change of control of the Company, as defined in
such agreements. Each affected employee would receive a severance payment
equal to 2.99 times base salary (as defined in Section 280G of the Internal
Revenue Code), and entitlement to Company-paid life, disability, medical and
dental benefits for 24 months following termination, as well as an amount in
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cash equal to the actuarial equivalent value of accrued retirement pension
credits equal to 24 months following termination; provided, however, that if any
payments under such agreements would not be deductible by the Company as a
result of Section 280G of the Internal Revenue Code, the amounts payable under
such agreements will be reduced until the entire payment is deductible.
The Company has the following additional benefit plans containing "change
in control" provisions. These plans, for which the five named executive
officers are eligible, were established by the Board of Directors. In the
event of a change in control: The SERP provides for the Company to satisfy
the liabilities accrued under the SERP through the purchase of fully-paid
annuity or life insurance contracts; the Company's Management Incentive
Compensation Plan provides that, at the option of the participant, the
Company will pay all Incentive Awards earned but not distributed; the
Company's Management Life Insurance Plan provides for the Company to prepay
all premiums to any life insurance policy under this Insurance Plan; and the
Company's Long-Term Incentive Plan provides that all restrictions on shares
of performance-based restricted stock will lapse immediately, without regard
to performance criterion, and shares will be immediately issued to all
participants, and all dividends in each Dividend Rights Account will be
immediately paid or, at the employee's option, the ongoing obligation to make
such payments will continue.
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STOCK PERFORMANCE CHART
The following chart compares the yearly change in the cumulative Total
Stockholder Return on the Company's Common Stock during the last five fiscal
years ended December 31, 1994, with the cumulative total return of the
Standard & Poor's ("S&P") 500 Index and the Dow Jones ("D J") Electric
Utilities Index. The comparison assumes $100 was invested on December 31,
1989, in the Company's Common Stock and in each of the foregoing indices and
assumes reinvestment of dividends.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG DELMARVA POWER & LIGHT COMPANY, THE S & P 500 INDEX
AND THE DOW JONES ELECTRIC UTILITIES INDEX
200|------------------------------------------------------------------|
| |
| |
| # |
| @ |
150|---------------------------------------------&------------&-------|
| @# |
D | # & # |
O | & |
L | @ @ |
L 100|----------#-------------------------------------------------------|
A | & |
R | @ |
S | |
| |
50|------------------------------------------------------------------|
| |
| |
| |
| |
0|----------|-----------|-----------|-----------|-----------|-------|
1990 1991 1992 1993 1994
1990 1991 1992 1993 1994
---- ---- ---- ---- ----
DELMARVA POWER & LIGHT COMPANY 94 120 141 152 127
S&P 500 97 126 136 150 152
D J ELECTRIC 102 132 141 158 138
@=DELMARVA POWER & LIGHT COMPANY &=S&P 500 #=D J ELECTRIC UTILITIES
* $100 INVESTED ON 12/31/89 IN STOCK OR INDEX.
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING DECEMBER 31.
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PROPOSAL NO. 2 -- APPOINTMENT OF THE COMPANY'S INDEPENDENT
PUBLIC ACCOUNTANTS
Coopers & Lybrand LLP, Certified Public Accountants, have been recommended
by the Audit Committee to examine the financial statements of the Company for
the year 1995. The By-Laws of the Company require the independent public
accountants to be appointed by vote of the holders of Common Stock.
Representatives of Coopers & Lybrand LLP will be present at the Annual
Meeting to respond to appropriate questions and may make such statements as
they may desire.
A favorable vote of the holders of a majority of the Common Stock present
and entitled to vote is necessary to appoint Coopers & Lybrand LLP as the
Company's independent public accountants.
Your Board of Directors recommends that you vote FOR the adoption of
Proposal No. 2.
OTHER MATTERS
If any other matters are properly brought before the meeting, it is
intended that the holders of the proxies will vote thereon in accordance with
their best judgment.
* * * * *
STOCKHOLDER PROPOSALS
Any stockholder proposal intended to be presented at the 1996 Annual
Meeting of Stockholders must be received by the Company at its principal
executive offices no later than December 22, 1995, in order to be eligible to
be considered for inclusion in the Company's proxy materials relating to that
Meeting.
SOLICITATION
The cost of the solicitation, including the expenses of brokers and others
who may forward solicitation material to beneficial owners, will be borne by
the Company. Officers and employees of the Company may solicit proxies
personally or by telegraph or telephone as well as by use of the mails.
PARTICIPANTS IN THE DIVIDEND REINVESTMENT AND COMMON SHARE PURCHASE PLAN
PLEASE NOTE
The proxy includes the number of shares that are held in your name in the
Company's Dividend Reinvestment and Common Share Purchase Plan ("DRIP"). Your
vote with respect to the shares that are held in your name is also an
instruction for voting the DRIP shares.
D. P. Connelly
Secretary
Wilmington, Delaware, April 21, 1995
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DIRECTIONS TO CLAYTON HALL --
UNIVERSITY OF DELAWARE NORTH CAMPUS
(WATCH FOR SIGNS DIRECTING YOU TO CLAYTON HALL)
To: Clayton Hall
From: Kirkwood Highway (Rt. 2)
Drive South on Kirkwood Highway, turn right onto Cleveland Avenue at
Porter Chevrolet, drive past 2 traffic lights, turn right onto New London
Road (Rt. 896), look for blue signs for Clayton Hall -- University of
Delaware North Campus on right (about 1/8 of a mile).
To: Clayton Hall
From: I-95 or Rt. 896
Exit onto Northbound Rt. 896 Newark exit and continue north on South
College Avenue, past the University of Delaware athletic complex, over the
bridge and past other University of Delaware buildings until you come to East
Main Street. Turn left onto East Main Street (position yourself in the right
lane), turn right onto New London Road (Rt. 896), drive up New London Road,
pass through one traffic light, look for signs for Clayton Hall -- University
of Delaware North Campus on the right (about 1/8 of a mile past traffic
light).
(SEE MAP ON FOLLOWING PAGE)
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NORTH CAMPUS
UNIVERSITY OF DELAWARE
CLAYTON HALL
MAP
23
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Proxy Delmarva Power & Light Company
Delmarva
Power
===============================================================================
This proxy when properly executed, will be voted as directed by the
stockholder. If no direction is given, the shares represented by this proxy
will be voted "FOR" items 1 and 2. This proxy is solicited on behalf of the
Board of Directors.
By signing and dating on the reverse side you authorize James H. Gilliam,
Jr., Sarah I. Gore, and H. Ray Landon, or any one of them, each with the
power of substitution, to represent and vote your shares of the Company at the
Annual Meeting of Stockholders of Delmarva Power & Light Company to be held on
May 25, 1995, or at any adjournments thereof, as directed on the reverse side.
They are further authorized to vote, in their discretion, upon such other
matters as may properly come before said meeting and adjournments thereof.
Nominees for the Election of Directors (3-year term): Howard E. Cosgrove,
Audrey K. Doberstein, James C. Johnson, and Weston E. Nellius.
(See Reverse Side)
The Board of Directors recommends a vote "FOR" items 1 and 2:
===============================================================================
To vote for all nominees, mark an "X" in the "For" box. To withhold authority
on any individual nominee, mark an "X" in the "For (except)" box and print the
appropriate nominee's name on the line provided.
If no boxes are marked, this Proxy will be voted "FOR" items 1 and 2.
Item No. 1-Election of Directors
/ / For / / Withhold (all) / / For (except)-----------------------------
Item No. 2-Appointment of Coopers & Lybrand LLP as Independent Auditor
/ / For / / Against / / Abstain
Signature
----------------------------------------------------
Signature
----------------------------------------------------
Date , 1995
----------------------------------------------------
Please sign name or names as printed on this
proxy to authorize the voting of your shares as
indicated. Where shares are registered with joint
owners, all joint owners should sign. Persons
signing as executors, administrators, trustees, etc.
should so indicate.