SEC Filing Consolidated Edison Inc

Proposal to Approve the Adoption of the Stock Purchase Assistance Plan

On February 28, 1996, the Board of Directors adopted the Gilbert Associates, Inc. Stock Purchase Assistance Plan (the "Plan"), subject to approval by the Company's stockholders. The following summary of the Plan is qualified in its entirety by reference to the complete text of the Plan set forth in Exhibit B to this Proxy Statement.

Purpose

The purpose of the Plan is to promote the long-term interests of the Company and its stockholders by further encouraging and assisting its officers and key executives to invest in the Company's Stock, with the intention of further aligning their interests and views as stockholders with other stockholders of the Company. The Board believes that a meaningful level of stock ownership will provide these employees with an additional incentive to use their best efforts to increase the value of the Company. The Board also believes that the Plan will enhance the Company's ability to recruit and retain persons who have special competence to contribute to the Company's success.

Administration

The Plan is to be administered by a committee of three or more members of the Board of Directors (the "Committee"). Each member of the committee is required to be a "disinterested person" within the meaning of Rule 16b-3 under the Securities Exchange Act of 1934, as amended, as well as an "outside director" within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"). The Board's Executive Development Committee will initially serve as the Plan's committee. Subject to the terms of the Plan, the committee is authorized to determine eligibility for loans, the amount of each loan, and the terms and conditions of repayment. The Committee also has the authority to interpret the Plan and to establish rules and regulations for purposes of administering the Plan.

Eligibility

Only officers and other key executives of the Company and certain subsidiaries who, in the judgment of the committee, are or will be in a position to contribute significantly to the long-term growth and success of the Company are eligible to receive loans under the Plan.

General Terms

The Plan authorizes the Committee to extend Company loans to selected key executives of the Company and certain subsidiaries for the purpose of acquiring Company stock, including the exercise of employee stock options. The Plan also authorizes loans to fund the payment of taxes incurred in connection with the grant of Company stock or the exercise of stock options as well as to refinance loans incurred to purchase Company stock.

The committee is authorized to establish the terms of each loan offered to key executives under the Plan, provided that no loan may exceed the fair market value of the shares of Common Stock purchased with the loan proceeds. All loans will be full recourse loans. Each loan must be evidenced by a promissory note from the key executive and must be secured by all or a portion of the shares purchased with the loan proceeds. The Committee intends that the rate of interest on each loan approximate the Company's cost of borrowing. In no event, however, will the rate of interest be less than the lowest prevailing rate of interest that would avoid imputed interest under Section 7872 of the Code. All loans must be repaid in full on or before the date established by the Committee at the time the loan is made, subject to the authority of the committee to extend the time for repayment. The Plan requires the immediate payment of a loan upon a key executive's termination of employment with the Company or his or her default in payment of any loan under the Plan.

The transfer of shares of Company stock acquired with the proceeds of a loan under the Plan will be subject to restrictions on transfer and assignability during the period of the loan. The committee is authorized to waive these transfer restrictions in situations where the committee determines that the justification for the waiver is not inconsistent with the purpose of the Plan.

Loan Limits

The Plan establishes limits on the aggregate amount of loans that may be made to all participants in the Plan as well as on the amount of loans that can be made to any one executive. No loans may be made under the Plan if the aggregate principal amount of all outstanding loans under the Plan would exceed 1.5% of the Company's consolidated assets, subject to the Board's authority to increase this amount if the number of key executives eligible to receive loans under the Plan is increased. Also, unless otherwise determined by the committee, the aggregate principal amount of all loans to an employee may not exceed 200% of the average of his or her annual base salary.

Forgiveness of Loans

The Plan authorizes the Board, upon recommendation from the Committee, to forgive: (1) all the principal and accrued interest on any outstanding loan to key executives upon a Change in Control of the Company, and (2) up to 50% of the principal amount of a loan and all accrued interest on the forgiven principal amount upon the death or disability of a key executive.

Termination or Amendment of the Plan

The Board may amend, discontinue, or terminate the Plan at any time; however, no amendment, discontinuance or termination may alter or otherwise affect the terms and conditions of any outstanding loan without the written consent of the key executive. In addition, without the proper approval of the stockholders of the Company, no amendment may change the purpose of the Plan or the purpose for which the loans may be extended to key employees, materially increase the aggregate loan limits or change the definition of "Key Executives" for purposes of expanding materially the eligibility of employees to receive loans under the Plan.

Federal Tax Consequences

The following summarizes the consequences of the extension and repayment of loans under the Plan for federal income tax purposes, based on management's understanding of existing federal income tax laws. This summary is necessarily general in nature and does not purport to be complete. Also, state and local income tax consequences are not discussed and may vary from locality to locality.

Based on the terms and conditions of the loans that may be made under the Plan, key executives will not recognize any compensation upon the extension of a loan. If any principal or interest is forgiven, the amount of the forgiveness will be recognized as ordinary income to the key executive. The Company will be entitled to a corresponding deduction in the year in which the key executive recognizes any ordinary income under the Plan.

Plan Loans

At present, no loans have been granted under the Plan. However, upon stockholder approval of the Plan, the Company intends to offer loans to certain of its officers and key executives during 1996.

Approval Vote

I approve the adoption of the Stock Purchase Assistance Plan.