<PAGE>
As filed with the Securities and Exchange Commission on March 17, 1997
Registration No. 333-_________
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------------
FORM S-4
Registration Statement under The Securities Act of 1933
-------------------------
BOSTON EDISON HOLDINGS
(Exact name of Registrant as specified in its charter)
-------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
Massachusetts 6719 Applied For
(State or other jurisdiction of (Primary standard industrial (I.R.S. employer
incorporation or organization) classification code number) identification no.)
</TABLE>
800 Boylston Street, Boston, MA 02199, (617) 424-2000
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
Theodora S. Convisser, Esq.
Clerk
800 Boylston Street, Boston, MA 02199, (617) 424-2000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
-------------------------
With Copies To:
David A. Fine, Esq.
Ropes & Gray
One International Place
Boston, Massachusetts 02110-2624
(617) 951-7473
-------------------------
Approximate date of commencement of proposed sale of the securities to
the public: At the effective time of the merger of a wholly-owned
subsidiary of the Registrant with and into Boston Edison Company, which shall
occur as soon as practicable after the effective date of this Registration
Statement and the satisfaction or waiver of all conditions to closing of such
merger as described in the enclosed Proxy Statement/Prospectus.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box: / /
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Title of Each Class of Proposed Maximum Proposed Maximum Amount of
Securities to be Registered Amount to be Registered Offering Price Per Unit Aggregate Offering Price Registration Fee
Common Shares,
$1.00 par value 48,514,973 shares $26.375(1) $1,279,582,412.88(1) $132,442.20(2)
</TABLE>
(1) The Registration Fee was calculated in accordance with Rule 457(f)(1),
based on the average of the high and low sales prices for shares of Common
Stock of Boston Edison Company on the New York Stock Exchange Composite
Tape on March 12, 1997.
(2) Pursuant to Rule 457(b), the total required fee of $387,752.25 has been
reduced by the $255,310.05 filing fee previously paid at the time of filing
of preliminary proxy materials by Boston Edison Company in connection with
this transaction on February 5, 1997.
-------------------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
[BOSTON EDISON COMPANY LETTERHEAD]
_____ __, 1997
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Boston Edison Company on Thursday, May 15, 1997 at 11:00 a.m. at the First
National Bank of Boston, Auditorium, Lobby Level, 100 Federal Street, Boston,
Massachusetts.
At the Meeting you will be asked to consider and vote on a proposal to form
a holding company for Boston Edison. The management and Board of Directors of
Boston Edison consider this change to be in the best interests of Boston Edison
and its stockholders. The new structure will help the Company respond more
effectively and efficiently to competitive changes occurring in the electric
utility industry and to new business opportunities that may arise from these
changes. It will clearly separate the new holding company's regulated and
unregulated lines of business in a manner consistent with the electric industry
restructuring principles outlined by the Massachusetts Department of Public
Utilities. All other Massachusetts investor owned electric utilities are
already organized in this manner.
The attached series of questions and answers provides information on the
proposed holding company, what it is and how it would affect the individual
stockholder. The enclosed Proxy Statement/Prospectus contains a more extensive
discussion of the proposal.
The Board of Directors and management of Boston Edison unanimously
recommend approval of the holding company structure and urge you to vote for the
proposed restructuring. A two-thirds majority is required to approve the
proposal, and your vote is critical to achieving a successful outcome.
At the Meeting, you will also be asked to vote on the election of four
directors and the adoption of the 1997 Stock Incentive Plan. Your vote on the
business at the Annual Meeting is important, regardless of the number of shares
that you own. Whether or not you plan to attend the Meeting, please sign, date
and return your proxy as soon as possible in the envelope provided. During the
Annual Meeting, management will report on operations and other matters affecting
Boston Edison, and will respond to stockholders' questions.
Sincerely,
/s/ Thomas J. May
Thomas J. May
Chairman of the Board,
President and Chief Executive Officer
<PAGE>
THE HOLDING COMPANY AND HOW IT WOULD AFFECT YOU
You may notice that this year's proxy statement looks different from those
of prior years. This is because it contains an extensive discussion of a
proposal to form a holding company structure for Boston Edison Company ("Boston
Edison"). This proposal is briefly summarized below. Each answer is
cross-referenced to the page or pages of the Proxy Statement/Prospectus in which
the topic is discussed in more detail.
WHAT IS BEING PROPOSED?
The Board of Directors proposes to form a holding company, a structure which is
commonly used throughout the utility industry, including in Massachusetts, where
every investor-owned electric utility other than Boston Edison already utilizes
such a structure. Boston Edison and its principal subsidiary, Boston Energy
Technology Group ("BETG"), would become subsidiaries of the new holding company,
while Boston Edison's other subsidiary, Harbor Electric Energy Company ("HEEC"),
a Massachusetts electric company, would remain a subsidiary of Boston Edison.
Current holders of Boston Edison's common stock would own common shares of the
holding company instead of stock in Boston Edison itself. (Please see pages ___
to ___ of the Proxy Statement/Prospectus.)
The charts below depict Boston Edison's current structure and the proposed
holding company structure:
CURRENT STRUCTURE
-----------------
HOLDERS OF COMMON STOCK
AND CUMULATIVE PREFERRED STOCK
:
:
Boston Edison
:
:
........................................................
: :
: :
HEEC BETG and
Subsidiaries
PROPOSED STRUCTURE
------------------
HOLDERS OF COMMON SHARES
:
:
HOLDERS OF CUMULATIVE Holding
PREFERRED STOCK Company
: :
: :
: .................................................
: : :
: : :
Boston Edison BETG and
: Subsidiaries
:
HEEC
<PAGE>
WHY IS A HOLDING COMPANY BEING FORMED?
In recent years, many state utility commissions, including the Massachusetts
Department of Utilities, have initiated inquiries into restructuring the
electric utility industry with a goal of promoting competition and extending to
all customers the option of choosing their own electricity suppliers. In
particular, the Massachusetts Department of Public Utilities has identified the
legal or functional separation of the electricity generation and distribution
businesses as an essential element of creating a competitive market for
electricity.
In December 1996, Boston Edison, the Massachusetts Attorney General and the
Massachusetts Division of Energy Resources announced that they had reached an
agreement (the "Settlement Agreement") that, if approved by the Massachusetts
Department of Public Utilities, would allow all retail customers in Boston
Edison's service area to choose their electricity suppliers beginning as
early as January 1, 1998. As part of the proposed settlement, Boston Edison
would agree to sell all of its fossil electric generating plants.
Accordingly, other than its Pilgrim Nuclear Power Station, Boston Edison
would no longer own any electricity generating facilities.
Assuming that the Settlement Agreement is approved by the Massachusetts
Department of Public Utilities, Boston Edison's electric business would be
thereafter limited primarily to distribution of electricity, and to a much
lesser extent, transmission of electricity. Accordingly, Boston Edison has
identified the need to increase its long-term growth potential through
investment in related non-utility new businesses. At the same time, the move to
a competitive electricity industry, together with a revolution in energy related
technology, has created significant new opportunities for energy service
providers like Boston Edison in non-utility business ventures. Pursuit of these
new opportunities is a key element of Boston Edison's strategy for long-term
growth to benefit its stockholders and customers.
The holding company structure is a well-established form of organization for
companies conducting multiple lines of business, particularly entities engaging
in both regulated and unregulated activities. The holding company structure
would provide increased financial, managerial and organizational flexibility in
order to better position Boston Edison to operate in this changing electric
utility industry. Moreover, the new structure would clearly separate the new
holding company's regulated and unregulated lines of business in a manner
consistent with the principles outlined by the Massachusetts Department of
Public Utilities. (Please see pages ___ to ___ of the Proxy
Statement/Prospectus.)
IN WHAT TYPES OF BUSINESSES WOULD THE HOLDING COMPANY INVEST?
The primary focus of the holding company would be maintaining the strength of
its core business of serving the electric utility needs of its customers. In
addition, the holding company would work to develop new business opportunities
in the telecommunications and energy marketing areas. Through BETG and its
subsidiaries, Boston Edison recently signed letters of intent to form two joint
ventures in such new, non-utility businesses. One involves a joint venture with
RCN, Inc., a subsidiary of C-TEC Corporation, to provide local and long-distance
telephone service, video and high-speed Internet access and eventually property
monitoring services. The other involves plans to form a joint venture with
Williams Energy Services Company, a subsidiary of The Williams Companies, Inc.,
to market electricity, natural gas and energy-related services to customers in
the six New England states. The new holding company would endeavor to develop
these businesses, as well as identify other non-utility businesses which are
related to and compatible with Boston Edison's core business. (Please see pages
___ to ___ of the Proxy Statement/Prospectus.)
HOW WOULD MY OWNERSHIP OF BOSTON EDISON STOCK BE AFFECTED BY THE NEW STRUCTURE?
Owners of Boston Edison's common stock automatically would become owners of the
holding company's common shares on a share-for-share basis. It is expected that
the holding company's common shares would be traded on the New York Stock
Exchange and the Boston Stock Exchange under the ticker symbol "_____". (Please
see pages ___ to ___ of the Proxy Statement/Prospectus.)
<PAGE>
HOW WOULD THE HOLDING COMPANY STRUCTURE AFFECT COMMON AND CUMULATIVE PREFERRED
STOCK DIVIDENDS?
While future dividends on the new holding company's common shares would depend
primarily upon the earnings, financial condition and capital requirements of its
subsidiaries, the trustees of the proposed holding company have no current
intention to change the current Boston Edison dividend policy. In addition, it
is expected that such dividends of the holding company would be declared and
paid on approximately the same schedule of dates as that now followed by Boston
Edison with respect to its common stock dividends. The cumulative preferred
stock would continue to be a security of Boston Edison, not the holding company,
and holders of the cumulative preferred stock would continue to have priority as
to Boston Edison dividends. (Please see pages ___ to ___ of the Proxy
Statement/Prospectus.)
WHAT WOULD HAPPEN TO BOSTON EDISON'S DIVIDEND REINVESTMENT AND COMMON STOCK
PURCHASE PLAN?
Boston Edison's Dividend Reinvestment and Common Stock Purchase Plan would be
assumed by the holding company. Participants in the Plan automatically would
become participants in the corresponding holding company plan. (Please see
page ___ of the Proxy Statement/Prospectus.)
WOULD STOCKHOLDERS NEED TO TURN IN THEIR CURRENT STOCK CERTIFICATES?
It would not be necessary for holders of Boston Edison's common stock to
exchange their stock certificates. Certificates for Boston Edison's common
stock automatically would represent the same number of common shares of the
holding company. New certificates bearing the name of the holding company would
be issued in the future as outstanding certificates are presented for transfer.
(Please see page ___ of the Proxy Statement/Prospectus.)
HOW WOULD FORMATION OF A HOLDING COMPANY AFFECT PERSONAL FEDERAL INCOME TAXES?
It would not. There would be no gain or loss to you for federal income tax
purposes on the conversion of your shares of Boston Edison common stock into
the holding company shares pursuant to the restructuring. For capital gain
purposes, the tax basis of the holding company shares received in exchange
for shares of Boston Edison's common stock would be the same as the tax basis
of your shares in Boston Edison, and the holding period of the holding
company shares would include the holding period of your shares of Boston
Edison's common stock, provided such stock is held as a capital asset at the
time of the exchange. (Please see pages ___ to ___ of the Proxy
Statement/Prospectus.)
WHAT EFFECT WOULD THERE BE ON HOLDERS OF BOSTON EDISON'S CUMULATIVE PREFERRED
STOCK AND DEBT SECURITIES?
Boston Edison's cumulative preferred stock and debt securities, consisting
primarily of debentures, commercial paper and bank credit lines, would not be
changed in the reorganization and would remain as preferred stock and debt
securities of Boston Edison. Boston Edison's depositary preferred shares,
representing ownership of 1/4 of one share of Boston Edison's 8.25% and 7.75%
Series of cumulative preferred stock, would continue to be traded on the New
York Stock Exchange. (Please see pages ___ to ___ of the Proxy
Statement/Prospectus.)
WHAT WOULD THE NEW HOLDING COMPANY BE CALLED?
We have not yet chosen a name for the holding company. It is temporarily
being called "Boston Edison Holdings." We expect the name to be chosen by the
Board of Directors prior to the restructuring. No further stockholder action
would be required. (Please see page __ of the Proxy Statement/Prospectus.)
<PAGE>
WHO WOULD MANAGE THE HOLDING COMPANY AFTER THE HOLDING COMPANY STRUCTURE IS
APPROVED BY THE STOCKHOLDERS?
The Board of Directors and certain of the principal executive officers of Boston
Edison would also serve as the trustees and executive officers of the holding
company upon completion of the reorganization. (Please see pages __ to __ of
the Proxy Statement/Prospectus.)
WHY WOULD THE NEW HOLDING COMPANY BE ORGANIZED AS A MASSACHUSETTS BUSINESS TRUST
INSTEAD OF A CORPORATION?
The new holding company would be formed as a Massachusetts business trust rather
than a corporation due to the potential Massachusetts income tax savings to the
trust and the lower filing fees payable by it in connection with its authorized
capital stock. The parent holding companies of most other investor-owned
Massachusetts utility holding systems are also organized as business trusts.
(Please see pages __ to __ of the Proxy Statement/Prospectus.)
HOW SOON WOULD THE HOLDING COMPANY STRUCTURE BE FORMED IF IT IS APPROVED BY THE
STOCKHOLDERS?
Management intends to form the holding company structure by the end of 1997.
However, any delays in obtaining the required approvals from regulatory agencies
(the Massachusetts Department of Public Utilities, the Federal Energy Regulatory
Commission, the Securities and Exchange Commission and the Nuclear Regulatory
Commission) could impact that schedule. (Please see pages ___ to ___ of the
Proxy Statement/Prospectus.)
WHAT VOTE IS REQUIRED TO APPROVE THE HOLDING COMPANY PROPOSAL?
In order for the holding company proposal to be approved under Massachusetts
law, it must receive the favorable vote, in person or by proxy, of the holders
of two-thirds of the outstanding shares of Boston Edison's common stock.
(Please see pages ___ to ___ of the Proxy Statement/Prospectus.)
CAN THE BROKER WHO HOLDS MY SHARES OF BOSTON EDISON COMMON STOCK VOTE THOSE
SHARES ON MY BEHALF?
Your broker may not vote your shares because the NYSE has declared a vote to
form a holding company as "non-discretionary." Only you can vote your shares.
Your vote on the business at the Annual Meeting is important regardless of the
number of shares that you own. Whether or not you plan to attend, please sign,
date and return your proxy card as soon as possible in the envelope provided so
that your shares can be voted in accordance with your instructions. (Please see
pages ___ to ___ of the Proxy Statement/Prospectus.)
THE ENCLOSED PROXY STATEMENT/PROSPECTUS
CONTAINS A THOROUGH AND DETAILED DISCUSSION OF
BOSTON EDISON'S PROPOSAL TO FORM A HOLDING COMPANY STRUCTURE.
(Boston Edison Logo)
BOSTON EDISON COMPANY
<PAGE>
BOSTON EDISON COMPANY
800 Boylston Street
Boston, Massachusetts 02199
Notice of Annual Meeting of Stockholders
to be held on May 15, 1997
To the Holders of Common Stock:
The Annual Meeting of Stockholders of Boston Edison Company ("Boston
Edison") will be held at the First National Bank of Boston, Auditorium, Lobby
Level, 100 Federal Street, Boston, Massachusetts, on Thursday, May 15, 1997 at
11:00 a.m., for the following purposes:
1. To elect four Class III directors to serve until the Annual Meeting to
be held in the year 2000.
2. To approve a proposal to adopt a holding company structure for Boston
Edison, all as more fully described in the accompanying Proxy
Statement/Prospectus.
3. To approve Boston Edison's 1997 Stock Incentive Plan and to authorize
the issuance of up to 2,000,000 shares of Common Stock under the Plan.
4. To transact any other business which may properly come before the
Annual Meeting or any adjournment thereof.
Further information as to the matters to be considered and acted on at the
Annual Meeting can be found in the accompanying Proxy Statement/Prospectus.
Only the holders of common stock of Boston Edison as of the close of
business on March 17, 1997, are entitled to notice of and to vote at the Annual
Meeting or any adjournment thereof.
Please sign, date and return the accompanying proxy in the enclosed
addressed envelope, which requires no postage if mailed in the United States.
Your proxy may be revoked at any time before the vote is taken by delivering to
the Clerk a written revocation or a proxy bearing a later date or by oral
revocation in person to the Clerk at the Annual Meeting.
By Order of the Board of Directors,
Theodora S. Convisser
Clerk
Boston, Massachusetts
_____ __, 1997
<PAGE>
BOSTON EDISON COMPANY
800 Boylston Street
Boston, Massachusetts 02199
(617) 424-2000
PROXY STATEMENT/PROSPECTUS
This Proxy Statement/Prospectus, together with the accompanying proxy and
1996 Annual Report, is being furnished to stockholders of Boston Edison Company,
a Massachusetts corporation ("Boston Edison"), in connection with solicitation
of proxies by the Board of Directors of Boston Edison to be voted at the Annual
Meeting of Stockholders to be held on Thursday, May 15, 1997 for the purposes
set forth in the foregoing Notice (the "Annual Meeting").
At the Annual Meeting, the stockholders will be asked to approve, among
other things, the formation of a holding company structure for Boston Edison.
The holding company structure will be created through an Agreement and Plan
of Merger (the "Merger Agreement") among Boston Edison, Boston Edison Holdings,
a Massachusetts business trust formed by Boston Edison ("Holdco"), and
Boston Edison Mergeco Electric Company, Inc., a Massachusetts utility
corporation formed by Holdco ("Mergeco"). At the time of the Merger
(as defined below), Mergeco will be a wholly-owned subsidiary of Holdco.
Pursuant to the Merger Agreement, Mergeco will merge with and into Boston
Edison (the "Merger") and each outstanding share of the common stock of Boston
Edison, $1.00 par value per share ("Boston Edison Common Stock"), will
automatically be converted into one common share of Holdco, $1.00 par value
per share ("Holdco Common Shares"). As a result of the Merger, Boston Edison
will become a subsidiary of Holdco and the holders of Boston Edison Common
Stock will become holders of Holdco Common Shares. The outstanding shares of
Boston Edison Cumulative Preferred Stock, par value $100 per share ("Boston
Edison Cumulative Preferred Stock"), will be unchanged and will continue to be
outstanding securities of Boston Edison. In connection with the
implementation of the holding company structure, Boston Edison intends to
transfer to Holdco its ownership interest in its principal subsidiary, Boston
Energy Technology Group, a Massachusetts corporation ("BETG"). See "Proposal
No. 2: Plan of Restructuring -- General."
If the restructuring is implemented, it will not be necessary for holders
of Boston Edison Common Stock to surrender their existing stock certificates for
Holdco share certificates. See "Proposal No. 2: Plan of Restructuring --
Exchange of Certificates Not Required."
This Proxy Statement/Prospectus also serves as the prospectus for Holdco
under the Securities Act of 1933, as amended (the "Securities Act"), with
respect to the issuance of up to 48,514,973 common shares of Holdco in
connection with the restructuring. Further information concerning the shares
offered hereby is contained in "Proposal No. 2: Plan of Restructuring --
Holdco's Declaration of Trust and Comparative Stockholders' Rights" and
"Proposal No. 2: Plan of Restructuring -- Holdco Common Shares."
------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
-------------
The principal executive offices of Boston Edison and Holdco are located at
800 Boylston Street, Boston, Massachusetts 02199, telephone number (617)
424-2000. This Proxy Statement/Prospectus and the accompanying proxy, solicited
on behalf of the Board of Directors of Boston Edison, were first mailed to
stockholders on or about _____ __, 1997.
The accompanying proxy, if properly executed and delivered by a stockholder
entitled to vote, will be voted at the Annual Meeting as specified in the proxy,
but may be revoked at any time before the vote is taken by the signer delivering
to the Clerk of Boston Edison a written revocation or a proxy bearing a later
date or by oral revocation in person to the Clerk at the Annual Meeting. If
choices are not specified on the accompanying proxy,
<PAGE>
the shares will be voted FOR the election of all of the nominees for director
specified in Proposal No. 1 below and FOR Proposals No. 2 and No. 3.
All the costs of preparing, assembling and mailing the enclosed material
and any additional material which may be sent in connection with the
solicitation of the enclosed proxies will be paid by Boston Edison, and no part
thereof will be paid directly or indirectly by any other person. Boston Edison
has retained D.F. King & Co., Inc. to assist in the solicitation of proxies at a
fee of $10,000, plus usual and customary expenses. Some employees may devote a
part of their time to the solicitation of proxies or for attendance at the
Annual Meeting but no additional compensation will be paid to them for the time
so employed and the cost of such additional solicitation will be nominal.
Boston Edison will reimburse brokerage firms, banks, trustees and others for
their actual out-of-pocket expenses in forwarding proxy material to the
beneficial owners of Boston Edison Common Stock.
On March 17, 1997, there were issued and outstanding 48,514,973 shares of
Boston Edison Common Stock. Only holders of record of Boston Edison Common
Stock at the close of business on that date shall be entitled to notice of and
to vote at the Annual Meeting or any adjournments thereof, and those entitled to
vote will have one vote for each share held. To the knowledge of management, no
person owns beneficially more than 5 percent of the outstanding voting
securities of Boston Edison.
The date of this Proxy Statement/Prospectus is _____ __, 1997.
<PAGE>
TABLE OF CONTENTS
Page
AVAILABLE INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . .
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE. . . . . . . . . . . .
SUMMARY OF PROXY STATEMENT/PROSPECTUS. . . . . . . . . . . . . . . . .
Proposal No. 1: Election of Directors . . . . . . . . . . . . . .
Proposal No. 2: Plan of Restructuring . . . . . . . . . . . . . .
Proposed Restructuring . . . . . . . . . . . . . . . . . . .
Special Considerations Applicable to the Restructuring . . .
Reasons for the Restructuring. . . . . . . . . . . . . . . .
Certain Effects on Stockholders. . . . . . . . . . . . . . .
Vote Required. . . . . . . . . . . . . . . . . . . . . . . .
Exchange of Certificates . . . . . . . . . . . . . . . . . .
Stock Exchange Listing . . . . . . . . . . . . . . . . . . .
Conditions to the Restructuring. . . . . . . . . . . . . . .
Dividend Policy. . . . . . . . . . . . . . . . . . . . . . .
Certain Federal Income Tax Consequences. . . . . . . . . . .
No Appraisal Rights. . . . . . . . . . . . . . . . . . . . .
Proposal No. 3: Adoption of the 1997 Stock Incentive Plan. . . .
PROPOSAL NO. 1: ELECTION OF DIRECTORS. . . . . . . . . . . . . . . . .
Information about Nominees and Incumbent Directors. . . . . . . .
Stock Ownership by Directors and Executive Officers . . . . . . .
Director Compensation . . . . . . . . . . . . . . . . . . . . . .
PROPOSAL NO. 2: PLAN OF RESTRUCTURING. . . . . . . . . . . . . . . . .
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Business of Boston Edison . . . . . . . . . . . . . . . . . . . .
The Restructuring . . . . . . . . . . . . . . . . . . . . . . . .
Reasons for the Restructuring . . . . . . . . . . . . . . . . . .
Benefits of Holding Company Structure . . . . . . . . . . . . . .
Special Considerations Applicable to the Restructuring. . . . . .
Recommendations of the Board. . . . . . . . . . . . . . . . . . .
Vote Required . . . . . . . . . . . . . . . . . . . . . . . . . .
Exchange of Certificates Not Required . . . . . . . . . . . . . .
Merger Agreement. . . . . . . . . . . . . . . . . . . . . . . . .
Amendment or Termination of Plan of Merger. . . . . . . . . . . .
Effectiveness of the Restructuring. . . . . . . . . . . . . . . .
Certain Federal Income Tax Consequences . . . . . . . . . . . . .
Treatment of Preferred Stock. . . . . . . . . . . . . . . . . . .
Treatment of Indebtedness . . . . . . . . . . . . . . . . . . . .
Dividend Policy . . . . . . . . . . . . . . . . . . . . . . . . .
Stock Exchange Listing. . . . . . . . . . . . . . . . . . . . . .
Regulatory Approval of the Restructuring. . . . . . . . . . . . .
Regulatory Matters. . . . . . . . . . . . . . . . . . . . . . . .
Holdco's Declaration of Trust and Comparative Stockholders'
Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Holdco Common Shares. . . . . . . . . . . . . . . . . . . . . . .
i
<PAGE>
Trustees and Management of Holdco . . . . . . . . . . . . . . . .
No Appraisal Rights . . . . . . . . . . . . . . . . . . . . . . .
Dividend Reinvestment and Common Stock Purchase Plan. . . . . . .
Common Stock Plans. . . . . . . . . . . . . . . . . . . . . . . .
Price Range of Boston Edison Common Stock . . . . . . . . . . . .
Transfer Agent and Registrar. . . . . . . . . . . . . . . . . . .
Financial Statements. . . . . . . . . . . . . . . . . . . . . . .
Legal Opinion . . . . . . . . . . . . . . . . . . . . . . . . . .
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . .
Report of the Executive Personnel Committee . . . . . . . . . . .
Compensation Committee Interlocks and Insider Participation . . .
Executive Compensation Tables . . . . . . . . . . . . . . . . . .
Summary Compensation Table. . . . . . . . . . . . . . . . . . . .
Long-Term Incentive Plans - Awards in Last Fiscal Year. . . . . .
Pension Plan Table. . . . . . . . . . . . . . . . . . . . . . . .
Change of Control Agreements. . . . . . . . . . . . . . . . . . .
STOCK PERFORMANCE GRAPH. . . . . . . . . . . . . . . . . . . . . . . .
PROPOSAL NO. 3: ADOPTION OF 1997 STOCK INCENTIVE PLAN . . . . . . . .
General . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Federal Income Tax Consequences . . . . . . . . . . . . . . . . .
Vote Required . . . . . . . . . . . . . . . . . . . . . . . . . .
Recommendation of the Board of Directors. . . . . . . . . . . . .
OTHER MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Voting Procedures . . . . . . . . . . . . . . . . . . . . . . . .
Adjournment of Meeting. . . . . . . . . . . . . . . . . . . . . .
Independent Accountants . . . . . . . . . . . . . . . . . . . . .
Other Business. . . . . . . . . . . . . . . . . . . . . . . . . .
Stockholder Proposals . . . . . . . . . . . . . . . . . . . . . .
Stockholder Nominations of Directors. . . . . . . . . . . . . . .
APPENDIX A: AGREEMENT AND PLAN OF MERGER . . . . . . . . . . . . . . .
APPENDIX B: DECLARATION OF TRUST OF HOLDCO . . . . . . . . . . . . . .
APPENDIX C: 1997 STOCK INCENTIVE PLAN. . . . . . . . . . . . . . . . .
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN OR INCORPORATED BY REFERENCE IN THIS PROXY
STATEMENT/PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROXY
STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR THE SOLICITATION
OF AN OFFER TO PURCHASE, ANY OF THE SECURITIES OFFERED BY THIS PROXY
STATEMENT/PROSPECTUS, OR THE SOLICITATION OF A PROXY IN ANY JURISDICTION TO OR
FROM ANY PERSON TO OR FROM WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION OF AN OFFER OR PROXY SOLICITATION IN SUCH JURISDICTION. NEITHER
THE DELIVERY OF THIS PROXY STATEMENT/PROSPECTUS NOR THE ISSUANCE OR SALE OF ANY
SECURITIES HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE INFORMATION SET FORTH HEREIN OR INCORPORATED
HEREIN BY REFERENCE SINCE THE DATE HEREOF.
AVAILABLE INFORMATION
Boston Edison is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information with
the Securities and Exchange Commission (the "SEC"). Such reports, proxy
statements and other information may be inspected and copied at the Public
Reference Facilities maintained by the SEC at Judiciary Plaza, 450 Fifth Street,
N.W., Room 1024, Washington, D.C. 20549 and at the SEC's regional offices at 7
World Trade Center, Suite 1300, New York, New York 10048 and at Northwestern
Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511. Copies of such material may be obtained at prescribed rates from
the Public Reference Facilities maintained by the SEC at Judiciary Plaza, 450
Fifth Street, N.W., Room 1024, Washington, D.C. 20549. Certain securities of
Boston Edison are listed on the New York Stock Exchange ("NYSE") and the Boston
Stock Exchange ("BoSE"), where reports, proxy statements and other information
concerning Boston Edison may also be inspected. Following completion of the
Merger, both Boston Edison and Holdco will file such reports and other
information as required under the Exchange Act and the rules of the NYSE and
BoSE.
Holdco has filed with the SEC a registration statement on Form S-4
(together with all amendments and exhibits thereto, the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities Act"),
registering the Holdco Common Shares that will be issued in lieu of shares of
Boston Edison Common Stock pursuant to the Merger described herein. See
"Proposal No. 2: Plan of Restructuring." This Proxy Statement/Prospectus, which
constitutes a part of the Registration Statement, does not contain all of the
information set forth in the Registration Statement, certain items of which are
contained in schedules and exhibits to the Registration Statement as permitted
by the rules and regulations of the SEC. Statements made in this Proxy
Statement/Prospectus as to the contents of any contract, agreement or other
document referred to are not necessarily complete. With respect to each such
contract, agreement or other document filed as an exhibit to the Registration
Statement, reference is made to the exhibit for a more complete description of
the matter involved, and each such statement shall be deemed qualified in its
entirety by such reference. Items and information omitted from this Proxy
Statement/Prospectus but contained in the Registration Statement may be
inspected and copied at the Public Reference Facilities maintained by the SEC at
Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549.
Upon completion of the Merger, the Holdco Common Shares will be listed on
the NYSE and BoSE. At the time of such listing, Boston Edison Common Stock will
be withdrawn from listing and registration under Section 12 of the Exchange Act.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES BY REFERENCE CERTAIN DOCUMENTS
WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. COPIES OF ANY SUCH
DOCUMENTS, OTHER THAN EXHIBITS TO SUCH DOCUMENTS UNLESS THEY ARE SPECIFICALLY
INCORPORATED BY REFERENCE, ARE AVAILABLE WITHOUT CHARGE TO ANY PERSON, INCLUDING
ANY BENEFICIAL OWNER, TO WHOM THIS PROXY STATEMENT/ PROSPECTUS IS DELIVERED UPON
WRITTEN OR ORAL REQUEST TO: THEODORA S. CONVISSER, CLERK, BOSTON EDISON COMPANY,
800 BOYLSTON STREET, BOSTON, MASSACHUSETTS 02199, TELEPHONE: (617) 424-2000. IN
ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY
MAY 1, 1997.
The following documents filed with the SEC (File No. 1-2301) pursuant to
the Exchange Act are incorporated by reference into this Proxy
Statement/Prospectus:
1. Boston Edison's Annual Report on Form 10-K for the year ended December
31, 1995, as amended by Form 10-K/A-1 which was filed with the SEC on June 28,
1996;
2. Boston Edison's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1996, June 30, 1996, and September 30, 1996; and
3. Boston Edison's Current Reports on Form 8-K dated September 30 and
December 20, 1996.
All other documents filed by Boston Edison pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this Proxy
Statement/Prospectus and prior to the termination of the offering made hereby
shall be deemed to be incorporated by reference herein and to be a part hereof
from the date of filing such documents. Any statement contained herein or in
any document incorporated or deemed to be incorporated by reference herein shall
be deemed to be modified or superseded for purposes of this Proxy
Statement/Prospectus to the extent that a statement contained herein or in any
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Proxy Statement/Prospectus.
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SUMMARY OF PROXY STATEMENT/PROSPECTUS
Reference is made to, and this summary is qualified in its entirety by,
the more detailed information contained in, attached to or incorporated by
reference in this Proxy Statement/Prospectus and the Appendices hereto.
Stockholders are urged to read this Proxy Statement/Prospectus and the
Appendices in their entirety.
Proposal No. 1: Election of Directors
THE BOARD OF DIRECTORS RECOMMENDS THAT
STOCKHOLDERS VOTE FOR THE ELECTION OF ALL NOMINEES FOR DIRECTOR.
Four persons have been nominated for election as Class III directors of
Boston Edison for a term expiring at the Annual Meeting to be held in the year
2000 and until their successors are duly chosen and qualified. Only holders of
record of Boston Edison Common Stock as of the close of business on March 17,
1997 (the "Record Date") are entitled to vote at the Annual Meeting and any
adjournments thereof. Directors will be elected by a plurality of the votes
properly cast at the meeting. If the proposed restructuring is approved and
consummated, the persons elected as directors of Boston Edison also will become
trustees of Holdco. See "Proposal No. 2: Plan of Restructuring -- Trustees and
Management of Holdco."
Proposal No. 2: Plan of Restructuring
THE BOARD OF DIRECTORS RECOMMENDS
THAT STOCKHOLDERS VOTE FOR THE PROPOSED
RESTRUCTURING TO FORM A HOLDING COMPANY.
Proposed Restructuring
The Boston Edison Board of Directors has authorized, subject to
stockholder and regulatory approval, a plan to restructure the corporate
organization of Boston Edison and its subsidiaries to form a holding company
structure. The result of the restructuring will be to have Boston Edison
become a separate subsidiary of a parent holding company, Boston Edison
Holdings ("Holdco"). The present holders of Boston Edison Common Stock will
become holders of Holdco Common Shares. The formation of a holding company
structure will be achieved by way of the merger with and into Boston Edison
of Boston Edison Mergeco Electric Company, Inc. ("Mergeco"), a newly formed
utility subsidiary of Holdco, with holders of Boston Edison Common Stock
exchanging their shares for Holdco Common Shares on a share-for-share basis
and Holdco becoming the sole holder of Boston Edison Common Stock. Each
series of Boston Edison Cumulative Preferred Stock and all indebtedness of
Boston Edison will remain as securities and obligations of Boston Edison and
will not be affected by the Merger. The name Boston Edison Holdings is being
used temporarily and is expected to change prior to, or as part of, the
formation of a holding company structure for Boston Edison.
As part of the restructuring, it is contemplated that Boston Edison will
transfer its ownership interest in its principal subsidiary, Boston Energy
Technology Group ("BETG"), to Holdco such that BETG will become a wholly-owned
subsidiary of Holdco and a sister corporation to Boston Edison. (These proposed
changes to the corporate structure of Boston Edison and its subsidiaries are
generally referred to in this Proxy Statement/Prospectus as the
"restructuring.")
Special Considerations Applicable to the Restructuring
The restructuring proposal involves certain special factors that should be
considered by stockholders. See "Proposal No. 2: Plan of Restructuring --
Special Considerations Applicable to the Restructuring."
Reasons for the Restructuring
In recent years, many state utility commissions, including the
Massachusetts Department of Utilities (the "Massachusetts DPU"), have initiated
inquiries into restructuring the electric utility industry with a goal of
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promoting competition and extending to all customers the option of choosing
their own electricity suppliers. In particular, the Massachusetts DPU has
identified the legal or functional separation of the electricity generation and
distribution businesses as an essential element of creating a competitive market
for electricity.
In December 1996, Boston Edison, the Massachusetts Attorney General and
the Massachusetts Division of Energy Resources announced that they had
reached an agreement (the "Settlement Agreement") that, if approved by the
Massachusetts DPU, would allow all retail customers in Boston Edison's
service area to choose their electricity suppliers beginning as early as
January 1, 1998. As part of the proposed settlement, Boston Edison would
agree to sell all of its fossil electric generating plants. Accordingly,
other than its Pilgrim Nuclear Power Station, Boston Edison would no longer
own any electricity generating facilities.
Assuming that the Settlement Agreement is approved by the Massachusetts
DPU, Boston Edison's electric business would be thereafter limited primarily to
distribution of electricity, and to a much lesser extent, transmission of
electricity. Accordingly, Boston Edison has identified the need to increase its
long-term growth potential through investment in related non-utility new
businesses. At the same time, the move to a competitive electricity industry,
together with a revolution in energy related technology, has created significant
new opportunities for energy service providers like Boston Edison in non-utility
business ventures. Pursuit of these new opportunities is a key element of
Boston Edison's strategy for long-term growth to benefit its stockholders and
customers.
The holding company structure is a well-established form of organization
for companies conducting multiple lines of business, particularly entities
engaging in both regulated and unregulated activities. The holding company
structure would provide increased financial, managerial and organizational
flexibility in order to better position Boston Edison to operate in this
changing electric utility industry. Moreover, the new structure would clearly
separate the new holding company's regulated and unregulated lines of business
in a manner consistent with the principles outlined by the Massachusetts DPU.
Although Boston Edison could continue to pursue non-utility business
opportunities through BETG and other non-utility subsidiaries, management and
the Board of Directors believe it is in the best interests of Boston Edison and
its stockholders to conduct such non-utility activities through a holding
company structure. See "Proposal No. 2: Plan of Restructuring -- Reasons for
the Restructuring" and "Proposal No. 2: Plan of Restructuring -- Benefits of
Holding Company Structure."
Certain Effects on Stockholders
Holdco has been formed as a Massachusetts business trust due to the
potential Massachusetts income tax savings to the trust and the lower filing
fees payable by it in connection with its authorized capital stock. Holdco's
shareholders will have rights and liabilities generally comparable to those
of stockholders of a corporation. Pursuant to certain decisions of the
Massachusetts courts, shareholders who exercise too much control over the
affairs of a Massachusetts business trust may be held personally liable as
partners for the obligations of a trust to the extent not satisfied by the
trust. Even if, however, Holdco were held to be a partnership, the
possibility of its shareholders incurring financial loss is remote because
(a) Holdco's Declaration of Trust (as defined below) contains an express
disclaimer of shareholder liability for the obligations of Holdco, requires
that notice of such disclaimer be given in each agreement, obligation or
instrument entered into or executed by Holdco and provides that no person has
authority to enter into an agreement, obligation or instrument except in
accordance with those requirements, (b) Holdco will seek adequate insurance
against tort liability, (c) most of Holdco's operations will be conducted by
incorporated subsidiaries such that the activities of Holdco will be limited
to the ownership of securities rather than the operation of physical assets
and (d) Holdco's Declaration of Trust provides for indemnification out of the
trust property for any shareholder held personally liable for the obligations
of Holdco. Use of a Massachusetts business trust as the parent holding
company of a Massachusetts electric utility is a common practice. The parent
holding companies of most other investor-owned Massachusetts utility holding
systems are also organized as business trusts. See "Proposal No. 2: Plan of
Restructuring -- Holdco's Declaration of Trust and Comparative Stockholders'
Rights."
Vote Required
Only holders of record of Boston Edison Common Stock as of the Record Date
will be entitled to receive notice of and vote at the Annual Meeting and any
adjournments thereof with respect to approval of the Merger Agreement and the
restructuring. Holders of Boston Edison Common Stock entitled to vote will have
one vote for
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each share held. In order for the holding company proposal to be
approved under Massachusetts law, it must receive the favorable vote, in person
or by proxy, of the holders of two-thirds of the outstanding shares of Boston
Edison Common Stock. As of the Record Date, 48,514,973 shares of Boston Edison
Common Stock were issued and outstanding. To the knowledge of management, no
person owns beneficially more than 5 percent of the outstanding voting
securities of Boston Edison. See "Proposal No. 2: Plan of Restructuring -- Vote
Required."
Exchange of Certificates
If the new holding company structure is implemented, it will not be
necessary for holders of Boston Edison Common Stock to surrender their existing
stock certificates for Holdco share certificates. Certificates representing
Boston Edison Common Stock will automatically represent the corresponding number
of Holdco Common Shares upon consummation of the Merger. See "Proposal No. 2:
Plan of Restructuring -- Exchange of Certificates Not Required."
Stock Exchange Listing
Shares of Boston Edison Common Stock are currently traded on the New York
Stock Exchange ("NYSE") and the Boston Stock Exchange ("BoSE") under the stock
symbol "BSE." Application will be made to list Holdco Common Shares on the NYSE
and the BoSE. See "Proposal No. 2: Plan of Restructuring -- Stock Exchange
Listing."
Conditions to the Restructuring
The Merger Agreement provides that the consummation of the Merger and the
restructuring into a holding company is subject to approval of the Merger
Agreement by the stockholders of Boston Edison, Holdco and Mergeco, as is set
forth more fully below under "Proposal No. 2: Plan of Restructuring -- Vote
Required," and to the approval by the NYSE and the BoSE of Holdco Common Shares
for listing upon official notice of issuance. If the stockholders of Boston
Edison approve the Merger, Boston Edison will then cause the shares of Holdco
and Mergeco to be voted in favor of the restructuring into a holding company.
In addition, the decision to proceed with the Merger and restructuring is
subject to, among other things, the receipt, on terms satisfactory to the Board
of Directors of Boston Edison, of (i) authorization from the Massachusetts DPU
to form a holding company structure for Boston Edison, (ii) other required
regulatory authorizations, including without limitation the approval of the
Federal Energy Regulatory Commission ("FERC"), the Nuclear Regulatory Commission
("NRC") and the SEC and (iii) such other consents and approvals as the Board may
deem necessary or appropriate. Following the restructuring, Holdco is expected
to qualify for an exemption under the Public Utility Holding Company Act of 1935
(the "Holding Company Act"). See "Proposal No. 2: Plan of Restructuring --
Regulatory Approval of the Restructuring" and "Proposal No. 2: Plan of
Restructuring -- Regulatory Matters."
Dividend Policy
While future dividends on Holdco Common Shares will depend primarily upon
the earnings, financial condition and capital requirements of its subsidiaries,
it is contemplated that Holdco initially will make dividend payments on Holdco
Common Shares at the rate currently applicable to Boston Edison Common Stock.
In addition, it is expected that such dividends of Holdco will be declared and
paid on approximately the same schedule of dates as that now followed by Boston
Edison with respect to Boston Edison Common Stock dividends. The most recent
dividend declared by the Board of Directors of Boston Edison was $0.47 per share
of Boston Edison Common Stock and was paid on February 3, 1997. See "Proposal
No. 2: Plan of Restructuring -- Dividend Policy."
Certain Federal Income Tax Consequences
For Federal income tax purposes, no gain or loss will be recognized by
Boston Edison, Holdco, the holders of shares of Boston Edison Common Stock
whose shares are exchanged for Holdco Common Shares or the holders of
Cumulative Preferred Stock as a result of the Merger. See "Proposal No. 2:
Plan of Restructuring -- Certain Federal Income Tax Consequences."
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No Appraisal Rights
Under Massachusetts law governing the proposed Merger, neither a dissenting
holder of Boston Edison Common Stock nor a holder of Boston Edison Cumulative
Preferred Stock, has a right to demand payment of the fair value of his or her
shares if the Merger is consummated.
Proposal No. 3: Adoption of the 1997 Stock Incentive Plan
THE BOARD OF DIRECTORS RECOMMENDS
THAT THE STOCKHOLDERS VOTE FOR ADOPTION
OF THE 1997 STOCK INCENTIVE PLAN
The Board of Directors has adopted the 1997 Stock Incentive Plan, subject
to approval of the stockholders, in order to attract and retain employees in
a position to make contributions to the success of Boston Edison, to reward
employees for such contributions, and to encourage employees to take into
account the long-term interests of Boston Edison through stock based awards.
See "Proposal No. 3: Adoption of the 1997 Stock Incentive Plan."
Proposal No. 3 requires the affirmative vote of a majority of the shares
present and entitled to vote on the matter. See "Proposal No. 3: Adoption of
the 1997 Stock Incentive Plan -- Vote Required."
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PROPOSAL NO. 1: ELECTION OF DIRECTORS
Information about Nominees and Incumbent Directors
Pursuant to Boston Edison's Bylaws, the Board of Directors has fixed the
number of directors at ten. Boston Edison's Restated Articles of Organization
provide for the classification of the Board of Directors into three classes
serving staggered three-year terms. The four persons named below have been
nominated by the Board of Directors for election as Class III directors for a
term expiring at the Annual Meeting to be held in the year 2000 and until their
successors are duly chosen and qualified. The remaining directors will continue
to serve as set forth below, with the two Class I directors having terms
expiring in 1998 and the four Class II directors having terms expiring in 1999.
If any of the nominees shall by reason of death, disability or resignation be
unavailable as a candidate at the Annual Meeting, votes pursuant to the proxy
will be cast for a substitute candidate as may be designated by the Board of
Directors, or in the absence of such designation, in such other manner as the
directors may in their discretion determine. Alternatively, in such a
situation, the Board of Directors may take action to fix the number of directors
for the ensuing year at the number of nominees named herein who are then able to
serve.
Senator Paul E. Tsongas, a Class I director who served as a member of the
Board of Directors since 1985, passed away on January 18, 1997. William F.
Connell, a Class II director who has served on the Board of Directors since
1987, has announced his intention to retire from the Board at the upcoming
Annual Meeting of Stockholders. Boston Edison is searching for a replacement to
fill the current Class I vacancy.
The Board of Directors has adopted the following director retirement
policy. Directors who are employees of Boston Edison, with the exception of the
Chief Executive Officer, retire from the Board when they retire from employment
with Boston Edison. Directors who are not employees of Boston Edison or who
have served as Chief Executive Officer retire from the Board at the annual
meeting of stockholders following their seventieth birthday.
The Board of Directors, which held eight regular meetings during 1996, has
an Executive Committee, an Audit, Finance and Risk Management Committee, an
Executive Personnel Committee, a Nuclear Oversight Committee, a Capital
Investment Committee and a Pricing Committee. During 1996, the Executive
Committee, which is authorized to exercise in the intervals between Board
meetings those powers of the Board which can be delegated and to act as a
nominating committee, met four times. The Audit, Finance and Risk Management
Committee, the responsibilities of which include recommendations as to the
selection of independent auditors, review of the scope of the independent audit,
annual financial statements, internal audit reports, and financial and
accounting controls and procedures, and review of Boston Edison's financial
requirements, insurance coverages, and legal compliance programs, met three
times. The Executive Personnel Committee, which is responsible for reviewing
officer and director compensation arrangements, executive officer personnel
planning and performance, certain benefit programs, and Boston Edison's human
resources policies, met four times. The Nuclear Oversight Committee, which
oversees Boston Edison's nuclear operations, met four times. The Capital
Investment Committee, which provides external oversight of Boston Edison's plans
for capital improvements and reviews investments in related businesses, met
three times. The Pricing Committee, which is authorized to approve the terms of
Boston Edison's debt and equity offerings, did not meet in 1996. All directors
attended at least 75% of the aggregate of the total number of meetings of the
Board and the total number of meetings held by all committees of the Board on
which he or she served.
The names of the nominees as Class III directors and the incumbent Class I
and Class II directors and certain information concerning them are shown in the
following table:
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Nominees as Class III Directors - Terms Expiring in 2000
Principal Occupation (1)
Nominees and Directorships
Gary L. Countryman Chairman of the Board and Chief
Age: 57 Executive Officer,
Director since: 1986 Liberty Mutual Insurance Company,
Member: Executive, and Chairman and Chief Executive
Executive Personnel Officer, Liberty Life Assurance
and Capital Investment Company of Boston
Committees Directorships: Liberty Mutual
Insurance Company,
Liberty Mutual Fire Insurance
Company, Liberty Life Assurance
Company of Boston, Bank of Boston
Corporation, The First National
Bank of Boston, The Neiman-Marcus
Group, Inc.
Thomas G. Dignan, Jr. (2) Partner, Ropes & Gray (Law Firm)
Age: 56 Directorships: Various educational,
Director since: 1983 cultural and civic organizations
Member: Executive,
Nuclear Oversight and Capital
Investment Committees
Herbert Roth, Jr. Former Chairman of the Board
Age: 68 (1978-1985) and Chief
Director since: 1978 Executive Officer (1968-1985), LFE
Member: Nuclear Oversight Corporation (Traffic and
and Capital Investment Industrial Process Control
Committees Systems)
Directorships/Trusteeships: Landauer,
Inc., Tech/Ops
Sevcon, Inc., Phoenix Home Life
Mutual Insurance Company, Phoenix
Series Fund, Phoenix Total Return
Fund, Inc., Phoenix
Multi-Portfolio Fund, The Big Edge
Series Fund, Mark IV Industries
Stephen J. Sweeney Former Chairman of the Board
Age: 68 (1986-1992) and
Director since: 1983 Chief Executive Officer
Member: Nuclear Oversight (1984-1990), Boston Edison Company
and Capital Investment Directorships: Selecterm, Inc.,
Committees Liberty Mutual
Insurance Company, Liberty Mutual
Fire Insurance Company, Liberty
Life Assurance Company of Boston,
Uno Restaurant Corporation
Incumbent Class I Directors - Terms Expiring in 1998
Principal Occupation (1)
Director and Directorships
Nelson S. Gifford Principal, Fleetwing Capital (Venture
Age: 66 Investments) (1992 to present);
Director since: 198 formerly Chairman (1986-1990)
Member: Audit, Finance and and Chief Executive Officer
Risk Management and Capital (1975-1990),
Investment Committees Dennison Manufacturing Company
(Stationery Products, Systems and
Packaging)
Directorships: John Hancock Mutual
Life Insurance
Company, Reed and Barton, J.M.
Huber Corp., Nypro Inc., Partners
Fund
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Matina S. Horner Executive Vice President, Teachers
Age: 57 Insurance and Annuity
Director since: 1988 Association/College
Member: Executive, Audit, Retirement Equities Fund; formerly
Finance and President (1972-1989), Radcliffe
Risk Management College
and Pricing Committees Directorships: The Neiman-Marcus
Group, Inc.
Incumbent Class II Directors - Terms Expiring in 1999
Principal Occupation (1)
Director and Directorships
Charles K. Gifford Chief Executive Officer (since 1995),
Age: 54 formerly Chairman (1995-1996) and
Director since: 1990 President (1989-1995), Bank of Boston
Member: Audit, Finance Corporation (Bank Holding Company)
and Risk Management, and Chairman and Chief Executive
Executive Officer (since 1995), formerly
Personnel and Pricing President (1989-1996), The First
Committees National Bank of Boston
Directorships: Bank of Boston
Corporation, The First National
Bank of Boston, Massachusetts
Mutual Life Insurance Company
Thomas J. May Chairman, President and Chief
Age: 49 Executive Officer (since
Director since: 1991 1995), formerly Chairman and Chief
Member: Executive Executive Officer (1994-1995),
and Pricing Committees President and Chief Operating
Officer (1993-1994), and Executive
Vice President (1990-1993), Boston
Edison Company
Directorships: Bank of Boston
Corporation, The First National
Bank of Boston, New England Mutual
Life Insurance Company
Sherry H. Penney Chancellor (1988-1995 and 1996 to
Age: 59 present), University of
Director since: 1990 Massachusetts at Boston and
Member: Audit, Finance and President (1995) (interim),
Risk Management University of Massachusetts
and Executive Directorships: Various educational,
Personnel Committees civic and cultural organizations
(1) Except as otherwise noted, each nominee and incumbent director has held the
position indicated for the last five years.
(2) During 1996, Boston Edison paid legal fees to the firm of Ropes & Gray.
Stock Ownership by Directors and Executive Officers
The following table sets forth the number of shares of Boston Edison Common
Stock beneficially owned as of January 31, 1997 by each director and nominee,
each of the executive officers named in the Summary Compensation Table, and the
directors and executive officers of Boston Edison as a group. None of the
individual or collective holdings listed below exceeds 1% of the outstanding
Boston Edison Common Stock. Except as indicated below, all of the shares listed
are held by the persons named with both sole voting power and sole investment
power. No member of the group is the beneficial owner of Boston Edison's
Cumulative Preferred Stock.
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Number of Shares of
Boston Edison Common
Name of Beneficial Owner Stock Beneficially Owned
E. Thomas Boulette 2,443(1)(2)
William F. Connell 1,886
Gary L. Countryman 1,686
Thomas G. Dignan, Jr. 2,115
Charles K. Gifford 1,452
Nelson S. Gifford 3,545
L. Carl Gustin 4,598(2)
Douglas S. Horan 2,514(1)(2)
Matina S. Horner 1,686
Ronald A. Ledgett 4,332(1)(2)
Thomas J. May 14,437(1) (2)
Sherry H. Penney 1,736
Herbert Roth, Jr. 6,000
Stephen J. Sweeney 5,131(3)
All directors and executive officers as a group,
including those named above (19 persons) 44,143(1) (2)
(1) The following shares are held in Boston Edison's Deferred Compensation
Trust due to deferrals by the following participants under Boston Edison's
Deferred Compensation Plan: Dr. Boulette, 887 shares; Mr. Horan, 127
shares; Mr. Ledgett, 2,157 shares; Mr. May, 7,125 shares; all executive
officers as a group, 15,512 shares. Participants in the Plan may instruct
the trustee to vote shares of Boston Edison Common Stock held in the trust
in accordance with their allocable share of such deferrals, but have no
dispositive power with respect to shares held in the trust.
(2) These totals include the following number of shares held in Boston Edison's
401(k) Plan: Dr. Boulette, 1,556 shares; Mr. Gustin, 3,336 shares; Mr.
Horan, 1,922 shares; Mr. Ledgett, 2,175 shares; Mr. May, 6,140 shares; all
executive officers as a group, 24,572 shares.
(3) 3,629 of Mr. Sweeney's 5,131 shares are held in a charitable annuity
remainder trust, of which he, as a co-trustee of the trust, shares
dispositive and voting power with respect to the shares.
Director Compensation
Each director who is not an employee of Boston Edison receives an annual
Board retainer of $10,000 and 200 shares of Boston Edison Common Stock pursuant
to Boston Edison's 1991 Director Stock Plan. Each such director who is a member
of the Executive Committee receives an additional annual Committee retainer of
$4,000. With the exception of the Pricing Committee, the members of which
receive no retainer, each of the chairmen of the other Board committees who is
not an employee of Boston Edison receives an annual Committee retainer of $4,000
and the other non-employee members of those committees receive an annual
Committee retainer of $2,750. Each director who is not an employee of Boston
Edison receives $1,000 for attendance in person at each meeting of the Board or
a committee and $500 for participating in such a meeting by telephone.
Directors may elect to defer part or all of their directors' fees pursuant to
Boston Edison's Deferred Fee Plan. Each director who is not otherwise eligible
for any Boston Edison pension or retirement benefit is entitled to an annual
amount, equal to the cash component of the annual Board retainer plus twice the
retainer received by a member of a committee other than the Executive Committee,
for a period of years equal to his or her service on the Board of Directors,
such payments to commence upon the director's date of death in office,
resignation or retirement. Should a director die prior to full receipt of the
benefit, his or her survivors continue to receive the payments to which the
director would have been entitled up to a maximum of ten years from the
commencement of the benefit.
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PROPOSAL NO. 2: PLAN OF RESTRUCTURING
General
The management and Board of Directors of Boston Edison consider it to be
in the best interests of Boston Edison and its stockholders to change into a
holding company structure whereby Boston Edison will become a separate,
wholly-owned subsidiary of a new parent company. The present holders of
Boston Edison Common Stock will become shareholders of the new parent, and
Boston Edison's principal subsidiary, BETG (and its subsidiaries), will
become a subsidiary of Holdco. Boston Edison's other subsidiary, HEEC, a
Massachusetts utility corporation, will remain a subsidiary of Boston Edison.
The holding company structure is a well-established form of organization
for companies conducting multiple lines of businesses, particularly entities
engaging in both regulated and unregulated activities. All investor-owned
Massachusetts electric utilities, other than Boston Edison, are currently
organized in a holding company structure. The holding company structure is
intended to provide increased financial, managerial and organizational
flexibility in order to better position Boston Edison to operate in the
changing electric utility industry. Specifically, the new structure would
clearly separate Holdco's regulated and unregulated lines of business,
enabling it to pursue non-utility business ventures in a manner consistent
with the electric industry restructuring principles outlined by the
Massachusetts Department of Public Utilities (the "Massachusetts DPU").
Although Boston Edison could continue to pursue non-utility business
opportunities through BETG and other non-utility subsidiaries, management and
the Board of Directors believe it is in the best interests of Boston Edison
and its stockholders to conduct such non-utility activities through a holding
company structure.
Business of Boston Edison
Boston Edison was incorporated in 1886 under Massachusetts law as an
investor-owned public utility. Boston Edison, with its wholly-owned utility
subsidiary Harbor Electric Energy Company, is currently engaged principally
in the generation, purchase, transmission, distribution and sale of electric
energy. Boston Edison provides electricity at retail to an area of 590
square miles, including the City of Boston and 39 surrounding cities and
towns. In 1996, Boston Edison served an average of 657,487 customers.
Boston Edison also supplies electricity at wholesale for resale to other
electric utilities and municipal electric departments.
Through BETG and its subsidiaries, Boston Edison is also engaged in
certain non-utility businesses, including energy utilization and
conservation, construction management and district energy. Recently, Boston
Edison announced that BETG (through its subsidiaries) had signed letters of
intent to form two joint ventures in new non-utility businesses. The first
involves a joint venture with RCN, Inc., a subsidiary of C-TEC Corporation,
to provide local and long-distance telephone service, video and high-speed
Internet access and eventually property monitoring services (the
"Telecommunications Venture"). The second letter of intent involves plans to
form a joint venture with Williams Energy Services Company, a subsidiary of
The Williams Companies, Inc., to market electricity, natural gas and
energy-related services to customers in the six New England states (the
"Energy Marketing Venture"). To date, Boston Edison's investment in, and the
results of operations of BETG and its subsidiaries, have not been material to
the financial condition and results of operations of Boston Edison as a whole.
As a regulated electric utility, Boston Edison operates under the
jurisdiction of the Massachusetts DPU, which jurisdiction includes
supervision over retail rates for electricity, accounting, issuance of bonds,
capital stock and certain other securities and investment by Boston Edison in
other entities, including subsidiaries. The FERC has jurisdiction over
various phases of Boston Edison's business, including, among other things,
regulation of the system of accounts, rates for power sold at wholesale for
resale and facilities used for the transmission or sale of such power.
Boston Edison is currently an "exempt holding company" under the Holding
Company Act, and is therefore subject to limited regulation of its utility
business by the SEC.
The current corporate structure of Boston Edison is as follows:
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HOLDERS OF COMMON STOCK
AND CUMULATIVE PREFERRED STOCK
:
:
Boston Edison
:
:
......................................................
: :
: :
: :
HEEC BETG and
Subsidiaries
The Restructuring
To carry out the restructuring, Boston Edison has formed Holdco, a
Massachusetts business trust, and Holdco's wholly-owned subsidiary, Mergeco,
a Massachusetts utility corporation, neither of which entities has any
present business or properties of its own. The outstanding Holdco Common
Shares are presently owned by Boston Edison, while the authorized stock of
Mergeco is presently subscribed for by Holdco and will be issued to Holdco
upon approval of the Massachusetts DPU. Boston Edison, Mergeco and Holdco
have entered into a Merger Agreement under which, subject to stockholder
approval as required by Massachusetts law, Boston Edison will become a
subsidiary of Holdco through the merger of Mergeco with and into Boston
Edison. In the Merger, the Boston Edison Common Stock will be exchanged
share-for-share for Holdco Common Shares. A copy of the Merger Agreement is
attached to this Proxy Statement as Appendix A.
Immediately following the Merger, Boston Edison will transfer the stock
of BETG to Holdco. After the restructuring, Holdco will engage in
non-utility business activities through BETG and its subsidiaries. In the
future, Holdco may establish additional subsidiaries to engage in new
non-utility businesses. If the proposed restructuring is consummated, it is
intended that advances to and other investments in non-utility businesses
will be made primarily by Holdco rather than by Boston Edison and that the
proceeds of financings by Boston Edison will be used entirely in the conduct
of its electric utility business. HEEC will remain a subsidiary of Boston
Edison.
None of the other securities of Boston Edison, including its six
outstanding series of Cumulative Preferred Stock (two of which are
represented by Depositary Preferred Shares) and debt securities, consisting
primarily of debentures, commercial paper and bank lines of credit, will be
altered by the Merger. These securities will continue to be outstanding
securities and obligations of Boston Edison. Boston Edison's management and
the Board of Directors believe that the restructuring will have no adverse
affect on the holders of its Cumulative Preferred Stock and debt securities.
See "Proposal No. 2: Plan of Restructuring -- Treatment of Preferred Stock"
and "Proposal No. 2: Plan of Restructuring -- Treatment of Indebtedness."
The reorganized corporate structure of Holdco immediately after the
Merger and restructuring is expected to be as follows:
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HOLDERS OF COMMON SHARES
:
:
HOLDERS OF CUMULATIVE Holding
PREFERRED STOCK Company
: :
: :
: ......................................................
: : :
: : :
: : :
Boston Edison BETG and
: Subsidiaries
:
HEEC
Reasons for the Restructuring
General. The holding company structure is intended to provide increased
financial, managerial and organizational flexibility in order to better
position Boston Edison to operate in the changing electric utility industry.
The holding company structure will permit Holdco to take advantage of
non-utility business opportunities in a more timely manner. In addition, the
holding company structure will clearly separate Holdco's regulated and
non-utility lines of business. The holding company structure is a
well-established form of organization for companies conducting multiple lines
of businesses, particularly entities engaging in both regulated and
unregulated activities.
Industry Restructuring. Traditionally, electric utilities have operated
under a monopoly regulatory framework, under which consumers have been
restricted to a single electricity provider, typically a vertically
integrated electric utility engaged, like Boston Edison, in the generation,
transmission, and distribution of electricity. However, since the 1970's,
the electric energy business has become increasingly competitive. With the
enactment of the Public Utility Regulatory Policies Act of 1978, a new
independent power producer industry commenced, competing with traditional
electric utilities for opportunities to generate new electric power. In
recent years many state utility commissions, including the Massachusetts DPU,
initiated inquiries into restructuring the electric utility industry with a
goal of promoting competition and extending to all customers the option of
choosing their own electricity suppliers. In March 1996, the Massachusetts
DPU opened a rule-making proceeding with a goal of establishing rules that
would apply to all electric companies' restructuring plans and encouraged
electric companies to enter into negotiated settlements consistent with the
principles established in that proceeding. One of the principles established
by the Massachusetts DPU was the legal or functional separation of the
generation and distribution businesses. In December 1996, Boston Edison, the
Massachusetts Attorney General and the Massachusetts Division of Energy
Resources announced that they had reached an agreement (the "Settlement
Agreement") that, if approved by the Massachusetts DPU, would allow all
retail customers in Boston Edison's service area to choose their electricity
suppliers beginning as early as January 1, 1998. As part of the proposed
settlement, Boston Edison would agree to sell all of its fossil electric
generating plants. Accordingly, other than its Pilgrim Nuclear Power Station,
Boston Edison would no longer own any electricity generating facilities.
Boston Edison's retained electricity distribution business would continue to
be regulated by the Massachusetts DPU.
Assuming that the Settlement Agreement is approved by the Massachusetts
DPU, Boston Edison's electric business will be thereafter limited primarily
to distribution of electricity, and to a much lesser extent, transmission of
electricity. Accordingly, Boston Edison has identified the need to increase
its long-term growth potential through investment in related non-utility new
businesses. The move to a competitive electricity industry, together with a
revolution in energy related technology, has created significant new
opportunities for energy service providers like Boston Edison to take
advantage of non-utility business ventures which are related to, but
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separate from, traditional regulated businesses. Pursuit of these new
opportunities will play an important role in maintaining the long-term
financial viability necessary for Boston Edison to continue to provide
reliable service to its customers, as well as enhance stockholder value.
Boston Edison has already begun to take advantage of such opportunities as
reflected by the proposed Telecommunications Venture and the Energy Marketing
Venture.
Initially, Boston Edison's electric utility business is expected to
constitute the predominant part of Holdco's earnings power for the
foreseeable future. Boston Edison's operations will be conducted with the
same assets (subject to the planned divestiture of fossil generation assets)
and same management, and will continue to be subject to the jurisdiction of
the Massachusetts DPU, the FERC, and the NRC. The primary focus of Holdco
will be on the development of BETG's existing non-utility business
activities, including the Telecommunications Venture and the Energy Marketing
Venture. Although Boston Edison has not yet identified other significant
investment opportunities for Holdco, it is expected that Holdco will develop
or acquire other businesses which are related to energy and
telecommunications-related services. These new investments will offer the
opportunity for greater earnings growth and mitigate the limitations of
Boston Edison being predominantly a regulated distribution/transmission
utility.
Benefits of Holding Company Structure
The holding company structure is a well-established form of organization
for companies conducting multiple lines of businesses, particularly entities
engaging in both regulated and unregulated activities. Many electric and gas
utilities have been organized as holding companies for many years, and many
other utilities have recently changed their organization to a holding company
structure. While Boston Edison could continue to pursue non-utility business
opportunities through BETG and other non-utility subsidiaries of Boston
Edison, management and the Board believe it is more desirable in the
long-term to conduct such non-utility activities through a holding company
structure. The benefits of a holding company structure may be summarized as
follows:
Timely Response to Business Opportunities. The holding company
structure, by separating BETG and any other new non-utility businesses into
corporations that will not be subsidiaries of Boston Edison, will enable
Holdco to pursue non-utility business opportunities without the delays
inherent in the regulatory process. For example, the holding company
structure will enable Holdco to make investments in non-utility businesses,
and to issue securities for the purpose of financing such investments,
without obtaining the approval of the Massachusetts DPU. This will allow
Holdco to respond to competitive forces and pursue non-utility businesses in
a timely fashion. The ability of Holdco to engage in these activities in a
timely manner without regulatory approval will make Holdco a more attractive
joint venture partner.
Flexible Financing Opportunities. The holding company corporate
structure also will permit the use of financing techniques that are more
directly suited to the particular requirements, characteristics and risks of
non-utility operations without effecting the capital structure or
creditworthiness of Boston Edison. The holding company structure will allow
the design and implementation of capitalization ratios appropriate for the
capital and business requirements of each industry in which Holdco is
engaged. This is particularly important in view of the potentially large
capital requirements of businesses such as the proposed Telecommunications
Venture.
Separation. The holding company structure will clearly separate Boston
Edison's electric utility business from the non-utility businesses of other
Holdco subsidiaries. As a result, it will provide a better structure for
regulators to assure that there is no cross-subsidization of cost or transfer
of business risk from unregulated to regulated lines of business. In
addition, the holding company structure will facilitate the analysis and
valuation of the holding company's individual lines of business by the
investment community. The holding company structure also will mitigate the
potential impact on Boston Edison, its preferred stock and debt security
holders and its customers, of the risks of non-utility businesses and will
permit the capital structure of Boston Edison to be managed efficiently.
Special Considerations Applicable to the Restructuring
Non-Utility Business Activities May Involve More Risk. The future
performance of Holdco Common Shares cannot be predicted. Following
consummation of the restructuring, Holdco will be able to make investments in
non-utility businesses and issue securities for the purpose of financing such
investments without
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obtaining the prior approval of the Massachusetts DPU. The restructuring,
therefore, will provide Holdco with more flexibility to pursue business
opportunities that might involve a higher degree of risk than would be
permitted for a regulated utility, but with the possibility of higher
potential returns commensurate with such risk. Pursuit of business
opportunities with greater risk could, in turn, have either a positive or an
adverse effect on the value of a shareholder's investment, depending upon the
return actually realized from such opportunities. Such business
opportunities may encounter competitive and other business factors not
previously experienced by Boston Edison to the same degree and may have
different, and perhaps greater, investment risk than those involved in Boston
Edison's regulated electric energy generation, distribution and transmission
business. There can be no assurance that such businesses will be successful
or, if unsuccessful, that they will not have a direct or indirect adverse
effect on Holdco. Any losses incurred by such businesses will not be
recoverable in Boston Edison's regulated rates. As Holdco becomes
increasingly engaged in non-utility business activities, such activities will
have an increasing impact on the market price of Holdco's Common Shares.
Dividends On Holdco Common Shares Will Be Dependent Upon Common Stock
Dividends Paid By Boston Edison. For a period of time following the
restructuring, the funds required by Holdco to enable it to pay dividends on
Holdco's Common Shares are expected to be derived primarily from the
dividends paid by Boston Edison. Accordingly, the ability of Holdco to pay
such dividends, as a practical matter, will be governed by the ability of
Boston Edison to pay dividends on its common stock. The ability of Boston
Edison to pay dividends on its common stock will continue to be subject to
the preferential dividend rights of the holders of the outstanding Boston
Edison Cumulative Preferred Stock. In addition, although it has no present
intention to do so, it is expected that Boston Edison may need to issue
additional preferred stock in the future to meet its capital needs. Such
additional preferred stock will also have preferential dividend rights. The
trustees of Holdco have no current intention to change the current Boston
Edison dividend policy.
Recommendations of the Board
The management and Board of Directors of Boston Edison recommend the
approval of the restructuring as proposed in the accompanying Notice of
Annual Meeting. The Board of Directors and management believe that the
restructuring is in the best interest of Boston Edison and its stockholders.
In making its decision to recommend the restructuring to the stockholders,
the Board of Directors considered many factors, including the factors set
forth above under "Proposal No. 2: Plan of Restructuring -- Reasons for the
Restructuring" and "Proposal No. 2: Plan of Restructuring -- Benefits of
Holding Company Structure."
Vote Required
In order for the restructuring into a holding company to be approved
under Massachusetts law, it must receive favorable votes, in person or by
proxy, of the holders of two-thirds of the outstanding shares of Boston
Edison Common Stock. See "Other Matters -- Voting Procedures."
The persons named in the accompanying proxy intend to vote such proxy in
favor of the restructuring unless a contrary choice is indicated thereon.
Exchange of Certificates Not Required
If the proposed restructuring is consummated, it will not be necessary
for holders of Boston Edison Common Stock to exchange their existing stock
certificates for Holdco share certificates. Holders of Boston Edison Common
Stock will automatically become holders of Holdco Common Shares, and their
stock certificates will automatically represent Holdco Common Shares. After
the restructuring, whenever presently outstanding certificates are presented
for transfer, new certificates bearing the name of Holdco will be issued.
Certificates also presented for transfer to a name other than that in which
the surrendered certificate is registered must be properly endorsed, with the
signature guaranteed, and accompanied by evidence of payment of any
applicable stock transfer taxes.
Merger Agreement
The Merger Agreement has been unanimously approved by the Boards of
Directors of Boston Edison, Holdco and Mergeco, and these companies have
executed the Merger Agreement, subject to the approval and
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adoption thereof by vote of Boston Edison's stockholders as required by
Massachusetts law and described herein. The Merger Agreement provides that:
(1) each outstanding share of Boston Edison Common Stock, $1.00 par value per
share, will be converted into one Holdco Common Share, $1.00 par value;
(2) each outstanding share of Boston Edison Cumulative Preferred Stock,
$100.00 par value per share, will continue as one issued and outstanding
share of Boston Edison Cumulative Preferred Stock, $100.00 par value per
share, with the same preferences, designations, relative rights,
privileges and powers, and subject to the same restrictions, limitations
and qualifications as were applicable to such stock prior to the Merger;
(3) each outstanding share of Mergeco Common Stock, $1.00 par value per
share, will be converted into one new share of Boston Edison Common
Stock, $1.00 par value per share, all of which will then be owned by
Holdco; and
(4) the Holdco Common Shares presently held by Boston Edison will be
canceled.
As a result of the Merger, Boston Edison, which will be the surviving
corporation, will become a subsidiary of Holdco, and all of the Holdco Common
Shares outstanding immediately after the Merger will be owned by the holders
of Boston Edison Common Stock outstanding at the effective time of the Merger.
If and when the Merger becomes effective, holders of Boston Edison Common
Stock will automatically become holders of Holdco Common Shares. Like the
Cumulative Preferred Stock, the outstanding debt securities of Boston Edison
and the terms thereof will not be altered in the Merger. Such debt
securities will remain outstanding and will continue to be obligations of
Boston Edison as the survivor of the Merger.
Amendment or Termination of Plan of Merger
By mutual consent of their respective Boards of Directors or trustees,
Boston Edison, Holdco and Mergeco may amend, modify or supplement the Merger
Agreement in such manner as may be agreed upon by them in writing at any time
before or after approval of the Merger Agreement by the stockholders of
Boston Edison; provided, however, that no such amendment, modification or
supplement shall, in the sole judgment of the Board of Directors of Boston
Edison, materially and adversely affect the rights of the holders of Boston
Edison Common Stock.
The Merger Agreement provides that it may be terminated, and the Merger
and other transactions incident to the restructuring plan abandoned, at any
time, whether before or after approval of the Merger Agreement by the
stockholders of Boston Edison, by action of the Board of Directors of Boston
Edison if the Board determines for any reason that the consummation of the
restructuring would for any reason be inadvisable or not in the best
interests of Boston Edison or its stockholders. The Board of Directors of
Boston Edison expects to terminate and abandon the restructuring if Boston
Edison has not received, within a reasonable period after stockholder
approval, approval of the Merger by the Massachusetts DPU as required by
Massachusetts law or other regulatory agencies with jurisdiction over the
transaction (see "Proposal No. 2: Plan of Restructuring --Regulatory Approval
of the Restructuring") or approval for listing of Holdco Common Shares on the
NYSE and BoSE (see "Proposal No. 2: Plan of Restructuring -- Stock Exchange
Listing"). Boston Edison is unable to predict under what other circumstances
the restructuring would be terminated and abandoned.
Effectiveness of the Restructuring
The Merger Agreement contemplates that the Merger will become effective,
and all other steps in the restructuring plan will be completed, as soon as
practical after the required stockholder and regulatory approvals and listing
authorization for Holdco Common Shares have been received, unless the Board
of Directors of Boston Edison theretofore has elected to abandon such plan.
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Certain Federal Income Tax Consequences
General. The following general discussion summarizes certain federal
income tax considerations relating to the Merger. This summary is provided
for general information only, and does not discuss all aspects of income
taxation that may be relevant to a particular holder of Boston Edison Common
Stock in light of the holder's personal tax circumstances or to certain types
of holders of Boston Edison Common Stock subject to special treatment under
the income tax laws of any jurisdiction including persons who are not United
States persons, dealers in securities, tax-exempt entities, and stockholders
who do not hold Boston Edison Common Stock as "capital assets" within the
meaning of Section 1221 of the Internal Revenue Code of 1986, as amended (the
"Internal Revenue Code").
The legal conclusions set forth in this summary reflect the opinion of
Ropes & Gray. No ruling has been requested from the Internal Revenue
Service. Each holder of Boston Edison Common Stock should consult such
holder's own tax advisor as to the specific tax consequences of the Merger to
such holder, including the application and effect of foreign, state or local
income and other tax laws.
The following discussion is based on existing statutes, existing and
proposed regulations and existing administrative interpretations and court
decisions. Future legislation, regulations, administration interpretations,
or court decisions could significantly change such authorities either
prospectively or retroactively, and could affect the legal conclusions set
forth in the following discussions.
For federal income tax purposes, the Merger is intended to qualify as a
tax-free exchange pursuant to Section 351 of the Internal Revenue Code.
Tax Implications to the Holders. For federal income tax purposes, no
gain or loss will be recognized by the holders of Boston Edison Common Stock
on their exchange of Boston Edison Common Stock for Holdco Common Shares
pursuant to the Merger. For federal income tax purposes, the tax basis of
the Holdco Common Shares received by each such holder pursuant to the Merger
will be the same as the holder's basis in the Boston Edison Common Stock
surrendered in the Merger, and the holding period of such Holdco Common
Shares will include the period during which such holder held the Boston
Edison Common Stock surrendered in the Merger, provided that such Boston
Edison Common Stock was held as a capital asset on the date of the exchange.
In addition, for federal or Massachusetts income tax purposes, the Merger
will not give rise to the recognition of gain or loss on shares of Cumulative
Preferred Stock to any holder of such stock, nor will the Merger affect such
holder's holding period in such stock.
Tax Implications to Holdco. For federal income tax purposes, no gain or
loss will be recognized by Holdco.
Other Tax Aspects. Apart from the federal income tax consequences of the
Merger discussed herein, no attempt has been made to determine the tax
consequences to a holder of Boston Edison Common Stock or Boston Edison
Cumulative Preferred Stock under the laws of any country, state or
jurisdiction. Holders of Boston Edison Common Stock may be subject to special
federal income tax treatment or to other taxes, such as state or local income
taxes that may be imposed by various jurisdictions, and also may be subject
to intangible property, estate and inheritance taxes in their state of
domicile. Each holder of Boston Edison Common Stock should consult the
holder's own tax advisors to determine the particular tax consequences of the
Merger to the holder.
THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS
INTENDED TO PROVIDE ONLY A GENERAL SUMMARY AND DOES NOT ADDRESS TAX
CONSEQUENCES WHICH MAY VARY WITH, OR ARE CONTINGENT UPON, INDIVIDUAL
CIRCUMSTANCES. MOREOVER, THIS DISCUSSION DOES NOT ADDRESS ANY FOREIGN,
FEDERAL, STATE OR LOCAL TAX CONSEQUENCES OF THE DISPOSITION OF STOCK IN
BOSTON EDISON BEFORE OR IN HOLDCO AFTER THE MERGER. ACCORDINGLY, EACH HOLDER
OF SUCH STOCK IS STRONGLY URGED TO CONSULT WITH SUCH HOLDER'S TAX
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ADVISORS TO DETERMINE THE PARTICULAR TAX CONSEQUENCES OF THE MERGER OR SUCH
DISPOSITION TO SUCH HOLDER.
Treatment of Preferred Stock
The proposed restructuring will not result in any change in Boston
Edison's outstanding series of Cumulative Preferred Stock, consisting of the
4.25% Series, the 4.78% Series, the 7.27% Series, the 8.00% Series, the 8.25%
Series and the 7.75% Series. Each of the 8.25% Series and 7.75% Series of
Cumulative Preferred Stock are represented by Depositary Preferred Shares,
each representing a 1/4 interest in a share of Cumulative Preferred Stock of
such series. The decision by management and the Board of Directors to have
the Cumulative Preferred Stock continue as securities of Boston Edison is
based upon, among other factors, a desire not to alter or potentially alter
the nature of the investment represented by such series of stock, namely
investment in a regulated utility, as well as the need of Boston Edison not
to foreclose future issuances of preferred or preference stock to help meet
its capital requirements. There will be no change in the preferences,
designations, relative rights, privileges and powers of the Cumulative
Preferred Stock, and the shares will be subject to the same restrictions,
limitations and qualifications as were applicable thereto prior to the
restructuring.
Since Boston Edison's electric utility operations will continue to
constitute the principal part of the consolidated assets and earnings power
of Holdco, it is believed that the Cumulative Preferred Stock will retain its
current investment ratings as well as its qualification for legal investment
for certain investors. It is anticipated that the current listing of the
Depositary Preferred Shares representing the 8.25% Series and 7.75% Series of
Cumulative Preferred Stock on the New York Stock Exchange will continue after
the Merger. After the restructuring is consummated, Boston Edison will
continue to be a reporting company under the Exchange Act.
Due to the comparatively small assets of BETG (i.e., the capital stock of
its unregulated subsidiaries), the consolidated assets and liabilities of
Boston Edison immediately before the Merger and restructuring (subject to the
proposed divestiture of its fossil generation assets) will be substantially
the same as the consolidated assets and liabilities of Boston Edison
immediately after the Merger and restructuring.
Treatment of Indebtedness
All of Boston Edison's indebtedness outstanding immediately prior to the
Merger, which is expected to consist of multiple series of debentures, as
well as commercial paper and bank credit facilities, will continue to be
outstanding indebtedness of Boston Edison after the Merger. Such
indebtedness will neither be assumed nor guaranteed by Holdco in connection
with the restructuring. The decision to have the indebtedness of Boston
Edison continue as obligations of Boston Edison is based upon a desire not to
alter, or potentially alter, the nature of the investment represented by such
obligations, namely a direct investment in a regulated utility.
Dividend Policy
While future dividends on Holdco Common Shares will depend primarily upon
the earnings, financial condition and capital requirements of its
subsidiaries, it is contemplated that Holdco initially will make dividend
payments on Holdco Common Shares at the rate currently applicable to Boston
Edison Common Stock. In addition, it is expected that such dividends of
Holdco will be declared and paid on approximately the same schedule of dates
as that now followed by Boston Edison with respect to Boston Edison Common
Stock dividends. The most recent dividend declared by the Board of Directors
of Boston Edison was $0.47 per share of Boston Edison Common Stock and was
paid on February 3, 1997.
Subject to the availability of earnings and the needs of its electric
utility business, Boston Edison intends to make regular cash payments to
Holdco in the form of dividends on Boston Edison Common Stock in amounts
which, to the extent not otherwise provided by Holdco's other subsidiaries,
if any, would be sufficient for Holdco to pay cash dividends on Holdco Common
Shares as referred to above, for operating expenses of Holdco and for such
other purposes as the Board of Directors of Holdco may determine. Boston
Edison does not contemplate any material loans or advances to Holdco in the
near future and would not be free to make such loans or advances without
prior approval of the Massachusetts DPU. Boston Edison is not party to any
agreement or subject to any
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laws or regulations which materially restrict the payment of dividends by it
to Holdco. However, under Boston Edison's principal bank credit agreement,
common equity cannot be less than 30% of total capitalization.
Dividends on the Boston Edison Cumulative Preferred Stock will continue
to be paid at the times and at the rates provided for in the various series
of such stock, depending upon the earnings, financial condition and other
factors affecting Boston Edison.
Stock Exchange Listing
Holdco has applied to list Holdco Common Shares on the NYSE and the BoSE.
It is expected that such listings will become effective on the effective date
of the Merger, subject to the rules of such exchanges. At the time of the
listing of Holdco Common Shares, Boston Edison Common Stock will be delisted
from trading on these stock exchanges (all outstanding shares will be held by
Holdco). The Boston Edison Depositary Preferred Shares representing 1/4 of
one share of Boston Edison's Cumulative Preferred Stock, 8.25% Series and
7.75 Series, are currently listed on the NYSE, and it is contemplated that
they will continue to be so listed after the restructuring.
Regulatory Approval of the Restructuring
The proposed Merger of Boston Edison and Mergeco must be approved by the
Massachusetts DPU before the restructuring can become effective. Under
applicable state law, the application for approval by the Massachusetts DPU
cannot be filed until after the holders of Boston Edison Common Stock have
approved the Merger. Upon filing of the application, the Massachusetts DPU,
after notice and a public hearing, must determine that the Merger and the
terms thereof are consistent with the public interest. Holdco also intends
to apply to the SEC under the Holding Company Act for approval of the
restructuring. See "Proposal No. 2: Plan of Restructuring -- Regulatory
Matters." The proposed restructuring also must be approved by the FERC and
the NRC before the Merger can be consummated. Holdco and Boston Edison
intend to file applications for approval with those agencies in the near
future.
Regulatory Matters
After the restructuring, Boston Edison and HEEC will continue to operate
electric utility businesses and will remain subject to regulation by the
Massachusetts DPU and, with respect to certain transactions, the FERC and,
with respect to Boston Edison's ownership and license of the Pilgrim Nuclear
Power Station, the NRC. Holdco, however, will not be subject to regulation
by these regulatory agencies, except that Holdco will be required to file an
annual statement of ownership of Boston Edison with the Massachusetts DPU,
which may examine the books, accounts, contracts, records and memoranda of
Holdco and may require it to furnish reports and information with respect to
its relations and dealings with Boston Edison and HEEC. In addition, the
reasonableness of any payment, charge, contract, purchase, sale, obligation
or other arrangement between Boston Edison or HEEC and Holdco or any
subsidiary of Holdco may come into question in retail rate making and finance
proceedings before the Massachusetts DPU. In that event, Boston Edison and
HEEC will have the burden of establishing and proving such reasonableness.
The Massachusetts DPU also has the power to terminate any such contract
relating to services rendered to Boston Edison or HEEC if it appears that the
amount of compensation called for in the contract is excessive, even if no
bad faith is found.
Boston Edison is currently an exempt public utility holding company under
the Holding Company Act. After the restructuring is completed, Holdco and
Boston Edison each will be public utility holding companies under the Holding
Company Act. Nevertheless, upon the filing of an appropriate exemption
statement pursuant to Rule U-2 under Section 3(a)(1) of the Holding Company
Act (and subject to the filing of annual exemption statements thereafter),
Holdco, Boston Edison and each of their subsidiary companies as such will be
entitled to an exemption from regulation as a "registered holding company"
under the Holding Company Act. The basis of the exemption is that Boston
Edison and HEEC, Holdco's only public utility subsidiaries, are organized in
the same state as Holdco (i.e. Massachusetts), and are predominantly
intrastate in character and carry on their business substantially in their
state of incorporation. The exemption will be available as long as the
utility business of Boston Edison and HEEC, and of any other public utility
subsidiary from which Holdco derives a material portion of its income, are
organized in Massachusetts and remain predominantly intrastate in character.
BETG and its
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subsidiaries and affiliates in which it holds an interest are not public
utilities, as defined by the Holding Company Act, and therefore do not affect
the availability of the exemption.
The exemption from the provisions of the Holding Company Act may be
revoked on a finding by the SEC that such exemption may be detrimental to the
public interests or the interest of investors or consumers. The prior
approval of the SEC under the Holding Company Act would be required if Holdco
or Boston Edison proposed the acquisition or creation, directly or
indirectly, of additional utility subsidiaries. Moreover, there also may be
limits on the extent to which Holdco and any non-utility subsidiaries can
diversify without raising questions about Holdco's exempt status. Current
SEC policies regarding the scope of permissible non-utility activities are
subject to change. Neither Holdco nor Boston Edison has any present
intention of becoming a registered holding company subject to regulation by
the SEC under the Holding Company Act.
In June 1995, the SEC Division of Investment Management issued a report
recommending significant revisions to, or limited repeal of, the Holding
Company Act. Holdco and Boston Edison, however, cannot predict whether
Congress will take any such action. Pending such action, the SEC indicated
that it would revise its rules and interpretations to modernize and simplify
holding company regulation. At this time, however, Holdco and Boston Edison
cannot predict the likelihood, timing or impact of such actions.
Following the restructuring, both Holdco and Boston Edison will be
subject to the reporting requirements of the Exchange Act by virtue of having
classes of securities registered thereunder.
Holdco's Declaration of Trust and Comparative Stockholders' Rights
Holdco has been organized under Chapter 182 of the Massachusetts General
Laws as an unincorporated voluntary association with transferable shares of
beneficial interest, commonly referred to as a "Massachusetts business
trust." Holdco was organized as a Massachusetts business trust, rather than a
corporation, because of the potential Massachusetts income tax savings to the
trust and the lower filing fees payable by it in connection with its
authorized capital stock. While a publicly traded parent holding company
formed as a Massachusetts business trust would be taxed as a corporation for
federal tax purposes, it would not be treated as a corporation for
Massachusetts tax purposes and therefore would not be subject to tax with
respect to its income or net worth under the Massachusetts corporate excise,
or subject to the utility franchise tax on income. Although Massachusetts
business trusts are generally subject to the Massachusetts personal income
tax, the personal income tax does not apply at the entity level to a
Massachusetts business trust that qualifies as a "holding company" under
Massachusetts law (the Board of Directors currently intends to operate Holdco
so that it will so qualify). Instead, dividends paid by such a trust would
generally be subject to tax. This entity-level tax treatment contrasts with
the Massachusetts tax treatment of a parent corporate holding company, which
would be subject to a tax on 5% of dividends received from subsidiaries and
on 100% of any other income (in each case after apportionment, which in the
case of a holding company for Boston Edison, would likely be, at least
initially, at or near 100% in Massachusetts). The rate of tax on income
applicable to corporations is 9.5%. Corporate holding companies are also
subject to a "net worth" tax at the rate of $2.60 per $1,000, but net worth
is computed, in general, after deducting investment in 80% or more owned
subsidiary corporations. Management believes that the extent of potential
savings associated with organizing Holdco as a Massachusetts business trust
could be significant since they depend, in large part, upon the amount and
nature of any dividends received by Holdco from Boston Edison. As previously
described, at least initially, dividends from Boston Edison will be Holdco's
primary source of income for the payment of dividends to its shareholders.
The lower filing fees arise from the fact that under Massachusetts law, the
fee for filing articles of organization of a corporation is one tenth of one
percent of the total amount of its authorized capital stock with par value,
and such fee is subject to change by the Massachusetts Secretary of State.
There are no fees payable by a business trust based upon its authorized
capital stock.
The following summary should be read in the context of, and is qualified
by reference to, Holdco's full Amended and Restated Declaration of Trust (the
"Declaration of Trust"), a copy of which substantially in the form it will
be in as of the effective date of the Merger is attached as Appendix B to this
Proxy Statement/Prospectus and incorporated herein by reference.
The rights of holders of Boston Edison Common Stock are governed by
Chapter 164 of the Massachusetts General Laws governing electric and gas
utilities, and by Boston Edison's Restated Articles of Incorporation and
Bylaws. If the Merger is consummated, the rights of the present holders of
Boston Edison Common Stock thereafter will be determined by Holdco's
Declaration of Trust and Bylaws. Except as noted below, the rights of
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holders of Holdco Common Shares will be virtually the same as the present
rights of the holders of Boston Edison Common Stock.
Pursuant to certain decisions of the Massachusetts courts, shareholders
who exercise too much control over the affairs of a Massachusetts business
trust may be held personally liable as partners for the obligations of a
trust to the extent not satisfied by the trust, with respect to tort claims,
contract claims (where shareholder liability is not negated as described
below), claims for taxes and certain statutory liabilities. Even if,
however, Holdco were held to be a partnership, the possibility of its
shareholders incurring financial loss is remote because (a) Holdco's
Declaration of Trust contains an express disclaimer of shareholder liability
for the obligations of Holdco, requires that notice of such disclaimer be
given in each agreement, obligation or instrument entered into or executed by
Holdco and provides that no person has authority to enter into an agreement,
obligation or instrument except in accordance with those requirements, (b)
Holdco will seek adequate insurance against tort liability, (c) most of
Holdco's operations will be conducted by incorporated subsidiaries such that
the activities of Holdco will be limited to the ownership of securities
rather than the operation of physical assets and (d) Holdco's Declaration of
Trust provides for indemnification out of the trust property for any
shareholder held personally liable for the obligations of Holdco.
Holdco's Declaration of Trust provides that the property and affairs of
Holdco will be held and managed by its trustees who will have all of the
powers and authority necessary and convenient to carry out Holdco's business.
The trustees may appoint officers and agents to carry out Holdco's business.
See "Proposal No. 2: Plan of Restructuring -- Trustees and Management of
Holdco." The powers and responsibilities of the trustees and officers of
Holdco will be comparable to those of directors and officers of a corporation
with no material differences. The trustees will be selected by a plurality
of the vote of the holders of Holdco Common Shares properly cast at an annual
meeting.
Holdco's Declaration of Trust will contain the same "fair price" and
"classified board" provisions that were adopted by Boston Edison's
stockholders (see "Proposal No. 2: Plan of Restructuring -- Holdco Common
Shares" below) and the same indemnification and limitations on directors'
liability provisions (applicable to the trustees) that were adopted by Boston
Edison's stockholders to enhance Boston Edison's ability to attract and
retain qualified directors and officers.
Under Chapter 164, Boston Edison may be merged with another utility
subject to Chapter 164 upon a two-thirds vote of each class of stock
outstanding and entitled to vote on the matter, and the approval of the
Massachusetts DPU. Subject to the "fair price" provisions in the Declaration
of Trust, Holdco, like a Massachusetts business corporation, may be merged
with another trust or corporation, or terminated and liquidated, upon a
two-thirds vote of the shares outstanding and entitled to vote thereon
(except that a change of form into another trust or into a corporation may be
done on approval of a majority of the common shareholders).
Under Chapter 164, stockholders of an electric utility company have no
appraisal rights. Holdco's Declaration of Trust provides that shareholders
of Holdco who dissent from a merger or similar transaction (other than a
transaction to change form into another trust or a corporation) will have
substantially the same rights of appraisal, subject to the same procedures,
as would a stockholder of a Massachusetts business corporation.
Under Chapter 164, the Restated Articles of Organization of Boston Edison
may be amended upon a majority vote of the common stockholders, except with
respect to certain provisions requiring a two-thirds vote of Boston Edison's
common stockholders. The Holdco Declaration of Trust may be amended by a
written instrument signed by a majority of the trustees then in office if
such amendment has been authorized by a majority vote of Holdco's common
shareholders, provided that amendments which, in the judgment of the
trustees, are of a fundamental character must be approved by a vote of the
holders of a majority of the outstanding Holdco Common Shares. In addition,
the "classified board" and "fair price" provisions can only be amended upon a
vote of 80% of the outstanding Holdco Common Shares unless such amendment is
authorized or recommended by 80% or more of the trustees. Certain other
provisions cannot be changed without a two-thirds vote as provided in the
Declaration of Trust. Amendments for the purpose of changing the name of
Holdco or of supplying any ambiguity or curing, correcting or supplementing
any defective or inconsistent provision contained in the Declaration of Trust
shall not require authorization by vote of the shareholders.
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Under Massachusetts law, the authority to adopt, amend or repeal the
bylaws of a Massachusetts corporation is in the stockholders; provided that
if authorized by the Articles of Organization, the bylaws may provide that
the directors may also make, amend or repeal the bylaws. Boston Edison's
Bylaws provide such authority to the Board of Directors. Holdco's
Declaration of Trust authorizes the trustees to adopt Bylaws in order to fix
the fiscal year; regulate the affairs of the trustees, including provisions
for the nomination thereof; provide for such committees as the trustees shall
deem appropriate, including an executive committee which shall be vested with
all of the powers and authorities of the trustees when the trustees are not
in session; provide for the appointment of a chairman of the trustees, a
president, one or more vice presidents, a treasurer, a clerk and such other
officers as the trustees may deem appropriate, and the manner of their
appointment and removal, and their respective powers and duties; provide for
the manner in which documents shall be executed, including share
certificates; provide for the appointment of transfer agents or officers and
registrars, and contain such further provisions relating to the above matters
or otherwise, incidental or in addition to but not inconsistent with the
provisions of the Declaration of Trust, as the trustees shall deem
appropriate. The Bylaws may only be amended by the trustees.
Under Massachusetts law and Boston Edison's Bylaws, the Board of
Directors can act without a meeting only by unanimous written consent. Under
Holdco's Declaration of Trust, the trustees may act without a meeting by a
consent signed by a majority of the trustees.
As with a Massachusetts business corporation, Holdco's Declaration of
Trust provides that no action may be brought by a shareholder on behalf of
Holdco unless a prior demand regarding such matter has been made on the
trustees and the shareholders.
Holdco's Declaration of Trust, like the Restated Articles of
Incorporation of Boston Edison, contains certain provisions that may be
viewed as having an anti-takeover effect, including provisions establishing
classes of trustees and requiring a super-majority vote of the disinterested
shareholders to approve certain business transactions with a shareholder
owning more than 5% of the outstanding Holdco Common Shares. Holdco is also
subject to Chapter 110F of the Massachusetts General Laws, which, in general,
provides that for three years after an acquiror has purchased 5% or more of
the stock of a company, the acquiror may not complete the acquisition through
merger, sell or pledge the assets of the company, or engage in other
self-dealing transactions. The Holdco Declaration of Trust will also contain
a provision (substantially the same as provisions of Massachusetts law
currently applicable to Boston Edison) allowing the trustees to consider
various constituencies and community and societal considerations, as well as
the long-term and short-term interests of the company, in determining what he
or she reasonably believes to be in the best interests of the company.
Holdco Common Shares
Holdco will issue shares of beneficial interest, referred to in this
Proxy Statement as "Holdco Common Shares," and may in the future issue other
equity and debt securities. The initial authorized capital stock of Holdco
will be 100,000,000 common shares, par value $1.00 per share, and 10,000,000
preferred shares, par value $1.00 per share. The authorized capital shares
may be issued from time to time by the trustees without the necessity of
obtaining further consent of the shareholders or any approvals from the
Massachusetts DPU. Holdco capital shares may be issued for money, services
or property, or as a distribution to shareholders, and upon such terms as the
trustees may in their absolute discretion determine. Upon consummation of
the Merger, the outstanding Holdco Common Shares will be the same as the
number of outstanding shares of Boston Edison Common Stock immediately prior
to the Merger and no Holdco preferred shares will be outstanding.
Holdco preferred shares may be issued by the trustees in one or more
classes or series within a class and shall have such designations,
preferences, voting rights, voting powers, full or limited, or no voting
rights, participating, optional or other special rights, and such
preferences, relative rights, qualifications, limitations or restrictions,
all as may be determined by the trustees. Authorization of preferred shares
in addition to the 10,000,000 shares initially authorized in the Declaration
of Trust requires the vote of the holders of two-thirds of the shares
outstanding and entitled to vote thereon. Under current provisions of the
Holding Company Act, and the rules and regulations thereunder, issuance of
Holdco preferred shares may be restricted.
The holders of the Holdco Common Shares, subject to any prior rights or
preferences of Holdco preferred shares outstanding at the time, will be
entitled to such dividends thereon as the trustees in their
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discretion lawfully declare (see "Proposal No. 2: Plan of Restructuring --
Dividend Policy" above) and will be vested with all voting rights. Each
Holdco Common Share will be entitled to one vote. The Holdco Common Shares
will not have cumulative voting rights in the election of trustees. In the
event of voluntary or involuntary liquidation or dissolution, the holders of
the Holdco Common Shares, subject to any prior rights or preferences of
Holdco preferred shares outstanding at the time, will share ratably in the
assets of Holdco. Holdco will have no right to call the Holdco Common Shares
for redemption. The holders of the Holdco Common Shares will have no
preemptive rights to subscribe to additional shares issued by Holdco.
Holdco has no agreement, understanding or plan for the issuance of any
Holdco Common Shares, except in connection with the proposed Merger and
except in connection with Holdco's Dividend Reinvestment and Common Shares
Purchase Plan (and, if approved by the stockholders and when assumed by
Holdco, the 1997 Stock Incentive Plan), or any Holdco preferred shares.
Holdco may issue and sell Holdco Common Shares in connection with the
acquisition of stock or assets of other companies, to finance expenditures,
additions and improvements to the property of Boston Edison, BETG or any of
its subsidiaries, which have not been financed with other permanent
securities and for other corporate purposes, or to repay or refinance
outstanding indebtedness. Dividend requirements and any redemption, sinking
fund or conversion provisions pertaining to Holdco preferred shares, if
authorized and issued, may have an adverse effect on the availability of
earnings for distribution to holders of the Holdco Common Shares and for use
with respect to other corporate purposes. See also "Proposal No. 2: Plan
of Restructuring -- Dividend Reinvestment and Common Stock Purchase Plan"
below for information concerning Holdco's intention to issue additional
Holdco Common Shares pursuant to such plan.
Trustees and Management of Holdco
The Class III directors of Boston Edison elected at its 1997 Annual
Meetings of Stockholders, together with the continuing Class I and Class II
directors elected at the 1995 and 1996 Annual Meetings of Stockholders,
respectively, will be the trustees of Holdco upon the completion of the
restructuring plan. In approving the restructuring, stockholders will be
considered to have ratified the election of such persons as trustees of
Holdco. Subject to their continuing qualification for office, such persons
will continue as both trustees of Holdco and directors of Boston Edison.
The officers of Holdco, each of whom presently holds a comparable office
in Boston Edison, are as follows:
<TABLE>
Name Office
- ---- ------
<S> <C>
Thomas J. May . . . . . . . . . . . . . . . . . . Chairman of the Board, President and Chief Executive Officer
Douglas S. Horan. . . . . . . . . . . . . . . . . Senior Vice President and General Counsel
James J. Judge. . . . . . . . . . . . . . . . . . Senior Vice President and Treasurer
Theodora S. Convisser . . . . . . . . . . . . . . Clerk
</TABLE>
Following the restructuring, the present members of Boston Edison's Board
of Directors will continue to serve as directors of Boston Edison, and the
present officers of Boston Edison will, at least initially, continue to hold
their present offices and enjoy substantially the same remuneration and
employee benefits now afforded. In the future, Holdco may have trustees and
officers who are not directors or officers of Boston Edison.
Initially, Holdco does not expect to have any employees of its own and
does not expect to render services to Boston Edison or any other subsidiary,
although it may do so in the future. For the immediate future, Boston Edison
will be reimbursed by Holdco for the time expended by Boston Edison's
officers and employees on the affairs of Holdco and its other subsidiaries
and for the use of Boston Edison's facilities by Holdco, and the offices of
Holdco will be located at the principal office of Boston Edison.
No Appraisal Rights
Under Massachusetts law governing the proposed Merger, neither a
dissenting holder of Boston Edison Common Stock nor the holders of Boston
Edison Cumulative Preferred Stock has a right to demand payment of the fair
value of his shares if the Merger is consummated.
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Dividend Reinvestment and Common Stock Purchase Plan
Following the effectiveness of the restructuring, Holdco will assume
Boston Edison's existing Dividend Reinvestment and Common Stock Purchase
Plan. Participants in such plan will continue to be able to make initial
purchases of Holdco Common Shares, reinvest their dividends on Holdco Common
Shares and Boston Edison Preferred Stock to purchase additional Holdco Common
Shares and to make optional payments to acquire additional Holdco Common
Shares.
Common Stock Plans
Boston Edison currently maintains two stock-related director/employee
benefit plans, namely the 1991 Director's Stock Plan and the Performance
Share Plan. If approved by the stockholders at the Annual Meeting, the 1997
Stock Incentive Plan will replace the Performance Share Plan. See "Proposal
No. 3: Adoption of the 1997 Stock Incentive Plan." In addition, Boston
Edison also maintains three qualified retirement plans, the Negotiated
Savings Plan for Production and Maintenance Employees, the Negotiated Savings
Plan for Office, Technical & Professional Employees and the Boston Edison
Savings Plan, each of which contains a company match and a company stock fund
investment option. Currently, an independent plan agent or trustee (with
respect to the qualified plans) purchases any necessary shares in connection
with the existing plans in the open market. Upon consummation of the
restructuring, Holdco will adopt or assume the plans and thereafter Holdco
Common Shares (in lieu of Boston Edison Common Stock) will be issued or
purchased by the respective independent plan agents, or trustees, whenever
stock is required to be issued or purchased in the open market in connection
with these plans.
Stockholder approval of the restructuring also will constitute
stockholder approval or ratification of the adoption or assumption of these
plans providing for the future use of Holdco Common Shares in lieu of Boston
Edison Common Stock thereunder.
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PRICE RANGE OF BOSTON EDISON COMMON STOCK
The reported range of the high and low sale prices of the Boston Edison
Common Stock, as reported in the consolidated reporting system for issues listed
on the New York Stock Exchange, was as follows:
High Low
---- ---
1995: First Quarter 25 1/2 23 1/8
Second Quarter 27 23 3/8
Third Quarter 27 1/2 24 1/2
Fourth Quarter 29 1/2 26 3/4
1996: First Quarter 30 1/8 26 1/4
Second Quarter 27 1/8 23 5/8
Third Quarter 25 3/8 21 3/4
Fourth Quarter 27 21 3/8
1997: First Quarter
through March 12th 27 3/8 26 1/8
The reported last sale price of Boston Edison Common Stock on the New York
Stock Exchange on March 12, 1997 was $26.50.
TRANSFER AGENT AND REGISTRAR
The First National Bank of Boston, the Transfer Agent and Registrar of the
Boston Edison Common Stock, will serve in the same capacities for the Holdco
Common Shares.
FINANCIAL STATEMENTS
No consolidated financial statements of Holdco and its subsidiary are
presented herein since Holdco presently has no assets or liabilities other than
the stock of Mergeco, and any pro forma consolidated financial statements of
Holdco would reflect no change from the financial statements of Boston Edison
prior to implementation of the restructuring plan.
LEGAL OPINION
The validity of the Holdco Common Shares to be issued upon consummation of
the Merger is being passed upon by Ropes & Gray, One International Place,
Boston, Massachusetts 02110-2624. Thomas G. Dignan, Jr., a partner of Ropes &
Gray, is a director of Boston Edison.
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EXPERTS
The consolidated balance sheets of Boston Edison as of December 31, 1995
and December 31, 1994, and the consolidated statements of income, retained
earnings and cash flows for each of the three years in the period ended December
31, 1995, incorporated by reference in this Proxy Statement/Prospectus, have
been incorporated herein in reliance on the report of Coopers & Lybrand, L.L.P.,
independent accountants, given on the authority of that firm as experts in
accounting and auditing.
EXECUTIVE COMPENSATION
REPORT OF THE EXECUTIVE PERSONNEL COMMITTEE
Under the rules established by the SEC, Boston Edison is required to
provide certain data and information in regard to the compensation and
benefits provided to its executive officers, including Boston Edison's Chief
Executive Officer and the four other most highly compensated executive
officers (the "Named Executive Officers"). The disclosure requirements for
the Named Executive Officers include the use of tables summarizing total
compensation and a report explaining the rationale and considerations that
led to fundamental executive compensation decisions affecting those
individuals for the prior year. In fulfillment of this requirement, the
Executive Personnel Committee, at the direction of the Board of Directors,
has prepared the following report for inclusion in this Proxy
Statement/Prospectus.
The Executive Personnel Committee
Boston Edison's executive compensation program is administered by the
Executive Personnel Committee, a committee of the Board of Directors composed of
the four non-employee directors listed as signatories to this report. Except as
discussed below, none of these non-employee directors has any interlocking or
other relationship with Boston Edison that would require disclosure by the SEC.
All decisions of the Executive Personnel Committee regarding the compensation of
the Named Executive Officers are subject to the approval of the non-employee
directors of Boston Edison, none of whom are eligible to participate in the
incentive plans described below.
Compensation Philosophy
The executive compensation philosophy of Boston Edison is to provide
competitive levels of compensation that advance Boston Edison's annual and
long-term performance objectives, reward corporate performance, and assist
Boston Edison in attracting, retaining and motivating highly qualified
executives. The framework for the Committee's executive compensation program is
to establish base salaries which are competitive with all electric utilities,
and to incentivize excellent performance by providing executives with the
opportunity to earn additional remuneration under the annual and long-term
incentive plans. The incentive plan goals are designed to improve the
effectiveness and enhance the efficiency of Boston Edison's operations and to
create value for stockholders.
Components of Compensation
Compensation paid to the Named Executive Officers, as reflected in the
following tables, consists of three primary elements: base salary, amounts paid
under Boston Edison's Executive Annual Incentive Compensation Plan, and shares
of Boston Edison's Common Stock awarded under Boston Edison's Performance Share
Plan. Boston Edison compares its compensation levels against all other
investor-owned electric utility companies. Boston Edison's strategy is to
establish base salaries and potential total compensation (base salary, annual
and long-term incentives) at the 60th percentile when compared to all electric
utilities.
During 1996, the Committee thoroughly reviewed data collected by nationally
recognized compensation experts as well as by Boston Edison's Human Resources
Group to determine whether Boston Edison was meeting its compensation strategy.
The review evaluated base salary and annual and long-term incentives for nearly
all
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electric utility companies. The data demonstrated that Boston Edison was in
conformance with its compensation strategy, except as it relates to the
long-term plan, to the satisfaction of the Committee. Recommendations to
modify the long-term plan were reviewed and approved by the Committee, and
are discussed below in the section describing long-term compensation.
Executive officer compensation in 1996 was not impacted by Section 162(m)
of the Internal Revenue Code because compensation levels were below the $1
million threshold established by the statute. The Committee intends to consider
the impact of Section 162(m) when establishing compensation levels in the future
to the extent it may become applicable. Boston Edison does not expect Section
162(m) to result in the loss of any deductions in 1997.
Annual Incentive
Boston Edison's annual incentive payments, reported in the fourth column of
the Summary Compensation Table below, are based on both corporate and business
unit performance objectives which are derived from the corporate operating plan
and which are approved by the Committee. Corporate performance objectives
include a comparison of target to actual earnings per share from operations.
Business unit performance objectives include predetermined levels for operating
and capital budgets, as well as key operating goals. The annual incentive plan
award for Mr. May is based solely on Boston Edison's achieving the earnings per
share objective. In 1996, earnings per share were $2.61, and Boston Edison was
able to significantly reduce its stranded asset exposure by over $20 million,
which exceeded the plan targets. The annual incentive plan awards for Messrs.
Ledgett, Boulette, Gustin and Horan were based 50% on earnings per share and 50%
on business unit performance objectives to achieve certain business unit budget
and operating plan targets. All four officers exceeded the specified business
unit performance levels.
Long-Term Compensation
The purpose of the Performance Share Plan is to enhance corporate focus
on Boston Edison's business direction beyond the annual operating plan and to
promote achievement of long-term objectives which create value for the
stockholder. Performance is measured by the relative total return to the
stockholder, which is defined as total dividends paid plus stock appreciation
throughout the three-year performance period based on a comparison of Boston
Edison's Common Stock performance to that of the Goldman Sachs Electric
Utility Database, a group of approximately 80 companies. To reach target
award, Boston Edison must be within the top 40% of the industry as measured
by the Goldman Sachs Electric Utility Database; for the threshold award,
Boston Edison must be in the top 50%; and for the maximum award, Boston
Edison must be in the top 10%. Boston Edison achieved the 36th percentile of
this group. Threshold was not attained, and no share awards were made for
1996.
The Committee has determined that the Performance Share Plan as presently
constituted does not accomplish the goals that were set for it. The
Committee worked with its external compensation consultants to devise a more
effective vehicle which will take into account the long-term interests of
Boston Edison by giving participants a strong incentive to maximize
stockholder value through the use of equity-related compensation. This
effort resulted in the 1997 Stock Incentive Plan which is presented to the
stockholders for approval in this Proxy Statement. The Committee is
continuing to consider with its consultant the most appropriate form of
awards under the stock incentive plan, and has therefore not made any awards
applicable to the current period at this time.
If the 1997 Stock Incentive Plan is approved by the stockholders at the
Annual Meeting, all new long-term incentive awards will be made under that
plan. At the time that the Committee grants awards under the 1997 Stock
Incentive Plan, it will determine whether existing awards under the
Performance Share Plan will terminate or continue.
Other Plans
At various times in the past, Boston Edison has adopted certain
broad-based employee benefit plans in which officers are permitted to
participate on the same terms as non-executive employees who meet applicable
eligibility criteria. Such plans include retirement, life, and health
insurance plans, as well as a 401 (k) savings plan which includes a company
matching contribution equal to the first six percent of pay contributed by
the
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employee up to a maximum deductible 401(k) contribution allowed by the
Internal Revenue Code. In addition, Boston Edison has a deferred
compensation plan in which officers and senior managers may elect to
participate. In 1996, the Committee reviewed and accepted a recommendation
from management and Towers Perrin to replace the Key Executive Benefit Plan
with a new Supplemental Executive Retirement Plan. The Supplemental
Executive Retirement Plan is better integrated with the pension plan. The
Supplemental Executive Retirement plan pays eligible participants
supplementary retirement income up to 60% of final average cash compensation
depending upon each participant's years of service, reduced by 50% of the
participant's social security benefit and further reduced by benefits the
participant receives under Boston Edison's pension plan.
Mr. May's 1996 Compensation
The Executive Personnel Committee makes decisions regarding the
compensation of the Chief Executive Officer using the same philosophy and
criteria as set forth above. As with other officers, Boston Edison compares
compensation levels for the Chief Executive Officer to all other investor-owned
electric utility companies.
Each year Boston Edison approves the adjustment of salary ranges for the
Chief Executive Officer and other corporate officers based on studies conducted
by external executive compensation consultants and Boston Edison's Human
Resources Group. The 1996 studies found Boston Edison's executive compensation
levels to be less than the approved 60th percentile position to market. Mr. May
received a 12% increase to his base salary in 1996. His salary will next be
reviewed by the Committee in April 1997.
Mr. May's annual incentive award, shown in the fourth column of the Summary
Compensation Table below, was in conformance with the provisions of the Annual
Incentive Plan as described above, and was based on Boston Edison's surpassing
its operating plan targets. As discussed above, the threshold performance
measures of the Performance Share Plan were not achieved.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Charles K. Gifford, who is a member of Boston Edison's Executive Personnel
Committee, is Chief Executive Officer of the Bank of Boston Corporation and
Chairman and Chief Executive Officer of The First National Bank of Boston.
Thomas J. May, Boston Edison's Chairman, President and Chief Executive Officer,
serves on the boards of directors of the Bank of Boston Corporation and The
First National Bank of Boston.
By the Executive Personnel Committee,
William F. Connell (Chairman)
Gary L. Countryman
Charles K. Gifford
Sherry H. Penney
EXECUTIVE COMPENSATION TABLES
The following information is given regarding annual and long-term
compensation earned by the Chief Executive Officer and the four other most
highly compensated executive officers of Boston Edison with respect to the years
1994, 1995 and 1996.
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SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term Compensation
----------------------
Annual Compensation Awards Payouts
- ----------------------------------------------------------------------------------------------------------
Name Other All
and Annual Restricted Other
Principal Compen- Stock Options/ LTIP Compen
Position Year Salary Bonus sation(1) Award(s) SARs Payouts sation(2)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Thomas J. May 1996 $463,625 $324,750 -- -- -- -- $ 9,000
Chairman, President 1995 415,083 292,500 -- -- -- 27,084 9,000
and Chief Executive 1994 362,500 214,500 -- -- -- 59,950 24,421
Officer
Ronald A. Ledgett 1996 193,667 119,300 -- -- -- -- 9,000
Senior Vice 1995 181,133 75,000 -- -- -- 11,210 9,000
President 1994 172,667 43,050 -- -- -- 24,750 15,248
E. Thomas Boulette 1996 189,250 100,000 -- -- -- -- 9,000
Senior Vice 1995 178,375 63,938 -- -- -- 10,899 9,000
President 1994 166,073 40,968 -- -- -- 10,959 9,542
L. Carl Gustin 1996 182,507 67,262 -- -- -- -- 9,000
Senior Vice 1995 176,839 64,988 -- -- -- 11,353 9,000
President 1994 170,675 42,794 -- -- -- 25,075 9,559
Douglas S. Horan 1996 175,833 83,750 -- -- -- -- 9,000
Senior Vice 1995 155,250 43,500 -- -- -- 4,400 9,000
President 1994 137,150 31,290 -- -- -- 6,300 8,229
</TABLE>
(1) None of the named executive officers received amounts of other annual
compensation in 1994, 1995, or 1996, which would require disclosure pursuant
to SEC rules.
(2) Amounts in this column for 1996 represent Boston Edison's matching
contribution under its 401(k) plan.
LONG-TERM INCENTIVE PLANS - AWARDS IN LAST FISCAL YEAR
The following table sets forth Performance Share awards potentially payable
in 1999 based on performance during the three-year period from January 1, 1996
through December 31, 1998.
<TABLE>
<CAPTION>
Estimated Future Payouts
Number of Performance or ------------------------
Shares, Units Other Period
or Other Until Maturation
Name Rights or Payout Threshold(1) Target(1) Maximum(1)
- ---- ------------- ---------------- ----------- -------- ----------
<S> <C> <C> <C> <C> <C>
Thomas J. May 7,339 1996-1998 3,669 7,339 11,008
Ronald A. Ledgett 1,879 1996-1998 940 1,879 2,819
E. Thomas Boulette 1,871 1996-1998 936 1,871 2,807
L. Carl Gustin 1,824 1996-1998 912 1,824 2,736
Douglas S. Horan 1,729 1996-1998 864 1,729 2,593
</TABLE>
(1) The first of these columns shows the number of shares to be awarded if
target performance is achieved, and the last three columns if threshold,
target and maximum performance. In addition, to these amounts, dividends
attributable to each share are credited throughout the performance period
and deemed reinvested quarterly. The Performance Share Plan has a
stockholder performance measure with the target performance level set at
the 60th percentile of the Goldman Sachs Database at the end of the
performance period. At the end of the period, the achievement percentage
is applied to the total number of shares - the amount as shown above plus
shares added through dividend reinvestment - to determine the number of
shares actually earned
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and distributed. See "Executive Compensation -- Report of the
Executive Personnel Committee -- Long Term Compensation."
During 1997, Boston Edison entered into retention agreements with each of
Mr. Ledgett and Mr. Horan that provide for the payment to such executives of
$75,000 and $50,000, respectively, if such executive remains in the employ of
Boston Edison on December 31, 1998.
PENSION PLAN TABLE
The following table shows the estimated annual retirement benefits
payable to executive officers under the qualified pension plan and the
Supplemental Executive Retirement Plan, assuming retirement at age 65. The
Supplemental Executive Retirement Plan is a non-qualified pension plan
providing a maximum benefit of 60% of compensation after attainment of 20
years of credited service and age 60. The Supplemental Executive Retirement
Plan provides the incremental benefits in excess of the benefits paid under
the qualified plan necessary to reach the benefit shown in the table. Each
of the officers named in the Summary Compensation Table participates in the
Supplemental Executive Retirement Plan. The benefits presented are based on
a straight life annuity and do not take into account a reduction in benefits
of up to 50% of the participant's primary Social Security benefit.
PENSION PLAN TABLE
YEARS OF CREDITED SERVICE
-------------------------
AVERAGE ANNUAL
COMPENSATION 10 15 20
- --------------------------------------- -------- -------- ---------
$200,000.......................... $ 60,000 $ 90,000 $120,000
$300,000.......................... 90,000 135,000 180,000
$400,000.......................... 120,000 180,000 240,000
$500,000.......................... 150,000 225,000 300,000
$600,000.......................... 180,000 270,000 360,000
$700,000.......................... 210,000 315,000 420,000
$800,000.......................... 240,000 360,000 480,000
For purposes of the retirement plans, Messrs. May, Ledgett, Boulette,
Gustin and Horan currently have 21, 15, 5, 16 and 19 years of credited
service, respectively.
Final average compensation for purposes of calculating the benefits under
the Supplemental Executive Retirement Plan is the highest average annual
compensation of the participant during any consecutive 36 month period.
Compensation taken into account in calculating the benefits described above
includes salary and annual bonus, including any amounts deferred under the
terms of the Deferred Compensation Plan.
Mr. May can elect, and Mr. Ledgett receives, an alternative supplemental
retirement benefit equal to 33% of final base salary annually for 15 years,
which at the current level would provide income in excess of the amounts
shown in the table above of approximately $9,000 and $31,000, respectively.
CHANGE OF CONTROL AGREEMENTS
Boston Edison has Change in Control Agreements (the "COC Agreements")
with certain key employees, including those named in the summary compensation
table, which provide severance benefits in the event of certain terminations
of employment following a "Change in Control" (as defined below). If,
following a Change in Control,
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the employee's employment were to be terminated other than for cause (as
defined) or the employee were to terminate his or her employment for reasons
specified in the COC Agreements, the employee would receive severance pay in
an amount equal to two times (three times in the case of Mr. May) the sum of
his or her annual base salary (at the rate in effect immediately prior to the
date of termination or immediately before the Change of Control whichever is
higher) plus his or her actual bonus paid in respect of the most recently
completed fiscal year or his or her target bonus for the fiscal year in which
the termination occurs (whichever is higher). In addition, the COC
Agreements provide for a pro rated bonus payment for the year in which the
termination occurs, the immediate vesting of bonus awards, immediate payment
of deferred compensation amounts upon such termination and payments equal to
the benefit the employee would have received under Boston Edison's retirement
plan assuming the executive was vested and remained employed for an
additional two (three) years. For two years (three years in the case of Mr.
May) following any such termination of employment, the employee would be
entitled to continue to participate in all welfare plans provided by Boston
Edison. The COC Agreements further provide for a "gross-up" payment under
which, if amounts paid under such agreements would be subject to a federal
excise tax on "excess parachute payments," Boston Edison will pay the
employee an additional amount of cash, so that, after payment of all such
taxes by the employee, the employee will have received the amount he would
have received in the absence of any such tax. A change of control under the
agreement generally includes the following events: (i) a person or group
becomes the beneficial owner of more than 30% of the voting power of Boston
Edison's securities; (ii) continuing directors cease to be a majority of the
board; (iii) a consolidation, merger or other reorganization or sale or other
disposition of all or substantially all of the assets of Boston Edison (other
than certain defined transactions); or (iv) approval by the stockholders of a
complete liquidation or dissolution of Boston Edison. The Merger
establishing Holdco as the parent entity for Boston Edison will not
constitute a Change in Control for purposes of the COC Agreements.
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STOCK PERFORMANCE GRAPH
The SEC requires that Boston Edison include in this Proxy Statement a
line-graph presentation comparing cumulative five-year stockholder returns
with the S&P 500 Stock index and either a nationally recognized industry
standard or an index of peer companies selected by Boston Edison. The Board
of Directors has approved the use of the Edison Electric Industry 100 Index
(EEI 100 Index), a recognized industry index of approximately 100 electric
utility companies. Pursuant to the SEC's regulations, the graph below
depicts the investment of $100 at the commencement of the measurement period,
with dividends reinvested.
Index: 1992 1993 1994 1995 1996
- ------ ---- ---- ---- ---- ----
Boston Edison $119 $136 $117 $155 $152
EEI 100 Index 108 120 106 138 140
S&P 500 108 118 120 165 203
Annual Total Return: 1992 1993 1994 1995 1996
- -------------------- ---- ---- ---- ---- ----
Boston Edison 18.8% 14.5% (13.8%) 32.2% (2.1%)
EEI 100 Index 7.6% 11.1% (11.6%) 31.0% 1.2%
S&P 500 7.6% 10.0% 1.3% 37.6% 23.0%
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PROPOSAL NO. 3: ADOPTION OF 1997 STOCK INCENTIVE PLAN
On January 23, 1997, the Board of Directors approved, and is submitting
for stockholder approval, the Boston Edison Company 1997 Stock Incentive Plan
(the "Stock Incentive Plan" or the "Plan"). The Board of Directors adopted
the Plan, subject to stockholder approval, in order to attract and retain key
employees in a position to make contributions to the success of Boston
Edison, to reward employees for such contributions, and to encourage
employees to take into account the long-term interests of Boston Edison
through stock-based awards. If approved, the Stock Incentive Plan will
replace the Performance Share Plan. A copy of the Plan appears as Appendix C
to this Proxy Statement/Prospectus.
General
The Plan permits a variety of stock and stock-based awards, including:
the granting of stock options and stock appreciation rights; the award of
restricted shares; the award of dividend equivalents; the granting of rights
to receive cash or shares on a deferred basis or based on performance; the
awarding of cash payments sufficient to offset the ordinary income taxes of
participants resulting from transactions under the Plan; the making of loans
to participants in connection with awards; and the granting of other
stock-based awards, all as more fully described below. By providing
equity-related compensation, the Board believes that the participants will
have a strong incentive to emphasize stockholder value.
The Plan is administered by the Executive Personnel Committee (excluding
any member who would not be considered (1) an "outside director" for purposes
of Section 162(m) of the Internal Revenue Code and the regulations thereunder
or (ii) a non-employee director within the meaning of Rule 16b-3(b)(3) of the
Exchange Act) (the "Committee"). The Committee has full authority,
consistent with the Plan, to select who will receive awards, to determine the
types of awards to be granted and the times of grant, to determine the number
of shares to be covered by any award, to determine the terms and conditions
of any award, to adopt, amend and rescind rules and regulations for the
administration of the Plan, to interpret the Plan and to decide any questions
and settle all controversies and disputes which may arise in connection with
the Plan.
Persons eligible to participate in the Plan are those key employees of
Boston Edison and its subsidiaries who, in the opinion of the Committee, are
in a position to make a contribution to the success of Boston Edison or its
subsidiaries and whose number and identities will be determined in the future
by the Committee.
The Plan limits the terms of awards to ten years and prohibits the
granting of awards more than ten years after the effective date of the Plan.
As of _________ __, 1997, no awards had been made under the Plan. Subject
to adjustment for stock-splits and similar events, there are 2,000,000 shares
available for future grant under the Plan. Awards and shares which are
forfeited, reacquired by Boston Edison, satisfied by a cash payment by Boston
Edison or otherwise satisfied or terminated without the issuance of Boston
Edison Common Stock are not counted. The Plan authorizes the Committee to
issue awards in substitution for awards held by employees of companies and
businesses acquired by Boston Edison on such terms and conditions as it deems
appropriate.
The number of shares for which stock options and stock appreciation
rights may be granted to any one participant in any calendar year is limited
to 100,000 shares; and in no event may the total compensation awarded to any
one participant in any one calendar year under all restricted stock awards
and all awards intended to qualify as "performance-based compensation" under
Section 162(m) of the Internal Revenue Code exceed the equivalent of 25,000
shares.
Stock Options. The Plan permits the granting of both non-transferable
(unless otherwise determined by the Committee) incentive stock options under
Section 422 of the Internal Revenue Code ("ISOs") and stock options that do
not so qualify ("NSOs"). The option exercise price of each option shall be
determined by the Committee but, in the case of ISOs, shall not be less than
100% (110% in the case of an ISO granted to a 10% stockholder) of the fair
market value of the shares on the date of grant. At March 12, 1997, the
closing price of Boston Edison Common Stock as reported on the New York Stock
Exchange Composite Tape was $26.50.
The term of each option may not exceed ten years (five years in the case
of an ISO granted to a 10% stockholder) from the date the option was granted
or such earlier date as may be specified by the Committee at the
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<PAGE>
time the option is granted. Options may be made exercisable in installments,
and the exercisability of options may be accelerated by the Committee. In
the event of termination of employment by reason of death or total and
permanent disability, each option held by an employee will become fully
exercisable and will remain exercisable for two years in the case of death
and one year in the case of disability (subject to the limitation relating to
maximum exercise period), all except as otherwise determined by the Committee.
Except as otherwise determined by the Committee, in the event of
termination of employment other than by reason of death or total and
permanent disability, all options held by an employee that are not then
exercisable shall terminate. Options that are exercisable on the date of
termination shall continue to be exercisable for a period of three months,
subject to the stated term of the option, unless the employee has admitted
to, or been convicted of, any act of fraud, theft or dishonesty arising in
the course of, or in connection with, his employment with Boston Edison and
its subsidiaries, in which case the entire option shall terminate
immediately, all except as otherwise determined by the Committee.
Stock Appreciation Rights. The Committee may also grant non-transferable
(unless otherwise determined by the Committee) stock appreciation rights
("SARs"), alone or in conjunction with options, entitling the holder upon
exercise to receive an amount in any combination of cash or shares of Boston
Edison Common Stock, not greater in value than the increase since the date of
grant in the value of the shares covered by such right. SARs are subject to
such terms and conditions as may be determined by the Committee. SARs may be
granted separately from or in tandem with the grant of options. In addition,
the Committee may determine, if so requested by an option holder, that Boston
Edison will pay the optionee, in cancellation of an option not accompanied by
a related SAR, any combination of cash, or shares of Boston Edison Common
Stock, equal to the difference between the fair market value of the Boston
Edison Common Stock to have been purchased upon exercise and the aggregate
consideration to have been paid upon exercise. The provisions described
above relating to the exercisability of NSOs upon termination of employment
as a result of death, disability or otherwise also apply to SARs.
Restricted Stock. The Committee may also grant restricted stock awards
subject to such conditions and restrictions, including vesting, as the
Committee may determine at the time of grant. The Committee may at any time
waive such restrictions, including through accelerated vesting. Unless
otherwise determined by the Committee, shares of restricted stock are
non-transferable, and if the employment of a participant who holds shares of
restricted stock terminates for any reason (other than death or total and
permanent disability) prior to the lapse or waiver of the restrictions,
Boston Edison may require the forfeiture or repurchase of the shares in
exchange for the amount, if any, which the participant paid for them. Except
as otherwise determined by the Committee, if an employee's employment
terminates because of death or total and permanent disability, all
restrictions on restricted stock held by him or her shall lapse. Prior to the
lapse of restrictions on shares of restricted stock the participant will have
all rights of a stockholder with respect to the shares, including voting and
dividend rights, subject only to the conditions and restrictions generally
applicable to restricted stock under the Plan or specifically set forth in
the award agreement.
In determining the vesting schedule for each award of restricted stock,
the Committee may impose whatever conditions to vesting as it determines to
be appropriate. In order for an award of restricted stock to qualify as
"performance-based compensation" under Section 162(m) of the Internal Revenue
Code, the Committee must provide that vesting of the restricted stock awards
is subject to one or more of the following performance goals: (1) earnings
per share, (2) individual performance objectives, (3) net income, (4) pro
forma net income, (5) return on designated assets, (6) return on revenues or
(7) satisfaction of company-wide or department based objectives. The
Committee will pre-establish in writing one or more of the performance goals
no later than ninety (90) days after the commencement of the period to which
the performance relates (or any such other time as is required to satisfy the
conditions of Section 162(m) of the Internal Revenue Code and the regulations
thereunder).
Deferred Stock. The Committee may make deferred stock awards under the
Plan. These are non-transferable (unless otherwise determined by the
Committee) awards entitling the recipient to receive shares of Boston Edison
Common Stock without any payment in one or more installments at a future date
or dates, as determined by the Committee. Receipt of deferred stock may be
conditioned on such matters as the Committee shall determine including
continued employment or attainment of performance goals. Except as otherwise
determined by the Committee, all such rights terminate upon the termination
of the participant's employment for any reason (including death). In order
to qualify as "performance-based compensation" under Section 162(m) of the
Internal
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Revenue Code, the same procedures for establishing and measuring performance
goals described for restricted stock above must be used.
Performance Units. The Committee may award non-transferable (unless
otherwise determined by the Committee) performance units entitling the
recipient to receive shares of Boston Edison Common Stock or cash in such
combinations as the Committee may determine upon the achievement of specified
performance goals over a fixed or determinable period and such other
conditions as the Committee may determine. Except as otherwise determined by
the Committee, rights under a performance unit award shall terminate upon a
participant's termination of employment for any reason (including death).
Performance units may be awarded independently or in connection with
stock options or other awards under the Plan. Unless otherwise determined by
the Committee, exercise of performance unit awards issued in tandem with
another award reduces the number of shares subject to the other award on such
basis as is specified in the award agreement. In order to qualify as
"performance-based compensation" under Section 162(m) of the Internal Revenue
Code, the same procedures for establishing and measuring performance goals
described for restricted stock above must be used.
Dividend Equivalent Awards. The Committee may award dividend equivalent
awards entitling the participant to receive cash, shares of Boston Edison
Common Stock, or other property equal in value to dividends paid with respect
to a specified number of shares of Boston Edison Common Stock. Dividend
equivalents may be awarded on a free-standing basis or in connection with
another award, and may be paid currently or on a deferred basis. The
Committee may provide at the date of grant or thereafter that the dividend
equivalent award shall be paid or distributed when accrued or shall be deemed
to have been reinvested in additional shares of Boston Edison Common Stock,
or other investment vehicles as the Committee may specify, provided that
dividend equivalent awards (other than free-standing dividend equivalent
awards) shall be subject to all conditions and restrictions of the underlying
awards to which they relate. Except as otherwise determined by the
Committee, all such rights terminate upon the termination of the
participant's employment for any reason (including death). In order to
qualify as "performance-based compensation" under Section 162(m) of the
Internal Revenue Code, the same procedures for establishing and measuring
performance goals described for restricted stock above must be used.
Other Stock-Based Awards. The Committee may grant other types of awards
of, or based on, Boston Edison Common Stock. Such awards may include debt
securities convertible into or exchangeable for shares of Boston Edison
Common Stock upon such conditions, including attainment of performance goals,
as the Committee may determine. In order to qualify as "performance-based
compensation" under Section 162(m) of the Internal Revenue Code, the same
procedures for establishing and measuring performance goals described for
restricted stock above must be used.
Supplemental Loans and Grants. The Committee may authorize loans in
connection with awards granted or exercised under the Plan. Each loan shall
be subject to such terms and conditions and shall bear such rates of
interest, if any, as the Committee shall determine. However, the amount of
any loan may not exceed the total exercise or purchase price plus an amount
equal to the cash payment which could have been paid to the borrower in
respect to taxes as described in the next paragraph.
The Committee may at any time grant to a participant the right to receive
a cash payment in connection with taxable events (including the lapse of
restrictions) under grants or awards. The amount of such payment may not
exceed the amount which would be required in order to pay in full the
federal, state and local income tax due as a result of income recognized by
the recipient in respect of such grant or award plus such cash payments based
on the maximum marginal federal, state and local tax rates (or such lower
rate as the Committee may determine) in effect at the times such taxable
income is recognized.
Change of Control Provisions. The Plan provides that in the event of a
"Change of Control", all awards outstanding but not then exercisable will
become immediately exercisable, and restrictions and conditions on all awards
outstanding will automatically lapse or be deemed waived. A "Change of
Control" under the Plan generally includes the following events: (i) a person
or group becomes the beneficial owner of more than 30% of the voting power of
Boston Edison's securities; (ii) a change of control required to be reported
under certain provisions of the Exchange Act; (iii) a consolidation, merger
or other reorganization (other than such a consolidation, merger or other
reorganization that (a) would result in the voting power immediately before
to continue to represent more than 50%
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of the voting power thereafter, or (b) in which no person or group would
acquire more than 20% of the voting power), or a sale of all or substantially
all assets or a plan of liquidation; and (iv) continuing directors cease to
be a majority of the board.
Adjustments for Stock Dividends, Mergers, etc. The Committee is required
to make appropriate adjustments in connection with awards to reflect stock
dividends, stock splits and similar events. In the event of a merger,
liquidation or similar event, in which Boston Edison is not the surviving
corporation, all awards will terminate, but prior to such event, all awards
outstanding but not then exercisable will become immediately exercisable and
all restrictions and conditions on all awards outstanding will lapse;
provided that so long as no Change in Control is involved, the Committee may
arrange for substitute awards from the successor corporation.
Effect, Discontinuance, Amendment and Termination. The Committee may at
any time discontinue granting awards under the Plan. The Committee may at
any time or times amend the Plan or any outstanding award for the purpose of
satisfying the requirements of any changes in applicable laws or regulations
or for any other purpose which may at any time be permitted by law, or may at
any time terminate the Plan as to any further grants of awards, provided that
no such amendment shall, without the approval of the stockholders, increase
the maximum number of shares available under the Plan, change the group of
employees eligible to receive awards, reduce the price at which ISOs may be
granted, extend the time in which awards may be granted or change the
amendment provisions of the Plan. However, no such action shall adversely
affect any rights under outstanding awards without the holder's consent.
Federal Income Tax Consequences
The following discussion summarizes certain federal income tax
consequences associated with stock option awards under the Plan. The summary
does not purport to cover federal employment tax or other federal tax
consequences that may be associated with the Plan, nor does it cover state,
local or non-U.S. taxes.
Incentive Options. In general, no taxable income is realized by the
optionee upon the grant or exercise of an ISO. However, the exercise of an
ISO may result in alternative minimum tax liability for the optionee. With
certain exceptions, a disposition of shares purchased under an ISO within two
years from the date of grant or within one year after the date of exercise
produces ordinary income to the optionee (and a deduction to Boston Edison)
equal to the excess of the value of the shares at the time of exercise over
the option price. Any additional gain recognized in the disposition is
treated as capital gain and any loss sustained will be capital loss (and no
additional deduction will be allowed to Boston Edison for Federal income tax
purposes).
Non-Statutory Options. No income is realized by an optionee at the time
a NSO is granted. Generally, (a) at exercise, ordinary income is realized by
the optionee in an amount equal to the difference between the option price
and the fair market value of the shares of the date of exercise, and Boston
Edison receives a tax deduction for the same amount (subject to satisfaction
of applicable withholding requirements), and (b) upon a later sale or
exchange, appreciation or depreciation after the date of exercise is treated
as either short-term or long-term capital gain or loss depending on how long
the shares have been held.
Generally, an ISO that is exercised more than three months following
termination of employment (other than termination by reason of death) is
treated as a non-statutory option. ISOs are also treated as non-statutory
options to the extent they first become exercisable in any one calendar year
as to shares of Boston Edison Common Stock having a value (determined at the
time the options were granted) in excess of $100,000.
Payments in Respect of a Change of Control. Under the so-called "golden
parachute" provisions of the Internal Revenue Code, the vesting or
accelerated exercisability of awards in connection with a change in control
of Boston Edison may be required to be valued and taken into account in
determining whether participants have received compensatory payments,
contingent on the change in control, in excess of certain limits. If these
limits are exceeded, a substantial portion of amounts payable to the
participant, including income recognized by reason of the grant, vesting or
exercise of awards under the Plan, may be subject to an additional 20%
federal tax and may be non-deductible to Boston Edison.
Section 162(m). Section 162(m) of the Internal Revenue Code limits to $1
million the deduction a public corporation may claim in any year for
compensation to any of certain key officers. There are a number of
exceptions
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to this deduction limitation, including an exception for qualifying
"performance-based compensation." It is intended that stock options granted
under the Plan will be eligible for this performance-based exception.
Vote Required
Only holders of record of Boston Edison Common Stock as of the Record
Date will be entitled to receive notice of and vote at the Annual Meeting and
any adjournments thereof with respect to approval of the Plan. Approval of
the Plan requires the affirmative vote of a majority of the shares present
and entitled to vote on the matter. See "Other Matters -- Voting Procedures."
The persons named in the accompanying proxy intend to vote such proxy in
favor of the Plan unless a contrary choice is indicated thereon.
Recommendation of the Board of Directors
The Board of Directors has approved the 1997 Stock Incentive Plan and
recommends that the stockholders vote FOR Proposal 3. Proxies solicited by
the Board of Directors will be so voted unless stockholders specify otherwise.
OTHER MATTERS
Voting Procedures
Consistent with state law and under Boston Edison's Bylaws, a majority of
the shares entitled to be cast on a particular matter, present in person or
represented by proxy, constitutes a quorum as to such matter. Votes cast by
proxy or in person at the Annual Meeting will be counted by persons appointed
by Boston Edison to act as election inspectors for the meeting.
Directors will be elected by a plurality of the votes properly cast at
the meeting. Proposal No. 2 requires the affirmative vote of two-thirds of
the outstanding Boston Edison Common Stock. Proposal No. 3 requires the
affirmative vote of a majority of the shares present and entitled to vote on
the matter. The election inspectors will count the total number of votes cast
"for" approval of Proposals No. 2 and No. 3 for purposes of determining
whether sufficient affirmative votes have been cast. The election inspectors
will count shares represented by proxies that withhold authority to vote for
a nominee for election as a director or that reflect abstentions and "broker
non-votes" (i.e., shares represented at the meeting held by brokers or
nominees as to which (i) instructions have not been received from the
beneficial owners or persons entitled to vote and (ii) the broker or nominee
does not have the discretionary voting power on a particular matter) only as
shares that are present and entitled to vote on the matter for purposes of
determining the presence of a quorum. Neither abstentions nor broker
non-votes have any effect on the outcome of voting on the election of
directors. For purposes of Proposal No. 2, abstentions and broker non-votes
have the effect of votes cast against the proposal. For purposes of Proposal
No. 3, abstentions are considered in determining the number of votes required
to obtain a majority of the shares present and entitled to vote and will have
the same effect as votes cast against the proposal.
Adjournment of Meeting
If sufficient votes in favor of any of the proposals set forth in the
Notice of Annual Meeting are not received by the time scheduled for the
meeting, the persons named as proxies may propose one or more adjournments of
the meeting to permit further solicitation of proxies with respect to any
such proposals. Any adjournment will require the affirmative vote of a
majority of the votes cast on the question in person or by proxy at the
session of the meeting to be adjourned. The persons named as proxies will
vote in favor of such adjournment those proxies which they are entitled to
vote in favor of such proposals. They will vote against any such adjournment
those proxies required to be voted against any of such proposals. Boston
Edison will pay the costs of any additional solicitation and of any adjourned
session.
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Independent Accountants
Representatives of Coopers & Lybrand, L.L.P., Boston Edison's independent
accountants, will be present at the Annual Meeting and will have the
opportunity to make a statement if they desire to do so. The representatives
will be available to respond to appropriate questions by Boston Edison's
stockholders.
Other Business
The management has no reason to believe that any other business will be
presented at the Annual Meeting, but if any other business shall be
presented, votes pursuant to the proxy will be cast thereon in accordance
with the discretion of the persons named in the accompanying proxy.
Stockholder Proposals
Any proposal to be presented at the annual meeting of stockholders to be
held in May 1998 must be received at Boston Edison's principal executive
offices no later than ___________ __, 1997.
Stockholder Nominations of Directors
The Board of Directors will consider nominations of candidates for
election as directors from stockholders which are submitted in accordance
with the procedures set forth in Section 3.1 of Boston Edison's Bylaws. In
general, these procedures require that stockholder nominations must be
submitted to the Clerk of Boston Edison in writing not less than 45 days
prior to the anniversary of the date of the immediately preceding annual
meeting and must contain certain specified information concerning the person
to be nominated and the stockholder submitting the nomination and the consent
of the nominee to serve as director if so elected.
The greater part of the stock of Boston Edison is widely distributed in
small lots. It is important, therefore, in order to secure representation at
the Annual Meeting of the number of shares necessary to take action, that all
stockholders who cannot be present in person, however small their holdings,
fill in, sign and return the enclosed proxy without delay to The First
National Bank of Boston, P.O. Box 9381, Boston, Massachusetts 02105. A
stamped envelope is enclosed for this purpose.
STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING. IF YOU
PLAN TO ATTEND, PLEASE SO INDICATE ON THE ENCLOSED PROXY CARD.
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<PAGE>
APPENDIX A
AGREEMENT AND PLAN OF MERGER
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<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER ("Agreement") dated as of March 14, 1997, by
and among Boston Edison Company, a Massachusetts electric utility corporation
("Boston Edison"), Boston Edison Mergeco Electric Company, Inc., a
Massachusetts utility corporation ("Mergeco"), and Boston Edison Holdings, a
Massachusetts business trust ("Holdco").
WITNESSETH:
WHEREAS, Boston Edison has an authorized capitalization consisting of (i)
100,000,000 shares of common stock, par value $1.00 per share ("Boston Edison
Common Stock"), of which 48,514,973 shares are issued and outstanding and
1,429,424 shares have been reserved for issuance pursuant to Boston Edison's
Dividend Reinvestment and Common Stock Purchase Plan; (ii) 2,890,000 shares
of cumulative preferred stock, par value $100.00 per share ("Boston Edison
Preferred Stock"), 2,130,000 shares of which (consisting of shares of six
separate series) are issued and outstanding; and (iii) 8,000,000 shares of
preference stock, par value $1.00 per share ("Boston Edison Preference
Stock"), of which no shares are issued and outstanding; the number of shares
of issued and outstanding Boston Edison Common Stock being subject to
increase to the extent that shares reserved for issuance are issued prior to
the Effective Time (as defined below) of the Merger;
WHEREAS, Mergeco has an authorized capitalization consisting of 200,000
shares of common stock, par value $1.00 per share ("Mergeco Common Stock"), of
which 100 shares have been subscribed for by Holdco and, once the issuance
thereof has been approved by the Massachusetts Department of Public Utilities as
required by law, will be issued to and owned beneficially and of record by
Holdco;
WHEREAS, Holdco has an authorized capitalization consisting of (i)
100,000,000 shares of beneficial interest, par value $1.00 per share ("Holdco
Common Shares", each a "Holdco Common Share"), of which 100 shares are issued
and outstanding and owned beneficially and of record by Boston Edison; and (ii)
10,000,000 preferred shares, par value $1.00 per share, of which no shares are
issued and outstanding; and
WHEREAS, the Boards of Directors of the respective parties hereto deem it
advisable and in the best interests of Boston Edison and its stockholders to
merge Mergeco with and into Boston Edison (the "Merger") in accordance with
Section 96 of Chapter 164 of the Massachusetts General Laws and pursuant to this
Agreement and the Articles of Merger attached hereto as ANNEX I and incorporated
herein (the "Articles"), whereby the holders of shares of Boston Edison Common
Stock will exchange their shares for Holdco Common Shares;
NOW, THEREFORE, in consideration of the premises and the representations,
warranties and agreements herein contained, the parties hereto agree that
Mergeco shall be merged with into Boston Edison, which shall be the corporation
surviving the Merger, and that the terms and conditions of the Merger, the mode
of carrying it into effect, and the manner of converting and exchanging shares
shall be as follows:
ARTICLE I
THE MERGER
(a) Subject to and in accordance with the provisions of this Agreement,
the Articles shall be executed and acknowledged by each of Boston Edison and
Mergeco and thereafter delivered to the Secretary of State of The Commonwealth
of Massachusetts for filing, as provided in Section 102A of Chapter 164 of the
Massachusetts General Laws. The Merger shall become effective at such time as
the Articles are filed as required by law with the Secretary of State of The
Commonwealth of Massachusetts or such date, not more than
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thirty days after such filing, as may be specified in the Articles (the
"Effective Time"). At the Effective Time, the separate existence of Mergeco
shall cease and Mergeco shall be merged with and into Boston Edison (Mergeco
and Boston Edison being sometimes referred to collectively herein as the
"Constituent Corporations" and Boston Edison, the corporation designated in
the Articles as the surviving corporation being sometimes referred to herein
as the "Surviving Corporation");
(b) Prior to and after the Effective Time, Holdco, Boston Edison and
Mergeco, respectively, shall take all such actions as may be necessary or
appropriate in order to effectuate the Merger. In this connection, Holdco
shall issue the Holdco Common Shares which the holders of Boston Edison
Common Stock are entitled to receive as provided in Article II hereof. In
the event that at any time after the Effective Time any further action is
necessary or desirable to carry out the purposes of this Agreement and to
vest the Surviving Corporation with full title to all properties, assets,
rights, approvals, immunities and franchises of either of the Constituent
Corporations, the officers and directors of each of the Constituent
Corporations as of the Effective Time shall take all such further action.
ARTICLE II
TERMS OF CONVERSION AND EXCHANGE OF SHARES
At the Effective Time:
(a) Each share of Boston Edison Common Stock issued and outstanding
immediately prior to the Merger thereupon shall be changed and converted into
one Holdco Common Share, which thereupon shall be issued, fully paid and
nonassessable;
(b) The shares of Boston Edison Preferred Stock issued and outstanding
immediately prior to the Merger shall not be converted or otherwise affected by
the Merger, and each such share shall continue to be issued and outstanding and
to be one fully paid and nonassessable share of the particular series of
preferred stock of the Surviving Corporation;
(c) The shares of Boston Edison Preference Stock issued and outstanding
immediately prior to the Merger, if any, shall not be converted or otherwise
affected by the Merger, and each such share shall continue to be issued and
outstanding and to be one fully paid and nonassessable share of the particular
series of preference stock of the Surviving Corporation;
(d) Each share of Mergeco Common Stock issued and outstanding immediately
prior to the Merger shall be converted into one share of common stock of the
Surviving Corporation, which thereupon shall be issued, fully paid and
nonassessable; and
(e) Each Holdco Common Share issued and outstanding immediately prior to
the Merger shall be canceled.
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<PAGE>
ARTICLE III
ARTICLES OF ORGANIZATION AND BYLAWS
From and after the Effective Time, and until thereafter amended as provided
by law, the Restated Articles of Organization of Boston Edison as in effect
immediately prior to the Merger shall be and continue to be the Restated
Articles of Organization of the Surviving Corporation. The purposes of the
Surviving Corporation, the total number of shares and par value of each class of
stock which the Surviving Corporation is authorized to issue and a description
of each class of stock authorized at the Effective Time, with the preferences,
voting powers, qualifications, special or relative rights or privileges as to
each class and any series thereof then established, are as stated in such
Restated Articles of Organization, which are attached hereto as Annex II and
incorporated herein. From and after the Effective Time, the Bylaws of Boston
Edison shall be and continue to be the Bylaws of the Surviving Corporation until
amended in accordance with law.
ARTICLE IV
DIRECTORS AND OFFICERS
The persons who are directors and officers of Boston Edison immediately
prior to the Merger shall continue as directors and officers, respectively, of
the Surviving Corporation and shall continue to hold office as provided in the
Bylaws of the Surviving Corporation. If, at or following the Effective Time, a
vacancy shall exist in the Board of Directors or in the position of any officer
of the Surviving Corporation, such vacancy may be filled in the manner provided
in the Bylaws of the Surviving Corporation.
ARTICLE V
STOCK CERTIFICATES
Following the Effective Time, each holder of an outstanding certificate or
certificates theretofore representing shares of Boston Edison Common Stock may,
but shall not be required to, surrender the same to Holdco for cancellation or
transfer, and each such holder or transferee will be entitled to receive
certificates representing the same number of Holdco Common Shares as shares of
Boston Edison Common Stock previously represented by the surrendered stock
certificates. Until so surrendered or presented for transfer, each outstanding
certificate which, prior to the Effective Time, represented Boston Edison Common
Stock shall be deemed and treated for all corporate purposes to represent the
ownership of the same number of Holdco Common Shares as though such surrender or
transfer and exchange had taken place. The stock transfer books for the Boston
Edison Common Stock shall be deemed to be closed at the Effective Time and no
transfer of outstanding shares of Boston Edison Common Stock outstanding prior
to the Effective Time shall be made thereafter on such books.
ARTICLE VI
CONDITIONS OF THE MERGER
Consummation of the Merger is subject to the satisfaction of the following
conditions:
(a) The Merger shall have received the approval of the holders of each
class of common stock outstanding and entitled to vote thereupon of each of the
Constituent Corporations as required by Section 96 of Chapter 164 of the
Massachusetts General Laws.
(b) The issuance of Mergeco Common Stock and the Merger shall have been
approved by the Massachusetts Department of Public Utilities as required by
Chapter 164 of the Massachusetts General Laws and all other governmental
agencies whose approval is necessary, appropriate or desirable.
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(c) The Holdco Common Shares to be issued and to be reserved for issuance
pursuant to the Merger shall have been approved for listing, upon official
notice of issuance, by the New York Stock Exchange and the Boston Stock
Exchange.
(d) Ropes & Gray shall have delivered an opinion, satisfactory to the
Board of Directors of Boston Edison, with respect to the tax consequences of the
Merger.
ARTICLE VII
AMENDMENT AND TERMINATION
The parties hereto by mutual consent of their respective Boards of
Directors may amend, modify or supplement this Agreement in such manner as may
be agreed upon by them in writing, at any time before or after approval of this
Agreement by the stockholders of Boston Edison; PROVIDED, HOWEVER, that no such
amendment, modification or supplement shall, in the sole judgment of the Board
of Directors of Boston Edison, materially and adversely affect the rights of the
stockholders of Boston Edison.
This Agreement may be terminated and the Merger and other transactions
herein provided for abandoned at any time, whether before or after approval of
this Agreement by the stockholders of Boston Edison, by action of the Board of
Directors of Boston Edison if said Board of Directors determines for any reason
that the consummation of the transactions provided for herein would for any
reason be inadvisable or not in the best interests of Boston Edison or its
stockholders.
ARTICLE VIII
EFFECTIVE TIME OF THE MERGER
Subject to the prior satisfaction of the conditions of the Merger set forth
in Article VI hereof and the authority to terminate this Agreement as set forth
in Article VII hereof, the Constituent Corporations and Holdco shall do all such
acts and things as shall be necessary or desirable in order to make the
Effective Time occur as soon thereafter as practicable.
ARTICLE IX
ASSUMPTION OF BOSTON EDISON'S STOCK PLANS
Holdco shall take all required action to assume Boston Edison's obligations
under the following plans: (i) the Dividend Reinvestment and Common Stock
Purchase Plan, (ii) the Director Stock Plan, (iii) the Performance Share Plan,
(iv) the Negotiated Savings Plan for Production and Maintenance Employees, (v)
the Negotiated Savings Plan for Office, Technical & Professional Employees and
(vi) the Boston Edison Savings Plan.
ARTICLE X
MISCELLANEOUS
This Agreement may be executed in counterparts, each of which when so
executed shall be deemed to be an original, and such counterparts shall together
constitute but one and the same instrument.
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<PAGE>
IN WITNESS WHEREOF, Boston Edison, Mergeco and Holdco, pursuant to approval
and authorization duly given by resolutions adopted by their respective Boards
of Directors, have each caused this Agreement and Plan of Merger to be executed
as of the date first written above by its President or one of its Vice
Presidents and Treasurer or Assistant Treasurer and its corporate or common seal
to be affixed hereto and attested by its Clerk.
ATTEST: BOSTON EDISON COMPANY
/s/ Theodora S. Convisser By: /s/ Thomas J. May
- --------------------------------- ------------------------------
Theodora S. Convisser Name: Thomas J. May
Clerk Title: Chairman, President and
Chief Executive Officer
[BOSTON EDISON COMPANY SEAL] By: /s/ James J. Judge
------------------------------
Name: James J. Judge
Title: Senior Vice President
and Treasurer
ATTEST: BOSTON EDISON MERGECO ELECTRIC
COMPANY, INC.
/s/ Theodora S. Convisser By: /s/ Thomas J. May
- --------------------------------- ------------------------------
Theodora S. Convisser Name: Thomas J. May
Clerk Title: Chairman, President and
Chief Executive Officer
[BOSTON EDISON MERGECO ELECTRIC
COMPANY, INC. SEAL] By: /s/ James J. Judge
------------------------------
Name: James J. Judge
Title: Senior Vice President
and Treasurer
ATTEST: BOSTON EDISON HOLDINGS
/s/ Theodora S. Convisser By: /s/ Thomas J. May
- --------------------------------- ------------------------------
Theodora S. Convisser Name: Thomas J. May
Clerk Title: Chairman, President and
Chief Executive Officer
[BOSTON EDISON HOLDINGS SEAL] By: /s/ James J. Judge
------------------------------
Name: James J. Judge
Title: Senior Vice President
and Treasurer
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<PAGE>
ANNEX I
to
Agreement and Plan of Merger
ARTICLES OF MERGER
of
BOSTON EDISON COMPANY
(A Massachusetts Utility Corporation)
and
BOSTON EDISON MERGECO ELECTRIC COMPANY, INC.
(A Massachusetts Utility Corporation)
and
BOSTON EDISON HOLDINGS
(A Massachusetts Business Trust)
Pursuant to the provisions of Section 102A of Chapter 164 of the
Massachusetts General Laws, the undersigned corporations adopt the following
Articles of Merger for the purpose of merging Boston Edison Mergeco Electric
Company, Inc. with and into Boston Edison Company, which shall be the
Surviving Corporation:
1. Attached hereto and incorporated herein by reference is the Agreement
and Plan of Merger dated as of March 10, 1997, of the undersigned corporations.
The Surviving Corporation will furnish a copy of said agreement to any of its
stockholders, or to any person who was a stockholder of a Constituent
Corporation, upon written request and without charge. The Effective Time as
defined therein is 5:00 P.M., Boston time on ____________, 1997.
2. The undersigned president or vice president and clerk or assistant
clerk of each undersigned corporation hereby state under the penalties of
perjury that the attached Agreement and Plan of Merger has been duly executed on
behalf of such corporation and has been approved by the stockholders of such
corporation and by the Department of Public Utilities of The Commonwealth of
Massachusetts in the manner required by Section 96 of Chapter 164 of the
Massachusetts General Laws.
3. The post office address of the initial principal office of the
Surviving Corporation is 800 Boylston Street, Boston, Massachusetts 02199.
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<PAGE>
4. The name, residence and post office address of each of the initial
directors and the chairman, president, treasurer and clerk of the Surviving
Corporation are as follows:
<TABLE>
<CAPTION>
NAME TITLE RESIDENCE POST OFFICE ADDRESS
<S> <C> <C> <C>
Thomas J. May Chairman of 107 Margery Lane c/o 800 Boylston Street
the Board Westwood, MA 02090 Boston, MA 02199
Chief Executive
Officer and
President
William F. Connell Director 111 Ocean Avenue c/o 800 Boylston Street
Swampscott, MA 01907 Boston, MA 02199
Gary L. Countryman Director 111 Hager Street c/o 800 Boylston Street
Marlboro, MA 01752 Boston, MA 02199
Thomas G. Dignan, Jr. Director 8 Saddle Ridge Road c/o 800 Boylston Street
Sudbury, MA 01776 Boston, MA 02199
Charles K. Gifford Director Blueberry Bill c/o 800 Boylston Street
Manchester, MA 01994 Boston, MA 02199
Nelson S. Gifford Director 14 Windsor Road c/o 800 Boylston Street
Wellesley, MA 02181 Boston, MA 02199
Matina S. Horner Director 100 U.N. Plaza c/o 800 Boylston Street
327 East 48th Street Boston, MA 02199
New York, NY 10017
Sherry H. Penney Director 90 Albee Road 90 Albee Road
Braintree, MA 02184 Braintree, MA 02184
Herbert Roth, Jr. Director 134 Lake Street c/o 800 Boylston Street
Sherborn, MA 01770 Boston, MA 02199
Stephen J. Sweeney Director 7 Greenbrook Road c/o 800 Boylston Street
S. Hamilton, MA 01982 Boston, MA 02199
James J. Judge Senior Vice 30 Cushing Hill Road c/o 800 Boylston Street
President Hanover, MA 02339 Boston, MA 02199
and Treasurer
Theodora S. Convisser Clerk 613 Pleasant Street c/o 800 Boylston Street
Belmont, MA 02178 Boston, MA 02199
</TABLE>
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5. The fiscal year of the Surviving Corporation initially adopted shall
end on the last day of the month of December in each year.
6. The date and time initially fixed in the Bylaws for the annual meeting
of the stockholders of the Surviving Corporation is 11:00 a.m. on the last
Tuesday in April of each year.
[Remainder of this page intentionally left blank.]
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<PAGE>
IN WITNESS WHEREOF, Boston Edison, Mergeco and Holdco, pursuant to approval
and authorization duly given by resolutions adopted by their respective Boards
of Directors, have each caused these Articles of Merger to be executed by its
president or one of its vice presidents and its clerk or one of its assistant
clerks.
Dated: ________________
BOSTON EDISON COMPANY
By: ______________________________
Name:
Title:
By: _________________________________
Name: Theodora S. Convisser
Title: Clerk
BOSTON EDISON MERGECO ELECTRIC COMPANY, INC.
By: ______________________________
Name:
Title:
By: _________________________________
Name: Theodora S. Convisser
Title: Clerk
BOSTON EDISON HOLDINGS
By: ______________________________
Name:
Title:
By: _________________________________
Name: Theodora S. Convisser
Title: Clerk
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<PAGE>
APPENDIX B
AMENDED AND RESTATED
DECLARATION OF TRUST
OF
BOSTON EDISON HOLDINGS
(FORMERLY BEC GROUP)
(FORMERLY BOSTON EDISON HOLDCO)
Dated March 14, 1997
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TABLE OF CONTENTS
1. NAME; PURPOSE...........................................................
2. DEFINITIONS.............................................................
3. LIMITATIONS ON LIABILITY................................................
4. NONASSESSABILITY OF SHAREHOLDERS........................................
5. RELIANCE OF THIRD PERSONS...............................................
6. PLACE OF BUSINESS.......................................................
7. TRUST ESTATE; CONVERSION INTO PERSONAL ESTATE...........................
8. POWERS OF TRUSTEES......................................................
9. NUMBER AND ELECTION.....................................................
10. RESIGNATION; VACANCIES; REMOVALS........................................
11. VESTING IN NEW TRUSTEES.................................................
12. COMPENSATION............................................................
13. UNISSUED SHARES.........................................................
14. DETERMINATION OF CAPITAL AND INCOME.....................................
15. DIVIDENDS...............................................................
16. FISCAL YEAR; ACCOUNTS...................................................
17. ACTION BY BOARD; QUORUM.................................................
18. BY-LAWS.................................................................
19. CERTIFICATE EVIDENCING VOTES...........................................
20. TRUSTEES AND OFFICERS..................................................
21. LIABILITY..............................................................
22. BOOKS AND REPORTS......................................................
23. ADVANCE OF EXPENSES....................................................
24. RIGHTS NOT EXCLUSIVE; DEFINITIONS......................................
25. SHAREHOLDERS...........................................................
26. SHAREHOLDERS, TRUSTEES, OFFICERS AND AGENTS............................
27. AUTHORIZATION OR RATIFICATION BY SHAREHOLDERS..........................
28. NUMBER; NONASSESSABLE..................................................
29. SHARES PERSONAL PROPERTY; TRUST ONLY...................................
30. RIGHTS OF SHAREHOLDERS; LIMITATION ON RIGHTS OF ACTION.................
31. ADDITIONAL SHARES......................................................
32. PREFERRED SHARES.......................................................
33. ALL OTHER CHANGES IN SHARES............................................
34. CONSIDERATION FOR ISSUE................................................
35. NO PREEMPTIVE OR PREFERENTIAL RIGHTS OF SUBSCRIPTION...................
36. TREASURY SHARES........................................................
37. TRANSFER BOOKS.........................................................
38. TRANSFER AGENT.........................................................
39. SHARE CERTIFICATES.....................................................
40. LOST, STOLEN OR DESTROYED SHARE CERTIFICATES...........................
41. TRANSFER OF SHARES.....................................................
42. TRANSFERS BY OPERATION OF LAW..........................................
43. JOINT OWNERS...........................................................
44. NO DUTY TO EXAMINE INTO TRUSTS, PLEDGES, ETC., TO WHICH SHARES ARE
SUBJECT...............................................................
45. ANNUAL MEETING.........................................................
46. SPECIAL MEETINGS.......................................................
47. PRESIDING OFFICER......................................................
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48. BUSINESS TO BE TRANSACTED..............................................
49. NOTICES................................................................
50. VOTING; QUORUM.........................................................
51. ADJOURNMENT OF MEETING.................................................
52. REQUISITE VOTE TO ACT..................................................
53. RECORD DATE FOR VOTING, DIVIDENDS AND OFFERINGS........................
54. DURATION OF TRUST......................................................
55. DEATH OF SHAREHOLDER OR TRUSTEE NOT TO TERMINATE TRUST.................
56. TERMINATION; COMBINATION; AFFILIATION..................................
57. CERTAIN TRANSACTIONS...................................................
58. AMENDMENTS.............................................................
59. CERTIFICATE OF TERMINATION OR AMENDMENT................................
60. DISPOSITION OF TRUST ESTATE ON TERMINATION.............................
61. FILING.................................................................
62. PROTECTION OF COMPANY, STOCK OF WHICH HELD BY TRUST....................
63. AUTHORITY OF THE TRUSTEES TO CONSTRUE TERMS HEREOF.....................
64. EFFECT OF CAPTIONS AND TABLE OF CONTENTS...............................
65. COUNTERPARTS...........................................................
66. GOVERNING LAW..........................................................
67. PROVISIONS IN CONFLICT WITH LAW OR REGULATIONS.........................
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<PAGE>
AMENDED AND RESTATED
DECLARATION OF TRUST
OF
BOSTON EDISON HOLDINGS
(FORMERLY BEC GROUP)
(FORMERLY BOSTON EDISON HOLDCO)
This AMENDED AND RESTATED DECLARATION OF TRUST made at Boston in the
County of Suffolk, The Commonwealth of Massachusetts, this 14th day of March,
1997 by Thomas J. May of 107 Margery Lane, Westwood, MA 02090, James J. Judge
of 30 Cushing Hill Road, Hanover, MA 02339 and Theodora S. Convisser of 613
Pleasant Street, Belmont, MA 02178, hereby amends and restates in its
entirety the Amended and Restated Declaration of Trust dated the 11th day of
March, 1997, as heretofore amended.
WHEREAS it is desired to create under and in accordance with the
provisions of this instrument a voluntary business association with
transferable shares for the acquisition of property and the conduct of
business as hereinafter set forth;
NOW, THEREFORE, this DECLARATION OF TRUST WITNESSETH that said Thomas J.
May, James J. Judge and Theodora S. Convisser, for themselves, their heirs,
executors, administrators, successors and assigns, do hereby declare that
they and their successors from time to time, as Trustees hereunder, will
hold, manage and dispose of the trust estate, as hereinafter defined in trust
in the manner and with and subject to the powers and provisions hereinafter
contained concerning the same, for the benefit of the Shareholders (as
hereinafter defined) according to the number and kind of shares held by them
respectively.
NAME; PURPOSE
1. NAME; PURPOSE. The Trustees as trustees hereunder, though not in
their individual capacities, shall be designated Boston Edison Holdings and
are hereinafter referred to as the "Company." So far as may be practicable,
all things relating to the trust hereby created shall be done under such
name. The purpose of the Company shall be to engage, either directly or
through direct or indirect subsidiaries, joint ventures, partnerships,
limited liability companies or other combinations or associations, in any
manufacturing, mercantile, selling, management, service or other business,
operation or activity related to energy generation, transmission or
distribution, utilization, conservation or transportation, construction,
telecommunications, or any other manufacturing, mercantile, selling,
management, service or other business, operation or activity, whether or not
related to the forgoing enumerated areas, that a corporation organized under
the Business Corporation Law of The Commonwealth of Massachusetts could carry
on.
DEFINITIONS
2. DEFINITIONS. Except where the context otherwise requires, the
following terms when used herein shall mean/the following:
(a) "Trustee" or "Trustees" means the person which is the trustee
hereunder for the time being, if there is only one, or if more than one,
the persons who are the trustees hereunder for the time being, whether, in
each case, original, additional or successor;
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<PAGE>
(b) "Trust estate" means the property at any time received by the Trustees
or otherwise acquired and held on behalf of the Company as hereinafter
provided;
(c) "Shareholder" or "Shareholders" mean the person or persons, natural or
corporate, at the time registered as the holder or holders of the shares of
the Company and, except to the extent limited by any subscription or by any
subscription certificate or part-paid shares accepted or issued, include
the person or persons, natural or corporate, at the time registered as the
holder or holders of such subscription certificates and part-paid shares;
and
(d) "Share" or "shares" mean the transferable share or shares of
beneficial interest provided for in Article 29 and include any
subscription certificate or part-paid share issued except to the
extent limited in such subscription certificate or part-paid share.
RIGHTS OF THIRD PERSONS
3. LIMITATIONS ON LIABILITY. The Trust estate shall be directly liable for
the payment and satisfaction of all obligations and liabilities incurred in the
carrying on of the business of the Company. No Trustee shall be held to any
liability whatever for the payment of any sum of money, or for damages or
otherwise under any contract, obligation or undertaking made, entered into or
issued by the Company or by any Trustee, officer, agent or representative
thereof, or in tort or otherwise, and no such contract, obligation or
undertaking shall be enforceable against the Trustees, the Shareholders, or the
officers, agents or other representatives of the Company or any of them in
their, his or her individual capacities or capacity and all such contracts,
obligations and undertakings shall be enforceable only against the Company; and
every person, firm, association, trust and corporation shall look only to the
Trust estate for the payment or satisfaction of any liability, damages, claim or
demand. In every agreement and obligation entered into and in every writing by
or on behalf of the Company, reference shall be made to this declaration of
trust, and the substance of such parts of the preceding sentence of this Article
3 as are applicable shall be set forth; and neither the Trustees nor any
officer, agent or representative of the Company shall have any power or
authority to enter into any agreement or obligation on behalf of the Company
except in accordance with the provisions of this Article 3. Failure to comply
with the provisions of this Article shall, however, in no event render any
Trustee, Shareholder, officer, or agent personally liable to the Company or its
Shareholders.
4. NONASSESSABILITY OF SHAREHOLDERS. No Trustee, officer, agent or
representative of the Company shall be entitled to look to the Shareholders
personally for indemnity against any liability incurred by them in the execution
of this trust or to call upon the Shareholders for the payment of any sum of
money or any assessment whatever, except when and to the extent that shares in
the Company are by their express terms issued part-paid and assessable.
5. RELIANCE OF THIRD PERSONS. The receipts of the Company for moneys or
things paid or delivered to it shall be effective discharges to the person,
firm, association, trust or corporation paying or delivering the same and from
all liability to see to the application thereof. No purchaser or person, firm,
association, trust or corporation dealing with the Company or with the Trustees,
officers, agents or representatives of the Company shall be bound to ascertain
or inquire whether any consent, resolution or other authorization of the
Trustees or Shareholders, as is herein required or provided for, has been
obtained or passed or as to the existence or occurrence of any event or purpose
in or for which a sale, lease, mortgage, pledge or charge is herein authorized
or directed, or otherwise as to the purpose or regularity of any of the acts of
the Trustees or the officers, agents or representatives of the Company
purporting to be done in pursuance of the trust or powers herein contained, or
as to the regularity of the removal, resignation or appointment of any Trustee
or any officer, agent or representative; and a transfer of the Trust estate, or
any part thereof, executed by the Trustees in whom the same shall be vested
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at the time of any such removal, resignation or appointment (including any
retiring Trustee who shall be willing to act and shall act in executing such
transfer but not otherwise including any such retiring Trustee) for the
purpose of vesting the same in a successor Trustee or providing evidence of
such vesting independently of such removal, resignation or appointment,
shall, as to the property comprised in such transfer, be conclusive evidence
in favor of any such purchaser or other person, firm, association, trust or
corporation dealing with the Company of the validity of such transfer and of
the matters therein recited relating to such removal, resignation or
appointment or the occasion thereof or the occasion of such transfer.
PLACE OF BUSINESS; TRUST ESTATE
6. PLACE OF BUSINESS. The principal place of business of the Company shall
be 800 Boylston Street, Boston, MA 02199, or at such other place in
Massachusetts as the Trustees shall from time to time determine.
7. TRUST ESTATE; CONVERSION INTO PERSONAL ESTATE. All property at any
time and from time to time subject to this trust shall, subject to the
provisions of Articles 8(c) and 8(g), be transferred to and vested in such of
the Trustees as are residents of Massachusetts. Notwithstanding any other
provisions hereof, all real estate at any time forming part of the Trust
estate shall be held upon trust for sale and conversion into personal estate
at such time or times and in such manner and upon such terms as the Trustee
shall approve, but the Trustees shall have power, until the termination of
this trust, to postpone such conversion so long as they in their uncontrolled
discretion shall think fit, and for the purpose of determining the nature of
the interest of the Shareholders therein, all such real estate shall at all
times be considered as personal estate; and the real estate and personal
property comprised in the Trust estate shall constitute a single fund. For
the purpose of such sale and conversion of real estate the Trustees shall
have full power to sell or exchange the same and to execute and deliver
proper deeds and instruments of conveyance thereof.
THE TRUSTEES
8. POWERS OF TRUSTEES. Subject to the provisions and conditions
contained herein, the Trustees shall have power from time to time, in
addition to the specific powers and authorities herein expressly granted, to
take any action which they deem to be necessary or convenient to carry out
the business of the Company, including without limitation of the generality
of the foregoing, the powers hereinafter specified:
(a) HOLD INVESTMENTS. To purchase, subscribe for or otherwise acquire
stocks, shares, bonds or other securities, property or obligations of any
corporation, wherever incorporated, or of any trust, association or other
entity, or of any nation, state, municipality or other governmental or
public agency, division or body or certificates or other evidences of
interest in any real or personal property, and to be a member of any
company, syndicate or joint undertaking, or the beneficiary of any trust,
and all whether or not any such company be domestic or foreign, and whether
or not the purposes of or character of business carried on or assets held
by any such company, syndicate or joint undertaking, or comprised of any
such real or personal property, be similar to the purposes of or business
carried on or assets held by the Company, and whether or not any such
securities, membership or beneficial interest might be considered
speculative, hazardous, nonproductive or wasting or would ordinarily be
considered a proper or prudent investment or activity for a trustee and,
whether or not any contingent or other liability may arise or exist in
respect thereof and irrespective of the proportion of the Trust estate
invested in one or more of said securities, properties or companies, and to
exercise all the rights and privileges of an owner thereof and, without
limiting the generality of the foregoing, to acquire, by exchange, purchase
or otherwise, the shares and dividend and profit rights in, and the bonds
and other securities and obligations of, the Company;
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(b) ASSUME OBLIGATIONS. To assume any obligations or liabilities of any
corporation, wherever incorporated, or of any trust, association or other
entity, and to discharge or liquidate such obligations or liabilities;
(c) BORROW. To borrow money for the purposes of the Company, and to issue,
whether for borrowed money or for other consideration, bonds or other
securities or obligations therefor if desired, which may mature at any time
or times, and may be convertible or after the issuance thereof may be made
convertible, with or without additional consideration for such conversion
right, into other securities of the Company or into other securities, all
for such periods and upon such terms as the Trustees may determine, and to
secure the payment thereof if desired by mortgage, pledge, assignment,
transfer or conveyance of or charge on the whole or any part of the Trust
estate then owned or thereafter acquired, which bonds or other securities
or obligations may be signed on behalf of the Company by the chairman, the
president or a vice president and by the treasurer or an assistant
treasurer, or by facsimiles of such signatures if the bonds or other
securities or obligations are authenticated or certified by a trustee or by
a registrar other than a trustee, officer or employee of the Company, and
may have affixed thereto the common seal of the Company or a facsimile
thereof and may carry interest coupons authenticated by the facsimile
signature of the treasurer; provided that no mortgage, pledge, assignment,
transfer or conveyance of or charge on the Trust estate as a whole or
substantially as a whole shall be made without authorization or approval by
vote, at a meeting duly called and held, of the holders of a majority of
the shares outstanding and entitled to vote thereon; and provided further
that even though any officer who has signed or whose facsimile signature
has been placed on any bond or other security or obligation shall have
ceased to be such officer before such bond, security or obligation is
issued, such bond, security or obligation may nonetheless be issued by the
Company;
(d) LEND AND AID. To advance or lend money to, and otherwise aid by
endorsement, guarantee or otherwise, and with or without security, and to
make capital contributions to, any corporation, trust, association or other
entity, any of the stocks, shares, bonds or other securities or obligations
of which shall have been acquired or subscribed for by or on behalf of the
Company or in which the Company has any business interest (including,
without limitation of the generality of the foregoing, the power to
guarantee the performance of any undertaking or obligation or the payment
of dividends on stock), and to discharge and cancel without payment any
indebtedness thus arising or to convert the same into stocks, shares,
bonds, or other obligations of such corporation, trust association or other
entity, or any other with or into which it may be consolidated or merged,
or to which its property may be transferred or leased, and in like manner
to advance or lend money to and otherwise aid any person or company
(whether or not a Shareholder), whenever the Trustees shall deem such
action to be necessary or convenient in the business or conducive to the
advantage of the Company;
(e) EXERCISE POWERS OF HOLDER OF INVESTMENTS. To exercise any and all
powers and rights belonging to the holder of any stocks, shares, bonds,
securities, property or obligations forming part of the Trust estate,
whether by voting or by giving any consent, request or notice, or
otherwise, either in person or by proxy or attorney, and to give proxies or
powers of attorney therefor, with or without power of substitution, which
proxies and powers of attorney may be for meetings or action generally or
for any particular meeting, meetings or action, and may include the
exercise of any discretionary powers; and, without limiting the generality
of the foregoing, to vote in favor of or to consent to the creation of any
mortgage, lien or other encumbrance upon all or part of the franchises and
property, real and personal, then owned or thereafter acquired, of any or
all of the corporations, trusts, associations and other entities, any of
the stocks, shares, bonds, securities or obligations of which may at the
time be subject to this trust, or to vote in favor of or to consent to the
merger or consolidation of any such corporation, trust association or other
entity with any other corporation, trust association or other entity, or
the sale,
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lease, surrender or abandonment of all or part of the franchises and
property, real and personal, of any such corporation, trust association or
other entity;
(f) SELL. To sell at public auction or by private contract or otherwise
use and deal in and with the whole or any part of the Trust estate, free
and discharged of this trust, and to convert, exchange or refund the whole
or any part of the Trust estate for or into any shares, bonds or other
securities or obligations, property or effects in which the Company might,
under the provisions hereof, invest any moneys; provided, however, that
except as provided in Article 8(o), Article 57 or Article 60, no sale or
other disposition of the Trust estate as a whole or substantially as a
whole shall be made without authorization or approval by vote, at a meeting
duly called and held, of the holders of two-thirds of the shares
outstanding and entitled to vote thereon, but this proviso shall not apply
to any disposition pursuant to any mortgage, pledge, or charge;
(g) TRANSFER SECURITIES INTO NAMES OF OTHERS. To cause any real or personal
property, including without limitation of the generality of the foregoing,
securities forming all or part of the Trust estate, to be transferred into
the name of the Company or transferred into the name of or vested in the
Trustees, or to cause or allow any real or personal property to remain in
the name of, or to be transferred into the name of, any other person, firm,
association, or other entity, trust, corporation or other entity and in any
such case in such manner as not to give notice that the same are affected
by any trust;
(h) DELEGATE POWERS. To employ and act through and to delegate any or all
of the powers and discretions of the Company to, and to permit any or all
of such powers and discretions to be exercised by, any of the officers,
agents or representatives of the Company or of the Trustees, including
without limitation the officers, employees, agents and representatives
referred to in the last paragraph of this Article 8;
(i) COLLECT FUNDS. To collect, sue for, receive and receipt for all sums
of money coming due to the Company, to consent to the extension of the time
for payment, or to the renewal, of any bonds or other securities, property
or obligations subject to this trust, and to prosecute, defend, compound,
compromise, abandon or adjust, by arbitration or otherwise, any actions,
suits, proceedings, disputes, claims, demands and things relating to the
Trust estate, and to extend time, with or without security, for the payment
or delivery of any debts or property and to execute and enter into
releases, agreements and other instruments and to pay or satisfy any debts
or claims upon any evidence that the Trustees shall think sufficient;
(j) DEPOSIT FUNDS. To deposit any moneys included in the Trust estate in
any bank or trust company including any bank or trust company that may at
the time be the Trustee, and to entrust to any such bank or trust company
for safekeeping any of the stock or share certificates, bonds or other
securities, property or obligations and any documents and papers comprised
in or relating to the Trust estate;
(k) PAY TAXES. To pay any and all taxes or liens of whatever nature or kind
imposed upon or against the Company or the Trustee in connection with the
Trust estate, or upon or against the Trust estate or any part thereof;
(l) ESTABLISH SURPLUS FUNDS. To set apart, from time to time, as surplus
funds, such sums as the Trustees may deem proper out of any sources which
according to generally accepted accounting principles may be considered
surplus, which surplus funds shall be applicable to any purposes to which
money forming part of the capital or income of the Trust estate may be
applied, including the payment of dividends;
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(m) ADOPT SEAL. To adopt and use a common seal;
(n) PURCHASE INSURANCE. To take out and maintain insurance or establish
self-insurance programs in such amounts and of such kinds and in such
companies and through such brokers and agents as may be necessary,
convenient or desirable, including insurance policies insuring the
Trustees, officers, employees and agents of the Company against claims and
liabilities of every nature arising by reason of holding, being or having
held any such office or position, or by reason of any action alleged to
have been taken or omitted by any such person as a Trustee, officer,
employee or agent, including any action taken or omitted that may be
determined to constitute negligence, whether or not the Company would have
the power to indemnify such person against such liability;
(o) TRANSFER TO NEW TRUST OR CORPORATION. When authorized by a majority
vote of Shareholders at a meeting, to sell and convey as an entirety and
going concern all the property and assets of the Company to a corporation or
a new association or trust organized for the purpose of acquiring the same
and organized with the same authorized classes of shares as the Company
shall then have with the same or substantially the same preferences, voting
powers, restrictions and qualifications thereof as attach to the shares of
the Company, the consideration for such sale and conveyance to be the
assumption by such new corporation, association or trust of all liabilities
and obligations of the Company then outstanding and the issuance and
delivery by such new corporation or association or trust to the Company, or
upon its order, for distribution as hereinafter provided for, of such
shares as will enable the Company to exchange its shares, share for share
and class for class, for the shares of such new corporation or association
or trust and thereupon such exchange shall be made, and this trust shall be
terminated, and each Shareholder of the Company by becoming a Shareholder
shall agree to receive and accept in such case the shares of such new
corporation or association or trust in exchange on the basis aforesaid as a
full and final distributive share of the proceeds in liquidation of such
sale and conveyance, and further agrees that in such case his shares in the
Company shall thereafter have no rights and privileges whatsoever except
the right and privilege of being exchanged for shares of such new
corporation or association or trust on the basis aforesaid;
(p) INVEST CAPITAL. To invest and re-invest the capital or other funds of
this trust in real or personal property of any kind, or in any interest
therein;
(q) ESTABLISH PENSION AND OTHER COMPENSATION PLANS. To establish and
carry out pension, profit-sharing, share bonus, share purchase, share
option, savings, thrift and other retirement, incentive, health, welfare
and benefit plans, trusts and provisions for any or all of the Trustees,
officers, employees, agents and consultants of the Company or of any of
its subsidiaries;
(r) To enter into or become partners or members in joint ventures, general
or limited partnerships, limited liability companies and any other
combinations or associations;
(s) To purchase, acquire, hold, utilize, lease, carry on, sell, exchange
and dispose of any other business or property, rights, or privileges which
may be deemed to be suitable, convenient or profitable for or in connection
with any of the purposes of the Company;
(t) To grant rights or options good for any period of time, including an
unlimited period of time (but not exceeding the duration of the Company) to
purchase from the Company any securities of the Company which have been
authorized but remain unissued or are held in the treasury, at such prices
and on such terms and conditions as may be fixed from time to time by the
Trustees; and to create and issue warrants or other instruments
representing such rights or options in such form as the trustees may
determine;
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(u) PERFORM OTHER NECESSARY THINGS. To do each and every thing necessary,
suitable, desirable, convenient or proper for the accomplishment of any of
the purposes or the attainment of any one or more of the objects
hereinbefore enumerated or incidental to the powers herein named and,
without limiting the generality of the foregoing, to deal with the Trust
estate and manage and conduct the business of the trust hereunder as fully
as if the Company were the absolute owner of the Trust estate and in so
doing to execute all contracts, agreements, deeds, covenants and
instruments, and do all such things as the Trustees may deem proper for the
purposes of the Company, whether or not involving action of a kind or
extent legal or customary for a trustee or for the management of trust
funds.
The powers and authority, whether discretionary or otherwise, conferred
upon the Trustees by this Article 8 and elsewhere in this declaration of
trust may be delegated to committees, officers, employees, agents and
representatives of the Company, and shall not be deemed to be mandatory but
shall, together with any and all implied powers and discretions, be exercised
by the Trustees from time to time to the extent deemed to be advantageous to
the Company, and may be exercised either alone or in association with others
and to the same extent and as fully as individuals might or could do as
principals, agents, contractors or otherwise and either alone or in
conjunction with or in partnership with others, and both within and without
The Commonwealth of Massachusetts. The acts of any committee, officers and
agents, within the scope of their respective authorities, shall be as agents
and delegates of the Trustees, and shall be deemed to be the acts of the
Trustees and not of the Shareholders. When authorized by the Trustees,
mortgages, conveyances and other instruments of transfer of real or other
property may be executed by any officer of the Company on behalf of the
Trustees or such of them as are residents of Massachusetts.
THE TRUSTEES
9. NUMBER AND ELECTION. The persons signing this Declaration of Trust
shall be the original Trustees. At such time as the outstanding shares of
the Company are not wholly owned by Boston Edison Company (the "Transition
Date"), the following provisions shall apply. The number of Trustees shall
be determined from time to time by the Trustees, but shall not be less than
three nor more than sixteen, divided into classes and elected for terms as
set forth below, shall be elected at the annual meeting of the Shareholders
by such Shareholders as have the right to vote at such election. The number
of Trustees may be increased at any time or from time to time to any number
not more than sixteen either by the Shareholders or by the Trustees by vote
of a majority of the Trustees then in office. The number of Trustees may be
decreased to any number not less than three at any time or from time to time
either by the Shareholders or by the Trustees by a vote of a majority of the
Trustees then in office, but only to eliminate vacancies existing by reason
of the death, resignation or removal of one or more Trustees.
The Trustees shall be elected as follows. The Trustees shall be divided
as nearly equally as possible into three classes, with each class to consist
of approximately one-third of the number of Trustees. The first Trustees of
the Company shall consist of the directors of Boston Edison Company divided
into the same three classes. The term of office of the Trustees of the first
class shall continue until the first annual meeting of the Shareholders
following the Transition Date, the term of office of the Trustees of the
second class shall continue until the second annual meeting of the
Shareholders following the Transition Date, and the term of office of the
Trustees of the third class shall continue until the third annual meeting of
the Shareholders following the Transition Date, and, in each case, until
their respective successors are chosen and qualified (unless otherwise
required by law) or until the Trustee sooner dies, resigns or is removed.
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At each annual meeting beginning with the first annual meeting of the
Shareholders following the Transition Date, the Trustees elected to succeed
those whose terms expire shall be of one class and shall be elected for a
term which shall continue until the third succeeding annual meeting, and
until a successor shall be elected (unless otherwise required by law) or
until the Trustee sooner dies, resigns or is removed. Any Trustee elected to
fill a vacancy caused by death, resignation or removal shall be elected for a
term which shall coincide with the term of the class of the vacant
trusteeship. Any Trustee elected to fill an additional trusteeship resulting
from an increase in the number of Trustees shall be of the class whose term
continues and shall be elected to serve until the annual meeting of the
Shareholders closest to three years from the date of the increase, and until
a successor shall be elected and qualified (unless otherwise required by law)
or until the Trustee sooner dies, resigns or is removed. The number of
Trustees shall not be increased or decreased at a time when, or to the extent
that, it would result in the Trustees not being divided as nearly equally as
possible into three classes each consisting of approximately one-third of the
number of Trustees. The total number of Trustees need not be an exact
multiple of three. A Trustee may succeed himself or herself. Whenever the
holders of any one or more classes or series of shares of the Company other
than common shares shall have the right, voting separately by class or
series, to elect Trustees at an annual or special meeting of stockholders,
the election, term of office, filling of vacancies and other features of such
trusteeship shall be governed by the terms of such class or series of shares,
and such Trustees shall not be divided into classes pursuant to this Article
9 unless expressly provided by such terms. References in this Article 9 to
an annual meeting of Shareholders shall be deemed to include a special
meeting held in place of an annual meeting. This Article 9 may be amended
only by vote of the holders of 80% of the shares issued and outstanding and
entitled to vote generally in the election of Trustees; provided, however,
that such 80% vote shall not be required for any alteration, amendment or
repeal that has been recommended by 80% of the Trustees then in office.
10. RESIGNATION; VACANCIES; REMOVALS. A Trustee may resign by
presenting his or her resignation in writing at a meeting of the Trustees or
delivering the same at the principal office of the Company, addressed to the
chairman, president or clerk of the Company, and its acceptance by the
Trustees shall not be required unless so stated in the resignation. Any
vacancy in the number of Trustees not required to be filled by the
Shareholders may be filled by the Trustees by vote of a majority of the
remaining Trustees although less than a quorum. Any Trustees so chosen shall
continue in office for the remainder of the full term of the class of
Trustees in which the new trusteeship was created or the vacancy occurred and
until his or her successor, if there be one, is chosen and qualified. The
remaining Trustees may act notwithstanding any vacancy in their numbers.
Except as otherwise provided in this declaration of trust, a Trustee
(including persons elected by the Trustees to fill any vacancies) may be
removed from office: (i) for cause by the vote of the holders of a majority
of the shares issued and outstanding and entitled to vote generally in the
election of Trustees; (ii) without cause by the vote of 80% of the shares
issued and outstanding and entitled to vote generally in the election of
Trustees; or (iii) for cause by vote of a majority of the Trustees then in
office. A Trustee may be removed for cause only after reasonable notice and
opportunity to be heard before the body proposing to remove him or her.
Except where a right to receive compensation shall be expressly provided in a
duly authorized written agreement with the Company, no Trustee resigning or
removed shall have any right to any compensation as such Trustee for any
period following his or her resignation or removal, or any right to damages
on account of such removal, whether his or her compensation be by the month
or by the year or otherwise, unless the body acting on the removal, shall in
their or its discretion provide for compensation.
11. VESTING IN NEW TRUSTEES. Upon the resignation or removal of a
Trustee hereunder and upon the election or appointment of a new Trustee
hereunder, such instruments shall be executed, acknowledged and delivered as
the remaining Trustees or the new Trustees shall deem necessary or convenient
for confirming or providing evidence of the vesting of the Trust estate in
the Trustees for the time being who are residents of Massachusetts.
Notwithstanding the failure to execute any conveyance, the Trust estate shall
always (not
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restricting the same to the above enumerated cases) vest in the Trustees for
the time being hereunder and the Trust estate shall always vest in such
Trustees as are residents of Massachusetts.
12. COMPENSATION. Each Trustee shall receive such reasonable
compensation as the Trustees may determine, and shall not be limited by any
provision of law with regard to the compensation of trustees of an express
trust.
13. UNISSUED SHARES. In particular, and without limiting the generality
of the foregoing, the Trustees may, subject to any requirement of law, at any
time issue all or from time to time any part of the unissued shares of the
Company from time to time authorized and may determine, subject to any
requirements of law, the consideration for which such shares is to be issued
and the manner of allocating such consideration between capital and surplus.
Unless the Trustees otherwise specify, the excess of the consideration for
any share with par value issued by it over such par value shall be paid-in
surplus. The Trustees may allocate to capital stock less than all of the
consideration for any share without par value issued by it, in which case the
balance of such consideration shall be paid-in surplus. All surplus shall be
available for any corporate purpose, including the payment of dividends.
14. DETERMINATION OF CAPITAL AND INCOME. The Trustees shall have power
to determine what constitutes capital or income, what constitutes the income
of the Trust estate for any year or other period, in what manner any expenses
or disbursements are to be allocated between capital and income, and the
amount of the net earnings and of the earned surplus; and every such
determination, whether express or implied in the acts or proceedings of the
Trustees, shall be conclusive and binding upon all persons interested.
15. DIVIDENDS. The Trustees may from time to time in its discretion
declare dividends out of the net earnings of the Trust estate or out of the
earned surplus or capital surplus, payable out of the Trust estate, at any
date fixed by the Trustees, in cash or property, including without limitation
bonds or other obligations of and the shares in the Company, and for that
purpose may capitalize all or any part of the earned surplus; but no
Shareholder shall have any right to any dividends except when and as the same
are declared by the Trustees, and no Trustee or Shareholder, officer, agent
or representative of the Company shall be liable therefor, and any
Shareholder entitled thereto shall look only to the Trust estate for the
payment of any such dividends. The Company shall pay and distribute the said
dividends so declared to the Shareholders according to the number of shares
held by them respectively.
16. FISCAL YEAR; ACCOUNTS. The Trustees may determine the fiscal year
for the Company, and the form in which the accounts of the Company shall be
kept, and may from time to time change the fiscal year or form of accounts.
17. ACTION BY BOARD; QUORUM. The action of the Trustees in respect of
any matter shall be by vote passed by the Trustees at a meeting or by a
written vote without a meeting (with or without notice to the other Trustees)
signed by at least a majority of the Trustees. At any meeting of the
Trustees, six trustees shall constitute a quorum for the transaction of
business, except when the number of Trustees then in office shall be less
than twelve, in which case a majority of the Trustees then in office shall
constitute a quorum. Any meeting may be adjourned from time to time by a
majority of the votes cast on the question, and the meeting may be held as
adjourned without further notice. Except as herein otherwise provided, when a
quorum is present at any meeting a majority of the Trustees in attendance
thereat shall decide any questions before such meeting. Nothing in this
Article 17 shall be construed as limiting the delegation of any power to a
committee of the Trustees.
18. BY-LAWS. The Trustees may by vote of a majority of the Trustees
then in office, make and from time to time amend, add to or rescind by-laws
for the Company (the "By-laws"). The By-laws may, subject to the
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provisions of this declaration of trust: (a) fix the fiscal year; (b)
regulate the affairs of the Trustees, including provisions for the nomination
thereof; (c) provide for such committees as the Trustees shall deem
appropriate, including an executive committee which shall be vested with all
of the powers and authorities of the Trustees in the intervals between
meetings of the Trustees; (d) provide for the appointment of a chairman of
the Trustees, a president, one or more vice presidents, a treasurer, a clerk
and such other officers as the Trustees may deem appropriate, and the manner
of their appointment and removal, and their respective powers and duties; (e)
provide for the manner in which documents shall be executed, including share
certificates; (f) provide for the appointment of transfer agents or officers
and registrars, and (g) contain such further provisions relating to the above
matters or otherwise, incidental or in addition to but not inconsistent with
the provisions of this declaration of trust, as the Trustees shall deem
appropriate.
19. CERTIFICATE EVIDENCING VOTES. A certificate signed by the chairman,
the president, the treasurer, the clerk or any assistant or temporary clerk,
or one or more of the Trustees, shall be conclusive evidence, in favor of
every person, firm, association, trust and corporation acting in good faith
in reliance thereon, as to the contents of any vote of the Trustees, or any
committee thereof, or of the Shareholders, and as to all matters in such
certificate contained relating to the meeting, if any, at which any vote is
therein certified to have been passed, including the regularity of the said
meeting and the passage of any vote thereat, and as to all other matters and
things stated in such certificate, and no person, firm, association, trust or
corporation shall be obligated to make any inquiry as to any of the said
matters, or as to the election or appointment of any person acting as a
Trustee at such meeting, or as to the holding of any shares by any person,
firm, association, trust or corporation acting as a Shareholder at such
meeting, or be affected by actual or implied notice of any irregularity
whatsoever therein.
INDEMNIFICATION AND LIMITATION OF LIABILITY
20. TRUSTEES AND OFFICERS. To the extent legally permissible, each of
the Company's Trustees and officers, as defined in Article 24, shall be
indemnified by the Trust estate against any loss, liability or expense,
including amounts paid in satisfaction of judgments, in compromise or as
fines and penalties, and counsel fees, imposed upon or reasonably incurred by
such person in connection with the defense or disposition of any action, suit
or other proceeding, whether civil or criminal, in which such person may be
involved or with which such person may be threatened, while in office or
thereafter, by reason of such person's being or having been such a Trustee or
officer, except with respect to any matter as to which such person shall have
been adjudicated in such action, suit or proceeding not to have acted in good
faith in the reasonable belief that his or her action was in the best
interests of the Company; provided, however, that as to any matter disposed
of by a compromise payment by such Trustee or officer, pursuant to a consent
decree or otherwise, no indemnification either for said payment or for any
other expenses shall be provided unless such compromise shall be approved as
in the best interests of the Company, after notice that it involves such
indemnification, (i) by a disinterested majority of the Trustees then in
office, or (ii) by a majority of the Disinterested Trustees then in office,
provided that there has been obtained an opinion in writing of independent
legal counsel to the effect that such Trustee or officer appears to have
acted in good faith in the reasonable belief that his or her action was in
the best interests of the Company, or (iii) by the vote, at a meeting duly
called and held, of the holders of a majority of the shares outstanding and
entitled to vote thereon, exclusive of any shares owned by any interested
Trustee or officer.
21. LIABILITY. No Trustee, officer or agent of the Company shall be
liable except for acts or failures to act which at the time would impose
liability on him or her if this trust were a Massachusetts business
corporation and he or she were a director, officer or agent thereof
respectively. In determining what he or she reasonably believes to be in the
best interests of the Company, a Trustee may consider the interests of the
Company s employees, suppliers, creditors and customers, the economy of the
state, region and nation, community and societal considerations, and the
long-term and short-term interests of the Company, its subsidiaries and its
Shareholders, including the possibility that these interests may best be
served by the continued independence of the
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Company. Notwithstanding any provision of law or this Article 21 or any other
provision in this declaration of trust contained, a Trustee shall not be
liable to the Company or any Shareholder for monetary damages for breach of
fiduciary duty as a Trustee except with respect to any matter as to which
such liability is imposed by applicable law and he or she shall have been
adjudicated (i) to have breached his or her duty of loyalty to the Company or
its Shareholders, (ii) to have acted not in good faith, or omitted to act in
good faith, (iii) to have knowingly violated the law or intentionally engaged
in misconduct, or (iv) to have derived any improper personal benefit from a
transaction. No amendment to or repeal of this Article shall apply to or
have any effect on the liability or alleged liability of any Trustee for or
with respect to any acts or omissions of such Trustee occurring prior to such
amendment or repeal.
22. BOOKS AND REPORTS. In discharging his or her duties a Trustee or
officer of the Company, when acting in good faith, shall be fully protected
in relying upon the books of account of the Company or of another
organization in which he or she serves as contemplated by Article 24, reports
made to the Company or to such other organization by any of its officers or
employees or by counsel, accountants, appraisers or other experts or
consultants selected with reasonable care by the Trustees or similar
governing body of such other organization, or upon other records of the
Company or of such other organization.
23. ADVANCE OF EXPENSES. Expenses, including counsel fees, reasonably
incurred by any Trustee or officer with respect to the defense or disposition
of any action, suit or proceeding referred to in Article 20 may be advanced
by the Company prior to the final disposition of such action, suit or
proceeding, upon receipt of an undertaking by or on behalf of the recipient
to repay such amount unless it is ultimately determined that he or she is
entitled to indemnification.
24. RIGHTS NOT EXCLUSIVE; DEFINITIONS. The rights of indemnification
provided in Article 20 shall not be exclusive of or affect any other rights
to which any Trustee or officer may be entitled and such rights shall inure
to the benefit of his or her successors, heirs, executors, administrators and
other legal representatives. Such other rights shall include all powers,
immunities and rights of reimbursement which would be allowed under the laws
of The Commonwealth of Massachusetts were the Company a business corporation
organized under such laws. As used in Articles 20, 21, 22 and 23 and this
Article 24, the terms "Trustee" and "officer" include persons who serve at
the request of the Company as directors, officers, or trustees of another
organization in which the Company has any direct or indirect interest as a
shareholder, creditor or otherwise. An "interested" Trustee or officer is
one against whom in such capacity the proceeding in question or another
proceeding on the same or similar grounds is then pending. Nothing contained
in Articles 20, 21, 22 and 23 and this Article 24 shall affect any rights to
indemnification to which Company personnel other than Trustees and officers
may be entitled by contract or otherwise under law. No Trustee shall be
obligated to give any bond or other security for the performance of any of
his or her duties.
25. SHAREHOLDERS. In case any Shareholder shall at any time for any
reason be held to or be under any personal liability solely by reason of his
or her being or having been a Shareholder and not by reason of his or her
acts or omissions as a Shareholder, then such Shareholder (or his or her
heirs, executors, administrators, or other legal representatives) shall be
entitled out of the Trust estate to be held harmless from, and indemnified
against, all loss, liability or expense by reason of such liability.
INTERESTED TRUSTEE, SHAREHOLDERS, AND OFFICERS; RATIFICATION BY SHAREHOLDERS
26. SHAREHOLDERS, TRUSTEES, OFFICERS AND AGENTS. No agreement, dealing,
relationship or arrangement of any kind with the Company, or with any company
which may be controlled by the Company or in which the Company may have any
interest, in which any Shareholder, Trustee, officer, agent or other
representative of the Company shall have a personal interest shall be void or
voidable or otherwise affected by such interest nor shall
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such Shareholder, Trustee, officer, agent or other representative so
interested be liable to account in respect thereof, except such effect or
liability, if any, as would have resulted under the same circumstances had
the Company been a business corporation organized under the laws of The
Commonwealth of Massachusetts. No Trustee, officer, agent or other
representative of the Company shall be precluded, by his or her office, from
acquiring shares or stock in or bonds or other obligations of or from holding
any office or place of profit in the Company or any company in which the
Company shall be interested as stockholder or otherwise. No Shareholder, by
reason of his or her holding such shares, however great in amount, shall be
precluded from holding any office or place of profit hereunder or under any
company in which the Company or the Trustees shall be interested as
stockholder or otherwise.
27. AUTHORIZATION OR RATIFICATION BY SHAREHOLDERS. Regardless of
whether the foregoing provisions have or have not been complied with, any
agreement, dealing, relationship or arrangement entered into by or on behalf
of the Company or by the Trustees, officers, agents or other representatives
of the Company, or by or on behalf of any company in which the Company or the
Trustees shall be interested as stockholder, or otherwise, shall not be
voided by reason of the interest therein of any Shareholder, Trustee,
officer, agent or other representative nor shall any Shareholder, Trustee,
officer, agent or other representative being so interested be liable to
account to the Company or to the Trustees, officers or Shareholders, or
otherwise, for any profit or benefit realized through any such agreement,
dealing, relationship or arrangement by reason of such Shareholder, Trustee,
officer, agent or other representative holding that position or of the
fiduciary relation thereby established, if such agreement, dealing,
relationship or arrangement shall have been authorized or ratified by the
Shareholders or by the stockholders of any such company, as the case may be,
after notice of the fact of the interest therein (including a general
statement of the nature and extent of such interest) of such Shareholder,
Trustee, officer, agent or other representative, except that if such
agreement, dealing, relationship or arrangement was with a Shareholder or
Shareholders the authorization or ratification shall be by a majority vote of
disinterested Shareholders at a meeting.
SHARES OF BENEFICIAL INTEREST
28. NUMBER; NONASSESSABLE. The entire beneficial interest in the Trust
estate and in all business conducted by the Company and all profits earned by
it shall be, and during the continuance of this trust shall remain, in the
owners from time to time of transferable shares of beneficial interest. The
shares of beneficial interest shall consist of (i) 100,000,000 common shares
all of the same class and each with a par value of one dollar ($1.00), and
(ii) 10,000,000 preferred shares, each with a par value of one dollar ($1.00)
and may be issued from time to time by the Trustees without the necessity of
obtaining the consent of the Shareholders. Subject to the limitations
prescribed by law and the provisions of this declaration of trust, the
Trustees are authorized to issue the preferred shares from time to time in
one or more series, each of such series to have such voting powers, full or
limited, or no voting powers, participating, optional or other special
rights, and such qualifications, limitations or restrictions thereof, as
shall be determined by the Trustees in a resolution or resolutions providing
for the issue of such preferred shares. Subject to the powers, preferences
and rights of any preferred shares, including any series thereof, having any
preference or priority over, or rights superior to, the common shares and
except as otherwise provided by law, the holders of the common shares shall
have and possess all powers and voting and other rights pertaining to the
shares of this Company and each common share shall be entitled to one vote.
All shares issued and to be issued shall be fully paid and nonassessable
except to the extent otherwise specifically provided in the certificates
representing such shares. In any issue of common shares, fractional shares
may be issued if authorized by the Trustees; and in lieu thereof the Trustees
may issue transferable or nontransferable instruments representing or
relating to fractional interests (on such terms and in such form as the
Trustees shall determine) and may appoint an exchange agent or exchange
agents to assist Shareholders in buying or selling such fractional interests.
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29. SHARES PERSONAL PROPERTY; TRUST ONLY. Shares shall be personal
property entitling the holders only to the rights and interest in the Trust
estate set forth in these presents, and it is expressly declared and agreed
by and between the Shareholders, Trustees and officers of the Company that a
trust and not a partnership is deemed to be created by this instrument and
that irrespective of whether any different status may be held to exist as far
as others are concerned, nevertheless as between the said Shareholders,
Trustees and officers the Shareholders shall be deemed to hold only the
relationship of CESTUIS QUE TRUSTENT to the Trustees, with only such rights
as are conferred upon them as such CESTUIS QUE TRUSTENT hereunder.
30. RIGHTS OF SHAREHOLDERS; LIMITATION ON RIGHTS OF ACTION. No
Shareholder shall have or acquire at any time any interest in any specific
property, real or personal, at any time forming part of the Trust estate, or
any right to any division or partition thereof or any other rights with
reference thereto, except to have said property dealt with as herein
provided, to receive dividends therefrom, as herein provided, and to share in
the distribution of the cash proceeds thereof, or distributions in kind, or
both, upon the termination of the trust, as herein provided. No action may
be brought by a Shareholder on behalf of the Company unless a prior demand
regarding such matter has been made on the Trustees and the Shareholders of
the Company.
31. ADDITIONAL SHARES. Additional common shares may be authorized from
time to time by a majority vote of the Shareholders at a meeting. Such
additional common shares shall rank equally and be in all respects identical
with the common shares originally authorized and may be issued from time to
time by the Trustees without the necessity of obtaining the consent of the
Shareholders.
32. PREFERRED SHARES. Additional preferred shares may be authorized
from time to time by vote, at a meeting duly called and held, of the holders
of two-thirds of the shares outstanding and entitled to vote thereon, and
such additional shares may be issued in one or more classes and in one or
more series within a class and shall have such voting powers, full or
limited, or no voting powers, participating, optional or other special
rights, and such qualifications, limitations or restrictions thereof, as
shall be determined in the vote authorizing them or by the Trustees pursuant
to authority granted to it by such vote or as provided in Article 29.
33. ALL OTHER CHANGES IN SHARES. Any authorized shares, whether issued
or unissued, may, by vote, at a meeting duly called and held, of the holders
of a majority of the shares outstanding and entitled to vote thereon, be
changed by increasing or decreasing their par value, be reduced in number, be
changed into the same or a different number of shares of any class or classes
with or without par value, or be classified or reclassified. In connection
with any of the foregoing, the Trustees may increase, decrease or adjust the
capital accounts of the Company.
34. CONSIDERATION FOR ISSUE. Unless otherwise prescribed by vote of the
Shareholders, all shares may be issued for money, services or property
(including other shares of the Company at the time outstanding), or as a
distribution to Shareholders, and upon such terms as to valuation of shares,
services or property and otherwise, as the Trustees may in its absolute
discretion determine.
35. NO PREEMPTIVE OR PREFERENTIAL RIGHTS OF SUBSCRIPTION. No holder of
shares of any class and no holder of other securities of the Company,
convertible or otherwise, shall have any preemptive or preferential right of
subscription to, or purchase of, any securities of the Company.
36. TREASURY SHARES. Shares in the Company acquired by the Company may
be canceled and the number of shares issued may thereby be reduced, or such
shares may be held in the treasury and be disposed of by the Company, when
authorized by the Trustees, as the trustees may from time to time determine;
but such shares while so held in the treasury shall not be entitled to any
voting rights or to any dividends and shall not be
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deemed outstanding in computing proportions or percentages of shares
hereunder or for any other purpose hereof. Shares canceled pursuant to this
Article 36 shall have the status of authorized but unissued shares.
37. TRANSFER BOOKS. A register or registers shall be kept under the
direction of the Trustees, which shall contain the names and addresses of the
Shareholders and the number and kind of shares held by them respectively and
a record of all transfers thereof. No Shareholder shall be entitled to
receive payment of any dividend declared, nor to have any notice given to him
or her as herein provided, until he or she has given his or her address to
the transfer agent, or such other officer or agent of the Company as shall
keep the said register, for entry thereon.
38. TRANSFER AGENT. The Company, when authorized by the Trustees, may
employ in the City of Boston or in any other cities the Trustees may
designate a transfer agent or transfer agents and a registrar or registrars.
The transfer agent or transfer agents shall keep the said registers and
record therein the transfers of any of the said shares and countersign
certificates of shares issued to the persons entitled to the same. The
transfer agents and registrars shall perform the duties usually performed by
transfer agents and registrars of certificates of stock in a corporation,
except as modified by the Trustees.
39. SHARE CERTIFICATES. No certificates certifying the ownership of
shares need be issued unless the Trustees otherwise determine from time to
time. The Trustees may make such rules as they consider appropriate for the
issuance of share certificates, the form thereof, and similar matters.
40. LOST, STOLEN OR DESTROYED SHARE CERTIFICATES. In the event the
Trustees authorize the issuance of share certificates, a new certificate may
be issued to replace any certificate previously issued, on satisfactory
evidence that the said certificate previously issued has been worn out,
mutilated, lost or destroyed and on such terms, if any, as to indemnity and
otherwise, as the Trustees shall deem proper.
41. TRANSFER OF SHARES. Every transfer of any certificated shares
(otherwise than by operation of law) shall be signed by the transferor or by
his or her agent thereunto duly authorized in writing, and upon delivery
thereof to the Company or a transfer agent of the Company, accompanied by the
existing certificate for such shares and such evidence of the genuineness of
such transfer, authorization and other matters as may reasonably be required,
shall be recorded in the register, and a new certificate therefor shall be
issued to the transferee, and in case of a transfer of only a part of the
shares represented by any certificate a new certificate for the residue
thereof shall be issued to the transferor. A Shareholder of record shall be
deemed to be the holder of the share or shares represented thereby for all
purposes hereof, and neither the Trustees nor any transfer agent or registrar
nor any officer or agent of the Company shall be affected by any notice of a
transfer until due presentment of the certificate for such shares or shares
for registration of transfer. The Trustees may determine from time to time
procedures for the transfer of uncertificated shares.
42. TRANSFERS BY OPERATION OF LAW. Any person becoming entitled to any
shares in consequence of the death, bankruptcy or insolvency of any
Shareholder, or otherwise by operation of law, shall be recorded in the
register as the holder of the said shares, and receive a new certificate for
the same, upon production of the proper evidence thereof and delivery of the
existing certificate to the Company or a transfer agent of the Company.
Until such production of evidence and delivery of the existing certificate,
the Shareholder of record shall be deemed to be the holder of such shares for
all purposes hereof, and neither the Trustees nor any transfer agent or
registrar nor any officer or agent of the Company shall be affected by any
notice of such death, bankruptcy, insolvency or other event. The Trustees
may determine from time to time procedures for the transfer by operation of
law of uncertificated shares.
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43. JOINT OWNERS. Any two or more persons in whose names any share is
registered shall be treated as joint owners of the entire interest therein,
and no entry shall be made in the register or in any certificate that any
person is entitled to any future, limited or contingent interest in any
share. However, any person registered as a holder of any share may, subject
to the provisions hereinafter contained, be described in the register or in
any certificate as a trustee or fiduciary of any kind, and appropriate words
may be added to the description to identify such trust.
44. NO DUTY TO EXAMINE INTO TRUSTS, PLEDGES, ETC., TO WHICH SHARES ARE
SUBJECT. The Company shall not, nor shall the Trustees or the Shareholders or
any officer of the Company or any transfer agent or other agents of the
Company, or the Trustees, be bound to take notice or be affected by notice of
any trust, whether express, implied or constructive, or of any charge, pledge
or equity to which any of the said shares or the interest of any of the
Shareholders in this trust may be subject, or to ascertain or inquire whether
any sale or transfer of any such shares or interest by any such Shareholder
or his or her personal representatives is authorized by such trust, charge,
pledge or equity, or to recognize any person as having any interest therein,
except the persons registered as such Shareholders. The receipt of the
person in whose name any share is registered, or, if such share is registered
in the names of more than one person, the receipt of any one of such persons,
or the receipt of the duly authorized agent of any such person, shall be a
sufficient discharge for all dividends and other money and for all shares,
bonds, obligations and other property payable, issuable or deliverable in
respect of such share and from all liability to see to the application
thereof.
MEETINGS OF SHAREHOLDERS
45. ANNUAL MEETING. An annual meeting of the Shareholders shall be held
on the last Tuesday of April in every year, or on such other date as the
Trustees or the chairman or the president may from time to time fix, at the
principal office of the Company or at such other place in Massachusetts as
may be designated by the Trustees, the chairman or the president, for the
purpose of electing Trustees and for such other purposes as may be prescribed
by law and hereby or as may be specified in the notice by the Trustees or by
the chairman or by the president of the Company. If such annual meeting is
omitted on the day herein provided for, a special meeting may be held in lieu
thereof, and any business transacted or election held at such special meeting
shall have the same effect as if transacted or held at such annual meeting.
46. SPECIAL MEETINGS. The Trustees, chairman or president of the
Company may, whenever any of them think fit, call or direct any officer of
the Company to call a special meeting of the Shareholders to be held at the
principal office of the Company or, in their discretion, at any other place
in Massachusetts, and such special meeting shall be so called by the clerk,
or in the case of the death, incapacity or refusal of the clerk, by another
officer, upon written application of one or more Shareholders who hold at
least forty percent in interest of the shares entitled to vote at such
special meeting.
47. PRESIDING OFFICER. The chairman or, if there is no chairman or the
chairman is absent, the president shall preside at every meeting of the
Shareholders, but if neither the chairman nor the president is present at the
commencement of the meeting or, being present, shall not be willing to
preside, the Shareholders present in person or by proxy shall choose the
chairman of such meeting.
48. BUSINESS TO BE TRANSACTED. At any annual or special meeting of
Shareholders, no business shall be transacted other than such as is referred
to in the notice of the meeting.
49. NOTICES. A written or printed notice of each meeting of the
Shareholders, whether annual or special, specifying the time, place and
purposes thereof, shall be given as hereinafter provided by the clerk or any
assistant clerk or by an officer designated by the Trustees to each of the
Shareholders entitled to vote thereat at least seven
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(7) days (including Sundays and holidays) before such meeting. Every notice
to any Shareholder required or provided for herein may be given to him or her
personally or by mailing it to him or her, postage prepaid, at his or her
address specified in the records of the Company. Notice shall be deemed to
have been given at the time when it is so mailed. In respect of any share
held jointly by several persons, notice so given to any one of them shall be
sufficient notice to all of them. Any notice so sent to the address of any
Shareholder shall be deemed to have been duly sent in respect of any such
share whether held by him or her solely or jointly with others,
notwithstanding he or she be then deceased or be bankrupt or insolvent or
legally incompetent, and whether the Trustees or any person sending such
notice have knowledge or not of his or her death, bankruptcy or insolvency or
legal incompetence, until some other person or persons shall be registered as
holders. The certificate of the person or persons giving such notice shall
be sufficient evidence thereof, and shall protect all persons acting in good
faith in reliance on such certificate. Whenever notice of meeting is
required to be given to a Shareholder under any provision of Massachusetts
law applicable to the Company or of this declaration of trust, a written
waiver thereof, executed before or after the meeting by such Shareholder or
Shareholder s attorney thereunto authorized and filed with the records of the
meeting, shall be deemed equivalent to such notice.
50. VOTING; QUORUM. At all meetings every Shareholder shall, subject to
the provisions of Article 53, have one vote for each share held by him or her
and may vote at any meeting or any adjournment or adjournments thereof in
person or by proxy in writing dated not more than six months before the
meeting named therein, which proxies shall be filed with the clerk or other
person responsible to record the proceedings of the meeting before being
voted; and, except as otherwise provided herein, the holders of a majority of
all the shares issued and outstanding and entitled to vote shall constitute a
quorum for the transaction of business. The placing of a shareholder's name
on a proxy pursuant to telephonic or electronically transmitted instructions
obtained pursuant to procedures reasonably designed to verify that such
instructions have been authorized by such shareholders shall constitute
execution of such proxy by or on behalf of such shareholder. Shares owned
directly or indirectly by the Company, if any, shall not be deemed
outstanding for this purpose, and the Company shall not, directly or
indirectly, vote any share of its own shares. When any share is held jointly
by several persons, any one of them may vote at any meeting in person or by
proxy in respect of such share, but if more than one of them shall be present
at such meeting in person or by proxy, and such joint owners or their proxies
so present disagree as to any vote to be cast, such vote shall not be
received in respect of such share. If the holder of any share is a minor or
a person of unsound mind, or subject to guardianship or to the legal control
of any other person as regards the charge or management of such share, he or
she may vote by his or her guardian or such other person appointed or having
such control, and such vote may be given in person or by proxy. No ballot
shall be required for any election unless requested by a Shareholder present
or represented at the meeting and entitled to vote in the election.
51. ADJOURNMENT OF MEETING. Any meeting (or portion thereof) may be
adjourned from time to time by a majority of the votes properly cast upon the
question, whether or not a quorum is present, and the meeting (or portion
thereof) may be held as adjourned without further notice.
52. REQUISITE VOTE TO ACT. Except as otherwise herein provided, when a
quorum is present at any meeting, a plurality of votes properly cast for
election to any office shall elect to such office, and a majority of the
shares represented at the meeting and entitled to vote upon any question
properly brought before the meeting shall decide such question. Provisions
hereunder for a majority vote of Shareholders at a meeting mean a vote of the
holders of a majority of those shares entitled to vote thereon which are
represented in person or by proxy at such meeting.
53. RECORD DATE FOR VOTING, DIVIDENDS AND OFFERINGS. For the purpose of
determining the Shareholders who are entitled to vote or act at any meeting
or any adjournment thereof, or who are entitled to receive payment of any
dividend or of any other distribution or offering, the trustees may from time
to time fix in advance a time,
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which shall be not more than sixty (60) days before the date of any meeting
of Shareholders or the date for the payment of any dividend or of any other
distribution or the date of the offering, as the record date for determining
the Shareholders having the right to notice of and to vote at such meeting
and any adjournment thereof or the right to receive such dividend or
distribution or such offering, and in such case only Shareholders of record
on such record date shall have such right, notwithstanding any transfer of
shares on the books of the Company after the record date; or without fixing
such record date the Trustees may for any of such purposes close the register
or transfer books for all or any part of such period. If no record date is
fixed and the transfer books are not closed, (i) the record date for
determining Shareholders having the right to notice of or to vote at a
meeting of Shareholders shall be at the close of business on the date next
preceding the day on which notice is given, and (ii) the record date for
determining Shareholders for any other purpose shall be at the close of
business on the day on which the Trustees acts with respect thereto.
DURATION AND TERMINATION OF TRUST;
COMBINATION; AMENDMENTS
54. DURATION OF TRUST. Unless terminated as provided in Article 8(o) or
Article 56, this trust shall continue without limitation of time.
55. DEATH OF SHAREHOLDER OR TRUSTEE NOT TO TERMINATE TRUST. The death
of a Trustee hereunder or of a Shareholder or the dissolution of a
Shareholder hereunder during the continuance of this trust shall not operate
to terminate this trust, nor shall it entitle the legal representatives of
any such Trustee or Shareholder to an accounting or to take any action in the
courts or otherwise.
56. TERMINATION; COMBINATION; AFFILIATION. Except as provided in
Article 57 below, the Trustees may terminate this trust at any time, or may
cause the Company to be merged, combined, consolidated or otherwise
affiliated with another trust, association, company, corporation or other
entity, if such termination, merger, combination, consolidation, or
affiliation has been authorized by vote, at a meeting duly called and held,
of the holders of two-thirds of the shares outstanding and entitled to vote
thereon or has been authorized pursuant to Article 8(o). Such termination,
merger, combination, consolidation or affiliation shall become effective only
upon presentation to the Trustees, as required by Article 59, of the
counterpart of the certificate referred to in said Article 59, or at such
later time as may be specified in the vote effecting such action. In
respect of any such merger, combination, consolidation or affiliation (other
than as provided in Article 8(o)), the agreement in respect thereof shall
confer on the holders of all shares of the Company who dissent from such
transaction within the time and in the manner provided in the Massachusetts
statute applicable to business corporations, substantially those rights they
would have if the Company were at the time a Massachusetts business
corporation. Such rights shall be the Shareholders' exclusive remedy in
respect of such holders' dissent from any such actions.
57. CERTAIN TRANSACTIONS.
A. HIGHER VOTE FOR CERTAIN BUSINESS TRANSACTIONS. In addition to any
affirmative vote required by law or otherwise in this declaration of
trust, and except as otherwise expressly provided in Section C of this
Article 57:
(1) any merger or consolidation of the Company or any Subsidiary (as
hereinafter defined) with (a) any Interested Shareholder (as
hereinafter defined) or (b) any other company (whether or not itself
an Interested Shareholder) which is or after such merger or
consolidation would be an Affiliate (as hereinafter defined) or
Associate (as hereinafter defined) of an Interested Shareholder; or
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(2) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of transactions) to or
with any Interested Shareholder or any Affiliate or Associate of any
Interested Shareholder involving any assets or securities of the
Company, any Subsidiary or any Interested Shareholder or any Affiliate
or Associate of any Interested Shareholder having an aggregate Fair
Market Value (as hereinafter defined) in excess of 5% of the total
consolidated book value of the total assets of the Company and its
Subsidiaries as of the end of the Company s most recent fiscal year
prior to the time the determination is made; or
(3) the adoption of any plan or proposal for the termination,
liquidation or dissolution of the Company proposed by or on behalf of
an Interested Shareholder or any Affiliate or Associate of any
Interested Shareholder; or
(4) any reclassification of securities (including any reverse stock
split) or recapitalization of the Company or any merger or
consolidation of the Company with any of its Subsidiaries or any other
transaction (whether or not with or otherwise involving an Interested
Shareholder) that has the effect, directly or indirectly, of
increasing the proportionate share of any class or series of Capital
Stock (as hereinafter defined), or any securities convertible into
Capital Stock or into equity securities of any Subsidiary, that is
beneficially owned by any Interested Shareholder or any Affiliate or
Associate of any Interested Shareholder; or
(5) any tender offer or exchange offer made by the Company for shares
of Capital Stock which may have the effect of increasing an Interested
Shareholder s percentage beneficial ownership (as hereinafter defined)
so that following the completion of the tender offer or exchange offer
the Interested Shareholder s percentage beneficial ownership of the
outstanding Capital Stock may exceed 110% of the Interested
Shareholder s percentage beneficial ownership immediately prior to the
commencement of such tender offer or exchange offer; or
(6) any agreement, contract or other arrangement providing for any
one or more of the actions specified in the foregoing clauses (1) to
(5);
shall require the affirmative vote of the holders of Voting Shares (as
hereinafter defined) representing shares equal to the sum of (i) a majority
of the then outstanding Voting Shares, excluding Voting Shares of which
such Interested Shareholder is the beneficial owner, plus (ii) the number
of Voting Shares of which such Interested Shareholder is the beneficial
owner, voting together as a single class. Such affirmative vote shall be
required notwithstanding the fact that no vote may be required, or that a
lesser percentage may be specified, by law or any agreement with any
national securities exchange or otherwise.
B. DEFINITION OF "BUSINESS TRANSACTION". For the purposes of this Article
57 the term "Business Transaction" shall mean any transaction that is
referred to in any one or more of clauses (1) through (6) of Section A
of this Article 57.
C. WHEN HIGHER VOTE IS NOT REQUIRED. The provisions of Section A of this
Article 57 shall not be applicable to any direct or indirect purchase
or other acquisition by the Company or any Subsidiary of any shares of
Capital Stock from an Interested Shareholder. The provisions of
Section A of this Article 57 shall also not be applicable to any
particular Business Transaction involving an Interested Shareholder,
and such Business Transaction shall require only such affirmative
vote, if any, as is required by law or by any other provision of this
declaration of trust if the Business Transaction shall have been
approved by a majority of the Disinterested Trustees (whether such
approval is made prior to or subsequent to the
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acquisition of beneficial ownership of the Voting Shares that caused the
Interested Shareholder to become an Interested Shareholder).
D. CERTAIN DEFINITIONS. For purposes of this Article 57:
(1) The term "Capital Stock" shall mean all the shares of
beneficial interest of the Company authorized to be issued
from time to time under Article 29 of this declaration of
trust.
(2) The term "person" shall mean any individual, firm,
corporation or other entity and shall include any group
comprised of any person and any other person with whom such
person or any Affiliate or Associate of such person has any
agreement, arrangement or understanding, directly or
indirectly, for the purpose of acquiring, holding, voting or
disposing of Capital Stock.
(3) The term "Interested Shareholder" shall mean any person
(other than the Company or any Subsidiary and other than any
profit-sharing, employee stock ownership or other employee
benefit plan of the Company or any Subsidiary or any trustee
of or fiduciary with respect to any such plan when acting in
such capacity) who or which (a) is the beneficial owner of
Voting Shares representing 5% or more of the votes entitled
to be cast by the holders of all then outstanding Voting
Shares; or (b) is an Affiliate of the Company and at any
time within the two-year period immediately prior to the
date in question was the beneficial owner of Voting Shares
representing 5% or more of the votes entitled to be cast by
the holders of all the outstanding Voting Shares.
(4) A person shall be a "beneficial owner" of any Capital
Stock (a) which such person or any of its Affiliates or
Associates beneficially owns, directly or indirectly; (b)
which such person or any of its Affiliates or Associates
has, directly or indirectly, (i) the right to acquire
(whether such right is exercisable immediately or subject
only to the passage of time), pursuant to any agreement,
arrangement or understanding or upon the exercise of
conversion rights, exchange rights, warrants or options, or
otherwise, or (ii) the right to vote pursuant to any
agreement, arrangement or understanding; or (iii) which is
beneficially owned, directly or indirectly, by any other
person with which such person or any of its Affiliates or
Associates has any agreement, arrangement or understanding
for the purpose of acquiring, holding, voting or disposing
of any shares of Capital Stock. For the purposes of
determining whether a person is an Interested Shareholder
pursuant to paragraph 3 above, the number of shares of
Capital Stock deemed to be outstanding shall include shares
deemed beneficially owned by such person through application
of this paragraph 4, but shall not include any other shares
of Capital Stock that may be issuable pursuant to any
agreement, arrangement or understanding, or upon exercise of
conversion rights, warrants or options, or otherwise.
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(5) An "Affiliate" of a specified person is a person that
directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control
with, the person specified.
(6) The term "Associate" used to indicate a relationship
with any person means (a) any company (other than the
Company or any Subsidiary) of which such person is an
officer or partner or is, directly or indirectly, the
beneficial owner of 10% or more of any class of equity
securities, (b) any trust or other estate in which such
person has a substantial beneficial interest or as to which
such person serves as trustee or in a similar fiduciary
capacity, and (c) any relative or spouse of such person, or
any relative of such spouse, who has the same home as such
person or who is a Trustee or officer of the Company or any
of its parents or subsidiaries.
(7) The term "Subsidiary" means any company of which a
majority of any class of equity security is beneficially
owned by the Company, PROVIDED, HOWEVER, that for the
purposes of the definition of Interested Shareholder set
forth in paragraph 3 above and the definition of Associate
set forth in paragraph 6 above, the term "Subsidiary" shall
mean only a company of which a majority of each class of
equity security is beneficially owned by the Company.
(8) The term "Disinterested Trustee" means any Trustee who
is not an Affiliate or Associate or representative of the
Interested Shareholder and was a Trustee prior to the time
that the Interested Shareholder became an Interested
Shareholder, and any Trustee who is a successor of a
Disinterested Trustee, is not an Affiliate or Associate or
representative of the Interested Shareholder and is
recommended or elected to succeed the Disinterested Trustee
by a majority of the Disinterested Trustees.
(9) The term "Fair Market Value" means (a) in the case of
cash, the amount of such cash, (b) in the case of stock, the
highest closing sale price during the 30-day period
immediately preceding the date in question of a share of
such stock on the Composite Tape for New York Stock Exchange
Listed Stocks, or, if such stock is not quoted on the
Composite Tape, on the New York Stock Exchange, or, if such
stock is not listed on such Exchange, on the principal
United States securities exchange registered under the
Securities Exchange Act of 1934 on which such stock is
listed, or, if such stock is not listed on any such
exchange, the highest closing bid quotation with respect to
a share of such stock during the 30-day period immediately
preceding the date in question on the National Association
of Securities Dealers, Inc. Automated Quotations System or
any similar system then in use, or if no such quotation is
available, the fair market value on the date in question of
a share of such stock as determined by a majority of the
Disinterested Trustees in good faith; and (c) in the case of
property other than cash or stock, the fair market value of
such property on the date in question as determined in good
faith by a majority of the Disinterested Trustees.
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(10) The term "Voting Shares" means all Capital Stock which
by its terms may be voted generally in the election of
Trustees of the Company.
E. POWERS OF THE DISINTERESTED TRUSTEES. A majority of the Disinterested
Trustees shall have the power and duty to determine for purposes of
this Article 57, on the basis of information known to them after
reasonable inquiry, (1) whether a person is an Interested Shareholder,
(2) the number of shares of Capital Stock or other securities
beneficially owned by any person, (3) whether a person is an Affiliate
or Associate of another, and (4) whether the assets that are the
subject of any Business Transaction have, or the consideration to be
received for the issuance or transfer of securities by the Company or
any Subsidiary in any Business Transaction has, an aggregate Fair
Market Value in excess of the amount set forth in clause (2) of
Section A of this Article 57. Any such determination made in good
faith shall be binding and conclusive for all the purposes of this
Article 57.
F. NO EFFECT ON FIDUCIARY OBLIGATIONS OF INTERESTED SHAREHOLDERS. Nothing
contained in this Article 57 shall be construed to relieve any
Interested Shareholder from any fiduciary obligation imposed by law.
G. ALTERATION, AMENDMENT, REPEAL. Notwithstanding any other provisions
of this declaration of trust (and notwithstanding the fact that a
lesser percentage or separate class vote may be specified by law or
this declaration of trust), the affirmative vote of the holders of 80%
of the then outstanding Voting Shares shall be required to alter,
amend or repeal this Article 57; PROVIDED, HOWEVER, that this Section
G shall not apply to, and such 80% vote shall not be required for, any
alteration, amendment or repeal recommended by a majority of the
Disinterested Trustees.
58. AMENDMENTS. The declaration of trust may be altered, amended, added
to or rescinded by an instrument in writing signed by a majority of the
Trustees, if the same has been authorized by majority vote of the
Shareholders at a meeting, and such other vote, if any, as may be required by
the rights or preferences relating to any class or series of shares; provided
that if such alteration, amendment, addition or rescission shall in the
judgment of the Trustees be of a fundamental character it shall require
authorization by vote, at such a meeting, of the holders of a majority of the
shares outstanding and entitled to vote thereon; and provided further that
any alteration, amendment, addition or rescission of any provision requiring
a vote of the holders of a specified percentage of the shares shall be only
by vote of the holders of such percentage; and provided further that the
provisions of Articles 3 and 4 exempting from personal liability the
Shareholders, Trustees, officers, agents and other representatives of the
Company may be amended only by unanimous vote of the holders of all shares
entitled to vote at the time such vote is taken and such amendment shall take
effect only prospectively. Such alteration, amendment, addition or
rescission shall become effective at such time as may be specified in the
vote effecting such action. Notwithstanding anything preceding in this
Article to the contrary but subject to the provisions of Article 57, the vote
of the holders of 80% of the shares issued and outstanding and entitled to
vote generally in the election of Trustees shall be required for any
alteration, amendment or repeal of Articles 9 and 10; provided, however, that
such 80% vote shall not be required for any alteration, amendment or repeal
adopted or recommended by 80% of the Trustees then in office. Amendments for
the purpose of changing the name of the Company or of supplying any omission,
curing any ambiguity or curing, correcting or supplementing any defective or
inconsistent provision contained in this declaration of trust shall not
require authorization by vote of the Shareholders.
59. CERTIFICATE OF TERMINATION OR AMENDMENT. In case this trust shall
be terminated or any merger, combination, consolidation or affiliation shall
be effected, or any of the terms, powers and provisions herein contained
shall be altered, amended, added to or rescinded, pursuant to the provisions
of Article 8(o), Article 56 or Article 58 or other authority, a certificate
in any number of counterparts deemed desirable, setting forth such
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termination, alteration, amendment, addition or rescission or the terms of
such merger, combination, consolidation or affiliation and either that the
Shareholders have authorized the same in accordance with the provisions of
said Article 8(o), Article 56 or Article 58, or the other authority pursuant
to which the same has been made, shall be signed by the chairman or president
and by the clerk or any assistant clerk and shall be acknowledged by either
the chairman or president signing the same and shall be recorded or filed in
the various public offices, if any, in which this declaration of trust is
then recorded or filed and at the principal office of the Company and in such
places as may be required by law, but failure to record or file any such vote
or resolution shall not affect the validity thereof.
60. DISPOSITION OF TRUST ESTATE ON TERMINATION. Upon the termination of
this trust the Trustees shall, upon such terms as shall be determined by the
Trustees, sell and convert into money or into shares, bonds or other
securities or obligations, whether of the purchaser or otherwise, the whole
or any part of the Trust estate and shall apportion the proceeds thereof and
any property forming part of the Trust estate excepted from such sale among
all the Shareholders in accordance with their respective rights ratably
according to the number and kind of shares held by them respectively. In
making any sale under this provision the Trustees shall have power to sell by
public auction or private contract and to buy in or rescind or vary any
contract of sale and to resell, without being answerable for loss, and for
the said purposes to execute or cause to be executed all proper deeds and
instruments and to do all proper things. The Trustees may, after the
distribution of the full amounts of money, if any, due upon liquidation or
termination on any preferred shares of any class or series which may be
outstanding, divide the whole or any part of the remaining Trust estate in
its actual state of investment among the Shareholders in accordance with
their respective rights ratably according to the number and kind of shares
held by them respectively, and for such purposes the Trustees shall have
power to determine the values of the property comprising said remaining Trust
estate.
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MISCELLANEOUS
61. FILING. This instrument and any amendment hereto shall be filed
with the Secretary of The Commonwealth of Massachusetts and in such other
places as may be required under the laws of The Commonwealth of Massachusetts
and may also be filed or recorded in such other places as the Trustees deem
appropriate. Unless any such amendment sets forth some later time for the
effectiveness of such amendment, such amendment shall be effective upon its
filing with the Secretary of The Commonwealth of Massachusetts. A restated
declaration of trust, integrating into a single instrument all of the
provisions of this instrument which are then in effect and operative, may be
executed from time to time by the Trustees and shall, upon filing with the
Secretary of The Commonwealth of Massachusetts, be conclusive evidence of all
amendments contained therein and may hereafter be referred to in lieu of this
instrument and the various amendments thereto.
62. PROTECTION OF COMPANY, STOCK OF WHICH HELD BY TRUST. No corporation,
trust, association or body politic shall be affected by notice that any of
its shares or bonds or other securities or obligations are subject to this
trust or be bound to see to the execution of this trust or to ascertain or
inquire whether any transfer of any such shares, bonds or securities or
obligations by the Company is authorized, notwithstanding such authority may
be disputed by some other person, firm, association, trust or corporation.
63. AUTHORITY OF THE TRUSTEES TO CONSTRUE TERMS HEREOF. The Trustees
shall have the authority to construe any of the terms, powers and provisions
herein contained and to act on any such construction, and its construction of
the same and any action taken pursuant thereto by the Trustees, or any
committee, officer or agent in good faith shall be final and conclusive.
64. EFFECT OF CAPTIONS AND TABLE OF CONTENTS. The captions and Table of
Contents are inserted for convenience of reference, and are not to be taken
as any part of this instrument or to control or affect the meaning,
construction or effect of the same.
65. COUNTERPARTS. This instrument may be simultaneously executed in
several counterparts, each of which shall be deemed to be an original, and
such counterparts, together, shall constitute one and the same instrument,
which shall be sufficiently evidenced by any such original counterpart.
66. GOVERNING LAW. This instrument is executed by the original Trustees
and delivered in The Commonwealth of Massachusetts, and with reference to the
statutes and law thereof, and the rights of all parties and the construction
and effect of every provision hereof shall be subject to and construed
according to the statutes and law of said Commonwealth.
67. PROVISIONS IN CONFLICT WITH LAW OR REGULATIONS. The provisions of
this instrument are severable, and if the Trustees shall determine, with the
advice of counsel, that any of such provisions would be inconsistent with any
of the conditions necessary for qualification of the Company as an exempted
holding company within the meaning of the Public Utility Holding Company Act
of 1935, as amended, and the rules and regulations thereunder or is
inconsistent with other applicable laws and regulations, such provision shall
be deemed never to have constituted a part of this instrument, provided that
such determination shall not affect any of the remaining provisions of this
instrument or render invalid or improper any action taken or omitted prior to
such determination. If any provision of this instrument shall be held
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall attach only to such provision in such jurisdiction and
shall not in any manner affect such provision in any other jurisdiction or
any other provision of this instrument in any jurisdiction.
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<PAGE>
IN WITNESS WHEREOF we have hereunto set our hands and seals at Boston in
The Commonwealth of Massachusetts on the date first above mentioned.
[SEAL] /s/ Thomas J. May
------------------------
Thomas J. May
[SEAL] /s/ James J. Judge
------------------------
James J. Judge
[SEAL] /s/ Theodora S. Convisser
------------------------
Theodora S. Convisser
COMMONWEALTH OF MASSACHUSETTS
COUNTY OF SUFFOLK, SS.
March 14, 1997
Then personally appeared before me the above-named Thomas J. May, James
J. Judge and Theodora S. Convisser, and severally acknowledged the foregoing
instrument to be their free act and deed.
WITNESS MY HAND and official seal at Boston, Massachusetts.
NOTARIAL SEAL
My commission expires
Notary Public in and for The Commonwealth of Massachusetts
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<PAGE>
APPENDIX C
1997 STOCK INCENTIVE PLAN
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BOSTON EDISON COMPANY
1997 STOCK INCENTIVE PLAN
1. PURPOSE
The purpose of this 1997 Stock Incentive Plan (the "Plan") is to advance
the interests of Boston Edison Company (the "Company") and its subsidiaries by
enhancing their ability (a) to attract and retain employees who are in a
position to make contributions to the success of the Company and its
subsidiaries; (b) to reward employees for such contributions; and (c) to
encourage employees to take into account the long-term interests of the Company
and its subsidiaries through ownership of shares of, and other interests in, the
Company's common stock ("Common Stock").
The Plan is intended to accomplish these goals by enabling the Company to
grant awards ("Awards") to eligible employees. Awards may be in the form of
Stock Options (as described in Section 6), Stock Appreciation Rights (as
described in Section 7), Restricted Stock Awards (as described in Section 8),
Deferred Stock Awards (as described in Section 9), Performance Unit Awards (as
described in Section 10), Dividend Equivalent Awards (as described in Section
11), and Other Stock-Based Awards (as described in Section 12).
2. ADMINISTRATION
The Plan will be administered by the Executive Personnel Committee of the
Board of Directors of the Company, excluding any member who would not be (i) an
"outside director" for purposes of Section 162(m) of the Internal Revenue Code
of 1986, as amended (the "Code"), and the regulations thereunder, or (ii) a
non-employee director as defined in Rule 16b-3(b)(3) under the Securities
Exchange Act of 1934, as amended (the "Exchange Act") (the "Committee"). The
Committee will have full discretionary authority, not inconsistent with the
express provisions of the Plan, to administer the Plan in all respects,
including without limitation, authority (a) to grant Awards to such eligible
employees as the Committee may select ("Participants"); (b) to determine the
type of Awards to be granted and the times of grants; (c) to determine the
number of shares of Common Stock to be covered by any Award; (d) to determine
the terms and conditions of any Award, which terms and conditions may differ
among individual Awards and Participants; (e) to prescribe the form or forms of
instruments evidencing Awards and any other instruments required under the Plan
and to change such forms from time to time; (f) to adopt, amend and rescind
rules and regulations for the administration of the Plan; (g) to interpret the
Plan and to decide any questions and settle all controversies and disputes that
may arise in connection with the Plan; and (h) to waive compliance by a
Participant with any obligation to be performed by him under an Award, except
that the Committee may not, (i) in the case of an incentive stock option (as
described in Section 6), take any action without consent of the Participant
which would cause such option to lose its status as an "incentive stock option"
("ISO") within the meaning of section 422 of the Code, or (ii) in the case of an
Award intended to qualify as "performance-based compensation" within the meaning
of Section 162(m)(4)(C) of the Code, increase the amount of compensation payable
under the Award to the extent that such increase would cause the Award to lose
its qualification as such performance-based compensation. Such determinations
and actions of the Committee shall be conclusive and shall bind all parties.
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3. EFFECTIVE DATE AND TERM OF PLAN
The Plan will become effective on the date on which it is approved by the
stockholders of the Company. Grants of Awards under the Plan may be made prior
to that date (but after adoption of the Plan by the Board of Directors), subject
to approval of the Plan by the stockholders.
No Award may be granted under the Plan after the completion of ten years
from the date on which the Plan was adopted by the Board of Directors, but
Awards previously granted may extend beyond that date.
4. SHARES SUBJECT TO THE PLAN
(a) NUMBER OF SHARES. Subject to adjustment as provided in Section 15,
the aggregate number of shares of Common Stock that may be delivered under the
Plan is 2,000,000, including shares issued in lieu of or upon reinvestment of
dividends arising from awards. Shares of Common Stock may be issued up to this
maximum pursuant to any type or types of Awards, including ISOs. For purposes
of this limitation, Awards and shares of Common Stock which are forfeited or
reacquired by the Company, and Awards which are satisfied or otherwise
terminated without the issuance of shares of Common Stock, will not be counted.
(b) SPECIAL LIMITATIONS APPLICABLE TO CERTAIN AWARDS. Subject to
adjustment as provided in Section 15 to the extent such adjustment is consistent
with the continued satisfaction by Awards of the requirements of Section
162(m)(4)(C) of the Code, (i) the maximum number of shares of Common Stock for
which Options and SARs may be awarded under the Plan to any Participant in any
calendar year is in each case 100,000 shares, and (ii) the maximum number of
shares of Common Stock with respect to which Restricted Stock Awards and Awards
intended to qualify as "performance-based compensation" under Section
162(m)(4)(C) of the Code may be granted to any Participant in any calendar year
is in each case the equivalent of 25,000 shares. For purposes of the preceding
sentence, the regrant of a canceled Option or SAR, or the repricing of an Option
or SAR, shall be treated as a separate Award to the extent required under
Section 162(m)(4)(C) of the Code. The per-individual Award limitations
described in this paragraph are intended to enable certain Awards under the Plan
to qualify for the performance-based compensation exemption rules set forth
under Section 162(m)(4)(C) of the Code and shall be subject to amendment or
revision to the extent (but only to the extent) consistent with such rules.
(c) SHARES TO BE DELIVERED. Shares delivered under the Plan will be
authorized but unissued shares of Common Stock or, if the Committee so decides
in its sole discretion, previously issued Common Stock acquired by the Company
in the open market or in private transactions, or shares of Common Stock held in
treasury. No fractional shares of Common Stock will be delivered under the
Plan.
5. ELIGIBILITY
Employees eligible to become Participants shall be those key employees of
the Company and its subsidiaries who, in the opinion of the Committee, are in a
position to make a contribution to the success of the Company or its
subsidiaries. A subsidiary for purposes of the Plan is a corporation or other
entity in which the Company owns, directly or indirectly, stock or other
equity-like interests possessing 50% or more of the total combined voting power
of all classes of stock or other equity interests. Members of the Committee
will not be eligible to become Participants.
6. STOCK OPTIONS
Stock Options granted under the Plan ("Options") may be either ISOs or
non-qualified stock options ("NSOs"). Except to the extent expressly designated
as an ISO (or to the extent it does not qualify as an ISO even if so
designated), each Option will be an NSO.
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No term of this Plan relating to ISOs will be interpreted, amended or
altered, nor will any discretion or authority granted to the Committee under the
Plan be exercised, so as to disqualify the Plan or, without the consent of the
optionee, any ISO, under Section 422 of the Code. The documents evidencing ISOs
will contain such provisions as are required of ISOs under the applicable
provisions of the Code.
Options granted under the Plan will be subject to the following terms and
conditions and will contain such additional terms and conditions, not
inconsistent with the terms of the Plan, as the Committee deems desirable:
(a) EXERCISE PRICE. The exercise price of each Option will be determined
by the Committee, but may not be, in the case of an ISO, less than 100% (110%,
in the case of an ISO granted to a ten-percent stockholder) of the fair market
value per share of Common Stock at the time the Option is granted. For this
purpose, "ten-percent stockholder" means any employee who at the time of grant
owns directly, or is deemed to own by reason of the attribution rules in section
424(d) of the Code, Common Stock possessing more than 10% of the total combined
voting power of all classes of stock of the Company or of any of its parent or
subsidiary corporations.
(b) DURATION OF OPTIONS. An Option will be exercisable during such period
or periods as the Committee may specify. The latest date on which an Option may
be exercised will be the date which is ten years (five years, in the case of an
ISO granted to a ten-percent stockholder) from the date the Option was granted
or such earlier date as may be specified by the Committee at the time the Option
is granted.
(c) EXERCISE OF OPTIONS.
(1) Options will be exercisable at such future time or times, whether
or not in installments, as determined by the Committee at or
after the grant date. The Committee may at any time accelerate
the exercisability of all or any portion of any Option.
(2) Any exercise of an Option must be by written notice to the
Company, accompanied by (i) the document evidencing the Option
(the "Option Certificate") and any other documents required by
the Committee and (ii) payment in accordance with Section 6(d)
below for the number of shares of Common Stock for which the
Option is exercised.
(d) PAYMENT FOR AND DELIVERY OF COMMON STOCK. Common Stock purchased upon
exercise of an Option shall be paid for as follows: (1) in cash or by certified
check, bank draft or money order payable to the order of the Company, or (2) if
so permitted by the Option Certificate or otherwise determined by the Committee,
(i) through the delivery of shares of Common Stock (held for at least six
months, or such other period as the Committee may specify) having a fair market
value on the last business day preceding the date of exercise equal to the
purchase price, or (ii) by a combination of cash and Common Stock as provided in
clauses (1) and (2)(i) above, or (iii) by delivery of a promissory note of the
Participant to the Company, in the case of an ISO, payable on such terms as are
specified in the Option Certificate, and in the case of an NSO, payable on such
terms as are specified in the Option Certificate or as are otherwise specified
by the Committee, or by a combination of cash (or cash and Common Stock) and the
Participant's promissory note; PROVIDED, HOWEVER, that if the Common Stock
delivered upon exercise of the Option is an original issue of authorized Common
Stock, at least so much of the exercise price as represents the par value of
such Common Stock must be paid in cash if the Committee determines that such
cash payment is required by law.
(e) NONTRANSFERABILITY OF OPTIONS. Except as otherwise determined by the
Committee or specified in the Option Certificate, no Option may be transferred
other than by will or by the laws of descent and distribution, and during a
Participant's lifetime an Option may be exercised only by him or her.
(f) DEATH OR DISABILITY. Except as otherwise determined by the Committee,
if a Participant's employment with the Company and its subsidiaries terminates
by reason of death or total and permanent disability, each Option held by the
Participant will become fully exercisable and will remain exercisable after the
date of such termination
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for a period of two years in the case of death and one year in the case of
total and permanent disability (but in no event later than the date the
option would have expired in all events under Section 6(b)). In the case of a
deceased Participant, such Option may be exercised within such time limits by
his executor or administrator, or by the person or persons to whom the Option
is transferred by will or the applicable laws of descent and distribution.
(g) OTHER TERMINATION OF EMPLOYMENT. Except as otherwise determined by
the Committee, if a Participant's employment with the Company and its
subsidiaries terminates for any reason other than death or total and permanent
disability, all Options held by the Participant that are not then exercisable
shall terminate. Options that are exercisable on the date of termination will
continue to be exercisable for a period of three months (but in no event later
than the date the option would have expired in all events under Section 6(b))
unless the employee has admitted to, or been convicted of, any act of fraud,
theft or dishonesty arising in the course of, or in connection with, his
employment with the Company and its subsidiaries, in which case the Option will
terminate immediately and in full, all except as otherwise determined by the
Committee. Except as otherwise determined by the Committee, after completion of
that three-month period, such Options shall terminate to the extent not
previously exercised, expired or terminated.
7. STOCK APPRECIATION RIGHTS
(a) NATURE OF STOCK APPRECIATION RIGHT. A Stock Appreciation Right
("SAR") is an Award entitling the recipient to receive an amount in cash or
shares of Common Stock or a combination thereof having a value equal to the
excess of the fair market value of a share of Common Stock on the date of
exercise over the fair market value of a share of Common Stock on the date of
grant (or over the Option exercise price, if the SAR was granted in tandem with
an Option), multiplied by the number of shares with respect to which the SAR has
been exercised, with the Committee having the right to determine the form of
payment.
(b) GRANT OF SARs. SARs may be granted in tandem with, or independently
of, Options granted under the Plan. In the case of an SAR granted in tandem
with an NSO, such SAR may be granted either at or after the time of the grant of
such Option. In the case of an SAR granted in tandem with an ISO, such SAR may
be granted only at the time of the grant of the Option. SARs will be evidenced
by such written agreement as is deemed appropriate by the Committee.
An SAR or applicable portion thereof granted in tandem with an Option will
terminate and no longer be exercisable upon the termination or exercise of such
Option, except that an SAR granted with respect to less than the full number of
shares covered by an Option will not be reduced until the exercise or
termination of the related Option exceeds the number of shares not covered by
the SAR.
(c) TERMS AND CONDITIONS OF SARs. SARs will be subject to such terms and
conditions as are determined from time to time by the Committee, subject, in the
case of SARs granted in tandem with Options, to the following:
(1) SARs will be exercisable only at such time or times and to the
extent that the related Option is exercisable.
(2) Upon the exercise of an SAR, the applicable portion of any
related Option must be surrendered.
(3) SARs will be transferable only with the related Option. Except
as otherwise determined by the Committee, all SARs will be
exercisable during the Participant's lifetime only by the
Participant or his legal representative.
(4) An SAR granted in tandem with an Option may be exercised only
when the market price of the Common Stock subject to the Option
exceeds the exercise price of such Option.
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The provisions of Sections 6(f) and 6(g) relating to the exercisability and
termination of Options shall also apply to SARs, whether or not granted in
tandem with Options.
Any exercise of an SAR must be by written notice to the Company,
accompanied by the document evidencing the SAR and any other documents required
by the Committee.
(d) DISCRETIONARY PAYMENTS. Notwithstanding that an Option at the time of
exercise shall not be accompanied by a related SAR, if the market price of the
shares subject to such Option exceeds the exercise price of such Option at the
time of its exercise, the Committee may, in its discretion, cancel such Option,
in which event the Company shall pay to the person exercising such Option an
amount equal to the difference between the fair market value of the Common Stock
to have been purchased pursuant to such exercise of such Option (determined on
the date the Option is canceled) and the aggregate consideration to have been
paid by such person upon such exercise. Such payment shall be by check or in
shares of Common Stock having a fair market value (determined on the date the
payment is to be made) equal to the amount of such payments or any combination
thereof, as determined by the Committee. The Committee may exercise its
discretion under the first sentence of this paragraph (d) only in the event of a
written request of the person exercising the option, which request shall not be
binding on the Committee.
8. RESTRICTED STOCK
(a) NATURE OF RESTRICTED STOCK AWARD. A Restricted Stock Award
("Restricted Stock Award") is an Award entitling the recipient to acquire shares
of Common Stock ("Restricted Stock") for a purchase price (which may be zero),
subject to such conditions, including the restrictions specified in Section 8(d)
below, as the Committee may impose at the time of grant. The Committee may also
condition such acquisition on the attainment of specified performance goals as
described in Section 16(f) below.
(b) RESTRICTED STOCK AWARD AGREEMENT. A Participant who is granted a
Restricted Stock Award will have no rights with respect to such Award unless the
Participant accepts the Award within 60 days (or such shorter period as the
Committee may specify) following the Award date by making payment to the Company
by certified or bank check or other instrument acceptable to the Committee in an
amount equal to the specified purchase price, if any, of the shares covered by
the Award and by executing and delivering to the Company an agreement (a
"Restricted Stock Award Agreement") in such form as the Committee determines.
(c) RIGHTS AS A STOCKHOLDER. Upon complying with Section 8(b) above, a
Participant will have all the rights of a stockholder with respect to the
Restricted Stock awarded to him including voting and dividend rights, subject to
the restrictions described in this Section 8 and subject to any other conditions
contained in the Restricted Stock Award Agreement. Unless the Committee
otherwise determines, certificates evidencing shares of Restricted Stock will
remain in the possession of the Company until such shares are free of any
restrictions under the Plan.
(d) RESTRICTION. Except as otherwise determined by the Committee, shares
of Restricted Stock may not be sold, assigned, transferred, pledged or otherwise
encumbered or disposed of, except as specifically provided herein. If a
Participant ceases for any reason to be employed by the Company or its
subsidiaries other than due to death or total and permanent disability, shares
of Restricted Stock held by such Participant shall be resold to the Company at
their purchase price, or forfeited to the Company if the purchase price was
zero, except as specifically set forth herein or otherwise determined by the
Committee. Shares of Restricted Stock resold to the Company shall have the
status of authorized but unissued shares of Common Stock.
(1) The Committee will specify in the Restricted Stock Award
Agreement the date or dates (which may depend upon or be related
to the attainment of performance goals and other conditions) on
which the nontransferability of the Restricted Stock and the
obligation of the Participant to resell such Stock to the Company
will lapse. The Committee may at
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any time accelerate such date or dates or waive such performance
goals and other conditions.
(2) Unless otherwise determined by the Committee or specified in the
Restricted Stock Award Agreement, if the Participant's employment
terminates because of death or total and permanent disability,
all restrictions on shares of Restricted Stock held by the
Participant will lapse.
(e) NOTICE OF ELECTION. Any Participant making an election under Section
83(b) of the Code with respect to a Restricted Stock Award must provide a copy
thereof to the Company within 30 days of the filing of such election with the
Internal Revenue Service.
(f) DIVIDENDS. Dividends paid on shares of Restricted Stock shall be
either paid at the dividend payment date or deferred for payment to such date as
determined by the Committee, in cash or in unrestricted shares of Common Stock
having a fair market value equal to the amount of such dividends. Shares
distributed in connection with a stock split or dividend in shares of stock, and
other property distributed as a dividend, shall be subject to restrictions and a
risk of forfeiture to the same extent as the Restricted Stock with respect to
which such shares of Restricted Stock or other property has been distributed.
9. DEFERRED STOCK AWARDS.
(a) NATURE OF DEFERRED STOCK AWARD. A Deferred Stock Award ("Deferred
Stock Award") is an award entitling the recipient to acquire shares of Common
Stock ("Deferred Stock") without payment in one or more installments at a future
date or dates, all as determined by the Committee. The Committee may condition
such acquisition on the attainment of specified performance goals as described
in Section 16(f) below.
(b) DEFERRED STOCK AWARD AGREEMENT. A Participant who is granted a
Deferred Stock Award shall have no rights with respect to such Award unless
within 60 days of the grant of such Award or such shorter period as the
Committee may specify, the Participant shall have accepted the Award by
executing and delivering to the Company an agreement (a "Deferred Stock Award
Agreement") in such form as the Committee determines.
(c) RESTRICTIONS ON TRANSFER. Except as otherwise determined by the
Committee, Deferred Stock Awards and all rights with respect to such Awards may
not be sold, assigned, transferred, pledged, or otherwise encumbered, and shall
be exercisable during the Participant's lifetime only by the Participant or the
Participant's legal representative.
(d) RIGHTS AS A STOCKHOLDER. A Participant receiving a Deferred Stock
Award will have rights of a stockholder only as to shares of Deferred Stock
actually received by the Participant under the Plan and not with respect to
shares subject to the Award but not actually received by the Participant. A
Participant shall be entitled to receive a stock certificate for shares of
Deferred Stock only upon satisfaction of all conditions therefor specified in
the Deferred Stock Award Agreement.
(e) TERMINATION. Except as otherwise determined by the Committee, a
Participant's rights in all Deferred Stock Awards shall automatically terminate
upon the termination of such Participant's employment by the Company and its
subsidiaries for any reason (including death).
(f) ACCELERATION, WAIVER, ETC. At any time prior to the termination of a
Participant's employment, the Committee may in its discretion accelerate, waive,
or, subject to Section 16, amend any or all of the restrictions or conditions
imposed under any Deferred Stock Award.
(g) PAYMENTS IN RESPECT OF DEFERRED STOCK. Without limiting the right of
the Committee to specify different terms, the Deferred Stock Award Agreement may
either make no provisions for, or may require or permit
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the immediate payment, deferral, or investment of amounts equal to, or less
than, any cash dividends which would have been payable on the Deferred Stock
had such stock been outstanding, all as determined by the Committee in its
sole discretion.
10. PERFORMANCE UNIT AWARDS.
(a) NATURE OF PERFORMANCE UNITS AWARDS. A Performance Unit Award
("Performance Unit Award") is an award entitling the recipient to acquire cash
or shares of Common Stock, or a combination of cash and shares of Common Stock,
upon the attainment of specified performance goals as described in Section 16(f)
below. The Committee in its sole discretion shall determine whether and to whom
Performance Unit Awards shall be made, the performance goals applicable under
each such Award, the periods during which performance is to be measured and all
other limitations and conditions applicable to each such Award. Performance Unit
Awards may be awarded independent of or in connection with the granting of any
other Award under the Plan.
(b) PERFORMANCE UNIT AWARD AGREEMENT. A Participant shall have no rights
with respect to a Performance Unit Award unless within 60 days of the grant of
such Award or such shorter period as the Committee may specify, the Participant
shall have accepted the Award by executing and delivering to the Company a
Performance Unit Award Agreement.
(c) RESTRICTIONS ON TRANSFER. Except as otherwise determined by the
Committee, Performance Unit Awards and all rights with respect to such Awards
may not be sold, assigned, transferred, pledged, or otherwise encumbered, and if
exercisable over a specified period, shall be exercisable during the
Participant's lifetime only by the Participant or the Participant's legal
representative.
(d) RIGHTS AS A STOCKHOLDER. A Participant receiving a Performance Unit
Award will have rights of a stockholder only as to shares of Common Stock
actually received by the Participant under the Plan and not with respect to
shares subject to the Award but not actually received by the Participant. A
Participant shall be entitled to receive a stock certificate evidencing the
acquisition of shares of Common Stock under a Performance Unit Award only upon
satisfaction of all conditions therefor specified in the Performance Unit Award
Agreement.
(e) TERMINATION. Except as otherwise determined by the Committee, a
Participant's rights in all Performance Unit Awards shall automatically
terminate upon the termination of such Participant's employment by the Company
and its subsidiaries for any reason (including death).
(f) ACCELERATION, WAIVER, ETC. At any time prior to the termination of a
Participant's employment, the Committee may in its discretion accelerate, waive,
or, subject to Section 16, amend any or all of the restrictions or conditions
imposed under any Performance Unit Award.
(g) EXERCISE. The Committee in its sole discretion shall establish
procedures to be followed in exercising any Performance Unit Award, which
procedures shall be set forth in the Performance Unit Award Agreement. The
Committee may at any time provide that payment under a Performance Unit Award
shall be made, upon satisfaction of the applicable performance goals, without
exercise by the Participant. Except as otherwise specified by the Committee, a
Performance Unit granted in tandem with an Option may be exercised only while
the Option is exercisable, and the exercise of a Performance Unit granted in
tandem with any other Award shall reduce the number of shares subject to the
related award on such basis as is specified in the Performance Unit Award
Agreement.
11. DIVIDEND EQUIVALENT AWARDS.
(a) NATURE OF DIVIDEND EQUIVALENT AWARDS. A Dividend Equivalent Award
("Dividend Equivalent Award") is an Award entitling the Participant to receive
cash, shares of Common Stock, or other property equal in value to dividends paid
with respect to a specified number of shares of Common Stock. Dividend
Equivalent Awards
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may be awarded on a free-standing basis or in connection with another Award,
and may be paid currently or on a deferred basis. The Committee may provide
at the date of grant or thereafter that the Dividend Equivalent Award shall
be paid or distributed when accrued or shall be deemed to have been
reinvested in additional shares of Common Stock or such other investment
vehicles as the Committee may specify; PROVIDED, HOWEVER, that Dividend
Equivalent Awards (other than free-standing Dividend Equivalent Awards) shall
be subject to all conditions and restrictions of the underlying Awards to
which they relate. The Committee may also condition such Award on the
attainment of specified performance goals as described in Section 16(f) below.
(b) DIVIDEND EQUIVALENT AWARD AGREEMENT. A Participant who is granted a
Dividend Equivalent Award shall have no rights with respect to such Award unless
within 60 days of the grant of such Award or such shorter period as the
Committee may specify, the Participant shall have accepted the Award by
executing and delivering to the Company an agreement (a "Dividend Equivalent
Award Agreement") in such form as the Committee determines.
(c) RESTRICTIONS ON TRANSFER. Except as otherwise determined by the
Committee, Dividend Equivalent Awards and all rights with respect to such Awards
may not be sold, assigned, transferred, pledged, or otherwise encumbered.
(d) RIGHTS AS A STOCKHOLDER. A Participant receiving a Dividend
Equivalent Award will have rights of a stockholder only as to shares of Common
Stock actually received by the Participant under the Plan and not with respect
to shares subject to the Award but not actually received by the Participant.
(e) TERMINATION. Except as otherwise determined by the Committee, a
Participant's rights in all Dividend Equivalent Awards shall automatically
terminate upon the termination of such Participant's employment by the Company
and its subsidiaries for any reason (including death).
(f) ACCELERATION, WAIVER, ETC. At any time prior to the Participant's
termination of employment, the Committee may in its discretion accelerate,
waive, or, subject to Section 16 of the Exchange Act, amend any or all of the
restrictions or conditions imposed under any Dividend Equivalent Award.
12. OTHER STOCK-BASED AWARDS.
(a) NATURE OF AWARDS. The Committee may grant other Awards under which
Common Stock is or may in the future be acquired ("Other Stock-Based Awards").
Such awards may include, without limitation, debt securities convertible into or
exchangeable for shares of Common Stock upon such conditions, including
attainment of performance goals, as the Committee shall determine. Subject to
the purchase price limitations in paragraph (b) below, such convertible or
exchangeable securities may have such terms and conditions as the Committee may
determine at the time of grant. However, no convertible or exchangeable debt
shall be issued unless the Committee shall have provided (by Company right of
repurchase, right to require conversion or exchange, or other means deemed
appropriate by the Committee) a means of avoiding any right of the holders of
such debt to prevent a Company transaction by reason of covenants in such debt.
The Committee may also condition such Awards on the attainment of specified
performance goals as described in Section 16(f) below.
(b) PURCHASE PRICE; FORM OF PAYMENT. The Committee may determine the
consideration, if any, payable upon the issuance or exercise of an Other
Stock-Based Award. The Committee may permit payment by certified check or bank
check or other instrument acceptable to the Committee or by surrender of other
shares of Common Stock (excluding shares then subject to restrictions under the
Plan).
(c) FORFEITURE OF AWARDS; REPURCHASE OF STOCK; ACCELERATION OR WAIVER OF
RESTRICTIONS. The Committee may determine the conditions under which an Other
Stock-Based Award shall be forfeited or, in the case of an Award involving a
payment by the recipient, the conditions under which the Company may or must
repurchase such Award or related Common Stock. At any time the Committee may in
its sole discretion accelerate, waive, or,
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subject to Section 16 of the Exchange Act, amend any or all of the
limitations or conditions imposed under any Other Stock-Based Award.
(d) OTHER STOCK-BASED AWARD AGREEMENTS. A Participant shall have no
rights with respect to any Other Stock-Based Award unless within 60 days after
the grant of such Award (or such shorter period as the Committee may specify)
the Participant shall have accepted the Award by executing and delivering to the
Company an agreement (an "Other Stock-Based Award Agreement") in such form as
the Committee determines.
(e) RESTRICTIONS ON TRANSFER. Except as otherwise determined by the
Committee, Other Stock-Based Awards may not be sold, assigned, transferred,
pledged, or encumbered nor shall any Other Stock-Based Award be transferred
other than by will or by the laws of descent and distribution or be exercisable
during the Participant's lifetime by other than the Participant or the
Participant's legal representative.
(f) RIGHTS AS A STOCKHOLDER. A recipient of any Other Stock-Based Award
will have rights of a stockholder only at the time and to the extent, if any,
specified in the Other Stock-Based Award Agreement or otherwise determined by
the Committee.
(g) DEEMED DIVIDEND PAYMENTS; DEFERRALS. Without limiting the right of
the Committee to specify different terms, an Other Stock-Based Award Agreement
may require or permit the immediate payment, waiver, deferral, or investment of
dividends or deemed dividends payable or deemed payable on Common Stock subject
to the Award.
13. SUPPLEMENTAL GRANTS.
(a) LOANS. The Company may in its sole discretion make a loan to the
recipient of an Award hereunder, either on or after the date of grant of such
Award. Such loans may be made either in connection with the exercise of a Stock
Option, an SAR or an Other Stock-Based Award, in connection with the purchase of
shares under any Award, or in connection with the payment of any federal, state
and local income tax in respect of income recognized under any Award. The
Committee shall have full authority to decide whether to make a loan hereunder
if it determines that the making of such loan is in the best interest of the
Company, and to determine the amount, term, and provisions of any such loan,
including the interest rate (which may be zero) charged in respect of any such
loan, whether the loan is to be secured or unsecured, the terms on which the
loan is to be repaid and the conditions, if any, under which it may be forgiven.
However, no loan hereunder shall provide or reimburse to the borrower the amount
used by him for the payment of the par value of any shares of Common Stock
issued, have a term (including extensions) exceeding ten years in duration, or
be in an amount exceeding the total exercise or purchase price paid by the
borrower under an Award or for related Common Stock under the Plan plus an
amount equal to the cash payment permitted in the following paragraph.
(b) CASH GRANTS. The Committee may at any time authorize a cash payment,
in respect of the grant or exercise of an Award under the Plan (or the lapse or
waiver of restrictions under an Award) which shall not exceed the amount which
would be required in order to pay in full any federal, state and local income
tax due as a result of income recognized by the recipient under both the Award
and such cash payment, in each case assuming that such income is taxed at the
regular maximum marginal rate applicable to individuals under the Code as in
effect at the time such income is includable in the recipient's income. Subject
to the foregoing, the Committee shall have complete authority to decide whether
to make such cash payments in any case, to make provision for such payments
either simultaneously with or after the grant of the associated Award and to
determine the amount of each such payment.
14. CHANGE OF CONTROL
Notwithstanding any other provision of this Plan, in the event of a Change
of Control of the Company as defined in EXHIBIT A hereto (a) each outstanding
Award held by each Participant the exercisability of which is
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restricted or limited will immediately become fully exercisable; and (b)
restrictions and conditions on each outstanding Award subject to such
restrictions and conditions held by each Participant will immediately lapse
or be deemed waived.
15. CHANGES IN COMPANY; SUBSTITUTE AWARDS
(a) CHANGES IN CAPITAL STOCK. In the event of a stock dividend, stock
split or combination of shares, recapitalization or other change in the
Company's capital stock, the number and kind of shares of stock, securities of
the Company or other consideration issued or issuable in respect of Awards then
outstanding or subsequently granted under the Plan, the maximum number of shares
of stock or securities that may be delivered under the Plan, the purchase price
and other relevant provisions will be appropriately adjusted by the Committee,
whose determination shall be binding on all persons.
The Committee may also adjust the number of shares, securities or other
consideration issued or issuable in respect of outstanding Awards, the exercise
price of outstanding Awards and the other terms of outstanding Awards, and may
make adjustments in the terms and conditions of, and the criteria and
performance objectives included in, Awards, to take into consideration material
changes in accounting practices or principles, consolidations or mergers (except
those described in Section 15(b) below), acquisitions or dispositions of stock
or property or any other event if it is determined by the Committee that such
adjustment is appropriate to avoid distortion in the operation of the Plan.
Adjustments under this paragraph will be made only to the extent they are
consistent with the requirements for ISOs or under Section 162(m)(4)(C) of the
Code.
(b) MERGER, ETC. Subject to Section 14, in the event of a dissolution or
liquidation of the Company or a merger or consolidation in which the Company is
not the surviving corporation or its outstanding shares are converted into
securities of another corporation or exchanged for other consideration, all
Awards granted hereunder will terminate, but during a period commencing 20 days
prior to the effective date of any such dissolution or liquidation (or 20 days
prior to any earlier related sale of substantially all the assets of the
Company) or of any such merger or consolidation, subject to the effectiveness of
such dissolution, liquidation, sale, merger or consolidation (1) all Awards
outstanding hereunder the exercisability of which is restricted or limited will
become immediately exercisable, and (2) all restrictions and conditions on all
Awards subject to such restrictions and conditions will immediately lapse or be
deemed waived; PROVIDED, HOWEVER, that, unless the event will give rise to a
Change of Control or it is anticipated that a Change of Control will coincide
with or follow the event, the Committee may instead arrange that the successor
or surviving corporation, if any, grant replacement or substitute Awards on
terms and conditions as the Committee considers appropriate in the
circumstances.
(c) SUBSTITUTE AWARDS. The Company may grant Awards under the Plan in
substitution for stock and stock based awards held by employees of another
corporation who concurrently become employees of the Company or its subsidiary
as the result of a merger or consolidation of the employing corporation with the
Company or its subsidiary or the acquisition by the Company or a subsidiary of
property or stock of the employing corporation. The Committee may direct that
the substitute Awards be granted on such terms and conditions as the Committee
considers appropriate. The shares which may be delivered under such substitute
Awards will be in addition to the maximum number of shares provided for in
Section 4(a) only to the extent that the substitute Awards are both (1) granted
to persons whose relationship to the Company does not make (and is not expected
to make) them subject to Section 16(b) of the Exchange Act and (2) are granted
in substitution for awards issued under a plan approved, to the extent then
required under Rule 16b-3 (or any successor rule under the Exchange Act), by the
stockholders of the entity which issued such predecessor awards.
16. GENERAL PROVISIONS
(a) NO DISTRIBUTION; COMPLIANCE WITH LEGAL REQUIREMENTS, ETC. The
Committee may require each person acquiring Common Stock pursuant to an Award to
represent to and agree with the Company in writing that such person is acquiring
the Common Stock without a view to distribution thereof.
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The Company will not be obligated to deliver any shares of Common Stock
pursuant to an Award (1) until, in the opinion of the Company's counsel, all
applicable federal and state laws and regulations have been complied with,
including, if required, the receipt of all necessary approvals from the
Massachusetts Department of Public Utilities, and (2) if the outstanding Common
Stock is at the time listed on any stock exchange, until the shares to be
delivered have been listed or authorized to be listed on such exchange upon
official notice of issuance, and (3) until all other legal matters in connection
with the issuance and delivery of such shares have been approved by the
Company's counsel. If the sale of Common Stock has not been registered under
the Securities Act of 1933, as amended, the Company may require such
representations or agreements as counsel for the Company may consider
appropriate to avoid violation of such Act and may require that the certificates
evidencing such Common Stock bear an appropriate legend restricting transfer.
Notwithstanding any provision of the Plan, the Company will be under no
obligation to deliver shares of Common Stock to an estate of a deceased
Participant, or to the person or persons to whom the Award has been transferred
by the Participant's will or the applicable laws of descent and distribution,
until the Company is satisfied as to the authority of such person or persons.
(b) TAX WITHHOLDING, ETC. Each Participant will, no later than the date
as of which the value of an Award or of any Common Stock or other amounts
received hereunder first becomes includable in gross income for federal income
tax purposes, pay to the Company, or make arrangements satisfactory to the
Committee regarding payment of, all federal, state and local taxes required by
law to be withheld with respect to such income. The Company and its
subsidiaries will, to the extent permitted by law, have the right to deduct any
such taxes from any payment of any kind otherwise due to the Participant.
The Committee may provide, in respect of any transfer of Common Stock under
an Award, that if and to the extent withholding of any federal, state or local
tax is required, the Participant may elect in such manner as the Committee
prescribes, to have the Company hold back from the transfer Common Stock having
a value calculated to satisfy such withholding obligation, or to deliver to the
Company previously owned shares of equal value. Notwithstanding the foregoing,
in the case of a Participant subject to the restrictions of Section 16(b) of the
Exchange Act no such election shall be effective unless made in compliance with
any applicable requirements of Rule 16b-3(e) or any successor rule under such
Act.
(c) CONTINUANCE OF EMPLOYMENT. For purposes of the Plan, employment of a
Participant will not be considered terminated (1) in the case of sick leave or
other bona fide leave of absence approved for purposes of the Plan by the
Committee, so long as the Participant's right to re-employment is guaranteed
either by statute or by contract, or (2) in the case of a transfer to the
employment of a corporation (or a parent or subsidiary corporation of such
corporation) issuing or assuming an option in a transaction to which section
424(a) of the Code would apply.
(d) FAIR MARKET VALUE. For purposes of the Plan, in general, "fair market
value" of a share of Common Stock on any date means the closing price on such
date as reflected in the New York Stock Exchange Composite Index. If, however,
the Committee determines that a different meaning is in any circumstance
necessary in order to comply with applicable law, such different meaning will
apply in that circumstance.
(e) EMPLOYMENT RIGHTS. Neither the adoption of the Plan nor the grant of
Awards will confer upon any employee any right to continued employment with the
Company or any subsidiary or affect in any way the right of the Company or any
subsidiary to terminate the employment of an employee at any time. Except as
specifically provided by the Committee in any particular case, the loss of
existing or potential profit in Awards granted under this Plan shall not
constitute an element of damages in the event of termination of the employment
of an employee even if the termination is in violation of an obligation of the
Company to the employee by contract or otherwise.
(f) AWARDS SUBJECT TO PERFORMANCE CONDITIONS. The Committee may, at the
time any Award described in the Plan is granted, impose the condition (in
addition to any conditions specified or authorized in any other provisions of
the Plan), that performance goals must be met prior to the Participant's
realization of any vesting,
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payment or benefit under the Award. Performance goals may be related to
personal performance, corporate performance, departmental performance, or any
other category of performance established by the Committee. The Committee
will determine the performance goals, the period or periods during which
performance is to be measured, and all other terms and conditions applicable
to the Award. If necessary in order to qualify an Award for the performance
based remuneration exception described in Section 162(m)(4)(C) of the Code
and the regulations thereunder, the Committee shall in writing preestablish
one or more specific, objectively determinable performance goal or goals
(based solely on one or more qualified performance criteria) no later than
ninety (90) days after the commencement of the period to which the
performance relates (or in any such other time as is required to satisfy the
conditions of Section 162(m)(4)(C) of the Code and the regulations
thereunder). For purposes of the preceding sentence, a qualified performance
criterion is any of the following: (i) earnings per share, (ii) individual
performance objectives, (iii) net income, (iv) proforma net income, (v)
return on designated assets, (vi) return on revenues, or (vii) satisfaction
of Company-wide or departmental based objectives.
17. EFFECT, DISCONTINUANCE, CANCELLATION, AMENDMENT AND TERMINATION.
Neither adoption of the Plan nor the grant of Awards to a Participant shall
affect the Company's right to grant to such Participant awards that are not
subject to the Plan, to issue Common Stock to such Participant as a bonus or
otherwise, or to adopt other plans or arrangements under which Common Stock may
be issued to employees.
The Committee may at any time discontinue granting Awards under the Plan.
With the consent of the Participant, the Committee may at any time cancel an
existing Award in whole or in part and grant the Participant another Award for
such number of shares of Common Stock as the Committee specifies, subject to
Section 4(b). The Committee may at any time or times amend the Plan or any
outstanding Award for the purpose of satisfying the requirements of any changes
in applicable laws or regulations or for any other purpose which may at the time
be permitted by law; and may at any time terminate the Plan as to any further
grants of Awards; PROVIDED, HOWEVER, that (except to the extent expressly
required or permitted herein) no such amendment shall, without the approval of
the stockholders of the Company, (a) increase the maximum number of shares
available for delivery under the Plan, (b) change the group of employees
eligible to receive Awards under the Plan, (c) reduce the price at which ISOs
may be granted, (d) extend the time within which Awards may be granted, or (e)
amend the provisions of this Section 17, and no such amendment shall adversely
affect the rights of any Participant (without his consent) under any Award
previously granted.
AS ADOPTED BY THE BOARD OF DIRECTORS: JANUARY 23, 1997
AS APPROVED BY THE STOCKHOLDERS: MAY ___, 1997
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EXHIBIT A
A "Change of Control" will occur for purposes of this Plan if (i) any
individual, corporation, partnership, company or other entity (a "Person"),
which term shall include a group, becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) of securities of the Company representing more than 30% of the combined
voting power of the Company's then-outstanding securities (other than as a
result of acquisitions of such securities from the Company), (ii) there is a
change of control of the Company of a kind which would be required to be
reported under Item 6(e) of Schedule 14A of Regulation 14A promulgated under the
Exchange Act) (or a similar item in a similar schedule or form), whether or not
the Company is then subject to such reporting requirement, (iii) the Company is
a party to, or the stockholders approve, a merger, consolidation, or other
reorganization (other than (a) a merger, consolidation or other reorganization
which would result in the voting securities of the Company outstanding
immediately prior thereto continuing to represent, either by remaining
outstanding or by being converted into vested securities of the surviving
entity, more than 50% of the combined voting power of the voting securities of
the Company or such surviving entity outstanding immediately after such merger,
consolidation, or other reorganization, or (b) a merger, consolidation, or other
reorganization effected to implement a recapitalization of the Company or
establish a holding company structure, or similar transaction in which no Person
acquires more than 20% of the combined voting power of the Company's then
outstanding securities, a sale of all or substantially all assets, or a plan of
liquidation or (iv) individuals who, at the date hereof, constitute the Board
cease for any reason to constitute a majority thereof; PROVIDED, HOWEVER, that
any director who is not in office at the date hereof but whose election by the
Board or whose nomination for election by the Company's stockholders was
approved by a vote of at least a majority of the directors then still in office
who either were directors at the date hereof or whose election or nomination for
election was previously so approved (other than an election or nomination of an
individual whose initial assumption of office is in connection with an actual or
threatened election contest relating to the election of the Directors of the
Company, as such terms are used in Rule 14a-11 of Regulation 14A promulgated
under the Exchange Act) shall be deemed to have been in office at the date
hereof for purpose of this definition.
Notwithstanding the foregoing provisions of this EXHIBIT A, a "Change of
Control" will not be deemed to have occurred solely because of the acquisition
of securities of the Company (or any reporting requirement under the Exchange
Act relating thereto) by an employee benefit plan maintained by the Company for
its employees.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
Holdco's Amended and Restated Declaration of Trust (the "Declaration
Trust") provides that, to the extent legally permissible, each of Holdco's
Trustees and officers shall be indemnified by the Trust estate against any
loss, liability or expense, including amounts paid in satisfaction of
judgments, in compromise or as fines and penalties, and counsel fees, imposed
upon or reasonably incurred by such person in connection with the defense or
disposition of any action, suit or other proceeding, whether civil or
criminal, in which such person may be involved or with which such person may
be threatened, while in office or thereafter, by reason of such person's
being or having been such a Trustee or officer, except with respect to any
matter as to which such person shall have been adjudicated in such action,
suit or proceeding not to have acted in good faith in the reasonable belief
that his or her action was in the best interests of Holdco; provided,
however, that as to any matter disposed of by a compromise payment by such
Trustee or officer, pursuant to a consent decree or otherwise, no
indemnification either for said payment or for any other expenses shall be
provided unless such compromise shall be approved as in the best interests of
Holdco, after notice that it involves such indemnification, (i) by a
disinterested majority of the Trustees then in office, or (ii) by a majority
of the Disinterested Trustees then in office, provided that there has been
obtained an opinion in writing of independent legal counsel to the effect
that such Trustee or officer appears to have acted in good faith in the
reasonable belief that his or her action was in the best interests of Holdco,
or (iii) by the vote, at a meeting duly called and held, of the holders of a
majority of the shares outstanding and entitled to vote thereon, exclusive of
any shares owned by any interested Trustee or officer.
In discharging his or her duties, a Trustee or officer of Holdco, when
acting in good faith, shall be fully protected in relying upon the books of
account of Holdco or of another organization in which he or she serves as
contemplated by the indeminification provisions of the Declaration of Trust,
reports made to the Company or to such other organization by any of its
officers or employees or by counsel, accountants, appraisers or other experts
or consultants selected with reasonable care by the Trustees or similar
governing body of such other organization, or upon other records of the
Holdco or of such other organization. The rights of indemnification provided
in the Declaration of Trust shall not be exclusive of or affect any other
rights to which any Trustee or officer may be entitled and such rights shall
inure to the benefit of his or her successors, heirs, executors,
administrators and other legal representatives. As used in this provision,
the terms "Trustee" and "officer" include persons who serve at the request of
Holdco as directors, officers, or trustees of another organization in which
Holdco has any direct or indirect interest as a shareholder, creditor or
otherwise.
Expenses, including counsel fees, reasonably incurred by any Trustee or
officer with respect to the defense or disposition of any action, suit or
proceeding referred to in the indemnification provisions of the Declaration
of Trust may be advanced by Holdco prior to the final disposition of such
action, suit or proceeding, upon receipt of an undertaking by or on behalf of
the recipient to repay such amount unless it is ultimately determined that he
or she is entitled to indemnification. Nothing contained in this provision
shall affect any rights to indemnification to which Holdco personnel other
than Trustees and officers may be entitled by contract or otherwise under
law. No Trustee shall be obligated to give any bond or other security for
the performance of any of his or her duties.
Holdco maintains two-part policies of insurance covering Trustees' and
officers' liability and reimbursement of Holdco for indemnification of a
Trustee or officer. The policies covering Trustees' and officers' liability
provide for payment on behalf of a Trustee or officer of any Loss (defined to
include among other things damages, judgments, settlements, costs and
expenses) arising from claims against such Trustee or officer by reason of
any Wrongful Act (as defined therein) subject to certain exclusions.
II-1
<PAGE>
Item 21. Exhibits and Financial Statement Schedules.
The following exhibits are being filed herewith:
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
2.1 Agreement and Plan of Merger dated as of March 14, 1997 (attached
as Appendix A).
3.1.1 Amended and Restated Declaration of Trust of Boston Edison
Holdings (attached as Appendix B)
3.1.2 Bylaws of Boston Edison Holdings
5.1 Opinion of Ropes & Gray as to the legality of the securities being
issued
8.1 Form of Opinion of Ropes & Gray as to certain federal income tax
consequences of the Merger
23.1 Consent of Ropes & Gray (included in its Opinions filed as
Exhibits 5.1 and 8.1, respectively)
23.2 Consent of Coopers & Lybrand, L.L.P.
99.1 Form of Proxy
Item 22. Undertakings.
The undersigned Registrant hereby undertakes:
(1) That, for purposes of determining any liability under the Securities
Act of 1933 (the "Securities Act"), each filing of the Registrant's annual
report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of
1934 (the "Exchange Act") (and, where applicable, each filing of an employee
benefit plan's annual report pursuant to Section 15(d) of the Exchange Act)
that is incorporated by reference in the Registration Statement shall be
deemed to be a new Registration Statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
(2) That prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this Registration
Statement, by any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c), the Registrant undertakes that such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other Items of
the applicable form.
(3) That every prospectus (i) that is filed pursuant to the immediately
preceding paragraph, or (ii) that purports to meet the requirements of
Section 10(a)(3) of the Securities Act and is used in connection with an
offering of securities subject to Rule 415, will be filed as a part of an
amendment to the Registration Statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
(4) That insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the
event that a claim
II-2
<PAGE>
for indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
(5) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Items 4, 10(b), 11, or 13 of this
Form, within one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt means.
This includes information contained in documents filed subsequent to the
effective date of the Registration Statement through the date of responding
to the request.
(6) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein,
that was not the subject of and included in the Registration Statement when
it became effective.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Boston, Commonwealth
of Massachusetts, on March 17, 1997.
BOSTON EDISON HOLDINGS
By /s/ Thomas J. May
---------------------------
Thomas J. May
Chairman, President and Chief
Executive Officer
Each person whose signature appears below hereby authorizes each of
Thomas J. May and Theodora S. Convisser with full power of substitution, to
execute in the name and on behalf of such person any amendment or any
post-effective amendment to this Registration Statement and to file the same,
with exhibits thereto, and other documents in connection therewith, making
such changes in this Registration Statement as the Registrant deems
appropriate, and appoints each of Thomas J. May and Theodora S. Convisser
with full power of substitution, attorney-in-fact to sign any amendment and
any post-effective amendment to this Registration Statement and to file the
same, with exhibits thereto, and other documents in connection therewith.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed below on March 17, 1997 by the following persons
in the capacities.
Signature Capacity
----------- ----------
/s/ Thomas J. May
- ---------------------------
Thomas J. May Chairman, President, Chief
Executive Officer (principal
executive officer) and Trustee
/s/ James J. Judge
- ---------------------------
James J. Judge Senior Vice President,
Treasurer (principal financial
and accounting officer) and
Trustee
/s/ Theodora S. Convisser
- ---------------------------
Theodora S. Convisser Clerk and Trustee
II-4
<PAGE>
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT PAGE
- ------- ----------------------- ------
2.1 Agreement and Plan of Merger dated as of
March 14, 1997 (attached as Appendix A)
3.1.1 Amended and Restated Declaration of Trust of
Boston Edison Holdings (attached as Appendix B)
3.1.2 Bylaws of Boston Edison Holdings
5.1 Opinion of Ropes & Gray as to the legality
of the securities being issued
8.1 Form of Opinion of Ropes & Gray as to
certain federal income tax consequences of
the Merger
23.1 Consent of Ropes & Gray (included in its Opinions
filed as Exhibits 5.1 and 8.1, respectively)
23.2 Consent of Coopers & Lybrand, L.L.P.
99.1 Form of Proxy
II-5
<PAGE>
BYLAWS
OF
BOSTON EDISON HOLDINGS
Section 1. DECLARATION OF TRUST
1.1 DECLARATION OF TRUST. References herein to the Declaration of Trust
shall apply to the Amended and Restated Declaration of Trust establishing
Boston Edison Holdings, dated March 14, 1997, as the same shall be amended
from time to time. These By-laws and all matters concerning the conduct and
regulation of the business and affairs of the Company shall be subject to
such provisions in regard thereto, if any, as are set forth in the
Declaration of Trust as from time to time in effect.
Section 2. TRUSTEES
2.1. NOMINATIONS. Nominations for the election of Trustees at an annual
meeting may be made by the Trustees or a committee appointed by the Trustees
or by any Shareholder entitled to vote generally in the election of Trustees;
however, any Shareholder entitled to vote generally in the election of
Trustees may nominate one or more persons for election as Trustees at an
annual meeting only if written notice of such Shareholder's intent to make
such nomination or nominations has been given, postage prepaid, to the clerk
not later than forty-five days prior to the anniversary of the date of the
immediately preceding annual meeting. Each such notice shall set forth: (a)
the name and address of the Shareholder who intends to make the nomination
and of the person or persons to be nominated; (b) a representation that the
Shareholder is a holder of record of the Company entitled to vote at such
meeting and intends to appear in person or by proxy at the meeting to
nominate the person or persons specified in the notice; (c) a description of
all arrangements or understandings between the Shareholder and each nominee
and any other person or persons (naming such person or persons) pursuant to
which the nomination or nominations are to be made by the Shareholder; (d)
such other information regarding each nominee proposed by such Shareholder as
would be required to be included in a proxy statement filed pursuant to the
proxy rules of the Securities and Exchange Commission; and (e) the consent of
each nominee to serve as a Trustee if so elected. The presiding officer of
the meeting may refuse to acknowledge the nomination of any person not made
in compliance with the foregoing procedure.
2.2 ACTION BY TRUSTEES. The action of the Trustees in respect of any
matter shall be by vote passed by the Trustees at a meeting or by a written
vote without a meeting (with or without notice to the other Trustees) signed
by at least a majority of the Trustees.
2.3. REGULAR MEETINGS. Regular meetings of the Trustees may be held at such
places and at such times as the Trustees may by vote from time to time
determine, and if so determined no notice thereof need be given, provided,
however, that notice of the first regular meeting following any such
determination shall be given to absent Trustees. A regular meeting of the
<PAGE>
Trustees may be held without notice immediately after and at the same place
as the annual meeting of the Shareholders or a special meeting of the
Shareholders held in lieu of such annual meeting.
2.4. SPECIAL MEETINGS. A special meeting of the Trustees may be held at any
time and at any place when called by the chairman, president, clerk or three
or more Trustees, by giving to each of the Trustees reasonable notice
thereof.
2.5. NOTICE. Without implied limitation, a notice thereof, mailed prepaid,
addressed to any Trustee, at his or her usual address, and posted in the City
of Boston, or where the principal office of the Company is situated, at least
forty-eight (48) hours before such meeting, or a notice given by telephone or
telefax at least twenty-four (24) hours before such meeting, shall be deemed
sufficient notice to such Trustee, whether the same be received by him or her
or not. It shall not be necessary to give notice of any such meeting to any
Trustee who is present at the meeting, or who executes, before or after the
meeting, a written waiver of such notice; and if under the foregoing
provisions there is no Trustee to whom notice of a meeting need be given,
such meeting may be held without call at any time and at any place.
2.6. MINUTES OF MEETINGS. The Trustees shall cause to be kept minutes of
all meetings of the Trustees and minutes of all meetings of the Shareholders,
and all such minutes, if signed or certified by the clerk or any assistant or
temporary clerk, shall be conclusive evidence of the matters therein stated.
2.7. PRESENCE THROUGH COMMUNICATIONS EQUIPMENT. Unless otherwise prohibited
by law, members of the Trustees may participate in a meeting by means of a
conference telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other at the same time
and participation by such means shall constitute presence in person at a
meeting.
2.8. COMMITTEES. The Trustees shall, by a vote of the majority of the
Trustees then in office, elect from their number an executive committee which
shall include the chairman of the Trustees, if any, and the president, and
which shall have and exercise all powers of the Trustees which may lawfully
be delegated in the intervals between the meetings of the Trustees. The
Trustees may also from time to time appoint such other committees as it may
determine and such committees shall have such powers as shall be specified by
vote of the Trustees. Except as the Trustees may otherwise determine, any
such committee may make rules for the conduct of its business, but unless
otherwise provided by the Trustees or such rules, its business shall be
conducted as nearly as may be in the same manner as is provided by this
declaration of trust for the conduct of business by the Trustees.
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<PAGE>
Section 3. OFFICERS AND AGENTS
3.1. ENUMERATION; QUALIFICATION. The officers of the Company shall be a
president, a treasurer and a clerk and any other officers, including a
chairman of the Trustees, as the Trustees may from time to time in their
discretion elect or appoint. The Trustees may likewise from time to time
appoint or employ or authorize the appointment or employment of agents,
employees or representatives of the Company, may fix their compensation, term
of employment, duties and powers, or authorize the same to be fixed, and may
remove them or terminate their employment or authorize the same to be done.
The clerk shall be a resident of Massachusetts unless the Company has a
resident agent appointed for the purpose of service of process. Any action
taken and any obligations entered into by such officers or agents on behalf
of the Company pursuant to authority granted to them shall be binding upon
the Trust estate. The Trustees may fix the compensation and duties and powers
of the officers or authorize the same to be fixed. Any officer may be but
need not be a Shareholder or Trustee and any two or more offices may be held
by the same person. Any officer may be required by the Trustees to give bond
for the faithful performance of his or her duties to the Company in such
amounts and with such sureties as the Trustees may determine.
3.2 RESIGNATION AND REMOVALS. Any officer may resign at any time by
delivering his or her resignation in writing to the chairman of the Trustees,
if any, the president, the treasurer or the clerk or to a meeting of the
Trustees. Such resignation shall be effective upon its receipt unless
specified to be effective at some other time. The Trustees may remove any
officer elected or appointed by them with or without cause by the vote of a
majority of the Trustees then in office. An officer may be removed for cause
only after reasonable notice and opportunity to be heard before the Trustees.
Except where a right to receive compensation shall be expressly provided in
a duly authorized written agreement with the Company, no officer resigning or
removed shall have any right to any compensation as such officer for any
period following his or her resignation or removal, or any right to damages
on account of such removal, whether his or her compensation be by the month
or by the year or otherwise, unless the Trustees shall in their discretion
provide for compensation
3.3. POWERS. Subject to law, to the Declaration of Trust, and the other
provisions of these By-laws, unless and until the Trustees otherwise
determines, the several officers shall have the authority and perform the
duties usually incident to their respective offices in the case of
corporations and such other duties and powers as the Trustees may from time
to time designate.
3.4. ELECTION. The chairman of the Trustees, if any, and the president,
treasurer and clerk shall be elected annually by the Trustees at their first
meeting following the annual meeting of the stockholders. Other officers, if
any, may be elected or appointed by the Trustees at said meeting or at any
other time. If the office of the president or the treasurer or clerk becomes
vacant, the Trustees may elect a successor by vote of a majority of the
Trustees then in office. If the office of any other officer becomes vacant,
the Trustees may elect a successor by vote of a majority of the Trustees
present. Each such successor shall hold office until his or her successor is
chosen and qualified, or until such officer sooner dies, resigns, is removed
or becomes disqualified.
-3-
<PAGE>
3.5. TENURE. The chairman of the trustees, the president, the treasurer
and the clerk shall continue in office until the first meeting of the
Trustees following the next succeeding annual meeting of the Shareholders or
the special meeting of the Shareholders held in lieu of such annual meeting,
and until his or her successor, if any, is chosen and qualified, and other
officers shall hold office until any such officer sooner dies, resigns, is
removed or becomes disqualified. Each agent shall retain his or her
authority at the pleasure of the Trustees.
3.6. CHIEF EXECUTIVE OFFICER, CHAIRMAN OF THE TRUSTEES, PRESIDENT AND VICE
PRESIDENTS. The Trustees shall designate either the chairman of the Trustees
or the president as the chief executive officer of the Company who shall have
general charge and supervision of the business of the Company, subject to the
control of the Trustees.
The president, if not designated as the chief executive officer, and any
vice presidents shall have the duties and powers as shall be designated by
the Trustees from time to time or the chief executive officer of the Company.
3.7. TREASURER AND ASSISTANT TREASURERS. The treasurer shall be in charge
of the Company's funds and valuable papers, books of account and accounting
records and shall have such other duties and powers as may be designated from
time to time by the Trustees or by the chief executive officer of the Company.
Any assistant treasurer shall have such duties and powers as shall be
designated from time to time by the Trustees or the chief executive officer
of the Company.
3.8. CLERK AND ASSISTANT CLERKS. The clerk shall record all proceedings of
the stockholders in a book or series of books to be kept therefor, which book
or books shall be kept in the principal office of the Company or at the
office of its transfer agent or of its clerk and shall be open at all
reasonable times to the inspection of any stockholder. In the absence of the
clerk from any meeting of stockholders, an assistant clerk, or if there be
none or the assistant clerk be absent, a temporary clerk chosen at the
meeting, shall record the proceedings thereof in the aforesaid book. Unless
a transfer agent has been appointed, the clerk shall keep or cause to be kept
the stock and transfer records of the Company, which shall contain the names
and record addresses of all the stockholders and the amount of stock held by
each. The clerk shall keep a true record of the proceedings of all meetings
of the Trustees and in the clerk's absence from any such meeting an assistant
clerk, or if there be none or the assistant clerk is absent, a temporary
clerk chosen at the meeting, shall record the proceedings thereof.
Any assistant clerk shall have such duties and powers as shall be
designated from time to time by the Trustees or the chief executive officer
of the Company.
-4-
<PAGE>
Section 4. CAPITAL STOCK
4.1. STOCK CERTIFICATES. Every Shareholder shall be entitled to receive a
certificate or certificates specifying the number and kind of shares held by
such Shareholder, with such description, if any, as may be necessary to
distinguish them from other shares to which different rights are attached.
Such certificates shall be signed by the chairman, the president or a vice
president and by the treasurer or an assistant treasurer of the Company and
countersigned by the transfer agent, if any, and registered by or on behalf
of the Trustees or by a registrar, if any, and a notation of such
registration shall be endorsed thereon. Such signatures may be facsimiles if
the certificate is signed by a transfer agent or by a registrar other than a
Trustee, officer or employee of the Company. Even though any officer who has
signed or whose facsimile signature has been placed on such certificate shall
have ceased to be such officer before such certificate is issued, such
certificate may nevertheless be issued by the Company.
In lieu of issuing share certificates, the Trustees or the transfer agent
may either issue receipts therefor or keep accounts upon the books of the
Company for the record holders of such shares, who shall in either case be
deemed, for all purposes hereunder, to be the holders of certificates for
such shares as if they had accepted such certificates and shall be held to
have expressly assented and agreed to the terms hereof.
4.2. LOST, STOLEN OR DESTROYED SHARE CERTIFICATES. In the event the
Trustees authorized the issuance of share certificates, subject to Section
4.3, a new certificate may be issued to replace any certificate previously
issued, on satisfactory evidence that the said certificate previously issued
has been worn out, mutilated, lost or destroyed and on such terms, if any, as
to indemnity and otherwise, as the Trustees shall deem proper.
Section 5. COMMON SEAL
The seal of the Company shall bear the inscription: BOSTON EDISON
HOLDINGS -- 1997 -- Massachusetts.
Section 6. EXECUTION OF PAPERS
Except as the Trustees may generally or in particular cases authorize the
execution thereof in some other manner, all deeds, leases, transfers,
contracts, bonds, notes, checks, drafts, and other obligations made, accepted
or endorsed on behalf of the Company shall be signed by the chairman of the
Trustees, if any, or by the president or by one or more of the vice
presidents or the treasurer.
-5-
<PAGE>
Section 7. FISCAL YEAR
Until the Trustees shall change the same, the fiscal year shall end on
the last day of December in each year.
Section 8. CONTROL SHARE ACQUISITIONS
The provisions of Massachusetts General Laws Chapter 110D as in effect
from time to time shall not apply to control share acquisitions of the
Company.
Section 9. AMENDMENTS
These By-laws may be altered, amended or repealed by vote of the majority of
the Trustees then in office, except with respect to any provision which by
law or by a provision of this trust requires action by the Shareholders.
-6-
<PAGE>
[ROPES & GRAY LETTERHEAD]
March 17, 1997
Boston Edison Holdings
800 Boylston Street
Boston, Massachusetts 02199
Re: Issuance of Shares of Beneficial Interest in Connection with the
Formation of a Holding Company Structure for Boston Edison Company
Ladies and Gentlemen:
At your request, we have examined the Registration Statement on Form S-4
(the "Registration Statement") in the form being filed by Boston Edison
Holdings, a Massachusetts business trust ("Holdco"), with the Securities and
Exchange Commission relating to the registration under the Securities Act of
1933, as amended, of up to 48,514,973 shares of beneficial interest of
Holdco, $1.00 par value per share (the "Holdco Common Shares"), in connection
with a merger that will cause Holdco to become the parent holding company of
Boston Edison Company, a Massachusetts corporation.
We have acted as counsel for Holdco in connection with the proposed issue
and sale of the Holdco Common Shares. We are familiar with the proceedings
taken by Holdco in respect thereof and have examined originals or certified or
attested copies of such certificates, records and documents as we have deemed
necessary for the purposes of this opinion.
Basing our opinion on the foregoing, we are of the opinion that:
(1) Holdco is a business trust validly organized and existing under the
laws of the Commonwealth of Massachusetts and is duly qualified to
carry on the business which it is now conducting; and
(2) When the Registration Statement has been declared effective, the
issuance of the Holdco Common Shares has been duly authorized by
appropriate corporate action and by appropriate action of regulatory
authorities having jurisdiction, including the Massachusetts
Department of Public Utilities, the Federal Energy Regulatory
Commission, the Nuclear Regulatory Commission and the Securities
<PAGE>
Boston Edison Holdings March 17, 1997
and Exchange Commission (pursuant to the Public Utility Holding
Company Act of 1935, as amended) and the Holdco Common Shares have
been issued in accordance with the terms of the Registration
Statement, including the Agreement and Plan of Merger constituting
APPENDIX A to the Proxy Statement/Prospectus contained in the
Registration Statement, the Holdco Common Shares will be validly
issued, fully paid and non-assessable.
We express no opinion as to matters of law in jurisdictions other than the
State of Massachusetts and the federal law of the United States, and express no
opinion as to the applicability of the so-called "blue sky" or securities laws
of the several states, including Massachusetts.
We understand that this opinion is to be used in connection with the
above-referenced Registration Statement and consent to the filing of this
opinion with and as part of said Registration Statement and the use of our name
therein and in the related Proxy Statement/Prospectus under the captions "Legal
Opinions" and "Experts."
Very truly yours,
/s/ Ropes & Gray
Ropes & Gray
<PAGE>
[ROPES & GRAY LETTERHEAD]
________________, 1997
Boston Edison Company
800 Boylston Street
Boston, Massachusetts 02199
Re: Certain Federal Income Tax Consequences in Connection with the
Formation of a Holding Company Structure for Boston Edison Company
Ladies and Gentlemen:
We have acted as counsel to Boston Edison Company, a Massachusetts
utility corporation ("Boston Edison"), in connection with the contemplated
formation of a holding company structure for Boston Edison Company and a
related Agreement and Plan of Merger (the "Merger Agreement") among Boston
Edison, Boston Edison Holdings, a Massachusetts business trust formed by
Boston Edison ("Holdco"), and Boston Edison Mergeco Electric Company, Inc., a
Massachusetts utility corporation ("Mergeco"). All capitalized terms used
herein, unless otherwise specified, have the meanings assigned to them in the
Merger Agreement.
In rendering this opinion, we have examined and relied upon (without any
independent investigation or review thereof) the accuracy and completeness of
the facts, information, covenants and representations contained in originals or
copies, certified or otherwise identified to our satisfaction, of the Merger
Agreement, the Registration Statement on Form S-4 filed by Holdco with the
Securities and Exchange Commission (the "Registration Statement"), such other
documents as we have deemed necessary or appropriate as a basis for the opinion
set forth below. In addition, we have relied upon certain statements and
representations made by executives of Boston Edison, as well as other
statements, representations and assumptions. Our opinion is conditioned on,
among other things, the initial and continuing accuracy of such facts,
information, covenants, representations and assumptions.
In our examination, we have assumed the genuineness of all signatures, the
legal capacity of natural persons, the authenticity of all documents submitted
to us as originals, the conformity to original documents of all documents
submitted to us as certified or photostatic copies, the authenticity of the
originals of such documents and that there has been (or will be by the Effective
Time of the Merger) due execution and delivery of all documents where due
execution and delivery are prerequisites to effectiveness thereof. We have
assumed that the Merger will be consummated pursuant to applicable state law in
accordance with the Merger Agreement and as described in the Registration
Statement. We have also assumed that any representation or statement made "to
the
<PAGE>
best of knowledge" or similarly qualified is correct without such
qualification. As to all matters in which a person or entity making a
representation referred to above has represented that such person or entity
either is not a party to, does not have, or is not aware of, any plan or
intention, understanding or agreement, we have assumed that there is in fact
no such plan, intention, understanding or agreement.
Based upon and subject to the foregoing, we are of the opinion that the
Merger will be tax-free under section 351 of the Internal Revenue Code of
1986, as amended (the "Code"). As a result:
1. No gain or loss will be recognized by the holders of Boston Edison Common
Stock upon the exchange of their shares of Boston Edison Common Stock solely
for Holdco Common Shares pursuant to the Merger.
2. The tax basis of the Holdco Common Shares received pursuant to the Merger
will be the same as the basis of the shares of Boston Edison Common Stock
exchanged therefor.
3. The holding period for Holdco Common Shares received pursuant to the Merger
will include the period that the shares of Boston Edison Common Stock
exchanged therefor were held by the holder, provided such shares were a
capital asset of the holder.
Our opinion is based upon the Code, Treasury Regulations, Internal
Revenue Service rulings, judicial decisions, and other applicable authority,
all as in effect on the date of this opinion. The legal authorities on which
this opinion is based may be changed at any time. Any such changes may be
retroactively applied and could modify the opinions expressed above. We
disclaim any obligation to notify you or any other person after the date
hereof if any change in fact and/or law should change our opinion with
respect to any matters set forth herein. This opinion does not address any
tax considerations under foreign, state or local laws, or any special tax
considerations applicable to certain holders of Boston Edison Common Stock in
light of their particular circumstances, including persons who are not United
States persons, dealers in securities, tax-exempt entities, and stockholders
who do not hold Boston Edison Common Stock as "capital assets" within the
meaning of Section 1221 of the Code.
This opinion is rendered solely for your benefit and for the benefit of
holders of Boston Edison Common Stock and shall not be relied upon,
circulated or quoted, in whole or in part, by any other party and shall not
be referred to in any report or document furnished to any other party without
our prior written consent. We hereby consent, however, to the inclusion of
this opinion as an exhibit to the Registration Statement and the reference to
this firm under the caption "Certain Federal Income Tax Consequences" therein.
Very truly yours,
Ropes & Gray
-2-
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this registration
statement of Boston Edison Holdings on Form S-4 of our report dated January
25, 1996, on our audits of the consolidated financial statements of Boston
Edison Company as of December 31, 1995 and 1994, and for each of the three
years in the period ended December 31, 1995, which report is included in the
Annual Report on Form 10-K of Boston Edison Company for the year ended
December 31, 1995.
/s/ Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
March 14, 1997
<PAGE>
THIS IS YOUR PROXY.
YOUR VOTE IS IMPORTANT
This year's Annual Stockholders' Meeting will be held:
DATE: THURSDAY, MAY 15, 1997
LOCATION: THE FIRST NATIONAL BANK OF BOSTON
AUDITORIUM, LOBBY LEVEL
100 FEDERAL STREET
BOSTON, MASSACHUSETTS
TIME: 11:00 A.M.
To ensure that your shares are voted on your behalf, please return your proxy
promptly in the enclosed envelope.
- -------------------------------------------------------------------------------
/X/ Please mark
votes as in
this example
PLEASE DO NOT MARK ANY BOXES IF VOTING WITH MANAGEMENT.
The Board of Directors recommends a vote FOR Proposal 1, FOR Proposal 2 and
FOR Proposal 3.
1. Election of Directors
NOMINEES: Gary L. Countryman,
Thomas G. Dignan, Jr., Herbert
Roth, Jr., Steven J. Sweeney.
FOR WITHHELD
/ / / /
/ / ___________________________
For all nominees except as
noted above
Signature _______________ Date________
FOR AGAINST ABSTAIN
2. Proposal to Approve Plan of / / / / / /
Restructuring to adopt a Holding
Company structure.
3. Proposal to Approve the 1997 / / / / / /
Stock Incentive Plan.
MARK HERE / /
TO DISCONTINUE
MULTIPLE
MAILINGS
MARK HERE / /
IF YOU PLAN
TO ATTEND
THE MEETINGS
MARK HERE / /
FOR ADDRESS
CHANGE AND
NOTE AT LEFT
Please sign name exactly as it appears hereon.
When signing as attorney, agent, guardian, executor, administrator, trustee
or the like, please give your full title as such.
Signature _______________ Date________
<PAGE>
BOSTON EDISON COMPANY
Proxy for Annual Meeting on May 15, 1997
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints Thomas G. Dignan, Jr., Charles K. Gifford
and Thomas J. May and each of them proxies, with power of substitution, to act
and vote in the name of the undersigned, with all the powers that the
undersigned would possess if personally present, on all matters which may come
before the Annual Meeting of Stockholder of Boston Edison Company to be held on
May 15, 1997 and any adjournment thereof.
The proxies are hereby authorized and instructed upon the matters specified
in the Notice of Annual Meeting as set forth on the reverse side hereof. IF NO
CHOICE IS INDICATED AS TO A PROPOSAL, THE PROXIES SHALL VOTE FOR SUCH PROPOSAL.
THE PROXIES MAY VOTE IN THEIR DISCRETION ON ANY OTHER MATTER WHICH MAY PROPERLY
COME BEFORE THE MEETING.
The undersigned hereby acknowledges receipt of the Notice of Annual Meeting
dated March 26, 1997 and the related Proxy Statement
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
