<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY
STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
FILED BY THE REGISTRANT FILED BY A PARTY OTHER THAN THE REGISTRANT
Check the appropriate box:
|X| Preliminary Proxy Statement
| | Definitive Proxy Statement
| | Definitive Additional Materials
| | Soliciting Material Pursuant to 240, 14a-11(c) or 240, 14a-12
BOSTON EDISON COMPANY
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
BOSTON EDISON COMPANY
(NAME OF PERSON(S) FILING PROXY STATEMENT)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
|X| $125 per Exchange Act Rules Q-11 (c) (1) (ii), 14a-6(i)(1), or 14a-6(i)(2).
| | $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
| | Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
(4) Proposed maximum aggregate value of transaction:
| | Check box if any or part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the
previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
BOSTON EDISON COMPANY
800 BOYLSTON STREET, BOSTON, MASSACHUSETTS 02199
NOTICE OF ANNUAL STOCKHOLDERS' MEETING
TO BE HELD ON APRIL 22, 1994
To the Holders of Common Stock:
The Annual Meeting of Stockholders of Boston Edison Company (the
"Company") will be held at the Sheraton Boston Hotel & Towers, Prudential
Center, Boston, Massachusetts, on Friday, April 22, 1994 at 11:00 a.m., for the
following purposes:
1. To elect five Class III directors to serve until the 1997
Annual Meeting.
2. To vote upon a proposal to amend the Articles of Organization
of the Company to increase by 500,000 the number of shares
of Cumulative Preferred Stock, having a par value of $100,
which the Company is authorized to issue.
3. To vote upon a proposal to amend the Articles of Organization
of the Company to authorize the issuance of reacquired
shares of Cumulative Preferred Stock.
4. To vote upon a proposal to restate the Articles of
Organization of the Company to consolidate the present
fifteen amendments to the Articles of Organization and the
amendments contemplated in Proposals Nos. 2 and 3 hereof
into a single document and to delete provisions which are
no longer operative.
5. To vote upon a stockholder proposal recommending the
immediate shutdown and retirement of the Company's nuclear
unit, which the Board of Directors opposes, if the
proposal is presented at the meeting.
6. 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 will be found in the Proxy Statement enclosed herewith.
The close of business on February 28, 1994 has been fixed as the
record date for the determination of holders of the Company's Common Stock
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 OF THE COMPANY A WRITTEN REVOCATION OR A PROXY BEARING A LATER DATE
OR BY ORAL REVOCATION IN PERSON TO THE CLERK OF THE COMPANY AT THE ANNUAL
MEETING.
By Order of the Board of Directors,
Theodora S. Convisser
Clerk
Boston, Massachusetts
March 17, 1994
<PAGE> 3
BOSTON EDISON COMPANY
800 Boylston Street, Boston, Massachusetts 02199
(617) 424-2000
PROXY STATEMENT
This Proxy Statement, the accompanying proxy and Annual Report to
stockholders for the year 1993 containing financial statements are being mailed
to stockholders beginning March 17, 1994. They are furnished in connection
with the solicitation of proxies by the Board of Directors of Boston Edison
Company to be voted at the Annual Meeting of Stockh olders of the Company to be
held on April 22, 1994 for the purposes set forth in the foregoing Notice.
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 the Company a written revocation or a proxy
bearing a later date or by oral revocation in perso n to the Clerk of the
Company at the Annual Meeting. If choices are not specified on the
accompanying proxy, the shares will be voted for the election of all of the
nominees for director specified below, FOR Proposals Nos. 2, 3 and 4 and
against Proposal No. 5.
All the costs of preparing, assembling and mailing the material
enclosed and any additional material which may be sent in connection with the
solicitation of the enclosed proxies will be paid by the Company, and no part
thereof will be paid directly or indirectly by any other person.
The Company has retained The First National Bank of Boston to assist
in the solicitation of proxies at a fee of $7,800, plus usual and customary
expenses. Some employees may devote a part of their time to the solicitation
of proxies or for attendance at the meeting but no additional compensation will
be paid them for the time so employed and the cost of such additional
solicitation will be nominal. The Company will reimburse brokerage firms,
banks, trustees and others for their actual out-of-pocket expenses in
forwarding proxy material to the beneficial owners of its Common Stock.
On February 28, 1994, there were issued and outstanding 45,212,568
shares ($1 par value per share) of Common Stock of the Company. Only common
stockholders of record 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 the Company.
PROPOSAL NO. 1 - ELECTION OF DIRECTORS
INFORMATION ABOUT NOMINEES AND INCUMBENT DIRECTORS
Pursuant to the Company's Bylaws, the Board of Directors has fixed the
number of directors at 14 members. The Company's Restated Articles of
Organization, as amended, provides for the classification of the Board of
Directors into three classes serving staggered three-year terms. The five
persons named below have been nominated by the Board of Directors for election
as Class III directors for a term expiring at the 1997 Annual Meeting and until
their successors are duly chosen and qualified. The remaining nine directors
will continue to serve as set forth below, with the five Class I directors
having terms expiring in 1995 and the four Class II directors having terms
expiring in 1996. 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. Charles
A. Zraket, who has served on the Company's Board of Directors since 1989, will
be retiring from the Board at the Annual Meeting pursuant to the Board's
director retirement policy described below.
The Board of Directors has adopted the following director retirement
policy. Directors who are employees of the Company, with the exception of the
chief executive officer, retire from the Board when they retire from employment
with the Company. Directors who are not employees of the Company or who have
served as chief executive officer retire from the Board at the Annual Meeting
of Stockholders following their seventieth birthday.
1
<PAGE> 4
The Board of Directors, which held eight regular meetings and two
special meetings during 1993, 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 1993 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 five 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
the Company'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 the Company's human resources policies, met three times. The Nuclear
Oversight Committee, which oversees the Company's nuclear operations, met four
times. The Capital Investment Committee, which provides external oversight of
the Company'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 the Company's debt and equity offerings, met four times.
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:
<TABLE>
NOMINEES AS CLASS III DIRECTORS - TERMS EXPIRING 1997
<CAPTION>
PRINCIPAL OCCUPATION (1)
NOMINEE AND DIRECTORSHIPS
------- ------------------
<S> <C>
Gary L. Countryman Chairman of the Board (since 1991) and Chief
Age: 54 Executive Officer, formerly President (1986-1992),
Director since: 1986 Liberty Mutual Insurance Company, and Chairman and
Member: Executive Chief Executive Officer, Liberty Life Assurance
Personnel and Company of Boston
Capital Investment Directorships: Liberty Mutual Insurance Company,
Committees 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.
George W. Davis Executive Vice President (since 1992), formerly
Age: 60 Senior Vice President (1990-1991) and Vice
Director since: 1992 President (1989-1990), Boston Edison Company,
Vice Admiral (ret.) U.S. Navy and former Commander
Naval Surface Force, Pacific (1985-1988)
Thomas G. Dignan, Jr.(2) Partner, Ropes & Gray (Law Firm)
Age: 53
Director since: 1983
Member: Executive,
Nuclear Oversight and
Capital Investment
Committees
Herbert Roth, Jr. Former Chairman of the Board (1978-1985) and Chief
Age: 65 Executive Officer (1968-1985), LFE Corporation
Director since: 1978 (Traffic and IndustrialProcess Control Systems)
Member: Capital Directorships/Trusteeships: Landauer, Inc.,
Investment and Tech/Ops Sevcon, Inc., Phoenix Home Life Mutual
Nuclear Oversight Insurance Company, Phoenix Series Fund, Phoenix
Committees Total Return Fund, Inc., Phoenix Multi-Portfolio
Fund, The Big Edge Series Fund, Mark IV Industries, Key
Energy Group, Inc.
</TABLE>
2
<PAGE> 5
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION (1)
NOMINEE AND DIRECTORSHIPS
------- ------------------
<S> <C>
Stephen J. Sweeney Former Chairman of the Board (1986-1992) and
Age: 65 Chief Executive Officer (1984-1990), Boston
Director since: 1983 Edison Company
Member: Capital Directorships: Selecterm, Inc., Liberty Mutual
Investment and Insurance Company, Liberty Mutual Fire Insurance
Nuclear Oversight Company, Liberty Life Assurance Company of
Committees Boston, Uno Restaurant Corporation
</TABLE>
<TABLE>
INCUMBENT CLASS I DIRECTORS - TERMS EXPIRING 1995
<CAPTION>
PRINCIPAL OCCUPATION (1)
DIRECTOR AND DIRECTORSHIPS
-------- -----------------------
<S> <C>
Nelson S. Gifford Former Vice Chairman (1990-1991), Avery Dennison
Age: 63 Corporation (Pressure-Sensitive Adhesives and
Director since: 1981 Materials, Office Products, Product
Member: Audit, Finance Identification and Control Systems, and Specialty
and Risk Management Chemicals), formerly Chairman (1986-1990) and
and Capital Investment Chief Executive Officer (1975-1990), Dennison
Committees Manufacturing Company (Stationery Products, Systems
and Packaging)
Directorships: John Hancock Mutual Life Insurance
Company, Reed and Barton, J. M. Huber Corp., Nypro Inc.
Kenneth I. Guscott General Partner, Long Bay Management Company (Real
Age: 68 Estate Development)
Director since: 1973 Directorships: Phoenix Home Life Mutual Insurance
Member: Executive Company
and Nuclear Oversight
Committees
Matina S. Horner Executive Vice President (since 1989), Teachers Insurance and
Age: 54 Annuity Association/College Retirement Equities Fund,
Director since: 1988 formerly President (1972-1989), Radcliffe College
Member: Audit, Finance Directorships: The Neiman-Marcus Group, Inc.
and Risk Management,
Executive and Pricing
Committees
Bernard W. Reznicek Chairman (since 1992) and Chief Executive Officer (since 1990),
Age: 57 formerly President (1987-1992) and Chief Operating Officer
Director since: 1987 (1987-1990), Boston Edison Company
Member: Executive and Directorships: Guarantee Mutual Life Company, State Street
Pricing Committees Boston Corporation, State Street Bank and Trust Company
Paul E. Tsongas Partner (1985-1989 and 1991 to present), formerly Of Counsel
Age: 53 (1989-1991), Foley, Hoag & Eliot (Law Firm), Former Chairman,
Director since: 1985 Commonwealth of Massachusetts Board of Regents of Higher
Member: Audit, Finance Education (1989-1991), former United States Senator from
and Risk Management, Massachusetts (1979-1985)
Executive Personnel and Directorships: Wang Laboratories, Shawmut Bank, N.A.,
Pricing Committees M/A-COM, Inc., Fibretek Inc., Tecogen, Inc., Northeast Energy
</TABLE>
3
<PAGE> 6
<TABLE>
INCUMBENT CLASS II DIRECTORS - TERMS EXPIRING 1996
<CAPTION>
PRINCIPAL OCCUPATION (1)
DIRECTOR AND DIRECTORSHIPS
-------- -----------------------
<S> <C>
William F. Connell Chairman and Chief Executive Officer, Connell Limited Partnership
Age: 55 (Metals Recycling and Processing and Industrial Production)
Director since: 1987 Directorships: Connell Industries, Inc., Teksid Aluminum
Member: Executive Foundry, Inc., Arthur D. Little, Inc., Harcourt General, Inc.,
and Executive Bank of Boston Corporation, The First National Bank of Boston,
Personnel Committees North American Mortgage Company
Charles K. Gifford President (since 1989), formerly Vice Chairman (1987-1989), Bank
Age: 51 of Boston Corporation (Bank Holding Company) and The
Director since: 1990 First National Bank of Boston
Member: Audit, Finance Directorships: Bank of Boston Corporation, The First National
and Risk Management, Bank of Boston, Massachusetts Mutual Life Insurance Company,
Executive Personnel and Massachusetts Minority Enterprise Investment Corporation
Pricing Committees
Thomas J. May President and Chief Operating Officer (since 1993),
Age: 46 formerly Executive Vice President (1990-1993) and
Director since: 1991 Senior Vice President (1987-1990), Boston Edison
Member: Executive and Company
Pricing Committee
Sherry H. Penney Chancellor, University of Massachusetts at Boston,
Age: 56 Directorships: Various educational, civic and
Director since: 1990 cultural organizations
Member: Audit, Finance
and Risk Management
and Executive Personnel
Committees
<FN>
(1) Except as otherwise noted, each nominee and incumbent director has
held the position indicated for the last five years.
(2) During 1993 the Company paid legal fees to the firm of Ropes & Gray.
</TABLE>
STOCK OWNERSHIP BY DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the number of shares of the Company's
Common Stock, $1.00 par value, beneficially owned as of January 31, 1994 by
each director and nominee, each of the executive officers named in the
Compensation Tables, and the directors and executive officers of the Company as
a group. None of the individual or collective holdin gs listed below exceeds
1% of the Company's outstanding 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
the Company's preferred stock.
4
<PAGE> 7
<TABLE>
<CAPTION>
NUMBER OF
COMMON SHARES
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED
------------------------ ------------------
<S> <C>
William F. Connell 1,059
Gary L. Countryman 859
Cameron H. Daley 2,891
George W. Davis 1,969
Thomas G. Dignan, Jr. 1,166
Charles K. Gifford 924
Nelson S. Gifford 1,458
Kenneth I. Guscott 1,430
Matina S. Horner 859
Thomas J. May 7,055 (1)
Sherry H. Penney 909
Charles E. Peters, Jr. 1,687
Bernard W. Reznicek 11,537 (1)
Herbert Roth, Jr. 3,400
Stephen J. Sweeney 4,338 (2)
Paul E. Tsongas 1,067
Charles A. Zraket 859
All directors and executive officers as a 56,893 (1)
group, including those named above (25 persons)
<FN>
(1) The following shares are held in the Company's Deferred
Compensation Trust on account of deferrals by the following
participants under the Company's Deferred Compensation Plan:
Mr. Reznicek, 4,747 shares; Mr. May, 2,821 shares; and all
executive officers as a group, 10,466 shares.
Participants in the Plan may instruct the trustee to vote
shares of Company 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) 3,517 of Mr. Sweeney's 4,338 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.
</TABLE>
DIRECTOR AND EXECUTIVE COMPENSATION
DIRECTOR COMPENSATION
Each director who is not an employee of the Company receives an annual Board
retainer of $10,000 and 200 shares of the Company's Common Stock pursuant to
the Company'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
receives an annual Committee retainer of $4,000 and the other members of those
committees receive an annual Committee retainer of $2,750. Each director who
is not an employee of the Company 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 the Company's Deferred Fee Plan. Each director who
is not otherwise eligible for any Company pension or retirement benefit is
entitled to an annual amount, equal to the
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<PAGE> 8
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.
REPORT OF THE EXECUTIVE PERSONNEL COMMITTEE
Under rules established by the Securities and Exchange Commission, the
Company is required to provide certain data and information in regard to the
compensation and benefits provided to its executive officers, including the
Company's Chief Executive Officer and 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.
THE EXECUTIVE PERSONNEL COMMITTEE
The Company's executive compensation program is administered by the
Executive Personnel Committee, a committee of the Board of Directors composed
of the five non-employee directors listed below this report. None of these
non-employee directors has any interlocking or other relationships with the
Company that would require disclosure by the Securities and Exchange
Commission. 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 the Company, none of whom are eligible to participate
in the incentive plans described below.
COMPENSATION PHILOSOPHY
The executive compensation philosophy of the Company is to provide
competitive levels of compensation that advance the Company's annual and
long-term performance objectives, reward corporate performance, and assist the
Company in attracting, retaining and motivating highly qualified executives.
The framework for the Committee's executive compensation programs is to
establish base salaries which are competitive with national utilities, and to
incent 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 Company operations, to provide savings for customers 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 the Company's Executive Annual Incentive Compensation Plan, and shares of
the Company's Common Stock awarded under the Company's Performance Share Plan.
The Company compares its compensation levels against other electric utility
companies which subscribe to a similar total compensation strategy, that is a
policy which provides for base salary as well as the potential for annual and
long-term incentive awards. The Company's strategy is to establish base
salaries at the 60th percentile for those electric utilities which possess the
same total compensation strategy, and to establish potential total compensation
(base salary, annual and long-term incentives) at the 75th percentile for
extraordinary performance.
During 1993, the Committee extensively reviewed data collected by nationally
recognized compensation experts as well as by the Company's Human Resources
group to determine whether the Company was meeting its compensation strategy.
The review evaluated base salary and annual and long-term incentives for nearly
all publicly traded electric utilitie s possessing a similar total
compensation strategy. The data demonstrated that the Company was in
conformance with its compensation strategy to the satisfaction of the
Committee.
The review further examined the design of the annual and long-term plans
against the executive incentive plans provided by nearly all publicly traded
electric utilities. The purpose of the study was to determine if the Company's
incentive plans were consistent with industry practice regarding such features
as performance measures and target award levels. While the review indicated
performance measures for both the
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<PAGE> 9
Company's annual and long-term plans to be appropriate and consistent with
practice within the electric utility industry, it showed most long-term plans
to place greater weight on capital appreciation. The Committee therefore
adopted management's recommendation to modify the weighting between the
shareholder and customer measures of the long-term plan, starting with the
1993-1995 plan cycle, from 50% for each measure to 75% for the shareholder
measure and 25% for the customer measure (further discussion of the shareholder
and customer measures is included under "Long-Term Compensation" below). The
review further indicated the target award levels for the long-term plan to be
appropriate and consistent with practice within the electric utility industry,
but somewhat high in the annual plan for positions at the Senior Vice President
level and below. The Committee therefore adopted management's recommendation
to reduce the target award levels in the annual plan for positions at the
Senior Vice President level and below by approximately 25% over two years.
Executive officer compensation in 1993 was not impacted by new Section
162(m) of the Internal Revenue Code because compensation levels were below the
$1 million threshold established by that statute. The Committee intends to
consider the impact of Section 162(m) in establishing compensation levels in
the future to the extent it may become applicable.
ANNUAL INCENTIVE
The Company's annual incentive payments, reported in the fourth column
of the Summary Compensation Table below, are based on both corporate and unit
performance objectives which are derived from the corporate operating plan.
Corporate performance objectives include a comparison of target to actual
earnings per share from operations and achievement of unit performance
objectives. The earnings per share objective reflects certain market,
financial, and operating goals to be achieved and is approved by the Committee.
Unit performance objectives include predetermined levels for operating and
capital budgets, complement and overtime, and are approved by the Committee.
The annual incentive plan awards for Messrs. Reznicek, May and Davis are based
entirely on the Company's degree of achievement regarding the earnings per
share objective. In 1993, earnings per share from operations was $2.28, which
exceeded the target of $2.20. The annual incentive plan awards for Messrs.
Daley and Peters are based equally on the earnings per share objective and
their unit performance objectives. In 1993, the unit performance objectives
for these two officers were achieved at the target level and approved by the
Committee.
LONG-TERM COMPENSATION
The purpose of the Performance Share Plan is to enhance corporate
focus on the Company's business direction beyond the annual operating plan and
to promote achievement of long-term corporate objectives which provide savings
to create value for the stockholder and the customer. The potential award
receivable under the Performance Share Plan at the end of a cycle is
conditioned upon meeting two performance criteria, a stockholder measure and a
customer measure. The stockholder criterion measures 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 the Company's common stock performance to that of the Goldman Sachs electric
utility database, a group of approximately 80 companies. To reach the target
award, Boston Edison must be within the top 30% of the industry as measured by
the Goldman Sachs database; for the threshold award, the Company must be in the
top 40%; and for the maximum award, the Company must be in the top 20%. During
the 1991-1993 cycle (see the eighth column of the Summary Compensation Table
below), Boston Edison's performance was in the top 20%. The customer measure
requires Boston Edison to be within the top 35% of a peer group of 13 urban
utilities (selected because they possess operations and customer
characteristics similar to those of Boston Edison) in terms of having the
lowest increase in residential customer price per kWh through the three-year
period to reach target. The percentage required for threshold is 50% and for
maximum is 20%. During the 1991-1993 cycle, the Company did not achieve the
customer measure threshold level and the Plan participants did not qualify for
the portion of the award attributable thereto. The two performance measures
were equally weighted (50% each) when determining the final award. All awards
under the Performance Share Plan are paid in shares of the Company's Common
Stock.
7
<PAGE> 10
OTHER PLANS
At various times in the past, the Company 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 and life and health
insurance plans, and a 401(k) savings plan which includes a Company matching
contribution equal to the first six percent of pay contributed by the employee
up to the maximum deductible 401(k) contribution allowed by the Internal
Revenue Code. In addition, the Company has a deferred compensation plan in
which officers and senior managers may elect to participate and a Key Executive
Benefit Plan which allows participants to elect either supplementary retirement
income for 15 years equal to 33% of final annual salary or retirement life
insurance equal to three times base pay less $50,000.
MR. REZNICEK'S 1993 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 its other officers, the Company compares
compensation levels for the Chief Executive Officer to those of other electric
utility companies which maintain a similar total compensation strategy (see
discussion above).
Each year the Company 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 the Company's Human
Resources group. In 1993, studies indicated officer base salary ranges to be
less than the approved 60th percentile position to market. The Chief Executive
Officer's base salary was increased by 11%, based on his and the Company's
performance and his position within his salary range. When evaluating Mr.
Reznicek's performance, key factors considered by the Committee included the
Company's strong financial performance, Mr. Reznicek's oversight of cost
control measures resulting in significant savings, and the Company's
performance in exceeding target levels for critical components of its annual
operating plan. The Committee did not assign specific weightings to these
factors.
Mr. Reznicek'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 the Company's
surpassing of its target by achieving earnings per share from operations of
$2.28 in 1993. This represented an earnings gr owth rate of 8.6%, which
exceeded the Company's 1993 target growth rate of 4.8% and the expected
industry earnings growth rate of 3.0%. Mr. Reznicek's long-term incentive
award, shown in the eighth column of the Summary Compensation Table below, was
also in conformance with the provisions of the Performance Share Plan and was
based on the Company's performance under the shareholder and customer
performance measures as described above.
By the Executive Personnel Committee,
William F. Connell (Chairman)
Gary L. Countryman
Charles K. Gifford
Sherry H. Penney
Paul E. Tsongas
8
<PAGE> 11
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 the Company with respect to the years
1991, 1992 and 1993. In accordance with transitional provisions applicable to
the revised rules on executive compensation disclosure adopted by the
Securities and Exchange Commission (the "Commission"), amounts of Other Annual
Compensation and All Other Compensation are reported for 1992 and 1993 only.
<TABLE>
SUMMARY COMPENSATION 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>
Bernard W. Reznicek 1993 $435,000 $283,500 -- -- -- $131,250 $28,090
Chairman and 1992 398,333 240,625 $53,077 -- -- 199,375 34,344
Chief Executive Officer 1991 370,417 140,000 -- -- -- 168,750 --
Thomas J. May 1993 297,250 139,405 -- -- -- 78,000 22,244
President and 1992 279,500 119,250 -- -- -- 123,750 23,139
Chief Operating Officer 1991 267,292 72,800 -- -- -- 85,000 --
George W. Davis 1993 289,750 139,405 -- -- -- 31,500 16,221
Executive Vice President 1992 248,875 103,750 -- -- -- 45,375 11,886
1991 153,816 29,400 -- -- -- -- --
Charles E. Peters, Jr. 1993 173,750 55,605 -- -- -- 36,000 9,281
Senior Vice President 1992 164,958 54,000 -- -- -- -- 6,843
1991 114,051 21,600 -- -- -- -- --
Cameron H. Daley 1993 170,050 54,615 -- -- -- 33,750 9,431
Senior Vice President 1992 162,167 53,213 -- -- -- 75,075 7,021
1991 154,375 39,150 -- -- -- 65,000 --
<FN>
(1) None of the named executive officers received amounts of other annual
compensation in 1993 which would require disclosure pursuant to the
Commission's rules. In 1992, Mr. Reznicek's other annual compensation
included a housing assistance allowance in the amount of $44,000; the other
named executive officers did not receive amounts which would require
disclosure.
(2) Amounts in this column for 1993 are comprised as follows: the
Company's matching contribution under its 401(k) plan ($8,994, for each of the
named executive officers); that portion of earnings on deferred compensation
deemed by the Commission to be above-market (Mr. Reznicek, $17,113; Mr. May,
$12,551; Mr. Davis, $5,449); and the value attributable to the Key Executive
Benefit Plan premium payment in 1993 (Mr. Reznicek, $1,983; Mr. May, $699; Mr.
Davis, $1,778; Mr. Peters, $287; Mr. Daley, $487). The Key Executive Benefit
Plan permits selected officers to elect either supplementary
</TABLE>
9
<PAGE> 12
retirement income for 15 years equal to 33% of final annual salary or
retirement life insurance equal to three times base pay less $50,000. Messrs.
Reznicek, May and Davis are entitled to a reduced benefit equal to 16.5% of
annual salary at termination after five years of service with the Company and
participation in the Plan, with an additional 3.3% of annual salary for each
additional year of service, up to the maximum benefit upon termination after
ten years of service. Mr. Daley is entitled to the maximum benefit upon
retirement at or after age 60. Mr. Peters is entitled to the maximum benefit
upon retirement at or after age 62 with twenty years of service and ten years
of participation under the Plan.
<TABLE>
LONG-TERM INCENTIVE PLANS - AWARDS IN LAST FISCAL YEAR
The following table sets forth Performance Share awards potentially
payable in 1996 based on performance during the three- year period from January
1, 1993 through December 31, 1995.
<CAPTION>
Estimated Future Payouts
Number of Performance or ----------------------------
Shares, Units Other Period
or Other Until Matura- (1) (1) (1)
Name Rights (1) tion or Payout Threshold Target Maximum
- ---- ------------- -------------- --------- ------ -------
<S> <C> <C> <C> <C> <C>
Bernard W. Reznicek 6,806 1993 - 1995 3,403 6,806 10,209
Thomas J. May 3,825 1993 - 1995 1,913 3,825 5,738
George W. Davis 3,825 1993 - 1995 1,913 3,825 5,738
Charles E. Peters, Jr. 1,697 1993 - 1995 848 1,697 2,546
Cameron H. Daley 1,669 1993 - 1995 835 1,669 2,504
<FN>
(1) The first of these columns shows the estimated number of shares to be
awarded if target performance is achieved, and the last three columns if
threshold, target and maximum performance, respectively, are achieved,
calculated with reference to the Company's closing Common Stock price on
December 31, 1993.
</TABLE>
<TABLE>
PENSION PLAN TABLE
The Company's pension plans generally provide, for employees who are
not members of a collective bargaining unit, annual benefits upon retirement at
age 65 (normal retirement) or thereafter, as shown on the following table,
reduced by up to 50% of the employee's primary Social Security Benefit.
<CAPTION>
Average ANNUAL PENSION (2)
Annual Base Pay ------------------
Used for 10 Years of 20 Years of 30 Years of 40 Years of
Computing Pension (1) Service Service Service Service
- --------------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
$100,000 20,000 40,000 62,500 67,500
150,000 30,000 60,000 93,750 101,250
200,000 (3) 40,000 80,000 125,000 135,000
250,000 (3) 50,000 100,000 156,250 168,750
300,000 (3) 60,000 120,000 187,500 202,500
350,000 (3) 70,000 140,000 218,750 236,250
400,000 (3) 80,000 160,000 250,000 270,000
450,000 (3) 90,000 180,000 281,250 303,750
500,000 (3) 100,000 200,000 312,500 337,500
<FN>
(1) For purposes of determining benefits, average annual base pay is
determined by averaging an employee's base pay for the thirty-six months of
employment out of the employee's last ten years of employment which
produces the highest average. Certain employees may make employee
contributions to the
</TABLE>
10
<PAGE> 13
pension plan and receive additional pension benefits based on those
contributions.
(2) The benefits set forth in the above table assume that the employee
elects a straight life annuity. Federal law limits the annual
benefits payable from qualified pension plans. Payments in excess of
applicable limitations are made outside the qualified pension plan
pursuant to the Company's excess benefit plan.
(3) Beginning in 1989, compensation taken into account under the qualified
pension plan for any individual in any year was limited to $200,000,
indexed annually by the Internal Revenue Service for cost of living
increases. For 1993, the applicable limit was $235,840. Benefits
based on compensation in excess of this limit are paid under the
Company's excess benefit plan, which together with individual
agreements may also provide for supplemental benefits in excess of
limitations on benefits under the Company's qualified pension plan, as
described above, or based on additional credit for service with other
employers or other factors.
Under the pension arrangements described above, the credited years of
service through 1993 and the average annual base pay as of December 31, 1993
for the officers named in the compensation table above are as follows: Mr.
Reznicek, 36 and $401,250; Mr. May, 18 and $281,347; Mr. Davis, 5 and
$229,028; Mr. Peters, 2 and $166,605; Mr. Daley, 28 and $162,197.
STOCK PERFORMANCE GRAPH
The Securities and Exchange Commission requires that the Company
include in this Proxy Statement a line-graph presentation comparing cumulative,
five-year shareholder returns with the S&P 500 Stock Index and either a
nationally recognized industry standard or an index of peer companies selected
by the Company. In the 1993 Proxy Statement, the Board of Directors approved
the use of the Goldman Sachs electric utility database(1), which consists of a
simple average of approximately 80 companies, for purposes of this performance
comparison. This index was chosen because it is the same index used for stock
performance comparisons under the Company's Performance Share Plan described
above. Revised Securities and Exchange Commission regulations issued after the
Company's 1993 Annual Meeting now specify that the index used must be weighted
according to the component companies' respective stock market capitalizations.
Since the index produced by Goldman Sachs is not weighted as the Commission's
regulations require, the Board of Directors has approved its replacement with
the Edison Electric Industry 100 Index (EEI 100 Index)(1), an index of
approximately 100 electric utility companies which is appropriately weighted.
The results produced by using the Goldman Sachs index are also shown below in
accordance with the Commission's regulations and in order to permit comparisons
to the data used in last year's performance graph. Pursuant to the
Commission's regulations, the graph below depicts the investment of $100 at the
commencement of the measurement period, with dividends reinvested.
(1) The following companies were included in the EEI 100 Index and the
Goldman Sachs database for the years 1989-1993: Allegheny Power
System, Inc., American Electric Power, Inc., Atlanta Energy, Inc.,
Baltimore Gas and Electric Co., Boston Edison Co., Carolina Power &
Light Co., Centerior Energy Corp., Central & South West Corp., Central
Louisiana Electric Co., Inc., Cilcorp, Inc., Cincinnati Gas & Electric
Co., CIPSCO, Inc., CMS Energy Corp., Commonwealth Edison Co.,
Commonwealth Energy Systems, Consolidated Edison Co. of NY, Delmarva
Power & Light Co., Detroit Edison Co., Dominion Resources, Inc.,
DPL, Inc., DQE, Inc., Duke Power Co., Eastern Utilities Assoc.,
Entergy Corp., Florida Progress Corp., FPL Group, Inc., General Public
tilities Corp., Gulf States Utilities Co., Hawaiian Electric
Industries, Inc., Houston Industries, Inc., Idaho Power Co., Illinois
ower Co., IPALCO Enterprises, Inc., Kansas City Power & Light Co., KU
Energy Corp., Long Island Lighting Co., Minnesota Power, Montana Power
Co., Nevada Power Co., New England Electric System, New York State
Electric & Gas Corp., Niagara Mohawk Power Corp., NIPSCO Industries,
Inc., Northeast Utilities, Northern States Power Co., Ohio Edison Co.,
Oklahoma Gas & Electric Co., Orange & Rockland Utilities, Inc., Pacific
Gas & Electric Co., Pacificorp, PECO Energy Co. (Philadelphia Electric
Co.), Pennsylvania Power & Light Co., Pinnacle West Capital Corp.,
Portland General Corp., Potomac Electric Power Corp., PSI Resources,
Inc., Public Service Co. of Colorado, Public Service Co. of New
Mexico, Public Service Enterprise Group, Puget Sound Power & Light
Co., Rochester Gas and Electric Corp., San Diego Gas & Electric Co.,
SCANA Corp., SCEcorp., Sierra Pacific Resources, Southern Company,
outhern Indiana Gas and Electric Co., Southwestern Public Service Co.,
TECO Energy Inc., Texas Utilities Co., Tucson Electric Power Co.,
Union Electric Co., Utilicorp United Inc., Wisconsin Energy Corp.,
Wisconsin Public Service Corp. and WPL Holdings, Inc. The EEI 100
Index also includes the following companies: Bangor-Hydro Electric
Co.,
11
<PAGE> 14
Black Hills Corp., Central Hudson Gas & Electric Co., Central Maine
Power Co., Central Vermont Public Service Corp., El Paso Electric Co.,
Empire District Electric Co., Eselco Inc., Green Mountain Power Corp.,
IES Industries, Inc., Interstate Power Co., Iowa-Illinois Gas &
Electric Co., LG&E Energy Corp., Madison Gas & Electric Co., Maine
Public Service Co., Midwest Resources, Inc., Northwestern Public
Service Co., Otter Tail Power Co., St. Joseph Light & Power Co., TNP
Enterprises, Inc., United Illuminating Co., Unitil Corp., Upper
Peninsula Energy Corp., Washington Water Power Co. and Western
Resources. In addition to the companies listed in the first sentence
of this footnote, the Goldman-Sachs database also included the
following additional companies in the years indicated: 1989 - Empresa
Nacional de Electricidad, Kansas Gas & Electric Co., Kansas Power &
Light Co., Louisville Gas & Electric Co., MDU Resources Group, Public
Service Company of New Hampshire and Utah Power & Light Company; 1990
- Empresa Nacional de Electricidad, IE Industries, Inc., Kansas Gas &
Electric Co., Kansas Power & LIght Co., MDU Resources Group and Public
Service Company of New Hampshire; 1991 - Empresa Nacional de
Electricidad, IES Industries, Inc., Iowa- Illinois Gas & Electric Co.,
Kansas Gas & Electric Co., Kansas Power & Light Co., LG&E Energy
Corp., MDU Resources Group, Midwest Resources, Inc., United
Illuminating Co. and Washington Water Power Co.; 1992 - Empresa
Nacional de Electricidad, IES Industries, Inc., Iowa- Illinois Gas &
Electric Co., LG&E Energy Corp., MDU Resources Group, Midwest
Resources, Inc., United Illuminating Co. and Western Resources; and
1993 - Empresa Nacional de Electricidad, IES Industries, Inc., Iowa-
Illinois Gas & Electric Co., LG&E Energy Corp., MDU Resources Group,
Midwest Resources, Inc., United Illuminating Co., Washington Water
Power Co. and Western Resources.
<TABLE>
STOCK PERFORMANCE GRAPH
<CAPTION>
INDEX: 1989 1990 1991 1992 1993
- ------ ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Boston Edison $135 $146 $196 $232 $266
S&P 500 132 127 166 179 197
EEI 100 Index 130 132 170 182 199
Goldman Sachs 127 127 161 177 198
</TABLE>
<TABLE>
<CAPTION>
ANNUAL TOTAL RETURN:
- --------------------
<S> <C> <C> <C> <C> <C>
Boston Edison 34.8% 8.4% 33.8% 18.8% 14.5%
S&P 500 31.5% (3.2%) 30.6% 7.6% 10.0%
EEI 100 Index 29.9% 1.3% 28.9% 7.3% 9.1%
Goldman Sachs 27.4% (0.7%) 27.1% 10.0% 12.2%
</TABLE>
12
<PAGE> 15
PROPOSAL NO. 2 - INCREASE IN AUTHORIZED CAPITAL STOCK
The management and Board of Directors of the Company recommend that
the stockholders adopt a proposal to amend the Restated Articles of
Organization of the Company to increase the authorized capital stock of the
Company by 500,000 additional shares of Cumulative Preferred Stock, having a
par value of $100 per share. If the proposed increase is approved by the
stockholders, the authorized Cumulative Preferred Stock of the Company would be
2,910,000 shares, of which six series consisting of 2,210,000 shares were
issued and outstanding as of the date hereof.
The additional shares of Cumulative Preferred Stock to be authorized
by the proposed amendment could be issued by the Board of Directors from time
to time without further stockholder action upon such terms and at such prices
as the Board shall determine and as are approved by the Massachusettts
Department of Public Utilities. There are no preempt ive rights to subscribe
to any additional shares of Cumulative Preferred Stock.
The Company has no agreement, understanding or plan for the issuance
of any of the additional shares of Cumulative Preferred Stock to be authorized
by the proposed amendment. Such additional shares may be issued and sold for
cash from time to time as the needs of the Company's business require in either
public or private offerings. Proceeds of any sale of any additional shares of
the Cumulative Preferred Stock will be used for lawful corporate purposes,
including among other things possible refunding of other series of the
Company's Cumulative Preferred Stock or capital expenditures for extensions,
additions and improvements to the property of the Company and the reduction or
refunding of short-term indebtedness, including indebtedness incurred to
finance such expenditures.
The Company's estimate of plant expenditures for the period 1994 to
1998, which is subject to continuing review and adjustment, is currently
approximately $850,000,000 (excluding nuclear fuel and allowances for funds
used during construction). Funds generated internally are a major source of
funding and repre-sented 74%, 90%, and 89% of plant expenditures in 1993, 1992
and 1991 respectively. It is expected that a significant percentage of future
plant expenditures will be funded internally, provided that the Company's rate
structure, which is cost-based, is adequate to cover increasing costs. It is
anticipated that the balance of the Company's plant expenditures and its
long-term debt maturities and sinking fund requirements (the latter two items
aggregating $415,400,000 in the next five years) will be financed by the
issuance of debt and equity securities.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL NO. 2.
PROPOSAL NO. 3 - ISSUANCE OF REACQUIRED SHARES OF CUMULATIVE
PREFERRED STOCK
The management and Board of Directors of the Company recommend that
the stockholders adopt a proposal to amend the Restated Articles of
Organization to permit the restoration of outstanding shares of Cumulative
Preferred Stock that are redeemed or otherwise reacquired by the Company to
authorized but unissued status upon the vote of the Board of Directors.
Pursuant to the Restated Articles of Organization of the Company,
shares of Cumulative Preferred Stock redeemed by the Company are required to be
cancelled and retired with no shares issued in place thereof. This provision
has necessitated periodic common stockholder votes and the filing of a number
of amendments to the Restated Articles of Organization to increase from time to
time the number of shares of Cumulative Preferred Stock the Company is
authorized to issue. The state filing fees associated with such amendments are
significant. For example, the filing fee associated with the proposed
amendment to increase the authorized Cumulative Preferred Stock by 500,000
shares as set forth in Proposal No. 2 is expected to be approximately $50,000.
While Proposal No. 2 would authorize the issuance of 500,000 additional shares
of Cumulative Preferred Stock, the proposed amendment to the Restated Articles
of Organization authorizing the Board of Directors to elect to restore redeemed
or otherwise reacquired shares to
13
<PAGE> 16
authorized but unissued status would, to the extent the Company had available
for reissuance such reacquired shares, reduce the need to obtain stockholder
approval for additional authorized shares and the necessity to file amendments
to the Restated Articles of Organization, thereby reducing the significant fees
and other costs associated with the filing of such amendments. If Proposal No.
3 is adopted, the reissuance of any previously reacquired shares by the Board
of Directors would continue to be subject to the conditions and restrictions on
the issuance of new shares set forth in the Restated Articles of Organization.
See "Description of Cumulative Preferred Stock - Voting Rights" below. The
proposed language of this amendment as it would appear in the form of the
Second Restated Articles of Organization is set forth below:
Shares of Cumulative Preferred Stock redeemed, purchased or otherwise
acquired by the corporation may, in the discretion of the board of
directors, be restored to the status of authorized but unissued shares
of Cumulative Preferred Stock by vote of the board of directors, and
may be reissued as shares of a new series of Cumulative Preferred Stock
having terms determined by the board of directors, subject to the
conditions and restrictions on issuance set forth herein.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL NO. 3
DESCRIPTION OF CUMULATIVE PREFERRED STOCK
The Cumulative Preferred Stock, par value $100 per share, constitutes
a class of capital stock which may be issued in series, and was created by a
vote of the holders of Common Stock in 1956. Currently outstanding are the
initial series, consisting of 180,000 shares of Cumulative Preferred Stock,
4.25% Series, issued in 1956; the second series, consisting of 250,000 shares
of Cumulative Preferred Stock, 4.78% Series, issued in 1958; the third series,
consisting of 480,000 shares of Cumulative Preferred Stock, 7.27% Series,
20,000 shares of which were redeemed in 1992, issued in 1987; the fourth
Series, consisting of 500,000 shares of Cumulative Preferred Stock, 8.00%
Series, issued in 1991; the fifth Series, consisting of 400,000 shares of
Cumulative Preferred Stock, 8.25% Series, issued in 1992; and the sixth Series,
consisting of 400,000 shares of Cumulative Preferred Stock, 7.75% Series,
issued in 1993. Another Series, consisting of 400,000 shares of Cumulative
Preferred Stock, 8.88% Series, was issued in 1970 and redeemed in 1993.
Each series of Cumulative Preferred Stock may differ, as determined by
the Board of Directors, from other series in certain respects, the principal
differences being as follows: amount issued, the dividend rate, the date of
the first dividend payment, the date from which dividends will be cumulative,
redemption prices, sinking or purchase funds, amounts payable upon distribution
of assets and conversion, participation and other special rights. Shares of
preferred stock which are redeemed are cancelled and may not be reissued. See
Proposal No. 3 above.
DIVIDENDS
Holders of Cumulative Preferred Stock are entitled to receive, when
and as declared by the Board of Directors out of funds legally available
therefor, cumulative dividends at the rate fixed for each series, payable
quarterly on the first days of February, May, August and November in each year,
before any dividends are paid on the Common Stock or other junior stock.
Dividends must be paid on all such shares if paid on the shares of any series
and if full dividends are not declared payments must be made pro rata in
proportion to the rate of dividend fixed for each series. After payment in
full of all dividends accrued on Cumulative Preferred Stock, dividends on the
Common Stock or other junior stock may be declared and paid as the Board of
Directors may determine.
REDEMPTION PROVISIONS
The Cumulative Preferred Stock and any series thereof may be redeemed as a
whole or in part at any time, by resolution of the Board of Directors, upon not
less than thirty days' notice, at the applicable redemption prices therefor
plus dividends accrued to the redemption date, except that if there are any
dividend arrearages on any Cumulative Preferred Stock no part less than all of
the Cumulative Preferred Stock may be redeemed or purchased.
14
<PAGE> 17
LIQUIDATION
Upon any liquidation, dissolution or winding up of the affairs of the
Company or distribution of capital, the holders of Cumulative Preferred Stock
are entitled to receive the full distributive amounts fixed for their
particular series, plus dividends accrued to the date of distribution, before
any distribution shall be made to holders of Common Stock or other junior
stock. Distributions of assets on liquidation must be pro rata in proportion
to the amount fixed for each series, if less than payment in full is all that
the available assets will provide.
VOTING RIGHTS
Holders of Common Stock have general voting rights, but holders of the
Cumulative Preferred Stock, except as otherwise required by law, have only the
voting rights set forth below.
Whenever dividends on the Cumulative Preferred Stock shall have
accrued and remain unpaid in an amount equal to six full quarterly dividends on
any series, holders of the Cumulative Preferred Stock, voting as a class, will
have the right to elect a majority of the Directors until all dividends in
default thereon shall have been paid.
Without the affirmative vote of holders of at least two-thirds of the
outstanding Cumulative Preferred Stock, the Company shall not
(a) change any provisions of the Cumulative Preferred Stock which
would be substantially prejudicial to the holders thereof,
except that, if such change is prejudicial to less than all
series thereof, only the affirmative vote of holders of two-
thirds of the series so affected shall be required; or
(b) create any class of stock ranking prior to or on a parity with
the Cumulative Preferred Stock in respect of either the payment
of dividends or the distribution of assets.
Without the affirmative vote of holders of at least a majority of the
outstanding Cumulative Preferred Stock, the Company shall not
(a) issue any additional shares of Cumulative Preferred Stock or
of any class of stock ranking prior to or on a parity with the
Cumulative Preferred Stock in respect of either the payment of
dividends or the distribution of assets (except for the purpose
of retiring stock ranking prior to the Cumulative
Preferred Stock or for the purpose of retiring Cumulative
Preferred Stock or stock ranking on a parity therewith if the
shares issued are only shares thereof or on a parity therewith)
unless, after giving effect thereto,
(i) net income of the Company for any period of twelve
months within the next preceding fifteen months (after
adding back interest charges on funded debt of the
Company deducted in the computation) shall have been at
least equal to one and one-half (1 1/2) times the sum of
the annual interest charges on funded debt of the
Company to be outstanding at the date of such issue plus
the annual dividend requirements on the Cumulative
Preferred Stock and on any class of stock ranking prior
to or on a parity with the Cumulative Preferred Stock in
respect of either the payment of dividends or the
distribution of assets which is to be outstanding at the
date of such issue, including the shares to be issued
but excluding any funded debt or shares of such prior or
parity stock to be retired in connection with such
issue; and
(ii) the aggregate amount of capital and paid-in premiums
represented by the Common Stock and any other junior
stock plus the earned surplus of the Company would be at
least equal to the capital and paid-in premiums
represented by the umulative Preferred Stock and all
other stock ranking prior to or on a parity with the
Cumulative Preferred Stock in espect of either the
payment of dividends or the distribution of assets to be
outstanding after giving effect to such issue but
excluding any such stock to be retired in connection
therewith; or
(b) merge into or consolidate with any other corporation or sell
or transfer its assets as, or substantially as, an entirety,
unless such merger, consolidation, sale or transfer shall
have been required by order
15
<PAGE> 18
of the Massachusetts Department of Public Utilities or other
regulatory authority of the Commonwealth of Massachusetts or of
the United States having jurisdiction in the premises, or
unless, in the case of such merger or consolidation, the
Company shall tself be the successor corporation. The term
"sale or transfer" includes a lease or exchange but does not
include a mortgage or pledge.
PRE-EMPTIVE RIGHTS
Holders of Cumulative Preferred Stock will not have pre-emptive rights
in respect of additional issues of capital stock.
PROPOSAL NO. 4 - RESTATEMENT OF ARTICLES OF ORGANIZATION
In order that all the provisions of the Company's Restated Articles of
Organization will be set forth in one document, the Board of Directors has
voted to amend and restate the existing Restated Articles of Organization by
adopting the Second Restated Articles of Organization and to recommend to the
Company's stockholders the approval of such amendment and restatement. The
Second Restated Articles of Organization makes no change to the existing
Restated Articles of Organization other than to reflect the amendments
specifically discussed in Proposals No. 2 and 3 and to eliminate certain
provisions which are no longer operative. If either Proposal No. 2 or 3 is not
approved by the stockholders, the relevant existing provisions of the Restated
Articles of Organization will be retained without change in the Second Restated
Articles of Organization. Because the Second Restated Articles of Organization
makes no substantive changes in the Company's Restated Articles of
Organization, the document is not set forth at length in this Proxy Statement.
However, a copy of the text of the proposed restatement will be furnished
without charge to any holder of Common Stock who requests it. Such requests
should be directed to the Clerk, Boston Edison Company, 800 Boylston Street,
Boston, MA 02199.
The form of the Second Restated Articles of Organization, if adopted,
will be filed with the Secretary of State of the Commonwealth of Massachusetts
as soon as practical after the Annual Meeting, and the Second Restated Articles
of Organization will become effective upon such filing.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL NO. 4.
STOCKHOLDER PROPOSAL
The following proposal is submitted by certain individual stockholders for the
third consecutive year. It is their recommendation that the Board of Directors
carry out the immediate shutdown of Pilgrim Nuclear Power Station. The Company
urges stockholders to vote again AGAINST this proposal for the same reasons
that they have defeated the proposal twice before. The Company believes that
the proposal is not in the stockholders' best interests and could negatively
impact their investment in the Company.
PROPOSAL NO. 5
Merle D. and Mary C. Ott, P.O. Box 1424, Duxbury, Massachusetts 02331
and Lilias Cingolani, 228 Main Street, Kingston, Massachusetts 02364, holders
of 330 shares of Common Stock of record, have submitted the following proposal:
Last year, holders of $60 million worth of Edison stock supported our
proposal to permanently retire a dangerous and endlessly consuming asset - the
PILGRIM NUCLEAR POWER STATION. PILGRIM is a 20-year old, poorly designed
nuclear plant with a history of management and equipment problems which
continue unabated.
CONSIDER THE FOLLOWING DEVELOPMENTS SINCE DECEMBER, 1992:
- SAFETY problems caused 9 UNPLANNED SHUTDOWNS.
- The Nuclear Regulatory Commission documents 10 VIOLATIONS of the
Company's operating license.
16
<PAGE> 19
- Company appoints its 5th Vice President-Nuclear in 5 years.
- Moody's ranks Edison with those nuclear utilities which have the
most significant nuclear exposure and face the greatest potential
impact on their credit. Moody's expresses concern about the
ability of utilities in this category to adequately fund
decommissioning expenses on an accelerated basis in case of a
premature shutdown and other concerns, leading Moody's to
state its belief that "given the risks and trends described...,
the potential for negative rating developments is greater for
these utilities..."
- Company asks NRC for license amendment to dramatically increase
on-site spent fuel inventory. Currently, PILGRIM has on-site,
above ground, 1629 highly radioactive spent fuel rods stored
in a facility designed for short-term storage of no more than
880 spent fuel rods.
- After denying that plant's faulty water level instrumentation
was a threat to public safety, Company later makes major
modifications after NRC orders GE Boiling Water Reactor (BWR)
Owners to fix device.
- NRC advises Company and other BWR plant owners to inspect their
facilities for reactor vessel core shroud cracking after cracks
are discovered for the first time in the US at a North Carolina
GE Mark I plant. Company refuses to take action until 1995.
- Moody's shows PILGRIM's power generation during plant's 20-year
lifetime to be only 47.4% of capacity, the lowest of all nuclear
utilities ranked. Given Company's past record, we expect
continuing unplanned shutdowns to portend low capacity in the
future at higher and higher costs.
- After Company spends $4 million on major turbine overhaul in
April, 1993, the media reports that GE refused to certify the
Plant's turbines due to cracking. Company originally denies
charges, later acknowledges them.
- NRC internal document says PILGRIM's turbine deck is "orientated
unfavorably with respect to the reactor building", and also says
GE estimates turbine could break apart in 18 months. Robert
Pollard, chief nuclear safety engineer for the Union of Concerned
Scientists, says, if Edison's turbine "comes apart, it would
hurl metal at speeds of hundreds of miles per hour directly at
the reactor building, control room and spent fuel pool".
- Massachusetts Senators write NRC to justify its schedule for
correcting "two significant safety concerns" at PILGRIM. Despite
Board appropriation of $27 million to replace cracked low
pressure turbines, Company won't schedule these repairs
until 1995.
Based on the foregoing, we urge you to vote FOR the following resolution:
RESOLVED, THAT THE STOCKHOLDERS DO HEREBY RECOMMEND THAT THE
BOARD OF DIRECTORS CARRY OUT THE IMMEDIATE SHUTDOWN OF THE
PILGRIM NUCLEAR POWER STATION AND ARRANGE FOR ITS ORDERLY
RETIREMENT.
COMPANY RESPONSE
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST PROPOSAL NO. 5.
The Company believes that this proposal is not in the best interests
of the Company or its stockholders. The Company strongly disagrees with the
proponents' conclusions with respect to the operations of Pilgrim Nuclear Power
Station for the following reasons:
- This proposal is presented by stockholders holding only 330
shares of the Company's common stock, valued at under $10,000,
who the Company believes are solely motivated by their opposition
to nuclear power and who are not acting in the best interests
of long-term stockholders of the Company. This is the third year
that this same proposal has been submitted by these same
stockholders.
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Each year this proposal has been soundly defeated.
- The Company believes that the descriptions and characterizations
of various events contained in the proposal are influenced by
the proponents' negative views of nuclear power in general and
do not accurately reflect the actual safety significance, or
lack thereof, of the various occurrences.
- The Company is committed to the safe and efficient operation of
Pilgrim Station and would not be allowed to operate the plant
otherwise by the Nuclear Regulatory Commission. In 1993 the NRC
rated the plant's most recent operations as its best ever, giving
it a Systematic Assessment of Licensee Performance (SALP)
average rating of 1.43. This is the fourth improvement since
1987 which the plant has received in the NRC's most critical
evaluation of plant operations and places the plant's rating
better than the industry average.
- Many of the events cited in the stockholder proposal reflect
normal plant operating activities which do not pose a threat to
the health or safety of the public either individually or in
the aggregate. The NRC, which closely monitored and reviewed the
Company's response to each of the events identified in the
proposal, has the authority to require the immediate
shutdown of Pilgrim Station if it determines that the health or
safety of the public is at risk.
- Operations at the plant continue to improve, as demonstrated by
management's completion in 1993 of the plant's shortest refueling
outage ever in 57 days, which surpassed the previous record
by some 50 days.
- The risk to stockholder investment in the Company and potential
dividend return posed by closure of the plant is immense, with
one-third of the Company's assets represented by its investment
in this facility.
THE COMPANY HAS AN OBLIGATION TO ITS STOCKHOLDERS TO PROTECT THEIR INVESTMENT
AND MAINTAIN THEIR CONFIDENCE IN THE COMPANY, AND TO ITS CUSTOMERS TO PROVIDE
SAFE AND RELIABLE ENERGY BY CONTINUING TO OPERATE PILGRIM STATION FULLY AND
SAFELY UNTIL THE END OF ITS USEFUL LIFE. FOR THESE REASONS, THE COMPANY'S
MANAGEMENT AND BOARD OF DIRECTORS STRONGLY RECOMMEND A VOTE AGAINST THIS
PROPOSAL.
OTHER MATTERS
VOTING PROCEDURES. Consistent with state law and under the Company'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 the Company to act as e lection inspectors for the
meeting.
Directors will be elected by a plurality of the votes properly cast at
the meeting. Proposals Nos. 2, 3 and 4 require the affirmative vote of a
majority of the common shares outstanding. A majority of the votes properly
cast on the matter are necessary for approval of Proposal No. 5.
The election inspectors will count the total number of votes cast
"for" approval of Proposals Nos. 2, 3, 4, and 5 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. For purposes of Proposals Nos. 2, 3 and 4, abstentions
and broker non-votes have the effect of a vote cast against such proposals, but
neither abstentions nor broker non-votes have any effect on the outcome of
voting on Proposals Nos. 1 and 5.
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
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<PAGE> 21
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. The Company will pay the costs of any additional
solicitation and of any adjourned session.
AUDITORS. Representatives of Coopers & Lybrand, the Company's
auditors, 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 of the Company'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 April 1995 must be received at the
Company's principal executive offices no later than November 18, 1994.
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 the Company's Bylaws. In general, these procedures require that stockholder
nominations must be submitted to the Clerk of the Company 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 THE COMPANY 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 1850, 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 NOTIFY THE CLERK OF THE COMPANY AT 800 BOYLSTON
STREET, BOSTON, MASSACHUSETTS 02199.
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PROXY
BOSTON EDISON COMPANY
PROXY FOR ANNUAL MEETING ON APRIL 22,1994
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoint Sherry H. Penney, Bernard W. Reznicek
and Herbert Roth, Jr., 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 Meeting of Stockholders of Boston Edison Company to be held on April
22,1994 and any adjournments 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
the election of all the nominees for director and proposals 2,3 and 4 and
AGAINST Proposal No. 5. 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 17,1994 and the related Proxy Statement.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
SEE REVERSE SIDE
<PAGE> 23
[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 PROPOSALS 1, 2, 3, AND 4.
1. Election of Directors
Nominees: Gary L. Countryman, George W. Davis, Thomas G. Dignan, Jr.,
Herbert Roth, Jr., Stephen J. Sweeney
FOR WITHHELD
[ ] [ ]
For all nominees except as noted above
2. Increase number of shares FOR AGAINST ABSTAIN
of authorized Preferred Stock. [ ] [ ] [ ]
3. Authorize Issuance of reacquired [ ] [ ] [ ]
shares of Preferred Stock.
4. Restate Articles of Organization. [ ] [ ] [ ]
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST PROPOSAL 5.
5. Stockholder proposal recommending FOR AGAINST ABSTAIN
the immediate shutdown and retirement [ ] [ ] [ ]
of the Company's nuclear unit.
MARK HERE FOR ADDRESS CHANGE [ ]
AND NOTE AT LEFT
Please sign name exactly as it appears hereon.
Signature: Date
--------------------------------------- --------------------
Signature: Date
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When signing as attorney, agent, guardian, executor, administrator, trustee or
the like, please give your full title as such.
