<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[x] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended June 30, 1996
or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from __________ to __________
Commission file number 1-2301
BOSTON EDISON COMPANY
(Exact name of registrant as specified in its charter)
Massachusetts 04-1278810
- ------------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
800 Boylston Street, Boston, Massachusetts 02199
- ------------------------------------------ -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 617-424-2000
------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes x No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at August 1, 1996
- ----- -----------------------------
Common Stock, $1 par value 48,360,041 shares
<PAGE> 2
Part I - Financial Information
Item 1. Financial Statements
- -----------------------------
<TABLE>
Boston Edison Company
Consolidated Statements of Income
(Unaudited)
(in thousands, except per share amounts)
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Operating revenues $389,756 $380,829 $777,605 $760,507
-------- -------- -------- --------
Operating expenses:
Fuel 38,180 34,053 78,917 74,091
Purchased power 89,598 89,555 191,657 186,810
Other operations and maintenance 98,762 106,158 199,604 210,927
Depreciation and amortization 53,122 39,525 95,086 78,909
Demand side management programs 8,528 12,819 14,998 24,423
Taxes - property and other 29,320 27,072 58,109 54,180
Income taxes 17,014 15,966 31,909 27,875
-------- -------- -------- --------
Total operating expenses 334,524 325,148 670,280 657,215
-------- -------- -------- --------
Operating income 55,232 55,681 107,325 103,292
Other income (expense), net 197 (537) 838 (367)
-------- -------- -------- --------
Operating and other income 55,429 55,144 108,163 102,925
-------- -------- -------- --------
Interest charges:
Long-term debt 23,718 26,259 48,708 51,293
Other 4,232 4,248 7,100 8,940
Allowance for borrowed funds used
during construction (447) (1,500) (775) (3,647)
-------- -------- -------- --------
Total interest charges 27,503 29,007 55,033 56,586
-------- -------- -------- --------
Net income 27,926 26,137 53,130 46,339
Preferred dividends provided 3,817 3,890 7,707 7,792
-------- -------- -------- --------
Earnings available for common
shareholders $ 24,109 $ 22,247 $ 45,423 $ 38,547
======== ======== ======== ========
Weighted average common shares
outstanding 48,194 45,909 48,132 45,756
======== ======== ======== ========
Earnings per share of common stock $0.50 $0.48 $0.94 $0.84
======== ======== ======== ========
Dividends declared per share of
common stock $0.470 $0.455 $0.940 $0.910
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 3
<TABLE>
Boston Edison Company
Consolidated Balance Sheets
(Unaudited)
(in thousands)
<CAPTION>
June 30, December 31,
1996 1995
---------- ------------
<S> <C> <C>
Assets
- ------
Utility plant in service, at original cost $4,356,156 $4,315,422
Less: accumulated depreciation 1,522,123 1,439,996
---------- ----------
2,834,033 2,875,426
Nuclear fuel, net 51,475 50,643
Construction work in progress 42,638 29,573
---------- ----------
Net utility plant 2,928,146 2,955,642
Investments in electric companies, at equity 23,429 23,620
Nuclear decommissioning trust 121,849 102,894
Current assets:
Cash and cash equivalents 4,340 5,841
Accounts receivable 253,270 219,114
Accrued unbilled revenues 45,838 37,113
Fuel, materials and supplies,
at average cost 53,924 59,631
Prepaid expenses and other 20,849 23,607
---------- ----------
Total current assets 378,221 345,306
---------- ----------
Regulatory assets:
Redemption premiums 41,596 44,709
Income taxes, net 46,802 46,121
Power contracts 19,014 21,396
Postretirement benefits costs 11,873 13,811
Nuclear outage costs 8,855 13,471
Other 16,492 17,266
---------- ----------
Total regulatory assets 144,632 156,774
Other deferred debits:
Intangible asset - pension 27,386 27,386
Other 25,101 32,227
---------- ----------
Total assets $3,648,764 $3,643,849
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements
<PAGE> 4
<TABLE>
Boston Edison Company
Consolidated Balance Sheets
(Unaudited)
(in thousands)
<CAPTION>
June 30, December 31,
1996 1995
---------- ------------
<S> <C> <C>
Capitalization and Liabilities
- ------------------------------
Common stock equity:
Common stock $ 737,997 $ 731,689
Retained earnings 257,881 257,749
---------- ----------
Total common stock equity 995,878 989,438
---------- ----------
Cumulative preferred stock:
Nonmandatory redeemable series 123,000 123,000
Mandatory redeemable series 88,000 92,000
---------- ----------
Total preferred stock 211,000 215,000
---------- ----------
Long-term debt 1,058,685 1,160,223
---------- ----------
Total capitalization 2,265,563 2,364,661
---------- ----------
Current liabilities:
Long-term debt/preferred stock
due within one year 103,467 102,667
Notes payable 262,500 126,441
Accounts payable 88,420 133,474
Accrued interest 24,533 25,113
Dividends payable 25,391 25,351
Pension benefits 12,619 32,602
Other 134,603 105,442
---------- ----------
Total current liabilities 651,533 551,090
---------- ----------
Deferred credits:
Power contracts 19,014 21,396
Accumulated deferred income taxes 493,306 497,282
Accumulated deferred investment tax credits 60,935 62,970
Nuclear decommissioning liability 123,134 113,288
Other 35,279 33,162
---------- ----------
Total deferred credits 731,668 728,098
Commitments and contingencies
__________ __________
Total capitalization and liabilities $3,648,764 $3,643,849
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements
<PAGE> 5
<TABLE>
Boston Edison Company
Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
<CAPTION>
Six Months Ended June 30,
1996 1995
-------- --------
<S> <C> <C>
Operating activities:
Net income $ 53,130 $ 46,339
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 88,761 72,495
Amortization of nuclear fuel 11,027 7,612
Amortization of deferred nuclear outage
costs 4,615 3,860
Other amortization 6,718 7,402
Deferred income taxes (4,732) (3,709)
Investment tax credits (2,036) (2,046)
Allowance for borrowed funds used during
construction (775) (3,647)
Net changes in:
Accounts receivable and accrued
unbilled revenues (42,881) (36,269)
Fuel, materials and supplies 3,343 8,181
Accounts payable (45,054) (34,675)
Other current assets and liabilities 11,396 (26,588)
Other, net 20,290 8,271
-------- --------
Net cash provided by operating activities 103,802 47,226
-------- --------
Investing activities:
Plant expenditures (excluding AFUDC) (59,907) (91,175)
Nuclear fuel expenditures (10,457) (11,911)
Nuclear decommissioning trust investments (18,955) (10,902)
Electric company investments 191 533
-------- --------
Net cash used in investing activities (89,128) (113,455)
-------- --------
Financing activities:
Issuances:
Common stock 6,325 31,569
Long-term debt 0 125,000
Redemptions:
Preferred stock (4,000) (2,000)
Long-term debt (101,600) (600)
Net change in notes payable 136,059 (42,309)
Dividends paid (52,959) (49,302)
-------- --------
Net cash (used in) provided by financing
activities (16,175) 62,358
-------- --------
Decrease in cash and cash equivalents (1,501) (3,871)
Cash and cash equivalents at beginning of year 5,841 6,822
-------- --------
Cash and cash equivalents at end of period $ 4,340 $ 2,951
======== ========
Cash paid during the period for:
Interest, net of amounts capitalized $ 51,834 $ 51,061
======== ========
Income taxes $ 41,189 $ 40,026
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 6
Notes to Consolidated Financial Statements
- ------------------------------------------
A) Basis of Presentation
---------------------
The accompanying unaudited consolidated financial statements should be read in
conjunction with the Boston Edison Company (the Company) 1995 Form 10-K Annual
Report and Form 10-Q for the period ended March 31, 1996. In the opinion of
the Company, the accompanying unaudited consolidated financial statements
reflect all adjustments (which are all of a normal recurring nature, except
for the change in accounting estimate as described in Note B) necessary to
present fairly the Company's financial position as of June 30, 1996 and the
results of its operations for the three and six-month periods ended June 30,
1996 and 1995 and its cash flows for the six-month periods ended June 30, 1996
and 1995. Certain reclassifications have been made to the prior year data to
conform to the current presentation.
The financial statements conform with generally accepted accounting principles
(GAAP). The preparation of financial statements in conformity with GAAP
requires the Company to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosures of contingent
assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from these estimates.
The results of operations for the three and six months ended June 30, 1996 are
not indicative of the results which may be expected for the entire year. The
Company's kWh sales and revenues are typically higher in the winter and summer
than in the spring and fall as sales tend to vary with weather conditions. In
addition, the Company bills higher base rates to commercial and industrial
customers during the billing months of June through September as mandated by
the Massachusetts Department of Public Utilities (MDPU). Accordingly, greater
than half of the Company's annual earnings typically occurs in the third
quarter.
B) Nature of Operations
--------------------
The Company is an investor-owned regulated public utility operating in the
energy and energy services business. This includes the generation, purchase,
transmission, distribution and sale of electric energy and the development and
implementation of electric demand side management programs. A portion of the
generation is produced by the Company's wholly owned nuclear generating unit,
Pilgrim Nuclear Power Station (Pilgrim). The Company supplies electricity at
retail to an area of 590 square miles, including the City of Boston and 39
surrounding cities and towns. It also supplies electricity at wholesale for
resale to other utilities and municipal electric departments. Electric
operating revenues were 89% retail and 11% wholesale in 1995.
C) Change in Accounting Estimate
-----------------------------
Upon the completion of a review of its electric generating units, the Company
determined that its oldest and least efficient units (Mystic 4, 5 and 6) are
unlikely to provide competitively priced power beyond the year 2000.
Therefore, during the second quarter of 1996 the Company revised the estimated
remaining useful lives of these units to five years. The effect of this
<PAGE> 7
change in estimate is an annual increase to depreciation expense of $22
million. The Company has revised depreciation expense retroactive to January
1996. Therefore, the impact on the second quarter was an $11 million increase
to depreciation expense.
D) Commitments and Contingencies
-----------------------------
In 1991 the Company was named in a lawsuit alleging discriminatory employment
practices under the Age Discrimination in Employment Act of 1967 concerning
employees affected by the Company's 1988 reduction in force. In July 1996 the
Company reached a tentative settlement of this lawsuit under which there is no
finding or admission of discriminatory employment practices. The settlement
does not have a material impact on the Company's financial position or results
of operations. The Company has also been named as a party in a lawsuit by
Subaru of New England, Inc. and Subaru Distributors Corporation. The
plaintiffs are claiming certain automobiles stored on lots in South Boston
suffered pitting damage caused by emissions from New Boston Station. The
Company believes that it has a strong defense in this case. The Company is
also involved in certain other legal matters. The Company is unable to fully
determine a range of reasonably possible litigation costs in excess of amounts
accrued, although, based on the information currently available, the Company
does not expect that any such additional costs will have a material impact on
its financial condition. However, it is reasonably possible that additional
litigation costs that may result from a change in estimates could have a
material impact on the results of a reporting period in the near term.
The Company owns or operates approximately 40 properties where oil or
hazardous materials were previously spilled or released. The Company is
required to clean up these properties in accordance with a timetable developed
by the Massachusetts Department of Environmental Protection and is continuing
to evaluate the costs associated with their cleanup. There are uncertainties
associated with these costs due to the complexities of cleanup technology,
regulatory requirements and the particular characteristics of the different
sites. The Company also continues to face possible liability as a potentially
responsible party in the cleanup of approximately ten multi-party hazardous
waste sites in Massachusetts and other states where it is alleged to have
generated, transported or disposed of hazardous waste at the sites. At the
majority of these sites the Company is one of many potentially responsible
parties and currently expects to have only a small percentage of the potential
liability. Through June 30, 1996, the Company has accrued approximately $7
million related to its cleanup liabilities. The Company is unable to fully
determine a range of reasonably possible cleanup costs in excess of the
accrued amount, although based on its assessments of the specific site
circumstances, it does not expect any such additional costs to have a material
impact on its financial condition. However, it is reasonably possible that
additional provisions for cleanup costs that may result from a change in
estimates could have a material impact on the results of a reporting period in
the near term.
<PAGE> 8
E) Income Taxes
------------
The following table reconciles the federal statutory income tax rate to the
annual estimated effective income tax rate for 1996 and the actual effective
income tax rate for 1995.
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Statutory tax rate 35.0% 35.0%
State income tax, net of federal income
tax benefit 4.2 4.3
Investment tax credits (1.8) (2.3)
Other (0.2) 0.1
---- ----
Effective tax rate 37.2% 37.1%
==== ====
</TABLE>
F) Spent Nuclear Fuel
------------------
In July 1996 the U.S. Court of Appeals for the D.C. Circuit ruled that the
United States Department of Energy (DOE) is obligated to begin taking spent
nuclear fuel for disposal in 1998. The decision was in response to petitions
filed by the Company and other interested parties in 1994 seeking declaratory
rulings for this obligation. Under the Nuclear Waste Policy Act of 1982 it is
the ultimate responsibility of the DOE to permanently dispose of spent nuclear
fuel. The DOE has been conducting scientific studies evaluating a potential
spent nuclear fuel repository site at Yucca Mountain, Nevada. The potential
site, however, has encountered substantial public and political opposition and
the DOE has publicly stated that it may be unable to construct such a
repository in a timely manner. It is unknown at this time whether and on what
schedule the DOE will eventually construct a spent fuel repository and what
the effect on the Company will be of any delays in such construction. Refer
to Note E to the consolidated financial statements of the Company's 1995 Form
10-K Annual Report for information regarding spent fuel storage capacity at
Pilgrim Station.
Item 2. Management's Discussion and Analysis
- ---------------------------------------------
Results of Operations - Three Months Ended June 30, 1996 vs. Three Months
- -------------------------------------------------------------------------
Ended June 30, 1995
- -------------------
Earnings per share of common stock for the three months ended June 30, 1996
was $0.50 as compared to $0.48 for the three months ended June 30, 1995. The
increase in earnings is primarily the result of a 3.7% increase in retail kWh
sales and lower operations and maintenance expense, partially offset by higher
depreciation and amortization expense.
The results of operations for the quarter are not indicative of the results
which may be expected for the entire year due to the seasonality of the
Company's kWh sales and revenues. Refer to Note A to the consolidated
financial statements.
<PAGE> 9
Operating revenues
Operating revenues increased 2.3% in the second quarter of 1996 as follows:
<TABLE>
<CAPTION>
(in thousands)
- ------------------------------------------------------
<S> <C>
Retail electric revenues $16,855
Demand side management revenues (5,922)
Wholesale revenues 1,014
Short-term sales and other revenues (3,017)
- ------------------------------------------------------
Increase in operating revenues $ 8,930
======================================================
</TABLE>
Retail electric revenues increased $16.9 million. Approximately $7 million of
the increase is a result of the 3.7% increase in retail kWh sales, mainly
driven by an improving local economy. Fuel and purchased power revenues
increased approximately $6 million due to the timing effect of fuel and
purchased power cost recovery. These higher revenues are offset by higher
fuel and purchased power expenses and, therefore, have no net effect on
earnings. Performance revenues, which vary annually based on the operating
performance of Pilgrim Station, increased approximately $4 million primarily
due to higher Pilgrim performance in 1996. The annual performance adjustment
charge is discussed further in the Electric Sales and Revenues section.
Demand side management (DSM) revenues decreased primarily due to a decline in
DSM program expenditures in 1996.
Operating expenses
Total fuel and purchased power expenses increased $4 million. This was
primarily due to an increase in nuclear generation which resulted in an
increase to nuclear fuel amortization. Higher oil and gas prices were offset
by a decrease in fossil generation. An increase in purchased power expense
from higher interchange purchases was offset by the timing effect of fuel and
purchased power cost collection. Fuel and purchased power expenses are
substantially all recoverable through fuel and purchased power revenues.
Other operations and maintenance expense decreased $7 million primarily due to
lower labor costs resulting from the 1995 corporate restructuring and the
Company's cost control efforts.
The increase in depreciation and amortization expense is primarily due to the
$11 million depreciation adjustment made as a result of the change in
estimated remaining useful lives of certain Company electric generating units
as discussed in Note B to the consolidated financial statements.
The decrease in DSM programs expense reflects the decline in current DSM
program expenditures.
Property and other taxes increased due to higher property taxes imposed by a
majority of the municipalities in which the Company operates.
<PAGE> 10
Interest charges
Interest charges on long-term debt decreased due to the maturity of $100
million 8 7/8% debentures in December 1995 and $100 million 5 1/8% debentures
in March 1996 partially offset by the issuance of $125 million 7.80%
debentures in May 1995. The allowance for borrowed funds used during
construction decreased due to lower construction work in progress balances and
shorter construction periods.
Results of Operations - Six Months Ended June 30, 1996 vs. Six Months Ended
- ---------------------------------------------------------------------------
June 30, 1995
- -------------
Earnings per share of common stock for the six months ended June 30, 1996 was
$0.94 as compared to $0.84 for the six months ended June 30, 1995. The
increase in earnings is primarily due to a 4.8% increase in retail kWh sales,
lower operations and maintenance expense and higher Pilgrim performance
revenues. These positive changes were partially offset by higher depreciation
and amortization and property tax expenses, and a decrease in the allowance
for borrowed funds used during construction.
The results of operations for the six months ended June 30, 1996 are not
indicative of the results which may be expected for the entire year due to the
seasonality of the Company's kWh sales and revenues. Refer to Note A to the
consolidated financial statements.
Operating revenues
Operating revenues increased 2.2% in the first six months of 1996 as follows:
<TABLE>
<CAPTION>
(in thousands)
- ------------------------------------------------------
<S> <C>
Retail electric revenues $30,996
Demand side management revenues (11,467)
Wholesale revenues 1,502
Short-term sales and other revenues (3,931)
- ------------------------------------------------------
Increase in operating revenues $17,100
======================================================
</TABLE>
Retail electric revenues increased $31.0 million. Approximately $14 million
of the increase resulted from the 4.8% increase in retail kWh sales driven by
a stronger economy and colder winter conditions. Performance revenues
increased approximately $9 million primarily due to the higher Pilgrim
performance in 1996. Fuel and purchased power revenues increased
approximately $8 million as a result of the timing effect of fuel and
purchased power cost recovery.
Operating expenses
As discussed in the results of operations for the second quarter, DSM revenues
decreased primarily due to the decline in current DSM program expenditures.
Total fuel and purchased power expenses increased 3.7%. Fuel expense
increased due to higher oil and gas prices and a 69% increase in nuclear
generation. Purchased power expense reflects a 9.2% increase in interchange
purchases. These increases were partially offset by a decrease in fossil
generation and the timing effect of fuel and purchased power cost collection.
<PAGE> 11
Fuel and purchased power expenses are substantially all recoverable through
fuel and purchased power revenues.
Other operations and maintenance expense decreased $11 million or 5.4%
primarily due to lower labor costs resulting from the 1995 corporate
restructuring and the Company's cost control efforts.
As discussed in the results of operations for the second quarter, the increase
in depreciation and amortization expense primarily reflects the $11 million
depreciation adjustment related to the change in the estimated useful lives of
Mystic 4, 5 and 6.
The decrease in DSM programs expense reflects the decline in current DSM
program expenditures.
The increase in property and other taxes is primarily due to higher property
taxes imposed by a majority of the municipalities in which the Company
operates.
Interest charges
The decrease in interest on long-term debt is due to the maturity of $100
million 8 7/8% debentures in December 1995 and $100 million 5 1/8% debentures
in March 1996 partially offset by the issuance of $125 million 7.80%
debentures in May 1995. Other interest charges decreased due to a lower
average short-term debt level and lower short-term interest rates. The
allowance for borrowed funds used during construction decreased due to lower
construction work in progress balances and shorter construction periods.
Electric Revenues
- -----------------
The annual performance adjustment charge provides the Company with
opportunities to improve its financial results. The most significant
potential impact of this performance incentive is based on Pilgrim Station's
annual capacity factor. Refer to the Electric revenues section of the
Company's 1995 Form 10-K Annual Report for detail regarding the annual
performance adjustment charge. Pilgrim's capacity factor for the performance
year ending October 1996 is currently expected to be approximately 94%.
Liquidity
- ---------
The Company continues to supplement internally generated funds with external
financings, primarily through the issuance of short-term commercial paper and
bank borrowings. The Company has authority from the Federal Energy Regulatory
Commission to issue up to $350 million of short-term debt. The Company has a
$200 million revolving credit agreement and arrangements with several banks to
provide additional short-term credit on a committed as well as on an
uncommitted and as available basis. At June 30, 1996 the Company had
approximately $263 million of short-term debt outstanding, none of which was
incurred under the revolving credit agreement. In 1994 the MDPU approved the
Company's financing plan to issue up to $500 million of securities through
1996 to refinance short and long-term securities and to fund capital
expenditures.
<PAGE> 12
Outlook for the Future
- ----------------------
On May 1, 1996 the MDPU issued an explanatory statement and proposed rules
(the Statement) as a follow-up to its August 1995 order on restructuring of
the electric utility industry. In February 1996 the Company, three other
electric utilities and the Massachusetts Division of Energy Resources
submitted restructuring proposals to the MDPU. The Statement was developed in
order to address the following twelve issues identified in the proposals:
- market structure
- market power
- transmission
- distribution
- stranded cost calculation and recovery mechanism
- rate unbundling
- performance-based regulation
- environmental regulation and demand side management
- default service
- universal service
- the effect of restructuring on municipal electric companies
- the local and utility tax impacts of restructuring
The Statement and its specific proposals were not intended to represent a
final resolution of any issues. Their purpose was to serve as reference
points and to generate response and discussion in the MDPU's investigation on
industry restructuring.
The Statement reiterated the MDPU's support for the principles of a
restructured industry identified in the 1995 order, including providing a
reasonable opportunity for the recovery of net, nonmitigatable potentially
strandable costs. In addition, the MDPU expressed support for the functional
separation of electric companies into distinct corporate entities and would
provide options for phased incentives for divestment of generation assets.
The Statement also supported the unbundling of rates on bills beginning in
January 1997 and a competitive generation market by January 1998. The
Company, along with other Massachusetts utilities, filed additional comments
with the MDPU on May 24, 1996 in response to the Statement. The Company's
filing was highlighted by the following:
- The Company supports the movement toward the creation of a central spot
wholesale electricity market;
- Although the Company agrees that the competitive generation and marketing
functions need to be functionally separated from the regulated delivery
functions, the forced divestiture of generation assets or the required
formation of a holding company structure are unworkable solutions;
- The Company is concerned that the MDPU has proposed that all above-market
purchased power costs would only be eligible for stranded cost recovery
during a ten-year transition period; and
- The Company has reservations with the apparent inflexibility regarding
the recovery of changes to the estimated decommissioning costs of nuclear
power plants after the conclusion of the ten-year transition period.
- The Company is concerned that portions of the MDPU's proposed rules may
cause serious unintended accounting problems, including the immediate
writedown of certain utility plant and regulatory assets.
<PAGE> 13
The MDPU held public hearings during June and July 1996 during which time the
Company's concerns were further emphasized.
On August 2, 1996, the Company filed its final comments on the MDPU's proposed
rules. The MDPU was scheduled to issue final rules in September. On
August 9, 1996, the MDPU postponed the expected date for issuance of final
rules, and stated that their goal is to issue such final rules by the end of
1996.
Although not anticipated by the Company, the potential exists that the final
rules issued by the MDPU or the enactment of legislation in Massachusetts
would require Massachusetts electric utilities to cease the application of
SFAS 71. Should it be required to discontinue the application of SFAS 71, the
Company would be required to take an immediate noncash charge to income for
all of its regulatory assets and the above-market portion of its purchased
power contracts. In addition, a write-down of utility plant assets could be
required if competitive or regulatory change should cause a substantial
revenue loss, or lead to the permanent shutdown or sale of generating
facilities. However, if laws are enacted or regulatory decisions are made
that do not offer Massachusetts electric utilities an opportunity to recover
stranded costs, the Company believes it has strong legal arguments to
challenge such laws or decisions. The Company will actively pursue the full
recovery of its stranded costs and is prepared to take the action necessary to
protect the interests of its shareholders.
Other Matters
- -------------
Resource regulation
The MDPU approved a settlement agreement between the Company and an
independent power producer, JMC Altresco, Inc. (Altresco) in April 1996. The
agreement settled a dispute which originated in 1991 regarding whether the
Company should be ordered to enter into a contract to purchase power from
Altresco. Under the settlement agreement the Company paid $9.2 million to
Altresco which is being collected from customers over a one-year period
through fuel and purchased power rates. The appeal period for this settlement
agreement expired during the second quarter.
Connecticut Yankee
The Company owns 9.5% of the common stock of Connecticut Yankee Atomic Power
Company (Connecticut Yankee), which owns a 580-megawatt nuclear generating
unit in Haddam Neck, CT. In July 1996 Northeast Utilities (NU), the largest
owner and operator of Connecticut Yankee, shut down the unit after it failed
a safety review conducted by an outside engineering firm. The review was
ordered as part of an inspection by the Nuclear Regulatory Commission of
NU's overall nuclear operations. After evaluating certain other pending
technical and regulatory issues, NU decided to delay the restart of the unit
and to begin a scheduled September refueling outage. NU cannot currently
estimate whether the shutdown will extend beyond the 60 days planned for the
refueling outage. Under its long-term power contract with Connecticut
Yankee, the Company is required to pay 9.5% of the nuclear unit's capital
and fixed operating costs. The ultimate recovery of any incremental
purchased power costs through fuel and purchased power revenues is subject
to review by the MDPU under the Company's generating unit performance
program.
<PAGE> 14
Safe harbor cautionary statement
The Company occasionally makes forward-looking statements such as forecasts
and projections of expected future performance or statements of its plans and
objectives. These forward-looking statements may be contained in filings with
the Securities and Exchange Commission, press releases and oral statements.
Actual results could potentially differ materially from these statements.
Therefore, no assurances can be given that the outcomes stated in such
forward-looking statements and estimates will be achieved. Refer also to the
safe harbor cautionary statements included in the Company's 1995 Form 10-K
Annual Report and Form 10-Q for the period ended March 31, 1996.
The above sections include certain forward-looking statements about
environmental and legal issues, Pilgrim Station's performance and industry
restructuring.
The impacts of various environmental and legal issues could differ from
current expectations. New regulations or changes to existing regulations
could impose additional operating requirements or liabilities. The effects of
changes in specific hazardous waste site conditions and cleanup technology
could affect estimated cleanup liabilities. The impacts of changes in
available information and circumstances regarding legal issues could affect
the estimated litigation costs.
Pilgrim Station's actual performance could differ from the Company's
expectations. The station's capacity factor could be impacted by changes in
regulations or by unplanned outages resulting from certain operating
conditions.
The effects of the ultimate outcome of the industry restructuring process
could differ from the Company's expectations. This could occur as regulatory
decisions and potential negotiated settlements or litigation between
utilities, intervenors and the MDPU are finalized during the industry
restructuring proceedings.
<PAGE> 15
Part II - Other Information
Item 5. Other Information
- --------------------------
The following additional information is furnished in connection with the
Registration Statement on Form S-3 of the Registrant (File No. 33-57840),
filed with the Securities and Exchange Commission on February 3, 1993.
Price and dividend information per share of common stock:
<TABLE>
<CAPTION>
Price
------------------------ Dividend
High Low Paid
------- ------- --------
<S> <C> <C> <C>
First quarter 1996 $30 1/8 $26 1/4 $0.470
Second quarter 1996 27 1/8 23 5/8 0.470
</TABLE>
The market value per share of the Company's common stock as of the close of
business on August 9, 1996 was $22 3/4 per share as reported in the Wall
Street Journal.
Ratio of earnings to fixed charges and ratio of earnings to fixed charges and
preferred stock dividend requirements:
Twelve months ended June 30, 1996:
---------------------------------
Ratio of earnings to fixed charges 2.53
Ratio of earnings to fixed charges and preferred
stock dividend requirements 2.11
<PAGE> 16
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits filed herewith:
Exhibit 10 - Material contracts
10.1 - Retention Agreement applicable to Ronald A. Ledgett
dated May 15, 1996
10.2 - Change in Control Agreement applicable to
Thomas J. May dated July 8, 1996
10.3 - Form of Change in Control Agreement applicable to
Ronald A. Ledgett, E. Thomas Boulette,
L. Carl Gustin, John J. Higgins and certain other
officers dated July 8, 1996
Exhibit 12 - Computation of ratio of earnings to fixed charges
12.1 - Computation of ratio of earnings to fixed charges
for the twelve months ended June 30, 1996
12.2 - Computation of ratio of earnings to fixed charges
and preferred stock dividend requirements for the
twelve months ended June 30, 1996
Exhibit 15 - Letter re unaudited interim financial information
15.1 - Report of Independent Accountants
Exhibit 27 - Financial Data Schedule
27.1 - Schedule UT
Exhibit 99 - Additional Exhibits
99.1 - Letter of Independent Accountants
Re Form S-3 Registration Statements filed by the
Company on September 14, 1990 (File No. 33-36824),
February 3, 1993 (File No. 33-57840) and May 31,
1995 (File No. 33-59693); Form S-8 Registration
Statements filed by the Company on October 10, 1985
(File No. 33-00810), July 28, 1986 (File No. 33-
7558), December 31, 1990 (File No. 33-38434),
June 5, 1992 (33-48424 and 33-48425), March 17, 1993
(33-59662 and 33-59682) and April 6, 1995 (33-58457)
b) No Form 8-K was filed during the second quarter of 1996.
<PAGE> 17
Signature
---------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BOSTON EDISON COMPANY
---------------------
(Registrant)
Date: August 13, 1996 /s/ Robert J. Weafer, Jr.
----------------------------
Robert J. Weafer, Jr.
Vice President-Finance,
Controller and Chief
Accounting Officer
Boston Edison
Executive Offices
800 Boylston Street
Boston, Massachusetts 02199
Thomas J. May
Chairman, President and Chief Executive Officer
May 15, 1996
Mr. Ronald A. Ledgett
Senior Vice President
Boston Edison Company
800 Boylston Street
Boston, MA 02199
Dear Ron:
At its April 25, 1996 meeting, the Board of Directors voted to adopt a Special
Retention Program to provide particularly valued employees with an incentive
to remain in the employment of the Company during the next three-year period.
I am pleased to inform you that the directors agreed with my assessment that
your contributions will be very important to the success of the Company during
this critical time.
Under the terms of the Agreement adopted by the Board, if you remain
continuously in the employment of the Company through December 31, 1998, the
Company will pay you an amount equal to the difference between the Performance
Share Plan award which the Board determines to award you in January, 1999, if
any, and $75,000. The net effect of this program is to guarantee you, if you
stay for the required period, a long-term incentive plan bonus in January of
1999 which will be no less than $75,000.
I look forward to, and depend upon, your assistance over the next three years
in positioning the Company to thrive in the new industry environment.
Sincerely,
/s/ T. J. May
- -------------
T. J. May
BOSTON EDISON COMPANY
Change in Control Agreement
---------------------------
AGREEMENT, made this ___ day of ________________, 1996, by and between
________ ("Executive") and Boston Edison Company (the "Company"),
WITNESSETH
WHEREAS, the Board of Directors of the Company (the "Board") has
determined that it is in the best interests of the Company and its
shareholders for the Company to agree to provide benefits under the
circumstances described below to Executive and other executives who are
responsible for the policy-making functions of the Company and the overall
viability of the Company's business; and
WHEREAS, the Board recognizes that the possibility of a change of control
of the Company is unsettling to such executives and desires to make
arrangements at this time to help assure their continuing dedication to their
duties to the Company and its shareholders, notwithstanding any attempts by
outside parties to gain control of the Company; and
WHEREAS, the Board believes it important, should the Company receive
proposals from outside parties, to enable such executives, without being
distracted by the uncertainties of their own employment situation, to perform
their regular duties, and where appropriate to assess such proposals and
advise the Board as to the best interests of the Company and its shareholders
and to take such other action regarding such proposals as the Board determines
to be appropriate; and
WHEREAS, the Board also desires to demonstrate to the executives that the
Company is concerned with their welfare and intends to provide that loyal
executives are treated fairly; and
WHEREAS, the Board wishes to assure the executives of fair severance
should any of their employment terminate in specified circumstances following
a change of control of the Company and to assure the executives of other
benefits upon a change of control.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, the parties hereto agree as follows:
1. In the event that any individual, corporation, partnership,
company, or other entity (a "Person"), which term shall include a "group"
(within the meaning of section 13(d) of the Securities Exchange Act of 1934
(the "Act")), begins a tender or exchange offer, circulates a proxy to the
Company's shareholders, or takes other steps to effect a "Change of Control"
(as defined in Exhibit A attached hereto and made a part hereof), Executive
agrees that he will not voluntarily leave the employ of the Company and will
render the services contemplated in the recitals to this Agreement until such
Person has terminated the efforts to effect a Change of Control or until a
Change of Control has occurred.
2. If, within 24 months following a Change of Control (the "Post
Change of Control Period") Executive's employment with the company is
terminated by the Company for any reason other than for "Cause" or
"Disability" (as defined paragraph 4 below), or as a result of Executive's
death, or Executive terminates such employment for Good Reason (as defined in
paragraph 5 below):
(a) The Company will pay to Executive within 30 days of such
termination of employment a lump-sum cash payment equal to the
sum of (i) the Executive's annual base salary ("Annual Base
Salary") through the date of such termination of employment to
the extent not theretofore paid, (ii) a prorated portion of the
target award payable under the Company's Executive Annual
Incentive Compensation Plan, or any comparable or successor plan
(the "Annual Plan") determined by calculating the product of, (A)
the target bonus award payable for the fiscal year in which the
date of termination occurs under the Annual Plan, times (B) a
fraction, the numerator of which is the number of days in the
current fiscal year through the date of termination of employment,
and the denominator of which is 365, (iii) a prorated portion of
the target award payable under the Company's Performance Share
Plan, or any comparable or successor plan (the "Long-Term Plan")
for the performance period ending on the last day of the fiscal
year during which the date of termination of employment occurs
determined by calculating the product of (A) the target award
payable for such performance period and (B) a fraction, the
numerator of which is the number of days in the current
performance period through the date of termination, and the
denominator of which is the actual number of days in the
performance period (provided that if any awards are expressed in
shares of common stock rather than cash, the Company will pay the
cash equivalent of such awards based on the closing price per
share as reported in the Wall Street Journal (Eastern Edition) New
York Stock Exchange Composite Transactions determined on the date
prior to the date of the Change of Control or the average per
share price for the 10 trading days preceding the date of the
Change of Control (whichever is higher)) and (iv) any compensation
for the fiscal year in which the date of termination occurs
previously deferred by the Executive (together with any accrued
interest or earnings thereon) and any accrued vacation pay, in
each case to the extent not theretofore paid; and
(b) any stock, stock option or cash awards granted to the Executive by
the Company that would have become vested upon continued
employment by the Executive shall immediately vest in full
notwithstanding any provision to the contrary of such grant and
shall remain exercisable until the earlier of the fifth
anniversary of such termination and the latest date on which such
grant could have been exercised; and
(c) the Company will pay to Executive within 30 days of such
termination of employment a lump-sum cash payment equal to three
times: (A) the amount of the Executive's Annual Base Salary at
the rate in effect immediately prior to the date of termination or
at the rate in effect immediately prior to the Change of Control,
whichever is higher, and (B) the amount of the actual bonus paid
to the Executive under the Annual Plan and the Long-Term Plan for
the most recently completed fiscal year ended before the Change of
Control, or the target bonus payable under the Annual Plan and
Long-Term Plan for the fiscal year during which the termination of
employment occurs, whichever is higher (provided that if any
awards are expressed in shares of common stock rather than cash,
the Company will pay the cash equivalent of such awards based on
the closing price per share as reported in the Wall Street Journal
(Eastern Edition) New York Stock Exchange Composite Transactions
determined on the date prior to the date of the Change of Control
or the average per share price for the 10 trading days preceding
the date of the Change of Control (whichever is higher));
(d) the Company will pay to Executive within 30 days of such
termination of employment a lump-sum cash payment equal to the
full balance standing to his credit with the Company under any and
all deferred compensation plans or arrangements and the lump-sum
actuarial equivalent of the Executive's accrued benefit under any
supplement retirement plan or arrangement (the sum of the amounts
described in subsections (a) and (d) shall be hereinafter referred
to as the "Accrued Obligations"); and
(e) an amount equal to the excess of (i) the lump-sum actuarial
equivalent of the accrued benefit under (a) the Company's
qualified defined benefit Retirement Plan (the "Retirement Plan")
(utilizing actuarial assumptions no less favorable to the
Executive than those in effect under the Retirement Plan
immediately prior to the date of the Change of Control), and (b)
any supplemental retirement plan of the Company in which the
Executive participates (the "SERP") which the Executive would
receive if the Executive's employment continued for two years
after the date of termination assuming for these purposes that all
accrued benefits are fully vested, and further assuming that the
Executive's annual compensation for purposes of determining
benefits under the Retirement Plan and SERP ("Covered
Compensation") in each of the two years is at least equal to the
higher of Executive's annual rate of Covered Compensation for the
most recently completed fiscal year ending prior to the date of
the Change of Control or the year in which the Change of Control
occurs, over (ii) the lump-sum actuarial equivalent of the
Executive's actual accrued benefit (paid or payable), if any,
under the Retirement Plan and the SERP as of the date of
termination and;
(f) Executive, together with his dependents, will continue following
such termination of employment to participate fully at the
Company's expense in all welfare benefit plans, programs,
practices and policies, including without limitation, life,
medical, disability, dental accidental death and travel insurance
plans, maintained or sponsored by the Company immediately prior to
the Change of Control, or receive substantially the equivalent
coverage (or the full value thereof in cash) from the Company,
until the longer of the second anniversary of such termination or
any longer period as may be provided by the terms of the
appropriate plan, program, practice or policy, provided, however,
that if the Executive becomes re-employed with another employer
and is eligible to receive medical or other welfare benefits under
another employer provided plan, the medical and other welfare
benefits described herein shall be secondary to those provided
under such other plan during such applicable period of
eligibility. For purposes of determining eligibility (but not the
time of commencement of benefits) of the Executive for any retiree
benefits pursuant to such plans, practices, programs and policies,
the Executive shall be considered to have remained employed until
two years after the date of termination and to have retired on the
last day of such period; and
(g) to the extent not theretofore paid or provided for, the Company
shall timely pay or provide to the Executive any other amounts or
benefits required to be paid or provided or which the Executive is
eligible to receive under any plan, program, policy, practice,
contract or agreement of the Company ("Other Benefits"); and
(h) the Company will promptly reimburse Executive for any and all
legal fees and expenses (including, without limitation,
stenographer fees, printing costs, etc.) incurred by him as a
result of such termination of employment, including without
limitation all fees and expenses incurred to enforce the
provisions of this Agreement or contesting or disputing that
the termination of his employment is for Cause or other than
for Good Reason (regardless of the outcome thereof).
Notwithstanding anything herein to the contrary, to the extent that any
payment or benefit provided for herein is required to be paid or vested an any
earlier date under the terms of any plan, agreement or arrangements, such
plan, agreement or arrangement shall control.
3. Death, Disability, Cause, Other Than For Good Reason.
----------------------------------------------------
(a) DEATH. If the Executive's employment shall terminate during the
Post Change of Control Period by reason of the Executive's death,
this Agreement shall terminate without further obligations to the
Executive's legal representatives under this Agreement, other than
for payment of Accrued Obligations and the timely payment or
provision of Other Benefits. Accrued Obligations shall be paid to
the Executive's estate or beneficiary, as applicable, in a lump
sum in cash within 30 days of death.
(b) DISABILITY. If the Executive's employment is terminated during
the Post Change of Control Period by reason of the Executive's
Disability, this Agreement shall terminate without further
obligations to the Executive other than for payment of Accrued
Obligations and the timely payment or provision of Other Benefits.
Accrued Obligations shall be paid to the Executive in a lump sum
in cash within 30 days of the date of termination of employment.
For purposes of this Agreement, "Disability" shall mean the
absence of the Executive from the Executive's duties with the
Company on a full-time basis for 180 consecutive business days as
a result of incapacity due to mental or physical illness which is
determined to be total and permanent by a physician selected by
the Company or its insurers and acceptable to the Executive or the
Executive's legal representative. If the Company determines in
good faith that the Disability of the Executive has occurred
during the Post Change of Control Period, it may give the
Executive written notice of its intention to terminate the
Executive's employment. In such event, the Executive's employment
with the Company shall terminate effective on the 30th day after
receipt of such notice by the Executive, provided that, within the
30 days of such receipt, the Executive shall not have returned to
full-time performance of the Executive's duties.
(c) CAUSE. If the Executive's employment shall be terminated for
Cause (as defined in Section 4 below) during the Post Change of
Control Period, this Agreement shall terminate without further
obligations to the Executive other than the obligation to pay the
Executive (A) his Annual Base Salary through the date of
termination, (B) the amount of any compensation previously
deferred by the Executive, and (C) Other Benefits, in each case to
the extent theretofore unpaid. If the Executive voluntarily
terminates employment during the Post Change of Control Period,
excluding a termination for Good Reason, this Agreement shall
terminate without further obligations to the Executive other than
for Accrued Obligations and the timely payment or provisions of
Other Benefits.
In such case, all Accrued Obligations shall be paid to the Executive in a
lump sum in cash within 30 days of date of the termination of employment.
4. "Cause" means only: (a) commission of a felony or gross neglect of
duty by the Executive which is intended to result in substantial personal
enrichment of the Executive at the expense of the Company, (b) conviction of a
crime involving moral turpitude, or (c) willful failure by the Executive of
his duties to the Company which failure is deliberate on the Executive's part,
results in material injury to the Company, and continues for more than 30 days
after written notice given to the Executive pursuant to a two-thirds vote of
all of the members of the Board at a meeting called and held for such purpose
(after reasonable notice to Executive) and at which meeting the Executive and
his counsel were given an opportunity to be heard, such vote to set forth in
reasonable detail the nature of the failure. For purposes of this definition
of Cause, no act or omission shall be considered to have been "willful" unless
it was not in good faith and the Executive had knowledge at the time that the
act or omission was not in the best interest of the Company. Any act, or
failure to act, based on authority given pursuant to a resolution duly adopted
by the Board or upon the instructions of the Chief Executive Officer or
another senior officer of the Company or based on the advice of counsel of the
Company shall be conclusively presumed to be done, or omitted to be done, by
the Executive in good faith and in the best interest of the Company.
5. Executive shall be deemed to have voluntarily terminated his
employment for Good Reason if the Executive leaves the employ of the Company
for any reason following:
(a) The assignment to the Executive of any duties inconsistent in any
respect with the Executive's position (including status, offices,
titles and reporting requirements), authority, duties or
responsibilities immediately prior to the Change of Control; or
any other action by the Company which results in a diminution in
such position, authority, duties or responsibilities, excluding
for this purpose an isolated, insubstantial and inadvertent action
not taken in bad faith and which is remedied by the Company
promptly after receipt of notice thereof given by the Executive;
(b) Any reduction in the Executive's rate of Annual Base Salary for
any fiscal year to less than 100% of the rate of Annual Base
Salary paid to him in the completed fiscal year immediately
preceding the Change of Control, or reduction in Executive's total
cash and stock compensation opportunities, including salary and
incentives, for any fiscal year to less than 100% of the total
cash and stock compensation opportunities made available to him in
the completed fiscal year immediately preceding the Change of
Control (for this purpose, such opportunities shall be deemed
reduced if the objective standards by which the Executive's
incentive compensation measured becomes stringent or the amount of
such compensation is materially reduced on a discretionary basis
from the amount that would be payable solely by reference to the
objectives; or
(c) Failure of the Company to continue in effect any retirement, life,
medical, dental, disability accidental death or travel insurance
plan, in which Executive was participating immediately prior to
the Change of Control unless the Company provides Executive with a
plan or plans that provide substantially similar benefits, or the
taking of any action by the Company that would adversely effect
Executive's participation in or materially reduce Executive's
benefits under any of such plans or deprive Executive of any
material fringe benefit enjoyed by Executive immediately prior to
the Change of Control other than an isolated, insubstantial and
inadvertent failure not occurring in bad faith and which is
remedied by the Company promptly after receipt of notice thereof
given by the Executive; or
(d) The Company requires Executive to be based at any office or
location outside the Greater Boston Metropolitan Area or the
Company requires the Executive to travel on Company business to
a substantially greater extent than required immediately prior
to the date of Change of Control; or
(e) Any purported termination by the Company of the Executive's
employment otherwise than is expressly permitted by this
Agreement; or
(f) Any failure by the Company to comply with and satisfy Section 8
of this Agreement.
For purposes of this Section 5, any good faith determination of Good
Reason made by the Executive shall be conclusive.
6. If any payment or benefit received by Executive (whether paid or
payable or distributed or distributable pursuant to the terms of this
Agreement or otherwise, but determined without regard to any additional
payments required under this Section 6), would be subject to the excise tax
imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the
"Code"), or any interest or penalties are incurred by the Executive with
respect to such excise tax) the Company will pay to Executive an additional
amount in cash (the "Additional Amount") equal to the amount necessary to
cause the aggregate payments and benefits received by Executive, including
such Additional Amount (net of all federal, state, and local income taxes and
all taxes payable as a result of the application of Sections 28OG and 4999 of
the Code and including any interest and penalties with respect to such taxes)
to be equal to the aggregate payments and benefits Executive would have
received, excluding such Additional Amount (net of all federal, state and
local income taxes) as if Sections 28OG and 4999 of the Code (and any
successor provisions thereto) had not been enacted into law.
Following the termination of Executive's employment, Executive may submit
to the Company a written opinion (the "Opinion") of a nationally recognized
accounting firm, employment consulting firm, or law firm selected by Executive
setting forth a statement and a calculation of the Additional Amount. The
determination of such firm concerning the extent of the Additional Amount
(which determination need not be free from doubt), shall be final and binding
on both Executive and the Company. The Company will pay to Executive the
Additional Amount not later than 10 days after such firm has rendered the
Opinion. The Company agrees to pay the fees and expenses of such firm in
preparing and rendering the opinion.
If, following the payment to Executive of the Additional Amount,
Executive's liability for the excise tax imposed by Section 4999 of the Code
on the payments and benefits received by Executive is finally determined (at
such time as the Internal Revenue Service is unable to make any further
adjustment to the amount of such liability) to be less than the amount thereof
set forth in the Opinion, Executive shall reimburse the Company, without
interest, in an amount equal to the amount by which the Additional Amount
should be reduced to reflect such decrease in the actual excise tax
liability. The calculation of such reimbursement shall be made by a
nationally recognized accounting firm, an employment consulting firm, or a law
firm selected by Executive, whose determination shall be binding on Executive
and the Company and whose fees and expenses therefor shall be paid by the
Company.
7. In the case of any dispute under this Agreement, Executive may
initiate binding arbitration in Boston, Massachusetts, before the American
Arbitration Association by serving a notice to arbitrate upon the Company or,
at Executive's election, institute judicial proceedings, in either case within
90 days of the effective date of his termination or, if later, his receipt of
notice of termination, or such longer period as may be reasonably necessary
for Executive to take such action if illness or incapacity should impair his
taking such action within the 90-day period. The Company shall not have the
right to initiate binding arbitration, and agrees that upon the initiation of
binding arbitration by Executive pursuant to this paragraph 7 the Company
shall cause to be dismissed any judicial proceedings it has brought against
Executive relating to this Agreement. The Company authorizes Executive from
time to time to retain counsel of his choice to represent Executive in
connection with any and all actions, proceedings, and/or arbitration, whether
by or against the Company or any director, officer, shareholder, or other
person affiliated with the Company, which may affect Executive's rights under
this Agreement. The Company agrees (i) to pay the fees and expenses of such
counsel, (ii) to pay the cost of such arbitration and/or judicial proceeding,
and (iii) to pay interest to Executive on all amounts owed to Executive under
this Agreement during any period of time that such amounts are withheld
pending arbitration and/or judicial proceedings. Such interest will be at the
base rate as announced from time to time by The First National Bank of Boston.
In addition, notwithstanding any existing prior attorney-client
relationship between the Company and counsel retained by Executive, the
Company irrevocably consents to Executive entering into an attorney-client
relationship with such counsel and agrees that a confidential relationship
shall exist between Executive and such counsel.
8. If the Company is at any time before or after a Change of Control
merged or consolidated into or with any other corporation or other entity
(whether or not the Company is the surviving entity), or if substantially all
of the assets thereof are transferred to another corporation or other entity,
the provisions of this Agreement will be binding upon and inure to the benefit
of the corporation or other entity resulting from such merger or consolidation
or the acquirer of such assets (the "Successor Entity"), and this paragraph 8
will apply in the event of any subsequent merger or consolidation or transfer
of assets. The Company will require any such Successor Entity to assume
expressly and agree to perform this Agreement in the same manner and to the
same extent that the Company would be required to perform if no such
transaction had taken place. As used in this Agreement, "Company" shall mean
the Company as hereinbefore defined and any Successor Entity which assumes and
agrees to perform this Agreement by operation of law or otherwise.
In the event of any merger, consolidation, or sale of assets described
above, nothing contained in this Agreement will detract from or otherwise
limit Executive's right to or privilege of participation in any stock option
or purchase plan or any bonus, profit sharing, pension, group insurance,
hospitalization, or other incentive or benefit plan or arrangement which may
be or become applicable to executives of the corporation resulting from such
merger or consolidation or the corporation acquiring such assets of the
Company.
In the event of any merger, consolidation, or sale of assets described
above, references to the Company in this Agreement shall unless the context
suggests otherwise be deemed to include the entity resulting from such merger
or consolidation or the acquirer of such assets of the Company.
9. Any termination by the Company for Cause, or by the Executive for
Good Reason, shall be communicated by Notice of Termination to the other party
hereto given in accordance with the last paragraph of Section 14 of this
Agreement. For purposes of this Agreement, a "Notice of Termination" means a
written notice which (i) indicates the specific termination provision in this
Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination
of the Executive's employment under the provision so indicated and (iii) if
the Date of Termination (as defined below) is other than the date of receipt
of such notice, specifies the termination date (which date shall be not more
than thirty days after the giving of such notice). The failure by the
Executive or the Company to set forth in the Notice of Termination any fact or
circumstance which contributes to a showing of Good Reason or Cause shall not
waive any right of the Executive or the Company, respectively, hereunder or
preclude the Executive or the Company, respectively, from asserting such fact
or circumstance in enforcing the Executive's or the Company's rights
hereunder.
"Date of Termination" means (i) if the Executive's employment is
terminated by the Company for Cause, or by the Executive for Good Reason, the
date of receipt of the Notice of Termination or any later date specified
therein, as the case may be, (ii) if the Executive's employment is terminated
by the Company other than for Cause or Disability, the Date of Termination
shall be the date on which the Company notifies the Executive of such
termination and (iii) if the Executive's employment is terminated by reason of
death or Disability, the Date of Termination shall be the date of death of the
Executive or the effective date of the Disability, as the case may be.
10. All payments required to be made by the Company hereunder to
Executive or his dependents, beneficiaries, or estate will be subject to the
withholding of such amounts relating to tax and/or other payroll deductions as
may be required by law.
11. There shall be no requirement on the part of the Executive to seek
other employment or otherwise mitigate damages in order to be entitled to the
full amount of any payments and benefits to which Executive is entitled under
this Agreement, and the amount of such payments and benefits shall not be
reduced by any compensation or benefits received by Executive from other
employment.
12. Nothing contained in this Agreement shall be construed as a
contract of employment between the Company and the Executive, or as a right of
the Executive to continue in the employ of the Company, or as a limitation of
the right of the Company to discharge the Executive with or without Cause;
provided that the Executive shall have the right to receive upon termination
of his employment the payments and benefits provided in this Agreement and
shall not be deemed to have waived any rights he may have either at law or in
equity in respect of such discharge.
13. No amendment, change, or modification of this Agreement may be
made except in writing, signed by both parties.
14. This Agreement shall terminate on the third anniversary of the
date hereof, provided, however, that commencing on the date one year after the
date hereof, and on each annual anniversary of such date (each such date
hereinafter referred to as a "Renewal Date"), unless previously terminated,
the term of this Agreement shall be automatically extended so as to terminate
three years from such Renewal Date, unless at least sixty days prior to the
Renewal Date the Company shall give notice to the Executive that the term of
this Agreement shall not be so extended. This Agreement shall not apply to a
Change of Control which takes place after the termination of this Agreement.
Payments made by the Company pursuant to this Agreement shall be in lieu
of severance payments, if any, which might otherwise be available to Executive
under any severance plan, policy, program or arrangement generally applicable
to the employees of the Company. If for any reason Executive receives
severance payments (other than under this Agreement) upon the termination of
his employment with the Company, the amount of such payments shall be deducted
from the amount paid under this Agreement. The purpose of this provision is
solely to avert a duplication of benefits; neither this provision nor the
provisions of any other agreement shall be interpreted to reduce the amount
payable to Executive below the amount that would otherwise have been payable
under this Agreement.
The provisions of this Agreement shall be binding upon and shall inure
to the benefit of Executive, his executors, administrators, legal
representatives, and assigns, and the Company and its successors.
The validity, interpretation, and effect of this Agreement shall be
governed by the laws of The Commonwealth of Massachusetts. Any ambiguities
in this Agreement shall be construed in favor of the Executive.
The invalidity or unenforceability of any provisions of this Agreement
shall not affect the validity or enforceability of any other provision of
this Agreement, which shall remain in full force and effect.
The Company shall have no right of set-off or counterclaims, in respect
of any claim, debt, or obligation, against any payments to Executive, his
dependents, beneficiaries, or estate provided for in this Agreement.
No right or interest to or in any payments shall be assignable by the
Executive; PROVIDED, however, that this provision shall not preclude him from
designating one or more beneficiaries to receive any amount that may be
payable after his death and shall not preclude the legal representative of his
estate from assigning any right hereunder to the person or persons entitled
thereto under his will or, in the case of intestacy, to the person or persons
entitled thereto under the laws of intestacy applicable to his estate. The
term "beneficiaries" as used in this Agreement shall mean a beneficiary or
beneficiaries so designated to receive any such amount, or if no beneficiary
has been so designated, the legal representative of the Executive's estate.
No right, benefit, or interest hereunder, shall be subject to
anticipation, alienation, sale, assignment, encumbrance, charge, pledge,
hypothecation, or set-off in respect of any claim, debt, or obligation, or to
execution, attachment, levy, or similar process, or assignment by operation of
law. Any attempt, voluntary or involuntary, to effect any action specified in
the immediately preceding sentence shall, to the full extent permitted by law,
be null, void, and of no effect.
All notices and other communications hereunder shall be in writing and
shall be given by hand delivery to the other party or by registered or
certified mail, return receipt requested, postage prepaid, addressed as
follows:
If to the Executive:
-------------------
If to the Company: Boston Edison Company
----------------- 800 Boylston Street
Boston, MA 02199
Attention: General Counsel
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
IN WITNESS WHEREOF, Boston Edison Company and Executive have each caused
this Agreement to be duly executed and delivered as of the date set forth
above.
BOSTON EDISON COMPANY
By:______________________________
Name:
Title:
________________________________
Executive
EXHIBIT A
CHANGE OF CONTROL. For the purposes of this Agreement, a "Change of
Control" shall mean:
(a) The acquisition by any Person of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of 30%
or more of either (i) the then outstanding shares of common stock
of the Company (the "Outstanding Company Common Stock") or (ii)
the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the
election of directors (the "Outstanding Company Voting
Securities"); provided, however, that for purposes of this
subsection (a), the following acquisitions shall not constitute a
Change of Control: (i) any acquisition directly from the Company,
(ii) any acquisition by the Company, (iii) any acquisition by any
employee benefit plan (or related trust) sponsored or maintained
by the Company or any corporation controlled by the Company or
(iv) any acquisition by any corporation pursuant to a transaction
which complies with clauses (i), (ii) and (iii) of subsection (c)
of this Exhibit A; or
(b) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual
becoming a director subsequent to the date hereof whose election,
or nomination for election by the Company's shareholders, was
approved by a vote of at least a majority of the directors then
comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding,
for this purpose, any such individual whose initial assumption of
office occurs as a result of an actual or threatened election
contest with respect to the election or removal of directors or
other actual or threatened solicitation of proxies or consents by
or on behalf of a Person other than the Board; or
(c) Consummation of a reorganization, merger or consolidation or sale
or other disposition of all or substantially all of the assets of
the Company (a "Business Combination"), in each case, unless,
following such Business Combination, (i) all or substantially all
of the individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly,
more than 50% of, respectively, the then outstanding shares of
common stock and the combined voting power of the then outstanding
voting securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from
such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns the Company
or all or substantially all of the Company's assets either
directly or through one or more subsidiaries) in substantially the
same proportions as their ownership, immediately prior to such
Business Combination of the Outstanding Company Common Stock and
outstanding Company Voting Securities, as the case may be, (ii) no
Person (excluding any corporation resulting from such Business
Combination or any employee benefit plan (or related trust) of the
Company or such corporation resulting from such Business
Combination) beneficially owns, directly or indirectly, 30% or
more of, respectively, the then outstanding shares of common stock
of the corporation resulting from such Business Combination or the
combined voting power of the then outstanding voting securities of
such corporation except to the extent that such ownership existed
prior to the Business Combination and (iii) at least a majority of
the members of the board of directors of the corporation resulting
from such Business Combination were members of the Incumbent Board
at the time of the execution of the initial agreement, or of the
action of the Board, providing for such Business Combination; or
(d) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
BOSTON EDISON COMPANY
Change in Control Agreement
---------------------------
AGREEMENT, made this ___ day of ________________, 1996, by and between
________ ("Executive") and Boston Edison Company (the "Company"),
WITNESSETH
WHEREAS, the Board of Directors of the Company (the "Board") has
determined that it is in the best interests of the Company and its
shareholders for the Company to agree to provide benefits under the
circumstances described below to Executive and other executives who are
responsible for the policy-making functions of the Company and the overall
viability of the Company's business; and
WHEREAS, the Board recognizes that the possibility of a change of control
of the Company is unsettling to such executives and desires to make
arrangements at this time to help assure their continuing dedication to their
duties to the Company and its shareholders, notwithstanding any attempts by
outside parties to gain control of the Company; and
WHEREAS, the Board believes it important, should the Company receive
proposals from outside parties, to enable such executives, without being
distracted by the uncertainties of their own employment situation, to perform
their regular duties, and where appropriate to assess such proposals and
advise the Board as to the best interests of the Company and its shareholders
and to take such other action regarding such proposals as the Board determines
to be appropriate; and
WHEREAS, the Board also desires to demonstrate to the executives that the
Company is concerned with their welfare and intends to provide that loyal
executives are treated fairly; and
WHEREAS, the Board wishes to assure the executives of fair severance
should any of their employment terminate in specified circumstances following
a change of control of the Company and to assure the executives of other
benefits upon a change of control.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, the parties hereto agree as follows:
1. In the event that any individual, corporation, partnership,
company, or other entity (a "Person"), which term shall include a "group"
(within the meaning of section 13(d) of the Securities Exchange Act of 1934
(the "Act")), begins a tender or exchange offer, circulates a proxy to the
Company's shareholders, or takes other steps to effect a "Change of Control"
(as defined in Exhibit A attached hereto and made a part hereof), Executive
agrees that he will not voluntarily leave the employ of the Company and will
render the services contemplated in the recitals to this Agreement until such
Person has terminated the efforts to effect a Change of Control or until a
Change of Control has occurred.
2. If, within 36 months following a Change of Control (the "Post
Change of Control Period") Executive's employment with the company is
terminated by the Company for any reason other than for "Cause" or
"Disability" (as defined paragraph 4 below), or as a result of Executive's
death, or Executive terminates such employment for Good Reason (as defined
in paragraph 5 below):
(a) The Company will pay to Executive within 30 days of such
termination of employment a lump-sum cash payment equal to the sum
of (i) the Executive's annual base salary ("Annual Base Salary")
through the date of such termination of employment to the extent
not theretofore paid, (ii) a prorated portion of the target award
payable under the Company's Executive Annual Incentive
Compensation Plan, or any comparable or successor plan (the
"Annual Plan") determined by calculating the product of, (A) the
target bonus award payable for the fiscal year in which the date
of termination occurs under the Annual Plan, times (B) a fraction,
the numerator of which is the number of days in the current fiscal
year through the date of termination of employment, and the
denominator of which is 365, (iii) a prorated portion of the
target award payable under the Company's Performance Share Plan,
or any comparable or successor plan (the "Long-Term Plan") for the
performance period ending on the last day of the fiscal year
during which the date of termination of employment occurs
determined by calculating the product of (A) the target award
payable for such performance period and (B) a fraction, the
numerator of which is the number of days in the current
performance period through the date of termination, and the
denominator of which is the actual number of days in the
performance period (provided that if any awards are expressed in
shares of common stock rather than cash, the Company will pay the
cash equivalent of such awards based on the closing price per
share as reported in the Wall Street Journal (Eastern Edition) New
York Stock Exchange Composite Transactions determined on the date
prior to the date of the Change of Control or the average per
share price for the 10 trading days preceding the date of the
Change of Control (whichever is higher)) and (iv) any compensation
for the fiscal year in which the date of termination occurs
previously deferred by the Executive (together with any accrued
interest or earnings thereon) and any accrued vacation pay, in
each case to the extent not theretofore paid; and
(b) any stock, stock option or cash awards granted to the Executive by
the Company that would have become vested upon continued
employment by the Executive shall immediately vest in full
notwithstanding any provision to the contrary of such grant and
shall remain exercisable until the earlier of the fifth
anniversary of such termination and the latest date on which such
grant could have been exercised; and
(c) the Company will pay to Executive within 30 days of such
termination of employment a lump-sum cash payment equal to three
times: (A) the amount of the Executive's Annual Base Salary at
the rate in effect immediately prior to the date of termination or
at the rate in effect immediately prior to the Change of Control,
whichever is higher, and (B) the amount of the actual bonus paid
to the Executive under the Annual Plan and the Long-Term Plan for
the most recently completed fiscal year ended before the Change of
Control, or the target bonus payable under the Annual Plan and
Long-Term Plan for the fiscal year during which the termination of
employment occurs, whichever is higher (provided that if any
awards are expressed in shares of common stock rather than cash,
the Company will pay the cash equivalent of such awards based on
the closing price per share as reported in the Wall Street Journal
(Eastern Edition) New York Stock Exchange Composite Transactions
determined on the date prior to the date of the Change of Control
or the average per share price for the 10 trading days preceding
the date of the Change of Control (whichever is higher));
(d) the Company will pay to Executive within 30 days of such
termination of employment a lump-sum cash payment equal to the
full balance standing to his credit with the Company under any and
all deferred compensation plans or arrangements and the lump-sum
actuarial equivalent of the Executive's accrued benefit under any
supplement retirement plan or arrangement (the sum of the amounts
described in subsections (a) and (d) shall be hereinafter referred
to as the "Accrued Obligations"); and
(e) an amount equal to the excess of (i) the lump-sum actuarial
equivalent of the accrued benefit under (a) the Company's
qualified defined benefit Retirement Plan (the "Retirement Plan")
(utilizing actuarial assumptions no less favorable to the
Executive than those in effect under the Retirement Plan
immediately prior to the date of the Change of Control), and (b)
any supplemental retirement plan of the Company in which the
Executive participates (the "SERP") which the Executive would
receive if the Executive's employment continued for three years
after the date of termination assuming for these purposes that all
accrued benefits are fully vested, and further assuming that the
Executive's annual compensation for purposes of determining
benefits under the Retirement Plan and SERP ("Covered
Compensation") in each of the three years is at least equal to the
higher of Executive's annual rate of Covered Compensation for the
most recently completed fiscal year ending prior to the date of
the Change of Control or the year in which the Change of Control
occurs, over (ii) the lump-sum actuarial equivalent of the
Executive's actual accrued benefit (paid or payable), if any,
under the Retirement Plan and the SERP as of the date of
termination and;
(f) Executive, together with his dependents, will continue following
such termination of employment to participate fully at the
Company's expense in all welfare benefit plans, programs,
practices and policies, including without limitation, life,
medical, disability, dental accidental death and travel insurance
plans, maintained or sponsored by the Company immediately prior to
the Change of Control, or receive substantially the equivalent
coverage (or the full value thereof in cash) from the Company,
until the longer of the third anniversary of such termination or
any longer period as may be provided by the terms of the
appropriate plan, program, practice or policy, provided, however,
that if the Executive becomes re-employed with another employer
and is eligible to receive medical or other welfare benefits under
another employer provided plan, the medical and other welfare
benefits described herein shall be secondary to those provided
under such other plan during such applicable period of
eligibility. For purposes of determining eligibility (but not the
time of commencement of benefits) of the Executive for any retiree
benefits pursuant to such plans, practices, programs and policies,
the Executive shall be considered to have remained employed until
three years after the date of termination and to have retired on
the last day of such period; and
(g) to the extent not theretofore paid or provided for, the Company
shall timely pay or provide to the Executive any other amounts or
benefits required to be paid or provided or which the Executive is
eligible to receive under any plan, program, policy, practice,
contract or agreement of the Company ("Other Benefits"); and
(h) the Company will promptly reimburse Executive for any and all
legal fees and expenses (including, without limitation,
stenographer fees, printing costs, etc.) incurred by him as a
result of such termination of employment, including without
limitation all fees and expenses incurred to enforce the
provisions of this Agreement or contesting or disputing that the
termination of his employment is for Cause or other than for Good
Reason (regardless of the outcome thereof).
Notwithstanding anything herein to the contrary, to the extent that any
payment or benefit provided for herein is required to be paid or vested an any
earlier date under the terms of any plan, agreement or arrangements, such
plan, agreement or arrangement shall control.
3. Death, Disability, Cause, Other Than For Good Reason.
----------------------------------------------------
(a) DEATH. If the Executive's employment shall terminate during the
Post Change of Control Period by reason of the Executive's death,
this Agreement shall terminate without further obligations to the
Executive's legal representatives under this Agreement, other than
for payment of Accrued Obligations and the timely payment or
provision of Other Benefits. Accrued Obligations shall be paid to
the Executive's estate or beneficiary, as applicable, in a lump
sum in cash within 30 days of death.
(b) DISABILITY. If the Executive's employment is terminated during
the Post Change of Control Period by reason of the Executive's
Disability, this Agreement shall terminate without further
obligations to the Executive other than for payment of Accrued
Obligations and the timely payment or provision of Other Benefits.
Accrued Obligations shall be paid to the Executive in a lump sum
in cash within 30 days of the date of termination of employment.
For purposes of this Agreement, "Disability" shall mean the
absence of the Executive from the Executive's duties with the
Company on a full-time basis for 180 consecutive business days as
a result of incapacity due to mental or physical illness which is
determined to be total and permanent by a physician selected by
the Company or its insurers and acceptable to the Executive or the
Executive's legal representative. If the Company determines in
good faith that the Disability of the Executive has occurred
during the Post Change of Control Period, it may give the
Executive written notice of its intention to terminate the
Executive's employment. In such event, the Executive's employment
with the Company shall terminate effective on the 30th day after
receipt of such notice by the Executive, provided that, within the
30 days of such receipt, the Executive shall not have returned to
full-time performance of the Executive's duties.
(c) Cause. If the Executive's employment shall be terminated for
Cause (as defined in Section 4 below) during the Post Change of
Control Period, this Agreement shall terminate without further
obligations to the Executive other than the obligation to pay the
Executive (A) his Annual Base Salary through the date of
termination, (B) the amount of any compensation previously
deferred by the Executive, and (C) Other Benefits, in each case to
the extent theretofore unpaid. If the Executive voluntarily
terminates employment during the Post Change of Control Period,
excluding a termination for Good Reason, this Agreement shall
terminate without further obligations to the Executive other than
for Accrued Obligations and the timely payment or provisions of
Other Benefits.
In such case, all Accrued Obligations shall be paid to the Executive in
a lump sum in cash within 30 days of date of the termination of employment.
4. "Cause" means only: (a) commission of a felony or gross neglect
of duty by the Executive which is intended to result in substantial personal
enrichment of the Executive at the expense of the Company, (b) conviction of
a crime involving moral turpitude, or (c) willful failure by the Executive of
his duties to the Company which failure is deliberate on the Executive's part,
results in material injury to the Company, and continues for more than 30 days
after written notice given to the Executive pursuant to a two-thirds vote of
all of the members of the Board at a meeting called and held for such purpose
(after reasonable notice to Executive) and at which meeting the Executive and
his counsel were given an opportunity to be heard, such vote to set forth in
reasonable detail the nature of the failure. For purposes of this definition
of Cause, no act or omission shall be considered to have been "willful" unless
it was not in good faith and the Executive had knowledge at the time that the
act or omission was not in the best interest of the Company. Any act, or
failure to act, based on authority given pursuant to a resolution duly adopted
by the Board or upon the instructions of the Chief Executive Officer or
another senior officer of the Company or based on the advice of counsel of the
Company shall be conclusively presumed to be done, or omitted to be done, by
the Executive in good faith and in the best interest of the Company.
5. Executive shall be deemed to have voluntarily terminated his
employment for Good Reason if the Executive leaves the employ of the Company
for any reason following:
(a) The assignment to the Executive of any duties inconsistent in any
respect with the Executive's position (including status, offices,
titles and reporting requirements), authority, duties or
responsibilities immediately prior to the Change of Control; or
any other action by the Company which results in a diminution in
such position, authority, duties or responsibilities, excluding
for this purpose an isolated, insubstantial and inadvertent action
not taken in bad faith and which is remedied by the Company
promptly after receipt of notice thereof given by the Executive;
(b) Any reduction in the Executive's rate of Annual Base Salary for
any fiscal year to less than 100% of the rate of Annual Base
Salary paid to him in the completed fiscal year immediately
preceding the Change of Control, or reduction in Executive's total
cash and stock compensation opportunities, including salary and
incentives, for any fiscal year to less than 100% of the total
cash and stock compensation opportunities made available to him in
the completed fiscal year immediately preceding the Change of
Control (for this purpose, such opportunities shall be deemed
reduced if the objective standards by which the Executive's
incentive compensation measured becomes stringent or the amount
of such compensation is materially reduced on a discretionary
basis from the amount that would be payable solely by reference
to the objectives; or
(c) Failure of the Company to continue in effect any retirement, life,
medical, dental, disability accidental death or travel insurance
plan, in which Executive was participating immediately prior to
the Change of Control unless the Company provides Executive with a
plan or plans that provide substantially similar benefits, or the
taking of any action by the Company that would adversely effect
Executive's participation in or materially reduce Executive's
benefits under any of such plans or deprive Executive of any
material fringe benefit enjoyed by Executive immediately prior to
the Change of Control other than an isolated, insubstantial and
inadvertent failure not occurring in bad faith and which is
remedied by the Company promptly after receipt of notice thereof
given by the Executive; or
(d) The Company requires Executive to be based at any office or
location outside the Greater Boston Metropolitan Area or the
Company requires the Executive to travel on Company business to
a substantially greater extent than required immediately prior
to the date of Change of Control; or
(e) Any purported termination by the Company of the Executive's
employment otherwise than is expressly permitted by this
Agreement; or
(f) Any failure by the Company to comply with and satisfy Section 8
of this Agreement.
For purposes of this Section 5, any good faith determination of Good
Reason made by the Executive shall be conclusive.
6. If any payment or benefit received by Executive (whether paid
or payable or distributed or distributable pursuant to the terms of this
Agreement or otherwise, but determined without regard to any additional
payments required under this Section 6), would be subject to the excise tax
imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the
"Code"), or any interest or penalties are incurred by the Executive with
respect to such excise tax) the Company will pay to Executive an additional
amount in cash (the "Additional Amount") equal to the amount necessary to
cause the aggregate payments and benefits received by Executive, including
such Additional Amount (net of all federal, state, and local income taxes and
all taxes payable as a result of the application of Sections 28OG and 4999 of
the Code and including any interest and penalties with respect to such taxes)
to be equal to the aggregate payments and benefits Executive would have
received, excluding such Additional Amount (net of all federal, state and
local income taxes) as if Sections 28OG and 4999 of the Code (and any
successor provisions thereto) had not been enacted into law.
Following the termination of Executive's employment, Executive may submit
to the Company a written opinion (the "Opinion") of a nationally recognized
accounting firm, employment consulting firm, or law firm selected by Executive
setting forth a statement and a calculation of the Additional Amount. The
determination of such firm concerning the extent of the Additional Amount
(which determination need not be free from doubt), shall be final and binding
on both Executive and the Company. The Company will pay to Executive the
Additional Amount not later than 10 days after such firm has rendered the
Opinion. The Company agrees to pay the fees and expenses of such firm in
preparing and rendering the opinion.
If, following the payment to Executive of the Additional Amount,
Executive's liability for the excise tax imposed by Section 4999 of the Code
on the payments and benefits received by Executive is finally determined (at
such time as the Internal Revenue Service is unable to make any further
adjustment to the amount of such liability) to be less than the amount thereof
set forth in the Opinion, Executive shall reimburse the Company, without
interest, in an amount equal to the amount by which the Additional Amount
should be reduced to reflect such decrease in the actual excise tax
liability. The calculation of such reimbursement shall be made by a
nationally recognized accounting firm, an employment consulting firm, or a law
firm selected by Executive, whose determination shall be binding on Executive
and the Company and whose fees and expenses therefor shall be paid by the
Company.
7. In the case of any dispute under this Agreement, Executive may
initiate binding arbitration in Boston, Massachusetts, before the American
Arbitration Association by serving a notice to arbitrate upon the Company or,
at Executive's election, institute judicial proceedings, in either case within
90 days of the effective date of his termination or, if later, his receipt of
notice of termination, or such longer period as may be reasonably necessary
for Executive to take such action if illness or incapacity should impair his
taking such action within the 90-day period. The Company shall not have the
right to initiate binding arbitration, and agrees that upon the initiation of
binding arbitration by Executive pursuant to this paragraph 7 the Company
shall cause to be dismissed any judicial proceedings it has brought against
Executive relating to this Agreement. The Company authorizes Executive from
time to time to retain counsel of his choice to represent Executive in
connection with any and all actions, proceedings, and/or arbitration, whether
by or against the Company or any director, officer, shareholder, or other
person affiliated with the Company, which may affect Executive's rights under
this Agreement. The Company agrees (i) to pay the fees and expenses of such
counsel, (ii) to pay the cost of such arbitration and/or judicial proceeding,
and (iii) to pay interest to Executive on all amounts owed to Executive under
this Agreement during any period of time that such amounts are withheld
pending arbitration and/or judicial proceedings. Such interest will be at the
base rate as announced from time to time by The First National Bank of Boston.
In addition, notwithstanding any existing prior attorney-client
relationship between the Company and counsel retained by Executive, the
Company irrevocably consents to Executive entering into an attorney-client
relationship with such counsel and agrees that a confidential relationship
shall exist between Executive and such counsel.
8. If the Company is at any time before or after a Change of Control
merged or consolidated into or with any other corporation or other entity
(whether or not the Company is the surviving entity), or if substantially all
of the assets thereof are transferred to another corporation or other entity,
the provisions of this Agreement will be binding upon and inure to the benefit
of the corporation or other entity resulting from such merger or consolidation
or the acquirer of such assets (the "Successor Entity"), and this paragraph 8
will apply in the event of any subsequent merger or consolidation or transfer
of assets. The Company will require any such Successor Entity to assume
expressly and agree to perform this Agreement in the same manner and to the
same extent that the Company would be required to perform if no such
transaction had taken place. As used in this Agreement, "Company" shall mean
the Company as hereinbefore defined and any Successor Entity which assumes and
agrees to perform this Agreement by operation of law or otherwise.
In the event of any merger, consolidation, or sale of assets described
above, nothing contained in this Agreement will detract from or otherwise
limit Executive's right to or privilege of participation in any stock option
or purchase plan or any bonus, profit sharing, pension, group insurance,
hospitalization, or other incentive or benefit plan or arrangement which may
be or become applicable to executives of the corporation resulting from such
merger or consolidation or the corporation acquiring such assets of the
Company.
In the event of any merger, consolidation, or sale of assets described
above, references to the Company in this Agreement shall unless the context
suggests otherwise be deemed to include the entity resulting from such merger
or consolidation or the acquirer of such assets of the Company.
9. Any termination by the Company for Cause, or by the Executive for
Good Reason, shall be communicated by Notice of Termination to the other party
hereto given in accordance with the last paragraph of Section 14 of this
Agreement. For purposes of this Agreement, a "Notice of Termination" means a
written notice which (i) indicates the specific termination provision in this
Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination
of the Executive's employment under the provision so indicated and (iii) if
the Date of Termination (as defined below) is other than the date of receipt
of such notice, specifies the termination date (which date shall be not more
than thirty days after the giving of such notice). The failure by the
Executive or the Company to set forth in the Notice of Termination any fact or
circumstance which contributes to a showing of Good Reason or Cause shall not
waive any right of the Executive or the Company, respectively, hereunder or
preclude the Executive or the Company, respectively, from asserting such fact
or circumstance in enforcing the Executive's or the Company's rights
hereunder.
"Date of Termination" means (i) if the Executive's employment is
terminated by the Company for Cause, or by the Executive for Good Reason, the
date of receipt of the Notice of Termination or any later date specified
therein, as the case may be, (ii) if the Executive's employment is terminated
by the Company other than for Cause or Disability, the Date of Termination
shall be the date on which the Company notifies the Executive of such
termination and (iii) if the Executive's employment is terminated by reason of
death or Disability, the Date of Termination shall be the date of death of the
Executive or the effective date of the Disability, as the case may be.
10. All payments required to be made by the Company hereunder to
Executive or his dependents, beneficiaries, or estate will be subject to the
withholding of such amounts relating to tax and/or other payroll deductions as
may be required by law.
11. There shall be no requirement on the part of the Executive to seek
other employment or otherwise mitigate damages in order to be entitled to the
full amount of any payments and benefits to which Executive is entitled under
this Agreement, and the amount of such payments and benefits shall not be
reduced by any compensation or benefits received by Executive from other
employment.
12. Nothing contained in this Agreement shall be construed as a
contract of employment between the Company and the Executive, or as a right of
the Executive to continue in the employ of the Company, or as a limitation of
the right of the Company to discharge the Executive with or without Cause;
provided that the Executive shall have the right to receive upon termination
of his employment the payments and benefits provided in this Agreement and
shall not be deemed to have waived any rights he may have either at law or in
equity in respect of such discharge.
13. No amendment, change, or modification of this Agreement may be
made except in writing, signed by both parties.
14. This Agreement shall terminate on the third anniversary of the
date hereof, provided, however, that commencing on the date one year after
the date hereof, and on each annual anniversary of such date (each such date
hereinafter referred to as a "Renewal Date"), unless previously terminated,
the term of this Agreement shall be automatically extended so as to terminate
three years from such Renewal Date, unless at least sixty days prior to the
Renewal Date the Company shall give notice to the Executive that the term of
this Agreement shall not be so extended. This Agreement shall not apply to a
Change of Control which takes place after the termination of this Agreement.
Payments made by the Company pursuant to this Agreement shall be in lieu
of severance payments, if any, which might otherwise be available to Executive
under any severance plan, policy, program or arrangement generally applicable
to the employees of the Company. If for any reason Executive receives
severance payments (other than under this Agreement) upon the termination of
his employment with the Company, the amount of such payments shall be deducted
from the amount paid under this Agreement. The purpose of this provision is
solely to avert a duplication of benefits; neither this provision nor the
provisions of any other agreement shall be interpreted to reduce the amount
payable to Executive below the amount that would otherwise have been payable
under this Agreement.
The provisions of this Agreement shall be binding upon and shall inure
to the benefit of Executive, his executors, administrators, legal
representatives, and assigns, and the Company and its successors.
The validity, interpretation, and effect of this Agreement shall be
governed by the laws of The Commonwealth of Massachusetts. Any ambiguities
in this Agreement shall be construed in favor of the Executive.
The invalidity or unenforceability of any provisions of this Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement, which shall remain in full force and effect.
The Company shall have no right of set-off or counterclaims, in respect
of any claim, debt, or obligation, against any payments to Executive, his
dependents, beneficiaries, or estate provided for in this Agreement.
No right or interest to or in any payments shall be assignable by the
Executive; PROVIDED, however, that this provision shall not preclude him from
designating one or more beneficiaries to receive any amount that may be
payable after his death and shall not preclude the legal representative of his
estate from assigning any right hereunder to the person or persons entitled
thereto under his will or, in the case of intestacy, to the person or persons
entitled thereto under the laws of intestacy applicable to his estate. The
term "beneficiaries" as used in this Agreement shall mean a beneficiary or
beneficiaries so designated to receive any such amount, or if no beneficiary
has been so designated, the legal representative of the Executive's estate.
No right, benefit, or interest hereunder, shall be subject to
anticipation, alienation, sale, assignment, encumbrance, charge, pledge,
hypothecation, or set-off in respect of any claim, debt, or obligation, or to
execution, attachment, levy, or similar process, or assignment by operation of
law. Any attempt, voluntary or involuntary, to effect any action specified in
the immediately preceding sentence shall, to the full extent permitted by law,
be null, void, and of no effect.
All notices and other communications hereunder shall be in writing and
shall be given by hand delivery to the other party or by registered or
certified mail, return receipt requested, postage prepaid, addressed as
follows:
If to the Executive:
-------------------
If to the Company: Boston Edison Company
----------------- 800 Boylston Street
Boston, MA 02199
Attention: General Counsel
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
IN WITNESS WHEREOF, Boston Edison Company and Executive have each caused
this Agreement to be duly executed and delivered as of the date set forth
above.
BOSTON EDISON COMPANY
By:______________________________
Name:
Title:
________________________________
Executive
EXHIBIT A
CHANGE OF CONTROL. For the purposes of this Agreement, a "Change of
Control" shall mean:
(a) The acquisition by any Person of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of 30%
or more of either (i) the then outstanding shares of common stock
of the Company (the "Outstanding Company Common Stock") or (ii)
the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the
election of directors (the "Outstanding Company Voting
Securities"); provided, however, that for purposes of this
subsection (a), the following acquisitions shall not constitute a
Change of Control: (i) any acquisition directly from the Company,
(ii) any acquisition by the Company, (iii) any acquisition by any
employee benefit plan (or related trust) sponsored or maintained
by the Company or any corporation controlled by the Company or
(iv) any acquisition by any corporation pursuant to a transaction
which complies with clauses (i), (ii) and (iii) of subsection (c)
of this Exhibit A; or
(b) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual
becoming a director subsequent to the date hereof whose election,
or nomination for election by the Company's shareholders, was
approved by a vote of at least a majority of the directors then
comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding,
for this purpose, any such individual whose initial assumption of
office occurs as a result of an actual or threatened election
contest with respect to the election or removal of directors or
other actual or threatened solicitation of proxies or consents by
or on behalf of a Person other than the Board; or
(c) Consummation of a reorganization, merger or consolidation or sale
or other disposition of all or substantially all of the assets of
the Company (a "Business Combination"), in each case, unless,
following such Business Combination, (i) all or substantially all
of the individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly,
more than 50% of, respectively, the then outstanding shares of
common stock and the combined voting power of the then outstanding
voting securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from
such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns the Company
or all or substantially all of the Company's assets either
directly or through one or more subsidiaries) in substantially the
same proportions as their ownership, immediately prior to such
Business Combination of the Outstanding Company Common Stock and
outstanding Company Voting Securities, as the case may be, (ii) no
Person (excluding any corporation resulting from such Business
Combination or any employee benefit plan (or related trust) of the
Company or such corporation resulting from such Business
Combination) beneficially owns, directly or indirectly, 30% or
more of, respectively, the then outstanding shares of common stock
of the corporation resulting from such Business Combination or the
combined voting power of the then outstanding voting securities of
such corporation except to the extent that such ownership existed
prior to the Business Combination and (iii) at least a majority of
the members of the board of directors of the corporation resulting
from such Business Combination were members of the Incumbent Board
at the time of the execution of the initial agreement, or of the
action of the Board, providing for such Business Combination; or
(d) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
<TABLE>
<CAPTION>
Exhibit 12.1
Boston Edison Company
Computation of Ratio of Earnings to Fixed Charges
Twelve Months Ended June 30, 1996
(in thousands)
<S> <C>
Net income from continuing operations $119,101
Income taxes 70,154
Fixed charges 123,996
--------
Total $313,251
========
Interest expense $114,857
Interest component of rentals 9,139
--------
Total $123,996
========
Ratio of earnings to fixed charges 2.53
====
</TABLE>
<TABLE>
<CAPTION>
Exhibit 12.2
Boston Edison Company
Computation of Ratio of Earnings to Fixed Charges
and Preferred Stock Dividend Requirements
Twelve Months Ended June 30, 1996
(in thousands)
<S> <C>
Net income from continuing operations $119,101
Income taxes 70,154
Fixed charges 123,996
--------
Total $313,251
========
Interest expense $114,857
Interest component of rentals 9,139
--------
Subtotal 123,996
--------
Preferred stock dividend requirements 24,641
--------
Total $148,637
========
Ratio of earnings to fixed charges and preferred
stock dividend requirements 2.11
====
</TABLE>
Exhibit 15.1
Report of Independent Accountants
To the Stockholders and Directors
of Boston Edison Company
We have reviewed the accompanying consolidated balance sheet of Boston Edison
Company (the Company) and subsidiaries as of June 30, 1996 and the related
statements of income for the three and six-month periods ended June 30, 1996
and 1995 and cash flows for the six-month periods ended June 30, 1996 and
1995. These financial statements are the responsibility of the Company's
management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the accompanying financial statements in order for them to
be in conformity with generally accepted accounting principles.
Boston, Massachusetts COOPERS & LYBRAND L.L.P.
July 25, 1996
Exhibit 99.1
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Boston Edison Company
Registration on Form
S-3 and Form S-8
We are aware that our report dated July 25, 1996 on our review of the interim
financial information of Boston Edison Company for the period ended June 30,
1996 and included in this Form 10-Q is incorporated by reference in the
Company's registration statements on Form S-3 (File Nos. 33-36824, 33-57840
and 33-59693) and on Form S-8 (File Nos. 33-00810, 33-7558, 33-38434, 33-
48424, 33-48425, 33-59662, 33-59682 and 33-58457). Pursuant to Rule 436(c)
under the Securities Act of 1933, this report should not be considered a part
of the registration statements prepared or certified by us within the meaning
of Sections 7 and 11 of that Act.
Boston, Massachusetts COOPERS & LYBRAND L.L.P.
July 25, 1996
<TABLE> <S> <C>
<ARTICLE> UT
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 2,928,146
<OTHER-PROPERTY-AND-INVEST> 145,278
<TOTAL-CURRENT-ASSETS> 378,221
<TOTAL-DEFERRED-CHARGES> 197,119
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 3,648,764
<COMMON> 48,240
<CAPITAL-SURPLUS-PAID-IN> 689,757
<RETAINED-EARNINGS> 257,881
<TOTAL-COMMON-STOCKHOLDERS-EQ> 995,878
88,000
123,000
<LONG-TERM-DEBT-NET> 1,058,685
<SHORT-TERM-NOTES> 121,500
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 141,000
<LONG-TERM-DEBT-CURRENT-PORT> 101,467
2,000
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 1,017,234
<TOT-CAPITALIZATION-AND-LIAB> 3,648,764
<GROSS-OPERATING-REVENUE> 777,605
<INCOME-TAX-EXPENSE> 31,909
<OTHER-OPERATING-EXPENSES> 638,371
<TOTAL-OPERATING-EXPENSES> 670,280
<OPERATING-INCOME-LOSS> 107,325
<OTHER-INCOME-NET> 838
<INCOME-BEFORE-INTEREST-EXPEN> 108,163
<TOTAL-INTEREST-EXPENSE> 55,033
<NET-INCOME> 53,130
7,707
<EARNINGS-AVAILABLE-FOR-COMM> 45,423
<COMMON-STOCK-DIVIDENDS> 45,291
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 103,802
<EPS-PRIMARY> 0.94
<EPS-DILUTED> 0
</TABLE>
