<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
FILED BY THE REGISTRANT /X/ FILED BY A PARTY OTHER THAN THE REGISTRANT / /
- - --------------------------------------------------------------------------------
Check the appropriate box:
/ / Preliminary Proxy Statement
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
BOSTON EDISON
(Name of Registrant as Specified In Its Charter)
BOSTON EDISON
(Name of Person(s) Filing Proxy Statement)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
- - --------------------------------------------------------------------------------
<PAGE> 2
[BOSTON EDISON LOGO]
Executive Offices
800 Boylston Street
Bosotn, Massachusetts 02199
March 31, 1998
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Boston Edison Company on Tuesday, May 5, 1998 at 11:00 a.m. at the Boston Back
Bay Hilton, Second Floor, Belvidere Ballroom, 40 Dalton Street, Boston,
Massachusetts.
The accompanying Notice of Annual Meeting of Stockholders and Proxy
Statement set forth the business to come before this year's meeting.
Your vote on the business at the Annual Meeting is important, regardless of
the number of shares that you own. Whether or not you plan to attend the
Meeting, please sign, date and return your proxy as soon as possible in the
envelope provided. During the Annual Meeting, management will report on
operations and other matters affecting Boston Edison, and will respond to
stockholders' questions.
Sincerely,
/s/ Thomas J. May
------------------
Chairman of the Board,
President and Chief Executive Officer
<PAGE> 3
[BOSTON EDISON LOGO]
800 BOYLSTON STREET
BOSTON, MASSACHUSETTS 02199
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 5, 1998
To the Holders of Common Stock:
The Annual Meeting of Stockholders of Boston Edison Company ("Boston
Edison") will be held at the Boston Back Bay Hilton, Second Floor, Belvidere
Ballroom, 40 Dalton Street, Boston, Massachusetts, on Tuesday, May 5 , 1998 at
11:00 a.m., for the following purposes:
1. To elect three Class I directors to serve until the Annual Meeting to
be held in the year 2001.
2. To transact any other business which may properly come before the
Annual Meeting or any adjournment thereof.
Further information as to the matters to be considered and acted on at the
Annual Meeting can be found in the accompanying Proxy Statement.
Only the holders of common stock of Boston Edison as of the close of
business on March 9, 1998, are entitled to notice of and to vote at the Annual
Meeting or any adjournment thereof.
Please sign, date and return the accompanying proxy in the enclosed
addressed envelope, which requires no postage if mailed in the United States.
Your proxy may be revoked at any time before the vote is taken by delivering to
the Clerk a written revocation or a proxy bearing a later date or by oral
revocation in person to the Clerk at the Annual Meeting.
By Order of the Board of Directors,
Theodora S. Convisser
Clerk
Boston, Massachusetts
March 31, 1998
<PAGE> 4
[BOSTON EDISON LOGO]
800 BOYLSTON STREET
BOSTON, MASSACHUSETTS 02199
(617) 424-2000
PROXY STATEMENT
This Proxy Statement, together with the accompanying proxy and Annual
Report to stockholders for the year 1997 containing financial statements, are
being mailed to stockholders beginning March 31, 1998. They are being furnished
in connection with the solicitation of proxies by the Board of Directors of
Boston Edison Company to be voted at the Annual Meeting of Stockholders of the
Company to be held on May 5, 1998 for the purposes set forth in the foregoing
Notice.
The accompanying proxy, if properly executed and delivered by a stockholder
entitled to vote, will be voted at the Annual Meeting as specified in the proxy,
but may be revoked at any time before the vote is taken by the signer delivering
to the Clerk of Boston Edison a written revocation or a proxy bearing a later
date or by oral revocation in person to the Clerk at the Annual Meeting. If
choices are not specified on the accompanying proxy, the shares will be voted
FOR the election of all of the nominees for director specified below.
All the costs of preparing, assembling and mailing the enclosed material
and any additional material which may be sent in connection with the
solicitation of the enclosed proxies will be paid by the Company, and no part
thereof will be paid directly or indirectly by any other person. The Company has
retained D.F. King & Co., Inc. to assist in the solicitation of proxies at a fee
of $1,500, plus usual and customary expenses. Some employees may devote a part
of their time to the solicitation of proxies or for attendance at the Annual
Meeting but no additional compensation will be paid to them for the time so
employed and the cost of such additional solicitation will be nominal. The
Company will reimburse brokerage firms, banks, trustees and others for their
actual out-of-pocket expenses in forwarding proxy material to the beneficial
owners of its Common Stock.
On March 9, 1998, there were issued and outstanding 48,514,973 shares of
Boston Edison Common Stock. Only holders of record of Boston Edison Common Stock
at the close of business on that date shall be entitled to notice of and to vote
at the Annual Meeting or any adjournments thereof, and those entitled to vote
will have one vote for each share held. To the knowledge of management, no
person owns beneficially more than 5 percent of the outstanding voting
securities of Boston Edison.
PROPOSAL NO. 1: ELECTION OF DIRECTORS
INFORMATION ABOUT NOMINEES AND INCUMBENT DIRECTORS
Pursuant to Boston Edison's Bylaws, the Board of Directors has fixed the
number of directors at ten. The Company's Restated Articles of Organization
provide for the classification of the Board of Directors into three classes
serving staggered three-year terms. The three persons named below have been
nominated by the Board of Directors for election as Class I directors for a term
expiring at the Annual Meeting to be held in the year 2001 and until their
successors are duly chosen and qualified. The remaining directors will continue
to serve as set forth below, with the Class II directors having terms expiring
in 1999 and the Class III directors having terms expiring in 2000. If any of the
nominees shall by reason of death, disability or resignation be unavailable as a
candidate at the Annual Meeting, votes pursuant to the proxy will be cast for a
substitute candidate as may be designated by the Board of Directors, or in the
absence of such designation, in such other manner as the directors may in their
1
<PAGE> 5
discretion determine. Alternatively, in such a situation, the Board of Directors
may take action to fix the number of directors for the ensuing year at the
number of nominees named herein who are then able to serve.
The Board of Directors has adopted the following director retirement
policy. Directors who are employees of the Company, with the exception of the
Chief Executive Officer, retire from the Board when they retire from employment
with the Company. Directors who are not employees of Boston Edison or who have
served as Chief Executive Officer retire from the Board at the annual meeting of
stockholders following their seventieth birthday.
The Board of Directors, which held eight regular meetings during 1997, has
an Executive Committee, an Audit, Finance and Risk Management Committee, an
Executive Personnel Committee, a Nuclear Oversight Committee, and a Pricing
Committee. During 1997, the Executive Committee, which is authorized to exercise
in the intervals between Board meetings those powers of the Board which can be
delegated, to act as a nominating committee, and to review director
compensation, met five times. The Audit, Finance and Risk Management Committee,
the responsibilities of which include recommendations as to the selection of
independent auditors, review of the scope of the independent audit, annual
financial statements, internal audit reports, and financial and accounting
controls and procedures, and review of Boston Edison's financial requirements,
insurance coverages, and legal compliance programs, met three times. The
Executive Personnel Committee, which is responsible for reviewing executive
officer compensation, personnel planning and performance, certain benefit
programs, and Boston Edison's human resources policies, met three times. The
Nuclear Oversight Committee, which oversees Boston Edison's nuclear operations,
met three times. The Pricing Committee, which is authorized to approve the terms
of Boston Edison's debt and equity offerings, did not meet in 1997. All
directors attended at least 75% of the aggregate of the total number of meetings
of the Board and the total number of meetings held by all committees of the
Board on which he or she served.
The names of the nominees as Class I directors and the incumbent Class II
and Class III directors and certain information concerning them are shown in the
following table:
NOMINEES AS CLASS I DIRECTORS - TERMS EXPIRING IN 2001
NOMINEES PRINCIPAL OCCUPATION(1) AND DIRECTORSHIPS
- - -------- -----------------------------------------
Richard J. Egan Chairman of the Board, EMC Corporation (Storage
Age: 62 Related Computer System Products); Director,
Director since: 1997 Cognition Inc., Shiva Corporation, New York Stock
Member: Executive Exchange Listed Company Advisory Committee.
Personnel and Nuclear
Oversight Committees
Nelson S. Gifford Principal, Fleetwing Capital (Venture
Age: 67 Investments); formerly Chairman (1986-1990) and
Director since: 1981 Chief Executive Officer (1975-1990), Dennison
Member: Executive and Audit, Manufacturing Company (Stationery Products,
Finance and Risk Management Systems and Packaging); Director, John Hancock
Committees Mutual Life Insurance Company, Reed and Barton,
J.M. Huber Corp., Nypro Inc., Partners Fund.
Matina S. Horner Executive Vice President, Teachers Insurance and
Age: 58 Annuity Association/College Retirement Equities
Director since: 1988 Fund; formerly President (1972-1989), Radcliffe
Member: Executive, Audit, College; Director, The Neiman-Marcus Group, Inc.
Finance and Risk Management
and Pricing Committees
(footnotes on page 4)
2
<PAGE> 6
INCUMBENT CLASS II DIRECTORS - TERMS EXPIRING IN 1999
DIRECTORS PRINCIPAL OCCUPATION(1) AND DIRECTORSHIPS
- - --------- -----------------------------------------
Charles K. Gifford Chairman (since 1997 and from 1995-1996) and Chief
Age: 55 Executive Officer (since 1995), formerly President
Director since: 1990 (1989-1995), BankBoston Corporation (Bank Holding
Member: Audit, Finance and Company), and Chairman and Chief Executive Officer
Risk Management, Executive (since 1995), formerly President (1989-1996),
Personnel and Pricing BankBoston, N.A.; Director, BankBoston
Committees Corporation, BankBoston, N.A., Massachusetts
Mutual Life Insurance Company.
Thomas J. May Chairman, President and Chief Executive Officer
Age: 50 (since 1995), formerly Chairman and Chief
Director since: 1991 Executive Officer (1994-1995), President and Chief
Member: Executive and Operating Officer (1993-1994), and Executive Vice
Pricing Committees President (1990-1993), Boston Edison Company;
Director, BankBoston Corporation, BankBoston,
N.A., Liberty Mutual Insurance Company, Liberty
Mutual Fire Insurance Company, Liberty Financial
Companies, Inc., New England Mutual Life Insurance
Company, RCN Corporation.
Sherry H. Penney Chancellor (1988-1995 and 1996 to present),
Age: 60 University of Massachusetts at Boston, formerly
Director since: 1990 President (1995) (interim), University of
Member: Audit, Finance and Massachusetts.
Risk Management and
Executive Personnel
Committees
INCUMBENT CLASS III DIRECTORS - TERMS EXPIRING IN 2000
DIRECTORS PRINCIPAL OCCUPATION(1) AND DIRECTORSHIPS
- - --------- -----------------------------------------
Gary L. Countryman Chairman of the Board and Chief Executive Officer,
Age: 58 Liberty Mutual Insurance Company, and Chairman and
Director since: 1986 Chief Executive Officer, Liberty Life Assurance
Member: Executive and Company of Boston; Director, Liberty Mutual
Executive Personnel Insurance Company, Liberty Life Assurance Company
Committees of Boston, Liberty Mutual Fire Insurance Company,
Liberty Financial Companies, Inc., BankBoston
Corporation, BankBoston, N.A., The Neiman-Marcus
Group, Inc., Alliance of American Insurers.
Thomas G. Dignan, Jr.(2) Partner, Ropes & Gray (Law Firm).
Age: 57
Director since: 1983
Member: Executive and Nuclear
Oversight Committees
(footnotes on page 4)
3
<PAGE> 7
DIRECTORS PRINCIPAL OCCUPATION(1) AND DIRECTORSHIPS
- - --------- -----------------------------------------
Herbert Roth, Jr. Former Chairman of the Board (1978-1985) and Chief
Age: 69 Executive Officer (1968-198 5), LFE Corporation
Director since: 1978 (Traffic and Industrial Process Control Systems);
Member: Nuclear Oversight Director/Trustee, Landauer, Inc., Tech/Ops Sevcon,
and Audit, Finance and Inc., Phoenix Home Life Mutual Insurance Company,
Risk Management Committees Phoenix Series Fund, Phoenix Total Return Fund,
Inc., Phoenix Multi-Portfolio Fund, The Big Edge
Series Fund, Mark IV Industries.
Stephen J. Sweeney Former Chairman of the Board (1986-1992) and Chief
Age: 69 Executive Officer (1984-199 0), Boston Edison
Director since: 1983 Company; Director, Selecterm, Inc., Liberty Mutual
Member: Nuclear Oversight Insurance Company, Liberty Mutual Fire Insurance
and Audit, Finance and Company, Liberty Life Assurance Company of Boston,
Risk Management Committees Liberty Financial Companies, Inc., Uno Restaurant
Corporation.
(1) Except as otherwise noted, each nominee and incumbent director has held the
position indicated for the last five years.
(2) During 1997, Boston Edison paid legal fees to the firm of Ropes & Gray.
STOCK OWNERSHIP BY DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the number of shares of Boston Edison Common
Stock beneficially owned as of January 31, 1998 by each director and nominee,
each of the executive officers named in the Summary Compensation Table, and the
directors and executive officers of Boston Edison as a group. None of the
individual or collective holdings listed below exceeds 1% of the outstanding
Boston Edison Common Stock. Except as indicated below, all of the shares listed
are held by the persons named with both sole voting power and sole investment
power. No member of the group is the beneficial owner of Boston Edison's
Cumulative Preferred Stock.
<TABLE>
NUMBER OF SHARES OF BOSTON EDISON COMMON
NAME OF BENEFICIAL OWNER STOCK BENEFICIALLY OWNED
- - ------------------------ ------------------------
<S> <C>
Gary L. Countryman .................................................1,995
Thomas G. Dignan, Jr. ..............................................2,466
Richard J. Egan ......................................................560
Charles K. Gifford .................................................1,724
Nelson S. Gifford ..................................................3,995
L. Carl Gustin .....................................................5,155(2)
Douglas S. Horan ...................................................3,041(1)(2)
Matina S. Horner ...................................................1,995
James J. Judge .....................................................2,638(1)(2)
Ronald A. Ledgett ..................................................4,995(1)(2)
Thomas J. May .....................................................16,126(1)(2)
Sherry H. Penney ...................................................2,045
erbert Roth, Jr. ...................................................4,200
Stephen J. Sweeney .................................................5,387(3)
All directors and executive officers as a
group, including those named above (17 persons) ..................42,263(1)(2)
</TABLE>
(footnotes on page 5)
4
<PAGE> 8
(1) The following shares are held in Boston Edison's Deferred Compensation Trust
due to deferrals by the following participants under Boston Edison's Deferred
Compensation Plan: Mr. Horan, 136 shares; Mr. Ledgett, 2,305 shares; Mr. May,
7,614 shares; all executive officers as a group, 12,741 shares. Participants in
the Plan may instruct the trustee to vote shares of Boston Edison Common Stock
held in the trust in accordance with their allocable share of such deferrals,
but have no dispositive power with respect to shares held in the trust.
(2) These totals include the following number of shares held in Boston Edison's
401(k) Plan: Mr. Gustin, 3,893 shares; Mr. Horan, 2,408 shares; Mr. Judge, 2,298
shares; Mr. Ledgett, 2,690 shares; Mr. May, 7,340 shares; all executive officers
as a group, 25,355 shares.
(3) 3,629 of Mr. Sweeney's 5,387 shares are held in a charitable annuity
remainder trust, of which he, as a co-trustee of the trust, shares dispositive
and voting power with respect to the shares.
EXECUTIVE COMPENSATION
DIRECTOR COMPENSATION
Each director who is not an employee of Boston Edison receives an annual
Board retainer of $10,000 and 200 shares of Boston Edison Common Stock pursuant
to Boston Edison's 1991 Director Stock Plan. Each such director who is a member
of the Executive Committee receives an additional annual Committee retainer of
$4,000. With the exception of the Pricing Committee, the members of which
receive no retainer, each of the chairmen of the other Board committees who is
not an employee of Boston Edison receives an annual Committee retainer of $4,000
and the other non-employee members of those committees receive an annual
Committee retainer of $2,750. Each director who is not an employee of Boston
Edison receives $1,000 for attendance in person at each meeting of the Board or
a committee and $500 for participating in such a meeting by telephone. Directors
may elect to defer part or all of their directors' fees pursuant to Boston
Edison's Deferred Fee Plan. Each director who is not otherwise eligible for any
Boston Edison pension or retirement benefit is entitled to an annual amount,
equal to the cash component of the annual Board retainer plus twice the retainer
received by a member of a committee other than the Executive Committee, for a
period of years equal to his or her service on the Board of Directors, such
payments to commence upon the director's date of death in office, resignation or
retirement. Should a director die prior to full receipt of the benefit, his or
her survivors continue to receive the payments to which the director would have
been entitled up to a maximum of ten years from the commencement of the benefit.
REPORT OF THE EXECUTIVE PERSONNEL COMMITTEE
Under the rules established by the SEC, Boston Edison is required to
provide certain data and information in regard to the compensation and benefits
provided to its executive officers, including Boston Edison's Chief Executive
Officer and the four other most highly compensated executive officers (the
"Named Executive Officers"). The disclosure requirements for the Named Executive
Officers include the use of tables summarizing total compensation and a report
explaining the rationale and considerations that led to fundamental executive
compensation decisions affecting those individuals for the prior year. In
fulfillment of this requirement, the Executive Personnel Committee, at the
direction of the Board of Directors, has prepared the following report for
inclusion in this Proxy Statement.
THE EXECUTIVE PERSONNEL COMMITTEE
Boston Edison's executive compensation program is administered by the
Executive Personnel Committee, a committee of the Board of Directors composed of
the four non-employee directors listed as signatories to this report.
5
<PAGE> 9
Except as discussed below, none of these non-employee directors has any
interlocking or other relationship with Boston Edison that would require
disclosure by the SEC. Generally, all decisions of the Executive Personnel
Committee regarding the compensation of the Chief Executive Officer are subject
to the approval of the non-employee directors of Boston Edison, none of whom are
eligible to participate in the incentive plans described below. The Executive
Personnel Committee administers the Company's 1997 Stock Incentive Plan
discussed below.
COMPENSATION PHILOSOPHY
The executive compensation philosophy of Boston Edison is to provide
competitive levels of compensation that advance Boston Edison's annual and
long-term performance objectives, reward corporate performance, and assist
Boston Edison in attracting, retaining and motivating highly qualified
executives. The framework for the Committee's executive compensation program is
to establish base salaries which are competitive with all electric utilities,
and to incentivize excellent performance by providing executives with the
opportunity to earn additional remuneration under the annual and long-term
incentive plans. The incentive plan goals are designed to improve the
effectiveness and enhance the efficiency of Boston Edison's operations and to
create value for stockholders. The Committee also seeks to link executive and
shareholder interests through equity-based incentive plans. Accordingly, in
1997, upon the Committee's recommendation, the Board approved stock ownership
guidelines of three times base salary for the CEO and one to one-and one-half
times base salary for the other executive officers. These guidelines allow the
executives five years to acquire this amount of stock.
COMPONENTS OF COMPENSATION
Compensation paid to the Named Executive Officers, as reflected in the
following tables, consists of three primary elements: base salary, annual
incentive awards, and long-term incentive awards. Boston Edison compares its
compensation levels against those of other growth-oriented investor-owned
electric utility companies. The Company's strategy is to establish total
compensation (base salary and annual incentives) at the 60th percentile of the
utility industry, and to compare its long-term incentive pla n to those of more
aggressive utilities and general industry companies that focus on value
creation.
During 1996 and early 1997, the Committee thoroughly reviewed data
collected by nationally recognized compensation experts as well as by Boston
Edison's Human Resources Group to determine whether Boston Edison was meeting
its compensation strategy. The review evaluated base salary and annual
incentives of nearly all electric utility companies, and long-term incentives of
a blend of utilities and general industry. The data demonstrated that Boston
Edison was in conformance with its compensation strategy, except as related to
the long-term plan, to the satisfaction of the Committee. Recommendations to
terminate the old long-term plan, known as the Performance Share Plan, and to
implement a new stock-based incentive plan, the 1997 Stock Incentive Plan, which
were approved by the Committee and by the stockholders of the Company, are
discussed below in the section describing long-term compensation.
The 1993 Omnibus Budget Reconciliation Act ("OBRA") is applicable to
compensation earned during 1994 and later. Under OBRA, the income tax deductions
of publicly traded companies may be limited to the extent total compensation for
certain executive officers exceeds one million dollars during any year; however,
the deduction limit does not apply to payments which qualify as "performance
based". The Committee has reviewed the final regulations issued by the Internal
Revenue Service and will continue to review the application of these rules to
future compensation. However, the Committee intends to continue basing its
executive compensation decisions primarily upon performance achieved, both
corporate and individual, while retaining the right to make subjective decisions
and to award compensation that may or may not meet all of the requirements for
excludability under OBRA.
6
<PAGE> 10
ANNUAL INCENTIVE PLAN
Boston Edison's annual incentive payments, reported in the fourth column of
the Summary Compensation Table below, are based on both corporate and business
unit performance objectives which are derived from the corporate operating plan
and which are approved by the Committee. Corporate performance objectives
include a comparison of target to actual earnings per share from operations.
Business unit performance objectives include predetermined levels for operating
and capital budgets, as well as key operati ng goals. The annual incentive plan
award for Mr. May is based solely on Boston Edison's achieving the earnings per
share objective. In 1997, earnings per share were $2.71, which exceeded the plan
target. The annual incentive plan awards for Messrs. Gustin, Horan, Judge and
Ledgett were based 50% on earnings per share and 50% on business unit
performance objectives to achieve certain business unit budget and operating
plan targets. All four officers exceeded the specified business unit performance
levels.
LONG-TERM COMPENSATION
During 1997, the Committee determined that the Company's existing long-term
compensation plan, the Performance Share Plan, no longer accomplished the goals
that were set for it. The Committee worked with its external compensation
consultant to devise a more effective vehicle which would take into account the
long-term interests of Boston Edison by giving participants a strong incentive
to maximize stockholder value through the use of equity-related compensation.
This effort resulted in the 1997 Stock Incentive Plan which was approved by the
stockholders at the 1997 Annual Meeting.
Upon approval of the 1997 Stock Incentive Plan, the Committee terminated
the Performance Share Plan, and the two outstanding awards which were to have
matured at the end of 1997 and 1998, and in lieu thereof made its first Stock
Incentive Plan grant in May, 1997.
Under the 1997 Stock Incentive Plan, executive officers and other key
employees are eligible to receive grants from time to time of stock-related
awards of seven general types: (i) stock options, (ii) stock appreciation
rights, (iii) restricted stock awards, (iv) deferred stock awards, (v)
performance unit awards, (vi) dividend equivalent awards, and (vii) other
stock-based awards. The grant in May of 1997, which consisted of non-qualfied
stock options, deferred shares and dividend equivalents on the de ferred shares,
was based upon the Committee's evaluation of performance towards key strategic
objectives, competitive award data provided by an external consultant, and the
cancellation of the previous Performance Share Plan awards. The Committee did
not weight any of these factors. The options and the deferred shares vest at the
rate of 33% per year over a three year period from the date of grant and the
options may be exercised over a ten-year period.
OTHER PLANS
At various times in the past, Boston Edison has adopted certain broad-based
employee benefit plans in which officers are permitted to participate on the
same terms as non-executive employees who meet applicable eligibility criteria.
Such plans include retirement, life, and health insurance plans, as well as a
401(k) savings plan which includes a company matching contribution equal to the
first six percent of pay contributed by the employee up to a maximum deductible
401(k) contribution allowed by the Int ernal Revenue Code. In addition, Boston
Edison has a deferred compensation plan in which officers and senior managers
may elect to participate.
In 1996, the Committee implemented the Supplemental Executive Retirement
Plan which provides eligible participants with supplementary retirement income
of up to 60% of final average cash compensation, depending upon each
participant's years of service, reduced by 50% of the participant's social
security benefit and further reduced by benefits the participant receives under
Boston Edison's pension plan.
7
<PAGE> 11
MR. MAY'S 1997 COMPENSATION
The Executive Personnel Committee makes decisions regarding the
compensation of the Chief Executive Officer using the same philosophy and
criteria set forth above. As with other officers, Boston Edison compares
compensation levels for the Chief Executive Officer to those of all other
investor-owned electric utility companies.
Each year Boston Edison approves the adjustment of salary ranges for the
Chief Executive Officer and other corporate officers based on studies conducted
by external executive compensation consultants and Boston Edison's Human
Resources Group. The 1997 studies found Boston Edison's executive compensation
levels to be less than the approved 60th percentile position to market. Mr. May
received a 4% increase to his base salary in 1997.
Mr. May's annual incentive award, shown in the fourth column of the Summary
Compensation Table below, was in conformance with the provisions of the Annual
Incentive Plan as described above, and was based on Boston Edison's surpassing
its operating plan targets. As discussed above, the Performance Share Plan was
cancelled and the Committee granted initial awards of stock options and deferred
shares under the terms of the 1997 Stock Incentive Plan. The Committee's policy
is to base individual awards on an ann ual study by its compensation consultant
comparing the value of long-term incentive grants to salary levels for a blend
of electric utility and general industry companies. The 16,400 deferred shares
and 100,000 options granted Mr. May in 1997 reflect this policy, as well as the
cancellation of the Performance Share Plan, and the cancellation of target
awards of 15,464 shares for Mr. May, and the share ownership guidelines as
described above.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Charles K. Gifford, who is a member of Boston Edison's Executive Personnel
Committee, is Chairman and Chief Executive Officer of BankBoston Corporation and
BankBoston, N.A. Thomas J. May, Boston Edison's Chairman, President and Chief
Executive Officer, serves on the boards of directors of BankBoston Corporation
and BankBoston, N.A.
Gary L. Countryman, who is the Chairman of Boston Edison's Executive
Personnel Committee, is Chairman of the Board and Chief Executive Officer of
Liberty Mutual Insurance Company and Liberty Mutual Fire Insurance Company and
Chairman of the Board of Liberty Financial Companies, Inc. Mr. May serves on the
boards of directors of Liberty Mutual Insurance Company, Liberty Mutual Fire
Insurance Company, and Liberty Financial Companies, Inc.
By the Executive Personnel Committee,
Gary L. Countryman(Chairman)
Richard J. Egan
Charles K. Gifford
Sherry H. Penney
8
<PAGE> 12
EXECUTIVE COMPENSATION TABLES
The following information is given regarding annual and long-term
compensation earned by the Chief Executive Officer and the four other most
highly compensated executive officers of Boston Edison with respect to the years
1995, 1996 and 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
----------------------
AWARDS PAYOUTS
ANNUAL ------ -------
COMPENSATION
NAME AND ------------
PRINCIPAL POSITION YEAR SALARY BONUS
- - ------------------ ---- ------ ----- OTHER SECURITIES ALL
ANNUAL DEFERRED UNDERLYING OTHER
COMPEN- STOCK OPTIONS/ LTIP COMPEN-
SATION(1) AWARD(S)(2) SARS (#) PAYOUTS SATION(3)
--------- ----------- -------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Thomas J. May 1997 $496,875 $498,750 -- $422,300 100,000 -- $9,600
Chairman, 1996 463,625 324,750 -- -- -- -- 9,000
President and 1995 415,083 292,500 -- -- -- $27,084 9,000
Chief Executive
Officer
Ronald A. Ledgett 1997 232,500 216,750 -- 118,450 28,600 -- 9,600
Executive Vice 1996 193,667 119,300 -- -- -- -- 9,600
President 1995 181,133 75,000 -- -- -- 11,210 9,000
Douglas S. Horan 1997 195,417 140,000 -- 103,000 25,000 -- 9,600
Senior Vice 1996 175,833 83,750 -- -- -- -- 9,000
President 1995 155,250 43,500 -- -- -- 4,400 9,000
James J. Judge 1997 183,667 136,400 -- 97,850 23,400 -- 9,600
Senior Vice 1996 167,000 80,000 -- -- -- -- 9,000
President 1995 122,200 37,500 -- -- -- 3,249 7,332
L. Carl Gustin 1997 187,813 121,250 -- 97,850 23,800 -- 9,600
Senior Vice 1996 182,507 67,262 -- -- -- -- 9,000
President 1995 176,839 64,988 -- -- -- 11,353 9,000
</TABLE>
(1) None of the named executive officers received amounts of other annual
compensation in 1995, 1996, or 1997, which would require disclosure pursuant to
SEC rules.
(2) Deferred Common Stock awards are valued at the closing market price as of
the date of the grant. The awards vest one-third on each of the first, second
and third anniversaries of the date of the grant. Dividends will accrue on the
awards from the date of grant and will be payable in the form of additional
shares which will vest at the same time the awards vest. Deferred Common Stock
holdings and the value thereof based on the closing price of the Common Stock on
December 31, 1997 are as follows: Mr. May, 16,400 shares ($621,150); Mr.
Ledgett, 4,600 shares ($174,225); Mr. Gustin, 3,800 shares ($143,925); Mr.
Horan, 4,000 shares ($151,500) and Mr. Judge, 3,800 shares ($143,925).
(3) Amounts in this column represent Boston Edison's matching contribution under
its 401(k) plan.
9
<PAGE> 13
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
---------------------------------
INDIVIDUAL GRANTS
--------------------------------------------------
NUMBER OF % OF TOTAL GRANT
SECURITIES OPTIONS EXERCISE DATE
UNDERLYING GRANTED TO OR BASE PRESENT
OPTIONS EMPLOYEES PRICE EXPIRATION VALUE
NAME GRANTED (1) IN 1997 ($/SH.) DATE ($)(2)
- - ---- ----------- ------- ------- ---- ------
<S> <C> <C> <C> <C> <C>
Thomas J. May 100,000 33.5% $26.00 6/26/07 $222,000
Ronald A. Ledgett 28,600 9.6% 25.75 5/28/07 63,492
L. Carl Gustin 23,800 8.0% 25.75 5/28/07 52,836
Douglas S. Horan 25,000 8.4% 25.75 5/28/07 55,500
James J. Judge 23,400 7.8% 25.75 5/28/07 51,948
</TABLE>
(1) Options vest one-third annually beginning June 26, 1998 for Mr. May and
beginning May 28, 1998 for the four other Named Executive Officers.
(2) The grant date present values were determined using the Black-Scholes option
pricing model. There is no assurance that the value realized will be at or near
the value estimated by the Black-Scholes model. Assumptions used for the model
are as follows: stock volatility, 16%; risk-free rate of return, 6.44%; dividend
yield, 7.28%; and time to exercise, four years.
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES AND FISCAL YEAR-END
---------------------------------------------------
OPTION VALUE TABLE
------------------
VALUE OF SECURITIES
NUMBER OF SECURITIES UNDERLYING UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES/SARS OPTIONS AT FISCAL YEAR-END (#) AT FISCAL YEAR-END ($)(1)
ACQUIRED ON VALUE ------------------------------ -------------------------
NAME EXERCISE (#) REALIZED ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- - ---- ------------ ------------ ------------------------- -------------------------
<S> <C> <C> <C> <C>
Thomas J. May 0 $0 0 / 100,000 $0 / $1,187,500
Ronald A. Ledgett 0 $0 0 / 28,600 $0 / $346,775
L. Carl Gustin 0 $0 0 / 23,800 $0 / $288,575
Douglas S. Horan 0 $0 0 / 25,000 $0 / $303,125
James J. Judge 0 $0 0 / 23,400 $0 / $283,725
</TABLE>
(1) Based on the closing price of the Company Common Stock on December 31, 1997
of $37.875.
During 1996, Boston Edison entered into retention agreements with each of
Messrs. Ledgett, Horan and Judge that provide for the following payment if the
executive remains in the employ of Boston Edison on December 31, 1998: Mr.
Ledgett, $75,000; Mr. Horan, $50,000; Mr. Judge, $50,000.
PENSION PLAN TABLE
The following table shows the estimated annual retirement benefits payable
to executive officers under the qualified pension plan and the Supplemental
Executive Retirement Plan, assuming retirement at age 65. The Supplemental
Executive Retirement Plan is a non-qualified pension plan providing a maximum
benefit of 60% of compensation after attainment of 20 years of credited service
and age 60. The Supplemental Executive Retirement Plan provides the incremental
benefits in excess of the benefits paid under the qualified plan necessary to
reach the benefit shown in the table. Each of the officers named in the Summary
Compensation Table participates in the Supplemental Executive Retirement Plan.
The benefits presented are based on a straight life annuity and do not take into
account a reduction in benefits of up to 50% of the participant's primary Social
Security benefit.
10
<PAGE> 14
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF CREDITED SERVICE
-------------------------
AVERAGE ANNUAL
COMPENSATION 10 15 20
------------ -- -- --
<S> <C> <C> <C>
$200,000. . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 60,000 $ 90,000 $120,000
$300,000. . . . . . . . . . . . . . . . . . . . . . . . . . . . 90,000 135,000 180,000
$400,000. . . . . . . . . . . . . . . . . . . . . . . . . . . . 120,000 180,000 240,000
$500,000. . . . . . . . . . . . . . . . . . . . . . . . . . . . 150,000 225,000 300,000
$600,000. . . . . . . . . . . . . . . . . . . . . . . . . . . . 180,000 270,000 360,000
$700,000. . . . . . . . . . . . . . . . . . . . . . . . . . . . 210,000 315,000 420,000
$800,000. . . . . . . . . . . . . . . . . . . . . . . . . . . . 240,000 360,000 480,000
</TABLE>
For purposes of the retirement plans, Messrs. May, Ledgett, Gustin, Horan
and Judge currently have 22, 17, 17, 20 and 20 years of credited service,
respectively.
Final average compensation for purposes of calculating the benefits under
the Supplemental Executive Retirement Plan is the highest average annual
compensation of the participant during any consecutive 36 month period.
Compensation taken into account in calculating the benefits described above
includes salary and annual bonus, including any amounts deferred under the terms
of the Deferred Compensation Plan.
Mr. May can elect, and Mr. Ledgett receives, an alternative supplemental
retirement benefit equal to 33% of final base salary annually for 15 years,
which at the current level would provide Mr. Ledgett with approximately $29,000
in excess of the amounts shown in the table above.
CHANGE OF CONTROL AGREEMENTS
Boston Edison has Change in Control Agreements (the "COC Agreements") with
certain key employees, including those named in the summary compensation table,
which provide severance benefits in the event of certain terminations of
employment following a "Change in Control" (as defined below). If, following a
Change in Control, the employee's employment were to be terminated other than
for cause (as defined) or the employee were to terminate his or her employment
for reasons specified in the COC Agreements, the employee would receive
severance pay in an amount equal to two times (three times in the case of Mr.
May) the sum of his or her annual base salary (at the rate in effect immediately
prior to the date of termination or immediately before the Change of Control,
whichever is higher) plus his or her actual bonus paid in respect of the most
recently completed fiscal year or his or her target bonus for the fiscal year in
which the termination occurs (whichever is higher). In addition, the COC
Agreements provide for a pro rated bonus payment for the year in which the
termination occurs, the immediate vesting of bonus awards, immediate payment of
deferred compensation amounts upon such termination and payments equal to the
benefit the employee would have received under Boston Edison's retirement plan
assuming the executive was vested and remained employed for an additional two
years (three years in the case of Mr. May). For two years (three years in the
case of Mr. May) following any such termination of employment, the employee
would be entitled to continue to participate in all welfare plans provided by
Boston Edison. The COC Agreements further provide for a "gross-up" payment under
which, if amounts paid under such agreements would be subject to a federal
excise tax on "excess parachute payments," Boston Edison will pay the employee
an additional amount of cash, so that, after payment of all such taxes by the
employee, the employee will have received the amount he would have received in
the absence of any such tax. A Change in Control under the agreement generally
includes
11
<PAGE> 15
the following events: (i) a person or group becomes the beneficial owner of more
than 30% of the voting power of Boston Edison's securities; (ii) continuing
directors cease to be a majority of the board; (iii) a consolidation, merger or
other reorganization or sale or other disposition of all or substantially all of
the assets of Boston Edison (other than certain defined transactions); or (iv)
approval by the stockholders of a complete liquidation or dissolution of Boston
Edison. The Merger establishing BEC Energy as the parent entity for Boston
Edison will not constitute a Change in Control for purposes of the COC
Agreements.
STOCK PERFORMANCE GRAPH
The SEC requires that Boston Edison include in this Proxy Statement a
line-graph presentation comparing cumulative five-year stockholder returns with
the S&P 500 Stock index and either a nationally recognized industry standard or
an index of peer companies selected by Boston Edison. The Board of Directors has
approved the use of the Edison Electric Industry 100 Index (EEI 100 Index), a
recognized industry index of approximately 100 electric utility companies.
Pursuant to the SEC's regulations, the graph below depicts the investment of
$100 at the commencement of the measurement period, with dividends reinvested.
[PERFORMANCE GRAPH OMITTED]
<TABLE>
<CAPTION>
- - -------------------------------------------------------------
Index: 1993 1994 1995 1996 1997
- - ----- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Boston Edison $115 $ 99 $130 $130 $192
EEI 100 Index 111 98 129 129 166
S&P 500 Index 110 111 153 153 251
- - -------------------------------------------------------------
- - -------------------------------------------------------------
Annual Total Return:
- - --------------------
Boston Edison 14.5% (13.8%) 32.2% (2.1%) 50.5%
EEI 100 Index 11.1% (11.6%) 31.0% 1.2% 27.4%
S&P 500 Index 10.0% 1.3% 37.6% 23.0% 33.2%
- - -------------------------------------------------------------
</TABLE>
12
<PAGE> 16
OTHER MATTERS
VOTING PROCEDURES
Consistent with state law and under Boston Edison's Bylaws, a majority of
the shares entitled to be cast on a particular matter, present in person or
represented by proxy, constitutes a quorum as to such matter. Votes cast by
proxy or in person at the Annual Meeting will be counted by persons appointed by
Boston Edison to act as election inspectors for the meeting.
Directors will be elected by a plurality of the votes properly cast at the
meeting. The election inspectors will count shares represented by proxies that
withhold authority to vote for a nominee for election as a director or that
reflect abstentions and "broker non-votes" (i.e., shares represented at the
meeting held by brokers or nominees as to which (i) instruc tions have not been
received from the beneficial owners or persons entitled to vote and (ii) the
broker or nominee does not have the discretionary voting power on a particular
matter) only as shares that are present and entitled to vote on the matter for
purposes of determining the presence of a quorum. Neither abstentions nor broker
non-votes have any effect on the outcome of voting on the election of directors.
ADJOURNMENT OF MEETING
If sufficient votes in favor of any of the proposals set forth in the
Notice of Annual Meeting are not received by the time scheduled for the meeting,
the persons named as proxies may propose one or more adjournments of the meeting
to permit further solicitation of proxies with respect to any such proposals.
Any adjournment will require the affirmative vote of a majority of the votes
cast on the question in person or by proxy at the session of the meeting to be
adjourned. The persons named as proxies will vote in favor of such adjournment
those proxies which they are entitled to vote in favor of such proposals. They
will vote against any such adjournment those proxies required to be voted
against any of such proposals. The Company will pay the costs of any additional
solicitation and of any adjourned session.
INDEPENDENT ACCOUNTANTS
Representatives of Coopers & Lybrand, L.L.P., Boston Edison's independent
accountants, will be present at the Annual Meeting and will have the opportunity
to make a statement if they desire to do so. The representatives will be
available to respond to appropriate questions by Boston Edison's stockholders.
OTHER BUSINESS
The management has no reason to believe that any other business will be
presented at the Annual Meeting, but if any other business shall be presented,
votes pursuant to the proxy will be cast thereon in accordance with the
discretion of the persons named in the accompanying proxy.
STOCKHOLDER PROPOSALS
Any proposal to be presented at the annual meeting of stockholders to be
held in May 1999 must be received at Boston Edison's principal executive offices
no later than November 28, 1998.
13
<PAGE> 17
STOCKHOLDER NOMINATIONS OF DIRECTORS
The Board of Directors will consider nominations of candidates for election
as directors from stockholders which are submitted in accordance with the
procedures set forth in Section 3.1 of the Company's Bylaws. In general, these
procedures require that stockholder nominations must be submitted to the Clerk
of Boston Edison in writing not less than 45 days prior to the anniversary of
the date of the immediately preceding annual meeting and must contain certain
specified information concerning the person to be nominated and the stockholder
submitting the nomination and the consent of the nominee to serve as director if
so elected.
The greater part of the stock of Boston Edison is widely distributed in
small lots. It is important, therefore, in order to secure representation at the
Annual Meeting of the number of shares necessary to take action, that all
stockholders who cannot be present in person, however small their holdings, fill
in, sign and return the enclosed proxy without delay to The First National Bank
of Boston, P.O. Box 9381, Boston, Massachusetts 02105. A stamped envelope is
enclosed for this purpose.
STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING. IF YOU
PLAN TO ATTEND, PLEASE SO INDICATE ON THE ENCLOSED PROXY CARD.
14
<PAGE> 18
DETACH HERE
PROXY
BOSTON EDISON COMPANY
PROXY FOR ANNUAL MEETING ON MAY 5, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Nelson S. Gifford, Matina S. Horner and
Thomas J. May and each of them proxies, with power of substitution, to act and
vote in the name of the undersigned, with all the powers that the undersigned
would possess if personally present, on all matters which may come before the
Annual Meeting of Stockholders of Boston Edison Company to be held on May 5,
1998 and any adjournment thereof.
The proxies are hereby authorized and instructed upon the matters
specified in the Notice of Annual Meeting as set forth on the reverse side
hereof. IF NO CHOICE IS INDICATED AS TO A PROPOSAL, THE PROXIES SHALL VOTE FOR
SUCH PROPOSAL. THE PROXIES MAY VOTE IN THEIR DISCRETION ON ANY OTHER MATTER
WHICH MAY PROPERLY COME BEFORE THE MEETING.
The undersigned hereby acknowledges receipt of the Notice of Annual
Meeting dated March 31, 1998 and the related Proxy Statement.
- - ----------- -----------
SEE REVERSE SEE REVERSE
SIDE CONTINUED AND TO BE BE SIGNED ON REVERSE SIDE SIDE
- - ----------- -----------
<PAGE> 19
[LOGO] BOSTON EDISON
800 BOYLSTON STREET
BOSTON, MA 02199
THIS IS YOUR PROXY.
YOUR VOTE IS IMPORTANT.
This year's Annual Stockholders' Meeting will be held:
DATE: TUESDAY, MAY 5, 1998
LOCATION: BOSTON BACK BAY HILTON
SECOND FLOOR, BELVIDERE BALLROOM
40 DALTON STREET
BOSTON, MASSACHUSETTS
TIME: 11:00 A.M.
To ensure that your shares are voted on your behalf, please return your proxy
promptly in the enclosed envelope.
DETACH HERE
<TABLE>
[X] PLEASE MARK
VOTES AS IN
THIS EXAMPLE.
<S> <C> <C> <C> <C>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 1.
1. Election of Directors
NOMINEES: Richard J. Egan, Nelson S. Gifford,
Matina S. Horner.
FOR WITHHELD
[ ] [ ]
MARK HERE IF COMMENTS ON OTHER SIDE [ ]
[ ]______________________________________
For all nominees except as noted above MARK HERE TO DISCONTINUE MULTIPLE MAILINGS [ ]
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [ ]
Please sign name exactly as it appears hereon.
When signing as attorney, agent, guardian, executor,
administrator, trustee or the like, please give your full
title as such.
Signature: ____________________________ Date: ________________ Signature: ____________________________ Date: ________________
</TABLE>
