<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1994
-----------------------------------------
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 1-2297
EASTERN ENTERPRISES
---------------------------------------------------------
(Exact name of registrant as specified in its charter)
MASSACHUSETTS 04-1270730
---------------------------------- ---------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9 RIVERSIDE ROAD, WESTON, MASSACHUSETTS 02193
---------------------------------------------------
(Address of principal executive offices)
(Zip Code)
617-647-2300
-------------------------------------------------------
(Registrant's telephone number, including area code)
-------------------------------------------------------
Former name, former address and former fiscal year,
if changed since last report.
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
----- -----
The number of shares of Common Stock outstanding of Eastern
Enterprises as of April 29, 1994 was 20,967,526.
<PAGE> 2
Form 10-Q
Page 2.
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
Company or group of companies for which report is filed:
EASTERN ENTERPRISES AND SUBSIDIARIES ("Eastern")
<TABLE>
Consolidated Statement of Earnings
- - ----------------------------------
<CAPTION>
Three months ended March 31,
(In thousands, except per share amounts) 1994 1993
- - -------------------------------------------------------------------------
<S> <C> <C>
REVENUES $410,759 $368,368
OPERATING COSTS AND EXPENSES:
Operating costs 300,814 269,117
Selling, general & administrative expenses 33,185 34,623
Depreciation & amortization 19,966 18,011
-------- --------
353,965 321,751
-------- --------
OPERATING EARNINGS 56,794 46,617
OTHER INCOME (EXPENSE):
Interest income 425 854
Interest expense (9,416) (9,063)
Other, net (188) (218)
-------- --------
EARNINGS BEFORE INCOME TAXES 47,615 38,190
Provision for income taxes 18,927 15,165
NET EARNINGS $ 28,688 $ 23,025
======== ========
EARNINGS PER SHARE $ 1.37 $ 1.02
======== ========
DIVIDENDS PER SHARE $ .35 $ .35
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 3
Form 10-Q
Page 3.
Eastern Enterprises and Subsidiaries
- - ------------------------------------
<TABLE>
Consolidated Balance Sheet
- - --------------------------
<CAPTION>
March 31, Dec. 31, March 31,
(In thousands) 1994 1993 1993
- - -------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and short-term investments $ 58,101 $ 52,240 $ 118,845
Receivables, less allowances 214,824 145,523 188,853
Inventories 59,428 87,568 68,931
Deferred gas costs 24,421 65,802 10,392
Other current assets 5,737 11,995 5,523
---------- ---------- ----------
Total current assets 362,511 363,128 392,544
INVESTMENTS:
Equity in U.S. Filter 44,193 44,292 -
Other investments 6,041 8,279 9,198
---------- ---------- ----------
Total investments 50,234 52,571 9,198
PROPERTY AND EQUIPMENT, AT COST 1,279,838 1,275,161 1,285,103
Less--Accumulated depreciation 506,177 489,196 492,335
---------- ---------- ----------
Net property and equipment 773,661 785,965 792,768
OTHER ASSETS:
Deferred post-retirement health
care costs 100,461 101,182 100,002
Goodwill, less amortization 13,137 13,231 90,266
Deferred charges and other costs 65,183 63,600 40,558
---------- ---------- ----------
Total other assets 178,781 178,013 230,826
---------- ---------- ----------
TOTAL ASSETS $1,365,187 $1,379,677 $1,425,336
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 4
Form 10-Q
Page 4.
Eastern Enterprises and Subsidiaries
- - ------------------------------------
<TABLE>
Consolidated Balance Sheet
- - --------------------------
<CAPTION>
March 31, Dec. 31, March 31,
(In thousands) 1994 1993 1993
- - ------------------------------------------------------------------------
<S> <C> <C> <C>
LIABILITIES AND SHAREHOLDER'S EQUITY
CURRENT LIABILITIES:
Current debt $ 68,645 $ 114,335 $ 61,388
Accounts payable 67,221 76,161 66,933
Accrued expenses 42,605 31,280 30,223
Other current liabilities 66,928 63,703 48,777
---------- ---------- ----------
Total current liabilities 245,399 285,479 207,321
GAS INVENTORY FINANCING 32,079 59,297 33,789
LONG-TERM DEBT 362,846 328,939 355,037
RESERVES AND OTHER LIABILITIES:
Deferred income taxes 91,606 90,793 107,583
Post-retirement health care 104,139 104,730 104,750
Coal miners retiree health care 61,941 63,060 -
Preferred stock of subsidiary 29,205 29,197 29,343
Other reserves 51,708 54,444 53,961
---------- ---------- ----------
Total reserves and other
liabilities 338,599 342,224 295,637
SHAREHOLDERS' EQUITY:
Common stock, $1.00 par value
Authorized shares -- 50,000,000
Issued shares -- 21,651,925 at
March 31, 1994; 21,644,378 at
December 31, 1993 and 23,640,582
at March 31, 1993 21,652 21,644 23,641
Capital in excess of par value 62,006 61,778 112,266
Retained earnings 320,644 299,131 423,797
Treasury stock at cost - 684,399
shares at March 31, 1994; 714,786
shares at December 31, 1993 and
999,326 shares at March 31, 1993 (18,038) (18,815) (26,152)
---------- ---------- ----------
Total shareholders' equity 386,264 363,738 533,552
---------- ---------- ----------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $1,365,187 $1,379,677 $1,425,336
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 5
Form 10-Q
Page 5.
Eastern Enterprises and Subsidiaries
- - ------------------------------------
<TABLE>
Consolidated Statement of Cash Flows
- - ------------------------------------
<CAPTION>
Three months ended March 31,
(In thousands) 1994 1993
- - --------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 28,688 $ 23,025
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 19,966 18,011
Income taxes and tax credits 13,904 13,724
Other changes in assets and liabilities:
Receivables (69,301) (50,895)
Inventories 28,140 24,147
Deferred gas costs 41,381 30,476
Accounts payable (8,940) (11,956)
Other 2,844 4,927
-------- --------
Net cash provided by operating activities 56,682 51,459
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (7,404) (10,781)
Short-term investments 12,974 (13,013)
Other (235) (2,228)
-------- --------
Net cash provided (used) by investing
activities 5,335 (26,022)
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid (7,856) (7,917)
Changes in notes payable (45,800) (961)
Proceeds from issuance of long-term debt 36,000 -
Repayment of long-term debt (1,435) (1,455)
Changes in gas inventory financing (27,218) (14,842)
Other 1,037 130
-------- --------
Net cash used by financing activities (45,272) (25,045)
-------- --------
Net increase in cash and cash equivalents 16,745 392
Cash and cash equivalents at beginning of year 23,766 91,377
-------- --------
Cash and cash equivalents at end of period 40,511 91,769
Short-term investments 17,590 27,076
-------- --------
CASH AND SHORT-TERM INVESTMENTS $ 58,101 $118,845
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 6
Form 10-Q
Page 6.
EASTERN ENTERPRISES AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
March 31, 1994
1. ACCOUNTING POLICIES
It is Eastern's opinion that the financial information contained in
this report reflects all adjustments necessary to present a fair
statement of results for the period reported. All of these
adjustments are of a normal recurring nature. Results for the period
are not necessarily indicative of results to be expected for the year,
due to the seasonal nature of Eastern's operations. All accounting
policies have been applied in a manner consistent with prior periods.
Such financial information is subject to year-end adjustments and
annual audit by independent public accountants.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted in this Form
10-Q. Therefore these interim financial statements should be read in
conjunction with Eastern's 1993 Annual Report filed on Form 10-K with
the Securities and Exchange Commission.
SHORT-TERM INVESTMENTS
Effective January 1, 1994, Eastern adopted Statement of Financial
Accounting Standards No. 115 ("SFAS 115"), "Accounting for Certain
Investments in Debt and Equity Securities," which requires investments
in debt and equity securities to be be carried at fair value.
Eastern's investment in U.S. Filter is specifically excluded from SFAS
115 because it is accounted for under the equity method of accounting.
Pursuant to SFAS 115, Eastern has classified its investments in debt
and equity securities as available for sale. Accordingly, the net
unrealized gains and losses computed in marking these securities to
market have been reported within retained earnings. At March 31,
1994, the difference between the fair value and the original cost of
these securities is immaterial.
EARNINGS PER SHARE
Per share amounts are based on the weighted average number of common
shares outstanding and common equivalent shares (20,982,000 shares in
1994 and 22,684,000 shares in 1993).
<PAGE> 7
Form 10-Q
Page 7.
<TABLE>
2. INVENTORIES
The components of inventories were as follows:
<CAPTION>
March 31, Dec. 31, March 31,
(In thousands) 1994 1993 1993
---------------------------------------------------------------
<S> <C> <C> <C>
Supplemental gas supplies $24,421 $53,152 $17,572
Other materials, supplies and
marine fuels 17,886 17,984 24,578
Finished products 17,121 16,432 26,781
------- ------- -------
$59,428 $87,568 $68,931
======= ====== =======
</TABLE>
<TABLE>
3. SUPPLEMENTAL CASH FLOW INFORMATION
The following are supplemental disclosures of cash flow information:
<CAPTION>
Three months ended March 31,
(In thousands) 1994 1993
-------------------------------------------------------------------
<S> <C> <C>
Cash paid during the year for:
Interest, net of amounts capitalized $2,172 $ 1,975
Income taxes $4,743 $ 2,209
</TABLE>
<PAGE> 8
Form 10-Q
Page 8.
<TABLE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
<CAPTION>
RESULTS OF OPERATIONS
REVENUES: Three months ended March 31,
(In thousands) 1994 1993 Change
------------------------------------------------------------
<S> <C> <C> <C>
Boston Gas $314,302 $258,226 22%
Midland 58,166 65,850 (12)%
Water Products Group 38,291 44,292 NM
-------- --------
Total $410,759 $368,368 12%
======== ========
</TABLE>
<TABLE>
<CAPTION>
OPERATING EARNINGS: Three months ended March 31,
(In thousands) 1994 1993 Change
----------------------------------------------------------
<S> <C> <C> <C>
Boston Gas $53,122 $41,228 29%
Midland 5,025 9,087 (45)%
Water Products Group (332) (2,613) NM
Headquarters (1,021) (1,085) 6%
-------- --------
Total $56,794 $46,617 22%
======== ========
</TABLE>
BOSTON GAS
A $37.7 million rate increase which took effect November 1, 1993
increased 1994 revenues by $16.3 million. Colder weather in the
Boston Gas service territory increased revenues by $24.2 million.
Weather was 14% colder than normal compared with near normal weather
in 1993. Sales to new firm customers increased revenues and operating
earnings by $12.2 million and $3.7 million, respectively.
The unusually cold first quarter weather increased operating earnings
by about $5 million, after taking into account the higher
workload-related labor and operating costs associated with the colder
weather. Partially offsetting the increase in revenues were higher
depreciation charges, property taxes and bad debt expense.
MIDLAND ENTERPRISES
Reductions in contract towing, changes in commodity mix, rate
reductions and rate de-escalations resulted in a 12% decrease in
revenues from the prior year. Reduced volume from a long-term
contract currently subject to litigation and downtime for unscheduled
plant maintenance at Midland's largest customer contributed to a 29%
reduction in utility contract coal ton miles from the 1993 level.
Volume in 1993 was positively impacted by stockpiling in anticipation
of a possible coal miners strike. Redeployment of equipment to other
commodities and tramp towing helped limit the reduction in overall ton
miles to 6%. Midland's liquid barge business, which was sold in
December 1993, generated revenues of $2.7 million in the first quarter
of 1993.
Operating earnings were significantly impacted by the reduced utility
contract coal volume and lower rates associated with non-coal tonnage.
Higher operating costs resulting from reduced tow sizes, loading
delays and other inefficiencies
<PAGE> 9
Form 10-Q
Page 9.
due to extended ice and high water conditions were partially offset by
implementation of cost savings programs. Adverse operating conditions
are expected to continue through most of the second quarter.
Midland has negotiated an extension of its long-term contract with its
largest customer, Cincinnati Gas & Electric Co., through the year
2000. Under the terms of the extension, Midland made some rate
concessions, retroactive to January 1, 1994, in exchange for certain
renewal and efficiency improvement rights.
WATER PRODUCTS GROUP
Revenues for WaterPro Supplies increased 26%, reflecting increases for
all of WaterPro's regions except the MidAtlantic. Most of WaterPro's
$1.3 reduction in operating loss was attributable to the increased
volume, partially offset by related selling expenses and a decrease in
margin percentage.
Ionpure Technologies, which was sold in the fourth quarter of 1993,
generated revenues of $13.9 million and an operating loss of $1.0 in
the first quarter of 1993.
LIQUIDITY AND CAPITAL RESOURCES
Management believes that projected cash flow from operations, in
combination with currently available resources, is more than
sufficient to meet Eastern's 1994 capital expenditure and working
capital requirements, normal debt repayments and anticipated dividend
payments to shareholders.
In January 1994 Boston Gas issued $36.0 million of Medium-Term Notes,
the proceeds of which were used to reduce short-term indebtedness.
Consolidated capital expenditures, principally at Boston Gas, are
budgeted at approximately $60 million for 1994.
<PAGE> 10
Form 10-Q
Page 10.
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Shareholders of the registrant was held
on April 28, 1994, at which the shareholders voted to elect the
following Trustees for terms of office expiring at the 1997
Annual Meeting of Shareholders:
Richard R. Clayton, with 17,776,166 shares voting for
and 106,586 shares withholding authority;
Leonard R. Jaskol, with 17,778,963 shares voting for
and 103,789 shares withholding authority;
Harold T. Miller, with 17,772,845 shares voting for
and 109,907 shares withholding authority; and
William G. Salatich, with 17,773,313 shares voting for
and 109,439 shares withholding authority.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) List of Exhibits
Exhibit 10.1 - Eastern's Supplemental Executive Retirement
Plan, as amended.
Exhibit 10.2 - Agreement dated April 28, 1994 between
Eastern and J. Atwood Ives.
Exhibit 10.3 - Agreement dated April 28, 1994 between
Eastern and Richard R. Clayton
(b) Report on Form 8-K
There were no reports on Form 8-K filed in the first
quarter of 1994.
<PAGE> 11
Form 10-Q
Page 11.
SIGNATURES
It is Eastern's opinion that the financial information contained
in this report reflects all adjustments necessary to present a fair
statement of results for the period reported. All of these
adjustments are of a normal recurring nature. Results for the period
are not necessarily indicative of results to be expected for the year,
due to the seasonal nature of Eastern's operations. All accounting
policies have been applied in a manner consistent with prior periods.
Such financial information is subject to year-end adjustments and
annual audit by independent public accountants.
Pursuant to the requirements of the Securities Exchange Act of
1934, Eastern has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
EASTERN ENTERPRISES
By JAMES J. HARPER
--------------------------
James J. Harper
Vice President and Controller
(Chief Accounting Officer)
May 2, 1994.
<PAGE> 1
Exhibit 10.1
------------
April 28, 1994
--------------
Eastern Enterprises
-------------------
Supplemental Executive Retirement Plan
--------------------------------------
1. Purpose. The purpose of this Plan is to provide key management
-------
personnel of Eastern Enterprises and its subsidiaries with an appropriate
level of retirement income by supplementing the retirement benefits provided
under the Eastern Enterprises Headquarters Retirement Plan, the Boston Gas
Company Retirement Plan, and the Midland Enterprises Inc. Salaried Retirement
Plan, as applicable.
2. Definitions. For purposes of this Plan, the following terms will
-----------
have the following meanings:
(a) The word "Eastern" will mean Eastern Enterprises and any successor
to all or a major portion of its assets or business which assumes
the obligations of Eastern Enterprises under the Plan.
(b) The word "Plan" will mean the Eastern Enterprises Supplemental
Executive Retirement Plan set forth herein, together with all
amendments hereto.
(c) The words "Retirement Plan" will mean, as applicable, the Eastern
Enterprises Headquarters Retirement Plan, the Boston Gas Company
Retirement Plan, and the Midland Enterprises Inc. Salaried
Retirement Plan, as from time to time amended.
(d) The words "Participating Subsidiary" will mean any Participating
Employer (as defined in the Retirement Plan), other than Eastern.
(e) The word "Compensation" will have the meaning provided in (i) or
(ii) below, whichever is applicable.
(i) With respect to any Officer first receiving benefits
hereunder before January 1, 1994, Compensation" means, for
any year, the salary paid by Eastern or by a Participating
- 1 -
<PAGE> 2
Subsidiary to such Officer for such year (calculated as of
his Earnings Measurement Date, as defined in the Retirement
Plan) and fifty percent (50%) of bonuses and incentive
awards paid (whether in cash or stock) by Eastern or by a
Participating Subsidiary to such Officer in such year;
provided, that amounts deferred by such Officer under
Eastern's Deferred Compensation Plan for Certain Management
Employees shall be treated as paid in the year they would
have been payable but for such deferral; further provided,
that in determining for the purposes hereof the amount of an
incentive award paid (whether in cash or stock) under
Eastern's Executive Incentive Compensation Plan (x) there
shall be included only the lesser of the amount paid or the
target award amount established in creating the incentive
opportunity to earn such award and (y) awards based on a
fixed number of shares of Eastern stock shall be valued at
the price for Eastern stock utilized in creating the
incentive opportunity to earn such award; and, further
provided, that no amount will be included with respect to
stock options or stock appreciation rights.
(ii) With respect to any Officer first receiving benefits
hereunder on or after January 1, 1994, "Compensation" means,
for any calendar year, the salary paid by Eastern or by a
Participating Subsidiary to such Officer for such calendar
year (calculated as of his Earnings Measurement Date, as
defined in the Retirement Plan) and one hundred percent
(100%) of bonuses and incentive awards (whether payable in
cash or stock) earned by such Officer with respect to such
calendar year under Eastern's Executive Incentive
Compensation Plan or any similar executive incentive plan
adopted by Eastern after January 1, 1994; provided, that
amounts deferred by such Officer under any deferred
compensation and/or savings plan maintained by Eastern or
any Participating Subsidiary from time to time shall be
treated as paid in the calendar year they would have been
payable but for such deferral, and the election to so defer
amounts earned shall be disregarded for purposes of
determining amounts earned; further provided, that in
determining for purposes hereof the amount of an incentive
award earned (whether payable in cash or stock), (a) a bonus
or award that relates to a plan period of more than one
calendar year, when earned in accordance with such Plan at
the end of such period, shall be deemed to have been earned
in equal annual installments during such period, and (b)
awards based on a fixed number of shares of Eastern stock
shall be valued at the price for Eastern stock utilized in
creating the incentive opportunity to earn such award; and,
further provided, that no amounts will be included with
respect to stock options, stock appreciation rights or
restricted stock awards.
- 2 -
<PAGE> 3
(f) The word "Officer" will mean any active employee of Eastern or a
Participating Subsidiary employed as a Chairman, a President, a
Vice President, a General Counsel, an Assistant Vice President, a
Treasurer, a Secretary, or a Controller. In addition to the
offices named in the preceding sentence, the Compensation
Committee may from time to time designate other offices of Eastern
or a Participating Subsidiary, the holders of which will be
Officers within the meaning of this Section 2(f).
(g) The words "Eligible Officer" will mean any Officer who satisfies
the eligibility requirements set forth in Section 4 of the Plan.
(h) The words "Executive Service" will mean the period of service
which an employee serves as an Officer, except that no service
after age sixty-five (65) will be counted as Executive Service.
(i) The words "Break in Service" will have the same meaning as in the
Retirement Plan.
(j) The words "Computation Period" will have the same meaning as in
the Retirement Plan.
(k) The words "Hour of Service" will have the same meaning as in the
Retirement Plan.
(l) The words "Social Security Benefit" will have the same meaning as
in the Retirement Plan.
(m) A "Change of Control" will be deemed to have occurred if
(i) after January 1, 1987 any "person" (as such term is used in
Sections 13(d) and 14(d) of the Securities Exchange Act of
1934), other than Eastern, becomes a beneficial owner
directly or indirectly of securities representing
twenty-five percent (25%) or more of the combined voting
power of the then outstanding voting securities of Eastern;
or
(ii) within two years after the commencement of a tender offer or
exchange offer for the voting securities of Eastern (other
than by Eastern), or as a result of a merger, consolidation,
sale of assets or contested election of trustees or
directors, or any combination of the foregoing, the
individuals who were trustees of Eastern immediately prior
thereto shall cease to constitute a majority of the Board of
the Trustees of Eastern or of the board of trustees or
directors of its successor by merger, consolidation or sale
of assets.
- 3 -
<PAGE> 4
Wherever used in the Plan, the masculine pronoun will include the
feminine.
3. Administration. The Plan will be administered by the Compensation
--------------
Committee of Eastern, which will have full power and authority to construe,
interpret and administer the Plan. Decisions of the Compensation Committee
will be final and binding on all persons. The Compensation Committee may, in
its discretion, adopt, amend and rescind rules and regulations, not
inconsistent with the Plan, relating to the administration thereof. In
individual cases, the Compensation Committee may also credit any Officer for
either eligibility or benefit-determination purposes, or both, with periods
of service in addition to those otherwise taken into account under the Plan,
whether or not such Officer has actually performed service for Eastern or its
subsidiaries in such periods.
4. Eligibility. All Officers fifty-five (55) years of age or older
------------
who (i) are serving in those positions of responsibility that most greatly
influence Eastern's performance (such positions to be designated from time to
time by the Compensation Committee with reference to this Section 4); (ii)
have completed at least twenty-four (24) consecutive months of service in one
or more of the positions so designated by the Compensation Committee; and
(iii) are Members in the Retirement Plan (as defined therein) will be covered
by the Plan and will be eligible to receive benefits hereunder, subject to the
provisions of the Plan. The Compensation Committee may extend eligibility
under the Plan on an individual basis to other employees of Eastern or of its
subsidiaries; provided, however, that no individual (other than a spouse or
-------- -------
- 4 -
<PAGE> 5
beneficiary of an Eligible Officer) who is not a Member in the Retirement Plan
will be eligible to receive benefits under the Plan.
5. Amount of Benefit. Subject to the offset described in Section 7
-----------------
below, the actuarial adjustments described in Section 8 below and the off-sets
described in Section 9 below, the benefit provided under the Plan with respect
to any Eligible Officer will be determined as follows:
(a) Termination of Employment At or After Age 62/60.
------------------------------------------------
(i) Except as otherwise provided in Section 5(a)(ii) below,
every Eligible Officer whose employment by Eastern and its
subsidiaries terminates (other than by death) upon or after
his attaining age sixty-two (62) will be eligible to receive
an annual amount which is the product of (i) his average
annual Compensation for those five (5) years, selected from
among the last ten (10) years of his Executive Service, in
which his aggregate Compensation was highest, and (ii) a
percentage determined according to the following table:
<TABLE>
<CAPTION>
Years of Executive
Service Percentage
------------------ ----------
<S> <C>
Less than 10 None
10 35
11 36.5
12 38
13 39.5
14 41
15 42.5
16 44
17 45.5
18 47
19 48.5
20 or more 50
</TABLE>
For purposes of this Section 5(a)(i), a Computation Period
in which an Officer has one thousand (1,000) or more Hours
of Service as an Officer will be deemed to be a "year of
Executive Service," except that years of Executive Service
prior to any Break in Service will be disregarded to the
extent that Years of Vesting Service (within the meaning of
the Retirement Plan) prior to such Break in Service would be
disregarded for purposes of the Retirement Plan.
- 5 -
<PAGE> 6
(ii) Every Eligible Officer whose employment by Eastern and its
subsidiaries terminates (other than by death) upon or after
his attaining age sixty (60) and who first receives benefits
hereunder on or after January 1, 1994 will be eligible to
receive an annual amount which is the product of (i) his
average annual Compensation for those five (5) calendar
years, selected from among the last ten (10) calendar years
of his Executive Service, in which his aggregate
Compensation was highest, and (ii) a percentage determined
according to the following table:
<TABLE>
<CAPTION>
Non-Calendar Years of
Executive Service Percentage
--------------------- ----------
<S> <C>
Less than 10 None
10 35
11 36.5
12 38
13 39.5
14 41
15 42.5
16 44
17 45.5
18 47
19 48.5
20 or more 50
</TABLE>
For purposes of this Section 5(a)(ii), a Computation Period
in which an Officer has one thousand (1,000) or more Hours
of Service as an Officer will be deemed to be a "non-
calendar year of Executive Service," and a calendar year in
which an Officer has one thousand (1,000) or more Hours of
Service as an Officer will be deemed to be a "calendar year
of Executive Service", except that if any Years of Vesting
Service (within the meaning of the Retirement Plan) prior to
any Break in Service with respect to such Officer would be
disregarded for purposes of the Retirement Plan, an
equivalent number of non-calendar years of Executive Service
and an equivalent number of calendar years of Executive
Service will be disregarded hereunder.
(b) Termination of Employment Before Age 62/60.
-------------------------------------------
(i) Except as otherwise provided in Section 5(b)(ii) below,
every Eligible Officer whose employment by Eastern and its
subsidiaries terminates (other than by death) upon or after
his attaining age fifty-five (55), but before his attaining
age sixty-two (62), will be eligible to receive an annual
amount equal to the amount calculated under Section 5(a)(i)
above multiplied by a percentage determined according to the
following table:
- 6 -
<PAGE> 7
<TABLE>
<CAPTION>
Age at Commencement
of Benefit Percentage
------------------- ----------
<S> <C>
61 95
60 90
59 85
58 80
57 75
56 70
55 65
</TABLE>
(ii) Every Eligible Officer whose employment by Eastern and its
subsidiaries terminates (other than by death) upon or after
his attaining age fifty-five (55), but before his attaining
age sixty (60), and who first receives benefits hereunder on
or after January 1, 1994 will be eligible to receive an
annual amount equal to the amount calculated under Section
5(a)(ii) above multiplied by a percentage determined
according to the following table:
<TABLE>
<CAPTION>
Age at Commencement
of Benefit Percentage
------------------- ----------
<S> <C>
59 95
58 90
57 85
56 80
55 75
</TABLE>
(c) DEATH BENEFITS. If an Eligible Officer dies while serving (or
deemed to be serving under Section 6 below) as an Eligible Officer
and leaves a surviving spouse, the spouse will be eligible to
receive an annual amount equal to the amount, if any, the Eligible
Officer would have been entitled to receive under (a) or (b)
above, whichever is applicable, had he retired with the prior
written permission of the Compensation Committee on the day before
his death.
(d) CONDITIONS AND LIMITATIONS. No officer whose employment
terminates upon or after his attaining age fifty-five (55), but
before his attaining age sixty-five (65), will be eligible for
benefits under the Plan unless:
(i) the Compensation Committee has given the Officer its prior
written permission (any Officer who dies shall be deemed to
have retired with the prior written permission of the
Compensation Committee); or
(ii) the Officer has given written notification to the
Compensation Committee at least six months in advance of the
termination; or
- 7 -
<PAGE> 8
(iii) the Officer is terminated by Eastern, or a subsidiary of
Eastern, and such termination is not determined by the
Compensation Committee to be a discharge for cause which
casts such discredit on the Officer or Eastern, or a
division or subsidiary of Eastern, as to justify forfeiture
of any benefits under this Plan.
No benefit with respect to any Eligible Officer under the Plan
will exceed, after adjustment for the offset described in Section
7 below but before actuarial adjustment under Section 8 below and
before adjustment for the offsets described in Section 9 below, an
amount equal to three (3) times the greater of (i) $90,000 or (ii)
the maximum benefit that could be paid with respect to such
Eligible Officer under section 415(b)(1)(A) of the Internal
Revenue Code of 1986, as from time to time amended (the "Code"),
as adjusted pursuant to section 415(d) of the Code and as in
effect on the date of such Eligible Officer's termination of
employment.
Except as otherwise provided herein, an Officer's employment will
terminate for purposes of the Plan as of the date on which such Officer (i)
retires, resigns or is dismissed from service as an Officer; (ii) dies while
serving as an Officer; or (iii) departs from the service of Eastern and its
subsidiaries for any reason; provided, that an Officer will not be deemed to
have terminated his employment solely by reason of a duly approved leave of
absence. For purposes of this Section 5 only, the age at which an Officer's
employment terminates or his benefits commence will be calculated in all cases
as of such Officer's nearest birthday.
Notwithstanding any other provision of this Plan, an Eligible Officer's
surviving spouse shall not be entitled to any benefits hereunder unless such
spouse was the person to whom the Eligible Officer was married at the time
benefit payments commenced under this Plan (or at the time of the Eligible
Officer's death, if earlier).
- 8 -
<PAGE> 9
6. Disability. For purposes of satisfying the length-of-service
-----------
requirements set forth in Section 4 and Section 5 above, an Officer who is
unable to work because of a disability for which he is eligible to receive
benefits under a long-term disability program sponsored by Eastern or by a
Participating Subsidiary will be deemed to continue to serve as an Officer
at the same salary he was receiving when forced to stop working by reason of
his disability, until such time as he returns to active employment or his
employment terminates.
7. Offset for Social Security payments. The annual benefit
-----------------------------------
calculated with respect to any Eligible Officer under Section 5 above shall be
reduced (but not below zero), before the adjustments described in Section 8
and Section 9 below, by a percentage of the Eligible Officer's Social Security
Benefit for any year in which such Eligible Officer is eligible to receive a
Social Security benefit (or, if the benefit hereunder becomes payable under
Section 5(c) by reason of the Eligible Officer's death, by a percentage of the
Social Security Benefit to which the Eligible Officer would have been
entitled, but only for those years in which such Eligible Officer, had he
lived, would have been eligible for Social Security benefits), as follows: for
Officers first receiving benefits hereunder prior to January 1, 1994, such
percentage shall be one hundred percent (100%); for Officers first receiving
benefits hereunder on or after January 1, 1994, such percentage shall be fifty
percent (50%).
8. Actuarial adjustment. For purposes of determining the benefit
--------------------
provided under this Plan with respect to any Eligible Officer, the amount
- 9 -
<PAGE> 10
calculated under Section 5 above with respect to such Eligible Officer, after
adjustment for the offset described in Section 7 above, will be actuarially
adjusted as necessary to reflect payment in the form specified in Section 10,
in the same manner and using the same actuarial assumptions as would apply in
determining how an accrued benefit of like amount payable (with the same
commencement date) under the Retirement Plan would be actuarially adjusted (if
at all) to reflect payment under the Retirement Plan in such specified form.
9. Offset for other benefits. The annual benefit calculated with
--------------------------
respect to any Eligible Officer under Section 5(a) or Section 5(b) above, as
adjusted for the offset described in Section 7 above and as further adjusted
actuarially under Section 8 above, will be reduced (but not below zero) by the
following amounts:
(a) the amount payable annually with respect to such Eligible Officer
(1) under the Retirement Plan, assuming commencement on the
commencement date hereunder and payment (i) if the Eligible
Officer is unmarried on such commencement date, in the form of a
single life annuity over the life of the Eligible Officer but with
sixty (60) monthly payments guaranteed, or (ii) in every other
case, in the form of a joint and survivor annuity under which
reduced payments will be made to the Eligible Officer for his
lifetime and, following his death, if his spouse survives him,
payments equal to one-half the amount payable to the Eligible
Officer during his lifetime will be paid to such surviving spouse
for the remainder of such spouse's lifetime, or (2) under any
other retirement plan to which Eastern or any of its subsidiaries
or affiliates has contributed (payments under any such other plan
to be determined, for purposes of this Section 9, as though
payable in the form described in (1)(i) or (1)(ii) above,
whichever is applicable); and
(b) with respect any Eligible Officer first receiving benefits
hereunder prior to January 1, 1994, the amount, if any, which the
Compensation Committee reasonably determines, in its sole
discretion, to be the annual retirement income or the equivalent
thereof to which the Eligible Officer is entitled by reason of any
prior employment (including for this purpose any service as a
- 10 -
<PAGE> 11
fiduciary or director), assuming the same form of payment as the
applicable benefit form under (a) above.
If an Eligible Officer dies while employed (or deemed to be employed
under Section 6 above) as an Eligible Officer, and leaves a surviving spouse,
the death benefit payable to his spouse each year under Section 5(c) above, as
adjusted for the offset described in Section 7 above and as further adjusted
actuarially pursuant to Section 8 above, will be reduced (but not below zero)
by the following amounts:
(aa) the death benefit provided the spouse each year under the
Retirement Plan, assuming commencement on the same commencement
date as hereunder, or under any other retirement plan to which
Eastern or any of its subsidiaries or affiliates has contributed
(payments under any such other plan to be determined, for purposes
of this Section 9, as though payable in the same form and
commencing at the same time as the death benefit hereunder); and
(bb) with respect to the spouse of an Eligible Officer who dies prior
to January 1, 1994, the amount, if any, which the Compensation
Committee reasonably determines, in its sole discretion, to be the
annual income to which the spouse of such Eligible Officer is
entitled under any plan, agreement or arrangement maintained by a
prior employer of such Eligible Officer (or in connection with any
service of such Eligible Officer as a fiduciary or director),
assuming the same form of payment and benefit commencement date as
hereunder.
10. Form and Timing of Benefits for Eligible Officers. Benefits
--------------------------------------------------
provided to an Eligible Officer under the Plan upon the termination of his
employment will be payable (a) if the Eligible Officer is unmarried on the
commencement date of benefits hereunder, in the form of a single-life annuity
over the life of the Eligible Officer but with sixty (60) monthly payments
guaranteed, or (b) in every other case, in the form of a joint and survivor
annuity under which reduced payments will be made to the Eligible Officer for
his lifetime and, following his death, if his spouse survives him, payments
- 11 -
<PAGE> 12
equal to one-half the amount payable to the Eligible Officer during his
lifetime will be paid to such surviving spouse for the remainder of such
spouse's lifetime. Benefits payable to a surviving spouse under Section 5(c)
above will be payable in the form of a single-life annuity over the life of
such surviving spouse. Solely for purposes of determining the amount payable
to a surviving spouse under Section 5(c), the benefit the deceased Eligible
Officer would have been entitled to receive had such Eligible Officer retired
with the written permission of the Compensation Committee on the day before
his death shall be assumed to have been payable in the form of a joint and
survivor annuity under which reduced payments are payable to the Eligible
Officer for his lifetime and, following his death, reduced payments in the
same amount are payable to the Eligible Officer's surviving spouse for the
remainder of such spouse's lifetime. Benefits provided hereunder will
commence as of the first day of the month next following the Eligible
Officer's termination of employment (or the Eligible Officer's death, in the
case of benefits described in Section 5(c)), irrespective of the form and
timing of benefit payments under the Retirement Plan.
11. No Vesting; Requirement of Non-Competition. Subject to the
-------------------------------------------
provisions of Section 14 below, nothing in this Plan will be construed as
vesting in any person rights to any benefits hereunder. If at any time the
Compensation Committee determines that a person receiving benefits hereunder
is competing, directly or indirectly, with the business of Eastern, it may
discontinue the payment of such benefits to such person. For purposes of this
paragraph, the phrase "competing, directly or indirectly, with the business of
Eastern" will be deemed to include (without limiting the generality of the
- 12 -
<PAGE> 13
same) engaging or being interested, directly or indirectly, as owner,
director, officer, employee, partner, through stock ownership (other than
ownership of less than two (2%) percent of the outstanding stock of any
publicly owned company), investment of capital, lending of money or property,
rendering of services or otherwise, either alone or in association with
others, in the operation of any type of business or enterprise in any way
competitive with the business of Eastern or of any of its subsidiaries.
Notwithstanding the foregoing, the Compensation Committee may waive or modify
its right to discontinue payments to any person by written agreement with such
person.
12. Limitation of Rights; Special Provision in the Event of Change in
-----------------------------------------------------------------
Control. Nothing in this Plan will be construed to create a trust or to
- - -------
obligate Eastern or any other person to segregate a fund, purchase an
insurance contract, or in any other way currently to fund the future payment
of any benefits hereunder, nor will anything herein be construed to give any
employee or any other person rights to any specific assets of Eastern or of
any other person.
Notwithstanding the foregoing, Eastern in its sole discretion may
establish a trust of which it is treated as the owner under Subpart E of
Subchapter J, Chapter 1 of the Code to provide for the payment of benefits
hereunder, subject to the claims of general creditors in the event of
insolvency and subject to such other terms and conditions as Eastern may deem
necessary or advisable to ensure that benefits are not includable, by reason
of the Trust, in the income of trust beneficiaries prior to actual
- 13 -
<PAGE> 14
distribution and that the existence of the trust does not cause the Plan or
any other arrangement to be considered funded for purposes of Title I of the
Employee Retirement Income Security Act of 1974, as amended (a "grantor
trust"). In the event Eastern establishes a grantor trust in respect of the
Plan and at the time of a Change of Control such trust (i) has not been
terminated or revoked and (ii) is not "fully funded" (as hereinafter defined),
Eastern shall promptly deposit in such grantor trust cash sufficient to cause
the trust to be "fully funded" as of the date of the deposit. For purposes of
this paragraph, the aforesaid grantor trust shall be deemed "fully funded" as
of any date if, as of that date, the fair market value of the assets held in
trust is not less than the aggregate present value as of that date of (1) all
benefits then in pay status under the Plan (including benefits not yet
commenced but in respect of Eligible Officers who have retired, died or
otherwise terminated employment under circumstances entitling them to benefits
hereunder) plus (2) all benefits that would be payable under the Plan if all
other Eligible Officers were deemed to have retired with the prior written
permission of the Compensation Committee on that date plus (3) all benefits
payable (as determined under rules similar to the rules described in (1) and
(2)) under all other plans and arrangements, to the extent provided for
through the grantor trust. In applying the preceding sentence, present value
shall be determined by using the interest and mortality assumptions used in
determining lump sum present values under the Retirement Plan.
13. Rights Non-Assignable. No employee or beneficiary or any other
---------------------
person will have any right to assign or otherwise to alienate the right to
receive payments under the Plan, in whole or in part.
- 14 -
<PAGE> 15
14. Termination; Amendment; Other. Eastern reserves the right at any
-----------------------------
time by action of its Board of Trustees to terminate the Plan or to amend its
provisions in any way, except that following a Change of Control no such
amendment or termination shall reduce the amount of Eastern's obligations
under Section 12 or extend the period within which Eastern may satisfy such
obligations. In addition, the Plan will automatically terminate if at any
time (and as of the date that) the Retirement Plan is terminated.
Notwithstanding the foregoing, no termination or amendment of the Plan (a
"Plan amendment") will reduce the benefit payable under the Plan to any person
with respect to an Eligible Officer whose employment with Eastern and its
subsidiaries was terminated prior to such Plan amendment, nor shall any Plan
amendment reduce the benefit to be paid with respect to a person who is an
Eligible Officer on the date of such Plan amendment below the amount which
such Eligible Officer would have received if his employment had terminated
with the prior written permission of the Compensation Committee on the day
before such Plan amendment; provided, however, that benefits otherwise payable
hereunder with respect to an Eligible Officer may be reduced or otherwise
modified by separate agreement between Eastern and such Officer.
- 15 -
<PAGE> 1
Exhibit 10.2
------------
April 28, 1994
J. Atwood Ives
1 Bennington Road
Lexington, MA 02173
Re: Eastern Enterprises Supplemental
--------------------------------
Executive Retirement Plan
-------------------------
Dear Woody:
As you know, the Eastern Enterprises Supplemental Executive
Retirement Plan is being amended in certain respects, as of
April 28, 1994 (the "Amended SERP").
In this regard, you and Eastern Enterprises have agreed that
certain of such amendments shall not apply with respect to benefits
that may become payable to you thereunder. Specifically, if benefits
should become payable under the Amended SERP to you or your spouse,
such benefits shall be calculated without giving effect to the
amendments to Sections 2 and 5 of such Plan approved by the Board of
Trustees on April 28, 1994.
Please indicate your agreement by signing in the space provided
below and returning one copy of this letter agreement to the
undersigned.
Yours truly,
/s/ Walter J. Flaherty
---------------------------
Walter J. Flaherty
Agreed:
/s/ J. Atwood Ives
- - ----------------------
J. Atwood Ives
WJF:law
Enclosure
<PAGE> 1
Exhibit 10.3
------------
April 28, 1994
Richard R. Clayton
736 Lowell Road
Concord, MA 01742
Re: Eastern Enterprises Supplemental
--------------------------------
Executive Retirement Plan
-------------------------
Dear Dick:
As you know, the Eastern Enterprises Supplemental Executive
Retirement Plan is being amended in certain respects, as of
April 28, 1994 (the "Amended SERP").
In this regard, you and Eastern Enterprises have agreed that
certain of such amendments shall not apply with respect to benefits
that may become payable to you thereunder. Specifically, if benefits
should become payable under the Amended SERP to you or your spouse,
such benefits shall be calculated without giving effect to the
amendments to Sections 2 and 5 of such Plan approved by the Board of
Trustees on April 28, 1994.
Please indicate your agreement by signing in the space provided
below and returning one copy of this letter agreement to the
undersigned.
Yours truly,
/s/ Walter J. Flaherty
-------------------------
Walter J. Flaherty
Agreed:
/s/ Richard R. Clayton
- - -------------------------
Richard R. Clayton
WJF:law
Enclosure
