<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934
FILED BY THE REGISTRANT /X/ FILED BY A PARTY OTHER THAN THE REGISTRANT / /
- --------------------------------------------------------------------------------
Check the appropriate box:
/ / Preliminary Proxy Statement
/X/ Definitive Proxy Statement
/X/ 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)).
Eastern Enterprises
(Name of Registrant as Specified In Its Charter)
Eastern Enterprises
(Name of Person(s) Filing Proxy Statement)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act
Rule 0-11 (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
[LOGO]
March 17, 1995
Dear Shareholder:
The Board of Trustees joins me in inviting you to attend Eastern's Annual
Meeting at 10:00 a.m. on Thursday, April 27, 1995 in the AUDITORIUM OF THE BANK
OF BOSTON, 100 FEDERAL STREET, BOSTON, MASSACHUSETTS.
The accompanying Annual Report to Shareholders reports on the Company's
operations and outlook. The Notice of Annual Meeting and Proxy Statement contain
a description of the formal business to be acted upon by the shareholders. At
the meeting, we intend to continue our practice of discussing Eastern's
operating businesses and their prospects. Trustees, officers and other
executives, as well as representatives of Eastern's independent accountants,
will be available to answer any questions you may have.
A proxy card and a postage-paid envelope are enclosed. Your vote,
regardless of the number of shares you own, is important. Whether or not you
plan to attend the meeting, I urge you to register your vote now by signing,
dating and returning the enclosed proxy card as soon as possible in the envelope
provided.
I look forward to greeting personally as many shareholders as possible at
the meeting.
Sincerely,
J. Atwood Ives
Chairman and Chief
Executive Officer
<PAGE> 3
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
APRIL 27, 1995
To the Holders of Common Stock of
Eastern Enterprises:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Eastern
Enterprises (the "Association") will be held in the AUDITORIUM OF THE BANK OF
BOSTON, 100 FEDERAL STREET, BOSTON, MASSACHUSETTS, at 10 o'clock in the morning
on Thursday, April 27, 1995 for the following purposes:
(1) To elect three Trustees to serve until the 1998 Annual Meeting of
Shareholders and until their successors are elected and qualified;
(2) To approve the Association's 1995 Stock Option Plan as set forth in the
attached Proxy Statement; and
(3) To consider and act upon any other matters that may properly come before
the meeting or any adjournment thereof.
Shareholders of record at the close of business on March 6, 1995 are the
shareholders entitled to receive notice of and to vote at such meeting.
Shareholders who wish their stock to be voted by proxy are requested to
date and sign the enclosed form of proxy and to return it in the enclosed
envelope. A resolution adopted by the Trustees of the Association provides that
shares voted by proxy shall be counted only if the proxy form has been presented
for validation to the Secretary prior to the meeting or, if the meeting is
adjourned to another day, prior to such adjourned session.
By order of the Board of Trustees
L. William Law, Jr.
Secretary
March 17, 1995
1
<PAGE> 4
PROXY STATEMENT
The enclosed form of proxy has been prepared at the direction of the Board
of Trustees of the Association, 9 Riverside Road, Weston, Massachusetts 02193.
Such proxy is solicited on behalf of, and the proxies named therein have been
designated by, the Board of Trustees. Giving the proxy will not affect your
right to revoke the proxy prior to voting and vote in person should you decide
to attend the meeting. Written notice of any such revocation may be addressed to
the Secretary of the Association. Shares represented by the enclosed form of
proxy, when properly executed and presented, will be voted as directed therein.
This Proxy Statement, the enclosed form of proxy and the Annual Report to
Shareholders, including financial statements, were mailed together to
shareholders on or about March 17, 1995.
OUTSTANDING SHARES AND VOTING POWER
At the close of business on March 6, 1995, the record date fixed by the
Board of Trustees for determining shareholders entitled to notice of and to vote
at the 1995 Annual Meeting of Shareholders, the Association had outstanding
20,251,303 shares of Common Stock. Under Article 11 of the Declaration of Trust
of the Association, a quorum for the consideration of questions to be presented
to the 1995 Annual Meeting of Shareholders shall consist of the holders of a
majority of shares of Common Stock issued and outstanding, provided that less
than a quorum may adjourn the meeting from time to time. Votes cast by proxy or
in person at the 1995 Annual Meeting of Shareholders will be counted by persons
appointed by the Association to act as election inspectors for the meeting.
Article 24 of the Declaration of Trust of the Association provides that:
"Shares of this trust which by the provisions of this Declaration are
entitled to vote upon any question shall be entitled to one vote per
share in person or by proxy, except that the election of Trustees by
the Common Stock shall be by cumulative voting, namely, each holder of
Common Stock will be entitled to as many votes as will equal the
number of his shares multiplied by the number of Trustees to be
elected, and he may cast all of such votes for a single candidate or
distribute them among any two or more candidates as he shall elect."
The three nominees for election as Trustees at the 1995 Annual Meeting of
Shareholders who receive the greatest number of votes properly cast will be
elected as Trustees. Proxies withholding authority to vote for one or more
nominees will thus have no effect on the outcome of the election. Proposal 2 set
forth in the attached Notice of Annual Meeting of Shareholders requires the
favorable vote of at least a majority of the outstanding shares of Common Stock.
Abstentions or broker non-votes will have the same effect as votes cast against
proposal 2, and may affect the outcome of voting on that proposal.
INFORMATION WITH RESPECT TO CERTAIN SHAREHOLDERS
The Association has received a copy of an amended statement on Schedule 13G
filed pursuant to Rule 13d-1 under the Securities Exchange Act of 1934 (the
"1934 Act") by Hotchkis and Wiley, 800 West Sixth Street, Los Angeles,
California 90017, an investment advisor, indicating that it owned beneficially
(as defined by Rule 13d-3 under the 1934 Act) on December 31, 1994, a total of
1,250,000 shares of the Association's outstanding Common Stock, representing
6.2% of such outstanding stock. The statement also indicated that it had sole
voting power with respect to all such shares and no dispositive power with
respect to any such shares.
The Association has received a copy of a statement on Schedule 13G filed
pursuant to Rule 13d-1 under the 1934 Act by Sasco Capital, Inc., Ten Sasco Hill
Road, Fairfield, Connecticut 06430, an investment advisor, indicating that it
owned beneficially (as defined by Rule 13d-3 under the 1934 Act) on December 31,
1994, a total of 1,138,400 shares of the Association's outstanding Common Stock,
representing 5.6% of such
2
<PAGE> 5
outstanding stock. Such statement also indicated that it had sole voting power
with respect to 582,800 such shares, no shared voting power with respect to any
such shares and sole dispositive power with respect to all such shares.
The Association has received a copy of an amended statement on Schedule 13D
filed pursuant to Rule 13d-1 under the 1934 Act by Mario J. Gabelli and Gabelli
Funds, Inc., One Corporate Center, Rye, New York 10580, and investment advisor
and broker-dealer entities controlled by them, indicating that collectively they
owned beneficially (as defined by Rule 13d-3 under the 1934 Act) on November 16,
1994, a total of 1,040,000 shares of the Association's outstanding Common Stock,
representing 5.1% of such outstanding stock. The statement also indicated that
they had sole dispositive power with respect to 800,000 shares, shared
dispositive power with respect to 240,000 shares, sole voting power with respect
to 726,500 shares and shared voting power with respect to 240,000 shares.
ELECTION OF TRUSTEES
The Board of Trustees is divided into three classes having staggered terms
of three years each. The Declaration of Trust of the Association provides that
the number of Trustees shall be fixed from time to time by the Trustees but
shall not be less than three or more than twenty. The total number of Trustees
to serve following the 1995 Annual Meeting is currently fixed at eight. Four of
the Trustees now in office have terms expiring at the 1997 Annual Meeting, and
three have terms expiring at the 1996 Annual Meeting. Two of the Trustees having
terms expiring at the 1997 Annual Meeting, Harold T. Miller and William G.
Salatich, are retiring from the Board as of the date of the 1995 Annual Meeting
in accordance with the retirement policy set forth in the Association's By-Laws.
Of the five Trustees now in office having terms expiring at the 1995 Annual
Meeting, three have been nominated by the Board of Trustees for reelection at
such meeting and the others, Nelson J. Darling, Jr. and William J. Pruyn, are
retiring from the Board of Trustees in accordance with such retirement policy.
Each Trustee elected at the 1995 Annual Meeting of Shareholders will hold office
until the 1998 Annual Meeting of Shareholders, and until such Trustee's
successor is elected and qualified; however, it is anticipated that Dean W.
Freed will resign from the Board and committees thereof in accordance with such
retirement policy at the time of the 1996 Annual Meeting.
INFORMATION WITH RESPECT TO BOARD OF TRUSTEES
The Board of Trustees, which held seven regularly scheduled meetings in
1994, maintains a standing Audit Committee, Compensation Committee and
Nominating Committee, each of which is comprised of Trustees who are not
officers or employees of the Association or any of its subsidiaries. The Board
of Trustees also maintains an Executive Committee which has substantially all of
the powers and discretion of the full Board of Trustees. Membership on the
various committees is indicated in the biographical information which follows.
It is the Association's policy that a majority of the members of the Board
of Trustees be independent, non-management Trustees.
The Audit Committee, which met five times in 1994, is responsible for
reviewing the performance and recommending the engagement of the Association's
independent auditors, reviewing the scope of the audit and approving all fees
paid to such auditors. The Audit Committee also reviews the Association's audit
and accounting procedures, internal controls, financial reporting practices and
annual and quarterly reports, and meets with, and reviews the audit plans of,
the Association's internal audit department.
The Compensation Committee, which met six times in 1994, is responsible for
approving officer compensation arrangements, recommending Trustee compensation
arrangements, administering stock option and other compensation and benefit
plans, and reviewing major personnel policies and benefit programs of the
Association and its subsidiaries.
3
<PAGE> 6
The Nominating Committee, which met five times in 1994, is responsible for
nominating Trustees, members of committees of the Board of Trustees and officers
of the Association, reviewing management development and succession programs,
and reviewing and making recommendations concerning the Association's corporate
governance policies. It will consider nominees for the Board of Trustees
recommended by shareholders of the Association. Written recommendations together
with supporting information should be directed to Eastern Enterprises, Attn: The
Nominating Committee, 9 Riverside Road, Weston, Massachusetts 02193. NOMINATIONS
FOR THE ELECTION OF TRUSTEES AT AN ANNUAL MEETING MAY BE MADE BY A SHAREHOLDER
ONLY IF WRITTEN NOTICE OF SUCH SHAREHOLDER'S INTENT TO MAKE SUCH NOMINATION HAS
BEEN GIVEN TO THE SECRETARY NOT LATER THAN FORTY-FIVE DAYS PRIOR TO THE
ANNIVERSARY OF THE DATE OF THE IMMEDIATELY PRECEDING ANNUAL MEETING. SUCH NOTICE
SHALL SET FORTH THE INFORMATION REQUIRED BY ARTICLE 6 OF THE ASSOCIATION'S
DECLARATION OF TRUST.
During 1994, each Trustee attended at least 75% of the aggregate of
meetings of the Board of Trustees and each committee on which he or she served,
other than Thomas W. Jones, who attended 67% of such meetings.
INFORMATION WITH RESPECT TO NOMINEES AND TRUSTEES
It is the intention of the management proxies to vote for the election of
the three nominees listed below. The management proxies will distribute the
total number of votes to which the shareholder executing the proxy is entitled
among the three nominees in such manner as such proxies in their discretion
shall determine unless other instructions are given in the proxy by the
shareholder executing it. If any nominee is not available as a candidate when
the election occurs, discretionary authority is reserved to vote for a
substitute. Management has no reason to believe that any nominee will not be
available.
THE NOMINEES FOR TERMS OF OFFICE EXPIRING AT THE 1998 ANNUAL MEETING OF
SHAREHOLDERS ARE AS FOLLOWS:
SAMUEL FRANKENHEIM, COUNSEL, ROPES & GRAY. Mr. Frankenheim is 62
years old and is a graduate of Cornell University and Cornell
University Law School. Prior to joining Ropes & Gray in 1992,
[photo] Mr. Frankenheim was Senior Vice President, General Counsel,
Secretary and a member of the Office of the Chairman of General
Cinema Corporation (now Harcourt General, Inc.) and of The
Neiman Marcus Group, Inc. He is a Trustee of the Wang Center for
the Performing Arts, Boston, and the Huntington Theater Company,
Boston; Chairman of the Board of the International Alliance of
First Night Celebrations; and an Honorary Trustee of
Newton-Wellesley Hospital.
Trustee since 1993;
member, Audit and Nominating Committees
DEAN W. FREED, DIRECTOR AND RETIRED CHAIRMAN, EG&G, INC., A
TECHNOLOGICAL PRODUCTS AND SERVICES COMPANY. Mr. Freed is 71
years old, is a graduate of Swarthmore College and Purdue
[photo] University, and attended Columbia University. Mr. Freed is a
Director of Emerson Hospital; a Trustee of the New England
Aquarium; a Trustee of the Boston Ballet and the Boston Symphony
Orchestra; and an Overseer of the WGBH Educational Foundation
and the Museum of Fine Arts, Boston.
Trustee since 1980;
member, Audit and Executive Committees
4
<PAGE> 7
J. ATWOOD IVES, CHAIRMAN AND CHIEF EXECUTIVE OFFICER OF THE
ASSOCIATION. Mr. Ives is 58 years old, is a graduate of Yale
College and Stanford University Graduate School of Business, and
is a certified public accountant. Prior to joining the
Association as Chairman and Chief Executive Officer in 1991, he
[photo] was Vice Chairman, Chief Financial Officer and a member of the
Office of the Chairman of General Cinema Corporation (now
Harcourt General, Inc.) and of The Neiman Marcus Group, Inc. He
is a Director of United States Filter Corporation; a Director or
Trustee of several mutual funds advised by Massachusetts
Financial Services Company; a Trustee of the Museum of Fine
Arts, Boston; and a member of the Corporate Advisory Board of
the Stanford University Graduate School of Business and the
Boston College Carroll School of Management.
Trustee since 1989;
Chairman, Executive Committee
THE MEMBERS OF THE BOARD OF TRUSTEES HAVING TERMS OF OFFICE EXPIRING AT THE
1997 ANNUAL MEETING OF SHAREHOLDERS ARE AS FOLLOWS:
RICHARD R. CLAYTON, PRESIDENT AND CHIEF OPERATING OFFICER OF THE
ASSOCIATION. Mr. Clayton is 56 years old and is a graduate of
Purdue University. Prior to joining Eastern in 1987 as its
Executive Vice President and Chief Administrative Officer, Mr.
[photo] Clayton was Chairman and Chief Executive Officer of Vermont
Castings, Inc. He is a member of the Board of Governors of the
New England Aquarium, a Vice President of the New England
Chapter of the National Association of Corporate Directors and a
Trustee of the Concord Museum.
Trustee since 1993
LEONARD R. JASKOL, CHAIRMAN AND CHIEF EXECUTIVE OFFICER OF
LYDALL, INC., A MANUFACTURING COMPANY. Mr. Jaskol is 58 years
old and is a graduate of American University and City University
of New York Graduate School of Business. He is a Director of
[photo] Rogers Corporation, the Connecticut Business and Industry
Association and the American Forest and Paper Association and
Chairman of that Association's Specialty Manufacturer Group; a
Trustee of American University; and a member of the Advisory
Board, Shawmut Bank of Hartford.
Trustee since 1994;
member, Compensation Committee
5
<PAGE> 8
THE MEMBERS OF THE BOARD OF TRUSTEES HAVING TERMS OF OFFICE EXPIRING AT THE
1996 ANNUAL MEETING OF SHAREHOLDERS ARE AS FOLLOWS:
ROBERT P. HENDERSON, CHAIRMAN, GREYLOCK MANAGEMENT CORPORATION,
A VENTURE CAPITAL FIRM. Mr. Henderson is 63 years old and is a
graduate of Dartmouth College and Amos Tuck School of Business
[photo] Administration. Mr. Henderson is a Director of Structural
Dynamics Research Corp., Filene's Basement, Inc., and Cabot
Corporation. He is a former Chairman of the Board of the Federal
Reserve Bank of Boston; a Member of the Corporation of New
England Deaconess Hospital; and a Trustee, Museum of Fine Arts,
Boston.
Trustee since 1978; Chairman, Nominating Committee;
member, Compensation and Executive Committees
THOMAS W. JONES, PRESIDENT AND CHIEF OPERATING OFFICER, TEACHERS
INSURANCE AND ANNUITY ASSOCIATION/COLLEGE RETIREMENT EQUITIES
FUND (TIAA/CREF). Mr. Jones is 45 years old and is a graduate of
[photo] Cornell University and Boston University School of Management.
Prior to joining TIAA/CREF in 1989 as its Executive Vice
President of Finance and Planning and Chief Financial Officer,
Mr. Jones was Senior Vice President and Treasurer of John
Hancock Mutual Life Insurance Company. He is a Director of
Thomas & Betts Corporation and a Trustee of Cornell University.
Trustee since 1990;
Chairman, Audit Committee
RINA K. SPENCE, PRESIDENT AND CHIEF EXECUTIVE OFFICER, RKS
HEALTH VENTURES CORPORATION. Ms. Spence is 46 years old and is a
graduate of Boston University and Harvard University, Kennedy
[photo] School of Government. Prior to organizing RKS Health Ventures
Corporation in 1994, Ms. Spence was President and Chief
Executive Officer of Emerson Health System, Inc. and Emerson
Hospital. Ms. Spence is a Trustee of the Wang Center for the
Performing Arts, Boston, the Boston Ballet and the University of
Massachusetts and a Director of Berkshire Mutual Life Insurance
Co.
Trustee since 1989;
Chairperson, Compensation Committee;
member, Nominating Committee
6
<PAGE> 9
STOCK OWNERSHIP OF TRUSTEES AND EXECUTIVE OFFICERS
The following information is furnished as to the Common Stock of the
Association owned beneficially (as defined by Rule 13d-3 under the Securities
Exchange Act of 1934) as of February 24, 1995 by each Trustee and nominee, each
executive officer named in the Summary Compensation Table on page 8, and the
Trustees and executive officers of the Association as a group. The information
concerning beneficial ownership has been furnished by the persons listed below.
<TABLE>
<CAPTION>
AMOUNT AND NATURE PERCENT
OF BENEFICIAL OF
NAME OWNERSHIP(A) CLASS(A)
- ----------------------------------------------- ------------------------ ----------
<S> <C> <C>
R. R. Clayton 87,834(b)(c) 0.4%
N. J. Darling, Jr. 3,200(d)(e)(f) --
W. J. Flaherty 21,081(b)(c) 0.1%
S. Frankenheim 2,800(d)(f) --
D. W. Freed 1,500(d) --
R. P. Henderson 2,157(d)(f) --
J. A. Ives 196,164(b)(g) 1.0%
L. R. Jaskol 1,400(d) --
T. W. Jones 900(d)(f) --
C. R. Messer 38,443(b)(c) 0.2%
H. T. Miller 1,800(d) --
W. J. Pruyn 25,100(d)(g) 0.1%
F. C. Raskin 28,539(b)(c) 0.1%
W. G. Salatich 5,200(d) --
R. K. Spence 1,100(d) --
Trustees and Executive Officers as a Group
(17 persons) 447,100(b)(c)(d)(e)(f)(g) 2.2%
---------------
<FN>
(a) Except as noted, each Trustee, nominee and executive officer has sole voting
and investment power over the shares owned. Mr. Ives is the beneficial owner
of approximately 1% of the outstanding shares of Common Stock of the
Association. No other Trustee, nominee or executive officer individually
owns 1% or more of such shares.
(b) Figures include the following shares which executive officers have the right
to acquire on or before April 25, 1995 through the exercise of employee
stock options: Mr. Ives, 154,000; Mr. Clayton, 62,600; Mr. Messer, 22,400;
Mr. Raskin, 13,000; Mr. Flaherty, 8,400; and Trustees and executive officers
as a group, 274,800.
(c) Figures include the following restricted shares held by executive officers
that were awarded under 1992 Restricted Stock Plan: Mr. Clayton, 4,000; Mr.
Messer, 2,000; Mr. Raskin, 2,000; Mr. Flaherty, 2,000; and Trustees and
executive officers as a group, 12,800.
(d) Figures for Messrs. Darling, Frankenheim, Freed, Henderson, Jones, Miller,
Pruyn and Salatich and Ms. Spence each include 800 restricted shares awarded
under Restricted Stock Plan for Non-Employee Trustees; figure for Mr. Jaskol
includes 400 such shares; and figure for Trustees and executive officers as
a group includes 7,600 such shares.
(e) 600 of such shares are held in a revocable trust of which Mr. Darling is the
settlor and a trustee and beneficiary and 1,800 of such shares are held in
an irrevocable trust of which he is a trustee and beneficiary. He shares
voting and investment power over such shares.
(f) Figures do not include the following Share Units held under the Deferred
Compensation Plan for Trustees: Mr. Darling, 24,413; Mr. Frankenheim, 2,361;
Mr. Henderson, 1,347; and Mr. Jones, 2,411.
(g) Figures include the following shares owned by spouse or held by spouse as
custodian for children: Mr. Ives, 4,000 and Mr. Pruyn, 16,000.
</TABLE>
7
<PAGE> 10
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth certain information concerning the
compensation of the Association's chief executive officer and its four most
highly compensated other executive officers (the "Named Executive Officers")
with respect to the Association's last three completed fiscal years:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
---------------------------------
AWARDS PAYOUTS
-------------------- -----------
ANNUAL SECURITIES
COMPENSATION RESTRICTED UNDERLYING
------------------ STOCK OPTIONS/ LTIP ALL OTHER
NAME AND PRINCIPAL SALARY BONUS(a) AWARDS(b) SARS PAYOUTS(c) COMPENSATION(d)
POSITION YEAR ($) ($) ($) (#) ($) ($)
- ---------------------- ----- ------- -------- ------- ----------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
J. Atwood Ives 1994 636,000 309,096 -- 20,000 -- 2,143
Chairman and Chief 1993 633,983 143,100 -- -- -- 2,249
Executive Officer 1992 600,000 144,000 -- -- -- 2,182
Richard R. Clayton 1994 442,000 209,508 -- 12,500 -- 1,855
President and Chief 1993 439,833 86,190 -- -- -- 2,249
Operating Officer 1992 414,667 93,600 276,250 -- -- 2,182
Chester R. Messer 1994 276,583 99,005 -- 7,000 -- 1,932
Senior Vice 1993 256,475 109,708 -- -- -- 2,249
President; 1992 242,083 89,443 138,125 -- 48,203 1,523
President of Boston
Gas Company
Fred C. Raskin 1994 274,558 98,313 -- 6,500 -- 2,310
Senior Vice 1993 268,475 38,769 -- -- -- 2,249
President; 1992 253,750 43,350 138,125 -- 49,223 2,182
President of Midland
Enterprises Inc.
Walter J. Flaherty 1994 231,208 90,675 -- 6,000 -- 1,875
Senior Vice 1993 215,583 37,975 -- -- -- 2,249
President 1992 198,500 30,000 138,125 -- 17,800 2,182
and Chief Financial
Officer
- ---------------
<FN>
(a) Amounts shown represent awards for 1992 (paid in 1993), awards for 1993
(paid in 1994) and awards for 1994 (paid in 1995) under the Association's
Executive Incentive Compensation Plan, which in each case were paid 50% in
cash and 50% in shares of the Association's Common Stock. For the purpose
of this table, the stock portion of each award is valued based on the fair
market value of such shares at the time of award.
(b) Amounts shown represent awards of restricted shares of the Association's
Common Stock under its 1992 Restricted Stock Plan. For the purpose of this
table, such awards have been valued based on the closing price of the
Association's Common Stock on the New York Stock Exchange (the "Closing
Price") on January 2, 1992, the date of grant. The numbers of restricted
shares of Common Stock awarded on such date were as follows: R. R. Clayton,
10,000 shares; C. R. Messer, 5,000 shares; F. C. Raskin, 5,000 shares; and
W. J. Flaherty, 5,000 shares. In each case, such shares vest at the rate of
20% per year, commencing January 2, 1993. As of December 30, 1994, the
numbers and values (based on the Closing Price on such date) of restricted
shares of Common Stock held are as follows: R. R. Clayton, 6,000 shares,
$157,500; C. R. Messer, 3,000 shares, $78,750; F. C. Raskin, 3,000 shares,
$78,750; and W. J. Flaherty, 3,000 shares, $78,750. Dividends on restricted
shares are paid directly to the holders.
</TABLE>
8
<PAGE> 11
(c) Amounts shown represent payment of awards for the 1989-1991 Plan Period
(paid in 1992) under the Association's Executive Incentive Compensation
Plan, which were paid 70% in shares of the Association's Common Stock and
30% in cash. For the purpose of this table, the stock portion of each award
is valued based on the fair market value of such shares at the time of
award.
(d) Amounts shown represent employer contributions under the Retirement Savings
(401k) Plan.
The following table sets forth certain information concerning non-qualified
stock options without stock appreciation rights ("SARs") granted to the Named
Executive Officers during 1994 under the Association's 1982 Stock Option Plan:
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT
------------------------------------------------------------- ASSUMED ANNUAL
NUMBER OF % OF TOTAL RATES OF STOCK PRICE
SECURITIES OPTIONS/SARS EXERCISE APPRECIATION FOR
UNDERLYING GRANTED TO OR BASE OPTION TERM(b)
OPTIONS/SARS EMPLOYEES IN PRICE EXPIRATION -----------------------------
NAME GRANTED(#)(a) FISCAL YEAR ($/SHARE) DATE 0%($) 5%($) 10%($)
- ----------------------- -------------- ------------- ------------ ---------- ----- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
J. Atwood Ives 20,000 18.5% $24.25 2/22/04 $ 0 $305,014 $772,965
Richard R. Clayton 12,500 11.6 24.25 2/22/04 0 190,634 483,103
Chester R. Messer 7,000 6.5 24.25 2/22/04 0 106,755 270,538
Fred C. Raskin 6,500 6.0 24.25 2/22/04 0 99,129 251,214
Walter J. Flaherty 6,000 5.6 24.25 2/22/04 0 91,504 231,890
- ---------------
<FN>
(a) Figures represent options without SARs. No SARs were granted in 1994. Each
such option becomes exercisable at the rate of 20% per year, commencing
February 23, 1995.
(b) The potential realizable values presented in this table use hypothetical
rates of appreciation prescribed by regulations of the Securities and
Exchange Commission, and are not intended to project rates of future
appreciation in the value of the Association's Common Stock. The assumed 5%
and 10% annual rates of appreciation would result in prices for the
Association's Common Stock increasing to $39.50 and $62.90 per share,
respectively, by February 22, 2004.
</TABLE>
9
<PAGE> 12
The following table sets forth certain information as to the number and
value of outstanding options and SARs in tandem with options, as of December 31,
1994, held by Named Executive Officers under the Association's 1982 Stock Option
Plan (no options or SARs were exercised by any such officer during 1994):
<TABLE>
<CAPTION>
YEAR-END OPTION/SAR VALUES
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS/SARS AT IN-THE-MONEY OPTIONS/SARS
12/31/94 AT 12/31/94 (a)
--------------------------- -------------------------
NAME EXERCISABLE/NON-EXERCISABLE EXERCISABLE/NON-EXERCISABLE
- -------------------- --------------------------- -------------------------
<S> <C> <C>
J. Atwood Ives 150,000/120,000(b) $0/40,000
Richard R. Clayton 59,080/13,520(c) 150,350/25,000(c)
Chester R. Messer 20,400/7,600(c) 71,730/14,000(c)
Fred C. Raskin 11,040/7,160(c) 10,944/13,000(c)
Walter J. Flaherty 6,860/6,340(c) 6,840/12,000(c)
- ---------------
<FN>
(a) All values are based on Closing Price as of December 30, 1994.
(b) Figures represent options without SARs. No SARs have been granted to J. A.
Ives.
(c) Figures represent options, including those with and those without tandem
SARs. All options granted during 1994 are without tandem SARs, and no SARs
have been granted to any executive officer since 1991. In each case in
which tandem SARs were granted, the amount of SARs granted was equal to
one-half of the related options. All SARs are exercisable in lieu of, and
not in addition to, such portion of the related options.
</TABLE>
The following table sets forth estimated annual benefits payable upon
retirement in specified compensation and years of service categories under
qualified retirement plans maintained for salaried employees of the Association
and certain subsidiaries (the "Retirement Plans") and the Association's
non-qualified Supplemental Executive Retirement Plan (the "SERP") maintained for
all executive officers and certain other officers of the Association and its
subsidiaries:
<TABLE>
<CAPTION>
PENSION PLAN TABLE
ESTIMATED ANNUAL RETIREMENT BENEFITS
BASED ON YEARS OF SERVICE(b)
-------------------------------------------------------
REMUNERATION(a) 15 20 25 30 35
<S> <C> <C> <C> <C> <C>
$ 100,000 42,500 50,000 50,000 50,000 50,000
200,000 85,000 100,000 100,000 100,000 100,000
300,000 127,500 150,000 150,000 150,000 150,000
400,000 170,000 200,000 200,000 200,000 200,000
500,000 212,500 250,000 250,000 250,000 250,000
600,000 255,000 300,000 300,000 300,000 300,000
700,000 297,500 350,000 350,000 350,000 350,000
800,000 340,000 370,000 370,000 370,000 370,000
900,000 370,000 370,000 370,000 370,000 370,000
1,000,000 370,000 370,000 370,000 370,000 370,000
- ---------------
<FN>
(a) The compensation covered by the Retirement Plans and the SERP is the average
annual compensation (whether or not deferred under deferred compensation or
savings plan) for the highest five years in the ten years preceding
retirement, based on the annual salary rate plus 100% of bonuses and
incentive
</TABLE>
10
<PAGE> 13
awards earned (whether payable in cash or stock), not including any amounts
with respect to options, SARs or restricted stock awards; provided that,
pursuant to letter agreements described on page 13 hereof, average annual
compensation for J.A. Ives and R.R. Clayton is based on annual salary rate
plus only 50% of bonuses and incentive awards earned.
(b) The benefits set forth in these columns assume that the participant elects a
straight life annuity with five years certain. Such benefits are shown
before deductions for 50% of Social Security benefits and other applicable
offsets. In general, Federal law limits the annual benefit payable under the
Retirement Plans to a participant at age 65, calculated in the form of a
life annuity (with no period certain), to a specified amount ($120,000,
adjusted as of January 1, 1995). Not being subject to limitations imposed on
the Retirement Plans by Federal law, the SERP provides for annual benefits
equal to up to one-half of covered compensation, provided that annual
benefits under the SERP, before offset for annual benefits received under
the Retirement Plans, may not exceed three times the $120,000 limit, as such
limit may from time to time be increased. Years of service credited under
the Retirement Plans and years of service as an officer credited under the
SERP through 1994 for the Named Executive Officers were as follows: J. A.
Ives, 8 and 8; R. R. Clayton, 14 and 14; C. R. Messer, 31 and 18; F. C.
Raskin, 17 and 16; W. J. Flaherty, 23 and 11. Years of service for J. A.
Ives and R. R. Clayton are determined in accordance with their employment
agreements described on pages 12 and 13 hereof. Years of service under the
SERP for F. C. Raskin, C. R. Messer and W. J. Flaherty equal years of
service as an officer of the Association or a subsidiary.
COMPENSATION OF TRUSTEES
During 1994, each Trustee of the Association who was not an officer of the
Association received cash retainer fees at an annual rate of $10,000. Each such
Trustee who was a member of the Executive, Audit, Compensation or Nominating
Committee received an additional annual retainer fee of $1,200 for each
committee of which he or she was a member. The Chairman of each of the Audit,
Compensation and Nominating Committees, in addition to the committee membership
retainer fee, received an annual retainer fee of $4,000. In addition, each such
non-officer Trustee received $1,000 for each meeting session of the Board of
Trustees and each standing committee meeting session he or she attended. The
Association also reimburses Trustees' travel expenses for attendance at
meetings. In addition to the above amounts, N. J. Darling, Jr. and R. P.
Henderson each received $3,000 for participating in mediation sessions that lead
to resolution of the Association's litigation related to its acquisition of
Ionpure Technologies Corporation.
The Association's Restricted Stock Plan for Non-Employee Trustees provides
for supplemental retainer fees in the form of five annual grants of restricted
shares of the Association's Common Stock, each in the amount of 400 shares, to
each Trustee who at the time of grant serves as a Trustee but is not an employee
of the Association or any of its subsidiaries. Initial grants under such Plan
were made on April 22, 1993 to each Trustee other than J. A. Ives, R. R. Clayton
and L. R. Jaskol (who was first elected to the Board on February 24, 1994), and
grants were made on June 1, 1994, to each Trustee other than J. A. Ives and R.
R. Clayton. Subsequent grants will be made on the first day of June in the years
1995, 1996 and 1997. All shares granted under such Plan are non-transferable and
subject to forfeiture while the recipient serves on the Board of Trustees. In
the event that he or she resigns or declines to stand for re-election to the
Board, not due to disability and not in accordance with a retirement policy of
the Board then in effect, all shares granted to him or her under the Plan shall
be forfeited. Dividends on restricted shares granted under the Plan are paid
directly to the Trustee.
The Association maintains a Retirement Plan for Non-Employee Trustees who
have served in that capacity for at least ten years pursuant to which each such
Trustee will receive annual retirement benefits for the number of years such
Trustee served (with ten years certain) equal to his or her average annual
retainer fees (including the value of one-half the number of shares awarded
under the Restricted Stock Plan for Non-
11
<PAGE> 14
Employee Trustees) for the highest five years in the ten years preceding
retirement. The Trustees who currently have ten years of service under such Plan
are R. P. Henderson, N. J. Darling, D. W. Freed, H. T. Miller and W. G.
Salatich.
The Association maintains a Deferred Compensation Plan for Trustees under
which Trustees' cash fees may be deferred at the election of participants.
Participants may elect to credit amounts deferred to a Cash Account or to a
Share Unit Account. Interest based on the prime rate plus 1% is credited to Cash
Accounts at the end of each calendar year. Amounts credited to Share Unit
Accounts are converted to Share Units based on the fair market value of the
Association's Common Stock on the deferral date. Additional Share Units are
credited to reflect dividends on shares of such stock. The balance in a
participant's Cash Account and Share Unit Account will be paid to him or her, or
to his or her beneficiary, in cash only, in a lump sum or installments when he
or she ceases to be a Trustee, or if he or she experiences serious financial
hardship.
The Association provides term life insurance to each non-employee Trustee
in the amount of $50,000.
Samuel Frankenheim, a Trustee of the Association, is counsel to Ropes &
Gray, a Boston law firm which provided legal services to the Association and its
subsidiaries during 1994, and which is expected to continue providing legal
services to them during 1995. Fees paid for such services during 1994 were less
than 5% of such firm's 1994 gross revenues.
TERMINATION OF
EMPLOYMENT AND CHANGE OF CONTROL ARRANGEMENTS
During 1994, the Association entered into new Salary Continuation
Agreements with officers of the Association and its subsidiaries under which, if
the employment of any such officer is terminated by the Association otherwise
than for Cause (as defined in such agreements, generally including malfeasance
or misfeasance), or by the officer for Good Reason (as defined in such
agreements, generally including diminishment of authority, responsibility or
cash compensation opportunities), following a Change of Control, the officer
would be entitled to receive income equal to the salary rate in effect at the
time of the Change of Control together with continuation of certain of the
Association's medical and other benefits. Subject to certain limitations, such
income and benefits for the Association's executive officers would continue for
18 months, but not beyond the date which follows by 30 months, the Change of
Control. For purposes of the Agreements, a "Change of Control" is deemed to
occur if (i) a person or entity or a group acting together becomes a beneficial
owner of securities representing 25 percent or more of the outstanding voting
securities of the Association or (ii) within two years after the commencement of
a tender offer or exchange offer for the voting securities of the Association,
or as a result of a merger, consolidation, sale of assets or contested election,
the individuals who were Trustees of the Association immediately prior thereto
shall cease to constitute a majority of the Board of Trustees of the Association
or of the board of trustees or directors of its successor. Prior to execution of
such new Salary Continuation Agreements in 1994, similar agreements had been in
effect which had provided continuation income upon any termination of employment
following a Change of Control, in amounts equal to salary plus the annual
average of bonuses during the previous 36 months, for a period (in the case of
the Association's Chairman, President and Senior Vice Presidents) of 36 months,
but not beyond the date which follows by 48 months, the Change of Control.
The Association has also entered into an employment agreement with Mr. Ives
dated November 27, 1991, and an employment agreement with Mr. Clayton dated
October 25, 1991, under which, if the employment of either such officer is
terminated by the Association otherwise than for Cause (as defined in such
agreements, generally including malfeasance or misfeasance), or by the officer
for Good Reason (as defined in such agreements, generally including diminishment
of authority, responsibility, or cash compensation opportunities), whether or
not following a Change of Control, he will be entitled to receive income equal
to the salary rate in effect at the time of such termination, together with
continuation of certain medical and other benefits.
12
<PAGE> 15
Subject to certain limitations, such income and benefits would continue for
thirty-six months in the case of Mr. Ives and twenty-four months in the case of
Mr. Clayton. If such termination occurs after a Change of Control and the Salary
Continuation Agreements also apply, the officer may elect the salary
continuation or other benefit provisions contained in his Salary Continuation
Agreement or the employment agreement referred to in this paragraph, but shall
not be entitled to a duplication of any such benefit under both agreements. Mr.
Ives' employment agreement established his initial salary rate at $600,000 per
year, subject to review and adjustment by the Compensation Committee. In
addition, under such employment agreements, Mr. Ives will be credited with five
years of service under the Association's Retirement Plan and SERP for his first
year of employment and one and one-half years of service for each year of
employment thereafter, and Mr. Clayton will be credited with one and one-half
years of service for each year of employment, plus four years, under such Plans.
Messrs. Ives and Clayton entered into letter agreements with the
Association dated April 28, 1994 under which each agreed that he will not be
entitled to the benefit of certain April, 1994, amendments to the Association's
SERP which (i) increased the portion of bonuses and incentive awards taken into
account in determining compensation covered by such Plan from 50% to 100%, and
(ii) increased the level of benefits payable upon early retirement prior to age
62.
The Association has established a trust to make supplemental retirement
benefit payments to certain officers of the Association and its subsidiaries
under the Association's SERP and retirement benefit payments to Trustees under
the Association's Retirement Plan for Non-Employee Trustees, and makes
contributions to such trust from time to time. Such Plans provide that upon a
Change of Control (as defined above), the Association is obligated to fund such
trust fully by depositing therein sufficient funds to pay all benefits to those
who have retired prior to the Change of Control plus all benefits that would be
payable if all eligible officers and Trustees had retired prior thereto. As of
February 24, 1995, the balance held in such trust was approximately $11 million.
COMPENSATION COMMITTEE REPORT
The duties of the Compensation Committee include approval of salary and
other compensation arrangements for the Association's officers, and
administration of the Association's incentive and stock plans, including the
Executive Incentive Compensation Plan and 1982 Stock Option Plan.
EXECUTIVE OFFICER COMPENSATION
The Committee's policy with respect to approving 1994 executive officer
compensation was to establish base salaries and annual incentive compensation
opportunities and to grant stock options which, in the judgment of the
Committee, were appropriate to provide fair compensation, to enable the
Association to attract and retain executives with abilities and experience
necessary to implement the Association's objectives, and to create incentives
for high levels of individual performance, consistent with attainment of the
financial goals and the best interests of the Association. The Committee's
judgments were based on an assessment of each executive officer's current and
past performance, his or her business experience and level of responsibilities,
information concerning compensation paid to executive officers at
similarly-sized companies, annual compensation increases at such companies and
recommendations and advice from the Association's chief executive officer
concerning compensation levels for other officers. The Committee's decisions
were not based on any established formulas with respect to weighting of the
foregoing factors or the effect of any particular factor on any component of an
executive officer's compensation, except to the extent that annual bonuses are
determined in accordance with the factors described below. Information
concerning compensation levels at similarly-sized companies reviewed by the
Committee consisted of data provided by Hewitt Associates, a
13
<PAGE> 16
management consulting firm, concerning total compensation, the components
thereof (salary, annual bonus and long-term compensation) and year-to-year
compensation increases for officers of companies having levels of total revenues
approximately the same as that of the Association. The comparator data provided
by Hewitt Associates was based on a number of surveys covering companies
representing a broad cross-section of U.S. industries. For 1994, base salaries
for executive officers as a group (including for the CEO) were targeted at
levels which averaged above the median base salaries for the comparator group in
the Hewitt Associates data, while opportunities for variable compensation were
set at levels which would cause total annual compensation (i.e., base salary and
bonus) of executive officers to average at about the median for such group.
Actual incentive compensation would exceed, and did in 1994 exceed, the
comparator group median as the Association was successful in substantially
exceeding financial performance targets established in the 1994 annual bonus
program. The comparator group data provided by Hewitt Associates also indicated
that levels of total compensation (including long-term compensation) of the
Association's executive officers for 1993 were below average total compensation
levels for similar positions at companies in the survey group, the short-fall
being primarily attributable to the infrequency and size of prior long-term
compensation grants. In light of such data, the Committee granted non-qualified
stock options in February, 1994 to the Association's executive officers and to
certain other officers of the Association and its subsidiaries. Such options
were granted without stock appreciation rights, and at an exercise price equal
to the fair market value of the Association's Common Stock on the date of grant.
In determining the size of option grants, the Committee considered
recommendations of Hewitt Associates as to the size of grant that would
approximate the average face value (i.e., the number of shares multiplied by the
exercise price) of annualized option grants for similar positions at companies
in the comparator group, and recommendations of management.
It was the Committee's judgment in establishing 1994 annual incentive
opportunities for executive officers, and has been its policy since 1992, that
(i) more senior executive officers should receive a larger portion of their
potential total compensation in the form of variable incentive awards than less
senior executive officers; (ii) appropriate maximum potential incentive awards
for executive officers, expressed as a percentage of salary, are 60% (for the
chief executive officer and chief operating officer), and 50% and 35% (for other
executive officers), reflecting the Committee's judgment as to an appropriate
mix of base and incentive compensation for executive officers at each level;
(iii) it is appropriate to base 50% of incentive compensation opportunities on
financial performance of the Association and 50% on individual performance; and
(iv) that in the case of the executive officers named in the compensation
tables, 50% of any annual incentive payment should be made in shares of the
Association's Common Stock. In accordance with such policy, the Committee
approved 1994 award opportunities under the Association's Executive Incentive
Compensation Plan equal to up to 60% (in the case of Messrs. Ives and Clayton)
or 50% or 35% (in the case of other executive officers) of individual salaries.
No portion of the bonus opportunity relating to financial performance (i.e., 50%
of the potential annual bonus amount) could be earned unless targeted pre-tax
income performance goals were met by the Association or, in the case of
executive officers who are subsidiary presidents, by the subsidiary. Upon
achievement of the targeted pre-tax income goals, which were set at levels at
which there was a 50% chance of achievement, the bonus award would equal half of
the potential financial performance bonus opportunity (i.e., 25% of the total
bonus opportunity), with additional bonus amounts being earned to the extent
that pre-tax income levels exceeded the target level up to an established
maximum pre-tax income level, at which point the full financial performance
bonus opportunity would be earned. The portion of the annual bonus opportunity
based on achievement of individual management objectives (i.e., the other 50% of
the potential annual bonus amount) could be earned by an executive officer
independent of the achievement of the financial goals. The Committee's intent in
establishing these management objectives was that only outstanding performance
by an executive officer would qualify such officer to earn in excess of 75% of
his or her management performance bonus (i.e., 37 1/2% of the total bonus
opportunity). Finally, the award opportunities provided that the Committee has
authority to approve discretionary awards in the event that extreme inequities
should arise in
14
<PAGE> 17
the administration of the Plan. A discretionary award may not exceed the maximum
potential award for any officer. No discretionary award was made to any
executive officer of the Association for 1994.
The Association and each of its subsidiaries were successful in reaching
and exceeding the targeted pre-tax income goals established for them in 1994. As
a result, each of the Association's executive officers earned an annual bonus in
1994 based on achievement of financial performance goals as well as a bonus
based on achievement of his or her individual management objectives. As in
previous years, the bonus payments to executive officers were made 50% in shares
of the Association's Common Stock (valued as of the time that the awards are
approved by the Committee) and 50% in cash. In this regard, cash is withheld by
the Association from the cash portion of the bonus to cover state and federal
tax withholding requirements relating to an individual's total bonus award. As a
result, after-tax bonus awards received by executive officers in the incentive
plan are primarily in the form of shares of the Association's stock.
Section 162(m) of the Internal Revenue Code disallows tax deductions for
certain compensation paid by a public company to its chief executive officer or
any other executive officer named in its proxy statement compensation tables, to
the extent such compensation exceeds $1 million in any year. None of such
officers received taxable compensation from the Association in excess of $1
million in 1994, and the Committee does not anticipate that such limitation will
affect deductibility of any compensation paid to the Association's executive
officers for 1995. With respect to Mr. Ives, in particular, the salary component
of his total compensation would appear to be exempt from such $1 million
limitation because it is paid pursuant to a written binding agreement executed
prior to February 17, 1993. Moreover, taxable income resulting from the exercise
of outstanding stock options issued under the existing 1982 Stock Option Plan
and options issued under the proposed 1995 Stock Option Plan would also be
exempt from the $1 million limitation under applicable rules. Finally, the
Committee has adopted a policy under which any executive officer whose
compensation subject to Section 162(m) would exceed $1 million in any year shall
if possible defer all or a portion of his or her annual incentive compensation
for such year to the extent necessary to avoid loss of the Association's tax
deduction for such executive's compensation.
CEO COMPENSATION
During 1994, Mr. Ives was paid a base salary of $636,000, reflecting the
same base salary rate which has been in effect since February 1, 1993. Mr. Ives'
base salary is provided for in his employment agreement with the Association,
described elsewhere in this proxy statement. That agreement, negotiated at the
time Mr. Ives became chief executive officer of the Association, specifies an
initial base salary of $600,000, effective December 1, 1991, with such
adjustments as the Compensation Committee shall approve from time to time.
In addition to his base salary, Mr. Ives was granted an incentive bonus
opportunity in 1994, as described above, under the Association's Executive
Incentive Compensation Plan. As with other executive officers of the
Association, 50% of Mr. Ives' potential award under such Plan was based on the
achievement by the Association of specific pre-tax income levels for 1994, and
50% of such bonus opportunity was based on the achievement by Mr. Ives of
management objectives approved for him by the Compensation Committee. Mr. Ives'
objectives were to identify and evaluate opportunities that would enhance
shareholder value and make the most productive use of the Association's capital
resources; to manage the Association's investment in United States Filter
Corporation; to focus corporate development efforts on new corporate strategies
and business opportunities as well as on the Association's core businesses; to
manage the Association's major litigation; and to evaluate officers and
implement appropriate management development and succession plans, including
programs that would enhance professional development and diversity and encourage
adherence to high ethical standards.
15
<PAGE> 18
Because the Association's pre-tax income performance for 1994 exceeded the
targeted financial performance goal, Mr. Ives was entitled to a payment of
$145,008 under the financial performance portion of his award opportunity, equal
to 76% of the maximum possible payment under such portion. In addition, the
Committee, after consultation with the other non-management members of the Board
of Trustees, determined that Mr. Ives' overall achievement of his 1994
management objectives equalled 86% of the maximum potential achievement, and
that Mr. Ives was therefore entitled to a payment of $164,088 under the portion
of his award opportunity based on management objectives. Under the terms of the
1994 incentive program, 50% of Mr. Ives' total incentive award was paid in
shares of the Association's Common Stock and 50% was payable in cash, subject to
withholding.
As described above, during 1994, Mr. Ives was granted a non-qualified stock
option without stock appreciation rights to purchase 20,000 shares of the
Association's Common Stock at a price of $24.25 per share, equal to the fair
market value of such stock on the date of grant.
No member of the Compensation Committee is a current or former officer or
employee of the Association or any of its subsidiaries.
Respectfully submitted,
COMPENSATION COMMITTEE MEMBERS
Rina K. Spence, Chairperson
Robert P. Henderson
Leonard R. Jaskol
Harold T. Miller
William G. Salatich
16
<PAGE> 19
PERFORMANCE GRAPH
The following graph compares the cumulative total shareholder return on the
Association's Common Stock to the cumulative total return of the S&P 500 Index
and the S&P Natural Gas Index over a five year period ending December 31, 1994:
<TABLE>
<CAPTION>
COMPARISON OF FIVE YEAR
CUMULATIVE TOTAL RETURNS(a)
MEASUREMENT PERIOD
(FISCAL YEAR COVERED) EASTERN ENTERPRISES S&P 500 INDEX S&P NATURAL GAS INDEX
<S> <C> <C> <C>
1989 100 100 100
1990 82 97 88
1991 89 126 76
1992 92 136 84
1993 90 150 100
1994 98 152 95
- ---------------
<FN>
(a) Based on an initial investment of $100 with dividends reinvested quarterly.
</TABLE>
PROPOSAL TO APPROVE 1995 STOCK OPTION PLAN
The Board of Trustees has approved the Eastern Enterprises 1995 Stock
Option Plan (the "Plan"), subject to approval of the Plan at the 1995 Annual
Meeting of Shareholders of the Association. A favorable vote of the holders of
at least a majority of the outstanding shares of Common Stock of the Association
is required for approval of the Plan. The Board of Trustees recommends that
shareholders vote "for" such approval.
The Plan would replace the Association's 1982 Stock Option Plan, under
which, as of February 28, 1995, a total of 992,812 shares of the Association's
Common Stock (out of a total of 1,000,000 shares authorized under such plan)
have been issued or are subject to outstanding options.
The following is a brief description of certain material features of the
Plan. Such description is qualified in its entirety by reference to the complete
text of the Plan, attached hereto as Exhibit A.
17
<PAGE> 20
Description of Plan. The purpose of the Plan is to attract, retain and
motivate those employees of the Association and its subsidiaries whose efforts
are determined by the Committee to have an important bearing on the success of
the business of the Association and its subsidiaries, by encouraging ownership
of shares of the Association's Common Stock ("Shares") by such eligible
employees. Eligible employees would include officers of the Association and its
subsidiaries (approximately 30 to 35 persons) and such selected non-officer
employees as the Committee may in the future determine.
The Plan provides for the grant of options to purchase Shares, either with
or without tandem stock appreciation rights ("SARs"). Up to 1,000,000 Shares may
be issued and sold under the Plan. Shares subject to any unexercised option that
expires, is terminated or becomes unexercisable will not count against such
limit. Shares delivered under the Plan may be authorized but unissued Shares or
Shares held in treasury. The maximum number of Shares for which a participant
may be awarded options in any calendar year is 250,000 and the maximum number of
shares as to which a participant may be awarded SARs in any calendar year is
likewise 250,000. No options may be granted under the Plan after December 31,
2004.
The Plan provides that the exercise price of an option or SAR shall be
determined by the Committee but shall be not less than the fair market value of
the Shares as of the grant date, as determined by the Committee.
The Plan shall be administered by the Committee, which is comprised
entirely of Trustees who are not officers or employees of the Association or any
of its subsidiaries and who are not eligible to participate in the Plan. The
Committee is responsible for determining which employees shall be granted
options; the size and exercise price of grants (within the limits referred to
above); whether options shall include SARs; whether options shall be incentive
stock options qualified under Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code") or non-qualified options; whether options may be
exercised by payment of cash or delivery of Shares, a promissory note or an
undertaking of a broker to deliver funds (i. e., a "cashless exercise"); whether
tax withholding may be satisfied by withholding or delivery of Shares; the time
or times when options and SARs become exercisable and the duration of exercise
periods (not to exceed 10 years after the date of grant). The Committee may also
accelerate the time at which all or any part of an option or SAR may be
exercised.
Although the Committee has indicated that it has no present intention to
grant options with tandem SARs, the Plan permits the grant of SARs concurrently
with an option or at any time thereafter during the term of the option. SARs
entitle the holder upon exercise to receive stock or cash, at the election of
the Committee, equal in value to the amount by which the fair market value of
the Shares subject to such exercise has increased over the aggregate option
price thereof. Any option accompanied by SARs shall provide for the surrender of
the SAR or option to the extent that the option or SAR to which it is related is
exercised. SARs are exercisable only to the extent that the related option is
exercisable. No SAR may be exercised earlier than six months after the date of
grant.
No option or SAR under the Plan may be transferred by a participant
otherwise than by will or the laws of descent and distribution, and during the
participant's lifetime options and SARs are exercisable only by the participant.
Any exercisable portion of an option generally terminates three months after
termination of the participant's employment for reasons other than retirement,
disability or death, unless the option expires earlier. In the case of
retirement, disability or death, any exercisable portion may generally be
exercised at any time on or before the expiration date provided in the option.
The Committee may grant options on terms differing from those outlined
above to replace outstanding options held by employees of companies acquired by
the Association or a subsidiary.
18
<PAGE> 21
In the event of a stock dividend, split-up or combination of shares,
recapitalization or merger in which the Association is the surviving company, or
other similar capital change, the number and kind of shares or securities of the
Association subject to the Plan and to options and SARs outstanding and to be
granted, the maximum number of shares or securities which may be issued or sold
under the Plan, option prices and other relevant provisions shall be
appropriately adjusted by the Board of Trustees. In the event of a merger or
consolidation in which the Association is not the surviving company, or in the
event its outstanding shares are converted into securities of another entity or
exchanged for other consideration, or in the event of the complete liquidation
of the Association, all outstanding options and SARs shall thereupon terminate,
but prior thereto the Board of Trustees shall either make all outstanding
options and SARs immediately exercisable or arrange to have the surviving
company grant replacement options.
The Committee may at any time discontinue granting options under the Plan.
The Board of Trustees may at any time amend the Plan or any outstanding option
or SAR for the purpose of satisfying the requirements of any changes in
applicable laws or regulations or for any other purpose which may be at the time
permitted by law, provided that no such amendment shall, without the approval of
the Association's shareholders, effect a change that would require shareholder
approval in order for the Plan to continue to qualify as exempt under Securities
and Exchange Commission Rule 16b-3 or continue to qualify under Sections 162(m)
and 422 of the Code, and no such amendment shall adversely affect the rights of
any participant (without his or her consent) under any option or SAR theretofore
granted.
The Closing Price of the Association's Shares as of March 6, 1995, was
$26.50.
Federal Tax Consequences. Under current provisions of the Code, the grant
of incentive stock options qualified under section 422 of the Code will not
produce taxable income to the optionee or a deduction for the Association.
Provided that certain conditions are met, the exercise of such an option does
not result in the imposition of regular income tax on the optionee or a
deduction for the Association at the time of exercise, although it may result in
the imposition of the alternative minimum tax on the optionee. If shares
acquired pursuant to the exercise of an incentive stock option are sold more
than two years after the date of grant and more than one year after the date of
exercise, any gain or loss on the sale will be a capital gain or loss, and the
Association will not be entitled to a deduction. If shares are disposed of prior
to expiration of such one and two year holding periods, then, generally, the
optionee will realize ordinary taxable income in the year of disposition and a
deduction will be available to the Association, in each case equal to the amount
by which the fair market value of the shares at the time of exercise exceeds the
option price.
Under the Code as currently in effect, the grant of a non-qualified stock
option will not produce taxable income to the optionee or a deduction for the
Association. However, upon exercise of such an option, the excess of the fair
market value of the acquired shares on the date of exercise over the option
price is taxable to the optionee as ordinary income and is subject to
withholding by the Association. In general, a deduction equal to the amount of
ordinary income realized by the optionee will be available to the Association.
When shares acquired upon exercise of a non-qualified option are sold, any gain
or loss will be a capital gain or loss.
Upon the exercise of SARs, the optionee realizes ordinary income subject to
withholding and a deduction is available to the Association. The amount of both
the income realized and the deduction equals the amount of cash received by the
optionee, to the extent that the exercise is satisfied in cash, and the fair
market value of shares received by the optionee, to the extent that the exercise
is settled by delivery of shares.
INDEPENDENT AUDITORS
The firm of Arthur Andersen LLP has been selected by the Board of Trustees
to act as independent auditors of the Association and its subsidiaries for the
year 1995. The Association has been advised by such firm that neither it nor any
member thereof has any financial interest in or financial relationship with the
Association or its subsidiaries. Representatives of Arthur Andersen LLP are
expected to be present at the 1995
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<PAGE> 22
Annual Meeting with the opportunity to make a statement if they desire to do so
and to be available to respond to appropriate questions.
EXPENSES OF SOLICITATION
The expenses of making this solicitation will be paid by the Association,
which may solicit proxies by mail, telephone, telegraph or personal interview.
In addition, the Association has retained the firm of Morrow & Co. to aid in
such solicitation of proxies. For such services, the Association expects to pay
such firm a fee of $7,000 plus expenses. The Association will reimburse banks,
brokerage firms and other custodians, nominees and fiduciaries for reasonable
expenses incurred in sending proxy materials to beneficial owners.
SHAREHOLDER PROPOSALS
Shareholder proposals intended to be presented at the 1996 Annual Meeting
of Shareholders must be received at the Association's principal executive
offices no later than November 18, 1995.
OTHER MATTERS
If sufficient votes in favor of any of the proposals set forth in the
attached Notice of Annual Meeting of Shareholders are not received by the time
scheduled for the meeting, the persons named as proxies may propose one or more
adjournments of the meeting for a period or periods of not more than 30 days in
the aggregate to permit further solicitation of proxies with respect to any of
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
adjournment with respect to any proposal those proxies which they are entitled
to vote in favor of such proposal. They will vote against adjournment with
respect to any proposal those proxies required to be voted against such
proposal. The Association will pay the costs of any additional solicitation and
of any adjourned session.
The Board of Trustees does not know of any business to be presented for
action by the shareholders in addition to those items appearing in the notice of
the meeting. However, if any additional matters properly come before the
meeting, or any adjournment thereof, it is the intention of the persons named in
the enclosed form of proxy to vote said proxy in accordance with their judgment
in such matters unless instructed to the contrary.
Reference is hereby made to the Declaration of Trust establishing Eastern
Enterprises dated July 18, 1929, as amended, a copy of which is on file in the
office of the Secretary of The Commonwealth of Massachusetts. The name "Eastern
Enterprises" refers to the Trustees under said declaration as Trustees and not
personally; and no Trustee, shareholder, officer or agent of Eastern Enterprises
shall be held to any personal liability in connection with the affairs of said
Eastern Enterprises, but the trust estate only is liable.
EASTERN ENTERPRISES
March 17, 1995
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EXHIBIT A
EASTERN ENTERPRISES
1995 STOCK OPTION PLAN
1. Purpose of the Plan; Certain Definitions. The purpose of this plan (the
"Plan") is to attract, retain and motivate those employees of Eastern
Enterprises ("Eastern") or its subsidiaries whose efforts are determined by the
Compensation Committee of the Board of Trustees of Eastern (the "Committee") to
have an important bearing on the success of the business of Eastern and its
subsidiaries ("Eligible Employees"). This purpose will be advanced by
encouraging the ownership by such employees of shares of beneficial interest
("Stock") of Eastern. The term "Participant" means an Eligible Employee to whom
an award is made under the Plan.
2. Administration of the Plan. The Plan shall be administered by the
Committee. All members of the Committee shall be appointed by the Board of
Trustees to serve at the Board's pleasure. All members of the Committee shall be
both "disinterested" within the meaning of Rule 16b-3 promulgated under the
Securities Exchange Act of 1934, as amended, and, to the extent required in
order to qualify the Plan under Section 162(m)(4)(C) of the Internal Revenue
Code of 1986, as amended (the "Code") (including any applicable transition
rules), "outside directors" within the meaning of Section 162(m)(4)(C)(i) of the
Code.
The Committee shall have authority, consistent with the Plan,
(a) to determine which Eligible Employees shall be granted options;
(b) to determine whether the options granted to any Eligible Employees
shall be incentive stock options, as defined in Section 422(b) of the Code
("incentive stock options"), or non-statutory stock options, or both;
(c) to determine whether stock appreciation rights shall be included
in any or all options granted to an Eligible Employee, either concurrently
with the grant of an option, or at any time thereafter during the term of
such option, all in accordance with Section 8;
(d) to determine whether any or all options granted to an Eligible
Employee shall be exercisable with shares of Stock ("shares") or other
permissible forms of payment in accordance with Section 7(c);
(e) to determine the time or times when options shall be granted and
the number of shares subject to each option;
(f) to determine the option price of the shares subject to each
option;
(g) to prescribe the time or times when each option becomes
exercisable and the duration of the exercise period;
(h) to prescribe the form or forms of the instruments evidencing any
options granted under the Plan and to change such forms from time to time;
(i) to adopt, amend and rescind rules and regulations for the
administration of the Plan, the options and stock appreciation rights and
for its own acts and proceedings; and
(j) to decide all questions and settle all controversies and disputes
which may arise in connection with the Plan.
All decisions, determinations and interpretations of the Committee shall be
binding upon all parties concerned.
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3. Limitations. The Stock which may be issued and sold under the Plan
shall not exceed in the aggregate 1,000,000 shares, except as such total number
may be adjusted pursuant to Section 16 below. To the extent that any option
granted under the Plan shall expire or terminate unexercised or for any reason
become unexercisable as to any shares subject thereto, such shares shall
thereafter be available for further grants under the Plan, within the limit
specified above. Stock delivered upon the exercise of options may, as determined
by the Board of Trustees, be previously issued Stock acquired by Eastern or
authorized but theretofore unissued shares. The Board of Trustees and the
officers of Eastern shall take appropriate action required for such delivery.
The maximum number of shares for which any Participant may be awarded
options in any calendar year is 250,000. The maximum number of shares as to
which any Participant may be awarded stock appreciation rights in any calendar
year is likewise 250,000. For purposes of the limitations described in this
paragraph, the cancellation and regrant, or the repricing, of an option or a
stock appreciation right shall be treated as a new grant, and both the old and
the new grants shall count against the applicable limit (to the extent occurring
in the same calendar year). The limitations described in this paragraph shall be
subject to adjustment to reflect stock splits, recapitalizations and other
corporate changes to the extent consistent with continued qualification of the
Plan under Section 162(m)(4)(C) of the Code, and shall be construed consistent
with regulations (including proposed regulations) issued under Section 162(m) of
the Code.
4. Participants. Participants shall be selected from time to time by the
Committee in its discretion only from among Eligible Employees. The Committee
may grant an option or stock appreciation right to any Eligible Employee who is
then a Participant or to any other Eligible Employees in accordance with the
Committee's determination from time to time.
5. Option Price. The option price per share with respect to each option
shall be determined by the Committee but shall not be less than the fair market
value of the Stock at the time the option is granted, as determined by the
Committee.
6. Option Period. Each option shall, subject to Sections 10, 11 and 12,
specify the period during which it may be exercised, which period shall not in
any event exceed 10 years from the date the option is granted.
7. Exercise of Options.
(a) Each option shall be made exercisable at such time or times,
whether or not in installments, as the Committee shall prescribe at the
time the option is granted. In the case of an option not immediately
exercisable in full, the Committee may at any time accelerate the time at
which all or any part of the option may be exercised.
The instruments evidencing options intended to be incentive stock
options shall contain such other provisions relating to exercise and other
matters as are required of incentive stock options under the applicable
provisions of the Code and applicable regulations (including proposed
regulations), as from time to time in effect.
(b) A person electing to exercise an option shall give written notice
to Eastern, as specified by the Committee, of his or her election and of
the number of shares he or she has elected to purchase, such notice to be
accompanied by any relevant documents required by the Committee, and shall
at the time of such exercise tender the purchase price of the shares he or
she has elected to purchase in accordance with paragraph (c) below. If the
notice of election to purchase is given by the executor or administrator of
a deceased Participant, or by the person or persons to whom the option has
been transferred by the Participant's will or the applicable laws of
descent and distribution, Eastern shall be under no obligation to deliver
shares pursuant to such exercise unless and until it is satisfied that the
person or persons giving such notice is or are entitled to exercise the
option.
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(c) Except as hereafter provided in this paragraph (c), the purchase
price for shares subject to an option shall be payable to Eastern by cash
(including check, bank draft or money order acceptable to the Committee and
payable to the order of Eastern). If so provided by the Committee, an
option may be made exercisable (i) by the delivery of shares of Stock (duly
owned by the Participant and for which the Participant has good title free
of any liens and encumbrances, and which, if acquired by the Participant
from Eastern, shall have been held for at least six months) having a fair
market value equal to the purchase price of the Stock to be purchased by
exercise of the option, or (ii) by delivery of a promissory note of the
Participant to Eastern, such note to be payable on such terms as are
specified by the Committee, or (iii) by delivery of an unconditional and
irrevocable undertaking by a broker to deliver promptly to Eastern
sufficient funds to pay the exercise price, or (iv) by any combination of
the foregoing permissible forms of payment. If the price is paid in whole
or in part in shares of Stock, such shares shall be valued at their fair
market value at the time of exercise, as determined by the Committee. If
the purchase price is paid in whole or in part in shares of Stock, the
certificate for such shares shall be accompanied by appropriate instruments
of transfer in form acceptable to the Committee. If an incentive stock
option is to be exercisable, in whole or in part, other than by payment in
cash as described above, the Committee shall so specify at the time the
option is granted and an appropriate provision shall be included in the
instrument evidencing the option.
8. Award and Exercise of Stock Appreciation Rights; Limitations.
(a) A stock appreciation right is a right granted to the holder to
receive, pursuant to the terms of the right, an amount payable in shares of
Stock or, at the election of the Committee, cash or a combination of cash
and shares of Stock, in each case equal to the increase in the value of the
shares covered by the option to which the stock appreciation right is
related, as more particularly set forth below in this Section 8. References
in the Plan to the exercise of stock options shall include the exercise of
any stock appreciation rights which are granted with such options.
(b) Any option granted under the Plan, or any replacement or other
option under the Plan, may contain such provisions relating to stock
appreciation rights, not inconsistent with this Section 8 and other
provisions of the Plan, as the Committee shall deem advisable. Any such
option accompanied by a stock appreciation right shall provide for the
surrender of any unexercised stock appreciation right to the extent that
the option which it accompanies, or to which it is related, is exercised.
(c) A stock appreciation right shall be exercisable when the related
option is surrendered, and only to the extent the related option is, at the
time, exercisable. No stock appreciation right shall be exercisable earlier
than six months after the date of grant.
(d) An exercisable stock appreciation right shall entitle the holder
to exercise such right or any portion thereof (and to surrender unexercised
the accompanying option to which it relates, or any portion thereof) and to
receive in satisfaction of such exercise, subject to the limitations below,
an amount, payable as provided for below, having an aggregate value, as
determined by the Committee, equal to (x) minus (y), where (x) is the fair
market value, on the date of exercise of the stock appreciation right, of
the shares of Stock subject to that portion of the accompanying option
which is surrendered, and (y) is the option price of such shares. The
Committee shall be entitled in its sole discretion to elect, at any time
before or after exercise of any stock appreciation right by the holder, to
discharge Eastern's obligation in respect thereof (i) by the delivery of
shares of Stock or (ii) by the payment of cash or partially by the payment
of cash and partially by the delivery of shares of Stock. The total value
of payments under (ii) above shall equal the aggregate value of the shares
of Stock deliverable under (i) above. No fractional shares will be
delivered.
(e) Unless otherwise consented to or unless otherwise required by the
Committee at any time, any
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full or partial exercise by an Eastern Trustee or officer (as defined for
this purpose by the applicable regulations of the Securities and Exchange
Commission) of a stock appreciation right to be satisfied in cash, in full
or partial settlement of the right so exercised at the time, shall be made
only during the period beginning on the third business day following the
date of release for publication of quarterly or annual (as the case may be)
summary statements of sales and earnings of Eastern and its subsidiaries,
and ending on the twelfth business day following such date.
(f) The Committee may, in its discretion, as it deems such to be in
the best interests of Eastern, impose other conditions and limitations upon
the exercise of a stock appreciation right, and upon Eastern's obligations
under the Plan in respect of stock appreciation rights, which conditions
may include a condition or limitation that the stock appreciation right may
only be exercised in accordance with further rules and regulations adopted
by the Committee from time to time. Such rules and regulations may govern
the right to exercise stock appreciation rights granted prior to the
adoption or amendment of such rules and regulations as well as stock
appreciation rights granted thereafter. Without limiting the foregoing, the
Committee may specify that stock appreciation rights may be exercised by
the holder thereof only with the consent of the Committee, or that stock
appreciation rights may be exercised by the holder thereof without such
consent, or that such stock appreciation rights shall be exercised
automatically by the occurrence of an event, by the passage of time or in
any other way.
9. Delivery of Shares. Eastern shall not be obligated to deliver any
shares pursuant to the exercise of any option unless and until (i) in the
opinion of Eastern's counsel, all applicable Federal and state laws and
regulations have been complied with; (ii) in the event the outstanding Stock is
at the time listed upon any stock exchange, the shares to be delivered have been
listed or authorized to be added to the list upon official notice of issuance
upon such exchange; and (iii) all other legal matters in connection with the
issuance and delivery of shares have been approved by Eastern's counsel. Without
limiting the generality of the foregoing, Eastern may require from the
Participant or other person exercising the option such investment representation
or such agreement, if any, as counsel for Eastern may consider necessary in
order to comply with the Securities Act of 1933 and may require that the
Participant or such other person agree that any sale of the shares will be made
only on the New York Stock Exchange or in such other manner as is permitted by
the Committee and that he or she will notify Eastern when he or she makes any
disposition of the shares whether by sale, gift or otherwise. Eastern shall use
its best efforts to effect any compliance and listing, and the Participant or
other person exercising the option shall take any action reasonably requested by
Eastern in such connection. A Participant or other person entitled to exercise
an option or stock appreciation right shall have the rights of a shareholder
only as to shares actually acquired by him or her under the Plan.
10. Rights in Event of Death. In the event of a Participant's death at a
time when he or she is entitled to exercise an option, then at any time or times
on or before the latest date on which the Participant could have exercised the
option had he or she remained in the employ of Eastern or a subsidiary such
option may be exercised, as to all or any of the shares which the Participant
was entitled to purchase at the time of his or her death, by the Participant's
executor or administrator or the person or persons to whom the option is
transferred by will or the applicable laws of descent and distribution. If a
Participant dies before an option previously granted to him or her has become
exercisable and the Participant is then in the employ of Eastern or one of its
subsidiaries, such option shall be deemed to have been exercisable by such
Participant immediately prior to his or her death to the extent the Participant
could have exercised the option had he or she remained in the employ of Eastern
or one of its subsidiaries until the time when the option would first have
become exercisable to any extent.
11. Retirement and Disability. In the event of a Participant's retirement
or disability at a time when he or she is entitled to exercise an option, then
at any time or times on or before the latest date on which the Participant could
have exercised the option had he or she remained in the employ of Eastern or a
subsidiary the
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Participant may exercise such option as to all or any of the shares which he or
she was entitled to purchase at the time of retirement or disability. For
purposes of this Section, retirement or disability means termination of
employment with Eastern or any subsidiary if such termination constitutes
retirement or disability as provided for at the time of such termination under
any retirement or disability program then maintained by Eastern or such
subsidiary.
12. Other Termination of Employment. In the event the employment of a
Participant terminates for any reason other than his or her death, disability or
retirement, the Participant may, unless discharged for cause which in the
opinion of the Committee casts such discredit on the Participant or Eastern as
to justify immediate termination of the option, exercise the option after the
date when his or her employment terminated, but only within three months after
the date of termination or such longer period as the Committee, in its sole
discretion, shall provide for either at the time the option is granted or in an
amendment to the option. In no event, however, may any option granted under the
Plan be exercised after the latest date on which the Participant could have
exercised had he or she remained in the employ of Eastern or a subsidiary.
13. Replacement Options. Eastern may grant options under the Plan on terms
differing from those provided for hereinabove where such options are granted in
substitution for options held by employees of other companies who concurrently
become employees of Eastern or a subsidiary as the result of a merger or
consolidation of the employing company with Eastern or a subsidiary, or the
acquisition by Eastern or a subsidiary of property or stock of the employing
company. The Committee may direct that the substitute options be granted on such
terms and conditions as it considers appropriate in the circumstances.
14. Non-transferability of Options. Options may not be transferred by the
Participant otherwise than by will or the laws of descent and distribution, and
during the Participant's lifetime shall be exercisable only by the Participant.
15. Use of Proceeds. The proceeds received by Eastern from the sale of
shares pursuant to the Plan will be used for the general purposes of Eastern,
except that any shares of Stock included in such proceeds may be held by Eastern
as treasury shares.
16. Changes in Stock. In the event of a stock dividend, split-up or
combination of shares, recapitalization or merger in which Eastern is the
surviving company, or other similar capital change, the number and kind of
shares or securities of Eastern subject to the Plan and to options and stock
appreciation rights then outstanding and to be granted hereunder, the maximum
number of shares or securities which may be issued or sold under the Plan,
option prices and other relevant provisions shall be appropriately adjusted by
the Board of Trustees of Eastern, whose determination shall be binding on all
persons. In the event of a consolidation or a merger in which Eastern is not the
surviving company, or in the event its outstanding shares are converted into
securities of another entity or exchanged for other consideration, or in the
event of the complete liquidation of Eastern, all outstanding options and stock
appreciation rights shall thereupon terminate, but at least twenty days prior to
the effective date of any such consolidation or merger, the Board of Trustees of
Eastern shall either (a) make all outstanding options and stock appreciation
rights immediately exercisable or (b) arrange to have the surviving company
grant replacement options to the Participants.
17. Employment Rights. The adoption of the Plan does not confer upon any
employee of Eastern or a subsidiary any right to continued employment with
Eastern or a subsidiary, as the case may be, nor does it interfere in any way
with the right of Eastern or a subsidiary to terminate the employment of any of
its employees at any time.
18. Amendments. The Committee may at any time discontinue granting options
and stock appreciation rights under the Plan. The Board of Trustees of Eastern
may at any time or times amend the Plan or amend any outstanding option or stock
appreciation right for the purpose of satisfying the requirements of any
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<PAGE> 28
changes in applicable laws or regulations or for any other purpose which may be
at the time permitted by law, provided that no such amendment shall, without the
approval of the shareholders of Eastern, effect a change to the Plan that would
require shareholder approval in order for the Plan to continue to qualify as
exempt under Rule 16b-3 or to continue to qualify under Sections 162(m)(4)(C)
and 422 of the Code, and no such amendment shall adversely affect the rights of
any Participant (without his or her consent) under any option or stock
appreciation right theretofore granted.
19. Tax Withholding. The Committee may require, as a condition to the
exercise of any option or stock appreciation right hereunder, that the
Participant or other person exercising the same pay to Eastern all taxes
required to be withheld in connection with such exercise. Without limiting the
foregoing, the Committee in its discretion may permit such tax withholding to be
satisfied through the holding back of shares otherwise deliverable upon exercise
or through the tendering to Eastern of shares previously acquired by the person
exercising the option or stock appreciation right.
20. Effective Date and Duration of Plan. The Plan shall become effective
upon its adoption by the Board of Trustees of Eastern subject to approval within
twelve months thereafter by vote of the holders of at least a majority of the
shares of the outstanding Stock of Eastern. No options may be granted under the
Plan after December 31, 2004.
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[LOGO] PROXY
PROXY SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES
FOR ANNUAL MEETING, APRIL 27, 1995
I (We) hereby appoint J.A. Ives and R.R. Clayton and each of them as
proxies, with full power of substitution to each, 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, including the election of Trustees, which
may come before the April 27, 1995 Annual Meeting of the Shareholders of
Eastern Enterprises and any adjournment of such meeting.
You are encouraged to specify your choice by marking the appropriate
box, SEE REVERSE SIDE, but you need not mark any box if you wish to vote in
accordance with the Board of Trustees' recommendation. This proxy when
properly executed and presented will be voted in the manner directed herein by
the undersigned shareholder. If no direction is made, this proxy will be voted
FOR election of the Trustee nominees and proposal 2 set forth on the reverse
side.
SEE REVERSE
Continued and to be signed and dated on the reverse side. SIDE
<PAGE> 30
/X/ Please mark votes as in this example.
THE BOARD OF TRUSTEES RECOMMENDS THAT YOU VOTE "FOR" ELECTION OF THE
NOMINEES LISTED BELOW AND "FOR" PROPOSAL 2.
1. Election of Trustees:
Nominees: Samuel Frankenheim, Dean W. Freed and
J. Atwood Ives.
FOR WITHHELD
ALL FROM ALL
NOMINEES NOMINEES
-------- --------
You may direct the manner
-------- -------- of distributing your votes
------ for the election of Trustees
by affixing instructions to
----------------------------------- this proxy.
(For all nominees except authority
to vote withheld from nominee(s)
noted above.)
Sign, Date and Return the Proxy Card Promptly Using
the Enclosed Envelope.
FOR AGAINST ABSTAIN
----- ------- -------
2. Approval of 1995 Stock
Option Plan. ----- ------- -------
3. In their discretion, the Proxies are authorized to
vote upon such other business as may properly
come before the meeting or any adjournment
thereof.
MARK HERE
FOR ADDRESS ------
CHANGE AND
NOTE AT LEFT ------
Please sign exactly as name or names appear on this proxy. If
stock is held jointly, each holder should sign. If signing as
attorney, trustee, executor, administrator, custodian, guardian
or corporate officer, please give full title.
Signature: _____________________________ Date_________________
Signature: _____________________________ Date_________________
