EASTERN ENTERPRISES, DEF 14A, 1996-03-18

EASTERN ENTERPRISES
DEF 14A, 1996-03-18
NATURAL GAS DISTRIBUTION

Previous: SYMBOL TECHNOLOGIES INC, S-8, 1996-03-18

Next: APCO ARGENTINA INC/NEW, 10-K, 1996-03-18

<PAGE> 1

SCHEDULE 14A INFORMATION

PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )

FILED BY THE REGISTRANT /X/ FILED BY A PARTY OTHER THAN THE REGISTRANT / /

- --------------------------------------------------------------------------------

Check the appropriate box:
/ / Preliminary Proxy Statement
/X/ Definitive Proxy Statement
/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] EASTERN
ENTERPRISES

March 18, 1996

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 25, 1996 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,

/s/ J. Atwood Ives
------------------------
J. Atwood Ives
Chairman and Chief
Executive Officer
<PAGE> 3

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

APRIL 25, 1996

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 25, 1996 for the following purposes:

(1) To elect two Trustees to serve until the 1999 Annual Meeting of
Shareholders and until their successors are elected and qualified;

(2) To approve the Association's 1996 Non-Employee Trustees' 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 4, 1996 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 18, 1996

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 18, 1996.

OUTSTANDING SHARES AND VOTING POWER

At the close of business on March 4, 1996, the record date fixed by the
Board of Trustees for determining shareholders entitled to notice of and to vote
at the 1996 Annual Meeting of Shareholders, the Association had outstanding
20,239,699 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 1996 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 1996 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 two nominees for election as Trustees at the 1996 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 a 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, 1995, a total of 1,318,100
shares of the Association's outstanding Common Stock, representing 6.5% of such
outstanding stock. The statement also indicated that it had shared voting power
with respect to all such shares and sole dispositive power with respect to all
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,

2
<PAGE> 5

1995, a total of 1,221,300 shares of the Association's outstanding Common Stock,
representing 6.1% of such outstanding stock. Such statement also indicated that
it had sole voting power with respect to 661,200 such shares, no shared voting
power with respect to any such shares and sole dispositive power with respect to
all such 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 1996 Annual Meeting is currently fixed at eight. Four of
the Trustees now in office have terms expiring at the 1998 Annual Meeting, three
have terms expiring at the 1997 Annual Meeting, and three have terms expiring at
the 1996 Annual Meeting. One of the Trustees having a term expiring at the 1998
Annual Meeting, Dean W. Freed, is retiring from the Board as of the date of the
1996 Annual Meeting in accordance with the retirement policy set forth in the
Association's By-Laws. Two of the Trustees now in office having terms expiring
at the 1996 Annual Meeting, have been nominated by the Board of Trustees for
reelection at such meeting. The remaining Trustee having a term expiring at the
1996 Annual Meeting, Mr. Robert P. Henderson, will leave the Board when his term
expires. Each Trustee elected at the 1996 Annual Meeting of Shareholders will
hold office until the 1999 Annual Meeting of Shareholders, and until such
Trustee's successor is elected and qualified.

INFORMATION WITH RESPECT TO BOARD OF TRUSTEES

The Board of Trustees, which held eight regularly scheduled meetings in
1995, 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 1995, 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 eight times in 1995, 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.

The Nominating Committee, which met four times in 1995, 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

3
<PAGE> 6

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 1995, 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 Leonard R. Jaskol, who attended 62.5% 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 two nominees listed below. The management proxies will distribute the total
number of votes to which the shareholder executing the proxy is entitled among
the two 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 1999 ANNUAL MEETING OF
SHAREHOLDERS ARE AS FOLLOWS:

THOMAS W. JONES, VICE CHAIRMAN, PRESIDENT AND CHIEF OPERATING
OFFICER, TEACHERS INSURANCE AND ANNUITY ASSOCIATION/COLLEGE
RETIREMENT EQUITIES FUND (TIAA/CREF). Mr. Jones is 46 years old
and is a graduate of Cornell University and Boston University
[photo] 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 and Deputy Chairman of The Federal Reserve Bank of New
York; Director of Thomas & Betts Corporation and a Trustee of
Cornell University and the Brookings Institution.

Trustee since 1990;
Chairman, Audit Committee

RINA K. SPENCE, PRESIDENT AND CHIEF EXECUTIVE OFFICER, RKS
HEALTH VENTURES CORPORATION. Ms. Spence is 47 years old and is a
graduate of Boston University and Harvard University, Kennedy
School of Government. Prior to organizing RKS Health Ventures
[photo] 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. and PNC Bank, New England.

Trustee since 1989;
Chairperson, Compensation Committee;
member, Nominating Committee

4
<PAGE> 7

THE MEMBERS OF THE BOARD OF TRUSTEES HAVING TERMS OF OFFICE EXPIRING AT THE
1998 ANNUAL MEETING OF SHAREHOLDERS ARE AS FOLLOWS:

JAMES R. BARKER, CHAIRMAN AND PRESIDENT OF INTERLAKE STEAMSHIP
COMPANY, VICE CHAIRMAN OF MORMAC MARINE GROUP, INC. AND MORAN
TOWING COMPANY. Mr. Barker is also a principal owner and
Director of Meridian Aggregates Company. Mr. Barker is 60 years
old and is a graduate of Columbia University and Harvard
[photo] Business School. He was formerly Chairman and Chief Executive
Officer of Moore McCormack Resources, Inc. Mr. Barker co-founded
Temple, Barker & Sloane, Inc., a management consulting firm. He
is a Director of GTE Corporation and The Pittston Company; and
Vice Chairman and a member of the Board of Trustees of Stamford
(Connecticut) Hospital.

Elected to Board of Trustees December, 1995;
member, Compensation Committee

SAMUEL FRANKENHEIM, COUNSEL, ROPES & GRAY. Mr. Frankenheim is 63
years old and is a graduate of Cornell University and Cornell
University Law School. Prior to joining Ropes & Gray in 1992,
Mr. Frankenheim was Senior Vice President, General Counsel,
Secretary and a member of the Office of the Chairman of General
[photo] 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;
Chairman, Nominating Committee;
member, Audit and Executive Committees

J. ATWOOD IVES, CHAIRMAN AND CHIEF EXECUTIVE OFFICER OF THE
ASSOCIATION. Mr. Ives is 59 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
was Vice Chairman, Chief Financial Officer and a member of the
[photo] Office of the Chairman of General Cinema Corporation (now
Harcourt General, Inc.) and of The Neiman Marcus Group, Inc. He
is 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

5
<PAGE> 8

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 57 years old and is a graduate of
Purdue University. Prior to joining Eastern in 1987 as its
[photo] Executive Vice President and Chief Administrative Officer, Mr.
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 and a Trustee of the Concord Museum.

Trustee since 1993;
Member, Executive Committee

LEONARD R. JASKOL, CHAIRMAN AND CHIEF EXECUTIVE OFFICER OF
LYDALL, INC., A MANUFACTURING COMPANY. Mr. Jaskol is 59 years
old and is a graduate of American University and City University
[photo] of New York Graduate School of Business. He is a Director of
Rogers Corporation, the Connecticut Business and Industry
Association and the American Forest and Paper Association; and a
Trustee of American University; and a member of the Advisory
Board, Shawmut Bank of Hartford.

Trustee since 1994;
member, Compensation Committee

DAVID B. STONE, CHAIRMAN OF NORTH AMERICAN MANAGEMENT CORP., AN
INVESTMENT MANAGEMENT FIRM. Mr. Stone is 68 years old and is a
graduate of Harvard University and Harvard Business School. Mr.
Stone serves as Chairman and Trustee of Memorial Drive Trust; a
[photo] Director of several mutual funds advised by Massachusetts
Financial Services Company; a Director of Boston Municipal
Research Bureau; President of Stonetex Oil Corp.; a Trustee of
the New England Aquarium; and a member of the WGBH Advisory
Board.
Elected to Board of Trustees May, 1995;
member, Audit and Nominating Committees

6
<PAGE> 9

STOCK OWNERSHIP OF TRUSTEES AND EXECUTIVE OFFICERS

<TABLE>
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, 1996 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.

<CAPTION>
AMOUNT AND NATURE PERCENT
NAME OF BENEFICIAL OWNERSHIP(A) OF CLASS(A)
- ------------------------------------------------------------------------ -----------
<S> <C> <C>
J.R. Barker 1,000 *
R. R. Clayton 97,310(b)(c)(f) 0.5
W. J. Flaherty 26,479(b)(c) 0.1
S. Frankenheim 3,200(d)(e) *
D. W. Freed 1,900(d) *
R. P. Henderson 2,670(d)(e) *
J. A. Ives 260,024(b)(f) 1.3
L. R. Jaskol 1,800(d)(e) *
T. W. Jones 1,300(d)(e) *
C. R. Messer 42,609(b)(c) 0.2
F. C. Raskin 32,745(b)(c) 0.2
R. K. Spence 1,500(d) *
D.B. Stone 400(d) *
Trustees and Executive Officers as a Group
(14 persons) 490,330(b)(c)(d)(e)(f) 2.4

<FN>
- ---------------

* Less than 0.1%.

(a) Except as noted, each Trustee, nominee and executive officer has sole voting
and investment power over the shares owned.

(b) Figures include the following shares which executive officers have the right
to acquire on or before April 23, 1996 through the exercise of employee
stock options: Mr. Ives, 211,000; Mr. Clayton, 67,100; Mr. Messer, 25,200;
Mr. Raskin, 14,900; Mr. Flaherty, 11,000; and Trustees and executive
officers as a group, 339,100.

(c) Figures include the following restricted shares held by executive officers
that were awarded under 1992 Restricted Stock Plan: Mr. Clayton, 2,000; Mr.
Messer, 1,000; Mr. Raskin, 1,000; Mr. Flaherty, 1,000; and Trustees and
executive officers as a group, 5,400.

(d) Figures for Messrs. Frankenheim, Freed, Henderson and Jones and Ms. Spence
each include 1,200 restricted shares awarded under Restricted Stock Plan for
Non-Employee Trustees; figure for Mr. Jaskol includes 800 such shares;
figure for Mr. Stone includes 400 such shares; and figure for Trustees and
executive officers as a group includes 7,200 such shares.

(e) Figures do not include the following Share Units held under the Deferred
Compensation Plan for Trustees: Mr. Frankenheim, 3,422; Mr. Henderson,
1,987; Mr. Jaskol, 369; Mr. Jones, 3,436 and Mr. Stone, 57.

(f) Figures include the following shares owned by spouse or held by spouse as
custodian for children: Mr. Ives, 4,000 and Mr. Clayton, 16,893.
</TABLE>

7
<PAGE> 10

COMPENSATION OF EXECUTIVE OFFICERS

<TABLE>
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

<CAPTION>
LONG TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION SECURITIES
----------------------------- UNDERLYING ALL OTHER
SALARY BONUS(A) OPTIONS/SARS COMPENSATION(B)
NAME AND PRINCIPAL POSITION YEAR ($) ($) (#) ($)
- ---------------------------------- ---- ------- -------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
J. Atwood Ives 1995 666,109 386,919 15,000 12,355
Chairman and Chief 1994 636,000 309,096 20,000 2,143
Executive Officer 1993 633,983 143,100 -- 2,249
Richard R. Clayton 1995 458,202 263,408 10,000 6,873
President and Chief 1994 442,000 209,508 12,500 1,855
Operating Officer 1993 439,833 86,190 -- 2,249
Chester R. Messer 1995 292,031 92,038 7,000 3,714
Senior Vice President; 1994 276,583 99,005 7,000 1,932
President of Boston 1993 256,475 109,708 -- 2,249
Gas Company
Fred C. Raskin 1995 285,069 143,000 7,000 2,150
Senior Vice President; 1994 274,558 98,313 6,500 2,310
President of Midland 1993 268,475 38,769 -- 2,249
Enterprises Inc.
Walter J. Flaherty 1995 245,315 115,116 7,000 1,711
Senior Vice President 1994 231,208 90,675 6,000 1,875
and Chief Financial 1993 215,583 37,975 -- 2,249
Officer

<FN>
- ---------------

(a) Amounts shown represent awards 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.

(b) Amounts shown represent employer contributions under the Association's
Retirement Savings (401k) Plan and, for Messrs. Ives, Clayton and Messer,
under the Association's Deferred Compensation Plan.
</TABLE>
8
<PAGE> 11
<TABLE>
The following table sets forth certain information concerning non-qualified
stock options granted to the Named Executive Officers during 1995 under the
Association's Stock Option Plans:

OPTION GRANTS IN LAST FISCAL YEAR

<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT
---------------------------------------------------------- ASSUMED ANNUAL
NUMBER OF % OF TOTAL RATES OF STOCK PRICE
SECURITIES OPTIONS EXERCISE APPRECIATION FOR
UNDERLYING GRANTED TO OR BASE OPTION TERM(B)
OPTIONS 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 15,000 14.1% $ 26.19 2/21/05 $ 0 $247,061 $626,102
Richard R. Clayton 10,000 9.4 26.19 2/21/05 0 164,707 417,401
Chester R. Messer 7,000 6.6 26.19 2/21/05 0 115,295 292,181
Fred C. Raskin 7,000 6.6 26.19 2/21/05 0 115,295 292,181
Walter J. Flaherty 7,000 6.6 26.19 2/21/05 0 115,295 292,181

<FN>
- ---------------

(a) Figures represent options without SARs. Each such option becomes exercisable
at the rate of 20% per year, commencing February 22, 1996.

(b) The potential realizable values presented in this table use the 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 $42.66 and $67.93 per share,
respectively, by February 21, 2005.
</TABLE>

<TABLE>
The following table sets forth certain information regarding the options
and SARs in tandem with options exercised during fiscal year 1995, and the
number and value of outstanding options and SARs in tandem with options held as
of December 31, 1995, by Named Executive Officers under the Association's Stock
Option Plans:

YEAR-END OPTION/SAR VALUES

<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS/SARS IN-THE-MONEY OPTIONS/SARS
SHARES AT 12/31/95(#) AT 12/31/95($)(B)
ACQUIRED ON VALUE ------------------------ -------------------------
NAME EXERCISE(#) REALIZED($)(A) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ----------------------- ----------- -------------- ------------------------ -------------------------
<S> <C> <C> <C> <C>
J. Atwood Ives -- -- 204,000/81,000(c) $ 1,682,000/721,400
Richard R. Clayton -- -- 62,000/20,000(d) 668,475/200,600(d)
Chester R. Messer -- -- 22,400/12,600(d) 269,380/125,020(d)
Fred C. Raskin 800(e) $7,048 12,200/12,200(d) 101,771/120,620(d)
Walter J. Flaherty -- -- 8,400/11,800(d) 74,015/116,220(d)

<FN>
- ---------------

(a) The amount "realized" reflects the appreciation on the date of exercise
(based on the excess of the fair market value of the shares on the date of
exercise over the exercise price).

(b) All values are based on closing price as of December 29, 1995.

(d) Figures represent options, including those with and those without tandem
SARs. All options granted during 1995 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.

(e) Figure represents exercise of SARs. No shares were acquired.

<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:

PENSION PLAN TABLE

<CAPTION>
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 49,988 57,488 57,488 57,488 57,488
200,000 92,488 107,488 107,488 107,488 107,488
300,000 134,988 157,488 157,488 157,488 157,488
400,000 177,488 207,488 207,488 207,488 207,488
500,000 219,988 257,488 257,488 257,488 257,488
600,000 262,488 307,488 307,488 307,488 307,488
700,000 304,988 357,488 357,488 357,488 357,488
800,000 347,488 370,000 370,000 370,000 370,000
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 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 12 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, 1996). 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 1995 for the Named Executive Officers were as
follows: J. A. Ives, 9 and 9; R. R. Clayton, 16 and 16; C. R. Messer, 32
and 19; F. C. Raskin, 18 and 17; W. J. Flaherty, 24 and 12. Years of
service for J. A. Ives and R. R. Clayton are determined in accordance with
their employment agreements described on page 12 hereof. Years of service
under the SERP for C. R. Messer, F. C. Raskin and W. J. Flaherty equal
years of service as an officer of the Association or a subsidiary.
</TABLE>

10
<PAGE> 13

COMPENSATION OF TRUSTEES

During 1995, 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.

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, L. R. Jaskol (who was first elected to the Board on February 24, 1994),
D.B. Stone (who was first elected to the Board on May 25, 1995), and J.R. Barker
(who was first elected to the Board on December 7, 1995). Additional grants were
made on June 1, 1994, to each Trustee other than J. A. Ives, R. R. Clayton, D.B.
Stone, and J.R. Barker and on June 1, 1995 to each Trustee other than J.A. Ives,
R.R. Clayton, and J.R. Barker. Subsequent grants will be made on the first day
of June in the years 1996 and 1997. All shares granted under such Plan are
nontransferable 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-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 and D. W. Freed. The Board
of Trustees has voted to terminate the Retirement Plan for Non-Employee Trustees
effective at the 1996 Annual Meeting.

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% (determined on the
first day of each calendar quarter) 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 1995, and which is expected to continue providing legal
services to them during 1996. Fees paid for such services during 1995 were less
than 5% of such firm's 1995 gross revenues.

11
<PAGE> 14

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. 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.

12
<PAGE> 15

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 13, 1996, the balance held in such trust was approximately $12 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 the 1982 and 1995 Stock Option Plans.

EXECUTIVE OFFICER COMPENSATION

The Committee's policy with respect to approving 1995 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 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 1995, base salaries for executive officers
of the Association as a group (including for the CEO) were targeted at levels
which averaged above the median base salaries for the comparator group 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 1995 exceed, the comparator group median
as the Association was successful in substantially exceeding financial
performance targets established in the 1995 annual bonus program. The comparator
group data provided by Hewitt Associates also suggested that annual long-term
compensation grants would be appropriate so that levels of total compensation
(including long-term compensation) of the Association's executive officers would
approximate average total compensation levels for similar positions at companies
in the survey group. With this information in mind, the Committee granted
non-qualified stock options in February, 1995 to the Association's executive
officers. Such options were granted without stock appreciation rights, and at an
exercise price equal to the fair market value of the

13
<PAGE> 16

Association's Common Stock on the date of grant. In determining the size of
option grants, the Committee considered recommendations of management.

It was the Committee's judgment in establishing 1995 annual incentive
opportunities for executive officers 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% (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) a higher percentage of incentive
compensation opportunities for more senior executive officers should be based on
financial performance of the Association and a lesser percentage of such
incentive opportunities should be based on individual performance, than for less
senior executive officers and other officers of the Association and its
subsidiaries; 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 1995 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% (in the case of other executive officers) of individual
salaries. No portion of the bonus opportunity relating to financial performance
(i.e., 75% of the potential annual bonus amount in the case of Mr. Ives, 70% in
the case of Mr. Clayton, and 67% for the other executive officers named in the
compensation tables) could be earned unless minimum pre-tax income performance
goals were met by the Association or, in the case of executive officers who are
subsidiary presidents, by the subsidiary. The minimum pre-tax income level was
85% of the targeted goal, and at such minimum level, the financial performance
award would equal 20% of the potential financial performance opportunity. 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 67% of
the potential financial performance 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 could be earned by an executive officer independent of the
achievement of the financial goals, so long as minimum financial results equal
to 50% of the targeted levels were achieved. 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. Finally, the award opportunities
provided that the Committee be given authority in its judgment to approve
discretionary awards in the event that equity should so require. A discretionary
award could not exceed the maximum potential award for any officer. A
discretionary award in the amount of $6,864 was made to Mr. Raskin for 1995.

The Association and each of its subsidiaries were successful in reaching
and exceeding the minimum pre-tax income goals established for them in 1995,
with the Association and its subsidiary, Midland Enterprises, each exceeding
their targeted and maximum pre-tax income goals. As a result, each of the
Association's executive officers earned an annual bonus in 1995 based on
achievement of financial performance goals, as well as a bonus based on
achievement of his or her individual management objectives, and, in the case of
Mr. Raskin, a discretionary award. 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 based on
the average of the high and low trading prices for the previous five business
days) 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.

14
<PAGE> 17

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 1995, and the Committee does not anticipate that such limitation will
affect deductibility of any compensation paid to the Association's executive
officers for 1996. 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 1982 and 1995 Stock Option Plans
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 be expected to defer, if possible, 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 1995, Mr. Ives was paid a base salary, effective from February 1,
1995, at an annual rate equal to $667,800. Prior to February 1, 1995, Mr. Ives'
base salary had been set at $636,000 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 1995, as described above, under the Association's Executive
Incentive Compensation Plan. Of Mr. Ives' potential award under such plan, 75%
was based on the achievement by the Association of specific pre-tax income
levels for 1995, and 25% 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 strategic
opportunities that would enhance shareholder value and make the most productive
use of the Association's capital resources; to successfully complete the
disposition of the Association's former subsidiary, WaterPro Supplies
Corporation; to monitor the Association's investment in United States Filter
Corporation with the view to maximizing the Association's return on investment;
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. Progress against these objectives was to be
measured by improved return on equity and, subject to market conditions,
increasing share price.

Because the Association's pre-tax income performance for 1995 exceeded the
maximum financial performance goal, Mr. Ives was entitled to a payment of
$297,630 under the financial performance portion of his award opportunity, equal
to 100% 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 1995
management objectives equalled 90% of the maximum potential achievement, and
that Mr. Ives was therefore entitled to a payment of $89,289 under the portion
of his award opportunity based on management objectives. Under the terms of the
1995 incentive program, 50% of Mr. Ives' total incentive award was paid in
shares of the Association's Common Stock and 50% was paid in cash.

15
<PAGE> 18

As described above, during 1995, Mr. Ives was granted a non-qualified stock
option to purchase 15,000 shares of the Association's Common Stock at a price of
$26.19 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
James R. Barker
Robert P. Henderson
Leonard R. Jaskol

16
<PAGE> 19

PERFORMANCE GRAPH

<TABLE>
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,
the S&P Natural Gas Index and the Edward D. Jones ("EDJ") Diversified Gas Index
over a five year period ending December 31, 1995:

COMPARISON OF FIVE YEAR
CUMULATIVE TOTAL RETURNS(A)

MEASUREMENT PERIOD EASTERN EDJ DIVERSIFIED S&P NATURAL S&P 500
(FISCAL YEAR COVERED) ENTERPRISES GAS INDEX(B) GAS INDEX INDEX
<S> <C> <C> <C> <C>
1990 100 100 100 100
1991 109 86 87 130
1992 112 91 96 140
1993 109 104 114 154
1994 119 90 109 156
1995 167 123 154 215

<FN>
- ---------------

(a) Based on an initial investment of $100 with dividends reinvested quarterly.
(b) The EDJ Diversified Gas Index is comprised of companies with at least 30
percent, but less than 90 percent, of their operating revenues derived from
natural gas distribution.
</TABLE>

17
<PAGE> 20

PROPOSAL TO APPROVE 1996 NON-EMPLOYEE TRUSTEES' STOCK OPTION PLAN

The Board of Trustees has approved the Eastern Enterprises 1996
Non-Employee Trustees' Stock Option Plan (the "Plan"), subject to the approval
of the Plan at the 1996 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 further align the outside Trustees' interests with those of
the Association's shareholders as these Trustees would benefit from option
grants under the Plan only to the extent that there is appreciation in the
market price of the Association's Common Stock. The Plan is intended to replace
the Association's Retirement Plan for Non-Employee Trustees which has been
terminated effective at the 1996 Annual Meeting.

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.

Purpose of the Plan. The Plan is intended to promote the long-term
interests of the Association by better enabling it to attract and retain outside
Trustees who are in a position to make significant contributions to the success
of the Association and to reward those Trustees for such contributions through
ownership of shares of Common Stock of the Association.

Eligibility. Trustees eligible to receive options under the Plan
("Eligible Trustees") shall be those Trustees who are not and have not been for
five years employees of the Association or of any subsidiary of the Association.
Assuming each of the current outside Trustees and nominees for Trustee is
elected at the 1996 Annual Meeting of Shareholders, six Trustees will be
eligible to participate in the Plan.

Effective Date and Term of Plan. The Plan shall become effective on the
date (the "Effective Date") on which the Plan is approved by the shareholders of
the Association. No option shall be granted under the Plan after the day (the
"Final Date") which follows the fourth annual shareholders meeting after the
Effective Date.

Administration. The Plan shall be administered by the Board of Trustees of
the Association. The Board of Trustees may delegate the administration of the
Plan to a committee. The Board of Trustees shall have authority, consistent with
the Plan (a) to issue options granted in accordance with the formula set forth
in the Plan to Eligible Trustees; (b) to prescribe the form or forms of
instruments evidencing awards and any other instruments required under the Plan
and to change such forms from time to time; (c) to adopt, amend and rescind
rules and regulations for the administration of the Plan; and (d) to interpret
the Plan and to decide any questions and settle all controversies and disputes
that may arise in connection with the Plan. The Board of Trustees may at any
time terminate the Plan as to any further grants of options. The Board of
Trustees may at any time or times amend the Plan for any purpose which may at
the time be permitted by law; provided, that except to the extent expressly
required or permitted by the Plan, no such amendment will, without the approval
of the shareholders of the Association, effectuate a change for which
shareholder approval is required in order for awards under the Plan to continue
to qualify under Rule 16b-3 promulgated under Section 16 of the Securities
Exchange Act of 1934.

Shares Subject to the Plan. The aggregate number of shares of Common Stock
that may be delivered upon the exercise of options granted under the Plan shall
be 75,000. If any option granted under the Plan terminates without having been
exercised in full, the number of shares of Common Stock as to which such option
was not exercised shall be available for future grants. Shares delivered under
the Plan shall be previously issued Common Stock acquired by the Association or
authorized but theretofore unissued shares. In the event of a Common Stock
dividend, split-up or combination of shares, recapitalization or other change in
the Association's capital, during the term of the Plan, the number and kind of
shares or securities of the

18
<PAGE> 21

Association subject to options then outstanding or subsequently granted under
the Plan, the maximum number of shares or securities that may be delivered under
the Plan, the exercise price, and other relevant provisions shall be
appropriately adjusted by the Board of Trustees, whose determination shall be
binding on all persons.

Transferability. Options may not be transferred by an Eligible Trustee
otherwise than by will or the laws of descent and distribution, and during the
Eligible Trustee's lifetime shall be exercisable only by the Eligible Trustee.

Terms, Conditions and Exercisability of Options. Each individual who is an
Eligible Trustee on the day (the "meeting grant date") following any annual
meeting of the Association's shareholders that occurs on or after the Effective
Date and on or before the Final Date shall automatically be granted on such
meeting grant date an option to purchase 1,100 shares of Common Stock. In
addition, each individual who becomes an Eligible Trustee (other than by
election at an annual meeting of the Association's shareholders) on a date (the
"interim grant date") that falls between meeting grant dates and prior to the
Final Date shall automatically be granted on the interim grant date an option
for 550 shares of Common Stock. The per-share exercise price of each option
shall be 100% of the fair market value per share of Common Stock on the date the
option is granted.

Each option granted under the Plan shall become exercisable as to one-half
of the shares subject to the option on each of the first and second
anniversaries of the grant date. The latest date on which an option may be
exercised shall be the tenth anniversary of the date the option was granted.

If an Eligible Trustee ceases to be a Trustee of the Association for any
reason (including death) (a "termination"), all options awarded to the Eligible
Trustee under the Plan and then held by the Eligible Trustee shall, to the
extent such options were exercisable immediately prior to termination, continue
to be exercisable by the Eligible Trustee (or in the event of the Eligible
Trustee's death, by his or her executor or administrator or the person or
persons to whom the option is transferred by will or the applicable laws of
descent and distribution) for a period of one year following termination or
until the tenth anniversary of the date of grant if earlier; provided, that if
termination is by reason of retirement pursuant to an established retirement
policy of the Board, all options held by the retiring Eligible Trustee shall
become exercisable (to the extent not already exercisable) immediately prior to
retirement. Except as provided in the preceding sentence, all options awarded to
an Eligible Trustee and held at the time of termination shall promptly expire.

In the event of a consolidation or merger 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
shall thereupon terminate, but at least twenty days prior to the effective date
of any such consolidation or merger, the Board of Trustees shall either (a) make
all outstanding options immediately exercisable or (b) arrange to have the
surviving company grant replacement options to the Eligible Trustees.

Payment for Common Stock. The exercise price of Common Stock purchased on
exercise of an option must be paid for as follows: (1) in cash or by check
(acceptable to the Association in accordance with guidelines established by the
Board of Trustees for this purpose), bank draft or money order payable to the
order of Eastern Enterprises, (2) through the delivery of shares of Common Stock
that have been outstanding and held by the Eligible Trustee for at least six
months and which have a fair market value on the last business day preceding the
date of exercise equal to the exercise price, or (3) by any combination of the
permissible forms of payment.

Federal Tax Consequences. Options under the Plan are non-qualified options
for Federal income tax purposes. The grant of an option under the Plan will not
result in the recognition of taxable income to an Eligible Trustee or in a
deduction to the Association.

19
<PAGE> 22

Upon exercise of an option, an Eligible Trustee will generally recognize
compensation income in an amount equal to the excess of the fair market value of
the shares acquired upon exercise over the option price paid for those shares.
The Association will be entitled to a deduction in the amount included in the
Eligible Trustee's income.

Gain or loss recognized upon a subsequent sale of any Common Stock received
upon the exercise of an option under the Plan will be taxed as capital gain or
loss (long-term or short-term, depending upon the holding period of the Common
Stock sold). If the option was exercised with cash, check, bank draft or money
order, the Eligible Trustee's tax basis in the Common Stock acquired upon
exercise will equal the sum of the amount paid and the amount recognized as
compensation income on account of the option exercise. If the option was
exercised by the surrender of previously owned shares of Common Stock, special
rules apply for determining the tax basis and holding periods.

<TABLE>
The following table sets forth summary information concerning the
hypothetical value of option grants for a single year to all Eligible Trustees
under the Plan. The number and value of options in the following table have been
calculated by Hewitt Associates, the Association's independent compensation
consultants.

1996 NON-EMPLOYEE TRUSTEES' STOCK OPTION PLAN

<CAPTION>
NUMBER OF
SECURITIES AGGREGATE
UNDERLYING DOLLAR
GROUP OPTIONS(A) VALUE(B)
- --------------------------------------------------------------------- ----------- ----------
<S> <C> <C>
Eligible Trustees as a group (six persons)........................... 6,600 $ 33,000

<FN>
- ---------------
(a) Total number of shares currently subject to annual option grant.

(b) Amounts shown in this column are based upon an assumed share price of $35 at
date of grant and a Black-Scholes value of 15.2% of share price. This
valuation takes into account the Association's specific volatility and
dividend yield.
</TABLE>

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 1996. 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 1996 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.
The Association will reimburse banks, brokerage firms and other custodians,
nominees and fiduciaries for reasonable expenses incurred in sending proxy
materials to beneficial owners.

20
<PAGE> 23

SHAREHOLDER PROPOSALS

Shareholder proposals intended to be presented at the 1997 Annual Meeting
of Shareholders must be received at the Association's principal executive
offices no later than November 17, 1996.

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 18, 1996

21
<PAGE> 24

EXHIBIT A

EASTERN ENTERPRISES

1996 NON-EMPLOYEE TRUSTEES' STOCK OPTION PLAN

1. Purpose. The purpose of this 1996 Non-Employee Trustees' Stock Option
Plan (the "Plan") is to advance the interests of Eastern Enterprises ("Eastern")
by enhancing the ability of Eastern to attract and retain non-employee trustees
who are in a position to make significant contributions to the success of
Eastern and to reward those trustees for such contributions through ownership of
shares of beneficial interest ("Stock") of Eastern.

2. Administration. The Plan shall be administered by the Board of
Trustees (the "Board") of Eastern. The Board may delegate the administration of
the Plan to a committee, in which case all references to "the Board" hereunder,
other than in Section 10(d), shall refer to the committee. The Board shall have
authority, consistent with the Plan (a) to issue options granted in accordance
with the formula set forth in this Plan to Eligible Trustees (as defined below);
(b) to prescribe the form or forms of instruments evidencing awards and any
other instruments required under the Plan and to change such forms from time to
time; (c) to adopt, amend and rescind rules and regulations for the
administration of the Plan; and (d) to interpret the Plan and to decide any
questions and settle all controversies and disputes that may arise in connection
with the Plan. All decisions, determinations and interpretations of the Board
shall be binding on all parties concerned. Transactions under the Plan are
intended to comply with all applicable conditions of Rule 16b-3 or its
successors under Section 16 of the Securities Exchange Act of 1934 (the
"Exchange Act"). To the extent any provision of the Plan or action by the Board
fails to so comply, it shall be deemed null and void, to the extent permitted by
law and deemed advisable by the Board.

3. Effective Date and Term of Plan. The Plan shall become effective on
the date (the "Effective Date") on which the Plan is approved by the
shareholders of Eastern. No option shall be granted under the Plan after the day
(the "Final Date") which follows the fourth annual shareholders meeting after
the Effective Date, but options previously granted may extend beyond that date.

4. Shares Subject to the Plan.

(a) Number of Shares. Subject to adjustment as provided in Section
4(c), the aggregate number of shares of Stock that may be delivered upon
the exercise of options granted under the Plan shall be 75,000. If any
option granted under the Plan terminates without having been exercised in
full, the number of shares of Stock as to which such option was not
exercised shall be available for future grants within the limits set forth
in this Section 4(a).

(b) Shares to be Delivered. Stock delivered under the Plan shall be
previously issued Stock acquired by Eastern or authorized but theretofore
unissued shares. No fractional shares shall be delivered under the Plan.

(c) Changes in Stock. In the event of a stock dividend, split-up or
combination of shares, recapitalization or other change in Eastern's
capital, after the Effective Date, the number and kind of shares or
securities of Eastern subject to options then outstanding or subsequently
granted under the Plan, the maximum number of shares or securities that may
be delivered under the Plan, the exercise price, and other relevant
provisions, shall be appropriately adjusted by the Board, whose
determination shall be binding on all persons.

A-1
<PAGE> 25

5. Eligibility of Trustees for Stock Options. Trustees eligible to
receive options under the Plan ("Eligible Trustee") shall be those trustees who
are not and have not been for five years employees of Eastern or of any
subsidiary of Eastern.

6. Terms and Conditions of Options.

(a) Number of Options. Each individual who is an Eligible Trustee on
the day (the "meeting grant date") following any annual meeting of
Eastern's shareholders that occurs on or after the Effective Date and on or
before the Final Date shall automatically be granted on such meeting grant
date an option to purchase 1,100 shares of Stock, subject to adjustment as
provided in Section 4. In addition, each individual who becomes an Eligible
Trustee (other than by election at an annual meeting of Eastern's
shareholders) on a date (the "interim grant date") that falls between
meeting grant dates and prior to the Final Date shall automatically be
granted on the interim grant date an option for 550 shares of Stock,
subject to adjustment as provided in Section 4.

(b) Exercise Price. The per-share exercise price of each option shall
be 100% of the fair market value per share of Stock on the date the option
is granted.

(c) Duration of Options. The latest date on which an option may be
exercised shall be the tenth anniversary of the date the option was
granted.

(d) Exercisability. Each option granted under the Plan shall become
exercisable as to one-half of the shares subject to the option on each of
the first and second anniversaries of the grant date.

Any exercise of an option must be in writing, signed by the proper
person and delivered or mailed to Eastern, accompanied by (1) any documents
required by the Board and (2) payment in full as provided below for the
number of shares for which the option is exercised.

(e) Payment for and Delivery of Stock. The exercise price of Stock
purchased on exercise of an option must be paid for as follows: (1) in cash
or by check (acceptable to Eastern in accordance with guidelines
established by the Board for this purpose), bank draft or money order
payable to the order of Eastern, (2) through the delivery of shares of
Stock that have been outstanding and held by the optionholder for at least
six months and which have a fair market value on the last business day
preceding the date of exercise equal to the exercise price, or (3) by any
combination of the permissible forms of payment.

Eastern shall not be obligated to deliver any shares of Stock pursuant to
the exercise of any option (a) until, in the opinion of Eastern's counsel, all
applicable Federal and state laws and regulations have been complied with, (b)
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 (c) 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 Eligible Trustee 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 Eligible Trustee 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 Board 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 Eligible Trustee or other person exercising the
option shall take any action reasonably requested by Eastern in such connection.
An Eligible Trustee or other person entitled to exercise an option shall have
the rights of a shareholder only as to shares actually acquired by him or her
under the Plan.

A-2
<PAGE> 26

If an option is exercised by any person other than the Eligible Trustee,
Eastern will be under no obligation to deliver Stock pursuant to such exercise
until Eastern is satisfied as to the authority of the person exercising the
option.

8. Termination of Options. If an Eligible Trustee ceases to be a trustee
of Eastern for any reason (including death) (a "termination"), all options
awarded to the Eligible Trustee under the Plan and then held by the Eligible
Trustee shall, to the extent such options were exercisable immediately prior to
termination, continue to be exercisable by the Eligible Trustee (or in the event
of the Eligible Trustee's death, by his or her executor or administrator or the
person or persons to whom the option is transferred by will or the applicable
laws of descent and distribution) for a period of one year following termination
or until the tenth anniversary of the date of grant if earlier; provided, that
if termination is by reason of retirement pursuant to an established retirement
policy of the Board, all options held by the retiring trustee shall become
exercisable (to the extent not already exercisable) immediately prior to
retirement. Except as provided in the preceding sentence, all options awarded to
an Eligible Trustee and held at time of termination shall promptly expire.

9. Certain Corporate Transactions. 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 shall thereupon terminate, but at least twenty days
prior to the effective date of any such consolidation or merger, the Board shall
either (a) make all outstanding options immediately exercisable or (b) arrange
to have the surviving company grant replacement options to the Eligible
Trustees.

10. General Provisions.

(a) Documentation of Options. Options will be evidenced by written
instruments prescribed by the Board from time to time. Such instruments may
be in the form of agreements, to be executed by both an Eligible Trustee
and Eastern, or certificates, letters or similar instruments, which need
not be executed by an Eligible Trustee but acceptance of which will
evidence agreement to the terms thereof.

(b) Nontransferability of Options. Options may not be transferred by
an Eligible Trustee otherwise than by will or the laws of descent and
distribution, and during the Eligible Trustee's lifetime shall be
exercisable only by the Eligible Trustee.

(c) Effect. Neither adoption of the Plan nor the grant of options to
an Eligible Trustee shall confer upon any person any right to continued
status as a trustee or affect Eastern's right to adopt other plans or
arrangements under which stock may be issued to trustees.

(d) Amendment; Termination. The Board may at any time terminate the
Plan as to any further grants of options. The Board may at any time or
times amend the Plan for any purpose which may at the time be permitted by
law; provided, that except to the extent expressly required or permitted by
the Plan, no such amendment will, without the approval of the shareholders
of Eastern, effectuate a change for which shareholder approval is required
in order for awards under the Plan to continue to qualify under Rule 16b-3
promulgated under Section 16 of the Exchange Act.

A-3
<PAGE> 27

<TABLE>
<S> <C>
DETACH HERE EAS F

[LOGO] EASTERN
ENTERPRISES

P PROXY SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES
R FOR ANNUAL MEETING, APRIL 25, 1996
O
X I (We) hereby appoint J.A. Ives and R.R. Clayton and each of them as
Y 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 25, 1996 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
-----------
</TABLE>
<PAGE> 28
[LOGO] EASTERN
ENTERPRISES

HIGHLIGHTS OF EASTERN'S 1995 RESULTS

* Eastern's total return to shareholders was 40%,
outperforming the S&P 500 Index.

* Eastern reported record operating results from continuing operations
of $2.44 per share versus $1.80 per share in the prior year,
after adjusting for non-recurring items.

* Operating earnings increased 17% to $113.7 million.

* Return on equity increased to 12.9% from 10.1%
in 1994, after adjusting for non-recurring items.

-------------------------------------------------------------------
THIS IS YOUR PROXY.
YOUR VOTE IS IMPORTANT.

Regardless of whether you plan to attend the Annual Meeting of
Shareholders, you can be sure your shares are represented at the
Meeting by promptly returning your proxy (attached below) in the
enclosed envelope. Thank you for your attention to this
important matter.
-------------------------------------------------------------------
<S> <C> <C> <C> <C>

DETACH HERE EAS F

/ 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: FOR AGAINST ABSTAIN
NOMINEES: Thomas W. Jones and Rina K. Spence 2. Approval of 1996 Non- / / / / / /
FOR WITHHELD Employee Trustees' Stock
ALL FROM ALL Option Plan.
NOMINEES NOMINEES
/ / / / 3. In their discretion, the Proxies are authorized to
vote upon such other business as may properly
You may direct the manner come before the meeting or any adjournment
of distributing your votes thereof.
for the election of Trustees
/ / by affixing instructions to
------------------------------ this proxy.
(For all nominees except MARK HERE
authority to vote withheld FOR ADDRESS / /
from nominee(s) noted above.) CHANGE AND
NOTE AT LEFT

SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING
THE ENCLOSED ENVELOPE.

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:
------------------------- ------- --------------------------- -------
</TABLE>