<PAGE>
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 [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
[X] Definitive Proxy Statement RULE 14C-5(D)(2))
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
EASTERN UTILITIES ASSOCIATES
------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
EASTERN UTILITIES ASSOCIATES
------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[_] $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:
Notes:
<PAGE>
[LOGO OF EASTERN UTILITIES APPEARS HERE]
Eastern Utilities Associates
One Liberty Square
P.O. Box 2333, Boston, MA 02107
March 27, 1996
To Our Shareholders:
We extend our personal invitation to join us at the Annual Meeting of
Shareholders on May 20, 1996.
The formal Notice of Meeting and Proxy Statement appear on the following
pages and contain details of the business to be conducted at the Annual
Meeting.
It is important that you promptly sign and return the enclosed proxy card
for the annual election of Trustees.
We appreciate your attention to this important action and look forward to
seeing you at our Annual Meeting.
Sincerely,
Donald G. Pardus
Chairman of the Board
<PAGE>
[LOGO OF EASTERN UTILITIES APPEARS HERE]
Eastern Utilities Associates
One Liberty Square
P.O. Box 2333, Boston, MA 02107
NOTICE OF ANNUAL MEETING
March 27, 1996
To Our Shareholders:
Notice is hereby given that the Annual Meeting of the Shareholders of
Eastern Utilities Associates, a voluntary association formed under a
Declaration of Trust dated April 2, 1928, as amended, will be held in the
Enterprise Room on the 5th floor of the State Street Bank and Trust Company,
225 Franklin Street, Boston, Massachusetts, on Monday, May 20, 1996, at 9:30
a.m., for the following purposes:
1. To elect eleven (11) Trustees of the Association for the ensuing year.
2. To transact such other business as may properly come before the
meeting.
Only Common Shareholders of record on the transfer books of the Association
at the close of business March 22, 1996 will be entitled to vote at the
meeting of which notice is hereby given and at any and all adjournments
thereof. In the election of Trustees, the holders of common shares have the
right of cumulative voting as provided in Article 28 of the Declaration of
Trust, as amended.
You are urged to sign, date and return the enclosed proxy at your earliest
convenience to The First National Bank of Boston, Shareholder Services
Division, Post Office Box 1878, Boston, Massachusetts 02105. An envelope is
enclosed for that purpose.
You are invited to be present at the meeting and in the event you do attend,
any proxy previously signed may be revoked and your shares voted in person at
the meeting.
By Order of the Trustees,
CLIFFORD J. HEBERT, JR., Secretary
<PAGE>
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
MAY 20, 1996
March 27, 1996
The accompanying proxy is solicited on behalf of the Trustees of Eastern
Utilities Associates for use at the Annual Meeting of the Shareholders to be
held in the Enterprise Room on the 5th floor of the State Street Bank and
Trust Company, 225 Franklin Street, Boston, Massachusetts, on Monday, May 20,
1996 for the purposes set forth in the foregoing Notice of Annual Meeting and
at any and all adjournments thereof.
The person giving such a proxy may revoke it at any time before it is voted,
by a later dated proxy delivered pursuant to this solicitation, by other
written revocation received by the Secretary, or by oral revocation in person
at the meeting.
An Annual Report, including financial statements, accompanies this
statement.
There are outstanding 20,436,755 common shares, the holders of which are
entitled, for each share held of record at the close of business on March 22,
1996, to one vote per share in person or by proxy, on all matters acted on at
the meeting, except that, as provided in Article 28 of the Declaration of
Trust, as amended, the election of Trustees will be by cumulative voting,
namely, each holder of common shares 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 in person or by proxy for a single
candidate or distribute them among any two or more candidates as he shall
elect. The only candidates eligible for election as Trustees will be those who
have been nominated by notice given in writing to the Secretary at least
twenty-four (24) hours prior to the time fixed for the calling to order of the
meeting at which the vote is to be taken.
The Association's Declaration of Trust provides that a quorum for the
meeting shall consist of the representation in person or by proxy at the
meeting of shareholders entitled to a majority or more of the votes that could
be cast at the meeting. The election of Trustees is by plurality vote, such
that the 11 nominees with the highest vote totals will be elected. Withheld
votes as to a particular nominee affect vote totals for that nominee. Broker
non- votes will not affect the outcome of the election. If an individual has
signed a proxy card but has not voted on a particular matter, such proxy will
be voted in favor of management's recommendation with respect to such matter
in accordance with the discretion granted to the proxies.
<PAGE>
ELECTION OF TRUSTEES AND OWNERSHIP OF COMMON SHARES
It is proposed to elect eleven (11) Trustees to serve for the ensuing year
until the next Annual Meeting of the Shareholders or until succeeding Trustees
have been chosen and qualified. Unless a contrary specification is made in the
accompanying form of proxy, the persons named in it, including any
substitutes, will vote such proxy for the nominees in the following list, or
for the election as Trustees of such other nominees as may be approved by a
majority of the Trustees if, for any reason, any of the nominees are unable to
serve, or in their discretion will cast cumulatively among any number of such
nominees any or all votes represented by proxies in which they are named.
All of the nominees in the following table are at present Trustees of the
Association and were elected to their present term of office at the Annual
Meeting of Shareholders held on May 15, 1995.
Each of the other nominees has served in the capacity indicated in the list
for more than five years, with the exception of Russell A. Boss, who was Chief
Operating Officer of A.T. Cross Company until April 1993, and Jacek Makowski,
who was Chairman and Chief Executive Officer of J. Makowski Company prior to
1996.
In addition to their principal occupations in the table below, the nominees
are trustees or directors of publicly held companies as follows: Mr. Boss is a
Director of A.T. Cross Company and Brown & Sharpe Manufacturing Co.; Mr.
Choquette is a Director of Fleet Financial Group and Carlisle Companies, Inc.;
Mr. Freeman is a Trustee or Director of Providence Journal Company, Amica
Mutual Insurance Company, Amica Life Insurance Company and of thirteen of the
registered mutual funds for which Scudder, Stevens & Clark is investment
advisor; Mr. Liebenow is a Director of Quaker Fabric Corporation; Mr. Marple
is a Trustee of thirteen of the registered mutual funds for which Scudder,
Stevens & Clark is investment advisor; Ms. Stapleton is a Director of Colonial
Gas Company; and Mr. Thorndike is a Director of Courier Corporation, Data
General Corporation, Providence Journal Company and Bradley Real Estate Inc.
and a Trustee of the Putnam Funds. In February 1994, Mr. Thorndike accepted
appointment as a successor trustee of private trusts in which he has no
beneficial interest, and concurrently became, serving until October 1994,
Chairman of the Board of two privately owned corporations controlled by such
trusts that filed voluntary petitions for relief under chapter 11 of the
United States Bankruptcy Code in August 1994.
Various Trustees also are directors of subsidiaries of the Association
having registered securities outstanding as follows: Mr. Pardus, Blackstone
Valley Electric Company and Eastern Edison Company; and Mr. Stevens,
Blackstone Valley Electric Company and Eastern Edison Company.
2
<PAGE>
The table below also sets forth the information concerning beneficial
ownership by the nominees, by each of the executive officers named in the
Summary Compensation Table on page 5 and by all Trustees and executive
officers as a group.
<TABLE>
<CAPTION>
COMMON
SHARES OF THE
ASSOCIATION
BENEFICIALLY
AGE AT OWNED AT
DECEMBER 31, TRUSTEE JANUARY 6,
NAME 1995 PRINCIPAL OCCUPATION SINCE 1996(a)
---- ------------ -------------------- ------- -------------
<S> <C> <C> <C> <C>
Russell A. Boss (A,P)... 57 President and Chief Executive Officer, 1989 1,000(b)
A.T. Cross Company (writing
instruments manufacturer), Lincoln,
Rhode Island
Richard M. Burns........ 58 Comptroller of the Association -- 4,463(c)
John D. Carney.......... 51 Executive Vice President of the -- 7,208(c)
Association
Paul J. Choquette, Jr. 57 President of Gilbane Building Company 1992 1,132
(C,P).................. (building construction), Providence,
Rhode Island
Peter S. Damon (A,P).... 60 President and Chief Executive Officer, 1991 1,033(d)
Bank of Newport, Newport, Rhode
Island
Peter B. Freeman (A,F).. 63 Corporate Director and Trustee, 1979 2,292
Providence, Rhode Island
Larry A. Liebenow 52 President and Chief Executive Officer 1994 1,000
(A,F).................. of Quaker Fabric Corporation
(upholstery manufacturer), Fall
River, Massachusetts
Wesley W. Marple, Jr. 63 Professor of Business Administration, 1976 1,885(e)
(A,C).................. Northeastern University, Boston,
Massachusetts
Jacek Makowski (F,P).... 65 Investor Boston, Massachusetts 1995 200
Donald G. Pardus........ 55 Chairman of the Board of Trustees and 1982 39,441(c)
Chief Executive Officer of the
Association
Robert G. Powderly...... 48 Executive Vice President of the -- 9,363(c)
Association
Margaret M. Stapleton 59 Vice President, John Hancock Mutual 1977 1,326
(C,F).................. Life Insurance Company, Boston,
Massachusetts
John R. Stevens......... 55 President and Chief Operating Officer 1990 23,780(c)
of the Association
W. Nicholas Thorndike 62 Corporate Director and Trustee, 1991 2,146
(C,F).................. Brookline, Massachusetts
Trustees and executive officers as a group.......................................... 102,161(f)
</TABLE>
- --------
(A), (C), (F), and (P) indicate member of Audit, Compensation and Nominating,
Finance or Pension Trust Committees, respectively.
(a) Unless otherwise indicated, beneficial ownership is based on sole
investment and voting power. Each nominee's ownership represents less than
two-tenths of one percent of the outstanding common shares of the
Association.
(b) In addition, Mr. Boss owns 5 shares of Blackstone Valley Electric
Company's 4.25% Preferred Stock.
(c) Jointly owned with spouse except for 387, 1,070, 4,525, 1,505 and 1,602
shares held under the Association's Employees' Savings Plan for Messrs.
Burns, Carney, Pardus, Powderly and Stevens, respectively, as to which
each has voting power, and 3,886, 6,138, 24,194, 6,357 and 16,905 shares
held under the Eastern Utilities Associates Restricted Stock Plan by
Messrs. Burns, Carney, Pardus, Powderly and Stevens, respectively, as to
which each has voting power. Also included are 191, 2,642, 1,324 and 1,053
shares individually owned by Messrs. Burns, Pardus, Powderly and Stevens.
(Footnotes continued on following page)
3
<PAGE>
(Footnotes continued from preceding page)
(d) Jointly owned with spouse, except for 200 shares held individually.
(e) In addition, Mr. Marple's spouse owns 263 common shares. Mr. Marple
disclaims any beneficial interest in such shares.
(f) Represents approximately five-tenths of one percent of total outstanding
common shares.
The Association was informed by statements filed on Schedule 13G and 13D
that the groups listed in the table below were the beneficial owners of 5% or
more of the Association's outstanding common shares. The table sets forth
information concerning such ownership as of December 31, 1995.
<TABLE>
<CAPTION>
AMOUNT OF % OF
NAME AND ADDRESS OF OUTSTANDING SHARES OUTSTANDING
BENEFICIAL OWNER BENEFICIALLY OWNED COMMON SHARES
------------------- ------------------ -------------
<S> <C> <C>
Capital Research and 1,280,000 6.3%
Management Company(1)..
333 South Hope Street
Los Angeles, CA 90071
FMR Corporation(1)...... 1,142,581 5.6%
82 Devonshire Street
Boston, MA 02109
</TABLE>
- --------
(1) Sole dispositive power.
COMPENSATION AND OTHER TRANSACTIONS
SUMMARY COMPENSATION TABLE
Information is set out below as to compensation paid by the Association and
its subsidiaries for the years 1993, 1994 and 1995, to each of the five
highest paid executive officers of the Association whose aggregate cash
compensation for 1995 exceeded $100,000.
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
----------------------------------------- ------------
OTHER RESTRICTED
FISCAL INCENTIVE ANNUAL STOCK ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1) AWARDS(2) COMPENSATION(3)
- --------------------------- ------ -------- --------- --------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Donald G. Pardus
Chairman and Chief
Executive Officer....... 1995 $400,025 $ 85,000 $13,696 $319,400 $10,000
1994 390,025 100,000 13,083 -- 9,750
1993 375,025 137,500 8,444 -- 8,438
John R. Stevens
President and Chief
Operating Officer....... 1995 $312,025 $ 68,000 $ 7,300 $202,561 $ 7,800
1994 300,025 80,000 13,475 -- 7,500
1993 275,025 107,500 12,071 -- 6,188
Robert G. Powderly
Executive Vice 1995 $168,025 $ 32,787 $ 9,790 $ 71,024 $ 4,200
President.............. 1994 156,025 40,999 8,350 -- 3,900
1993 143,025 44,559 8,710 -- 3,218
John D. Carney
Executive Vice 1995 $155,775 $ 32,787 $ 4,025 $ 72,750 $ 3,894
President.............. 1994 140,025 34,207 4,229 -- 3,500
1993 134,025 38,867 6,618 -- 3,015
Richard M. Burns
Comptroller............. 1995 $134,525 $ 18,785 -- $ 50,577 $ 3,363
1994 130,025 22,005 -- -- 3,245
1993 125,025 25,621 -- -- 2,188
</TABLE>
(Footnotes on following page)
4
<PAGE>
(Footnotes for preceding page)
- --------
(1) Represents amount reimbursed for tax liability accruing as a result of
personal use of company-owned automobiles.
(2) Aggregate amount and value (including the value reflected in the table
under "Restricted Stock Awards") of shares held under the Association's
Restricted Stock Plan to the officers listed above are as follows:
Mr. Pardus, 13,887 shares, $319,400; Mr. Stevens, 8,807 shares, $202,561;
Mr. Powderly, 3,088 shares, $71,024; Mr. Carney, 3,163 shares, $72,750;
and Mr. Burns, 2,199 shares, $50,577. Dividends are paid on these shares.
(3) Contributions made under the Association's Employees' Savings Plan.
The Employees' Retirement Plan of Eastern Utilities Associates and its
Affiliated companies (the "Pension Plan") is a tax-qualified defined benefit
plan available to employees who have completed one year of service and have
attained the age of twenty-one. All of the officers referred to in the Summary
Compensation Table above participate in the Pension Plan. Trustees who are not
also employees of the Association and its subsidiaries (the "EUA System") are
not covered by the Pension Plan. The benefits of participants become fully
vested after five years of service. Annual lifetime benefits are determined
under formulas applicable to all employees, regardless of position, and the
amounts depend on length of credited service and salaries prior to retirement.
Benefits are equal to one and six-tenths percent of salaries (averaged over
the four years preceding retirement) for each year of credited service up to
thirty-five, reduced for each year by one and two-tenths percent of the
participants' estimated age sixty-five Social Security benefit, plus seventy-
five hundredths percent of salaries for each year of credited service in
excess of thirty-five years up to the Pension Plan maximum of forty years.
Any contributions to provide benefits under the Pension Plan are made by the
EUA System in amounts determined by the Pension Plan's actuaries to meet the
funding standards established by the Employee Retirement Income Security Act
of 1974. Any contributions are actuarially determined and cannot appropriately
be allocated to individual participants. The annual benefits shown in the
table below are straight life annuity amounts, without reduction for primary
Social Security benefits as described above. Federal law limits the annual
benefits payable from qualified pension plans in the form of a life annuity,
after reduction for Social Security benefits, to $120,000 (for 1995 and 1996)
plus adjustments for increases in the cost of living. The number of years of
service credited at present under the Pension Plan to Messrs. Pardus, Stevens,
Carney, Powderly and Burns are thirty-three, thirty, twenty-nine, sixteen and
twenty, respectively.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
AVERAGE ANNUAL -----------------------------------------------------
SALARY 15 20 25 30 35 40
- -------------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
$100,000................. $ 24,000 $ 32,000 $ 40,000 $ 48,000 $ 56,000 $ 59,750
200,000................. 48,000 64,000 80,000 96,000 112,000 119,500
300,000................. 72,000 96,000 120,000 144,000 168,000 179,250
400,000................. 96,000 128,000 160,000 192,000 224,000 239,000
500,000................. 120,000 160,000 200,000 240,000 280,000 298,750
600,000................. 144,000 192,000 240,000 288,000 336,000 358,500
</TABLE>
The Association has a Key Executive Plan for certain officers of the
Association and its subsidiaries. This plan provides for the annual payment of
supplemental retirement benefits equal to 25% of the officer's base salary
when he retires, for a period of fifteen (15) years following the date of
retirement. In addition, in the event of the death of the participant prior to
retirement an amount equal to 200% of the officer's base salary at that time
will be paid to his beneficiary. A grantor trust has been established by the
Association to help ensure the performance of its payment obligations under
the Key Executive Plan. Any amount not covered by trust payments or otherwise
will be paid from funds available to the EUA System.
5
<PAGE>
The Association maintains non-qualified, unfunded retirement plans (the
"Restoration Plans") to restore benefits under the qualified plans' formulas
which are not covered under the qualified plan trusts due to federal
limitations on either earnings, contributions or benefits. Payments or
contributions which exceed the applicable federal limitations are made outside
the qualified plans in the same manner and under the same conditions as are
applicable to benefits payable from, or contributions payable to, the
qualified plans. A grantor trust has been established by the Association to
help ensure the performance of its payment obligations under these plans. Any
amounts not covered by trust payments or otherwise will be paid from funds
available to the EUA System.
CHANGE-IN-CONTROL ARRANGEMENTS
Severance agreements with executive officers of the Association and certain
of its affiliates provide that an officer's rate of compensation, benefits,
position, responsibilities and other conditions of employment will not be
reduced during the term of the agreement, which is thirty-six months
commencing upon the date on which a Change in Control, as defined in the
agreements, of the Association occurs. If within thirty-six months after a
Change in Control the officer's employment is terminated for any reason other
than Cause, as defined in the agreements, the Association will, (i) pay the
officer within five business days a lump-sum cash amount generally equal to
the present value of the additional wages and retirement benefits that the
executive would have received in return for completing an additional three
years of service, (ii) continue or vest certain fringe benefits and common
share grants, (iii) reimburse legal fees and expenses incurred as a result of
the termination or to enforce the provisions of the severance agreement and
(iv) reimburse for a portion of the taxes on certain of the foregoing
payments, including any amount contributing a "parachute payment" under the
Internal Revenue Code. If the officer leaves the employ of the Association or
a subsidiary following a reduction in his position, compensation,
responsibilities, authority or other benefits existing prior to the Change in
Control, or suffers a relocation of regular employment of more than fifty
miles, such departure will be deemed to be a termination for reasons other
than Cause.
COMPENSATION OF TRUSTEES
Each non-management Trustee of the Association receives, as a standard
arrangement, a retainer fee for all services as a Trustee in the amount of
$14,000 annually, with an additional $750 fee for each Trustees' or Committee
meeting attended. Effective January 1, 1996, each committee chairperson
receives an annual retainer fee in the amount of $2,500. Upon leaving the
Board, each non-management Trustee who has attained the age of sixty and who
has served as a member of the Board of Trustees for at least five years is
entitled to an annual amount, equal to the then current annual retainer paid
to active Trustees, for as many full years as that Trustee has served as a
Trustee. In the event of a change in control of the Association, a grantor
trust has been established by the Association to ensure the performance of its
payment obligations under this retirement plan.
REPORT OF THE COMPENSATION AND NOMINATING COMMITTEE
ON COMPENSATION OF EXECUTIVE OFFICERS
The compensation philosophy of the Board of Trustees' Compensation and
Nominating Committee (the "Committee") and the Association is to be
competitive with prevailing utility industry compensation norms when
satisfactory results are achieved and surpass market norms when exceptional
results are reached. (Since the total compensation for any executive is still
significantly below the $1 million threshold at which tax deductions are
limited under the Internal Revenue Code, the Committee has not had to address
issues relative thereto.) The Committee is composed entirely of independent,
non-employee Trustees.
Compensation of executive officers, including the Chief Executive Officer
("CEO"), is a mix of three components, base salary, annual cash incentives and
long-term incentives ("Stock Grants"). In recent years, the Association has
moved toward placing a greater percentage of compensation at risk through the
use of annual cash incentives and Stock Grants. The incentives are designed to
reinforce the implementation of both short and long-term objectives needed to
build the Association's business and to retain the talent required to manage
the Association's business
6
<PAGE>
BASE SALARY
The Committee, working with an independent compensation consultant, annually
reviews the base salary of the CEO and the four other executive officers named
in the Summary Compensation Table on page 5. Each executive officer, including
those named above, is assigned a salary range which is established using
compensation data for comparable officer positions in other utilities. These
other utilities: 1) generally have revenue at or about the same level of the
Association; 2) operate in generally the same geographic area as the
Association; and 3) have other characteristics similar to those of the
Association. None of the comparative utilities are included in the Standard &
Poor's 26 Electric Power Utilities Index ("S&P 26 Utilities Index") because
their level of annual revenue is less than those utilities included in that
Index.
Each salary range has a minimum amount, a position value (reasonably
equivalent to market value) and an excess amount which is 10% above the
position value. Base salary is limited to no more than the excess amount.
Although no specific measure of corporate performance is used in determining
base salary, the Committee sets the base salaries for each of the officers
listed in the Summary Compensation Table after considering all of the
following factors: 1) the financial and operational performance of the
Association; 2) observed individual performance; 3) time in current position;
4) existing base salary relative to position value; and, 5) except for the
CEO, input of the CEO. Generally, the base salary of the CEO and the four
other officers approximates the averages for similar positions in the
comparable utilities described above. Salary increases for 1995 were based on
the five factors outlined above.
ANNUAL CASH INCENTIVES
The Association has had an Annual Cash Incentive Plan since 1987. Each year
the Committee, working with an independent compensation consultant, reviews
the Annual Cash Incentive Plan. The 1995 version of the Plan applicable to
officers, other than the CEO and COO, contained two Performance Objectives
which were approved by the Committee in early 1995. One Objective measures
Earnings Per Average Common Share against a target and the other measures the
Cost of Service Per Customer against a peer group of 20 New England utilities.
Each Performance Objective represents 40% of the total objectives.
The 1995 Earnings Per Average Common Share (before charges for Voluntary
Retirement Incentive and Net Loss of Disposition of Cogeneration Operations)
equaled the threshold amount necessary for an incentive award, but was less
than the target amount. Peformance under the Cost of Service Per Customer
Objective exceeded the 1995 target.
With respect to the peer group of 20 New England utilities, none are
included in the S&P 26 Utilities Index. The peer group used to measure the
Cost of Service Per Customer was selected because it includes virtually all of
the electric utilities located in the same geographic area as the Association
(New England).
The remaining 20% of the total Objective was discretionary. In prior years,
each officer had several individual goals which formed the primary basis for
determining the level of their individual discretionary awards. In 1995, the
officers had a common goal of maximizing the benefits of the Core Electric
Business reorganization which took place in April 1995.
The Committee also considers and sets Annual Cash Incentive Awards to the
CEO and the COO. A portion of their 1995 Cash Incentive Award was determined
using the same Performance Objectives described above (Earnings Per Average
Common Share (20% weight) and Cost of Service Per Customer (20% weight)). An
additional Performance Objective of Total Return Versus the S&P 26 Utilities
Index (20% weight) was also utilized for the CEO and COO.
Earnings Per Average Common Share equaled the threshold amount necessary for
an incentive award, while Performance under the Cost of Service Per Customer
Objective exceeded the 1995 target. The threshold for Total Return Versus the
S&P 26 Utilities Index was not met and no award was paid for that Objective.
7
<PAGE>
The remaining 40% in Cash Incentive Awards is discretionary. In determining
the level of discretionary awards to the CEO and COO, weight was given to
several factors, including performance measured against a series of six
specific goals designed primarily to measure financial and operating
performance. Goals for 1995 related to Return on Average Common Equity,
Price/Earnings Ratio, Earnings Contribution from EUA Cogenex, and three
Qualitative measures. Three of the six goals were met in 1995. The 1995 Cash
Incentive Awards to the CEO and COO are reflected in the Summary Compensation
Table on page 5 under "Annual Compensation--Incentive Bonus."
LONG-TERM INCENTIVES (STOCK PLAN)
The Association established a restricted stock grant plan in 1989 which, as
amended since then, is now the Eastern Utilities Associates Restricted Stock
Plan. The purpose of the plan is to assist the Association in securing,
retaining and motivating key executives and to recognize their efforts on
behalf of the Association through awards of common shares of the Association.
Such grants may be awarded every third year and the currently outstanding
awards vest on the fifth anniversary of the date of the grant if the executive
has continued in the employment of the Association through that date. Awards
under the plan for 1995 to the executives listed in the Summary Compensation
Table on page 5 are shown separately.
COMPENSATION AND
NOMINATING COMMITTEE
Paul J. Choquette, Jr Margaret M. Stapleton
Wesley W. Marple, Jr. W. Nicholas Thorndike
8
<PAGE>
CORPORATE PERFORMANCE GRAPH
The following table compares total shareholder returns over the last five
fiscal years to the Standard & Poors 500 Stock Index ("S&P 500") and the S&P
26 Utilities Index. Total return values for the S&P 500, S&P 26 Utilities
Index and Eastern Utilities Associates were calculated based on cumulative
total return values assuming reinvestment of dividends.
TOTAL RETURN SUMMARY
BASED ON INITIAL INVESTMENT OF $100
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG EASTERN UTILITIES ASSOCIATES, THE S&P 500 INDEX
AND THE S&P 26 UTILITIES INDEX
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
EASTERN UTILITIES ASSOCIATES S&P 500 S&P 28 UTILITIES INDEX
<S> <C> <C> <C>
12/90 100 100 100
12/91 93 130 130
12/92 118 140 138
12/93 141 155 155
12/94 118 157 135
12/95 135 215 177
</TABLE>
- --------------------------------------------------------------------------------
EASTERN UTILITIES ASSOCIATES S&P S&P 26 UTILITIES INDEX
----[ ]---- ----+---- ----.----
- --------------------------------------------------------------------------------
* $100 INVESTED ON 12/31/90 IN STOCK OR INDEX-
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING DECEMBER 31.
THE FOREGOING REPORT OF THE COMMITTEE AND THE CORPORATE PERFORMANCE GRAPH
THAT APPEARS IMMEDIATELY AFTER SUCH REPORT SHALL NOT BE DEEMED TO BE
SOLICITING MATERIAL OR TO BE FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES EXCHANGE ACT OF 1934 OR
INCORPORATED BY REFERENCE IN ANY DOCUMENT SO FILED.
COMMITTEES
In addition to eleven meetings of the Trustees, meetings were held in 1995
of each of the four standing Committees of the Association: Audit Committee
(two); Compensation and Nominating Committee (four); Finance Committee (four);
and Pension Trust Committee (three). Each of the Trustees attended at least
75% of
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the total number of meetings of the Trustees and of Committees on which he or
she served. All members of the Committees are non-management Trustees; the
Chief Executive Officer of the Association serves as Secretary of each
Committee.
The general function of each standing Committee is outlined below.
The Audit Committee recommends the selection or retention of independent
auditors, consults with them with respect to the plan of audit, reviews with
them their audit report and consults with them and with the Association's
internal audit staff as to the adequacy of internal controls.
The Finance Committee monitors and reviews financial matters, including
financial forecasts. It makes recommendations to the Trustees with respect to
changes in dividend policy, the capital structures of the Association and of
its subsidiaries, and other financial issues.
The Pension Trust Committee reviews recommendations as to amendments to the
Retirement Plan and the Employees' Savings Plan, monitors the performance of
the investment managers for each plan's trust fund, determines overall
objectives of the trust funds, reviews the annual actuarial report, reviews
the appropriateness of certain actuarial assumptions and makes recommendations
to the Trustees.
The Compensation and Nominating Committee reviews the compensation of the
Chairman, the President, the Executive Vice Presidents and the Comptroller and
the amount of fees to be paid to Trustees, monitors the Annual Cash Incentive
Plan and the Restricted Stock Plan, considers candidates (including candidates
recommended by Shareholders) to fill vacancies among the Trustees, reviews
membership on Committees of the Trustees and makes recommendations to the
Trustees. Shareholder recommendations should be submitted in writing to the
Chairman or the Secretary of the Association. This Committee would recommend a
successor to the Chief Executive Officer if that office became vacant and
would also deliberate on any plan in which officers or Trustees as a class
would be eligible to receive any additional compensation or related benefit
such as deferred compensation or stock options. All members are non-employee
Trustees and none has any direct or indirect material interest in or
relationship with the Association outside of his or her position as Trustee.
AUDITORS
Coopers & Lybrand L.L.P., Certified Public Accountants, are the
Association's auditors. Audit services of Coopers & Lybrand L.L.P. for 1995
included the examination, reporting and certification of the consolidated
financial statements of the Association contained in the Annual Report to
Shareholders and services related to certain filings with the Securities and
Exchange Commission.
Representatives of Coopers & Lybrand L.L.P. will be present at the Annual
Meeting, will have an opportunity to make a statement, and will be available
to answer appropriate questions
OTHER MATTERS
Management does not intend to bring before the meeting any matters other
than those specified and has no knowledge of any other matters which may be
brought up by other persons. However, if any other matters not now known
properly come before the meeting or any adjournment thereof, the persons named
in the enclosed form of proxy, including any substitutes, are expected to vote
said proxy in accordance with their judgment on such matters.
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EXPENSES
The expenses in connection with the solicitation of the enclosed form of
proxy will be borne by the Association. In order to obtain the requisite
quorum at the Annual Meeting, it may be necessary to solicit proxies by
telephone, telegraph or personal interview. The Association does not expect to
pay any compensation for the solicitation of proxies, but will pay brokers and
other persons holding shares in their names or in the names of nominees their
expenses, nominal in amount, for sending proxy material to principals and
obtaining their proxies.
SHAREHOLDER PROPOSALS
The 1997 Annual Meeting of Shareholders is tentatively scheduled to be held
on or about May 19, 1997. Proposals of Shareholders intended to be presented
at the meeting must be received by the Association on or before November 29,
1996.
THE ASSOCIATION WILL FURNISH WITHOUT CHARGE A COPY OF ITS ANNUAL REPORT ON
FORM 10-K, INCLUDING FINANCIAL STATEMENTS AND SCHEDULES THERETO, REQUIRED TO
BE FILED WITH THE SECURITIES AND EXCHANGE COMMISSION FOR FISCAL YEAR 1995 UPON
WRITTEN REQUEST TO CLIFFORD J. HEBERT, JR., TREASURER AND SECRETARY, EASTERN
UTILITIES ASSOCIATES, P.O. BOX 2333, BOSTON, MASSACHUSETTS 02107.
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