SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [ ]
Filed by a Party other than the Registrant [X]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
PECO ENERGY COMPANY (FORMERLY KNOWN AS PHILADELPHIA ELECTRIC COMPANY)
---------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
T.D. CUTLER; H.D. WILLIAMS (PECO ENERGY);
T. ROCH (ALLEN, LANE AND SCOTT (THIRD PARTY FILER))
---------------------------------------------------------------------
(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(j)(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(1):
__________________________________________________________________
4) Proposed maximum aggregate value of transaction:
__________________________________________________________________
[ ] 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:
__________________________________________________
- ---------------
(1) Set forth the amount on which the filing fee is calculated and state
how it was determined.
<PAGE>
PECO ENERGY COMPANY
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
APRIL 13, 1994
Dear Shareholder:
YOU ARE CORDIALLY INVITED TO ATTEND THE 1994 ANNUAL MEETING OF
SHAREHOLDERS WHICH WILL BE HELD ON WEDNESDAY, APRIL 13, 1994, AT 9:30 A.M.
IN THE DELAWARE/NEW JERSEY ROOM AT THE VALLEY FORGE CONVENTION CENTER, 1200
FIRST AVENUE, KING OF PRUSSIA, PENNSYLVANIA. THE VALLEY FORGE CONVENTION
CENTER IS LOCATED APPROXIMATELY TWO MILES NORTHWEST OF THE KING OF PRUSSIA
MALL. (SEE MAP AND DIRECTIONS LOCATED ON PAGES 24 AND 25.)
The purposes of the Meeting are as follows:
1. To elect four Class I directors to serve for three-year terms;
2. To approve the appointment of Coopers & Lybrand as auditors for the
year 1994;
3. To consider and take action on the shareholder proposals beginning
on page 18 of the Proxy Statement (if such proposals are presented
at the Meeting); and
4. To transact any other business that may properly come before the
Meeting.
Holders of Common Stock of record at the close of business February 23,
1994, are eligible to vote upon each of the matters listed above. The
number of shares indicated on your proxy represents the total number of
shares of Common Stock held by you as of February 23, 1994, including any
shares held under the Dividend Reinvestment and Stock Purchase Plan.
At the Meeting, we will present a report on our current operations and
future plans, followed by a question and answer period during which we will
welcome comments and questions from those present.
We hope you will indicate your continuing interest in the Company and
your support of the Board of Directors by completing, signing and mailing
your proxy promptly. In order to have your proxy voted, please allow the
postal service sufficient time to return your proxy prior to the meeting
date of April 13, 1994.
L. S. BINDER J.F. PAQUETTE, JR.
Secretary Chairman of the Board
Philadelphia, Pennsylvania 19101
March 7, 1994
<PAGE>
PECO ENERGY COMPANY
2301 MARKET STREET
P. O. BOX 8699
PHILADELPHIA, PENNSYLVANIA 19101
PROXY STATEMENT
The accompanying proxy, solicited by the Board of Directors, may be
revoked by the shareholder at any time prior to its exercise by attending
the Meeting and voting in person, by notifying the Secretary of the Company
in person or in writing, or by filing a later-dated proxy. If the
shareholder specifies a choice with respect to any matter to be acted upon,
the shares will be voted accordingly. If no choice is specified, the proxy
will be voted as set forth below.
The approximate date on which this Proxy Statement and proxy are being
sent to shareholders is March 7, 1994. The solicitation of proxies
generally will be by mail. The Company has engaged the firm of Morrow &
Co. to solicit proxies on its behalf at a cost of approximately $70,000;
however, some personal solicitation may be conducted by Company employees.
The Company will bear all costs of solicitation together with the expenses
of banks and brokers which, at the Company's request, will forward proxies
to beneficial owners of shares held of record by such banks and brokers.
On February 23, 1994, the Company had outstanding 221,520,099 shares of
Common Stock. Record holders of Common Stock as of that date are entitled
to one vote per share on all matters presented to the Meeting.
* * *
PROPOSAL 1. ELECTION OF DIRECTORS
The Board of Directors presently consists of fifteen members, divided
into three equal classes of five directors. The terms of the classes are
staggered so that the term of a class expires at each Annual Meeting.
The terms of the five directors in Class I are scheduled to expire at
the April 13, 1994 Annual Meeting. A resolution adopted by the Board of
Directors in 1973 provides that a director will withhold his name from
nomination for re-election to the Board of Directors at the Annual Meeting
next following his 70th birthday. Pursuant to this resolution, Class I
Director Robert D. Harrison, a director since 1970, is now 70 and is
withholding his name from renomination. As a result, the Board of
Directors has adopted a resolution setting the number of directors at
fourteen, with four directors in Class I. The remaining four Class I
directors are being renominated for election at the April 13, 1994 Annual
Meeting.
If one or more of these nominees becomes unable or unwilling to serve
at the time of the Meeting, the shares represented by proxy will be voted
for the remaining nominees and for any substitute nominee(s) designated by
the Board of Directors or, if none, the size of the Board of Directors will
be reduced accordingly. The Board of Directors does not anticipate that
any nominee will be unavailable or unable to serve.
The election of directors requires the affirmative vote of the holders
of a majority of the shares present, in person or by proxy, and entitled to
vote at the Meeting. Abstentions and broker non-votes will not constitute
or be counted as "votes" cast for purposes of the Meeting. Shares
represented by properly executed proxies will be voted for the four Class I
nominees listed below unless otherwise specified on a shareholder's proxy
card. Any shareholder who wishes to withhold authority from the
proxyholders to vote for the election of directors, or to withhold
authority to vote for any individual nominee, may do so by marking the
proxy to that effect. No proxy may be voted for a greater number of
persons than the number of nominees named.
<PAGE>
EQUITY SECURITIES BENEFICIALLY
OWNED ON DECEMBER 31, 1993 (A)
------------------------------
NOMINEES FOR DIRECTOR COMMON SHARES
- ---------------------------------------------------- -------------
CLASS I -- TERM EXPIRING IN 1997
RICHARD G. GILMORE ............................. 1,057 (B)
RICHARD H. GLANTON ............................. 2,800
JOSEPH J. MCLAUGHLIN ........................... 2,881 (B)
CORBIN A. MCNEILL, JR. ......................... 3,601
INCUMBENT DIRECTORS
- ----------------------------------------------------
CLASS II -- TERM EXPIRING IN 1995
SUSAN W. CATHERWOOD ............................ 1,122
NELSON G. HARRIS ............................... 3,295
EDITHE J. LEVIT ................................ 4,792
JOHN M. PALMS .................................. 247
JOSEPH F. PAQUETTE, JR. ........................ 28,614 (B)
CLASS III -- TERM EXPIRING IN 1996
M. WALTER D'ALESSIO ............................ 1,652
JAMES A. HAGEN ................................. 1,127 (B)
JOSEPH C. LADD ................................. 482
KINNAIRD R. MCKEE .............................. 623 (B)
RONALD RUBIN ................................... 1,122 (B)
OTHER EXECUTIVE OFFICERS
- ----------------------------------------------------
WILLIAM L. BARDEEN ............................. 6,443
JAMES W. DURHAM ................................ 10,045
DICKINSON M. SMITH ............................. 2,885
All current executive officers and directors as a group (31 persons)
owned beneficially 113,522 shares of Common Stock at December 31, 1993,
representing less than one percent of the shares of Common Stock
outstanding.
- ---------------
NOTE A -- In addition, each of the directors and executive officers may be
deemed to have beneficial ownership of Common Stock which
currently may be acquired upon the exercise of stock options
granted under the Company's Long-Term Incentive Plan as follows:
R. G. Gilmore 0 E. J. Levit 8,000 K. R. McKee 3,000
R. H. Glanton 0 J. M. Palms 8,000 R. Rubin 8,000
J. J. McLaughlin 8,000 J. F. Paquette, Jr. 160,499 W. L. Bardeen 10,000
C. A. McNeill, Jr. 144,500 M. W. D'Alessio 8,000 J. W. Durham 35,000
S. W. Catherwood 8,000 J. A. Hagen 8,000 D. M. Smith 89,753
N. G. Harris 8,000 J. C. Ladd 8,000
All current executive officers and directors as a
group (31 persons) 857,868
NOTE B -- Does not include an aggregate of 510,693 shares of Common Stock
held under PECO Energy Company's Service Annuity Plan. Messrs.
Gilmore, Hagen, McKee, McLaughlin, Paquette and Rubin are
members of the Executive Committee which monitors the investment
policy and performance of the investments under the Plan. For a
more detailed description of the Executive Committee see "Audit,
Compensation, Executive, Nominating and Nuclear Committees"
section beginning on page 6.
* * *
2
<PAGE>
BUSINESS BACKGROUND OF NOMINEES AND DIRECTORS
NOMINEES FOR DIRECTORS -- TERMS EXPIRING IN 1997
|-----------| Richard G. Gilmore, age 66, was originally elected to
| | the Board of Directors in 1979. In 1983, he resigned
| | from the Board when he accepted the position of Finance
| | Director of the City of Philadelphia. At that time, he
| | was also Vice President and Treasurer of The Girard
| | Company (now Mellon Bank Corporation) and Executive Vice
|-----------| President and Treasurer of Girard Bank, its subsidiary,
[Photo of by which he had been employed since 1972. He resigned
Mr. Gilmore] from the position of Finance Director in December 1985,
at which time he was re-elected to the Board. In 1986,
he was elected Senior Vice President, Finance and Chief
Financial Officer of the Company and served until 1991
when he retired. Mr. Gilmore also is a director of CSS
Industries, Inc. and a member of the Board of Trustees
of various Legg Mason mutual funds.
|-----------| Richard H. Glanton, age 47, was elected to the Board of
| | Directors in 1991. Since 1987, he has been a partner of
| | the law firm of Reed Smith Shaw & McClay. From 1983 to
| | 1986, Mr. Glanton was a partner of Wolf, Block, Schorr &
| | Solis-Cohen. He also is a director of General Accident
| | Insurance Company of North America and President of the
|-----------| Barnes Foundation. See footnote 1 on page 6.
[Photo of
Mr. Glanton]
|-----------| Joseph J. McLaughlin, age 66, was elected to the Board
| | of Directors in 1974. In 1974, Mr. McLaughlin was
| | elected President and Chief Executive Officer of the
| | Beneficial Mutual Savings Bank. He retired from those
| | positions in 1993. He also is a director of the
| | Beneficial Mutual Savings Bank and Paper Manufacturers
|-----------| Company.
[Photo of
Mr. McLaughlin]
|-----------| Corbin A. McNeill, Jr., age 54, was elected to the Board
| | of Directors in 1990. From 1985 to 1987, Mr. McNeill
| | served as Vice President, Nuclear, Public Service
| | Electric and Gas Company. In 1987, he was appointed
| | Senior Vice President, Nuclear, Public Service Electric
| | and Gas Company. In 1988, he was named Philadelphia
|-----------| Electric Company's Executive Director, Nuclear, on loan
[Photo of from Public Service Electric and Gas Company, and later
Mr. McNeill, Jr.] was elected Executive Vice President, Nuclear of the
Company. In 1990, he was elected President and Chief
Operating Officer.
3
<PAGE>
INCUMBENT DIRECTORS -- TERMS EXPIRING IN 1995
|-----------| Susan W. Catherwood, age 50, was elected to the Board of
| | Directors in 1988. From 1978 to 1984, Mrs. Catherwood
| | was Program Coordinator for the Academy of Music
| | Anniversary Concerts. From 1982 to 1991, she was
| | Chairman, Board of Overseers, University Museum,
| | University of Pennsylvania. In 1991, she became
|-----------| Chairman, Trustee Board, University of Pennsylvania
[Photo of Health System (formerly University of Pennsylvania
Mrs. Catherwood] Medical Center). She also is a director of The Glenmede
Corporation and The Glenmede Trust Company.
|-----------| Nelson G. Harris, age 67, was elected to the Board of
| | Directors in 1989. From 1981 to 1991, Mr. Harris was
| | President and Chief Executive Officer of Tasty Baking
| | Company, a diversified company engaged in the
| | manufacture and distribution of consumer and industrial
| | products which include food and graphic art materials.
|-----------| In 1991, Mr. Harris was elected Chairman and Chief
[Photo of Executive Officer of Tasty Baking Company. In 1992, he
Mr. Harris] retired as Chairman and Chief Executive Officer and was
elected Chairman of Tasty Baking Company's Executive
Committee. Mr. Harris also is a director and Vice
Chairman of American Water Works Company, Inc. and
director of CoreStates Financial Corporation and Tasty
Baking Company.
|-----------| Edithe J. Levit, M.D., age 67, was elected to the Board
| | of Directors in 1980. Dr. Levit is President Emeritus
| | and a life member of the National Board of Medical
| | Examiners, an independent, non-profit agency, providing
| | evaluation services for the medical profession. Prior
| | to 1987, she was President and Chief Executive Officer
|-----------| of that agency. She also is a member of the Board of
[Photo of Directors of Germantown Savings Bank.
Dr. Levit]
|-----------| John M. Palms, age 58, was elected to the Board of
| | Directors in 1990. From 1982 to 1988, Dr. Palms served
| | as Vice President for Academic Affairs at Emory
| | University. In 1988, he became a Charles Howard
| | Chandler Professor of Physics at Emory University. Dr.
| | Palms was elected President of Georgia State University
|-----------| in 1989 and, in 1991, was elected President of the
[Photo of University of South Carolina. He also is a director of
Dr. Palms] Fortis Holdings Inc., Nations Bank of South Carolina,
N.A., and Policy Management System Corporation.
4
<PAGE>
|-----------| Joseph F. Paquette, Jr., age 59, was elected to the
| | Board of Directors in 1988. He was Vice President,
| | Finance and Accounting and Chief Financial Officer of
| | the Company from 1978 until his resignation in 1986, at
| | which time he became Executive Vice President and Chief
| | Financial Officer of Consumers Power Company, an
|-----------| electric and gas utility in Michigan. In 1987, he was
[Photo of elected President and Chief Operating Officer of
Mr. Paquette, Jr.] Consumers Power Company and President of its parent
company, CMS Energy Corporation. In March 1988, he
returned to the Company and was elected President, Chief
Operating Officer and a director. In April 1988, he was
elected Chairman of the Board and Chief Executive
Officer. He also is a director of Associated Electric &
Gas Insurance Services Limited, Meridian Bancorp, Inc.,
and Meridian Bank.
INCUMBENT DIRECTORS -- TERMS EXPIRING IN 1996
|-----------| M. Walter D'Alessio, age 60, was elected to the Board of
| | Directors in 1983. Since 1982, Mr. D'Alessio has been
| | President and Chief Executive Officer of Latimer & Buck,
| | Inc., a mortgage banking and real estate development
| | finance subsidiary of Legg Mason. He also is a director
| | of the Philadelphia Stock Exchange and Pennsylvania Blue
|-----------| Shield.
[Photo of
Mr. D'Alessio]
|-----------| James A. Hagen, age 61, was elected to the Board of
| | Directors in 1990. From 1985 to 1988, Mr. Hagen served
| | as Executive Vice President -- Sales & Marketing, CSX
| | Transportation. In 1988, he became President --
| | Distribution Services Group, CSX Transportation. Mr.
| | Hagen was elected Chairman, President and Chief
|-----------| Executive Officer of Conrail, Inc. in 1989.
[Photo of
Mr. Hagen]
|-----------| Joseph C. Ladd, age 67, was elected to the Board of
| | Directors in 1977. Mr. Ladd served as President, Chief
| | Executive Officer and Director of Fidelity Mutual Life
| | Insurance Co. from 1971 to 1984. He served as Chairman
| | of the Board and Chief Executive Officer of Fidelity
| | Mutual Life Insurance Co. until 1989 and as Chairman of
|-----------| the Board from 1989 to 1992. Mr. Ladd is a director of
[Photo of CoreStates Financial Corporation, CoreStates Bank, N.A.,
Mr. Ladd] and Philadelphia Suburban Corporation.
5
<PAGE>
|-----------| Kinnaird R. McKee, age 64, was elected to the Board of
| | Directors in 1989. In 1988, Admiral McKee retired from
| | the U.S. Navy. From 1982 until 1988, he served as
| | Director, Navy Nuclear Propulsion. His career included
| | service as Director of Naval Warfare, Commander of the
| | U.S. Third Fleet, and Superintendent, U.S. Naval
|-----------| Academy. He is currently an engineering consultant. He
[Photo of also is a director of Entergy Corporation and Entergy
Mr. McKee] Operations Inc.
|-----------| Ronald Rubin, age 62, was elected to the Board of
| | Directors in 1988. Since 1976, Mr. Rubin has been a
| | General Partner of Richard I. Rubin & Co. Inc., a real
| | estate development and management company. He also is a
| | director of Continental Bank and Midlantic Corporation.
| |
|-----------|
[Photo of
Mr. Rubin]
(1) Richard H. Glanton is a partner of the law firm of Reed Smith Shaw &
McClay which provided legal services to the Company during 1993.
* * *
MEETINGS OF DIRECTORS
The total number of regular and special meetings of the Board of
Directors during 1993 was 13. Each director attended more than seventy-five
percent of the meetings of the Board and the meetings of committees of which
he or she was a member.
* * *
AUDIT, COMPENSATION, EXECUTIVE, NOMINATING AND NUCLEAR COMMITTEES
The Audit Committee consists of S. W. Catherwood (Chairman), M. W.
D'Alessio, R. H. Glanton, R. D. Harrison and J. C. Ladd. The Committee
meets quarterly. At each meeting, the Company's internal auditor reports on
completed audits and the audit program. During the year, the Committee
meets with the Company's independent auditors to review their audit of the
consolidated financial statements; to review the auditors' Report to
Management for the preceding year; to review their plans for conducting the
audit for the current year; to approve their services and fees; and to be
informed of proposed or new accounting practices. The Audit Committee met
four times during 1993.
The Compensation Committee consists of J. A. Hagen (Chairman), N. G.
Harris, J. C. Ladd and R. Rubin. The Committee meets as necessary on call
of the Chairman of the Committee. The Committee makes decisions pertaining
to compensation for the positions of Director, Chairman, President, Senior
Vice President and Vice President. These decisions, except for certain
decisions under the Long-Term Incentive Plan, are reviewed by the full
Board. The Committee also reviews and monitors management development
programs for officers and employees. The Compensation Committee met once
during 1993.
6
<PAGE>
The Executive Committee consists of J. F. Paquette, Jr. (Chairman),
R. G. Gilmore, J. A. Hagen, K. R. McKee, J. J. McLaughlin and R. Rubin. The
Committee meets quarterly. During intervals between meetings of the Board
of Directors, the Executive Committee may exercise all powers of the Board
of Directors in the management of all affairs of the Company. This
Committee also has fiduciary responsibilities associated with the Company's
Service Annuity Plan, including setting and monitoring the investment policy
and reviewing the transactions and performance of the investment managers.
The Executive Committee met four times during 1993.
The Nominating Committee consists of M. W. D'Alessio (Chairman), S. W.
Catherwood, R. H. Glanton, R. D. Harrison and J. M. Palms. The Committee
recommends to the Board of Directors candidates for election to the Board of
Directors, with such candidates to be sought from an appropriate variety of
sources such as those with managerial experience as business executives or
with suitable academic or scientific backgrounds. While the Committee
normally expects to be able to identify from its own resources an ample
number of qualified candidates, it will review recommendations from
shareholders of persons to be considered as nominees at the 1995 Annual
Meeting of Shareholders if such recommendations are submitted in writing to
the Secretary of the Company at the address of the Company set forth on page
1. The determination of nominees recommended by the Committee is within the
sole discretion of the Committee, and the final selection of nominees is
within the sole discretion of the Board of Directors. Therefore, no
assurance can be given that persons recommended by shareholders will be
nominated as directors. The Company's bylaws do not permit shareholders to
nominate candidates from the floor at the Annual Meeting without prior
notification to the Company Secretary. Any such notification would have to
include certain information detailed in the Company's bylaws. Shareholders
who desire to nominate a candidate from the floor at the 1994 Annual Meeting
should contact the Company's Secretary, Mrs. L. S. Binder. Nominations must
be received 14 days prior to the Annual Meeting (March 30, 1994). The
Nominating Committee met once during 1993.
The Nuclear Committee consists of R. D. Harrison (Chairman), R. G.
Gilmore, E. J. Levit, K. R. McKee, J. J. McLaughlin and J. M. Palms.
Effective April 1, 1994, Dr. Palms will succeed Mr. Harrison as Chairman of
the Nuclear Committee. The Committee was established in 1987 to assist the
Board of Directors in the proper discharge of the Board's responsibilities
for oversight of the nuclear operations of the Company. The Nuclear
Committee met twelve times during 1993.
* * *
REMUNERATION OF DIRECTORS
Directors who are not officers of the Company are remunerated as set
forth below and are reimbursed expenses, if any, for attendance at meetings:
$20,000 annual Board retainer
$ 1,000 per meeting attended
$ 2,000 annual retainer for Chairmanship of Audit, Nuclear and
Special Committees
$ 1,000 annual retainer for Chairmanship of Compensation and
Nominating Committees
7
<PAGE>
In addition to the remuneration stated above, directors who are not
officers of the Company receive options for 5,000 shares of the Company's
Common Stock when first elected to the Board, and receive options for 3,000
shares at each three-year anniversary of their election.
Directors who are also officers of the Company do not receive directors'
fees.
The Company has an unfunded Deferred Compensation Plan for non-officer
directors which permits such directors to defer all or a portion of their
remuneration. Amounts deferred will be credited with interest, compounded
quarterly, equal to the average prime commercial lending rate of The Chase
Manhattan Bank, N.A., in effect on the 15th day of each month, plus one-half
of one percent. The amounts deferred and the interest credited thereon are
unfunded obligations of the Company and may not be distributed to the
participant (except to meet a financial hardship) until that person ceases
to be a director, retires or reaches age 65.
The Company also has a retirement plan for directors. Benefits under
the plan are based upon years of service as a non-employee director. A
minimum of five years of service as a non-employee director is required to
be entitled to benefits. Unless a director selects early retirement,
benefit payments will commence at the age of 70 and will be paid quarterly
for life and cease upon death. The annual pension payable at normal
retirement will be equal to 50% of the annual Board retainer at the time of
retirement for five full years of service, with an additional 10% for each
additional full year of service up to ten years. For ten or more years of
non-employee director service, a director is entitled to 100% of the annual
retainer at the time of retirement.
* * *
EXECUTIVE COMPENSATION DISCLOSURE
The following three tables show information relating to the Chief
Executive Officer and the four most highly compensated executive officers
during the calendar year 1993.
8
<PAGE>
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
ALL
OTHER
COMPEN-
ANNUAL SATION
COMPENSATION LONG-TERM COMPENSATION ($)(A)
-------------------- --------------------------- --------
AWARDS PAYOUTS
----------------- ---------
RESTRICTED LONG-TERM
STOCK INCENTIVE
NAME AND SALARY BONUS OTHER AWARD(S) OPTIONS PLAN
PRINCIPAL POSITION YEAR ($) ($) ($)(A) ($) (#) PAYOUTS ($)
- -------------------------------- ------ ----- ------ --------- ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Joseph F. Paquette, Jr. 1993 425,534 403,262 0 0 40,000 0 0
Chairman of Board and 1992 420,151 376,567 0 0 100,000 139,500 0
Chief Executive Officer 1991 387,283 308,701 0 80,000 0
Corbin A. McNeill, Jr. 1993 350,990 186,697 0 0 24,000 0 0
President and Chief 1992 331,471 174,339 0 0 70,000 105,563 0
Operating Officer 1991 295,254 178,867 0 32,500 0
William L. Bardeen (B) 1993 292,319 115,372 0 0 15,000 0 0
Senior Vice President, 1992 238,008 99,113 0 0 60,000 0 0
Finance and Chief 1991 0 0 0 0 0
Financial Officer
James W. Durham (C) 1993 253,222 97,781 0 0 15,000 0 0
Senior Vice President 1992 234,840 91,302 0 0 35,000 87,188 0
and General Counsel 1991 216,927 113,601 0 25,000 0
Dickinson M. Smith (D) 1993 220,502 85,558 0 0 15,000 0 0
Senior Vice President, 1992 203,615 83,998 0 0 35,000 46,219 0
Nuclear 1991 195,015 99,400 0 25,000 0
(A) In accordance with the transitional provisions applicable to the
revised rules on executive officer and director compensation disclosure
adopted by the Securities and Exchange Commission, as interpreted by
the Commission's Staff, amounts of Other Annual Compensation and All
Other Compensation are excluded for 1991.
(B) Mr. Bardeen began his employment with the Company on February 18, 1992.
(C) Mr. Durham was awarded 500 Common Shares on February 25, 1991 valued at
$19.50 per share, the closing price of the Company's Common Stock on
that day. The shares vest at the rate of 100 shares per year beginning
February 25, 1992. On December 31, 1993, Mr. Durham held 300
restricted shares of the Company's Common Stock valued at $5,850.
Dividends are paid on these shares.
(D) Mr. Smith was awarded 1,000 Common Shares on June 22, 1989 valued at
$22.125 per share, the closing price of the Company's Common Stock on
that day. The shares vest at the rate of 200 shares per year beginning
June 22, 1990. On December 31, 1993, Mr. Smith held 200 restricted
shares of the Company's Common Stock valued at $4,425. Dividends are
paid on these shares.
</TABLE>
9
<PAGE>
OPTION GRANTS IN 1993
GRANT DATE
INDIVIDUAL GRANTS VALUE
-------------------- ----------
NUMBER % OF
OF TOTAL GRANT
SECURITIES OPTIONS EXERCISE DATE
UNDERLYING GRANTED TO OR BASE EXPIRA- PRESENT
OPTIONS EMPLOYEES PRICE TION VALUE
NAME GRANTED(#) IN 1993 ($/SH) DATE ($)(A)
- ---- ---------- ---------- -------- ------- --------
Joseph F. Paquette, Jr. 40,000 7.5% $29.625 2/28/03 $116,039
Chairman of Board and
Chief Executive Officer
Corbin A. McNeill, Jr. 24,000 4.5 $29.625 2/28/03 $ 69,623
President and Chief
Operating Officer
William L. Bardeen 15,000 2.8 $29.625 2/28/03 $ 43,515
Senior Vice President,
Finance and Chief
Financial Officer
James W. Durham 15,000 2.8 $29.625 2/28/03 $ 43,515
Senior Vice President
and General Counsel
Dickinson M. Smith 15,000 2.8 $29.625 2/28/03 $ 43,515
Senior Vice President,
Nuclear
(A) Values indicated are an estimate based on the Black-Scholes option
pricing model. The actual value realized will be determined by the
excess of the stock price over the exercise price on the date the
option is exercised. There is no certainty the actual value realized
will be at or near the value estimated by the Black-Scholes option
pricing model.
Assumptions used for the Black-Scholes model are as follows:
risk-free interest rate 6.00%
volatility .20
dividend yield 6.78%
time of exercise 10 years
Although executives face uncertain risks of forfeiture, these risks are
not factored into the calculated values.
10
<PAGE>
AGGREGATED OPTION EXERCISES IN 1993
AND OPTION VALUES AT DECEMBER 31, 1993
SECURITIES
UNDERLYING VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
12/31/93 12/31/93(1)
SHARES
ACQUIRED (#) ($)
ON VALUE EXERCISABLE EXERCISABLE
NAME EXERCISE(#) REALIZED($) UNEXERCISABLE UNEXERCISABLE
- ---- ----------- ----------- ------------- -------------
Joseph F. Paquette, Jr. 100,000 $766,800 E--160,499 E--$1,097,236
Chairman of Board and U-- 40,000 U--$ 25,000
Chief Executive Officer
Corbin A. McNeill, Jr. 0 0 E--144,500 E--$1,119,000
President and Chief U-- 24,000 U--$ 15,000
Operating Officer
William L. Bardeen 50,000 $293,750 E-- 10,000 E--$ 47,500
Senior Vice President, U-- 15,000 U--$ 9,375
Finance and Chief
Financial Officer
James W. Durham 52,000 $540,250 E-- 35,000 E--$ 166,250
Senior Vice President U-- 15,000 U--$ 9,375
and General Counsel
Dickinson M. Smith 0 0 E-- 89,753 E--$ 758,294
Senior Vice President, U-- 15,000 U--$ 9,375
Nuclear
- ---------------
(1) Market value of underlying securities at the year-end price of
$30.25 per share, minus the value of underlying securities at the
exercise or base price.
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EXECUTIVE COMPENSATION -- COMPENSATION COMMITTEE REPORT
EXECUTIVE COMPENSATION PHILOSOPHY
The Company's compensation philosophy reflects a commitment to
compensate executives competitively with other companies in the industry
while rewarding executives for achieving levels of operational excellence
and financial returns which insure positive short- and long-term business
performance and continual growth in shareholder value. The Board of
Directors believes that the Company's overall compensation program must be
competitive in order to attract and retain the qualified individuals
necessary to manage the Company and address the significant challenges
facing the Company and the industry.
The compensation program for executives consists of base salary, annual
incentive and long-term incentive components. The combination of these
elements balances short- and long-term business performance goals and aligns
executive financial rewards with those of the Company's shareholders.
Annual incentive awards are earned based on the Company's financial and
operational results in comparison to goals established at the start for the
year. See "Management Incentive Compensation Plan."
Long-term incentive awards in the form of stock options and dividend
equivalents relate directly to increases in shareholder value, which
determines any economic gain for executives. See "Long-Term Incentive
Plan."
The compensation levels of the Company's officers are reviewed each year
by a nationally recognized, independent consulting firm, and the results are
presented to the Compensation Committee of the Board of Directors. The
Compensation Committee makes its decisions on officer salary levels based
upon the consultants' evaluations and other factors, such as the
individual's performance and the Company's financial condition. These
decisions, except for certain decisions under the Long-Term Incentive Plan,
are reviewed by the full Board. Among other things, the independent
consulting firm compares officer compensation levels to those of other
electric and gas utilities. The latest comparison continues to verify that
the Company's executive compensation levels are competitive within the
utility industry and are below the levels typically found in general
industry.
The Company's pay programs are well within the $1 million compensation
cap for tax deduction purposes as outlined in the Omnibus Budget
Reconciliation Act of 1993. The Company will make every effort to maximize
deductions within this cap; however, the Company reserves the right to make
adjustments based on competitive pay levels or necessitated by other
unforeseen circumstances.
EXECUTIVE SALARIES
Executive salaries are established at competitive levels based upon
survey information from other major electric and gas utility companies,
including most of the companies in the Dow Jones Utility Average. Executive
salaries correspond to approximately the median salaries of comparable
executives of the companies in the survey. The base pay levels
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indicated in the Summary Compensation Table include an annual salary
increase granted to the Chairman/CEO and other executives in the Table. Mr.
Paquette's salary continues to be substantially below competitive levels.
MANAGEMENT INCENTIVE COMPENSATION PLAN
In 1988, the Board of Directors established a Management Incentive Plan
(Management Plan) for individuals in the upper levels of management. The
Management Plan replaced a previous incentive compensation plan. The
bonuses paid under the Management Plan are targeted at the 75% percentile of
major electric utilities, which is consistent with median bonuses paid in
general industry. Each year, a participant is assigned a base percentage,
which is multiplied by a corporate goals multiplier (a percentage based on
the achievement of corporate goals established by the Board of Directors)
and further multiplied by a performance multiplier based on the
participant's performance during the year. The resulting percentages are
multiplied by the mid-point of the salary range for employees at the
participant's management level, and the product equals the participant's
cash award. Corporate goals are established based upon critical business
factors necessary to achieve short- and long-term strategic objectives.
Although these measures may vary from year to year, they typically include
earnings per share, operating and maintenance costs, capital expenditures,
power generation and a measure relating to customer service objectives. A
participant's individual performance is rated by individual achievement of
pre-established goals which include and/or support the key business
objectives outlined above. For awards paid in February 1994 for performance
in 1993, the factors used in determining corporate and individual
performance of the Chairman, as measured against predetermined objectives,
were earnings per share, operating and maintenance costs, capital
expenditures, safety, nuclear generation capacity factor, forced outage
factor and customer interruptions. The most critical of these factors were
earnings per share (weighted 30%) and operating and maintenance costs
(weighted 20%). The remaining factors were each weighted 10%. Consistent
with the determination of awards for all participants, the Chairman's 1993
Management Plan award shown in the Summary Compensation Table was based on a
combination of corporate and individual performance. Corporate performance
was measured by comparing actual results to predetermined goals on each of
the seven performance factors. The corporate performance for the 1993
Management Plan award was as follows: earnings per share, operating and
maintenance costs, nuclear generation and forced outage factor exceeded
target levels; capital expenditures met target levels; safety and customer
interruptions did not meet target levels. In addition to the financial and
operating goals cited above, the bonus amounts in the Summary Compensation
Table incorporate an evaluation of the officers' individual performance.
Mr. Paquette discussed with the Committee the performance of the officers
and made recommendations regarding their individual performance ratings.
In evaluating the Chairman's performance, the Committee made an
assessment of Mr. Paquette's leadership in achieving the Company's long-term
strategies and business goals. In the judgement of the Committee, Mr.
Paquette has made great progress in positioning the Company to adapt and
succeed in an industry marked by rapid change. Specific results taken into
consideration were the improvement in total return to shareholders and focus
on customer satisfaction.
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LONG-TERM INCENTIVE PLAN
In 1989, the Board of Directors approved and the Company's shareholders
ratified the Long-Term Incentive Plan (Incentive Plan). The types of
long-term incentive awards which may be granted under the Incentive Plan are
non-qualified options to purchase shares of the Company's Common Stock,
dividend equivalents and shares of restricted Common Stock.
Stock options for the Chairman and other executives, indicated on the
Summary Compensation Table and the Option Grant Table, are granted at levels
competitive with other major utility companies. Options are granted to
executives at approximately the median level of grants to comparable
executives at other major electric utility companies. Their purpose is to
reward executives for strategic and operational activities associated with
growth in shareholder value, since the ultimate value to the executive is
determined by share price appreciation. The individual receiving an option
is entitled to purchase a share of the Company's Common Stock at a specified
price (option exercise price) within a specified period of time. The option
exercise price is equal to at least the closing price of the Company's
Common Stock on the New York Stock Exchange as reported on the composite
tape on the date of the grant or the last business day preceding the grant
date, when applicable. Stock options granted under the Incentive Plan may
not be exercised more than ten years after the date of the grant.
Dividend equivalents are granted in conjunction with stock options on a
three-year cycle. Not all option grants include dividend equivalents.
Dividend equivalents granted under the Incentive Plan provide the
opportunity for the Chairman and other executive officers to earn an amount
equal to the dividends that would have been paid had the participant
acquired the shares underlying the options at the time the options were
granted. All or a portion of the dividend equivalents are paid, as
determined by the Compensation Committee, based on the Company's performance
measured over a three- to five-year period. For the performance period 1992
to 1994, the measure to be used to determine dividend equivalents paid to
the Chairman and other executive officers will be the Company's three-year
total shareholder return measured against the three-year total shareholder
return of a comparison group of companies consisting of the 50 largest
investor-owned electric utilities, including most of the companies in the
Dow Jones Utility Average. Total shareholder return (TSR) is defined as the
sum of share price appreciation and dividends paid over the performance
period. See the following table:
THE COMPANY'S THREE-YEAR PERCENT OF ACCUMULATED
TSR QUINTILE RANK DIVIDEND EQUIVALENTS EARNED
------------------------ ---------------------------
1 100%
2 75%
3 50%
4 25%
5 0%
For the 1989 to 1991 performance period payout reported in the Summary
Compensation Table, a value of 75% of the dividend equivalent amounts
was used. Instead of a specific formula, this payment was based upon
consideration of the Company's overall performance over the period
highlighted by lowering costs, completion of Limerick Generating
Station Unit
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No. 2, restart of the Peach Bottom Atomic Power Station and completion
of a Company reorganization. Consideration was also given to the Company's
TSR over the 1989-91 period compared to the group of 50 largest utilities.
Restricted stock awards are shares of Common Stock subject to limitation
on their sale, transfer or pledge until the expiration of a restriction
period of not less than 12 months as determined by the Compensation
Committee at the time of the grant. During the restriction period, the
recipient of an award is entitled to receive dividends and vote the shares
of restricted stock. After the restriction period, the shares will be
distributed to the participant. As indicated in the Summary Compensation
Table, restricted stock has been used sparingly, awarded only at the
conclusion of a highly unusual accomplishment of major importance.
SHAREHOLDER RETURN COMPARISON COMPANIES VERSUS
EXECUTIVE COMPENSATION COMPARISON COMPANIES
Although the companies used for these two purposes are substantially the
same, they do differ slightly. The shareholder return comparison companies
are those included in the Dow Jones Utility Average. Those companies used
for executive pay comparisons are major electric utilities participating in
the Edison Electric Institute compensation surveys, the most commonly
recognized, accepted and reliable source of compensation data for electric
utilities. Performance comparison for the Incentive Plan purposes is the 50
largest investor owned electric utilities. Seventy percent of the companies
in the Dow Jones Utility Average (excluding PECO Energy) are used for
executive compensation and performance compensation purposes.
COMPARISON OF CUMULATIVE SHAREHOLDER RETURN
As noted on the graph shown on page 16, an investment of $100 in the
Company's Common Stock on December 31, 1988 would have grown in value to
$212.50, assuming reinvestment of dividends, at December 31, 1993. For the
five-year period ending December 31, 1993, the total cumulative return for
holders of the Company's Common Stock amounted to 112.5%, or the equivalent
of 16.3% per year compounded. That return exceeded both the comparable
return of the Standard & Poor's 500 Stock Index and the Dow Jones Utility
Average.
COMPENSATION COMMITTEE MEMBERS:
J. A. Hagen (Chairman) J. C. Ladd
N. G. Harris R. Rubin
* * *
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SHAREHOLDER RETURN COMPARISON
Shown below is a line graph comparing the yearly dollar change in the
cumulative total shareholder return on the Company's Common Stock against
the cumulative total return of the S&P 500 Stock Index and the Dow Jones
Utility Average for the period 1989 through 1993.
COMPARISON OF FIVE-YEAR CUMULATIVE RETURN
1989-1993
DOLLARS DOLLARS
$225 $225
$200 ID: LINE GRAPH SHOWING $200
$175 $175
$150 S&P 500 (as dashes) $150
$125 PECO ENERGY (as solid rule) $125
$100 DJ UTILITIES (as dot leaders) $100
$ 75 $ 75
$ 50 Footnote (A) appears at approximately the $ 50
$ 25 $110 Million mark for the year 1991 $ 25
$ 0 $ 0
1989 1990 1991 1992 1993
(A) An adverse electric base rate order issued by the Pennsylvania Public
Utility Commission in April 1990 necessitated various write-offs and
lowered the Company's earnings power. Consequently, the Company
reduced its common stock dividend, effective June 1990, which caused a
decline in the price of the Common Stock and the total yearly return.
DECEMBER 31,
-------------------------------------------------
1988 1989 1990 1991 1992 1993
-------------------------------------------------
PECO Energy Company $100 $127.82 $107.89 $164.46 $174.85 $212.50
S & P 500 Stock Index $100 $131.69 $127.60 $166.47 $179.15 $197.21
Dow Jones Utility Average $100 $135.63 $129.44 $149.18 $155.26 $170.21
Assumptions:
1. $100 invested on December 31, 1988 in PECO Energy Company Common
Stock, S&P 500 Stock Index and Dow Jones Utility Average.
2. All dividends are reinvested.
* * *
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RETIREMENT PLANS. The following table shows the estimated annual
retirement benefit payable on a straight life annuity basis to
participating employees, including officers, in the earnings and year of
service classifications indicated, under the Company's non-contributory
retirement plans. The amounts shown in the table are not subject to any
deduction for Social Security or other offset amounts.
PENSION PLAN TABLE
----------------------------------------------
AVERAGE ANNUAL
SALARY FOR YEARS OF SERVICE
HIGHEST CONSECUTIVE ----------------------------------------------
FIVE YEARS 10 YEARS 20 YEARS 30 YEARS 40 YEARS
-------------------------------------------------------------------
$ 100,000 $ 19,757 $ 34,515 $ 49,272 $ 64,030
200,000 40,257 70,515 100,772 131,030
300,000 60,757 106,515 152,272 198,030
400,000 81,257 142,515 203,772 265,030
500,000 101,757 178,515 255,272 332,030
600,000 122,257 214,515 306,772 399,030
700,000 142,757 250,515 358,272 466,030
800,000 163,257 286,515 409,772 533,030
900,000 183,757 322,515 461,272 600,030
1,000,000 204,257 358,515 512,772 667,030
Covered compensation includes salary and bonus which is disclosed in
the Summary Compensation Table on page 9 for the five named executive
officers. The calculation of retirement benefits under the plans generally
is based upon average earnings for the highest consecutive five-year
period.
Messrs. Paquette, McNeill, Bardeen, Durham and Smith have,
respectively, 36, 26, 2, 10 and 12 credited years of service under the
Company's pension program. If Mr. Bardeen completes five years of
continuous employment with the Company, then, upon his retirement, his
service with the Company for purposes of calculating his benefits under the
Company's pension program will be increased by 20 years. Mr. Durham and
Mr. Smith are being granted one year of additional service, for purposes of
calculating their benefits under the Company's pension program, for each
year of service up to a maximum of 10 additional years.
The Internal Revenue Code of 1986, as amended, limits the annual
benefits which may be paid from a tax-qualified retirement plan. As
permitted by the Employee Retirement Income Security Act of 1974, the
Company has supplemental plans which authorize the payment out of general
funds of the Company of any benefits calculated under provisions of the
applicable retirement plan which may be above these limits.
* * *
PROPOSAL 2. APPOINTMENT OF AUDITORS FOR 1994
The Board of Directors, subject to the approval of the shareholders,
has appointed Coopers & Lybrand, independent certified public accountants,
as the auditors of the Company for the year 1993. Unless otherwise
directed, proxies will be voted "FOR" approval of this appointment.
Abstentions and broker non-votes will not constitute or be counted as
"votes" cast for purposes of the Meeting.
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A representative of Coopers & Lybrand will be present at the Annual
Meeting to respond to appropriate questions and will have the opportunity
to make a statement, if he so desires.
* * *
PROPOSAL 3. SHAREHOLDER PROPOSAL A
A shareholder of the Company has advised the Company that he will
submit the proposal set forth below at the Annual Meeting. The name and
address of the proponent and the number of shares held by the proponent
will be furnished by the Company to any person, orally or in writing as
requested, promptly upon the receipt of an oral or written request.
SHAREHOLDER PROPOSAL
Resolved that PECO Energy adopt the following policy:
That no lawyer shall be selected for the PECO slate of endorsed
candidates for director that either directly or indirectly derives any
compensation from any law firm that provides legal services to PECO.
REASONS IN SUPPORT
Board Members have the duty of undivided loyalty to PECO. There is an
ample pool of candidates qualified to serve on PECO's Board without
conflicts of interest. Lawyer Board Members that derive compensation from
the providing of legal services to PECO raise questions of conflict of
interest including:
1. Can such a director be a vigorous advocate of policies designed
to reduce legal expenses by using internal legal staff to the fullest
extent possible, settling cases instead of litigation, choosing the
most cost effective law firms and strictly monitoring activities and
billing when external counsel must be used?
2. Can such a director be relied on to prudently limit top
managements salaries, stock options and other perquisites, when
offending top management by such limitation could result in an end to
income derived from providing legal services to PECO?
PECO has a history of Lawyer directors whose law firms provide legal
services to PECO. The proponent of this resolution has asked the PECO
Board and its chief executive to stop this practice at a number of recent
annual meetings without success. PECO shareholders should vote for this
resolution.
BOARD OF DIRECTORS' STATEMENT IN OPPOSITION TO SHAREHOLDER PROPOSAL:
The Board of Directors recommends that shareholders vote "AGAINST" this
proposal. This proposal seeks to impose what the Board believes to be an
arbitrary and unnecessary policy relating to director selection.
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The Nominating Committee of the Board selects as nominees only those
persons who the Committee believes are well qualified to serve as
directors. It weighs, on a case by case basis, the potential contribution
it believes a potential nominee will make to PECO Energy. This "case by
case" approach is consistent with the approach adopted by the New York
Stock Exchange.
The Board has a policy that a director shall not enter into
transactions with the Company without first disclosing the individual
transaction and obtaining advance approval by the Board of Directors. The
Board believes that it is in the best interests of the Company and its
shareholders to maintain the ability to utilize the business services of
individual Board members.
The Board believes, as a general matter, that any proposal which, like
this proposal, seeks to impose rigid eligibility requirements for director
nominations is not in the best interests of shareholders because such
requirements restrict, rather than enhance, the Company's ability to
identify the most qualified persons to serve as directors.
For these reasons, the Board recommends a vote "AGAINST" the
shareholder's proposal. The affirmative vote of the holders of a majority
of the Company's Common Stock present at the Meeting in person or by proxy
is required for the adoption of this proposal. Unless otherwise directed,
proxies will be voted "AGAINST" adoption of this shareholder's proposal.
Abstentions and broker non-votes will not constitute or be counted as votes
cast for purposes of the Meeting.
* * *
PROPOSAL 4. SHAREHOLDER PROPOSAL B
A shareholder of the Company has advised the Company that he will
submit the proposal set forth below at the Annual Meeting. The name and
address of the proponent and the number of shares held by the proponent
will be furnished by the Company to any person, orally or in writing as
requested, promptly upon the receipt of an oral or written request.
NEW ENERGY POLICY
WHEREAS Equity interests of stockholders will likely be improved by
PECO Energy Company's initiating a more aggressive company
policy to promote energy efficiency, renewable energy and
end-use planning;
WHEREAS Global warming, acid rain, and radioactive emissions will be
reduced by the greater use of energy conservation and renewable
energy sources;
WHEREAS Energy planners have already warned about the folly of
expanding use of non-renewable sources of energy, causing their
depletion, and making them unavailable for future generations;
WHEREAS Energy efficiency and renewable energy sources are already
competitively priced, as well as environmentally superior to
our present dependence on coal, oil, and nuclear fuels;
19
<PAGE>
WHEREAS Twelve New England utilities receive financial incentives to
conserve, being allowed to earn slightly more profit on their
energy efficiency investments than for the power they supply;
and
WHEREAS The greater use of energy efficiency and renewable energy
sources would be economically advantageous in avoiding costs of
building expensive new generating facilities;
I therefore request the Board of Directors of PECO Energy Company to
more aggressively:
1. Expand energy conservation, reduce energy waste, utilize more
renewable energy sources, implement least-cost energy planning, and
minimize environmental damage in all methods chosen to serve customers.
2. Communicate regularly to stockholders and customers about this
new energy policy.
SUPPORTING STATEMENT
PECO Energy Company is to be commended for initiating its program
"Conserve Energy. Use It Wisely" and its other efforts to encourage energy
conservation. PECO should work harder to incorporate more elements of a
progressive new energy policy.
Twelve New England and several California utilities have adopted model
new energy policies mandating greater energy conservation. Through
favorable rate structuring, energy saved becomes more profitable than
investments in new power plants, even as electricity use may be declining.
The new policy adopted by the New England and California utilities is
beneficial to stockholders, ratepayers, communities, and the environment.
PECO has begun the right process. I urge its expansion.
BOARD OF DIRECTORS' STATEMENT REGARDING SHAREHOLDER PROPOSAL:
While the management and Board of Directors generally agree with the
objectives of this proposal, which essentially requests that the Company
"more aggressively" pursue energy conservation, the Board recommends a vote
"AGAINST" the proposal because its implementation is unnecessary and could,
under current regulatory conditions, be detrimental to the Company's
shareholders. An identical proposal was submitted to shareholders at the
prior two annual meetings of shareholders and was disapproved at each of
those meetings.
On December 13, 1993, the Pennsylvania Public Utility Commission (PUC),
after several years of deliberation, issued an Order allowing
Pennsylvania's electric utilities to recover the costs of energy
conservation programs. Although utilities will be allowed to recover the
program costs and an incentive through a surcharge to customer bills, the
Order is deficient because a significant portion of revenues lost as a
result of energy conservation programs will be recoverable if and when
permitted in a utility's next rate case. Furthermore, the Order is
currently being challenged before the PUC and the Commonwealth Court of
Pennsylvania by non-utility parties, which creates uncertainty whether it
will become final. Nevertheless, the Company, is moving ahead to design
cost-effective energy-conservation programs which
20
<PAGE>
benefit its customers without harming the Company's shareholders.
Therefore, the Company, within the limitations of the PUC's Order, is
already "more aggressively" pursing energy conservation.
In addition to these concerns, increasing competition in the utility
industry has caused concerns about the effect of utility-sponsored energy
conservation programs on the competitiveness of the Company's rates.
Typically, utility-sponsored energy conservation programs cause rates to
rise. This is a major concern where customers have the ability to install
alternative service such as self-generation. It should be noted that many
of the New England utilities referenced in the proposal have recently
reduced their energy conservation efforts due to concerns about adverse
impact of rate increases on regional economic development and
competitiveness.
The Company is committed to pursuing energy conservation programs which
are beneficial to its customers and not harmful to its shareholders.
However, the Board must oppose this shareholder's proposal because it is
unnecessary and could harm the interests of the Company's shareholders.
The affirmative vote of the holders of a majority of the Company's
Common Stock present at the Meeting in person or by proxy is required for
the adoption of this proposal. Unless otherwise directed, proxies will be
voted "AGAINST" adoption of this shareholder's proposal. Abstentions and
broker non-votes will not constitute or be counted as votes cast for
purposes of the Meeting.
* * *
PROPOSAL 5. SHAREHOLDER PROPOSAL C
A shareholder of the Company has advised the Company that it will
submit the proposal set forth below at the Annual Meeting. The name and
address of the proponent and the number of shares held by the proponent
will be furnished by the Company to any person, orally or in writing as
requested, promptly upon the receipt of an oral or written request.
SHAREHOLDER PROPOSAL
BE IT RESOLVED: That the stockholders of PECO Energy Company (or
"Company") urge that the Board of Directors take the necessary steps, in
compliance with Pennsylvania state law, to declassify the Board of
Directors for the purpose of director elections. The Board
declassification shall be done in a manner that does not affect the
unexpired terms of directors previously elected.
SUPPORTING STATEMENT
The Board of Directors of the Company is divided into three classes
serving staggered three-year terms. It is our belief that the
classification of the Board of Directors is not in the best interests of
the Company and its shareholders. The elimination of the staggered board
would require each director to stand for election annually. This procedure
would allow shareholders an opportunity to annually register their views on
the performance of the Board collectively and each director individually.
It is our belief that the concerns that the annual
21
<PAGE>
election of all directors would leave the Company without experienced
board members in the event that all incumbents are voted out is unfounded.
If the owners should choose to replace the entire board, it would be
obvious that the incumbent directors' contributions were not valued.
It is our belief that a company's corporate governance procedures and
practices, and the level of management accountability they impose, are
related to the financial performance of a company. While the Company's
current performance may be deemed to be adequate, we believe sound
corporate governance practices, such as the annual election of all
directors, will impose the level of management accountability necessary to
help ensure that a good performance record is attainable over the long
term. Regardless of whether a shareholder believes the current Board or
management team is performing satisfactorily or not, we believe it is
clearly in the best interest of the Company and its shareholders that a
process be in place which allows shareholders to take definitive action as
owners if they believe the Board is failing to realize the full potential
of the Company's assets.
A classified board of directors protects the incumbency of the Board of
Directors and current management which in turn limits accountability to
stockholders. In addition to a classified Board, the Company has the
following measures in place which in our opinion further protects
incumbency and limits accountability to shareholders: no confidential or
secret ballot proxy voting and a lack of cumulative voting for Directors.
We believe that allowing shareholders to annually register their views on
the performance of the Board and each Director is one of the best methods
to ensure that our Company will be managed in the best interest of
shareholders. We urge your support for this proposal.
BOARD OF DIRECTORS' STATEMENT IN OPPOSITION TO SHAREHOLDER PROPOSAL:
The Board of Directors recommends that shareholders vote "AGAINST" this
proposal. In 1990, shareholders of the Company voted to classify the Board
of Directors into three classes, each to serve for terms of three years,
with one class being elected each year. The Board of Directors believes
there is no reason to change the current procedure of electing a classified
Board. The Company's directors, elected by the shareholders, are fully
accountable to serve the shareholders' interests throughout their term of
office, whether the term is three years or one year. Furthermore, similar
classified Board provisions exist at over half of the companies that
comprise the Standard & Poor's 500 Stock Index.
The Board of Directors believes that the election of directors by
classes enhances the continuity and stability in the Board and its
policies. When directors are elected by class, a change in control of the
Board normally requires at least two shareholder meetings, instead of one.
With a classified Board, it is more likely that a majority of the directors
of the Company will have prior PECO Energy Board experience. Having at
least some experienced directors will facilitate continuity, as well as
stable leadership and policy by assuring that experienced personnel,
familiar with PECO Energy and its business, will be on the Board at all
times.
22
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Board classification is also intended to encourage any person seeking
to acquire control of the Company to initiate such an action through arm's
length negotiations with management and the Board of Directors, who are in
a position to negotiate a transaction which is fair to all shareholders of
the Company.
The Board recommends a vote "AGAINST" this shareholder's proposal. The
affirmative vote of the holders of a majority of the Company's Common Stock
present at the Meeting in person or by proxy is required for the adoption
of this proposal. Unless otherwise directed, proxies will be voted
"AGAINST" adoption of this shareholder's proposal. Abstentions and broker
non-votes will not constitute or be counted as votes cast for purposes of
the Meeting.
* * *
OTHER MATTERS
Other than the foregoing, the Board of Directors knows of no other
matters which will be presented at the Annual Meeting for action by the
shareholders. Nevertheless, if any other matters properly come before the
Meeting, or any adjournment thereof, it is anticipated that the proxies
will be voted according to the best judgment of the persons acting by
authorization of the proxies.
* * *
DEADLINE FOR FILING SHAREHOLDER PROPOSALS
FOR 1995 ANNUAL MEETING
The date by which proposals of shareholders intended to be presented at
the 1995 Annual Meeting must be received by the Company for inclusion in
the Company's 1995 Proxy Statement and proxy relating to that meeting is
November 7, 1994.
* * *
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VALLEY FORGE CONVENTION CENTER DIRECTIONS
BY CAR: FROM PHILADELPHIA: Take the Schuylkill Expressway to Exit #25
(Goddard Boulevard). Bear right at first light onto Goddard
Boulevard. Turn right at next light onto North Gulph Road and
proceed approximately 1-1/2 miles to the fourth traffic light at
First Avenue. The Valley Forge Convention Plaza sign is on the
right. (See entrance instructions on following page.)
FROM PENNSYLVANIA TURNPIKE: Take Turnpike Exit #24 (Valley Forge).
Take first exit immediately after toll (Exit 25 -- Valley Forge) to
North Gulph Road and proceed approximately 1-1/2 miles to the fourth
traffic light at First Avenue. The Valley Forge Convention Plaza
sign is on the right. (See entrance instructions on following
page.)
FROM ROUTE 202: Take Pottstown Exit (422 West) to first exit
(Bridgeport -- Route 23 East) and proceed east on Route 23 (Valley
Forge Road). Turn right at first light onto Moore Road. Turn
right at next light onto First Avenue. Proceed to next light and
turn right onto North Gulph Road. The Valley Forge Convention
Plaza sign is on the right. (See entrance instructions on
following page.)
FROM ROUTE 422 EAST: Take King of Prussia Industrial Park Exit to
light and turn left onto North Gulph Road. The Valley Forge
Convention Plaza sign will be on the right, after the turn. (See
entrance instructions on following page.)
BY BUS: SEPTA (215-580-7800): Route #125 bus departs daily from Center City
Philadelphia at both 16th Street and JFK Boulevard and at the 29th
Street side of 30th Street Station. The bus stops at the Sheraton
Plaza Hotel.
[MAP OF MAJOR ROUTES TO VALLEY FORGE CONVENTION CENTER.]
24
<PAGE>
ENTRANCE INSTRUCTIONS
From the traffic light at the intersection of North Gulph Road and
First Avenue, proceed on North Gulph Road to the second entrance on the
right, approximately 150 yards. Turn right at that entrance and
immediately turn left into the large parking lot. Proceed past the
Sheraton Plaza Hotel main entrance level to the next entrance at a lower
level. Inside the building follow the directions to the meeting location.
This entrance is easily accessible for the handicapped.
[MAP OF VALLEY FORGE CONVENTION CENTER.]
25
<PAGE>
PECO ENERGY COMPANY
1994 COMMON STOCK PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON APRIL 13, 1994,
AT 9:30 A.M. IN THE DELAWARE/NEW JERSEY ROOM AT THE
VALLEY FORGE CONVENTION CENTER, 1200 FIRST AVENUE,
KING OF PRUSSIA, PENNSYLVANIA.
P Joseph C. Ladd, Edithe J. Levit and Morton W. Rimerman,
or any of them, with power of substitution are hereby
appointed proxies to vote as specified all shares of Common
Stock which the Shareholder(s) named on the reverse side is
R entitled to vote at the above Annual Meeting or at any
adjournment thereof, and in their discretion to vote upon all
other matters as may properly be brought before the Meeting.
O First Chicago Trust Company of New York, as Custodian
under the Dividend Reinvestment and Stock Purchase Plan, and
PECO Energy Company, as Custodian for the 401(k) Employee
Savings Plan, are hereby authorized to execute a proxy with
X identical instructions for any shares of Common Stock held
for the benefit of the Shareholder(s) named on the reverse
side.
Y Nominees for election to the Board of Directors for
Class I terms expiring in 1997 are:
Richard G. Gilmore
Richard H. Glanton
Joseph J. McLaughlin
Corbin A. McNeill, Jr.
---------------
SEE REVERSE
SIDE
---------------
<PAGE>
|-----| PLEASE MARK YOUR 9172
| X | VOTES AS IN THIS
|-----| EXAMPLE.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN.
IF NO DIRECTION IS MADE THIS PROXY WILL BE VOTED FOR PROPOSALS 1 AND 2 AND
AGAINST PROPOSALS 3, 4 AND 5.
- ------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1 AND 2.
- ------------------------------------------------------------------------------
FOR WITHHELD FOR AGAINST ABSTAIN
1. Election of 2. Appointment
Directors. of auditors
(see reverse) --- --- for 1994 --- --- ---
For, except vote withheld from the following nominee(s):
----------------------------------------------------
- ------------------------------------------------------------------------------
THE BOARD RECOMMENDS A VOTE AGAINST PROPOSALS 3, 4 AND 5.
- ------------------------------------------------------------------------------
FOR AGAINST ABSTAIN
3. Shareholder Proposal A.
--- --- ---
4. Shareholder Proposal B.
--- --- ---
5. Shareholder Proposal C.
--- --- ---
NOTE: Please sign exactly as name appears hereon. Joint
owners should each sign. When signing as attorney,
executor, administrator, trustee or guardian, give full
title as such.
- ------------------------------------------------------------
- ------------------------------------------------------------
SIGNATURE(S) DATE
A REMINDER
PECO ENERGY COMPANY
ANNUAL MEETING OF SHAREHOLDERS -- APRIL 13, 1994
We previously sent to you proxy material concerning our upcoming Annual
Meeting of Shareholders.
According to our latest records, we have not yet received your proxy.
Whether your holdings are large or small, receiving your signed proxy as
soon as possible before the Meeting will be helpful and will aid us in
avoiding further expense and delay.
The time before the Meeting is short. Due to the possibility of a
delay in the mail, please sign, date and return the enclosed duplicate
proxy immediately, even if your original proxy was mailed.
We appreciate your cooperation.
L. S. BINDER
Secretary
<PAGE>
PLEASE REMEMBER
TO SIGN AND DATE YOUR PROXY
---- --- ----
<PAGE>
APPENDIX OF
GRAPHIC AND IMAGE MATERIAL
OMITTED FROM ELECTRONIC FORMAT DOCUMENT
PURSUANT TO RULE 304 OF REGULATION S-T
Photographs of Nominees for Director and Incumbent Directors appear on
pages 3- 6 of the Definitive Proxy Statement.
Performance Graph comparing cumulative total shareholder return on PECO
Energy's Common Stock against S&P 500 Stock Index and Dow Jones Utility
Average appears on page 16 of the Definitive Proxy Statement.
Map of major routes to Valley Forge Convention Center appears on page
24 of the Definitive Proxy Statement.
Map of Valley Forge Convention Center appears on page 25 of the
Definitive Proxy Statement.
