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
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(Name of Registrant as Specified In Its Charter)
T.D. CUTLER; G.M. PFEIL (PECO ENERGY);
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(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:
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2) Aggregate number of securities to which transaction applies:
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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:
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[ ] 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:
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2) Form, Schedule or Registration Statement No.:
--------------------------------------------------
3) Filing Party:
--------------------------------------------------
4) Date Filed:
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- ---------------
(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 10, 1996
Dear Shareholder:
YOU ARE CORDIALLY INVITED TO ATTEND THE 1996 ANNUAL MEETING OF SHAREHOLDERS
WHICH WILL BE HELD ON WEDNESDAY, APRIL 10, 1996, AT 9:30 A.M. IN THE
LANCASTER/MONTGOMERY ROOM OF 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 26 AND 27.)
The purposes of the Meeting are as follows:
1. To elect five Class III directors to serve for three-year terms;
2. To approve the appointment of Coopers & Lybrand L.L.P. as auditors for
the year 1996;
3. To consider and take action on the shareholder proposals beginning on
page 22 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 21,
1996, 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 21, 1996, 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 10,
1996.
K. K. COMBS J. F. PAQUETTE, JR.
CORPORATE SECRETARY CHAIRMAN OF THE BOARD
Philadelphia, Pennsylvania
March 4, 1996
<PAGE>
PECO ENERGY COMPANY
2301 MARKET STREET
P. O. BOX 8699
PHILADELPHIA, PENNSYLVANIA 19101-8699
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 Corporate Secretary 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 4, 1996. 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 $35,000; 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 21, 1996, the Company had outstanding 222,510,287 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 III are scheduled to expire at the
April 10, 1996 Annual Meeting. These directors are being nominated for
reelection at the 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 five Class III 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>
<TABLE>
<CAPTION>
EQUITY SECURITIES BENEFICIALLY
OWNED ON DECEMBER 31, 1995
------------------------------
NUMBER OF COMMON SHARES
-----------------------------------------------
NOMINEES FOR DIRECTOR BENEFICIALLY OWNED ACQUIRABLE (A) TOTAL
- ------------------------------------------------------------------------------------------------
CLASS III -- TERM EXPIRING IN 1999
<S> <C> <C> <C>
M. WALTER D'ALESSIO 898 11,000 11,898
JAMES A. HAGEN 1,306 (B) 8,000 9,306
JOSEPH C. LADD 637 11,000 11,637
KINNAIRD R. McKEE 779 (C) 6,000 6,779
RONALD RUBIN 1,277 (B) 11,000 12,277
INCUMBENT DIRECTORS
- -------------------------------------------
CLASS I -- TERM EXPIRING IN 1997
RICHARD G. GILMORE 1,353 (B)(C) 3,000 4,353
RICHARD H. GLANTON 1,596 3,000 4,596
JOSEPH J. McLAUGHLIN 3,060 (B) 11,000 14,060
CORBIN A. McNEILL, JR. 6,205 (B) 248,500 254,705
ROBERT SUBIN 1,160 5,000 6,160
CLASS II -- TERM EXPIRING IN 1998
SUSAN W. CATHERWOOD 1,277 11,000 12,277
NELSON G. HARRIS 3,780 (B) 11,000 14,780
EDITHE J. LEVIT 3,816 11,000 14,816
JOHN M. PALMS 833 6,500 7,333
JOSEPH F. PAQUETTE, JR. 33,433 (B) 240,000 273,433
OTHER EXECUTIVE OFFICERS
- -------------------------------------------
WILLIAM L. BARDEEN 8,055 55,000 63,055
JAMES W. DURHAM 11,179 90,000 101,179
DICKINSON M. SMITH 4,269 144,753 149,022
KENNETH G. LAWRENCE 2,710 58,000 60,710
All current executive officers and directors
as a group (38 persons) 125,767 (D) 1,723,924 1,849,691
</TABLE>
- -------------------
NOTE A--Shares which may be acquired within 60 days upon the exercise of stock
options granted under the Company's Long-Term Incentive Plan
NOTE B--Does not include an aggregate of 575,193 shares of Common Stock held
under PECO Energy Company's Service Annuity Plan. Messrs. Gilmore,
Hagen, Harris, McLaughlin, McNeill, 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, Nuclear and Ad Hoc Finance Committees" section
beginning on page 7.
NOTE C--In addition, Admiral McKee and Mr. Gilmore own 600 and 200 shares,
respectively, of 9% Cumulative Monthly Preferred Securities (MIPS).
NOTE D--Beneficial ownership represents less than one percent of the shares of
Common Stock outstanding.
* * *
2
<PAGE>
BUSINESS BACKGROUND OF NOMINEES AND DIRECTORS
NOMINEES FOR DIRECTOR -- TERMS EXPIRING IN 1999
------------ M. Walter D'Alessio, age 62, was elected to the Board of
| | Directors in 1983. Since 1982, Mr. D'Alessio has been
| | President and Chief Executive Officer of Legg Mason Real
|[Photo of | Estate Services (previously Latimer & Buck, Inc.),
|M. Walter| commercial mortgage banking and pension fund advisors. He
|D'Alessio]| also is a director of the Philadelphia Stock Exchange and
| | Pennsylvania Blue Shield.
------------
------------ James A. Hagen, age 63, was elected to the Board of
| | Directors in 1990. From May 1989 to March 1995, Mr. Hagen
| | served as Chairman, President and Chief Executive Officer
|[Photo of | of Conrail. He is currently Chairman of the Board of
|James A. | Directors of Conrail. Mr. Hagen is also a director of Penn
| Hagen] | Mutual Life Insurance Company.
| |
------------
------------ Joseph C. Ladd, age 69, was elected to the Board of
| | Directors in 1977. Mr. Ladd served as President, Chief
| | Executive Officer and Director of Fidelity Mutual Life
|[Photo of | Insurance Co. from 1971 to 1984. He served as Chairman of
|Joseph C.| the Board and Chief Executive Officer of Fidelity Mutual
| Ladd] | Life Insurance Co. until 1989 and as Chairman of the Board
| | from 1989 to 1992. Mr. Ladd also is a director of
------------ Philadelphia Suburban Corporation.
------------ Kinnaird R. McKee, age 66, 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,
|[Photo of | Navy Nuclear Propulsion. His career included service as
| Kinnaird | Director of Naval Warfare, Commander of the U.S. Third
| R. McKee]| Fleet, and Superintendent, U.S. Naval Academy. He also is a
| | director of Entergy Corporation.
------------
3
<PAGE>
------------ Ronald Rubin, age 64, was elected to the Board of Directors
| | in 1988. From 1976 to 1992, Mr. Rubin was a General Partner
| | of Richard I. Rubin & Co. Inc., a real estate development
|[Photo of | and management company. In 1992, that organization became
| Ronald | The Rubin Organization, Inc. and he became its Chief
| Rubin] | Executive Officer.
| |
------------
INCUMBENT DIRECTORS -- TERMS EXPIRING IN 1997
------------ Richard G. Gilmore, age 68, was first 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
|[Photo of | City of Philadelphia. At that time, he was also Vice
|Richard G.| President and Treasurer of The Girard Company (now Mellon
| Gilmore] | Bank Corporation) and Executive Vice President and
| | Treasurer of Girard Bank, its subsidiary, by which he had
------------ been employed since 1972. He resigned from the position of
Finance Director in December 1985, at which time he was
reelected 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 seventeen Legg Mason (or their
subsidiary) mutual funds.
------------ Richard H. Glanton, age 49, 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. He also is a director
|[Photo of | of General Accident Insurance Company of North America,
|Richard H.| Philadelphia Suburban Corporation and Philadelphia Suburban
| Glanton] | Water Company and President of the Barnes Foundation. See
| | footnote 1 on page 6.
------------
------------ Joseph J. McLaughlin, age 68, was elected to the Board of
| | Directors in 1974. In 1974, Mr. McLaughlin was elected
| | President and Chief Executive Officer of the Beneficial
|[Photo of | Mutual Savings Bank. He retired from those positions in
|Joseph J. | 1993. He also is a director of the Beneficial Mutual
|McLaughlin| Savings Bank and Paper Manufacturers Company.
| |
------------
4
<PAGE>
------------ Corbin A. McNeill, Jr., age 56, 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
|[Photo of | Company. In 1987, he was appointed Senior Vice President,
|Corbin A. | Nuclear, Public Service Electric and Gas Company. In 1988,
| McNeill] | he was named the Company's Executive Director, Nuclear, on
| | loan from Public Service Electric and Gas Company, and
------------ later was elected Executive Vice President, Nuclear, of the
Company. In 1990, he was elected President and Chief
Operating Officer. In 1995, Mr. McNeill was elected to the
additional position of Chief Executive Officer. See
footnote 2 on page 6.
------------ Robert Subin, age 57, was elected to the Board of Directors
| | in 1994. In 1988, Mr. Subin was elected Corporate Vice
| | President of Campbell Soup Company. In May 1990, he became
|[Photo of | Vice President--Grocery Sector, Campbell North America, and
| Robert | was then promoted to Executive Vice President,
| Subin] | International Division in November 1990. In 1992, Mr. Subin
| | was named President, Campbell Europe/America Division and,
------------ in 1993, was named President, International Specialty
Foods. In August 1994, he was appointed Senior Vice
President of Campbell Soup Company, President, Bakery and
Confectionery Division. In 1995, he was appointed to his
present position, Senior Vice President--Finance, Campbell
Soup Company.
INCUMBENT DIRECTORS -- TERMS EXPIRING IN 1998
------------ Susan W. Catherwood, age 52, was elected to the Board of
| | Directors in 1988. From 1978 to 1984, Mrs. Catherwood was
| | Program Coordinator for the Academy of Music Anniversary
|[Photo of | Concerts. From 1982 to 1991, she was Chairman, Board of
| Susan W. | Overseers, University Museum, University of Pennsylvania.
|Catherwood| In 1991, she became Chairman, Trustee Board, University of
| | Pennsylvania Medical Center and Health System (formerly
------------ University of Pennsylvania Medical Center). She also is a
director of The Glenmede Corporation, The Glenmede Trust
Company, and the Glenmede Trust Company of New Jersey.
5
<PAGE>
------------ Nelson G. Harris, age 69, was elected to the Board of
| | Directors in 1989. From 1981 to 1991, Mr. Harris was
| | President and Chief Executive Officer of Tasty Baking
|[Photo of | Company, a diversified company engaged in the manufacture
|Nelson G.| and distribution of food products. In 1991, Mr. Harris was
| Harris] | elected Chairman and Chief Executive Officer of Tasty
| | Baking Company. In 1992, he 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 a director of CoreStates Financial Corporation and
Tasty Baking Company.
------------ Edithe J. Levit, M.D., age 69, 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
|[Photo of | independent, non-profit agency providing evaluation
| Edithe J.| services for the medical profession. Prior to 1987, she was
| Levit] | President and Chief Executive Officer of that agency.
| |
------------
------------ John M. Palms, age 60, 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
|[Photo of | 1988, he became a Charles Howard Chandler Professor of
| John M. | Physics at Emory University. Dr. Palms was elected
| Palms] | President of Georgia State University in 1989, and in 1991
| | was elected President of the University of South Carolina.
------------ He also is a director of Fortis Holdings Inc., Policy
Management System Corporation, a trustee of the Institute
for Defense Analysis, and a member of the Advisory Council
for the Institute of Nuclear Power Operations (INPO).
------------ Joseph F. Paquette, Jr., age 61, was elected to the Board
| | of Directors and President, Chief Operating Officer in
| | March 1988. In April 1988, he was elected Chairman of the
|[Photo of | Board and Chief Executive Officer. In 1995, he stepped down
| Joseph F.| from the position of Chief Executive Officer. He is also a
| Paquette]| director of Associated Electric & Gas Insurance Services
| | Limited, Meridian Bankcorp, Inc., and Meridian Bank. See
------------ footnote 2 below.
(1) Richard H. Glanton is a partner of the law firm of Reed Smith Shaw & McClay,
which provided legal services to the Company during 1995.
(2) On April 12, 1995, the Board of Directors elected Corbin A. McNeill, Jr. to
the additional position of Chief Executive Officer. Joseph F. Paquette, Jr. will
continue as Chairman of the Board and Chairman of the Executive Committee until
his retirement in 1997.
* * *
6
<PAGE>
MEETINGS OF DIRECTORS
The total number of regular and special meetings of the Board of Directors
during 1995 was eleven. 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, NUCLEAR, AND AD HOC FINANCE
COMMITTEES
The Audit Committee consists of S. W. Catherwood (Chairman), M. W.
D'Alessio, J. C. Ladd, E. J. Levit and K. R. McKee. 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 1995.
The Compensation Committee consists of J. A. Hagen (Chairman), N. G.
Harris, J. C. Ladd, R. Rubin and R. Subin. The Committee meets as necessary on
the call of the Chairman of the Committee. The Committee makes decisions
pertaining to compensation for the positions of Director, Chairman, Chief
Executive Officer, 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
three times during 1995.
The Executive Committee consists of J. F. Paquette, Jr. (Chairman), R. G.
Gilmore, J. A. Hagen, N. G. Harris, J. J. McLaughlin, C. A. McNeill, Jr. 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 1995.
The Nominating Committee consists of M. W. D'Alessio (Chairman), S. W.
Catherwood, R. H. Glanton 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 1997 Annual Meeting of Shareholders if such recommendations are submitted
in writing to the Corporate Secretary at the address set forth on page 1. The
7
<PAGE>
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 Corporate
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 1996 Annual Meeting should contact the Company's
Corporate Secretary, Ms. K. K. Combs. Nominations must be received 14 calendar
days prior to the Annual Meeting (March 27, 1996). The Nominating Committee met
once during 1995.
The Nuclear Committee consists of J. M. Palms (Chairman), R. G. Gilmore, E.
J. Levit, K. R. McKee and J. J. McLaughlin. 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 nine times during 1995.
The Ad Hoc Finance Committee was established in 1994 to assist management
in reviewing financial and other opportunities. The Committee consists of R. G.
Gilmore (Chairman), M. W. D'Alessio and J. C. Ladd. The Committee met five times
during 1995.
* * *
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:
$21,000 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,
Ad Hoc Finance and Nominating Committees
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
8
<PAGE>
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
Officers (Messrs. Paquette and McNeill) and the four most highly compensated
executive officers during the calendar year 1995.
9
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ALL OTHER
COMPENSATION
ANNUAL COMPENSATION LONG-TERM COMPENSATION ($)
------------------- -------------------------------------- ------------
AWARDS PAYOUTS
----------------------- -----------
RESTRICTED LONG-TERM
STOCK INCENTIVE PLAN
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) OTHER ($) AWARD(S) ($) OPTIONS (#) PAYOUTS ($)
- -------------------------------------- --------- --------- -------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Joseph F. Paquette, Jr. (A) 1995 497,614 400,119 0 0 50,000 219,000 0
Chairman of the Board 1994 485,332 305,670 0 0 50,000 0 0
1993 425,534 403,262 0 0 40,000 0 0
Corbin A. McNeill, Jr. (B) 1995 444,986 272,675 0 0 50,000 153,300 0
President and Chief 1994 379,386 135,857 0 0 30,000 0 0
Executive Officer 1993 350,990 186,697 0 0 24,000 0 0
William L. Bardeen 1995 314,010 109,388 0 0 20,000 139,525 0
Senior Vice President 1994 304,532 88,072 0 0 20,000 0 0
and Group Executive, 1993 292,319 115,372 0 0 15,000 0 0
Consumer Energy
Services Group
James W. Durham (C) 1995 273,992 119,591 0 0 20,000 76,650 0
Senior Vice President 1994 262,757 83,712 0 0 20,000 0 0
and General Counsel 1993 253,222 97,781 0 0 15,000 0 0
Dickinson M. Smith 1995 264,495 117,335 0 0 20,000 76,650 0
President, 1994 236,298 87,200 0 0 20,000 0 0
PECO Nuclear Generation 1993 220,502 85,558 0 0 15,000 0 0
and Chief Nuclear Officer
Kenneth G. Lawrence (D) 1995 209,874 114,807 0 0 20,000 58,425 0
Senior Vice President, 1994 185,873 74,071 0 0 20,000 0 0
Finance and Chief 1993 154,466 52,783 0 0 8,000 0 0
Financial Officer
</TABLE>
(A) Mr. Paquette served as Chief Executive Officer of the Company until April
12, 1995.
(B) Mr. McNeill became Chief Executive Officer of the Company, effective April
12, 1995.
(C) Mr. Durham was granted a restricted stock award of 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, 1995, Mr.
Durham held 100 restricted shares of the Company's Common Stock valued at
$1,950. Dividends are paid on these shares.
(D) Mr. Lawrence was granted a restricted stock award of 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, 1995, Mr.
Lawrence held 100 restricted shares of the Company's Common Stock valued at
$1,950. Dividends are paid on these shares.
10
<PAGE>
OPTION GRANTS IN 1995
<TABLE>
<CAPTION>
GRANT DATE
INDIVIDUAL GRANTS VALUE
--------------------- ----------
NUMBER % OF
OF TOTAL GRANT
SECURITIES OPTIONS EXERCISE DATE
UNDERLYING GRANTED TO OR BASE EXPIRA- PRESENT
OPTIONS EMPLOYEES PRICE TION VALUE
NAME GRANTED(#)(A) IN 1995 ($/SH) DATE ($)(B)
- ---- ------------ ---------- ---------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Joseph F. Paquette, Jr. 50,000 5.9% $26.125 2/25/05 $166,547
Chairman of the Board
Corbin A. McNeill, Jr. 50,000 5.9 26.125 2/25/05 166,547
President and Chief
Executive Officer
William L. Bardeen 20,000 2.4 26.125 2/25/05 66,619
Senior Vice President
and Group Executive,
Consumer Energy
Services Group
James W. Durham 20,000 2.4 26.125 2/25/05 66,619
Senior Vice President
and General Counsel
Dickinson M. Smith 20,000 2.4 26.125 2/25/05 66,619
President,
PECO Nuclear and
Chief Nuclear Officer
Kenneth G. Lawrence 20,000 2.4 26.125 2/25/05 66,619
Senior Vice President,
Finance and Chief
Financial Officer
</TABLE>
(A) An equal number of dividend equivalent units were granted in 1995 in
conjunction with stock options. For further information regarding dividend
equivalent units, see the Compensation Committee Report--Long-Term Incentive
Plan.
(B) Values indicated are an estimate based on the Black-Scholes option pricing
model. Dividend equivalent units, which were granted in 1995, are not
considered in the Black-Scholes option pricing model. Although executives
face uncertain risks of forfeiture, these risks are not factored into the
calculated values. The actual value realized will be determined by the
excess of the stock price over the exercise price on the date the option is
exercised. There is no certainty the actual value realized will be at or
near the value estimated by the Black-Scholes option pricing model.
Assumptions used for the Black-Scholes model are as of December 31, 1995 and
are as follows:
Risk-free interest rate 5.71%
Volatility .1674
Dividend yield 5.48%
Time of exercise 10 years
11
<PAGE>
AGGREGATED OPTION EXERCISES IN 1995
AND OPTION VALUES AT DECEMBER 31, 1995
<TABLE>
<CAPTION>
SECURITIES
UNDERLYING VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
12/31/95 12/31/95(1)
SHARES
ACQUIRED (#) ($)
ON VALUE EXERCISABLE EXERCISABLE
NAME EXERCISE (#) REALIZED ($) UNEXERCISABLE UNEXERCISABLE
- ----- ----------- ---------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Joseph F. Paquette, Jr. 60,499 $517,269 E 190,000 E $ 645,000
Chairman of the Board U 50,000 U 200,000
Corbin A. McNeill, Jr. 0 0 E 198,500 E 1,210,438
President and Chief U 50,000 U 200,000
Executive Officer
William L. Bardeen 10,000 45,000 E 35,000 E 72,500
Senior Vice President U 20,000 U 80,000
and Group Executive,
Consumer Energy
Services Group
James W. Durham 0 0 E 70,000 E 234,375
Senior Vice President U 20,000 U 80,000
and General Counsel
Dickinson M. Smith 0 0 E 124,753 E 819,574
President, U 20,000 U 80,000
PECO Nuclear and
Chief Nuclear Officer
Kenneth G. Lawrence 0 0 E 38,000 E 115,250
Senior Vice President, U 20,000 U 80,000
Finance and Chief
Financial Officer
</TABLE>
- -------------------
(1) Market value of underlying securities at the year-end price of $30.125 per
share, minus the value of underlying securities at the exercise or base
price. All options whose exercise or base price exceeds the market value
are valued at zero.
12
<PAGE>
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-term 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-term 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 of 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 compensation 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. While Mr. Paquette's total compensation is generally
comparable to CEO compensation levels of similarly sized utilities in the
survey, Mr. McNeill's total compensation is below such levels.
Under the transition rules outlined in the Omnibus Budget Reconciliation
Act of 1993, the Company is in compliance with Section 162(m) governing the
deductibility for federal income tax purposes of the compensation paid to
executive officers. 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.
13
<PAGE>
EXECUTIVE SALARIES
Executive salaries are established at competitive levels based upon survey
information from other comparably sized major electric and gas utility
companies, including a majority 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
indicated in the Summary Compensation Table include annual salary increases
granted in 1995 to the officers in the Table, excluding the Chairman. A greater
portion of Messrs. Paquette's and McNeill's compensation is linked to the
performance of the Company. As a result, Messrs. Paquette's and McNeill's
salaries continue to be below competitive levels, i.e., their salaries are below
the median salary level of CEOs of comparably sized utilities. The salaries of
all executive level positions are reviewed by a nationally recognized,
independent compensation consulting firm, to ensure the comparable salary data
is valid and appropriate.
MANAGEMENT INCENTIVE COMPENSATION PLAN
In 1988, the Board of Directors established a Management Incentive
Compensation 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 75th percentile
of major electric utilities, which is consistent with median bonuses paid in
general industry. Each year, a participant is assigned a base bonus percentage
which is directly related to the participant's position. Each participant's base
bonus percentage is determined by using bonus percentage data of comparably
sized utilities gathered from surveys and by the internal system of valuing PECO
Energy positions. This base bonus percentage is then multiplied by a Company
goals multiplier. This multiplier is a percentage based on the achievement of
corporate goals for the Chairman and CEO and a combination of corporate, group
and business unit or departmental goals for all other plan participants,
established by the Board of Directors. This multiplier can range anywhere from
0% to a maximum of 125% if the Company and its business units/departments exceed
these goals. This amount is then multiplied by an individual performance
multiplier based on the participant's performance during the year, which can
range anywhere from 0% to a maximum of 125% if the participant had exceptional
job performance. The resulting percentage is multiplied by the midpoint of the
participant's salary range, and the product equals the participant's bonus.
Corporate, group and business unit or departmental goals are established
based upon critical business factors necessary to achieve short-term and
long-term strategic objectives. Although these measures may vary from year to
year, they typically include earnings per share, total expenditures, safety and
a measure relating to customer service objectives. A participant's individual
performance is rated on individual achievement of pre-established goals which
include and/or support the key business objectives.
14
<PAGE>
The goals used in determining Company performance for the 1995 Management
Plan awards were: earnings per share, customer satisfaction and diversity. These
goals accounted for 100% of the Company performance factor for the Chairman and
CEO, and 65% to 75% of the Company performance factor for other executives and
Management Plan participants. The remaining factors, which accounted for 25% to
35% of the Company performance factor for other executives and Management Plan
participants consisted of: total expenditures and safety for the specific
department or business unit, and specific departmental or business unit goals.
The weighting of these factors for Messrs. Paquette and McNeill and the other
executives listed in the Summary Compensation Table are as follows:
EXECUTIVE FACTORS WEIGHTING (%)
- --------- ------- ------------
Chairman of the Board, Corporate
Chief Executive Officer Earnings Per Share 50%
Customer Satisfaction 30
Diversity 20
Senior Vice President Corporate 65
and Group Executive, Group 15
Consumer Energy Total Expenditures
Services Group Safety
Business Unit Goals 20
Senior Vice President Corporate 75
and General Counsel Group 15
Total Expenditures
Safety
Business Unit Goals 10
President, Corporate 65
PECO Nuclear and Group 15
Chief Nuclear Officer Total Expenditures
Safety
Departmental Goals 20
Senior Vice President, Corporate 75
Finance and Chief Group 15
Financial Officer Total Expenditures
Safety
Departmental Goals 10
Consistent with the determination of awards for all participants, the
Chairman's and Chief Executive Officer's 1995 Management Plan award shown in the
Summary Compensation Table was based on a combination of corporate and
individual performance. The Company performance for the 1995 Management Plan
award was as follows: earnings per share and diversity exceeded target levels
while customer satisfaction 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 each officer's individual
performance.
15
<PAGE>
In evaluating each of the Chairman's and CEO's individual performance, the
Committee made an assessment of their leadership in achieving the Company's
long-term strategies and business goals. In the judgment of the Committee,
Messrs. Paquette and McNeill have made great progress in positioning the Company
to adapt and succeed in an industry marked by rapid change. Specific factors
taken into consideration were the Company's strong financial performance,
development of strategic alternatives, pursuit of additional earnings
opportunities in power marketing and telecommunications, and its response to
significant operational challenges. In addition, the Committee considered Mr.
McNeill's achievements in assuming the role of Chief Executive Officer and Mr.
Paquette's strategic direction and leadership in his role as Chairman.
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 stock options
to purchase shares of the Company's Common Stock, dividend equivalents and
shares of restricted Common Stock.
The combined value of stock options and dividend equivalents granted to the
Chairman, CEO and other executives indicated on the Summary Compensation Table
and the Option Grant Table are at levels competitive with other major utility
companies. Stock options and dividend equivalents are granted to executives at
approximately the mean level of grants to comparable executives at other major
electric utility companies.
The purpose of stock options 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 in the
first year of a three-year cycle; dividend equivalents were granted in 1995 to
the Chairman, CEO and other executives in the Summary Compensation Table. Not
all option grants include dividend equivalents. Dividend equivalents granted
under the Incentive Plan provide the opportunity for the recipient to earn an
amount equal to the dividends that would have been paid had the recipient
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-year period. For the performance period 1992 to 1994 (used to determine
awards reported in the Summary Compensation Table under Long-Term Incentive Plan
Payouts), the measure used to determine dividend equivalents paid is the
Company's three-year total shareholder return measured against the three-year
16
<PAGE>
total shareholder return of a comparison group of companies consisting of the 50
largest investor-owned electric utilities, including a majority 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 as follows:
<TABLE>
<S> <C>
(AVERAGE 12/94 STOCK PRICE-AVERAGE 12/91 STOCK PRICE) + CUMULATIVE 1992--1994 DIVIDENDS PAID
--------------------------------------------------------------------------------------------
AVERAGE 12/91 STOCK PRICE
</TABLE>
Dividend equivalent unit payouts are based on the following schedule:
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 1992-1994 performance period, PECO Energy's three-year TSR ranking
was in the third quintile as measured against the three-year TSR of the 50
largest investor-owned utilities. As a result, the dividend equivalent payout
was 50% of the accumulated dividend equivalents earned for the 1992-1994
performance period.
For the performance period 1995-1997, the dividend equivalent unit payout
schedule has been adjusted to a more competitive scale. The revised scale allows
for more upside earnings potential for above targeted competitive level
performance while maintaining downside earnings penalties for below targeted
competitive level performance. The comparison group of companies remains the 50
largest investor-owned electric utilities and the TSR calculation differs only
in relation to using share price appreciation and dividends paid over the
1995-1997 performance period. For 1995-1997, the dividend equivalent unit
payouts will be based on the following schedule:
THE COMPANY'S THREE-YEAR PERCENT OF ACCUMULATED
TSR QUINTILE RANK DIVIDEND EQUIVALENTS EARNED
------------------------ ---------------------------
1 150%
2 125
3 100
4 50
5 0
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 recipient. 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.
17
<PAGE>
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 19, an investment of $100 in the
Company's Common Stock on December 31, 1990 would have grown in value to $221,
assuming reinvestment of dividends, at December 31, 1995. For the five-year
period ending December 31, 1995, the total cumulative return for holders of the
Company's Common Stock amounted to 121%, or the equivalent of 17.2% per year
compounded. That return significantly exceeded the comparable Dow Jones Utility
Average and was marginally above the return of the Standard & Poor's 500 Stock
Index.
Compensation Committee
J. A. Hagen (Chairman)
N. G. Harris
J. C. Ladd
R. Rubin
R. Subin
* * *
18
<PAGE>
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 1991 through 1995.
[INSERT GRAPH]
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
DECEMBER 31,
-----------------------------------------------------------------
1990 1991 1992 1993 1994 1995
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PECO Energy Company $100 $152 $162 $197 $169 $221
- ------------------------------------------------------------------------------------------------
S & P 500 Stock Index $100 $130 $140 $155 $157 $215
- ------------------------------------------------------------------------------------------------
Dow Jones Utility Average $100 $115 $120 $131 $111 $147
- ------------------------------------------------------------------------------------------------
</TABLE>
Assumptions:
1. $100 invested on December 31, 1990 in PECO Energy Company Common Stock,
S&P 500 Stock Index and Dow Jones Utility Average.
2. All dividends are reinvested.
* * *
19
<PAGE>
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.
<TABLE>
<CAPTION>
PENSION PLAN TABLE
-----------------------------------------------------------------------
AVERAGE ANNUAL YEARS OF SERVICE
COMPENSATION FOR -----------------------------------------------------------------------
HIGHEST CONSECUTIVE
FIVE YEARS 10 YEARS 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS 40 YEARS
----------------------- -----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 100,000 $ 19,593 $ 26,889 $ 34,186 $ 41,482 $ 48,778 $ 56,075 $ 63,371
200,000 40,093 55,139 70,186 85,232 100,278 115,325 130,371
300,000 60,593 83,389 106,186 128,982 151,778 174,575 197,371
400,000 81,092 111,639 142,186 172,732 203,278 233,825 264,371
500,000 101,593 139,889 178,186 216,482 254,778 293,075 331,371
600,000 122,093 168,139 214,186 260,232 306,278 352,325 398,371
700,000 142,593 196,389 250,186 303,982 357,778 411,575 465,371
800,000 163,093 224,639 286,186 347,732 409,278 470,825 532,371
900,000 183,593 252,889 322,186 391,482 460,778 530,075 599,371
1,000,000 204,093 281,139 358,186 435,232 512,278 589,328 666,371
</TABLE>
Covered compensation includes salary and bonus which is disclosed in the
Summary Compensation Table on page 10 for the six named executive officers. The
calculation of retirement benefits under the plans is based upon average
earnings for the highest consecutive five-year period.
Messrs. Paquette, McNeill, Bardeen, Durham, Smith and Lawrence have 38, 28,
4, 14, 16 and 26 credited years of service, respectively, 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.
CHANGE-OF-CONTROL AGREEMENTS. The Company has entered into
change-of-control agreements with most of its executive officers, including the
individuals named in the Summary Compensation Table. The purpose of the
agreements is to assure the objective judgment, and to retain the loyalties, of
key executives when the Company is faced with a potential change of control by
providing for a continuation of compensation (salary and bonus), health and
other benefits for a two-year period, and, for certain officers, a minimum of
twenty years of credited service under the Company's deferred compensation and
supplemental pension benefit plans for purposes of determining the officer's
pension, if an officer's employment is terminated within three years after a
Change of Control.
20
<PAGE>
Change of Control is defined as (a) the purchase or other acquisition of
20% or more of either the outstanding shares of common stock or the combined
voting power of the Company's then-outstanding voting securities; (b) the
approval by the shareholders of a reorganization, merger, or consolidation, in
which the existing shareholders do not own more than 50% of the new company; or
(c) a change of 25% of the membership of the Board of Directors within a
twelve-month period unless approved by 85% of the pre-change directors still in
office.
In addition, the Company's Long-Term Incentive Compensation Plan provides
that in the event of a change of control, restrictions on participant stock
options and restricted stock grants lapse. The Company has also entered into two
trust agreements to provide for the payment of retirement benefits and deferred
compensation benefits of directors and officers that include provisions
requiring full funding in the event of a change of control.
* * *
PROPOSAL 2. APPOINTMENT OF AUDITORS FOR 1996
The Board of Directors, subject to the approval of the shareholders, has
appointed Coopers & Lybrand L.L.P., independent certified public accountants, as
the auditors of the Company for the year 1996. 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.
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 that representative so desires.
* * *
21
<PAGE>
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 Company (PECO) 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.
SHAREHOLDER'S STATEMENT OF 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 Chairman to stop this practice at a number of recent annual meetings without
success. PECO shareholders should vote for this resolution.
22
<PAGE>
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. An identical
proposal was submitted to shareholders at the prior two Annual Meetings of
Shareholders and was disapproved, with only 12.4% and 13.9% of the vote cast in
favor. 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.
* * *
23
<PAGE>
PROPOSAL 4. SHAREHOLDER PROPOSAL B
A shareholder of the Company has advised the Company that she 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 COMPANY (PECO) adopt the following policy:
That there shall be term limits for members of the Board of Directors of PECO
and such term limits shall not exceed six years.
SHAREHOLDER'S STATEMENT OF SUPPORT
PECO has a history of having an unlimited term of service for the
members of its Board of Directors. The practice allows Board Members to continue
to serve regardless of the record of performance in directing the company's
affairs.
Limiting the term of service will allow for regular replenishment of
the Board composition with opportunity for new expertise, ideas and perspectives
to help insure the continued viability and growth of the company.
This resolution is consistent with trends in the country to limit terms
of office of members of the United States Congress and other governing bodies.
The proponent believes that implementation of this proposal will allow PECO to
be guided by a continual infusion of new people bringing in new ideas and
expertise to guide the company in its strategic planning and financial and
business decision making. This should benefit PECO employees, shareholders and
customers by allocating our resources in the most effective and constructive
manner.
BOARD OF DIRECTORS' STATEMENT IN
OPPOSITION TO SHAREHOLDER PROPOSAL:
The Board of Directors recommends that shareholders vote "AGAINST" this
proposal.
The Board of Directors believes that the familiarity with and understanding
of the Company achieved through continuity of service are assets which enhance
directors' contributions to the Company. Arbitrarily limiting directors' service
would deprive the Company of the insights directors have gained into the
Company's business, strategies and policies. It is this insight that is
especially vital now as the electric utility industry faces the prospect of
competition. In addition, arbitrarily disqualifying those directors who have
served for six years deprives PECO Energy shareholders of the opportunity to
evaluate and vote for or against those directors on the basis of merit.
24
<PAGE>
The Nominating Committee of the Board of Directors, which is composed
entirely of independent directors, reviews and recommends director nominees for
consideration by the full Board of Directors. The Board of Directors, in turn,
recommends for shareholder consideration and approval a slate of director
nominees who are selected because of their experience, diversity and
contribution to the Company. In addition, the Board policy governing directors'
retirement (at age 70) and the Company's Bylaw provision allowing the number of
directors to be varied, assure ample opportunity to add new directors with new
expertise, ideas and perspectives.
Currently, the average tenure of the Company's 15 directors is 9.8 years,
and 13 of the 15 directors have served six or more years. The Board of Directors
believes that a restriction on the number of years of director service is
unnecessary and would deprive the Company of experienced oversight, promote
needless turnover of directors, and weaken the Company's present effective
system of governance.
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.
* * *
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 1997 ANNUAL MEETING
Proposals intended for inclusion in next year's proxy statement should be
sent to the Corporate Secretary of the Company at 2301 Market Street, P.O. Box
8699, Philadelphia, PA, 19101-8699, and must be received by November 4, 1996.
* * *
25
<PAGE>
VALLEY FORGE CONVENTION CENTER DIRECTIONS
BY CAR: FROM PHILADELPHIA: Take the Schuylkill Expressway to Exit 25 (Mall
Boulevard). Bear right at first light onto Mall Boulevard. Turn
right at next light onto North Gulph Road and proceed
approximately 11/2 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 11/2 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.
[INSERT MAP]
26
<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.
[INSERT MAP]
27
<PAGE>
PECO ENERGY COMPANY
1996 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 10, 1996,
AT 9:30 A.M. IN THE LANCASTER/MONTGOMERY ROOM OF THE
VALLEY FORGE CONVENTION CENTER, 1200 FIRST AVENUE,
KING OF PRUSSIA, PENNSYLVANIA.
P Richard G. Gilmore, Joseph J. McLaughlin and J. Barry Mitchell,
or any of them, with power of substitution are hereby appointed
proxies to vote as specified all shares of Common Stock which the
R Shareholder(s) named on the reverse side is 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
O be brought before the Meeting.
First Chicago Trust Company of New York, as Custodian under the
X 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 identical instructions
Y for any shares of Common Stock held for the benefit of the
Shareholder(s) named on the reverse side.
Nominees for election to the Board of Directors for Class III
terms expiring in 1999 are:
M. Walter D'Alessio
James A. Hagen
Joseph C. Ladd
Kinnaird R. McKee
Ronald Rubin
---------------
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 AND 4.
- ------------------------------------------------------------------------------
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 1996 --- --- ---
For, except vote withheld from the following nominee(s):
----------------------------------------------------
- ------------------------------------------------------------------------------
THE BOARD RECOMMENDS A VOTE AGAINST PROPOSALS 3 AND 4.
- ------------------------------------------------------------------------------
FOR AGAINST ABSTAIN
3. Shareholder Proposal A.
--- --- ---
4. Shareholder Proposal B.
--- --- ---
SPECIAL ACTION |-----|
Discontinue Annual Report | |
mailing for this account. |-----|
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 suc
- ------------------------------------------------------------
- ------------------------------------------------------------
SIGNATURE(S) DATE
A REMINDER
PECO ENERGY COMPANY
ANNUAL MEETING OF SHAREHOLDERS -- APRIL 10, 1996
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.
K. K. COMBS
Corporate 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 19 of the Definitive Proxy Statement.
Map of major routes to Valley Forge Convention Center appears on page
26 of the Definitive Proxy Statement.
Map of Valley Forge Convention Center appears on page 27 of the
Definitive Proxy Statement.