SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
PECO ENERGY COMPANY
________________________________________________
(Name of Registrant as Specified In Its Charter)
T. D. CUTLER; G. M. PFEIL (PECO ENERGY)
________________________________________________
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No Fee Required.
[ ] 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:
___________________________________________________
5. Total fee paid:
___________________________________________________
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
___________________________________________________
2) Form, Schedule or Registration Statement No.:
___________________________________________________
3) Filing Party:
___________________________________________________
4) Date Filed:
___________________________________________________
(1) Set forth the amount on which the filing fee is calculated and
state how it was determined.
<PAGE>
[LOGO] PECO ENERGY NOTICE OF 1999
2301 Market Street ANNUAL MEETING
PO Box 8699 AND
Philadelphia, PA 19101-8699 PROXY STATEMENT
MARCH 30, 1999
Dear Shareholder:
Please come to our annual meeting on April 27, 1999. We are holding
the meeting this year at the Sunnybrook Ballroom in Pottstown, PA, not far
from our Limerick Generating Station. You will hear about our 1998
performance and have the opportunity to ask questions. Enclosed with this
proxy statement are your voting card and the 1998 annual report.
You will notice that we have again used "plain English" in our proxy
statement. We are pleased that so many of you liked the new format last
year and found the proxy easier to read.
We are again offering you the chance to cast your vote on-line. If you
have access to a computer, it is a very easy way to vote. Whether you
choose to vote by proxy card, telephone or computer, it would help if you
would vote as soon as possible.
I look forward to seeing you at the annual meeting.
Sincerely,
/s/ CORBIN A. MCNEILL, JR.
Corbin A. McNeill, Jr.
Chairman, President
and Chief Executive Officer
[LOGO] POWERING UP
<PAGE>
KATHERINE K. COMBS
Deputy General Counsel
and Corporate Secretary
[LOGO] PECO ENERGY
___________________________________
PECO Energy Company
2301 Market Street
PO Box 8699
Philadelphia, PA 19101-8699
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
APRIL 27, 1999
March 30, 1999
We will hold the annual meeting of shareholders of PECO Energy Company
on Tuesday, April 27, 1999, at 9:30 a.m. at the Sunnybrook Ballroom in
Pottstown, Pennsylvania.
The purpose of the annual meeting is to consider and take action on the
following:
1. Election of three directors: Daniel L. Cooper, M. Walter D'Alessio
and Ronald Rubin, each for a term of three years.
2. Ratification of PricewaterhouseCoopers, LLP as PECO Energy Company's
independent accountants for 1999.
3. A shareholder proposal relating to the use of mixed oxide fuel in
nuclear reactors, if properly presented at the annual meeting.
4. Any other business that properly comes before the annual meeting.
Shareholders of record as of March 5, 1999 can vote at the annual
meeting. This proxy statement, voting instructions and 1998 annual report
to shareholders are being distributed on or about March 30, 1999.
YOUR VOTE IS VERY IMPORTANT. IF VOTING BY MAIL, PLEASE SIGN, DATE AND
RETURN THE ENCLOSED PROXY CARD IN THE ENCLOSED ENVELOPE, AND ALLOW
SUFFICIENT TIME FOR THE POSTAL SERVICE TO DELIVER YOUR PROXY BEFORE THE
MEETING. IF VOTING BY TELEPHONE OR INTERNET, PLEASE FOLLOW THE
INSTRUCTIONS ON YOUR PROXY CARD.
By Order of the board of directors
/s/ KATHERINE K. COMBS
Katherine K. Combs
Deputy General Counsel and Corporate Secretary
<PAGE>
T A B L E O F C O N T E N T S
Commonly Asked Questions and Answers about the Annual Meeting ......... 1
Proposal 1: Election of Directors ...................................... 4
Proposal 2: Ratification of PricewaterhouseCoopers, LLP as
PECO Energy Company's Independent Accountants for 1999 ..... 4
Proposal 3: Use of Mixed Oxide Fuel in Nuclear Reactors ................ 4
Beneficial Ownership ................................................... 7
Board of Directors ..................................................... 8
Board Committees ....................................................... 12
Board Compensation ..................................................... 13
Report of the Compensation Committee ................................... 15
Performance Graph ...................................................... 20
Summary Compensation Table ............................................. 21
Option Grants in 1998 .................................................. 22
Option Exercises and Year-end Value .................................... 23
Retirement Plans ....................................................... 24
Other Information ...................................................... 25
- ------------------------------------------------------------------------------
For directions to the annual meeting, please refer to the inside back cover.
- ------------------------------------------------------------------------------
<PAGE>
C O M M O N L Y A S K E D
Q U E S T I O N S A N D A N S W E R S
A B O U T T H E A N N U A L M E E T I N G
- ------------------------------------------------------------------------------
Q: WHAT AM I VOTING ON?
A: o Election of three directors: Daniel L. Cooper, M. Walter D'Alessio
and Ronald Rubin;
o Ratification of PricewaterhouseCoopers, LLP as PECO Energy Company's
independent accountants for 1999; and
o A shareholder proposal relating to the use of mixed oxide fuel
in nuclear reactors, if properly presented at the annual meeting.
- ------------------------------------------------------------------------------
Q: WHO CAN VOTE?
A: Common shareholders of PECO Energy Company as of the close of business
on the record date, March 5, 1999, can vote at the annual meeting.
Each share of PECO Energy Company common stock gets one vote.
- ------------------------------------------------------------------------------
Q: HOW DO I VOTE?
A: Sign and date each proxy card that you receive and return it in the
prepaid envelope or vote by telephone or on the Internet. If we receive
your signed proxy before the annual meeting, we will vote your shares
as you direct. You can specify on your proxy whether your shares should
be voted for all, some or none of the nominees for director. You can
also specify whether you approve, disapprove or abstain from the other
two proposals.
If you do not mark any selections, your proxy card will be voted:
o in favor of the election of the directors named in Proposal 1;
o in favor of Proposal 2; and
o against the shareholder proposal, Proposal 3.
You have the right to revoke your proxy any time before the meeting by:
o notifying the Corporate Secretary; or
o casting another vote either in person or by one of the other
methods discussed above.
- ------------------------------------------------------------------------------
Q: CAN I VOTE MY SHARES BY TELEPHONE OR BY INTERNET?
A: If you hold your stock in your own name, you may vote by telephone
or through the Internet, by following the instructions included on
your proxy card.
If your shares are held in "street name," you will need to contact
your broker or other nominee to find out whether you will be able to
vote by telephone or by Internet.
1
<PAGE>
- ------------------------------------------------------------------------------
Q: WHO WILL COUNT THE VOTE?
A: Representatives of First Chicago Trust Company of New York, a
division of EquiServe, and PECO Energy Company's Office of the Corporate
Secretary will count the votes and serve as judges of election.
- ------------------------------------------------------------------------------
Q: WHAT CONSTITUTES A QUORUM?
A: As of the record date, March 5, 1999, 224,840,556 shares of PECO
Energy Company's common stock were issued and outstanding. In order to
conduct the annual meeting, more than one-half of the outstanding shares
must be present or be represented by proxy. This is referred to as a
"quorum." If you submit a properly executed proxy card or vote by
telephone or by Internet, you will be considered part of the quorum.
Proxies marked as abstaining on any proposal to be acted on by
shareholders will be treated as present at the annual meeting for
purposes of a quorum. Proxies marked as abstaining, however, will not
be counted as votes cast on that proposal. Abstaining proxies include
proxies containing broker non-votes.
- ------------------------------------------------------------------------------
Q: WHAT VOTE IS NEEDED FOR THESE PROPOSALS TO BE ADOPTED?
A: More than one-half of shares present either in person or by
proxy and entitled to vote at the annual meeting must vote for a
proposal in order for it to be adopted. For the election of directors,
abstentions and votes "withheld" will be considered votes against the
directors. For all other proposals, abstentions and broker non-votes
will not be counted as "votes" cast.
- ------------------------------------------------------------------------------
Q: WHO CONDUCTS THE PROXY SOLICITATION AND HOW MUCH WILL IT COST?
A: PECO Energy Company is asking for your proxy for the annual
meeting and will pay all the cost of asking for shareholder proxies. We
have hired Morrow & Co., Inc. to help us send out the proxy materials
and ask for proxies. Morrow & Co.'s fee for these services is $15,000,
plus out-of-pocket expenses. We can ask for proxies through the mail or
personally by telephone or telegram. We can use directors, officers and
regular employees of PECO Energy Company to ask for proxies. These
people do not receive additional compensation for these services. We
will reimburse brokerage houses and other custodians, nominees and
fiduciaries for their reasonable out-of-pocket expenses for forwarding
solicitation material to the beneficial owners of PECO Energy Company
common stock.
2
<PAGE>
- ------------------------------------------------------------------------------
Q: HOW DOES A SHAREHOLDER NOMINATE SOMEONE TO BE A DIRECTOR OF PECO
ENERGY COMPANY?
A: You may recommend any person as a nominee for director of PECO
Energy Company by writing to M. Walter D'Alessio, Chairman of the
corporate governance committee, c/o PECO Energy Company, 2301 Market
Street, P.O. Box 8699, Philadelphia, PA 19101-8699. Your
recommendation must include a notarized statement indicating the
nominee's willingness to serve, if elected, and information required
under the Bylaws, including the nominee's principal occupations or
employment over the past five years. The corporate governance committee
has the sole discretion to decide whom it will recommend, and the board
has the sole discretion to make the final selection of nominees. You
cannot nominate a candidate from the floor of the annual meeting unless
you have submitted the notice and the information required by the Bylaws
to the Corporate Secretary and it is received no later than April 13,
1999.
- ------------------------------------------------------------------------------
Q: WHEN ARE THE SHAREHOLDER PROPOSALS FOR THE ANNUAL MEETING HELD IN THE
YEAR 2000 DUE?
A: In order to be considered, you must submit proposals for next
year's annual meeting in writing to Katherine K. Combs, Deputy General
Counsel and Corporate Secretary, PECO Energy Company, 2301 Market
Street, P.O. Box 8699, Philadelphia, PA 19101-8699. Under the Bylaws,
no proposal can be considered at the 2000 annual meeting unless it is
received by the Corporate Secretary before the close of business on
December 1, 1999. The proposal must also meet the other requirements of
the rules of the SEC relating to shareholder proposals.
3
<PAGE>
P R O P O S A L S T O B E V O T E D U P O N
PROPOSAL 1:
ELECTION OF DIRECTORS
The board of PECO Energy Company consists of 12 members, divided into
three classes. The three-year terms of each class are staggered so that
the term of one class expires at each annual meeting. The terms of the
three Class III directors will expire at the 1999 annual meeting.
The corporate governance committee has recommended, and the board
nominates, the following Class III directors for re-election: Daniel L.
Cooper, M. Walter D'Alessio and Ronald Rubin. Each has consented to serve
a three-year term.
If any director is unable to stand for re-election, the board may
reduce the number of directors, or designate a substitute. In that case,
shares represented by proxies may be voted for a substitute director. We
do not expect that any nominee will be unavailable or unable to serve.
THE CORPORATE GOVERNANCE COMMITTEE AND THE BOARD OF DIRECTORS RECOMMEND
A VOTE "FOR" THESE DIRECTORS.
PROPOSAL 2:
RATIFICATION OF PRICEWATERHOUSECOOPERS, LLP AS PECO ENERGY COMPANY'S
INDEPENDENT ACCOUNTANTS FOR 1999
Coopers & Lybrand had been our independent public accountants for many
years. Effective July 1, 1998, Coopers & Lybrand merged with
PriceWaterhouse to form PricewaterhouseCoopers, LLP. Since this merger,
PricewaterhouseCoopers has been our independent public accountants. The
audit committee and the board of directors believe that
PricewaterhouseCoopers's long-term knowledge of PECO Energy Company is
invaluable, especially as PECO Energy Company moves to competition in the
energy market. Representatives of PricewaterhouseCoopers working on PECO
Energy Company matters are periodically changed, providing PECO Energy
Company with new expertise and experience. Representatives of
PricewaterhouseCoopers have direct access to members of the audit committee
and regularly attend their meetings. Representatives of
PricewaterhouseCoopers will attend the annual meeting to answer appropriate
questions and make a statement if they desire.
In 1998, the audit committee reviewed the PricewaterhouseCoopers Audit
Plan for 1999 and proposed fees and concluded that the scope of audit was
appropriate and the proposed fees were reasonable.
THE AUDIT COMMITTEE AND THE BOARD OF DIRECTORS RECOMMEND A VOTE "FOR"
PRICEWATERHOUSECOOPERS, LLP AS PECO ENERGY COMPANY'S INDEPENDENT
ACCOUNTANTS FOR 1999.
PROPOSAL 3:
USE OF MIXED OXIDE FUEL IN NUCLEAR REACTORS
The Maryland Safe Energy Coalition of P.O. Box 3311, Baltimore, MD
21218 and Robert F. Sutton, of 4026 School House Lane, Plymouth Meeting, PA
19462 have informed PECO Energy Company that they intend to present the
following proposal at the annual meeting:
4
<PAGE>
"REFUSE PLUTONIUM FUEL FOR COMMERCIAL REACTORS
WHEREAS: the Department of Energy (DOE) plans to dispose of surplus
weapons plutonium by immobilization in ceramics and possibly as
plutonium/uranium oxide (MOX) fuel for commercial reactors (to prevent
diversion to bomb making and environmental dispersal);
PECO Energy Company has expressed interest to use MOX fuel;
We believe the public opposes using weapons plutonium fuel because we
believe it would: (1) be too dangerous because it would be more hazardous
to control during fissioning in reactors, increasing operating risks and
component aging; (2) still be weapons-usable, so would require heavy
security in transit and at reactors (greater proliferation potential than
immobilization); (3) be more costly to fabricate the fuel and to operate
the reactors; (4) violate the barrier between nuclear power and nuclear
weapons; (5) generate nearly as much new plutonium during fissioning as it
initially contained, resulting in little net loss of plutonium; (6)
generate great quantities of radioactive waste, exacerbating the already
critical, unresolved problems of radioactive waste storage; and (7)
increase the likelihood of locking the U.S. into a deadly plutonium
economy;
The DOE has an unreliable record over the last 23 years managing large
projects;
The potential financial rewards are too small to justify the large
risks to some of the Company's most valuable assets;
PECO's long history of violations, fines and safety problems make
Limerick 1, 2 or Peach Bottom 2, 3 poor choices to use the more risky MOX
fuel; and
Electric utility deregulation is causing most utilities to cut costs.
This added pressure to try to make nuclear electricity cost-competitive
further reduces public confidence that PECO could maintain safety and
security, especially using the more risky weapons plutonium fuel;
THEREFORE BE IT RESOLVED that the shareholders request the Company to
establish a firm policy to refuse to use plutonium (MOX) fuel.
Supporting Statement:
Three utilities (ComEd, Entergy and Virginia Power) recently canceled
their interest in MOX, recognizing large risks with doubtful payback. The
risks of this new venture cannot be overstated. Weapons plutonium cannot
be used directly as fuel, but must undergo complicated and dangerous
processing, creating additional radioactive waste. No fabrication facility
exists in the U.S. It could be years before MOX fuel could be produced,
extending plutonium accessibility for diversion. During these delays,
economic or technical conditions may close candidate reactors. Regulatory
uncertainties between the DOE and the Nuclear Regulatory Commission could
complicate the process, introducing further adverse economic conditions for
the utility.
European experience using MOX fuel is only from reprocessed commercial
reactor wastes, not weapons plutonium. European public support for MOX
fuel is declining. European reprocessing corporations are a driving force
of MOX fuel promotion. The U.S. should lead in developing the most
effective way to immobilize weapons plutonium directly, and assist all
others in this choice.
The safety of hundreds of future generations depends upon the careful
isolation of plutonium from the biosphere. Use of weapons plutonium in
commercial reactors would create a dangerous precedent. For economic,
safety, environmental, and nonproliferation reasons, we urge your
supporting vote."
5
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "AGAINST" THIS SHAREHOLDER PROPOSAL.
This proposal was submitted for consideration at the 1998 annual
meeting and was defeated with 93.76% voting against and 6.24% voting in
favor.
This proposal seeks to prevent PECO Energy Company from even
considering participation in a federal program in which PECO Energy Company
could obtain a low-cost source of fuel. This program is personally
supported by the President of the United States, the U.S. Department of
Energy and the National Academy of Science.
Nuclear reactors in the United States use uranium oxide as fuel.
Nuclear reactors can also use a blend of plutonium oxide and uranium oxide,
also known as mixed oxide, as fuel. The process involves blending small
amounts of plutonium oxide into the uranium oxide. Mixed oxide fuel has
been in existence for decades and is widely used in Europe, although
obtaining plutonium from excess weapons is a recent concept resulting from
nuclear disarmament.
As a result of nuclear disarmament, there was concern about what to do
with surplus weapons-usable plutonium. In an effort to reduce the danger
of existing stockpiles of plutonium, the National Academy of Science
recommended to the President of the United States a program to reduce the
stockpiles. Based on the National Academy of Science report, the
Department of Energy began evaluating the feasibility of using mixed oxide
in United States commercial nuclear reactors. After several years of
study, hearings, public input and a substantial record, the Department of
Energy adopted a two-part program for disposing of plutonium:
o immobilization, which involves encasing surplus plutonium in glass or
ceramic material for disposal; and
o mixed oxide fuel, which involves blending small amounts of plutonium
into uranium oxide for use in commercial nuclear power plants.
Many of the concerns raised in the proposal have been examined
extensively by the Department of Energy and were taken into account in
adopting this program. In addition, PECO Energy Company's nuclear plants
are recognized by both the United States Nuclear Regulatory Commission and
the nuclear industry as among the best in the industry. As a result, PECO
Energy Company believes that Limerick and Peach Bottom are potential
candidates for the use of mixed oxide fuel.
PECO Energy Company supports the United States government's efforts to
reduce global stockpiles of weapons-usable material that could present a
threat to national and international security. In addition, PECO Energy
Company may be able to benefit by reducing its cost of fuel. PECO Energy
Company has publicly indicated a willingness to participate in a program
supporting the nonproliferation goal. PECO Energy Company, however, has
made it clear to the Department of Energy and industry participants that
PECO Energy Company will not use mixed oxide fuel unless PECO Energy
Company is guaranteed a net economic benefit. Furthermore, PECO Energy
Company will not use mixed oxide fuel unless it is convinced that safety,
environmental and security matters are adequately addressed.
This shareholder proposal, however, would unfairly prevent PECO Energy
Company from even considering future participation in these kinds of
programs.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "AGAINST" THIS SHAREHOLDER PROPOSAL.
6
<PAGE>
B E N E F I C I A L O W N E R S H I P
This table indicates how much PECO Energy Company common stock was
owned by the directors, named executive officers and beneficial owners of
more than 5% owned as of December 31, 1998.
o The shares listed as "Beneficially Owned" include shares in the
Employee Savings Plan, the Officers and Directors Deferred Compensation
Plan and the Directors Deferred Stock Unit Plan.
o The shares listed as "May Be Acquired" include shares of PECO Energy
Company common stock which can be acquired upon the exercise of stock
options granted under the PECO Energy Company Long-Term Incentive Plan.
o Beneficial ownership of directors and officers as a group represents
less than 1% of the outstanding shares of PECO Energy Company
common stock.
- ----------------------------------------------------------------------------
NUMBER OF COMMON SHARES
----------------------------------------
BENEFICIALLY MAY BE
NAME OWNED ACQUIRED TOTAL
- ----------------------------------------------------------------------------
Susan W. Catherwood, Director 8,085 6,000 14,085
- ----------------------------------------------------------------------------
Daniel L. Cooper, Director 1,668 0 1,668
- ----------------------------------------------------------------------------
M. Walter D'Alessio, Director 8,648 11,000 19,648
- ----------------------------------------------------------------------------
G. Fred DiBona, Jr., Director 1,983 0 1,983
- ----------------------------------------------------------------------------
James W. Durham, Officer 13,213 164,000 177,213
- ----------------------------------------------------------------------------
Michael J. Egan, Officer 6,378 423,000 429,378
- ----------------------------------------------------------------------------
R. Keith Elliott, Director 2,983 0 2,983
- ----------------------------------------------------------------------------
Richard H. Glanton, Director 4,440 3,000 7,440
- ----------------------------------------------------------------------------
Rosemarie B. Greco, Director 1,306 0 1,306
- ----------------------------------------------------------------------------
Kenneth G. Lawrence, Officer 5,610 128,000 133,610
- ----------------------------------------------------------------------------
Corbin A. McNeill, Jr., Director
and Officer 42,968 848,500 891,468
- ----------------------------------------------------------------------------
John M. Palms, Ph.D., Director 7,746 9,500 17,246
- ----------------------------------------------------------------------------
Joseph F. Paquette, Jr., Director 35,178 190,000 225,178
- ----------------------------------------------------------------------------
Gerald R. Rainey, Officer 21,736 0 21,736
- ----------------------------------------------------------------------------
Ronald Rubin, Director 9,013 11,000 20,013
- ----------------------------------------------------------------------------
Robert Subin, Director 4,390 5,000 9,390
- ----------------------------------------------------------------------------
United Bank of Switzerland AG 16,125,789(A) 0 16,125,789(A)
Bahnhofstrasse 45,
8021, Zurich, Switzerland
Brinson Partners, Inc.
209 South LaSalle
Chicago, Illinois 60604
- ----------------------------------------------------------------------------
Directors and Officers as
a group (37) 251,257 2,476,200 2,727,457
- ----------------------------------------------------------------------------
(A) In a Form 13G filed with the SEC on February 17, 1999, as of
December 31, 1998, United Bank of Switzerland AG and Brinson Partners,
Inc., a U.S. subsidiary of United Bank, disclosed that they held
approximately 7.2% of the issued and outstanding shares of PECO Energy
Company common stock and had the right to vote and sell these shares.
United Bank was one of the financial institutions that entered into a
forward purchase agreement with PECO Energy Company for its common stock.
United Bank's holdings reported in the Form 13G included 4.6 million shares
held by United Bank pursuant to this agreement. PECO Energy Company
settled these agreements by purchasing these shares. United Bank and
Brinson Partners do not currently hold more than 5% of the outstanding
shares of PECO Energy Company common stock.
This table does not include 489,093 shares of common stock held under
PECO Energy Company's Service Annuity Plan. Messrs. Cooper, D'Alessio,
Elliott, Paquette and Rubin are members of the finance committee which
monitors the investment policy and performance of the investments under
that plan.
7
<PAGE>
B O A R D O F D I R E C T O R S
[PHOTO: CORBIN A. McNEILL, JR.]
[PHOTO: SUSAN W. CATHERWOOD]
[PHOTO: DANIEL L. COOPER*]
CORBIN A. McNEILL, JR. Director since 1990
Mr. McNeill, age 59, is Chairman, President and Chief Executive Officer
of PECO Energy Company. He was elected Executive Vice President,
Nuclear in 1988, President and Chief Operating Officer in 1990, Chief
Executive Officer in 1995 and Chairman in 1997. Before joining PECO
Energy Company in 1988, he was Senior Vice President, Nuclear of Public
Service Electric and Gas Company.
SUSAN W. CATHERWOOD Director since 1988
Ms. Catherwood, age 55, is Chairman of the Trustee Board, University of
Pennsylvania Medical Center and Health System and Vice Chairman of the
Board of the University of Pennsylvania. She was formerly Chairman of
the Board of Overseers of the University of Pennsylvania Museum.
Ms. Catherwood is also a director of the Glenmede Corporation, the Glenmede
Trust Company, the Glenmede Trust Company of New Jersey and the Pew
Charitable Trusts.
DANIEL L. COOPER* Director since 1997
Admiral Cooper, age 64, is the former Vice President and General
Manager, Nuclear Services Division of Gilbert/Commonwealth, Inc. He is
also Chairman of the Advisory Board of Applied Research Laboratory, Penn
State University. He retired from the Navy in 1991 as Assistant Chief
of Naval Operations (Undersea Warfare). His career included service as
Commander, Submarine Force, of the U.S. Atlantic Fleet and Director of
Navy Program Planning. He is a former director and Vice Chairman of the
Board of USAA insurance company.
*Nominee for election
8
<PAGE>
B O A R D O F D I R E C T O R S
[PHOTO: M. WALTER D'ALESSIO*]
[PHOTO: G. FRED DiBONA, JR.]
[PHOTO: R. KEITH ELLIOTT]
M. WALTER D'ALESSIO* Director since 1983
Mr. D'Alessio, age 65, is Chairman, President and Chief Executive
Officer of Legg Mason Real Estate Services, commercial mortgage banking
and pension fund advisors. He is also a director of the Philadelphia
Beltline Railroad, Independence Blue Cross and the Brandywine Real
Estate Investment Trust.
G. FRED DiBONA, JR. Director since 1997
Mr. DiBona, age 48, is President and Chief Executive Officer of
Independence Blue Cross, a health insurance organization. He also
serves as Chairman, President and Chief Executive Officer of Keystone
Health Plan East, a subsidiary of Independence Blue Cross. He is past
chairman of the National Blue Cross and Blue Shield Association. He is
also a director of Tasty Baking Company and Philadelphia Suburban
Corporation.
R. KEITH ELLIOTT Director since 1997
Mr. Elliott, age 57, is Chairman and Chief Executive Officer of Hercules
Incorporated, which produces specialty chemicals and related products.
He is also a director of Hercules Incorporated, Wilmington Trust Company
and Computer Task Group.
*Nominee for election
9
<PAGE>
B O A R D O F D I R E C T O R S
[PHOTO: RICHARD H. GLANTON]
[PHOTO: ROSEMARIE B. GRECO]
[PHOTO: JOHN M. PALMS]
RICHARD H. GLANTON Director since 1991
Mr. Glanton, age 52, is a partner of the law firm of Reed Smith Shaw &
McClay, L.L.P. and serves as General Counsel of Lincoln University. Mr.
Glanton is also a director of CGU Corporation of North America,
Philadelphia Suburban Corporation, Philadelphia Suburban Water Company,
Wackenhut Corrections Corporation and a trustee and former president of
the Barnes Foundation.
Reed Smith Shaw & McClay, L.L.P. provided legal services to PECO Energy
Company during 1998. Under the board's conflict of interest policy, the
board specifically reviewed the proposal to engage Mr. Glanton's partners
to perform particular legal services and concluded that the representation
was in the best interest of PECO Energy Company.
ROSEMARIE B. GRECO Director since 1998
Ms. Greco, age 52, is the former President of CoreStates Financial
Corporation and Chief Executive Officer, a director and President of
CoreStates Bank, N.A. Previously, she served as President and Chief
Executive Officer of Fidelity Bank and Senior Executive Vice President
and Chief Retail Officer of First Fidelity Bancorporation. She is also
a director of Sun Company, The Pennsylvania Real Estate Investment
Trust, Cardone Industries, Inc., Genuardi Supermarkets, Inc. and
P.W.R.T. Comserve, Inc.
JOHN M. PALMS, Ph.D. Director since 1990
Dr. Palms, age 63, is President of the University of South Carolina and
Professor of Physics. He previously served as President of Georgia
State University and was the Charles Howard Chandler Professor of
Physics and Vice President for Academic Affairs of Emory University. He
is also director of Fortis, Inc., Policy Management Systems Corporation,
Chairman of the Board of Trustees of the Institute for Defense Analyses
and a member of the Advisory Council for the Institute of Nuclear Power
Operations.
10
<PAGE>
B O A R D O F D I R E C T O R S
[PHOTO: JOSEPH F. PAQUETTE, JR.]
[PHOTO: RONALD RUBIN*]
[PHOTO: ROBERT SUBIN]
JOSEPH F. PAQUETTE, JR. Director since 1988
Mr. Paquette, age 64, retired as Chairman of the Board in 1997. During
his career with PECO Energy Company, he also held the positions of
President, Chief Executive Officer and Chief Operating Officer. He is
also a director of AAA Mid-Atlantic Inc. and Keystone Insurance
Companies.
RONALD RUBIN* Director since 1988
Mr. Rubin, age 67, is Chief Executive Officer of The Pennsylvania Real
Estate Investment Trust, a real estate management and development
company. In 1997, the Rubin Organization, Inc. was acquired by The
Pennsylvania Real Estate Investment Trust. He is a former director of
Continental Bank and Midlantic Bank.
ROBERT SUBIN Director since 1994
Mr. Subin, age 60, retired as Senior Vice President - Global Sourcing &
Engineering for Campbell Soup Company in 1998. During his career at
Campbell Soup Company, he held the positions of Senior Vice President -
Finance, President of the Bakery and Confectionery Division, President
of the International Specialty Foods Division and President of the
Campbell Europe/America Division.
*Nominee for election
11
<PAGE>
B O A R D C O M M I T T E E S
- ------------------------------------------------------------------------------
COMMITTEE MEMBERSHIP ROSTER
- ------------------------------------------------------------------------------
COMPEN- CORPORATE PUBLIC
NAME BOARD AUDIT SATION GOVERNANCE FINANCE NUCLEAR AFFAIRS
- ------------------------------------------------------------------------------
C. A. McNeill, Jr. X* X*
- ------------------------------------------------------------------------------
S. W. Catherwood X X* X
- ------------------------------------------------------------------------------
D. L. Cooper X X X X
- ------------------------------------------------------------------------------
M. W. D'Alessio X X* X X
- ------------------------------------------------------------------------------
G. F. DiBona, Jr. X X X
- ------------------------------------------------------------------------------
R. K. Elliott X X X*
- ------------------------------------------------------------------------------
R. H. Glanton X X X
- ------------------------------------------------------------------------------
R. B. Greco X X X X
- ------------------------------------------------------------------------------
J. M. Palms X X X X*
- ------------------------------------------------------------------------------
J. F. Paquette, Jr. X X X
- ------------------------------------------------------------------------------
R. Rubin X X X X
- ------------------------------------------------------------------------------
R. Subin X X* X
- ------------------------------------------------------------------------------
No. of Meetings
in 1998 9 6 1 3 2 12 1
- ------------------------------------------------------------------------------
*Chairperson
Each committee except the public affairs committee reviewed its charter
in 1998 and conducted an assessment of its own performance. These
committee self-assessments were reviewed by the corporate governance
committee, and the results were reported to the full board.
Audit: Reviews auditing, accounting, financial reporting and internal
control functions. Also reviews officers' and directors' expenses,
corporate code of conduct, environmental and legal compliance matters and
Year 2000 issues. This committee recommends the independent public
accountants and approves the scope of the annual audit by the independent
accountants and internal auditors. All members of this committee are
non-employee directors. The committee meets outside of the presence of
management for portions of its meetings with both the independent
accountants and the internal auditors.
Compensation: Reviews the executives' compensation and administers and
oversees the employee benefit plans and programs. The committee makes
compensation decisions, which are approved by the full board, for the
positions of Chairman, Chief Executive Officer, President, Senior Vice
President, Vice President and Corporate Secretary. The committee uses the
services of an independent compensation consultant who reports directly to
the committee. All members are non-employee directors.
Corporate Governance: Considers and recommends nominees for election
as directors. Reviews individual committee self-assessments and makes
recommendations on board and committee structure, membership, functions,
compensation and effectiveness. Oversees management succession planning
and development programs on behalf of the board. Establishes the job
description and performance criteria of the Chief Executive Officer and
initially evaluates the CEO's performance for the board. All members are
non-employee directors.
12
<PAGE>
Finance: Reviews and makes recommendations to the board about
significant financial matters and business opportunities. Serves as the
fiduciary of PECO Energy Company's qualified pension and savings plans,
establishes the investment policy and reviews the transactions and
performance of the investment managers. All members are non-employee
directors.
Nuclear: Oversees nuclear operations of PECO Energy Company for
safety, reliability and quality and effectiveness of management and
management systems. The committee uses an independent consultant to assist
it in performing its functions.
Public Affairs: Advises management on matters of legislative,
regulatory and public policy.
Each director attended at least seventy-five percent of the meetings of
the board and the meetings of committees of which he or she was a member.
BOARD COMPENSATION
Employee directors receive no compensation, other than their normal
salary, for serving on the board or its committees.
PECO Energy Company's total compensation target for directors who are
not officers of PECO Energy Company is the lowest 25th percentile of the
general industry average. Directors are paid in cash and deferred stock
units as set forth below, and are reimbursed expenses, if any, for
attending meetings:
$21,000 Annual board retainer
$ 1,000 Meeting fee
$ 2,000 Annual retainer for chairmanship of audit and nuclear
committees
$ 1,000 Annual retainer for chairmanship of compensation, corporate
governance and finance committees
715 Deferred stock units
Directors are required to own at least 3,000 shares of PECO Energy
Company common stock or stock units within three years after their election
to the board.
Effective January 1997, PECO Energy Company terminated all future
retirement benefit accruals and stock option grants for non-employee
directors. Accrued benefits under the previous retirement plan have been
replaced with a one-time grant of deferred stock units equal to the January
1997 value of all accrued benefits. The expected values of the future
benefits under the previous retirement plan have been replaced with annual
grants of 715 deferred stock units. Each deferred stock unit is the right
to receive one share of PECO Energy Company common stock at retirement.
Before retirement, deferred stock units accrue dividend equivalents for
each year the director serves on the board. Upon retirement, the director
can receive the accumulated shares in a lump sum or spread the distribution
over a period of up to ten years.
Directors can elect to receive all or a portion of their compensation
in stock or to defer receiving it until retirement, death or until they no
longer serve as director. Deferred compensation is put in an unfunded
account and credited with interest, equal to the amount that would have
been earned had the compensation been invested in one or more of eight
designated mutual funds. The deferred amounts and
13
<PAGE>
accrued interest are unfunded obligations of PECO Energy Company and
cannot be distributed to the director until he or she reaches 65, retires
or is no longer a director. There are exceptions to this rule for
financial hardship.
In 1998, non-employee directors received $590,750 as a group. At its
February 9, 1998 meeting, the corporate governance committee reviewed the
overall level of director compensation and found no changes were warranted
at that time.
14
<PAGE>
R E P O R T O F T H E C O M P E N S A T I O N C O M M I T T E E
WHAT IS OUR COMPENSATION PHILOSOPHY?
The objectives of PECO Energy Company's executive compensation program
are to motivate and reward senior management for achieving high levels of
business performance and outstanding financial results. In 1998, PECO
Energy Company continued to direct its focus to compensating executives
competitively with general industry. This philosophy reflects a commitment
to attract and retain key executives, ensure positive business performance
and continue the growth we have seen in shareholder value.
The compensation committee, composed of non-employee directors, has the
responsibility of administering executive compensation programs, policies
and practices.
There are three parts to PECO Energy Company's executive compensation
program:
o Base salary;
o Annual bonuses; and
o Long-term incentives.
These three parts balance short-term, mid-term and long-term business
objectives and align executive financial rewards with those of PECO Energy
Company's shareholders.
Annual incentives are awarded for the successful achievement of PECO
Energy Company's financial and operational goals established at the
beginning of each year.
Long-term incentives are generally granted in the form of stock options
and restricted stock. These awards tie the executives' financial rewards
directly to increased shareholder value.
WHAT FACTORS DO WE CONSIDER IN DETERMINING OVERALL COMPENSATION?
Compensation levels for PECO Energy Company's executives are reviewed
each year by a nationally recognized, independent consulting firm. A
survey of large, general industry companies, adjusted for PECO Energy
Company's size, including the majority of companies in the "Fortune 500,"
is prepared and presented to the compensation committee. The compensation
committee uses this information, along with individual performance and PECO
Energy Company's overall financial condition, to make decisions on each
executive's overall compensation.
HOW DO WE DETERMINE BASE SALARY?
Base salaries for PECO Energy Company's executives are determined by
individual performance and by comparisons to the salaries of executives in
similar positions in general industry, and where appropriate, the utility
sector. The goal for the base salary component is to pay competitively
with comparable markets to attract and retain key executives. Executive
salaries are targeted to correspond to approximately the median (50th
percentile) salaries of the companies identified and surveyed.
MR. MCNEILL'S 1998 BASE SALARY: The committee determined Mr. McNeill's
base salary as Chairman, President and CEO by considering:
o input from outside consulting firms, which reviews competitive data
and estimates a competitive level of base pay;
15
<PAGE>
o performance achieved against financial goals in 1997; and
o the implementation of PECO Energy Company's strategic plans.
In addition, at the time the review was held in February 1998, PECO
Energy Company had not yet forged a successful settlement in response to
the Electricity Generating and Customer Choice Act. Based on the 1997
business situation, Mr. McNeill's base salary did not increase in 1998,
even though his base salary was significantly below that of general
industry.
OTHER NAMED EXECUTIVES' 1998 BASE SALARY: The base pay for the other
named executive officers listed in the Summary Compensation Table on page
21 was determined by their individual performance and by considering
comparable compensation data from the industry surveys referred to above.
In addition, at the time the review was held, in February 1998, because of
the business situation described previously, no base salary increases were
granted to the other named executive officers in 1998.
HOW ARE ANNUAL BONUSES DETERMINED?
Under the PECO Energy Company management incentive compensation plan,
annual bonuses are paid to executives based on a combination of the
achievement of pre-determined corporate and business unit-specific measures
and individual performance. The objective of the incentive plan is to tie
executive bonuses to achievement of key goals of PECO Energy Company and
the executive's particular business unit.
Corporate and business unit measures are established each year and are
based on critical business factors necessary to achieve a balance of short
and long-term strategic business objectives. These goals are incorporated
into a number of factors designed to measure corporate and business unit
performance. These key performance factors are financial, customer,
internal and innovation measures, which are described below.
1998 BONUS PAYOUT LEVEL: For 1998, 100% of Mr. McNeill's bonus payout
was determined according to the following corporate performance measures:
o earnings per share;
o cash flow;
o customer satisfaction;
o employee commitment; and
o implementation of the corporate value drivers.
Each measure has a target goal. If all target goals are met, Mr.
McNeill is eligible to receive the target level bonus. Due to the
outstanding financial performance of PECO Energy Company during 1998, the
compensation committee approved a bonus payout level significantly higher
than the target level.
16
<PAGE>
The other named executive officers listed in the Summary Compensation
Table on page 21 are measured on a combination of corporate and on measures
specific to their business unit or department.
EXECUTIVE FACTORS WEIGHTING
--------- ------- ---------
Mr. McNeill Corporate 100%
Messrs. Egan and Durham Corporate 80%
Business Unit 20%
Messrs. Lawrence Corporate 75%
and Rainey Business Unit 25%
MR. MCNEILL'S 1998 BONUS: In evaluating Mr. McNeill's performance, the
committee considered the overall performance of PECO Energy Company against
the measures that were achieved in the incentive plan. In arriving at Mr.
McNeill's bonus, the committee factored in his leadership in positioning
PECO Energy Company for the future, including:
o the finalization of a settlement among major parties in PECO
Energy Company's restructuring proceeding;
o the significant increase in shareholder value as demonstrated by a
total return of 78% for PECO Energy Company shareholders during
the period January 1, 1998 through December 31, 1998, the highest
return for the 25 largest electric utilities in the United States;
o the achievement of earnings per share of greater than 30% above
target;
o the development and implementation of a corporate vision, mission
and 5-year growth strategy;
o the implementation of the competitive cost review, a long-term
proactive approach to position PECO Energy Company for success in
the competitive marketplace; and
o his contribution in developing an aggressive acquisition strategy
which led to the acquisition of Three Mile Island Unit 1 by
AmerGen.
A final 1998 incentive plan payout to Mr. McNeill of $708,100 was
approved by the committee.
OTHER NAMED EXECUTIVE OFFICERS' 1998 BONUSES: The final 1998
incentive plan payouts as approved by the committee for Messrs. Egan,
Durham, Lawrence and Rainey were an aggregate of $855,400 for the group
and were determined in accordance with the incentive plan and each
individual's performance.
HOW IS COMPENSATION USED TO FOCUS MANAGEMENT ON LONG-TERM
VALUE CREATION?
In 1997, the shareholders approved an amended 1989 long-term
incentive plan. The amended 1989 plan awards performance-based grants
and provides PECO Energy Company flexibility in its executive
compensation practices in a competitive, deregulated business
environment. For 1998, the amended 1989 plan was divided into two
segments: mid-term and long-term incentives.
Mid-term incentives are awarded in the form of restricted stock to
retain key executives engaged in positioning PECO Energy Company.
Awards are determined upon the successful completion of strategic goals
designed to achieve long-term business success and increased shareholder
value. Depending upon PECO Energy Company's progress each year, the
committee may award restricted stock with
17
<PAGE>
prohibitions on sale or transfer until the restrictions lapse. The
first year of mid-term incentive awards will be 1999. Mid-term
incentive awards replaced the dividend equivalent awards which were
discontinued in 1998.
Long-term incentives are granted in the form of stock options. The
purpose of stock options is to align compensation directly to increases
in shareholder value. Individuals receiving options are given the right
to buy a fixed number of shares of PECO Energy Company common stock at
the closing price of the PECO Energy Company common stock on the date of
grant during a specified period of time. In 1998 as part of the new
executive compensation strategy, the compensation committee added a
performance hurdle to all stock options granted. In order to be able to
exercise the stock options, the stock price must rise to a level
previously determined by the committee.
In 1998, Mr. McNeill and other named officers received a multi-year
grant of stock options. These awards were designed to motivate the
executives to achieve aggressive stock appreciation during the uncertain
business conditions that exist during the transition to deregulation.
In addition, this approach supported the strategy of shifting total
compensation from utility industry to general industry standards, where
the proportion of at-risk pay to fixed pay is considerably higher. All
stock options were issued with performance vesting "hurdles." The
performance of the stock resulted in stock prices considerably exceeding
the "hurdle." Stock options will not be awarded to the recipients of
the multi-year grant in 1999.
MR. MCNEILL'S AND OTHER NAMED EXECUTIVE OFFICERS 1998 STOCK OPTION
AWARDS: Mr. McNeill received options to purchase 500,000 shares of PECO
Energy Company common stock in 1998. Other named executive officers
received options to purchase an aggregate of 364,000 shares of PECO
Energy Company common stock.
STOCK OWNERSHIP GUIDELINES
PECO Energy Company is committed to strengthening the alignment of
its executives' financial interests with those of its shareholders.
Officers of PECO Energy Company are required to own the following levels
of stock:
STOCK
POSITION OWNERSHIP LEVELS
-------- ----------------
Chairman, President and CEO 4 times salary
Senior Vice Presidents 2 times salary
Other officers 1 times salary
Officers must meet the required levels of stock ownership by
February 2002 or five years from their election as an officer of PECO
Energy Company, whichever is later. The Chairman reviews ownership
progress of executives on a regular basis, and reports progress against
target levels to the compensation committee annually. Stock options,
whether vested or unvested, will not be considered stock owned for the
purpose of meeting the ownership guidelines.
18
<PAGE>
CAN WE DEDUCT EXECUTIVE COMPENSATION UNDER SECTION 162(M) OF THE
INTERNAL REVENUE CODE?
Under Section 162(m) of the Internal Revenue Code, PECO Energy
Company may not deduct executive compensation in excess of $1.0 million
per year unless it qualifies as performance-based compensation. The
compensation committee reviewed PECO Energy Company's current
compensation plans and practices and concluded that it was entitled to
deduct executive compensation under Section 162(m).
ARE THE COMPANIES USED IN THE EXECUTIVE COMPENSATION COMPARISON AND
IN THE SHAREHOLDER RETURN COMPARISON THE SAME?
The shareholder return comparison companies are those included in
the Dow Jones Utility Average. For 1998, the companies used for
executive pay comparisons are companies across general industry,
including a number of major electric utilities.
WHAT WAS PECO ENERGY COMPANY'S CUMULATIVE SHAREHOLDER RETURN?
As noted on the graph shown on page 20, an investment of $100 in
PECO Energy Company common stock on December 31, 1993 would have grown
in value to $186.62 assuming reinvestment of dividends at December 31,
1998. For the five-year period ending December 31, 1998, the total
cumulative return for holders of PECO Energy Company common stock
amounted to approximately 87%, or the equivalent of 13.29% per year
compounded. That return was slightly above the comparable Dow Jones
Utility Average, but both indices were substantially below the return of
the Standard & Poor's 500 Stock Index.
COMPENSATION COMMITTEE
Robert Subin, Chairman
G. Fred DiBona, Jr.
Rosemarie B. Greco
John M. Palms, Ph.D.
Ronald Rubin
19
<PAGE>
P E R F O R M A N C E G R A P H
COMPARISON OF FIVE-YEAR CUMULATIVE RETURN
The performance chart below illustrates a five-year comparison of
cumulative total returns based on an initial investment of $100 in PECO
Energy Company common stock as compared with the S&P 500 Stock Index and
the Dow Jones Utility Average for the period 1994 through 1998.
This performance chart assumes:
o $100 invested on December 31, 1993 in PECO Energy Company common
stock, S&P 500 Stock Index and Dow Jones Utility Average.
o All dividends are reinvested.
[ID: GRAPHIC, PERFORMANCE GRAPH]
COMPARISON OF FIVE-YEAR CUMULATIVE RETURN
1994-1998
DOLLARS DOLLARS
$300 $300
$250 ID: LINE GRAPH SHOWING $250
$200 PECO ENERGY (as solid rule) $200
$150 S&P 500 (as dashes) $150
$100 DJ UTILITIES (as dot leaders) $100
$ 50 $ 50
$ 0 $ 0
1994 1995 1996 1997 1998
- ---------------------------------------------------------------------------
DECEMBER 31,
- ---------------------------------------------------------------------------
1993 1994 1995 1996 1997 1998
- ---------------------------------------------------------------------------
PECO Energy Company $100.00 85.88 112.22 100.49 104.61 186.62
- ---------------------------------------------------------------------------
S&P 500 Stock Index $100.00 101.32 139.40 171.41 228.59 293.92
- ---------------------------------------------------------------------------
Dow Jones Utility Average $100.00 84.71 111.80 121.98 150.03 178.35
- ---------------------------------------------------------------------------
20
<PAGE>
S U M M A R Y C O M P E N S A T I O N T A B L E
COMPENSATION OF EXECUTIVE OFFICERS
The amounts listed under "All Other Compensation" are matching
contributions made by PECO Energy Company under the PECO Energy Company
Employee Savings Plan.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
Long-Term Compensation
------------------------------
Annual Compensation Awards Payouts
- ----------------------------------------------------------------------------------------------------------------
Long-Term
Restricted Incentive
Stock Plan All Other
Name and Award(s) Options Payouts Compensation
Principal Position Year Salary ($) Bonus ($) Other ($) ($) (#) ($) ($)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Corbin A. McNeill, Jr. 1998 585,476 708,100 0 0 500,000 0 3,200
Chairman of the Board, 1997 551,112 330,200 0 0 50,000 0 3,200
President and Chief 1996 505,440 218,868 0 0 50,000 0 1,500
Executive Officer
- ----------------------------------------------------------------------------------------------------------------
Michael J. Egan 1998 317,439 235,700 0 0 125,000 0 0
Senior Vice President, 1997 63,003 229,148 0 99,851(A) 298,000 0 0
Finance and Chief
Financial Officer
- ----------------------------------------------------------------------------------------------------------------
James W. Durham 1998 298,952 225,300 0 0 34,000 0 3,200
Senior Vice President 1997 294,639 111,733 0 0 20,000 0 3,200
and General Counsel 1996 289,966 92,695 0 0 20,000 0 1,500
- ----------------------------------------------------------------------------------------------------------------
Kenneth G. Lawrence 1998 282,164 200,700 0 0 115,000 0 3,107
Senior Vice President, 1997 255,126 107,142 0 0 20,000 0 3,200
Corporate and President, 1996 233,294 92,695 0 0 20,000 0 1,500
Peco Energy Distribution
- ----------------------------------------------------------------------------------------------------------------
Gerald R. Rainey 1998 269,308 193,700 0 0 90,000 0 2,040
President and Chief 1997 215,260 99,783 0 0 10,000 0 3,200
Nuclear Officer, 1996 191,580 73,427 0 0 10,000 0 1,500
PECO Nuclear
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
(A) At December 31, 1998, Mr. Egan held 4,475 shares of restricted
stock with an aggregate value of $186,831. These shares vest on October
13, 2000 and Mr. Egan will receive dividends on these shares during this
vesting period.
The preceding table does not include a $200,000 signing bonus that Mr.
Egan received when he was elected an officer effective October 13, 1997.
21
<PAGE>
O P T I O N G R A N T S I N 1 9 9 8
The options listed below become exercisable in full when the closing
price of PECO Energy Company common stock on the NYSE is at least $25.00
per share.
Values indicated are an estimate based on the Black-Scholes option
pricing model. Although executives risk forfeiting these options in some
circumstances, these risks are not factored into the calculated values.
The actual value of these options will be determined by the excess of the
stock price over the exercise price on the date the option is exercised.
There is no certainty that the actual value realized will be at or near the
value estimated by the Black-Scholes option pricing model.
Assumptions used for the Black-Scholes model are as of December 31,
1998 and are as follows:
Risk-free interest rate 5.46%
Volatility .2141
Dividend yield 6.78%
Time of exercise 9.5 years
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
Grant Date
Individual Grants Value
----------------------- -----------
Number of % of Total
Securities Options Grant Date
Underlying Granted to Exercise or Present
Options Employees Base Price Expiration Value
Name Granted (#) in 1998 ($/SH) Date ($)
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Corbin A. McNeill, Jr. 500,000 25.3 19.6875 02/23/08 1,045,000
Chairman of the Board,
President and Chief
Executive Officer
- ------------------------------------------------------------------------------------------
Michael J. Egan 29,000 1.46 19.6875 02/23/08 60,610
Senior Vice President, 96,000 4.85 21.8750 04/08/08 237,120
Finance and Chief
Financial Officer
- ------------------------------------------------------------------------------------------
James W. Durham 28,000 1.41 19.6875 02/23/08 58,520
Senior Vice President 6,000 0.30 21.8750 04/08/08 14,820
and General Counsel
- ------------------------------------------------------------------------------------------
Kenneth G. Lawrence 27,000 1.36 19.6875 02/23/08 56,430
Senior Vice President, 88,000 4.44 21.8750 04/08/08 217,360
Corporate and President,
PECO Energy Distribution
- ------------------------------------------------------------------------------------------
Gerald R. Rainey 23,000 1.16 19.6875 02/23/08 48,070
President and Chief Nuclear 67,000 3.38 21.8750 04/08/08 165,490
Officer, PECO Nuclear
- ------------------------------------------------------------------------------------------
</TABLE>
22
<PAGE>
O P T I O N E X E R C I S E S
A N D Y E A R - E N D V A L U E
This table shows the number and value of exercised and unexercised
stock options for the named executive officers during 1998. Value is
determined using the market value of PECO Energy Company common stock at
the year-end price of $41.75 per share, minus the value of PECO Energy
Company common stock at the exercise price. All options whose exercise
price exceeds the market value are valued at zero.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options at Options at
12/31/98 12/31/98
- ------------------------------------------------------------------------------------
Shares
Acquired (#) ($)
on Value Exercisable Exercisable
Name Exercise (#) Realized ($) Unexercisable Unexercisable
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Corbin A. McNeill, Jr. 0 0 E 848,500 E 16,980,500
Chairman of the Board, U 0 U 0
President and Chief
Executive Officer
- ------------------------------------------------------------------------------------
Michael J. Egan 0 0 E 423,000 E 8,340,039
Senior Vice President, U 0 U 0
Finance and Chief
Financial Officer
- ------------------------------------------------------------------------------------
James W. Durham 0 0 E 164,000 E 2,757,625
Senior Vice President U 0 U 0
and General Counsel
- ------------------------------------------------------------------------------------
Kenneth G. Lawrence 55,000 818,084 E 128,000 E 2,262,000
Senior Vice President, U 0 U 0
Corporate and President,
PECO Energy Distribution
- ------------------------------------------------------------------------------------
Gerald R. Rainey 120,000 1,576,964 E 0 E 0
President and Chief Nuclear U 0 U 0
Officer, PECO Nuclear
- ------------------------------------------------------------------------------------
</TABLE>
23
<PAGE>
R E T I R E M E N T P L A N S
The following table shows the estimated annual retirement benefits
payable on a straight-life annuity basis to participating employees,
including officers, in the earnings and year of service classes indicated,
under PECO Energy 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.
Covered compensation includes salary and bonus which is disclosed in
the Summary Compensation Table on page 21 for the named executive officers.
The calculation of retirement benefits under the plans is based upon
average earnings for the highest consecutive five-year period.
The Internal Revenue Code limits the annual benefits that can be paid
from a tax-qualified retirement plan. As permitted by the Employee
Retirement Income Security Act of 1974, PECO Energy Company has
supplemental plans which allow the payment out of general funds of PECO
Energy Company of any benefits calculated under provisions of the
applicable retirement plan which may be above these limits.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
Pension Plan Table
--------------------------------------------------------------------------
Average Annual
Compensation Years of Service
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>
$ 100,000 $ 19,411 $ 26,616 $ 33,821 $ 41,026 $ 48,232 $ 55,437 $ 62,642
200,000 39,911 54,866 69,821 84,776 99,732 114,687 129,642
300,000 60,411 83,116 105,821 128,526 151,232 173,937 196,642
400,000 80,911 111,366 141,821 172,276 202,732 233,187 263,642
500,000 101,411 139,616 177,821 216,026 254,232 292,437 330,642
600,000 121,911 167,866 213,821 259,776 305,732 351,687 397,642
700,000 142,411 196,116 249,821 303,526 357,232 410,937 464,642
800,000 162,911 224,366 285,821 347,276 408,732 470,187 531,642
900,000 183,411 252,616 321,821 391,026 460,232 529,437 598,642
1,000,000 203,911 280,866 357,821 434,776 511,732 588,687 665,642
- -----------------------------------------------------------------------------------------
</TABLE>
Messrs. McNeill, Egan, Durham, Lawrence and Rainey have 31, 1, 20, 29
and 29 credited years of service, respectively, under PECO Energy Company's
pension program. Mr. Durham is being granted one year of additional
service, for purposes of calculating his benefits under PECO Energy
Company's pension program, for each year of service up to a maximum of 10
additional years.
24
<PAGE>
O T H E R I N F O R M A T I O N
TRANSACTIONS WITH MANAGEMENT: PECO Energy Company's Power Team has
entered into an agreement with Pat Bessey, Inc. to sponsor Bessey's
National Association of Stock Car Auto Racing activities. Under the
agreement, Power Team will pay Bessey $10 million in 1999 and $8 million in
both 2000 and 2001 in return for advertising and other promotional
activities of Power Team. Bessey will also receive incentive payments
ranging from $30,000 to $150,000 per race, in addition to other incentive
payments, if a Power Team-sponsored car wins certain Indy Racing League,
Winston Cup or Busch Grand National NASCAR races. PECO Energy Company also
pays all transportation, travel and lodging expenses for appearances at
company-requested, non-racing events.
Joseph W. Bessey is President and an owner of Pat Bessey, Inc. and the
husband of Nancy J. Bessey, President of PECO Energy's Power Team.
CHANGE-OF-CONTROL AGREEMENTS: PECO Energy 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 keep the
loyalties, of key executives when PECO Energy Company is faced with a
potential change of control by providing for a continuation of salary,
bonus, health and other benefits for a maximum period of three years.
In addition, PECO Energy Company's long-term incentive plan allows the
committee administering this plan to terminate the restrictions on stock
options and restricted stock grants at any time. PECO Energy 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.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE: The federal
securities laws require PECO Energy Company's directors and executive
officers to file with the SEC initial reports of ownership and reports of
changes in ownership of any securities of PECO Energy Company.
To PECO Energy Company's knowledge, based solely on a review of the
copies of these reports given to PECO Energy Company and written
representations that no other reports were required during 1998, all of
PECO Energy Company's directors and executive officers made the required
filings except that, R. Keith Elliott, a director of PECO Energy Company,
filed one late report of changes in beneficial ownership on Form 4 relating
to a purchase of shares of PECO Energy Company common stock.
DISCRETIONARY VOTING AUTHORITY: The board of PECO Energy Company knows
of no other matters to be presented for action at the meeting. As to any
other matters that may properly come before the meeting, the individuals
serving as proxies intend to vote in their best judgment. Your signed
proxy card gives authority to Joseph F. Paquette, Jr., Susan W. Catherwood
and J. Barry Mitchell to vote on those matters.
25
<PAGE>
SUNNYBROOK BALLROOM DIRECTIONS
RT. 422 EAST -- east to Armand Hammer Boulevard exit -- follow boulevard
to East High Street -- turn right -- look for Sunnybrook on left --
directly across from Pottstown Memorial Medical Center.
RT. 422 WEST -- west to Armand Hammer Boulevard exit -- follow boulevard
to East High Street -- turn right -- look for Sunnybrook on left --
directly across from Pottstown Memorial Medical Center.
PENNSYLVANIA TURNPIKE -- to Downingtown exit -- north on Rt. 100 to 422
- -- east on Rt. 422 to Armand Hammer Boulevard exit -- follow boulevard
to East High Street -- turn right -- look for Sunnybrook on left --
directly across from Pottstown Memorial Medical Center.
RT. 663 -- south to High Street -- turn left -- look for Sunnybrook on
left directly across from the Pottstown Memorial Medical Center.
RT. 724 EAST OR WEST -- turn off to east bound 422 and proceed to Armand
Hammer Boulevard exit -- follow boulevard to East High Street -- turn
right -- look for Sunnybrook on left -- directly across from Pottstown
Memorial Medical Center.
RT. 100 NORTH OR SOUTH -- take Rt. 422 east to Armand Hammer Boulevard
exit -- follow boulevard to East High Street -- turn right -- look for
Sunnybrook on left -- directly across from Pottstown Memorial Medical
Center.
RT. 23 EAST OR WEST -- exit on Rt. 100 -- north on 100 to 422 -- east on
422 to Armand Hammer Boulevard exit -- follow boulevard to East High
Street -- turn right -- look for Sunnybrook on left directly across from
the Pottstown Memorial Medical Center.
[ID -- AREA MAP]
<PAGE>
[LOGO] PECO ENERGY
PECO ENERGY COMPANY
2301 MARKET STREET
P.O. BOX 8699
PHILADELPHIA, PA 19101-8699
<PAGE>
APPENDIX OF
GRAPHIC AND IMAGE MATERIAL
OMITTED FROM ELECTRONIC FORMAT DOCUMENT
PURSUANT TO RULE 304 OF REGULATION S-T
