<PAGE 1>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the registrant [ x ]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ x ] Preliminary proxy statement [ ] Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
[ ] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
COMMONWEALTH ENERGY SYSTEM
(Name of Registrant as Specified in Its Charter)
_____________________________________________________________________________
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[ ] $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
1) Title of each class of securities to which transaction applies:
_______________________________________________________________
2) Aggregate number of securities to which transactions applies:
_______________________________________________________________
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
_______________________________________________________________
4) Proposed maximum aggregate value of transaction:
_______________________________________________________________
5) Total fee paid:
_______________________________________________________________
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount previously paid:
_____________________________________________
2) Form, Schedule or Registration Statement No.:
_____________________________________________
3) Filing party:
_____________________________________________
4) Date filed:
_____________________________________________
<PAGE 2>
Commonwealth
Energy System
Notice of 1996
Annual Meeting,
Proxy Statement
and 1995 Financial
Information
Please sign and return your
proxy promptly
<PAGE 3>
COMMONWEALTH ENERGY SYSTEM
Cambridge, Massachusetts
Notice of Annual Meeting of Shareholders
May 2, 1996
To the Shareholders of
COMMONWEALTH ENERGY SYSTEM
Notice is hereby given that the Annual Meeting of Shareholders of
Commonwealth Energy System will be held at the office of the System, One Main
Street, P.O. Box 9150, Cambridge, Massachusetts 02142-9150, on Thursday,
May 2, 1996, at 10:30 o'clock A.M., Eastern Daylight Time, for the following
purposes:
1. To elect three Trustees to hold office for a three-year term and
until the election and qualification of their respective
successors.
2. To take action on a proposal by the Board of Trustees: i) to
amend Section 22 of the System's Declaration of Trust, as amended,
to change the number of authorized common shares of the System
from eighteen million (18,000,000) shares having a par value of
four dollars ($4) each to fifty million (50,000,000) shares having
a par value of two dollars ($2) each; ii) to amend Section 5 of
the System's Declaration of Trust in order to facilitate the
implementation of share splits; and iii) to authorize and consent
to a two-for-one share split resulting in the issuance of one
additional Common Share for each Common Share outstanding.
3. To consider and vote upon a shareholder proposal, if presented at
the meeting, as described herein.
4. To transact such other business as may properly come before the
meeting or any adjournment or adjournments thereof.
Common Shareholders of record at the close of business on March 15, 1996
are entitled to notice of, and to vote at, the meeting.
By order of the Trustees,
Michael P. Sullivan
Vice President, Secretary
and General Counsel
March 29, 1996
IMPORTANT
We cordially invite you to attend the Annual Meeting of Shareholders,
but IF YOU DO NOT EXPECT TO BE PRESENT, PLEASE MAIL YOUR PROXY IN ORDER THAT
THE PRESENCE OF A QUORUM MAY BE ASSURED. Because our shares are widely
distributed over a large number of holders, it is both necessary and desirable
that all Shareholders send in their proxies. Failure to secure a quorum on
the date set would necessitate an adjournment, which would cause the System
considerable and needless expense. To avoid this, please SIGN AND DATE the
accompanying proxy and mail it promptly in the enclosed envelope to
Commonwealth Energy System, P.O. Box 9150, Cambridge, Massachusetts 02142-
9150.
<PAGE 4>
PROXY STATEMENT
This statement is furnished in connection with the solicitation of
proxies by the Board of Trustees of Commonwealth Energy System (hereinafter
called the "System") to be used at the Annual Meeting of Shareholders of the
System to be held on Thursday, May 2, 1996, at the principal executive office
of the System, One Main Street, P.O. Box 9150, Cambridge, Massachusetts 02142-
9150, of which due notice has been given in accordance with the System's
Declaration of Trust dated December 31, 1926, as amended. If the enclosed
form of proxy is executed and returned, it may nevertheless be revoked at any
time insofar as it has not been exercised. A properly executed and returned
proxy will be voted in accordance with the directions contained thereon.
Abstentions shall be voted neither "for" nor "against," but shall be counted
in the determination of a quorum. Broker non-votes will not be counted either
in calculating the number of shares present for the purpose of determination
of a quorum or for the purpose of determining whether a matter has received
the required number of votes. The giving of a later-dated proxy revokes all
proxies previously given. The approximate date on which this Proxy Statement
and the accompanying proxy card will first be mailed to Shareholders is
March 29, 1996.
FINANCIAL STATEMENTS
The audited financial statements of Commonwealth Energy System and
Subsidiary Companies, which include comparative Balance Sheets as of
December 31, 1995 and 1994, Statements of Income and Statements of Cash Flows
for the three years ended December 31, 1995 and the Report of Independent
Public Accountants, are included in Exhibit A of this Proxy Statement.
VOTING SECURITIES
Each Common Share is entitled to one vote. Only Shareholders of record
at the close of business on March 15, 1996 are qualified to vote at the
meeting. There were outstanding as of the record date 10,764,838 Common
Shares.
The Employees Savings Plan of Commonwealth Energy System and Subsidiary
Companies owned beneficially 1,678,765 Common Shares representing 15.6% of the
outstanding Common Shares as of January 31, 1996. Members of the Plan are
entitled to give voting instructions with respect to their interests.
OWNERSHIP BY MANAGEMENT OF VOTING SECURITIES
The following table shows the beneficial ownership, reported to the
System as of January 31, 1996, of Common Shares of the System owned by the
Chief Executive Officer and the four other most highly compensated Executive
Officers and, as a group, all Trustees and Executive Officers of the System.
Total
Common Percent of
Name Shares (1) Class
William G. Poist 5,871 0.1%
Russell D. Wright 3,602 0.1%
Kenneth M. Margossian 3,165 0.1%
James D. Rappoli 2,001 0.1%
Leonard R. Devanna 1,912 0.1%
All Trustees and Executive Officers
as a group (15 persons) 26,788 0.2%
<PAGE 5>
(1) Beneficial ownership set forth in this Proxy Statement includes, where
applicable, shares with respect to which voting or investment power is
attributed to an Executive Officer or Trustee because of joint or
fiduciary ownership of the shares or relationship of the Executive Officer
or Trustee to the record owner, such as a spouse, together with shares
held under the Employees Savings Plan of Commonwealth Energy System and
Subsidiary Companies.
MATTERS TO BE BROUGHT BEFORE THE MEETING
1-ELECTION OF TRUSTEES
Three Trustees will be elected at the Annual Meeting of Shareholders to
hold office for the ensuing three years in accordance with the Declaration of
Trust, which provides for staggered terms of Trustees of three years each.
The three Trustees elected at this meeting will hold office for a three-year
term and until the election and qualification of their respective successors.
Under the terms of the Declaration of Trust, Trustees are required to be
elected by a plurality vote of the Shareholders.
The Shares represented by the enclosed form of proxy will be voted, and
the persons named in such form of proxy will, unless otherwise directed in the
proxy, vote shares represented by proxies received for the election of the
following nominees:
Peter H. Cressy
William J. O'Brien
William G. Poist
It is not contemplated that any of the three nominees will be unable to
serve; however, should any of the nominees be unavailable to serve, your proxy
will be voted for the election of a nominee acceptable to the remaining
Trustees.
INFORMATION CONCERNING NOMINEES AND TRUSTEES
Common Shares
Beneficially
Year First Owned as of
Became a January 31,
Name, Principal Occupation and Term of Office Trustee Age 1996
(C) SHELDON A. BUCKLER, formerly Vice Chairman
of the Board and a Director, Polaroid
Corporation, Cambridge, Massachusetts
(Manufacturer of photographic equipment
and supplies); Director, Aseco Corp.;
Nashua Corporation; Parlex Corp. and
Spectrum Information Technologies, Inc.
TERM EXPIRES IN 1998 ............... (1991) 64 2,047
(A) PETER H. CRESSY, Chancellor, University of
(E) Massachusetts Dartmouth, North Dartmouth,
Massachusetts
TERM EXPIRES IN 1996 (NOMINEE)...... (1994) 54 105
(B) HENRY DORMITZER, formerly Executive Vice
(D) President, Wyman-Gordon Company, Worcester,
Massachusetts (Producer of forgings for
aerospace and transportation industries)
TERM EXPIRES IN 1997 ................... (1985) 61 700
<PAGE 6>
INFORMATION CONCERNING NOMINEES AND TRUSTEES
Common Shares
Beneficially
Year First Owned as of
Became a January 31,
Name, Principal Occupation and Term of Office Trustee Age 1996
(A) BETTY L. FRANCIS, Executive Vice President
(C) and Chief Financial Officer, BancBoston
Mortgage Corporation, Jacksonville, Florida
TERM EXPIRES IN 1998 ................... (1991) 49 100
(C) FRANKLIN M. HUNDLEY, Member and a Managing
(D) Director, Rich, May, Bilodeau & Flaherty,
P.C., Boston, Massachusetts (Attorneys);
Director, The Berkshire Gas Company
TERM EXPIRES IN 1997 ................... (1985) 61 2,425
(A) WILLIAM J. O'BRIEN, President, William J.
(D) O'Brien, Inc., Southborough, Massachusetts
(Management consulting)
TERM EXPIRES IN 1996 (NOMINEE).......... (1994) 63 1,100
WILLIAM G. POIST, President and Chief
Executive Officer of Commonwealth Energy
System and Chairman, Chief Executive Officer
and a Director of its subsidiary companies
TERM EXPIRES IN 1996 (NOMINEE).......... (1992) 62 5,870
(B) MICHAEL C. RUETTGERS, President, Chief
(E) Executive Officer and a Director, EMC
Corporation, Hopkinton, Massachusetts
(Data storage technology); Director,
CrossComm Corporation
TERM EXPIRES IN 1998 ................... (1995) 53 500
(B) GERALD L. WILSON, Vannevar Bush Professor of
(E) Engineering, Massachusetts Institute of
Technology, Cambridge, Massachusetts;
Director, Analogic Corp.
TERM EXPIRES IN 1997 ................... (1985) 56 602
Each of the persons named above has held his or her present position (or
another executive position with the same employer) for more than the past five
years except for Dr. Wilson, who served as Vice President-Corporate Technology
and Manufacturing at Carrier Corporation during 1991-1992 while on a leave of
absence from Massachusetts Institute of Technology and Mr. O'Brien, who served
as President and Chief Executive Officer of The Hanover Insurance Company from
1979 to 1992.
During 1995, fees of $568,126 were incurred for legal services rendered
by the firm of Rich, May, Bilodeau & Flaherty, P.C., of which Mr. Hundley is a
Member and a Managing Director. The firm has been employed in the last fiscal
year and the current fiscal year.
Each Trustee, including nominees, owned beneficially less than one-third
of one percent of the outstanding Common Shares.
- -------------------------
(A) Member of Audit Committee.
(B) Member of Executive Compensation Committee.
(C) Member of Nominating Committee.
(D) Member of Benefit Review Committee.
(E) Member of Strategic Planning Committee.
<PAGE 7>
COMPENSATION OF EXECUTIVE OFFICERS DURING THE YEAR 1995
The following table shows compensation paid by the System and its
subsidiaries to the System's President and Chief Executive Officer and the
four other highest paid Executive Officers of the System whose total
compensation in 1995 exceeded $100,000.
SUMMARY COMPENSATION TABLE
Long-Term Compensation (3)
Annual Compensation Awards Payouts
Long-
Options Term
Other /Stock Incen- All
Annual Restr- Apprec- tive Other
Compen- icted iation Plan Compen-
Name and Salary sation Stock Rights (LTIP) sation
Principal Position Year (1) Bonus (2) Awards (SARS) Payouts (4)
William G. Poist 1995 $350,000 $ - - - - $14,004
President and Chief 1994 320,000 98,721 - - - - 12,804
Executive Officer of 1993 291,888 78,031 - - - - 11,604
the System and Chair-
man and Chief Exec-
utive Officer of its
subsidiary companies
Russell D. Wright 1995 $231,667 $ - - - - $ 9,269
President and Chief 1994 215,897 60,964 - - - - 8,400
Operating Officer 1993 195,000 53,814 - - - - 7,704
of Cambridge
Electric Light
Company, Canal
Electric Company,
COM/Energy Steam
Company and
Commonwealth
Electric Company
Kenneth M. Margossian 1995 $194,583 $ - - - - $ 7,786
President and 1994 179,917 52,005 - - - - 7,140
Chief Operating 1993 165,000 47,256 - - - - 6,564
Officer of Common-
wealth Gas Company
and Hopkinton LNG Corp.
James D. Rappoli 1995 $164,583 $ - - - - $ 6,586
Financial Vice 1994 151,686 43,196 - - - - 5,880
President and 1993 130,333 36,184 - - - - 5,082
Treasurer of the
System and its
subsidiary companies
<PAGE 8>
SUMMARY COMPENSATION TABLE (CONT'D)
Long-Term Compensation (3)
Annual Compensation Awards Payouts
Long-
Options Term
Other /Stock Incen- All
Annual Restr- Apprec- tive Other
Compen- icted iation Plan Compen-
Name and Salary sation Stock Rights (LTIP) sation
Principal Position Year (1) Bonus (2) Awards (SARS) Payouts (4)
Leonard R. Devanna 1995 $154,250 $ - - - - $ 7,714
Vice President - 1994 142,166 41,745 - - - - 5,912
Strategic Planning 1993 133,333 37,542 - - - - 6,603
of the System and
Vice President-
Systems, Planning and
Development of
COM/Energy Services
Company
- --------------------
<FN>
(1) The amounts in this column represent the aggregate total of cash
compensation received and compensation deferred by the above-named
individuals. Compensation is deferred pursuant to the provisions of the
Employees Savings Plan and the Executive Salary Continuation and Excess
Benefit Plan of Commonwealth Energy System and Subsidiary Companies.
(2) The dollar value of perquisites and other personal benefits, securities
or property totalling either $50,000 or 10% of total annual salary and
bonus, together with various other earnings, amounts reimbursed for the
payment of taxes, and the dollar value of any stock discounts not
generally available are required to be disclosed in this column. In
1995, there were no such perquisites, earnings, reimbursements or
discounts paid or made.
(3) In 1995, the System did not provide to its employees, including
Executive Officers, any payments or awards in the form of restricted
stock, stock options, stock appreciation rights, long-term incentive
plan payouts or other forms of long-term compensation.
(4) The amounts in this column represent the aggregate contributions by the
System and certain subsidiary companies during 1995 on behalf of the
above-named individuals to the Employees Savings Plan and the Executive
Salary Continuation and Excess Benefit Plan of Commonwealth Energy
System and Subsidiary Companies. The Employees Savings Plan of
Commonwealth Energy System and Subsidiary Companies is a defined
contribution plan. The Plan incorporates salary deferral provisions
pursuant to Section 401(k) of the Internal Revenue Code for all
employees who have elected to participate on that basis. The Executive
Salary Continuation and Excess Benefit Plan of Commonwealth Energy
System and Subsidiary Companies is a defined contribution/defined
benefit plan. Unlike the Employees Savings Plan, this Plan is not a
qualified plan under Section 401(a) of the Internal Revenue Code. The
Plan was established to provide an additional benefit to any participant
in the Employees Savings Plan whose benefit under the plan would be
curtailed by limits in effect under the Internal Revenue Code for
qualified plans. Of the amounts set forth in the "All Other
Compensation" column, $6,162, $9,244, $4,621, $2,311 and $2,890
represent the contributions made on behalf of Messrs. Poist, Wright,
Margossian, Rappoli and Devanna, respectively, by the Employees Savings
Plan. Contributions made on behalf of Messrs. Poist, Wright,
Margossian, Rappoli and Devanna by the Executive Salary Continuation and
Excess Benefit Plan in 1995 equalled $7,842, $25, $3,165, $4,275 and
$4,824, respectively.
<PAGE 9>
PENSION PLAN TABLE
The following table shows annual retirement benefits payable to
employees, including Executive Officers, upon retirement at age 65, in various
compensation and years of service classifications, assuming the election of a
retirement allowance payable as a life annuity from the Pension Plan for
Employees of Commonwealth Energy System and Subsidiary Companies and the
Executive Salary Continuation and Excess Benefit Plan of Commonwealth Energy
System and Subsidiary Companies, as of December 31, 1995.
Highest Annual
Consecutive 3-Year
Average Base
Salary of Last Annual Benefit for Years of Service (1)
10 Years 10 Years 15 Years 20 Years 25 Years 30 Years 35 Years
$ 90,000 .... $15,771 $23,656 $ 31,541 $ 39,426 $ 47,312 $ 51,447
120,000 .... 21,271 31,906 42,541 53,176 63,812 69,447
150,000 .... 26,771 40,156 53,541 67,926 80,312 87,447
180,000 .... 32,271 48,406 64,541 80,676 96,812 105,447
210,000 .... 37,771 56,656 75,541 94,426 113,312 123,447
240,000 .... 43,271 64,906 86,541 108,176 129,812 141,447
270,000 .... 48,770 73,156 97,541 121,926 146,312 159,447
300,000 .... 54,270 81,406 108,541 135,676 162,812 177,447
330,000 .... 59,770 89,656 119,541 149,426 179,312 195,447
360,000 .... 65,270 97,906 130,541 163,176 195,812 213,447
390,000 .... 70,770 106,156 141,541 176,926 212,312 231,447
420,000 .... 76,270 114,406 152,541 190,676 228,812 249,447
- -------------
<FN>
(1) Federal law places certain limits on the amount of benefits which can be
paid from qualified pension plans. Payments made by the System in
excess of the applicable limitations are made pursuant to the terms of
the Executive Salary Continuation and Excess Benefit Plan of
Commonwealth Energy System and Subsidiary Companies. For 1995, the
maximum annual compensation limit under the Pension Plan for Employees
of Commonwealth Energy System and Subsidiary Companies was $150,000, and
the maximum annual benefit under that Plan was $120,000.
The Pension Plan is a non-contributory defined benefit plan. The Plan
is a final average earnings type plan under which benefits reflect the
employee's years of credited service. The employee receives the higher of
either an integrated or non-integrated formula to realize the maximum
retirement benefit applicable to his or her employment history. Both of the
formulae are based on the average of the three highest consecutive January 1
base salaries during the ten-year period preceding the employee's retirement
or termination. Retirement benefits are available to employees on or after
age fifty-five provided the sum of their age and years of service is at least
seventy-five. Messrs. Poist, Wright, Margossian, Rappoli and Devanna have 31,
28, 26, 21 and 14 credited years of service respectively. For the purposes of
calculating the annual retirement benefits of Messrs. Poist, Wright,
Margossian, Rappoli and Devanna pursuant to the Plan, only the amounts set
forth in the summary compensation table as "Salary" are utilized to determine
each Executive Officer's three highest consecutive January 1 base salaries
during the ten-year period preceding the Executive Officer's retirement or
termination.
Each Executive Officer of the System has elected certain pre-retirement
death benefits and supplemental retirement benefits in exchange for waiving
certain standard life insurance benefits (in excess of $50,000), and the
survivor income benefits generally available to all eligible employees. The
alternative program for Executive Officers provides a pre-retirement death
benefit of either: (i) a lump-sum payment of three times salary; or (ii)
fifty percent of monthly base salary for one hundred and eighty months. The
supplemental retirement benefit provides that an Executive Officer may retire
after the attainment of age fifty-five and completion of ten years of service.
Normal retirement at age sixty-five provides an annual payment equal to
<PAGE 10>
thirty-five percent of final base salary per year for life, or for a period of
one hundred and eighty months, whichever is longer. Benefits are reduced for
retirement prior to age sixty-five. The supplemental retirement benefits are
in addition to the amounts shown in the table above and are not subject to
limitation. If termination of employment occurs following a change in control
of the System after the Executive Officer's completion of ten years of service
with the System but before the attainment of age fifty-five, the Executive
Officer shall be entitled to receive upon attainment of age fifty-five a
retirement benefit equal to the amounts that would have been payable had the
Executive Officer remained in the employment of the System until the date of
the Executive Officer's fifty-fifth birthday and retired on that date. Should
the employment of the Executive Officer terminate for any other reason (other
than death) and before completion of ten years of service and attainment of
age fifty-five, there are no benefits payable under this alternative program
for Executive Officers.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Executive Compensation Committee of the Board of Trustees (the
"Committee") is composed of three independent, non-employee Trustees. The
Committee reviews and approves compensation levels for the System's Chief
Executive Officer and oversees the System's executive compensation programs
affecting all Executive Officers. These programs have been designed in order
to attract, retain, motivate and reward those individuals who are most
responsible for the System's growth and profitability.
Compensation for Executive Officers consists of base salary, annual cash
incentive compensation and long-term incentive awards in the form of
restricted stock awards of Common Shares. Executive Officers also participate
in the Pension Plan and the Employees Savings Plan and receive benefits under
medical and other benefit plans which are available to employees generally.
The Chief Executive Officer's base salary target is designed generally
to match the market median for the utility reference group described in the
next paragraph. The Committee adjusts the Chief Executive Officer's salary in
relation to the salary range target on a subjective basis, through the
evaluation of the same objective criteria used to determine the Chief
Executive Officer's annual incentive award set forth below. Less emphasis is
placed on base salary adjustments than on incentive compensation, consistent
with the Committee's objectives of placing increasingly greater emphasis on
performance based, at-risk incentive compensation.
In setting the Chief Executive Officer's base salary for 1995, the
Committee surveyed and reviewed compensation levels and the reference criteria
relating to such compensation levels within the gas and electric utility
industry. Compensation data and comparisons were provided to the Committee by
an independent consultant and were used by the Committee together with market
compensation data provided by the System's human resources department,
compensation reports contained in proxy materials for companies considered by
the Committee to be similar to the System in size, responsibility and
complexity, and utility industry references such as those provided by the
Edison Electric Institute. Among the reference criteria reviewed by the
Committee in developing external market pay norms were business type
(investor-owned utilities), scope (utilities with revenues of approximately
$500 million to $2 billion) and location (utilities headquartered in the
northeast region of the U.S.). This market reference group of companies
represents a subset of Value Line, Inc.'s utility sample. It is not necessary
for the Committee to formulate a policy with respect to qualifying
compensation paid to Executive Officers for deductibility under Section 162(m)
of the Internal Revenue Code, since the compensation of each Executive Officer
of the System is significantly lower than the $1 million threshold at which
tax deductions are limited.
<PAGE 11>
The Chief Executive Officer's award for 1995 pursuant to the System's
Annual Incentive Plan was determined on a weighted basis, with two-thirds of
the award potential attributable to the attainment of System goals and
objectives, and one-third of the award potential attributable to individual
goals and objectives. For 1995, the System criteria forming the goals and
objectives applicable to the Annual Incentive Plan were: 1) meeting pre-
established targets comparing System actual net income to budgeted net income
for 1995; 2) success in implementing budgetary constraints in the interest of
controlling costs; and 3) meeting certain pre-established benchmark measures
of operation and maintenance expenses per customer, as compared to a peer
group of 18 utility companies recommended by the System's independent
compensation consultant. Each of the three System goals and objectives are
equally weighted, and awards are made based on meeting, exceeding or reaching
maximum attainment of targets.
The goal established for actual net income was to meet or exceed the
approved budgeted amounts. The System's 1995 net income exceeded targeted net
income by 11.9%, resulting in a maximum award. The goal established for cost
control was for operating and maintenance expenses in 1995 to be below the
approved budgeted amounts. This goal was achieved by the System having
reduced actual operation and maintenance expenses to 7.1% below established
budgets, resulting in a maximum award for having exceeded the 5% below budget
maximum target. The goal of maintaining operating and maintenance expenses
per customer within the top 50% of the 18 company industry peer group was
exceeded, as the System was rated the fifth most effective of the 18 companies
in controlling operation and maintenance expenses. In the aggregate, the
goals and objectives applicable to the System component of the Annual
Incentive Plan were rated as 100% achieved.
The individual goals of the Chief Executive Officer for 1995 under the
Annual Incentive Plan included: implementing six specific objectives developed
in 1995 relating to the System's strategic plan, developing and implementing
an effective investor relations program, and strengthening the System's
relationships with state regulatory and elected officials so as to help
advance the System's positions on issues having the greatest impact on the
industry. The Chief Executive Officer's performance relative to achieving
individual goals was rated as 73% achieved, resulting in an aggregate
performance rating of 91% achievement.
The System's Long Term Incentive Plan, approved by shareholders in 1994,
measures performance and provides the potential for awards of Common Shares
over a three-year Plan Period. The first year of the initial Plan Period
established under that Plan was 1994, and as a result no award was made under
the Plan for 1995.
With respect to other Executive Officers, the Chief Executive Officer,
in conjunction with the System's human resources department and independent
consultant, established salary ranges for each Executive Officer. The salary
ranges were based in part upon salaries provided to executive officers in the
System's industry peer group, as reported by the Edison Electric Institute and
from regional salary surveys so as to establish salary ranges generally in the
median of the peer group. Specific salary levels were then established
through an evaluation of the Executive Officer's performance of goals and
duties. The base salary levels, as recommended by the Chief Executive
Officer, were also reviewed and approved by the Executive Compensation
Committee.
In addition to base salary, the named Executive Officers are also
eligible under the Annual Incentive Plan to receive annual variable incentive
compensation of up to a maximum of 30% of annual base salary. In 1995, the
System goals and objectives constituting the annual performance criteria and
the corresponding weightings which determined eligibility for awards to the
named Executive Officers under the Annual Incentive Plan were the same as
those applicable to the Chief Executive Officer. The individual goals and
<PAGE 12>
objectives of the other Executive Officer Plan participants included various
financial and operating performance standards, such as the continued
maintenance of individual department total annual expenses at amounts not
exceeding approved budgets, the negotiation and execution of settlement
agreements with state regulatory agencies so as to resolve several financial
issues without the need to file and prosecute a rate case, and the
implementation of enhanced procedures designed to further reduce costs and
increase productivity of both in-house and outside legal counsel services.
THE EXECUTIVE COMPENSATION COMMITTEE
Henry Dormitzer, Chairperson
Michael C. Ruettgers
Gerald L. Wilson
<PAGE 13>
COMPARATIVE TOTAL SHAREHOLDER RETURN
Set forth below is a line graph comparing the cumulative total
shareholder return for the System's Common Shares to the cumulative total
return of the S&P 500 Stock Index and a Peer Group Index which is comprised of
88 utility companies (including the System) which are followed by Value Line,
Inc. The entities which comprise the Peer Group are also set forth
hereinafter.
Comparative Five-Year Total Returns
Commonwealth Energy System, S&P 500 and Value Line Peer Group
(Performance results through 12/31/95)
---------------------------------------------------------------
Line graph illustration of
comparative five-year (1991-1995) cumulative
total returns based on values listed
in chart below.
---------------------------------------------------------------
1990 1991 1992 1993 1994 1995
COM/Energy $100.00 $128.84 $150.74 $174.25 $147.29 $195.20
S&P 500 100.00 130.55 140.72 154.91 157.39 216.42
Peer Group 100.00 129.87 139.63 155.49 136.52 178.91
Assumes $100 invested at the close of trading on the last trading day of
1990 in COM/Energy Common Shares, S&P 500 and the Peer Group. Also
assumes reinvestment of dividends.
Source: Value Line, Inc.
PEER GROUP
Allegheny Power System, Inc. Montana Power Co.
American Electric Power Co., Inc. Nevada Power Co.
Atlantic Energy Inc. New England Electric System
Baltimore Gas and Electric Company New York State Electric & Gas Corp.
Boston Edison Company Niagara Mohawk Power Corporation
Carolina Power & Light Co. NIPSCO Industries Inc.
Centerior Energy Corporation Northeast Utilities
Central Hudson Gas & Electric Corp. Northern States Power Co.
Central Louisiana Electric Company Inc. Northwestern Public Service Co.
Central Maine Power Co. Ohio Edison Co.
Central & South West Corp. Oklahoma Gas & Electric Co.
Central Vermont Public Service Corp. Orange and Rockland Utilities, Inc.
CILCORP Inc. Otter Tail Power Co.
CINergy Corp. Pacific Gas & Electric Co.
CIPSCO Incorporated PacifiCorp.
CMS Energy Corp. PECO Energy Company
<PAGE 14>
Commonwealth Energy System Pinnacle West Capital Corp.
Consolidated Edison Co. of New York, Inc. Portland General Electric Co.
DPL Inc. Potomac Electric Power Co.
Delmarva Power & Light Company PP&L Resources, Inc.
Dominion Resources, Inc. Public Service Co. of Colorado
DQE Public Service Co. of New Mexico
Duke Power Co. Public Service Enterprise Group Inc.
Eastern Utilities Associates Puget Sound Power & Light Co.
Empire District Electric Company Rochester Gas and Electric Corp.
Entergy Corporation St. Joseph Light & Power Co.
Florida Progress SCANA Corp.
FPL Group, Inc. SCEcorp
General Public Utilities Corp. Sierra Pacific Power Co.
Green Mountain Power Corp. The Southern Company
Hawaiian Electric Co., Inc. Southwestern Public Service Co.
Houston Industries Incorporated TECO Energy, Inc.
Idaho Power Co. Texas Utilities Company
IES Industries TNP Enterprises, Inc.
Illinova Corp. Tucson Electric Power Co.
Interstate Power Co. Unicom Corp.
IPALCO Enterprises, Inc. Union Electric Co.
Kansas City Power & Light Co. United Illuminating Co.
KU Energy Corporation UtiliCorp. United Inc.
LG&E Energy Corp. Washington Water Power Co.
Long Island Lighting Co. Western Resources Inc.
MDU Resources Wisconsin Energy Corp.
MidAmerican Energy Company WPL Holdings, Inc.
Minnesota Power & Light Co. WPS Resources Corporation
MEETINGS OF THE BOARD OF TRUSTEES AND COMMITTEES
The System's Board of Trustees held fourteen meetings throughout 1995.
The Board has an Audit Committee, an Executive Compensation Committee, a
Nominating Committee, a Benefit Review Committee and a Strategic Planning
Committee.
The Audit Committee is composed of Betty L. Francis, Chairperson,
Peter H. Cressy and William J. O'Brien. The Committee held four meetings in
1995. The Committee's functions are to recommend the selection of an
independent public accountant, to review the scope of and approach to audit
work, to review non-audit services provided by the independent public
accountants, and to review accounting principles and practices and the
adequacy of internal controls.
The Executive Compensation Committee is composed of Henry Dormitzer,
Chairperson, Michael C. Ruettgers and Gerald L. Wilson. During 1995 the
Committee held six meetings. This Committee reviews and recommends
compensation and promotional adjustments for certain of the System's personnel
and also reviews and recommends adjustments to the compensation of Trustees.
The Nominating Committee is composed of Sheldon A. Buckler, Chairperson,
Betty L. Francis and Franklin M. Hundley. The Committee held two meetings in
1995. The functions of the Committee are to coordinate suggestions or
searches for potential nominees for the position of Trustee, to review and
<PAGE 15>
evaluate qualifications of potential nominees and to recommend to the Board of
Trustees nominees for vacancies occurring from time to time on the Board of
Trustees. The Committee will consider nominees recommended by Shareholders
upon the timely submission of the names of such nominees with their
qualifications and biographical information forwarded to the Nominating
Committee of the Board of Trustees.
The Benefit Review Committee is composed of Franklin M. Hundley,
Chairperson, Henry Dormitzer and William J. O'Brien. During 1995 the
Committee held one meeting. The Committee was organized to consider and
recommend to the Board of Trustees matters associated with the System's major
funded benefit plans. Functions of the Committee include recommending the
composition of benefit plan boards and reviewing investment policy,
objectives, performance or proposed changes related to the plans.
The Strategic Planning Committee is composed of Gerald L. Wilson,
Chairperson, Peter H. Cressy and Michael C. Ruettgers. The Committee held two
meetings during 1995. The functions of this Committee are to attend strategic
planning sessions, provide support and insight to management and coordinate
management planning activities with the Board of Trustees.
During 1995, each Trustee who was not an employee of the System was
compensated for his or her services as Trustee at the rate of $10,000 per
year, plus $850 for each Trustee and Committee meeting attended. The
Chairpersons of the Audit, Executive Compensation, Benefit Review and
Strategic Planning Committees each received an additional $1,000 during the
year. In addition, the Chairman of the Board received a retainer of $10,000
per year for his services as Chairman of the Board and of the Nominating
Committee. Effective February 23, 1996, non-employee Trustees were
compensated for their services as Trustee at the rate of $12,500 per year,
plus $1,000 for each Trustee and Committee meeting attended. The Chairpersons
of the Audit, Executive Compensation, Benefit Review and Strategic Planning
Committees each receive an additional $1,000 during the year. In addition,
the Chairman of the Board receives a retainer of $20,000 per year for his
services as Chairman of the Board and of the Nominating Committee.
Trustees are entitled to defer all or a specified portion of their
compensation pursuant to the terms of the Deferred Compensation Plan for
Trustees of Commonwealth Energy System. An account is established for each
Trustee electing to participate in the Plan, which account is credited with
the amount which would otherwise be payable to the Trustee as compensation for
the Trustee's services. At the end of each month, interest is credited at an
annual rate equivalent to the weighted average prime lending rate. Upon the
Trustee's retirement, the account balance is paid either in a lump sum or in
annual installments according to the election made by the Trustee. The rights
of the Trustee in the account are not assignable and constitute an unsecured
claim against the general assets of the System.
The Retirement Plan for Trustees of Commonwealth Energy System was
adopted to provide retirement benefits to non-management members of the Board
of Trustees in recognition of their services to the System. Members of the
Board of Trustees who have served as Trustees for at least five years are
eligible to participate in the Plan. Each eligible Trustee qualifies for an
annual retirement benefit payment equal to fifty percent of the annual
retainer fee in effect at retirement (excluding retainers for chairing
committees), plus 10% of the annual retainer fee for each year in addition to
five years served, up to 100% of such fee. The annual retirement benefit
payment is adjusted to reflect the first subsequent increase, if any, in the
annual retainer fee for service on the Board following the Trustee's
retirement. The annual retirement benefit payment becomes vested at the time
of eligibility and is payable to Trustees for a period equal to the greater of
ten years or the number of years of service as a Trustee.
<PAGE 16>
2-AMENDMENTS TO SECTIONS 5 AND 22 OF THE
DECLARATION OF TRUST
There will be presented to Shareholders by the Board of Trustees a
proposal to amend Sections 5 and 22 of the System's Declaration of Trust,
which sections set forth the specific powers of the Board of Trustees, the
present authorized number of Common Shares of beneficial interest and the par
value of such Common Shares. The proposed amendments would change the par
value of each Common Share from Four Dollars ($4.00) to Two Dollars ($2.00),
increase the number of authorized Common Shares from 18,000,000 to 50,000,000
Common Shares, and allow for share splits or reverse share splits and changes
in the par value of Common Shares under certain terms without specific
Shareholder approval. The text of the proposed amendments to Sections 5 and
22 is annexed as Appendix A to this Proxy Statement.
The Trustees of the System have concluded that it would be desirable for
the Common Shares of the System to be split on a two-for-one basis because the
Trustees believe such a split will broaden the market for the System's Common
Shares and result in a wider distribution of the System's Common Shares, both
of which are regarded by the Trustees as being in the best interests of the
System and its Shareholders. In addition, the Trustees have concluded that it
would be desirable to increase the total number of Common Shares authorized
for issuance and for the Trustees of the System to be able to effect future
share splits that would not alter the aggregate par value of the then
outstanding Common Shares without the expense and potential for delay that
could result from the current requirement that splits of Common Shares be
specifically approved by the holders of a majority of such shares.
Accordingly, the Trustees have proposed that the Declaration of Trust of the
System be amended so as to change the number of authorized Common Shares of
the System from 18,000,000 Common Shares, par value $4.00 per share, to
50,000,000 Common Shares, par value $2.00 per share, that share splits be
facilitated by an amendment to Section 5 of the Declaration of Trust, and have
further proposed that a share split be effected such that each Common Share of
the System issued and outstanding on the record date of such split be changed
into two Common Shares, par value $2.00 per share.
Upon approval by the holders of a majority of the Common Shares, the
proposed amendments will become effective upon the filing of the amended
Declaration of Trust as required by the terms of the Declaration of Trust and
the laws of the Commonwealth of Massachusetts. The Trustees will vote May 2,
1996 to effect a two-for-one split of the Common Shares. It is presently
expected that the record date of the proposed share split will be May 15,
1996. At the close of business on said record date, the System shall
determine the Shareholders of record on such date. Shareholders of record
shall be entitled to receive an additional Common Share for each Common Share
held on said record date when the share split becomes effective. The
effective date of the share split is expected to be June 5, 1996. The Board
of Trustees, however, may fix a different record or effective date for the
share split.
Upon the effective date of the share split, the outstanding certificates
representing Common Shares will represent, in every instance, exactly the same
number of Common Shares of the par value of $2.00 per share. EACH CERTIFICATE
OUTSTANDING PRIOR TO THE RECORD DATE FOR THE SHARE SPLIT WILL CONTINUE TO
REPRESENT THE SAME NUMBER OF SHARES. DO NOT DESTROY YOUR CERTIFICATES AND DO
NOT MAIL THEM TO THE SYSTEM OR ITS TRANSFER AGENT. EACH SUCH CERTIFICATE AND
THE CERTIFICATES FOR ADDITIONAL SHARES TO BE MAILED WILL REPRESENT YOUR TOTAL
SHARES AFTER THE SHARE SPLIT BECOMES EFFECTIVE. It is presently anticipated
that additional certificates representing one additional Common Share of the
par value of $2.00 per share for each Common Share outstanding on the record
date will be issued on the date that the share split becomes effective.
<PAGE 17>
On March 15, 1996, there were 18,000,000 Common Shares authorized, of
which 10,764,838 were issued and outstanding. After giving effect to the
proposed amendment, the number of Common Shares authorized would increase to
50,000,000 and, upon the effective date of the share split, the number of
Common Shares issued and outstanding as aforesaid would double. The increase
in the number of authorized Common Shares will permit the System to respond
more readily to the market for such shares and will assist the System in
effecting transactions involving the issuance of additonal Common Shares. The
System, however, currently does not have plans for the issuance of any
additional Common Shares, other than the additional Common Shares that would
be issued to Shareholders in connection with the proposed two-for-one share
split. The System may issue additional Common Shares pursuant to the System's
Dividend Reinvestment and Common Share Purchase Plan or pursuant to a new
issuance of Common Shares made in accordance with the requirements of the
Declaration of Trust and applicable laws.
The change in par value from $4.00 to $2.00, in conjunction with
doubling the number of Common Shares issued and outstanding as aforesaid, will
not result in any changes in the total Shareholders' equity accounts of the
System represented by the Common Shares, Preferred Shares, premium on shares
and retained earnings. Financial statements are not furnished herewith
specifically for the purposes of the proposal, inasmuch as such statements are
not deemed necessary for the exercise of prudent judgment in voting for or
against the proposal, as the proposed amendments, together with the share
split, will occasion no change in and of themselves in the relative holdings
of Shareholders and will cause no change in the aggregate par value of
outstanding Common Shares (or Preferred Shares) of the System.
The System has been advised by counsel that the proposed share split
will not result in any gain or loss for Federal income tax purposes to the
System's Common Shareholders. For Federal income tax purposes, the tax basis
of each Common Share held after the split will be equal to one half of the
basis of each Common Share held prior thereto, and the holder of each Common
Share outstanding immediately prior to the record date will be entitled to
tack the holding period for such share to each Common Share received in the
proposed share split. For additional information and with regard to any
questions regarding the tax consequences of the proposed share split,
Shareholders should consult their own tax advisors.
Under the current provisions of the Declaration of Trust, approval by
the holders of a majority of the Common Shares is required for any share
split, reverse share split or change in par value involving Common Shares.
The Board of Trustees recommends amending these provisions by the addition of
a new Section 5(w), which will have the effect of deleting the requirement of
obtaining such Common Shareholder approval for share splits, reverse share
splits or changes in par value in connection with share splits that will not
alter the aggregate shareholder equity accounts of the System. The Board
believes that this amendment will help eliminate the expense and potential for
delay that accompanies the present Common Shareholder approval requirement and
should allow the System to respond more readily to the market for its Common
Shares.
The proposed amendments to the Declaration of Trust relating to the
increase in the number of authorized Common Shares and the facilitation of
splits of Common Shares, together with the proposed two-for-one share split,
are presented as one integrated proposal. The adoption of this proposal
requires the affirmative vote of the holders of a majority of the outstanding
Common Shares entitled to be voted at the meeting. There are no rights of
appraisal or similar rights of dissenters with respect to the proposal.
Upon the affirmative vote of the holders of a majority of the
outstanding Common Shares entitled to vote on the proposal, the System will on
May 2, 1996 effect the filing of the amended Declaration of Trust, as required
by the terms of the Declaration of Trust and the laws of the Commonwealth of
Massachusetts and the Trustees will vote to effect the two-for-one share split
as described above.
THE TRUSTEES RECOMMEND A VOTE "FOR" THE APPROVAL OF THE AMENDMENTS.
<PAGE 18>
3-SHAREHOLDER PROPOSAL
The System has been advised that Mr. John Jennings Crapo, Porter Square
Branch, P.O. Box 151, Cambridge, Massachusetts, 02140-0002, holder of 225
Common Shares, proposes to submit the following proposal at the 1996 Annual
Meeting:
It is the judgment of the Shareholders of the Commonwealth Energy System
("C.E.S.") that the C.E.S. DECLARATION OF TRUST dated December 31, 1926 as
Amended be amended and that the Board of Trustees present to Shareholders at
the next Annual Meeting of Shareholders an appropriate amendment to said
Declaration of Trust to accomplish the following:
Trustees elected at the Annual Meeting of Shareholders starting with the
1998 Annual Meeting of Shareholders shall be elected to hold office until the
next annual meeting and until their successors are elected and qualified.
SUPPORTING STATEMENT
Presently I have 225 shares of C.E.S. Common Stock which May 15, 1995
closed at $40.75 and aggregately was worth $9,168.75.
At said stock's closing May 27, 1994 I had 225 said shares and it was
worth $40.50 ($9,112.50).
May 07, 1993 at said stock's closing, I had 225 shares worth $44.50
($10,012.50).
May 08, 1992 at the stock closing I had 225 shares said stock worth
$37.25 ($8,381.25).
May 17, 1991 I had 224 shares of said stock worth $33.37 ($7,476.00).
May 23, 1990 I had 218 shares of said stock at stock's closing worth
$34.50 ($7,521.00).
I've sold none of said shares and plan to continue to own them
throughout the adjournment of the C.E.S. next stockholder meeting at which
time I plan to move proposal's adoption. I plan to attend in person the next
stockholder meeting.
At May 04, 1995 stockholder meeting proponent moved proposal's adoption.
Motion to adopt for the fourth time this proposal has been considered was
seconded by Mr. Henry Dormitzer, Trustee, who is Chairperson of the C.E.S.
Board of Trustees Executive Compensation Committee. At the 1992, 1993 and
1994 C.E.S. stockholder meeting attorney Mr. Richard J. Morrison of the
COM/Energy Services Company seconded Proponent's motion to adopt this
proposal. May 4, 1995, Proponent's Proposal got 16% of the votes of shares
cast in person and by Proxy. These 1995 figures are subject to revision
pending on proponent receiving the tally in writing from Mr. Sullivan, Esq.
whom as General Counsel of COM/Energy Services Co., is Mr. Morrison's
supervisor.
BOARD OF TRUSTEES RECOMMENDATION:
The Board of Trustees recommends a vote AGAINST this proposal for the
following reasons:
This proposal has been submitted at each Annual Meeting since 1991. It
requests that the Board of Trustees submit a proposal to Shareholders at the
1997 Annual Meeting, calling for the repeal of the classified Board, so that
all Trustees would be elected on an annual basis. The classified board was
adopted at the 1987 Annual Meeting, when Shareholders voted to amend the
System's Declaration of Trust to create three classes of Trustees, with an
equal number of Trustees in each class, and to provide that the Trustees would
serve three-year staggered terms, such that three Trustees are eligible for
<PAGE 19>
election each year. The classified board is intended to help to ensure
continued familiarity of Board members with the business, management and
policies of the System, since a majority of the Trustees at any given time
would have prior experience as Board members. These amendments are also
designed to encourage persons seeking to acquire control of the System to
initiate an acquisition through arms-length negotiations with the System's
management and Board of Trustees, by making it more difficult to change the
composition of the Board. Also, the amendments may allow the System's
management to obtain more time and information for evaluating a takeover
proposal, in order to fully protect the interests of the System and its
Shareholders.
As has been its position since this proposal was first submitted, the
Board believes that each Trustee is fully accountable to Shareholders
throughout each term of office, whether that term is three years or one year.
The Board again notes that the classified board system was determined to be of
sufficient merit that the Massachusetts legislature has codified that
system, in its 1990 amendments to the laws pertaining to Massachusetts
business corporations (however, the System, as a Massachusetts Trust, is not
affected by this legislation).
Repeal of the classified Board (which, if the present proposal is
adopted, would actually be pursuant to the acceptance of a proposed Amendment
to the Declaration of Trust to be offered at the 1997 Annual Meeting of
Shareholders) requires the affirmative vote or written consent of three-
quarters of the shares entitled to vote, in accordance with the terms of the
System's Declaration of Trust.
ACCORDINGLY, A VOTE "AGAINST" THE PROPOSAL IS RECOMMENDED.
4-OTHER BUSINESS
The Board of Trustees of the System knows of no matters other than those
set forth in the Notice of the Annual Meeting which are likely to be brought
before the meeting. However, if any other matters of which the Board of
Trustees is not aware are appropriately presented for action, it is the
intention of the persons named in the proxy to vote in accordance with their
judgment on such matters.
<PAGE 20>
MISCELLANEOUS
The independent public accounting firm selected by the Trustees as
Auditor of the System is Arthur Andersen LLP. It is expected that
representatives of Arthur Andersen LLP will be present at the Annual Meeting
with the opportunity to make a statement if they desire to do so and to
respond to appropriate questions.
The cost of soliciting proxies will be borne by the System. A limited
number of regular employees may solicit proxies by telephone or in person
subsequent to the initial solicitation by mail. In addition, the System has
retained the firm of D. F. King to aid in such solicitation of proxies. The
System expects to pay such firm a fee of $5,500 plus expenses. The System
will reimburse banks, brokerage firms and other custodians, nominees and
fiduciaries for reasonable expenses incurred in sending proxy material to
security owners.
The proxy card for a participant in the System's Dividend Reinvestment
and Common Share Purchase Plan includes the number of shares which are
registered in the participant's name and the number of shares beneficially
owned by the participant that are held in the name of the nominee of the
System for the Plan. A participant's vote with respect to the shares
registered in the participant's name is also an instruction by the participant
to the nominee to vote the shares credited to the participant's account under
the Plan.
In order for Shareholder proposals for the 1997 Annual Meeting of
Shareholders to be eligible for inclusion in the System's Proxy Statement,
they must be received by the System at its principal office in Cambridge,
Massachusetts, prior to November 30, 1996.
It is important that proxies be returned promptly to avoid unnecessary
expense. Therefore, Shareholders are urged, regardless of the number of
shares owned, to SIGN, DATE and RETURN the enclosed proxy promptly.
Michael P. Sullivan
Vice President, Secretary
and General Counsel
Cambridge, Massachusetts 02142-9150
March 29, 1996
<PAGE 21>
APPENDIX A
PROPOSED AMENDMENTS TO
SECTIONS 5 and 22 OF THE DECLARATION OF TRUST
Section 5 of the System's Declaration of Trust, "Powers of Trustees",
would be amended by the insertion in Section 5 of a new Subsection (w) which
would read as follows:
Section 5, Subsection (w)--To effect a share split or reverse share
split of the Common Shares of the System and to change the par value of Common
Shares of the System in connection with any such share split or reverse share
split, provided that such share split, reverse share split or change in the
par value of the Common Shares of the System does not result in impairment of
the capital of this trust, as represented by the aggregate of the par value of
its outstanding shares and any cash premiums paid on the sale of such shares;
to effect, without the consent or vote of the holders of any Common Shares or
Preferred Shares, any amendments to this Declaration of Trust necessary to
reflect such a share split, reverse share split or change in par value; and to
issue Common Shares to effect any such share split or reverse share split,
notwithstanding any other provisions of this Declaration of Trust, including,
without limitation, the provisions of Section 22 and Section 44.
In addition, the existing Subsection (w) would be amended by renumbering
it as Subsection (x).
Section 22 of the System's Declaration of Trust would be amended (1) by
deleting the words "eighteen million (18,000,000) Common Shares" in the second
sentence of the first paragraph of said Section 22 and substituting the words
"fifty million (50,000,000) Common Shares" in lieu thereof; (2) by deleting
the words "four dollars ($4) per share" in the second sentence of the first
paragraph of said Section 22 and substituting therein the words "two dollars
($2) per share; and (3) by deleting the figure "18,000,000" in the first
sentence of the next to last paragraph of said Section 22 and substituting the
figure "50,000,000" in lieu thereof.
so that the first paragraph of Section 22 reads in its entirety, as
follows:
Section 22.--The beneficial interest in this trust shall be and during
the continuance of this trust shall remain in the owners from time to time of
transferable shares of beneficial interest. The shares of beneficial interest
now authorized shall consist of fifty million (50,000,000) Common Shares
having a par value of two dollars ($2) per share and a class of Cumulative
Preferred Shares having a par value of one hundred dollars ($100) per share
(hereinafter called "Preferred Shares").
and so that the first sentence of the next to last paragraph of said Section
22 reads in its entirety as follows:
Common Shares in addition to the 50,000,000 Shares herein authorized may
be authorized from time to time by vote at a meeting or by the written consent
of the registered holders of a majority of the Common Shares at the time
outstanding and entitled to vote and may be issued from time to time by the
Trustees at not less than par for such consideration and upon such terms and
in such manner as may be determined by such vote or written consent or, if
authorized by such vote or written consent, upon such terms and in such manner
and for such consideration as may be determined by the Trustees.
<PAGE 22>
APPENDICES
COMMONWEALTH ENERGY SYSTEM
Proxy-Annual Meeting of Shareholders-May 2, 1996
This Proxy is Solicited on Behalf of the Board of Trustees
The undersigned hereby appoints Sheldon A. Buckler, Henry Dormitzer and
William G. Poist, and each or any of them, with power of substitution, as
proxies to attend the Annual Meeting of Shareholders of the System to be held
on Thursday, May 2, 1996 and at any adjournment thereof and to vote the number
of shares which the shareholder(s) would be entitled to vote if personally
present:
To vote your shares for all Trustee nominees, mark the "FOR" box on
item 1. To withhold voting for all nominees, mark the "WITHHELD" box. If you
do not wish your shares voted "FOR" a particular nominee, mark the
"EXCEPTION" box and enter name(s) of the exception(s) in the space provided.
_____________________________________________________________________________
The Trustees recommend a vote "FOR" #1 and #2
1. Election of Trustees
Nominees: P. H. Cressy, W. J. O'Brien, W. G. Poist
[ ] FOR [ ] WITHHELD [ ] EXCEPTIONS
EXCEPTIONS: ____________________
2. Consent to a two-for-one share split and to amend
Sections 5 and 22 of the Declaration of Trust.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
_____________________________________________________________________________
The Trustees recommend a vote "AGAINST" #3
3. Shareholder Proposal
[ ] FOR [ ] AGAINST [ ] ABSTAIN
_____________________________________________________________________________
4. Upon any other business that may properly come before the meeting.
_____________________________________________________________________________
This Proxy will be voted as directed above. If no other indication
is made, this proxy will be voted FOR proposals #1 AND 2,
and AGAINST proposal #3.
Any proxy or proxies to vote such shares at said meeting
heretofore given by the sharheolder(s) are hereby revoked.
PLEASE SIGN AND DATE ON REVERSE SIDE
____________________________________________________
____________________________________________________
Signature(s)
should agree with name(s) printed below
(When signing as attorney, executor or administrator, trustee or
guardian, etc., please indicate your full title as such.)
Acct. No. No. of
Shares
Dated_______________________, 1996
PLEASE SIGN, DATE AND RETURN IN ENCLOSED PREPAID ENVELOPE