STONE & WEBSTER ENGINEERING CORPORATION

245 SUMMER STREET, Boston, MASSACHUSETTS

This is to confirm the financial interests that employees of Stone & Webster will have in connection with the services that we will be providing to TVA pursuant to the TVA/SWEC Loan Agreement.

The total revenues of Stone & Webster during its last fiscal year were in excess of $2,000,000,000, and the revenues from the services provided to TVA purouant to the above agreement will represent a small fraction (lass than .4%) of Stone & Webster's total revenues per year. Company personnel providing services to TVA pursuant to the TVA/SWEC Loan Agreement will be compensated in accordance with established Stone & Webster policy. employee of Stone & Webster will receive any bonus, compensation, or any other personal benefit that is attributable to the dollar volume of services provided to TVA by Stone & Webster.

No

Subject:

Board Action:

Application for Board Detenation

Determination for Richard B. Kelly under 18 U.S.C.
§ 208(b).

WHEREAS, Richard B. Kelly will serve for not more than 2 years as a loaned employee, as TVA's Manager of Nuclear Quality Assurance, in which position it is reasonably expected that he will use the QA engineering services of Stone & Webster Engineering Corporation (SWEC); and

WHEREAS, Mr. Kelly is an officer, director, salaried employee, and stockholder of SWEC; and

WHEREAS, Mr. Kelly has made a written disclosure of certain financial interests in SWEC; and

WHEREAS, TVA's General Manager has directed that the Office of Nuclear Power limit its use of SWEC for QA engineering work to $ year for 2 years; and

per

WHEREAS, Mr. Kelly is compensated by SWEC on a salary basis, and he will not receive any SWEC bonus or other personal benefit in connection with the work he performs for TVA under this arrangement, other than as a shareholder of less than .1 percent of SWEC stock; and

WHEREAS, SWEC is a large entity with revenues substantially in excess of that represented by TVA's maximum QA engineering business with SWEC; and

WHEREAS, as a loaned employee, Mr. Kelly is subject to TVA's employee rules, regulations, and procedures on conduct, conflicts, and ethics except as provided herein;

BE IT RESOLVED that the Board hereby finds pursuant to 18 U.S.C. § 208(K) that Mr. Kelly's financial interests in SWEC are not so substantial as to be deemed likely to affect the integrity of the services which TVA expects of him.

Attachment: W. F. Willis memorandum to the Board

Richard Kelly's written disclosure

W. F. Willis' direction to the Office of Nuclear Power to limit QA engineering work under Contract No. TV-68702A

Manager of Nuclear Power Steven A. White has selected and the individual
members of the Board have approved Richard B. Kelly to serve, as a loaned
employee, in the position of Manager of Nuclear Quality Assurance (QA)
for TVA for up to two years.

Mr. Kelly is coming to TVA under TVA Contract No. TV-68879A with Stone &
Webster Engineering Corporation (SWEC). He is a SWEC director, the SWEC
QA Manager, and a stockholder of SWEC, both directly and through various
SWEC stock option plans. He is compensated by SWEC with a salary and
will receive no other personal benefit in connection with any work or
services provided to TVA by SWEC, except as a shareholder and beneficial
owner of less than .1 percent of SWEC common stock. No part of his
compensation is specifically related to the volume of business TVA does
with SWEC. He will remain a SWEC director and officer, although he
intends to delegate substantially all of his SWEC QA manager responsi-
bilities to subordinates while holding this TVA job. He will also
continue to receive the above-described compensation from SWEC. These
details of Mr. Kelly's financial interests with SWEC are set out in
Mr. Kelly's February 6 letter to me which is attached.

As a loaned employee, unless otherwise specified, Mr. Kelly is subject to all TVA rules, regulations, and procedures on conduct, conflicts, and ethics applicable to regular TVA employees.

As TVA's QA Manager, Mr. Kelly will direct and be responsible for TVA's
entire nuclear QA effort, working at the direction of Mr. White. In that
work, it is reasonably anticipated that Mr. Kelly may find it
advantageous to the accomplishment of TVA's work that he call on Stone &
Webster for certain QA engineering support services. These services will
be made available to TVA by SWEC under TVA Contract No. TV-68702A. I
have determined that the QA engineering services that TVA obtains from
SWEC will be limited to $
per year for two years. My direction

to the Office of Nuclear Power in this regard is attached.

Stone & Webster is a large firm. It represents that its annual revenues
in its last fiscal year were in excess of $2 billion. Under present
contracts, TVA's total annual payments to SWEC will not exceed $8 million
per year and the QA engineering work in which Mr. Kelly might participate
in directing for TVA will not exceed $
per year, a very small
fraction of SWEC's business. These details of SWEC's business are set
out in Mr. Matson's February 12 letter to me which is attached.

Thus, Mr. Kelly's disclosed interests in SWEC would prevent him under 18 U.S.C§ 208 from participating in any way in TVA determinations on the TVA/SWEC contracts. However, as the Board knows, it could determine that the specifically identified interests of Mr. Kelly in SWEC and the limits we have placed on his participation in any TVA/SWEC contract matter cause that financial interest to be not so substantial as to be deemed likely to affect the integrity of the services which TVA may expect of him and, therefore, waive the prohibitions of the statute pursuant to 18 U.S.C. §. 208(b).

The individual members of the Board can act by indicating their determinations on the attached Board action form.

C. H. Dean, Jr.

Richard M. Freeman
John B. Waters

WFW: JM

Attachments

cc: Herbert S. Sanger, Jr., E11B33 C-K

Steven A. White, LP 6N 38A-C

W. F. Willis

ΤΟ

: Steven A. White, Manager of Nuclear Power, LP 6N 33A-C

FROM : W. F. Willis, General Manager, E12816 C-K

DATE

SUBJECT:

:

LIMITATION ON QA ENGINEERING SERVICES TO BE ORDERED FROM STONE & WEBSTER
ENGINEERING CORPORATION (SWEC)

As we discussed, the Office of Nuclear Power is to order any QA engineering
work to be obtained from SWEC under TVA Contract No. TV-68702A with 'SWEC
and to limit its use of that contract for QA engineering work to $.
per year during each of the next two years. -