<PAGE>
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
CENTRAL MAINE POWER COMPANY
- --------------------------------------------------------------------------------
(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):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 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 transaction 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.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
LOGO CENTRAL MAINE POWER COMPANY
---------------------------
GENERAL OFFICE: 83 EDISON DRIVE, AUGUSTA, MAINE 04336
April 20, 1995
TO THE HOLDERS OF COMMON STOCK
AND 6% PREFERRED STOCK OF
CENTRAL MAINE POWER COMPANY:
The Annual Meeting of the Shareholders, formal notice of which, together with
a Proxy Statement, appears on the following pages, will be held on May 24,
1995. The place for the meeting will be the Augusta Civic Center, in Augusta,
Maine.
At the meeting, holders of Common Stock and 6% Preferred Stock will be asked
to elect Class II directors of the Company for a three-year term.
In addition, holders of Common Stock and 6% Preferred Stock will be asked to
consider proposals:
. To approve the appointment by the Company's Board of Directors of
Coopers & Lybrand L.L.P., Boston, Massachusetts, as auditors for the
Company for the year 1995; and
. To act upon the shareholder proposal set forth in the Proxy Statement.
It is important for you and the Company that each shareholder participate in
this Annual Meeting. WHETHER OR NOT YOU PLAN TO ATTEND, PLEASE SIGN, DATE AND
RETURN THE ENCLOSED PROXY IN THE ENCLOSED SELF-ADDRESSED ENVELOPE. No postage
is necessary. Of course, if you attend the meeting, you will be able to vote
your shares in person.
A copy of the Company's Annual Report for 1994, containing copies of
certified financial statements, is also enclosed.
Cordially yours,
/s/ David T. Flanagan
David T. Flanagan
President and Chief Executive Officer
URGENT. PLEASE SIGN, DATE AND RETURN ENCLOSED PROXY IMMEDIATELY.
<PAGE>
LOGO CENTRAL MAINE POWER COMPANY
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 24, 1995
AT 10:00 A.M.
You are hereby notified of and invited to attend the Annual Meeting of the
Shareholders of Central Maine Power Company (the "Company"), to be held at the
Augusta Civic Center, Augusta, Maine, on May 24, 1995, at 10:00 A.M., Eastern
Daylight Time, to hear reports on Company affairs and to consider and act upon
the following matters:
1. To elect four directors to Class II of the Company's Board of
Directors for a three-year term;
2. To approve the appointment by the Company's Board of Directors of
Coopers & Lybrand L.L.P., Boston, Massachusetts, as the Company's auditors
for the year 1995;
3. To act upon the shareholder proposal set forth in the Proxy
Statement; and
4. To consider and act upon any other matters that may properly come
before the meeting.
The close of business on April 3, 1995 has been fixed as the record date for
determination of shareholders entitled to notice of, and to vote at, the Annual
Meeting or any adjournment thereof.
By Order of the Board of Directors
/s/ William M. Finn
William M. Finn
Secretary and Clerk
Augusta, Maine
April 20, 1995
<PAGE>
April 20, 1995
CENTRAL MAINE POWER COMPANY
LOGO 83 EDISON DRIVE
AUGUSTA, MAINE 04336
----------------
PROXY STATEMENT
This statement is furnished in connection with the solicitation of proxies by
the Board of Directors of Central Maine Power Company for the Annual Meeting of
the Shareholders of Central Maine Power Company (the "Company"), to be held on
May 24, 1995, at 10:00 A.M. at the Augusta Civic Center, Augusta, Maine. It is
being mailed to the shareholders on or about April 20, 1995.
The Annual Report of the Company for the year ended December 31, 1994,
including certified financial statements, is also enclosed.
VOTING RIGHTS
Only holders of record of shares of Common Stock and 6% Preferred Stock at
the close of business on April 3, 1995 are entitled to vote on all proposals at
the meeting. The total number of shares entitled to vote at the meeting will be
32,442,752 shares of Common Stock and 5,713 shares of 6% Preferred Stock.
Holders of Common Stock are entitled to one-tenth vote per share, and holders
of 6% Preferred Stock are entitled to one vote per share, regarding all matters
that are expected to be acted upon at the meeting. Accordingly, the holders of
Common Stock are entitled to 3,244,275 votes and the holders of 6% Preferred
Stock are entitled to 5,713 votes on all proposals at the meeting.
A majority of the total votes entitled to be cast at the meeting by the
holders of Common Stock and 6% Preferred Stock will constitute a quorum.
Abstentions, votes withheld from nominees for director, and broker non-votes
will be counted for the purpose of determining whether a quorum is present.
With respect to the election of directors, nominees who receive the greatest
number of votes cast by the holders of the Company's Common Stock and 6%
Preferred Stock, voting as a single class, will be elected, even though any
such nominee may not receive a majority of the votes cast. An affirmative vote
of a majority of the votes cast at the meeting by the holders of the Company's
Common Stock and 6% Preferred Stock, voting as a single class, is required for
approval of each of the matters presented to the shareholders for consideration
at the Annual Meeting. Votes withheld from nominees for director or abstentions
with respect to Proposal 2 or the shareholder proposal will be counted in
determining the total number of votes cast on the matter to which the votes
pertain and will have the same effect as a vote against the matter. Broker non-
votes will not be included in determining the total number of votes cast on a
matter and will have no effect on that matter.
Under the By-Laws of the Company, the election of directors at the Annual
Meeting shall at the option of any shareholder be by cumulative voting.
Accordingly, each shareholder having the right to vote for directors shall be
entitled to as many votes as pertain to the shares of stock owned by such
shareholder multiplied by the number of directors to be elected, and may cast
all such votes for a single director or may distribute them among the number to
be voted for, or any two or three of them, as such shareholder may see fit. If
any shareholder entitled to vote for directors at the meeting either gives
written notice to the President of the Company before the time fixed for the
meeting of his or her intention to vote cumulatively or states his or her
intention to vote cumulatively at the meeting before the voting for directors
commences, all
<PAGE>
shareholders entitled to vote for directors at such meeting shall be entitled
to cumulate their votes. Any shareholder who wishes to vote cumulatively but
who will not be present at the meeting should give written notice to the
President of the Company of such intention before the meeting and should
clearly indicate in writing on the accompanying form of proxy the director or
directors for whom he or she wishes to vote and the number of votes he or she
wishes to distribute to each such director. If no written indication is made on
the proxy, the votes will be evenly distributed among all of the nominees. If
any shareholder has indicated his or her intention to vote cumulatively (either
by written notice or by a statement made at the meeting), each shareholder
present at the meeting who has not given his or her proxy or has revoked his or
her proxy in the manner described in the following paragraph may vote
cumulatively at the meeting by means of a written ballot distributed at the
meeting.
Shareholders may vote at the meeting either in person or by duly authorized
proxy. The giving of a proxy by a shareholder will not affect the shareholder's
right to vote his or her shares if he or she attends the meeting and wishes to
vote in person. A proxy may be revoked or withdrawn by the person giving it, at
any time prior to the voting thereof, at the registration desk for the meeting
or by advising the Secretary of the Company. In addition, the proper execution
of a new proxy will operate to revoke a prior proxy. All shares represented by
effective proxies on the enclosed form, received by the Company, will be voted
at the meeting or any adjourned session thereof, all in accordance with the
terms of such proxies.
PROPOSAL 1
ELECTION OF DIRECTORS
It is intended that the persons named in the accompanying form of proxy will
vote to elect the first four persons listed below to serve as Class II
directors for a three-year term expiring at the 1998 Annual Meeting of the
Shareholders. However, if voting is cumulative, such proxies may cumulate the
total number of votes to which the shareholder executing the proxy is entitled
in favor of one or more of the nominees in such manner as such proxies shall in
their discretion determine, unless other instructions are given in the proxy by
the shareholder executing it. Nominees named in the accompanying form of proxy
who receive the greatest number of votes cast by the holders of the Company's
Common Stock and 6% Preferred Stock, voting as a single class, will be elected,
even though any such nominee may not receive a majority of the votes cast. The
remaining seven persons listed below as Class III and Class I directors will
continue in office for terms which expire at the 1996 and 1997 Annual Meeting
of the Shareholders, respectively, or, in each case, until their respective
successors are duly elected and qualified. Should any person named below as a
Class II director be unable or unwilling to serve as a director, persons acting
under the proxy intend to vote for such other person as management may
recommend, or the Board of Directors may exercise its exclusive power to fix
the number of directors at fewer than eleven.
On December 15, 1993, the Board of Directors fixed the number of directors at
twelve and elected David T. Flanagan to Class III of the Board effective
January 1, 1994. Matthew Hunter, who had been a member of the Board in Class I
since 1989, retired from employment with the Company effective May 1, 1994 and
from service as a director effective as of the same date. In preparation for
Mr. Hunter's planned retirement, the Board, at its March 16, 1994 meeting,
fixed the number of directors at eleven effective May 1, 1994. M. Anne Szostak,
who had been a Class III director since July 1, 1993, resigned from the Board
effective November 10, 1994. At its March 15, 1995 meeting, the Board elected
Peter J. Moynihan as a Class III director effective April 1, 1995 to fill the
vacancy created by Ms. Szostak's resignation.
Set forth below is information about each nominee and continuing director.
Each person listed is currently serving as a director of the Company. In
addition, David T. Flanagan is President and Chief Executive Officer of the
Company, and Carlton D. Reed, Jr. serves as Chairman of the Board of Directors.
2
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS
AND BUSINESS EXPERIENCE
DURING PAST FIVE
YEARS AND CURRENT FIRST
NAME AND DIRECTORSHIPS OF BECAME A
AGE PUBLIC COMPANIES DIRECTOR
-------- ----------------------- --------
<C> <S> <C>
CLASS II:
E. James Dufour (60).................... Senior Vice President, 1971
Kyes Agency, Inc.
(General insurance
and real estate);
Director, Somerset Woods
Trustees (Land trust)
David M. Jagger (53).................... President and Treasurer, 1988
Jagger Brothers, Inc.
(Textiles)
Charles E. Monty (68)................... Retired (1992) Chairman 1977
of the Board, Maine
Yankee Atomic Power
Company (a); Retired
(1989) Executive Vice
President and Chief
Operating Officer
of the Company
Robert H. Reny (69)..................... President and Chief 1988
Executive Officer,
R. H. Reny, Inc.
(Department stores);
President, Downeast
Wholesalers, Inc.
(Wholesale dry goods);
President, Renbro, Inc.
(Real estate); Treasurer,
Newman & Beamis, Inc.
(Wholesale toys)
CLASS III:
Charleen M. Chase (46).................. Executive Director, 1985
Community Concepts,
Inc. (Community action
agency)
David T. Flanagan (47).................. President and Chief Exec- 1994
utive Officer of the
Company, effective Janu-
ary 1, 1994; Executive
Vice President (July
1991 through December
1993); Senior Vice Pres-
ident, Finance and Law
(from September 1988);
Chairman of the Board of
Directors, Maine Yankee
Atomic Power Company (a)
Robert H. Gardiner (50)................. President, Maine Public 1992
Broadcasting
Corporation; previously
(1988 to 1992),
President and General
Manager, WCBB (Public
television)
Peter J. Moynihan (51).................. Senior Vice President and 1995
Chief Investment
Officer, UNUM
Corporation (Insurance)
</TABLE>
- --------
(a) The Company owns 38 percent of the outstanding voting stock of Maine
Yankee Atomic Power Company.
3
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS
AND BUSINESS EXPERIENCE
DURING PAST FIVE
YEARS AND CURRENT FIRST
NAME AND DIRECTORSHIPS OF BECAME A
AGE PUBLIC COMPANIES DIRECTOR
-------- ----------------------- --------
<C> <S> <C>
CLASS I:
Charles H. Abbott (59).................. Chairman, Skelton, Tain- 1988
tor & Abbott, P.A. (At-
torneys)
Carlton D. Reed, Jr. (64)............... Chairman of the Board of 1971
the Company; Chairman of
the Board and Chief
Executive Officer, Reed
& Reed, Inc.
(Construction)
Kathryn M. Weare (46)................... Owner and Manager, The 1992
Cliff House (Resort and
conference center)
</TABLE>
BOARD COMMITTEES, MEETINGS AND COMPENSATION
CERTAIN COMMITTEES OF THE BOARD
The Board's Audit Committee, which has as its members David M. Jagger
(Chair), Charleen M. Chase, Charles E. Monty and Kathryn M. Weare, held four
meetings in 1994. The Audit Committee recommends to the Board the independent
accountants to be selected by the Company and reviews the plan and scope of the
audit as well as the results and costs of the audit. The Committee also reviews
with the independent accountants and management the Company's internal
accounting procedures and controls, and the adequacy of the accounting services
provided by the Company's personnel.
The Governance Committee, now composed of Carlton D. Reed, Jr. (Chair),
Charles H. Abbott, Charleen M. Chase, E. James Dufour, David M. Jagger and
Robert H. Reny, has among its concerns the selection, performance, evaluation
and compensation of directors. The Committee will consider for nomination to
the Board individuals whose names have been submitted by shareholders in
writing. Supporting information should accompany any submission. The Governance
Committee also oversees the Company's long-range corporate planning and
succession planning, and evaluates the performance of the President and Chief
Executive Officer. The Governance Committee held three meetings in 1994.
The Compensation and Benefits Committee, whose members are Robert H. Reny
(Chair), Charles H. Abbott, E. James Dufour, Robert H. Gardiner and David M.
Jagger, held ten meetings in 1994. This committee reviews and makes
recommendations to the Board concerning compensation and benefit programs for
all executive officers. The Compensation and Benefits Committee also
administers the Company's 1987 Executive Incentive Plan and the Long-Term
Incentive Plan.
MEETINGS OF THE BOARD
The Board held 16 meetings (including regularly scheduled and special
meetings) in 1994. Each director listed above attended more than 75 percent of
the aggregate of the total number of Board meetings and the total number of
meetings of all committees on which that director served that were held during
periods he or she served as a director.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
In 1994, the members of the Compensation and Benefits Committee of the
Company's Board of Directors were Robert H. Reny, who served as Chair, E. James
Dufour, Robert H. Gardiner and David M. Jagger. In addition, M. Anne Szostak
served on the Committee until May 25, 1994, when she was replaced by Charles H.
Abbott as a Committee member.
Ms. Szostak was Chairman of the Board, President and Chief Executive Officer
of Fleet Bank of Maine during the period that she served on the Compensation
and Benefits Committee. Richard A. Crabtree, Vice
4
<PAGE>
President, Retail Operations, of the Company served in 1994 and continues to
serve as a director of Fleet Bank of Maine.
COMPENSATION OF DIRECTORS
In accordance with the established guidelines for the Board of Directors of
the Company, the Chairman of the Board receives an annual retainer of $25,200,
the Vice Chairman of the Board (a position that is currently vacant) receives
an annual retainer of $10,000, and each director (other than the Chairman or
Vice Chairman) who is the Chair of a committee of the Board and not an
executive officer of the Company receives an annual retainer of $8,400. Each
other director who is not an officer of the Company (an "outside director")
receives an annual retainer of $6,800. All retainers are payable quarterly. In
addition to ordinary travel expenses, all outside directors receive $600 for
each meeting of the Board attended, and all outside directors serving on a
committee of the Board receive $300 for each committee meeting attended on a
day on which they have also attended a meeting of the full Board or another
committee and $600 for any other committee meeting attended. A fee of $150 is
paid to outside directors for participating in a telephone meeting of the Board
or one of its committees if, in the opinion of the person presiding at the
meeting, substantial action is taken or matters of importance are resolved.
In March 1988, the Company established a voluntary deferred compensation plan
for outside directors. Under the plan, a director who receives a retainer as
described above may elect to have all or a specified portion, in increments of
25 percent, of his or her retainer (but not meeting fees) for the calendar year
following the election and subsequent calendar years credited quarterly to a
deferred compensation account, maintained at the election of the director
either as a cash account or an account in units based on the value of the
Common Stock of the Company ("Compensation Units"). The number of Compensation
Units credited to a director's account is equal to the number of shares of the
Company's Common Stock that could have been purchased as of the middle of a
calendar quarter with the amount of the retainer deferred for that quarter. The
Company matches Compensation Units in a director's account with one-half the
number of Compensation Units in the account. All current outside directors of
the Company who served as directors in 1994 have elected to defer payment of
their retainers in the form of Compensation Units from time to time. For those
directors, the number of Compensation Units in their respective accounts as of
March 31, 1995 is shown in the table that appears under the caption "SECURITY
OWNERSHIP." Accounts maintained in the form of cash do not receive a match. A
director's cash account accrues interest at an annual rate equal to the rate of
return on equity earned by the Company in the prior calendar year. Compensation
Units and matching Compensation Units in a director's account are credited with
the equivalent of dividends on the Company's Common Stock. Specifically,
whenever dividends are paid on the Company's Common Stock, each account
maintained in Compensation Units is credited with additional Compensation Units
equal to the number of shares that could have been purchased if a cash dividend
had been paid on the Compensation Units in the account. Deferred retainers,
whether held in a cash account or an account in Compensation Units, are paid
solely in cash, in a lump sum or installments beginning on the first business
day of the calendar year following the year in which the director ceases to
serve on the Board or of a specified calendar year thereafter, as irrevocably
elected in advance by the director. The value of the Compensation Units in a
director's account at the time a lump sum or any installment payment is made
will be equal to the market value of the same number of shares of the Company's
Common Stock on the payment date.
In September 1991, the Board of Directors adopted a retirement plan for
outside directors. Under the plan each outside director who has completed five
or more years of service is eligible to receive, at the later of the attainment
of age 62 or when he or she ceases to serve on the Board, an annual benefit
equal to the amount of the director's basic annual retainer for the year the
director ceases to serve on the Board, payable monthly for a period equal to
the number of months the individual has served as an outside director. No death
benefit is provided under the plan. For 1994, the basic annual retainer for
each outside director, including the Chairman of the Board and each committee
Chair, was $6,800. This amount is included in the annual retainers for the
Chairman and the committee Chairs discussed above.
5
<PAGE>
SECURITY OWNERSHIP
The following table lists the number of shares of the Common Stock of the
Company beneficially owned as of April 3, 1995 by each director of the Company
and each of the executive officers of the Company named in the Summary
Compensation Table contained in this Proxy Statement. The total number of such
shares beneficially owned as of April 3, 1995 by all directors and executive
officers of the Company as a group is also listed. Shares listed as
beneficially owned include shares as to which the directors and executive
officers have or share the power to vote or the power to dispose. For non-
employee directors, listings include, where appropriate, shares of Common Stock
credited under the Company's Dividend Reinvestment and Common Stock Purchase
Plan ("DRP"). For executive officers, shares listed include, where appropriate,
DRP shares, restricted shares awarded under the Company's 1987 Executive
Incentive Plan and its Long-Term Incentive Plan, and shares credited under the
Employee Savings and Investment Plan for Non-Union Employees as of December 31,
1994.
The table also lists the number of Compensation Units as of March 31, 1995 in
the accounts of the directors who have participated in the deferred retainer
plan described above under the caption "Compensation of Directors." Only non-
employee directors are eligible to participate in the deferred retainer plan.
The value of the Compensation Units at the time they are paid out will be equal
to the market value of the same number of shares of the Company's Common Stock
on the payment date, but the deferred amounts will be paid only in cash.
Compensation Units will not be distributed in the form of Common Stock.
<TABLE>
<CAPTION>
COMPENSATION UNITS
SHARES BENEFICIALLY REPRESENTING
DIRECTORS AND NAMED EXECUTIVE OWNED DEFERRED RETAINER
OFFICERS (AS OF APRIL 3, 1995) (AS OF MARCH 31, 1995)
----------------------------- --------------------- ----------------------
<S> <C> <C>
Charles H. Abbott.............. 2,060 5,709
Charleen M. Chase.............. 1,068 2,522
E. James Dufour................ 4,505 6,290
David T. Flanagan.............. 14,467 --
Robert H. Gardiner............. 1,000 2,052
David M. Jagger................ 1,000 4,643
Charles E. Monty............... 1,837 4,319
Peter J. Moynihan.............. 1,037 --
Carlton D. Reed, Jr. .......... 3,075 13,237
Robert H. Reny................. 600 5,923
Kathryn M. Weare............... 571 1,687
Richard A. Crabtree............ 10,117 --
David E. Marsh................. 7,311 --
Arthur W. Adelberg............. 7,474 --
Gerald C. Poulin............... 6,199 --
All directors and executive
officers as a group (including
persons listed above)......... 70,384 46,382
</TABLE>
The number of shares of Common Stock of the Company beneficially owned as of
April 3, 1995 by each of the directors and named executive officers, and the
aggregate number of such shares beneficially owned as of that date by all of
the directors and executive officers of the Company as a group, constituted
less than one percent of the total shares of that class then outstanding. As of
April 3, 1995, Mr. Abbott's spouse held sole voting and investment power over
700 shares of the total number of shares listed for Mr. Abbott and all shares
listed for Ms. Chase were held jointly. Of the shares listed for Mr. Crabtree
and Mr. Poulin, 2,016 and 201 shares, respectively, were held jointly as of
that date. The total number of shares held jointly for all directors and
executive officers as a group as of April 3, 1995 was 3,285 shares. The shares
listed for Mr. Crabtree also include 151 shares held by his spouse as
custodian. No director or officer owned as of April 3, 1995 any shares of 6%
Preferred Stock or of any other class of the Company's equity securities.
6
<PAGE>
As of April 3, 1995, there was no person who was known to be the beneficial
owner of more than five percent of the Common Stock and the 6% Preferred Stock
of the Company in the aggregate. Christine M. Nyhan, trustee, 1825 Spindrift
Lane, La Jolla, California 92037, owned of record 1,675 shares of the Company's
6% Preferred Stock. The outstanding shares of Common Stock and 6% Preferred
Stock will vote together as a single class at the meeting. Shares held by
Christine M. Nyhan, trustee, represent approximately .05 percent of the
combined voting power of Common Stock and 6% Preferred Stock and approximately
29.31 percent of the voting power of the 6% Preferred Stock.
EXECUTIVE COMPENSATION
The following Summary Compensation Table presents information on compensation
to David T. Flanagan for the year during which Mr. Flanagan has held the
position of President and Chief Executive Officer and to other executive
officers of the Company for 1992, 1993 and 1994.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
-------------------- ------------
NAME RESTRICTED
AND STOCK ALL OTHER
PRINCIPAL AWARD(S) COMPENSATION
POSITION YEAR SALARY ($) BONUS ($) ($)(2) ($)(3)
--------- ---- ---------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
David T. Flanagan.......... 1994 231,666.64 0 0 4,944.80
President and Chief Execu-
tive Officer(1)
Richard A. Crabtree........ 1994 153,400.08 12,200.00 0 4,812.94
Vice President, 1993 151,783.36 6,208.77 8,150.63 4,578.40
Retail Operations 1992 147,849.92 5,420.63 8,213.01 4,425.00
David E. Marsh............. 1994 148,800.00 0 0 4,728.86
Vice President, 1993 126,016.72 5,152.34 6,759.38 3,795.09
Corporate Services, and 1992 122,700.00 4,498.20 6,804.38 3,672.00
Chief Financial Officer
Arthur W. Adelberg......... 1994 148,800.00 0 0 4,675.32
Vice President, 1993 125,866.72 5,152.34 6,759.38 3,790.28
Law and Power Supply 1992 122,600.00 4,498.20 6,804.38 3,672.00
Gerald C. Poulin........... 1994 121,175.00 0 0 3,635.25
Vice President, 1993 105,399.96 3,125.24 4,095.00 3,150.00
Generation and 1992 101,750.00 2,661.75 4,058.76 3,042.00
Technical Support
</TABLE>
- --------
(1) Mr. Flanagan was elected President and Chief Executive Officer effective
January 1, 1994.
(2) At December 31, 1994, the number of shares and value of the aggregate
restricted stock holdings of each of the named executive officers were as
follows: Mr. Flanagan, 10,805 shares and $146,548.21; Mr. Crabtree, 5,431
shares and $73,660.65; Mr. Marsh, 5,137 shares and $69,673.13; Mr. Adelberg,
5,143 shares and $69,754.51; and Mr. Poulin, 2,696 shares and $36,565.85. The
aggregate restricted stock holdings listed for each of the named executive
officers include contingent grants of shares of the Company's Common Stock
under the Company's Long-Term Incentive Plan ("LTIP") for each of the 3-year
performance periods beginning January 1, 1993 and January 1, 1994,
respectively. The vesting of these shares is subject to attaining a performance
objective that is designed to increase value to shareholders over the longer
term. Of the aggregate number of shares of restricted stock, the shares
contingently granted to the named executive officers under the LTIP and their
value as of December 31, 1994 are as follows: Mr. Flanagan, 9,420 shares and
$127,763.46; Mr. Crabtree, 4,212 shares and $57,127.36; Mr. Marsh, 4,212 shares
and $57,127.36; Mr. Adelberg, 4,212 shares and $57,127.36; and Mr. Poulin,
2,089 shares and $28,333.11. The performance
7
<PAGE>
restricted shares of the Company's Common Stock granted to the named executive
officers for the 3-year performance period beginning January 1, 1994 are set
forth in the table under the caption "LONG-TERM INCENTIVE PLAN--AWARDS FOR LAST
FISCAL YEAR." Dividends on the performance restricted shares under the LTIP are
earned at the same rate as dividends on the unrestricted Common Stock of the
Company and are reinvested in additional performance restricted shares during
the performance period until any payout. The balance of the aggregate
restricted stock holdings represents awards under the Company's 1987 Executive
Incentive Plan ("EIP"). Dividends on shares of restricted stock granted under
the EIP are earned at the same rate as dividends on the unrestricted Common
Stock of the Company and are paid either during the 3-year restriction period
applicable to these shares or at the end of the restriction period.
(3) For 1994, amounts of All Other Compensation include (i) matching
contributions by the Company to the Employee Savings and Investment Plan for
Non-Union Employees in the amount of $4,500 for Mr. Flanagan, $4,500 for Mr.
Crabtree, $4,464 for Mr. Marsh, $4,464.02 for Mr. Adelberg, and $3,635.25 for
Mr. Poulin; and (ii) the value of term life insurance premiums paid under
universal life insurance policies in the amount of $444.80 for Mr. Flanagan,
$312.94 for Mr. Crabtree, $264.86 for Mr. Marsh, and $211.30 for Mr. Adelberg.
The Company has purchased universal life insurance policies for Mr. Flanagan,
Mr. Crabtree, Mr. Marsh and Mr. Adelberg, who have no immediate right to
receive the cash surrender value of the policies and may never have any right
to receive the cash surrender value. The respective interests of these four
executive officers in the cash surrender value of the policies will vest only
if certain conditions are first satisfied. If an executive officer's interest
in the cash surrender value vests, the retirement benefits payable to the
executive officer by the Company under its Supplemental Executive Retirement
Plan (the "SERP"), a defined benefit retirement income plan, will be reduced
dollar for dollar by the amount of the cash surrender value of the policy at
the time it vests. The premium paid on each of these policies is designed to
produce a cash surrender value which is equal to, but which may be less than,
the benefits payable under the SERP.
LONG-TERM INCENTIVE PLAN--AWARDS FOR LAST FISCAL YEAR
<TABLE>
<CAPTION>
NUMBER OF PERFORMANCE ESTIMATED FUTURE PAYOUTS UNDER
PERFORMANCE PERIOD UNTIL NON-STOCK PRICE-BASED PLANS(2)
RESTRICTED MATURATION --------------------------------
NAME SHARES(1) OR PAYOUT THRESHOLD(#) TARGET(#) MAXIMUM(#)
- ---- ----------- ------------ ------------ --------- ----------
<S> <C> <C> <C> <C> <C>
David T. Flanagan... 6,797 3 years 0 6,797 10,195
Richard A. Crabtree. 2,394 3 years 0 2,394 3,591
David E. Marsh...... 2,394 3 years 0 2,394 3,591
Arthur W. Adelberg.. 2,394 3 years 0 2,394 3,591
Gerald C. Poulin.... 1,976 3 years 0 1,976 2,964
</TABLE>
- --------
(1) Awards are contingent grants of shares of performance restricted Common
Stock of the Company. Dividends on these shares are reinvested in additional
shares of performance restricted Common Stock during the performance period
until any payout.
(2) At the end of the 3-year performance period, the number of shares,
including shares resulting from dividend reinvestment, actually paid out will
be based on the average percentage change over the performance period in the
Company's total shareholder return (stock price plus dividends) as compared
with the 3-year average percentage change in the total shareholder return of
the 100 other utilities against which the Company's performance is measured in
the performance graph in the Proxy Statement for the 1994 Annual Meeting. The
number of shares listed as estimated threshold, target and maximum payouts do
not reflect the addition of shares resulting from dividend reinvestment or the
subtraction of shares necessary to satisfy tax withholding obligations.
Regardless of the Company's performance against the peer group of utilities, no
award payout will be made for a performance period during which the dividend on
the Company's Common Stock has been reduced by action of the Company's Board of
Directors declaring a reduced dividend. In that event, the Compensation and
Benefits Committee of the Board of Directors is given the discretion under the
Long-Term Incentive Plan to determine whether and to what extent to defer award
payouts. Any award payouts will be distributed in the form of unrestricted
Common Stock of the Company.
8
<PAGE>
PENSION PLAN TABLES AND EMPLOYMENT ARRANGEMENTS
BASIC PENSION PLAN
The Company makes payments to the Retirement Income Plan for Non-Union
Employees (the "Basic Pension Plan") for virtually all full-time non-union
employees of the Company, including the executive officers. Estimated annual
retirement benefits payable by the Company under the Basic Pension Plan,
assuming retirement on December 31, 1994 at age 65, for average salary levels
and credited years of service specified in the following Basic Pension Plan
Table are as set forth in the Table.
<TABLE>
<CAPTION>
AVERAGE ANNUAL SALARY FOR YEARS OF SERVICE
5 HIGHEST CONSECUTIVE YEARS ---------------------------------------
PRECEDING RETIREMENT 15 20 25 30 35
--------------------------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
$150,000............................... $35,235 $46,998 $59,848 $70,547 $73,307
175,000............................... 38,910 52,757 66,661 80,574 86,072
200,000............................... 44,812 60,832 76,841 92,849 99,243
225,000............................... 48,690 66,079 83,468 100,927 107,953
250,000............................... 48,690 66,079 83,468 100,927 107,953
275,000............................... 48,690 66,079 83,468 100,927 107,953
300,000............................... 48,690 66,079 83,468 100,927 107,953
325,000............................... 48,690 66,079 83,468 100,927 107,953
350,000............................... 48,690 66,079 83,468 100,927 107,953
</TABLE>
For the executive officers named in the Summary Compensation Table other than
Mr. Flanagan and Mr. Crabtree, compensation covered by the Basic Pension Plan
consists of base salary, including base salary shown in the Salary column of
that Table. Because the amount of compensation that could be taken into account
in determining retirement benefits under the Basic Pension Plan was limited by
federal tax law to $150,000 in 1994, the 1994 covered compensation under the
Basic Pension Plan for Mr. Flanagan and Mr. Crabtree was limited to that amount
of their respective base salaries. Messrs. Flanagan, Crabtree, Marsh, Adelberg
and Poulin have been credited with 9, 22, 20, 8 and 23 years of service,
respectively. Benefits listed in the Basic Pension Plan Table are payable as a
single life annuity and reflect an offset for estimated Social Security
benefits payable upon attainment of age 65.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
The Company maintains a Supplemental Executive Retirement Plan (the "SERP")
that provides supplemental retirement income to selected executive officers of
the Company. Estimated annual retirement benefits payable by the Company under
the SERP, assuming retirement on December 31, 1994 at age 65, for average
compensation levels and credited years of service specified in the following
SERP Table are as set forth in the Table.
<TABLE>
<CAPTION>
AVERAGE ANNUAL YEARS OF SERVICE
COMPENSATION ---------------------------------------
FOR 3 HIGHEST YEARS 15 20 25 30 35
------------------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
$150,000................................ $23,265 $31,002 $37,652 $26,953 $24,193
175,000................................ 29,340 38,243 47,089 33,176 27,678
200,000................................ 33,188 43,168 53,159 37,151 30,757
225,000................................ 39,060 50,921 62,782 45,323 38,297
250,000................................ 48,810 63,921 79,032 61,573 54,547
275,000................................ 58,560 76,921 95,282 77,823 70,797
300,000................................ 68,310 89,921 111,532 94,073 87,047
325,000................................ 78,060 102,921 127,782 110,323 103,297
350,000................................ 87,810 115,921 144,032 126,573 119,547
</TABLE>
For the executive officers named in the Summary Compensation Table except Mr.
Poulin, who does not participate in the SERP, compensation covered by the SERP
consists of base salary and incentive awards received under the Company's 1987
Executive Incentive Plan, including amounts shown in the Salary, Bonus
9
<PAGE>
and Restricted Stock Awards columns of that Table other than the 1994 amount
shown for Mr. Crabtree in the Bonus column. Messrs. Flanagan, Crabtree, Marsh
and Adelberg have been credited with 9, 22, 20 and 8 years of service,
respectively. Years of credited service up to 25 years are taken into account
in computing retirement benefits under the SERP. Benefits listed in the SERP
Table reflect the deduction of benefits payable under the Basic Pension Plan
upon attainment of age 65, as shown in the Basic Pension Plan Table. SERP
benefits payable by the Company to Messrs. Flanagan, Crabtree, Marsh and
Adelberg will be further reduced, dollar for dollar, by the amount of the cash
surrender value of universal life insurance policies, which have been purchased
for these four executive officers, at such time as their respective interests
in the cash surrender value may vest.
EMPLOYMENT AND TERMINATION OF EMPLOYMENT ARRANGEMENTS
Effective December 9, 1994, the Company entered into separate employment
agreements with Messrs. Crabtree, Marsh, Adelberg and Poulin. The agreements
are intended to encourage these executive officers to continue their employment
so that the Company will have the continuing benefit of their services during a
period of transition in its business due to the challenges of operating in an
increasingly competitive environment and in the event of a change of control of
the Company.
The agreements provide for a specified minimum base salary and for continued
participation in benefit plans in accordance with the provisions of those plans
while the executive officers are employed by the Company. Under these
agreements, which do not restrict in any way the ability of the Board of
Directors to terminate the employment of these executive officers as provided
by Maine law, the executive officers are required to devote substantially all
of their time and attention to their respective primary job responsibilities
described in the separate agreements.
The agreements also provide for severance benefits for certain terminations
of employment. If, within 36 months following a change of control of the
Company, the executive officer's employment is terminated by the Company
without cause or by the executive officer within 12 months of an event
constituting a constructive discharge, the Company will provide the following
severance benefits to the executive officer: (1) a lump sum amount equal to
2.99 times the annual average of his base salary and any incentive compensation
over the five years before the change of control; (2) the continuation of the
minimum level of coverage available under the Company's group medical, life,
accident and disability plans for three years; (3) three years of credit under
any pension plan in which the executive officer participates; and (4) limited
outplacement services. If no change of control has occurred and the executive
officer's employment is terminated by the Company without cause or by the
executive officer within six months of a constructive discharge, the executive
officer will be entitled to receive severance benefits equal to one time his
annual base salary in effect at the time of termination, in 12 monthly
installments. In such a case, the last six monthly payments will be reduced by
an amount equal to any salary or commissions earned elsewhere by the executive
officer.
For one year after the termination of employment for any reason other than a
change of control, the executive officer is prohibited from taking any action
intended to advance the interests of a competitor. After the executive
officer's employment terminates, he is required to use his best efforts to
comply with requests that he cooperate with the Company in proceedings
affecting the Company and is also required to maintain the confidentiality of
the Company's information. The agreements provide that the executive officer
will no longer be entitled to monthly severance payments if he fails to comply
with any of these requirements.
Each agreement continues in effect until December 31, 1997 and is
automatically extended for one year on each December 31 unless either the
Company or the executive officer gives prior notice of an intention not to
extend the agreement. The agreements provide for one final three-year extension
after a change of control.
10
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Compensation policies that are generally applied by the Compensation and
Benefits Committee of the Board of Directors of the Company (the "Committee")
to the Company's executive officers reflect two fundamental principles that
apply to every employee of the Company. These principles are (i) that the
Company strives to offer competitive compensation to attract and retain well-
qualified employees and periodically reviews and adjusts compensation to take
into account individual contributions and performance, and (ii) that part of
every employee's compensation is tied directly to Company performance for the
benefit of its shareholders, customers and employees.
With respect to the executive officers of the Company, the first compensation
principle is implemented by base salary, which is a fixed amount measured
against comparable positions in the electric utility industry that also takes
into account individual performance. The second principle is implemented in
part through short-term incentive compensation, which is a variable amount that
may be paid to the extent certain financial and operating goals established
annually by the Committee are met. A long-term incentive compensation program
for the President and Chief Executive Officer and the other executive officers
named in the Summary Compensation Table in this Proxy Statement, under which
variable incentive compensation may be paid based on Company performance
measured by total shareholder return, also implements the compensation
principle of pay for performance.
BASE SALARY. Base salaries for the executive officers of the Company are
generally measured against median base pay levels for positions with comparable
functional responsibilities at electric utilities with revenues that are
comparable in size to the Company's revenues. Median base pay levels for this
segment of the electric utility market are developed for the Company by a
nationally-recognized independent compensation consultant, based on an annual
study of compensation paid by electric utilities which are members of the
Edison Electric Institute ("EEI"), a trade association for investor-owned
electric utilities of which the Company is also a member. Substantially all of
the electric utilities in the comparison group are represented in the EEI 100
Index used in the performance graph in this Proxy Statement. The study of EEI
member utilities takes into account similarities in functional responsibilities
of executive officer positions and actual base salaries earned by electric
utility officers in functionally equivalent positions. A recommended salary
grade consisting of a range of salaries for each position is then developed for
the Company by the consultant, using the median market salary as the midpoint
of the range.
To preserve the Company's ability to attract and retain highly-qualified
persons in key executive management positions, the Committee annually reviews
and evaluates the salary study information compiled and analyzed each year by
the independent compensation consultant, which served as an adviser to the
Committee in 1994. In addition, the Committee annually reviews recommended
salary grades with their corresponding salary ranges for executive officer
positions. The Committee periodically takes actions on base salaries based on
this information and the recommendations of its adviser, using the median
market salary for comparable positions as a benchmark for developing salary
recommendations while taking into account the financial position of the Company
and economic conditions in Maine.
While the median market salary for comparable positions is the standard
against which base salary for the Company's executive officers is generally
measured and a salary range is established for each of the Company's executive
officer positions and not for individual officers, salary adjustments may be
made by the Committee to recognize individual contributions and performance. In
addition, the Committee may make other adjustments to base salary in connection
with an increase or a change in the scope of responsibilities of an executive
officer's position.
As a result of the retirement in late 1993 of an executive officer with major
responsibilities in the areas of power supply, power production and engineering
and of the consolidation of the Company's operations and its reorganization
along functional lines during the first quarter of 1994, some of the executive
officers assumed additional or different duties. For this reason, the
Committee's compensation consultant was
11
<PAGE>
retained to evaluate the functional responsibilities of the restructured
positions against positions with equivalent functional responsibilities in the
electric utility market segment noted and to develop recommendations concerning
salary grades for the restructured positions. Pending the compensation
consultant's review, the Committee supported interim increases in compensation
for two executive officers listed in the Summary Compensation Table to take
into account their assumption of significant additional duties, and in the case
of one of these executive officers, also to narrow the competitive gap between
the salary for his position before he assumed additional duties and the market
base pay level for a similar position.
After the compensation consultant completed the comparative study of the
restructured positions and equivalent positions in the market, the Committee,
after considering the market data, the compensation consultant's
recommendations and the business circumstances of the Company, endorsed an
increase of one grade for certain executive officer positions, including
positions held by three executive officers named in the Summary Compensation
Table. The Committee believes that these grade changes appropriately recognize
the expanded scope of responsibilities of these executive officer positions,
the enhanced importance of specific existing duties in the increasingly
competitive business environment in which the Company operates, and salary
ranges for equivalent positions in the market. Consistent with prior practice
of adjusting salaries to correspond to a grade adjustment so that base salaries
for the Company's executive officers continue to be within a competitive range
of median market salaries for comparable positions, the Committee also
supported a salary increase for the executive officers holding these positions.
In recognition of the contributions of another executive officer named in the
Summary Compensation Table whose base salary is aligned with the median market
salary for his position, the Committee supported a bonus payment in lieu of any
salary adjustment for this executive officer.
In 1994, the Committee also adjusted the range of salaries within each salary
grade by 3 percent for executive officer positions, including the position of
President and Chief Executive Officer, to take into account the electric
utility market's planned upward adjustment of salary ranges for top management
positions for that year. In addition, the Committee recommended salary
increases of up to 3 percent for certain other executive officers, except the
President and Chief Executive Officer, to move the salaries for their positions
closer to the median market base pay levels at which base salaries for the
Company's executive officers are targeted. The Committee believes that in view
of the average 11 percent disparity in 1993 between base salaries of the
Company's executive officers other than the President and Chief Executive
Officer and higher median market salaries, these increases will help to ensure
the retention of persons in key executive management positions by placing them
within range of the market for their positions.
As a result of these actions, in 1994 the base salaries of the Company's
executive officers were within a competitive range of, but on average lower
than, the median base salaries of executive officers with comparable functional
responsibilities at electric utilities with comparable revenues. Specifically,
the base salaries of the executive officers were, on average, approximately 8
percent below the median base salaries for comparable positions in the electric
utility market segment indicated. In acknowledgment of the economic climate and
the financial position of the Company, the Committee did not grant any
increases in the base salaries of the Company's executive officers in 1994 to
reflect individual contributions and performance.
In considering Mr. Flanagan's base salary when he assumed his duties as
President and Chief Executive Officer of the Company effective January 1, 1994,
the Committee initially reviewed usual market information and additional
information provided by its compensation consultant, including New England
electric utility market information. Although the Committee views median market
salaries for comparable executive officer positions as a useful benchmark for
developing and maintaining competitive salaries for the Company's executive
officers, the Committee believed that the Company's overall financial position
and outlook in early 1994 resulting from inadequate recovery in a rate
proceeding, credit downgrades, weak sales, the need for cost reductions, and
competitive and economic pressures warranted a substantial departure from the
practice
12
<PAGE>
of using competitive market data in establishing the base salary of the new
President and Chief Executive Officer of the Company. Accordingly, the
Committee fixed Mr. Flanagan's 1994 base salary at a level that is
approximately 30 percent below the median market salary for chief executive
officers with equivalent responsibilities at electric utilities with comparable
revenues and for chief executive officers at regional electric utilities.
SHORT-TERM INCENTIVE COMPENSATION. In 1994, the Company's short-term
incentive compensation program for its executive officers, including the
President and Chief Executive Officer, was tied to both the Company's short-
term financial performance and the Company's achievement of certain operating
goals for the benefit of its shareholders, customers and employees. Since
approval in 1988 by the shareholders of the Company of the short-term incentive
compensation program for the Company's executive officers in the form of the
1987 Executive Incentive Plan (the "Plan"), the Committee has adopted specific
and measurable performance goals annually.
The performance goals set by the Committee under the Plan take into
consideration the Company's annual and longer-term planning and measurement
processes evidenced by its Corporate Goals and Objectives, which are adopted
annually by the Board of Directors. In this way, the incentive compensation
program under the Plan, as administered by the Committee, supports the
Company's financial and operating goals.
For 1994, the Committee adopted three goals focusing on corporate
performance, as well as individual goals for the executive officers and other
participants in the Plan. The goals directed towards corporate performance were
as follows: (1) achieving investment grade ratings on the Company's senior
secured debt from the three major credit rating agencies; (2) attaining a
targeted three-year average differential between the Company's price of
electricity and the higher prices of a peer group of New England electric
utilities; and (3) assuring that customer expectations are met, as evidenced by
improvements in customer perceptions of value received from the Company
measured by market surveys. Individual goals were key components of corporate
strategy and were designed to support the Company's 1994 corporate Goals and
Objectives. The three corporate goals and the individual goals were weighted
equally, so that Plan participants could have received up to 25 percent of the
maximum possible incentive award under each of these four sets of goals.
In addition, the Committee developed an earnings goal for 1994, with
performance measured in terms of return on equity, that served as a keystone to
awards of incentive compensation under the Plan for that year. Under this
approach, no incentive compensation is paid if a threshold return on equity is
not achieved, regardless of performance results under the three corporate goals
and the individual goals. Because the threshold return on equity was not
attained in 1994 as a result of restructuring charges taken by the Company in
connection with a stipulation approved by the Maine Public Utilities Commission
settling issues in the Company's alternative rate plan proceeding and other
factors, there were no awards of incentive compensation under any of the four
sets of goals in effect for that year.
In 1994, the potential maximum award payout to the President and Chief
Executive Officer was 30 percent of base salary and ranged from 15 percent to
20 percent of base salary for the other executive officers depending on their
respective positions. The Committee believes that these levels of potential
awards can help to close the competitive gap that exists between the base
salaries of the Company's executive officers and median market salaries while
advancing the compensation principle of pay for performance by placing a larger
portion of total pay at risk. The larger potential award payout for the
President and Chief Executive Officer takes into account the responsibilities
of that position and the effect of the decisions of the President and Chief
Executive Officer on the Company's business. Potential awards for 1994 based on
attainment of all goals at specified levels of performance would have
represented the same proportions of total short-term incentive compensation for
all executive officers, including the President and Chief Executive Officer.
For executive officers who participate in both the Plan and the Company's
Long-Term Incentive Plan ("LTIP"), incentive awards under the Plan would have
been payable in cash. Other participants in the Plan
13
<PAGE>
could have elected to receive awards in the form of cash or a combination of
cash and Common Stock of the Company restricted for a three-year period from
the date of the award. The Committee believes that incentive awards in the form
of stock are more appropriately made under the LTIP for executive officers who
participate in both the Plan and the LTIP since stock compensation under the
LTIP is intended to reflect the efforts of the executive officers to enhance
shareholder value over the longer term.
LONG-TERM INCENTIVE COMPENSATION. On the recommendation of the Committee, the
Board of Directors of the Company adopted the Long-Term Incentive Plan
("LTIP"), in which the President and Chief Executive Officer and the other
executive officers named in the Summary Compensation Table participate. The
LTIP is intended to focus the attention of this group of executive officers
more sharply on a performance objective that is designed to increase value to
shareholders over the longer term. In addition, the LTIP is intended to provide
compensation opportunities that are competitive with those offered by other
electric utilities, as recommended in the final report of the auditors in
connection with the management audit of the Company initiated by the Maine
Public Utilities Commission. The LTIP was approved by the Company's
shareholders at the 1994 Annual Meeting.
The LTIP seeks to accomplish these objectives by providing for contingent
grants of performance restricted shares of the Common Stock of the Company for
each three-year performance period. For the performance period beginning
January 1, 1994, Mr. Flanagan was granted 6,797 shares of performance
restricted Common Stock, and the other participating executive officers were
granted lesser amounts, as shown in the Long-Term Incentive Plan Awards Table
in this Proxy Statement.
The number of shares contingently granted to each of these executive
officers, including the President and Chief Executive Officer, reflects a fixed
percentage of the midpoint of the salary range for that executive officer's
position as of the beginning of the performance period. The percentage applied
to midpoint represents an average percentage of median base salary awarded as
long-term incentive compensation at electric utilities included in the EEI
compensation study. Unlike median base salaries, which vary by size of utility
revenues, average levels of long-term incentive compensation do not vary across
the total sample of utilities in the EEI study. For this reason, the reference
group is the group of all electric utilities with long-term incentive
compensation programs rather than a segment of this market. Substantially all
of the electric utilities in the comparison group are represented in the EEI
100 Index used in the performance graph in this Proxy Statement. Since the
midpoint of the salary ranges for the Company's executive officers is generally
equivalent to the median market salaries for their respective positions, the
level of contingent grants under the LTIP is competitive with market levels of
long-term incentive compensation.
During the three-year performance period that began on January 1, 1994, the
shares of performance restricted stock that were contingently granted for that
period, as well as additional shares resulting from the reinvestment of
dividends on the shares granted, will remain completely at risk and subject to
forfeiture to the extent performance results are not achieved. At the end of
the performance period, the number of shares, including shares resulting from
dividend reinvestment, actually paid out will be based on the average
percentage change over the performance period in the Company's total
shareholder return (stock price plus dividends) as ranked against the three-
year average percentage change in the total shareholder return of the 100 other
utilities in the EEI 100 Index against which the Company's performance was
measured in the performance graph in the Proxy Statement for the 1994 Annual
Meeting. Performance demonstrating higher returns to shareholders will yield
payouts of a larger number of the shares contingently granted and the shares
resulting from dividend reinvestment, with performance above the targeted level
designed to result in a payout of a supplemental number of shares. No shares
will be paid out for performance resulting in a ranking in the lowest quarter.
Regardless of the Company's performance against the peer group of utilities, no
award payout will be made for a performance period during which the dividend on
the Company's Common Stock has been reduced by action of the Company's Board of
Directors. In that event, the Committee may exercise its discretion under the
LTIP to determine whether and to what extent to defer award payouts. Any award
payouts will be distributed in the form of unrestricted Common Stock of the
Company.
14
<PAGE>
Together with the 1987 Executive Incentive Plan, the LTIP places a portion of
total pay for executive officers at risk by conditioning awards of incentive
compensation on achievement of performance results. By conditioning awards of
short-term incentive compensation on attainment of specific financial and
operating goals, the Company's short-term incentive compensation program
focuses the attention of the Company's executive officers more keenly on the
interests of the Company's shareholders, customers and employees. Likewise, by
providing a close link between shareholder returns and compensation
opportunities and delivering pay only if and to the extent performance results
are achieved, the LTIP will serve to sharpen the long-term focus on increasing
shareholder value.
OTHER COMPENSATION POLICIES. For 1994, amounts of All Other Compensation in
the Summary Compensation Table include matching contributions by the Company to
the Employee Savings and Investment Plan for Non-Union Employees, which is
available to all non-union employees of the Company on the same terms, in the
amount of $4,500 for Mr. Flanagan and in lesser amounts for the other executive
officers of the Company. The amount of matching contributions made for the
Company's non-union employees, including its executive officers, participating
in the plan is equal to 60 percent of the first 5 percent of salary invested in
the plan by an employee, up to a specified maximum salary for the executive
officers.
Compensation reported for 1994 also includes the value of term life insurance
premiums paid under universal life insurance policies in the amount of $444.80
for Mr. Flanagan and in lesser amounts for certain other executive officers.
The Company has purchased universal life insurance policies for Mr. Flanagan,
Mr. Crabtree, Mr. Marsh and Mr. Adelberg, who have no immediate right to
receive the cash surrender value of the policies and may never have any right
to receive the cash surrender value. The respective interests of these four
executive officers in the cash surrender value of the policies will vest only
if certain conditions are first satisfied. If an executive officer's interest
in the cash surrender value vests, the retirement benefits payable to the
executive officer by the Company under its Supplemental Executive Retirement
Plan (the "SERP"), a defined benefit retirement income plan, will be reduced
dollar for dollar by the amount of the cash surrender value of the policy at
the time it vests. The premium paid on each of these policies is designed to
produce a cash surrender value which is equal to, but which may be less than,
the benefits payable under the SERP.
Effective January 1, 1994, a provision of federal tax law denies a tax
deduction to any publicly-held company for compensation paid to any executive
officer named in the Summary Compensation Table of that company's proxy
statement that exceeds one million dollars in a taxable year, except for
certain performance-based compensation. Compensation paid to the executive
officers of the Company named in the Summary Compensation Table will continue
to be deductible by the Company since all such amounts will be less than the
one million dollar limitation.The Committee has not adopted a policy with
respect to these compensation limits because compensation paid to any named
executive officer will not exceed the one million dollar limit in any year.
Compensation and Benefits Committee
Robert H. Reny (Chair)
Charles H. Abbott
E. James Dufour
Robert H. Gardiner
David M. Jagger
15
<PAGE>
SHAREHOLDER RETURN COMPARISON
The graph below compares the cumulative total shareholder return on the
Common Stock of the Company with the cumulative total return on the S&P 500
Index and the Edison Electric Institute Index of 100 other investor-owned
electric utilities ("EEI 100 Index") at December 31 for each of the last five
fiscal years (assuming the investment of $100 in the Company's Common Stock,
the S&P 500 Index and the EEI 100 Index on December 31, 1989, and the
reinvestment of all dividends).
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
DECEMBER 31
-----------------------------
1989 1990 1991 1992 1993 1994
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Central Maine Power Company....................... $100 $ 96 $131 $144 $ 98 $ 95
S&P 500 Index..................................... $100 $ 97 $126 $136 $150 $152
EEI 100 Index..................................... $100 $101 $131 $141 $156 $138
</TABLE>
The foregoing Compensation Committee Report on Executive Compensation and
Shareholder Return Comparison (including but not limited to the graph) will not
be deemed incorporated by reference by any general statement incorporating or
purporting to incorporate by reference this Proxy Statement into any filing
under the Securities Act of 1933 or under the Securities Exchange Act of 1934,
or any other filing with the Securities and Exchange Commission, whether such
statement was made prior to, or is made contemporaneously with or after, the
date of this Proxy Statement.
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PROPOSAL 2
APPROVAL OF
INDEPENDENT PUBLIC ACCOUNTANTS
At the regular meeting held on February 15, 1995, the Board of Directors of
the Company acted to appoint Coopers & Lybrand L.L.P., Boston, Massachusetts,
as auditors for the Company for the year 1995. At the Annual Meeting it is the
intention of the persons named in the proxy enclosed herewith to vote in favor
of the approval of such action by the Board of Directors. Representatives of
Coopers & Lybrand L.L.P. will attend the meeting and, if they so desire, make a
statement; they will also respond to appropriate questions.
The appointment of Coopers & Lybrand L.L.P. by the Board of Directors is
based on the recommendation of the Audit Committee, which historically has
reviewed both the audit scope and the estimated audit fees and related services
for the coming year. The Audit Committee considered the appointment of auditors
for the Company for 1995 at a meeting held on February 14, 1995. The
affirmative vote of a majority of the votes cast by the holders of the
Company's Common Stock and 6% Preferred Stock, voting as a single class,
entitled to vote at the Annual Meeting, is sought for approval of the
appointment.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 2.
SHAREHOLDER PROPOSAL
Mr. Peter L. Murray, 89 West Street, Portland, Maine 04102, a shareholder of
the Company who is the beneficial owner of 2,637 shares of the Company's Common
Stock, has submitted the following proposed resolution with a supporting
statement, and has informed the Company that he or his representative intends
to present the proposed resolution at the 1995 Annual Meeting of the Company's
Shareholders.
PROPOSED RESOLUTION. RESOLVED: That the shareholders recommend to the Board
of Directors that the share purchase rights issued to the shareholders under
the "Shareholder Rights Plan" adopted by the Board of Directors on September
28, 1994 be redeemed and the Shareholder Rights Plan be terminated.
SHAREHOLDER'S SUPPORTING STATEMENT. The statement submitted by the
shareholder in support of the proposed resolution is as follows:
On September 28, 1994, without prior notice to or participation by the
shareholders, the Board of Directors adopted a "Shareholder Rights Plan." What
our Board of Directors refers to as a "Shareholder Rights Plan" is known in the
industry as a "poison pill." Under the Company's "poison pill" special rights
have been issued to the shareholders. These rights are worthless except in a
hostile takeover attempt. However, if someone tries to buy the Company from the
shareholders, the Directors can trigger the pill, giving the existing
shareholders the right to buy new shares and confronting the would-be purchaser
with immediate and intolerable dilution of his investment. The effect of this
"poison pill" arrangement is to raise a very serious hurdle to any potential
acquirer of a controlling block of stock in the Company and effectively make it
possible for a person to acquire control of the Company only with the approval
of the Company's Board of Directors.
Although the ostensible purpose of this arrangement is to protect minority
shareholders if a third party acquires control of the Company, its actual
effect can be to entrench the Company's management and Board of Directors
against efforts to unseat them by stock acquisition. Although it is labeled a
"Shareholder Rights Plan," the poison pill reduces the options available to us,
the Company's present shareholders, by reducing the possibility of any sale of
our stock to an outside acquirer of the Company regardless of how attractive
the offer might be to us. Academic studies show that poison pills depress share
value. Since they limit the right of shareholders to sell their own property at
a price they consider favorable, they must by definition reduce the value of
the stock.
Protection of the interests of minority shareholders can be accomplished by
other less burdensome means such as a "fair price amendment." Certainly any
mechanism which restricts the practical marketability of
17
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our stock in the Company and potentially jeopardizes the liquidity of our
investment should not be enacted by the Board of Directors, but should be
subject to the free and informed vote of all of the Company's shareholders. If
a poison pill is really in the best interest of shareholders, then we can
freely vote to retain it. If it is not, we, by our vote, can recommend to our
Board of Directors to terminate it.
BOARD OF DIRECTORS STATEMENT OPPOSING THE RESOLUTION. The Board of Directors
believes that the Shareholder Rights Plan preserves the long-term value of the
Company for its shareholders in the event of a takeover and therefore that the
Rights Plan is in the best interests of its shareholders. The Board adopted the
Rights Plan to ensure that all of the Company's shareholders are treated fairly
and equally and receive the full long-term value of their investment in the
Company in the event a prospective acquirer tries to gain control of the
Company by using coercive takeover tactics. Some of the takeover tactics used
by a prospective acquirer to gain control of a company at as low a cost as
possible do not treat all shareholders fairly and equally. For example, an
acquirer sometimes is willing to pay a premium price to get just enough shares
to gain control of a company and then will acquire the rest of the shares at a
lower price. This practice does not treat all shareholders equally, and it
pressures shareholders into selling their shares at a price that is
superficially attractive but that may not represent their full, longer-term
value.
The Rights Plan was put in place to guard against these or other coercive
takeover tactics, not to block acquisition offers that are fair and equitable
for all shareholders. The existence of the Rights Plan encourages prospective
bidders to negotiate with the Board, which is in a stronger position than
individual shareholders to negotiate a price that maximizes value for all of
the Company's shareholders. By creating inducements for a potential acquirer to
negotiate with the Board, the Rights Plan creates an orderly process that
allows the Board sufficient time to evaluate whether a takeover offer is
beneficial to all of the Company's shareholders while retaining the Board's
flexibility to develop other alternatives that may result in greater value for
the Company's shareholders.
The Board of Directors, which is required by law to act in the best interests
of the shareholders, has an obligation to all of the Company's shareholders to
prevent coercive takeover tactics that could deprive the shareholders of a
meaningful choice concerning their investment in the Company. The Board
believes that the Rights Plan provides substantial assistance in fulfilling
that obligation while giving the Board the flexibility that is necessary for it
to develop and consider alternatives that will maximize value for the Company's
shareholders.
The Board believes that shareholder rights plans do not depress the value of
a company's stock, but rather should result in a higher price for the
shareholders in the event of a takeover. At the time the adoption of the Rights
Plan was announced, there was no evidence, based on the market price of the
Company's stock, that it depressed the value of those shares. The Rights Plan
will give the Board the ability to ensure that shareholders do not receive a
reduced value for their shares in the event of an attempt to take over the
Company. With the Rights Plan in place the Board will have the opportunity to
negotiate a price that is higher than the price originally offered by the
potential acquirer or develop other alternatives that maximize value for all
shareholders. The price an acquirer is ultimately willing to pay for a
company's stock can far exceed the initial offer when the acquirer must
negotiate the price with the Board of Directors.
The Board is charged with the responsibility of exercising its independent
judgment in furtherance of the best interests of the Company's shareholders
when evaluating the merits of an acquisition offer. The fact that, unlike most
corporations, ten of the eleven directors of the Company, including the
Chairman of the Board, are non-employee outside directors provides further
assurance of the independence of the Company's Board of Directors and that
maximizing value for the Company's shareholders will be the Board's dominant
concern in any takeover situation.
Holders of the Company's Common Stock and 6% Preferred Stock, present or
represented by proxy, will be entitled to vote on the proposed resolution at
the Annual Meeting. The affirmative vote of a majority of the votes cast at the
meeting by the holders of the Company's Common Stock and 6% Preferred Stock,
voting as a single class, is required for approval of the resolution.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST APPROVAL OF THE RESOLUTION.
18
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DEADLINE FOR SHAREHOLDER PROPOSALS
Proposals of shareholders intended to be presented at the 1996 Annual Meeting
of the Shareholders must be received on or before December 20, 1995, for
inclusion in the proxy materials relating to that meeting. Any such proposals
should be sent to William M. Finn, Secretary and Clerk, Central Maine Power
Company, 83 Edison Drive, Augusta, Maine 04336.
OTHER MATTERS
The accompanying proxy is solicited by and on behalf of the Board of
Directors of Central Maine Power Company for use at the Annual Meeting of the
Shareholders to be held on May 24, 1995 or any adjournments thereof. The cost
of solicitation will be paid by the Company. No solicitation is to be made by
specially engaged employees or other paid solicitors except that Beacon Hill
Partners will solicit shareholders of record and broker nominees on behalf of
the Company, for which it will receive a fee of approximately $4,500, plus
reasonable expenses. Banks, brokerage firms and other custodians, nominees and
fiduciaries will be reimbursed by the Company for reasonable expenses incurred
in sending proxy materials to beneficial owners of the Company's Common Stock
and 6% Preferred Stock. In addition, directors, officers or employees of the
Company may solicit proxies by telephone or in person, the costs of which will
be nominal.
The Board of Directors of the Company does not know of any matter, other than
the matters set forth in this Proxy Statement, to be acted upon at this Annual
Meeting. However, if any other matter shall be properly brought before the
meeting, the proxies will be voted in respect thereof in accordance with the
judgment of the person or persons voting the proxies.
By Order of the Board of Directors
/s/ David T. Flanagan
David T. Flanagan
President and Chief Executive
Officer
Augusta, Maine
April 20, 1995
Again, we call your attention to the enclosed Proxy. We would appreciate
it very much if you would VOTE, DATE, SIGN and RETURN IT PROMPTLY,
regardless of whether you plan to attend the meeting.
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CENTRAL MAINE POWER COMPANY
PROXY SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS OF CENTRAL MAINE POWER COMPANY
(COMMON AND 6% PREFERRED SHAREHOLDERS)
The undersigned hereby appoints Arthur W. Adelberg, Richard A. Crabtree and
David E. Marsh and each of them singly, proxies, with power of substitution, to
represent the undersigned at the Annual Meeting of the Shareholders of Central
Maine Power Company, to be held at 10 A.M., E.D.T., on May 24, 1995, at the
Augusta Civic Center, Augusta, Maine, and at any adjournments thereof; to vote
the number of shares which the undersigned would be entitled to vote if present
in person in such manner as such proxies may determine, all as indicated in the
Notice of the Meeting and Proxy Statement, receipt of which is acknowledged;
and to vote on the following proposals as specified below by the undersigned.
(1) Election of Class II Directors:
[_] VOTE FOR all nominees listed below [_] WITHHOLD AUTHORITY to vote for
(except as marked to the contrary below) all nominees listed below
E. JAMES DUFOUR, DAVID M. JAGGER, CHARLES E. MONTY, ROBERT H. RENY
(INSTRUCTION--TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL
NOMINEE, WRITE THAT NOMINEE'S NAME IN THE SPACE PROVIDED BELOW)
-------------------------------------------------------
(2) Proposal to approve the appointment of Coopers & Lybrand L.L.P. as auditors
for the Company for the year 1995, as set forth in the Proxy Statement:
[_] FOR [_] AGAINST [_] ABSTAIN
(3) Shareholder proposal relating to the termination of the Shareholder Rights
Plan:
[_] FOR [_] AGAINST [_] ABSTAIN
I plan to attend the Annual Meeting: [_] YES [_] NO NUMBER ATTENDING:
-----
PLEASE SIGN AND DATE ON THE OTHER SIDE
<PAGE>
ANNUAL MEETING OF This proxy when properly executed will be voted
in the manner directed herein by the undersigned
CENTRAL MAINE POWER COMPANY shareholder. IN THE ABSENCE OF SPECIFIED DIREC-
TION, THIS PROXY WILL BE VOTED IN FAVOR OF THE
83 EDISON DRIVE ELECTION OF ALL NOMINEES NAMED IN THIS PROXY, IN
AUGUSTA, ME 04336 FAVOR OF PROPOSAL 2 SET FORTH IN THIS PROXY, AND
AGAINST PROPOSAL 3 SET FORTH IN THIS PROXY. The
Please date, sign exactly as proxies are also authorized to vote in their
name(s) appear below and discretion upon such other matters as may prop-
return promptly in the erly come before the meeting or any adjournment
enclosed envelope. thereof.
If signing as attorney,
administrator, executor, guardian,
trustee or as a custodian for a
minor, please add your title as
such. If a corporation, please sign
in full corporate name and indicate
the signer's office. If a partner,
please sign in the partnership's
name.
X
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X
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Dated __________________________ 1995
