<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.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
-------------------------------------------------------------------------
<PAGE>
LOGO CENTRAL MAINE POWER COMPANY
---------------------------
GENERAL OFFICE: 83 EDISON DRIVE, AUGUSTA, MAINE 04336
April 16, 1996
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 22,
1996. 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 III 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 1996; 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 1995, 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 22, 1996
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 22, 1996, 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 III 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 1, 1996 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 16, 1996
<PAGE>
April 16, 1996
CENTRAL MAINE POWER COMPANY
LOGO 83 EDISON DRIVE
AUGUSTA, MAINE 04336
----------------
PROXY STATEMENT
This Proxy 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 22, 1996, at 10:00 A.M. at the Augusta Civic Center, Augusta,
Maine. It is being mailed to the shareholders on or about April 16, 1996.
The Annual Report of the Company for the year ended December 31, 1995,
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 1, 1996 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. Votes withheld from
nominees for director will be counted in determining the total number of votes
cast on the matter and will have the same effect as a vote against the matter.
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 other matters presented
to the shareholders for consideration at the Annual Meeting. 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, but will have no effect on that 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 that
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 that 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 shareholders entitled to vote for directors at such meeting
shall be entitled to cumulate their votes. Any
<PAGE>
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 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 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 proxy will vote to
elect the first four persons listed below to serve as Class III directors for a
three-year term expiring at the 1999 Annual Meeting of the Shareholders.
However, if voting is cumulative, such persons 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 the manner that such persons shall in their
discretion determine, unless other instructions are given in the proxy by the
shareholder executing it. Nominees named in the accompanying 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
eight persons listed below as Class I and Class II directors will continue in
office for terms which expire at the 1997 and 1998 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 III
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 twelve.
On March 16, 1994, the Board of Directors 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. Carlton D. Reed, Jr., who had been a director of the
Company since 1971 and had served as Chairman of the Board of Directors since
January 1, 1991, retired from service on the Board effective December 31, 1995.
On November 20, 1995, the Board elected David M. Jagger, who has been a member
of the Board since 1988, to succeed Mr. Reed as Chairman of the Board effective
January 1, 1996. On the same date, the Board also elected Charles H. Abbott, a
member of the Board since 1988, to the position of Vice Chairman of the Board,
which had previously been vacant, effective January 1, 1996. At its January 17,
1996 meeting, the Board elected Lyndel J. Wishcamper as a Class I director
effective February 1, 1996 to fill the vacancy created by Mr. Reed's
retirement. At its meeting on March 20, 1996, the Board elected William J. Ryan
as a director in Class I effective April 17, 1996. On March 26, 1996, the Board
fixed the number of directors at twelve effective April 17, 1996 and elected
Duane D. Fitzgerald as a member of the Board in Class II, also effective April
17, to fill the vacancy created by the planned April 16, 1996 retirement of
Robert H. Reny, a Class II director since January 1, 1988.
2
<PAGE>
Set forth below is information about each nominee and continuing director.
Each person listed has been serving as a director of the Company, except Mr.
Ryan and Mr. Fitzgerald, whose service as directors is effective as of April
17, 1996. In addition, David T. Flanagan is President and Chief Executive
Officer of the Company, David M. Jagger serves as Chairman of the Board of
Directors, and Charles H. Abbott serves as Vice Chairman of the Board.
<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 III:
Charleen M. Chase (47).................. Executive Director, 1985
Community Concepts,
Inc. (Community action
agency)
David T. Flanagan (48).................. 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
(September 1988 to July
1991); Chairman of the
Board of Directors,
Maine Yankee Atomic
Power Company (a)
Robert H. Gardiner (51)................. President, Maine Public 1992
Broadcasting
Corporation; previously
(1988 to 1992),
President and General
Manager, WCBB (Public
television)
Peter J. Moynihan (52).................. Senior Vice President and 1995
Chief Investment
Officer, UNUM
Corporation (Insurance)
CLASS I:
Charles H. Abbott (60).................. Chairman, Skelton, Tain- 1988
tor & Abbott, P.A. (At-
torneys); Vice Chairman
of the Board of the Com-
pany
William J. Ryan (52).................... Chairman, President and 1996
Chief Executive Officer,
Peoples Heritage Finan-
cial Group, Inc. and
Peoples Heritage Bank;
Director, Blue Cross and
Blue Shield of Maine
Lyndel J. Wishcamper (53)............... President, Wishcamper 1996
Properties, Inc. (Real
estate); Chairman of the
Board, Atlantic Bank and
Trust, N.A., and
Atlantic Bancorp
Kathryn M. Weare (47)................... Owner and Manager, The 1992
Cliff House (Resort and
conference center)
</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 II:
E. James Dufour (61).................... Senior Vice President, 1971
Kyes Agency,
Inc. (General insurance
and real
estate); Director,
Somerset Woods Trustees
(Land trust)
Duane D. Fitzgerald (56)................ Chairman of the Board, 1996
Bath Iron Works
Corporation
(Shipbuilding) (from
March 1, 1996); Corporate
Vice President, General
Dynamics Corporation
(September 1995 to
March 1, 1996); President
and Chief Executive
Officer (September 1991
to March 1, 1996) and
previously (December 1988
to September 1991),
President and Chief
Operating Officer, Bath
Iron Works Corporation;
Director, UAL Corporation
David M. Jagger (54).................... President and Treasurer, 1988
Jagger
Brothers, Inc.
(Textiles);
Chairman of the Board of
the Company
Charles E. Monty (69)................... Retired (1992) Chairman of 1977
the
Board, Maine Yankee
Atomic
Power Company (a);
Retired
(1989) Executive Vice
President
and Chief Operating
Officer of the
Company
</TABLE>
- --------
(a) The Company owns 38 percent of the outstanding voting stock of Maine
Yankee Atomic Power Company.
4
<PAGE>
BOARD COMMITTEES, MEETINGS AND COMPENSATION
CERTAIN COMMITTEES OF THE BOARD
The Board's Audit Committee, which has as its members Kathryn M. Weare
(Chair), Charleen M. Chase and Charles E. Monty, held three meetings in 1995.
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 David M. Jagger (Chair), Charles H.
Abbott, E. James Dufour and Robert H. Gardiner, has among its concerns the
selection, performance and evaluation 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. In addition, the Board is in the process of establishing a
committee composed of shareholders and non-employee directors, which will
provide an additional means of receiving names of persons for consideration by
the Governance Committee for nomination to the Board. 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 four meetings in 1995.
The Compensation and Benefits Committee, whose members in 1995 were Robert H.
Reny (Chair), Charles H. Abbott, E. James Dufour, Robert H. Gardiner and David
M. Jagger, held ten meetings in 1995. All 1995 members of this committee other
than Mr. Reny continue to serve on the Committee; Mr. Reny retired from service
as a director effective April 16, 1996. This committee reviews and makes
recommendations to the Board concerning compensation and benefit programs for
all executive officers and compensation for directors of the Company. The
Compensation and Benefits Committee also administers the Company's 1987
Executive Incentive Plan and its Long-Term Incentive Plan.
MEETINGS OF THE BOARD
The Board held 14 meetings (including regularly scheduled and special
meetings) in 1995. 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 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 receives an annual retainer of $10,300, 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 executive 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
meeting of the Board or one of its committees by telephone 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
5
<PAGE>
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 1995 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 29, 1996 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 1995, 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 discussed
above for the Chairman, Vice Chairman and the committee Chairs.
6
<PAGE>
SECURITY OWNERSHIP
The following table lists the number of shares of the Common Stock of the
Company beneficially owned as of April 5, 1996 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 5, 1996 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 outside
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 (401(k) Plan) as of
December 31, 1995.
The table also lists the number of Compensation Units as of March 29, 1996 in
the accounts of the directors who have participated in the deferred retainer
plan described above under the caption "Compensation of Directors." Only
outside 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 5, 1996) (AS OF MARCH 29, 1996)
----------------------------- --------------------- ----------------------
<S> <C> <C>
Charles H. Abbott.............. 3,186 7,195
Charleen M. Chase.............. 1,146 2,698
E. James Dufour................ 4,505 7,770
Duane D. Fitzgerald............ 500 --
David T. Flanagan.............. 19,464 --
Robert H. Gardiner............. 1,000 3,140
David M. Jagger................ 1,000 6,422
Charles E. Monty............... 1,837 5,463
Peter J. Moynihan.............. 1,111 843
William J. Ryan................ 500 --
Kathryn M. Weare............... 1,033 2,687
Lyndel J. Wishcamper........... 1,122 167
David E. Marsh................. 7,711 --
Arthur W. Adelberg............. 7,887 --
Richard A. Crabtree............ 10,345 --
Gerald C. Poulin............... 9,566 --
All directors and executive
officers as a group (including
persons listed above)......... 73,230 36,385
</TABLE>
The number of shares of Common Stock of the Company beneficially owned as of
April 5, 1996 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 5, 1996, Mr. Abbott's spouse held sole voting and investment power over
800 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, 2,162 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 5, 1996 was 3,509 shares. The shares
listed for Mr. Crabtree also include 80 shares held by his spouse as custodian.
No director or officer owned as of April 5, 1996 any shares of 6% Preferred
Stock or of any other class of the Company's equity securities.
7
<PAGE>
As of April 1, 1996, 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.
With respect to reports on changes in ownership of the stock of the Company
required to be filed with the Securities and Exchange Commission by directors
and officers of the Company, Douglas Stevenson, a former officer of the
Company, filed late one required report on Form 4 covering one transaction in
connection with the liquidation of his account under the Company's Savings and
Investment (401(k)) Plan.
EXECUTIVE COMPENSATION
The following Summary Compensation Table presents information on compensation
to David T. Flanagan for the years during which Mr. Flanagan has held the
position of President and Chief Executive Officer and to other executive
officers of the Company for 1993, 1994 and 1995.
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) ($)(4)
--------- ---- ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
David T. Flanagan....... 1995 240,000.00 76,000.00 0 4,989.60
President and Chief Ex-
ecutive Officer(1) 1994 231,666.64 0 0 4,944.80
David E. Marsh.......... 1995 157,816.72 40,781.67 0 4,800.91
Vice President, 1994 148,800.00 0 0 4,728.86
Corporate Services,
Treasurer, and 1993 126,016.72 5,152.34 6,759.38 3,795.09
Chief Financial Officer
Arthur W. Adelberg...... 1995 157,816.72 40,781.67 0 4,741.36
Vice President, 1994 148,800.00 0 0 4,675.32
Law and Power Supply 1993 125,866.72 5,152.34 6,759.38 3,790.28
Richard A. Crabtree..... 1995 156,466.64 40,646.66 0 4,839.43
Vice President, 1994 153,400.08 12,200.00 0 4,812.94
Retail Operations 1993 151,783.36 6,208.77 8,150.63 4,578.40
Gerald C. Poulin........ 1995 127,366.72 27,736.27 0 3,821.00
Vice President, 1994 121,175.00 0 0 3,635.25
Generation and 1993 105,399.96 3,125.24 4,095.00 3,150.00
Technical Support
</TABLE>
- --------
(1) Mr. Flanagan was elected President and Chief Executive Officer effective
January 1, 1994.
(2) These amounts include awards for 1995 performance under the Company's
1987 Executive Incentive Plan of $36,000 for Mr. Flanagan, $15,781.67 for Mr.
Marsh, $15,781.67 for Mr. Adelberg, $15,646.66 for Mr. Crabtree, and $12,736.67
for Mr. Poulin. The balance of the amounts listed for each of the named
executive officers represents payments to recognize the importance of the
continuing efforts of these executive officers towards rebuilding the financial
and competitive position of the Company and to help assure that the Company
will retain the continuing benefit of the specific skills, knowledge and
experience contributed by these executive officers in a period of changing
business conditions due to an increasingly competitive business climate in the
electric utility industry.
8
<PAGE>
(3) At December 31, 1995, the number of shares and value of the aggregate
restricted stock holdings of each of the named executive officers were as
follows: Mr. Flanagan, 19,412 shares and $279,047.50; Mr. Marsh, 8,491 shares
and $122,058.12; Mr. Adelberg, 8,491 shares and $122,058.12; Mr. Crabtree,
8,373 shares and $120,361.87; and Mr. Poulin, 5,345 shares and $76,834.38. The
aggregate restricted stock holdings listed for each of the named executive
officers other than Mr. Poulin include contingent grants of performance
restricted 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, January 1, 1994, and January 1, 1995, respectively. For Mr.
Poulin, aggregate restricted stock holdings include contingent grants of
performance restricted shares under the LTIP for the two performance periods
beginning January 1, 1994 and January 1, 1995. The vesting of the LTIP shares
is subject to attaining a threshold level of performance with respect to a
specified performance objective. 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, 1995 were as
follows: Mr. Flanagan, 18,299 shares and $263,048.12; Mr. Marsh, 7,691 shares
and $110,558.12; Mr. Adelberg, 7,691 shares and $110,558.12; Mr. Crabtree,
7,408 shares and $106,490.00; and Mr. Poulin, 4,863 shares and $69,905.63. For
the 3-year performance period beginning January 1, 1993, the specified level of
performance was not attained. As a result, the performance restricted shares
contingently granted for that performance period plus additional performance
restricted shares resulting from the reinvestment of dividends through January
1996 were forfeited on March 18, 1996.
The number of LTIP shares forfeited and their value as of the forfeiture date
was as follows:
<TABLE>
<CAPTION>
VALUE AS OF
NUMBER OF FORFEITURE
NAME SHARES FORFEITED DATE (MARCH 18, 1996)
---- ---------------- ---------------------
<S> <C> <C>
David T. Flanagan.................. 2,433 $33,453.75
David E. Marsh..................... 1,832 25,190.00
Arthur W. Adelberg................. 1,832 25,190.00
Richard A. Crabtree................ 1,832 25,190.00
</TABLE>
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 or forfeiture. 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.
(4) For 1995, amounts of All Other Compensation include (i) matching
contributions by the Company to the Employee Savings and Investment Plan for
Non-Union Employees (401(k) Plan) in the amount of $4,500 for Mr. Flanagan,
$4,500 for Mr. Marsh, $4,500 for Mr. Adelberg, $4,500 for Mr. Crabtree, and
$3,821 for Mr. Poulin; and (ii) the value of term life insurance premiums paid
under universal life insurance policies in the amount of $489.60 for Mr.
Flanagan, $300.91 for Mr. Marsh, $241.36 for Mr. Adelberg, and $339.43 for Mr.
Crabtree. The Company has purchased universal life insurance policies for Mr.
Flanagan, Mr. Marsh, Mr. Adelberg, Mr. Crabtree, and beginning in 1996, for Mr.
Poulin, 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 five 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.
9
<PAGE>
LONG-TERM INCENTIVE PLAN--AWARDS FOR LAST FISCAL YEAR
<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUTS UNDER
NON-STOCK PRICE-BASED PLANS(2)
---------------------------------
NUMBER OF PERFORMANCE
PERFORMANCE PERIOD UNTIL
RESTRICTED MATURATION
NAME SHARES(1) OR PAYOUT THRESHOLD(#) TARGET(#) MAXIMUM(#)
- ---- ----------- ------------ ------------ --------- ----------
<S> <C> <C> <C> <C> <C>
David T. Flanagan... 7,742 3 years 0 7,742 11,613
David E. Marsh...... 2,996 3 years 0 2,996 4,494
Arthur W. Adelberg.. 2,996 3 years 0 2,996 4,494
Richard A. Crabtree. 2,727 3 years 0 2,727 4,090
Gerald C. Poulin.... 2,477 3 years 0 2,477 3,715
</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 or forfeiture.
(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 3-year average of the Company's total shareholder return (stock
price plus dividends) as compared with the 3-year average of the total
shareholder return of the other utilities against which the Company's
performance is measured in the performance graph in the Proxy Statement. 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.
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 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, 1995 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>
YEARS OF SERVICE
---------------------------------------
AVERAGE ANNUAL SALARY FOR
5 HIGHEST CONSECUTIVE YEARS
PRECEDING RETIREMENT 15 20 25 30 35
--------------------------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
$150,000............................... $35,079 $46,722 $58,491 $70,204 $72,906
175,000............................... 41,454 55,282 69,116 82,954 86,282
200,000............................... 45,185 62,565 79,741 95,704 99,657
225,000............................... 45,185 62,565 79,944 97,323 106,910
250,000............................... 45,185 62,565 79,944 97,323 106,910
275,000............................... 45,185 62,565 79,944 97,323 106,910
300,000............................... 45,185 62,565 79,944 97,323 106,910
325,000............................... 45,185 62,565 79,944 97,323 106,910
350,000............................... 45,185 62,565 79,944 97,323 106,910
</TABLE>
For Mr. Poulin, an executive officer named in the Summary Compensation Table,
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 1995, the 1995 covered compensation under the Basic Pension Plan
for Messrs. Flanagan, Marsh, Adelberg and Crabtree was limited to that amount
of their respective base salaries. Messrs. Flanagan, Marsh, Adelberg, Crabtree
and Poulin
10
<PAGE>
have been credited with 10, 21, 9, 23 and 24 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, 1995 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>
YEARS OF SERVICE
---------------------------------------
AVERAGE ANNUAL
COMPENSATION
FOR 3 HIGHEST YEARS 15 20 25 30 35
------------------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
$150,000................................ $23,421 $31,278 $39,009 $27,296 $24,594
175,000................................ 26,796 35,718 44,634 30,796 27,468
200,000................................ 32,815 41,435 50,259 34,296 30,343
225,000................................ 42,565 54,435 66,306 48,927 39,340
250,000................................ 52,315 67,435 82,556 65,177 55,590
275,000................................ 62,065 80,435 98,806 81,427 71,840
300,000................................ 71,815 93,435 115,056 97,677 88,090
325,000................................ 81,565 106,435 131,306 113,927 104,340
350,000................................ 91,315 119,435 147,556 130,177 120,590
</TABLE>
For the executive officers named in the Summary Compensation Table,
compensation covered by the SERP consists of base salary shown in the Salary
column of that Table, and incentive awards received under the Company's 1987
Executive Incentive Plan, including amounts shown for 1993 in the Bonus and
Restricted Stock Awards columns of that Table and amounts included in the Bonus
column for 1995 as follows: Mr. Flanagan, $36,000.00; Mr. Marsh, $15,781.67;
Mr. Adelberg, $15,781.67; Mr. Crabtree, $15,646.66; and Mr. Poulin, $12,736.67.
Messrs. Flanagan, Marsh, Adelberg, Crabtree and Poulin have been credited with
10, 21, 9, 23 and 24 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, Marsh, Adelberg, Crabtree and Poulin 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 five executive
officers, at such time as their respective interests in the cash surrender
value may vest.
Under an employment agreement with the Company, which is described in the
section of this Proxy Statement entitled "Employment and Termination of
Employment Arrangements," Mr. Flanagan is entitled to an incremental retirement
benefit, beginning at age 55, that, when added to benefits payable to him under
the Basic Pension Plan and the SERP, provides an aggregate annual retirement
benefit of 65 percent of base salary earned during the final 12 months of
employment with the Company plus the average of incentive compensation earned
under the 1987 Executive Incentive Plan for the three years preceding the
termination of his employment. Benefits payable to Mr. Flanagan under the Basic
Pension Plan and the SERP as well as any amounts received under the universal
life insurance policy for Mr. Flanagan will be offset against the total
retirement benefit payable under the agreement. At assumed total covered
compensation in the amounts set forth below, the aggregate annual retirement
benefit payable to Mr. Flanagan, beginning at age 55, would be as follows:
<TABLE>
<CAPTION>
TOTAL COVERED AGGREGATE
COMPENSATION ANNUAL BENEFIT
------------- --------------
<S> <C>
$250,000................................ $162,500
275,000................................ 178,750
300,000................................ 195,000
325,000................................ 211,250
350,000................................ 227,500
</TABLE>
11
<PAGE>
EMPLOYMENT AND TERMINATION OF EMPLOYMENT ARRANGEMENTS
Effective December 9, 1994, the Company entered into separate employment
agreements with Messrs. Marsh, Adelberg, Crabtree and Poulin. The Company also
entered into an employment agreement with Mr. Flanagan effective December 29,
1995. 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
participation in benefit plans in accordance with the provisions of those
plans. In addition, Mr. Flanagan's agreement provides for an incremental
retirement benefit that, when added to benefits payable to him under existing
pension plans, provides an aggregate annual retirement benefit, beginning at
age 55, of 65 percent of his base salary for the final 12 months of employment
plus the average of short-term incentive compensation earned for the three
years preceding the termination of his employment. Under these agreements,
which do not restrict 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 Mr. Marsh, Mr. Adelberg, Mr. Crabtree or Mr. Poulin, as
the case may be: (1) a lump sum amount equal to 2.99 times the annual average
of his base salary and certain 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. In addition to the change of control severance benefits described in
items (2), (3) and (4) for the other executive officers, Mr. Flanagan's
agreement provides for a lump sum payment equal to 2.99 times his base salary
earned during the 12 months before the change of control plus the three-year
average of short-term incentive compensation earned for the period preceding
the change of control and also continues the incremental retirement benefit. 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 times 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 an executive officer other than Mr. Flanagan,
for whom no reductions are made.
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 installment severance payments if he fails to
comply with any of these requirements.
The agreements for Messrs. Marsh, Adelberg, Crabtree and Poulin continue in
effect until December 31, 1997, and for Mr. Flanagan until December 31, 1998,
and are 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 his agreement. The agreements provide for one final three-year extension
after a change of control.
12
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Compensation policies that have generally been 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 (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 that has
generally been measured against comparable positions in the electric utility
industry and that also has taken into account individual contributions. 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 have
generally been 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 have been 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 the electric
utilities that have been in the comparison group are represented in the EEI 100
Index used in the performance graph in the Company's proxy statements.
To preserve the Company's ability to attract and retain highly-qualified
persons in key executive management positions, the Committee has periodically
reviewed and taken action on base salaries, using median market salaries for
comparable positions as a benchmark for developing salary recommendations while
taking into account individual contributions made by the executive officers,
the financial position of the Company, and economic conditions in Maine.
In considering base salaries for the executive officers of the Company other
than Mr. Flanagan in 1995, the Committee initially reviewed market information
similar to that reviewed in prior years and a subset of that market information
consisting of New England electric utilities. Although the Committee views
median market salaries for comparable executive officer positions as a useful
tool for developing and maintaining competitive salaries for the Company's
executive officers, the Committee believed that the financial challenges faced
by the Company in 1995 and general economic conditions in Maine warranted a
departure from the practice of using competitive market data in determining the
1995 base salaries of the executive officers of the Company. After balancing
these factors against the significant contributions made by the executive
officers to the Company's strategy for rebuilding the financial and competitive
position of the Company, the Committee recommended an average 3.5 percent base
salary increase for three of the named executive officers other than Mr.
Flanagan, and for the remaining named executive officer, who assumed additional
responsibilities in 1995, a base salary increase of 6.5 percent to reflect his
additional duties.
In reviewing Mr. Flanagan's base salary in 1995, the Committee recognized
that the disparity between his salary and the higher median market salary for
his position was at least 30 percent, but also took into account the factors
considered in determining base salaries for the other executive officers. The
Committee determined that in lieu of a base salary increase in 1995 for Mr.
Flanagan, he should be provided with an
13
<PAGE>
incremental retirement benefit beginning at age 55 whose value, as determined
by the Committee's independent compensation consultant, is substantially
equivalent to the value of a $25,000 base salary increase that was considered
but not granted by the Committee. The incremental retirement benefit is
intended to ensure that Mr. Flanagan is fairly compensated, although not on a
current basis, for his leadership and substantial contributions in developing
and implementing a business strategy to restore the Company's financial and
competitive position and to take into account his prior employment outside the
Company during which he acquired skills and expertise that now benefit the
Company.
BONUS COMPENSATION. In 1995, 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 financial performance and its
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 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 1995, the Committee adopted two 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 bonds from the three
major credit rating agencies while achieving 1995 budget targets for operation
and maintenance expense, capital investment, and fuel and purchased power; and
(2) assuring that customer expectations are met, as evidenced by improvements
in customer satisfaction and 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 1995 Corporate
Goals and Objectives. The two corporate goals and the individual goals were
weighted equally, so that Plan participants could receive up to one-third of
the maximum possible incentive award under each of these three sets of goals.
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 has existed 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.
In 1995, the goal concerning bond ratings and budget targets was not met and,
consequently, there was no award in connection with this goal. One of the two
elements of the customer goal was satisfied, resulting in a payout of one-half
of the maximum award relating to this goal. For the President and Chief
Executive Officer, the associated payout was 5 percent of his 1995 base salary,
and for the other executive officers, the payout ranged from 2 1/2 percent to 3
1/3 percent of 1995 base salary depending on their respective positions with
the Company. After a detailed review, the Committee concluded that each of the
executive officers had substantially met his individual goals, resulting in a
payout of the full portion of the award relating to the individual goals. For
Mr. Flanagan, the payout under this set of goals was equal to 10 percent of his
1995 base salary, while payouts for the other executive officers ranged from 5
percent to 6 2/3 percent of their respective base salaries for 1995. Awards
under the performance goals that were attained as well as potential awards
based on attainment of all goals represent the same proportions of total short-
term incentive compensation for all executive officers, including the President
and Chief Executive Officer.
14
<PAGE>
For executive officers who participate in both the Plan and the Company's
Long-Term Incentive Plan ("LTIP"), incentive awards under the Plan were payable
in cash. Other participants in the Plan 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.
The Committee's discussions concerning 1995 compensation for the named
executive officers, including Mr. Flanagan, included an extensive review of
their contributions and efforts towards the development and implementation of
the Company's business strategy for attaining certain financial objectives and
meeting the competitive challenges faced by the Company in several aspects of
its traditional business. Although significant efforts to rebuild the Company's
financial and competitive position have been undertaken, the Company continues
to face challenges in these areas. The Committee believes that particularly in
this period of transition to an increasingly competitive environment in the
electric utility business and in light of the tasks undertaken by the executive
management team and the novel solutions and approaches its members have
developed to address some of the competitive challenges facing not only the
Company but the electric utility industry generally, it is important to retain
the executive officers who have the extensive familiarity with the Company's
business circumstances and the specific skills, knowledge and experience that
will allow the Company to continue to benefit from their services. To indicate
the importance of the continuing efforts of this executive team and to help
assure that the Company will continue to receive the benefit of the talents of
its members, the Committee authorized a bonus payment to Mr. Flanagan in the
amount of $40,000 and to the other named executive officers in lesser amounts.
LONG-TERM INCENTIVE COMPENSATION. The Long-Term Incentive Plan ("LTIP"), in
which the President and Chief Executive Officer and the other named executive
officers participate, 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. The LTIP was approved by
the Company's shareholders at the 1994 Annual Meeting.
The LTIP seeks to accomplish this objective 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, 1995, Mr. Flanagan was granted 7,742 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,
reflected an average percentage of median base salary awarded as long-term
incentive compensation at electric utilities represented in the EEI 100 Index
used in the performance graph in the Company's proxy statements.
During the three-year performance period that began on January 1, 1995, 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 three-year
average of the Company's total shareholder return (stock price plus dividends)
as ranked against the three-year average of the total shareholder return of
other utilities in the EEI 100 Index against which the Company's performance is
measured in the performance graph. 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. 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
15
<PAGE>
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.
The first three-year performance period under the Company's LTIP ended as of
December 31, 1995. For that performance period, the threshold level of
performance with respect to the ranking of the three-year average of the
Company's total shareholder return against the three-year average of the total
shareholder return of the other utilities in the EEI 100 Index used in the
performance graph in this Proxy Statement was not attained. As a result, the
performance restricted shares contingently granted for that performance period
plus additional performance restricted shares resulting from the reinvestment
of dividends through January 1996 were forfeited during the first quarter of
1996. The amount of such shares forfeited by Mr. Flanagan was 2,433 shares,
with lesser amounts being forfeited by the named executive officers who were
participants in the LTIP for that performance period.
OTHER COMPENSATION POLICIES. For 1995, 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 (401(k) Plan),
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.
Compensation reported for 1995 also includes the value of term life insurance
premiums paid under universal life insurance policies in the amount of $489.60
for Mr. Flanagan and in lesser amounts for the named executive officers. The
Company has purchased universal life insurance policies for Mr. Flanagan, Mr.
Marsh, Mr. Adelberg, Mr. Crabtree and, beginning in 1996, for Mr. Poulin, 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 five 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
16
<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 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, 1990, and the reinvestment of
all dividends).
[GRAPH]
<TABLE>
<CAPTION>
DECEMBER 31
-----------------------------
1990 1991 1992 1993 1994 1995
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Central Maine Power Company....................... $100 $137 $151 $102 $99 $113
S&P 500 Index..................................... $100 $130 $140 $154 $156 $215
EEI 100 Index..................................... $100 $128 $138 $154 $136 $178
</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.
17
<PAGE>
PROPOSAL 2
APPROVAL OF
INDEPENDENT PUBLIC ACCOUNTANTS
At the regular meeting held on February 21, 1996, 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 1996. 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 1996 at a meeting held on February 20, 1996. 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
A shareholder of the Company has submitted the following proposed resolution
with a supporting statement, and has informed the Company that she or her
representative intends to present the proposed resolution at the 1996 Annual
Meeting of the Company's Shareholders. The name and address of the shareholder
and the number of shares held will be promptly furnished by the Company, orally
or in writing as requested, to any person requesting this information either
orally or in writing.
PROPOSED RESOLUTION. That the shareholders recommend to the Board of
Directors that the Company divest itself of all investments in the Maine Yankee
Atomic Power Company as soon as possible, and within the calendar year of 1996.
SHAREHOLDER'S SUPPORTING STATEMENT. The statement submitted by the
shareholder in support of the proposed resolution is as follows:
The Maine Yankee Atomic Power Plant is one of the ten oldest plants of its
kind in the United States. Maintenance costs at aging nuclear power plants are
escalating, and may not be recoverable from ratepayers as competition in the
utility industry grows. Moreover, the costs of decommissioning nuclear plants
continue to rise dramatically, and the recent official decommissioning estimate
of approximately $317 million is far short of unofficial estimates exceeding
$1.5 billion. As free market electricity prices fall, these excessive costs may
become "stranded," or not recoverable from ratepayers. Indeed, an August, 1995
Wall Street report estimated that the Company is the fourth-worst utility in
the nation in terms of its stranded investment risk. While Non-Utility
Generator (NUG) contracts are the historical cause of this stranded investment
exposure, in the future, high maintenance and repair, decommissioning and
nuclear waste storage costs may very well exacerbate this exposure.
Additionally, as more becomes proven about the health effects of what has
been previously thought to be low doses of radiation, the Company's financial
exposure is likely to worsen, as the lawsuit from University of Southern Maine
students shows.
18
<PAGE>
One of the world's leading economists and experts on energy, Amory Lovins has
said that "the nuclear industry is suffering from an incurable attack of market
forces." Lovins points out that as nuclear plants' costs are rising
uncontrollably, their competition is steadily bringing their prices down. The
Company should recognize these economic facts, and protect Shareholders' vital
financial interests by divesting its holdings in Maine Yankee.
BOARD OF DIRECTORS STATEMENT OPPOSING THE RESOLUTION. The Board of Directors
believes that the 38-percent ownership interest of Central Maine Power Company
("Central Maine") in Maine Yankee Atomic Power Company, the owner and operator
of the Maine Yankee nuclear generating plant in Wiscasset, Maine, has been one
of Central Maine's most valuable assets. The forced divestment of that interest
proposed by the shareholder, who submitted the proposal in conjunction with an
active critic of the Maine Yankee plant, would deprive Central Maine of its
largest source of low-cost, around-the-clock, base-load power during a period
of increasing competition in the electric-utility business, when Central Maine
and its shareholders could least afford the resulting financial burden.
Since commencing commercial operation on January 1, 1973, the Maine Yankee
plant has produced more electric power than any other generating unit in New
England at rates to Central Maine and Maine Yankee's other New England utility
customers that have often been among the lowest for any nuclear plant in the
United States. As recently as 1994, for example, the plant generated 6.6
billion kilowatt-hours of electricity, the second-highest annual output in the
plant's history, at a total power cost of only 2.6 cents per kilowatt-hour. The
plant's performance in 1994 resulted in its being recognized as having the
second-lowest production costs (operating, maintenance, and fuel costs) of the
nuclear power plants in the United States by an independent organization that
regularly rates nuclear plant performance. Over the plant's operating history
through 1995, its average total power cost has been 2.5 cents per kilowatt-
hour. As a comparison, Central Maine paid an average of 8.4 cents per kilowatt-
hour to another of its major sources of power, non-utility generators, in 1995.
Maine Yankee achieved those results while effectively carrying out a long-
term comprehensive preventive maintenance program at the plant. Over the
operating history of the plant Maine Yankee has invested over $200 million
dollars in capital improvements to upgrade, renew and replace components of the
plant while maintaining the high safety and performance standards which its
management and regulators have consistently required. In May of 1995, while
Maine Yankee's Board of Directors was assessing the merits of repairing a large
number of degraded steam-generator tubes at the plant through a process of
sleeving substantially all of the plant's steam generator tubes, the Maine
Yankee Board commissioned an extensive study of the condition of the plant's
major components by an internationally recognized engineering firm. The purpose
of the study was to obtain an independent assessment of the structures,
systems, components and programs at the plant to identify any that might, due
to substandard condition, pose a significant financial risk to Maine Yankee in
the future, which would assist the Board in evaluating the benefits and costs
of the then-proposed sleeving project. The study characterized the plant as
being "well-maintained" and in "excellent" condition, and attributed those
conclusions to the long-standing preventive maintenance program, combined with
Maine Yankee's continuous performance and reliability monitoring and
appropriate corrective actions over the plant's operating history.
The proponent's contentions concerning nuclear plants in general, whether or
not accurate in a generic sense, have not been shown to apply to the Maine
Yankee plant. No evidence is presented to relate the allegation that nuclear
plant costs are rising "uncontrollably" specifically to the Maine Yankee plant,
which is the subject of the proposal to be voted on by Central Maine's
shareholders. Given the continuing favorability of Maine Yankee's rates for
power, which are directly determined by its costs, it is clear that the generic
contentions do not apply to Maine Yankee.
The shareholder also contends that the costs of decommissioning nuclear
plants are rising "dramatically." Maine Yankee is providing for the future cost
of decommissioning the plant by collecting
19
<PAGE>
the estimated costs of decommissioning from its New England utility customers
as a small fractional part of its rates and placing those funds in trust with
an independent trustee. The amount of the estimate is determined by engineering
studies conducted periodically by an independent expert and included in Maine
Yankee's rates to the extent allowed by the Federal Energy Regulatory
Commission in rate proceedings. Maine Yankee has stated that it recognizes the
relative uncertainties associated with estimating future decommissioning costs,
but will continue to seek recovery through rates of its periodically reviewed
and updated cost estimates. Technological changes, as well as legislative and
regulatory actions, are among the uncertainties that could affect the amount of
the estimates.
The shareholder proposing the resolution also suggests that Central Maine's
financial exposure is likely to worsen as more becomes proven about the health
effects of low doses of radiation, and cites the existence of an unresolved
lawsuit against Maine Yankee in support of the suggestion. Central Maine is a
separate entity from Maine Yankee and is not a party to the suit, which Maine
Yankee has indicated it believes is without legal merit. The proponent's
prediction as to Central Maine's financial exposure is unfounded speculation.
The shareholder proposal recommends that Central Maine divest itself of its
investments in Maine Yankee, not in any orderly manner, but "as soon as
possible, and within the calendar year of 1996." Central Maine is thus being
urged by the proponent not only to get rid of its largest source of low-cost
power, but to do so under fire-sale conditions. The Board of Directors of
Central Maine believes that implementing such a recommendation would be
severely detrimental to the best interests of the Company and its shareholders.
Holders of Central Maine'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.
DEADLINE FOR SHAREHOLDER PROPOSALS
Proposals of shareholders intended to be presented at the 1997 Annual Meeting
of the Shareholders must be received on or before December 17, 1996, for
inclusion in the proxy materials relating to that meeting. Any such proposals
should be sent to 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 22, 1996 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 Corporate
Investor Communications, Inc. will solicit shareholders of record and broker
nominees on behalf of the Company, for which it will receive a fee of
approximately $3,500, 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.
20
<PAGE>
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 16, 1996
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.
21
<PAGE>
CENTRAL MAINE POWER COMPANY
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
(COMMON AND 6% PREFERRED SHAREHOLDERS)
The undersigned shareholder hereby appoints Arthur W. Adelberg and David E.
Marsh, and either of them, proxies, with power of substitution, to vote all
shares that the undersigned is entitled to vote at the Annual Meeting of the
Shareholders of Central Maine Power Company to be held on May 22, 1996 at 10
A.M. EDT, at the Augusta Civic Center, Augusta, Maine, and at any
adjournments, on the proposals described in the accompanying Proxy Statement
as marked below, and in their discretion on any other matters that may
properly come before the meeting or any adjournment. If this proxy is properly
signed, your shares will be voted as you directed by marking the boxes below.
IF NO DIRECTION IS GIVEN, YOUR SHARES WILL BE VOTED FOR THE ELECTION OF ALL
---
NOMINEES FOR DIRECTOR NAMED BELOW, FOR PROPOSAL 2, AND AGAINST PROPOSAL 3
--- -------
BELOW.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
FOR PROPOSAL 1
---
1. ELECTION OF DIRECTORS
Nominees:
Charleen M. Chase VOTE FOR WITHHOLD VOTE
ALL FOR ALL
David T. Flanagan (EXCEPT AS MARKED)
[_] [_]
Robert H. Gardiner
Peter J. Moynihan
TO WITHHOLD VOTE for any nominee,
write that nominee's name in this space:
- -------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
FOR PROPOSAL 2
---
2. APPROVAL OF COOPERS & LYBRAND, L.L.P. AS AUDITORS FOR 1996
FOR AGAINST ABSTAIN
[_] [_] [_]
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
AGAINST PROPOSAL 3
-------
3. SHAREHOLDER PROPOSAL RECOMMENDING THAT THE COMPANY DIVEST ITSELF OF ITS
INVESTMENT IN MAINE YANKEE ATOMIC POWER COMPANY IN 1996.
FOR AGAINST ABSTAIN
[_] [_] [_]
WILL YOU ATTEND THE ANNUAL MEETING?
YES __ NO __ Number attending: ___
SIGNATURE(S) _________________________________
_________________________________ DATED ____________ 1996
PLEASE DATE, SIGN EXACTLY AS NAME(S) APPEAR ABOVE, AND RETURN PROMPTLY IN
ENCLOSED ENVELOPE.
If signing for a corporation or partnership, sign in that name and indicate
your title. If signing as attorney, executor, guardian, trustee or custodian,
please add your title.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
DETACH HERE AND RETURN COMPLETED, SIGNED AND DATED PROXY IN ENCLOSED ENVELOPE
