SCHEDULE 14C INFORMATION
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Securities Exchange Act of 1934
Check the appropriate box:
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Central Maine Power Company
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<PAGE>
CENTRAL MAINE POWER COMPANY
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be held on May 18, 2000 at 10:00 A.M.
at the offices of Central Maine Power Company
83 Edison Drive, Augusta, Maine
TO THE HOLDERS OF COMMON STOCK AND 6% PREFERRED STOCK OF CENTRAL
MAINE POWER COMPANY
You are hereby notified of and invited to attend the Annual Meeting of
Shareholders of Central Maine Power Company to be held at Central Maine Power
Company's corporate offices at 83 Edison Drive, Augusta, Maine, on May 18, 2000
at 10:00 a.m. Eastern Daylight Time, to hear reports on Central Maine Power's
affairs and consider and vote on the following matters:
1. To elect four directors to Class I of Central Maine Power Company's Board
of Directors;
2. To approve amendments to Central Maine Power Company's Articles of
Incorporation reducing the allowed minimum and maximum number of directors
and eliminating the classified structure of the Board of Directors under
which the directors serve staggered terms, which would take effect ONLY
upon the completion of the pending merger between CMP Group, Inc., the
holding company parent of Central Maine Power Company, and Energy East
Corporation;
3. To elect an entire new Board of Directors of Central Maine Power Company
consisting of six members, who would serve as directors ONLY upon the
completion of the pending merger between CMP Group and Energy East; and
4. To consider and act upon any other matters that may properly come before
the meeting.
The close of business on March 20, 2000 has been fixed as the record
date for the determination of shareholders entitled to receive notice of and to
vote at the Annual Meeting or any adjournment thereof.
By Order of the Board of Directors
/s/ Anne M. Pare
Anne M. Pare
Secretary and Clerk
Augusta, Maine
April 12, 2000
April 12, 2000
CENTRAL MAINE POWER COMPANY
83 Edison Drive
Augusta, Maine 04336
INFORMATION STATEMENT
GENERAL INFORMATION
This Information Statement is provided to the holders of record as of
the close of business on March 20, 2000 of Central Maine Power Company common
stock and 6% Preferred Stock in connection with the Annual Meeting of
Shareholders of Central Maine Power Company or any adjournments. The Annual
Meeting will be held on May 18, 2000 at 10:00 a.m. at the corporate offices of
Central Maine Power Company, 83 Edison Drive, Augusta, Maine. This Information
Statement is being mailed to shareholders on or about April 12, 2000.
The Summary Annual Report to shareholders for the year ended 1999, and
the Form 10-K for 1999 containing audited financial statements and Management's
Discussion and Analysis of Financial Condition and Results of Operations were
mailed together to shareholders on or about March 31, 2000.
At the 1998 Annual Meeting, Central Maine Power's shareholders approved
the formation of a holding company over Central Maine Power. On September 1,
1998, CMP Group, Inc. became the new holding company over Central Maine Power.
As a result, CMP Group now holds 100 percent of the issued and outstanding
common stock of Central Maine Power, which constitutes over 99 percent of
Central Maine Power's total outstanding voting stock. The remaining voting stock
of Central Maine Power is the 6% Preferred Stock, 5,713 shares of which are
outstanding. CMP Group holds 533 shares of 6% Preferred Stock.
VOTING RIGHTS
Voting Procedure. Under Maine law, every shareholder entitled to vote
at the Annual Meeting has the right to vote in person or by proxy. Central Maine
Power Company and its directors and officers are not soliciting proxies for the
Annual Meeting.
We Are Not Asking You for a Proxy and
You Are Requested Not To Send Us a Proxy
If you cannot attend the Annual Meeting, Maine law permits you to appoint an
agent who will attend the Annual Meeting and vote your shares on your behalf.
This appointment is made by giving a person other than a director or officer of
Central Maine Power Company or of CMP Group a written proxy that you have signed
and that states that the person named in the proxy is authorized to vote your
shares on all matters at the Annual Meeting. Again, please do not send a proxy
to Central Maine Power Company.
Votes and Shares. The Board of Directors of Central Maine Power
established the close of business on March 20, 2000 as the record date for the
determination of shareholders entitled to receive notice of and to vote at the
Annual Meeting.
As of the close of business on March 20, 2000, there were 31,211,471
shares outstanding of Central Maine Power common stock, all of which were held
by CMP Group. Each share of common stock is entitled to one-tenth vote, for a
total of 3,121,147 votes entitled to be cast by CMP Group on each matter at the
Annual Meeting. In addition, as of the record date, there were 5,713 shares
outstanding of Central Maine Power 6% Preferred Stock. Each share of 6%
Preferred Stock is entitled to one vote, for a total of 5,713 votes entitled to
be cast by the holders of 6% Preferred Stock on each matter at the Annual
Meeting. At the Annual Meeting, the shares of Central Maine Power common stock
and 6% Preferred Stock will vote together as a single class on all matters at
that meeting. As a result of its ownership of all 31,211,471 outstanding shares
of Central Maine Power common stock, representing 3,121,147 votes, and its 533
shares of Central Maine Power 6% Preferred Stock, representing 533 votes, CMP
Group holds 99.8 percent of the combined voting power of the Central Maine Power
common stock and 6% Preferred Stock. CMP Group intends to vote all of its shares
of Central Maine Power common stock and its 533 shares of Central Maine Power 6%
Preferred Stock in favor of Proposals 1, 2 and 3 at the Annual Meeting.
Proposals 1, 2 and 3 are described in this Information Statement.
Quorum. A majority of the total votes entitled to be cast at the Annual
Meeting by the holders of Central Maine Power common stock and 6% Preferred
Stock, voting together as a single class, on Proposals 1, 2 and 3 will
constitute a quorum for purposes of action to be taken on those Proposals.
Abstentions, votes withheld from nominees for director, and broker non-votes
will be counted in determining whether a quorum exists.
Required Votes; Cumulative Voting for Directors. The holders of Central
Maine Power's common stock and 6% Preferred Stock, voting together as a single
class, will be asked to take action on three proposals, which are discussed
under "PROPOSAL 1," "PROPOSAL 2" and "PROPOSAL 3" in this Information Statement.
Proposal 1. In Proposal 1, the shareholders will be asked to elect four
directors to the Central Maine Power Board of Directors for three-year terms.
However, the terms of these directors and the other members of the Board of
Directors would terminate upon the earlier completion of the pending merger
between CMP Group and Energy East. For additional information about the earlier
termination of directors' terms, see the discussion under "PROPOSAL 2" and
"PROPOSAL 3" below. Director nominees who receive the greatest number of votes
cast will be elected, even though a nominee may not receive a majority of the
votes cast. Votes withheld from a nominee for director will be counted in
determining the total number of votes cast with respect to that nominee and will
have the same effect as a vote against that nominee.
Under the By-laws of Central Maine Power Company, the election of
directors at each Annual Meeting may, at the option of any shareholder, be by
cumulative voting. Under cumulative voting, each shareholder having the right to
vote for directors at the 2000 Annual Meeting is entitled to as many votes as
pertain to the shares of stock owned by that shareholder multiplied by the four
directors to be elected under Proposal 1, and may cast all of those votes for a
single director or may distribute them among the directors to be voted for, or
any two or three of them, as that shareholder sees fit. A shareholder entitled
to vote for directors at the Annual Meeting who wishes to vote cumulatively must
give written notice of his or her intention to vote cumulatively to the
President or the Secretary of Central Maine Power before the meeting or announce
his or her intention to vote cumulatively at the meeting before the voting for
directors begins. If a shareholder gives that notice or makes that announcement,
then all shareholders entitled to vote for directors at the meeting will be
entitled to cumulate their votes.
Proposal 2. In Proposal 2, the shareholders will be asked to approve
amendments to Central Maine Power's Articles of Incorporation (i) reducing the
allowed minimum and maximum number of directors and (ii) eliminating the
classified structure of the Board of Directors under which the directors serve
staggered terms. These amendments would take effect only upon the completion of
the pending merger between CMP Group and Energy East. Under Central Maine
Power's Articles of Incorporation, the affirmative vote of 80 percent of the
total number of outstanding shares of Central Maine Power common stock and 6%
Preferred Stock, voting together as a single class, is required for approval of
Proposal 2. Abstentions and broker non-votes will have the same effect as a vote
against Proposal 2. Even if Proposal 2 is adopted, it will not have any effect
unless and until the merger between CMP Group and Energy East is completed. For
additional information, see the discussion under "PROPOSAL 2" below.
Proposal 3. In Proposal 3, the shareholders will be asked to elect an
entire new Board of Directors of Central Maine Power Company consisting of six
members who will serve as directors only upon the completion of the pending
merger between CMP Group and Energy East. Director nominees who receive the
greatest number of votes cast will be elected, even though a nominee may not
receive a majority of the votes cast. Votes withheld from a nominee for director
will be counted in determining the total number of votes cast with respect to
that nominee and will have the same effect as a vote against that nominee. Even
if Proposal 3 is adopted, it will not have any effect unless and until the
merger between CMP Group and Energy East is completed. For additional
information, see the discussion under "PROPOSAL 3" below.
Under cumulative voting, each shareholder having the right to vote for
directors at the 2000 Annual Meeting is entitled to as many votes as pertain to
the shares of stock owned by that shareholder multiplied by the six directors to
be elected under Proposal 3, and may cast all of those votes for a single
director or may distribute them among the directors to be voted for, or any two,
three, four or five of them, as that shareholder sees fit. A shareholder
entitled to vote for directors at the Annual Meeting who wishes to vote
cumulatively must give written notice of his or her intention to vote
cumulatively to the President or the Secretary of Central Maine Power before the
meeting or announce his or her intention to vote cumulatively at the meeting
before the voting for directors begins. If a shareholder gives that notice or
makes that announcement, then all shareholders entitled to vote for directors at
the meeting will be entitled to cumulate their votes.
PROPOSAL 1
ELECTION OF PRE-MERGER DIRECTORS
The Board of Directors of Central Maine Power Company currently has 13
members. All Central Maine Power Board members also serve on the Board of
Directors of CMP Group other than Sara J. Burns, Central Maine Power's
President, who serves only on the Central Maine Power Board. As currently
required by the Articles of Incorporation of Central Maine Power Company, the
Board is divided into three classes, with one class of directors being elected
at each Annual Meeting for a three-year term.
At the Annual Meeting, the holders of Central Maine Power common stock
and 6% Preferred Stock will be asked to elect Charles H. Abbott, William J.
Ryan, Kathryn M. Weare and Lyndel J. Wishcamper to the Central Maine Power Board
of Directors. (See the information listed below about each nominee.) Nominees
who receive the greatest number of votes cast by the holders of Central Maine
Power common stock and 6% Preferred Stock, voting together as a single class,
will be elected, even though any nominee may not receive a majority of the votes
cast. Each of these nominees has indicated his or her willingness to serve as a
director if elected. These individuals will serve as directors for three-year
terms. However, the terms of these directors would terminate upon the earlier
completion of the pending merger between CMP Group and Energy East.
The remaining directors listed below (Class II and Class III directors)
will continue in office for terms that expire at the Annual Meetings for the
years indicated below, or terminate upon the earlier completion of the pending
merger between CMP Group and Energy East. For additional information about the
earlier termination of directors' terms, see the discussion below under
"PROPOSAL 2" and "PROPOSAL 3" below.
Set forth below is information about each nominee and continuing
director.
<TABLE>
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Principal Occupations and Business Experience
During Past Five Years and Current First Became a
Name and Age Directorships of Public Companies Director Term Expires
- ------------ ---------------- -------- -------
Class I:
Charles H. Abbott (64) Member, Skelton, Taintor & Abbott, P.A., Auburn, 1988 2000
Maine (Attorneys); Vice Chairman of the Boards of
Central Maine Power & CMP Group (1)
William J. Ryan (56) Chairman, President and Chief Executive Officer, 1996 2000
Peoples Heritage Financial Group, Inc., Portland,
Maine
Kathryn M. Weare (51) Owner and Manager, The Cliff House, Ogunquit, 1992 2000
Maine (Resort and conference center)
Lyndel J. Wishcamper (57) President, Wishcamper Properties, Inc., Portland, 1996 2000
Maine (Real estate)
Class II:
Lawrence A. Bennigson (62) Executive Director, Toffler Associates, Boston, 1999 (2) 2001
Massachusetts (Strategic management advising)
(1998); Senior Fellow, Harvard Business School
Executive Development Center (Executive education)
(1998); independent management consultant (1994
through 1997); Director, SBS Technologies, Inc.
Sara J. Burns (44) President (from September 1, 1998) and Chief 1998 2001
Operating Officer, Distribution Services
(from May 1, 1997 to September 1, 1998),
Central Maine Power; prior thereto, held
various non-executive positions with Central
Maine Power
Duane D. Fitzgerald (60) Non-executive Chairman of the Board, Bath Iron 1996 2001
Works Corporation, Bath, Maine (Shipbuilding)
(from March 1, 1996); Corporate Vice President,
General Dynamics Corporation (September 1995 to
March 1, 1996); President and Chief Executive
Officer, Bath Iron Works Corporation (September
1991 to March 1, 1996)
</TABLE>
<TABLE>
<S> <C> <C> <C>
Principal Occupations and Business Experience
During Past Five Years and Current First Became a
Name and Age Directorships of Public Companies Director Term Expires
- ------------ ---------------- -------- -------
David M. Jagger (58) President and Treasurer, Jagger Brothers, Inc., 1988 2001
Springvale, Maine (Textiles); Chairman of the
Boards of Central Maine Power and CMP Group (1)
Lee M. Schepps (59) Retired (1998) President, The Julius Schepps Co., 1999 (2) 2001
Dallas, Texas (Wholesale beverage distribution and
real estate management)
Class III:
Charleen M. Chase (51) Executive Director, Community Concepts, Inc., 1985 2002
South Paris, Maine (Community action agency)
David T. Flanagan (52) President and Chief Executive Officer, CMP Group 1994 2002
(1) (from September 1, 1998); President and Chief
Executive Officer, Central Maine Power (from
January 1, 1994 to September 1, 1998)
Robert H. Gardiner (55) President, Maine Public Broadcasting Corporation, 1992 2002
Lewiston, Maine (Public television)
Peter J. Moynihan (56) Retired (1999) Senior Vice President and Chief 1995 2002
Investment Officer, UNUM (now UNUMProvident)
Corporation, Portland, Maine (Insurance)
</TABLE>
(1) CMP Group holds all of the outstanding common stock of Central Maine Power.
(2) Elected effective March 18, 1999.
BOARD COMMITTEES, MEETINGS AND COMPENSATION
Certain Committees of the Board. The Central Maine Power Board of
Directors currently has Governance and Compensation and Benefits Committees in
addition to other committees; prior to the September 1, 1998 holding company
reorganization of Central Maine Power, its Board also had an Audit Committee.
The CMP Group Audit Committee has assumed responsibility for overseeing the
financial reporting process for CMP Group and its business units, including
Central Maine Power, on a consolidated basis.
The Governance Committee of Central Maine Power, now composed of David
M. Jagger (Chair), Charles H. Abbott, Robert H. Gardiner and William J. Ryan,
has among its concerns the selection, performance and evaluation of directors.
Due to the pending merger between CMP Group and Energy East and the planned
changes in the structure and composition of the Board of Directors of Central
Maine Power upon the completion of the merger, the Governance Committee will not
consider individuals for nomination to the Board at this time. For additional
information about the planned changes in the structure and composition of the
Central Maine Power Board, see the discussion under "PROPOSAL 2" and "PROPOSAL
3" below. The Governance Committee held one meeting in 1999.
The Compensation and Benefits Committee, whose members are Charles H.
Abbott (Chair), Duane D. Fitzgerald, Peter J. Moynihan and Lyndel J. Wishcamper,
held 5 meetings jointly with the CMP Group Compensation and Benefits Committee,
which is composed of the same members, in 1999. The Central Maine Power
Compensation and Benefits Committee reviews and makes recommendation to the
Central Maine Power Board concerning compensation and benefits for executive
officers of Central Maine Power.
Meetings of the Board. The Central Maine Power Board held 11 meetings
in 1999. Each director listed above attended more than 75 percent 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, other than Mr. Ryan, who attended two-thirds of those meetings.
Compensation of Directors. Since each outside director serves on both
the CMP Group and Central Maine Power Boards and the same committees of each
Board, the annual retainer applies to service on both Boards of Directors, and
separate meeting fees for Central Maine Power are paid only if a meeting of that
Board or one of its committees is held on a day when no CMP Group meeting is
held. The usual practice is to hold meetings of the CMP Group and Central Maine
Power Boards, or their committees, on the same day so that meeting fees are
limited.
In accordance with the established guidelines for the Board of
Directors of CMP Group, 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 outside director (other than the Chairman or Vice Chairman) who is the
Chair of a committee of the Board receives an annual retainer of $8,400. Each
other outside director receives an annual retainer of $6,800. All retainers are
payable quarterly. In addition to ordinary travel expenses and subject to the
policy described in the preceding paragraph, 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.
Outside directors may participate in a voluntary deferred compensation
plan under which a director may elect to have all or part of his or her retainer
(but not meeting fees) credited 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 CMP Group common stock ("Compensation Units"). The number
of Compensation Units credited to a director's account is equal to the number of
shares of CMP Group 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.
CMP Group matches Compensation Units representing deferred retainers with
one-half that number of Compensation Units. Whenever dividends are paid on CMP
Group'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.
Effective January 1, 1998, the Central Maine Power Board terminated the
retirement plan for outside directors that had been in effect since September
1991. Accrued benefits under the former retirement plan were converted for all
directors serving on the Board as of January 1, 1998, to Compensation Units
under the deferred compensation plan. In addition, at the beginning of each
year, each outside director receives a fixed grant of 500 Compensation Units.
Dividend equivalents are added to Compensation Units on dividend payment dates
for CMP Group common stock. There is no company match for Compensation Units
other than those representing deferred retainers.
As of the date of this Information Statement, the deferred compensation
plan provides that all deferred compensation is paid solely in cash following
retirement from the Board. The value of the Compensation Units in a director's
account at the time a payment is made will be equal to the value of the same
number of shares of CMP Group common stock on the payment date. The number of
Compensation Units in the accounts of directors under the deferred compensation
plan as of March 1, 2000, is shown in the "SECURITY OWNERSHIP" table that
appears below.
PROPOSAL 2
AMENDMENT OF ARTICLES OF INCORPORATION
In Proposal 2, the holders of Central Maine Power's common stock and 6%
Preferred Stock are being asked to approve amendments to the Articles of
Incorporation of Central Maine Power Company. The Articles of Incorporation are
referred to in this Proposal 2 and below in Proposal 3 as the "Charter." If the
amendments to the Charter are approved, they would take effect only if the
pending merger between CMP Group and Energy East is completed.
The Board of Directors of Central Maine Power Company currently is
classified into three classes of directors as shown above in Proposal 1, with
one class (approximately one-third of the full Board) elected at each annual
meeting. The Charter currently requires a minimum of nine directors and allows a
maximum of 18 directors.
On June 14, 1999, CMP Group entered into an Agreement and Plan of
Merger with Energy East and EE Merger Corp., which was approved by CMP Group's
shareholders at a special meeting of the shareholders of CMP Group held on
October 7, 1999. The Maine Public Utilities Commission, the Federal Energy
Regulatory Commission, the Connecticut Department of Public Utility Control, the
Nuclear Regulatory Commission, the Federal Communications Commission, the U.S.
Department of Justice and the Federal Trade Commission have also approved the
merger. The only remaining required regulatory approval is pending from the
Securities and Exchange Commission. If the Securities and Exchange Commission
approves the merger, the merger is expected to be completed and become effective
in the middle of this year.
When the merger becomes effective, CMP Group will become a wholly-owned
subsidiary of Energy East, with all of CMP Group's common stock being held by
Energy East, and Central Maine Power will continue to be a subsidiary of CMP
Group. All of the common stock of Central Maine Power will continue to be held
by CMP Group.
The merger agreement between CMP Group and Energy East intends that the
members of the Board of Directors of Central Maine Power who are serving on the
Board immediately before the merger is completed will resign from the Board of
Directors and will be appointed to serve on a newly established advisory board.
The advisory board will be created only upon the completion of the pending
merger between CMP Group and Energy East. After the completion of the merger,
the advisory board, which will meet at least four times per year, will provide
advice to a new, smaller Board of Directors of Central Maine Power on various
matters, including community relations, customer service, economic development,
employee development and relations and other matters. For information on the
composition of the proposed new, smaller Board of Directors of Central Maine
Power Company, see the discussion below under Proposal 3. The members of the
advisory board will not be elected by the shareholders of Central Maine Power
Company. The advisory board members will be appointed by the new Board of
Directors of Central Maine Power and will serve at the Board's discretion.
To implement effectively the advisory board provision of the merger
agreement, the Board of Directors of Central Maine Power proposes to eliminate
the classified structure of the Board currently in effect. In addition, the
Board believes that reducing the size of the Board will enhance communications
among the directors and will permit the planned composition of the Central Maine
Power Board after the merger becomes effective. For this reason, the holders of
Central Maine Power's common stock and 6% Preferred Stock are being asked to
approve amendments to Section B.6(c) of the Capital Stock Provisions and
Sections 1.(A) and 1.(B) of the Corporate Governance Provisions of Central Maine
Power's Charter. These amendments would
(1) reduce the size of the Central Maine Power Company Board of Directors from
its currently allowed size of a minimum of nine and a maximum of eighteen
directors to a minimum of three and a maximum of nine directors, with the
initial number of directors after the effective date of this amendment
being six; and
(2) eliminate the classified structure of the Central Maine Power Company Board
of Directors that currently requires the staggered election of directors
and instead, provide for the annual election of all directors.
The Board of Directors of Central Maine Power has authorized the Charter
amendments and directed that they be submitted to a vote of Central Maine
Power's shareholders. A copy of these proposed amendments is attached to this
Information Statement as Exhibit 1.
Central Maine Power's Charter requires the affirmative vote of 80
percent of the total number of outstanding shares of Central Maine Power common
stock and 6% Preferred Stock, voting together as a single class, for approval of
Proposal 2. CMP Group holds 100 percent of the outstanding common stock of
Central Maine Power and 533 shares of the total 5,713 outstanding shares of
Central Maine Power 6% Preferred Stock. CMP Group intends to vote all of the
shares of Central Maine Power common stock and its 533 shares of 6% Preferred
Stock in favor of Proposal 2.
The proposed Charter amendments will become effective only upon the
filing of the amendments with the office of the Maine Secretary of State. This
filing will be made only if and when the pending merger between CMP Group and
Energy East becomes effective. Upon being filed with the Maine Secretary of
State, the amendments will reduce the allowed size of the Board to a minimum of
three and a maximum of nine directors. Initially, six directors will serve on
the Board after the Charter amendments become effective. Under the Charter, the
Board of Directors will continue to have the exclusive authority to change the
number of directors serving on the Board within the range of three to nine
directors. The amendments to the Charter being proposed in Proposal 2 will not
affect the exclusive authority of the Board of Directors to fix the number of
directors serving on the Board. In addition, as a result of the Charter
amendments, all directors will be elected annually at the Annual Meeting of
Shareholders of Central Maine Power Company to hold office until the next Annual
Meeting. Any increase in the authorized number of directors or any vacancies on
the Board resulting from death, resignation, retirement, disqualification,
removal from office or other cause will continue to be filled by a majority of
the directors then in office, even though that may be less than a quorum of the
Board.
Interest of Certain Persons in the Proposed Amendments. The merger
agreement between CMP Group and Energy East intends that the members of the
Board of Directors of Central Maine Power who are serving on the Board
immediately before the merger is completed will resign from the Board of
Directors and will be appointed to serve on a newly established advisory board.
The advisory board will be created only upon the completion of the pending
merger between CMP Group and Energy East. After the completion of the merger,
the advisory board, which will meet at least four times per year, will provide
advice to a new, smaller Board of Directors of Central Maine Power on various
matters, including community relations, customer service, economic development,
employee development and relations and other matters. The advisory board
members, who will be appointed by the new Board of Directors of Central Maine
Power and serve at the Board's discretion, will receive remuneration for their
services equivalent to the base remuneration currently provided to the directors
of CMP Group.
PROPOSAL 3
ELECTION OF POST-MERGER BOARD OF DIRECTORS
In Proposal 3, the holders of Central Maine Power Company's common
stock and 6% Preferred Stock are being asked to elect a new six-member Board of
Directors who will take office only upon the completion of the pending merger
between CMP Group and Energy East. The actual date that the six new directors
take office will be the date of the filing of amendments to the Charter of
Central Maine Power Company with the office of the Maine Secretary of State, as
discussed above under Proposal 2. The filing of the amendments with the Maine
Secretary of State is conditioned upon the effectiveness of the pending merger.
As discussed above in Proposal 2, the merger agreement between CMP
Group and Energy East intends that the members of the Board of Directors of
Central Maine Power who are serving on the Board immediately before the merger
is completed will resign from the Board of Directors and will be appointed to
serve on a newly established advisory board. The advisory board, which will meet
at least four times per year, will provide advice to a new, smaller board of
directors on various matters, including community relations, customer service,
economic development, employee development and relations and other matters. The
members of the advisory board will be appointed by the Board of Directors of
Central Maine Power and will serve at the Board's discretion.
After the effective date of the merger, the Board of Directors of
Central Maine Power Company will continue to be elected by the holders of
Central Maine Power's common stock and 6% Preferred Stock, voting together as a
single class. Upon the effectiveness of the amendments to Central Maine Power's
Charter discussed in Proposal 2 above, all directors will be elected annually at
the Annual Meeting of Shareholders of Central Maine Power Company to hold office
until the next Annual Meeting.
Initially, there will be six members of the Board of Directors after
the merger becomes effective and the amendments to Central Maine Power's Charter
are filed with the office of the Maine Secretary of State. Under the Charter,
the Board of Directors will continue to have the exclusive authority to change
the number of directors serving on the Board within the range authorized by the
Charter.
At the Annual Meeting, the holders of common stock and 6% Preferred Stock
of Central Maine Power Company will be asked to elect Arthur W. Adelberg, Sara
J. Burns, David T. Flanagan, Michael I. German, Kenneth M. Jasinski and Wesley
W. von Schack to the Central Maine Power Board of Directors. The terms of these
directors will take effect only upon the completion of the merger between CMP
Group and Energy East and the filing of the amendments to Central Maine Power's
Charter described in Proposal 2, which is expected to be immediately after the
completion of the pending merger.
Set forth below is information about each nominee:
<TABLE>
<S> <C> <C>
Principal Occupations and Business Experience During Past Five Term
Name and Age Years and Current Directorships of Public Companies Expires
------------ --------------------------------------------------- -------
Arthur W. Adelberg (48) Executive Vice President and Chief Financial Officer (from 2001
December 16, 1999) and Executive Vice President (from September
1, 1998 to December 16, 1999), CMP Group (1);
Executive Vice President (from May 1, 1997 to
September 1, 1998) and Vice President, Law and
Power Supply (from March 1, 1994 to May 1,
1997), Central Maine Power
Sara J. Burns (44) President (from September 1, 1998) and Chief Operating Officer, 2001
Distribution Services (from May 1, 1997 to September 1, 1998),
Central Maine Power; prior thereto, held various non-executive
positions with Central Maine Power
David T. Flanagan (52) President and Chief Executive Officer, CMP Group (1) (from 2001
September 1, 1998); President and Chief Executive Officer,
Central Maine Power (from January 1, 1994 to September 1,
1998); Director, CMP Group (1) and Central Maine Power
Michael I. German (49 ) Senior Vice President, Energy East Corporation, Stamford, 2001
Connecticut, (from April 1998); President and Chief Operating
Officer (from April 1999), Executive Vice President and Chief
Operating Officer (April 1998 to April 1999), Executive Vice
President (from May 1997 to April 1998), and Senior Vice
President-Gas Business Unit (to May 1997), New York State
Electric & Gas Corporation, Binghamton, New York
Kenneth M. Jasinski (51) Executive Vice President and General Counsel (from April 1999) 2001
and Senior Vice President and General Counsel (from April 1998
to April 1999), Energy East Corporation, Stamford,
Connecticut; Executive Vice President , New York State
Electric & Gas Corporation, Binghamton, New York (from April
1998 to April, 1999); Partner, Huber Lawrence & Abell, New
York, New York (Attorneys) (to April 1998).
Wesley W. von Schack (55) Chairman, President and Chief Executive Officer, Energy East 2001
Corporation, Stamford, Connecticut (from April 1998);
Chairman, President and Chief Executive Officer, New York
State Electric & Gas Corporation (from September 1996 to April
1999); Chairman, President and Chief Executive Officer, DQE,
Inc. and Duquesne Light Company, Pittsburgh, Pennsylvania (to
August 1996); Director, Energy East Corporation and New York
State Electric & Gas Corporation
</TABLE>
(1) CMP Group holds all of the outstanding common stock of Central Maine Power.
SECURITY OWNERSHIP
The following table sets forth information concerning the beneficial
ownership of CMP Group common stock as of March 1, 2000 by each director of
Central Maine Power and each executive officer named in the Summary Compensation
Table contained in this Information Statement. As of March 1, 2000, no director
or executive officer of Central Maine Power owned any shares of Central Maine
Power 6% Preferred Stock.
<TABLE>
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CMP Group Number of CMP Group Shares
Compensation Units Shares Beneficially Beneficially Owned Subject Total CMP Group
Directors and Named (as of Owned (as of to Options Exercisable as of Shares
Executive Officers March 1, 2000) March 1, 2000) March 1, 2000 Beneficially Owned
Charles H. Abbott 19,705 7,281 - 7,281
Lawrence A. Bennigson 906 300 - 300
Sara J. Burns - 11,669 20,136 31,805
Charleen M. Chase 11,127 1,432 - 1,432
Duane D. Fitzgerald 5,723 500 - 500
David T. Flanagan - 46,138 103,904 150,042
Robert H. Gardiner 11,749 1,000 - 1,000
David M. Jagger 24,534 1,000 - 1,000
Peter J. Moynihan 7,088 1,390 - 1,390
William J. Ryan 2,378 1,000 - 1,000
Lee M. Schepps 906 1,500 - 1,500
Kathryn M. Weare 10,916 1,292 - 1,292
Lyndel J. Wishcamper 5,782 - - -
Michael R. Cutter - 8,544 13,482 22,026
Curtis I. Call - 12,863 2,630 15,493
Anne M. Pare - 1,801 10,757 12,558
----- ------ ------
All directors and
Executive officers 100,814 97,710 150,909 248,619
</TABLE>
The number of shares of CMP Group common stock beneficially owned as of
March 1, 2000 by each of the directors and named executive officers, and the
aggregate number beneficially owned as of that date by all of the directors and
executive officers of Central Maine Power as a group, constituted less than 1
percent of the total shares of that class then outstanding. As of March 1, 2000,
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. The total number of shares held jointly for all
directors and executive officers as a group as of March 1, 2000, was 1,432
shares.
The following table sets forth the name and address of each shareholder
known to be the beneficial owner of 5 percent or more of the outstanding shares
of Central Maine Power Company 6% Preferred Stock, the number of shares
beneficially owned, and the percentage of shares owned as of March 1, 2000.
Shares of 6% Preferred Stock
Name and Address Beneficially Owned Percentage of Class
Christine M. Nyhan, Trustee 1,675 29.31% (1)
1825 Spindrift Drive
La Jolla, CA 92037
CMP Group, Inc. 533 9.3 (2)
83 Edison Drive
Augusta, ME 04336
(1) Shares held by Christine M. Nyhan, trustee, represent 29.31 percent of
the voting power of the 6% Preferred Stock and approximately .05 percent
of the combined voting power of the Central Maine Power common stock and
6% Preferred Stock, which will vote together as a single class at the
Annual Meeting on all proposals described in this Information Statement
(2) CMP Group has sole power to vote and dispose of these shares. Shares held
by CMP Group represent 9.3 percent of the voting power of the 6%
Preferred Stock. As a result of its ownership of all 31,211,471 issued
and outstanding shares of Central Maine Power common stock, representing
3,121,147 votes, and its 533 shares of Central Maine Power 6% Preferred
Stock, representing 533 votes, CMP Group holds 99.8 percent of the
combined voting power of the Central Maine Power common stock and 6%
Preferred Stock. Shares of Central Maine Power common stock and 6%
Preferred Stock will vote together as a single class on all proposals
described in this Information Statement.
Change of Control. On June 14, 1999, CMP Group, Energy East and EE Merger
Corp. entered into an Agreement and Plan of Merger, dated as of June 14, 1999,
providing for a merger transaction among CMP Group, Energy East and EE Merger
Corp. Pursuant to the merger agreement, EE Merger Corp. will merge with and into
CMP Group, with CMP Group being the surviving corporation and becoming a
wholly-owned subsidiary of Energy East. After the merger is completed, all of
the common stock of Central Maine Power will continue to be directly owned by
CMP Group.
Under the terms of the merger agreement, each outstanding share of CMP
Group common stock, other than any treasury shares or shares owned by Energy
East or any subsidiary of CMP Group or Energy East, will be converted into the
right to receive $29.50 in cash. Pursuant to the merger agreement, approximately
$957 million in cash will be paid to holders of shares of CMP Group common
stock, with additional payments being made to holders of stock options and
performance shares awarded under CMP Group's performance incentive plans.
The merger is subject to certain customary closing conditions, including
without limitation the receipt of all necessary governmental approvals and the
making of all necessary governmental filings. CMP Group's shareholders approved
the merger at a special meeting on October 7, 1999. The Maine Public Utilities
Commission, the U.S. Department of Justice, the Federal Trade Commission, the
Federal Communications Commission, the Nuclear Regulatory Commission and the
Connecticut Department of Public Utility Control have approved the merger. Other
approvals are pending from the Federal Energy Regulatory Commission and the
Securities and Exchange Commission. If the remaining approvals are granted, we
estimate that the merger could be completed around mid-2000.
Section 16(a) Beneficial Reporting Compliance. After review, Central
Maine Power Company believes that during 1999 all filing requirements under
Section 16(a) of the Securities Exchange Act with respect to shares of common
stock of CMP Group were satisfied by its directors and executive officers.
<TABLE>
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EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
Annual Compensation Long-Term Compensation
------------------- ----------------------
Awards Payouts
------ -------
Restricted
Stock LTIP
Award(s) Securities Payouts All Other
Name and Bonus ($) Underlying ($) Compensation
Principal Position Year Salary ($) ($) (1) (2) Options (#) (3) ($)
Sara J. Burns 1999 212,714 63,815 84,552 16,275 143,683 6,400 (5)
President 1998 175,000 28,239 12,727 14,711 0 3,063
1997 139,000 56,250 25,000 0 0 2,601
Michael R. Cutter 1999 145,600 43,680 57,884 11,140 126,098 5,728 (6)
Vice President 1998 140,000 16,735 22,649 11,769 0 3,025
1997 120,820 25,000 33,352 0 0 2,869
Curtis I. Call 1999 123,767 30,942 40,991 7,891 89,551 4,951 (7)
Treasurer 1998 112,515 9,527 12,904 7,882 0 3,376
1997 104,000 22,000 29,341 0 0 3,120
Anne M. Pare 1999 121,399 45,525 20,240 7,740 93,905 0
Secretary (4) 1998 116,730 17,441 7,863 8,177 0 0
1997 109,000 22,500 10,029 0 0 0
</TABLE>
(1) Amounts are performance-based cash awards under the Annual Incentive Plan.
(2) Amounts are performance-based awards in the form of CMP Group common stock
under the Annual Incentive Plan. At December 31, 1999, the number and value
of the aggregate restricted stock holdings for each of the named executive
officers were as follows: Ms. Burns, 2,259 shares and $62,264; Mr. Cutter,
3,341 shares and $92,086; Mr. Call, 2,532 shares and $69,788; and Ms. Pare,
1,065 shares and $29,354. All shares listed in the Restricted Stock Awards
column will vest on the date of consummation of the pending merger between
CMP Group and Energy East. Dividends on shares of restricted stock are
earned at the same rate as dividends on unrestricted shares of CMP Group
common stock and are reinvested in additional shares of common stock that
are subject to the same restrictions as the shares on which dividends are
earned.
(3) Amounts are performance-based awards in the form of shares of CMP Group
common stock under the Long-Term Incentive Plan.
(4) Ms. Pare is an employee and officer of CMP Group for which she serves as
Treasurer, Corporate Counsel and Secretary. Her compensation is derived
solely from her employment with CMP Group.
(5) Company matching contribution under the Savings and Investment Plan for
Non-Union Employees of Central Maine Power Company (the "401(k) Plan").
(6) Company matching contribution under the 401(k) Plan.
(7) Company matching contribution under the 401(k) Plan.
<TABLE>
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OPTION/SAR GRANTS IN LAST FISCAL YEAR
Potential Realizable Value
at Assumed
Annual Rates of Stock
Price Appreciation for
Individual Grants Option Term (2)
- --------------------------------------------------------------------------------------------- --------------------------
(a) (b) (c) (d) (e) (f) (g)
% of Total
Number of Securities Options/SARs
Underlying Granted to Exercise or
Options/SARs Employees in Base Price Expiration
Name Granted (#) Fiscal Year ($/Sh) Date (1) 5% ($) 10% ($)
---- ----------- ----------- ------ -------- ------ -------
Sara J. Burns 16,275 6.40% 18.1875 1/12/06 120,502 280,822
Michael R. Cutter 11,140 4.38% 18.1875 1/12/06 82,482 192,218
Curtis I. Call 7,891 3.10% 18.1875 1/12/06 58,426 136,158
Anne M. Pare 7,740 3.04% 18.1875 1/12/06 57,308 133,552
</TABLE>
(1) The options grant provided for vesting in increments of one-third on the
first, second and third anniversaries of the January 12, 1999 grant date. Under
the merger agreement between CMP Group and Energy East, all outstanding options
will be cancelled immediately prior to the consummation of the merger, and upon
consummation of the merger, each option holder will be entitled to the payment
of $11.3125, less applicable withholding taxes, for each option held. This
amount is the difference between the merger consideration of $29.50 per share of
CMP Group common stock and the $18.1875 exercise price of the options granted on
January 12, 1999.
(2) See note 1 to the Option/SAR Grants table above for information on the
option term and maximum value in connection with the pending merger between CMP
Group and Energy East.
<TABLE>
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AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
(a) (b) (c) (d) (e)
Number of Securities
Underlying Unexercised Value of Unexercised
Options/SARs at Fiscal In-the-Money Options/SARs
Shares Acquired on Value Realized Year-End (#) At Fiscal Year-End ($)(1)
Name Exercise (#) ($) Exercisable/Unexercisable Exercisable/Unexercisable
---- ------------ ---- ---- ------------------------- -------------------------
Sara J. Burns 0 0 14,711/16,275 149,868/152,578
Michael R. Cutter 2,000 (2) 20,148 9,769/11,140 99,522/104,438
Curtis I. Call 7,882 (2) 79,404 0/7,891 0/73,978
Anne M. Pare 0 0 8,177/7,740 83,303/72,563
</TABLE>
(1) Options are "in the money" if the market value of the underlying stock
exceeds the exercise or base price of the option.
(2) On December 29, 1999, CMP Group entered into separate loan agreements with
two executive officers of Central Maine Power. These loans were made
pursuant to a loan program authorized by the Board of Directors of CMP
Group for the purpose of providing funds for the exercise of stock options
granted to these executive officers under a performance incentive plan of
CMP Group and for the payment of related withholding taxes. The amounts
borrowed by these executive officers, excluding interest, which accrues at
an annual rate of 5.74 percent, are as follows: Curtis I. Call,
$164,304.49; and Michael R. Cutter, $41,691.06. These loans, which are
evidenced by promissory notes, are secured with the shares of common stock
of CMP Group acquired through the exercise of the stock options. CMP Group
holds the stock certificates for these shares as well as a stock power
executed by these executive officers. Under the loan agreements, the
outstanding principal amounts of these loans and all accrued interest are
due upon the earliest to occur of the sale of the stock collateral, the
completion of the pending merger between CMP Group and Energy East, any
termination of the merger agreement between CMP Group and Energy East, and
the first anniversary of the loan.
<TABLE>
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LONG-TERM INCENTIVE PLAN--AWARDS IN LAST FISCAL YEAR
Estimated Future Payouts
under Non-Stock Price-Based Plans
---------------------------------
(a) (b) (c) (d) (e) (f)
Performance
Number of or Other
Shares, Units Period Until
or Other Maturation or Threshold Target Maximum
Name Rights (#) (1) Payout (2) (#) (#) (#)
---- -------------- ---------- --- --- ---
Sara J. Burns 4,297 1999-2001 2,149 4,297 6,446
Michael R. Cutter 2,942 1999-2001 1,471 2,942 4,413
Curtis I. Call 2,084 1999-2001 1,042 2,084 3,126
Anne M. Pare 2,044 1999-2001 1,022 2,044 3,066
</TABLE>
(1) Performance shares are granted at the beginning of a three-year
performance period and are paid out in the form of CMP Group common
stock if performance goals established for that three-year period are
attained. For the performance period from January 1, 1999 through
December 31, 2001, performance is measured by reference to total
shareholder return and by the ranking of Central Maine Power compared
to other electric utilities represented in the EEI Index. All
outstanding performance shares will vest on the date of consummation of
the pending merger between CMP Group and Energy East.
(2) See note 1 to the Long-Term Incentive Plan Awards table above for
information on the vesting of the performance shares in connection with
the pending merger between CMP Group and Energy East.
PENSION PLAN TABLE
Basic Pension Plan. CMP Group and Central Maine Power make payments to
the Retirement Income Plan for Non-Union Employees (the "Basic Pension Plan")
for full-time non-union employees, including the executive officers. Estimated
annual retirement benefits payable under the Basic Pension Plan, assuming
retirement on December 31, 1999 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.
Average Annual Salary for 5 Highest Years of Service
Consecutive Years Preceding Retirement ______________________
- --------------------------------------
___15__ __20__ __25__ __30__ __35__
$125,000 $28,344 $37,793 $47,241 $56,689 $58,637
150,000 34,719 46,293 57,866 69,439 72,012
175,000 37,269 49,693 62,116 74,539 77,362
200,000 37,269 49,693 62,116 74,539 77,362
225,000 37,269 49,693 62,116 74,539 77,362
250,000 37,269 49,693 62,116 74,539 77,362
275,000 37,269 49,693 62,116 74,539 77,362
300,000 37,269 49,693 62,116 74,539 77,362
For Ms. Pare and Messrs. Cutter and Call, compensation covered by the Basic
Pension Plan consists of base salary, including base salary shown in the Salary
column of the Summary Compensation 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 $160,000 in 1999, the 1999
covered compensation under the Basic Pension Plan for Ms. Burns was limited to
that amount of her base salary. Years of service for purposes of the Basic
Pension Plan are as follows: Ms. Burns, 12 years; Mr. Cutter, 23 years; Mr.
Call, 13 years; and Ms. Pare, 12 years. 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.
EMPLOYMENT AND TERMINATION OF EMPLOYMENT ARRANGEMENTS
Existing Employment Agreements. All of the named executive officers
have employment agreements that provide for a specified minimum base salary and
for participation in compensation and benefit plans in accordance with the terms
of those plans. Each agreement provides for severance benefits if the executive
officer's employment is terminated without cause after a change of control.
If within 12 months following the consummation of a change of control,
Central Maine Power terminates the employment of Ms. Burns, Mr. Cutter or Mr.
Call, or CMP Group terminates Ms. Pare's employment, other than for cause or
disability, or they terminate their employment for any of the reasons specified
in their employment agreements, Ms. Burns will be entitled to 1.99 times her
base salary, and the remaining named executive officers will be entitled to one
times their respective base salaries. In those circumstances, they would also be
entitled to the continuation of medical and other benefits under group benefit
plans for a specified period and limited outplacement services. The closing of
the merger between CMP Group and Energy East would constitute the consummation
of a change of control under these agreements. If these executive officers
become entitled to change of control severance payments, they will also receive
an amount equal to their respective annual base salaries, paid in 12 equal
monthly installments, as reasonable compensation for their agreement not to
compete, subject to forfeiture if they compete during that 12-month period.
If severance benefits paid in connection with a change of control
constituted "excess parachute payments" under federal tax law, they would be
reduced to avoid the imposition of an excise tax on the executive officer
receiving the benefits, but only if the amount of the reduction was less than
the excise tax that the executive would otherwise be required to pay.
The agreements for Ms. Burns, Mr. Cutter, Mr. Call and Ms. Pare provide for
retention payments equal to one-half of their then-current base salaries if they
continue their employment until the earlier of May 31, 2000 or a specified
change of control event.
The employment agreements for all of the named executive officers are
automatically extended for successive one-year periods from their initial
expiration dates unless the employer or the executive officer gives notice of
non-renewal. These agreements will remain in effect for one year after the
consummation of the change of control.
Energy East and Central Maine Power have entered into a new agreement
with Ms. Burns that will become effective upon the closing of the merger. At
that time, this new employment agreement will replace and terminate Ms. Burns'
existing employment agreement. The employment rights and obligations of Ms.
Burns will be governed by the new agreement after the completion of the merger.
New Employment Agreement. The term of Ms. Burns' new employment
agreement is three years, beginning on the effective date of the merger, and
will be automatically extended each month unless either the employer or Ms.
Burns gives notice that the agreement will not be extended. Under the terms of
her employment agreement, Ms. Burns will continue to serve as the President of
Central Maine Power. Her base salary will be $300,000 and may be increased by
the Energy East board of directors. She will also participate in all incentive
compensation, fringe benefit and employee benefit plans on the same basis as
other executives and key management employees. The agreement provides for a
"gross-up" payment to Ms. Burns if any payment, benefit or distribution
constitutes an "excess parachute payment" under federal tax law on which she is
required to pay excise tax.
Under Ms. Burns' new employment agreement, Energy East, Central Maine
Power or Ms. Burns may terminate her employment at any time. If Energy East or
Central Maine Power terminates Ms. Burns' employment other than for cause or
disability, or if Ms. Burns terminates her employment for good reason, she will
receive, for the remainder of the term of her employment agreement, her base
salary, incentive compensation calculated as specified in the agreement, and
employee welfare benefits. She will also receive outplacement services costing
up to $10,000 and a payment equal to the value of fringe benefits she would have
received through the term of her employment agreement.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Overview. The objectives of the Compensation and Benefits Committee in
administering executive compensation programs for CMP Group and Central Maine
Power executives are to assure that total compensation opportunities are
competitive with those available in the utility industry and general industry
and contain significant pay-for-performance elements to align more closely the
interests of the executive officers and shareholders by supporting and
increasing shareholder value.
The Committee believes that the three existing components of total
direct compensation for executive officers, namely, base salary, annual
incentives and long-term incentives, are appropriate means of achieving these
objectives. These items of compensation are designed to be leveraged for
performance and shareholder value enhancement and to be more competitive in a
changing business environment. This performance-oriented compensation approach
is designed to support the attainment of corporate strategic goals and to
balance the focus on short and long-term performance goals.
On an overall basis, the elements of direct compensation are aligned
with a competitive market that includes electric utilities in the Edison
Electric Institute ("EEI") Index of Investor-Owned Electrics used in the
performance graph below and companies from general industry selected from a
published survey compiled by the Committee's independent compensation consultant
based on business diversity and complexity, competitive similarities, revenue
size and geography. This blended market takes into account that Central Maine
Power's electric utility business is the principal business of its holding
company parent CMP Group and also reflects the formation of the holding company
to facilitate the pursuit of appropriate non-utility business ventures. The
Committee believes that this expanded market better enables CMP Group and
Central Maine Power to attract and retain executive talent that is essential in
aggressively managing changing business requirements in a competitive climate.
Total compensation opportunities provided by base salary and annual and
long-term incentives are designed to reflect median compensation levels for
positions with comparable responsibilities in the targeted blended market. The
mix of these compensation elements is performance leveraged to support and
enhance shareholder value by tying earnings opportunities to performance
results.
Base Salary. Base salaries of the executive officers are measured
against median base salary levels for positions with comparable functional
responsibilities in the identified market, adjusted to take into account
individual abilities and skills in light of the business challenges requiring
those attributes. In setting 1999 base salaries for the executive officers, the
Committee relied on the EEI executive compensation survey of comparable
positions and information from its independent compensation consultant. Based on
this process and after taking into account individual factors, the Committee
adjusted the base salaries of the executive officers other than Ms. Burns an
average 6 percent to bring their salaries within 90 to 95 percent of the market
for their positions. The Committee adjusted Ms. Burns' base salary by 22 percent
to reflect her assumption of additional duties when she became President of
Central Maine Power in September 1998 as part of its holding company
restructuring.
Annual Incentives. In 1999, the annual incentive compensation program
for executive officers of CMP Group and Central Maine Power, including Ms.
Burns, reflected several important corporate strategic objectives focused on (i)
the transition to competition resulting from federal and state regulatory and
legislative initiatives that have opened the generation and transmission markets
to competition and (ii) the enhancement of shareholder value through a business
alliance or combination and through investments in non-utility businesses. These
objectives and their weighting were as follows: completing Central Maine Power's
generation asset sale, 40%; developing and obtaining Board approval of a
strategy designed to maximize the value of the electric transmission and
distribution business, 40%; developing and obtaining Board approval of a
performance-based rate plan to replace the Alternative Rate Plan, which expired
at the end of 1999, 10%; and achieving specified earnings levels relating to CMP
Group investments in certain subsidiaries, 10%. The Committee determined that
all of these objectives were fully achieved.
In addition to these four corporate goals, a combination of return on
equity and share prices was used to determine the percentage of the target award
pool available for awards. Based on return on equity and share price performance
levels previously established by the Committee, the Committee determined that
the maximum of two times the target pool would be available for awards.
The result of these combined performance levels and performance under
individual goals was that the maximum of 200 percent of targeted short-term
incentive compensation was earned under the plan by each of the named executive
officers in 1999. Targeted annual incentive compensation for Ms. Burns is 30
percent of her base salary. Based on 1999 performance results, she received an
award equal to 60 percent of her base salary. Targeted annual incentive
compensation for the other named executive officers is 25 percent of their base
salaries. For 1999, these executive officers received awards equal to 50 percent
of their base salaries.
Awards under the Annual Incentive Plan are paid in cash for 75 percent
of the total award, and 25 percent in the form of CMP Group common stock
purchased at a 25 percent discount for the remaining portion. Plan participants
may also elect to take up to an additional 25 percent of the total award in
stock, which is also purchased at a 25 percent discount.
Long-Term Incentive Compensation. The Long-Term Incentive Plan
("LTIP"), in which the executive officers of CMP Group and Central Maine Power
participate, is intended to focus attention more sharply on shareholder value
enhancement. Target long-term compensation opportunities are 60 percent of base
salary for Ms. Burns and 50 percent of base salary for the other named executive
officers.
The first three-year performance period under the LTIP was completed at
the end of 1999. The target performance measure previously established by the
Committee for that period was that Central Maine Power must rank at the median
of the other utilities in the EEI Index, which ranks utilities based on their
cumulative total shareholder return. The Committee also established threshold
and maximum performance levels for that three-year performance cycle. Central
Maine Power's cumulative total shareholder return of 163 percent for that period
placed it second in rank in the EEI Index. For this reason, the Committee
awarded shares of CMP Group common stock at the maximum level of 150 percent of
the number of performance shares granted at target performance levels at the
beginning of the three-year period.
In 1999, both performance shares for a three-year performance period
running until the end of the year 2001 and stock options were granted to the
executive officers as shown on the Long-Term Incentive Plan Awards table and the
Option/SAR Grants table above. Performance shares represented 63 percent of
targeted long-term incentive compensation, and stock options represented the
remaining 37 percent. These proportions reflect the limit on the number of
available shares for awards under the LTIP approved by the shareholders.
Under the LTIP, performance shares are paid out in the form of CMP
Group common stock if performance goals are attained. For the performance period
from 1999 to the end of 2001, performance will be measured by reference to total
shareholder return and by the ranking of Central Maine Power compared to other
electric utilities represented in the EEI Index for threshold, target and
maximum levels of performance.
Each option granted in 1999 represents the right to purchase one share
of common stock at the price of $18.1875 per share, the market value of the
common stock on the date of the grant. Under the LTIP, the options vest in
one-third increments on the first, second and third anniversaries of the grant.
In 1999, options were granted based on the Binomial Option Valuation Model,
using a binomial value of 15.7 percent of the market value of the stock, which
the Committee believes properly captures the value of an executive's right of
early exercise before the end of the option term.
Under the merger agreement between CMP Group and Energy East, all
outstanding options will be cancelled immediately prior to the consummation of
the merger, and upon consummation of the merger, each option holder will be
entitled to the payment of the difference between the merger consideration of
$29.50 per share of CMP Group common stock and the exercise price of the
options. All outstanding performance shares will also vest at the time of the
consummation of the merger.
Other Policies. A provision of federal tax law denies a tax deduction
to any publicly-held company for compensation paid to any named executive
officer that exceeds one million dollars in a taxable year, except for certain
performance-based compensation. The Committee has not adopted a specific policy
with respect to these compensation limits, but notes that awards under the
Annual Incentive Plan and the LTIP are performance-based.
Compensation and Benefits Committee
Charles H. Abbott, Chair
Duane D. Fitzgerald
Peter J. Moynihan
Lyndel J. Wishcamper
SHAREHOLDER RETURN COMPARISON
The graph below compares the cumulative total shareholder return on the
common stock of CMP Group with the cumulative total return on the S&P 500 Index
and the Edison Electric Institute Index of Investor-owned Electrics ("EEI
Index") at December 31 for each of the last five fiscal years (assuming the
investment of $100 in CMP Group's common stock, the S&P 500 Index and the EEI
Index on December 31, 1994, and the reinvestment of all dividends).
__________________December 31______________
-------------------------------------------
1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ----
CMP Group........ $100 $114 $ 99 $139 $180 $273
S&P 500 Index.... $100 $137 $169 $226 $290 $351
EEI Index........ $100 $131 $133 $169 $192 $157
EXHIBIT 1
Section B.6(c) of the Capital Stock Provisions of the Articles
of Incorporation is hereby amended to read in its entirety as follows:
(c) The Company shall have a Board of Directors
consisting of not fewer than three nor more than nine members.
The number of Directors may be changed by a resolution of the
Board of Directors as provided in the Corporate Governance
Provisions of these Articles of Incorporation or may otherwise
be changed as provided in these Capital Stock Provisions.
The Articles of Incorporation, as heretofore amended, are
further amended by amending Sections 1.(A) and 1.(B) of the Article
entitled "Corporate Governance Provisions," to read in their entirety
as follows:
1.(A) Except as otherwise fixed in or pursuant to these
Articles of Incorporation with respect to the right of the
holders of any class or series of capital stock having a
preference over Common Stock as to dividends or upon
liquidation to elect Directors under specified circumstances,
the Board of Directors shall consist of not fewer than three
nor more than nine members, the exact number (i) to be six
persons upon the effective date of this provision, subject to
change exclusively by the Board of Directors as provided in
this Article, and (ii) if to be changed from six persons to
some other number not fewer than three nor more than nine
persons subsequent to the effective date of this provision, to
be fixed from time to time exclusively by the Board of
Directors pursuant to a resolution adopted by a majority of
the total number of authorized Directors (whether or not there
exist any vacancies in previously authorized directorships at
the time any such resolution is presented to the Board for
adoption).
(B) Except as otherwise fixed in or pursuant to these
Articles of Incorporation with respect to the right of the
holders of any class or series of capital stock having a
preference over Common Stock as to dividends or upon
liquidation to elect Directors under specified circumstances,
newly created directorships resulting from any increase in the
authorized number of Directors or any vacancies in the Board
of Directors resulting from death, resignation, retirement,
disqualification, removal from office or other cause may be
filled only by a majority vote of the Directors then in
office, though less than a quorum of the Board of Directors,
acting at a regular or special meeting. If any applicable
provision of the Maine Business Corporation Act expressly
confers power on shareholders to fill such a directorship at a
special meeting of shareholders, such a directorship may be
filled at such a meeting only by the affirmative vote of at
least 80 percent of the combined voting power of all of the
then outstanding shares of Voting Stock, voting together as a
single class. Any Director elected to fill any vacancy shall
be elected for the unexpired term of his predecessor.