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SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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 Rule 14a-11(c) or Rule 14a-12.
FIRSTENERGY CORP.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
XXXXXXXXXXXXXXXX
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) 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: ...........................................................
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[FirstEnergy LOGO]
NOTICE OF
ANNUAL MEETING
OF SHAREHOLDERS
AND
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
MAY 15, 2001
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FirstEnergy 76 South Main St.
Akron, Ohio 44308
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NANCY C. ASHCOM
Corporate Secretary
March 28, 2001
Dear Shareholder:
You are invited to attend FirstEnergy's Annual Meeting of Shareholders at
10 a.m. on Tuesday, May 15, at the John S. Knight Center in Akron, Ohio.
As part of the agenda, business to be voted on includes six items which are
explained in this proxy statement. The first three items are the election of
three members to your Board of Directors, ratification of auditor, and approval
of amendments to the Executive and Director Incentive Compensation Plan. YOUR
BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THESE ITEMS 1, 2, AND 3 ON THE
PROXY CARD. In addition, there are three shareholder proposals. YOUR BOARD OF
DIRECTORS RECOMMENDS THAT YOU VOTE AGAINST THESE SHAREHOLDER PROPOSALS, WHICH
ARE ITEMS 4, 5, AND 6 ON THE PROXY CARD.
Please take time to review the notice of meeting and proxy statement. Then,
to ensure that your shares are represented at the Annual Meeting, appoint your
proxy and vote your shares. We are again pleased to offer our registered
shareholders the options of appointing a proxy and voting their shares by
telephone, Internet, or mail. You are encouraged to take advantage of the
telephone or Internet options, which make voting convenient, quick, and easy.
Voting instructions are provided in the proxy statement and on your proxy card.
As you vote, you may choose to stop future mailings of paper copies of the
annual report and proxy statement and view these materials through our Internet
site. If you make this choice, we would send you a proxy card and instructions
on how to access the annual report and proxy statement at a specific Internet
site. Also, if you have multiple accounts and wish to continue receiving paper
copies of the annual report and proxy statement, you can choose to stop mailings
of multiple copies of the annual report, if you have not done so already;
however, we are required to provide Internet access or send at least one copy of
the annual report to every shareholder address.
Your participation and support are important to us. If you are planning to
attend the Annual Meeting, directions to the John S. Knight Center are on the
back of your proxy card. We hope you can join us.
Sincerely,
/s/ Nancy C. Ashcom
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TABLE OF CONTENTS
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS.................... 1
PROXY STATEMENT............................................. 2
ANNUAL MEETING AND VOTING INFORMATION....................... 2
BOARD OF DIRECTORS INFORMATION.............................. 4
ITEMS TO BE VOTED ON........................................ 6
OTHER BUSINESS.............................................. 14
BUSINESS RELATIONSHIPS AND TRANSACTIONS..................... 14
BIOGRAPHICAL INFORMATION ON NOMINEES AND DIRECTORS.......... 15
SECURITY OWNERSHIP OF MANAGEMENT............................ 18
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS............. 18
SUMMARY EXECUTIVE COMPENSATION TABLE........................ 19
LONG-TERM INCENTIVE PLAN TABLE -- AWARDS IN 2000............ 20
STOCK OPTIONS GRANTED IN 2000............................... 20
AGGREGATED STOCK OPTIONS EXERCISED IN 2000 AND STOCK OPTION
VALUES AT DECEMBER 31, 2000............................... 21
SEVERANCE AGREEMENTS AND OTHER CONTRACTS.................... 21
EXECUTIVE RETIREMENT PLAN................................... 21
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE
COMPENSATION.............................................. 22
BOARD AUDIT COMMITTEE REPORT................................ 24
INDEPENDENT AUDITOR -- SERVICES AND FEES.................... 24
SHAREHOLDER RETURN -- PERFORMANCE COMPARISON GRAPHS......... 25
APPENDIX A -- AUDIT COMMITTEE CHARTER....................... A-1
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO THE HOLDERS OF SHARES OF COMMON STOCK:
The 2001 FirstEnergy Corp. Annual Meeting of Shareholders will be held at
10 a.m. on May 15, 2001, at the John S. Knight Center, 77 E. Mill Street, Akron,
Ohio. The purpose of the Annual Meeting will be to:
-- Elect three members to the Board of Directors for a term of three
years;
-- Ratify the appointment of Arthur Andersen LLP as our auditor for 2001;
-- Approve amendments to the Executive and Director Incentive
Compensation Plan;
-- Vote on three shareholder proposals, if properly presented at the
Annual Meeting; and
-- Take action on other business that properly may come before the
meeting.
Please read the accompanying proxy statement. Then vote your shares by
following the instructions on your proxy card to ensure your representation at
the Annual Meeting.
On behalf of the Board of Directors,
NANCY C. ASHCOM
Corporate Secretary
March 28, 2001
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March 28, 2001
PROXY STATEMENT
ANNUAL MEETING AND VOTING INFORMATION
WHY AM I RECEIVING THIS PROXY STATEMENT AND PROXY CARD?
You are receiving this proxy statement and a proxy card, which are being
mailed beginning on or about March 30, 2001, because you were the owner of
shares of common stock of FirstEnergy Corp. (later referred to as the Company)
at the close of business on March 21, 2001. This date is the record date which
was set by the Board of Directors (later referred to as the Board) to determine
which shareholders are entitled to vote at the Annual Meeting (later referred to
as the Meeting). This proxy statement describes issues expected to be voted upon
and gives you information about the Company and its management. The address of
the Company is 76 South Main Street, Akron, Ohio 44308-1890.
HOW DO I VOTE?
If your shares are held in "Street Name" by a broker or bank, you will
receive specific voting instructions for voting those shares.
If you are a registered shareholder, you may vote your shares through a
proxy appointed by telephone, Internet, or mail, or you may vote your shares in
person at the Meeting. To appoint a proxy and vote:
1. BY TELEPHONE (do not return your proxy card)
a. Call the toll-free number indicated on your proxy card using a
touch-tone telephone. Telephone voting is available 24 hours a
day, 7 days a week, until 10 a.m. Eastern time on May 15, 2001.
b. Enter your Control Number indicated on your proxy card.
c. Follow the simple recorded instructions.
2. BY INTERNET (do not return your proxy card)
a. Go to the Web site indicated on your proxy card. Internet voting
is available 24 hours a day, 7 days a week, until 10 a.m. Eastern
time on May 15, 2001.
b. Enter your Control Number indicated on your proxy card.
c. Follow the simple instructions.
3. BY MAIL
a. Mark your choices on your proxy card. If you properly execute your
proxy card but do not specify your choices, your shares will be
voted as recommended by your Board of Directors.
b. Date and sign your proxy card.
c. Mail your proxy card in the enclosed postage-paid envelope. If
your envelope is misplaced, send your proxy card to FirstEnergy
Corp., c/o IVS Associates, 111 Continental Drive, Suite 305,
Newark, Delaware 19713.
4. AT THE MEETING
a. You may vote in person at the Meeting, even if you previously
appointed a proxy by telephone, Internet, or mail.
You may revoke your appointment of a proxy or change your voting
instructions before the Meeting commences by sending a proxy card that revises
your previous appointment and voting instructions; by appointing a proxy and
voting by telephone or Internet after the date of your previous appointment; by
voting in person at the Meeting; or by notifying the Corporate Secretary of the
Company in writing prior to the Meeting. If a proxy card is received by the
proxy tabulator after the date that a telephone or Internet appointment is made,
the tabulator will treat the proxy card as your final instruction. For that
reason, it is important to allow your proxy card to reach the tabulator if you
want to change the voting instructions on a mailed proxy card by using the
telephone or Internet option.
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HOW DOES THE BOARD OF DIRECTORS RECOMMEND THAT I VOTE?
Your Board recommends that you vote as follows:
"FOR" the three nominees to the Board who are listed in this proxy
statement;
"FOR" the ratification of Arthur Andersen LLP as our independent auditor;
"FOR" the approval of amendments to the Executive and Director Incentive
Compensation Plan; and
"AGAINST" all three shareholder proposals.
WHAT IS A QUORUM AND WHAT OTHER VOTING INFORMATION SHOULD I BE AWARE OF?
As of the record date, 223,981,580 shares of common stock were issued and
outstanding. A majority of these shares, represented at the Meeting either in
person or by proxy, constitutes a quorum. A quorum is required to conduct
business at the Meeting. All shares represented at the Meeting are counted for
the purpose of determining a quorum, without regard to abstentions or broker
non-votes. You are entitled to one vote for each share that you owned on the
record date.
If your shares are held by a broker or bank in "Street Name", we encourage
you to provide instructions to your broker or bank by executing the voting form
supplied to you. Your broker is permitted to vote your shares on Items 1, 2, and
3 without your instructions. However, your broker cannot vote your shares on
Items 4, 5, and 6 unless you provide instructions; therefore, your failure to
give voting instructions means that your shares will not be voted on these
items, and your unvoted shares will be referred to as broker non-votes.
An item to be voted on may require a percent of votes cast, rather than a
percent of shares outstanding, to determine passage or failure. Votes cast is
defined to include both for and against votes, and excludes abstentions and
broker non-votes. Abstentions and broker non-votes are the equivalent of
negative votes when passage or failure is measured by a percent of shares
outstanding. If your proxy card is not voted properly, such as marking more than
one box for an item, your vote for that particular item will be treated as an
abstention.
You do not have rights of appraisal in regard to any item presented if you
are a dissenting shareholder.
HOW ARE PROXY CARDS BEING SOLICITED, AND WHAT IS THE COST?
The Board is soliciting your vote. We have arranged for the services of
Innisfree M&A Incorporated to solicit votes personally or by telephone, mail, or
other electronic means for a fee not to exceed $15,000 plus reimbursement of
expenses. Votes also may be solicited in a similar manner, without additional
compensation, by officers and employees of the Company. The Company will pay all
solicitation costs and will reimburse brokers and banks for postage and expenses
incurred by them for sending proxy material to beneficial owners.
WILL ANY OTHER MATTERS BE VOTED ON OTHER THAN THOSE DESCRIBED IN THIS PROXY
STATEMENT?
We do not know of any business that will be considered other than the
matters described in this proxy statement. However, if any other matters are
presented properly, your executed appointment of a proxy as outlined above will
give authority to the appointed Proxies to vote on those matters at their
discretion, unless you indicate otherwise in writing.
DO I NEED AN ADMISSION TICKET TO ATTEND THE ANNUAL MEETING?
An admission ticket is not necessary, but you will be asked to register
upon arrival at the Meeting. If your shares are held in "Street Name" by a
broker or bank, upon arrival at the Meeting, you will need to present a letter
or statement from your broker or bank indicating ownership of FirstEnergy common
stock on the record date of March 21, 2001.
WHERE CAN I FIND THE VOTING RESULTS OF THE MEETING?
We will announce the preliminary voting results at the Meeting. Final
voting results will be published in our second quarter Form 10-Q report which
will be filed with the Securities and Exchange Commission, and also will be
posted on our Internet site at www.firstenergycorp.com. In addition, we plan on
providing a summary of the Meeting in our Midyear Report to Shareholders.
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WHEN ARE SHAREHOLDER PROPOSALS FOR THE YEAR 2002 ANNUAL MEETING DUE?
A shareholder who wishes to offer a proposal for inclusion in the Company's
proxy statement and proxy card for the year 2002 Annual Meeting must submit the
proposal and any supporting statement to the Corporate Secretary at the
Company's principal office by November 28, 2001. Any proposal received after
that date will not be eligible for inclusion in the year 2002 proxy statement
and proxy card.
A shareholder who wishes to offer a proposal for consideration at the year
2002 Annual Meeting after November 28, 2001, and who wants the proposal
referenced in the Company's proxy statement, must submit the proposal to the
Corporate Secretary at the Company's principal office by February 13, 2002.
However, in order to actually raise the matter at the meeting, the shareholder
also will have to comply with the notice provisions contained in the Company's
Code of Regulations.
HOW CAN I LEARN MORE ABOUT THE OPERATIONS OF THE COMPANY?
You can learn more about the operations of the Company by reviewing the
Annual Report to Shareholders for the year ended December 31, 2000, which is
included with the mailing of this proxy statement. You also can view the Annual
Report and other information by visiting the Company's Internet site at
www.firstenergycorp.com.
A COPY OF OUR FORM 10-K ANNUAL REPORT FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION WILL BE SENT TO YOU, WITHOUT CHARGE, UPON WRITTEN REQUEST TO
NANCY C. ASHCOM, CORPORATE SECRETARY, FIRSTENERGY CORP., 76 S. MAIN STREET,
AKRON, OHIO 44308-1890.
BOARD OF DIRECTORS INFORMATION
WHAT FUNCTION DOES YOUR BOARD OF DIRECTORS PERFORM?
Your Board of Directors has the responsibility for establishing broad
corporate policies and for the overall performance of your Company. However, the
Board is not involved in day-to-day operations. The directors are kept informed
of the Company's business by various reports and documents sent to them each
month, as well as by operating and financial presentations made at Board and
committee meetings by Company management. The Board has established committees,
which are described below, to assist in performing its responsibilities.
HOW MANY MEETINGS DID THE BOARD HOLD IN 2000?
Your Board held 14 meetings during 2000. In 2000, all directors attended
75% or more of the meetings of the Board and of the committees of which they are
members.
WHAT COMMITTEES HAS THE BOARD OF DIRECTORS ESTABLISHED?
The Board has established the committees listed below. All committees,
except for the Nuclear Committee, are comprised of non-employee directors. The
Biographical Information On Nominees And Directors section includes committee
memberships.
Audit Committee
This four-member committee, whose members are independent as defined by New
York Stock Exchange listing standards, meets with management, financial
personnel, internal auditors and the independent auditor to review the adequacy
of the internal controls of the Company and the objectivity of financial
reporting. The Audit Committee recommends to the Board the appointment of the
Company's independent auditor, subject to ratification by shareholders at the
Annual Meeting. The committee also reviews management's programs to monitor
compliance with the Company's policies on business ethics and risk management.
Both the internal auditors and the independent auditor periodically meet alone
with the Audit Committee and always have unrestricted access to the committee.
The Audit Committee Report can be found on page 24 of this proxy statement. The
Audit Committee met five times in 2000.
The Audit Committee acts under a written charter adopted by the Board. A
copy of the Audit Committee Charter is attached to this proxy statement as
Appendix A.
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Compensation Committee
This four-member committee's primary duties are to recommend to the Board
the salaries of the chief executive officer and president; to discuss salary
levels for all other senior officers with the chief executive officer; and to
maintain an orderly relationship of compensation for officers which is
compatible with industry standards for comparable companies. The Compensation
Committee met four times in 2000.
Finance Committee
This four-member committee's primary duties are to oversee and ensure that
the Company's financial resources are managed prudently and cost effectively; to
make recommendations to the Board as to capital structure policies, the issuance
of securities, and other appropriate financial matters; and to approve terms of
sales of Company securities when the Board does not exercise such powers. The
Finance Committee met twice in 2000.
Nominating Committee
This four-member committee evaluates and makes recommendations to the Board
concerning possible candidates to fill vacancies on the Board. The committee
will consider nominees recommended by shareholders. These recommendations must
be submitted in writing to the committee, in care of the Corporate Secretary of
the Company, at least six months prior to the date of the Annual Meeting.
Shareholder recommendations should be accompanied by a description of the
proposed nominee's qualifications and other relevant biographical information,
together with the written consent of the proposed nominee to be named in the
proxy statement and to serve on the Board. This committee also evaluates,
monitors, and administers the Company's Corporate Governance Guidelines. The
Nominating Committee met four times in 2000.
Nuclear Committee
This three-member committee is authorized and directed to monitor and make
recommendations to both management and the Board regarding nuclear matters,
including the operation of all nuclear units in which any subsidiary of the
Company has an ownership interest. The Nuclear Committee met four times in 2000.
WHAT IS THE CURRENT COMPENSATION OF DIRECTORS?
A director who is an employee of the Company receives no compensation for
serving as a director. Directors who are not employees receive an annual
retainer consisting of $25,000 in cash and $35,000 in equity in the form of
common stock, deferred common stock, or stock options; $1,000 for each Board and
committee meeting which they attend; and reimbursement for expenses related to
attending meetings. In addition, the chair of each committee receives an
additional annual retainer of $3,000.
Directors can elect to defer all or a portion of their cash retainers,
meeting fees and chair fees in the form of deferred stock or deferred cash. At
the time of deferral, 20% is added to the funds allocated to deferred stock.
Funds deferred into the stock account are used to purchase FirstEnergy common
stock, and dividends on shares in this account are reinvested. Payouts are in
FirstEnergy common stock. The 20% increase and any attributable dividends
associated with the deferred stock are forfeited if the director leaves the
Board within three years from the date of deferral for any reason other than
retirement, disability, or death. Directors do not receive a 20% increase on the
portion of their equity retainers allocated to deferred stock.
Directors may elect to receive all or a portion of their cash retainers and
meeting fees in stock options, which are granted as of January 1 in the year
following the directors election, are earned over a ten-month period in the year
of the grant, and vest four years from the date of grant. The funds allocated to
stock options are increased by 20% at the time of deferral. This 20% vests over
a four-year period and is subject to forfeiture upon termination from the Board
for any reason other than retirement, disability, or death during the vesting
period. Directors do not receive a 20% increase on the portion of their equity
retainers allocated to stock options.
Directors may elect to defer all of their cash retainer, meeting fees, and
chair fees into an estate enhancement program, which would pay out to their
estate upon death. Additionally, directors may elect to receive FirstEnergy
common stock in lieu of their retainers.
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ITEMS TO BE VOTED ON
ITEM 1--ELECTION OF DIRECTORS
You are being asked to vote for ROBERT B. HEISLER, JR., ROBERT L.
LOUGHHEAD, AND ROBERT C. SAVAGE to serve on the Board of Directors for a
three-year term.
The Board of Directors currently consists of 11 members divided into three
groups. Three nominees will be elected at this Annual Meeting to serve for a
three-year term. The remaining directors will continue to serve as indicated in
the "BIOGRAPHICAL INFORMATION ON NOMINEES AND DIRECTORS" section, with four
directors having terms expiring in 2002 and four directors having terms expiring
in 2003.
Under the Company's Code of Regulations, at any election of directors, the
persons receiving the greatest number of votes are elected to the vacancies to
be filled. Your Board has no reason to believe that the persons nominated will
not be available to serve after being elected. If any of these nominees would
not be available to serve for any reason after being elected, shares represented
by the appointed Proxies will be voted either for a lesser number of directors
or for another person selected by the Board. However, if the inability to serve
is believed to be temporary in nature, the shares represented by the appointed
Proxies will be voted for that person who, if elected, will serve when able to
do so.
YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" ITEM 1.
ITEM 2--RATIFICATION OF THE APPOINTMENT OF AUDITOR
You are being asked to ratify the appointment of Arthur Andersen LLP as our
auditor for the year 2001. Ratification requires the favorable vote of a
majority of the votes cast.
Your Board has appointed Arthur Andersen LLP, independent public
accountants, as auditor to examine the books and accounts of the Company for the
year 2001. They have performed the annual audit for this Company since it became
a holding company in 1997, and performed the annual audits of its utility
operating companies for many years prior to that time. Their representative is
expected to attend the meeting and will have an opportunity to make a statement
and respond to appropriate questions. Refer to page 24 for information regarding
services performed by, and fees paid to, Arthur Andersen LLP during the year
2000.
YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" ITEM 2.
ITEM 3--APPROVAL OF AMENDMENTS TO THE EXECUTIVE AND DIRECTOR INCENTIVE
COMPENSATION PLAN
You are being asked to approve amendments to the FirstEnergy Corp.
Executive and Director Incentive Compensation Plan (later referred to as the
Plan) originally approved by shareholders at the Company's 1998 Annual Meeting.
The purpose of the Plan is to link the personal interests of key employees and
directors to the long-term financial success of the Company and the growth of
shareholder value. The Board believes that the proposed amendments will enhance
the Company's ability to continue to attract and retain the people upon whose
judgment and special skills the success of the Company is largely dependent and
to use stock-based incentive compensation to align the interests of key
employees and directors to those of the Company and its shareholders. These
amendments also will enable the Company to broaden participation in the Plan by
granting awards under the Plan to a larger group of employees. The Plan is
administered by the Compensation Committee of the Board of Directors, which
designates persons as key employees. Any employee of the Company and its
subsidiaries could be designated as a key employee. The Plan permits awards to
be made to key employees in the form of stock options, stock appreciation
rights, restricted stock, performance shares, and cash and to be made to non-
employee directors in the form of stock options and restricted stock. The
adoption of these amendments requires the favorable vote of a majority of the
votes cast.
The Plan currently limits the aggregate number of shares of common stock
that may be issued under the Plan to 7,500,000. If the proposed amendments are
approved, the aggregate number will be increased to 15,000,000. Shares purchased
by the Company on the open market for issuance under the Plan are included in
these totals. No more than 75% of the aggregate number of shares available under
the Plan may be issued in the form of either
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restricted stock or performance shares. If an award lapses or is forfeited, the
shares that would have been issued in connection with that award become
available to be used for other awards. The limitation on the number of shares
issuable under the Plan and the number of shares issuable in connection with
awards not yet exercised are subject to adjustment to prevent dilution. Each
grant of stock options, stock appreciation rights, and restricted stock is
evidenced by an award agreement in which the Compensation Committee sets the
specific terms and conditions governing the award. As of February 28, 2001,
5,259,226 shares have been issued under the Plan. The Board believes that
raising the share limit to 15,000,000 will afford the Company additional
flexibility in offering incentive compensation under the Plan. As stated above,
the Board believes that stock-based incentive compensation is a useful tool to
align the interests of key employees and directors to those of the Company and
its shareholders.
The Plan provides for the grant of awards in the form of stock options.
Presently, no more than 200,000 shares subject to stock options may be granted
to any participant in any calendar year. If the proposed amendments are
approved, that limit will be increased to 500,000. The Plan provides for the
grant of both incentive stock options intended to qualify under Section 422 of
the Internal Revenue Code and nonqualified options. The exercise price of each
type of option cannot be less than the fair market value of the Company's common
stock on the date of the grant based upon the average of the high and low prices
of the stock on that date. The fair market value of a share of the Company's
common stock as of February 28, 2001, was $28.065. No option awarded may expire
any later than ten years from the date of grant. Directors may convert all or
any portion of their retainer and meeting fees into stock options as described
under "BOARD OF DIRECTORS INFORMATION -- What is the current compensation of
directors?" on page 5 of this proxy statement.
As a general matter, under current federal income tax laws relating to
grants of stock options, the grant of either an incentive stock option or a
nonqualified option under the Plan will not result in taxable income to the
participant, nor will the Company be entitled to a deduction for federal income
tax purposes at the time of the option grant. In the case of a nonqualified
stock option, under federal tax law, the participant may realize taxable income
based on the difference between the exercise price and the fair market value of
the shares received at the time the option is exercised, and the Company would
be entitled to a corresponding deduction for federal income tax purposes. In the
case of an incentive stock option, under federal tax law, the participant may be
able to defer the realization of taxable income until the acquired shares are
sold. In this case, the amount of taxable income will be based on the difference
between the exercise price and the amount received in the sale, but certain
conditions, including minimum holding periods, apply. If those conditions are
satisfied, the Company is not entitled to any corresponding deduction for
federal income tax purposes.
Under the Plan, stock appreciation rights may be granted in lieu of, or in
addition to, the grant of options or may be granted independently. Like options,
the term of stock appreciation rights cannot exceed ten years. Stock
appreciation rights allow the recipient of the rights to realize the value of
the difference between the market price of the common stock at the time that the
rights are granted and the market value of that stock when the rights are
exercised. To the extent that the value of the stock has not increased during
that time, the rights will have no value. The Plan currently provides that the
maximum number of shares subject to stock appreciation rights granted to any
individual in any calendar year is 200,000, but if the proposed amendments are
approved, that 200,000 limit will be increased to 500,000. The exercise of stock
appreciation rights, whether paid in cash or stock, is considered to be an
issuance of shares for purposes of these limits.
Shares of restricted stock may also be awarded under the Plan. Restricted
stock will be valued at its fair market value as of the date of the grant.
Currently, the maximum number of shares of restricted stock that may be granted
to any participant in any calendar year is 100,000 shares. If the proposed
amendments are approved, that limit will be increased to 250,000. Any shares of
restricted stock awarded will be subject to restrictions on transferability, and
any other restrictions that the Compensation Committee may impose, until the
date on which the restrictions expire. During the period of restriction, the
holder of restricted stock will be entitled to receive dividends on the
restricted stock that generally are reinvested to purchase additional shares,
which are also restricted, and will be entitled to exercise full voting rights
with respect to the restricted stock.
Awards under the Plan may also be given in the form of performance shares.
The Plan currently provides that the maximum number of shares of common stock
that may be awarded as performance shares may not exceed 100,000, and the
maximum amount payable in cash to any participant in any calendar year pursuant
to any
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performance share award is $1,000,000. If the proposed amendments are approved,
the 100,000 limit on the maximum number of shares of common stock awarded as
performance shares will be increased to 250,000, and the $1,000,000 limit on the
amount payable in cash pursuant to any performance share award will be increased
to $2,000,000. Under the Plan, the Compensation Committee sets performance goals
over periods that it selects in advance. The performance goals are based on the
attainment by the Company or its subsidiaries of specified levels of various
measures, which may include total shareholder return, return on equity, return
on capital, earnings per share, market share, stock price, sales, costs, net
income, cash flow, retained earnings, customer satisfaction, product price
measures, safety record, service reliability, operating and maintenance cost
management, and energy production availability, among others.
The Plan also provides for cash awards that may be made to participants as
determined by the Compensation Committee. Currently, the amount payable in cash
in a calendar year to any participant with respect to any performance period
pursuant to any performance cash award may not exceed $1,000,000. If the
proposed amendments are approved, that limit will be increased to $2,000,000.
All cash awards are subject to pre-established, objective, business-related
performance measures selected by the Compensation Committee. The performance
goals may include attainment of merger milestones, specified levels of customer
satisfaction, service reliability, safety, tactical objectives, shareholder
return, expense control, revenue, margins, shareholder value, and individual
performance, among others. These performance goals are measured over periods
consisting of one to five years. Depending on the extent that the goals are
achieved, cash awards may range from 0% to 200% of the target award. As an
incentive to increase his or her ownership in the Company, a participant, with
the approval of the Compensation Committee, may convert a cash award to
restricted stock. Cash awards converted into restricted stock may be increased
by up to 20%.
Generally, upon a change of control of the Company, all stock options,
stock appreciation rights, and restricted stock immediately vest, and all
performance shares and performance cash awards are paid out in cash. Generally,
a "change of control" includes the acquisition of the beneficial ownership of
50% of the outstanding shares of common stock or other voting stock of the
Company, a change in the majority of the members of the Board of Directors, or a
reorganization, merger, or dissolution of the Company.
The Plan may be terminated, amended, or modified at any time by the Board
of Directors, but no amendment may be adopted without the approving vote of
shareholders that would increase the number of shares of the common stock that
can be issued under the Plan, change the designation of the employees who can
participate in the Plan, materially increase either the cost of the Plan or the
benefits to participants, or extend the period after the date of a grant during
which stock options or stock appreciation rights may be exercised to more than
ten years.
YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" ITEM 3.
ITEM 4--SHAREHOLDER PROPOSAL
A shareholder has indicated that a proposal will be presented at the Annual
Meeting that seeks to change the process by which the Company's Board of
Directors is elected. Adoption of the proposal requires the affirmative vote of
80 percent of the shares entitled to vote at the Meeting.
For the fourth year in a row, a shareholder proposal that seeks to change
the method by which the Company's Board of Directors is elected has been
submitted for consideration at our Annual Meeting. The proposal failed to pass
at the 1998, 1999, and 2000 Annual Meetings, but the shareholder has raised the
issue again.
Your Board of Directors is divided into three classes. Each class serves
for a term of three years, with one class, constituting approximately one-third
of the Board, being elected each year at the Company's Annual Meeting of
Shareholders. We believe that this structure enhances the continuity and
stability in the Board's business strategies and policies, since generally
two-thirds of the directors at all times will have had prior experience and
familiarity with the business and affairs of the Company.
Your Board believes that classification of the Board provides any potential
acquirer with an incentive to negotiate with the Board as opposed to a few large
shareholders. This allows the Board to negotiate terms or
8
13
consider alternatives that maximize value for all shareholders. In a situation
in which someone is seeking to acquire the Company, because of our Board
structure, holders of large blocks of Company stock will be less able to
negotiate special concessions or terms at the expense of smaller shareholders.
Your Board of Directors believes that having directors divided into three groups
and electing a portion of those directors each year helps to ensure that the
Company will be managed in the best interests of all shareholders, both large
and small, and that all shareholder interests will be addressed equitably, thus
minimizing the potential negative impact on any group of shareholders.
The shareholder's proposal would have you believe that the current method
of electing directors makes the Company less competitive. However, we continue
to believe that the policies and strategies, which have been adopted, have
improved the fundamental soundness of the Company and have helped to make it a
strong competitor in the deregulated utility industry. We believe the change the
shareholder is asking you to adopt will not accomplish any useful purpose and
may, in fact, be harmful to some shareholders. It is a change that should not be
made.
The shareholder asserts that the Company's opposition to the similar
proposal submitted in 2000 included two costly mass mailings that were paid for
without the consent of shareholders. This seems to imply that the Company did
something wrong or unethical. But this is not the case. The Company's opposition
to the proposal in question was properly limited to its opposition statement in
the 2000 proxy materials. The mailings on April 4, 2000, and April 12, 2000,
were brief one-page letters to shareholders who had not yet voted. Both simply
encouraged shareholders to vote and reminded them of the Internet and telephone
voting methods.
Your Board of Directors places the good of the Company and the best
interests of the shareholders first. The Board has considered the proposal and
the level of support it received in 1998, 1999, and 2000 and continues to
believe the proposal should be rejected. THE BOARD ENCOURAGES YOU TO VOTE
AGAINST THIS PROPOSAL.
The following is the complete text of the proposal as submitted. The
proponent's name, address, and number of shares held will be furnished upon
written or oral request.
-------------BEGINNING OF SHAREHOLDER PROPOSAL-------------
"RESOLVED:
ANNUAL ELECTION OF EACH DIRECTOR
ADOPT PROPOSAL THAT WON 52% APPROVAL
FirstEnergy shareholders request the Board of Directors take all necessary steps
to adopt annual election of each director as corporate policy. Also, require
that any future action on this topic be put to shareholder vote -- as a separate
proposal.
SUPPORTING STATEMENT
The election of directors is the primary avenue for shareholders to hold
management accountable for its performance.
Requiring each director to stand for election annually gives shareholders
an opportunity to register their views on the performance of each director
individually and the board as a group. Many institutional investors hold that
electing each director annually is one of the best methods to ensure that the
Company will be managed in the best interest of investors.
This proposal topic won a 52% majority of the votes cast for and against at
the April 1999 shareholder meeting. Additionally, this proposal topic won nearly
50% of the votes cast for and against at the April 2000 shareholder meeting.
The 2000 vote was achieved notwithstanding a costly management campaign
against this proposal topic -- paid for by shareholders without their consent.
This campaign included 2 separate mass-mailings.
Additionally this proposal topic arguably would have won a 2nd consecutive
majority vote if the company did not influence the vote of stock in the
Company's Employee Savings Plans. Employee Plans hold 7% of the voting shares of
the company. Many institutional investors believe that Employee Plan trustees
frequently vote according to management's position.
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MANAGEMENT REFUSED TO TAKE ANY MEANINGFUL ACTION IN RESPONSE TO THE 52%
SHAREHOLDER APPROVAL in spite of a letter from the Council of Institutional
Investors (www.cii.org). FirstEnergy is 53% owned by institutional investors.
Some independent proxy analysts are particularly concerned about the lack
of annual election of each director combined with poison pills and other
takeover defenses as is the case with FirstEnergy. FirstEnergy management is
further protected by strong anti-takeover provisions under Ohio law.
The Plain Dealer reported this proposal topic was presented at the 2000
shareholder meeting by John Chevedden, Redondo Beach, Calif., with the
supporting statement that "the best boards continue to raise the bar."
The adoption of this one proposal to improve a significant management rule
deserves particular attention because the company has important rules and
practices that are not competitive -- according to many institutional investors:
- - No confidential voting.
- - No cumulative voting.
- - 3-year director terms.
- - Poison pill.
- - Two directors with 20 and 21-year terms.
- - Management refuses to act on a majority shareholder vote and the company is
53%-owned by institutional shareholders.
- - 80% super-majority vote required to REMOVE A DIRECTOR WITH CAUSE. Yet less
than 80% of shareholders typically vote.
- - Hence the 80% vote requirement makes director removal for cause virtually
impossible.
To improve shareholder value vote for:
ANNUAL ELECTION OF EACH DIRECTOR
YES ON 4"
-------------END OF SHAREHOLDER PROPOSAL-------------
YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "AGAINST" ITEM 4.
ITEM 5--SHAREHOLDER PROPOSAL
A shareholder has indicated that a proposal will be presented at the Annual
Meeting that seeks to change the voting requirements contained in the Company's
governing documents. Adoption of the proposal requires the affirmative vote of
80 percent of the shares entitled to vote at the Meeting. A virtually identical
proposal was defeated by shareholders last year.
Certain proposals presented to shareholders require the approval of 80
percent of the shares entitled to vote. We believe that this requirement,
contained in our governing documents, ensures that decisions affecting only the
most important aspects of the existence of the Company and how it operates are
fair to all of our shareholders, large and small. It only applies to provisions
that are extremely significant to the Company and that should, therefore, be
important to you. The Board believes that "80 percent" voting is a valuable tool
for ensuring that the votes of all shareholders are valued with respect to
fundamental corporate issues.
We believe the present voting requirements are crucial in assuring that all
shareholders are treated fairly. A major reason advanced for this proposal is to
"facilitate the adoption" of the proposal discussed in Item 4. However, adoption
of the proposal to change voting requirements would have ramifications beyond
the manner in which the Board of Directors is elected. In fact, this proposal is
designed to have an across-the-board effect and, if adopted, would lead to the
protection afforded by these voting provisions being stripped from shareholders
on all significant matters.
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15
As is the case with the supporting statement to Item 4, the proponent's
characterization of the Company's mailings in connection with the 2000 Annual
Meeting seems to imply wrongdoing. Those mailings were exactly as described in
our opposition statement to Item 4 and were entirely proper. Those of you who
were shareholders last year received those mailings, and we hope that you can
appreciate how objectionable we find the proponent's characterization of our
attempt to encourage all shareholders to join in the voting process.
Your Board of Directors believes adoption of this proposal will have a
detrimental effect on the interests of shareholders. We continue to believe
that, for all shareholders to be treated fairly under all circumstances, the
current voting requirements must be retained. THE BOARD ENCOURAGES YOU TO VOTE
AGAINST THIS PROPOSAL.
The following is the complete text of the proposal as submitted. The
proponent's name, address, and number of shares held will be furnished upon
written or oral request.
-------------BEGINNING OF SHAREHOLDER PROPOSAL-------------
"RESOLVED:
REINSTATE SIMPLE-MAJORITY VOTE
ADOPT PROPOSAL THAT WON 48% OF YES-NO SHAREHOLDER VOTE IN 2000
FirstEnergy shareholders recommend reinstate simple majority vote on each issue
submitted to shareholder vote. Delete FirstEnergy requirements for greater than
a majority shareholder vote. This includes the 80% vote requirement to remove a
director WITH CAUSE. Also, require that any change on this proposal topic be put
to shareholder vote -- as a separate proposal.
The 48% vote in 2000 was particularly impressive since:
1) It was the first submittal of this proposal topic at FirstEnergy.
2) Management made an expensive effort to influence voting by sending 2 separate
one-sided voting instructions -- at shareholder expense and without shareholder
approval -- to thousands of shareholders. These 2 mass-mailings presented only
management's view. The merits of all shareholder proposals were omitted.
Additionally this proposal topic arguably would have won majority approval
if the company did not influence the vote of stock in the Company's Employee
Savings Plans. Employee Plans hold 7% of the voting shares of the company.
SUPPORTING STATEMENT:
WHY RETURN TO SIMPLE-MAJORITY VOTE?
- - Simple-majority proposals like this proposal won 54% APPROVAL from
shareholders at major companies in 1999 and 2000 -- Investor Responsibility
Research Center.
SUPER-MAJORITY REQUIREMENTS ARE WIDELY OPPOSED:
- - The bi-partisan National Conference of State Legislatures urged States to ban
super-majority rules.
- - Major professionally-managed funds, including those holding substantial
FirstEnergy stock, declare that super-majority rules are not in the best
interest of shareholders.
- - Simple-majority proponents said that super-majority requirements may devaluate
the stock.
- - Under the existing rule, if 79% of shares outstanding voted yes to remove a
director WITH CAUSE and 1% voted no -- only 1% of shares would override the
79% majority.
A SIMPLE-MAJORITY VOTE REQUIREMENT WILL FACILITATE THE ADOPTION OF PROPOSAL 4
FOR ANNUAL ELECTION OF ALL DIRECTORS IN THIS PROXY STATEMENT:
- - The proposal 4 topic for Annual Election of All Directors won 52% of the
FirstEnergy yes-no shareholder vote in 1999.
- - However, management said that unless this proposal 5 topic is adopted, Annual
Election of All Directors will require an 80% vote of all outstanding shares.
- - Thus in an election with an 80% turn-out, a 1%-minority will override a
79%-majority, unless it is reformed by this proposal.
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WHAT INCENTIVE IS THERE FOR GOOD CORPORATE GOVERNANCE--HIGHLIGHTED BY
SIMPLE-MAJORITY VOTE?
A new survey by the international management consultancy McKinsey & Co.
shows that institutional investors would pay an 18% premium for good corporate
governance.
McKinsey warns that companies that fail to reform will be at a competitive
disadvantage in attracting capital to finance growth.
Wall Street Journal June 19, 2000
To increase shareholder value:
ADOPT PROPOSAL THAT WON 48% APPROVAL
REINSTATE SIMPLE-MAJORITY VOTE
YES ON 5"
-------------END OF SHAREHOLDER PROPOSAL-------------
YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "AGAINST" ITEM 5.
ITEM 6--SHAREHOLDER PROPOSAL
A shareholder has indicated that a proposal will be presented at the Annual
Meeting asking shareholders to approve a resolution recommending (a) that a
performance-based senior executive compensation system be established that
focuses the five most highly paid members of management on advancing the
long-term success of the Company and (b) that the Company in its annual report
to shareholders (i) disclose specific performance criteria and the target level
that must be achieved to satisfy that criteria, (ii) explain why the particular
criteria were selected, (iii) rank each performance factor in order of
importance, and (iv) disclose the weight attached to each such factor. Adoption
of the proposal requires the favorable vote of a majority of the votes cast.
Your Board of Directors opposes this proposal for two reasons. First,
although we agree with the proponent that a performance-based senior executive
compensation system is important, the Company already has in place a successful
performance-based compensation system designed to align the compensation of
senior management, including the five most highly paid members of management,
with the Company's performance, business strategies and growth in shareholder
value. Second, as discussed below, we already disclose much of what the
proponent is requesting; however, although we totally agree that management
should be held accountable and that we should set appropriate performance
targets, we oppose disclosing our targets because we believe such disclosure of
sensitive and confidential information would put us at a disadvantage with
respect to our competitors and suppliers. This would not be in our best interest
or the best interest of our shareholders.
In accordance with the Securities and Exchange Commission's detailed proxy
rules, the Company already supplies substantially all of the information
requested by the proponent as to its Chief Executive Officer in its proxy
statement for annual shareholder meetings. The Board Compensation Committee
Report on Executive Compensation included in this proxy statement lists each of
the corporate financial and strategic objectives, and its associated weight (and
thus importance), that were used in arriving at the Chief Executive Officer's
compensation. The criteria, and the associated weight, applied to other
executive officers is a function of their area of responsibility and rank.
However, the Company does not disclose sensitive information that it believes
would, if disclosed, put it at a disadvantage with respect to its competitors
and suppliers, especially as the deregulation of the electric utility industry
proceeds and we face additional competition in all facets of our business. As a
matter of fact, the Securities and Exchange Commission regulation requiring
disclosure of executive compensation specifically states that "registrants are
not required to disclose target levels with respect to specific quantitative or
qualitative performance-related factors considered by the committee (or board),
or any factors or criteria involving confidential commercial or business
information, the disclosure of which would have an adverse effect on the
registrant."
Currently, the Company's executive compensation system consists of (1) base
salaries; (2) annual cash incentive opportunities; (3) performance shares; and
(4) stock options. This compensation system is designed to focus management on
the long-term success of the Company, as well as the achievement of shorter-term
goals,
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and is described in more detail in the Board Compensation Committee Report on
Executive Compensation on page 22 in this proxy statement.
Base salaries are reviewed annually and are subject to adjustments based on
factors which include market comparisons to the pay packages of executive
officers at similar-size energy services companies, as well as business unit and
corporate performance. An executive's annual cash incentive opportunity is based
on the achievement of preset financial and operational targets deemed to have
importance in creating shareholder value. In the case of both base compensation
and incentive opportunity, the level of compensation is based on meeting
short-term goals but the goals, if achieved, contribute to the long-term success
of the Company.
The performance share component compensates an executive to the extent that
the Company's stock price rises over a three-year period, obviously an incentive
geared to the Company's long-term success. In addition, however, the performance
share award can be increased or decreased based on the total return of the
Company's common stock (i.e., stock appreciation plus reinvested dividends)
relative to an index of energy companies during the period. The performance
share component thus focuses the executive not only on the Company's individual
long-term success but also on its success relative to its peers.
The stock option component of an executive's compensation links the
personal interest of the executive directly to the long-term financial success
of the Company and growth in shareholder value.
Your Board of Directors places the good of the Company and the best
interests of the shareholders first and believes the Company is currently making
available all required and necessary information regarding its executive
compensation system. To make further disclosure of, for instance, specific
target levels, could give competitors and suppliers information that could be
used against the Company and thus harm shareholder interests. THE BOARD
ENCOURAGES YOU TO VOTE AGAINST THIS PROPOSAL.
The following is the complete text of the proposal as submitted. The
proponent's name, address and number of shares held will be furnished upon
written or oral request.
-------------BEGINNING OF SHAREHOLDER PROPOSAL-------------
"RESOLVED, that the shareholders of FirstEnergy Corporation ("Company") hereby
request that the Company's Board of Directors take the necessary steps to
establish a performance-based senior executive compensation system that focuses
the five most highly-paid members of management on advancing the long-term
success of the Company. To demonstrate that such steps have been taken, we
request that the Compensation Committee Report included in the company's annual
report to shareholders identify specific performance criteria and explain why
they have been selected; the specific target level that must be achieved to
satisfy that performance criteria; and rank each performance factor in order of
importance, as well as identify the weight attached to each factor.
SUPPORTING STATEMENT
The long-term success of the Company depends on the ability of the board of
directors and senior management to establish and implement a strategic plan that
ensures the Company's long-term success. This strategic plan must meet the needs
of the Company's customers, recognize the important contributions of its
employees, accept the Company's responsibility to associate itself with
responsible vendors and suppliers, and satisfy all legal and ethical
responsibilities to the Company's immediate and broader community.
Senior management must be keenly focused on fulfilling these strategic plans.
The best way to ensure proper focus is through a performance-based executive
compensation system that generously rewards superior performance. Specific
financial and non-financial performance criteria should be selected to focus the
five most highly-paid members of management on advancing the long-term success
of the Company.
This system must be transparent, justifiable and challenging to focus senior
management and the rest of the Company. Accountability must be the cornerstone
of the system. Such a system would serve to motivate senior management and all
other employees throughout the ranks.
Too often, though, the executive compensation system may reward average or below
average performance and does not motivate senior management to excel. Rather
than challenging them to achieve superior performance, enormous compensation
packages, including massive stock option grants, effectuate significant and
unjustifiable transfer of wealth from shareholders to managers. Such a system is
not in shareholders' interest.
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The Company's most recent proxy statement provides in pertinent part:
The Committee approved six long-term 1999 corporate financial and strategic
objectives for Mr. Holland [retiring Chairman and CEO]. These objectives
related to the achievement of confidential target levels regarding total
shareholder return relative to the Edison Electric Institute's Index of
Investor-Owned Electric Companies (the "Index"), merger savings, profit,
earnings per share, customer service excellence, and the level of
performance at FirstEnergy's nuclear facilities as measured by an industry
index.
The Company's unwillingness to disclose target levels for these performance
criteria diminishes shareholders' ability to monitor the Company's compensation
practices and ascertain whether senior management is truly being rewarded for
outstanding performance. Adoption of this proposal would advance a senior
management compensation system that promotes accountability, ensures management
is rewarded for excellent performance, not average results, and focuses
management and all employees on achieving long-term success. We urge you to vote
for this proposal."
-------------END OF SHAREHOLDER PROPOSAL-------------
YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "AGAINST" ITEM 6.
OTHER BUSINESS
We have received notification from the person who is acting as
representative for the proponents of two of the shareholder proposals that are
contained in this proxy statement that an additional proposal may be presented
at the Annual Meeting requiring the Company, its outside auditor, and its
outside legal counsel to report on certain matters. These matters relate to the
reporting, in a specific way, of voting results, the way in which the Company's
response to shareholder proposals is presented in the proxy statement and the
method the Company uses to disclose the proponent of a shareholder proposal.
Also included is a request for a report from the independent auditor regarding
information requested by this person at the 2000 Annual Meeting on expenses
incurred from outside legal counsel for work done last year in helping the
Company seek guidance from the Securities and Exchange Commission concerning
certain shareholder proposals, and the amounts paid by the Company to its
outside proxy solicitor from 1997 to 2001. Finally, the proposal seeks a report
from the Company's outside legal counsel setting forth the reasons given to the
Securities and Exchange Commission concerning why the inclusion in this proxy
statement of certain shareholder proposals was not appropriate and the amount
billed by counsel for its services in this regard.
We believe that the proposal is nothing more than an attempt by this person
to advance a particular agenda and is not necessary, appropriate, or in the best
interest of shareholders. If this proposal is properly presented at the Meeting
and a vote is taken, the proxies appointed by you pursuant to this proxy
statement will use the discretionary voting power granted to them to oppose this
proposal.
BUSINESS RELATIONSHIPS AND TRANSACTIONS
FirstEnergy Services Corp., a subsidiary of the Company, entered into an
18-month contract from December 1, 2000 to June 1, 2002 with Duck Creek Energy,
Inc. to purchase variable amounts of gas at a fixed negotiated price. Payments
to Duck Creek Energy, Inc. for December 2000 purchases approximated $31,000 and
are estimated to be $370,000 in 2001. Mr. Russell W. Maier, a director, has a
10%-15% ownership interest in certain oil and gas wells operated by Duck Creek
Energy, Inc., and some of the gas supplied under this contract will come from
those wells.
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BIOGRAPHICAL INFORMATION ON NOMINEES AND DIRECTORS
NOMINEES FOR ELECTION AS DIRECTORS
Terms expiring in the Year 2004:
[HEISLER PHOTO]
ROBERT B. HEISLER, JR. -- Group Executive Vice President
since 1997 of KeyCorp, a financial services company which
provides investment management, retail and commercial
banking, consumer finance, and investment banking
products and services. President of Key Capital Partners
from 1997-2000. President and Chief Executive Officer
from 1995-1996 of Society National Bank. Age 52. He is
also a Director of Key Trust Company of Ohio, National
Association. Director of the Company since 1998.
Committees: Compensation, Nominating
[LOUGHHEAD PHOTO]
ROBERT L. LOUGHHEAD -- Retired in 1987 as Chairman of the
Board, President and Chief Executive Officer of Weirton
Steel Corporation, a manufacturer of steel products. Age
71. Director of the Company since 1997 and Director of
Ohio Edison from 1980-1997.
Committees: Audit, Compensation
[SAVAGE PHOTO]
ROBERT C. SAVAGE -- President and Chief Executive Officer
since 1973 of Savage & Associates, Inc., an insurance,
financial planning and estate planning firm. Age 63.
Director of the Company since 1997 and Director of
Centerior Energy from 1990-1997.
Committees: Finance, Nominating
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OTHER MEMBERS OF THE BOARD
Terms expiring in the Year 2002:
[ALEXANDER PHOTO]
ANTHONY J. ALEXANDER -- President of the Company since
2000. Executive Vice President and General Counsel of the
Company, The Illuminating Company, Ohio Edison, and
Toledo Edison from 1997-2000, and of Pennsylvania Power
from 1999-2000. Senior Vice President and General Counsel
of Ohio Edison from 1991-1997. Age 49. He is also a
Director of Ohio Edison, Pennsylvania Power, The
Illuminating Company, and Toledo Edison. Director of the
Company since 2000.
[BURG PHOTO]
H. PETER BURG -- Chairman of the Board and Chief
Executive Officer of the Company since 2000, Chairman of
the Board of Pennsylvania Power since 1999, and President
of Ohio Edison, The Illuminating Company, and Toledo
Edison since 1997. President and Chief Executive Officer
from 1999-2000, President and Chief Operating Officer
from 1998-1999, and President and Chief Financial Officer
from 1997-1998 of the Company. President, Chief Operating
Officer and Chief Financial Officer from 1996-1997, and
Senior Vice President and Chief Financial Officer from
1989-1996 of Ohio Edison. Age 54. He is also a Director
of Ohio Edison, Pennsylvania Power, The Illuminating
Company, and Toledo Edison. Director of the Company since
1997 and Director of Ohio Edison since 1989.
Committee: Nuclear
[MAIER PHOTO]
RUSSELL W. MAIER -- Retired in 1998 as Chairman of the
Board and Chief Executive Officer (a position held since
1989) of Republic Engineered Steels, Inc., a specialty
bar producer. Age 64. Director of the Company since 1997
and Director of Ohio Edison from 1995-1997.
Committees: Compensation, Nuclear
[WILLIAMS PHOTO]
JESSE T. WILLIAMS, SR. -- Retired in 1998 as Vice
President of Human Resources Policy, Employment Practices
and Systems (a position held since 1996) of The Goodyear
Tire & Rubber Company, a manufacturer of tires and
rubber-related products. Vice President, Human Resources
Policy and Employment Practices from 1995-1996 of The
Goodyear Tire & Rubber Company. Age 61. Director of the
Company since 1997 and Director of Ohio Edison from
1992-1997.
Committees: Audit, Nominating
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Terms expiring in the Year 2003:
[CARTWRIGHT PHOTO]
DR. CAROL A. CARTWRIGHT -- President since 1991 of Kent
State University. Age 59. She is also a Director of
PolyOne Corporation and KeyCorp. Director of the Company
since 1997 and Director of Ohio Edison from 1992-1997.
Committees: Finance, Nominating
[CONWAY PHOTO]
WILLIAM F. CONWAY -- President since 1994 of William F.
Conway & Associates, Inc., a management consulting firm.
Age 70. He is also a Director of Northeast Utilities
System. Director of the Company since 1997 and Director
of Centerior Energy from 1994-1997.
Committees: Audit, Nuclear
[POWERS PHOTO]
PAUL J. POWERS -- Retired in 2000 as Chairman of the
Board and Chief Executive Officer (a position held since
1987) of Commercial Intertech Corp., a hydraulic
components and metal components manufacturer. Age 66. He
is also a Director of Global Marine Inc., Twin Disc,
Incorporated, and York International Corp. Director of
the Company since 1997 and Director of Ohio Edison from
1992-1997.
Committees: Compensation, Finance
[SMART PHOTO]
GEORGE M. SMART -- Chairman of the Board and President
since 1993 of Phoenix Packaging Corporation, a
manufacturer of easy-opening lids. Age 55. He is also a
Director of UNB Corp. Director of the Company since 1997
and Director of Ohio Edison from 1988-1997.
Committees: Audit, Finance
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SECURITY OWNERSHIP OF MANAGEMENT
The following table shows shares of stock beneficially owned as of February
28, 2001, by each director and nominee; the executive officers named in the
Summary Executive Compensation Table; and all directors and executive officers
as a group. Also listed, as of February 28, are shares deferred by executive
officers under the Executive Deferred Compensation Plan and common stock
equivalents credited to executive officers as a result of participation in
incentive compensation plans.
DEFERRED SHARES AND
SHARES BENEFICIALLY COMMON STOCK
NAME CLASS OF STOCK OWNED(1) EQUIVALENTS(2)
---- -------------- ------------------- -------------------
Anthony J. Alexander Common 106,183 31,672
H. Peter Burg Common 132,191 60,950
Dr. Carol A. Cartwright Common 7,358
William F. Conway Common 4,571
Arthur R. Garfield Common 10,073 17,801
John A. Gill Common 20,459 17,230
Robert B. Heisler, Jr. Common 5,474
Robert L. Loughhead Common 5,835
Russell W. Maier Common 5,362
Richard H. Marsh Common 8,517 11,302
Paul J. Powers Common 14,695
Robert C. Savage Common 4,419
George M. Smart Common 5,813
Jesse T. Williams, Sr. Common 5,281
All Directors & Executive Officers as a
Group Common 425,371 246,698
(1) Shares beneficially owned include (a) any shares with respect to which the
person has a direct or indirect pecuniary interest and (b) shares that the
person has the right to acquire beneficial ownership within 60 days of
February 28, 2001 (Alexander - 10,000 shares; Burg - 15,000 shares; Garfield
- 2,500 shares; Gill - 5,000 shares; Marsh - 5,000 shares; and all directors
and executive officers as a group - 67,500 shares). The percentage of shares
beneficially owned by any director or nominee, or by all directors and
executive officers as a group, does not exceed one percent of the class
owned.
(2) Common stock equivalents represent the cumulative number of performance and
phantom shares credited to each executive officer. The value of these
equivalents is measured in part by the market price of the Company's common
stock. Because final payments may vary due to performance factors (see the
narrative under the Long-Term Incentive Plan Table), the value of an
executive's common stock equivalent account may not correlate directly with
the stock's market price. Performance, phantom, and deferred shares do not
have voting rights or other rights associated with ownership of common
stock.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table shows all persons known to be the beneficial owner of
more than five percent of common shares of the Company as of December 31, 2000.
VOTING POWER INVESTMENT POWER
SHARES PERCENT OF NUMBER OF SHARES NUMBER OF SHARES
BENEFICIALLY COMMON SHARES ----------------------- -----------------------
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED OUTSTANDING SOLE SHARED SOLE SHARED
- ------------------------------------ ------------ ------------- ---------- ---------- ---------- ----------
AXA Financial, Inc. (and affiliates) 20,367,547 8.90% 9,648,565 2,481,349 20,169,447 198,100
1290 Avenue of the Americas, 11th
Fl.,
New York, NY 10104
Barclays Global Investors, N.A. (and
affiliates) 12,971,748 5.75% 11,861,192 0 12,971,748 0
45 Fremont Street, San Francisco, CA
94105
Barrow, Hanley, Mewhinney & Strauss,
Inc.(1) 16,112,934 6.96% 3,057,100 13,055,834 16,112,934 0
3232 McKinney Avenue, 15th Fl.,
Dallas, TX 75204
State Street Bank and Trust Company 17,210,546 7.60% 3,957,533 12,765,261 17,195,266 15,280
225 Franklin Street, Boston, MA 02110
(1) Vanguard Windsor Funds-Windsor II Fund filed a Schedule 13G with the
Securities and Exchange Commission disclosing that it beneficially owns, and
has sole voting power for, 12,062,177 shares. Both Barrow and Vanguard have
confirmed that 11,878,377 of the shares reported by Vanguard are managed by
Barrow and are included in the shares disclosed as beneficially owned by
Barrow.
18
23
SUMMARY EXECUTIVE COMPENSATION TABLE
LONG-TERM COMPENSATION
-----------------------------------
AWARDS PAYOUTS
----------------------- ---------
ANNUAL COMPENSATION SECURITIES LONG-TERM
NAME AND ------------------------------ RESTRICTED UNDERLYING INCENTIVE ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS OTHER(1) STOCK(2) OPTIONS PLAN(3) COMPENSATION(4)
------------------ ---- -------- -------- -------- ---------- ---------- --------- ----------------
H. Peter Burg 2000 $765,616 $383,546 $8,540 $2,775,000 200,000 $458,198 $40,488
Chairman and Chief 1999 $663,011 $319,292 $3,805 $ 0 87,703 $ 80,621 $51,350
Executive Officer 1998 $503,136 $ 85,969 $4,255 $ 0 32,012 $283,171 $37,332
Anthony J. Alexander 2000 $505,687 $420,190 $7,511 $1,665,000 120,000 $277,117 $23,331
President 1999 $406,100 $295,142 $2,680 $ 0 56,367 $ 68,804 $29,931
1998 $367,899 $ 91,119 $3,089 $ 618,750 18,925 $228,695 $25,918
John A. Gill 2000 $317,098 $ 87,282 $7,516 $ 0 40,000 $144,394 $40,167
Senior Vice President 1999 $299,110 $105,862 $3,260 $ 0 27,603 $ 45,635 $46,552
1998 $260,688 $ 67,027 $3,097 $ 0 8,796 $170,153 $41,993
Richard H. Marsh 2000 $295,198 $ 81,881 $4,354 $ 0 40,000 $ 64,084 $15,087
Vice President and 1999 $272,523 $103,407 $1,420 $ 0 27,603 $ 12,757 $17,397
Chief Financial Officer 1998 $231,747 $ 62,513 $1,865 $ 0 8,796 $ 32,237 $11,997
Arthur R. Garfield 2000 $305,429 $ 44,265 $4,518 $ 0 40,000 $ 84,357 $28,153
Senior Vice President 1999 $215,400 $ 56,068 $2,625 $ 0 14,233 $ 29,260 $ 4,059
1998 $192,737 $ 31,939 $2,160 $ 0 4,901 $ 34,504 $ 3,768
(1) Consists of reimbursement for income tax obligations on Executive Indemnity
Program premium and on perquisites.
(2) Reflects the dollar value of any restricted common stock award on the date
of the award, determined by multiplying the number of shares awarded by the
closing market price of the Company's common stock on the award date. At
December 31, 2000, the total number of all restricted stock holdings and
values determined by multiplying the total number of restricted shares by
the closing market price of the Company's common stock on December 31, 2000,
are as follows: Burg -- 100,000 shares ($3,156,000); and Alexander -- 80,000
shares ($2,524,800). Dividends are paid in cash on restricted shares granted
in 1998, but dividends on all other restricted shares are reinvested into
additional shares which also are restricted. Restricted shares cannot be
sold by the executive during the restricted period, and these shares can be
forfeited if the executive leaves the Company prior to the end of the
restricted period.
(3) These amounts represent cash payouts of awards granted in prior years under
the Executive Incentive Compensation Plan, and includes amounts deferred
into the Executive Deferred Compensation Plan. Amounts deferred into the
stock account feature of this Plan are increased by 20% at the time of
deferral and are treated as though invested in the Company's common stock
with a dividend reinvestment feature. The final payout of the deferred
amounts is in the Company's common stock. Any value not attributable to the
dollar amount actually deferred by an executive is forfeited if he or she
resigns or is terminated for cause prior to the scheduled payout date.
(4) For 2000, amount is comprised of (1) matching Company common stock
contributions under the tax-qualified Savings Plan: Burg-$5,762;
Alexander-$5,762; Gill-$2,572; Marsh-$2,365; Garfield-$3,809; (2) the
current dollar value of the Company's portion of the premiums paid in 2000
for insurance policies under the Executive Supplemental Life Plan:
Burg-$15,496; Alexander-$7,631; Gill-$5,350; Marsh-$3,288; Garfield-
$10,822; (3) above market interest earned under the Executive Deferred
Compensation Plan: Burg-$17,006; Alexander-$8,519; Gill-$30,876;
Marsh-$9,398; Garfield-$13,395; and (4) a portion of the Executive Indemnity
Program premium reportable as income: Burg-$2,224; Alexander-$1,419;
Gill-$1,369; Marsh-$36; Garfield-$127.
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LONG-TERM INCENTIVE PLAN TABLE -- AWARDS IN 2000
ESTIMATED FUTURE PAYOUTS UNDER
2000 TARGET PERFORMANCE OR NON-STOCK PRICE BASED PLAN
LONG-TERM OTHER PERIOD ------------------------------------------------
INCENTIVE UNTIL MATURATION BELOW
NAME OPPORTUNITY OR PAYOUT THRESHOLD THRESHOLD TARGET MAXIMUM
---- ----------- ---------------- --------- --------- -------- ----------
H. P. Burg $542,500 3 years $0 $271,250 $542,500 $ 813,750
A. J. Alexander $260,000 3 years $0 $130,000 $260,000 $ 390,000
J. A. Gill $123,815 3 years $0 $ 61,908 $123,815 $ 185,723
R. H. Marsh $123,815 3 years $0 $ 61,908 $123,815 $ 185,723
A. R. Garfield $123,815 3 years $0 $ 61,908 $123,815 $ 185,723
Each executive's target long-term award was converted into a number of
performance shares calculated using the average of the high and low stock prices
of the common stock on the last trading day in 1999. These shares were placed
into an account in the executive's name for a three-year period that will end on
December 31, 2002. During this three-year performance period, an amount equal to
the dividend for a share of common stock will be credited to this account for
each performance share in the account on the date that the common stock
dividends are paid. These dividend equivalents will be converted into additional
performance shares based on the closing price of FirstEnergy common stock on
that day. At the end of the three-year performance period, the executive's
account will be valued based on the average of the high and low prices on the
last trading day in 2002.
The final account value may be adjusted upward or downward based upon the
total shareholder return of FirstEnergy common stock relative to an energy
services company index during this three-year period. If the total shareholder
return ranking is below the 60th percentile, no long-term award will be paid. If
the total shareholder return ranking is in the top 15%, the award payout will be
150% of the account value. Award payouts for a ranking between the 60th and 15th
percentile will be interpolated between 50% and 150%.
If an executive retires, dies, separates due to disability, or separates
for a reason that the executive qualifies for and elects severance prior to the
end of the three-year period, the value of the account will be decreased based
on the number of months worked during the period. However, an executive must
work at least twelve months during the three-year period to be eligible for an
award payout. The final value of an executive's account, if any, will be paid to
the executive in cash early in the year 2003. Executives may also elect to defer
the receipt of any Long-Term Incentive Program award per the provisions of the
Executive Deferred Compensation Plan.
STOCK OPTIONS GRANTED IN 2000
INDIVIDUAL GRANTS
----------------------------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS GRANT
UNDERLYING GRANTED TO EXERCISE DATE
OPTIONS EMPLOYEES IN OR BASE EXPIRATION DATE PRESENT
NAME GRANTED FISCAL YEAR PRICE DATE EXERCISEABLE VALUE(1)
---- ---------- ------------ -------- ---------- ------------ --------
H. P. Burg 60,000 1.99% $19.31 3/01/10 3/01/04 $124,740
140,000 4.65% $27.75 11/22/10 11/22/04 $602,098
A. J. Alexander 40,000 1.33% $19.31 3/01/10 3/01/04 $ 83,160
80,000 2.66% $27.75 11/22/10 11/22/04 $344,056
J. A. Gill 20,000 0.66% $19.31 3/01/10 3/01/04 $ 41,580
20,000 0.66% $27.75 11/22/10 11/22/04 $ 86,014
R. H. Marsh 20,000 0.66% $19.31 3/01/10 3/01/04 $ 41,580
20,000 0.66% $27.75 11/22/10 11/22/04 $ 86,014
A. R. Garfield 20,000 0.66% $19.31 3/01/10 3/01/04 $ 41,580
20,000 0.66% $27.75 11/22/10 11/22/04 $ 86,014
ANNUAL OPTION BLACK-
DIVIDEND RISK-FREE TURNOVER ANNUAL TERM SCHOLES
GRANT DATE YIELD RATE RATE VOLATILITY (IN YEARS) VALUE
(1) ---------- -------- --------- -------- ---------- ---------- -------
3/1/00 7.80 6.500 0.24 20.607529 6.88 $ 2.02
11/22/00 5.40 3.875 0.14 23.121778 8.38 $ 3.83
20
25
AGGREGATED STOCK OPTIONS EXERCISED IN 2000
AND STOCK OPTION VALUES AT DECEMBER 31, 2000
VALUE OF
NUMBER OF SECURITIES UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES OPTIONS AT OPTIONS AT
ACQUIRED VALUE DECEMBER 31, 2000 DECEMBER 31, 2000
NAME ON EXERCISE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ----------- -------- ------------------------- -------------------------
H. P. Burg 0 $0 15,000/319,715 $111,150/$1,849,282
A. J. Alexander 0 $0 10,000/195,292 $74,100/$1,171,978
J. A. Gill 0 $0 5,000/76,399 $37,050/$504,886
R. H. Marsh 0 $0 5,000/76,399 $37,050/$504,886
A. R. Garfield 0 $0 2,500/59,134 $18,525/$417,369
SEVERANCE AGREEMENTS AND OTHER CONTRACTS
There are separate severance agreements currently in effect with H. Peter
Burg, Anthony J. Alexander, John A. Gill and Richard H. Marsh. These agreements
provide for the payment of severance benefits if the individual's employment
with FirstEnergy or its subsidiaries is terminated under specified circumstances
within three years after a change in control of FirstEnergy. A change in control
includes the acquisition of the beneficial ownership of 50% of the outstanding
shares of common stock or other voting stock of the Company, a change in the
majority of the members of the Board of Directors, or a reorganization, merger,
or dissolution of the Company. The agreements are intended to ensure that the
individuals are free from personal distractions in order to put in place the
best plan for shareholders when a change of control is occurring or perceived as
imminent. The principal severance benefits under each agreement include payment
of the following when the individual is terminated or resigns for good reason,
which generally is defined as a material change, following a change of control,
inconsistent with the individual's previous job duties or compensation:
- the individual's base salary and accrued benefits through the date of
termination, including a pro-rata portion of the annual and all
deferred long-term incentive awards earned;
- 2.99 times the sum of the individual's base salary plus the average of
his annual incentive compensation awards over the past three years;
- Supplemental Executive Retirement Plan (SERP) benefits as follows: if
the individual is less than age 55 at termination, the benefit is
calculated as if he were age 55, offset by compensation earned from
subsequent employers until age 55, at which time it then will be
offset by pension benefits and, at age 62, further offset by social
security payments; if the individual is between age 55 and 62 at
termination, the benefit is calculated in accordance with the SERP and
will be offset by social security payments beginning at age 62; if the
individual is age 62 or more at termination, the benefit is calculated
in accordance with the SERP;
- continuation of group health and life insurance, as if the individual
had retired at the greater of his current age or age 55, and the
greater of his current years of service or actual years of service at
age 55; and
- payment of legal fees and expenses as well as any excise taxes
resulting from the agreement.
The severance pay agreements have initial three-year terms and are renewed
automatically each year for an additional year unless expressly discontinued by
the Board. After a change in control, if the individual resigns, he is
prohibited for two years from working for or with competing entities.
EXECUTIVE RETIREMENT PLAN
The FirstEnergy System Supplemental Executive Retirement Plan is limited to
eligible senior executives as approved by the Compensation Committee of the
Board of Directors. At normal retirement, eligible senior executives, which
include all of the officers listed in the Summary Executive Compensation Table,
who have five or more years of service with the Company or its subsidiaries are
provided a retirement benefit. This benefit is equal to the greater of 65
percent of the executive's highest annual salary, or 55 percent of the average
of the executive's highest three consecutive years of salary plus annual
incentive awards paid after January 1, 1996, and paid prior to retirement. The
benefit is reduced by the executive's pensions under tax-qualified pension plans
of the Company or
21
26
other employers, any supplemental pension under the Company's Executive Deferred
Compensation Plan, and social security benefits. Subject to exceptions that
might be made in specific cases, senior executives retiring prior to age 65, or
with less than five years of service, or both, may receive a similar but reduced
benefit. This Plan also provides for disability and surviving spouse benefits.
As of the end of 2000, the estimated annual retirement benefits of the executive
officers listed in the Summary Executive Compensation Table at age 65 from these
sources were: Burg-$497,674; Alexander-$328,697; Gill-$206,114; Marsh-$191,999;
and Garfield-$198,529.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
FirstEnergy's executive compensation program is administered by the
Compensation Committee of the Board of Directors which has responsibility for
the compensation program for the executive officers of the Company. The
committee is comprised of four directors listed at the end of this report, none
of whom is an employee of the Company, and each of whom qualifies as a
non-employee director for the purpose of Rule 16b-3 under the Securities
Exchange Act of 1934 and an outside director for the purposes of Section 162(m)
of the Internal Revenue Code.
The committee's primary objective is to establish and administer programs to
attract, retain, and motivate skilled and talented executives, and align their
compensation with Company and business unit performance, business strategies,
and growth in shareholder value. The committee, with the assistance of an
outside consultant, has established, and the Board of Directors has endorsed, an
executive compensation philosophy for the Company which includes the following
elements:
- A "pay-for-performance" orientation under which a significant portion
of total compensation reflects corporate, business unit and individual
performance;
- An emphasis on stock incentives to closely align the interests of
executives with the long-term interests of shareholders;
- An emphasis on total compensation under which base salaries and cash
incentives are generally targeted at or near median competitive levels
in the energy services industry, but which provides opportunities,
including stock incentives, to achieve total compensation at the 75th
percentile of energy services industry levels if both corporate and
individual performance are superior;
- An appropriate balance of annual and long-term compensation to
facilitate retention of talented executives, reward long-term
strategic results, and encourage FirstEnergy stock ownership; and
- An emphasis on increasing the proportion of an executive's total
compensation at risk through the use of stock and other performance
incentives, and decreasing the proportion of compensation based on
salary and benefits, as an executive's level of responsibility
increases.
Recognizing that competitive compensation levels for senior executive
officers at a corporation the size of FirstEnergy may exceed the $1,000,000
deduction limit of Section 162(m) of the Internal Revenue Code, it is the
Company's policy to structure executive compensation plans to maximize the
deductibility of executive compensation by minimizing the compensation subject
to this limit. As part of this policy, shareholders approved the FirstEnergy
Corp. Executive and Director Incentive Compensation Plan in 1998 and are being
asked to approve amendments to that Plan this year.
The salary column in the Summary Executive Compensation Table (later
referred to as the Table) lists the 2000 base salaries of Mr. Burg and the other
named executive officers, including salary deferred into the FirstEnergy Corp.
Executive Deferred Compensation Plan and/or the FirstEnergy Savings Plan. In
accordance with the Company's 2000 pay philosophy, executives received base
salary increases in 2000 intended to place their salaries in a salary range
determined by the median of salaries of comparable positions in similar-sized
energy services companies.
Under the Executive Incentive Compensation Plan (later referred to as the
Incentive Plan), a target total incentive opportunity was established for an
executive at the beginning of the year which was then allocated into a target
annual incentive opportunity and a target long-term incentive opportunity. As
the level of an executive's responsibility increased, both the portion of
his/her total pay opportunity that was put at risk and the portion that was tied
to the long-term return of the Company's common stock increased. For 2000, 58%
of Mr. Burg's total
22
27
target cash compensation was put at risk in the form of incentive compensation.
This amounted to a target total incentive opportunity of $1,085,000 equally
divided between annual and long-term incentive opportunities.
At the beginning of 2000, the committee reviewed and approved a list of
measurable corporate financial and strategic goals to be used to establish
annual objectives for executives participating in the Incentive Plan. Each
executive had a portion of his/her incentive award based on the achievement of
certain specific corporate financial goals of direct benefit to the shareholder.
Additional objectives established for any executive were other financial or
strategic goals from the list that the executive directly affects or other
specific objectives that were expected to directly contribute to the achievement
of all goals. Actual awards range from $0 for performance that is below
threshold, 50% of target for performance at threshold, 150% of target for
outstanding operational performance, and 200% of target for outstanding
financial performance that directly enhances shareholder value.
The committee approved five annual 2000 corporate financial and strategic
objectives for Mr. Burg. These objectives related to the achievement of
confidential target levels regarding earnings per share, profit, customer
service excellence, the performance of the Company's nuclear facilities as
measured by an industry index, and employee safety. These objectives were
weighted at 40%, 40%, 10%, 5%, and 5%, respectively, of Mr. Burg's target annual
incentive opportunity. Based on the level of 2000 achievement of each of these
objectives, Mr. Burg received an annual incentive award of $183,546. The annual
incentive award paid to each of the other named executive officers in accordance
with the Incentive Plan is included in the Bonus column of the Table. The awards
include amounts deferred into the FirstEnergy Corp. Executive Deferred
Compensation Plan.
The committee approved a long-term incentive opportunity with the payout
based on the performance of the Company's common stock, both on an absolute
basis and as compared to an index of peer companies, between January 1, 2000,
and December 31, 2002. This award will be paid out in early 2003. The long-term
program is described in the narrative under the Long-Term Incentive Plan Table.
The committee also approved a special deregulation incentive program for key
executives related to receiving approval of a transition plan satisfactory to
the Company. As a result, Mr. Burg received an award of $200,000.
The committee, along with an outside consultant, reviewed the stock-based
incentive opportunities granted to key executives of the Company. Affirming the
Company's compensation philosophy, the committee approved the grants of
non-qualified stock options to key executives and employees in March and
November of 2000. The details of the grants for Mr. Burg and the other named
executive officers are listed in the Stock Options Granted in 2000 Table.
In addition, the committee approved an award of 100,000 shares of restricted
stock to Mr. Burg. The restrictions will lapse on November 22, 2004. The
restrictions are based upon continued employment with the Company. If Mr. Burg
ceases to be employed by the Company for reasons other than death, disability,
or certain involuntary reasons prior to November 22, 2004, he will forfeit all
shares associated with the award.
In accordance with the Incentive Plan in effect in 1997, Messrs. Burg,
Alexander, Gill, Marsh, and Garfield received a performance share grant with a
term of four years from 1997 through 2000. The terms and conditions of this
long-term grant were reported in the Ohio Edison Company Proxy Statement for
that year. In early 2001, the 1997 Account was valued based on the total return
for the Company's common stock (and Ohio Edison's prior to 1998) during this
period and a 48th percentile total return ranking relative to an index of peer
companies. Mr. Burg's payout was $235,354.
In accordance with the Incentive Plan in effect in 1998, Messrs. Burg,
Alexander, Gill, Marsh and Garfield received opportunities with a term of three
years from 1998 through 2000. The terms and conditions of this long-term grant
were reported in the FirstEnergy Corp. Proxy Statement for that year. Based on
the level of achievement for each of the long-term objectives, Mr. Burg's payout
under the 1998 long-term incentive program was $222,844. Because the Company
changed from a four-year to a three-year long-term incentive in 1998, plan
participants received two long-term payouts for 2000 as described in this
paragraph and in the preceding paragraph.
Compensation Committee: Robert L. Loughhead, Chair
Robert B. Heisler, Jr.
Russell W. Maier
Paul J. Powers
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28
BOARD AUDIT COMMITTEE REPORT
The Audit Committee oversees the Company's financial reporting process on
behalf of the Board of Directors. In fulfilling its oversight responsibilities,
the committee reviewed and discussed with management the audited financial
statements to be included in the Company's Annual Report on Form 10-K for the
year ended December 31, 2000. In performing its review, the committee discussed
the propriety of the application of accounting principles by the Company, the
reasonableness of significant judgments and estimates used in the preparation of
the financial statements, and the clarity of disclosures in the financial
statements.
The committee reviewed and discussed with the independent auditor, Arthur
Andersen LLP, its opinion on the conformity of the audited financial statements
with accounting principles generally accepted in the United States. Included in
this discussion were the matters required by Statement on Auditing Standards No.
61, "Communication With Audit Committees", as amended, by the Auditing Standards
Board of the American Institute of Certified Public Accountants, which included
its judgment as to the propriety of the application of accounting principles by
the Company.
The committee received the written communications from the independent
auditor regarding its independence from the Company as required by the
Independence Standards Board's Standard No. 1, "Independence Discussions With
Audit Committees", and discussed that matter with the independent auditor.
The committee discussed with the Company's internal and independent
auditors the overall scope, plans and results of their respective audits. The
committee met with the internal and independent auditors, with and without
management present, to discuss the results of their examinations, their
evaluations of the Company's internal controls, and the overall quality of the
Company's financial reporting process.
Based on the above reviews and discussions, the committee recommended to
the Board of Directors that the audited financial statements be included in the
Company's Annual Report on Form 10-K for the year ended December 31, 2000, for
filing with the Securities and Exchange Commission.
Audit Committee: George M. Smart, Chair
William F. Conway
Robert L. Loughhead
Jesse T. Williams, Sr.
INDEPENDENT AUDITOR--SERVICES AND FEES
The following is a summary of the fees paid by the Company to its
independent auditor, Arthur Andersen LLP, for services provided during the year
2000:
Audit Fees $ 893,300
Financial Information Systems Design and Implementation Fees $ 0
All Other Fees (Includes business consulting services, tax
services, and assurance services) $5,301,200
----------
Total Fees $6,194,500
==========
The audit committee of the Board of Directors has considered whether the
nonaudit services rendered by the independent auditor are compatible with the
auditor maintaining its independence.
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29
SHAREHOLDER RETURN--PERFORMANCE COMPARISON GRAPHS
The following graphs show the total annual return from an investment in the
Company's common stock (Ohio Edison common stock prior to the merger on November
8, 1997) compared with the total annual returns in the Edison Electric
Institute's Index of Investor-Owned Electric Utility Companies (referred to
below as the EEI Index) and the Standard & Poor's 500 Index of widely held
common stocks (referred to below as the S&P 500 Index). The top graph shows the
total annual returns by year. The bottom graph provides the cumulative value of
a $100 investment on December 31, 1995. Total return represents stock price
changes plus the reinvestment of dividends in the stock.
TOTAL ANNUAL RETURNS
[BAR GRAPH]
FIRST ENERGY EEI INDEX S&P 500 INDEX
------------ --------- -------------
1996 3.72% 1.19% 22.96%
1997 35.85% 27.37% 33.36%
1998 17.75% 13.89% 28.58%
1999 -26.28% -18.6% 21.04%
2000 47.66% 47.97% -9.11%
TOTAL RETURN CUMULATIVE VALUES
($100 INVESTMENT ON DECEMBER 31, 1995)
[LINE GRAPH]
FIRST ENERGY EEI INDEX S&P 500 INDEX
------------ --------- -------------
1995 100 100 100
1996 103.72 101.19 122.96
1997 140.9 128.89 163.98
1998 165.91 146.79 210.84
1999 122.31 119.49 255.21
2000 180.61 176.8 231.96
25
30
APPENDIX A
AUDIT COMMITTEE CHARTER
I. PURPOSE
The primary function of the Audit Committee is to assist the Board of
Directors in fulfilling its oversight responsibilities by reviewing:
- the financial information to be provided by the Company to
shareholders, governmental agencies, and others
- the systems of internal controls
- the audit process
II. COMPOSITION
The Committee shall be comprised of three or more directors as determined
by the Board, all of whom have no relationships to the Company that may
interfere with the exercise of their independence from management and the
Company.
The members of the Committee shall be elected by the Board at the annual
organizational meeting of the Board or until their successors shall be duly
elected and qualified. The Board shall name a Chair for the Committee.
III. QUALIFICATIONS OF MEMBERS; DEFINITIONS
QUALIFICATIONS
All members of the Committee shall be financially literate, having a
working familiarity with basic finance and accounting practices, or must become
financially literate within a reasonable period of time after his or her
appointment to the Committee. At least one member of the Committee shall have
accounting or related financial management expertise.
A director who is an employee (including non-employee executive officers)
of the Company or any of its affiliates may not serve on the Committee until
three years following termination of his or her employment. In the event the
employment relationship is with a former parent or predecessor of the Company,
the director could serve on the Committee after three years following the
termination of the relationship between the Company and the former parent or
predecessor.
A director (i) who is a partner, controlling shareholder, or executive
officer of an organization that has a business relationship with the Company, or
(ii) who has a direct business relationship with the Company (e.g., a
consultant) may serve on the audit committee only if the Board determines in its
business judgment that the relationship does not interfere with the director's
exercise of independent judgment. In making a determination regarding the
independence of a director pursuant to this paragraph, the Board should
consider, among other things, the materiality of the relationship to the
Company, to the director, and, if applicable, to the organization with which the
director is affiliated.
A director who is an Immediate Family member of an individual who is an
executive officer of the Company or any of its affiliates cannot serve on the
Committee until three years following the termination of such employment
relationship.
A director who is employed as an executive of another corporation where any
of the Company's executives serves on that corporation's compensation committee
may not serve on the Committee.
Notwithstanding the requirements set forth above, one director who is no
longer an employee or who is an Immediate Family member of a former executive
officer of the Company or its affiliates, but is not considered independent
pursuant to these provisions due to the three-year restriction period, may be
appointed, under exceptional and limited circumstances, to the Committee if the
Company's Board determines in its business judgment that membership on the
Committee by the individual is required in the best interests of the Company
A-1
31
and its shareholders, and the Company discloses, in the next annual proxy
statement subsequent to such determination, the nature of the relationship and
the reasons for that determination.
DEFINITIONS
"Business Relationships" can include commercial, industrial, banking,
consulting, legal, accounting, and other relationships. A director can have this
relationship directly with the Company, or the director can be a partner,
officer or employee of an organization that has such a relationship. The
director may serve on the Committee without the above-referenced Board
determination after three years following the termination of, as applicable,
either (1) the relationship between the organization with which the director is
affiliated and the Company, (2) the relationship between the director and his or
her partnership status, shareholder interest or executive officer position, or
(3) the direct business relationship between the director and the Company.
"Immediate Family" includes a person's spouse, parents, children, siblings,
mothers-in-law and fathers-in-law, sons and daughters-in-law, brothers and
sisters-in-law, and anyone (other than employees) who shares such person's home.
"Affiliate" includes a subsidiary, sibling company, predecessor, parent
company, or former parent company.
IV. MEETINGS
The Committee shall meet at least four times annually, or more frequently
as circumstances dictate. As part of its responsibility to foster open
communications, the Committee shall meet at least annually with management, the
manager of the Internal Auditing Department, and the independent accountants in
separate executive sessions to discuss any matters that the Committee or each of
these groups believes should be discussed privately.
V. POWER AND AUTHORITY
The Committee shall have the authority to call meetings at its discretion
and invite members of the Company and external auditors to attend. The Committee
shall have the power to require and oversee any investigations that the
Committee deems necessary to discharge their responsibilities and to employ
whatever auditors, advisors, or consultants as are needed to conduct such
investigations. The Committee shall have the power to provide the proper
educational programs to members of the Committee to ensure proper financial and
accounting familiarity expertise expected of each Committee member. The Chairman
of the Committee shall be consulted prior to the appointment or removal of the
manager of the Internal Auditing Department.
VI. RESPONSIBILITIES AND DUTIES
Specific responsibilities and duties of the Committee are:
CONCERNING THE FINANCIAL INFORMATION TO BE PROVIDED BY THE COMPANY TO
SHAREHOLDERS, GOVERNMENTAL AGENCIES, AND OTHERS:
1. The Committee shall review the results of the annual audit of the
consolidated financial statements conducted by the independent auditors,
including the nature and disposition of comments appearing in the
independent auditors' management letter.
2. The Committee shall exercise oversight of the Company's annual and
quarterly financial reporting process, including the related internal
accounting controls; and to review, prior to publication, the Company's
annual consolidated financial statements and related significant
accounting policies and changes.
3. The Committee shall ensure the review by the independent accountant of
filings with the SEC and other published documents containing the
Company's financial statements to consider whether the information
contained in these documents is consistent with the information
contained in the annual financial statements.
4. The Committee shall inquire as to the accounting for new business
transactions and changes to accounting principles.
A-2
32
5. The Committee shall discuss with the independent accountant and
management pending accounting principle changes and their impact on the
Company, including implementation impacts on the financial statements.
6. The Committee shall review the work of other audit firms.
CONCERNING THE SYSTEMS OF INTERNAL CONTROLS:
1. The Committee shall review annually the results of management's program
to monitor compliance with the Company's policies on business ethics;
and reviews, whenever necessary, significant cases of employee conflict
of interest or misconduct.
2. The Committee shall review the reports of the Company's Risk Policy
Committee concerning the Company's risk management activities and
compliance with the Company's Risk Oversight Policy.
3. The Committee shall consider and review with the independent accountant
and the manager of the Internal Auditing Department the adequacy of the
Company's internal controls including computerized information system
controls and security.
4. The Committee shall review any significant findings and recommendations
of the independent accountant and Internal Auditing together with
management's responses.
5. The Committee shall periodically review the directors', officers', and
management perquisites.
CONCERNING THE AUDIT PROCESS:
1. The outside auditor for the Company is ultimately accountable to the
Board and the Committee, and the Board and the Committee have the
ultimate authority and responsibility to select, evaluate and where
appropriate, replace the outside auditor or nominate the outside auditor
to be proposed for shareholder approval in any proxy statement.
2. The Committee is responsible for ensuring that the outside auditor
submits on a periodic basis to the Committee a formal written statement
delineating all relationships between the auditor and the Company. The
Committee shall actively engage in a dialogue with the outside auditor
with respect to any disclosed relationships or services that may impact
the objectivity and independence of the outside auditor and recommend
that the Board take appropriate action in response to the outside
auditors' report to satisfy itself of the outside auditors'
independence.
3. The Committee shall review the annual audit plan and proposed fees of
the independent auditors, the annual audit plan of the Company's
internal auditors, and request any additional audit work with respect to
these plans as the Committee deems necessary.
4. The Committee shall review annually the scope of activities, staffing,
budget, results, and effectiveness of the Company's internal audit
function and advises management of such changes to the internal audit
function as the Committee deems necessary.
5. The Committee shall review and reassess annually the adequacy of this
Charter.
VII. REPORTING OF ACTIVITIES
1. The Committee shall provide periodic reports to the full Board of
Directors concerning the scope and results of the work performed by the
Committee.
2. The Committee shall ensure that periodic reports are filed to fulfill
external regulatory and listing agency requirements.
In addition to the above responsibilities and duties, the Committee shall
perform other assignments as determined by the Board of Directors.
A-3
33
76 South Main St.
[FirstEnergy Logo] Akron, Ohio 44308
- --------------------------------------------------------------------------------
NANCY C. ASHCOM
Corporate Secretary
March 28, 2001
Dear Shareholder:
You are invited to attend FirstEnergy's Annual Meeting of Shareholders at
10 a.m. on Tuesday, May 15, at the John S. Knight Center in Akron, Ohio.
As you may recall, you previously consented to accessing annual reports and
proxy statements on the Internet instead of receiving paper copies. We
appreciate your help in saving the Company money by electing to view these
documents on the Internet. TO ACCESS AND VIEW THE PROXY STATEMENT AND ANNUAL
REPORT, PLEASE GO TO THE INTERNET ADDRESS LISTED ON YOUR PROXY CARD UNDER VOTING
OPTION "2 -- VOTE BY INTERNET".
The Notice of Annual Meeting of Shareholders is printed on the back of this
letter. As part of the agenda, business to be voted on includes six items which
are explained in the proxy statement. The first three items are the election of
three members to your Board of Directors, ratification of auditor, and approval
of amendments to the Executive and Director Incentive Compensation Plan. YOUR
BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THESE ITEMS 1, 2, AND 3 ON THE
PROXY CARD. In addition, there are three shareholder proposals. YOUR BOARD OF
DIRECTORS RECOMMENDS THAT YOU VOTE AGAINST THESE SHAREHOLDER PROPOSALS, WHICH
ARE ITEMS 4, 5, AND 6 ON THE PROXY CARD.
Enclosed is your proxy card which provides instructions to appoint your
proxy and vote your shares. We are pleased to again offer our registered
shareholders the options of appointing a proxy and voting their shares by
telephone, Internet, or mail. You are encouraged to take advantage of the
telephone or Internet options, which make voting convenient, quick, and easy.
ALSO, PLEASE NOTE THAT SINCE YOU HAVE ALREADY CONSENTED TO ACCESSING ANNUAL
REPORTS AND PROXY STATEMENTS ON THE INTERNET, IT IS NOT NECESSARY TO AGAIN CHECK
THE BOX ON THE PROXY CARD THAT PROVIDES CONSENT IN THE FUTURE.
If, in the future, you wish to receive paper copies of annual reports and
proxy statements with proxy cards mailed to you, or if you would like a paper
copy of these documents sent to you now, please call FirstEnergy Investor
Services at (800) 736-3402.
Your participation and support are important to us. If you are planning to
attend the Annual Meeting, directions to the John S. Knight Center are on the
back of your proxy card. We hope you can join us.
Sincerely,
/s/ Nancy C. Ashcom
34
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO THE HOLDERS OF SHARES OF COMMON STOCK:
The 2001 FirstEnergy Corp. Annual Meeting of Shareholders will be held at
10 a.m. on May 15, 2001, at the John S. Knight Center, 77 E. Mill Street, Akron,
Ohio. The purpose of the Annual Meeting will be to:
-- Elect three members to the Board of Directors for a term of three
years;
-- Ratify the appointment of Arthur Andersen LLP as our auditor for 2001;
-- Approve amendments to the Executive and Director Incentive
Compensation Plan;
-- Vote on three shareholder proposals, if properly presented at the
Annual Meeting; and
-- Take action on other business that properly may come before the
meeting.
Please read the accompanying proxy statement. Then vote your shares by
following the instructions on your proxy card to ensure your representation at
the Annual Meeting.
On behalf of the Board of Directors,
NANCY C. ASHCOM
Corporate Secretary
March 28, 2001
35
[FIRSTENERGY LOGO]
Thank you for investing in FirstEnergy. Please take a moment now to vote your
shares of common stock for the upcoming Annual Meeting of Shareholders.
YOUR VOTE IS IMPORTANT!
YOU CAN VOTE IN ONE OF THREE WAYS:
1. VOTE BY TELEPHONE -- THIS IS THE PREFERRED OPTION BECAUSE IT IS THE
EASIEST AND MOST COST EFFECTIVE WAY TO VOTE YOUR SHARES. You will be asked
to enter the Control Number below. Then, if you wish to vote as
recommended by the Board of Directors, simply press 1. If you do not wish
to vote as the Board recommends, you need only respond to a few simple
prompts.
-----------------------------------
YOUR CONTROL NUMBER IS:
1-888-457-2961 [picture of [picture of
phone] computer]
FOR TELEPHONE OR INTERNET VOTING
-----------------------------------
CALL ON A TOUCH-TONE TELEPHONE
ANYTIME. THERE IS NO CHARGE
FOR THIS CALL
Your telephone or Internet vote authorizes the named Proxies to vote your
shares in the same manner as if you had marked, signed, and returned your
proxy card.
OR
2. VOTE BY INTERNET -- Access http://www.proxyvoting.com/fe and respond to a
few simple prompts after entering the Control Number above.
OR
3. VOTE BY MAIL -- If you do not have access to a touch-tone telephone or the
internet, complete and return the proxy card below in the envelope
provided.
TEAR HERE
Vote by marking an (X) in the appropriate boxes. WHEN PROPERLY EXECUTED, YOUR
PROXY CARD WILL BE VOTED IN THE MANNER YOU DIRECT; AND, IF YOU DO NOT SPECIFY
YOUR CHOICES, YOUR PROXY CARD WILL BE VOTED FOR ITEMS 1,2, AND 3, AND AGAINST
ITEMS 4,5, AND 6.
------------------------------------
- ------------------------------------------------------------------------ Your Board of Directors recommends
Your Board of Directors recommends a vote FOR items 1,2, and 3. a vote AGAINST Items 4,5, and 6.
- ------------------------------------------------------------------------ ------------------------------------
1. Election of 3 Directors FOR 3-Year Term FOR [ ] WITHHOLD [ ] 4. Shareholder Proposal
Nominees: 01 - R.B. Heisler, Jr., 02 - R.L. Loughhead, 03 - R.C. Savage FOR [ ] AGAINST [ ] ABSTAIN [ ]
FOR, except withhold vote from following nominees:
-------------------- 5. Shareholder Proposal
2. Ratification of Auditor FOR [ ] AGAINST [ ] ABSTAIN [ ] FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. Approval of Incentive Compensation FOR [ ] AGAINST [ ] ABSTAIN [ ] 6. Shareholder Proposal
Plan Amendments FOR [ ] AGAINST [ ] ABSTAIN [ ]
- ------------------------------------------------------------------------ ------------------------------------
[ ] Check this box if you consent to accessing, in the future, the annual
report and proxy statement on the Internet (no paper copies).
[ ] Check this box if you want to discontinue receiving the annual report
for this account because you receive another copy at this address.
X
-------------------------------------------------- ------------------
SIGNATURE DATE
SIGN ABOVE AS NAME(S) APPEAR ON THIS PROXY CARD. If signing for a
corporation or partnership or as an agent, attorney or fiduciary,
indicate the capacity in which you are signing.
36
[MAP - DIRECTIONS TO PROXY MEETING]
JOHN S. KNIGHT CENTER
77 E. Mill St.
Akron, Ohio
P Main parking for the John S. Knight Center
Entrances located on Mill St. and Broadway
- --------------------------------------------------------------------------------
[FirstEnergy logo] THIS PROXY CARD IS SOLICITED BY THE BOARD OF DIRECTORS FOR
THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD AT THE JOHN
S. KNIGHT CENTER, 77 E. MILL STREET, AKRON, OHIO, ON
TUESDAY, MAY 15, 2001, AT 10 A.M., EASTERN TIME.
P
The undersigned appoints Nancy C. Ashcom and Edward J. Udovich as Proxies
with the power to appoint their substitute; authorizes them to represent R
and to vote, as directed on the reverse side, all the shares of common
stock of FirstEnergy Corp. which the undersigned would be entitled to vote O
if personally present a the Annual Meeting of Shareholders to be held on
May 15, 2001, or at any adjournment; and authorizes them to vote, at their X
discretion, on other business that properly may come before the meeting.
Y
You are urged to specify your choices by marking the appropriate boxes on
the REVERSE SIDE, but you do not need to mark any boxes if you wish to vote
as the Board of Directors recommends.
SIGN THIS CARD ON THE REVERSE SIDE.
Please sign and mail promptly if you are not voting by telephone or internet.
37
FIRSTENERGY CORP. SAVINGS PLAN
VOTING DIRECTION FORM
YOU MAY VOTE BY TELEPHONE TOLL-FREE
OR BY COMPLETING AND MAILING THIS VOTING DIRECTION FORM
- -------------------------------------------
- ------------------------------------------- ALLOCATED SHARES:
Voting by phone is easy, and you can vote 24 hours a day and 7 days a
week. Just call the toll-free number, enter you control number, and follow the
simple prompts. If you prefer to vote by mail, complete, sign, and date this
form, and return it in its entirety to the Trustee in the postage-paid envelope
provided. ALL VOTES MUST BE RECEIVED BY THE TRUSTEE NO LATER THAN 5:00 P.M.
EASTERN TIME ON MAY 11, 2001, TO BE INCLUDED IN THE VOTING RESULTS.
Call Toll-Free
on a Touch-Tone Phone:
1-888-216--1289
Enter the following Control Number:
---------------------
---------------------
FIRSTENERGY CORP. SAVINGS PLAN
Voting Direction Form
FirstEnergy Annual Meeting of Shareholders - May 15, 2001
TO: STATE STREET BANK AND TRUST COMPANY, TRUSTEE OF THE FIRSTENERGY CORP.
SAVING PLAN
As a participant and a "named fiduciary" in the FirstEnergy Savings Plan, I
direct State Street Bank and Trust Company, Trustee, to vote, as directed
below, shares of FirstEnergy common stock which are allocated to my account,
AND ALSO my proportionate number of shares which have not been allocated to
participants or for which no direction forms are received, at the Annual
Meeting of Shareholders on May 15, 2001, or at any adjournment, and in its
discretion it is authorized to vote upon any other business that properly
may come before the meeting.
TO BE COMPLETED, SIGNED, AND DATED ON REVERSE SIDE.
DO NOT RETURN THIS FORM IF YOU VOTE BY TELEPHONE.
38
INDICATE YOUR DIRECTION BY MARKING AN (X) IN THE APPROPRIATE BOXES BELOW. IF NO
DIRECTIONS ARE INDICATED, THE SHARES REPRESENTED BY THIS SIGNED DIRECTION FORM
WILL BE VOTED AS YOUR BOARD OF DIRECTORS RECOMMENDS, WHICH IS FOR ITEMS 1, 2,
AND 3, AND AGAINST ITEMS 4,5, AND 6.
ALLOCATED SHARES (see other side for number of shares.) UNALLOCATED SHARES (Proportion to be determined.)
- ------------------------------------------------------ --------------------------------------------------
YOUR BOARD RECOMMENDS A VOTE FOR ITEMS 1,2, AND 3. YOUR BOARD RECOMMENDS A VOTE FOR ITEMS 1,2, AND 3.
- ------------------------------------------------------ --------------------------------------------------
Item 1. Election of 3 Directors for 3-Year Term: Item 1. Election of 3 Directors for 3-Year Term:
FOR [ ] [ ] WITHHOLD FOR [ ] [ ] WITHHOLD
all nominees listed authority to vote all nominees listed authority to vote
below (except as for all nominees below (except as for all nominees
printed to the listed below printed to the listed below
contrary below) contrary below)
Nominees: Nominees:
R. B. Heisler, Jr., R.L. Loughhead, R.C. Savage R. B. Heisler, Jr., R.L. Loughhead, R.C. Savage
INSTRUCTION: To withhold authority to vote for INSTRUCTION: To withhold authority to vote for
any individual nominee, print that nominee's name any individual nominee, print that nominee's name
on the following line. on the following line.
------------------------------------------------- -------------------------------------------------
Item 2. Ratification of Auditors. Item 2. Ratification of Auditors.
[ ] FOR [ ] AGAINST [ ] ABSTAIN [ ] FOR [ ] AGAINST [ ] ABSTAIN
Item 3. Approval of Incentive Compensation Plan Amendments. Item 3. Approval of Incentive Compensation Plan Amendments.
[ ] FOR [ ] AGAINST [ ] ABSTAIN [ ] FOR [ ] AGAINST [ ] ABSTAIN
------------------------------------------------- -------------------------------------------------
YOUR BOARD RECOMMENDS A VOTE YOUR BOARD RECOMMENDS A VOTE
AGAINST ITEMS 4,5, AND 6. AGAINST ITEMS 4,5, AND 6.
------------------------------------------------- -------------------------------------------------
Item 4. Shareholder Proposal. Item 4. Shareholder Proposal.
[ ] FOR [ ] AGAINST [ ] ABSTAIN [ ] FOR [ ] AGAINST [ ] ABSTAIN
Item 5. Shareholder Proposal. Item 5. Shareholder Proposal.
[ ] FOR [ ] AGAINST [ ] ABSTAIN [ ] FOR [ ] AGAINST [ ] ABSTAIN
Item 6. Shareholder Proposal. Item 6. Shareholder Proposal.
[ ] FOR [ ] AGAINST [ ] ABSTAIN [ ] FOR [ ] AGAINST [ ] ABSTAIN
- ------------------------------------------------------- Date 2001
SIGNATURE. Sign as name appears above. ----------------------------,
TO ASSURE YOUR REPRESENTATION AT THE MEETING, PLEASE SIGN AND MAIL PROMPTLY IN
THE ENCLOSED, POSTAGE-PAID ENVELOPE TO STATE STREET BANK AND TRUST COMPANY,
BOX 1997 G.P.O., NEW YORK, N.Y. 10117-0024
39
[FirstEnergy Letterhead]
March 28, 2001
Dear Savings Plan Participant:
Our Annual Meeting of Shareholders will be held on Tuesday, May 15.
Please exercise your right to vote your Savings Plan FirstEnergy Common Stock on
the business items that will be presented at the meeting.
There are six items to vote on at this year's meeting, including three
shareholder proposals. YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR ITEM
1, THE ELECTION OF THREE DIRECTORS; FOR ITEM 2, THE RATIFICATION OF THE
APPOINTMENT OF AUDITORS; AND FOR ITEM 3, THE APPROVAL OF INCENTIVE COMPENSATION
PLAN AMENDMENTS. IN ADDITION, YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE
AGAINST ALL THREE SHAREHOLDER PROPOSALS, WHICH ARE ITEMS 4, 5, AND 6 ON YOUR
VOTING FORM. The reasons for voting against these proposals are discussed in the
enclosed proxy statement.
You can vote your Plan shares using a touch-tone telephone. SIMPLY CALL
TOLL-FREE 1-888-216-1289. We encourage you to take advantage of this quick and
easy way of voting. If you do not vote by telephone, you should complete, sign,
date, and return your voting form in the postage-paid envelope provided.
Your vote on these business items is very important to the Company, and
we encourage you to vote as soon as possible. If you have any questions, please
call Investor Services at 1-800-736-3402. Thanks for your continued support.
Sincerely,
/s/ Nancy C. Ashcom
40
FIRSTENERGY CORP. RETIREMENT SAVINGS PLAN
FOR IBEW REPRESENTED EMPLOYEES
AT THE BEAVER VALLEY NUCLEAR POWER PLANT
VOTING DIRECTION FORM
FIRSTENERGY ANNUAL MEETING OF SHAREHOLDERS - MAY 15, 2001
- -------------------------------------------
- ------------------------------------------- ALLOCATED SHARES:
COMPLETE, SIGN, AND DATE THIS FORM AND RETURN IT IN ITS ENTIRETY
TO THE TRUSTEE IN THE POSTAGE-PAID ENVELOPE PROVIDED.
ALL VOTES MUST BE RECEIVED BY THE TRUSTEE NO LATER THAN 5:00 P.M.
EASTERN TIME ON MAY 11, 2001 TO BE INCLUDED IN THE VOTING RESULTS.
FIRSTENERGY CORP. 401(k) RETIREMENT SAVINGS PLAN
Voting Direction Form
FirstEnergy Annual Meeting of Shareholders - May 15, 2001
TO: STATE STREET BANK AND TRUST COMPANY, TRUSTEE
As a participant in the FirstEnergy Corp. 401(k) Retirement Savings Plan
for IBEW Represented Employees at the Beaver Valley Nuclear Power Plant, I
direct State Street Bank and Trust Company, Trustee, to vote, as directed
below, shares of FirstEnergy common stock which are allocated to my account,
AND ALSO my proportionate number of shares which have not been allocated to
participants or for which no direction forms are received, at the Annual
Meeting of Shareholders on May 15, 2001, or at any adjournment, and in its
discretion it is authorized to vote upon any other business that properly may
come before the meeting.
TO BE COMPLETED, SIGNED, AND DATED ON REVERSE SIDE.
41
INDICATE YOUR DIRECTION BY MARKING AN (X) IN THE APPROPRIATE BOXES BELOW. IF NO
DIRECTIONS ARE INDICATED, THE SHARES REPRESENTED BY THIS SIGNED DIRECTION FORM
WILL BE VOTED AS YOUR BOARD OF DIRECTORS RECOMMENDS, WHICH IS FOR ITEMS 1, 2,
AND 3, AND AGAINST ITEMS 4,5, AND 6.
ALLOCATED SHARES (See other side for number of shares.) UNALLOCATED SHARES (Proportion to be determined.)
- ------------------------------------------------------ --------------------------------------------------
YOUR BOARD RECOMMENDS A VOTE FOR ITEMS 1,2, AND 3. YOUR BOARD RECOMMENDS A VOTE FOR ITEMS 1,2, AND 3.
- ------------------------------------------------------ --------------------------------------------------
Item 1. Election of 3 Directors for 3-Year Term: Item 1. Election of 3 Directors for 3-Year Term:
FOR [ ] [ ] WITHHOLD FOR [ ] [ ] WITHHOLD
all nominees listed authority to vote all nominees listed authority to vote
below (except as for all nominees below (except as for all nominees
printed to the listed below printed to the listed below
contrary below) contrary below)
Nominees: R. B. Heisler, Jr., R.L. Loughhead, Nominees: R. B. Heisler, Jr., R.L. Loughhead,
R.C. Savage R.C. Savage
INSTRUCTION: To withhold authority to vote for INSTRUCTION: To withhold authority to vote for
any individual nominee, print that nominee's name any individual nominee, print that nominee's name
on the following line. on the following line.
------------------------------------------------- -------------------------------------------------
Item 2. Ratification of Auditors. Item 2. Ratification of Auditors.
[ ] FOR [ ] AGAINST [ ] ABSTAIN [ ] FOR [ ] AGAINST [ ] ABSTAIN
Item 3. Approval of Incentive Compensation Plan Amendments. Item 3. Approval of Incentive Compensation Plan Amendments.
[ ] FOR [ ] AGAINST [ ] ABSTAIN [ ] FOR [ ] AGAINST [ ] ABSTAIN
------------------------------------------------- -------------------------------------------------
YOUR BOARD RECOMMENDS A VOTE YOUR BOARD RECOMMENDS A VOTE
AGAINST ITEMS 4,5, AND 6. AGAINST ITEMS 4,5, AND 6.
------------------------------------------------- -------------------------------------------------
Item 4. Shareholder Proposal. Item 4. Shareholder Proposal.
[ ] FOR [ ] AGAINST [ ] ABSTAIN [ ] FOR [ ] AGAINST [ ] ABSTAIN
Item 5. Shareholder Proposal. Item 5. Shareholder Proposal.
[ ] FOR [ ] AGAINST [ ] ABSTAIN [ ] FOR [ ] AGAINST [ ] ABSTAIN
Item 6. Shareholder Proposal. Item 6. Shareholder Proposal.
[ ] FOR [ ] AGAINST [ ] ABSTAIN [ ] FOR [ ] AGAINST [ ] ABSTAIN
- ------------------------------------------------------- Date 2001
SIGNATURE. Sign as name appears above. ----------------------------,
TO ASSURE YOUR REPRESENTATION AT THE MEETING, PLEASE SIGN AND MAIL PROMPTLY IN
THE ENCLOSED, POSTAGE-PAID ENVELOPE TO STATE STREET BANK AND TRUST COMPANY,
BOX 1997 G.P.O., NEW YORK, N.Y. 10117-0024
42
FIRSTENERGY CORP. 402(k) RETIREMENT SAVINGS PLAN
FOR IBEW REPRESENTED EMPLOYEES
AT THE BEAVER VALLEY NUCLEAR POWER PLANT
VOTING DIRECTION FORM
FIRSTENERGY ANNUAL MEETING OF SHAREHOLDERS - MAY 15, 2001
- -------------------------------------------
- ------------------------------------------- ALLOCATED SHARES:
COMPLETE, SIGN, AND DATE THIS FORM AND RETURN IT IN ITS ENTIRETY
TO THE TRUSTEE IN THE POSTAGE-PAID ENVELOP PROVIDED.
ALL VOTES MUST BE RECEIVED BY THE TRUSTEE NO LATER THAN 5:00 P.M.
EASTERN TIME ON MAY 11, 2001 TO BE INCLUDED IN THE VOTING RESULTS.
FIRSTENERGY CORP. 401(k) RETIREMENT SAVINGS PLAN
Voting Direction Form
FirstEnergy Annual Meeting of Shareholders - May 15, 2001
TO: THE NORTHERN TRUST COMPANY, TRUSTEE
As a participant in the FirstEnergy Corp. 401(k) Retirement Savings Plan
for IBEW Represented Employees at the Beaver Valley Nuclear Power Plant, I
direct The Northern Trust Company, Trustee, to vote, as directed below, shares
of First Energy common stock which are allocated to my account at the Annual
Meeting of Shareholders on May 15, 2001, or at any adjournment, and in its
discretion it is authorized to vote upon any other business that properly may
come before the meeting.
TO BE COMPLETED, SIGNED, AND DATED ON REVERSE SIDE.
43
INDICATE YOUR DIRECTION BY MARKING AN (X) IN THE APPROPRIATE BOXES BELOW. IF NO
DIRECTIONS ARE INDICATED, THE SHARES REPRESENTED BY THIS SIGNED DIRECTION FORM
WILL BE VOTED AS YOUR BOARD OF DIRECTORS RECOMMENDS, WHICH IS FOR ITEMS 1, 2,
AND 3, AND AGAINST ITEMS 4,5, AND 6.
ALLOCATED SHARES (see other side for number of shares.)
------------------------------------------------------
YOUR BOARD RECOMMENDS A VOTE FOR ITEMS 1,2, AND 3.
------------------------------------------------------
Item 1. Election of 3 Directors for 3-Year Term:
FOR [ ] [ ] WITHHOLD
all nominees listed authority to vote
below (except as for all nominees
printed to the listed below
contrary below)
Nominees: R. B. Heisler, Jr., R.L. Loughhead, R.C. Savage
INSTRUCTION: To withhold authority to vote for
any individual nominee, print that nominee's name
on the following line.
-------------------------------------------------
Item 2. Ratification of Auditors.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Item 3. Approval of Incentive Compensation Plan Amendments.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
-------------------------------------------------
YOUR BOARD RECOMMENDS A VOTE
AGAINST ITEMS 4,5, AND 6.
-------------------------------------------------
Item 4. Shareholder Proposal.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Item 5. Shareholder Proposal.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Item 6. Shareholder Proposal.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
- ------------------------------------------------- Date 2001
SIGNATURE. Sign as name appears on reverse side. --------------------,
TO ASSURE YOUR REPRESENTATION AT THE MEETING, PLEASE SIGN AND MAIL PROMPTLY IN
THE ENCLOSED, POSTAGE-PAID ENVELOPE TO
THE NORTHERN TRUST COMPANY, BOX 1997, G.P.O., NEW YORK, N.Y. 10117-0024
44
[FirstEnergy Letterhead]
March 28, 2001
Dear Savings Plan Participant:
Our Annual Meeting of Shareholders will be held on Tuesday, May 15.
Please exercise your right to vote your Savings Plan FirstEnergy Common Stock on
the business items that will be presented at the meeting.
There are six items to vote on at this year's meeting, including three
shareholder proposals. YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR ITEM
1, THE ELECTION OF THREE DIRECTORS; FOR ITEM 2, THE RATIFICATION OF THE
APPOINTMENT OF AUDITORS; AND FOR ITEM 3, THE APPROVAL OF INCENTIVE COMPENSATION
PLAN AMENDMENTS. IN ADDITION, YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE
AGAINST ALL THREE SHAREHOLDER PROPOSALS, WHICH ARE ITEMS 4, 5, AND 6 ON YOUR
VOTING FORM. The reasons for voting against these proposals are discussed in the
enclosed proxy statement.
Please vote your Plan shares by completing, signing, dating, and
returning your voting form in the postage-paid envelope provided.
Your vote on these business items is very important to the Company, and
we encourage you to vote as soon as possible. If you have any questions, please
call Investor Services at 1-800-736-3402. Thanks for your continued support.
Sincerely,
/s/ Nancy C. Ashcom