<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
ENERGY EAST CORPORATION
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ 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:
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(4) Date Filed:
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<PAGE>
ENERGY EAST CORPORATION
ALBANY, NEW YORK
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 23, 1999
------------------------
To the Holders of Common Stock of
Energy East Corporation:
You are cordially invited to attend the Annual Meeting of Stockholders of
Energy East Corporation which will be held at the Citicorp/Citibank Auditorium,
12th Floor, 399 Park Avenue, New York, New York on April 23, 1999 at 10:30 A.M.
(Eastern Daylight Saving Time). The meeting is being held for the following
purposes:
(1) To elect two directors to serve in Class I for a term expiring at the
2002 Annual Meeting;
(2) To consider and approve for adoption a proposal to amend the Certificate
of Incorporation to authorize 100,000,000 additional shares of Common
Stock;
(3) To consider and approve for adoption a proposal to amend the Certificate
of Incorporation and By-Laws to lower the supermajority vote requirement
from three-fourths to two-thirds in order to amend certain By-Law
provisions;
(4) To consider and approve for adoption a proposal to amend the Certificate
of Incorporation to institute cumulative voting in the election of
directors;
(5) To consider and act upon a stockholder proposal;
and for the transaction of any other business properly brought before the
meeting or any adjournment thereof.
Holders of record of Common Stock at the close of business on February 22,
1999 will be entitled to notice of and to vote at the meeting.
Whether or not you expect to be present at the Annual Meeting, we request
that you mark, sign and date the accompanying form of proxy and return it in the
enclosed envelope. The proxy is revocable by you at any time before the exercise
thereof, and the giving of such proxy will not affect your right to vote in
person, if you attend the Annual Meeting.
Everett A. Gilmour and Alton G. Marshall will retire from the Board of
Directors as of April 23, 1999. The Company would like to express how deeply
appreciative it is of their contributions, loyalty and guidance during their
respective 19 and 28 years of dedicated service to the Company.
By Order of the Board of Directors,
Daniel W. Farley
SECRETARY
Dated: March 3, 1999
Please mark, sign and date the enclosed proxy and return it in the envelope
enclosed for your convenience.
<PAGE>
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 23, 1999
------------------------
This statement is furnished in connection with the solicitation of proxies
on behalf of the Board of Directors of Energy East Corporation (the "Company"),
to be used at the Company's Annual Meeting of Stockholders to be held on April
23, 1999, at the Citicorp/Citibank Auditorium, 12th Floor, 399 Park Avenue, New
York, New York. This statement and the form of proxy were first mailed to
holders of Common Stock on or about March 3, 1999. The mailing address of the
Company's principal executive office is P.O. Box 12904, Albany, New York
12212-2904.
ANNUAL REPORT
An Annual Report to Stockholders for the year ended December 31, 1998,
including consolidated financial statements, has been mailed to all stockholders
of record. The Annual Report is not a part of this Proxy Statement.
OUTSTANDING VOTING SECURITIES AND VOTING RIGHTS
The close of business on February 22, 1999 (the "Record Date") has been
fixed as the date for determining the holders of Common Stock entitled to vote
at the meeting. As of the Record Date, the Company had outstanding 62,906,411
shares of Common Stock.
The proxy represents the number of shares registered in your name as well as
the number of whole shares credited to your account under the Company's Dividend
Reinvestment and Stock Purchase Plan (the "Dividend Reinvestment Plan"). If you
are an employee of the Company or any subsidiary and participate in the Tax
Deferred Savings Plans of New York State Electric & Gas Corporation ("NYSEG"),
the proxy constitutes an instruction for the trustee of such plans to vote the
whole shares in your account in such plans in the manner specified on the proxy.
In voting for Proposal 1 (the election of directors), you may vote in favor
of all nominees or withhold your votes as to all, or as to specific, nominees.
The two nominees receiving the highest number of affirmative votes cast, in
person or by proxy, by holders of Common Stock entitled to vote shall be elected
to serve as directors. As a result, votes that are withheld will not be counted
and will have no effect on the vote in connection with the election of
directors. In voting for Proposal 2 (additional Common Stock), Proposal 3
(supermajority vote requirement), Proposal 4 (cumulative voting), and Proposal 5
(Stockholder Proposal), you may vote in favor of, or against, or may abstain
from voting on each of such proposals. The vote required to approve each of
Proposals 2 and 4 is the affirmative vote, in person or by proxy, of a majority
of the outstanding Common Stock entitled to vote. The vote required to approve
Proposal 3 is the affirmative vote, in person or by proxy, of two-thirds of the
outstanding Common Stock entitled to vote. The vote required to approve the
Stockholder Proposal is the affirmative vote, in person or by proxy, of a
majority of the votes cast by holders of Common Stock entitled to vote. As a
result, abstentions will have the same legal effect as a vote against Proposals
2, 3 and 4, and will be voted neither "for" nor "against" and will have no
effect on the vote in connection with the Stockholder Proposal.
<PAGE>
Under the rules of the New York Stock Exchange ("NYSE"), member brokerage
firms that hold shares in street name for beneficial owners may, to the extent
that such beneficial owners do not furnish voting instructions with respect to
any or all proposals submitted for stockholder action, vote in their discretion
upon proposals which are considered "discretionary" proposals under the rules of
the NYSE. Member brokerage firms that have received no instructions from their
clients as to "non-discretionary" proposals do not have discretion to vote on
these proposals. Under the rules of the NYSE, Proposals 2, 3, 4 and 5 are
considered "non-discretionary items" whereby brokerage firms may not vote in
their discretion on behalf of their clients if such clients have not furnished
voting instructions. Such "broker non-votes" will not be considered as votes
cast in determining the outcome of Proposals 2, 3, 4 and 5. Accordingly, such
"broker non-votes" will have the same legal effect as a vote against Proposals
2, 3 and 4 and will have no effect on the vote in connection with Proposal 5.
In determining whether a quorum is present, all duly executed proxies
(including those marked "abstain" or "withhold") will be counted. Broker
non-votes will not be counted for purposes of determining whether a quorum is
present.
PROPOSAL 1: ELECTION OF DIRECTORS (Item 1 on Proxy Card)
Your Board of Directors currently consists of twelve directors divided into
three classes. One class of directors is elected at each annual meeting of
stockholders for a term expiring at the third succeeding annual meeting of
stockholders.
The nominees for election at this Annual Meeting to serve as directors in
Class I for a term expiring at the 2002 Annual Meeting of Stockholders and
thereafter until their successors shall be elected and shall qualify are: Alison
P. Casarett and John M. Keeler. Dr. Casarett and Mr. Keeler were elected to
Class I for a term expiring at the 1999 Annual Meeting of Stockholders. Everett
A. Gilmour and Alton G. Marshall are not standing for re-election to the Board
of Directors because they are retiring as directors of the Company effective at
this Annual Meeting.
Unless otherwise specified on the proxy, shares represented by proxies in
the accompanying form received on behalf of the Board of Directors will be voted
for the election of Alison P. Casarett and John M. Keeler. While it is not
anticipated that any of the nominees will be unable to qualify or accept office,
if one or more should be unable to do so, the proxy holders reserve the right to
vote for any substitute nominee or nominees designated by the Board of
Directors.
Between May 1, 1998 (the effective date of the formation of the holding
company) and December 31, 1998, there were five meetings of the Board of
Directors. All of the directors attended 75% or more of the total number of
meetings of the Board of Directors and the Committees of the Board on which they
served.
2
<PAGE>
The following sets forth information for each nominee for election at this
Annual Meeting and for each director continuing in office.
<TABLE>
<S> <C>
CLASS I
DIRECTORS NOMINATED FOR TERMS EXPIRING IN 2002
[PHOTO]
ALISON P. CASARETT
DEAN EMERITUS, CORNELL UNIVERSITY, ITHACA, NY. Emeritus Professor of
Radiation Biology, New York State College of Veterinary Medicine, Cornell
University. Director of NYSEG, Ithaca, NY. Dr. Casarett was Special
Assistant to the President of Cornell University from August 1993 to June
1995. Prior to that time, she was the Dean of The Graduate School at
Cornell University. Dr. Casarett, 68, has been a director of Energy East
Corporation since April 1998 and a director of NYSEG since 1979.
[Photo]
JOHN M. KEELER
OF COUNSEL, HINMAN, HOWARD & KATTELL,* BINGHAMTON, NY; ATTORNEYS AT
LAW. Chairman, The Stuart and Willma Hoyt Foundation, Binghamton, NY.
Director of: NYSEG, Ithaca, NY; Security Mutual Life Insurance Company of
New York, Binghamton, NY; and the Harriet L. Dickenson Foundation,
Binghamton, NY. Past Chairman, The Harpur Forum of Binghamton University
Foundation, Binghamton, NY; Past President of Broome County Bar
Association and of Broome County United Way, both of Binghamton, NY. Mr.
Keeler, 65, has been a director of Energy East Corporation since April
1998 and a director of NYSEG since 1989.
</TABLE>
<TABLE>
<S> <C>
CLASS II
DIRECTORS WHOSE TERMS EXPIRE IN 2000
[PHOTO]
JOSEPH J. CASTIGLIA
FORMER VICE CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER OF PRATT &
LAMBERT UNITED, INC., BUFFALO, NY. Business Consultant and Private
Investor, JBC Enterprises, East Aurora, NY. Chairman, Catholic Health
System of Western New York, Buffalo, NY; Chairman, Blue Cross & Blue
Shield of Western New York, Inc., Buffalo, NY. Director of: NYSEG, Ithaca,
NY; Vision Group of Funds and Vision Fiduciary Funds, Inc., Buffalo, NY;
Sevenson Environmental Services, Inc., Niagara Falls, NY; Buffalo Alliance
for Education, Buffalo, NY; and Community Foundation for Greater Buffalo,
Buffalo, NY. Mr. Castiglia was Vice Chairman, President and Chief
Executive Officer of Pratt & Lambert United, Inc. from August 1994 until
his retirement in January 1996. Prior to that time, he was President and
Chief Executive Officer of Pratt & Lambert, Inc. from 1989 until July
1994, at which time the company was merged with United Coatings, Inc. Mr.
Castiglia, 64, has been a director of Energy East Corporation since April
1998 and a director of NYSEG since 1995.
</TABLE>
3
<PAGE>
<TABLE>
<S> <C>
[Photo]
LOIS B. DEFLEUR
PRESIDENT OF THE STATE UNIVERSITY OF NEW YORK AT BINGHAMTON, BINGHAMTON,
NY. Chairperson of the American Council on Education, Washington, DC.
Director of: NYSEG, Ithaca, NY; Broome County Chamber of Commerce,
Binghamton, NY; and WSKG Public Television and Radio, Binghamton, NY;
Director's Advisory Council, M&T Bank-Southern Division, Endicott and
Ithaca, NY. Dr. DeFleur, 62, has been President of the State University of
New York at Binghamton since 1990, and has been a director of Energy East
Corporation since its formation and a director of NYSEG since 1995.
[Photo]
WALTER G. RICH
CHAIRMAN, PRESIDENT, CHIEF EXECUTIVE OFFICER AND A DIRECTOR OF DELAWARE
OTSEGO CORPORATION, COOPERSTOWN, NY, AND ITS SUBSIDIARY, THE NEW YORK,
SUSQUEHANNA & WESTERN RAILWAY CORPORATION. Director of: NYSEG, Ithaca, NY;
Security Mutual Life Insurance Company of New York, Binghamton, NY; and
New York Business Development Corporation, Albany, NY. He is a member of
the Franklin Industrial Advisory Board of the Syracuse University School
of Management, Syracuse, NY; and appointed by the Governor a member of the
New York State Public Transportation Safety Board, Albany, NY. Mr. Rich,
53, has been a director of Energy East Corporation since its formation and
a director of NYSEG since 1997.
[Photo]
WESLEY W. VON SCHACK
CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER OF ENERGY EAST
CORPORATION, ALBANY, NY. Director of: NYSEG, Ithaca, NY; Mellon Bank
Corporation and Mellon Bank, N.A., Pittsburgh, PA; RTI International
Metals, Inc., Niles, OH; AEGIS Insurance Services, Inc., Jersey City, NJ;
Business Council of New York State, Albany, NY; and Peconic Land Trust,
Inc., Long Island, NY. Mr. von Schack was Chairman, President, Chief
Executive Officer and a director of DQE, Inc. and Duquesne Light Company
prior to August 1996. Mr. von Schack, 54, has been Chairman, President,
Chief Executive Officer and a director of Energy East Corporation since
its formation and Chairman, President, Chief Executive Officer and a
director of NYSEG since September 1996.
</TABLE>
4
<PAGE>
<TABLE>
<S> <C>
CLASS III
DIRECTORS WHOSE TERMS EXPIRE IN 2001
[PHOTO]
RICHARD AURELIO
FORMER PRESIDENT OF TIME WARNER CABLE GROUP, NYC, AND NY1 NEWS AND SENIOR
ADVISOR TO THE CHAIRMAN AND CEO OF TIME WARNER, INC., NEW YORK, NY.
Director of: NYSEG, Ithaca, NY; The Citizens Committee for New York City,
Inc., New York, NY; and the Javits Foundation, New York, NY. Mr. Aurelio
was a Time Warner executive from 1979 through 1998. Prior to that time, he
served as deputy mayor of New York City during the Lindsay administration,
as an administrative assistant to U.S. Senator Jacob K. Javits, as news
editor of Newsday and a public relations executive. Mr. Aurelio, 70, has
been a director of Energy East Corporation since its formation and a
director of NYSEG since 1997.
[Photo]
JAMES A. CARRIGG
FORMER CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER OF NYSEG, ITHACA,
NY. Director of: NYSEG, Ithaca, NY; and Security Mutual Life Insurance
Company of New York, Binghamton, NY. Trustee of: Dr. G. Clifford &
Florence B. Decker Foundation, Binghamton, NY; and the Public Policy
Institute of the Business Council of New York State, Albany, NY. Mr.
Carrigg was Chairman, President and Chief Executive Officer of NYSEG from
January 1991 to September 1996, and was Chairman and Chief Executive
Officer of NYSEG from May 1988 to December 1990. Prior to that time, he
was President and Chief Operating Officer of NYSEG. Mr. Carrigg, 65, has
been a director of Energy East Corporation since April 1998 and a director
of NYSEG since 1983.
[Photo]
PAUL L. GIOIA
OF COUNSEL, LEBOEUF, LAMB, GREENE & MACRAE,* ALBANY, NY; ATTORNEYS AT LAW.
Director of: NYSEG, Ithaca, NY; and Berkshire Gas Company, Pittsfield, MA.
Mr. Gioia was a Senior Vice President of First Albany Corporation from May
1987 to October 1993. Prior to that time, he served as a member and was
Chairman of the Public Service Commission of the State of New York and
also served as a member of the New York State Energy Research and
Development Authority. Mr. Gioia, 56, has been a director of Energy East
Corporation since April 1998 and a director of NYSEG since 1991.
[Photo]
BEN E. LYNCH
PRESIDENT OF WINCHESTER OPTICAL COMPANY, ELMIRA, NY. Director of NYSEG,
Ithaca, NY. Past Chairman of Arnot-Ogden Medical Center, Elmira, NY; Past
President of Horseheads Board of Education, Horseheads, NY. Former Trustee
of the Pennsylvania College of Optometry, Philadelphia, PA; and of the
Optometric Center of New York Foundation, New York, NY. Mr. Lynch, 61, has
been President of Winchester Optical Company since 1965, and has been a
director of Energy East Corporation since April 1998 and a director of
NYSEG since 1987.
</TABLE>
- - ------------------------
* The law firms of which Mr. Keeler and Mr. Gioia are of counsel provided
legal services to the Company in 1998 and are expected to provide legal
services to the Company in 1999.
5
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table indicates the number of shares of Common Stock and
Common Stock equivalent units beneficially owned as of February 12, 1999 by each
director and nominee, each of the executive officers named in the Summary
Compensation Table included elsewhere herein, and by the 17 current directors
and executive officers as a group and the percent of the outstanding securities
so owned.
<TABLE>
<CAPTION>
COMMON STOCK TOTAL COMMON STOCK
BENEFICIALLY COMMON STOCK AND COMMON STOCK PERCENT
NAME OWNED(1) EQUIVALENT UNITS(2) EQUIVALENT UNITS OF CLASS
- - ---------------------------------------------- -------------- ------------------- ------------------- -----------
<S> <C> <C> <C> <C>
Richard Aurelio............................... 1,000 1,080 2,080 (3)
James A. Carrigg.............................. 15,087 18,455 33,542 (3)
Alison P. Casarett............................ 541 10,629 11,170 (3)
Joseph J. Castiglia........................... 5,000 2,579 7,579 (3)
Lois B. DeFleur............................... 300 2,579 2,879 (3)
Daniel W. Farley.............................. 13,522 3,862 17,384 (3)
Michael I. German............................. 42,284 11,892 54,176 (3)
Everett A. Gilmour............................ 3,052 1,407 4,459 (3)
Paul L. Gioia................................. 2,649 3,445 6,094 (3)
Kenneth M. Jasinski........................... 18,866 4,305 23,171 (3)
John M. Keeler................................ 1,301 6,451 7,752 (3)
Ben E. Lynch.................................. 1,219 6,247 7,466 (3)
Alton G. Marshall............................. 200 1,407 1,607 (3)
Walter G. Rich................................ 1,000 1,080 2,080 (3)
Robert E. Rude................................ 7,939 1,059 8,998 (3)
Wesley W. von Schack.......................... 99,241 30,248 129,489 (3)
17 current directors and executive officers as
a group..................................... 219,820 107,784 327,604 (3)
</TABLE>
- - ------------------------
(1) Includes shares of Common Stock which may be acquired through the exercise
of stock options which are exercisable currently. The persons who have such
options and the number of shares which may be acquired are as follows: Mr.
Farley, 10,032; Mr. German, 31,666; Mr. Jasinski, 16,666; Mr. Rude, 5,000;
Mr. von Schack, 83,333; and all executive officers as a group, 151,697.
(2) Includes Common Stock equivalent units granted under the Long-Term Executive
Incentive Share Plan ("LTEISP") and the Director Share Plan for non-employee
directors for which the director, nominee or executive officer does not have
voting rights.
(3) Less than 2/3 of 1% of the outstanding Common Stock.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors and executive officers, and persons holding ten percent
or more of the Company's equity securities to file reports of ownership and
changes in ownership with the Securities and Exchange Commission ("SEC") and the
NYSE. Such reporting persons are also required to provide the Company with
copies of all Section 16(a) forms they file. Specific due dates for these
reports have been established by SEC regulations. Based solely on its review of
the copies of the reports received by it and certain written representations
from certain reporting persons, the Company believes that during 1998 all filing
requirements were satisfied by its directors and executive officers.
6
<PAGE>
STOCK PERFORMANCE GRAPH
The yearly change in the cumulative total stockholder return on the
Company's Common Stock during the five years ending December 31, 1998, compared
with the cumulative total return on the Standard & Poor's Utilities Index and
Standard & Poor's 500 Index, assuming $100 was invested on December 31, 1993,
and assuming reinvestment of dividends, is shown by the following:
COMPARISON OF FIVE-YEAR CUMULATIVE RETURN
ENERGY EAST CORPORATION, S&P UTILITIES, AND S&P 500
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
STANDARD & POORS
ENERGY EAST CORPORATION UTILITIES STANDARD & POORS 500
<S> <C> <C> <C>
12/31/93 100 100 100
12/31/94 66.94 92.06 101.32
12/31/95 97.03 130.74 139.4
12/31/96 86.23 134.82 171.41
12/31/97 150.05 168.06 228.59
12/31/98 248.02 192.88 293.92
</TABLE>
<TABLE>
<CAPTION>
12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Energy East Corporation............... $ 100.00 $ 66.94 $ 97.03 $ 86.23 $ 150.05 $ 248.02
Standard & Poor's Utilities........... $ 100.00 $ 92.06 $ 130.74 $ 134.82 $ 168.06 $ 192.88
Standard & Poor's 500................. $ 100.00 $ 101.32 $ 139.40 $ 171.41 $ 228.59 $ 293.92
</TABLE>
7
<PAGE>
EXECUTIVE COMPENSATION
Compensation for services to the Company and its subsidiaries for each of
the last three fiscal years of the chief executive officer and the next four
highest compensated executive officers of the Company who served in such
capacities on December 31, 1998, is shown by the following:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
NAME AND ---------------------- OPTIONS/ ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS SARS (#) COMPENSATION(1)
- - --------------------------------------------- --------- ---------- ---------- ------------- ----------------
<S> <C> <C> <C> <C> <C>
Wesley W. von Schack......................... 1998(2) $ 575,000 $ 283,475 100,000 $ 47,006
Chairman, President and 1997 575,000 257,677 69,000 66,641
Chief Executive Officer 1996 178,766 72,033 0 75,381
Michael I. German............................ 1998 323,878 120,750 55,459 5,000
Senior Vice President 1997 237,500 74,375 30,000 6,075
1996 217,500 50,563 0 2,250
Kenneth M. Jasinski(3)....................... 1998 252,885 111,750 50,000 0
Senior Vice President 1997 0 0 0 0
and General Counsel 1996 0 0 0 0
Daniel W. Farley............................. 1998 144,000 57,600 18,607 1,860
Secretary 1997 144,000 37,800 13,533 3,360
1996 142,875 24,465 0 1,793
Robert E. Rude............................... 1998 127,580 42,000 15,000 1,905
Controller 1997 107,833 23,000 9,000 3,147
1996 96,650 3,912 0 1,578
</TABLE>
- - ------------------------
(1) In 1998, the Company contributed for Messrs. von Schack, German, Farley, and
Rude, $2,500, $2,500, $1,860, and $1,725, respectively, under the Tax
Deferred Savings Plan. The Company contributed for Messrs. German and Rude,
$2,500 and $180, respectively, under the Employees' Stock Purchase Plan. For
Mr. von Schack, $3,014 represents the dollar value of the term portion, and
$41,492 represents the benefit, projected on an actuarial basis, of the
whole-life portion of a premium paid for a life insurance policy.
(2) Compensation data for Mr. von Schack is provided only for a portion of 1996
because his employment commenced September 9, 1996.
(3) Compensation data for Mr. Jasinski is provided only for a portion of 1998
because his employment commenced April 29, 1998.
8
<PAGE>
LONG-TERM INCENTIVE PLAN AWARDS(1) IN LAST FISCAL YEAR (1998)
<TABLE>
<CAPTION>
PERFORMANCE
OR OTHER ESTIMATED FUTURE PAYOUT UNDER
PERIOD NON-STOCK PRICE-BASED PLANS
UNTIL ---------------------------------------
NUMBER OF MATURATION TARGET
PERFORMANCE OR THRESHOLD SHARES MAXIMUM
NAME SHARES PAYOUT SHARES (#) (#) SHARES (#)
- - -------------------------------------------------- ------------- ----------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Wesley W. von Schack.............................. 6,828 1998-2000 1,707 6,828 10,242
Michael I. German................................. 2,599 1998-2000 650 2,599 3,899
Kenneth M. Jasinski............................... 2,265 1998-2000 566 2,265 3,398
Daniel W. Farley.................................. 786 1998-2000 197 786 1,179
Robert E. Rude.................................... 552 1998-2000 138 552 828
</TABLE>
- - ------------------------
(1) Pursuant to the LTEISP, participants, including executive officers of the
Company, were granted a certain number of Performance Shares in 1998
depending upon their position. Performance Shares granted earn dividend
equivalents in the form of additional Performance Shares. Payments
representing the cash value of a certain percentage of the Performance
Shares are made at the end of each three-year Performance Cycle and are
based on the Company's ranking with respect to its three-year average total
stockholder return as compared to the top 100 utilities by revenue. A new
Performance Cycle begins on January 1 of each year. Achievement of a ranking
of 65th will result in the payment of the cash value of 25% (threshold
amount) of the Performance Shares. Achievement of a ranking of 50th will
result in the payment of the cash value of 100% (target amount) of the
Performance Shares. Achievement of a ranking of 20th will result in the
payment of the cash value of 150% (maximum amount) of the Performance
Shares. There will be no payments, however, if the Company's ranking is
below 65th. The value of the Performance Shares will be measured by
reference to the average of the daily closing prices of a share of Common
Stock for the last five trading days of the Performance Cycle.
9
<PAGE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR (1998)
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------------
NUMBER OF PERCENTAGE OF
SECURITIES TOTAL
UNDERLYING OPTIONS/ SARS
OPTIONS/ GRANTED TO
SARS EMPLOYEES EXERCISE OR GRANT DATE
GRANTED IN FISCAL BASE PRICE EXPIRATION PRESENT
NAME #(1) YEAR ($/SH) DATE VALUE(4)
- - ------------------------------------------- ----------- --------------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Wesley W. von Schack....................... 100,000 18.17% $ 35.8750 2/5/08 $535,000
Michael I. German.......................... 50,000 9.09% 35.8750 2/5/08 267,500
5,459(2) .99% 57.4375 5/21/07 51,751(5)
Kenneth M. Jasinski........................ 50,000(3) 9.09% 40.1250 4/29/08 347,500(6)
Daniel W. Farley........................... 18,000 3.27% 35.8750 2/5/08 96,300
607(2) .11% 57.4375 5/21/07 5,754(5)
Robert E. Rude............................. 15,000 2.73% 35.8750 2/5/08 80,250
</TABLE>
- - ------------------------
(1) Pursuant to the 1997 Stock Option Plan, participants were granted Options to
purchase a specified number of shares of Common Stock at specified exercise
prices. These Options were granted in tandem with Stock Appreciation Rights
and are for a term of ten years from the date of grant. The exercise price
of an Option or tandem Stock Appreciation Right may not be less than 100% of
the closing price of a share of Common Stock determined on the last trading
date before such Option and tandem Stock Appreciation Right are granted. The
exercise of an Option or a tandem Stock Appreciation Right will result in a
corresponding cancellation of the related Stock Appreciation Right or Option
to the extent of the number of shares of Common Stock as to which the Option
or the Stock Appreciation Right was exercised. Replacement Options are
granted to participants at the time of an exercise of an Option to the
extent that all or any portion of the Option exercise price or taxes
incurred in connection with the exercise of the Option are paid for by using
other common shares of the Company or by the withholding of the Company's
common shares. The Replacement Option is granted for the number of shares
the participant tenders to pay the exercise price or taxes incurred.
Replacement Options will first be exercisable no earlier than six months
from the date of their grant and will have an expiration date equal to the
expiration date of the original Option. The Options are transferable to
family members and certain entities under certain circumstances. Except
where noted, the Options and tandem Stock Appreciation Rights were granted
on February 5, 1998. The Options and the tandem Stock Appreciation Rights
are exercisable in three installments regarding the original number of
Options granted as follows: (a) in aggregate as to no more than 33 1/3% on
January 1, 1999; (b) in aggregate as to no more than 66 2/3% on January 1,
2000; and (c) on January 1, 2001 as to 100% of all Options which have not
been previously exercised.
(2) Represents the grant of a Replacement Option. The Replacement Option was
granted on December 7, 1998 and will be first exercisable on June 7, 1999.
(3) The Options and tandem Stock Appreciation Rights were granted on April 29,
1998 and have the same vesting schedule as the Options and tandem Stock
Appreciation Rights granted on February 5, 1998.
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<PAGE>
(4) Based on the Black-Scholes option pricing model. There is no assurance the
value realized will be at or near the value estimated by the Black-Scholes
option pricing model. The actual value, if any, will depend on the excess of
the stock price over the exercise price on the date the option is exercised.
In determining the "Grant Date Present Value," the following common
assumptions were used: stock price volatility, 21.34%; risk-free interest
rate, 5.82%; and an expected term before exercise of 10 years.
(5) In determining the "Grant Date Present Value," the following common
assumptions were used: stock price volatility, 23.23%; risk-free interest
rate, 4.96%; and an expected term before exercise of 10 years.
(6) In determining the "Grant Date Present Value," the following common
assumptions were used: stock price volatility, 21.41%; risk-free interest
rate, 6.02%; and an expected term before exercise of 10 years.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR (1998)
AND FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SHARES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS/SARS AT IN-THE-MONEY OPTIONS/SARS
ACQUIRED ON FISCAL YEAR-END (#) AT FISCAL YEAR-END(2)
EXERCISE VALUE -------------------------- ---------------------------
NAME (#) REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- - ------------------------------- ----------- ----------- ----------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Wesley W. von Schack........... 19,000 $ 408,500 50,000 100,000 $ 1,737,500 $ 2,062,500
Michael I. German.............. 15,000 535,313 15,000 55,459 521,250 1,031,250
Kenneth M. Jasinski............ 0 0 0 50,000 0 818,750
Daniel W. Farley............... 1,533 48,984 4,032 18,607 140,112 371,250
Robert E. Rude................. 0 0 0 15,000 0 309,375
</TABLE>
- - ------------------------
(1) The "Value Realized" is equal to the difference between the Option exercise
price and the closing price of a share of Common Stock on the NYSE on the
date of exercise.
(2) The "Value of Unexercised In-the-Money Options/SARs at Fiscal Year-End" is
equal to the difference between the Option exercise price and the closing
price of $56.50 a share of Common Stock on the NYSE on December 31, 1998.
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<PAGE>
PENSION PLAN TABLE
The following table sets forth the maximum retirement benefits payable to
executive officers who retire at age 60 or later, in specified compensation and
years of service classifications, pursuant to the Retirement Benefit Plan and
the Supplemental Executive Retirement Plan ("SERP") as they presently exist, and
assuming no optional payment form is elected. The amounts listed below reflect
the deduction for Social Security benefits. There are no other offset amounts.
<TABLE>
<CAPTION>
AVERAGE YEARS OF SERVICE
ANNUAL ----------------------------------------------------------------------------------
SALARY* 10 15 20 25 30 35 40**
- - -------------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
$700,000.............................. $ 314,300 $ 351,000 $ 387,800 $ 424,500 $ 461,300 $ 498,000 $ 534,800
650,000.............................. 290,600 324,800 358,900 393,000 427,100 461,300 495,400
600,000.............................. 267,000 298,500 330,000 361,500 393,000 424,500 456,000
550,000.............................. 243,400 272,300 301,100 330,000 358,900 387,800 416,600
500,000.............................. 219,800 246,000 272,300 298,500 324,800 351,000 377,300
450,000.............................. 196,100 219,800 243,400 267,000 290,600 314,300 337,900
400,000.............................. 172,500 193,500 214,500 235,500 256,500 277,500 298,500
350,000.............................. 148,900 167,300 185,600 204,000 222,400 240,800 259,100
300,000.............................. 125,300 141,000 156,800 172,500 188,300 204,000 219,800
250,000.............................. 101,600 114,800 127,900 141,000 154,100 167,300 180,400
200,000.............................. 78,000 88,500 99,000 109,500 120,000 130,500 141,000
150,000.............................. 54,400 62,300 70,100 78,000 85,900 93,800 101,600
</TABLE>
- - ------------------------
* Average of the salaries (not including amounts listed under "Bonus,"
"Long-Term Compensation Awards, Options/SARs," and "All Other Compensation"
in the Summary Compensation Table) for the five highest paid consecutive
years during the last ten years of employment service. The average of the
highest three years of salary within the last ten years of employment for
the SERP was assumed to be 5% higher than each salary shown.
** Maximum years of employment service for Retirement Benefit Plan and SERP
purposes.
The Retirement Benefit Plan provides retirement benefits for hourly and
salaried employees, including executive officers of the Company and certain
subsidiaries, based on length of service and the average for the five highest
paid consecutive years during the last ten years of employment service. The
Retirement Benefit Plan is non-contributory and is funded under a trust
arrangement and an insurance contract. Amounts paid into the Retirement Benefit
Plan are computed on an actuarial basis. The Retirement Benefit Plan provides
for normal or early retirement benefits.
The SERP provides that all salaried employees, including executive officers
of the Company and certain subsidiaries, shall receive the full benefits of the
Retirement Benefit Plan without regard to any limitations imposed by the federal
tax law and by including certain amounts deferred under the Deferred
Compensation Plan for Salaried Employees. In addition, it provides that officers
and certain other key employees of the Company and certain subsidiaries, who
have at least ten years of service, who have served in key capacities for at
least five years and who retire at age 60 or later, shall receive a total
retirement
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<PAGE>
benefit (including benefits under the Retirement Benefit Plan and Social
Security), based on years of service, of up to 75% of the average of their
highest three years of salary within the last ten years of employment.
Messrs. von Schack, German and Jasinski each have an agreement with the
Company and NYSEG which provides that, for the purposes of the Retirement
Benefit Plan and the SERP, they each will be credited with two years of service
for each year actually worked for the first five years of employment, provided
that they each are employed by the Company or NYSEG for at least five years. Mr.
von Schack was employed commencing September 9, 1996, Mr. German was employed
commencing December 5, 1994, and Mr. Jasinski was employed commencing April 29,
1998.
Messrs. von Schack, German, Jasinski, Farley and Rude have 2, 4, 1, 17, and
22 credited years of service, respectively, under the Retirement Benefit Plan
and SERP.
EMPLOYMENT, CHANGE IN CONTROL AND OTHER ARRANGEMENTS
The Company and NYSEG have entered into employment agreements with Messrs.
von Schack, German and Jasinski. Mr. von Schack's agreement provides for his
employment as Chairman, President and Chief Executive Officer of the Company and
of NYSEG for a term ending on September 8, 2001. Mr. German's agreement provides
for his employment as Senior Vice President of the Company and Executive Vice
President and Chief Operating Officer of NYSEG for a term ending on February 28,
2002. Mr. Jasinski's agreement provides for his employment as Senior Vice
President and General Counsel of the Company and Executive Vice President of
NYSEG for a term ending on April 28, 2002. Each agreement provides for automatic
one-year extensions unless either party to an agreement gives notice that such
agreement is not to be extended. Each agreement was unanimously approved by the
Board of Directors and provides for, among other things, a base salary of
$575,000 for Mr. von Schack, $375,000 for Mr. German, and $375,000 for Mr.
Jasinski, subject to increase by the Board of Directors, and in the case of Mr.
von Schack, the payment of the annual premium on a life insurance policy (the
"Life Insurance Policy") on his life. The agreements also provide for
eligibility for participation in the Company's or NYSEG's other compensation and
benefit plans and for certain payments in the event of the termination of
employment for cause due to disability or termination by the Company without
cause prior to a change in control of the Company.
The agreements also provide that, if, generally, within two years following
a change in control of the Company, the officer's employment is terminated
either by the Company without cause or by the officer for good reason, he will
receive a lump-sum payment equal to three times the sum of (i) his then-annual
base salary, (ii) an award under the Annual Executive Incentive Plan ("AEIP")
for the year in which the termination occurs, and (iii) in the case of Mr. von
Schack, the premium on the Life Insurance Policy. In the event of such
termination, the officer's life (other than the Life Insurance Policy),
disability, accident and health insurance benefits will continue for a period of
thirty-six months and he will receive an amount equal to all earned but unpaid
awards under the AEIP and a pro rata portion of any award under the AEIP with
respect to the year in which the termination occurs, provided, however, that
there will be no duplication of payments made pursuant to the agreement and the
AEIP. Also, in the event of such termination, the officer will be given
additional age and service credit under the SERP and the present value of any
SERP benefits will be paid in a lump sum to the officer, unless the officer
elects to receive
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<PAGE>
such SERP benefits in the manner provided in the SERP. In the event that any
payments made on account of a change in control of the Company, whether under
the agreement or otherwise, would subject the officer to federal excise tax or
interest or penalties with respect to such federal excise tax, he will be
entitled to be made whole for the payment of any such taxes, interest or
penalties.
Messrs. Farley and Rude each have a severance agreement in order to provide
for certain payments if, generally, within two years following a change in
control of the Company, the individual's employment is terminated either by
NYSEG without cause or by the individual for good reason. The severance
agreements have terms ending on December 31, 2000 with automatic one-year
extensions unless either party to an agreement gives notice that the agreement
is not to be extended. The agreements were unanimously approved by the Board of
Directors of NYSEG. The benefits consist of a lump-sum severance payment equal
to two times the sum of (i) the individual's then-annual base salary, and (ii)
any award under the AEIP with respect to the year immediately preceding the year
in which the termination occurs. In the event of such termination, the
individual's life, disability, accident and health insurance benefits will
continue for a period of twenty-four months and the individual will receive an
amount equal to all earned but unpaid awards under the AEIP and a pro rata
portion of any award under the AEIP with respect to the year in which the
termination occurs, provided, however, that there shall be no duplication of
payments made pursuant to the agreement and the AEIP. Also, in the event of such
termination, the individual will be given additional age and service credit
under the SERP. In the event that any payments made on account of a change in
control of the Company, whether under the agreement or otherwise, would subject
the individual to federal excise tax or interest or penalties with respect to
such federal excise tax, the individual will be entitled to be made whole for
the payment of any such taxes, interest or penalties.
Certain employees, including senior management of the Company and of NYSEG,
have entered into Employee Invention and Confidentiality Agreements. The
agreements provide for, among other things, payments (up to one year's salary)
and certain health insurance premiums to the individual in the event that the
individual's employment is terminated whether voluntarily or involuntarily, and
the noncompetition and nonsolicitation provisions of the agreement prevent the
individual from obtaining other appropriate employment, so long as he or she is
not entitled to receive payments under a change in control severance agreement.
In the event of a change in control of the Company, participants in the AEIP
will be paid an amount which includes all earned but unpaid awards, a pro rata
portion of any award with respect to the year in which such change in control
occurs and an additional payment at the end of the year in which such change in
control occurs, to the extent that the award earned under the normal terms of
the AEIP exceeds the amount paid upon such change in control. In addition,
participants in the LTEISP will be paid an amount which includes (i) the payment
of awards for all cycles in progress at the time of such change in control
computed and paid out in full (rather than pro rata) and based on the assumption
that the Company's performance was at the 50th percentile; and (ii) any amounts
earned under the normal terms of the LTEISP through the end of each performance
cycle, to the extent those amounts exceed the amounts paid at the time of such
change in control. All change in control payments under the LTEISP are to be
valued based on the change in control price of the Company's Common Stock. After
a change in control of the Company, officers and certain key employees of the
Company and certain subsidiaries who qualify, and whose employment is terminated
at age 55 or later, other than for cause, shall receive a total retirement
benefit as determined under the SERP.
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<PAGE>
The Executive Compensation and Succession Committee of the Board of
Directors in its discretion may take certain actions in order to preserve, in
the event of a change in control of the Company, a participant's rights under an
award issued pursuant to the 1997 Stock Option Plan or the Restricted Stock
Plan.
Grantor trusts have been established to provide for the payment of certain
employee and director benefits, including any severance benefits that might
become payable after a change in control of the Company under Mr. von Schack's,
Mr. German's and Mr. Jasinski's employment agreements and the other severance
agreements.
DIRECTORS' COMPENSATION
Directors of the Company, other than officers of the Company or officers of
any subsidiary of the Company, receive an annual retainer of $22,000, plus
$1,000 for each directors' and committee meeting attended. The Chairperson of
each standing committee receives additional compensation of $1,000 for serving
as Chairperson of such committee. Under the terms of the Deferred Compensation
Plan for Directors, directors can elect to defer a portion or all of their
compensation. Such deferred compensation, together with interest thereon, is
payable in a lump sum or over a period of years following retirement as a
director.
Pursuant to the Director Share Plan for Directors, persons who are
non-employee directors are eligible for certain benefits to be paid upon their
ceasing to serve as directors of the Company. On each January 1, April 1, July
1, and October 1, all non-employee directors receive 150 Phantom Shares pursuant
to the Director Share Plan. In addition, all persons who were non-employee
directors prior to January 1, 1996 received an initial grant of Phantom Shares
either in an amount based on the actuarial present value of the vested accrued
benefit earned by the director in lieu of continued participation in the
Retirement Plan for Directors or in an amount equal to the number of Phantom
Shares awarded to an eligible director from January 1, 1997 to the effective
date of participation in the Director Share Plan. Phantom Shares granted earn
dividend equivalents in the form of additional Phantom Shares. Upon a director
ceasing to serve as a director of the Company, cash payments representing the
value of the Phantom Shares held by the director are to be made to the director.
The value of the Phantom Shares is to be determined by multiplying the number of
Phantom Shares by the average of the daily closing prices of the Company's
Common Stock for the five trading days preceding the date the director ceases to
serve as a director. Under the terms of the Deferred Compensation Plan for the
Director Share Plan, a director may defer a portion or all of the cash payment
to be made under the Director Share Plan over a period of years following the
director's ceasing to serve as a director.
Pursuant to the Retirement Plan, eligible directors who opted to continue
participating in the Retirement Plan qualify for annual retirement benefits. The
Retirement Plan was amended in January 1996 to provide that any director elected
after December 31, 1995 will not participate in the Retirement Plan. An eligible
director who serves on the Board for at least five years qualifies for annual
retirement benefits equal to 50% of the highest annual retainer in effect during
such service. An eligible director who serves on the Board for ten years or more
qualifies for annual retirement benefits equal to 100% of the highest annual
retainer in effect during such service, while an eligible director with between
five and ten years of service qualifies for prorated amounts. Payments of
Retirement Plan benefits
15
<PAGE>
generally commence upon the later of the eligible director's attaining age 65 or
retirement from the Board and continue for a period equal to the greater of the
eligible director's life or ten years. Eligible directors elected prior to the
effective date of the Retirement Plan will have such prior service included in
establishing their eligibility and the amount of their retirement benefits.
COMMITTEES
The Company's Board of Directors has an Audit Committee, a Nominating
Committee, and an Executive Compensation and Succession Committee.
The Audit Committee, which consists of Ben E. Lynch, Chairman, Lois B.
DeFleur, Paul L. Gioia, and Walter G. Rich, had two meetings between May 1, 1998
(the effective date of the formation of the holding company) and December 31,
1998. The Audit Committee recommends the appointment of the independent
accountants and reviews with them the audit plan and results of the audit. It
also meets with the independent accountants, internal auditor, and management to
discuss the adequacy of the Company's system of internal controls and financial
reporting, meets with the internal auditor to discuss the results of completed
internal audits and meets with management to discuss the Company's Corporate
Compliance Program, including the adequacy of management's compliance and
enforcement efforts.
The Nominating Committee, which consists of Alton G. Marshall, Chairman,
Richard Aurelio, Lois B. DeFleur, and Everett A. Gilmour had no meetings between
May 1, 1998 (the effective date of the formation of the holding company) and
December 31, 1998. The Nominating Committee is responsible for recommending
candidates to fill vacancies on the Board of Directors. The Committee makes
recommendations to the Board of Directors regarding criteria for nomination as a
candidate to the Board of Directors. Stockholders wishing to recommend
candidates for consideration by the Nominating Committee should submit to the
Secretary of the Company the name, a statement of qualifications and the written
consent of the candidate. Recommendations will be brought to the attention of
the Nominating Committee.
The Executive Compensation and Succession Committee, which consists of
Everett A. Gilmour, Chairman, Richard Aurelio, Joseph J. Castiglia, and Alton G.
Marshall, had three meetings between May 1, 1998 (the effective date of the
formation of the holding company) and December 31, 1998. That Committee, among
other things, recommends compensation for officers, awards under the AEIP, and
candidates for election as officers.
REPORT OF EXECUTIVE COMPENSATION AND SUCCESSION COMMITTEE
The Executive Compensation and Succession Committee (the "Committee") is
composed entirely of independent outside directors. Under the guidance of the
Committee, the Company's general compensation policies are designed to manage
the Company toward overall enhanced profitability and increased stockholder
value. Accordingly, two principles underlying the Company's compensation policy
for all senior managers, including Mr. von Schack and the other named executive
officers, are (i) aligning the financial interests of senior managers with those
of the Company's stockholders, and (ii) rewarding senior management for
corporate and individual performance. These principles are reflected in the
structure of the Company's compensation program for senior managers which
consists of three basic components: base
16
<PAGE>
salary, short-term incentive compensation awards and long-term incentive
compensation awards. In creating and further refining this structure, the
Committee has deliberately placed an increased emphasis on the at risk elements
of compensation. The Committee believes that placing compensation at risk and
linking such compensation to performance better aligns senior management's
financial interests with those of the stockholders, which in turn supports the
Company's overall objective of enhancing stockholder value.
In general, base salaries are targeted at competitive levels, subject to
adjustment by the Committee depending on the individual's performance, based on
the Committee's general policy that senior management compensation should be
competitive so as to attract and retain talented executives. To that end, the
Committee has in the past reviewed compensation data from certain utility and
general industry companies, as well as certain salary surveys to assist in its
decision-making. The Committee has also considered a number of qualitative
factors, including the Company's financial and operational achievements, the
individual's experience, responsibilities, effectiveness in performing those
responsibilities and in leading or helping the Company effectively respond to
the rapidly changing utility industry. Because the Committee has placed greater
emphasis on the at risk portion of senior management compensation, Mr. von
Schack's base salary has not been increased from the original amount set forth
in his employment agreement.
In 1998, earnings per share rose substantially and stockholder value was
enhanced as the Company's market value increased significantly. Total
shareholder return in 1998 exceeded both the S&P Utility Average and the S&P 500
Index. In the past year, the Company made excellent progress in restructuring
and repositioning itself as the energy industry is deregulated. In determining
each officer's performance, including Mr. von Schack's, the Committee evaluated
them within the context of the year experienced by the Company in terms of
achieving the objectives of its 1998 operating plan, as well as their leadership
in planning and implementing strategic and operating initiatives designed to
increase the long-term value of the Company. The utility continues to provide
superior service and has been applauded by customers for its performance
following various storms during the past year. The customer complaint rate
continues to be the lowest of all electric, natural gas and telephone companies
in New York State. The Company has continued its commitment to act in an
environmentally responsible manner while providing service cost effectively.
These results and individual performances are reflected in the at risk portion
of senior management compensation for 1998.
The AEIP, in which the Company's executive officers participate, provides
for short-term cash performance incentive awards if certain annual goals are
achieved. For 1998, annual performance incentive awards were based on earnings
targets and individual performance objectives. Awards ranged from approximately
23% to 49% of the participant's base salary, depending upon the participant's
position, and the performance levels achieved. See the Bonus column in the
Summary Compensation Table for performance incentive awards earned for 1998. The
LTEISP, in which the Company's executive officers participate, provides for cash
incentive awards based on the Company's long-term financial performance relative
to the long-term financial performance of companies in the same industry. No
cash incentive awards were made under the LTEISP in 1998. See the Long-Term
Incentive Plan Awards table for a description of the LTEISP and performance
share grants made under the LTEISP. Awards under the 1997 Stock Option Plan and
the Restricted Stock Plan are intended to more closely align the long-term
financial interests of management with those of the Company's stockholders by
providing long-term incentives to
17
<PAGE>
those individuals who can significantly affect the future growth and success of
the Company. For example, should the Company's Common Stock double in value over
the ten-year option term (from $35.88 per share to $71.76 per share),
stockholder value would increase an estimated $2,258,220,432, while the value of
the grants to the individuals listed in the Option/SAR Grants Table would
increase an estimated $8,358,875 or 0.37% of the total gain realized by all
stockholders. See the Option/SAR Grants Table for a description of the 1997
Stock Option Plan and awards made under the 1997 Stock Option Plan. No awards
were made under the Restricted Stock Plan in 1998.
Section 162(m) of the Internal Revenue Code generally disallows a tax
deduction to a company for compensation in excess of $1 million paid to a
company's chief executive officer and each of the next four most highly
compensated executive officers except that qualifying performance-based
compensation that meets certain specified criteria is not subject to Section
162(m). The Committee believes, based on information currently available, that
Section 162(m) limitations do not apply to awards made under the 1997 Stock
Option Plan because the 1997 Stock Option Plan satisfies the requirements of
Section 162(m) and was approved by Common Stockholders. The Committee has
reviewed and will continue to review tax consequences as well as other relevant
considerations when making compensation decisions within the context of the
overall operation of the Company's compensation program and will consider what
actions should be taken, if any, to continue to operate the compensation program
in a tax effective manner.
EXECUTIVE COMPENSATION AND SUCCESSION COMMITTEE
<TABLE>
<S> <C>
Everett A. Gilmour, Chairman Joseph J. Castiglia
Richard Aurelio Alton G. Marshall
</TABLE>
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PROPOSAL 2: INCREASE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
(Item 2 on Proxy Card)
The authorized Common Stock of the Company now consists of 200,000,000
shares with a par value of $.01 per share, of which 62,906,411 shares were
issued and outstanding and 180,266 shares were held by the Company as treasury
shares as of the close of business February 22, 1999. Of the 136,913,323
authorized but unissued shares, the Company estimates that approximately
63,086,677 shares will be issued in connection with the two for one stock split
of the Company's Common Stock on April 1, 1999. Your Board of Directors has
unanimously approved and recommends that you approve a proposal to amend Article
4(A) of the Certificate of Incorporation to authorize 100,000,000 additional
shares of Common Stock. Article 4(A) of the Certificate of Incorporation as
proposed to be amended is included in Exhibit A to this Proxy Statement.
In light of the recently announced two for one stock split of the Company's
Common Stock, we believe it is desirable for the conduct of the Company's
business to increase, at this time, the authorized shares of Common Stock to
assure availability of an adequate number of shares to meet the Company's future
financing requirements and for other corporate purposes. While the Company does
not currently contemplate issuing additional Common Stock (except as mentioned
above), the increase in the number of authorized shares at this time will
provide the Company with the necessary flexibility to issue Common Stock in the
future as the need arises. This proposal to amend the Certificate of
Incorporation is not being recommended in response to any specific effort of
which we are aware to obtain control of the Company and we are not seeking to
increase the number of authorized shares of Common Stock for anti-takeover
purposes. However, although we have no present intention of doing so, the
authorized but unissued Common Stock could be used to make any attempt to effect
a takeover of the Company more difficult and less likely.
Stockholders should note that the Certificate of Incorporation and By-Laws
contain certain provisions which could be viewed as having anti-takeover
effects. The Certificate of Incorporation provides that the Board of Directors
be classified into three classes, with one class elected each year, and does not
currently provide for cumulative voting in the election of directors. (We have
submitted a proposal for your consideration regarding the institution of
cumulative voting. See Proposal 4.) The Certificate of Incorporation and By-Laws
require the affirmative vote of the stockholders entitled to cast three-fourths
of the votes entitled to be cast for the alteration, amendment, repeal of, or
the adoption of any provision inconsistent with, certain specified By-Laws if
such alteration, amendment, repeal or adoption is by action of the stockholders.
(We have submitted a proposal for your consideration to lower the supermajority
vote requirement from three-fourths to two-thirds. See Proposal 3.) The
Certificate of Incorporation provides that the Stockholders may take action
without a meeting only by unanimous consent. The By-Laws provide that directors
may only be removed by holders of a majority of the votes of shares of Common
Stock for cause and only at a meeting of stockholders. In addition, the By-Laws
do not permit stockholders to increase or decrease the number of directors and
provide that a majority of the outstanding Common Stock may request that a
special meeting be called. The By-Laws contain certain advance notice procedures
which stockholders must comply with in order to make nominations of candidates
for election as directors or to bring other business before an annual meeting of
stockholders. The Board of Directors has, to the extent permitted by statute and
the Certificate of Incorporation, the full authority to determine
19
<PAGE>
the terms of any series of the Company's Preferred Stock without further action
by the stockholders, except as required by law or applicable stock exchange
requirements.
The proposal to amend the Certificate of Incorporation to authorize
100,000,000 additional shares of Common Stock must be approved by the vote of a
majority of all outstanding shares of Common Stock entitled to vote. If the
proposal is approved, no further authorization from stockholders will be
necessary prior to the issuance of the shares, unless required by applicable law
or the rules of the NYSE. Holders of Common Stock do not have preemptive rights.
YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE ADOPTION OF PROPOSAL 2.
PROPOSED AMENDMENTS TO THE COMPANY'S CERTIFICATE OF INCORPORATION AND BY-LAWS
In accordance with an understanding with Institutional Shareholder Services,
we have agreed to submit Proposals 3 and 4, below, for stockholder approval at
this year's Annual Meeting of Stockholders. The Company's Certificate of
Incorporation and By-Laws currently require supermajority stockholder approval
for amendments by stockholders to certain specified provisions of the Company's
By-Laws. In addition, the Certificate of Incorporation and By-Laws do not
currently provide for cumulative voting in the election of directors. On
February 19, 1999, we approved, subject to stockholder approval, the amendment
of Article 9 of the Certificate of Incorporation and of By-Law No. 43 to lower
the supermajority stockholder vote requirement from three-fourths to two-thirds
and the amendment of Article 4(B)(1) of the Certificate of Incorporation to
provide for cumulative voting in the election of directors. Article 4(B)(1) and
Article 9 of the Certificate of Incorporation and By-Law No. 43, each as
proposed to be amended, are included in Exhibit A to this Proxy Statement.
Because of our understanding with Institutional Shareholder Services, and for
the reasons described below, we recommend a vote for approval of Proposals 3 and
4.
PROPOSAL 3: LOWER SUPERMAJORITY VOTE REQUIREMENT (Item 3 on Proxy Card)
Article 9 of the Certificate of Incorporation and By-Law No. 43 currently
require the affirmative vote of the stockholders entitled to cast three-fourths
of the votes entitled to be cast in order to alter, amend, repeal, or adopt any
provision inconsistent with, certain specified provisions of the By-Laws if such
alteration, amendment, repeal or adoption is by action of the stockholders. We
are proposing an amendment to Article 9 of the Certificate of Incorporation and
By-Law No. 43 to lower the supermajority stockholder vote requirement from
three-fourths to two-thirds.
The By-Law provisions which require a three-fourths supermajority vote in
order to amend them relate generally to the advance notice procedures, special
meetings of stockholders, the structure of the Company's Board of Directors, and
the amendment of the supermajority requirement. The supermajority requirement
makes it more difficult for stockholders to amend such provisions, and therefore
helps to discourage unsolicited takeover proposals for the Company that we
determine are detrimental to the Company.
We recognize the difficulty in obtaining sufficient proxies to satisfy a
three-fourths stockholder vote requirement. As a result, we believe that a
two-thirds (rather than a three-fourths) vote requirement would make it easier
for stockholders to amend such By-Law provisions without substantially
sacrificing the protection that a supermajority stockholder vote requirement
affords.
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PROPOSAL 4: INSTITUTE CUMULATIVE VOTING IN THE ELECTION OF DIRECTORS
(Item 4 on Proxy Card)
We are proposing an amendment to Article 4(B)(1) of the Certificate of
Incorporation to provide for cumulative voting in the election of directors at
all elections occurring after this year's Annual Meeting of Stockholders.
Cumulative voting means that the total number of votes which you may cast for
the election of directors of a given class shall equal the number of directors
in such class to be elected multiplied by the number of shares held, and you may
cast all of such votes for a single nominee for director or you may distribute
them among all or several nominees in such class. A potential benefit of
cumulative voting is that it could lead to a more diverse Board by providing a
means by which a stockholder or a group of stockholders holding a significant
percentage of the Common Stock, though not a majority, can elect directors.
While under cumulative voting, it is possible for representation on a board
of directors to be obtained by an individual or group of individuals who own a
small percentage of the voting stock, such a stockholder or group may have
interests and goals which are not consistent with, and indeed may be in conflict
with, those of a majority of stockholders. We believe that, despite this
possibility, since the Board of Directors of the Company is classified, the
ability of a stockholder who controls a small percentage of the Common Stock to
gain representation on the Board is somewhat mitigated.
If approved, the proposed amendment to Article 4(B)(1) of the Certificate of
Incorporation could change the voting requirement in the By-Laws for removal of
directors as is currently in effect. The applicable By-Law provides, among other
things:
"Except as otherwise provided by statute, at any meeting
of the stockholders, the holders of a majority of the
votes of shares of common stock issued and outstanding,
voting separately as a class, may remove at any time, for
cause only, any director."
Section 706(c)(1) of the New York Business Corporation Law (the "BCL")
provides that, in the case of a corporation having cumulative voting, no
director may be removed when the votes cast against his removal would be
sufficient to elect him if voted cumulatively in an election at which the same
total number of votes were cast and the entire board, or the entire class of
directors of which he is a member, were then being elected.
If the proposed amendment to Article 4(B)(1) of the Certificate of
Incorporation to provide for cumulative voting is approved, then director
removal could be limited by the provisions of BCL Section 706(c)(1). The
limitation could arise because even if a majority of the votes of shares voted
to remove a director, where the votes cast against the removal of such director
would be sufficient to elect him if voted cumulatively, then such director could
not be removed. Conversely, a majority of the votes may remove a director where
the votes cast against the removal of such director would be insufficient to
elect him if voted cumulatively.
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PROPOSAL 5: STOCKHOLDER PROPOSAL (Item 5 on Proxy Card)
Mr. and Mrs. Edward Rudy, Box 7077, Yorkville Station, New York, New York,
10128, who are the beneficial owners of approximately 6,600 shares of Common
Stock have advised the Company that they intend to present the following
proposal at the 1999 Annual Meeting of Stockholders:
"RESOLVED: That the stockholders of Energy East Corporation, assembled in
annual meeting in person and by proxy, hereby request that the Board of
Directors take the steps necessary to provide for an immediate reduction in
stipends, fees, salaries, stock options and/or other remuneration being paid to
members of the Board of Directors, including officers and executives who also
serve as directors, to the exact percentage reduction which has been approved by
the Board of Directors for dividends payable to shareholders of the corporation
and, furthermore, said reduction shall not be restored nor payments to all
Energy East corporate directors increased except in the exact same cumulative
percentages as are or have been approved for increases in shareholder common
stock dividends. Included are the new dividend restorations or increases
proposed by Chairman Wesley W. Von Schack and/or other members of the Board of
Directors, and approved by the Board of Directors prior to the approval of this
shareholders' proposal by the shareholder-owners of Energy East."
The following statement was submitted by the proponents in support of the
proposal:
"The shareholder-voters of Energy East showed very strong support for this
proposal when it was presented at the last four annual meetings. Shareholders
who are the owners of Energy East Corporation, and who were the owners of its
predecessor, New York State Electric & Gas Corporation, are the only
shareholders in a major utility who have been subjected to two large dividend
reductions in less than a decade.
The most recent dividend reduction, in 1994, carried the explanation, by a
former NYSEG Chairman, on behalf of the NYSEG Board of Directors, that `we
understand the importance of the dividend. While difficult, this action is a
crucial step in positioning NYSEG for a competitive environment.'
We believe that the Board of Directors should fully participate with the
non-director shareholder owners in this `crucial step' which previous management
and the Board of Directors, at that time, determined was necessary. We do not
believe that shareholder dividends which are relied upon as retirement income by
many retired NYSEG employees and other investors, should be slashed without
similar reductions in salaries, stipends, benefits, perks, pensions, or other
payments to the current Energy East Board of Directors.
Energy East Corporation, under the direction and guidance of Wes Von Schack,
is certainly doing very well. Chairman Von Schack started the process of
restoring the dividend with a $.20 annual raise in 1998 and, less than a year
later, another $.08 annual raise payable in 1999. That totals $.28 and we
applaud our Chairman and the Energy East Board of Directors for keeping their
word and taking that action! Income is up, expenses are down and we have seen a
terrific increase in the price of Energy East Corporate stock. Our corporation
has seen an amazing turnaround from being the poorest performing utility on the
NYSE to being the number one performing utility. . . and we applaud that great
accomplishment!
In 1986, the dividend rate per share was $2.64 on an annual basis. In 1999,
including the two new dividend increases, the dividend rate per share will be
$1.68. We appreciate the excellent management that has recently partially
restored the dividend cuts and greatly improved the performance of Energy East
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Corporation shares. You certainly made an excellent start, but it is time to
restore the dividend rate to at least the 1986 rate of $2.64 per share on an
annual basis!
If you agree, please mark your ballot in favor of this resolution; if you
disagree, mark against. NOTE: PROXY OR PROXIES NOT MARKED WILL BE VOTED AGAINST
THIS RESOLUTION, unless you have indicated that you wish to abstain from voting
on this proposal."
BOARD OF DIRECTORS' POSITION
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST ADOPTION OF THE
STOCKHOLDER PROPOSAL FOR THE FOLLOWING REASONS:
Despite the fact that the Company posted an exceptional 1998 in which
earnings, price per share and dividends all increased substantially, total
shareholder return in 1998 outperformed both the S&P Utility Average and the S&P
500 Index, and your Board recently raised the dividend again and declared a two
for one stock split, Mr. and Mrs. Rudy have again submitted a proposal which is
nearly identical to a proposal that was presented at the 1995, 1996, 1997 and
1998 Annual Meetings. Each year, this proposal has been soundly defeated by
successively higher numbers of votes of stockholders, who had the foresight and
wisdom to recognize that furthering both the long-term and short-term interest
of stockholders and the Company requires more than a superficially appealing,
narrow gesture such as tying the level of dividends to director compensation. We
believe that neither your interests nor the Company's interests are well served
by wasting the time of the overwhelming majority of the stockholders on repeated
consideration of a proposal which garners less and less stockholder support each
year it is submitted. Specifically, shareholder support for this proposal has
decreased each year and declined 45% in 1998 from the preceding year.
The Securities and Exchange Commission rules require that we include the
resubmitted proposal, no matter how irrelevant it has become, so long as the
resubmitted proposal has managed to draw at least 10% of the required vote on
its last submission. In 1998, the proposal drew 10.97% of the vote, barely
passing the 10% threshold requirement. The continued resubmission of this
proposal is inappropriate in light of the fact that the proposal draws less and
less stockholder support each year. The strategies we have embraced and the
direction we have chosen, combined with our ability to adapt to the new
competitive energy marketplace, have created a more efficient, more market
driven and more profitable company. Repeated resubmission of this proposal is
unwarranted. For the foregoing reasons, we strongly believe that the Stockholder
Proposal is not in your best interests.
YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE AGAINST THE STOCKHOLDER
PROPOSAL.
INDEPENDENT ACCOUNTANTS
The Company has appointed PricewaterhouseCoopers LLP, a firm of independent
certified public accountants, as auditors for the year 1999. Representatives of
PricewaterhouseCoopers LLP are expected to be present at the meeting and will
have an opportunity to make a statement if they desire to do so. They will also
be available to answer questions that you may have. From time to time
PricewaterhouseCoopers LLP performs certain management advisory services for the
Company and NYSEG.
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DEADLINE FOR STOCKHOLDER PROPOSALS
For a stockholder proposal to be considered for inclusion in our proxy
statement and form of proxy for the 2000 Annual Meeting, it must be received by
the Company's Secretary at P.O. Box 12904, Albany, New York, 12212-2904 by
November 4, 1999. Under our By-Laws, if you wish to nominate candidates for
election to the Board of Directors or if you wish to bring any matter before the
2000 Annual Meeting (other than those matters included in our proxy material),
you must notify the Company's Secretary in writing by January 24, 2000. The
notice must also meet certain other requirements.
OTHER MATTERS
We do not know of any other matters of business to be presented for action
at the meeting. However, the enclosed form of proxy will confer discretionary
authority for the transacting of any such other and further business if properly
brought before the meeting or any adjournment thereof. If any such business is
so brought before the meeting, the persons named in the enclosed form of proxy,
or their substitutes, will vote according to their discretion.
The proxy is revocable by you at any time before the exercise thereof, and
the giving of such proxy will not affect your right to vote in person, should
you later find it convenient to attend the meeting.
State law requires the Company to inform stockholders of the initiation or
renewal of insurance indemnifying itself and its officers and directors. This
insurance, which is carried with Associated Electric & Gas Insurance Services
Limited, Energy Insurance Mutual Limited, and CNA Insurance Company, has been
renewed for one year beginning October 28, 1998, at a premium of $184,348. In
addition, the Pension Trust Liability Insurance, which is carried with Federal
Insurance Company, covering the Company, its subsidiaries, and its directors and
those officers considered fiduciaries under the Employee Retirement Income
Security Act of 1974, has been renewed for one year beginning November 1, 1998
at a premium of $68,495.
COST OF SOLICITATION
The accompanying proxy is solicited on behalf of the Board of Directors. The
costs of this solicitation, including reimbursement of charges of brokerage
houses and others for their expenses in forwarding proxy materials to beneficial
owners of stock, will be paid by the Company. In addition, directors, officers,
and employees of the Company or of NYSEG may solicit proxies by telephone,
telegram or in person, without additional compensation. In addition, the Company
has retained Georgeson & Company, Inc. to aid in the solicitation of proxies at
an anticipated fee of approximately $14,500, plus reimbursement of out-of-pocket
expenses incurred by that firm on behalf of the Company.
By Order of the Board of Directors
DANIEL W. FARLEY,
SECRETARY
Dated: March 3, 1999
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EXHIBIT A
Article 4(A) of the Certificate of Incorporation, would be revised to provide as
follows:
4. (A) The aggregate number of shares of stock which the Corporation shall
have authority to issue is Three Hundred Ten Million (310,000,000)
consisting of:
(1) Three Hundred Million (300,000,000) shares of Common Stock, with
a par value of One Cent ($.01) per share; and
(2) Ten Million (10,000,000) shares of Preferred Stock, with a par
value of One Cent ($.01) per share.
Article 4(B)(1) of the Certificate of Incorporation, would be revised to provide
as follows:
(1) COMMON STOCK
Each share of Common Stock shall have one vote, except that at all elections
of directors by the holders of Common Stock, each holder of Common Stock shall
be entitled to as many votes as shall equal the number of votes which (except
for this provision as to cumulative voting) he would be entitled to cast for the
election of directors with respect to his shares of Common Stock multiplied by
the number of directors in the class to be elected, and he may cast all of such
votes for a single director in such class or may distribute them among the
number of directors in such class to be voted for, or any two or more of them,
as he may see fit. Subject to any voting rights which may vest in holders of
Preferred Stock under the provisions of any series of Preferred Stock
established by the Board of Directors pursuant to authority herein provided and
except as otherwise provided by law, the exclusive voting power for all purposes
shall be vested in the holders of Common Stock. Subject to the rights of the
holders of Preferred Stock under the provisions of any series of Preferred Stock
established by the Board of Directors pursuant to authority herein provided, the
holders of Common Stock shall be entitled to receive such dividends, in cash,
securities, or property, as may from time to time be declared by the Board of
Directors. In the event of any liquidation, dissolution or winding up of the
Corporation, either voluntary or involuntary, after payment or provision for
payment shall have been made of the amounts to which the holders of Preferred
Stock shall be entitled under the provisions of any series of Preferred Stock
established by the Board of Directors pursuant to authority herein provided, the
holders of Common Stock shall be entitled, to the exclusion of the holders of
the Preferred Stock of any series, to share ratably, according to the number of
shares held by them, in all remaining assets of the Corporation available for
distribution.
Article 9 of the Certificate of Incorporation, would be revised to provide as
follows:
9. By-Laws of the Corporation may be altered, amended, repealed or adopted
by the affirmative vote of the stockholders entitled to cast a majority of the
votes entitled to be cast, or by the affirmative vote of a majority of the Board
of Directors at any meeting duly held as provided in the By-Laws of the
Corporation; provided that any alteration, amendment or repeal of, or the
adoption of any provision inconsistent with, By-Laws 6, 7, 8, 10, or 43, if by
action of the stockholders, shall be only upon the affirmative vote of the
stockholders entitled to cast two-thirds of the votes entitled to be cast.
By-Law No. 43, would be revised to provide as follows:
43. These By-Laws may be altered, amended or repealed, or new By-Laws may be
adopted, by the affirmative vote of the stockholders entitled to cast a majority
of the votes entitled to be cast, or by the affirmative vote of a majority of
the Board of Directors at any meeting duly held as provided above; provided that
any alteration, amendment or repeal of, or the adoption of any provision
inconsistent with, By-Laws 6, 7, 8, 10 or 43, if by action of the stockholders,
shall be only upon the affirmative vote of the stockholders entitled to cast
two-thirds of the votes entitled to be cast.
A-1
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This proxy is solicited on behalf of the Board of Directors of
ENERGY EAST CORPORATION
Annual Meeting of Stockholders
The undersigned appoints D. W. Farley, K. M. Jasinski, R. E. Rude or any one
or more of them, with power of substitution, proxies of the undersigned, to
vote, as specified, and in their discretion with respect to any other
business properly brought before the meeting, all shares of stock of Energy
East Corporation which the undersigned is entitled to vote at the Annual
Meeting of Stockholders of said Corporation to be held on April 23, 1999, and
at any adjournment thereof.
(Continued and to be signed on reverse side.)
Please mark votes as in this sample.
The Board of Directors Recommends a vote "FOR" Proposals 1, 2, 3 and 4.
1. Election of Directors, as provided in the Company's Proxy Statement.
(Instructions: TO WITHHOLD AUTHORITY to vote for any individual nominees, print
that nominee's name on the line provided below.)
A. P. Casarett J. M. Keeler
[] For all Nominees listed below
[] Withhold Authority to vote for all Nominees listed below
2. Increase number of authorized
shares of common stock. FOR AGAINST ABSTAIN
3. Lower supermajority vote
requirement. FOR AGAINST ABSTAIN
4. Institute cumulative voting
in the election of directors. FOR AGAINST ABSTAIN
The Board of Directors Recommends a vote "AGAINST" Proposal 5.
5. Stockholder Proposal as
provided in the
Company's Proxy Statement FOR AGAINST ABSTAIN
This proxy, when properly executed, will be voted as directed, or if no
contrary direction is indicated, will be voted FOR all the nominees, FOR
the increase in common stock, FOR the supermajority vote requirement, FOR
cumulative voting and AGAINST Proposal (5) and as said proxies shall deem
advisable on such other business as may come before the meeting.
The undersigned hereby revokes any other proxy to vote at such Annual Meeting,
and hereby ratifies and confirms all that said attorneys and proxies, and each
of them, may lawfully do by virtue hereof. With respect to matters not known at
the time of the solicitations hereof, said proxies are authorized to vote in
accordance with their best judgement.
Date: , 1999
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SIGNATURE(S)
NOTE: This proxy should be marked, dated and signed by the stockholder(s)
exactly as his name appears hereon, and returned promptly in the enclosed
envelope. Persons signing as a fiduciary should so indicate. If shares are
held by joint tenants or as community property, both must sign.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
