Exhibit 99-1
Directors
Directors Whose Terms Expire In 2005
Sara J. Burns (49) President of Central Maine Power Company (the "company"), Augusta, ME. Director since September 1998.(1)
Kenneth M. Jasinski (56) Executive Vice President and Chief Financial Officer of Energy East, Albany, NY and Portland, ME. Mr. Jasinski was Executive Vice President, General Counsel and Secretary of Energy East from August 2000 to February 2002, Executive Vice President and General Counsel of Energy East from April 1999 to August 2000, Senior Vice President and General Counsel of Energy East from April 1998 to April 1999, Executive Vice President of NYSEG from April 1998 to April 1999. Director since September 2000.(1)
Wesley W. von Schack (60) Chairman, President, and Chief Executive Officer of Energy East, Albany, NY and Portland, ME. Director of: Energy East, Albany, NY and Portland, ME; Mellon Financial Corporation and Mellon Bank, N.A., Pittsburgh, PA; AEGIS Insurance Services, Inc., Jersey City, NJ; and Gettysburg National Battlefield Museum Foundation, Washington, DC. Trustee of the American Gas Foundation, Washington, DC. Mr. von Schack was Chairman, President and Chief Executive Officer of NYSEG from September 1996 to April 1999. Director since September 2000.(1)
__________
(1) None of the directors receive compensation for serving as directors of the company because they are officers of Energy East or certain of its subsidiaries.
Section 16(a) Beneficial Ownership Reporting Compliance
The company believes that during 2004 all filing requirements under Section 16(a) of the Securities Exchange Act of 1934 were satisfied by its directors and executive officers.
Executive Compensation
The following sets forth certain information relating to cash and noncash compensation for each of the last three fiscal years for Ms. Burns and the next four highest compensated officers of the company. The following also sets forth certain information relating to benefits and to change in control arrangements for the company's officers.
Summary Compensation Table
|
| | | Annual Compensation | Long-Term Compensation | |
| | | | Awards | Payouts | |
Name and
Principal Position |
Year
|
Salary
|
Bonus
| Restricted Stock(1) | Options/
SARs (#) | Long-Term
Incentive Plan | All Other
Compensation(2) |
| | | | | | | |
Sara J. Burns
President | 2004
2003
2002
| $296,539
300,000
300,000 | $204,000
181,286
240,000 | $143,340
115,200
- -
| 20,000
20,000
60,000
| -
- -
- - | $24,887
42,087
4,520 |
Douglas A. Herling
Vice President | 2004
2003
2002 | 148,269
147,695
131,560 | 45,900
34,243
51,312 | 45,391
36,480
- - | -
- -
26,000 | -
- -
- - | 6,747
6,315
5,164 |
Kathleen A. Case
Vice President | 2004
2003
2002 | 128,500
128,750
120,000 | 44,200
34,914
68,200 | 45,391
36,480
- - | -
- -
26,000 | -
- -
- - | 5,558
5,191
2,557 |
Stephen G. Robinson
Vice President | 2004
2003
2002 | 128,500
128,250
116,000 | 44,200
29,677
43,650 | 45,391
36,480
- - | -
- -
26,000 | -
- -
- - | 5,406
5,019
4,567 |
R. Scott Mahoney
Vice President -
Controller, Treasurer
& Clerk | 2004
2003
2002 | 126,077
103,483
93,500 | 44,200
30,886
25,143 | 47,120
- -
- - | 10,000
- -
6,000 | -
- -
- - | 5,130
4,249
3,791 |
_______________
(1) As of December 31, 2004, the aggregate restricted stock holdings and their value, for Ms. Burns, Mr. Herling, Ms. Case and Messrs. Robinson and Mahoney were 12,000 shares ($320,160), 3,800 shares ($101,384), 3,800 shares ($101,384), 3,800 shares ($101,384) and 1,900 shares ($50,692), respectively, under the Energy East Restricted Stock Plan. Dividends are paid on restricted stock in a manner consistent with dividends paid on Energy East common stock.
On January 1, 2005, restricted stock vested based on Energy East's achievement of certain performance measures in 2004. The number of shares of restricted stock that vested for Ms. Burns, Mr. Herling, Ms. Case and Mr. Robinson were 3,000, 950, 950 and 950, respectively.
(2) In 2004, the company contributed for Ms. Burns, Mr. Herling, Ms. Case, and Messrs. Robinson and Mahoney $6,800, $5,931, $5,140, $5,140 and $5,043, respectively, under the Tax Deferred Savings Plan. The company also contributed $120 for Mr. Robinson under the Employees' Stock Purchase Plan. The company made a payment of $17,637 for Ms. Burns for financial planning services. The company made payments of $450, $120, $418, $146 and $87 for Ms. Burns, Mr. Herling, Ms. Case, and Messrs. Robinson and Mahoney, respectively, for group term life insurance. The company also made a payment of $696 for Mr. Herling for his use of a company vehicle.
Option/SAR Grants in Last Fiscal Year (2004)
| | Individual Grants | |
| | |
Name
| Number of
Securities
Underlying
Options/SARs
Granted #(1) | Percentage of
Total Options/SARs
Granted to
Employees in
Year |
Exercise or
Base Price
($/Sh)
|
Expiration
Date
|
Grant Date
Present
Value
|
| | | | | |
Sara J. Burns | 20,000(2) | 1.53% | $23.8900 | 02/12/14 | $60,600(3) |
R. Scott Mahoney | 10,000(4) | 0.76% | $25.1100 | 10/15/14 | $28,400(5) |
___________
(1) Pursuant to the Energy East 2000 Stock Option Plan, participants were granted options to purchase a specified number of shares of Energy East 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 an Energy East share 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 Energy East 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 shares of Energy East common stock or by the withholding of Energy East common stock. 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.
(2) The options and tandem stock appreciation rights were granted on February 12, 2004 and the right to exercise vests in three installments as follows: (a) 33 1/3% vested on grant date, February 12, 2004; (b) an additional 33 1/3% vested on January 1, 2005; and (c) the remaining 33 1/3% will vest on January 1, 2006.
(3) There is no assurance the value realized will be at or near the value based on 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, 20.67%; risk-free interest rate, 3.52%; dividend yield, 4.74%; and an expected term before exercise of 5.88 years.
(4) The options and tandem stock appreciation rights were granted on October 15, 2004, and the right to exercise vests in three installments as follows: (a) 33 1/3% vested on grant date, October 15, 2004; (b) an additional 33 1/3% vested on January 1, 2005; and (c) the remaining 33 1/3% will vest on January 1, 2006.
(5) There is no assurance the value realized will be at or near the value based on 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, 17.99%; risk-free interest rate, 3.61%; dividend yield, 4.63%; and an expected term before exercise of 5.88 years.
Aggregated Option/SAR Exercises in Last Fiscal Year (2004)
and Fiscal Year-End Option/SAR Values
|
| | | | Number of Shares
Underlying Unexercised
Options/SARs at
Fiscal Year-End(#) |
| | | |
Name
| Shares
Acquired on
Exercise(#) |
Value
Realized(1)
|
Exercisable
|
Unexercisable
|
| | | | |
Sara J. Burns | 138,333 | $868,965 | 6,666 | 20,001 |
Douglas A. Herling | 40,000 | 236,600 | 4,333 | 1,667 |
Kathleen A. Case | 15,000 | 80,100 | 29,333 | 1,667 |
Stephen G. Robinson | 30,000 | 161,000 | 4,333 | 1,667 |
R. Scott Mahoney | - | - | 7,666 | 8,334 |
| | Value of Unexercised
In-the-Money Options/SARs
at Fiscal Year-End(2) |
| |
Name | Exercisable | Unexercisable |
| | |
Sara J. Burns | $18,598 | $87,738 |
Douglas A. Herling | 22,308 | 9,052 |
Kathleen A. Case | 204,478 | 9,052 |
Stephen G. Robinson | 22,308 | 9,052 |
R. Scott Mahoney | 27,861 | 19,519 |
_______________
(1) The "Value Realized" is equal to the difference between the option exercise price and the closing price of an Energy East share on the New York Stock Exchange 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 $26.68 per Energy East share on the New York Stock Exchange on December 31, 2004.
Pension Plan
The following table sets forth the maximum retirement benefits payable to officers who retire at age 65, in specified compensation and years of service classifications, pursuant to the Retirement Income Plan for Non-Union Employees as it presently exists, and assuming no optional payment form is elected. The amounts listed below reflect the reduction for Social Security benefits. There are no other offset amounts.
Average
Annual
Salary* | |
Years of Service
|
| |
| | 15 | | 20 | | 25 | | 30 | | 35 |
| | | | | | | | | | |
$400,000 | | $46,900 | | $62,600 | | $78,200 | | $93,900 | | $97,400 |
350,000 | | 46,900 | | 62,600 | | 78,200 | | 93,900 | | 97,400 |
300,000 | | 46,900 | | 62,600 | | 78,200 | | 93,900 | | 97,400 |
250,000 | | 46,900 | | 62,600 | | 78,200 | | 93,900 | | 97,400 |
200,000 | | 46,200 | | 61,600 | | 77,000 | | 92,400 | | 95,800 |
150,000 | | 33,400 | | 44,600 | | 55,700 | | 66,900 | | 69,000 |
100,000 | | 20,700 | | 27,600 | | 34,500 | | 41,400 | | 42,300 |
__________
* Average of the salaries (including amounts listed under "Bonus" in the Summary Compensation Table, and not including other amounts listed under "Long-Term Compensation Awards, Restricted Stock Awards, Options/SARs, Payouts Long-Term Incentive Plan," and "All Other Compensation" in the Summary Compensation Table) for the five highest paid consecutive years of employment service preceding retirement.
The Retirement Income Plan for Non-Union Employees provides retirement benefits for full-time non-union employees, including officers of the company, based on length of service and the average annual eligible compensation for the five highest paid consecutive years of employment service preceding retirement. Retirement benefits under the Retirement Income Plan for Non-Union Employees are computed on an actuarial basis and are payable as a single life annuity.
Mr. Herling, Ms. Case and Messrs. Robinson and Mahoney have 22, 12, 20 and 9 credited years of service, respectively, under the Retirement Income Plan for Non-Union Employees.
Ms. Burns participates in both the Retirement Income Plan for Non-Union Employees and the Energy East Supplemental Executive Retirement Plan ("Energy East SERP"). The following table sets forth the maximum retirement benefits payable to executive officers who participate in the Energy East SERP and retire at age 60 or later, in specified compensation and years of service classifications, pursuant to the Energy East SERP as it presently exists, and assuming no optional payment form is selected. The amounts listed below reflect the reduction for Social Security benefits. There are no other offset amounts.
Average
Annual
Salary* |
Years of Service
|
|
10 | 15 | 20 | 25 | 30 | 35 | 40** |
| | | | | | | |
$700,000 | $192,000 | $297,000 | $339,000 | $381,000 | $423,000 | $465,000 | $507,000 |
600,000 | 162,000 | 252,000 | 288,000 | 324,000 | 360,000 | 396,000 | 432,000 |
500,000 | 132,000 | 207,000 | 237,000 | 267,000 | 297,000 | 327,000 | 357,000 |
__________
* Average of the salaries (including amounts listed under "Bonus" in the Summary Compensation Table, and not including other amounts listed under "Long-Term Compensation Awards, Restricted Stock Awards," "Options/SARs," "Payouts Long-Term Incentive Plan, and "All Other Compensation" in the Summary Compensation Table) for the highest three consecutive years of salary within the last five years of employment service.
** Maximum years of employment service for Energy East SERP purposes.
The Energy East SERP provides that key employees, including certain executive officers of Energy East and certain subsidiaries, who have completed five years of service and who terminate employment prior to becoming eligible for the Energy East SERP benefit described in the next sentence, shall receive the full benefits of the Retirement Income Plan for Non-Union Employees without regard to any limitations imposed by the federal tax law. Participants who have at least five years of service, and who retire at age 55 or later, shall receive a total retirement benefit (including benefits under the Retirement Income Plan for Non-Union Employees and Social Security), based on years of service, of up to 75% of the average of their highest three consecutive years of eligible compensation within the last five years of employment. Benefits payable prior to age 60 are reduced for early retirement.
Ms. Burns has 17 credited years of service under the Retirement Income Plan for Non-Union Employees and the Energy East SERP.
Employment, Change In Control and Other Arrangements
The company has entered into an employment agreement with Ms. Burns for a term of three years beginning on September 1, 2000, which is automatically extended each month unless either the company, Energy East, or Ms. Burns gives written notice that the agreement will not be extended. Ms. Burns' agreement provides for her employment as President of the company at a base salary of $300,000, and for her eligibility for participation in all of the company's incentive compensation, fringe benefit and employee benefit plans on the same basis as other executives and key management employees. The agreement provides that, if Ms. Burn's employment is terminated by the company other than for cause or disability or by her for good reason, she will receive (i) payments of base salary at the rate in effect at the time of termination for the remainder of the term of the employment agreement, (ii) incentive compensation for the remainder of the term of the employment agreement, calculated o n the basis of the value of short-term incentive compensation paid to her in the most recently completed fiscal year and the value of any long-term incentive compensation awards determined on the projected target value of the awards,(iii) continuation of all employee welfare benefits for the remainder of the term of the employment agreement, (iv) outplacement services costing up to $10,000, and (v) a lump sum payment equal to the value of the fringe benefits that she would have received through the term of the employment agreement and any unreimbursed expenses. In the event that any payments made under the agreement would subject Ms. Burns to federal excise tax or interest or penalties with respect to such federal excise tax, she will be entitled to be made whole for the payment of any such taxes, interest or penalties.
The company has entered into employment agreements with Messrs. Herling and Robinson and Ms. Case that provide for severance benefits in the event that the individual's employment is terminated by the company other than for cause or disability or by the individual for good reason. The agreements continue through April 2005 and are automatically extended for successive one-year periods unless either the company or the individual gives written notice that the agreement will not be extended. The individual is entitled to receive an amount equal to one times the individual's then annual base salary, plus continuation of medical and other benefits under the company's group benefit plans and limited outplacement services. The individual is also entitled to receive an amount equal to one times the individual's then annual base salary as compensation for the individual's agreement not to compete, subject to forfeiture if the individual competes during the twelve-month period imme diately following termination of employment. In the event that any payments made under the agreement would subject the individual to federal excise tax or interest or penalties with respect to such federal excise tax, total severance payments will be reduced to a level where the tax will be eliminated.
In the event of a change in control of Energy East, participants in the Energy East Annual Executive Incentive Plan ("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 if the AEIP continues in effect for the remainder of the performance period, 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.
After a change in control of Energy East, officers and certain key employees of Energy East and certain subsidiaries with 5 or more years of service 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 Energy East SERP. The Energy East SERP provides that, in the case of a change in control, a participant with 5 or more years of service may receive the present value of any SERP benefits in a lump sum, if the participant has so elected upon commencement of participation.
The Compensation and Management Succession Committee of the Board of Directors of Energy East in its discretion may take certain actions in order to preserve, in the event of a change in control of Energy East, a participant's rights under an award issued pursuant to the 2000 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 severance benefits that might become payable after a change in control of Energy East.
Security Ownership of Management
The following table indicates the number of shares of Energy East common stock, and Energy East common stock equivalent units beneficially owned as of February 1, 2005, by each director, each of the officers named in the Summary Compensation Table included elsewhere herein, and by the 7 current directors and officers as a group and the percent of the outstanding securities so owned.
Name
| Energy East
Common Stock
Beneficially
Owned(1) |
Percent
of Class
|
| | |
Sara J. Burns | 33,737 | (2) |
Douglas A. Herling | 10,697 | (2) |
Kathleen A. Case | 34,771 | (2) |
Kenneth M. Jasinski | 217,199 | (2) |
R. Scott Mahoney | 15,236 | (2) |
Stephen G. Robinson | 11,248 | (2) |
Wesley W. von Schack | 1,643,830 | 1.1% |
7 current directors and
officers as a group |
1,966,718
|
1.3%
|
___________
(1) Includes shares of Energy East common stock that may be acquired through the exercise of stock options that are exercisable currently. The number of shares which may be acquired, and by whom, are as follows: Ms. Burns, 20,000; Mr. Herling, 6,000, Ms. Case, 31,000; Mr. Jasinski, 167,500; Mr. Mahoney, 12,666, Mr. Robinson 6,000; Mr. von Schack, 1,450,000; and all current directors and officers as a group, 1,693,166.
(2) Less than 1% of the outstanding common stock of Energy East.
Code of Ethics
All of the company's directors and employees, including its principal executive, financial and accounting officers are subject to the Energy East Code of Conduct. The Energy East Code of Conduct is available on Energy East's website:www.energyeast.com. Waivers of the Code of Conduct are not contemplated. However, in the unlikely event of an amendment to, or waiver from, the Code of Conduct applicable to the principal executive, financial accounting officers of the company, Energy East will post such information on its website:www.energyeast.com.
Audit Fees
Aggregate fees billed to or allocated to the company by Energy East as part of its consolidated audits for each of the last two fiscal years for professional services rendered for the audit of the company's consolidated annual financial statements and the reviews of the financial statements included in the company's Forms 10-Q for the year 2004 were $314,757 and for the year 2003 were $200,078.
Audit-Related Fees
Aggregate fees billed to or allocated to the company by Energy East for each of the last two fiscal years for assurance and related services reasonably related to the performance of the audit of the company's consolidated annual financial statements and the reviews of the financial statements included in the company's Forms 10-Q for the year 2004 were $457,008 and for the year 2003 were $28,978, consisting of the following:
| | 2004 Fees | 2003 Fees |
Benefit Plan Audits | $75,557 | $28,978 |
Sarbanes-Oxley | $380,680 | - |
Consent and comfort Letters | $771 | - |
Tax Fees
Aggregate fees billed to or allocated to the company by Energy East for each of the last two fiscal years for professional tax services rendered for the year 2004 were $9,339 and for the year 2003 were $17,225, consisting of the following:
| | 2004 Fees | 2003 Fees |
Tax Compliance and Refunds | $9,339 | - |
All Other Fees
The company did not engage PricewaterhouseCoopers to provide any other services during 2004.
Audit Committee
The Audit Committee of Energy East, which serves as the Audit Committee for the company, has not adopted pre-approval policies or procedures. In addition, none of the services described above were approved under the "de minimis" service exception. Further information regarding Energy East's Audit Committee will be set forth in Energy East's proxy statement to be filed with the Securities and Exchange Commission on or prior to May 2, 2005.
