IMPORTANT
Stockholders are cordially invited to attend the annual stockholders'
meeting. If you will be unable to attend th4 annual meeting in person, it is
important that you fill out, sign and return the enclosed proxy promptly in
order to insure a proper representation at the meeting.
BANGOR HYDRO-ELECTRIC COMPANY
NOTICE OF ANNUAL MEETING
MAY 13, 1998
To The Stockholders:
The Annual Meeting of the stockholders of Bangor Hydro-Electric Company will
be held on Wednesday, May 13, 1998 at 10:00 o'clock a.m. at the Rococo Room
of the Pilot's Grill restaurant, Hammond Street, Bangor, Maine for the
purpose of electing three directors to serve for three-year terms and to
transact such other business as may properly come before the meeting.
The Board of Directors has fixed the close of business on March 20, 1998 as
the record date for the determination of stockholders of the Company entitled
to notice of and to vote at the Annual Meeting. Accordingly, only
stockholders of record at the close of business on March 20, 1998 will be
entitled to vote at said meeting.
IF YOU DO NOT PLAN TO ATTEND THE MEETING, YOU ARE URGED TO DATE, SIGN and
RETURN the enclosed proxy. An addressed envelope, which requires no postage
if mailed in the United States, is provided for your use.
By Order of the Board of Directors
Andrew Landry
Clerk
Bangor, Maine
March 17, 1998
BANGOR HYDRO-ELECTRIC COMPANY
33 STATE STREET
BANGOR, MAINE 04401
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 13, 1998
The accompanying proxy to be mailed on or about March 31, 1998 is solicited
by the Board of Directors of Bangor Hydro-Electric Company and the cost of
such solicitation will be paid by the Company. The person giving the proxy
has the power to revoke it at any time before it is exercised (1) by delivery
to the Clerk of the Company of any written instrument which by its terms
revokes the proxy, (2) by duly executed proxy subsequent in time to the
original proxy, (3) by the presence of the stockholder at the Annual Meeting
and the giving of notice to the Clerk of the Company of such revocation, or
(4) by giving notice in open meeting at the Annual Meeting of such
revocation.
The Company will bear the cost of the solicitation of proxies, including the
charges and expenses of brokerage firms and others for forwarding
solicitation material to beneficial owners of shares of the Company's Common
Stock and Preferred Stock. In addition to the use of the mail, proxies may be
solicited by employees of the Company, by personal interview, by telephone or
by telegraph.
VOTING SECURITIES OUTSTANDING AND PRINCIPAL HOLDERS THEREOF
The Company has outstanding 47,340 shares of Preferred Stock having general
voting rights of one vote per share, and, as of December 31, 1997, 7,363,424
shares of Common Stock having general voting rights of one-twelfth of one
vote per share. Stockholders of record at the close of business on March 20,
1998 will be entitled to vote at the Annual Meeting.
The following table sets forth as of December 31, 1997 information with
respect to persons known to management to be the beneficial owners of more
than 5% of any class of voting securities of the Company:
Name and Address of Amount and Nature Percent
Title of Class Beneficial Owner of Beneficial Ownership of Class
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Preferred Stock First Colony Life 5,192 shares 11.0%
Insurance Company
700 Main Street
Lynchburg, Virginia 24504
First Colony Life Insurance Company is a holder of term notes due 2008 in the
amount of $6,402,941 executed by Bangor-Pacific Hydro Associates (BPHA). BPHA
is a partnership that was formed in 1986 for the purpose of redeveloping and
operating a hydroelectric project located within the Company's service
territory. Penobscot Hydro Co., Inc., a wholly owned subsidiary of Bangor
Hydro-Electric Company, is a 50% general partner of BPHA. During 1996, BPHA
paid $682,085 in interest and $411,765 in principal to First Colony Life
Insurance Company.
The following table sets forth as of February 28, 1998 information with
respect to the beneficial ownership of equity securities by directors,
nominees for the office of director and named executive officers:
Title of Class Name of Benefiicial Owner Beneficially Owned*
- -------------------------------------------------------------------
Common Robert S. Briggs 5,413
Preferred Robert S. Briggs 22
Common William C. Bullock, Jr. 5,400
Common Jane J. Bush 296
Common David M. Carlisle 912
Common Alton E. Cianchette 2,534
Common G. Clifton Eames 900
Common Marion M. Kane 200
Common Norman A. Ledwin 180
Common Carroll R. Lee 1,396
Common Directors & Executive
Officers as a group (11) 18,273
Preferred Directors & Executive Officers
as a group (11) 22
* The directors and executive officers of the Company as a group own a
beneficial interest in less than 1% of the Company's Common and Preferred
Stock.
ELECTION OF DIRECTORS
It is intended, unless otherwise instructed in the enclosed proxy, to vote
the proxies in favor of the election of the nominees named in the table on
the following page as directors to hold office until the expiration of their
respective terms and until their successors shall have been duly elected and
qualified. The nominees are now members of the Board of Directors of the
Company, each having served continuously since first elected.
If, for any reason, any of the nominees are unable to serve (which event is
not now anticipated) it is intended that such proxies will be voted for the
election of such other person or persons as may be designatd by a majority of
the directors.
The following table sets forth the nominees and the directors whose terms
continue, their ages, other positions held by them with the Company, the date
when they first became a director and their business experience during the
past five years:
Business Experience During
Name and Became Last 5 Years and
Position (Age) Director and Other Directorships
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CLASS III (NOMINEES FOR TERM EXPIRING IN 2001)
Carroll R. Lee (48) 1991 Senior Vice President and Chief Oper-
Executive Vice President ating Officer of the Company; Direc-
and Chief Operating tor of Maine Yankee Atomic Power Com-
Officer and Director pany; Director of Maine Electric Pow-
er Company, Inc.; President of the
Board of Community Health and Coun-
seling Service, a not-for-profit sup-
plier of home and mental health care
services
David M. Carlisle (59) 1989 President, Prentiss & Carlisle
Director Companies, a timberland management
company; Trustee of Bangor Savings
Bank; Director of Easter Maine
Healthcare
Vice President and co-owner of Coas-
Jane J. Bush (52) 1990 tal Ventures, a retailing company
Director
CLASS II (DIRECTORS WHOSE TERMS EXPIRE IN 2000)
Robert S. Briggs (54) Chairman of the Board; President &
Chairman of the Board, President Chief Executive Officer of the Com-
& Chief Executive Officer pany; Trustee of Eastern Maine
Medical Center
William C. Bullock, Jr. (61) Chairman of the Board and Director
Director of Merrill Merchants Bank; Director
of Eastern Maine Healthcare
G. Clifton Eames (70) Chairman of the Board of Trustees of
Director Bangor Savings Bank; Chairman of the
Board of Directors of N.H. Bragg &
Sons, a distributor of automotive and
industrial supplies; Director of
Eastern Maine Healthcare
CLASS I (DIRECTORS WHOSE TERMS EXPIRE IN 1999)
Alton E. Cianchette (67) Chairman of the Board of Cianbro
Director Corporation, a construction company
Marion M. Kane (53) President of Maine Community Founda-
Director tion, a not-for-profit charitable
foundation that manages a pool of
individual charitable funds
Norman A. Ledwin (56) President and Chief Executive Officer
Director and a Director of Eastern Maine
Healthcare, a healthcare organization
made up of not-for-profit and for-
profit entities (including Eastern
Maine Medical Center, a not-for-
profit regional acute care hospital
facility
In 1997, the Board of Directors met on fourteen occasions. The Board of
Directors has three standing committees: an Audit Committee, an Investment
Committee and a Compensation Committee. The Audit Committee, consisting of
Mrs. Bush (Chair), Mr. Carlisle, Mr. Cianchette and Ms. Kane reviews with the
internal auditor and the independent public accountants the scope and results
of their audit and other services to the Company, reviews the adequacy of the
Company's internal accounting controls and reports to the Board as necessary.
The Audit Committee met twice in 1997. The Compensation Committee, consisting
of Mr. Eames (Chair), Mr. Bullock and Mr. Ledwin, reviews the Company's
executive compensation and compensation policies in general, and makes
recommendations to the full Board of Directors. The Compensation Committee
met twice in 1997. The Investment Committee, consisting of Mr. Bullock
(Chair), Mr. Carlisle, Mr. Briggs and other non-director members of
management, oversees the investments of the Company's pension funds. The
Investment Committee met twice in 1997. The Board does not have a nominating
or similar committee. Committee appointments will be reviewed after the
Annual Meeting. Directors who are not employees of the Company appoint from
their own number the members of the Audit Committee and the Compensation
Committee. Other committee assignments are made by the Chairman of the Board.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
The following table shows, for the fiscal years ending December 31, 1997,
1996 and 1995, the cash compensation paid by the Company to the Chief
Executive Officer and to the only other executive officer whose total salary
and bonus during 1996 exceeded $100,000:
SUMMARY COMPENSATION TABLE - ANNUAL COMPENSATION
Name and Principal Position Year Salary Bonus
- ------------------------------------------------------------------------
Robert S. Briggs 1997 $189,894 $0,000*
Chairman of the Board, President 1996 $175,895 $0,000
and Chief Executive Officer 1995 $176,601 $0,000
Carroll R. Lee 1997 $143,476 $2,549*
Executive Vice President and 1996 $125,422 $0,000
Chief Operating Officer 1995 $125,072 $0,000
* See the Compensation Committee Report below regarding the status of 1997
incentive compensation for the officers.
Neither of the above named executive officers received "Other Annual
Compensation" that meets the threshold reporting requirements nor did they
receive any "Long-Term Compensation" or "Other Compensation".
The executive officers participate in a defined benefit pension plan that is
also applicable to all non-union employees. The following table sets forth
estimated annual benefit amounts payable upon retirement to persons in
specified compensation and benefit service classifications assuming their
retirement at the normal retirement age (65) in 1998.
Years of Benefit Service
- ---------------------------------------------------------------------------
Average
Annual
Compensation 5 10 15 20 25 30
$50,000 $ 4,377 $8,755 $13,132 $17,510 $21,887 $26,265
75,000 6,877 13,755 20,632 27,510 34,387 41,265
100,000 9,377 18,755 28,132 37,510 46,877 56,265
150,000 14,377 28,755 43,132 57,510 71,887 86,265
200,000 14,711 29,421 44,132 58,843 73,554 88,264
Compensation covered by the plan is total basic compensation exclusive of
overtime, bonuses, and other extra, contingent or supplemental compensation,
and is cash compensation plus compensation deferred pursuant to the Company's
Section 401(k) Plan. It is essentially the same as the amount shown as
"Salary" in the Summary Compensation Table above. The annual retirement
benefit is the greater of the following:
a. The benefit accrued as of December 31, 1988 under a prior plan formula.
b. 2.0% "average annual compensation" minus 0.4% of "covered compensation",
times years of "benefit service".
The benefit may not be larger than limits set forth in IRC Section 415.
"Average annual compensation" is computed using the 36 consecutive months
yielding the highest average, and "benefit service" generally means years of
employment after age 21 and one year of service, up to a maximum of 30 years.
"Covered compensation" is the average (without indexing) of the Social
Security Taxable Wage Bases for the 35 calendar years ending with the year an
individual attains Social Security Normal Retirement Age. It is assumed that
the taxable wage base in effect at the beginning of the plan calculation year
will remain the same for all future years. The benefit amount is payable in a
life annuity form in full upon retirement at age 62 and in proportionately
reduced amounts upon termination down to age 55. The benefit service of the
persons named in the Summary Compensation Table above (rounded to the nearest
year) is: Mr. Briggs 18 years and Mr. Lee 24 years.
In 1994, the Company amended its pension plans to provide an incentive for
early retirement. For those employees who were members of a pension plan on
February 1, 1994, six years were added to that member's age and benefit
service. For each full month of employment following February 28, 1994, the
additional age and benefit service will be reduced by one month. If Mr.
Briggs or Mr. Lee were to retire before the additional age and benefit
service provided by the early retirement program is fully reduced, they would
receive enhanced benefits from the program.
In addition to the foregoing, Mr. Briggs and Mr. Lee are parties to
Supplemental Retirement Agreements with the Company under which additional
retirement benefits are to be paid. The amount of the additional benefits
payable upon retirement at age 62 shall be 20% of the officer's final annual
salary per year for a period of fifteen years. These supplemental benefits
are not funded, although the Company maintains insurance policies on the
lives of Mr. Briggs and Mr. Lee that would reimburse the Company for the cost
of the benefits upon the death of the covered officer.
Mr. Briggs and Mr. Lee are parties to agreements under which in the event 1)
of a change of control of the Company as defined in the agreements and 2) the
covered party leaves the employment of the Company within one year after the
change of control, he would be entitled to receive a pay-ment equal to two
years' salary (three years' salary if he is not eligible for early retirement
under the defined benefit pension plan at the time) based upon his average
salary over the past five years. He would also be entitled to receive the
Company's standard health, life insurance and disability benefits for a
period of two years.
The executive officers also participate in a long-term disability income plan
which is applicable to all employees. Under the plan, after 90 days of
disability, employees are entitled to receive 66 2/3% of their basic monthly
earnings up to a maximum monthly benefit of $5,000.
Directors who are not employees of the Company are paid a fee of $500 per
meeting for attendance at regular or special meetings of the Board, and $500
per meeting for attendance at committee meetings (unless the committee
meeting is held the same day as another meeting for which a full meeting fee
is paid, in which case the fee is $250). The directors are also paid an
annual retainer of $6,000. Directors who are employees of the Company receive
no fee for their services as directors.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1997, the Compensation Committee of the Company's Board of Directors
consisted of Mr. Eames, Mr. Bullock and Mr. Ledwin.
During 1997, Mr. Briggs, the Chairman of the Company's Board of Directors and
its President and Chief Executive Officer, serve as a Trustee of Eastern
Maine Medical Center, a hospital facility located in Bangor, Maine. Mr.
Ledwin, who serves on the Board's Compensation Committee, is President, Chief
Executive Officer and a Director of Eastern Maine Healthcare, the
organization that owns and operates Eastern Maine Medical Center.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Company manages its compensation programs in a manner intended to
attract, retain and motivate its people. Historically, salaries, including
executive salaries, have been intended to be established at competitive
levels, with progress within competitive ranges dependent upon
qualifications, experience and individual performance. In considering salary
adjustments for the chief executive officer, the Committee's recommendation
to the Board is based upon the Committee's qualitative judgment with respect
to the chief executive officer's performance in attending to the Company's
strategic priorities, and the Company's financial results as measured against
reasonable expectations.
The Company has been evolving toward a system that relies on base salaries
that are competitive, but that, especially at executive and senior management
levels, depend increasingly on incentive awards for the achievement of
predetermined performance criteria in order to earn compensation at higher
levels within the applicable competitive range. However, the Company's
financial condition in recent periods and the nature of the issues that
management has had to address in order to restore the Company's financial
health have made it impractical to establish meaningful executive incentive
plans and more comprehensive compensation packages, and inappropriate to
devote scarce resources toward doing so. As the Company recovers its
financial health, the Committee intends to return its attention to this
subject.
The challenges facing the Company in recent times have arisen from factors
beyond the ability of current management to control and, in the view of the
Committee and the Board, the executive officers of the Company have performed
exceptionally well in meeting those challenges. The Company has had to
maintain the competitiveness of the compensation for management and employees
at other levels in order to retain talented people in critical functions. The
Committee and the Board believe that this concern should apply to the
executive officers as well, despite the willingness of the current executive
officers to forego increases in their compensation. At the beginning of 1997,
the Committee and the Board approved Mr. Lee's promotion to his current
position, and adjusted the salaries of Mr. Lee and Mr. Briggs to their
current levels. The last previous salary adjustment for these officers was in
early 1993. Even at these levels, the Committee is of the view that the
compensation of these executives is at the low end of the appropriate
competitive range, and the Committee intends to review these salaries again
during 1998.
Since 1991, the Company has maintained an annual incentive bonus program
applicable to all employees including executive officers. Payments under this
program have been contingent upon the attainment of predetermined targets in
some or all of these areas: financial results, service reliability, customer
satisfaction, cost control, employee satisfaction, and workplace safety. For
1995 and 1996, payments to management personnel were conditioned upon
threshold financial returns which were not achieved. Therefore, there were no
bonus payments to management in those years. For 1997, the plan included
objective targets for all employees in the areas of cost control, customer
satisfaction, and workplace safety. In addition, as in prior years, there was
an employee satisfaction target for all management people. For the senior
management group (including the executive officers), who oversee the four
separate internal business units, additional objective targets were
established with respect to certain activities of those units. The potential
bonus opportunity ranged from 4% of wages and salaries genrally, to 8% of
salaries for senior management. These targets were partially achieved in
1997, resulting in a payout of approximately 2% of wages and salaries
generally, and approximately 1.8% of senior management salaries. The
Committee and the Board do not consider it appropriate to retain the general
discretion to withhold payment of such bonuses given the objective,
measurable nature of the predetermined targets. However, any payment to the
chief executive officer is subject to specific Board approval. Accordingly,
the amount calculated as earned by Mr. Lee pursuant to this program was paid,
as appears in the Summary Compensation Table. As discussed further below, no
amount has been paid to Mr. Briggs.
In attempting to advance the goal discussed above of having a greater portion
of executive compensation be derived from incentive compensation, in early
1997 the Committee recommended, and the Board approved, a discretionary bonus
plan for the four executive officers, including Mr. Briggs and Mr. Lee. These
individuals could earn up to an additional 8% of salary based upon Committee
(or full Board, in the case of Mr. Briggs) review of the progress with
respect to enumerated priorities established at the beginning of the year.
The performance review of the executive officers other than Mr. Briggs and
Mr. Lee resulted in partial payment under this program. The Committee's
review of the performance of Mr. Briggs and Mr. Lee also indicates that some
level of award would be justified, but these officers are of the view that
the Board should exercise its discretion to forego any such award given the
Company's financial performance in 1997 and given the broad, general
accountability these officers have for overall Company performance. The
Committee is considering alternatives to address this matter, but no final
determination has been made as to whether, when or under what additional
conditions an award to these officers under this 1997 program might be made.
COMPENSATION COMMITTEE
G. Clifton Eames, Chair
William C. Bullock, Jr.
Norman A. Ledwin
INDEPENDENT PUBLIC ACCOUNTANTS
Coopers & Lybrand, One Post Office Square, Boston, Massachusetts 02109, were
the indepen-dent public accountants for the Company for the 1997 fiscal year
and have been selected for the 1998 fiscal year. The Company expects that
representatives of Coopers & Lybrand will be present at the Annual Meeting,
will have the opportunity to make a statement, and will be available to
respond to appropriate questions.
VOTING PROCEDURES
Under the Company's Certificate of Organization, as amended, the Board of
Directors shall consist of not less than nine nor more than fifteen persons,
the exact number to be fixed from time to time by the Board of Directors. The
Certificate of Organization also requires that the directors be divided into
three classes with staggered three-year terms and that the classes be nearly
as equal in number as may be. At a meeting on March 23, 1994, the Board of
Directors fixed the number of Directors at nine and divided them into three
classes with three Directors in each class. The terms of the three Directors
in Class III will expire at the time of the Annual Meeting. Under Maine law,
those three candidates who receive the greatest number of votes cast at the
meeting, even if they do not receive a majority of th votes cast, shall be
deemed elected. Consequently, as long as votes are cast for at least three
candidates, abstentions and broker non-votes will have no effect on the
outcome of the election of Directors.
PERFORMANCE GRAPH
As shown in the line graph on the following page, for a period beginning
December 31, 1992 through December 31, 1997, a comparison is made of the
cumulative total returns for the Company, the Russell 2000 Index (a
comparative broad market index) and the Edison Electric Institute (EEI) Index
of 100 investor-owned electric utilities (a comparative peer group index).
The Russell 2000 index is an index composed of the smallest 2000 companies in
a universe of the 3000 largest domestic publicly traded companies in terms of
market capitalization.
Bangor Hydro-Electric Company
Comparison of Five-Year Cumulative Total Return
The Company, the Russell 2000 Index and the EEI Index
[graph submitted to SEC via FORM-SE]
OTHER MATTERS
The management has no knowledge of any other matter to come before or to be
acted upon at the meeting. If, however, any other matter properly comes
before the meeting, it is the intention of the persons named in the proxy to
vote thereon in accordance with their judgment.
STOCKHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
Any proposals of stockholders of the Company intended to be presented at the
1999 Annual Meeting must be received by the Company on or before December 2,
1998 for inclusion in the proxy statement and form of proxy relating to that
meeting.
By Order of the Board of Directors,
Andrew Landry
Clerk
Bangor, Maine
March 17, 1998
BANGOR HYDRO-ELECTRIC COMPANY
P.O. BOX 1599
BANGOR, ME 04402-1599
THIS IS YOUR PROXY.
YOUR VOTE IS IMPORTANT
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Regardless of whether you plan to attend the Annual Meeting of Shareholders,
you can be sure your shares are represented at the meeting by promptly
returning your proxy (attached below) in the enclosed envelope. Thank you
for your attention to this important matter.
---
| X | Please mark vote as in example.
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THIS PROXY WILL BE VOTED IN ACCORDANCE WITH YOUR SPECIFIC DIRECTIONS BELOW.
IF THE PROXY IS SIGNED AND RETURNED WITHOUT SUCH DIRECTIONS, IT WILL BE VOTED
FOR ALL NOMINEES.
1. Election of Directors
Nominees: Jane J. Bush, David M. Carlisle, Carroll R. Lee
FOR --- WITHHELD --- 2. In their discretion, the proxies
ALL | | FROM ALL | | are authorized to vote upon such
NOMINEES | | NOMINEES | | other business as may properly
--- --- come before the meeting.
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| |
| |
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FOR ALL NOMINEES EXCEPT AS NOTED ABOVE
--- MARK HERE
| | FOR ADDRESS
| | CHANGE AND
--- NOTE AT LEFT
Please sign exactly as name appears hereon. Executors, Administrators,
Trustees, etc. should so indicate when signing. Joint owners should each
sign.
Signature: Date:
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Signature: Date:
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