IMPORTANT
Stockholders are cordially invited to attend the annual stockholders'
meeting. If you will be unable to attend the 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 19, 1999
To The Stockholders:
The Annual Meeting of the stockholders of Bangor Hydro-Electric Company will
be held on Wednesday, May 19, 1999 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 26, 1999 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 26, 1999 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 31, 1999
BANGOR HYDRO-ELECTRIC COMPANY
33 State Street
Bangor, Maine 04401
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 19, 1999
The accompanying proxy to be mailed on or about March 31, 1999 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, 1998, 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 26,
1999 will be entitled to vote at the Annual Meeting.
The following table sets forth as of December 31, 1998 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:
Title of Class
- --------------
Preferred Stock
Name and Address of Beneficial Owner
- ------------------------------------
First Colony Life
Insurance Company
700 Main Street
Lynchburg, Virginia 24504
Amount and Nature of Beneficial Ownership
- -----------------------------------------
5,192 shares
Percent of Class
- ----------------
11.0%
First Colony Life Insurance Company is a holder of term notes due 2008 in the
amount of $5,867,647 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 1998, BPHA
paid $638,445 in interest and $432,353 in principal to First Colony Life
Insurance Company.
The following table sets forth as of February 28, 1999 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 Beneficial Owner Beneficially Owned*
- -------------------------------------------------------------------
Common Robert S. Briggs 6,002
Preferred Robert S. Briggs 28
Common William C. Bullock, Jr. 6,000
Common Jane J. Bush 296
Common David M. Carlisle 2,412
Common Joseph H. Cyr 1,653
Common Marion M. Kane 260
Common Paul A. LeBlanc 449
Common Norman A. Ledwin 180
Common Carroll R. Lee 1,396
Common James E. Rier, Jr. 200
Common Frederick S. Samp 794
Common Directors & Executive
Officers as a group (11) 19,642
Preferred Directors & Executive
Officers as a group (11) 28
* 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 designated 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 (including any other directorship held by them in any company
with a class of securities registered pursuant to Section 12 of the
Securities Exchange Act of 1934 or subject to the requirements of Section
15(d) of that Act, or in any company registered as an investment company
under the Investment Company Act of 1940 (referred to in the table as
"Reporting Companies")):
Name and Became Business Experience During Last 5 Years
Postion (Age) Director and Other Directorships
- ----------------------------------------------------------------------------
CLASS I ( NOMINEES FOR TERM EXPIRING IN 2002)
Marion M. Kane (54)
Director 1996 President of Maine Community
Foundation, a not-for-profit
charitable foundation that manages
a pool of individual charitable
funds; Director of Maine Bank and
Trust Company
Norman A. Ledwin (57)
Director 1996 President and Chief Executive
Officer 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
James E. Rier, Jr.(53)
Director 1998 President of Rier Motors Co., an
automobile dealership located in Machias,
Maine
CLASS III (DIRECTORS WHOSE TERMS EXPIRE IN 2001)
Carroll R. Lee (49)
Senior Vice President
& Chief Operating Officer
and Director 1991 Senior Vice President and Chief Operating
Officer of the Company; Director of Maine
Yankee Atomic Power Company; Director of
Maine Electric Power Company, Inc.;
President of the Board of Community
Health and Counseling Service, a not-for-
profit supplier of home and mental health
care services
David M. Carlisle (60)
Director 1989 President, Prentiss & Carlisle Companies,
a timberland management company; Director
of Bangor Savings Bank; Director of
Eastern Maine Healthcare
Jane J. Bush (53)
Director 1990 Vice President and co-owner of Coastal
Ventures, a retailing company
CLASS II (DIRECTORS WHOSE TERMS EXPIRE IN 2000)
Robert S. Briggs (55)
Chairman of the Board,President
& Chief Executive Officer
1985 Chairman of the Board; President and Chief
Executive Officer of the Company; Director
of Maine Yankee Atomic Power Company;
Trustee of Eastern Maine Medical Center
William C. Bullock, Jr. (62)
Director 1982 Chairman of the Board and Director of
Merrill Merchants Bancshares, Inc. (a
reporting company) and its subsidiary,
Merrill Merchants Bank; Director of
Eastern Maine Healthcare
Joseph H. Cyr (58)
Director 1998 President of John T. Cyr & Sons, Inc., a
school and charter bus company; Director
of Merrill Merchants Bancshares, Inc. (a
reporting company) and its subsidiary,
Merrill Merchants Bank
In 1998, the Board of Directors met on eleven occasions. The Board of
Directors has three standing committees: an Audit Committee, an Investment
Committee and a Compensation Committee. The Audit Committee, consisting of
Ms. Bush (Chair), Mr. Carlisle, Mr. Rier and Ms. Kane reviews with 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 1998. The Compensation Committee, consisting of Mr.
Bullock (Chair), Mr. Cyr 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 1998.
The Investment Committee, consisting of Mr. Bullock (Chair), Mr. Carlisle,
Ms. Kane, Mr. Briggs and other non-director members of management, oversees
the investments of the Company's pension funds. The Investment Committee met
twice in 1998. 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, 1998,
1997 and 1996, the cash compensation paid by the Company to the Chief
Executive Officer and to the other executive officers whose total salary and
bonus exceeded $100,000:
SUMMARY COMPENSATION TABLE - ANNUAL COMPENSATION
Other Annual
Name and Principal Position Year Salary Bonus Compensation*
- ------------------------------------------------------------------------
Robert S. Briggs 1998 $200,981 $41,726 $3,200
Chairman of the Board, President 1997 189,894 12,175 3,200
& Chief Executive Officer 1996 175,895 0 3,448
Carroll R. Lee 1998 $153,645 $24,467 $3,200
Senior Vice President & 1997 143,476 9,899 2,813
Chief Operating Officer 1996 125,422 0 2,459
Frederick S. Samp 1998 $101,807 $14,337 $2,159
Vice President-Finance & Law
Paul A. LeBlanc 1998 $ 94,961 $12,093 $1,984
Vice President - Human Resources
& Information Services
* For each named executive officer, Other Annual Compensation consists of the
Company's matching contribution to a 401(k) Plan.
The executive officers participate in a defined benefit pension plan that is
also applicable to all 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 $ 4,339 $ 8,678 $13,016 $17,355 $21,694 $26,033
$75,000 6,839 13,678 20,516 27,355 34,194 41,033
$100,000 9,339 18,678 28,016 37,355 46,694 56,033
$150,000 14,339 28,678 43,016 57,355 71,694 86,033
$200,000 14,672 29,344 44,016 58,688 73,361 88,033
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-19 years, Mr. Lee-25 years, Mr. Samp-13 years and Mr.
LeBlanc-25 years.
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.
The named executive officers 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 payment 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 also 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
During 1998, Mr. Briggs, the Chairman of the Company's Board of Directors and
its President and Chief Executive Officer, served 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 had to address in order to restore the Company's financial health
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 is returning its attention to this subject.
The challenges the Company faced in recent times arose 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.
While the Committee and the Board believed that this concern should apply to
the executive officers as well, the Board deferred to the willingness of the
two most senior officers to forego increases in their compensation for four
years, until the beginning of 1997. Although adjustments were made in 1997
and 1998, the Committee is of the view that the compensation of these
executives remains at the low end of the competitive range.
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
1996, payments to management personnel were conditioned upon threshold
financial returns which were not achieved, thereby precluding bonus payments
to management in that year. For both 1997 and 1998, 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 generally, to 5% of
salaries for middle management, 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 for those below senior management, and
approximately 1 1 /2% of senior management salaries (with the exception of
Mr. Briggs, as discussed below). For 1998 the targets were more fully
achieved, resulting in a payout of about 3 1/2 of wages and salaries
generally, about 4 1/2 of salaries for middle management, and about 7% of
salaries for senior management.
In attempting to advance the goal discussed above of having a greater portion
of executive compensation be derived from incentive compensation, for 1997
and 1998 the Committee recommended, and the Board approved, discretionary
bonus plans for the executive officers. In 1997, 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. In early 1998, the
Committee determined that each of the officers had earned a portion of their
respective opportunities. The Committee determined that Mr. Briggs and Mr.
Lee should each be awarded 7% out of the 8% award potential. But in view of
the Company's financial performance in 1997 and given their broad, general
accountability for overall Company performance, these officers suggested to
the Committee and the Board that the Board's discretion to forego the payment
of their awards should be exercised. In the case of Mr. Briggs, this included
the amount calculated as earned under the general incentive bonus program
described above, because the payment of any incentive compensation award to
the chief executive officer remains subject to the specific approval of the
full Board. The Board believed that the performance of these officers
warranted the payment of the amounts earned, but agreed to an alternative
form of payment in which one-half of the amounts in question were paid
forthwith, but the payment of the remainder was contingent upon the Company's
financial performance in 1998 and the status of common dividend reinstatement
at year-end 1998. The Company's 1998 financial results met the necessary
target, but only one-half of the remaining amounts were paid in view of the
continuing suspension of common dividend payments. The amounts not paid have
been forfeited. In 1998, the Board adopted a revised plan establishing Mr.
Briggs' potential award as chief executive officer at 30% of salary, Mr.
Lee's potential award as senior vice president and chief operating officer at
20% of salary, and the remaining executive officers at 15% of salary. Awards
were once again dependent upon a review of progress with respect to
enumerated priorities. In addition, payments were conditional upon the
Company's 1998 financial performance and the status of common dividend
reinstatement at year-end. The Board was of the opinion that the efforts of
these executives contributed substantially to the Company's progress in 1998,
and that their maximum award potentials had been earned. However, in view of
the continuing suspension of common dividends, the award payments to these
officers under this plan were limited to one-half of their respective award
potentials.
COMPENSATION COMMITTEE
William C. Bullock, Jr., Chairman
Joseph H. Cyr
Norman A. Ledwin
INDEPENDENT PUBLIC ACCOUNTANTS
PricewaterhouseCoopers, LLP, One Post Office Square, Boston, Massachusetts
02109, were the independent public accountants for the Company for the 1998
fiscal year and have been selected for the 1999 fiscal year. The Company
expects that representatives of PricewaterhouseCoopers, LLP, 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 I 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 the 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 below, for a period beginning December 31, 1993
through December 31, 1998, 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)
- ------------------------------December 31,-------------------------------
1993 1994 1995 1996 1997 1998
- -------------------------------------------------------------------------
Bangor Hydro $100.00 $ 58.99 $ 76.46 $ 65.67 $ 44.78 $ 92.74
-41.01% 29.60% -14.10% -31.81% 107.07%
EEI Index $100.00 $ 88.43 $115.86 $117.25 $149.33 $170.07
-11.57% 31.02% 1.20% 27.36% 13.89%
Russell 2000 $100.00 $ 98.18 $126.10 $146.90 $179.75 $175.17
-1.82% 28.44% 16.49% 22.36% -2.55%
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 2000 ANNUAL MEETING
Any proposals of stockholders of the Company intended to be presented at the
2000 Annual Meeting must be received by the Company on or before December 15,
1999 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 31, 1999
BANGOR HYDRO-ELECTRIC COMPANY
P.O. BOX 1599
BANGOR, ME 04402-1599
PROXY
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Robert S. Briggs and Frederick S. Samp each
or either of them, with full power of substitution, proxies to vote all of
the stock of Bangor Hydro-Electric Company which the undersigned is entitled
to vote at the Annual Meeting of the Stockholders May 19, 1999, or at any
adjournment thereof.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
BANGOR HYDRO-ELECTRIC COMPANY
C/O EquiServe
P. O. Box 8040
Boston, MA 02266-8040
THIS IS YOUR PROXY.
YOUR VOTE IS IMPORTANT
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.
---
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: Marion M. Kane, Norman A. Ledwin, James E. Rier, Jr.
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.
---
| |
| |
--- --------------------------------------
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:
------------------------- ----------
Signature: Date:
-------------------------- ----------
