DEF 14A 1 pxy2002.txt PROXY - BANGOR HYDRO-ELECTRIC COMPANY IMPORTANT Stockholders are cordially invited to attend the annual stockholders' meeting. If you will be unable to attend 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 APRIL 24, 2002 To The Stockholders: The Annual Meeting of the stockholders of Bangor Hydro-Electric Company will be held on Wednesday, April 24, 2002 at 9:00 o'clock a.m. at the Sheraton Four Points Hotel, 308 Godfrey Boulevard, Bangor, Maine (adjacent to Bangor International Airport) for the following purposes: 1) To elect three directors to serve three year terms; 2) To amend the Articles of Incorporation of the Company to reduce the par value of the Company's common stock from $5.00 to $0.00; 3) To amend the Articles of Incorporation of the Company to permit the Company to make capital distributions or to repurchase common or preferred shares out of the unreserved and unrestricted capital surplus of the Company. 4) To transact such other business as may properly come before the meeting. The Board of Directors has fixed the close of business on March 15, 2002 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 15, 2002 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 15, 2002 BANGOR HYDRO-ELECTRIC COMPANY 33 State Street Bangor, Maine 04401 PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON APRIL 24, 2002 The accompanying proxy to be mailed on or about March 15, 2002 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 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 15, 2002 will be entitled to vote at the Annual Meeting. The following table sets forth as of March 1, 2002 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 --------------- Common Stock Name and Address of Beneficial Owner ------------------------------------- BHE Holdings Inc. 566 Washington Road Rye, New Hampshire 03870 Amount and Nature of Beneficial Ownership ------------------------------------------ 7,363,424 shares Percent of Class ----------------- 100.0% The following table sets forth as of March 1, 2002 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 1 Preferred Robert S. Briggs 28 Common Jane J. Bush 1 Common Christopher G. Huskilson 1 Common Paul A. LeBlanc 0 Common Norman A. Ledwin 1 Common Carroll R. Lee 1 Common Elizabeth A. MacDonald 1 Common David McD. Mann 1 Common Frederick S. Samp 0 Common Richard J. Smith 1 Common Ronald E. Smith 1 Common Directors & Executive Officers as a group (11) 9 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 last 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 2005) Robert S. Briggs (57) Director 1985 Retired Chairman of the Board, President and Chief Executive Officer of the Company; Trustee of Eastern Maine Medical Center Norman A. Ledwin (59) 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) Elizabeth A. MacDonald (55) Director 2001 Vice President, Human Resources of Emera Inc., a parent of the Company; From October 10, 1997 until November 9, 2001 was Vice President - Human Resource of Nova Scotia Power Inc.; Prior to October 10, 1997 was a self- employed consultant CLASS II (DIRECTORS WHOSE TERMS EXPIRE IN 2003) Jane J. Bush (56) Director 1990 President and co-owner of Coastal Ventures, a retailing company David McD. Mann (62) Chairman 2001 President and Chief Executive Officer and Director of Emera Inc., a parent of the Company and a company traded on the Toronto Stock Exchange; President and Chief Executive Officer and Director of Nova Scotia Power Inc., an affiliate of the Company and a company with classes of securities traded on the Toronto Stock Exchange; Director of Logistec Corporation, a company traded on the Toronto Stock Exchange; Member of Maritimes and Northeast Pipeline, LLC Management Committee; Member of Maritimes and Northeast Pipeline, LP Management Committee; until July 22, 1996 was a senior partner with the Halifax, Nova Scotia law firm of Cox Downie Richard J. Smith (50) Director 2001 Corporate Secretary and General Counsel of Emera Inc., a parent of the Company; Corporate Secretary and General Counsel of Nova Scotia Power Inc., an affiliate of the Company CLASS III (DIRECTORS WHOSE TERMS EXPIRE IN 2003 IN 2004) Christopher G. Huskilson (44) Vice Chairman 2001 Chief Operating Officer of Nova Scotia Power Inc., an affiliate of the Company; Member of the Planning Committee of the Northeast Power Coordinating Council Carroll R. Lee (52) President & Chief Operating Officer and Director 1991 President and Chief Operating Officer of the Company; Former President of the Board of Community Health and Counseling Service, a not-for- profit supplier of home and mental health care services Ronald E. Smith (51) Director 2001 Senior Vice President and Chief Financial Officer of Emera Inc., a parent of the Company; Director of Clear Picture Corporation; Director of CrossOff Inc., a company traded on the Toronto Stock Exchange; Director and Chair of Audit Committee of Atlantic Blue Cross Care; from September 1999 to October 2000 was an independent consultant; from March 1999 to September 1999 was Chief Financial Officer, Telecommunications, for Aliant Inc.; prior to March 1999 was Chief Financial Officer for Maritime Tel & Tel Co. Ltd. In 2001, the Board met on eleven occasions. The Board of Directors has one standing committee, its Audit Committee. The Audit Committee 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 presently consists of Jane J. Bush, Norman A. Ledwin, Richard J. Smith and Ronald E. Smith. Neither Richard J. Smith nor Ronald E. Smith are independent under the listing standards of the New York Stock Exchange since both are employees of Emera Inc., a parent of the Company. With respect to Mr. Ledwin, the Board determined that Mr. Ledwin's affiliation with Eastern Maine Healthcare, which has an indirect business relationship with the Company, does not interfere with his exercise of independent judgment. Prior to the completion of the Company's merger with Emera Inc., the Audit Committee was composed of Ms. Bush as Chair, and former Directors David M. Carlisle, Marion M. Kane and James E. Rier, Jr., each of whom was independent under the listing standards of the New York Stock Exchange. The Audit Committee met four times during 2001. Audit Committee members and the Chair of the Committee are appointed by the Chairman of the Board. The Board does not have a compensation, investment or nominating committee. AUDIT COMMITTEE REPORT In overseeing the preparation of the Company's financial statements, the Committee met with both management and the Company's outside auditors to review and discuss all financial statements prior to their issuance and to discuss significant accounting issues. Management advised the Committee that all financial statements were prepared in accordance with generally accepted accounting principles, and the Committee discussed the statements with both management and the outside auditors. The Committee's review included discussion with the outside auditors of matters required to be discussed pursuant to Statement on Auditing Standards No. 61 (Communication With Audit Committees). With respect to the Company's outside auditors, the Committee, among other things, discussed with Ernst & Young matters relating to its independence, including the disclosures made to the Committee as required by the Independence Standards Board Standard No. 1 (Independence Discussions with Audit Committees). On the basis of these reviews and discussions, the Committee recommended to the Board of Directors that the Board approve the inclusion of the Company's audited financial statements in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2001, for filing with the Securities and Exchange Commission. AUDIT COMMITTEE Jane J. Bush, Chair Norman A. Ledwin Richard J. Smith Ronald E. Smith AUDIT COMMITTEE CHARTER On January 11, 2000, the Audit Committee of the Board of Directors adopted a formal written Charter. The Charter sets forth the purpose of the Audit Committee, established criteria for assuring the independence of the Committee's members, and describes the duties of the Committee. A copy of the Charter was included with the definitive proxy statement for the annual meeting of stockholders held on December 19, 2001. EXECUTIVE COMPENSATION AND OTHER INFORMATION The following table shows, for the fiscal years ending December 31, 2001, 200, and 1999, 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** 2001 $186,753 $140,000 $0 Chairman of the Board, President 2000 $236,102 $6,564 $3,400 & Chief Executive Officer 1999 $207,549 $66,499 $3,200 Carroll R. Lee** 2001 $190,131 $101,760 $3,400 President & Chief 2000 $180,289 $5,029 $3,400 Operating Officer 1999 $161,149 $37,968 $3,200 Frederick S. Samp 2001 $138,624 $61,283 $3,400 Vice President-Finance & Law 2000 $131,206 $3,664 $3,046 1999 $112,574 $21,457 $2,527 Paul A. LeBlanc 2001 $128,066 $51,186 $3,400 Vice President-Human Resources 2000 $121,285 $3,383 $2,800 & Information Services 1999 $101,031 $19,197 $2,246 * For each named executive officer, Other Annual Compensation consists of the Company's matching contribution to a 401(k) Plan. ** On October 10, 2001, Mr. Briggs retired as Chairman of the Board, President and Chief Executive Officer and Mr. Lee assumed the position of President and Chief Operating Officer The executive officers participate in a tax qualified defined benefit pension plan that is also applicable to all employees. In addition, the executive officers are parties to Supplemental Benefit Agreements with the Company under which additional retirement benefits are to be paid. Said agreements define the total pension amount to be paid to the executive officer by the Company, with the supplemental amount defined as the difference between this total amount due and the amount due to the executive officer under the tax qualified pension plan applicable to all employees. The total amount of pension benefit, as defined under the Supplemental Benefit Agreements, is a function of the executive officer's age at retirement and his average total compensation over a three-year period. Under the Supplemental Benefit Agreements, no pension amount would be due until the executive officer reaches age 55. At age 55, the executive officer would be entitled to receive 50% of his or her average total compensation over a three-year period. The total pension amount to be paid upon retirement would increase proportionately until a retirement age of 62, at which point the executive officer would be entitled to receive upon retirement 75% of his or her average total compensation over a three-year period. The following table sets forth estimated annual benefit amounts payable upon retirement after age 55 to the executive officers: Age at Retirement ---------------------------------------------------------------------------- - Average Total Compensation 55 56 57 58 59 60 61 62+ $100,000 $50,000 $53,000 $57,000 $60,000 $64,000 $68,000 $72,000 $75,000 $150,000 75,000 79,500 85,500 90,000 96,000 102,000 108,000 112,500 $200,000 100,000 106,000 114,000 120,000 128,000 136,000 144,000 150,000 $250,000 125,000 132,500 142,500 150,000 160,000 170,000 180,000 187,500 $300,000 150,000 159,000 171,000 180,000 192,000 204,000 216,000 225,000 Compensation covered under the defined plan applicable to all employees is total basic compensation exclusive of overtime, bonuses, and other extra, contingent or supplemental compensation, and inclusive of compensation deferred pursuant to the Company's Section 401(k) Plan. Compensation covered under the tax qualified pension plan is limited to the amount set forth in IRC Section 415. Subject to this limitation, it is essentially the same as the amount shown as "Salary" in the Summary Compensation Table above. Compensation covered by the Supplemental Benefit Agreements is total compensation inclusive of bonuses, and other, contingent or supplemental compensation, and compensation deferred pursuant to the Company's Section 401(k) Plan. "Average Total Compensation" for both plans is computed using the average of the total annual compensation actually paid by the Company to the Executive during the thirty-six consecutive calendar months in which the Executive's total compensation from the Company was the highest. The total annual pension amounts shown in the Pension Plan Table above are payable for the remainder of the executive officer's life after retirement. If the executive officer's spouse survives the executive officer, the spouse will receive an annual benefit for the remainder of her life equal to 50% of the annual benefit to the executive officer. The total annual pension amounts shown in the Pension Plan Table are not subject to any deduction for Social Security or other offset amounts. Mr. Briggs was a party to such a Supplemental Benefit Agreement at the time of his retirement effective October 10, 2001. 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 based upon his average salary over the past three years. He would also be entitled to receive the Company's standard health, life insurance and disability benefits for a period of two years. Based upon the completion of the Company's merger with Emera Inc., the named executive officers would be entitled to receive this benefit upon leaving the employment of the Company prior to October 10, 2002. Mr. Briggs' retirement effective October 10, 2001 constituted such a termination of employment pursuant to the terms of such an agreement. 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, Emera Inc. or other Emera affiliates 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, Emera Inc. or other Emera affiliates receive no fee for their services as directors. COMPENSATION COMMITTEE INTERLOCKS During 2001, Mr. Briggs 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. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS During 2001, the Company made payments to Eastern Maine Healthcare, its subsidiaries and affiliates, of $604,395. Mr. Ledwin, who serves on the Company's Board of Directors, is President, Chief Executive Officer and a Director of Eastern Maine Healthcare. Prior to the Company's merger with Emera Inc. on October 10, 2001, Mr. Ledwin also served on the Compensation Committee of the Company's Board of Directors. Subsequent to the Company's merger with Emera Inc., Mr. Ledwin began serving on the Audit Committee of the Company's Board of Directors. Eastern Maine Healthcare owns and operates Eastern Maine Medical Center, the second largest hospital in the State of Maine and the largest in the region served by the Company, as well as several other health care organizations in the region. The Company provides health care benefits to its employees through a self insured managed care plan. An independent plan administrator negotiates on behalf of the Company the rates for health care services paid to individual providers under the plan, including Eastern Maine Healthcare and its affiliates. REPORT ON EXECUTIVE COMPENSATION The Company manages its compensation programs in a manner intended to attract, retain and motivate its people. Compensation, including executive compensation, is 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 president, the Board's determination is based upon its qualitative judgment with respect to the president'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, depends 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 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 Board believed that this concern should apply to the executive officers as well, the Board deferred to the willingness of the Company's executives to forego attempts to keep their compensation at competitive levels while the Company recovered its financial health. In 1999 and 2000, adjustments were made to the base salaries of the executives in order to move them closer to the competitive range for such salaries. In addition, in 1999 the Compensation Committee of the Board completed a long-pending project to implement revised supplemental executive retirement plans to replace plans that are no longer appropriate, a project that had been delayed in view of the more pressing priorities. The Company has not included a long-term incentive component to its compensation program, but anticipates that its 2002 incentive compensation program will begin to incorporate such an incentive. Since 1991, the Company has maintained an annual incentive bonus program applicable to all employees including executive officers. For the periods presented in the compensation table, 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), which develops and oversees the accomplishment of the Company's annual strategic plan, additional targets were established with respect to the accomplishment of components of the annual plan. 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. Performance for 1998 and 1999 resulted in payouts of approximately 7% and 6.5% of salaries for senior management (inclusive of executive officers) during these respective years. Performance for 2000 resulted in payouts of approximately 5.7% for senior manager (exclusive of executive officers) and 2.8% for executive officers. Performance for 2001 resulted in payouts of 0.93% of salaries for senior management (inclusive of executive officers). In attempting to advance the goal discussed above of having a greater portion of executive compensation be derived from incentive compensation, for the periods presented in the compensation table the Compensation Committee of the Board recommended, and the Board approved, discretionary bonus plans for the executive officers. 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 then-continuing suspension of common dividends, the award payments to these officers under this plan were limited to one-half of their respective award potentials. For 1999, 2000 and 2001 similar plans with the same award potentials was adopted for these executives. The Committee evaluated the executives' performance soon after the end of each of these years, and determined that they had earned an award equal to 85% of their respective award potentials for 1999. For 2000 and 2001, the threshold level of earnings per share was not attained and thus no payouts were made under the plan. In 2001, however, to reflect the successful completion of the merger transaction with Emera, Inc., prior to the closing the Board authorized bonuses to the executive officers as follows: Mr. Briggs, 59.3%; Mr. Lee, 52.6%; Mr. Samp, 43.5%; and Mr. LeBlanc, 39.2%. March 15, 2002 BOARD OF DIRECTORS* Jane J. Bush Christopher G. Huskilson Norman A. Ledwin Elizabeth A. MacDonald David McD. Mann Richard J. Smith Ronald E. Smith * - During the period 1998 though 2002, neither Mr. Briggs nor Mr. Lee participated in any deliberations of the Company's Board of Directors concerning executive officer compensation. INDEPENDENT PUBLIC ACCOUNTANTS Ernst & Young LLP, P.O. Box 2007, Station CRO, 13th Floor, 1959 Upper Water Street, Halifax, N.S. B3J 2Z1 has been appointed for the 2001 and 2002 fiscal years. Ernst & Young serves as independent auditors to Emera Inc., a parent of the Company. The Company does not expect that representatives of Ernst & Young will be present at the Annual Meeting, have the opportunity to make a statement, or be available to respond to appropriate questions. At a regularly scheduled meeting of the Board of Directors held on November 21, 2001, the Board appointed Ernst & Young LLP to serve as the Company's Independent Public Accountants for the Company's 2001 and 2002 fiscal years, thereby dismissing PricewaterhouseCoopers, LLP. For a full disclosure regarding this change in accountants, please refer to the Company's Report on Form 8-K dated for events occurring on November 21, 2002 which is incorporated herein by reference VOTING PROCEDURES Under the Company's Certificate of Organization, as amended, the Board of Directors shall consist of not less than three 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 February 6, 2002, 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 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 Securities and Exchange Commission Regulation S-K, Item 402(l) requires the inclusion of a performance graph for "a class of common stock registered under section 12 of the Exchange Act". On October 10, 2001, all shares of the common stock of the Company were acquired by Emera Inc. of Halifax, Nova Scotia. On October 23, 2001, the Company filed Form 15 with the Securities and Exchange Commission deregistering its common stock. The Company has no remaining class of common stock registered under section 12 of the Exchange Act. This item is therefore omitted. ITEMS TO BE VOTED UPON The following additional matters will be presented by the management at the meeting: Item 1. Amend the Articles of Incorporation of the Company to reduce the par value of the Company's common stock from $5.00 to $0.00. The purpose of this proposed amendment is to provide the Board of Directors with a greater degree of flexibility including, for instance flexibility in the distribution of shares in exchange for property and services and flexibility in the distribution of the Company's capital surplus. Item 2. Amend the Articles of Incorporation of the Company to permit the Company to use its unreserved and unrestricted capital surplus, as defined in the Maine Business Corporation Act, to make capital distributions as permitted by Section 517 of the Maine Business Corporation Act or to repurchase its own common or preferred shares as permitted by Section 518 of the Maine Business Corporation Act, and to authorize the Company's Board of Directors to direct such a capital distribution or such a repurchase of common or preferred shares from time-to-time, to the extent such a distribution or repurchase is not contrary to any other provision of these Articles, on such terms as they deem reasonable and in the best interests of the Company. The purpose of this proposed amendment is to permit the Company to make capital distributions and to repurchase its common and preferred shares out of the unreserved and unrestricted capital surplus of the Company. Pursuant to generally accepted accounting principles, at the effective time of the Company's acquisition by Emera, Inc. the Company reallocated its retained earnings as of such effective time to other capital surplus. However, the Maine Business Corporation Act (the "MBCA") may prohibit the Company from paying common dividends or, unless provided in the Company's Articles of Incorporation or by vote of the Company's shareholders, from making capital distributions and from repurchasing its own common or preferred shares except from its unrestricted and unreserved earned surplus, as defined in the MBCA, or from its net earnings from its current or next preceding fiscal year. As a result, the Company may face restrictions to the extent that it desires to make capital distributions or to repurchase its own common or preferred shares. This amendment will allow the Company to use the unreserved and unrestricted capital surplus to make capital distributions and to repurchase its own common or preferred shares. 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 2001 ANNUAL MEETING Any proposals of stockholders of the Company intended to be presented at the 2003 Annual Meeting must be received by the Company on or before December 31, 2002 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 15, 2002 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 David McD. Mann and Andrew Landry 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 December 19, 2001, or at any adjournment thereof. (CONTINUED AND TO BE SIGNED ON REVERSE SIDE) BANGOR HYDRO-ELECTRIC COMPANY C/O EquiServe P.O. Box 43010 Providence, RI 02940-3010 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 AND IN FAVOR OF THE RESOLUTIONS DESCRIBED HEREIN. RETURNING YOUR SIGNED PROXY SHALL ALSO AUTHORIZE THE PROXIES TO VOTE OTHER MATTERS THAT MAY PROPERLY COME BEFORE THE MEETING IN THEIR DISCRETION. 1. Election of Directors Nominees: Class I: Robert S. Briggs, Norman A. Ledwin, Elizabeth A. MacDonald FOR --- WITHHELD --- ALL | | FROM ALL | | NOMINEES | | NOMINEES | | --- --- --- | | | | --- -------------------------------------- FOR ALL NOMINEES EXCEPT AS NOTED ABOVE 2. Resolved to amend the Articles of Incorporation of the Company to reduce the par value of the Company's common stock from $5.00 to $0.00. FOR --- AGAINST --- THE | | THE | | RESOLUTION | | RESOLUTION | | --- --- 3. Resolved to amend the Articles of Incorporation of the Company to permit the Company to use its unreserved and unrestricted capital surplus, as defined in the Maine Business Corporation Act, to make capital distributions as permitted by Section 517 of the Maine Business Corporation Act or to repurchase its own common or preferred shares as permitted by Section 518 of the Maine Business Corporation Act, and to authorize the Company's Board of Directors to direct such a capital distribution or such a repurchase of common or preferred shares from time-to-time, to the extent such a distribution or repurchase is not contrary to any other provision of these Articles, on such terms as they deem reasonable and in the best interests of the Company. FOR --- AGAINST --- THE | | THE | | RESOLUTION | | RESOLUTION | | --- --- --- 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: -------------------------- ----------