-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Im9F//jcdCU7wcaQO++h30rF5k+qeNsibryEoLngsfp7UxBvIl3yuh8j4A+ie6RA eTWX9NzYwVJd7DIXzTOwwA== 0000950124-98-001493.txt : 19980324 0000950124-98-001493.hdr.sgml : 19980324 ACCESSION NUMBER: 0000950124-98-001493 CONFORMED SUBMISSION TYPE: DEF 14A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19980505 FILED AS OF DATE: 19980323 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: MADISON GAS & ELECTRIC CO CENTRAL INDEX KEY: 0000061339 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC & OTHER SERVICES COMBINED [4931] IRS NUMBER: 390444025 STATE OF INCORPORATION: WI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: DEF 14A SEC ACT: SEC FILE NUMBER: 000-01125 FILM NUMBER: 98570584 BUSINESS ADDRESS: STREET 1: 133 S BLAIR ST STREET 2: PO BOX 1231 CITY: MADISON STATE: WI ZIP: 53701 BUSINESS PHONE: 6082527923 MAIL ADDRESS: STREET 1: POST OFFICE BOX 1231 CITY: MADISON STATE: WI ZIP: 53701-1231 DEF 14A 1 DEF 14A 1 MADISON GAS AND ELECTRIC COMPANY [MG&E LOGO] ------------------------------------------------ PROXY STATEMENT ------------------------------------------------ ANNUAL MEETING OF SHAREHOLDERS TO BE HELD MAY 5, 1998 2 MADISON GAS AND ELECTRIC COMPANY POST OFFICE BOX 1231 MADISON, WISCONSIN 53701-1231 March 23, 1998 Dear Shareholder: The directors and officers of the Company join me in extending a cordial invitation to you to attend our 1998 Annual Meeting of Shareholders which will be held on Tuesday, May 5, 1998, at 11:00 a.m., local time, in the Exhibition Hall of the Dane County Exposition Center, 1919 Expo Way, Madison, Wisconsin (see the map on next page). The accompanying Proxy Statement requests approval of the election of a slate of nominees for directors of Class III to hold office until 2001. At the Meeting we will discuss last year's operations, comment on items of interest to you and the Company, and give you an opportunity to ask questions. Following the Meeting, our Company's officers, directors, and other employees will be available to answer any questions you may have. YOUR VOTE IS IMPORTANT. I ENCOURAGE YOU TO SIGN AND DATE YOUR PROXY PROMPTLY AND MAIL IT BACK TO US even if you plan to attend the Meeting. You may revoke your proxy at the Meeting and vote your shares in person if you wish. I hope you will be able to attend. Very truly yours, David C. Mebane DAVID C. MEBANE Chairman of the Board, President, and Chief Executive Officer 3 If you plan to attend the Annual Meeting in person, please fill out the reservation form and return it with your proxy so that we may have an indication of the number of shareholders planning to attend the Meeting. If you have any questions, please feel free to call our Shareholder Services toll-free number. Call 1-800-356-6423 if you are calling from outside Wisconsin (Continental United States). In Wisconsin, please call 1-800-362-6423, and in the Madison area, call 252-4744. Map Note: Enter the Dane County Expo Center grounds through the Main Gate off of Rimrock Road (see inset map). 4 MADISON GAS AND ELECTRIC COMPANY POST OFFICE BOX 1231 MADISON, WISCONSIN 53701-1231 NOTICE OF ANNUAL MEETING OF SHAREHOLDERS TUESDAY, MAY 5, 1998, 11:00 A.M. The 1998 Annual Meeting of Shareholders of Madison Gas and Electric Company will be held in Madison, Wisconsin, in the Exhibition Hall of the Dane County Exposition Center, 1919 Expo Way, Madison, Wisconsin, on Tuesday, May 5, 1998, at 11:00 a.m., local time, for the purposes of: (1) Electing three Class III directors to hold office until the Annual Meeting of Shareholders in 2001 and until their successors have been elected and qualified. (2) Transacting such other business as may properly come before the Meeting. Only those shareholders of Common Stock of record at the close of business on March 1, 1998, are entitled to vote at the Meeting. All shareholders are requested to be present at the Meeting in person or by proxy. Enclosed is a proxy. Your attention is directed to the Proxy Statement of Madison Gas and Electric Company on the following pages. By order of the Board of Directors GARY J. WOLTER, Secretary March 23, 1998 ------------------------- It is important to you and the Company that your shares be represented at the Annual Meeting of Shareholders. Even if you plan to attend the Meeting in person, you are requested to sign, date, and mail the enclosed proxy promptly -- regardless of the size of your stock holding. The signature on the proxy should correspond exactly with the name of the shareholder as it appears on the proxy. Where stock is registered in the names of two or more persons, all such persons should sign the proxy. If the proxy is signed as attorney, officer, personal representative, administrator, trustee, guardian, or similar capacity, please indicate full title as such. 1 5 MADISON GAS AND ELECTRIC COMPANY POST OFFICE BOX 1231 MADISON, WISCONSIN 53701-1231 PROXY STATEMENT To the Shareholders of the Common Stock of MADISON GAS AND ELECTRIC COMPANY: The Proxy Statement and accompanying proxy, mailed on or about March 23, 1998, are furnished as a part of the solicitation of proxies by the Board of Directors of Madison Gas and Electric Company (hereinafter referred to as the "Company"), to be voted at the 1998 Annual Meeting of Shareholders of the Company to be held in the Exhibition Hall of the Dane County Exposition Center, 1919 Expo Way, Madison, Wisconsin, on Tuesday, May 5, 1998, at 11:00 a.m., local time, for the purposes set forth in the accompanying Notice of Annual Meeting of Shareholders. A shareholder who executes a proxy may revoke it at any time before it is voted. A proxy may be revoked by written notice to the Company, execution of a subsequent proxy which is voted at the 1998 Annual Meeting, or attendance at the Meeting and voting in person. Attendance at the Meeting will not automatically revoke a proxy. As of March 1, 1998, the Company had outstanding 16,079,718 shares of 50,000,000 authorized shares of Common Stock. The Common Stock constitutes the only class of securities entitled to vote at the 1998 Annual Meeting of Shareholders. Only those shareholders of Common Stock of record at the close of business on March 1, 1998, are entitled to vote at the Meeting. At the 1985 Annual Meeting of Shareholders, the shareholders of the Company approved an amendment to the Company's Restated Articles of Incorporation (the "Restated Articles") limiting the voting power of any shareholder who acquires more than 10 percent of the Company's outstanding voting stock. To the knowledge of the Company, this limitation does not currently apply to any shareholder. Accordingly, at the present time, one share of Common Stock will be entitled to one vote. For those shareholders who are participants in the Company's Investors Plus Plan, the shares you have accumulated in the Plan are held by the Administrator of the Plan under the nominee name of Whimm & Co., and those shares, including your reinvestment shares, will be voted in accordance with the direction given on the proxy. VOTING INFORMATION A shareholder may, with respect to the election of directors, (i) vote for the election of all named director nominees, (ii) withhold authority to vote for all named director nominees, or (iii) vote for the election of all such nominees other than any nominee with respect to whom the shareholder withholds authority to vote by so indicating on the proxy. Proxies properly executed and received by the Company at or prior to the 1998 Annual Meeting of Shareholders and not revoked will be voted as directed therein. In the absence of a specific direction from a shareholder, proxies will be voted for the election of the named director nominees. If a proxy indicates that all or a portion of the votes represented by such proxy are not being voted, such nonvotes will not be considered as votes cast with respect to such matter, although such shares may be considered present and entitled to vote for other purposes and will count for purposes of determining the presence of a quorum. 2 6 If a quorum is present at the 1998 Annual Meeting, the three persons receiving the greatest number of votes will be elected to serve as Class III directors. Accordingly, withholding authority to vote for a director and nonvotes with respect to the election of directors will not affect the outcome of the election of directors. ELECTION OF DIRECTORS The Board of Directors consists of eight directors divided into three classes, one class having two directors and two classes having three directors, with one class being elected each year for a term of three years. Accordingly, it is proposed that the three nominees listed below be elected to serve as Class III directors for three-year terms, to expire at the 2001 Annual Meeting of Shareholders and upon the election and qualification of their successors. Messrs. Blaney, Mohs, and Stark are currently Class III directors whose terms expire at the 1998 Annual Meeting and who have been nominated for reelection. Each of the nominees has indicated a willingness to serve if elected, and the Board of Directors has no reason to believe that any nominee will be unavailable. If any of the nominees should become unable to serve, it is presently intended that the proxies solicited hereby will be voted for a substitute nominee designated by the Board of Directors. Under the Company's retirement guidelines for directors, non-officer directors must retire from the board no later than the Annual Meeting of Shareholders following their 73(rd) birthday. Under the terms of the Company's Bylaws, nominations for the Board of Directors made by shareholders must be made in writing and delivered or mailed to the Chief Executive Officer and/or President of the Company at the Company's principal executive offices not less than 14 days nor more than 60 days prior to the Annual Meeting of Shareholders. If less than 14 days' notice of the Annual Meeting is given to shareholders, such nominations must be delivered or mailed as specified above not later than the close of business on the fourth day following the day on which the notice was mailed. Such notification shall contain the following information to the extent known to the nominating shareholder: a) name and address of each proposed nominee, b) the principal occupation of each proposed nominee, c) the name and residence address of the nominating shareholder, and d) the number of shares of capital stock of the corporation owned by the nominating shareholder. Shareholder nominations for the 1998 Annual Meeting of Shareholders must be delivered or mailed to the Company no later than April 21, 1998. The following table sets forth the names of the nominees and the current directors who will continue in office after the Meeting, their ages, information as to their business experience for the last five years (unless otherwise noted), and the year they first became directors of the Company. 3 7
DIRECTOR NAMES (AGES) AND BUSINESS EXPERIENCE SINCE ------------------------------------ -------- Nominees (Class III) -- Term Expiring in 2001 RICHARD E. BLANEY (61), Madison, Wisconsin.................. 1974 Retired President of Richard Blaney Seeds Inc., sellers of hybrid seed corn, with which he was associated for more than 9 years. FREDERIC E. MOHS (61), Madison, Wisconsin................... 1975 Partner in the law firm of Mohs, MacDonald, Widder & Paradise, of which he has been a member since 1968. PHILLIP C. STARK (72), Madison, Wisconsin................... 1985 Chairman of the Board and Vice President and Secretary of The Stark Company, a real estate company, with which he has been associated for 49 years. Members of the Board of Directors Continuing in Office Class I -- Term Expiring in 1999 JEAN MANCHESTER BIDDICK (71), Madison, Wisconsin............ 1982 Retired Chief Executive Officer of Neesvig's Inc., a wholesale meat company, with which she was associated for more than 27 years. DAVID C. MEBANE (64), Madison, Wisconsin.................... 1984 Chairman of the Board of Directors, President, and Chief Executive Officer of the Company, of which he has been an officer since 1980; also director of First Federal Capital Corp., a bank holding company. REGINA M. MILLNER (53), Madison, Wisconsin.................. 1996 Attorney and Real Estate Consultant for more than 12 years and President of RMM Enterprises, Inc., a real estate consulting firm; also a director of Wisconsin State Equity Corporation. Class II -- Term Expiring in 2000 H. LEE SWANSON (59), Cross Plains, Wisconsin................ 1988 Chief Executive Officer, President, and Director of the State Bank of Cross Plains, with which he has been associated for more than 32 years; also director of Chorus Communications Group and MidPlains Telephone Company. FRANK C. VONDRASEK (69), Madison, Wisconsin................. 1982 Vice Chairman of the Board of Directors of the Company, of which he was an officer from 1974 through 1993.
4 8 BENEFICIAL OWNERSHIP OF COMMON STOCK The following table lists the beneficial ownership of Common Stock of each director and nominee, the individuals named in the Summary Compensation Table, the directors and executive officers as a group, and each person known by the Company to be the beneficial owner of more than 5 percent of the outstanding shares of Common Stock. In each case the indicated owner has sole voting power and sole investment power with respect to the shares shown except as noted.
PERCENT OF NUMBER OF SHARES OUTSTANDING NAME BENEFICIALLY OWNED COMMON STOCK ---- ------------------ ------------ Jean Manchester Biddick............... 3,716 * Richard E. Blaney..................... 1,335 * Robert E. Domek....................... 3,651(2)(5) * Terry A. Hanson....................... 1,909(1)(2) * David C. Mebane....................... 8,264(1)(2) * Regina M. Millner..................... 924 * Frederic E. Mohs...................... 1,786(3) * Phillip C. Stark...................... 3,329 * H. Lee Swanson........................ 3,150 * Frank C. Vondrasek.................... 21,355(1)(2) * Mark C. Williamson.................... 2,048(1)(2) * Gary J. Wolter........................ 3,187(1)(2) * All directors and executive officers as a group (19).................... 73,363(2) * Marshall & Ilsley Corporation......... 974,403(4) 6.06 770 North Water Street Milwaukee, Wisconsin 53202
- ------------------------- * Less than 1 Percent. (1) Messrs. Hanson, Mebane, Vondrasek, Williamson, and Wolter are directors of Madison Gas and Electric Company Foundation, Inc., and as such have shared voting and investment power in an additional 9,847 shares of Common Stock held thereby. (2) Includes Common Stock held under the two Employee Stock Ownership Plans of the Company for the account of executive officers of the Company with respect to which such persons have sole voting but no investment power: Mr. Domek, 2,177 shares; Mr. Hanson, 402 shares; Mr. Mebane, 5,149 shares; Mr. Vondrasek, 11,956 shares; Mr. Williamson, 14 shares; Mr. Wolter, 83 shares; and directors and executive officers as a group, 31,413 shares. (3) Includes 611 shares of Common Stock with respect to which Mr. Mohs is trustee of a trust for the benefit of his children. (4) Marshall & Ilsley Trust Company is the Trustee of the Company=s Employee Stock Ownership Plans. Marshall & Ilsley Corporation (M&I), as a parent holding company, filed a Schedule 13G to report beneficial ownership by it and four subsidiaries of shares of Common Stock. Based on information contained in the Schedule 13G, this includes shares as to which M&I has or shares voting and investment power as follows: sole voting power as to 91,580 shares; shared voting power as to 878,688 shares (as to which beneficial ownership is disclaimed as to 833,907 shares held in one or more employee benefit plans); sole investment power as to 88,974 shares; and shared investment power as to 885,429 shares (as to which beneficial ownership is disclaimed as to 833,907 shares held in one or more employee benefit plans). (5) Retired as Executive Vice President December 31, 1997. 5 9 SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE Section 16(a) of the Securities Exchange Act of 1934 requires the Company's directors, executive officers, and persons who own more than ten percent of the Company's Common Stock to file reports of ownership and changes in ownership with the Securities and Exchange Commission. Such persons are also required to furnish the Company with copies of all such reports. Based solely on its review of the copies of such reports received by the Company and written representations from certain reporting persons, the Company notes that its directors and executive officers (the Company does not have any greater than ten percent shareholders) filed all required reports during or with respect to 1997 on a timely basis, except for Robert E. Domek, who filed one report late relating to a sale of stock. BOARD COMMITTEES The Company has an Audit Committee, a Compensation Committee, an Executive Committee, and a Personnel Committee. During the year ended December 31, 1997, a total of 12 meetings of the Board of Directors were held. All of the directors attended in excess of 75 percent of the aggregate of these meetings and (if they were members of the Audit, Compensation, Executive, or Personnel Committee) the meetings of the Audit, Compensation, Executive, and Personnel Committees. Directors who are not employees of the Company will receive $11,500 annually, plus $650 for each Board meeting attended and $350 for each Audit, Compensation, Executive, or Personnel Committee meeting attended. The Vice Chairman of the Board of Directors receives an additional $6,500 annual retainer. Mr. Mebane does not receive additional compensation for serving as a director. The members of the Audit Committee are Mrs. Biddick, Ms. Millner, and Messrs. Blaney, Mohs, Stark, Swanson, and Vondrasek. The Audit Committee held two meetings during 1997. The Audit Committee's function is to meet with the Company's internal auditors and independent public accountants and discuss with them the scope and results of their audits, the Company's accounting practices, and the adequacy of the Company's internal controls. The Audit Committee also approves services performed by the Company's independent public accountants. The members of the Compensation Committee are Messrs. Blaney, Mohs, and Stark. The Compensation Committee held one meeting during 1997. The function of the Compensation Committee is to review the salaries, fees, and other benefits of officers and directors and recommend compensation adjustments to the Board of Directors. The members of the Executive Committee are Mrs. Biddick and Messrs. Blaney, Mebane, Mohs, and Vondrasek. The Executive Committee did not meet during 1997. The Executive Committee provides a means of taking prompt action when a quorum of the Board of Directors cannot be readily assembled. When the Board of Directors is not in session, the Executive Committee has the powers of the Board in the management of the business and affairs of the Company, except action with respect to dividends to shareholders, election of principal officers, or the filling of vacancies on the Board of Directors or committees created by the Board of Directors. The members of the Executive Committee are elected by the Board of Directors each year at the first meeting of the Board following the Annual Meeting of Shareholders to serve until the first Board meeting following the next Annual Meeting of Shareholders. The members of the Personnel Committee are Mrs. Biddick, Ms. Millner, and Messrs. Mebane, Mohs, Swanson, and Vondrasek. The Personnel Committee held one meeting during 1997. The Personnel Committee makes recommendations with respect to the election of directors and officers of the Company. Nominations for the Board of Directors by shareholders, which are submitted to the Chief Executive Officer and/or President of the Company, in the manner described above, will be considered by the Personnel Committee, the Board, or the Chief Executive Officer. 6 10 EXECUTIVE COMPENSATION The following table summarizes the compensation for the fiscal years 1995, 1996, and 1997 of the Chief Executive Officer and four other executive officers serving as executive officers on December 31, 1997, whose salary exceeded $100,000 for fiscal year 1997. SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION ------------------------------- --------------------------------- AWARDS PAYOUTS ----------------------- ------- RESTRICTED SECURITIES OTHER ANNUAL STOCK UNDERLYING LTIP ALL OTHER NAME AND PRINCIPAL SALARY BONUS COMPENSATION AWARDS OPTIONS PAYOUTS COMPENSATION POSITION YEAR ($) ($) ($) ($) (#) ($) ($)(5) ------------------ ---- ------ ----- ------------ ---------- ---------- ------- ------------ David C. Mebane....... 1997 $287,316 0 $ 0 $ 0 0 0 $ 8,857 Chairman, President, 1996 270,756 0 0 0 0 0 12,263 and Chief Executive 1995 252,452 0 2,766 6,350 0 0 11,353 Officer Robert E. Domek(1).... 1997 $180,575 0 $ 0 $ 0 0 0 $54,958 Executive Vice 1996 170,000 0 0 0 0 0 8,927 President 1995 119,558 0 1,087 6,350 0 0 7,678 Gary J. Wolter(2)..... 1997 $176,612 0 $ 0 $ 0 0 0 $ 6,171 Senior Vice President- 1996 160,516 0 0 0 0 0 4,412 Administration and 1995 144,844 0 153 6,350 0 0 3,566 Secretary Mark C. Williamson(3)....... 1997 $174,984 0 $ 0 $ 0 0 0 $ 3,114 Senior Vice President- 1996 158,092 0 0 0 0 0 395 Energy Services 1995 141,396 0 184 6,350 0 0 354 Terry A. Hanson(4).... 1997 $122,416 0 $ 0 $ 0 0 0 $ 5,089 Vice President- 1996 114,068 0 0 0 0 0 3,836 Finance 1995 106,480 0 119 6,350 0 0 1,994
- ------------------------- (1) Senior Vice President-Human Resources until May 1, 1995, when he was promoted to Executive Vice President. He was elected President of Great Lakes Energy Corp. (GLENCO) and Vice Chairman of American Energy Management, Inc. (AEM), in May of 1996. GLENCO and AEM were subsidiaries of the Company. (2) Vice President-Administration and Secretary until May 1, 1995, when he was promoted to Senior Vice President-Administration and Secretary. (3) Vice President-Energy Services until May 1, 1995, when he was promoted to Senior Vice President-Energy Services. (4) Treasurer until October 1, 1996, when he was promoted to Vice President and Treasurer. Promoted to Vice President-Finance on November 1, 1997. (5) Amounts for all other compensation for 1997 are Company contributions to a 401(k) defined contribution plan and pay for unused vacation. The 401(k) Company contribution for 1997 was $3,550 for Mr. Mebane, $2,879 for Mr. Domek, $2,997 for Mr. Wolter, $3,114 for Mr. Williamson, and $2,804 for Mr. Hanson; the residual for each person in 1997 was pay for unused vacation. 7 11 REPORT ON EXECUTIVE COMPENSATION CORPORATE MISSION The mission of Madison Gas and Electric Company is to provide quality gas and electric utility service to its customers at competitive rates; to meet all customers= gas, electric, and related energy needs; and to earn a reasonable return for investors. MGE is committed to maintaining the highest standards of corporate citizenship and fair treatment for all employees. COMPENSATION PHILOSOPHY The principal goal of the Madison Gas and Electric Company compensation program is to pay employees, including executive officers, at levels which are: - reflective of how well the Company is achieving its corporate mission - consistent with the Company's current financial condition, earnings, rates, total shareholder return, and projected Consumer Price Index - reflective of individual performance and experience - competitive in the marketplace - administered in a fair and consistent manner. Executive salaries are established within a salary range that reflects competitive salary levels for similar positions in similar-sized gas and electric utilities and other Wisconsin utilities. The utilities used for salary comparison are not the same companies included in the performance graph peer group in this Proxy Statement. The Upper Midwest combination utilities included in the performance graph peer group were selected to reflect utilities facing similar weather and economic conditions. Many of these companies are larger than MGE with much higher compensation structures. When examining compensation peer groups, it was determined more appropriate to consider similar-sized utilities and other Wisconsin utilities. The midpoint (or middle) of an executive's salary range is approximately equal to the median salary level of the surveyed utilities. An executive's position in the range reflects his or her performance over a period of years in that position, the executive's experience in that position, and Company performance. Specific individual or Company performance targets are not set. Instead, an executive=s salary within the salary range is determined by subjectively evaluating the individual=s performance and experience and the Company's performance. While MGE's current compensation program has functional adequacy to retain and fairly compensate the Company's executives, the Compensation Committee and the full Board review the objectives of the executive compensation program on a continuing basis. Each year, the Compensation Committee reviews and recommends to the Board annual salaries, salary grades and ranges, and the overall salary program design for the Company's executives. 8 12 EXECUTIVE COMPENSATION Company performance factors such as earnings, rates, shareholder return, and other available financial criteria were used in determining the CEO's and other executive officers' positions in his or her salary range. Other criteria such as gas and electric reliability and responsiveness to industry change were also examined. In 1997, MGE earned above the return on equity authorized by the Public Service Commission of Wisconsin. This was achieved despite lower sales because of mild weather and substantial additional expenses because of the outage of the Kewaunee Nuclear Power Plant. Additionally, the Company has taken a leadership role in industry restructuring and merger policy. A study was performed for the Company in 1996 by a compensation consultant. The study compared the pay level of key MGE executives to pay levels of general industry and pay levels of other utilities with revenues of approximately $250 million. The study showed that pay levels for MGE executives were generally below the median of salary and incentive compensation for both general industry and similar-sized utilities. Salary adjustments were made which moved Company executives closer to the market median for their positions. In 1997, the CEO's annual salary was set at $292,992. The CEO's total compensation remains below the market total compensation for both general industry and similar-sized utilities identified in the compensation study. Richard E. Blaney Frederic E. Mohs Phillip C. Stark 9 13 COMPANY PERFORMANCE The following graph shows a five-year comparison of cumulative total returns for the Company, S&P 500, and a Peer Group Index weighted according to each company's market capitalization as of the beginning of each annual period. MADISON GAS AND ELECTRIC COMPANY FINANCIAL PERFORMANCE CUMULATIVE FIVE-YEAR TOTAL RETURN* COMPARISON [PERFORMANCE GRAPH] Assumes $100 invested on December 31, 1992, in each of the Company's Common Stock, S&P 500, and the Peer Group *Total return assumes reinvestment of dividends
-------------------------------- S&P PEER MGE 500 GROUP ------------------------------ 1992 $100 $100 $100 1993 $110 $110 $113 1994 $112 $112 $107 1995 $128 $153 $140 1996 $117 $189 $145 1997 $141 $252 $187
10 14 The Peer Group selected by the Company is composed of the following Upper Midwest combination utilities: Cilcorp Inc. Minnesota Power & Light Cinergy Corp. Nipsco Industries Inc. Cipsco Inc. Northern States Power-MN CMS Energy Corp. SIGCorp. Inc. DPL Inc. St. Joseph Light & Power IES Industries Inc. Utilicorp United Inc. Illinova Corp. Wisconsin Energy Corp. Interstate Power Co. WPL Holdings Inc. *Iowa-Illinois Gas & Elec. WPS Resources Corp. **MidAmerica Energy Holding Note: Data accumulated by S&P Compustat Services
*Merged with Midwest Resources on 7/17/95 **Name change from MidAmerican Energy Co. 11 15 MADISON GAS AND ELECTRIC COMPANY FINANCIAL PERFORMANCE MGE VERSUS WISCONSIN PEER GROUP Note: This graph is for comparison purposes only. It is to show how the Company's Five-Year Total Return compares to the other Wisconsin utilities. [PERFORMANCE GRAPH] Assumes $100 invested on December 31, 1992, in each of the Company's Common Stock and the Wisconsin Utility Peer Group Average Wisconsin Peer Group average is weighted based on market capitalization at the beginning of the year Total return assumes reinvestment of dividends
----------------------- WISCONSIN MGE PEER GROUP ----------------------- 1992 $100 $100 1993 $110 $108 1994 $112 $102 1995 $128 $128 1996 $117 $119 1997 $141 $140
Wisconsin Peer Group: Wisconsin Energy Corp. WPL Holdings Inc. WPS Resources Corp. 12 16 PENSION PLAN AND SUPPLEMENTAL RETIREMENT PLAN The Company has a noncontributory qualified defined benefit Pension Plan covering its salaried employees. The amount of pension is based on years of service and final 60-month average earnings prior to retirement. The following table indicates the estimated maximum retirement benefits payable (unreduced for survivor protection) at the normal retirement age of 65 for specified compensation and years of service classifications. Substantially all compensation shown in the salary column of the summary compensation table is included in compensation under the Pension Plan, subject to any statutory regulations imposed by the Internal Revenue Code. Information in this table is based on the Pension Plan formula for years of service credit earned in 1986 and subsequent years. The retirement benefits are not subject to any reduction for Social Security benefits received by the employees or for any other offset amounts. PENSION PLAN TABLE(1)
ANNUAL PENSION AT NORMAL RETIREMENT AGE OF 65 AFTER YEARS OF SERVICE INDICATED BELOW(2) --------------------------------------------- FINAL FIVE-YEAR 25 YEARS AVERAGE ANNUAL SALARY 10 YEARS 15 YEARS 20 YEARS OR MORE - --------------------- -------- -------- -------- -------- $100,000.............. $12,500 $18,750 $25,000 $31,250 $125,000.............. $15,625 $23,438 $31,250 $39,063 $160,000.............. $20,000 $30,000 $40,000 $50,000
- ------------------------- (1) The retirement benefits reflect limits imposed by the Internal Revenue Code on benefit amounts and covered compensation. (2) The Pension Plan Table does not reflect service credit prior to 1986 when the Pension Plan required employee contributions. The normal retirement pension for employees with service credits prior to 1986 will exceed the amounts shown in the Pension Plan Table, depending on their years of pre- 1986 service and contributions made to the Pension Plan. The estimated annual retirement benefit payable at normal retirement age of 65 under the Pension Plan formula (assuming continuation of 1997 compensation levels through retirement and taking into account employee contributions and service credits for 1985 and prior years) is $56,176 to Mr. Mebane, $44,586 to Mr. Wolter, $50,943 to Mr. Williamson, and $45,371 to Mr. Hanson. At December 31, 1997, the annual retirement benefit payable to Mr. Domek is $48,680. The full credited years of service under the Pension Plan are 21 for Mr. Mebane, 14 for Mr. Wolter, 12 for Mr. Williamson, 16 for Mr. Hanson, and 25 for Mr. Domek. Officers of the Company are also covered under a nonqualified supplemental retirement plan which provides a supplemental retirement benefit. The supplemental retirement benefit is a designated percentage ranging from 55 to 70 percent of the final 60-month average earnings less the benefit payable from the Pension Plan described above. The designated percentage is based on the officer's age at retirement. The estimated supplemental annual retirement benefit payable at normal retirement age of 65 under the supplemental retirement plan (assuming continuation of 1997 compensation levels through retirement) is $134,698 to Mr. Mebane, $83,086 to Mr. Wolter, $75,729 to Mr. Williamson, and $42,871 to Mr. Hanson. At December 31, 1997, the annual supplemental retirement benefit payable to Mr. Domek was $55,090. 13 17 DEFERRED COMPENSATION PLAN Officers of the Company are permitted to defer a portion of their current salary under a nonqualified deferred compensation plan initiated in 1984. Three officers contributed to the plan during 1997. Participants in the plan are entitled to receive deferred compensation upon termination of active employment. Deferred compensation under this plan does not constitute compensation as defined under the Pension Plan described above. The Company has entered into a trust agreement for the purpose of assuring the payment of the Company's obligations under the supplemental retirement plan and deferred compensation plan. Under the trust agreement, in the event of a change in control or potential change in control of the Company, the Company will be obligated to deliver to the trustee cash or marketable securities having a value equal to the present value of the amounts which the Company is obligated to pay under such plans and the costs of maintaining the trust. "Change in control" is defined generally as the acquisition by any person, subject to certain exceptions, of beneficial ownership of 20 percent or more of the Common Stock; a change in the majority of the Board of Directors; certain mergers or similar transactions involving the Company's assets where, among other conditions, the current shareholders do not constitute at least 60 percent of the shareholders of the resulting or acquiring entity; or a liquidation of the Company. SEVERANCE PLANS The Company has entered into severance agreements with certain key employees, including Messrs. Mebane, Wolter, Williamson, and Hanson. Under these agreements, each such employee is entitled to a severance payment following a change in control of the Company as defined above if, within 24 months after such change in control, employment with the Company is terminated by (i) the Company, (ii) the employee for good reason, or (iii) the employee for any reason during the 30-day period commencing one year after the date of change in control. Each agreement has a three-year initial term, but on the first anniversary of execution and each anniversary thereafter, the agreement is extended for an additional year, unless either the Company or the employee gives notice not to extend the agreement or a change in control of the Company has occurred. Severance payments will be equal to three times the employee's annual base salary plus three times the highest bonus paid during any of the five years preceding a change in control. If the employee receives severance benefits following a change in control, health, life, and disability benefits are continued for up to three years, and the employee will also be grossed up for any excise taxes the employee may incur. In circumstances not involving a change in control of the Company, Messrs. Mebane, Wolter, Williamson, and Hanson, like other salaried employees, are entitled under the Company's general severance plan to a payment equal to two weeks of compensation plus the employee's weekly compensation multiplied by the number of years of employment, not exceeding 24. SOLICITATION OF PROXIES The cost of soliciting proxies will be borne by the Company. In addition to solicitation by mail, directors, officers, and employees of the Company may solicit proxies from the shareholders of the Company personally or by telephone. The Company has retained Morrow & Co., Inc., to aid in the solicitation of proxies at a fee of $6,000 plus expenses. 14 18 RECEIPT OF SHAREHOLDERS' PROPOSALS AND DIRECTOR NOMINATIONS FOR NEXT ANNUAL MEETING In order to be considered for inclusion in the Company's proxy materials for the 1999 Annual Meeting of Shareholders, any shareholders' proposals must be received at the Company's principal executive offices at 133 South Blair Street, Post Office Box 1231, Madison, Wisconsin 53701-1231, no later than November 23, 1998. Shareholder nominations for Class I directors to be elected at the 1999 Annual Meeting of Shareholders must be submitted in the manner described in Election of Directors above not less than 14 days nor more than 60 days prior to the 1999 Annual Meeting. OTHER MATTERS The Company's Annual Report for the year 1997 has been mailed to shareholders. The management has no knowledge of any other matters to be brought before the Annual Meeting. If, however, any other matters properly come before the Annual Meeting, it is the intention of the persons named in the proxy to vote the proxies in accordance with their judgment on such matters. The Board of Directors has selected Coopers & Lybrand L.L.P. to audit the consolidated financial statements of the Company and its subsidiaries for 1998. Coopers & Lybrand L.L.P., the Company's independent public accountant in 1997, is expected to have a representative present at the meeting who may make a statement and will be available to respond to appropriate questions. Madison Gas and Electric Company DAVID C. MEBANE DAVID C. MEBANE Chairman of the Board, President, and Chief Executive Officer Dated March 23, 1998 15 19 MADISON GAS AND ELECTRIC COMPANY POST OFFICE BOX 1231 MADISON, WISCONSIN 53701-1231 [MG&E LOGO] This proxy is solicited on behalf of the Board of Directors of Madison Gas and Electric Company. MGE's Annual Meeting of Shareholders will be held at 11:00 a.m., local time, on Tuesday, May 5, 1998, in the Exhibition Hall at the Dane County Exposition Center, 1919 Expo Way, Madison, Wisconsin (see map on back). YOUR VOTE IS IMPORTANT. PLEASE SIGN AND DATE THE ATTACHED PROXY PROMPTLY AND MAIL IT BACK TO US EVEN IF YOU PLAN TO ATTEND THE MEETING. If you do plan on attending the meeting, be sure to complete and return the bottom two-thirds of this form in the enclosed envelope. Fold and Detach Here Fold and Detach Here - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - PLEASE SIGN AND RETURN. MADISON GAS AND ELECTRIC COMPANY PROXY ITEM 1: Election of Directors: Class III Nominees: Richard E. Blaney, Frederic E. Mohs, and Phillip C. Stark [ ] FOR [ ] WITHHOLD all nominees listed above authority to vote for all (except as marked to the nominees listed contrary below)
(Instructions: To withhold authority to vote for any individual nominee, write that nominee's name in the space provided below.) -------------------------------- ITEM 2: In their discretion upon such other business as may properly come before the meeting. THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS SPECIFIED WITH RESPECT TO THE MATTER DESIGNATED IN THE PROPOSAL NUMBERED (1). IF NO SPECIFICATION IS MADE, THE SHARES WILL BE VOTED "FOR ALL NOMINEES." This proxy revokes any proxy heretofore given. ------------------------------------------------- (L.S.) ---------------------------------------------, 1998 ------------------------------------------------- (L.S.) MONTH DAY Please sign exactly as name appears hereon. For joint accounts, all tenants should sign. Executors, Administrators, Trustees, etc., should so indicate when signing.
(continued on reverse side) - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 1998 ANNUAL SHAREHOLDERS MEETING RESERVATION Please sign and return if you plan to attend the Annual Meeting. (If you do not plan to attend, please leave blank.) --------------------------------------- Shareholder(s) --------------------------------------- --------------------------------------- Guest 20 MAP PROXY PROXY FOR ANNUAL MEETING OF SHAREHOLDERS -- MAY 5, 1998 THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS [MG&E LOGO] The undersigned Common Stock shareholder of MADISON GAS AND ELECTRIC COMPANY hereby appoints DAVID C. MEBANE and FRANK C. VONDRASEK, or either of them, as proxies with power of substitution, to represent and to vote all shares of stock the undersigned would be entitled to vote, at the Annual Meeting of Shareholders to be held in the Exhibition Hall at the Dane County Exposition Center, 1919 Expo Way, Madison, Wisconsin, on Tuesday, May 5, 1998, at 11:00 a.m., local time, and at all adjournments thereof. Shares represented by all properly executed proxies will be voted in accordance with instructions appearing on the proxy. IN THE ABSENCE OF SPECIFIC INSTRUCTIONS, PROXIES WILL BE VOTED IN ACCORDANCE WITH THE RECOMMENDATIONS OF THE BOARD OF DIRECTORS, AND IN THE DISCRETION OF THE PROXY HOLDERS AS TO ANY OTHER MATTERS THAT MAY PROPERLY COME BEFORE THE ANNUAL MEETING. PLEASE SIGN EXACTLY AS NAME(S) APPEAR ON THIS PROXY, AND DATE THIS PROXY. IF JOINT ACCOUNT, EACH JOINT OWNER SHOULD SIGN. IF SIGNING FOR A CORPORATION OR PARTNERSHIP OR AS AGENT, ATTORNEY, OR FIDUCIARY, INDICATE THE CAPACITY IN WHICH YOU ARE SIGNING. -----END PRIVACY-ENHANCED MESSAGE-----