<PAGE> 1
SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c) of the Securities
Exchange Act of 1934 (Amendment No. )
Check the appropriate box:
X Preliminary Information Statement
- ---
Confidential, for Use of the Commission Only
(as permitted by Rule 14c-5(d)(2))
- ---
Definitive information statement
- ---
WISCONSIN ELECTRIC POWER COMPANY
(Name of Registrant as Specified in Its Charter)
Payment of Filing Fee (Check the appropriate box):
X $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14c-5(g).
- ---
Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.
- ---
(1) Title of each class of securities to which transaction applies:
--------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
--------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined.)
--------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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<PAGE> 2
___ Fee paid previously with preliminary materials.
___ Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-----------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 3
April 26, 1996
Dear Stockholder:
Wisconsin Electric Power Company will hold its annual meeting of stockholders
at 9:00 a.m. on Tuesday, May 21, 1996 at the Public Service Building Annex,
333 West Everett Street, Milwaukee, Wisconsin. We are not soliciting proxies
for this meeting, as over 99% of Wisconsin Electric's voting stock is owned,
and will be voted, by its parent company, Wisconsin Energy Corporation. If
you wish, you may attend the meeting and vote your shares of preferred stock;
however, it will be a short business meeting only.
On behalf of the directors and officers of Wisconsin Energy, I invite you to
attend Wisconsin Energy's annual meeting to be held Wednesday, May 22, 1996 at
1:30 p.m. The Wisconsin Energy meeting will be held at the Bradley Center,
1001 North Fourth Street, in downtown Milwaukee. By attending this meeting,
you will have the opportunity to meet many of the Wisconsin Electric officers
and directors. Although you cannot vote your shares of Wisconsin Electric
preferred stock at the Wisconsin Energy meeting, you should find the
afternoon's activities to be worthwhile. You will be asked to register before
entering the meeting.
The annual report to stockholders accompanies this information statement. If
you have any questions about the material presented or would like a copy of
the Wisconsin Energy Corporation summary annual report, please call our toll-
free Stockholder Hotline at 1-800-558-9663.
Sincerely,
Richard A. Abdoo
Chairman of the Board
and Chief Executive Officer
[LOGO]
This document is printed on recycled paper.
<PAGE> 4
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
April 26, 1996
To the Stockholders of Wisconsin Electric Power Company:
The Annual Meeting of Stockholders of Wisconsin Electric Power Company will be
held at the Public Service Building Annex, 333 West Everett Street, Milwaukee,
Wisconsin, on Tuesday, May 21, 1996, at 9:00 a.m., for the following purposes:
1. To elect a Board of Directors to hold office until the 1997 Annual Meeting
of Stockholders;
2. To approve an amendment to the Restated Articles of Incorporation to
change the name of the company to Wisconsin Energy Company effective with
the consummation of the merger between Wisconsin Energy Corporation,
Wisconsin Electric's parent company, and Northern States Power Company;
and
3. To consider any other matters which may properly come before the meeting.
Stockholders of record at the close of business on March 21, 1996 will be
entitled to vote at the meeting.
By Order of the Board of Directors
/s/Ann Marie Brady
- ---------------------------------
Ann Marie Brady
Corporate Secretary and
Vice President - External Affairs
<PAGE> 5
WISCONSIN ELECTRIC POWER COMPANY
231 West Michigan Street
P.O. Box 2046
Milwaukee, Wisconsin 53201
INFORMATION STATEMENT
and
ANNUAL REPORT TO STOCKHOLDERS
----------------------------
INFORMATION STATEMENT
This information statement is being furnished to stockholders beginning on or
about April 26, 1996 in connection with the annual meeting of stockholders of
Wisconsin Electric Power Company ("Wisconsin Electric" or "WE") to be held on
May 21, 1996, at WE's Public Service Building Annex, 333 West Everett Street,
Milwaukee, Wisconsin, and all adjournments of the meeting, for the purposes
listed in the Notice of Annual Meeting of Stockholders. The WE annual report
to stockholders accompanies this information statement.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A
PROXY. However, you may vote your shares of preferred stock at the meeting.
VOTING SECURITIES
As of March 21, 1996, WE had outstanding 44,498 shares of Six Per Cent.
Preferred Stock; 260,000 shares of $100 par value 3.60% Serial Preferred
Stock; and 33,289,327 shares of common stock. Each outstanding share of each
class is entitled to one vote. Stockholders of record at the close of
business on March 21, 1996 will be entitled to vote at the meeting. A
majority of the votes entitled to be cast by the shares entitled to vote shall
constitute a quorum.
All of WE's outstanding common stock, representing over 99% of its voting
securities, is owned beneficially by its parent company, Wisconsin Energy
Corporation ("Wisconsin Energy" or "WEC"). A list of stockholders of record
entitled to vote at the meeting will be available for inspection by
stockholders at WE's principal business office at 231 West Michigan Street,
Milwaukee, Wisconsin, prior to and at the meeting.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANT
Price Waterhouse LLP has acted as independent public accountant for WE or its
predecessor continuously since 1932, and was appointed by Wisconsin Energy's
board of directors to serve as independent public accountant of WEC and its
subsidiaries, including WE, during the current year. Representatives of the
firm will not attend the annual meeting, but will be present at Wisconsin
Energy's annual meeting on May 22, 1996 to make any statement they may
consider appropriate and to respond to questions which may be directed to
them.
1
<PAGE> 6
THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors is responsible for overseeing the performance of WE.
In 1995 the Board held eight meetings. The average attendance of all
directors for Board and committee meetings was 97%.
Effective March 1, 1996, Director Remmel retired from the Board and the Board
decreased the number of directors to nine. Also, Director Udell has indicated
his intention to retire as a director effective with the end of his present
term which expires at the 1996 Annual Meeting and the Board has approved a
reduction in the size of the Board to eight members effective with this
retirement.
WE has an Executive Committee, Compensation Committee and a Finance Committee;
it does not have audit or nominating committees. The Executive Committee,
which did not meet in 1995, may exercise all of the powers vested in the Board
during periods between Board meetings except action regarding dividends or
other distributions to stockholders, the filling of vacancies on the Board and
other powers which by law may not be delegated to a committee. Directors
Abdoo, Grigg, Ahearne, Cornog, Johnson and Stratton are regular members of the
Executive Committee; all other directors are alternate members. The
Compensation Committee, which met five times in 1995, identifies through
succession planning potential executive officers of WE and provides a
competitive, performance-based executive and director compensation program
that enables WE to attract and retain key individuals and to motivate them to
achieve WE's short and long-term goals. Directors Ahearne, Bergstrom, Cornog
and Udell are members of the Compensation Committee. The Finance Committee,
which met six times in 1995, may take or authorize all necessary actions to
effect financings, refinancings and refundings pursuant to financing plans
approved by the Board of Directors, thus enhancing the Company's ability to
act quickly with respect to certain financing matters when market conditions
warrant. Through March 1, 1996, Directors Udell, Grigg and Remmel were
members of the Finance Committee; effective with Mr. Remmel's retirement on
March 1, 1996, Director Porter was appointed a member of the committee.
ELECTION OF DIRECTORS
At the 1996 annual meeting, there will be an election of eight directors to
hold office for a term of one year and until they are reelected or until their
respective successors are duly elected and qualified. Directors are elected
by a plurality of the votes cast by the shares entitled to vote in the
election at a meeting at which a quorum is present. "Plurality" means that
the individuals who receive the largest number of votes are elected as
directors up to the maximum number of directors to be chosen in the election.
Therefore, any shares not voted, whether by withheld authority, broker non-
vote or otherwise, have no effect in the election of directors.
The nominees named below have consented to being nominated and to serve if
elected. The Board of Directors does not expect that any of the nominees will
become unavailable for any reason. If that should occur before the meeting,
another nominee or nominees may be selected by the WE Board of Directors.
Biographical information regarding each nominee is shown below. Ages are
shown as of December 31, 1995.
2
<PAGE> 7
Information Concerning Nominees (For Terms Expiring in 1997)
RICHARD A. ABDOO. Age 51. Chairman of the Board, President and Chief
Executive Officer of WEC since 1991. Chairman of the Board and Chief
Executive Officer of Wisconsin Electric, WEC's principal subsidiary, since
1990. Executive Vice President of WEC from January 1990 to May 1991.
Director of WEC since 1988. Director of Wisconsin Electric since 1989.
Chairman of the Board and Chief Executive Officer of Wisconsin Natural Gas
Company ("Wisconsin Natural" or "WN"), WEC's gas utility subsidiary which was
merged into Wisconsin Electric effective January 1, 1996, from 1990 to 1995.
Director of Wisconsin Natural from 1989 to 1995. Director of Marshall &
Ilsley Corporation and United Wisconsin Services, Inc.
JOHN F. AHEARNE. Age 61. Director of the Sigma Xi Center for Sigma Xi, The
Scientific Research Society, an organization that provides grants to graduate
students and conducts national meetings on major scientific issues, since
1989. Adjunct Scholar of Resources for the Future, an economic research, non-
profit institute, since 1993. Lecturer, Duke University, since 1995. Vice
President and Senior Fellow of Resources for the Future from 1984 to 1993.
Commissioner of the United States Nuclear Regulatory Commission from 1978 to
1983, serving as its Chairman from 1979 to 1981. Member, National Academy of
Engineers. Director of WEC and Wisconsin Electric since 1994.
JOHN F. BERGSTROM. Age 49. President and Chief Executive Officer of
Bergstrom Corporation since 1974; Bergstrom Corporation owns and operates
numerous automobile dealerships, three hotels, a convention center and a real
estate company. Director of WEC since 1987. Director of Wisconsin Electric
since 1985. Director of First National Bank-Fox Valley, Kimberly-Clark
Corporation, Midwest Express Holdings, Inc., Universal Foods Corporation and
The Green Bay Packers, Inc.
ROBERT A. CORNOG. Age 55. Chairman of the Board, President and Chief
Executive Officer of Snap-on Incorporated, a tool manufacturer, since 1991.
President of Macwhyte Company, a maker of wire rope and a subsidiary of Amsted
Industries, from 1981 to 1991. Director of WEC since 1993. Director of
Wisconsin Electric since 1994. Director of Snap-on Incorporated and Johnson
Controls, Inc.
RICHARD R. GRIGG. Age 47. Vice President of WEC and President and Chief
Operating Officer of Wisconsin Electric since January 1995. President and
Chief Operating Officer of Wisconsin Natural during 1995. Group Executive and
Vice President of Wisconsin Electric from June to December 1994. Vice
President of Wisconsin Electric from 1990 to 1994. Director of WEC since May
1995. Director of Wisconsin Electric since 1994. Director of Wisconsin
Natural during 1995.
GENEVA B. JOHNSON. Age 66. Corporate Director. Former President and Chief
Executive Officer of Family Service America, an organization representing
private agencies in the United States and Canada that provide human service
programs, from 1983 to 1994. Director of WEC and Wisconsin Electric since
1988. Director of Firstar Bank Milwaukee, N.A.
DAVID K. PORTER. Age 52. Senior Vice President of WE since 1989. Vice
President of Wisconsin Natural from 1989 to 1995. Director of WE since 1989.
Director of Wisconsin Natural from 1988 to 1995.
3
<PAGE> 8
FREDERICK P. STRATTON, JR. Age 56. Chairman and Chief Executive Officer of
Briggs & Stratton Corporation, a manufacturer of small gasoline engines, since
1986. Director of WEC since 1987. Director of Wisconsin Electric since 1986.
Director of Briggs & Stratton Corporation, Banc One Corporation, Midwest
Express Holdings, Inc. and Weyco Group, Inc.
PROPOSAL TO AMEND THE RESTATED ARTICLES OF INCORPORATION TO CHANGE THE NAME OF
THE COMPANY
In view of recent changes in Wisconsin Electric's business as a result of the
merger of Wisconsin Natural into WE and as contemplated in connection with the
proposed merger transaction between WE's parent, Wisconsin Energy, and
Northern States Power Company ("NSP"), anticipated to be consummated by
January 1, 1997, subject to obtaining all requisite regulatory approvals, the
Board is recommending for stockholder approval an amendment to the Restated
Articles of Incorporation (the "Restated Articles") changing the name of
Wisconsin Electric to "Wisconsin Energy Company", effective upon consummation
of the WEC/NSP transaction. Changing Wisconsin Electric's name will not alter
any of the rights of WE stockholders.
On January 1, 1996, the merger of WN into Wisconsin Electric was completed.
Upon consummation of that merger, in addition to continuing to be engaged in
its historical electric utility operations, WE also became engaged in the
historical gas utility operations of WN, including the purchase, storage,
distribution and sale of natural gas to retail customers and the
transportation of customer-owned gas. In contemplation of the WN/WE merger,
in 1994 WE stockholders approved an amendment to the then Restated Articles
eliminating a reference to electric and steam operations so as to avoid an
incomplete description of WE's business after consummation of that merger.
The proposed name change amendment is a further step to publicly convey that
WE's business involves more than electric operations.
In addition, upon consummation of the WEC/NSP merger transaction, Wisconsin
Energy will be renamed Primergy Corporation. Given the availability of the
"Wisconsin Energy" name upon completion of that transaction and its
recognition within and without the State of Wisconsin, in their merger
agreement, WEC and NSP agreed that upon consummation of the transaction
Wisconsin Electric would begin operating under the name of Wisconsin Energy
Company. Should the merger transaction between WEC and NSP not be consummated,
WEC will not file the proposed amendment with the Wisconsin Department of
Financial Institutions and it will therefore not become effective.
The proposed amendment to the Restated Articles is as follows (material to be
deleted is shown in brackets [ ] and new material is shown in BOLD FACE):
ARTICLE I. NAME
The name of such corporation is [WISCONSIN ELECTRIC POWER COMPANY] "WISCONSIN
ENERGY COMPANY."
Approval of this proposal will require the affirmative vote of a majority of
all the votes entitled to be cast on the proposal by the holders of the
outstanding shares of WE's common stock, Six Per Cent. Preferred Stock and
$100 par value 3.60% Serial Preferred Stock, voting together as one voting
group. Abstentions and broker non-votes will have the same effect as votes
cast against approval of the proposal. Since the WEC Board of Directors has
indicated its intention to vote all of the outstanding shares of WE common
stock for the proposal, approval of the proposal is assured.
4
<PAGE> 9
OTHER MATTERS
The Board of Directors is not aware of any other matters which may properly
come before the meeting. The WE Bylaws set forth the requirements that must
be followed should a stockholder wish to propose any floor nominations for
director or floor proposals at annual or special meetings of stockholders. In
the case of annual meetings, the Bylaws state, among other things, that notice
and certain other documentation must be provided to WE at least 70 days and
not more than 100 days before the scheduled date of the annual meeting. No
such notices have been received by WE.
STOCK OWNERSHIP OF DIRECTORS, NOMINEES AND EXECUTIVE OFFICERS
WE directors, nominees and executive officers as a group (18 persons) do not
own any of WE's stock, but do own 91,516 shares of common stock of its parent
company, Wisconsin Energy (less than 1% of total WEC common stock
outstanding). The following table lists the beneficial ownership of WEC
common stock (as well as the phantom common stock shares) of each director,
nominee and executive officer named in the Summary Compensation Table below,
as of February 29, 1996. Included are shares owned by each individual's
spouse, minor children or any other relative sharing the same residence, as
well as shares held in a fiduciary capacity or held in WEC's Stock Plus
Investment Plan and Wisconsin Electric's Management Employee Savings Plan
("MESP").
Number Number
of of
Name Shares(1) Name Shares(1)
-------------------- ------ ------------------------- ------
Richard A. Abdoo 18,636 Geneva B. Johnson 2,569
John F. Ahearne 395 David K. Porter 9,576
John F. Bergstrom 5,098 Jerry G. Remmel 6,917
Francis Brzezinski 2,730 Frederick P. Stratton, Jr. 5,718
Robert A. Cornog 2,473 Jon G. Udell (2) 6,679
Richard R. Grigg, Jr. 3,001
(1) Share units held in the WEC phantom common stock account under WEC's
Directors' Deferred Compensation Plan or Executive Deferred Compensation
Plan are: Mr. Abdoo (3,040), Mr. Bergstrom (2,098), Mr. Brzezinski
(754), Mr. Cornog (183), Mr. Grigg (106), Mrs. Johnson (287), Mr. Porter
(186), and Mr. Stratton (418). Share units are intended to reflect the
performance of WEC common stock and are payable in cash.
(2) Dr. Udell disclaims beneficial ownership of 2,803 of such shares.
Each person has sole voting and investment power as to all shares listed for
such person (other than the phantom common stock share units indicated above)
except that the following persons have shared voting and/or investment power
as to the indicated number of shares so listed: Mr. Brzezinski (176), Mr.
Stratton (3,300), Dr. Udell (2,803) and all directors and executive officers
as a group (9,340).
Information on beneficially owned shares is based on data furnished by the
specified persons and is determined in accordance with Rule 13d-3 under the
Securities Exchange Act of 1934, as required for purposes of this information
statement. It is not necessarily to be construed as an admission of
beneficial ownership for other purposes.
5
<PAGE> 10
COMPENSATION
Directors' Compensation
In order to more closely link directors' pay to performance and to align the
Board's interests with stockholders, effective January 1, 1996, the Board
determined that a portion of directors' fees will be paid in WEC common stock.
Directors can elect to receive the fee in common stock or invest the fee in
the WEC phantom common stock account under the Directors' Deferred
Compensation Plan.
During 1995, each nonemployee director received an annual retainer fee of
$18,000 (effective January 1, 1996, one-half of this fee shall be paid in WEC
common stock and the other half is to be paid in cash) plus an attendance fee
of $1,000 for each Board or committee meeting attended (effective January 1,
1996, the attendance fee was increased to $1,250 for each Board or committee
meeting attended). In addition, a per diem fee of $1,000 for travel on
company business is paid for each day on which a Board or committee meeting is
not also held. Nonemployee directors are also paid $300 for each signed,
written unanimous consent in lieu of a meeting. Non-employee chairs of the
committees of the Board received a quarterly committee chair retainer of
$1,250. Employee directors receive no directors' fees. Although certain WE
directors also serve on WEC's board and compensation committee, only single
fees are paid for meetings held by both boards or committees on the same day.
In these cases, fees are allocated between WE and WEC based on services
rendered.
Nonemployee directors may defer fees so long as they serve on the Board of WE
and/or its affiliates pursuant to the Directors' Deferred Compensation Plan.
Under the plan, fees may be deferred into an account which accrues interest
semiannually at the prime rate or into a WEC phantom common stock account, the
value of which will appreciate or depreciate based on the market performance
of such stock, as well as through the accumulation of any reinvested
dividends. Such deferral amounts are credited to such accounts in the name of
each participating director on the books of WE, are unsecured and are payable
only in cash following termination of the director's service to WE. Such
amounts will be paid out of the general corporate assets or the trust
described under "Retirement Plans" in this information statement.
EXECUTIVE OFFICERS' COMPENSATION
The following table summarizes certain information concerning compensation
awarded to, earned by or paid to WE's Chief Executive Officer and each of WE's
other four most highly compensated executive officers (who are also the CEO
and other most highly compensated officers of WEC) for services in all
capacities to WEC and its subsidiaries, including WE, for the last three
fiscal years. The amounts shown in this and all subsequent tables in this
information statement are WEC consolidated compensation data. The portion of
time devoted by each officer to WE in 1995, as determined by the percent of
time each officer worked for WE versus the other affiliated companies, is as
follows: Mr. Abdoo (81%), Mr. Grigg (93%), Mr. Remmel (70%), Mr. Brzezinski
(53%) and Mr. Porter (90%).
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<PAGE> 11
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long-Term
Compensation
------------
Awards
Annual Compensation ------------
-------------------------------- Securities
Other Annual Underlying All Other
Name and Principal Position WE Year Salary Bonus Compensation Options/SARs Compensation
($) ($) ($) (#) (1) ($) (2)
- ----------------------------------- ---- ------- ------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
RICHARD A. ABDOO
Chairman of the Board and 1995 496,000 232,000 8,321 38,000 83,858
Chief Executive Officer 1994 450,000 222,396 0 25,000 15,970
1993 450,000 122,000 0 22,500 15,170
- ------------------------------------ ---- ------- ------- ------------ ------------ -------------
RICHARD R. GRIGG
President and 1995 237,500 63,788 3,084 19,000 42,125
Chief Operating Officer 1994 168,333 46,667 0 6,500 11,000
1993 147,833 25,000 0 6,500 8,000
- ------------------------------------ ---- ------- ------- ------------ ------------ -------------
JERRY G. REMMEL
Chief Financial Officer 1995 215,000 60,953 0 0 7,798
1994 215,000 66,009 0 0 7,481
1993 190,000 41,000 0 0 6,406
- ------------------------------------ ---- ------- ------- ------------ ------------ -------------
FRANCIS BRZEZINSKI
Vice President- Business 1995 225,000 25,515 80,532(3) 7,600 17,051
Development 1994 212,000 26,037 0 6,500 7,478
1993 206,167 22,500 0 6,500 7,058
- ------------------------------------ ---- ------- ------- ------------ ------------ -------------
DAVID K. PORTER
Senior Vice President 1995 190,000 46,170 0 7,600 21,766
1994 190,000 58,333 0 3,000 6,695
1993 185,000 20,000 0 6,500 6,242
- ------------------------------------ ---- ------- ------- ------------ ------------ -------------
</TABLE>
(1) Grants of options were in combination with contingent dividend
awards, as described in the table entitled "Long-Term Incentive Plans--
Awards in Last Fiscal Year". No stock appreciation rights ("SARs") were
awarded during any of the fiscal years indicated.
(2) All Other Compensation for 1995 for Messrs. Abdoo, Grigg, Remmel,
Brzezinski and Porter, respectively, includes: (i) employer matching of
contributions by each named executive into the MESP in the amount of
$4,620 for each named executive officer, (ii) "make whole" payments under
the Executive Deferred Compensation Plan with respect to matching in the
MESP on deferred salary or salary received but not otherwise eligible for
matching in the amounts of $10,260, $2,505, $1,830, $2,130 and $1,080,
respectively, and (iii) the full dollar value of life insurance premiums
in the amounts of $68,978, $35,000, $1,348, $10,301 and $16,066,
respectively (for 1995, in order to provide the same benefit at reduced
cost to WE, a split-dollar life insurance program was established to
replace the previous term life insurance program; Mr. Remmel continued to
participate in the term life program).
(3) Includes $41,893 for club memberships; the balance is for related tax
gross-up payments.
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<PAGE> 12
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
| Grant Date
Individual Grants (1) | Value
--------------------------------------------------|-------------
Percent of
Number of Total
Securities Options/SARs Exercise
Underlying Granted to or Base Grant Date
Options/SARs Employees in Price Expiration Present
Name Granted(#) Fiscal Year ($/Sh) Date Value($)(2)
- ------------------ ------------ ------------ -------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Richard A. Abdoo 38,000 20.0% 30.188 12/19/05 184,680
Richard R. Grigg 19,000 10.0 30.188 12/19/05 92,340
Jerry G. Remmel 0 N/A N/A N/A N/A
Francis Brzezinski 7,600 4.0% 30.188 12/19/05 36,936
David K. Porter 7,600 4.0% 30.188 12/19/05 36,936
N/A = Not Applicable
</TABLE>
(1) Consists of incentive and non-qualified stock options to purchase
shares of WEC common stock granted pursuant to WEC's 1993 Omnibus Stock
Incentive Plan ("OSIP") on December 20, 1995. These options were granted
with an equal number of contingent dividend awards (as described in the
table entitled "Long-Term Incentive Plans--Awards in Last Fiscal Year"),
have exercise prices equal to the fair market value of the WEC shares on
the date of grant and first become exercisable on December 20, 1999, at
which time they become fully exercisable. Upon a "change in control" of
WEC, as defined in the OSIP, or upon retirement, permanent total
disability or death of the option holder, these options shall become
immediately exercisable. The above executive officers who were granted
stock options and contingent dividend awards on December 20, 1995 have
agreed that the proposed merger with NSP will not be considered a change
in control of WEC as to such grants. Each of the above executive
officers receiving awards under the OSIP has also waived the
applicability of the OSIP's change in control provisions to the proposed
merger with NSP for outstanding options and contingent dividend awards
granted prior to December 20, 1995. These options were granted for a
term of ten years, subject to earlier termination in certain events
related to termination of employment. In the discretion of the WEC
compensation committee, the exercise price may be paid by delivery of
already owned shares and tax withholding obligations related to exercise
may be satisfied by withholding shares otherwise deliverable upon
exercise, subject to certain conditions. Subject to the limitations of
the OSIP, the WEC compensation committee has the power with the
participant's consent to modify or waive the restrictions on vesting of
these options, to amend these options and to grant extensions or to
accelerate these options.
(2) The Black-Scholes option pricing model was used to determine the
options' grant date present value. The assumptions used in the Black-
Scholes equation are: market price of stock: $30.188; exercise price of
option: $30.188; stock volatility: 0.12; annualized risk-free interest
rate: 7.5%; exercise at the end of 10 year option term; and dividend
yield: 5.02%. WEC's use of this model should not be construed as an
endorsement of its accuracy. Whether the model's assumptions will prove
to be accurate cannot be known at the date of grant. The ultimate value
of the options, if any, will depend upon the future value of the WEC
common stock, which cannot be forecast with reasonable accuracy, and the
optionee's investment decisions.
8
<PAGE> 13
No stock options other than those granted pursuant to the OSIP were
outstanding in the last fiscal year. The earliest date outstanding options
previously granted under the OSIP become exercisable is December 15, 1997.
Consequently, no options were exercisable in 1995. The following table sets
forth the number of options which were not exercisable and the value of such
options based upon the difference between the exercise price and the market
price of the underlying shares as of December 31, 1995.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
Number of Securities Underlying Value of Unexercised In-the-Money
Unexercised Options/SARs Options/SARs
at Fiscal Year-End at Fiscal Year-End
(#) ($)
------------------------------- ---------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ------------------ ------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Richard A. Abdoo 0 85,500 0 185,031
Richard R. Grigg 0 32,000 0 54,206
Jerry G. Remmel N/A N/A N/A N/A
Francis Brzezinski 0 20,600 0 49,224
David K. Porter 0 17,100 0 35,882
N/A = Not Applicable
</TABLE>
The following table further describes the long-term incentive awards made
during 1995:
<TABLE>
LONG-TERM INCENTIVE PLANS--AWARDS IN LAST FISCAL YEAR
<CAPTION>
Estimated Future
Payouts Under
Performance Non-Stock
Number of or Other Price-Based Plans
Shares, Units Period Until -------------------
or Other Maturation Target
Name Rights(#)(1) or Payout ($ or #) (2)
- ------------------ ------------- ------------- -------------------
<S> <C> <C> <C>
Richard A. Abdoo 38,000 12/19/99 $237,310
Richard R. Grigg 19,000 12/19/99 $118,655
Jerry G. Remmel 0 N/A N/A
Francis Brzezinski 7,600 12/19/99 $47,462
David K. Porter 7,600 12/19/99 $47,462
N/A = Not Applicable
</TABLE>
(1) Consists of performance units awarded under the OSIP in combination
with stock options (as described in the table entitled "Option/SAR Grants
in Last Fiscal Year" above). These performance units, entirely in the
form of contingent dividends, will be paid if total shareholder return
(appreciation in the value of WEC common stock plus reinvested dividends)
over a four year period ending December 19, 1999 equals or exceeds the
median return earned by the companies included in the Peer Group Index in
the "Performance Graphs" section of WEC's proxy statement for the 1996
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WEC Annual Meeting, except that there will be no payout if WEC's total
shareholder return is negative over the course of such period. If
payable, each participant shall receive an amount equal to the actual
dividends paid on WEC common stock for the period of December 20, 1995
through December 19, 1999 multiplied by the number of performance units
awarded to such participant. Upon a "change in control" of WEC, as
defined in the OSIP, this benefit shall immediately vest with all
performance goals deemed fully achieved. As described in footnote 1 to
the table entitled "Option/SAR Grants in Last Fiscal Year", WEC's
proposed merger with NSP does not constitute a change in control under
the OSIP with respect to any outstanding contingent dividends granted to
the above executive officers.
(2) Assumes, for purposes of illustration only, 4% per year compound
annual dividend increase based on the current quarterly dividend rate.
SEVERANCE POLICY. Effective on April 28, 1995, the WEC board adopted a Senior
Executive Severance Policy ("Severance Policy") providing for severance
benefits to certain WE executive officers (including Messrs. Grigg, Brzezinski
and Porter) and key employees. The Severance Policy was adopted to encourage
such persons, whose expertise has been important to WE's success, to remain
with WE during the WEC/NSP merger transition process. The Severance Policy
provides for payment of severance to participants whose employment is
terminated under certain circumstances (e.g., terminations by WE that are
other than for cause, disability or retirement, terminations resulting from
certain sales of a business by WE, and terminations resulting from reductions
in participants' salaries, responsibilities or benefits) at any time before
(i) the second anniversary of the effective time of the merger with NSP if the
transaction is consummated or (ii) if the transaction is not consummated,
April 28, 2000, unless further extended by the Board.
The severance benefits under the Severance Policy consist of: (i) three years'
salary and annual incentive compensation; (ii) payment of the actuarial
equivalent of the additional retirement benefits the participant would have
earned if he or she had remained employed for three more years; (iii)
continued medical, dental and life insurance coverage for three years; (iv)
outplacement services or the use of office space and support; and (v)
financial planning counseling.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
COMPENSATION PHILOSOPHY AND OBJECTIVES. The Compensation Committee, which is
composed entirely of independent non-employee directors, is responsible for
making decisions regarding succession planning and executive compensation.
The Committee, which functions as a combined Compensation Committee for WE and
WEC, seeks to provide a competitive, performance-based executive compensation
program that enables WE to attract and retain key individuals and motivate
them to achieve WE's short and long-term goals. The Committee regularly re-
examines its compensation philosophy to determine if the executive
compensation package is effective in helping WE achieve its corporate
objectives.
The Committee believes that a substantial portion of overall executive
compensation should be at risk, dependent on achievement of individual and
corporate goals that are aligned with the interests of WEC's and WE's
stockholders and customers. As a result, compensation for executives will
vary from year to year, based upon the level of achievement of operating,
financial, safety, environmental stewardship, customer satisfaction and other
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performance goals. Superior performance will be rewarded with above-average
compensation; below-average performance will yield below-average compensation.
The Committee employs a nationally recognized compensation consultant, Towers
Perrin, to advise it on matters relating to the administration and design of
WE's executive compensation program. The consultant provides the Committee
with competitive information regarding compensation levels, practices and
trends within the industry.
In determining competitive compensation for WE's officer positions, the
Committee relies primarily on an analysis of compensation practices for the
companies included in the industry peer group used to compare investment
performance in WEC's proxy statement for the 1996 WEC Annual Meeting ("Peer
Group"). The Committee relies secondarily on a broader analysis of
compensation data from a survey of approximately 100 utilities conducted by
the Edison Electric Institute ("EEI"). The Committee reviews both peer group
specific and broader industry pay practices to be fully informed of industry
compensation levels. The Committee does not mathematically average the data
from the two analyses but, rather, considers them as separate reads of the
external market.
As part of the Committee's efforts to continually re-examine its compensation
philosophy, the Committee is presently modifying the peer group for 1996
compensation determinations to include a broader group of general industrial
companies. In view of WEC's proposed merger with Northern States Power
Company ("NSP") to form Primergy Corporation, the Committee is also
considering present compensation practices for NSP executives and expected
compensation levels for executives of Primergy Corporation.
ELEMENTS OF COMPENSATION. The 1995 compensation of WE's executives primarily
consisted of three elements: base salary, annual incentive compensation and
long-term incentive compensation. The Committee's basis for determining
appropriate levels of executive compensation for 1995 for each of these
elements is described below. Specific values of 1995 compensation for the
Chief Executive Officer and each of WE's other four most highly compensated
officers are included in the "Summary Compensation Table" provided in this
information statement.
BASE SALARY. In determining appropriate executive base salaries, the
Committee considered factors such as individual experience, performance and
potential, changes in duties and responsibilities, economic conditions in the
utility service areas, financial success of WEC (measured in terms of such
factors as total shareholder return versus t he Peer Group, earnings per share
on WEC common stock and continuity of WEC's dividend payment), customer
satisfaction, the outstanding reputation of WE's utility operations,
competitiveness of utility service rates and impact of re-engineering and cost
control achievements. In addition, the Committee reviewed executive
compensation practices for comparable positions at companies within the Peer
Group, as well as the broader group of utilities in the EEI database. The
Committee weights these factors substantially equally. In general, base
salaries are targeted at or near the 50th percentile of the Peer Group.
ANNUAL INCENTIVE COMPENSATION. The Committee administers WEC's Short-Term
Performance Plan ("STPP") which provides annual cash incentive opportunities
to executive officers and key employees. The STPP is designed to promote the
achievement of customer and shareholder-focused objectives of WEC and its
subsidiaries, including WE, while recognizing individual and team performance
of participants.
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Annual incentive compensation awards are targeted at approximately the 50th
percentile of industry pay practices. In 1995, target incentive awards were
set for participants and ranged from 15% to 45% of base salary. Each
executive is eligible to receive an award if pre-established corporate
performance goals are met. Awards may be increased by up to 25% of targeted
amounts or reduced to zero based on individual and team performance.
Performance goals for 1995 were 60% financial and 40% operational. Financial
goals focused on achievement of tar get net income levels. Operational goals
were related to total shareholder return versus WEC's Peer Group, safety of
nuclear operations, achievement of operating income targets, customer
satisfaction, revenue growth, and environmental stewardship.
Based on attainment of the above-named performance measures, the Committee
granted awards under the STPP for 1995 ranging from 11% to 38% of base salary.
LONG-TERM INCENTIVE COMPENSATION. The Committee administers WEC's 1993
Omnibus Stock Incentive Plan ("OSIP"), a long-term incentive plan designed to
link the interests of executives and key employees to long-term shareholder
value. The OSIP allows WEC to grant stock options, stock appreciation rights,
stock awards and performance units to participants. Equity interests in WEC
common stock enable participants to share in the appreciation of the value of
WEC common stock and provide an incentive for managing the continued
performance and value of WE. Long-term incentive awards are targeted at the
90th percentile of the industry grant practices.
In view of the Committee's desire to provide long-term incentive compensation
to a greater number of employees, the Committee increased the number of
participants in the OSIP compared to last year. For 1995, awards in the form
of stock options and performance dividend units were granted to each of six
groups of OSIP participants. The stock option and performance unit grants
ranged from 1,900 to 38,000 shares and related dividend performance units; the
grant level was dependent on each participant's role in influencing the
achievement of long-term performance goals.
The Committee believes that an important adjunct to the long-term incentive
program is significant stock ownership by participants. Accordingly, as a
condition of participating in the OSIP, the Committee has implemented stock
ownership guidelines for participants.
CHIEF EXECUTIVE OFFICER COMPENSATION. Performance and compensation of the
Chief Executive Officer are of particular importance to the Committee. Mr.
Abdoo's performance was evaluated by the Committee and compensation was
determined in accordance with the executive compensation policies described
above.
A new procedure was instituted in 1995, whereby the Compensation Committee
chairman requested that outside directors provide a written evaluation of the
CEO's performance. A summary of the directors' feedback was discussed by
Committee members as part of its compensation determinations and has been
shared with the CEO.
With respect to base salary, in recognition of the leadership provided by the
Chief Executive Officer in shaping and guiding a financially strong
organization that is able to provide quality services to its customers at
competitive prices, as well as his role in positioning WE to take advantage of
a deregulated utility environment, and in consideration of competitive salary
data, the Committee set Mr. Abdoo's consolidated base salary at $496,000. Mr.
Abdoo's base salary approximates the 50th percentile of the Peer Group.
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With respect to annual incentive compensation for fiscal year 1995, the
Compensation Committee awarded Mr. Abdoo the annual incentive award set forth
in the "Bonus" column of the Summary Compensation Table. In this regard, the
Committee established his 1995 STPP target award level at 45% of base salary.
The Committee's evaluation of Mr. Abdoo's 1995 performance resulted in an
award under the STPP of $172,000 or 35% of base salary. The award was based
upon the Company's actual performance versus the specific company-wide
operational and financial performance goals cited above in the Annual
Incentive Compensation section.
In determining Mr. Abdoo's 1995 STPP award, the Committee specifically noted
several accomplishments by the CEO during 1995, including (i) WEC's continued
strong financial reputation, noting that earnings per share of WEC common
stock for 1995 were at record levels, (ii) the completion of the merger of
WEC's electric and gas utilities which resulted in significant savings through
the elimination of administrative overheads and other economies, (iii) the
achievement of record earnings related to Wisconsin Natural, (iv) his
leadership with respect to nuclear operations, noting that the exemplary
operational performance of nuclear plant personnel earned a "1" rating from
the Institute of Nuclear Power Operations for the first time in the life of
the plant, (v) his leadership role in maintaining solid relationships with
regulatory agencies, (vi) his strong support of environmental stewardship,
noting that two of WE's environmental projects, involving purchase and
protection of 14,000 acres of threatened rain forest in Belize and replacement
of outdated, heavily-polluting boilers in Decin, Czech Republic with new,
more-efficient equipment, were among only seven projects selected under the
U.S. Initiative on Joint Implementation, a federal multi-agency group working
to promote voluntary and cooperative partnerships leading to the
implementation of projects that reduce, avoid or capture carbon dioxide
emissions, (vii) the continued development of glass aggregate technology by
WEC's subsidiary, Minergy Corp., (viii) his consistent support of equal
opportunity, diversity and cross cultural sensitivity within WEC, and (ix) his
leadership of management and represented employees in guiding them to
implement productivity improvements that will enable WE to become the low-cost
energy provider in the upper midwest region. Mr. Abdoo's award was
principally determined by achievement of the company-wide goals and was
adjusted based on individual performance. The Committee weighted the
performance goals as cited above in the Annual Incentive Compensation section.
The Committee also approved a bonus of $60,000 for Mr. Abdoo (included in the
"Bonus" column of the Summary Compensation Table) in recognition of his
successful negotiation of the proposed merger of WEC and NSP to form Primergy
Corporation, as well as the CEO's visionary efforts to restructure the
electric utility industry.
With respect to the OSIP, in keeping with the Compensation Committee's
philosophy as stated above, Mr. Abdoo was awarded stock options and related
dividend performance units in 1995 as set forth in the "Long-Term Compensation
Awards" column of the Summary Compensation Table to specifically link a
portion of his compensation to the achievement of WE's longer term goals. The
award of dividend performance units will be paid if total shareholder return
(appreciation in the value of WEC common stock plus reinvested dividends) over
a four year period ending December 19, 1999 equals or exceeds the median
return earned by the Peer Group, except that there will be no payout if WEC's
total shareholder return is negative over the course of such period.
The Committee also applied subjective judgment in evaluating the relative
importance of the factors which were the basis for determining each element of
Mr. Abdoo's compensation to precisely determine his salary and awards.
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COMPLIANCE WITH TAX REGULATIONS REGARDING EXECUTIVE COMPENSATION. Section
162(m) of the Internal Revenue Code generally disallows a tax deduction to
public companies for compensation over $1 million paid to the corporation's
chief executive officer and the other executive officers named in the Summary
Compensation Table. Qualifying performance-based compensation will not be
subject to the deduction limit if certain requirements are met. WE's
executive compensation program, as presently constructed, is not likely to
generate non-deductible compensation in excess of these limits. The Committee
will continue to review these tax regulations as they apply to WE's executive
compensation program. It is the Committee's intent to preserve the
deductibility of executive compensation to the extent reasonably practicable
and to the extent consistent with its other compensation objectives.
Respectfully submitted to WE's stockholders by the Compensation Committee of
the Board of Directors.
Robert A. Cornog, Committee Chair
John F. Ahearne
John F. Bergstrom
Jon G. Udell
RETIREMENT PLANS
During 1995, WE maintained a retirement plan for management employees,
including WE executive officers. The plan provided retirement income based on
years of credited service and final average compensation for the 36 highest
consecutive months. Retirement benefits were not subject to any deduction for
Social Security or other offset, since they were computed using a step-rate
formula which provided a Social Security integrated benefit based on
percentages of the participant's final average compensation for up to 30 years
of credited service with additional (lower) percentages of compensation in
excess of 30 years, up to a maximum of 10 years. WE amended the retirement
plan, generally effective as of January 1, 1996, to adopt a cash balance
retirement formula, which bases a participant's defined benefit pension on the
value of a hypothetical account balance. A participant's starting account
balance equals the present value of the prior step-rate formula's life annuity
benefit payable at age 65. The account balance is thereafter increased by
annual additions equal to a percentage of pay, interest credits, and a one-
time special transition credit. Those individuals who were participants in
the plan on December 31, 1995 are in no event to receive any less than what
would have been provided under the prior formula had it continued, if they
terminate on or before January 1, 2011.
The following table shows the estimated life annuity annual pension benefits
payable upon retirement to persons in various compensation and
years-of-service classifications, during 1995, based on the prior plan formula
before the change to the cash balance approach:
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PENSION PLAN TABLE
Years of Service
----------------------------------------------------------
Remuneration 15 20 25 30 35 40
- ------------ -------- -------- -------- -------- -------- --------
$ 50,000 $ 11,077 $ 14,770 $ 18,462 $ 22,154 $ 24,281 $ 26,408
100,000 24,014 32,018 40,023 48,028 52,592 57,157
150,000 36,952 49,270 61,587 73,904 80,882 87,908
200,000 49,889 66,518 83,148 99,778 109,217 118,657
250,000 62,825 83,767 104,709 125,651 137,528 149,405
300,000 75,764 101,018 126,273 151,528 165,842 180,157
400,000 101,639 135,518 169,398 203,278 222,467 241,657
500,000 127,514 170,018 212,523 255,028 279,092 303,157
600,000 153,389 204,518 255,648 306,778 335,717 364,657
700,000 179,264 239,018 298,773 358,528 392,342 426,157
800,000 205,139 273,518 341,898 410,278 448,967 487,657
900,000 231,014 308,018 385,023 462,028 505,592 549,157
The compensation for the individuals listed in the Summary Compensation Table
in the columns labeled "Salary" and "Bonus" is virtually equivalent to the
compensation considered for purposes of the retirement plans and the various
supplemental plans. Messrs. Abdoo, Grigg, Brzezinski and Porter currently
have 20, 25, 6 and 26 credited years of service, respectively. Mr. Remmel
retired effective March 1, 1996 with 40 years of credited service. The
Supplemental Executive Retirement Plan (described below) provides designated
participants a "make whole" benefit equal to any decrease in pension which may
have resulted when the retirement plans adopted the step-rate formula. Such
"make whole" benefit will be paid as a pension supplement out of the general
corporate assets or the grantor trust described below.
OTHER RETIREMENT BENEFITS. Designated elected officers of WE participate in
the Supplemental Executive Retirement Plan ("SERP"). The SERP provides
monthly supplemental pension benefits to participants, which will be paid out
of corporate assets or the grantor trust described below as follows: (a) an
amount equal to the difference between the actual pension benefit payable
under the management employee retirement plan and what such pension benefit
would be if calculated without regard to any limitation imposed by the
Internal Revenue Code on pension benefits or covered compensation, (b) an
amount calculated so as to provide participants with a supplemental lifetime
annuity, estimated to amount to between 8% and 10% of final average
compensation depending on which pension payment option is selected, and (c) an
amount for certain participants equal to the difference between the actual
pension benefit payable under the management employee retirement plan and what
such pension benefit would be if calculated under the prior benefit formula in
effect on December 31, 1988. Except for a "change in control" of WEC, as
defined in the SERP, no such payments are made until after the participant's
retirement or death.
WEC has entered into an agreement with Mr. Abdoo, who cannot accumulate by
normal retirement age the maximum number of years of credited service under
the management employee retirement plan. According to this agreement, Mr.
Abdoo at retirement will receive supplemental retirement payments which will
make his total retirement benefits at age 58 or older substantially the same
as those payable to employees who are age 60 or older, who are in the same
compensation bracket and who became plan participants at the age of 25. Mr.
Abdoo's agreement, the SERP and the Executive Deferred Compensation Plan
provide for a grantor trust to fund such agreement and plans and to provide
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for optional lump sum payments and, in the instance of a change in control,
mandatory lump sum payouts without regard to whether the executive's
employment has terminated. In each case, the interest rate benchmark formula
for calculating the lump sum amount is the five-year U. S. Treasury Note yield
as of the last business day of the month prior to date of payment. The WEC
Amended Non-Qualified Trust has been established and funded for this purpose.
Mr. Abdoo's agreement, the SERP, the Executive Deferred Compensation Plan, the
Directors' Deferred Compensation Plan and the Amended Non-Qualified Trust have
each been amended to provide that WEC's proposed merger with NSP will not
constitute a change in control under such agreement, plans and trust.
AVAILABILITY OF FORM 10-K
A COPY (WITHOUT EXHIBITS) OF WE'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL
YEAR ENDED DECEMBER 31, 1995 AS FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION IS AVAILABLE WITHOUT CHARGE TO ANY STOCKHOLDER OF RECORD OR
BENEFICIAL OWNER OF WE COMMON STOCK BY WRITING TO THE CORPORATE SECRETARY, ANN
MARIE BRADY, 231 WEST MICHIGAN STREET, P. O. BOX 2046, MILWAUKEE, WISCONSIN
53201.
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