<PAGE> 1
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14a INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [ ] [ ] Confidential, For Use of
Filed by a party other than the Commission Only (as
the registrant [ ] permitted by Rule 14a-6(c)(2))
Check the appropriate box:
[ ] Preliminary proxy statement
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to
Rule 14a-11(c) or Rule 14a-12
Madison Gas and Electric
- - -------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
Madison Gas and Electric
- - -------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rule 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transactions applies:
- - --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transactions 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:
- - --------------------------------------------------------------------------------
(5) Total fee paid:
- - -------------------------------------------------------------------------------
[ ] 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.:
- - --------------------------------------------------------------------------------
(3) Filing party:
- - --------------------------------------------------------------------------------
(4) Date filed:
- - --------------------------------------------------------------------------------
<PAGE> 2
MADISON GAS AND ELECTRIC COMPANY
[MG&E LOGO]
------------------------------------------------
PROXY STATEMENT
------------------------------------------------
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 5, 1997
<PAGE> 3
MADISON GAS AND ELECTRIC COMPANY
POST OFFICE BOX 1231
MADISON, WISCONSIN 53701-1231
March 24, 1997
Dear Shareholder:
The directors and officers of the Company join me in extending a cordial
invitation to you to attend our 1997 Annual Meeting of Shareholders which will
be held on Monday, May 5, 1997, at 11:00 a.m., local time, at the Holiday Inn --
Madison West, 1313 John Q. Hammons Drive, Greenway Center, Middleton, Wisconsin
(see the map on the next page).
The accompanying Proxy Statement requests approval of the election of a
slate of nominees for directors of Class II to hold office until 2000.
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 TO US. 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
<PAGE> 4
[CAMERA READY MAP]
<PAGE> 5
MADISON GAS AND ELECTRIC COMPANY
POST OFFICE BOX 1231
MADISON, WISCONSIN 53701-1231
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MONDAY, MAY 5, 1997, 11:00 A.M.
The 1997 Annual Meeting of Shareholders of Madison Gas and Electric Company
will be held in Middleton, Wisconsin, at the Holiday Inn -- Madison West, 1313
John Q. Hammons Drive, Greenway Center, Middleton, Wisconsin, on Monday, May 5,
1997, at 11:00 a.m., local time, for the purposes of:
(1) Electing two Class II directors to hold office until the Annual
Meeting of Shareholders in 2000 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, 1997, 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 24, 1997
-------------------------
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
<PAGE> 6
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 24,
1997, 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 1997 Annual Meeting of Shareholders of the
Company to be held in Middleton, Wisconsin, at the Holiday Inn -- Madison West,
1313 John Q. Hammons Drive, Greenway Center, Middleton, Wisconsin, on Monday,
May 5, 1997, 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 1997 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, 1997, 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 1997 Annual Meeting of
Shareholders. Only those shareholders of Common Stock of record at the close of
business on March 1, 1997, 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
2
<PAGE> 7
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 prior to the 1997 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.
If a quorum is present at the 1997 Annual Meeting, the two persons
receiving the greatest number of votes will be elected to serve as Class II
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 two nominees listed below be elected to serve as Class
II directors for three-year terms, to expire at the 2000 Annual Meeting of
Shareholders and upon the election and qualification of their successors.
Messrs. Swanson and Vondrasek are currently Class II directors whose terms
expire at the 1997 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 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
3
<PAGE> 8
1997 Annual Meeting of Shareholders must be delivered or mailed to the Company
no later than April 21, 1997.
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.
<TABLE>
<CAPTION>
DIRECTOR
NAMES (AGES) AND BUSINESS EXPERIENCE SINCE
------------------------------------ --------
<S> <C>
Nominees (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 31 years; also director of
Mid-Plains Telephone Company, an independent telephone
company.
FRANK C. VONDRASEK (68), Madison, Wisconsin................. 1982
Vice Chairman of the Board of Directors of the Company, of
which he was an officer from 1974 through 1993.
Members of the Board of Directors Continuing in Office
Class III -- Term Expiring in 1998
RICHARD E. BLANEY (60), 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 (60), 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 (71), 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 48 years.
</TABLE>
4
<PAGE> 9
<TABLE>
<CAPTION>
DIRECTOR
NAMES (AGES) AND BUSINESS EXPERIENCE SINCE
------------------------------------ --------
<S> <C>
Class I -- Term Expiring in 1999
JEAN MANCHESTER BIDDICK (70), 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 (63), 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 11 years
and President of RMM Enterprises, Inc., a real estate
consulting firm; also a director of Wisconsin State Equity
Corporation.
</TABLE>
5
<PAGE> 10
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.
<TABLE>
<CAPTION>
PERCENT OF
NUMBER OF SHARES OUTSTANDING
NAME BENEFICIALLY OWNED COMMON STOCK
---- ------------------ ------------
<S> <C> <C>
Jean Manchester Biddick........................... 3,492 *
Richard E. Blaney................................. 1,255 *
Robert E. Domek................................... 7,453(1)(2) *
Joseph T. Krzos................................... 1,320(1)(2) *
David C. Mebane................................... 7,948(1)(2) *
Regina M. Millner................................. 918 *
Frederic E. Mohs.................................. 1,678(3) *
Phillip C. Stark.................................. 3,127 *
H. Lee Swanson.................................... 3,150(4) *
Frank C. Vondrasek................................ 20,064(1)(2) *
Mark C. Williamson................................ 1,883(2) *
Gary J. Wolter.................................... 2,882(1)(2) *
All directors and executive officers as a group
(19)............................................ 77,930(2) *
Marshall & Ilsley Corporation..................... 1,010,596(5) 6.3
770 North Water Street
Milwaukee, Wisconsin 53202
</TABLE>
- - -------------------------
* Less than 1 percent.
(1) Messrs. Domek, Krzos, Mebane, Vondrasek, 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, 6,048 shares; Mr. Krzos, 250; Mr. Mebane, 4,838 shares; Mr.
Vondrasek, 11,233 shares; Mr. Williamson, 13 shares; Mr. Wolter, 78 shares;
and directors and executive officers as a group, 35,337 shares.
(3) Includes 574 shares of Common Stock with respect to which Mr. Mohs is
trustee of a trust for the benefit of his children.
6
<PAGE> 11
(4) Mr. Swanson is a member of the Qualified Plan Committee of the Profit
Sharing Plan and the Money Purchase Pension Plan of the State Bank of Cross
Plains and as such has shared voting and investment power in an additional
1,575 shares of Common Stock held thereby.
(5) 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
98,062 shares; shared voting power as to 913,331 shares (as to which
beneficial ownership is disclaimed as to 856,191 shares held in one or more
employee benefit plans); sole investment power as to 101,100 shares; and
shared investment power as to 909,496 shares (as to which beneficial
ownership is disclaimed as to 856,191 shares held in one or more employee
benefit plans).
BOARD COMMITTEES
The Company has an Audit Committee, a Compensation Committee, an Executive
Committee, and a Personnel Committee.
During the year ended December 31, 1996, a total of 13 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 $10,000
annually, plus $500 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 $1,000 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 1996. 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 two meetings during 1996. 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 1996.
The Executive Committee
7
<PAGE> 12
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 two
meetings during 1996. 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.
8
<PAGE> 13
EXECUTIVE COMPENSATION
The following table summarizes the compensation for the fiscal years 1994,
1995, and 1996 of the Chief Executive Officer and four other executive officers
serving as executive officers on December 31, 1996, whose salary exceeded
$100,000 for fiscal year 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
--------------------------------- ---------------------------------
AWARDS PAYOUTS
----------------------- -------
RESTRICTED SECURITIES
OTHER ANNUAL STOCK UNDERLYING LTIP ALL OTHER
BONUS COMPENSATION AWARDS ($) OPTIONS PAYOUTS COMPENSATION ($)
NAME AND PRINCIPAL POSITION YEAR SALARY ($) ($) ($) (5) (#) ($) (6)
--------------------------- ---- ---------- ----- ------------ ---------- ---------- ------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
David C. Mebane(1)........... 1996 $280,769 0 0 $ 0 0 0 $2,250
Chairman, President and 1995 $264,321 0 0 6,350 0 0 $2,250
Chief Executive Officer 1994 $237,601 0 0 0 0 0 $2,250
Robert E. Domek(2)........... 1996 $177,332 0 0 $ 0 0 0 $1,595
Executive Vice President 1995 $126,930 0 0 6,350 0 0 $1,393
1994 $112,255 0 0 0 0 0 $1,268
Gary J. Wolter(3)............ 1996 $162,846 0 0 $ 0 0 0 $2,083
Senior Vice President- 1995 $146,517 0 0 6,350 0 0 $2,046
Administration and 1994 $122,221 0 0 0 0 0 $1,832
Secretary
Mark C. Williamson(4)........ 1996 $158,092 0 0 $ 0 0 0 $ 395
Senior Vice President- 1995 $141,580 0 0 6,350 0 0 $ 354
Energy Services 1994 $116,230 0 0 0 0 0 $ 291
Joseph T. Krzos.............. 1996 $123,032 0 0 $ 0 0 0 $1,846
Vice President-Finance 1995 $117,754 0 0 6,350 0 0 $1,764
1994 $110,180 0 0 0 0 0 $1,650
</TABLE>
- - -------------------------
(1) Chief Executive Officer since January 1, 1994. Promoted to Chairman,
President and Chief Executive Officer on May 9, 1994.
(2) 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 are subsidiaries of the Company.
(3) Vice President-Administration and Secretary until May 1, 1995, when he was
promoted to Senior Vice President-Administration and Secretary.
(4) Vice President-Energy Services until May 1, 1995, when he was promoted to
Senior Vice President-Energy Services.
(5) The amounts in the table reflect the market value on the date of grant of
restricted stock awarded under restricted stock award agreements. The number
of shares of restricted stock held by each executive officer named in the
table is 300 and the market value of such shares as of December 31, 1996,
was $6,075. The restricted stock awards vested on February 16, 1997.
(6) All other compensation for 1996 amounts are Company contributions to a
401(k) defined contribution plan.
9
<PAGE> 14
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. 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.
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
10
<PAGE> 15
Committee reviews and recommends to the Board annual salaries, salary grades and
ranges, and the overall salary program design for the Company's executives.
EXECUTIVE COMPENSATION
Executive salaries were set in April of 1996. 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.
At the time 1996 compensation was set, the Compensation Committee and the
full Board of Directors reviewed Company performance for 1995 and first quarter
information for 1996. This information showed MGE's cumulative five-year total
return was above the return for MGE's peer group of utilities. Electric and
natural gas rates were held constant through the review period while cost
control measures continued.
A study was performed for the Company in early 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. The
CEO's annual salary was increased to $275,700. The CEO's total compensation
remains below the market total compensation for both general industry and
similar-sized utilities identified in the compensation study.
CHANGE IN COMPENSATION COMMITTEE
Robert M. Bolz, a member of MGE's Compensation Committee, retired May 6,
1996, after 24 years of service to MGE. Mr. Bolz was replaced on the
Compensation Committee by Phillip C. Stark.
Richard E. Blaney
Frederic E. Mohs
Phillip C. Stark
11
<PAGE> 16
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
<TABLE>
<CAPTION>
MEASUREMENT PERIOD MGE S&P 500 PEER GROUP
(FISCAL YEAR COVERED)
<S> <C> <C> <C>
1991 100 100 100
1992 112 108 106
1993 123 118 120
1994 125 120 113
1995 145 165 148
1996 131 203 154
</TABLE>
Assumes $100 invested on December 31, 1991, in each of the Company's Common
Stock, S&P 500, and the Peer Group
*Total return assumes reinvestment of dividends
<TABLE>
<CAPTION>
--------------------------------
S&P PEER
MGE 500 GROUP
------------------------------
<S> <C> <C> <C>
1991 $100 $100 $100
1992 $112 $108 $106
1993 $123 $118 $120
1994 $125 $120 $113
1995 $143 $165 $148
1996 $131 $203 $154
</TABLE>
12
<PAGE> 17
The Peer Group selected by the Company is composed of the following Upper
Midwest combination utilities:
<TABLE>
<S> <C>
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 Hldg.
</TABLE>
Note: Data accumulated by S&P Compustat Services
* Merged with MidAmerican Energy Co.
** Name change from MidAmerican Energy Co.
13
<PAGE> 18
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.
<TABLE>
<CAPTION>
MEASUREMENT PERIOD MGE WISCONSIN
(FISCAL YEAR COVERED) PEER GROUP
<S> <C> <C>
1991 100 100
1992 112 109
1993 123 118
1994 125 111
1995 143 139
1996 131 130
</TABLE>
Assumes $100 invested on December 31, 1991, in each of the Company's Common
Stock and the
Wisconsin Utility Peer Group
Total return assumes reinvestment of dividends
<TABLE>
<CAPTION>
-----------------------
WISCONSIN
MGE PEER
GROUP
-----------------------
<S> <C> <C>
1991 $100 $100
1992 $112 $109
1993 $123 $118
1994 $125 $111
1995 $143 $139
1996 $131 $130
</TABLE>
Wisconsin Peer Group: Wisconsin Energy Corp.
WPL Holdings Inc.
WPS Resources Corp.
14
<PAGE> 19
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 upon 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)
<TABLE>
<CAPTION>
ANNUAL PENSION AT NORMAL RETIREMENT AGE OF 65
AFTER YEARS OF SERVICE INDICATE BELOW(2)
---------------------------------------------
FINAL FIVE-YEAR 25 YEARS
AVERAGE ANNUAL SALARY 10 YEARS 15 YEARS 20 YEARS OR MORE
--------------------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
$100,000......................... $12,500 $18,750 $25,000 $31,250
$125,000......................... $15,625 $23,438 $31,250 $39,063
$150,000......................... $18,750 $28,125 $37,500 $46,875
</TABLE>
- - -------------------------
(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 1996 compensation
levels through retirement and taking into account employee contributions and
service credits for 1985 and prior years) is $55,540 to Mr. Mebane, $44,871 to
Mr. Wolter, $50,000 to Mr. Williamson, and $42,477 to Mr. Krzos. At December 31,
1996, the estimated annual retirement benefit payable to Mr. Domek was $43,752.
The full credited years of service under the Pension Plan are 20 for Mr.
Mebane, 13 for Mr. Wolter, 11 for Mr. Williamson, 14 for Mr. Krzos, 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
15
<PAGE> 20
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 1996
compensation levels through retirement) is $130,618 to Mr. Mebane, $70,671 to
Mr. Wolter, $64,122 to Mr. Williamson, and $43,354 to Mr. Krzos. At December 31,
1996, the estimated annual supplemental retirement benefit payable to Mr. Domek
was $39,957.
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. Two
officers contributed to the plan during 1996. 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, Domek, Wolter, Williamson, and Krzos. 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
16
<PAGE> 21
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, Domek, Wolter, Williamson, and
Krzos, 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.
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 1998 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 24,
1997.
Shareholder nominations for Class I directors to be elected at the 1998
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 1998 Annual Meeting.
17
<PAGE> 22
OTHER MATTERS
The Company's Annual Report for the year 1996 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 1997.
Coopers & Lybrand L.L.P., the Company's independent public accountant in 1996,
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 24, 1997
18
<PAGE> 23
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF MADISON GAS AND
ELECTRIC COMPANY
The undersigned Common Stock shareholder of MADISON GAS AND ELECTRIC
COMPANY hereby appoints RICHARD E. BLANEY, DAVID C. MEBANE, AND FRANK
C. VONDRASEK, and each of them, as proxies with power of substitution
(to act by a majority of such of them as shall be present) 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 at
the Holiday Inn -- Madison West, 1313 John Q. Hammons Drive, Greenway
Center, Middleton, Wisconsin, on Monday, May 5, 1997, at 11:00 a.m.,
local time, and at all adjournments thereof:
(1) The election of members of Class II of the Board of Directors as
provided in the Company's Proxy Statement:
<TABLE>
<CAPTION>
<S><C>
[ ] FOR all nominees listed below
(except as marked to the contrary below)
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY to vote for all nominees listed
(except as marked to the contrary below) below
</TABLE>
Class II (3 years) -- H. Lee Swanson and Frank C. Vondrasek (to withhold
authority to vote for any individual nominee, write the nominee's name
in the space provided below):
----------------------------------------------------------------------
(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 PROPOSAL NUMBERED (1). IF NO
SPECIFICATION IS MADE, THE SHARES WILL BE VOTED "FOR" ALL NOMINEES.
<TABLE>
<S><C>
This proxy revokes any proxy heretofore given.
--------------------------------------------------- , 1997
MONTH DAY
This proxy revokes any proxy heretofore given. ------------------------------------------------- (L.S.)
--------------------------------------------------- , 1997 ------------------------------------------------- (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.
</TABLE>
