<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 [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[X] Preliminary proxy statement. [ ] Confidential, for use of the
Commission only (as permitted by
Rule 14a-6(e)(2).
[ ] 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)
- --------------------------------------------------------------------------------
(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 Rules 14a-6(i)(1) 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:
- --------------------------------------------------------------------------------
(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
POST OFFICE BOX 1231
MADISON, WISCONSIN 53701-1231
March 31, 2000
Dear MGE Shareholder:
It is our pleasure to invite you to attend our 2000 Annual Meeting of
Shareholders to be held on Tuesday, May 9, 2000, at 11:00 a.m., local time, in
the Exhibition Hall of the Dane County Exposition Center, 1919 Expo Way,
Madison, Wisconsin (see the map on the back cover).
At the meeting we will ask you to consider and vote upon the election of
three Class II directors to hold office until 2003. We will discuss last year's
performance, comment on items of interest to you and Madison Gas and Electric
Company (MGE), and respond to your questions. Following the meeting, we will be
available to answer any additional questions you may have.
YOUR VOTE IS IMPORTANT. WE ENCOURAGE YOU TO SIGN AND DATE YOUR PROXY CARD
AND MAIL IT BACK TO US PROMPTLY 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.
We look forward to seeing you at the meeting.
Very truly yours,
[DAVID C. MEBANE]
DAVID C. MEBANE
Chairman of the Board
[GARY J. WOLTER]
GARY J. WOLTER
President and Chief Executive Officer
<PAGE> 3
NOTICE OF THE ANNUAL MEETING OF SHAREHOLDERS
OF MADISON GAS AND ELECTRIC COMPANY
DATE: Tuesday, May 9, 2000
TIME: 11:00 a.m., local time
PLACE:Exhibition Hall
Dane County Exposition Center
1919 Expo Way
Madison, Wisconsin
PURPOSE:
- - To elect three Class II directors to terms of office expiring at the 2003
Annual Meeting of Shareholders; and
- - To transact such other business as may properly come before the meeting.
Shareholders of record at the close of business on March 1, 2000, are
entitled to vote at the meeting.
The matters to be acted upon at the meeting are described in the
accompanying proxy statement.
By order of the Board of Directors
MARK A. FRANKEL
Vice President, General Counsel,
and Secretary
March 31, 2000
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
MADISON GAS AND ELECTRIC COMPANY............................ 1
THE ANNUAL MEETING.......................................... 1
Attending the Annual Meeting.............................. 1
This Proxy Statement...................................... 1
Voting.................................................... 2
Street Name Holders....................................... 2
Record Holders............................................ 2
Matters to Be Considered.................................. 2
Quorum Requirement........................................ 2
The Vote Necessary for Action to Be Taken................. 3
Revocation of Proxies..................................... 3
ELECTION OF DIRECTORS....................................... 3
BENEFICIAL OWNERSHIP OF COMMON STOCK........................ 5
MEETINGS AND COMMITTEES OF THE BOARD........................ 6
DIRECTOR COMPENSATION....................................... 7
EXECUTIVE COMPENSATION...................................... 7
Summary Compensation Table................................ 7
Report on Executive Compensation.......................... 8
Company Performance....................................... 11
Pension Plan and Supplemental Retirement Plan............. 13
Deferred Compensation Plan................................ 14
Severance Plans........................................... 14
OTHER INFORMATION........................................... 15
Expenses of Solicitation.................................. 15
Shareholder Proposals for the 2001 Annual Meeting......... 15
Other Matters............................................. 16
MAP IS ON BACK COVER
</TABLE>
<PAGE> 5
MADISON GAS AND ELECTRIC COMPANY
-------------------------
MGE is an investor-owned public utility with executive offices located at
133 South Blair Street, Madison, Wisconsin 53703. Our telephone number is (608)
252-7000. Our Web site is located at www.mge.com on the Internet.
THE ANNUAL MEETING
ATTENDING THE ANNUAL MEETING
Our annual meeting will be held on Tuesday, May 9, 2000, at 11:00 a.m. in
the Exhibition Hall of the Dane County Exposition Center, 1919 Expo Way,
Madison, Wisconsin. If you plan to attend the meeting, please fill out the
enclosed reservation form and return it with your proxy card so we may have an
indication of the number of shareholders planning to attend the meeting. If your
shares are held through a broker or its nominee and you would like to attend the
meeting, please see "Voting -- Street Name Holders" below.
THIS PROXY STATEMENT
We sent you our proxy materials because our Board of Directors is
soliciting your proxy to vote your shares at the meeting. If you own MGE common
stock in more than one account, such as individually and also jointly with your
spouse, you may receive more than one set of these proxy materials. To assist us
in saving money and to provide you with better shareholder services, we
encourage you to have all your accounts registered in the same name and address.
You may do this by contacting our Shareholder Services Department toll-free at
1-800-356-6423 if calling from within the Continental United States and at (608)
252-4744 if calling from the Madison area.
On March 31, 2000, we began mailing these proxy materials to all
shareholders of record at the close of business on March 1, 2000. On the record
date of March 1, 2000, there were 16,192,272 shares of common stock outstanding
and entitled to vote.
At the 1985 Annual Meeting of Shareholders, shareholders approved an
amendment to our Articles of Incorporation limiting the voting power of any
shareholder who acquires more than 10 percent of our outstanding voting stock.
To our knowledge, this limitation does not currently apply to any shareholder.
At the present time, each share of common stock will be entitled to one vote at
the meeting. For those shareholders who are participants in our Dividend
Reinvestment and Direct Stock Purchase Plan (Investors Plus Plan), the shares
you have accumulated in the plan are held by the administrator under the nominee
name of Whimm & Co., and those shares, including your reinvestment shares, will
be voted in accordance with your direction given on your proxy.
1
<PAGE> 6
VOTING
STREET NAME HOLDERS
If you own shares through a broker, the registered holder of those shares
is the broker or its nominee. If you receive our proxy materials from your
broker, you should vote your shares by following the procedures specified by
your broker. Your broker will tabulate the votes it has received and submit a
proxy card to us reflecting the votes of the street name holders. If you plan to
attend the annual meeting and vote your street name shares in person, you should
contact your broker to obtain a broker's proxy card and MGE's Shareholder
Services to make a reservation for the meeting.
RECORD HOLDERS
You can vote in person at the meeting or by proxy. By giving us your proxy,
you are authorizing the individuals named on our proxy card (the proxies) to
vote your shares in the manner you indicate. You may:
- Vote for the election of all three of our director nominees;
- Withhold authority to vote for all three of the director nominees; or
- Vote for the election of one or two of our director nominees and withhold
authority to vote for the other nominee(s) by so indicating on the proxy
card.
If you sign and return our proxy card without indicating your instructions
and without indicating expressly you are not voting some or all of your shares,
your shares will be voted for the election of all three director nominees.
The signature on the proxy card should correspond exactly with the name of
the shareholder as it appears on the proxy card. Where stock is registered in
the name of two or more persons, all such persons should sign the proxy. If you
sign a proxy card as an attorney, officer, personal representative,
administrator, trustee, guardian, or similar capacity, please indicate your full
title in such capacity.
MATTERS TO BE CONSIDERED
At the meeting, shareholders will:
- Elect three Class II directors to terms of office expiring at the 2003
Annual Meeting of Shareholders; and
- Transact any other business properly raised.
QUORUM REQUIREMENT
A quorum is necessary to hold a valid meeting of shareholders. If
shareholders entitled to cast at least a majority of the shares entitled to vote
at the meeting are present in person or by proxy, a quorum will exist. In order
to assure the presence of a quorum, please sign and return your proxy card
promptly in the enclosed postage-paid envelope, even if you plan to attend the
meeting. Abstentions and broker nonvotes are counted as present for establishing
a quorum. A broker nonvote occurs when a broker
2
<PAGE> 7
votes on some matter on the proxy card, but not on others because the broker
does not have the authority to do so.
THE VOTE NECESSARY FOR ACTION TO BE TAKEN
If a quorum is present, the three 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.
REVOCATION OF PROXIES
If you are a registered holder of common stock, you may revoke your proxy
by giving written revocation to MGE's Corporate Secretary at any time before
your proxy is voted, by executing a later-dated proxy card which is voted at the
meeting, or by attending the meeting and voting your shares in person. If your
shares are held by a broker, you must contact your broker to revoke your proxy.
Attendance at the meeting will not automatically revoke your proxy.
ELECTION OF DIRECTORS
The Board of Directors consists of nine directors divided into three
classes, each class having three directors, with one class being elected each
year for a term of three years.
Messrs. Swanson, Nevin, and Wolter are currently Class II directors whose
terms expire at the 2000 Annual Meeting. They have been nominated for reelection
to serve as Class II directors for three-year terms, to expire at the 2003
Annual Meeting and upon the election and qualification of their successors.
Each of the nominees has indicated a willingness to serve if elected, and
the Board has no reason to believe that any nominee will be unavailable. If any
nominee should become unable to serve, it is presently intended that your proxy
will be voted for a substitute nominee designated by the Board.
Mrs. Biddick is currently a Class I director whose term would normally
expire at the 2002 Annual Meeting. Under MGE director retirement guidelines,
nonofficer directors must retire from the Board no later than the annual meeting
following their 73rd birthday. Therefore, Mrs. Biddick would be required to
retire at the 2000 meeting. The Board wishes to make an exception to the
guidelines and has asked Mrs. Biddick to continue to serve as a Class I director
until the term to which she has been elected expires at the annual meeting in
2002 or until her earlier resignation.
3
<PAGE> 8
The following table sets forth certain information about the nominees and
the current directors who will continue in office after the meeting.
<TABLE>
<CAPTION>
DIRECTOR
NAMES (AGES) AND BUSINESS EXPERIENCE SINCE
------------------------------------ --------
<S> <C>
Nominees (Class II) -- Term Expiring in 2003
H. LEE SWANSON (62), 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 34 years; also director of Chorus
Communications Group and the Federal Home Loan Bank of
Chicago.
JOHN R. NEVIN (57), Madison, Wisconsin...................... 1998
Associate Dean of Master's Programs; Director, Grainger
Center for Supply Chain Management, and Grainger Wisconsin
Distinguished Professor, School of Business, University of
Wisconsin-Madison, where he has been a faculty member for
29 years.
GARY J. WOLTER (45), Madison, Wisconsin..................... 2000
President and Chief Executive Officer of MGE, of which he
has been an officer since 1989 and an employee since 1984.
Members of the Board of Directors Continuing in Office
Class III -- Term Expiring in 2001
RICHARD E. BLANEY (63), 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 (63), Madison, Wisconsin................... 1975
Partner in the law firm of Mohs, MacDonald, Widder &
Paradise, of which he has been a member since 1968.
F. CURTIS HASTINGS (54), Madison, Wisconsin................. 1999
President of J. H. Findorff & Son, Inc., and Findorff,
Inc., commercial and industrial general contractors and
design builders, with which he has been associated for 29
years; also director of National Guardian Life Insurance
Co.
Class I -- Term Expiring in 2002
JEAN M. BIDDICK (73), 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 (66), Madison, Wisconsin.................... 1984
Chairman of the Board of Directors of MGE, of which he has
been an officer since 1980; also director of First Federal
Capital Corp., a bank holding company.
REGINA M. MILLNER (56), Madison, Wisconsin.................. 1996
Attorney, analyst and broker for more than 21 years; her
firm, RMillner & Co., S.C., specializes in complex real
estate projects and provides consulting services for
private clients and governmental agencies; also director
of Meriter Hospital and Health Services.
</TABLE>
4
<PAGE> 9
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 MGE 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 M. Biddick....................... 4,189 *
Richard E. Blaney..................... 1,505 *
Terry A. Hanson....................... 3,294(1)(2) *
F. Curtis Hastings.................... 1,702 *
Thomas R. Krull....................... 11,954(1)(2) *
David C. Mebane....................... 9,888(1)(2) *
Regina M. Millner..................... 924 *
Frederic E. Mohs...................... 1,891(3) *
John R. Nevin......................... 900 *
H. Lee Swanson........................ 3,150 *
Mark C. Williamson.................... 3,456(1)(2) *
Gary J. Wolter........................ 4,887(1)(2) *
All directors and executive officers
as a group (19).................... 59,716(2) *
Marshall & Ilsley Corporation......... 889,625(4) 5.53
770 North Water Street
Milwaukee, Wisconsin 53202
</TABLE>
- -------------------------
* Less than 1 percent.
(1) Messrs. Hanson, Krull, Mebane, Williamson, and Wolter are directors of
Madison Gas and Electric Company Foundation, Inc., and as such have shared
voting and investment power in an additional 12,000 shares of common stock
held by the Foundation.
(2) Includes common stock held under the two employee stock ownership plans for
the account of executive officers of MGE with respect to which such persons
have sole voting but no investment power: Mr. Hanson, 453 shares; Mr. Krull,
7,205 shares; Mr. Mebane, 5,804 shares; Mr. Williamson, 15 shares; Mr.
Wolter, 94 shares; and directors and executive officers as a group, 16,624
shares.
(3) Includes 628 shares of common stock with respect to which Mr. Mohs is
trustee of a trust for the benefit of his children.
(4) Marshall & Ilsley Trust Company is the Trustee of the MGE 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 124,129 shares;
shared voting power as to 765,271 shares (as to which beneficial ownership
is disclaimed as to 756,909 shares held in one or more employee benefit
plans); sole investment power as to 127,679 shares; and shared investment
power as to 761,946 shares (as to which beneficial ownership is disclaimed
as to 756,909 shares held in one or more employee benefit plans).
5
<PAGE> 10
MEETINGS AND COMMITTEES OF THE BOARD
MGE has an Audit Committee, a Compensation Committee, an Executive
Committee, and a Personnel Committee.
The following table sets forth the membership of each committee:
<TABLE>
<CAPTION>
AUDIT COMPENSATION EXECUTIVE PERSONNEL
NAME COMMITTEE COMMITTEE COMMITTEE COMMITTEE
---- --------- ------------ --------- ---------
<S> <C> <C> <C> <C>
Jean M. Biddick................................... X X X
Richard E. Blaney................................. X X X
F. Curtis Hastings................................ X X
David C. Mebane................................... X X
Regina M. Millner................................. X X
Frederic E. Mohs.................................. X X* X X
John R. Nevin..................................... X X
H. Lee Swanson.................................... X* X X
</TABLE>
- -------------------------
* Chairperson
The Board of Directors met 12 times during 1999. All directors attended at
least 75 percent of the aggregate number of meetings of the Board and the
committees on which the director served.
The Audit Committee's function is to meet with MGE's internal auditors and
independent public accountants and discuss with them the scope and results of
their audits, accounting practices, and the adequacy of MGE's internal controls.
The Audit Committee also approves services performed by MGE's independent public
accountants. The Audit Committee held two meetings during 1999 and adopted a new
charter in 2000.
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. The Compensation Committee held two meetings during
1999.
The Executive Committee acts in lieu of the full Board and between meetings
of the Board. The Executive Committee has the powers of the Board in the
management of the business and affairs of MGE, except action with respect to
dividends to shareholders, election of principal officers, or the filling of
vacancies on the Board or committees created by the Board. The Executive
Committee did not meet during 1999.
The Personnel Committee makes recommendations with respect to the election
of MGE directors and officers. Nominations for the Board by shareholders, which
are submitted to the Chief Executive Officer and/or President of MGE in the
manner described under "Other Information -- Shareholder Proposals for the 2001
Meeting" will be considered by the Personnel Committee, the Board, or the Chief
Executive Officer. The Personnel Committee held two meetings during 1999.
6
<PAGE> 11
DIRECTOR COMPENSATION
In 1999 directors who were not employees of MGE received an annual retainer
of $13,000, plus $800 for each Board meeting attended and $350 for each Audit,
Compensation, Executive, or Personnel Committee meeting attended. Neither Mr.
Mebane nor Mr. Wolter receive additional compensation for serving as a director.
EXECUTIVE COMPENSATION
The following table summarizes the compensation for 1997, 1998, and 1999 of
the Chief Executive Officer and four other executive officers serving as
executive officers on December 31, 1999, whose salary exceeded $100,000 for
1999.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------------------- ---------------------------------
AWARDS PAYOUTS
----------------------- -------
SECURITIES
OTHER ANNUAL RESTRICTED UNDERLYING LTIP ALL OTHER
NAME AND PRINCIPAL SALARY BONUS COMPENSATION STOCK OPTIONS PAYOUTS COMPENSATION
POSITION YEAR ($) ($) ($) AWARDS($) (#) ($) ($)(6)
------------------ ---- ------ ----- ------------ ---------- ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
David C. Mebane(1)....... 1999 337,036 17,500 0 0 0 0 10,892
Chairman of the Board 1998 303,736 14,000 0 0 0 0 8,226
1997 287,316 0 0 0 0 0 8,857
Gary J. Wolter(2)........ 1999 219,780 17,500 0 0 0 0 8,677
President and 1998 192,356 14,000 0 0 0 0 7,584
Chief Executive Officer 1997 176,612 0 0 0 0 0 6,171
Mark C. Williamson(3).... 1999 219,604 17,500 0 0 0 0 8,733
Executive Vice 1998 191,528 14,000 0 0 0 0 8,325
President
and Chief Strategic 1997 174,984 0 0 0 0 0 3,114
Officer
Thomas R. Krull(4)....... 1999 149,332 15,000 0 0 0 0 4,268
Group Vice President 1998 131,204 12,000 0 0 0 0 3,981
1997 120,764 0 0 0 0 0 2,736
Terry A. Hanson(5)....... 1999 148,776 15,000 0 0 0 0 6,632
Vice President -- 1998 130,260 12,000 0 0 0 0 6,450
Finance 1997 122,416 0 0 0 0 0 5,089
</TABLE>
- -------------------------
(1) Chairman, President and Chief Executive Officer until February 1, 2000.
(2) Senior Vice President -- Administration and Secretary until February 1,
2000, when he was promoted to President and Chief Executive Officer.
(3) Senior Vice President -- Energy Services until February 1, 2000, when he was
promoted to Executive Vice President and Chief Strategic Officer.
(4) Vice President -- Gas and Electric Operations until February 1, 2000, when
he was promoted to Group Vice President.
(5) Vice President and Treasurer until November 1, 1997, when he was promoted to
Vice President -- Finance.
(6) All other compensation for 1999 amounts are company contributions to a
401(k) defined contribution plan, $148 for value attributable to a holiday
gift, and pay for unused vacation. The 401(k) company contribution for 1999
was $4,800 for Mr. Mebane, $4,734 for Mr. Wolter, $4,800 for Mr. Williamson,
$4,120 for Mr. Krull, and $3,938 for Mr. Hanson; the residual for each
person in 1999 was pay for unused vacation for each officer, except Mr.
Krull.
7
<PAGE> 12
AGREEMENT WITH EXECUTIVE OFFICER
In 1999, Chairman, President and Chief Executive Officer David C. Mebane
indicated an intention to retire from MGE. The Board desired to continue Mr.
Mebane's employment as an officer of MGE and advisor to the Board and senior
management. The Board then entered into a contract with Mr. Mebane. The
agreement provides for him to continue as an employee and serve as Chairman of
the MGE Board, consultant and advisor to the Board and senior management, and
Chairman of the MGE Foundation. Mr. Mebane has agreed to act as Chairman of the
monthly Board meetings and the 2000 Annual Meeting. He will also review and
approve official communications with shareholders and review major operational,
financial, regulatory, public policy, and public affairs activities of MGE and
provide the Board with a monthly assessment of the same. He will be responsible
for corporate governance issues at the Board level. Mr. Mebane is prohibited
from engaging in any other aspect of the gas and electric utility business in
the state of Wisconsin during the term of the contract and for two years
thereafter. The agreement runs from February 1, 2000, through February 1, 2001.
The Chairman will be paid $310,000, plus standard benefits.
REPORT ON EXECUTIVE COMPENSATION
CORPORATE MISSION
The mission of MGE 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 MGE compensation program is to pay employees,
including executive officers, at levels which are:
- Reflective of how well MGE is achieving its corporate mission;
- Consistent with MGE's current financial condition, earnings, rates, total
shareholder return, and projected Consumer Price Index;
- Reflective of individual performance and experience;
- Competitive in the marketplace; and
- Administered in a fair and consistent manner.
Executive salaries are established within a salary range that reflects
competitive salary levels for similar positions in similar-sized gas and
electric utilities and other Wisconsin utilities. The utilities used for salary
comparison are not the same companies included in the performance graph peer
group in this proxy statement. The Upper Midwest combination utilities included
in the performance graph peer group were selected to reflect utilities facing
similar weather and economic conditions. Many of these companies are larger than
MGE with much higher compensation structures.
8
<PAGE> 13
When examining compensation peer groups, it was determined more appropriate to
consider similar-sized utilities and other Wisconsin utilities.
The midpoint (or middle) of an executive's salary range is approximately
equal to the median salary level of the surveyed utilities. An executive's
position in the range reflects his or her performance over a period of years in
that position, the executive's experience in that position, and MGE 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 MGE's performance.
While MGE's current compensation program has functional adequacy to retain
and fairly compensate executives, the Compensation Committee and the full Board
review the objectives of the executive compensation program on a continuing
basis. Each year, the Compensation Committee reviews and recommends to the Board
annual salaries, salary grades and ranges, and the overall salary program design
for MGE's executives.
From time to time the Compensation Committee considers awarding bonuses to
MGE's executives in the form of cash and/or stock. These bonuses may be made for
extraordinary company or individual performance, a desire to retain an executive
by making that executive's compensation more competitive, aligning the long-term
interests of executives with shareholders, and other reasons.
EXECUTIVE COMPENSATION
Performance factors such as earnings, rates, shareholder return, and other
available financial criteria were used in determining the CEO's and other
executive officers' positions in his or her salary range. Other criteria such as
gas and electric reliability and responsiveness to industry change were also
examined.
Officer salaries were set effective May 1, 1999. Among the significant
achievements the Compensation Committee considered in setting the salary of the
CEO and other senior executives were the following: 1998 earnings were strong
despite lower gas sales resulting from one of the warmest years on record. A gas
capacity release program generated new revenues, and MGE implemented a
distributed generation program. An 83-MW natural gas peaking plant was
negotiated, sited, and readied for construction. MGE constructed a 17-turbine
wind farm which is the largest east of the Mississippi. MGE also maintained its
strong AA bond rating.
In 1999, MGE's earnings exceeded the budget forecast, despite lower gas
margins because of another warm winter and the higher electric fuel costs
resulting from Columbia Plant outages and higher purchased power costs. MGE was
instrumental in shaping Wisconsin energy policy through the Governor's
Reliability 2000 Act which will provide fair access for all to the transmission
grid. MGE developed a new gas purchasing incentive program which will allow
shareholders to receive up to $750,000 of additional earnings in 2000. MGE had
the highest ten-year average annual return among the four major Wisconsin
combination utilities.
9
<PAGE> 14
A compensation study was performed for MGE in 1999 by an independent
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 MGE executives closer to the market median for their positions.
In May of 1999, the CEO's annual salary was set at $330,000.
A stock and cash bonus was granted to MGE officers based on 1999
performance. The bonus granted to the CEO and several other senior officers was
$17,500. When determining whether to grant the bonus, the Compensation Committee
in particular considered the performance factors noted above, together with the
further alignment of the long-term interests of the executive officers and
shareholders created by the stock portion of the bonus.
Jean M. Biddick
Richard E. Blaney
Frederic E. Mohs
10
<PAGE> 15
COMPANY PERFORMANCE
The following graph shows a five-year comparison of cumulative total
returns for MGE, Russell 2000, a Peer Group Industry Index, and the EEI Index
weighted according to each company's market capitalization as of the beginning
of each year.
MADISON GAS AND ELECTRIC COMPANY
FINANCIAL PERFORMANCE
CUMULATIVE FIVE-YEAR TOTAL RETURN COMPARISON
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
MGE RUSSELL 2000 PEER GROUP EEI INDEX
--- ------------ ---------- ---------
<S> <C> <C> <C> <C>
1994 100.00 100.00 100.00 100.00
1995 114.00 127.00 127.00 131.00
1996 105.00 155.00 141.00 133.00
1997 126.00 204.00 191.00 169.00
1998 132.00 191.00 206.00 192.00
1999 125.00 188.00 204.00 157.00
</TABLE>
Assumes $100 invested on 12/31/94 in each of MGE's common stock, Russell 2000,
the Industry Peer Group, and the EEI Index.
Total return assumes reinvestment of dividends
<TABLE>
<CAPTION>
---------------------------------------
RUSSELL PEER EEI
MGE 2000 GROUP INDEX
---------------------------------------
<S> <C> <C> <C> <C>
1994 $100 $100 $100 $ 100
1995 $114 $127 $127 $ 131
1996 $105 $155 $141 $ 133
1997 $126 $204 $191 $ 169
1998 $132 $191 $206 $ 192
1999 $125 $188 $204 $ 157
</TABLE>
MGE has decided to use the EEI Index for the industry index comparison.
Given the mergers in the electric utility industry, the original peer group
has substantially changed and MGE believes a standard industry index will
provide a better comparison.
The Peer Group selected by the Company is composed of 13 Upper Midwest
combination utilities:
AES Corp.
Alliant Energy Corp.
CMS Energy Corp.
DPL Inc. St.
Illinova Corp.
MidAmerican Energy Holding
Minnesota Power & Light
Northern States Power-MN
SIGCORP Inc.
Joseph Light & Power
Utilicorp United Inc.
Wisconsin Energy Corp.
WPS Resources Corp.
11
<PAGE> 16
MADISON GAS AND ELECTRIC COMPANY
FINANCIAL PERFORMANCE
MGE VERSUS WISCONSIN PEER GROUP
Note: This graph is for comparison purposes only. It is to show how the
Company's Five-Year Total Return compares to the other Wisconsin utilities.
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
MGE WI PEER GROUP
--- -------------
<S> <C> <C>
1994 100.00 100.00
1995 114.00 125.00
1996 105.00 116.00
1997 126.00 138.00
1998 132.00 154.00
1999 125.00 117.00
</TABLE>
Assumes $100 invested on December 31, 1994, in each of the MGE's common stock
and the
Wisconsin Utility Peer Group Average.
The Wisconsin Peer Group average is weighted based on market capitalization at
the beginning of the year.
Total return assumes reinvestment of dividends
<TABLE>
<CAPTION>
-------------------
WI
MGE PEER
GROUP
-------------------
<S> <C> <C>
1994 $100 $100
1995 $114 $125
1996 $105 $116
1997 $126 $138
1998 $132 $154
1999 $125 $117
</TABLE>
Wisconsin Peer Group: Wisconsin Energy Corp.
Alliant Energy Corp.
WPS Resources Corp.
12
<PAGE> 17
PENSION PLAN AND SUPPLEMENTAL RETIREMENT PLAN
MGE has a noncontributory qualified defined benefit pension plan covering
its salaried employees. The amount of pension is based upon years of service and
high 60-month average earnings in the ten years 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 INDICATED BELOW(2)
--------------------------------------------------------------
FINAL FIVE-YEAR 30 YEARS
AVERAGE ANNUAL SALARY 10 YEARS 15 YEARS 20 YEARS 25 YEARS OR MORE
- --------------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$100,000.............. $14,000 $21,000 $28,000 $35,000 $42,000
$140,000.............. $19,600 $29,400 $39,200 $49,000 $58,800
$170,000.............. $23,800 $35,700 $47,600 $59,500 $71,400
</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 1999 compensation
levels through retirement and taking into account employee contributions and
service credits for 1985 and prior years) is $77,187 to Mr. Wolter, $72,940 to
Mr. Williamson, $86,946 to Mr. Krull, and $62,232 to Mr. Hanson. At December 31,
1999, the annual retirement benefit payable to Mr. Mebane is $64,985.
The full credited years of service under the pension plan are 23 for Mr.
Mebane, 16 for Mr. Wolter, 14 for Mr. Williamson, 26 for Mr. Krull, and 18 for
Mr. Hanson.
Officers of MGE are also covered under a nonqualified supplemental
retirement plan which provides a supplemental retirement benefit. The
supplemental retirement benefit is a designated percentage ranging from 55 to 70
percent of the final 60-month average earnings less the benefit payable from the
pension plan described above. The designated percentage is based on the
officer's age at retirement. The estimated supplemental annual retirement
benefit payable at normal retirement age of 65 under the supplemental retirement
plan (assuming continuation of 1999 compensation levels
13
<PAGE> 18
through retirement) is $97,819 to Mr. Wolter, $81,066 to Mr. Williamson, $16,029
to Mr. Krull, and $35,057 to Mr. Hanson. At December 31, 1999, the annual
supplemental retirement benefit payable to Mr. Mebane was $140,961.
DEFERRED COMPENSATION PLAN
Officers of MGE are permitted to defer a portion of their current salary
under a nonqualified deferred compensation plan initiated in 1984. Three
officers contributed to the plan during 1999. 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.
MGE has entered into a trust agreement for the purpose of assuring the
payment of its 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 MGE, MGE will be obligated to deliver
to the trustee cash or marketable securities having a value equal to the present
value of the amounts which MGE 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 MGE'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 MGE.
SEVERANCE PLANS
MGE has entered into severance agreements with certain key employees,
including Messrs. Mebane, Wolter, Williamson, Krull, and Hanson. Under these
agreements, each such employee is entitled to a severance payment following a
change in control of MGE as defined above if, within 24 months after such change
in control, employment with MGE is terminated by (i) MGE, (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 MGE or the employee gives notice not to extend the agreement or a change
in control of MGE has occurred. Severance payments will be equal to three times
the employee's annual base salary plus three times the highest bonus paid during
any of the five years preceding a change in control. If the employee receives
severance benefits following a change in control, health, life, and disability
benefits are continued for up to three years, and the employee will also be
grossed up for any excise taxes the employee may incur. In circumstances not
involving a change in control of MGE, Messrs. Mebane, Wolter, Williamson, Krull,
and Hanson, like other salaried employees, are entitled under MGE's general
severance plan to a payment
14
<PAGE> 19
equal to two weeks of compensation plus the employee's weekly compensation
multiplied by the number of years of employment, not exceeding 24.
OTHER INFORMATION
EXPENSES OF SOLICITATION
MGE will bear the cost of soliciting proxies for the annual meeting.
Proxies will be solicited by mail and may be solicited personally by directors,
officers, or employees of MGE who will not receive special compensation for such
services. MGE has retained Morrow & Co., Inc., to solicit proxies at a fee of
$6,000 plus expenses.
SHAREHOLDER PROPOSALS FOR THE 2001 ANNUAL MEETING
In order to be considered for inclusion in MGE's proxy materials for the
2001 annual meeting, a shareholder proposal must be received by MGE no later
than December 1, 2000. In addition, even if a shareholder proposal is set forth
in MGE's 2000 proxy statement as a matter to be considered by shareholders,
MGE's Bylaws establish an advance notice procedure for shareholder proposals to
be brought before any meeting of shareholders, including proposed nominations of
persons for election to the Board of Directors. Shareholders at the 2000 annual
meeting may consider a proposal or nomination brought by a shareholder of record
on March 1, 2000, who is entitled to vote at the 2000 annual meeting and who has
given MGE timely written notice, in proper form, of the shareholder's proposal
or nomination. A shareholder proposal or nomination intended to be brought
before the 2000 annual meeting must have been received by MGE after the close of
business on January 24, 2000, and prior to the close of business on February 18,
2000. MGE did not receive notice of any shareholder proposal or nomination
relating to the 2000 annual meeting. The 2001 annual meeting is expected to be
held on May 15, 2001. A shareholder proposal or nomination intended to be
brought before the 2001 annual meeting must be received by MGE after the close
of business on January 29, 2001, and prior to the close of business on February
22, 2001. All proposals and nominations should be directed to MGE's principal
executive offices at 133 South Blair Street, Post Office Box 1231, Madison,
Wisconsin 53701-1231, Attention: Corporate Secretary.
15
<PAGE> 20
OTHER MATTERS
Our Annual Report for the year 1999 has been mailed to shareholders.
The Board does not know of any other matters that will be presented at the
annual meeting. If any other matters properly come before the 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 has selected PricewaterhouseCoopers LLP to audit the consolidated
financial statements of MGE and its subsidiaries for 2000.
PricewaterhouseCoopers LLP, MGE's independent public accountant in 1999, is
expected to have a representative present at the 2000 annual 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
[GARY J. WOLTER]
GARY J. WOLTER
President and
Chief Executive Officer
Dated March 31, 2000
16
<PAGE> 21
If you plan to attend the meeting in person, please fill out the
reservation form and return it with your proxy card so that we may have an
indication of the number of shareholders planning to attend the meeting.
If you have any questions, please feel free to call our Shareholder
Services toll-free number. Call 1-800-356-6423 if you are calling from within
the Continental United States and 252-4744 if calling from the Madison area.
Map
Note: Enter the Dane County Expo Center grounds through the Main Gate off of
Rimrock Road (see inset map).
<PAGE> 22
MADISON GAS AND ELECTRIC COMPANY
POST OFFICE BOX 1231
MADISON, WISCONSIN 53701-1231
[MG&E LOGO]
This proxy is solicited on behalf of the Board of Directors of Madison Gas and
Electric Company. MGE's Annual Meeting will be held at 11:00 a.m., local time,
on Tuesday, May 9, 2000, in the Exhibition Hall at the Dane County Exposition
Center, 1919 Expo Way, Madison, Wisconsin (see map on back).
YOUR VOTE IS IMPORTANT. PLEASE SIGN AND DATE THE ATTACHED PROXY PROMPTLY AND
MAIL IT BACK TO US EVEN IF YOU PLAN TO ATTEND THE MEETING. If you do plan on
attending the meeting, be sure to complete and return the bottom two-thirds of
this form in the enclosed envelope.
Fold and Detach Here Fold and Detach Here
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
PLEASE
SIGN
AND
RETURN
MADISON GAS AND ELECTRIC COMPANY PROXY
ITEM 1: Election of Directors: Class II Nominees: John R. Nevin,
H. Lee Swanson, and Gary J. Wolter
<TABLE>
<S> <C>
[ ] FOR [ ] WITHHOLD
all nominees listed above authority to vote for all
(except as marked to the nominees listed
contrary below)
</TABLE>
To withhold authority to vote
for any individual nominee,
write that nominee's name here:
--------------------------------
ITEM 2: In their discretion upon such other business as may
properly come before the meeting
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS SPECIFIED
WITH RESPECT TO PROPOSAL NUMBER (1). IF NO SPECIFICATION IS
MADE, THE SHARES WILL BE VOTED "FOR ALL NOMINEES."
<TABLE>
<S> <C>
This proxy revokes any proxy heretofore given. ----------------------------------------------------
--------------------------------------------------- , ----------------------------------------------------
2000
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>
(continued on reverse side)
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
2000 ANNUAL SHAREHOLDER MEETING RESERVATION
<TABLE>
<S> <C>
PLEASE SIGN AND RETURN IF YOU PLAN TO ATTEND THE ANNUAL
MEETING. ------------------------------------------------------------
(IF YOU DO NOT PLAN TO ATTEND, DO NOT RETURN THIS PORTION OF Shareholder(s)
THE FORM.) ------------------------------------------------------------
Shareholder(s)
------------------------------------------------------------
Guest
</TABLE>
<PAGE> 23
[MAP]
PROXY
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS -- MAY 9, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
[MG&E LOGO]
I (we) appoint(s) RICHARD E. BLANEY, DAVID C. MEBANE, and FREDERIC E.
MOHS, as proxies with power of substitution, to represent and to vote all
shares of stock I (we) would be entitled to vote at the Annual Meeting to
be held in the Exhibition Hall of the Dane County Exposition Center, 1919
Expo Way, Madison, Wisconsin, on Tuesday, May 9, 2000, at 11:00 a.m.,
local time, and at all adjournments thereof.
Shares represented by all properly executed proxies will be voted in
accordance with instructions appearing on the proxy. IN THE ABSENCE OF
SPECIFIC INSTRUCTIONS, PROXIES WILL BE VOTED IN ACCORDANCE WITH THE
RECOMMENDATIONS OF THE BOARD OF DIRECTORS AND IN THE DISCRETION OF THE
PROXY HOLDERS AS TO ANY OTHER MATTERS THAT MAY PROPERLY COME BEFORE THE
ANNUAL MEETING.
PLEASE SIGN EXACTLY AS NAME(S) APPEAR ON THIS PROXY CARD AND DATE THIS
PROXY. IF JOINT ACCOUNT, EACH JOINT OWNER SHOULD SIGN. IF SIGNING FOR A
CORPORATION OR PARTNERSHIP OR AS AGENT, ATTORNEY, OR FIDUCIARY, INDICATE
THE CAPACITY IN WHICH YOU ARE SIGNING.
