<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant / /
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
CILCORP. INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
MERRILL CORP.
- --------------------------------------------------------------------------------
(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>
<TABLE>
<C> <S>
300 HAMILTON BLVD., SUITE 300, PEORIA, CENTRAL ILLINOIS LIGHT COMPANY
IL 61602 CILCORP INVESTMENT MANAGEMENT INC.
CILCORP VENTURES INC.
QST ENTERPRISES INC.
</TABLE>
March 10, 1997
To Our Shareholders:
You are cordially invited to attend the Annual Meeting of Shareholders
of CILCORP Inc. which will be held at 300 Liberty Street, Peoria,
Illinois, on April 22, 1997 at 10:00 AM, Central Time. Detailed
information as to the business to be transacted at the meeting is
contained in the accompanying Notice of Annual Meeting and Proxy
Statement.
It is important that your shares be represented at the meeting. Please
complete, sign and date the enclosed Proxy and return it in the
envelope provided as soon as possible.
Your continued interest and cooperation are greatly appreciated.
Sincerely,
Robert O. Viets
President and Chief
Executive Officer
<PAGE>
CILCORP INC.
300 HAMILTON BOULEVARD, SUITE 300
PEORIA, ILLINOIS 61602
NOTICE OF ANNUAL MEETING
March 10, 1997
Dear Shareholders:
The Annual Meeting of Shareholders of CILCORP Inc. will be held on Tuesday,
April 22, 1997 at 10:00 AM, Central Time, at 300 Liberty Street, Peoria,
Illinois 61602 for the following purposes:
1. To elect four members of the Board of Directors;
2. To consider and vote upon a shareholder proposal which is set forth and
described in the attached proxy statement, if such proposal is brought
before the meeting; and
3. To transact such other business as may properly come before the meeting.
Shareholders of record at the close of business on February 21, 1997 are
entitled to vote at the meeting.
By Order of the Board of Directors,
John G. Sahn
Vice President, General Counsel and Secretary
IMPORTANT
It is important that your shares be represented at the meeting.
Please mark, sign, date and return the enclosed proxy promptly in
order that your shares will be voted.
<PAGE>
PROXY STATEMENT
GENERAL
This statement is furnished in connection with a solicitation of proxies
by the Board of Directors of CILCORP Inc. (the "Company" or "CILCORP"), for use
at the Annual Meeting of Shareholders to be held on Tuesday, April 22, 1997 at
10:00 AM, Central Time, at 300 Liberty Street, Peoria, Illinois, and any
adjournment thereof. The executive offices of the Company are located at 300
Hamilton Boulevard, Suite 300, Peoria, Illinois 61602. The shares represented by
your proxy will be voted as directed therein if the proxy is duly executed and
returned prior to the meeting. If no choice has been specified, the persons
named in the proxy intend to vote for the election of the nominees listed
herein. You may revoke your proxy by a duly executed later proxy, or at any time
before it is exercised by written notice to the Secretary of the Company,
received prior to the time of the meeting, or orally at the meeting.
Shareholders of record participating in the Company's Investors Choice
Automatic Dividend Reinvestment and Stock Purchase Plan will receive one proxy
for shares held of record as well as shares held for that person's account under
such Plan. Shares in the account of an employee participating in the savings
plans of the Company's subsidiaries, Central Illinois Light Company ("CILCO")
and QST Enterprises Inc. ("QST"), will be voted in accordance with the
employee's instructions; or, if no instructions are given, pursuant to the trust
agreements pertaining to the plans.
The expense of the solicitation of proxies is being borne by the Company.
In addition to solicitation by mail, officers and regular employees of the
Company may solicit proxies either personally, or by telephone or fax. The
Company will reimburse banks, brokers or other similar agents or fiduciaries for
forwarding proxy material to their principals, the beneficial owners of the
stock. The Company has arranged for D. F. King & Co., Inc., for a fee of
approximately $8,500, to assist in the solicitation of proxies. Such
solicitation may be made by mail, telephone, fax or in person.
The annual report of the Company for the year ended December 31, 1996 is
being sent, along with the Notice of Annual Meeting, this Proxy Statement and
the accompanying Proxy, to all shareholders of record at the close of business
on February 21, 1997, which is the record date for the determination of
shareholders entitled to vote at the meeting. These items are to be first mailed
to shareholders on or about March 10, 1997.
VOTING SECURITIES AND PRINCIPAL HOLDERS
On February 21, 1997, the record date for the meeting, the outstanding
voting stock of the Company consisted of 13,610,680 shares of common stock, no
par value (the "common stock"). Each share of common stock entitles the holder
thereof to one vote upon each matter coming before the meeting. Votes cast by
proxy or in person at the
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annual meeting will be tabulated by the election inspectors appointed for the
meeting who will determine whether or not a quorum is present. The election
inspectors will treat abstentions as shares that are present and entitled to
vote for purposes of determining the presence of a quorum but as unvoted for
purposes of determining the approval of any matter submitted to the shareholders
for a vote. If a broker indicates on the proxy that it does not have
discretionary authority as to certain shares to vote on a particular matter,
those shares will not be considered as present and entitled to vote with respect
to that matter. To the Company's knowledge, no single entity or person has
beneficial ownership of 5% or more of the Company's outstanding common stock. No
independent inquiry has been made to determine whether any shareholder is the
beneficial owner of shares not registered in the name of such shareholder or
whether any shareholder is a member of a shareholder group.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth as of December 31, 1996 the beneficial
ownership of the Company's common stock (including ownership of stock in the
CILCO Employees' Savings Plan as of December 31, 1996) by all directors
(including nominees for director), the executive officers included in the
Summary Compensation Table herein, and all directors and officers as a group.
The following table also sets forth as of January 1, 1997 the common stock units
held by directors participating in the Company's and CILCO's Deferred
Compensation Stock Plans.
<TABLE>
<CAPTION>
COMMON STOCK
------------------------
NAME OF BENEFICIAL OWNER SHARES(1) UNITS(2)
- ------------------------------------------------------------------ ----------- -----------
<S> <C> <C>
Marcus Alexis 1,100 3,366
John R. Brazil 400
Willard Bunn III 1,200 754
Jerry D. Caulder 100
Homer J. Holland 500
H. Safford Peacock 1,000 6,185
Katherine E. Smith 949 4,192
Richard N. Ullman 1,646 4,513
Robert O. Viets 10,292 7,172
Murray M. Yeomans 1,250 5,894
William M. Shay 6,456
James F. Vergon 4,960
Thomas S. Romanowski 4,210
Michael J. Bowling 2,906
All directors and officers as a group 42,629 32,076
</TABLE>
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- -------
(1) In each case, the named individual or his spouse has sole voting and
investment power. The directors and officers individually and as a group own
less than one percent of the Company's common stock.
(2) Compensation deferred under the Deferred Compensation Stock Plans is
converted into units of common stock based upon the market price of such
stock on the trading date next following the date payment would have been
made to the director. Additional amounts are credited to the director's
account equal to common stock dividends paid, and are treated as
automatically reinvested in the Company's common stock.
1. ELECTION OF DIRECTORS
The Board of Directors consists of ten members, divided into three
classes, with members of each class serving a three-year term. At the 1997
Annual Meeting, the shareholders will elect four persons as directors with terms
continuing until the Annual Meeting of Shareholders in 2000 or until their
respective successors are elected and qualified. The remaining six directors
will continue to serve as set forth below, with three directors having terms
expiring April 1998 and three directors having terms expiring April 1999. To be
elected a director, a nominee must receive the affirmative vote of a majority of
the Company's outstanding shares represented at the meeting and entitled to
vote. All of the nominees are now directors of the Company and all have agreed
to serve if elected. The nominees and directors are listed below, together with
biographical information.
The Board of Directors has no reason to believe that the nominees will not
be available, but in the event that a vacancy among the original nominees is
occasioned by death or any other reason prior to the meeting, the proxy will be
voted for a substitute nominee or nominees designated by the Board of Directors.
3
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NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS
FOR THREE-YEAR TERMS EXPIRING APRIL 2000
<TABLE>
<S> <C>
MARCUS ALEXIS
BOARD OF TRUSTEES PROFESSOR OF ECONOMICS AND
PROFESSOR OF MANAGEMENT AND STRATEGY [PHOTO1]
NORTHWESTERN UNIVERSITY, EVANSTON, ILLINOIS
Director of CILCORP since 1988
Member of Compensation and Finance Committees
Dr. Alexis was born at New York, New York in 1932. He
graduated from Brooklyn College in 1953 with a degree in
economics. Dr. Alexis received a Master of Arts degree in
economics from Michigan State University in 1954, and a
Ph.D degree in economics from the University of Minnesota
in 1959. He initially joined Northwestern University in
1970 and served as chairman of the Department of Economics
from 1976-1979 and 1982-1985. During the period 1979 to
1981, he was a member, vice chairman and acting chairman of
the Interstate Commerce Commission. He joined the
University of Illinois at Chicago in 1985 as dean of the
College of Business Administration and professor of
economics. He returned to Northwestern University in 1990.
He is former Chairman of the Federal Reserve Bank of
Chicago and serves on the boards of the Teachers Insurance
and Annuity Association, the Metropolitan Planning Council
in Chicago, and is also a director of the Lincoln Park
Zoological Society.
</TABLE>
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<TABLE>
<S> <C>
H. SAFFORD PEACOCK
INVESTMENT MANAGEMENT AND FARMING
Director of CILCORP since 1985 [PHOTO2]
Member of Executive and Finance Committees
Mr. Peacock was born at Monmouth, Illinois in 1928.
He graduated from the Massachusetts Institute of Technology
in 1950. He joined Myers Industries, Inc. (manufacturers of
store fixtures and storage shelving) in Lincoln, Illinois
in 1953 in an engineering capacity, and was elected vice
president of manufacturing and director in 1960. He served
as vice president and general manager from 1974 until his
retirement in 1977. He is active in investment management,
including farming operations and industrial real estate. He
is a trustee and past chairman of the board of trustees of
Lincoln College and a trustee and past chairman of the
board of trustees of Monmouth College. He also serves as a
director of the National Defense University Foundation in
Washington, D.C. He was a director of CILCO from 1978 to
1994.
RICHARD N. ULLMAN
PRESIDENT OF FEDERAL COMPANIES, PEORIA, ILLINOIS
Director of CILCORP since 1988 [PHOTO3]
Member of Executive and Finance Committees
Mr. Ullman was born at Peoria, Illinois in 1934. He
graduated from DePauw University in 1956 with a liberal
arts degree. He joined Federal Warehouse Company in 1957.
In 1973 he was named president of that company and of
Federal Companies (commercial warehousing, local and long
distance moving). He is a director of First of America
Bank-Illinois, N.A., First of America Bank-Illinois, N.A.
Peoria Regional Advisory Board, Keystone Consolidated
Industries, Inc. and the Peoria Medical Research
Corporation. Mr. Ullman is a member of the Saint Francis
Medical Center Advisory Board, a member of the advisory
board of Children's Hospital of Illinois at Saint Francis
Medical Center, and serves as a member of the board of
trustees of Bradley University. He is active in a number of
professional and civic organizations.
</TABLE>
5
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<TABLE>
<S> <C>
ROBERT O. VIETS
PRESIDENT AND CHIEF EXECUTIVE OFFICER OF CILCORP
Director of CILCORP since 1988 [PHOTO4]
Member of Executive Committee
Mr. Viets was born at Girard, Kansas in 1943. He
graduated from Washburn University in 1965 with a degree in
economics and received his law degree from Washington
University School of Law in 1969. He is a certified public
accountant and has had experience with a national
accounting firm. Mr. Viets joined CILCO in 1973 as manager
of special studies and was appointed manager of rates and
regulatory affairs in 1976. He was elected assistant vice
president, regulatory and legislative affairs, in 1980;
vice president, financial services in 1981; vice president
(finance group) in 1983; senior vice president of the
Company and CILCO in 1986 and to his present position with
the Company in 1988. He is also chairman and chief
executive officer of CILCO and QST Enterprises Inc.,
chairman of CILCORP Ventures Inc. and a director of CILCORP
Investment Management Inc. and, Environmental Science &
Engineering, Inc. Mr. Viets is a director of First of
America Bank-Illinois, N.A.; First of America
Bank-Illinois, N.A. Peoria Regional Advisory Board; RLI
Corp.; Lincoln Office Supply Co., Incorporated; the Peoria
Medical Research Corporation and Methodist Health Services
Corporation. He serves as chairman of the board of trustees
of Bradley University.
</TABLE>
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MEMBERS OF THE BOARD OF DIRECTORS CONTINUING IN OFFICE
TERM EXPIRING APRIL 1998
<TABLE>
<S> <C>
WILLARD BUNN III
SENIOR VICE PRESIDENT AND MANAGING DIRECTOR IN
THE FINANCIAL SERVICES UNIT [PHOTO5]
ABN-AMRO CHICAGO CORPORATION, CHICAGO, ILLINOIS
Director of CILCORP since 1994
Member of Audit and Finance Committees
Mr. Bunn was born at Springfield, Illinois in 1943.
He graduated from Princeton University in 1966 with a
degree in history and received his master's degree in
business administration from The Darden School at the
University of Virginia in 1968. He was associated with
Chemical Bank from 1968 to 1978 serving in various
capacities, including vice president and group head of
domestic depository institutions. He joined Marine Bank of
Springfield in 1978 as an executive vice president and was
subsequently elected president in 1980 and chairman and
chief executive officer in 1989. In 1992, Mr. Bunn became
chairman and chief executive officer of Banc One Illinois
Corporation (which merged with Marine Bank). He retired
from these positions on December 31, 1994 and joined The
Chicago Corporation on April 1, 1995. Mr. Bunn serves on
the boards of various local and state business and civic
organizations.
</TABLE>
7
<PAGE>
HOMER J. HOLLAND
PRESIDENT OF HOLLAND PARTNERS, INC.
CHICAGO, ILLINOIS [PHOTO6]
Director of CILCORP since 1994
Member of Compensation and Director Affairs Committees
Mr. Holland was born at Madison, Wisconsin in 1941.
He is a 1963 graduate of the U.S. Military Academy and
served in the U.S. Army from 1963 to 1971. He received
Masters of Science degrees in physics and electrical
engineering from Massachusetts Institute of Technology in
1967 and a Doctor of Business Administration degree from
George Washington University in 1972. Following military
service, he was associated with the First National Bank of
Chicago from 1971 to 1979, last serving as senior vice
president. He was president of Exchange National Bank of
Chicago from 1979 to 1983. Mr. Holland founded Holland
Partners, Inc. in 1983 and through this company acquired
control of six Illinois savings banks and one Texas savings
bank. He sold his banks in 1995 and 1996 and now
concentrates on investments in financial services and real
estate. He is a director of USAA Capital Corporation,
Lifeline Shelter Systems, Inc., Wisconsin Industrial
Products Inc., First Financial Training Services and the
Institute of European Studies.
<PAGE>
<TABLE>
<S> <C>
KATHERINE E. SMITH
GROUP EXECUTIVE
DAIRY MANAGEMENT INC., CHICAGO, ILLINOIS [PHOTO7]
Director of CILCORP since 1985
Member of Audit and Director Affairs Committees
Ms. Smith was born at Chicago, Illinois in 1940. She
is a 1961 graduate of Oregon State University with a degree
in family and consumer science. She was named to her
current position in 1995. From 1982 to 1994, Ms. Smith was
vice president, consumer affairs, U. S. Grocery Products
Division of The Quaker Oats Company. She was formerly with
The Great Atlantic & Pacific Tea Company, Inc. from 1976 to
1982 as vice president, consumer affairs and marketing
services, and prior to that was associated with The
Pillsbury Company. She began her business career with
Southern California Gas Company, a division of Pacific
Lighting Corporation, where she advanced through various
positions related to customer services. Ms. Smith is active
in a number of professional and civic associations
including the American Association of Family & Consumer
Science. In addition, she is a trustee of the Oregon State
University Foundation.
</TABLE>
9
<PAGE>
MEMBERS OF THE BOARD OF DIRECTORS CONTINUING IN OFFICE
TERM EXPIRING APRIL 1999
<TABLE>
<S> <C>
JOHN R. BRAZIL
PRESIDENT OF BRADLEY UNIVERSITY, PEORIA, ILLINOIS
Director of CILCORP since 1993 [PHOTO8]
Member of Audit and Director Affairs Committees
Dr. Brazil was born at Los Angeles, California in
1946. He received a bachelor's degree in history from
Stanford University in 1968 and a master's degree and Ph.D.
in American studies from Yale University in 1972 and 1975,
respectively. In 1980, he was a Fulbright senior scholar in
English and American studies at the University of Sydney,
Australia. Prior to joining Bradley University as president
in January 1992, he served as chancellor and professor of
English at the University of Massachusetts Dartmouth
(formerly known as Southeastern Massachusetts University)
from 1984 through 1991. Dr. Brazil was previously
associated with San Jose' State University in California
for eleven years, last serving as professor of humanities
and American studies and vice president for academic
affairs. He is a director of First of America
Bank-Illinois, N.A., First of America Bank-Illinois, N.A.
Peoria Regional Advisory Board, Methodist Medical Center,
National Association of Independent Colleges and
Universities and past chair of the Walter Byers
Post-Graduate Scholarship Committee of the National Col-
legiate Athletic Association.
</TABLE>
10
<PAGE>
<TABLE>
<S> <C>
JERRY D. CAULDER
CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER OF
MYCOGEN CORPORATION, SAN DIEGO, CALIFORNIA [PHOTO9]
Director of CILCORP since 1996
Member of Audit and Compensation Committees
Dr. Caulder was born in Gideon, Missouri in 1942. He
received a Bachelor of Science degree in botany and zoology
from Southeast Missouri State University in 1964 and a
Master's degree and a Doctorate in agronomy and plant
physiology from the University of Missouri in 1969. In
1984, Dr. Caulder joined Mycogen Corporation (agricultural
biotechnology products and services) as president and chief
executive officer and was elected chairman of the board in
1989. Prior to joining Mycogen, he managed various aspects
of both the international and domestic business of Mon-
santo Company for over 15 years. He serves as a consultant
and speaker to various organizations, including the
Brookings Institute (Washington, D.C.), The Keystone Group
(Keystone, Colorado) and the World Economic Forum (Geneva,
Switzerland).
MURRAY M. YEOMANS
RETIRED CHAIRMAN OF YEOMANS DISTRIBUTING COMPANY,
PEORIA, ILLINOIS [PHOTO9]
Director of CILCORP since 1987
Member of Executive and Director Affairs Committees
Mr. Yeomans was born at Philadelphia, Pennsylvania in
1935. He is a 1958 graduate of Miami University (Ohio) with
a degree in business administration. He joined Yeomans
Distributing Company (wholesale appliances and central
heating and cooling equipment) in 1960 and was named
president in 1972 and chairman and chief executive officer
in 1991. In June of 1996 Mr. Yeomans, who was the sole
shareholder of Yeomans Distributing Company, sold the
company to the employees through an Employee Stock
Ownership Plan (ESOP) and retired from the company. He is a
director of Peoria Area Community Foundation. In addition,
he is a member of the Saint Francis Medical Center Advisory
Board, the First of America Bank-Illinois, N.A. Peoria
Regional Advisory Board and a director of the Illinois
Neurological Institute. Mr. Yeomans is active in civic and
charitable activities.
</TABLE>
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<PAGE>
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
The Board of Directors has, among others, Audit, Compensation and Director
Affairs Committees.
The Audit Committee is responsible for reviewing audits made by the
Company's independent accountants, including the scope of the auditors' reports
and reviewing such other matters, such as the effectiveness of internal
controls, as the Committee may deem appropriate. The Audit Committee recommends
to the Board of Directors the independent accounting firm which will be engaged
to audit the Company's financial statements. The Committee also reviews the
activities of the Company's internal auditors. Directors serving as members of
the Committee are Messrs. Brazil, Bunn, Caulder and Ms. Smith. During 1996, the
Committee held five meetings.
The Compensation Committee considers and makes recommendations to the
Board of Directors with respect to the compensation of the Company's executive
officers. Directors serving as members of the Committee are Messrs. Alexis,
Caulder and Holland. During 1996, the Committee held four meetings.
The Director Affairs Committee, in addition to monitoring governance
policies of the Board, reviews and recommends to the Board of Directors nominees
to serve on the Board. The Committee considers nominees brought to its attention
by other members of the Board, by members of management and by shareholders.
Shareholders may submit recommendations to the Committee with respect to
nominees by writing to the Secretary of the Company. Under the Company's
By-laws, written notice of any shareholder nomination of an individual for
election as a director at the Annual Meeting must be received by the Secretary
of the Company at 300 Hamilton Boulevard, Suite 300, Peoria, Illinois 61602, not
later than sixty days prior to the first anniversary of the date of the last
Annual Meeting of Shareholders and set forth the name, age, business and
residential address, principal occupation, number of shares of common stock
owned and such other information concerning the nominee as may be required by
the federal securities laws in respect of an individual nominated as a director
for whom proxies are solicited. (A copy of the Company's By-laws specifying the
requirements for shareholder nominations will be furnished to any shareholder
without charge upon written request to the Secretary.) Directors serving as
members of the Committee are Ms. Smith and Messrs. Brazil, Holland and Yeomans.
During 1996, the Committee held six meetings.
During 1996, the Board of Directors held a total of six meetings.
DIRECTORS' COMPENSATION
No fees are paid to directors who are employees of the Company or its
subsidiaries. Non-employee members of the Board receive a total annual retainer
fee of $16,000 for serving on the Company's Board and on the Board of any of the
Company's subsidiaries,
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prorated for less than a year's service. Non-employee directors also receive an
attendance fee of $750 for attending meetings of the Board of Directors of the
Company and an attendance fee of $750 for each meeting attended of committees of
the Board. Directors also are reimbursed for their travel expenses for each
Board or committee meeting attended.
EXECUTIVE COMPENSATION
The following table sets forth the annual and long-term compensation
earned for the years 1996, 1995 and 1994 for the Chief Executive Officer and the
four most highly compensated executive officers of the Company and its
subsidiaries who perform policy-making functions for the Company.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM
COMPENSATION
--------------------- --------------- ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY LTIP PAYOUTS(1) COMPENSATION(2)
- ----------------------------------------- --------- ---------- --------------- ----------------
<S> <C> <C> <C> <C>
Robert O. Viets 1996 $ 382,544 $ 64,500 $ 31,894
President and Chief Executive 1995 327,756 17,819 34,925
Officer of the Company 1994 261,000 88,015 27,364
James F. Vergon 1996 194,564 86,542 14,634
President and Chief 1995 181,661 61,437 15,610
Operating Officer of CILCO (3) 1994 140,270 63,012 12,513
William M. Shay 1996 194,398 81,981 22,948
Executive Vice President 1995 185,838 54,641 24,812
of the Company (4) 1994 156,818 49,852 19,418
Thomas S. Romanowski 1996 145,449 72,492 13,749
Vice President of CILCO 1995 133,584 56,662 14,442
1994 127,795 58,775 11,751
Michael J. Bowling 1996 123,852 51,318 5,155
Vice President of CILCO (5) 1995 103,540 34,057 4,520
1994 94,320 21,979 4,271
</TABLE>
(1) Amounts paid pursuant to the EVA-Based Incentive Compensation Plans of the
Company and CILCO.
(2) Amounts shown in this column for 1996 represent (a) employer contributions
under the CILCO Employees' Savings Plan: Mr. Viets $4,140, Mr. Vergon
$4,500, Mr. Shay $4,420, Mr. Romanowski $4,088 and Mr. Bowling $3,387 and
(b) earnings on deferred compensation: Mr. Viets, $27,754, Mr. Vergon,
$10,134, Mr. Shay $18,528, Mr. Romanowski $9,661, and Mr. Bowling $1,768.
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(3) Effective January 19, 1996. Previously, Mr. Vergon was a group president of
CILCO effective April 1, 1995, vice president of CILCO effective March 1,
1993 and served as vice president and chief financial officer of CILCORP
from January 1, 1993 through February 28, 1993.
(4) Effective November 4, 1996. Previously, Mr. Shay was President and Chief
Executive Officer of QST Enterprises Inc., a subsidiary of CILCORP,
effective January 29, 1996 and served as a group president of CILCO
effective April 1, 1995, and vice president of CILCO effective January 1,
1993.
(5) Effective April 1, 1995. Previously, Mr. Bowling was Manager of Electric
Engineering.
EVA-BASED INCENTIVE COMPENSATION PLAN
Incentive compensation is awarded in accordance with the Company's EVA-
Based Incentive Compensation Plan (the "EVA Plan"). The purpose of the EVA Plan
is to provide an incentive to eligible officers and senior managers to increase
and maintain shareholder value by rewarding the achievement of these objectives.
EVA is a measure of profitability that is based on the difference between the
return earned on the capital invested in an enterprise and the cost of that
capital. This difference can be either positive or negative and results in an
addition to or a deduction from award balances accumulated from prior years.
Each year, one third of the net balance accumulated is paid to the participant.
That portion of the incentive compensation which has been deferred is "at risk"
since a negative EVA in a subsequent year may eliminate previously accumulated
balances. The calculation of the award pool is based, in part, on a fixed
percentage of the improvement in EVA from the prior year and, in part, on a
fixed percentage of the average of EVA contributed over a three-year period.
These percentages, which do not change from year to year, were determined when
the EVA Plan was originally established and were designed, using historical
financial data, to create an award pool of sufficient size to achieve the Plan
objectives and are used only for that purpose. Annually, at the outset of each
plan year, the Compensation Committee determines the portion of the award pool
to be allocated to each participant, including the executive officers, based on
that individual's job responsibilities and the Committee's evaluation of the
effect which that individual's performance is expected to have on the size of
the award pool. A portion of the award pool is allocated, at the Committee's
discretion, at the conclusion of each plan year. Discretionary awards are
determined on the basis of the CEO's recommendation and the compensation
policies established by the Committee. Both the non-discretionary and
discretionary portions of an award are added to each participant's account
balance, one third of which is paid and the remainder of which remains at risk
in the account balance.
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LONG TERM INCENTIVE PLANS--AWARDS IN 1996(1)
<TABLE>
<CAPTION>
PERFORMANCE OR
NUMBER OF OTHER PERIOD
SHARES, UNITS UNTIL
OR OTHER MATURATION OR
NAME RIGHTS(2) PAYOUT(3) THRESHOLD(4) TARGET(5) MAXIMUM(6)
- --------------------------- ------------- --------------- ------------ --------- ------------
<S> <C> <C> <C> <C> <C>
R. O. Viets $ 174,139 -- $ 43,000 $ 95,110 $ 128,999
J. F. Vergon 139,536 -- 54,132 100,644 162,395
W. M. Shay 139,536 -- 54,654 101,166 163,961
T. S. Romanowski 107,640 -- (7) (7) (7)
M. J. Bowling 83,772 -- (7) (7) (7)
</TABLE>
(1) Amounts listed are dollar amounts under the Company's EVA-Based Incentive
Compensation Plan (the "Plan").
(2) Amounts listed are the net increases or decreases accrued during the 1996
plan year to previously accumulated balances.
(3) Each year, one-third of the net balance accumulated in the Plan is paid to
the participant. (See Summary Compensation Table for amounts paid in 1996.)
(4) Amounts listed are payable if net change in EVA in 1997 is zero.
(5) Amounts listed are payable if net change in EVA in 1997 is the same as in
1996.
(6) Amounts listed are accumulated balances at the beginning of the 1997 plan
year.
(7) Mr. Romanowski and Mr. Bowling, along with all Plan Participants except
Messrs. Viets, Vergon and Shay, will not be participating in the Plan in
1997 and, under the terms of the Plan, are entitled to distribution of their
accumulated account balances.
CERTAIN PLANS
CILCO BENEFIT REPLACEMENT PLAN. The CILCO Board of Directors has
established a Benefit Replacement Plan (the "Benefit Replacement Plan"). The
Benefit Replacement Plan provides for payments to participants from CILCO's
general funds to restore the retirement benefit under the CILCO non-contributory
Pension Plan for Management, Office and Technical Employees (the "Pension
Plan"), when such benefit is restricted by (1) the maximum defined benefit
limitation of Section 415(b) of the Internal Revenue Code of 1986, as amended
(the "Code"), (2) the indexed compensation limitation of Section 401(a)(17) of
the Code, and (3) participation in certain deferred compensation plans. The
Benefit Replacement Plan generally covers all Pension Plan participants affected
by these restrictions and provides for payment at the times and in the forms of
the Pension Plan.
15
<PAGE>
CILCO PENSION PLAN. Pension benefits are provided to Company employees
through CILCO's Pension Plan. Directors who are not employees do not participate
in this Plan. Pension benefits are determined using a formula based on years of
service and highest average rate of monthly earnings for any sixty consecutive
month period. The normal retirement date specified in the Pension Plan is age
65. Retirement prior to age 62 results in an appropriate reduction in pension
benefits.
The following table shows the aggregate annual benefits payable on a
straight life annuity basis upon retirement at normal retirement age under the
Pension Plan and under the Benefit Replacement Plan discussed above. The amounts
shown are not subject to any deduction for Social Security benefits or other
offset amounts other than that for an optional survivorship provision.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
--------------------------------------------------------
REMUNERATION 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS
- ------------- --------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
$ 200,000 42,750 57,000 71,250 85,500 99,750
225,000 48,096 64,128 80,160 96,192 112,224
250,000 53,442 71,250 89,064 106,878 124,692
300,000 64,128 85,500 106,878 128,250 149,628
350,000 74,814 99,750 124,692 149,628 174,564
400,000 85,500 114,000 142,500 171,000 199,500
</TABLE>
The sum of annual and long-term compensation shown for the executive
officers listed in the above Summary Compensation Table is substantially
compensation as covered by the Pension Plan and the Benefit Replacement Plan. At
January 1, 1997, the credited years of service under the Pension Plan for such
officers are as follows: R. O. Viets--23 years, W. M. Shay--14 years, J. F.
Vergon--25 years, T. S. Romanowski--25 years and M. J. Bowling--19 years.
COMPENSATION PROTECTION PLANS. The Boards of Directors of the Company and
CILCO have established Compensation Protection Plans providing benefits to
eligible employees. All of those named in the Summary Compensation Table are
eligible employees. The Plans provide severance benefits in the event of (i) a
termination of employment resulting directly or indirectly from a sale of
substantially all or certain assets of the Company or CILCO or (ii) a
termination of employment within two years after a change in control occurring
involuntarily for a reason other than unacceptable performance or occurring
voluntarily with good reason as defined in the Plans. A change in control
includes the sale of all or part of the business of the Company or CILCO to a
person not controlled by CILCORP, a merger or consolidation of CILCORP in which
CILCORP does not survive or in which its common stock is converted, the
acquisition of 30% of the beneficial ownership of CILCORP by a person together
with the failure of continuing
16
<PAGE>
directors to constitute a majority of its board of directors, or a sale of all
or substantially all of the assets of CILCORP. Upon a covered termination, a
participant is entitled to a continuation of base salary and benefit plan
coverage for two years (or a shorter period for participants below the position
of vice president with less than 30 years of service) after such termination.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
BACKGROUND AND POLICIES. The Compensation Committee of the Board of
Directors (the "Committee") is comprised of three non-employee members of the
Board. The Committee considers and makes recommendations to the Board with
respect to the compensation of the executive officers (the president and vice
presidents) of the Company. The Committee's compensation policies with respect
to the executive officers are as follows:
1. Compensation levels should be established which are internally fair and
equitable, bearing in mind (a) past practices, patterns and
relationships, and (b) the relationship between officer level
compensation and the compensation provided for top level managers
throughout the Company.
2. Compensation should be comparable and reasonable in relation to similar
positions in other companies of like size, structure and purpose. A
group of utility and utility holding companies of comparable size and
nature was used for comparative purposes. This group includes
consideration of thirteen holding companies with revenues under $1
billion that had a utility as a major subsidiary and non-regulated
businesses. The group differs from the group of companies identified for
comparative stock performance purposes.
3. Compensation of the executive officers should be directly related to the
economic value created for the Company's shareholders.
4. A compensation program should be designed to attract and retain superior
management.
EXECUTIVE OFFICER COMPENSATION PROGRAM. The Company's current executive
officer compensation program is comprised of two major components: base salary
and incentive compensation. Base salary levels for the Company's executive
officers are set by the Committee relative to other utility and utility holding
companies of similar size. In addition, the Committee also considers the
individual officer's experience and performance. Salaries of the executive
officers are reviewed each year by the Committee and may be adjusted based on
the individual's contribution to the Company's performance, as well as
competitive pay levels.
17
<PAGE>
The Company has not yet developed a policy with respect to qualifying
certain performance-based compensation paid to its named executive officers
under the EVA Plan and the Shareholder Return Plan for corporate deductibility
under Section 162(m) of the Internal Revenue Code. The total compensation paid
to each of these officers in 1996 was significantly below the $1,000,000
deductibility cap specified in Section 162(m). If and when it is anticipated
that the total compensation paid to any of these named executive officers will
reach this limit, the Company will establish such a policy.
PRESIDENT'S COMPENSATION. All outside directors of the Company are
engaged annually in a review of the president and chief executive officer's
performance prior to approving his compensation. The Compensation Committee of
the Board reviews such evaluations and makes a recommendation to the full Board
regarding compensation for the ensuing year.
Upon the Committee's recommendation, Mr. Viets was awarded a salary of
$385,000 commencing April 1, 1996, representing an increase of 10% over his
prior salary level. The Committee based its decision on the following factors:
(1) studies conducted by an external executive compensation consultant, which
indicated that Mr. Viets' base salary was moderately below the base salary
compensation of the chief executive officers at comparable companies, and (2)
the Company's performance in 1995 which included a return on common equity,
adjusted for the impact of CILCO's Early Retirement Program, of approximately
13% (which was slightly above the utility industry average return on equity of
approximately 11.4%) and total shareholder return which exceeded 40% as compared
with the utility average of approximately 30%. The increase was intended to
bring Mr. Viets' salary in line with those of the chief executive officers of
comparable companies. Mr. Viets also received an award of $64,500 in 1996
pursuant to the Company's EVA-Based Incentive Compensation Plan.
Compensation Committee
Homer J. Holland, CHAIRPERSON
Marcus Alexis
Jerry D. Caulder
18
<PAGE>
COMPARATIVE STOCK PERFORMANCE
The graph below compares the yearly percentage change in the cumulative
total shareholder return on the common stock of the Company during the five
years ended December 31, 1996 with the cumulative total return on the S&P 500
Index and the S&P Utility Index over the same period. The S & P Utility Index
includes gas pipeline and telecommunications companies in addition to electric
and combination companies. The comparison assumes $100 was invested on December
31, 1991 in the Company's common stock and in each of the foregoing indices, and
assumes reinvestment of dividends.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
1991 1992 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C> <C>
Cilcorp $100.00 $111.67 $112.24 $103.94 $146.40 $134.32
S&P 500 $100.00 $107.62 $118.46 $120.03 $165.13 $203.05
S&P Utilities $100.00 $108.09 $123.70 $113.87 $161.73 $166.78
</TABLE>
19
<PAGE>
2. SHAREHOLDER PROPOSAL
(THE BOARD RECOMMENDS THAT CILCORP SHAREHOLDERS
VOTE AGAINST PROPOSITION 2.)
Two shareholders of the Company have advised the Company that they will
submit the proposal set forth below at the annual meeting. The names and
addresses of the proponents and the number of shares held by the proponents will
be furnished by the Secretary of the Company to any person, orally or in
writing, as requested, promptly upon the receipt of an oral or written request.
"The shareholders of CILCORP, Inc. request the following amendment to
the Bylaws and (or) Articles of Incorporation be adopted:
Beginning at the 1998 CILCORP, Inc. Annual Shareholders meeting, each
director shall at all times, hold directly in their name, an amount of
shares of CILCORP, Inc. common or voting class preferred, of such
quantity not to be less than the average shareholder's holding of the
particular class of stock. The number of shares shall be based upon the
annual report to shareholders; of the preceding year.
It shall be the duty of the Secretary of CILCORP, Inc. to certify this
compliance prior to an individual being seated on our Board of
Directors.
Should any director fail to comply with this ownership requirement, such
director shall have thirty (30) days from the date of non-compliance to
comply. Failure to comply shall result in disqualification and such
director's position shall be declared vacant."
SHAREHOLDERS' STATEMENT IN SUPPORT OF PROPOSAL
"In the proponents opinion, a director with an investment at least equal
to that of the average shareholder (holding 940 shares based upon the
current annual report) should help to instill strong, undivided and
lasting interest in our corporation. This should promote directors to
think like the average owner and expose them directly to the risks of
the business as well as it's opportunities. Assets represented in the
form of--PHANTOM or other forms of ILLUSIONARY shares, must not be
construed as bonafide stock holdings in CILCORP INC. An investment in
CILCORP, Inc. is a monetary commitment; however, if the amount is of a
superficial nature, the question of dedication becomes one of
conjecture. Your directors, who have numerous overlapping Directorships
in this community should certainly have the ability to examine
management's initiatives as being in the best interest of the company
and it's shareholders. For a number of years we have witnessed board
members placing their retainer and meeting fees in tax deferred accounts
drawing interest on money from our
20
<PAGE>
company while avoiding buying additional common shares; therefore, the
question we ask--"WHY ARE DIRECTORS UN-WILLING TO PLACE THEIR DOLLAR AT
RISK FOR THE DECISIONS THEY AUTHORIZE?"
This proposal does not eliminate highly qualified individuals from
serving on our Board of Directors, but demands a highest level of
motivation and commitment to the employees, customers and shareholders."
BOARD OF DIRECTORS' STATEMENT IN OPPOSITION TO SHAREHOLDER PROPOSAL
The Board believes that the establishment of a mandatory, arbitrary level
of stock ownership by CILCORP directors is unwarranted. A director of CILCORP
owes, by law, a fiduciary obligation to the shareholders of the Company. He or
she is obligated to exercise the utmost duty of care and loyalty to shareholders
and to conduct the business and affairs of the Company in such a way as to
maximize the benefits of stock ownership. The selection of CILCORP's directors
should be based primarily on the business experience, management skill and sound
judgment which they contribute to the Board rather than on the number of shares
owned and wealth accumulation.
Any implication by this proposal that CILCORP's current directors are not
dedicated to the interests of the Company and its shareholders is false and
misleading. All of the Company's current directors hold significant investment
interests in the Company, consisting of outright stock ownership and deferred
compensation arrangements which are the equivalent of additional investment in
the Company's stock. At January 1, 1997, directors had a combined investment in
the Company exceeding $4 million, an average in excess of $420,000 per director.
The average investment by directors in the Company's common stock or common
stock equivalents exceeds 5,000 shares, an increase of approximately 1,600
shares during the last two years.
Six incumbent directors are participating in a deferred compensation plan
which provides that the value of amounts deferred fluctuates proportionately
with the performance of the Company's common stock. The economic interest is not
"illusionary." The compensation deferred is money that the Directors are
entitled to receive currently but do not because they have chosen to leave it
with this Company to be treated as an investment in common stock. Moreover, a
participant in the plan cannot dispose of his or her plan investment so long as
he or she is a director. Because plan participants cannot liquidate their stock
holdings for short term advantage, the Company believes the plan requires a
higher level of commitment to CILCORP than outright share ownership.
To amend the Company's By-laws to include the foregoing proposal, the
affirmative vote of 75% of the shares outstanding and entitled to vote thereon
at the annual meeting is required.
21
<PAGE>
To amend the Company's Articles of Incorporation to include the foregoing
proposal, the affirmative vote of a majority of the shares outstanding and
entitled to vote thereon at the annual meeting is required, as well as approval
by the Board.
3. OTHER MATTERS
The Board has no knowledge of any business to be presented for
consideration at the annual meeting other than that discussed above. Should any
other business properly come before the meeting or any adjournment thereof, it
is intended that the shares represented by proxies will be voted with respect
thereto in accordance with the best judgment of the persons named in such
proxies.
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has appointed Arthur Andersen LLP, independent
public accountants, to audit the accounts of the Company for 1997. A
representative of Arthur Andersen LLP is expected to be present at the annual
meeting and will be given an opportunity to make a statement if he so desires
and to respond to appropriate questions.
PROPOSALS OF SHAREHOLDERS
Proposals of shareholders to be presented at the April 28, 1998 annual
meeting must be received not later than November 11, 1997 for inclusion in the
proxy statement and form of proxy relating to that meeting. Proposals should be
sent to the Secretary, CILCORP Inc., 300 Hamilton Boulevard, Suite 300, Peoria,
Illinois 61602.
By Order of the Board of Directors,
John G. Sahn
Vice President, General Counsel and
Secretary
March 10, 1997
22
<PAGE>
[LOGO]
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned appoints H.S. Peacock, R.O. Viets, and J.G. Sahn, and
each of them, attorneys and proxies with power of substitution to each, with
authority to vote all shares which the undersigned would be entitled to vote
if personally present at the 1997 annual meeting of shareholders of CILCORP
Inc., or at any adjournment thereof, upon the items set forth in the notice
of meeting and proxy statement relating thereto and, in their discretion,
upon any other matter which may properly come before the meeting. The shares
represented hereby will be voted as directed on the reverse of this card.
IF NOT OTHERWISE DIRECTED, THIS PROXY WILL BE VOTED
FOR ITEM 1 AND AGAINST ITEM 2.
(CONTINUED AND TO BE SIGNED ON THE OTHER SIDE)
<PAGE>
PROXY. PLEASE DATE AND SIGN EXACTLY AS NAME APPEARS BELOW. EACH JOINT OWNER
SHOULD SIGN. ATTORNEY, EXECUTOR, ADMINISTRATOR, TRUSTEE, CORPORATE
OFFICER OR OTHERS SIGNING IN A REPRESENTATIVE CAPACITY SHOULD GIVE
THEIR FULL TITLES.
DATE: ____________________________, 1997
________________________________________
SIGNATURE/S
_________________________________________
1. ELECTION OF DIRECTORS
/ / FOR all nominees listed / / WITHHOLD AUTHORITY
below (except as marked to vote for all nominees
to the contrary below) listed below
Nominees: M. Alexis, H.S. Peacock, R.N. Ullman, and R.O. Viets
INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, WRITE
THAT NOMINEE'S NAME IN THE SPACE PROVIDED BELOW.
______________________________________________________________________________
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THE FOLLOWING.
2. Shareholder proposal FOR AGAINST ABSTAIN
(director share ownership) / / / / / /
NO POSTAGE REQUIRED IF RETURNED IN THE ENCLOSED
ENVELOPE AND MAILED IN THE UNITED STATES.
