<PAGE>
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:
[_] 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
NIPSCO INDUSTRIES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
NIPSCO INDUSTRIES, INC.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
NOTICE OF ANNUAL MEETING
March 10, 1995
To the Holders of Common Shares of
NIPSCO Industries, Inc.:
The annual meeting of the shareholders of NIPSCO Industries, Inc. (the
"Company"), will be held at the Center for Visual and Performing Arts, 1040
Ridge Road, Munster, Indiana, on Wednesday, April 12, 1995, at 10:00 a.m.,
Central Daylight Savings Time, for the following purposes:
(1) to elect three members of the Board of Directors, each for a term of
three years; and
(2) to transact any other business that may properly come before the meeting
or any adjournment or adjournments thereof.
Shareholders of record on February 21, 1995, will be entitled to vote at the
meeting. The stock transfer books will not close.
The Company has approximately 39,000 common shareholders of record. In order
that there may be proper representation at the meeting, each shareholder is
requested to vote, sign and mail the enclosed proxy at once. If sufficient
proxies are not obtained, an adjournment will be necessary. Please help avoid
the expense and delay of adjourning the meeting by mailing your proxy promptly.
Shareholders attending the meeting may vote in person, and in such cases
proxies they have signed will not be voted.
In order to facilitate arrangements for the meeting, we would like to know in
advance how many shareholders expect to attend in person. If you plan to
attend, please indicate in the space provided on the proxy card.
Please Vote, Date, Sign and Return the Enclosed Proxy Promptly.
LOGO
Nina M. Rausch
Secretary
LOGO
- --------------------------------------------------------------------------------
<PAGE>
PROXY STATEMENT
THE ACCOMPANYING PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
THE COMPANY AND IS REVOCABLE BY THE SHAREHOLDER. The common shares, no par
value, of the Company ("Common Shares") represented by the proxies will be
voted as directed, but in the absence of direction, proxies will be voted for
all of the nominees for director. The proxy statement and form of proxy are
first being sent to shareholders on March 10, 1995. The expense of this
solicitation will be borne by the Company. It is intended that the original
solicitation of proxies by mail and a reminder letter may be supplemented by
telephone, telegraph and personal solicitation by officers and regular
employees of the Company or its subsidiaries. In addition, the Company has
retained Morrow & Co., Inc., for a fee of $8,000 plus reimbursement of
expenses, to aid in the solicitation of proxies. Requests will also be made of
brokerage houses and other nominees and fiduciaries to forward proxy material
at the expense of the Company to the beneficial owners of stock held of record
by such persons.
All of a shareholder's shares registered in the same name, including those
held for the shareholder as a participant in the Company's Automatic Dividend
Reinvestment and Share Purchase Plan and the Tax Deferred Savings Plan, will be
represented on one proxy.
Proxies may be revoked at any time before a vote is taken or the authority
granted is otherwise exercised. Revocation of proxies may be accomplished by
delivering an instrument of revocation or a duly executed proxy bearing a later
date to the Secretary of the Company or by attending the meeting and voting in
person. Attendance at the meeting will not in and of itself revoke a proxy.
If you are planning to attend the meeting in person, please indicate in the
space provided on the proxy card, so that the Company may facilitate
arrangements.
VOTING SECURITIES--
The close of business on February 21, 1995, is the date for the determination
of the number of shares outstanding and of shareholders entitled to notice of
and to vote at the meeting. As of February 21, 1995, the Company had issued and
outstanding 64,185,689 Common Shares owned by approximately 39,000 shareholders
of record. Each common share is entitled to one vote on each matter voted upon.
A quorum of shareholders is necessary to take action at the Annual Meeting. A
majority of the outstanding Common Shares, represented in person or by proxy,
will constitute a quorum of shareholders at the Annual Meeting. The judges of
election will determine whether or not a quorum is present. A plurality vote of
the shares represented at the meeting is required to elect a director.
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Votes cast by proxy or in person at the meeting will be tabulated by the judges
of election appointed for the meeting.
ELECTION OF DIRECTORS
NOMINEES FOR ELECTION AS DIRECTORS--
The Company's Board of Directors is composed of nine directors, who are
divided into three classes. One class is elected each year for a term of three
years. Upon recommendation of the Nominating and Compensation Committee, the
Board of Directors has nominated for reelection as directors Steven C. Beering,
Ernestine M. Raclin and Denis E. Ribordy, each for a term of three years. The
Board of Directors does not anticipate that any of the nominees will be unable
to serve, but if such a situation should arise the proxies will be voted in
accordance with the best judgment of the person or persons acting thereunder.
The following chart gives information about nominees (who have consented to
being named in the proxy statement and to serve if elected) and incumbent
directors. The dates shown for service as a director include service as a
director of Northern Indiana Public Service Company ("Northern Indiana") prior
to the March 3, 1988 share exchange with the Company. The Company's current
directors are also the directors of Northern Indiana, now a wholly-owned
subsidiary of the Company.
<TABLE>
<CAPTION>
NAME, AGE AND PRINCIPAL OCCUPATIONS HAS BEEN
FOR PAST FIVE YEARS AND PRESENT DIRECTOR
DIRECTORSHIPS HELD SINCE
----------------------------------- --------
<S> <C>
NOMINEES FOR TERMS TO EXPIRE IN 1998
Steven C. Beering, 62--President of Purdue University, West
Lafayette, Indiana. Dr. Beering is also a director of Arvin
Industries, Inc., American United Life Insurance Company, Eli Lilly
and Company and Guidant Corporation................................ 1986
Ernestine M. Raclin, 67--Chairman of the Board, 1st Source
Corporation, a bank holding company, and 1st Source Bank, South
Bend, Indiana...................................................... 1983
Denis E. Ribordy, 65--Chairman and Chief Executive Officer of the
Chicago Motor Club, Chicago, Illinois; retired President of Ribordy
Drugs, Inc., Merrillville, Indiana, a retail drugstore chain. Mr.
Ribordy is also a director of Mercantile National Bank of Indiana.. 1981
</TABLE>
2
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<TABLE>
<CAPTION>
NAME, AGE AND PRINCIPAL OCCUPATIONS HAS BEEN
FOR PAST FIVE YEARS AND PRESENT DIRECTOR
DIRECTORSHIPS HELD SINCE
----------------------------------- --------
<S> <C>
DIRECTORS WHOSE TERMS EXPIRE IN 1996
Ian M. Rolland, 61--Chairman and Chief Executive Officer of Lincoln
National Corporation, Fort Wayne, Indiana, an insurance and
financial services firm, since January 1, 1992, previously President
and Chief Executive Officer; and Chairman and Chief Executive
Officer of The Lincoln National Life Insurance Company. Mr. Rolland
is also a director of Lincoln National Corporation, Tokheim
Corporation, Norwest Corporation, Norwest Bank Indiana, N.A. and
Emphesys Financial Group, Inc....................................... 1978
Edmund A. Schroer, 67--Consultant to the Company; retired March 1,
1993 as Chairman, President and Chief Executive Officer of the
Company and Chairman and Chief Executive Officer of Northern
Indiana............................................................. 1977
John W. Thompson, 45--General Manager--Marketing, IBM Corporation,
Somers, New York. IBM is a worldwide corporation, whose offerings
include services, software, systems, products and technologies. Mr.
Thompson is also a director of IBM Credit Corporation............... 1993
DIRECTORS WHOSE TERMS EXPIRE IN 1997
Arthur J. Decio, 64--Chairman of the Board and Chief Executive
Officer and Director of Skyline Corporation, Elkhart, Indiana, a
manufacturer of manufactured housing and recreational vehicles. Mr.
Decio is also a director of Quality Dining, Inc..................... 1991
Gary L. Neale, 55--Chairman, President and Chief Executive Officer of
the Company and of Northern Indiana since March 1, 1993; prior
thereto, Executive Vice President of the Company, and President and
Chief Operating Officer of Northern Indiana. Mr. Neale is also a
director of Modine Manufacturing Company............................ 1991
Robert J. Welsh, Jr., 59--President and Chief Executive Officer of
Welsh Oil, Inc., Merrillville, Indiana, a marketer of petroleum
products through convenience stores and travel centers. Mr. Welsh is
also a director of NBD Indiana, Inc................................. 1988
</TABLE>
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS--
The Board of Directors of the Company met ten times during 1994. The Board
has the following six standing committees: the Executive Committee, the Audit
Committee, the Nominating and Compensation Committee, the Environmental Affairs
Committee, the Public Affairs and Employment Committee and the Corporate
Governance Committee.
3
<PAGE>
During 1994, each director attended at least 80% of the combined total number
of the Company's Board meetings and the meetings of the respective committees
on which he or she was a member.
The Executive Committee has the authority to act on behalf of the Board at
such times as is reasonably necessary when the Board is not in session. The
Committee met once in 1994. Mr. Neale is Chairman and Messrs. Decio, Ribordy,
Rolland and Welsh were members of the Committee in 1994.
The Audit Committee met five times in 1994. The Committee has reviewed and
made recommendations to the Board with respect to the engagement of the
independent public accountants, both for 1994 and 1995, and the fees relating
to audit services and other services performed by them. The Committee meets
with the independent public accountants and officers responsible for Company
financial matters. Members of the Committee in 1994 were Mr. Rolland, Chairman,
and Messrs. Decio, Schroer and Thompson.
The Nominating and Compensation Committee met three times in 1994. The
Committee advises the Board with respect to nominations of Directors and the
salary, compensation and benefits of directors and officers of the Company. Mr.
Ribordy was Chairman of the Committee, and Dr. Beering, Mrs. Raclin and Mr.
Welsh were members during 1994. The Committee considers nominees for Directors
recommended by shareholders. The Company's By-laws require that shareholders
who desire to nominate a person for election as a director at the 1996 annual
meeting must deliver a written notice to the Secretary of the Company by
November 13, 1995. The notice of nomination must set forth (i) the name, age
and address of each nominee proposed, (ii) the principal occupation or
employment of the nominee, (iii) the number of Company Common Shares
beneficially owned by the nominee and (iv) such other information concerning
the nominee as would be required, under the rules of the Securities and
Exchange Commission, in a proxy statement soliciting proxies for the election
of the nominee. The nomination notice must also include the nominating
shareholder's name and address and the number of Common Shares beneficially
owned by the shareholder. The shareholder must also furnish the signed consent
of the nominee to serve as a director, if elected.
The Environmental Affairs Committee met twice during 1994. The Committee
reviews the status of environmental compliance of the Company, and considers
Company public policy issues. Members of the Committee in 1994 were Mr. Welsh,
Chairman, Dr. Beering, and Messrs. Decio and Schroer.
The Public Affairs and Employment Committee met once in 1994. The Committee
advises the Board regarding charitable and political contributions, employment
policies, shareholder proposals
4
<PAGE>
concerning matters of general public interest and consumer and utility industry
related issues. Members of the Committee in 1994 were Mrs. Raclin, Chairman,
and Messrs. Ribordy, Rolland and Thompson.
The Corporate Governance Committee met once in 1994. The Committee consists
of all members of the Board who are not also officers. The Committee meets once
a year to evaluate/advise the Board regarding the performance of the Board of
Directors and each of its members and the nature and amount of information
flowing between the Board, management and shareholders. Mr. Rolland was
Chairman of the Committee in 1994.
COMPENSATION OF DIRECTORS--
Each director who is not receiving a salary from the Company is paid $15,000
per year, $3,000 annually per standing committee on which the director sits,
$1,000 annually for each committee chairmanship, $750 for each Board meeting
attended and $750 per committee meeting attended. Directors of the Company do
not receive any additional compensation for services as a director of any
Company subsidiary, including Northern Indiana. Under a deferred compensation
arrangement, directors may have their fees deferred in the current year and
credited to an interest-bearing account or to a phantom stock account for
payment in the future.
The Company's Nonemployee Director Retirement Plan provides a retirement
benefit for each nonemployee director of the Company who has completed at least
five years of service on the Board. The benefit will be an amount equal to the
annual retainer for Board service in effect at the time of the Director's
retirement from the Board, to be paid for the lesser of ten years or the number
of years of service as a nonemployee director of the Company.
The Company's Nonemployee Director Stock Incentive Plan provides for grants
of restricted Common Shares to nonemployee directors of the Company. Initial
grants were made in 1992, following shareholder approval of the plan, at the
level of 250 shares for each year of service as a director, and 1,000
restricted Common Shares have been granted to each nonemployee director elected
or reelected since that date. A grant of 1,000 shares will be made in the
future to each person, other than an employee of the Company, who is elected or
reelected as a director of the Company. The grants of restricted shares vest in
20% annual increments, with full vesting five years after the date of award.
In 1994, the Company adopted its Directors' Charitable Gift Program for
nonemployee directors. Under the program, the Company will make a donation to
one or more eligible tax-exempt organizations as designated by each eligible
director. The Company will contribute up to an aggregate of $125,000 as
designated by nonemployee directors having served as a director of the
5
<PAGE>
Company for at least five years and up to $250,000 as designated by those
having served ten years or more. Organizations eligible to receive a gift under
the program include charitable organizations and educational institutions
located in Indiana and educational institutions that the director attended or
for which he or she serves on its governing board. Individual directors will
derive no financial benefit from the program, as all deductions relating to the
charitable donations will accrue solely to the Company. All current nonemployee
directors are eligible to participate in the program.
An agreement between the Company and Mr. Schroer, retired Chairman, President
and Chief Executive Officer of the Company, provides that, for a period of
three years beginning March 1, 1993, he is to be engaged by the Company as an
independent consultant for an annual fee of $200,000. In the event of death
during the term of the consulting contract, his survivor is entitled to such
fees for the remainder of the three year term. The agreement provides for
severance payments equal to amounts remaining due for the consulting period in
the event the consulting agreement is terminated at any time by the Company
(other than for Good Cause) or due to death or disability, or if Mr. Schroer
voluntarily terminates the agreement with Good Reason.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The Company is not aware of any beneficial owner of more than 5% of its
Common Shares, as of January 31, 1995.
The following table sets forth information as to the beneficial ownership of
Common Shares, as of January 31, 1995, for each of the named directors and
executive officers, and for all directors and executive officers as a group.
<TABLE>
<CAPTION>
NAME OF
BENEFICIAL AMOUNT AND NAME OF
OWNER BENEFICIAL OWNERSHIP(/1/)
---------- -------------------------
<S> <C>
Steven C. Beering.............................. 1,793
Arthur J. Decio................................ 3,250
Gary L. Neale.................................. 153,656(/2/)
Ernestine M. Raclin............................ 9,672
Denis E. Ribordy............................... 25,163(/3/)
Ian M. Rolland................................. 6,181
Edmund A. Schroer.............................. 20,550
John W. Thompson............................... 1,192
Robert J. Welsh, Jr............................ 5,000
Stephen P. Adik................................ 87,291(/2/)
Patrick J. Mulchay............................. 63,762(/2/)
Jeffrey W. Yundt............................... 79,882(/2/)
John W. Dunn................................... 68,499(/2/)
All directors and executive officers as a
group......................................... 869,499(/2/)
</TABLE>
6
<PAGE>
- --------
(1) The number of shares owned includes shares held in the Company's Automatic
Dividend Reinvestment and Share Purchase Plan, shares held in the Company's
Tax Deferred Savings Plan (the "401(k) Plan") and restricted shares awarded
under the Company's Long-Term Incentive Plan (the "Incentive Plan") and
Nonemployee Director Stock Incentive Plan, where applicable. The percentage
of Common Shares owned by all directors and officers as a group is 1.4
percent of the Common Shares outstanding.
(2) The totals include shares for which the following executive officers have a
right to acquire beneficial ownership, within 60 days after January 31,
1995, by exercising stock options granted under the Incentive Plan: Gary L.
Neale--75,000 shares; Stephen P. Adik--43,600 shares; Patrick J. Mulchay--
31,200 shares; Jeffrey W. Yundt--42,300 shares; John W. Dunn--32,500
shares; and all executive officers as a group--369,100 shares.
(3) Mr. Ribordy disclaims beneficial ownership of 100 shares owned by his wife.
EXECUTIVE COMPENSATION
NOMINATING AND COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION--
The Nominating and Compensation Committee's (the "Compensation Committee")
compensation policy for all executive officers, including the person who served
as Chief Executive Officer of the Company during 1994 and the four other most
highly compensated officers of the Company (the "Named Officers"), is designed
to relate total compensation (defined as base salary, incentive bonus and long-
term, stock-based compensation) to corporate performance. The Compensation
Committee has implemented a "pay-for-performance" program which is designed to
position the Company's executive compensation competitively and to reward
performance that creates additional shareholder value. The Compensation
Committee discusses and considers executive compensation matters, then makes
recommendations to the full Board of Directors, which takes the final action on
such matters. The Board accepted all of the Compensation Committee's
recommendations in 1994.
The Compensation Committee has engaged an independent, nationally known,
compensation consulting firm, Hewitt Associates ("Hewitt"), to advise it and
provide surveys of comparative compensation practices for a group of similarly
sized electric, gas or combination utility companies, approximately half of
which are located in the Midwest. The 1994 executive compensation comparative
group consisted of 20 companies from which data was available to Hewitt and
which were believed to be competitors of the Company for executive talent. The
comparative compensation group is subject to change for future years if
information about any company included in the group is not available, if it is
determined that any utility companies included in the group are no longer
competitors for executive talent, or if different utility companies are
determined to be
7
<PAGE>
competitors. The Company's comparative compensation group is not the same as
the corporations which make up the Dow Jones Utilities Index in the Stock Price
Performance Graph included in this proxy statement.
The Compensation Committee considers the surveys provided by Hewitt in
determining base salary, incentive bonus and long-term stock-based
compensation. The Compensation Committee's philosophy is to set conservative
base salaries while providing performance-based variable compensation through
the Bonus and Incentive Plans described below to allow total compensation to
fluctuate according to the Company's financial performance. Long-term incentive
awards are stock-based (e.g., stock options or goal-based restricted stock
awards) to emphasize long-term stock price appreciation and the concomitant
increased shareholder value. In 1994, total compensation of the executive
officers, including the Chief Executive Officer, was targeted at or near the
75th percentile of the comparative compensation group. Total compensation would
reach this goal only if the Company met its earnings and operating expense
targets for the year and its long-term stock price targets. Base salaries of
the executive officers, as a group, constituted approximately 50% of total
target compensation.
In establishing Mr. Neale's base salary for 1994, the Compensation Committee
reviewed information provided by Hewitt regarding the chief executive officer
compensation practices of the group of 20 comparative utilities described
above. The Compensation Committee determined to set base salary near the median
salary of the comparative group, giving regard to Mr. Neale's proven abilities
and record with the Company since joining it as Executive Vice President and
Chief Operating Officer in 1989. As with the other executive officers, Mr.
Neale's total compensation was targeted to be at about the 75th percentile of
the comparative compensation group, if the Company met its targeted financial
goals. The result of the Compensation Committee's determination as to Mr.
Neale's total compensation package was that more than 50% of Mr. Neale's total
compensation was performance based and at risk, dependent upon the Company's
earnings per share, Northern Indiana's operating expense level and the
Company's stock price performance. The Compensation Committee noted that this
compensation only would be realized if specific financial benchmarks were
reached by the Company.
Annual incentive awards for all executive officers are determined in
accordance with the Senior Management Incentive Plan (the "Bonus Plan"). The
Bonus Plan sets forth a formula established at the beginning of each fiscal
year by the Compensation Committee for awarding incentive bonuses, based upon
the Company's financial performance. Bonuses awarded to each of the Named
Officers (including the Chief Executive Officer) are based on overall corporate
financial performance, rather than individual performance of the executive. In
1994, the bonus formula (and the relative weight of the factors on which it was
based) was based upon attaining targets for both the Company's
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earnings per share and the operating expense level of Northern Indiana. The
range of awards and levels of awards (as a percent of base salary), if
financial performance targets are achieved, are as follows:
<TABLE>
<CAPTION>
AWARD IF
RANGE TARGETS MET
-------- -----------
<S> <C> <C>
Chief Executive Officer................................. 0 to 60% 50%
Named Officers and certain other executive officers..... 0 to 60% 40%
All other executive officers............................ 0 to 45% 30%
</TABLE>
The percentage bonus opportunity levels have remained constant since inception
of the Bonus Plan in 1990; however, the required financial performance levels
of the Company necessary to attain the maximum and target bonus levels have
been increased annually. In 1994, the Company's actual earnings per share fell
slightly below the targeted amount, but operating expense levels were more
favorable than targeted.
Executive officers are also eligible to receive awards under the Company's
Incentive Plan. Under the Incentive Plan, stock options, stock appreciation
rights, performance units, restricted stock awards and supplemental cash
payments may be awarded. Only stock options were awarded in 1994. Base salaries
of the executive officers, prior awards under the Incentive Plan, and the
Company's total compensation target are considered in establishing long-term
incentive awards. Options granted to executive officers are valued using the
Black-Scholes option pricing model at the time of grant for purposes of
determining the number of options to be granted to reach total target
compensation. In 1994, the number of options granted to the Chief Executive
Officer and other executive officers (including all Named Officers) was based
on these considerations. The compensation value of stock options depends on
actual stock price appreciation.
Section 162(m) of the Internal Revenue Code provides that, commencing in
1994, compensation in excess of $1,000,000 per year paid to the chief executive
officer or any of the four other most highly compensated executive officers
employed at year-end, other than compensation meeting the definition of
"performance based compensation," will not be deductible by a corporation for
federal income tax purposes. The Compensation Committee believes that the
Company's incentive bonus and long-term stock-based compensation constitutes
performance based compensation for purposes of the Internal Revenue Code. In
light of its emphasis on such performance based compensation, the Compensation
Committee does not anticipate that the limits of Section 162(m) will affect the
deductibility of any compensation paid by the Company. However, the
Compensation Committee will continue to review the deductibility of
compensation under Section 162(m) and related regulations.
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The Compensation Committee believes that its overall executive compensation
program has been successful in providing competitive compensation sufficient to
attract and retain highly qualified executives, while at the same time
encouraging increased performance from the executive officers which creates
additional shareholder value.
Nominating and Compensation
Committee
Denis E. Ribordy, Chairman
Steven C. Beering
Ernestine M. Raclin
Robert J. Welsh, Jr.
January 27, 1995
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STOCK PRICE PERFORMANCE GRAPH
The following graph compares the yearly change in the Company's cumulative
total shareholder return on Common Shares, during the years 1990 through 1994,
with the cumulative total return on the Standard & Poor's 500 Stock Index and
the Dow Jones Utilities Average, assuming the investment of $100 on December
31, 1989 and the reinvestment of dividends.
LOGO
<TABLE>
[GRAPH APPEARS HERE]
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
AMONG NIPSCO INDUSTRIES, INC., S&P 500 INDEX AND DJ UTILITIES
<CAPTION>
Measurement Period NIPSCO S&P
(Fiscal Year Covered) INDUSTRIES 500 INDEX DJ UTILITIES
- ------------------- ---------- --------- ------------
<S> <C> <C> <C>
Measurement Pt-
12/31/89 $100 $100 $100
FYE 12/31/90 $103.31 $ 96.90 $ 95.46
FYE 12/31/91 $148.52 $126.36 $109.95
FYE 12/31/92 $160.60 $135.97 $114.38
FYE 12/31/93 $207.96 $149.65 $125.42
FYE 12/31/94 $197.62 $147.35 $ 99.28
</TABLE>
11
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COMPENSATION OF EXECUTIVE OFFICERS--
Summary. The following table summarizes all annual and long-term compensation
for services to the Company and its subsidiaries, including Northern Indiana,
for the years 1994, 1993 and 1992 awarded to, earned by or paid to each of the
Named Officers.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION(/1/) COMPENSATION
-------------------------- -------------------
AWARDS
-------------------
SECU-
OTHER RITIES ALL
ANNUAL RESTRICTED UNDER- OTHER
COMPEN- STOCK LYING COMPEN-
SALARY BONUS SATION AWARDS OPTIONS/ SATION
NAME AND PRINCIPAL POSITION YEAR ($) ($)(/2/) ($)(/3/) ($)(/4/) SARS (#) ($)(/5/)
--------------------------- ---- ------ -------- -------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Gary L. Neale, Chairman, 1994 $460,000 $230,000 $1,903 $ 0 25,000 $11,190
President and Chief 1993 400,000 206,000 1,475 0 25,000 10,479
Executive Officer(/6/) 1992 275,000 91,658 656 0 10,000 5,560
Stephen P. Adik, 1994 205,000 82,000 1,118 0 8,000 1,927
Executive Vice President, 1993 185,000 87,875 476 0 8,000 2,877
Chief Financial Officer and 1992 185,000 49,340 871 0 6,000 2,294
Treasurer
Patrick J. Mulchay, 1994 175,000 70,000 852 0 8,000 3,078
Executive Vice President 1993 140,000 66,500 1,057 0 8,000 4,332
and Chief Operating 1992 120,000 32,004 316 0 6,000 1,745
Officer--Electric
Jeffrey W. Yundt 1994 175,000 70,000 1,174 0 8,000 739
Executive Vice President and 1993 157,000 74,575 1,028 0 8,000 1,134
Chief Operating Officer-- 1992 157,000 41,872 583 0 6,000 1,175
Gas
John W. Dunn, 1994 165,000 66,000 811 0 6,500 2,275
Group Vice President 1993 157,000 74,575 834 0 8,000 951
1992 157,000 41,872 435 0 6,000 1,219
</TABLE>
- --------
(/1/) Compensation deferred at the election of Named Officer is reported in the
category and year in which such compensation was earned.
(/2/) All bonuses are paid pursuant to the Bonus Plan. The Bonus Plan is
designed to supplement a conservative base salary with incentive bonus
payments if targeted financial performance is
12
<PAGE>
attained. The 1994 target aggregate payout for the Bonus Plan for the
Named Officers was $518,000, which was equal to the actual aggregate
payout for the Named Officers. See "Nominating and Compensation Committee
Report on Executive Compensation."
(/3/) In accordance with applicable Securities and Exchange Commission rules,
the amounts shown for each of the Named Officers do not include
perquisites and other personal benefits, as the aggregate amount of such
benefits is less than the lesser of $50,000 and 10% of the total salary
and bonus of such Named Officer.
(/4/) The Company has not awarded restricted shares since 1991. The restrictions
on shares awarded during 1991 lapse five years from the date of grant and
become up to 100% vested based on the amount of appreciation of the
Company's Common Share price during the five-year restriction period.
There is a two-year holding period for the shares after the restrictions
lapse. Restricted shares held (assuming 100% vesting) and aggregate market
value at December 30, 1994 (based on the average of the high and low
prices for that date as reported in The Wall Street Journal) were as
follows: Mr. Neale, 30,000 shares valued at $890,625; Messrs. Adik, Dunn,
and Yundt, 15,000 shares each valued at $445,312, and Mr. Mulchay, 10,000
shares valued at $296,875. Dividends on the restricted shares are paid to
the Named Officers.
(/5/) Effective January 1, 1991, the Chairman, President, Executive Vice
Presidents and Vice Presidents of the Company and Northern Indiana have
available to them a supplemental life insurance plan which provides split-
dollar coverage of up to 3.5 times base compensation as of commencement of
participation in the plan and 1.75 times base compensation after
retirement. "All other compensation" represents Company contributions to
the 401(k) Plan and the dollar value of the benefit to the Named Officers
of the remainder of the premiums paid by the Company during 1994 on behalf
of the Named Officers under the supplemental life insurance plan, as
follows: Mr. Neale--$1,026 401(k) Plan, $862 premium value and $9,302 term
insurance cost; Mr. Adik--$942 401(k) Plan, $371 premium value and $614
term insurance cost; Mr. Mulchay, $349 401(k) Plan, $330 premium value and
$2,399 term insurance cost; Mr. Yundt, $0 401(k) Plan, $298 premium value
and $441 term insurance cost and Mr. Dunn--$193 401(k) Plan, $326 premium
value and $1,756 term insurance cost.
(/6/) Prior to March 1, 1993, Mr. Neale served as Executive Vice President of
the Company and President and Chief Operating Officer of Northern
Indiana.
13
<PAGE>
Option Grants in 1994. The following table sets forth grants of options to
purchase Common Shares of the Company made during 1994 to the Named Officers.
No stock appreciation rights were awarded during 1994.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
- ------------------------------------------------------------------
NUMBER
OF PERCENT
SECU- OF TOTAL
RITIES OPTIONS/
UNDER- SARS
LYING GRANTED
OPTIONS/ TO
SARS EMPLOYEES EXERCISE OR GRANT DATE
GRANTED IN FISCAL BASE PRICE EXPIRATION PRESENT VALUE
NAME (#)(/1/) YEAR(/2/) ($/SH)(/3/) DATE ($)(/4/)
---- -------- --------- ----------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Gary L. Neale........... 25,000 8.5% $28.75 08/23/04 $104,000
Stephen P. Adik......... 8,000 2.7% 28.75 08/23/04 33,280
Patrick J. Mulchay...... 8,000 2.7% 28.75 08/23/04 33,280
Jeffrey W. Yundt........ 8,000 2.7% 28.75 08/23/04 33,280
John W. Dunn............ 6,500 2.2% 28.75 08/23/04 27,040
</TABLE>
- --------
(/1/) All options granted in 1994 are fully exercisable commencing one year from
the date of grant. Vesting may be accelerated as a result of certain
events relating to a change in control of the Company. The exercise price
and tax withholding obligation related to exercise may be paid by delivery
of already owned Common Shares or by reducing the number of Common Shares
received on exercise, subject to certain conditions.
(/2/) Based on an aggregate of 294,650 options granted to all employees in 1994.
(/3/) All options were granted at the average of high and low prices as reported
in The Wall Street Journal on the date of grant.
(/4/) Grant date present value is determined using the Black-Scholes option
pricing model. The assumptions used in the Black-Scholes option pricing
model were as follows: volatility: 18.2% (calculated using daily Common
Share prices for the twelve-month period preceding the date of grant);
risk-free rate of return: 5.01% (the rate for a ten-year U.S. treasury);
dividend yield: $1.44; option term: ten years; vesting: 100% one year
after date of grant; and turnover: 9.0% (to reflect the probability of
forfeiture due to termination prior to vesting) and 16.6% (to reflect the
probability of a shortened option term due to termination of employment
prior to the option expiration date). No assumptions relating to non-
transferability or risk of forfeiture were made. Actual gains, if any, on
option exercises and Common Shares are dependent on the future
14
<PAGE>
performance of the Company's Common Shares and overall market condition.
There can be no assurance that the amounts reflected in this table will be
achieved.
Option Exercises in 1994. The following table sets forth certain information
concerning the exercise of options or stock appreciation rights ("SARs") during
1994 by each of the Named Officers and the number and value of unexercised
options and SARs at December 31, 1994.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS/SARS
ACQUIRED OPTIONS/SARS AT FISCAL AT FISCAL YEAR-END
ON VALUE YEAR-END (#)(/1/) ($)(/2/)
EXERCISE REALIZED ------------------------- -------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Gary L. Neale........... 0 $ 0 75,000 25,000 $450,625 $23,437
Stephen P. Adik......... 0 0 43,600 8,000 375,375 7,500
Patrick J. Mulchay...... 0 0 31,200 8,000 196,350 7,500
Jeffrey W. Yundt........ 0 0 42,300 8,000 351,000 7,500
John W. Dunn............ 4,500 54,156 32,500 6,500 201,187 6,093
</TABLE>
- --------
(/1/) Includes some SARs granted in tandem with options.
(/2/) Represents the difference between the option exercise price and $29.69,
the average of high and low prices of the Company's Common Shares on
December 30, 1994, as reported in The Wall Street Journal.
15
<PAGE>
PENSION PLAN AND SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN--
The following table shows estimated annual benefits, giving effect to the
Company's Supplemental Executive Retirement Plan (as described below), payable
upon retirement to persons in the specified remuneration and years-of-service
classifications.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
--------------------------------------------
REMUNERATION 15 20 25 30 35
- ------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$200,000........................... $ 79,500 $106,000 $111,000 $116,000 $116,000
250,000........................... 102,000 136,000 142,250 148,500 148,500
300,000........................... 124,500 166,000 173,500 181,000 181,000
350,000........................... 147,000 196,000 204,750 213,500 213,500
400,000........................... 169,500 226,000 236,000 246,000 246,000
450,000........................... 192,000 256,000 267,250 278,500 278,500
500,000........................... 214,500 286,000 298,500 311,000 311,000
550,000........................... 237,000 316,000 329,750 343,500 343,500
600,000........................... 259,500 346,000 361,000 376,000 376,000
650,000........................... 282,000 376,000 392,250 408,500 408,500
700,000........................... 304,500 406,000 423,500 441,000 441,000
750,000........................... 327,000 436,000 454,750 473,500 473,500
800,000........................... 349,500 466,000 486,000 506,000 506,000
850,000........................... 372,000 496,000 517,250 538,500 538,500
</TABLE>
The credited years of service for the officers shown in the Summary
Compensation table, pursuant to the Supplemental Plan, are as follows: Gary L.
Neale--20 years; Stephen P. Adik--16 years; Patrick J. Mulchay--32 years;
Jeffrey W. Yundt--15 years; and John W. Dunn--23 years.
Upon their retirement, regular employees and officers of the Company and its
subsidiaries which adopt the plan (including directors who are also full-time
officers) will be entitled to a monthly pension in accordance with the
provisions of the Company's pension plan, effective as of January 1, 1945. The
directors who are not and have not been officers of the Company are not
included in the pension plan. The pensions are payable out of a trust fund
established under the pension plan with The Northern Trust Company, trustee.
The trust fund consists of contributions made by the Company and the earnings
of the fund. Over a period of years the contributions are intended to result in
over-all actuarial solvency of the trust fund. The pension plan of the Company
has been qualified as non-discriminatory under Sections 401 and 404 of the
Internal Revenue Code of 1986 (the "Code").
16
<PAGE>
Pension benefits are determined separately for each participant. The formula
for a monthly payment for retirement at age 65 is 1.7% of average monthly
compensation multiplied by years of service (to a maximum of 30 years) plus
0.6% of average monthly compensation multiplied by years of service over 30.
Average monthly compensation is the average for the 60 consecutive highest-paid
months in the employee's last 120 months of service. Covered compensation is
defined as wages reported as W-2 earnings plus any salary reduction
contributions made under the Tax Deferred Savings Plan and an amount equivalent
to base pay for certain non-compensated periods of authorized leave of absence,
minus any amounts paid for unused vacations accrued.
The Company also has a Supplemental Executive Retirement Plan for officers.
Participants in the Plan are selected by the Board of Directors. Benefits from
the Plan are to be paid from the general assets of the Company.
The Supplemental Plan provides the larger of (i) 60% of 5-year average pay
less Primary Social Security Benefits (prorated for less than 20 years of
service) and an additional 0.5% of 5-year average pay less Primary Social
Security Benefits per year for participants with between 20 and 30 years of
service, or (ii) the benefit formula under the Company's Pension Plan. In
either case, the benefit is reduced by the actual pension payable from the
Company's Pension Plan. In addition, the Supplemental Plan provides certain
disability and pre-retirement death benefits for the spouse of a participant.
CHANGE IN CONTROL AND TERMINATION AGREEMENTS--
The Board of Directors of the Company has authorized Change in Control and
Termination Agreements ("Agreements") with Mr. Neale and the Vice Presidents of
the Company (including each of the Named Officers) (each such person being an
"executive"). The Company believes that these Agreements and related
shareholder rights protections are in the best interests of the shareholders,
to insure that in the event of extraordinary events, totally independent
judgment is enhanced to maximize shareholder value. The Agreements, which are
terminable upon three years' notice, provide for the payment of three times
then current annual base salary and the continuation of certain employee
benefits for a period of 36 months ("Severance Period"), if the executive's
employment were terminated within 24 months in the event of certain changes in
control of the Company. Based on their 1994 base salaries, the amounts that
would be payable to the highest paid executive officers would be as follows:
Gary L. Neale--$1,380,000; Stephen P. Adik--$615,000; Patrick J. Mulchay--
$525,000; Jeffrey W. Yundt--$525,000; and John W. Dunn--$495,000.
17
<PAGE>
The executive would receive full benefits under any supplemental retirement
plan of the Company, offset by amounts paid to the executive from any qualified
retirement plans of the Company. All stock options held by the executive would
become immediately exercisable upon the date of termination of employment, and
the restrictions would lapse on all restricted shares awarded to the executive.
If any penalty tax under the Code is imposed on the payment of three times base
salary, the Company would increase the payment to the extent necessary to
compensate the individual for the imposition of such tax.
During the Severance Period, the executive and spouse would continue to be
covered by applicable health or welfare plans of the Company. If the executive
died during the Severance Period, all amounts payable to the executive would be
paid to a named beneficiary. No amounts would be payable under the Agreements
if the executive's employment were terminated by the Company for Good Cause (as
defined in the Agreements).
The Agreement with Mr. Neale also provides for the same severance payments as
above described in the event his employment is terminated at any time by the
Company (other than for Good Cause) or due to death or disability, or if he
voluntarily terminates employment with Good Reason (as defined in the
Agreements).
INCLUSION OF SHAREHOLDER PROPOSALS IN PROXY MATERIALS
Any holder of Common Shares who wishes to submit a proposal to be voted upon
by shareholders at the 1996 annual meeting of the Company, and who wishes the
proposal to be included in the Company's proxy materials, must submit the
proposal to the Secretary of the Company by November 13, 1995. The notice must
include a brief description of the business desired to be brought before the
meeting, the reasons for conducting such business at the meeting and any
material interest in such business of such shareholder and the beneficial
owner, if any, on whose behalf the proposal is made. The notice must also
include the nominating shareholder's name and address and the number of Common
Shares beneficially owned by the shareholder. Any proposal submitted will also
be subject to the rules of the Securities and Exchange Commission regarding
shareholder proposals.
18
<PAGE>
COMPLIANCE WITH FORMS 3, 4 AND 5 REPORTING REQUIREMENTS
Based solely upon its review of the Forms 3, 4 and 5 furnished to the Company
pursuant to Section 16(a) of the Securities Exchange Act of 1934, the Company
believes that all of its directors, officers and beneficial owners of more than
10% of its Common Shares filed all such reports on a timely basis during 1994,
except that one Form 4, reporting one sale of Common Shares acquired upon
exercise of a stock option, was filed late by John W. Dunn, Group Vice
President, and one Form 4, reporting one sale transaction, was filed late by
Steven C. Beering, Director.
ANNUAL REPORT AND FINANCIAL STATEMENTS
Attention is directed to the financial statements contained in the Company's
Annual Report for the year ended December 31, 1994. A copy of the Annual Report
has been sent, or is concurrently being sent, to all shareholders of record as
of February 21, 1995.
AVAILABILITY OF FORM 10-K
A copy of the Company's annual report for 1994 to the Securities and Exchange
Commission on Form 10-K, without exhibits, will be provided without charge to
any shareholder or beneficial owner of the Company's shares upon written
request to Nina M. Rausch, Secretary, NIPSCO Industries, Inc., 5265 Hohman
Avenue, Hammond, Indiana 46320.
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP has been selected by the Board of Directors to serve as
the Company's independent public accountants for the year 1995, as they have
served for many years past. A representative of that firm will be present at
the annual meeting and will be given an opportunity to make a statement if he
so desires. The Company has been informed by the representative that he does
not presently intend to make such a statement. The representative will also be
available to respond to questions from shareholders.
19
<PAGE>
OTHER BUSINESS
The Board of Directors does not intend to bring any other matters before the
meeting and does not know of any matters which will be brought before the
meeting by others. If any matters properly come before the meeting it is the
intention of the persons named in the enclosed form of proxy to vote the proxy
in accordance with their judgment on such matters.
It is important that proxies be returned promptly. Therefore, shareholders
are urged to vote, date, sign and return the enclosed proxy. No postage need be
affixed if mailed in the United States,
By Order of the Board of Directors
LOGO
Nina M. Rausch
Secretary
Dated: March 10, 1995
20
<PAGE>
NIPSCO INDUSTRIES, INC.
- -------------------------------------------------------------------------------
NOTICE OF ANNUAL
OFFICERS MEETING AND
Gary L. Neale PROXY STATEMENT
Chairman,
President and
1995
Chief Executive
Officer
Stephen P. Adik
NIPSCO INDUSTRIES, INC.
Executive Vice
President and
Chief Financial
Officer, and
Treasurer
5265 Hohman Avenue
Hammond, Indiana 46320-1775 LOGO
- -------------------------------------------------------------------------------
Patrick J. Mulchay
Executive Vice
President and
Chief Operating
Officer, Electric
Jeffrey W. Yundt
Executive Vice
President and
Chief Operating
Officer, Gas
William R. Elliott
Vice President,
Subsidiary
Operations,
Electric
Owen C. Johnson,
Jr.
Vice President,
Human Resources
David A. Kelly
Vice President,
Real Estate and
Taxes
Jerry M. Springer
Controller and
Assistant
Secretary
Dennis E. Senchak
Assistant
Treasurer
Nina M. Rausch
Secretary
<PAGE>
- -
PROXY PROXY
NIPSCO INDUSTRIES, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS, APRIL 12, 1995
The undersigned hereby appoints Gary L. Neale, Stephen P. Adik and Jerry M.
Springer, or any of them, the attorneys and proxies of the undersigned, with
full power of substitution, for and in the name of the undersigned to represent
and vote the shares of the undersigned at the Annual Meeting of Shareholders of
the Company, to be held at the Center for Visual and Performing Arts, 1040
Ridge Road, Munster, Indiana, on Wednesday, April 12, 1995, at 10 a.m., CDST,
and at any adjournment or adjournments thereof, in accordance with the Notice
and Proxy Statement received upon the following matters:
UNLESS A CONTRARY DIRECTION IS INDICATED, THIS PROXY WILL BE VOTED "FOR" THE
ELECTION OF DIRECTORS.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF DIRECTORS.
PLEASE MARK, SIGN, DATE AND MAIL THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
(Continued and to be signed on reverse side.)
- -
<PAGE>
- -
NIPSCO INDUSTRIES, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. [X]
[ ]
1. Election of Directors
Nominees: Steven C. Beering, Ernestine M. Raclin and Denis E. Ribordy
For
For Withheld All
[_] [_] [_]
(Except Nominee(s) written below)
--------------------------------------
2. Transacting such other business as may properly come before the meeting or
any adjournment or adjournments thereof.
For Against Abstain
[_] [_] [_]
IF YOU PLAN TO ATTEND THE ANNUAL MEETING IN PERSON, PLEASE INDICATE
THE NUMBEROF SHAREHOLDER(S) ATTENDING IN THE FOLLOWING BOX: [_]
Dated: ________________________________________, 1995
Signature(s) ___________________________________________________________________
_______________________________________________________________________________
PLEASE SIGN EXACTLY AS YOUR NAME APPEARS HEREON. JOINT OWNERS SHOULD EACH SIGN.
WHERE APPLICABLE, INDICATE YOUR OFFICIAL POSITION OR REPRESENTATIVE CAPACITY.
- -
