CIPSCO INCORPORATED
607 East Adams Street
Springfield, Illinois 62739
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
The annual meeting of shareholders of CIPSCO Incorporated (the "Company")
will be held at the Springfield Hilton, 700 East Adams Street, Springfield,
Illinois, on April 26, 1995, at 10:00 AM, for the purpose of considering and
voting with respect to the following matters:
(1) the election of a Board of nine directors;
(2) the approval of the appointment by the Board of Directors of Arthur
Andersen LLP as independent public accountants for 1995; and
(3) the transaction of such other business as may properly come before
the meeting.
Reference is made to the attached Proxy Statement for further information
with respect to the foregoing.
Only shareholders of the Company of record on its books at the close of
business on February 27, 1995, are entitled to vote at the meeting. All such
shareholders are urged to be present in person, or represented by proxy, at
the meeting.
A copy of the Company's Annual Report to Shareholders for the year 1994,
has been mailed to each shareholder of the Company of record on its books.
By order of the Board of Directors,
[SIG]
R. W. Jackson,
Senior Vice President and Secretary
March 6, 1995
All shareholders, even if they plan to attend the meeting in person, are
urged to vote, date and sign their proxies and return them to the Company in
the enclosed envelope as promptly as possible. The Board of Directors
encourages all shareholders to be represented at the meeting, whether their
shareholdings are small or large.
CIPSCO INCORPORATED
607 East Adams Street
Springfield, Illinois 62739
217/523-3600
March 6, 1995
Proxy Statement Relating to
1995 Annual Meeting of Shareholders
INTRODUCTION
General. The purposes of the meeting are set forth in the attached
Notice. The enclosed proxy relating to the meeting is solicited on behalf of
the Board of Directors of the Company and the cost of such solicitation will
be borne by the Company. Following the initial solicitation of proxies by
mail beginning on or about March 1, 1995, certain officers, directors and
employees of the Company may solicit proxies by correspondence, telephone,
telegraph, telecopy, other electronic means or in person, but without extra
compensation. The Company will pay to banks, brokers, nominees and other
fiduciaries their reasonable charges and expenses incurred in forwarding the
proxy soliciting material to their principals. In addition, Morrow & Co.,
Inc., New York, New York, has been retained to assist the Company and its
affiliate in the solicitation of proxies. Such solicitation may be made by
mail, telecommunication or in person. The estimated aggregate cost of such
services of Morrow & Co., Inc. is $5,500.
The Company will provide without charge to each shareholder entitled to
vote at the meeting who makes a written request therefor, a copy of the
Company's 1994 Annual Report on Form 10-K as filed with the Securities and
Exchange Commission pursuant to the Securities Exchange Act of 1934. Written
requests for a copy of the report should be directed to Corporate Secretary,
CIPSCO Incorporated, 607 East Adams Street, Springfield, Illinois 62739.
Holding Company. The Company is the parent holding company of Central
Illinois Public Service Company ("CIPS").
Voting. The voting securities of the Company outstanding on the record
date stated below consisted of 34,069,542 shares of Common Stock, without par
value.
Only shareholders of record on the Company books at the close of business
on February 27, 1995, are entitled to notice of and to vote at the meeting.
At such meeting, each such shareholder is entitled to one vote, for each share
of common stock of the Company held, on each matter submitted to a vote at the
meeting, except that in the election of directors, each such shareholder is
entitled to vote cumulatively and therefore may give one nominee for election
as many votes as shall equal the number of directors to be elected multiplied
by the number of shares held by such shareholder, or may distribute such votes
among any two or more nominees. The proxies solicited herewith seek
discretionary authority to cast cumulative votes in the election of directors.
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Any shareholder may vote his or her shares either in person or by duly
authorized proxy. The giving of a proxy by a shareholder will not affect the
right to vote shares if the shareholder attends the meeting and desires to
vote in person. Prior to the voting of a proxy, it may be revoked by the
shareholder by delivering written notice of revocation to the Secretary of the
Company, by executing a subsequently dated proxy or by voting in person at the
meeting. All shares represented by effective proxies on the enclosed form of
proxy, received by the Company, will be voted at the meeting (or any adjourned
session thereof) in accordance with the terms of such proxies.
A majority of the outstanding shares entitled to vote on a matter,
represented in person or by proxy, constitutes a quorum for consideration of
such matter at the meeting. If a quorum is present, the nine persons
receiving the greatest number of votes will be elected as directors. The
affirmative vote of the majority of the shares represented at the meeting and
entitled to vote on a matter will be sufficient to take action on a matter
properly before the meeting (unless a higher vote is required by law).
Broker non-votes will not be considered represented at the meeting on
those matters for which no instructions from the shareholder have been given
to the broker. Accordingly, for a matter which requires the vote of a
percentage of shares represented at the meeting, broker non-votes will have no
effect on the outcome. Abstentions will be counted in determining the quorum
in attendance for all matters and will be included in the total number of
shares represented and voting on a matter.
Each participant in the Company's Automatic Dividend Reinvestment and
Stock Purchase Plan (the "Reinvestment Plan") or the CIPS Employee Stock
Ownership Plan (the "ESOP"), Employee Long-Term Savings Plan, Employee Long-
Term Savings Plan-IUOE No. 148 or Employee Long-Term Savings Plan-IBEW No. 702
(the "Savings Plans") will receive a form of proxy by which such participant
may direct the respective agent or trustee under such Plan as to the manner of
voting shares credited to the participant's account under such Plan.
Shareholders of record who are participants in the Reinvestment Plan will
receive one form of proxy which will be deemed to include shares held of
record and shares held under the Reinvestment Plan. If a participant in any
of the Savings Plans does not return a proxy by April 21, 1995, the trustee
under such Plans will vote such participant's shares under such Plan, in
accordance with the instructions provided by the Central Illinois Public
Service Company Plan Committee, unless the participant votes in person at the
meeting. A participant in the Reinvestment Plan, the ESOP or any Savings Plan
wishing to vote in person at the meeting may obtain a proxy for shares
credited to his account under such Plan by making a written request therefor
by April 14, 1995 as follows: for the Reinvestment Plan to Illinois Stock
Transfer Company, 223 West Jackson Boulevard, Chicago, Illinois 60606; for the
ESOP or Savings Plans to Boston Safe Deposit and Trust Company, Attention:
Chris D. Kuhn, One Boston Place, Boston, Massachusetts 02116. After March 31,
1995, Savings Plan requests should be directed to Merrill Lynch, Attention:
Denise Ratti, 265 Davidson Ave., Somerset, New Jersey 08873.
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Proposals of Shareholders. Under the rules of the Securities and
Exchange Commission, any shareholder proposal intended to be presented at the
1996 annual meeting of shareholders of the Company must be received at the
principal executive office of the Company no later than November 6, 1995, in
order to be eligible to be considered for inclusion in the proxy materials
relating to that meeting.
Voting Securities Beneficially Owned by Principal Holders, Directors,
Nominees and Executive Officers. The directors, nominees and executive
officers of the Company and CIPS owned beneficially at February 1, 1995, an
aggregate of 53,132 shares of Common Stock of the Company representing .16% of
the outstanding Common Stock and one share of Preferred Stock of CIPS
representing less than 0.01% of the outstanding Preferred Stock. To the
Company's knowledge, the only beneficial owner of more than 5% of the
Company's Common Stock as of February 1, 1995 was Franklin Resources, Inc.,
which owned beneficially 2,139,400 shares. This information is based solely
upon information set forth in the Company's shareholder records and in
statements filed with the Securities and Exchange Commission pursuant to
Section 13 of the Securities Exchange Act of 1934. The Company believes such
shares may be held by Franklin Resources, Inc. for its mutual fund affiliates.
ELECTION OF DIRECTORS
Director Information. Nine directors are to be elected at the meeting.
Barring unforeseen contingencies, and in the absence of contrary directions,
the proxies solicited herewith will be voted for the election of William J.
Alley, Clifford L. Greenwalt, John L. Heath, Robert W. Jackson, Gordon R.
Lohman, Richard A. Lumpkin, Hanne M. Merriman, Thomas L. Shade and James W.
Wogsland as directors of the Company, to hold office until the next annual
meeting of shareholders of the Company or until their respective successors
are elected and qualified. Except for Mr. Lumpkin, each of the nominees is a
director of the Company, has served continuously as such and has served as a
director of CIPS, in each case, since his or her election in the respective
years indicated below. The proxies may also be voted for a substitute nominee
or nominees in the event any one or more of the above nominees shall be unable
to serve for any reason or be withdrawn from nomination, a contingency not now
anticipated.
Under the policy adopted by the Board of Directors with respect to the
age of directors, Mr. Donald G. Raymer, retired President and Chief Executive
Officer of CIPS, who has been a director of CIPS since 1972 and the Company
since it became the holding company of CIPS in 1990, will not stand for
reelection as director at the meeting.
Except as otherwise indicated below, each nominee has been engaged in his
or her present principal occupation for at least the past five years.
The following information is given with respect to the nominees for
election as directors:
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William J. Alley
Principal occupation: Retired Chairman of the Board and Chief
Executive Officer of American Brands,
Inc. (consumer products and services),
Stamford, Connecticut.
Age: 65
Served as a director of the
Company since: 1990
Served as a director of CIPS
since: 1974
Shares beneficially owned at
February 1, 1995: 1,527 shares of Common Stock. In
addition, Mr Alley's account in the
directors' deferred compensation plan
described below holds the equivalent of
5,057 shares of Common Stock.
Other information: Mr. Alley served as Chairman of the
Board and Chief Executive Officer of
American Brands, Inc. from 1987 to his
retirement in 1994. He is Chairman of
the Audit Committee, Chairman of the
Executive Committee and a member of the
Compensation Committee of the Board.
Mr. Alley is also a director of
American Brands, Inc., Rayonier, Inc.,
Rayonier Forest Resources, Inc., Olin
Corporation and Bunn-O-Matic
Corporation.
Clifford L. Greenwalt
Principal occupation: President and Chief Executive Officer
of the Company, President and Chief
Executive Officer of CIPS and Chairman
of the Board of CIPSCO Investment
Company.
Age: 62
Served as a director of the
Company since: 1990
Served as a director of CIPS
since: 1986
4
Shares beneficially owned at
February 1, 1995: 10,722 shares of Common Stock.
Other information: Mr. Greenwalt is a member of the
Executive Committee of the Board. He
is a director of First of America Bank
Corporation, Kalamazoo, Michigan and
was appointed a director of its wholly-
owned subsidiary, First of America
Bank-Illinois, N.A. He has been
President and Chief Executive Officer
of the Company since it became the
parent company of CIPS in 1990. Mr.
Greenwalt was Senior Vice President-
Operations of CIPS from 1980 to 1989
when he became President.
John L. Heath
Principal occupation: Retired Chairman and President of L.S.
Heath & Sons, Inc. (also known as Heath
Candy Company -- confectionery
manufacturer), Robinson, Illinois.
Age: 59
Served as a director of the
Company since: 1990
Served as a director of CIPS
since: 1977
Shares beneficially owned at
February 1, 1995: 4,000 shares of Common Stock.
Other information: Mr. Heath is a member of the Nominating
and Audit Committees of the Board. He
served as Chairman of L.S. Heath &
Sons, Inc. from 1971 until 1988 and
also as President and Chief Executive
Officer from 1971 until 1982. Mr.
Heath is a director of the Biltmore
Bank Corp. and of its wholly-owned
subsidiary, The Biltmore Investors Bank
of Phoenix, Arizona. He is also a
director of Sun Street Food Corporation
of Phoenix, Arizona.
5
Robert W. Jackson
Principal occupation: Senior Vice President, Chief Financial
Officer and Secretary of the Company,
Senior Vice President -- Finance and
Secretary of CIPS, and President and
Chief Executive Officer of CIPSCO
Investment Company.
Age: 64
Served as a director of the
Company since: 1990
Served as a director of CIPS
since: 1986
Shares beneficially owned at
February 1, 1995: 6,634 shares of Common Stock.
Other information: Mr. Jackson is a director of Firstbank
of Illinois Co. and each of its wholly-
owned subsidiary banks, including the
First National Bank of Springfield.
Gordon R. Lohman
Principal occupation: President and Chief Executive Officer
of AMSTED Industries Incorporated
(diversified manufacturer of industrial
products), Chicago, Illinois.
Age: 60
Served as a director of the
Company since: 1990
Served as a director of CIPS
since: 1989
Shares beneficially owned at
February 1, 1995: 200 shares of Common Stock. In
addition, Mr. Lohman's account in the
directors' deferred compensation plan
described below holds the equivalent of
4,462 shares of Common Stock.
Other information: Mr. Lohman is Chairman of the
Compensation Committee and a member of
the Audit Committee and Executive
Committee of the Board. He became
6
President of AMSTED Industries
Incorporated in 1988 and Chief
Executive Officer in 1990. He was
Executive Vice President of that firm
in 1988 and served as Vice President
from 1978 through 1987. He is a
director of American Brands, Inc.
Richard A. Lumpkin
Principal occupation: Chairman of the Board and Chief
Executive Officer of Consolidated
Communications Inc. ("CCI")
(diversified telecommunications holding
company) Mattoon, Illinois.
Age: 59
Shares beneficially owned at
February 1, 1995: 1,000 shares of CIPSCO Common Stock.
Other information: Mr. Lumpkin has been Chairman of the
Board and Chief Executive Officer of
CCI since 1989 and President and
Treasurer prior to 1989. He is also
Chairman of the Board and Chief
Executive Officer of Illinois
Consolidated Telephone Company, a
telephone utility subsidiary of CCI.
Mr. Lumpkin serves as a director of
Mid-America National Bancorp, Inc. and
its wholly-owned subsidiary Mid-America
National Bank of Chicago; First Mid-
Illinois Bancshares, Inc. and its
wholly-owned subsidiary First Mid-
Illinois Bank and Trust, N.A. of
Mattoon, Illinois; and Sarah Bush
Lincoln Health Systems, also of
Mattoon, Illinois.
Hanne M. Merriman
Principal occupation: Principal in Hanne Merriman Associates
(retail business consultants),
Washington, D.C.
Age: 53
Served as a director of the
Company since: 1990
7
Served as a director of CIPS
since: 1990
Shares beneficially owned at
February 1, 1995: 1,505 shares of Common Stock. In
addition, Mrs. Merriman's account in
the directors' deferred compensation
plan described below holds the
equivalent of 3,006 shares of Common
Stock.
Other information: Mrs. Merriman is Chairman of the
Nominating Committee and a member of
the Audit Committee of the Board. She
was President of Nan Duskin, Inc. from
1991 to 1992. Previously she had been
a retail business consultant from
January 1990. Mrs. Merriman also
served as President and Chief Executive
Officer of Honeybee, Inc., a division
of Spiegel, Inc., and President of
Garfinckels, a division of Allied
Stores Corporation. Mrs. Merriman is a
director of USAir Group, Inc., State
Farm Mutual Automobile Insurance Co.,
The Rouse Company, AnnTaylor Stores
Corporation and T. Rowe Price Mutual
Funds.
Thomas L. Shade
Principal occupation: Retired Chairman of the Board and Chief
Executive Officer of Moorman
Manufacturing Company (livestock feed
products), Quincy, Illinois.
Age: 64
Served as a director of the
Company since: 1991
Served as a director of CIPS
since: 1991
Shares beneficially owned at
February 1, 1995: 2,506 shares of Common Stock. In
addition, Mr. Shade's account in the
directors' deferred compensation plan
described below holds the equivalent of
2,318 shares of Common Stock.
8
Other information: Mr. Shade is a member of the Audit and
Compensation Committees of the Board.
Mr. Shade served as Chairman of the
Board and Chief Executive Officer of
Moorman Manufacturing Company during
1992 and 1993. He was President and
Chief Executive Officer of that firm
from 1984 to 1992. He also is a
director of Moorman Manufacturing
Company and Quincy Soybean Company,
both of Quincy, Illinois.
James W. Wogsland
Principal occupation: Vice Chairman of Caterpillar, Inc.
(heavy equipment and engine
manufacturer), Peoria, Illinois.
Age: 63
Served as a director of the
Company since: 1992
Served as a director of CIPS
since: 1992
Shares beneficially owned at
February 1, 1995: 1,000 shares of Common Stock. In
addition, Mr. Wogsland's account in
the directors' deferred compensation
plan described below holds the
equivalent of 1,541 shares of Common
Stock.
Other information: Mr. Wogsland is a member of the Audit
and Nominating Committees of the Board.
Mr. Wogsland has been Vice Chairman of
Caterpillar, Inc. since 1990. He was
Executive Vice President of that firm
from 1987 until 1990. He is a director
of Caterpillar, Inc; First of America
Bank Corporation, Kalamazoo, Michigan;
and Protection Mutual Insurance
Company.
Executive Compensation. The Company's principal operating subsidiary is
CIPS. Each of the officers of the Company is also an officer of CIPS and did
not receive separate compensation from the Company for services as a Company
officer. The following table contains information with respect to the
compensation paid by CIPS for all services rendered during 1992 through 1994
9
to the President and the four other most highly compensated executive officers
of the Company and CIPS.
Summary Compensation Table
Annual
Compensation All Other
_________________
Compensation
Name of Individual Principal Positions(s) Year Salary Bonus (1)
__________________ _____________________ ____ ________ _______ ____________
C.L. Greenwalt President and Chief 1994 $359,168 $70,800 $ 8,466
Executive Officer of 1993 339,093 99,902 5,852
the Company; 1992 317,375 0 2,073
President and Chief
Executive Officer of
CIPS; Chairman of
CIPSCO Investment
Company
R.W. Jackson Senior Vice 1994 234,592 38,351 3,552
President and 1993 224,545 44,699 2,864
Secretary of the 1992 213,426 10,278 1,713
Company; Senior
Vice President-
Finance and Secretary
of CIPS; President
and Chief Executive
Officer of CIPSCO
Investment Company
L.A. Dodd Senior Vice 1994 204,591 32,048 3,249
President-Operations 1993 194,272 36,009 3,524
of CIPS 1992 176,880 8,504 2,073
W.R. Morgan Vice President of 1994 149,710 19,788 2,250
CIPS 1993 142,713 21,235 2,700
1992 135,758 8,653 2,073
G.W. Moorman Vice President of 1994 141,717 17,955 1,354
CIPS 1993 134,585 20,047 2,564
1992 124,713 8,421 2,073
(1) Premiums paid by the Company on behalf of the officers for group term
life insurance.
Substantially all employees of the Company and CIPS (including officers)
participate in CIPS' Retirement Income Plan (the "Retirement Plan"), including
10
persons whose remuneration is reported in the Summary Compensation Table.
Employer contributions to the Retirement Plan are determined actuarially. For
purposes of the Retirement Plan, compensation of a participant is base pay,
exclusive of bonuses, overtime pay, and other special payments. Compensation
for the persons named in the Summary Compensation Table is substantially
equivalent to the compensation reported in the table under "Salary."
Retirement Plan benefits depend upon years of service, age at retirement and
final average pay. In certain cases, pension benefits under the Retirement
Plan (or compensation used to measure such benefits) will be reduced to comply
with maximum limitations imposed by the Internal Revenue Code ("IRC"). CIPS
maintains an unfunded Excess Benefit Plan to provide for the payment of the
difference between the monthly benefit that would have been paid to
participants under the Retirement Plan if such IRC limitations were not in
effect and the reduced amount payable as a result of such IRC limitations.
The credited years of service under the Retirement Plan and the Excess Benefit
Plan for the above listed persons as of December 31, 1994 are as follows:
Greenwalt, 31 years; Jackson, 15 years; Dodd, 30 years; Morgan, 31 years; and
Moorman, 25 years. Assuming retirement at age 65, it is estimated a
participant would be eligible for a maximum annual benefit under the
Retirement Plan, as supplemented by the Excess Benefit Plan, as follows:
Annual Benefit After Specified
Years of Service (1)
Average Annual _____________________________________________________
Earnings (2) 20 25 30 35 40
____________________ ________ ________ ________ ________ ________
$125,000............ $ 33,903 $ 42,379 $ 50,855 $ 59,330 $ 67,806
150,000............ 41,403 51,754 62,105 72,455 82,806
175,000............ 48,903 61,129 73,355 85,580 97,806
200,000............ 56,403 70,504 84,605 98,705 112,806
225,000............ 63,903 79,879 95,855 111,830 127,806
250,000............ 71,403 89,254 107,105 124,955 142,806
275,000............ 78,903 98,629 118,355 138,080 157,806
300,000............ 86,403 108,004 129,605 151,205 172,806
325,000............ 93,903 117,379 140,855 164,330 187,806
350,000............ 101,403 126,754 152,105 177,455 202,806
375,000............ 108,903 136,129 163,355 190,580 217,806
400,000............ 116,403 145,504 174,605 203,705 232,806
425,000............ 123,903 154,879 185,855 216,830 247,806
450,000............ 131,403 164,254 197,105 229,955 262,806
________
(1) Annual benefits are on a straight-line basis. Amounts shown have been
reduced by an amount equal to 50% of estimated Social Security benefits
and are not subject to any other offset amounts.
(2) "Average Annual Earnings" means the average annual base compensation
during the four consecutive years of highest pay during the 10-year
period immediately preceding retirement.
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CIPS also maintains an unfunded Special Executive Retirement Plan (the
"Executive Plan") for each employee of the Company or CIPS who was hired from
outside the Company, CIPS or their affiliates as a senior officer and who is a
participant in and qualifies for benefits under the Retirement Plan. For
purposes of the Executive Plan, a senior officer includes the president, vice
president and such other officers of the Company or CIPS as shall be
designated from time to time by the Board of Directors of the Company or CIPS.
A participant in the Executive Plan who becomes disabled or retires in
accordance with the provisions of the Executive Plan is eligible to receive
benefits under the Executive Plan in an amount equal to the difference between
(i) the amounts which would have been payable under the Retirement Plan, as
supplemented by the Excess Benefit Plan, if the participant had 35 years of
credited service under the Retirement Plan (reduced in accordance with the
Executive Plan if the participant terminates employment for any reason prior
to age 65) and (ii) the aggregate of the amounts which are paid or payable (a)
under the Retirement Plan as supplemented by the Excess Benefit Plan, based
upon the number of actual years of credited service under the Retirement Plan,
(b) under certain other pension plans as a result of the participant's prior
employment and (c) under any employment contract (excluding the Management
Continuity Agreement described below) with the Company or CIPS. A qualifying
surviving spouse of any participant who dies is eligible to receive a
percentage of the benefit provided under the Executive Plan for the
participant. At present, Mr. Jackson is a participant under the Executive
Plan. His estimated annual benefits under the Retirement Plan, the Excess
Benefit Plan and the Executive Plan are as set forth in the table above.
CIPS will establish in 1995 an irrevocable trust to provide itself a
source of funds to assist it in meeting its liabilities under the Excess
Benefit Plan and the Executive Plan. CIPS will make contributions to the
trust from time to time in amounts determined in accordance with the
provisions of the trust to be sufficient to pay when due benefits to its
participants or their beneficiaries under such plans. Notwithstanding the
trust, these plans are not qualified or "funded" and amounts on deposit in the
trust are subject to the claims of CIPS' general creditors under the
applicable law. The Excess Benefit Plan and the Executive Plan each provides
that in the event of a change in control (which has substantially the same
meaning as "change in control" under the Management Continuity Agreements
described in the following paragraph) the present value of benefits owed any
participant pursuant to each such Plan will be paid in a lump sum (i) for a
terminated participant already receiving or entitled to receive benefits,
within 30 days after such change in control and (ii) for any other
participant, within 30 days after termination provided such participant's
termination occurs within two years after such change in control. Any such
lump sum will be increased by an amount necessary to compensate the
participant for any excise tax payable under federal, state or local tax law
as a result of the lump sum payment being made contingent on a change in
control.
The individuals named in the Summary Compensation Table and three other
executive officers of the Company or CIPS have each entered into a Management
subsidiary of the Company will continue to employ the executive for a period
12
Continuity Agreement with the Company, which provides that in the event of a
"change in control" of the Company or CIPS, the Company and/or CIPS or another
of three years from the date of the change in control (the "Period of
Employment"). In the event of the executive's (i) involuntary termination of
employment during the Period of Employment except by reason of death,
disability, attainment of age 65 or cause (as defined in the Management
Continuity Agreement) or (ii) resignation during the Period of Employment for
good reason (as defined in the Management Continuity Agreement), the executive
will be entitled to payment of severance compensation in an amount equal to
the present value of the executive's base pay and incentive pay (determined as
provided in the Management Continuity Agreement) that would have accrued if
the executive remained employed until the end of the Period of Employment.
The executive will also receive continued employee benefits until the end of
the Period of Employment, subject to offset for comparable benefits. The
severance compensation will be increased by an amount necessary to compensate
the executive for any excise tax payable under federal, state or local tax law
as a result of the payment and any other compensation paid by the Company or
any of its affiliates being contingent on a change in control. A "change in
control" occurs, in general, if (i) as a result of a merger, consolidation or
sale of assets, less than a majority of the voting power of the Company is
held after such event by the persons who were holders of the voting power of
the Company prior to such event or less than a majority of the voting power of
CIPS is held after such event by the Company or by the holders of the voting
power of the Company prior to such event, (ii) any person (or group) acquires
beneficial ownership of 20 percent or more of the voting power of the Company
or CIPS or (iii) within any two-year period a majority of the members of the
Board of Directors of the Company or CIPS ceases to be members (other than
changes in members approved by at least two-thirds of the continuing
directors).
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Overview. The Compensation Committee of the Board of Directors of the
Company (the "Committee") is charged with overall oversight and review of the
performance and compensation of the executive officers of the Company. The
Committee is responsible for assuring that executive compensation and benefit
plans are implemented and are consistent with the Company's shareholder
interests, corporate goals and compensation philosophy.
The Company's executive officer compensation program supports these goals
and objectives. It is designed to attract, retain, motivate and reward top
quality and experienced officers to achieve the Company's business objectives.
It links executive compensation with corporate performance by providing the
opportunity to earn increased compensation during periods of superior results,
but also limiting compensation during periods with lesser results.
The executive officer compensation program consists of a base salary and
an annual incentive. The base salary is determined by a combination of the
individual's performance relative to specific job responsibilities and market
comparisons of salaries for similar jobs in the utility industry. Particular
emphasis is placed on salary data provided by the Edison Electric Institute
13
(EEI) survey of electric and combination electric and natural gas utilities.
This group of utilities is essentially the same group that makes up the EEI
100 utility peer group whose performance is shown on the Performance Graph
below. The philosophy is to pay base salaries and provide for incentive
compensation that are comparable to the medians of such amounts for a subgroup
of utilities included in the EEI survey that are of comparable size to the
Company (based on revenues). Salaries for the officers listed in the Summary
Compensation Table were increased in 1994 to track competitive base salaries
being paid by the utility industry and to reflect performance, which is
determined subjectively by the Committee based on individual evaluations.
Incentive compensation was earned based on achievement of the objectives of
the annual management incentive plan (described below).
The Management Incentive Plan. The Management Incentive Plan (MIP), an
annual incentive program instituted in 1992, strongly supports the Company's
primary goal of achieving superior returns on shareholders' investments. The
MIP is intended to provide additional compensation to the executive officers,
named in the Summary Compensation Table above, along with about five other
officers and 20 other employees of the Company and its subsidiaries. It is
the Committee's responsibility to administer the MIP and in so doing (1) set
the overall corporate financial performance goal and unit or individual
objectives, (2) determine the participants to be included in the MIP, and (3)
determine the amount of each participant's incentive pay to be based on
attainment of the overall corporate goal and the amount to be based on
achievement of his or her unit or individual objectives. Specific award
levels are set by the Compensation Committee prior to the beginning of the
fiscal year for which they apply. Incentive awards are payable in cash as
soon as feasible following the close of the year after determination by the
Committee of the level of attainment of the goals.
The overall corporate goal is based on attainment of targeted return on
average Common Stock equity of the Company. The Committee has determined that
return on equity is the measure of corporate performance that most directly
measures management's performance. Individual unit objectives relate to such
areas as service reliability, public and employee safety, proper maintenance
of corporate assets and quantifiable improvement in efficiency and
productivity. The MIP provides for threshold, target and maximum levels of
awards based on performance against the predetermined targets, set annually by
the Compensation Committee. A participant may receive the portion of his or
her incentive pay tied to unit or individual objectives even though the
Company has not attained the overall corporate goal, with the exception of the
President and Chief Executive Officer, whose incentive pay is tied solely to
the overall corporate goal of return on equity. For other executive officers,
individual unit awards are weighted, according to the participant's position,
to produce awards from about one-fifth to one-third of the total award and
corporate performance goals weighted to make up the remaining portion.
However, for any incentive pay to be earned by any participant, overall
earnings of the Company, on a per share basis, must equal or exceed the
annualized Common Stock dividend rate then in effect. Accordingly,
shareholders will realize an appropriate return on their investment prior to
the payment of any incentive compensation.
14
For 1994, award levels were designed so that achievement of threshold
performance would have earned approximately one-half of the target award while
maximum performance would have earned approximately 1.5 times the target
award. Total incentive pay ranges varied, depending on the participant's
position within the organization, from a minimum of 7 percent of base salary
for some participants, assuming threshold corporate and unit goals were
achieved, to a maximum of 40 percent of base salary for the President and
Chief Executive Officer assuming maximum performance was achieved. The
threshold corporate goal of return on common equity was exceeded in 1994
resulting in MIP participants, including the officers named in the Summary
Compensation Table, earning various amounts of incentive compensation, based
on the formulas previously described. The Committee determined that incentive
compensation was earned by participants in 1994 for achievement of individual
and unit goals, in accordance with the MIP provisions. Benefits earned in
1994 are reflected in the "Bonus" column of the Summary Compensation Table
above.
Compensation of the Chief Executive Officer. The Committee is
responsible for reviewing the Chief Executive Officer's performance and
adjusting his base salary accordingly. In addition, the Committee adjusts
base salary to reflect changes in the prevailing competitive market levels for
chief executive officers in other comparably-sized utilities, as described
above. Mr. Greenwalt's base salary increased in 1994 approximately 5.9
percent in consideration of strong performance of his duties which are
reflected in the Company's excellent operating and financial performance.
Under his leadership CIPSCO achieved exceptional levels of earnings and return
on shareholders' equity which placed the Company among the top 15 percent of
major electric and natural gas utilities in the nation during 1993. He has
directed the Company's effort to establish strategic objectives and initiated
plans for achieving them. The capital structure, cash flows and financial
condition remain strong as indicated by continued excellent credit ratings for
the utility subsidiary. Mr. Greenwalt's 1994 base compensation increase also
reflects changes in levels of executive compensation at similar-sized
utilities.
Incentive compensation for the Chief Executive Officer was determined in
accordance with the provisions and formulas of the MIP. Accordingly, Mr.
Greenwalt's incentive compensation is based solely on the Company's
performance as measured by the overall corporate goal of return on equity. He
earned $70,800 under the MIP in 1994 because the Company's return on common
equity exceeded the predetermined threshold goal as established in the MIP.
The members of the Committee are indicated below. No member of the
Compensation Committee is a current or former officer of the Company or any of
its subsidiaries.
G. R. Lohman, Chairman
W. J. Alley
T. L. Shade
15
Performance Graph. The following graph is a comparison of total returns
on CIPSCO Common Stock compared with the Standard & Poor's 500 index, the Dow
Jones Utility Index and an industry peer group as reported by the Edison
Electric Institute ("EEI 100"). It assumes $100 invested at December 31,
1989, and all dividends paid during the period reinvested in additional
common stock. The peer group consists of about 100 investor-owned electric
and combination electric and natural gas utilities. The returns have been
weighted to reflect the different market capitalization of each utility in the
group. A portion of incentive compensation to executive officers is based on
return on CIPSCO Common Stock equity rather than total return (shown on the
graph) for reasons set forth in the Compensation Committee Report.
(Graph to be inserted here)
Title: Total Return Summary
Based on Initial Investment of $100
on December 31, 1989
Data Points: 1990 1991 1992 1993 1994
____ ____ ____ ____ ____
CIPSCO 104 143 165 178 169
S&P 500 97 126 136 150 152
EEI 100 101 131 141 156 138
DJ Util 95 110 114 125 106
Directors' Compensation. No annual retainer or fees are paid to any
director who is an officer of the Company, CIPS or any other subsidiary of the
Company. During 1994 other members of the Board of the Company received an
annual retainer of $13,000 for serving on the Board of the Company. The
Company pays no additional fees for attendance at Board meetings or for
service on committees. Effective January 1, 1995, the annual fee for
directors who are not officers of the Company was increased to $16,000.
The annual retainer paid to each director by the Company is reduced by an
amount equal to the aggregate amount paid to such director by each subsidiary
of the Company as an annual retainer for services as a director of such
subsidiary. Non-employee directors of CIPS received an annual retainer of
$10,000 and a fee of $750 for each CIPS Board meeting or committee meeting
attended. Effective January 1, 1995, the annual retainer for serving on the
Board of CIPS was increased to $12,000. Consequently, the aggregate annual
retainer for service on both Boards for 1994 was $13,000 and for 1995 will be
$16,000. All current directors are on the Board of the Company and CIPS.
Directors were also reimbursed for their reasonable travel and out-of-pocket
expenses for each Company Board or Committee meeting attended.
16
The Company and CIPS each maintain an unfunded deferred compensation plan
under which directors may elect to defer directors' retainers and fees paid by
that company. For each director who elects to participate in a plan, the
amount of his or her directors' retainers and fees is accrued in an unfunded
account in the name of the director. Such amount is adjusted in value by an
amount equivalent to the amount which would be available if the director's
compensation were invested in the Company's Common Stock and dividends on such
stock were reinvested. The aggregate value of each participant's accounts in
the plans at February 1, 1995 (based on deferred director's fees paid by the
Company and CIPS) was equivalent to investments in Company Common Stock as
follows: Mr. Alley, 5,057 shares; Mr. Lohman, 4,462 shares; Mrs. Merriman,
3,006 shares; Mr. Shade, 2,318 shares; and Mr. Wogsland, 1,541 shares.
Amounts accrued in a director's account will be paid in cash upon his or her
retirement as a director either in a single payment or over a period not to
exceed 20 calendar quarters, with interest. Because officers of the Company
or CIPS receive no compensation for services as directors, any director who is
an officer is not eligible to participate in these plans.
The Company has established a Director Retirement Plan for directors of
the Company and its affiliates, including CIPS, who are not or have never been
officers of the Company or any affiliate, including CIPS. Each director who
has completed five years of service on the Board of the Company or any of its
affiliates is eligible for monthly retirement payments for a period of the
lesser of 10 years or the number of full years the director served on any of
the Boards. The annual retirement benefit for a director of the Company is
equal to the annual retainer in effect for the Company's directors (without
reduction for director's fees paid by affiliates of the Company) at the time
the director ceases to serve as a director. The annual retirement benefit for
a director who is not a member of the Board of the Company is equal to the
annual retainer in effect at the time the director ceases to serve as a
director for each of the Boards of which the director was a member but not to
exceed the amount of retainer for the Company's directors. Such annual
retirement payment is reduced a proportional amount for directors retiring
before reaching age 72.
Meetings and Committees of the Board. During 1994, the Board of
Directors held six meetings. The Board of Directors of the Company and CIPS
have each established an Executive Committee, an Audit Committee, a Nominating
Committee and a Compensation Committee. Committee members are appointed by a
majority of directors at the Board of Directors meeting following the annual
meeting of shareholders. Committee members are the same for the Company's
committees and CIPS' committees.
Mr. Alley, Mr. Greenwalt, Mr. Lohman and Mr. Raymer are the members of
the Executive Committee. The Company's Executive Committee held no meetings
and CIPS' Executive Committee held one meeting in 1994. The Executive
Committee has and may exercise all the authority of the Board of Directors in
the management of the Company, except as limited by Illinois law.
17
Mr. Alley, Mr. Heath, Mr. Lohman, Mrs. Merriman, Mr. Shade and Mr.
Wogsland are the members of the Audit Committee. The Company's Audit
Committee and the CIPS Audit Committee each held three meetings in 1994. The
Audit Committee engages an independent public accountant for the Company,
subject to the approval of the Board and shareholders; discusses with the
independent public accountant the scope and results of its audit and the
adequacy of the Company's accounting, financial and operating controls;
approves the performance of non-audit professional services by the independent
public accountant; and discusses with management and the independent public
accountant the Company's accounting principles, policies and practices and its
reporting policies and practices.
Mrs. Merriman, Mr. Heath and Mr. Wogsland are the members of the
Nominating Committee. The Company's Nominating Committee and CIPS' Nominating
Committee each held three meetings in 1994. The Nominating Committee seeks
out and recommends to the Board qualified candidates for election to the
Board; reviews the performance of Board members and, based upon such review,
makes recommendations to the Board as to which Board members should stand for
re-election. In making recommendations of nominees for election to the Board,
the Nominating Committee will consider persons recommended by shareholders.
Any shareholder wishing to make such a recommendation should write to the
President of the Company who will forward all such recommendations to the
Nominating Committee.
Mr. Lohman, Mr. Alley, and Mr. Shade are the members of the Compensation
Committee. The Company's Compensation Committee and CIPS' Compensation
Committee each held three meetings in 1994. The Compensation Committee
reviews the compensation to be paid officers of the Company (other than
assistant officers); reviews directors' fees and fees paid to directors for
membership on the various committees of the Board; and makes recommendations
to the Board as to appropriate levels of such officers' compensation,
directors' fees and fees for membership on such committees. No member of the
Compensation Committee is a current or former officer of the Company or CIPS.
During 1994, each director attended at least 82 percent of the total of
the meetings of the Company's and CIPS' Board and of committees of each
company's Board of which he or she was a member.
APPROVAL OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
Subject to the approval of the shareholders of the Company, the Board of
Directors has appointed the firm of Arthur Andersen LLP as independent public
accountants to examine the annual financial statements of the Company for
1995. The firm has served as independent public accountants for the Company
and CIPS for many years. A representative of Arthur Andersen LLP will be
present at the annual meeting to make a statement if he or she so desires, and
to respond to
questions.
18
The following resolution concerning the appointment of independent public
accountants will be offered at the meeting:
"RESOLVED, that the appointment by the Company's Board of Directors of
Arthur Andersen LLP to examine the annual financial statements of the Company
and its subsidiaries for 1995 is hereby approved."
The Board of Directors recommends a vote "FOR" the foregoing proposal.
OTHER MATTERS
At the date hereof, the Board of Directors of the Company knows of no
business to come before the meeting other than those matters described above.
However, should any such business properly come before the meeting, the
proxies will be voted in respect thereof in accordance with the judgment of
the person or persons voting the proxies.
CIPSCO INCORPORATED
By Order of the Board of Directors,
[SIG]
R. W. Jackson
Senior Vice President and Secretary
19
Graphic Material Appendix
The performance graph required by Item 402(1) of Regulation s-K is on page
15 of this filing. The paper copy has a line graph with four differentiated
lines showing the returns given in the data presented on page 15. A paper
copy of the graph has been submitted supplementally to the Branch Chief
pursuant to Regulation S-T Item 304 (d) (2).