UPPER PENINSULA ENERGY CORPORATION
600 Lakeshore Drive
Houghton, Michigan 49931
(906) 487-5000
FAX: (906) 487-5199
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be held April 28, 1998
March 24, 1998
To the Common Shareholders of
UPPER PENINSULA ENERGY CORPORATION
NOTICE is hereby given that the Annual Meeting of the Shareholders
of Upper Peninsula Energy Corporation will be held at the Corporate Office
of the Corporation, 600 Lakeshore Drive, Houghton, Michigan, on Tuesday,
April 28, 1998, at 2 p.m. (EDT), for the following purposes:
1. To elect two Class II Directors for three-year terms expiring
in 2001;
2. To transact such other business as may properly come before
the meeting and any adjournments thereof;
all as set forth in the Proxy Statement accompanying this notice.
Further information regarding voting rights and the business to be
transacted at the meeting is given in the accompanying Proxy Statement.
Only holders of record of common stock on the stock transfer books
of the Corporation at the close of business on March 6, 1998 will be
entitled to vote at the meeting and any adjournments thereof.
By order of the Board of Directors
B. C. Arola
Secretary
IF YOU ARE A HOLDER OF COMMON STOCK OF THE CORPORATION AND DO NOT EXPECT
TO ATTEND THE ANNUAL MEETING OF SHAREHOLDERS, PLEASE FILL IN, SIGN, DATE,
AND RETURN THE ENCLOSED PROXY IN THE BUSINESS REPLY ENVELOPE PROVIDED, AS
EARLY AS POSSIBLE. NO POSTAGE IS REQUIRED.
UPPER PENINSULA ENERGY CORPORATION
600 Lakeshore Drive
Houghton, Michigan 49931
(906) 487-5000
PROXY STATEMENT
The enclosed proxy, which is being mailed on or about March 24,
1998, is solicited on behalf of the Board of Directors of Upper Peninsula
Energy Corporation (the "Corporation") for use at the Annual Meeting of
the Shareholders of the Corporation to be held at the Corporate Office of
the Corporation, 600 Lakeshore Drive, Houghton, Michigan, on Tuesday,
April 28, 1998, at 2 p.m. (EDT) and any adjournments thereof.
A shareholder giving the enclosed proxy has the power to revoke it
at any time before it is exercised by written notice to the Secretary of
the Corporation, or by sending a later dated proxy, or in person at the
April 28, 1998 meeting.
The Corporation will bear the cost of the solicitation of proxies,
including the charges and expenses of brokerage firms and others for
forwarding solicitation material to beneficial owners of stock. In
addition to the use of the mails, proxies may be solicited by personal
interview, telephone or other electronic means by certain of the
Corporation's employees without additional compensation therefor. The
Corporation may also retain and compensate one or more outside
organizations to assist in the solicitation of proxies.
STOCK OUTSTANDING, VOTING RIGHTS AND VOTES REQUIRED
Only holders of common stock of record on the stock transfer
books of the Corporation at the close of business on March 6, 1998, (the
"record date") will be entitled to vote at the meeting. The Corporation
had 2,950,001 shares of common stock outstanding on the record date, and a
majority of such shares constitutes a quorum for transaction of business
at the meeting.
Directors will be elected by a plurality of votes of common
shareholders cast for the election of Directors at the meeting. For
election of Directors and on all other matters, the holders of the common
stock are entitled to one vote for each share of stock held and owned by
them.
SECURITY OWNERSHIP OF MANAGEMENT
To the knowledge of the Corporation, no person, firm, corporation or
group owned, of record or beneficially, more than five percent of the
outstanding common stock of the Corporation on March 6, 1998.
The following table sets forth certain information regarding the
beneficial ownership of the Corporation's common stock as of March 6, 1998
by: (a) Corporation Directors; (b) the Corporation's Chief Executive
Officer and the other executive officers named in the SUMMARY COMPENSATION
TABLE and (c) the Corporation's executive officers and Directors as a
group. Except as otherwise described in the notes below, the following
beneficial owners have sole voting power and sole investment power with
respect to all common stock set forth opposite their names.
Number of Common
Stock Shares Percent (2)
Name of Beneficial Owner Beneficially Owned (1) of Class
------------------------ ---------------------- -----------
Clarence R. Fisher 6,009 *
Samuel S. Benedict 800 *
Rodger T. Ederer 452 *
Thomas M. Strong 297 *
Leonard Angeli 140 *
Robert A. Ubbelohde 100 *
Neil D. Nelson 1,827 (3) *
Burton C. Arola 2,119 *
All Executive Officers and Directors
as a Group - - - - (8 persons) 11,744 *
<FN>
<F1> Each of the beneficial owners identified above has sole voting and
investment power as to all of the shares shown in this column as
beneficially owned, with the exception of those held by certain
Officers and Directors jointly with their spouses or directly by their
spouses, minor children, or certain other relatives or relatives of
their spouses.
<F2> Asterisk indicates less than one percent.
<F3> Mr. Nelson's spouse owns sole voting and investment power as to
1,507 shares. Mr. Nelson disclaims any beneficial interest in said
shares.
</FN>
ELECTION OF DIRECTORS
The shares represented by the proxies which are executed and
returned will be voted at the Annual Meeting for the election, as Class
III Directors, of the two nominees named in the table set forth below,
unless authority to vote for individual nominees, or the nominees as a
group, is expressly withheld.
The Articles of Incorporation of the Corporation provide that the
Board of Directors shall be divided into three classes, with each class to
be as nearly equal in number as shall be possible, and that one class
shall be elected each year for a term of three years. Accordingly, it is
proposed that Messrs. Leonard Angeli and Robert A. Ubbelohde, who are
presently Class III Directors whose terms expire at this meeting, be
elected to serve three-year terms until their successors are duly elected
and qualify.
Listed below, by Class, are the names of those persons nominated for
election as Directors of the Corporation (each is currently a Director),
and of the continuing Directors of the Corporation, their principal
occupations, ages, the year in which each first became a Director of the
Corporation or the Corporation's predecessor in interest, and the year in
which each such Director's term as a Director will expire:
Name, Principal Occupation Age at First Became
for Last Five Years 4/28/98 a Director
- --------------------------------------------------- ------- ------------
NOMINEES DIRECTORS -- CLASS III (Term Expiring in 2001)
LEONARD ANGELI (2) 66 1989
Retailer, Leonard Angeli, Inc.
ROBERT A. UBBELOHDE Ph.D. (3) 55 1995
Dean of the Faculty, 1988-1991 and President 1991
to present, Suomi College, Hancock, Michigan
CONTINUING DIRECTORS -- CLASS II (Term Expiring in 2000)
SAMUEL S. BENEDICT (2) 68 1986(1)
Retired. Formerly President & Chief Operating
Officer, Mead Corporation
CLARENCE R. FISHER 58 1992
Chairman of the Board, Chief Executive Officer
and President of the Corporation and Upper
Peninsula Power Company
CONTINUING DIRECTORS -- CLASS I (Term Expiring in 1999)
RODGER T. EDERER (2) 67 1978(1)
Practicing Attorney, 1784 Hamilton Road Okemos,
Michigan since July 1995. Prior thereto a
shareholder in the Lansing, Michigan, law firm
of Loomis, Ewert, Ederer, Parsley, Davis &
Gotting, P. C.
THOMAS M. STRONG (3) 60 1989
President & Chief Executive Officer,
Citizens State Bank of Ontonagon, Michigan
<FN>
NOTES:
<F1> Includes period of service as a Director of the Corporation's
Principal subsidiary Upper Peninsula Power Company (UPPCO).
<F2> Member of Compensation Committee; Samuel S. Benedict, Chairman.
<F3> Member of Audit Committee; Thomas M. Strong, Chairman.
There are no family relationships among the Directors.
</FN>
Should any of the nominees become unavailable for any reason (which
is not anticipated), the shares represented by the enclosed proxy may be
voted for such other person or persons as may be selected by the Board of
Directors of the Corporation.
DIRECTORS' COMPENSATION
During 1997, the Corporation's Directors, except Directors who are
employees, received an annual retainer of $7,200; $500 for each directors'
meeting attended; and $500 for each committee meeting attended.
DIRECTORS AND COMMITTEE MEETINGS AND FUNCTIONS
During 1997, the Directors held a total of Nine (9) meetings.
The Audit Committee held two meetings in 1997. On February 13,
1998, the Corporation's Audit Committee met with representatives of
Deloitte & Touche LLP to review the financial statements for the year
ended December 31, 1997, and will report their findings to the Board of
Directors and management.
The functions of the Audit Committee are to: (1) recommend the
selection, retention and termination of the Corporation's external
auditors; (2) approve, in advance, the types of professional services for
which the Corporation would retain the external auditors and consider
whether any such service would impair the independence of the external
auditors; (3) review the overall scope of the audit with external
auditors, the financial statements and external audit results and
recommendations of the independent audit with management; and (4) provide
whatever additional function it deems necessary in connection with the
internal accounting and reporting practices of the Corporation.
The Compensation Committee held four meetings in 1997. The
functions of the Compensation Committee are to: (1) recommend compensation
levels for Directors of this Corporation; (2) recommend the annual salary
level and employee fringe provisions, as well as any special compensation
program of all officers of the Corporation; (3) to review and approve the
salary administration program of the Corporation; (4) to set performance
goals and to establish eligibility for the various incentive plans; (5) to
prepare and submit for inclusion in the annual proxy statement a
Compensation Committee Report on Executive Compensation; and (6) to keep
informed of union settlement terms negotiated.
The Corporation does not have a nominating or any similar committee.
Each Director attended all of the meetings of the Board of Directors
and committees of which he was a member during 1997.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
IN COMPENSATION DECISIONS
The relationship between Compensation Committee member Rodger T.
Ederer and the Corporation is described in TRANSACTIONS WITH MANAGEMENT
below.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors of Upper
Peninsula Power Company (the "Committee") is pleased to present its report
on executive compensation. This Committee report documents the components
of the Corporation's executive officer compensation programs and describes
the basis on which 1997 compensation determinations were made by the
Committee with respect to the executive officers of the Corporation,
including the executive officers that are named in the SUMMARY
COMPENSATION TABLE.
Compensation Philosophy and Overall Objectives of Executive Compensation
Programs
It is the philosophy of the Corporation to ensure that executive
compensation be directly linked to improvements in corporate performance
and increases in shareholder value. The following objectives have been
adopted by the Committee as guidelines for compensation decisions:
1. Provide a competitive total compensation package that enables the
Corporation to attract and retain key executives.
2. Integrate all pay programs with the Corporation's annual and long-
term business objectives and strategy, and focus executive behavior
on the fulfillment of those objectives.
3. Provide variable compensation opportunities that are directly linked
with the performance of the Corporation and that align executive
remuneration with the interests of shareholders.
Compensation Program Components
The Committee regularly reviews the Corporation's annual
compensation program to ensure that pay levels and incentive opportunities
are competitive and reflect the performance of the Corporation's Chief
Executive Officer (CEO) and other executive officers. The specific
elements of the compensation program are further explained below.
Base Salary. Base pay levels are largely determined through
comparisons with companies of similar size and complexity of the
Corporation. In arriving at actual salaries, the Committee considers the
earnings per share, other operating results and individual performance
contributions, all within a competitive salary range for each position
that is established through job evaluation and market comparisons. Base
pay levels for the executive officers are competitive within a range that
the Committee considers to be reasonable and necessary. Including salary
mid-point attainment adjustments, the named executive officers received
average salary increases of 5.6% effective July 1, 1997. Base salaries
will be reviewed in July, 1998.
Incentive Compensation. The Committee considers long-term incentive
opportunities to be an integral part of the Company's executive
compensation program . The 1995 Corporate Performance Incentive Plan and
the 1995 Long-Term Stock Incentive Plan are discussed below, as part of
the SUMMARY COMPENSATION TABLE and under OTHER COMPENSATION PLANS.
The 1995 Performance Incentive Plan allows the Committee to make
cash awards, Corporate common stock awards or a combination of cash or
stock (including restricted stock) to the eleven positions selected by the
Committee as being eligible to participate. These positions include the
three executive officers named in the SUMMARY COMPENSATION TABLE below,
another officer and key management positions in grades 17 and above.
Performance incentive awards are made based on the Corporation's
previous years performance measurements of shareholder related and
customer related criteria compared to the same measurements of a group of
upper midwest utilities. From this data a mandatory minimum of 50
performance points must be earned out of a maximum of 100 performance
points. These performance points become a "performance multiplier" which
is then applied to maximum performance award opportunities (being 30% of
the base salary of the Chairman of the Board and Chief Executive Officer
and President, 25% for the other officers and 20% for the non-officer
participants).
The 1995 Long-Term Stock Incentive Plan, in furtherance of the
incentive program, provides for the award of stock options, restricted
stock and unrestricted stock awards as determined by the Committee. See
OTHER COMPENSATION PLANS below.
Discussion of 1997 Compensation for the Chairman of the Board and Chief
Executive Officer
The Chief Executive Officer's base salary is established based
largely on the same policy applicable to executive officers and discussed
above, except that salary decisions are made with a significant emphasis
on earnings, operating results and quality of management.
Executive compensation reviews are made annually with adjustments
effective July 1 of each year. Effective July 1, 1997, Mr. Fisher's
salary upon review, was increased from $199,250 to $210,000.
After review of base compensation, other benefits and the incentive
program, the Committee believes that the total compensation program for
executives of the Corporation will be competitive with the compensation
programs provided by other corporations of comparative size and nature.
The Committee also believes that any amounts paid under the incentive
program will be appropriately related to corporate and individual
performance, yielding awards that are directly linked to the annual
financial and operational results of the Corporation.
Compensation Committee of the Board of Directors
Samuel S. Benedict, Chairman Leonard Angeli Rodger T. Ederer
SUMMARY COMPENSATION TABLE
The following tabulation sets forth total compensation during 1995,
1996 and 1997 for the Chief Executive Officer and two executive officers
of the Corporation and its subsidiaries whose total annual compensation
(base salary and bonus) exceeded $100,000:
Annual Compensation Long-Term Compensation
--------------------------------- ----------------------
Base Restricted Stock All Other
Name and Principal Position Year Salary($) Bonus (1)($) Awards (2)($) Compensation (3)($)
- --------------------------------- ---- --------- ------------ ---------------------- -------------------
Clarence R. Fisher, Chairman of 1997 204,393 49,314 -0- 138,819
the Board, Chief Executive 1996 192,957 0 42,098 5,095
Officer and President 1995 181,198 0 40,845 2,764
Neil D. Nelson 1997 127,099 25,375 -0- 72,102
Vice President - Operations 1996 118,604 0 21,469 4,332
1995 110,400 0 20,650 2,333
Burton C. Arola 1997 116,549 23,531 -0- 70,722
Vice President - Finance 1996 111,150 0 20,325 4,826
Treasurer and Secretary 1995 105,504 0 19,915 2,715
<FN>
- -------------------
<F1> The amounts appearing in this column represent 1996 Performance
Incentive Plan cash awards paid in 1997.
<F2> The amounts appearing in this column are the dollar values of
restricted stock awards granted during each reporting year beginning
in 1995 when the Corporation's 1995 Performance Incentive Plan was
adopted. During 1997 all restricted stock was surrendered to UPEN,
see further discussion below.
<F3> On July 10, 1997, the Board of Directors of the Corporation approved
the Agreement and Plan of Merger (the "Merger Agreement") between the
Corporation and WPS Resources Corporation ("WPS Resources").
Immediately prior to the execution and delivery of the Merger
Agreement, UPPCO entered into agreements with ten officers and
employees of UPPCO who had been participants in UPEN's 1995 Corporate
Performance Incentive Plan and 1995 Long-Term Stock Incentive Plan
(the "Incentive Plan Participants"), including Messrs. Fisher, Nelson
and Arola, pursuant to which UPPCO agreed to make a one-time payment
to the Incentive Plan Participants in amounts ranging from 46.5% to
63.4% of their respective base salaries (an aggregate of $533,208) on
or before August 10, 1997, in consideration for the continued
employment and cooperation of such Incentive Plan Participants with
respect to the facilitation of the merger of UPEN and WPS Resources
(the "Merger") and the smooth transition of operation after the
consummation of the Merger. These agreements provide that if the
employment of an Incentive Plan Participant is terminated other than
under specified conditions, such Incentive Plan Participant will be
required to repay to UPPCO a pro rata portion of such additional
cash compensation based upon the percentage of the period between
July 10, 1997 and July 31, 1998 during which such Incentive Plan
Participant no longer continued to be employed by UPPCO. Pursuant to
these agreements, Messrs. Fisher, Nelson and Arola received payments
of $133,166, $67,644 and $64,977, respectively, included in the
amounts of "All Other Compensation" set forth above. Other amounts
appearing in this column represent Company paid life and disability
insurance premiums, auto insurance premium allowance and contributions
made to the UPPCO 401(k) plan for salaried employees.
</FN>
Immediately prior to the execution and delivery of the Merger
Agreement, each of the Incentive Plan Participants who received an
aggregate of 18,714 shares of restricted stock and options to acquire an
aggregate of 9,311 shares of UPEN Common Stock under UPEN's 1995 Long-Term
Stock Incentive Plan surrendered such restricted stock and options. Each
of UPEN's five outside directors surrendered the 100 shares of UPEN Common
Stock issued to each of them as compensation for services as directors of
UPEN. Their were no stock option grants in 1997 under the 1995 Long-Term
Stock Incentive Plan.
PERFORMANCE GRAPH
The following performance graph compares the performance of Upper
Peninsula Energy Corporation's Common Stock to the Nasdaq Stock Market
Total Return Index (United States Companies) and Edison Electric Institute
Index of 100 investor-owned electrics (which includes UPEN) for the last
five fiscal years. The graph assumes that the value of the investment in
the Corporation's Common Stock and each index was $100 at December 31,
1992 and that all dividends were reinvested.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
Upper Peninsula NASDAQ Stock Market EEI Index 100
Energy Total Return Index Investor - Owned
Corporation - U.S. Companies Electrics
--------------- ------------------- ----------------
1992 100 100 100
1993 110 115 111
1994 96 112 98
1995 122 159 129
1996 122 195 130
1997 200 240 166
PENSION PLANS
Upper Peninsula Power Company (UPPCO), a subsidiary of Upper
Peninsula Energy Corporation, maintains a Pension Plan applicable to all
full-time employees. Benefits are determined under the Plan by taking the
employee's monthly base rate of pay at July 1, 1980, and multiplying by
2%. This sum is then multiplied by the number of years and fractions
thereof of credited service prior to July 1, 1980, which develops the
employee's monthly past-service benefit. This monthly past-service
benefit is then added to the employee's monthly future-service benefit,
which is derived by adding, for each year and fractions thereof
of credited service after July 1, 1980, 2% of the employee's monthly
base rate of pay at each July 1. The Plan provides for optional early
retirement payments based on a 3% reduction of base benefits for each year
of early retirement prior to normal retirement age of 65 or, under the
Rule of 85 formula, 100% of base benefits at the time of early retirement
for all employees accumulating 85 or more points from the sum of their age
plus years of service. The estimated annual pension benefit, taking into
consideration the limitations imposed by Internal Revenue Code Section
401(a)(17), payable to the three executive officers named in the SUMMARY
COMPENSATION TABLE upon retirement at age 65 (normal retirement age under
the Plan) based on the assumption that they will continue their salary
rates at December 31, 1997, until their normal retirement date is: Mr.
Fisher $65,558, Mr. Nelson $26,041 and Mr. Arola $78,566.
An unfunded Supplemental Retirement Plan (the "SERP") is maintained
by UPPCO for a select group of management employees including the three
executive officers named in the SUMMARY COMPENSATION TABLE, as designated
by the Board of Directors and provides an annual retirement supplement for
life, but not to exceed 15 years, equal to 0.5% times final annual salary
times years of service. A minimum of 25 years and a maximum of 40 years
of service are used in the benefit calculation, but not for purposes of
eligibility. Under normal conditions, a beneficiary of the SERP must
continue to be employed through age 60 in order to qualify for benefits
under the SERP. The SERP provides, however, that participants will
receive full eligibility for full benefits following a Change in Control
of UPEN (which would include the Merger). The SERP also provides to
participants who retire after a Change in Control with reduced benefits
under UPPCO's Pension Plan due to failure to meet full eligibility
requirements, an additional benefit payment equal to the amount of the
reduction in Pension Plan benefits. The benefits payable to a participant
under the SERP are also subject to the further limitation that such
benefits, when combined with any other payment or benefit under any other
agreement or plan of UPEN or any of its affiliates or subsidiaries, shall
not constitute an "excess parachute payment" for purposes of Section 280G
of the Code. The SERP also provides a supplemental benefit for a
participant and a participant's surviving spouse, who participates in the
Company's Pension Plan and whose benefit under the pension plan is reduced
due to the limitations imposed by Internal Revenue Code Section
401(a)(17). The supplemental benefit will be an amount equal to the
difference between the amount the participant would have received pursuant
to the terms of the Pension Plan but for the limitations imposed and the
amount actually received.
SUPPLEMENTAL RETIREMENT PLAN TABLE
Years of Service
Annual ----------------------------------------------
Remuneration 25 30 35 40
------------ ------- ------- ------- -------
$ 100,000 $12,500 $15,000 $17,500 $20,000
110,000 13,750 16,500 19,250 22,000
120,000 15,000 18,000 21,000 24,000
130,000 16,250 19,500 22,750 26,000
140,000 17,500 21,000 24,500 28,000
150,000 18,750 22,500 26,250 30,000
160,000 20,000 24,000 28,000 32,000
170,000 21,250 25,500 29,750 34,000
180,000 22,500 27,000 31,500 36,000
190,000 23,750 28,500 33,250 38,000
200,000 25,000 30,000 35,000 40,000
210,000 26,250 31,500 36,750 42,000
220,000 27,500 33,000 38,500 44,000
230,000 28,750 34,500 40,250 46,000
240,000 30,000 36,600 42,000 48,000
250,000 31,250 37,500 43,750 50,000
The amounts under the heading Annual Remuneration are the amounts
reportable under the heading Base Salary in the SUMMARY COMPENSATION
TABLE, not annualized. As of December 31, 1997, Messrs. Fisher, Nelson
and Arola were credited with 34, 25 and 25 years of service, respectively.
The increased benefit due Mr. Fisher to offset the Internal Revenue
Code Section 401(a)(17) restriction discussed above is not reflected in
the above table. Assuming normal retirement at age 65 and present salary
rate, Mr. Fisher would be entitled to an additional $9,891.
Increased benefits that may result from a Change in Control
occurrence are not reflected in the above table.
TERMINATION OF EMPLOYMENT AND "CHANGE OF CONTROL" ARRANGEMENTS
UPPCO has entered into Termination Agreements with a select group of
management personnel of UPEN and UPPCO, including the three executive
officers named in the SUMMARY COMPENSATION TABLE and one additional
executive officer. Under the terms of such Termination Agreements,
following a "Change of Control" of UPEN, which occurred on January 29,
1998 when approval of the Merger by the holders of UPEN Common Stock
occurred, if the participant's employment is terminated without Cause (as
defined in such Termination Agreements), other than due to Retirement or
Disability (as such terms are defined in such Termination Agreements), or
by the participant for Good Reason (as defined in such Termination
Agreements), which includes a determination by the participant in good
faith within one year following the "Change of Control" that such
participant can no longer continue to fulfill the responsibilities for
which such participant was employed, then the participant will be entitled
to receive a severance payment equal to the maximum amount allowable such
that such payment, when combined with any other payment or benefit under
any other agreement or plan of UPEN or any of its affiliates or
subsidiaries, will not constitute an "excess parachute payment" for
purposes of Section 280G of the Code. The amount to which a participant
would be entitled under such participant's Termination Agreement will,
therefore, depend upon the total combination of benefits to which such
participant would be entitled following a "Change of Control" of UPEN.
Without giving effect to reductions by reason of the receipt of other
benefits, a participant's severance payment would be an amount not to
exceed three times such participant's average annual wage over the
previous five years.
OTHER COMPENSATION PLANS
An Employee Stock Purchase Plan is available to all full-time
employees who have more than six (6) months of service with UPPCO. This
Plan allows employees, through payroll deductions up to 15% of their gross
pay, to purchase common stock of the Corporation twice each year (June 1
and December 1) at a price equal to 90% of the average price which was in
effect six (6) months prior to the purchase date. Directors who are not
employees are not eligible to participate in this Plan. During 1997, the
difference between the option price of common stock purchased under this
Plan and the fair market value of the shares purchased amounted to $1,674
for Mr. Fisher, $1,674 for Mr. Nelson and $420 for Mr. Arola. Future
amounts will be based on the number of shares purchased, option price and
the fair market value.
UPPCO 401(k) plans are available for all employees who have more
than six (6) months of service. Voluntary employee contributions, through
payroll deductions from 1 % to 15 % of annual income, can be made by all
eligible employees. All participating employees receive a 50% matching
contribution (up to a maximum of 3% of the employee's salary). A 1997 lump
sum contribution to the 401(k) for the benefit of certain salaried
employees was approved by the Board of Directors based on 1996
performance. Such contributions are to be made in amounts equal to 1 % of
base salary if performance goals are met. The 1997 applicable performance
goal was a 12.25% return on common equity. It is expected that the
required return on common equity will be reviewed in subsequent years.
Withdrawals from the Plan can only be made upon death, retirement,
disability, termination of employment, serious financial hardship or upon
reaching age 59 1/2. Directors who are not employees are not eligible to
participate in this Plan.
In 1995, the Directors of the Corporation adopted the 1995 Corporate
Performance Incentive Plan and 1995 Long-Term Stock Incentive Plan. Both
plans are designed to attract and retain capable employees and to provide
them with long-term incentives to continue their services to the
Corporation, to maximize the value of the Corporation to its stockholders
and to permit such officers and key employees to acquire a continuing
ownership interest in the Corporation. In 1997, cash awards were made
based on the Corporation's previous years performance measurements of
shareholder related and customer related criteria compared to the same
measurements of a group of upper midwest utilities. From this data, it
was determined that a total of 82.5 performance points out of a maximum of
100 had been earned, resulting in a .825 "performance multiplier". This
.825 performance multiplier was then applied to maximum performance award
opportunities (being 30% of the base salary of the Chairman of the Board
and Chief Executive Officer and President, 25% for the other officers and
20% for the non-officer participants). At the discretion of the
Compensation Committee future awards may be cash, Corporate common stock
or a combination of cash or stock (including restricted stock). No
incentive stock options were granted in 1997.
TRANSACTIONS WITH MANAGEMENT
Mr. Rodger T. Ederer, a Class I Director, rendered various legal
services in 1997 to the Corporation and its subsidiaries as a private
practicing attorney. During 1997, in the ordinary course of its business,
an aggregate of $90,414 was paid to Mr. Ederer. Mr. Ederer has also been
retained for the year 1998.
ANNUAL REPORT
The financial statements and auditors' opinion are contained in the
enclosed Upper Peninsula Energy Corporation's 1997 Annual Report to
Shareholders.
SHAREHOLDER PROPOSALS
Shareholder proposals intended for inclusion in the 1999 proxy and
proxy statement must be received by the Secretary of the Corporation, 600
Lakeshore Drive, P. O. Box 130, Houghton, Michigan 49931-0130, not later
than November 24, 1998.
INDEPENDENT PUBLIC ACCOUNTANTS
The firm of Deloitte & Touche LLP (or an associated predecessor) has
been retained by the Corporation or its subsidiary, UPPCO, as auditors
since 1947 and are considered for appointment in the month of July each
year. Representatives of Deloitte & Touche LLP are not expected to be
available at the Annual Meeting of Shareholders.
DISCRETIONARY AUTHORITY
The Board of Directors of the Corporation has no knowledge of any
business to be brought before the Annual Meeting of Shareholders of the
Corporation other than that which is specified in the notice of such
meeting or may arise in connection with or for the purpose of effecting
the same. Should any other business properly come before the meeting, it
is intended that proxies will be voted in respect thereof in accordance
with the judgment of the person or persons voting the proxies.
UPPER PENINSULA ENERGY CORPORATION
600 Lakeshore Drive P.O. Box 130 Houghton, MI 49931-0130
SOLICITED BY THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING OF SHAREHOLDERS ON APRIL 28, 1998
The undersigned hereby appoints Clarence R. Fisher and Burton C. Arola as
Proxies, each with the power to appoint his substitute, and hereby authorizes
them to represent and to vote, as designated on the reverse side, all the
shares of common stock of UPPER PENINSULA ENERGY CORPORATION held on record by
the undersigned on March 6, 1998, at the Annual Meeting of Shareholders to
be held April 28, 1998, or at any adjournment thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER(S). IF NO DIRECTION IS GIVEN WITH
RESPECT TO A PARTICULAR PROPOSAL, THIS PROXY WILL BE VOTED "FOR" SUCH
PROPOSAL.
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| PLEASE VOTE, DATE AND SIGN ON REVERSE AND RETURN PROMPTLY USING THE |
| ENCLOSED ENVELOPE. |
| |
| NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES OF AMERICA. |
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HAS YOUR ADDRESS CHANGED? D0 YOU HAVE ANY COMMENTS?
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[X] PLEASE MARK VOTES
AS IN THIS EXAMPLE
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UPPER PENINSULA
ENERGY CORPORATION
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If joint account, each owner must sign.
Shareholder, please sign this proxy exactly as your name(s) appear(s) to the
left, including the title "Executor", "trustee", etc., if the same is
indicated. If stock is held by a corporation, this proxy should be executed by
a proper officer thereof.
RECORD DATE SHARES:
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Please be sure to sign and date this Proxy. | Date |
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- -----Shareholder sign here------------------------Co-owner sign here---------
For All For All
1. Election of Directors. Nominees Withhold Except
Leonard Angell [ ] [ ] [ ]
Robert a. Ubbelohde
NOTE: If you do not wish your shares voted "For" a particular nominee, mark
the "For All Except" box and strike a line through the nominee's name. Your
shares will be voted for the remaining nominee.
For Against Abstain
2. In their discretion, the proxies are authorized [ ] [ ] [ ]
to vote upon such other business as may properly
come before the meeting, including voting for
substitute nominees if any director nominee is
not available.
Mark box at right if an address change or comment has been noted on the
reverse side of this card [ ]