SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
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[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
CILCORP INC.
(Name of Registrant as Specified In Its Charter)
CILCORP INC.
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (check the appropriate box):
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[_] $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:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:*
(4) Proposed maximum aggregate value of transaction:
- --------
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determined.
[_] 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.
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Notes:
[LOGO OF CILCORP INC.]
300 HAMILTON BLVD., SUITE 300, PEORIA, IL 61602
CENTRAL ILLINOIS LIGHT COMPANY
CILCORP INVESTMENT MANAGEMENT INC.
CILCORP VENTURES INC.
ENVIRONMENTAL SCIENCE & ENGINEERING, INC.
March 21, 1994
To Our Shareholders:
You are cordially invited to attend the Annual Meeting of Shareholders of
CILCORP Inc. which will be held at 300 Liberty Street, Peoria, Illinois, on
April 26, 1994 at 10 AM, Central Time. Detailed information as to the business
to be transacted at the meeting is contained in the accompanying Notice of
Annual Meeting and Proxy Statement.
It is important that your shares be represented at the meeting. Please complete,
sign and date the enclosed Proxy and return it in the envelope provided as soon
as possible.
Your continued interest and cooperation are greatly appreciated.
Sincerely,
/s/ Robert O. Viets
Robert O. Viets
President and Chief
Executive Officer
CILCORP Inc.
300 Hamilton Boulevard, Suite 300
Peoria, Illinois 61602
Notice of Annual Meeting
March 21, 1994
Dear Shareholders:
The Annual Meeting of Shareholders of CILCORP Inc. will be held on Tuesday,
April 26, 1994 at 10 AM, Central Time, at 300 Liberty Street, Peoria, Illinois
61602 for the following purposes:
1. To elect six members of the Board of Directors;
2. To ratify the appointment by the Board of Directors of Arthur Andersen &
Co. as the independent public accountants for the year 1994;
3. To consider and vote upon a shareholder proposal which is set forth and
described in the attached proxy statement, if such proposal is brought
before the meeting; and
4. To transact such other business as may properly come before the meeting.
Shareholders of record at the close of business on February 25, 1994 are
entitled to vote at the meeting.
By Order of the Board of Directors,
John G. Sahn
Vice President, General Counsel and Secretary
IMPORTANT
It is important that your shares be represented at the meeting. Please mark,
sign, date and return the enclosed proxy promptly in order that your shares will
be voted.
Proxy Statement
General
This statement is furnished in connection with a solicitation of proxies
by the Board of Directors of CILCORP Inc. (the "Company" or "CILCORP"), for use
at the Annual Meeting of Shareholders to be held on Tuesday, April 26, 1994 at
10 AM, Central Time, at 300 Liberty Street, Peoria, Illinois, and any
adjournment thereof. The executive offices of the Company are located at 300
Hamilton Boulevard, Suite 300, Peoria, Illinois 61602. The shares represented by
your proxy will be voted as directed therein if the proxy is duly executed and
returned prior to the meeting. If no choice has been specified, the persons
named in the proxy intend to vote for the election of the nominees listed below,
in favor of ratification of the designated independent public accountants
(Proposal 2), and against the shareholder proposal (Proposal 3). You may revoke
your proxy by a duly executed later proxy, or at any time before it is exercised
by written notice to the Secretary of the Company, received prior to the time of
the meeting, or orally at the meeting.
Shareholders of record participating in the Company's Automatic Dividend
Reinvestment and Stock Purchase Plan will receive one proxy for both shares held
of record and shares held under such Plan. Shares in the account of an employee
participating in the savings plans of the Company's subsidiaries, Central
Illinois Light Company ("CILCO") and Environmental Science & Engineering, Inc.
("ESE"), will be voted in accordance with the employee's instructions; or, if no
instructions are given, at the discretion of the Trustees of the plans.
The expense of the solicitation of proxies is being borne by the Company.
In addition to solicitation by mail, officers and regular employees of the
Company may solicit proxies either personally, or by telephone or telefax. The
Company will reimburse banks, brokers or other similar agents or fiduciaries for
forwarding proxy material to their principals, the beneficial owners of the
stock. The Company has arranged for D. F. King & Co., Inc., for a fee of
approximately $7,500, to assist in the solicitation of proxies. Such
solicitation may be made by mail, telephone, telefax or in person.
The annual report of the Company for the year ended December 31, 1993 has
been sent to all shareholders of record at the close of business on February 25,
1994, which is the record date for the determination of shareholders entitled to
vote at the meeting. This proxy statement and accompanying proxy are to be first
mailed to shareholders on March 21, 1994.
Voting Securities and Principal Holders
On February 25, 1994, the record date for the meeting, the outstanding
voting stock of the Company consisted of 13,032,036 shares of common stock, no
par value (the "common stock"). Each share of common stock entitles the holder
thereof to one vote upon each matter coming before the meeting. Votes cast by
proxy or in person at the
1
annual meeting will be tabulated by the election inspectors appointed for the
meeting and will determine whether or not a quorum is present. The election
inspectors will treat abstentions as shares that are present and entitled to
vote for purposes of determining the presence of a quorum but as unvoted for
purposes of determining the approval of any matter submitted to the shareholders
for a vote. If a broker indicates on the proxy that it does not have
discretionary authority as to certain shares to vote on a particular matter,
those shares will not be considered as present and entitled to vote with respect
to that matter.
To the Company's knowledge, no single entity or person has beneficial
ownership of 5% or more of the Company's outstanding common stock. No
independent inquiry has been made to determine whether any shareholder is the
beneficial owner of shares not registered in the name of such shareholder or
whether any shareholder is a member of a shareholder group.
Security Ownership of Management
The following table sets forth as of January 1, 1994 the beneficial
ownership of the Company's common stock by all directors (including nominees for
director), the executive officers included in the Summary Compensation Table
herein, and all directors and officers as a group. The following table also sets
forth as of January 1, 1994 the common stock equivalents held by directors
participating in the Company's and CILCO's Deferred Compensation Stock Plans
(the "Plans").
Shares of Common
Stock and Nature Common Stock
Name of Beneficial Owner of Beneficial Ownership(1) Equivalents(2)
- ------------------------ -------------------------- --------------
Marcus Alexis 100 757
John R. Brazil 200 --
Willard Bunn III 500 --
David E. Connor 4,604 --
Homer J. Holland 100 --
Robert V. O'Keefe 1,200 --
H. Safford Peacock 1,000 2,365
R. Wayne Slone 8,230 --
Katherine E. Smith 121 1,393
Richard N. Ullman 1,000 1,600
James M. Unland 1,073 1,630
Robert O. Viets 5,511 3,618
Murray M. Yeomans 1,250 2,483
Ronald L. Rainson 811 --
William M. Shay 1,643 --
James F. Vergon 1,074 --
All directors and officers as a group 37,060 13,846
2
- ---------
(1) In each case, with respect to the shares of common stock shown, the named
individual or his spouse has sole voting and investment power. No director
or officer owns directly or indirectly more than one-tenth of one percent
of the Company's common stock. All directors and officers as a group own
less than one percent of the Company's common stock.
(2) Compensation deferred under the Plans is converted into units of common
stock based upon the market price of such stock on the trading date next
following the date payment would have been made to the director. Additional
amounts are credited to the director's account equal to common stock
dividends paid, and are treated as automatically reinvested in the
Company's common stock.
1. Election of Directors
The Board of Directors consists of eleven members, divided into three
classes, with members of each class serving a three-year term. At the 1994
Annual Meeting, the shareholders will elect two persons as directors with terms
continuing until the Annual Meeting of Shareholders in 1995 and four persons as
directors with terms continuing until the Annual Meeting of Shareholders in 1997
and, in each case, until their respective successors are elected and qualified.
The remaining five directors will continue to serve as set forth below, with two
directors having terms expiring April 1995 and three directors having terms
expiring April 1996. To be elected a director, a nominee must receive the
affirmative vote of a majority of the Company's outstanding shares represented
at the meeting and entitled to vote. All of the nominees except Messrs. Willard
Bunn III and Homer J. Holland are now directors of the Company. All of the
nominees have agreed to serve if elected. The vacancies on the Board result from
the retirement of Messrs. Robert V. O'Keefe and James M. Unland in accordance
with the Company's By-laws. Their many years of service to the Company and its
shareholders are deeply appreciated. The nominees and directors are listed
below, together with biographical information.
The Board of Directors has no reason to believe that the nominees will
not be available, but in the event that a vacancy among the original nominees is
occasioned by death or any other reason prior to the meeting, the proxy will be
voted for a substitute nominee or nominees designated by the Board of Directors.
3
Nominees for Election to the Board of Directors
For One-Year Term Expiring April 1995
Willard Bunn III
Chairman and Chief Executive Officer of Banc One Illinois
Corporation, and Chairman of Bank One, Springfield, Illinois
Not previously a director
Director of CILCO since 1991
Mr. Bunn was born at Springfield, Illinois in 1943. He joined Bank One,
formerly Marine Bank of Springfield, in 1978 as an executive vice
president. He was elected president in 1980 and chairman and chief
executive officer in 1989. He was named to his present position in 1992. He
was formerly associated with Chemical Bank from 1968 to 1978 serving in
various capacities including vice president and group head of domestic
depository institutions. Mr. Bunn graduated from Princeton University in
1966 with a degree in history. He received his master's degree in business
administration from The Darden School at the University of Virginia in
1968. Mr. Bunn is a trustee of Illinois Wesleyan University, Bloomington,
Illinois and serves on the boards of various local and state business and
civic organizations.
4
Homer J. Holland
Chairman of River Valley Holdings, Inc., parent of River Valley
Savings Bank, F.S.B., Peoria, Illinois; Chairman of Western Capital
Holdings, Inc., parent of River Valley Bank, F.S.B., McAllen, Texas and
President of Holland Partners, Inc. Chicago, Illinois (financial and
executive management services for financial service institutions)
Not previously a director
Mr. Holland was born at Madison, Wisconsin in 1941. He is a 1963 graduate
of the U.S. Military Academy and served in the U.S. Army from 1963 to 1971.
He received a Masters of Science degree in physics and electrical
engineering from Massachusetts Institute of Technology in 1967 and a Doctor
of Business Administration degree from George Washington University in
1972. Following military service, he was associated with the First National
Bank of Chicago from 1971 to 1979, last serving as senior vice president.
He was president of Exchange National Bank of Chicago from 1979 to 1983.
Mr. Holland founded Holland Partners, Inc. in 1983. He has been associated
with the River Valley Savings Bank, F.S.B. since 1985. He is a director of
CILCORP Investment Management Inc., United Services Automobile Association,
River Valley Holdings, Inc., River Valley Savings Bank, F.S.B., Western
Capital Holdings, Inc., River Valley Bank, F.S.B., Lifeline Shelter
Systems, Inc., Wisconsin Industrial Products Inc. and the Institute of
European Studies.
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Nominees for Election to the Board of Directors
For Three-Year Term Expiring April 1997
Marcus Alexis
Board of Trustees Professor of Economics and Professor of
Management and Strategy Northwestern University,
Evanston, Illinois
Director of CILCORP and CILCO since 1988
Member of Compensation and Finance Committees
Dr. Alexis was born at New York, New York in 1932. He graduated from
Brooklyn College in 1953 with a degree in economics. Dr. Alexis received a
Master of Arts degree in economics from Michigan State University in 1954,
and a Ph.D degree in economics from the University of Minnesota in 1959. He
initially joined Northwestern University in 1970 and served as chairman of
the Department of Economics from 1976-1979 and 1982-1985. During the period
1979 to 1981, he was a member, vice chairman and acting chairman of the
Interstate Commerce Commission. He joined the University of Illinois at
Chicago in 1985 as dean of the College of Business Administration and
professor of economics. He returned to Northwestern University in 1990. He
is former Chairman of the Federal Reserve Bank of Chicago and serves on the
boards of the Teachers Insurance and Annuity Association, the Metropolitan
Planning Council in Chicago, and is also a director of the Economics Club
of Chicago and the Lincoln Park Zoological Society.
H. Safford Peacock
Investment Management and Farming
Director of CILCORP since 1985 and CILCO since 1978
Member of Audit and Finance Committees
Mr. Peacock was born at Monmouth, Illinois in 1928. He graduated from the
Massachusetts Institute of Technology in 1950. He joined Myers Industries,
Inc. (manufacturers of store fixtures and storage shelving) in Lincoln,
Illinois in 1953 in an engineering capacity, and was elected vice president
of manufacturing and director in 1960. He served as vice president and
general manager from 1974 until his retirement in 1977. He is active in
investment management, including farming operations and industrial real
estate. He is a trustee of Lincoln College and a trustee and past chairman
of the board of trustees of Monmouth College.
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Richard N. Ullman
President of Federal Companies, Peoria, Illinois (commercial
warehousing, local and long distance moving)
Director of CILCORP and CILCO since 1988
Member of Audit and Finance Committees
Mr. Ullman was born at Peoria, Illinois in 1934. He graduated from DePauw
University in 1956 with a liberal arts degree. He joined Federal Warehouse
Company in 1957. In 1973 he was named president of that company and of
Federal Companies. He is a director of First of America Bank-Illinois, N.A.
(of Peoria) and Keystone Consolidated Industries, Inc. and the Peoria
Medical Research Corporation. Mr. Ullman is a member of the Saint Francis
Medical Center Advisory Board, a member of the advisory board of Children's
Hospital of Illinois at Saint Francis Medical Center, and serves as a
trustee of Bradley University. He is active in a number of professional and
civic organizations.
Robert O. Viets
President and Chief Executive Officer of this Company
Director of CILCORP since 1988
Member of Executive Committee
Mr. Viets was born at Girard, Kansas in 1943. He graduated from Washburn
University in 1965 with a degree in economics and received his law degree
from Washington University School of Law in 1969. He is a certified public
accountant and has had experience with a national accounting firm. Mr.
Viets joined CILCO in 1973 as manager of special studies and was appointed
manager of rates and regulatory affairs in 1976. He was elected assistant
vice president, regulatory and legislative affairs in 1980, vice president,
financial services in 1981, vice president (finance group) in 1983, senior
vice president of the Company and CILCO in 1986 and to his present position
in 1988. Mr. Viets is a director of First of America Bank-Illinois, N.A.
(of Peoria), RLI Corp., Lincoln Office Supply Co., Incorporated, the Peoria
Medical Research Corporation and Methodist Health Services Corporation. He
serves as chairman of the board of trustees of Bradley University. He is
also a director of Environmental Science & Engineering, Inc., CILCORP
Investment Management Inc. and CILCORP Ventures Inc.
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Members of the Board of Directors Continuing in Office
Term Expiring April 1995
R. Wayne Slone
Chairman, President and Chief Executive Officer of CILCO
Director of CILCORP and CILCO since 1988
Mr. Slone was born in Fulton County, Illinois in 1935. He joined CILCO in
1958 and held various positions related to sales and operations until he
was appointed commercial activities manager in 1974. He was appointed
general manager, suburban division in 1976, manager of rates and regulatory
affairs in 1981 and group manager in 1982. He was elected vice president
(customer service group) in 1983, senior vice president of the Company and
CILCO in 1986, president and chief executive officer of CILCO in 1988 and
chairman in 1991. Mr. Slone is a director of the Edison Electric Institute,
the Heartland Partnership and the Agricultural Research and Development
Corporation. Mr. Slone is a former chairman of the board of trustees of
Proctor Hospital and Proctor Health Care Inc. He is a trustee of Eureka
College. He is a retired Lieutenant Colonel of the Illinois Air National
Guard, past president of the Elmwood, Illinois Community Unit School
District and is active in civic organizations.
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Katherine E. Smith
Vice President, Consumer Affairs, U. S. Grocery Products Division
The Quaker Oats Company, Chicago, Illinois
Director of CILCORP and CILCO since 1985
Member of Compensation and Nominating Committees
Ms. Smith was born at Chicago, Illinois in 1940. She is a 1961 graduate of
Oregon State University with a degree in home economics. Ms. Smith has been
associated with The Quaker Oats Company since 1982 as vice president,
consumer affairs, U. S. Grocery Products Division. She was formerly with
The Great Atlantic & Pacific Tea Company, Inc. from 1976 to 1982 as vice
president, consumer affairs and marketing services and prior to that, she
was associated with The Pillsbury Company. She began her business career
with Southern California Gas Company, a division of Pacific Lighting
Corporation, where she advanced through various positions related to
customer services. Ms. Smith is active in a number of professional and
civic associations including Grocery Manufacturers of America, Society of
Consumer Affairs Professionals in Business and the American Home Economics
Association. In addition, she is a trustee of the Oregon State University
Foundation.
9
Members of the Board of Directors Continuing in Office
Term Expiring April 1996
John R. Brazil
President of Bradley University, Peoria, Illinois
Director of CILCORP and CILCO since 1993
Member of Audit and Nominating Committees
Dr. Brazil was born at Los Angeles, California in 1946. He received a
bachelor's degree in history from Stanford University in 1968 and a
master's degree and Ph.D. in American studies from Yale University in 1972
and 1975, respectively. In 1980, he was a Fulbright senior scholar in
English and American studies at the University of Sydney, Australia. Prior
to joining Bradley University as president in January 1992, he served as
chancellor and professor of English at the University of Massachusetts
Dartmouth (formerly known as Southeastern Massachusetts University) from
1984 through 1991. Dr. Brazil was previously associated with San Jose'
State University in California for eleven years, last serving as professor
of humanities and American studies and vice president for academic affairs.
He is a director of First of America Bank-Illinois, N.A., Methodist Medical
Center (both of Peoria), and chairs the Walter Byers Post-Graduate
Scholarship Committee of the National Collegiate Athletic Association.
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David E. Connor
President of David E. Connor and Associates, Peoria, Illinois
(financial advisor to businesses and banks)
Director of CILCORP since 1985 and CILCO since 1968
Member of Executive and Finance Committees
Mr. Connor was born at Omaha, Nebraska in 1925. He graduated from Yale
University in 1947. Prior to his retirement in 1985, he had served as
president and as a director of Midwest Financial Group, Inc. (a multi-bank
holding company) since its inception in 1981, and chairman of its largest
subsidiary, Commercial National Bank of Peoria. Mr. Connor had been
associated with the bank since 1952, and advanced through various areas of
responsibilities to vice president in 1956. He was elected a director in
1959, senior vice president in 1964, president in 1967 and chairman in
1985. Mr. Connor formed David E. Connor and Associates in 1985. Other
directorships include CILCORP Investment Management Inc., Keystone
Consolidated Industries, Inc., Agricultural Research & Development
Corporation, Peoria Development Corporation and First Bankers Trust Shares,
Quincy, Illinois. He is a member of the board of trustees of Bradley
University and was formerly chairman of that board. He also serves on the
boards of various local and state business and civic organizations.
Murray M. Yeomans
Chairman and Chief Executive Officer of Yeomans Distributing
Company, Peoria, Illinois
(wholesale appliances and central heating and cooling equipment)
Director of CILCORP and CILCO since 1987
Member of Audit and Compensation Committees
Mr. Yeomans was born at Philadelphia, Pennsylvania in 1935. He is a 1958
graduate of Miami University (Ohio) with a degree in business
administration. He joined Yeomans Distributing Company in 1960 and was
named president in 1972 and to his present position in 1991. He is a
director of First of America Bank-Illinois, N.A. (of Peoria), Peoria Area
Community Foundation and serves as a trustee of Bradley University. In
addition, he is a member of the Saint Francis Medical Center Advisory Board
and the board of directors of the Illinois Neurological Institute. Mr.
Yeomans is active in civic and charitable activities.
11
Committees and Meetings of the Board of Directors
The Board of Directors, has, among others, Audit, Compensation and
Nominating Committees.
The Audit Committee is responsible for reviewing audits made by the
Company's independent accountants, including the scope of the auditors' reports
thereon and reviewing such other matters, such as the effectiveness of internal
controls, as the Committee may deem appropriate. The Audit Committee recommends
to the Board of Directors the independent accounting firm which will be engaged
to audit the Company's financial statements. The Committee also reviews the
activities of the Company's internal auditors. Directors serving as members of
the Committee are Messrs. Brazil, Peacock, Ullman and Yeomans. During 1993, the
Committee held five meetings.
The Compensation Committee considers and makes recommendations to the
Board of Directors with respect to the compensation of the Company's executive
officers. Directors serving as members of the Committee are Messrs. Alexis,
O'Keefe, Yeomans and Ms. Smith. During 1993, the Committee held seven meetings.
The Nominating Committee's principal function is to review and recommend
to the Board of Directors nominees to serve on the Board. The Committee
considers nominees brought to its attention by other members of the Board, by
members of management and by shareholders. Shareholders may submit
recommendations to the Committee with respect to nominees by writing to the
Secretary of the Company. Under the Company's By-laws, written notice of any
shareholder nomination of an individual for election as a director at the Annual
Meeting must be received by the Secretary of the Company at 300 Hamilton
Boulevard, Suite 300, Peoria, Illinois 61602, not later than sixty days prior to
the first anniversary of the date of the last Annual Meeting of Shareholders and
set forth the name, age, business and residential address, principal occupation,
number of shares of stock owned and such other information concerning the
nominee as may be required by the federal securities laws in respect of an
individual nominated as a director for whom proxies are solicited. (A copy of
the Company's By-laws specifying the requirements for shareholder nominations
will be furnished to any shareholder without charge upon written request to the
Secretary.) Directors serving as members of the Committee are Messrs. Brazil,
Unland, and Ms. Smith. During 1993, the Committee held four meetings.
During 1993, the Board of Directors held a total of ten meetings.
Proposals of Shareholders
Proposals of shareholders to be presented at the April 25, 1995 annual
meeting must be received not later than November 21, 1994 for inclusion in the
proxy statement and form of proxy relating to that meeting. Proposals should be
sent to the Secretary, CILCORP Inc., 300 Hamilton Boulevard, Suite 300, Peoria,
Illinois 61602.
12
Executive Compensation
The following table sets forth the compensation earned for the years
1993, 1992 and 1991 for the Chief Executive Officer and the four highest
compensated executive officers of the Company and its subsidiaries whose total
annual compensation exceeded $100,000:
SUMMARY COMPENSATION TABLE
Annual Long-Term
Compensation Compensation
----------------- --------------- All Other
Name and Principal Position Year Salary LTIP Payouts(1) Compensation(2)
- --------------------------- ---- ------ --------------- ---------------
Robert O. Viets 1993 $ 257,850 $ 41,962 $ 25,305
President and Chief Executive 1992 243,800 48,121 19,903
Officer of the Company 1991 227,000 68,601 19,791
R. Wayne Slone 1993 205,500 88,635 28,611
Chairman, President and Chief 1992 195,250 60,976 22,371
Executive Officer of CILCO 1991 183,350 61,849 22,262
Ronald L. Rainson 1993 214,000 -- 10,043
Chairman, President and Chief 1992 189,500 24,800 9,651
Executive Officer of ESE 1991 153,000 -- 10,239
William M. Shay 1993 150,437 34,864 17,953
Vice President of CILCO(3) 1992 143,250 30,851 25,821
1991 135,350 42,953 24,092
James F. Vergon 1993 134,564 57,114 11,635
Vice President of CILCO(4) 1992 121,205 40,796 9,310
1991 113,714 38,425 9,091
(1) Amounts paid, if any, pursuant to the EVA-Based Incentive Compensation
Plans of the Company, CILCO and ESE.
(2) The amounts shown in this column for 1993 represent (a) employer
contributions under the CILCO and ESE Savings Plans: Mr. Viets $4,497, Mr.
Slone $4,497, Mr. Rainson $2,015, Mr. Shay $4,062 and Mr. Vergon $4,037;
and (b) earnings on deferred compensation: Mr. Viets $20,808, Mr. Slone
$24,114, Mr. Rainson $8,028, Mr. Shay $13,891 and Mr. Vergon $7,598.
(3) Effective January 1, 1993. Previously Mr. Shay was a vice president of the
Company.
(4) Mr. Vergon served as vice president and chief financial officer of the
Company from January 1, 1993 through February 28, 1993.
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Compensation Committee Report on Executive Compensation
Background and Policies. The Compensation Committee of the Board of
Directors (the "Committee") is comprised of four non-employee members of the
Board. The Committee considers and makes recommendations to the Board with
respect to the compensation of the executive officers (the president and vice
presidents) of the Company. The Committee's compensation policies with respect
to the executive officers are as follows:
1. Compensation levels should be established which are internally fair and
equitable, bearing in mind (a) past practices, patterns and
relationships, and (b) the relationship between officer level
compensation and the compensation provided for top level managers
throughout the Company.
2. Compensation should be comparable and reasonable in relation to similar
positions in other companies of like size, structure and purpose.
3. Compensation of the executive officers should be directly related to
the economic value created for the Company's shareholders.
4. A compensation program should be designed to attract and retain
superior management.
Executive Officer Compensation Program. The Company's current executive
officer compensation program is comprised of two major components: base salary
and incentive compensation. Base salary levels for the Company's executive
officers are set by the Committee relative to other companies of similar size
and purpose. In addition, the Committee also considers the individual officer's
experience and performance. Salaries of the executive officers are reviewed each
year by the Committee and may be adjusted based on the individual's contribution
to the Company's performance and competitive pay levels.
Incentive compensation is awarded in accordance with the Company's
EVA-Based Incentive Compensation Plan ("EVA Plan") and the Shareholder Return
Incentive Compensation Plan approved by shareholders on April 27, 1993
("Shareholder Return Plan"). The purpose of the EVA Plan is to provide an
incentive to eligible officers to increase and maintain shareholder value by
rewarding the achievement of this objective. EVA is a measure of profitability
that is based on the difference between the return earned on the capital
invested in an enterprise and the cost of that capital. This difference can be
either positive or negative. The resulting award is added to or deducted from
balances accumulated from prior years. Each year, one third of the net balance
accumulated is paid to the participant. That portion of the incentive
compensation which has been deferred is "at risk" so that a negative EVA in a
subsequent year may eliminate previously accumulated balances. The award payment
is based, in part, on a fixed percent of the improvement in
14
EVA from the prior year plus a fixed percent of the maintenance of EVA over the
preceding three years.
The purposes of the Shareholder Return Plan are to promote long term
growth in the value of the Company's common stock, to attract and retain
executives of outstanding ability, to encourage teamwork among the executives of
the Company and its subsidiaries, and to reward performance based on the
successful achievement of pre-established corporate financial goals. Shares may
be granted to eligible key employees of the Company or its subsidiaries who, due
to the nature and scope of their positions, regularly and directly make or
influence policy decisions which impact the overall long-term results or success
of the Company. Only the Chief Executive Officers of the Company and its
operating subsidiaries, CILCO and ESE, are currently participating in the Plan.
Each has been granted a designated number of shares to be distributed based upon
achievement of pre-established financial objectives for the first performance
period which commenced on January 1, 1993 and ends on December 31, 1997. The
financial objectives are based upon the Company's total shareholder return.
In 1993, the vice president of the Company received a salary increase of
4.2% based upon 1992 performance. The total shareholder return on the Company's
common stock (including reinvested dividends) for 1992 was 11.7%.
President's Compensation. In April 1993, Mr. Viets' base salary was
increased from $248,400 to $261,000, a 5% increase based upon his performance
during 1992 and designed to achieve a more competitive level of compensation. In
evaluating his performance, the Committee recognized his significant
contribution toward management of the ongoing operations of the holding company
and its subsidiaries. The Committee considered the following factors occurring
in 1992;
1. Despite unusually mild weather conditions in CILCO's service
territory, CILCORP earned 9.5% on common equity.
2. The 11.7% total return on CILCORP stock exceeded the returns of peer
companies in the utility and environmental industry. It also exceeded
the average earned by stocks in the S&P 500.
3. CILCORP Investment Management Inc., a CILCORP subsidiary, participated
in the reorganization of Tucson Electric Power Company which
significantly reduced the Company's risk in a leveraged lease
transaction.
Other factors included:
. Significant improvement in earnings at ESE
. Better than average return on the Company's pension funds
. Financial restructuring of CILCO's long-term debt at significantly
lower interest rates
15
. Reorganization of executive management to better address strategic
objectives
The payment to Mr. Viets of an award of $41,962 in 1993 pursuant to the
Company's EVA-Based Incentive Compensation Plan resulted primarily from a
positive award balance which had accumulated for prior years and the average of
the Company's performance for the three twelve-month periods ended September 30,
1993, 1992 and 1991.
Following approval of the Company's Shareholder Return Incentive
Compensation Plan at the Annual Meeting of Shareholders on April 27, 1993, the
Compensation Committee granted to Mr. Viets 6,000 shares of common stock for the
performance period beginning January 1, 1993. Actual distribution of the shares
granted to Mr. Viets will occur only in the event that pre-established Company
financial objectives based on total shareholder return are achieved during the
performance period which expires December 31, 1997.
Compensation Committee
Katherine E. Smith, Chairperson
Marcus Alexis
Robert V. O'Keefe
Murray M. Yeomans
16
Comparative Stock Performance
The graph below compares the yearly percentage change in the cumulative
total shareholder return on the common stock of the Company during the five
years ended December 31, 1993 with the cumulative total return on the S&P 500
Index and the S&P Utility Index over the same period. The comparison assumes
$100 was invested on December 31, 1988 in the Company's common stock and in each
of the foregoing indices, and assumes reinvestment of dividends.
[GRAPH APPEARS HERE]
COMPARISON OF FIVE YEAR CUMULATIVE PRETURN
AMONG CILCORP, S&P 500 INDEX AND S&P UTILITIES INDEX
Measurement period S&P 500 S&P Utilities
(Fiscal year Covered) Cilcorp Index Index
- --------------------- ---------------- ------- ---------
Measurement PT - $100 $100 $100
12/31/88
FYE 12/31/89 $126 $132 $147
FYE 12/31/90 $124 $128 $143
FYE 12/31/91 $144 $166 $164
FYE 12/31/92 $161 $179 $178
FYE 12/31/93 $162 $197 $203
17
Certain Plans
CILCO Benefit Replacement Plan. The CILCO Board of Directors has
established a Benefit Replacement Plan (the "Plan"). The Plan provides for
payments to Plan participants from CILCO's general funds to restore the
retirement benefit under the CILCO Pension Plan when such benefit is restricted
by (1) the maximum defined benefit limitation of Section 415(b) of the Internal
Revenue Code of 1986, as amended (the "Code"), (2) the indexed compensation
limitation of Section 401(a)(17) of the Code, and (3) participation in certain
deferred compensation plans. The Plan generally covers all CILCO Pension Plan
participants affected by these restrictions and provides for payment at the
times and in the forms of the Pension Plan.
CILCO Pension Plan. Pension benefits are provided through CILCO's non-
contributory Pension Plan for Management, Office and Technical Employees (the
"Pension Plan"). Directors who are not employees do not participate in this
Plan. Pension benefits are determined using a formula based on years of service
and highest average rate of monthly earnings for any sixty consecutive month
period. The normal retirement date specified in the Pension Plan is age 65.
Retirement prior to age 62 results in an appropriate reduction in pension
benefits.
The following table shows the aggregate annual benefits payable on a
straight life annuity basis upon retirement at normal retirement age under the
CILCO Pension Plan and under the CILCO Benefit Replacement Plan discussed above.
The amounts shown are not subject to any deduction for Social Security benefits
or other offset amounts other than that for an optional survivorship provision.
PENSION PLAN TABLE
Years of Service
-----------------------------------------------------------
Remuneration 15 years 20 years 25 years 30 years 35 years
------------ -------- -------- -------- -------- --------
$ 175,000 $ 37,406 $ 49,875 $ 62,344 $ 74,813 $ 87,281
200,000 42,750 57,000 71,250 85,500 99,750
225,000 48,094 64,125 80,156 96,188 112,219
250,000 53,438 71,250 89,063 106,875 124,688
300,000 64,125 85,500 106,875 128,250 149,625
350,000 74,813 99,750 124,688 149,625 174,563
The annual and long-term compensation shown for the individuals listed in
the above Summary Compensation Table is substantially compensation as covered by
the Pension Plan and the Benefit Replacement Plan. Mr. Rainson is not a
participant in the plans. At January 1, 1994, the credited years of service
under the Pension Plan for the officers named in the above table are as follows:
R. O. Viets--20 years, R. W. Slone--35 years, W. M. Shay--11 years, and J. F.
Vergon--22 years.
18
Compensation Protection Plans. The Boards of Directors of CILCO and ESE
have established Compensation Protection Plans providing severance benefits to
eligible employees, including Messrs. Shay, Slone and Vergon in the case of
CILCO, and Mr. Rainson in the case of ESE, in the event of (i) a termination of
employment resulting directly or indirectly from a sale of substantially all or
certain assets of CILCO or ESE or (ii) a termination of employment within two
years after a change in control occurring involuntarily for a reason other than
unacceptable performance or occurring voluntarily with good reason as defined in
the plan. A change in control includes the sale of all or part of the business
of CILCO or ESE to a person not controlled by CILCORP, a merger or consolidation
of CILCORP in which CILCORP does not survive or in which its common stock is
converted, the acquisition of 30% of the beneficial ownership of CILCORP by a
person together with the failure of continuing directors to constitute a
majority of its board of directors, or a sale of all or substantially all of the
assets of CILCORP. Upon a covered termination, a participant is entitled to a
continuation of base salary and benefit plan coverage for two years (or a
shorter period for participants below the position of vice president in the case
of CILCO and senior vice president in the case of ESE with less than 30 years of
service) after such termination.
Directors' Compensation. No fees are paid to directors who are employees
of the Company or its subsidiaries. Non-employee members of the Board receive a
total annual retainer fee of $13,000 for serving on the Company's Board and on
the Board of any of the Company's subsidiaries, prorated for less than a year's
service. Non-employee directors also receive an attendance fee of $750 for
attending meetings of the Board of Directors of the Company or its subsidiaries
and an attendance fee of $750 for each meeting attended of committees of those
Boards. A single Board or committee attendance fee is payable to each director
in the event the Boards of the Company and CILCO or committees of the Boards of
the Company and CILCO meet on the same day. Directors are also reimbursed for
their travel expenses for each Board or committee meeting attended.
2. Appointment of Independent Public Accountants
(The Board Recommends a Vote FOR Ratification.)
The Board of Directors has appointed Arthur Andersen & Co., independent
public accountants, to audit the accounts of the Company for 1994. Although the
appointment of independent public accountants is not required to be approved by
the shareholders, the Board believes the shareholders should participate in this
appointment through ratification. If a majority of the shares represented and
voting at the meeting does not ratify the appointment, the Board will reconsider
its action.
A representative of Arthur Andersen & Co. is expected to be present at
the annual meeting and will be given an opportunity to make a statement if he so
desires and to respond to appropriate questions.
19
3. Shareholder Proposal
(The Board Recommends That CILCORP Shareholders Vote AGAINST Proposal 3.)
Three shareholders of the Company have advised the Company that they will
submit the proposal set forth below at the annual meeting. The names and
addresses of the proponents and the number of shares held by the proponents will
be furnished by the Secretary of the Company to any person, orally or in
writing, as requested, promptly upon the receipt of an oral or written request.
"The shareholders of CILCORP Inc. request the following amendment to the
By-laws and (or) Articles of Incorporation be adopted:
Beginning at the 1995 CILCORP Inc. Annual Shareholders meeting, each
director shall at all times hold, directly in their name, an amount of
shares of CILCORP Inc. common or voting class preferred of such quantity
not to be less than the average shareholder's holding of the particular
class of stock. The number of shares shall be based upon the annual report
to shareholders of the preceding year.
It shall be the duty of the Secretary of CILCORP Inc. to certify this
compliance prior to an individual being seated on our Board of Directors.
Should any director fail to comply with this ownership requirement, such
director shall have thirty (30) days from the date of non-compliance to
comply. Failure to comply shall result in disqualification and such
director's position shall be declared vacant."
Shareholders' Statement in Support of Proposal
"In the proponents' opinion, a director with an investment at least equal
to that of the average shareholder (holding 782 shares based upon the 1992
annual report) should help to instill strong, undivided and lasting
interest in our corporation. This should promote directors to think like
the average owner and expose them directly to risks of the business as
well as its opportunities. Assets represented in the form of--PHANTOM or
other forms of ILLUSIONARY shares, must not be construed as bonafide stock
holdings in CILCORP Inc. An investment in CILCORP Inc. is a monetary
commitment; however, if the amount is of a superficial nature, the
question of dedication becomes one of conjecture. This would ensure that
our Directors examine management's initiatives as being in the best
interests of the shareholder. The basic question which we ask is "WHY ARE
DIRECTORS UN-WILLING TO DIRECTLY PLACE THEIR DOLLAR AT RISK FOR THE
DECISIONS THEY MAY AUTHORIZE?"
This proposal does not eliminate highly qualified individuals from serving
on our Board of Directors, but demands a highest level of motivation and
commitment to the employees, customers and shareholders."
20
Board of Directors' Statement in Opposition to Shareholder Proposal
The Board believes that the establishment of a mandatory, arbitrary level
of stock ownership by CILCORP directors is unwarranted. A director of CILCORP
owes, by law, a fiduciary obligation to the shareholders of the Company. He or
she is obligated to exercise the utmost duty of care and loyalty to shareholders
and to conduct the business and affairs of the Company in such a way as to
maximize the benefits of stock ownership. The selection of CILCORP's directors
should be based primarily on the business experience, management skill and sound
judgment which they contribute to the Board rather than on the number of shares
owned and wealth accumulation.
Any implication from this proposal that CILCORP's current directors are
not dedicated to the interests of the Company and its shareholders is false and
misleading. All of the Company's current directors hold significant investment
interests in the Company, consisting of outright stock ownership and deferred
compensation arrangements through which the participants assume the position of
unsecured general creditors. At January 1, 1994, directors had a combined
investment in the Company exceeding $3.7 million, an average in excess of
$339,000 per director. The average investment by directors in the Company's
common stock or common stock equivalents exceeds 3,400 shares, an increase of
approximately 1,400 shares during the last three years.
In addition, seven incumbent directors are participating in a deferred
compensation plan which provides that the value of amounts deferred fluctuates
proportionately with the performance of the Company's common stock. The economic
interest is not illusionary. The plan provides directors their only opportunity
to participate in the benefits (and risks) of owning CILCORP stock without being
subject to regulations of the Securities and Exchange Commission which impose
severe stock market trading limitations on "insiders." A participant in the plan
cannot, however, dispose of his or her plan investment so long as he or she is a
director. Because plan participants cannot liquidate their stock holdings to
take advantage of market developments, the Company believes the plan requires a
higher level of commitment to CILCORP than outright share ownership.
To amend the Company's By-laws to include the foregoing proposal, the
affirmative vote of 75% of the shares outstanding and entitled to vote thereon
at the annual meeting is required.
To amend the Company's Articles of Incorporation to include the foregoing
proposal, the affirmative vote of a majority of the shares outstanding and
entitled to vote thereon at the annual meeting is required, as well as approval
by the Board.
4. Other Matters
The Board has no knowledge of any business to be presented for
consideration at the annual meeting other than that discussed above. Should any
other business properly
21
come before the meeting or any adjournment thereof, it is intended that the
shares represented by proxies will be voted with respect thereto in accordance
with the best judgment of the persons named in such proxies.
By Order of the Board of Directors,
John G. Sahn
Vice President, General Counsel and
Secretary
March 21, 1994
22
[LOGO OF CILCORP INC.]
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned appoints, D.E. Connor, R.O. Viets, and J.G. Sahn, and
each of them, attorneys and proxies with power of substitution to each,
with authority to vote, all shares which the undersigned would be entitled
to vote if personally present, at the 1994 annual meeting of shareholders
of CILCORP Inc., or at any adjournment thereof, upon the items set forth
in the notice of meeting and proxy statement relating thereto and, in their
discretion, upon any other matter which may properly come before the meeting.
The shares represented hereby will be voted as directed on the reverse of
this card.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED. IF NOT OTHERWISE DIRECTED, THIS PROXY
WILL BE VOTED FOR ITEMS 1 AND 2 AND AGAINST ITEM 3
--- -------
(CONTINUED AND TO BE SIGNED ON THE OTHER SIDE)
PROXY. PLEASE DATE AND SIGN EXACTLY AS NAME APPEARS BELOW. EACH JOINT OWNER
SHOULD SIGN. ATTORNEY, EXECUTOR, ADMINISTRATOR, TRUSTEE, CORPORATE
OFFICER OR OTHERS SIGNING IN A REPRESENTATIVE CAPACITY SHOULD GIVE
THEIR FULL TITLES.
DATE:_____________________________, 1994
________________________________________
SIGNATURES
________________________________________
1. ELECTION OF DIRECTORS
[_] FOR all nominees listed [_] WITHHOLD AUTHORITY
below (except as marked to vote for all nominees
to the contrary below) listed below
Nominees: M. Alexis, W. Bunn III, H.J. Holland, H.S. Peacock, R.N. Ullman,
and R.O. Viets
Instruction: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below.
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE
---
APPOINTMENT OF INDEPENDENT ACCOUNTANTS.
2. Appointment of
Arthur Andersen & Co. FOR AGAINST ABSTAIN
as independent accountants [_] [_] [_]
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THE
-------
FOLLOWING.
3. Shareholder proposal FOR AGAINST ABSTAIN
(director share ownership) [_] [_] [_]
NO POSTAGE REQUIRED IF RETURNED IN THE ENCLOSED
ENVELOPE AND MAILED IN THE UNITED STATES.
Graphic Appendix List
Page No. Description
-------- -----------
4 Photo of Willard Bunn, III appears on page 4
5 Photo of Homer J. Holland appears on page 5
6 Photos of Marcus Alexis and H. Safford Peacock
appear on page 6
7 Photos of Richard N. Ullman and Robert O. Viets
appear on page 7
8 Photo of R. Wayne Slone appears on page 8
9 Photo of Katherine E. Smith appears on page 9
10 Photo of John R. Brazil appears on page 10
11 Photos of David E. Connor and Murray M. Yeomans
appear on page 11
17 5 year comparison graph between Cilcorp, S&P 500
and S&P Utilities appears on page 17