-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, DzwwKs2jR6pv0Bi3XMFeQXO/dItGFTamuhTymaIA8jk6pYgb4bO14GEbKR2nlgzs dY1F8UyIZYZTbR5xePiYtA== 0000950131-95-000549.txt : 19950615 0000950131-95-000549.hdr.sgml : 19950615 ACCESSION NUMBER: 0000950131-95-000549 CONFORMED SUBMISSION TYPE: DEF 14A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19950412 FILED AS OF DATE: 19950310 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: NIPSCO INDUSTRIES INC CENTRAL INDEX KEY: 0000823392 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC & OTHER SERVICES COMBINED [4931] IRS NUMBER: 351719974 STATE OF INCORPORATION: IN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: DEF 14A SEC ACT: 1934 Act SEC FILE NUMBER: 001-09779 FILM NUMBER: 95519826 BUSINESS ADDRESS: STREET 1: 5265 HOHMAN AVE CITY: HAMMOND STATE: IN ZIP: 46320 BUSINESS PHONE: 2198535200 MAIL ADDRESS: STREET 1: 5265 HOHMAN AVENUE CITY: HAMMOND STATE: IN ZIP: 46320-1775 DEF 14A 1 NOTICE & PROXY SCHEDULE 14A INFORMATION Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 (Amendment No. ) Filed by the Registrant [X] Filed by a Party other than the Registrant [_] Check the appropriate box: [_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY RULE 14A-6(E)(2)) [X] Definitive Proxy Statement [_] Definitive Additional Materials [_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12 NIPSCO INDUSTRIES, INC. - -------------------------------------------------------------------------------- (Name of Registrant as Specified In Its Charter) NIPSCO INDUSTRIES, INC. - -------------------------------------------------------------------------------- (Name of Person(s) Filing Proxy Statement, if other than the Registrant) Payment of Filing Fee (Check the appropriate box): [X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or Item 22(a)(2) of Schedule 14A. [_] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-6(i)(3). [_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11. (1) Title of each class of securities to which transaction applies: ------------------------------------------------------------------------- (2) Aggregate number of securities to which transaction applies: ------------------------------------------------------------------------- (3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined): ------------------------------------------------------------------------- (4) Proposed maximum aggregate value of transaction: ------------------------------------------------------------------------- (5) Total fee paid: ------------------------------------------------------------------------- [_] Fee paid previously with preliminary materials. [_] Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. (1) Amount Previously Paid: ------------------------------------------------------------------------- (2) Form, Schedule or Registration Statement No.: ------------------------------------------------------------------------- (3) Filing Party: ------------------------------------------------------------------------- (4) Date Filed: ------------------------------------------------------------------------- Notes: NOTICE OF ANNUAL MEETING March 10, 1995 To the Holders of Common Shares of NIPSCO Industries, Inc.: The annual meeting of the shareholders of NIPSCO Industries, Inc. (the "Company"), will be held at the Center for Visual and Performing Arts, 1040 Ridge Road, Munster, Indiana, on Wednesday, April 12, 1995, at 10:00 a.m., Central Daylight Savings Time, for the following purposes: (1) to elect three members of the Board of Directors, each for a term of three years; and (2) to transact any other business that may properly come before the meeting or any adjournment or adjournments thereof. Shareholders of record on February 21, 1995, will be entitled to vote at the meeting. The stock transfer books will not close. The Company has approximately 39,000 common shareholders of record. In order that there may be proper representation at the meeting, each shareholder is requested to vote, sign and mail the enclosed proxy at once. If sufficient proxies are not obtained, an adjournment will be necessary. Please help avoid the expense and delay of adjourning the meeting by mailing your proxy promptly. Shareholders attending the meeting may vote in person, and in such cases proxies they have signed will not be voted. In order to facilitate arrangements for the meeting, we would like to know in advance how many shareholders expect to attend in person. If you plan to attend, please indicate in the space provided on the proxy card. Please Vote, Date, Sign and Return the Enclosed Proxy Promptly. LOGO Nina M. Rausch Secretary LOGO - -------------------------------------------------------------------------------- PROXY STATEMENT THE ACCOMPANYING PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY AND IS REVOCABLE BY THE SHAREHOLDER. The common shares, no par value, of the Company ("Common Shares") represented by the proxies will be voted as directed, but in the absence of direction, proxies will be voted for all of the nominees for director. The proxy statement and form of proxy are first being sent to shareholders on March 10, 1995. The expense of this solicitation will be borne by the Company. It is intended that the original solicitation of proxies by mail and a reminder letter may be supplemented by telephone, telegraph and personal solicitation by officers and regular employees of the Company or its subsidiaries. In addition, the Company has retained Morrow & Co., Inc., for a fee of $8,000 plus reimbursement of expenses, to aid in the solicitation of proxies. Requests will also be made of brokerage houses and other nominees and fiduciaries to forward proxy material at the expense of the Company to the beneficial owners of stock held of record by such persons. All of a shareholder's shares registered in the same name, including those held for the shareholder as a participant in the Company's Automatic Dividend Reinvestment and Share Purchase Plan and the Tax Deferred Savings Plan, will be represented on one proxy. Proxies may be revoked at any time before a vote is taken or the authority granted is otherwise exercised. Revocation of proxies may be accomplished by delivering an instrument of revocation or a duly executed proxy bearing a later date to the Secretary of the Company or by attending the meeting and voting in person. Attendance at the meeting will not in and of itself revoke a proxy. If you are planning to attend the meeting in person, please indicate in the space provided on the proxy card, so that the Company may facilitate arrangements. VOTING SECURITIES-- The close of business on February 21, 1995, is the date for the determination of the number of shares outstanding and of shareholders entitled to notice of and to vote at the meeting. As of February 21, 1995, the Company had issued and outstanding 64,185,689 Common Shares owned by approximately 39,000 shareholders of record. Each common share is entitled to one vote on each matter voted upon. A quorum of shareholders is necessary to take action at the Annual Meeting. A majority of the outstanding Common Shares, represented in person or by proxy, will constitute a quorum of shareholders at the Annual Meeting. The judges of election will determine whether or not a quorum is present. A plurality vote of the shares represented at the meeting is required to elect a director. 1 Votes cast by proxy or in person at the meeting will be tabulated by the judges of election appointed for the meeting. ELECTION OF DIRECTORS NOMINEES FOR ELECTION AS DIRECTORS-- The Company's Board of Directors is composed of nine directors, who are divided into three classes. One class is elected each year for a term of three years. Upon recommendation of the Nominating and Compensation Committee, the Board of Directors has nominated for reelection as directors Steven C. Beering, Ernestine M. Raclin and Denis E. Ribordy, each for a term of three years. The Board of Directors does not anticipate that any of the nominees will be unable to serve, but if such a situation should arise the proxies will be voted in accordance with the best judgment of the person or persons acting thereunder. The following chart gives information about nominees (who have consented to being named in the proxy statement and to serve if elected) and incumbent directors. The dates shown for service as a director include service as a director of Northern Indiana Public Service Company ("Northern Indiana") prior to the March 3, 1988 share exchange with the Company. The Company's current directors are also the directors of Northern Indiana, now a wholly-owned subsidiary of the Company.
NAME, AGE AND PRINCIPAL OCCUPATIONS HAS BEEN FOR PAST FIVE YEARS AND PRESENT DIRECTOR DIRECTORSHIPS HELD SINCE ----------------------------------- -------- NOMINEES FOR TERMS TO EXPIRE IN 1998 Steven C. Beering, 62--President of Purdue University, West Lafayette, Indiana. Dr. Beering is also a director of Arvin Industries, Inc., American United Life Insurance Company, Eli Lilly and Company and Guidant Corporation................................ 1986 Ernestine M. Raclin, 67--Chairman of the Board, 1st Source Corporation, a bank holding company, and 1st Source Bank, South Bend, Indiana...................................................... 1983 Denis E. Ribordy, 65--Chairman and Chief Executive Officer of the Chicago Motor Club, Chicago, Illinois; retired President of Ribordy Drugs, Inc., Merrillville, Indiana, a retail drugstore chain. Mr. Ribordy is also a director of Mercantile National Bank of Indiana.. 1981
2
NAME, AGE AND PRINCIPAL OCCUPATIONS HAS BEEN FOR PAST FIVE YEARS AND PRESENT DIRECTOR DIRECTORSHIPS HELD SINCE ----------------------------------- -------- DIRECTORS WHOSE TERMS EXPIRE IN 1996 Ian M. Rolland, 61--Chairman and Chief Executive Officer of Lincoln National Corporation, Fort Wayne, Indiana, an insurance and financial services firm, since January 1, 1992, previously President and Chief Executive Officer; and Chairman and Chief Executive Officer of The Lincoln National Life Insurance Company. Mr. Rolland is also a director of Lincoln National Corporation, Tokheim Corporation, Norwest Corporation, Norwest Bank Indiana, N.A. and Emphesys Financial Group, Inc....................................... 1978 Edmund A. Schroer, 67--Consultant to the Company; retired March 1, 1993 as Chairman, President and Chief Executive Officer of the Company and Chairman and Chief Executive Officer of Northern Indiana............................................................. 1977 John W. Thompson, 45--General Manager--Marketing, IBM Corporation, Somers, New York. IBM is a worldwide corporation, whose offerings include services, software, systems, products and technologies. Mr. Thompson is also a director of IBM Credit Corporation............... 1993 DIRECTORS WHOSE TERMS EXPIRE IN 1997 Arthur J. Decio, 64--Chairman of the Board and Chief Executive Officer and Director of Skyline Corporation, Elkhart, Indiana, a manufacturer of manufactured housing and recreational vehicles. Mr. Decio is also a director of Quality Dining, Inc..................... 1991 Gary L. Neale, 55--Chairman, President and Chief Executive Officer of the Company and of Northern Indiana since March 1, 1993; prior thereto, Executive Vice President of the Company, and President and Chief Operating Officer of Northern Indiana. Mr. Neale is also a director of Modine Manufacturing Company............................ 1991 Robert J. Welsh, Jr., 59--President and Chief Executive Officer of Welsh Oil, Inc., Merrillville, Indiana, a marketer of petroleum products through convenience stores and travel centers. Mr. Welsh is also a director of NBD Indiana, Inc................................. 1988
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS-- The Board of Directors of the Company met ten times during 1994. The Board has the following six standing committees: the Executive Committee, the Audit Committee, the Nominating and Compensation Committee, the Environmental Affairs Committee, the Public Affairs and Employment Committee and the Corporate Governance Committee. 3 During 1994, each director attended at least 80% of the combined total number of the Company's Board meetings and the meetings of the respective committees on which he or she was a member. The Executive Committee has the authority to act on behalf of the Board at such times as is reasonably necessary when the Board is not in session. The Committee met once in 1994. Mr. Neale is Chairman and Messrs. Decio, Ribordy, Rolland and Welsh were members of the Committee in 1994. The Audit Committee met five times in 1994. The Committee has reviewed and made recommendations to the Board with respect to the engagement of the independent public accountants, both for 1994 and 1995, and the fees relating to audit services and other services performed by them. The Committee meets with the independent public accountants and officers responsible for Company financial matters. Members of the Committee in 1994 were Mr. Rolland, Chairman, and Messrs. Decio, Schroer and Thompson. The Nominating and Compensation Committee met three times in 1994. The Committee advises the Board with respect to nominations of Directors and the salary, compensation and benefits of directors and officers of the Company. Mr. Ribordy was Chairman of the Committee, and Dr. Beering, Mrs. Raclin and Mr. Welsh were members during 1994. The Committee considers nominees for Directors recommended by shareholders. The Company's By-laws require that shareholders who desire to nominate a person for election as a director at the 1996 annual meeting must deliver a written notice to the Secretary of the Company by November 13, 1995. The notice of nomination must set forth (i) the name, age and address of each nominee proposed, (ii) the principal occupation or employment of the nominee, (iii) the number of Company Common Shares beneficially owned by the nominee and (iv) such other information concerning the nominee as would be required, under the rules of the Securities and Exchange Commission, in a proxy statement soliciting proxies for the election of the nominee. The nomination notice must also include the nominating shareholder's name and address and the number of Common Shares beneficially owned by the shareholder. The shareholder must also furnish the signed consent of the nominee to serve as a director, if elected. The Environmental Affairs Committee met twice during 1994. The Committee reviews the status of environmental compliance of the Company, and considers Company public policy issues. Members of the Committee in 1994 were Mr. Welsh, Chairman, Dr. Beering, and Messrs. Decio and Schroer. The Public Affairs and Employment Committee met once in 1994. The Committee advises the Board regarding charitable and political contributions, employment policies, shareholder proposals 4 concerning matters of general public interest and consumer and utility industry related issues. Members of the Committee in 1994 were Mrs. Raclin, Chairman, and Messrs. Ribordy, Rolland and Thompson. The Corporate Governance Committee met once in 1994. The Committee consists of all members of the Board who are not also officers. The Committee meets once a year to evaluate/advise the Board regarding the performance of the Board of Directors and each of its members and the nature and amount of information flowing between the Board, management and shareholders. Mr. Rolland was Chairman of the Committee in 1994. COMPENSATION OF DIRECTORS-- Each director who is not receiving a salary from the Company is paid $15,000 per year, $3,000 annually per standing committee on which the director sits, $1,000 annually for each committee chairmanship, $750 for each Board meeting attended and $750 per committee meeting attended. Directors of the Company do not receive any additional compensation for services as a director of any Company subsidiary, including Northern Indiana. Under a deferred compensation arrangement, directors may have their fees deferred in the current year and credited to an interest-bearing account or to a phantom stock account for payment in the future. The Company's Nonemployee Director Retirement Plan provides a retirement benefit for each nonemployee director of the Company who has completed at least five years of service on the Board. The benefit will be an amount equal to the annual retainer for Board service in effect at the time of the Director's retirement from the Board, to be paid for the lesser of ten years or the number of years of service as a nonemployee director of the Company. The Company's Nonemployee Director Stock Incentive Plan provides for grants of restricted Common Shares to nonemployee directors of the Company. Initial grants were made in 1992, following shareholder approval of the plan, at the level of 250 shares for each year of service as a director, and 1,000 restricted Common Shares have been granted to each nonemployee director elected or reelected since that date. A grant of 1,000 shares will be made in the future to each person, other than an employee of the Company, who is elected or reelected as a director of the Company. The grants of restricted shares vest in 20% annual increments, with full vesting five years after the date of award. In 1994, the Company adopted its Directors' Charitable Gift Program for nonemployee directors. Under the program, the Company will make a donation to one or more eligible tax-exempt organizations as designated by each eligible director. The Company will contribute up to an aggregate of $125,000 as designated by nonemployee directors having served as a director of the 5 Company for at least five years and up to $250,000 as designated by those having served ten years or more. Organizations eligible to receive a gift under the program include charitable organizations and educational institutions located in Indiana and educational institutions that the director attended or for which he or she serves on its governing board. Individual directors will derive no financial benefit from the program, as all deductions relating to the charitable donations will accrue solely to the Company. All current nonemployee directors are eligible to participate in the program. An agreement between the Company and Mr. Schroer, retired Chairman, President and Chief Executive Officer of the Company, provides that, for a period of three years beginning March 1, 1993, he is to be engaged by the Company as an independent consultant for an annual fee of $200,000. In the event of death during the term of the consulting contract, his survivor is entitled to such fees for the remainder of the three year term. The agreement provides for severance payments equal to amounts remaining due for the consulting period in the event the consulting agreement is terminated at any time by the Company (other than for Good Cause) or due to death or disability, or if Mr. Schroer voluntarily terminates the agreement with Good Reason. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The Company is not aware of any beneficial owner of more than 5% of its Common Shares, as of January 31, 1995. The following table sets forth information as to the beneficial ownership of Common Shares, as of January 31, 1995, for each of the named directors and executive officers, and for all directors and executive officers as a group.
NAME OF BENEFICIAL AMOUNT AND NAME OF OWNER BENEFICIAL OWNERSHIP(/1/) ---------- ------------------------- Steven C. Beering.............................. 1,793 Arthur J. Decio................................ 3,250 Gary L. Neale.................................. 153,656(/2/) Ernestine M. Raclin............................ 9,672 Denis E. Ribordy............................... 25,163(/3/) Ian M. Rolland................................. 6,181 Edmund A. Schroer.............................. 20,550 John W. Thompson............................... 1,192 Robert J. Welsh, Jr............................ 5,000 Stephen P. Adik................................ 87,291(/2/) Patrick J. Mulchay............................. 63,762(/2/) Jeffrey W. Yundt............................... 79,882(/2/) John W. Dunn................................... 68,499(/2/) All directors and executive officers as a group......................................... 869,499(/2/)
6 - -------- (1) The number of shares owned includes shares held in the Company's Automatic Dividend Reinvestment and Share Purchase Plan, shares held in the Company's Tax Deferred Savings Plan (the "401(k) Plan") and restricted shares awarded under the Company's Long-Term Incentive Plan (the "Incentive Plan") and Nonemployee Director Stock Incentive Plan, where applicable. The percentage of Common Shares owned by all directors and officers as a group is 1.4 percent of the Common Shares outstanding. (2) The totals include shares for which the following executive officers have a right to acquire beneficial ownership, within 60 days after January 31, 1995, by exercising stock options granted under the Incentive Plan: Gary L. Neale--75,000 shares; Stephen P. Adik--43,600 shares; Patrick J. Mulchay-- 31,200 shares; Jeffrey W. Yundt--42,300 shares; John W. Dunn--32,500 shares; and all executive officers as a group--369,100 shares. (3) Mr. Ribordy disclaims beneficial ownership of 100 shares owned by his wife. EXECUTIVE COMPENSATION NOMINATING AND COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION-- The Nominating and Compensation Committee's (the "Compensation Committee") compensation policy for all executive officers, including the person who served as Chief Executive Officer of the Company during 1994 and the four other most highly compensated officers of the Company (the "Named Officers"), is designed to relate total compensation (defined as base salary, incentive bonus and long- term, stock-based compensation) to corporate performance. The Compensation Committee has implemented a "pay-for-performance" program which is designed to position the Company's executive compensation competitively and to reward performance that creates additional shareholder value. The Compensation Committee discusses and considers executive compensation matters, then makes recommendations to the full Board of Directors, which takes the final action on such matters. The Board accepted all of the Compensation Committee's recommendations in 1994. The Compensation Committee has engaged an independent, nationally known, compensation consulting firm, Hewitt Associates ("Hewitt"), to advise it and provide surveys of comparative compensation practices for a group of similarly sized electric, gas or combination utility companies, approximately half of which are located in the Midwest. The 1994 executive compensation comparative group consisted of 20 companies from which data was available to Hewitt and which were believed to be competitors of the Company for executive talent. The comparative compensation group is subject to change for future years if information about any company included in the group is not available, if it is determined that any utility companies included in the group are no longer competitors for executive talent, or if different utility companies are determined to be 7 competitors. The Company's comparative compensation group is not the same as the corporations which make up the Dow Jones Utilities Index in the Stock Price Performance Graph included in this proxy statement. The Compensation Committee considers the surveys provided by Hewitt in determining base salary, incentive bonus and long-term stock-based compensation. The Compensation Committee's philosophy is to set conservative base salaries while providing performance-based variable compensation through the Bonus and Incentive Plans described below to allow total compensation to fluctuate according to the Company's financial performance. Long-term incentive awards are stock-based (e.g., stock options or goal-based restricted stock awards) to emphasize long-term stock price appreciation and the concomitant increased shareholder value. In 1994, total compensation of the executive officers, including the Chief Executive Officer, was targeted at or near the 75th percentile of the comparative compensation group. Total compensation would reach this goal only if the Company met its earnings and operating expense targets for the year and its long-term stock price targets. Base salaries of the executive officers, as a group, constituted approximately 50% of total target compensation. In establishing Mr. Neale's base salary for 1994, the Compensation Committee reviewed information provided by Hewitt regarding the chief executive officer compensation practices of the group of 20 comparative utilities described above. The Compensation Committee determined to set base salary near the median salary of the comparative group, giving regard to Mr. Neale's proven abilities and record with the Company since joining it as Executive Vice President and Chief Operating Officer in 1989. As with the other executive officers, Mr. Neale's total compensation was targeted to be at about the 75th percentile of the comparative compensation group, if the Company met its targeted financial goals. The result of the Compensation Committee's determination as to Mr. Neale's total compensation package was that more than 50% of Mr. Neale's total compensation was performance based and at risk, dependent upon the Company's earnings per share, Northern Indiana's operating expense level and the Company's stock price performance. The Compensation Committee noted that this compensation only would be realized if specific financial benchmarks were reached by the Company. Annual incentive awards for all executive officers are determined in accordance with the Senior Management Incentive Plan (the "Bonus Plan"). The Bonus Plan sets forth a formula established at the beginning of each fiscal year by the Compensation Committee for awarding incentive bonuses, based upon the Company's financial performance. Bonuses awarded to each of the Named Officers (including the Chief Executive Officer) are based on overall corporate financial performance, rather than individual performance of the executive. In 1994, the bonus formula (and the relative weight of the factors on which it was based) was based upon attaining targets for both the Company's 8 earnings per share and the operating expense level of Northern Indiana. The range of awards and levels of awards (as a percent of base salary), if financial performance targets are achieved, are as follows:
AWARD IF RANGE TARGETS MET -------- ----------- Chief Executive Officer................................. 0 to 60% 50% Named Officers and certain other executive officers..... 0 to 60% 40% All other executive officers............................ 0 to 45% 30%
The percentage bonus opportunity levels have remained constant since inception of the Bonus Plan in 1990; however, the required financial performance levels of the Company necessary to attain the maximum and target bonus levels have been increased annually. In 1994, the Company's actual earnings per share fell slightly below the targeted amount, but operating expense levels were more favorable than targeted. Executive officers are also eligible to receive awards under the Company's Incentive Plan. Under the Incentive Plan, stock options, stock appreciation rights, performance units, restricted stock awards and supplemental cash payments may be awarded. Only stock options were awarded in 1994. Base salaries of the executive officers, prior awards under the Incentive Plan, and the Company's total compensation target are considered in establishing long-term incentive awards. Options granted to executive officers are valued using the Black-Scholes option pricing model at the time of grant for purposes of determining the number of options to be granted to reach total target compensation. In 1994, the number of options granted to the Chief Executive Officer and other executive officers (including all Named Officers) was based on these considerations. The compensation value of stock options depends on actual stock price appreciation. Section 162(m) of the Internal Revenue Code provides that, commencing in 1994, compensation in excess of $1,000,000 per year paid to the chief executive officer or any of the four other most highly compensated executive officers employed at year-end, other than compensation meeting the definition of "performance based compensation," will not be deductible by a corporation for federal income tax purposes. The Compensation Committee believes that the Company's incentive bonus and long-term stock-based compensation constitutes performance based compensation for purposes of the Internal Revenue Code. In light of its emphasis on such performance based compensation, the Compensation Committee does not anticipate that the limits of Section 162(m) will affect the deductibility of any compensation paid by the Company. However, the Compensation Committee will continue to review the deductibility of compensation under Section 162(m) and related regulations. 9 The Compensation Committee believes that its overall executive compensation program has been successful in providing competitive compensation sufficient to attract and retain highly qualified executives, while at the same time encouraging increased performance from the executive officers which creates additional shareholder value. Nominating and Compensation Committee Denis E. Ribordy, Chairman Steven C. Beering Ernestine M. Raclin Robert J. Welsh, Jr. January 27, 1995 10 STOCK PRICE PERFORMANCE GRAPH The following graph compares the yearly change in the Company's cumulative total shareholder return on Common Shares, during the years 1990 through 1994, with the cumulative total return on the Standard & Poor's 500 Stock Index and the Dow Jones Utilities Average, assuming the investment of $100 on December 31, 1989 and the reinvestment of dividends. LOGO [GRAPH APPEARS HERE] COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN AMONG NIPSCO INDUSTRIES, INC., S&P 500 INDEX AND DJ UTILITIES
Measurement Period NIPSCO S&P (Fiscal Year Covered) INDUSTRIES 500 INDEX DJ UTILITIES - ------------------- ---------- --------- ------------ Measurement Pt- 12/31/89 $100 $100 $100 FYE 12/31/90 $103.31 $ 96.90 $ 95.46 FYE 12/31/91 $148.52 $126.36 $109.95 FYE 12/31/92 $160.60 $135.97 $114.38 FYE 12/31/93 $207.96 $149.65 $125.42 FYE 12/31/94 $197.62 $147.35 $ 99.28
11 COMPENSATION OF EXECUTIVE OFFICERS-- Summary. The following table summarizes all annual and long-term compensation for services to the Company and its subsidiaries, including Northern Indiana, for the years 1994, 1993 and 1992 awarded to, earned by or paid to each of the Named Officers. SUMMARY COMPENSATION TABLE
LONG-TERM ANNUAL COMPENSATION(/1/) COMPENSATION -------------------------- ------------------- AWARDS ------------------- SECU- OTHER RITIES ALL ANNUAL RESTRICTED UNDER- OTHER COMPEN- STOCK LYING COMPEN- SALARY BONUS SATION AWARDS OPTIONS/ SATION NAME AND PRINCIPAL POSITION YEAR ($) ($)(/2/) ($)(/3/) ($)(/4/) SARS (#) ($)(/5/) --------------------------- ---- ------ -------- -------- ---------- -------- -------- Gary L. Neale, Chairman, 1994 $460,000 $230,000 $1,903 $ 0 25,000 $11,190 President and Chief 1993 400,000 206,000 1,475 0 25,000 10,479 Executive Officer(/6/) 1992 275,000 91,658 656 0 10,000 5,560 Stephen P. Adik, 1994 205,000 82,000 1,118 0 8,000 1,927 Executive Vice President, 1993 185,000 87,875 476 0 8,000 2,877 Chief Financial Officer and 1992 185,000 49,340 871 0 6,000 2,294 Treasurer Patrick J. Mulchay, 1994 175,000 70,000 852 0 8,000 3,078 Executive Vice President 1993 140,000 66,500 1,057 0 8,000 4,332 and Chief Operating 1992 120,000 32,004 316 0 6,000 1,745 Officer--Electric Jeffrey W. Yundt 1994 175,000 70,000 1,174 0 8,000 739 Executive Vice President and 1993 157,000 74,575 1,028 0 8,000 1,134 Chief Operating Officer-- 1992 157,000 41,872 583 0 6,000 1,175 Gas John W. Dunn, 1994 165,000 66,000 811 0 6,500 2,275 Group Vice President 1993 157,000 74,575 834 0 8,000 951 1992 157,000 41,872 435 0 6,000 1,219
- -------- (/1/) Compensation deferred at the election of Named Officer is reported in the category and year in which such compensation was earned. (/2/) All bonuses are paid pursuant to the Bonus Plan. The Bonus Plan is designed to supplement a conservative base salary with incentive bonus payments if targeted financial performance is 12 attained. The 1994 target aggregate payout for the Bonus Plan for the Named Officers was $518,000, which was equal to the actual aggregate payout for the Named Officers. See "Nominating and Compensation Committee Report on Executive Compensation." (/3/) In accordance with applicable Securities and Exchange Commission rules, the amounts shown for each of the Named Officers do not include perquisites and other personal benefits, as the aggregate amount of such benefits is less than the lesser of $50,000 and 10% of the total salary and bonus of such Named Officer. (/4/) The Company has not awarded restricted shares since 1991. The restrictions on shares awarded during 1991 lapse five years from the date of grant and become up to 100% vested based on the amount of appreciation of the Company's Common Share price during the five-year restriction period. There is a two-year holding period for the shares after the restrictions lapse. Restricted shares held (assuming 100% vesting) and aggregate market value at December 30, 1994 (based on the average of the high and low prices for that date as reported in The Wall Street Journal) were as follows: Mr. Neale, 30,000 shares valued at $890,625; Messrs. Adik, Dunn, and Yundt, 15,000 shares each valued at $445,312, and Mr. Mulchay, 10,000 shares valued at $296,875. Dividends on the restricted shares are paid to the Named Officers. (/5/) Effective January 1, 1991, the Chairman, President, Executive Vice Presidents and Vice Presidents of the Company and Northern Indiana have available to them a supplemental life insurance plan which provides split- dollar coverage of up to 3.5 times base compensation as of commencement of participation in the plan and 1.75 times base compensation after retirement. "All other compensation" represents Company contributions to the 401(k) Plan and the dollar value of the benefit to the Named Officers of the remainder of the premiums paid by the Company during 1994 on behalf of the Named Officers under the supplemental life insurance plan, as follows: Mr. Neale--$1,026 401(k) Plan, $862 premium value and $9,302 term insurance cost; Mr. Adik--$942 401(k) Plan, $371 premium value and $614 term insurance cost; Mr. Mulchay, $349 401(k) Plan, $330 premium value and $2,399 term insurance cost; Mr. Yundt, $0 401(k) Plan, $298 premium value and $441 term insurance cost and Mr. Dunn--$193 401(k) Plan, $326 premium value and $1,756 term insurance cost. (/6/) Prior to March 1, 1993, Mr. Neale served as Executive Vice President of the Company and President and Chief Operating Officer of Northern Indiana. 13 Option Grants in 1994. The following table sets forth grants of options to purchase Common Shares of the Company made during 1994 to the Named Officers. No stock appreciation rights were awarded during 1994. OPTION/SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS - ------------------------------------------------------------------ NUMBER OF PERCENT SECU- OF TOTAL RITIES OPTIONS/ UNDER- SARS LYING GRANTED OPTIONS/ TO SARS EMPLOYEES EXERCISE OR GRANT DATE GRANTED IN FISCAL BASE PRICE EXPIRATION PRESENT VALUE NAME (#)(/1/) YEAR(/2/) ($/SH)(/3/) DATE ($)(/4/) ---- -------- --------- ----------- ---------- ------------- Gary L. Neale........... 25,000 8.5% $28.75 08/23/04 $104,000 Stephen P. Adik......... 8,000 2.7% 28.75 08/23/04 33,280 Patrick J. Mulchay...... 8,000 2.7% 28.75 08/23/04 33,280 Jeffrey W. Yundt........ 8,000 2.7% 28.75 08/23/04 33,280 John W. Dunn............ 6,500 2.2% 28.75 08/23/04 27,040
- -------- (/1/) All options granted in 1994 are fully exercisable commencing one year from the date of grant. Vesting may be accelerated as a result of certain events relating to a change in control of the Company. The exercise price and tax withholding obligation related to exercise may be paid by delivery of already owned Common Shares or by reducing the number of Common Shares received on exercise, subject to certain conditions. (/2/) Based on an aggregate of 294,650 options granted to all employees in 1994. (/3/) All options were granted at the average of high and low prices as reported in The Wall Street Journal on the date of grant. (/4/) Grant date present value is determined using the Black-Scholes option pricing model. The assumptions used in the Black-Scholes option pricing model were as follows: volatility: 18.2% (calculated using daily Common Share prices for the twelve-month period preceding the date of grant); risk-free rate of return: 5.01% (the rate for a ten-year U.S. treasury); dividend yield: $1.44; option term: ten years; vesting: 100% one year after date of grant; and turnover: 9.0% (to reflect the probability of forfeiture due to termination prior to vesting) and 16.6% (to reflect the probability of a shortened option term due to termination of employment prior to the option expiration date). No assumptions relating to non- transferability or risk of forfeiture were made. Actual gains, if any, on option exercises and Common Shares are dependent on the future 14 performance of the Company's Common Shares and overall market condition. There can be no assurance that the amounts reflected in this table will be achieved. Option Exercises in 1994. The following table sets forth certain information concerning the exercise of options or stock appreciation rights ("SARs") during 1994 by each of the Named Officers and the number and value of unexercised options and SARs at December 31, 1994. AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED SHARES UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS/SARS ACQUIRED OPTIONS/SARS AT FISCAL AT FISCAL YEAR-END ON VALUE YEAR-END (#)(/1/) ($)(/2/) EXERCISE REALIZED ------------------------- ------------------------- NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE ---- -------- -------- ----------- ------------- ----------- ------------- Gary L. Neale........... 0 $ 0 75,000 25,000 $450,625 $23,437 Stephen P. Adik......... 0 0 43,600 8,000 375,375 7,500 Patrick J. Mulchay...... 0 0 31,200 8,000 196,350 7,500 Jeffrey W. Yundt........ 0 0 42,300 8,000 351,000 7,500 John W. Dunn............ 4,500 54,156 32,500 6,500 201,187 6,093
- -------- (/1/) Includes some SARs granted in tandem with options. (/2/) Represents the difference between the option exercise price and $29.69, the average of high and low prices of the Company's Common Shares on December 30, 1994, as reported in The Wall Street Journal. 15 PENSION PLAN AND SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN-- The following table shows estimated annual benefits, giving effect to the Company's Supplemental Executive Retirement Plan (as described below), payable upon retirement to persons in the specified remuneration and years-of-service classifications. PENSION PLAN TABLE
YEARS OF SERVICE -------------------------------------------- REMUNERATION 15 20 25 30 35 - ------------ -------- -------- -------- -------- -------- $200,000........................... $ 79,500 $106,000 $111,000 $116,000 $116,000 250,000........................... 102,000 136,000 142,250 148,500 148,500 300,000........................... 124,500 166,000 173,500 181,000 181,000 350,000........................... 147,000 196,000 204,750 213,500 213,500 400,000........................... 169,500 226,000 236,000 246,000 246,000 450,000........................... 192,000 256,000 267,250 278,500 278,500 500,000........................... 214,500 286,000 298,500 311,000 311,000 550,000........................... 237,000 316,000 329,750 343,500 343,500 600,000........................... 259,500 346,000 361,000 376,000 376,000 650,000........................... 282,000 376,000 392,250 408,500 408,500 700,000........................... 304,500 406,000 423,500 441,000 441,000 750,000........................... 327,000 436,000 454,750 473,500 473,500 800,000........................... 349,500 466,000 486,000 506,000 506,000 850,000........................... 372,000 496,000 517,250 538,500 538,500
The credited years of service for the officers shown in the Summary Compensation table, pursuant to the Supplemental Plan, are as follows: Gary L. Neale--20 years; Stephen P. Adik--16 years; Patrick J. Mulchay--32 years; Jeffrey W. Yundt--15 years; and John W. Dunn--23 years. Upon their retirement, regular employees and officers of the Company and its subsidiaries which adopt the plan (including directors who are also full-time officers) will be entitled to a monthly pension in accordance with the provisions of the Company's pension plan, effective as of January 1, 1945. The directors who are not and have not been officers of the Company are not included in the pension plan. The pensions are payable out of a trust fund established under the pension plan with The Northern Trust Company, trustee. The trust fund consists of contributions made by the Company and the earnings of the fund. Over a period of years the contributions are intended to result in over-all actuarial solvency of the trust fund. The pension plan of the Company has been qualified as non-discriminatory under Sections 401 and 404 of the Internal Revenue Code of 1986 (the "Code"). 16 Pension benefits are determined separately for each participant. The formula for a monthly payment for retirement at age 65 is 1.7% of average monthly compensation multiplied by years of service (to a maximum of 30 years) plus 0.6% of average monthly compensation multiplied by years of service over 30. Average monthly compensation is the average for the 60 consecutive highest-paid months in the employee's last 120 months of service. Covered compensation is defined as wages reported as W-2 earnings plus any salary reduction contributions made under the Tax Deferred Savings Plan and an amount equivalent to base pay for certain non-compensated periods of authorized leave of absence, minus any amounts paid for unused vacations accrued. The Company also has a Supplemental Executive Retirement Plan for officers. Participants in the Plan are selected by the Board of Directors. Benefits from the Plan are to be paid from the general assets of the Company. The Supplemental Plan provides the larger of (i) 60% of 5-year average pay less Primary Social Security Benefits (prorated for less than 20 years of service) and an additional 0.5% of 5-year average pay less Primary Social Security Benefits per year for participants with between 20 and 30 years of service, or (ii) the benefit formula under the Company's Pension Plan. In either case, the benefit is reduced by the actual pension payable from the Company's Pension Plan. In addition, the Supplemental Plan provides certain disability and pre-retirement death benefits for the spouse of a participant. CHANGE IN CONTROL AND TERMINATION AGREEMENTS-- The Board of Directors of the Company has authorized Change in Control and Termination Agreements ("Agreements") with Mr. Neale and the Vice Presidents of the Company (including each of the Named Officers) (each such person being an "executive"). The Company believes that these Agreements and related shareholder rights protections are in the best interests of the shareholders, to insure that in the event of extraordinary events, totally independent judgment is enhanced to maximize shareholder value. The Agreements, which are terminable upon three years' notice, provide for the payment of three times then current annual base salary and the continuation of certain employee benefits for a period of 36 months ("Severance Period"), if the executive's employment were terminated within 24 months in the event of certain changes in control of the Company. Based on their 1994 base salaries, the amounts that would be payable to the highest paid executive officers would be as follows: Gary L. Neale--$1,380,000; Stephen P. Adik--$615,000; Patrick J. Mulchay-- $525,000; Jeffrey W. Yundt--$525,000; and John W. Dunn--$495,000. 17 The executive would receive full benefits under any supplemental retirement plan of the Company, offset by amounts paid to the executive from any qualified retirement plans of the Company. All stock options held by the executive would become immediately exercisable upon the date of termination of employment, and the restrictions would lapse on all restricted shares awarded to the executive. If any penalty tax under the Code is imposed on the payment of three times base salary, the Company would increase the payment to the extent necessary to compensate the individual for the imposition of such tax. During the Severance Period, the executive and spouse would continue to be covered by applicable health or welfare plans of the Company. If the executive died during the Severance Period, all amounts payable to the executive would be paid to a named beneficiary. No amounts would be payable under the Agreements if the executive's employment were terminated by the Company for Good Cause (as defined in the Agreements). The Agreement with Mr. Neale also provides for the same severance payments as above described in the event his employment is terminated at any time by the Company (other than for Good Cause) or due to death or disability, or if he voluntarily terminates employment with Good Reason (as defined in the Agreements). INCLUSION OF SHAREHOLDER PROPOSALS IN PROXY MATERIALS Any holder of Common Shares who wishes to submit a proposal to be voted upon by shareholders at the 1996 annual meeting of the Company, and who wishes the proposal to be included in the Company's proxy materials, must submit the proposal to the Secretary of the Company by November 13, 1995. The notice must include a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting and any material interest in such business of such shareholder and the beneficial owner, if any, on whose behalf the proposal is made. The notice must also include the nominating shareholder's name and address and the number of Common Shares beneficially owned by the shareholder. Any proposal submitted will also be subject to the rules of the Securities and Exchange Commission regarding shareholder proposals. 18 COMPLIANCE WITH FORMS 3, 4 AND 5 REPORTING REQUIREMENTS Based solely upon its review of the Forms 3, 4 and 5 furnished to the Company pursuant to Section 16(a) of the Securities Exchange Act of 1934, the Company believes that all of its directors, officers and beneficial owners of more than 10% of its Common Shares filed all such reports on a timely basis during 1994, except that one Form 4, reporting one sale of Common Shares acquired upon exercise of a stock option, was filed late by John W. Dunn, Group Vice President, and one Form 4, reporting one sale transaction, was filed late by Steven C. Beering, Director. ANNUAL REPORT AND FINANCIAL STATEMENTS Attention is directed to the financial statements contained in the Company's Annual Report for the year ended December 31, 1994. A copy of the Annual Report has been sent, or is concurrently being sent, to all shareholders of record as of February 21, 1995. AVAILABILITY OF FORM 10-K A copy of the Company's annual report for 1994 to the Securities and Exchange Commission on Form 10-K, without exhibits, will be provided without charge to any shareholder or beneficial owner of the Company's shares upon written request to Nina M. Rausch, Secretary, NIPSCO Industries, Inc., 5265 Hohman Avenue, Hammond, Indiana 46320. INDEPENDENT PUBLIC ACCOUNTANTS Arthur Andersen LLP has been selected by the Board of Directors to serve as the Company's independent public accountants for the year 1995, as they have served for many years past. A representative of that firm will be present at the annual meeting and will be given an opportunity to make a statement if he so desires. The Company has been informed by the representative that he does not presently intend to make such a statement. The representative will also be available to respond to questions from shareholders. 19 OTHER BUSINESS The Board of Directors does not intend to bring any other matters before the meeting and does not know of any matters which will be brought before the meeting by others. If any matters properly come before the meeting it is the intention of the persons named in the enclosed form of proxy to vote the proxy in accordance with their judgment on such matters. It is important that proxies be returned promptly. Therefore, shareholders are urged to vote, date, sign and return the enclosed proxy. No postage need be affixed if mailed in the United States, By Order of the Board of Directors LOGO Nina M. Rausch Secretary Dated: March 10, 1995 20 NIPSCO INDUSTRIES, INC. - ------------------------------------------------------------------------------- NOTICE OF ANNUAL OFFICERS MEETING AND Gary L. Neale PROXY STATEMENT Chairman, President and 1995 Chief Executive Officer Stephen P. Adik NIPSCO INDUSTRIES, INC. Executive Vice President and Chief Financial Officer, and Treasurer 5265 Hohman Avenue Hammond, Indiana 46320-1775 LOGO - ------------------------------------------------------------------------------- Patrick J. Mulchay Executive Vice President and Chief Operating Officer, Electric Jeffrey W. Yundt Executive Vice President and Chief Operating Officer, Gas William R. Elliott Vice President, Subsidiary Operations, Electric Owen C. Johnson, Jr. Vice President, Human Resources David A. Kelly Vice President, Real Estate and Taxes Jerry M. Springer Controller and Assistant Secretary Dennis E. Senchak Assistant Treasurer Nina M. Rausch Secretary - - PROXY PROXY NIPSCO INDUSTRIES, INC. THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE ANNUAL MEETING OF SHAREHOLDERS, APRIL 12, 1995 The undersigned hereby appoints Gary L. Neale, Stephen P. Adik and Jerry M. Springer, or any of them, the attorneys and proxies of the undersigned, with full power of substitution, for and in the name of the undersigned to represent and vote the shares of the undersigned at the Annual Meeting of Shareholders of the Company, to be held at the Center for Visual and Performing Arts, 1040 Ridge Road, Munster, Indiana, on Wednesday, April 12, 1995, at 10 a.m., CDST, and at any adjournment or adjournments thereof, in accordance with the Notice and Proxy Statement received upon the following matters: UNLESS A CONTRARY DIRECTION IS INDICATED, THIS PROXY WILL BE VOTED "FOR" THE ELECTION OF DIRECTORS. THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF DIRECTORS. PLEASE MARK, SIGN, DATE AND MAIL THIS PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE. (Continued and to be signed on reverse side.) - - - - NIPSCO INDUSTRIES, INC. PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. [X] [ ] 1. Election of Directors Nominees: Steven C. Beering, Ernestine M. Raclin and Denis E. Ribordy For For Withheld All [_] [_] [_] (Except Nominee(s) written below) -------------------------------------- 2. Transacting such other business as may properly come before the meeting or any adjournment or adjournments thereof. For Against Abstain [_] [_] [_] IF YOU PLAN TO ATTEND THE ANNUAL MEETING IN PERSON, PLEASE INDICATE THE NUMBEROF SHAREHOLDER(S) ATTENDING IN THE FOLLOWING BOX: [_] Dated: ________________________________________, 1995 Signature(s) ___________________________________________________________________ _______________________________________________________________________________ PLEASE SIGN EXACTLY AS YOUR NAME APPEARS HEREON. JOINT OWNERS SHOULD EACH SIGN. WHERE APPLICABLE, INDICATE YOUR OFFICIAL POSITION OR REPRESENTATIVE CAPACITY. - - -----END PRIVACY-ENHANCED MESSAGE-----