<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [_]
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
WPL HOLDINGS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] 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:
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Notes:
<PAGE>
[WPL HOLDINGS LOGO]
222 WEST WASHINGTON AVENUE P.O. BOX 2568 MADISON, WI 53701-2568 PHONE:
608/252-4888
March 7, 1997
To the Owners of WPL Holdings, Inc.:
We extend a cordial invitation to you to join us at the 1997 Annual Meeting
of Shareowners. The meeting will be held immediately following the Annual
Meeting of Shareowners of Wisconsin Power and Light Company in the Exhibition
Hall at the Dane County Expo Center, 1881 Expo Mall, Madison, Wisconsin, on
April 23, 1997, at 10:00 a.m. To help with directions, a map showing the
location of the meeting site is provided on the last page of this document.
Parking will be available at no cost. If you plan to join us, please indicate
the names of the individuals who will be attending on the enclosed proxy card
reservation form.
WPL Holdings, Inc. (the Company) and Wisconsin Power and Light Company
(WP&L), a subsidiary of the Company, will be holding separate shareowner
meetings. If you are a shareowner of the Company and a preferred shareowner of
WP&L, you will receive two Notices of Annual Meeting and Proxy Statements and
two proxy cards, one for each company. If you are a shareowner of both
companies, you will have to return both cards to vote all your shares.
The enclosed Notice of Annual Meeting and Proxy Statement sets forth the
items to be considered at the meeting of the Company. There will also be
informative reports on the affairs of the Company, WP&L, and Heartland
Development Corporation, after which shareowners will be given the opportunity
to ask questions and make comments. A lunch will be served following the
meeting.
It is important to your interests, and also is helpful to the directors of
the Company, that all shareowners participate in the affairs of the Company,
regardless of the number of shares owned. Whether or not you plan to attend
the meeting, please sign and date the enclosed proxy card and return it in the
postage paid envelope. You may, of course, still vote your shares in person at
the meeting even if you have previously returned your proxy.
Your participation in person or by proxy is very important.
Sincerely,
[LOGO OF ERROLL B. DAVIS, JR.]
Erroll B. Davis, Jr.
President and Chief Executive
Officer
<PAGE>
WPL HOLDINGS, INC.
ANNUAL MEETING OF SHAREOWNERS
DATE: April 23, 1997
TIME: Directly Following the 10:00 a.m.
Annual Meeting of
Wisconsin Power and Light Company
LOCATION: Exhibition Hall at the
Dane County Expo Center
Madison, Wisconsin
(See map printed on last
page of this document.)
SHAREOWNER INFORMATION NUMBERS
LOCAL CALLS (MADISON AREA)......................252-3110
TOLL FREE NUMBER..........................1-800-356-5343
<PAGE>
[LOGO OF WPL HOLDINGS]
222 WEST WASHINGTON AVENUE P.O. BOX 2568 MADISON, WI 53701-2568 PHONE:
608/252-4888
NOTICE OF ANNUAL MEETING OF SHAREOWNERS
DIRECTLY FOLLOWING THE 10:00 A.M., APRIL 23, 1997
ANNUAL MEETING OF SHAREOWNERS OF WISCONSIN POWER AND LIGHT COMPANY
The Annual Meeting of Shareowners of WPL Holdings, Inc. (the Company) will
be held in the Exhibition Hall at the Dane County Expo Center, 1881 Expo Mall,
Madison, Wisconsin, on April 23, 1997, directly following the 10:00 a.m.,
local time, Annual Meeting of Shareowners of Wisconsin Power and Light
Company, for the following purposes:
(1) To elect a total of three directors for terms expiring at the 2000
Annual Meeting of Shareowners.
(2) To consider and act upon any other business that may properly come
before the meeting or any adjournment or postponement thereof.
The Board of Directors of the Company presently knows of no other business
to come before the meeting.
Only the holders of common stock of record on the books of the Company at
the close of business on February 25, 1997, are entitled to vote at the
meeting. All such shareowners are requested to be present at the meeting in
person or by proxy, so that the presence of a quorum may be assured.
PLEASE SIGN AND RETURN YOUR PROXY IMMEDIATELY. IF YOU ATTEND THE MEETING,
YOU MAY WITHDRAW YOUR PROXY AT THE REGISTRATION DESK AND VOTE IN PERSON. ALL
SHAREOWNERS ARE URGED TO RETURN THEIR PROXIES PROMPTLY.
Your proxy covers all of your shares of common stock of the Company. For
present or past employees of the Company or Wisconsin Power and Light Company,
your proxy includes any shares held for your account under the Company's
Dividend Reinvestment and Stock Purchase Plan. For shares credited to an
account under the Wisconsin Power and Light Company Employees' Retirement
Savings Plan (formerly the Employees' Long Range Savings and Investment Plan),
you will receive a form of proxy from the trustee of the plan.
A copy of the 1996 Annual Report of the Company is enclosed.
By Order of the Board of Directors,
[LOGO EDWARD M. GLEASON]
Edward M. Gleason
Vice President, Treasurer
and Corporate Secretary
Madison, Wisconsin
March 7, 1997
<PAGE>
[LOGO OF WPL HOLDINGS]
222 WEST WASHINGTON AVENUE P.O. BOX 2568 MADISON, WI 53701-2568 PHONE:
608/252-4888
March 7, 1997
PROXY STATEMENT RELATING TO
1997 ANNUAL MEETING OF SHAREOWNERS
The purposes of the meeting are set forth in the accompanying notice. The
enclosed proxy relating to the meeting is solicited on behalf of the Board of
Directors of the Company and the cost of such solicitation will be borne by
the Company. Following the original solicitation of proxies by mail, beginning
on or about March 7, 1997, certain of the officers and regular employees of
the Company may solicit proxies by telephone, telegraph or in person, but
without extra compensation. The Company will pay to banks, brokers, nominees,
and other fiduciaries, their reasonable charges and expenses incurred in
forwarding the proxy material to their principals.
The Company is the parent holding company of Wisconsin Power and Light
Company (WP&L) and Heartland Development Corporation (HDC). The Company, IES
Industries Inc. (IES), Interstate Power Company (IPC) and certain related
companies have entered into an Agreement and Plan of Merger, dated as of
November 10, 1995, as amended (Merger Agreement), pursuant to which the
Company, IES and IPC will combine into a single entity to be known after the
combination as Interstate Energy Corporation. Shareowners of each of the
merger partners approved the transaction and certain related matters at
separate shareowner meetings held on September 5, 1996. Subject to receipt of
regulatory approvals, the proposed combination is currently expected to close
by the end of the third quarter of 1997. As provided in the Merger Agreement,
at the effective time of the combination, the Board of Directors of Interstate
Energy Corporation will consist of fifteen directors, six designated by the
Company, six designated by IES and three designated by IPC.
The Company will furnish without charge, to each shareowner who is entitled
to vote at the meeting and who makes a written request, a copy of the
Company's Annual Report on Form 10-K (not including exhibits thereto), as
filed pursuant to the Securities Exchange Act of 1934. Written requests for
the Form 10-K should be mailed to the Corporate Secretary at the address
stated above.
ELECTION OF DIRECTORS
Three directors are to be elected at the meeting. Erroll B. Davis, Jr.,
Milton E. Neshek and Carol T. Toussaint are nominees to hold office for a term
expiring at the 2000 Annual Meeting of Shareowners of the Company or until
their successors have been duly elected and qualified.
Directors will be elected by a plurality of the votes cast at the meeting
(assuming a quorum is present). An abstention from voting will be tabulated as
a vote withheld on the election, and will be included in computing the number
of shares present for purposes of determining the presence of a quorum, but
will not be considered in determining whether each of the directors to be
elected has received a plurality of the votes cast at the meeting. A broker or
nominee holding shares registered in its name, or the name of a nominee, which
are beneficially owned by another person, and for which the nominee has not
received instructions as to the voting from the beneficial owner, has the
discretion to vote the beneficial owner's shares with respect to the election
of directors. The proxies solicited may be voted for a substitute nominee or
nominees in the event that any of the nominees shall be unable to serve, or
for good reason will not serve, a contingency not now anticipated.
1
<PAGE>
Brief biographies of the director nominees and continuing directors follow.
These biographies include their age (as of December 31, 1996), an account of
their business experience, and the names of publicly-held and certain other
corporations of which they are also directors. Except as otherwise indicated,
each nominee and continuing director has been engaged in his or her present
occupation for at least the past five years.
Nominees
ERROLL B. DAVIS, JR.
[PHOTO] Principal Occupation: President and Chief Executive
Officer of the Company; President and Chief Executive
Officer of WP&L; Chairman of the Board of HDC.
Age: 52
Served as director since: May 1982
Annual Meeting at which nominated term of office will
expire: 2000
Other Information: Mr. Davis was elected President of the Company in January
1990, and was elected President and Chief Executive Officer of the Company
effective July 1, 1990. He has served as a director of WP&L since April 1984.
Mr. Davis joined WP&L in August 1978 and was elected President in July 1987.
He was elected to his current position with WP&L in August 1988. Mr. Davis was
elected Chairman of the Board of HDC effective July 1, 1990. He is a director
of the Edison Electric Institute, the Association of Edison Illuminating
Companies, Amoco Oil Company, Competitive Wisconsin, Inc., PPG Industries,
Inc., Sentry Insurance Company (a mutual company), and the Wisconsin Utilities
Association. Mr. Davis is also a director and past chair of the Wisconsin
Association of Manufacturers and Commerce, a director and vice chair of
Forward Wisconsin, and a director and vice chair of the Electric Power
Research Institute.
MILTON E. NESHEK
[PHOTO] Principal Occupation: President, Chief Executive Officer
and Director of the law firm of Godfrey, Neshek, Worth,
Leibsle and Conover, S.C., Elkhorn, Wisconsin; and
General Counsel, Assistant Secretary and Manager, New
Market Development, Kikkoman Foods, Inc. (a food
products manufacturer), Walworth, Wisconsin.
Age: 66
Served as director since: December 1986
Annual Meeting at which nominated term of office will
expire: 2000
Other Information: Mr. Neshek has served as a director of WP&L since November
1984. Mr. Neshek is a director of Heartland Properties, Inc. (HPI) and Capital
Square Financial Corporation, subsidiaries of HDC. He is also a director of
Kikkoman Foods, Inc.; Midwest U.S.-Japan Association; Regional Transportation
Authority (for southeast Wisconsin); and Wisconsin-Chiba, Inc. He is a fellow
in the American College of Probate Counsel. Mr. Neshek is active in the
Walworth County Bar Association, the State Bar of Wisconsin, and the American
Judicature Society. Mr. Neshek is also a member of the Wisconsin
Sesquicentennial Commission and a member of the Executive and Finance
Committee for the Wisconsin Sesquicentennial Commission.
2
<PAGE>
CAROL T. TOUSSAINT
[PHOTO] Principal Occupation: Consultant
Age: 67
Served as director since: February 1994
Annual Meeting at which nominated term of office will
expire: 2000
Other Information: Mrs. Toussaint has served as a director of WP&L since
August 1976. She is an independent consultant on board organization, fund
development and public relations working primarily with nonprofit
organizations. She is the owner of Vantage Point, a lecture program business,
and an Associate of Hayes Briscoe, a fund development consulting firm. She is
an active member and past chair of the Utility Women's Conference, a national
organization open to women serving as directors or officers of investor-owned
electric, gas, water and telephone companies.
THE BOARD OF DIRECTORS RECOMMENDS THE FOREGOING NOMINEES FOR ELECTION AS
DIRECTORS AND URGES EACH SHAREOWNER TO VOTE "FOR" ALL NOMINEES. SHARES OF
COMMON STOCK REPRESENTED BY EXECUTED BUT UNMARKED PROXIES WILL BE VOTED "FOR"
ALL NOMINEES.
Continuing Directors
L. DAVID CARLEY
[PHOTO]
Principal Occupation: Consultant to institutions and
associations in higher education and health care
delivery; financial advisor to and investor in small
businesses.
Age: 68
Served as director since: February 1994
Annual Meeting at which current term of office will
expire: 1998
Other Information: Mr. Carley has served as a director of WP&L from 1975 to
1977, and again since October 1983. He is a trustee of the Kennedy
Presidential Library, and is the Chairman of the Board of Alliance Therapies
Inc., a health rehabilitation firm.
ROCKNE G. FLOWERS
[PHOTO]
Principal Occupation: President and Director of Nelson
Industries, Inc. (a muffler, filter, industrial
silencer, and active sound and vibration control
technology and manufacturing firm), Stoughton,
Wisconsin.
Age: 65
Served as director since: April 1981
Annual Meeting at which current term of office will
expire: 1999
Other Information: Mr. Flowers has served as a director of WP&L since February
1994. He previously served as a director of WP&L from April 1979 to July 1990.
Mr. Flowers is also a director of RMT, Inc., a subsidiary of
3
<PAGE>
HDC; Digisonix, Inc.; American Family Mutual Insurance Company; Janesville
Sand and Gravel Company; M&I Madison Bank; Meriter Health Services, Inc.;
Meriter Hospital; the Wisconsin History Foundation, and University Research
Park.
DONALD R. HALDEMAN
[PHOTO]
Principal Occupation: Executive Vice President and Chief
Executive Officer, Rural Insurance Companies (a mutual
group), Madison, Wisconsin; and farm owner-operator,
Norwalk, Wisconsin.
Age: 60
Served as director since: February 1994
Annual Meeting at which current term of office will
expire: 1998
Other Information: Mr. Haldeman has served as a director of WP&L since July
1985. Mr. Haldeman is also a director of Competitive Wisconsin, Inc., and a
member of the Board of Directors of the Natural Resources Foundation of
Wisconsin, Inc.
KATHARINE C. LYALL
[PHOTO]
Principal Occupation: President, University of Wisconsin
System, Madison, Wisconsin.
Age: 55
Served as director since: February 1994
Annual Meeting at which current term of office will
expire: 1999
Other Information: Ms. Lyall has served as President of the University of
Wisconsin System since April 1992. Prior to becoming President, she served as
Executive Vice President of the University of Wisconsin System. Ms. Lyall has
served as a director of WP&L since October 1986. She also serves on the Board
of Directors of the Kemper National Insurance Companies and the Carnegie
Foundation for the Advancement of Teaching. She is a member of a variety of
professional and community organizations, including the American Economic
Association; the Association of American Universities (currently serving on
the Executive Committee); the Wisconsin Academy of Sciences, Arts and Letters;
the American Red Cross (Dane County); Competitive Wisconsin, Inc.; and Forward
Wisconsin. In addition to her administrative position, she is a professor of
economics at the University of Wisconsin-Madison.
4
<PAGE>
ARNOLD M. NEMIROW
[PHOTO]
Principal Occupation: Chairman, President and Chief
Executive Officer, Bowater, Inc. (a pulp and paper
manufacturer), Greenville, South Carolina.
Age: 53
Served as director since: February 1991
Annual Meeting at which current term of office will
expire: 1998
Other Information: Mr. Nemirow served as President, Chief Executive Officer
and Director of Wausau Paper Mills Company, a pulp and paper manufacturer,
from 1990 until joining Bowater, Inc., in September 1994. Mr. Nemirow has
served as a director of WP&L since February 1994. He is a member of the New
York Bar.
HENRY C. PRANGE
[PHOTO]
Principal Occupation: Retired Chairman of the Board, H.
C. Prange Company (retail stores), Green Bay, Wisconsin.
Age: 69
Served as director since: December 1986
Annual Meeting at which current term of office will
expire: 1999
Other Information: Mr. Prange has served as a director of WP&L since December
1965.
JUDITH D. PYLE
[PHOTO]
Principal Occupation: Vice Chair of The Pyle Group, a
financial services company, Madison, Wisconsin.
Age: 53
Served as a director since: May 1992
Annual Meeting at which current term of office will
expire: 1998
Other Information: Prior to assuming her current position, Ms. Pyle served as
Vice Chair and Senior Vice President of Corporate Marketing of Rayovac
Corporation (a battery and lighting products manufacturer), Madison,
Wisconsin. Ms. Pyle has served as a director of WP&L since February 1994. Ms.
Pyle is a director of
5
<PAGE>
Firstar Corporation. She is also a member of the Board of Visitors at the
University of Wisconsin School of Business and the School of Human Ecology.
Further, Ms. Pyle is a member of Boards of Directors of the United Way
Foundation, Greater Madison Chamber of Commerce, Madison Art Center, and
Wisconsin Taxpayers Alliance, and is a trustee of the White House Endowment
Fund.
MEETINGS AND COMMITTEES OF THE BOARD
The Board of Directors of the Company has standing Audit, Compensation and
Personnel, and Nominating and Governance Committees. A description of the
duties of each committee and meetings held during 1996 follows.
AUDIT COMMITTEE
The committee consists of L. D. Carley, R. G. Flowers, D. R. Haldeman, and
K. C. Lyall (Chair). The committee held two meetings in 1996. The committee
reviews the reports and comments of the independent auditors; reviews the
activities and reports of the Company's internal audit staff; and, in response
to the reports and comments of both the independent auditors and internal
auditors, recommends to the Board any action which the Audit Committee
considers appropriate.
COMPENSATION AND PERSONNEL COMMITTEE
The committee consists of A. M. Nemirow (Chair), M. E. Neshek, H. C. Prange,
J. D. Pyle, and C. T. Toussaint. The committee held three meetings in 1996.
The committee sets executive compensation policy; reviews the performance of
and approves salaries for officers and certain other management personnel;
reviews and recommends to the Board new or changed employee benefit plans;
administers the Company's Long-Term Equity Incentive Plan; reviews major
provisions of negotiated employment contracts, if any; and reviews human
resource development programs.
NOMINATING AND GOVERNANCE COMMITTEE
The committee consists of L. D. Carley (Chair), R. G. Flowers, K. C. Lyall,
A. M. Nemirow, H. C. Prange, and J. D. Pyle. The committee held two meetings
in 1996. The committee's responsibilities include making recommendations to
the Board of Directors for nominees for election to the Board, selecting
committee members and chairpersons, making recommendations relating to
specific corporate governance issues, and reviewing the CEO's performance. In
making recommendations of nominees for election to the Board, the committee
will consider nominees recommended by shareowners. Any shareowner wishing to
make a recommendation should write the Chief Executive Officer of the Company,
who will forward all recommendations to the committee.
The Board of Directors held eleven meetings during 1996. No director
attended less than 86% of the aggregate number of meetings of the Board and
Board Committees on which they served.
COMPENSATION OF DIRECTORS
No fees are paid to directors who are officers of the Company and/or any of
its subsidiaries (presently Mr. Davis). Nonmanagement directors, each of whom
serve on the Boards of the Company, WP&L, and HDC, receive an annual retainer
of $32,800 for service on all three boards. Travel expenses are paid for each
meeting day attended. All nonmanagement directors also receive a 25 percent
Company matching contribution in
6
<PAGE>
common stock for limited optional cash purchases, up to $10,000, of the
Company's common stock through the Company's Dividend Reinvestment and Stock
Purchase Plan. Matching contributions of $2,500 each for calendar year 1996
were made for the following directors: L. D. Carley, R. G. Flowers, D. R.
Haldeman, K. C. Lyall, A. M. Nemirow, M. E. Neshek, H. C. Prange, J. D. Pyle,
and C. T. Toussaint.
Director's Charitable Award Program--The Company maintains a Director's
Charitable Award Program for the nonmanagement members of the Board of
Directors beginning after three years of service. The purpose of the Program
is to recognize the interest of the Company and its directors in supporting
worthy institutions, and to enhance the Company's director benefit program so
that the Company is able to continue to attract and retain directors of the
highest caliber. Under the Program, when a director dies, the Company will
donate a total of $500,000 to one qualified charitable organization, or divide
that amount among a maximum of four qualified charitable organizations,
selected by the individual director. The individual director derives no
financial benefit from the Program. All deductions for charitable
contributions are taken by the Company, and the donations are funded by the
Company through life insurance policies on the directors. Over the life of the
Program, all costs of donations and premiums on the life insurance policies,
including a return of the Company's cost of funds, will be recovered through
life insurance proceeds on the directors. The Program, over its life, will not
result in any material cost to the Company.
Director's Life Insurance Program--The Company maintains a split-dollar
Director's Life Insurance Program for nonemployee directors, beginning after
three years of service, which provides a maximum death benefit of $500,000 to
each eligible director. Under the split-dollar arrangement, directors are
provided a death benefit only and do not have any interest in the cash value
of the policies. The Life Insurance Program is structured to pay a portion of
the total death benefit to the Company to reimburse the Company for all costs
of the program, including a return on its funds. The Life Insurance Program,
over its life, will not result in any material cost to the Company.
Director Emeritus Program--The Company has adopted a Director Emeritus
Program that will be available during the transition to a new Interstate
Energy Corporation board of directors. A director emeritus is appointed by the
Board of Directors of the Company and is entitled to serve as such until age
70, but no longer than two years. Directors emeriti are entitled to receive
the annual retainer fee paid to the Company's regular directors. Directors
emeriti will participate in various board activities but are not voting
members.
7
<PAGE>
OWNERSHIP OF VOTING SECURITIES
Listed in the following table are the shares of the Company's common stock
owned, as of December 31, 1996, by the executive officers listed in the
Summary Compensation Table and each of the directors of the Company, as well
as shares owned by the directors and officers as a group. The table also sets
forth each person known by the Company to beneficially own, as of December 31,
1996, five percent or more of the outstanding shares of common stock of the
Company.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY PERCENT
NAME OF BENEFICIAL OWNER OWNED(1) OF CLASS
- ------------------------ ------------ --------
<S> <C> <C>
Executives(2)
Lance W. Ahearn....................................... 23,041 *
A. J. (Nino) Amato.................................... 3,290(3) *
William D. Harvey..................................... 7,817(3) *
Eliot G. Protsch...................................... 8,731(3) *
Director Nominees
Erroll B. Davis, Jr................................... 10,879(3) *
Milton E. Neshek...................................... 11,007 *
Carol T. Toussaint.................................... 9,243 *
Continuing Directors
L. David Carley....................................... 4,175 *
Rockne G. Flowers..................................... 8,123 *
Donald R. Haldeman.................................... 3,625 *
Katharine C. Lyall.................................... 5,245 *
Arnold M. Nemirow..................................... 7,005 *
Henry C. Prange....................................... 10,473(3) *
Judith D. Pyle........................................ 4,744 *
All Executives and Directors as a Group (27 people),
including those listed above........................... 132,096 *
Other Beneficial Owners (4)
IES................................................... 6,123,944 16.6%
IPC................................................... 6,123,944 16.6%
</TABLE>
- --------
* Less than one percent of the total outstanding shares of Company common
stock.
(1) Total shares of Company common stock outstanding on December 31, 1996 were
30,773,735.
(2) Stock ownership of Mr. Davis is shown with director nominees.
(3) Included in the beneficially owned shares shown are the following indirect
ownership interests with shared voting and investment powers: Mr. Amato--
938; Mr. Harvey--1,662; Mr. Protsch--461; Mr. Davis--4,976; and Mr.
Prange--248.
(4) By reason of stock option agreements entered into in connection with the
Merger Agreement, each of IES and IPC may be deemed to have sole voting
and dispositive power with respect to the shares listed above which are
subject to their respective options and, accordingly, each of IES and IPC
may be deemed to beneficially own all of such shares (assuming exercise of
its options and the nontriggering of the other party's right to exercise
its options for common stock). However, each of IES and IPC expressly
disclaimed any beneficial ownership of such shares because the options are
exercisable only in certain circumstances. The address for IES is: IES
Tower, 200 First Street SE, Cedar Rapids, Iowa 52401. The address for IPC
is: 1000 Main Street, P.O. Box 769, Dubuque, Iowa 532004-0769.
8
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
The following Summary Compensation Table sets forth the total compensation
paid by the Company and its subsidiaries for all services rendered during
1996, 1995, and 1994 to the Chief Executive Officer and the four other most
highly compensated executive officers of the Company or its subsidiaries who
perform policy making functions for the Company.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
---------------------------------- --------------------------
RESTRICTED SECURITIES
NAME AND OTHER ANNUAL STOCK UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY(1) BONUS(2) COMPENSATION(3) AWARDS(4) OPTIONS/SARS(5) COMPENSATION(6)
------------------ ---- --------- -------- --------------- ---------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Erroll B. Davis, Jr..... 1996 $450,000 $297,862 $23,438 $ 0 12,600 $66,711
President and CEO 1995 426,038 125,496 18,963 0 13,100 61,513
1994 426,038 128,232 14,958 272,000 0 57,723
William D. Harvey....... 1996 220,000 92,104 10,765 0 4,650 29,343
Senior Vice 1995 203,846 47,340 5,746 0 4,700 23,534
President--WP&L 1994 193,654 56,080 5,203 0 0 22,632
Eliot G. Protsch........ 1996 220,000 101,224 7,657 0 4,650 25,890
Senior Vice 1995 200,000 47,520 4,169 0 4,700 20,178
President--WP&L 1994 190,000 56,080 3,930 0 0 18,346
Lance W. Ahearn......... 1996 205,000 59,860 6,180 0 0 35,147
President and CEO-- 1995 195,000 34,125 3,814 0 0 29,663
HDC 1994 186,533 33,576 0 0 0 30,811
Anthony J. Amato........ 1996 168,846 65,920 9,346 0 3,550 22,723
Senior Vice 1995 156,804 40,046 5,144 0 3,650 18,059
President--WP&L 1994 152,885 43,138 5,328 0 0 17,021
</TABLE>
- --------
(1) Includes vacation days sold back to the Company.
(2) The bonus for 1996 includes special bonuses related to time and effort
expended in working toward the completion of the merger with IES and IPC:
Mr. Davis--$75,000; Mr. Harvey--$10,000; Mr. Protsch--$20,000; Mr. Amato--
$5,000.
(3) Other Annual Compensation for 1996 consists of: Income tax gross-ups for
reverse split-dollar life insurance: Mr. Davis--$13,984, Mr. Harvey--
$5,692, Mr. Protsch--$3,268, Mr. Ahearn--$3,640, and Mr. Amato--$4,957;
and income tax gross-ups on financial counseling benefit: Mr. Davis--
$9,454, Mr. Harvey--$5,073, Mr. Protsch--$4,389, Mr. Ahearn--$2,540, and
Mr. Amato--$4,389.
(4) The restricted stock award to Mr. Davis consists of 1.67 shares of HDC
common stock which had an estimated net book value of $269,132 at December
31, 1996. Dividends are not paid on Mr. Davis' restricted stock. These
shares vest at a rate of 0.4175 shares per year beginning on December 21,
1994, and will be fully vested on March 31, 1997, subject to earlier
vesting in certain cases. These shares are subject to transfer
restrictions in accordance with a Restricted Stock Agreement between the
Company, HDC and Mr. Davis. The Company loaned to Mr. Davis $194,929 which
equals the income taxes withheld in connection with shares vested as of
December 31, 1996. Mr. Davis is charged interest on the loan at the prime
rate.
(5) Awards made in 1996 were in combination with contingent dividend awards as
described in the table entitled "Long-Term Incentive Awards in 1996".
(6) All Other Compensation for 1996 consists of: matching contributions to
401(k) plan, Mr. Davis--$13,500, Mr. Harvey--$6,600, Mr. Protsch--$6,600,
Mr. Ahearn--$4,750, and Mr. Amato--$4,100; Financial
9
<PAGE>
counseling benefit, Mr. Davis--$10,250, Mr. Harvey--$5,500, Mr. Protsch--
$5,500, Mr. Ahearn--$5,500, and Mr. Amato--$5,500; Split dollar life
insurance premiums, Mr. Davis--$27,800, Mr. Harvey--$11,072, Mr. Protsch--
$9,695, Mr. Ahearn--$18,017, and Mr. Amato--$6,911; and Reverse split
dollar life insurance, Mr. Davis--$15,161, Mr. Harvey--$6,171, Mr.
Protsch--$4,095, Mr. Ahearn--$6,880, and Mr. Amato--$6,212. The split
dollar insurance premiums are calculated using the "foregone interest"
method.
OPTION GRANTS IN 1996
The following table sets forth certain information concerning options
granted during 1996 to the executive officers named in the Summary
Compensation Table.
OPTION/SAR GRANTS IN 1996
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
PRICE APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM(2)
------------------------------------------------ -----------------------
NUMBER OF % OF TOTAL
SHARES OPTIONS/SARS
UNDERLYING GRANTED TO EXERCISE OR
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION
NAME GRANTED(1) FISCAL YEAR ($/SHARE) DATE 5% 10%
---- ------------ ------------ ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Erroll B. Davis, Jr..... 12,600 17% $30.75 1/2/06 $243,684 $617,652
William D. Harvey....... 4,650 6% 30.75 1/2/06 89,931 227,943
Eliot G. Protsch........ 4,650 6% 30.75 1/2/06 89,931 227,943
Lance W. Ahearn......... NA NA NA NA NA NA
Anthony J. Amato........ 3,550 5% 30.75 1/2/06 68,657 174,021
</TABLE>
- --------
(1) Consists of non-qualified stock options to purchase shares of Company
common stock granted pursuant to the Company's Long-Term Equity Incentive
Plan. These options were granted on January 2, 1996, and will fully vest
on January 2, 1999. The options were granted with an equal number of
contingent dividend awards as described in the table entitled "Long-Term
Incentive Awards in 1996", and have per share exercise prices equal to the
fair market value of a share of Company common stock on the date of grant.
Upon a "change in control" as defined in the Long-Term Equity Incentive
Plan or upon retirement, disability or death of the option holder, these
options shall become immediately exercisable. Upon exercise of an option,
the executive purchases all or a portion of the shares covered by the
option by paying the exercise price multiplied by the number of shares as
to which the option is exercised, either in cash or by surrendering common
shares already owned by the executive.
(2) The hypothetical potential appreciation shown for the named executives is
required by the rules of the Securities and Exchange Commission. The
amounts shown do not represent either the historical or expected future
performance of Company common stock. For example, in order for the named
executives to realize the potential values set forth in the 5% and 10%
columns in the table above, the price per share of the Company's common
stock would be $50.09 and $79.77, respectively, as of the expiration date
of the options.
10
<PAGE>
The following table provides information for the named executives regarding
the number and value of unexercised options. No options were exercised during
1996.
OPTION VALUES AT DECEMBER 31, 1996
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS/SARS
OPTIONS/SARS AT YEAR END AT YEAR END(1)
------------------------- -------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Erroll B. Davis, Jr........ 0 25,700 0 $8,188
William D. Harvey.......... 0 9,350 0 2,938
Eliot G. Protsch........... 0 9,350 0 2,938
Lance W. Ahearn............ NA NA NA NA
Anthony J. Amato........... 0 7,200 0 2,281
</TABLE>
- --------
(1) Based on the closing per share price on December 31, 1996 of Company
common stock of $28.125.
The following table provides information concerning long-term incentive
awards made to the named executives in 1996.
LONG-TERM INCENTIVE AWARDS IN 1996
<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUTS
UNDER NON-STOCK
NUMBER OF PERFORMANCE OR PRICE-BASED PLANS(2)
SHARES, UNITS OTHER PERIOD ------------------------
OR OTHER RIGHTS UNTIL MATURATION THRESHOLD TARGET MAXIMUM
NAME (#)(1) OR PAYOUT ($) ($) ($)
---- --------------- ---------------- --------- ------ -------
<S> <C> <C> <C> <C> <C>
Erroll B. Davis, Jr..... 12,600 1/2/99 60,228 75,222 131,670
William D. Harvey....... 4,650 1/2/99 22,227 27,761 48,593
Eliot G. Protsch........ 4,650 1/2/99 22,227 27,761 48,593
Lance W. Ahearn......... NA NA NA NA NA
Anthony J. Amato........ 3,550 1/2/99 16,969 21,194 37,098
</TABLE>
- --------
(1) Consists of Performance Units awarded under the Company's Long-Term Equity
Incentive Plan in combination with stock options (as described in the
table entitled "Option/SAR Grants in 1996"). These Performance Units are
entirely in the form of contingent dividends and will be paid if total
shareholder return over a three-year period ending January 2, 1999 equals
or exceeds the median return earned by the companies in a peer group of
utility holding companies, except that there will be no payment if the
Company's total return is negative over the course of such period. If
payable, each participant will receive an amount equal to the accumulated
dividends paid on one share of Company common stock during the period of
January 2, 1996 through December 31, 1999 multiplied by the number of
performance units awarded to the participant, and modified by a
performance multiplier which ranges from 0 to 1.75 based on the Company's
total return relative to the peer group.
(2) Assumes, for purposes of illustration only, a two cent per share increase
in the annual dividend on shares of common stock for 1997 and 1998.
CERTAIN TRANSACTIONS AND AGREEMENTS WITH EXECUTIVES
The Company has entered into employment and severance agreements with
certain of its executive officers and certain executive officers of its
subsidiaries, including Messrs. Davis, Harvey, Protsch, Ahearn and Amato. The
Company recognizes that, in today's developing competitive marketplace within
the energy industry, circumstances may arise in which a change in control of
the Company may occur, through acquisition or
11
<PAGE>
otherwise. This potentiality may cause uncertainty about the continued
employment of certain key executives with the Company, without regard to the
competence or past contributions of the executives. The Company recognizes
further that this uncertainty could result in the loss to the Company of
valuable services of one or more of the key executives, particularly during a
period when these same executives may be called upon to negotiate on behalf of
the shareowners. Because of the intimate knowledge of the business and the
affairs of the Company which these executives possess, such loss could be to
the detriment of the Company and its shareowners. To provide the Company and
certain key executives reasonable security against changes in the relationship
of the executives with the Company in the event of a change in control, the
Company entered into the employment and severance agreements. The agreements
provide that each executive officer that is a party to the agreements is
entitled to benefits if, within five years after a change in control of the
Company (as defined in the agreements), the officer's employment is ended
through (i) termination by the Company, other than by reason of death or
disability or for cause (as defined in the agreements), or (ii) termination by
the officer due to a breach of the agreement by the Company or a significant
change in the officer's responsibilities, or (iii) in the case of Mr. Davis'
agreement, termination by Mr. Davis following the first anniversary of the
change of control. The benefits provided are: (i) a cash termination payment
of one, two or three times (depending on which executive is involved) the sum
of the executive officer's annual salary and his average annual bonus during
the three years before the termination and (ii) continuation for up to five
years of equivalent hospital, medical, dental, accident, disability and life
insurance coverage as in effect at the time of termination. The agreements
also provide the foregoing benefits in connection with certain terminations
which are effected in anticipation of a change of control. Each agreement
provides that if any portion of the benefits under the agreement or under any
other agreement for the officer would constitute an excess payment for
purposes of the Internal Revenue Code, benefits will be reduced so that the
officer will be entitled to receive $1 less than the maximum amount which he
could receive without becoming subject to the 20% excise tax imposed by the
Code on certain excess payments, or which the Company may pay without loss of
deduction under the Code. The Board of Directors has authorized that each of
the above referenced agreements be amended to specifically provide that the
consummation of the transactions contemplated by the Merger Agreement will
constitute a change of control in certain circumstances for purposes of the
agreements.
The Company and HDC also entered into a Restricted Stock Agreement with Mr.
Davis in relation to the award to Mr. Davis in 1994 of 1.67 shares of HDC
common stock as shown in the Summary Compensation Table. The agreement
restricts the transfer of the HDC stock awarded to Mr. Davis and gives HDC the
right of first refusal on any proposed transfer of the stock, at prices per
share as determined in accordance with the agreement. The agreement also
provides for the sale of the stock by Mr. Davis to HDC in the event of a sale
of HDC, and, beginning on March 31, 1997, provides for the conversion of the
HDC stock into common stock of the Company over a period of five years at a
ratio as determined in accordance with the agreement.
The Company and HDC also have in place a Restricted Stock Agreement with Mr.
Ahearn in connection with an award to Mr. Ahearn of 5 shares of HDC common
stock in 1991. The final portion of Mr. Ahearn's stock vested in 1994. The
provisions of the agreement with Mr. Ahearn are similar to the provisions of
the agreement with Mr. Davis. HDC had loaned to Mr. Ahearn an amount of
$502,948 which equals the income taxes withheld, plus accumulated interest at
the prime rate, in connection with HDC shares awarded to him. On April 1,
1996, Mr. Ahearn converted 1.67 shares of HDC stock into 21,672 shares of
Company common stock in accordance with provisions of the agreement. On June
30, 1996, Mr. Ahearn sold back 1.8 shares to HDC in accordance with provisions
of the agreement at an aggregate price of $722,073 determined on the basis of
an independent appraisal of the value of HDC stock. On June 30, 1996, Mr.
Ahearn repaid his outstanding loans from the Company in full.
12
<PAGE>
RETIREMENT AND EMPLOYEE BENEFIT PLANS
Salaried employees (including officers) of the Company and WP&L are eligible
to participate in a Retirement Plan maintained by WP&L. Mr. Ahearn is not
eligible to participate in the plan. All of the other executive officers named
in the foregoing Summary Compensation Table participated in the plan during
1996. Contributions to the plan are determined actuarially, computed on a
straight-life annuity basis, and cannot be readily calculated as applied to
any individual participant or small group of participants. For purposes of the
plan, compensation means payment for services rendered, including vacation and
sick pay, and is substantially equivalent to the salary amounts reported in
the foregoing Summary Compensation Table. Retirement Plan benefits depend upon
length of plan service (up to a maximum of 30 years), age at retirement, and
amount of compensation (determined in accordance with the plan) and are
reduced by up to 50 percent of Social Security benefits. Credited years of
service under the plan for covered persons named in the foregoing Summary
Compensation Table are as follows: Erroll B. Davis, Jr., 17 years; Eliot G.
Protsch, 17 years; A. J. (Nino) Amato, 10 years; and William D. Harvey, 9
years. Assuming retirement at age 65, a Retirement Plan participant (in
conjunction with the Unfunded Supplemental Retirement Plan described below)
would be eligible at retirement for a maximum annual retirement benefit as
follows:
RETIREMENT PLAN TABLE
<TABLE>
<CAPTION>
ANNUAL BENEFIT AFTER SPECIFIED YEARS IN PLAN*
AVERAGE ANNUAL ---------------------------------------------------
COMPENSATION 5 10 15 20 25 30
- -------------- ------- ------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
$125,000.................. $10,210 $20,421 $ 30,631 $ 40,841 $ 51,052 $ 61,262
150,000.................. 12,502 25,004 37,506 50,008 62,510 75,012
200,000.................. 17,085 34,171 51,256 68,341 85,427 102,512
250,000.................. 21,669 43,337 65,006 86,675 108,343 130,012
300,000.................. 26,252 52,504 78,756 105,008 131,260 157,512
350,000.................. 30,835 61,671 92,506 123,341 154,177 185,012
400,000.................. 35,419 70,837 106,256 141,675 177,093 212,512
450,000.................. 40,002 80,004 120,006 160,008 200,010 240,012
475,000.................. 42,294 84,587 126,881 169,175 211,468 253,762
500,000.................. 44,585 89,171 133,756 178,341 222,927 267,512
525,000.................. 46,877 93,754 140,631 187,508 234,385 281,262
550,000.................. 49,169 98,337 147,506 196,675 245,843 295,012
</TABLE>
- --------
*Average annual compensation is based upon the average of the highest 36
consecutive months of compensation. The Retirement Plan benefits shown
above are net of estimated Social Security benefits and do not reflect any
deductions for other amounts. The annual retirement benefits payable are
subject to certain maximum limitations (in general, $120,000 for 1995 and
$150,000 for 1996) under the Internal Revenue Code. Under the Retirement
Plan and a supplemental survivors income plan, if a Retirement Plan
participant dies prior to retirement, the designated survivor of the
participant is entitled to a monthly income benefit equal to approximately
50 percent (100 percent in the case of certain executive officers and key
management employees) of the monthly retirement benefit which would have
been payable to the participant under the Retirement Plan if the
participant had remained employed by the Company until eligible for normal
retirement.
Unfunded Supplemental Retirement Plan--WP&L maintains an Unfunded
Supplemental Retirement Plan which provides funds for payment of retirement
benefits above the limitations on payments from qualified pension plans in
those cases where an employee's retirement benefits exceed the qualified plan
limits. Additionally, the plan provides for payments of supplemental
retirement benefits to employees holding the
13
<PAGE>
position of Vice President or higher, who have been granted additional months
of service by the Board of Directors for purposes of computing retirement
benefits. The benefits payable under this plan are included in the amounts
disclosed in the Retirement Plan Table set forth above.
Unfunded Executive Tenure Compensation Plan--WP&L maintains an Unfunded
Executive Tenure Compensation Plan to provide incentive for key executives to
remain in the service of WP&L by providing additional compensation which is
payable only if the executive remains with WP&L until retirement (or other
termination if approved by the Board of Directors). Participants in the plan
must be designated by the Chief Executive Officer of WP&L and approved by its
Board of Directors. Mr. Davis was the only active participant in the plan as
of December 31, 1996. The plan provides for monthly payments to a participant
after retirement (at or after age 65, or with Board approval, prior to age 65)
for 120 months. The payments will be equal to 25 percent of the participant's
highest average salary for any consecutive 36-month period. If a participant
dies prior to retirement or before 120 payments have been made, the
participant's beneficiary will receive monthly payments equal to 50 percent of
such amount for 120 months in the case of death before retirement, or if the
participant dies after retirement, 50 percent of such amount for the balance
of the 120 months. Annual benefits of $112,500 would be payable to Mr. Davis
upon retirement, assuming he continues in WP&L's service until retirement at
the same salary as was in effect on December 31, 1996.
REPORT OF THE COMPENSATION AND PERSONNEL COMMITTEE
ON EXECUTIVE COMPENSATION
TO OUR SHAREOWNERS: The Compensation and Personnel Committee (the
"Committee") of the Board of Directors of the Company is comprised of five
independent, nonemployee directors who have no "interlocking" relationships,
as defined by the Securities and Exchange Commission. The Committee assesses
the effectiveness and competitiveness of, approves the design of, and
administers executive compensation programs within a consistent total
compensation framework for the Company. The Committee also reviews and
approves all salary arrangements and other remuneration for executives,
evaluates executive performance, and considers related matters. To support the
Committee in carrying out its mission, Towers Perrin, an independent
consultant, is engaged to provide assistance in the development of
comprehensive executive compensation policies.
The Committee is committed to implementing a total compensation program for
executives which furthers the Company's mission. The Committee, therefore,
adheres to the following compensation policies which are intended to
facilitate the achievement of the Company's business strategies.
Total compensation should enhance the Company's ability to attract,
retain, and encourage the development of exceptionally knowledgeable and
experienced executives, upon whom, in large part, the successful operation
and management of the Company depends.
Base salary levels should be targeted at a competitive market range paid
to executives of comparable companies.
Incentive compensation programs should strengthen the relationship
between pay and performance by emphasizing variable, at-risk compensation
that is consistent with meeting predetermined Company, subsidiary, and
individual performance goals.
COMPONENTS OF COMPENSATION
The Committee relates total compensation levels for the Company's senior
executives to the compensation paid to executives of comparable companies. As
the Company is a diversified utility holding company with both regulated and
nonregulated operations, comparison groups are customized to the respective
position which an
14
<PAGE>
executive holds. Utility executives' pay is compared to that of executives
with similar responsibilities at utilities and/or non-utilities (general
industries) in both the Midwest and national markets, as well as to companies
with similar revenue levels and employment levels. Compensation paid to
holding company executives, including Mr. Davis, is compared to the
compensation paid by a utility comparison group. However, in order to
recognize holding company employees for increasing nonregulated business
responsibilities, benchmark data also are drawn from similarly sized
diversified industrial companies furnished by public survey data. For
executives with sole responsibilities in the nonregulated businesses,
comparison group data reflect the relevant mix of the nonregulated business
operations.
The Committee has reviewed overall compensation levels and compared them to
the benchmarks established. It has been determined that total executive
compensation, including that for Mr. Davis, is in line with competitive
salaries of the comparison groups of companies.
The current elements of the Company's executive compensation program are
base salary, short-term (annual) incentives and long-term (equity) incentives.
These elements are addressed separately below. In determining each component
of compensation, the Committee considers all elements of an executive's total
compensation package, including benefit and perquisite programs.
BASE SALARIES
The Committee annually reviews each executive's base salary. Base salaries
are targeted at a competitive market range when comparing both utility and
non-utility (general industry) data. Base salaries are adjusted annually by
the Committee to recognize changes in the market, varying levels of
responsibility, prior experience, and breadth of knowledge. Increases to base
salaries are driven primarily by market adjustments. Individual performance
factors are not considered by the Committee in setting base salaries. In 1996,
certain executives received base salary increases in recognition of changes in
the current market. Greater emphasis was placed on the opportunity for
executives to increase their earnings through annual incentive plans by
exceeding specific strategic goals. Base pay adjustments are tied to market
changes in appropriate salary levels and will minimize across-the-board
increases. During 1996, all executive salaries were reviewed for market
comparability using utility and general industry data contained in
compensation surveys published by Edison Electric Institute, American Gas
Association and several compensation consulting firms. Any recommended changes
will be effective for 1997. Market ranges will be reviewed annually.
SHORT-TERM INCENTIVES
The goal of short-term (annual) incentive programs is to promote the
Committee's pay-for-performance philosophy by providing executives with direct
financial incentives in the form of annual cash or stock based bonuses to
achieve corporate, subsidiary, and individual performance goals. Annual bonus
opportunities allow the Committee to communicate specific goals that are of
primary importance during the coming year and motivate executives to achieve
these goals. The Committee on an annual basis reviews and approves the
program's performance goals and the relative weight assigned to each goal as
well as targeted and maximum award levels. A description of the short-term
incentive programs available to executive officers follows.
Wisconsin Power and Light Company Management Incentive Plan--The WP&L
Management Incentive Plan (the "WP&L MIP") covers utility executives and in
1996 was based on achieving annual targets in several areas of overall
corporate performance that include profitability, operations and maintenance
expense control, reduction in lost time accidents, and individual/team
performance. Target and maximum bonus awards were set at the median of the
utility market levels. Targets were considered by the Committee to be
achievable, but require
15
<PAGE>
above-average performance from each of the executives. For 1996, the threshold
levels for all WP&L MIP performance categories were exceeded. Actual payment
of bonuses, as a percentage of annual salary, is determined by the level of
performance achieved in each category. Weighting factors are applied to the
percentage achievement under each category to determine overall performance.
If the threshold performance level is not reached, there is no bonus payment
associated with that particular category. Once the designated maximum
performance is reached, there is no additional payment. The actual percentage
of salary paid as a bonus, within the allowable range, is equal to the
weighted average percent achievement for all the performance categories. For
example, if the overall weighted performance achievement is 70%, the executive
will receive 70% of his or her maximum allowable bonus award. The WP&L MIP
awarded 91 percent of its allowable maximum for 1996. Potential WP&L MIP
awards for executives range from 0 to 40 percent of annual salary. The WP&L
MIP does not allow for discretion in bonus determinations. Awards for 1996
under the WP&L MIP made to top executives (other than to Mr. Davis and Mr.
Ahearn) are shown in the Summary Compensation Table.
Heartland Development Corporation Management Incentive Plan--Mr. Ahearn and
selected other executives of HDC are covered by the HDC Management Incentive
Plan (the "HDC MIP") which is based on achievement of specified combinations
of net income and revenue growth targets and on achieving a number of other
specific HDC performance objectives which included the development of business
strategies for certain new ventures and restructuring and growth targets for
existing operating units. The incentive compensation plan for Mr. Ahearn
consists of a potential award maximum of 80 percent of his base salary; 75
percent associated with performance in the net income and revenue growth
category and 25 percent for the achievement of specific personal performance
goals. The actual payment of bonuses as a percentage of annual salary is
determined as described for the WP&L MIP. The HDC MIP awarded 37 percent of
its allowable maximum in 1996. Mr. Ahearn's award for 1996 under the HDC MIP
is set forth in the Summary Compensation Table.
WPL Holdings Management Incentive Plan--Mr. Davis is covered by the
Company's Management Incentive Plan (the "WPLH MIP"). Awards under the WPLH
MIP are based on WP&L, HDC and individual performance achievement in relation
to predetermined goals. For each Plan year, the Committee will determine the
performance apportionment for Mr. Davis. In 1996 that apportionment was 50%
for WP&L performance, 25% for HDC performance and 25% for individual
performance. WP&L performance is measured based on the overall percentage
achievement factor of the corporate goals established for the WP&L MIP. HDC
performance is measured based on the overall percentage achievement of the
1996 financial performance goals from the HDC plan. Individual performance is
measured based on the achievement of certain specific goals, which included
strategy development and implementation, established for Mr. Davis by the
Committee. The 1996 WPLH MIP award range for Mr. Davis was from 0 to 70
percent of annual salary. The actual payment of bonuses as a percentage of
annual salary is determined as described for the WP&L MIP. In 1996, the WPLH
MIP provided a payment to Mr. Davis as a result of the achievement of goals
under the WP&L MIP, the HDC financial performance component, and for
achievement of the personal goals established by the Committee. For 1996
performance, Mr. Davis' annual bonus payment represented 49 percent of his
base salary, as reflected in the Summary Compensation Table. Under the WPLH
MIP, Mr. Davis was awarded $222,862 solely in connection with 1996 performance
as discussed above. In the judgment of the Committee, Mr. Davis' award range
is in line with the median of the same combined utility and general industry
comparison group used for base salary comparisons.
LONG-TERM INCENTIVES
The Committee strongly believes compensation for senior executives should
include long-term, at-risk pay to strengthen the alignment of shareowner and
management interests at both the WP&L and HDC level. In this regard, the Long-
Term Equity Incentive Plan allows for grants of stock options, restricted
stock, and performance
16
<PAGE>
units/shares with respect to the Company's common stock. The Committee
believes the Long-Term Equity Incentive Plan balances the Company's existing
compensation programs by emphasizing compensation based on the long-term
successful performance of the Company from the perspective of the shareowners.
Stock options provide a reward that is directly tied to the benefit
shareowners receive from increases in the price of the Company's common stock.
The payout from the performance units is based on the Company's continued
payment of dividends, a significant component of investment returns for
utilities, and the relative total return to shareowners compared to other
comparable investments. Thus, the two components of the Long-Term Equity
Incentive Plan, i.e., stock options and performance units, provide incentives
for management to produce superior shareowner returns on both an absolute and
relative basis. During 1996 the Committee made a grant of stock options and
performance units to Messrs. Davis, Amato, Protsch and Harvey. All option
grants were made at the fair market value of the Company's common stock on the
date the grants were approved (January 2, 1996). The options vest after three
years and have a ten-year term from the date of the grant. Executives were
also granted performance units which will accumulate all of the dividends paid
on one share of the Company's common stock over a three-year period. One
performance unit was granted for each option received by the executive.
Accrued dividends are not reinvested in the Company's common stock, nor is any
interest paid on accrued dividends. Performance units will be paid out in cash
or in shares of the Company's Common Stock. The payment will be modified by a
performance multiplier which ranges from 0 to 1.75 based on the three year
average of the Company's total shareowner return relative to a utility holding
company peer group. If the Company's total shareowner return for the three
year period is negative, the performance unit payout will be zero. In
determining actual award levels, the Committee was primarily concerned with
providing a competitive total compensation level to officers. As such, award
levels (including the awards made to Mr. Davis) were based on a competitive
analysis of similarly-sized utility companies that took into consideration the
market level of long-term incentives, as well as the competitiveness of the
total compensation package. Award ranges, as well as individual award levels,
were then established based on responsibility level and market
competitiveness. No corporate or individual performance measures were reviewed
in connection with the awards of options and performance units. Award levels
were targeted to the median of the range of such awards paid by comparable
companies. In addition, the Committee did not consider the amounts of options
or performance units already outstanding or previously granted when making
awards for 1996.
SPECIAL BONUS PAYOUT
During 1996, Company executives devoted considerable time and effort toward
the completion of the merger with IES and IPC. The Committee and the Board
determined that there should be appropriate recognition and reward for this
work. Therefore, the Committee recommended and the Board approved special one
time bonus awards in the amounts of $75,000 for Mr. Davis, $20,000 for Mr.
Protsch, $10,000 for Mr. Harvey and $5,000 for Mr. Amato.
POLICY WITH RESPECT TO THE $1 MILLION DEDUCTION LIMIT
Section 162(m) of the Internal Revenue Code generally limits the corporate
deduction for compensation paid to executive officers named in the proxy
statement to $1 million unless such compensation is based upon performance
objectives meeting certain regulatory criteria or is otherwise excluded from
the limitation. The Committee has carefully considered the impact of this tax
code provision. Based on the Committee's commitment to link compensation with
performance as described in this report, the Committee currently intends to
qualify compensation paid to the Company's executive officers for
deductibility under Section 162(m).
17
<PAGE>
CONCLUSION
The Committee believes the existing executive compensation policies and
programs provide the appropriate level of competitive compensation for the
Company's executives. In addition, the Committee believes that the long and
short term performance incentives effectively align the interests of
executives and shareowners toward a successful future for the Company.
COMPENSATION AND PERSONNEL COMMITTEE
Arnold M. Nemirow (Chair)
Milton E. Neshek
Henry C. Prange
Judith D. Pyle
Carol T. Toussaint
18
<PAGE>
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
Rules of the Securities and Exchange Commission require that the Company
show a graphical comparison of the total return on its common stock for the
last five fiscal years with the total returns of a broad market index and a
more narrowly focused industry or group index. (Total return is defined as the
return on common stock including dividends and stock price appreciation,
assuming reinvestment of dividends.) The Company has selected the Standard &
Poors (S&P) 500 index for the broad market index, and the S&P Utility Index as
the industry index. These indices were selected because of their broad
availability and recognition. The following chart compares the total return of
an investment of $100 in Company common stock on December 31, 1991, with like
returns for the S&P 500 and S&P Utilities indices.
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
1991 1992 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C> <C>
WPL Holdings, Inc. $100.00 $109.39 $112.10 $ 99.59 $119.04 $116.70
S&P Utilities Index $100.00 $108.09 $123.70 $113.87 $161.73 $166.78
S&P 500 Index $100.00 $107.62 $118.46 $120.03 $165.13 $203.05
</TABLE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Company's directors, its executive officers, and certain other officers
are required to report their ownership of the Company's common stock and WP&L
preferred stock and any changes in that ownership to the Securities and
Exchange Commission and the New York Stock Exchange. All required filings in
1996 were properly made in a timely fashion. In making the above statements,
the Company has relied on the representations of the persons involved and on
copies of their reports filed with the Securities and Exchange Commission.
19
<PAGE>
GENERAL
Voting--The outstanding voting securities of the Company on the record date
stated below consisted of 30,773,735 shares of common stock. Only shareowners
of the Company of record on its books at the close of business on February 25,
1997, are entitled to vote at the meeting. Each such shareowner is entitled to
one vote for each share of common stock registered in his or her name on the
record date, on each matter submitted to a vote at the meeting. Shareowners
may vote either in person or by duly authorized proxy. The giving of proxies
by shareowners will not affect their right to vote their shares if they attend
the meeting and desire to vote in person. Presence at the meeting of a
shareowner who signed a proxy, however, does not itself revoke the proxy. A
proxy may be revoked by the person giving it at any time prior to the time it
is voted by advising the Secretary of the Company prior to such voting. A
proxy may also be revoked by a shareowner who duly executes another proxy
bearing a later date but prior to the voting. All shares represented by
effective proxies on the enclosed form, received by the Company, will be voted
at the meeting or any adjourned or postponed session of the meeting, all in
accordance with the terms of such proxies.
Proposals of Shareowners--Under the rules of the Securities and Exchange
Commission, any shareowner proposal intended to be presented at the 1998
Annual Meeting of Shareowners must be received at the principal office of the
Company no later than November 7, 1997, in order to be eligible to be
considered for inclusion in the Company's proxy materials relating to that
meeting.
Independent Auditors--The Board of Directors has appointed Arthur Andersen
LLP as the Company's independent auditors for 1997. Arthur Andersen LLP acted
as the independent auditors for the Company in 1996. Representatives of Arthur
Andersen LLP are expected to be present at the meeting with the opportunity to
make a statement if they so desire. Such representatives are also expected to
be available to respond to appropriate questions.
Other Business--The meeting is being held for the purposes set forth in the
notice accompanying this proxy statement. The Board of Directors of the
Company knows of no business to be transacted at the meeting other than that
set forth in the notice. However, if any other business should properly be
presented to the meeting, the proxies will be voted in respect thereof in
accordance with the judgment of the person or persons voting the proxies.
WPL Holdings, Inc.
[LOGO OF ERROLL B. DAVIS, JR.]
Erroll B. Davis, Jr.
President and Chief Executive
Officer
20
<PAGE>
[MAP SHOWING DIRECTIONS TO ANNUAL MEETING OF SHAREHOLDERS OF
WISCONSIN POWER AND LIGHT COMPANY]
<PAGE>
PROXY CARD
[LOGO OF WPL HOLDINGS, INC.]
VOID Indicate your vote by an (x) in the appropriate box.
ELECTION OF DIRECTORS:
Nominees for terms ending in 2000.
Erroll B. Davis, Jr. Withhold For All
Milton E. Neshek For All For All Except (*)
Carol T. Toussaint [_] [_] [_]
(*) TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL
NOMINEE STRIKE A LINE THROUGH THE NOMINEE'S NAME IN
THE LIST ABOVE AND MARK AN (X) IN THE "For All Except"
BOX.
Please date and sign your name(s) exactly as shown
above and mail promptly in the enclosed envelope.
_________________________________________________
Signature DATED
ACCT #99999999
_________________________________________________
Signature DATED PROXY #700003-2
Important: When signing as attorney, executor,
administrator, trustee, or guardian, please give
your full title as such. In the case of JOINT
HOLDERS, all should sign.
Please FOLD here and DETACH Proxy Card
- --------------------------------------------------------------------------------
To All WPL Holdings, Inc. Shareowners:
You are invited to attend the Annual Meeting of Shareowners on Wednesday,
April 23, 1997, at 10:00 a.m. in the Exhibition Hall at the Dane County
Exposition Center, 1881 Expo Mall, Madison, Wisconsin.
Above is your 1997 WPL Holdings, Inc. Proxy Card. Please read both sides of
the Proxy Card, note your election, sign and date it. Detach and return it
promptly in the self-addressed enclosed envelope. We encourage you to vote
your shares. This will help avoid any expenses associated with follow-up
letters to shareowners who have not responded.
If you are attending the Annual Meeting and Luncheon, please complete and
detach the Reservation Form below and return it with the signed proxy card
in the enclosed envelope.
To cancel your luncheon reservation contact Shareowner Services at:
Local(Madison).......(608) 252-3110
Toll Free............1-800-356-5343
Please FOLD here and DETACH Reservation Form
- --------------------------------------------------------------------------------
ANNUAL MEETING RESERVATION
VOID
Return this stub only if you are planning to attend the luncheon.
I (WE) WILL ATTEND THE ANNUAL MEETING LUNCHEON.
Please list your name(s) and your guest(s) below:
ACCT #9999999 __________________________________________________
__________________________________________________
__________________________________________________
<PAGE>
[LOGO OF WPL HOLDINGS, INC.]
ANNUAL MEETING OF SHAREOWNERS APRIL 23, 1997
The undersigned appoints Erroll B. Davis, Jr. and Edward M. Gleason, or either
of them, attorneys and proxies, with the power of substitution to vote all
shares of stock of WPL Holdings, Inc. of record in the name of the undersigned
(including any shares held or credited to the undersigned's account under the
Company's Dividend Reinvestment and Stock Purchase Plan) at the close of
business on February 25, 1997, at the Annual Meeting of Shareowners of the
Company, to be held in the Exhibition Hall at the Dane County Exposition Center,
Madison, Wisconsin, on April 23, 1997, at 10:00 a.m., and at all adjournments
thereof, upon all matters that properly come before the meeting, including the
matters described in the Company's Notice of Annual Meeting of Shareowners dated
March 7, 1997 and accompanying Proxy Statement subject to any directions on the
reverse side of this card.
This Proxy is solicited on behalf of the Board of Directors of WPL Holdings,
Inc.
If No Choice is Specified, the Proxies Shall Vote FOR the Proposals.
(continued and to be signed and dated on the other side)
- --------------------------------------------------------------------------------
