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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 Section240.14a-11(c) or
Section240.14a-12
INTERSTATE ENERGY CORPORATION
- --------------------------------------------------------------------------------
(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)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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INTERSTATE ENERGY CORPORATION
D/B/A ALLIANT CORPORATION
222 WEST WASHINGTON AVENUE P.O. BOX 2568 MADISON, WI 53701-2568 PHONE:
608/252-3110
May 22, 1998
TO THE OWNERS OF INTERSTATE ENERGY CORPORATION:
We extend a cordial invitation to you to join us at the 1998 Annual Meeting
of Shareowners. The meeting will be held at the Collins Plaza Hotel, 1200
Collins Road, N.E., Cedar Rapids, Iowa, on Wednesday, June 24, 1998, at 10:00
a.m. (Central Time). If you plan to join us, please indicate the names of the
individuals who will be attending on the enclosed proxy card reservation form.
Interstate Energy Corporation (the "Company") and its subsidiaries,
Wisconsin Power and Light Company ("WP&L") and Interstate Power Company ("IPC"),
will hold separate shareowner meetings. If you are a shareowner of the Company
and a preferred shareowner of WP&L, you will receive separate Notices of Annual
Meeting and Proxy Statements and separate proxy cards, one for each company. If
you are a shareowner of the Company and a preferred shareowner of WP&L, you will
have to return both proxy cards to vote all your shares. If you are a preferred
shareowner of IPC, you will receive a separate Note of Meeting and, if you so
desire, will need to attend the meeting to vote your shares.
The enclosed Notice of Annual Meeting and Proxy Statement sets forth the
items to be considered at the Company's annual meeting. There will also be
informative reports on the affairs of the Company after which shareowners will
be given the opportunity to ask questions and make comments. Light refreshments
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,
[SIG]
LEE LIU
CHAIRMAN OF THE BOARD
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INTERSTATE ENERGY CORPORATION
D/B/A ALLIANT CORPORATION
ANNUAL MEETING OF SHAREOWNERS
DATE: June 24, 1998
TIME: 10:00 AM, Central Time
LOCATION: Collins Plaza Hotel
1200 Collins Road, N.E.
Cedar Rapids, Iowa
</TABLE>
<TABLE>
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SHAREOWNER INFORMATION NUMBERS
LOCAL CALLS (MADISON, WI AREA) ............................. 608-252-3110
TOLL FREE NUMBER ......................................... 1-800-356-5343
</TABLE>
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INTERSTATE ENERGY CORPORATION
D/B/A ALLIANT CORPORATION
222 WEST WASHINGTON AVENUE P.O. BOX 2568 MADISON WI 53701-2568 PHONE:
608/252-3110
NOTICE OF ANNUAL MEETING OF SHAREOWNERS
JUNE 24, 1998
10:00 AM
The Annual Meeting of Shareowners of Interstate Energy Corporation (the
"Company") will be held at the Collins Plaza Hotel, 1200 Collins Road, N.E.,
Cedar Rapids, Iowa, on Wednesday, June 24, 1998, at 10:00 AM (local time), for
the following purposes:
(1) To elect (a) five directors for terms expiring at the 2001 Annual
Meeting of Shareowners, (b) three directors for terms expiring at the 2000
Annual Meeting of Shareowners, and (c) three directors for terms expiring at
the 1999 Annual Meeting of Shareowners.
(2) To consider and act upon any other business that may properly come
before the meeting.
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 May 11, 1998, 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
Shareowner Direct Plan. For present or past employees of IES Utilities Inc.,
your proxy includes any shares held for your account under IES Utilities
Employee Stock Ownership Plan. For shares credited to an account under any
401(k) or similar retirement savings plan of the Company, Wisconsin Power and
Light Company, IES Utilities Inc. or Interstate Power Company, you will receive
a form of proxy from the trustee of the respective plan.
A copy of the 1997 Annual Report of the Company is enclosed.
By Order of the Board of Directors,
[SIG]
EDWARD M. GLEASON
VICE PRESIDENT--TREASURER
AND CORPORATE SECRETARY
May 22, 1998
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INTERSTATE ENERGY CORPORATION
D/B/A ALLIANT CORPORATION
222 WEST WASHINGTON AVENUE P.O. BOX 2568 MADISON WI 53701-2568 PHONE:
608/252-3110
May 22, 1998
PROXY STATEMENT RELATING TO
1998 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 May 22, 1998, 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.
On April 21, 1998, the merger involving IES Industries Inc. ("IES
Industries", the former parent of IES Utilities Inc. ("IES")), Interstate Power
Company ("IPC") and WPL Holdings, Inc. was completed (the "Merger"), after which
the name of the Company was changed from WPL Holdings, Inc. to Interstate Energy
Corporation. Following the Merger, Heartland Development Corporation, the
holding company for non-regulated operations of the Company, changed its name to
Alliant Industries, Inc. ("Alliant Industries"). The Company is now the parent
holding company of Wisconsin Power and Light Company ("WP&L"), IES, IPC and
Alliant Industries.
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
Eleven directors are to be elected at the Company's 1998 Annual Meeting of
Shareowners, scheduled to be held on June 24, 1998. Joyce L. Hanes, Arnold M.
Nemirow, Jack R. Newman, Judith D. Pyle and David Q. Reed are nominees to hold
office for a term expiring in 2001; Lee Liu, Robert W. Schlutz and Wayne H.
Stoppelmoor are nominees to hold office for a term expiring in 2000; and Alan B.
Arends, Robert D. Ray and Anthony R. Weiler are nominees to hold office for a
term expiring in 1999. All nominees are currently directors of the Company,
WP&L, IES and IPC. All persons elected as directors will serve until the Annual
Meeting of Shareowners of the Company in the year their respective term expires,
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). Consequently, any shares not voted at the
meeting, whether due to abstentions, broker non-votes or otherwise, will have no
effect on 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.
Brief biographies of the director nominees and continuing directors follow.
These biographies include their age (as of December 31, 1997), an account of
their business experience, and the names of publicly-
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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
FOR TERMS EXPIRING IN 2001
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JOYCE L. HANES
Principal Occupation: Director and Chairman of Midwest Wholesale Inc.
Age: 65
Served as a director of the Company since the consummation of the
Merger.
[PHOTO]
Annual Meeting at which nominated term of office will expire: 2001
</TABLE>
OTHER INFORMATION: Ms. Hanes has been a director of Midwest Wholesale Inc.,
Mason City, Iowa since 1970. She was re-elected Chairman of the Board of that
company in December 1997, having previously served as Chairman from 1986 to
1988. Ms. Hanes has served as a director of IPC since 1982, and of WP&L and IES
since the consummation of the Merger.
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ARNOLD M. NEMIROW
Principal Occupation: Chairman, President and Chief Executive
Officer, Bowater, Inc. (a pulp and paper manufacturer), Greenville,
South Carolina.
Age: 54
[PHOTO]
Served as a director of the Company since 1991.
Annual Meeting at which nominated term of office will expire: 2001
</TABLE>
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 1994, and of IES and IPC since the consummation of the
Merger. He is a member of the New York Bar.
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JACK R. NEWMAN
Principal Occupation: Partner of Morgan, Lewis & Bockius, an
international law firm based in Washington, D.C.
Age: 64
[PHOTO]
Served as a director of the Company since the consummation of the
Merger.
Annual Meeting at which nominated term of office will expire: 2001
</TABLE>
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OTHER INFORMATION: Mr. Newman has been engaged in private practice since 1967
and has been a partner of Morgan, Lewis & Bockius since December 1, 1994. Prior
to joining Morgan, Lewis & Bockius, he was a partner in the law firms Newman &
Holtzinger and Newman, Bouknight & Edgar. He has served as nuclear legal counsel
to IES since 1968. He advises a number of utility companies on nuclear power
matters, including many European and Asian companies. Mr. Newman is a member of
the Bar of the State of New York, the Bar Association of the District of
Columbia, the Association of the Bar of the City of New York, the Federal Bar
Association and the Lawyers Committee of the Edison Electric Institute. Mr.
Newman has served as a director of IES since 1994, and of WP&L and IPC since the
consummation of the Merger.
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JUDITH D. PYLE
Principal Occupation: Vice Chair of The Pyle Group, a financial
services company, Madison, Wisconsin.
Age: 54
[PHOTO]
Served as a director of the Company since 1992.
Annual Meeting at which nominated term of office will expire: 2001
</TABLE>
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 is a director of Firstar Corporation. She is also a member of the Board
of Visitors at the University of Wisconsin 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, Wisconsin Taxpayers Alliance
and the Children's Theatre of Madison, and is a trustee of the White House
Endowment Fund. Ms. Pyle has served as a director of WP&L since 1994, and of IES
and IPC since the consummation of the Merger.
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DAVID Q. REED
Principal Occupation: Independent practitioner of law in Kansas City,
Missouri.
Age: 66
Served as a director of the Company since the consummation of the
Merger.
[PHOTO]
Annual Meeting at which nominated term of office will expire: 2001
</TABLE>
OTHER INFORMATION: Mr. Reed has been engaged in the private practice of law
since 1960. He is a member of the American Bar Association, the Association of
Trial Lawyers of America, the Missouri Association of Trial Lawyers, the
Missouri Bar and the Kansas City Metropolitan Bar Association. Mr. Reed has
served as a director of IES (or predecessor companies) since 1967, and of WP&L
and IPC since the consummation of the Merger.
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FOR TERMS EXPIRING IN 2000
<TABLE>
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LEE LIU
Principal Occupation: Chairman of the Board of the Company.
Age: 64
Served as a director of the Company since the consummation of the
Merger.
[PHOTO]
Annual Meeting at which current term of office will expire: 2000
</TABLE>
OTHER INFORMATION: Mr. Liu has served as Chairman of the Board of the Company
since the consummation of the Merger. Mr. Liu was Chairman of the Board and
Chief Executive Officer of IES Industries and Chairman of the Board and Chief
Executive Officer of IES prior to the Merger. Mr. Liu has held a number of
professional, management and executive positions after joining Iowa Electric
Light and Power Company (later known as IES Utilities Inc.) in 1957. He is a
director of HON Industries Inc., an office equipment manufacturer in Muscatine,
Iowa; McLeodUSA Inc., a telecommunications company in Cedar Rapids, Iowa;
Principal Financial Group, an insurance company in Des Moines, Iowa; and Eastman
Chemical Company, a diversified chemical company in Kingsport, Tennessee. He
also serves as a trustee for Mercy Medical Center, a hospital in Cedar Rapids,
Iowa and is a member of the University of Iowa College of Business Board of
Visitors. Mr. Liu has served as a director of IES (or predecessor companies)
since 1981, and of WP&L and IPC since the consummation of the Merger.
<TABLE>
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ROBERT W. SCHLUTZ
Principal Occupation: President of Schlutz Enterprises, a diversified
farming and retailing business in Columbus Junction, Iowa.
Age: 62
[PHOTO]
Served as a director of the Company since the consummation of the
Merger.
Annual Meeting at which current term of office will expire: 2000
</TABLE>
OTHER INFORMATION: Mr. Schlutz is a director of PM Agri-Nutritional Group Inc.,
an animal health business in St. Louis, Missouri, and the Iowa Foundation for
Agricultural Advancement. Mr. Schlutz is President of the Iowa State Fair Board
and member of various community organizations. He also served on the National
Advisory Council for the Kentucky Fried Chicken Corporation. He is a past
Chairman of the Environmental Protection Commission for the State of Iowa. Mr.
Schlutz has served as a director of IES (or predecessor companies) since 1989,
and of WP&L and IPC since the consummation of the Merger.
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WAYNE H. STOPPELMOOR
Principal Occupation: Vice Chairman of the Board of the Company.
Age: 63
Served as a director of the Company since the consummation of the
Merger.
[PHOTO]
Annual Meeting at which current term of office will expire: 2000
</TABLE>
OTHER INFORMATION: Mr. Stoppelmoor has served as Vice Chairman of the Board of
Directors of the Company since the consummation of the Merger. Prior thereto,
Mr. Stoppelmoor had served as Chairman, President and Chief Executive Officer of
IPC. He retired as President of IPC on October 1, 1996 and as Chief Executive
Officer on January 1, 1997. Mr. Stoppelmoor has served as a director of IPC
since 1986, and of WP&L and IES since the consummation of the Merger.
FOR TERMS EXPIRING IN 1999
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ALAN B. ARENDS
Principal Occupation: Chairman of the Board of Directors of Alliance
Benefit Group Financial Services Corp. (formerly Arends Associates,
Inc.) of Albert Lea, Minnesota, an employee benefits company.
[PHOTO]
Age: 64
Served as a director of the Company since the consummation of the
Merger.
Annual Meeting at which current term of office will expire: 1999
</TABLE>
OTHER INFORMATION: Mr. Arends founded Alliance Benefit Group Financial
Services Corp. in 1983. Mr. Arends has served as a director of IPC since 1993,
and of WP&L and IES since the consummation of the Merger.
<TABLE>
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ROBERT D. RAY
Principal Occupation: Retired President and Chief Executive Officer
of IASD Health Services Inc. (formerly Blue Cross and Blue Shield
of Iowa, Western Iowa and South Dakota), an insurance firm in Des
Moines, Iowa.
[PHOTO]
Age: 69
Served as a director of the Company since the consummation of the
Merger.
Annual Meeting at which current term of office will expire: 1999
</TABLE>
OTHER INFORMATION: Mr. Ray served as Governor of the State of Iowa for
fourteen years, and was the United States Delegate to the United Nations in
1984. He is a director of the Maytag Company, an appliance manufacturer in
Newton, Iowa. He also serves as Chairman of the National Leadership Commission
on Health Care Reform and the National Advisory Committee on Rural Health Care.
Mr. Ray is Chairman of the Board of Governors, Drake University, Des Moines,
Iowa, and a member of
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the Iowa Business Council. Mr. Ray has served as a director of IES (or
predecessor companies) since 1987, and of WP&L and IPC since the consummation of
the Merger.
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ANTHONY R. WEILER
Principal Occupation: Senior Vice President, Merchandising, for
Heilig-Meyers Company, a national furniture retailer in Richmond,
Virginia.
Age: 61
[PHOTO]
Served as a director of the Company since the consummation of the
Merger.
Annual Meeting at which current term of office will expire: 1999
</TABLE>
OTHER INFORMATION: Mr. Weiler was previously Chairman and Chief Executive
Officer of Chittenden & Eastman Company, a national manufacturer of mattresses
in Burlington, Iowa. He was employed by Chittenden & Eastman in various
management positions from 1960 to 1995. Mr. Weiler joined Heilig-Meyers Company
as Senior Vice President of Merchandising in 1995. Mr. Weiler is Chairman of the
National Home Furnishings Association and a director of the Retail Home
Furnishings Foundation. He is a trustee of NHFA Insurance and a past director of
the Burlington Area Development Corporation, the Burlington Area Chamber of
Commerce and various community organizations. Mr. Weiler has served as a
director of IES (or predecessor companies) since 1991, and of WP&L and IPC since
the consummation of the Merger.
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
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ERROLL B. DAVIS,
JR.
Principal Occupation: President and Chief Executive Officer of the
Company.
Age: 53
Served as a director of the Company since 1982.
[PHOTO]
Annual Meeting at which current term of office will expire: 2000
</TABLE>
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. Mr. Davis joined WP&L in August 1978 and was elected
President in July 1987. He was elected President and Chief Executive Officer of
WP&L in August 1988. Mr. Davis has also served as Chief Executive Officer of IES
and IPC since the consummation of the Merger. He is a director of the Edison
Electric Institute, Amoco Oil Company, Competitive Wisconsin, Inc., PPG
Industries, Inc., and the Wisconsin Utilities Association. Mr. Davis is also a
director and past chair of the Wisconsin Association of Manufacturers and
Commerce, former director and vice chair of Forward Wisconsin, director and
acting chair of the Electric Power Research
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Institute, and past director of the Association of Edison Illuminating Companies
and the American Gas Association. Mr. Davis is also a member of the Iowa
Business Council. Mr. Davis has served as a director of WP&L since 1984, and of
IES and IPC since the consummation of the Merger.
<TABLE>
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ROCKNE G. FLOWERS
Principal Occupation: Chief Executive Officer of Nelson Industries,
Inc. (a muffler, filter, industrial silencer, and active sound and
vibration control technology and manufacturing firm), Stoughton,
Wisconsin (a subsidiary of Cummins Engine Company).
[PHOTO]
Age: 66
Served as a director of the Company since 1981.
Annual Meeting at which current term of office will expire: 1999
</TABLE>
OTHER INFORMATION: Mr. Flowers is a director of Digisonix, Inc.; American Family
Mutual Insurance Company; Janesville Sand and Gravel Company; M&I Bank of
Southern Wisconsin; Meriter Health Services, Inc.; Meriter Hospital; the
Wisconsin History Foundation; and University Research Park. Mr. Flowers has
served as a director of WP&L from 1979 to 1990 and since 1994, and of IES and
IPC since the consummation of the Merger.
<TABLE>
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KATHARINE C.
LYALL
Principal Occupation: President, University of Wisconsin System,
Madison, Wisconsin.
Age: 56
[PHOTO]
Served as a director of the Company since 1994.
Annual Meeting at which current term of office will expire: 1999
</TABLE>
OTHER INFORMATION: Ms. Lyall has served as President of the University of
Wisconsin System since April 1992. Prior thereto, she served as Executive Vice
President of the University of Wisconsin System. 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;
Carnegie Foundation for Advancement of Teaching (President, Board of Trustees);
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. Ms. Lyall has served as a director of WP&L
since 1986, and of IES and IPC since the consummation of the Merger.
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MILTON E. NESHEK
Principal Occupation: Special Consultant to the Kikkoman Corporation,
Tokyo, Japan, and General Counsel, Secretary and Manager, New
Market Development, Kikkoman Foods, Inc. (a food products
manufacturer), Walworth, Wisconsin.
[PHOTO]
Age: 67
Served as a director of the Company since 1986.
Annual Meeting at which current term of office will expire: 2000
</TABLE>
OTHER INFORMATION: Mr. Neshek is 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 a member of 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 its
Executive and Finance Committee. Mr. Neshek is a member of the Wisconsin
International Trade Council (WITCO) and is Chairman of the WITCO International
Education Task Force. Mr. Neshek has served as a director of WP&L since 1984,
and of IES and IPC since the consummation of the Merger.
MEETINGS AND COMMITTEES OF THE BOARD
The Board of Directors of the Company has standing Audit, Compensation and
Personnel, and Nominating and Governance Committees. Information regarding each
of the committees is set forth below.
AUDIT COMMITTEE
As of January 1, 1997, the committee consisted of L. David Carley, R. G.
Flowers, Donald. R. Haldeman, and K. C. Lyall (Chair). Messrs. Carley and
Haldeman retired as directors upon consummation of the Merger. The committee
held two meetings in 1997. Since the effective date of the Merger, the committee
has consisted of J. L. Hanes (Chair), K. C. Lyall, M. E. Neshek, D. Q. Reed and
R. W. Schlutz. The committee recommends to the Board the appointment of
independent auditors; 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
As of January 1, 1997, the committee consisted of A. M. Nemirow (Chair), M.
E. Neshek, Henry. C. Prange, J. D. Pyle, and Carol T. Toussaint. Mr. Prange and
Mrs. Toussaint retired as directors upon consummation of the Merger. The
committee held two meetings in 1997. Since the effective date of the Merger, the
committee has consisted of A. M. Nemirow (Chair), A. B. Arends, J. R. Newman, J.
D. Pyle and A. R. Weiler. The committee sets executive compensation policy;
administers the Company's Long-Term Equity Incentive Plan; 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; reviews major provisions of negotiated employment contracts, if any; and
reviews human resource development programs.
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NOMINATING AND GOVERNANCE COMMITTEE
As of January 1, 1997, the committee consisted of L. D. Carley (Chair), R.
G. Flowers, K. C. Lyall, A. M. Nemirow, H. C. Prange, and J. D. Pyle. Messrs.
Carley and Prange retired as directors upon consummation of the Merger. The
committee held four meetings in 1997. Since the effective date of the Merger,
the committee has consisted of R. G. Flowers (Chair), A. B. Arends, J. D. Pyle,
R. D. Ray and A. R. Weiler. The committee's responsibilities include
recommending and nominating new members of the Board, recommending committee
assignments and committee chair persons, evaluating overall Board effectiveness,
preparing an annual report on CEO effectiveness, and considering and developing
recommendations to the Board of Directors on other corporate governance issues.
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 seven meetings during 1997. Only one director
(Mr. Nemirow) attended less than 75% of the aggregate number of meetings of the
Board and Board committees on which he 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, Mr. Liu and Mr. Stoppelmoor).
Non-management directors, each of whom serve on the Boards of the Company, WP&L,
IES, IPC and Alliant Industries, receive an annual retainer of $32,800 for
service on all five boards. Travel expenses are paid for each meeting day
attended. All non-management directors also receive a 25 percent Company
matching contribution in common stock for limited optional cash purchases, up to
$10,000, of the Company's common stock through the Company's Shareowner Direct
Plan. Matching contributions of $2,500 each for calendar year 1997 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 members of its 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 non-employee 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
9
<PAGE>
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--In connection with the Merger, the Company put in
place a Director Emeritus Program under which directors that retired from the
Board as a result of the Merger are paid the same annual retainer fee as
continuing directors for up to two years after they retire or until they reach
age 71, whichever occurs first. This program is intended to apply only to
directors who retired in connection with the Merger.
Director nominee Jack R. Newman serves as legal counsel to the Company on
nuclear issues. Mr. Newman's firm, Morgan, Lewis & Bockius has also provided
legal services to the Company related to the Merger.
10
<PAGE>
OWNERSHIP OF VOTING SECURITIES
Listed in the following table are the shares of the Company's common stock
owned by the executive officers listed in the Summary Compensation Table and all
directors of the Company, as well as the number of shares owned by directors and
officers as a group as of April 21, 1998. The directors and executive officers
of the Company as a group owned less than one percent of the outstanding shares
of common stock on that date. To the Company's knowledge, no shareowner
beneficially owned 5 percent or more of the Company's outstanding common stock
as of April 21, 1998.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY
NAME OF BENEFICIAL OWNER OWNED(1)
- ----------------------------------------------------------------------------------------------------- -----------
<S> <C>
Executives(2)
Lance W. Ahearn................................................................................... 29,358(3)
A. J. (Nino) Amato................................................................................ 5,810(4)(5)
Daniel A. Doyle................................................................................... 3,603(4)
William D. Harvey................................................................................. 14,767(4)
Eliot G. Protsch.................................................................................. 14,941(4)
Director Nominees
Alan B. Arends.................................................................................... 1,100
Joyce L. Hanes.................................................................................... 1,868(4)
Lee Liu........................................................................................... 56,617(4)
Arnold M. Nemirow................................................................................. 9,567
Jack R. Newman.................................................................................... 1,482
Judith D. Pyle.................................................................................... 6,100
Robert D. Ray..................................................................................... 3,193
David Q. Reed..................................................................................... 6,044(4)
Robert W. Schlutz................................................................................. 3,633
Wayne H. Stoppelmoor.............................................................................. 6,075
Anthony R. Weiler................................................................................. 4,603(4)
Continuing Directors
Erroll B. Davis, Jr............................................................................... 33,703(4)
Rockne G. Flowers................................................................................. 9,819
Katharine C. Lyall................................................................................ 7,194
Milton E. Neshek.................................................................................. 12,195
All Executives and Directors as a Group
33 people, including those listed above........................................................... 312,257
</TABLE>
- ---------
(1) Total shares of Company common stock outstanding as of April 21, 1998 were
76,780,996.
(2) Stock ownership of Mr. Davis is shown with continuing directors.
(3) Mr. Ahearn resigned in November 1997.
(4) Included in the beneficially owned shares shown are: Indirect ownership
interests with shared voting and investment powers: Mr. Amato--1,032, Mr.
Harvey--1,828, Mr. Protsch--552, Mr. Davis--5,603, Ms. Hanes--425, Mr.
Liu--9,755, Mr. Reed--353 and Mr. Weiler--1,037; and Excercisable stock
options: Mr. Davis--13,100, Mr. Harvey--4,700, Mr. Protsch--4,700, Mr.
Amato--3,650 and Mr. Doyle--2,900 (all directors and executive officers as a
group--39,200).
(5) Mr. Amato left the Company following the effective date of the Merger.
11
<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 1997,
1996, and 1995 to the Chief Executive Officer and the five other most highly
compensated executive officers of the Company or its subsidiaries who performed
policy making functions for the Company.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
---------------------------------------- -------------
OTHER OPTIONS/
NAME AND ANNUAL SARS ALL OTHER
PRINCIPAL POSITION YEAR SALARY(1) BONUS(2) COMPENSATION(3) (SHARES)(4) COMPENSATION(5)
- ------------------------------ --------- ---------- ---------- ---------------- ------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Erroll B. Davis, Jr. ......... 1997 $ 450,000 $ 200,800 $ 19,982 13,800 $ 60,261
President and CEO 1996 450,000 297,862 23,438 12,600 66,711
1995 426,038 125,496 18,963 13,100 61,513
William D. Harvey ............ 1997 220,000 43,986 14,944 5,100 33,043
Senior Vice President-- 1996 220,000 92,104 10,765 4,650 29,343
WP&L 1995 203,846 47,340 5,746 4,700 23,534
Eliot G. Protsch ............. 1997 220,000 51,400 11,444 5,100 30,057
Senior Vice President-- 1996 220,000 101,224 7,657 4,650 25,890
WP&L 1995 200,000 47,520 4,169 4,700 20,178
A. J. (Nino) Amato(6) ........ 1997 168,846 25,262 13,775 3,900 27,809
Senior Vice President-- 1996 168,846 65,920 9,346 3,550 22,723
WP&L 1995 156,804 40,046 5,144 3,650 18,059
Daniel A. Doyle .............. 1997 165,400 20,139 7,087 3,250 17,811
Vice President--Power 1996 149,150 46,865 3,053 2,800 12,180
Production--WP&L 1995 140,399 32,465 3,090 2,900 11,155
Lance W. Ahearn(7) ........... 1997 186,011 70,458 106,340 -- 791,727
1996 205,000 59,860 6,180 -- 35,147
1995 195,000 34,125 3,814 -- 29,663
</TABLE>
- ---------
(1) Includes vacation days sold back to the Company, if any.
(2) Bonuses include special bonuses for merger related work of: Mr.
Davis--$100,000, Mr. Harvey-- $25,000, Mr. Protsch--$25,000, Mr.
Amato--$5,000 and Mr. Doyle--$10,000. The bonus for Mr. Ahearn for 1997
includes a tax reimbursement bonus related to tax on proceeds from Alliant
Industries restricted stock redeemed during 1997.
(3) Other Annual Compensation for 1997 consists of: Income tax gross-ups for
reverse split-dollar life insurance: Mr. Davis--$13,526, Mr. Harvey--$5,567,
Mr. Protsch--$2,866, Mr. Ahearn--$3,476, Mr. Amato--$4,732 and Mr.
Doyle--$3,164; Income tax gross-ups on financial counseling benefit: Mr.
Davis--$6,456, Mr. Harvey--$9,377, Mr. Protsch--$8,578, Mr. Ahearn--$4,096,
Mr. Amato-- $9,043 and Mr. Doyle--$3,923; and Income tax gross-ups for
redemption of Alliant Industries stock: Mr. Ahearn--$98,768.
12
<PAGE>
(4) Awards made in 1997 were in combination with contingent dividend awards as
described in the table entitled "Long-Term Incentive Awards in 1997".
(5) All Other Compensation for 1997 consists of: matching contributions to
401(k) plan, Mr. Davis-- $13,500, Mr. Harvey--$6,600, Mr. Protsch--$6,600,
Mr. Ahearn--$4,750, Mr. Amato--$4,100 and Mr. Doyle--$4,962; Financial
counseling benefit, Mr. Davis--$7,000, Mr. Harvey--$10,167, Mr.
Protsch--$10,750, Mr. Ahearn--$11,333, Mr. Amato--$11,333 and Mr.
Doyle--$4,917; Split dollar life insurance premiums, Mr. Davis--$25,096, Mr.
Harvey--$10,241, Mr. Protsch--$9,116, Mr. Amato--$6,446 and Mr.
Doyle--$3,967; Reverse split dollar life insurance, Mr. Davis--$14,665, Mr.
Harvey--$6,035, Mr. Protsch--$3,591, Mr. Ahearn--$6,744, Mr. Amato--$5,930
and Mr. Doyle--$3,965; Severance payments pursuant to severance agreements:
Mr. Ahearn--$768,900. The split dollar insurance premiums are calculated
using the "foregone interest" method.
(6) Mr. Amato left the Company following the effective date of the Merger.
(7) Mr. Ahearn resigned as President and Chief Executive Officer of Alliant
Industries in November 1997.
13
<PAGE>
PRO-FORMA EXECUTIVE COMPENSATION INFORMATION
The following sets forth pro-forma compensation information as though the
Merger had been consummated on January 1, 1997. The compensation reflected in
the table was paid by the Company and IES Industries, as the case may be.
PRO-FORMA
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
ANNUAL COMPENSATION AWARDS
---------------------------------------- -----------------------
OTHER OPTIONS/ RESTRICTED
NAME AND ANNUAL SARS STOCK ALL OTHER
PRINCIPAL POSITION YEAR SALARY(1) BONUS(2) COMPENSATION(3) (SHARES)(4) AWARDS(5) COMPENSATION(6)
- ------------------------------- --------- ---------- ---------- ---------------- ----------- ---------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Erroll B. Davis, Jr. .......... 1997 $ 450,000 $ 200,800 $ 19,982 13,800 $ -- $ 60,261
President and CEO of 1996 450,000 297,862 23,438 12,600 -- 66,711
the Company 1995 426,038 125,496 18,963 13,100 -- 61,513
Lee Liu ....................... 1997 400,000 189,000 5,956 -- 176,391 13,277
Chairman of the Board 1996 380,000 175,000 2,578 -- 253,475 13,956
and CEO--IES 1995 340,000 142,800 1,588 -- 176,745 13,507
Industries
Larry D. Root ................. 1997 336,000 -- 1,164 -- -- --
President and Chief 1996 50,909 -- 813 -- -- 252,000
Operating Officer--IES 1995 220,822 62,606 566 -- -- 208,038
Industries
James E. Hoffman .............. 1997 232,200 62,694 -- -- 35,462 847
Executive Vice President-- 1996 226,467 58,050 -- -- 101,879 823
IES Industries 1995 89,583 206,500 51,523 -- 143,125 324
Thomas M. Walker .............. 1997 230,000 62,100 38,138 -- -- 2,367
Executive Vice President 1996 9,583 -- -- -- 30,000 119
and CFO--IES
Industries
</TABLE>
- ---------
(1) Includes vacation days sold back to the Company, if any.
(2) The bonus for Mr. Davis includes a special bonus for merger related work of
$100,000. The bonuses for Mr. Liu, Mr. Hoffman and Mr. Walker represent plan
year awards from the IES Industries Management Incentive Compensation Plan.
The amount reported as bonus for Mr. Hoffman in 1995 also includes a
one-time payment of $185,000 when he commenced employment with IES
Industries.
(3) Other Annual Compensation for 1997 consists of: Income tax gross-ups for
reverse split-dollar life insurance: Mr. Davis--$13,526; Income tax
gross-ups on financial counseling benefit: Mr. Davis-- $6,456; Earnings from
the IES Utilities Key Employee Deferred Compensation Plan in excess of 120%
of the applicable federal long-term rate provided under Section 1274(d) of
the Internal Revenue Code: Mr. Liu--$5,956 and Mr. Root--$1,164; Relocation
expense reimbursement: Mr. Walker--$38,138. Also included in 1995 are
relocation expense reimbursements for Mr. Hoffman of $51,523.
14
<PAGE>
(4) Awards for Mr. Davis made in 1997 were in combination with contingent
dividend awards as described in the table entitled "Long-Term Incentive
Awards in 1997".
(5) Awards of IES Industries restricted stock had been made by IES Industries
since June 1, 1988, with one-third of each year's award being restricted for
one year, one-third being restricted for two years, and one-third being
restricted for three years. The shares of restricted stock reflected in this
table subject to such three-year vesting schedule are as follows: Mr.
Liu--5,004 shares awarded for 1997, 8,703 shares awarded for 1996, and 6,171
shares awarded for 1995; Mr. Hoffman--1,006 shares awarded for 1997, 3,498
shares awarded for 1996 and 5,000 shares awarded for 1995; Mr. Walker--
1,000 shares awarded for 1996. Restricted stock is considered outstanding
upon award date and dividends are paid to the eligible officers on these
shares while restricted. The amounts shown in the table above represent the
value of the awards based upon closing price of IES Industries common stock
on the award date. The award date was usually in the calendar year following
the plan year. At December 31, 1997, the following listed officers of IES
Industries had restricted stock for which restrictions had not lapsed as
follows (values based on December 31, 1997 closing price for IES Industries
common stock): Mr. Liu--20,592 shares valued at $758,043; Mr. Hoffman--7,838
valued at $288,536; Mr. Walker--667 shares valued at $24,554. All of the
restricted shares award by IES Industries vested upon consummation of the
Merger.
(6) All Other Compensation for 1997 consists of: matching contributions to
401(k) plan, Mr. Davis-- $13,500 and Mr. Liu--$3,800; Financial counseling
benefit, Mr. Davis--$7,000; Split dollar life insurance premiums, Mr.
Davis--$25,096; Reverse split dollar life insurance, Mr. Davis--$14,665;
Life insurance coverage in excess of $50,000: Mr. Liu--$9,477, Mr.
Hoffman--$847 and Mr. Walker-- $2,367. The split dollar insurance premiums
are calculated using the "foregone interest" method. The
1996 amount for Mr. Root includes consulting fees of $249,989. The 1995
amount for Mr. Root includes severance costs of $200,660.
15
<PAGE>
STOCK OPTIONS
The following table sets forth certain information concerning options
granted during 1997 to the executives named below:
OPTION/SAR GRANTS IN 1997
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
---------------------------------------------------------- VALUE AT ASSUMED
NUMBER OF % OF TOTAL ANNUAL RATES OF STOCK
SECURITIES OPTIONS/SAR APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM(2)
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION ----------------------
NAME GRANTED(1) FISCAL YEAR ($/SHARE) DATE 5% 10%
- ---------------------------------- ------------- ----------------- ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Erroll B. Davis, Jr............... 13,800 17 % $ 28.00 1/2/07 $ 243,018 $ 615,814
William D. Harvey................. 5,100 6 % 28.00 1/2/07 89,811 227,613
Eliot G. Protsch.................. 5,100 6 % 28.00 1/2/07 89,811 227,613
A. J. (Nino) Amato................ 3,900 5 % 28.00 1/2/07 68,679 174,057
Daniel A. Doyle................... 3,250 4 % 28.00 1/2/07 57,233 145,048
Lance W. Ahearn................... NA NA NA NA NA NA
</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.
Options were granted on January 2, 1997, and will fully vest on January 2,
2000. These options were granted with an equal number of contingent dividend
awards as described in the table entitled "Long-Term Incentive Awards in
1997" and have exercise prices equal to the fair market value of Company
shares on the date of grant. Upon a "change in control" of the Company as
defined in the 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 Securities and Exchange Commission ("SEC") rules. The
amounts shown do not represent either the historical or expected future
performance of the Company's 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 $45.61 and $72.65, respectively, as of the expiration date of
the options.
16
<PAGE>
The following table provides information for the executives named below
regarding the number and value of unexercised options. No options were
exercisable during 1997.
OPTION/SAR VALUES AT DECEMBER 31, 1997
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS/SARS AT IN-THE-MONEY OPTIONS/SARS AT
FISCAL YEAR END FISCAL YEAR END(1)
------------------------------ ------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------------------------------------------- --------------- ------------- --------------- -------------
<S> <C> <C> <C> <C>
Erroll B. Davis, Jr...................................... 0 39,500 0 $ 174,338
William D. Harvey........................................ 0 14,450 0 63,620
Eliot G. Protsch......................................... 0 14,450 0 63,620
A. J. (Nino) Amato....................................... 0 11,000 0 48,950
Daniel A. Doyle.......................................... 0 8,950 0 39,619
Lance W. Ahearn.......................................... NA NA NA NA
</TABLE>
- ---------
(1) Based on the closing per share price on December 31, 1997 of Company common
stock of $33.125.
LONG-TERM INCENTIVE AWARDS--The following table provides information
concerning long-term incentive awards made to the executives named below in
1997.
LONG-TERM INCENTIVE AWARDS IN 1997
<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUTS UNDER
NON-STOCK
NUMBER OF PERFORMANCE OR PRICE-BASED PLANS(2)
SHARES, UNITS OTHER PERIOD ----------------------------------
OR OTHER RIGHTS UNTIL MATURATION THRESHOLD TARGET MAXIMUM
NAME (#)(1) OR PAYOUT ($) ($) ($)
- -------------------------------------------- --------------- ---------------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C>
Erroll B. Davis, Jr......................... 13,800 1/2/00 66,240 82,800 144,900
William D. Harvey........................... 5,100 1/2/00 24,480 30,600 53,550
Eliot G. Protsch............................ 5,100 1/2/00 24,480 30,600 53,550
A. J. (Nino) Amato.......................... 3,900 1/2/00 18,720 23,400 40,950
Daniel A. Doyle............................. 3,250 1/2/00 15,600 19,500 34,125
Lance W. Ahearn............................. NA NA NA NA NA
</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 1997"). These Performance Units are entirely
in the form of contingent dividends and will be paid if total shareowner
return over a three-year period ending January 2, 2000 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 shall receive an amount equal to the accumulated dividends paid
on one share of Company common stock during the period of January 2, 1997
through December 31, 2000 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 $2.00 per share annual
dividend on shares of common stock for 1998 and 1999.
17
<PAGE>
AGREEMENTS AND TRANSACTIONS WITH EXECUTIVES
In connection with the Merger, Messrs. Liu and Davis entered into new
employment agreements with the Company. Pursuant to Mr. Liu's agreement, Mr. Liu
will serve as Chairman of the Company until the second anniversary of the
effective time of the Merger. Mr. Liu will thereafter retire as an officer of
the Company, although he may continue to serve as a director. Under Mr. Davis's
agreement, Mr. Davis will serve as the Chief Executive Officer of the Company
until at least the fifth anniversary of the effective time of the Merger. Mr.
Davis will also serve as the Chairman of the Company following the second
anniversary of the Merger. Following the expiration of the initial term of Mr.
Davis's employment agreement, his agreement will automatically renew for
successive one-year terms, unless either Mr. Davis or the Company gives prior
written notice of his or its intent to terminate the agreement. Mr. Davis will
also serve as Chief Executive Officer of each subsidiary of the Company until at
least the third anniversary of the effective time of the Merger and as a
director of such companies during the term of his employment agreement.
Mr. Liu's employment agreement provides that he receive an annual base
salary of not less than $400,000, and supplemental retirement benefits and the
opportunity to earn short-term and long-term incentive compensation (including
stock options, restricted stock and other long-term incentive compensation) in
amounts no less than he was eligible to receive from IES Industries before the
effective time of the Merger. Pursuant to Mr. Davis's employment agreement, he
is paid an annual base salary of not less than $450,000. Mr. Davis also has the
opportunity to earn short-term and long-term incentive compensation (including
stock options, restricted stock and other long-term incentive compensation) in
amounts no less than he was eligible to receive before the effective time of the
Merger, as well as supplemental retirement benefits (including continued
participation in the WP&L Executive Tenure Compensation Plan) in an amount no
less than he was eligible to receive before the effective time of the Merger,
and life insurance providing a death benefit of three times his annual salary.
If the employment of either Mr. Liu or Mr. Davis is terminated without cause
(as defined in their respective employment agreements) or if either of them
terminates his employment for good reason (as defined in their respective
employment agreements), the Company or its affiliates will continue to provide
the compensation and benefits called for by the respective employment agreement
through the end of the term of such employment agreement (with incentive
compensation based on the maximum potential awards and with any stock
compensation paid in cash), and all unvested stock compensation will vest
immediately. If either Mr. Liu or Mr. Davis dies or becomes disabled, or
terminates his employment without good reason, during the term of his respective
employment agreement, the Company or its affiliates will pay to the officer or
his beneficiaries or estate all compensation earned through the date of death,
disability or such termination (including previously deferred compensation and
pro rata incentive compensation based upon the maximum potential awards). If the
officer is terminated for cause, the Company or its affiliates will pay his base
salary through the date of termination plus any previously deferred
compensation. Notwithstanding the foregoing, in the event that any payments to
an officer under his employment agreement or otherwise are subject to the excise
tax on excess parachute payments under the Internal Revenue Code (the "Code"),
then the total payments to be made under the employment agreement will be
reduced so that the value of these payments the officer is entitled to receive
is $1 less than the amount that would subject the officer 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 Company also has key executive employment and severance agreements
("KEESAs") with Mr. Davis and with certain other executive officers of the
Company and its subsidiaries, including Messrs. Harvey, Protsch, Amato and
Doyle. The KEESAs provide that each executive officer that is a party thereto is
entitled to benefits if, within five years after a change in control of the
Company (as defined in
18
<PAGE>
the KEESAs), 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 KEESAs), 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's agreement, termination by Mr. Davis following
the first anniversary of the change of control. The consummation of the Merger
was deemed to constitute a change in control of the Company for purposes of the
KEESAs. 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 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. Each KEESA provides that if any portion of the
benefits under the KEESA or under any other agreement for the officer would
constitute an excess payment for purposes of the 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. Mr. Davis's employment agreement as described above
limits benefits paid thereunder to the extent that duplicate payments would be
provided to him under his KEESA. In connection with the termination of his
employment and pursuant to a letter agreement with the Company, Mr. Amato
received benefits totaling $614,771 under his KEESA.
IES Industries also had an executive change of control severance agreement
with Mr. Hoffman that was assumed by the Company in connection with the Merger.
Mr. Hoffman's agreement provides for salary continuation and certain other
benefits in the event he is terminated within a three-year period following a
change in control of IES Industries. The consummation of the Merger constituted
a change in control of IES Industries for purposes of Mr. Hoffman's agreement.
Mr. Hoffman's severance agreement provides that, in the event of his termination
during the three-year period following the effective time of the Merger other
than for just cause, death, retirement, disability or voluntary resignation
(excluding resignation for good reason), his salary (at its then current level)
will be continued for a period of 18 months. Additionally, Mr. Hoffman will be
entitled to certain benefits during the severance period, including life and
health insurance, and he would receive annual incentive award payments equal to
the average annual incentive awards paid to executives of the same or comparable
designation during the three years prior to the change in control. In the event
Mr. Hoffman should die during the severance period, the salary and benefits
payments described above would be payable during the remainder of the term to
his surviving spouse or his estate. Mr. Hoffman would also become immediately
vested in any stock option or comparable award granted to him.
In connection with the termination of his employment on November 21, 1997,
the Company entered into a severance agreement with Mr. Ahearn. Pursuant to this
agreement, Mr. Ahearn received a severance payment of $768,900 and a pro-rated
bonus of $70,458. In addition, Mr. Ahearn will receive in three annual
installments commencing January 1998 payments aggregating $204,190. In
consideration for these payments, Mr. Ahearn provided the Company with a general
release of claims, agreed to maintain the confidentiality of certain information
and entered into a one-year covenant not-to-compete.
During 1997, in connection with a Restricted Stock Agreement entered into in
1991 with the Company and Alliant Industries, Mr. Ahearn converted 0.51 shares
of Alliant Industries stock into 7,104 shares of Company common stock and
redeemed his remaining 1.02 shares of Alliant Industries stock for $421,553 per
share. The conversion and redemption amounts were based on third-party
appraisals of Alliant Industries stock. Similarly, during 1997, Mr. Davis
converted 0.5567 shares of Alliant Industries stock into 7,754 shares of Company
common stock and redeemed his remaining 1.1133 shares of Alliant Industries
19
<PAGE>
stock for $421,553 per share. The proceeds of the redemption to Mr. Davis were
used, in part, to repay $315,257 of principal and interest on loans made by the
Company to Mr. Davis for taxes withheld in connection with the vesting of his
Alliant Industries stock. Mr. Davis was charged interest on these loans at the
prime rate.
Alliant Industries also has a consulting agreement with Mr. Root that became
effective upon consummation of the Merger and Mr. Root's retirement. The
consulting agreement provides that Mr. Root be paid $1,500 and $2,000 per day
for consulting services performed in the United States and outside the United
States, respectively. In addition, in connection with an early retirement
agreement entered into with IES in 1995, Mr. Root, in addition to other
retirement benefits he is entitled to as a retired officer, receives, as an
unfunded supplemental pension benefit, $11,306.11 per month for a period of
fifteen years. If Mr. Root dies before receiving payments for ten years, then
his surviving spouse and children will receive such payments up to the end of
such ten-year period. In such a case, payments beyond ten years will be
forfeited. The Company is also obligated to pay, within three months of Mr.
Root's death, a death benefit of $200,660 to his beneficiaries.
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. During his employment,
Mr. Ahearn was not eligible to participate in the plan. All eligible persons
whose compensation is reported in the foregoing Summary Compensation Table
participated in the plan during 1997. 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.,
18 years; Eliot G. Protsch, 18 years; A. J. (Nino) Amato, 11 years; Daniel A.
Doyle, 5 years; and William D. Harvey, 10 years. Assuming retirement at age 65,
a Retirement Plan participant (in
20
<PAGE>
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.................................... $ 10,132 $ 20,265 $ 30,397 $ 40,529 $ 50,662 $ 60,794
150,000.................................... 12,424 24,848 37,272 49,696 62,120 74,544
200,000.................................... 17,007 34,015 51,022 68,029 85,037 102,044
250,000.................................... 21,591 43,181 64,772 86,363 107,953 129,544
300,000.................................... 26,174 52,348 78,522 104,696 130,870 157,044
350,000.................................... 30,757 61,515 92,272 123,029 153,787 184,544
400,000.................................... 35,341 70,681 106,022 141,363 176,703 212,044
450,000.................................... 39,924 79,848 119,772 159,696 199,620 239,544
475,000.................................... 42,216 84,431 126,647 168,863 211,078 253,294
500,000.................................... 44,507 89,015 133,722 178,029 222,537 267,044
525,000.................................... 46,799 93,598 140,397 187,196 233,995 280,794
550,000.................................... 49,091 98,181 147,272 196,363 245,453 294,544
</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, $150,000 for 1996 and
$160,000 for 1997) under the 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 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.
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). In the case of the Chief
Executive Officer only, in the event that the Chief Executive Officer (1) is
terminated under his employment agreement with the Company as described above
(the "Employment Agreement") other than for cause, death or disability (as those
terms are defined in the Employment Agreement), (2) terminates his employment
under the Employment Agreement for good reason (as such term is defined in the
Employment Agreement), or (3) is terminated as a result of a failure of the
Employment Agreement to be renewed automatically
21
<PAGE>
pursuant to its terms (regardless of the reason for such non-renewal), then for
purposes of the plan, the Chief Executive Officer shall be deemed to have
retired at age 65 and shall be entitled to benefits under the plan. 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, 1997. 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, 1997.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN--The Company maintains an unfunded
Supplemental Executive Retirement 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, disability or
death. Participants in the plan must be approved by the Compensation and
Personnel Committee of the Board. The plan provides for payments of 60% of the
participant's average annual earnings (base salary and bonus) for the highest
paid three years out of the last ten years of the participant's employment. The
normal retirement date under the plan is age 65 or the date the participant has
completed 10 years of employment, whichever is later. If a participant retires
prior to age 62, the 60% payment under the plan is reduced by 3% per year for
each year the participant's retirement date precedes his/her normal retirement
date. Benefit payments under the plan will be made for a maximum of 18 years,
with a minimum of 12 years of payments if the participant dies after retirement.
Messrs. Davis, Harvey, Protsch, and Doyle are participants in this plan. The
following table shows payments under the plan, assuming a minimum of 10 years of
service at retirement age.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN TABLE
<TABLE>
<CAPTION>
GREATER
LESS THAN 10 THAN 10
AVERAGE COMPENSATION YEARS YEARS
- ------------------------------------------------------------------------------------------ --------------- ----------
<S> <C> <C>
$125,000.................................................................................. $ 0 $ 75,000
150,000.................................................................................. 0 90,000
200,000.................................................................................. 0 120,000
250,000.................................................................................. 0 150,000
300,000.................................................................................. 0 180,000
350,000.................................................................................. 0 210,000
400,000.................................................................................. 0 240,000
450,000.................................................................................. 0 270,000
500,000.................................................................................. 0 300,000
550,000.................................................................................. 0 330,000
</TABLE>
KEY EMPLOYEE DEFERRED COMPENSATION PLAN--The Company maintains an unfunded
Key Employee Deferred Compensation Plan under which participants may defer up to
100% of base salary or incentive compensation. The Company matches up to 50% of
the employee deferral (plus 401(k) contributions up to 6% of pay, less 401(k)
matching contributions). The deferrals and matching contributions receive an
annual return equal to the A-utility bond rate with a minimum return no less
than the prime interest rate
22
<PAGE>
published in the Wall Street Journal. Payments from the plan may be made in lump
sums or installments at the election of the participant. Participants are
selected by the CEO of Alliant Services Company. Messrs. Davis, Harvey, Protsch
and Doyle participate in this plan.
ALLIANT SERVICES RETIREMENT PLANS
IES UTILITIES PENSION PLAN: Prior to the completion of the Merger, IES
Industries, IES and the Cedar Rapids and Iowa City Railway Company ("CRANDIC")
(a current subsidiary of Alliant Industries) maintained certain retirement and
employee benefit plans for eligible employees. Upon completion of the Merger,
IES Industries' interest in these plans was transferred to Alliant Services
Company ("Alliant Services")(a wholly-owned subsidiary of the Company). Alliant
Services, IES and CRANDIC now maintain non-contributory retirement plans
covering employees who have at least one year of accredited service and who have
elected to remain under these plans following the Merger. Mr. Liu participates
in this plan. Maximum annual benefits payable at age 65 to participants who
retire at age 65, calculated on the basis of straight life annuity, are
illustrated in the following table:
ALLIANT SERVICES PENSION PLAN TABLE
<TABLE>
<CAPTION>
ESTIMATED MAXIMUM ANNUAL RETIREMENT BENEFITS BASED ON
AVERAGE OF HIGHEST ANNUAL SALARY SERVICE YEARS OF SERVICE
(REMUNERATION) FOR 3 CONSECUTIVE ------------------------------------------------------
YEARS OF THE LAST 10 15 20 25 30 35
- ---------------------------------------------------------- --------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
$125,000.................................................. $ 26,869 $ 35,828 $ 44,784 $ 53,741 $ 62,697
150,000.................................................. 32,683 43,576 54,471 65,366 76,259
175,000.................................................. 35,913 48,282 60,650 73,019 85,388
200,000.................................................. 40,038 54,282 68,525 82,769 97,013
225,000.................................................. 44,163 60,282 76,400 92,519 108,638
250,000.................................................. 44,818 61,235 77,652 94,068 110,485
300,000.................................................. 44,818 61,235 77,652 94,068 110,485
400,000.................................................. 44,818 61,235 77,652 94,068 110,485
450,000.................................................. 44,818 61,235 77,652 94,068 110,485
500,000.................................................. 44,818 61,235 77,652 94,068 110,485
</TABLE>
For 1997, $125,000 was the maximum benefits allowable under the retirement
plans prescribed by Section 415 of the Code.
With respect to Mr. Liu, the remuneration for retirement plan purposes would
be substantially the same as that shown as "Salary" in the Pro-Forma Summary
Compensation Table. As of December 31, 1997, Mr. Liu had 40 accredited years of
service under the retirement plan.
ALLIANT SERVICES SUPPLEMENTAL RETIREMENT PLANS: Alliant Services maintains
a non-qualified Supplemental Retirement Plan (SRP) for eligible former officers
of IES Industries who have elected to remain under this plan following the
Merger. Mr. Liu is the only executive named in the Pro-Forma Summary
Compensation Table participating in the SRP. The SRP currently provides for
payment of supplemental retirement benefits equal to 75% of the officer's base
salary in effect at the date of retirement, reduced by benefits receivable under
the qualified retirement plan, for a period not to exceed 15 years following the
date of retirement. In the event of the death of the officer following
retirement, similar payments reduced by the joint and survivor annuity of the
qualified retirement plan will be made to his or her designated beneficiary
(surviving spouse or dependent children), if any, for a period not to exceed 10
years from the date of the officer's retirement. Thus, if an officer died 10
years after retirement, no payment to the
23
<PAGE>
beneficiary would be made. Death benefits are provided on the same basis to a
designated beneficiary for a period not to exceed 10 years from the date of
death should the officer die prior to retirement. The SRP further provides that
if, at the time of the death of an officer, the officer is entitled to receive,
is receiving, or has received supplemental retirement benefits by virtue of
having taken retirement, a death benefit shall be paid to the officer's
designated beneficiary or to the officer's estate in an amount equal to 100% of
the officer's annual salary in effect at the date of retirement. Under certain
circumstances, an officer who takes early retirement will be entitled to reduced
benefits under the SRP. The SRP also provides for benefits in the event an
officer becomes disabled under the terms of the qualified retirement plan. Life
insurance policies on the participants have been purchased sufficient in amount
to finance actuarially all future liabilities under the SRP. The SRP has been
designed so that if the assumptions made as to mortality, experience, policy
dividends, tax credits and other factors are realized, all life insurance
premium payments will be recovered over the life of the SRP.
The following table shows the estimated annual benefits payable under the
Supplemental Retirement Plan equal to 75% of the officer's base salary in effect
at the date of retirement:
ALLIANT SERVICES COMPANY
SUPPLEMENTAL RETIREMENT PLAN PAYMENTS
75% SRP BENEFIT
<TABLE>
<CAPTION>
YEARS OF SERVICE
----------------------------------------------------------
ANNUAL SALARY 15 20 25 30 35
- ----------------------------------------------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
$125,000............................................. $ 66,881 $ 57,922 $ 48,966 $ 40,009 $ 31,053
150,000............................................. 79,817 68,924 58,029 47,134 36,241
175,000............................................. 95,337 82,968 70,600 58,231 45,862
200,000............................................. 109,962 95,718 81,475 67,231 52,987
225,000............................................. 124,587 108,468 92,350 76,231 60,112
250,000............................................. 142,682 126,265 109,848 93,432 77,015
300,000............................................. 180,182 163,765 147,348 130,932 114,515
400,000............................................. 255,182 238,765 222,348 205,932 189,515
450,000............................................. 292,682 276,265 259,848 243,432 227,015
500,000............................................. 330,182 313,765 297,348 280,932 264,515
</TABLE>
24
<PAGE>
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 is comprised of five independent,
non-employee 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,
an independent consultant is engaged to provide assistance to the Committee.
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. Specifically, the Committee targets
the median (50th percentile) of equally weighted data from utility and
general industry 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. In addition, incentive levels will be targeted at the
median (50th percentile) of equally weighted data from utility and general
industry companies.
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
non-regulated operations, comparison groups are customized to the respective
position which an 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 non-regulated 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 non-regulated businesses, comparison group data reflect
the relevant mix of the non-regulated business operations.
The Committee has 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.
25
<PAGE>
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. Base pay adjustments are
tied to market changes in appropriate salary levels and will minimize
across-the-board increases. During 1997, 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 1998. 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 during 1997 to executive officers follows.
WISCONSIN POWER AND LIGHT COMPANY MANAGEMENT INCENTIVE PLAN--The WP&L
Management Incentive Plan (the "WP&L MIP") covered utility executives and in
1997 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
above-average performance from each of the executives. 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. 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. In 1997 there was no payout for
performance against the corporate targets. Executives received awards under the
WP&L MIP for achievements against individual performance goals. Awards for 1997
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 Heartland Development Corporation ("HDC") (renamed
Alliant Industries following the Merger) were covered during 1997 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
26
<PAGE>
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 consisted 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 48 percent of its allowable maximum in 1997. Mr. Ahearn's award for
1997 under the HDC MIP is set forth in the Summary Compensation Table.
MANAGEMENT INCENTIVE PLAN--In 1997, Mr. Davis was covered by the Company's
Management Incentive Plan (the "Company MIP"). Awards under the Company MIP in
1997 were based on WP&L, HDC and individual performance achievement in relation
to predetermined goals. For each Plan year, the Committee determines the
performance apportionment for Mr. Davis. In 1997 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 1997 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 1997 Company 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 1997, the Company MIP provided a payment to Mr. Davis as a
result of the HDC financial performance component, and for achievement of the
personal goals established by the Committee. For 1997 performance, Mr. Davis'
annual bonus payment represented 22 percent of his base salary, as reflected in
the Summary Compensation Table. Under the Company MIP, Mr. Davis was awarded
$100,800 solely in connection with 1997 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. In this regard, the Long-Term Equity Incentive Plan allows for
grants of stock options, restricted stock, and performance 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 1997 the Committee made a grant
of stock options and performance units to Messrs Davis, Amato, Doyle, Protsch
and Harvey. All option grants were made at the fair market value of Company
common stock on the date the grants were approved (January 2, 1997). 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
27
<PAGE>
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 1997.
SPECIAL BONUS PAYOUT
During 1997, Company executives devoted considerable time and effort toward
the completion of the Merger. 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 $100,000 for Mr. Davis, $25,000 for Mr. Protsch, $25,000 for Mr.
Harvey, $10,000 for Mr. Doyle 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
by the Company under Section 162(m).
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)
Alan B. Arends
Jack R. Newman
Judith D. Pyle
Anthony R. Weiler
28
<PAGE>
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
Rules of the Securities and Exchange Commission ("SEC") 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, 1992, with like
returns for the S&P 500 and S&P Utilities indices. Pursuant to SEC rules, the
table reflects only information regarding the common stock of the Company
(formally known as WPL Holdings, Inc.).
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
CUMULATIVE TOTAL SHAREHOLDER RETURN
<S> <C> <C> <C>
Interstate Energy Corporation (formerly WPL Holdings,
Inc.)
IEC S&P Utilities Index S&P 500 Index
1992 $100.00 $100.00 $100.00
1993 102.48 114.44 110.08
1994 91.04 105.35 111.53
1995 108.82 149.63 153.45
1996 106.68 154.30 188.68
1997 134.86 192.34 251.63
Years
</TABLE>
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C> <C>
IEC $ 100.00 $ 102.48 $ 91.04 $ 108.82 $ 106.68 $ 134.86
S&P Utilities Index $ 100.00 $ 114.44 $ 105.35 $ 149.63 $ 154.30 $ 192.34
S&P 500 Index $ 100.00 $ 110.08 $ 111.53 $ 153.45 $ 188.68 $ 251.63
</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
subsidiary preferred stock and any changes in that ownership to the Securities
and Exchange Commission and the New York Stock Exchange. To the best of the
Company's knowledge, all required filings in 1997 were properly made in a timely
fashion. In making
29
<PAGE>
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.
GENERAL
VOTING--The outstanding voting securities of the Company on the record date
stated below consisted of 76,781,996 shares of common stock. Only shareowners of
the Company of record on its books at the close of business on May 11, 1998 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 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 1999 Annual
Meeting of Shareowners must be received at the principal office of the Company
no later than January 21, 1999, 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 1998. Arthur Andersen LLP acted as
independent auditors for the Company in 1997. 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.
By Order of the Board of Directors
[SIG]
EDWARD M. GLEASON
VICE PRESIDENT-TREASURER
AND CORPORATE SECRETARY
30
<PAGE>
INTERSTATE ENERGY CORPORATION
ANNUAL MEETING OF SHAREOWNERS ON JUNE 24, 1998
The undersigned appoints Lee Liu and Edward M. Gleason, or either of them,
attorneys and proxies, with the power of substitution to vote all shares of
stock of Interstate Energy Corporation held of record in the name of the
undersigned (including any shares held or credited to the undersigned's account
under the Company's Shareowner Direct Plan and ISU Employee Stock Ownership
Plan) at the close of business on May 11, 1998, at the 1998 Annual Meeting of
Shareowners to be held at the Collins Plaza Hotel and Convention Center, 1200
Collins Road NE, Cedar Rapids, Iowa, on June 24, 1998 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 May 22, 1998 and accompanying Proxy Statement, subject to any
directions on the reverse side of this card.
Dated:__________________________ , 1998
_______________________________________
Signature
_______________________________________
Signature
Please sign exactly as name appears
hereon. When signing as attorney,
executor, administrator, trustee,
guardian, etc., give full title as
such. In the case of JOINT HOLDERS,
all should sign.
PLEASE FOLD AND DETACH CARD AT PERFORATION BEFORE MAILING.
Dear Shareowners,
You are invited to attend the Annual Meeting of Shareowners on
Wednesday, June 24, 1998, at 10:00 a.m. at the Collins Plaza Hotel and
Convention Center, 1200 Collins Road, NE, Cedar Rapids, Iowa. If you
plan to attend the meeting, please complete and detach the Reservation
Form below and return it with the signed proxy card.
We hope you will be able to join us to review the year and take a look
at what the future holds for the new Company. SEATING IS LIMITED IN
THE MEETING ROOM AND WILL BE FILLED ON A FIRST-COME BASIS.
COMPLIMENTARY BEVERAGES AND PASTRIES WILL BE SERVED AFTER THE MEETING.
Above is your 1998 Interstate Energy Corporation Proxy Card. Whether
or not you are able to attend the meeting in person, please mark the
attached proxy to indicate your voting preferences and sign, detach
and return the proxy card and Reservation card (if applicable) in the
enclosed postage-paid envelope.
_ PLEASE FOLD AND DETACH CARD AT PERFORATION BEFORE MAILING. _
ANNUAL MEETING RESERVATION
RETURN THIS STUB ONLY IF YOU ARE PLANNING
TO ATTEND THE MEETING.
I (WE) WILL ATTEND THE ANNUAL MEETING.
PLEASE LIST YOUR NAME(s) AND YOUR
GUEST(s) BELOW.
_______________________________________
_______________________________________
_______________________________________
<PAGE>
INTERSTATE ENERGY CORPORATION
ANNUAL MEETING OF SHAREOWNERS ON JUNE 24, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF INTERSTATE ENERGY
CORPORATION.
The Board of Directors recommends a vote "FOR" the election of all listed
nominees. If no specification is given, the proxies will vote FOR the election
of all listed nominees. To vote in accordance with the Board of Directors'
recommendations, just sign on the reverse side without checking any boxes.
PLEASE SIGN, DATE AND RETURN THIS PROXY CARD IN THE ENCLOSED POSTAGE-PAID
ENVELOPE.
INDICATE YOUR VOTE BY AN (X) IN THE APPROPRIATE BOX.
ELECTION OF DIRECTORS
Nominees for term ending in:
<TABLE>
<CAPTION>
WITHHOLD FOR ALL
2001 2000 1999 FOR ALL FOR ALL EXCEPT (*)
- ---- ---- ---- / / / / / /
<S> <C> <C> <C> <C> <C>
Joyce L. Hanes Lee Liu Alan B. Arends
Arnold M. Nemirow Robert W. Schlutz Robert D. Ray
Jack R. Newman Wayne H. Stoppelmoor Anthony R. Weiler (*)To withhold authority to vote for
Judith D. Pyle any individual nominee, strike a line
David Q. Reed through the nominee's name to the left and
mark an (X) in the "FOR ALL EXCEPT" box.
</TABLE>
PLEASE FOLD AND DETACH CARD AT PERFORATION BEFORE MAILING.
