SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
_______________________
Date of Report
(Date of earliest
event reported): April 21, 1998
Interstate Energy Corporation
(Exact name of registrant as specified in its charter)
Wisconsin 1-9894 39-1380265
(State or other (Commission File (IRS Employer
jurisdiction of Number) Identification No.)
incorporation)
222 West Washington Avenue, Madison, Wisconsin 53703
(Address of principal executive offices, including zip code)
(608) 252-3311
(Registrant's telephone number)
WPL Holdings, Inc.
(Former name or former address, if
changed since last report)
<PAGE>
Item 2. Acquisition or Disposition of Assets.
On April 21, 1998, following receipt of final regulatory approval,
the three-way business combination (the "Merger") between WPL Holdings,
Inc., a holding company incorporated under the laws of the State of
Wisconsin ("WPLH"), IES Industries Inc., a holding company incorporated
under the laws of the State of Iowa ("IES"), and Interstate Power Company,
an operating public utility incorporated under the laws of the State of
Delaware ("IPC"), was consummated in accordance with the terms of an
Agreement and Plan of Merger, dated as of November 10, 1995 (as amended on
May 22, 1996 and August 16, 1996) by and among WPLH, IES and IPC, among
others (the "Merger Agreement"). In the Merger, WPLH, as the surviving
holding company, changed its name to Interstate Energy Corporation (the
"Company") and is currently doing business as Alliant Corporation.
Pursuant to the terms of the Merger Agreement, IES was merged with
and into the Company and each outstanding share of IES common stock was
converted into the right to receive 1.14 shares of Company common stock.
Similarly, an acquisition subsidiary of the Company was merged with and
into IPC (with IPC as the surviving corporation) and each outstanding
share of IPC common stock was converted into the right to receive 1.11
shares of Company common stock. At the effective time of the Merger,
there were 30,761,923 and 9,768,907 shares of IES common stock and IPC
common stock outstanding, respectively. All outstanding shares of WPLH
common stock remain unchanged and outstanding as shares of Company common
stock following the Merger. In this Current Report on Form 8-K, unless
the context otherwise requires, all references to the Company's common
stock include the rights to purchase shares of such common stock pursuant
to the terms of the Rights Agreement between the Company and Morgan
Shareholders Services Trust Company, as Rights Agent thereunder, dated as
of February 22, 1989.
As a result of the Merger, IES Utilities Inc. and IPC joined
Wisconsin Power and Light Company as the operating public utility
subsidiaries of the Company. The outstanding shares of preferred stock of
IES Utilities Inc., IPC and Wisconsin Power and Light Company were
unaffected by the Merger. In connection with the Merger, the Company
filed an application to become and is now a registered public utility
holding company under the Public Utility Holding Company Act of 1935, as
amended. The Merger will be accounted for as a pooling of interests for
accounting purposes.
Following consummation of the Merger, the holding companies for the
nonregulated businesses of the Company and IES were merged. The resulting
company, known as Alliant Industries Inc., is now the parent holding
company of substantially all of the Company's nonregulated businesses.
The Merger Agreement and the amendments thereto are filed as
exhibits to this Current Report on Form 8-K and are incorporated herein by
reference. The discussion above is qualified in its entirety by reference
to that agreement and the amendments thereto.
In connection with the Merger, the Company entered into employment
agreements (the "Employment Agreements") with (i) Lee Liu, who will serve
as Chairman of the Board of the Company; and (ii) Erroll B. Davis, Jr.,
who will serve as President and Chief Executive Officer of the Company and
as Chief Executive Officer of the Company's subsidiaries. It is
anticipated that the Company will also enter into a consulting agreement
with Wayne H. Stoppelmoor, who will serve as Vice Chairman of the Company.
In addition, IPC entered into an employment agreement with Michael R.
Chase, who will serve as President of IPC. The Employment Agreements are
filed as exhibits to this Current Report on Form 8-K and are incorporated
herein by reference.
Pursuant to the terms of the Merger Agreement, the Board of
Directors of the Company was reconstituted. The current directors of the
Company are:
Alan B. Arends Milton E. Neshek
Erroll B. Davis, Jr. Jack R. Newman
Rockne G. Flowers Judith D. Pyle
Joyce L. Hanes Robert D. Ray
Lee Liu David Q. Reed
Katharine C. Lyall Robert W. Schlutz
Arnold M. Nemirow Wayne H. Stoppelmoor
Anthony R. Weiler
The current executive officers of the Company are:
Erroll B. Davis, Jr. - President and Chief Executive Officer
William D. Harvey - Executive Vice President-Generation
Thomas M. Walker - Executive Vice President and
Chief Financial Officer
Michael R. Chase - Executive Vice President-
Corporate Services
James E. Hoffman - Executive Vice President-
Business Development
Eliot G. Protsch - Executive Vice President-Energy Delivery
John E. Ebright - Vice President-Controller
Edward M. Gleason - Vice President, Treasurer and
Corporate Secretary
Donald D. Jannette - Assistant Corporate Secretary
John E. Kratchmer - Assistant Controller
Susan J. Kosmo - Assistant Controller
Item 7. Financial Statements and Exhibits.
(a) Financial Statements of Businesses Acquired
(1) IES Industries Inc.
Audited Consolidated Financial Statements (incorporated by
reference to IES Industries Inc.'s Annual Report on Form 10-K for
the fiscal year ended December 31, 1997 (Commission File
No. 1-9187)):
Report of Independent Public Accountants
Consolidated Statements of Income for the years ended
December 31, 1997, 1996 and 1995
Consolidated Balance Sheets as of December 31, 1997 and 1996
Consolidated Statements of Cash Flows for the years ended
December 31, 1997, 1996 and 1995
Notes to Consolidated Financial Statements
(2) Interstate Power Company
Audited Financial Statements (incorporated by reference to
Interstate Power Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1997 (Commission File No. 1-3632)):
Report of Independent Auditors
Statements of Income for the years ended
December 31, 1997, 1996 and 1995
Balance Sheets as of December 31, 1997 and 1996
Statements of Cash Flows for the years ended
December 31, 1997, 1996 and 1995
Notes to Financial Statements
(b) Pro Forma Financial Information
The unaudited pro forma financial information included herein
relates to the three-way business combination (the "Merger")
between WPL Holdings, Inc., a holding company incorporated under
the laws of the State of Wisconsin ("WPLH"), IES Industries Inc., a
holding company incorporated under the laws of the State of Iowa
("IES"), and Interstate Power Company, an operating public utility
incorporated under the laws of the State of Delaware ("IPC"), which
was consummated on April 21, 1998. In the Merger, WPLH, as the
surviving holding company, changed its name to Interstate Energy
Corporation (the "Merged Company") and is currently doing business
as Alliant Corporation.
The unaudited pro forma combined balance sheet at December 31, 1997
gives effect to the Merger as if it had occurred on December 31,
1997. The unaudited pro forma combined statements of income for
each of the three years in the period ended December 31, 1997 gives
effect to the Merger as if it had occurred on January 1, 1995.
These statements are prepared on the basis of accounting for the
Merger as a pooling of interests and are based on the assumptions
set forth in the notes thereto. In addition, the pro forma
financial information does not give effect to the expected
synergies resulting from the Merger or the costs to be incurred to
achieve such synergies. The pro forma financial information,
however, does reflect the transition costs to effect the Merger.
The historical data for WPLH have been adjusted to reflect the
restatement of such data to account for certain discontinued
operations as discussed in Note 6.
The following pro forma financial information has been prepared
from, and should be read in conjunction with, the historical
consolidated financial statements and related notes thereto of
WPLH, IES and IPC. The following information is not necessarily
indicative of the financial position or operating results that
would have occurred had the Merger been consummated on the date, or
at the beginning of the period, for which the Merger is being given
effect nor is it necessarily indicative of future operating results
or financial position.
<PAGE>
<TABLE>
<CAPTION>
INTERSTATE ENERGY CORPORATION
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
12/31/97
(In thousands)
Pro Forma
ASSETS WPLH IES IPC Adjustments Pro Forma
(As Reported) (As Reported) (As Reported) (See Note 1) Combined
<S> <C> <C> <C> <C> <C>
UTILITY PLANT
Electric $1,790,641 $2,072,866 $869,715 $- $4,733,222
Gas 237,856 187,098 70,201 - 495,155
Other 220,679 145,716 - - 366,395
----------- --------- -------- -------- ----------
Total 2,249,176 2,405,680 939,916 - 5,594,772
Less: Accumulated
provision for
depreciation 1,065,726 1,115,261 450,595 - 2,631,582
Construction work in
progress 42,312 38,923 5,276 - 86,511
Nuclear fuel--net 19,046 36,731 - - 55,777
---------- -------- -------- --------- ----------
Net utility plant 1,244,808 1,366,073 494,597 - 3,105,478
OTHER PROPERTY, PLANT
AND EQUIPMENT
---NET AND OTHER
INVESTMENTS 139,548 319,657 4,746 (125) 463,826
CURRENT ASSETS
Cash and cash equivalents 13,987 10,143 2,897 302 27,329
Accounts receivable ---
net 78,082 52,295 27,061 12,489 169,927
Fossil fuel inventories,
at average cost 18,857 10,579 11,220 - 40,656
Materials and supplies,
at average cost 19,274 24,274 6,297 - 49,845
Prepayments and other 42,808 69,920 15,035 (3,278) 124,485
--------- ---------- -------- ------- --------
Total current assets 173,008 167,211 62,510 9,513 412,242
EXTERNAL DECOMMISSIONING
FUND 112,356 77,882 - - 190,238
INVESTMENT IN MCLEODUSA INC. 0 326,582 1,440 - 328,022
DEFERRED CHARGES AND OTHER 192,087 199,814 75,456 (15,442) 451,915
---------- --------- -------- ------- ---------
TOTAL ASSET $1,861,807 $2,457,219 $638,749 ($6,054) $4,951,721
========== ========= ======== ======= =========
CAPITALIZATION AND
LIABILITIES
CAPITALIZATION
Common Stock Equity:
Common stock $308 $- $34,163 ($33,706) $765
Other stockholders'
equity 607,275 818,133 181,457 23,204 1,630,069
---------- -------- -------- -------- ---------
Total common stock
equity 607,583 818,133 215,620 (10,502) 1,630,834
Preferred stock not
mandatorily redeemable 59,963 18,320 10,819 - 89,102
Preferred stock mandatory
sinking fund - - - - 24,267
Long-term debt---net 457,520 845,189 165,194 - 1,467,903
---------- -------- -------- -------- ----------
Total capitalization 1,125,066 1,681,642 415,900 (10,502) 3,212,106
CURRENT LIABILITIES
Current maturities,
sinking funds, and
capital lease
obligations 11,528 13,684 6,314 - 31,526
Commercial paper, notes
payable and other 123,095 - 33,500 - 156,595
Variable rate demand bonds 56,975 - - - 56,975
Accounts payable and
accruals 91,175 78,702 13,208 9,549 192,634
Taxes accrued 412 62,432 16,014 65 78,923
Other accrued liabilities 55,987 67,174 12,445 15,532 151,138
--------- -------- -------- --------- ----------
Total current
liabilities 339,172 221,992 81,481 25,146 667,791
OTHER LIABILITIES
Deferred income taxes 253,519 372,837 104,670 (2,800) 728,226
Deferred investment tax
credits 35,039 31,838 15,985 - 82,862
Accrued environmental
remediation costs 9,238 46,989 5,794 - 62,021
Capital lease obligations - 23,548 86 - 23,634
Other liabilities and
deferred credits 99,773 78,373 14,833 (17,898) 175,081
--------- --------- -------- --------- ---------
Total other liabilities 397,569 553,585 141,368 (20,698) 1,071,824
--------- --------- -------- --------- ----------
TOTAL CAPITALIZATION AND
LIABILITIES $1,861,807 $2,457,219 $638,749 ($6,054) $4,951,721
========== ========== ======== ========== ==========
See accompanying Notes to Unaudited Pro Forma Combined Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
INTERSTATE ENERGY CORPORATION
UNAUDITED PRO FORMA COMBINED STATEMENTS OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1997
(In thousands, except per share amounts)
Operating Revenues Pro Forma
WPLH IES IPC Adjustments Pro Forma
(As Reported) (As Reported) (As Reported) (See Note 1) Combined
<S> <C> <C> <C> <C> <C>
Electric utility $634,143 $604,270 $277,340 $- $1,515,753
Gas utility 155,883 183,517 54,507 - 393,907
Other 129,229 142,912 - 118,826 390,967
--------- --------- -------- -------- ---------
Total operating revenues 919,255 930,699 331,847 118,826 2,300,627
Operating Expenses
Electric and steam production fuels 116,812 108,344 55,402 - 280,558
Purchased power 125,438 74,098 56,770 - 256,306
Cost of gas sold 99,267 126,631 33,324 - 259,222
Other operation 254,796 231,481 64,685 119,306 670,268
Maintenance 48,058 57,185 17,782 96 123,121
Depreciation and amortization 111,289 114,122 31,676 245 257,332
Taxes other than income taxes 34,988 51,701 16,708 - 103,397
--------- --------- -------- -------- ---------
Total operating expenses 790,648 763,562 276,347 119,647 1,950,204
--------- --------- -------- -------- ---------
Operating Income 128,607 167,137 55,500 (821) 350,423
Other Income (Expense)
Allowance for funds used
during construction 2,775 2,309 190 - 5,274
Other income and deductions, net 4,432 1,850 6,772 856 13,910
--------- -------- -------- -------- ---------
Total other income (expense) 7,207 4,159 6,962 856 19,184
Interest Charges 42,535 64,383 15,610 35 122,563
Income from Continuing Operations
before Income Taxes and
Preferred Dividends 93,279 106,913 46,852 - 247,044
Income Taxes 28,715 39,662 17,684 - 86,061
Preferred Dividends of
Subsidiaries (Note 2) 3,310 914 2,469 - 6,693
--------- -------- -------- --------- ---------
Income from Continuing
Operations $61,254 $66,337 $26,699 $- $154,290
========= ======== ======== ========= =========
Average Common Shares
Outstanding 30,782 30,380 9,725 5,323 76,210
Earnings per Share of Common
Stock from Continuing
Operations (Basic and diluted) $1.99 $2.18 $2.74 N/A $2.02
========= ======== ======== ========= ========
See accompanying Notes to Unaudited Pro Forma Combined Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
INTERSTATE ENERGY CORPORATION
UNAUDITED PRO FORMA COMBINED STATEMENTS OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1996
(In thousands, except per share amounts)
Pro Forma
WPLH IES IPC Adjustments Pro Forma
(As Reported) (As Reported) (As Reported) (See Note 1) Combined
<S> <C> <C> <C> <C> <C>
Operating Revenues
Electric utility $589,482 $574,273 $276,620 $- $1,440,375
Gas utility 165,627 273,979 49,464 (113,115) 375,955
Other 177,735 125,660 - 113,115 416,510
--------- --------- --------- -------- ----------
Total operating revenues 932,844 973,912 326,084 - 2,232,840
Operating Expenses
Electric and steam production fuels 114,470 84,579 57,560 - 256,609
Purchased power 81,108 88,350 61,556 - 231,014
Cost of gas sold 104,830 217,351 31,617 (113,474) 240,324
Other operation 317,608 212,501 51,707 113,474 695,290
Maintenance 46,492 49,001 16,164 - 111,657
Depreciation and amortization 90,683 107,393 31,087 - 229,163
Taxes other than income taxes 34,603 48,171 16,064 - 98,838
--------- -------- --------- -------- ---------
Total operating expenses 789,794 807,346 265,755 - 1,862,895
--------- -------- --------- -------- ---------
Operating Income 143,050 166,566 60,329 - 369,945
Other Income (Expense)
Allowance for funds used
during construction 3,208 2,103 263 - 5,574
Other income and deductions, net 14,098 (4,591) 2,336 - 11,843
--------- -------- --------- -------- ---------
Total other income (expense) 17,306 (2,488) 2,599 - 17,417
Interest Charges 42,027 54,822 16,472 - 113,321
--------- -------- --------- --------- ---------
Income from Continuing Operations
before Income Taxes and
Preferred Dividends 118,329 109,256 46,456 - 274,041
Income Taxes 41,814 47,435 18,133 - 107,382
Preferred Dividends of
Subsidiaries (Note 2) 3,310 914 2,463 - 6,687
--------- -------- --------- --------- ---------
Income from Continuing
Operations (Notes 3 and 6) $73,205 $60,907 $25,860 $- $159,972
========= ======== ========= ========= =========
Average Common Shares
Outstanding 30,790 29,861 9,594 5,236 75,481
Earnings per Share of Common
Stock from Continuing
Operations (Basic and diluted) $2.38 $2.04 $2.69 N/A $2.12
========= ======== ========= ========= =========
See accompanying Notes to Unaudited Pro Forma Combined Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
INTERSTATE ENERGY CORPORATION
UNAUDITED PRO FORMA COMBINED STATEMENTS OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1995
(In thousands, except per share amounts)
Pro Forma
WPLH IES IPC Adjustments Pro Forma
(As Reported) (As Reported) (As Reported) (See Note 1) Combined
<S> <C> <C> <C> <C> <C>
Operating Revenues
Electric utility $546,324 $560,471 $274,873 $- $1,381,668
Gas utility 139,165 190,339 43,669 (53,047) 320,126
Other 121,766 100,200 - 53,047 275,013
-------- -------- -------- -------- ----------
Total operating revenues 807,255 851,010 318,542 - 1,976,807
Operating Expenses
Electric and steam production fuels 116,488 96,256 62,164 - 274,908
Purchased power 44,940 66,874 57,566 - 169,380
Cost of gas sold 84,002 141,716 25,888 (50,519) 201,087
Other operation 252,722 199,768 44,581 50,519 547,590
Maintenance 42,043 46,093 14,881 - 103,017
Depreciation and amortization 86,319 97,958 29,560 - 213,837
Taxes other than income taxes 34,188 49,011 15,990 - 99,189
-------- -------- -------- -------- ---------
Total operating expenses 660,702 697,676 250,630 - 1,609,008
-------- -------- -------- -------- ---------
Operating Income 146,553 153,334 67,912 - 367,799
Other Income (Expense)
Allowance for funds used
during construction 2,088 3,424 341 - 5,853
Other income and deductions, net 5,954 1,548 (4,008) - 3,494
-------- ------- ------- -------- ---------
Total other income (expense) 8,042 4,972 (3,667) - 9,347
Interest Charges 43,559 50,727 17,136 - 111,422
-------- ------- ------- -------- ---------
Income from Continuing Operations
before Income Taxes and
Preferred Dividends 111,036 107,579 47,109 - 265,724
Income Taxes 36,108 42,489 19,453 - 98,050
Preferred Dividends of
Subsidiaries (Note 2) 3,310 914 2,458 - 6,682
-------- ------- ------- -------- --------
Income from Continuing
Operations (Note 6) $71,618 $64,176 $25,198 $- $160,992
======== ======= ======= ======== ========
Average Common Shares
Outstanding 30,774 29,202 9,564 5,140 74,680
Earnings per Share of Common
Stock from Continuing
Operations (Basic and diluted) $2.33 $2.20 $2.63 N/A $2.16
======== ======= ======= ======== ========
See accompanying Notes to Unaudited Pro Forma Combined Financial Statements
</TABLE>
<PAGE>
INTERSTATE ENERGY CORPORATION
NOTES TO UNAUDITED PRO FORMA
COMBINED FINANCIAL STATEMENTS
1. Pro Forma Adjustments
<TABLE>
<CAPTION>
December 31, 1997
BALANCE SHEET Merged
Company
Consolidation Eliminations Common IPC IES Merger
of for Stock Unbilled Pension Transaction Total
IEA-HES LLC IEA-HES LLC Adjustment Revenues Liability Costs Pro Forma
(Note 1 (a)) (Note 1 (b)) (Note 1 (c)) (Note 1 (d)) (Note 1 (e)) (Note 1 (g)) Adjustments
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
OTHER PROPERTY,
PLANT AND EQUIP
---NET AND OTHER
INVESTMENTS $3,458 ($3,583) $ - $ - $ - $ - ($125)
CURRENT ASSETS
Cash and cash
equivalents 3,308 (3,006) - - - - 302
Accounts receivable
---net 8,932 (1,965) - 5,522 - - 12,489
Prepayments and
other 2 - - (3,280) - - (3,278)
-------- -------- -------- -------- -------- -------- --------
Total current
assets 12,242 (4,971) - 2,242 - - 9,513
DEFERRED CHARGES AND
OTHER - - - 2,456 (17,898) - (15,442)
-------- -------- -------- -------- -------- -------- --------
TOTAL ASSETS $15,700 ($8,554) $ - $4,698 ($17,898) $ - ($6,054)
======== ======== ======== ======== ======== ======== ========
CAPITALIZATION AND
LIABILITIES
CAPITALIZATION
Common Stock
Equity:
Common stock $ - $ - ($33,706) $ - $ - $ - ($33,706)
Other
stockholders'
equity 3,583 (3,583) 33,706 4,698 - (15,200) 23,204
-------- -------- -------- -------- -------- --------- --------
Total common
stock equity 3,583 (3,583) - 4,698 - (15,200) (10,502)
CURRENT LIABILITIES
Accounts payable
and accruals 11,514 (1,965) - - - - 9,549
Taxes accrued 65 - - - - - 65
Other accrued
liabilities 538 (3,006) - - - 18,000 15,532
-------- -------- -------- -------- -------- -------- --------
Total current
liabilities 12,117 (4,971) - - - 18,000 25,146
OTHER LIABILITIES
Deferred income
taxes - - - - - (2,800) (2,800)
Other liabilities
and deferred
credits - - - - (17,898) - (17,898)
-------- -------- -------- -------- -------- -------- --------
Total other
liabilities - - - - (17,898) (2,800) (20,698)
-------- -------- -------- -------- -------- -------- --------
TOTAL
CAPITALIZATION AND
LIAB. $15,700 ($8,554) $ - $4,698 ($17,898) $ - ($6,054)
======== ======== ======== ======== ======== ======== ========
<CAPTION>
Merged
1997 INCOME STATEMENT Consolidation Eliminations Company
of for Common Stock Total
IEA-HES LLC IEA-HES LLC Adjustment Pro Forma
(Note 1 (a)) (Note 1 (b)) (Note 1 (c)) Adjustments
<S> <C> <C> <C> <C>
OPERATING REVENUES:
Gas utility $ - $ - $ - $ -
Other 118,826 - - 118,826
------- ------- -------- -------
Total operating
revenues 118,826 - - 118,826
OPERATING EXPENSES:
Cost of gas sold - - - -
Other operation 119,306 - - 119,306
Maintenance 96 - - 96
Depreciation and
amortization 245 - - 245
------- -------- -------- -------
Total operating
expenses 119,647 - - 119,647
OPERATING INCOME (821) - - (821)
OTHER INCOME (EXPENSE)
Other income and
deductions, net 61 795 - 856
------- -------- -------- --------
Total other income
(expense) 61 795 - 856
INTEREST CHARGES 35 - - 35
------- -------- -------- --------
INCOME FROM CONTINUING
OPER. ($795) $795 $ - $ -
======= ======== ======== ========
AVERAGE COMMON SHARES - - 5,323 5,323
<CAPTION>
1996 INCOME STATEMENT Merged
Company
Common Stock IEA Total
Adjustment Gas Activity Pro Forma
(Note 1 (c)) (Note 1 (f)) Adjustments
<S> <C> <C> <C>
OPERATING REVENUES:
Gas utility $ - ($113,115) ($113,115)
Other - 113,115 113,115
------- --------- ---------
Total operating revenues - - -
OPERATING EXPENSES:
Cost of gas sold - (113,474) (113,474)
Other operation - 113,474 113,474
-------- -------- ---------
Total operating expenses - - -
-------- -------- ---------
INCOME FROM CONTINUING OPERATIONS $ - $ - $ -
======== ======== =========
AVERAGE COMMON SHARES 5,236 - 5,236
<CAPTION>
1995 INCOME STATEMENT Merged
Company
Common Stock IEA Total
Adjustment Gas Activity Pro Forma
(Note 1 (c)) (Note 1 (f)) Adjustments
<S> <C> <C> <C>
OPERATING REVENUES:
Gas utility $ - ($53,047) ($53,047)
Other - 53,047 53,047
-------- -------- ---------
Total operating revenues - - -
OPERATING EXPENSES:
Cost of gas sold - (50,519) (50,519)
Other operation - 50,519 50,519
-------- -------- ---------
Total operating expenses - - -
-------- -------- ---------
INCOME FROM CONTINUING OPERATIONS $ - $ - $ -
======== ======== =========
AVERAGE COMMON SHARES 5,140 - 5,140
</TABLE>
(a) Consolidation of IEA-HES L.L.C.
In January 1997, IES and WPLH formed a gas marketing joint venture named
IEA-HES L.L.C. Pursuant to the applicable accounting rules, IES and WPLH
each accounted for this joint venture in 1997 under the equity method of
accounting with their investment recorded on the balance sheet in "Other
Property, Plant and Equipment -- Net and Other Investments" and their
allocated portion of earnings on the income statement in "Other Income and
Deductions, Net". This pro forma adjustment reflects the financial
results of IEA-HES L.L.C. as a consolidated subsidiary.
(b) Eliminations for IEA-HES L.L.C.
This pro forma adjustment reflects the elimination of intercompany
balances of IEA-HES L.L.C. and also eliminates the equity investments of
IES and WPLH and their allocated portion of revenues and expenses.
(c) Merged Company Common Stock Adjustment
The pro forma combined financial statements reflect the conversion of each
share of IES Common Stock (no par value) outstanding into 1.14 shares of
Merged Company Common Stock ($.01 par value) and the conversion of each
share of IPC Common Stock ($3.50 par value) into 1.11 shares of Merged
Company Common Stock ($.01 par value), and the continuation of each share
of WPLH Common Stock ($.01 par value) outstanding as one share of Merged
Company Common Stock, as provided in the Merger Agreement. The pro forma
adjustment to common stock equity restates the common stock account to
equal par value for all shares to be issued ($.01 par value per share of
Merged Company Common Stock) and reclassifies the excess to other
stockholders' equity. The average number of shares of common stock used
for calculating per share amounts is based on the exchange ratios shown
below.
<TABLE>
<CAPTION>
As As
Exchange reported Pro forma As Reported Pro forma reported Pro forma
Ratio 12/31/97 12/31/97 12/31/96 12/31/96 12/31/95 12/31/95
<S> <C> <C> <C> <C> <C> <C> <C>
WPLH N/A 30,782 30,782 30,790 30,790 30,774 30,774
IES 1.14 30,380 34,633 29,861 34,042 29,202 33,290
IPC 1.11 9,725 10,795 9,594 10,649 9,564 10,616
</TABLE>
The number of shares of common stock at December 31, 1997 used for
calculating the par value of common stock is based on the exchange ratios
shown below.
As
Exchange reported Pro forma
Ratio 12/31/97 12/31/97
WPLH N/A 30,789 30,789
IES 1.14 30,577 34,858
IPC 1.11 9,761 10,835
(d) IPC Unbilled Revenues
The financial results of IPC do not include accrued revenues for services
rendered but unbilled at month-end. The pro forma adjustment reflects the
impact of adopting unbilled revenues, including the tax impact of the
adoption. The change is being implemented to conform to the method
currently utilized by WPLH and IES.
(e) IES Pension Liability
The accrued pension liability (and offsetting regulatory asset), included
in the financial results of IES, was calculated using a five-year smoothed
method of recognizing deferred asset gains. The pro forma adjustment
reflects a change to the straight market value method which recognizes
deferred asset gains sooner. The change is being implemented to conform
to the method currently utilized by WPLH and IPC.
(f) IEA Gas Activity
The gas revenues and cost of gas sold of Industrial Energy Applications,
Inc. (IEA), a subsidiary of IES, for 1996 and 1995 have been reclassed
into "Other" operating revenues and "Other operation" expenses,
respectively, consistent with the 1997 presentation.
(g) Merger Transaction Costs
The merger partners estimate they will incur an additional $18 million of
merger-related transaction costs in the first six months of 1998. These
costs include fees for financial advisors, attorneys and accountants as
well as separation costs relating to various officers of the merger
partners who have left the company under the terms of their respective
change of control agreements. These costs have been reflected in the pro
forma balance sheet at December 31, 1997 such that accrued liabilities
have been increased by $18 million, other stockholders' equity has been
reduced by the net of tax amount and the applicable income tax deduction
has been recorded in deferred income taxes.
2. Preferred Stock Dividends of IPC
The Preferred Stock Dividends of IPC have been reclassified in the
unaudited pro forma combined statements as "Preferred Dividends of
Subsidiaries" and deducted in the determination of income from continuing
operations which reflects the holding company structure of the Merged
Company.
3. Nonrecurring Material Items Included in Historical Financial Results
IES's income from continuing operations for the year ended December 31,
1996 included costs incurred relating to its successful defense of a
hostile takeover attempt mounted by MidAmerican Energy Company. The
after-tax impact on income from continuing operations was a decrease of
$4.6 million.
Nonrecurring items affecting WPLH's performance for the year ended
December 31, 1996 included the impact of the sale of a combustion turbine
and the sale of WPLH's assisted-living real estate investments. The
after-tax impact of these items on continuing operations was an increase
of $5.9 million.
4. Estimated Costs and Cost Savings of Proposed Merger
The allocation between WPLH, IES and IPC and their customers of the
estimated cost savings of approximately $749 million over ten years
resulting from the Merger, net of the costs incurred to achieve such
savings, will be subject to regulatory review and approval. Costs arising
from the Merger are currently estimated to be approximately $78 million.
Approximately $22 million of these costs had been incurred through
December 31, 1997 and are reflected in results of operations. The
estimate of potential cost savings constitutes a forward-looking statement
and actual results may differ materially from this estimate. The estimate
is necessarily based upon various assumptions that involve judgments with
respect to, among other things, future national and regional economic and
competitive conditions, technological developments, inflation rates,
regulatory treatment, weather conditions, financial market conditions,
future business decisions and other uncertainties. No assurance can be
given that the estimated cost savings will actually be realized. None of
the estimated cost savings have been reflected in the unaudited pro forma
combined financial statements. The only merger-related costs that have
been reflected in the pro forma combined financial statements are the $22
million of costs incurred through December 31, 1997 and the $18 million of
transaction costs discussed in Note 1(g). The remaining costs to be
incurred to achieve the cost savings have not been included in the pro
forma combined financial statements.
5. Intercompany Transactions
Intercompany transactions (including purchased and exchange power
transactions) between WPLH, IES and IPC during the periods presented were
included in the determination of regulated rates and/or were not material.
Accordingly, no pro forma adjustments were made to eliminate such
transactions.
6. Discontinued Operations
The financial statements of WPLH reflect the discontinuance of operations
of its utility energy and marketing consulting business in 1995. The
discontinuance of this business resulted in a pre-tax loss in the fourth
quarter of 1995 of $7.7 million. The after-tax loss on disposition was
$11.0 million reflecting the associated tax expense on disposition due to
the non-deductibility of the carrying value of goodwill at sale. During
1996, WPLH recognized an additional loss of $1.3 million, net of
applicable income tax benefit, associated with the final disposition of
the business. Operating revenues, operating expenses, other income and
expense and income taxes for the discontinued operations for the time
periods presented have been excluded from income from continuing
operations. Interest expense has been adjusted for the amounts associated
with direct obligations of the discontinued operations.
(c) Exhibits.
The exhibits listed in the accompanying Exhibit Index are filed as
part of this Current Report on Form 8-K.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
INTERSTATE ENERGY CORPORATION
Date: May 5, 1998. By: /s/ Thomas M. Walker
Thomas M. Walker
Executive Vice President and
Chief Financial Officer
<PAGE>
INTERSTATE ENERGY CORPORATION
EXHIBIT INDEX TO FORM 8-K
Dated April 21, 1998
Exhibit
(2.1) Agreement and Plan of Merger, dated as of November 10,
1995, by and among WPL Holdings, Inc., IES Industries
Inc., Interstate Power Company and AMW Acquisition,
Inc. [Incorporated by reference to Exhibit (2.1) to
WPL Holdings, Inc.'s Current Report on Form 8-K, dated
November 10, 1995]
(2.2) Amendment No. 1 to Agreement and Plan of Merger and
Stock Option Agreements, dated as of May 22, 1996, by
and among WPL Holdings, Inc., IES Industries Inc.,
Interstate Power Company, a Delaware corporation, AMW
Acquisition, Inc., WPLH Acquisition Co. and Interstate
Power Company, a Wisconsin corporation [Incorporated by
reference to Exhibit (2.1) to WPL Holdings, Inc.'s
Current Report on Form 8-K, dated May 22, 1996]
(2.3) Amendment No. 2 to Agreement and Plan of Merger, dated
as of August 16, 1996, by and among WPL Holdings, Inc.,
IES Industries Inc., Interstate Power Company, a
Delaware corporation, WPLH Acquisition Co. and
Interstate Power Company, a Wisconsin corporation
[Incorporated by reference to Exhibit (2.1) to WPL
Holdings, Inc.'s Current Report on Form 8-K, dated
August 16, 1996.]
(3.1) Amendments to the Restated Articles of Incorporation of
Interstate Energy Corporation
(3.2) Restated Articles of Incorporation of Interstate Energy
Corporation, as amended
(3.3) By-laws of Interstate Energy Corporation
(10.1) Employment Agreement, dated as of April 21, 1998, by
and between Interstate Energy Corporation and Erroll B.
Davis, Jr.
(10.2) Employment Agreement, dated as of April 21, 1998, by
and between Interstate Energy Corporation and Lee Liu
(10.3) Employment Agreement, dated as of April 21, 1998, by
and between Interstate Power Company and Michael R.
Chase
(23.1) Consent of Arthur Andersen LLP, IES Industries Inc.'s
independent public accountants
(23.2) Consent of Deloitte & Touche, Interstate Power
Company's independent public accountants
Amendments to the
Restated Articles of Incorporation
of Interstate Energy Corporation
(the "Corporation")
A. Article I of the Restated Articles of Incorporation of the
Corporation was amended, effective April 21, 1998, to provide in its
entirety as follows:
The name of the corporation is Interstate
Energy Corporation.
B. Article IV of the Restated Articles of Incorporation of the
Corporation was amended, effective April 20, 1998, to provide as
follows:
The corporation shall have authority to
issue two hundred million (200,000,000)
shares of common stock, $.01 par value.
RESTATED
ARTICLES OF INCORPORATION
OF
INTERSTATE ENERGY CORPORATION, AS AMENDED
These Restated Articles of Incorporation supersede and take the
place of the existing Articles of Incorporation and all prior amendments
thereto.
ARTICLE I
The name of the corporation is Interstate Energy Corporation.
ARTICLE II
The period of existence of the corporation shall be perpetual.
ARTICLE III
The corporation is organized for the purpose of engaging in any
lawful activities within the purposes for which corporations may be
organized under Chapter 180 of the Wisconsin Statutes, as amended from
time to time.
ARTICLE IV
The corporation shall have authority to issue two hundred
million (200,000,000) shares of common stock, $.01 par value.
ARTICLE V
No holder of any capital stock of the corporation shall have any
preemptive right to purchase, acquire to subscribe to any capital stock or
other securities issued or sold by the Corporation, including any such
capital stock or securities now or hereafter authorized.
ARTICLE VI
The address of the initial registered office of the Corporation
is 222 West Washington Avenue, P.O. Box 2568, Madison, Wisconsin 53701-
2568, and the name of the registered agent of the Corporation at such
address is Edward M. Gleason.
ARTICLE VII
The corporation reserves the right to increase or decrease its
authorized capital stock or any class or series thereof, or to reclassify
the same.
ARTICLE VIII
The number of directors constituting the Board of Directors
shall be as fixed from time to time by the Bylaws of the Corporation, but
shall not be less than seven (7). Each director shall be a stockholder of
the Corporation. The directors of the Corporation shall be divided into
three classes as nearly equal in number as possible, to serve for
staggered three-year terms or until their respective successors are duly
elected and qualified. The initial directors of the Corporation shall be
those persons who, at the time of the effectiveness of the merger of the
Corporation's subsidiary, WPL Acquisitions, Inc., into the Corporation's
subsidiary, Wisconsin Power and Light Company, are serving as directors of
Wisconsin Power and Light Company, each to hold office for the term for
which such person was elected a director of Wisconsin Power and Light
Company. Beginning with the Corporation's annual meeting of stockholders
in 1988, the successors of the class of directors whose terms shall then
expire shall be elected to hold office for a term expiring at the third
annual meeting of stockholders after their election or until their
respective successors are duly elected and qualified. If, at any annual
meeting of stockholders, directors of more than one class are to be
elected, each class of directors to be elected at such meeting shall be
nominated and voted for in a separate election. Any vacancy occurring in
the Board of Directors, including a vacancy created by an increase in the
number of directors, shall be filled until the next succeeding annual
meeting of stockholders by the majority vote of the directors then in
office, even if less than a quorum.
BYLAWS
OF
INTERSTATE ENERGY CORPORATION
(Effective as of April 21, 1998)
ARTICLE I
OFFICES
Section 1.1 PRINCIPAL AND BUSINESS OFFICES. - The Corporation may
have such principal and other business offices, either within or without
the State of Wisconsin, as the Board of Directors may designate or as the
business of the Corporation may require from time to time.
Section 1.2 REGISTERED OFFICE. - The registered office of the
Corporation required by the Wisconsin Business Corporation Law to be
maintained in the State of Wisconsin may be, but need not be, identical
with the principal office in the State of Wisconsin, and the address of
the registered office may be changed from time to time by the Board of
Directors or by the registered agent. The business office of the
registered agent of the Corporation shall be identical to such registered
office.
ARTICLE II
SEAL
Section 2.1 CORPORATE SEAL. - The corporate seal shall have
inscribed thereon the name of the Corporation and the words "CORPORATE
SEAL, WISCONSIN." Said seal may be used by causing it or a facsimile
thereof to be impressed or affixed or reproduced.
ARTICLE III
SHAREOWNERS
Section 3.1. ANNUAL MEETING. - The Annual Meeting of Shareowners
shall be held at such date and time as the Board of Directors may
determine. The Board of Directors may designate any place, either within
or without the State of Wisconsin, as the place for the Annual Meeting.
If no designation is made, the place of the Annual Meeting shall be the
principal office of the Corporation. The Annual Meeting shall be held for
the purposes of electing Directors and of transacting such other business
as may properly come before the meeting. <PAGE>
Section 3.2 SPECIAL MEETINGS. - Special Meetings of the Shareowners
may be called by the Board of Directors or the Chief Executive Officer.
The Corporation shall call a Special Meeting of Shareowners in the event
that the holders of at least ten percent (10%) of all of the votes
entitled to be cast on any issue request a special meeting be held.
Section 3.3 NOTICE OF MEETINGS - WAIVER. - Notice of the time and
place of each Annual or Special Meeting of Shareowners shall be sent by
mail to the recorded address of each shareowner not less than ten (10)
days nor more than sixty (60) days before the date of the meeting, except
in cases where other special method of notice may be required by statute,
in which case the statutory method shall be followed. The notice of a
Special Meeting shall state the purpose of the meeting. If an Annual or
Special Meeting of shareowners is adjourned to a different date, time or
place, the Corporation shall not be required to give notice of the new
date, time or place if the new date, time or place is announced at the
meeting before adjournment; provided, however, that if a new record date
for an adjourned meeting is or must be fixed, the Corporation shall give
notice of the adjourned meeting to persons who are shareowners as of the
new record date. Notice of any meeting of the shareowners may be waived by
any shareowner.
Section 3.4 FIXING OF RECORD DATE. - For the purpose of determining
shareowners entitled to notice of, or to vote at, any meeting of
shareowners, or at any adjournment thereof, or shareowners entitled to
receive payment of any dividend, or in order to make a determination of
shareowners for any other lawful action, the Board of Directors may fix,
in advance, a record date for such determination of shareowners. Such
date in case of a meeting of shareowners or other lawful action shall not
be more than seventy (70) days prior to the date of such meeting or lawful
action. If no record date is fixed by the Board of Directors or by
statute for the determination of shareowners entitled to demand a special
meeting as contemplated in Section 3.2 hereof, the record date shall be
the date that the first shareowner signs the demand. When a determination
of shareowners entitled to vote at any meeting of shareowners has been
made as provided in this section, such determination shall apply to any
adjournment thereof unless the meeting is adjourned to a date more than
one hundred twenty (120) days after the date fixed for the original
meeting in which event the Board of Directors must fix a new record date.
Section 3.5 SHAREOWNER LIST. - The Corporation shall have available,
beginning two (2) days after the notice of the meeting is given for which
the list was prepared and continuing to the date of the meeting, a
complete record of each shareowner entitled to vote at such meeting, or
any adjournment thereof, showing the address of and number of shares held<PAGE>
by each shareowner. The shareowner list shall be available for inspection
by any shareowner during normal business hours at the Corporation's
principal office or at a place identified in the meeting notice in the
city where the meeting will be held. The Corporation shall make the
shareowners' list available at the meeting and any shareowner or his agent
or attorney may inspect the list at any time the meeting or any
adjournment thereof.
Section 3.6 QUORUM AND VOTING REQUIREMENTS. - Shares entitled to
vote as a separate voting group may take action on a matter at a meeting
only if a quorum of those shares exists with respect to that matter. A
majority of the outstanding shares entitled to vote on a matter,
represented in person or by proxy, shall constitute a quorum for action on
that matter. If a quorum exists, except in the case of the election of
directors, action on a matter shall be approved if the votes cast favoring
the action exceed the votes cast opposing the action, unless the
Corporation's Articles of Incorporation, any Bylaw adopted under authority
granted in the Articles of Incorporation or statute requires a greater
number of affirmative votes. Directors shall be elected by a plurality of
the votes cast by the shares entitled to vote in the election of directors
at a meeting at which a quorum is present. Though less than a quorum of
the outstanding votes are represented at a meeting, a majority of the
votes so represented may adjourn the meeting from time to time without
further notice. At such adjourned meeting at which a quorum shall be
present or represented, any business may be transacted which might have
been transacted at the meeting as originally notified.
Section 3.7 CONDUCT OF MEETING. - The Chairperson of the Board shall
preside at each meeting of shareowners. In the absence of the Chairperson
of the Board, such persons, in the following order, shall act as chair of
the meeting; the Vice Chairperson of the Board the Chief Executive
Officer, the President, any Vice President, the Director in attendance
with the longest tenure in that office. The Secretary, or if absent, an
Assistant Secretary, of the Company shall act as Secretary of each
shareowner meeting.
Section 3.8 PROXIES. - Any shareowner having the right to vote at a
meeting of shareowners may exercise such right by voting in person or by
proxy at such meeting. Such proxies shall be filed with the Secretary of
the Corporation before or at the time of the meeting. No proxy shall be
valid after eleven (11) months from the date of its execution, unless
otherwise provided in the proxy.
Section 3.9 VOTING OF SHARES. - Except as provided in the Articles of
Incorporation or statute, each outstanding share entitled to vote shall be<PAGE>
entitled to one (1) vote upon each matter submitted to a vote at a meeting
of shareowners.
Section 3.10 VOTING OF SHARES BY CERTAIN HOLDERS. - Shares standing
in the name of another corporation may be voted by such officer, agent or
proxy as the Bylaws of such corporation may prescribe, or, in the absence
of such provision, as the Board of Directors of such corporation may
determine.
Shares held by an administrator, executor, guardian or conservator
may be voted by such person, either in person or by proxy, without a
transfer of such shares into that person's name. Shares standing in the
name of a trustee may be voted by such trustee, either in person or by
proxy, without a transfer of such shares into the trustee's name. The
Corporation may request evidence of such fiduciary status with respect to
the vote, consent, waiver, or proxy appointment.
Shares standing in the name of a receiver or trustee in
bankruptcy may be voted by such receiver or trustee, and shares held by
or under the control of a receiver may be voted by such receiver
without the transfer of the shares into such person's name if
authority so to do is contained in an appropriate order of the court by
which such receiver was appointed.
A pledgee, beneficial owner, or attorney-in-fact of the shares held
in the name of a shareholder shall be entitled to vote such shares. The
Corporation may request evidence of such signatory's authority to sign for
the shareholder with respect to the vote, consent, waiver, or proxy
appointment.
Neither treasury shares nor shares held by another corporation, if a
majority of the shares entitled to vote for the election of Directors of
such other corporation is held by the Corporation, shall be voted at any
meeting or counted in determining the total number of outstanding shares
at any given time.
ARTICLE IV
BOARD OF DIRECTORS
Section 4.1 GENERAL POWER. - The business and affairs of the
Corporation shall be managed by its Board of Directors.
Section 4.2 NUMBER. CLASSES & TERM. - The number of Directors
of the Corporation shall be fifteen (15). The Directors of the<PAGE>
Corporation shall be divided into three classes, hereinafter referred to
as "Class I," "Class II," and "Class III" with each class having five (5)
Directors. The initial Class I Directors shall consist of two (2)
directors selected by each of IES Industries Inc. ("IES") and WPL Holdings
Inc. ("WPLH") and one (1) selected by Interstate Power Company ("IPC");
the initial Class II Directors shall consist of two (2) directors selected
by each of IES and WPLH and one (1) selected by IPC; and the initial Class
III Directors shall consist of two (2) directors selected by each of IES
and WPLH and one (1) selected from IPC. The initial term of Class I
Directors shall expire at the first annual meeting of Shareowners of the
Corporation, the initial term of Class II Directors shall expire at the
second annual meeting of Shareowners of the Corporation and the initial
term of Class III Directors shall expire at the third annual meeting of
Shareowners of the Corporation.
At each annual shareowner meeting after the first annual shareowner
meeting, directors to replace those of a Class whose terms expire at such
annual meeting shall be elected to hold office until the third succeeding
annual meeting and until their respective successors shall have been duly
qualified and elected. If the number of directors is hereafter changed,
any newly created directorships or decrease in directorships shall be so
apportioned among the classes as to make all classes as nearly equal in
number as is practicable.
Section 4.3 CHAIRPERSON OF THE BOARD. - The Chairperson of the Board
if not designated as the Chief Executive Officer of the Company shall
assist the Board in the formulation of policies and may make
recommendations therefore. Information as to the affairs of the Company
in addition to that contained in the regular reports shall be furnished to
him or her on request. He or she may make suggestions and recommendations
to the Chief Executive Officer regarding any matters relating to the
affairs of the Company and shall be available for consultation and advice.
Section 4.4 VICE CHAIRPERSON OF THE BOARD. - The Vice Chairperson of
the Board shall assist the Board in the formulation of policies and make
recommendations therefore. The Vice Chairperson shall have such other
powers and duties as may be prescribed for him or her by the Chairperson
of the Board or the Board of Directors. In the absence of or the
inability of the Chairperson of the Board to act as Chairperson of the
Board, the Vice Chairperson of the Board shall assume the powers and
duties of the Chairperson of the Board.
Section 4.5 QUALIFICATIONS AND REMOVAL. - No person who has attained
70 years of age shall be eligible for election or re-election to the Board
of Directors. Any Director who has attained seventy (70) years of age<PAGE>
shall resign from the Board of Directors effective as of the next annual
Meeting of Shareowners. For a period of five (5) years following the
formation of the Corporation, no person, except any of the initial
Directors selected pursuant to Section 4.2 hereof, who is an executive
officer or employee of the Corporation or any of its subsidiaries shall be
eligible to serve as a Director of the Corporation; provided, however,
that any individual serving as Chief Executive Officer of the Corporation
shall be eligible to serve as a Director of the Corporation. In the event
the Chief Executive Officer resigns or retires from his or her office or
employment with the Corporation, he or she shall simultaneously submit his
or her resignation from the Board of Directors. In the event that the
Chief Executive Officer is removed from his or her office by the Board of
Directors, or is involuntarily terminated from employment with the
Corporation, he or she shall simultaneously submit his or her resignation
from the Board of Directors. In the event that a Director experiences a
change in their principal occupation or primary business affiliation, the
Director must submit their resignation from the Board to the Nominating
and Governance Committee. The Nominating and Governance Committee shall
recommend to the Board of Directors whether the Board should accept such
resignation. If the Nominating and Governance Committee recommends
acceptance of the resignation, an affirmative vote of two-thirds of the
remaining Directors holding office is required to affirm the Nominating
and Governance Committee's recommendation. A resignation may be tendered
by any Director at any meeting of the shareholders or of the Board of
Directors, who shall at such meeting accept the same.
Section 4.6 REGULAR MEETINGS. - Regular meetings of the Board of
Directors shall be held at such time and place as may be determined by the
Board of Directors, but in no event shall the Board meet less than once a
year.
Section 4.7 SPECIAL MEETINGS. - Special meetings of the Board of
Directors may be called by or at the request of the Chairman of the Board,
the Vice Chairman of the Board, the Chief Executive Officer or any two
(2) Directors. The Chief Executive Officer or Secretary may fix any
place, either within or without the State of Wisconsin, whether in person
or by telecommunications, as the place for holding any special meeting.
Section 4.8 NOTICE; WAIVER. - Notice of any meeting of the Board of
Directors, unless otherwise provided pursuant to Section 4.6, shall be
given at least forty-eight (48) hours prior to the meeting by written
notice delivered personally or mailed to each Director at such address
designed by each Director, by telegram or other form of wire or wireless
communication. The notice need not describe the purpose of the meeting of
the Board of Directors or the business to be transacted at such meeting. <PAGE>
If mailed, such notice shall be deemed to be delivered when deposited in
the United States mail, so addressed, with postage prepared. Any Director
may waive notice of any meeting. The attendance of a Director at a
meeting shall constitute a waiver of notice of such meeting, except where
a Director attends a meeting for the express purpose of objecting to the
transaction of business because the meeting is not lawfully called or
convened.
Section 4.9 QUORUM. - A majority of the Board of Directors shall
constitute a quorum for the transaction of business at any meeting of the
Board of Directors, but if less than such majority is present at a
meeting, a majority of the Directors present may adjourn the meeting to
some other day without further notice.
Section 4.10 MEETING PARTICIPATION. - (a) Any or all members of
the Board of Directors, or any committee thereof, may participate in a
regular or special meeting by, or to conduct the meeting through, the use
of any means of communication by which any of the following occurs:
1) All participating directors may simultaneously hear each
other during the meeting.
2) All communication during the meeting is immediately
transmitted to each participating director, and each
participating director is able to immediately send messages
to all other participating directors.
(b) If a meeting is conducted by the means of communication
described herein, all participating directors shall be informed
that a meeting is taking place at which official business may be
transacted.
(c) A director participating in a meeting by means of such
communication is deemed to be present in person at the meeting.
Section 4.11 ACTION WITHOUT MEETING. - Any action required or
permitted to be taken at any meeting of the Directors of the Corporation
or of any committee of the Board may be taken without a meeting if a
consent in writing setting forth the action so taken shall be signed by
all of the Directors or all of the members of the Committee of Directors,
as the case may be. Such consent shall have the same force and effect as
a unanimous vote at a meeting and shall be filed with the Secretary of the
Corporation to be included in the official records of the Corporation.
The action taken is effective when the last Director signs the consent
unless the consent specifies a different effective date.<PAGE>
Section 4.12 PRESUMPTION OF ASSENT. - A Director of the Corporation
who is present at a meeting of the Board of Directors at which action on
any corporate matter is taken shall be presumed to have assented to the
action taken unless (a) the Director objects at the beginning of the
meeting or promptly upon arrival to the holding of or transacting business
at the meeting, (b) the Director's dissent or abstention shall be entered
in the minutes of the meeting, (c) the Director shall file a written
dissent or abstention to such action with the presiding officer of the
meeting before the adjournment thereof or shall forward such dissent or
abstention by registered or certified mail to the Secretary of the
Corporation immediately after the adjournment of the meeting, or (d) the
Director shall file a written notice to the Secretary of the Corporation
promptly after receiving the minutes of the meeting that the minutes
failed to show the Director's dissention or abstention from the action
taken. Such right to dissent or abstain shall not apply to a Director who
voted in favor of such action.
Section 4.13 VACANCIES. - Except as provided below, any vacancy
occurring in the Board of Directors or on any Committee of the Board of
Directors and any directorship to be filled by reason of an increase in
the number of Directors may be filled by the affirmative vote of a
majority of the Directors then in office, even if less than a quorum of
the Board of Directors. For a period of time commencing on formation of
Interstate Energy Corporation and expiring on the date of the third annual
meeting of shareowners of the Corporation, the initially appointed IES,
IPC and WPLH directors, each as a separate group, shall be entitled to
nominate those persons who will be eligible to be appointed, elected or
re-elected as IES, IPC and WPLH Directors. The Director or Directors so
chosen shall hold office until the next election of the Class for which
such Director or Directors shall have been chosen and until their
successors shall have been duly elected and qualified..)
Section 4.14 COMPENSATION. - Compensation and expenses for
attendance at a regular or special meeting of the Board of Directors, or
at any committee meeting, shall be payable in such amounts as determined
from time to time by the Board of Directors. No such payment shall
preclude any Director from serving the Corporation in any other capacity
and receiving compensation therefor. Directors who are full time
employees or officers of the Corporation shall not receive any
compensation.
ARTICLE V
COMMITTEES<PAGE>
Section 5.1 COMMITTEES. - The Board of Directors may, by resolution
passed by a majority of the whole Board, designate from their number
various Committees from time to time as corporate needs may dictate. The
Committees may make their own rules of procedure and shall meet where and
as provided by such rules, or by resolution of the Board of Directors. A
majority of the members of the Committee shall constitute a quorum for the
transaction of business. Each Committee shall keep regular minutes of its
meetings and report the same to the Board of Directors when required. The
Committee may be authorized by the Board of Directors to perform specified
functions, except that a committee may not do any of the following: (a)
authorize distributions; (b) approve or propose to shareowners action that
the Wisconsin Business Corporation Law requires to be approved by
shareowners; (c) fill vacancies on the Board of Directors, or, unless the
Board of Directors provides by resolution that vacancies on a committee
shall be filled by the affirmative vote of the remaining committee
members, on any Board committee; (d) amend the Corporation's Articles of
Incorporation; (e) adopt, amend or repeal bylaws; (f) approve a plan of
merger not requiring shareowner approval; (g) authorize or approve
reacquisition of shares, except according to a formula or method
prescribed by the Board of Directors; and (h) authorize or approve the
issuance or sale or contract for sale of shares, or determine the
designation and relative rights, preferences and limitations of a class or
series of shares, except that the Board of Directors may authorize a
committee to do so within limits prescribed by the Board of Directors.
Section 5.2 EXECUTIVE COMMITTEE. An Executive Committee is hereby
established and shall consist of at least three (3) members, including the
Chairman of the Board. The Executive Committee shall possess all the
powers and authority of the Board of Directors when said Board of
Directors is not in session, except for the powers and authorities set
forth in Section 5.1.
Section 5.3 AUDIT COMMITTEE. - An Audit Committee is hereby
established and shall consist of at least three (3) Directors, all of whom
shall be outside members of the Board of Directors. The members of the
Committee shall be elected annually by a majority vote of the members of
the Board of Directors. Said Committee shall meet at the call of any one
of its members, but in no event shall it meet less than once a year.
Subsequent to each such Committee meeting, a report of the actions taken
by such Committee shall be made to the Board of Directors.
Section 5.4 COMPENSATION AND PERSONNEL COMMITTEE - A Compensation
and Personnel Committee is hereby established and shall consist of at
least three (3) Directors who are not and never have been officers,
employees or legal counsel of the Company. The Chairperson and the<PAGE>
members of the Compensation and Personnel Committee shall be elected
annually by a majority vote of the members of the Board of Directors.
Said Committee shall meet at such times as it determines, but at least
twice each year, and shall meet at the request of the Chairman of the
Board, the Chief Executive Officer, or any Committee member. Subsequent
to each such Committee meeting, a report of the actions taken by such
Committee shall be made to the Board of Directors.
Section 5.5 NOMINATING AND GOVERNANCE COMMITTEE. - A Nominating and
Governance Committee shall be established and shall consist of at least
three (3) Directors, all of whom shall be outside members of the Board of
Directors. The Chairperson and the members of the Nominating and
Governance Committee shall be elected annually by a majority vote of the
members of the Board of Directors. Said Committee shall meet at the call
of any one of its members, but in no event shall it meet less than once a
year. Subsequent to each such Committee meeting, a report of the actions
taken by such Committee shall be made to the Board of Directors.
ARTICLE VI
OFFICERS
Section 6.1 OFFICERS. - The Board of Directors shall elect a Chief
Executive Officer, a President, such number of Vice Presidents with such
designations as the Board of Directors at the time may decide upon, a
Secretary, a Treasurer and a Controller. The Chief Executive Officer may
appoint such other officers and assistant officers as may be deemed
necessary. The same person may simultaneously hold more than one such
office.
Section 6.2 TERM OF OFFICERS. - All Officers, unless sooner removed,
shall hold their respective offices until their successors, willing to
serve, shall have been elected but any Officer may be removed from Office
at any time by the Board of Directors.
Section 6.3 REMOVAL OF OFFICERS. - Any officer may be removed by the
Board of Directors whenever in its judgment the best interests of the
Corporation will be served thereby, but such removal shall be without
prejudice to the contract rights, if any, of the person so removed.
Election or appointment of an officer shall not of itself create contract
rights.
Section 6.4 CHIEF EXECUTIVE OFFICER. - Subject to the control of
the Board of Directors the Chief Executive Officer designated by the Board
of Directors shall have and be responsible for the general management and
direction of the business of the Corporation, shall establish the lines of<PAGE>
authority and supervision of the Officers and employees of the
Corporation, shall have the power to appoint and remove and discharge any
and all agents and employees of the Corporation not elected or appointed
directly by the Board of Directors, and shall assist the Board in the
formulation of policies of the Corporation. The Chairperson of the Board,
if Chief Executive Officer, may delegate any part of his or her duties to
the President, or to one or more of the Vice Presidents of the
Corporation.
Section 6.5 PRESIDENT. - The President, when he or she is not
designated as and does not have the powers of the Chief Executive Officer,
shall have such other powers and duties as may from time to time be
prescribed by the Board of Directors or be delegated to him or her by the
Chairperson of the Board or the Chief Executive Officer.
Section 6.6 VICE PRESIDENTS. - The Vice Presidents shall have such
powers and duties as may be prescribed for him or her by the Board of
Directors and the Chief Executive Officer. In the absence of or in the
event of the death of the Chief Executive Officer and the President, the
inability or refusal to act, or in the event for any reason it shall be
impracticable for Chief Executive Officer and the President to act
personally, the Vice President (or in the event there be more than one
Vice President, the Vice Presidents in the order designated by the Board
of Directors, or in the absence of any designation, then in the order of
their election) shall perform the duties of the Chief Executive Officer
and the President, and when so acting, shall have all the powers of and be
subject to all the restrictions upon the Chief Executive Officer and the
President. The execution of any instrument of the Corporation by any Vice
President shall be conclusive evidence, as to third parties, of his or her
authority to act in the stead of the Chief Executive Officer and the
President.
Section 6.7 SECRETARY. - The Secretary shall attend all meetings of
the Board of Directors, shall keep a true and faithful record thereof in
proper books to be provided for that purpose, and shall be responsible for
the custody and care of the corporate seal, corporate records and minute
books of the Corporation, and of all other books, documents and papers as
in the practical business operation of the Corporation shall naturally
belong in the office or custody of the Secretary, or shall be placed in
his or her custody by the Chief Executive Officer or by the Board of
Directors. He or she shall also act as Secretary of all shareowners'
meetings, and keep a record thereof. He or she shall, except as may be
otherwise required by statute or by these bylaws, sign, issue and publish
all notices required for meetings of shareowners and of the Board of
Directors. He or she shall be responsible for the custody of the stock<PAGE>
books of the Corporation and shall keep a suitable record of the addresses
of shareowners. He or she shall also be responsible for the collection,
custody and disbursement of the funds received for dividend reinvestment.
He or she shall sign stock certificates, bonds and mortgages, and all
other documents and papers to which his or her signature may be necessary
or appropriate, shall affix the seal of the Corporation to all instruments
requiring the seal, and shall have such other powers and duties as are
commonly incidental to the office of Secretary, or as may be prescribed
for him or her by the President or by the Board of Directors.
Section 6.8 TREASURER. - The Treasurer shall have charge of, and be
responsible for, the collection, receipt, custody and disbursement of the
funds of the Corporation, and shall deposit its funds in the name of the
Corporation in such banks or trust companies as he or she shall designate
and shall keep a proper record of cash receipts and disbursements. He or
she shall be responsible for the custody of such books, receipted vouchers
and other books and papers as in the practical business operation of the
Corporation shall naturally belong in the office or custody of the
Treasurer, or shall be placed in his or her custody by the President, or
by the Board of Directors. He or she shall sign checks, drafts, and other
paper providing for the payment of money by the Corporation for operating
purposes in the usual course or business. He or she may, in the absence of
the Secretary and Assistant Secretaries sign stock certificates. The
Treasurer shall have such other powers and duties as are commonly
incidental to the office of Treasurer, or as may be prescribed for him or
her by the President or by the Board of Directors.
Section 6.9 CONTROLLER. - The Controller shall be the principal
accounting Officer of the Corporation. He or she shall have general
supervision over the books of accounts of the Corporation. He or she
shall examine the accounts of all Officers and employees from time to time
and as often as practicable, and shall see that proper returns are made of
all receipts from all sources. All bills, properly made in detail and
certified, shall be submitted to him or her, and he or she shall audit and
approve the same if found satisfactory and correct, but he or she shall
not approve any voucher unless charges covered by the voucher have been
previously approved through work orders, requisition or otherwise by the
head of the department in which it originated, or unless he or she shall
be otherwise satisfied of its propriety and correctness. He or she shall
have full access to all minutes, contracts, correspondence and other
papers and records of the Corporation relating to its business matters,
and shall be responsible for the custody of such books and documents as
shall naturally belong in the custody of the Controller and as shall be
placed in his or her custody by the President or by the Board of
Directors. The Controller shall have such other powers and duties as are<PAGE>
commonly incidental to the office of Controller, or as may be prescribed
for him or her by the President or by the Board of Directors.
Section 6.10 ASSISTANT OFFICERS. - The Assistant Secretaries,
Assistant Treasurers, Assistant Controllers, and other Assistant Officers
shall respectively assist the Secretary, Treasurer, Controller, and other
Officers of the Corporation in the performance of the respective duties
assigned to such principal Officer, and in assisting his or her principal
Officer each assistant Officer shall to that extent and for such purpose
have the same powers as his or her principal Officer. The powers and
duties of any such principal Officer shall temporarily devolve upon an
assistant Officer in case of the absence, disability, death, resignation
or removal from office of such principal Officer.
ARTICLE VII
CERTIFICATES FOR SHARES AND THEIR TRANSFER
Section 7.1 CERTIFICATES FOR SHARES. - Each certificate representing
shares of the Corporation shall state upon the fact (a) that the
Corporation is organized under the laws of the State of Wisconsin, (b) the
name of the person to whom issued, (c) the number and class of shares, and
the designation of the series, if any, which such certificate represents,
and (d) the par value of each share, if any, and each such certificate
shall otherwise be in such form as shall be determined by the Board of
Directors. Such certificates shall be signed by the Chairman of the
Board, or the Chief Executive Officer or the President and by the
Secretary or an Assistant Secretary and shall be sealed with the corporate
seal or a facsimile thereof. The signatures of such officers upon a
certificate may be facsimiles if the certificate is manually signed on
behalf of a transfer agent and registrar. In case any officer or other
authorized person who has signed or whose facsimile signature has been
placed upon such certificate for the Corporation shall have ceased to be
such officer or employee or agent before such certificate is issued, it
may be issued by the Corporation with the same effect as if such person
where an officer or employee or agent at the date of its issue. Each
certificate for shares shall be consecutively numbered or otherwise
identified.
All certificates surrendered to the Corporation for transfer shall be
canceled and no new certificate shall be issued until the former
certificate for a like number of shares shall have been surrendered and
canceled, except that in case of a lost, destroyed or mutilated
certificate a new one may be issued therefor upon such terms and indemnity
to the Corporation as the Board of Directors may prescribe.<PAGE>
Section 7.2. TRANSFER OF SHARES. - Transfer of shares of the
Corporation shall be made only on the stock transfer books of the
Corporation by the holder of record thereof or by such person's legal
representative, who shall furnish proper evidence of authority to
transfer, or authorized attorney, by power of attorney duly executed and
filed with the Secretary of the Corporation, and on surrender for
cancellation of the certificate for such shares.
Subject to the provisions of Section 3.10 of Article III of these
Bylaws, the person in whose name shares stand on the books of the
Corporation shall be treated by the Corporation as the owner thereof for
all purposes, including all rights deriving from such shares, and the
Corporation shall not be bound to recognize any equitable or other claim
to, or interest in, such shares or rights deriving from such shares, on
the part of any other person, including (without limitation) a purchaser,
assignee or transferee of such shares, or rights deriving from such
shares, unless and until such purchaser, assignee, transferee or other
person becomes the record holder of such shares, whether or not the
Corporation shall have either actual or constructive notice of the
interest of such purchaser, assignee, transferee or other person. Except
as provided in said Section 3.10 hereof, no such purchaser, assignee,
transferee or other person shall be entitled to receive notice of the
meetings of shareholders, to vote at such meetings, to examine the
complete record of the shareholders entitled to vote at meetings, or to
own, enjoy or exercise any other property or rights deriving from such
shares against the Corporation, until such purchaser, assignee, transferee
or other person has become the record holder of such shares.
Section 7.3 LOST, DESTROYED OR STOLEN CERTIFICATES. - When the owner
claims that certificates for shares have been lost, destroyed or
wrongfully taken, a new certificate shall be issued in place thereof if
the owner (a) so requests before the Corporation has notice that such
shares have been acquired by a bona fide purchaser, (b) files with the
Corporation a sufficient indemnity bond if required by the Corporation and
(c) satisfies such other reasonable requirements as may be provided by the
Corporation.
Section 7.4 STOCK REGULATIONS. - The Board of Directors shall have
the power and authority to make all such further rules and regulations not
inconsistent with law as it may deem expedient concerning the issue,
transfer and registration of shares of the Corporation.
ARTICLE VIII
INDEMNIFICATION AND LIABILITY OF DIRECTOR AND OFFICERS<PAGE>
Section 8.1 INDEMNIFICATION. - The Corporation shall, to the fullest
extent permitted or required by Sections 180.0850 to 180.0859, inclusive,
of the Wisconsin Business Corporation Law, including any amendments
thereto (but in the case of any such amendment, only to the extent such
amendment permits or requires the corporation to provide broader
indemnification rights than prior to such amendment), indemnify its
Directors, Officers, employees and agents against any and all Liabilities,
and advance any and all reasonable Expenses, incurred thereby in any
Proceeding to which any such Director, Officer, employee or agent is a
Party because he or she is or was a Director, Officer, employee or agent
of the Corporation. The rights to indemnification granted hereunder shall
not be deemed exclusive of any other rights to indemnification against
Liabilities or the advancement of Expenses which a Director, Officer,
employee or agent may be entitled under any written agreement, Board
resolution, vote of shareowners, the Wisconsin Business Corporation Law or
otherwise. The Corporation may, but shall not be required to, supplement
the foregoing rights to indemnification against Liabilities and
advancement of Expenses under this Section 8.1 by the purchase of
insurance on behalf of any one or more of such Directors, Officers,
employees or agents, whether or not the Corporation would be obligated to
indemnify or advance Expenses to such Director, Officer, employee or agent
under this Section 8.1. All capitalized terms used in this Article VIII
and not otherwise defined herein shall have the meaning set forth in
Section 180.0850 of the Wisconsin Business Corporation Law.
ARTICLE IX
MISCELLANEOUS
Section 9.1 FISCAL YEAR. - The fiscal year of the Corporation shall
be the calendar year.
Section 9.2 DIVIDENDS. - Subject to the provisions of law or the
Articles of Incorporation, the Board of Directors may, at any regular or
special meeting, declare dividends upon the capital stock of the
Corporation payable out of surplus (whether earned or paid-in) or profits
as and when they deem expedient. Before declaring any dividend there may
be set apart out of surplus or profits such sum or sums as the directors
from time to time in their discretion deem proper for working capital or
as a reserve fund to meet contingencies or for such other purposes as the
directors shall deem conducive to the interests of the Corporation.
Section 9.3 CONTRACTS, CHECKS, DRAFTS, DEEDS, LEASES AND OTHER
INSTRUMENTS. - All contracts, checks, drafts or other orders for the
payment of money, notes or other evidences of indebtedness issued in the
name of the Corporation, shall be signed by such officer or officers,<PAGE>
agent or agents of the Corporation and in such manner as shall from time
to time be determined by resolution of the Board of Directors. The Board
may authorize by resolution any officer or officers to enter into and
execute any contract or instrument of indebtedness in the name of the
Corporation, and such authority may be general or confined to specific
instances. All funds of the Corporation not otherwise employed shall be
deposited from time to time to the credit of the Corporation in such banks
or other depositories as the Treasurer may authorize.
All contracts, deeds, mortgages, leases or instruments that require
the corporate seal of the Corporation to be affixed thereto shall be
signed by the President or a Vice President, and by the Secretary, or an
Assistant Secretary, or by such other officer or officers, or person or
persons, as the Board of Directors may be resolution prescribe.
Section 9.4 VOTING OF SHARES OWNED BY THE CORPORATION. - Subject
always to the specific directions of the Board of Directors, any share or
shares of stock issued by any other corporation and owned or controlled by
the Corporation may be voted at any shareholders' meeting of such other
corporation by the Chief Executive Officer of the Corporation, if
present, or if absent by any other officer of the Corporation who may be
present. Whenever, in the judgment of the Chief Executive Officer, or if
absent, of any officer, it is desirable for the Corporation to execute a
proxy or give a shareholders' consent in respect to any share or shares of
stock issued by any other corporation and owned by the Corporation, such
proxy or consent shall be executed in the name of the Corporation by the
Chief Executive Officer or one of the officers of the Corporation and
shall be attested by the Secretary or an Assistant Secretary of the
Corporation without necessity of any authorization by the Board of
Directors. Any person or persons designated in the manner above stated as
the proxy or proxies of the Corporation shall have full right, power and
authority to vote the share or shares of stock issued by such other
corporation and owned by the Corporation in the same manner as such share
or shares might be voted by the Corporation.
ARTICLE X
AMENDMENT OR REPEAL OF BYLAWS
Section 10.1 AMENDMENTS BY BOARD OF DIRECTORS. - Except as otherwise
provided by the Wisconsin Business Corporation Law or the Articles of
Incorporation, these Bylaws may be amended or repealed and new Bylaws may
be adopted by the Board of Directors by the affirmative vote of a majority
of the number of directors present at any meeting at which a quorum is in
attendance; provided, however, that the shareowners in adopting, amending<PAGE>
or repealing a particular bylaw may provide therein that the Board of
Directors may not amend, repeal or readopt that bylaw.
Section 10.2 IMPLIED AMENDMENT. - Any action taken or authorized by
the shareowners or by the Board of Directors which would be inconsistent
with the Bylaws then in effect but which is taken or authorized by
affirmative vote of not less than the number of shares or the number of
directors required to amend the Bylaws so that the Bylaws would be
consistent with such action shall be given the same effect as though the
Bylaws had been temporarily amended or suspended so far, but only so far,
as is necessary to permit the specific action so taken or authorized.<PAGE>
As Executed
EMPLOYMENT AGREEMENT
THIS AGREEMENT by and between Interstate Energy Corporation, a
Wisconsin corporation (the "Company"), and Erroll B. Davis, Jr. (the
"Executive"), dated as of the 21st day of April, 1998.
W I T N E S S E T H T H A T
WHEREAS, the Company is party to an Agreement and Plan of
Merger, as amended (the "Merger Agreement"), dated November 10, 1995, by
and among the Company, IES Industries Inc., an Iowa corporation ("IES"),
Interstate Power Company, a Delaware corporation ("Interstate Power"),
WPLH Acquisition Co., a Wisconsin corporation and a wholly-owned
subsidiary of the Company, and Interstate Power Company, a Wisconsin
corporation and a wholly-owned subsidiary of Interstate; and
WHEREAS, the parties to the Merger Agreement wish to provide for
the orderly succession of management of the Company following the
Effective Time (as defined in the Merger Agreement); and
WHEREAS, the parties to the Merger Agreement further wish to
provide for the employment by the Company of the Executive, and the
Executive wishes to serve the Company and its subsidiaries, in the
capacities and on the terms and conditions set forth in this Agreement.
NOW, THEREFORE, it is hereby agreed as follows:
1. Employment Period. The Company shall employ the Executive,
and the Executive shall serve the Company, on the terms and conditions set
forth in this Agreement, for an initial period (the "Initial Period")
commencing at the Effective Time and ending on the date immediately
preceding the fifth anniversary of the Effective Time. This Agreement
thereafter will automatically renew for successive terms of one (1) year
each, unless either party hereto has given sixty (60) days' advance
written notice of its or his intent to allow the term of this Agreement to
expire. The term during which the Executive is employed by the Company
hereunder (including without limitation the Initial Period) is hereafter
referred to as the "Employment Period." Upon the termination of the
Employment Period the Executive will have the status of a retired senior
executive officer of the Company and shall be entitled to all of the
rights, privileges and benefits provided to such retired officers.
2. Position and Duties.
(a) During the first two (2) years of the Initial Period,
the Executive shall serve as President and Chief Executive
Officer of the Company and thereafter, until the end of the
Employment Period, the Executive shall serve as Chairman of the
Board of Directors, President and Chief Executive Officer of the
Company; in each case with such duties and responsibilities as
are customarily assigned to such positions, and such other
duties and responsibilities not inconsistent therewith as may
from time to time be assigned to him by the Board of Directors
of the Company (the "Board"). The Executive also shall continue
to serve as a member of the Board following the Effective Time,
and the Board shall propose the Executive for re-election to the
Board throughout the Employment Period.
(b) In addition to the responsibilities designated in
paragraph (a) of Section 2 above, during the three-year period
following the Effective Time, the Executive shall be entitled to
serve as the Chief Executive Officer of each entity which during
such period is a subsidiary of the Company and the Company shall
cause the Executive to be appointed or elected as the Chief
Executive Officer of each such subsidiary. In his capacity as
the Chief Executive Officer of said subsidiaries, the Executive
shall have such duties and responsibilities as are customarily
assigned to such position, and such other duties and
responsibilities not inconsistent therewith as may from time to
time be assigned to him by the Board of Directors of each such
subsidiary. During the Employment Period, the Executive also
shall serve as a member of the Board of Directors of each of the
Company's subsidiaries and the Company shall cause the Executive
to be appointed, elected or re-elected as such a director.
(c) During the Employment Period, and excluding any
periods of vacation and sick leave to which the Executive is
entitled, the Executive shall devote reasonable attention and
time during normal business hours to the business and affairs of
the Company and its affiliates and, to the extent necessary to
discharge the responsibilities assigned to the Executive under
this Agreement, use the Executive's reasonable best efforts to
carry out such responsibilities faithfully and efficiently. It
shall not be considered a violation of the foregoing for the
Executive to serve on corporate, industry, civic or charitable
boards or committees, so long as such activities do not
significantly interfere with the performance of the Executive's
responsibilities as an employee of the Company and its
affiliates in accordance with this Agreement.
(d) The Company's headquarters shall be located in
Madison, Wisconsin and the Executive shall reside in the general
area of Madison, Wisconsin. During the Employment Period, the
Company also will provide the Executive with a furnished
apartment in the Cedar Rapids, Iowa area.
3. Compensation.
(a) Base Salary. The Executive's compensation during the
Employment Period shall be determined by the Board upon the
recommendation of the Compensation and Personnel Committee (or
other appropriate committee) of the Board, subject to the next
sentence and paragraph (b) of Section 3. During the Employment
Period, the Executive shall receive an annual base salary
("Annual Base Salary") of not less than his aggregate annual
base salary from the Company and its subsidiaries as in effect
immediately before the Effective Time. The Annual Base Salary
shall be payable in accordance with the Company's regular
payroll practice for its senior executives, as in effect from
time to time. During the Employment Period, the Annual Base
Salary shall be reviewed for possible increase at least
annually. Any increase in the Annual Base Salary shall not
limit or reduce any other obligation of the Company under this
Agreement. The Annual Base Salary shall not be reduced after
any such increase, and the term "Annual Base Salary" shall
thereafter refer to the Annual Base Salary as so increased.
(b) Incentive Compensation. During the Employment Period,
the Executive shall continue to participate in short-term
incentive compensation plans and long-term incentive
compensation plans (the latter to consist of plans offering
stock options, restricted stock and other long-term incentive
compensation) offered by the Company and its present or future
affiliates which shall provide him with the opportunity to earn,
on a year-by-year basis, short-term and long-term incentive
compensation (the "Incentive Compensation") at least equal to
the amounts that he had the opportunity to earn immediately
before the Effective Time, and such compensation shall be
payable in accordance with standards (i.e., performance
criteria, performance levels, etc.) which are no less favorable
to the Executive than those applicable with respect to the
Incentive Compensation payable to the Executive immediately
before the Effective Time.
(c) Other Benefits.
(i) Retirement Plan; Supplemental Retirement Plan.
During the Employment Period, the Executive shall
participate in a retirement plan and/or supplemental
retirement plan (the "Defined Benefit Arrangement") such
that the aggregate value of the retirement benefits that he
and his spouse will receive at the end of the Employment
Period under all defined benefit plans of the Company and
its affiliates (whether qualified or not) will be not less
than the benefits he would have received (assuming his
employment through the end of the Employment Period) under
the Wisconsin Power and Light Company Retirement Plan and
the Supplemental Retirement Plan in which the Executive
participates, as in effect immediately prior to the
Effective Time.
(ii) Executive Tenure Compensation Plan. During the
Employment Period, the Executive shall continue to
participate in the Wisconsin Power and Light Company
Executive Tenure Compensation Plan.
(iii) Life Insurance. During the Employment
Period, the Company shall provide the Executive with life
insurance coverage (the "Life Insurance Coverage")
providing a death benefit to such beneficiary or
beneficiaries as the Executive may designate of not less
than three times his Annual Base Salary.
(iv) Additional Benefits. In addition, and without
limiting the generality of the foregoing, during the
Employment Period and thereafter: (A) the Executive shall
be entitled to participate in all applicable incentive,
savings and retirement plans, practices, policies and
programs of the Company and its affiliates to the same
extent as other senior executives (or, where applicable,
retired senior executives) of the Company, and (B) the
Executive and/or the Executive's family, as the case may
be, shall be eligible for immediate participation in (and
without any limitation for preexisting conditions), and
shall receive all benefits under, all applicable welfare
benefit plans, practices, policies and programs provided by
the Company and its affiliates, other than severance plans,
practices, policies and programs but including, without
limitation, medical, prescription, dental, disability,
salary continuance, employee life insurance, group life
insurance, accidental death and travel accident insurance
plans and programs, to the same extent as other senior
executives (or, where applicable, retired senior
executives) of the Company, provided, however, that the
Executive's aggregate benefits as a retired senior
executive under the plans described in this clause (B)
shall not be less than the benefits provided by the Company
and its affiliates to its retired senior executive officers
as of the date of this Agreement.
(d) Perquisites. During the Employment Period, the
Executive shall be entitled to receive such perquisites as the
Company may establish from time to time which are commensurate
with his position and at lease comparable to those received by
other senior executives at the Company.
(e) Expense Reimbursement. The Company shall reimburse
the Executive for all reasonable and documented expenses
incurred by the Executive in the performance of the Executive's
duties under this Agreement.
4. Termination of Employment.
(a) Death or Disability. The Executive's employment shall
terminate automatically upon the Executive's death during the
Employment Period. The Company shall be entitled to terminate
the Executive's employment because of the Executive's Disability
during the Employment Period. "Disability" means that (i) the
Executive has been unable, for a period of 180 consecutive
business days, to perform the Executive's duties under this
Agreement, as a result of physical or mental illness or injury,
and (ii) a physician selected by the Company or its insurers,
and acceptable to the Executive or the Executive's legal
representative, has determined that the Executive's incapacity
is total and permanent. A termination of the Executive's
employment by the Company for Disability shall be communicated
to the Executive by written notice, and shall be effective on
the 30th day after receipt of such notice by the Executive (the
"Disability Effective Date"), unless the Executive returns to
full-time performance of the Executive's duties before the
Disability Effective Date.
(b) By the Company.
(i) The Company may terminate the Executive's
employment during the Employment Period for Cause or
without Cause. "Cause" means:
A. the willful and continued failure of the
Executive substantially to perform the Executive's
duties under this Agreement (other than as a result of
physical or mental illness or injury), after the Board
delivers to the Executive a written demand for
substantial performance that specifically identifies
the manner in which the Board believes that the
Executive has not substantially performed the
Executive's duties; or
B. illegal conduct or gross misconduct by the
Executive, in either case that is willful and results
in material and demonstrable damage to the business or
reputation of the Company.
No act or failure to act on the part of the Executive shall
be considered "willful" unless it is done, or omitted to be
done, by the Executive in bad faith or without reasonable
belief that the Executive's action or omission was in the
best interests of the Company. Any act or failure to act
that is based upon authority given pursuant to a resolution
duly adopted by the Board, or the advice of counsel for the
Company, shall be conclusively presumed to be done, or
omitted to be done, by the Executive in good faith and in
the best interests of the Company.
(ii) A termination of the Executive's employment for
Cause shall be effected in accordance with the following
procedures. The Company shall give the Executive written
notice ("Notice of Termination for Cause") of its intention
to terminate the Executive's employment for Cause, setting
forth in reasonable detail the specific conduct of the
Executive that it considers to constitute Cause and the
specific provision(s) of this Agreement on which it relies,
and stating the date, time and place of the Special Board
Meeting for Cause. The "Special Board Meeting for Cause"
means a meeting of the Board called and held specifically
for the purpose of considering the Executive's termination
for Cause, that takes place not less than ten (10) and not
more than twenty (20) business days after the Executive
receives the Notice of Termination for Cause. The
Executive shall be given an opportunity, together with
counsel, to be heard at the Special Board Meeting for
Cause. The Executive's termination for Cause shall be
effective when and if a resolution is duly adopted at the
Special Board Meeting for Cause by a two-thirds vote of the
entire membership of the Board, excluding employee
directors, stating that in the good faith opinion of the
Board, the Executive is guilty of the conduct described in
the Notice of Termination for Cause, and that conduct
constitutes Cause under this Agreement.
(iii) A termination of the Executive's employment
without Cause shall be effected in accordance with the
following procedures. The Company shall give the Executive
written notice ("Notice of Termination without Cause") of
its intention to terminate the Executive's employment
without Cause, stating the date, time and place of the
Special Board Meeting without Cause. The "Special Board
Meeting without Cause" means a meeting of the Board called
and held specifically for the purpose of considering the
Executive's termination without Cause, that takes place not
less than ten (10) and not more than twenty (20) business
days after the Executive receives the Notice of Termination
without Cause. The Executive shall be given an
opportunity, together with counsel, to be heard at the
Special Board Meeting without Cause. The Executive's
termination without Cause shall be effective when and if a
resolution is duly adopted at the Special Board Meeting
without Cause by a two-thirds vote of the entire membership
of the Board, excluding employee directors, stating that
the Executive is terminated without Cause.
(c) Good Reason.
(i) The Executive may terminate employment for Good
Reason or without Good Reason. "Good Reason" means:
A. the assignment to the Executive of any
duties inconsistent in any respect with paragraphs (a)
and (b) of Section 2 of this Agreement, or any other
action by the Company that results in a diminution in
the Executive's position, authority, duties or
responsibilities, other than an isolated,
insubstantial and inadvertent action that is not taken
in bad faith and is remedied by the Company promptly
after receipt of notice thereof from the Executive;
B. any failure by the Company to comply with
any provision of Section 3 of this Agreement, other
than an isolated, insubstantial and inadvertent
failure that is not taken in bad faith and is remedied
by the Company promptly after receipt of notice
thereof from the Executive;
C. any requirement by the Company that the
Executive's services be rendered primarily at a
location or locations other than that provided for in
paragraph (d) of Section 2 of this Agreement;
D. any purported termination of the Executive's
employment by the Company for a reason or in a manner
not expressly permitted by this Agreement;
E. any failure by the Company to comply with
paragraph (c) of Section 11 of this Agreement; or
F. any other substantial breach of this
Agreement by the Company that either is not taken in
good faith or is not remedied by the Company promptly
after receipt of notice thereof from the Executive.
(ii) A termination of employment by the Executive for
Good Reason shall be effectuated by giving the Company
written notice ("Notice of Termination for Good Reason") of
the termination within six months of the event constituting
Good Reason, setting forth in reasonable detail the
specific conduct of the Company that constitutes Good
Reason and the specific provision(s) of this Agreement on
which the Executive relies. A termination of employment by
the Executive for Good Reason shall be effective on the
fifth business day following the date when the Notice of
Termination for Good Reason is given, unless the notice
sets forth a later date (which date shall in no event be
later than thirty (30) days after the notice is given).
(iii) A termination of the Executive's employment
by the Executive without Good Reason shall be effected by
giving the Company written notice of the termination.
(d) Date of Termination. The "Date of Termination" means
the date of the Executive's death, the Disability Effective
Date, the date on which the termination of the Executive's
employment by the Company for Cause or without Cause or by the
Executive for Good Reason is effective, or the date on which the
Executive gives the Company notice of a termination of
employment without Good Reason, as the case may be.
5. Obligations of the Company upon Termination.
(a) By the Company other than for Cause, Death or
Disability; by the Executive for Good Reason. If, during the
Employment Period, the Company terminates the Executive's
employment, other than for Cause, Death, or Disability, or the
Executive terminates employment for Good Reason, the Company
shall continue to provide the Executive with the compensation
and benefits set forth in paragraphs (a), (b) and (c) of Section
3 as if he had remained employed by the Company pursuant to this
Agreement through the end of the Employment Period and then
retired (at which time he will be treated as eligible for and
will be entitled to receive all retiree welfare benefits and
other benefits provided to retired senior executives, as set
forth in Section 3(c), with such benefits being calculated for
this purpose as though the Executive had retired at age 62 with
earnings on an annual basis during the years between the Date of
Termination and age 62 equal to the Executive's earnings for the
year immediately preceding the Date of Termination); provided,
that the Incentive Compensation for the period through the end
of the Employment Period shall be equal to the maximum Incentive
Compensation that the Executive would have been eligible to earn
for such period; provided, further that in lieu of stock
options, restricted stock and other stock-based awards, the
Executive shall be paid cash equal to the fair market value
(without regard to any restrictions) of the stock options,
restricted stock and other stock-based awards that would
otherwise have been granted; and provided, further that to the
extent any benefits described in paragraph (c) of Section 3
cannot be provided pursuant to the plan or program maintained by
the Company for its executives, the Company shall provide such
benefits outside such plan or program at no additional cost
(including without limitation tax cost) to the Executive and his
family; and provided, finally, that during any period when the
Executive is eligible to receive benefits of the type described
in clause (B) of paragraph (c)(iv) of Section 3 under another
employer-provided plan, the benefits provided by the Company
under this paragraph (a) of Section 5 may be made secondary to
those provided under such other plan. In addition to the
foregoing, any restricted stock outstanding on the Date of
Termination shall be fully vested as of the Date of Termination
and all options outstanding on the Date of Termination shall be
fully vested and exercisable and shall remain in effect and
exercisable through the end of their respective terms, without
regard to the termination of the Executive's employment. The
payments and benefits provided pursuant to this paragraph (a) of
Section 5 are intended as liquidated damages for a termination
of the Executive's employment by the Company other than for
Cause or Disability or for the actions of the Company leading to
a termination of the Executive's employment by the Executive for
Good Reason, and shall be the sole and exclusive remedy
therefor.
(b) Death and Disability. If the Executive's employment
is terminated by reason of the Executive's death or Disability
during the Employment Period, the Company shall pay to the
Executive or, in the case of the Executive's death, to the
Executive's designated beneficiaries (or, if there is no such
beneficiary, to the Executive's estate or legal representative),
in a lump sum in cash within thirty (30) days after the Date of
Termination, the sum of the following amounts (the "Accrued
Obligations"): (1) any portion of the Executive's Annual Base
Salary through the Date of Termination that has not yet been
paid; (2) an amount representing the Incentive Compensation for
the period that includes the Date of Termination, computed by
assuming that the amount of all such Incentive Compensation
would be equal to the maximum amount of such Incentive
Compensation that the Executive would have been eligible to earn
for such period, and multiplying that amount by a fraction, the
numerator of which is the number of days in such period through
the Date of Termination, and the denominator of which is the
total number of days in the relevant period; (3) any
compensation previously deferred by the Executive (together with
any accrued interest or earnings thereon) that has not yet been
paid; and (4) any accrued but unpaid Incentive Compensation and
vacation pay. Any deferred compensation (together with any
accrued interest or earnings thereon, if any) that has not yet
been paid, will be paid in accordance with the terms and
conditions applicable to such deferred compensation.
(c) By the Company for Cause; By the Executive Other than
for Good Reason. If the Executive's employment is terminated by
the Company for Cause during the Employment Period, the Company
shall pay the Executive the Annual Base Salary through the Date
of Termination and the amount of any compensation previously
deferred by the Executive (together with any accrued interest or
earnings thereon), in each case to the extent not yet paid, and
the Company shall have no further obligations under this
Agreement, except as specified in Section 6 below. If the
Executive voluntarily terminates employment during the
Employment Period, other than for Good Reason, the Company shall
pay the Accrued Obligations to the Executive in a lump sum in
cash within thirty (30) days of the Date of Termination, and the
Company shall have no further obligations under this Agreement,
except as specified in Section 6 below.
6. Non-exclusivity of Rights. Nothing in this Agreement shall
prevent or limit the Executive's continuing or future participation in any
plan, program, policy or practice provided by the Company or any of its
affiliates for which the Executive may qualify, nor shall anything in this
Agreement limit or otherwise affect such rights as the Executive may have
under any contract or agreement with the Company or any of its affiliates
relating to subject matter other than that specifically addressed herein.
Vested benefits and other amounts that the Executive is otherwise entitled
to receive under the Incentive Compensation program, the Defined Benefit
Arrangement, the Life Insurance Coverage, the Executive Tenure
Compensation Plan, the Executive's Deferred Compensation Plan(s), or any
other plan, policy, practice or program of, or any contract or agreement
with, the Company or any of its affiliates on or after the Date of
Termination shall be payable in accordance with the terms of each such
plan, policy, practice, program, contract or agreement, as the case may
be, except as explicitly modified by this Agreement.
7. Full Settlement. The Company's obligation to make the
payments provided for in, and otherwise to perform its obligations under,
this Agreement shall not be affected by any set-off, counterclaim,
recoupment, defense or other claim, right or action that the Company may
have against the Executive or others. In no event shall the Executive be
obligated to seek other employment or take any other action by way of
mitigation of the amounts payable to the Executive under any of the
provisions of this Agreement. The amounts payable by the Company under
this Agreement shall not be offset or reduced by any amounts otherwise
receivable or received by the Executive from any source, except as
specifically provided in paragraph (a) of Section 5 with respect to
benefits described in clause (B) of paragraph (c)(iv) of Section 3.
8. Confidential Information. The Executive shall hold in a
fiduciary capacity for the benefit of the Company all secret or
confidential information, knowledge or data relating to the Company or any
of its affiliated companies and their respective businesses that the
Executive obtains during the Executive's employment by the Company or any
of its affiliated companies and that is not public knowledge (other than
as a result of the Executive's violation of this Section 8) ("Confidential
Information"). The Executive shall not communicate, divulge or
disseminate Confidential Information at any time during or after the
Executive's employment with the Company, except with the prior written
consent of the Company or as otherwise required by law or legal process.
In no event shall any asserted violation of the provisions of this Section
8 constitute a basis for deferring or withholding any amounts otherwise
payable to the Executive under this Agreement.
9. Limitation on Payments.
(a) Notwithstanding any other provision of this Agreement,
if any portion of any payment under this Agreement, or under any
other agreement with or plan of the Company or its affiliates
(in the aggregate "Total Payments"), would constitute an "excess
parachute payment," then the Total Payments to be made to the
Executive shall be reduced such that the value of the aggregate
Total Payments that the Executive is entitled to receive shall
be One Dollar ($1) less than the maximum amount which the
Executive may receive without becoming subject to the tax
imposed by Section 4999 (or any successor provision) of the
Internal Revenue Code of 1986, as amended (the "Code") or which
the Company may pay without loss of deduction under Section
280G(a) of the Code (or any successor provision). For purposes
of this Agreement, the terms "excess parachute payment" and
"parachute payments" shall have the meanings assigned to them in
Section 280G of the Code (or any successor provision), and such
"parachute payments" shall be valued as provided therein.
Present value for purposes of this Agreement shall be calculated
in accordance with Section 1274(b)(2) of the Code (or any
successor provision). Within fifteen (15) days following the
Date of Termination or notice by the Company to the Executive of
its belief that there is a payment or benefit due the Executive
which will result in an excess parachute payment as defined in
Section 280G of the Code (or any successor provision), the
Executive and the Company, at the Company's expense, shall
obtain the opinion (which need not be unqualified) of nationally
recognized tax counsel selected by the Company's independent
auditors and acceptable to the Executive in his sole discretion
(which may be regular outside counsel to the Company), which
opinion sets forth (i) the amount of the Base Period Income,
(ii) the amount and present value of Total Payments and (iii)
the amount and present value of any excess parachute payments
determined without regard to the limitations of this paragraph
(a) of Section 9. As used in this Agreement, the term "Base
Period Income" means an amount equal to the Executive's
"annualized includible compensation for the base period" as
defined in Section 280G(d)(1) of the Code (or any successor
provision). For purposes of such opinion, the value of any
noncash benefits or any deferred payment or benefit shall be
determined by the Company's independent auditors in accordance
with the principles of Sections 280G(d)(3) and (4) of the Code
(or any successor provisions), which determination shall be
evidenced in a certificate of such auditors addressed to the
Company and the Executive. Such opinion shall be dated as of
the Date of Termination and addressed to the Company and the
Executive and shall be binding upon the Company and the
Executive. If such opinion determines that there would be an
excess parachute payment, any payment or benefit determined by
such counsel to be includible in Total Payments shall be reduced
or eliminated as specified by the Executive in writing delivered
to the Company within thirty (30) days of his receipt of such
opinion or, if the Executive fails to so notify the Company,
then as the Company shall reasonably determine, so that under
the bases of calculations set forth in such opinion there will
be no excess parachute payment. If such legal counsel so
requests in connection with the opinion required by this
paragraph (a) of Section 9, the Executive and the Company shall
obtain, at the Company's expense, and the legal counsel may rely
on in providing the opinion, the advice of a firm of recognized
executive compensation consultants as to the reasonableness of
any item of compensation to be received by the Executive. If
the provisions of Sections 280G and 4999 of the Code (or any
successor provisions) are repealed without succession, then this
paragraph (a) of Section 9 shall be of no further force or
effect.
(b) If, notwithstanding the provisions of paragraph (a) of
Section 9, it is ultimately determined by a court or pursuant to
a final determination by the Internal Revenue Service that any
portion of Total Payments is subject to the tax (the "Excise
Tax") imposed by Section 4999 of the Code (or any successor
provision), the Company shall pay to the Executive an additional
amount (the "Gross-Up Payment") such that the net amount
retained by the Executive after deduction of any Excise Tax and
any interest charges or penalties in respect of the imposition
of such Excise Tax (but not any federal, state or local income
tax) on the Total Payments, and any federal, state and local
income tax and Excise Tax upon the payment provided for by this
paragraph (b) of Section 9, shall be equal to the Total
Payments. For purposes of determining the amount of the Gross-
Up Payment, the Executive shall be deemed to pay federal income
taxes at the highest marginal rate of federal income taxation in
the calendar year in which the Gross-Up Payment is to be made
and state and local income taxes at the highest marginal rates
of taxation in the state and locality of the Executive's
domicile for income tax purposes on the date the Gross-Up
Payment is made, net of the maximum reduction in federal income
taxes which could be obtained from deduction of such state and
local taxes.
10. Attorneys' Fees. The Company agrees to pay, as incurred,
to the fullest extent permitted by law, all legal fees and expenses that
the Executive may reasonably incur as a result of any contest (regardless
of the outcome) by the Company, the Executive or others of the validity or
enforceability of or liability under, or otherwise involving, any
provision of this Agreement, together with interest on any delayed payment
at the applicable federal rate provided for in Section 7872(f)(2)(A) of
the Code.
11. Successors.
(a) This Agreement is personal to the Executive and,
without the prior written consent of the Company, shall not be
assignable by the Executive. This Agreement shall inure to the
benefit of and be enforceable by the Executive's legal
representatives.
(b) This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns.
(c) The Company shall require any successor (whether
direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or
assets of the Company expressly to assume and agree to perform
this Agreement in the same manner and to the same extent that
the Company would have been required to perform it if no such
succession had taken place. As used in this Agreement,
"Company" shall mean both the Company as defined above and any
such successor that assumes and agrees to perform this
Agreement, by operation of law or otherwise.
12. Miscellaneous.
(a) This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Wisconsin, without
reference to principles of conflict of laws. The captions of
this Agreement are not part of the provisions hereof and shall
have no force or effect. This Agreement may not be amended or
modified except by a written agreement executed by the parties
hereto or their respective successors and legal representatives.
(b) All notices and other communications under this
Agreement shall be in writing and shall be given by hand
delivery to the other party or by registered or certified mail,
return receipt requested, postage prepaid, addressed as follows:
If to the Executive:
Erroll B. Davis, Jr.
7829 Noll Valley Road
Verona, Wisconsin 53593
If to the Company:
Interstate Energy Corporation
222 West Washington Avenue
P.O. Box 2568
Madison, Wisconsin 53701-2568
Attention: General Counsel
With a copy to:
Benjamin F. Garmer, III
c/o Foley & Lardner
777 East Wisconsin Avenue
Milwaukee, WI 53202-5367
or to such other address as either party furnishes to the other in writing
in accordance with this paragraph (b) of Section 12. Notices and
communications shall be effective when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability
of any other provision of this Agreement. If any provision of
this Agreement shall be held invalid or unenforceable in part,
the remaining portion of such provision, together with all other
provisions of this Agreement, shall remain valid and enforceable
and continue in full force and effect to the fullest extent
consistent with law.
(d) Notwithstanding any other provisions of this
Agreement, the Company may withhold from amounts payable under
this Agreement all federal, state, local and foreign taxes that
are required to be withheld by applicable laws or regulations.
(e) The Executive's or the Company's failure to insist
upon strict compliance with any provisions of, or to assert any
right under, this Agreement (including, without limitation, the
right of Executive to terminate employment for Good Reason
pursuant to paragraph (c) of Section 4 of this Agreement) shall
not be deemed to be a waiver of such provision or right or of
any other provision of or right under this Agreement.
(f) The Executive and the Company acknowledge that this
Agreement supersedes any other agreement between them concerning
the subject matter hereof, excluding the agreement between the
Executive and the Company dated June 25, 1994, as in effect on
the date hereof or as hereafter amended from time to time (the
"Severance Agreement"); provided, however, that to the extent
that a payment or benefit to be provided under this Agreement is
similarly to be provided under the Severance Agreement, the
Company agrees to pay or provide to the Executive that payment
or benefit which provides the highest value to the Executive,
and the Executive agrees, in order to avoid duplication of
payments or benefits, that upon the receipt of any such highest
value payment or benefit under either this Agreement or the
Severance Agreement, as the case may be, he shall have no right
to any similar payment or benefit of lesser value under the
other agreement.
(g) The rights and benefits of the Executive under this
Agreement may not be anticipated, assigned, alienated or subject
to attachment, garnishment, levy, execution or other legal or
equitable process except as required by law. Any attempt by the
Executive to anticipate, alienate, assign, sell, transfer,
pledge, encumber or charge the same shall be void. Payments
hereunder shall not be considered assets of the Executive in the
event of insolvency or bankruptcy.
(h) This Agreement may be executed in several
counterparts, each of which shall be deemed an original, and
said counterparts shall constitute but one and the same
instrument.
13. Effectiveness of Agreement. The effectiveness of this
Agreement is subject to the consummation of the Merger (as defined in the
Merger Agreement). If for any reason the Merger is not consummated in
accordance with the terms of the Merger Agreement, this Agreement shall be
null and void, ab initio.
IN WITNESS WHEREOF, the Executive has hereunto set the
Executive's hand and, pursuant to the authorization of its Board of
Directors, the Company has caused this Agreement to be executed in its
name and on its behalf, all as of the day and year first above written.
/s/ Erroll B. Davis, Jr.
Erroll B. Davis, Jr.
INTERSTATE ENERGY CORPORATION
By /s/ E. M. Gleason
Vice President
As Executed
EMPLOYMENT AGREEMENT
THIS AGREEMENT by and between Interstate Energy Corporation, a
Wisconsin corporation (the "Company"), and Lee Liu (the "Executive"),
dated as of the 21st day of April, 1998.
WHEREAS, WPL Holdings, Inc., IES Industries Inc. ("IES
Industries"), Interstate Power Company, a Delaware corporation, WPLH
Acquisition Co. and Interstate Power Company, a Wisconsin corporation
(collectively, the "Merger Parties"), have entered into an Agreement and
Plan of Merger dated as of November 10, 1995, as amended (the "Merger
Agreement"); and
WHEREAS, the Merger Parties wish to provide for the orderly
succession of management of the Company following the Effective Time (as
defined in the Merger Agreement); and
WHEREAS, the Merger Parties further wish to provide for the
employment by the Company of the Executive, and the Executive wishes to
serve the Company, in the capacities and on the terms and conditions set
forth in this Agreement:
NOW, THEREFORE, it is hereby agreed as follows:
1. Employment Period. The Company shall employ the Executive,
and the Executive shall serve the Company as an employee and officer of
the Company, on the terms and conditions set forth in this Agreement, for
the period commencing on the Effective Time and ending on the date
immediately preceding the second anniversary of the Effective Time (the
"Employment Period"). Upon the termination of the Employment Period the
Executive will have the status of a retired senior executive officer of
the Company and shall be entitled to all of the rights, privileges and
benefits provided to such retired officers.
2. Position and Duties.
(a) Title. During the Employment Period, the Executive shall
serve as Chairman of the Board of Directors (the "Board") of the Company
("Chairman"). Upon termination of the Employment Period, the Executive
shall continue to be eligible to serve as a director of the Company.
(b) Duties. During the Employment Period, the Executive shall
perform the normal and ordinary duties of Chairman and shall serve,
together with the Vice Chairman of the Board and the Chief Executive
Officer, as a member of the senior executive team of the Company charged
with responsibility for developing and implementing programs to achieve
the corporate integration and restructuring of the Merger Parties
following the Effective Time. In addition, he will have involvement, as
appropriate, in government regulatory initiatives, will be involved in
major economic development initiatives of the Company and will serve in
such other capacities and will perform such other functions consistent
with his status as Chairman as may be reasonably assigned by the Board
from time to time. The Executive shall devote the necessary time and
effort required to perform the above described duties.
(c) Office. The Executive's services hereunder shall be performed
primarily at the existing executive offices of IES Industries located in
Cedar Rapids, Iowa, subject to such business travel as shall be necessary
and appropriate.
3. Compensation.
(a) Base Salary. During the Employment Period, the Executive
shall receive an annual base salary ("Annual Base Salary") of not less
than Four Hundred Thousand Dollars ($400,000), payable in accordance with
the Company's regular payroll practice for its senior executives, as in
effect from time to time. During the Employment Period, the Annual Base
Salary shall be reviewed for possible increase at least annually. Any
increase in the Annual Base Salary shall not limit or reduce any other
obligation of the Company under this Agreement. The Annual Base Salary
shall not be reduced after any such increase, and the term "Annual Base
Salary" shall thereafter refer to the Annual Base Salary as so increased.
(b) Incentive Compensation. During the Employment Period, the
Executive shall participate in such short-term incentive compensation
plans and long-term incentive compensation plans as shall be decided upon
in the discretion of the Compensation Committee of the Board (the
"Compensation Committee") (the latter to consist of plans offering stock
options, restricted stock and/or other long-term incentive compensation),
providing him with the opportunity to earn, on an annualized basis, short-
term and long-term incentive compensation (collectively, the "Incentive
Compensation") not less than the aggregate amount of the incentive
compensation that the Executive had an opportunity to earn under IES
Industries' Management Incentive Compensation Plan (the "MICP") and Long-
Term Incentive Plan (the "LTIP") in respect of the calendar year ended
immediately prior to the Effective Time, and such Incentive Compensation
shall be payable in accordance with standards (i.e., performance criteria,
performance levels, etc.) which are no less favorable to the Executive
than those applicable with respect to the amounts that were payable to the
Executive under each of the MICP and the LTIP in respect of the calendar
year ended immediately prior to the Effective Time.
(c) Other Benefits. In addition, and without limiting the
generality of the foregoing, during the Employment Period and thereafter:
(A) the Executive shall be entitled to participate in all applicable
incentive, savings and retirement plans, practices, policies and programs
of the Company and its affiliates to the same extent as other senior
executives (or, where applicable, retired senior executives) of the
Company, (B) the Executive and/or the Executive's family, as the case may
be, shall be eligible for immediate participation in (and without any
limitation for pre-existing conditions), and shall receive all benefits
under, all applicable welfare benefit plans, practices, policies and
programs provided by the Company and its affiliates, including, without
limitation, medical, prescription, dental, disability, salary continuance,
accidental death and travel insurance plans and programs, to the same
extent as other senior executives (or, where applicable, retired senior
executives) of the Company, provided, however that the Executive's
aggregate benefits as a retired senior executive under the plans described
in this clause (B) shall not be less than the benefits provided by IES
Industries to its retired senior executive officers as of the date of this
Agreement and (C) the Company shall maintain, at no cost to the Executive,
life insurance on the life of the Executive payable to one or more
beneficiaries designated by the Executive in an amount not less than the
aggregate amount of the life insurance provided to the Executive by IES
Industries immediately prior to the Effective Time.
(d) Perquisites. During the Employment Period, the Executive
shall be entitled to receive such perquisites as the Company may establish
from time to time which are commensurate with his position and at least
comparable to those received by other senior executives at the Company.
(e) Expense Reimbursement. The Company shall reimburse the
Executive for all reasonable and documented expenses incurred by the
Executive in the performance of the Executive's duties under this
Agreement.
(f) Supplemental Retirement Benefit. The Executive and IES
Industries have entered into that certain Amended and Restated
Supplemental Retirement Agreement dated February 1, 1993, as amended (the
"Supplemental Retirement Agreement"). The Company shall assume, honor and
perform the obligations of IES Industries under the Supplemental
Retirement Agreement (as amended as set forth below). In addition, the
Company and the Executive agree that as of the Effective Time the terms of
the Supplemental Retirement Agreement shall be amended as provided below.
(Capitalized terms used below in this Section 3(f) which are not otherwise
specifically defined in this Agreement shall have the meanings ascribed to
such terms in the Supplemental Retirement Agreement as amended hereby).
The Supplemental Retirement Agreement shall be amended as follows:
(i) the term "Annual Salary" as defined in Section 2.1 of the
Supplemental Retirement Agreement for purposes of
calculating the benefit payable to the Executive and his
Designated Beneficiary under the Supplemental Retirement
Agreement shall be modified so that "Annual Salary" shall
be the sum of (A) the Executive's Annual Base Salary and
(B) an amount equal to the average of the annual
incentive awards payable to the Executive under the IES
Industries MICP in respect of each of the three (3)
consecutive annual performance periods ended immediately
prior to the Effective Time of the Merger;
(ii) the Executive shall be fully vested in and entitled to
receive, at Normal Retirement Age, the full amount of his
Normal Retirement Benefit under the Supplemental
Retirement Agreement, as amended hereby, and the
Executive shall be deemed to have attained Normal
Retirement Age for all purposes under the Supplemental
Retirement Agreement as of the date on which he ceases,
for any reason, to receive the compensation and benefits
set forth in paragraphs (a), (b) and (c) of Section 3 of
this Agreement;
(iii) Sections 3.2, 3.3 and 4.1 of the Supplemental
Retirement Agreement shall be amended to provide that
in the event of the Executive's death at any time on
or after the Effective Time, the Executive's
Designated Beneficiary shall receive monthly
Supplemental Benefit payments or Death Benefit
payments, as the case may be, for a period of months
that, when added to the number of months, if any,
during which the Executive received monthly benefits
under the Supplemental Retirement Agreement, will be
equal to one hundred eighty (180) months; and
(iv) for purposes of Section 9.1 of the Supplemental
Retirement Agreement, in the event of the Executive's
death, the Executive shall be treated as receiving the
Supplemental Benefit portion of the Normal Retirement
Benefit at the time of death regardless of whether he was
actually receiving such Supplemental Benefit at such
time.
The foregoing modifications to the terms of the Supplemental
Retirement Agreement shall take effect as of the Effective Time. As soon
as practicable following the Effective Time (but in no event later than 60
days after the Effective Time), the Company and the Executive shall take
all actions necessary to execute a formal amendment to the Supplemental
Retirement Agreement incorporating the modifications set forth above.
Until the time that such a formal amendment is properly executed, the
provisions of this Section 3(f) shall serve and be construed, for all
intents and purposes, as an amendment to the terms of the Supplemental
Retirement Agreement, and the obligations of the Company thereunder shall
be governed by the terms of the Supplemental Retirement Agreement as so
amended.
4. Termination of Employment.
(a) Death or Disability. The Executive's employment shall
terminate automatically upon the Executive's death during the Employment
Period. The Company shall be entitled to terminate the Executive's
employment because of the Executive's Disability during the Employment
Period. "Disability" means that (i) the Executive has been unable, for a
period of one hundred and eighty (180) consecutive business days, to
perform the Executive's duties under this Agreement, as a result of
physical or mental illness or injury, and (ii) a physician selected by the
Company or its insurers, and acceptable to the Executive or the
Executive's legal representative, has determined that the Executive's
incapacity is total and permanent. A termination of the Executive's
employment by the Company for Disability shall be communicated to the
Executive by written notice and shall be effective on the thirtieth (30th)
day after receipt of such notice by the Executive (the "Disability
Effective Date"), unless the Executive returns to full-time performance of
the Executive's duties before the Disability Effective Date.
(b) By the Company. (i) The Company may terminate the
Executive's employment during the Employment Period for Cause or without
Cause. "Cause" means:
A. the willful and continued failure of the Executive
substantially to perform the Executive's duties under this
Agreement (other than as a result of physical or mental illness or
injury), after the Board of Directors of the Company (the "Board")
delivers to the Executive a written demand for substantial
performance that specifically identifies the manner in which the
Board believes that the Executive has not substantially performed
the Executive's duties; or
B. illegal conduct or gross misconduct by the Executive, in
either case that is willful and results in material and
demonstrable damage to the business or reputation of the Company.
No act or failure to act on the part of the Executive shall be considered
"willful" unless it is done, or omitted to be done, by the Executive in
bad faith or without reasonable belief that the Executive's action or
omission was in the best interests of the Company. Any act or failure to
act that is based upon authority given pursuant to a resolution duly
adopted by the Board, or the advice of counsel for the Company, shall be
conclusively presumed to be done, or omitted to be done, by the Executive
in good faith and in the best interests of the Company.
(ii) A termination of the Executive's employment for Cause
shall be effected in accordance with the following procedures. The
Company shall give the Executive written notice ("Notice of Termination
for Cause") of its intention to terminate the Executive's employment for
Cause, setting forth in reasonable detail the specific conduct of the
Executive that it considers to constitute Cause and the specific
provision(s) of this Agreement on which it relies, and stating the date,
time and place of the Board Meeting for Cause. The "Board Meeting for
Cause" means a meeting of the Board at which the Executive's termination
for Cause will be considered, that takes place not less than ten (10) and
not more than twenty (20) business days after the Executive receives the
Notice of Termination for Cause. The Executive shall be given an
opportunity, together with counsel, to be heard at the Board Meeting for
Cause. The Executive's termination for Cause shall be effective when and
if a resolution is duly adopted at the Board Meeting for Cause by a two-
thirds vote of the entire membership of the Board, excluding employee
directors, stating that in the good faith opinion of the Board, the
Executive is guilty of the conduct described in the Notice of Termination
for Cause, and that conduct constitutes Cause under this Agreement.
(iii) A termination of the Executive's employment without
Cause shall be effected in accordance with the following procedures. The
Company shall give the Executive written notice ("Notice of Termination
Without Cause") of its intention to terminate the Executive's employment
without Cause, stating the date, time and place of the Board Meeting
without Cause. The "Board Meeting without Cause" means a meeting of the
Board at which the Executive's termination without Cause will be
considered, that takes place not less than ten (10) and not more than
twenty (20) business days after the Executive receives the Notice of
Termination without Cause. The Executive shall be given an opportunity,
together with counsel, to be heard at the Board Meeting without Cause.
The Executive's termination without Cause shall be effective when and if a
resolution is duly adopted at the Board Meeting without Cause by a two-
thirds vote of the entire membership of the Board, excluding employee
directors, stating that the Executive is terminated without Cause.
(c) Good Reason. (i) The Executive may terminate employment for
Good Reason or without Good Reason. "Good Reason" means:
A. the assignment to the Executive of any duties
inconsistent in any respect with paragraphs (a) and (b) of Section
2 of this Agreement, or any other action by the Company that
results in a diminution in the Executive's position, authority,
duties or responsibilities, other than an isolated, insubstantial
and inadvertent action that is not taken in bad faith and is
remedied by the Company promptly after receipt of notice thereof
from the Executive;
B. any failure by the Company to comply with any provision
of Section 3 of this Agreement, other than an isolated,
insubstantial and inadvertent failure that is not taken in bad
faith and is remedied by the Company promptly after receipt of
notice thereof from the Executive;
C. any requirement by the Company that the Executive's
services be rendered primarily at a location or locations other
than that provided for in paragraph (c) of Section 2 of this
Agreement.
D. any purported termination of the Executive's employment
by the Company for a reason or in a manner not expressly permitted
by this Agreement;
E. any failure by the Company to comply with paragraph (c)
of Section 12 of this Agreement; or
F. any other substantial breach of this Agreement by the
Company that either is not taken in good faith or is not remedied
by the Company promptly after receipt of notice thereof from the
Executive.
(ii) A termination of employment by the Executive for Good
Reason shall be effectuated by giving the Company written notice ("Notice
of Termination for Good Reason") of the termination within six (6) months
of the event constituting Good Reason, setting forth in reasonable detail
the specific conduct of the Company that constitutes Good Reason and the
specific provision(s) of this Agreement on which the Executive relies. A
termination of employment by the Executive for Good Reason shall be
effective on the fifth (5th) business day following the date when the
Notice of Termination for Good Reason is given, unless the notice sets
forth a later date (which date shall in no event be later than thirty (30)
days after the notice is given).
(iii) A termination of the Executive's employment by the
Executive without Good Reason shall be effected by giving the Company
written notice of the termination.
(d) Date of Termination. The "Date of Termination" means the date
of the Executive's death, the Disability Effective Date, the date on which
the termination of the Executive's employment by the Company for Cause or
without Cause or by the Executive for Good Reason is effective, or the
date on which the Executive gives the Company notice of a termination of
employment without Good Reason, as the case may be.
5. Obligations of the Company Upon Termination.
(a) By the Company other than for Cause, Death or Disability; by
the Executive for Good Reason. If, during the Employment Period, the
Company terminates the Executive's employment, other than for Cause, Death
or Disability, or the Executive terminates employment for Good Reason, the
Company shall continue to provide the Executive with the compensation and
benefits set forth in paragraphs (a), (b) and (c) of Section 3 as if he
had remained employed by the Company pursuant to this Agreement through
the end of the Employment Period and then retired (at which time he will
be treated as eligible for all retiree welfare benefits and other benefits
provided to retired senior executives, as set forth in Sections 3(c) and
(f)); PROVIDED, that the Incentive Compensation for such period shall be
equal to the maximum Incentive Compensation that the Executive would have
been eligible to earn for such period; PROVIDED, further that in lieu of
stock options, restricted stock and other stock-based awards, the
Executive shall be paid cash equal to the fair market value (without
regard to any restrictions) of the stock options, restricted stock and
other stock-based awards that would otherwise have been granted; PROVIDED,
further, that to the extent any benefits described in paragraph (c) of
Section 3 cannot be provided pursuant to a plan or program maintained by
the Company for its executives, the Company shall provide such benefits
outside such plan or program at no additional cost (including without
limitation tax cost) to the Executive and his family; and PROVIDED,
finally, that during any period when the Executive is eligible to receive
benefits of the type described in clause (B) of paragraph (c) of Section 3
under another employer-provided plan, the benefits provided by the Company
under this paragraph (a) of Section 5 may be made secondary to those
provided under such other plan. In addition to the foregoing, any
restricted stock outstanding on the Date of Termination shall be fully
vested as of the Date of Termination and all options outstanding on the
Date of Termination shall be fully vested and exercisable and shall remain
in effect and exercisable through the end of their respective terms,
without regard to the termination of the Executive's employment. The
payments and benefits provided pursuant to this paragraph (a) of Section 5
are intended as liquidated damages for a termination of the Executive's
employment by the Company other than for Cause or Disability or for the
actions of the Company leading to a termination of the Executive's
employment by the Executive for Good Reason, and shall be the sole and
exclusive remedy therefor.
(b) Death and Disability. If the Executive's employment is
terminated by reason of the Executive's death or Disability during the
Employment Period, the Company shall pay to the Executive or, in the case
of the Executive's death, to the Executive's designated beneficiaries (or,
if there is no such beneficiary, to the Executive's surviving spouse, or
if the Executive is not survived by a spouse, to the Executive's estate or
legal representative), in a lump sum in cash within thirty (30) days after
the Date of Termination, the sum of the following amounts (the "Accrued
Obligations"): (1) any portion of the Executive's Annual Base Salary
through the Date of Termination that has been earned but not yet been
paid; (2) an amount representing the Incentive Compensation for the period
that includes the Date of Termination, computed by assuming that the
amount of all such Incentive Compensation would be equal to the maximum
amount of such Incentive Compensation that the Executive would have been
eligible to earn for such period, and multiplying that amount by a
fraction, the numerator of which is the number of days in such period
through the Date of Termination, and the denominator of which is the total
number of days in the relevant period; (3) any compensation previously
deferred by the Executive (together with any accrued interest or earnings
thereon) that has not yet been paid; and (4) any accrued but unpaid
Incentive Compensation and vacation pay. Any deferred compensation
(together with any accrued interest or earnings thereon, if any) that has
not yet been paid, will be paid in accordance with the terms and
conditions applicable to such deferred compensation.
(c) By the Company for Cause; by the Executive other than for Good
Reason. If the Executive's employment is terminated by the Company for
Cause during the Employment Period, the Company shall pay the Executive
the Annual Base Salary through the Date of Termination and the amount of
any compensation previously deferred by the Executive (together with any
accrued interest or earnings thereon), in each case to the extent not yet
paid, and the Company shall have no further obligations under this
Agreement, except as specified in Section 6 below. If the Executive
voluntarily terminates employment during the Employment Period, other than
for Good Reason, the Company shall pay the Accrued Obligations to the
Executive in a lump sum in cash within thirty (30) days of the Date of
Termination, and the Company shall have no further obligations under this
Agreement, except as specified in Section 6 below.
6. Non-Exclusivity of Rights. Nothing in this Agreement shall
prevent or limit the Executive's continuing or future participation in any
plan, program, policy or practice provided by the Company for which the
Executive may qualify, nor shall anything in this Agreement limit or
otherwise affect such rights as the Executive may have under any contract
or agreement with the Company or any of its affiliates relating to subject
matter other than that specifically addressed herein. Vested benefits and
other amounts that the Executive is otherwise entitled to receive under
the Incentive Compensation, the deferred compensation and other benefit
programs listed in paragraph (c) of Section 3, or any other plan, policy,
practice or program of, or any contract or agreement with, the Company or
any of its affiliates on or after the Date of Termination shall be payable
in accordance with the terms of each such plan, policy, practice, program,
contract or agreement, as the case may be, except as explicitly modified
by this Agreement.
7. Full Settlement. The Company's obligation to make the
payments provided for in, and otherwise to perform its obligations under,
this Agreement shall not be affected by any set-off, counterclaim,
recoupment, defense or other claim, right or action that the Company may
have against the Executive or others. In no event shall the Executive be
obligated to seek other employment or take any other action by way of
mitigation of the amounts payable to the Executive under any of the
provisions of this Agreement. The amounts payable by the Company under
this Agreement shall not be offset or reduced by any amounts otherwise
receivable or received by the Executive from any source, except as
specifically provided in paragraph (a) of Section 5 with respect to
benefits described in clause (B) of paragraph (c) of Section 3.
8. Confidential Information. The Executive shall hold in a
fiduciary capacity for the benefit of the Company all secret or
confidential information, knowledge or data relating to the Company or any
of its affiliated companies and their respective businesses that the
Executive obtains during the Executive's employment by the Company or any
of its affiliated companies and that is not public knowledge (other than
secret or confidential information, knowledge or data which becomes public
knowledge as a result of the Executive's violation of this Section 8)
("Confidential Information"). The Executive shall not communicate,
divulge or disseminate Confidential Information at any time during or
after the Executive's employment with the Company, except with the prior
written consent of the Company or as otherwise required by law or legal
process. In no event shall any asserted violation of the provisions of
this Section 8 constitute a basis for deferring or withholding any amounts
otherwise payable to the Executive under this Agreement.
9. Limitation on Payments. (a) Notwithstanding any other
provision of this Agreement, if any portion of any payment under this
Agreement, or under any other agreement with or plan of the Company or its
affiliates (in the aggregate "Total Payments"), would constitute an
"excess parachute payment," then the Total Payments to be made to the
Executive shall be reduced such that the value of the aggregate Total
Payments that the Executive is entitled to receive shall be One Dollar
($1) less than the maximum amount which the Executive may receive without
becoming subject to the tax imposed by Section 4999 (or any successor
provision) of the Internal Revenue Code of 1986, as amended (the "Code")
or which the Company may pay without loss of deduction under Section
280G(a) of the Code (or any successor provision). For purposes of this
Agreement, the terms "excess parachute payment" and "parachute payments"
shall have the meanings assigned to them in Section 280G of the Code (or
any successor provision), and such "parachute payments" shall be valued as
provided therein. Present value for purposes of this Agreement shall be
calculated in accordance with Section 1274(b)(2) of the Code (or any
successor provision). Within fifteen (15) days following the Date of
Termination or notice by the Company to the Executive of its belief that
there is a payment or benefit due the Executive which will result in an
excess parachute payment as defined in Section 280G of the Code (or any
successor provision), the Executive and the Company, at the Company's
expense, shall obtain the opinion (which need not be unqualified) of
nationally recognized tax counsel selected by the Company's independent
auditors and acceptable to the Executive in his sole discretion (which may
be regular outside counsel to the Company), which opinion sets forth (i)
the amount of the Base Period Income, (ii) the amount and present value of
Total Payments and (iii) the amount and present value of any excess
parachute payments determined without regard to the limitations of this
paragraph (a) of Section 9. As used in this Agreement, the term "Base
Period Income" means an amount equal to the Executive's "annualized
includible compensation for the base period" as defined in Section
280G(d)(1) of the Code (or any successor provision). For purposes of such
opinion, the value of any noncash benefits or any deferred payment or
benefit shall be determined by the Company's independent auditors in
accordance with the principles of Sections 280G(d)(3) and (4) of the Code
(or any successor provisions), which determination shall be evidenced in a
certificate of such auditors addressed to the Company and the Executive.
Such opinion shall be dated as of the Date of Termination and addressed to
the Company and the Executive and shall be binding upon the Company and
the Executive. If such opinion determines that there would be an excess
parachute payment, any payment or benefit determined by such counsel to be
includible in Total Payments shall be reduced or eliminated as specified
by the Executive in writing delivered to the Company within thirty (30)
days of his receipt of such opinion or, if the Executive fails to so
notify the Company, then as the Company shall reasonably determine, so
that under the bases of calculations set forth in such opinion there will
be no excess parachute payment. If such legal counsel so requests in
connection with the opinion required by this paragraph (a) of Section 9,
the Executive and the Company shall obtain, at the Company's expense, and
the legal counsel may rely on in providing the opinion, the advice of a
firm of recognized executive compensation consultants as to the
reasonableness of any item of compensation to be received by the
Executive. If the provisions of Sections 280G and 4999 of the Code (or
any successor provisions) are repealed without succession, then this
paragraph (a) of Section 9 shall be of no further force or effect.
(b) If, notwithstanding the provisions of paragraph (a) of Section
9, it is ultimately determined by a court or pursuant to a final
determination by the Internal Revenue Service that any portion of Total
Payments is subject to the tax (the "Excise Tax") imposed by Section 4999
of the Code (or any successor provision), the Company shall pay to the
Executive an additional amount (the "Gross-Up Payment") such that the net
amount retained by the Executive after deduction of any Excise Tax and any
interest charges or penalties in respect of the imposition of such Excise
Tax (but not any federal, state or local income tax) on the Total
Payments, and any federal, state and local income tax and Excise Tax upon
the payment provided for by this paragraph (b) of section 9, shall be
equal to the Total Payments. For purposes of determining the amount of
the Gross-Up Payment, the Executive shall be deemed to pay federal income
taxes at the highest marginal rate of federal income taxation in the
calendar year in which the Gross-Up Payment is to be made and state and
local income taxes at the highest marginal rates of taxation in the state
and locality of the Executive's domicile for income tax purposes on the
date the Gross-Up Payment is made, net of the maximum reduction in federal
income taxes which could be obtained from deduction of such state and
local taxes.
10. Executive's Service on the Board.
(a) Appointment and Nomination. The Company shall appoint the
Executive as a member of the Board for an initial three (3) year term
commencing on the Effective Date (the "Initial Board Term").
(b) Board and Committee Compensation. The Executive shall be
compensated for his Board services in accordance with the general policies
and practices of the Company as in effect from time to time relating to
the compensation of employee and non-employee directors, as the case may
be, and to the extent that such policies and practices provide for such
compensation.
(c) Office and Secretarial Assistance. Provided that the
Executive remains in the employ of the Company as of the conclusion of the
Employment Period and continues to serve as a member of the Board
throughout his initial three-year term as a director, the Company shall
provide to the Executive, for a period of one (1) year following the
conclusion of the Employment Period, a furnished office and a full-time
secretary at the Executive's disposal at the existing executive offices of
IES Industries in Cedar Rapids, Iowa for the Executive's use in connection
with any continuing business of the Company and any personal business of
the Executive.
11. Attorneys' Fees. The Company agrees to pay, as incurred, to
the fullest extent permitted by law, all legal fees and expenses that the
Executive may reasonably incur as a result of any contest (regardless of
the outcome) by the Company, the Executive or others of the validity or
enforceability of or liability under, or otherwise involving, any
provision of this Agreement, together with interest on any delayed payment
at the applicable federal rate provided for in Section 7872(f)(2)(A) of
the Code.
12. Successors. (a) This Agreement is personal to the Executive
and, without the prior written consent of the Company, shall not be
assignable by the Executive. This Agreement shall inure to the benefit of
and be enforceable by the Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be binding
upon the Company and its successors and assigns.
(c) The Company shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company expressly
to assume and agree to perform this Agreement in the same manner and to
the same extent that the Company would have been required to perform it if
no such succession had taken place. As used in this Agreement, "Company"
shall mean both the Company as defined above and any such successor that
assumes and agrees to perform this Agreement, by operation of law or
otherwise.
13. Miscellaneous. (a) This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Iowa, without
reference to principles of conflict of laws. The captions of this
Agreement are not part of the provisions hereof and shall have no force or
effect. This Agreement may not be amended or modified except by a written
agreement executed by the parties hereto or their respective successors
and legal representatives.
(b) All notices and other communications under this Agreement
shall be in writing and shall be given by hand delivery to the other party
or by facsimile, addressed as follows:
If to the Executive:
Mr. Lee Liu
3086 Loggerhead Road
Cedar Rapids, Iowa 52411
If to the Company:
Interstate Energy Corporation
222 West Washington Avenue
P.O. Box 2568
Madison, Wisconsin 53701-2568
Attn: General Counsel
or to such other address as either party furnishes to the other in writing
in accordance with this paragraph (b) of Section 13. Notices and
communications shall be effective when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provision of this Agreement. If any provision of this Agreement shall be
held invalid or unenforceable in part, the remaining portion of such
provision, together with all other provisions of this Agreement, shall
remain valid and enforceable and continue in full force and effect to the
fullest extent consistent with law.
(d) Notwithstanding any other provision of this Agreement, the
Company may withhold from amounts payable under this Agreement all
federal, state, local and foreign taxes that are required to be withheld
by applicable laws or regulations.
(e) The Executive's or the Company's failure to insist upon strict
compliance with any provisions of, or to assert any right under, this
Agreement (including, without limitation, the right of the Executive to
terminate employment for Good Reason pursuant to paragraph (c) of Section
4 of this Agreement) shall not be deemed to be a waiver of such provision
or right or of any other provision of or right under this Agreement.
(f) The Executive and the Company acknowledge that this Agreement
supersedes the Employment Agreement between IES Industries and the
Executive, dated February 27, 1991 and the Executive Change of Control
Severance Agreement between IES Industries and the Executive, dated
December 12, 1989 (and any successor Executive Change of Control Severance
Agreement between the Executive and IES Industries).
(g) The rights and benefits of the Executive under this Agreement
may not be anticipated, alienated or subject to attachment, garnishment,
levy, execution or other legal or equitable process except as required by
law. Any attempt by the Executive to anticipate, alienate, assign, sell,
transfer, pledge, encumber or charge the same shall be void. Payments
hereunder shall not be considered assets of the Executive in the event of
insolvency or bankruptcy.
(h) This Agreement may be executed in several counterparts, each
of which shall be deemed an original, and said counterparts shall
constitute but one and the same instrument.
14. Effectiveness of Agreement. The effectiveness of this
Agreement is subject to the consummation of the Merger (as defined in the
Merger Agreement). If for any reason the Merger is not consummated in
accordance with the terms of the Merger Agreement, this Agreement shall be
null and void ab initio.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's
hand and, pursuant to the authorization of the Board of Directors, the
Company has caused this Agreement to be executed in its name on its
behalf, all as of the day and year first above written.
INTERSTATE ENERGY CORPORATION
By: /s/ Edward M. Gleason
Name: Edward M. Gleason
Title: Vice President
/s/ Lee Liu
LEE LIU
As Executed
EMPLOYMENT AGREEMENT
THIS AGREEMENT by and between Interstate Power Company, a
Delaware corporation (the "Company"), and Michael R. Chase (the
"Executive"), dated as of the 21st day of April, 1998.
WHEREAS, the Company, WPL Holdings, Inc. ("WPL Holdings"), IES
Industries Inc., WPLH Acquisition Co. and Interstate Power Company, a
Wisconsin corporation (collectively, the "Merger Parties"), have entered
into an Agreement and Plan of Merger dated as of November 10, 1995, as
amended (the "Merger Agreement"); and
WHEREAS, the Merger Parties wish to provide for the orderly
succession of management of the Company following the Effective Time (as
defined in the Merger Agreement); and
WHEREAS, the Merger Parties further wish to provide for the
employment by the Company of the Executive, and the Executive wishes to
serve the Company, in the capacities and on the terms and conditions set
forth in this Agreement:
NOW, THEREFORE, it is hereby agreed as follows:
1. Employment Period. The Company shall employ the Executive,
and the Executive shall serve the Company as an employee and officer of
the Company, on the terms and conditions set forth in this Agreement, for
the period commencing on the Effective Time and ending on the last day of
the calendar month immediately following the calendar month in which the
Executive attains age 62 (the "Employment Period"). Upon the termination
of the Employment Period the Executive will have the status of a retired
senior executive officer of the Company and shall be entitled to all of
the rights, privileges and benefits provided to such retired officers.
2. Position and Duties.
(a) Title. During the Employment Period, the Executive shall
serve as the President of the Company.
(b) Duties. During the Employment Period, the Executive shall
report to the Board of Directors of the Company (the "Board") and shall
perform the duties, undertake the responsibilities and exercise the
authority customarily performed, undertaken and exercised by persons
situated in a similar executive capacity and shall additionally perform
such duties as may be reasonably assigned from time to time by the Board,
consistent with his status as President. During the Employment Period,
and excluding any periods of vacation and sick leave to which the
Executive is entitled, the Executive shall devote the whole of his
attention and time during normal business hours (and outside those hours
when reasonably necessary to his duties hereunder) to the business and
affairs of the Company and, to the extent necessary to discharge the
responsibilities assigned to the Executive under this Agreement, use the
Executive's reasonable best efforts to carry out such responsibilities
faithfully and efficiently. It shall not be considered a violation of the
foregoing for the Executive to serve on corporate, industry, civic or
charitable boards or committees, so long as such activities do not
significantly interfere with the performance of the Executive's
responsibilities as an employee of the Company in accordance with this
Agreement.
(c) Office. The Executive's services hereunder shall be
performed primarily at the executive offices of the Company located in
Dubuque, Iowa, subject to such business travel as shall be necessary and
appropriate.
3. Compensation.
(a) Base Salary. The Executive's compensation during the
Employment Period shall be determined by the Board upon the recommendation
of the Compensation and Personnel Committee (or the appropriate committee)
of the Board, subject to the next sentence and paragraph (b) of Section 3.
During the Employment Period, the Executive shall receive an annual salary
("Annual Base Salary") of not less than his aggregate annual base salary
from the Company and its affiliates in effect immediately before the
Effective Time. The Annual Base Salary shall be payable in accordance
with the Company's regular payroll practice for its senior executives, as
in effect from time to time. During the Employment Period, the Annual
Base Salary shall be reviewed for possible increase at least annually.
Any increase in the Annual Base Salary shall not limit or reduce any other
obligation of the Company under this Agreement. The Annual Base Salary
shall not be reduced after any such increase, and the term "Annual Base
Salary" shall thereafter refer to the Annual Base Salary as so increased.
(b) Incentive Compensation. During the Employment Period, the
Executive shall participate in such short-term incentive compensation
plans and long-term incentive compensation plans as shall be decided upon
in the discretion of the Compensation Committee of the Board (or other
appropriate committee) (the latter to consist of plans offering stock
options, restricted stock and/or other long-term incentive compensation),
offered by WPL Holdings and its present and future affiliates, to the same
extent as other senior executives of WPL Holdings and its primary
subsidiaries (the "Incentive Compensation").
(c) Other Benefits. In addition, and without limiting the
generality of the foregoing, during the Employment Period and thereafter:
(A) the Executive shall be entitled to participate in all applicable
incentive, savings and retirement plans, practices, policies and programs
of WPL Holdings and its affiliates to the same extent as other senior
executives (or, where applicable, retired senior executives) of the
Company, and (B) the Executive and/or the Executive's family, as the case
may be, shall be eligible for immediate participation in (and without any
limitation for pre-existing conditions), and shall receive all benefits
under, all applicable welfare benefit plans, practices, policies and
programs provided by WPL Holdings and its affiliates, including, without
limitation, medical, prescription, dental, disability, salary continuance,
employee life insurance, accidental death and travel insurance plans and
programs, to the same extent as other senior executives (or, where
applicable, retired senior executives) of the Company; provided, however
that the Executive's aggregate benefits as a retired senior executive
under the plans described in this clause (B) shall not be less than the
benefits provided by the Company to its retired senior executive officers
as of the date of this Agreement.
(d) Perquisites. During the Employment Period, the Executive
shall be entitled to receive such perquisites as WPL Holdings may
establish from time to time which are commensurate with his position and
at least comparable to those received by other senior executives at WPL
Holdings.
(e) Expense Reimbursement. The Company shall reimburse the
Executive for all reasonable and documented expenses incurred by the
Executive in the performance of the Executive's duties under this
Agreement.
(f) Supplemental Retirement Benefit. During the Employment
Period, the Executive shall participate in a retirement plan and/or
supplemental retirement plan such that the aggregate value of the
retirement benefits that will be payable to or with respect to the
Executive at the end of the Employment Period under all defined benefit
plans of the Company and its affiliates (whether qualified or not) will
not be less than the benefits he would have received (assuming his
employment through the end of the Employment Period) under the Interstate
Power Company Retirement Income Plan and the Interstate Power Company
Supplemental Retirement Plan, as in effect on the date of this Agreement.
4. Termination of Employment.
(a) Death or Disability. The Executive's employment shall
terminate automatically upon the Executive's death during the Employment
Period. The Company shall be entitled to terminate the Executive's
employment because of the Executive's Disability during the Employment
Period. "Disability" means that (i) the Executive has been unable, for a
period of one hundred and eighty (180) consecutive business days, to
perform the Executive's duties under this Agreement, as a result of
physical or mental illness or injury, and (ii) a physician selected by the
Company or its insurers, and acceptable to the Executive or the
Executive's legal representative, has determined that the Executive's
incapacity is total and permanent. A termination of the Executive's
employment by the Company for Disability shall be communicated to the
Executive by written notice and shall be effective on the thirtieth (30th)
day after receipt of such notice by the Executive (the "Disability
Effective Date"), unless the Executive returns to full-time performance of
the Executive's duties before the Disability Effective Date.
(b) By the Company. (i) The Company may terminate the
Executive's employment during the Employment Period for Cause or without
Cause. "Cause" means:
A. the willful and continued failure of the Executive
substantially to perform the Executive's duties under this
Agreement (other than as a result of physical or mental illness
or injury), after the Board of Directors of the Company (the
"Board") delivers to the Executive a written demand for
substantial performance that specifically identifies the manner
in which the Board believes that the Executive has not
substantially performed the Executive's duties; or
B. illegal conduct or gross misconduct by the Executive,
in either case that is willful and results in material and
demonstrable damage to the business or reputation of the
Company.
No act or failure to act on the part of the Executive shall be considered
"willful" unless it is done, or omitted to be done, by the Executive in
bad faith or without reasonable belief that the Executive's action or
omission was in the best interests of the Company. Any act or failure to
act that is based upon authority given pursuant to a resolution duly
adopted by the Board, or the advice of counsel for the Company, shall be
conclusively presumed to be done, or omitted to be done, by the Executive
in good faith and in the best interests of the Company.
(ii) A termination of the Executive's employment for Cause
shall be effected in accordance with the following procedures. The
Company shall give the Executive written notice ("Notice of Termination
for Cause") of its intention to terminate the Executive's employment for
Cause, setting forth in reasonable detail the specific conduct of the
Executive that it considers to constitute Cause and the specific
provision(s) of this Agreement on which it relies, and stating the date,
time and place of the Board Meeting for Cause. The "Board Meeting for
Cause" means a meeting of the Board at which the Executive's termination
for Cause will be considered, that takes place not less than ten (10) and
not more than twenty (20) business days after the Executive receives the
Notice of Termination for Cause. The Executive shall be given an
opportunity, together with counsel, to be heard at the Board Meeting for
Cause. The Executive's termination for Cause shall be effective when and
if a resolution is duly adopted at the Board Meeting for Cause by a two-
thirds vote of the entire membership of the Board, excluding employee
directors, stating that in the good faith opinion of the Board, the
Executive is guilty of the conduct described in the Notice of Termination
for Cause, and that conduct constitutes Cause under this Agreement.
(iii) A termination of the Executive's employment without
Cause shall be effected in accordance with the following procedures. The
Company shall give the Executive written notice ("Notice of Termination
Without Cause") of its intention to terminate the Executive's employment
without Cause, stating the date, time and place of the Board Meeting
without Cause. The "Board Meeting without Cause" means a meeting of the
Board at which the Executive's termination without Cause will be
considered, that takes place not less than ten (10) and not more than
twenty (20) business days after the Executive receives the Notice of
Termination without Cause. The Executive shall be given an opportunity,
together with counsel, to be heard at the Board Meeting without Cause.
The Executive's termination without Cause shall be effective when and if a
resolution is duly adopted at the Board Meeting without Cause by a two-
thirds vote of the entire membership of the Board, excluding employee
directors, stating that the Executive is terminated without Cause.
(c) Good Reason. (i) The Executive may terminate employment
for Good Reason or without Good Reason. "Good Reason" means:
A. the assignment to the Executive of any duties
inconsistent in any respect with paragraphs (a) and (b) of
Section 2 of this Agreement, or any other action by the Company
that results in a diminution in the Executive's position,
authority, duties or responsibilities, or a diminution in the
overall importance of the Executive's role to WPL Holdings and
its affiliates, other than an isolated, insubstantial and
inadvertent action that is not taken in bad faith and is
remedied by the Company promptly after receipt of notice thereof
from the Executive;
B. any failure by the Company to comply with any
provision of Section 3 of this Agreement, other than an
isolated, insubstantial and inadvertent failure that is not
taken in bad faith and is remedied by the Company promptly after
receipt of notice thereof from the Executive;
C. any requirement by the Company that the Executive's
services be rendered primarily at a location or locations other
than that provided for in paragraph (c) of Section 2 of this
Agreement;
D. any purported termination of the Executive's
employment by the Company for a reason or in a manner not
expressly permitted by this Agreement;
E. any failure by the Company to comply with paragraph
(c) of Section 11 of this Agreement; or
F. any other substantial breach of this Agreement by the
Company that either is not taken in good faith or is not
remedied by the Company promptly after receipt of notice thereof
from the Executive.
(ii) A termination of employment by the Executive for Good
Reason shall be effectuated by giving the Company written notice ("Notice
of Termination for Good Reason") of the termination within three (3)
months of the event constituting Good Reason, setting forth in reasonable
detail the specific conduct of the Company that constitutes Good Reason
and the specific provision(s) of this Agreement on which the Executive
relies. A termination of employment by the Executive for Good Reason
shall be effective on the fifth (5th) business day following the date when
the Notice of Termination for Good Reason is given, unless the notice sets
forth a later date (which date shall in no event be later than thirty (30)
days after the notice is given).
(iii) A termination of the Executive's employment by the
Executive without Good Reason shall be effected by giving the Company
written notice of the termination.
(d) Date of Termination. The "Date of Termination" means the
date of the Executive's death, the Disability Effective Date, the date on
which the termination of the Executive's employment by the Company for
Cause or without Cause or by the Executive for Good Reason is effective,
or the date on which the Executive gives the Company notice of a
termination of employment without Good Reason, as the case may be.
5. Obligations of the Company Upon Termination.
(a) By the Company other than for Cause, Death or Disability;
by the Executive for Good Reason. If, during the Employment Period, the
Company terminates the Executive's employment, other than for Cause, Death
or Disability, or the Executive terminates employment for Good Reason, the
Company shall continue to provide the Executive with the compensation and
benefits set forth in paragraphs (a), (b) and (c) of Section 3 as if he
had remained employed by the Company pursuant to this Agreement until the
end of the Employment Period; PROVIDED, that the annualized Incentive
Compensation for such period shall be equal to the average of the
annualized Incentive Compensation payable to the Executive in respect of
each of the three successive calendar years ended immediately prior to the
Date of Termination; PROVIDED, further that in lieu of stock options,
restricted stock and other stock-based awards, the Executive shall be paid
cash equal to the fair market value (without regard to any restrictions)
of the stock options, restricted stock and other stock-based awards that
would otherwise have been granted; PROVIDED, further, that to the extent
any benefits described in paragraph (c) of Section 3 cannot be provided
pursuant to a plan or program maintained by the Company for its
executives, the Company shall provide such benefits outside such plan or
program at no additional cost (including without limitation tax cost) to
the Executive and his family; and PROVIDED, finally, that during any
period when the Executive is eligible to receive benefits of the type
described in clause (B) of paragraph (c) of Section 3 under another
employer-provided plan, the benefits provided by the Company under this
paragraph (a) of Section 5 may be made secondary to those provided under
such other plan. In addition to the foregoing, any restricted stock
outstanding on the Date of Termination shall be fully vested as of the
Date of Termination and all options outstanding on the Date of Termination
shall be fully vested and exercisable and shall remain in effect and
exercisable through the end of their respective terms, without regard to
the termination of the Executive's employment. The payments and benefits
provided pursuant to this paragraph (a) of Section 5 are intended as
liquidated damages for a termination of the Executive's employment by the
Company other than for Cause or Disability or for the actions of the
Company leading to a termination of the Executive's employment by the
Executive for Good Reason, and shall be the sole and exclusive remedy
therefor.
(b) Death and Disability. If the Executive's employment is
terminated by reason of the Executive's death or Disability during the
Employment Period, the Company shall pay to the Executive or, in the case
of the Executive's death, to the Executive's designated beneficiaries (or,
if there is no such beneficiary, to the Executive's surviving spouse, or
if the Executive is not survived by a spouse, to the Executive's estate or
legal representative), in a lump sum in cash within thirty (30) days after
the Date of Termination, the sum of the following amounts (the "Accrued
Obligations"): (1) any portion of the Executive's Annual Base Salary
through the Date of Termination that has been earned but not yet been
paid; (2) an amount representing the Incentive Compensation for the period
that includes the Date of Termination, computed by assuming that the
amount of all such Incentive Compensation would be equal to the maximum
amount of such Incentive Compensation that the Executive would have been
eligible to earn for such period, and multiplying that amount by a
fraction, the numerator of which is the number of days in such period
through the Date of Termination, and the denominator of which is the total
number of days in the relevant period; (3) any compensation previously
deferred by the Executive (together with any accrued interest or earnings
thereon) that has not yet been paid; and (4) any accrued but unpaid
Incentive Compensation and vacation pay. Any deferred compensation
(together with any accrued interest or earnings thereon, if any) that has
not yet been paid, will be paid in accordance with the terms and
conditions applicable to such deferred compensation.
(c) By the Company for Cause; by the Executive other than for
Good Reason. If the Executive's employment is terminated by the Company
for Cause during the Employment Period, the Company shall pay the
Executive the Annual Base Salary through the Date of Termination and the
amount of any compensation previously deferred by the Executive (together
with any accrued interest or earnings thereon), in each case to the extent
not yet paid, and the Company shall have no further obligations under this
Agreement, except as specified in Section 6 below. If the Executive
voluntarily terminates employment during the Employment Period, other than
for Good Reason, the Company shall pay the Accrued Obligations to the
Executive in a lump sum in cash within thirty (30) days of the Date of
Termination, and the Company shall have no further obligations under this
Agreement, except as specified in Section 6 below.
6. Non-Exclusivity of Rights. Subject to Section 12(f),
nothing in this Agreement shall prevent or limit the Executive's
continuing or future participation in any plan, program, policy or
practice provided by the Company for which the Executive may qualify, nor
shall anything in this Agreement limit or otherwise affect such rights as
the Executive may have under any contract or agreement with the Company or
any of its affiliates relating to subject matter other than that
specifically addressed herein. Vested benefits and other amounts that the
Executive is otherwise entitled to receive under the Incentive
Compensation, the deferred compensation and other benefit programs listed
in paragraph (c) of Section 3, or any other plan, policy, practice or
program of, or any contract or agreement with, the Company or any of its
affiliates on or after the Date of Termination shall be payable in
accordance with the terms of each such plan, policy, practice, program,
contract or agreement, as the case may be, except as explicitly modified
by this Agreement.
7. Full Settlement. The Company's obligation to make the
payments provided for in, and otherwise to perform its obligations under,
this Agreement shall not be affected by any set-off, counterclaim,
recoupment, defense or other claim, right or action that the Company may
have against the Executive or others. In no event shall the Executive be
obligated to seek other employment or take any other action by way of
mitigation of the amounts payable to the Executive under any of the
provisions of this Agreement. The amounts payable by the Company under
this Agreement shall not be offset or reduced by any amounts otherwise
receivable or received by the Executive from any source, except as
specifically provided in paragraph (a) of Section 5 with respect to
benefits described in clause (B) of paragraph (c) of Section 3.
8. Confidential Information. The Executive shall hold in a
fiduciary capacity for the benefit of the Company all secret or
confidential information, knowledge or data relating to the Company or any
of its affiliated companies and their respective businesses that the
Executive obtains during the Executive's employment by the Company or any
of its affiliated companies and that is not public knowledge (other than
as a result of the Executive's violation of this Section 8) ("Confidential
Information"). The Executive shall not communicate, divulge or
disseminate Confidential Information at any time during or after the
Executive's employment with the Company, except with the prior written
consent of the Company or as otherwise required by law or legal process.
In no event shall any asserted violation of the provisions of this Section
8 constitute a basis for deferring or withholding any amounts otherwise
payable to the Executive under this Agreement.
9. Limitation on Payments. (a) Notwithstanding any other
provision of this Agreement, if any portion of any payment under this
Agreement, or under any other agreement with or plan of the Company or its
affiliates (in the aggregate "Total Payments"), would constitute an
"excess parachute payment," then the Total Payments to be made to the
Executive shall be reduced such that the value of the aggregate Total
Payments that the Executive is entitled to receive shall be One Dollar
($1) less than the maximum amount which the Executive may receive without
becoming subject to the tax imposed by Section 4999 (or any successor
provision) of the Internal Revenue Code of 1986, as amended (the "Code")
or which the Company may pay without loss of deduction under Section
280G(a) of the Code (or any successor provision). For purposes of this
Agreement, the terms "excess parachute payment" and "parachute payments"
shall have the meanings assigned to them in Section 280G of the Code (or
any successor provision), and such "parachute payments" shall be valued as
provided therein. Present value for purposes of this Agreement shall be
calculated in accordance with Section 1274(b)(2) of the Code (or any
successor provision). Within fifteen (15) days following the Date of
Termination or notice by the Company to the Executive of its belief that
there is a payment or benefit due the Executive which will result in an
excess parachute payment as defined in Section 280G of the Code (or any
successor provision), the Executive and the Company, at the Company's
expense, shall obtain the opinion (which need not be unqualified) of
nationally recognized tax counsel selected by the Company's independent
auditors and acceptable to the Executive in his sole discretion (which may
be regular outside counsel to the Company), which opinion sets forth (i)
the amount of the Base Period Income, (ii) the amount and present value of
Total Payments and (iii) the amount and present value of any excess
parachute payments determined without regard to the limitations of this
paragraph (a) of Section 9. As used in this Agreement, the term "Base
Period Income" means an amount equal to the Executive's "annualized
includible compensation for the base period" as defined in Section
280G(d)(1) of the Code (or any successor provision). For purposes of such
opinion, the value of any noncash benefits or any deferred payment or
benefit shall be determined by the Company's independent auditors in
accordance with the principles of Sections 280G(d)(3) and (4) of the Code
(or any successor provisions), which determination shall be evidenced in a
certificate of such auditors addressed to the Company and the Executive.
Such opinion shall be dated as of the Date of Termination and addressed to
the Company and the Executive and shall be binding upon the Company and
the Executive. If such opinion determines that there would be an excess
parachute payment, any payment or benefit determined by such counsel to be
includible in Total Payments shall be reduced or eliminated as specified
by the Executive in writing delivered to the Company within thirty (30)
days of his receipt of such opinion or, if the Executive fails to so
notify the Company, then as the Company shall reasonably determine, so
that under the bases of calculations set forth in such opinion there will
be no excess parachute payment. If such legal counsel so requests in
connection with the opinion required by this paragraph (a) of Section 9,
the Executive and the Company shall obtain, at the Company's expense, and
the legal counsel may rely on in providing the opinion, the advice of a
firm of recognized executive compensation consultants as to the
reasonableness of any item of compensation to be received by the
Executive. If the provisions of Sections 280G and 4999 of the Code (or
any successor provisions) are repealed without succession, then this
paragraph (a) of Section 9 shall be of no further force or effect.
(b) If, notwithstanding the provisions of paragraph (a) of
Section 9, it is ultimately determined by a court or pursuant to a final
determination by the Internal Revenue Service that any portion of Total
Payments is subject to the tax (the "Excise Tax") imposed by Section 4999
of the Code (or any successor provision), the Company shall pay to the
Executive an additional amount (the "Gross-Up Payment") such that the net
amount retained by the Executive after deduction of any Excise Tax and any
interest charges or penalties in respect of the imposition of such Excise
Tax (but not any federal, state or local income tax) on the Total
Payments, and any federal, state and local income tax and Excise Tax upon
the payment provided for by this paragraph (b) of section 9, shall be
equal to the Total Payments. For purposes of determining the amount of
the Gross-Up Payment, the Executive shall be deemed to pay federal income
taxes at the highest marginal rate of federal income taxation in the
calendar year in which the Gross-Up Payment is to be made and state and
local income taxes at the highest marginal rates of taxation in the state
and locality of the Executive's domicile for income tax purposes on the
date the Gross-Up Payment is made, net of the maximum reduction in federal
income taxes which could be obtained from deduction of such state and
local taxes.
10. Attorneys' Fees. The Company agrees to pay, as incurred,
to the fullest extent permitted by law, all legal fees and expenses that
the Executive may reasonably incur as a result of any contest (regardless
of the outcome) by the Company, the Executive or others of the validity or
enforceability of or liability under, or otherwise involving, any
provision of this Agreement, together with interest on any delayed payment
at the applicable federal rate provided for in Section 7872(f)(2)(A) of
the Code.
11. Successors. (a) This Agreement is personal to the
Executive and, without the prior written consent of the Company, shall not
be assignable by the Executive. This Agreement shall inure to the benefit
of and be enforceable by the Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be binding
upon the Company and its successors and assigns.
(c) The Company shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company expressly
to assume and agree to perform this Agreement in the same manner and to
the same extent that the Company would have been required to perform it if
no such succession had taken place. As used in this Agreement, "Company"
shall mean both the Company as defined above and any such successor that
assumes and agrees to perform this Agreement, by operation of law or
otherwise.
12. Miscellaneous. (a) This Agreement shall be governed by,
and construed in accordance with, the laws of the State of Iowa, without
reference to principles of conflict of laws. The captions of this
Agreement are not part of the provisions hereof and shall have no force or
effect. This Agreement may not be amended or modified except by a written
agreement executed by the parties hereto or their respective successors
and legal representatives.
(b) All notices and other communications under this Agreement
shall be in writing and shall be given by hand delivery to the other party
or by facsimile, addressed as follows:
If to the Executive:
Mr. Michael R. Chase
7790 Timmerman Drive
East Dubuque, Illinois 61025
If to the Company:
Interstate Power Company
1000 Main Street
P.O. Box 769
Dubuque, Iowa 52004-0769
Attn: General Counsel
with a copy to:
Interstate Energy Corporation
222 West Washington Avenue
P.O. Box 2568
Madison, Wisconsin 53701-2568
Attn: General Counsel
or to such other address as either party furnishes to the other in writing
in accordance with this paragraph (b) of Section 12. Notices and
communications shall be effective when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provision of this Agreement. If any provision of this Agreement shall be
held invalid or unenforceable in part, the remaining portion of such
provision, together with all other provisions of this Agreement, shall
remain valid and enforceable and continue in full force and effect to the
fullest extent consistent with law.
(d) Notwithstanding any other provision of this Agreement, the
Company may withhold from amounts payable under this Agreement all
federal, state, local and foreign taxes that are required to be withheld
by applicable laws or regulations.
(e) The Executive's or the Company's failure to insist upon
strict compliance with any provisions of, or to assert any right under,
this Agreement (including, without limitation, the right of the Executive
to terminate employment for Good Reason pursuant to paragraph (c) of
Section 4 of this Agreement) shall not be deemed to be a waiver of such
provision or right or of any other provision of or right under this
Agreement.
(f) The Executive and the Company acknowledge that this
Agreement supersedes any other agreement between the Executive and Company
concerning the subject matter hereof, excluding the Agreement between the
Executive and the Company dated as of November 8, 1995, as in effect on
the date hereof or as hereafter amended from time to time (the "Severance
Agreement"); provided, however, that to the extent that a payment or
benefit to be provided, or limitation or restriction to be imposed, under
this Agreement is similarly to be provided or imposed under the Severance
Agreement, the Company agrees to pay, provide or impose that payment,
benefit, limitation or restriction which, in each case, provides the
highest value to the Executive, and the Executive agrees, in order to
avoid duplication of payments or benefits, that upon the receipt of any
such highest value payment or benefit under either this Agreement or the
Severance Agreement, as the case may be, he shall have no right to any
similar payment or benefit of lesser value under the other agreement.
(g) The rights and benefits of the Executive under this
Agreement may not be anticipated, alienated or subject to attachment,
garnishment, levy, execution or other legal or equitable process except as
required by law. Any attempt by the Executive to anticipate, alienate,
assign, sell, transfer, pledge, encumber or charge the same shall be void.
Payments hereunder shall not be considered assets of the Executive in the
event of insolvency or bankruptcy.
(h) This Agreement may be executed in several counterparts,
each of which shall be deemed an original, and said counterparts shall
constitute but one and the same instrument.
13. Effectiveness of Agreement. The effectiveness of this
Agreement is subject to the consummation of the Merger (as defined in the
Merger Agreement). If for any reason the Merger is not consummated in
accordance with the terms of the Merger Agreement, this Agreement shall be
null and void ab initio.
IN WITNESS WHEREOF, the Executive has hereunto set the
Executive's hand and, pursuant to the authorization of the Board of
Directors, the Company has caused this Agreement to be executed in its
name on its behalf, all as of the day and year first above written.
INTERSTATE POWER COMPANY
By: /s/ Michael R. Chase
Name: Michael R. Chase
Title: President and Chief Executive
Officer
/s/ Michael R. Chase
MICHAEL R. CHASE
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of our reports on the consolidated financial statements of IES Industries
Inc. incorporated by reference in this Interstate Energy Corporation Form
8-K into Interstate Energy Corporation's previously filed Registration
Statements on Form S-8 (Nos. 33-52215, 333-41485 and 333-46735) and Form
S-3 (Nos. 33-21482 and 333-26627).
ARTHUR ANDERSEN LLP
Chicago, Illinois
May 5, 1998
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Form 8-K of
Interstate Energy Corporation filed May 5, 1998 of our report dated
January 29, 1998 with respect to the audited financial statements,
appearing in the Annual Report on Form 10-K of Interstate Power Company
for the year ended December 31, 1997.
/s/ Deloitte & Touche LLP
Davenport, Iowa
May 5, 1998
