SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. ____)
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
Interstate Energy Corporation
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-
11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by
registration statement number, or the Form or Schedule and the date
of its filing.
1) Amount Previously Paid:
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3) Filing Party:
4) Date Filed:
<PAGE>
Preliminary Copy
INTERSTATE ENERGY CORPORATION
d/b/a Alliant Corporation
222 West Washington Avenue P. O. Box 2568 Madison, WI 53701-2568
Phone: 608/252-3110
May 18, 1998
TO THE OWNERS OF INTERSTATE ENERGY CORPORATION:
We extend a cordial invitation to you to join us at the 1998 Annual
Meeting of Shareowners. The meeting will be held at the Collins Plaza
Hotel, 1200 Collins Road, N.E., Cedar Rapids, Iowa, on Wednesday, June 24,
1998, at 10:00 a.m. (Central Time). If you plan to join us, please
indicate the names of the individuals who will be attending on the
enclosed proxy card reservation form.
Interstate Energy Corporation (the Company) and its subsidiaries,
Wisconsin Power and Light Company ("WP&L") and Interstate Power Company
("IPC"), will hold separate shareowner meetings. If you are a shareowner
of the Company and a preferred shareowner of WP&L, you will receive
separate Notices of Annual Meeting and Proxy Statements and separate proxy
cards, one for each company. If you are a shareowner of the Company and a
preferred shareholder of WP&L, you will have to return both proxy cards to
vote all your shares. If you are a preferred shareowner of IPC, you will
receive a separate Note of Meeting and, if you so desire, will need to
attend the meeting to vote your shares.
The enclosed Notice of Annual Meeting and Proxy Statement sets forth
the items to be considered at the Company's annual meeting. There will
also be informative reports on the affairs of the Company after which
shareowners will be given the opportunity to ask questions and make
comments. Light refreshments will be served following the meeting.
It is important to your interests, and also is helpful to the
directors of the Company, that all shareowners participate in the affairs
of the Company, regardless of the number of shares owned. Whether or not
you plan to attend the meeting, please sign and date the enclosed proxy
card and return it in the postage paid envelope. You may, of course,
still vote your shares in person at the meeting even if you have
previously returned your proxy.
Your participation in person or by proxy is very important.
Sincerely,
LEE LIU
Chairman of the Board
<PAGE>
INTERSTATE ENERGY CORPORATION
d/b/a Alliant Corporation
ANNUAL MEETING OF SHAREOWNERS
DATE: June 24, 1998
TIME: 10:00 AM, Central Time
LOCATION: Collins Plaza Hotel
1200 Collins Road, N.E.
Cedar Rapids, Iowa
SHAREOWNER INFORMATION NUMBERS
LOCAL CALLS (MADISON, WI AREA)
608-252-3110
TOLL FREE NUMBER . . . . . 1-800-356-5343
<PAGE>
INTERSTATE ENERGY CORPORATION
d/b/a Alliant Corporation
222 West Washington Avenue P. O. Box 2568 Madison WI 53701-2568
Phone: 608/252-3110
NOTICE OF ANNUAL MEETING OF SHAREOWNERS
June 24, 1998
10:00 AM
The Annual Meeting of Shareowners of Interstate Energy Corporation
(the Company) will be held at the Collins Plaza Hotel, 1200 Collins Road,
N.E., Cedar Rapids, Iowa, on Wednesday, June 24, 1998, at 10:00 AM (local
time), for the following purposes:
(1) To elect (a) five directors for terms expiring at the 2001
Annual Meeting of Shareowners, (b) three directors for terms
expiring at the 2000 Annual Meeting of Shareowners, and (c)
three directors for terms expiring at the 1999 Annual Meeting
of Shareowners.
(2) To approve an amendment of the Company's Restated Articles of
Incorporation to change the name of the Company from Interstate
Energy Corporation to Alliant Corporation.
(3) To consider and act upon any other business that may properly
come before the meeting.
The Board of Directors of the Company presently knows of no other
business to come before the meeting.
Only the holders of common stock of record on the books of the
Company at the close of business on May 11, 1998, are entitled to vote at
the meeting. All such shareowners are requested to be present at the
meeting in person or by proxy, so that the presence of a quorum may be
assured.
Please sign and return your proxy immediately. If you attend the
meeting, you may withdraw your proxy at the registration desk and vote in
person. All shareowners are urged to return their proxies promptly.
Your proxy covers all of your shares of common stock of the Company.
For present or past employees of the Company or Wisconsin Power and Light
Company, your proxy includes any shares held for your account under the
Company's Shareowner Direct Plan. For present or past employees of IES
Utilities Inc., your proxy includes any shares held for your account under
IES Utilities Employee Stock Ownership Plan. For shares credited to an
account under any 401(k) or similar retirement savings plan of the
Company, Wisconsin Power and Light Company, IES Utilities Inc. or
Interstate Power Company, you will receive a form of proxy from the
trustee of the respective plan.
A copy of the 1997 Annual Report of the Company is enclosed.
By Order of the Board of Directors,
EDWARD M. GLEASON
Vice President, Treasurer
and Corporate Secretary
May 18, 1998
<PAGE>
INTERSTATE ENERGY CORPORATION
d/b/a Alliant Corporation
222 West Washington Avenue P. O. Box 2568 Madison WI 53701-2568
Phone: 608/252-3110
May 18, 1998
PROXY STATEMENT RELATING TO
1998 ANNUAL MEETING OF SHAREOWNERS
The purposes of the meeting are set forth in the accompanying notice.
The enclosed proxy relating to the meeting is solicited on behalf of the
Board of Directors of the Company and the cost of such solicitation will
be borne by the Company. Following the original solicitation of proxies
by mail, beginning on or about May 18, 1998, certain of the officers and
regular employees of the Company may solicit proxies by telephone,
telegraph or in person, but without extra compensation. The Company will
pay to banks, brokers, nominees, and other fiduciaries, their reasonable
charges and expenses incurred in forwarding the proxy material to their
principals.
On April 21, 1998, the merger involving IES Industries Inc.,
Interstate Power Company and WPL Holdings, Inc. was completed (the
"Merger"), after which the name of the Company was changed from WPL
Holdings, Inc. to Interstate Energy Corporation. Following the Merger,
Heartland Development Corporation, the holding company for non-regulated
operations of the Company, changed its name to Alliant Industries Inc.
("Alliant Industries"). The Company is now the parent holding company of
Wisconsin Power and Light Company ("WP&L"), IES Utilities Inc. ("IES"),
Interstate Power Company ("IPC") and Alliant Industries.
The Company will furnish without charge, to each shareowner who is
entitled to vote at the meeting and who makes a written request, a copy of
the Company's Annual Report on Form 10-K (not including exhibits
thereto), as filed pursuant to the Securities Exchange Act of 1934.
Written requests for the Form 10-K should be mailed to the Corporate
Secretary at the address stated above.
PROPOSAL #1:
ELECTION OF DIRECTORS
Eleven directors are to be elected at the meeting. Joyce L. Hanes,
Arnold M. Nemirow, Jack R. Newman, Judith D. Pyle, and David Q. Reed are
nominees to hold office for a term expiring in 2001; Lee Liu, Robert W.
Schlutz and Wayne H. Stoppelmoor are nominees to hold office for a term
expiring in 2000; and Alan B. Arends, Robert D. Ray and Anthony R. Weiler
are nominees to hold office for a term expiring in 1999. All nominees are
currently directors of the Company, IES and IPC. All persons elected as
directors will serve until the Annual Meeting of Shareowners of the
Company in the year their respective term expires, or until their
successors have been duly elected and qualified.
Directors will be elected by a plurality of the votes cast at the
meeting (assuming a quorum is present). Consequently, any shares not
voted at the meeting, whether due to abstentions, broker non-votes or
otherwise, will have no effect on the election of directors. A vote shown
as withheld on a returned proxy card will have the same effect as a vote
against. The proxies solicited may be voted for a substitute nominee or
nominees in the event that any of the nominees shall be unable to serve,
or for good reason will not serve, a contingency not now anticipated.
Brief biographies of the director nominees and continuing directors
follow. These biographies include their age (as of December 31, 1997), an
account of their business experience, and the names of publicly-held and
certain other corporations of which they are also directors. Except as
otherwise indicated, each nominee and continuing director has been engaged
in his or her present occupation for at least the past five years.
Nominees
For Terms Expiring in 2001
Joyce L. Hanes Principal Occupation: Director and Chairman
of Midwest Wholesale Inc.
Age: 65
(Photo)
Served as a director of the Company since
the consummation of the Merger.
Annual meeting at which nominated term of
office will expire: 2001
Other Information: Ms. Hanes has been a director of Midwest Wholesale
Inc., Mason City, Iowa since 1970. She was re-elected Chairman of the
Board of that company in December, 1997, having previously served as
Chairman from 1986 to 1988. Ms. Hanes has served as a director of IPC
since 1982, and of WP&L and IES since the consummation of the Merger.
Arnold M. Nemirow Principal Occupation: Chairman, President
and Chief Executive Officer, Bowater, Inc. (a
pulp and paper manufacturer), Greenville,
South Carolina.
Age: 54
(Photo)
Served as director of the Company since 1991.
Annual Meeting at which nominated term of
office will expire: 2001
Other Information: Mr. Nemirow served as President, Chief Executive
Officer and Director of Wausau Paper Mills Company, a pulp and paper
manufacturer, from 1990 until joining Bowater, Inc., in September 1994.
Mr. Nemirow has served as a director of WP&L since 1994, and of IES and
IPC since the consummation of the Merger. He is a member of the New York
Bar.
Jack R. Newman Principal Occupation: Partner of Morgan,
Lewis & Bockius, an international law firm
based in Washington, D.C.
Age: 64
(Photo)
Served as a director of the Company since the
consummation of the Merger.
Annual Meeting at which nominated term of
office will expire: 2001
Other Information: Mr. Newman has been engaged in private
practice since 1967 and has been a partner of Morgan, Lewis & Bockius
since December 1, 1994. Prior to joining Morgan, Lewis & Bockius, he was
a partner in the law firms Newman & Holtzinger and Newman, Bouknight &
Edgar. He has served as nuclear legal counsel to IES since 1968. He
advises a number of utility companies on nuclear power matters, including
many European and Asian companies. Mr. Newman is a member of the Bar of
the State of New York, the Bar Association of the District of Columbia,
the Association of the Bar of the City of New York, the Federal Bar
Association and the Lawyers Committee of the Edison Electric Institute.
Mr. Newman has served as a director of IES since 1994, and of WP&L and IPC
since the consummation of the Merger.
Judith D. Pyle Principal Occupation: Vice Chair of The Pyle
Group, a financial services company, Madison,
Wisconsin.
Age: 54
(Photo)
Served as a director of the Company since
1992.
Annual Meeting at which nominated term of
office will expire: 2001
Other Information: Prior to assuming her current position, Ms. Pyle
served as Vice Chair and Senior Vice President of Corporate Marketing of
Rayovac Corporation (a battery and lighting products manufacturer),
Madison, Wisconsin. Ms. Pyle is a director of Firstar Corporation. She
is also a member of the Board of Visitors at the University of Wisconsin
School of Human Ecology. Further, Ms. Pyle is a member of Boards of
Directors of the United Way Foundation, Greater Madison Chamber of
Commerce, Madison Art Center, Wisconsin Taxpayers Alliance, Children's
Theatre of Madison, and is a trustee of the White House Endowment Fund.
Ms. Pyle has served as a director of WP&L since 1994, and of IES and IPC
since the consummation of the Merger.
David Q. Reed Principal Occupation: Independent
practitioner of law in Kansas City, Missouri.
Age: 66
(Photo)
Served as a director of the Company since the
consummation of the Merger.
Annual Meeting at which nominated term of
office will expire: 2001
Other Information: Mr. Reed has been engaged in the private
practice of law since 1960. He is a member of the American Bar
Association, the Association of Trial Lawyers of America, the Missouri
Association of Trial Lawyers, the Missouri Bar and the Kansas City
Metropolitan Bar Association. Mr. Reed has served as a director of IES
(or predecessor companies) since 1967, and of WP&L and IPC since the
consummation of the Merger.
For Terms Expiring in 2000
Lee Liu Principal Occupation: Chairman of the Board
of the Company.
Age: 64
(Photo) Served as a director of the Company since the
consummation of the Merger.
Annual Meeting at which current term of
office will expire: 2000
Other Information: Mr. Liu has served as Chairman of the Board
of the Company since the consummation of the Merger. Mr. Liu was Chairman
of the Board and Chief Executive Officer of IES Industries Inc. and
Chairman of the Board and Chief Executive Officer of IES. Mr. Liu has
held a number of professional, management and executive positions after
joining Iowa Electric Light and Power Company (later known as IES
Utilities Inc.) in 1957. He is a director of HON Industries Inc., an
office equipment manufacturer in Muscatine, Iowa; McLeod USA Inc., a
telecommunications company in Cedar Rapids, Iowa; Principal Financial
Group, an insurance company in Des Moines, Iowa; and Eastman Chemical
Company, a diversified chemical company in Kingsport, Tennessee. He also
serves as a trustee for Mercy Medical Center, a hospital in Cedar Rapids,
Iowa and is a member of the University of Iowa College of Business Board
of Visitors. Mr Liu has served as a director of IES (or predecessor
companies) since 1981, and of WP&L and IPC since the consummation of the
Merger.
Robert W. Schlutz Principal Occupation: President of Schlutz
Enterprises, a diversified farming and
retailing business in Columbus Junction,
Iowa.
Age: 62
(Photo)
Served as a director of the Company since the
consummation of the Merger.
Annual Meeting at which current term of
office will expire: 2000
Other Information: Mr. Schlutz is a director of PM Agri-Nutritional Group
Inc., an animal health business in St. Louis, Missouri, and the Iowa
Foundation for Agricultural Advancement. Mr. Schlutz is President of the
Iowa State Fair Board and member of various community organizations. He
also served on the National Advisory Council for the Kentucky Fried
Chicken Corporation. He is a past Chairman of the Environmental
Protection Commission for the State of Iowa. Mr. Schlutz has served as a
director of IES (or predecessor companies) since 1989, and of WP&L and IPC
since the consummation of the Merger.
Wayne H. Stoppelmoor Principal Occupation: Vice Chairman of the
Board of the Company.
Age: 63
(Photo)
Served as a director of the Company since the
consummation of the Merger.
Annual Meeting at which current term of
office will expire: 2000
Other Information: Mr. Stoppelmoor has served as Vice Chairman of the
Board of Directors of the Company since the consummation of the Merger.
Prior thereto, Mr. Stoppelmoor had served as Chairman, President and Chief
Executive Officer of IPC. He retired as President of IPC on October 1,
1996 and as Chief Executive Officer on January 1, 1997. Mr. Stoppelmoor
has served as a director of IPC since 1986, and of WP&L and IPC since the
consummation of the Merger.
For Terms Expiring in 1999
Alan B. Arends Principal Occupation: Chairman of the Board
of Directors of Alliance Benefit Group
Financial Services, Corp. (formerly Arends
Associates, Inc.,) of Albert Lea, Minnesota,
an employee benefits company.
Age: 64
(Photo)
Served as a director of the Company since the
consummation of the Merger.
Annual Meeting at which current term of
office will expire: 1999
Other Information: Mr. Arends founded Alliance Benefit Group Financial
Services Corp. in 1983. Mr. Arends has served as a director of IPC since
1993, and of WP&L and IES since the consummation of the Merger.
Robert D. Ray Principal Occupation: Retired President and
Chief Executive Officer of IASD Health
Services Inc. (formerly Blue Cross and Blue
Shield of Iowa, Western Iowa and South
Dakota), an insurance firm in Des Moines,
Iowa.
Age: 69
(Photo)
Served as a director of the Company since the
consummation of the Merger.
Annual Meeting at which current term of
office will expire: 1999
Other Information: Mr. Ray served as Governor of the State of Iowa for
fourteen years, and was the United States Delegate to the United Nations
in 1984. He is a director of the Maytag Company, an appliance
manufacturer in Newton, Iowa. He also serves as Chairman of the National
Leadership Commission on Health Care Reform and the National Advisory
Committee on Rural Health Care. Mr. Ray is Chairman of the Board of
Governors, Drake University, Des Moines, Iowa, and a member of the Iowa
Business Council. Mr. Ray has served as a director of IES (or predecessor
companies) since 1987, and of WP&L and IPC since the consummation of the
Merger.
Anthony R. Weiler Principal Occupation: Senior Vice President,
Merchandising, for Heilig-Meyers Company, a
national furniture retailer in Richmond,
Virginia.
Age: 61
(Photo)
Served as a director of the Company since the
consummation of the Merger.
Annual Meeting at which current term of
office will expire: 1999
Other Information: Mr. Weiler was previously Chairman and Chief Executive
Officer of Chittenden & Eastman Company, a national manufacturer of
mattresses in Burlington, Iowa. He was employed by Chittenden & Eastman
in various management positions from 1960 to 1995. Mr. Weiler joined
Heilig-Meyers Company as Senior Vice President of Merchandising in 1995.
Mr. Weiler is Chairman of the National Home Furnishings Association and a
director of the Retail Home Furnishings Foundation. He is a trustee of
NHFA Insurance and a past director of the Burlington Area Development
Corporation, the Burlington Area Chamber of Commerce and various community
organizations. Mr. Weiler has served as a director of IES (or predecessor
companies) since 1991, and of WP&L and IPC since the consummation of the
Merger.
THE BOARD OF DIRECTORS RECOMMENDS THE FOREGOING NOMINEES FOR ELECTION AS
DIRECTORS AND URGES EACH SHAREOWNER TO VOTE "FOR" ALL NOMINEES. SHARES OF
COMMON STOCK REPRESENTED BY EXECUTED BUT UNMARKED PROXIES WILL BE VOTED
"FOR" ALL NOMINEES.
Continuing Directors
Erroll B. Davis, Jr. Principal Occupation: President and Chief
Executive Officer of the Company.
Age: 53
(Photo)
Served as director of the Company since 1982.
Annual Meeting at which current term of
office will expire: 2000
Other Information: Mr. Davis was elected President of the Company in
January, 1990, and was elected President and Chief Executive Officer of
the Company effective July 1, 1990. Mr. Davis joined WP&L in August, 1978
and was elected President in July, 1987. He was elected as President and
Chief Executive Officer of WP&L in August, 1988. Mr. Davis has also
served as Chief Executive Officer of IES and IPC since the consummation of
the Merger. He is a director of the Edison Electric Institute, Amoco Oil
Company, Competitive Wisconsin, Inc., PPG Industries, Inc., and the
Wisconsin Utilities Association. Mr. Davis is also a director and past
chair of the Wisconsin Association of Manufacturers and Commerce, former
director and vice chair of Forward Wisconsin, and director and acting
chair of the Electric Power Research Institute, past director of the
Association of Edison Illuminating Companies, and the American Gas
Association. Mr. Davis is also a member of the Iowa Business Council. Mr.
Davis has served as a director of WP&L since 1984, and of IES and IPC
since the consummation of the Merger.
Rockne G. Flowers Principal Occupation: Chief Executive
Officer of Nelson Industries, Inc. (a
muffler, filter, industrial silencer, and
active sound and vibration control technology
and manufacturing firm), Stoughton, Wisconsin
(a subsidiary of Cummins Engine Company).
Age: 66
(Photo)
Served as director of the Company since 1981.
Annual Meeting at which current term of
office will expire: 1999
Other Information: Mr. Flowers is a director of Digisonix, Inc.;
American Family Mutual Insurance Company; Janesville Sand and Gravel
Company; M&I Bank of Southern Wisconsin; Meriter Health Services, Inc.;
Meriter Hospital; the Wisconsin History Foundation, and University
Research Park. Mr. Flowers has served as a director of WP&L from 1979 to
1990 and since 1994, and of IES and IPC since the consummation of the
Merger.
Katharine C. Lyall Principal Occupation: President, University
of Wisconsin System, Madison, Wisconsin.
Age: 56
(Photo) Served as director of the Company since 1994.
Annual Meeting at which current term of
office will expire: 1999
Other Information: Ms. Lyall has served as President of the University of
Wisconsin System since April 1992. Prior thereto, she served as Executive
Vice President of the University of Wisconsin System. She also serves on
the Board of Directors of the Kemper National Insurance Companies and the
Carnegie Foundation for the Advancement of Teaching. She is a member of a
variety of professional and community organizations, including the
American Economic Association; Carnegie Foundation for Advancement of
Teaching (President, Board of Trustees); the Wisconsin Academy of
Sciences, Arts and Letters; the American Red Cross (Dane County);
Competitive Wisconsin, Inc.; and Forward Wisconsin. In addition to her
administrative position, she is a professor of economics at the University
of Wisconsin-Madison. Ms. Lyall has served as a director of WP&L since
1986, and of IES and IPC since the consummation of the Merger.
Milton E. Neshek Principal Occupation: Special Consultant to
the Kikkoman Corporation, Tokyo, Japan, and
General Counsel and Secretary of Kikkoman
Foods, Inc. and Manager, New Market
Development, Kikkoman Foods, Inc. (a food
products manufacturer), Walworth, Wisconsin.
(Photo)
Age: 67
Served as director of the Company since 1986.
Annual Meeting at which current term of
office will expire: 2000
Other Information: Mr. Neshek is a director of Kikkoman Foods, Inc.;
Midwest U.S.-Japan Association; Regional Transportation Authority (for
southeast Wisconsin); and Wisconsin-Chiba, Inc. He is a fellow in the
American College of Probate Counsel. Mr. Neshek is a member of the
Walworth County Bar Association, the State Bar of Wisconsin, and the
American Judicature Society. Mr. Neshek is also a member of the Wisconsin
Sesquicentennial Commission and a member of its Executive and Finance
Committee. Mr. Neshek is a member of the Wisconsin International Trade
Council (WITCO) and is Chairman of the WITCO International Education Task
Force. Mr. Neshek has served as a director of WP&L since 1984, and of IES
and IPC since the consummation of the Merger.
PROPOSAL #2:
CHANGE OF CORPORATE NAME
The Board of Directors proposes and recommends that the shareowners
approve an amendment (the "Name Change Amendment") to Article I of the
Company's Restated Articles of Incorporation to change the name of the
Company from "Interstate Energy Corporation" to "Alliant Corporation".
The terms of the Name Change Amendment are set forth in Appendix A to this
Proxy Statement. The name change is intended to reflect the Company's
strategy to form valuable alliances and partnerships that will ensure
success in a competitive energy-services marketplace and to reflect the
Company's long-term strategy to expand its energy-related businesses both
domestically and internationally. Changing the Company's name does not
alter any of the rights of shareowners.
The affirmative vote of the holders of a majority of the shares of
the Company's common stock represented and voted at the annual meeting
(assuming a quorum is present) is required to approve the Name Change
Amendment. Assuming the existence of a quorum, any shares of common stock
not voted at the meeting, whether due to abstentions, broker non-votes or
otherwise, will have no impact regarding the proposal to approve the Name
Change Amendment.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE NAME CHANGE AMENDMENT.
SHARES OF COMMON STOCK REPRESENTED BY EXECUTED BUT UNMARKED PROXIES WILL
BE VOTED "FOR" SUCH AMENDMENT.
MEETINGS AND COMMITTEES OF THE BOARD
The Board of Directors of the Company has standing Audit,
Compensation and Personnel, and Nominating and Governance Committees.
Information regarding each of the committees is set forth below.
Audit Committee
As of January 1, 1997, the committee consisted of L. David. Carley,
R. G. Flowers, Donald. R. Haldeman, and K. C. Lyall (Chair). Messrs.
Carley and Haldeman retired as directors upon consummation of the Merger.
The committee held two meetings in 1997. Since the effective date of the
Merger, the committee has consisted of J. L. Hanes (Chair), K. C. Lyall,
M. E. Neshek, D. Q. Reed and R. W. Schlutz. The committee recommends to
the Board the appointment of independent auditors; reviews the reports and
comments of the independent auditors; reviews the activities and reports
of the Company's internal audit staff; and, in response to the reports and
comments of both the independent auditors and internal auditors,
recommends to the Board any action which the Audit Committee considers
appropriate.
Compensation and Personnel Committee
As of January 1, 1997, the committee consisted of A. M. Nemirow
(Chair), M. E. Neshek, Henry. C. Prange, J. D. Pyle, and Carol. T.
Toussaint. Mr. Prange and Mrs. Toussaint retired as directors upon
consummation of the Merger. The committee held two meetings in 1997.
Since the effective date of the Merger, the committee has consisted of A.
M. Nemirow (Chair), A. B. Arends, J. R. Newman, J. D. Pyle and A. R.
Weiler. The committee sets executive compensation policy; administers the
Company's Long-Term Equity Incentive Plan; reviews the performance of and
approves salaries for officers and certain other management personnel;
reviews and recommends to the Board new or changed employee benefit plans;
reviews major provisions of negotiated employment contracts, if any; and
reviews human resource development programs.
Nominating and Governance Committee
As of January 1, 1997, the committee consisted of L. D. Carley
(Chair), R. G. Flowers, K. C. Lyall, A. M. Nemirow, H. C. Prange, and J.
D. Pyle. Messrs. Carley and Prange retired as directors upon consummation
of the Merger. The committee held four meetings in 1997. Since the
effective date of the Merger, the committee has consisted of R. G. Flowers
(Chair), A. B. Arends, J. D. Pyle, R. D. Ray and A. R. Weiler. The
committee's responsibilities include recommending and nominating new
members of the Board, recommending committee assignments and committee
chair persons, evaluating overall Board effectiveness, preparing an annual
report on CEO effectiveness, and considering and developing
recommendations to the Board of Directors on other corporate governance
issues. In making recommendations of nominees for election to the Board,
the committee will consider nominees recommended by shareowners. Any
shareowner wishing to make a recommendation should write the Chief
Executive Officer of the Company, who will forward all recommendations to
the committee.
The Board of Directors held seven meetings during 1997. Only one
director (Mr. Nemirow) attended less than 75% of the aggregate number of
meetings of the Board and Board committees on which he served.
Compensation of Directors
No fees are paid to directors who are officers of the Company and/or
any of its subsidiaries (presently Mr. Davis, Mr. Liu and Mr.
Stoppelmoor). Non-management directors, each of whom serve on the Boards
of the Company, WP&L, IES, IPC and Alliant Industries, receive an annual
retainer of $32,800 for service on all five boards. Travel expenses are
paid for each meeting day attended. All non-management directors also
receive a 25 percent Company matching contribution in common stock for
limited optional cash purchases, up to $10,000, of the Company's common
stock through the Company's Shareowner Direct Plan. Matching
contributions of $2,500 each for calendar year 1997 were made for the
following directors: L. D. Carley, R. G. Flowers, D. R. Haldeman, K. C.
Lyall, A. M. Nemirow, M. E. Neshek, H. C. Prange, J. D. Pyle, and C. T.
Toussaint.
Director's Charitable Award Program - The Company maintains a
Director's Charitable Award Program for the members of its Board of
Directors beginning after three years of service. The purpose of the
Program is to recognize the interest of the Company and its directors in
supporting worthy institutions, and to enhance the Company's director
benefit program so that the Company is able to continue to attract and
retain directors of the highest caliber. Under the Program, when a
director dies, the Company will donate a total of $500,000 to one
qualified charitable organization, or divide that amount among a maximum
of four qualified charitable organizations, selected by the individual
director. The individual director derives no financial benefit from the
Program. All deductions for charitable contributions are taken by the
Company, and the donations are funded by the Company through life
insurance policies on the directors. Over the life of the Program, all
costs of donations and premiums on the life insurance policies, including
a return of the Company's cost of funds, will be recovered through life
insurance proceeds on the directors. The Program, over its life, will not
result in any material cost to the Company.
Director's Life Insurance Program - The Company maintains a split-
dollar Director's Life Insurance Program for non-employee directors,
beginning after three years of service, which provides a maximum death
benefit of $500,000 to each eligible director. Under the split-dollar
arrangement, directors are provided a death benefit only and do not have
any interest in the cash value of the policies. The Life Insurance
Program is structured to pay a portion of the total death benefit to the
Company to reimburse the Company for all costs of the program, including a
return on its funds. The Life Insurance Program, over its life, will not
result in any material cost to the Company.
Director Emeritus Program - In connection with the Merger, the
Company put in place a Director Emeritus Program under which directors
that retired from the Board as a result of the Merger are paid the same
annual retainer fee as continuing directors for up to two years after they
retire or until they reach age 71, whichever occurs first. This program
is intended to apply only to directors who retired in connection with the
Merger.
Director nominee Jack R. Newman serves as legal counsel to the
Company on nuclear issues. Mr. Newman's firm, Morgan, Lewis & Bockius has
also has provided legal services to the Company related to the Merger.
OWNERSHIP OF VOTING SECURITIES
Listed in the following table are the shares of the Company's common
stock owned by the executive officers listed in the Summary Compensation
Table and all directors of the Company, as well as the number of shares
owned by directors and officers as a group as of April 21, 1998. The
directors and executive officers of the Company as a group owned less than
one percent of the outstanding shares of common stock on that date. To
the Company's knowledge, no shareowner beneficially owned 5 percent or
more of the Company's outstanding common stock as of April 21, 1998.
Shares
Beneficially
Name of Beneficial Owner Owned(1)
Executives(2)
Lance W. Ahearn . . . . . . . . . . . . 29,358 (3)
A. J. (Nino) Amato . . . . . . . . . . 5,810 (4)
Daniel A. Doyle . . . . . . . . . . . . 3,603 (4)
William D. Harvey . . . . . . . . . . . 14,767 (4)
Eliot G. Protsch . . . . . . . . . . . 14,941 (4)
Director Nominees
Alan B. Arends . . . . . . . . . . . 1,100
Joyce L. Hanes. . . . . . . . . . . . . 1,868
Lee Liu . . . . . . . . . . . . . . . . 49,772
Arnold M. Nemirow . . . . . . . . . . . 9,567
Jack R. Newman . . . . . . . . . . . . 1,482
Judith D. Pyle . . . . . . . . . . . . 6,100
Robert D. Ray . . . . . . . . . . . . . 3,193
David Q. Reed . . . . . . . . . . . . . 6,044
Robert W. Schlutz . . . . . . . . . . . 3,633
Wayne H. Stoppelmoor . . . . . . . . . 6,075
Anthony R. Weiler . . . . . . . . . . . 4,603
Continuing Directors
Erroll B. Davis, Jr. . . . . . . . . 33,703 (4)
Rockne G. Flowers . . . . . . . . . . . 9,819
Katharine C. Lyall . . . . . . . . . . 7,194
Milton E. Neshek . . . . . . . . . . . 12,195
All Executives and Directors as a Group
36 people, including those listed above 304,758
(1) Total shares of Company common stock outstanding as
of April 22, 1998 were 76,754,618.
(2) Stock ownership of Mr. Davis is shown with continuing
directors.
(3) Mr. Ahearn resigned in November 1997.
(4) Included in the beneficially owned shares shown are: Indirect
ownership interests with shared voting and investment powers:
Mr. Amato -1,032, Mr. Harvey - 1,828, Mr. Protsch - 552, Mr.
Davis - 5,603, Ms. Hanes - 425, Mr. Liu - 9,755, Mr. Reed - 353
and Mr. Weiler - 1,037; and Excercisable stock options : Mr.
Davis - 13,100, Mr. Harvey - 4,700, Mr. Protsch - 4,700, Mr.
Amato - 3,650 and Mr. Doyle - 2,900 (all directors and officers
as a group - 39,200).
COMPENSATION OF EXECUTIVE OFFICERS
The following Summary Compensation Table sets forth the total
compensation paid by the Company and its subsidiaries for all services
rendered during 1997, 1996, and 1995 to the Chief Executive Officer and
the five other most highly compensated executive officers of the Company
or its subsidiaries who performed policy making functions for the Company.
<TABLE>
SUMMARY COMPENSATION TABLE
(Dollars)
<CAPTION>
Long-Term
Annual Compensation Compensation Awards
Other Options/ Restricted
Name and Annual SARs Stock All Other
Principal Position Year Salary1 Bonus 2 Compensation 3 (Shares) 4 Awards Compensation 5
<S> <C> <C> <C> <C> <C> <C> <C>
Erroll B. Davis, Jr. 1997 450,000 200,800 19,982 13,800 - 60,261
President and CEO 1996 450,000 297,862 23,438 12,600 - 66,711
1995 426,038 125,496 18,963
13,100 - 61,513
William D. Harvey 1997 220,000 43,986 14,944 5,100 - 33,043
Senior Vice 1996 220,000 92,104 10,765 4,650 - 29,343
President - WP&L 1995 203,846 47,340 5,746 4,700 - 23,534
Eliot G. Protsch 1997 220,000 51,400 11,444 5,100 - 30,057
Senior Vice 1996 220,000 101,224 7,657 4,650 - 25,890
President - WP&L 1995 200,000 47,520 4,169 4,700 - 20,178
A. J. (Nino) Amato 6 1997 168,846 25,262 13,775 3,900 - 27,809
Senior Vice 1996 168,846 65,920 9,346 3,550 - 22,723
President - WP&L 1995 156,804 40,046 5,144 3,650 - 18,059
Daniel A. Doyle 1997 165,400 20,139 7,087 3,250 - 17,811
Vice President - Power 1996 149,150 46,865 3,053 2,800 - 12,180
Production - WP&L 1995 140,399 32,465 3,090 2,900 - 11,155
Lance W. Ahearn 7 1997 186,011 70,458 106,340 - - 791,727
1996 205,000 59,860 6,180 - - 35,147
1995 195,000 34,125 3,814 - - 29,663
___________________
1 Includes vacation days sold back to the Company, if any.
2 Bonuses include special bonuses for merger related work of: Mr. Davis - $100,000, Mr. Harvey - $25,000, Mr. Protsch -
$25,000, Mr. Amato - $5,000 and Mr. Doyle - $10,000. The bonus for Mr. Ahearn for 1997 includes a tax reimbursement
bonus related to tax on proceeds from Alliant Industries restricted stock redeemed during 1997.
3 Other Annual Compensation for 1997 consists of: Income tax gross-ups for reverse split-dollar life insurance: Mr. Davis
- $13,526, Mr. Harvey - $5,567, Mr. Protsch - $2,866, Mr. Ahearn - $3,476, Mr. Amato - $4,732 and Mr. Doyle - $3,164;
Income tax gross-ups on financial counseling benefit: Mr. Davis - $6,456, Mr. Harvey - $9,377, Mr. Protsch - $8,578, Mr.
Ahearn - $4,096, Mr. Amato - $9,043 and Mr. Doyle - $3,923; and Income tax gross-ups for redemption of Alliant Industries
stock: Mr. Ahearn - $98,768.
4 Awards made in 1997 were in combination with contingent dividend awards as described in the table entitled "Long-Term
Incentive Awards in 1997".
5 All Other Compensation for 1997 consists of: matching contributions to 401(k) plan, Mr. Davis - $13,500, Mr. Harvey -
$6,600, Mr. Protsch - $6,600, Mr. Ahearn - $4,750, Mr. Amato -$4,100 and Mr. Doyle - $4,962; Financial counseling
benefit, Mr. Davis - $7,000, Mr. Harvey - $10,167, Mr. Protsch - $10,750, Mr. Ahearn - $11,333, Mr. Amato - $11,333 and
Mr. Doyle - $4,917; Split dollar life insurance premiums, Mr. Davis -$25,096, Mr. Harvey - $10,241, Mr. Protsch - $9,116,
Mr. Amato - $6,446 and Mr. Doyle - $3,967; Reverse split dollar life insurance, Mr. Davis - $14,665, Mr. Harvey - $6,035,
Mr. Protsch - $3,591, Mr. Ahearn - $6,744, Mr. Amato -$5,930 and Mr. Doyle - $3,965; Severance payments pursuant to
severance agreements: Mr. Ahearn - $768,900. The split dollar insurance premiums are calculated using the "foregone
interest" method.
6 Mr. Amato left the Company following the effective date of the Merger.
7 Mr. Ahearn resigned as President and Chief Executive Officer of Alliant Industries in November 1997.
</TABLE>
Pro-Forma Executive Compensation Information
The following sets forth pro-forma compensation information as though
the Merger had been consummated on January 1, 1997. The compensation
reflected in the table was paid by the Company and IES Industries, as the
case may be.
<TABLE>
Pro-Forma
SUMMARY COMPENSATION TABLE
(Dollars)
<CAPTION>
Long-Term
Annual Compensation Compensation Awards
Other Options/ Restricted
Name and Annual SARs Stock All Other
Principal Position Year Salary1 Bonus 2 Compensation 3 (Shares) 4 Awards Compensation 5
<S> <C> <C> <C> <C> <C> <C> <C>
B. Davis, Jr. 1997 450,000 200,800 19,982 13,800 - 60,261
President and CEO 1996 450,000 297,862 23,438 12,600 - 66,711
of the Company 1995 426,038 125,496 18,963 13,100 - 61,513
Lee Liu 1997 400,000 189,000 5,956 - 176,391 13,277
Chairman of the Board 1996 380,000 175,000 2,578 - 253,475 13,956
and CEO - IES 1995 340,000 142,800 1,588 - 176,745 13,507
Larry D. Root 1997 336,000 - 1,164 - - -
President and Chief 1996 50,909 - 813 - - 252,000
Operating 1995 220,822 62,606 566 - - 208,038
Officer - IES
James E. Hoffman 1997 232,200 62,694 - - 35,462 847
Executive Vice 1996 226,467 58,050 - - 101,879 823
President - IES 1995 89,583 206,500 51,523 - 143,125 324
Thomas M. Walker 1997 230,000 62,100 38,138 - - 2,367
Executive Vice 1996 9,583 - - - 30,000 119
President and CFO - IES
___________________
1 Includes vacation days sold back to the Company, if any.
2 The bonus for Mr. Davis consists of $39,375, from the Company's Management Incentive Plan, $61,425 from the Alliant
Industries Management Incentive Plan and a special bonus for merger related work of $100,000. The bonuses for Mr. Liu,
Mr. Hoffman and Mr. Walker represent plan year awards from the IES Utilities Inc. Management Incentive Compensation Plan.
The amount reported as bonus for Mr. Hoffman in 1995 also includes a one-time payment of $185,000 when he commenced
employment with IES Utilities.
3 Other Annual Compensation for 1997 consists of: Income tax gross-ups for reverse split-dollar life insurance: Mr. Davis
- $13,526; Income tax gross-ups on financial counseling benefit: Mr. Davis - $6,456; Earnings from the IES Utilities Key
Employee Deferred Compensation Plan in excess of 120% of the applicable federal long-term rate provided under Section
1274(d) of the Internal Revenue Code: Mr. Liu - $5,956 and Mr. Root - $1,164; Relocation expense reimbursement: Mr.
Walker - $38,138. Also included in 1995 are relocation expense reimbursements for Mr. Hoffman of $51,523.
4 Awards for Mr. Davis made in 1997 were in combination with contingent dividend awards as described in the table entitled
"Long-Term Incentive Awards in 1997".
5 Awards of IES Industries restricted stock had been made by IES Industries Inc. since June 1, 1988, with one-third of each
year's award being restricted for one year, one-third being restricted for two years, and one-third being restricted for
three years. The shares of restricted stock reflected in this table subject to such three-year vesting schedule are as
follows: Mr. Liu - 5,004 shares awarded for 1997, 8,703 shares awarded for 1996, and 6,171 shares awarded for 1995; Mr.
Hoffman - 1,006 shares awarded for 1997, 3,498 shares awarded for 1996 and 5,000 shares awarded for 1995; Mr. Walker -
1,000 shares awarded for 1996. Restricted stock is considered outstanding upon award date and dividends are paid to the
eligible officers on these shares while restricted. The amounts shown in the table above represent the value of the
awards based upon closing price of IES Industries Common Stock on the award date. The award date is usually in the
calendar year following the plan year. At December 31, 1997, the following listed officers of IES Industries Inc. had
restricted stock for which restrictions had not lapsed as follows (values based on December 31, 1997 closing price for
IES Industries Common Stock): Mr. Liu - 20,592 shares valued at $758,043; Mr. Hoffman - 7,838 valued at $288,536; Mr.
Walker - 667 shares valued at $24,554. All of the restricted shares award by IES Industries vested upon consummation of
the Merger.
6 All Other Compensation for 1997 consists of: matching contributions to 401(k) plan, Mr. Davis - $13,500 and Mr. Liu -
$3,800; Financial counseling benefit, Mr. Davis - $7,000; Split dollar life insurance premiums, Mr. Davis -$25,096;
Reverse split dollar life insurance, Mr. Davis - $14,665; Life insurance coverage in excess of $50,000: Mr. Liu - $9,477,
Mr. Hoffman - $847 and Mr. Walker - $2,367. The split dollar insurance premiums are calculated using the "foregone
interest" method. The 1996 amount for Mr. Root includes consulting fees of $249,989. The 1995 amount for Mr. Root
includes severance costs of $200,660.
</TABLE>
OPTION/SAR GRANTS IN 1997
The following table sets forth certain information concerning
options/SAR's granted during 1997 to the executives named below:
<TABLE>
OPTION/SAR GRANTS IN 1997
<CAPTION>
Potential Realizable Value
at Assumed Annual Rates of
Stock Appreciation for
Option Term 2
Individual Grants
% of Total
Options/SARs
Granted to Exercise or
Options/ Employees in Base Price Expiration
Name SARs Granted 1 Fiscal Year ($/Share) Date 5% 10%
<S> <C> <C> <C> <C> <C> <C>
Erroll B. Davis, Jr. 13,800 17% $28.00 1/2/07 $243,018 $615,814
William D. Harvey 5,100 6% 28.00 1/2/07 89,811 227,613
Eliot G. Protsch 5,100 6% 28.00 1/2/07 89,811 227,613
A. J. (Nino) Amato 3,900 5% 28.00 1/2/07 68,679 174,057
Daniel A. Doyle 3,250 4% 28.00 1/2/07 57,233 145,048
Lance W. Ahearn NA NA NA NA NA NA
1 Consists of non-qualified stock options to purchase shares
of Company common stock granted pursuant to the Company's
Long Term Equity Incentive Plan. Options were granted on
January 2, 1997, and will fully vest on January 2, 2000.
These options were granted with an equal number of
contingent dividend awards as described in the table
entitled "Long-Term Incentive Awards in 1997" and have
exercise prices equal to the fair market value of Company
shares on the date of grant. Upon a "change in control" of
the Company as defined in the Plan or upon retirement,
disability or death of the option holder, these options
shall become immediately exercisable. Upon exercise of an
option, the executive purchases all or a portion of the
shares covered by the option by paying the exercise price
multiplied by the number of shares as to which the option
is exercised, either in cash or by surrendering common
shares already owned by the executive.
2 The hypothetical potential appreciation shown for the named
executives is required by the Securities and Exchange
Commission ("SEC") rules. The amounts shown do not
represent either the historical or expected future
performance of the Company's common stock level of
appreciation. For example, in order for the named
executives to realize the potential values set forth in the
5% and 10% columns in the table above, the price per share
of the Company's Common Stock would be $45.61 and $72.65
respectively as of the expiration date of the options.
</TABLE>
The following table provides information for the executives named
below regarding the number and value of unexercised options. No options
were exercisable during 1997.
<TABLE>
OPTION/SAR VALUES AT DECEMBER 31, 1997
<CAPTION>
Number of Unexercised Value of Unexercised In-the-Money
Options/SAR's at Year End Options/SAR's at Year End 1
Name Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C>
Erroll B. Davis, Jr. 0 39,500 0 $174,338
William D. Harvey 0 14,450 0 63,620
Eliot G. Protsch 0 14,450 0 63,620
A. J. (Nino) Amato 0 11,000 0 48,950
Daniel A. Doyle 0 8,950 0 39,619
Lance W. Ahearn NA NA NA NA
1 Based on the closing per share price on December 31, 1997 of
Company common stock of $33.125.
</TABLE>
The following table provides information concerning long-term
incentive awards made to the executives named below in 1997.
<TABLE>
LONG-TERM INCENTIVE AWARDS IN 1997
<CAPTION>
ESTIMATED FUTURE PAYOUTS UNDER NON-STOCK
PRICE-BASED PLANS 2
NUMBER OF PERFORMANCE OR
SHARES, UNITS OTHER PERIOD
OR OTHER UNTIL MATURATION
NAME RIGHTS OR PAYOUT THRESHOLD TARGET MAXIMUM
(#) 1 ($) ($) ($)
<S> <C> <C> <C> <C> <C>
Erroll B. Davis, Jr. 13,800 1/2/00 66,240 82,800 144,900
William D. Harvey 5,100 1/2/00 24,480 30,600 53,550
Eliot G. Protsch 5,100 1/2/00 24,480 30,600 53,550
A. J. (Nino) Amato 3,900 1/2/00 18,720 23,400 40,950
Daniel A. Doyle 3,250 1/2/00 15,600 19,500 34,125
Lance W. Ahearn NA NA NA NA NA
1 Consists of Performance Units awarded under the Company's
Long-Term Equity Incentive Plan in combination with stock
options (as described in the table entitled "Option/SAR
Grants in 1997"). These Performance Units are entirely in
the form of contingent dividends and will be paid if total
shareholder return over a three-year period ending January
2, 2000 equals or exceeds the median return earned by the
companies in a peer group of utility holding companies,
except that there will be no payment if the Company's total
return is negative over the course of such period. If
payable, each participant shall receive an amount equal to
the accumulated dividends paid on one share of Company
common stock during the period of January 2, 1997 through
December 31, 2000 multiplied by the number of performance
units awarded to the participant, and modified by a
performance multiplier which ranges from 0 to 1.75 based on
the Company's total return relative to the peer group.
2 Assumes, for purposes of illustration only, a $2.00 per
share annual dividend on shares of common stock for 1998 and
1999.
</TABLE>
Agreements and Transactions with Executives
In connection with the Merger, Messrs. Liu and Davis entered into new
employment agreements with the Company. Pursuant to Mr. Liu's agreement,
Mr, Liu will serve as Chairman of the Company until the second anniversary
of the effective time of the Merger. Mr. Liu will thereafter retire as an
officer of the Company, although he may continue to serve as a director.
Under Mr. Davis's agreement, Mr. Davis will serve as the Chief Executive
Officer of the Company until at least the fifth anniversary of the
effective time of the Merger and, following Mr, Liu's retirement, Mr,
Davis will also serve as Chairman of the Company. Following the
expiration of the initial term of Mr. Davis's employment agreement, his
agreement will automatically renew for successive one-year terms, unless
either Mr. Davis or the Company gives prior written notice of his or its
intent to terminate the agreement. Mr. Davis will also serve as Chief
Executive Officer of each subsidiary of the Company until at least the
third anniversary of the effective time of the Merger and as a director of
such companies during the term of his employment agreement.
Mr. Liu's employment agreement provides that he receive an annual
base salary of not less than $400,000, and supplemental retirement
benefits and the opportunity to earn short-term and long-term incentive
compensation (including stock options, restricted stock and other long-
term incentive compensation) in amounts no less than he was eligible to
receive from IES Industries before the effective time of the Merger.
Pursuant to Mr. Davis's employment agreement, he is paid an annual base
salary of not less than $450,000. Mr. Davis also has the opportunity to
earn short-term and long-term incentive compensation (including stock
options, restricted stock and other long-term incentive compensation) in
amounts no less than he was eligible to receive before the effective time
of the Merger, as well as supplemental retirement benefits (including
continued participation in the WP&L Executive Tenure Compensation Plan) in
an amount no less than he was eligible to receive before the effective
time of the Merger, and life insurance providing a death benefit of three
times his annual salary.
If the employment of either Mr, Liu or Mr. Davis is terminated
without cause (as defined in their respective employment agreements) or if
either of them terminates his employment for good reason (as defined in
their respective employment agreements), the Company or its affiliates
will continue to provide the compensation and benefits called for by the
respective employment agreement through the end of the term of such
employment agreement (with incentive compensation based on the maximum
potential awards and with any stock compensation paid in cash), and all
unvested stock compensation will vest immediately. If either Mr. Liu or
Mr. Davis dies or becomes disabled, or terminates his employment without
good reason, during the term of his respective employment agreement, the
Company or its affiliates will pay to the officer or his beneficiaries or
estate all compensation earned through the date of death, disability or
such termination (including previously deferred compensation and pro rata
incentive compensation based upon the maximum potential awards). If the
officer is terminated for cause, the Company or its affiliates will pay
his base salary through the date of termination plus any previously
deferred compensation. Notwithstanding the foregoing, in the event that
any payments to an officer under his employment agreement or otherwise are
subject to the excise tax on excess parachute payments under the Internal
Revenue Code (the "Code"), then the total payments to be made under the
employment agreement will be reduced so that the value of these payments
the officer is entitled to receive is $1 less than the amount that would
subject the officer to the 20% excise tax imposed by the Code on certain
excess payments, or which the Company may pay without loss of deduction
under the Code.
The Company also has key executive employment and severance
agreements ("KEESAs") with Mr. Davis and with certain other executive
officers of the Company and its subsidiaries, including Messrs. Harvey,
Protsch, Amato and Doyle. The KEESAs provide that each executive officer
that is a party thereto is entitled to benefits if, within five years
after a change in control of the Company (as defined in the KEESAs), the
officer's employment is ended through (i) termination by the Company,
other than by reason of death or disability or for cause (as defined in
the KEESAs), or (ii) termination by the officer due to a breach of the
agreement by the Company or a significant change in the officer's
responsibilities, or (iii) in the case of Mr. Davis's agreement,
termination by Mr. Davis following the first anniversary of the change of
control. The consummation of the Merger was deemed to constitute a change
in control of the Company for purposes of the KEESAs. The benefits
provided are,. (i) a cash termination payment of one, two or three times
(depending on which executive is involved) the sum of the officer's annual
salary and his average annual bonus during the three years before the
termination and (ii) continuation for up to five years of equivalent
hospital, medical, dental, accident, disability and life insurance
coverage as in effect at the time of termination. Each KEESA provides
that if any portion of the benefits under the KEESA or under any other
agreement for the officer would constitute an excess payment for purposes
of the Internal Revenue Code, benefits will be reduced so that the officer
will be entitled to receive $1 less than the maximum amount which he could
receive without becoming subject to the 20% excise tax imposed by the Code
on certain excess payments, or which the Company may pay without loss of
deduction under the Code. Mr. Davis's employment agreement as described
above limits benefits paid thereunder to the extent that duplicate
payments would be provided to him under his KEESA. In connection with the
termination of his employment and pursuant to a letter agreement with the
Company, Mr. Amato received benefits totalling $614,771 under his KEESA.
IES Industries also had an executive change of control severance
agreement with Mr. Hoffman that was assumed by the Company in connection
with the Merger. Mr. Hoffman's agreement provides for salary continuation
and certain other benefits in the event he is terminated within a three-
year period following a change in control of IES Industries. The
consummation of the Merger constituted a change in control of IES
Industries for purposes of Mr. Hoffman's agreement. Mr. Hoffman's
severance agreement provides that, in the event of his termination during
the three-year period following the effective time of the Merger other
than for just cause, death, retirement, disability or voluntary
resignation (excluding resignation for good reason), his salary (at its
then current level) will be continued for a period of 18 months.
Additionally, Mr, Hoffman will be entitled to certain benefits during the
severance period, including life and health insurance, and he would
receive annual incentive award payments equal to the average annual
incentive awards paid to executives of the same or comparable designation
during the three years prior to the change in control. In the event Mr.
Hoffman should die during the severance period, the salary and benefits
payments described above would be payable during the remainder of the term
to his surviving spouse or his estate. Mr. Hoffman would also become
immediately vested in any stock option or comparable award granted to him.
In connection with the termination of his employment on November 21,
1997, the Company entered into a severance agreement with Mr. Ahearn.
Pursuant to this agreement, Mr. Ahearn received a severance payment of
$768,900 and a pro-rated bonus of $70,458. In addition, Mr. Ahearn will
receive in three annual installments commencing January 1998 payments
aggregating $204,190. In consideration for these payments, Mr. Ahearn
provided the Company with a general release of claims, agreed to maintain
the confidentiality of certain information and entered into a one-year
covenant not-to-compete.
During 1997, in connection with a Restricted Stock Agreement entered
into in 1991 with the Company and Alliant Industries, Mr. Ahearn converted
0.51 shares of Alliant Industries stock into 7,104 shares of Company
common stock and redeemed his remaining 1.02 shares of Alliant Industries
stock for $421,553 per share. The conversion and redemption amounts were
based on third-party appraisals of Alliant Industries stock. Similarly,
during 1997, Mr. Davis converted 0.5567 shares of Alliant Industries stock
into 7,754 shares of Company common stock and redeemed his remaining
1.1133 shares of Alliant Industries stock for $421,553 per share. The
proceeds of the redemption to Mr. Davis were used, in part, to repay
$315,257 of principal and interest on loans made by the Company to Mr.
Davis for taxes withheld in connection with the vesting of his Alliant
Industries stock. Mr. Davis was charged interest on these loans at the
prime rate.
Alliant Industries also has a consulting agreement with Mr. Root that
became effective upon consummation of the Merger and Mr. Root's
retirement. The consulting agreement provides that Mr. Root be paid
$1,500 and $2,000 per day for consulting services performed in the United
States and outside the United States, respectively. In addition, in
connection with an early retirement agreement entered into with IES in
1995, Mr. Root, in addition to other retirement benefits he is entitled to
as a retired officer, receives, as an unfunded supplemental pension
benefit, $11,306.11 per month for a period of fifteen years. If Mr. Root
dies before receiving payments for ten years, then his surviving spouse
and children will receive such payments up to the end of such ten-year
period. In such a case, payments beyond ten years will be forfeited. The
Company is also obligated to pay, within three months of Mr. Root's death,
a death benefit of $200,660 to his beneficiaries.
Retirement and Employee Benefit Plans
Salaried employees (including officers) of the Company and WP&L are
eligible to participate in a Retirement Plan maintained by WP&L. During
his employment, Mr. Ahearn was not eligible to participate in the plan.
All eligible persons whose compensation is reported in the foregoing
Summary Compensation Table participated in the plan during 1997.
Contributions to the plan are determined actuarially, computed on a
straight-life annuity basis, and cannot be readily calculated as applied
to any individual participant or small group of participants. For
purposes of the plan, compensation means payment for services rendered,
including vacation and sick pay, and is substantially equivalent to the
salary amounts reported in the foregoing Summary Compensation Table.
Retirement Plan benefits depend upon length of plan service (up to a
maximum of 30 years), age at retirement, and amount of compensation
(determined in accordance with the plan) and are reduced by up to 50
percent of Social Security benefits. Credited years of service under the
plan for covered persons named in the foregoing Summary Compensation Table
are as follows: Erroll B. Davis, Jr., 18 years; Eliot G. Protsch, 18
years; A. J. (Nino) Amato, 11 years; Daniel A. Doyle, 5 years; and William
D. Harvey, 10 years. Assuming retirement at age 65, a Retirement Plan
participant (in conjunction with the Unfunded Supplemental Retirement Plan
described below) would be eligible at retirement for a maximum annual
retirement benefit as follows:
<TABLE>
Retirement Plan Table
<CAPTION>
Average
Annual Annual Benefit After Specified Years in Plan*
Compensation 5 10 15 20 25 30
<S> <C> <C> <C> <C> <C> <C>
$125,000 $10,132 $20,265 $ 30,397 $ 40,529 $ 50,662 $ 60,794
150,000 12,424 24,848 37,272 49,696 62,120 74,544
200,000 17,007 34,015 51,022 68,029 85,037 102,044
250,000 21,591 43,181 64,772 86,363 107,953 129,544
300,000 26,174 52,348 78,522 104,696 130,870 157,044
350,000 30,757 61,515 92,272 123,029 153,787 184,544
400,000 35,341 70,681 106,022 141,363 176,703 212,044
450,000 39,924 79,848 119,772 159,696 199,620 239,544
475,000 42,216 84,431 126,647 168,863 211,078 253,294
500,000 44,507 89,015 133,722 178,029 222,537 267,044
525,000 46,799 93,598 140,397 187,196 233,995 280,794
550,000 49,091 98,181 147,272 196,363 245,453 294,544
* Average annual compensation is based upon the average of the highest 36 consecutive months of compensation. The
Retirement Plan benefits shown above are net of estimated Social Security benefits and do not reflect any deductions for
other amounts. The annual retirement benefits payable are subject to certain maximum limitations (in general, $150,000 for
1996 and $160,000 for 1997) under the Internal Revenue Code. Under the Retirement Plan and a supplemental survivors income
plan, if a Retirement Plan participant dies prior to retirement, the designated survivor of the participant is entitled to
a monthly income benefit equal to approximately 50 percent (100 percent in the case of certain executive officers and key
management employees) of the monthly retirement benefit which would have been payable to the participant under the
Retirement Plan if the participant had remained employed by the Company until eligible for normal retirement.
</TABLE>
Unfunded Supplemental Retirement Plan - WP&L maintains an Unfunded
Supplemental Retirement Plan which provides funds for payment of
retirement benefits above the limitations on payments from qualified
pension plans in those cases where an employee's retirement benefits
exceed the qualified plan limits. Additionally, the plan provides for
payments of supplemental retirement benefits to employees holding the
position of Vice President or higher, who have been granted additional
months of service by the Board of Directors for purposes of computing
retirement benefits.
Unfunded Executive Tenure Compensation Plan - WP&L maintains an
Unfunded Executive Tenure Compensation Plan to provide incentive for key
executives to remain in the service of WP&L by providing additional
compensation which is payable only if the executive remains with WP&L
until retirement (or other termination if approved by the Board of
Directors). In the case of the Chief Executive Officer only, in the event
that the Chief Executive Officer (1) is terminated under his employment
agreement with the Company (the "Employment Agreement") other than for
Cause, Death or Disability (as those terms are defined in the Employment
Agreement), (2) terminates his employment under the Employment Agreement
for Good Reason (as such term is defined in the Employment Agreement), or
(3) is terminated as a result of a failure of the Employment Agreement to
be renewed automatically pursuant to its terms (regardless of the reason
for such non-renewal), then for purposes of the plan, the Chief Executive
Officer shall be deemed to have retired at age 65 and shall be entitled to
benefits under the plan. Participants in the plan must be designated by
the Chief Executive Officer of WP&L and approved by its Board of
Directors. Mr. Davis was the only active participant in the plan as of
December 31, 1997. The plan provides for monthly payments to a
participant after retirement (at or after age 65, or with Board approval,
prior to age 65) for 120 months. The payments will be equal to 25 percent
of the participant's highest average salary for any consecutive 36-month
period. If a participant dies prior to retirement or before 120 payments
have been made, the participant's beneficiary will receive monthly
payments equal to 50 percent of such amount for 120 months in the case of
death before retirement, or if the participant dies after retirement, 50
percent of such amount for the balance of the 120 months. Annual benefits
of $112,500 would be payable to Mr. Davis upon retirement, assuming he
continues in WP&L's service until retirement at the same salary as was in
effect on December 31, 1997.
Supplemental Executive Retirement Plan - The Company maintains an unfunded
Supplemental Executive Retirement Plan to provide incentive for key
executives to remain in the service of WP&L by providing additional
compensation which is payable only if the executive remains with WP&L
until retirement, disability or death. Participants in the plan must be
approved by the Compensation and Personnel Committee of the Board. The
plan provides for payments of 60% of the participant's average annual
earnings (base salary and bonus) for the highest paid three years out of
the last ten years of the participant's employment. The normal retirement
date under the plan is age 65 or the date the participant has completed 10
years of employment, whichever is later. If a participant retires prior
to age 62, the 60% payment under the plan is reduced by 3% per year for
each year the participant's retirement date precedes his/her normal
retirement date. Benefit payments under the plan will be made for a
maximum of 18 years, with a minimum of 12 years of payments if the
participant dies after retirement. Messrs. Davis, Harvey, Protsch, and
Doyle are participants in this plan. The following table shows payments
under the plan, assuming a minimum of 10 years of service at retirement
age.
Supplemental Executive Retirement Plan Table
Average
Compensation < 10 Years >10 Years
$125,000 $0 $75,000
150,000 0 90,000
200,000 0 120,000
250,000 0 150,000
300,000 0 180,000
350,000 0 210,000
400,000 0 240,000
450,000 0 270,000
500,000 0 300,000
550,000 0 330,000
Key Employee Deferred Compensation Plan - The Company maintains an
unfunded Key Employee Deferred Compensation Plan under which participants
may defer up to 100% of base salary or incentive compensation. The
Company matches up to 50% of the employee deferral (plus 401(k)
contributions up to 6% of pay, less 401(k) matching contributions). The
deferrals and matching contributions receive an annual return equal to the
A-utility bond rate with a minimum return no less than the prime interest
rate published in the Wall Street Journal. Payments from the plan may be
made in lump sums or installments at the election of the participant.
Participants are selected by the CEO of Alliant Services Company. Messrs.
Davis, Harvey, Protsch and Doyle participate in this plan.
ALLIANT SERVICES RETIREMENT PLANS
IES Utilities Pension Plan: Prior to the completion of the Merger, IES
Industries, IES Utilities and the Cedar Rapids and Iowa City Railway
Company ("CRANDIC") (a current subsidiary of Alliant Industries, Inc.)
maintained certain retirement and employee benefit plans for eligible
employees. Upon completion of the Merger, IES Industries' interest in
these plans was transferred to Alliant Services Company ("Alliant
Services")(a wholly-owned subsidiary of the Company). Alliant Services,
IES Utilities and CRANDICC now maintain non-contributory retirement plans
covering employees who have at least one year of accredited service and
who have elected to remain under these plans following the Merger. Mr.
Liu participates in this plan. Maximum annual benefits payable at age 65
to participants who retire at age 65, calculated on the basis of straight
life annuity, are illustrated in the following table:
<TABLE>
Alliant Services Pension Plan Table
<CAPTION>
Average of Highest Annual Estimated Maximum Annual Retirement Benefits Based on Service
Salary (Remuneration) Years of Service
for 3 Consecutive
Years of the last 10 15 20 25 30 35
<S> <C> <C> <C> <C> <C>
125,000 26,869 35,828 44,784 53,741 62,697
150,000 32,683 43,576 54,471 65,366 76,259
175,000 35,913 48,282 60,650 73,019 85,388
200,000 40,038 54,282 68,525 82,769 97,013
225,000 44,163 60,282 76,400 92,519 108,638
250,000 44,818 61,235 77,652 94,068 110,485
300,000 44,818 61,235 77,652 94,068 110,485
400,000 44,818 61,235 77,652 94,068 110,485
450,000 44,818 61,235 77,652 94,068 110,485
500,000 44,818 61,235 77,652 94,068 110,485
</TABLE>
For 1997, $125,000 was the maximum benefits allowable under the
retirement plans prescribed by Section 415 of the Code.
With respect to Mr. Liu, the remuneration for retirement plan purposes
would be substantially the same as that shown as "Salary" in the Pro-Forma
Summary Compensation Table. As of December 31, 1997, Mr. Liu had 40
accredited years of service under the retirement plan.
Alliant Services Supplemental Retirement Plans: Alliant Services
maintains a non-qualified Supplemental Retirement Plan (SRP) for eligible
former officers of IES Industries who have elected to remain under this
plan following the Merger. Mr. Liu is the only executive named in the
Pro-Forma Summary Compensation Table participating in this plan. The plan
currently provides for payment of supplemental retirement benefits equal
to 69% of the officer's base salary in effect at the date of retirement,
reduced by benefits receivable under the qualified retirement plan, for a
period not to exceed 18 years following the date of retirement. In the
event of the death of the officer following retirement, similar payments
reduced by the joint and survivor annuity of the qualified retirement plan
will be made to his or her designated beneficiary (surviving spouse or
dependent children), if any, for a period not to exceed 12 years from the
date of the officer's retirement. Thus, if an officer died 12 years after
retirement, no payment to the beneficiary would be made. Death benefits
are provided on the same basis to a designated beneficiary for a period
not to exceed 12 years from the date of death should the officer die prior
to retirement. The Supplemental Retirement Plan further provides that if,
at the time of the death of an officer, the officer is entitled to
receive, is receiving, or has received supplemental retirement benefits by
virtue of having taken retirement, a death benefit shall be paid to the
officer's designated beneficiary or to the officer's estate in an amount
equal to 100% of the officer's annual salary in effect at the date of
retirement. Under certain circumstances, an officer who takes early
retirement will be entitled to reduced benefits under the Supplemental
Retirement Plan. The Supplemental Retirement Plan also provides for
benefits in the event an officer becomes disabled under the terms of the
qualified retirement plan. Life insurance policies on the participants
have been purchased sufficient in amount to finance actuarially all future
liabilities under the Supplemental Retirement Plan. The Supplemental
Retirement Plan has been designed so that if the assumptions made as to
mortality, experience, policy dividends, tax credits and other factors are
realized, all life insurance premium payments will be recovered over the
life of the Supplemental Retirement Plan.
The following table shows the estimated annual benefits payable under
the Supplemental Retirement Plan equal to 69% of the officer's base salary
in effect at the date of retirement:
<TABLE>
Alliant Services Company
Supplemental Retirement Plan Payments
69% SRP Benefit
<CAPTION>
Years of Service
Annual Salary 15 20 25 30 35
<S> <C> <C> <C> <C> <C>
125,000 59,381 50,422 41,466 32,509 23,553
150,000 70,817 59,924 49,029 38,134 27,241
175,000 84,837 72,468 60,100 47,731 35,362
200,000 97,962 83,718 69,475 55,231 40,987
225,000 111,087 94,968 78,850 62,731 46,612
250,000 127,682 111,265 94,848 78,432 62,015
300,000 162,182 145,765 129,348 112,932 96,515
400,000 231,182 214,765 198,348 181,932 165,515
450,000 265,682 249,265 232,848 216,432 200,015
500,000 300,182 283,765 267,348 250,932 234,515
</TABLE>
Mr. Liu has elected to continue under the supplemental retirement
agreement previously provided to him by IES Industries and now maintained
by Alliant Services which provides for payment of benefits equal to 75% of
his base salary, for a period not to exceed 15 years following the date of
retirement, and payment to the surviving spouse or dependent children for
a period not to exceed 15 years following the date of retirement.
The following table shows the estimated annual benefits payable under
the Supplemental Retirement Plan equal to 75% of the officer's base salary
in effect at the date of retirement:
<TABLE>
Alliant Services Company
Supplemental Retirement Plan Payments
75% SRP Benefit
<CAPTION>
Years of Service
Annual Salary 15 20 25 30 35
<S> <C> <C> <C> <C> <C>
125,000 66,881 57,922 48,966 40,009 31,053
150,000 79,817 68,924 58,029 47,134 36,241
175,000 95,337 82,968 70,600 58,231 45,862
200,000 109,962 95,718 81,475 67,231 52,987
225,000 124,587 108,468 92,350 76,231 60,112
250,000 142,682 126,265 109,848 93,432 77,015
300,000 180,182 163,765 147,348 130,932 114,515
400,000 255,182 238,765 222,348 205,932 189,515
450,000 292,682 276,265 259,848 243,432 227,015
500,000 330,182 313,765 297,348 280,932 264,515
</TABLE>
Report of the Compensation and Personnel Committee
on Executive Compensation
To Our Shareowners: The Compensation and Personnel Committee (the
Committee") of the Board of Directors is comprised of five independent,
non-employee directors who have no "interlocking" relationships, as
defined by the Securities and Exchange Commission. The Committee assesses
the effectiveness and competitiveness of, approves the design of, and
administers executive compensation programs within a consistent total
compensation framework for the Company. The Committee also reviews and
approves all salary arrangements and other remuneration for executives,
evaluates executive performance, and considers related matters. To
support the Committee in carrying out its mission, an independent
consultant is engaged to provide assistance to the Committee.
The Committee is committed to implementing a total compensation
program for executives which furthers the Company's mission. The
Committee, therefore, adheres to the following compensation policies which
are intended to facilitate the achievement of the Company's business
strategies.
- Total compensation should enhance the Company's ability to attract,
retain, and encourage the development of exceptionally knowledgeable
and experienced executives, upon whom, in large part, the successful
operation and management of the Company depends.
- Base salary levels should be targeted at a competitive market range
paid to executives of comparable companies. Specifically, the
Committee targets the median (50th percentile) of equally weighted
data from utility and general industry companies.
- Incentive compensation programs should strengthen the relationship
between pay and performance by emphasizing variable, at-risk
compensation that is consistent with meeting predetermined Company,
subsidiary, and individual performance goals. In addition, incentive
levels will be targeted at the median (50th percentile) of equally
weighted data from utility and general industry companies.
Components of Compensation
The Committee relates total compensation levels for the Company's
senior executives to the compensation paid to executives of comparable
companies. As the Company is a diversified utility holding company with
both regulated and non-regulated operations, comparison groups are
customized to the respective position which an executive holds. Utility
executives' pay is compared to that of executives with similar
responsibilities at utilities and/or non-utilities (general industries)
in both the Midwest and national markets, as well as to companies with
similar revenue levels and employment levels. Compensation paid to
holding company executives, including Mr. Davis, is compared to the
compensation paid by a utility comparison group. However, in order to
recognize holding company employees for increasing non-regulated business
responsibilities, benchmark data also are drawn from similarly sized
diversified industrial companies furnished by public survey data. For
executives with sole responsibilities in the non-regulated businesses,
comparison group data reflect the relevant mix of the non-regulated
business operations.
The Committee has determined that total executive compensation,
including that for Mr. Davis, is in line with competitive salaries of the
comparison groups of companies.
The current elements of the Company's executive compensation program
are base salary, short-term (annual) incentives and long-term (equity)
incentives. These elements are addressed separately below. In
determining each component of compensation, the Committee considers all
elements of an executive's total compensation package, including benefit
and perquisite programs.
Base Salaries
The Committee annually reviews each executive's base salary. Base
salaries are targeted at a competitive market range when comparing both
utility and non-utility (general industry) data. Base salaries are
adjusted annually by the Committee to recognize changes in the market,
varying levels of responsibility, prior experience, and breadth of
knowledge. Increases to base salaries are driven primarily by market
adjustments. Individual performance factors are not considered by the
Committee in setting base salaries. Base pay adjustments are tied to
market changes in appropriate salary levels and will minimize across-the-
board increases. During 1997, all executive salaries were reviewed for
market comparability using utility and general industry data contained
in compensation surveys published by Edison Electric Institute, American
Gas Association and several compensation consulting firms. Any
recommended changes will be effective for 1998. Market ranges will be
reviewed annually.
Short-Term Incentives
The goal of short-term (annual) incentive programs is to promote the
Committee's pay-for-performance philosophy by providing executives with
direct financial incentives in the form of annual cash or stock based
bonuses to achieve corporate, subsidiary, and individual performance
goals. Annual bonus opportunities allow the Committee to communicate
specific goals that are of primary importance during the coming year and
motivate executives to achieve these goals. The Committee on an annual
basis reviews and approves the program's performance goals and the
relative weight assigned to each goal as well as targeted and maximum
award levels. A description of the short-term incentive programs
available during 1997 to executive officers follows.
Wisconsin Power and Light Company Management Incentive Plan - The WP&L
Management Incentive Plan (the "WP&L MIP") covered utility executives and
in 1997 was based on achieving annual targets in several areas of overall
corporate performance that include profitability, operations and
maintenance expense control, reduction in lost time accidents, and
individual/team performance. Target and maximum bonus awards were set at
the median of the utility market levels. Targets were considered by the
Committee to be achievable, but require above-average performance from
each of the executives. Actual payment of bonuses, as a percentage of
annual salary, is determined by the level of performance achieved in each
category. Weighting factors are applied to the percentage achievement
under each category to determine overall performance. If the threshold
performance level is not reached, there is no bonus payment associated
with that particular category. Once the designated maximum performance is
reached, there is no additional payment. The actual percentage of salary
paid as a bonus, within the allowable range, is equal to the weighted
average percent achievement for all the performance categories. For
example, if the overall weighted performance achievement is 70%, the
executive will receive 70% of his or her maximum allowable bonus award.
Potential WP&L MIP awards for executives range from 0 to 40 percent of
annual salary. The WP&L MIP does not allow for discretion in bonus
determinations. In 1997 there was no payout for performance against the
corporate targets. Executives received awards under the WP&L MIP for
achievements against individual performance goals. Awards for 1997 under
the WP&L MIP made to top executives (other than to Mr. Davis and Mr.
Ahearn) are shown in the Summary Compensation Table.
Heartland Development Corporation Management Incentive Plan - Mr. Ahearn
and selected other executives of Heartland Development Corporation ("HDC")
(renamed Alliant Industries following the Merger) were covered during 1997
by the HDC Management Incentive Plan (the "HDC MIP") which is based on
achievement of specified combinations of net income and revenue growth
targets and on achieving a number of other specific HDC performance
objectives which included the development of business strategies for
certain new ventures and restructuring and growth targets for existing
operating units. The incentive compensation plan for Mr. Ahearn consisted
of a potential award maximum of 80 percent of his base salary; 75 percent
associated with performance in the net income and revenue growth category
and 25 percent for the achievement of specific personal performance goals.
The actual payment of bonuses as a percentage of annual salary is
determined as described for the WP&L MIP. The HDC MIP awarded 48 percent
of its allowable maximum in 1997. Mr. Ahearn's award for 1997 under the
HDC MIP is set forth in the Summary Compensation Table.
Management Incentive Plan - In 1997, Mr. Davis was covered by the
Company's Management Incentive Plan (the "Company MIP"). Awards under the
Company MIP in 1997 were based on WP&L, HDC and individual performance
achievement in relation to predetermined goals. For each Plan year, the
Committee determines the performance apportionment for Mr. Davis. In 1997
that apportionment was 50% for WP&L performance, 25% for HDC performance
and 25% for individual performance. WP&L performance is measured based on
the overall percentage achievement factor of the corporate goals
established for the WP&L MIP. HDC performance is measured based on the
overall percentage achievement of the 1997 financial performance goals
from the HDC plan. Individual performance is measured based on the
achievement of certain specific goals, which included strategy development
and implementation, established for Mr. Davis by the Committee. The 1997
Company MIP award range for Mr. Davis was from 0 to 70 percent of annual
salary. The actual payment of bonuses as a percentage of annual salary is
determined as described for the WP&L MIP. In 1997, the Company MIP
provided a payment to Mr. Davis as a result of the HDC financial
performance component, and for achievement of the personal goals
established by the Committee. For 1997 performance, Mr. Davis' annual
bonus payment represented 22 percent of his base salary, as reflected in
the Summary Compensation Table. Under the Company MIP, Mr. Davis was
awarded $100,800 solely in connection with 1997 performance as discussed
above. In the judgment of the Committee, Mr. Davis' award range is in
line with the median of the same combined utility and general industry
comparison group used for base salary comparisons.
Long-Term Incentives
The Committee strongly believes compensation for senior executives
should include long-term, at-risk pay to strengthen the alignment of
shareowner and management. In this regard, the Long-Term Equity Incentive
Plan allows for grants of stock options, restricted stock, and performance
units/shares with respect to the Company's common stock. The Committee
believes the Long-Term Equity Incentive Plan balances the Company's
existing compensation programs by emphasizing compensation based on the
long-term successful performance of the Company from the perspective of
the shareowners. Stock options provide a reward that is directly tied to
the benefit shareowners receive from increases in the price of the
Company's common stock. The payout from the performance units is based on
the Company 's continued payment of dividends, a significant component of
investment returns for utilities, and the relative total return to
shareowners compared to other comparable investments. Thus, the two
components of the Long-Term Equity Incentive Plan, i.e., stock options and
performance units, provide incentives for management to produce superior
shareowner returns on both an absolute and relative basis. During 1997
the Committee made a grant of stock options and performance units to
Messrs Davis, Amato, Protsch and Harvey. All option grants were made at
the fair market value of Company common stock on the date the grants were
approved (January 2, 1997). The options vest after three years and have a
ten-year term from the date of the grant. Executives were also granted
performance units which will accumulate all of the dividends paid on one
share of the Company's common stock over a three-year period. One
performance unit was granted for each option received by the executive.
Accrued dividends are not reinvested in the Company's common stock, nor is
any interest paid on accrued dividends. Performance units will be paid
out in cash or in shares of the Company's common stock. The payment will
be modified by a performance multiplier which ranges from 0 to 1.75 based
on the three year average of the Company's total shareowner return
relative to a utility holding company peer group. If the Company's total
shareowner return for the three year period is negative, the performance
unit payout will be zero. In determining actual award levels, the
Committee was primarily concerned with providing a competitive total
compensation level to officers. As such, award levels (including the
awards made to Mr. Davis) were based on a competitive analysis of
similarly-sized utility companies that took into consideration the market
level of long-term incentives, as well as the competitiveness of the total
compensation package. Award ranges, as well as individual award levels,
were then established based on responsibility level and market
competitiveness. No corporate or individual performance measures were
reviewed in connection with the awards of options and performance units.
Award levels were targeted to the median of the range of such awards paid
by comparable companies. In addition, the Committee did not consider the
amounts of options or performance units already outstanding or previously
granted when making awards for 1997.
Special Bonus Payout
During 1997, Company executives devoted considerable time and effort
toward the completion of the Merger. The Committee and the Board
determined that there should be appropriate recognition and reward for
this work. Therefore, the Committee recommended and the Board approved
special one time bonus awards in the amounts of $100,000 for Mr. Davis,
$25,000 for Mr. Protsch, $25,000 for Mr. Harvey, $10,000 for Mr. Doyle and
$5,000 for Mr. Amato.
Policy With Respect to the $1 Million Deduction Limit
Section 162(m) of the Internal Revenue Code generally limits the
corporate deduction for compensation paid to executive officers named in
the proxy statement to $1 million unless such compensation is based upon
performance objectives meeting certain regulatory criteria or is otherwise
excluded from the limitation. The Committee has carefully considered the
impact of this tax code provision. Based on the Committee's commitment to
link compensation with performance as described in this report, the
Committee currently intends to qualify compensation paid to the Company's
executive officers for deductibility by the Company under Section 162(m).
Conclusion
The Committee believes the existing executive compensation policies
and programs provide the appropriate level of competitive compensation for
the Company's executives. In addition, the Committee believes that the
long and short term performance incentives effectively align the interests
of executives and shareowners toward a successful future for the Company.
COMPENSATION AND PERSONNEL COMMITTEE
Arnold M. Nemirow (Chair)
Alan B. Arends
Jack R. Newman
Judith D. Pyle
Anthony R. Weiler
Comparison of Five-Year Cumulative Total Return
Rules of the Securities and Exchange Commission ("SEC") require that
the Company show a graphical comparison of the total return on its common
stock for the last five fiscal years with the total returns of a broad
market index and a more narrowly focused industry or group index. (Total
return is defined as the return on common stock including dividends and
stock price appreciation, assuming reinvestment of dividends.) The
Company has selected the Standard & Poors (S&P) 500 index for the broad
market index, and the S&P Utility Index as the industry index. These
indices were selected because of their broad availability and recognition.
The following chart compares the total return of an investment of $100 in
Company common stock on December 31, 1992, with like returns for the S&P
500 and S&P Utilities indices. Pursuant to SEC rules, the table reflects
only information regarding the common stock of the Company (formally known
as WPL Holdings, Inc.).
[Performance Chart]
1992 1993 1993 1995 1996 1997
WPL Holdings, Inc. $100.00 $102.48 $91.04 $108.82 $106.68 $134.86
S&P Utilities Index $100.00 $114.44 $105.35 $149.63 $154.30 $192.34
S&P 500 Index $100.00 $110.08 $111.53 $153.45 $188.68 $251.63
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
The Company's directors, its executive officers, and certain other
officers are required to report their ownership of the Company's common
stock and WP&L preferred stock and IES Utilities preferred stock and any
changes in that ownership to the Securities and Exchange Commission and
the New York Stock Exchange. To the best of the Company's knowledge, all
required filings in 1997 were properly made in a timely fashion. In
making the above statements, the Company has relied on the representations
of the persons involved and on copies of their reports filed with the
Securities and Exchange Commission.
GENERAL
Voting - The outstanding voting securities of the Company on the
record date stated below consisted of 76,754,618 shares of common stock.
Only shareowners of the Company of record on its books at the close of
business on May 11, 1998, are entitled to vote at the meeting. Each such
shareowner is entitled to one vote for each share of common stock
registered in his or her name on the record date, on each matter submitted
to a vote at the meeting. Shareowners may vote either in person or by
duly authorized proxy. The giving of proxies by shareowners will not
affect their right to vote their shares if they attend the meeting and
desire to vote in person. Presence at the meeting of a shareowner who
signed a proxy, however, does not itself revoke the proxy. A proxy may be
revoked by the person giving it at any time prior to the time it is voted
by advising the Secretary of the Company prior to such voting. A proxy
may also be revoked by a shareowner who duly executes another proxy
bearing a later date but prior to the voting. All shares represented by
effective proxies on the enclosed form, received by the Company, will be
voted at the meeting or any adjourned session of the meeting, all in
accordance with the terms of such proxies.
Proposals of Shareowners - Under the rules of the Securities and
Exchange Commission, any shareowner proposal intended to be presented at
the 1999 Annual Meeting of Shareowners must be received at the principal
office of the Company no later than January 19, 1999, in order to be
eligible to be considered for inclusion in the Company's proxy materials
relating to that meeting.
Independent Auditors - The Board of Directors has appointed Arthur
Andersen LLP as the Company's independent auditors for 1998. Arthur
Andersen LLP acted as independent auditors for the Company in 1997.
Representatives of Arthur Andersen LLP are expected to be present at the
meeting with the opportunity to make a statement if they so desire. Such
representatives are also expected to be available to respond to
appropriate questions.
Other Business - The meeting is being held for the purposes set forth
in the notice accompanying this proxy statement. The Board of Directors
of the Company knows of no business to be transacted at the meeting other
than that set forth in the notice. However, if any other business should
properly be presented to the meeting, the proxies will be voted in respect
thereof in accordance with the judgment of the person or persons voting
the proxies.
By Order of the Board of Directors
Edward M. Gleason
Vice President, Treasurer
and Corporate Secretary
<PAGE>
Appendix A
PROPOSED AMENDMENT TO THE
RESTATED ARTICLES OF INCORPORATION
OF INTERSTATE ENERGY CORPORATION
Proposed additions and deletions effected by the Name Change
Amendment are in bold type and indicated by overstriking, respectively.
EDGAR only: Additions are bracketed and deletions are between *s.
ARTICLE 1
The name of the corporation is *Interstate Energy Corporation*
[Alliant Corporation.]
<PAGE>
Preliminary Copy
Interstate Energy Corporation
Annual Meeting of Shareowners on June 24, 1998
This proxy is solicited on behalf of the Board of Directors of Interstate
Energy Corporation
The Board of Directors recommend a vote "FOR" proposal 1 and a vote "FOR"
the election of all listed nominees. If no specification is given, the
proxies will vote FOR proposal 1 and FOR the election of all listed
nominees. To vote in accordance with the Board of Director's
recommendations, just sign on the reverse side without checking any boxes.
PLEASE SIGN, DATE AND RETURN THIS PROXY CARD IN THE ENCLOSED POSTAGE-PAID
ENVELOPE.
1. Amendment to Restated For Against Abstain
Articles of Incorporation to
Change the name of the
Company to Alliant Corporation.
2. ELECTION OF DIRECTORS Indicate your vote by an (X) in the
Nominees for term ending appropriate box.
in:
Withhold For All
2001 For All For All Except (*)
Joyce L. Hanes
Arnold M. Nemirow
Jack R. Newman
Judith D. Pyle
David Q. Reed
2000
Lee Liu
Robert W. Schlutz
Wayne H. Stoppelmoor
1999
Alan B. Arends
Robert D. Ray
Anthony R. Weiler
(*) To withhold authority to vote for
any individual nominee, strike a
line through the nominee's name
above and mark an (x) in the "For
All Except" box.
Proxy to be signed and dated on the reverse side.
* Please fold and detach card at perforation before mailing. *
<PAGE>
Interstate Energy Corporation
Annual Meeting of Shareowners on June 24, 1998
The undersigned appoints Erroll B. Davis, Jr. and Edward M. Gleason, or
either of them, attorneys and proxies, with the power of substitution to
vote all shares of stock of Interstate Energy Corporation held of record
in the name of the undersigned (including any shares held or credited to
the undersigned's account under the Company's Shareowner Direct Plan and
ISU Employee Stock Ownership Plan) at the close of business on May 11,
1998, at the 1998 annual meeting of shareowners to be held at the Collins
Plaza Hotel and Convention Center, 1200 Collins Road NE, Cedar Rapids,
Iowa, on June 24, 1998 at 10:00 a.m. and at all adjournments thereof, upon
all matters that properly come before the meeting, including the matters
described in the Company's Notice of Annual Meeting of Shareowners dated
May 18, 1998 and accompanying Proxy Statement subject to any directions on
the reverse side of this card
PROXY NUMBER ACCOUNT NUMBER
SHAREOWNERS NAME
SHAREOWNERS ADDRESS Dated:________________________________
SHAREOWNERS ADDRESS
SHAREOWNERS ADDRESS ______________________________________
SHAREOWNERS ADDRESS Signature
SHAREOWNERS ADDRESS
Please sign exactly as name appears hereon.
When signing as attorney, executor,
administrator, trustee, or guardian, give
your full title as such. In the case of
JOINT HOLDERS, all should sign.
Dear Shareowners,
You are invited to attend the Annual Meeting of Shareowners on Wednesday,
June 24, 1998, at 10:00 a.m. at the Collins Plaza Hotel and Convention
Center, 1200 Collins Road, NE, Cedar Rapids, Iowa. If you plan to attend
the meeting, please complete and detach the Reservation Form below and
return it with the signed proxy card.
We hope you will be able to join us to review the year and take a look at
what the future holds for the new Company. Seating is limited in the
meeting room and will be filled on a first-come basis. Complimentary
beverages and pastries will be served after the meeting.
Above is your 1998 Interstate Energy Corporation Proxy Card. Whether or
not you are able to attend the meeting in person, please mark the attached
proxy to indicate your voting preferences and sign, detach and return the
proxy card and Reservation card (if applicable) in the enclosed
postage-paid envelope.
ANNUAL MEETING RESERVATION
SHAREOWNERS NAME Return this stub only if you are planning
SHAREOWNERS ADDRESS to attend the Meeting.
SHAREOWNERS ADDRESS
SHAREOWNERS ADDRESS I (WE) WILL ATTEND THE ANNUAL MEETING.
SHAREOWNERS ADDRESS
SHAREOWNERS ADDRESS Please list your name(s) and your guest(s)
below.
ACCOUNT NUMBER ___________________________________
___________________________________
___________________________________
