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:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
PRELIMINARY PROXY MATERIALS DATED FEBRUARY 22, 1999
INTERSTATE ENERGY CORPORATION
d/b/a Alliant Energy Corporation
222 West Washington Avenue, P. O. Box 2568, Madison, WI 53701-2568
Phone: 608/252-3110
March 29, 1999
TO THE SHAREOWNERS OF INTERSTATE ENERGY CORPORATION:
We extend a cordial invitation to you to join us at the 1999 Annual
Meeting of Shareowners. The meeting will be held at the Dubuque Five Flags
Center, 405 Main Street, Dubuque, Iowa, on Wednesday, May 19, 1999 at 1:00 p.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 Notice 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 Energy Corporation
ANNUAL MEETING OF SHAREOWNERS
DATE: May 19, 1999
TIME: 1:00 PM, Central Time
LOCATION: Dubuque Five Flags Center
405 Main Street
Dubuque, 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 Energy Corporation
222 West Washington Avenue P. O. Box 2568 Madison WI 53701-2568
Phone: 608/252-3110
NOTICE OF ANNUAL MEETING OF SHAREOWNERS
May 19, 1999
1:00 PM
The Annual Meeting of Shareowners of Interstate Energy Corporation (the
"Company") will be held at the Dubuque Five Flags Center, 405 Main Street,
Dubuque, Iowa, on Wednesday, May 19, 1999, at 1:00 PM (local time), for the
following purposes:
(1) To elect five directors for terms expiring at the 2002 Annual
Meeting of Shareowners.
(2) To approve an amendment to the Company's Restated Articles of
Incorporation to change the name of the Company from Interstate
Energy Corporation to Alliant Energy Corporation.
(3) To consider and vote upon a proposal to approve the Company's
Long-Term Equity Incentive Plan, as amended.
(4) To consider and act upon any other business that may properly come
before the meeting or any adjournment or postponement thereof.
The Board of Directors of the Company presently knows of no other
business to come before the meeting.
Only the holders of common stock of record on the books of the Company
at the close of business on March 23, 1999, 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 1998 Annual Report of the Company is enclosed.
By Order of the Board of Directors,
EDWARD M. GLEASON
Vice President - Treasurer
and Corporate Secretary
March 29, 1999
<PAGE>
INTERSTATE ENERGY CORPORATION
d/b/a Alliant Energy Corporation
222 West Washington Avenue P. O. Box 2568 Madison WI 53701-2568
Phone: 608/252-3110
March 29, 1999
PROXY STATEMENT RELATING TO
1999 ANNUAL MEETING OF SHAREOWNERS
The purposes of the meeting are set forth in the accompanying notice.
The enclosed proxy relating to the meeting is solicited on behalf of the Board
of Directors of the Company and the cost of such solicitation will be borne by
the Company. Following the original solicitation of proxies by mail, beginning
on or about March 29, 1999, 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 materials to their principals.
On April 21, 1998, the merger involving IES Industries Inc. ("IES
Industries", the former parent of IES Utilities Inc. ("IES")), Interstate Power
Company ("IPC") and WPL Holdings, Inc. was completed (the "Merger"), after which
the name of the Company was changed from WPL Holdings, Inc. to Interstate Energy
Corporation. Following the Merger, Heartland Development Corporation, the
holding company for non-regulated operations of the Company, changed its name to
Alliant Energy Resources, Inc. ("AERI"). The Company is the parent holding
company of Wisconsin Power and Light Company ("WP&L"), IES, IPC and AERI.
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
Five directors are to be elected at the Company's 1999 Annual Meeting
of Shareowners for terms expiring in 2002. The nominees for election as selected
by the Nominating and Governance Committee of the Company's Board of Directors
are: Alan B. Arends, Rockne G. Flowers, Katharine C. Lyall, Robert D. Ray and
Anthony R. Weiler. Each of the nominees is currently serving as a director of
the Company, WP&L, IES, IPC and AERI. All persons elected as directors will
serve until the Annual Meeting of Shareowners of the Company in the year 2002,
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 or otherwise, will have no effect on the
election of directors. The proxies solicited may be voted for a substitute
nominee or
4
<PAGE>
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, 1998), 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 2002
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: 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: 2002
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.
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: 67
(Photo)
Served as a director of the Company since 1981.
Annual Meeting at which nominated term of office will
expire: 2002
Other Information: Mr. Flowers is a director of American Family Mutual Insurance
Company, Janesville Sand and Gravel Company, M&I Bank of Southern Wisconsin, 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.
5
<PAGE>
Katharine C. Lyall Principal Occupation: President, University of Wisconsin
System, Madison, Wisconsin.
Age: 57
(Photo) Served as a director of the Company since 1994.
Annual Meeting at which nominated term of office will
expire: 2002
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, the
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.
Robert D. Ray Principal Occupation: President, Drake University, Des
Moines, Iowa.
Age: 70
(Photo)
Served as a director of the Company since the consummation
of the Merger.
Annual Meeting at which nominated term of office will
expire: 2002
Other Information: Mr. Ray served as President and Chief Executive Officer of
Life Investors Insurance Co. (AEGON USA) from 1983 to 1989 and President of Blue
Cross/Blue Shield (Wellmark) from 1989 until his retirement in 1996. Prior
thereto, Mr. Ray served as Governor of the State of Iowa for fourteen years, and
was a United States Delegate to the United Nations in 1984. Before that he was a
trial lawyer. He is a director of the Maytag Company (an appliance manufacturer)
and a director of Norwest Bank IA. He serves as Chairman of the National
Coalition on Health Care and the National Advisory Committee on Rural Health.
Mr. Ray previously served as Chairman of the Board of Governors, Drake
University, and as 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.
6
<PAGE>
Anthony R. Weiler Principal Occupation: Senior Vice President of Heilig-Meyers
Company, a national furniture retailer with headquarters in
Richmond, Virginia.
Age: 62
(Photo)
Served as a director of the Company since the consummation
of the Merger.
Annual Meeting at which nominated term of office will
expire: 2002
Other Information: Mr. Weiler was previously Chairman and Chief Executive
Officer of Chittenden & Eastman Company, a national manufacturer of mattresses
in Burlington, Iowa. Chittenden & Eastman employed him in various management
positions from 1960 to 1995. Mr. Weiler joined Heilig-Meyers Company as Senior
Vice President in 1995. Mr. Weiler previously served as President and Chairman
of the National Home Furnishings Association and is currently a director of the
Retail Home Furnishings Foundation and the NHFA Insurance Trust. He is a past
director of the Burlington Area Development Corporation, the Burlington Area
Chamber of Commerce and various community organizations. He is a board member of
the Tuckahoe YMCA in Richmond, Virginia. Mr. Weiler has served as a director of
IES (or predecessor companies) since 1979 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: 54
(Photo)
Served as a 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 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 member of the Boards of
Directors of BP Amoco p.l.c., PPG Industries, Inc., the Edison Electric
Institute, the Wisconsin Manufacturers and Commerce Association and the
Association of Edison Illuminating Companies. He also is a member of the
Electric Power Research Institute, the Iowa Business Council, the American
Society of Corporate Executives and the Nuclear Energy Institute. Mr. Davis has
served as a director of WP&L since 1984 and of IES and IPC since the
consummation of the Merger.
7
<PAGE>
Joyce L. Hanes Principal Occupation: Director and Chairman of Midwest
Wholesale Inc. (a products wholesaler), Mason City, Iowa.
Age: 66
(Photo)
Served as a director of the Company since the consummation
of the Merger.
Annual meeting at which current 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. She is a director of the Iowa Student Loan Liquidity Corp. and the North
Iowa Area Community College Foundation and is President of Camp Tanglefoot, Inc.
Ms. Hanes has served as a director of IPC since 1982 and of WP&L and IES since
the consummation of the Merger.
Lee Liu Principal Occupation: Chairman of the Board of the Company.
Age: 65
(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 and Chairman of the Board and Chief
Executive Officer of IES prior to the Merger. Mr. Liu has held a number of
professional, management and executive positions after joining Iowa Electric
Light and Power Company (later known as IES) in 1957. He is a director of
McLeodUSA Inc., a telecommunications company in Cedar Rapids, Iowa, Principal
Financial Group, an insurance company in Des Moines, Iowa, and Eastman Chemical
Company, a diversified chemical company in Kingsport, Tennessee. He also serves
as a trustee for Mercy Medical Center, a hospital in Cedar Rapids, Iowa, and is
a member of the University of Iowa College of Business Board of Visitors. Mr.
Liu has served as a director of IES (or predecessor companies) since 1981 and of
WP&L and IPC since the consummation of the Merger.
Arnold M. Nemirow Principal Occupation: Chairman, President and Chief
Executive Officer, Bowater, Inc. (a pulp and paper
manufacturer), Greenville, South Carolina.
Age: 55
(Photo)
Served as a director of the Company since 1991.
Annual Meeting at which current 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.
8
<PAGE>
Milton E. Neshek Principal Occupation: Special Consultant to the Kikkoman
Corporation, Tokyo, Japan, and General Counsel, Secretary
and Manager, New Market Development, Kikkoman Foods, Inc. (a
food products manufacturer), Walworth, Wisconsin.
(Photo) Age: 68
Served as a 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
and the State Bar of Wisconsin. 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.
Jack R. Newman Principal Occupation: Partner of Morgan, Lewis & Bockius, an
international law firm based in Washington, D.C.
Age: 65
(Photo)
Served as a director of the Company since the consummation
of the Merger.
Annual Meeting at which current 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 of 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.
9
<PAGE>
Judith D. Pyle Principal Occupation: Vice Chair of The Pyle Group, a
financial services company, Madison, Wisconsin.
Age: 55
(Photo)
Served as a director of the Company since 1992.
Annual Meeting at which current 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, Wisconsin Taxpayers Alliance, Children's Theatre of
Madison and the Boys and Girls Club of Dane County. Ms. Pyle is also Vice
Chairman of Georgette Klinger, Inc. 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: 67
(Photo)
Served as a director of the Company since the consummation
of the Merger.
Annual Meeting at which current term of office will expire:
2001
Other Information: Mr. Reed has been engaged in the private practice of law
since 1960. He is also President and Chief Executive Officer of Fairview
Enterprises, Inc., a land holding corporation with properties in Missouri and
Michigan. 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.
Robert W. Schlutz Principal Occupation: President of Schlutz Enterprises, a
diversified farming and retailing business in Columbus
Junction, Iowa.
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
10
<PAGE>
Other Information: Mr. Schlutz is a director of PM Agri-Nutritional Group Inc.,
an animal health business in St. Louis, Missouri. Mr. Schlutz is a past director
for the Iowa Foundation for Agricultural Advancement, past President of the Iowa
State Fair Board, past President of the Association of National Kentucky Fried
Chicken Franchisees, and a past director of the National Certified Angus Beef
Association. Mr. Schlutz is also a member of various community organizations. He
previously 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: 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. Stoppelmoor has served as Vice Chairman of the Board of
Directors of the Company since the consummation of the Merger. Prior thereto,
Mr. Stoppelmoor had served as Chairman, President and Chief Executive Officer of
IPC. He retired as President of IPC on October 1, 1996 and as Chief Executive
Officer on January 1, 1997. Mr. Stoppelmoor has served as a director of IPC
since 1986 and of WP&L and IES since the consummation of the Merger.
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 Energy 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.
11
<PAGE>
PROPOSAL #3:
APPROVAL OF LONG-TERM EQUITY INCENTIVE PLAN, AS AMENDED
General
The Company's Long-Term Equity Incentive Plan (the "Plan") was
initially adopted by the Board of Directors on January 23, 1994 and approved and
ratified by shareowners on May 18, 1994. In February 1999, the Board unanimously
adopted amendments to the Plan contingent upon shareowner approval of the Plan,
as so amended, at the 1999 Annual Meeting of Shareowners.
Among other things, the amendments to the Plan change the name of the
Plan to the "Interstate Energy Corporation Long-Term Equity Incentive Plan" to
reflect the change in the name of the Company after the Merger. In the event
that the Name Change Amendment is approved by shareowners, the name of the Plan
will automatically become the "Alliant Energy Corporation Long-Term Equity
Incentive Plan." In addition, the amendments to the Plan increase the aggregate
number of shares of common stock authorized for issuance under the Plan from
1,000,000 to 3,800,000 (subject to adjustment in order to prevent dilution in
certain cases described below). As of the date of this Proxy Statement, awards
covering an aggregate of _____ shares of common stock were outstanding under the
Plan. The Board approved this amendment to allow for the issuance of additional
shares under the Plan. The amendments to the Plan also increase the number of
shares of common stock that may be granted as restricted stock and the number of
shares of common stock with respect to which any individual employee may be
granted options thereunder. Prior to being amended, the Plan provided that
300,000 shares of common stock could be granted as restricted stock and that no
employee was permitted to be granted options that could result in the employee
receiving more than 150,000 shares of common stock under the Plan (in each case
subject to adjustment in order to prevent dilution in certain cases described
below). As amended, the Plan provides that 400,000 shares of common stock may be
granted as restricted stock and that no employee may be granted options that
could result in the employee receiving more than 300,000 shares of common stock
under the Plan (subject to adjustment in order to prevent dilution in certain
cases described below). The increases in these limits are being proposed to
reflect the increase in the authorized shares issuable under the Plan, as
amended.
The following summary description of the Plan, as amended, is qualified
in its entirety by reference to the full text of the Plan which is attached to
this Proxy Statement as Appendix B.
Purpose of the Plan
The purpose of the Plan is to promote the success and enhance the value
of the Company by linking the personal interests of the employees of the Company
and its subsidiaries to those of Company shareowners, and by providing such
employees with an incentive for outstanding performance. The Plan is further
intended to provide flexibility to the Company in its ability to motivate,
attract, and retain the services of the employees of the Company and its
subsidiaries upon whose judgment, interest, and special effort the successful
conduct of its operation largely is dependent.
Administration
The Plan is required to be administered by a committee of the Board
(the "Committee") consisting of not less than two directors who qualify as
"Non-Employee Directors" pursuant to Rule 16b-3 under the Securities Exchange
Act of 1934 and as "outside directors" pursuant to Section 162(m) of the
Internal Revenue Code (the "Code"). The Compensation and Personnel Committee
serves as the administrator of the Plan, unless otherwise determined by the
Board. Among other functions, the Committee has the authority to
12
<PAGE>
establish rules for the administration of the Plan; to select the employees of
the Company and its subsidiaries to whom awards will be granted; to determine
the types of awards to be granted to employees and the number of shares covered
by such awards; to set the terms and conditions of such awards; to determine
whether, to what extent and when awards may be settled in cash or shares; and to
amend the terms and conditions of any outstanding awards to the extent
authorized under the Plan. Except as otherwise provided in the Plan,
determinations and interpretations with respect to the Plan and any award
agreements will be in the sole discretion of the Committee, whose determinations
and interpretations will be binding on all parties. Any nonunion employee of the
Company or any subsidiary, including any executive officer or employee-director
of the Company, is eligible to receive awards under the Plan. Approximately ___
employees are currently eligible to participate in the Plan.
Awards under the Plan; Available Shares
The Plan authorizes the granting to employees of: (1) stock options,
which may be either incentive stock options ("ISOs") which qualify for special
income tax treatment under Section 422 of the Code or nonqualified stock
options; (2) restricted stock; and/or (3) performance shares and performance
units. The Plan, as amended, provides that up to a total of 3,800,000 shares of
common stock (subject to adjustment as described below) will be available for
the granting of awards. Of this number, up to 400,000 shares may be granted as
restricted stock. If any shares subject to awards granted under the Plan, or to
which any award relates, are forfeited or if an award otherwise terminates,
expires or is cancelled prior to the delivery of all of the shares or other
consideration issuable or payable pursuant to the award, such shares (assuming
the holder of the award did not receive dividends on the shares or exercise
other indicia of ownership) will be available for the granting of new awards
under the Plan. Any shares delivered pursuant to an award may be either
authorized and unissued shares of common stock or shares reacquired and held by
the Company.
Terms of Awards
Options. Options may be granted to employees at such times and in such
amounts as determined by the Committee, provided that the maximum number of
shares subject to options that may be granted to any single participant during
the term of the Plan, as amended, is 300,000 (subject to adjustment as described
below). The exercise price per share of common stock subject to an option
granted under the Plan will be determined by the Committee, provided that the
exercise price may not be less than 100% of the fair market value of a share of
common stock on the date of grant. In addition, the Committee may grant options
with exercise prices that increase over time. The term of an option granted
under the Plan will be as determined by the Committee, but cannot exceed ten
years. Options granted under the Plan will become exercisable in such manner and
within such period or periods and in such installments or otherwise as
determined by the Committee. Options will be exercised by payment in full of the
exercise price, either (1) in cash; (2) by tendering previously acquired shares
of common stock having a fair market value on the date of exercise equal to the
option exercise price; or (3) by a combination of (1) and (2). In addition, the
Committee, in its sole discretion, may allow cashless exercises as permitted
under the Federal Reserve Board's Regulation T. All ISOs granted under the Plan
will also be required to comply with all other terms of Section 422 of the Code.
At the time an option is granted, the Committee may also grant dividend
equivalents. Dividend equivalents give the participant a contingent right to
receive an amount equal to the dividends declared on a share of common stock on
all record dates during the period specified by the Committee. Payout of the
value of a dividend equivalent will be made pursuant to such terms and
conditions as determined by the Committee.
In the event a participant's employment is terminated by reason of
death, disability or retirement, all outstanding options granted to the
participant will become fully vested and remain exercisable prior to their
expiration or for one year (three years in the case of retirement), whichever
period is shorter. If a
13
<PAGE>
participant's employment is terminated for any other reason (other than for
cause), unvested options held by the participant will be forfeited, unless
otherwise determined by the Committee, and vested options may be exercised
during the three-month period following termination. If a participant's
employment is terminated for cause, all options held by the participant will be
forfeited.
Restricted Stock. Shares of restricted common stock granted to
employees under the Plan will be subject to such restrictions as the Committee
may impose, including a requirement that participants pay a stipulated purchase
price for each share and restrictions based upon the achievement of specific
performance goals (Company-wide, divisional and/or individual). The restrictions
imposed on the shares may lapse separately or in combination at such time or
times, or in such installments or otherwise, as the Committee may deem
appropriate. Upon termination of a participant's employment for any reason other
than death, disability or retirement during the applicable restriction period,
all shares of restricted stock still subject to restriction will be subject to
forfeiture by the participant. In the event a participant's employment is
terminated by reason of death, disability or retirement, all shares of
restricted stock still subject to restriction will become fully vested. Under
the Plan, the Committee has the authority in its discretion to waive in whole or
in part any or all remaining restrictions with respect to shares of restricted
stock granted to an employee.
During the period of restriction, participants may exercise full voting
rights with respect to restricted shares and may receive all regular cash
dividends paid with respect to those shares. All other cash dividends and
distributions may be credited to participants subject to the same restrictions
on transferability and forfeitability as the restricted shares with respect to
which they are paid. If any dividends or distributions are paid in shares, the
shares will be subject to the same restrictions on transferability as the shares
on which the dividends or distributions are paid.
Performance Shares and Performance Units. The Plan also provides for
the granting of performance shares and performance units to employees. The
Committee will determine the number of performance units and shares granted to
participants; provided that so long as the Committee determines that a grant of
performance units or performance shares should qualify for the
"performance-based" exemption under Section 162(m) of the Code, the maximum
payout to any executive officer named in the compensation table with respect to
performance units and/or performance shares granted in any fiscal year is
$400,000. The Committee will determine the applicable performance period, which,
in all cases, will exceed six months, the performance goal or goals to be
achieved during any performance period, the proportion of payments, if any, to
be made for performance between the minimum and full performance levels and any
other terms, conditions and rights relating to the grant of performance shares
or performance units. Company and subsidiary performance goals established by
the Committee under the Plan may be chosen from return on equity, total
shareowner return, net income, earnings per share and cash flow. The Committee
will establish the specific goals each year prior to the commencement of the
period to which the compensation relates. Payment on performance shares and
performance units held by employees will be made in cash or shares of common
stock (which, in the discretion of the Committee, may be shares of restricted
stock) (or in a combination thereof), which have an aggregate fair market value
equal to the value of the earned performance shares and performance units.
Payments will be made in a single lump sum within seventy-five days following
the close of the applicable performance period, unless the participant elects to
defer payment.
In the event a participant's employment is terminated by reason of
death, disability, retirement or involuntary termination without cause, the
participant will receive a prorated payout of the performance shares and/or
performance units as determined by the Committee based on the length of time the
awards were held and the achievement of the preestablished performance goals.
Upon termination of a participant's employment for any other reason, all
performance shares and performance units will be forfeited.
14
<PAGE>
Participants will be entitled to receive dividends declared with
respect to shares earned in connection with grants of performance shares and
performance units, subject to the same accrual, forfeiture and payout
restrictions which apply with respect to shares of restricted stock. In
addition, participants may, at the discretion of the Committee, be entitled to
exercise voting rights with respect to shares which have been earned in
connection with grants of performance units and performance shares.
Adjustments
In the event of any merger, reorganization, consolidation,
recapitalization, repurchase, separation, liquidation, stock dividend, share
exchange, split-up, spin-off, share combination or any other change affecting
the common stock such that an adjustment is appropriate in order to prevent
dilution or enlargement of the benefits or potential benefits intended to be
made available under the Plan, then the Committee generally has the authority,
in such manner as it deems equitable, to adjust (1) the number and type of
securities that may be issued under the Plan, (2) the number and type of
securities subject to outstanding awards, and (3) the grant, purchase or
exercise price with respect to any award. The Committee may limit any such
adjustment to qualify a transaction in which the Company or any affiliate is a
party for pooling-of-interests accounting treatment.
Limits on Transferability
Except as otherwise provided by the Committee, no award granted under
the Plan may be assigned, sold, pledged, transferred or encumbered by any
participant, otherwise than by will, or by the laws of descent and distribution.
Amendment and Termination
The Board may amend, suspend or terminate the Plan at any time. No
termination, amendment, or modification of the Plan may (except as otherwise
expressly contemplated by the Plan, as amended, for awards granted after January
20, 1999) adversely affect in any material way any outstanding award without the
consent of the holder of such award.
Deferrals
The Committee may permit a participant to defer receipt of the payment
of cash or delivery of shares due with respect to an award, subject to such
rules and procedures as the Committee may establish.
Withholding
The Company has the right to reduce the number of shares or amount of
cash payable under an award by the amount necessary to satisfy any federal,
state, local or foreign taxes of any kind required by law to be withheld with
respect to such amount or to take such other actions as may be necessary to
satisfy any such withholding obligations. The Committee may require or permit
withholding obligations arising with respect to awards under the Plan to be
settled with shares of common stock, including shares of common stock that are
part of, or are received upon exercise of, the award that gives rise to the
withholding requirement. The obligations of the Company under the Plan are
conditional on such payment or arrangements, and the Company and any affiliate
will, to the extent permitted by law, have the right to deduct any such taxes
from any payment otherwise due to the employee. The Committee may establish such
procedures as it deems appropriate for the settling of withholding obligations
with shares of common stock.
15
<PAGE>
Change in Control
Upon the occurrence of a Change in Control (as defined in the Plan) of
the Company (1) all outstanding options will become immediately exercisable; (2)
any restriction periods and related restrictions on restricted stock will lapse;
(3) the target payout opportunity attainable under all outstanding performance
units and shares will be deemed fully earned for the entire performance period
and a pro rata portion of the performance share or unit, based on the portion of
the performance period which has elapsed, will be paid out in cash; and (4) the
Committee may make any other modifications to outstanding awards, except, in all
cases, unless otherwise specifically prohibited by the Plan. The Committee may
amend, modify or rescind these provisions of the Plan if it determines that
these provisions may prevent a transaction in which the Company or any affiliate
is a party from being accounted for on a pooling-of-interests basis.
Certain Federal Income Tax Consequences
Stock Options. The grant of a stock option under the Plan will create
no income tax consequences to the participant or the Company. A participant who
is granted a nonqualified stock option will generally recognize ordinary income
at the time of exercise in an amount equal to the excess of the fair market
value of the common stock at such time over the exercise price. The Company will
be entitled to a deduction in the same amount and at the same time as ordinary
income is recognized by the participant. A subsequent disposition of the common
stock will give rise to capital gain or loss to the extent the amount realized
from the sale differs from the tax basis, i.e., the fair market value of the
common stock on the date of exercise. This capital gain or loss will be a
long-term or short-term capital gain or loss depending upon the length of time
the common stock was held.
In general, if a participant holds the shares of common stock acquired
pursuant to the exercise of an ISO for at least two years from the date of grant
and one year from the date of exercise, the participant will recognize no income
or gain as a result of exercise (except that the alternative minimum tax may
apply). Any gain or loss realized by the participant on the disposition of the
common stock will be treated as a long-term capital gain or loss. No deduction
will be allowed to the Company. If either of these holding period requirements
is not satisfied, the participant will recognize ordinary income at the time of
the disposition equal to the lesser of (1) the gain realized on the disposition
or (2) the difference between the exercise price and the fair market value of
the shares of common stock on the date of exercise. The Company will be entitled
to a deduction in the same amount and at the same time as ordinary income is
recognized by the participant. Any additional gain realized by the participant
over the fair market value at the time of exercise will be treated as a capital
gain. This capital gain will be a long-term or short-term capital gain depending
upon the length of time the common stock was held.
Restricted Stock. If a stock award is granted in the form of restricted
stock, the participant will not recognize income upon the award of restricted
stock under the Plan unless the election described below is made. An individual
who has not made such an election will recognize ordinary income at the end of
the applicable restriction period in an amount equal to the fair market value of
the restricted stock at such time, reduced by any amount paid for the stock. The
Company will be entitled to a corresponding deduction in the same amount and at
the same time as the participant recognizes income. Any otherwise taxable
disposition of the stock after the end of the applicable restriction period will
result in capital gain or loss (long-term or short-term depending on the length
of time the restricted stock is held after the end of the applicable restriction
period). Dividends paid in cash and received by a participant prior to the end
of the applicable restriction period will constitute ordinary income to the
participant in the year paid. The Company will be entitled to a corresponding
deduction for such dividends, subject to the application of Section 162(m) of
the Code, as more completely described below. Any dividends paid in stock will
be treated as an award of additional restricted stock subject to the tax
treatment described herein.
16
<PAGE>
A participant may, within 30 days after the date of the award of
restricted stock, elect to recognize ordinary income as of the date of the award
in an amount equal to the fair market value of such restricted stock on the date
of the award, reduced by any amount paid for the stock. The Company will be
entitled to a corresponding deduction in the same amount and at the same time as
the participant recognizes income, subject to the application of Section 162(m)
of the Code, as more completely described below. If the election is made, any
cash dividends received with respect to the restricted stock will be treated as
dividend income to the participant in the year of payment and will not be
deductible by the Company. Any otherwise taxable disposition of the restricted
stock (other than by forfeiture) will result in capital gain or loss (long-term
or short-term depending on the holding period). If the participant who has made
an election subsequently forfeits the restricted stock, the participant will
only be entitled to deduct a loss equal to the amount (if any) paid for the
stock. In addition, the Company would then be required to include as ordinary
income the amount of the deduction it originally claimed with respect to such
shares.
Performance Shares and Performance Units. The grant of performance
units or performance shares will create no income tax consequences for the
participant or the Company. Upon the receipt of cash, shares of common stock or
other property at the end of the applicable performance period, the participant
will generally recognize ordinary income equal to the amount of any cash and the
fair market value of any shares or other property received. The Company will be
entitled to a deduction in the same amount and at the same time as income is
recognized by the participant.
Code Section 162(m). Section 162(m) of the Code limits the Company's
income tax deduction for compensation paid in any taxable year to certain
executive officers to $1,000,000 per individual. Amounts in excess of $1 million
are not deductible unless one of several exceptions apply. The Committee intends
to grant awards under the Plan that are designed, in most cases, to qualify for
one such exception, the performance-based compensation exception. While the
grant of options, performance shares and performance units can be structured so
as to qualify for this exception, the restricted stock grants may or may not
qualify for this exception, depending on the nature of the restrictions imposed
by the Committee. The Company does not anticipate that Section 162(m) of the
Code will have a material impact on its ability to deduct compensation payable
under the Plan.
Awards Under the Plan
During 1998, the Committee approved grants of stock options and
performance shares to executive officers and others that are not subject to
shareowner approval of the Plan, as amended. See "Option/SAR Grants in 1998" and
"Long-Term Incentive Awards in 1998." The Committee has not approved any grants
of awards that require shareowner approval of the Plan, as amended.
The Company cannot currently determine the number of shares or the
types of shares that may be granted to eligible participants under the Plan, as
amended, in the future. Such determinations will be made from time to time by
the Committee.
On March __, 1999, the last reported sales price per share of the
common stock on the New York Stock Exchange was $________.
Vote Required
The affirmative vote of the holders of a majority of the shares of
common stock represented and voted at the annual meeting (assuming a quorum is
present) is required to approve the Plan, as amended; provided that a majority
of the outstanding shares of the Company's common stock are voted on the
proposal. Assuming such proviso is met, any shares not voted at the annual
meeting (whether by broker non-votes or otherwise, except abstentions), will
have no impact on the vote. Shares as to which holders abstain from voting will
be treated as votes against the Plan, as amended. In the event that the Plan, as
amended, is
17
<PAGE>
not approved by shareowners at the 1999 Annual Meeting, the Plan (except for the
amendments adopted by the Board in February 1999) will remain in full force and
effect.
THE BOARD RECOMMENDS A VOTE "FOR" THE PLAN, AS AMENDED. SHARES OF
COMMON STOCK REPRESENTED AT THE ANNUAL MEETING BY EXECUTED BUT UNMARKED PROXIES
WILL BE VOTED "FOR" THE PLAN, AS AMENDED.
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
The Audit Committee held one meeting in 1998. The Audit Committee
currently consists of J. L. Hanes (Chair), K. C. Lyall, M. E. Neshek, J. R.
Newman and R. W. Schlutz. The Audit 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
The Compensation and Personnel Committee held three meetings in 1998.
The Compensation and Personnel Committee currently consists of A. M. Nemirow
(Chair), A. B. Arends, J. D. Pyle, D. Q. Reed and A. R. Weiler. The Compensation
and Personnel 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; and reviews human resource
development programs.
Nominating and Governance Committee
The Nominating and Governance Committee held two meetings in 1998. The
Nominating and Governance Committee currently consists of R. G. Flowers (Chair),
A. B. Arends, J. D. Pyle, R. D. Ray and A. R. Weiler. The Nominating and
Governance Committee's responsibilities include recommending and nominating new
members of the Board, recommending committee assignments and committee
chairpersons, evaluating overall Board effectiveness, preparing an annual report
on Chief Executive Officer 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 Nominating
and Governance 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 Company's Bylaws also provide for shareowner nominations of candidates for
election as directors. These provisions require such nominations to be made
pursuant to timely notice (as specified in the Bylaws) in writing to the
Corporate Secretary of the Company.
The Board of Directors held five meetings during 1998. All directors
attended at least 88% of the aggregate number of meetings of the Board and Board
committees on which he or she served.
18
<PAGE>
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 AERI, 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 1998 were made for the following
directors: A. B. Arends, R. G. Flowers, J. L. Hanes, K. C. Lyall, A. M. Nemirow,
M. E. Neshek, J. R. Newman, J. D. Pyle, R. D. Ray, and R. W. Schlutz. As of the
effective date of the Merger, a previously existing retirement plan for IES
Industries directors was terminated. Persons with vested interests in that plan
received a payout of those interests at the time of the Merger. Those persons
receiving such a payout included the following directors: L. Liu - $76,800, R.
D. Ray - $76,800, D. Q. Reed - $76,800, R. W. Schlutz - $76,800, and A. R.
Weiler - $76,800.
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. The
imputed income allocations reported for each director in 1998 under the
Director's Life Insurance Program were as follows: R. G. Flowers - $432, K. C.
Lyall - $393, A. M. Nemirow - $37, M. E. Neshek - $950 and J. D. Pyle - $70.
Director Jack R. Newman serves as legal counsel to the Company on
nuclear issues. Mr. Newman's firm, Morgan, Lewis & Bockius provides certain
legal services to the Company.
19
<PAGE>
OWNERSHIP OF VOTING SECURITIES
Listed in the following table are the shares of the Company's common
stock owned by the executive officers listed in the Summary Compensation Table
and all directors of the Company, as well as the number of shares owned by
directors and executive officers as a group as of December 31, 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 December 31, 1998.
Shares
Beneficially
Name of Beneficial Owner Owned(1)
------------------------ ------------
Executives(2)................................................
Michael R. Chase............................................. 7,025
William D. Harvey............................................ 19,957 (3)
Eliot G. Protsch............................................. 20,015 (3)
Director Nominees
Alan B. Arends.......................................... 2,202
Rockne G. Flowers....................................... 10,189
Katharine C. Lyall...................................... 7,715
Robert D. Ray........................................... 4,032
Anthony R. Weiler....................................... 4,603 (3)
Continuing Directors
Erroll B. Davis, Jr..................................... 47,042 (3)
Joyce L. Hanes.......................................... 2,858 (3)
Lee Liu................................................. 57,798 (3)
Arnold M. Nemirow....................................... 10,387
Milton E. Neshek........................................ 12,315
Jack R. Newman.......................................... 2,027
Judith D. Pyle.......................................... 6,297
David Q. Reed........................................... 6,043 (3)
Robert W. Schlutz....................................... 4,185
Wayne H. Stoppelmoor.................................... 6,088
All Executives and Directors as a Group
37 people, including those listed above................. 352,938
(1) Total shares of Company common stock outstanding as of
December 31, 1998 were 77,630,043.
(2) Stock ownership of Mr. Davis and Mr. Liu are shown with
continuing directors.
(3) Included in the beneficially owned shares shown are indirect ownership
interests with shared voting and investment powers: Mr. Harvey - 1,897,
Mr. Protsch - 573, Mr. Davis - 5,866, Ms. Hanes - 541, Mr. Liu - 9,755,
Mr. Reed - 353 and Mr. Weiler - 1,037; and excercisable stock options:
Mr. Davis - 25,700, Mr. Harvey - 9,350, Mr. Protsch - 9,350 (all
directors and executive officers as a group - 97,450).
20
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
The following Summary Compensation Table sets forth the total
compensation paid by the Company and its subsidiaries for all services rendered
during 1998, 1997, and 1996 to the Chief Executive Officer and the four other
most highly compensated executive officers of the Company or its subsidiaries
who performed policy making functions for the Company.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
(Dollars)
Long-Term
Annual Compensation Compensation Awards
--------------------------------------- ---------------------------
Other Options/ Restricted
Name and Annual SARs Stock All Other
Principal Position Year Salary Bonus Compensation 2 (Shares) 3 Awards 4 Compensation 5
- ------------------ ---- ------- ----- ------------- ----------- -------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Erroll B. Davis, Jr. 1998 $540,000 $ - $13,045 36,752 $ - $57,996
President and CEO 1997 450,000 200,800 19,982 13,800 - 60,261
of the Company 1996 450,000 297,862 23,438 12,600 - 66,711
Lee Liu 1998 387,692 - - 25,347 337,241 52,073
Chairman of the Board 1997 400,000 189,000 5,956 - 176,391 13,277
1996 380,000 175,000 2,578 - 253,475 13,956
Michael R. Chase1 1998 253,846 - - - - 6,997
Executive Vice President 1997 225,000 6,750 - - - 1,600
1996 171,250 - - - - 250
William D. Harvey 1998 223,846 - 4,699 11,406 - 28,642
Executive Vice President 1997 220,000 43,986 14,944 5,100 - 33,043
1996 220,000 92,104 10,765 4,650 - 29,343
Eliot G. Protsch 1998 233,846 - 2,443 11,406 - 20,398
Executive Vice President 1997 220,000 51,400 11,444 5,100 - 30,057
1996 220,000 101,224 7,657 4,650 - 25,890
1 Mr. Chase retired on December 31, 1998.
2 Other Annual Compensation for 1998 consists of income tax gross-ups for
reverse split-dollar life insurance.
3 Awards made in 1998 were in combination with contingent dividend awards as
described in the table entitled "Long-Term Incentive Awards in 1998".
4 Prior to the Merger, IES Industries had historically made awards of
restricted stock. Such awards (to the extent not previously vested) vested
automatically upon the consummation of the Merger. The number of shares of
restricted stock reflected in this table that were subject to such automatic
vesting are as follows: Mr. Liu - 8,703 shares awarded for 1998, 5,004 shares
awarded for 1997 and 8,703 shares awarded for 1996. Restricted stock was
considered outstanding upon the award date and dividends were 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 the closing price of
IES Industries common stock on the award date.
5 All Other Compensation for 1998 consists of: matching contributions to 401(k)
Plan and Deferred Compensation Plan, Mr. Davis - $16,200, Mr. Liu - $4,754,
Mr. Chase - $6,997, Mr. Harvey - $7,015 and Mr. Protsch - $7,015; Financial
counseling benefit, Mr. Davis - $7,000, Mr. Liu - $4,448, Mr. Harvey - $7,000
and Mr. Protsch - $2,333; split dollar life insurance premiums, Mr. Davis -
$20,653, Mr. Harvey - $8,738 and Mr. Protsch - $7,989; reverse split dollar
life insurance, Mr. Davis - $14,143, Mr. Harvey - $5,889 and Mr. Protsch -
$3,061; life insurance coverage in excess of $50,000, Mr. Liu - $9,910; and
dividends on restricted stock, Mr. Liu - $32,961. The split dollar insurance
premiums are calculated using the "foregone interest" method.
</TABLE>
21
<PAGE>
STOCK OPTIONS
The following table sets forth certain information concerning options
granted during 1998 to the executives named below:
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN 1998
- ----------------------------------------------------------------------------------------------------------------
Potential Realizable
Value at Assumed
Annual Rates of Stock
Appreciation for Option
Individual Grants Term 2
---------------------------------------------------------- -------------------------
Number of % of Total
Securities Options/SARs
Underlying Granted to Exercise or
Options/ Employees in Base Price Expiration
Name SARs Granted 1 Fiscal Year ($/Share) Date 5% 10%
- -------------------------- -------------- ---------------- ------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Erroll B. Davis, Jr. 36,752 5.8% $31.5625 6/30/08 $729,527 $1,848,993
- -------------------------- -------------- ---------------- ------------- ------------ ----------- -------------
Lee Liu 25,347 4.0% 31.5625 6/30/08 503,138 1,275,208
- -------------------------- -------------- ---------------- ------------- ------------ ----------- -------------
Michael R. Chase NA NA NA NA NA NA
- -------------------------- -------------- ---------------- ------------- ------------ ----------- -------------
William D. Harvey 11,406 1.8% 31.5625 6/30/08 226,409 573,836
- -------------------------- -------------- ---------------- ------------- ------------ ----------- -------------
Eliot G. Protsch 11,406 1.8% 31.5625 6/30/08 226,409 573,836
- -------------------------- -------------- ---------------- ------------- ------------ ----------- -------------
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 July 1, 1998, and
will fully vest on January 2, 2001. 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 $51.41 and $81.87, 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 exercisable and unexercised options.
22
<PAGE>
<TABLE>
<CAPTION>
OPTION/SAR VALUES AT DECEMBER 31, 1998
- ------------------------------------------------------------------------------------------------------
Number of Securities Underlying
Unexercised Value of Unexercised In-the-Money
Options/SARs at Fiscal Year End Options/SARs at Year End1
- -------------------------- ------------------------------------- ------------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- -------------------------- ----------------- ------------------- ----------------- ------------------
<S> <C> <C> <C> <C>
Erroll B. Davis, Jr. 13,100 63,152 $62,225 $102,817
- -------------------------- ----------------- ------------------- ---------------- -------------------
Lee Liu 0 25,347 0 17,426
- -------------------------- ----------------- ------------------- ---------------- -------------------
Michael R. Chase 0 0 0 0
- -------------------------- ----------------- ------------------- ---------------- -------------------
William D. Harvey 4,700 21,156 22,325 36,492
- -------------------------- ----------------- ------------------- ---------------- -------------------
Eliot G. Protsch 4,700 21,156 22,325 36,492
- -------------------------- ----------------- ------------------- ---------------- -------------------
1 Based on the closing per share price on December 31, 1998 of Company common stock of
$32.25
</TABLE>
Long-Term Incentive Awards - The following table provides information
concerning long-term incentive awards made to the executives named below in
1998.
<TABLE>
<CAPTION>
LONG-TERM INCENTIVE AWARDS IN 1998
- ------------------------------------------------------------------------------------------------------------------
ESTIMATED FUTURE PAYOUTS UNDER NON-STOCK
PRICE-BASED PLANS
- --------------------------- ---------------- --------------------- -----------------------------------------------
NUMBER OF PERFORMANCE OR
SHARES, UNITS OTHER PERIOD UNTIL
NAME OR OTHER RIGHTS MATURATION OR PAYOUT THRESHOLD TARGET MAXIMUM
- --------------------------- ---------------- --------------------- ----------------- ------------- ---------------
(#)1 (#) (#) (#)
- --------------------------- ---------------- --------------------- ----------------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
Erroll B. Davis, Jr. 11,026 1/2/01 5,513 11,026 22,052
- --------------------------- ---------------- --------------------- ----------------- ------------- ---------------
Lee Liu 7,604 1/2/01 3,802 7,604 15,208
- --------------------------- ---------------- --------------------- ----------------- ------------- ---------------
Michael R. Chase -- -- -- -- --
- --------------------------- ---------------- --------------------- ----------------- ------------- ---------------
William D. Harvey 2,661 1/2/01 1,330 2,661 5,322
- --------------------------- ---------------- --------------------- ----------------- ------------- ---------------
Eliot G. Protsch 2,661 1/2/01 1,330 2,661 5,322
- --------------------------- ---------------- --------------------- ----------------- ------------- ---------------
1 Consists of performance shares awarded under the Company's
Long-Term Equity Incentive Plan. These performance shares will
vest based on achievement of specified Total Shareholder Return
(TSR) levels as compared with an investor-owned utility peer
group over the period ending January 2, 2001. Payouts will be in
shares of Company common stock, but will be modified by a
performance multiplier which ranges from 0 to 2.00.
</TABLE>
23
<PAGE>
Agreements and Transactions with Executives
Each of Messrs. Liu and Davis have employment agreements with the
Company. Pursuant to Mr. Liu's agreement, Mr. Liu will serve as Chairman of the
Company until April 21, 2000. Mr. Liu will thereafter retire as an officer of
the Company, although he may continue to serve as a director. Under Mr. Davis'
agreement, Mr. Davis will serve as the Chief Executive Officer of the Company
until April 21, 2003. Mr. Davis will also serve as the Chairman of the Company
following April 21, 2000. Following the expiration of the initial term of Mr.
Davis' 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 April 21, 2001 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' 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
Mr. Liu under his employment agreement or otherwise are subject to the excise
tax on excess parachute payments under the Code, then the total payments to be
made under Mr. Liu's employment agreement will be reduced so that the value of
these payments he is entitled to receive is $1 less than the amount that would
subject Mr. Liu 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.
Under Mr. Davis' employment agreement, if any payments thereunder constitute an
excess parachute payment, the Company will pay to Mr. Davis the amount necessary
to offset the excise tax and any applicable taxes on this additional payment.
24
<PAGE>
Each of the three companies that were party to the Merger had in
effect, at the time of the Merger, key executive employment and severance
agreements (the "Pre-Merger KEESAs") with certain of their executive officers.
The Pre-Merger KEESAs were intended to provide the executives with specified
severance benefits in the event of certain terminations following a change in
control of the employer. The consummation of the Merger constituted such a
change in control. Although each party to the Merger had Pre-Merger KEESAs in
effect, the terms of such agreements were not identical.
To provide selected executives of the Company with severance
arrangements with generally comparable terms relating to any future change in
control of the Company, the Company in 1999 offered new key executive employment
and severance agreements (the "New KEESAs") to such executive officers of the
Company (including Messrs. Davis, Harvey and Protsch). In order to receive a New
KEESA, each executive officer (other than Mr. Davis) was required to cancel
existing rights under his or her Pre-Merger KEESA in exchange for a grant of
restricted stock; Mr. Davis did not receive a grant of restricted stock in
connection with the cancellation of his Pre-Merger KEESA. The grants of
restricted stock were valued at one times salary for certain executive officers
(including Messrs. Harvey and Protsch) and one-half times salary for certain
other officers. Subject to certain exceptions, the restricted stock will vest
only if the executive remains with the Company for a period of at least three
years.
The New KEESAs provide that each executive officer who is a party
thereto is entitled to benefits if, within five years after a change in control
of the Company (as defined in the New 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' agreement,
termination by Mr. Davis following the first anniversary of the change of
control. The benefits provided are (i) a cash termination payment of two or
three times (depending on which executive is involved) the sum of the officer's
annual salary and his or her 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 New KEESA for executive officers
below the level of Executive Vice President provides that if any portion of the
benefits under the KEESA or under any other agreement for the officer would
constitute an excess payment for purposes of the Code, benefits will be reduced
so that the officer will be entitled to receive $1 less than the maximum amount
which he could receive without becoming subject to the 20% excise tax imposed by
the Code on certain excess payments, or which the Company may pay without loss
of deduction under the Code. The New KEESAs for the Chief Executive Officer and
the Executive Vice Presidents (including Messrs. Davis, Harvey and Protsch)
provide that if any payments thereunder or otherwise constitute an excess
parachute payment, the Company will pay to the appropriate officer the amount
necessary to offset the excise tax and any additional taxes on this additional
payment. Mr. Davis' employment agreement as described above limits benefits paid
thereunder to the extent that duplicate payments would be provided to him under
his New KEESA.
In connection with his retirement effective January 1, 1999, Mr. Chase
entered into an Early Retirement Agreement with the Company. Pursuant to this
agreement, Mr. Chase received a payment of $255,000 on January 1, 1999 and is
entitled to receive a payment of $210,750 on January 1, 2000. Mr. Chase also
agreed to the termination of his outstanding stock options. Mr. Chase is subject
to certain noncompetition and nondisclosure provisions pursuant to his
retirement agreement.
Mr. Stoppelmoor entered into a three-year consulting agreement with the
Company in connection with the Merger. Under the terms of his consulting
agreement, Mr. Stoppelmoor receives an annual fee of $324,500 during each of the
first two years and a fee of $200,000 during the third year of the consulting
period. Mr. Stoppelmoor is also entitled to participate in compensation plans
equivalent to those provided
25
<PAGE>
the Company's Chairman of the Board and Chief Executive Officer during the
consulting period, subject to approval by the Compensation and Personnel
Committee of the Board. Although Mr. Stoppelmoor is eligible to participate in
the Directors Charitable Award Program and the Directors Life Insurance Program
as a result of his service as Vice Chairman of the Board Directors, his
consulting agreement provides that he shall not be eligible to receive any other
compensation otherwise payable to directors of the Company.
Retirement and Employee Benefit Plans
ALLIANT SERVICES RETIREMENT PLANS
Salaried employees (including officers) of the Company are eligible to
participate in a Retirement Plan maintained by Alliant Services. In 1998, the
Retirement Plan was amended to implement a cash balance format, thereby changing
the benefit calculation formulas and adding a lump sum distribution option for
eligible participants. The plan bases a participant's defined benefit pension on
the value of a hypothetical account balance. For individuals participating in
the plan as of August l, 1998, a starting account balance was created equal to
the present value of the benefit accrued as of December 31, 1997, under the
plans benefit formula prior to the change to a cash balance approach. That
formula provided a retirement income based on years of credited service and
final average compensation for the 36 highest consecutive months, with a
reduction for a Social Security offset. In addition, individuals participating
in the plan as of August 1, 1998 received a special one-time transition credit
amount equal to a specified percentage varying with age multiplied by credited
service and base pay.
For 1998 and thereafter, a participant receives annual credits to the
account equal to 5% of base pay (including certain incentive payments, pre-tax
deferrals and other items), plus an interest credit on all prior accruals equal
to 4% plus a share of the gain on the investment return on assets in the trust
investment for the year.
The life annuity payable under the plan is determined by converting the
hypothetical account balance credits into annuity form. Individuals who were
participants in the plan on August 1, 1998 are in no event to receive any less
than what would have been provided under the prior formula, had it continued, if
they terminate on or before August 1, 2008, and do not elect to commence
benefits before the earlier of age 55.
All of the individuals listed in the Summary Compensation Table who
participate in the plan (i.e., Messrs. Davis, Protsch and Harvey) are
"grandfathered" under the prior plans benefit formula. Since their estimated
benefits under that formula are higher than under the cash balance plan formula,
utilizing current assumptions, their benefits would currently be determined by
the prior plan benefit formula. All eligible persons whose compensation is
reported in the foregoing Summary Compensation Table participated in the plan
during 1998. Contributions to the "grandfathered" 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. 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., 19 years; Eliot
G. Protsch, 19 years; and William D. Harvey, 11 years. Assuming retirement at
age 65, a plan participant (in conjunction with the Unfunded Excess Plan
described below) would be eligible at retirement for a maximum annual retirement
benefit as follows:
26
<PAGE>
<TABLE>
<CAPTION>
Retirement Plan Table
Average Annual Benefit After Specified Years in Plan*
Annual -----------------------------------------------------------------------------------
Compensation 5 10 15 20 25 30
- ------------ ------- ------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
$125,000 $10,116 $20,233 $ 30,349 $ 40,465 $ 50,582 $60,698
150,000 12,408 24,816 37,224 49,632 62,040 74,448
200,000 16,991 33,983 50,974 67,965 84,977 101,948
250,000 21,575 43,149 64,724 86,299 107,873 129,448
300,000 26,158 52,316 78,474 104,632 130,790 156,948
350,000 30,741 61,483 92,224 122,965 153,707 184,448
400,000 35,325 70,649 105,974 141,299 176,623 211,948
450,000 39,908 79,816 119,724 159,632 199,540 239,448
475,000 42,200 84,399 126,599 168,799 210,998 253,198
500,000 44,491 88,983 133,674 177,965 222,457 266,948
525,000 46,783 93,566 140,349 187,132 233,915 280,698
550,000 49,075 98,149 147,224 196,299 245,373 294,448
600,000 53,568 107,316 160,974 214,632 268,290 321,948
650,000 58,241 116,485 174,724 232,965 291,207 349,448
* Average annual compensation is based upon the average of the highest 36
consecutive months of compensation. The 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, $160,000 for 1998) under the Code. Under
the plan, if a plan participant dies prior to retirement, the designated
survivor of the participant is entitled to a monthly income benefit equal to
approximately 50 percent of the monthly retirement benefit which would have
been payable to the participant under the plan.
</TABLE>
Pension Plan Applicable to Mr. Liu
Prior to the Merger, Mr. Liu participated in the IES Industries
retirement plan (which plan was transferred to Alliant Services in connection
with the Merger). Mr. Liu's benefits under the plan have been "grandfathered" to
reflect the benefit plan formula in effect at the time of the Merger. 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>
<CAPTION>
Alliant Services Pension Plan Table
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 1998, $130,000 was the maximum benefit allowable under the
retirement plans prescribed by Section 415 of the Code.
27
<PAGE>
With respect to Mr. Liu, the remuneration for retirement plan purposes
would be substantially the same as that shown as "Salary" in the Summary
Compensation Table. As of December 31, 1998, Mr. Liu had 41 accredited years of
service under the retirement plan.
Unfunded Excess Plan - Alliant Services maintains an Unfunded Excess
Plan that 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. This plan
provides an amount equal to the difference between the actual pension benefit
payable under the pension plan and what such pension benefit would be if
calculated without regard to any limitation imposed by the Code on pension
benefits or covered compensation.
Unfunded Executive Tenure Compensation Plan - Alliant Services
maintains an Unfunded Executive Tenure Compensation Plan to provide incentive
for key executives to remain in the service of Alliant Services by providing
additional compensation which is payable only if the executive remains with
Alliant Services until retirement (or other termination if approved by the Board
of Directors). In the case of the Chief Executive Officer only, in the event
that the Chief Executive Officer (1) is terminated under his employment
agreement with the Company as described above (the "Employment Agreement") other
than for cause, death or disability (as those terms are defined in the
Employment Agreement), (2) terminates his employment under the Employment
Agreement for good reason (as such term is defined in the Employment Agreement),
or (3) is terminated as a result of a failure of the Employment Agreement to be
renewed automatically 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 the Company and approved by its Board of Directors. Mr. Davis was the only
active participant in the plan as of December 31, 1998. 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 $145,000 would
be payable to Mr. Davis upon retirement, assuming he continues in Alliant
Services' service until retirement at the same salary as was in effect on
December 31, 1998.
28
<PAGE>
Alliant Services Supplemental Retirement Plans
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 the Company by providing additional
compensation which is payable only if the executive remains with the Company
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 reduced by the sum of benefit payable to the officer
from the officer's defined benefit plan. The normal retirement date under the
plan is age 62 with at least 10 years of service. 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, and Protsch 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
600,000 0 360,000
650,000 0 390,000
* Reduced by the sum of the benefit payable from the applicable defined benefit
plan.
Alliant Services Supplemental Retirement Plan - Alliant Services
maintains a non-qualified Supplemental Retirement Plan ("SRP") for eligible
former officers of IES Industries who elected to remain under this plan
following the Merger. Mr. Liu is the only executive named in the Summary
Compensation Table participating in the SRP. The SRP currently provides for
payment of supplemental retirement benefits equal to 75% of the officer's base
salary in effect at the date of retirement, reduced by benefits receivable under
the qualified retirement plan, for a period not to exceed 15 years following the
date of retirement. In the event of the death of the officer following
retirement, similar payments reduced by the joint and survivor annuity of the
qualified retirement plan will be made to his or her designated beneficiary
(surviving spouse or dependent children), if any, for a period not to exceed 10
years from the date of the officer's retirement. Thus, if an officer died 10
years after retirement, no payment to the beneficiary would be made. Death
benefits are provided on the same basis to a designated beneficiary for a period
not to exceed 10 years from the date of death should the officer die prior to
retirement. The SRP further provides that if, at the time of the death of an
officer, the officer is entitled to receive, is receiving, or has received
supplemental retirement
29
<PAGE>
benefits by virtue of having taken retirement, a death benefit shall be paid to
the officer's designated beneficiary or to the officer's estate in an amount
equal to 100% of the officer's annual salary in effect at the date of
retirement. Under certain circumstances, an officer who takes early retirement
will be entitled to reduced benefits under the SRP. The SRP also provides for
benefits in the event an officer becomes disabled under the terms of the
qualified retirement plan. Life insurance policies on the participants have been
purchased sufficient in amount to finance actuarially all future liabilities
under the SRP. The SRP has been designed so that if the assumptions made as to
mortality, experience, policy dividends, tax credits and other factors are
realized, all life insurance premium payments will be recovered over the life of
the SRP.
The following table shows the estimated annual benefits payable under
the Supplemental Retirement Plan equal to 75% of the officer's base salary in
effect at the date of retirement:
<TABLE>
<CAPTION>
Alliant Services Company
Supplemental Retirement Plan Payments
75% SRP Benefit
Years of Service
Annual Salary 15 20 25 30 35
------------- -- -- -- -- --
<S> <C> <C> <C> <C> <C>
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 of the Company is comprised of five
non-employee directors. 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.
30
<PAGE>
- - Base salary levels should be targeted at a competitive market range paid to
executives at 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, business unit
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, the
Company's Chief Executive Officer, 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 prerequisite
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. 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. Based on these factors, the base salary
for Mr. Davis was set at $540,000 for 1998.
Short-Term Incentives
The goal of the 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, business unit, and individual performance goals.
31
<PAGE>
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 1998 to executive officers follows.
Interstate Energy Corporation Officer Incentive Compensation Plan--The
IEC Officer Incentive Compensation Plan (the "IEC OICP") covered utility
executives and in 1998 was based on achieving annual targets in corporate
performance that included an earnings per share ("EPS") target, and business
unit and individual performance. Target and maximum bonus awards were set at the
median of the utility and general industry market levels. Targets were
considered by the Committee to be achievable, but required 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 a pre-determined EPS
has not been met, there is no bonus payment associated with the plan. If the
threshold performance is not reached, there is no bonus payment associated with
that particular category. Once the designated maximum performance is reached,
there is not 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. Potential IEC OICP awards for
executives range from 0 to 70 percent of annual salary. In 1998 there was no
payout associated with the IEC OICP since the pre-determined EPS was not met.
In 1998, Mr. Davis was covered by the Company's Officer Incentive
Compensation Plan (the "Company OICP"). Awards under the Company OICP in 1998
were based on corporate and strategic goal achievement in relation to
predetermined goals. For each plan year, the Committee determines the
performance apportionment for Mr. Davis. In 1998 that apportionment was 75% for
corporate performance and 25% for strategic goal performance. Corporate
performance is measured based on a company-wide EPS target established at the
beginning of the year. Strategic goals are measured based on the achievement of
certain specific goals, which included strategy development and implementation,
established for Mr. Davis by the Committee. The 1998 OICP award range for Mr.
Davis was from 0 to 100 percent of annual salary. The actual payment of bonuses
as a percentage of annual salary is determined as described for the IEC OICP. In
1998, the Company OICP did not provide a payment to Mr. Davis as a result of the
pre-determined EPS not being met.
Alliant Energy Resources Annual Incentive Plan--The Alliant Energy
Resources Annual Incentive Plan covered non-utility executives and in 1998 was
based on achieving annual targets in corporate performance that included an EPS
target, business unit performance that includes the contribution to EPS, and
group (International) unit and individual performance. Target and maximum bonus
awards were set at competitive market levels. Targets were considered by the
Committee to be achievable, but required 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 business unit's EPS contribution to
corporate is below threshold level, there is no bonus payment associated with
the plan. If the threshold performance is not reached, there is no bonus payment
associated with that particular category. Once the designated maximum
performance is reached, there is not 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. Potential
Alliant Energy Resources Annual Incentive Plan awards for executives range from
0 to 50 percent of annual salary. In 1998 there was no payout associated with
the plan since the business unit's EPS contribution to corporate was below the
threshold level.
32
<PAGE>
Long-Term Incentives
The Committee strongly believes compensation for 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 unit/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. A description of the long-term
incentive programs available during 1998 to executive officers follows.
Interstate Energy Corporation Long-Term Incentive Program--The
Interstate Energy Corporation Long-Term Incentive Program covered utility
executives and consisted of the following components: stock options and
performance shares. 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 shares is based on the Company's
three-year total return to shareowners relative to an investor-owned utility
peer group. Thus, the two components of the Long-Term Incentive Program, i.e.
stock options and performance shares, provide incentives for management to
produce superior shareowner returns on both an absolute and relative basis.
During 1998 the Committee made a grant of stock options and performance shares
to Messrs. Davis, Liu, Harvey, and Protsch. All option grants were made at the
fair market value of Company common stock on the date the grants were approved
(July 1, 1998). Options have a two and one-half year vesting schedule with
one-third vesting on January 2, 1999, one-third vesting on January 2, 2000 and
the final one-third vesting on January 2, 2001 and have a ten-year term from the
date of the grant. Executives were also granted performance shares. Performance
shares will be paid out in shares of the Company's common stock. The award will
be modified by a performance multiplier which ranges from 0 to 2.00 based on the
three-year average of the Company's total shareowner return relative to an
investor-owned utility peer group. In determining actual award levels, the
Committee was primarily concerned with providing a competitive total
compensation level to officers. As such, award levels (including 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 shares. 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 and performance shares already outstanding or
previously granted when making awards for 1998.
Alliant Energy Resources Long-Term Incentive Program--The Alliant
Energy Resources Long-Term Incentive Program covered non-utility executives and
consisted of the following components: stock options and performance units.
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 Alliant Energy Resources three-year
average growth in EPS contribution to the Company's EPS. Thus, the two
components of the Long-Term Incentive Program, i.e. stock options and
performance units, provide incentives for management to produce superior
shareowner returns on both an absolute and relative basis. All option grants
were made at the fair market value of Company common stock on the date the
grants were approved (August 21, 1998). Options have a two and one-half year
vesting schedule with one-third vesting on January 2, 1999, one-third vesting on
January 2, 2000 and the final one-third vesting on January 2, 2001 and have a
ten-year term from the date of the grant. Executives were also granted
performance units. Performance units will be paid out in cash. The payment will
be modified by a performance multiplier which ranges from 0 to 2.00 based on the
Alliant Energy Resources three-year average growth in EPS contribution to the
Company's EPS. In determining actual award levels, the
33
<PAGE>
Committee was primarily concerned with providing a competitive total
compensation level to officers. As such, award levels were based on a
competitive analysis of similarly-sized general industry 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 and performance units already outstanding or previously granted when
making awards for 1998.
Stock Ownership Guidelines
In January 1999, the Company established stock ownership guidelines for
executive officers as a way to better align the financial interests of its
officers with those of its shareowners. These officers are expected to make
continuing progress towards compliance with these guidelines and to comply fully
with the guidelines within five years of implementation. Officers are required
to own stock with a value equal to a specified multiple of their base salaries.
Under these guidelines, the requisite multiples are three for the Chief
Executive Officer and Executive Vice Presidents and 1.5 for Vice Presidents. The
Chief Executive Officer retains the right to grant special dispensation for
hardship, promotions or new hires.
Policy with Respect to the $1 Million Deduction Limit
Section 162(m) of the 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. Based
on the Committee's commitment to link compensation with performance as described
in this report, the Committee currently intends to qualify future 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
34
<PAGE>
Compensation and Personnel Committee Interlocks and Insider Participation
The members of the Compensation and Personnel Committee who served
during 1998 are identified above. Mr. Newman, a member of the Compensation and
Personnel Committee during 1998, is a partner in the law firm of Morgan, Lewis
and Bockius. Morgan, Lewis and Bockius provides certain legal services to the
Company. Mr. Newman is no longer a member of the Committee.
Comparison of Five-Year Cumulative Total Return
Rules of the 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, 1993, 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.).
[graph omitted]
<TABLE>
<CAPTION>
1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
IEC $100.00 $ 88.84 $106.19 $104.10 $131.60 $136.62
S&P Utilities Index $100.00 $ 92.06 $130.74 $134.83 $168.07 $192.89
S&P 500 Index $100.00 $101.32 $139.40 $171.40 $228.59 $293.91
</TABLE>
35
<PAGE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Company's directors, its executive officers and certain other
officers are required to report their ownership of the Company's common stock
and subsidiary preferred stock and any changes in that ownership to the
Securities and Exchange Commission and the New York Stock Exchange. In November
1998, a Form 4 was inadvertently filed late for Alan B. Arends reflecting a
stock purchase on October 29, 1998. In addition, Form 3s were filed late on
behalf of Thomas Aller and Claire Fulenwider, reflecting their status as
insiders effective October 21, 1998. To the best of the Company's knowledge, all
required filings in 1998, with the exception of those noted, 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 SEC.
GENERAL
Voting - The outstanding voting securities of the Company on the record
date stated below consisted of ___________ shares of common stock. Only
shareowners of the Company of record on its books at the close of business on
March 23, 1999, 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 Corporate 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 - Any shareowner proposal intended to be
presented at and included in the Company's proxy materials for the 2000 Annual
Meeting of Shareowners pursuant to Rule 14a-8 under the Securities Exchange Act
of 1934 ("Rule 14a-8"), must be received at the principal office of the Company
no later than November 29, 1999. In addition, a shareowner who otherwise intends
to present business at the 2000 Annual Meeting of Shareowners (including,
nominating persons for election as directors) must comply with the requirements
set forth in the Company's Bylaws. Among other things, to bring business before
an annual meeting, a shareowner must give written notice thereof, complying with
the Bylaws, to the Corporate Secretary of the Company not less than 45 days
prior to the month and day in the current year corresponding to the date on
which the Company first mailed its proxy materials for the prior year's annual
meeting (subject to certain exceptions if the 70th day prior to the annual
meeting or the 10th day following the announcement of the annual meeting is
earlier than such date). Accordingly, if the Company does not receive notice of
a shareowner proposal submitted otherwise than pursuant to Rule 14a-8 prior to
February 12, 2000, then the notice will be considered untimely and the Company
will not be required to present such proposal at the 2000 Annual Meeting of
Shareowners. If the Board of Directors chooses to present such proposal at the
2000 Annual Meeting of Shareowners, then the persons named in proxies solicited
by the Board of Directors for the 2000 Annual Meeting of Shareowners may
exercise discretionary voting power with respect to such proposal.
Independent Auditors - The Board of Directors has appointed Arthur
Andersen LLP as the Company's independent auditors for 1999. Arthur Andersen LLP
acted as independent auditors for the Company in 1998. 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.
36
<PAGE>
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 be properly presented
at 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
37
<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 between *s and deletions are bracketed.
ARTICLE 1
The name of the corporation is [Interstate Energy Corporation] *Alliant
Energy Corporation.*
<PAGE>
Appendix B
INTERSTATE ENERGY CORPORATION
LONG-TERM EQUITY INCENTIVE PLAN
AS AMENDED
Article 1. Establishment, Purpose, and Duration
1.1 Establishment of the Plan. Interstate Energy Corporation, a
Wisconsin corporation (hereinafter referred to as the "Company"), hereby
establishes an incentive compensation plan to be known as the "Interstate Energy
Corporation Long-Term Equity Incentive Plan" (hereinafter referred to as the
"Plan"), as set forth in this document. The Plan permits the grant of
Nonqualified Stock Options, Incentive Stock Options, Restricted Stock,
Performance Units, and Performance Shares. The Plan became effective as of
January 23, 1994 (the "Effective Date"), and shall remain in effect as provided
in Section 1.3 herein.
1.2 Purpose of the Plan. The purpose of the Plan is to promote the
success and enhance the value of the Company by linking the personal interests
of Participants to those of Company shareowners, and by providing Participants
with an incentive for outstanding performance. The Plan is further intended to
provide flexibility to the Company in its ability to motivate, attract, and
retain the services of Participants upon whose judgment, interest, and special
effort the successful conduct of its operation largely is dependent.
1.3 Duration of the Plan. The Plan commenced on the Effective Date, as
described in Section 1.1 herein, and shall remain in effect, subject to the
right of the Board of Directors to terminate the Plan at any time pursuant to
Article 13 herein, until all Shares subject to it shall have been purchased or
acquired according to the Plan's provisions. However, in no event may an Award
be granted under the Plan on or after January 22, 2004.
Article 2. Definitions
Whenever used in the Plan, the following terms shall have the meanings
set forth below and, when the meaning is intended, the initial letter of the
word is capitalized:
(a) "Award" means, individually or collectively, a grant under
this Plan of Nonqualified Stock Options, Incentive Stock
Options, Restricted Stock, Performance Units, or Performance
Shares.
(b) "Award Agreement" means an agreement entered into by each
Participant and the Company setting forth the terms and
provisions applicable to Awards granted to Participants under
this Plan.
(c) "Beneficial Owner" shall have the meaning ascribed to such
term in Rule 13d-3 of the General Rules and Regulations under
the Exchange Act; provided, however, that a Person shall not
be deemed the Beneficial Owner of, or to beneficially own, any
security as a result of an agreement, arrangement or
understanding to vote such security if the agreement,
arrangement or understanding: (i) arises solely from a
revocable proxy or consent
<PAGE>
given to such Person in response to a public proxy or consent
solicitation made pursuant to, and in accordance with, the
applicable rules and regulations under the Exchange Act and
(ii) is not also then reportable on Schedule 13D under the
Exchange Act (or any comparable or successor report).
(d) "Board" or "Board of Directors" means the Board of Directors
of the Company.
(e) "Cause" means the admission by or the conviction of the
Participant of an act of fraud, embezzlement, theft, or other
criminal act constituting a felony under U.S. laws involving
moral turpitude. The Board of Directors, by majority vote,
shall make the determination of whether Cause exists.
(f) "Change in Control" means the occurrence of any one of the
events set forth in the following paragraphs:
(i) any Person (other than (A) the Company or any
Subsidiary, (B) a trustee or other fiduciary holding
securities under any employee benefit plan of the
Company or any Subsidiary, (C) an underwriter
temporarily holding securities pursuant to an
offering of such securities or (D) a corporation
owned, directly or indirectly, by the shareowners of
the Company in substantially the same proportions as
their ownership of stock in the Company ("Excluded
Persons")) is or becomes the Beneficial Owner,
directly or indirectly, of securities of the Company
(not including in the securities beneficially owned
by such Person any securities acquired directly from
the Company or its affiliates after January 20, 1999,
pursuant to express authorization by the Board that
refers to this exception) representing 20% or more of
either the then outstanding Shares or the combined
voting power of the Company's then outstanding voting
securities; or
(ii) the following individuals cease for any reason to
constitute a majority of the number of Directors of
the Company then serving: (A) individuals who, on
January 20, 1999, constituted the Board and (B) any
new Director (other than a Director whose initial
assumption of office is in connection with an actual
or threatened election contest, including but not
limited to a consent solicitation, relating to the
election of Directors of the Company, as such terms
are used in Rule 14a-11 of Regulation 14A under the
Exchange Act) whose appointment or election by the
Board or nomination for election by the Company's
shareowners was approved by a vote of at least
two-thirds (2/3) of the Directors then still in
office who either were Directors on January 20, 1999,
or whose appointment, election or nomination for
election was previously so approved (collectively the
"Continuing Directors"); provided, however, that
individuals who are appointed to the Board pursuant
to or in accordance with the
-2-
<PAGE>
terms of an agreement relating to a merger,
consolidation, or share exchange involving the
Company (or any Subsidiary) shall not be Continuing
Directors for purposes of the Plan until after such
individuals are first nominated for election by a
vote of at least two-thirds (2/3) of the then
Continuing Directors and are thereafter elected as
Directors by the shareowners of the Company at a
meeting of shareowners held following consummation of
such merger, consolidation or share exchange; and,
provided further, that in the event the failure of
any such Persons appointed to the Board to be
Continuing Directors results in a Change in Control,
the subsequent qualification of such Persons as
Continuing Directors shall not alter the fact that a
Change in Control occurred; or
(iii) the Company after January 20, 1999 consummates a
merger, consolidation or share exchange with any
other corporation or issues voting securities in
connection with a merger, consolidation or share
exchange involving the Company (or any Subsidiary),
other than (A) a merger, consolidation or share
exchange which results in the voting securities of
the Company outstanding immediately prior to such
merger, consolidation or share exchange continuing to
represent (either by remaining outstanding or by
being converted into voting securities of the
surviving entity or any parent thereof) at least 50%
of the combined voting power of the voting securities
of the Company or such surviving entity or any parent
thereof outstanding immediately after such merger,
consolidation or share exchange, or (B) a merger,
consolidation or share exchange effected to implement
a recapitalization of the Company (or similar
transaction) in which no Person (other than an
Excluded Person) is or becomes the Beneficial Owner,
directly or indirectly, of securities of the Company
(not including in the securities beneficially owned
by such Person any securities acquired directly from
the Company or its affiliates after January 20, 1999,
pursuant to express authorization by the Board that
refers to this exception) representing 20% or more of
either the then outstanding Shares or the combined
voting power of the Company's then outstanding voting
securities; or
(iv) the shareowners of the Company approve a plan of
complete liquidation or dissolution of the Company or
the Company effects a sale or disposition of all or
substantially all of its assets (in one transaction
or a series of related transactions within any period
of 24 consecutive months), other than a sale or
disposition by the Company of all or substantially
all of the Company's assets to an entity at least 75%
of the combined voting power of the voting securities
of which are owned by Persons in substantially the
same proportions as their ownership of the Company
immediately prior to such sale.
-3-
<PAGE>
Notwithstanding the foregoing, no "Change in Control" shall be
deemed to have occurred if there is consummated any
transaction or series of integrated transactions immediately
following which the record holders of the Shares immediately
prior to such transaction or series of transactions continue
to own, directly or indirectly, in the same proportions as
their ownership in the Company, an entity that owns all or
substantially all of the assets or voting securities of the
Company immediately following such transaction or series of
transactions.
(g) "Code" means the Internal Revenue Code of 1986, as amended
from time to time.
(h) "Committee" means the committee, as specified in Article 3,
appointed by the Board to administer the Plan.
(i) "Company" means Interstate Energy Corporation, a Wisconsin
corporation, or any successor thereto as provided in Article
16 herein.
(j) "Director" means any individual who is a member of the Board
of Directors of the Company.
(k) "Disability" shall have the meaning ascribed to such term in
the Alliant Energy Cash Balance Plan.
(l) "Dividend Equivalent" means a contingent right to be paid
dividends declared with respect to outstanding Option grants,
pursuant to the terms of Section 6.5 herein.
(m) "Employee" means any nonunion employee of the Company or of
the Company's Subsidiaries. Directors who are not otherwise
employed by the Company shall not be considered Employees
under this Plan.
(n) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, or any successor Act thereto.
(o) "Fair Market Value" means the Fair Market Value of the Shares
determined by such methods or procedures as shall be
established from time to time by the Committee; provided,
however, that so long as the Shares are traded in a public
market, Fair Market Value means the average of the high and
low prices of a Share in the principal market for the Shares
on the specified date (or, if no sales occurred on such date,
the last preceding date on which sales occurred).
(p) "Incentive Stock Option" or "ISO" means an option to purchase
Shares, granted under Article 6 herein, which is designated as
an Incentive Stock Option and is intended to meet the
requirements of Section 422 of the Code, or any successor
provision thereto.
-4-
<PAGE>
(q) "Named Executive Officer" means a Participant who, as of the
date of vesting and/or payout of an Award, is one of the group
of "covered employees," as defined in Section 162(m) of the
Code and the regulations promulgated thereunder.
(r) "Nonqualified Stock Option" or "NQSO" means an option to
purchase Shares, granted under Article 6 herein, which is not
an Incentive Stock Option.
(s) "Option" means an Incentive Stock Option or a Nonqualified
Stock Option.
(t) "Option Price" means the price at which a Share may be
purchased by a Participant pursuant to an Option, as
determined by the Committee.
(u) "Participant" means an Employee who has outstanding an Award
granted under the Plan.
(v) "Performance Unit" means an Award granted to an Employee, as
described in Article 8 herein.
(w) "Performance Share" means an Award granted to an Employee, as
described in Article 8 herein.
(x) "Period of Restriction" means the period during which the
transfer of Shares of Restricted Stock is limited in some way
(based on the passage of time, the achievement of performance
goals, or the occurrence of other events as determined by the
Committee, at its discretion), and the Shares are subject to a
substantial risk of forfeiture, as provided in Article 7
herein.
(y) "Person" shall have the meaning ascribed to such term in
Section 3(a)(9) of the Exchange Act and used in Sections 13(d)
and 14(d) thereof, including a "group" as defined in Section
13(d).
(z) "Restricted Stock" means an Award granted to a Participant
pursuant to Article 7 herein.
(aa) "Retirement" shall have the meaning ascribed to such term in
the Alliant Energy Cash Balance Plan.
(ab) "Shares" means the shares of common stock of the Company.
(ac) "Subsidiary" means any corporation, partnership, venture, or
other entity in which the Company, directly or indirectly, has
at least an eighty percent (80%) ownership interest.
-5-
<PAGE>
Article 3. Administration
3.1 The Committee. The Plan shall be administered by the Compensation
and Personnel Committee of the Board or by any other Committee appointed by the
Board consisting of not less than two (2) Directors. The members of the
Committee shall be appointed from time to time by, and shall serve at the
discretion of, the Board of Directors. The Committee shall be comprised solely
of Directors who qualify as "Non-Employee Directors" pursuant to Rule 16b-3
under the Exchange Act and as "outside directors" pursuant to Section 162(m) of
the Code and the regulations thereunder.
3.2 Authority of the Committee. The Committee shall have full power
except as limited by law or by the Articles of Incorporation or Bylaws of the
Company, and subject to the provisions herein, to designate Employees to be
Participants in the Plan; to determine the size and types of Awards; to
determine the terms and conditions of such Awards in a manner consistent with
the Plan; to determine whether, to what extent, and under what circumstances,
Awards granted to Participants may be settled or exercised in cash, Shares or
other property; to construe and interpret the Plan and any agreement or
instrument entered into under the Plan; to establish, amend, or waive rules and
regulations for the Plan's administration; and (subject to the provisions of
Article 13 herein) to amend the terms and conditions of any outstanding Award to
the extent such terms and conditions are within the discretion of the Committee
as provided in the Plan. Further, the Committee shall make all other
determinations which may be necessary or advisable for the administration of the
Plan. As permitted by law, the Committee may delegate its authorities as
identified hereunder.
3.3 Decisions Binding. All determinations and decisions made by the
Committee pursuant to the provisions of the Plan and all related orders or
resolutions of the Board shall be final, conclusive, and binding on all persons,
including the Company, its shareowners, Employees, Participants, and their
estates and beneficiaries.
Article 4. Shares Subject to the Plan
4.1 Number of Shares. Subject to adjustment as provided in Section 4.3
herein, the total number of Shares available for grant under the Plan shall be
3,800,000. Of this number, up to 400,000 Shares (subject to adjustment as
provided in Section 4.3 herein) may be granted as Restricted Stock. These Shares
may be either authorized but unissued or reacquired Shares. The following rules
will apply for purposes of the determination of the number of Shares available
for grant under the Plan:
(a) While an Award is outstanding, it shall be counted against the
authorized pool of Shares, regardless of its vested status.
(b) The grant of an Option or Restricted Stock shall reduce the
Shares available for grant under the Plan by the number of
Shares subject to such Award.
(c) The Committee shall in each case determine the appropriate
number of Shares to deduct from the authorized pool in
connection with the grant of Performance Units and/or
Performance Shares.
-6-
<PAGE>
(d) Unless otherwise determined by the Committee, the grant of an
award opportunity under Article 8 of this Plan shall not
reduce the authorized pool; provided, however, that payout of
such opportunity in the form of Shares shall reduce the
authorized pool by such number of Shares.
(e) To the extent that an Award is settled in cash rather than in
Shares, the authorized Share pool shall be credited with the
appropriate number of Shares represented by the cash
settlement of the Award, as determined at the sole discretion
of the Committee.
4.2 Lapsed Awards. If any Award granted under this Plan is canceled,
terminates, expires, or lapses for any reason, any Shares subject to such Award
again shall be available for the grant of an Award under the Plan.
4.3 Adjustments in Authorized Shares. In the event of any merger,
reorganization, consolidation, recapitalization, repurchase, separation,
liquidation, stock dividend, share exchange, split-up, spin-off, Share
combination, or other change in the corporate structure of the Company affecting
the Shares, such adjustment shall be made in the number and class of securities
which may be delivered under the Plan, and in the number and class of and/or
price of securities subject to outstanding Awards granted under the Plan, as may
be determined to be appropriate and equitable by the Committee, in its sole
discretion, to prevent dilution or enlargement of rights; provided that the
number of securities subject to any Award shall always be a whole number; and
provided further that the Committee may, in its sole discretion, limit any such
adjustment in order to qualify a transaction in which the Company or any
affiliate is a party for pooling-of-interests accounting treatment.
Article 5. Eligibility and Participation
5.1 Eligibility. Persons eligible to participate in this Plan include
all active Employees of the Company and its Subsidiaries, as determined by the
Committee, including Employees who are members of the Board, but excluding
Directors who are not Employees.
5.2 Actual Participation. Subject to the provisions of the Plan, the
Committee may, from time to time, select from all eligible Employees those to
whom Awards shall be granted and shall determine the nature and amount of each
Award.
Article 6. Stock Options
6.1 Grant of Options. Subject to the terms and provisions of the Plan,
Options may be granted to Employees at any time and from time to time as shall
be determined by the Committee. The Committee shall have discretion in
determining the number of Shares subject to Options granted to each Participant;
provided, however, that the maximum number of Shares subject to Options which
may be granted to any single Participant during the term of the Plan is 300,000
(subject to adjustment as provided in Section 4.3 herein). The Committee may
grant ISOs, NQSOs, or a combination thereof.
6.2 Award Agreement. Each Option grant shall be evidenced by an Award
Agreement that shall specify the Option Price, the duration of the Option, the
number of Shares to
-7-
<PAGE>
which the Option pertains, and such other provisions as the Committee shall
determine. The Award Agreement also shall specify whether the Option is intended
to be an ISO within the meaning of Section 422 of the Code, or a NQSO whose
grant is intended not to fall under the Code provisions of Section 422.
6.3 Option Price. The Option Price for each grant of an Option under
this Section 6.3 shall be at least equal to one hundred percent (100%) of the
Fair Market Value of a Share on the date the Option is granted. In addition, the
Committee may grant Options which have Option Prices that increase over time,
upon such terms as the Committee, in its sole discretion, deems appropriate.
6.4 Duration of Options. Each Option shall expire at such time as the
Committee shall determine at the time of grant; provided, however, that no
Option shall be exercisable later than the tenth (10th) anniversary date of its
grant.
6.5 Dividend Equivalents. Simultaneous with the grant of an Option, the
Participant receiving the Option may be granted, at no additional cost, Dividend
Equivalents. Each Dividend Equivalent shall entitle the Participant to receive a
contingent right to be paid an amount equal to the dividends declared on a Share
on all record dates occurring during the period between the grant date of an
Option and the date as specified by the Committee. The underlying value of each
Dividend Equivalent shall accrue as a book entry in the name of each Participant
holding the Dividend Equivalent. Payout of the accrued value of a Dividend
Equivalent shall occur only pursuant to the terms and conditions as specified by
the Committee.
6.6 Exercise of Options. Options granted under the Plan shall be
exercisable at such times and be subject to such restrictions and conditions as
the Committee shall in each instance approve, which need not be the same for
each grant or for each Participant.
6.7 Payment. Options shall be exercised by the delivery of a written
notice of exercise to the Company, setting forth the number of Shares with
respect to which the Option is to be exercised, accompanied by full payment for
the Shares. The Option Price upon exercise of any Option shall be payable to the
Company in full either: (a) in cash or its equivalent, or (b) by tendering
previously acquired Shares having an aggregate Fair Market Value at the time of
exercise equal to the total Option Price, or (c) by a combination of (a) and
(b).
Notwithstanding the foregoing, the Committee also may allow cashless
exercises as permitted under Federal Reserve Board's Regulation T, subject to
such procedures as the Committee may deem appropriate.
As soon as practicable after receipt of a written notification of
exercise and full payment, the Company shall deliver to the Participant, in the
Participant's name, Share certificates in an appropriate amount based upon the
number of Shares purchased under the Option(s).
6.8 Termination of Employment Due to Death, Disability, or Retirement.
(a) Termination by Death. In the event the employment of a
Participant is terminated by reason of death, all outstanding
Options granted to that Participant shall immediately vest one
hundred percent (100%), and shall
-8-
<PAGE>
remain exercisable at any time prior to their expiration date,
or for one (1) year after the date of death, whichever period
is shorter, by such person or persons as shall have been named
as the Participant's beneficiary, or by such persons that have
acquired the Participant's rights under the Option by will or
by the laws of descent and distribution.
(b) Termination by Disability. In the event the employment of a
Participant is terminated by reason of Disability, all
outstanding Options granted to that Participant shall
immediately vest one hundred percent (100%) as of the date the
Committee determines the definition of Disability to have been
satisfied, and shall remain exercisable at any time prior to
their expiration date, or for one (1) year after the date that
the Committee determines the definition of Disability to have
been satisfied, whichever period is shorter.
(c) Termination by Retirement. In the event the employment of a
Participant is terminated by reason of Retirement, all
outstanding Options granted to that Participant shall
immediately vest one hundred percent (100%), and shall remain
exercisable at any time prior to their expiration date, or for
three (3) years after the effective date of Retirement,
whichever period is shorter.
(d) Employment Termination Followed by Death. In the event that a
Participant's employment terminates by reason of Disability or
Retirement, and within the exercise period following such
termination the Participant dies, then the remaining exercise
period under outstanding Options shall equal the longer of:
(i) one (1) year following death; or (ii) the remaining
portion of the exercise period which was triggered by the
employment termination. Such Options shall be exercisable by
such person or persons who shall have been named as the
Participant's beneficiary, or by such persons who have
acquired the Participant's rights under the Option by will or
by the laws of descent and distribution.
(e) Exercise Limitations on ISOs. In the case of ISOs, the tax
treatment prescribed under Section 422 of the Code may not be
available if the Options are not exercised within the Section
422 prescribed time periods after each of the various types of
employment termination.
6.9 Termination of Employment for Other Reasons. If the employment of a
Participant shall terminate for any reason other than the reasons set forth in
Section 6.8 (and other than for Cause), all Options held by the Participant
which are not vested as of the effective date of employment termination
immediately shall be forfeited to the Company (and shall once again become
available for grant under the Plan). However, the Committee, in its sole
discretion, shall have the right to immediately vest all or any portion of such
Options, subject to such terms as the Committee, in its sole discretion, deems
appropriate.
Options which are vested as of the effective date of employment
termination may be exercised by the Participant within the period beginning on
the effective date of employment termination, and ending three (3) months after
such date.
-9-
<PAGE>
If the employment of a Participant shall be terminated by the Company
for Cause, all outstanding Options held by the Participant immediately shall be
forfeited to the Company and no additional exercise period shall be allowed,
regardless of the vested status of the Options.
6.10 Nontransferability of Options. Except as otherwise provided by the
Committee, no Option granted under the Plan may be sold, transferred, pledged,
assigned, or otherwise alienated or hypothecated, other than by will or by the
laws of descent and distribution. Further, except as otherwise provided by the
Committee, all Options granted to a Participant under the Plan shall be
exercisable during his or her lifetime only by such Participant, or, if
permissible under applicable law, by such Participant's guardian or legal
representative.
Article 7. Restricted Stock
7.1 Grant of Restricted Stock. Subject to the terms and provisions of
the Plan, the Committee, at any time and from time to time, may grant Shares of
Restricted Stock to eligible Employees in such amounts as the Committee shall
determine.
7.2 Restricted Stock Agreement. Each Restricted Stock grant shall be
evidenced by a Restricted Stock Agreement that shall specify the Period of
Restriction, or Periods, the number of Restricted Stock Shares granted, and such
other provisions as the Committee shall determine.
7.3 Transferability. Except as provided in this Article 7, the Shares
of Restricted Stock granted herein may not be sold, transferred, pledged,
assigned, or otherwise alienated or hypothecated until the end of the applicable
Period of Restriction established by the Committee and specified in the
Restricted Stock Agreement, or upon earlier satisfaction of any other
conditions, as specified by the Committee in its sole discretion and set forth
in the Restricted Stock Agreement. All rights with respect to the Restricted
Stock granted to a Participant under the Plan shall be available during his or
her lifetime only to such Participant.
7.4 Other Restrictions. The Committee shall impose such other
conditions and/or restrictions on any Shares of Restricted Stock granted
pursuant to the Plan as it may deem advisable including, without limitation, a
requirement that Participants pay a stipulated purchase price for each Share of
Restricted Stock, restrictions based upon the achievement of specific
performance goals (Company-wide, divisional, and/or individual), and/or
restrictions under applicable Federal or state securities laws; and may legend
the certificates representing Restricted Stock to give appropriate notice of
such restrictions.
7.5 Certificate Legend. In addition to any legends placed on
certificates pursuant to Section 7.4 herein, each certificate representing
Shares of Restricted Stock granted pursuant to the Plan may bear the following
legend:
"The sale or other transfer of the Shares of stock represented by this
certificate, whether voluntary, involuntary, or by operation of law, is
subject to certain restrictions on transfer as set forth in the
Interstate Energy Corporation Long-Term Equity Incentive Plan, and in a
Restricted Stock Agreement. A copy of the Plan and such
-10-
<PAGE>
Restricted Stock Agreement may be obtained from Interstate Energy
Corporation."
The Company shall have the right to retain the certificates
representing Shares of Restricted Stock in the Company's possession until such
time as all conditions and/or restrictions applicable to such Shares have been
satisfied.
7.6 Removal of Restrictions. Except as otherwise provided in this
Article 7, Shares of Restricted Stock covered by each Restricted Stock grant
made under the Plan shall become freely transferable by the Participant after
the last day of the Period of Restriction. Once the Shares are released from the
restrictions, the Participant shall be entitled to have the legend required by
Section 7.5 removed from his or her Share certificate.
7.7 Voting Rights. During the Period of Restriction, Participants
holding Shares of Restricted Stock granted hereunder may exercise full voting
rights with respect to those Shares.
7.8 Dividends and Other Distributions. During the Period of
Restriction, Participants holding Shares of Restricted Stock granted hereunder
may be credited with all regular cash dividends paid with respect to all Shares
while they are so held. Except as provided in the succeeding sentence, all other
cash dividends and other distributions paid with respect to Shares of Restricted
Stock may be credited to Participants subject to the same restrictions on
transferability and forfeitability as the Shares of Restricted Stock with
respect to which they were paid. If any such dividends or distributions are paid
in Shares, the Shares shall be subject to the same restrictions on
transferability and forfeitability as the Shares of Restricted Stock with
respect to which they were paid. Subject to the succeeding paragraph, all
dividends credited to a Participant shall be paid to the Participant within
forty-five (45) days following the full vesting of the Shares of Restricted
Stock with respect to which such dividends were earned.
7.9 Termination of Employment Due to Death, Disability, or Retirement.
In the event the employment of a Participant is terminated by reason of death,
Disability, or Retirement, all outstanding Shares of Restricted Stock shall
immediately vest one hundred percent (100%) as of the date of employment
termination (in the case of Disability, the date employment terminates shall be
deemed to be the date that the Committee designates as the date the definition
of Disability has been satisfied). The holder of the certificates of Restricted
Stock shall be entitled to have any nontransferability legends required under
Sections 7.4 and 7.5 of this Plan removed from the Share certificates.
7.10 Termination of Employment for Other Reasons. If the employment of
a Participant shall terminate for any reason other than those specifically set
forth in Section 7.9 herein, during the applicable Period of Restriction, all
Shares of Restricted Stock still subject to restriction as of the effective date
of employment termination immediately shall be forfeited and returned to the
Company; provided, however, that the Committee may waive in whole or in part any
or all remaining restrictions with respect to such Shares, upon such terms as
the Committee, in its sole discretion, deems appropriate.
-11-
<PAGE>
Article 8. Performance Units and Performance Shares
8.1 Grant of Performance Units/Shares. Subject to the terms of the
Plan, Performance Units and Performance Shares may be granted to eligible
Employees at any time and from time to time, as shall be determined by the
Committee. The Committee shall have complete discretion in determining the
number of Performance Units and Performance Shares granted to each Participant;
provided, however, that unless and until the Committee determines that a grant
of Performance Units and/or Shares shall not be designed to qualify for the
"performance-based" exemption under Code Section 162(m), the maximum payout to
any Named Executive Officer with respect to Performance Units and/or Performance
Shares granted in any one fiscal year of the Company shall be four hundred
thousand dollars ($400,000).
8.2 Value of Performance Units/Shares. Each Performance Unit shall have
an initial value that is established by the Committee at the time of grant. Each
Performance Share shall have an initial value equal to the Fair Market Value of
a Share on the date of grant. The Committee shall set performance goals in its
discretion which, depending on the extent to which they are met, will determine
the number and/or value of Performance Units/Shares that will be paid out to the
Participants. The time period during which the performance goals must be met
shall be called a "Performance Period." Performance Periods shall, in all cases,
exceed six (6) months in length. Unless and until the Committee proposes for
shareowner vote a change in the general performance measures, the attainment of
which shall determine the number and/or value of Performance Units and/or
Performance Shares granted under the Plan, the Company or Subsidiary performance
measure to be used for purposes of grants to Named Executive Officers shall be
chosen from among the following alternatives:
(a) Return on equity;
(b) Total shareowner return (share price appreciation plus
dividends);
(c) Net income;
(d) Earnings per share; and/or
(e) Cash flow.
The Committee shall have sole discretion to alter the governing
performance measures, subject to shareowner approval, to the extent required in
order to comply with Section 162(m) of the Code. Notwithstanding the foregoing,
in the event the Committee determines it is advisable to grant Performance Units
and/or Performance Shares which shall not qualify for the "performance-based"
exemption under Code Section 162(m), the Committee may make such grants without
satisfying the requirements of Code Section 162(m).
8.3 Earning of Performance Units/Shares. After the applicable
Performance Period has ended, the holder of Performance Units/Shares shall be
entitled to receive payout on the number and value of Performance Units/Shares
earned by the Participant over the Performance Period, to be determined as a
function of the extent to which the corresponding performance goals have been
achieved.
-12-
<PAGE>
8.4 Form and Timing of Payment of Performance Units/Shares. Payment of
earned Performance Units/Shares shall be made in a single lump sum, within
seventy-five (75) calendar days following the close of the applicable
Performance Period. The Committee, in its sole discretion, may pay earned
Performance Units/Shares in the form of cash or in Shares (or in a combination
thereof), which have an aggregate Fair Market Value equal to the value of the
earned Performance Units/Shares at the close of the applicable Performance
Period. Such Shares may be granted subject to any restrictions deemed
appropriate by the Committee.
Participants shall be entitled to receive any dividends declared with
respect to Shares which have been earned in connection with grants of
Performance Units and/or Performance Shares which have been earned, but not yet
distributed to Participants. (Such dividends shall be subject to the same
accrual, forfeiture, and payout restrictions as apply to dividends earned with
respect to Shares of Restricted Stock, as set forth in Section 7.8 herein.) In
addition, Participants may, at the discretion of the Committee, be entitled to
exercise their voting rights with respect to such Shares.
8.5 Termination of Employment Due to Death, Disability, Retirement, or
Involuntary Termination Without Cause. In the event the employment of a
Participant is terminated by reason of death, Disability, Retirement, or
involuntary termination without Cause during a Performance Period, the
Participant shall receive a prorated payout of the Performance Units/Shares. The
prorated payout shall be determined by the Committee, in its sole discretion,
and shall be based upon the length of time that the Participant held the
Performance Units/Shares during the Performance Period, and shall further be
adjusted based on the achievement of the preestablished performance goals.
Payment of earned Performance Units/Shares shall be made at the same
time payments are made to Participants who did not terminate employment during
the applicable Performance Period.
8.6 Termination of Employment for Other Reasons. In the event that a
Participant's employment terminates for any reason other than those reasons set
forth in Section 8.5 herein, all Performance Units/Shares shall be forfeited by
the Participant to the Company.
8.7 Nontransferability. Except as otherwise provided by the Committee,
Performance Units/Shares may not be sold, transferred, pledged, assigned, or
otherwise alienated or hypothecated, other than by will or by the laws of
descent and distribution. Further, except as otherwise provided by the
Committee, a Participant's rights under the Plan shall be exercisable during the
Participant's lifetime only by the Participant or the Participant's legal
representative.
Article 9. Beneficiary Designation
Each Participant under the Plan may, from time to time, name any
beneficiary or beneficiaries (who may be named contingently or successively) to
whom any benefit under the Plan is to be paid in case of his or her death before
he or she receives any or all of such benefit. Each such designation shall
revoke all prior designations by the same Participant, shall be in a form
prescribed by the Company, and will be effective only when filed by the
Participant in writing with the Company during the Participant's lifetime. In
the absence of any such designation, benefits remaining unpaid at the
Participant's death shall be paid to the Participant's estate. The spouse of a
married Participant domiciled in a community property jurisdiction shall join in
any designation of beneficiary or beneficiaries other than the spouse.
-13-
<PAGE>
Article 10. Deferrals
The Committee may permit a Participant to defer such Participant's
receipt of the payment of cash or the delivery of Shares that would otherwise be
due to such Participant by virtue of the exercise of an Option or the lapse or
waiver of restrictions with respect to Restricted Stock, or the satisfaction of
any requirements or goals with respect to Performance Units/Shares. If any such
deferral election is required or permitted, the Committee shall, in its sole
discretion, establish rules and procedures for such payment deferrals.
Article 11. Rights of Employees
11.1 Employment. Nothing in the Plan shall interfere with or limit in
any way the right of the Company to terminate any Participant's employment at
any time, nor confer upon any Participant any right to continue in the employ of
the Company. For purposes of the Plan, transfer of employment of a Participant
between the Company and any one of its Subsidiaries, or vice versa, (or between
Subsidiaries) shall not be deemed a termination of employment.
11.2 Participation. No Employee shall have the right to be selected to
receive an Award under this Plan, or, having been so selected, to be selected to
receive a future Award.
Article 12. Change in Control
12.1 Acceleration Upon a Change in Control. Upon the occurrence of a
Change in Control, unless otherwise specifically prohibited by the terms of
Article 17 herein:
(a) Any and all Options granted hereunder shall become immediately
exercisable;
(b) Any Period of Restriction and restrictions imposed on
Restricted Shares shall lapse;
(c) The target payout opportunity attainable under all outstanding
Performance Units and Performance Shares shall be deemed to
have been fully earned for the entire Performance Period(s) as
of the effective date of the Change in Control, and there
shall be paid out in cash to Participants within thirty (30)
days following the effective date of the Change in Control a
pro rata portion of such target payout opportunity based on
the number of complete and partial calendar months within the
Performance Period which had elapsed as of such effective
date; provided, however, that there shall not be an
accelerated payout with respect to Performance Units or
Performance Shares which were granted less than six (6) months
prior to the effective date of the Change in Control; and
-14-
<PAGE>
(d) Subject to Article 13 herein, the Committee shall have the
authority to make any modifications to the Awards as
determined by the Committee to be appropriate before the
effective date of the Change in Control.
12.2 Pooling Limitations. The Committee may, in its sole discretion,
amend, modify or rescind the provisions of Section 12.1 if it determines that
the operation of Section 12.1 may prevent a transaction in which the Company or
any affiliate is a party from being accounted for on a pooling-of-interests
basis.
Article 13. Amendment, Modification, and Termination
13.1 Amendment, Modification, and Termination. The Board may, at any
time and from time to time, alter, amend, suspend or terminate the Plan in whole
or in part.
The Committee shall not have the authority to cancel outstanding Awards
and issue substitute Awards in replacement thereof.
13.2 Awards Previously Granted. No termination, amendment, or
modification of the Plan shall (except as otherwise expressly contemplated by
the Plan for Awards granted after January 20, 1999) adversely affect in any
material way any Award previously granted under the Plan, without the written
consent of the Participant holding such Award.
Article 14. Withholding
14.1 Tax Withholding. The Company shall have the power and the right to
deduct or withhold, or require a Participant to remit to the Company, an amount
sufficient to satisfy Federal, state, and local taxes (including the
Participant's FICA obligation) required by law to be withheld with respect to
any taxable event arising from, or as a result of, any Awards to Participants
under this Plan.
14.2 Share Withholding. With respect to withholding required upon the
exercise of Options, upon the lapse of restrictions on Restricted Stock, or upon
any other taxable event arising as a result of Awards granted hereunder,
Participants may elect, subject to the approval of the Committee, to satisfy the
withholding requirement, in whole or in part, by having the Company withhold
Shares (or deliver to the Company previously acquired Shares) having a Fair
Market Value on the date the tax is to be determined equal to the minimum
statutory total tax which is required to be withheld in connection with the
transaction. The Committee may establish such procedures as it deems appropriate
for the settling of withholding obligations with Shares.
Article 15. Indemnification
Each person who is or shall have been a member of the Committee, or of
the Board, shall be indemnified and held harmless by the Company against and
from any loss, cost, liability, or expense that may be imposed upon or
reasonably incurred by him or her in connection with or resulting from any
claim, action, suit, or
-15-
<PAGE>
proceeding to which he or she may be a party or in which he or she may be
involved by reason of any action taken or failure to act under the Plan and
against and from any and all amounts paid by him or her in settlement thereof,
with the Company's approval, or paid by him or her in satisfaction of any
judgment in any such action, suit, or proceeding against him or her, provided he
or she shall give the Company an opportunity, at its own expense, to handle and
defend the same before he or she undertakes to handle and defend it on his or
her own behalf.
The foregoing right of indemnification shall not be exclusive of any
other rights of indemnification to which such persons may be entitled under the
Company's Articles of Incorporation or Bylaws, as a matter of law, or otherwise,
or any power that the Company may have to indemnify them or hold them harmless.
Article 16. Successors
All obligations of the Company under the Plan, with respect to Awards
granted hereunder, shall be binding on any successor to the Company, whether the
existence of such successor is the result of a direct or indirect purchase,
merger, consolidation, or otherwise, of all or substantially all of the business
and/or assets of the Company.
Article 17. Restrictions on Share Transferability
In addition to any restrictions imposed pursuant to the Plan, all
certificates for Shares delivered under the Plan pursuant to any Award or the
exercise thereof shall be subject to such stop transfer orders and other
restrictions as the Committee may deem advisable under the Plan or the rules,
regulations, and other requirements of the Securities and Exchange Commission,
any stock exchange or market upon which such Shares are then listed or traded,
and any applicable Federal or state securities laws, and the Committee may cause
a legend or legends to be put on any such certificates to make appropriate
reference to such restrictions.
Article 18. Legal Construction
18.1 Gender and Number. Except where otherwise indicated by the
context, any masculine term used herein also shall include the feminine; the
plural shall include the singular and the singular shall include the plural.
18.2 Severability. In the event any provision of the Plan shall be held
illegal or invalid for any reason, the illegality or invalidity shall not affect
the remaining parts of the Plan, and the Plan shall be construed and enforced as
if the illegal or invalid provision had not been included.
18.3 Requirements of Law. The granting of Awards and the issuance of
Shares under the Plan shall be subject to all applicable laws, rules, and
regulations, and to such approvals by any governmental agencies or national
securities exchanges as may be required.
18.4 Governing Law. To the extent not preempted by Federal law, the
Plan, and all agreements hereunder, shall be construed in accordance with and
governed by the laws of the State of Wisconsin.
-16-
<PAGE>
INTERSTATE ENERGY CORPORATION
ANNUAL MEETING OF SHAREOWNERS ON MAY 19, 1999
The undersigned appoints Lee Liu and Edward M. Gleason, or either of them,
attorneys and proxies, with the power of substitution to vote all shares of
stock of Interstate Energy Corporation held of record in the name of the
undersigned (including any shares held or credited to the undersigned's account
under the Company's Shareowner Direct Plan and the IES Utilities Employee Stock
Ownership Plan) at the close of business on March 23, 1999, at the 1999 Annual
Meeting of Shareowners to held at the Dubuque Five Flags Center, 405 Main
Street, Dubuque, Iowa, on May 19, 1999 at 1:00 p.m. and at all adjournments
thereof, upon all matters that properly come before the meeting, including the
matters described in the Company's Notice of Annual Meeting of Shareowners dated
March 29, 1999 and accompanying Proxy Statement, subject to any directions on
the reverse side of this card.
Dated: , 1999
__________________________________________
Signature
__________________________________________
Signature
Please sign exactly as name appears hereon.
When signing as attorney, executor,
administrator, trustee, guardian, etc., give
full title as such. In the case of JOINT
HOLDERS, all should sign.
PLEASE FOLD AND DETACH CARD AT PERFORATION BEFORE MAILING.
Dear Shareowners,
You are invited to attend the Annual Meeting of Shareowners on Wednesday, May
19, 1999, at 1:00 p.m. at the Dubuque Five Flags Center, 405 Main Street,
Dubuque, 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 us. Seating is limited in the meeting room and will be
filled on a first-come basis. Complimentary refreshments will be served after
the meeting.
Above is your 1999 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 Form (if applicable) in the enclosed postage-paid envelope.
<PAGE>
PLEASE FOLD AND DETACH CARD AT PERFORATION BEFORE MAILING.
ANNUAL MEETING RESERVATION
RETURN THIS STUB ONLY IF YOU ARE PLANNING
TO ATTEND THE MEETING.
I (WE) WILL ATTEND THE ANNUAL MEETING.
PLEASE LIST YOUR NAME(S) AND YOUR
GUESTS BELOW.
______________________________________
______________________________________
______________________________________
INTERSTATE ENERGY CORPORATION
ANNUAL MEETING OF SHAREOWNERS ON MAY 19, 1999
This Proxy is solicited on behalf of the Board of Directors of Interstate Energy
Corporation.
The Board of Directors recommends a vote "FOR" the election of all listed
nominees, "FOR" the amendment to the Restated Articles of Incorporation of
Interstate Energy Corporation and "FOR" approval of the Long-Term Equity
Incentive Plan, as amended. If no specification is given, the proxies will vote
"FOR" the proposals. To vote in accordance with the Board of Directors'
recommendations, just sign on the reverse side without checking any boxes.
Please sign, date and return this proxy card in the enclosed postage-paid
envelope.
Indicate your vote by an (X) in the appropriate box.
1. ELECTION OF DIRECTORS: Withold For All
Nominees for term ending in 2002. For All For All Except (*)
Alan B. Arends
Rockne G. Flowers
Katharine C. Lyall
Robert D. Ray
Anthony R. Weiler
[ ] [ ] [ ]
(*) To withhold authority to vote for any
individual nominee, strike a line through
the nominee's name to the left and mark an
(X) in the "FOR ALL EXCEPT" box.
2. PROPOSAL TO AMEND THE For Against Abstain
RESTATED ARTICLES OF
INCORPORATION TO CHANGE THE
CORPORATION'S NAME [ ] [ ] [ ]
3. PROPOSAL TO APPROVE THE For Against Abstain
LONG-TERM EQUITY
INCENTIVE PLAN, AS AMENDED [ ] [ ] [ ]
PLEASE FOLD AND DETACH CARD AT PERFORATION BEFORE MAILING.
