UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission Name of Registrant, State of Incorporation, IRS Employer
File Address of Principal Executive Offices and Identification
Number Telephone Number Number
- -----------------------------------------------------------------------
1-9894 ALLIANT ENERGY CORPORATION 39-1380265
(a Wisconsin corporation)
222 West Washington Avenue
Madison, Wisconsin 53703
Telephone (608)252-3311
0-4117-1 IES UTILITIES INC. 42-0331370
(an Iowa corporation)
Alliant Energy Tower
Cedar Rapids, Iowa 52401
Telephone (319)398-4411
0-337 WISCONSIN POWER AND LIGHT COMPANY 39-0714890
(a Wisconsin corporation)
222 West Washington Avenue
Madison, Wisconsin 53703
Telephone (608)252-3311
Indicate by check mark whether the registrants (1) have filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrants were required
to file such reports), and (2) have been subject to such filing
requirements for the past (90) days. Yes [ X ] No [ ]
This combined Form 10-Q is separately filed by Alliant Energy
Corporation, IES Utilities Inc. and Wisconsin Power and Light
Company. Information contained in the quarterly report relating
to IES Utilities Inc. and Wisconsin Power and Light Company is
filed by such registrant on its own behalf. Each of IES
Utilities Inc. and Wisconsin Power and Light Company makes no
representation as to information relating to registrants other
than itself.
Number of shares outstanding of each class of common stock as of
April 30, 2000:
Alliant Energy Common stock, $.01 par value, 79,002,896
Corporation shares outstanding
IES Utilities Inc. Common stock, $2.50 par value, 13,370,788
shares outstanding (all of which are owned
beneficially and of record by Alliant Energy
Corporation)
Wisconsin Power and Common stock, $5 par value, 13,236,601 shares
Light Company outstanding (all of which are owned
beneficially and of record by Alliant Energy
Corporation)
<PAGE>
<TABLE>
<CAPTION>
CONTENTS
Page
----
<S> <C> <C>
Part I. Financial Information 4
Item 1. Consolidated Financial Statements 4
Alliant Energy Corporation:
---------------------------
Consolidated Statements of Income for the Three Months Ended
March 31, 2000 and 1999 4
Consolidated Balance Sheets as of March 31, 2000 and December 31,
1999 5
Consolidated Statements of Cash Flows for the Three Months Ended
March 31, 2000 and 1999 7
Notes to Consolidated Financial Statements 8
IES Utilities Inc.:
-------------------
Consolidated Statements of Income for the Three Months Ended
March 31, 2000 and 1999 11
Consolidated Balance Sheets as of March 31, 2000 and December 31,
1999 12
Consolidated Statements of Cash Flows for the Three Months Ended
March 31, 2000 and 1999 14
Notes to Consolidated Financial Statements 15
Wisconsin Power and Light Company:
----------------------------------
Consolidated Statements of Income for the Three Months Ended
March 31, 2000 and 1999 16
Consolidated Balance Sheets as of March 31, 2000 and December 31,
1999 17
Consolidated Statements of Cash Flows for the Three Months Ended
March 31, 2000 and 1999 19
Notes to Consolidated Financial Statements 20
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 21
Item 3. Quantitative and Qualitative Disclosures About Market Risk 32
Part II. Other Information 32
Item 6. Exhibits and Reports on Form 8-K 32
Signatures 35
</TABLE>
-2-
<PAGE>
DEFINITIONS
Certain abbreviations or acronyms used in the text and notes of
this combined Form 10-Q are defined below:
Abbreviation or Acronym Definition
- ----------------------- ----------
Alliant Energy Alliant Energy Corporation
ATC American Transmission Company, LLC
CEMS Continuous Emission Monitoring System
Corporate Services Alliant Energy Corporate Services, Inc.
Dth Dekatherm
EAC Energy Adjustment Clause
EPA United States Environmental Protection
Agency
FERC Federal Energy Regulatory Commission
IES IES Industries Inc.
IESU IES Utilities Inc.
International Alliant Energy International, Inc.
Investments Alliant Energy Investments, Inc.
IPC Interstate Power Company
ISCO Alliant Energy Industrial Services, Inc.
ISO Independent System Operator
IUB Iowa Utilities Board
MAIN Mid-America Interconnected Network, Inc.
MAPP Mid-Continent Area Power Pool
McLeod McLeodUSA Incorporated
MD&A Management's Discussion and
Analysis of Financial Condition and
Results of Operations
MWH Megawatt-Hour
OCA Office of Consumer Advocate
PGA Purchased Gas Adjustment
PSCW Public Service Commission of Wisconsin
PUHCA Public Utility Holding Company Act
of 1935
Resources Alliant Energy Resources, Inc.
RTO Regional Transmission Organization
SEC Securities and Exchange Commission
SFAS Statement of Financial Accounting
Standards
Transportation Alliant Energy Transportation, Inc.
Whiting Whiting Petroleum Corporation
WP&L Wisconsin Power and Light Company
WPLH WPL Holdings, Inc.
-3-
<PAGE>
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
ALLIANT ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
For the Three Months Ended March 31,
2000 1999
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
(in thousands, except per share amounts)
Operating revenues:
Electric utility $373,622 $351,338
Gas utility 130,134 133,684
Non-regulated and other 117,094 61,833
-------------------- -------------------
620,850 546,855
-------------------- -------------------
- -----------------------------------------------------------------------------------------------------------------
Operating expenses:
Electric and steam production fuels 69,272 65,404
Purchased power 62,345 52,065
Cost of utility gas sold 82,113 81,343
Other operation 186,537 130,365
Maintenance 29,929 23,812
Depreciation and amortization 75,911 73,640
Taxes other than income taxes 26,353 27,239
-------------------- -------------------
532,460 453,868
-------------------- -------------------
- -----------------------------------------------------------------------------------------------------------------
Operating income 88,390 92,987
-------------------- -------------------
- -----------------------------------------------------------------------------------------------------------------
Interest expense and other:
Interest expense 40,618 33,400
Contingent interest on indexed senior notes 39,493 -
Allowance for funds used during construction (1,754) (1,934)
Preferred dividend requirements of subsidiaries 1,678 1,676
Gain on sale of McLeodUSA Inc. stock (10,206) -
Miscellaneous, net (13,197) (6,771)
-------------------- -------------------
56,632 26,371
-------------------- -------------------
- -----------------------------------------------------------------------------------------------------------------
Income before income taxes 31,758 66,616
-------------------- -------------------
- -----------------------------------------------------------------------------------------------------------------
Income taxes 12,438 24,872
-------------------- -------------------
- -----------------------------------------------------------------------------------------------------------------
Net income $19,320 $41,744
==================== ===================
- -----------------------------------------------------------------------------------------------------------------
Average number of common shares outstanding 78,996 77,780
==================== ===================
- -----------------------------------------------------------------------------------------------------------------
Earnings per average common share (basic and diluted) $0.24 $0.54
==================== ===================
- -----------------------------------------------------------------------------------------------------------------
Dividends declared per common share $0.50 $0.50
==================== ===================
- -----------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
</TABLE>
-4-
<PAGE>
<TABLE>
<CAPTION>
ALLIANT ENERGY CORPORATION
CONSOLIDATED BALANCE SHEETS
March 31,
2000 December 31,
ASSETS (Unaudited) 1999
- ---------------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C>
Property, plant and equipment:
Utility -
Plant in service -
Electric $5,068,008 $5,032,675
Gas 547,306 540,874
Other 460,354 458,547
---------------- -----------------
6,075,668 6,032,096
Less - Accumulated depreciation 3,144,273 3,077,459
---------------- -----------------
2,931,395 2,954,637
Construction work in progress 130,088 119,276
Nuclear fuel, net of amortization 54,995 54,363
---------------- -----------------
3,116,478 3,128,276
Other property, plant and equipment, net of accumulated
depreciation and amortization of $191,244 and $184,722, respectively 403,941 357,758
---------------- -----------------
3,520,419 3,486,034
---------------- -----------------
- ---------------------------------------------------------------------------------------------------------------
Current assets:
Cash and temporary cash investments 47,500 113,669
Accounts receivable:
Customer, less allowance for doubtful accounts
of $1,942 and $2,253, respectively 66,615 67,299
Unbilled utility revenues 34,120 48,033
Other, less allowance for doubtful accounts
of $1,131 and $954, respectively 28,204 30,095
Production fuel, at average cost 42,893 49,657
Materials and supplies, at average cost 52,818 52,440
Gas stored underground, at average cost 5,933 23,151
Regulatory assets 29,464 33,439
Prepaid gross receipts tax 15,648 20,864
Other 45,087 47,339
---------------- -----------------
368,282 485,986
---------------- -----------------
- ---------------------------------------------------------------------------------------------------------------
Investments:
Investment in McLeodUSA Inc. 1,607,180 1,123,790
Investments in foreign entities 578,572 198,055
Nuclear decommissioning trust funds 276,216 271,258
Other 69,627 59,866
---------------- -----------------
2,531,595 1,652,969
---------------- -----------------
- ---------------------------------------------------------------------------------------------------------------
Other assets:
Regulatory assets 261,427 263,610
Deferred charges and other 196,094 187,084
---------------- -----------------
457,521 450,694
---------------- -----------------
- ---------------------------------------------------------------------------------------------------------------
Total assets $6,877,817 $6,075,683
================ =================
- ---------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
</TABLE>
-5-
<PAGE>
<TABLE>
<CAPTION>
ALLIANT ENERGY CORPORATION
CONSOLIDATED BALANCE SHEETS (CONTINUED)
March 31,
2000 December 31,
CAPITALIZATION AND LIABILITIES (Unaudited) 1999
- --------------------------------------------------------------------------------------------------------------------
(in thousands, except share amounts)
<S> <C> <C>
Capitalization:
Common stock - $.01 par value - authorized 200,000,000 shares;
outstanding 79,000,744 and 78,984,014 shares, respectively $790 $790
Additional paid-in capital 946,033 942,408
Retained earnings 557,286 577,464
Accumulated other comprehensive income 913,950 634,903
Shares acquired for deferred compensation trust - 24,552 shares at
an average cost of $29.52 per share (725) -
----------------- -----------------
Total common equity 2,417,334 2,155,565
----------------- -----------------
Cumulative preferred stock of subsidiaries, net 113,677 113,638
Long-term debt (excluding current portion) 2,019,502 1,486,765
----------------- -----------------
4,550,513 3,755,968
----------------- -----------------
- --------------------------------------------------------------------------------------------------------------------
Current liabilities:
Current maturities and sinking funds 5,692 54,795
Variable rate demand bonds 55,100 55,100
Commercial paper 300,785 374,673
Notes payable 54 50,046
Capital lease obligations 13,285 13,321
Accounts payable 167,275 191,149
Accrued interest 38,805 24,818
Accrued taxes 105,191 78,825
Other 74,466 90,898
----------------- -----------------
760,653 933,625
----------------- -----------------
- --------------------------------------------------------------------------------------------------------------------
Other long-term liabilities and deferred credits:
Accumulated deferred income taxes 1,197,431 1,018,482
Accumulated deferred investment tax credits 71,647 71,857
Environmental liabilities 63,839 65,327
Pension and other benefit obligations 63,181 61,988
Other 170,553 168,436
----------------- -----------------
1,566,651 1,386,090
----------------- -----------------
- --------------------------------------------------------------------------------------------------------------------
Total capitalization and liabilities $6,877,817 $6,075,683
================= =================
- --------------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
</TABLE>
-6-
<PAGE>
<TABLE>
<CAPTION>
ALLIANT ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
For the Three Months Ended March 31,
2000 1999
- ----------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C>
Cash flows from operating activities:
Net income $19,320 $41,744
Adjustments to reconcile net income to net cash flows
from operating activities:
Depreciation and amortization 75,911 73,640
Amortization of nuclear fuel 4,841 5,024
Amortization of deferred energy efficiency expenditures 7,280 7,930
Deferred taxes and investment tax credits (20,075) (1,799)
Refueling outage provision 2,421 2,415
Gain on disposition of assets, net (10,644) (1,771)
Contingent interest on indexed senior notes 39,493 -
Other (4,283) (299)
Other changes in assets and liabilities:
Accounts receivable 16,488 9,774
Production fuel 6,764 9,743
Gas stored underground 17,218 13,524
Accounts payable (23,874) (40,708)
Accrued interest 13,987 311
Accrued taxes 26,366 21,924
Benefit obligations and other 14,506 28,700
----------------- -----------------
Net cash flows from operating activities 185,719 170,152
----------------- -----------------
- ----------------------------------------------------------------------------------------------------
Cash flows from (used for) financing activities:
Common stock dividends declared (39,498) (38,834)
Proceeds from issuance of common stock 514 8,538
Net change in Resources' credit facility (4,848) 42,995
Proceeds from issuance of other long-term debt 510,957 11,994
Reductions in other long-term debt (51,672) (62,310)
Net change in other short-term borrowings (119,032) (2,257)
Principal payments under capital lease obligations (1,882) (3,369)
Other (14,078) 113
----------------- -----------------
Net cash flows from (used for) financing activities 280,461 (43,130)
----------------- -----------------
- ----------------------------------------------------------------------------------------------------
Cash flows used for investing activities:
Construction and acquisition expenditures:
Utility (60,447) (41,638)
Non-regulated businesses (457,213) (49,198)
Nuclear decommissioning trust funds (15,437) (15,437)
Proceeds from disposition of assets 11,054 3,022
Shared savings program (5,873) (4,247)
Other (4,433) 2,832
----------------- -----------------
Net cash flows used for investing activities (532,349) (104,666)
----------------- -----------------
- ----------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and temporary cash investments (66,169) 22,356
----------------- -----------------
- ----------------------------------------------------------------------------------------------------
Cash and temporary cash investments at beginning of period 113,669 31,827
----------------- -----------------
- ----------------------------------------------------------------------------------------------------
Cash and temporary cash investments at end of period $47,500 $54,183
================= =================
- ----------------------------------------------------------------------------------------------------
Supplemental cash flow information:
Cash paid during the period for:
Interest $25,795 $31,952
================= =================
Income taxes $3,092 $4,600
================= =================
Noncash investing and financing activities:
Capital lease obligations incurred $222 $1,414
================= =================
- ----------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
</TABLE>
-7-
<PAGE>
ALLIANT ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. The interim consolidated financial statements included herein
have been prepared by Alliant Energy, without audit, pursuant
to the rules and regulations of the SEC. Accordingly, certain
information and footnote disclosures normally included in
financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted,
although management believes that the disclosures are adequate
to make the information presented not misleading. The
consolidated financial statements include Alliant Energy and
its consolidated subsidiaries (including IESU, WP&L, IPC,
Resources and Corporate Services). These financial statements
should be read in conjunction with the financial statements
and the notes thereto included in Alliant Energy's, IESU's and
WP&L's latest Annual Report on Form 10-K.
In the opinion of management, all adjustments, which are
normal and recurring in nature, necessary for a fair
presentation of (a) the consolidated results of operations for
the three months ended March 31, 2000 and 1999, (b) the
consolidated financial position at March 31, 2000 and December
31, 1999, and (c) the consolidated statement of cash flows for
the three months ended March 31, 2000 and 1999, have been
made. Because of the seasonal nature of IESU's, WP&L's and
IPC's operations, results for the three months ended March 31,
2000 are not necessarily indicative of results that may be
expected for the year ending December 31, 2000. Certain prior
period amounts have been reclassified on a basis consistent
with the 2000 presentation.
2. Alliant Energy's comprehensive income, and the components of
other comprehensive income, net of taxes, were as follows (in
thousands):
For the Three
Months Ended
March 31,
2000 1999
-------- --------
Net income $19,320 $41,744
Other comprehensive income:
Unrealized gains on securities:
Unrealized holding gains arising during 284,458 75,031
period, net of tax (1)
Less: reclassification adjustment for gains
included in net income,
net of tax (2) (6,328) --
-------- --------
Net unrealized gains 278,130 75,031
-------- --------
Foreign currency translation adjustments 917 (614)
-------- --------
Other comprehensive income 279,047 74,417
-------- --------
Comprehensive income $298,367 $116,161
======== ========
(1) Primarily due to quarterly adjustments to the estimated fair
value of Alliant Energy's investment in McLeod.
(2) The first quarter 2000 earnings included a pre-tax gain of
$10.2 million ($0.08 per share) from the sale of 150,000
shares of McLeod stock held by Alliant Energy. Alliant
Energy still held beneficial ownership in approximately 19
million shares of McLeod stock as of March 31, 2000. (The
McLeod shares in this note do not reflect McLeod's 3-for-1
stock split effective April 24, 2000).
IESU and WP&L had no comprehensive income in the periods
presented.
-8-
<PAGE>
3. Certain financial information relating to Alliant Energy's
significant business segments is presented below:
<TABLE>
<CAPTION>
---------------------------------------------
Regulated Domestic Utilities Alliant
--------------------------------------------- Non-regulated Energy
Electric Gas Other Total Businesses Other Consolidated
--------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Three Months Ended
March 31, 2000
--------------
Operating revenues $373,622 $130,134 $8,157 $511,913 $109,463 ($526) $620,850
Operating income (loss) 63,839 18,850 1,780 84,469 3,943 (22) 88,390
Net income (loss) 39,067 (16,112) (3,635) 19,320
Three Months Ended
March 31, 1999
--------------
Operating revenues $351,338 $133,684 $9,204 $494,226 $53,199 ($570) $546,855
Operating income (loss) 68,615 23,939 2,354 94,908 (1,836) (85) 92,987
Net income (loss) 44,767 (1,906) (1,117) 41,744
</TABLE>
Non-regulated earnings for the three months ended March 31,
2000 included a $24.8 million after-tax non-cash charge to net
income to recognize an increase in Alliant Energy's obligation
relating to its 30-year exchangeable senior notes issued in
February 2000. Resources' (i.e., the non-regulated
businesses) assets increased $881 million during the first
three months of 2000, primarily due to the increase in market
value of its investment in McLeod and Alliant Energy's recent
investment in various Brazilian utilities. On January 25,
2000, Resources acquired a stake in four Brazilian electric
utilities for a total of approximately $347 million.
Intersegment revenues were not material to Alliant Energy's
operations.
4. The provisions for income taxes are based on the estimated
annual effective tax rate, which differs from the federal
statutory rate of 35% principally due to: state income taxes,
tax credits, effects of utility rate making and certain
non-deductible expenses.
5. At March 31, 2000, Alliant Energy had $579 million of
investments in foreign entities on its Consolidated Balance
Sheet that primarily included investments in various Brazilian
electric utilities, investments in various New Zealand and
Australian utility entities, investments in various generation
facilities in China and an investment in secured debentures of
a development project in Mexico. The Brazil and China
investments are accounted for under the equity method and the
New Zealand and Australian investments are accounted for under
the cost method. The geographic concentration of Alliant
Energy's investments in foreign entities at March 31, 2000,
included investments of approximately $357 million in Brazil,
$138 million in New Zealand and Australia, $69 million in
China, $14 million in Mexico and $1 million in other
countries.
6. Summary financial information for Resources was as follows (in
thousands):
March 31,
2000
-------------
Current assets $96,253
Non-current assets 2,633,389
Current liabilities 199,341
Non-current liabilities 686,209
(excludes minority interest)
Minority interest (primarily 7,107
real estate joint ventures)
-9-
<PAGE>
Refer to the "Non-regulated Businesses" column of Note 3 for
summary income statement data of Resources. Alliant Energy
has not presented separate financial statements for Resources
because it is a wholly-owned subsidiary of Alliant Energy and
because management has determined that such information is not
material to holders of senior notes of Resources. Alliant
Energy has fully and unconditionally guaranteed the payment of
principal and interest on the senior notes.
7. On February 1, 2000, Resources completed a private placement
of $402.5 million of exchangeable senior notes due 2030. The
exchangeable senior notes have a stated interest rate of 7.25%
through February 15, 2003 and 2.5% thereafter and are
exchangeable for cash based upon a percentage of the value of
McLeod Class A Common Stock. Refer to "Liquidity and Capital
Resources - Future Considerations" for a further discussion.
WP&L issued $100 million of senior unsecured debentures in
March 2000 at a fixed interest rate of 7-5/8%, due 2010. The
net proceeds from the sale of the debentures were primarily
used to repay short-term debt.
-10-
<PAGE>
<TABLE>
<CAPTION>
IES UTILITIES INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
For the Three Months Ended March 31,
2000 1999
- ----------------------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C>
Operating revenues:
Electric utility $145,708 $140,017
Gas utility 59,429 61,296
Steam and other 6,987 7,952
---------------------- ---------------------
212,124 209,265
---------------------- ---------------------
- ----------------------------------------------------------------------------------------------------------------------
Operating expenses:
Electric and steam production fuels 32,639 26,589
Purchased power 13,422 13,150
Cost of gas sold 38,074 37,912
Other operation 43,273 47,439
Maintenance 10,493 9,904
Depreciation and amortization 26,850 25,482
Taxes other than income taxes 11,875 12,616
---------------------- ---------------------
176,626 173,092
---------------------- ---------------------
- ----------------------------------------------------------------------------------------------------------------------
Operating income 35,498 36,173
---------------------- ---------------------
- ----------------------------------------------------------------------------------------------------------------------
Interest expense and other:
Interest expense 13,011 13,204
Allowance for funds used during construction (490) (849)
Miscellaneous, net (4,750) (857)
---------------------- ---------------------
7,771 11,498
---------------------- ---------------------
- ----------------------------------------------------------------------------------------------------------------------
Income before income taxes 27,727 24,675
---------------------- ---------------------
- ----------------------------------------------------------------------------------------------------------------------
Income taxes 11,616 10,216
---------------------- ---------------------
- ----------------------------------------------------------------------------------------------------------------------
Net income 16,111 14,459
---------------------- ---------------------
- ----------------------------------------------------------------------------------------------------------------------
Preferred dividend requirements 229 229
---------------------- ---------------------
- ----------------------------------------------------------------------------------------------------------------------
Earnings available for common stock $15,882 $14,230
====================== =====================
- ----------------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
</TABLE>
-11-
<PAGE>
<TABLE>
<CAPTION>
IES UTILITIES INC.
CONSOLIDATED BALANCE SHEETS
March 31,
2000 December 31,
ASSETS (Unaudited) 1999
- --------------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C>
Property, plant and equipment:
Utility -
Plant in service -
Electric $2,208,987 $2,196,895
Gas 209,610 207,769
Steam 59,931 59,929
Common 149,514 147,845
----------------- -----------------
2,628,042 2,612,438
Less - Accumulated depreciation 1,339,604 1,311,996
----------------- -----------------
1,288,438 1,300,442
Construction work in progress 44,485 37,572
Leased nuclear fuel, net of amortization 36,150 39,284
----------------- -----------------
1,369,073 1,377,298
Other property, plant and equipment, net of accumulated
depreciation and amortization of $2,131 and $2,094, respectively 5,444 5,481
----------------- -----------------
1,374,517 1,382,779
----------------- -----------------
- --------------------------------------------------------------------------------------------------------------
Current assets:
Cash and temporary cash investments 4,760 5,720
Accounts receivable:
Customer, less allowance for doubtful accounts
of $497 and $824, respectively 10,638 14,130
Associated companies 2,854 5,696
Other, less allowance for doubtful accounts
of $989 and $817, respectively 9,599 12,864
Income tax refunds receivable - 6,007
Production fuel, at average cost 12,555 12,312
Materials and supplies, at average cost 24,429 24,722
Gas stored underground, at average cost 1,851 11,462
Adjustment clause balances 3,584 11,099
Regulatory assets 16,167 18,569
Prepayments and other 2,891 2,921
----------------- -----------------
89,328 125,502
----------------- -----------------
- --------------------------------------------------------------------------------------------------------------
Investments:
Nuclear decommissioning trust funds 108,583 105,056
Other 6,121 6,119
----------------- -----------------
114,704 111,175
----------------- -----------------
- --------------------------------------------------------------------------------------------------------------
Other assets:
Regulatory assets 117,269 123,031
Deferred charges and other 12,288 13,321
----------------- -----------------
129,557 136,352
----------------- -----------------
- --------------------------------------------------------------------------------------------------------------
Total assets $1,708,106 $1,755,808
================= =================
- --------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
</TABLE>
-12-
<PAGE>
<TABLE>
<CAPTION>
IES UTILITIES INC.
CONSOLIDATED BALANCE SHEETS (CONTINUED)
March 31,
2000 December 31,
CAPITALIZATION AND LIABILITIES (Unaudited) 1999
- --------------------------------------------------------------------------------------------------------------------
(in thousands, except share amounts)
<S> <C> <C>
Capitalization:
Common stock - $2.50 par value - authorized 24,000,000
shares; 13,370,788 shares outstanding $33,427 $33,427
Additional paid-in capital 279,042 279,042
Retained earnings 254,177 252,953
------------------ -----------------
Total common equity 566,646 565,422
Cumulative preferred stock 18,320 18,320
Long-term debt (excluding current portion) 551,142 551,079
------------------ -----------------
1,136,108 1,134,821
------------------ -----------------
- --------------------------------------------------------------------------------------------------------------------
Current liabilities:
Current maturities and sinking funds 196 51,196
Capital lease obligations 13,272 13,307
Notes payable to associated companies 72,770 56,946
Accounts payable 27,454 41,273
Accounts payable to associated companies 10,068 17,438
Accrued payroll and vacations 8,162 7,816
Accrued interest 11,923 10,833
Accrued taxes 53,482 44,259
Other 16,862 15,802
------------------ -----------------
214,189 258,870
------------------ -----------------
- --------------------------------------------------------------------------------------------------------------------
Other long-term liabilities and deferred credits:
Accumulated deferred income taxes 225,875 225,961
Accumulated deferred investment tax credits 27,191 26,682
Environmental liabilities 24,905 26,292
Pension and other benefit obligations 27,395 27,734
Capital lease obligations 22,878 25,977
Other 29,565 29,471
------------------ -----------------
357,809 362,117
------------------ -----------------
- --------------------------------------------------------------------------------------------------------------------
Total capitalization and liabilities $1,708,106 $1,755,808
================== =================
- --------------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
</TABLE>
-13-
<PAGE>
<TABLE>
<CAPTION>
IES UTILITIES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
For the Three Months Ended March 31,
2000 1999
- --------------------------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C>
Cash flows from operating activities:
Net income $16,111 $14,459
Adjustments to reconcile net income to net cash
flows from operating activities:
Depreciation and amortization 26,850 25,482
Amortization of leased nuclear fuel 3,357 3,499
Amortization of deferred energy efficiency expenditures 4,402 6,064
Deferred taxes and investment tax credits (258) (473)
Refueling outage provision 2,421 2,415
Other 147 146
Other changes in assets and liabilities:
Accounts receivable 9,599 (456)
Gas stored underground 9,611 6,397
Accounts payable (21,189) (22,393)
Accrued taxes 9,223 9,185
Adjustment clause balances 7,515 4,809
Benefit obligations and other 9,053 3,952
------------------ -------------------
Net cash flows from operating activities 76,842 53,086
------------------ -------------------
- --------------------------------------------------------------------------------------------------------------------------
Cash flows used for financing activities:
Common stock dividends declared (14,658) (43,976)
Dividends payable - (4,840)
Preferred stock dividends (229) (229)
Reductions in long-term debt (51,000) (50,000)
Net change in short-term borrowings 15,824 9,694
Principal payments under capital lease obligations (1,882) (3,369)
Other - (3)
------------------ -------------------
Net cash flows used for financing activities (51,945) (92,723)
------------------ -------------------
- --------------------------------------------------------------------------------------------------------------------------
Cash flows used for investing activities:
Utility construction expenditures (24,241) (16,621)
Nuclear decommissioning trust funds (1,502) (1,502)
Other (114) 441
------------------ -------------------
Net cash flows used for investing activities (25,857) (17,682)
------------------ -------------------
- --------------------------------------------------------------------------------------------------------------------------
Net decrease in cash and temporary cash investments (960) (57,319)
------------------ -------------------
- --------------------------------------------------------------------------------------------------------------------------
Cash and temporary cash investments at beginning of period 5,720 57,904
------------------ -------------------
- --------------------------------------------------------------------------------------------------------------------------
Cash and temporary cash investments at end of period $4,760 $585
================== ===================
- --------------------------------------------------------------------------------------------------------------------------
Supplemental cash flow information:
Cash paid (refunded) during the period for:
Interest $10,496 $13,989
================== ===================
Income taxes ($528) $7,334
================== ===================
Noncash investing and financing activities - Capital lease obligations incurred $222 $1,414
================== ===================
- --------------------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
</TABLE>
-14-
<PAGE>
IES UTILITIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Except as modified below, the Alliant Energy Notes to
Consolidated Financial Statements are incorporated by
reference insofar as they relate to IESU.
1. The interim consolidated financial statements included herein
have been prepared by IESU, without audit, pursuant to the
rules and regulations of the SEC. Accordingly, certain
information and footnote disclosures normally included in
financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted,
although management believes that the disclosures are adequate
to make the information presented not misleading. IESU is a
subsidiary of Alliant Energy. These financial statements
should be read in conjunction with the financial statements
and the notes thereto included in IESU's latest Annual Report
on Form 10-K.
In the opinion of management, all adjustments, which are
normal and recurring in nature, necessary for a fair
presentation of (a) the consolidated results of operations for
the three months ended March 31, 2000 and 1999, (b) the
consolidated financial position at March 31, 2000 and December
31, 1999, and (c) the consolidated statement of cash flows for
the three months ended March 31, 2000 and 1999, have been
made. Because of the seasonal nature of IESU's operations,
results for the three months ended March 31, 2000 are not
necessarily indicative of results that may be expected for the
year ending December 31, 2000. Certain prior period amounts
have been reclassified on a basis consistent with the 2000
presentation.
2. Certain financial information relating to IESU's significant
business segments is presented below. Intersegment revenues were
not material to IESU's operations.
Electric Gas Other Total
--------------------------------------------
(in thousands)
Three Months Ended March 31, 2000
- ---------------------------------
Operating revenues $145,708 $59,429 $6,987 $212,124
Operating income 26,685 7,413 1,400 35,498
Earnings available for common stock 15,882
Three Months Ended March 31, 1999
- ---------------------------------
Operating revenues $140,017 $61,296 $7,952 $209,265
Operating income 25,337 8,947 1,889 36,173
Earnings available for common stock 14,230
-15-
<PAGE>
<TABLE>
<CAPTION>
WISCONSIN POWER AND LIGHT COMPANY
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
For the Three Months Ended March 31,
2000 1999
- ---------------------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C>
Operating revenues:
Electric utility $162,376 $149,944
Gas utility 55,286 51,794
Water 1,170 1,252
---------------------- ---------------------
218,832 202,990
---------------------- ---------------------
- ---------------------------------------------------------------------------------------------------------------------
Operating expenses:
Electric production fuels 23,798 27,366
Purchased power 33,757 24,000
Cost of gas sold 35,329 31,181
Other operation 32,115 26,108
Maintenance 13,750 9,103
Depreciation and amortization 32,377 31,139
Taxes other than income taxes 7,211 7,702
---------------------- ---------------------
178,337 156,599
---------------------- ---------------------
- ---------------------------------------------------------------------------------------------------------------------
Operating income 40,495 46,391
---------------------- ---------------------
- ---------------------------------------------------------------------------------------------------------------------
Interest expense and other:
Interest expense 10,908 9,865
Allowance for funds used during construction (1,062) (923)
Miscellaneous, net (4,079) (4,344)
---------------------- ---------------------
5,767 4,598
---------------------- ---------------------
- ---------------------------------------------------------------------------------------------------------------------
Income before income taxes 34,728 41,793
---------------------- ---------------------
- ---------------------------------------------------------------------------------------------------------------------
Income taxes 12,857 15,505
---------------------- ---------------------
- ---------------------------------------------------------------------------------------------------------------------
Net income 21,871 26,288
---------------------- ---------------------
- ---------------------------------------------------------------------------------------------------------------------
Preferred dividend requirements 828 828
---------------------- ---------------------
- ---------------------------------------------------------------------------------------------------------------------
Earnings available for common stock $21,043 $25,460
====================== =====================
- ---------------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
</TABLE>
-16-
<PAGE>
<TABLE>
<CAPTION>
WISCONSIN POWER AND LIGHT COMPANY
CONSOLIDATED BALANCE SHEETS
March 31,
2000 December 31,
ASSETS (Unaudited) 1999
- ---------------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C>
Property, plant and equipment:
Utility -
Plant in service -
Electric $1,938,668 $1,921,624
Gas 262,248 258,132
Water 27,858 27,770
Common 217,777 218,607
----------------- -----------------
2,446,551 2,426,133
Less - Accumulated depreciation 1,297,223 1,266,366
----------------- -----------------
1,149,328 1,159,767
Construction work in progress 69,401 66,784
Nuclear fuel, net of amortization 18,846 15,079
----------------- -----------------
1,237,575 1,241,630
Other property, plant and equipment, net of accumulated
depreciation and amortization of $169 for both periods 639 608
----------------- -----------------
1,238,214 1,242,238
----------------- -----------------
- ---------------------------------------------------------------------------------------------------------------
Current assets:
Cash and temporary cash investments 23,990 3,555
Accounts receivable:
Customer 13,461 22,061
Associated companies 2,357 5,067
Other 11,554 10,984
Production fuel, at average cost 16,932 20,663
Materials and supplies, at average cost 21,392 20,439
Gas stored underground, at average cost 3,083 8,624
Prepaid gross receipts tax 15,648 20,864
Other 4,261 9,275
----------------- -----------------
112,678 121,532
----------------- -----------------
- ---------------------------------------------------------------------------------------------------------------
Investments:
Nuclear decommissioning trust funds 167,633 166,202
Other 14,868 15,272
----------------- -----------------
182,501 181,474
----------------- -----------------
- ---------------------------------------------------------------------------------------------------------------
Other assets:
Regulatory assets 88,368 82,161
Deferred charges and other 150,113 138,730
----------------- -----------------
238,481 220,891
----------------- -----------------
- ---------------------------------------------------------------------------------------------------------------
Total assets $1,771,874 $1,766,135
================= =================
- ---------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
</TABLE>
-17-
<PAGE>
<TABLE>
<CAPTION>
WISCONSIN POWER AND LIGHT COMPANY
CONSOLIDATED BALANCE SHEETS (CONTINUED)
March 31,
2000 December 31,
CAPITALIZATION AND LIABILITIES (Unaudited) 1999
- ---------------------------------------------------------------------------------------------------------
(in thousands, except share amounts)
<S> <C> <C>
Capitalization:
Common stock - $5 par value - authorized 18,000,000
shares; 13,236,601 shares outstanding $66,183 $66,183
Additional paid-in capital 229,438 229,438
Retained earnings 324,519 303,476
----------------- -----------------
Total common equity 620,140 599,097
----------------- -----------------
Cumulative preferred stock 59,963 59,963
Long-term debt (excluding current portion) 514,092 414,673
----------------- -----------------
1,194,195 1,073,733
----------------- -----------------
- ---------------------------------------------------------------------------------------------------------
Current liabilities:
Current maturities 1,875 1,875
Variable rate demand bonds 55,100 55,100
Notes payable to associated companies 633 125,749
Accounts payable 83,178 88,245
Accounts payable to associated companies 24,008 25,306
Accrued taxes 20,377 6,539
Other 25,712 23,744
----------------- -----------------
210,883 326,558
----------------- -----------------
- ---------------------------------------------------------------------------------------------------------
Other long-term liabilities and deferred credits:
Accumulated deferred income taxes 232,699 235,838
Accumulated deferred investment tax credits 30,851 31,311
Customer advances 32,896 34,643
Environmental liabilities 10,879 10,861
Other 59,471 53,191
----------------- -----------------
366,796 365,844
----------------- -----------------
- ---------------------------------------------------------------------------------------------------------
Total capitalization and liabilities $1,771,874 $1,766,135
================= =================
- ---------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
</TABLE>
-18-
<PAGE>
<TABLE>
<CAPTION>
WISCONSIN POWER AND LIGHT COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
For the Three Months Ended March 31,
2000 1999
- ------------------------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C>
Cash flows from operating activities:
Net income $21,871 $26,288
Adjustments to reconcile net income to net cash
flows from operating activities:
Depreciation and amortization 32,377 31,139
Amortization of nuclear fuel 1,484 1,525
Deferred taxes and investment tax credits (3,224) (1,578)
Other (2,854) (1,617)
Other changes in assets and liabilities:
Accounts receivable 10,740 5,529
Accounts payable (6,365) (17,717)
Accrued taxes 13,838 15,762
Benefit obligations and other 27,644 24,287
--------------------- ----------------------
Net cash flows from operating activities 95,511 83,618
--------------------- ----------------------
- ------------------------------------------------------------------------------------------------------------------------
Cash flows used for financing activities:
Common stock dividends - (14,588)
Preferred stock dividends (828) (828)
Proceeds from issuance of long-term debt 100,000 -
Net change in short-term borrowings (125,116) (25,697)
Other (1,320) -
--------------------- ----------------------
Net cash flows used for financing activities (27,264) (41,113)
--------------------- ----------------------
- ------------------------------------------------------------------------------------------------------------------------
Cash flows used for investing activities:
Utility construction expenditures (26,950) (18,967)
Nuclear decommissioning trust funds (13,935) (13,935)
Shared savings program (6,016) (2,519)
Other (911) 601
--------------------- ----------------------
Net cash flows used for investing activities (47,812) (34,820)
--------------------- ----------------------
- ------------------------------------------------------------------------------------------------------------------------
Net increase in cash and temporary cash investments 20,435 7,685
--------------------- ----------------------
- ------------------------------------------------------------------------------------------------------------------------
Cash and temporary cash investments at beginning of period 3,555 1,811
--------------------- ----------------------
- ------------------------------------------------------------------------------------------------------------------------
Cash and temporary cash investments at end of period $23,990 $9,496
===================== ======================
- ------------------------------------------------------------------------------------------------------------------------
Supplemental cash flow information:
Cash paid (refunded) during the period for:
Interest $7,949 $8,468
===================== ======================
Income taxes $2,227 ($357)
===================== ======================
- ------------------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
</TABLE>
-19-
<PAGE>
WISCONSIN POWER AND LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Except as modified below, the Alliant Energy Notes to
Consolidated Financial Statements are incorporated by
reference insofar as they relate to WP&L.
1. The interim consolidated financial statements included herein
have been prepared by WP&L, without audit, pursuant to the
rules and regulations of the SEC. Accordingly, certain
information and footnote disclosures normally included in
financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted,
although management believes that the disclosures are adequate
to make the information presented not misleading. The
consolidated financial statements include WP&L and its
consolidated subsidiary. WP&L is a subsidiary of Alliant
Energy. These financial statements should be read in
conjunction with the financial statements and the notes
thereto included in WP&L's latest Annual Report on Form 10-K.
In the opinion of management, all adjustments, which are
normal and recurring in nature, necessary for a fair
presentation of (a) the consolidated results of operations for
the three months ended March 31, 2000 and 1999, (b) the
consolidated financial position at March 31, 2000 and December
31, 1999, and (c) the consolidated statement of cash flows for
the three months ended March 31, 2000 and 1999, have been
made. Because of the seasonal nature of WP&L's operations,
results for the three months ended March 31, 2000 are not
necessarily indicative of results that may be expected for the
year ending December 31, 2000. Certain prior period amounts
have been reclassified on a basis consistent with the 2000
presentation.
2. Certain financial information relating to WP&L's significant
business segments is presented below. Intersegment revenues
were not material to WP&L's operations.
Electric Gas Other Total
-------------------------------------------
(in thousands)
Three Months Ended March 31, 2000
Operating revenues $162,376 $55,286 $1,170 $218,832
Operating income 31,059 9,056 380 40,495
Earnings available for common stock 21,043
Three Months Ended March 31, 1999
Operating revenues $149,944 $51,794 $1,252 $202,990
Operating income 35,349 10,577 465 46,391
Earnings available for common stock 25,460
-20-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Alliant Energy was formed as the result of a three-way merger
involving WPLH, IES and IPC that was completed in April 1998.
The primary first tier subsidiaries of Alliant Energy include:
WP&L, IESU, IPC, Resources and Corporate Services. Among various
other regulatory constraints, Alliant Energy is operating as a
registered public utility holding company subject to the
limitations imposed by PUHCA. This MD&A includes information
relating to Alliant Energy, IESU and WP&L (as well as IPC,
Resources and Corporate Services). Where appropriate,
information relating to a specific entity has been segregated and
labeled as such. The following discussion and analysis should be
read in conjunction with the Consolidated Financial Statements
and Notes to Consolidated Financial Statements included in this
report as well as the financial statements, notes and MD&A
included in Alliant Energy's, IESU's and WP&L's latest Annual
Report on Form 10-K.
FORWARD-LOOKING STATEMENTS
Statements contained in this report (including MD&A) that are not
of historical fact are forward-looking statements intended to
qualify for the safe harbors from liability established by the
Private Securities Litigation Reform Act of 1995. From time to
time, Alliant Energy, IESU or WP&L may make other forward-looking
statements within the meaning of the federal securities laws that
involve judgments, assumptions and other uncertainties beyond the
control of such companies. These forward-looking statements may
include, among others, statements concerning revenue and cost
trends, cost recovery, cost reduction strategies and anticipated
outcomes, pricing strategies, changes in the utility industry,
planned capital expenditures, financing needs and availability,
statements of expectations, beliefs, future plans and strategies,
anticipated events or trends and similar comments concerning
matters that are not historical facts. Investors and other users
of the forward-looking statements are cautioned that such
statements are not a guarantee of future performance and that
such forward-looking statements are subject to risks and
uncertainties that could cause actual results to differ
materially from those expressed in, or implied by, such
statements. Some, but not all, of the risks and uncertainties
include weather effects on sales and revenues, competitive
factors, general economic conditions in the relevant service
territory, federal and state regulatory or government actions,
including issues associated with the deregulation of the utility
industry, unanticipated construction and acquisition
expenditures, issues related to stranded costs and the recovery
thereof, the operations of Alliant Energy's nuclear facilities,
unanticipated costs associated with certain environmental
remediation efforts being undertaken by Alliant Energy,
unanticipated issues relating to establishing a transmission
company, material changes in the value of Alliant Energy's
investment in McLeod, technological developments, employee
workforce factors, including changes in key executives,
collective bargaining agreements or work stoppages, political,
legal and economic conditions in foreign countries Alliant Energy
has investments in and changes in the rate of inflation.
UTILITY INDUSTRY OUTLOOK
A summary of the current regulatory environment is included in
the Form 10-K filed by Alliant Energy, IESU and WP&L for the year
ended December 31, 1999. Set forth below are several
developments relating to such regulatory environment.
Across the nation, approximately half of the states (including
Illinois) have passed legislation or issued regulatory rulings
granting customers the right to choose their electric energy
supplier. Legislation that would allow customers to choose their
electric energy supplier was introduced in Iowa in 2000 but was
never voted upon. At the federal level, a number of proposals to
restructure the electric industry are currently under
consideration. However, there continues to be a lack of
consensus over how restructuring should be implemented and how
much control the federal government should have over this
process. Until one of the proposals gains significant bipartisan
support, Alliant Energy believes there is unlikely to be final
federal action to either facilitate or force states to open
electricity markets to competition.
"Reliability 2000" legislation was enacted in Wisconsin in 1999.
This legislation included, among other items, the formation of a
-21-
<PAGE>
Wisconsin transmission company for those Wisconsin utility
holding companies who elect to take advantage of the new asset
cap law. WP&L currently expects to transfer its transmission
assets to the transmission company (American Transmission
Company, or ATC) and it is expected that the net book value of
such assets will become the new carrying value within ATC,
resulting in no gain or loss for WP&L. The PSCW has not yet
determined the exact scope of the assets that must be transferred
to the ATC. A final ruling on such matter is expected in June
2000.
WP&L does not expect this transfer to result in a significant
impact on its financial condition or results of operations
because it believes the FERC will allow WP&L to earn a return on
the contributed assets comparable to the return currently allowed
by the PSCW and FERC. WP&L will not be able to determine its
exact ownership percentage in ATC until it is known which
entities will participate in ATC, and the valuation of the assets
each participant contributes is completed. However, WP&L expects
its ownership interest to exceed 20%, but be less than 50%. As a
result, WP&L expects to account for its investment in ATC under
the equity method. It is currently anticipated that ATC's
dividend policy will support a return of a significant portion of
these earnings to the participants. ATC will realize its
revenues from the provision of transmission services to both
participants in the ATC as well as nonparticipants. ATC is
expected to begin operations on January 1, 2001.
In December 1999, FERC issued Order 2000 which outlines
requirements for utilities to voluntarily turn over operational
control of their transmission system to a regional entity.
FERC's timeline is to have the RTOs in operation by the end of
2001. Alliant Energy's current plans to contribute its Wisconsin
transmission assets to ATC, in exchange for an equity interest,
and to participate in the Midwest ISO are expected to comply with
the provisions of Order 2000. In March 2000, FERC approved
Alliant Energy's membership in the Midwest ISO as well as WP&L's
transfer of its transmission assets.
Each of the utilities complies with the provisions of SFAS 71,
"Accounting for the Effects of Certain Types of Regulation." SFAS
71 provides that rate-regulated public utilities record certain
costs and credits allowed in the rate making process in different
periods than for non-regulated entities. These are deferred as
regulatory assets or regulatory liabilities and are recognized in
the consolidated statements of income at the time they are
reflected in rates. If a portion of the utility subsidiaries'
operations becomes no longer subject to the provisions of SFAS 71
as a result of competitive restructurings or otherwise, a
write-down of related regulatory assets and possibly other
charges would be required, unless some form of transition cost
recovery is established by the appropriate regulatory body that
would meet the requirements under generally accepted accounting
principles for continued accounting as regulatory assets during
such recovery period. In addition, each utility subsidiary would
be required to determine any impairment of other assets and
write-down any impaired assets to their fair value. The utility
subsidiaries believe they currently meet the requirements of SFAS
71 and will continue to monitor and assess this as the various
utility industry restructuring initiatives progress.
ALLIANT ENERGY RESULTS OF OPERATIONS
Overview - Alliant Energy reported net income of $19.3 million,
or $0.24 per share (basic and diluted), for the first quarter of
2000, compared to net income of $41.7 million, or $0.54 per share
(basic and diluted), for the first quarter of 1999. The first
quarter 2000 earnings included a $24.8 million, or $0.31 per
share, non-cash charge to net income to recognize an increase in
Alliant Energy's obligation relating to its 30-year exchangeable
senior notes issued in February. Refer to "Interest Expense and
Other" and "Liquidity and Capital Resources - Future
Considerations" for a further discussion of the $24.8 million
non-cash charge.
Alliant Energy's increase in earnings, excluding the non-cash
charge, was due to several factors, including: a pre-tax gain of
$10.2 million realized from the sale of 150,000 shares of Alliant
Energy's investment in McLeod; increased earnings from Alliant
Energy's oil and gas and industrial services businesses; and
income realized from settlement of a utility tax issue. These
items were partially offset by: higher utility operating
expenses, largely due to scheduled outages at several generating
plants and higher energy conservation expenses; the impact of
milder weather conditions in the first quarter of 2000 compared
to the comparable period in 1999; and increased interest expense
to fund Alliant Energy's strategic growth initiatives.
-22-
<PAGE>
First quarter 2000 utility earnings were $39.1 million ($0.49 per
share) compared to $44.8 million ($0.57 per share) for the same
period in 1999. The decrease resulted primarily from higher
operation and maintenance expenses ($0.08 per share), lower
natural gas margins ($0.03 per share) and higher depreciation
expense ($0.02 per share). These items were offset partially by
interest income realized from a tax settlement ($0.03 per share)
and a higher electric margin ($0.02 per share).
The higher operation and maintenance expenses were due to costs
associated with scheduled outages at several generating plants,
higher energy conservation expenses and increased nuclear
operating expenses. Alliant Energy estimates that the milder
weather conditions resulted in lower earnings of approximately
$0.06 per share ($0.03 electric; $0.03 gas) in the first quarter
of 2000 compared to the comparable period in 1999. The higher
overall electric margin was due to a rate recovery adjustment
implemented at WP&L in March 1999 to recover higher
purchased-power and transmission costs as well as increased sales
to retail customers due to continued economic strength in Alliant
Energy's utility service territory. These items were offset
partially by continued higher purchased power costs at WP&L.
Resources reported a net loss of $16.1 million, or ($0.20) per
share, in the first quarter of 2000, which included the $24.8
million ($0.31 per share) non-cash charge related to the senior
notes issued in February. Resources reported a net loss of $1.9
million, or ($0.02) per share, for the first quarter of 1999.
The increase in non-regulated earnings, excluding the non-cash
charge, was substantially due to the gain realized on the sale of
the McLeod shares ($0.08 per share) and the increased earnings
from Alliant Energy's oil and gas ($0.06 per share) and
industrial services ($0.02 per share) businesses. These items
were offset partially by higher net interest expense ($0.03 per
share) to fund strategic growth initiatives, including the recent
$347 million investment in several Brazilian electric utilities.
Refer to "Liquidity and Capital Resources - Future
Considerations" for a further discussion of the Brazilian
investments.
Electric Utility Operations - Electric margins and MWH sales for
- ---------------------------
Alliant Energy for the three months ended March 31 were as follows:
<TABLE>
<CAPTION>
Revenues and Costs MWHs Sold
(in thousands) (in thousands)
------------------------ ----------------------
2000 1999 Change 2000 1999 Change
------------ ----------- -------- ---------- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
Residential $134,995 $130,280 4% 1,821 1,810 1%
Commercial 77,850 72,023 8% 1,278 1,244 3%
Industrial 111,544 102,601 9% 3,120 3,076 1%
------------ ----------- ---------- ----------
Total from ultimate customers 324,389 304,904 6% 6,219 6,130 1%
Sales for resale 33,894 36,214 (6%) 1,205 1,345 (10%)
Other 15,339 10,220 50% 48 41 17%
------------ ----------- ---------- ----------
Total revenues/sales 373,622 351,338 6% 7,472 7,516 (1%)
========== ==========
Electric production fuels
expense 65,545 61,309 7%
Purchased power expense
62,345 52,065 20%
------------ -----------
Margin $245,732 $237,964 3%
============ ===========
</TABLE>
Electric margin increased $7.8 million, or 3%, for the first
quarter of 2000, compared with the same period in 1999. The
increase was primarily due to a $15 million rate recovery
adjustment implemented at WP&L in March 1999 to recover higher
purchased-power and transmission costs, an increase in sales to
retail customers due to continued economic strength in Alliant
Energy's service territory and higher other revenues primarily
due to WP&L conservation programs for which WP&L receives a
return on its invested capital. Higher purchased-power costs and
the impact of milder weather conditions partially offset these
items.
IESU's and IPC's electric tariffs include EAC's that are designed
to currently recover the costs of fuel and the energy portion of
purchased-power billings.
-23-
<PAGE>
Gas Utility Operations - Gas margins and Dth sales for Alliant
- ----------------------
Energy for the three months ended March 31 were as follows:
<TABLE>
<CAPTION>
Revenues and Costs Dekatherms Sold
(in thousands) (in thousands)
------------------------ ---------------------
2000 1999 Change 2000 1999 Change
------------ ----------- -------- ---------- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
Residential $79,611 $82,439 (3%) 13,073 14,836 (12%)
Commercial 39,570 39,159 1% 7,776 8,559 (9%)
Industrial 6,834 6,767 1% 1,688 1,919 (12%)
Transportation/other 4,119 5,319 (23%) 12,398 14,609 (15%)
------------ ----------- ---------- ----------
Total revenues/sales 130,134 133,684 (3%) 34,935 39,923 (12%)
========== ==========
Cost of gas sold 82,113 81,343 1%
------------ -----------
Margin $48,021 $52,341 (8%)
============ ===========
</TABLE>
Gas margin decreased $4.3 million, or 8%, for the first quarter
of 2000, compared with the same period in 1999, primarily due to
reduced natural gas sales due to milder weather.
IESU's and IPC's gas tariffs include PGA clauses that are
designed to currently recover the cost of utility gas sold.
Non-regulated and Other Revenues - Non-regulated and other
- --------------------------------
revenues for the three months ended March 31 were as follows (in
thousands):
2000 1999
-------- --------
ISCO $80,221 $29,407
Oil and gas (Whiting) 19,195 12,833
Steam 7,340 8,262
Transportation 4,788 5,224
Other 5,550 6,107
--------- ---------
$117,094 $61,833
======== =========
ISCO revenues increased significantly in the first quarter of
2000, compared with the same period in 1999, primarily due to the
second quarter 1999 acquisition of an oil gathering and
transportation business in Texas. Oil and gas revenues increased
due to higher oil and gas prices, partially offset by reduced gas
volumes.
Other Operating Expenses - Other operation expenses for the three
- --------------------------
months ended March 31 were as follows (in thousands):
2000 1999
------------ ----------
Utility - IESU / WP&L / IPC $93,860 $87,829
ISCO 76,183 26,443
Oil and gas (Whiting) 7,349 7,534
Transportation 2,363 1,984
Other 6,782 6,575
------------ ----------
$186,537 $130,365
============ ==========
Other operation expenses at the utility subsidiaries increased $6
million in the first quarter of 2000, compared with the same
period in 1999, primarily due to higher energy conservation,
nuclear operating and transmission and distribution expenses.
These items were partially offset by expenses incurred in 1999
relating to Alliant Energy's Year 2000 readiness program. Other
operation expenses at ISCO increased $50 million in the first
quarter of 2000, compared with the same period in 1999, primarily
due to expenses associated with the acquisition of the oil
gathering and transportation business.
-24-
<PAGE>
Maintenance expenses increased $6.1 million primarily due to
costs associated with scheduled outages at several of Alliant
Energy's generating plants and increased transmission and
distribution maintenance expenses.
Depreciation and amortization expense increased $2.3 million in
the first quarter of 2000, compared with the same period in 1999,
primarily as a result of utility property additions.
Interest Expense and Other - Interest expense increased $7.2
- --------------------------
million in the first quarter of 2000, compared with the same
period in 1999, primarily due to higher utility and non-regulated
borrowings to fund Alliant Energy's strategic growth initiatives,
including Resources' $347 million investment in several Brazilian
electric utilities in January 2000.
Alliant Energy recorded $39.5 million of contingent interest on
indexed senior notes in the first quarter of 2000 to recognize an
increase in Alliant Energy's obligation relating to Resources'
issuance of $402.5 million of exchangeable 30-year senior notes
in February. The amount payable upon maturity of the notes is
generally the higher of: a) the original principal amount, as
adjusted for any accrued interest or distributions on the common
stock of McLeod; or, b) the current market value of the shares of
McLeod stock attributable to the exchangeable senior notes.
Specific accounting principles govern the exchangeable senior
notes. Due to the exchange feature of the senior notes, any
increase in the value of McLeod stock above $77.23 per share
results in a corresponding increase in Alliant Energy's
obligation under the senior notes. Current accounting principles
do not allow the increases in market value of Alliant Energy's
McLeod holdings to be reflected in earnings, but require a charge
against earnings to reflect the corresponding increase in Alliant
Energy's obligation under the senior notes. The closing price of
the McLeod stock at March 31, 2000 was $84.81; thus, the senior
notes were reported at approximately $442 million at March 31,
2000. The non-cash charge recorded as a result of this increase
did not impact earnings from operations nor will it impact
Alliant Energy's ability to pay dividends. If the McLeod stock
price closes below $84.81 per share on June 30, 2000, Alliant
Energy in the second quarter will reverse the proportionate share
of the non-cash charge recorded in the first quarter. (The
McLeod stock prices in this paragraph do not reflect McLeod's
3-for-1 stock split that was effective April 24, 2000). Refer to
"Liquidity and Capital Resources - Future Considerations" for a
further discussion.
Alliant Energy sold 150,000 shares of its investment in McLeod in
the first quarter of 2000, resulting in a pre-tax gain of $10.2
million (the 150,000 shares have not been adjusted for the
3-for-1 stock split).
Miscellaneous, net income increased $6.4 million for the first
quarter of 2000, compared with the same period in 1999, primarily
due to increased interest income, including $4.1 million realized
from a tax settlement at IESU.
Income Taxes - Income tax expense decreased $12.4 million for the
- ------------
first quarter of 2000, compared with the same period in 1999,
primarily due to lower taxable income. The effective income tax
rates for the first quarter of 2000 and 1999 were 37.2% and
36.4%, respectively.
IESU RESULTS OF OPERATIONS
Overview - IESU's earnings available for common stock increased
- ---------
$1.7 million for the first quarter of 2000, compared with the
same period in 1999. The increased earnings for 2000 were
primarily due to reduced other operation expenses and income
realized from settlement of a tax issue. Lower electric and gas
margins partially offset these items.
-25-
<PAGE>
Electric Utility Operations - Electric margins and MWH sales for
- ---------------------------
IESU for the three months ended March 31 were as follows:
<TABLE>
<CAPTION>
Revenues and Costs MWHs Sold
(in thousands) (in thousands)
------------------------ ---------------------
2000 1999 Change 2000 1999 Change
------------ ----------- -------- ---------- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
Residential $54,942 $54,353 1% 684 693 (1%)
Commercial 40,226 38,548 4% 632 628 1%
Industrial 42,205 37,882 11% 1,214 1,182 3%
------------ ----------- ---------- ----------
Total from ultimate customers 137,373 130,783 5% 2,530 2,503 1%
Sales for resale 5,203 6,353 (18%) 247 341 (28%)
Other 3,132 2,881 9% 10 10 --
------------ ----------- ---------- ----------
Total revenues/sales 145,708 140,017 4% 2,787 2,854 (2%)
========== ==========
Electric production fuels
expense 28,912 22,494 29%
Purchased power expense 13,422 13,150 2%
------------ -----------
Margin $103,374 $104,373 (1%)
============ ===========
</TABLE>
Electric margin decreased $1.0 million, or 1%, for the first
quarter of 2000, compared with the same period in 1999. The
decrease was primarily due to reduced recoveries of approximately
$2.5 million in concurrent and previously deferred expenditures
for Iowa-mandated energy efficiency programs and the impact of
milder weather conditions. Economic growth in the service
territory and reduced purchased-power capacity costs partially
offset these items. The recovery for energy efficiency programs
in Iowa is in accordance with IUB orders (a portion of these
recoveries is offset as they are also amortized to expense in
other operation expense).
IESU's electric tariffs include EAC's that are designed to
currently recover the costs of fuel and the energy portion of
purchased-power billings.
Gas Utility Operations - Gas margins and Dth sales for IESU for
- -----------------------
the three months ended March 31 were as follows:
<TABLE>
<CAPTION>
Revenues and Costs Dekatherms Sold
(in thousands) (in thousands)
------------------------ ---------------------
2000 1999 Change 2000 1999 Change
------------ ----------- -------- ---------- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
Residential $37,214 $39,161 (5%) 6,055 6,855 (12%)
Commercial 17,702 17,970 (1%) 3,472 3,889 (11%)
Industrial 3,101 2,803 11% 811 873 (7%)
Transportation/other 1,412 1,362 4% 2,919 3,195 (9%)
------------ ----------- ---------- ----------
Total revenues/sales 59,429 61,296 (3%) 13,257 14,812 (10%)
========== ==========
Cost of gas sold 38,074 37,912 --
------------ -----------
Margin $21,355 $23,384 (9%)
============ ===========
</TABLE>
Gas margin decreased $2.0 million, or 9%, for the first quarter
of 2000, compared with the same period in 1999, primarily due to
reduced natural gas sales due to milder weather.
IESU's gas tariffs include PGA clauses that are designed to
currently recover the cost of gas sold.
Other Operating Expenses - IESU's other operation expenses
- -------------------------
decreased $4.2 million in the first quarter of 2000, compared
with the same period in 1999, primarily due to a $2.6 million
decrease in energy efficiency expenses, expenses incurred in 1999
on IESU's Year 2000 readiness efforts and lower employee benefits
costs. Higher nuclear operating expenses partially offset these
items.
-26-
<PAGE>
Interest Expense and Other - Miscellaneous, net income increased
- --------------------------
$3.9 million in the first quarter of 2000, compared with the same
period in 1999, primarily due to $4.1 million of interest income
realized from a tax settlement.
Income Taxes - IESU's income tax expense increased $1.4 million
- ------------
for the first quarter of 2000, compared with the same period in
1999, primarily due to higher taxable income. The effective
income tax rates were 41.9% and 41.4% in the first quarter of
2000 and 1999, respectively.
WP&L RESULTS OF OPERATIONS
Overview - WP&L's earnings available for common stock decreased
- ---------
$4.4 million for the first quarter of 2000, compared with the
same period in 1999, primarily due to higher other operation and
maintenance expenses, partially offset by a higher electric
margin.
Electric Utility Operations - Electric margins and MWH sales for
- ----------------------------
WP&L for the three months ended March 31 were as follows:
<TABLE>
<CAPTION>
Revenues and Costs MWHs Sold
(in thousands) (in thousands)
------------------------ ---------------------
2000 1999 Change 2000 1999 Change
------------ ----------- -------- ---------- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
Residential $57,546 $53,889 7% 838 801 5%
Commercial 29,695 27,016 10% 503 465 8%
Industrial 41,270 39,599 4% 1,127 1,087 4%
------------ ----------- ---------- ----------
Total from ultimate customers 128,511 120,504 7% 2,468 2,353 5%
Sales for resale 24,957 24,929 -- 789 813 (3%)
Other 8,908 4,511 97% 21 15 40%
------------ ----------- ---------- ----------
Total revenues/sales 162,376 149,944 8% 3,278 3,181 3%
========== ==========
Electric production fuels
expense 23,798 27,366 (13%)
Purchased power expense 33,757 24,000 41%
------------ -----------
Margin $104,821 $98,578 6%
============ ===========
</TABLE>
Electric margin increased $6.2 million, or 6%, for the first
quarter of 2000, compared with the same period in 1999. The
increase was primarily due to a $15 million rate recovery
adjustment implemented in March 1999 to recover higher
purchased-power and transmission costs, a 5% increase in sales to
retail customers primarily due to continued economic strength in
the service territory and higher other revenues due to
conservation programs for which WP&L receives a return on its
invested capital. Higher purchased-power costs and the impact of
milder weather conditions partially offset these items. Refer to
"Liquidity and Capital Resources - Rates and Regulatory Matters"
for a discussion of a rate filing WP&L made to request recovery
of its increased purchased power and transmission costs.
Gas Utility Operations - Gas margins and Dth sales for WP&L for
- -----------------------
the three months ended March 31 were as follows:
<TABLE>
<CAPTION>
Revenues and Costs Dekatherms Sold
(in thousands) (in thousands)
------------------------ ---------------------
2000 1999 Change 2000 1999 Change
------------ ----------- -------- ---------- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
Residential $33,013 $31,260 6% 5,293 5,857 (10%)
Commercial 17,306 15,100 15% 3,350 3,493 (4%)
Industrial 2,732 2,504 9% 587 659 (11%)
Transportation/other 2,235 2,930 (24%) 4,069 4,043 1%
------------ ----------- ---------- ----------
Total revenues/sales 55,286 51,794 7% 13,299 14,052 (5%)
========== ==========
Cost of gas sold 35,329 31,181 13%
------------ -----------
Margin $19,957 $20,613 (3%)
============ ===========
</TABLE>
-27-
<PAGE>
Gas margin decreased $0.7 million, or 3%, for the first quarter
of 2000, compared with the same period in 1999, primarily due to
reduced natural gas sales resulting from milder weather.
Other Operating Expenses - Other operation expenses increased
- -------------------------
$6.0 million for the first quarter of 2000, compared with the
same period in 1999, due to higher energy conservation, nuclear
operating and transmission and distribution expenses.
Maintenance expenses increased $4.6 million for the first quarter
of 2000 compared with the first quarter of 1999 primarily due to
costs associated with scheduled outages at several generating
plants and higher transmission and distribution maintenance
expenses.
Interest Expense and Other - Interest expense increased $1.0
- --------------------------
million for the first quarter of 2000, compared with the same
period in 1999, primarily due to additional debt outstanding in
the first quarter of 2000.
Income Taxes - WP&L's income tax expense decreased $2.6 million
- ------------
for the first quarter of 2000, compared with the same period in
1999, due to lower taxable income. The effective income tax
rates were 37.0% and 37.1% in the first quarter of 2000 and 1999,
respectively.
LIQUIDITY AND CAPITAL RESOURCES
Cash flows from operating activities at Alliant Energy increased
$16 million for the first quarter of 2000, compared with the same
period in 1999, primarily due to changes in working capital.
Cash flows from financing activities increased $324 million for
the first quarter of 2000, compared with the same period in 1999,
primarily as a result of changes in the amount of debt
outstanding. Cash flows used for investing activities increased
$428 million for the first quarter of 2000, compared with the
same period in 1999, due to increased levels of construction and
acquisition expenditures primarily in the non-regulated
businesses.
Cash flows from operating activities at IESU increased $24
million for the first quarter of 2000, compared with the same
period in 1999, primarily due to changes in working capital.
Cash flows used for financing activities decreased $41 million
for the first quarter of 2000, compared with the same period in
1999, due to decreased common stock dividends in 2000. The
dividend payment in the first quarter of 1999 was larger than
IESU's historical quarterly payment as no dividend payments were
made in the last three quarters of 1998 due to merger-related tax
considerations. Cash flows used for investing activities
increased $8 million for the first quarter of 2000, compared with
the same period in 1999, due to increased levels of construction
expenditures.
Cash flows from operating activities at WP&L increased $12
million for the first quarter of 2000, compared with the same
period in 1999, primarily due to changes in working capital.
Cash flows used for financing activities decreased $14 million
for the first quarter of 2000, compared with the same period in
1999, as WP&L did not declare a common stock dividend in the
first quarter of 2000 as part of its management of its capital
structure. Cash flows used for investing activities increased
$13 million for the first quarter of 2000, compared with the same
period in 1999, primarily due to increased levels of construction
expenditures.
Future Considerations
On February 1, 2000, Resources completed a private placement of
$402.5 million of exchangeable senior notes due 2030. The
exchangeable senior notes have a stated interest rate of 7.25%
through February 15, 2003 and 2.5% thereafter and are
exchangeable for cash based upon a percentage of the value of
McLeod Class A Common Stock. Alliant Energy has agreed to fully
and unconditionally guarantee the payment of principal and
interest on the exchangeable senior notes.
The exchangeable senior notes have certain accounting
consequences for Alliant Energy that affect reported earnings.
Alliant Energy records its investment in McLeod stock at its fair
value, with changes in fair value, net of income tax effects,
recorded directly to the common equity section of the
Consolidated Balance Sheets as a component of "Accumulated other
comprehensive income." Any such changes in fair value are
reflected in current earnings only at the time they are actually
-28-
<PAGE>
realized through a sale. However, applicable accounting rules
require Alliant Energy to record in its Consolidated Statements
of Income any increase or decrease in the settlement value (i.e.,
the amount payable upon maturity) of the exchangeable senior
notes that results from changes in the market value of McLeod
stock. The settlement value of the exchangeable senior notes at
any point in time is generally (assuming no deferrals of interest
payments) the higher of: (a) the original principal amount plus
accrued interest less cash dividends or other distributions on
the McLeod stock; or (b) the current market value of the shares
of McLeod stock attributable to the exchangeable senior notes.
Accordingly, any increase or decrease in the settlement value of
the exchangeable senior notes will be recorded as subtractions
from, or additions to, Alliant Energy's reported net income as
"contingent interest on indexed senior notes."
The market price of the McLeod stock has been volatile and has
fluctuated over a wide range since McLeod's initial public
offering. A significant increase in the market value of McLeod
stock would significantly decrease Alliant Energy's reported net
income. Similarly, a significant decrease in the market value of
McLeod stock would significantly increase Alliant Energy's
reported net income, subject to the condition that the settlement
value of the exchangeable senior notes will not be reduced below
the original principal amount plus accrued interest less cash
dividends or other distributions on the McLeod stock. These
increases and decreases in reported income in Alliant Energy's
Consolidated Statements of Income will be non-cash in nature and
will be reflected on Alliant Energy's Consolidated Balance Sheets
as increases and decreases in long-term debt. Alliant Energy
would recognize a non-cash charge to net income of approximately
$3.3 million for each $1/share increase in McLeod's stock price
above $77.23/share as relates to the 5.2 million shares of McLeod
stock attributable to the exchangeable senior notes. (McLeod
stock price and share information set forth herein are not
adjusted for McLeod's 3-for-1 stock split effective April 24,
2000). Refer to "Alliant Energy Results of Operations - Interest
Expense and Other" for a discussion of a non-cash charge Alliant
Energy recorded in the first quarter of 2000. This impact on
earnings is expected to be mitigated somewhat once Alliant Energy
adopts SFAS 133, "Accounting for Derivative Instruments and
Hedging Activities." Refer to "Other Matters - Accounting
Pronouncements" for a further discussion.
On January 25, 2000, Resources acquired a stake in four Brazilian
electric utilities serving more than 820,000 customers for a
total investment of approximately $347 million. As part of this
investment, Resources acquired a 49.1% ownership interest in
Companhia Forca e Luz Cataguazes-Leopoldina (Cataguazes), an
electric utility. Cataguazes owns a majority stake in CENF,
another electric utility company, as well as a majority interest
in Energisa S.A., an energy development company. As part of the
same investment, Resources directly acquired a 45.6% interest in
Energisa S.A. itself, which holds majority stakes in two
regulated utilities (Energipe and Celb). As part owner of
Cataguazes, Resources will hold both indirect and direct
interests in Energisa S.A. The investment is anticipated to
dilute Alliant Energy's earnings per share by approximately 3% in
2000, with positive contributions to earnings expected in
subsequent years. Resources, through its wholly owned
subsidiary, International, initially financed the Brazil
investment with cash made available through the internal transfer
of existing non-regulated corporate assets. Resources has
entered into a shareholders agreement with the Brazilian
companies, which would allow it to name two directors to the
boards of each company and its subsidiaries. The agreement will
also provide Resources with a role in selecting each company's
management team, along with voting rights relating to critical
issues at the Brazilian companies and their subsidiaries. The
investment will be accounted for under the equity method.
As a result of a sale by Whiting of its interest in an offshore
oil and gas production property in the fourth quarter of 1999,
Whiting has a potential gain contingency of $500,000 relating to
the sale that will be resolved in the fourth quarter of 2000.
Such gain contingency has not yet been recognized in income.
Financing and Capital Structure
WP&L issued $100 million of senior unsecured debentures in March
2000 at a fixed interest rate of 7-5/8%, due 2010. The net
proceeds from the sale of the debentures were primarily used to
repay short-term debt.
Refer to "Liquidity and Capital Resources - Future
Considerations" for a discussion of $402.5 million of exchangeable
senior notes issued by Resources in February 2000.
-29-
<PAGE>
Capital Requirements
Refer to the "Other Matters - Environmental" section for a
discussion of various issues impacting Alliant Energy's future
capital requirements.
Rates and Regulatory Matters
In February and April of 2000, the OCA requested certain
financial information related to the electric utility operations
within the state of Iowa from IESU and IPC, respectively. IESU
has responded to its data requests and IPC is in the process of
preparing its responses. While IESU and IPC cannot predict the
outcome of this process, such data requests could lead to an
effort by the OCA to seek an electric rate reduction for IESU
and/or IPC in Iowa.
WP&L's retail electric rates are based in part on forecasted fuel
and purchased-power costs. Under PSCW rules, WP&L can seek
emergency rate increases if the annual costs are more than 3%
higher than the estimated costs used to establish rates. If
WP&L's earnings exceed its authorized return on equity, the
incremental revenues collected causing the excessive return are
subject to refund. WP&L does not believe any revenues collected
to-date are subject to refund. In December 1999, WP&L requested
a $26 million retail electric rate increase to reflect higher
purchased power and transmission costs. Effective May 5, 2000,
the PSCW granted WP&L a $16.5 million annual retail electric rate
increase.
In April 2000, the intervenors who had appealed the PSCW's order
to grant WP&L rate recovery of $6.3 million of it Year 2000
program expenditures withdrew their appeal. WP&L began
recovering such costs in May 2000.
OTHER MATTERS
Labor Issues
The collective bargaining agreements at Alliant Energy cover
approximately 52% of all Alliant Energy employees. In the first
quarter of 2000, two agreements that had expired in 1999 were
ratified and the parties have reached tentative agreement on the
remaining three agreements that had expired in 1999. Once these
three agreements are ratified, all expired agreements will be
renewed and there are no significant agreements expiring in
2000.
Market Risk Sensitive Instruments and Positions
Alliant Energy's primary market risk exposures are associated
with interest rates, commodity prices, equity prices and currency
exchange rates. Alliant Energy has risk management policies to
monitor and assist in controlling these market risks and uses
derivative instruments to manage some of the exposures. Alliant
Energy's market risks have not changed materially from the market
risks reported in the 1999 Form 10-K, except as noted below.
Equity Price Risk - At March 31, 2000 and December 31, 1999,
- -----------------
Alliant Energy had an investment in the stock of McLeod, a
publicly traded telecommunications company, valued at $1,607
million and $1,124 million, respectively. A 10% increase
(decrease) in the quoted market price at March 31, 2000 and
December 31, 1999 would have increased (decreased) the value of
the investment by approximately $161 million and $112 million,
respectively.
Currency Risk - Alliant Energy has investments in various
- --------------
countries where the net investments are not hedged, including
Australia, Brazil, China, New Zealand, and Singapore. As a
result, these investments are subject to currency exchange risk
with fluctuations in currency exchange rates. At March 31, 2000
and December 31, 1999, Alliant Energy had a cumulative foreign
currency translation loss of $8.7 million and $9.6 million,
respectively, recorded in "Accumulated other comprehensive
income" on its Consolidated Balance Sheets. Based on Alliant
Energy's investments at March 31, 2000 and December 31, 1999, a
10% sustained increase/decrease over the next twelve months in
the foreign exchange rates of Australia, Brazil, China, New
Zealand and Singapore would decrease/increase the cumulative
foreign currency translation loss by $54.5 million and $17.2
million, respectively. The significant increase in the March 31
amount is primarily due to Resources' $347 million investment in
Brazil in January 2000.
-30-
<PAGE>
Accounting Pronouncements
In June 1998, the FASB issued SFAS 133. The Statement
establishes accounting and reporting standards requiring that
every derivative instrument be recorded on the balance sheet as
either an asset or liability measured at its fair value. The
Statement requires that changes in the derivative's fair value be
recognized currently in earnings unless specific hedge accounting
criteria are met. Special accounting for qualifying hedges
allows a derivative's gains and losses to offset related results
on the hedged item in the income statement, and requires that a
company must formally document, designate, and assess the
effectiveness of transactions that receive hedge accounting.
SFAS 133 is effective for fiscal years beginning after June 15,
2000 and must be applied to (a) derivative instruments and (b)
certain derivative instruments embedded in hybrid contracts that
were issued, acquired or substantively modified after
December 31, 1998 (effective dates noted are as amended by
SFAS 137). Alliant Energy has organized a cross-functional
project team to assist in implementing SFAS 133. The team
consists of both Alliant Energy employees and a consultant that
has been engaged to support the project. The team has
substantially completed Alliant Energy's inventory of financial
instruments, commodity contracts and other commitments for the
purpose of identifying and assessing all of Alliant Energy's
derivatives and has begun the process of estimating the fair
value of the derivatives, designating certain derivatives as
hedges and assessing the effectiveness of those derivatives
designated as hedges. Although all effects of implementing
SFAS 133 have not yet been quantified, it could increase
volatility in earnings and other comprehensive income. However,
earnings volatility related to Resources' exchangeable senior
notes is expected to decrease subsequent to the adoption of SFAS
133.
SFAS 133 will require Alliant Energy to split the value of
Resources' exchangeable senior notes into a debt component and a
derivative component. Any changes in the fair value of the
derivative component subsequent to the SFAS 133 adoption date
will be reflected as an increase or decrease in Alliant Energy's
reported net income. At the date of initial adoption, SFAS 133
provides Alliant Energy a one-time ability to transfer any of
Alliant Energy's available-for-sale securities to the trading
category. Alliant Energy expects to transfer approximately 25%
of its shares of McLeod stock to trading upon adoption of SFAS
133. As a result, Alliant Energy expects to report a significant
gain from the one-time transfer of these McLeod shares to
trading; the amount of the gain cannot be determined until the
adoption date as it will be based on the value of McLeod stock at
such time. The gain recognized will be based on the appreciation
in the shares transferred, which is currently recognized as a
component of "Accumulated other comprehensive income" on Alliant
Energy's Consolidated Balance Sheets.
Changes subsequent to the SFAS 133 adoption date in the fair
value of the shares of McLeod stock transferred to trading will
be reflected as an increase or decrease in Alliant Energy's
reported net income and are expected to at least partially offset
changes in the fair value of the derivative component of the
exchangeable senior notes. However, there may be periods with
significant non-cash increases or decreases to Alliant Energy's
net income pertaining to the exchangeable senior notes and the
shares of McLeod stock classified as trading. At the date of
initial adoption, Alliant Energy will also recognize a one-time
increase or decrease to income to reflect the cumulative effect
of a change in accounting principle for the difference between
(a) the current fair value of the derivative component plus the
carrying amount of the debt component, and (b) the carrying
amount of the exchangeable senior notes under current accounting
principles. This amount cannot be determined until the adoption
date.
Alliant Energy has certain fixed price commodity contracts for
the future purchase or sale of natural gas, coal and oil that
meet the derivative criteria in the Statement. Alliant Energy
also has other financial derivative contracts it uses in both its
utility and non-regulated activities. Alliant Energy intends to
designate these contracts as hedges of the underlying purchases
or sales and will record derivative assets and liabilities on its
balance sheet based on the fair value of the contracts at the
adoption date. Such amounts will be substantially offset by an
amount that will be recorded in 'Accumulated other comprehensive
income" on Alliant Energy's Consolidated Balance Sheets. The
fair values will fluctuate over time due to changes in the
underlying commodity prices.
-31-
<PAGE>
Alliant Energy is analyzing various alternatives relating to the
possible early adoption of SFAS 133 in 2000. SFAS 133 may only
be adopted on the first day of any quarter prior to the required
adoption date (i.e., January 1, 2001 for Alliant Energy).
Environmental
A summary of Alliant Energy's environmental issues is included in
the Form 10-K, filed by Alliant Energy, IESU and WP&L for the
year ended December 31, 1999. Set forth below are several
developments relating to Alliant Energy's environmental issues.
Pursuant to an internal review of operations in 1998, IPC
discovered that Unit No. 6 at its generating facility in Dubuque,
Iowa required a Clean Air Act Acid Rain permit and CEMS. IPC has
informed its environmental regulators and has installed the CEMS
and obtained the permit. Pursuant to its internal review, IPC
also identified and disclosed to regulators a potentially similar
situation at its Lansing, Iowa generating facility. In the
second quarter of 1999, the EPA determined that Lansing units 1
and 2 are affected units. Therefore, in the third quarter of
1999, IPC installed the CEMS at both of these facilities and in
December 1999 IPC submitted its certification to the EPA for the
Lansing facility. IPC received a settlement offer from the EPA,
dated December 3, 1999, to settle the matter for $550,000. IPC
has since responded with a counteroffer, and the parties have
reached an agreement in principle which contemplates a civil
penalty payment and the performance of a supplemental
environmental project with a combined value of approximately
$400,000. IPC has established the necessary liability for the
expected settlement obligation relating to this issue.
Power Supply
Alliant Energy transferred its IESU and IPC regional reliability
membership from the MAPP reliability region to the MAIN region
effective in May 2000. Given WP&L is already a member of MAIN,
this will give Alliant Energy additional operating flexibility
and will eliminate duplicate reporting requirements. Alliant
Energy will continue to participate in the MAPP Regional
Transmission Committee and the MAPP Power and Energy Market
Committee.
On April 25, 2000, Alliant Energy issued a request for proposal
(RFP) for a contract to construct a 500-600 megawatt power plant
in Wisconsin. The construction of the facility will assist
Alliant Energy in meeting its growing demands for electricity,
will enable Alliant Energy to place a greater reliance on
internal generation versus purchased power and will also help
Alliant Energy maintain the required 18% reserve margin in
Wisconsin. The proposed timeline includes proposals due in June
2000 and construction beginning in the second quarter of 2001.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Quantitative and Qualitative Disclosures About Market Risk are
reported under Item 2. MD&A "Other Matters - Market Risk
Sensitive Instruments and Positions."
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits: The following Exhibits are filed herewith or
- --------------
incorporated herein by reference. Documents indicated by an
asterisk (*) are incorporated herein by reference.
3.1* Bylaws of Alliant Energy, as amended, effective as of
March 15, 2000 (incorporated by reference to Exhibit 3.2
to Alliant Energy's Form 10-K for the year 1999)
3.2* Bylaws of WP&L, as amended, effective as of March 15,
2000 (incorporated by reference to Exhibit 3.4 to WP&L's
Form 10-K for the year 1999)
3.3* Bylaws of IESU, as amended, effective as of March 15,
2000 (incorporated by reference to Exhibit 3.6 to IESU's
Form 10-K for the year 1999)
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<PAGE>
4.1* Officers' Certificate, dated as of March 1, 2000,
creating WP&L's 7-5/8% debentures due March 1, 2010
(incorporated by reference to Exhibit 4 to WP&L's Form
8-K, dated March 1, 2000)
4.2* Indenture, relating to Resources' debt securities, dated
as of November 4, 1999, among Resources, Alliant Energy,
as Guarantor, and Firstar Bank, N.A., as Trustee,
(incorporated by reference to Exhibit 4.1 to Resources'
and Alliant Energy's Registration Statement on Form S-4
(Registration No. 333-92859), and the indentures
supplemental thereto dated, respectively, November 4,
1999 and February 1, 2000 (Exhibit 4.2 in File No.
33-92859 and Exhibit 99.4 in Alliant Energy's Form 8-K
dated February 1, 2000)
4.3* Registration Rights Agreement, related to Resources'
exchangeable senior notes due 2030, dated as of February
1, 2000, among Resources, Alliant Energy and Merrill
Lynch, Pierce, Fenner & Smith Incorporated (incorporated
by reference to Exhibit 99.5 to Alliant Energy's Form
8-K dated February 1, 2000)
4.4* Purchase Agreement, relating to Resources' exchangeable
senior notes due 2030, dated as of January 26, 1999,
among Resources, Alliant Energy and Merrill Lynch,
Pierce, Fenner & Smith Incorporated (incorporated by
reference to Exhibit 99.2 to Alliant Energy's Form 8-K
dated February 1, 2000)
10.1 Supplemental Retirement Agreement
10.2 Third Amended and Restated November 1998 Stockholders'
Agreement entered into as of March 10, 2000, by and
among McLeod, Alliant Energy, Investments and certain
other principal stockholders of McLeod
10.3 Third Amended and Restated January 1999 Stockholders'
Agreement entered into as of March 10, 2000, by and
among McLeod, Alliant Energy, Investments and certain
other principal stockholders of McLeod
27.1 Financial Data Schedule for Alliant Energy Corporation
at and for the period ended March 31, 2000
27.2 Financial Data Schedule for IES Utilities Inc. at and
for the period ended March 31, 2000
27.3 Financial Data Schedule for Wisconsin Power and Light
Company at and for the period ended March 31, 2000
(b) Reports on Form 8-K:
- ------------------------
Alliant Energy
Alliant Energy filed a Current Report on Form 8-K, dated January
25, 2000, as amended by Alliant Energy's Current Report on Form
8-K/A dated January 25, 2000, reporting (under Item 5) that on
January 25, 2000, Alliant Energy issued a press release
announcing that Resources agreed to acquire a significant stake
in four Brazilian electric utilities.
Alliant Energy filed a Current Report on Form 8-K, dated January
26, 2000, reporting (under Item 5) that on January 26, 2000,
Alliant Energy issued a press release pursuant to Rule 135c under
the Securities Act of 1933 announcing certain proposed
unregistered offerings. The press release announces that
Resources intends to offer approximately $350 million aggregate
principal amount of exchangeable senior notes due 2030 in a
private placement in accordance with Rule 144A under the
Securities Act of 1933.
-33-
<PAGE>
Alliant Energy filed a Current Report on Form 8-K, dated February
1, 2000, reporting (under Item 5) that on February 1, 2000,
Alliant Energy issued a press release announcing its earnings for
the fourth quarter and the fiscal year ended December 31, 1999.
Alliant Energy filed a Current Report on Form 8-K, dated February
1, 2000, reporting (under Item 5) that on February 1, 2000,
Alliant Energy issued a press release pursuant to Rule 135c under
the Securities Act of 1933 announcing that Resources completed a
private placement of 5,940,960 exchangeable senior notes in the
aggregate principal amount of $402.5 million in accordance with
Rule 144A under the Securities Act of 1933.
Alliant Energy filed a Current Report on Form 8-K, dated February
1, 2000, reporting (under Item 5) certain accounting consequences
for Alliant Energy related to the issuance of 5,940,960
exchangeable senior notes due 2030 in the aggregate principal
amount of $402.5 million by Resources.
WP&L
WP&L filed a Current Report on Form 8-K, dated February 25, 2000,
reporting (under Item 5) certain financial results for the year
ended December 31, 1999.
WP&L filed a Current Report on Form 8-K, dated March 1, 2000,
reporting (under Item 5) that on March 1, 2000, WP&L agreed to
sell $100 million principal amount of its 7-5/8% Debentures due
March 1, 2010 in a public offering.
IESU - None.
-34-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, Alliant Energy Corporation, IES Utilities Inc. and
Wisconsin Power and Light Company have each duly caused this
report to be signed on its behalf by the undersigned thereunto
duly authorized on the 11th day of May 2000.
ALLIANT ENERGY CORPORATION
Registrant
By: /s/ Daniel A. Doyle Vice President-Chief Accounting and Financial
- ----------------------- Planning Officer (Principal Accounting Officer)
Daniel A. Doyle
IES UTILITIES INC.
Registrant
By: /s/ Daniel A. Doyle Vice President-Chief Accounting and Financial
- ----------------------- Planning Officer (Principal Accounting Officer)
Daniel A. Doyle
WISCONSIN POWER AND LIGHT COMPANY
Registrant
By: /s/ Daniel A. Doyle Vice President-Chief Accounting and Financial
- ----------------------- Planning Officer (Principal Accounting Officer)
Daniel A. Doyle
-35-
EXHIBIT 10.1
SUPPLEMENTAL RETIREMENT AGREEMENT
This Supplemental Retirement Agreement is made this ____ day
of ____________, 2000, by and between _________________ (the
"Officer") and Alliant Energy Corporation (the "Company").
W I T N E S S E T H:
WHEREAS, Alliant Energy wishes to provide supplemental
retirement benefits to a select group of senior executive
personnel, including the Officer, to ensure the overall
effectiveness of the Company's executive compensation program and
that the Company will be able to attract, retain, and motivate
qualified senior executive personnel.
WHEREAS, the Company and the Officer have heretofore entered
into one or more agreements (the "Prior Agreements") providing
supplemental retirement, deferred compensation or similar
benefits, which Prior Agreements are identified in Appendix A
hereto; and
WHEREAS, the Company and the Officer wish to enter into this
Agreement, which shall amend, restate, supersede and replace the
Prior Agreements;
NOW, THEREFORE, the parties agree that the Prior Agreements
are hereby amended and restated as follows:
ARTICLE I
SCOPE OF AGREEMENT
1.1 Effect on Prior Agreements. This Agreement shall
supersede and replace the Prior Agreements, effective as of the
date of this Agreement, and the parties shall thereafter have no
further rights or obligations under the Prior Agreements.
1.2 Effect on Change of Control Agreements. If the Officer
is a party to an agreement which is binding on the Company and
which takes effect in the event of a change in control, such
agreement shall supersede and control over the provisions of this
Agreement in the event of any conflict between the two.
1.3 No Contract of Employment. This Agreement does not
constitute an employment agreement between the Officer and the
Company. Nothing in this Agreement shall affect the Company's
right to terminate the Officer's employment or position as an
officer at any time, with or without cause.
1.4 Effect on Other Benefits. Nothing in this Agreement
shall modify, impair or otherwise affect the rights of the
Officer to participate in or receive benefits under any other
employee benefit plan of the Company, it being understood that
the rights of the Officer to participate in or receive benefits
under any such plan shall be determined in accordance with the
provisions of such plan and shall not be affected by the
provisions of this Agreement.
ARTICLE II
DEFINITIONS
2.1 Board of Directors means the Board of Directors of
Alliant Energy Corporation or any committee of the Board which is
designated by the Board of Directors, or permitted by the Bylaws
of the Alliant Energy Corporation, to act on behalf of the Board
of Directors.
2.2 Continuous Employment means the Officer's last
continuous period of employment with the Company immediately
preceding the Officer's retirement. If the Officer has been
continuously employed by the Company since the merger of IES
Industries Inc., WPL Holdings, Inc. and Interstate Power Company,
the Officer's Continuous Employment shall also include his or her
last continuous period of employment with IES Industries Inc.,
WPL Holdings, Inc. or Interstate Power Company, and their
respective subsidiaries, immediately preceding the date of such
merger. If the Officer's Supplemental Benefit is computed by
using the Officer's Prior Employer Benefit as set forth in
Paragraph 3.1, the Officer's service with such prior employers
shall also be treated as Continuous Employment.
2.3 Dependent Child or Children means any child of the
Officer who, on the date of any payment under this Agreement, is
18 years of age or under, is 24 years of age or under and is a
"student" as defined in Section 151(c)(4) of the Internal Revenue
Code, or is a "substantially handicapped person." The term
"child" includes any naturally born or legally adopted child;
provided, in the case of an adopted child, that the adoption
became final prior to such child's 18th birthday. The term
"substantially handicapped person" includes any person who has a
"physical or mental impairment which substantially limits one or
more major life activities," as those terms are defined in 29
C.F.R. Section 32.3.
2.4 Disabled means the Officer has satisfied (and continues
to satisfy) the requirements for receiving disability benefits
under the terms of the Company's long-term disability plan.
2.5 Earnings means the Officer's base salary, bonus and/or
annual incentive pay for personal services rendered to the
Company. The Officer's base salary shall be treated as Earnings
in the calendar year in which it is paid, regardless of when it
is earned. The Officer's bonus and/or annual incentive pay shall
be treated as Earnings in the calendar year in which it is
earned, regardless of when it is paid.
2.6 Eligible Officer means Chairmana Chief Executive
Officer, President, or Executive Vice President of Alliant Energy
Corporation.
2.7 Final Average Earnings means the Officer's average
monthly Earnings for the three consecutive calendar years out of
the Officer's last ten calendar years of employment with the
Company that yields the highest average. If the Officer has been
employed by the Company for fewer than three calendar years, the
Officer's Final Average Earnings shall be the Officer's average
monthly Earnings for all of his or her completed calendar years
of employment with the Company.
2.8 Internal Revenue Code means the Internal Revenue Code
of 1986, as amended.
2.9 Normal Retirement Date means the later of the
Officer's 62nd birthday or the date on which the Officer completes
ten years of Continuous Employment.
2.10 Pension Plan means any defined benefit pension plan of
the Company or its subsidiaries which is qualified under Section
401(a) of the Internal Revenue Code and from which the Officer is
entitled to a benefit.
2.11 Prior Employer Benefit means the monthly amounts
payable to the Officer or the Officer's Surviving Spouse from any
of the Officer's prior employers' qualified or non-qualified
defined benefit pension or similar type of plans, which are
attributable to the prior employers' contributions to such plans.
2.12 Supplemental Benefit means the benefit described in
Paragraph 3.1 and payable to the Officer pursuant to Articles
III, IV or V.
2.13 Surviving Spouse means the individual, if any, who is
legally married to the Officer at the time of the Officer's death.
ARTICLE III
NORMAL RETIREMENT BENEFIT
3.1 Supplemental Benefit.
Subject to the following provisions of this Article III, if the
Officer remains a full-time employee and an Eligible Officer of
the Company until his or her Normal Retirement Date, the Officer
shall receive a Supplemental Benefit equal to 60% of the
Officer's Final Average Earnings, reduced by the sum of:
(i) the monthly benefit payable to the Officer
from the Pension Plan;
plus
(ii) the monthly benefit payable to the Officer
from the nonqualified Excess Retirement Plan;
plus
(iii)the monthly amount of the Officer's Prior
Employer Benefit. See Appendix B for Prior Employer
Offset.
The Supplemental Benefit shall be paid in equal monthly
installments, commencing on the first day of the month following
the Officer's retirement from the Company as both an Officer and
an employee and continuing for the lifetime of the Officer,
except as otherwise provided in Paragraph 3.3.
(a) For the purposes of Subparagraph (a), the amount
of the Officer's monthly benefit from the Pension Plan shall be
determined as follows:
(i) If the Officer receives a joint and survivor
annuity from the Pension Plan and the Officer's
Surviving Spouse is the joint annuitant, the Officer's
monthly benefit from the Pension Plan shall be the
monthly amount payable to the Officer under such joint
and survivor annuity.
(ii) If the Officer receives a single life annuity
from the Pension Plan, the Officer's monthly benefit
from the Pension Plan shall be the monthly amount
payable to the Officer under such single life annuity.
(iii)If the Officer receives any other form of
payment from the Pension Plan, such other form of
payment shall be converted to an actuarially equivalent
single life annuity, using the actuarial assumptions
then in use for such purpose under the Pension Plan,
and the Officer's monthly benefit from the Pension Plan
shall be the monthly amount that would be payable to
the Officer under such single life annuity.
(iv) If a portion of the Officer's benefits under
the Pension Plan have been awarded to an Alternate
Payee pursuant to a qualified domestic relations order,
as defined in Section 414(p) of the Internal Revenue
Code, the Officer's monthly benefit from the Pension
Plan shall be deemed to be the amount that would have
been payable to the Officer if no such order had been
entered.
(v) The Officer's monthly benefit from the
Pension Plan shall be determined as though it had
commenced on the same date as the Officer's
Supplemental Benefit, regardless of when the Officer's
Pension Plan benefit actually commences.
(vi) Any increase in the monthly amount of the
Officer's Pension Plan benefit shall correspondingly
reduce the monthly amount of the Officer's Supplemental
Benefit unless the Board of Directors provides by
resolution that the Supplemental Benefit shall not be
so reduced.
(b) For the purposes of Subparagraph (a), the monthly
amount of the Officer's Prior Employer Benefit shall be
determined, and shall be included in the computation of the
Supplemental Benefit, in the sole and absolute discretion of the
Board of Directors.
3.2 Officer's Death After Receiving Twelve Years of Benefit
Payments. If the Officer dies after receiving at least 144
monthly Supplemental Benefit payments, the Officer's Supplemental
Benefit shall terminate upon the Officer's death (with the full
monthly payment being made for the month in which such death
occurs), and the Company shall have no further obligation to make
any payments under this Article.
3.3 Officer's Death Prior to Receiving Twelve Years of
Benefit Payments.
(a) If the Officer dies after the commencement of
Supplemental Benefit payments but prior to receiving 144 monthly
payments, the Officer's Surviving Spouse (if any) shall continue
to receive the monthly payments determined under Paragraph 3.1
until the date on which the Officer and such Surviving Spouse
have received a total of 144 monthly payments. If both the
Officer and the Officer's Surviving Spouse die before they have
received a total of 144 monthly payments, the monthly payments
determined under Paragraph 3.1 shall continue to be paid to the
Officer's Dependent Children until a total of 144 monthly
Supplemental Benefit payments have been made to the Officer, the
Officer's Surviving Spouse, and the Officer's Dependent Children.
(b) Payments under this Paragraph 3.3 shall be made
only to the Officer's Surviving Spouse and Dependent Children,
and in no event shall such payments be made to the estate or
heirs of the Officer, to the estates or heirs of the Officer's
Surviving Spouse or Dependent Children, or to any persons other
than the Officer's Surviving Spouse or Dependent Children. If a
payment to Dependent Children is due on a date when there is more
than one Dependent Child, such payment shall be equally divided
among those persons who qualify as Dependent Children on the date
the payment is due. If the Officer is deceased and there are no
individuals who qualify as the Officer's Surviving Spouse or
Dependent Children on the date a payment is due, the Company
shall have no further obligation to make payments under this
Article.
ARTICLE IV
EARLY RETIREMENT BENEFIT
4.1 Supplemental Benefit. If the Officer retires at or
after age 55 but prior to his or her Normal Retirement Date with
ten or more years of Continuous Employment, the Officer shall
receive the Supplemental Benefit described in Article III
commencing on the first day of the month following the Officer's
retirement from the Company as both an Officer and an employee.
If the Officer's Supplemental Benefit begins prior to age 62, the
monthly amount shall be reduced by one quarter of one percent
(.25%) for each month by which the date on which the Officer
retires precedes his or her Normal Retirement Date; provided,
however, that there shall be no reduction if the Officer has been
an Eligible Officer with the Company for ten or more years after
April 21, 1998.
4.2 Payment of Benefit. The amount payable under this
Article IV shall be calculated and paid in the same manner, and
shall be subject to the same conditions and limitations, as the
benefit described in Article III.
ARTICLE V
DISABILITY BENEFIT
5.1 Supplemental Benefit. If the Officer becomes Disabled
prior to his or her termination of employment with the Company,
and continues to be Disabled until he or she would have been
entitled to a Supplemental Benefit under Articles III or IV, the
Officer shall be eligible to receive a Supplemental Benefit
commencing on the first day of the month following the date on
which the Officer ceases to be entitled to disability benefits
under the Company's long-term disability plan. The amount
payable under this Article V shall be calculated and paid in the
same manner, and shall be subject to the same conditions and
limitations, as the benefit described in Article III (if the
Officer ceases to be entitled to disability benefits at or after
his or her Normal Retirement Date) or in Article IV (if the
Officer ceases to be entitled to disability benefits prior to his
or her Normal Retirement Date but after becoming entitled to a
Supplemental Benefit under Article IV).
5.2 Cessation of Disability. If the Officer becomes
Disabled while employed as an Eligible Officer the Company, but
ceases to be Disabled prior to the date on which he or she would
have been entitled to a Supplemental Benefit under Section 5.1,
the period during which the Officer was Disabled shall be
included in the Officer's period of Continuous Employment if (and
only if):
(a) the Officer resumes full-time employment with the
Company as an Eligible Officer within 30 days after he or
she ceased to be Disabled; and
(b) the Officer continues in such employment until he
or she becomes entitled to a Supplemental Benefit under
Articles III or IV.
ARTICLE VI
PRERETIREMENT DEATH BENEFIT
6.1 Death Benefit.
(a) If the Officer dies prior to termination of his or
her employment with the Company, the Officer's Surviving Spouse
(if any) shall receive a death benefit equal to 60% of the
Officer's Final Average Earnings, reduced by the sum of:
(i) the monthly benefit payable to the Officer
from the Pension Plan;
plus
(ii) the monthly benefit payable to the Officer
from the nonqualified Excess Retirement Plan;
plus
(iii)the monthly amount of the Officer's Prior
Employer Benefit.
The death benefit payable under this Article VI shall be paid in
equal monthly installments, commencing within 30 days after the
Officer's death and ending when 144 monthly payments have been
made to the Officer's Surviving Spouse.
(b) For the purposes of Subparagraph (a), the amount
of the Surviving Spouse's monthly benefit from the Pension Plan
shall be determined as follows:
(i) The Surviving Spouse's monthly benefit from
the Pension Plan shall be the monthly amount payable to
the Surviving Spouse in the form of a single life
annuity. If the Surviving Spouse receives any other
form of payment under the Pension Plan, such other form
of payment shall be converted to an actuarially
equivalent single life annuity, using the actuarial
assumptions then in use for such purpose under the
Pension Plan, and the Surviving Spouse's monthly
benefit from the Pension Plan shall be the monthly
amount that would be payable to the Surviving Spouse
under such single life annuity.
(ii) If a portion of the Officer's or the
Surviving Spouse's Pension Plan benefit has been
awarded to an Alternate Payee pursuant to a qualified
domestic relations order, as defined in Section 414(p)
of the Internal Revenue Code, the Surviving Spouse's
monthly benefit from the Pension Plan shall be deemed
to be the amounts that would have been payable to the
Surviving Spouse if no such order had been entered.
(iii)The Surviving Spouse's monthly benefit from
the Pension Plan shall be determined as though it had
commenced on the same date as the Surviving Spouse's
death benefit, regardless of when such benefit payments
actually begin.
(iv) Any increase in the monthly amount of the
Surviving Spouse's Pension Plan benefit shall
correspondingly reduce the monthly amount of the
Surviving Spouse's death benefit unless the Board of
Directors provides by resolution that the death benefit
shall not be so reduced.
(c) For the purposes of Subparagraph (a), the monthly
amount of the Officer's Prior Employer Benefit shall be
determined, and shall be included in the computation of the
Surviving Spouse's death benefit, in the sole and absolute
discretion of the Board of Directors.
6.2 Surviving Spouse's Death Prior to Receiving Twelve
Years of Benefit Payments.
(a) If there is no Surviving Spouse when the Officer
dies, or if the Officer's Surviving Spouse dies prior to the
receipt of 144 monthly payments, the monthly payments described
in Paragraph 6.1 shall be paid (or continue to be paid) to the
Officer's Dependent Children until a total of 144 monthly
Supplemental Benefit payments have been made to the Officer's
Surviving Spouse and Dependent Children.
(b) Payments under this Article VI shall be made only
to the Officer's Surviving Spouse and Dependent Children, and in
no event shall such payments be made to the estate or heirs of
the Officer's Surviving Spouse and Dependent Children or to any
persons other than the Officer's Surviving Spouse and Dependent
Children. If a payment to Dependent Children is due on a date
when there is more than one Dependent Child, such payment shall
be equally divided among those persons who qualify as Dependent
Children on the date the payment is due. If there are no
individuals who qualify as the Officer's Surviving Spouse and
Dependent Children on the date a payment is due, the Company
shall have no further obligation to make payments under this
Article.
ARTICLE VII
POSTRETIREMENT DEATH BENEFIT
7.1 Death Benefit. If the Officer dies subsequent to the
commencement of Supplemental Benefit payments under Articles III,
IV or V, the Company shall pay a death benefit to the Officer's
beneficiary. Such benefit shall be in addition to the benefits
paid to the Officer and the Officer's Surviving Spouse or
Dependent Children under Articles III, IV or V; however, no death
benefit shall be payable under this Article VII if the Officer's
death causes a beneficiary or the estate of the Officer to
receive a death benefit under the disability premium waiver
provision of the Company's group life insurance plan, or if the
Officer dies before retirement.
7.2 Amount of Death Benefit. The death benefit payable
pursuant to Paragraph 7.1 shall be an amount equal to 100% of the
Officer's Final Average Earnings, as determined for the purpose
of calculating the amount of the Officer's benefits under Article
III, IV, or V, whichever is applicable.
7.3 Payment of Death Benefit. The Postretirement Death
Benefit shall be paid to the beneficiary or beneficiaries
designated in writing by the Officer or, in default of such
designation or the failure of the designated beneficiaries to
survive the Officer, to the Officer's estate. The death benefit
payable under this Article shall be paid in a single sum, within
30 days after the date the proper beneficiary has been
identified. Beneficiary designation shown on Appendix C.
ARTICLE VIII
TERMINATION OF EMPLOYMENT OR LOSS OF POSITION
8.1 Termination of Employment. If the Officer is
discharged by the Company for any reason, or if the Officer's
employment with the Company terminates prior to the date the
Officer becomes entitled to a Supplemental Benefit under Articles
III or IV for any reason other than the Officer's death or
disability, the Officer (and his or her Surviving Spouse,
Dependent Children, or other beneficiaries) shall forfeit any and
all rights to receive benefits under this Agreement.
8.2 Loss of Position as Officer. The Officer shall be
eligible for benefits under this Agreement only while holding the
position of Eligible Officer in the Company. Except as otherwise
provided in Article V (relating to Disability), if the Officer
ceases to hold such a position prior to the Officer's termination
of employment, the Officer (and his or her Surviving Spouse,
Dependent Children, or other beneficiaries) shall forfeit any and
all rights to receive benefits under this Agreement unless the
Officer retires with a right to an immediate benefit under
Article III or IV within 30 days after the loss of such position.
ARTICLE IX
FUNDING
9.1 Unsecured Obligation. The Company's obligations under
this Agreement are an unsecured promise to make benefit payments
in the future, and nothing herein shall be construed as giving
the Officer or his or her beneficiaries any right, title,
interest or claim in or to any specific asset, fund, reserve,
account or property owned by the Company, or in which the Company
has any right, title or interest, either now or in the future.
The rights of the Officer and his or her beneficiaries to receive
payments under this Agreement shall be solely those of unsecured
general creditors of the Company.
9.2 "Rabbi" Trust. This Agreement is intended to be
unfunded for the purposes of the Internal Revenue Code and the
Employee Retirement Income Security Act of 1974, as amended.
However, nothing in this Agreement shall preclude the Company
from establishing a trust (of the type commonly known as a "rabbi
trust") to assist it in meeting its obligations under this
Agreement. If a rabbi trust was established with respect to the
Officer's Prior Agreements, this Agreement shall be substituted
for the Prior Agreements for all purposes of such trust, and any
reference in such trust to the Prior Agreements shall be deemed
to be a reference to this Agreement.
ARTICLE X
ADMINISTRATION
10.1 Administration and Interpretation. The Board of
Directors has sole and exclusive discretion to interpret the
provisions of this Agreement, and any such interpretation shall
be final and binding upon the Officer unless it is found by a
court of competent jurisdiction to have been arbitrary and
capricious. The Board of Directors may adopt such rules and
regulations relating to the administration of this Agreement as
it may deem necessary or advisable.
10.2 Claims Procedure. If the Officer or the Officer's
beneficiary (hereinafter referred to as a "Claimant") is denied
any benefit under this Agreement, he or she may file a claim with
the Board of Directors. The Board of Directors shall notify the
Claimant within 90 days of its allowance or denial of the claim,
unless the Claimant receives written notice from the Board of
Directors prior to the end of such 90 day period that special
circumstances require an extension of the time for decision,
which extension shall not exceed an additional 90 days. The
notice of the Board of Directors' decision shall be in writing
sent by mail to Claimant's last known address and, if a denial of
the claim, and shall contain:
(a) the specific reasons for the denial;
(b) specific references to pertinent provisions of
this Agreement on which the denial is based; and
(c) if applicable, a description of any additional
information or material necessary to perfect the claim, an
explanation of why such information or material is necessary
and an explanation of the claim review procedure.
10.3 Review Procedure.
(a) A Claimant is entitled to request a review of any
denial of his or her claim for a benefit. The request for review
must be submitted to the Board of Directors in writing within 60
days of mailing of the notice of the denial. Absent a request
for review within the 60 day period, the claim will be deemed to
have been conclusively denied.
(b) The review shall be conducted by the Board of
Directors, which shall afford the Claimant a hearing and the
opportunity to review all pertinent documents and submit issues
and comments orally and in writing. The Board of Directors shall
render a decision within 60 days after receipt of a request for a
review; provided, that in special circumstances (such as the
necessity of holding a hearing) the Board of Directors may extend
the time for decision by not more than 60 days upon written
notice to the Claimant. The Claimant shall receive written
notice of the Board of Directors' decision, together with
specific reasons for the decision and references to the pertinent
provisions of this Agreement which form the basis for the
decision.
ARTICLE XI
AMENDMENT AND TERMINATION
11.1 By the Parties. Except as provided in Paragraph 11.2,
this Agreement may not be amended or terminated except by a
written instrument signed by both parties.
11.2 By the Company. At any time prior to the Officer's
termination of employment with a right to receive benefit
payments under this Agreement, this Agreement may be terminated
or amended by action of the Board of Directors in its sole and
absolute discretion, without any notice to or the consent or
approval of the Officer; provided, that:
(a) this Agreement may not be amended or terminated by
the Board of Directors unless a similar amendment or
termination is made with respect to all similar agreements
between the Company and its Eligible Officers; and
(b) this Agreement may not be amended or terminated in
a manner that would reduce or impair the Officer's right to
receive payment of his or her Accrued Benefit if the Officer
subsequently retires under circumstances that would have
entitled the Officer to a benefit if this Agreement had not
been amended or terminated. For the purposes of this
Subparagraph (b), the Officer's "Accrued Benefit" is an
amount equal to one-fifteenth of the Supplemental Benefit
the Officer would have been be entitled to receive at
retirement if this Agreement had not been amended or
terminated, multiplied by the Officer's years of Continuous
Employment (up to a maximum of 15 years) on the date the
Agreement is amended or terminated.
Subject to the foregoing, the right of the Board of Directors to
amend or terminate this Agreement shall include the absolute
discretion to make any amendment prospective or retroactive in
application.
ARTICLE XII
RESTRICTIVE COVENANT
12.1 Covenant Not to Compete. Notwithstanding anything in
this Agreement to the contrary, it is expressly agreed that all
payments under this Agreement shall terminate, and that the
Company shall have no further obligation under this Agreement,
upon any violation of the provisions of Paragraph 12.2. Payments
pursuant to this Agreement are intended to serve as consideration
for this covenant not to compete.
12.2 Scope of Covenant. If, during the period set forth
herein and within the service area in which the Company or any of
its affiliated companies provides utility services (or in the
case of any non-utility business, within the geographic area
served by such business), the Officer accepts employment with or
becomes a consultant to, or the Officer becomes a partner or
shareholder in, any business that is in competition with the
business of the Company or any of its affiliated companies, and
the Officer fails to terminate such position within 30 days after
notice from the Board of Directors of the violation of this
covenant not to compete, the Officer and the Officer's
beneficiaries shall forfeit all rights to future payments under
this Agreement. However, the Officer may hold up to a five
percent interest in any company that is traded on the New York
Stock Exchange, American Stock Exchange or other national or
over-the-counter exchange without violating the provisions of this
Paragraph 12.2. Any violation of the provisions set forth above
during the period commencing on the date of the Officer's
termination of employment with the Company and ending on the
third anniversary of such date shall constitute a violation of
this Article and shall result in the termination of all future
payments under this Agreement. The determination of the Board of
Directors as to whether a business is in competition with the
Company and whether the competition is occurring in the
geographic area designated above shall be controlling for
purposes of this Agreement.
12.3 Reasonableness of Restrictions. The Officer agrees
that the restrictions set forth in this Article XII including,
but not limited to, the time period and the geographical area of
such restrictions are fair and reasonable and are reasonably
required for the protection of the interests of the Company and
its affiliated companies. In the event that, notwithstanding the
foregoing, any of the provisions of this Article XII shall be
held to be invalid or unenforceable, the remaining provisions
thereof shall nevertheless continue to be valid and enforceable
as though the invalid or unenforceable parts had not been
included. In the event that any provision of this Article XII
relating to the time period and/or the areas of restriction shall
be declared by a court of competent jurisdiction to exceed the
maximum time period or areas such court deems reasonable and
enforceable, the time period and/or areas of restriction deemed
reasonable and enforceable by said court shall become and
thereafter be the maximum time period and/or areas.
ARTICLE XIII
GENERAL PROVISIONS
13.1 Assignability of Benefits. Neither the Officer nor his
or her beneficiaries shall have the power to transfer, assign,
anticipate, mortgage or otherwise encumber any right to receive a
payment in advance of such payment, and any attempted transfer,
assignment, anticipation, mortgage or encumbrance shall be void.
No payment shall be subject to seizure for payment of public or
private debts, judgments, alimony or separate maintenance, or be
transferable by operation of law in the event of bankruptcy,
insolvency or otherwise.
13.2 Applicable Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of
Wisconsin, except to the extent the same are superseded by
applicable federal law.
13.3 Tax Withholding. The Company shall withhold all
applicable income and other taxes required on all payments under
this Agreement.
13.4 Counterparts. This Agreement may be signed in
counterparts, which together shall constitute written evidence of
the complete agreement of the parties.
13.5 Headings. The headings in this Agreement are for
convenience only and shall not be used to interpret or construe
its provisions.
IN WITNESS WHEREOF, the parties have hereto set their
respective hands on the day and year first above written.
Executive's Name
By
----------------------
Alliant Energy Corporation
EXHIBIT 10.2
THIRD AMENDED AND RESTATED
NOVEMBER 1998 STOCKHOLDERS' AGREEMENT
This Third Amended and Restated November 1998
Stockholders' Agreement (this "Agreement") is entered into as of
March 10, 2000, by and among McLeodUSA Incorporated, a Delaware
corporation (the "Company"); Alliant Energy Corporation, a
Wisconsin corporation ("AEC"); Alliant Energy Investments, Inc.,
an Iowa corporation and indirect wholly owned subsidiary of AEC
("AEI"); Heartland Properties, Inc., a Wisconsin corporation and
indirect wholly owned subsidiary of AEC ("Heartland"); LNT
Communications LLC, an Iowa limited liability company and
indirect wholly owned subsidiary of AEC ("LNT"); Alliant Energy
Foundation, Inc., a Wisconsin corporation (non-profit) ("AEF" and
together with AEC, AEI, Heartland and LNT, the "AEC Entities");
Clark E. McLeod ("McLeod"); Mary E. McLeod (together with McLeod,
the "McLeods"); Richard A. Lumpkin ("Lumpkin") and certain of the
former shareholders of Consolidated Communications Inc. ("CCI")
and certain permitted transferees of certain of the former CCI
shareholders in each case who are listed in Schedule I hereto
(the "Principal CCI Shareholders"); and for purposes of Sections
4, 5.6, 5.8(b), 5.11 and the first and second sentences of
Section 5.3 only, certain of the other former CCI shareholders
and certain permitted transferees of certain of the other former
CCI shareholders in each case who are listed in Schedule II
hereto (the "Other CCI Shareholders"). The AEC Entities, the
McLeods, and Lumpkin and the Principal CCI Shareholders are
referred to herein collectively as the "Principal Stockholders"
and individually as a "Principal Stockholder."
WHEREAS, the Company, AEC, AEI, Heartland, AEF, the
McLeods, Lumpkin, the Principal CCI Shareholders and the Other
CCI Shareholders are parties to a Second Amended and Restated
November 1998 Stockholders' Agreement, entered into as of
December 17, 1999 (the "Second Amended and Restated November 1998
Stockholders' Agreement");
WHEREAS, the Company, AEC, AEI, Heartland, AEF, the
McLeods, Lumpkin and the Principal CCI Shareholders desire to add
LNT as a party to this Agreement as a result of the transfer of
certain shares of the Company's Class A common stock, par value
$.01 per share (the "Class A Common Stock"), by an Affiliate (as
defined in Section 1.2) of AEC to LNT;
WHEREAS, the Other CCI Shareholders no longer desire to
be parties to this Agreement and the Company and the Principal
Stockholders desire to terminate the Other CCI Shareholders as
parties to this Agreement;
WHEREAS, the Company and the Principal Stockholders
deem it to be in the best interests of the Company and its
stockholders to provide for the continuity and stability of the
business and policies of the Company on the terms and conditions
hereinafter set forth;
WHEREAS, concurrently with the execution and delivery
of this Agreement, the Company, the Principal Stockholders, the
Other CCI Shareholders and certain other stockholders of the
Company are entering into an amendment and restatement of the
Second Amended and Restated January 1999 Stockholders' Agreement,
entered into as of December 17, 1999; and
WHEREAS, the Company and the Principal Stockholders
desire to amend and restate the Second Amended and Restated
November 1998 Stockholders' Agreement in its entirety with the
terms and conditions hereinafter set forth;
NOW, THEREFORE, for and in consideration of the
foregoing and of the mutual covenants and agreements contained
herein, the parties hereto agree as follows:
1. VOTING AGREEMENT
1.1 Board of Directors
For the period commencing on the Effective Date (as
defined in Section 1.2) and ending on the Expiration Date (as
defined in Section 1.2), each Principal Stockholder, for so long
as each such Principal Stockholder beneficially and continuously
owns at least two million five hundred thousand (2,500,000)
shares of Class A Common Stock, subject to adjustment pursuant to
Section 5.1, shall take or cause to be taken all such action
within their respective power and authority as may be required:
(a) to establish and maintain the authorized size of the Board of
Directors of the Company (the "Board of Directors" or the "Board") at
up to thirteen (13) directors;
(b) to cause to be elected to the Board one (1) director designated by the
AEC Entities, for so long as the AEC Entities collectively
beneficially and continuously own at least two million five hundred
thousand (2,500,000) shares of Class A Common Stock (subject to
adjustment pursuant to Section 5.1);
(c) to cause Lumpkin to be elected to the Board, for so long as Lumpkin
and the Principal CCI Shareholders collectively beneficially and
continuously own at least two million five hundred thousand
(2,500,000) shares of Class A Common Stock (subject to adjustment
pursuant to Section 5.1);
(d) to cause to be elected to the Board three (3) directors who are
executive officers of the Company designated by McLeod, for so long as
the McLeods collectively beneficially and continuously own at least
two million five hundred thousand (2,500,000) shares of Class A Common
Stock (subject to adjustment pursuant to Section 5.1);
(e) to cause to be elected to the Board a director or directors nominated
by the Board to replace a director or directors designated pursuant to
paragraphs (b) through (d) above upon the earlier to occur of such
designated director's or directors' resignation (and the acceptance of
such resignation by the Board) and the expiration of such director's
or directors' term as a result of any party or parties identified in
paragraphs (b) through (d) above no longer collectively beneficially
and continuously owning at least two million five hundred thousand
(2,500,000) shares of Class A Common Stock (subject to adjustment
pursuant to Section 5.1) at any time during the period commencing on
the Effective Date and ending on the Expiration Date; it being
understood that within three (3) business days following such time
that the party or parties identified in paragraphs (b) through (d)
above no longer collectively beneficially and continuously own at
least two million five hundred thousand (2,500,000) shares of Class A
Common Stock (subject to adjustment pursuant to Section 5.1) during
such period, such party or parties shall use its or their respective
best efforts to cause the director or directors designated by such
party or parties to tender their immediate resignation to the Board
which the Board may accept or reject; and
(f) to cause to be elected to the Board, if and as nominated by the Board,
up to eight (8) non-employee directors.
For purposes of Section 1.1, (i) the McLeods shall be
deemed to be a single Principal Stockholder, (ii) Lumpkin and all
of the Principal CCI Shareholders shall be deemed to be a single
Principal Stockholder, and the Principal CCI Shareholders shall
be deemed to own shares "continuously" as long as the shares of
the Principal CCI Shareholders are owned by the Principal CCI
Shareholders or a CCI Permitted Transferee (as defined in Section
3.1), and (iii) the AEC Entities shall be deemed to be a single
Principal Stockholder, and the AEC Entities shall be deemed to
own shares "continuously" as long as the shares of the AEC
Entities are owned by the AEC Entities or an AEC Permitted
Transferee (as defined in Section 3.1).
1.2 Definitions
For purposes of this Agreement, the following terms
have the meanings indicated:
(a) "Affiliate" and "Associate" shall have the
respective meanings ascribed to such terms in Rule
12b-2 under the Securities Exchange Act of 1934,
as amended (the "Exchange Act").
(b) A person shall be deemed the "beneficial
owner" of and shall be deemed to "beneficially
own" any securities:
(i) which such person or any of such person's
Affiliates or Associates, directly or
indirectly, has the right to acquire
(whether such right is exercisable
immediately or only after the passage of
time) pursuant to any agreement,
arrangement or understanding (whether or
not in writing), or upon the exercise of
conversion rights, exchange rights, other
rights, warrants or options, or otherwise;
(ii)which such person or any of such person's
Affiliates or Associates, directly or
indirectly, has the right to vote or
dispose of or has "beneficial ownership"
of (as determined pursuant to Rule 13d-3
under the Exchange Act), including
pursuant to any agreement, arrangement or
understanding, whether or not in writing;
or
(iii) which are beneficially owned, directly
or indirectly, by any other person (or any
Affiliate or Associate thereof) with which
such person or any of such person's
Affiliates or Associates has any
agreement, arrangement or understanding
(whether or not in writing), for the
purpose of acquiring, holding, voting or
disposing of any voting securities of the
Company.
For purposes of the definition of "beneficial
owner" and "beneficially own," the terms
"agreement," "arrangement" and "understanding"
shall not include this Agreement or the Third
Amended and Restated January 1999 Stockholders'
Agreement (as defined in Section 1.2).
(c) "Effective Date" shall mean March 10, 2000.
(d) "Expiration Date" shall mean December 31,
2001.
(e) "Original Stockholders' Agreement" shall mean
the Stockholders' Agreement, entered into as of
June 14, 1997, as amended on September 19, 1997,
by and among the Company, AEI, the McLeods,
Lumpkin and certain other stockholders.
(f) "Stock Split" shall mean that certain
two-for-one stock split in the form of a stock
dividend paid on July 26, 1999 to stockholders of
record on July 12, 1999 effected by the Company
with respect to its Class A Common Stock.
(g) "Subsidiary" or "Subsidiaries" shall mean a
corporation, partnership, joint venture or other
entity of which AEC owns, directly or indirectly,
one hundred percent (100%) of the outstanding
securities or other interests the holders of which
are generally entitled to vote for the election of
the board of directors or other governing body.
(h) "Third Amended and Restated January 1999
Stockholders' Agreement" shall mean the Third
Amended and Restated January 1999 Stockholders'
Agreement, entered into as of March 10, 2000, by
and among the Company, the Principal Stockholders,
the Other CCI Shareholders, M/C Investors L.L.C.
and Media/Communications Partners III Limited
Partnership.
2. STANDSTILL
AEC hereby agrees that, prior to the Expiration Date,
neither AEC nor any Affiliate of AEC will (and AEC will not
assist or encourage others to), directly or indirectly, acquire
or agree, offer, seek or propose to acquire, or cause to be
acquired, ownership (including, but not limited to, beneficial
ownership) of any securities issued by the Company or any of its
subsidiaries, or any rights or options to acquire such ownership
(including from a third party), except (a) to the extent
expressly set forth in this Agreement, (b) as consented prior
thereto in writing by the Board of Directors, (c) upon conversion
of any Class B common stock, $.01 par value per share, of the
Company into Class A Common Stock pursuant to the terms thereof,
(d) with respect to transfers of equity securities between or
among AEC and AEC's Subsidiaries consistent with the terms and
conditions of this Agreement, or (e) with respect to the grant,
vesting or exercise of stock options.
3. TRANSFERS OF SECURITIES
3.1 Restrictions on Transfers
(a) Except as otherwise provided in this Section 3.1
or Section 3.2, each Principal Stockholder hereby severally
agrees that until the Expiration Date, such Principal Stockholder
will not offer, sell, contract to sell, grant any option to
purchase, or otherwise dispose of, directly or indirectly,
("Transfer"), any equity securities of the Company or any other
securities convertible into or exercisable for such equity
securities ("Securities") beneficially owned by such Principal
Stockholder (including distributions of Securities with respect
to such Securities and Securities acquired as a result of a stock
split with respect to such Securities) without submitting a
written request to, and receiving the prior written consent of,
the Board of Directors, provided, however, that (i) the AEC
Entities may transfer Securities to or among any Subsidiary or
Subsidiaries of AEC, and (ii) any Principal CCI Shareholder may
transfer Securities to any other Principal CCI Shareholder, the
spouse of a Principal CCI Shareholder, or a lineal descendant of
a Principal CCI Shareholder (or a trust for the primary benefit
of any one or more of a Principal CCI Shareholder, the spouse of
a Principal CCI Shareholder, or a lineal descendant of a
Principal CCI Shareholder or a partnership or limited liability
company owned and managed solely by one or more Principal CCI
Shareholders, spouses of Principal CCI Shareholders and lineal
descendants of Principal CCI Shareholders), or, in the case of a
Principal CCI Shareholder that is a trust, to any beneficiary of
such trust (or a trust for the primary benefit of such
beneficiary or a partnership or limited liability company owned
and managed solely by one or more Principal CCI Shareholders,
spouses of Principal CCI Shareholders and lineal descendants of
Principal CCI Shareholders), in each case with respect to clause
(i) and clause (ii), provided that (x) such transfer is done in
accordance with the transfer restrictions applicable to such
Securities under federal and state securities laws and (y) the
transferee agrees to be bound by the terms hereof (as this
Agreement may be amended or amended and restated from time to
time) as a Principal Stockholder with respect to the shares being
transferred pursuant to this Section (any such AEC Entity
transferee pursuant to the foregoing proviso, an "AEC Permitted
Transferee" and any such Principal CCI Shareholder transferee
pursuant to the foregoing proviso, a "CCI Permitted Transferee"),
and any such transfer shall not constitute a "Transfer" for
purposes of this Agreement. Notwithstanding the foregoing, no
party hereto shall avoid the provisions of this Agreement by
making one or more transfers to one or more AEC Permitted
Transferees or CCI Permitted Transferees, as the case may be, and
then at any time directly or indirectly disposing of all or any
portion of such party's interest in any such AEC Permitted
Transferee or CCI Permitted Transferee, as the case may be. In
the event that the Board of Directors consents to any Transfer of
Securities by a Principal Stockholder pursuant to this
Section 3.1(a) upon the written request of such Principal
Stockholder (the "Transferring Stockholder") and except as
otherwise provided in Section 3.1(b) and Section 3.2, each other
Principal Stockholder shall, notwithstanding the provisions of
this Section 3.1(a), have the right to Transfer a percentage of
the total number of Securities beneficially owned by such
Principal Stockholder equal to the percentage of the total number
of Securities beneficially owned by the Transferring Stockholder
that the Board of Directors has consented may be Transferred by
such Transferring Stockholder. The parties acknowledge that any
Transfer pursuant to this Section 3.1(a) to which the Board of
Directors has consented may be in connection with, or as part of,
a private placement by the Company of, or other transaction
involving, its Securities.
(b) In addition to the provisions of Section 3.1(a),
for the period commencing for the quarter ending March 31, 2000
and ending on the Expiration Date, the Board shall determine
prior to the public release of the Company's consolidated
financial results with respect to each such financial reporting
quarter during such period, the aggregate number, if any, of
shares of Class A Common Stock (not to exceed in the aggregate
three hundred thousand (300,000) shares of Class A Common Stock
per quarter, subject to adjustment pursuant to Section 5.1) that
may be Transferred by the Principal Stockholders (the "Transfer
Amount") during the period commencing on the third (3rd) business
day and ending on the twenty-third (23rd) business day following
such public release of the Company's quarterly or annual
financial results or such other trading period designated or
permitted by the Board with respect to the purchase and sale of
its Securities (each such period, a "Transfer Period").
Notwithstanding the provisions of Section 3.1(a), each Principal
Stockholder shall be entitled to Transfer during each Transfer
Period, provided such Transfer is effected in accordance with all
applicable federal and state securities laws, a number of shares
of Class A Common Stock equal to thirty-three and one-third
percent (33 1/3%) of the Transfer Amount, if any, for such
Transfer Period (rounding down in the case of any fractional
amount). Any portion of any Principal Stockholder's share of the
Transfer Amount that such Principal Stockholder elects not to
transfer during a Transfer Period shall be reallocated equally
among the remaining Principal Stockholders who intend to Transfer
shares of Class A Common Stock during such Transfer Period, and
such remaining Principal Stockholders shall be entitled to
Transfer such additional shares of Class A Common Stock during
the Transfer Period, provided such Transfer is effected in
accordance with all applicable federal and state securities
laws. In no event shall any portion of a Transfer Amount that is
not utilized by a Principal Stockholder during a Transfer Period
be reallocated or otherwise credited to any subsequent Transfer
Periods.
(c) For the period commencing for the quarter ending
March 31, 2000 and ending on the Expiration Date, the Company
shall give each Principal Stockholder prompt written notice (in
any event no later than fifty (50) days prior to the beginning of
the applicable Transfer Period) of its determination of any
Transfer Amount. Within seven (7) days of receipt of such
notice, any Principal Stockholder that desires to Transfer shares
of Class A Common Stock during such Transfer Period pursuant to
Section 3.1(b) shall provide written notice to the Company of the
number of shares of Class A Common Stock that such Principal
Stockholder desires to Transfer pursuant to Section 3.1(b). Not
later than seven (7) days after receipt of such responses, the
Company shall notify all remaining Principal Stockholders of any
Principal Stockholder's election not to Transfer the total number
of shares of Class A Common Stock that such Principal Stockholder
is entitled to Transfer during such Transfer Period. Any
Principal Stockholder that desires to Transfer additional shares
of Class A Common Stock equal to all or part of the remaining
Transfer Amount shall notify the Company within seven (7) days of
receipt of the Company's second notice. The Company shall
allocate the remaining Transfer Amount in accordance with the
provisions of Section 3.1(b) and shall notify the appropriate
Principal Stockholders of such allocation no later than ten (10)
days prior to the beginning of the Transfer Period.
(d) For purposes of this Section 3.1, the McLeods shall
be deemed to be a single Principal Stockholder, Lumpkin and all
of the Principal CCI Shareholders shall be deemed to be a single
Principal Stockholder and the AEC Entities shall be deemed to be
a single Principal Stockholder.
3.2 Registration Rights
(a) In the event that the Board of Directors consents
pursuant to Section 3.1(a) to a Principal Stockholder's request
for a Transfer and in connection therewith, the Company agrees to
register Securities with respect to such Transfer under the
Securities Act of 1933, as amended (the "Securities Act"), the
Company shall grant each other Principal Stockholder the
opportunity (subject to reduction in the event the registered
Transfer is underwritten) to register for Transfer under the
Securities Act a percentage of the total number of Securities
beneficially owned by such Principal Stockholder equal to the
percentage of the total number of Securities beneficially owned
by the Transferring Stockholder that such Transferring
Stockholder is registering for Transfer under the Securities Act,
on the same terms and conditions as the Transferring Stockholder
(each Principal Stockholder registering, or indicating a desire
to register, any Securities for Transfer under the Securities Act
pursuant to this Section 3.2 being a "Registering Transferor").
(b) To the extent that the Company grants pursuant to
Section 3.1(b) a Principal Stockholder the opportunity to
register shares of Class A Common Stock for Transfer under the
Securities Act, the Company shall grant each other Principal
Stockholder the opportunity (subject to reduction in the event
the registered Transfer is underwritten) to register an equal
number of shares of Class A Common Stock for Transfer under the
Securities Act on the same terms and conditions.
(c) In the event the Company proposes to register any
shares of Class A Common Stock under the Securities Act pursuant
to an underwritten primary offering (other than pursuant to a
registration statement on Form S-4 or Form S-8 or any successor
forms thereto or other form which would not permit the inclusion
of the shares of Class A Common Stock of the Principal
Stockholders), the Company, as determined by the Board of
Directors, shall give written notice to all Principal
Stockholders of its intention to effect such a registration.
Following any such notice, the Board of Directors shall undertake
to determine the aggregate number, if any, of shares of Class A
Common Stock held by the Principal Stockholders (not to exceed in
the aggregate on a per year basis a number of shares of Class A
Common Stock equal to fifteen percent (15%) of the total number
of shares of Class A Common Stock beneficially owned by the
Principal Stockholders as of December 31, 1998 (and which, in the
aggregate for Lumpkin and all of the Principal CCI Shareholders
(based on the termination of the Other CCI Shareholders as
parties to this Agreement) on a pre-Stock Split basis, is fifteen
percent (15%) of 2,755,651 shares of Class A Common Stock),
subject to appropriate and proportionate adjustment as a result
of the Stock Split and subject to adjustment pursuant to Section
5.1) to be registered by the Company under the Securities Act
(the "Registrable Amount") for Transfer by the Principal
Stockholders in connection with such offering. If the Board
determines to register shares of Class A Common Stock held by the
Principal Stockholders pursuant to this Section 3.2(c), the
Company will promptly give written notice of such determination
to all Principal Stockholders, and thereupon the Company will use
commercially reasonable efforts to effect the registration of
that portion of the Registrable Amount that the Registering
Transferors indicate a desire to register. In the event the
Registering Transferors indicate a desire to register a number of
shares of Class A Common Stock that, in the aggregate, exceeds
the Registrable Amount, the number of shares of Class A Common
Stock that each Registering Transferor shall be entitled to
register shall be reduced to the extent such number exceeds such
Registering Transferor's pro rata share of the Registrable Amount
based upon the ratio of the total number of Securities
beneficially owned by such Registering Transferor to the total
number of Securities beneficially owned by all Principal
Shareholders. To the extent any portion of the Registrable
Amount remains unallocated after such reductions, each
Registering Transferor who has indicated a desire to register
additional shares of Class A Common Stock shall be entitled to
register an additional amount of Class A Common Stock equal to
such Registering Transferor's pro rata portion of the remaining
Registrable Amount based upon the ratio of the total number of
Securities beneficially owned by such Registering Transferor to
the total number of Securities beneficially owned by all
Registering Transferors who have indicated a desire to register
additional shares of Class A Common Stock. The reallocation
procedure described in the preceding sentence shall be repeated
until the entire Registrable Amount is allocated. All terms,
conditions and rights with respect to such registration
(including but not limited to any determination to reduce the
Registrable Amount) shall be determined by the Board, provided
that (i) the representations and warranties of a Principal
Stockholder shall be customary taking into account, among other
things, the nature of the offering and such Principal
Stockholder's relationship with the Company, and (ii) the Company
shall be responsible for all expenses with respect to such
registration other than underwriting discounts and commissions
allocable to the Class A Common Stock of the Registering
Transferors, which underwriting discounts and commissions shall
be the responsibility of the Registering Transferors.
(d) In addition to the registration rights granted
pursuant to Sections 3.2(a), (b) and (c), no more frequently than
once during each of the calendar years ending December 31, 2000
and 2001 (each such year, an "Annual Period"), and upon either
(i) the receipt of a written request of one or more Principal
Stockholders or (ii) a determination by the Board of Directors,
the Board shall undertake to determine the Registrable Amount, if
any, for Transfer by the Principal Stockholders. If the Board
determines to register shares of Class A Common Stock held by the
Principal Stockholders pursuant to this Section 3.2(d), the
Company will promptly give written notice of such determination
to all Principal Stockholders, and thereupon the Company will use
commercially reasonable efforts to effect the registration of
that portion of the Registrable Amount that the Registering
Transferors indicate a desire to register. In the event the
Registering Transferors indicate a desire to register a number of
shares of Class A Common Stock that, in the aggregate, exceeds
the Registrable Amount, the number of shares of Class A Common
Stock that each Registering Transferor shall be entitled to
register shall be reduced to the extent such number exceeds such
Registering Transferor's pro rata share of the Registrable Amount
based upon the ratio of the total number of Securities
beneficially owned by such Registering Transferor to the total
number of Securities beneficially owned by all Principal
Stockholders. To the extent any portion of the Registrable
Amount remains unallocated after such reductions, each
Registering Transferor who has indicated a desire to register
additional shares of Class A Common Stock shall be entitled to
register an additional amount of Class A Common Stock equal to
such Registering Transferor's pro rata portion of the remaining
Registrable Amount based upon the ratio of the total number of
Securities beneficially owned by such Registering Transferor to
the total number of Securities beneficially owned by all
Registering Transferors who have indicated a desire to register
additional shares of Class A Common Stock. The reallocation
procedure described in the preceding sentence shall be repeated
until the entire Registrable Amount is allocated. All terms,
conditions and rights with respect to such registration
(including but not limited to any determination to reduce the
Registrable Amount) shall be determined by the Board, provided
that (i) the representations and warranties of a Principal
Stockholder shall be customary taking into account, among other
things, the nature of the offering and such Principal
Stockholder's relationship with the Company, and (ii) the Company
shall be responsible for all expenses with respect to such
registration other than underwriting discounts and commissions,
which underwriting discounts and commissions shall be the
responsibility of the Registering Transferors.
(e) If the Board establishes a committee (a "Pricing
Committee") to authorize and approve the price and any other
terms of any Transfer of Securities registered under the
Securities Act pursuant to this Section 3.2 in which Lumpkin or
any Principal CCI Shareholder is participating as a Registering
Transferor, the Company will use its best efforts to cause
Lumpkin to be nominated to such Pricing Committee.
Notwithstanding any other provision of this Agreement, to the
extent the Company has undertaken to register Securities of the
Principal Stockholders pursuant to this Section 3.2, the Company
may subsequently determine not to register such Securities and
may either not file a registration statement or otherwise
withdraw or abandon a registration statement previously filed
with respect to the registration of such Securities.
(f) For purposes of this Section 3.2, the McLeods
shall be deemed to be a single Principal Stockholder, Lumpkin and
all of the Principal CCI Shareholders shall be deemed to be a
single Principal Stockholder and the AEC Entities shall be deemed
to be a single Principal Stockholder.
4. REPRESENTATIONS AND WARRANTIES
4.1 Representations and Warranties of Non-individual
Stockholders
Each non-individual party to this Agreement hereby
represents and warrants, as of the date of this Agreement, to the
Company and to each other party as follows:
4.1.1Authorization
Such party has taken all action necessary for it to
enter into this Agreement and to consummate the transactions
contemplated hereby.
4.1.2Binding Obligation
This Agreement constitutes a valid and binding
obligation of such party, enforceable in accordance with its
terms, except to the extent that such enforceability may be
limited by bankruptcy, insolvency, and similar laws affecting the
rights and remedies of creditors generally, and by general
principles of equity and public policy; and each document and
instrument to be executed by such party pursuant hereto, when
executed and delivered in accordance with the provisions hereof,
shall be a valid and binding obligation of such party,
enforceable in accordance with its terms (with the aforesaid
exceptions).
4.2 Representations and Warranties of Individual
Stockholders
Each party to this Agreement who is an individual
hereby represents and warrants, as of the date of this Agreement,
to the Company and to each other party as follows:
4.2.1Power and Authority
Such party has the legal capacity and all other power
and authority necessary to enter into this Agreement and to
consummate the transactions contemplated hereby.
4.2.2Binding Obligation
This Agreement constitutes a valid and binding
obligation of such party, enforceable in accordance with its
terms, except to the extent that such enforceability may be
limited by bankruptcy, insolvency, and similar laws affecting the
rights and remedies of creditors generally, and by general
principles of equity and public policy; and each document and
instrument to be executed by such party pursuant hereto, when
executed and delivered in accordance with the provisions hereof,
shall be a valid and binding obligation of such party,
enforceable in accordance with its terms (with the aforesaid
exceptions).
4.3 Representations and Warranties of the Company
The Company hereby represents and warrants, as of the
date of this Agreement, to each party as follows:
4.3.1Authorization
The Company has taken all corporate action necessary
for it to enter into this Agreement and to consummate the
transactions contemplated hereby.
4.3.2Binding Obligation
This Agreement constitutes a valid and binding
obligation of the Company, enforceable in accordance with its
terms, except to the extent that such enforceability may be
limited by bankruptcy, insolvency, and similar laws affecting the
rights and remedies of creditors generally, and by general
principles of equity and public policy; and each document and
instrument to be executed by the Company pursuant hereto, when
executed and delivered in accordance with the provisions hereof,
shall be a valid and binding obligation of the Company,
enforceable in accordance with its terms (with the aforesaid
exceptions).
5. MISCELLANEOUS
5.1 Effect of Changes in Capitalization
All share amounts of the Company's capital stock
referred to in this Agreement shall be appropriately and
proportionally adjusted for any recapitalization,
reclassification, stock split-up, combination of shares, exchange
of shares, stock dividend or other distribution payable in
capital stock, or other increase or decrease in such shares
effected without receipt of consideration by the Company,
occurring after the date of this Agreement.
5.2 Additional Actions and Documents
Each of the parties hereto hereby agrees to take or
cause to be taken such further actions, to execute, deliver and
file or cause to be executed, delivered and filed such further
documents and instruments, and to obtain such consents, as may be
necessary or as may be reasonably requested in order to fully
effectuate the purposes, terms and conditions of this Agreement,
whether before, at or after the Effective Date.
5.3 Entire Agreement; Termination of Original
Stockholders' Agreement; Amendment
Other than the Third Amended and Restated January 1999
Stockholders' Agreement with respect to the parties thereto and
as set forth therein, this Agreement constitutes the entire
agreement among the parties hereto as of the date hereof with
respect to the specific matters contemplated herein, and it
supersedes all prior oral or written agreements, commitments or
understandings with respect to the matters provided for herein.
The parties hereto further agree, confirm and acknowledge that
the Original Stockholders' Agreement is terminated and of no
force or effect. No amendment, modification or discharge of this
Agreement shall be valid or binding unless set forth in writing
and duly executed by the Company and by the party against whom
enforcement of the amendment, modification, or discharge is
sought.
5.4 Limitation on Benefit
It is the explicit intention of the parties hereto that
no person or entity other than the parties hereto is or shall be
entitled to bring any action to enforce any provision of this
Agreement against any of the parties hereto, and the covenants,
undertakings and agreements set forth in this Agreement shall be
solely for the benefit of, and shall be enforceable only by, the
parties hereto or their respective successors, heirs, executors,
administrators, legal representatives and permitted assigns.
5.5 Binding Effect; Specific Performance
This Agreement shall be binding upon and shall inure to
the benefit of the parties hereto and their respective
successors, heirs, executors, administrators, legal
representatives and permitted assigns. No party shall assign
this Agreement without the written consent of the other parties
hereto; and such consent shall not be unreasonably withheld. The
parties hereto agree that irreparable damage would occur in the
event any provision of this Agreement was not performed in
accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition
to any other remedy at law or in equity.
5.6 Governing Law
This Agreement, the rights and obligations of the
parties hereto, and any claims or disputes relating thereto,
shall be governed by and construed in accordance with the laws of
Delaware (excluding the choice of law rules thereof).
5.7 Notices
All notices, demands, requests, or other communications
which may be or are required to be given, served, or sent by any
party to any other party pursuant to this Agreement shall be in
writing and shall be hand-delivered or mailed by first-class,
registered or certified mail, return receipt requested, postage
prepaid, or transmitted by telegram, telecopy, facsimile
transmission or telex, addressed as follows:
(i) If to the Company or to the McLeods:
McLeodUSA Incorporated
McLeodUSA Technology Park
6400 C Street, SW, P.O. Box 3177
Cedar Rapids, IA 52406-3177
Attention: Randall Rings
Facsimile: (319) 790-7901
(ii) If to the AEC Entities:
Alliant Energy Investments, Inc.
200 1st Street SE
Cedar Rapids, IA 52401
Attention: James E. Hoffman
Facsimile: (319) 398-4204
(iii)If to Lumpkin or any Principal CCI Shareholder:
P.O. Box 1234
Mattoon, IL 61938
Attention: Richard A. Lumpkin
Facsimile: (217) 234-9934
with a copy to :
Schiff Hardin & Waite
6600 Sears Tower
Chicago, Illinois 60606
Attention: David R. Hodgman, Esq.
Facsimile: (312) 258-5600
Each party may designate by notice in writing a new
address to which any notice, demand, request or communication may
thereafter be so given, served or sent. Each notice, demand,
request, or communication which shall be hand-delivered, mailed,
transmitted, telecopied or telexed in the manner described above,
or which shall be delivered to a telegraph company, shall be
deemed sufficiently given, served, sent, received or delivered
for all purposes at such time as it is delivered to the addressee
(with the return receipt, the delivery receipt, or the answerback
being deemed conclusive, but not exclusive, evidence of such
delivery) or at such time as delivery is refused by the addressee
upon presentation.
5.8 Termination
(a) Notwithstanding any other provision of this
Agreement, if during any Annual Period the Board of Directors has
not provided a Principal Stockholder a reasonable opportunity to
Transfer Securities pursuant to Section 3.2 or consented to the
written request of such Principal Stockholder or otherwise
provided such Principal Stockholder a reasonable opportunity to
Transfer (other than a transfer by a Principal CCI Shareholder to
a CCI Permitted Transferee and other than a transfer by the AEC
Entities to an AEC Permitted Transferee) pursuant to Section
3.1(a) an aggregate number of shares of Class A Common Stock
equal to not less than fifteen percent (15%) of the total number
of shares of Class A Common Stock beneficially owned by such
Principal Stockholder as of December 31, 1998 (and which, in the
aggregate for Lumpkin and all of the Principal CCI Shareholders
(based on the termination of the Other CCI Shareholders as
parties to this Agreement) on a pre-Stock Split basis, is fifteen
percent (15%) of 2,755,651 shares of Class A Common Stock),
subject to appropriate and proportionate adjustment as a result
of the Stock Split and subject to adjustment pursuant to Section
5.1, then such Principal Stockholder may terminate this Agreement
as it applies to such terminating party by providing written
notice of termination to the Company and the other Principal
Stockholders no later than ten (10) business days following the
end of such Annual Period, such that all rights and obligations
hereunder shall cease, and this Agreement shall be of no further
force or effect, with respect to the terminating party. Unless
otherwise previously terminated by the Principal Stockholders
pursuant to this Section 5.8(a), this Agreement shall terminate
on the Expiration Date. For purposes of this Section 5.8(a), the
McLeods shall be deemed to be a single Principal Stockholder,
Lumpkin and all of the Principal CCI Shareholders shall be deemed
to be a single Principal Stockholder and the AEC Entities shall
be deemed to be a single Principal Stockholder.
(b) This Agreement is hereby terminated with respect
to each of the Other CCI Shareholders, such that all rights and
obligations hereunder shall cease, and this Agreement shall be of
no further force or effect, with respect to each of the Other CCI
Shareholders.
5.9 Publicity
Each of the Principal Stockholders will use its
reasonable best efforts to consult with the Company prior to
issuing any press release, making any filing with any
governmental entity or national securities exchange or making any
other public dissemination of information by such Principal
Stockholder within which this Agreement or the contents hereof
are referenced or described.
5.10 Appointment of Representative
Each of the Principal CCI Shareholders hereby appoints
Lumpkin, with power of substitution, as its exclusive agent to
act on its behalf with respect to any and all actions to be taken
under or amendments or modifications to be made to this Agreement
(the "Representative"). The Representative shall take, and the
Principal CCI Shareholders agree that the Representative shall
take, any and all actions which the Representative believes are
necessary or advisable under this Agreement for and on behalf of
each of the Principal CCI Shareholders, as fully as if each of
the Principal CCI Shareholders were acting on its own behalf,
including, without limitation, dealing with the Company and the
other parties hereto with respect to all matters arising under
this Agreement, entering into any amendment or modification to
this Agreement deemed advisable by the Representative and taking
any and all other actions specified in or contemplated by this
Agreement. The Company and the other parties hereto shall have
the right to rely upon all actions taken or not taken by the
Representative pursuant to this Agreement, all of which actions
or omissions shall be legally binding upon each of the Principal
CCI Shareholders.
5.11 Execution in Counterparts
To facilitate execution, this Agreement may be executed
in as many counterparts as may be required; and it shall not be
necessary that the signatures of, or on behalf of, each party, or
that the signatures of all persons required to bind any party,
appear on each counterpart; but it shall be sufficient that the
signature of, or on behalf of, each party, or that the signatures
of the persons required to bind any party, appear on one or more
of the counterparts. All counterparts shall collectively
constitute a single agreement. It shall not be necessary in
making proof of this Agreement to produce or account for more
than a number of counterparts containing the respective
signatures of, or on behalf of, all of the parties hereto.
[Remainder of Page Intentionally Left Blank]
<PAGE>
IN WITNESS WHEREOF, the undersigned have duly executed
and delivered this Third Amended and Restated November 1998
Stockholders' Agreement, or have caused this Third Amended and
Restated November 1998 Stockholders' Agreement to be duly
executed and delivered on their behalf, as of the day and year
first hereinabove set forth.
McLEODUSA INCORPORATED
By: /s/ J. Lyle Patrick
--------------------------------
Name: J. Lyle Patrick
Title: Group Vice President/CFO
/s/ Clark E. McLeod /s/ Mary E. McLeod
- ------------------- -------------------
Clark E. McLeod Mary E. McLeod
ALLIANT ENERGY CORPORATION
By: /s/ James E. Hoffman
-------------------------------
Name: James E. Hoffman
Title: Executive Vice President
Business Development
ALLIANT ENERGY FOUNDATION, INC.
By: /s/ Edward M. Gleason
----------------------------
Name: Edward M. Gleason
Title: Treasurer
ALLIANT ENERGY INVESTMENTS, INC.
By: /s/ James E. Hoffman
-------------------------
Name: James E. Hoffman
Title: President, Alliant Energy Resources
HEARTLAND PROPERTIES, INC.
By: /s/ Henry Wertheimer
--------------------------------
Name: Henry Wertheimer
Title: Vice President/Treasurer
LNT COMMUNICATIONS LLC
By: Alliant Energy Resources, Inc., its sole member
By: /s/ James E. Hoffman
---------------------------------
Name: James E. Hoffman
Title: President
/s/ Richard A. Lumpkin /s/ Gail G. Lumpkin
- ---------------------- --------------------
Richard A. Lumpkin Gail G. Lumpkin
<PAGE>
The two trusts created under the Mary Green Lumpkin Gallo Trust
Agreement dated December 29, 1989, one for the benefit of each
of:
Benjamin Iverson Lumpkin
Elizabeth Arabella Lumpkin
United States Trust Company
of New York, Trustee
By: /s/ Loraine B. Tsavaris
---------------------------------
Name: Loraine B. Tsavaris
Title: Managing Director
The trust established by Richard Adamson Lumpkin under the Trust
Agreement dated February 6, 1970, for the benefit of Richard
Anthony Lumpkin
United States Trust Company
of New York, Trustee
By: /s/ Loraine B. Tsavaris
-------------------------------
Name: Loraine B. Tsavaris
Title: Managing Director
The two trusts created under the Richard Adamson Lumpkin
Grandchildren's Trust dated September 5, 1980, one for the
benefit of each of:
Benjamin Iverson Lumpkin
Elizabeth Arabella Lumpkin
United States Trust Company
of New York, Trustee
By: /s/ Loraine B. Tsavaris
---------------------------------
Name: Loraine B. Tsavaris
Title: Managing Director
The two 1990 Personal Income Trusts established by Richard A.
Lumpkin, dated April 20, 1990, one for the benefit of each of:
Benjamin Iverson Lumpkin
Elizabeth Arabella Lumpkin
/s/ David R. Hodgman
- -------------------------
David R. Hodgman, Trustee
/s/ Steven L. Grissom
- --------------------------
Steven L. Grissom, Trustee
<PAGE>
FOR PURPOSES OF SECTIONS 4, 5.6, 5.8(b), 5.11 AND THE FIRST AND
SECOND SENTENCES OF SECTION 5.3 ONLY:
Margaret Lumpkin Keon Trust Mary Lee Sparks Trust
dated May 13, 1978 dated May 13, 1978
/s/ Margaret Lumpkin Keon /s/ Mary Lee Sparks
- ------------------------- ------------------------------
Margaret Lumpkin Keon, as Trustee Mary Lee Sparks, as Trustee
/s/ Steven L. Grissom
---------------------
Steven L. Grissom, as Trustee
/s/ Mary Lee Sparks
- -------------------
Mary Lee Sparks
<PAGE>
The ten trusts created under the Mary Green Lumpkin Gallo Trust
Agreement dated December 29, 1989, one for the benefit of each
of:
Joseph John Keon III,
Katherine Stoddert Keon,
Lisa Anne Keon,
Margaret Lynley Keon,
Pamela Keon Vitale,
Susan Tamara Keon DeWyngaert,
Anne Romayne Sparks,
Barbara Lee Sparks,
Christina Louise Sparks, and
John Woodruff Sparks
United States Trust Company
of New York, Trustee
By: /s/ Loraine B. Tsavaris
---------------------------------
Name: Loraine B. Tsavaris
Title: Managing Director
The ten trusts created under the Richard Adamson Lumpkin
Grandchildren's Trust dated September 5, 1980, one for the
benefit of each of:
Joseph John Keon III,
Katherine Stoddert Keon,
Lisa Anne Keon,
Margaret Lynley Keon,
Pamela Keon Vitale,
Susan Tamara Keon DeWyngaert,
Anne Romayne Sparks,
Barbara Lee Sparks,
Christina Louise Sparks, and
John Woodruff Sparks
United States Trust Company
of New York, Trustee
By: /s/ Loraine B. Tsavaris
----------------------------
Name: Loraine B. Tsavaris
Title: Managing Director
The two trusts established by Richard Adamson Lumpkin under the
Trust Agreement dated February 6, 1970, one for the benefit of
each of:
Margaret Anne Keon, and
Mary Lee Sparks
United States Trust Company
of New York, Trustee
By: /s/ Loraine B. Tsavaris
----------------------------
Name: Loraine B. Tsavaris
Title: Managing Director
The ten 1990 Personal Income Trusts established by Margaret L.
Keon and Mary Lee Sparks, each dated April 20, 1990, one for the
benefit of each of:
Joseph John Keon III,
Katherine Stoddert Keon,
Lisa Anne Keon,
Margaret Lynley Keon,
Pamela Keon Vitale,
Susan Tamara Keon DeWyngaert,
Anne Romayne Sparks,
Barbara Lee Sparks,
Christina Louise Sparks, and
John Woodruff Sparks
/s/ David R. Hodgman
- --------------------
David R. Hodgman, Trustee
/s/ Steven L. Grissom
- ---------------------
Steven L. Grissom, Trustee
<PAGE>
SCHEDULE I
Richard A. Lumpkin
Gail G. Lumpkin
United States Trust Company of New York, as Trustee of two trusts
created under the Mary Green Lumpkin Gallo Trust Agreement dated
December 29, 1989, one for the benefit of each of Benjamin
Iverson Lumpkin and Elizabeth Arabella Lumpkin.
United States Trust Company of New York, as Trustee of two trusts
created under the Richard Adamson Lumpkin Grandchildren's Trust
dated September 5, 1980, one for the benefit of each of Benjamin
Iverson Lumpkin and Elizabeth Arabella Lumpkin.
United States Trust Company of New York, as Trustee of the trust
established by Richard Adamson Lumpkin under the Trust Agreement
dated February 6, 1970, for the benefit of Richard Anthony
Lumpkin.
David R. Hodgman and Steven L. Grissom, as Trustees of two 1990
Personal Income Trusts established by Richard A. Lumpkin, each
dated April 20, 1990, one for the benefit of each of Benjamin
Iverson Lumpkin and Elizabeth Arabella Lumpkin.
<PAGE>
SCHEDULE II
Margaret Lumpkin Keon, as Trustee under the Margaret Lumpkin Keon
Trust dated May 13, 1978.
Mary Lee Sparks and Steven L. Grissom, as Trustees of the Mary
Lee Sparks Trust dated May 13, 1978.
Mary Lee Sparks
United States Trust Company of New York, as Trustee of ten trusts
created under the Mary Green Lumpkin Gallo Trust Agreement dated
December 29, 1989, one for the benefit of each of Joseph John
Keon III, Katherine Stoddert Keon, Lisa Anne Keon, Margaret
Lynley Keon, Pamela Keon Vitale, Susan Tamara Keon DeWyngaert,
Anne Romayne Sparks, Barbara Lee Sparks, Christina Louise Sparks,
and John Woodruff Sparks.
United States Trust Company of New York, as Trustee of ten trusts
created under the Richard Adamson Lumpkin Grandchildren's Trust
dated September 5, 1980, one for the benefit of each of Joseph
John Keon III, Katherine Stoddert Keon, Lisa Anne Keon, Margaret
Lynley Keon, Pamela Keon Vitale, Susan Tamara Keon DeWyngaert,
Anne Romayne Sparks, Barbara Lee Sparks, Christina Louise Sparks,
and John Woodruff Sparks.
United States Trust Company of New York, as Trustee of two trusts
established by Richard Adamson Lumpkin under the Trust Agreement
dated February 6, 1970, one for the benefit of each of Margaret
Anne Keon and Mary Lee Sparks.
David R. Hodgman and Steven L. Grissom, as Trustees of ten 1990
Personal Income Trusts established by Margaret L. Keon and Mary
Lee Sparks, each dated April 20, 1990, one for the benefit of
each of Joseph John Keon III, Katherine Stoddert Keon, Lisa Anne
Keon, Margaret Lynley Keon, Pamela Keon Vitale, Susan Tamara Keon
DeWyngaert, Anne Romayne Sparks, Barbara Lee Sparks, Christina
Louise Sparks, and John Woodruff Sparks.
EXHIBIT 10.3
THIRD AMENDED AND RESTATED
JANUARY 1999 STOCKHOLDERS' AGREEMENT
This Third Amended and Restated January 1999
Stockholders' Agreement (this "Agreement") is entered into as of
March 10, 2000, by and among McLeodUSA Incorporated, a Delaware
corporation (the "Company"); Alliant Energy Corporation, a
Wisconsin corporation ("AEC"); Alliant Energy Investments, Inc.,
an Iowa corporation and indirect wholly owned subsidiary of AEC
("AEI"); Heartland Properties, Inc., a Wisconsin corporation and
indirect wholly owned subsidiary of AEC ("Heartland");
LNT Communications LLC, an Iowa limited liability company and
indirect wholly owned subsidiary of AEC ("LNT"); Alliant Energy
Foundation, Inc., a Wisconsin corporation (non-profit) ("AEF" and
together with AEC, AEI, Heartland and LNT, the "AEC Entities");
Clark E. McLeod ("McLeod"); Mary E. McLeod (together with McLeod,
the "McLeods"); M/C Investors L.L.C., a Delaware limited
liability company ("M/C Investors"); Media/Communications
Partners III Limited Partnership, a Delaware limited partnership
("M/C Partners" and together with M/C Investors, the "M/C
Stockholders"); Richard A. Lumpkin ("Lumpkin") and certain of the
former shareholders of Consolidated Communications Inc. ("CCI")
and certain permitted transferees of certain of the former CCI
shareholders in each case who are listed in Schedule I hereto
(the "Principal CCI Shareholders"); and for purposes of Sections
4, 5.6, 5.8(d), 5.11 and the first sentence of Section 5.3 only,
certain of the other former CCI shareholders and certain
permitted transferees of certain of the other former CCI
shareholders in each case who are listed in Schedule II hereto
(the "Other CCI Shareholders"). The AEC Entities, the McLeods,
Lumpkin and the Principal CCI Shareholders are referred to herein
collectively as the "Original Stockholders" and individually as
an "Original Stockholder."
WHEREAS, the Company, AEC, AEI, Heartland, AEF, the
McLeods, the M/C Stockholders, Lumpkin, the Principal CCI
Shareholders and the Other CCI Shareholders are parties to a
Second Amended and Restated January 1999 Stockholders' Agreement,
entered into as of December 17, 1999 (the "Second Amended and
Restated January 1999 Stockholders' Agreement");
WHEREAS, the Company, AEC, AEI, Heartland, AEF, the
McLeods, the M/C Stockholders, Lumpkin and the Principal CCI
Shareholders desire to add LNT as a party to this Agreement as a
result of the transfer of certain shares of the Company's Class A
common stock, par value $.01 per share (the "Class A Common
Stock"), by an Affiliate (as defined in Section 2.2) of AEC to LNT;
WHEREAS, the Other CCI Shareholders no longer desire
to be parties to this Agreement and the Company, the M/C
Stockholders and the Original Stockholders desire to terminate
the Other CCI Shareholders as parties to this Agreement;
WHEREAS, the Company, the Original Stockholders and the
M/C Stockholders deem it to be in the best interests of the
Company and its stockholders to provide for the continuity and
stability of the business and policies of the Company on the
terms and conditions hereinafter set forth;
WHEREAS, concurrently with execution and delivery of
this Agreement, the Company, the Original Stockholders and the
Other CCI Shareholders are entering into an amendment and
restatement of the Second Amended and Restated November 1998
Stockholders' Agreement, entered into as of December 17, 1999; and
WHEREAS, the Company, the Original Stockholders and the
M/C Stockholders desire to amend and restate the Second Amended
and Restated January 1999 Stockholders' Agreement in its entirety
with the terms and conditions hereinafter set forth;
NOW, THEREFORE, for and in consideration of the
foregoing and of the mutual covenants and agreements contained
herein, the parties hereto agree as follows:
1. [INTENTIONALLY DELETED]
2. VOTING AGREEMENT
2.1 Board of Directors
For the period commencing on the Effective Date (as defined
in Section 2.2) and ending on the Expiration Date (as defined in
Section 2.2), each Original Stockholder and the M/C Stockholders,
for so long as each such Original Stockholder and the M/C
Stockholders beneficially and continuously owns at least two
million five hundred thousand (2,500,000) shares of Class A
Common Stock, subject to adjustment pursuant to Section 5.1,
shall take or cause to be taken all such action within their
respective power and authority as may be required:
(a) to establish and maintain the authorized size of the Board of
Directors of the Company (the "Board of Directors" or the "Board") at
up to thirteen (13) directors;
(b) to cause to be elected to the Board one (1) director designated by the
AEC Entities, for so long as the AEC Entities collectively
beneficially and continuously own at least two million five hundred
thousand (2,500,000) shares of Class A Common Stock (subject to
adjustment pursuant to Section 5.1);
(c) to cause Lumpkin to be elected to the Board, for so long as Lumpkin
and the Principal CCI Shareholders collectively beneficially and
continuously own at least two million five hundred thousand
(2,500,000) shares of Class A Common Stock (subject to adjustment
pursuant to Section 5.1);
(d) to cause to be elected to the Board three (3) directors who are
executive officers of the Company designated by McLeod, for so long as
the McLeods collectively beneficially and continuously own at least
two million five hundred thousand (2,500,000) shares of Class A Common
Stock (subject to adjustment pursuant to Section 5.1);
(e) to cause to be elected to the Board one (1) director designated by the
M/C Stockholders, for so long as the M/C Stockholders collectively
beneficially and continuously own at least two million five hundred
thousand (2,500,000) shares of Class A Common Stock (subject to
adjustment pursuant to Section 5.1);
(f) to cause to be elected to the Board a director or directors nominated
by the Board to replace a director or directors designated pursuant to
paragraphs (b) through (e) above upon the earlier to occur of such
designated director's or directors' resignation (and the acceptance of
such resignation by the Board) and the expiration of such director's
or directors' term as a result of any party or parties identified in
paragraphs (b) through (e) above no longer collectively beneficially
and continuously owning at least two million five hundred thousand
(2,500,000) shares of Class A Common Stock (subject to adjustment
pursuant to Section 5.1) at any time during the period commencing on
the Effective Date and ending on the Expiration Date; it being
understood that within three (3) business days following such time
that the party or parties identified in paragraphs (b) through (e)
above no longer collectively beneficially and continuously own at
least two million five hundred thousand (2,500,000) shares of Class A
Common Stock (subject to adjustment pursuant to Section 5.1) during
such period, such party or parties shall use its or their respective
best efforts to cause the director or directors designated by such
party or parties to tender their immediate resignation to the Board
which the Board may accept or reject; and
(g) to cause to be elected to the Board, if and as nominated by the Board,
up to seven (7) non-employee directors.
For purposes of this Section 2.1, (i) the McLeods shall
be deemed to be a single Original Stockholder of the Company,
(ii) the M/C Stockholders shall be deemed to be a single
stockholder of the Company, and the M/C Stockholders shall be
deemed to own shares "continuously" as long as the shares of the
M/C Stockholders are owned by the M/C Stockholders or an M/C
Stockholder Permitted Transferee (as defined in Section 3.1),
(iii) Lumpkin and all of the Principal CCI Shareholders shall be
deemed to be a single Original Stockholder of the Company, and
the Principal CCI Shareholders shall be deemed to own shares
"continuously" as long as the shares of the Principal CCI
Shareholders are owned by the Principal CCI Shareholders or a CCI
Permitted Transferee (as defined in the Third Amended and
Restated November 1998 Stockholders' Agreement (as defined in
Section 2.2)), and (iv) the AEC Entities shall be deemed to be a
single Original Stockholder of the Company, and the AEC Entities
shall be deemed to own shares "continuously" as long as the
shares of the AEC Entities are owned by the AEC Entities or an
AEC Permitted Transferee (as defined in the Third Amended and
Restated November 1998 Stockholders' Agreement).
2.2 Definitions
For purposes of this Agreement, the following terms
have the meanings indicated:
(a) "Affiliate" and "Associate" shall have the
respective meanings ascribed to such terms in Rule
12b-2 under the Securities Exchange Act of 1934,
as amended (the "Exchange Act").
(b) A person shall be deemed the "beneficial
owner" of and shall be deemed to "beneficially
own" any securities:
(i) which such person or any of such person's
Affiliates or Associates, directly or
indirectly, has the right to acquire
(whether such right is exercisable
immediately or only after the passage of
time) pursuant to any agreement,
arrangement or understanding (whether or
not in writing), or upon the exercise of
conversion rights, exchange rights, other
rights, warrants or options, or otherwise;
(ii)which such person or any of such person's
Affiliates or Associates, directly or
indirectly, has the right to vote or
dispose of or has "beneficial ownership"
of (as determined pursuant to Rule 13d-3
under the Exchange Act), including
pursuant to any agreement, arrangement or
understanding, whether or not in writing;
or
(iii) which are beneficially owned, directly
or indirectly, by any other person (or any
Affiliate or Associate thereof) with which
such person or any of such person's
Affiliates or Associates has any
agreement, arrangement or understanding
(whether or not in writing), for the
purpose of acquiring, holding, voting or
disposing of any voting securities of the
Company.
For purposes of the definition of "beneficial
owner" and "beneficially own," the terms
"agreement," "arrangement" and "understanding"
shall not include this Agreement or the Third
Amended and Restated November 1998 Stockholders'
Agreement.
(c) "Effective Date" shall mean March 10, 2000.
(d) "Expiration Date" shall mean December 31,
2001.
(e) "Merger" shall mean the merger of Ovation
Communications, Inc. with and into Bravo
Acquisition Corporation pursuant to the terms and
conditions of the Merger Agreement.
(f) "Merger Agreement" shall mean the Agreement
and Plan of Merger, dated as of January 7, 1999,
by and among the Company, Bravo Acquisition
Corporation, Ovation Communications, Inc. and
certain of the stockholders of Ovation
Communications, Inc.
(g) "Stock Split" shall mean that certain
two-for-one stock split in the form of a stock
dividend paid on July 26, 1999 to stockholders of
record on July 12, 1999 effected by the Company
with respect to its Class A Common Stock.
(h) "Third Amended and Restated November 1998
Stockholders' Agreement" shall mean the Third
Amended and Restated November 1998 Stockholders'
Agreement, entered into as of March 10, 2000 by
and among the Company, the Original Stockholders
and the Other CCI Shareholders.
3. TRANSFERS OF SECURITIES
3.1 Restrictions on Transfers
(a) Except as otherwise provided in this Section 3.1
or Section 3.2, the M/C Stockholders hereby agree that until the
Expiration Date, the M/C Stockholders will not offer, sell,
contract to sell, grant any option to purchase, or otherwise
dispose of, directly or indirectly, ("Transfer"), any equity
securities of the Company or any other securities convertible
into or exercisable for such equity securities ("Securities")
beneficially owned by such M/C Stockholders as a result of the
Merger (including distributions of Securities with respect to
such Securities and Securities acquired as a result of a stock
split with respect to such Securities) without submitting a
written request to, and receiving the prior written consent of,
the Board of Directors; provided, however, that the M/C
Stockholders may transfer Securities to any beneficial owner or
Affiliate of the M/C Stockholders, in each case provided that (i)
such transfer is done in accordance with the transfer
restrictions applicable to such Securities under federal and
state securities laws and (ii) the transferee agrees to be bound
by the terms hereof (as this Agreement may be amended or amended
and restated from time to time) as an M/C Stockholder with
respect to the shares being transferred pursuant to this Section
(any such M/C Stockholder transferee pursuant to the foregoing
proviso, an "M/C Stockholder Permitted Transferee"), and any such
transfer shall not constitute a "Transfer" for purposes of this
Agreement. Notwithstanding the foregoing, no party hereto shall
avoid the provisions of this Agreement by making one or more
transfers to one or more M/C Stockholder Permitted Transferees
and then at any time directly or indirectly disposing of all or
any portion of such party's interest in any such M/C Stockholder
Permitted Transferee. In the event that the Board of Directors
consents to any Transfer of Securities by a Principal Stockholder
(for purposes of this Agreement, the term "Principal Stockholder"
shall have the same meaning as ascribed to such term in the Third
Amended and Restated November 1998 Stockholders' Agreement)
pursuant to Section 3.1(a) of the Third Amended and Restated
November 1998 Stockholders' Agreement upon the written request of
such Principal Stockholder (the "Transferring Principal
Stockholder") and except as otherwise provided in Section 3.1(b)
and Section 3.2 of this Agreement, the M/C Stockholders shall,
notwithstanding the provisions of this Section 3.1(a), have the
right to Transfer a percentage of the total number of Securities
beneficially owned by the M/C Stockholders equal to the
percentage of the total number of Securities beneficially owned
by the Transferring Principal Stockholder that the Board of
Directors has consented may be Transferred by such Transferring
Principal Stockholder. In the event the Board of Directors
consents to any Transfer of Securities by the M/C Stockholders
pursuant to this Section 3.1(a) upon the written request of the
M/C Stockholders (the "Transferring M/C Stockholders"), and
except as otherwise provided in Section 3.1(b) and Section 3.2 of
the Third Amended and Restated November 1998 Stockholders'
Agreement, each Principal Stockholder shall, notwithstanding the
provisions of Section 3.1(a) of the Third Amended and Restated
November 1998 Stockholders' Agreement, have the right to Transfer
a percentage of the total number of Securities beneficially owned
by such Principal Stockholder equal to the percentage of the
total number of Securities beneficially owned by the Transferring
M/C Stockholders that the Board of Directors has consented may be
Transferred by such Transferring M/C Stockholders.
(b) In addition to the provisions of Section 3.1(a),
for the period commencing for the quarter ending March 31, 2000
and ending on the Expiration Date, the Board shall determine
prior to the public release of the Company's consolidated
financial results with respect to each such financial reporting
quarter during such period, the aggregate number, if any, of
shares of Class A Common Stock (not to exceed in the aggregate
one hundred thousand (100,000) shares of Class A Common Stock per
quarter, subject to adjustment pursuant to Section 5.1) that may
be Transferred by the M/C Stockholders (the "Transfer Amount")
during the period commencing on the third (3rd) business day and
ending on the twenty-third (23rd) business day following such
public release of the Company's quarterly or annual financial
results or such other trading period designated or permitted by
the Board with respect to the purchase and sale of its Securities
(each such period, a "Transfer Period"). Notwithstanding the
provisions of Section 3.1(a), the M/C Stockholders shall be
entitled to Transfer during each Transfer Period, provided such
Transfer is effected in accordance with all applicable federal
and state securities laws, a number of shares of Class A Common
Stock equal to the Transfer Amount, if any, for such Transfer
Period. In no event shall any portion of a Transfer Amount that
is not utilized by the M/C Stockholders during a Transfer Period
be reallocated or otherwise credited to any subsequent Transfer
Periods. Notwithstanding the foregoing provisions of this
Section 3.1(b), to the extent that the Company permits the
Principal Stockholders the opportunity to Transfer shares of
Class A Common Stock pursuant to Section 3.1(b) of the Third
Amended and Restated November 1998 Stockholders' Agreement, the
Company shall grant the M/C Stockholders the opportunity to
Transfer on the same terms and conditions a number of shares of
Class A Common Stock equal to the number of shares which each
Principal Stockholder is entitled to Transfer pursuant to such
Section 3.1(b), without considering those provisions of Section
3.1(b) of the Third Amended and Restated November 1998
Stockholders' Agreement relating to the reallocation of amounts
among the Principal Stockholders. To the extent the Board
determines a Transfer Amount with respect to the M/C Stockholders
for any particular quarter pursuant to this Section 3.1(b), the
Board shall determine an equal Transfer Amount for such quarter
with respect to each Principal Stockholder pursuant to Section
3.1(b) of the Third Amended and Restated November 1998
Stockholders' Agreement.
(c) For the period commencing for the quarter ending
March 31, 2000 and ending on the Expiration Date, the Company
shall give the M/C Stockholders prompt written notice (in any
event no later than fifty (50) days prior to the beginning of the
applicable Transfer Period) of its determination of any Transfer
Amount. Within seven (7) days of receipt of such notice, the M/C
Stockholders shall provide written notice to the Company of the
number of shares of Class A Common Stock that the M/C
Stockholders desire to Transfer pursuant to Section 3.1(b).
(d) For purposes of this Section 3.1, the M/C
Stockholders shall be deemed to be a single stockholder of the
Company, the McLeods shall be deemed to be a single Principal
Stockholder of the Company, Lumpkin and all of the Principal CCI
Shareholders shall be deemed to be a single Principal Stockholder
of the Company and the AEC Entities shall be deemed to be a
single Principal Stockholder of the Company.
3.2 Registration Rights
(a) In the event that the Board of Directors consents
pursuant to Section 3.1(a) of the Third Amended and Restated
November 1998 Stockholders' Agreement to a Principal
Stockholder's request for a Transfer and in connection therewith,
the Company agrees to register Securities with respect to such
Transfer under the Securities Act of 1933, as amended (the
"Securities Act"), the Company shall grant the M/C Stockholders
the opportunity (subject to reduction in the event the registered
Transfer is underwritten) to register for Transfer under the
Securities Act a percentage of the total number of Securities
beneficially owned by the M/C Stockholders equal to the
percentage of the total number of Securities beneficially owned
by the Transferring Principal Stockholder that such Transferring
Principal Stockholder is registering for Transfer under the
Securities Act, on the same terms and conditions as the
Transferring Principal Stockholder. In the event that the Board
of Directors consents pursuant to Section 3.1(a) of this
Agreement to the M/C Stockholders' request for a Transfer, and in
connection therewith the Company agrees to register Securities
with respect to such Transfer under the Securities Act, the
Company shall grant each Principal Stockholder pursuant to
Section 3.1(a) of the Third Amended and Restated November 1998
Stockholders' Agreement the opportunity (subject to reduction in
the event the registered Transfer is underwritten) to register
for Transfer under the Securities Act a percentage of the total
number of Securities beneficially owned by such Principal
Stockholder equal to the percentage of the total number of
Securities beneficially owned by the Transferring M/C
Stockholders that such Transferring M/C Stockholders are
registering under the Securities Act, on the same terms and
conditions as the Transferring M/C Stockholders.
(b) To the extent that the Company grants pursuant to
Section 3.1(b) of the Third Amended and Restated November 1998
Stockholders' Agreement a Principal Stockholder the opportunity
to register shares of Class A Common Stock for Transfer under the
Securities Act, the Company shall grant the M/C Stockholders the
opportunity (subject to reduction in the event the registered
Transfer is underwritten) to register an equal number of shares
of Class A Common Stock for Transfer under the Securities Act on
the same terms and conditions, without considering those
provisions of Section 3.1(b) of the Third Amended and Restated
November 1998 Stockholders' Agreement relating to the
reallocation of amounts among the Principal Stockholders. To the
extent that the Company grants pursuant to Section 3.1(b) of this
Agreement the M/C Stockholders the opportunity to register shares
of Class A Common Stock for Transfer under the Securities Act,
the Company shall grant each Principal Stockholder pursuant to
Section 3.1(b) of the Third Amended and Restated November 1998
Stockholders' Agreement the opportunity (subject to reduction in
the event the registered Transfer is underwritten) to register an
equal number of shares of Class A Common Stock for Transfer under
the Securities Act on the same terms and conditions.
(c) In the event the Company proposes to register any
shares of Class A Common Stock under the Securities Act pursuant
to an underwritten primary offering (other than pursuant to a
registration statement on Form S-4 or Form S-8 or any successor
forms thereto or other form which would not permit the inclusion
of the shares of Class A Common Stock of the M/C Stockholders),
the Company, as determined by the Board of Directors, shall give
written notice to the M/C Stockholders of its intention to effect
such a registration. Following any such notice, the Board of
Directors shall undertake to determine the aggregate number, if
any, of shares of Class A Common Stock held by the M/C
Stockholders (not to exceed in the aggregate on a per year basis
a number of shares of Class A Common Stock equal to fifteen
percent (15%) of the total number of shares of Class A Common
Stock beneficially owned by the M/C Stockholders as of the
Effective Time (as defined in the Merger Agreement) in connection
with the consummation of the Merger, subject to appropriate and
proportionate adjustment as a result of the Stock Split and
subject to adjustment pursuant to Section 5.1) to be registered
by the Company under the Securities Act (the "Registrable
Amount") for Transfer by the M/C Stockholders in connection with
such offering during such period. If the Board determines to
register shares of Class A Common Stock held by the M/C
Stockholders pursuant to this Section 3.2(c), the Company will
promptly give written notice of such determination to the M/C
Stockholders, and thereupon the Company will use commercially
reasonable efforts to effect the registration of that portion of
the Registrable Amount that the M/C Stockholders indicate a
desire to register. All terms, conditions and rights with
respect to such registration (including but not limited to any
determination to reduce the Registrable Amount) shall be
determined by the Board, provided that (i) the representations
and warranties of the M/C Stockholders shall be customary taking
into account, among other things, the nature of the offering and
the M/C Stockholders' relationship with the Company, and (ii) the
Company shall be responsible for all expenses with respect to
such registration other than underwriting discounts and
commissions allocable to the Class A Common Stock of the M/C
Stockholders, which underwriting discounts and commissions shall
be the responsibility of the M/C Stockholders. Notwithstanding
the foregoing provisions of this Section 3.2(c), to the extent
that the Company grants pursuant to Section 3.2(c) of the Third
Amended and Restated November 1998 Stockholders' Agreement the
Principal Stockholders the opportunity to register shares of
Class A Common Stock for Transfer under the Securities Act, the
Company shall grant the M/C Stockholders the opportunity to
register shares of Class A Common Stock on a substantially
similar basis. To the extent that the Company grants pursuant to
Section 3.2(c) of this Agreement the M/C Stockholders the
opportunity to register shares of Class A Common Stock for
Transfer under the Securities Act, the Company shall grant each
Principal Stockholder pursuant to Section 3.2(c) of the Third
Amended and Restated November 1998 Stockholders' Agreement the
opportunity to register shares of Class A Common Stock on a
substantially similar basis.
(d) In addition to the registration rights granted
pursuant to Sections 3.2(a), (b) and (c), no more frequently than
once during each of the calendar years ending December 31, 2000
and 2001 (each such year, an "Annual Period"), and upon either
(i) the receipt of a written request of the M/C Stockholders or
(ii) a determination by the Board of Directors, the Board shall
undertake to determine the Registrable Amount, if any, for
Transfer by the M/C Stockholders. If the Board determines to
register shares of Class A Common Stock held by the M/C
Stockholders pursuant to this Section 3.2(d), the Company will
promptly give written notice of such determination to the M/C
Stockholders, and thereupon the Company will use commercially
reasonable efforts to effect the registration of that portion of
the Registrable Amount that the M/C Stockholders indicate a
desire to register. All terms, conditions and rights with
respect to such registration (including but not limited to any
determination to reduce the Registrable Amount) shall be
determined by the Board, provided that (i) the representations
and warranties of the M/C Stockholders shall be customary taking
into account, among other things, the nature of the offering and
the M/C Stockholders' relationship with the Company, and (ii) the
Company shall be responsible for all expenses with respect to
such registration other than underwriting discounts and
commissions allocable to the Class A Common Stock of the M/C
Stockholders, which underwriting discounts and commissions shall
be the responsibility of the M/C Stockholders. Notwithstanding
the foregoing provisions of this Section 3.2(d), to the extent
that the Company grants pursuant to Section 3.2(d) of the Third
Amended and Restated November 1998 Stockholders' Agreement the
Principal Stockholders the opportunity to register shares of
Class A Common Stock for Transfer under the Securities Act, the
Company shall grant the M/C Stockholders the opportunity to
register shares of Class A Common Stock on a substantially
similar basis. To the extent that the Company grants pursuant to
Section 3.2(d) of this Agreement the M/C Stockholders the
opportunity to register shares of Class A Common Stock for
Transfer under the Securities Act, the Company shall grant each
Principal Stockholder pursuant to Section 3.2(d) of the Third
Amended and Restated November 1998 Stockholders' Agreement the
opportunity to register shares of Class A Common Stock on a
substantially similar basis.
(e) For purposes of this Section 3.2, the M/C
Stockholders shall be deemed to be a single stockholder of the
Company, the McLeods shall be deemed to be a single Principal
Stockholder of the Company, Lumpkin and all of the Principal CCI
Shareholders shall be deemed to be a single Principal Stockholder
of the Company and the AEC Entities shall be deemed to be a
single Principal Stockholder of the Company.
(f) Notwithstanding any other provision of this
Agreement, to the extent the Company has undertaken to register
Securities of the M/C Stockholders pursuant to this Section 3.2,
the Company may subsequently determine not to register such
Securities and may either not file a registration statement or
otherwise withdraw or abandon a registration statement previously
filed with respect to the registration of such Securities;
provided that to the extent the Principal Stockholders are also
participating in such registration, the M/C Stockholders and the
Principal Stockholders will be treated on a substantially similar
basis with respect to any such determination not to register
Securities or the withdrawal or abandonment of a registration
statement previously filed as contemplated by this Section 3.2(f).
4. REPRESENTATIONS AND WARRANTIES
4.1 Representations and Warranties of Non-individual
Stockholders
Each non-individual party to this Agreement hereby
represents and warrants, as of the date of this Agreement, to the
Company and to each other party as follows:
4.1.1 Authorization
Such party has taken all action necessary for it to
enter into this Agreement and to consummate the transactions
contemplated hereby.
4.1.2 Binding Obligation
This Agreement constitutes a valid and binding
obligation of such party, enforceable in accordance with its
terms, except to the extent that such enforceability may be
limited by bankruptcy, insolvency, and similar laws affecting the
rights and remedies of creditors generally, and by general
principles of equity and public policy; and each document and
instrument to be executed by such party pursuant hereto, when
executed and delivered in accordance with the provisions hereof,
shall be a valid and binding obligation of such party,
enforceable in accordance with its terms (with the aforesaid
exceptions).
4.2 Representations and Warranties of Individual
Stockholders
Each party to this Agreement who is an individual
hereby represents and warrants, as of the date of this Agreement,
to the Company and to each other party as follows:
4.2.1 Power and Authority
Such party has the legal capacity and all other power
and authority necessary to enter into this Agreement and to
consummate the transactions contemplated hereby.
4.2.2 Binding Obligation
This Agreement constitutes a valid and binding
obligation of such party, enforceable in accordance with its
terms, except to the extent that such enforceability may be
limited by bankruptcy, insolvency, and similar laws affecting the
rights and remedies of creditors generally, and by general
principles of equity and public policy; and each document and
instrument to be executed by such party pursuant hereto, when
executed and delivered in accordance with the provisions hereof,
shall be a valid and binding obligation of such party,
enforceable in accordance with its terms (with the aforesaid
exceptions).
4.3 Representations and Warranties of the Company
The Company hereby represents and warrants, as of the
date of this Agreement, to each party as follows:
4.3.1 Authorization
The Company has taken all corporate action necessary
for it to enter into this Agreement and to consummate the
transactions contemplated hereby.
4.3.2 Binding Obligation
This Agreement constitutes a valid and binding
obligation of the Company, enforceable in accordance with its
terms, except to the extent that such enforceability may be
limited by bankruptcy, insolvency, and similar laws affecting the
rights and remedies of creditors generally, and by general
principles of equity and public policy; and each document and
instrument to be executed by the Company pursuant hereto, when
executed and delivered in accordance with the provisions hereof,
shall be a valid and binding obligation of the Company,
enforceable in accordance with its terms (with the aforesaid
exceptions).
5. MISCELLANEOUS
5.1 Effect of Changes in Capitalization
All share amounts of the Company's capital stock
referred to in this Agreement shall be appropriately and
proportionally adjusted for any recapitalization,
reclassification, stock split-up, combination of shares, exchange
of shares, stock dividend or other distribution payable in
capital stock, or other increase or decrease in such shares
effected without receipt of consideration by the Company,
occurring after the date of this Agreement.
5.2 Additional Actions and Documents
Each of the parties hereto hereby agrees to take or
cause to be taken such further actions, to execute, deliver and
file or cause to be executed, delivered and filed such further
documents and instruments, and to obtain such consents, as may be
necessary or as may be reasonably requested in order to fully
effectuate the purposes, terms and conditions of this Agreement,
whether before, at or after the Effective Date.
5.3 Entire Agreement; Amendment
Other than the Third Amended and Restated November 1998
Stockholders' Agreement with respect to the parties thereto and
as set forth therein, this Agreement constitutes the entire
agreement among the parties hereto as of the date hereof with
respect to the specific matters contemplated herein, and it
supersedes all prior oral or written agreements, commitments or
understandings with respect to the matters provided for herein.
No amendment, modification or discharge of this Agreement shall
be valid or binding unless set forth in writing and duly executed
by the Company and by the party against whom enforcement of the
amendment, modification or discharge is sought. Any amendment,
modification or discharge of this Agreement to be enforced
against the M/C Stockholders shall be valid and binding with
respect to all M/C Stockholders if such amendment, modification
or discharge is executed by those M/C Stockholders holding a
majority of the shares of Class A Common Stock issued to the M/C
Stockholders in the Merger (including distributions of Securities
with respect to such Securities and Securities acquired as a
result of a stock split with respect to such Securities).
5.4 Limitation on Benefit
It is the explicit intention of the parties hereto that
no person or entity other than the parties hereto is or shall be
entitled to bring any action to enforce any provision of this
Agreement against any of the parties hereto, and the covenants,
undertakings and agreements set forth in this Agreement shall be
solely for the benefit of, and shall be enforceable only by, the
parties hereto or their respective successors, heirs, executors,
administrators, legal representatives and permitted assigns.
5.5 Binding Effect; Specific Performance
This Agreement shall be binding upon and shall inure to
the benefit of the parties hereto and their respective
successors, heirs, executors, administrators, legal
representatives and permitted assigns. No party shall assign
this Agreement without the written consent of the other parties
hereto; and such consent shall not be unreasonably withheld. The
parties hereto agree that irreparable damage would occur in the
event any provision of this Agreement was not performed in
accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition
to any other remedy at law or in equity.
5.6 Governing Law
This Agreement, the rights and obligations of the
parties hereto, and any claims or disputes relating thereto,
shall be governed by and construed in accordance with the laws of
Delaware (excluding the choice of law rules thereof).
5.7 Notices
All notices, demands, requests, or other communications
which may be or are required to be given, served, or sent by any
party to any other party pursuant to this Agreement shall be in
writing and shall be hand-delivered or mailed by first-class,
registered or certified mail, return receipt requested, postage
prepaid, or transmitted by telegram, telecopy, facsimile
transmission or telex, addressed as follows:
(i) If to the Company or to the McLeods:
McLeodUSA Incorporated
McLeodUSA Technology Park
6400 C Street, SW, P.O. Box 3177
Cedar Rapids, IA 52406-3177
Attention: Randall Rings
Facsimile: (319) 790-7901
(ii) If to the AEC Entities:
Alliant Energy Investments, Inc.
200 1st Street SE
Cedar Rapids, IA 52401
Attention: James E. Hoffman
Facsimile: (319) 398-4204
(iii)If to Lumpkin or any Principal CCI Shareholder:
P.O. Box 1234
Mattoon, IL 61938
Attention: Richard A. Lumpkin
Facsimile: (217) 234-9934
with a copy to :
Schiff Hardin & Waite
6600 Sears Tower
Chicago, IL 60606
Attention: David R. Hodgman, Esq.
Facsimile: (312) 258-5600
(iv) If to the M/C Stockholders:
c/o Media/Communications Partners III
Limited Partnership
75 State Street
Boston, MA 02109
Attention: James F. Wade
Facsimile: (617) 345-7201
with a copy to:
Edwards & Angell, LLP
101 Federal Street
Boston, MA 02110
Attention: Stephen O. Meredith, Esq.
Facsimile: (617) 439-4170
Each party may designate by notice in writing a new
address to which any notice, demand, request or communication may
thereafter be so given, served or sent. Each notice, demand,
request or communication which shall be hand-delivered, mailed,
transmitted, telecopied or telexed in the manner described above,
or which shall be delivered to a telegraph company, shall be
deemed sufficiently given, served, sent, received or delivered
for all purposes at such time as it is delivered to the addressee
(with the return receipt, the delivery receipt, or the answerback
being deemed conclusive, but not exclusive, evidence of such
delivery) or at such time as delivery is refused by the addressee
upon presentation.
5.8 Termination
(a) This Agreement shall terminate and be of no
further force or effect as to an Original Stockholder (and not as
to the Company and the M/C Stockholders) at such time as the
Third Amended and Restated November 1998 Stockholders' Agreement
shall terminate and be of no further force or effect with respect
to such Original Stockholder.
(b) If (i) during any Annual Period the Board of
Directors has not provided the M/C Stockholders a reasonable
opportunity to Transfer shares of Class A Common Stock pursuant
to the registration of such shares under the Securities Act
pursuant to Section 3.2 in an aggregate amount equal to not less
than fifteen percent (15%) of the total number of shares of Class
A Common Stock beneficially owned by the M/C Stockholders as of
the Effective Time in connection with the consummation of the
Merger, subject to appropriate and proportionate adjustment as a
result of the Stock Split and subject to adjustment pursuant to
Section 5.1 or (ii) the Third Amended and Restated November 1998
Stockholders' Agreement has been terminated by all parties
thereto, then the M/C Stockholders may terminate this Agreement
by providing written notice of termination to the Company and the
Original Stockholders (x) in the case of clause (b)(i) above, no
later than thirty (30) days following the end of such Annual
Period and (y) in the case of clause (b)(ii) above, at any time
following such termination, such that all rights and obligations
hereunder shall cease, and this Agreement shall be of no further
force or effect.
(c) Unless otherwise previously terminated by the M/C
Stockholders pursuant to Section 5.8(b), this Agreement shall
terminate on the Expiration Date.
(d) This Agreement is hereby terminated with respect
to each of the Other CCI Shareholders, such that all rights and
obligations hereunder shall cease, and this Agreement shall be of
no further force or effect, with respect to each of the Other CCI
Shareholders.
(e) For purposes of this Section 5.8, the M/C
Stockholders shall be deemed to be a single stockholder of the
Company, the McLeods shall be deemed to be a single Original
Stockholder of the Company, Lumpkin and all of the Principal CCI
Shareholders shall be deemed to be a single Original Stockholder
of the Company, and the AEC Entities shall be deemed to be a
single Original Stockholder of the Company.
5.9 Publicity
The M/C Stockholders will use their reasonable best
efforts to consult with the Company prior to issuing any press
release, making any filing with any governmental entity or
national securities exchange or making any other public
dissemination of information by the M/C Stockholders within which
this Agreement or the contents hereof are referenced or described.
5.10 Appointment of Representative
(a) Each of the M/C Stockholders hereby appoints M/C
Partners, with power of substitution, as its exclusive agent to
act on its behalf with respect to any and all actions to be taken
under or amendments or modifications to be made to this Agreement
(the "M/C Representative"). The M/C Representative shall take,
and the M/C Stockholders agree that the M/C Representative shall
take, any and all actions which the M/C Representative believes
are necessary or advisable under this Agreement for and on behalf
of each of the M/C Stockholders, as fully as if each of the M/C
Stockholders was acting on its own behalf, including, without
limitation, dealing with the Company and the other parties hereto
with respect to all matters arising under this Agreement,
entering into any amendment or modification to this Agreement
deemed advisable by the M/C Representative and taking any and all
other actions specified in or contemplated by this Agreement.
The Company and the other parties hereto shall have the right to
rely upon all actions taken or not taken by the M/C
Representative pursuant to this Agreement, all of which actions
or omissions shall be legally binding upon each of the M/C
Stockholders.
(b) Each of the Principal CCI Shareholders hereby
appoints Lumpkin, with power of substitution, as its exclusive
agent to act on its behalf with respect to any and all actions to
be taken under or amendments or modifications to be made to this
Agreement (the "CCI Representative"). The CCI Representative
shall take, and the Principal CCI Shareholders agree that the CCI
Representative shall take, any and all actions which the CCI
Representative believes are necessary or advisable under this
Agreement for and on behalf of each of the Principal CCI
Shareholders, as fully as if each of the Principal CCI
Shareholders was acting on its own behalf, including, without
limitation, dealing with the Company and the other parties hereto
with respect to all matters arising under this Agreement,
entering into any amendment or modification to this Agreement
deemed advisable by the CCI Representative and taking any and all
other actions specified in or contemplated by this Agreement.
The Company and the other parties hereto shall have the right to
rely upon all actions taken or not taken by the CCI
Representative pursuant to this Agreement, all of which actions
or omissions shall be legally binding upon each of the Principal
CCI Shareholders.
5.11 Execution in Counterparts
To facilitate execution, this Agreement may be executed
in as many counterparts as may be required; and it shall not be
necessary that the signatures of, or on behalf of, each party, or
that the signatures of all persons required to bind any party,
appear on each counterpart; but it shall be sufficient that the
signature of, or on behalf of, each party, or that the signatures
of the persons required to bind any party, appear on one or more
of the counterparts. All counterparts shall collectively
constitute a single agreement. It shall not be necessary in
making proof of this Agreement to produce or account for more
than a number of counterparts containing the respective
signatures of, or on behalf of, all of the parties hereto.
[Remainder of Page Intentionally Left Blank]
<PAGE>
IN WITNESS WHEREOF, the undersigned have duly executed
and delivered this Third Amended and Restated January 1999
Stockholders' Agreement, or have caused this Third Amended and
Restated January 1999 Stockholders' Agreement to be duly executed
and delivered on their behalf, as of the day and year first
hereinabove set forth.
McLEODUSA INCORPORATED
By: /s/ J. Lyle Patrick
-------------------------------
Name: J. Lyle Patrick
Title: Group Vice President/CFO
/s/ Clark E. McLeod /s/ Mary E. McLeod
- ------------------- -------------------
Clark E. McLeod Mary E. McLeod
M/C INVESTORS L.L.C.
By: /s/ Peter H.O. Claudy
--------------------------
Name: Peter H.O. Claudy
Title: Manager
MEDIA/COMMUNICATIONS PARTNERS III LIMITED PARTNERSHIP
By: M/C III L.L.C., its General Partner
By: /s/ Peter H.O. Claudy
---------------------------------
Name: Peter H.O. Claudy
Title: Manager
ALLIANT ENERGY CORPORATION, INC.
By: /s/ James E. Hoffman
----------------------------------
Name: James E. Hoffman
Title: Executive Vice President
Business Development
ALLIANT ENERGY FOUNDATION
By: /s/ Edward M. Gleason
--------------------------------
Name: Edward M. Gleason
Title: Treasurer
ALLIANT ENERGY INVESTMENTS, INC.
By: /s/ James E. Hoffman
-------------------------
Name: James E. Hoffman
Title: President, Alliant Energy Resources
HEARTLAND PROPERTIES, INC.
By: /s/ Henry Wertheimer
--------------------------------
Name: Henry Wertheimer
Title: Vice President/Treasurer
LNT COMMUNICATIONS LLC
By: Alliant Energy Resources, Inc., its sole member
By: /s/ James E. Hoffman
--------------------------------
Name: James E. Hoffman
Title: President
/s/ Richard A. Lumpkin /s/ Gail G. Lumpkin
- ---------------------- ----------------------
Richard A. Lumpkin Gail G. Lumpkin
<PAGE>
The two trusts created under the Mary Green Lumpkin Gallo Trust
Agreement dated December 29, 1989, one for the benefit of each
of:
Benjamin Iverson Lumpkin
Elizabeth Arabella Lumpkin
United States Trust Company
of New York, Trustee
By: /s/ Loraine B. Tsavaris
----------------------------------
Name: Loraine B. Tsavaris
Title: Managing Director
The trust established by Richard Adamson Lumpkin under the Trust
Agreement dated February 6, 1970, for the benefit of Richard
Anthony Lumpkin.
United States Trust Company
of New York, Trustee
By: /s/ Loraine B. Tsavaris
----------------------------------
Name: Loraine B. Tsavaris
Title: Managing Director
The two trusts created under the Richard Adamson Lumpkin
Grandchildren's Trust dated September 5, 1980, one for the
benefit of each of:
Benjamin Iverson Lumpkin
Elizabeth Arabella Lumpkin
United States Trust Company
of New York, Trustee
By: /s/ Loraine B. Tsavaris
----------------------------
Name: Loraine B. Tsavaris
Title: Managing Director
The two 1990 Personal Income Trusts established by Richard A.
Lumpkin, dated April 20, 1990, one for the benefit of each of:
Benjamin Iverson Lumpkin
Elizabeth Arabella Lumpkin
/s/ David R. Hodgman
- --------------------
David R. Hodgman, Trustee
/s/ Steven L. Grissom
- ---------------------
Steven L. Grissom, Trustee
<PAGE>
FOR PURPOSES OF SECTIONS 4, 5.6, 5.8(d), 5.11 AND THE FIRST
SENTENCE OF SECTION 5.3 ONLY:
Margaret Lumpkin Keon Trust Mary Lee Sparks Trust
dated May 13, 1978 dated May 13, 1978
/s/ Margaret Lumpkin Keon /s/ Mary Lee Sparks
- ---------------------------------- --------------------------------
Margaret Lumpkin Keon, as Trustee Mary Lee Sparks, as Trustee
/s/ Steven L. Grissom
------------------------------
Steven L. Grissom, as Trustee
/s/ Mary Lee Sparks
- --------------------------------
Mary Lee Sparks
The ten trusts created under the Mary Green Lumpkin Gallo Trust
Agreement dated December 29, 1989, one for the benefit of each
of:
Joseph John Keon III,
Katherine Stoddert Keon,
Lisa Anne Keon,
Margaret Lynley Keon,
Pamela Keon Vitale,
Susan Tamara Keon DeWyngaert,
Anne Romayne Sparks,
Barbara Lee Sparks,
Christina Louise Sparks, and
John Woodruff Sparks
United States Trust Company
of New York, Trustee
By: /s/ Loraine B. Tsavaris
----------------------------
Name: Loraine B. Tsavaris
Title: Managing Director
The ten trusts created under the Richard Adamson Lumpkin
Grandchildren's Trust dated September 5, 1980, one for the
benefit of each of:
Joseph John Keon III,
Katherine Stoddert Keon,
Lisa Anne Keon,
Margaret Lynley Keon,
Pamela Keon Vitale,
Susan Tamara Keon DeWyngaert,
Anne Romayne Sparks,
Barbara Lee Sparks,
Christina Louise Sparks, and
John Woodruff Sparks
United States Trust Company of
New York, Trustee
By: /s/ Loraine B. Tsavaris
----------------------------
Name: Loraine B. Tsavaris
Title: Managing Director
The two trusts established by Richard Adamson Lumpkin under the
Trust Agreement dated February 6, 1970, one for the benefit of
each of:
Margaret Anne Keon, and
Mary Lee Sparks
United States Trust Company
of New York, Trustee
By: /s/ Loraine B. Tsavaris
----------------------------
Name: Loraine B. Tsavaris
Title: Managing Director
The ten 1990 Personal Income Trusts established by Margaret L.
Keon and Mary Lee Sparks, each dated April 20, 1990, one for the
benefit of each of:
Joseph John Keon III,
Katherine Stoddert Keon,
Lisa Anne Keon,
Margaret Lynley Keon,
Pamela Keon Vitale,
Susan Tamara Keon DeWyngaert,
Anne Romayne Sparks,
Barbara Lee Sparks,
Christina Louise Sparks, and
John Woodruff Sparks
/s/ David R. Hodgman
- --------------------
David R. Hodgman, Trustee
/s/ Steven L. Grissom
- ---------------------
Steven L. Grissom, Trustee
<PAGE>
SCHEDULE I
Richard A. Lumpkin
Gail G. Lumpkin
United States Trust Company of New York, as Trustee of two trusts
created under the Mary Green Lumpkin Gallo Trust Agreement dated
December 29, 1989, one for the benefit of each of Benjamin
Iverson Lumpkin and Elizabeth Arabella Lumpkin.
United States Trust Company of New York, as Trustee of two trusts
created under the Richard Adamson Lumpkin Grandchildren's Trust
dated September 5, 1980, one for the benefit of each of Benjamin
Iverson Lumpkin and Elizabeth Arabella Lumpkin.
United States Trust Company of New York, as Trustee of the trust
established by Richard Adamson Lumpkin under the Trust Agreement
dated February 6, 1970, for the benefit of Richard Anthony
Lumpkin.
David R. Hodgman and Steven L. Grissom, as Trustees of two 1990
Personal Income Trusts established by Richard A. Lumpkin, each
dated April 20, 1990, one for the benefit of each of Benjamin
Iverson Lumpkin and Elizabeth Arabella Lumpkin.
<PAGE>
SCHEDULE II
Margaret Lumpkin Keon, as Trustee under the Margaret Lumpkin Keon
Trust dated May 13, 1978.
Mary Lee Sparks and Steven L. Grissom, as Trustees of the Mary
Lee Sparks Trust dated May 13, 1978.
Mary Lee Sparks
United States Trust Company of New York, as Trustee of ten trusts
created under the Mary Green Lumpkin Gallo Trust Agreement dated
December 29, 1989, one for the benefit of each of Joseph John
Keon III, Katherine Stoddert Keon, Lisa Anne Keon, Margaret
Lynley Keon, Pamela Keon Vitale, Susan Tamara Keon DeWyngaert,
Anne Romayne Sparks, Barbara Lee Sparks, Christina Louise Sparks,
and John Woodruff Sparks.
United States Trust Company of New York, as Trustee of ten trusts
created under the Richard Adamson Lumpkin Grandchildren's Trust
dated September 5, 1980, one for the benefit of each of Joseph
John Keon III, Katherine Stoddert Keon, Lisa Anne Keon, Margaret
Lynley Keon, Pamela Keon Vitale, Susan Tamara Keon DeWyngaert,
Anne Romayne Sparks, Barbara Lee Sparks, Christina Louise Sparks,
and John Woodruff Sparks.
United States Trust Company of New York, as Trustee of two trusts
established by Richard Adamson Lumpkin under the Trust Agreement
dated February 6, 1970, one for the benefit of each of Margaret
Anne Keon and Mary Lee Sparks.
David R. Hodgman and Steven L. Grissom, as Trustees of ten 1990
Personal Income Trusts established by Margaret L. Keon and Mary
Lee Sparks, each dated April 20, 1990, one for the benefit of
each of Joseph John Keon III, Katherine Stoddert Keon, Lisa Anne
Keon, Margaret Lynley Keon, Pamela Keon Vitale, Susan Tamara Keon
DeWyngaert, Anne Romayne Sparks, Barbara Lee Sparks, Christina
Louise Sparks, and John Woodruff Sparks.
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
This schedule contains summary financial information extracted from the March
31, 2000 Financial Statements included in Alliant Energy Corporation's Form 10-Q
and is qualified in its entirety by reference to such Financial Statements.
</LEGEND>
<CIK> 0000352541
<NAME> ALLIANT ENERGY CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 3,116,478
<OTHER-PROPERTY-AND-INVEST> 2,935,536
<TOTAL-CURRENT-ASSETS> 368,282
<TOTAL-DEFERRED-CHARGES> 196,094
<OTHER-ASSETS> 261,427
<TOTAL-ASSETS> 6,877,817
<COMMON> 790
<CAPITAL-SURPLUS-PAID-IN> 945,308
<RETAINED-EARNINGS> 1,471,236 <F1>
<TOTAL-COMMON-STOCKHOLDERS-EQ> 2,417,334
24,575
89,102
<LONG-TERM-DEBT-NET> 2,019,502
<SHORT-TERM-NOTES> 54
<LONG-TERM-NOTES-PAYABLE> 55,100
<COMMERCIAL-PAPER-OBLIGATIONS> 300,785
<LONG-TERM-DEBT-CURRENT-PORT> 5,692
0
<CAPITAL-LEASE-OBLIGATIONS> 22,940
<LEASES-CURRENT> 13,285
<OTHER-ITEMS-CAPITAL-AND-LIAB> 1,929,448
<TOT-CAPITALIZATION-AND-LIAB> 6,877,817
<GROSS-OPERATING-REVENUE> 620,850
<INCOME-TAX-EXPENSE> 12,438 <F2>
<OTHER-OPERATING-EXPENSES> 532,460
<TOTAL-OPERATING-EXPENSES> 532,460 <F2>
<OPERATING-INCOME-LOSS> 88,390
<OTHER-INCOME-NET> 25,157
<INCOME-BEFORE-INTEREST-EXPEN> 113,547
<TOTAL-INTEREST-EXPENSE> 80,111 <F3>
<NET-INCOME> 20,998
1,678
<EARNINGS-AVAILABLE-FOR-COMM> 19,320
<COMMON-STOCK-DIVIDENDS> 39,498
<TOTAL-INTEREST-ON-BONDS> 144,211
<CASH-FLOW-OPERATIONS> 185,719
<EPS-BASIC> 0.24
<EPS-DILUTED> 0.24
<FN>
<F1> Includes $913,950 of Accumulated Other Comprehensive Income.
<F2> Income tax expense is not included in Operating Expense in the Consolidated
Statements of Income.
<F3> Includes $39,493 of Contingent Interest on Indexed Debt Securities.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
This schedule contains summary financial information extracted from the March
31, 2000 Financial Statements included in IES Utilities Inc.'s Form 10-Q and is
qualified in its entirety by reference to such Financial Statements.
</LEGEND>
<CIK> 0000052485
<NAME> IES UTILITIES INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1,369,073
<OTHER-PROPERTY-AND-INVEST> 120,148
<TOTAL-CURRENT-ASSETS> 89,328
<TOTAL-DEFERRED-CHARGES> 12,288
<OTHER-ASSETS> 117,269
<TOTAL-ASSETS> 1,708,106
<COMMON> 33,427
<CAPITAL-SURPLUS-PAID-IN> 279,042
<RETAINED-EARNINGS> 254,177
<TOTAL-COMMON-STOCKHOLDERS-EQ> 566,646
0
18,320
<LONG-TERM-DEBT-NET> 551,142
<SHORT-TERM-NOTES> 72,770
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 196
0
<CAPITAL-LEASE-OBLIGATIONS> 22,878
<LEASES-CURRENT> 13,272
<OTHER-ITEMS-CAPITAL-AND-LIAB> 462,882
<TOT-CAPITALIZATION-AND-LIAB> 1,708,106
<GROSS-OPERATING-REVENUE> 212,124
<INCOME-TAX-EXPENSE> 11,616
<OTHER-OPERATING-EXPENSES> 176,626
<TOTAL-OPERATING-EXPENSES> 176,626
<OPERATING-INCOME-LOSS> 35,498
<OTHER-INCOME-NET> 5,240
<INCOME-BEFORE-INTEREST-EXPEN> 40,738
<TOTAL-INTEREST-EXPENSE> 13,011
<NET-INCOME> 16,111
229
<EARNINGS-AVAILABLE-FOR-COMM> 15,882
<COMMON-STOCK-DIVIDENDS> 14,658
<TOTAL-INTEREST-ON-BONDS> 38,852
<CASH-FLOW-OPERATIONS> 76,842
<EPS-BASIC> 0 <F2>
<EPS-DILUTED> 0 <F2>
<FN>
<F1> Income tax expense is not included in Operating Expense in the Consolidated
Statements of Income.
<F2>Earnings per share of common stock is not reflected because all common
shares are held by Alliant Energy Corporation.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
This schedule contains summary financial information extracted from the March
31, 2000 Financial Statements included in Wisconsin Power and Light Company's
Form 10-Q and is qualified in its entirety by reference to such Financial
Statements.
</LEGEND>
<CIK> 0000107832
<NAME> WISCONSIN POWER AND LIGHT COMPANY
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1,237,575
<OTHER-PROPERTY-AND-INVEST> 183,140
<TOTAL-CURRENT-ASSETS> 112,678
<TOTAL-DEFERRED-CHARGES> 150,113
<OTHER-ASSETS> 88,368
<TOTAL-ASSETS> 1,771,874
<COMMON> 66,183
<CAPITAL-SURPLUS-PAID-IN> 229,438
<RETAINED-EARNINGS> 324,519
<TOTAL-COMMON-STOCKHOLDERS-EQ> 620,140
0
59,963
<LONG-TERM-DEBT-NET> 514,092
<SHORT-TERM-NOTES> 633
<LONG-TERM-NOTES-PAYABLE> 55,100
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 1,875
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 520,071
<TOT-CAPITALIZATION-AND-LIAB> 1,771,874
<GROSS-OPERATING-REVENUE> 218,832
<INCOME-TAX-EXPENSE> 12,857
<OTHER-OPERATING-EXPENSES> 178,337
<TOTAL-OPERATING-EXPENSES> 178,337
<OPERATING-INCOME-LOSS> 40,495
<OTHER-INCOME-NET> 5,141
<INCOME-BEFORE-INTEREST-EXPEN> 45,636
<TOTAL-INTEREST-EXPENSE> 10,908
<NET-INCOME> 21,871
828
<EARNINGS-AVAILABLE-FOR-COMM> 21,043
<COMMON-STOCK-DIVIDENDS> 0
<TOTAL-INTEREST-ON-BONDS> 41,182
<CASH-FLOW-OPERATIONS> 95,511
<EPS-BASIC> 0 <F2>
<EPS-DILUTED> 0 <F2>
<FN>
<F1> Income tax expense is not included in Operating Expense in the Consolidated
Statements of Income.
<F2>Earnings per share of common stock is not reflected because all common
shares are held by Alliant Energy Corporation.
</FN>
</TABLE>
