<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
IES INDUSTRIES INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
(5) Total fee paid:
-----------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
[LOGO]
Dear Shareholder of IES Industries Inc.:
You are cordially invited to attend the Annual Meeting of Shareholders of
IES Industries Inc. ("IES Industries") which will be held on Thursday, May 22,
1997, at the Collins Plaza Hotel, 1200 Collins Road N.E., Cedar Rapids, Iowa, at
2:00 p.m. (Central Daylight Time).
A map showing the location of the Annual Meeting of Shareholders is printed
on the last page of this Proxy Statement.
A notice of the meeting and a proxy/directions card are enclosed. We hope
you will sign, date and return the proxy/directions card as promptly as possible
in the enclosed self-addressed postage prepaid envelope. As a Shareholder, it is
in your best interest, as well as helpful to your Board of Directors, that you
participate in the affairs of IES Industries, whether you own a few shares or
many shares.
A copy of the Annual Report of IES Industries, including financial
statements for the fiscal year ended December 31, 1996, is included in this
mailing with your Proxy Statement. A report of the Annual Meeting will be mailed
to all Shareholders following the meeting.
Please let me express my appreciation for your past cooperation and I look
forward to your continued interest in IES Industries.
Whether or not you plan to attend the Annual Meeting, please promptly
complete, sign, date and return the enclosed proxy/directions card in the
enclosed postage prepaid envelope. You may, of course, attend the Annual Meeting
and vote in person, even if you have previously returned your proxy card.
On behalf of your Board of Directors, thank you for your continued support.
Sincerely,
Lee Liu
CHAIRMAN OF THE BOARD
& CHIEF EXECUTIVE OFFICER
March 27, 1997
<PAGE>
IES INDUSTRIES INC.
----------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
---------------------
TO BE HELD MAY 22, 1997
To the Shareholders of
IES INDUSTRIES INC.
The Annual Meeting of the Shareholders of IES Industries Inc. ("IES
Industries"), an Iowa corporation, will be held at the Collins Plaza Hotel, 1200
Collins Road N.E., Cedar Rapids, Iowa, on the 22nd day of May, 1997, at the hour
of 2:00 p.m. (Central Daylight Time) for the following purposes:
1) To elect a board of nine directors to serve until the next ensuing
annual meeting or until their successors are duly elected and qualified.
2) To transact such other business as may properly come before the meeting
or at any adjournment or adjournments thereof.
The Board of Directors, in accordance with the Bylaws and Articles of
Incorporation of IES Industries, has fixed the close of business, March 17,
1997, as the record date for the determination of Shareholders entitled to
notice of and to vote at this meeting and any adjournment or adjournments
thereof. Your continued interest and cooperation are greatly appreciated.
This Notice and the Annual Report are sent to you by order of the Board of
Directors.
Stephen W. Southwick
VICE PRESIDENT, GENERAL COUNSEL &
SECRETARY
Cedar Rapids, Iowa
March 27, 1997
THE BYLAWS REQUIRE THAT THE HOLDERS OF A MAJORITY OF THE OUTSTANDING SHARES OF
STOCK ENTITLED TO VOTE BE REPRESENTED IN PERSON OR BY PROXY AT THE MEETING TO
CONSTITUTE A QUORUM FOR THE TRANSACTION OF BUSINESS. THEREFORE, REGARDLESS OF
THE NUMBER OF SHARES YOU HOLD, IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED
AT THE MEETING.
PLEASE SIGN, DATE AND MAIL THE PROXY/DIRECTIONS CARD PROMPTLY IN THE
SELF-ADDRESSED ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED
STATES. THE PROMPT RETURN OF YOUR PROXY/DIRECTIONS CARD WILL SAVE THE EXPENSE
INVOLVED IN FURTHER COMMUNICATION.
<PAGE>
IES INDUSTRIES INC.
IES TOWER
200 FIRST STREET S.E.
CEDAR RAPIDS, IOWA 52401
March 27, 1997
PROXY STATEMENT
PROXY/DIRECTIONS CARD FOR OWNERS OF COMMON STOCK
This Proxy Statement, the accompanying proxy/directions card and the Annual
Report are being mailed on or about March 27, 1997, to each holder of record of
IES Industries Inc. ("IES Industries" or the "Company") Common Stock at the
close of business March 17, 1997 (the "Shareholders") and to each beneficial
owner of Company Common Stock held in certain employee plans referred to below
who is not otherwise a holder of record. Proxy/directions cards in the form
enclosed are solicited by the Board of Directors of IES Industries for use at
the Annual Meeting of Shareholders ("Annual Meeting") to be held at the Collins
Plaza Hotel, 1200 Collins Road N.E., in the City of Cedar Rapids, Iowa, on May
22, 1997, at the hour of 2:00 p.m. (Central Daylight Time).
The proxy/directions card enclosed has imprinted thereon the number of
shares of Common Stock held of record as well as shares held for the account of
Shareholder participants in the IES Industries Dividend Reinvestment and Stock
Purchase Plan. Proxy/directions cards for Shareholders who are employees of IES
Industries and who are participants in the IES Industries Employee Stock
Purchase Plan, the Dividend Reinvestment and Stock Purchase Plan or the IES
Industries Bonus Stock Ownership Plan will also have imprinted thereon the
number of shares held for the account of participants in that plan. Employees
who are not Shareholders of record but who are participants in any of the plans
will receive a proxy/directions card for shares being held for them pursuant to
such plan. The number of shares imprinted on the proxy/directions card is the
number of shares to be voted in accordance with the instructions of the
Shareholder or Plan participant.
All shares of IES Industries Common Stock held for the account of
participants in the IES Industries Dividend Reinvestment and Stock Purchase
Plan, the IES Industries Bonus Stock Ownership Plan and the IES Industries
Employee Stock Purchase Plan, respectively, are held of record by IES Industries
Inc., Shareholder Services Department ("the Administrator"). All shares held in
such plans will be voted by the Administrator in the manner indicated by the
participant's proxy/directions card. Participants in the Iowa Southern Utilities
Company ("IS Utilities") Employee Stock Ownership Plan ("ESOP") will receive a
proxy/directions card for shares being held for them pursuant to such plan. The
number of shares imprinted on the proxy/directions card are the number of shares
to be voted in accordance with the instructions of the ESOP participant. All
shares of IES Industries Common Stock held for the account of participants in
the ESOP are held of record by Stephen W. Southwick (Vice President, General
Counsel & Secretary), as Trustee. All shares held in the ESOP will be voted by
the Trustee in the manner indicated by the participant's proxy/directions card.
Employees who are participants in the IES Industries Common Stock Fund of
the IES Industries Employee Savings Plan (the "ESP") will receive a
proxy/directions card from American Express Trust Company (the "ESP Trustee"),
the holder of record for shares held in the ESP. The proxy/directions card has
imprinted thereon the number of shares held for the account of each participant.
The number of shares imprinted on the proxy/directions card will be voted by the
ESP Trustee in accordance with the instructions of the ESP participant. Shares
not voted by the participants will be voted by the ESP Trustee as the Employee
Savings Plan Committee directs.
A person giving a proxy/directions card may revoke it at any time before the
shares of IES Industries Common Stock that it represents are voted. Except as
provided below, any Shareholder attending the meeting may, on request, vote his
or her own shares even though he or she has previously sent in a proxy.
Attendance at the IES Industries Annual Meeting will not in and of itself
constitute a revocation of a
<PAGE>
proxy. Because the participants in the various plans described above are not the
record owners of shares held in such plans, such shares may not be voted in
person at the Annual Meeting by such participants. Unless revoked, the shares of
IES Industries Common Stock represented by proxy/directions cards will be voted
on all matters to be acted upon at the Annual Meeting in accordance with the
instructions indicated thereon. If no instructions are indicated on the
proxy/directions card, such shares will be voted for the election of the
nominees for director named herein.
Directors are elected by a majority of votes cast by the shares entitled to
vote in the election at a meeting at which a quorum is present. Except as
otherwise provided in the Articles of Incorporation and the Bylaws, other items
of business shall be decided by a majority vote at a meeting at which a quorum
is present. Votes by proxy are voted by a proxy committee of three directors
appointed by the Board of Directors. Votes are counted and certified to the
Secretary by the Administrator and by inspectors of election appointed by the
Administrator. Abstentions and exceptions are also counted as votes cast and
certified. Broker non-votes are not voted by the proxy committee.
COST OF SOLICITATION
The cost of soliciting proxies/directions for the Annual Meeting will be
borne by IES Industries. Solicitation will be made primarily by mail. Officers,
directors or regular employees of IES Industries may, however, solicit
proxies/directions personally or by telephone or telegram without special
compensation for such service. In addition, the Company has retained Morrow &
Co., Inc. to assist in the solicitation of proxies. Such firm will solicit by
mail, telephone, telegram, and personal solicitation. For these services, the
Company will pay a fee not in excess of $5,000 to Morrow & Co., Inc., plus
reasonable out-of-pocket costs and expenses.
IES Industries will reimburse brokers and other persons holding stock in
their names, or in the names of nominees, for their expenses in sending proxy
material to the beneficial owners of stock held of record by such brokers or
other persons.
PURPOSES OF MEETING
The only known business to be presented at the Annual Meeting is the
election of nine directors of IES Industries to serve until the next annual
meeting or until their successors are duly elected and qualified. As of the date
of mailing this Proxy Statement, the Board of Directors does not know of any
other business to be brought before the Annual Meeting. However, the enclosed
proxy/directions card authorizes the voting of such shares on all other matters
that may properly come before the meeting and it is the intention of the proxy
holders to take such action in connection therewith as shall be in accordance
with their best judgment.
STOCK ENTITLED TO VOTE
On March 17, 1997, IES Industries had 30,215,440 outstanding shares of
Common Stock in which all voting rights are vested.
Each Shareholder entitled to vote upon the subject to be acted upon at the
Annual Meeting and at any and all adjournments thereof is entitled to one vote,
in person or by proxy, for each share of IES Industries Common Stock registered
in his or her name, at the close of business on March 17, 1997.
Shares cannot be voted at the Annual Meeting unless the record owner is
present in person or represented by proxy.
2
<PAGE>
PROPOSED MERGER WITH
WPL HOLDINGS, INC. AND INTERSTATE POWER COMPANY
On November 10, 1995, the Company, WPL Holdings, Inc., a holding company
incorporated under the laws of the State of Wisconsin ("WPLH") and Interstate
Power Company, an operating public utility incorporated under the laws of the
State of Delaware ("IPC"), entered into an Agreement and Plan of Merger, as
amended ("Merger Agreement"), providing for: a) IPC becoming a wholly-owned
subsidiary of WPLH, and b) the merger of the Company with and into WPLH, which
merger will result in the combination of the Company and WPLH as a single
holding company (collectively, the "Proposed Merger"). The new holding company
will be renamed Interstate Energy Corporation ("IEC") and the Company will cease
to exist. The Proposed Merger has been approved by the respective Boards of
Directors and shareholders. It is still subject to approval by several federal
and state regulatory agencies. As of the date of this Proxy Statement, the
Company anticipates that the Proposed Merger will be consummated by the end of
the third quarter of 1997.
In connection with the execution of the Merger Agreement, the Company, WPLH
and IPC also entered into reciprocal option grantor/option holder stock option
and trigger payment agreements (the "Stock Option Agreements") each granting the
other two parties an irrevocable option ("Option") to purchase, under certain
circumstances, a certain percentage of authorized but unissued shares of the
respective issuer's common stock (representing up to an aggregate of 19.9% of
the outstanding common stock of such issuer on November 10, 1995), at the
exercise price of $26.7125 per share in the case of IES Industries Common Stock,
$30.675 per share in the case of WPLH Common Stock and $28.9375 per share in the
case of IPC Common Stock. The Options will generally become exercisable at any
time after the Merger Agreement becomes terminable by the holder of an Option
under circumstances which could entitle such holder to termination fees from the
issuer of the Option under certain sections of the Merger Agreement. The
conditions that would give rise to the exercise of the Company Option do not
exist as of the date of this Proxy Statement.
PROPOSAL--NOMINATION AND ELECTION OF DIRECTORS
Nine directors will be elected by the Shareholders at the Annual Meeting to
serve until the next annual meeting or until their respective successors have
been duly elected and qualified. All of the nominees have previously been
elected as directors by the Shareholders. IES Industries' principal subsidiary
is IES Utilities Inc. ("IES Utilities").
In the event that any nominee should become unavailable for election, which
is not now contemplated, the Board of Directors reserves discretionary authority
to designate a substitute nominee. Proxies will be voted for the election of
such other nominee or nominees as may be so designated by the Board of
Directors.
3
<PAGE>
NOMINEES FOR ELECTION AS DIRECTORS
<TABLE>
<CAPTION>
YEAR FIRST
ELECTED A
NAME AND AGE DIRECTOR
---------------------------------------------------------------------- -----------------
<S> <C> <C>
C.R.S. ANDERSON, 69 1978
[PICTURE]
Mr. Anderson is the retired Chairman of the Board of IES Industries after serving in that
position following the merger of IE Industries Inc. and Iowa Southern Inc. Prior to the
merger, Mr. Anderson was Chairman and President of Iowa Southern Inc., and had served in
various positions at Iowa Southern Utilities Company since 1956. He is a past chairman of
the Missouri Valley Electric Association and the Iowa Association of Business and
Industry; and a former director of IMG Bond Accumulation Fund, IMG Stock Accumulation
Fund, Midwest Gas Association and the Iowa Business Development Credit Corporation. Mr.
Anderson has been a director of IES Industries since 1991 and was first elected to the
Iowa Southern Utilities Company board in 1978. Mr. Anderson serves on the Executive
Committee and chairs the Audit Committee.
J. WAYNE BEVIS, 62 1987
[PICTURE]
Mr. Bevis is Vice Chairman of Pella Corporation, a window and door manufacturing company
in Pella, Iowa. Mr. Bevis retired on December 31, 1995 as Chief Executive Officer of
Pella Corporation. He has served in various positions at Pella Corporation since 1973 and
has been a director of Pella Corporation since 1975. Mr. Bevis has been a director of IES
Industries since 1991 and was first elected to the IE Industries Inc. board in 1987. Mr.
Bevis serves on the Audit and the Compensation Committees.
LEE LIU, 63 1981
[PICTURE]
Mr. Liu is Chairman of the Board & Chief Executive Officer of the Company and is Chairman
of the Board & Chief Executive Officer of IES Utilities. Mr. Liu has held a number of
professional, management and executive positions since joining Iowa Electric Light and
Power Company, now known as IES Utilities, in 1957. He is a director of: HON Industries
Inc., an office equipment manufacturer in Muscatine, Iowa; McLeod, Inc., a
telecommunications company in Cedar Rapids, Iowa; Principal Financial Group, an insurance
company in Des Moines, Iowa; and Eastman Chemical Company, a diversified chemical company
in Kingsport, Tennessee. He also serves as a trustee for Mercy Medical Center, a hospital
in Cedar Rapids, Iowa and is a member of the Iowa Business Council and the University of
Iowa College of Business Board of Visitors. Mr. Liu has been a director of the Company
since 1991 and was first elected to the board of Iowa Electric Light and Power Company in
1981. Mr. Liu chairs the Executive Committee and serves on the Nominating Committee.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
YEAR FIRST
ELECTED A
NAME AND AGE DIRECTOR
---------------------------------------------------------------------- -----------------
JACK R. NEWMAN, 63 1994
[PICTURE]
Mr. Newman has been a Partner of Morgan, Lewis & Bockius, an international law firm based
in Washington, D.C., specializing in energy matters since December 1, 1994. Mr. Newman
has been engaged in private practice since 1967 and was previously a partner in the law
firms Newman & Holtzinger and Newman, Bouknight & Edgar. He has served as nuclear legal
counsel to the Company since 1968. Prior to 1967, Mr. Newman served as Secretary and
General Counsel of the Nuclear Materials and Equipment Corporation and as Staff Counsel
to the Joint Congressional Committee on Atomic Energy. He advises a number of utility
companies on nuclear power matters, including many European and Asian companies. Mr.
Newman is a member of the Bar of the State of New York, the Bar Association of the
District of Columbia, the Association of the Bar of the City of New York, the Federal Bar
Association and the Lawyers Committee of the Edison Electric Institute. He was first
appointed to the board of the Company in August 1994. Mr. Newman serves on the Audit and
Compensation Committees.
<S> <C> <C>
ROBERT D. RAY, 68 1987
[PICTURE]
Mr. Ray retired on December 31, 1996 as President and Chief Executive Officer of IASD
Health Services Inc. (formerly Blue Cross and Blue Shield of Iowa, Western Iowa and South
Dakota), an insurance firm in Des Moines, Iowa. From 1983 until 1989 he was President and
Chief Executive Officer of Life Investors, Inc., an insurance firm in Cedar Rapids, Iowa.
Mr. Ray served as Governor of the State of Iowa for fourteen years, and was the United
States Delegate to the United Nations in 1984. He is a director of the Maytag Company, an
appliance manufacturer in Newton, Iowa. He also serves as Chairman of the National
Leadership Commission on Health Care Reform and the National Advisory Committee on Rural
Health Care. Mr. Ray is Chairman of the Board of Governors, Drake University, Des Moines,
Iowa, and a member of the Iowa Business Council. He has been a director of the Company
since 1991 and was first elected to the IE Industries Inc. board in 1987. Mr. Ray serves
on the Audit and Nominating Committees.
DAVID Q. REED, 65 1967
[PICTURE]
Mr. Reed is an independent practitioner of law in Kansas City, Missouri. Mr. Reed has
been engaged in the private practice of law since 1960. From 1972 until 1988, he was a
senior member of the firm of Kodas, Reed & McFadden, P.C. in Kansas City, Missouri. Mr.
Reed is a member of the American Bar Association, the Association of Trial Lawyers of
America, the Missouri Association of Trial Lawyers, the Missouri Bar and the Kansas City
Metropolitan Bar Association. He served in the Missouri General Assembly from 1972 until
1974. Mr. Reed has been a director of the Company since 1991 and was first elected to the
Iowa Electric Light and Power Company board in 1967. Mr. Reed serves on the Executive
Committee and chairs the Nominating Committee.
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
YEAR FIRST
ELECTED A
NAME AND AGE DIRECTOR
---------------------------------------------------------------------- -----------------
HENRY ROYER, 65 1984
[PICTURE]
Mr. Royer has been President and Chief Executive Officer of River City Bank in
Sacramento, California since August 1994. He served as Chairman of the Board and
President of Firstar Bank of Cedar Rapids, N.A. from 1983 until 1994. Mr. Royer is a
director of CRST, Inc., a trucking company in Cedar Rapids, Iowa, a trustee of Berthel
Investment Trust and has served on numerous Cedar Rapids community organization boards.
He has been a director of the Company since 1991 and was first elected to the board of
Iowa Electric Light and Power Company in 1984. Mr. Royer serves on the Executive
Committee and chairs the Compensation Committee.
<S> <C> <C>
ROBERT W. SCHLUTZ, 61 1989
[PICTURE]
Mr. Schlutz is President of Schlutz Enterprises, a diversified farming and retailing
business in Columbus Junction, Iowa. He is a director of PM Agri-Nutritional Group Inc.,
an animal health business, in St. Louis, Missouri and the Iowa Foundation for
Agricultural Advancement. Mr. Schlutz is President of the Iowa State Fair Board and a
member of various community organizations. He also served on the National Advisory
Council for the Kentucky Fried Chicken Corporation. He is a past chairman of the
Environmental Protection Commission for the State of Iowa. Mr. Schlutz has been a
director of the Company since 1991 and was first elected to the Iowa Southern Inc. board
in 1989. Mr. Schlutz serves on the Audit and Nominating Committees.
ANTHONY R. WEILER, 60 1979
[PICTURE]
Mr. Weiler is Senior Vice President, Merchandising, for Heilig-Meyers Company, a national
furniture retailer in Richmond, Virginia. Mr. Weiler was previously Chairman and Chief
Executive Officer of Chittenden & Eastman Company, a national manufacturer of mattresses
in Burlington, Iowa. He was with Chittenden & Eastman from 1960 until 1995, and held
various management positions. Mr. Weiler is Chairman of the National Home Furnishings
Association and a director of the Retail Home Furnishings Foundation. He is a trustee of
NHFA Insurance and a past director of the Burlington Area Development Corporation, the
Burlington Area Chamber of Commerce and various community organizations. Mr. Weiler has
been a director of the Company since 1991 and was first elected to the Iowa Southern
Utilities Company board in 1979. Mr. Weiler serves on the Nominating and the Compensation
Committees.
</TABLE>
Except as otherwise noted, all nominees have served in their current
positions for five years or more as of the date of this proxy. All other
information is as of January 1, 1997. All nominees are also the current
directors of IES Utilities.
------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
THE ELECTION OF ALL NOMINEES.
6
<PAGE>
SECURITY OWNERSHIP OF BENEFICIAL OWNERS
Set forth below is certain information with respect to beneficial ownership
of Common Stock by each person known by the Company to own 5% or more of the
outstanding Common Stock of the Company:
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP PERCENT OF
NAME OF BENEFICIAL OWNER (1) CLASS (1)
- ------------------------------------------------------------- ---------------------- -----------
<S> <C> <C>
WPL Holdings, Inc............................................ 5,861,115 16.3%
Interstate Power Company..................................... 5,861,115 16.3%
</TABLE>
- ------------------------
(1) By reason of the Stock Option Agreements, executed concurrently with the
Merger Agreement, each of WPLH and IPC may be deemed to have sole voting and
dispositive power with respect to the shares listed above which are subject
to their respective options from the Company and, accordingly, each of WPLH
and IPC may be deemed to beneficially own all of such shares (assuming
exercise of its option and the nontriggering of the other party's right to
exercise its option for Common Stock). However, each of WPLH and IPC
expressly disclaim any beneficial ownership of such shares because such
options are exercisable only in certain circumstances.
SECURITY OWNERSHIP OF MANAGEMENT
Set forth below is certain information with respect to beneficial ownership
of the Common Stock of the Company as of February 1, 1997, by each current
director and nominee for director, certain executive officers and by all
directors and executive officers of the Company as a group:
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP PERCENT OF
NAME OF BENEFICIAL OWNER (1) CLASS (1)
- ------------------------------------------------------------- ---------------------- -----------
<S> <C> <C>
C.R.S. Anderson.............................................. 20,000 *
J. Wayne Bevis............................................... 1,500 *
John F. Franz, Jr............................................ 14,613 *
James E. Hoffman............................................. 5,268 *
Lee Liu...................................................... 41,476 *
Jack R. Newman............................................... 1,000 *
Robert D. Ray................................................ 2,500 *
David Q. Reed................................................ 5,002 *
Harold W. Rehrauer........................................... 7,904 *
Henry Royer.................................................. 6,257 *
Robert W. Schlutz............................................ 2,490 *
Philip D. Ward............................................... 7,458 *
Anthony R. Weiler............................................ 3,648 *
All Executive Officers and Directors of the Company and IES
Utilities as a group (20 persons)........................... 162,596 *
</TABLE>
- ------------------------
* Less than one percent of the total outstanding shares of Company Common
Stock.
(1) Includes ownership of shares by family members even though beneficial
ownership of such shares may be disclaimed.
7
<PAGE>
OTHER TRANSACTIONS
The Company has a contract with IASD Health Services Inc. ("IASD"), for
administration of its employee health insurance plan, as it has for many prior
years. In 1996, the Company paid $265,361 to IASD for such services. The Company
also contracted with IASD for administration of its dental insurance plan and
paid $60,491 to IASD for those services in 1996. As previously stated, Mr. Ray
retired on December 31, 1996 as President and Chief Executive Officer of IASD.
FUNCTIONING OF THE BOARD OF DIRECTORS AND COMMITTEES
IES Industries' Board has an Executive Committee, an Audit Committee, a
Nominating Committee and a Compensation Committee.
The current members of the Executive Committee are Lee Liu, Chairman; C.R.S.
Anderson; David Q. Reed and Henry Royer. The current members served on this
Committee during 1996. The Committee met four times during 1996. It is empowered
with all of the authority vested in the IES Industries Board, subject to certain
limitations, and may act when the IES Industries Board is not in session.
Current members of the Audit Committee are C.R.S. Anderson, Chairman; J.
Wayne Bevis; Jack R. Newman; Robert D. Ray and Robert W. Schlutz. Mr. Newman was
appointed to the Committee on September 5, 1996. All other current members
served on this Committee during 1996. The Committee met twice during 1996. The
principal functions of the Committee are to review IES Industries' internal
audit activities, including reviews of the internal control procedures; to
oversee the corporate compliance process; to recommend to the IES Industries
Board an independent public accounting firm to be IES Industries' auditors; and
to approve the audit arrangements and audit results. Both the internal and
independent auditors have direct and independent access to the Audit Committee.
Current members of the Nominating Committee are David Q. Reed, Chairman; Lee
Liu; Robert D. Ray; Robert W. Schlutz and Anthony R. Weiler. Mr. Schlutz was
appointed to the Committee on September 5, 1996. All other current members
served on this Committee during 1996. The Committee met once during 1996. Its
principal function is to review and recommend to the IES Industries Board
nominees to serve on the Board and its committees. While there are no formal
procedures, the Committee considers nominees brought to its attention by other
members of the IES Industries Board, members of management and Shareholders.
Current members of the Compensation Committee are Henry Royer, Chairman; J.
Wayne Bevis; Jack R. Newman and Anthony R. Weiler. Mssrs. Bevis and Weiler were
appointed to the Committee on April 12, 1996. All other current members served
on this Committee during 1996. Former Director Dr. George Daly served on the
Compensation Committee until his resignation from the Board on April 3, 1996.
Former Director G. Sharp Lannom, IV was a member of the Compensation Committee
until his resignation from the Board on April 12, 1996. The Committee met three
times during 1996. The principal functions of the committee are to review and
make recommendations to the IES Industries Board on the salaries and other
compensation and benefits of the elected officers of IES Industries and its
subsidiaries, and to review and administer incentive compensation or similar
plans for officers and other key employees of IES Industries and its
subsidiaries. The report of the Compensation Committee is included later in this
Proxy Statement.
IES Industries Board met ten times in 1996. The various committees of the
Board met an aggregate of ten times. All of the directors attended 75% or more
of these meetings.
COMPENSATION OF DIRECTORS
In 1996, non-employee directors of the Company received fees of $12,000 per
year, 300 shares of common stock of the Company plus $700 per Board meeting or
Committee meeting attended. If a Committee meeting is the same day as a meeting
of the Board of Directors as a whole or if a Committee
8
<PAGE>
meeting is by telephone conference, each participating non-employee director
receives $350, one-half the regular Committee meeting fee. In addition,
non-employee directors serving as chairman of a Committee receive an annual fee
of $1,500 for serving in such capacity. Directors who are officers do not
receive any fees for attendance at Board meetings or meetings of Committees of
which they are members. Retired Director G. Sharp Lannom, IV, received $1,400 in
meeting fees in 1996 for meetings attended prior to his retirement. In addition,
in 1996, non-employee members of the Board each received a special award of 700
shares of Company Common Stock in recognition of the Board's extraordinary
efforts on behalf of the Company.
Under the Director Retirement Plan, the Company provides a retirement or
death benefit to directors, including directors who are employees of the
Company, in an amount equal to 80% of the annual directors' fee. Such amount is
payable annually, based upon length of service, to directors who have served at
least four years, for a maximum period of eight years. Retired Directors Robert
F. Brewer and Dr. Salomon Levy each received payments of $8,000 and retired
Directors Dr. George Daly and G. Sharp Lannom, IV, each received payments of
$9,600 under the Director Retirement Plan in 1996.
Director Jack R. Newman has served as nuclear legal counsel to the Company
since 1968. Mr. Newman's firm, Morgan, Lewis & Bockius, was paid $167,684 for
nuclear legal services provided to the Company in 1996. Morgan, Lewis & Bockius
also provided merger related legal services for the Company, WPLH and IPC, a
portion of which was paid by the Company according to the terms of the Merger
Agreement. The Company paid $445,762 in 1996 to Morgan, Lewis & Bockius for
merger related, international and other legal services.
The Company makes available to members of the Board of Directors a business
travel accident insurance policy at an annual cost to the Company of $10 per
director. No director received any payments under such policy in 1996.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
Under the supervision of the Compensation Committee of the Board of
Directors, IES Industries has implemented compensation practices intended to
enhance the performance of the Company and increase its value to all
Shareholders. In order to provide information on current and future practices of
the Company, the Compensation Committee has furnished the following report on
executive compensation.
COMPENSATION PHILOSOPHY
The Compensation Committee has devoted substantial attention to the
philosophy of IES Industries' compensation. This philosophy is intended to
provide guiding principles for the future and is embodied in four primary
objectives:
1. To provide incentives based on value delivered to IES Industries'
Shareholders and customers.
2. To clearly link individual executive pay actions to performance.
3 To maintain a system of rewards that is structured competitively with
industry standards.
4. To attract, motivate and retain executives of the highest quality.
The most important performance yardstick in our compensation program is our
ability to deliver value to Shareholders through appreciation in share price and
payment of dividends. On an ongoing basis, the Committee will test and refine
the compensation program to ensure a high correlation between the level of
compensation and the return to Shareholders. Achieving desirable Shareholder
returns over a sustained period of time requires management's attention to a
number of financial and non-financial strategic elements which enable us to
focus on the current and long-term requirements of the customer. OUR
COMPENSATION PROGRAM, THEREFORE, FOCUSES EXECUTIVES ON ACTIONS THAT DIRECTLY
IMPACT SHAREHOLDER RETURN IN THE SHORT- AND LONG-TERM AND BY PROVIDING SERVICE
TO OUR CUSTOMERS.
9
<PAGE>
The Committee uses multiple sources of information to evaluate and establish
appropriate compensation practices. While using multiple sources, we rely on
data from a utility industry peer group of companies (as listed in the
Performance Graph below) to assess IES Industries' relative performance and
compensation levels. Peer companies were selected by meeting multiple criteria
including revenue size, sources of revenue, geographic location, markets served,
and comparable operations. Consistent with our objectives, the Committee will
position its executives' total compensation target levels at the median of this
peer group of companies. The total compensation target levels for the last
fiscal year for the Chief Executive Officer and Executive Officers in general
were consistent with said policy. Annual executive total compensation will fall
below, at, or above the median depending on individual and company performance.
IES Industries' executive compensation program has three components--base
salary, annual incentives and long-term incentives. The target mix of total
compensation for executives will be an approximate range of 50% to 75% base
salary and the remainder of 25% to 50% in the combined total of short- and
long-term incentives. The calculations for the short- and long-term incentive
awards for the Chief Executive Officer and the Executive Officers in general are
described later in this report. Furthermore, the Committee believes this mix,
while more variable than industry-wide practices, serves to send a clear message
to IES Industries' executives that performance directly governs pay.
The Committee strongly believes that incentive compensation should only be
awarded with commensurate performance. We have approved compensation plans which
include high threshold (minimum) levels of performance to ensure that incentives
are paid only when truly earned.
DESCRIPTION OF COMPENSATION PROGRAMS
The following text briefly describes the role of each element of
compensation.
BASE SALARY. Base salary will be at levels sufficient to attract and retain
qualified executives. Aggregate base salary increases are intended to parallel
increases in the pay levels of the utility industry as a whole. Individual
executive salary increases will reflect the individual's level of performance,
current position within salary range, and utility industry trends.
ANNUAL INCENTIVE. IES Industries' executive annual incentive plan serves to
recognize and reward executives for taking actions that build the value of the
Company, generate competitive total returns to Shareholders and minimize cost to
the Company's customers. The formula for annual incentive awards recognizes
operational and financial goals of significance to IES Industries and is based
on IES Industries' achievement of Earnings Per Share ("EPS") versus a
predetermined target and a Cost to the Customer per Kwh ("CCK") measure versus a
peer group cost target, along with the achievement of individual objectives. The
criteria for the annual incentive plan is reviewed prior to the beginning of a
new fiscal year. Payments are made based on corporate and individual performance
versus target, with an emphasis on CORPORATE over INDIVIDUAL.
For the 1996 fiscal year, this plan had various incentive levels with target
award opportunities ranging from 12% to 35% of base salary. Awards based on the
target criteria of EPS and CCK measure could range between 0% and 150% of the
target incentive level, with adjustments for individual performance. The
adjusted EPS for 1996 was $2.30 and the CCK measure was 127.69. This corporate
performance for 1996 based on the predetermined financial and operational goals
provided, in general, 125% of the target incentive level with adjustments for
individual considerations. Based on his individual performance, John F. Franz,
Jr., was granted an additional $12,423. There were no other adjustments for
individual performance for Executive Officers listed in this Proxy Statement.
Thus, the calculation for an individual who had an opportunity to earn 12% of
base salary would be base salary x 12% x 125%. The results of this plan for the
Chief Executive Officer and the Executive Officers appear in this Proxy
Statement.
10
<PAGE>
LONG-TERM INCENTIVES. The Company's current long-term incentive plan serves
to reward executive performance in successfully executing the long-term business
strategy and building Shareholder value. The plan allows for the awarding of
nonqualified stock options, stock appreciation rights, restricted stock and
performance units payable in cash or stock.
The performance criteria for the long-term incentive plan for fiscal years
1994, 1995 and 1996 include total return to shareholders versus the peer group
(35%), earnings growth versus three-year growth rates (35%) and team/individual
performance (30%). Each performance criteria could range between 0% and 125% of
the target incentive levels. For the 1994, 1995 and 1996 fiscal years, this plan
had various incentive levels with target award opportunities ranging from 26% to
65% of base salary.
Any awards to be made under the long-term incentive plan for 1996
performance will be determined in May 1997 and will be reported in the Company's
next Proxy Statement.
COMPENSATION ADMINISTRATION. The Committee follows an annual cycle to
administer each of the three components of executive compensation. The integrity
of our compensation program relies on a rigorous, annual performance evaluation
process. Moreover, the Committee's evaluation process includes the use of
outside consultants in order to assure it has the best possible information and
an objective approach to the administration of compensation programs.
DISCUSSION OF CEO PAY. Consistent with the compensation philosophy, the
Committee managed the CEO's total compensation during 1996 based on the overall
performance of IES Industries and on relative levels of compensation for Chief
Executive Officers in the utility industry.
The Committee took the following 1996 compensation actions for the Chief
Executive Officer:
1. BASE SALARY AT $400,000. Based on Mr. Liu's performance in 1995 and
1996, the Committee elected to increase his base salary to $400,000. Mr. Liu's
base salary for 1996 was based on the corporate policies for executive
compensation rather than his "Employment Agreement."
2. PROVIDED A CASH INCENTIVE IN 1997 OF $175,000 BASED ON 1996 PERFORMANCE.
Mr. Liu's annual incentive target is 35% of base salary, which represents a more
variable approach than industry practices and is based on the formula for annual
incentive awards as set forth in the above "Annual Incentive" section. The
formula for performance in 1996 provided 125% of the target incentive with no
individual consideration. Thus, Mr. Liu's award was calculated by multiplying
his base salary x 35% x 125%.
3. RESTRICTION WAIVED ON 15,000 SHARES OF COMMON STOCK. Mr. Liu was
previously granted restricted stock under the Company's Long-Term incentive Plan
which was to be awarded to Mr. Liu upon his retirement in the amounts of 4,000
shares on December 21, 1992; 4,000 shares on June 1, 1993; 3,000 shares on June
1, 1994 and 4,000 shares on December 8, 1995. The Committee approved waiving the
restrictions on the previously granted restricted stock on January 2, 1997,
rather than at Mr. Liu's retirement.
The Committee is aware of the limitations the current tax regulations have
placed on the tax deductibility of compensation in excess of $1 million which is
earned in any year by an executive officer. Currently none of the executive
officers has earned compensation subject to such limitations. The Committee will
continue to monitor developments in this area.
March 27, 1997
<TABLE>
<S> <C>
COMPENSATION COMMITTEE
Henry Royer, Chair J. Wayne Bevis
Jack R. Newman Anthony R. Weiler
</TABLE>
11
<PAGE>
EXECUTIVE COMPENSATION
The following table shows, for the fiscal years ending December 31,
1994-1996, the cash compensation paid by the Company and its subsidiaries as
well as certain other compensation paid or accrued for those years, to the Chief
Executive Officer and to each of the four most highly compensated Executive
Officers of the Company and its subsidiaries:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
-------------
ANNUAL COMPENSATION RESTRICTED
NAME AND PRINCIPAL -------------------------------------------- STOCK ALL OTHER
POSITION(1) YEAR SALARY BONUS(2) OTHER(3) AWARDS(4) COMPENSATION(5)
- --------------------------------------- --------- --------- --------- ----------- ------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Lee Liu 1996 $ 380,000 $ 175,000 $ 2,578 * $ 13,956
Chairman of the Board 1995 340,000 142,800 1,588 $ 176,645 13,507
& Chief Executive Officer 1994 324,375 161,798 1,114 298,127 13,604
James E. Hoffman 1996 226,467 58,050 -- * 823
Executive Vice President 1995 89,583 206,500 51,523 143,125 324
John F. Franz, Jr. 1996 155,083 40,000 1,028 * 5,338
Vice President 1995 144,050 25,213 418 41,993 4,893
1994 127,379 30,062 57 257,473 4,393
Harold W. Rehrauer 1996 129,667 23,625 1,056 * 4,374
Vice President 1995 119,000 19,992 677 24,732 4,030
1994 112,580 22,652 323 26,336 4,162
Philip D. Ward 1996 126,343 22,750 466 * 4,287
Vice President 1995 119,030 19,997 386 24,732 4,058
1994 115,486 22,657 278 26,336 3,789
</TABLE>
- --------------------------
* The grants of restricted stock pursuant to the long-term incentive plan for
the 1996 plan year have not been determined as of the date of this Proxy
Statement. See footnote (4) below for a discussion of restricted stock
awards.
(1) Mssrs. Franz, Rehrauer and Ward are not officers of the Company, but are
officers of IES Utilities. Mr. Hoffman commenced employment with IES
Utilities effective August 1, 1995. Effective November 6, 1996, Mr. Hoffman
was also appointed Executive Vice President of the Company.
(2) The amounts listed represent plan year awards pursuant to the Management
Incentive Compensation Plan, the Company's annual incentive plan, with cash
payment made in the subsequent calendar year. The amount reported as bonus
for Mr. Hoffman in 1995 also includes a one-time payment of $185,000 when he
commenced employment with IES Utilities.
(3) The 1996 amounts shown as Other Annual Compensation represent the earnings
for the Key Employee Deferred Compensation Plan in excess of 120% of the
applicable federal long-term rate provided under Section 1274(d) of the
Internal Revenue Code. Also included in 1995 are relocation and moving
expenses for Mr. Hoffman in the amount of $51,523.
(4) The awards of restricted stock have been made on June 1st since 1988, with
one-third of the award being restricted for one year, one-third being
restricted for two years and one-third being restricted for three years. The
shares of restricted stock reflected in this table subject to such
three-year vesting schedule for Messrs. Liu, Franz, Rehrauer and Ward are as
follows: Mr. Liu--6,171 shares in 1995 and 8,315 shares in 1994; Mr.
Franz--1,467 shares in 1995 and 1,380 shares in 1994; Mr. Rehrauer--864
shares in 1995 and 1,164 shares in 1994; and Mr. Ward--864 shares in 1995
and 1,164 shares in 1994. In addition, in June 1994, Mr. Liu received a
grant of 3,000 shares, and in December 1995, Mr. Liu received a grant of
4,000 shares;
12
<PAGE>
the restrictions on all of these shares lapsed on January 2, 1997. In June
1995, Mr. Franz received a grant of 10,000 shares. The restrictions on 1,000
shares will lapse each year beginning in June 1996 with the restrictions on
the remainder lapsing at retirement but not prior to Mr. Franz becoming age
60. On May 31, 1996, Mr. Hoffman received a grant of 5,000 shares as set
forth in his employment letter. These shares are in lieu of any award for
1995 under the long-term incentive plan but they have the same restrictions
as if awarded under the plan. Restricted stock is considered outstanding
upon award date and dividends are paid to the eligible officers on these
shares while restricted. The amounts shown in the table above represent the
value of the awards based upon closing price of IES Industries Common Stock
on the award date. The award date is in the calendar year following the plan
year. At December 31, 1996, the listed officers had restricted stock for
which restrictions had not lapsed (based upon the December 31, 1996 closing
price of IES Industries Common Stock) as follows:
<TABLE>
<CAPTION>
SHARES VALUE
--------- ---------
<S> <C> <C>
Lee Liu 28,604 $ 854,545
James E. Hoffman 5,000 149,375
John F. Franz, Jr. 12,735 380,458
Harold W. Rehrauer 1,852 55,329
Philip D. Ward 1,875 56,016
</TABLE>
No stock options or stock appreciation rights have been awarded to the
executive officers listed above.
(5) Amounts shown for 1996 represent: (a) contributions by the Company to the
applicable employee savings plan in the following amounts: Mr. Liu--$4,685,
Mr. Franz--$2,989, Mr. Rehrauer--$2,487 and Mr. Ward--$2,454; and (b) amount
included in W-2 earnings for life insurance coverage in excess of $50,000 in
the following amounts: Mr. Liu--$9,271, Mr. Hoffman--$823, Mr.
Franz--$2,349, Mr. Rehrauer--$1,887 and Mr. Ward--$1,833.
13
<PAGE>
PERFORMANCE GRAPH
The graph below compares the total return to Shareholders of IES Industries
versus that for the S&P 500 and IES Industries' peer group. Peer companies were
identified based on revenue size, sources of revenue, geographic location,
markets served and comparable operations. The following 17 companies comprise
IES Industries' peer group:
<TABLE>
<S> <C>
CIPSCO Inc. MDU Resources Group, Inc.
CILCORP Inc. MidAmerican Energy Company
DPL Inc. Minnesota Power and Light Company
IPALCO Enterprises Inc. Southwestern Public Service
Company
Illinois Power Company UtiliCorp United Inc.
Interstate Power Co. WPL Holdings, Inc.
KU Energy Corp. Wisconsin Energy Corporation
Kansas City Power and Light Company Wisconsin Public Service
Corporation
LG&E Energy Corp.
</TABLE>
IES INDUSTRIES INC.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
VALUE OF $100 INVESTED
12/31/91
<S> <C> <C> <C>
IES Industries
Year End Inc. Peer Group Index S&P 500
1991 $100.00 $100.00 $100.00
1992 $116.47 $107.72 $107.60
1993 $131.84 $117.16 $118.47
1994 $115.32 $111.93 $120.01
1995 $131.55 $143.21 $165.13
1996 $159.13 $148.60 $203.11
</TABLE>
The Company and Peer Group Index total returns include dividends compounded
quarterly.
<TABLE>
<CAPTION>
1991 1992 1993 1994 1995 1996
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
IES Industries Inc.............................. $ 100.00 $ 116.47 $ 131.84 $ 115.32 $ 131.55 $ 159.13
Peer Group Index................................ $ 100.00 $ 107.72 $ 117.16 $ 111.93 $ 143.21 $ 148.60
S&P 500......................................... $ 100.00 $ 107.60 $ 118.47 $ 120.01 $ 165.13 $ 203.11
</TABLE>
Total returns for each peer company were determined in accordance with the
Securities and Exchange Commission regulations, I.E. weighted according to each
company's stock market capitalization.
14
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Bevis, Newman, Royer and Weiler served as members of the
Compensation Committee during 1996. None of the members of the Compensation
Committee are or were officers or employees of the Company or its subsidiaries.
IES INDUSTRIES PLANS
IES Industries Pension Plans: IES Industries, IES Utilities and the Cedar
Rapids and Iowa City Railway Company have non-contributory retirement plans
covering employees who have at least one year of accredited service. Directors
who are not officers do not participate in the plans. Maximum annual benefits
payable at age 65 to participants who retire at age 65, calculated on the basis
of straight life annuity, are illustrated in the following table:
PENSION PLAN TABLE
<TABLE>
<CAPTION>
AVERAGE OF HIGHEST ANNUAL ESTIMATED MAXIMUM ANNUAL RETIREMENT BENEFITS BASED ON
SALARY (REMUNERATION) SERVICE YEARS
FOR 3 CONSECUTIVE -----------------------------------------------------
YEARS OF THE LAST 10 15 20 25 30 35
- ------------------------------------------ --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
125,000 26,994 35,993 44,991 53,989 62,987
150,000 32,807 43,742 54,678 65,614 76,549
175,000 36,427 48,871 61,315 73,759 86,203
200,000 40,927 55,246 69,565 83,884 98,203
225,000 45,427 61,621 77,815 94,009 110,203
250,000 46,142 62,634 79,126 95,618 112,110
300,000 46,142 62,634 79,126 95,618 112,110
400,000 46,142 62,634 79,126 95,618 112,110
450,000 46,142 62,634 79,126 95,618 112,110
500,000 46,142 62,634 79,126 95,618 112,110
</TABLE>
For 1996, $120,000 was the maximum benefits allowable under the retirement
plans prescribed by Section 415 of the Internal Revenue Code.
With respect to the officers named in the Summary Compensation Table, the
remuneration for retirement plan purposes would be substantially the same as
that shown as "Salary." As of December 31, 1996, the officers had accredited
years of service for the retirement plan as follows: Lee Liu, 39 years; James E.
Hoffman, 1 year; John F. Franz, Jr., 5 years; Harold W. Rehrauer, 24 years and
Philip D. Ward, 23 years.
SUPPLEMENTAL RETIREMENT PLANS: IES Industries has a non-qualified
Supplemental Retirement Plan for eligible officers of IES Industries and IES
Utilities, including Messrs. Liu, Hoffman, Franz, Rehrauer and Ward. The plan
provides for payment of supplemental retirement benefits equal to 69% of the
officer's base salary in effect at the date of retirement, reduced by benefits
receivable under the qualified retirement plan, for a period not to exceed 18
years following the date of retirement. In the event of the death of the officer
following retirement, similar payments reduced by the joint and survivor annuity
of the qualified retirement plan will be made to his or her designated
beneficiary (surviving spouse or dependent children), if any, for a period not
to exceed 12 years from the date of the officer's retirement. Thus, if an
officer died 12 years after retirement, no payment to the beneficiary would be
made. Death benefits are provided on the same basis to a designated beneficiary
for a period not to exceed 12 years from the date of death should the officer
die prior to retirement. The Supplemental Retirement Plan further provides that
if, at the time of the death of an officer, the officer is entitled to receive,
is receiving, or has received supplemental retirement benefits by virtue of
having taken retirement, a death benefit shall be paid to the officer's
designated beneficiary or to the officer's estate in an amount equal to 100% of
the officer's annual
15
<PAGE>
salary in effect at the date of retirement. Under certain circumstances, an
officer who takes early retirement will be entitled to reduced benefits under
the Supplemental Retirement Plan. The Supplemental Retirement Plan also provides
for benefits in the event an officer becomes disabled under the terms of the
qualified retirement plan. IES Industries has purchased life insurance on the
participants sufficient in amount to finance actuarially all of its future
liabilities under the Supplemental Retirement Plan and IES Industries is the
owner and beneficiary of all such life insurance. The Supplemental Retirement
Plan has been designed so that if the assumptions made as to mortality,
experience, policy dividends, tax credits and other factors are realized, IES
Industries will fully recover all of its premium payments over the life of the
Supplemental Retirement Plan.
The following table shows the estimated annual benefits payable under the
Supplemental Retirement Plan equal to 69% of the officer's base salary in effect
at the date of retirement:
IES INDUSTRIES INC.
SUPPLEMENTAL RETIREMENT PLAN PAYMENTS
69% SRP BENEFIT
<TABLE>
<CAPTION>
SERVICE YEARS
-----------------------------------------------------
FIRST ANNUAL SALARY 15 20 25 30 35
- ------------------------------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
125,000 59,256 50,258 41,259 32,261 23,263
150,000 70,693 59,758 48,822 37,886 26,951
175,000 84,323 71,879 59,435 46,991 34,547
200,000 97,073 82,754 68,435 54,116 39,797
225,000 109,823 93,629 77,435 61,241 45,047
250,000 126,358 109,866 93,374 76,882 60,390
300,000 160,858 144,366 127,874 111,382 94,890
400,000 229,858 213,366 196,874 180,382 163,890
450,000 264,358 247,866 231,374 214,882 198,390
500,000 298,858 282,366 265,874 249,382 232,890
</TABLE>
Mr. Liu has elected to continue under the supplemental retirement agreement
previously provided to him by the Company with provisions for payment of
benefits equal to 75% of the officer's base salary, for a period not to exceed
15 years following the date of retirement, and payment to the surviving spouse
or dependent children for a period not to exceed 15 years following the date of
retirement.
16
<PAGE>
The following table shows the estimated annual benefits payable under the
Supplemental Retirement Plan equal to 75% of the officer's base salary in effect
at the date of retirement:
IES INDUSTRIES INC.
SUPPLEMENTAL RETIREMENT PLAN PAYMENTS
75% SRP BENEFIT
<TABLE>
<CAPTION>
SERVICE YEARS
-----------------------------------------------------
FINAL ANNUAL SALARY 15 20 25 30 35
- ------------------------------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
125,000 66,756 57,758 48,759 39,761 30,763
150,000 79,693 68,758 57,822 46,886 35,951
175,000 94,823 82,379 69,935 57,491 45,047
200,000 109,073 94,754 80,435 66,116 51,797
225,000 123,323 107,129 90,935 74,741 58,547
250,000 141,358 124,866 108,374 91,882 75,390
300,000 178,858 162,366 145,874 129,382 112,890
400,000 253,858 237,366 220,874 204,382 187,890
450,000 291,358 274,866 258,374 241,882 225,390
500,000 328,858 212,366 295,874 279,382 262,890
</TABLE>
EXECUTIVE GUARANTY PLAN: The Company's Board has approved an Executive
Guaranty Plan (the "Guaranty Plan") for officers of the Company and its
principal subsidiary, IES Utilities. The purpose of the Guaranty Plan is to
promote flexibility in financial planning of participating officers and to
provide an inducement to new officers in order to retain and attract the best
possible executive management team. Under the Guaranty Plan, IES Industries
guarantees loans within defined limits, based on salary level and years of
service made to participating officers for various specified purposes, including
real estate acquisitions and purchases of IES Industries Common Stock. As of
December 31, 1996, a guarantee of $70,527 was outstanding for Mr. Liu.
EXECUTIVE CHANGE OF CONTROL AGREEMENTS: The Company has severance
agreements with fourteen of its executives, including Messrs. Liu, Hoffman,
Franz, Rehrauer and Ward. The severance agreements run for terms of one year
(three years in the case of Mr. Liu), subject to automatic renewal unless either
party gives notice of non-renewal to the other party at least 60 days prior to
the annual renewal date. Each agreement provides for salary continuation and
certain other benefits in the event the covered executive is terminated within a
three-year period following a change of control of the Company. For these
purposes, a change of control is as described in IES Industries Restated
Articles of Incorporation and, in addition, will be deemed to have occurred, if
following a merger, consolidation or reorganization, the owners of the capital
stock entitled to vote in the election of directors of the Company prior to the
transaction own less than 75% of the resulting entity's voting stock or during
any period of two consecutive years, individuals who, at the beginning of such
period constitute the Board of Directors of the parent company, cease for any
reason to constitute at least a majority of the Board of Directors of any
successor organization. Accordingly, the Proposed Merger will constitute a
change of control for purposes of each of the Company severance agreements.
Specifically, the agreements provide that following termination of a covered
executive's employment except for just cause, death, retirement, disability or
voluntary resignation (other than resignation for "good cause"), the executive's
salary will be continued, at a level equal to his/her salary just prior to
termination for a period ranging from eighteen to thirty-six months (depending
upon the executive involved and, in certain cases, his/her length of service).
Additionally, certain benefits will be continued during the applicable severance
period, including life and health insurance, and the executive will continue to
receive annual incentive award payments equal to the average annual incentive
awards paid to executives of the same or comparable designation during the three
years prior to the change of control. In the event the executive dies during the
severance period, the salary and benefit payments described above shall be
payable during the remainder of the term to the executive's surviving spouse or
17
<PAGE>
his/her estate. The executive will also become immediately vested and entitled
to receive awards of restricted stock or other rights granted to the executive
under the IES Industries Long-Term Incentive Plan. With respect to a covered
executive who is age 56 or older at the time of the change of control or under
age 56 and has ten or more full years of service with the Company at the time of
the Change of Control, the severance agreement further provides that the change
of control will cause the executive to become fully vested in his/her
Supplemental Retirement Plan benefit, and that if the executive is terminated
within three years following the change of control, he/she will be able to
commence his/her Supplemental Retirement Plan benefit payments on the earlier of
the date he/she attains age 65 or the date salary continuation payments cease
under his/her severance agreement. Certain amendments were made to the existing
severance agreements in 1996. The amendments to the severance agreement for Mr.
Liu provide, among other things, that during the applicable severance period Mr.
Liu will be entitled to receive payments equal to the average value of both the
long-term and the annual incentive awards received by executives of the same or
comparable designation during the three years prior to the change of control. In
addition, the amendments for all covered executives provide reimbursement, in an
amount not to exceed 15% of the executive's base salary, for outplacement
services and legal fees incurred by the executive in connection with his
termination, and also provide severance benefits in the event of certain
employment terminations within 180 days prior to a change of control.
The provisions of the severance agreement covering Mr. Liu have been
incorporated into the employment agreement to be executed between Mr. Liu and
Interstate Energy Corporation in connection with the Proposed Merger ("Merger
Employment Agreement"). After the effective time of the Proposed Merger, Mr.
Liu's Merger Employment Agreement will supersede his existing severance
agreement.
The Company believes that these agreements enable the Company to employ key
executives who can approach major business decisions objectively and without
concern for their personal situations.
EMPLOYMENT AGREEMENT
IE Industries Inc. and Iowa Electric Light and Power Company, the
predecessor companies of the Company and IES Utilities, entered into an
employment agreement ("Employment Agreement") with Lee Liu, which became
effective July 1, 1991. The Employment Agreement provides that Mr. Liu shall be
employed as President, Chief Executive Officer and Chairman of the Executive
Committee of IES Industries and as Chief Executive Officer and Chairman of IES
Utilities from July 1, 1991 until April 1995, which period shall be
automatically extended unless at least six months prior to any expiration
thereof either IES Industries or IES Utilities or Mr. Liu shall give notice that
they do not wish to extend such time (the "Period of Employment"). To date,
neither party has given such notice. The Employment Agreement also provides that
he shall become Chairman of the Board at such time as C.R.S. Anderson ceases to
serve in such position. This occurred on July 1, 1993. The Employment Agreement
provides that Mr. Liu shall provide consulting services to the Company for three
years (the "Period of Consulting") after the conclusion of the Period of
Employment.
During the Period of Employment, Mr. Liu will be paid a base annual salary
of at least $275,000, and will be entitled to participate in all incentive
compensation plans applicable to the positions he holds and all retirement and
employee welfare benefit plans. During the Period of Employment, Mr. Liu's
incentive compensation shall be at least equal to that paid to the Chairman of
the Board of IES Industries.
If Mr. Liu's employment is terminated without his consent by IES Industries
or IES Utilities during the Period of Employment for other than an unremedied
material breach or just cause or by his resignation if such resignation occurs
after IES Industries fails to cause him to be employed in or elected to the
positions specified in the Employment Agreement or after a material diminution
in his duties, responsibilities or status, then Mr. Liu shall be entitled to an
amount equal to the sum of his base annual salary as of the date of termination
plus his average incentive compensation during the three years immediately
preceding the date of termination multiplied by the number of years (and
fractions thereof) then
18
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remaining in the Period of Employment. Mr. Liu also would be entitled to
continued insurance coverages and an amount equal to the then present value of
the actuarially determined difference between the aggregate retirement benefits
actually to be received by him as of the date of termination and those that
would have been received by him had he continued to be employed at the base
salary in effect at termination through the expiration of the Period of
Employment. All his shares of Company restricted stock would also vest at that
time.
During the Period of Consulting, Mr. Liu will make himself available for up
to 30 days per year, report to the Chief Executive Officer of IES Industries and
will earn an annual consulting fee equal to 13.33% of his highest annual base
salary during his Period of Employment. If Mr. Liu's consulting services are
terminated for reasons other than material breach or just cause, he will be
entitled to a lump sum payment equal to the amount of the consulting fee he
would otherwise have earned during the Period of Consulting.
The Merger Employment Agreement which Mr. Liu will enter into with
Interstate Energy in connection with the Proposed Merger will supersede the
Employment Agreement described above.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors and persons who own more than 10% of the registered class
of the Company's equity securities to file reports of ownership and changes in
ownership with the Securities and Exchange Commission ("SEC"). Such officers,
directors and Shareholders are required by SEC regulations to furnish the
Company with copies of all such reports that they file.
Based solely on a review of copies of reports filed with the SEC with
respect to 1996 and of written representations by certain officers and
directors, all persons subject to the reporting requirements of Section 16(a)
filed the required reports on a timely basis, except for an inadvertent late
filing by Peter W. Dietrich, Vice President (one report covering one
transaction).
INDEPENDENT PUBLIC ACCOUNTANTS
The Audit Committee recommended and the Board of Directors authorized the
engagement of Arthur Andersen LLP as auditors for IES Industries and its
subsidiaries for 1997. They have served as IES Industries' auditors for 1996 and
for many prior years. The Board believes that because of the Audit Committee's
direct and independent access to both the internal and independent auditors and
the Audit Committee's overall responsibility for audit results and supervision
of the auditors, the Audit Committee is best suited to select the independent
auditor and approve audit arrangements. A representative of Arthur Andersen LLP
will be in attendance at the Annual Meeting and will be available to respond to
appropriate questions and to make a statement if he desires to do so.
SHAREHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
Shareholder proposals for the 1998 Annual Meeting of the Company must be
received at the offices of the Company no later than the close of business on
November 24, 1997, for inclusion in the 1998 proxy statement and form of proxy.
19
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GENERAL
A copy of the Annual Report of IES Industries, including financial
statements for the fiscal year ended December 31, 1996, has been included in
this mailing to Shareholders with this Proxy Statement.
A copy of the Company's Annual Report on Form 10-K (excluding exhibits) for
the year ended December 31, 1996, which is required to be filed with the
Securities and Exchange Commission, will be made available to stockholders to
whom this Proxy Statement is mailed, without charge, upon written request to the
office of the Director, Shareholder Services, IES Industries Inc., 200 First
Street, S.E., Cedar Rapids, Iowa 52401.
By Order of the Board of Directors
Stephen W. Southwick
Vice President, General Counsel &
Secretary
Cedar Rapids, Iowa
March 27, 1997
20
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IES INDUSTRIES, INC.
Proxy/Direction Card for
Annual Meeting on May 22nd, 1997
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This Proxy/Direction is solicited by the Board of Directors of IES Industries
Inc. ("IES Industries").
The undersigned hereby appoints David Q. Reed, Henry Royer, and Robert W.
Schlutz, jointly and severally, with full power of substitution, to vote all
shares of common stock which the undersigned holds of record and is entitled
to vote at the Annual Meeting of Shareholders to be held at the Collins
Plaza Hotel, 1200 Collins Road N.E., Cedar Rapids, Iowa on the 22nd day of
May, 1997 at 2:00 p.m. (CDT), or any adjournment thereof. All shares votable
include shares held of record by the administrator for the participants in the
IES Industries Dividend Reinvestment and Stock Purchase Plan, Employee Stock
Purchase Plan, Bonus Stock Ownership Plan, Employee Stock Ownership Plan, and
Employee Savings Plan. Shares will be voted in the manner specified by the
undersigned and in the discretion of the persons named above or such
administrator on such other matters as may properly come before the meeting. If
no specification is made, such shares will be voted by the persons named
above or such administrator for all nominees to the Board of Directors. The
following space is provided for comments. Please mark the comments box on
the reverse side if you use this space.
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(continued and to be signed on reverse side)
<PAGE>
/X/ Please mark your
votes as in this
example
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE FOLLOWING:
AGAINST
FOR ALL ALL EXCEPTIONS
THE ELECTION OF NOMINEES: C.R.S. Anderson;
DIRECTORS: / / / / / / J. Wayne Bevis; Lee Liu;
Jack R. Newman; Robert D.
Ray; David Q. Reed; Henry
Royer; Robert W. Schlutz;
Anthony R. Weiler.
EXCEPTIONS
To withhold authority to vote for any particular
nominee write the nominee's name(s) on the
line(s) below:
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If you have noted
comments on the other
side of the card mark here. / /
Please sign exactly as name appears hereon.
Joint owners should each sign. When signing
as attorney, executor, administrator, trustee
or guardian, please give full title as such.
- --------------------------------------------------
- --------------------------------------------------
SIGNATURE(S) DATE
