UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
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Alliant Energy Corporation
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SEC 1913 (3-99)
NOTICE OF 2002 ANNUAL MEETING
[ALLIANT ENERGY LOGO]
Alliant Energy
Corporation
Proxy Statement
YOUR VOTE IS IMPORTANT
ALLIANT ENERGY CORPORATION
ANNUAL MEETING OF SHAREOWNERS
DATE: May 15, 2002
TIME: 1:00 PM, Central Daylight Savings Time
LOCATION: U. S. Cellular Center
370 First Avenue, NE
Cedar Rapids, Iowa
SHAREOWNER INFORMATION NUMBERS
LOCAL CALLS (MADISON, WI AREA) 608-458-3110
TOLL FREE NUMBER.............. 800-356-5343
[LOGO] Alliant Energy /TM/
Alliant Energy Corporation
4902 North Biltmore Lane
P. O. Box 2568
Madison, WI 53701-2568
Phone: 608-458-3110
NOTICE OF ANNUAL MEETING AND PROXY STATEMENT
Dear Alliant Energy Corporation Shareowner:
On Wednesday, May 15, 2002, Alliant Energy Corporation (the "Company") will
hold its 2002 Annual Meeting of Shareowners at the U. S. Cellular Center, 370
First Avenue, NE, Cedar Rapids, Iowa. The meeting will begin at 1:00 p.m.
Central Daylight Savings Time.
Only shareowners of record at the close of business on March 25, 2002 may vote
at this meeting. All shareowners are requested to be present at the meeting in
person or by proxy so that a quorum may be assured. At the meeting, the
Company's shareowners will:
1. Elect four directors for terms expiring at the 2005 Annual Meeting of
Shareowners;
2. Consider and vote upon a proposal to approve the 2002 Equity Incentive
Plan; and
3. Attend to any other business properly presented at the meeting.
The Board of Directors of the Company presently knows of no other business to
come before the meeting.
If your shares are registered directly with the Company's Shareowner Services
Department, then you may vote these shares by telephone or Internet.
Instructions for voting by these convenient methods are shown on the enclosed
proxy card. If you prefer, you may sign and date the enclosed proxy card and
return it in the postage paid envelope.
A copy of the 2001 Annual Report of the Company is enclosed.
By Order of the Board of Directors
/s/ F. J. Buri
F. J. Buri
Corporate Secretary
Dated, mailed and made available on the
Internet on or about April 4, 2002.
TABLE OF CONTENTS
Questions and Answers....................................................... 1
Election of Directors....................................................... 4
2002 Equity Incentive Plan Proposal......................................... 7
Meetings and Committees of the Board........................................ 12
Compensation of Directors................................................... 13
Ownership of Voting Securities.............................................. 15
Compensation of Executive Officers.......................................... 16
Stock Options............................................................... 18
Long-Term Incentive Awards.................................................. 20
Certain Agreements.......................................................... 21
Retirement and Employee Benefit Plans....................................... 22
Report of the Compensation and Personnel Committee on Executive Compensation 25
Report of the Audit Committee............................................... 28
Comparison of Five-Year Cumulative Total Return............................. 29
Section 16(a) Beneficial Ownership Reporting Compliance..................... 30
QUESTIONS AND ANSWERS
1. Q: Why am I receiving these materials?
A: The Board of Directors of Alliant Energy Corporation (the "Company") is
providing these proxy materials to you in connection with the Company's
Annual Meeting of Shareowners (the "Annual Meeting"), which will take
place on Wednesday, May 15, 2002. As a shareowner, you are invited to
attend the Annual Meeting and are entitled to and requested to vote on
the proposals described in this proxy statement.
2. Q: What is Alliant Energy Corporation?
A: The Company is a public utility holding company whose primary first tier
subsidiaries include Interstate Power and Light Company ("IP&L"),
Wisconsin Power and Light Company ("WP&L"), Alliant Energy Resources,
Inc. ("AER") and Alliant Energy Corporate Services, Inc. ("Alliant Energy
Corporate Services"). IP&L was formed on January 1, 2002 when Interstate
Power Company ("IPC") merged with and into IES Utilities Inc. ("IES").
IES was the surviving company in the merger and changed its name to
Interstate Power and Light Company.
3. Q: Who is entitled to vote at the Annual Meeting?
A: Only shareowners of record at the close of business on March 25, 2002 are
entitled to vote at the Annual Meeting. As of the record date, 90,135,503
shares of the Company's common stock were issued and outstanding. Each
shareowner is entitled to one vote for each share of the Company's common
stock held on the record date.
4. Q: What may I vote on at the Annual Meeting?
A: You may vote on the election of four nominees to serve on the Company's
Board of Directors for terms expiring at the Annual Meeting of
Shareowners in the year 2005 and a proposal to approve the 2002 Equity
Incentive Plan.
5. Q: How does the Board of Directors recommend I vote?
A: The Board of Directors recommends that you vote your shares "FOR" each of
the listed director nominees and "FOR" the proposal to adopt the 2002
Equity Incentive Plan.
6. Q: How can I vote my shares?
A: You may vote either in person at the Annual Meeting or by appointing a
proxy. If your shares are registered directly with the Company's
Shareowner Services Department, then you have three options to appoint a
proxy:
. by telephone;
. by Internet; or
. by mailing the proxy card.
Please refer to the instructions included on your proxy card to vote by
proxy. If you hold your shares through a bank, broker or other record
holder, then you may vote by the methods your bank or broker makes
available, in which case the bank or broker will include instructions
with this proxy statement. If you vote by the Internet, then you should
understand that there may be costs associated with electronic access,
such as usage charges from Internet access providers and telephone
companies, that you must bear. Appointing a proxy will not affect your
right to vote your shares if you attend the Annual Meeting and desire to
vote in person.
7. Q: How are votes counted?
A: In the election of directors, you may vote FOR all of the director
nominees or your vote may be WITHHELD with respect to one or more
nominees. With regard to the proposal to approve the 2002 Equity
Incentive Plan, you may vote FOR, AGAINST or ABSTAIN. If you return your
signed proxy card but do not mark the boxes showing how you wish to vote,
your shares will be voted "FOR" all listed director nominees and "FOR"
the proposal to approve the 2002 Equity Incentive Plan.
1
8. Q: Can I change my vote?
A: You have the right to revoke your proxy at any time before the Annual
Meeting by:
. providing written notice to the Corporate Secretary of the Company and
voting in person at the Annual Meeting; or
. appointing a new proxy prior to the start of the Annual Meeting.
Attendance at the Annual Meeting will not cause your previously appointed
proxy to be revoked unless you specifically so request in writing.
9. Q: What shares are included on the proxy card(s)?
A: Your proxy card(s) covers all of your shares of the Company's common
stock, including any shares held in your account under the Company's
Shareowner Direct Plan. For present or past employees of IP&L, your proxy
includes any shares held in your account under the IES Employee Stock
Ownership Plan.
10. Q: How is the Company's common stock held for employees in the Alliant
Energy Corporation 401(k) Savings Plan voted?
A: For shares held in the 401(k) Savings Plan, you will receive a separate
form of proxy from the trustee of the Plan.
11. Q: What does it mean if I get more than one proxy card?
A: If your shares are registered differently and are in more than one
account, then you will receive more than one card. Be sure to vote all of
your accounts to ensure that all of your shares are voted. The Company
encourages you to have all accounts registered in the same name and
address (whenever possible). You can accomplish this by contacting the
Company's Shareowner Services Department at the Shareowner Information
Numbers shown at the front of this proxy statement.
12. Q: Who may attend the Annual Meeting?
A: All shareowners who owned shares of the Company's common stock on March
25, 2002 may attend the Annual Meeting. You will be asked to indicate
whether you plan to attend the Annual Meeting when voting electronically,
or you may indicate on the enclosed proxy card your intention to attend
the Annual Meeting and return it with your signed proxy.
13. Q: How will voting on any other business be conducted?
A: The Board of Directors of the Company does not know of any business to be
considered at the Annual Meeting other than the election of four
directors and the proposal to approve the 2002 Equity Incentive Plan. If
any other business is properly presented at the Annual Meeting, your
proxy gives Erroll B. Davis, Jr., the Company's Chairman, President and
Chief Executive Officer, and F. J. Buri, the Company's Corporate
Secretary, authority to vote on such matters in their discretion.
14. Q: Where and when will I be able to find the results of the voting?
A: The results of the voting will be announced at the Annual Meeting. You
may also call the Company's Shareowner Services Department at the
Shareowner Information Numbers shown at the front of this proxy statement
for the results. The Company will also publish the final results in its
Quarterly Report on Form 10-Q for the second quarter of 2002 to be filed
with the Securities and Exchange Commission.
15. Q: Are the Company's 2001 Annual Report and these proxy materials available
on the Internet?
A: Yes. You can access the Company's home page at www.alliantenergy.com to
view the 2001 Annual Report and these proxy materials.
16. Q: How can I access future proxy materials and annual reports on the
Internet?
A: The Company is offering you the opportunity to consent to access its
future notices of shareowner meetings, proxy materials and annual reports
electronically through the Company's Web site.
2
If you are a shareowner of record, you can consent to access these
materials electronically to allow the Company to save the cost of
producing and mailing these materials by marking the appropriate box
on your proxy card or by following the instructions provided if you vote
over the Internet or by telephone. If you consent to access these
materials over the Internet, then you will receive a proxy card in the
mail next year with instructions containing the Internet address to
access those materials. However, you will not receive those materials
by mail. Your consent will remain in effect unless it is revoked by
calling or writing the Company's Shareowner Services Department at the
Shareowner Information Numbers shown at the front of this proxy
statement or at the address of the Company shown on the first page of
this proxy statement.
If you hold your stock through a bank, broker or other holder of record,
please refer to the information provided by that entity for instructions
on how to elect to view future proxy statements and annual reports over
the Internet.
If you consent to electronic access, then you will be responsible for
your usual Internet related charges (e.g., online fees, telephone
charges) in connection with electronic viewing and printing of proxy
materials and annual reports. The Company will continue to distribute
printed materials to shareowners who do not consent to access thes
materials electronically.
17. Q: When are shareowner proposals for the 2003 Annual Meeting due?
A: All shareowner proposals to be considered for inclusion in the Company's
proxy statement for the 2003 Annual Meeting must be received at the
principal office of the Company by December 5, 2002.
In addition, any shareowner who intends to present a proposal from the
floor at the 2003 Annual Meeting must submit the proposal in writing to
the Corporate Secretary of the Company no later than February 18, 2003,
which must be accompanied by the information required by the Company's
Bylaws. A proposal may be presented from the floor only after the
Company's Board of Directors has determined that it is a proper matter
for consideration under the Company's Bylaws.
18. Q: Who are the independent auditors of the Company and how are they
appointed?
A: Arthur Andersen LLP acted as independent auditors for the Company in
2001. Representatives of Arthur Andersen LLP are expected to be present
at the meeting with the opportunity to make a statement if they so desire
and to be available to respond to appropriate questions. The Board of
Directors expects to appoint the Company's independent auditors for 2002
later in 2002.
19. Q: Who will bear the cost of soliciting proxies for the Annual Meeting and
how will these proxies be solicited?
A. The Company will pay the cost of preparing, assembling, printing, mailing
and distributing these proxy materials. In addition to the mailing of
these proxy materials, the solicitation of proxies or votes may be made
in person, by telephone or by electronic communication by the Company's
officers and employees who will not receive any additional compensation
for these solicitation activities. The Company will pay to banks,
brokers, nominees and other fiduciaries their reasonable charges and
expenses incurred in forwarding the proxy materials to their principals.
The Company has retained Georgeson Shareholder Communications Inc. to aid
in the solicitation at an estimated cost of $6,000 plus out-of-pocket
expenses.
20. Q: If more than one shareowner lives in my household, how can I obtain an
extra copy of the Company's 2001 Annual Report and this proxy statement?
A. Pursuant to the rules of the SEC, services that deliver the Company's
communications to shareowners that hold their stock through a bank,
broker or other holder of record may deliver to multiple shareowners
sharing the same address a single copy of the Company's 2001 Annual
Report and proxy statement. Upon written or oral request, the Company
will deliver a separate copy of the 2001 Annual Report or proxy statement
to any shareowner at a shared address to which a single copy of each
document was delivered. You may notify the Company of your request by
calling or writing the Company's Shareowner Services Department at the
Shareowner Information Numbers shown at the front of this proxy statement
or at the address of the Company shown on the first page of this proxy
statement.
3
ELECTION OF DIRECTORS
Four directors will be elected this year for terms expiring in 2005. The
nominees for election as selected by the Nominating and Governance Committee of
the Company's Board of Directors are: Alan B. Arends, Katharine C. Lyall,
Singleton B. McAllister and Anthony R. Weiler. Each of the nominees is
currently serving as a director of the Company. Each person elected as director
will serve until the Annual Meeting of Shareowners of the Company in 2005 or
until his or her successor has been duly elected and qualified.
Directors will be elected by a plurality of the votes cast at the meeting
(assuming a quorum is present). Consequently, any shares not voted at the
meeting, whether by abstention or otherwise, will have no effect on the
election of directors. The proxies solicited may be voted for a substitute
nominee or nominees if any of the nominees are unable to serve, or for good
reason will not serve, a contingency not now anticipated.
Brief biographies of the director nominees and continuing directors follow.
These biographies include their age (as of December 31, 2001), an account of
their business experience and the names of publicly held and certain other
corporations of which they are also directors. Except as otherwise indicated,
each nominee and continuing director has been engaged in his or her present
occupation for at least the past five years.
NOMINEES
[PHOTO] ALAN B. ARENDS
Director Since 1998
Alan B. Arends
Age 68
Nominated Term Expires
in 2005
Mr. Arends is Chairman of the Board of Directors of Alliance
Benefit Group Financial Services Corp., Albert Lea, Minnesota,
an employee benefits company that he founded in 1983. He has
served as a director of IP&L (or predecessor companies) since
1993 and of WP&L and AER since 1998.
[PHOTO] KATHARINE C. LYALL
Director Since 1994
Katharine C. Lyall
Age 60
Nominated Term Expires
in 2005
Ms. Lyall is President of the University of Wisconsin System
in Madison, Wisconsin. In addition to her administrative
position, she is a professor of economics at the University of
Wisconsin-Madison. She serves on the Boards of Directors of
the Kemper National Insurance Companies, M&I Corporation and
the Carnegie Foundation for the Advancement of Teaching. Ms.
Lyall has served as a director of WP&L since 1986, of AER
since 1994 and of IP&L (or predecessor companies) since 1998.
[PHOTO] SINGLETON B. MCALLISTER
Director Since 2001
Singleton B. McAllister
Age 49
Nominated Term Expires
in 2005
Ms. McAllister is a partner with Patton Boggs LLP, a
Washington D.C.-based law firm, working in the public policy
and business law areas. From 1996 until early 2001, Ms.
McAllister was General Counsel for the United States Agency
for International Development. She was also a partner at Reed,
Smith, Shaw and McClay where she specialized in government
relations and corporate law. Ms. McAllister has served as a
director of IP&L (or predecessor companies), WP&L and AER
since 2001.
4
[PHOTO] ANTHONY R. WEILER Director Since 1998
Anthony R. Weiler
Age 65 Nominated Term Expires
in 2005
Mr. Weiler is a consultant for several home furnishings
organizations. Prior to assuming his current position, Mr.
Weiler had been a Senior Vice President for Heilig-Meyers
Company, a national furniture retailer headquartered in
Richmond, Virginia. He is a Director of the Retail Home
Furnishings Foundation. Mr. Weiler has served as a director of
IP&L (or predecessor companies) since 1979 and of WP&L and AER
since 1998. Mr. Weiler is Chair of the Nominating and
Governance Committee.
The Board of Directors unanimously recommends a vote FOR all nominees for
election as directors.
CONTINUING DIRECTORS
[PHOTO] ERROLL B. DAVIS, JR. Director Since 1982
Erroll B. Davis, Jr.
Age 57 Term Expires in 2003
Mr. Davis has been President of the Company since January 1990
and was elected President and Chief Executive Officer in July
1990. He was elected Chairman of the Board in April 2000. Mr.
Davis joined WP&L in 1978 and served as President of WP&L from
1987 until 1998. He was elected Chief Executive Officer of
WP&L in 1988. Mr. Davis has also served as Chief Executive
Officer of AER and IP&L (or predecessor companies) since 1998.
He is a member of the Boards of Directors of BP Amoco p.l.c.,
PPG Industries, Inc., Electric Power Research Institute and
the Edison Electric Institute. Mr. Davis has served as a
director of WP&L since 1984, of AER since 1988 and of IP&L (or
predecessor companies) since 1998. Mr. Davis is Chair of the
Capital Approval Committee.
[PHOTO] JACK B. EVANS Director Since 2000
Jack B. Evans Age 53 Term Expires in 2004
Mr. Evans is a Director and since 1996 has served as President
of The Hall-Perrine Foundation, a private philanthropic
corporation in Cedar Rapids, Iowa. Previously, Mr. Evans was
President and Chief Operating Officer of SCI Financial Group,
Inc., a regional financial services firm. Mr. Evans is a
director of Gazette Communications, the Federal Reserve Bank
of Chicago and Nuveen Institutional Advisory Corp., and Vice
Chairman and a director of United Fire and Casualty Company.
Mr. Evans has served as a director of IP&L (or predecessor
companies), WP&L and AER since 2000. Mr. Evans is Chair of the
Audit Committee.
[PHOTO] JOYCE L. HANES Director Since 1998
Joyce L. Hanes Age 69 Term Expires in 2004
Ms. Hanes has been a Director of Midwest Wholesale, Inc., a
products wholesaler in Mason City, Iowa, since 1970 and
Chairman of the Board since December 1997, having previously
served as Chairman from 1986 to 1988. She is a director of
Iowa Student Loan Liquidity Corp. Ms. Hanes has served as a
director of IP&L (or predecessor companies) since 1982 and of
WP&L and AER since 1998.
5
[PHOTO] LEE LIU Director Since 1998
Lee Liu Age 68 Term Expires in 2003
Mr. Liu was elected Vice Chairman of the Board of Directors of
the Company, IP&L, WP&L and AER in January 2002. He served as
Chairman of the Board of the Company from April 1998 until
April 2000 in accordance with the terms of his employment
agreement. He was Chairman of the Board and Chief Executive
Officer of IES Industries Inc. (a predecessor to the Company)
and Chairman of the Board and Chief Executive Officer of IES
prior to 1998. Mr. Liu held a number of professional,
management and executive positions after joining Iowa Electric
Light and Power Company (later known as IES) in 1957. He is a
director of Principal Financial Group and Eastman Chemical
Company. Mr. Liu has served as a director of IP&L (or
predecessor companies) since 1981 and of WP&L and AER since
1998.
[PHOTO] DAVID A. PERDUE Director Since 2001
David A. Perdue
Age 52 Term Expires in 2004
Mr. Perdue is President and Chief Executive Officer of the
Reebok Brand for Reebok International Limited, a designer,
distributor and marketer of footwear, apparel and sports
equipment, located in Canton, Massachusetts. Prior to joining
Reebok in 1998, he was Senior Vice President of Operations at
Haggar, Inc. Mr. Perdue has served as a director of IP&L (or
predecessor companies), WP&L and AER since 2001.
[PHOTO] JUDITH D. PYLE Director Since 1992
Judith D. Pyle
Age 58 Term Expires in 2004
Ms. Pyle is Vice Chair of The Pyle Group, a financial services
company located in Madison, Wisconsin. Prior to assuming her
current position, Ms. Pyle served as Vice Chairman and Senior
Vice President of Corporate Marketing of Rayovac Corporation
(a battery and lighting products manufacturer), Madison,
Wisconsin. In addition, Ms. Pyle is Vice Chairman of Georgette
Klinger, Inc. and a director of Uniek, Inc. Ms. Pyle has served
as a director of WP&L since 1994, of AER since 1992 and of IP&L
(or predecessor companies) since 1998. Ms. Pyle is Chair of the
Compensation and Personnel Committee.
[PHOTO] ROBERT W. SCHLUTZ Director Since 1998
Robert W. Schlutz
Age 65 Term Expires in 2003
Mr. Schlutz is President of Schlutz Enterprises, a diversified
farming and retailing business in Columbus Junction, Iowa. Mr.
Schlutz has served as a director of IP&L (or predecessor
companies) since 1989 and of WP&L and AER since 1998. Mr.
Schlutz is Chair of the Environmental, Nuclear, Health and
Safety Committee.
[PHOTO] WAYNE H. STOPPELMOOR Director Since 1998
Wayne H. Stopplemoor
Age 67 Term Expires in 2003
Mr. Stoppelmoor served as Vice Chairman of the Board of the
Company from April 1998 until April 2000 in accordance with the
terms of his consulting agreement. Prior to 1998, he was
Chairman, President and Chief Executive Officer of IPC. He
retired as Chief Executive Officer of IPC in 1997. Mr.
Stoppelmoor has served as a director of IP&L (or predecessor
companies) since 1986 and of WP&L and AER since 1998.
6
2002 EQUITY INCENTIVE PLAN PROPOSAL
General
The Company currently has in effect the Long-Term Equity Incentive Plan. As of
February 28, 2002, awards covering an aggregate of 3,483,904 shares of common
stock were outstanding and 316,096 shares remained available for the granting
of awards used in the Long-Term Equity Incentive Plan. To allow for additional
equity-based compensation awards to be made by the Company, the Board of
Directors adopted the 2002 Equity Incentive Plan (the "Plan") on January 23,
2002. The Plan will be effective following shareowner approval of the Plan
provided that such approval is obtained within twelve months following the
Board's adoption of the Plan.
Purpose
The purpose of the Plan is to promote the best interests of the Company and its
shareowners by providing key employees and non-employee directors of the
Company and its affiliates with an opportunity to acquire a proprietary
interest in the Company. The Plan is intended to promote continuity of
management and to provide increased incentive and personal interest in the
welfare of the Company by those key employees who are primarily responsible for
shaping and carrying out the long-range plans of the Company and securing the
Company's continued growth and financial success. In addition, by encouraging
stock ownership by directors who are not employees of the Company or its
affiliates, the Company seeks to attract and retain on the Board of Directors
persons of exceptional competence and to provide further incentive to serve as
a director of the Company.
Administration and Eligibility
The Plan is required to be administered by a committee of the Board of
Directors (the "Committee"), consisting of not less than two directors, each of
whom is a "non-employee director" within the meaning of Rule 16b-3 under the
Securities Exchange Act of 1934 and an "outside director" within the meaning of
Section 162(m) of the Internal Revenue Code. Among other functions, the
Committee has the authority to select the key employees and non-employee
directors of the Company and its affiliates to be participants under the Plan;
to determine the types of awards to be granted to participants and the number
of shares covered by such awards; to set the terms and conditions of such
awards; to determine whether, to what extent and when awards may be settled in
cash or shares; to determine whether, to what extent and when cash, shares and
other awards may be deferred; and to establish, amend or waive rules for the
administration of the Plan. Subject to the express terms of the Plan,
determinations and interpretations with respect to the Plan and award
agreements will be in the sole discretion of the Committee, whose
determinations and interpretations will be binding on all parties. The
Compensation and Personnel Committee has been designated as the current
administrator of the Plan.
Any key employee of the Company or any affiliate, including any executive
officer or employee-director of the Company or any affiliate, is eligible to be
granted awards by the Committee under the Plan. Non-employee directors of the
Company are only eligible to be granted non-qualified stock options under the
Plan. Approximately 100 persons are currently eligible to participate in the
Plan. The number of eligible participants may increase over time based upon
future growth of the Company.
Awards Under the Plan; Available Shares
The Plan authorizes the Committee to grant to key employees: (a) stock options,
which may be either incentive stock options meeting the requirements of Section
422 of the Internal Revenue Code or non-qualified stock options; (b) stock
appreciation rights; (c) restricted stock; (d) restricted stock units; and (e)
performance shares and performance units. The Committee may only grant
non-qualified stock options to non-employee directors. The Plan provides that
up to a total of 4,000,000 shares of common stock (subject to adjustment as
described below) are available for granting of awards under the Plan.
If any shares subject to awards granted under the Plan, or to which any award
relates, are forfeited or if an award otherwise terminates, expires or is
cancelled prior to the delivery of all of the shares or other consideration
issuable or payable pursuant to the award, then such shares will be available
for the granting of new awards under the Plan. Any shares delivered pursuant to
an award may be either authorized and unissued shares of common stock or
treasury shares.
Terms of Awards
Options. The Committee may grant non-qualified stock options to non-employee
directors and non-qualified stock options and incentive stock options to key
employees, provided that no individual key employee may be granted, during any
calendar year, options to purchase in excess of 500,000 shares of common stock
under the Plan (subject to adjustment as described below).
7
The Committee will determine the exercise price per share of common stock
subject to options granted under the Plan, provided that the exercise price may
not be less than 100% of the fair market value of a share of common stock on
the date of grant. The term of any option granted under the Plan will be
determined by the Committee, provided that the term of any option may not
exceed ten years from the date of its grant. Options granted under the Plan
will become exercisable in the manner, at the times and in the amounts
determined by the Committee. Participants may exercise options by payment in
full of the exercise price, at the discretion of the Committee, in cash or by
tendering shares of common stock or other consideration having a fair market
value on the date of exercise equal to the option exercise price. All incentive
stock options granted under the Plan must comply with Section 422 of the
Internal Revenue Code.
Stock Appreciation Rights. The Committee may grant stock appreciation rights to
key employees, provided that no individual key employee may be granted, during
any calendar year, stock appreciation rights under the Plan with respect to
more than 500,000 shares of common stock (subject to adjustment as described
below). A stock appreciation right granted under the Plan will confer on the
holder a right to receive, upon exercise of the stock appreciation right, the
excess of (a) the fair market value of one share of common stock on the date of
exercise over (b) the grant price of the stock appreciation right as specified
by the Committee. The grant price of a stock appreciation right under the Plan
may not be less than 100% of the fair market value of a share of common stock
on the date of grant. At the time of grant, the Committee will determine the
grant price, term, methods of exercise, methods of settlement (including
whether the holder of a stock appreciation right will be paid in cash, shares
of common stock or other consideration), and any other terms and conditions of
any stock appreciation right granted under the Plan.
Restricted Stock. The Committee may grant shares of restricted stock to key
employees, provided that no key employee may be granted, during any calendar
year, more than 200,000 shares of restricted stock and that the aggregate
number of shares of restricted stock and restricted stock units granted under
the Plan to all key employees as a group shall not exceed 400,000 (in each
case, subject to adjustment as described below). Shares of restricted stock
granted to key employees under the Plan will be subject to such restrictions as
the Committee may impose, including any limitation on the right to vote the
shares or receive dividends on the shares. The restrictions imposed on the
shares may lapse separately or in combination at the times and in the amounts
as the Committee determines. Except as otherwise determined by the Committee,
upon termination of a key employee's employment for any reason during the
applicable restriction period, all shares of restricted stock still subject to
restriction will be forfeited by the key employee.
Restricted Stock Units. The Committee may grant restricted stock units to key
employees, provided that no key employee, during any calendar year, may be
granted more than 200,000 restricted stock units and that the aggregate number
of shares of restricted stock and restricted stock units granted under the Plan
to all key employees as a group shall not exceed 400,000 (in each case, subject
to adjustment as described below). Restricted stock units granted to key
employees under the Plan will be subject to such restrictions as the Committee
may impose, which restrictions may lapse separately or in combination at the
times and in the amounts as the Committee determines. Except as otherwise
determined by the Committee, upon termination of a key employee's employment
for any reason during the applicable restriction period, all unvested
restricted stock units will be forfeited by the key employee.
Performance Shares and Performance Units. The Committee may grant performance
shares and/or performance units to key employees, provided that no key employee
may receive, during any calendar year, more than 200,000 performance shares or
more than 200,000 performance units under the Plan (subject to adjustment as
described below). The Committee will determine and/or select the applicable
performance period, the performance goals (and the performance levels related
to these goals) to be achieved during any performance period, the proportion of
payments, if any, to be made for performance between the minimum and full
performance level for any performance goal and, if applicable, the relative
percentage weighting given to each of the selected performance goals, the
restrictions applicable to shares of restricted stock or restricted stock units
received upon payment of performance shares or performance units if payment is
made in such manner, and any other terms, conditions and rights relating to the
grant of performance shares or performance units.
Under the terms of the Plan, the Committee may select from various performance
goals, including return on equity, return on investment, return on net assets,
return on revenues, operating income, performance value added, pre-tax profits,
net income, net earnings per share, working capital as a percent of net sales,
net cash provided by operating activities, market price per share of common
stock, total shareowner return and key operational
8
measures, including customer loyalty, customer satisfaction, employee safety,
market share, system reliability and cost structure reduction. The Committee
has sole discretion to alter the selected performance goals, subject to
shareowner approval, to the extent required to qualify the performance award
for the performance-based exemption provided by Section 162(m) of the Internal
Revenue Code. If the Committee determines it is advisable to grant performance
shares and/or performance units that do not qualify for the performance-based
exemption, then the Committee may make such grants in its discretion.
Following completion of the applicable performance period, payment on
performance shares and/or performance units granted to and earned by key
employees will be made in shares of common stock (which, at the discretion of
the Committee, may be shares of restricted stock), cash or restricted stock
units with an aggregate fair market value equal to the value of the earned
performance shares and/or performance units at the close of the applicable
performance period.
Key employees will have no voting rights with respect to the performance shares
or the shares underlying performance units held by them during the applicable
performance period.
Adjustments
If any dividend or other distribution, recapitalization, stock split, reverse
stock split, reorganization, merger, consolidation, split-up, spin-off,
combination, repurchase, or exchange of shares of common stock or other
securities of the Company, issuance of warrants or other rights to purchase
shares of common stock or other securities of the Company, or other similar
corporate transaction or event affects the shares of common stock such that an
adjustment is appropriate, then the Committee will generally have the authority
to, in such manner as it deems equitable, adjust (a) the number and type of
shares subject to the Plan and which thereafter may be made the subject of
awards, (b) the number and type of shares subject to individual participant
limitations, (c) the number and type of shares subject to outstanding awards,
and (d) the grant, purchase or exercise price with respect to any award; or may
make provision for a cash payment to the holder of an outstanding award in
exchange for cancellation of the award or in lieu of such an adjustment.
Limits on Transferability
Except as otherwise provided by the Committee, no award granted under the Plan
(other than an award of restricted stock on which the restrictions have lapsed
or an award of restricted stock units which have vested) may be assigned, sold,
transferred or encumbered by any participant, otherwise than by will, by
designation of a beneficiary, or by the laws of descent and distribution.
Except as otherwise provided by the Committee, each award will be exercisable
during the participant's lifetime only by such participant or, if permissible
under applicable law, by the participant's guardian or legal representative.
Dividend Equivalents
In addition to awards granted under the Plan, the Committee may grant dividend
equivalents to key employees and non-employee directors, entitling the
participants to receive cash equal to cash dividends paid with respect to a
specified number of shares of common stock. Dividend equivalents may only be
granted in connection with an award granted to the key employee or non-employee
director under the Plan.
No Repricing of Options
Except for certain adjustments discussed above or adjustments made with
shareowner approval, the Committee does not have authority to effect repricing
of options granted under the Plan or to modify options or enter into
transactions that would be deemed to constitute a repricing of an option
granted under the Plan for accounting purposes.
Amendment and Termination
Except as otherwise provided in the Plan, the Board of Directors may amend,
alter, suspend, discontinue, or terminate the Plan. Shareowner approval of any
amendment of the Plan must be obtained if the amendment (a) increases the
number of shares of common stock with respect to which awards may be granted
under the Plan, (b) expands the class of persons eligible to participate under
the Plan or (c) otherwise increases in any material respect the benefits
payable under the Plan. Shareowner approval must also be obtained for an
amendment if otherwise required by the Internal Revenue Code or rules
promulgated thereunder (in order to allow for incentive stock options to be
granted under the Plan), or the listing requirements of the New York Stock
Exchange or any principal securities exchange or market on which shares of
common stock are then traded (in order to maintain the listing of shares of
common stock thereon). Termination of the Plan will not affect the rights of
participants with respect to awards previously granted to them, and all
unexpired awards will continue in force and effect after termination of the
Plan except as they may lapse or be terminated by their own terms and
conditions.
Withholding
Not later than the date as of which tax withholding is first required with
respect to any award under the Plan, a key employee will be required to pay to
the Company, or make
9
arrangements satisfactory to the Company regarding the payment of, any federal,
state, local or foreign taxes required by law to be withheld with respect to
such amount. Unless otherwise determined by the Committee, withholding
obligations arising with respect to awards under the Plan may be settled with
shares of common stock (other than shares of restricted stock), including
shares that are part of, or are received upon exercise of, the award that gives
rise to the withholding requirement. The obligations of the Company under the
Plan are conditional on such payment or arrangements, and the Company and any
affiliate will, to the extent permitted by law, have the right to deduct any
taxes from any payment otherwise due to the key employee. The Committee may
establish such procedures as it deems appropriate for the settling of
withholding obligations with shares of common stock.
Certain Federal Income Tax Consequences
Stock Options. The grant of a stock option under the Plan creates no income tax
consequences to the key employee or the non-employee director or the Company. A
key employee or a non-employee director who is granted a non-qualified stock
option will generally recognize ordinary income at the time of exercise for
each underlying share of common stock in an amount equal to the excess of the
fair market value of the common stock at such time over the exercise price. The
Company will generally be entitled to a deduction in the same amount and at the
same time as ordinary income is recognized by the key employee or the
non-employee director. A subsequent disposition of common stock will generally
give rise to capital gain or loss to the extent the amount realized from the
disposition differs from the tax basis (i.e., the fair market value of common
stock on the date of exercise). This capital gain or loss will be a long-term
or short-term capital gain or loss depending upon the length of time common
stock is held prior to the disposition.
In general, a key employee will recognize no income or gain as a result of
exercise of an incentive stock option for regular tax purposes (income equal to
the excess of the fair market value of the common stock at such time over the
exercise price is recognized for alternative minimum tax purposes). Except as
described below, any gain or loss realized by the key employee on the
disposition of common stock acquired pursuant to the exercise of an incentive
stock option will be treated as a long-term capital gain or loss and no
deduction will be allowed to the Company. If the key employee fails to hold the
shares of common stock acquired pursuant to the exercise of an incentive stock
option for at least two years from the date of grant of the incentive stock
option and one year from the date of exercise, the key employee will recognize
ordinary income at the time of the disposition equal to the lesser of (a) the
gain realized on the disposition or (b) the excess of the fair market value of
the shares of common stock on the date of exercise over the exercise price. The
Company will be entitled to a deduction in the same amount and at the same time
as ordinary income is recognized by the key employee. Any additional gain
realized by the key employee over the fair market value at the time of exercise
will be treated as a capital gain. This capital gain will be a long-term
capital gain if the common stock has been held for more than one year from the
date of exercise.
Stock Appreciation Rights. The grant of a stock appreciation right will create
no income tax consequences for the key employee or the Company. Upon exercise
of a stock appreciation right, the key employee will recognize ordinary income
equal to the amount of any cash and the fair market value of any shares of
common stock or other property received, except that if the key employee
receives an option or shares of restricted stock or restricted stock units upon
exercise of a stock appreciation right, recognition of income may be deferred
in accordance with the rules applicable to such other awards. The Company will
generally be entitled to a deduction in the same amount and at the same time as
income is recognized by the key employee.
Restricted Stock. A key employee will not recognize income at the time an award
of restricted stock is made under the Plan, unless the election described below
is made. A key employee who has not made such an election will recognize
ordinary income at the time the restrictions on the stock lapse in an amount
equal to the fair market value of the restricted stock at such time reduced by
any amount paid for the restricted stock. The Company will generally be
entitled to a corresponding deduction in the same amount and at the same time
as the key employee recognizes income. Any otherwise taxable disposition of the
restricted stock after the time the restrictions lapse will generally result in
capital gain or loss (long-term or short-term depending upon the length of time
the restricted stock is held after the time the restrictions lapse). Dividends
paid in cash and received by a key employee prior to the time the restrictions
lapse will constitute ordinary income to the key employee in the year paid. The
Company will generally be entitled to a corresponding compensation deduction
for such dividends. Any dividends paid in stock will be treated as an award of
additional restricted stock subject to the tax treatment described herein.
A key employee may, within thirty days after the date of the award of
restricted stock, elect to recognize ordinary income as of the date of the
award in an amount equal to the fair market value of such restricted stock on
the date of the award reduced by any amount paid for the restricted
10
stock. The Company will generally be entitled to a corresponding deduction in
the same amount and at the same time as the key employee recognizes income. If
the election is made, then any cash dividends received with respect to the
restricted stock will be treated as dividend income to the key employee in the
year of payment and will not be deductible by the Company. Any otherwise
taxable disposition of the restricted stock (other than by forfeiture) will
result in capital gain or loss (long-term or short-term depending on the
holding period). If the key employee who has made an election subsequently
forfeits the restricted stock, then the key employee will not be entitled to
recognize a capital loss equal to the amount the key employee paid for the
restricted stock less the amount received upon forfeiture. In addition, the
Company would then be required to include as ordinary income the amount of the
deduction it originally claimed with respect to such shares.
Restricted Stock Units. A key employee will not recognize income at the time an
award of restricted stock units is made under the Plan. A key employee will
recognize ordinary income at the time of exercise in an amount equal to the
fair market value of the underlying shares of common stock at such time reduced
by any amount paid for the restricted stock units. The Company will generally
be entitled to a deduction in the same amount and at the same time as ordinary
income is recognized by the key employee. A subsequent disposition of the
common stock received pursuant to an award of restricted stock units will give
rise to capital gain or loss to the extent the amount realized from the sale
differs from the tax basis. This capital gain or loss will be a long-term or
short-term capital gain or loss depending upon the length of time the common
stock is held prior to the disposition.
Performance Shares and Performance Units. The grant of performance shares
and/or performance units will create no income tax consequences for the key
employee or the Company. Upon the receipt of cash or shares of common stock at
the end of the applicable performance period, the key employee will recognize
ordinary income equal to the amount of cash or the fair market value of the
shares of common stock received, except that if the key employee receives
shares of restricted stock or restricted stock units in payment of performance
shares or performance units, recognition of income may be deferred in
accordance with the rules applicable to such awards. The Company will generally
be entitled to a deduction in the same amount and at the same time as income is
recognized by the key employee.
Dividend Equivalents. The key employee or non-employee director will recognize
ordinary income equal to the dividend equivalents paid with respect to awards
under the Plan. The Company will generally be entitled to a deduction in the
same amount and at the same time as income is recognized by the key employee or
non-employee director.
Future Plan Benefits
No awards have been made to date under the Plan and the Company cannot
currently determine the number of shares or the type of shares that may be
granted to eligible participants under the Plan in the future. Such
determinations will be made from time to time by the Committee.
During 2001, the Committee approved grants of stock options and performance
shares to executive officers and others under the Company's Long-Term Equity
Incentive Plan that are not subject to shareowner approval of the Plan. See
"Stock Option Grants in 2001" and "Long-Term Incentive Awards in 2001."
On March 15, 2002, the closing price per share of the common stock on the New
York Stock Exchange was $29.49.
Vote Required
The affirmative vote of a majority of the votes cast on the proposal at the
Annual Meeting (assuming a quorum is present) is required to approve the Plan,
provided that a majority of the outstanding shares of common stock are voted on
the proposal. For purposes of determining the vote required for this proposal,
abstentions and broker nonvotes will have no impact on the vote. The votes
represented by proxies will be voted FOR approval of the Plan, unless a vote
against such approval or to abstain from voting is specifically indicated on
the proxy.
The Board of Directors unanimously recommends that shareowners vote FOR
approval of the 2002 Equity Incentive Plan.
11
MEETINGS AND COMMITTEES OF THE BOARD
The full Board of Directors of the Company considers all major decisions of the
Company. However, the Board has established standing Audit; Compensation and
Personnel; Environmental, Nuclear, Health and Safety; Nominating and
Governance; and Capital Approval Committees so that certain important matters
can be addressed in more depth than may be possible in a full Board meeting.
The following is a description of each of these committees:
Audit Committee
The Audit Committee held two meetings in 2001. The Committee currently consists
of J. B. Evans (Chair), A. B. Arends, K. C. Lyall, S. B. McAllister and J. D.
Pyle. The Audit Committee recommends to the Board the appointment of
independent auditors; reviews the reports and comments of the independent
auditors; reviews the activities and reports of the Company's internal audit
staff; and, in response to the reports and comments of both the independent
auditors and internal auditors, recommends to the Board any action which the
Committee considers appropriate.
Compensation and Personnel Committee
The Compensation and Personnel Committee held three meetings in 2001.
The Committee currently consists of J. D. Pyle (Chair), A. B. Arends, J. B.
Evans and D. A. Perdue. This Committee sets executive compensation policy;
administers the Company's Long-Term Equity Incentive Plan; reviews the
performance of and approves salaries for officers and certain other management
personnel; reviews and recommends to the Board new or changed employee benefit
plans; reviews major provisions of negotiated employment contracts; and reviews
human resource development programs.
Environmental, Nuclear, Health and Safety Committee
The Environmental, Nuclear, Health and Safety Committee held two meetings in
2001. The Committee currently consists of R. W. Schlutz (Chair), J. L. Hanes,
D. A. Perdue and A. R. Weiler. The Committee's responsibilities are to review
environmental policy and planning issues of interest to the Company, including
matters involving the Company before environmental regulatory agencies and
compliance with air, water and waste regulations. In addition, the Committee
reviews policies and operating issues related to the Company's nuclear
generating station investments including planning and funding for
decommissioning of the plants. The Committee also reviews health and safety
related policies, activities and operational issues as they affect employees,
customers and the general public.
Nominating and Governance Committee
The Nominating and Governance Committee held five meetings in 2001. The
Committee currently consists of A. R. Weiler (Chair), J. L. Hanes, K. C. Lyall,
S. B. McAllister and R. W. Schlutz. This Committee's responsibilities include
recommending and nominating new members of the Board; recommending committee
assignments and committee chairpersons; evaluating overall Board effectiveness;
preparing an annual report on Chief Executive Officer effectiveness; and
considering and developing recommendations to the Board of Directors on other
corporate governance issues. In nominating persons for election to the Board,
the Nominating and Governance Committee will consider nominees recommended by
shareowners. Any shareowner wishing to make a recommendation should write to the
Corporate Secretary of the Company, who will forward all recommendations to the
Committee. The Company's Bylaws also provide for shareowner nominations of
candidates for election as directors. These provisions require such nominations
to be made pursuant to timely notice (as specified in the Bylaws) in writing to
the Corporate Secretary of the Company.
Capital Approval Committee
The Capital Approval Committee held one meeting in 2001. The Committee
currently consists of J. B. Evans, J. D. Pyle and A. R. Weiler. Mr. Davis is
the Chair and a non-voting member of this Committee. The purpose of this
Committee is the evaluation of certain investment proposals where (a) an
iterative bidding process is required and/or (b) the required timelines for
such a proposal would not permit the proposal to be brought before a regular
meeting of the Board of Directors and/or a special meeting of the full Board of
Directors is not practical or merited.
The Board of Directors held seven meetings during 2001. Each director attended
at least 85% of the aggregate number of meetings of the Board and Board
committees on which he or she served.
The Board and each committee conducts performance evaluations annually to
determine its effectiveness and suggests improvements for consideration and
implementation. In addition, Mr. Davis' performance as Chief Executive Officer
is also evaluated by the full Board on an annual basis.
12
COMPENSATION OF DIRECTORS
No retainer fees are paid to Mr. Davis for his service on the Company's Board
of Directors. In 2001, all other directors (the "non-employee directors"), each
of whom served on the Boards of the Company, IES, IPC, WP&L and AER, received
an annual retainer for service on all five Boards consisting of $25,000 in cash
and 1,000 shares of Company common stock. Travel expenses are paid for each
meeting day attended. Beginning in 2002, the annual retainer for each
non-employee director has been changed to $30,000 in cash and 1,000 shares of
Company common stock for service on all four Boards (the Company, IP&L, WP&L
and AER). The directors have the option to receive each amount outright (in
cash and stock), to have each amount deposited to their Shareowner Direct Plan
account or to a directors' Deferred Compensation Account or any combination
thereof.
Director's Deferred Compensation Plan
Under the Director's Deferred Compensation Plan, directors may elect to defer
all or part of their retainer fee. Amounts deposited to a Deferred Compensation
Interest Account receive an annual return based on the A-Utility Bond Rate with
a minimum return no less than the prime interest rate published in The Wall
Street Journal. The balance credited to a director's Deferred Compensation
Interest Account as of any date will be the accumulated deferred cash
compensation and interest that are credited to such account as of such date.
Amounts deposited to a Company Stock Account, whether the cash portion or the
stock portion of the director's compensation, are treated as though invested in
the common stock of the Company and will be credited with dividends and those
dividends will be reinvested. Annually, the director may elect that the
Deferred Compensation Account will be paid in a lump sum or in annual
installments for up to ten years beginning in the year of or one tax year after
retirement or resignation from the Board.
Director's Charitable Award Program
The Company maintains a Director's Charitable Award Program for the members of
its Board of Directors beginning after three years of service. The purpose of
the Program is to recognize the interest of the Company and its directors in
supporting worthy institutions, and to enhance the Company's director benefit
program so that the Company is able to continue to attract and retain directors
of the highest caliber. Under the Program, when a director dies, the Company
will donate a total of $500,000 to one qualified charitable organization, or
divide that amount among a maximum of four qualified charitable organizations,
selected by the individual director. The individual director derives no
financial benefit from the Program. All deductions for charitable contributions
are taken by the Company, and the donations are funded by the Company through
life insurance policies on the directors. Over the life of the Program, all
costs of donations and premiums on the life insurance policies, including a
return of the Company's cost of funds, will be recovered through life insurance
proceeds on the directors. The Program, over its life, will not result in any
material cost to the Company.
Director's Life Insurance Program
The Company maintains a split-dollar Director's Life Insurance Program for
non-employee directors, beginning after three years of service, which provides
a maximum death benefit of $500,000 to each eligible director. Under the
split-dollar arrangement, directors are provided a death benefit only and do
not have any interest in the cash value of the policies. The Life Insurance
Program is structured to pay a portion of the total death benefit to the
Company to reimburse the Company for all costs of the program, including a
return on its funds. The Life Insurance Program, over its life, will not result
in any material cost to the Company. The imputed income allocations reported
for each director in 2001 under the Director's Life Insurance Program were as
follows: A. B. Arends -- $50, J. L. Hanes -- $50, K. C. Lyall -- $395, J. D.
Pyle -- $50, W. H. Stoppelmoor -- $828 and A. R. Weiler -- $50.
Pension Arrangements
Prior to April 1998, Mr. Liu participated in the IES Industries Inc. retirement
plan, which has been transferred to Alliant Energy Corporate Services. Mr.
Liu's benefits under the plan have been "grandfathered" to reflect the benefit
plan formula in effect in April 1998. See "Retirement and Employee Benefit
Plans -- IES Industries Pension Plan."
Alliant Energy Corporate Services also maintains a non-qualified Supplemental
Retirement Plan ("SRP") for eligible former officers of IES Industries Inc.
Mr. Liu participates in the SRP. The SRP generally provides for payment of
supplemental retirement benefits equal to 75% of the officer's base salary in
effect at the date of retirement, reduced by benefits receivable under the
qualified retirement plan, for a period not to exceed 15 years following the
date of retirement. The SRP also provides for certain death benefits to be paid
to the
13
officer's designated beneficiary and benefits if an officer becomes disabled
under the terms of the qualified retirement plan.
Certain Agreements
Mr. Stoppelmoor had a three-year consulting arrangement with the Company that
expired on April 21, 2001. Under the terms of his consulting arrangement, Mr.
Stoppelmoor received $200,000 in 2001 for consulting services. After April 21,
2001, Mr. Stoppelmoor became eligible to receive the annual compensation paid
to non-employee directors.
14
OWNERSHIP OF VOTING SECURITES
Listed in the following table are the number of shares of the Company's common
stock beneficially owned by the executive officers listed in the Summary
Compensation Table and all nominees and directors of the Company, as well as
the number of shares owned by directors and executive officers as a group as of
February 28, 2002. The directors and executive officers of the Company as a
group owned 1.8% of the outstanding shares of common stock on that date. No
individual director or officer owned more than 1% of the outstanding shares of
common stock on that date. To the Company's knowledge, no shareowner
beneficially owned 5% or more of the Company's outstanding common stock as of
December 31, 2001.
- SHARES
- BENEFICIALLY
NAME OF BENEFICIAL OWNER OWNED/(1)/
------------------------ ------------
Executives/(2)/
William D. Harvey....................... 101,673/(3)/
James E. Hoffman........................ 72,009/(3)/
Eliot G. Protsch........................ 110,831/(3)/
Thomas M. Walker........................ 64,939/(3)/
Director Nominees
Alan B. Arends.......................... 6,884/(3)/
Katharine C. Lyall...................... 13,540
Singleton B. McAllister................. 1,543
Anthony R. Weiler....................... 8,847/(3)/
Directors
Erroll B. Davis, Jr..................... 326,875/(3)/
Jack B. Evans........................... 33,961/(3)/
Joyce L. Hanes.......................... 7,505/(3)/
Lee Liu................................. 191,969/(3)/
David A. Perdue......................... 2,681/(3)/
Judith D. Pyle.......................... 11,047
Robert W. Schlutz....................... 9,694/(3)/
Wayne H. Stoppelmoor.................... 132,604/(3)/
All Executives and Directors as a Group
29 people, including those listed above. 1,587,493/(3)/
/(1)Total shares of Company common stock outstanding as of February 28, 2002
were 90,135,503. /
/(2)Stock ownership of Mr. Davis is shown with the directors. /
/(3)Included in the beneficially owned shares shown are indirect ownership
interests with shared voting and investment powers: Mr. Davis -- 7,601, Ms.
Hanes -- 550, Mr. Liu -- 19,755, Mr. Weiler -- 1,331, Mr. Harvey -- 2,365
and Mr. Protsch -- 714; shares of common stock held in deferred
compensation plans: Mr. Arends -- 2,927, Mr. Davis -- 29,255, Mr. Evans --
3,961, Ms. Hanes -- 183, Mr. Perdue -- 2,681, Mr. Schlutz -- 3,961, Mr.
Weiler -- 2,927, Mr. Harvey -- 7,510, Mr. Hoffman -- 3,156, Mr. Protsch --
18,112 and Mr. Walker -- 13,621 (all executive officers and directors as a
group -- 109,498); and stock options exercisable on or within 60 days of
February 28, 2002: Mr. Davis -- 264,714, Mr. Liu -- 148,849, Mr.
Stoppelmoor -- 119,201, Mr. Harvey -- 64,235, Mr. Hoffman -- 49,785, Mr.
Protsch -- 64,235 and Mr. Walker -- 48,322 (all executive officers and
directors as a group -- 1,142,859). /
15
COMPENSATION OF EXECUTIVE OFFICERS
The following Summary Compensation Table sets forth the total compensation paid
by the Company and its subsidiaries to the Chief Executive Officer and the
four other most highly compensated executive officers of the Company for all
services rendered during 2001, 2000 and 1999.
SUMMARY COMPENSATION TABLE
---------------------------------------------------------------------------------------------------------------------
Annual Compensation Long-Term Compensation
--------------------------------------------------------------------------
------------------------------------------------------------------------------------------------
Awards Payouts -----------------
----------------------------------------------------
-----------------------------------
Securities
Restricted Underlying
Name and Other Annual Stock Options LTIP All Other
Principal Position Year Base Salary Bonus Compensation/(1)/ Awards/(2)/ (Shares)/(3)/ Payouts Compensation/(4)/
----------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------
Erroll B. Davis, Jr. 2001 $683,269 $489,364 $11,265 -- 108,592 $359,605 $50,284
Chairman, President. 2000 637,692 895,200 11,875 -- 111,912 196,711 52,619
and Chief 1999 580,000 440,220 12,526 -- 77,657 84,870 53,188
Executive Officer
---------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------
William D. Harvey 2001 274,616 161,233 4,061 -- 21,798 92,209 42,944
Executive Vice 2000 264,615 206,541 4,234 -- 21,063 47,474 42,230
President 1999 254,423 116,535 4,565 $ 255,004 17,071 31,365 37,005
---------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------
James E. Hoffman 2001 274,616 135,795 -- -- 21,798 92,209 23,455
Executive 2000 264,615 233,147 -- -- 21,063 47,474 22,094
Vice President 1999 254,423 159,350 -- 255,004 17,071 -- 24,625
---------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------
Eliot G. Protsch 2001 274,616 143,688 893 -- 21,798 92,209 38,372
Executive Vice 2000 264,615 214,942 1,423 -- 21,063 47,474 38,058
President 1999 254,423 152,898 1,909 255,004 17,071 31,365 32,941
---------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------
Thomas M. Walker 2001 264,615 133,852 -- -- 21,005 88,597 6,207
Executive Vice 2000 254,616 190,026 -- -- 20,268 47,474 6,166
President & Chief 1999 244,808 148,960 -- -- 16,402 -- 6,531
Financial Officer
---------------------------------------------------------------------------------------------------------------------
/(1)Other Annual Compensation for 2001 consists of income tax gross-ups for
reverse split-dollar life insurance. /
/(2)/In 1999, restricted stock was awarded under the Alliant Energy Corporation
Long-Term Incentive Plan as follows: Mr. Harvey -- 9,294 shares, Mr.
Hoffman -- 9,294 shares and Mr. Protsch -- 9,294 shares. Dividends on
shares of restricted stock granted under the Long-Term Equity Incentive
Plan are held in escrow and reinvested in shares of common stock pending
vesting of the underlying restricted stock. If such restricted stock
vests, then the participant is also entitled to receive the common stock
into which the dividends on the restricted stock were reinvested. The
amounts shown in the table above represent the market value of the
restricted stock on the date of grant. The number of shares of restricted
stock held by the officers identified in the table and the market value of
such shares as of December 31, 2001 were as follows: Mr. Harvey -- 9,294
shares ($282,166), Mr. Hoffman -- 9,294 shares ($282,166) and Mr. Protsch
-- 9,294 shares ($282,166).
/(3)Awards made in 2001 were in combination with performance share awards as
described in the table entitled "Long-Term Incentive Awards in 2001". /
16
/(4)/The table below shows the components of the compensation reflected under
this column for 2001:
-----------------------------------------------------------------------------------------------
Erroll B. Davis, Jr. William D. Harvey James E. Hoffman Eliot G. Protsch Thomas M. Walker
-----------------------------------------------------------------------------------------------
A. $20,498 $ 8,238 $ 1,700 $ 8,238 $5,250
-----------------------------------------------------------------------------------------------
B. 12,466 7,121 0 6,861 0
-----------------------------------------------------------------------------------------------
C. 12,302 5,127 0 1,162 0
-----------------------------------------------------------------------------------------------
D. 5,018 998 651 651 957
-----------------------------------------------------------------------------------------------
E. 0 21,460 21,104 21,460 0
-----------------------------------------------------------------------------------------------
Total $50,284 $42,944 $23,455 $38,372 $6,207
-----------------------------------------------------------------------------------------------
A. Matching contributions to 401(k) Plan and Deferred Compensation Plan
B. Split-dollar life insurance reportable income (the split-dollar insurance
premiums are calculated using the "foregone interest" method)
C. Reverse split-dollar life insurance
D. Life insurance coverage in excess of $50,000
E. Dividends earned in 2001 on restricted stock
17
STOCK OPTIONS
The following table sets forth certain information concerning stock options
granted during 2001 to the executives named below:
STOCK OPTION GRANTS IN 2001
Potential Realizable Value at
Assumed Annual Rates of
Stock Price Appreciation for
Individual Grants Option Term/(2)/
---------------------------------------------------------------------------
% of Total
Options
Number of Granted
Securities to Exercise
Underlying Employees of Base
Options in Fiscal Price Expiration
Name Granted/(1)/ Year ($/Share) Date 5% 10%
-----------------------------------------------------------------------------------------------
Erroll B. Davis, Jr. 108,592 15.1% $31.54 1/1/11 $5,579,457 $8,883,912
-----------------------------------------------------------------------------------------------
William D. Harvey 21,798 3.0% 31.54 1/1/11 1,119,981 1,783,294
-----------------------------------------------------------------------------------------------
James E. Hoffman 21,798 3.0% 31.54 1/1/11 1,119,981 1,783,294
-----------------------------------------------------------------------------------------------
Eliot G. Protsch 21,798 3.0% 31.54 1/1/11 1,119,981 1,783,294
-----------------------------------------------------------------------------------------------
Thomas M. Walker 21,005 2.9% 31.54 1/1/11 1,079,237 1,718,419
/(1)/Consists of non-qualified stock options to purchase shares of Company
common stock granted pursuant to the Company's Long Term Equity Incentive
Plan. Options were granted on January 2, 2001, and will have a three-year
vesting schedule with one-third becoming exercisable on January 2, 2002,
one-third becoming exercisable on January 2, 2003 and the final one-third
becoming exercisable on January 2, 2004. Upon a "change in control" of the
Company as defined in the Plan or upon retirement, disability or death of
the option holder, the options will become immediately exercisable.
/(2)/The hypothetical potential appreciation shown for the named executives is
required by rules of the Securities and Exchange Commission ("SEC"). The
amounts shown do not represent the historical or expected future
performance of the Company's common stock. In order for the named
executives to realize the potential values set forth in the 5% and 10%
columns in the table above, the price per share of the Company's common
stock would be $51.38 and $81.81, respectively, as of the expiration date
of the options.
18
The following table provides information for the executives named below
regarding the number and value of exercisable and unexercised options. None of
the executives exercised options in fiscal 2001.
OPTION VALUES AT DECEMBER 31, 2001
Number of Securities Underlying Value of Unexercised In-the-Money Options
Unexercised Options at Fiscal Year End at Year End/(1)/
---------------------------------------------------------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
-----------------------------------------------------------------------------------------------------
---------------------------------------------- --------------------------
Erroll B. Davis, Jr. 264,714 109,699 $239,754 $66,028
-----------------------------------------------------------------------------------------------------
---------------------------------------------- --------------------------
William D. Harvey 64,235 21,553 58,612 12,427
-----------------------------------------------------------------------------------------------------
---------------------------------------------- --------------------------
James E. Hoffman 49,785 21,553 33,134 12,427
-----------------------------------------------------------------------------------------------------
---------------------------------------------- --------------------------
Eliot G. Protsch 64,235 21,553 58,612 12,427
-----------------------------------------------------------------------------------------------------
Thomas M. Walker 48,322 20,759 31,871 11,958
/(1)/Based on the closing per share price of Company common stock on December
31, 2001 of $30.36.
19
LONG-TERM INCENTIVE AWARDS
The following table provides information concerning long-term incentive awards
made to the executives named below in 2001.
LONG-TERM INCENTIVE AWARDS IN 2001
------------------------------------------------------------------------------
Estimated Future Payouts Under
Non-Stock Price-Based Plans
------------------------------
Number of Performance ------------ -------- --------
Shares, or Other
Units or Period Until
Other Rights Maturation Threshold Target Maximum
Name (#)/(1)/ or Payout (#) (#) (#)
-----------------------------------------------------------------------------
Erroll B. Davis, Jr. 22,804 1/1/04 11,402 22,804 45,608
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
William D. Harvey 4,360 1/1/04 2,180 4,360 8,720
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
James E. Hoffman 4,360 1/1/04 2,180 4,360 8,720
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
Eliot G. Protsch 4,360 1/1/04 2,180 4,360 8,720
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
Thomas M. Walker 4,201 1/1/04 2,101 4,201 8,402
-----------------------------------------------------------------------------
/(1)Consists of performance shares awarded under the Company's Long-Term Equity
Incentive Plan. The payout from the performance shares is based on two
equally-weighted performance components: the Company's three-year Total
Shareholder Return (TSR) relative to an investor-owned utility peer group,
and annualized earnings per share growth versus internally set performance
hurdles contained in the Alliant Energy Strategic Plan during the
performance cycle ending December 31, 2003. Payouts are subject to
modification pursuant to a performance multiplier that ranges from 0 to
2.00, and will be made in shares of Company common stock or a combination
of common stock and cash. /
20
CERTAIN AGREEMENTS
Mr. Davis has an employment agreement with the Company, pursuant to which he
will serve as the Chairman, President and Chief Executive Officer of the
Company until the expiration of the initial term of the agreement on April 21,
2003. Following the expiration of the initial term of Mr. Davis' employment
agreement, his agreement will automatically renew for successive one-year
terms, unless either Mr. Davis or the Company gives prior written notice of his
or its intent to terminate the agreement. Mr. Davis will also serve as the
Chief Executive Officer and a director of each subsidiary of the Company during
the term of his employment agreement. Pursuant to Mr. Davis' employment
agreement, he is paid an annual base salary of not less than $450,000. Mr.
Davis' current salary under his employment agreement is $685,000. Mr. Davis
also has the opportunity to earn short-term and long-term incentive
compensation (including stock options, restricted stock and other long-term
incentive compensation) and receive supplemental retirement benefits (including
continued participation in the WP&L Executive Tenure Compensation Plan) and
life insurance providing a death benefit of three times his annual salary. If
the employment of Mr. Davis is terminated without cause (as defined in the
employment agreement) or if Mr. Davis terminates his employment for good reason
(as defined in the employment agreement), the Company or its affiliates will
continue to provide the compensation and benefits called for by the employment
agreement through the end of the term of such employment agreement (with
incentive compensation based on the maximum potential awards and with any stock
compensation paid in cash), and all unvested stock compensation will vest
immediately. If Mr. Davis dies or becomes disabled, or terminates his
employment without good reason, during the term of his respective employment
agreement, the Company or its affiliates will pay to Mr. Davis or his
beneficiaries or estate all compensation earned through the date of death,
disability or such termination (including previously deferred compensation and
pro rata incentive compensation based upon the maximum potential awards). If
Mr. Davis is terminated for cause, the Company or its affiliates will pay his
base salary through the date of termination plus any previously deferred
compensation. Under Mr. Davis' employment agreement, if any payments thereunder
constitute an excess parachute payment under the Internal Revenue Code (the
"Code"), the Company will pay to Mr. Davis the amount necessary to offset the
excise tax and any applicable taxes on this additional payment.
The Company currently has in effect key executive employment and severance
agreements (the "KEESAs") with certain executive officers of the Company
(including Messrs. Davis, Harvey, Hoffman, Protsch and Walker). The KEESAs
provide that each executive officer who is a party thereto is entitled to
benefits if, within five years after a change in control of the Company (as
defined in the KEESAs), the officer's employment is ended through (a)
termination by the Company, other than by reason of death or disability or for
cause (as defined in the KEESAs), or (b) termination by the officer due to a
breach of the agreement by the Company or a significant change in the officer's
responsibilities, or (c) in the case of Mr. Davis' agreement, termination by
Mr. Davis following the first anniversary of the change of control. The
benefits provided are (a) a cash termination payment of two or three times
(depending on which executive is involved) the sum of the officer's annual
salary and his or her average annual bonus during the three years before the
termination and (b) continuation for up to five years of equivalent hospital,
medical, dental, accident, disability and life insurance coverage as in effect
at the time of termination. Each KEESA for executive officers below the level
of Executive Vice President provides that if any portion of the benefits under
the KEESA or under any other agreement for the officer would constitute an
excess parachute payment for purposes of the Code, benefits will be reduced so
that the officer will be entitled to receive $1 less than the maximum amount
which he or she could receive without becoming subject to the 20% excise tax
imposed by the Code on certain excess parachute payments, or which the Company
may pay without loss of deduction under the Code. The KEESAs for the Chief
Executive Officer and the Executive Vice Presidents (including Messrs. Davis,
Harvey, Hoffman, Protsch and Walker) provide that if any payments thereunder or
otherwise constitute an excess parachute payment, the Company will pay to the
appropriate officer the amount necessary to offset the excise tax and any
additional taxes on this additional payment. Mr. Davis' employment agreement as
described above limits benefits paid thereunder to the extent that duplicate
payments would be provided to him under his KEESA.
21
RETIREMENT AND EMPLOYEE BENEFIT PLANS
Alliant Energy Corporate Services Retirement Plans
Salaried employees (including officers) of the Company are eligible to
participate in a Retirement Plan maintained by Alliant Energy Corporate
Services. In 1998, the Retirement Plan was amended to implement a cash balance
format, thereby changing the benefit calculation formulas and adding a lump sum
distribution option for eligible participants. The Alliant Energy Cash Balance
Pension Plan bases a participant's defined benefit pension on the value of a
hypothetical account balance. For individuals participating in the Plan as of
August 1, 1998, a starting account balance was created equal to the present
value of the benefit accrued as of December 31, 1997, under the Plan's benefit
formula prior to the change to a cash balance approach. That formula provided a
retirement income based on years of credited service and final average
compensation for the 36 highest consecutive months, with a reduction for a
Social Security offset. In addition, individuals participating in the Plan as
of August 1, 1998 received a special one-time transition credit amount equal to
a specified percentage varying with age multiplied by credited service and base
pay.
For 1998 and thereafter, a participant receives annual credits to the account
equal to 5% of base pay (including certain incentive payments, pre-tax
deferrals and other items), plus an interest credit on all prior accruals equal
to 4%, plus a potential share of the gain on the investment return on assets in
the trust investment for the year.
The life annuity payable under the Plan is determined by converting the
hypothetical account balance credits into annuity form. Individuals who were
participants in the Plan on August 1, 1998 are in no event to receive any less
than what would have been provided under the prior formula, had it continued,
if they terminate on or before August 1, 2008, and do not elect to commence
benefits before the age of 55.
All of the individuals listed in the Summary Compensation Table who participate
in the Plan (Messrs. Davis, Protsch and Harvey) are "grandfathered" under the
prior plan benefit formula. Since their estimated benefits under that formula
are higher than under the Plan formula, utilizing current assumptions, their
benefits would currently be determined by the prior plan benefit formula. The
following table illustrates the estimated annual benefits payable upon
retirement at age 65 under the prior formula based on average annual
compensation and years of service. To the extent benefits under the Plan are
limited by tax law, any excess will be paid under the Unfunded Excess Plan
described below.
Retirement Plan Table
Annual Benefit After Specified Year In Plan
- -------------------------------------------
Average
Annual
Compensation 15 20 25 30+
------------ -------- -------- -------- --------
$ 200,000 $ 55,000 $ 73,300 $ 91,700 $110,000
300,000 82,500 110,000 137,500 165,000
400,000 110,000 146,700 183,300 220,000
500,000 137,500 183,300 229,100 275,000
600,000 165,000 220,000 275,000 330,000
700,000 192,500 256,700 320,800 385,000
800,000 220,000 293,300 366,700 440,000
900,000 247,000 330,000 412,500 495,000
1,000,000 275,000 366,700 458,300 550,000
1,100,000 302,500 403,300 504,100 605,000
For purposes of the Plan, compensation means payment for services rendered,
including vacation and sick pay, and is substantially equivalent to the salary
amounts reported in the foregoing Summary Compensation Table. Plan benefits
depend upon length of Plan service (up to a maximum of 30 years), age at
retirement and amount of compensation (determined in accordance with the Plan)
and are reduced by up to 50% of Social Security benefits. The estimated
benefits in the table above do not reflect the Social Security offset. The
estimated benefits are computed on a straight-life annuity basis. Benefits will
be adjusted if the employee receives one of the optional forms of payment.
Credited
22
years of service under the Plan for covered persons named in the foregoing
Summary Compensation Table are as follows: Erroll B. Davis, Jr., 22 years;
Eliot G. Protsch, 22 years; and William D. Harvey, 14 years.
IES Industries Pension Plan
Prior to April 1998, Messrs. Hoffman and Walker participated in the IES
Industries Inc. retirement plan (which has been merged into the Alliant Energy
Cash Balance Pension Plan). Plan benefits payable to Messrs. Hoffman and Walker
have been "grandfathered" to reflect the benefit plan formula in effect at that
time. Since their estimated benefits under that formula are higher than under
the Plan formula, utilizing current assumptions, their benefits would currently
be determined by the prior plan benefit formula. The following table
illustrates the estimated annual benefits payable upon retirement at age 65
under the prior formula for the average annual compensation and years of
service. To the extent benefits under the Plan are limited by tax law, any
excess will be paid under the Unfunded Excess Plan described below.
Pension Plan Table
Annual Benefit After Specified Year In Plan
- --------------------------------------------
Average
Annual
Compensation 15 20 25 30 35
------------ -------- -------- -------- -------- --------
$200,000. $ 43,709 $ 58,279 $ 72,849 $ 87,418 $101,988
300,000. 66,959 89,279 111,599 133,918 156,238
400,000. 90,209 120,279 150,348 180,418 210,488
500,000. 113,459 151,279 189,099 226,918 264,738
600,000. 136,709 182,279 227,849 273,418 318,988
For purposes of the Plan, compensation means payment for services rendered,
including vacation and sick pay, and is substantially equivalent to the salary
amounts reported in the foregoing Summary Compensation Table. Plan benefits
depend upon length of Plan service (up to a maximum of 35 years), age at
retirement and amount of compensation (determined in accordance with the Plan).
The estimated benefits are computed on a straight-life annuity basis. Benefits
will be adjusted if the employee receives one of the optional forms of payment.
Credited years of service under the Plan for covered persons named in the
foregoing Summary Compensation Table are as follows: Mr. Hoffman, six years and
Mr. Walker, five years.
Unfunded Excess Plan -- Alliant Energy Corporate Services maintains an Unfunded
Excess Plan that provides funds for payment of retirement benefits above the
limitations on payments from qualified pension plans in those cases where an
employee's retirement benefits exceed the qualified plan limits. The Unfunded
Excess Plan provides an amount equal to the difference between the actual
pension benefit payable under the pension plan and what such pension benefit
would be if calculated without regard to any limitation imposed by the Code on
pension benefits or covered compensation.
Unfunded Executive Tenure Compensation Plan -- Alliant Energy Corporate
Services maintains an Unfunded Executive Tenure Compensation Plan to provide
incentive for selected key executives to remain in the service of the Company
by providing additional compensation that is payable only if the executive
remains with the Company until retirement (or other termination if approved by
the Board of Directors). In the case of the Chief Executive Officer only, in
the event that the Chief Executive Officer (a) is terminated under his
employment agreement with the Company as described above other than for cause,
death or disability (as those terms are defined in the employment agreement),
(b) terminates his employment under the employment agreement for good reason
(as such term is defined in the employment agreement), or (c) is terminated as
a result of a failure of the employment agreement to be renewed automatically
pursuant to its terms (regardless of the reason for such non-renewal), then for
purposes of the Plan, the Chief Executive Officer shall be deemed to have
retired at age 65 and shall be entitled to benefits under the Plan. Any
participant in the Plan must be approved by the Board of Directors. Mr. Davis
was the only active participant in the Plan as of December 31, 2001. The Plan
provides for monthly payments to a participant after retirement (at or after
age 65, or with Board approval, prior to age 65) for 120 months. The payments
will be equal to 25% of the participant's highest average salary for any
consecutive 36-month period. If a participant dies prior to retirement or
before 120 payments have been made, the participant's beneficiary will receive
monthly payments equal to 50% of such amount for 120 months in the case of
death before retirement, or if the participant dies after retirement, 50% of
such amount for the balance of the 120 months. Annual benefits of $160,000
would be payable to Mr. Davis upon retirement, assuming he continues in Alliant
Energy Corporate Services' service until retirement at the same salary as was
in effect on December 31, 2001.
23
Alliant Energy Corporate Services Supplemental Executive Retirement Plan
The Company maintains an unfunded Supplemental Executive Retirement Plan
("SERP") to provide incentive for key executives to remain in the service of
the Company by providing additional compensation that is payable only if the
executive remains with the Company until retirement, disability or death.
Participants in the SERP must be approved by the Compensation and Personnel
Committee of the Board. The SERP provides for payments of 60% of the
participant's average annual earnings (base salary and bonus) for the highest
paid three years out of the last ten years of the participant's employment
reduced by the sum of benefits payable to the officer from the officer's
defined benefit plan and the Unfunded Excess Plan. The normal retirement date
under the SERP is age 62 with at least ten years of service and early
retirement is at age 55 with at least ten years of service. If a participant
retires prior to age 62, the 60% payment under the SERP is reduced by 3% per
year for each year the participant's retirement date precedes his/her normal
retirement date. The actuarial reduction factor will be waived for senior
officers who have attained age 55 and have a minimum of ten years of service in
a senior executive position with the Company. Benefit payments under the SERP
will be made in a lump sum, or for the lifetime of the senior officer, with a
minimum of 12 years of payments if the participant dies after retirement. A
postretirement death benefit of one times the senior executive officer's final
average earnings at the time of retirement will be paid to the designated
beneficiary. Messrs. Davis, Harvey, Hoffman, Protsch and Walker are
participants in the SERP. The following table shows payments under the SERP,
assuming a minimum of ten years of service at retirement age.
Supplemental Executive Retirement Plan Table
Average Annual Benefit After Specified Years in Plan
Annual --------------------------------------------
Compensation (less than)10 Years (greater than)10 Years*
------------ ------------------- -----------------------
$ 200,000 0 $120,000
300,000 0 180,000
400,000 0 240,000
500,000 0 300,000
600,000 0 360,000
700,000 0 420,000
800,000 0 480,000
900,000 0 540,000
1,000,000 0 600,000
1,100,000 0 660,000
----------
* Reduced by the sum of the benefit payable from the applicable defined benefit
pension plan and the Unfunded Excess Plan.
Key Employee Deferred Compensation Plan -- The Company maintains an unfunded
Key Employee Deferred Compensation Plan under which participants may defer up
to 100% of base salary, incentive compensation and eligible SERP payments.
Participants who have made the maximum allowed contribution to the
Company-sponsored 401(k) Plan may receive an additional credit to the Deferred
Compensation Plan. The credit will be equal to 50% of the lesser of (a) the
amount contributed to the 401(k) Plan plus the amount deferred under this Plan,
or (b) 6% of base salary reduced by the amount of any matching contributions in
the 401(k) Plan. The employee may elect to have his deferrals credited to an
Interest Account or a Company Stock Account. Deferrals and matching
contributions to the Interest Account receive an annual return based on the
A-Utility Bond Rate with a minimum return no less than the prime interest rate
published in The Wall Street Journal, provided that the return may not be
greater than 12% or less than 6%. Deferrals and matching contributions credited
to the Company Stock Account are treated as though invested in the common stock
of the Company and will be credited with dividends and those dividends will be
reinvested. The shares of common stock identified as obligations under the Plan
are held in a rabbi trust. Payments from the Plan may be made in a lump sum or
in annual installments for up to ten years at the election of the participant.
Participants are selected by the Chief Executive Officer of Alliant Energy
Corporate Services. Messrs. Davis, Harvey, Protsch and Walker participate in
the Plan.
24
REPORT OF THE COMPENSATION AND PERSONNEL COMMITTEE ON EXECUTIVE COMPENSATION
To Our Shareowners:
The Compensation and Personnel Committee (the "Committee") of the Board of
Directors of the Company is currently comprised of four non-employee directors.
The Committee assesses the effectiveness and competitiveness of, approves the
design of and administers executive compensation programs within a consistent
total compensation framework for the Company. The Committee also reviews and
approves all salary arrangements and other remuneration for executives,
evaluates executive performance, and considers related matters. To support the
Committee in carrying out its mission, an independent consultant is engaged to
provide assistance to the Committee.
The Committee is committed to implementing an overall compensation program for
executives that furthers the Company's mission. Therefore, the Committee adheres
to the following compensation policies, which are intended to facilitate the
achievement of the Company's business strategies:
. Total compensation should enhance the Company's ability to attract, retain
and encourage the development of exceptionally knowledgeable and
experienced executives, upon whom, in large part, the successful operation
and management of the Company depends.
. Base salary levels should be targeted at a competitive market range of
base salaries paid to executives of comparable companies. Specifically,
the Committee targets the median (50th percentile) of base salaries paid
by a selected group of utility and general industry companies.
. Incentive compensation programs should strengthen the relationship between
pay and performance by emphasizing variable, at-risk compensation that is
consistent with meeting predetermined Company, subsidiary, business unit
and individual performance goals. In addition, the Committee targets
incentive levels at the median (50th percentile) of incentive compensation
paid by a selected group of utility and general industry companies.
Components of Compensation
The major elements of the Company's executive compensation program are base
salary, short-term (annual) incentives and long-term (equity) incentives. These
elements are addressed separately below. In setting the level for each major
component of compensation, the Committee considers all elements of an
executive's total compensation package, including employee benefit and
perquisite programs. The Committee's goal is to provide an overall compensation
package for each executive officer that is competitive to the packages offered
other similarly situated executives. The Committee has determined that total
executive compensation, including that for Mr. Davis, is in line with
competitive compensation of the comparison group of companies.
Base Salaries
The Committee annually reviews each executive's base salary. Base salaries are
targeted at a competitive market range (i.e., at the median level) when
comparing both utility and non-utility (general industry) data. The Committee
annually adjusts base salaries to recognize changes in the market, varying
levels of responsibility, prior experience and breadth of knowledge. Increases
to base salaries are driven primarily by market adjustments for a particular
salary level, which generally limits across-the-board increases. The Committee
does not consider individual performance factors in setting base salaries. The
Committee reviewed executive salaries for market comparability using utility
and general industry data contained in compensation surveys published by Edison
Electric Institute, American Gas Association and several compensation
consulting firms. Based on the foregoing, the Committee established the annual
salary for Mr. Davis at $685,000 for the 2001 fiscal year.
Short-Term Incentives
The Company's short-term (annual) incentive programs promote the Committee's
pay-for-performance philosophy by providing executives with direct financial
incentives in the form of annual cash bonuses tied to the achievement of
corporate, subsidiary, business unit and individual performance goals. Annual
bonus opportunities allow the Committee to communicate specific goals that are
of primary importance during the coming year and motivate executives to achieve
these goals. The Committee on an annual basis reviews and approves the
programs' performance goals, the relative weight assigned to each goal and the
targeted and maximum award levels. A description of the short-term incentive
programs available during 2001 to executive officers follows.
25
Alliant Energy Corporation Management Incentive Compensation Plan -- In 2001,
the Alliant Energy Corporation Management Incentive Compensation Plan (the
"MICP") covered executives and was based on achieving annual targets in
corporate performance that included earnings per share ("EPS"), safety and
environmental targets for the utility businesses, and business unit and
individual performance goals. Target and maximum bonus awards under the MICP in
2001 were set at the median of the utility and general industry market levels.
The Committee considered these targets to be achievable, but to require
above-average performance from each of the executives. The level of performance
achieved in each category determines actual payment of bonuses, as a percentage
of annual salary. Weighting factors are applied to the percentage achievement
under each category to determine overall performance. If a pre-determined EPS
target is not met, there is no bonus payment associated with the MICP. If the
threshold performance for any other performance target is not reached, there is
no bonus payment associated with that particular category. Once the designated
maximum performance is reached, there is no additional payment for performance
above the maximum level. The actual percentage of salary paid as a bonus,
within the allowable range, is equal to the weighted average percent
achievement for all the performance categories. Potential MICP awards range
from 0% to 100% of annual salary for eligible executives other than Mr. Davis.
The amounts paid under the MICP to eligible officers included in the Summary
Compensation Table are reflected in that table under the heading "Bonus".
In 2001, Mr. Davis was covered by the MICP. Awards for Mr. Davis under the MICP
in 2001 were based on corporate and strategic goal achievement in relation to
predetermined goals. For each plan year, the Committee determines the
performance apportionment for Mr. Davis. In 2001, that apportionment was 75% for
corporate performance and 25% for strategic goal performance. Corporate
performance is measured based on Company-wide EPS, environmental, diversity and
safety targets established at the beginning of the year. Strategic goals are
measured based on the achievement of certain specific goals, which included
strategy development and implementation, established for Mr. Davis by the
Committee. The 2001 MICP award range for Mr. Davis was from 0% to 150% of annual
salary. The award earned by Mr. Davis under the MICP for 2001 is set forth in
the Summary Compensation Table under the heading "Bonus".
Long-Term Incentives
The Committee strongly believes compensation for executives should include
long-term, at-risk pay to strengthen the alignment of the interests of the
shareowners and management. In this regard, the Alliant Energy Corporation
Long-Term Equity Incentive Plan permits grants of stock options, restricted
stock and performance units/shares with respect to the Company's common stock.
The Committee believes the Long-Term Equity Incentive Plan balances the
Company's annual compensation programs by emphasizing compensation based on the
long-term successful performance of the Company from the perspective of the
Company's shareowners. A description of the long-term incentive programs
available during 2001 to executive officers under the Long-Term Equity
Incentive Plan is set forth below.
Alliant Energy Corporation Long-Term Incentive Program -- The Alliant Energy
Corporation Long-Term Incentive Program covered executives and consisted of the
following components in 2001: non-qualified stock options and performance
shares. Non-qualified stock options provide a reward that is directly tied to
the benefit shareowners receive from increases in the price of the Company's
common stock. The payout from the performance shares is based on two
equally-weighted performance components: the Company's three-year total return
to shareowners relative to an investor-owned utility peer group, and annualized
EPS growth versus internally set performance hurdles contained in the Alliant
Energy Strategic Plan. Thus, the two components of the Long-Term Incentive
Program (i.e., stock options and performance shares) provide incentives for
management to produce superior shareowner returns on both an absolute and
relative basis. During 2001, the Committee made a grant of stock options and
performance shares to various executive officers, including Messrs. Davis,
Harvey, Hoffman, Protsch and Walker. All option grants had per share exercise
prices equal to the fair market value of a share of Company common stock on the
date the grants were approved. Options vest on a one-third basis at the
beginning of each calendar year after grant and have a ten-year term from the
date of the grant. Executives in the Alliant Energy Corporation Long-Term
Equity Incentive Program were also granted performance shares. Performance
shares will be paid out in shares of the Company's common stock or cash. The
award will be modified by a performance multiplier, which ranges from 0 to 2.00
based on Company performance.
In determining actual award levels under the Alliant Energy Corporation
Long-Term Equity Incentive Program, the Committee was primarily concerned with
providing a competitive total compensation level to officers. As such, award
levels (including awards made to Mr. Davis) were based on a competitive
analysis of similarly sized utility companies that took into consideration the
market level of long-term incentives, as well as the competitiveness of the
26
total compensation package. Award ranges, as well as individual award levels,
were then established based on responsibility level and market competitiveness.
No corporate or individual performance measures were reviewed in connection
with the awards of options and performance shares. Award levels were targeted
to the median of the range of such awards paid by comparable companies. The
Committee did not consider the amounts of options and performance shares
already outstanding or previously granted when making awards for 2001. Mr.
Davis' awards in 2001 under the Long-Term Incentive Program are shown in the
tables under "Stock Option Grants in 2001" and "Long-Term Incentive Awards in
2001".
Stock Ownership Guidelines
The Company has established stock ownership guidelines for executive officers
as a way to better align the financial interests of its officers with those of
its shareowners. These officers are expected to make continuing progress
towards compliance with these guidelines and to comply fully with the
guidelines within five years of implementation. Officers are required to own
stock with a value equal to a specified multiple of their base salaries. Under
these guidelines, the requisite multiples are three for the Chief Executive
Officer and Executive Vice Presidents and 1.5 for Vice Presidents. The Chief
Executive Officer retains the right to grant special dispensation for hardship,
promotions or new hires.
Policy with Respect to the $1 Million Deduction Limit
Section 162(m) of the Code generally limits the corporate deduction for
compensation paid to executive officers named in the proxy statement to $1
million unless such compensation is based upon performance objectives meeting
certain regulatory criteria or is otherwise excluded from the limitation. Based
on the Committee's commitment to link compensation with performance as
described in this report, the Committee intends, in most instances, to qualify
future compensation paid to the Company's executive officers for deductibility
by the Company under Section 162(m) except in limited appropriate circumstances.
Conclusion
The Committee believes the existing executive compensation policies and
programs provide an appropriate level of competitive compensation for the
Company's executives. In addition, the Committee believes that the long- and
short-term performance incentives effectively align the interests of executives
and shareowners toward a successful future for the Company.
COMPENSATION AND PERSONNEL COMMITTEE
Judith D. Pyle (Chair)
Alan B. Arends
Jack B. Evans
David A. Perdue
27
REPORT OF THE AUDIT COMMITTEE
The Audit Committee (the "Committee") of the Board of Directors of the Company
is composed of five independent directors, each of whom is independent as
defined in the New York Stock Exchange's listing standards. The Committee
operates under a written charter adopted by the Board of Directors. The
Committee recommends to the Board of Directors the selection of the Company's
independent auditors.
The Company's management ("management") is responsible for the Company's
internal controls and the financial reporting process, including the system of
internal controls. The Company's independent auditors are responsible for
expressing an opinion on the conformity of the Company's audited consolidated
financial statements with generally accepted accounting principles. The
Committee has reviewed and discussed the audited consolidated financial
statements with management and the independent auditors. The Committee has
discussed with the independent auditors matters required to be discussed by
Statement on Auditing Standards No. 61 (Communication With Audit Committees).
The Company's independent auditors have provided to the Committee the written
disclosures required by Independence Standards Board Standard No. 1
(Independence Discussions with Audit Committees), and the Committee discussed
with the independent auditors their independence. The Committee considered
whether the independent auditors provision of non-audit services is compatible
with maintaining the independent auditors independence. The fees to the
independent auditors for 2001 were as follows:
Audit Fees................... $936,324
Financial Information Systems
and Implementation Fees...... 0
All Other Fees:
Audit-Related Fees* $404,086
Tax Related Fees... 491,443
Other.............. 35,159
--------
Total All Other Fees......... 930,688
----------
*Audit-related fees include statutory audits of subsidiaries, benefit plan
audits, acquisition due diligence, accounting consultation, various attest
services under professional standards, assistance with registration statements,
comfort letters and consents.
The Committee discussed with the Company's internal and independent auditors
the overall scopes and plans for their respective audits. The Committee meets
with the internal and independent auditors, with and without management
present, to discuss the results of their examinations, the evaluation of the
Company's internal controls and overall quality of the Company's financial
reporting.
Based on the Committee's reviews and discussions with management, the internal
auditors and the independent auditors referred to above, the Committee
recommended to the Board of Directors that the audited consolidated financial
statements be included in the Company's Annual Report on Form 10-K for the year
ended December 31, 2001 for filing with the SEC.
AUDIT COMMITTEE
Jack B. Evans (Chair)
Alan B. Arends
Katharine C. Lyall
Singleton B. McAllister
Judith D. Pyle
28
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
Rules of the SEC require that the Company show a graphical comparison of the
total return on its common stock for the last five fiscal years with the total
returns of a broad market index and a more narrowly focused industry or group
index. (Total return is defined as the return on common stock including
dividends and stock price appreciation, assuming reinvestment of dividends.)
The Company has selected the Standard & Poors (S&P) 500 Index for the broad
market index and the S&P Utility Index as the industry index. These indices
were selected because of their broad availability and recognition. The
following chart compares the total return of an investment of $100 in Company
common stock on December 31, 1996, with like returns for the S&P 500 and S&P
Utilities indices. Pursuant to SEC rules, the table reflects only information
regarding the common stock of the Company (formerly known as WPL Holdings,
Inc.).
[CHART]
Cumulative Total Shareholder Return
Alliant Energy Corporation
Alliant
Energy S&P S&P
Corporation Utilities 500
(LNT) Index Index
1996 100.00 100.00 100.00
1997 126.31 118.61 131.01
1998 131.22 130.59 165.95
1999 119.99 114.29 198.35
2000 148.91 176.35 178.24
2001 151.57 119.01 154.99
December 31,
------- ------- ------- ------- ------- -------
1996 1997 1998 1999 2000 2001
-------------------------------- ------- ------- ------- ------- ------- -------
Alliant Energy Corporation (LNT) $100.00 $126.31 $131.22 $119.99 $148.91 $151.57
-------------------------------- ------- ------- ------- ------- ------- -------
S&P Utilities Index 100.00 118.61 130.59 114.29 176.35 119.01
-------------------------------- ------- ------- ------- ------- ------- -------
S&P 500 Index 100.00 131.01 165.95 198.35 178.24 154.99
29
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Company's directors, its executive officers and certain other officers are
required to report their ownership of the Company's common stock and subsidiary
preferred stock and any changes in that ownership to the SEC and the New York
Stock Exchange. To the best of the Company's knowledge, all required filings in
2001 were properly made in a timely fashion. In making the above statements,
the Company has relied on the representations of the persons involved and on
copies of their reports filed with the SEC.
By Order of the Board of Directors
/s/ F. J. Buri
F. J. Buri
Corporate Secretary
30
[LOGO] Alliant
Energy /TM/
We're on for you
(C) 2002 Alliant Energy
71-0906
ALLIANT ENERGY CORPORATION
PO BOX 2568
MADISON WI 53701-2568
--------------------------------------------
ANNUAL MEETING OF SHAREOWNERS - MAY 15, 2002
--------------------------------------------
The undersigned appoints Erroll B. Davis, Jr. and F.J. Buri, or either of them,
attorneys and proxies with the power of substitution to vote all shares of stock
of Alliant Energy Corporation (the "Company"), held of record in the name of the
undersigned (including any shares held or credited to the undersigned's account
under the Company's Shareowner Direct Plan and ISU Employee Stock Ownership
Plan) at the close of business on March 25, 2002, at the Annual Meeting of
Shareowners of the Company to be held at the U.S. Cellular Center, Cedar Rapids,
Iowa on May 15, 2002 at 1:00 p.m., and at all adjournments thereof, upon all
matters that properly come before the meeting, including the matters described
in the Company's Notice of Annual Meeting of Shareowners dated April 4, 2002 and
accompanying Proxy Statement, subject to any directions indicated on the reverse
side of this card.
This proxy is solicited on behalf of the Board of Directors of Alliant Energy
Corporation.
This proxy when properly executed will be voted in the manner directed herein by
the shareowner. If no direction is made, the proxies will vote "FOR" the
election of all listed director nominees and "FOR" the proposal to approve the
2002 Equity Incentive Plan.
"E" IS FOR EASY. . . AND ELECTRONIC
To access the Annual Report and Proxy Statement on the Internet, please open our
site at www.proxyvoting.com/alliant. We encourage you to check out our site to
see how easy and convenient it is. Click on the Annual Report button for the
Annual Report/Proxy Statement. You may print or just view these materials. Your
Internet provider may have usage charges associated with electronic access.
Electronic methods cut down on your paperwork. They also reduce our printing and
postage costs which achieves greater shareowner value. If you would like
electronic access to these reports next year and not receive them by mail, be
sure to indicate this when you complete the proxy card.
Remember, whether or not you are attending the annual meeting, we encourage you
to vote your shares and thank you for being an Alliant Energy Shareowner.
WHERE AND WHEN
You are invited to attend the Annual Meeting of Shareowners on Wednesday, May
15, 2002 at 1:00 p.m. at the U.S. Cellular Center, 370 First Ave. NE, Cedar
Rapids, Iowa.
A light refreshment will be served following the meeting.
[Logo of Alliant Energy]
Shareowner Services
PO Box 2568
Madison WI 53701-2568
SHAREOWNER INFORMATION NUMBERS
Local Madison, WI... 1-608-458-3110
All Other Areas..... 1-800-356-5343
[_] I (we) will attend the annual meeting.
[_] I (we) consent to access future notices of annual meetings, proxy
statements and annual reports electronically on the internet, instead of
receiving these materials by mail.
Indicate your vote by an (x) in the appropriate boxes
1. ELECTION OF DIRECTORS
Nominees for terms ending in 2005: WITHHOLD FOR ALL
FOR ALL FOR ALL EXCEPT(*)
[_] [_] [_]
01 Alan B. Arends
02 Katharine C. Lyall
03 Singleton B. McAllister
04 Anthony R. Weiler
(*) TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE A LINE
THROUGH THE NOMINEE'S NAME IN THE LIST ABOVE AND MARK AN (X) IN THE "For all
Except" BOX.
2. PROPOSAL TO APPROVE THE 2002 EQUITY INCENTIVE PLAN
FOR AGAINST ABSTAIN
[_] [_] [_]
Please date and sign your name(s) exactly as shown above and mail promptly in
the enclosed envelope.
-------------------------------------------------------------------------------
Signature Date
-------------------------------------------------------------------------------
Signature Date
Important: When signing as attorney, executor, administrator, trustee or
guardian, please give your full title as such. In the case of JOINT HOLDERS, all
should sign.
Please fold and detach Proxy Card at perforation if appointing a proxy by mail.
-------------------------------------------------------------------------------
Please take a moment to vote your shares for the upcoming Annual Meeting of
Shareowners. You can access our home page at www.alliantenergy.com to view the
Annual Report and Proxy Statement. You can appoint a proxy to vote your shares
in one of three ways:
OPTION #1: By Telephone: Call toll free: 1-800-660-7580 using a touch tone phone
24 hours a day, 7 days a week. You will be asked to enter the Control Number
below. If you wish to instruct your proxy to vote "For" all matters as
recommended by the Board of Directors, simply press 1. Please wait for your
confirmation. If you do not wish to instruct your proxy to vote as the Board
recommends, you need only respond to a few simple prompts.
There is no charge for this call.
------------------------------------------------
Your Control Number is:
For Telephone/Internet Voting
------------------------------------------------
(Appointing your proxy by telephone or Internet authorizes the named
proxies to vote your shares in the same manner as if you had marked,
signed and returned your proxy card.)
OPTION #2: By Internet: Access www.proxyvoting.com/alliant and by using the
Control Number above, respond to a few simple prompts.
OPTION #3: By Mail: If you do not desire to appoint your proxy by telephone or
Internet, please mark, sign, date and return the proxy card above.
Your telephone or Internet proxy must be received by 5 p.m. CST on May 13, 2002
to be counted in the final tabulation.
If you appoint a proxy by telephone or Internet, please do not mail this card.