Exhibit 10.17
Interstate Energy Corporation (d/b/a Alliant)
Long-Term Incentive Program
Revised 7/1/98
ESTABLISHMENT OF PROGRAM SPECIFICATIONS:
These specifications have been established to govern the Long-Term
Incentive Program for eligible employees of Interstate Energy
Corporation (d/b/a Alliant). These specifications work in conjunction
with the WPL Holdings, Inc. Long-Term Equity Incentive Plan adopted on
January 23, 1994. If there are any differences between these
specifications and the plan document, the plan document will be
followed in determining employee benefits.
PURPOSE OF THE PROGRAM:
The purpose of the Program is to promote the success and enhance the
value of the company by linking the personal interests of participants
to those of company shareowners, and by providing participants with an
incentive for outstanding performance. The Program is further intended
to provide flexibility to the company in its ability to motivate,
attract, and retain the services of participants upon whose judgment,
interest, and special effort the successful conduct of its operation
largely is dependent.
PROGRAM STRUCTURE:
The Program will consist of a combination of stock options and
performance shares.
ELIGIBILITY AND PARTICIPATION:
Persons eligible to participate in this Program include all active
executive employees of Interstate Energy Corporation as determined by
the Compensation and Personnel Committee. Subject to the provisions of
the Plan, the committee may, from time to time, select from all
eligible executive employees, those to whom awards shall be granted and
shall determine the amount of each award.
GRANT FREQUENCY:
It is anticipated that stock option grants will be made annually for
Directors and General Managers. Assistant Vice Presidents on up will
receive three years worth of grants up front.
It is anticipated that performance share grants will be made annually.
Initial grants will be made on July 1, 1998.
TYPE AND PRICE:
Stock Options: Option grants will be nonqualified stock options. The
price of each option will be set at the fair market value on the date
of the grant.
Performance Shares: Each grant of stock will be based on Company=s Total
Shareholder Return (TSR) performance. TSR performance represents stock
price appreciation plus dividends reinvested. A performance cycle
shall begin effective July 1, 1998 and have a cycle length of two and
one-half years, running until January 2, 2001. Subsequent performance
cycles begin on January 1 and are three years long. Performance shares
will be paid out in Interstate Energy Corporation shares, but will be
modified by a performance multiplier which ranges from 0 to 2.00 (see
scale below) based on the three-year average of Alliant TSR relative to
an investor-owned utility peer group.
Stock options and performance shares are freestanding; the exercise of
stock options would not affect the payout of performance shares and
vice versa.
Performance Multiplier:
3-yr Total Shareholder Below 40th 40th 45th 50th 60th 70th 80th 90th
Return - Percentile percentile percentile percentile percentile percentile percentile percentile percentile
Relative to Peer Group*
% of Target Value Paid Out 0% 50% 75% 100% 125% 150% 175% 200%
* Peer Group consists of Investor-Owned Utilities.
AWARD SIZE:
Award sizes will be determined by the Compensation and Personnel
Committee of the Board of Directors. The number of options granted to
each participant under the Program will be based on maintaining a
competitive total of compensation level. Recommendations of award size
within the stated range will be made by the Chief Executive Officer
based on individual participant performance.
The grants will be based on the following:
Participant Group Total LTIP Target Awards Performance Share Stock Stock Options Target
(as % of salary) (as % of salary) (as % of salary)
President & CEO, Chairman of the Board & 80% 60% 20%
Vice-Chairman of the Board
Executive Vice Presidents 50% 35% 15%
Senior Vice Presidents & Vice Presidents 35% 25% 10%
Assistant Vice Presidents 30% 20% 10%
Directors & General Managers 20% 0% 20%
To calculate Performance Share Award:
Base Salary x (Peer Group Target x Performance Share Target) = Number of
Market Share Price Shares Granted
To calculate Stock Option Award:
Base Salary x Stock Option Target = Number of Stock Options Granted
Black-Scholes Ratio (10%) x Market Share Price
VESTING:
Stock options granted on July 1, 1998 will have a two and one-half year
vesting schedule rather than the normal three year vesting schedule
with one-third of the stock options granted vesting on January 2, 1999,
one-third vesting on January 2, 2000 and the final one-third vesting on
January 2, 2001. Stock options granted on or after January 2, 1999
will have the normal three-year vesting schedule, with one-third
vesting each year. These stock options will vest 100 percent three
years after the date of the grant.
EXERCISE PERIOD:
All unexercised options will expire ten years after the date of grant.
PAYMENT OF AWARDS:
- Stock options are exercisable up to ten years after the grant date
following the vesting period.
- Employee can:
- exercise options with cash
- exercise options via a stock-for-stock swap
- use broker loans for cashless exercises, or
- elect share withholding (similar to share appreciation program).
- Performance shares will be paid in Interstate Energy Corporation shares
as soon as practicable at the end of each performance cycle, but not
later than seventy-five days following the end of the performance
cycle.
TERMINATION IN THE CASE OF DEATH, DISABILITY OR RETIREMENT:
All outstanding options granted to the participant shall immediately
vest one hundred percent, and shall remain exercisable at any time
prior to their expiration date, or for one year after the date of death
or disability or for three years after retirement, whichever period is
shorter.
For all performance shares, the participant shall receive a prorated
payout of the performance shares. The prorated payout shall be
determined by the committee, in its sole discretion, and shall be based
upon the length of time that the participant held the performance
shares during the performance period, and shall further be adjusted
based on the achievement of the pre-established performance goals.
TERMINATION OF EMPLOYMENT FOR OTHER REASONS:
If the employment of a participant shall terminate for any reason other
than the reasons set forth (and other than for cause), all options held
by the participant which are not vested as of the effective date of
employment termination immediately shall be forfeited to the company.
However, the committee, in its sole discretion, shall have the right to
immediately vest all or any portion of such options, subject to such
terms as the committee, in its sole discretion, deems appropriate. All
performance shares not paid shall be forfeited by the participant to
the company.
Options which are vested as of the effective date of employment
termination may be exercised by the participant within the period
beginning on the effective date of employment termination, and ending
three (3) months after such date.
If the employment of a participant shall be terminated by the company
for cause, all outstanding options held by the participant shall be
forfeited to the company and no additional exercise period shall be
allowed, regardless of the vested status of the options.
INCOME AND TAX CONSIDERATIONS:
Employee: At exercise, the excess of the stock's fair market value over
the option price is taxed as ordinary income and is subject to
withholding. At payment, performance shares are taxed as ordinary
income.
At sale, any appreciation occurring after calculation of the exercise
tax obligation is taxed as either:
- a long-term capital gain if the stock is held for more than 18
months, or
- as a short-term capital gain for stock held for less than 18 months.
Company: At exercise, deduction allowed for the amount the executive
recognizes as taxable income in the year executive is taxed if
withholding requirements are met.