-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KSiVoPTWLTaIyUo3kmbrmGvqsXx/sx7bnRmNjIZlbI6Zr4aIUmNbJ/e6ZE5HDfuK MwmrUsOKp2bU9hsP5XQbdw== 0000107832-00-000057.txt : 20000512 0000107832-00-000057.hdr.sgml : 20000512 ACCESSION NUMBER: 0000107832-00-000057 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000511 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALLIANT ENERGY CORP CENTRAL INDEX KEY: 0000352541 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC & OTHER SERVICES COMBINED [4931] IRS NUMBER: 391380265 STATE OF INCORPORATION: WI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-09894 FILM NUMBER: 626738 BUSINESS ADDRESS: STREET 1: 222 WEST WASHNGTON AVENUE CITY: MADISON STATE: WI ZIP: 53703 BUSINESS PHONE: 6082523110 MAIL ADDRESS: STREET 1: P O BOX 2568 CITY: MADISON STATE: WI ZIP: 53701-2568 FORMER COMPANY: FORMER CONFORMED NAME: INTERSTATE ENERGY CORP DATE OF NAME CHANGE: 19980427 FORMER COMPANY: FORMER CONFORMED NAME: WPL HOLDINGS INC DATE OF NAME CHANGE: 19920703 FILER: COMPANY DATA: COMPANY CONFORMED NAME: IES UTILITIES INC CENTRAL INDEX KEY: 0000052485 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC & OTHER SERVICES COMBINED [4931] IRS NUMBER: 420331370 STATE OF INCORPORATION: IA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-04117 FILM NUMBER: 626739 BUSINESS ADDRESS: STREET 1: 200 FIRST ST SE STREET 2: IES TOWER CITY: CEDAR RAPIDS STATE: IA ZIP: 52401 BUSINESS PHONE: 3193984411 FORMER COMPANY: FORMER CONFORMED NAME: IOWA ELECTRIC LIGHT & POWER CO DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: IOWA RAILWAY & LIGHT CORP DATE OF NAME CHANGE: 19670629 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WISCONSIN POWER & LIGHT CO CENTRAL INDEX KEY: 0000107832 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC & OTHER SERVICES COMBINED [4931] IRS NUMBER: 390714890 STATE OF INCORPORATION: WI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-00337 FILM NUMBER: 626740 BUSINESS ADDRESS: STREET 1: 222 W WASHINGTON AVE CITY: MADISON STATE: WI ZIP: 53703 BUSINESS PHONE: 6082523311 10-Q 1 10-Q FOR QUARTERLY PERIOD ENDED MARCH 31, 2000 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2000 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______ to _______ Commission Name of Registrant, State of Incorporation, IRS Employer File Address of Principal Executive Offices and Identification Number Telephone Number Number - ----------------------------------------------------------------------- 1-9894 ALLIANT ENERGY CORPORATION 39-1380265 (a Wisconsin corporation) 222 West Washington Avenue Madison, Wisconsin 53703 Telephone (608)252-3311 0-4117-1 IES UTILITIES INC. 42-0331370 (an Iowa corporation) Alliant Energy Tower Cedar Rapids, Iowa 52401 Telephone (319)398-4411 0-337 WISCONSIN POWER AND LIGHT COMPANY 39-0714890 (a Wisconsin corporation) 222 West Washington Avenue Madison, Wisconsin 53703 Telephone (608)252-3311 Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and (2) have been subject to such filing requirements for the past (90) days. Yes [ X ] No [ ] This combined Form 10-Q is separately filed by Alliant Energy Corporation, IES Utilities Inc. and Wisconsin Power and Light Company. Information contained in the quarterly report relating to IES Utilities Inc. and Wisconsin Power and Light Company is filed by such registrant on its own behalf. Each of IES Utilities Inc. and Wisconsin Power and Light Company makes no representation as to information relating to registrants other than itself. Number of shares outstanding of each class of common stock as of April 30, 2000: Alliant Energy Common stock, $.01 par value, 79,002,896 Corporation shares outstanding IES Utilities Inc. Common stock, $2.50 par value, 13,370,788 shares outstanding (all of which are owned beneficially and of record by Alliant Energy Corporation) Wisconsin Power and Common stock, $5 par value, 13,236,601 shares Light Company outstanding (all of which are owned beneficially and of record by Alliant Energy Corporation)
CONTENTS Page ---- Part I. Financial Information 4 Item 1. Consolidated Financial Statements 4 Alliant Energy Corporation: --------------------------- Consolidated Statements of Income for the Three Months Ended March 31, 2000 and 1999 4 Consolidated Balance Sheets as of March 31, 2000 and December 31, 1999 5 Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2000 and 1999 7 Notes to Consolidated Financial Statements 8 IES Utilities Inc.: ------------------- Consolidated Statements of Income for the Three Months Ended March 31, 2000 and 1999 11 Consolidated Balance Sheets as of March 31, 2000 and December 31, 1999 12 Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2000 and 1999 14 Notes to Consolidated Financial Statements 15 Wisconsin Power and Light Company: ---------------------------------- Consolidated Statements of Income for the Three Months Ended March 31, 2000 and 1999 16 Consolidated Balance Sheets as of March 31, 2000 and December 31, 1999 17 Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2000 and 1999 19 Notes to Consolidated Financial Statements 20 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 21 Item 3. Quantitative and Qualitative Disclosures About Market Risk 32 Part II. Other Information 32 Item 6. Exhibits and Reports on Form 8-K 32 Signatures 35
-2- DEFINITIONS Certain abbreviations or acronyms used in the text and notes of this combined Form 10-Q are defined below: Abbreviation or Acronym Definition - ----------------------- ---------- Alliant Energy Alliant Energy Corporation ATC American Transmission Company, LLC CEMS Continuous Emission Monitoring System Corporate Services Alliant Energy Corporate Services, Inc. Dth Dekatherm EAC Energy Adjustment Clause EPA United States Environmental Protection Agency FERC Federal Energy Regulatory Commission IES IES Industries Inc. IESU IES Utilities Inc. International Alliant Energy International, Inc. Investments Alliant Energy Investments, Inc. IPC Interstate Power Company ISCO Alliant Energy Industrial Services, Inc. ISO Independent System Operator IUB Iowa Utilities Board MAIN Mid-America Interconnected Network, Inc. MAPP Mid-Continent Area Power Pool McLeod McLeodUSA Incorporated MD&A Management's Discussion and Analysis of Financial Condition and Results of Operations MWH Megawatt-Hour OCA Office of Consumer Advocate PGA Purchased Gas Adjustment PSCW Public Service Commission of Wisconsin PUHCA Public Utility Holding Company Act of 1935 Resources Alliant Energy Resources, Inc. RTO Regional Transmission Organization SEC Securities and Exchange Commission SFAS Statement of Financial Accounting Standards Transportation Alliant Energy Transportation, Inc. Whiting Whiting Petroleum Corporation WP&L Wisconsin Power and Light Company WPLH WPL Holdings, Inc. -3-
PART I. FINANCIAL INFORMATION ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS ALLIANT ENERGY CORPORATION CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) For the Three Months Ended March 31, 2000 1999 - ----------------------------------------------------------------------------------------------------------------- (in thousands, except per share amounts) Operating revenues: Electric utility $373,622 $351,338 Gas utility 130,134 133,684 Non-regulated and other 117,094 61,833 -------------------- ------------------- 620,850 546,855 -------------------- ------------------- - ----------------------------------------------------------------------------------------------------------------- Operating expenses: Electric and steam production fuels 69,272 65,404 Purchased power 62,345 52,065 Cost of utility gas sold 82,113 81,343 Other operation 186,537 130,365 Maintenance 29,929 23,812 Depreciation and amortization 75,911 73,640 Taxes other than income taxes 26,353 27,239 -------------------- ------------------- 532,460 453,868 -------------------- ------------------- - ----------------------------------------------------------------------------------------------------------------- Operating income 88,390 92,987 -------------------- ------------------- - ----------------------------------------------------------------------------------------------------------------- Interest expense and other: Interest expense 40,618 33,400 Contingent interest on indexed senior notes 39,493 - Allowance for funds used during construction (1,754) (1,934) Preferred dividend requirements of subsidiaries 1,678 1,676 Gain on sale of McLeodUSA Inc. stock (10,206) - Miscellaneous, net (13,197) (6,771) -------------------- ------------------- 56,632 26,371 -------------------- ------------------- - ----------------------------------------------------------------------------------------------------------------- Income before income taxes 31,758 66,616 -------------------- ------------------- - ----------------------------------------------------------------------------------------------------------------- Income taxes 12,438 24,872 -------------------- ------------------- - ----------------------------------------------------------------------------------------------------------------- Net income $19,320 $41,744 ==================== =================== - ----------------------------------------------------------------------------------------------------------------- Average number of common shares outstanding 78,996 77,780 ==================== =================== - ----------------------------------------------------------------------------------------------------------------- Earnings per average common share (basic and diluted) $0.24 $0.54 ==================== =================== - ----------------------------------------------------------------------------------------------------------------- Dividends declared per common share $0.50 $0.50 ==================== =================== - ----------------------------------------------------------------------------------------------------------------- The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
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ALLIANT ENERGY CORPORATION CONSOLIDATED BALANCE SHEETS March 31, 2000 December 31, ASSETS (Unaudited) 1999 - --------------------------------------------------------------------------------------------------------------- (in thousands) Property, plant and equipment: Utility - Plant in service - Electric $5,068,008 $5,032,675 Gas 547,306 540,874 Other 460,354 458,547 ---------------- ----------------- 6,075,668 6,032,096 Less - Accumulated depreciation 3,144,273 3,077,459 ---------------- ----------------- 2,931,395 2,954,637 Construction work in progress 130,088 119,276 Nuclear fuel, net of amortization 54,995 54,363 ---------------- ----------------- 3,116,478 3,128,276 Other property, plant and equipment, net of accumulated depreciation and amortization of $191,244 and $184,722, respectively 403,941 357,758 ---------------- ----------------- 3,520,419 3,486,034 ---------------- ----------------- - --------------------------------------------------------------------------------------------------------------- Current assets: Cash and temporary cash investments 47,500 113,669 Accounts receivable: Customer, less allowance for doubtful accounts of $1,942 and $2,253, respectively 66,615 67,299 Unbilled utility revenues 34,120 48,033 Other, less allowance for doubtful accounts of $1,131 and $954, respectively 28,204 30,095 Production fuel, at average cost 42,893 49,657 Materials and supplies, at average cost 52,818 52,440 Gas stored underground, at average cost 5,933 23,151 Regulatory assets 29,464 33,439 Prepaid gross receipts tax 15,648 20,864 Other 45,087 47,339 ---------------- ----------------- 368,282 485,986 ---------------- ----------------- - --------------------------------------------------------------------------------------------------------------- Investments: Investment in McLeodUSA Inc. 1,607,180 1,123,790 Investments in foreign entities 578,572 198,055 Nuclear decommissioning trust funds 276,216 271,258 Other 69,627 59,866 ---------------- ----------------- 2,531,595 1,652,969 ---------------- ----------------- - --------------------------------------------------------------------------------------------------------------- Other assets: Regulatory assets 261,427 263,610 Deferred charges and other 196,094 187,084 ---------------- ----------------- 457,521 450,694 ---------------- ----------------- - --------------------------------------------------------------------------------------------------------------- Total assets $6,877,817 $6,075,683 ================ ================= - --------------------------------------------------------------------------------------------------------------- The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
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ALLIANT ENERGY CORPORATION CONSOLIDATED BALANCE SHEETS (CONTINUED) March 31, 2000 December 31, CAPITALIZATION AND LIABILITIES (Unaudited) 1999 - -------------------------------------------------------------------------------------------------------------------- (in thousands, except share amounts) Capitalization: Common stock - $.01 par value - authorized 200,000,000 shares; outstanding 79,000,744 and 78,984,014 shares, respectively $790 $790 Additional paid-in capital 946,033 942,408 Retained earnings 557,286 577,464 Accumulated other comprehensive income 913,950 634,903 Shares acquired for deferred compensation trust - 24,552 shares at an average cost of $29.52 per share (725) - ----------------- ----------------- Total common equity 2,417,334 2,155,565 ----------------- ----------------- Cumulative preferred stock of subsidiaries, net 113,677 113,638 Long-term debt (excluding current portion) 2,019,502 1,486,765 ----------------- ----------------- 4,550,513 3,755,968 ----------------- ----------------- - -------------------------------------------------------------------------------------------------------------------- Current liabilities: Current maturities and sinking funds 5,692 54,795 Variable rate demand bonds 55,100 55,100 Commercial paper 300,785 374,673 Notes payable 54 50,046 Capital lease obligations 13,285 13,321 Accounts payable 167,275 191,149 Accrued interest 38,805 24,818 Accrued taxes 105,191 78,825 Other 74,466 90,898 ----------------- ----------------- 760,653 933,625 ----------------- ----------------- - -------------------------------------------------------------------------------------------------------------------- Other long-term liabilities and deferred credits: Accumulated deferred income taxes 1,197,431 1,018,482 Accumulated deferred investment tax credits 71,647 71,857 Environmental liabilities 63,839 65,327 Pension and other benefit obligations 63,181 61,988 Other 170,553 168,436 ----------------- ----------------- 1,566,651 1,386,090 ----------------- ----------------- - -------------------------------------------------------------------------------------------------------------------- Total capitalization and liabilities $6,877,817 $6,075,683 ================= ================= - -------------------------------------------------------------------------------------------------------------------- The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
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ALLIANT ENERGY CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) For the Three Months Ended March 31, 2000 1999 - ---------------------------------------------------------------------------------------------------- (in thousands) Cash flows from operating activities: Net income $19,320 $41,744 Adjustments to reconcile net income to net cash flows from operating activities: Depreciation and amortization 75,911 73,640 Amortization of nuclear fuel 4,841 5,024 Amortization of deferred energy efficiency expenditures 7,280 7,930 Deferred taxes and investment tax credits (20,075) (1,799) Refueling outage provision 2,421 2,415 Gain on disposition of assets, net (10,644) (1,771) Contingent interest on indexed senior notes 39,493 - Other (4,283) (299) Other changes in assets and liabilities: Accounts receivable 16,488 9,774 Production fuel 6,764 9,743 Gas stored underground 17,218 13,524 Accounts payable (23,874) (40,708) Accrued interest 13,987 311 Accrued taxes 26,366 21,924 Benefit obligations and other 14,506 28,700 ----------------- ----------------- Net cash flows from operating activities 185,719 170,152 ----------------- ----------------- - ---------------------------------------------------------------------------------------------------- Cash flows from (used for) financing activities: Common stock dividends declared (39,498) (38,834) Proceeds from issuance of common stock 514 8,538 Net change in Resources' credit facility (4,848) 42,995 Proceeds from issuance of other long-term debt 510,957 11,994 Reductions in other long-term debt (51,672) (62,310) Net change in other short-term borrowings (119,032) (2,257) Principal payments under capital lease obligations (1,882) (3,369) Other (14,078) 113 ----------------- ----------------- Net cash flows from (used for) financing activities 280,461 (43,130) ----------------- ----------------- - ---------------------------------------------------------------------------------------------------- Cash flows used for investing activities: Construction and acquisition expenditures: Utility (60,447) (41,638) Non-regulated businesses (457,213) (49,198) Nuclear decommissioning trust funds (15,437) (15,437) Proceeds from disposition of assets 11,054 3,022 Shared savings program (5,873) (4,247) Other (4,433) 2,832 ----------------- ----------------- Net cash flows used for investing activities (532,349) (104,666) ----------------- ----------------- - ---------------------------------------------------------------------------------------------------- Net increase (decrease) in cash and temporary cash investments (66,169) 22,356 ----------------- ----------------- - ---------------------------------------------------------------------------------------------------- Cash and temporary cash investments at beginning of period 113,669 31,827 ----------------- ----------------- - ---------------------------------------------------------------------------------------------------- Cash and temporary cash investments at end of period $47,500 $54,183 ================= ================= - ---------------------------------------------------------------------------------------------------- Supplemental cash flow information: Cash paid during the period for: Interest $25,795 $31,952 ================= ================= Income taxes $3,092 $4,600 ================= ================= Noncash investing and financing activities: Capital lease obligations incurred $222 $1,414 ================= ================= - ---------------------------------------------------------------------------------------------------- The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
-7- ALLIANT ENERGY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. The interim consolidated financial statements included herein have been prepared by Alliant Energy, without audit, pursuant to the rules and regulations of the SEC. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted, although management believes that the disclosures are adequate to make the information presented not misleading. The consolidated financial statements include Alliant Energy and its consolidated subsidiaries (including IESU, WP&L, IPC, Resources and Corporate Services). These financial statements should be read in conjunction with the financial statements and the notes thereto included in Alliant Energy's, IESU's and WP&L's latest Annual Report on Form 10-K. In the opinion of management, all adjustments, which are normal and recurring in nature, necessary for a fair presentation of (a) the consolidated results of operations for the three months ended March 31, 2000 and 1999, (b) the consolidated financial position at March 31, 2000 and December 31, 1999, and (c) the consolidated statement of cash flows for the three months ended March 31, 2000 and 1999, have been made. Because of the seasonal nature of IESU's, WP&L's and IPC's operations, results for the three months ended March 31, 2000 are not necessarily indicative of results that may be expected for the year ending December 31, 2000. Certain prior period amounts have been reclassified on a basis consistent with the 2000 presentation. 2. Alliant Energy's comprehensive income, and the components of other comprehensive income, net of taxes, were as follows (in thousands): For the Three Months Ended March 31, 2000 1999 -------- -------- Net income $19,320 $41,744 Other comprehensive income: Unrealized gains on securities: Unrealized holding gains arising during 284,458 75,031 period, net of tax (1) Less: reclassification adjustment for gains included in net income, net of tax (2) (6,328) -- -------- -------- Net unrealized gains 278,130 75,031 -------- -------- Foreign currency translation adjustments 917 (614) -------- -------- Other comprehensive income 279,047 74,417 -------- -------- Comprehensive income $298,367 $116,161 ======== ======== (1) Primarily due to quarterly adjustments to the estimated fair value of Alliant Energy's investment in McLeod. (2) The first quarter 2000 earnings included a pre-tax gain of $10.2 million ($0.08 per share) from the sale of 150,000 shares of McLeod stock held by Alliant Energy. Alliant Energy still held beneficial ownership in approximately 19 million shares of McLeod stock as of March 31, 2000. (The McLeod shares in this note do not reflect McLeod's 3-for-1 stock split effective April 24, 2000). IESU and WP&L had no comprehensive income in the periods presented. -8- 3. Certain financial information relating to Alliant Energy's significant business segments is presented below:
--------------------------------------------- Regulated Domestic Utilities Alliant --------------------------------------------- Non-regulated Energy Electric Gas Other Total Businesses Other Consolidated -------------------------------------------------------------------------------------- (in thousands) Three Months Ended March 31, 2000 -------------- Operating revenues $373,622 $130,134 $8,157 $511,913 $109,463 ($526) $620,850 Operating income (loss) 63,839 18,850 1,780 84,469 3,943 (22) 88,390 Net income (loss) 39,067 (16,112) (3,635) 19,320 Three Months Ended March 31, 1999 -------------- Operating revenues $351,338 $133,684 $9,204 $494,226 $53,199 ($570) $546,855 Operating income (loss) 68,615 23,939 2,354 94,908 (1,836) (85) 92,987 Net income (loss) 44,767 (1,906) (1,117) 41,744
Non-regulated earnings for the three months ended March 31, 2000 included a $24.8 million after-tax non-cash charge to net income to recognize an increase in Alliant Energy's obligation relating to its 30-year exchangeable senior notes issued in February 2000. Resources' (i.e., the non-regulated businesses) assets increased $881 million during the first three months of 2000, primarily due to the increase in market value of its investment in McLeod and Alliant Energy's recent investment in various Brazilian utilities. On January 25, 2000, Resources acquired a stake in four Brazilian electric utilities for a total of approximately $347 million. Intersegment revenues were not material to Alliant Energy's operations. 4. The provisions for income taxes are based on the estimated annual effective tax rate, which differs from the federal statutory rate of 35% principally due to: state income taxes, tax credits, effects of utility rate making and certain non-deductible expenses. 5. At March 31, 2000, Alliant Energy had $579 million of investments in foreign entities on its Consolidated Balance Sheet that primarily included investments in various Brazilian electric utilities, investments in various New Zealand and Australian utility entities, investments in various generation facilities in China and an investment in secured debentures of a development project in Mexico. The Brazil and China investments are accounted for under the equity method and the New Zealand and Australian investments are accounted for under the cost method. The geographic concentration of Alliant Energy's investments in foreign entities at March 31, 2000, included investments of approximately $357 million in Brazil, $138 million in New Zealand and Australia, $69 million in China, $14 million in Mexico and $1 million in other countries. 6. Summary financial information for Resources was as follows (in thousands): March 31, 2000 ------------- Current assets $96,253 Non-current assets 2,633,389 Current liabilities 199,341 Non-current liabilities 686,209 (excludes minority interest) Minority interest (primarily 7,107 real estate joint ventures) -9- Refer to the "Non-regulated Businesses" column of Note 3 for summary income statement data of Resources. Alliant Energy has not presented separate financial statements for Resources because it is a wholly-owned subsidiary of Alliant Energy and because management has determined that such information is not material to holders of senior notes of Resources. Alliant Energy has fully and unconditionally guaranteed the payment of principal and interest on the senior notes. 7. On February 1, 2000, Resources completed a private placement of $402.5 million of exchangeable senior notes due 2030. The exchangeable senior notes have a stated interest rate of 7.25% through February 15, 2003 and 2.5% thereafter and are exchangeable for cash based upon a percentage of the value of McLeod Class A Common Stock. Refer to "Liquidity and Capital Resources - Future Considerations" for a further discussion. WP&L issued $100 million of senior unsecured debentures in March 2000 at a fixed interest rate of 7-5/8%, due 2010. The net proceeds from the sale of the debentures were primarily used to repay short-term debt. -10-
IES UTILITIES INC. CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) For the Three Months Ended March 31, 2000 1999 - ---------------------------------------------------------------------------------------------------------------------- (in thousands) Operating revenues: Electric utility $145,708 $140,017 Gas utility 59,429 61,296 Steam and other 6,987 7,952 ---------------------- --------------------- 212,124 209,265 ---------------------- --------------------- - ---------------------------------------------------------------------------------------------------------------------- Operating expenses: Electric and steam production fuels 32,639 26,589 Purchased power 13,422 13,150 Cost of gas sold 38,074 37,912 Other operation 43,273 47,439 Maintenance 10,493 9,904 Depreciation and amortization 26,850 25,482 Taxes other than income taxes 11,875 12,616 ---------------------- --------------------- 176,626 173,092 ---------------------- --------------------- - ---------------------------------------------------------------------------------------------------------------------- Operating income 35,498 36,173 ---------------------- --------------------- - ---------------------------------------------------------------------------------------------------------------------- Interest expense and other: Interest expense 13,011 13,204 Allowance for funds used during construction (490) (849) Miscellaneous, net (4,750) (857) ---------------------- --------------------- 7,771 11,498 ---------------------- --------------------- - ---------------------------------------------------------------------------------------------------------------------- Income before income taxes 27,727 24,675 ---------------------- --------------------- - ---------------------------------------------------------------------------------------------------------------------- Income taxes 11,616 10,216 ---------------------- --------------------- - ---------------------------------------------------------------------------------------------------------------------- Net income 16,111 14,459 ---------------------- --------------------- - ---------------------------------------------------------------------------------------------------------------------- Preferred dividend requirements 229 229 ---------------------- --------------------- - ---------------------------------------------------------------------------------------------------------------------- Earnings available for common stock $15,882 $14,230 ====================== ===================== - ---------------------------------------------------------------------------------------------------------------------- The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
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IES UTILITIES INC. CONSOLIDATED BALANCE SHEETS March 31, 2000 December 31, ASSETS (Unaudited) 1999 - -------------------------------------------------------------------------------------------------------------- (in thousands) Property, plant and equipment: Utility - Plant in service - Electric $2,208,987 $2,196,895 Gas 209,610 207,769 Steam 59,931 59,929 Common 149,514 147,845 ----------------- ----------------- 2,628,042 2,612,438 Less - Accumulated depreciation 1,339,604 1,311,996 ----------------- ----------------- 1,288,438 1,300,442 Construction work in progress 44,485 37,572 Leased nuclear fuel, net of amortization 36,150 39,284 ----------------- ----------------- 1,369,073 1,377,298 Other property, plant and equipment, net of accumulated depreciation and amortization of $2,131 and $2,094, respectively 5,444 5,481 ----------------- ----------------- 1,374,517 1,382,779 ----------------- ----------------- - -------------------------------------------------------------------------------------------------------------- Current assets: Cash and temporary cash investments 4,760 5,720 Accounts receivable: Customer, less allowance for doubtful accounts of $497 and $824, respectively 10,638 14,130 Associated companies 2,854 5,696 Other, less allowance for doubtful accounts of $989 and $817, respectively 9,599 12,864 Income tax refunds receivable - 6,007 Production fuel, at average cost 12,555 12,312 Materials and supplies, at average cost 24,429 24,722 Gas stored underground, at average cost 1,851 11,462 Adjustment clause balances 3,584 11,099 Regulatory assets 16,167 18,569 Prepayments and other 2,891 2,921 ----------------- ----------------- 89,328 125,502 ----------------- ----------------- - -------------------------------------------------------------------------------------------------------------- Investments: Nuclear decommissioning trust funds 108,583 105,056 Other 6,121 6,119 ----------------- ----------------- 114,704 111,175 ----------------- ----------------- - -------------------------------------------------------------------------------------------------------------- Other assets: Regulatory assets 117,269 123,031 Deferred charges and other 12,288 13,321 ----------------- ----------------- 129,557 136,352 ----------------- ----------------- - -------------------------------------------------------------------------------------------------------------- Total assets $1,708,106 $1,755,808 ================= ================= - -------------------------------------------------------------------------------------------------------------- The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
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IES UTILITIES INC. CONSOLIDATED BALANCE SHEETS (CONTINUED) March 31, 2000 December 31, CAPITALIZATION AND LIABILITIES (Unaudited) 1999 - -------------------------------------------------------------------------------------------------------------------- (in thousands, except share amounts) Capitalization: Common stock - $2.50 par value - authorized 24,000,000 shares; 13,370,788 shares outstanding $33,427 $33,427 Additional paid-in capital 279,042 279,042 Retained earnings 254,177 252,953 ------------------ ----------------- Total common equity 566,646 565,422 Cumulative preferred stock 18,320 18,320 Long-term debt (excluding current portion) 551,142 551,079 ------------------ ----------------- 1,136,108 1,134,821 ------------------ ----------------- - -------------------------------------------------------------------------------------------------------------------- Current liabilities: Current maturities and sinking funds 196 51,196 Capital lease obligations 13,272 13,307 Notes payable to associated companies 72,770 56,946 Accounts payable 27,454 41,273 Accounts payable to associated companies 10,068 17,438 Accrued payroll and vacations 8,162 7,816 Accrued interest 11,923 10,833 Accrued taxes 53,482 44,259 Other 16,862 15,802 ------------------ ----------------- 214,189 258,870 ------------------ ----------------- - -------------------------------------------------------------------------------------------------------------------- Other long-term liabilities and deferred credits: Accumulated deferred income taxes 225,875 225,961 Accumulated deferred investment tax credits 27,191 26,682 Environmental liabilities 24,905 26,292 Pension and other benefit obligations 27,395 27,734 Capital lease obligations 22,878 25,977 Other 29,565 29,471 ------------------ ----------------- 357,809 362,117 ------------------ ----------------- - -------------------------------------------------------------------------------------------------------------------- Total capitalization and liabilities $1,708,106 $1,755,808 ================== ================= - -------------------------------------------------------------------------------------------------------------------- The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
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IES UTILITIES INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) For the Three Months Ended March 31, 2000 1999 - -------------------------------------------------------------------------------------------------------------------------- (in thousands) Cash flows from operating activities: Net income $16,111 $14,459 Adjustments to reconcile net income to net cash flows from operating activities: Depreciation and amortization 26,850 25,482 Amortization of leased nuclear fuel 3,357 3,499 Amortization of deferred energy efficiency expenditures 4,402 6,064 Deferred taxes and investment tax credits (258) (473) Refueling outage provision 2,421 2,415 Other 147 146 Other changes in assets and liabilities: Accounts receivable 9,599 (456) Gas stored underground 9,611 6,397 Accounts payable (21,189) (22,393) Accrued taxes 9,223 9,185 Adjustment clause balances 7,515 4,809 Benefit obligations and other 9,053 3,952 ------------------ ------------------- Net cash flows from operating activities 76,842 53,086 ------------------ ------------------- - -------------------------------------------------------------------------------------------------------------------------- Cash flows used for financing activities: Common stock dividends declared (14,658) (43,976) Dividends payable - (4,840) Preferred stock dividends (229) (229) Reductions in long-term debt (51,000) (50,000) Net change in short-term borrowings 15,824 9,694 Principal payments under capital lease obligations (1,882) (3,369) Other - (3) ------------------ ------------------- Net cash flows used for financing activities (51,945) (92,723) ------------------ ------------------- - -------------------------------------------------------------------------------------------------------------------------- Cash flows used for investing activities: Utility construction expenditures (24,241) (16,621) Nuclear decommissioning trust funds (1,502) (1,502) Other (114) 441 ------------------ ------------------- Net cash flows used for investing activities (25,857) (17,682) ------------------ ------------------- - -------------------------------------------------------------------------------------------------------------------------- Net decrease in cash and temporary cash investments (960) (57,319) ------------------ ------------------- - -------------------------------------------------------------------------------------------------------------------------- Cash and temporary cash investments at beginning of period 5,720 57,904 ------------------ ------------------- - -------------------------------------------------------------------------------------------------------------------------- Cash and temporary cash investments at end of period $4,760 $585 ================== =================== - -------------------------------------------------------------------------------------------------------------------------- Supplemental cash flow information: Cash paid (refunded) during the period for: Interest $10,496 $13,989 ================== =================== Income taxes ($528) $7,334 ================== =================== Noncash investing and financing activities - Capital lease obligations incurred $222 $1,414 ================== =================== - -------------------------------------------------------------------------------------------------------------------------- The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
-14- IES UTILITIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Except as modified below, the Alliant Energy Notes to Consolidated Financial Statements are incorporated by reference insofar as they relate to IESU. 1. The interim consolidated financial statements included herein have been prepared by IESU, without audit, pursuant to the rules and regulations of the SEC. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted, although management believes that the disclosures are adequate to make the information presented not misleading. IESU is a subsidiary of Alliant Energy. These financial statements should be read in conjunction with the financial statements and the notes thereto included in IESU's latest Annual Report on Form 10-K. In the opinion of management, all adjustments, which are normal and recurring in nature, necessary for a fair presentation of (a) the consolidated results of operations for the three months ended March 31, 2000 and 1999, (b) the consolidated financial position at March 31, 2000 and December 31, 1999, and (c) the consolidated statement of cash flows for the three months ended March 31, 2000 and 1999, have been made. Because of the seasonal nature of IESU's operations, results for the three months ended March 31, 2000 are not necessarily indicative of results that may be expected for the year ending December 31, 2000. Certain prior period amounts have been reclassified on a basis consistent with the 2000 presentation. 2. Certain financial information relating to IESU's significant business segments is presented below. Intersegment revenues were not material to IESU's operations. Electric Gas Other Total -------------------------------------------- (in thousands) Three Months Ended March 31, 2000 - --------------------------------- Operating revenues $145,708 $59,429 $6,987 $212,124 Operating income 26,685 7,413 1,400 35,498 Earnings available for common stock 15,882 Three Months Ended March 31, 1999 - --------------------------------- Operating revenues $140,017 $61,296 $7,952 $209,265 Operating income 25,337 8,947 1,889 36,173 Earnings available for common stock 14,230 -15-
WISCONSIN POWER AND LIGHT COMPANY CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) For the Three Months Ended March 31, 2000 1999 - --------------------------------------------------------------------------------------------------------------------- (in thousands) Operating revenues: Electric utility $162,376 $149,944 Gas utility 55,286 51,794 Water 1,170 1,252 ---------------------- --------------------- 218,832 202,990 ---------------------- --------------------- - --------------------------------------------------------------------------------------------------------------------- Operating expenses: Electric production fuels 23,798 27,366 Purchased power 33,757 24,000 Cost of gas sold 35,329 31,181 Other operation 32,115 26,108 Maintenance 13,750 9,103 Depreciation and amortization 32,377 31,139 Taxes other than income taxes 7,211 7,702 ---------------------- --------------------- 178,337 156,599 ---------------------- --------------------- - --------------------------------------------------------------------------------------------------------------------- Operating income 40,495 46,391 ---------------------- --------------------- - --------------------------------------------------------------------------------------------------------------------- Interest expense and other: Interest expense 10,908 9,865 Allowance for funds used during construction (1,062) (923) Miscellaneous, net (4,079) (4,344) ---------------------- --------------------- 5,767 4,598 ---------------------- --------------------- - --------------------------------------------------------------------------------------------------------------------- Income before income taxes 34,728 41,793 ---------------------- --------------------- - --------------------------------------------------------------------------------------------------------------------- Income taxes 12,857 15,505 ---------------------- --------------------- - --------------------------------------------------------------------------------------------------------------------- Net income 21,871 26,288 ---------------------- --------------------- - --------------------------------------------------------------------------------------------------------------------- Preferred dividend requirements 828 828 ---------------------- --------------------- - --------------------------------------------------------------------------------------------------------------------- Earnings available for common stock $21,043 $25,460 ====================== ===================== - --------------------------------------------------------------------------------------------------------------------- The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
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WISCONSIN POWER AND LIGHT COMPANY CONSOLIDATED BALANCE SHEETS March 31, 2000 December 31, ASSETS (Unaudited) 1999 - --------------------------------------------------------------------------------------------------------------- (in thousands) Property, plant and equipment: Utility - Plant in service - Electric $1,938,668 $1,921,624 Gas 262,248 258,132 Water 27,858 27,770 Common 217,777 218,607 ----------------- ----------------- 2,446,551 2,426,133 Less - Accumulated depreciation 1,297,223 1,266,366 ----------------- ----------------- 1,149,328 1,159,767 Construction work in progress 69,401 66,784 Nuclear fuel, net of amortization 18,846 15,079 ----------------- ----------------- 1,237,575 1,241,630 Other property, plant and equipment, net of accumulated depreciation and amortization of $169 for both periods 639 608 ----------------- ----------------- 1,238,214 1,242,238 ----------------- ----------------- - --------------------------------------------------------------------------------------------------------------- Current assets: Cash and temporary cash investments 23,990 3,555 Accounts receivable: Customer 13,461 22,061 Associated companies 2,357 5,067 Other 11,554 10,984 Production fuel, at average cost 16,932 20,663 Materials and supplies, at average cost 21,392 20,439 Gas stored underground, at average cost 3,083 8,624 Prepaid gross receipts tax 15,648 20,864 Other 4,261 9,275 ----------------- ----------------- 112,678 121,532 ----------------- ----------------- - --------------------------------------------------------------------------------------------------------------- Investments: Nuclear decommissioning trust funds 167,633 166,202 Other 14,868 15,272 ----------------- ----------------- 182,501 181,474 ----------------- ----------------- - --------------------------------------------------------------------------------------------------------------- Other assets: Regulatory assets 88,368 82,161 Deferred charges and other 150,113 138,730 ----------------- ----------------- 238,481 220,891 ----------------- ----------------- - --------------------------------------------------------------------------------------------------------------- Total assets $1,771,874 $1,766,135 ================= ================= - --------------------------------------------------------------------------------------------------------------- The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
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WISCONSIN POWER AND LIGHT COMPANY CONSOLIDATED BALANCE SHEETS (CONTINUED) March 31, 2000 December 31, CAPITALIZATION AND LIABILITIES (Unaudited) 1999 - --------------------------------------------------------------------------------------------------------- (in thousands, except share amounts) Capitalization: Common stock - $5 par value - authorized 18,000,000 shares; 13,236,601 shares outstanding $66,183 $66,183 Additional paid-in capital 229,438 229,438 Retained earnings 324,519 303,476 ----------------- ----------------- Total common equity 620,140 599,097 ----------------- ----------------- Cumulative preferred stock 59,963 59,963 Long-term debt (excluding current portion) 514,092 414,673 ----------------- ----------------- 1,194,195 1,073,733 ----------------- ----------------- - --------------------------------------------------------------------------------------------------------- Current liabilities: Current maturities 1,875 1,875 Variable rate demand bonds 55,100 55,100 Notes payable to associated companies 633 125,749 Accounts payable 83,178 88,245 Accounts payable to associated companies 24,008 25,306 Accrued taxes 20,377 6,539 Other 25,712 23,744 ----------------- ----------------- 210,883 326,558 ----------------- ----------------- - --------------------------------------------------------------------------------------------------------- Other long-term liabilities and deferred credits: Accumulated deferred income taxes 232,699 235,838 Accumulated deferred investment tax credits 30,851 31,311 Customer advances 32,896 34,643 Environmental liabilities 10,879 10,861 Other 59,471 53,191 ----------------- ----------------- 366,796 365,844 ----------------- ----------------- - --------------------------------------------------------------------------------------------------------- Total capitalization and liabilities $1,771,874 $1,766,135 ================= ================= - --------------------------------------------------------------------------------------------------------- The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
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WISCONSIN POWER AND LIGHT COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) For the Three Months Ended March 31, 2000 1999 - ------------------------------------------------------------------------------------------------------------------------ (in thousands) Cash flows from operating activities: Net income $21,871 $26,288 Adjustments to reconcile net income to net cash flows from operating activities: Depreciation and amortization 32,377 31,139 Amortization of nuclear fuel 1,484 1,525 Deferred taxes and investment tax credits (3,224) (1,578) Other (2,854) (1,617) Other changes in assets and liabilities: Accounts receivable 10,740 5,529 Accounts payable (6,365) (17,717) Accrued taxes 13,838 15,762 Benefit obligations and other 27,644 24,287 --------------------- ---------------------- Net cash flows from operating activities 95,511 83,618 --------------------- ---------------------- - ------------------------------------------------------------------------------------------------------------------------ Cash flows used for financing activities: Common stock dividends - (14,588) Preferred stock dividends (828) (828) Proceeds from issuance of long-term debt 100,000 - Net change in short-term borrowings (125,116) (25,697) Other (1,320) - --------------------- ---------------------- Net cash flows used for financing activities (27,264) (41,113) --------------------- ---------------------- - ------------------------------------------------------------------------------------------------------------------------ Cash flows used for investing activities: Utility construction expenditures (26,950) (18,967) Nuclear decommissioning trust funds (13,935) (13,935) Shared savings program (6,016) (2,519) Other (911) 601 --------------------- ---------------------- Net cash flows used for investing activities (47,812) (34,820) --------------------- ---------------------- - ------------------------------------------------------------------------------------------------------------------------ Net increase in cash and temporary cash investments 20,435 7,685 --------------------- ---------------------- - ------------------------------------------------------------------------------------------------------------------------ Cash and temporary cash investments at beginning of period 3,555 1,811 --------------------- ---------------------- - ------------------------------------------------------------------------------------------------------------------------ Cash and temporary cash investments at end of period $23,990 $9,496 ===================== ====================== - ------------------------------------------------------------------------------------------------------------------------ Supplemental cash flow information: Cash paid (refunded) during the period for: Interest $7,949 $8,468 ===================== ====================== Income taxes $2,227 ($357) ===================== ====================== - ------------------------------------------------------------------------------------------------------------------------ The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
-19- WISCONSIN POWER AND LIGHT COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Except as modified below, the Alliant Energy Notes to Consolidated Financial Statements are incorporated by reference insofar as they relate to WP&L. 1. The interim consolidated financial statements included herein have been prepared by WP&L, without audit, pursuant to the rules and regulations of the SEC. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted, although management believes that the disclosures are adequate to make the information presented not misleading. The consolidated financial statements include WP&L and its consolidated subsidiary. WP&L is a subsidiary of Alliant Energy. These financial statements should be read in conjunction with the financial statements and the notes thereto included in WP&L's latest Annual Report on Form 10-K. In the opinion of management, all adjustments, which are normal and recurring in nature, necessary for a fair presentation of (a) the consolidated results of operations for the three months ended March 31, 2000 and 1999, (b) the consolidated financial position at March 31, 2000 and December 31, 1999, and (c) the consolidated statement of cash flows for the three months ended March 31, 2000 and 1999, have been made. Because of the seasonal nature of WP&L's operations, results for the three months ended March 31, 2000 are not necessarily indicative of results that may be expected for the year ending December 31, 2000. Certain prior period amounts have been reclassified on a basis consistent with the 2000 presentation. 2. Certain financial information relating to WP&L's significant business segments is presented below. Intersegment revenues were not material to WP&L's operations. Electric Gas Other Total ------------------------------------------- (in thousands) Three Months Ended March 31, 2000 Operating revenues $162,376 $55,286 $1,170 $218,832 Operating income 31,059 9,056 380 40,495 Earnings available for common stock 21,043 Three Months Ended March 31, 1999 Operating revenues $149,944 $51,794 $1,252 $202,990 Operating income 35,349 10,577 465 46,391 Earnings available for common stock 25,460 -20- ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Alliant Energy was formed as the result of a three-way merger involving WPLH, IES and IPC that was completed in April 1998. The primary first tier subsidiaries of Alliant Energy include: WP&L, IESU, IPC, Resources and Corporate Services. Among various other regulatory constraints, Alliant Energy is operating as a registered public utility holding company subject to the limitations imposed by PUHCA. This MD&A includes information relating to Alliant Energy, IESU and WP&L (as well as IPC, Resources and Corporate Services). Where appropriate, information relating to a specific entity has been segregated and labeled as such. The following discussion and analysis should be read in conjunction with the Consolidated Financial Statements and Notes to Consolidated Financial Statements included in this report as well as the financial statements, notes and MD&A included in Alliant Energy's, IESU's and WP&L's latest Annual Report on Form 10-K. FORWARD-LOOKING STATEMENTS Statements contained in this report (including MD&A) that are not of historical fact are forward-looking statements intended to qualify for the safe harbors from liability established by the Private Securities Litigation Reform Act of 1995. From time to time, Alliant Energy, IESU or WP&L may make other forward-looking statements within the meaning of the federal securities laws that involve judgments, assumptions and other uncertainties beyond the control of such companies. These forward-looking statements may include, among others, statements concerning revenue and cost trends, cost recovery, cost reduction strategies and anticipated outcomes, pricing strategies, changes in the utility industry, planned capital expenditures, financing needs and availability, statements of expectations, beliefs, future plans and strategies, anticipated events or trends and similar comments concerning matters that are not historical facts. Investors and other users of the forward-looking statements are cautioned that such statements are not a guarantee of future performance and that such forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in, or implied by, such statements. Some, but not all, of the risks and uncertainties include weather effects on sales and revenues, competitive factors, general economic conditions in the relevant service territory, federal and state regulatory or government actions, including issues associated with the deregulation of the utility industry, unanticipated construction and acquisition expenditures, issues related to stranded costs and the recovery thereof, the operations of Alliant Energy's nuclear facilities, unanticipated costs associated with certain environmental remediation efforts being undertaken by Alliant Energy, unanticipated issues relating to establishing a transmission company, material changes in the value of Alliant Energy's investment in McLeod, technological developments, employee workforce factors, including changes in key executives, collective bargaining agreements or work stoppages, political, legal and economic conditions in foreign countries Alliant Energy has investments in and changes in the rate of inflation. UTILITY INDUSTRY OUTLOOK A summary of the current regulatory environment is included in the Form 10-K filed by Alliant Energy, IESU and WP&L for the year ended December 31, 1999. Set forth below are several developments relating to such regulatory environment. Across the nation, approximately half of the states (including Illinois) have passed legislation or issued regulatory rulings granting customers the right to choose their electric energy supplier. Legislation that would allow customers to choose their electric energy supplier was introduced in Iowa in 2000 but was never voted upon. At the federal level, a number of proposals to restructure the electric industry are currently under consideration. However, there continues to be a lack of consensus over how restructuring should be implemented and how much control the federal government should have over this process. Until one of the proposals gains significant bipartisan support, Alliant Energy believes there is unlikely to be final federal action to either facilitate or force states to open electricity markets to competition. "Reliability 2000" legislation was enacted in Wisconsin in 1999. This legislation included, among other items, the formation of a -21- Wisconsin transmission company for those Wisconsin utility holding companies who elect to take advantage of the new asset cap law. WP&L currently expects to transfer its transmission assets to the transmission company (American Transmission Company, or ATC) and it is expected that the net book value of such assets will become the new carrying value within ATC, resulting in no gain or loss for WP&L. The PSCW has not yet determined the exact scope of the assets that must be transferred to the ATC. A final ruling on such matter is expected in June 2000. WP&L does not expect this transfer to result in a significant impact on its financial condition or results of operations because it believes the FERC will allow WP&L to earn a return on the contributed assets comparable to the return currently allowed by the PSCW and FERC. WP&L will not be able to determine its exact ownership percentage in ATC until it is known which entities will participate in ATC, and the valuation of the assets each participant contributes is completed. However, WP&L expects its ownership interest to exceed 20%, but be less than 50%. As a result, WP&L expects to account for its investment in ATC under the equity method. It is currently anticipated that ATC's dividend policy will support a return of a significant portion of these earnings to the participants. ATC will realize its revenues from the provision of transmission services to both participants in the ATC as well as nonparticipants. ATC is expected to begin operations on January 1, 2001. In December 1999, FERC issued Order 2000 which outlines requirements for utilities to voluntarily turn over operational control of their transmission system to a regional entity. FERC's timeline is to have the RTOs in operation by the end of 2001. Alliant Energy's current plans to contribute its Wisconsin transmission assets to ATC, in exchange for an equity interest, and to participate in the Midwest ISO are expected to comply with the provisions of Order 2000. In March 2000, FERC approved Alliant Energy's membership in the Midwest ISO as well as WP&L's transfer of its transmission assets. Each of the utilities complies with the provisions of SFAS 71, "Accounting for the Effects of Certain Types of Regulation." SFAS 71 provides that rate-regulated public utilities record certain costs and credits allowed in the rate making process in different periods than for non-regulated entities. These are deferred as regulatory assets or regulatory liabilities and are recognized in the consolidated statements of income at the time they are reflected in rates. If a portion of the utility subsidiaries' operations becomes no longer subject to the provisions of SFAS 71 as a result of competitive restructurings or otherwise, a write-down of related regulatory assets and possibly other charges would be required, unless some form of transition cost recovery is established by the appropriate regulatory body that would meet the requirements under generally accepted accounting principles for continued accounting as regulatory assets during such recovery period. In addition, each utility subsidiary would be required to determine any impairment of other assets and write-down any impaired assets to their fair value. The utility subsidiaries believe they currently meet the requirements of SFAS 71 and will continue to monitor and assess this as the various utility industry restructuring initiatives progress. ALLIANT ENERGY RESULTS OF OPERATIONS Overview - Alliant Energy reported net income of $19.3 million, or $0.24 per share (basic and diluted), for the first quarter of 2000, compared to net income of $41.7 million, or $0.54 per share (basic and diluted), for the first quarter of 1999. The first quarter 2000 earnings included a $24.8 million, or $0.31 per share, non-cash charge to net income to recognize an increase in Alliant Energy's obligation relating to its 30-year exchangeable senior notes issued in February. Refer to "Interest Expense and Other" and "Liquidity and Capital Resources - Future Considerations" for a further discussion of the $24.8 million non-cash charge. Alliant Energy's increase in earnings, excluding the non-cash charge, was due to several factors, including: a pre-tax gain of $10.2 million realized from the sale of 150,000 shares of Alliant Energy's investment in McLeod; increased earnings from Alliant Energy's oil and gas and industrial services businesses; and income realized from settlement of a utility tax issue. These items were partially offset by: higher utility operating expenses, largely due to scheduled outages at several generating plants and higher energy conservation expenses; the impact of milder weather conditions in the first quarter of 2000 compared to the comparable period in 1999; and increased interest expense to fund Alliant Energy's strategic growth initiatives. -22- First quarter 2000 utility earnings were $39.1 million ($0.49 per share) compared to $44.8 million ($0.57 per share) for the same period in 1999. The decrease resulted primarily from higher operation and maintenance expenses ($0.08 per share), lower natural gas margins ($0.03 per share) and higher depreciation expense ($0.02 per share). These items were offset partially by interest income realized from a tax settlement ($0.03 per share) and a higher electric margin ($0.02 per share). The higher operation and maintenance expenses were due to costs associated with scheduled outages at several generating plants, higher energy conservation expenses and increased nuclear operating expenses. Alliant Energy estimates that the milder weather conditions resulted in lower earnings of approximately $0.06 per share ($0.03 electric; $0.03 gas) in the first quarter of 2000 compared to the comparable period in 1999. The higher overall electric margin was due to a rate recovery adjustment implemented at WP&L in March 1999 to recover higher purchased-power and transmission costs as well as increased sales to retail customers due to continued economic strength in Alliant Energy's utility service territory. These items were offset partially by continued higher purchased power costs at WP&L. Resources reported a net loss of $16.1 million, or ($0.20) per share, in the first quarter of 2000, which included the $24.8 million ($0.31 per share) non-cash charge related to the senior notes issued in February. Resources reported a net loss of $1.9 million, or ($0.02) per share, for the first quarter of 1999. The increase in non-regulated earnings, excluding the non-cash charge, was substantially due to the gain realized on the sale of the McLeod shares ($0.08 per share) and the increased earnings from Alliant Energy's oil and gas ($0.06 per share) and industrial services ($0.02 per share) businesses. These items were offset partially by higher net interest expense ($0.03 per share) to fund strategic growth initiatives, including the recent $347 million investment in several Brazilian electric utilities. Refer to "Liquidity and Capital Resources - Future Considerations" for a further discussion of the Brazilian investments. Electric Utility Operations - Electric margins and MWH sales for - --------------------------- Alliant Energy for the three months ended March 31 were as follows:
Revenues and Costs MWHs Sold (in thousands) (in thousands) ------------------------ ---------------------- 2000 1999 Change 2000 1999 Change ------------ ----------- -------- ---------- ---------- ------- Residential $134,995 $130,280 4% 1,821 1,810 1% Commercial 77,850 72,023 8% 1,278 1,244 3% Industrial 111,544 102,601 9% 3,120 3,076 1% ------------ ----------- ---------- ---------- Total from ultimate customers 324,389 304,904 6% 6,219 6,130 1% Sales for resale 33,894 36,214 (6%) 1,205 1,345 (10%) Other 15,339 10,220 50% 48 41 17% ------------ ----------- ---------- ---------- Total revenues/sales 373,622 351,338 6% 7,472 7,516 (1%) ========== ========== Electric production fuels expense 65,545 61,309 7% Purchased power expense 62,345 52,065 20% ------------ ----------- Margin $245,732 $237,964 3% ============ ===========
Electric margin increased $7.8 million, or 3%, for the first quarter of 2000, compared with the same period in 1999. The increase was primarily due to a $15 million rate recovery adjustment implemented at WP&L in March 1999 to recover higher purchased-power and transmission costs, an increase in sales to retail customers due to continued economic strength in Alliant Energy's service territory and higher other revenues primarily due to WP&L conservation programs for which WP&L receives a return on its invested capital. Higher purchased-power costs and the impact of milder weather conditions partially offset these items. IESU's and IPC's electric tariffs include EAC's that are designed to currently recover the costs of fuel and the energy portion of purchased-power billings. -23- Gas Utility Operations - Gas margins and Dth sales for Alliant - ---------------------- Energy for the three months ended March 31 were as follows:
Revenues and Costs Dekatherms Sold (in thousands) (in thousands) ------------------------ --------------------- 2000 1999 Change 2000 1999 Change ------------ ----------- -------- ---------- ---------- ------- Residential $79,611 $82,439 (3%) 13,073 14,836 (12%) Commercial 39,570 39,159 1% 7,776 8,559 (9%) Industrial 6,834 6,767 1% 1,688 1,919 (12%) Transportation/other 4,119 5,319 (23%) 12,398 14,609 (15%) ------------ ----------- ---------- ---------- Total revenues/sales 130,134 133,684 (3%) 34,935 39,923 (12%) ========== ========== Cost of gas sold 82,113 81,343 1% ------------ ----------- Margin $48,021 $52,341 (8%) ============ ===========
Gas margin decreased $4.3 million, or 8%, for the first quarter of 2000, compared with the same period in 1999, primarily due to reduced natural gas sales due to milder weather. IESU's and IPC's gas tariffs include PGA clauses that are designed to currently recover the cost of utility gas sold. Non-regulated and Other Revenues - Non-regulated and other - -------------------------------- revenues for the three months ended March 31 were as follows (in thousands): 2000 1999 -------- -------- ISCO $80,221 $29,407 Oil and gas (Whiting) 19,195 12,833 Steam 7,340 8,262 Transportation 4,788 5,224 Other 5,550 6,107 --------- --------- $117,094 $61,833 ======== ========= ISCO revenues increased significantly in the first quarter of 2000, compared with the same period in 1999, primarily due to the second quarter 1999 acquisition of an oil gathering and transportation business in Texas. Oil and gas revenues increased due to higher oil and gas prices, partially offset by reduced gas volumes. Other Operating Expenses - Other operation expenses for the three - -------------------------- months ended March 31 were as follows (in thousands): 2000 1999 ------------ ---------- Utility - IESU / WP&L / IPC $93,860 $87,829 ISCO 76,183 26,443 Oil and gas (Whiting) 7,349 7,534 Transportation 2,363 1,984 Other 6,782 6,575 ------------ ---------- $186,537 $130,365 ============ ========== Other operation expenses at the utility subsidiaries increased $6 million in the first quarter of 2000, compared with the same period in 1999, primarily due to higher energy conservation, nuclear operating and transmission and distribution expenses. These items were partially offset by expenses incurred in 1999 relating to Alliant Energy's Year 2000 readiness program. Other operation expenses at ISCO increased $50 million in the first quarter of 2000, compared with the same period in 1999, primarily due to expenses associated with the acquisition of the oil gathering and transportation business. -24- Maintenance expenses increased $6.1 million primarily due to costs associated with scheduled outages at several of Alliant Energy's generating plants and increased transmission and distribution maintenance expenses. Depreciation and amortization expense increased $2.3 million in the first quarter of 2000, compared with the same period in 1999, primarily as a result of utility property additions. Interest Expense and Other - Interest expense increased $7.2 - -------------------------- million in the first quarter of 2000, compared with the same period in 1999, primarily due to higher utility and non-regulated borrowings to fund Alliant Energy's strategic growth initiatives, including Resources' $347 million investment in several Brazilian electric utilities in January 2000. Alliant Energy recorded $39.5 million of contingent interest on indexed senior notes in the first quarter of 2000 to recognize an increase in Alliant Energy's obligation relating to Resources' issuance of $402.5 million of exchangeable 30-year senior notes in February. The amount payable upon maturity of the notes is generally the higher of: a) the original principal amount, as adjusted for any accrued interest or distributions on the common stock of McLeod; or, b) the current market value of the shares of McLeod stock attributable to the exchangeable senior notes. Specific accounting principles govern the exchangeable senior notes. Due to the exchange feature of the senior notes, any increase in the value of McLeod stock above $77.23 per share results in a corresponding increase in Alliant Energy's obligation under the senior notes. Current accounting principles do not allow the increases in market value of Alliant Energy's McLeod holdings to be reflected in earnings, but require a charge against earnings to reflect the corresponding increase in Alliant Energy's obligation under the senior notes. The closing price of the McLeod stock at March 31, 2000 was $84.81; thus, the senior notes were reported at approximately $442 million at March 31, 2000. The non-cash charge recorded as a result of this increase did not impact earnings from operations nor will it impact Alliant Energy's ability to pay dividends. If the McLeod stock price closes below $84.81 per share on June 30, 2000, Alliant Energy in the second quarter will reverse the proportionate share of the non-cash charge recorded in the first quarter. (The McLeod stock prices in this paragraph do not reflect McLeod's 3-for-1 stock split that was effective April 24, 2000). Refer to "Liquidity and Capital Resources - Future Considerations" for a further discussion. Alliant Energy sold 150,000 shares of its investment in McLeod in the first quarter of 2000, resulting in a pre-tax gain of $10.2 million (the 150,000 shares have not been adjusted for the 3-for-1 stock split). Miscellaneous, net income increased $6.4 million for the first quarter of 2000, compared with the same period in 1999, primarily due to increased interest income, including $4.1 million realized from a tax settlement at IESU. Income Taxes - Income tax expense decreased $12.4 million for the - ------------ first quarter of 2000, compared with the same period in 1999, primarily due to lower taxable income. The effective income tax rates for the first quarter of 2000 and 1999 were 37.2% and 36.4%, respectively. IESU RESULTS OF OPERATIONS Overview - IESU's earnings available for common stock increased - --------- $1.7 million for the first quarter of 2000, compared with the same period in 1999. The increased earnings for 2000 were primarily due to reduced other operation expenses and income realized from settlement of a tax issue. Lower electric and gas margins partially offset these items. -25- Electric Utility Operations - Electric margins and MWH sales for - --------------------------- IESU for the three months ended March 31 were as follows:
Revenues and Costs MWHs Sold (in thousands) (in thousands) ------------------------ --------------------- 2000 1999 Change 2000 1999 Change ------------ ----------- -------- ---------- ---------- ------- Residential $54,942 $54,353 1% 684 693 (1%) Commercial 40,226 38,548 4% 632 628 1% Industrial 42,205 37,882 11% 1,214 1,182 3% ------------ ----------- ---------- ---------- Total from ultimate customers 137,373 130,783 5% 2,530 2,503 1% Sales for resale 5,203 6,353 (18%) 247 341 (28%) Other 3,132 2,881 9% 10 10 -- ------------ ----------- ---------- ---------- Total revenues/sales 145,708 140,017 4% 2,787 2,854 (2%) ========== ========== Electric production fuels expense 28,912 22,494 29% Purchased power expense 13,422 13,150 2% ------------ ----------- Margin $103,374 $104,373 (1%) ============ ===========
Electric margin decreased $1.0 million, or 1%, for the first quarter of 2000, compared with the same period in 1999. The decrease was primarily due to reduced recoveries of approximately $2.5 million in concurrent and previously deferred expenditures for Iowa-mandated energy efficiency programs and the impact of milder weather conditions. Economic growth in the service territory and reduced purchased-power capacity costs partially offset these items. The recovery for energy efficiency programs in Iowa is in accordance with IUB orders (a portion of these recoveries is offset as they are also amortized to expense in other operation expense). IESU's electric tariffs include EAC's that are designed to currently recover the costs of fuel and the energy portion of purchased-power billings. Gas Utility Operations - Gas margins and Dth sales for IESU for - ----------------------- the three months ended March 31 were as follows:
Revenues and Costs Dekatherms Sold (in thousands) (in thousands) ------------------------ --------------------- 2000 1999 Change 2000 1999 Change ------------ ----------- -------- ---------- ---------- ------- Residential $37,214 $39,161 (5%) 6,055 6,855 (12%) Commercial 17,702 17,970 (1%) 3,472 3,889 (11%) Industrial 3,101 2,803 11% 811 873 (7%) Transportation/other 1,412 1,362 4% 2,919 3,195 (9%) ------------ ----------- ---------- ---------- Total revenues/sales 59,429 61,296 (3%) 13,257 14,812 (10%) ========== ========== Cost of gas sold 38,074 37,912 -- ------------ ----------- Margin $21,355 $23,384 (9%) ============ ===========
Gas margin decreased $2.0 million, or 9%, for the first quarter of 2000, compared with the same period in 1999, primarily due to reduced natural gas sales due to milder weather. IESU's gas tariffs include PGA clauses that are designed to currently recover the cost of gas sold. Other Operating Expenses - IESU's other operation expenses - ------------------------- decreased $4.2 million in the first quarter of 2000, compared with the same period in 1999, primarily due to a $2.6 million decrease in energy efficiency expenses, expenses incurred in 1999 on IESU's Year 2000 readiness efforts and lower employee benefits costs. Higher nuclear operating expenses partially offset these items. -26- Interest Expense and Other - Miscellaneous, net income increased - -------------------------- $3.9 million in the first quarter of 2000, compared with the same period in 1999, primarily due to $4.1 million of interest income realized from a tax settlement. Income Taxes - IESU's income tax expense increased $1.4 million - ------------ for the first quarter of 2000, compared with the same period in 1999, primarily due to higher taxable income. The effective income tax rates were 41.9% and 41.4% in the first quarter of 2000 and 1999, respectively. WP&L RESULTS OF OPERATIONS Overview - WP&L's earnings available for common stock decreased - --------- $4.4 million for the first quarter of 2000, compared with the same period in 1999, primarily due to higher other operation and maintenance expenses, partially offset by a higher electric margin. Electric Utility Operations - Electric margins and MWH sales for - ---------------------------- WP&L for the three months ended March 31 were as follows:
Revenues and Costs MWHs Sold (in thousands) (in thousands) ------------------------ --------------------- 2000 1999 Change 2000 1999 Change ------------ ----------- -------- ---------- ---------- ------- Residential $57,546 $53,889 7% 838 801 5% Commercial 29,695 27,016 10% 503 465 8% Industrial 41,270 39,599 4% 1,127 1,087 4% ------------ ----------- ---------- ---------- Total from ultimate customers 128,511 120,504 7% 2,468 2,353 5% Sales for resale 24,957 24,929 -- 789 813 (3%) Other 8,908 4,511 97% 21 15 40% ------------ ----------- ---------- ---------- Total revenues/sales 162,376 149,944 8% 3,278 3,181 3% ========== ========== Electric production fuels expense 23,798 27,366 (13%) Purchased power expense 33,757 24,000 41% ------------ ----------- Margin $104,821 $98,578 6% ============ ===========
Electric margin increased $6.2 million, or 6%, for the first quarter of 2000, compared with the same period in 1999. The increase was primarily due to a $15 million rate recovery adjustment implemented in March 1999 to recover higher purchased-power and transmission costs, a 5% increase in sales to retail customers primarily due to continued economic strength in the service territory and higher other revenues due to conservation programs for which WP&L receives a return on its invested capital. Higher purchased-power costs and the impact of milder weather conditions partially offset these items. Refer to "Liquidity and Capital Resources - Rates and Regulatory Matters" for a discussion of a rate filing WP&L made to request recovery of its increased purchased power and transmission costs. Gas Utility Operations - Gas margins and Dth sales for WP&L for - ----------------------- the three months ended March 31 were as follows:
Revenues and Costs Dekatherms Sold (in thousands) (in thousands) ------------------------ --------------------- 2000 1999 Change 2000 1999 Change ------------ ----------- -------- ---------- ---------- ------- Residential $33,013 $31,260 6% 5,293 5,857 (10%) Commercial 17,306 15,100 15% 3,350 3,493 (4%) Industrial 2,732 2,504 9% 587 659 (11%) Transportation/other 2,235 2,930 (24%) 4,069 4,043 1% ------------ ----------- ---------- ---------- Total revenues/sales 55,286 51,794 7% 13,299 14,052 (5%) ========== ========== Cost of gas sold 35,329 31,181 13% ------------ ----------- Margin $19,957 $20,613 (3%) ============ ===========
-27- Gas margin decreased $0.7 million, or 3%, for the first quarter of 2000, compared with the same period in 1999, primarily due to reduced natural gas sales resulting from milder weather. Other Operating Expenses - Other operation expenses increased - ------------------------- $6.0 million for the first quarter of 2000, compared with the same period in 1999, due to higher energy conservation, nuclear operating and transmission and distribution expenses. Maintenance expenses increased $4.6 million for the first quarter of 2000 compared with the first quarter of 1999 primarily due to costs associated with scheduled outages at several generating plants and higher transmission and distribution maintenance expenses. Interest Expense and Other - Interest expense increased $1.0 - -------------------------- million for the first quarter of 2000, compared with the same period in 1999, primarily due to additional debt outstanding in the first quarter of 2000. Income Taxes - WP&L's income tax expense decreased $2.6 million - ------------ for the first quarter of 2000, compared with the same period in 1999, due to lower taxable income. The effective income tax rates were 37.0% and 37.1% in the first quarter of 2000 and 1999, respectively. LIQUIDITY AND CAPITAL RESOURCES Cash flows from operating activities at Alliant Energy increased $16 million for the first quarter of 2000, compared with the same period in 1999, primarily due to changes in working capital. Cash flows from financing activities increased $324 million for the first quarter of 2000, compared with the same period in 1999, primarily as a result of changes in the amount of debt outstanding. Cash flows used for investing activities increased $428 million for the first quarter of 2000, compared with the same period in 1999, due to increased levels of construction and acquisition expenditures primarily in the non-regulated businesses. Cash flows from operating activities at IESU increased $24 million for the first quarter of 2000, compared with the same period in 1999, primarily due to changes in working capital. Cash flows used for financing activities decreased $41 million for the first quarter of 2000, compared with the same period in 1999, due to decreased common stock dividends in 2000. The dividend payment in the first quarter of 1999 was larger than IESU's historical quarterly payment as no dividend payments were made in the last three quarters of 1998 due to merger-related tax considerations. Cash flows used for investing activities increased $8 million for the first quarter of 2000, compared with the same period in 1999, due to increased levels of construction expenditures. Cash flows from operating activities at WP&L increased $12 million for the first quarter of 2000, compared with the same period in 1999, primarily due to changes in working capital. Cash flows used for financing activities decreased $14 million for the first quarter of 2000, compared with the same period in 1999, as WP&L did not declare a common stock dividend in the first quarter of 2000 as part of its management of its capital structure. Cash flows used for investing activities increased $13 million for the first quarter of 2000, compared with the same period in 1999, primarily due to increased levels of construction expenditures. Future Considerations On February 1, 2000, Resources completed a private placement of $402.5 million of exchangeable senior notes due 2030. The exchangeable senior notes have a stated interest rate of 7.25% through February 15, 2003 and 2.5% thereafter and are exchangeable for cash based upon a percentage of the value of McLeod Class A Common Stock. Alliant Energy has agreed to fully and unconditionally guarantee the payment of principal and interest on the exchangeable senior notes. The exchangeable senior notes have certain accounting consequences for Alliant Energy that affect reported earnings. Alliant Energy records its investment in McLeod stock at its fair value, with changes in fair value, net of income tax effects, recorded directly to the common equity section of the Consolidated Balance Sheets as a component of "Accumulated other comprehensive income." Any such changes in fair value are reflected in current earnings only at the time they are actually -28- realized through a sale. However, applicable accounting rules require Alliant Energy to record in its Consolidated Statements of Income any increase or decrease in the settlement value (i.e., the amount payable upon maturity) of the exchangeable senior notes that results from changes in the market value of McLeod stock. The settlement value of the exchangeable senior notes at any point in time is generally (assuming no deferrals of interest payments) the higher of: (a) the original principal amount plus accrued interest less cash dividends or other distributions on the McLeod stock; or (b) the current market value of the shares of McLeod stock attributable to the exchangeable senior notes. Accordingly, any increase or decrease in the settlement value of the exchangeable senior notes will be recorded as subtractions from, or additions to, Alliant Energy's reported net income as "contingent interest on indexed senior notes." The market price of the McLeod stock has been volatile and has fluctuated over a wide range since McLeod's initial public offering. A significant increase in the market value of McLeod stock would significantly decrease Alliant Energy's reported net income. Similarly, a significant decrease in the market value of McLeod stock would significantly increase Alliant Energy's reported net income, subject to the condition that the settlement value of the exchangeable senior notes will not be reduced below the original principal amount plus accrued interest less cash dividends or other distributions on the McLeod stock. These increases and decreases in reported income in Alliant Energy's Consolidated Statements of Income will be non-cash in nature and will be reflected on Alliant Energy's Consolidated Balance Sheets as increases and decreases in long-term debt. Alliant Energy would recognize a non-cash charge to net income of approximately $3.3 million for each $1/share increase in McLeod's stock price above $77.23/share as relates to the 5.2 million shares of McLeod stock attributable to the exchangeable senior notes. (McLeod stock price and share information set forth herein are not adjusted for McLeod's 3-for-1 stock split effective April 24, 2000). Refer to "Alliant Energy Results of Operations - Interest Expense and Other" for a discussion of a non-cash charge Alliant Energy recorded in the first quarter of 2000. This impact on earnings is expected to be mitigated somewhat once Alliant Energy adopts SFAS 133, "Accounting for Derivative Instruments and Hedging Activities." Refer to "Other Matters - Accounting Pronouncements" for a further discussion. On January 25, 2000, Resources acquired a stake in four Brazilian electric utilities serving more than 820,000 customers for a total investment of approximately $347 million. As part of this investment, Resources acquired a 49.1% ownership interest in Companhia Forca e Luz Cataguazes-Leopoldina (Cataguazes), an electric utility. Cataguazes owns a majority stake in CENF, another electric utility company, as well as a majority interest in Energisa S.A., an energy development company. As part of the same investment, Resources directly acquired a 45.6% interest in Energisa S.A. itself, which holds majority stakes in two regulated utilities (Energipe and Celb). As part owner of Cataguazes, Resources will hold both indirect and direct interests in Energisa S.A. The investment is anticipated to dilute Alliant Energy's earnings per share by approximately 3% in 2000, with positive contributions to earnings expected in subsequent years. Resources, through its wholly owned subsidiary, International, initially financed the Brazil investment with cash made available through the internal transfer of existing non-regulated corporate assets. Resources has entered into a shareholders agreement with the Brazilian companies, which would allow it to name two directors to the boards of each company and its subsidiaries. The agreement will also provide Resources with a role in selecting each company's management team, along with voting rights relating to critical issues at the Brazilian companies and their subsidiaries. The investment will be accounted for under the equity method. As a result of a sale by Whiting of its interest in an offshore oil and gas production property in the fourth quarter of 1999, Whiting has a potential gain contingency of $500,000 relating to the sale that will be resolved in the fourth quarter of 2000. Such gain contingency has not yet been recognized in income. Financing and Capital Structure WP&L issued $100 million of senior unsecured debentures in March 2000 at a fixed interest rate of 7-5/8%, due 2010. The net proceeds from the sale of the debentures were primarily used to repay short-term debt. Refer to "Liquidity and Capital Resources - Future Considerations" for a discussion of $402.5 million of exchangeable senior notes issued by Resources in February 2000. -29- Capital Requirements Refer to the "Other Matters - Environmental" section for a discussion of various issues impacting Alliant Energy's future capital requirements. Rates and Regulatory Matters In February and April of 2000, the OCA requested certain financial information related to the electric utility operations within the state of Iowa from IESU and IPC, respectively. IESU has responded to its data requests and IPC is in the process of preparing its responses. While IESU and IPC cannot predict the outcome of this process, such data requests could lead to an effort by the OCA to seek an electric rate reduction for IESU and/or IPC in Iowa. WP&L's retail electric rates are based in part on forecasted fuel and purchased-power costs. Under PSCW rules, WP&L can seek emergency rate increases if the annual costs are more than 3% higher than the estimated costs used to establish rates. If WP&L's earnings exceed its authorized return on equity, the incremental revenues collected causing the excessive return are subject to refund. WP&L does not believe any revenues collected to-date are subject to refund. In December 1999, WP&L requested a $26 million retail electric rate increase to reflect higher purchased power and transmission costs. Effective May 5, 2000, the PSCW granted WP&L a $16.5 million annual retail electric rate increase. In April 2000, the intervenors who had appealed the PSCW's order to grant WP&L rate recovery of $6.3 million of it Year 2000 program expenditures withdrew their appeal. WP&L began recovering such costs in May 2000. OTHER MATTERS Labor Issues The collective bargaining agreements at Alliant Energy cover approximately 52% of all Alliant Energy employees. In the first quarter of 2000, two agreements that had expired in 1999 were ratified and the parties have reached tentative agreement on the remaining three agreements that had expired in 1999. Once these three agreements are ratified, all expired agreements will be renewed and there are no significant agreements expiring in 2000. Market Risk Sensitive Instruments and Positions Alliant Energy's primary market risk exposures are associated with interest rates, commodity prices, equity prices and currency exchange rates. Alliant Energy has risk management policies to monitor and assist in controlling these market risks and uses derivative instruments to manage some of the exposures. Alliant Energy's market risks have not changed materially from the market risks reported in the 1999 Form 10-K, except as noted below. Equity Price Risk - At March 31, 2000 and December 31, 1999, - ----------------- Alliant Energy had an investment in the stock of McLeod, a publicly traded telecommunications company, valued at $1,607 million and $1,124 million, respectively. A 10% increase (decrease) in the quoted market price at March 31, 2000 and December 31, 1999 would have increased (decreased) the value of the investment by approximately $161 million and $112 million, respectively. Currency Risk - Alliant Energy has investments in various - -------------- countries where the net investments are not hedged, including Australia, Brazil, China, New Zealand, and Singapore. As a result, these investments are subject to currency exchange risk with fluctuations in currency exchange rates. At March 31, 2000 and December 31, 1999, Alliant Energy had a cumulative foreign currency translation loss of $8.7 million and $9.6 million, respectively, recorded in "Accumulated other comprehensive income" on its Consolidated Balance Sheets. Based on Alliant Energy's investments at March 31, 2000 and December 31, 1999, a 10% sustained increase/decrease over the next twelve months in the foreign exchange rates of Australia, Brazil, China, New Zealand and Singapore would decrease/increase the cumulative foreign currency translation loss by $54.5 million and $17.2 million, respectively. The significant increase in the March 31 amount is primarily due to Resources' $347 million investment in Brazil in January 2000. -30- Accounting Pronouncements In June 1998, the FASB issued SFAS 133. The Statement establishes accounting and reporting standards requiring that every derivative instrument be recorded on the balance sheet as either an asset or liability measured at its fair value. The Statement requires that changes in the derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met. Special accounting for qualifying hedges allows a derivative's gains and losses to offset related results on the hedged item in the income statement, and requires that a company must formally document, designate, and assess the effectiveness of transactions that receive hedge accounting. SFAS 133 is effective for fiscal years beginning after June 15, 2000 and must be applied to (a) derivative instruments and (b) certain derivative instruments embedded in hybrid contracts that were issued, acquired or substantively modified after December 31, 1998 (effective dates noted are as amended by SFAS 137). Alliant Energy has organized a cross-functional project team to assist in implementing SFAS 133. The team consists of both Alliant Energy employees and a consultant that has been engaged to support the project. The team has substantially completed Alliant Energy's inventory of financial instruments, commodity contracts and other commitments for the purpose of identifying and assessing all of Alliant Energy's derivatives and has begun the process of estimating the fair value of the derivatives, designating certain derivatives as hedges and assessing the effectiveness of those derivatives designated as hedges. Although all effects of implementing SFAS 133 have not yet been quantified, it could increase volatility in earnings and other comprehensive income. However, earnings volatility related to Resources' exchangeable senior notes is expected to decrease subsequent to the adoption of SFAS 133. SFAS 133 will require Alliant Energy to split the value of Resources' exchangeable senior notes into a debt component and a derivative component. Any changes in the fair value of the derivative component subsequent to the SFAS 133 adoption date will be reflected as an increase or decrease in Alliant Energy's reported net income. At the date of initial adoption, SFAS 133 provides Alliant Energy a one-time ability to transfer any of Alliant Energy's available-for-sale securities to the trading category. Alliant Energy expects to transfer approximately 25% of its shares of McLeod stock to trading upon adoption of SFAS 133. As a result, Alliant Energy expects to report a significant gain from the one-time transfer of these McLeod shares to trading; the amount of the gain cannot be determined until the adoption date as it will be based on the value of McLeod stock at such time. The gain recognized will be based on the appreciation in the shares transferred, which is currently recognized as a component of "Accumulated other comprehensive income" on Alliant Energy's Consolidated Balance Sheets. Changes subsequent to the SFAS 133 adoption date in the fair value of the shares of McLeod stock transferred to trading will be reflected as an increase or decrease in Alliant Energy's reported net income and are expected to at least partially offset changes in the fair value of the derivative component of the exchangeable senior notes. However, there may be periods with significant non-cash increases or decreases to Alliant Energy's net income pertaining to the exchangeable senior notes and the shares of McLeod stock classified as trading. At the date of initial adoption, Alliant Energy will also recognize a one-time increase or decrease to income to reflect the cumulative effect of a change in accounting principle for the difference between (a) the current fair value of the derivative component plus the carrying amount of the debt component, and (b) the carrying amount of the exchangeable senior notes under current accounting principles. This amount cannot be determined until the adoption date. Alliant Energy has certain fixed price commodity contracts for the future purchase or sale of natural gas, coal and oil that meet the derivative criteria in the Statement. Alliant Energy also has other financial derivative contracts it uses in both its utility and non-regulated activities. Alliant Energy intends to designate these contracts as hedges of the underlying purchases or sales and will record derivative assets and liabilities on its balance sheet based on the fair value of the contracts at the adoption date. Such amounts will be substantially offset by an amount that will be recorded in 'Accumulated other comprehensive income" on Alliant Energy's Consolidated Balance Sheets. The fair values will fluctuate over time due to changes in the underlying commodity prices. -31- Alliant Energy is analyzing various alternatives relating to the possible early adoption of SFAS 133 in 2000. SFAS 133 may only be adopted on the first day of any quarter prior to the required adoption date (i.e., January 1, 2001 for Alliant Energy). Environmental A summary of Alliant Energy's environmental issues is included in the Form 10-K, filed by Alliant Energy, IESU and WP&L for the year ended December 31, 1999. Set forth below are several developments relating to Alliant Energy's environmental issues. Pursuant to an internal review of operations in 1998, IPC discovered that Unit No. 6 at its generating facility in Dubuque, Iowa required a Clean Air Act Acid Rain permit and CEMS. IPC has informed its environmental regulators and has installed the CEMS and obtained the permit. Pursuant to its internal review, IPC also identified and disclosed to regulators a potentially similar situation at its Lansing, Iowa generating facility. In the second quarter of 1999, the EPA determined that Lansing units 1 and 2 are affected units. Therefore, in the third quarter of 1999, IPC installed the CEMS at both of these facilities and in December 1999 IPC submitted its certification to the EPA for the Lansing facility. IPC received a settlement offer from the EPA, dated December 3, 1999, to settle the matter for $550,000. IPC has since responded with a counteroffer, and the parties have reached an agreement in principle which contemplates a civil penalty payment and the performance of a supplemental environmental project with a combined value of approximately $400,000. IPC has established the necessary liability for the expected settlement obligation relating to this issue. Power Supply Alliant Energy transferred its IESU and IPC regional reliability membership from the MAPP reliability region to the MAIN region effective in May 2000. Given WP&L is already a member of MAIN, this will give Alliant Energy additional operating flexibility and will eliminate duplicate reporting requirements. Alliant Energy will continue to participate in the MAPP Regional Transmission Committee and the MAPP Power and Energy Market Committee. On April 25, 2000, Alliant Energy issued a request for proposal (RFP) for a contract to construct a 500-600 megawatt power plant in Wisconsin. The construction of the facility will assist Alliant Energy in meeting its growing demands for electricity, will enable Alliant Energy to place a greater reliance on internal generation versus purchased power and will also help Alliant Energy maintain the required 18% reserve margin in Wisconsin. The proposed timeline includes proposals due in June 2000 and construction beginning in the second quarter of 2001. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. Quantitative and Qualitative Disclosures About Market Risk are reported under Item 2. MD&A "Other Matters - Market Risk Sensitive Instruments and Positions." PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: The following Exhibits are filed herewith or - -------------- incorporated herein by reference. Documents indicated by an asterisk (*) are incorporated herein by reference. 3.1* Bylaws of Alliant Energy, as amended, effective as of March 15, 2000 (incorporated by reference to Exhibit 3.2 to Alliant Energy's Form 10-K for the year 1999) 3.2* Bylaws of WP&L, as amended, effective as of March 15, 2000 (incorporated by reference to Exhibit 3.4 to WP&L's Form 10-K for the year 1999) 3.3* Bylaws of IESU, as amended, effective as of March 15, 2000 (incorporated by reference to Exhibit 3.6 to IESU's Form 10-K for the year 1999) -32- 4.1* Officers' Certificate, dated as of March 1, 2000, creating WP&L's 7-5/8% debentures due March 1, 2010 (incorporated by reference to Exhibit 4 to WP&L's Form 8-K, dated March 1, 2000) 4.2* Indenture, relating to Resources' debt securities, dated as of November 4, 1999, among Resources, Alliant Energy, as Guarantor, and Firstar Bank, N.A., as Trustee, (incorporated by reference to Exhibit 4.1 to Resources' and Alliant Energy's Registration Statement on Form S-4 (Registration No. 333-92859), and the indentures supplemental thereto dated, respectively, November 4, 1999 and February 1, 2000 (Exhibit 4.2 in File No. 33-92859 and Exhibit 99.4 in Alliant Energy's Form 8-K dated February 1, 2000) 4.3* Registration Rights Agreement, related to Resources' exchangeable senior notes due 2030, dated as of February 1, 2000, among Resources, Alliant Energy and Merrill Lynch, Pierce, Fenner & Smith Incorporated (incorporated by reference to Exhibit 99.5 to Alliant Energy's Form 8-K dated February 1, 2000) 4.4* Purchase Agreement, relating to Resources' exchangeable senior notes due 2030, dated as of January 26, 1999, among Resources, Alliant Energy and Merrill Lynch, Pierce, Fenner & Smith Incorporated (incorporated by reference to Exhibit 99.2 to Alliant Energy's Form 8-K dated February 1, 2000) 10.1 Supplemental Retirement Agreement 10.2 Third Amended and Restated November 1998 Stockholders' Agreement entered into as of March 10, 2000, by and among McLeod, Alliant Energy, Investments and certain other principal stockholders of McLeod 10.3 Third Amended and Restated January 1999 Stockholders' Agreement entered into as of March 10, 2000, by and among McLeod, Alliant Energy, Investments and certain other principal stockholders of McLeod 27.1 Financial Data Schedule for Alliant Energy Corporation at and for the period ended March 31, 2000 27.2 Financial Data Schedule for IES Utilities Inc. at and for the period ended March 31, 2000 27.3 Financial Data Schedule for Wisconsin Power and Light Company at and for the period ended March 31, 2000 (b) Reports on Form 8-K: - ------------------------ Alliant Energy Alliant Energy filed a Current Report on Form 8-K, dated January 25, 2000, as amended by Alliant Energy's Current Report on Form 8-K/A dated January 25, 2000, reporting (under Item 5) that on January 25, 2000, Alliant Energy issued a press release announcing that Resources agreed to acquire a significant stake in four Brazilian electric utilities. Alliant Energy filed a Current Report on Form 8-K, dated January 26, 2000, reporting (under Item 5) that on January 26, 2000, Alliant Energy issued a press release pursuant to Rule 135c under the Securities Act of 1933 announcing certain proposed unregistered offerings. The press release announces that Resources intends to offer approximately $350 million aggregate principal amount of exchangeable senior notes due 2030 in a private placement in accordance with Rule 144A under the Securities Act of 1933. -33- Alliant Energy filed a Current Report on Form 8-K, dated February 1, 2000, reporting (under Item 5) that on February 1, 2000, Alliant Energy issued a press release announcing its earnings for the fourth quarter and the fiscal year ended December 31, 1999. Alliant Energy filed a Current Report on Form 8-K, dated February 1, 2000, reporting (under Item 5) that on February 1, 2000, Alliant Energy issued a press release pursuant to Rule 135c under the Securities Act of 1933 announcing that Resources completed a private placement of 5,940,960 exchangeable senior notes in the aggregate principal amount of $402.5 million in accordance with Rule 144A under the Securities Act of 1933. Alliant Energy filed a Current Report on Form 8-K, dated February 1, 2000, reporting (under Item 5) certain accounting consequences for Alliant Energy related to the issuance of 5,940,960 exchangeable senior notes due 2030 in the aggregate principal amount of $402.5 million by Resources. WP&L WP&L filed a Current Report on Form 8-K, dated February 25, 2000, reporting (under Item 5) certain financial results for the year ended December 31, 1999. WP&L filed a Current Report on Form 8-K, dated March 1, 2000, reporting (under Item 5) that on March 1, 2000, WP&L agreed to sell $100 million principal amount of its 7-5/8% Debentures due March 1, 2010 in a public offering. IESU - None. -34- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, Alliant Energy Corporation, IES Utilities Inc. and Wisconsin Power and Light Company have each duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized on the 11th day of May 2000. ALLIANT ENERGY CORPORATION Registrant By: /s/ Daniel A. Doyle Vice President-Chief Accounting and Financial - ----------------------- Planning Officer (Principal Accounting Officer) Daniel A. Doyle IES UTILITIES INC. Registrant By: /s/ Daniel A. Doyle Vice President-Chief Accounting and Financial - ----------------------- Planning Officer (Principal Accounting Officer) Daniel A. Doyle WISCONSIN POWER AND LIGHT COMPANY Registrant By: /s/ Daniel A. Doyle Vice President-Chief Accounting and Financial - ----------------------- Planning Officer (Principal Accounting Officer) Daniel A. Doyle -35- EX-10.1 2 SUPPLEMENTAL RETIREMENT AGREEMENT EXHIBIT 10.1 SUPPLEMENTAL RETIREMENT AGREEMENT This Supplemental Retirement Agreement is made this ____ day of ____________, 2000, by and between _________________ (the "Officer") and Alliant Energy Corporation (the "Company"). W I T N E S S E T H: WHEREAS, Alliant Energy wishes to provide supplemental retirement benefits to a select group of senior executive personnel, including the Officer, to ensure the overall effectiveness of the Company's executive compensation program and that the Company will be able to attract, retain, and motivate qualified senior executive personnel. WHEREAS, the Company and the Officer have heretofore entered into one or more agreements (the "Prior Agreements") providing supplemental retirement, deferred compensation or similar benefits, which Prior Agreements are identified in Appendix A hereto; and WHEREAS, the Company and the Officer wish to enter into this Agreement, which shall amend, restate, supersede and replace the Prior Agreements; NOW, THEREFORE, the parties agree that the Prior Agreements are hereby amended and restated as follows: ARTICLE I SCOPE OF AGREEMENT 1.1 Effect on Prior Agreements. This Agreement shall supersede and replace the Prior Agreements, effective as of the date of this Agreement, and the parties shall thereafter have no further rights or obligations under the Prior Agreements. 1.2 Effect on Change of Control Agreements. If the Officer is a party to an agreement which is binding on the Company and which takes effect in the event of a change in control, such agreement shall supersede and control over the provisions of this Agreement in the event of any conflict between the two. 1.3 No Contract of Employment. This Agreement does not constitute an employment agreement between the Officer and the Company. Nothing in this Agreement shall affect the Company's right to terminate the Officer's employment or position as an officer at any time, with or without cause. 1.4 Effect on Other Benefits. Nothing in this Agreement shall modify, impair or otherwise affect the rights of the Officer to participate in or receive benefits under any other employee benefit plan of the Company, it being understood that the rights of the Officer to participate in or receive benefits under any such plan shall be determined in accordance with the provisions of such plan and shall not be affected by the provisions of this Agreement. ARTICLE II DEFINITIONS 2.1 Board of Directors means the Board of Directors of Alliant Energy Corporation or any committee of the Board which is designated by the Board of Directors, or permitted by the Bylaws of the Alliant Energy Corporation, to act on behalf of the Board of Directors. 2.2 Continuous Employment means the Officer's last continuous period of employment with the Company immediately preceding the Officer's retirement. If the Officer has been continuously employed by the Company since the merger of IES Industries Inc., WPL Holdings, Inc. and Interstate Power Company, the Officer's Continuous Employment shall also include his or her last continuous period of employment with IES Industries Inc., WPL Holdings, Inc. or Interstate Power Company, and their respective subsidiaries, immediately preceding the date of such merger. If the Officer's Supplemental Benefit is computed by using the Officer's Prior Employer Benefit as set forth in Paragraph 3.1, the Officer's service with such prior employers shall also be treated as Continuous Employment. 2.3 Dependent Child or Children means any child of the Officer who, on the date of any payment under this Agreement, is 18 years of age or under, is 24 years of age or under and is a "student" as defined in Section 151(c)(4) of the Internal Revenue Code, or is a "substantially handicapped person." The term "child" includes any naturally born or legally adopted child; provided, in the case of an adopted child, that the adoption became final prior to such child's 18th birthday. The term "substantially handicapped person" includes any person who has a "physical or mental impairment which substantially limits one or more major life activities," as those terms are defined in 29 C.F.R. Section 32.3. 2.4 Disabled means the Officer has satisfied (and continues to satisfy) the requirements for receiving disability benefits under the terms of the Company's long-term disability plan. 2.5 Earnings means the Officer's base salary, bonus and/or annual incentive pay for personal services rendered to the Company. The Officer's base salary shall be treated as Earnings in the calendar year in which it is paid, regardless of when it is earned. The Officer's bonus and/or annual incentive pay shall be treated as Earnings in the calendar year in which it is earned, regardless of when it is paid. 2.6 Eligible Officer means Chairmana Chief Executive Officer, President, or Executive Vice President of Alliant Energy Corporation. 2.7 Final Average Earnings means the Officer's average monthly Earnings for the three consecutive calendar years out of the Officer's last ten calendar years of employment with the Company that yields the highest average. If the Officer has been employed by the Company for fewer than three calendar years, the Officer's Final Average Earnings shall be the Officer's average monthly Earnings for all of his or her completed calendar years of employment with the Company. 2.8 Internal Revenue Code means the Internal Revenue Code of 1986, as amended. 2.9 Normal Retirement Date means the later of the Officer's 62nd birthday or the date on which the Officer completes ten years of Continuous Employment. 2.10 Pension Plan means any defined benefit pension plan of the Company or its subsidiaries which is qualified under Section 401(a) of the Internal Revenue Code and from which the Officer is entitled to a benefit. 2.11 Prior Employer Benefit means the monthly amounts payable to the Officer or the Officer's Surviving Spouse from any of the Officer's prior employers' qualified or non-qualified defined benefit pension or similar type of plans, which are attributable to the prior employers' contributions to such plans. 2.12 Supplemental Benefit means the benefit described in Paragraph 3.1 and payable to the Officer pursuant to Articles III, IV or V. 2.13 Surviving Spouse means the individual, if any, who is legally married to the Officer at the time of the Officer's death. ARTICLE III NORMAL RETIREMENT BENEFIT 3.1 Supplemental Benefit. Subject to the following provisions of this Article III, if the Officer remains a full-time employee and an Eligible Officer of the Company until his or her Normal Retirement Date, the Officer shall receive a Supplemental Benefit equal to 60% of the Officer's Final Average Earnings, reduced by the sum of: (i) the monthly benefit payable to the Officer from the Pension Plan; plus (ii) the monthly benefit payable to the Officer from the nonqualified Excess Retirement Plan; plus (iii)the monthly amount of the Officer's Prior Employer Benefit. See Appendix B for Prior Employer Offset. The Supplemental Benefit shall be paid in equal monthly installments, commencing on the first day of the month following the Officer's retirement from the Company as both an Officer and an employee and continuing for the lifetime of the Officer, except as otherwise provided in Paragraph 3.3. (a) For the purposes of Subparagraph (a), the amount of the Officer's monthly benefit from the Pension Plan shall be determined as follows: (i) If the Officer receives a joint and survivor annuity from the Pension Plan and the Officer's Surviving Spouse is the joint annuitant, the Officer's monthly benefit from the Pension Plan shall be the monthly amount payable to the Officer under such joint and survivor annuity. (ii) If the Officer receives a single life annuity from the Pension Plan, the Officer's monthly benefit from the Pension Plan shall be the monthly amount payable to the Officer under such single life annuity. (iii)If the Officer receives any other form of payment from the Pension Plan, such other form of payment shall be converted to an actuarially equivalent single life annuity, using the actuarial assumptions then in use for such purpose under the Pension Plan, and the Officer's monthly benefit from the Pension Plan shall be the monthly amount that would be payable to the Officer under such single life annuity. (iv) If a portion of the Officer's benefits under the Pension Plan have been awarded to an Alternate Payee pursuant to a qualified domestic relations order, as defined in Section 414(p) of the Internal Revenue Code, the Officer's monthly benefit from the Pension Plan shall be deemed to be the amount that would have been payable to the Officer if no such order had been entered. (v) The Officer's monthly benefit from the Pension Plan shall be determined as though it had commenced on the same date as the Officer's Supplemental Benefit, regardless of when the Officer's Pension Plan benefit actually commences. (vi) Any increase in the monthly amount of the Officer's Pension Plan benefit shall correspondingly reduce the monthly amount of the Officer's Supplemental Benefit unless the Board of Directors provides by resolution that the Supplemental Benefit shall not be so reduced. (b) For the purposes of Subparagraph (a), the monthly amount of the Officer's Prior Employer Benefit shall be determined, and shall be included in the computation of the Supplemental Benefit, in the sole and absolute discretion of the Board of Directors. 3.2 Officer's Death After Receiving Twelve Years of Benefit Payments. If the Officer dies after receiving at least 144 monthly Supplemental Benefit payments, the Officer's Supplemental Benefit shall terminate upon the Officer's death (with the full monthly payment being made for the month in which such death occurs), and the Company shall have no further obligation to make any payments under this Article. 3.3 Officer's Death Prior to Receiving Twelve Years of Benefit Payments. (a) If the Officer dies after the commencement of Supplemental Benefit payments but prior to receiving 144 monthly payments, the Officer's Surviving Spouse (if any) shall continue to receive the monthly payments determined under Paragraph 3.1 until the date on which the Officer and such Surviving Spouse have received a total of 144 monthly payments. If both the Officer and the Officer's Surviving Spouse die before they have received a total of 144 monthly payments, the monthly payments determined under Paragraph 3.1 shall continue to be paid to the Officer's Dependent Children until a total of 144 monthly Supplemental Benefit payments have been made to the Officer, the Officer's Surviving Spouse, and the Officer's Dependent Children. (b) Payments under this Paragraph 3.3 shall be made only to the Officer's Surviving Spouse and Dependent Children, and in no event shall such payments be made to the estate or heirs of the Officer, to the estates or heirs of the Officer's Surviving Spouse or Dependent Children, or to any persons other than the Officer's Surviving Spouse or Dependent Children. If a payment to Dependent Children is due on a date when there is more than one Dependent Child, such payment shall be equally divided among those persons who qualify as Dependent Children on the date the payment is due. If the Officer is deceased and there are no individuals who qualify as the Officer's Surviving Spouse or Dependent Children on the date a payment is due, the Company shall have no further obligation to make payments under this Article. ARTICLE IV EARLY RETIREMENT BENEFIT 4.1 Supplemental Benefit. If the Officer retires at or after age 55 but prior to his or her Normal Retirement Date with ten or more years of Continuous Employment, the Officer shall receive the Supplemental Benefit described in Article III commencing on the first day of the month following the Officer's retirement from the Company as both an Officer and an employee. If the Officer's Supplemental Benefit begins prior to age 62, the monthly amount shall be reduced by one quarter of one percent (.25%) for each month by which the date on which the Officer retires precedes his or her Normal Retirement Date; provided, however, that there shall be no reduction if the Officer has been an Eligible Officer with the Company for ten or more years after April 21, 1998. 4.2 Payment of Benefit. The amount payable under this Article IV shall be calculated and paid in the same manner, and shall be subject to the same conditions and limitations, as the benefit described in Article III. ARTICLE V DISABILITY BENEFIT 5.1 Supplemental Benefit. If the Officer becomes Disabled prior to his or her termination of employment with the Company, and continues to be Disabled until he or she would have been entitled to a Supplemental Benefit under Articles III or IV, the Officer shall be eligible to receive a Supplemental Benefit commencing on the first day of the month following the date on which the Officer ceases to be entitled to disability benefits under the Company's long-term disability plan. The amount payable under this Article V shall be calculated and paid in the same manner, and shall be subject to the same conditions and limitations, as the benefit described in Article III (if the Officer ceases to be entitled to disability benefits at or after his or her Normal Retirement Date) or in Article IV (if the Officer ceases to be entitled to disability benefits prior to his or her Normal Retirement Date but after becoming entitled to a Supplemental Benefit under Article IV). 5.2 Cessation of Disability. If the Officer becomes Disabled while employed as an Eligible Officer the Company, but ceases to be Disabled prior to the date on which he or she would have been entitled to a Supplemental Benefit under Section 5.1, the period during which the Officer was Disabled shall be included in the Officer's period of Continuous Employment if (and only if): (a) the Officer resumes full-time employment with the Company as an Eligible Officer within 30 days after he or she ceased to be Disabled; and (b) the Officer continues in such employment until he or she becomes entitled to a Supplemental Benefit under Articles III or IV. ARTICLE VI PRERETIREMENT DEATH BENEFIT 6.1 Death Benefit. (a) If the Officer dies prior to termination of his or her employment with the Company, the Officer's Surviving Spouse (if any) shall receive a death benefit equal to 60% of the Officer's Final Average Earnings, reduced by the sum of: (i) the monthly benefit payable to the Officer from the Pension Plan; plus (ii) the monthly benefit payable to the Officer from the nonqualified Excess Retirement Plan; plus (iii)the monthly amount of the Officer's Prior Employer Benefit. The death benefit payable under this Article VI shall be paid in equal monthly installments, commencing within 30 days after the Officer's death and ending when 144 monthly payments have been made to the Officer's Surviving Spouse. (b) For the purposes of Subparagraph (a), the amount of the Surviving Spouse's monthly benefit from the Pension Plan shall be determined as follows: (i) The Surviving Spouse's monthly benefit from the Pension Plan shall be the monthly amount payable to the Surviving Spouse in the form of a single life annuity. If the Surviving Spouse receives any other form of payment under the Pension Plan, such other form of payment shall be converted to an actuarially equivalent single life annuity, using the actuarial assumptions then in use for such purpose under the Pension Plan, and the Surviving Spouse's monthly benefit from the Pension Plan shall be the monthly amount that would be payable to the Surviving Spouse under such single life annuity. (ii) If a portion of the Officer's or the Surviving Spouse's Pension Plan benefit has been awarded to an Alternate Payee pursuant to a qualified domestic relations order, as defined in Section 414(p) of the Internal Revenue Code, the Surviving Spouse's monthly benefit from the Pension Plan shall be deemed to be the amounts that would have been payable to the Surviving Spouse if no such order had been entered. (iii)The Surviving Spouse's monthly benefit from the Pension Plan shall be determined as though it had commenced on the same date as the Surviving Spouse's death benefit, regardless of when such benefit payments actually begin. (iv) Any increase in the monthly amount of the Surviving Spouse's Pension Plan benefit shall correspondingly reduce the monthly amount of the Surviving Spouse's death benefit unless the Board of Directors provides by resolution that the death benefit shall not be so reduced. (c) For the purposes of Subparagraph (a), the monthly amount of the Officer's Prior Employer Benefit shall be determined, and shall be included in the computation of the Surviving Spouse's death benefit, in the sole and absolute discretion of the Board of Directors. 6.2 Surviving Spouse's Death Prior to Receiving Twelve Years of Benefit Payments. (a) If there is no Surviving Spouse when the Officer dies, or if the Officer's Surviving Spouse dies prior to the receipt of 144 monthly payments, the monthly payments described in Paragraph 6.1 shall be paid (or continue to be paid) to the Officer's Dependent Children until a total of 144 monthly Supplemental Benefit payments have been made to the Officer's Surviving Spouse and Dependent Children. (b) Payments under this Article VI shall be made only to the Officer's Surviving Spouse and Dependent Children, and in no event shall such payments be made to the estate or heirs of the Officer's Surviving Spouse and Dependent Children or to any persons other than the Officer's Surviving Spouse and Dependent Children. If a payment to Dependent Children is due on a date when there is more than one Dependent Child, such payment shall be equally divided among those persons who qualify as Dependent Children on the date the payment is due. If there are no individuals who qualify as the Officer's Surviving Spouse and Dependent Children on the date a payment is due, the Company shall have no further obligation to make payments under this Article. ARTICLE VII POSTRETIREMENT DEATH BENEFIT 7.1 Death Benefit. If the Officer dies subsequent to the commencement of Supplemental Benefit payments under Articles III, IV or V, the Company shall pay a death benefit to the Officer's beneficiary. Such benefit shall be in addition to the benefits paid to the Officer and the Officer's Surviving Spouse or Dependent Children under Articles III, IV or V; however, no death benefit shall be payable under this Article VII if the Officer's death causes a beneficiary or the estate of the Officer to receive a death benefit under the disability premium waiver provision of the Company's group life insurance plan, or if the Officer dies before retirement. 7.2 Amount of Death Benefit. The death benefit payable pursuant to Paragraph 7.1 shall be an amount equal to 100% of the Officer's Final Average Earnings, as determined for the purpose of calculating the amount of the Officer's benefits under Article III, IV, or V, whichever is applicable. 7.3 Payment of Death Benefit. The Postretirement Death Benefit shall be paid to the beneficiary or beneficiaries designated in writing by the Officer or, in default of such designation or the failure of the designated beneficiaries to survive the Officer, to the Officer's estate. The death benefit payable under this Article shall be paid in a single sum, within 30 days after the date the proper beneficiary has been identified. Beneficiary designation shown on Appendix C. ARTICLE VIII TERMINATION OF EMPLOYMENT OR LOSS OF POSITION 8.1 Termination of Employment. If the Officer is discharged by the Company for any reason, or if the Officer's employment with the Company terminates prior to the date the Officer becomes entitled to a Supplemental Benefit under Articles III or IV for any reason other than the Officer's death or disability, the Officer (and his or her Surviving Spouse, Dependent Children, or other beneficiaries) shall forfeit any and all rights to receive benefits under this Agreement. 8.2 Loss of Position as Officer. The Officer shall be eligible for benefits under this Agreement only while holding the position of Eligible Officer in the Company. Except as otherwise provided in Article V (relating to Disability), if the Officer ceases to hold such a position prior to the Officer's termination of employment, the Officer (and his or her Surviving Spouse, Dependent Children, or other beneficiaries) shall forfeit any and all rights to receive benefits under this Agreement unless the Officer retires with a right to an immediate benefit under Article III or IV within 30 days after the loss of such position. ARTICLE IX FUNDING 9.1 Unsecured Obligation. The Company's obligations under this Agreement are an unsecured promise to make benefit payments in the future, and nothing herein shall be construed as giving the Officer or his or her beneficiaries any right, title, interest or claim in or to any specific asset, fund, reserve, account or property owned by the Company, or in which the Company has any right, title or interest, either now or in the future. The rights of the Officer and his or her beneficiaries to receive payments under this Agreement shall be solely those of unsecured general creditors of the Company. 9.2 "Rabbi" Trust. This Agreement is intended to be unfunded for the purposes of the Internal Revenue Code and the Employee Retirement Income Security Act of 1974, as amended. However, nothing in this Agreement shall preclude the Company from establishing a trust (of the type commonly known as a "rabbi trust") to assist it in meeting its obligations under this Agreement. If a rabbi trust was established with respect to the Officer's Prior Agreements, this Agreement shall be substituted for the Prior Agreements for all purposes of such trust, and any reference in such trust to the Prior Agreements shall be deemed to be a reference to this Agreement. ARTICLE X ADMINISTRATION 10.1 Administration and Interpretation. The Board of Directors has sole and exclusive discretion to interpret the provisions of this Agreement, and any such interpretation shall be final and binding upon the Officer unless it is found by a court of competent jurisdiction to have been arbitrary and capricious. The Board of Directors may adopt such rules and regulations relating to the administration of this Agreement as it may deem necessary or advisable. 10.2 Claims Procedure. If the Officer or the Officer's beneficiary (hereinafter referred to as a "Claimant") is denied any benefit under this Agreement, he or she may file a claim with the Board of Directors. The Board of Directors shall notify the Claimant within 90 days of its allowance or denial of the claim, unless the Claimant receives written notice from the Board of Directors prior to the end of such 90 day period that special circumstances require an extension of the time for decision, which extension shall not exceed an additional 90 days. The notice of the Board of Directors' decision shall be in writing sent by mail to Claimant's last known address and, if a denial of the claim, and shall contain: (a) the specific reasons for the denial; (b) specific references to pertinent provisions of this Agreement on which the denial is based; and (c) if applicable, a description of any additional information or material necessary to perfect the claim, an explanation of why such information or material is necessary and an explanation of the claim review procedure. 10.3 Review Procedure. (a) A Claimant is entitled to request a review of any denial of his or her claim for a benefit. The request for review must be submitted to the Board of Directors in writing within 60 days of mailing of the notice of the denial. Absent a request for review within the 60 day period, the claim will be deemed to have been conclusively denied. (b) The review shall be conducted by the Board of Directors, which shall afford the Claimant a hearing and the opportunity to review all pertinent documents and submit issues and comments orally and in writing. The Board of Directors shall render a decision within 60 days after receipt of a request for a review; provided, that in special circumstances (such as the necessity of holding a hearing) the Board of Directors may extend the time for decision by not more than 60 days upon written notice to the Claimant. The Claimant shall receive written notice of the Board of Directors' decision, together with specific reasons for the decision and references to the pertinent provisions of this Agreement which form the basis for the decision. ARTICLE XI AMENDMENT AND TERMINATION 11.1 By the Parties. Except as provided in Paragraph 11.2, this Agreement may not be amended or terminated except by a written instrument signed by both parties. 11.2 By the Company. At any time prior to the Officer's termination of employment with a right to receive benefit payments under this Agreement, this Agreement may be terminated or amended by action of the Board of Directors in its sole and absolute discretion, without any notice to or the consent or approval of the Officer; provided, that: (a) this Agreement may not be amended or terminated by the Board of Directors unless a similar amendment or termination is made with respect to all similar agreements between the Company and its Eligible Officers; and (b) this Agreement may not be amended or terminated in a manner that would reduce or impair the Officer's right to receive payment of his or her Accrued Benefit if the Officer subsequently retires under circumstances that would have entitled the Officer to a benefit if this Agreement had not been amended or terminated. For the purposes of this Subparagraph (b), the Officer's "Accrued Benefit" is an amount equal to one-fifteenth of the Supplemental Benefit the Officer would have been be entitled to receive at retirement if this Agreement had not been amended or terminated, multiplied by the Officer's years of Continuous Employment (up to a maximum of 15 years) on the date the Agreement is amended or terminated. Subject to the foregoing, the right of the Board of Directors to amend or terminate this Agreement shall include the absolute discretion to make any amendment prospective or retroactive in application. ARTICLE XII RESTRICTIVE COVENANT 12.1 Covenant Not to Compete. Notwithstanding anything in this Agreement to the contrary, it is expressly agreed that all payments under this Agreement shall terminate, and that the Company shall have no further obligation under this Agreement, upon any violation of the provisions of Paragraph 12.2. Payments pursuant to this Agreement are intended to serve as consideration for this covenant not to compete. 12.2 Scope of Covenant. If, during the period set forth herein and within the service area in which the Company or any of its affiliated companies provides utility services (or in the case of any non-utility business, within the geographic area served by such business), the Officer accepts employment with or becomes a consultant to, or the Officer becomes a partner or shareholder in, any business that is in competition with the business of the Company or any of its affiliated companies, and the Officer fails to terminate such position within 30 days after notice from the Board of Directors of the violation of this covenant not to compete, the Officer and the Officer's beneficiaries shall forfeit all rights to future payments under this Agreement. However, the Officer may hold up to a five percent interest in any company that is traded on the New York Stock Exchange, American Stock Exchange or other national or over-the-counter exchange without violating the provisions of this Paragraph 12.2. Any violation of the provisions set forth above during the period commencing on the date of the Officer's termination of employment with the Company and ending on the third anniversary of such date shall constitute a violation of this Article and shall result in the termination of all future payments under this Agreement. The determination of the Board of Directors as to whether a business is in competition with the Company and whether the competition is occurring in the geographic area designated above shall be controlling for purposes of this Agreement. 12.3 Reasonableness of Restrictions. The Officer agrees that the restrictions set forth in this Article XII including, but not limited to, the time period and the geographical area of such restrictions are fair and reasonable and are reasonably required for the protection of the interests of the Company and its affiliated companies. In the event that, notwithstanding the foregoing, any of the provisions of this Article XII shall be held to be invalid or unenforceable, the remaining provisions thereof shall nevertheless continue to be valid and enforceable as though the invalid or unenforceable parts had not been included. In the event that any provision of this Article XII relating to the time period and/or the areas of restriction shall be declared by a court of competent jurisdiction to exceed the maximum time period or areas such court deems reasonable and enforceable, the time period and/or areas of restriction deemed reasonable and enforceable by said court shall become and thereafter be the maximum time period and/or areas. ARTICLE XIII GENERAL PROVISIONS 13.1 Assignability of Benefits. Neither the Officer nor his or her beneficiaries shall have the power to transfer, assign, anticipate, mortgage or otherwise encumber any right to receive a payment in advance of such payment, and any attempted transfer, assignment, anticipation, mortgage or encumbrance shall be void. No payment shall be subject to seizure for payment of public or private debts, judgments, alimony or separate maintenance, or be transferable by operation of law in the event of bankruptcy, insolvency or otherwise. 13.2 Applicable Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Wisconsin, except to the extent the same are superseded by applicable federal law. 13.3 Tax Withholding. The Company shall withhold all applicable income and other taxes required on all payments under this Agreement. 13.4 Counterparts. This Agreement may be signed in counterparts, which together shall constitute written evidence of the complete agreement of the parties. 13.5 Headings. The headings in this Agreement are for convenience only and shall not be used to interpret or construe its provisions. IN WITNESS WHEREOF, the parties have hereto set their respective hands on the day and year first above written. Executive's Name By ---------------------- Alliant Energy Corporation EX-10.2 3 3RD AMENDED & RESTATED 11/98 STOCKHOLDER'S AGRMT EXHIBIT 10.2 THIRD AMENDED AND RESTATED NOVEMBER 1998 STOCKHOLDERS' AGREEMENT This Third Amended and Restated November 1998 Stockholders' Agreement (this "Agreement") is entered into as of March 10, 2000, by and among McLeodUSA Incorporated, a Delaware corporation (the "Company"); Alliant Energy Corporation, a Wisconsin corporation ("AEC"); Alliant Energy Investments, Inc., an Iowa corporation and indirect wholly owned subsidiary of AEC ("AEI"); Heartland Properties, Inc., a Wisconsin corporation and indirect wholly owned subsidiary of AEC ("Heartland"); LNT Communications LLC, an Iowa limited liability company and indirect wholly owned subsidiary of AEC ("LNT"); Alliant Energy Foundation, Inc., a Wisconsin corporation (non-profit) ("AEF" and together with AEC, AEI, Heartland and LNT, the "AEC Entities"); Clark E. McLeod ("McLeod"); Mary E. McLeod (together with McLeod, the "McLeods"); Richard A. Lumpkin ("Lumpkin") and certain of the former shareholders of Consolidated Communications Inc. ("CCI") and certain permitted transferees of certain of the former CCI shareholders in each case who are listed in Schedule I hereto (the "Principal CCI Shareholders"); and for purposes of Sections 4, 5.6, 5.8(b), 5.11 and the first and second sentences of Section 5.3 only, certain of the other former CCI shareholders and certain permitted transferees of certain of the other former CCI shareholders in each case who are listed in Schedule II hereto (the "Other CCI Shareholders"). The AEC Entities, the McLeods, and Lumpkin and the Principal CCI Shareholders are referred to herein collectively as the "Principal Stockholders" and individually as a "Principal Stockholder." WHEREAS, the Company, AEC, AEI, Heartland, AEF, the McLeods, Lumpkin, the Principal CCI Shareholders and the Other CCI Shareholders are parties to a Second Amended and Restated November 1998 Stockholders' Agreement, entered into as of December 17, 1999 (the "Second Amended and Restated November 1998 Stockholders' Agreement"); WHEREAS, the Company, AEC, AEI, Heartland, AEF, the McLeods, Lumpkin and the Principal CCI Shareholders desire to add LNT as a party to this Agreement as a result of the transfer of certain shares of the Company's Class A common stock, par value $.01 per share (the "Class A Common Stock"), by an Affiliate (as defined in Section 1.2) of AEC to LNT; WHEREAS, the Other CCI Shareholders no longer desire to be parties to this Agreement and the Company and the Principal Stockholders desire to terminate the Other CCI Shareholders as parties to this Agreement; WHEREAS, the Company and the Principal Stockholders deem it to be in the best interests of the Company and its stockholders to provide for the continuity and stability of the business and policies of the Company on the terms and conditions hereinafter set forth; WHEREAS, concurrently with the execution and delivery of this Agreement, the Company, the Principal Stockholders, the Other CCI Shareholders and certain other stockholders of the Company are entering into an amendment and restatement of the Second Amended and Restated January 1999 Stockholders' Agreement, entered into as of December 17, 1999; and WHEREAS, the Company and the Principal Stockholders desire to amend and restate the Second Amended and Restated November 1998 Stockholders' Agreement in its entirety with the terms and conditions hereinafter set forth; NOW, THEREFORE, for and in consideration of the foregoing and of the mutual covenants and agreements contained herein, the parties hereto agree as follows: 1. VOTING AGREEMENT 1.1 Board of Directors For the period commencing on the Effective Date (as defined in Section 1.2) and ending on the Expiration Date (as defined in Section 1.2), each Principal Stockholder, for so long as each such Principal Stockholder beneficially and continuously owns at least two million five hundred thousand (2,500,000) shares of Class A Common Stock, subject to adjustment pursuant to Section 5.1, shall take or cause to be taken all such action within their respective power and authority as may be required: (a) to establish and maintain the authorized size of the Board of Directors of the Company (the "Board of Directors" or the "Board") at up to thirteen (13) directors; (b) to cause to be elected to the Board one (1) director designated by the AEC Entities, for so long as the AEC Entities collectively beneficially and continuously own at least two million five hundred thousand (2,500,000) shares of Class A Common Stock (subject to adjustment pursuant to Section 5.1); (c) to cause Lumpkin to be elected to the Board, for so long as Lumpkin and the Principal CCI Shareholders collectively beneficially and continuously own at least two million five hundred thousand (2,500,000) shares of Class A Common Stock (subject to adjustment pursuant to Section 5.1); (d) to cause to be elected to the Board three (3) directors who are executive officers of the Company designated by McLeod, for so long as the McLeods collectively beneficially and continuously own at least two million five hundred thousand (2,500,000) shares of Class A Common Stock (subject to adjustment pursuant to Section 5.1); (e) to cause to be elected to the Board a director or directors nominated by the Board to replace a director or directors designated pursuant to paragraphs (b) through (d) above upon the earlier to occur of such designated director's or directors' resignation (and the acceptance of such resignation by the Board) and the expiration of such director's or directors' term as a result of any party or parties identified in paragraphs (b) through (d) above no longer collectively beneficially and continuously owning at least two million five hundred thousand (2,500,000) shares of Class A Common Stock (subject to adjustment pursuant to Section 5.1) at any time during the period commencing on the Effective Date and ending on the Expiration Date; it being understood that within three (3) business days following such time that the party or parties identified in paragraphs (b) through (d) above no longer collectively beneficially and continuously own at least two million five hundred thousand (2,500,000) shares of Class A Common Stock (subject to adjustment pursuant to Section 5.1) during such period, such party or parties shall use its or their respective best efforts to cause the director or directors designated by such party or parties to tender their immediate resignation to the Board which the Board may accept or reject; and (f) to cause to be elected to the Board, if and as nominated by the Board, up to eight (8) non-employee directors. For purposes of Section 1.1, (i) the McLeods shall be deemed to be a single Principal Stockholder, (ii) Lumpkin and all of the Principal CCI Shareholders shall be deemed to be a single Principal Stockholder, and the Principal CCI Shareholders shall be deemed to own shares "continuously" as long as the shares of the Principal CCI Shareholders are owned by the Principal CCI Shareholders or a CCI Permitted Transferee (as defined in Section 3.1), and (iii) the AEC Entities shall be deemed to be a single Principal Stockholder, and the AEC Entities shall be deemed to own shares "continuously" as long as the shares of the AEC Entities are owned by the AEC Entities or an AEC Permitted Transferee (as defined in Section 3.1). 1.2 Definitions For purposes of this Agreement, the following terms have the meanings indicated: (a) "Affiliate" and "Associate" shall have the respective meanings ascribed to such terms in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). (b) A person shall be deemed the "beneficial owner" of and shall be deemed to "beneficially own" any securities: (i) which such person or any of such person's Affiliates or Associates, directly or indirectly, has the right to acquire (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding (whether or not in writing), or upon the exercise of conversion rights, exchange rights, other rights, warrants or options, or otherwise; (ii)which such person or any of such person's Affiliates or Associates, directly or indirectly, has the right to vote or dispose of or has "beneficial ownership" of (as determined pursuant to Rule 13d-3 under the Exchange Act), including pursuant to any agreement, arrangement or understanding, whether or not in writing; or (iii) which are beneficially owned, directly or indirectly, by any other person (or any Affiliate or Associate thereof) with which such person or any of such person's Affiliates or Associates has any agreement, arrangement or understanding (whether or not in writing), for the purpose of acquiring, holding, voting or disposing of any voting securities of the Company. For purposes of the definition of "beneficial owner" and "beneficially own," the terms "agreement," "arrangement" and "understanding" shall not include this Agreement or the Third Amended and Restated January 1999 Stockholders' Agreement (as defined in Section 1.2). (c) "Effective Date" shall mean March 10, 2000. (d) "Expiration Date" shall mean December 31, 2001. (e) "Original Stockholders' Agreement" shall mean the Stockholders' Agreement, entered into as of June 14, 1997, as amended on September 19, 1997, by and among the Company, AEI, the McLeods, Lumpkin and certain other stockholders. (f) "Stock Split" shall mean that certain two-for-one stock split in the form of a stock dividend paid on July 26, 1999 to stockholders of record on July 12, 1999 effected by the Company with respect to its Class A Common Stock. (g) "Subsidiary" or "Subsidiaries" shall mean a corporation, partnership, joint venture or other entity of which AEC owns, directly or indirectly, one hundred percent (100%) of the outstanding securities or other interests the holders of which are generally entitled to vote for the election of the board of directors or other governing body. (h) "Third Amended and Restated January 1999 Stockholders' Agreement" shall mean the Third Amended and Restated January 1999 Stockholders' Agreement, entered into as of March 10, 2000, by and among the Company, the Principal Stockholders, the Other CCI Shareholders, M/C Investors L.L.C. and Media/Communications Partners III Limited Partnership. 2. STANDSTILL AEC hereby agrees that, prior to the Expiration Date, neither AEC nor any Affiliate of AEC will (and AEC will not assist or encourage others to), directly or indirectly, acquire or agree, offer, seek or propose to acquire, or cause to be acquired, ownership (including, but not limited to, beneficial ownership) of any securities issued by the Company or any of its subsidiaries, or any rights or options to acquire such ownership (including from a third party), except (a) to the extent expressly set forth in this Agreement, (b) as consented prior thereto in writing by the Board of Directors, (c) upon conversion of any Class B common stock, $.01 par value per share, of the Company into Class A Common Stock pursuant to the terms thereof, (d) with respect to transfers of equity securities between or among AEC and AEC's Subsidiaries consistent with the terms and conditions of this Agreement, or (e) with respect to the grant, vesting or exercise of stock options. 3. TRANSFERS OF SECURITIES 3.1 Restrictions on Transfers (a) Except as otherwise provided in this Section 3.1 or Section 3.2, each Principal Stockholder hereby severally agrees that until the Expiration Date, such Principal Stockholder will not offer, sell, contract to sell, grant any option to purchase, or otherwise dispose of, directly or indirectly, ("Transfer"), any equity securities of the Company or any other securities convertible into or exercisable for such equity securities ("Securities") beneficially owned by such Principal Stockholder (including distributions of Securities with respect to such Securities and Securities acquired as a result of a stock split with respect to such Securities) without submitting a written request to, and receiving the prior written consent of, the Board of Directors, provided, however, that (i) the AEC Entities may transfer Securities to or among any Subsidiary or Subsidiaries of AEC, and (ii) any Principal CCI Shareholder may transfer Securities to any other Principal CCI Shareholder, the spouse of a Principal CCI Shareholder, or a lineal descendant of a Principal CCI Shareholder (or a trust for the primary benefit of any one or more of a Principal CCI Shareholder, the spouse of a Principal CCI Shareholder, or a lineal descendant of a Principal CCI Shareholder or a partnership or limited liability company owned and managed solely by one or more Principal CCI Shareholders, spouses of Principal CCI Shareholders and lineal descendants of Principal CCI Shareholders), or, in the case of a Principal CCI Shareholder that is a trust, to any beneficiary of such trust (or a trust for the primary benefit of such beneficiary or a partnership or limited liability company owned and managed solely by one or more Principal CCI Shareholders, spouses of Principal CCI Shareholders and lineal descendants of Principal CCI Shareholders), in each case with respect to clause (i) and clause (ii), provided that (x) such transfer is done in accordance with the transfer restrictions applicable to such Securities under federal and state securities laws and (y) the transferee agrees to be bound by the terms hereof (as this Agreement may be amended or amended and restated from time to time) as a Principal Stockholder with respect to the shares being transferred pursuant to this Section (any such AEC Entity transferee pursuant to the foregoing proviso, an "AEC Permitted Transferee" and any such Principal CCI Shareholder transferee pursuant to the foregoing proviso, a "CCI Permitted Transferee"), and any such transfer shall not constitute a "Transfer" for purposes of this Agreement. Notwithstanding the foregoing, no party hereto shall avoid the provisions of this Agreement by making one or more transfers to one or more AEC Permitted Transferees or CCI Permitted Transferees, as the case may be, and then at any time directly or indirectly disposing of all or any portion of such party's interest in any such AEC Permitted Transferee or CCI Permitted Transferee, as the case may be. In the event that the Board of Directors consents to any Transfer of Securities by a Principal Stockholder pursuant to this Section 3.1(a) upon the written request of such Principal Stockholder (the "Transferring Stockholder") and except as otherwise provided in Section 3.1(b) and Section 3.2, each other Principal Stockholder shall, notwithstanding the provisions of this Section 3.1(a), have the right to Transfer a percentage of the total number of Securities beneficially owned by such Principal Stockholder equal to the percentage of the total number of Securities beneficially owned by the Transferring Stockholder that the Board of Directors has consented may be Transferred by such Transferring Stockholder. The parties acknowledge that any Transfer pursuant to this Section 3.1(a) to which the Board of Directors has consented may be in connection with, or as part of, a private placement by the Company of, or other transaction involving, its Securities. (b) In addition to the provisions of Section 3.1(a), for the period commencing for the quarter ending March 31, 2000 and ending on the Expiration Date, the Board shall determine prior to the public release of the Company's consolidated financial results with respect to each such financial reporting quarter during such period, the aggregate number, if any, of shares of Class A Common Stock (not to exceed in the aggregate three hundred thousand (300,000) shares of Class A Common Stock per quarter, subject to adjustment pursuant to Section 5.1) that may be Transferred by the Principal Stockholders (the "Transfer Amount") during the period commencing on the third (3rd) business day and ending on the twenty-third (23rd) business day following such public release of the Company's quarterly or annual financial results or such other trading period designated or permitted by the Board with respect to the purchase and sale of its Securities (each such period, a "Transfer Period"). Notwithstanding the provisions of Section 3.1(a), each Principal Stockholder shall be entitled to Transfer during each Transfer Period, provided such Transfer is effected in accordance with all applicable federal and state securities laws, a number of shares of Class A Common Stock equal to thirty-three and one-third percent (33 1/3%) of the Transfer Amount, if any, for such Transfer Period (rounding down in the case of any fractional amount). Any portion of any Principal Stockholder's share of the Transfer Amount that such Principal Stockholder elects not to transfer during a Transfer Period shall be reallocated equally among the remaining Principal Stockholders who intend to Transfer shares of Class A Common Stock during such Transfer Period, and such remaining Principal Stockholders shall be entitled to Transfer such additional shares of Class A Common Stock during the Transfer Period, provided such Transfer is effected in accordance with all applicable federal and state securities laws. In no event shall any portion of a Transfer Amount that is not utilized by a Principal Stockholder during a Transfer Period be reallocated or otherwise credited to any subsequent Transfer Periods. (c) For the period commencing for the quarter ending March 31, 2000 and ending on the Expiration Date, the Company shall give each Principal Stockholder prompt written notice (in any event no later than fifty (50) days prior to the beginning of the applicable Transfer Period) of its determination of any Transfer Amount. Within seven (7) days of receipt of such notice, any Principal Stockholder that desires to Transfer shares of Class A Common Stock during such Transfer Period pursuant to Section 3.1(b) shall provide written notice to the Company of the number of shares of Class A Common Stock that such Principal Stockholder desires to Transfer pursuant to Section 3.1(b). Not later than seven (7) days after receipt of such responses, the Company shall notify all remaining Principal Stockholders of any Principal Stockholder's election not to Transfer the total number of shares of Class A Common Stock that such Principal Stockholder is entitled to Transfer during such Transfer Period. Any Principal Stockholder that desires to Transfer additional shares of Class A Common Stock equal to all or part of the remaining Transfer Amount shall notify the Company within seven (7) days of receipt of the Company's second notice. The Company shall allocate the remaining Transfer Amount in accordance with the provisions of Section 3.1(b) and shall notify the appropriate Principal Stockholders of such allocation no later than ten (10) days prior to the beginning of the Transfer Period. (d) For purposes of this Section 3.1, the McLeods shall be deemed to be a single Principal Stockholder, Lumpkin and all of the Principal CCI Shareholders shall be deemed to be a single Principal Stockholder and the AEC Entities shall be deemed to be a single Principal Stockholder. 3.2 Registration Rights (a) In the event that the Board of Directors consents pursuant to Section 3.1(a) to a Principal Stockholder's request for a Transfer and in connection therewith, the Company agrees to register Securities with respect to such Transfer under the Securities Act of 1933, as amended (the "Securities Act"), the Company shall grant each other Principal Stockholder the opportunity (subject to reduction in the event the registered Transfer is underwritten) to register for Transfer under the Securities Act a percentage of the total number of Securities beneficially owned by such Principal Stockholder equal to the percentage of the total number of Securities beneficially owned by the Transferring Stockholder that such Transferring Stockholder is registering for Transfer under the Securities Act, on the same terms and conditions as the Transferring Stockholder (each Principal Stockholder registering, or indicating a desire to register, any Securities for Transfer under the Securities Act pursuant to this Section 3.2 being a "Registering Transferor"). (b) To the extent that the Company grants pursuant to Section 3.1(b) a Principal Stockholder the opportunity to register shares of Class A Common Stock for Transfer under the Securities Act, the Company shall grant each other Principal Stockholder the opportunity (subject to reduction in the event the registered Transfer is underwritten) to register an equal number of shares of Class A Common Stock for Transfer under the Securities Act on the same terms and conditions. (c) In the event the Company proposes to register any shares of Class A Common Stock under the Securities Act pursuant to an underwritten primary offering (other than pursuant to a registration statement on Form S-4 or Form S-8 or any successor forms thereto or other form which would not permit the inclusion of the shares of Class A Common Stock of the Principal Stockholders), the Company, as determined by the Board of Directors, shall give written notice to all Principal Stockholders of its intention to effect such a registration. Following any such notice, the Board of Directors shall undertake to determine the aggregate number, if any, of shares of Class A Common Stock held by the Principal Stockholders (not to exceed in the aggregate on a per year basis a number of shares of Class A Common Stock equal to fifteen percent (15%) of the total number of shares of Class A Common Stock beneficially owned by the Principal Stockholders as of December 31, 1998 (and which, in the aggregate for Lumpkin and all of the Principal CCI Shareholders (based on the termination of the Other CCI Shareholders as parties to this Agreement) on a pre-Stock Split basis, is fifteen percent (15%) of 2,755,651 shares of Class A Common Stock), subject to appropriate and proportionate adjustment as a result of the Stock Split and subject to adjustment pursuant to Section 5.1) to be registered by the Company under the Securities Act (the "Registrable Amount") for Transfer by the Principal Stockholders in connection with such offering. If the Board determines to register shares of Class A Common Stock held by the Principal Stockholders pursuant to this Section 3.2(c), the Company will promptly give written notice of such determination to all Principal Stockholders, and thereupon the Company will use commercially reasonable efforts to effect the registration of that portion of the Registrable Amount that the Registering Transferors indicate a desire to register. In the event the Registering Transferors indicate a desire to register a number of shares of Class A Common Stock that, in the aggregate, exceeds the Registrable Amount, the number of shares of Class A Common Stock that each Registering Transferor shall be entitled to register shall be reduced to the extent such number exceeds such Registering Transferor's pro rata share of the Registrable Amount based upon the ratio of the total number of Securities beneficially owned by such Registering Transferor to the total number of Securities beneficially owned by all Principal Shareholders. To the extent any portion of the Registrable Amount remains unallocated after such reductions, each Registering Transferor who has indicated a desire to register additional shares of Class A Common Stock shall be entitled to register an additional amount of Class A Common Stock equal to such Registering Transferor's pro rata portion of the remaining Registrable Amount based upon the ratio of the total number of Securities beneficially owned by such Registering Transferor to the total number of Securities beneficially owned by all Registering Transferors who have indicated a desire to register additional shares of Class A Common Stock. The reallocation procedure described in the preceding sentence shall be repeated until the entire Registrable Amount is allocated. All terms, conditions and rights with respect to such registration (including but not limited to any determination to reduce the Registrable Amount) shall be determined by the Board, provided that (i) the representations and warranties of a Principal Stockholder shall be customary taking into account, among other things, the nature of the offering and such Principal Stockholder's relationship with the Company, and (ii) the Company shall be responsible for all expenses with respect to such registration other than underwriting discounts and commissions allocable to the Class A Common Stock of the Registering Transferors, which underwriting discounts and commissions shall be the responsibility of the Registering Transferors. (d) In addition to the registration rights granted pursuant to Sections 3.2(a), (b) and (c), no more frequently than once during each of the calendar years ending December 31, 2000 and 2001 (each such year, an "Annual Period"), and upon either (i) the receipt of a written request of one or more Principal Stockholders or (ii) a determination by the Board of Directors, the Board shall undertake to determine the Registrable Amount, if any, for Transfer by the Principal Stockholders. If the Board determines to register shares of Class A Common Stock held by the Principal Stockholders pursuant to this Section 3.2(d), the Company will promptly give written notice of such determination to all Principal Stockholders, and thereupon the Company will use commercially reasonable efforts to effect the registration of that portion of the Registrable Amount that the Registering Transferors indicate a desire to register. In the event the Registering Transferors indicate a desire to register a number of shares of Class A Common Stock that, in the aggregate, exceeds the Registrable Amount, the number of shares of Class A Common Stock that each Registering Transferor shall be entitled to register shall be reduced to the extent such number exceeds such Registering Transferor's pro rata share of the Registrable Amount based upon the ratio of the total number of Securities beneficially owned by such Registering Transferor to the total number of Securities beneficially owned by all Principal Stockholders. To the extent any portion of the Registrable Amount remains unallocated after such reductions, each Registering Transferor who has indicated a desire to register additional shares of Class A Common Stock shall be entitled to register an additional amount of Class A Common Stock equal to such Registering Transferor's pro rata portion of the remaining Registrable Amount based upon the ratio of the total number of Securities beneficially owned by such Registering Transferor to the total number of Securities beneficially owned by all Registering Transferors who have indicated a desire to register additional shares of Class A Common Stock. The reallocation procedure described in the preceding sentence shall be repeated until the entire Registrable Amount is allocated. All terms, conditions and rights with respect to such registration (including but not limited to any determination to reduce the Registrable Amount) shall be determined by the Board, provided that (i) the representations and warranties of a Principal Stockholder shall be customary taking into account, among other things, the nature of the offering and such Principal Stockholder's relationship with the Company, and (ii) the Company shall be responsible for all expenses with respect to such registration other than underwriting discounts and commissions, which underwriting discounts and commissions shall be the responsibility of the Registering Transferors. (e) If the Board establishes a committee (a "Pricing Committee") to authorize and approve the price and any other terms of any Transfer of Securities registered under the Securities Act pursuant to this Section 3.2 in which Lumpkin or any Principal CCI Shareholder is participating as a Registering Transferor, the Company will use its best efforts to cause Lumpkin to be nominated to such Pricing Committee. Notwithstanding any other provision of this Agreement, to the extent the Company has undertaken to register Securities of the Principal Stockholders pursuant to this Section 3.2, the Company may subsequently determine not to register such Securities and may either not file a registration statement or otherwise withdraw or abandon a registration statement previously filed with respect to the registration of such Securities. (f) For purposes of this Section 3.2, the McLeods shall be deemed to be a single Principal Stockholder, Lumpkin and all of the Principal CCI Shareholders shall be deemed to be a single Principal Stockholder and the AEC Entities shall be deemed to be a single Principal Stockholder. 4. REPRESENTATIONS AND WARRANTIES 4.1 Representations and Warranties of Non-individual Stockholders Each non-individual party to this Agreement hereby represents and warrants, as of the date of this Agreement, to the Company and to each other party as follows: 4.1.1Authorization Such party has taken all action necessary for it to enter into this Agreement and to consummate the transactions contemplated hereby. 4.1.2Binding Obligation This Agreement constitutes a valid and binding obligation of such party, enforceable in accordance with its terms, except to the extent that such enforceability may be limited by bankruptcy, insolvency, and similar laws affecting the rights and remedies of creditors generally, and by general principles of equity and public policy; and each document and instrument to be executed by such party pursuant hereto, when executed and delivered in accordance with the provisions hereof, shall be a valid and binding obligation of such party, enforceable in accordance with its terms (with the aforesaid exceptions). 4.2 Representations and Warranties of Individual Stockholders Each party to this Agreement who is an individual hereby represents and warrants, as of the date of this Agreement, to the Company and to each other party as follows: 4.2.1Power and Authority Such party has the legal capacity and all other power and authority necessary to enter into this Agreement and to consummate the transactions contemplated hereby. 4.2.2Binding Obligation This Agreement constitutes a valid and binding obligation of such party, enforceable in accordance with its terms, except to the extent that such enforceability may be limited by bankruptcy, insolvency, and similar laws affecting the rights and remedies of creditors generally, and by general principles of equity and public policy; and each document and instrument to be executed by such party pursuant hereto, when executed and delivered in accordance with the provisions hereof, shall be a valid and binding obligation of such party, enforceable in accordance with its terms (with the aforesaid exceptions). 4.3 Representations and Warranties of the Company The Company hereby represents and warrants, as of the date of this Agreement, to each party as follows: 4.3.1Authorization The Company has taken all corporate action necessary for it to enter into this Agreement and to consummate the transactions contemplated hereby. 4.3.2Binding Obligation This Agreement constitutes a valid and binding obligation of the Company, enforceable in accordance with its terms, except to the extent that such enforceability may be limited by bankruptcy, insolvency, and similar laws affecting the rights and remedies of creditors generally, and by general principles of equity and public policy; and each document and instrument to be executed by the Company pursuant hereto, when executed and delivered in accordance with the provisions hereof, shall be a valid and binding obligation of the Company, enforceable in accordance with its terms (with the aforesaid exceptions). 5. MISCELLANEOUS 5.1 Effect of Changes in Capitalization All share amounts of the Company's capital stock referred to in this Agreement shall be appropriately and proportionally adjusted for any recapitalization, reclassification, stock split-up, combination of shares, exchange of shares, stock dividend or other distribution payable in capital stock, or other increase or decrease in such shares effected without receipt of consideration by the Company, occurring after the date of this Agreement. 5.2 Additional Actions and Documents Each of the parties hereto hereby agrees to take or cause to be taken such further actions, to execute, deliver and file or cause to be executed, delivered and filed such further documents and instruments, and to obtain such consents, as may be necessary or as may be reasonably requested in order to fully effectuate the purposes, terms and conditions of this Agreement, whether before, at or after the Effective Date. 5.3 Entire Agreement; Termination of Original Stockholders' Agreement; Amendment Other than the Third Amended and Restated January 1999 Stockholders' Agreement with respect to the parties thereto and as set forth therein, this Agreement constitutes the entire agreement among the parties hereto as of the date hereof with respect to the specific matters contemplated herein, and it supersedes all prior oral or written agreements, commitments or understandings with respect to the matters provided for herein. The parties hereto further agree, confirm and acknowledge that the Original Stockholders' Agreement is terminated and of no force or effect. No amendment, modification or discharge of this Agreement shall be valid or binding unless set forth in writing and duly executed by the Company and by the party against whom enforcement of the amendment, modification, or discharge is sought. 5.4 Limitation on Benefit It is the explicit intention of the parties hereto that no person or entity other than the parties hereto is or shall be entitled to bring any action to enforce any provision of this Agreement against any of the parties hereto, and the covenants, undertakings and agreements set forth in this Agreement shall be solely for the benefit of, and shall be enforceable only by, the parties hereto or their respective successors, heirs, executors, administrators, legal representatives and permitted assigns. 5.5 Binding Effect; Specific Performance This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors, heirs, executors, administrators, legal representatives and permitted assigns. No party shall assign this Agreement without the written consent of the other parties hereto; and such consent shall not be unreasonably withheld. The parties hereto agree that irreparable damage would occur in the event any provision of this Agreement was not performed in accordance with the terms hereof and that the parties shall be entitled to specific performance of the terms hereof, in addition to any other remedy at law or in equity. 5.6 Governing Law This Agreement, the rights and obligations of the parties hereto, and any claims or disputes relating thereto, shall be governed by and construed in accordance with the laws of Delaware (excluding the choice of law rules thereof). 5.7 Notices All notices, demands, requests, or other communications which may be or are required to be given, served, or sent by any party to any other party pursuant to this Agreement shall be in writing and shall be hand-delivered or mailed by first-class, registered or certified mail, return receipt requested, postage prepaid, or transmitted by telegram, telecopy, facsimile transmission or telex, addressed as follows: (i) If to the Company or to the McLeods: McLeodUSA Incorporated McLeodUSA Technology Park 6400 C Street, SW, P.O. Box 3177 Cedar Rapids, IA 52406-3177 Attention: Randall Rings Facsimile: (319) 790-7901 (ii) If to the AEC Entities: Alliant Energy Investments, Inc. 200 1st Street SE Cedar Rapids, IA 52401 Attention: James E. Hoffman Facsimile: (319) 398-4204 (iii)If to Lumpkin or any Principal CCI Shareholder: P.O. Box 1234 Mattoon, IL 61938 Attention: Richard A. Lumpkin Facsimile: (217) 234-9934 with a copy to : Schiff Hardin & Waite 6600 Sears Tower Chicago, Illinois 60606 Attention: David R. Hodgman, Esq. Facsimile: (312) 258-5600 Each party may designate by notice in writing a new address to which any notice, demand, request or communication may thereafter be so given, served or sent. Each notice, demand, request, or communication which shall be hand-delivered, mailed, transmitted, telecopied or telexed in the manner described above, or which shall be delivered to a telegraph company, shall be deemed sufficiently given, served, sent, received or delivered for all purposes at such time as it is delivered to the addressee (with the return receipt, the delivery receipt, or the answerback being deemed conclusive, but not exclusive, evidence of such delivery) or at such time as delivery is refused by the addressee upon presentation. 5.8 Termination (a) Notwithstanding any other provision of this Agreement, if during any Annual Period the Board of Directors has not provided a Principal Stockholder a reasonable opportunity to Transfer Securities pursuant to Section 3.2 or consented to the written request of such Principal Stockholder or otherwise provided such Principal Stockholder a reasonable opportunity to Transfer (other than a transfer by a Principal CCI Shareholder to a CCI Permitted Transferee and other than a transfer by the AEC Entities to an AEC Permitted Transferee) pursuant to Section 3.1(a) an aggregate number of shares of Class A Common Stock equal to not less than fifteen percent (15%) of the total number of shares of Class A Common Stock beneficially owned by such Principal Stockholder as of December 31, 1998 (and which, in the aggregate for Lumpkin and all of the Principal CCI Shareholders (based on the termination of the Other CCI Shareholders as parties to this Agreement) on a pre-Stock Split basis, is fifteen percent (15%) of 2,755,651 shares of Class A Common Stock), subject to appropriate and proportionate adjustment as a result of the Stock Split and subject to adjustment pursuant to Section 5.1, then such Principal Stockholder may terminate this Agreement as it applies to such terminating party by providing written notice of termination to the Company and the other Principal Stockholders no later than ten (10) business days following the end of such Annual Period, such that all rights and obligations hereunder shall cease, and this Agreement shall be of no further force or effect, with respect to the terminating party. Unless otherwise previously terminated by the Principal Stockholders pursuant to this Section 5.8(a), this Agreement shall terminate on the Expiration Date. For purposes of this Section 5.8(a), the McLeods shall be deemed to be a single Principal Stockholder, Lumpkin and all of the Principal CCI Shareholders shall be deemed to be a single Principal Stockholder and the AEC Entities shall be deemed to be a single Principal Stockholder. (b) This Agreement is hereby terminated with respect to each of the Other CCI Shareholders, such that all rights and obligations hereunder shall cease, and this Agreement shall be of no further force or effect, with respect to each of the Other CCI Shareholders. 5.9 Publicity Each of the Principal Stockholders will use its reasonable best efforts to consult with the Company prior to issuing any press release, making any filing with any governmental entity or national securities exchange or making any other public dissemination of information by such Principal Stockholder within which this Agreement or the contents hereof are referenced or described. 5.10 Appointment of Representative Each of the Principal CCI Shareholders hereby appoints Lumpkin, with power of substitution, as its exclusive agent to act on its behalf with respect to any and all actions to be taken under or amendments or modifications to be made to this Agreement (the "Representative"). The Representative shall take, and the Principal CCI Shareholders agree that the Representative shall take, any and all actions which the Representative believes are necessary or advisable under this Agreement for and on behalf of each of the Principal CCI Shareholders, as fully as if each of the Principal CCI Shareholders were acting on its own behalf, including, without limitation, dealing with the Company and the other parties hereto with respect to all matters arising under this Agreement, entering into any amendment or modification to this Agreement deemed advisable by the Representative and taking any and all other actions specified in or contemplated by this Agreement. The Company and the other parties hereto shall have the right to rely upon all actions taken or not taken by the Representative pursuant to this Agreement, all of which actions or omissions shall be legally binding upon each of the Principal CCI Shareholders. 5.11 Execution in Counterparts To facilitate execution, this Agreement may be executed in as many counterparts as may be required; and it shall not be necessary that the signatures of, or on behalf of, each party, or that the signatures of all persons required to bind any party, appear on each counterpart; but it shall be sufficient that the signature of, or on behalf of, each party, or that the signatures of the persons required to bind any party, appear on one or more of the counterparts. All counterparts shall collectively constitute a single agreement. It shall not be necessary in making proof of this Agreement to produce or account for more than a number of counterparts containing the respective signatures of, or on behalf of, all of the parties hereto. [Remainder of Page Intentionally Left Blank] IN WITNESS WHEREOF, the undersigned have duly executed and delivered this Third Amended and Restated November 1998 Stockholders' Agreement, or have caused this Third Amended and Restated November 1998 Stockholders' Agreement to be duly executed and delivered on their behalf, as of the day and year first hereinabove set forth. McLEODUSA INCORPORATED By: /s/ J. Lyle Patrick -------------------------------- Name: J. Lyle Patrick Title: Group Vice President/CFO /s/ Clark E. McLeod /s/ Mary E. McLeod - ------------------- ------------------- Clark E. McLeod Mary E. McLeod ALLIANT ENERGY CORPORATION By: /s/ James E. Hoffman ------------------------------- Name: James E. Hoffman Title: Executive Vice President Business Development ALLIANT ENERGY FOUNDATION, INC. By: /s/ Edward M. Gleason ---------------------------- Name: Edward M. Gleason Title: Treasurer ALLIANT ENERGY INVESTMENTS, INC. By: /s/ James E. Hoffman ------------------------- Name: James E. Hoffman Title: President, Alliant Energy Resources HEARTLAND PROPERTIES, INC. By: /s/ Henry Wertheimer -------------------------------- Name: Henry Wertheimer Title: Vice President/Treasurer LNT COMMUNICATIONS LLC By: Alliant Energy Resources, Inc., its sole member By: /s/ James E. Hoffman --------------------------------- Name: James E. Hoffman Title: President /s/ Richard A. Lumpkin /s/ Gail G. Lumpkin - ---------------------- -------------------- Richard A. Lumpkin Gail G. Lumpkin The two trusts created under the Mary Green Lumpkin Gallo Trust Agreement dated December 29, 1989, one for the benefit of each of: Benjamin Iverson Lumpkin Elizabeth Arabella Lumpkin United States Trust Company of New York, Trustee By: /s/ Loraine B. Tsavaris --------------------------------- Name: Loraine B. Tsavaris Title: Managing Director The trust established by Richard Adamson Lumpkin under the Trust Agreement dated February 6, 1970, for the benefit of Richard Anthony Lumpkin United States Trust Company of New York, Trustee By: /s/ Loraine B. Tsavaris ------------------------------- Name: Loraine B. Tsavaris Title: Managing Director The two trusts created under the Richard Adamson Lumpkin Grandchildren's Trust dated September 5, 1980, one for the benefit of each of: Benjamin Iverson Lumpkin Elizabeth Arabella Lumpkin United States Trust Company of New York, Trustee By: /s/ Loraine B. Tsavaris --------------------------------- Name: Loraine B. Tsavaris Title: Managing Director The two 1990 Personal Income Trusts established by Richard A. Lumpkin, dated April 20, 1990, one for the benefit of each of: Benjamin Iverson Lumpkin Elizabeth Arabella Lumpkin /s/ David R. Hodgman - ------------------------- David R. Hodgman, Trustee /s/ Steven L. Grissom - -------------------------- Steven L. Grissom, Trustee FOR PURPOSES OF SECTIONS 4, 5.6, 5.8(b), 5.11 AND THE FIRST AND SECOND SENTENCES OF SECTION 5.3 ONLY: Margaret Lumpkin Keon Trust Mary Lee Sparks Trust dated May 13, 1978 dated May 13, 1978 /s/ Margaret Lumpkin Keon /s/ Mary Lee Sparks - ------------------------- ------------------------------ Margaret Lumpkin Keon, as Trustee Mary Lee Sparks, as Trustee /s/ Steven L. Grissom --------------------- Steven L. Grissom, as Trustee /s/ Mary Lee Sparks - ------------------- Mary Lee Sparks The ten trusts created under the Mary Green Lumpkin Gallo Trust Agreement dated December 29, 1989, one for the benefit of each of: Joseph John Keon III, Katherine Stoddert Keon, Lisa Anne Keon, Margaret Lynley Keon, Pamela Keon Vitale, Susan Tamara Keon DeWyngaert, Anne Romayne Sparks, Barbara Lee Sparks, Christina Louise Sparks, and John Woodruff Sparks United States Trust Company of New York, Trustee By: /s/ Loraine B. Tsavaris --------------------------------- Name: Loraine B. Tsavaris Title: Managing Director The ten trusts created under the Richard Adamson Lumpkin Grandchildren's Trust dated September 5, 1980, one for the benefit of each of: Joseph John Keon III, Katherine Stoddert Keon, Lisa Anne Keon, Margaret Lynley Keon, Pamela Keon Vitale, Susan Tamara Keon DeWyngaert, Anne Romayne Sparks, Barbara Lee Sparks, Christina Louise Sparks, and John Woodruff Sparks United States Trust Company of New York, Trustee By: /s/ Loraine B. Tsavaris ---------------------------- Name: Loraine B. Tsavaris Title: Managing Director The two trusts established by Richard Adamson Lumpkin under the Trust Agreement dated February 6, 1970, one for the benefit of each of: Margaret Anne Keon, and Mary Lee Sparks United States Trust Company of New York, Trustee By: /s/ Loraine B. Tsavaris ---------------------------- Name: Loraine B. Tsavaris Title: Managing Director The ten 1990 Personal Income Trusts established by Margaret L. Keon and Mary Lee Sparks, each dated April 20, 1990, one for the benefit of each of: Joseph John Keon III, Katherine Stoddert Keon, Lisa Anne Keon, Margaret Lynley Keon, Pamela Keon Vitale, Susan Tamara Keon DeWyngaert, Anne Romayne Sparks, Barbara Lee Sparks, Christina Louise Sparks, and John Woodruff Sparks /s/ David R. Hodgman - -------------------- David R. Hodgman, Trustee /s/ Steven L. Grissom - --------------------- Steven L. Grissom, Trustee SCHEDULE I Richard A. Lumpkin Gail G. Lumpkin United States Trust Company of New York, as Trustee of two trusts created under the Mary Green Lumpkin Gallo Trust Agreement dated December 29, 1989, one for the benefit of each of Benjamin Iverson Lumpkin and Elizabeth Arabella Lumpkin. United States Trust Company of New York, as Trustee of two trusts created under the Richard Adamson Lumpkin Grandchildren's Trust dated September 5, 1980, one for the benefit of each of Benjamin Iverson Lumpkin and Elizabeth Arabella Lumpkin. United States Trust Company of New York, as Trustee of the trust established by Richard Adamson Lumpkin under the Trust Agreement dated February 6, 1970, for the benefit of Richard Anthony Lumpkin. David R. Hodgman and Steven L. Grissom, as Trustees of two 1990 Personal Income Trusts established by Richard A. Lumpkin, each dated April 20, 1990, one for the benefit of each of Benjamin Iverson Lumpkin and Elizabeth Arabella Lumpkin. SCHEDULE II Margaret Lumpkin Keon, as Trustee under the Margaret Lumpkin Keon Trust dated May 13, 1978. Mary Lee Sparks and Steven L. Grissom, as Trustees of the Mary Lee Sparks Trust dated May 13, 1978. Mary Lee Sparks United States Trust Company of New York, as Trustee of ten trusts created under the Mary Green Lumpkin Gallo Trust Agreement dated December 29, 1989, one for the benefit of each of Joseph John Keon III, Katherine Stoddert Keon, Lisa Anne Keon, Margaret Lynley Keon, Pamela Keon Vitale, Susan Tamara Keon DeWyngaert, Anne Romayne Sparks, Barbara Lee Sparks, Christina Louise Sparks, and John Woodruff Sparks. United States Trust Company of New York, as Trustee of ten trusts created under the Richard Adamson Lumpkin Grandchildren's Trust dated September 5, 1980, one for the benefit of each of Joseph John Keon III, Katherine Stoddert Keon, Lisa Anne Keon, Margaret Lynley Keon, Pamela Keon Vitale, Susan Tamara Keon DeWyngaert, Anne Romayne Sparks, Barbara Lee Sparks, Christina Louise Sparks, and John Woodruff Sparks. United States Trust Company of New York, as Trustee of two trusts established by Richard Adamson Lumpkin under the Trust Agreement dated February 6, 1970, one for the benefit of each of Margaret Anne Keon and Mary Lee Sparks. David R. Hodgman and Steven L. Grissom, as Trustees of ten 1990 Personal Income Trusts established by Margaret L. Keon and Mary Lee Sparks, each dated April 20, 1990, one for the benefit of each of Joseph John Keon III, Katherine Stoddert Keon, Lisa Anne Keon, Margaret Lynley Keon, Pamela Keon Vitale, Susan Tamara Keon DeWyngaert, Anne Romayne Sparks, Barbara Lee Sparks, Christina Louise Sparks, and John Woodruff Sparks. EX-10.3 4 3RD AMENDED & RESTATED 1/99 STOCKHOLDER'S AGRMNT EXHIBIT 10.3 THIRD AMENDED AND RESTATED JANUARY 1999 STOCKHOLDERS' AGREEMENT This Third Amended and Restated January 1999 Stockholders' Agreement (this "Agreement") is entered into as of March 10, 2000, by and among McLeodUSA Incorporated, a Delaware corporation (the "Company"); Alliant Energy Corporation, a Wisconsin corporation ("AEC"); Alliant Energy Investments, Inc., an Iowa corporation and indirect wholly owned subsidiary of AEC ("AEI"); Heartland Properties, Inc., a Wisconsin corporation and indirect wholly owned subsidiary of AEC ("Heartland"); LNT Communications LLC, an Iowa limited liability company and indirect wholly owned subsidiary of AEC ("LNT"); Alliant Energy Foundation, Inc., a Wisconsin corporation (non-profit) ("AEF" and together with AEC, AEI, Heartland and LNT, the "AEC Entities"); Clark E. McLeod ("McLeod"); Mary E. McLeod (together with McLeod, the "McLeods"); M/C Investors L.L.C., a Delaware limited liability company ("M/C Investors"); Media/Communications Partners III Limited Partnership, a Delaware limited partnership ("M/C Partners" and together with M/C Investors, the "M/C Stockholders"); Richard A. Lumpkin ("Lumpkin") and certain of the former shareholders of Consolidated Communications Inc. ("CCI") and certain permitted transferees of certain of the former CCI shareholders in each case who are listed in Schedule I hereto (the "Principal CCI Shareholders"); and for purposes of Sections 4, 5.6, 5.8(d), 5.11 and the first sentence of Section 5.3 only, certain of the other former CCI shareholders and certain permitted transferees of certain of the other former CCI shareholders in each case who are listed in Schedule II hereto (the "Other CCI Shareholders"). The AEC Entities, the McLeods, Lumpkin and the Principal CCI Shareholders are referred to herein collectively as the "Original Stockholders" and individually as an "Original Stockholder." WHEREAS, the Company, AEC, AEI, Heartland, AEF, the McLeods, the M/C Stockholders, Lumpkin, the Principal CCI Shareholders and the Other CCI Shareholders are parties to a Second Amended and Restated January 1999 Stockholders' Agreement, entered into as of December 17, 1999 (the "Second Amended and Restated January 1999 Stockholders' Agreement"); WHEREAS, the Company, AEC, AEI, Heartland, AEF, the McLeods, the M/C Stockholders, Lumpkin and the Principal CCI Shareholders desire to add LNT as a party to this Agreement as a result of the transfer of certain shares of the Company's Class A common stock, par value $.01 per share (the "Class A Common Stock"), by an Affiliate (as defined in Section 2.2) of AEC to LNT; WHEREAS, the Other CCI Shareholders no longer desire to be parties to this Agreement and the Company, the M/C Stockholders and the Original Stockholders desire to terminate the Other CCI Shareholders as parties to this Agreement; WHEREAS, the Company, the Original Stockholders and the M/C Stockholders deem it to be in the best interests of the Company and its stockholders to provide for the continuity and stability of the business and policies of the Company on the terms and conditions hereinafter set forth; WHEREAS, concurrently with execution and delivery of this Agreement, the Company, the Original Stockholders and the Other CCI Shareholders are entering into an amendment and restatement of the Second Amended and Restated November 1998 Stockholders' Agreement, entered into as of December 17, 1999; and WHEREAS, the Company, the Original Stockholders and the M/C Stockholders desire to amend and restate the Second Amended and Restated January 1999 Stockholders' Agreement in its entirety with the terms and conditions hereinafter set forth; NOW, THEREFORE, for and in consideration of the foregoing and of the mutual covenants and agreements contained herein, the parties hereto agree as follows: 1. [INTENTIONALLY DELETED] 2. VOTING AGREEMENT 2.1 Board of Directors For the period commencing on the Effective Date (as defined in Section 2.2) and ending on the Expiration Date (as defined in Section 2.2), each Original Stockholder and the M/C Stockholders, for so long as each such Original Stockholder and the M/C Stockholders beneficially and continuously owns at least two million five hundred thousand (2,500,000) shares of Class A Common Stock, subject to adjustment pursuant to Section 5.1, shall take or cause to be taken all such action within their respective power and authority as may be required: (a) to establish and maintain the authorized size of the Board of Directors of the Company (the "Board of Directors" or the "Board") at up to thirteen (13) directors; (b) to cause to be elected to the Board one (1) director designated by the AEC Entities, for so long as the AEC Entities collectively beneficially and continuously own at least two million five hundred thousand (2,500,000) shares of Class A Common Stock (subject to adjustment pursuant to Section 5.1); (c) to cause Lumpkin to be elected to the Board, for so long as Lumpkin and the Principal CCI Shareholders collectively beneficially and continuously own at least two million five hundred thousand (2,500,000) shares of Class A Common Stock (subject to adjustment pursuant to Section 5.1); (d) to cause to be elected to the Board three (3) directors who are executive officers of the Company designated by McLeod, for so long as the McLeods collectively beneficially and continuously own at least two million five hundred thousand (2,500,000) shares of Class A Common Stock (subject to adjustment pursuant to Section 5.1); (e) to cause to be elected to the Board one (1) director designated by the M/C Stockholders, for so long as the M/C Stockholders collectively beneficially and continuously own at least two million five hundred thousand (2,500,000) shares of Class A Common Stock (subject to adjustment pursuant to Section 5.1); (f) to cause to be elected to the Board a director or directors nominated by the Board to replace a director or directors designated pursuant to paragraphs (b) through (e) above upon the earlier to occur of such designated director's or directors' resignation (and the acceptance of such resignation by the Board) and the expiration of such director's or directors' term as a result of any party or parties identified in paragraphs (b) through (e) above no longer collectively beneficially and continuously owning at least two million five hundred thousand (2,500,000) shares of Class A Common Stock (subject to adjustment pursuant to Section 5.1) at any time during the period commencing on the Effective Date and ending on the Expiration Date; it being understood that within three (3) business days following such time that the party or parties identified in paragraphs (b) through (e) above no longer collectively beneficially and continuously own at least two million five hundred thousand (2,500,000) shares of Class A Common Stock (subject to adjustment pursuant to Section 5.1) during such period, such party or parties shall use its or their respective best efforts to cause the director or directors designated by such party or parties to tender their immediate resignation to the Board which the Board may accept or reject; and (g) to cause to be elected to the Board, if and as nominated by the Board, up to seven (7) non-employee directors. For purposes of this Section 2.1, (i) the McLeods shall be deemed to be a single Original Stockholder of the Company, (ii) the M/C Stockholders shall be deemed to be a single stockholder of the Company, and the M/C Stockholders shall be deemed to own shares "continuously" as long as the shares of the M/C Stockholders are owned by the M/C Stockholders or an M/C Stockholder Permitted Transferee (as defined in Section 3.1), (iii) Lumpkin and all of the Principal CCI Shareholders shall be deemed to be a single Original Stockholder of the Company, and the Principal CCI Shareholders shall be deemed to own shares "continuously" as long as the shares of the Principal CCI Shareholders are owned by the Principal CCI Shareholders or a CCI Permitted Transferee (as defined in the Third Amended and Restated November 1998 Stockholders' Agreement (as defined in Section 2.2)), and (iv) the AEC Entities shall be deemed to be a single Original Stockholder of the Company, and the AEC Entities shall be deemed to own shares "continuously" as long as the shares of the AEC Entities are owned by the AEC Entities or an AEC Permitted Transferee (as defined in the Third Amended and Restated November 1998 Stockholders' Agreement). 2.2 Definitions For purposes of this Agreement, the following terms have the meanings indicated: (a) "Affiliate" and "Associate" shall have the respective meanings ascribed to such terms in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). (b) A person shall be deemed the "beneficial owner" of and shall be deemed to "beneficially own" any securities: (i) which such person or any of such person's Affiliates or Associates, directly or indirectly, has the right to acquire (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding (whether or not in writing), or upon the exercise of conversion rights, exchange rights, other rights, warrants or options, or otherwise; (ii)which such person or any of such person's Affiliates or Associates, directly or indirectly, has the right to vote or dispose of or has "beneficial ownership" of (as determined pursuant to Rule 13d-3 under the Exchange Act), including pursuant to any agreement, arrangement or understanding, whether or not in writing; or (iii) which are beneficially owned, directly or indirectly, by any other person (or any Affiliate or Associate thereof) with which such person or any of such person's Affiliates or Associates has any agreement, arrangement or understanding (whether or not in writing), for the purpose of acquiring, holding, voting or disposing of any voting securities of the Company. For purposes of the definition of "beneficial owner" and "beneficially own," the terms "agreement," "arrangement" and "understanding" shall not include this Agreement or the Third Amended and Restated November 1998 Stockholders' Agreement. (c) "Effective Date" shall mean March 10, 2000. (d) "Expiration Date" shall mean December 31, 2001. (e) "Merger" shall mean the merger of Ovation Communications, Inc. with and into Bravo Acquisition Corporation pursuant to the terms and conditions of the Merger Agreement. (f) "Merger Agreement" shall mean the Agreement and Plan of Merger, dated as of January 7, 1999, by and among the Company, Bravo Acquisition Corporation, Ovation Communications, Inc. and certain of the stockholders of Ovation Communications, Inc. (g) "Stock Split" shall mean that certain two-for-one stock split in the form of a stock dividend paid on July 26, 1999 to stockholders of record on July 12, 1999 effected by the Company with respect to its Class A Common Stock. (h) "Third Amended and Restated November 1998 Stockholders' Agreement" shall mean the Third Amended and Restated November 1998 Stockholders' Agreement, entered into as of March 10, 2000 by and among the Company, the Original Stockholders and the Other CCI Shareholders. 3. TRANSFERS OF SECURITIES 3.1 Restrictions on Transfers (a) Except as otherwise provided in this Section 3.1 or Section 3.2, the M/C Stockholders hereby agree that until the Expiration Date, the M/C Stockholders will not offer, sell, contract to sell, grant any option to purchase, or otherwise dispose of, directly or indirectly, ("Transfer"), any equity securities of the Company or any other securities convertible into or exercisable for such equity securities ("Securities") beneficially owned by such M/C Stockholders as a result of the Merger (including distributions of Securities with respect to such Securities and Securities acquired as a result of a stock split with respect to such Securities) without submitting a written request to, and receiving the prior written consent of, the Board of Directors; provided, however, that the M/C Stockholders may transfer Securities to any beneficial owner or Affiliate of the M/C Stockholders, in each case provided that (i) such transfer is done in accordance with the transfer restrictions applicable to such Securities under federal and state securities laws and (ii) the transferee agrees to be bound by the terms hereof (as this Agreement may be amended or amended and restated from time to time) as an M/C Stockholder with respect to the shares being transferred pursuant to this Section (any such M/C Stockholder transferee pursuant to the foregoing proviso, an "M/C Stockholder Permitted Transferee"), and any such transfer shall not constitute a "Transfer" for purposes of this Agreement. Notwithstanding the foregoing, no party hereto shall avoid the provisions of this Agreement by making one or more transfers to one or more M/C Stockholder Permitted Transferees and then at any time directly or indirectly disposing of all or any portion of such party's interest in any such M/C Stockholder Permitted Transferee. In the event that the Board of Directors consents to any Transfer of Securities by a Principal Stockholder (for purposes of this Agreement, the term "Principal Stockholder" shall have the same meaning as ascribed to such term in the Third Amended and Restated November 1998 Stockholders' Agreement) pursuant to Section 3.1(a) of the Third Amended and Restated November 1998 Stockholders' Agreement upon the written request of such Principal Stockholder (the "Transferring Principal Stockholder") and except as otherwise provided in Section 3.1(b) and Section 3.2 of this Agreement, the M/C Stockholders shall, notwithstanding the provisions of this Section 3.1(a), have the right to Transfer a percentage of the total number of Securities beneficially owned by the M/C Stockholders equal to the percentage of the total number of Securities beneficially owned by the Transferring Principal Stockholder that the Board of Directors has consented may be Transferred by such Transferring Principal Stockholder. In the event the Board of Directors consents to any Transfer of Securities by the M/C Stockholders pursuant to this Section 3.1(a) upon the written request of the M/C Stockholders (the "Transferring M/C Stockholders"), and except as otherwise provided in Section 3.1(b) and Section 3.2 of the Third Amended and Restated November 1998 Stockholders' Agreement, each Principal Stockholder shall, notwithstanding the provisions of Section 3.1(a) of the Third Amended and Restated November 1998 Stockholders' Agreement, have the right to Transfer a percentage of the total number of Securities beneficially owned by such Principal Stockholder equal to the percentage of the total number of Securities beneficially owned by the Transferring M/C Stockholders that the Board of Directors has consented may be Transferred by such Transferring M/C Stockholders. (b) In addition to the provisions of Section 3.1(a), for the period commencing for the quarter ending March 31, 2000 and ending on the Expiration Date, the Board shall determine prior to the public release of the Company's consolidated financial results with respect to each such financial reporting quarter during such period, the aggregate number, if any, of shares of Class A Common Stock (not to exceed in the aggregate one hundred thousand (100,000) shares of Class A Common Stock per quarter, subject to adjustment pursuant to Section 5.1) that may be Transferred by the M/C Stockholders (the "Transfer Amount") during the period commencing on the third (3rd) business day and ending on the twenty-third (23rd) business day following such public release of the Company's quarterly or annual financial results or such other trading period designated or permitted by the Board with respect to the purchase and sale of its Securities (each such period, a "Transfer Period"). Notwithstanding the provisions of Section 3.1(a), the M/C Stockholders shall be entitled to Transfer during each Transfer Period, provided such Transfer is effected in accordance with all applicable federal and state securities laws, a number of shares of Class A Common Stock equal to the Transfer Amount, if any, for such Transfer Period. In no event shall any portion of a Transfer Amount that is not utilized by the M/C Stockholders during a Transfer Period be reallocated or otherwise credited to any subsequent Transfer Periods. Notwithstanding the foregoing provisions of this Section 3.1(b), to the extent that the Company permits the Principal Stockholders the opportunity to Transfer shares of Class A Common Stock pursuant to Section 3.1(b) of the Third Amended and Restated November 1998 Stockholders' Agreement, the Company shall grant the M/C Stockholders the opportunity to Transfer on the same terms and conditions a number of shares of Class A Common Stock equal to the number of shares which each Principal Stockholder is entitled to Transfer pursuant to such Section 3.1(b), without considering those provisions of Section 3.1(b) of the Third Amended and Restated November 1998 Stockholders' Agreement relating to the reallocation of amounts among the Principal Stockholders. To the extent the Board determines a Transfer Amount with respect to the M/C Stockholders for any particular quarter pursuant to this Section 3.1(b), the Board shall determine an equal Transfer Amount for such quarter with respect to each Principal Stockholder pursuant to Section 3.1(b) of the Third Amended and Restated November 1998 Stockholders' Agreement. (c) For the period commencing for the quarter ending March 31, 2000 and ending on the Expiration Date, the Company shall give the M/C Stockholders prompt written notice (in any event no later than fifty (50) days prior to the beginning of the applicable Transfer Period) of its determination of any Transfer Amount. Within seven (7) days of receipt of such notice, the M/C Stockholders shall provide written notice to the Company of the number of shares of Class A Common Stock that the M/C Stockholders desire to Transfer pursuant to Section 3.1(b). (d) For purposes of this Section 3.1, the M/C Stockholders shall be deemed to be a single stockholder of the Company, the McLeods shall be deemed to be a single Principal Stockholder of the Company, Lumpkin and all of the Principal CCI Shareholders shall be deemed to be a single Principal Stockholder of the Company and the AEC Entities shall be deemed to be a single Principal Stockholder of the Company. 3.2 Registration Rights (a) In the event that the Board of Directors consents pursuant to Section 3.1(a) of the Third Amended and Restated November 1998 Stockholders' Agreement to a Principal Stockholder's request for a Transfer and in connection therewith, the Company agrees to register Securities with respect to such Transfer under the Securities Act of 1933, as amended (the "Securities Act"), the Company shall grant the M/C Stockholders the opportunity (subject to reduction in the event the registered Transfer is underwritten) to register for Transfer under the Securities Act a percentage of the total number of Securities beneficially owned by the M/C Stockholders equal to the percentage of the total number of Securities beneficially owned by the Transferring Principal Stockholder that such Transferring Principal Stockholder is registering for Transfer under the Securities Act, on the same terms and conditions as the Transferring Principal Stockholder. In the event that the Board of Directors consents pursuant to Section 3.1(a) of this Agreement to the M/C Stockholders' request for a Transfer, and in connection therewith the Company agrees to register Securities with respect to such Transfer under the Securities Act, the Company shall grant each Principal Stockholder pursuant to Section 3.1(a) of the Third Amended and Restated November 1998 Stockholders' Agreement the opportunity (subject to reduction in the event the registered Transfer is underwritten) to register for Transfer under the Securities Act a percentage of the total number of Securities beneficially owned by such Principal Stockholder equal to the percentage of the total number of Securities beneficially owned by the Transferring M/C Stockholders that such Transferring M/C Stockholders are registering under the Securities Act, on the same terms and conditions as the Transferring M/C Stockholders. (b) To the extent that the Company grants pursuant to Section 3.1(b) of the Third Amended and Restated November 1998 Stockholders' Agreement a Principal Stockholder the opportunity to register shares of Class A Common Stock for Transfer under the Securities Act, the Company shall grant the M/C Stockholders the opportunity (subject to reduction in the event the registered Transfer is underwritten) to register an equal number of shares of Class A Common Stock for Transfer under the Securities Act on the same terms and conditions, without considering those provisions of Section 3.1(b) of the Third Amended and Restated November 1998 Stockholders' Agreement relating to the reallocation of amounts among the Principal Stockholders. To the extent that the Company grants pursuant to Section 3.1(b) of this Agreement the M/C Stockholders the opportunity to register shares of Class A Common Stock for Transfer under the Securities Act, the Company shall grant each Principal Stockholder pursuant to Section 3.1(b) of the Third Amended and Restated November 1998 Stockholders' Agreement the opportunity (subject to reduction in the event the registered Transfer is underwritten) to register an equal number of shares of Class A Common Stock for Transfer under the Securities Act on the same terms and conditions. (c) In the event the Company proposes to register any shares of Class A Common Stock under the Securities Act pursuant to an underwritten primary offering (other than pursuant to a registration statement on Form S-4 or Form S-8 or any successor forms thereto or other form which would not permit the inclusion of the shares of Class A Common Stock of the M/C Stockholders), the Company, as determined by the Board of Directors, shall give written notice to the M/C Stockholders of its intention to effect such a registration. Following any such notice, the Board of Directors shall undertake to determine the aggregate number, if any, of shares of Class A Common Stock held by the M/C Stockholders (not to exceed in the aggregate on a per year basis a number of shares of Class A Common Stock equal to fifteen percent (15%) of the total number of shares of Class A Common Stock beneficially owned by the M/C Stockholders as of the Effective Time (as defined in the Merger Agreement) in connection with the consummation of the Merger, subject to appropriate and proportionate adjustment as a result of the Stock Split and subject to adjustment pursuant to Section 5.1) to be registered by the Company under the Securities Act (the "Registrable Amount") for Transfer by the M/C Stockholders in connection with such offering during such period. If the Board determines to register shares of Class A Common Stock held by the M/C Stockholders pursuant to this Section 3.2(c), the Company will promptly give written notice of such determination to the M/C Stockholders, and thereupon the Company will use commercially reasonable efforts to effect the registration of that portion of the Registrable Amount that the M/C Stockholders indicate a desire to register. All terms, conditions and rights with respect to such registration (including but not limited to any determination to reduce the Registrable Amount) shall be determined by the Board, provided that (i) the representations and warranties of the M/C Stockholders shall be customary taking into account, among other things, the nature of the offering and the M/C Stockholders' relationship with the Company, and (ii) the Company shall be responsible for all expenses with respect to such registration other than underwriting discounts and commissions allocable to the Class A Common Stock of the M/C Stockholders, which underwriting discounts and commissions shall be the responsibility of the M/C Stockholders. Notwithstanding the foregoing provisions of this Section 3.2(c), to the extent that the Company grants pursuant to Section 3.2(c) of the Third Amended and Restated November 1998 Stockholders' Agreement the Principal Stockholders the opportunity to register shares of Class A Common Stock for Transfer under the Securities Act, the Company shall grant the M/C Stockholders the opportunity to register shares of Class A Common Stock on a substantially similar basis. To the extent that the Company grants pursuant to Section 3.2(c) of this Agreement the M/C Stockholders the opportunity to register shares of Class A Common Stock for Transfer under the Securities Act, the Company shall grant each Principal Stockholder pursuant to Section 3.2(c) of the Third Amended and Restated November 1998 Stockholders' Agreement the opportunity to register shares of Class A Common Stock on a substantially similar basis. (d) In addition to the registration rights granted pursuant to Sections 3.2(a), (b) and (c), no more frequently than once during each of the calendar years ending December 31, 2000 and 2001 (each such year, an "Annual Period"), and upon either (i) the receipt of a written request of the M/C Stockholders or (ii) a determination by the Board of Directors, the Board shall undertake to determine the Registrable Amount, if any, for Transfer by the M/C Stockholders. If the Board determines to register shares of Class A Common Stock held by the M/C Stockholders pursuant to this Section 3.2(d), the Company will promptly give written notice of such determination to the M/C Stockholders, and thereupon the Company will use commercially reasonable efforts to effect the registration of that portion of the Registrable Amount that the M/C Stockholders indicate a desire to register. All terms, conditions and rights with respect to such registration (including but not limited to any determination to reduce the Registrable Amount) shall be determined by the Board, provided that (i) the representations and warranties of the M/C Stockholders shall be customary taking into account, among other things, the nature of the offering and the M/C Stockholders' relationship with the Company, and (ii) the Company shall be responsible for all expenses with respect to such registration other than underwriting discounts and commissions allocable to the Class A Common Stock of the M/C Stockholders, which underwriting discounts and commissions shall be the responsibility of the M/C Stockholders. Notwithstanding the foregoing provisions of this Section 3.2(d), to the extent that the Company grants pursuant to Section 3.2(d) of the Third Amended and Restated November 1998 Stockholders' Agreement the Principal Stockholders the opportunity to register shares of Class A Common Stock for Transfer under the Securities Act, the Company shall grant the M/C Stockholders the opportunity to register shares of Class A Common Stock on a substantially similar basis. To the extent that the Company grants pursuant to Section 3.2(d) of this Agreement the M/C Stockholders the opportunity to register shares of Class A Common Stock for Transfer under the Securities Act, the Company shall grant each Principal Stockholder pursuant to Section 3.2(d) of the Third Amended and Restated November 1998 Stockholders' Agreement the opportunity to register shares of Class A Common Stock on a substantially similar basis. (e) For purposes of this Section 3.2, the M/C Stockholders shall be deemed to be a single stockholder of the Company, the McLeods shall be deemed to be a single Principal Stockholder of the Company, Lumpkin and all of the Principal CCI Shareholders shall be deemed to be a single Principal Stockholder of the Company and the AEC Entities shall be deemed to be a single Principal Stockholder of the Company. (f) Notwithstanding any other provision of this Agreement, to the extent the Company has undertaken to register Securities of the M/C Stockholders pursuant to this Section 3.2, the Company may subsequently determine not to register such Securities and may either not file a registration statement or otherwise withdraw or abandon a registration statement previously filed with respect to the registration of such Securities; provided that to the extent the Principal Stockholders are also participating in such registration, the M/C Stockholders and the Principal Stockholders will be treated on a substantially similar basis with respect to any such determination not to register Securities or the withdrawal or abandonment of a registration statement previously filed as contemplated by this Section 3.2(f). 4. REPRESENTATIONS AND WARRANTIES 4.1 Representations and Warranties of Non-individual Stockholders Each non-individual party to this Agreement hereby represents and warrants, as of the date of this Agreement, to the Company and to each other party as follows: 4.1.1 Authorization Such party has taken all action necessary for it to enter into this Agreement and to consummate the transactions contemplated hereby. 4.1.2 Binding Obligation This Agreement constitutes a valid and binding obligation of such party, enforceable in accordance with its terms, except to the extent that such enforceability may be limited by bankruptcy, insolvency, and similar laws affecting the rights and remedies of creditors generally, and by general principles of equity and public policy; and each document and instrument to be executed by such party pursuant hereto, when executed and delivered in accordance with the provisions hereof, shall be a valid and binding obligation of such party, enforceable in accordance with its terms (with the aforesaid exceptions). 4.2 Representations and Warranties of Individual Stockholders Each party to this Agreement who is an individual hereby represents and warrants, as of the date of this Agreement, to the Company and to each other party as follows: 4.2.1 Power and Authority Such party has the legal capacity and all other power and authority necessary to enter into this Agreement and to consummate the transactions contemplated hereby. 4.2.2 Binding Obligation This Agreement constitutes a valid and binding obligation of such party, enforceable in accordance with its terms, except to the extent that such enforceability may be limited by bankruptcy, insolvency, and similar laws affecting the rights and remedies of creditors generally, and by general principles of equity and public policy; and each document and instrument to be executed by such party pursuant hereto, when executed and delivered in accordance with the provisions hereof, shall be a valid and binding obligation of such party, enforceable in accordance with its terms (with the aforesaid exceptions). 4.3 Representations and Warranties of the Company The Company hereby represents and warrants, as of the date of this Agreement, to each party as follows: 4.3.1 Authorization The Company has taken all corporate action necessary for it to enter into this Agreement and to consummate the transactions contemplated hereby. 4.3.2 Binding Obligation This Agreement constitutes a valid and binding obligation of the Company, enforceable in accordance with its terms, except to the extent that such enforceability may be limited by bankruptcy, insolvency, and similar laws affecting the rights and remedies of creditors generally, and by general principles of equity and public policy; and each document and instrument to be executed by the Company pursuant hereto, when executed and delivered in accordance with the provisions hereof, shall be a valid and binding obligation of the Company, enforceable in accordance with its terms (with the aforesaid exceptions). 5. MISCELLANEOUS 5.1 Effect of Changes in Capitalization All share amounts of the Company's capital stock referred to in this Agreement shall be appropriately and proportionally adjusted for any recapitalization, reclassification, stock split-up, combination of shares, exchange of shares, stock dividend or other distribution payable in capital stock, or other increase or decrease in such shares effected without receipt of consideration by the Company, occurring after the date of this Agreement. 5.2 Additional Actions and Documents Each of the parties hereto hereby agrees to take or cause to be taken such further actions, to execute, deliver and file or cause to be executed, delivered and filed such further documents and instruments, and to obtain such consents, as may be necessary or as may be reasonably requested in order to fully effectuate the purposes, terms and conditions of this Agreement, whether before, at or after the Effective Date. 5.3 Entire Agreement; Amendment Other than the Third Amended and Restated November 1998 Stockholders' Agreement with respect to the parties thereto and as set forth therein, this Agreement constitutes the entire agreement among the parties hereto as of the date hereof with respect to the specific matters contemplated herein, and it supersedes all prior oral or written agreements, commitments or understandings with respect to the matters provided for herein. No amendment, modification or discharge of this Agreement shall be valid or binding unless set forth in writing and duly executed by the Company and by the party against whom enforcement of the amendment, modification or discharge is sought. Any amendment, modification or discharge of this Agreement to be enforced against the M/C Stockholders shall be valid and binding with respect to all M/C Stockholders if such amendment, modification or discharge is executed by those M/C Stockholders holding a majority of the shares of Class A Common Stock issued to the M/C Stockholders in the Merger (including distributions of Securities with respect to such Securities and Securities acquired as a result of a stock split with respect to such Securities). 5.4 Limitation on Benefit It is the explicit intention of the parties hereto that no person or entity other than the parties hereto is or shall be entitled to bring any action to enforce any provision of this Agreement against any of the parties hereto, and the covenants, undertakings and agreements set forth in this Agreement shall be solely for the benefit of, and shall be enforceable only by, the parties hereto or their respective successors, heirs, executors, administrators, legal representatives and permitted assigns. 5.5 Binding Effect; Specific Performance This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors, heirs, executors, administrators, legal representatives and permitted assigns. No party shall assign this Agreement without the written consent of the other parties hereto; and such consent shall not be unreasonably withheld. The parties hereto agree that irreparable damage would occur in the event any provision of this Agreement was not performed in accordance with the terms hereof and that the parties shall be entitled to specific performance of the terms hereof, in addition to any other remedy at law or in equity. 5.6 Governing Law This Agreement, the rights and obligations of the parties hereto, and any claims or disputes relating thereto, shall be governed by and construed in accordance with the laws of Delaware (excluding the choice of law rules thereof). 5.7 Notices All notices, demands, requests, or other communications which may be or are required to be given, served, or sent by any party to any other party pursuant to this Agreement shall be in writing and shall be hand-delivered or mailed by first-class, registered or certified mail, return receipt requested, postage prepaid, or transmitted by telegram, telecopy, facsimile transmission or telex, addressed as follows: (i) If to the Company or to the McLeods: McLeodUSA Incorporated McLeodUSA Technology Park 6400 C Street, SW, P.O. Box 3177 Cedar Rapids, IA 52406-3177 Attention: Randall Rings Facsimile: (319) 790-7901 (ii) If to the AEC Entities: Alliant Energy Investments, Inc. 200 1st Street SE Cedar Rapids, IA 52401 Attention: James E. Hoffman Facsimile: (319) 398-4204 (iii)If to Lumpkin or any Principal CCI Shareholder: P.O. Box 1234 Mattoon, IL 61938 Attention: Richard A. Lumpkin Facsimile: (217) 234-9934 with a copy to : Schiff Hardin & Waite 6600 Sears Tower Chicago, IL 60606 Attention: David R. Hodgman, Esq. Facsimile: (312) 258-5600 (iv) If to the M/C Stockholders: c/o Media/Communications Partners III Limited Partnership 75 State Street Boston, MA 02109 Attention: James F. Wade Facsimile: (617) 345-7201 with a copy to: Edwards & Angell, LLP 101 Federal Street Boston, MA 02110 Attention: Stephen O. Meredith, Esq. Facsimile: (617) 439-4170 Each party may designate by notice in writing a new address to which any notice, demand, request or communication may thereafter be so given, served or sent. Each notice, demand, request or communication which shall be hand-delivered, mailed, transmitted, telecopied or telexed in the manner described above, or which shall be delivered to a telegraph company, shall be deemed sufficiently given, served, sent, received or delivered for all purposes at such time as it is delivered to the addressee (with the return receipt, the delivery receipt, or the answerback being deemed conclusive, but not exclusive, evidence of such delivery) or at such time as delivery is refused by the addressee upon presentation. 5.8 Termination (a) This Agreement shall terminate and be of no further force or effect as to an Original Stockholder (and not as to the Company and the M/C Stockholders) at such time as the Third Amended and Restated November 1998 Stockholders' Agreement shall terminate and be of no further force or effect with respect to such Original Stockholder. (b) If (i) during any Annual Period the Board of Directors has not provided the M/C Stockholders a reasonable opportunity to Transfer shares of Class A Common Stock pursuant to the registration of such shares under the Securities Act pursuant to Section 3.2 in an aggregate amount equal to not less than fifteen percent (15%) of the total number of shares of Class A Common Stock beneficially owned by the M/C Stockholders as of the Effective Time in connection with the consummation of the Merger, subject to appropriate and proportionate adjustment as a result of the Stock Split and subject to adjustment pursuant to Section 5.1 or (ii) the Third Amended and Restated November 1998 Stockholders' Agreement has been terminated by all parties thereto, then the M/C Stockholders may terminate this Agreement by providing written notice of termination to the Company and the Original Stockholders (x) in the case of clause (b)(i) above, no later than thirty (30) days following the end of such Annual Period and (y) in the case of clause (b)(ii) above, at any time following such termination, such that all rights and obligations hereunder shall cease, and this Agreement shall be of no further force or effect. (c) Unless otherwise previously terminated by the M/C Stockholders pursuant to Section 5.8(b), this Agreement shall terminate on the Expiration Date. (d) This Agreement is hereby terminated with respect to each of the Other CCI Shareholders, such that all rights and obligations hereunder shall cease, and this Agreement shall be of no further force or effect, with respect to each of the Other CCI Shareholders. (e) For purposes of this Section 5.8, the M/C Stockholders shall be deemed to be a single stockholder of the Company, the McLeods shall be deemed to be a single Original Stockholder of the Company, Lumpkin and all of the Principal CCI Shareholders shall be deemed to be a single Original Stockholder of the Company, and the AEC Entities shall be deemed to be a single Original Stockholder of the Company. 5.9 Publicity The M/C Stockholders will use their reasonable best efforts to consult with the Company prior to issuing any press release, making any filing with any governmental entity or national securities exchange or making any other public dissemination of information by the M/C Stockholders within which this Agreement or the contents hereof are referenced or described. 5.10 Appointment of Representative (a) Each of the M/C Stockholders hereby appoints M/C Partners, with power of substitution, as its exclusive agent to act on its behalf with respect to any and all actions to be taken under or amendments or modifications to be made to this Agreement (the "M/C Representative"). The M/C Representative shall take, and the M/C Stockholders agree that the M/C Representative shall take, any and all actions which the M/C Representative believes are necessary or advisable under this Agreement for and on behalf of each of the M/C Stockholders, as fully as if each of the M/C Stockholders was acting on its own behalf, including, without limitation, dealing with the Company and the other parties hereto with respect to all matters arising under this Agreement, entering into any amendment or modification to this Agreement deemed advisable by the M/C Representative and taking any and all other actions specified in or contemplated by this Agreement. The Company and the other parties hereto shall have the right to rely upon all actions taken or not taken by the M/C Representative pursuant to this Agreement, all of which actions or omissions shall be legally binding upon each of the M/C Stockholders. (b) Each of the Principal CCI Shareholders hereby appoints Lumpkin, with power of substitution, as its exclusive agent to act on its behalf with respect to any and all actions to be taken under or amendments or modifications to be made to this Agreement (the "CCI Representative"). The CCI Representative shall take, and the Principal CCI Shareholders agree that the CCI Representative shall take, any and all actions which the CCI Representative believes are necessary or advisable under this Agreement for and on behalf of each of the Principal CCI Shareholders, as fully as if each of the Principal CCI Shareholders was acting on its own behalf, including, without limitation, dealing with the Company and the other parties hereto with respect to all matters arising under this Agreement, entering into any amendment or modification to this Agreement deemed advisable by the CCI Representative and taking any and all other actions specified in or contemplated by this Agreement. The Company and the other parties hereto shall have the right to rely upon all actions taken or not taken by the CCI Representative pursuant to this Agreement, all of which actions or omissions shall be legally binding upon each of the Principal CCI Shareholders. 5.11 Execution in Counterparts To facilitate execution, this Agreement may be executed in as many counterparts as may be required; and it shall not be necessary that the signatures of, or on behalf of, each party, or that the signatures of all persons required to bind any party, appear on each counterpart; but it shall be sufficient that the signature of, or on behalf of, each party, or that the signatures of the persons required to bind any party, appear on one or more of the counterparts. All counterparts shall collectively constitute a single agreement. It shall not be necessary in making proof of this Agreement to produce or account for more than a number of counterparts containing the respective signatures of, or on behalf of, all of the parties hereto. [Remainder of Page Intentionally Left Blank] IN WITNESS WHEREOF, the undersigned have duly executed and delivered this Third Amended and Restated January 1999 Stockholders' Agreement, or have caused this Third Amended and Restated January 1999 Stockholders' Agreement to be duly executed and delivered on their behalf, as of the day and year first hereinabove set forth. McLEODUSA INCORPORATED By: /s/ J. Lyle Patrick ------------------------------- Name: J. Lyle Patrick Title: Group Vice President/CFO /s/ Clark E. McLeod /s/ Mary E. McLeod - ------------------- ------------------- Clark E. McLeod Mary E. McLeod M/C INVESTORS L.L.C. By: /s/ Peter H.O. Claudy -------------------------- Name: Peter H.O. Claudy Title: Manager MEDIA/COMMUNICATIONS PARTNERS III LIMITED PARTNERSHIP By: M/C III L.L.C., its General Partner By: /s/ Peter H.O. Claudy --------------------------------- Name: Peter H.O. Claudy Title: Manager ALLIANT ENERGY CORPORATION, INC. By: /s/ James E. Hoffman ---------------------------------- Name: James E. Hoffman Title: Executive Vice President Business Development ALLIANT ENERGY FOUNDATION By: /s/ Edward M. Gleason -------------------------------- Name: Edward M. Gleason Title: Treasurer ALLIANT ENERGY INVESTMENTS, INC. By: /s/ James E. Hoffman ------------------------- Name: James E. Hoffman Title: President, Alliant Energy Resources HEARTLAND PROPERTIES, INC. By: /s/ Henry Wertheimer -------------------------------- Name: Henry Wertheimer Title: Vice President/Treasurer LNT COMMUNICATIONS LLC By: Alliant Energy Resources, Inc., its sole member By: /s/ James E. Hoffman -------------------------------- Name: James E. Hoffman Title: President /s/ Richard A. Lumpkin /s/ Gail G. Lumpkin - ---------------------- ---------------------- Richard A. Lumpkin Gail G. Lumpkin The two trusts created under the Mary Green Lumpkin Gallo Trust Agreement dated December 29, 1989, one for the benefit of each of: Benjamin Iverson Lumpkin Elizabeth Arabella Lumpkin United States Trust Company of New York, Trustee By: /s/ Loraine B. Tsavaris ---------------------------------- Name: Loraine B. Tsavaris Title: Managing Director The trust established by Richard Adamson Lumpkin under the Trust Agreement dated February 6, 1970, for the benefit of Richard Anthony Lumpkin. United States Trust Company of New York, Trustee By: /s/ Loraine B. Tsavaris ---------------------------------- Name: Loraine B. Tsavaris Title: Managing Director The two trusts created under the Richard Adamson Lumpkin Grandchildren's Trust dated September 5, 1980, one for the benefit of each of: Benjamin Iverson Lumpkin Elizabeth Arabella Lumpkin United States Trust Company of New York, Trustee By: /s/ Loraine B. Tsavaris ---------------------------- Name: Loraine B. Tsavaris Title: Managing Director The two 1990 Personal Income Trusts established by Richard A. Lumpkin, dated April 20, 1990, one for the benefit of each of: Benjamin Iverson Lumpkin Elizabeth Arabella Lumpkin /s/ David R. Hodgman - -------------------- David R. Hodgman, Trustee /s/ Steven L. Grissom - --------------------- Steven L. Grissom, Trustee FOR PURPOSES OF SECTIONS 4, 5.6, 5.8(d), 5.11 AND THE FIRST SENTENCE OF SECTION 5.3 ONLY: Margaret Lumpkin Keon Trust Mary Lee Sparks Trust dated May 13, 1978 dated May 13, 1978 /s/ Margaret Lumpkin Keon /s/ Mary Lee Sparks - ---------------------------------- -------------------------------- Margaret Lumpkin Keon, as Trustee Mary Lee Sparks, as Trustee /s/ Steven L. Grissom ------------------------------ Steven L. Grissom, as Trustee /s/ Mary Lee Sparks - -------------------------------- Mary Lee Sparks The ten trusts created under the Mary Green Lumpkin Gallo Trust Agreement dated December 29, 1989, one for the benefit of each of: Joseph John Keon III, Katherine Stoddert Keon, Lisa Anne Keon, Margaret Lynley Keon, Pamela Keon Vitale, Susan Tamara Keon DeWyngaert, Anne Romayne Sparks, Barbara Lee Sparks, Christina Louise Sparks, and John Woodruff Sparks United States Trust Company of New York, Trustee By: /s/ Loraine B. Tsavaris ---------------------------- Name: Loraine B. Tsavaris Title: Managing Director The ten trusts created under the Richard Adamson Lumpkin Grandchildren's Trust dated September 5, 1980, one for the benefit of each of: Joseph John Keon III, Katherine Stoddert Keon, Lisa Anne Keon, Margaret Lynley Keon, Pamela Keon Vitale, Susan Tamara Keon DeWyngaert, Anne Romayne Sparks, Barbara Lee Sparks, Christina Louise Sparks, and John Woodruff Sparks United States Trust Company of New York, Trustee By: /s/ Loraine B. Tsavaris ---------------------------- Name: Loraine B. Tsavaris Title: Managing Director The two trusts established by Richard Adamson Lumpkin under the Trust Agreement dated February 6, 1970, one for the benefit of each of: Margaret Anne Keon, and Mary Lee Sparks United States Trust Company of New York, Trustee By: /s/ Loraine B. Tsavaris ---------------------------- Name: Loraine B. Tsavaris Title: Managing Director The ten 1990 Personal Income Trusts established by Margaret L. Keon and Mary Lee Sparks, each dated April 20, 1990, one for the benefit of each of: Joseph John Keon III, Katherine Stoddert Keon, Lisa Anne Keon, Margaret Lynley Keon, Pamela Keon Vitale, Susan Tamara Keon DeWyngaert, Anne Romayne Sparks, Barbara Lee Sparks, Christina Louise Sparks, and John Woodruff Sparks /s/ David R. Hodgman - -------------------- David R. Hodgman, Trustee /s/ Steven L. Grissom - --------------------- Steven L. Grissom, Trustee SCHEDULE I Richard A. Lumpkin Gail G. Lumpkin United States Trust Company of New York, as Trustee of two trusts created under the Mary Green Lumpkin Gallo Trust Agreement dated December 29, 1989, one for the benefit of each of Benjamin Iverson Lumpkin and Elizabeth Arabella Lumpkin. United States Trust Company of New York, as Trustee of two trusts created under the Richard Adamson Lumpkin Grandchildren's Trust dated September 5, 1980, one for the benefit of each of Benjamin Iverson Lumpkin and Elizabeth Arabella Lumpkin. United States Trust Company of New York, as Trustee of the trust established by Richard Adamson Lumpkin under the Trust Agreement dated February 6, 1970, for the benefit of Richard Anthony Lumpkin. David R. Hodgman and Steven L. Grissom, as Trustees of two 1990 Personal Income Trusts established by Richard A. Lumpkin, each dated April 20, 1990, one for the benefit of each of Benjamin Iverson Lumpkin and Elizabeth Arabella Lumpkin. SCHEDULE II Margaret Lumpkin Keon, as Trustee under the Margaret Lumpkin Keon Trust dated May 13, 1978. Mary Lee Sparks and Steven L. Grissom, as Trustees of the Mary Lee Sparks Trust dated May 13, 1978. Mary Lee Sparks United States Trust Company of New York, as Trustee of ten trusts created under the Mary Green Lumpkin Gallo Trust Agreement dated December 29, 1989, one for the benefit of each of Joseph John Keon III, Katherine Stoddert Keon, Lisa Anne Keon, Margaret Lynley Keon, Pamela Keon Vitale, Susan Tamara Keon DeWyngaert, Anne Romayne Sparks, Barbara Lee Sparks, Christina Louise Sparks, and John Woodruff Sparks. United States Trust Company of New York, as Trustee of ten trusts created under the Richard Adamson Lumpkin Grandchildren's Trust dated September 5, 1980, one for the benefit of each of Joseph John Keon III, Katherine Stoddert Keon, Lisa Anne Keon, Margaret Lynley Keon, Pamela Keon Vitale, Susan Tamara Keon DeWyngaert, Anne Romayne Sparks, Barbara Lee Sparks, Christina Louise Sparks, and John Woodruff Sparks. United States Trust Company of New York, as Trustee of two trusts established by Richard Adamson Lumpkin under the Trust Agreement dated February 6, 1970, one for the benefit of each of Margaret Anne Keon and Mary Lee Sparks. David R. Hodgman and Steven L. Grissom, as Trustees of ten 1990 Personal Income Trusts established by Margaret L. Keon and Mary Lee Sparks, each dated April 20, 1990, one for the benefit of each of Joseph John Keon III, Katherine Stoddert Keon, Lisa Anne Keon, Margaret Lynley Keon, Pamela Keon Vitale, Susan Tamara Keon DeWyngaert, Anne Romayne Sparks, Barbara Lee Sparks, Christina Louise Sparks, and John Woodruff Sparks. EX-27.1 5 FINANCIAL DATA SCHEDULE
UT This schedule contains summary financial information extracted from the March 31, 2000 Financial Statements included in Alliant Energy Corporation's Form 10-Q and is qualified in its entirety by reference to such Financial Statements. 0000352541 ALLIANT ENERGY CORPORATION 1,000 3-MOS DEC-31-2000 JAN-01-2000 MAR-31-2000 PER-BOOK 3,116,478 2,935,536 368,282 196,094 261,427 6,877,817 790 945,308 1,471,236 2,417,334 24,575 89,102 2,019,502 54 55,100 300,785 5,692 0 22,940 13,285 1,929,448 6,877,817 620,850 12,438 532,460 532,460 88,390 25,157 113,547 80,111 20,998 1,678 19,320 39,498 144,211 185,719 0.24 0.24 Includes $913,950 of Accumulated Other Comprehensive Income. Income tax expense is not included in Operating Expense in the Consolidated Statements of Income. Includes $39,493 of Contingent Interest on Indexed Debt Securities.
EX-27.2 6 FINANCIAL DATA SCHEDULE
UT This schedule contains summary financial information extracted from the March 31, 2000 Financial Statements included in IES Utilities Inc.'s Form 10-Q and is qualified in its entirety by reference to such Financial Statements. 0000052485 IES UTILITIES INC. 1,000 3-MOS DEC-31-2000 JAN-01-2000 MAR-31-2000 PER-BOOK 1,369,073 120,148 89,328 12,288 117,269 1,708,106 33,427 279,042 254,177 566,646 0 18,320 551,142 72,770 0 0 196 0 22,878 13,272 462,882 1,708,106 212,124 11,616 176,626 176,626 35,498 5,240 40,738 13,011 16,111 229 15,882 14,658 38,852 76,842 0 0 Income tax expense is not included in Operating Expense in the Consolidated Statements of Income. Earnings per share of common stock is not reflected because all common shares are held by Alliant Energy Corporation.
EX-27.3 7 FINANCIAL DATA SCHEDULE
UT This schedule contains summary financial information extracted from the March 31, 2000 Financial Statements included in Wisconsin Power and Light Company's Form 10-Q and is qualified in its entirety by reference to such Financial Statements. 0000107832 WISCONSIN POWER AND LIGHT COMPANY 1,000 3-MOS DEC-31-2000 JAN-01-2000 MAR-31-2000 PER-BOOK 1,237,575 183,140 112,678 150,113 88,368 1,771,874 66,183 229,438 324,519 620,140 0 59,963 514,092 633 55,100 0 1,875 0 0 0 520,071 1,771,874 218,832 12,857 178,337 178,337 40,495 5,141 45,636 10,908 21,871 828 21,043 0 41,182 95,511 0 0 Income tax expense is not included in Operating Expense in the Consolidated Statements of Income. Earnings per share of common stock is not reflected because all common shares are held by Alliant Energy Corporation.
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