SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
Indianapolis Power & Light Company
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(Name of Registrant As Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11: (Set forth the amount on
which the filing fee is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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April 15, 1997
Dear Preferred Shareholder:
You have been sent a Proxy Statement this year instead of an information
statement because the Company is proposing an important initiative that
requires your approval. This initiative, which is reflected in the annexed
Proxy Statement as Proposal 2, seeks to amend the Articles of Incorporation
to remove the limitation on the issuance of unsecured indebtedness. This
will provide the Company with more financial flexibility and will enhance its
ability to raise capital at a reasonable cost during the next several years.
Enclosed with this letter are the Notice of Annual Meeting and the Proxy
Statement which provides more information on Proposal 2. A copy of IPALCO
Enterprises, Inc. 1996 Annual Report, your proxy card and a return envelope
are also enclosed.
It is important that your shares be represented at this meeting and
that your vote be registered in favor of Proposal 2. Therefore, I urge you
to fill in, date and sign the enclosed proxy and return it as soon as
possible.
Thank you for your interest in our Company's future.
Sincerely,
John R. Hodowal
Chairman of the Board and
Chief Executive Officer
<PAGE>
PRELIMINARY COPIES
IPL
INDIANAPOLIS POWER & LIGHT COMPANY
One Monument Circle
P.O. Box 1595
Indianapolis, Indiana 46206-1595
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 21, 1997
TO THE SHAREHOLDERS OF
INDIANAPOLIS POWER & LIGHT COMPANY
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of
Indianapolis Power & Light Company will be held at its principal office,
One Monument Circle, Indianapolis, Indiana on Wednesday, May 21, 1997, at
10 o'clock A.M. (Eastern Standard Time), for the following purposes:
1. To elect sixteen (16) directors to hold office for terms of one
year each and until their successors are duly elected and
qualified;
2. To approve an amendment to IPL's Amended Articles of Incorporation
to remove the limitation on the issuance of unsecured indebtedness;
and
3. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on Thursday,
April 10, 1997, as the record date for determining the shareholders entitled
to notice of, and to vote at, the meeting and at any adjournment thereof.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THIS MEETING.
Whether or not you expect to be present at the meeting, you are urged to
fill in, date and sign the enclosed proxy and return it immediately in the
accompanying postage guaranteed envelope.
By order of the Board of Directors.
INDIANAPOLIS POWER & LIGHT COMPANY
By: BRYAN G. TABLER, Secretary
Indianapolis, Indiana
April 15, 1997
<PAGE>
INDIANAPOLIS POWER & LIGHT COMPANY
PROXY STATEMENT
TABLE OF CONTENTS
ANNUAL MEETING INFORMATION . . . . . . . . . . . . . . 1
Date, Time and Place of Annual Meeting. . . . . . . 1
Solicitation of Proxies . . . . . . . . . . . . . . 1
Other Business. . . . . . . . . . . . . . . . . . . 1
Shareholder Proposals for 1998 Annual Meeting . . . 2
RELATIONSHIP WITH AUDITOR. . . . . . . . . . . . . . . 2
VOTING SECURITIES AND BENEFICIAL OWNERS. . . . . . . . 2
Beneficial Ownership of the Common Stock of IPALCO
By Directors, Nominees
and Executive Officers. . . . . . . . . . . . . . . 3
PROPOSAL 1 - ELECTION OF SIXTEEN DIRECTORS . . . . . . 4
INFORMATION REGARDING THE BOARD OF DIRECTORS . . . . . 6
Procedure To Propose Nominees For Director. . . . . 6
Number Of Board Meetings and Attendance . . . . . . 6
Committees of the Board . . . . . . . . . . . . . . 7
Compensation Committee Interlocks and Insider
Participation . . . . . . . . . . . . . . . . . . . 7
Compensation of Directors . . . . . . . . . . . . . 7
Certain Business Relationships. . . . . . . . . . . 8
PROPOSAL 2 - APPROVE AMENDMENT TO AMENDED ARTICLES OF
INCORPORATION TO REMOVE THE LIMITATION ON THE ISSUANCE
OF UNSECURED INDEBTEDNESS . . . . . . . . . . . . . 8
Purpose and Effect of Proposed Amendment. . . . . . 8
Vote Required to Approve Proposed Amendment . . . . 10
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE
COMPENSATION. . . . . . . . . . . . . . . . . . . . 10
Compensation Policies Relating Generally to Executive
Officers. . . . . . . . . . . . . . . . . . . . . . 10
Base Salary. . . . . . . . . . . . . . . . . 10
Annual Incentive Plan. . . . . . . . . . . . 11
Long-Term Performance and Restricted Stock
Incentive Plan . . . . . . . . . . . . . . . 11
Basis for Chief Executive Officer's Compensation. . 12
Deductibility of Executive Compensation . . . . . . 12
COMPENSATION OF EXECUTIVE OFFICERS . . . . . . . . . . 13
Nature and Types of Compensation. . . . . . . . . . 13
Summary Compensation - Table I. . . . . . . . . . . 14
Option Exercises - Table II . . . . . . . . . . . . 15
Performance Graph - Table III . . . . . . . . . . . 16
Performance Graph . . . . . . . . . . . . . . . . . 17
Pension Plans . . . . . . . . . . . . . . . . . . . 17
Pension Plan Table - Table IV. . . . . . . . 17
Employment Contracts and Termination of Employment
and Change-in-Control Arrangements. . . . . . . . . 18
FINANCIAL INFORMATION FOR INDIANPOLIS POWER & LIGHT
COMPANY. . . . . . . . . . . . . . . . . . . . . . . . 19
<PAGE>
PRELIMINARY COPIES
INDIANAPOLIS POWER & LIGHT COMPANY
PROXY STATEMENT
Relating to the
Annual Meeting of Shareholders
May 21, 1997
(Mailed on or about April 15, 1997)
ANNUAL MEETING INFORMATION
Date, Time and Place of Annual Meeting
The information set forth in this Proxy Statement is furnished in
connection with the solicitation of the enclosed proxy by and on behalf of
the Board of Directors of Indianapolis Power & Light Company ("IPL") for use
at its Annual Meeting of Shareholders to be held May 21, 1997, at 10:00
o'clock A.M. (EST) at the principal office of IPL, One Monument Circle,
Indianapolis, Indiana 46204, pursuant to the accompanying Notice of Annual
Meeting and at any adjournment of such meeting.
At the close of business on December 31, 1983, IPL became a subsidiary of
IPALCO Enterprises, Inc. (``IPALCO'') and, at that time, all outstanding
shares of IPL Common Stock were exchanged for Common Stock of IPALCO and all
Common shareholders of IPL became Common shareholders of IPALCO. As a result,
IPALCO owns all 17,206,630 outstanding shares of IPL's Common Stock. However,
there are currently outstanding 518,985 shares of IPL's Cumulative Preferred
Stock.
Solicitation of Proxies
The presence in person or by proxy of the holders of a majority of the
outstanding shares entitled to vote at the Annual Meeting is necessary to
constitute a quorum. Shares represented for any purpose are deemed present
for quorum purposes. If the enclosed form of proxy is properly executed and
returned in time for the meeting, the named proxies will vote the shares
represented by the proxy in accordance with the instructions marked. Proxies
returned unmarked will be voted in favor of the proposed nominees for
director and in favor of the proposed amendment to IPL's Amended Articles of
Incorporation. If other matters are properly brought before the meeting, or
any adjournment thereof, the enclosed proxy gives discretionary authority to
the persons named therein to vote in accordance with their best judgment on
such matters. A shareholder executing and delivering the enclosed proxy has
the unconditional right to revoke it at any time before the authority granted
therein is exercised.
Under Indiana law, the election of directors will be determined by
plurality vote at a meeting where a quorum is present. As a result, the
sixteen nominees who receive the greatest number of votes cast for election
as directors will be elected as directors of IPL. Broker non-votes and
withheld votes will not affect the outcome of the election of directors.
This solicitation of proxies is being made by IPL and the expenses
thereof will be borne by IPL. The principal solicitation is being made by
mail. However, additional solicitation may be made by telephone, telegraph or
personal contact by officers and other employees of IPL and its subsidiaries,
who will not be additionally compensated therefor. IPL expects to reimburse
broker-dealers and others for reasonable expenses of forwarding proxy
material to beneficial owners.
Other Business
Management is not presently aware of any business to be presented at the
1997 Annual Meeting other than the election of directors and the proposed
amendment to the Amended Articles of Incorporation. The minutes of the Annual
Meeting of Shareholders held April 17, 1996 will be presented for approval
at the 1997 Annual Meeting; however, such action is not intended to
constitute approval or disapproval of any matter referred to in such minutes.
Shareholder Proposals for 1998 Annual Meeting
If a shareholder intends to present a proposal at the Annual Meeting of
Shareholders to be held April 15, 1998, the proposal must be received by the
Corporate Secretary not later than December 16, 1997 for inclusion in IPL's
proxy or information statement and form of proxy, if applicable.
RELATIONSHIP WITH AUDITOR
Deloitte & Touche LLP (the ``Auditor'') with offices at Market Tower,
Suite 3000, 10 West Market Street, Indianapolis, Indiana, has been the
auditor for IPL since the year 1952, and was appointed by the Board of IPALCO
upon recommendation of the Audit Committee to serve as such during the
current year. A representative of the Auditor will be present at the Annual
Meeting of Shareholders on May 21, 1997, and will be given an opportunity to
make a statement and to respond to appropriate questions from shareholders.
VOTING SECURITIES AND BENEFICIAL OWNERS
On January 15, 1997, IPL had outstanding 17,206,630 shares of Common
Stock and 518,985 shares of Cumulative Preferred Stock issued in six (6)
separate series. Each share of Cumulative Preferred Stock entitles its owner
to two (2) votes, and each share of Common Stock entitles its owner to one
(1) vote upon each matter to come before the meeting. Only shareholders of
record at the close of business on Thursday, April 10, 1997, will be
entitled to vote at the meeting or at any adjournment thereof.
<TABLE>
On January 15, 1997, the following beneficial owners held more than 5%
of a class of IPL's voting securities:
<CAPTION>
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Name and Address of Amount and Nature Percent
Title of Class Beneficial Owner of Beneficial Ownership of Class
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<S> <C> <C> <C>
Common Stock IPALCO Enterprises, Inc. 17,206,630 shares<F1> 100%
One Monument Circle
Indianapolis, IN 46204
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<FN>
<F1> IPALCO Enterprises, Inc. has sole power to vote and dispose of all shares shown as
beneficially owned by it.
</FN>
</TABLE>
On January 15, 1997, none of the directors, executive officers or
nominees for director of IPL beneficially owned equity securities of IPL.
<TABLE>
Beneficial Ownership of the Common Stock of IPALCO By Directors, Nominees
and Executive Officers
On January 15, 1997, the following named directors and nominees of IPL,
and executive officers of IPALCO and its subsidiaries, including IPL,
individually and as a group, beneficially owned equity securities of IPALCO
as follows:
<CAPTION>
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Name of Amount and Nature Percent
Title of Class Beneficial Owner of Beneficial Ownership<F1> of Class<F2>
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<S> <C> <C> <C>
Common Stock Joseph D. Barnette, Jr. 16,000 shares <F3>
Robert A. Borns 44,409 shares <F3>
John R. Brehm 72,674 shares <F4>
Mitchell E. Daniels, Jr. 18,300 shares <F3>
Rexford C. Early 11,642 shares <F3>
Otto N. Frenzel III 31,200 shares <F3>
Max L. Gibson 11,100 shares
Edwin J. Goss 14,407 shares <F3>
Earl B. Herr, Jr. 13,860 shares
John R. Hodowal 247,510 shares <F4>
Ramon L. Humke 174,533 shares <F4>
Sam H. Jones 18,360 shares <F3>
Andre B. Lacy 37,806 shares <F5>
L. Ben Lytle 12,748 shares
Michael S. Maurer 11,072 shares
Andrew J. Paine, Jr. 0 shares
Sallie W. Rowland 19,244 shares <F3>
Thomas H. Sams 23,001 shares <F3>, <F6>
Bryan G. Tabler 15,199 shares <F3>, <F4>
Gerald D. Waltz 105,056 shares <F4>
Other Executive Officers 276,300 shares <F1>, <F4>
All 27 directors, nominees,
and executive officers, as
a group 1,174,421 shares <F3>, <F4> 2.06%
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<FN>
<F1> Except as otherwise noted below, each person named in the table has
sole voting and investment power with respect to all shares of common
stock listed as owned by such person. Shares beneficially owned
include shares that may be acquired pursuant to exercise of
outstanding options that are exercisable within 60 days as follows:
Mr. Barnette-9,000; Mr. Borns-12,000; Mr. Brehm-52,500; Mr. Daniels-
18,000; Mr. Early-6,000; Mr. Frenzel-18,000; Mr. Gibson-6,000; Mr.
Goss-12,000; Dr. Herr-12,000; Mr. Hodowal-180,000; Mr. Humke-105,000;
Mr. Jones-18,000; Mr. Lacy-18,000; Mr. Lytle-12,000; Mr. Maurer-
9,000; Mrs. Rowland-18,000; Mr. Sams-18,000; Mr. Waltz-55,320; other
executive officers-201,750; directors and executive officers as a
group-780,570.
<F2> Percentages less than 1% of total common stock outstanding are not
indicated.
<F3> Includes 43,547 shares owned by or with family members sharing their
home and shares held in trust or other arrangements with family
members.
<F4> Includes vested and contingent interests in shares of common stock
held by the Trustee in the Thrift Plan (stated in whole shares) of:
Mr. Brehm-13,522; Mr. Hodowal-29,645; Mr. Humke-7,618; Mr. Tabler-
901; Mr. Waltz-36,160; other executive officers-57,624; and all
executive officers as a group-145,470.
<F5> Includes 12,000 shares owned by LDI, Ltd. and 2,700 shares owned by
the Lacy Foundation of which Mr. Lacy is a partner and a director,
respectively, and 600 shares representing his vested interest in a
self-employment retirement plan, totaling 15,300 shares, 11,700 of
which he disclaims beneficial ownership.
<F6> Mr. Sams disclaims beneficial ownership of 1,500 shares of the total
shares shown opposite his name.
</TABLE>
<PAGE>
PROPOSAL 1 - ELECTION OF SIXTEEN DIRECTORS
At a meeting held January 28, 1997, the Executive Committee of IPL's
Board of Directors nominated 16 nominees for election as directors at its
Annual Meeting of Shareholders to be held May 21, 1997 for terms of one year
each and until their successors are duly elected and qualified. All nominees,
except Andrew J. Paine, Jr., currently are members of the Board and all
nominees have consented to serve if elected. The nominees for director and
the names, ages, (as of May 21, 1997), job experience and directorships of
such nominees are as follows:
Joseph D. Barnette, Jr., 57, Chairman and Chief Executive Officer of Banc One
Indiana Corporation (a bank holding company) since January, 1993 and
Chairman and Chief Executive Officer of Bank One, Indianapolis, NA
since October, 1994. Prior to that, Mr. Barnette was President and
Chief Executive Officer of Banc One Indiana Corporation (July, 1990 -
January, 1993) and President and Chief Executive Officer of Bank One,
Indianapolis, NA (January, 1990 - October, 1994). He is a director of
IPALCO, IWC Resources Corporation, Indianapolis Water Company and
Meridian Insurance Group, Inc. He has been a director of IPL since
January, 1993.
Robert A. Borns, 61, Chairman of Borns Management Corporation (real estate
owners and managers), Indianapolis, Indiana since 1961, and Chairman
of Correctional Management Company L.L.C. since 1996. Mr. Borns
serves on numerous boards, including the Board of Trustees of
Indianapolis Museum of Art, Indianapolis Symphony Orchestra, Indiana
University Foundation and St. Vincent Hospital Advisory Board. He is
also a director of IPALCO, Indianapolis Water Company, IWC Resources
Corporation, Standard Management Corporation, and of Heritage
Partners Management, Inc. He has been a director of IPL since April,
1986 (excluding the period March 15 to August 23, 1993).
Mitchell E. Daniels, Jr., 48, Vice President, Corporate Strategy and Policy,
Eli Lilly and Company (pharmaceuticals manufacturer), Indianapolis,
Indiana. During the period April 1, 1993 to January 6, 1996, Mr.
Daniels was President, North American Pharmaceutical Operations of
Eli Lilly and Company. Prior to that time, he was Vice President,
Corporate Affairs of Eli Lilly and Company and President and Chief
Executive Officer of Hudson Institute, Inc. (March, 1987 to August,
1990). He is a director of IPALCO, Acordia, Inc. and NBD Bank, N.A.
and has been a director of IPL since November, 1989.
Rexford C. Early, 62, President of Carlisle Insurance Agency, Inc.,
Indianapolis, Indiana, a position he has held for more than five
years. Mr. Early was Chairman of the Indiana Republican Party from
March, 1991 to March, 1993. He is a director of IPALCO and has been
a director of IPL since August, 1993.
<PAGE>
Otto N. Frenzel III, 66, Chairman, Executive Committee, National City Bank,
Indiana, Indianapolis, Indiana. Mr. Frenzel has held his present
position since January, 1996. For more than 3 years prior to that
time, Mr. Frenzel was Chairman of the Board of National City Bank,
Indiana. Prior to May, 1992, Mr. Frenzel was Chairman of the
Board of Merchants National Bank & Trust Company of Indianapolis and
Chairman of the Board of Merchants National Corporation. He is a
director of IPALCO, National City Corporation, American United Life
Insurance Company, Indiana Energy, Inc., Indiana Gas Company, Inc.,
Indianapolis Water Company, Baldwin & Lyons, Inc. and IWC Resources
Corporation. He has been a director of IPL since April, 1977.
Max L. Gibson, 56, President of Majax Corporation (waste consulting firm),
Terre Haute, Indiana for the past five years. For more than five
years prior to his consulting work, Mr. Gibson was President of
Victory Services Corporation (waste disposal), Terre Haute, Indiana.
He is a director of IPALCO, First Financial Corporation, Terre
Haute First National Bank and First State Bank, Brazil, Indiana. He
has been a director of IPL since August, 1993.
Dr. Earl B. Herr, Jr., 69, Retired. For more than five years prior to his
retirement in December, 1992, Dr. Herr was Executive Vice President
of Eli Lilly and Company (pharmaceuticals manufacturer),
Indianapolis, Indiana. He is a director of IPALCO and Lilly Endowment
and has been a director of IPL since April, 1986 (excluding the
period March 15 to August 23, 1993).
John R. Hodowal, 52, Chairman of the Board and President of IPALCO and
Chairman of the Board and Chief Executive Officer of IPL. Except for
the Chairmanship of IPL which he assumed in February, 1990, Mr.
Hodowal has held his current positions since May, 1989. For some
years prior to that time, he was Vice President and Treasurer of
IPALCO and Executive Vice President of IPL. He is a director of
IPALCO, Bank One, Indianapolis, NA and Anthem Insurance Companies,
Inc. He has been a director of IPL since April, 1984.
Ramon L. Humke, 64, Vice Chairman of IPALCO and President and Chief Operating
Officer of IPL. Prior to February, 1990 when he assumed his present
position with IPL, Mr. Humke was President and Chief Executive
Officer of Ameritech Services and Senior Vice President of Ameritech
Bell Group (September, 1989 - February, 1990) and President and Chief
Executive Officer of Indiana Bell Telephone Company (October, 1983 -
September, 1989). He is a director of IPALCO, NBD Bank, N.A., LDI
Management, Inc. and is Chairman of the Boards of Meridian Mutual
Insurance Company and Meridian Insurance Group, Inc. He has been a
director of IPL since February, 1990.
<PAGE>
Sam H. Jones, 69, President, Indianapolis Urban League, Inc., Indianapolis,
Indiana. Mr. Jones has held his present position for more than 5
years and serves on numerous educational, social and cultural boards,
including the Advisory Board of Indiana University-Purdue University
at Indianapolis, Methodist Health Foundation, Board of One Hundred
Black Men of Indianapolis and the Administrative Board of Northwest
United Methodist Church. He is a director of IPALCO and has been a
director of IPL since June, 1983.
Andre B. Lacy, 57, General Partner and Chief Executive of LDI, Ltd. (an
industrial and investment limited partnership), Chairman of the
Board, Chief Executive Officer and President of LDI Management, Inc.,
the managing general partner of LDI, Ltd., and Chairman and Chief
Executive Officer of all subsidiaries and divisions thereof. He
has held his present positions for more than 5 years. He is a
director of IPALCO, Tredegar Industries, Inc., Albemarle Corporation,
Patterson Dental Co., Herff Jones and The National Bank of
Indianapolis. He has been a director of IPL since April, 1987.
L. Ben Lytle, 50, President and Chief Executive Officer, Anthem Insurance
Companies, Inc. (insurance and financial services), Indianapolis,
Indiana. He served as Chairman from March, 1994 to March, 1996, and
has held the remaining positions for more than five years. He is a
director of IPALCO, Bank One, Indianapolis, NA and Anthem Insurance
Companies, Inc. and its subsidiaries. He has been a director of
IPL since April, 1992.
Michael S. Maurer, 54, Chairman of the Board of MyStar Communications
Corporation (radio station operations), a position he has held for
more than five years; Chairman of the Board of IBJ Corporation
(newspaper publisher) since December, 1990; Chairman of the Board of
The National Bank of Indianapolis since December, 1993. Mr. Maurer is
Chair, United Way of Central Indiana. He has been a director of
IPALCO and IPL since January, 1993.
Andrew J. Paine, Jr., 59, President and Chief Executive Officer of NBD
Indiana, Inc. and Executive Vice President of First Chicago NBD
Corporation. In his position with NBD Indiana, Inc. he directs the
operation of all NBD banks in Indiana. In 1981, Mr. Paine was named
Vice Chairman of Indiana National Bank, and was elected Executive
Vice President of NBD Bancorp after it acquired INB in 1992. Mr.
Paine was named Chief Executive Officer in June, 1994, and Executive
Vice President of First Chicago NBD Corporation in 1995. He is a
director of Indianapolis Life Insurance Company and Bankers Life
Insurance Company of New York.
Sallie W. Rowland, 64, Chairman and Chief Executive Officer of Rowland
Design, Inc. (an architectural, interiors and graphic design firm),
Indianapolis, Indiana, positions she has held for more than 5 years.
Mrs. Rowland serves on various community boards including The
Indianapolis Chamber of Commerce. She is a director of IPALCO,
NBD Bank, N.A., Meridian Insurance Group, Inc. and Meridian Mutual
Insurance Company. She has been a director of IPL since April, 1988.
Thomas H. Sams, 55, President and Chief Executive Officer, Waldemar
Industries, Inc. (an investment holding company), Indianapolis,
Indiana and an officer of various subsidiary and affiliated
corporations thereof. Mr. Sams has held these positions since
1966. He is a director of IPALCO, NBD Bank, N.A., and Meridian
Insurance Group, Inc. He has been a director of IPL since April, 1986.
INFORMATION REGARDING THE BOARD OF DIRECTORS
Procedure To Propose Nominees For Director
IPL will accept timely recommendations by shareholders of proposed
nominees for director. All such proposals must be received by IPL's Corporate
Secretary not later than January 2 of any year for consideration at that
year's Annual Meeting of Shareholders. The Executive Committee will review
nominees proposed by shareholders in the same manner as other proposed
nominees.
Number of Board Meetings and Attendance
Each director of IPL is elected for a term of one year and until his or
her successor is duly elected and qualified. During the year 1996, the Board
of Directors of IPL held 11 meetings. Its Executive Committee and Audit
Committee held a total of 9 meetings. All directors attended, in the
aggregate, more than 75% of the aggregate of Board meetings and assigned
committee meetings. On average, directors attended more than 92% of Board and
committee meetings held in 1996.
<PAGE>
Committees of the Board
The Board of Directors of IPL has two standing committees, the Executive
Committee and the Audit Committee. There is no nominating committee, as such;
however, the Executive Committee substantially performs the functions of such
committee. It reviews, among other things, the qualifications and suitability
of candidates to stand for election to IPL's Board of Directors and
recommends nominees to the Board. In addition, the Executive Committee
considers and recommends the declaration of dividends and acts on matters
when the full Board is not in session. The Executive Committee held six
meetings in 1996 and is currently composed of Mr. John R. Hodowal, Chairman,
and Messrs. Robert A. Borns, Otto N. Frenzel III, Earl B. Herr, Jr., Ramon L.
Humke and Sam H. Jones, members.
The Audit Committee reviews the scope of the audit, examines the
auditor's reports, makes appropriate recommendations to the Board of
Directors as a result of such review and examination, and inquires into the
effectiveness of the financial and accounting functions and controls. The
Audit Committee first approves all non-audit services and gives appropriate
consideration to the effect, if any, they may have on the independence of
the auditor; except that management advisory and tax services, which do not
exceed $50,000 per project or $150,000 in the aggregate per calendar year,
may be approved by the Chairman of the Board without such Committee's
consent. The Audit Committee held three meetings in 1996 and is currently
made up of Mrs. Sallie W. Rowland, Chairman, and Messrs. Rexford C. Early,
Edwin J. Goss, Sam H. Jones and Andre B. Lacy, members.
Compensation Committee Interlocks and Insider Participation
There is no standing Compensation Committee of the Board of Directors of
IPL. Mr. John R. Hodowal and Mr. Ramon L. Humke consult with the
Compensation Committee of the Board of Directors of IPALCO concerning the
base salary component of executive officer compensation. Mr. Frenzel is
Chairman, and Messrs. Borns, Herr and Sams are the members of IPALCO's
Compensation Committee. However, Mr. Hodowal and Mr. Humke do not
participate in discussions with the Compensation Committee with regard to
their own compensation. IPL's President and Chief Operating Officer, Mr.
Ramon L. Humke, is a member of the Compensation Committee of the Board of
Directors of LDI Management, Inc. Mr. Andre B. Lacy is Chairman of the
Board, Chief Executive Officer and President of LDI Management, Inc. and is
also a director of IPL.
<PAGE>
Compensation of Directors
Non-employee directors serving on the Board of IPL are paid an annual
fee of $8,500 plus $450 for each meeting attended; however, directors of
IPALCO and its subsidiaries are limited to two annual fees. Non-employee
members of the Executive Committee of the Board are paid annual fees of
$10,000, but no meeting fees. Members of the Audit Committee of the Board,
all of whom are non-employee directors, are paid annual fees of $4,000 plus
$450 for each meeting attended. The Chairman of this committee receives an
additional fee of $1,500 annually. Members of the Executive and Audit
Committees of both IPALCO and IPL are limited to one annual fee. Directors
who are also officers of IPL receive no director fees.
Certain Business Relationships
During 1996, companies associated with Anthem Insurance Companies, Inc.
("Anthem") administered health care programs for IPALCO and its subsidiaries
under contracts that involve payments to Anthem aggregating approximately
$15 million. Mr. L. Ben Lytle is President and Chief Executive Officer of
Anthem.
IPL maintained a line of credit during 1996 with National City Bank,
Indiana ("NCB") of which Mr. Otto N. Frenzel III is Chairman of the
Executive Committee. During 1996, the maximum principal amount outstanding
at any time on IPL's $30 million line of credit with NCB was approximately
$11 million, and IPL had no outstanding balance with NCB as of December 31,
1996.
IPL maintained a long-term revolving credit facility during 1996 with
Bank One, Indianapolis, NA, of which Mr. Joseph D. Barnette, Jr. is Chairman
and Chief Executive Officer. IPL did not utilize the credit facility during
1996.
An unutilized credit line and an unutilized long-term revolving credit
facility were also maintained by IPL with First Chicago NBD of which Mr.
Ramon L. Humke is a director.
<PAGE>
IPL engaged Rowland Design, Inc. for architectural and design services
for certain improvements to IPL's corporate offices located at One Monument
Circle. During 1996, IPL paid fees of approximately $93,000 under such
agreements. Mrs. Sallie W. Rowland is Chairman and CEO of Rowland Design,
Inc.
IPL engaged Schenkel & Associates, LLC, for consulting services in the
areas of community affairs, public relations, and communication, and paid
fees of approximately $25,000 during 1996. Mr. Thomas M. Miller, a member of
the Board of Directors of IPL prior to his death on July 5, 1996, was a
majority owner of Schenkel & Associates, LLC.
PROPOSAL 2 - APPROVE AMENDMENT TO AMENDED ARTICLES OF
INCORPORATION TO REMOVE THE LIMITATION ON THE ISSUANCE OF
UNSECURED INDEBTEDNESS
Purpose and Effect of Proposed Amendment
Under Article 6 of IPL's Articles of Incorporation, as amended, (the
"Articles"), the holders of IPL's Cumulative Preferred Stock (the "Preferred
Stock") have special voting rights with respect to certain matters, including
among others the amendment of the Articles to authorize any prior ranking
stock, the issuance of Preferred Stock unless certain coverage tests are met,
and the issuance of unsecured indebtedness unless certain coverage tests are
met.
Specifically, Article 6(A)(4)(g) provides that the approval of a
majority of the Preferred Stock, voting separately as a class, is required
for IPL to:
issue any unsecured notes, debentures or other securities
representing unsecured indebtedness, or assume any such
unsecured securities, for purposes other than the refunding
of outstanding unsecured securities theretofore issued
or assumed by the Company or the redemption or other
retirement of all outstanding shares of Preferred Stock,
if immediately after such issue or assumption, the total
principal amount of all unsecured notes, debentures or
other securities representing unsecured indebtedness
issued or assumed by the Company and then outstanding
(including unsecured securities then to be issued or
assumed) would exceed twenty percent (20%) of the
aggregate of (i) the total principal amount of all
bonds or other securities representing secured
indebtedness issued or assumed by the Company, and
then to be outstanding and (ii) the capital and
surplus of the Company as then to be stated on the
books of account of the Company.
<PAGE>
The proposed amendment would remove clause (A)(4)(g) of Article 6
from the Articles of Incorporation and thereby eliminate the special voting
rights contained in that clause and enable IPL to incur unsecured
indebtedness without a shareholder vote. The amendment is intended to
increase the flexibility of the Board of Directors in obtaining financing
on the best possible terms for IPL. Historically, IPL's long-term debt
financing generally has been accomplished through the issuance of first
mortgage bonds (secured debt financing) pursuant to IPL's Mortgage and
Deed of Trust (the "Mortgage"). All of the first mortgage bonds issued by
IPL pursuant to the Mortgage are secured by a first priority lien on
substantially all of IPL's properties. In light of the increasingly
competitive pressures in the utility industry and the financial markets,
the Board of Directors believes it is in IPL's best interests to have
maximum flexibility with respect to obtaining future financing to meet
IPL's needs. The elimination of the provision providing for special voting
rights with respect to the issuance or assumption of unsecured indebtedness
would provide IPL with the ability to obtain the best terms available in the
debt markets. This should result in long-term benefits for all of IPL's
shareholders, including the holders of IPL's Preferred Stock.
Even though the removal of the provision providing for special voting
rights would permit IPL to issue a greater amount of unsecured debt, IPL does
not have any present intention to issue an aggregate amount of debt greater
than it otherwise would be permitted to issue. In other words, the total
amount of secured and unsecured debt intended to be issued and outstanding
would not exceed the total amount of secured and unsecured debt currently
permitted by the Articles and the Mortgage; instead, unsecured debt would
become a more significant component of the overall debt of IPL.
In addition, the adoption of the proposed amendment would not remove
all restrictions on IPL's issuance of debt securities. As a regulated
utility, the issuance of any securities by IPL would continue to be subject
to the prior approval of the Indiana Utility Regulatory Commission (with
respect to securities maturing in more than one year) or the Federal
Energy Regulatory Commission (with respect to securities maturing in one year
or less). Consequently, although the removal of the provision providing for
special voting rights will increase the financial flexibility of IPL by
removing a limitation on the amount of unsecured debt that IPL is permitted
to issue, it is not intended that the overall debt capacity levels would be
increased, and, in any event, the issuance of any debt securities will
continue to be reviewed by regulatory agencies.
Vote Required to Approve Proposed Amendment
Adoption of Proposal 2 requires the affirmative vote of the holders of
(i) a majority of the outstanding common stock and (ii) two-thirds of
the outstanding shares of IPL Cumulative Preferred Stock, voting separately
as a class. Proxies representing shares held on the record date which are
returned duly executed, will be voted, unless otherwise specified, in favor
of the proposed amendment to IPL's Amended Articles of Incorporation.
Abstentions and broker non-votes will have the effect of a vote against the
proposal since the affirmative vote of two-thirds of the outstanding shares
is required for approval of the proposed amendment. IPALCO has advised IPL
that it intends to vote all of the outstanding shares of common stock of
IPL in favor of Proposal 2.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 2.
BOARD COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
Compensation Policies Relating Generally to Executive Officers
The Compensation Committee (``Committee'') of the Board of Directors
("Board") of IPALCO Enterprises, Inc. ("IPALCO"), in consultation with its
outside advisor, establishes the compensation policies of IPALCO and its
subsidiaries, including IPL, with regard to all officers. The Committee
recommends to the Board the adoption or amendment of compensation plans for
officers, including the named executive officers. On authority of the full
Board, the Committee administers all such plans, including establishing
officers' base salary levels, reviewing and approving performance measures
and goals for both annual and long-term incentive plans, and approving
incentive awards.
The Committee is made up of four non-employee directors whose philosophy
is to attract, retain, and motivate a high quality management team by
providing a strong and direct link between IPALCO performance and officer
compensation, with a significant portion of total compensation being
dependent upon measurable performance objectives. The compensation program
for executive and other selected officers had three basic components in 1996:
base salary, a performance-based annual incentive plan, and a long-term
performance and restricted stock incentive plan. It is the policy of the
Committee that the compensation program should directly link executive and
shareholder interests.
Base Salary
The Committee targeted 1996 base salaries for officers, including the
named executive officers, at the median level for similar positions within
comparably performing utilities, and where such positions are also found in
general industry, at a level approximately one-half the difference between
the utility industry and general industry medians. The Committee considered
the analysis which was provided by the outside advisor that IPALCO salaries
are within the median range of comparable utilities and below those of
general industry. The Committee also considered both company and individual
performance in approving the range of salary increases and the salary for
each officer, including the named executive officers. 1996 base salary
increases for all officers averaged 4.5%, slightly ahead of the utility
industry average, but aligned with IPALCO performance.
The comparative compensation data for electric utilities used by the
Committee were derived from companies with comparable revenues as reported in
the annual Edison Electric Institute Executive Compensation Survey. Data for
general industry were drawn from five national executive compensation
surveys provided by the outside consultant.
Annual Incentive Plan
The IPALCO Annual Incentive Plan is a performance-based plan which
measures company performance in four equally weighted criteria: Net Income,
Customer Satisfaction, Productivity, and Budget Compliance. For 1996 only,
the Committee amended the Annual Incentive Plan to remove Customer
Satisfaction and weigh the remaining performance measures one-third each.
The customer survey being used was incapable of measuring management's
efforts to improve customer service. For 1997 and beyond, Customer
Satisfaction will be measured by an independent broad-based customer survey
focusing on service characteristics which customers have stated are
important. Target awards are set approximately halfway between general
industry and utility medians. Participants in the Plan are approved in
advance of the plan year by the Committee. All participants, including the
named executive officers, are measured against performance goals which are
established by the Committee and announced at the beginning of the year.
Goals are set at Threshold, Target, and Maximum levels, with Threshold
performance required for any award in each criteria; however, if the
Threshold goal for Net Income is not met, no payout is made regardless of
the performance in any other criteria. Each performance level is assigned an
award value, with interpolation for performance between levels. For named
executive officers, performance at Threshold, Target, and Maximum
levels respectively warrants a payout of 10%, 22.5%, and 35% of base salary.
Factors ranging from .75 to 1.5 are applied to the award percentage based
upon the participant's position.
The Plan permits the reduction or elimination of an award should an
individual participant's performance be below expectations. No awards were
reduced in 1996.
For 1996, the Company met the Maximum performance goals in all three
performance measures: Net Income, Productivity and Budget Compliance.
Long-Term Performance and Restricted Stock Incentive Plan
The performance-based restricted stock plan is designed to focus the
attention of prospective participants on long-term company objectives and
performance. Participation is subject to Committee approval and is limited
to key employees (including non-officers) who contribute on a continuing
basis to the strategic and long-term growth of the company.
The Plan continues to measure company performance in Total Return to
Shareholders and in Cost Effective Service (net income as a percentage of
utility revenues) compared with the performance of a Peer Group of 15
comparable utilities. Criteria for selection of peer companies included
revenue size and sources, market-to-book ratio, fuel source, and dividend
yield among other criteria. Target awards are set approximately halfway
between general industry and utility medians. Conditional restricted stock
grants, at Target levels, ranging from 10% to 35% of base salary, are awarded
at the beginning of each three-year performance period. Final awards are
based upon IPALCO's ranking within the Peer Group over the performance
period, with one-third of the shares to be vested during each of the fourth,
fifth, and sixth years after the beginning of the performance period. The
performance period for Program 1 covers 1995-1997, with final restricted
stock awards made July 1, 1998.
Performance in Total Return to Shareholders and Cost Effective Service
continues also to be measured over the four-year performance periods
specified in the original Long-Term Incentive Plan for those programs begun
prior to 1995. For Program 5, for the years 1992-1995, IPALCO ranked first
among peers in Cost Effective Service and sixth among peers in Total Return
to Shareholders. Using the schedule specified in the plan for that level of
performance, the named executive officers received incentive payments
totaling $282,249 in 1996.
Basis For Chief Executive Officer's Compensation
The Chief Executive Officer's (``CEO'') compensation continues to be
directly and explicitly linked to IPALCO performance with consideration given
to the Committee's assessment of his individual performance. The Committee
thoroughly reviews the CEO's performance, including strategic direction,
leadership and management team development, as well as overall company
performance. The Committee's review is both subjective and objective. IPALCO
performance data used in the incentive plans plus other financial,
operational, service, and administrative data are considered.
Total 1996 compensation for the CEO (including base salary, Annual
Incentive Plan payment, and Long-Term Incentive payment and stock associated
with the Long-Term Performance and Restricted Stock Incentive Plan), is
shown in Table I. His total compensation was slightly above the median of
Peer Group CEOs, but was slightly below the median of CEO compensation in
comparably high-performing peer companies.
At Target performance, under the current compensation program,
approximately 37% of the CEO's total direct compensation is variable and at
risk. During 1996, approximately 43% of the CEO's actual total direct
compensation was at risk.
Deductibility of Executive Compensation
Section 162(m) of the Internal Revenue Code will not permit a public
corporation to deduct, for federal income tax purposes, annual compensation
in excess of $1 million paid to certain top executives, unless that
compensation qualifies as "performance based" compensation. This limitation
will not impact IPALCO with respect to executive compensation paid in 1996,
nor does the Committee believe that this will have an impact in 1997. The
Committee continues to review this issue with the present intent to take
appropriate steps to ensure the continued deductibility of its executive
compensation.
The Compensation Committee of the
Board of Directors of IPALCO
Enterprises, Inc.
Otto N. Frenzel III, Chairman
Robert A. Borns
Earl B. Herr, Jr.
Thomas H. Sams
COMPENSATION OF EXECUTIVE OFFICERS
Nature and Types of Compensation
The two tables that follow on succeeding pages disclose all plan and
non-plan compensation awarded to, earned by, or paid to the Chairman of the
Board and Chief Executive Officer (``CEO'') and to the four named executive
officers other than the CEO who are the most highly compensated key policy-
making executive officers of IPL, each of whose total annual salary and
bonus exceeded $100,000 for the year 1996. The tables include a Summary
Compensation Table (Table I) and an Aggregated Option/SAR Exercises In Last
Fiscal Year and Fiscal Year-End Option/SAR Value Table (Table II). No table
is presented for Option/SAR Grants in last fiscal year since no stock options
were granted during 1996. No table is presented for Long-Term Incentive
Plans since the issuance of restricted stock under the Long-Term Performance
and Restricted Stock Incentive Plan is included in the Summary Compensation
Table (Table I).
<PAGE>
<TABLE>
SUMMARY COMPENSATION TABLE
Long-Term Compensation
--------------------------------------
Annual Compensation Awards Awards Payouts
-----------------------------------------------------------------------------------
Other Securities
Annual Restricted Underlying All Other
Compen- Stock Options/ LTIP Compen-
Name and sation<F1> Awards<F2> SARs<F3> Payouts<F4> sation<F5>
Principal Position Year Salary ($) Bonus ($) ($) ($) (#) ($) ($)
- ------------------ ---- ---------- --------- ---------- ----------- -------- -------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
John R. Hodowal 1994 $461,051 $214,566 $ 41,471 -0- -0- $ 76,250 $8,955
Chairman & CEO 1995 476,012 206,425 43,721 $491,790 -0- 75,488 8,310
1996 515,125 272,370 229,775 -0- -0- 111,333 6,000
Ramon L. Humke 1994 $382,221 $177,801 $130,141 -0- -0- $ 63,646 $8,955
President & COO 1995 394,591 171,120 157,606 $407,700 -0- 62,975 8,310
1996 432,812 228,935 200,277 -0- -0- 92,296 6,000
John R. Brehm 1994 $218,304 $ 67,728 $ 3,678 -0- -0- $ 25,781 $8,199
Senior Vice President, 1995 225,315 89,513 6,301 $133,050 -0- 24,228 8,310
Finance & Information 1996 236,394 83,253 7,788 -0- -0- 34,996 6,698
Services
Bryan G. Tabler<F6> 1994 $ 46,157 $ 15,785 $ 1,360 -0- -0- -0- -0-
Senior Vice President, 1995 202,931 58,650 14,471 $121,305 -0- -0- $5,589
Secretary & General 1996 218,184 76,907 17,077 -0- -0- $ 10,651 6,698
Counsel
Gerald D. Waltz 1994 $202,955 $ 62,887 $ 4,465 -0- -0- $ 26,042 $7,731
Senior Vice President, 1995 201,930 58,353 11,178 $121,530 -0- 24,228 8,310
Electric Delivery 1996 209,792 73,885 12,355 -0- -0- 32,972 6,000
- -------------------------------
<FN>
<F1> Represents taxes paid by IPALCO and/or IPL on accrued interest and contributions of principal under the
Funded Supplemental Retirement Plan (See ``Pension Plans''). Includes $10,227 earned in above market
interest on deferred compensation for Mr. Humke for 1996.
<F2> Restricted common stock awards are valued at the closing market price as of the date of grant.
Restricted common stock holdings and the value thereof based on the closing price of the common
stock at year end are as follows: Mr. Hodowal - 24,589 shares ($670,050); Mr. Humke - 20,385
shares ($555,491); Mr. Brehm - 6,652 shares ($181,267); Mr. Tabler - 6,067 shares ($165,326);
and Mr. Waltz - 6,076 shares ($165,571). Dividends on the restricted common stock are payable
to the named officers. Shares awarded in 1995 represent a cumulative 3-year award for years
1995, 1996, and 1997. Under the terms of the Plan, no additional shares will be awarded to the
named officers before 1998.
<F3> No options have stock appreciation rights.
<F4> Payouts shown were made in 1996 for the 4-year LTIP Program ended December 31, 1995.
<F5> Represents 1996 contributions made by IPL to the Trustee of the Employees' Thrift Plan.
<F6> Mr. Tabler started his employment on October 1, 1994, and became an officer of both IPALCO and IPL on January 1, 1995.
TABLE I
</TABLE>
<PAGE>
<TABLE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs at Options/SARs
FY-End(#) FY-End ($)*
Shares Acquired Exercisable/ Exercisable/
Name On Exercise (#) Value Realized ($) Unexercisable Unexercisable
- ------------------- --------------- ------------------ ------------------ ----------------
<S> <C> <C> <C> <C>
John R. Hodowal 35,000 $542,485 180,000(e) $401,701(e)
-0-(u) -0-(u)
Ramon L. Humke 82,500 $921,385 105,000(e) $239,013(e)
-0-(u) -0-(u)
John R. Brehm -0- -0- 52,500(e) $119,506(e)
-0-(u) -0-(u)
Bryan G. Tabler -0- -0- ---- ----
---- ----
Gerald D. Waltz 18,120 $267,208 55,320(e) $193,880(e)
-0-(u) -0-(u)
- ------------------------------
(e) Exercisable.
(u) Unexercisable.
* Based upon year-end closing market price of $27.25 per share of common stock.
TABLE II
</TABLE>
<PAGE>
Performance Graph
The Performance Graph on this page, Table III, plots the total
cumulative return that shareholders of IPALCO received (solid line)
during the 5-year period ended December 31, 1996, compared with the total
cumulative return to shareholders of companies comprising the Standard and
Poors 500 Index (solid line with dash) and the Standard & Poor's Electric
Companies Index (wavy line). The Graph shows the cumulative
total return assuming dividend reinvestment and based upon an initial
investment of $100.00. The vertical portion of the Graph indicates the
dollar value ranging from $90.00 to $210.00, and the horizontal portion of
the Graph is the year, beginning in 1991 and continuing through 1996.
The points on the Performance Graph are as follows:
<TABLE>
CUMULATIVE TOTAL RETURN ASSUMING DIVIDEND REINVESTMENT
<CAPTION>
1991 1992 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C> <C>
IPALCO 100 114 119 108 146 165
S & P 500 100 108 118 120 165 203
S & P ELEC COMPANIES 100 106 119 104 136 136
Source: Standard and Poor's Compustat Services, Inc.
TABLE III
</TABLE>
<PAGE>
Performance Graph
The Performance Graph (Table III) on the preceding page plots the total
cumulative return that shareholders of IPALCO received (solid line) during
the 5-year period ended December 31, 1996, compared with the total cumulative
return to shareholders of companies comprising the Standard and Poor's 500
Index (solid line with dash) and the Standard & Poor's Electric Companies
Index (wavy line). The Graph reflects IPALCO's superior return as compared
to the electric utility industry and is one of the bases for the Chief
Executive Officer's compensation disclosed in the Compensation Committee
Report set forth in this Proxy Statement.
Pension Plans
Table IV below illustrates the combined annual retirement benefits
computed on a straight-life annuity basis that are payable under the Base
Retirement Plan and the Funded Supplemental Retirement Plan (assuming
continuous employment to age 65) to named executive officers having the
remuneration and years of service shown.
<TABLE>
- ------------------------------------------------------------------------------------------------------------------
PENSION PLAN TABLE <F1>
<CAPTION>
Remuneration Years of Service
- ---------------- -----------------------------------------------------------------------------------------------
15 20 25 30 35
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
$125,000 $ 81,250 $ 81,250 $ 81,250 $ 81,250 $ 81,250
150,000 97,500 97,500 97,500 97,500 97,500
175,000 113,750 113,750 113,750 113,750 113,750
200,000 130,000 130,000 130,000 130,000 130,000
225,000 146,250 146,250 146,250 146,250 146,250
250,000 162,500 162,500 162,500 162,500 162,500
300,000 195,000 195,000 195,000 195,000 195,000
400,000 260,000 260,000 260,000 260,000 260,000
450,000 292,500 292,500 292,500 292,500 292,500
500,000 325,000 325,000 325,000 325,000 325,000
___________________________________
<FN>
<F1> This table takes into account the latest Internal Revenue Code Section 415 benefit
limitations and Internal Revenue Code Section 401(a)(17) compensation limitation
applicable to the Base Retirement Plan. Benefits for both the Base Retirement Plan
portion and Funded Supplemental Retirement Plan portion of the combined amounts
have been shown without adjustment for income taxes.
TABLE IV
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
IPL's Employees' Retirement Plan (the ``Base Retirement Plan'') covers
all permanent employees with one (1) year of service but excludes directors
unless they are also officers. It provides fixed benefits at normal
retirement age based upon compensation and length of service, the costs of
which are computed actuarially. The remuneration covered by the Plan includes
``Salary'' but excludes ``Bonus'' and ``Other Compensation,'' annual or
otherwise, as those terms are used in the Summary Compensation Table (Table
I). Benefits are calculated on the basis of the highest average annual salary
in any 60 consecutive months of employment. Years of service for Pension Plan
purposes of named executive officers are as follows: Mr. Hodowal - 28, Mr.
Humke - 7, Mr. Brehm - 21, Mr. Tabler - 2, and Mr. Waltz - 36.
The Funded Supplemental Retirement Plan referred to above is applicable
to the named executive officers and, at reduced benefits, to all other
officers of IPALCO and IPL. In addition to the Base Retirement Plan and
Funded Supplemental Retirement Plan benefits described above, the Funded
Supplemental Retirement Plan also provides Mr. Hodowal with a straight-life
annuity of $130,000 per year commencing at age 65, which benefit is reduced
for early retirement. Contributions and accrued interest credited during
1996 to the accounts of Messrs. Hodowal, Humke, Brehm, Tabler and Waltz
amounted to $271,745, $196,824, $7,256, $20,466 and $9,987, respectively
(in addition to the federal, state and local income tax payments reflected in
Table I above). Contributions are based on actuarial assessments of benefits
projected to accrue to such officers under the Funded Supplemental Retirement
Plan upon termination of employment at normal retirement age and at current
salary levels.
Employment Contracts and Termination of Employment and Change-in-Control
Arrangements
IPL has employment contracts with Messrs. Hodowal and Humke which
provide for an indefinite term that is convertible into a fixed 3-year term
upon notice. Such contracts terminate upon death, total disability or
retirement. Should they be terminated without ``cause'' or resign for ``good
reason'' (as those terms are defined in the contract--see below), they would
continue to receive their Salary, as that term is used in Table I above,
for up to 3 years thereafter, less any severance payments received from other
agreements.
All Officers of IPL have Termination Benefits Agreements, dated on or
after January 1, 1993. These Agreements provide for payment of severance
benefits equal to 299.99% of the last 5 years' average annual Salary (but not
exceeding the limits of Internal Revenue Code 280G), if IPL or IPALCO
undergoes an ``acquisition of control'' while the agreement is in effect and
if, within 3 years after an acquisition of control, any such officer is
terminated without ``cause'' or resigns for ``good reason,'' as those terms
are therein defined (see below).
The term ``without `cause''' is defined in the employment contracts and
Termination Benefits Agreements discussed above to mean in the absence of
fraud, dishonesty, theft of corporate assets or other gross misconduct, as
set out in a good faith determination of the Board of Directors. The term
``resign for `good reason''' is defined in the same agreements to mean
generally, and subject to lengthy qualifications and amplification, demotion;
assignment of duties inconsistent with the officer's status, position or
responsibilities; reduction in base salary or failure to grant annual
increases commensurate with increases of other officers; relocation of the
headquarters of IPALCO or IPL to a location outside Greater Indianapolis; or
termination of the executive's participation in, or the existence of, an
incentive compensation, insurance or pension program. The term ``acquisition
of control'' in such contracts means, generally and subject to lengthy
amplification and qualifications therein, acquisition by any person, entity,
or group of 20% or more of the combined voting power of the outstanding
securities of IPALCO entitled to vote in the election of directors, excluding
acquisitions by or from IPALCO or any acquisition by any employee benefit
plan of IPALCO or IPL; change in majority membership of the Board of
Directors other than by normal succession; certain reorganizations, mergers
or consolidations resulting in control of the reorganized, merged, or
consolidated entity by persons not previously in control of IPALCO; approval
by the shareholders of complete liquidation or dissolution of IPALCO, or of a
sale of all or substantially all of its assets to an entity not controlled by
directors and holders of voting securities who were directors and holders of
voting securities of IPALCO prior to the transaction.
A Benefit Protection Fund and Trust Agreement (``Fund'') is also in
effect to pay litigation expenses in the event it becomes necessary for any
officer to enforce the employment contracts and Termination Benefits
Agreements above described. The Fund is held in trust by National City Bank,
Indianapolis, and at December 31, 1996, the sum of $887,580 was reserved in
trust for such expenses.
FINANCIAL INFORMATION FOR INDIANAPOLIS POWER & LIGHT COMPANY
Attached hereto as Exhibit "A" are the audited financial statements of
IPL. Attached hereto as Exhibit "B" is certain selected financial data for
IPL.
By order of the Board of Directors.
IPALCO ENTERPRISES, INC.
By: BRYAN G. TABLER, Secretary
Indianapolis, Indiana
April 15, 1997
- --------------------------------------------------------------------------
EXHIBIT A
- ---------
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-------------------------------------------
INDEPENDENT AUDITORS' REPORT
----------------------------
To the Board of Directors of Indianapolis Power & Light Company:
We have audited the accompanying balance sheets of Indianapolis
Power & Light Company as of December 31, 1996 and 1995, and the
related statements of income, retained earnings and cash flows for
each of the three years in the period ended December 31, 1996.
These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all
material respects, the financial position of Indianapolis Power &
Light Company as of December 31, 1996 and 1995, and the results of
its operations and its cash flows for each of the three years in
the period ended December 31, 1996 in conformity with generally
accepted accounting principles.
Deloitte & Touche LLP
Indianapolis, Indiana
January 24, 1997
<TABLE>
INDIANAPOLIS POWER & LIGHT COMPANY
Statements of Income
For the Years Ended December 31, 1996, 1995 and 1994
<CAPTION>
1996 1995 1994
--------------- --------------- ---------------
(In Thousands)
<S> <C> <C> <C>
OPERATING REVENUES (Note 9):
Electric $ 724,764 $ 673,388 $ 649,767
Steam 37,739 35,818 36,309
--------------- --------------- ---------------
Total operating revenues 762,503 709,206 686,076
--------------- --------------- ---------------
OPERATING EXPENSES:
Operation:
Fuel 164,339 169,206 169,756
Other 137,192 116,428 104,273
Power purchased 18,365 19,102 19,060
Purchased steam 7,240 6,680 7,653
Maintenance 67,768 63,013 68,562
Depreciation and amortization 102,769 100,984 87,028
Taxes other than income taxes 33,363 31,706 30,891
Income taxes - net (Note 8) 68,248 54,499 55,543
--------------- --------------- ---------------
Total operating expenses 599,284 561,618 542,766
--------------- --------------- ---------------
OPERATING INCOME 163,219 147,588 143,310
--------------- --------------- ---------------
OTHER INCOME AND (DEDUCTIONS):
Allowance for equity funds used during construction 5,967 6,003 4,672
Other - net (2,527) (2,020) (1,527)
Income taxes - net (Note 8) 982 931 823
--------------- --------------- ---------------
Total other income - net 4,422 4,914 3,968
--------------- --------------- ---------------
INCOME BEFORE INTEREST CHARGES 167,641 152,502 147,278
--------------- --------------- ---------------
INTEREST CHARGES:
Interest on long-term debt 43,425 45,656 45,566
Other interest 3,638 4,728 1,497
Allowance for borrowed funds used during construction (3,354) (5,367) (4,709)
Amortization of redemption premiums and expenses on
debt - net 1,344 1,212 1,101
--------------- --------------- ---------------
Total interest charges 45,053 46,229 43,455
--------------- --------------- ---------------
NET INCOME 122,588 106,273 103,823
PREFERRED DIVIDEND REQUIREMENTS 3,182 3,182 3,182
--------------- --------------- ---------------
INCOME APPLICABLE TO COMMON STOCK $ 119,406 $ 103,091 $ 100,641
=============== =============== ===============
See notes to financial statements.
</TABLE>
<TABLE>
INDIANAPOLIS POWER & LIGHT COMPANY
Balance Sheets
December 31, 1996 and 1995
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
ASSETS 1996 1995
- ---------------------------------------------------------------------------------------------------------
(In Thousands)
<S> <C> <C>
UTILITY PLANT:
Utility plant in service (Note 2) $ 2,763,305 $ 2,517,790
Less accumulated depreciation 1,048,492 984,910
----------------- -----------------
Utility plant in service - net 1,714,813 1,532,880
Construction work in progress 63,243 249,249
Property held for future use 9,913 9,878
----------------- -----------------
Utility plant - net 1,787,969 1,792,007
----------------- -----------------
OTHER PROPERTY -
At cost, less accumulated depreciation 5,799 4,454
----------------- -----------------
CURRENT ASSETS:
Cash and cash equivalents 8,840 9,985
Accounts receivable (less allowance for doubtful
accounts - 1996, $907,000 and 1995, $786,000) 6,710 55,459
Receivable from parent 1,182 1,693
Fuel - at average cost 30,121 29,894
Materials and supplies - at average cost 52,027 56,547
Prepayments and other current assets 9,612 4,095
----------------- -----------------
Total current assets 108,492 157,673
----------------- -----------------
DEFERRED DEBITS:
Regulatory assets (Note 4) 137,974 142,711
Miscellaneous 12,166 11,971
----------------- -----------------
Total deferred debits 150,140 154,682
----------------- -----------------
TOTAL $ 2,052,400 $ 2,108,816
================= =================
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
CAPITALIZATION AND LIABILITIES 1996 1995
- ----------------------------------------------------------------------------------------------------------
(In Thousands)
<S> <C> <C>
CAPITALIZATION (See Notes 5 and 6):
Common shareholder's equity
Common stock, no par, authorized - 20,000,000 shares,
issued and outstanding - 17,206,630 shares in 1996,
17,206,630 shares in 1995 $ 324,537 $ 324,537
Premium on 4% cumulative preferred stock 1,363 1,363
Retained earnings 456,349 421,229
----------------- -----------------
Total common shareholder's equity 782,249 747,129
Cumulative preferred stock (Note 5) 51,898 51,898
Long-term debt (Note 6) 627,791 669,000
----------------- -----------------
Total capitalization 1,461,938 1,468,027
----------------- -----------------
CURRENT LIABILITIES:
Notes payable - banks and commercial paper (Note 7) 34,000 65,022
Current maturities and sinking fund requirements (Note 6) 11,250 15,150
Accounts payable and accrued expenses 56,537 73,053
Dividends payable 21,910 21,263
Taxes accrued 19,621 19,023
Interest accrued 13,301 14,324
Other current liabilities 14,519 16,092
----------------- -----------------
Total current liabilities 171,138 223,927
----------------- -----------------
DEFERRED CREDITS AND OTHER LONG-TERM LIABILITIES:
Accumulated deferred income taxes - net (Note 8) 304,854 293,748
Unamortized investment tax credit 47,722 50,636
Accrued postretirement benefits (Note 11) 23,635 30,517
Accrued pension benefits (Note 10) 37,283 31,834
Miscellaneous 5,830 10,127
----------------- -----------------
Total deferred credits and other long-term liabilities 419,324 416,862
----------------- -----------------
COMMITMENTS AND CONTINGENCIES (Note 13)
TOTAL $ 2,052,400 $ 2,108,816
================= =================
See notes to financial statements.
</TABLE>
<TABLE>
INDIANAPOLIS POWER & LIGHT COMPANY
Statements of Cash Flows
For the Years Ended December 31, 1996, 1995 and 1994
<CAPTION>
1996 1995 1994
--------------- -------------- ---------------
(In Thousands)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATIONS:
Net income $ 122,588 $ 106,273 $ 103,823
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 97,313 99,300 88,371
Amortization of regulatory assets 17,680 6,748 -
Deferred income taxes and investment tax credit adjustme 3,195 (4,564) 2,650
Allowance for funds used during construction (9,321) (11,370) (9,381)
Premiums on redemptions of debt (3,128) (2,506) (1,363)
Change in certain assets and liabilities:
Accounts receivable 49,260 (9,174) 4,869
Fuel, materials and supplies 4,293 6,362 (2,743)
Accounts payable (16,516) 4,199 17,207
Taxes accrued 598 2,236 (4,590)
Accrued pension benefits 5,449 4,731 4,563
Other - net (17,177) 3,978 19,778
--------------- --------------- ---------------
Net cash provided by operating activities 254,234 206,213 223,184
--------------- --------------- ---------------
CASH FLOWS FROM INVESTING:
Construction expenditures (78,543) (166,874) (178,295)
Other (13,488) (20,307) (11,002)
--------------- --------------- ---------------
Net cash used in investing activities (92,031) (187,181) (189,297)
--------------- --------------- ---------------
CASH FLOWS FROM FINANCING:
Issuance of long-term debt 20,000 110,000 200,000
Retirement of long-term debt (65,150) (80,350) (85,928)
Short-term debt - net (31,022) 38,622 (63,600)
Dividends paid (86,811) (84,471) (82,421)
Other (365) (683) (2,452)
--------------- --------------- ---------------
Net cash used in financing activities (163,348) (16,882) (34,401)
--------------- --------------- ---------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (1,145) 2,150 (514)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 9,985 7,835 8,349
--------------- --------------- ---------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 8,840 $ 9,985 $ 7,835
=============== =============== ===============
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest (net of amount capitalized) $ 45,339 $ 46,792 $ 40,747
=============== =============== ===============
Income taxes $ 67,979 $ 53,049 $ 59,129
=============== =============== ===============
See notes to financial statements.
</TABLE>
<TABLE>
INDIANAPOLIS POWER & LIGHT COMPANY
Statements of Retained Earnings
For the Years Ended December 31, 1996, 1995 and 1994
<CAPTION>
1996 1995 1994
---------------- ---------------- ----------------
(In Thousands)
<S> <C> <C> <C>
RETAINED EARNINGS AT BEGINNING OF YEAR $ 421,229 $ 399,862 $ 379,249
NET INCOME 122,588 106,273 103,823
---------------- ---------------- ----------------
Total 543,817 506,135 483,072
DEDUCT:
Cash dividends declared:
Cumulative preferred stock - at prescribed
rate of each series (See Note 5) 3,182 3,182 3,182
Common stock 84,286 81,724 80,028
---------------- ---------------- ----------------
Total 87,468 84,906 83,210
---------------- ---------------- ----------------
RETAINED EARNINGS AT END OF YEAR $ 456,349 $ 421,229 $ 399,862
================ ================ ================
See notes to financial statements.
</TABLE>
INDIANAPOLIS POWER & LIGHT COMPANY
----------------------------------
Notes to Financial Statements
For the Years Ended December 31, 1996,1995 and 1994
- --------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
All the outstanding common stock of Indianapolis Power & Light Company
(IPL) is owned by IPALCO Enterprises, Inc. At December 31, 1996 and
1995, IPL had a receivable, which is due on demand, for advances made to
IPALCO.
Nature of Operations: IPL is engaged principally in providing
electric and steam service to the Indianapolis metropolitan area.
Concentrations of Risk: Substantially all of IPL's business activity
is with customers located within the Indianapolis area. In addition,
approximately 65% of IPL's employees are covered by collective bargaining
agreements.
Regulation: The retail utility operations of IPL are subject to the
jurisdiction of the Indiana Utility Regulatory Commission (IURC). IPL's
wholesale power transactions are subject to the jurisdiction of the
Federal Energy Regulatory Commission. These agencies regulate IPL's
utility business operations, tariffs, accounting, depreciation
allowances, services, security issues and the sale and acquisition of
utility properties. The financial statements of IPL are based on
generally accepted accounting principles, including the provisions of
Statement of Financial Accounting Standards No. 71, "Accounting for the
Effects of Certain Types of Regulation," which gives recognition to the
ratemaking and accounting practices of these agencies.
Revenues: Revenues are recorded as billed to customers on a monthly
cycle billing basis. Revenue is not accrued for energy delivered but
unbilled at the end of the year. A fuel adjustment charge provision,
which is established after public hearing, is applicable to substantially
all the rate schedules of IPL, and permits the billing or crediting of
estimated fuel costs above or below the levels included in such rate
schedules. Actual fuel costs in excess of or under estimated fuel costs
billed are deferred or accrued, respectively.
Authorized Annual Operating Income: Indiana law requires electric
utilities under the jurisdiction of the IURC to meet operating expense
and income requirements as a condition for approval of requested changes
in fuel adjustment charges. Additionally, customer refunds may result if
the utilities rolling 12-month operating income, determined at quarterly
measurement dates, exceeds the utilities' authorized annual operating
income and cannot be offset by applicable cumulative net operating income
deficiencies. In such a circumstance, the required customer refund for
the quarterly measurement period is calculated to be one-fourth of the
excess annual operating income grossed up for federal and state taxes.
Effective July 1, 1996, IPL's authorized annual electric operating
income, for purposes of quarterly operating income tests, is $163
million, as established in an IURC order dated August 24, 1995. This
level will be maintained until changed by an IURC order. During 1996,
IPL's rolling annual electric operating income was less than the
authorized annual operating income at each of the quarterly measurement
dates (January, April, July and October). At October 31, 1996, IPL's
most recent quarterly measurement date, IPL had a cumulative net
operating deficiency of $93 million, of which $63.5 million expires at
varying amounts during the five-year period ending September 1, 2000.
The operating deficiency is calculated by summing the 20 most recent
quarterly measurement period results. As a consequence IPL could, for a
period of time, earn above $163 million of electric net operating income
without being required to make a customer refund.
Through the date of IPL's next general electric rate order, IPL is
required to file upward and downward adjustments in fuel cost credits and
charges on a quarterly basis, based on changes in the cost of fuel,
irrespective of its level of earnings.
Pursuant to an order of the IURC, IPL's authorized annual steam net
operating income is $6.2 million, plus any cumulative annual
underearnings occurring during the five-year period subsequent to the
implementation of the new rate tariffs.
Allowance For Funds Used During Construction: In accordance with the
prescribed uniform system of accounts, IPL capitalizes an allowance for
the net cost of funds (interest on borrowed funds and a reasonable rate
on equity funds) used for construction purposes during the period of
construction with a corresponding credit to income. IPL capitalized
amounts using pretax composite rates of 7.3%, 8.5% and 9.5% during 1996,
1995 and 1994, respectively.
Utility Plant and Depreciation: Utility plant is stated at original
cost as defined for regulatory purposes. The cost of additions to
utility plant and replacements of retirement units of property, as
distinct from renewals of minor items which are charged to maintenance,
are charged to plant accounts. Units of property replaced or abandoned
in the ordinary course of business are retired from the plant accounts at
cost; such amounts plus removal costs, less salvage, are charged to
accumulated depreciation. Depreciation is computed by the straight-line
method based on functional rates approved by the IURC and averaged 3.4%
during 1996 and 3.5% during 1995 and 1994. Depreciation expense for 1996
includes an adjustment to spare parts inventory of $4.5 million resulting
from recognition of the impairment in value of excess spare parts.
Depreciation expense for 1995 and 1994 includes adjustments to property
held for future use of approximately $12.3 million and $3.9 million,
respectively. The adjustments in 1995 and 1994 reflect incurred costs of
expired regulatory permits and for designing and engineering a future
generating station in Patriot, Indiana.
Sale of Accounts Receivable: In late December 1996, IPL entered into
an agreement to sell, on a revolving basis, undivided percentage
interests in certain of its accounts receivable, including accounts
receivable for KWH delivered but not billed, up to an aggregate maximum
at any one time of $50 million. Accounts receivable on the Consolidated
Balance Sheets are net of the $50 million interest sold under the IPL
agreement at December 31, 1996. The gross amount of receivables sold was
$55.6 million, of which $5.6 million was replaced with a receivable from
the purchasing party.
The Financial Accounting Standards Board has issued Statement No. 125
relating to the accounting for transfers of financial assets.
Enterprises anticipates adopting this standard on its effective date of
January 1, 1997, and does not expect that it will have a material effect
on its financial position or results of operations.
Regulatory Assets: Regulatory assets represent deferred costs that
have been, or that are expected to be, included as allowable costs for
ratemaking purposes. IPL has recorded regulatory assets relating to
certain costs as authorized by the IURC. Specific regulatory assets are
disclosed in Note 4. As of December 31, 1996, all nontax-related
regulatory assets have been included as allowable costs in orders of the
IURC authorizing IPL to increase customer tariffs except for
approximately $10 million in costs for Demand Side Management (DSM)
incurred subsequent to January 1995 (see Note 9). IPL is amortizing such
regulatory assets to expense over periods authorized by these orders. Tax-
related regulatory assets represent the net income tax liability for
deferred costs and revenues to be considered in future regulatory
proceedings.
In accordance with regulatory treatment, IPL deferred as a regulatory
asset certain post in-service date carrying charges and certain other
costs related to its investment in Petersburg Unit 4. As authorized in
the 1995 Electric Rate Settlement (see Note 9), IPL, effective September
1, 1995, is amortizing this deferral to expense over a life which
generally approximates the useful life of the related facility.
Also in accordance with regulatory treatment, IPL defers as regulatory
assets nonsinking fund debt and preferred stock redemption premiums and
expenses, and amortizes such costs over the life of the original debt,
or, in the case of preferred stock redemption premiums, over 20 years.
Derivatives: IPL has limited involvement with derivative financial
instruments, and these financial instruments are not used for trading
purposes. They are used to manage well-defined interest rate risks as
more fully discussed in Note 6.
Income Taxes: Deferred taxes are provided for all significant
temporary differences between book and taxable income. The effects of
income taxes are measured based on enacted laws and rates. Such
differences include the use of accelerated depreciation methods for tax
purposes, the use of different book and tax depreciable lives, rates and
in-service dates and the accelerated tax amortization of pollution
control facilities. Deferred tax assets and liabilities are recognized
for the expected future tax consequences of existing differences between
the financial reporting and tax reporting basis of assets and
liabilities.
IPL has recorded as regulatory assets and net deferred tax
liabilities, income taxes payable and includable in allowable costs for
ratemaking purposes in future years.
Investment tax credits which reduced federal income taxes in the years
they arose have been deferred and are being amortized to income over the
useful lives of the properties in accordance with regulatory treatment.
IPL participates in a tax sharing agreement with the consolidated
IPALCO group which allocates taxes as if each company had filed a return
on a stand alone basis.
Statements of Cash Flows - Cash Equivalents: IPL considers all highly
liquid investments purchased with original maturities of 90 days or less
to be cash equivalents.
Employee Benefit Plans: Substantially all employees of IPL are
covered by a defined benefit pension plan, a defined contribution plan
and a postretirement benefit plan.
The defined benefit pension plan is noncontributory and is funded
through two trusts. Additionally, a select group of management employees
of IPL are covered under a funded supplemental retirement plan.
Collectively, these two plans are referred to as Plans. Benefits are
based on each individual employee's years of service and compensation.
IPL's funding policy is to contribute annually not less than the minimum
required by applicable law, nor more than the maximum amount which can be
deducted for federal income tax purposes.
The defined contribution plan is sponsored by IPL as the Employees'
Thrift Plan of Indianapolis Power & Light Company (Thrift Plan).
Employees elect to make contributions to the Thrift Plan based on a
percentage of their annual base compensation. IPL matches each
employee's contributions in amounts up to, but not exceeding, 4% of the
employee's annual base compensation.
The postretirement benefit plan is sponsored by IPL and provides
certain health-care and life insurance benefits to employees who retire
from active service on or after attaining age 55 and have rendered at
least 10 years of service. This plan is funded through a Voluntary
Employee Beneficiary Association (VEBA) Trust. IPL's policy is to fund
the annual actuarially determined postretirement benefit cost.
Long-Lived Assets: Effective January 1, 1996, IPL adopted the
provision of Financial Accounting Standards Board, Statement of Financial
Accounting Standards No. 121 (SFAS 121), "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." The
adoption of this new standard did not have a material impact on IPL's
financial position or results of operations. As competitive factors
influence pricing in the utility industry, this opinion may change in the
future. The general requirements of SFAS 121 apply to property, plant
and equipment of IPL and require impairment to be considered whenever
evidence suggests that it is no longer probable that future cash flows
are at least equal to the carrying amount of the asset.
Stock-Based Compensation: Effective January 1, 1996, IPL adopted the
provisions of Financial Accounting Standards Board, Statement of
Financial Accounting Standards No. 123 (SFAS 123), "Accounting for Stock-
Based Compensation." The accounting requirements of this pronouncement
are applicable to all new employee awards granted after the adoption of
SFAS 123. The new standard provides for the adoption, at the option of
the company, of a fair value method of accounting for stock options and
similar equity instruments. IPL has elected to continue to account for
such transactions under Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees." The adoption of SFAS 123 has
no effect on the net income, earnings per share or the cash flows of IPL.
Use of Management Estimates: The preparation of financial statements
in conformity with generally accepted accounting principles requires that
management make certain estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements. The
reported amounts of revenues and expenses during the reporting period may
also be affected by the estimates and assumptions management is required
to make. Actual results may differ from those estimates.
Reclassification: Certain amounts from prior years' financial
statements have been reclassified to conform to the current year
presentation.
2. UTILITY PLANT IN SERVICE
The original cost of utility plant in service at December 31,
segregated by functional classifications, follows:
1996 1995
- -----------------------------------------------------------------
(In Thousands)
Production $1,684,705 $1,490,958
Transmission 235,218 231,410
Distribution 712,391 676,240
General 130,991 119,182
---------- ----------
Total utility plant in service $2,763,305 $2,517,790
========== ==========
Substantially all of IPL's property is subject to the lien of the
indentures securing IPL's First Mortgage Bonds.
3. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair value amounts of financial instruments have been
determined by IPL, using available market information and appropriate
valuation methodologies. However, considerable judgment is required in
interpreting market data to develop the estimates of fair value.
Accordingly, the estimates presented herein are not necessarily
indicative of the amounts that IPL could realize in a current market
exchange. The use of different market assumptions and/or estimation
methodologies may have an effect on the estimated fair value amounts.
Cash, Cash Equivalents and Notes Payable: The carrying amount
approximates fair value due to the short maturity of these instruments.
Long-Term Debt, Including Current Maturities and Sinking Fund
Requirements: Interest rates that are currently available to IPL for
issuance of debt with similar terms and remaining maturities are used to
estimate fair value. The variable rate debt has been included at the
face amount for both carrying amount and fair value. The fair value of
the interest rate swap agreement has been estimated at $1.2 million and
$3.6 million, which represents the amount that IPL would have to pay to
enter into an equivalent agreement at December 31, 1996 and 1995,
respectively, with a swap counter party. The fair value of the debt
outstanding has been determined on the basis of the specific securities
issued and outstanding. Accordingly, the purpose of this disclosure is
not to approximate the value on the basis of how the debt might be
refinanced. At December 31, 1996 and 1995, the carrying amount of IPL's
long-term debt, including current maturities and sinking fund
requirements, and the approximate fair value are as follows:
1996 1995
- -------------------------------------------------------
(In Thousands)
Carrying amount $639,041 $684,150
Approximate fair value $644,988 $718,229
4. REGULATORY ASSETS
The amounts of regulatory assets at December 31, 1996 and 1995, are as
follows:
1996 1995
- -----------------------------------------------------------------------
(In Thousands)
Related to Deferred Taxes (Note 1) $ 39,175 $ 34,178
Postretirement Benefit Costs in Excess of Cash
Payments and Amounts Capitalized (Note 11) 23,584 30,016
Unamortized Reacquisition Premium on Debt (Note 1) 25,151 22,600
Unamortized Petersburg Unit 4 Carrying Charges
and Certain Other Costs (Note 1) 34,005 39,143
Demand Side Management Costs (Note 9) 13,841 10,853
Other 2,218 5,921
--------- ---------
Total Regulatory Assets $ 137,974 $ 142,711
========= =========
5. CAPITAL STOCK
Common Stock: There were no changes in IPL common stock during 1996,
1995 and 1994.
Restrictions on the payment of cash dividends or other distributions
on common stock and on the purchase or redemption of such shares are
contained in the indenture securing IPL's First Mortgage Bonds. In
addition, pursuant to IPL's Articles of Incorporation, no dividends may
be paid or accrued and no other distribution may be made on the Common
Stock unless dividends on all outstanding shares of its preferred stock
have been paid or declared and set apart for payment. All of the
retained earnings at December 31, 1996, were free of such restrictions.
Cumulative Preferred Stock of Subsidiary: Preferred stock
shareholders are entitled to two votes per share, and if four full
quarterly dividends are in default on all shares of the preferred stock
then outstanding, they are entitled to elect the smallest number of IPL
Directors to constitute a majority. Preferred stock is redeemable solely
at the option of IPL and can be redeemed in whole or in part at any time
at the call prices stated below.
Preferred stock consists of the following:
December 31, 1996
-----------------
Shares Call December 31,
Outstanding Price 1996 1995
----------- ------- ------- -------
(Thousands of Dollars)
Cumulative, $100 Par Value,
authorized 2,000,000 shares
4% Series 100,000 $118.00 $10,000 $10,000
4.20% Series 39,000 103.00 3,900 3,900
4.60% Series 30,000 103.00 3,000 3,000
4.80% Series 50,000 101.00 5,000 5,000
6% Series 100,000 102.00 10,000 10,000
8.20% Series 199,985 101.00 19,998 19,998
------- ------- -------
Total cumulative preferred stock 518,985 $51,898 $51,898
======= ======= =======
Variable class, Par Value undetermined,
authorized 3,000,000 shares, none issued
6. LONG-TERM DEBT
Long-term debt consists of the following:
December 31,
----------------
1996 1995
-------- --------
Series Due (Thousands of Dollars)
------ -----
First Mortgage Bonds:
5 1/8% April 1996 (redeemed April 1996) $ - $ 15,000
5 5/8% May 1997 11,250 11,400
6.05% February 2004 (issued February 1994) 80,000 80,000
8% October 2006 58,800 58,800
7 3/8% August 2007 80,000 80,000
6.10% * January 2016 41,850 41,850
5.40% * August 2017 24,650 24,650
9 5/8% June 2019 (redeemed December 1996) - 50,000
7.45% August 2019 23,500 23,500
5.50% * October 2023 30,000 30,000
7.05% February 2024 (issued February 1994) 100,000 100,000
6 5/8% * December 2024 (issued February 1995) 40,000 40,000
Unamortized discount - net (1,009) (1,050)
-------- --------
Total first mortgage bonds 489,041 554,150
Variable Series Notes *
1991 August 2021 40,000 40,000
1994A December 2024 (issued December 1994) 20,000 20,000
1995B January 2023 (issued October 1995) 40,000 40,000
1995C December 2029 (issued December 1995) 30,000 30,000
1996 November 2029 (issued November 1996) 20,000 -
Current maturities and sinking fund requirements (11,250) (15,150)
-------- --------
Total long-term debt $627,791 $669,000
======== ========
* Notes are issued to the city of Petersburg, Indiana (City), by IPL to
secure the loan of proceeds from various tax-exempt instruments issued by
the City.
IPL redeemed the $33.2 million, 7.4% Series, the $19.75 million, 7
1/8% Series and the $25.2 million, 7.65% Series First Mortgage Bonds in
March 1994; the $40.0 million, 10 5/8% Series in March 1995; and the
$40.0 million, 9 5/8% Series in December 1995.
The Series 1991 note provides for an interest rate which varies with
the tax-exempt commercial paper rate. The 1994A, 1995B, 1995C and 1996
notes provide for an interest rate which varies with the tax-exempt
weekly rate. IPL, at its option, can change the interest rate mode for
these notes to be based on other short-term rates. Additionally, the
variable rate notes can be converted into long-term fixed interest rate
instruments by the issuance of an IPL First Mortgage Bond. The notes are
classified as long-term liabilities because IPL maintains long-term
credit facilities supporting these agreements which were unused at
December 31, 1996.
The average interest rates and the year-end interest rates for the
variable rate notes are as follows:
Average Interest Rate for Interest Rate at
the Year Ended December 31, December 31,
1996 1995 1996 1995
- ------------------------------------------------------------------
Series 1991 3.53% 3.91% 3.47% 3.72%
Series 1994A 3.53% 3.94% 4.10% 5.10%
Series 1995B 5.21% 5.14% 5.21% 5.21%
Series 1995C 3.52% 4.41% 4.10% 5.10%
Series 1996 3.72% -- 4.05% --
In conjunction with the issuance of the 1995B note, IPL entered into
an interest rate swap agreement. Pursuant to the swap agreement, IPL
will pay interest at a fixed rate of 5.21% to a swap counter party and
will receive a variable rate of interest in return, which is identical to
the variable rate payment made on the 1995B note. The result is to
effectively establish a fixed rate of interest on the 1995B note of
5.21%.
There are no maturities or sinking fund requirements on long-term debt
for the five years subsequent to December 31, 1996, other than as shown
in the balance sheet for December 31, 1996.
7. LINES OF CREDIT
IPL has committed lines of credit with banks of $100 million at
December 31, 1996, to provide loans for interim financing and also
require the payment of commitment fees. These lines of credit, based on
separate formal and informal agreements, have expiration dates ranging
from January 31, 1997, to December 31, 1997. Lines of credit used to
support commercial paper were $20 million at December 31, 1996. IPL has
a Liquidity facility in the amount of $150 million to support certain
floating rate tax-exempt facilities (see Note 6). IPL has an uncommitted
line of credit with a bank in the amount of $25 million which does not
require the payment of a commitment fee. At December 31, 1996, $11
million was unused. The weighted average interest rate on notes payable
and commercial paper outstanding was 6.16% and 5.80% at December 31, 1996
and 1995, respectively.
8. INCOME TAXES
Federal and state income taxes charged to income are as follows:
1996 1995 1994
- -------------------------------------------------------------------------
(In Thousands)
Operating Expenses:
Current income taxes:
Federal $56,676 $51,331 $45,919
State 8,378 7,732 6,919
------- ------- -------
Total current taxes 65,054 59,063 52,838
------- ------- -------
Deferred federal income taxes 6,507 (1,748) 4,896
Deferred state income taxes (398) 309 1,077
------- ------- -------
Total deferred income taxes 6,109 (1,439) 5,973
------- ------- -------
Net amortization of investment credit (2,915) (3,125) (3,268)
------- ------- -------
Total charge to operating expenses 68,248 54,499 55,543
Net credit to other income and deductions (982) (931) (823)
------- ------- -------
Total federal and state income tax provisions $67,266 $53,568 $54,720
======= ======= =======
The provision for federal income taxes (including net investment tax
credit adjustments) is less than the amount computed by applying the
statutory tax rate to pretax income. The reasons for the difference,
stated as a percentage of pretax income, are as follows:
1996 1995 1994
- -------------------------------------------------------------------------
Federal statutory tax rate 35.0% 35.0% 35.0%
Effect of state income taxes (1.5) (1.8) (1.8)
Amortization of investment tax credits (1.5) (2.0) (2.1)
Removal cost adjustments - (1.7) (0.8)
Other - net (0.7) (1.0) (0.8)
---- ---- ----
Effective tax rate 31.3% 28.5% 29.5%
==== ==== ====
The significant items comprising IPL's net deferred tax liability
recognized in the balance sheets as of December 31, 1996 and 1995, are as
follows:
1996 1995
- ----------------------------------------------------------------------
(In Thousands)
Deferred tax liabilities:
Relating to utility property $376,121 $366,801
Other 19,200 14,666
-------- --------
Total deferred tax liabilities 395,321 381,467
-------- --------
Deferred tax assets:
Relating to utility property 28,298 24,934
Investment tax credit 29,156 30,936
Employee Benefit Plans 15,396 14,724
Unbilled revenue 10,517 11,157
Other 7,100 5,968
-------- --------
Total deferred tax assets 90,467 87,719
-------- --------
Net deferred tax liability $304,854 $293,748
======== ========
9. RATE MATTERS
Electric Rate Settlement Agreement: On August 24, 1995, the IURC
issued an order approving without amendment a Stipulation and Settlement
Agreement (Settlement Agreement) resolving all issues in IPL's then
pending electric general rate proceeding.
As provided for by the Settlement Agreement, IPL increased its basic
rates and charges for retail electric service in two steps. It is
estimated that these increases will provide the following additional
annual revenues:
Step 1 - $35,000,000 on September 1, 1995
Step 2 - $25,000,000 on July 1, 1996
Effective with the implementation of new tariffs in Step 1, IPL was
authorized to begin amortization of certain regulatory assets.
Additionally, IPL's existing depreciation rates were reapproved.
Under terms of the Settlement Agreement, IPL will not seek another
general increase in its basic rates and charges until after July 1, 1997,
except in the event of an emergency. IPL also has agreed not to file a
request to build any large, base-load generating capacity before January
1, 2000. This provision can be waived in extreme circumstances. In
addition, the parties agreed to, and subsequently resolved, pending
litigation involving IPL's Clean Air Act compliance plan.
Steam Rate Order: By an order dated January 13, 1993, the IURC
authorized IPL to increase its steam system rates and charges over a six-
year period. Accordingly, IPL will implement new steam tariffs designed
to produce estimated additional annual steam operating revenues as
follows:
Additional
Annual
Year Revenues
---- -----------
January 13, 1997 $ 2,384,000
January 13, 1998 370,000
Demand Side Management Program: In compliance with an order dated
September 8, 1993, IPL is deferring certain approved DSM costs and
carrying charges. In the Settlement Agreement approved by the IURC on
August 24, 1995, IPL was authorized to amortize $5.3 million of such
costs deferred prior to February 1995, over a four-year period beginning
September 1, 1995. On December 19, 1996, IPL filed a petition with the
IURC requesting review, modification and/or termination of, and related
regulatory treatment for, DSM programs approved in the order dated
September 8, 1993.
10. EMPLOYEE PENSION BENEFIT PLANS
Pension expense is comprised of the following components:
1996 1995 1994
- --------------------------------------------------------------------------
(In Thousands)
Service cost--benefits earned during the period $ 6,482 $ 6,375 $ 7,832
Interest cost on projected benefit obligation 16,335 15,348 15,358
Actual (return) loss on plan assets (23,307) (29,529) 10,366
Net amortization and deferral 5,758 13,499 (27,297)
------- ------- -------
Net periodic pension cost 5,268 5,693 6,259
Less:
Amount allocated to related parties 121 98 79
------- ------- -------
IPL net periodic pension cost 5,147 5,595 6,180
Less amount capitalized 1,061 1,199 1,365
------- ------- -------
Amount charged to expense $ 4,086 $ 4,396 $ 4,815
======= ======= =======
A summary of the Plans' funding status at its October 31, 1996 plan
year-end, evaluation date and the amount recognized in the balance sheets
at December 31, 1996 and 1995, follows:
1996 1995
- ---------------------------------------------------------------------------
(In Thousands)
Actuarial present value of benefit obligations:
Vested benefit obligation $(173,654) $(148,124)
Nonvested benefit obligation (32,705) (27,883)
--------- ---------
Accumulated benefit obligation (206,359) (176,007)
========= =========
Projected benefit obligation (229,937) (223,137)
Plan assets at fair value 235,250 220,978
--------- ---------
Funded status--plan assets less than projected
benefit obligation 5,313 (2,159)
Unrecognized net gain from past experience
different from that assumed (36,126) (30,174)
Unrecognized past service costs 8,132 14,495
Unrecognized net asset at January 1, 1987, being
amortized over an original life of 18.9 years (12,583) (13,996)
Adjustment required to recognize minimum liability (2,019) -
--------- ---------
Net accrued pension benefits included in other
long-term liabilities at December 31 $ (37,283) $ (31,834)
========= =========
Approximately 41% of the Plans' assets were in equity securities at
October 31, 1996, with the remainder in fixed income securities.
Assumptions used in determining this information were:
1996 1995 1994
- -------------------------------------------------------------------------
Discount rate 7.50% 7.50% 8.00%
Rate of increase in future compensation levels 5.10% 5.10% 6.10%
Expected long-term rate of return on assets 8.00% 8.00% 8.00%
11. EMPLOYEE POSTRETIREMENT BENEFIT PLAN
<TABLE>
Postretirement benefit expense is comprised of the following
components:
1996 1995 1994
- ------------------------------------------------------------------------------------------
(In Thousands)
<S> <C> <C> <C>
Service cost -- benefits earned during the period $ 3,891 $ 3,855 $ 5,051
Interest cost on accumulated postretirement benefit obligation 10,450 10,796 11,052
Actual (return) loss on plan assets 1,280 (319) (435)
Net amortization and deferral 2,233 4,661 5,740
------- ------- -------
Net periodic postretirement benefit cost 17,854 18,993 21,408
Less:
Amount capitalized 3,511 3,891 4,464
Regulatory asset deferral - 6,978 12,289
------- ------- -------
Amount charged to expense $14,343 $ 8,124 $ 4,655
======= ======= =======
</TABLE>
Also, during 1996 and 1995, IPL expensed postretirement regulatory
asset amortization of $6.4 million and $2.1 million, respectively.
A summary of the retiree health-care and life insurance plan's funding
status, and the amount recognized in the balance sheets at December 31,
1996 and 1995, follows:
<TABLE>
1996 1995
- -------------------------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of accumulated postretirement (In Thousands)
benefit obligation:
Retirees $ (62,856) $ (60,442)
Fully eligible active plan participants (21,314) (20,645)
Other active plan participants (61,879) (61,055)
--------- --------
Total (146,049) (142,142)
Plan assets at fair value 49,274 29,800
--------- --------
Funded status--accumulated postretirement benefit obligation
in excess of plan assets (96,775) (112,342)
Unrecognized net gain from past experience different
from that assumed (24,354) (21,761)
Unrecognized net obligation at January 1, 1993, being
amortized over an original life of 20 years 97,494 103,586
--------- ---------
Net accrued postretirement benefit cost included in
deferred liabilities at December 31 $ (23,635) $ (30,517)
========= =========
</TABLE>
IPL has expensed its nonconstruction related postretirement benefits
costs associated with its regulated steam business and, subsequent to
August 1995, with its regulated electric business. IPL's electric
business postretirement benefit costs incurred prior to September 1,
1995, net of amounts capitalized for construction and benefits paid to
participants, were deferred as a regulatory asset on the balance sheets.
The Settlement Agreement approved the amortization to operating expense
of this regulatory asset over five years beginning September 1, 1995.
The annual amortization is $6.4 million. IPL funds its annual
postretirement benefit costs in excess of actual benefits paid to
participants to an irrevocable VEBA Trust. Annual funding is
discretionary and is based on the projected cost over time of benefits to
be provided to covered persons consistent with acceptable actuarial
methods. The VEBA Trust provides for full funding of IPL's accumulated
postretirement benefit obligation in the event of certain change of
control transactions. During 1996 and 1995, IPL contributed $20.8
million and $18.5 million, respectively, of these costs to the VEBA.
Plan assets consist of the cash surrender value of life insurance
policies on certain active and retired employees.
The assumed health-care cost trend rate used in measuring the
accumulated postretirement benefit obligation is 8.8% for 1997, gradually
declining to 4.5% in 2003. A 1% increase in the assumed health care cost
trend rate for each year would increase the accumulated postretirement
benefit obligation, as of December 31, 1996, by approximately $20.8
million and the combined service cost and interest cost for 1996 by
approximately $2.5 million.
Assumptions used in determining the information above were:
1996 1995 1994
- ------------------------------------------------------------------------
Discount rate 7.50% 7.25% 8.00%
Rate of increase in future compensation levels 5.10% 5.10% 6.10%
Expected long-term rate of return on assets 8.00% 8.00% 8.00%
12. OTHER EMPLOYEE BENEFIT PLANS
IPL's contributions to the Thrift Plan, net of amounts allocated to
related parties were $3.4 million, $3.2 million and $3.3 million in 1996,
1995 and 1994, respectively.
13. COMMITMENTS AND CONTINGENCIES
In 1997, IPL anticipates the cost of its construction program to be
approximately $86 million.
IPL is involved in litigation arising in the normal course of
business. While the results of such litigation cannot be predicted with
certainty, management, based upon advice of counsel, believes that the
final outcome will not have a material adverse effect on the financial
position and results of operations. With respect to environmental
issues, IPL has ongoing discussions with various regulatory authorities
and continues to believe that IPL is in compliance with its various
permits.
14. QUARTERLY RESULTS (UNAUDITED)
Operating results for the years ended December 31, 1996 and 1995 by
quarter, are as follows (in thousands):
1996
-----------------------------------------------
March 31 June 30 September 30 December 31
-------- ------- ------------ -----------
Operating revenues $196,446 $177,621 $205,672 $182,764
Operating income $ 44,844 $ 36,122 $ 51,163 $ 31,090
Net income $ 35,880 $ 26,980 $ 39,632 $ 20,096
1995
------------------------------------------------
March 31 June 30 September 30 December 31
-------- ------- ------------ -----------
Operating revenues $175,518 $159,652 $199,873 $174,163
Operating income $ 38,278 $ 30,405 $ 50,802 $ 28,103
Net income $ 27,612 $ 20,111 $ 40,598 $ 17,952
The quarterly figures reflect seasonal and weather-related
fluctuations which are normal to IPL's operations. Colder weather was
experienced in the first and second quarters of 1996 as compared to the
same periods in 1995. In addition, during the fourth quarter of 1995,
IPL expensed approximately $12.3 million of property held for future use.
See Note 9 regarding rate increases.
EXHIBIT B
- ---------
SELECTED FINANCIAL DATA
-----------------------
<TABLE>
<CAPTION>
(In Thousands) 1996 1995 1994 1993 1992
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total operating revenues $ 762,503 $ 709,206 $ 686,076 $ 664,303 $ 633,203
Operating income 163,219 147,588 143,310 142,368 134,240
Allowance for funds used
during construction 9,321 11,370 9,381 5,527 5,081
Income applicable to
common stock 119,406 103,091 100,641 99,584 89,876
Utility plant - net 1,787,969 1,792,007 1,711,772 1,608,871 1,532,964
Total assets 2,052,400 2,108,816 2,000,380 1,870,306 1,763,246
Construction expenditures 78,543 166,874 178,295 145,765 112,037
Common shareholder's equity 782,249 747,129 725,762 705,149 682,413
Nonredeemable cumulative
preferred stock 51,898 51,898 51,898 51,898 51,898
Long-term debt (less current
maturities and sinking
fund requirements) 627,791 669,000 654,121 532,260 540,641
See financial statements.
</TABLE>
[form of proxy/instruction card]
INDIANAPOLIS POWER & LIGHT COMPANY
This Proxy/Instruction Card is solicited on Behalf of the Board of Directors
The undersigned hereby appoints John R. Hodowal and Bryan G. Tabler
as Proxies, each with the power of substitution, and authorizes them to
represent and vote as designated below, all the shares of Indianapolis Power
& Light Company cumulative preferred stock held of record by the undersigned
on April 10, 1997, at the annual meeting of the shareholders to be held
May 21, 1997, or at any adjournment thereof, with respect to the matter(s)
set forth below.
1. Election of Sixteen Nominees for Director, namely: Joseph D.
Barnette, Jr., Robert A. Borns, Mitchell E. Daniels, Jr.,
Rexford C. Early, Otto N. Frenzel III, Max L. Gibson, Earl B.
Herr, Jr., John R. Hodowal, Ramon L. Humke, Sam H. Jones, Andre
B. Lacy, L. Ben Lytle, Michael S. Maurer, Andrew J. Paine, Jr.,
Sallie W. Rowland, Thomas H. Sams
[ ] Vote for All Nominees
[ ] Withhold Vote from All Nominees
[ ] Vote for All Nominees, Except Nominees written below:
--------------------------------------------------------------------
Please write name(s) of Nominee(s) from whom vote is withheld)
2. Appoval of an amendment to the Amended Articles of Incorporation to
remove the limitation on the issuance of unsecured indebtedness.
[ ] For [ ] Against [ ] Abstain
(FOLD HERE - DO NOT TEAR)
This Proxy/Instruction Card when properly executed will be voted in the
manner directed by the undersigned shareholder. If not otherwise indicated,
this Proxy will be voted FOR the sixteen nominees for Director listed above
and FOR the amendment to the Amended Articles of Incorporation and confers
discretionary authority to vote on currently unknown matters properly
presented to the meeting. This Proxy shall be voted on those matters
properly presented in accordance with the best judgment of the named Proxies.
Receipt of the Notice of Annual Meeting and Proxy Statement dated April 15,
1997, and the 1996 Annual Report is hereby acknowledged.
Dated _______________, 1997.
Your signature must be exactly ____________________________
as your name appears below. (SIGNATURE)
When signing as attorney-in-fact,
executor, administrator, trustee,
guardian or corporate officer, ____________________________
please give full title as such. (SIGNATURE IF HELD JOINTLY)
Please complete 1997 Proxy at
right. Then date, sign, detach
it from this form at perforations,
fold it and return immediately in
accompanying postage guaranteed
envelope.
Account ID:
ADDRESS CHANGE
_______________________________
STREET
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APT. NO./P.O. BOX
_______________________________
CITY
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SIGNATURE
[at perforation]
(DETACH HERE)
