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INDIANAPOLIS POWER & LIGHT COMPANY
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<PAGE>
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 APRIL 15, 1998
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 the office of the Company,
One Monument Circle, Indianapolis, Indiana on Wednesday, April 15, 1998, at
10:00 A.M. (Eastern Standard Time), for the following purposes:
1. To elect fourteen (14) directors to hold office for terms of one
year each and until their successors are duly elected and
qualified; and
2. 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 Wednesday,
February 25, 1998, as the record date for determining the shareholders
entitled to notice of, and to vote at, the meeting and at any adjournment
thereof.
Proxies will not be solicited for this meeting and you are requested
not to send us a proxy. Shareholders are welcome to attend the meeting in
person and cast their votes by ballot on the issues presented at the meeting.
By order of the Board of Directors.
INDIANAPOLIS POWER & LIGHT COMPANY
By: BRYAN G. TABLER, Secretary
Indianapolis, Indiana
March 9, 1998
INDIANAPOLIS POWER & LIGHT COMPANY
INFORMATION STATEMENT
TABLE OF CONTENTS
GENERAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . 1
OTHER BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . 1
Shareholder Proposals for 1999 Annual Meeting. . . . . . . . 1
RELATIONSHIP WITH AUDITOR. . . . . . . . . . . . . . . . . . . 2
VOTING SECURITIES AND BENEFICIAL OWNERS. . . . . . . . . . . . 2
DIRECTORS AND NOMINEES . . . . . . . . . . . . . . . . . . . . 3
Election of Fourteen Directors . . . . . . . . . . . . . . . 3
INFORMATION REGARDING THE BOARD OF DIRECTORS . . . . . . . . . 5
Procedure To Propose Nominees For Director . . . . . . . . . 5
Number Of Board Meetings and Attendance. . . . . . . . . . . 6
Committees of the Board. . . . . . . . . . . . . . . . . . . 6
Compensation Committee Interlocks and Insider Participation. 6
Compensation of Directors. . . . . . . . . . . . . . . . . . 7
Certain Business Relationships . . . . . . . . . . . . . . . 7
Vote Required For Election of Directors. . . . . . . . . . . 8
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION. 8
Compensation Policies Relating Generally to Executive
Officers. . . . . . . . . . . . . . . . . . . . . . . . . 8
Base Salary. . . . . . . . . . . . . . . . . . . . . . . . . 8
Annual Incentive Plan. . . . . . . . . . . . . . . . . . . . 9
Long-Term Performance and Restricted Stock Incentive Plan. . 10
Stock Options. . . . . . . . . . . . . . . . . . . . . . . . 10
Basis for Chief Executive Officer's Compensation . . . . . . 11
Deductibility of Executive Compensation. . . . . . . . . . . 11
COMPENSATION OF EXECUTIVE OFFICERS . . . . . . . . . . . . . . 12
Nature and Types of Compensation . . . . . . . . . . . . . . 12
Summary Compensation -- Table I. . . . . . . . . . . . . . . 13
Option/SAR Grants in Last Fiscal Year -- Table II. . . . . . 14
Option/SAR Exercises in Last Fiscal Year -- Table III. . . . 15
Performance Graph -- Table IV. . . . . . . . . . . . . . . . 16
Performance Graph. . . . . . . . . . . . . . . . . . . . . . 17
Pension Plans. . . . . . . . . . . . . . . . . . . . . . . . 17
Pension Plan Table - Table V . . . . . . . . . . . . . . . . 17
Employment Contracts and Termination of Employment and
Change-in-Control Arrangements . . . . . . . . . . . . . . 18
(i)
INDIANAPOLIS POWER & LIGHT COMPANY
INFORMATION STATEMENT
Relating to the
Annual Meeting of Shareholders
April 15, 1998
(Mailed on or about March 9, 1998)
GENERAL INFORMATION
The following information is furnished in connection with the Annual
Meeting of Shareholders of Indianapolis Power & Light Company ("IPL") to be
held 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 remain outstanding 591,353 shares of IPL's
Cumulative Preferred Stock.
Since IPALCO's ownership represents more than 93% of the total votes
that could be cast for the election of directors, and shareholders do not
have cumulative voting rights, the Board of Directors considered it
inappropriate to solicit proxies for IPL's Annual Meeting of Shareholders
to be held April 15, 1998. Please be advised, therefore, that this is only
an Information Statement. WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE
REQUESTED NOT TO SEND US A PROXY. However, if you wish to vote your shares of
Cumulative Preferred Stock, you may do so by attending the meeting in person
and casting your vote by a ballot which will be provided for that purpose.
OTHER BUSINESS
Management is not presently aware of any business to be presented at
the Annual Meeting other than the election of directors. The minutes of the
Annual Meeting of Shareholders held May 21, 1997 and the minutes of the
Special Meeting of Shareholders held October 8, 1997 and as adjourned to
October 9, 1997 will be presented for approval at the 1998 Annual Meeting;
however, such action is not intended to constitute approval or disapproval of
any matter referred to in such minutes.
Shareholder Proposals for 1999 Annual Meeting
If a shareholder intends to present a proposal at the Annual Meeting
of Shareholders to be held April 21, 1999, the proposal must be received by
the Corporate Secretary not later than November 9, 1998 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 April 15, 1998, 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, 1998, IPL had outstanding 17,206,630 shares of Common
Stock and 591,353 shares of Cumulative Preferred Stock issued in five (5)
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 Wednesday, February 25, 1998, will be
entitled to vote at the meeting or at any adjournment thereof.
At January 15, 1998, the following beneficial owners held more than
5% of a class of IPL's voting securities:
<TABLE>
<CAPTION>
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Name and Address of Amount and Nature of Percent
Title of Class Beneficial Owner 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>
At January 15, 1998, none of the directors, executive officers or
nominees for director of IPL beneficially owned equity securities of IPL.
DIRECTORS AND NOMINEES
Election of Fourteen Directors
At a meeting held January 27, 1998, the Executive Committee of IPL's
Board of Directors nominated 14 nominees for election as directors at its
Annual Meeting of Shareholders to be held April 15, 1998 for terms of one
year each and until their successors are duly elected and qualified. All
nominees 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
April 15, 1998), job experience and directorships of such nominees are as
follows:
Joseph D. Barnette, Jr., 58, Chairman and Chief Executive Officer of Bank
One, Indiana, NA since March, 1997 and Chairman and Chief Executive
Officer of Banc One Indiana Corporation (a bank holding company)
since January, 1993. Prior to that, Mr. Barnette was Chairman and
Chief Executive Officer of Bank One, Indianapolis, NA (October,
1994 - March, 1997), 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 and Meridian
Insurance Group, Inc. He has been a director of IPL since January,
1993.
Robert A. Borns, 62, 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, Standard Management Corporation, and of
Artistic Media Partners. He has been a director of IPL since April,
1986 (excluding the period March 15 to August 23, 1993).
Mitchell E. Daniels, Jr., 49, 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 and NBD Bank, NA and has been a
director of IPL since November, 1989.
Rexford C. Early, 63, 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 trustee of the Indianapolis
Foundation and currently serves as its Chairman. He is a director of
IPALCO and has been a director of IPL since August, 1993.
Otto N. Frenzel III, 67, 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.,
and Baldwin & Lyons, Inc. He has been a director of IPL since April,
1977.
Max L. Gibson, 57, 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.
John R. Hodowal, 53, 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, 65, 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, NA, 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.
Andre B. Lacy, 58, 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,
FinishMaster, Inc., Herff Jones, Patterson Dental Co., and The
National Bank of Indianapolis. He has been a director of IPL since
April, 1987.
L. Ben Lytle, 51, 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, 55, Chairman of the Board of The National Bank of
Indianapolis since December, 1993. Mr. Maurer is Chairman of the
Board of MyStar Communications Corporation (radio station
operations), a position he has held for more than five years; and
Chairman of the Board of IBJ Corporation (newspaper publisher) since
December, 1990. 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., 60, President and Chief Executive Officer of NBD Bank
NA and Executive Vice President of First Chicago NBD Corporation. In
his position with NBD Bank, NA 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 of NBD Indiana, Inc. 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. He has been a director of IPALCO
and IPL since May, 1997.
Sallie W. Rowland, 65, 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 and Indianapolis Project. She is a
director of IPALCO, NBD Bank, NA, Meridian Insurance Group, Inc. and
Meridian Mutual Insurance Company. She has been a director of IPL
since April, 1988.
Thomas H. Sams, 56, 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, NA, 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 1997, the
Board of Directors of IPL held 11 meetings. Its Executive Committee and Audit
Committee held a total of 10 meetings. Each director attended more than 81%
of the aggregate of Board meetings and assigned committee meetings except for
Mr. L. Ben Lytle who attended over 72%. On average, all directors attended
more than 92% of Board and committee meetings held in 1997.
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 1997 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 four meetings in 1997 and is currently
made up of Mrs. Sallie W. Rowland, Chairman, and Messrs. Sam H. Jones,
Andre B. Lacy, and Andrew J. Paine, Jr., 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, Early, 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.
Compensation of Directors
Non-employee directors serving on the Board of IPL are paid an annual
fee of $8,500 plus $500 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
$500 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 1997, companies associated with Anthem Insurance Companies,
Inc. ("Anthem") administered health care programs for IPALCO and its
subsidiaries, including IPL, under contracts that involve payments to Anthem
aggregating approximately $17 million. Mr. L. Ben Lytle is President and
Chief Executive Officer of Anthem.
IPL maintained a line of credit during 1997 with National City Bank,
Indiana ("NCB") of which Mr. Otto N. Frenzel III is Chairman of the Executive
Committee. During 1997, the maximum principal amount outstanding at any time
on IPL's $30 million line of credit with NCB was approximately $16.5 million,
and IPL had an outstanding balance with NCB as of December 31, 1997 of
approximately $13.7 million.
IPL maintained a long-term revolving credit facility during 1997 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
1997.
An unutilized credit line and an unutilized long-term revolving
credit facility were also maintained by IPL with First Chicago NBD, of which
Mr. Andrew J. Paine, Jr., is an executive officer. Mr. Ramon L. Humke is a
director of NBD Bank, NA.
IPL engaged Rowland Design, Inc. for architectural and design
services for certain improvements to IPL's corporate offices located at One
Monument Circle. During 1997, IPL paid fees of approximately $97,000 under
such agreements. Mrs. Sallie W. Rowland is Chairman and CEO of Rowland
Design, Inc.
Vote Required For Election of Directors
Under Indiana law, directors are elected by plurality vote at a
meeting where a quorum (a majority of shares issued and outstanding) is
present. Shares represented for any purpose are deemed present for quorum
purposes. Withheld votes and broker non-votes will not impact the outcome
of the election of directors.
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 five 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 named executive officers and other selected officers had four basic
components in 1997: base salary, a performance-based annual incentive plan,
a long-term performance and restricted stock incentive plan and a stock
option plan. It is the policy of the Committee that the compensation program
should directly link executive and shareholder interests.
Base Salary
During 1997 the Committee thoroughly reviewed base salary of
officers, including the named executive officers, in light of IPALCO's
transformation from a more traditional utility to a more general industry
company following the leveraged recapitalization, dividend reduction and
stock buy back in April, 1997. The Committee agreed to continue its practice
of tying a greater percentage of total compensation to IPALCO's performance.
As such, no named executive officer received a 1997 base salary increase.
The Committee targeted 1997 base salaries for officers, including the
named executive officers, at the 75th percentile 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 at the 75th percentile 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, if any, and the
salary for each officer, including the named executive officers.
In 1997 nineteen officers, including all named executive officers,
received the same base salary as in 1996 while eleven officers received base
salary increases. Total base salary increases for all officers averaged 2.1%.
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 and from an analysis prepared by the
outside consultant on comparable executive position compensation within the
S&P 400 MidCap general industry companies.
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. 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 2.5 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 1997.
For 1997, the Company met the Maximum performance goals in all four
performance measures: Net Income, Customer Satisfaction, 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.
Program 1 (1995-1997) of the Plan measured 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 ended December 31, 1997 and in January, 1998
the Committee reviewed Program 1 performance with IPALCO ranked 1st in Total
Return to Shareholders and 1st in Cost Effective Service.
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. In the final Program 6 (replaced by the performance based
restricted stock plan discussed above), for the years 1993-1996, IPALCO
ranked first among peers in Cost Effective Service and fourth among peers in
Total Return to Shareholders. Using the schedule specified in the Plan for
the level of performance, the named executive officers received incentive
payments totaling $331,336.34 in 1997.
Stock Options
The Compensation Committee strongly believes management is in a
position to exert the greatest influence on those strategic decisions which
affect IPALCO's long-term financial success and the creation of shareholder
value. Thus, the Compensation Committee has maintained a posture that
particularly senior officers, including the named executive officers, should
have a portion of their long-term incentive compensation tied directly to the
stock price performance.
As reported in IPL's 1997 proxy statement in March, 1997, the
Compensation Committee assessed the competitiveness of IPALCO's total
compensation (base salary + annual incentive + long-term incentives) relative
to the electric utility industry and general industry, focusing expressly on
the relative value of IPALCO's long-term incentive levels (performance based
restricted stock plan described above + stock options). Based upon the
Compensation Committee's desire to maintain long-term incentive compensation
opportunities at competitive levels, officers, including the named executive
officers, were granted stock options on March 25, 1997, in varying amounts
at the exercise price of $31.375 per share, vesting immediately.
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,
operations, service, and administrative data are considered. The Committee
closely followed IPALCO's performance during the three-year period 1995-1997
and calendar year 1997 compared to the S&P 500 Index and the S&P Electric
Companies Index. IPALCO substantially outperformed both of these market
measurements in 1997 and during the three-year period 1995-1997.
Total 1997 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 and stock
options), is shown in Tables I and II. His total compensation was slightly
above the median of comparable electric utility industry CEOs, but was below
the median of CEO compensation in comparable high-performing general industry
companies.
At Target performance, under the current compensation program,
approximately 56% of the CEO's total direct compensation is variable and at
risk. During 1997, approximately 53% 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 $1 million paid to certain top executives, unless that
compensation qualifies as "performance based" compensation. This limitation
will have insignificant impact on IPALCO with respect to executive
compensation paid in 1997. The Committee continues to review this issue with
the present intent to limit Section 162(m) where appropriate to ensure the
continued deductibility of its executive compensation.
The Compensation Committee of the
Board of Directors of IPALCO
Enterprises, Inc.
Otto N. Frenzel III, Chairman
Robert A. Borns
Rexford C. Early
Earl B. Herr, Jr.
Thomas H. Sams
COMPENSATION OF EXECUTIVE OFFICERS
Nature and Types of Compensation
The three tables that follow on succeeding pages disclose all plan
and non-plan compensation awarded to, earned by, or paid to the Chairman of
the Board and Chief Executive Officer ("CEO") and to the four named executive
officers other than the CEO who are the most highly compensated key
policy-making executive officers of IPL. The tables include a Summary
Compensation Table (Table I), a table showing Option/SAR Grants in Last
Fiscal Year (Table II), an Aggregated Option/SAR Exercises In Last Fiscal
Year and Fiscal Year-End Option/SAR Values Table (Table III). No table is
presented for Long-Term Incentive Plans since the issuance of restricted
stock under the Long-Term Performance and Restricted Stock Incentive Plan is
included in the Summary Compensation Table (Table I).
<TABLE>
SUMMARY COMPENSATION TABLE
--------------------------
Long-Term Compensation
------------------------------------
Annual Compensation Awards Awards Payouts
-----------------------------------------------------------------------
Other Securities
Annual Restricted Underlying All Other
Compen- Stock Options/ LTIP Compen-
Name and Salary sation<F2> Awards<F3> SARs<F4> Payouts<F5> sation<F6>
Principal Position Year ($)<F1> Bonus ($) ($) ($) (#) ($) ($)
- ------------------ ---- ------- --------- ---------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
John R. Hodowal 1995 $476,012 $206,425 $ 43,721 $491,790 -0- $ 75,488 $ 8,310
Chairman & CEO 1996 515,125 272,370 229,775 -0- -0- 111,333 6,000
1997 532,958 468,125 70,087 -0- 250,000 127,550 5,831
Ramon L. Humke 1995 $394,591 $171,120 $ 157,606 $407,700 -0- $ 62,975 $ 8,310
President & COO 1996 432,812 228,935 200,277 -0- -0- 92,296 6,000
1997 450,778 395,937 236,242 -0- 125,000 106,147 5,831
John R. Brehm 1995 $225,315 $ 89,513 $ 6,301 $133,050 -0- $ 24,228 $ 8,310
SVP, Finance & 1996 236,394 83,253 7,788 -0- -0- 34,996 6,698
Information Services 1997 240,781 84,595 7,512 -0- 75,000 39,858 5,630
Bryan G. Tabler 1995 $202,931 $ 58,650 $ 14,471 $121,350 -0- -0- $ 5,589
SVP, Secretary & 1996 218,184 76,907 17,077 -0- -0- $ 10,652 6,119
General Counsel 1997 225,742 79,310 20,053 -0- 45,000 21,197 5,081
Gerald D. Waltz 1995 $201,930 $ 58,353 $ 11,178 $121,530 -0- $ 24,228 $ 8,310
SVP, Electric Delivery 1996 209,792 73,885 12,355 -0- -0- 32,972 6,000
1997 213,678 75,075 12,000 -0- 45,000 36,584 5,831
- ----------------------------
<FN>
<F1> The named executive officers did not receive a base salary increase
from 1996 to 1997. Salary increases, if applicable take effect in
May. 1996 figures reflect 4 months pay at 1995 base salary rates and
8 months at 1996 base salary rates, while 1997 figures reflect 12
months pay at the 1996 base salary rates.
<F2> 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 $10,277 and $17,783 earned in
above market interest on deferred compensation for Mr. Humke in 1996
and 1997, respectively.
<F3> 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 ($1,031,201); Mr.
Humke - 20,385 shares ($854,896); Mr. Brehm - 6,652 shares
($278,968); Mr. Tabler - 6,067 shares ($254,435); and Mr. Waltz -
6,076 shares ($254,812). Dividends on the restricted common stock
are payable to the named officers. Shares awarded in 1995 represent
a cumulative 3-year award for years 1995, 1996, and 1997. Under the
terms of the Plan, no additional shares will be awarded to the named
officers before 1998.
<F4> No options have stock appreciation rights.
<F5> Payouts shown were made pursuant to the 1990 Long-Term Incentive
Plan (the "LTIP Plan"). The LTIP Plan was replaced by the IPALCO
Enterprises, Inc. Long-Term Performance and Restricted Stock
Incentive Plan and no additional payments will be made under the
LTIP Plan.
<F6> Represents contributions made by IPL to the Trustee of the Employees'
Thrift Plan.
TABLE I
</FN>
</TABLE>
<TABLE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
Potential
Realizable Value at
Assumed Annual
Rates of Stock Price
Appreciation
Individual Grants for Option Term
------------------------------------------------------------------ ----------------------------
% of
Total
Number of Options/
Securities SARs
Underlying Granted to Exercise
Options/ Employees or Base Expira-
SARs in Fiscal Price<F2> tion
Name Granted (#)<F1> Year ($/Sh) Date 5% ($)<F3> 10%($)<F3>
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
John R. Hodowal 250,000 23.4 $31.375 03/25/07 $4,932,892 $12,500,918
Ramon L. Humke 125,000 11.7 $31.375 03/25/07 $2,466,446 $ 6,250,459
John R. Brehm 75,000 7.0 $31.375 03/25/07 $1,479,868 $ 3,750,275
Bryan G. Tabler 45,000 4.2 $31.375 03/25/07 $ 887,921 $ 2,250,165
Gerald D. Waltz 45,000 4.2 $31.375 03/25/07 $ 887,921 $ 2,250,165
_________________________
<FN>
<F1> 3,187 underlying securities out of the amount shown for each officer
relate to incentive stock options, the balance relate to non-
qualified stock options. All options are exercisable immediately;
however, incentive stock options expire one day before the expiration
date shown. None of the stock options contain stock appreciation
rights.
<F2> Equal to market price on grant date.
<F3> These values are not a prediction of what IPALCO believes the market
value of its common stock will be in the next 10 years. IPALCO does
not know and cannot determine whether its common stock will increase
(or decrease) in value over that period. The values shown in these
columns are merely assumed values required by, and calculated in
accordance with, Securities and Exchange Commission Rules.
TABLE II
</FN>
</TABLE>
<TABLE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
Number of
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 -0- -0- 430,000 (e) $5,686,076
-0- (u) -0-
Ramon L. Humke -0- -0- 230,000 (e) $3,101,513
-0- (u) -0-
John R. Brehm -0- -0- 127,500 (e) $1,682,788
-0- (u) -0-
Bryan G. Tabler -0- -0- 45,000 (e) $ 475,312
-0- (u) -0-
Gerald D. Waltz 43,481 $462,401 56,839 (e) $ 671,919
-0- (u) -0-
- ------------------------------
(e) Exercisable.
(u) Unexercisable.
* Based upon year-end closing market price of $41.9375 per share of common stock.
TABLE III
</TABLE>
Performance Graph
The Performance Graph on this page, Table IV, plots the total
cumulative return that shareholders of IPALCO received (solid line) during
the period December 31, 1992 through December 31, 1997, compared with the
total cumulative return to shareholders of companies comprising the
Standards and Poor's 500 Index (dotted line) and the Standard &
Poor's Electric Companies Index (dash/dotted line). The Graph showns the
cumulative total return assuming dividend reinvestment and based upon an
initial investment of $100. The vertical portion of the Graph indicates the
dollar value ranging from $90.00 to $260.00, and the horizontal portion of
the Graph is the year, beginning in 1992 and continuing through December 31,
1997.
The points on the Performance Graph are as follows:
<TABLE>
[solid line] IPALCO [dotted line] S & P 500 [dash/dotted line] S & P
Electric
Companies
CUMULATIVE TOTAL RETURN ASSUMING DIVIDEND REINVESTMENT
<CAPTION>
1992 1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C> <C>
IPALCO 100 104.16 94.42 127.74 144.72 229.37
S & P 500 100 110.08 111.53 153.45 188.68 251.63
S & P ELEC COMPANIES 100 112.60 97.89 128.32 128.11 161.74
Source: Standard and Poor's Compustat Services, Inc.
TABLE IV
</TABLE>
Performance Graph
The Performance Graph (Table IV) on the preceding page plots the
total cumulative return that shareholders of IPALCO received (solid line)
during the period from December 31, 1992 through December 31, 1997, compared
with the total cumulative return to shareholders of companies comprising the
Standard and Poor's 500 Index (dotted line) and the Standard & Poor's
Electric Companies Index (dash/dotted 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 Information Statement.
Pension Plans
Table V 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>
Remuneration Years of Service
- -----------------------------------------------------------------
15 20 25 30 35
-------- -------- -------- -------- --------
<S> <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 V
- ------------------------------------------------------------------------------
</FN>
</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 - 29, Mr. Humke - 8, Mr. Brehm - 22, Mr. Tabler - 3, and
Mr. Waltz - 37.
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 1997
to the accounts of Messrs. Hodowal, Humke, Brehm, Tabler and Waltz amounted
to $46,676, $208,285, $5,895, $22,176 and $7,842, 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 an employment contract with Mr. Hodowal which provides for an
indefinite term that is convertible into a fixed 3-year term upon notice. IPL
has an employment contract with Mr. Humke which provides for a 3-year term
expiring on December 31, 1999. 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 compensation (as
defined in 280G of the Internal Revenue Code) payable by IPALCO and its
subsidiaries which was includable in the gross income of the officer, if
IPALCO or IPL 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, 1997, the sum of $945,439 was reserved in
trust for such expenses.
By order of the Board of Directors.
INDIANAPOLIS POWER & LIGHT COMPANY
By: BRYAN G. TABLER, Secretary
Indianapolis, Indiana
March 9, 1998
