<PAGE>
SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c)
of the Securities Exchange Act of 1934 (Amendment No. )
Check the appropriate box:
[_] Preliminary Information Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14C-5(D)(2))
[X] Definitive Information Statement
INDIANAPOLIS POWER & LIGHT COMPANY
- --------------------------------------------------------------------------------
(Name of Registrant As Specified In Charter)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.
(1) Title of each class of securities to which transaction applies:
--------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
--------------------------------------------------------------------------
(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):
--------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
--------------------------------------------------------------------------
(5) Total fee paid:
--------------------------------------------------------------------------
[_] 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:
--------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
--------------------------------------------------------------------------
(3) Filing Party:
--------------------------------------------------------------------------
(4) Date Filed:
--------------------------------------------------------------------------
<PAGE>
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 21, 1999
TO THE SHAREHOLDERS OF
INDIANAPOLIS POWER & LIGHT COMPANY
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 21, 1999, at 10:00 A.M. (Indianapolis Time), for
the following purposes:
1. To elect fifteen (15) 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.
Shareholders of record at the close of business on Wednesday, March 3,
1999, are entitled to notice of and to vote at the Annual Meeting.
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 15, 1999
<PAGE>
INDIANAPOLIS POWER & LIGHT COMPANY
INFORMATION STATEMENT
TABLE OF CONTENTS
<TABLE>
<S> <C>
GENERAL INFORMATION........................................................ 1
OTHER BUSINESS............................................................. 1
Shareholder Proposals for 2000 Annual Meeting.......................... 1
RELATIONSHIP WITH AUDITOR.................................................. 1
VOTING SECURITIES AND BENEFICIAL OWNERS.................................... 2
DIRECTORS AND NOMINEES..................................................... 2
Election of Fifteen Directors.......................................... 2
INFORMATION REGARDING THE BOARD OF DIRECTORS............................... 4
Procedure To Propose Nominees For Director............................. 4
Number Of Board Meetings and Attendance................................ 4
Standing Committees of the Board....................................... 5
Compensation Committee Interlocks and Insider Participation............ 5
Compensation of Directors.............................................. 6
Certain Business Relationships......................................... 6
Vote Required For Election of Directors................................ 6
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION.............. 7
Compensation Policies Relating Generally to Executive Officers......... 7
Base Salary............................................................ 7
Annual Incentive Plan.................................................. 8
Long-Term Performance and Restricted Stock Incentive Plan.............. 8
Stock Options.......................................................... 9
Basis for Chief Executive Officer's Compensation....................... 9
Deductibility of Executive Compensation................................ 9
COMPENSATION OF EXECUTIVE OFFICERS......................................... 10
Nature and Types of Compensation....................................... 10
Summary Compensation--Table I.......................................... 10
Option/SAR Exercises in Last Fiscal Year--Table II..................... 12
Performance Graph--Table III........................................... 13
Performance Graph...................................................... 14
Pension Plans.......................................................... 14
Pension Plan Table--Table IV........................................... 14
Employment Contracts and Termination of Employment and Change-in-
Control Arrangements.................................................. 15
</TABLE>
-i-
<PAGE>
INDIANAPOLIS POWER & LIGHT COMPANY
INFORMATION STATEMENT
Relating to the
Annual Meeting of Shareholders
April 21, 1999
(Mailed on or about March 15, 1999)
GENERAL INFORMATION
The following information is furnished in connection with the Annual
Meeting of Shareholders of Indianapolis Power & Light Company ("IPL") to be
held April 21, 1999 at 10:00 A.M. (Indianapolis Time) at the principal office
of Indianapolis Power & Light Company, One Monument Circle, Indianapolis,
Indiana 46204.
At the close of business on December 31, 1983, IPL became a subsidiary of
IPALCO Enterprises, Inc. ("IPALCO") and, as a result, IPALCO owns all
17,206,630 outstanding shares of IPL's Common Stock. There are also 591,353
shares of IPL's Cumulative Preferred Stock outstanding.
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. 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 April 15, 1998 will be presented for approval at
the 1999 Annual Meeting; however, such action is not intended to constitute
approval or disapproval of any matter referred to in such minutes.
Shareholder Proposals for 2000 Annual Meeting
If a shareholder intends to present a proposal at the Annual Meeting of
Shareholders to be held April 19, 2000, the proposal must be received by the
Corporate Secretary not later than November 17, 1999 for inclusion in IPL's
proxy or information statement and form of proxy, if applicable. The proposal
must comply in all respects with the rules and regulations of the Securities
and Exchange Commission and the By-Laws of IPL. Under IPL's By-Laws, other
proposals which are not included in the proxy or information statement will be
considered untimely and will not be presented at that meeting unless they are
received by the Secretary of IPL in writing, no later than January 31, 2000.
RELATIONSHIP WITH AUDITOR
Deloitte & Touche LLP (the "Auditor") with offices at Bank One
Center/Tower, 111 Monument Circle, Suite 2000, 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 and will be given an opportunity to make a statement
and to respond to appropriate questions from shareholders.
<PAGE>
VOTING SECURITIES AND BENEFICIAL OWNERS
On January 15, 1999, 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, March 3, 1999, will be entitled to vote
at the meeting or at any adjournment thereof.
At January 15, 1999, the following beneficial owners held more than 5% of
a class of IPL's voting securities:
<TABLE>
<CAPTION>
Title of Name and Address Amount and Nature Percent
Class of Beneficial Owner of Beneficial Ownership of Class
- --------------------------------------------------------------------------
<C> <S> <C> <C>
Common Stock IPALCO Enterprises, Inc. 17,206,630 shares (1) 100%
One Monument Circle
Indianapolis, IN 46204
</TABLE>
- -------
(1)IPALCO Enterprises, Inc. has sole power to vote and dispose of all shares
shown as beneficially owned by it.
At January 15, 1999, none of the directors, executive officers or
nominees for director of IPL beneficially owned equity securities of IPL.
<TABLE>
<CAPTION>
Name and Address Amount and Nature Percent
Title of Class of Beneficial Owner of Beneficial Ownership of Class
- --------------------------------------------------------------------------
<C> <S> <C> <C>
Preferred Stock Wellington Management 75,000 shares of 12.7%
Company, LLP 5.65% Cumulative
75 State Street Preferred Stock (2)
Boston, MA 02109
</TABLE>
- -------
(2) Pursuant to a Schedule 13G received by IPL, Wellington Management
Company, LLP ("WMC") in its capacity as investment adviser, may be deemed
to beneficially own 75,000 shares of the Cumulative Preferred Stock of
IPL which are held of record by clients of WMC. WMC has shared power to
dispose or to direct the disposition of such shares.
DIRECTORS AND NOMINEES
Election of Fifteen Directors
The Executive Committee of IPL's Board of Directors nominated 15 nominees
for election as directors at its Annual Meeting for terms of one year each and
until their successors are duly elected and qualified. All nominees, other
than Daniel R. Coats, 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 21, 1999), job experience and directorships of such nominees are
as follows:
Joseph D. Barnette, Jr., 59, Chairman and Chief Executive Officer of Bank One,
Indiana, NA, since March, 1997. Prior to that, Mr. Barnette was Chairman
and Chief Executive Officer of Bank One, Indianapolis, NA (October, 1994-
March, 1997), Chairman and Chief Executive Officer (January, 1993-
December, 1998), and President and Chief Executive Officer (July, 1990-
January, 1993) of Banc One Indiana Corporation, 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, 63, 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 Artistic Media Partners. He has been
a director of IPL since April, 1986 (excluding the period March 15 to
August 23, 1993).
2
<PAGE>
Daniel R. Coats, 55, Partner, Verner, Liipfert, Bernhard, McPherson and Hand
since February 1, 1999. Senator Coats represented the State of Indiana in
the U.S. Senate from 1988 to 1998, and represented Indiana's Fourth
District in the U.S. House of Representatives from 1981 to 1988. Senator
Coats currently serves as National Board President of Big Brothers Big
Sisters of America, an organization he has been associated with since
1972. He is also a board member of the International Republican Institute
and the Wheaton College Board of Visitors.
Mitchell E. Daniels, Jr., 50, Senior 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 has been a director of IPL since
November, 1989.
Rexford C. Early, 64, 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 served
as its Chairman in 1998, and he is a trustee of the English Foundation.
He is a director of IPALCO and has been a director of IPL since August,
1993.
Otto N. Frenzel III, 68, Chairman, Executive Committee, National City Bank of
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; 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, 58, 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, 54, 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 and Anthem Insurance
Companies, Inc. He has been a director of IPL since April, 1984.
Ramon L. Humke, 66, 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; LDI Management, Inc.; Monument
Advisors, LLC; 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, 59, 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.
3
<PAGE>
L. Ben Lytle, 52, Chairman, 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, was re-elected Chairman in November, 1997, and has held the
remaining positions since 1989. He is a director of IPALCO; Duke Realty
Investments, Inc.; Central Newspapers, Inc.; and Anthem Insurance
Companies, Inc. and its subsidiaries. He has been a director of IPL since
April, 1992.
Michael S. Maurer, 56, 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. He is a director
of IPALCO and has been a director of IPL since January, 1993.
Andrew J. Paine, Jr., 61, Retired: Prior to his retirement in October, 1998,
Mr. Paine was 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 directed 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 IPALCO; Indianapolis Life
Insurance Company; and Bankers Life Insurance Company of New York. He has
been a director of IPL since May, 1997.
Sallie W. Rowland, 66, 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; Meridian
Insurance Group, Inc.; and Meridian Mutual Insurance Company. She has
been a director of IPL since April, 1988.
Thomas H. Sams, 57, 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
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 1998, 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 85% of
the aggregate of Board meetings and assigned committee meetings except for Mr.
Andrew J. Paine, Jr. who attended over 71%. On average, all directors attended
more than 92% of Board and committee meetings held in 1998.
4
<PAGE>
STANDING COMMITTEES OF THE BOARD
<TABLE>
<CAPTION>
Board Member Board Audit Executive
-----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Joseph D. Barnette, Jr. X
-----------------------------------------------------------------------------------------
Robert A. Borns X X
-----------------------------------------------------------------------------------------
Mitchell E. Daniels, Jr. X
-----------------------------------------------------------------------------------------
Rexford C. Early X
-----------------------------------------------------------------------------------------
Otto N. Frenzel III X X
-----------------------------------------------------------------------------------------
Max L. Gibson X
-----------------------------------------------------------------------------------------
John R. Hodowal X* X*
-----------------------------------------------------------------------------------------
Ramon L. Humke X X
-----------------------------------------------------------------------------------------
Andre B. Lacy X X X
-----------------------------------------------------------------------------------------
L. Ben Lytle X
-----------------------------------------------------------------------------------------
Michael S. Maurer X X
-----------------------------------------------------------------------------------------
Andrew J. Paine, Jr. X X
-----------------------------------------------------------------------------------------
Sallie W. Rowland X X*
-----------------------------------------------------------------------------------------
Thomas H. Sams X X
-----------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------
Meetings held in 1998 11 3 7
</TABLE>
* Chairperson
Audit: Examines and inquires into the effectiveness of auditing,
accounting, financial reporting and internal control functions.
Recommends the appointment of the auditor, reviews the scope of
the audit, reviews the auditor's report and makes appropriate
recommendations to the Board after such review. All members are
non-employee directors.
Executive: May act on behalf of the Board when the full Board is not is
session. Performs the functions of a nominating committee. It
reviews the qualifications of candidates to stand for election
to the Board of Directors and makes specific recommendations
with respect thereto. In addition, the Executive Committee
considers and recommends the declaration of dividends.
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, Gibson, 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.
5
<PAGE>
Compensation of Directors
Employee directors receive no compensation other than their normal salary
for serving on the Board or its committees. Non-employee directors receive the
following fees for their service on the Board:
<TABLE>
<S> <C>
Annual Retainer Fees:
Board of Directors $10,000
Executive Committee 15,000
Audit Committee 4,000
Meeting Fees:
Board of Directors $ 500
Executive Committee 0
Audit Committee 500
</TABLE>
The Chairperson of the Audit Committee receives an additional fee of
$1,500 annually. Directors of IPALCO and its subsidiaries are limited to two
annual fees. Members of the Executive and Audit Committees of both IPALCO and
IPL are limited to one annual fee.
Outside directors of IPALCO receive an annual grant of options to
purchase 3,000 shares of IPALCO common stock on May 1 of each year, if they
have served as a director of IPALCO for the prior 12 months. The options
become exercisable six months after the date of grant. The exercise price of
these options is equal to the fair market value of IPALCO's common stock on
the date of grant. The options expire after ten years.
Directors may elect to defer part or all of their annual retainer,
attendance or committee fees under a non-qualified, unfunded deferred
compensation plan. Deferred amounts earn interest equal to IPL's cost of
capital as determined by the Indiana Utility Regulatory Commission in IPL's
last general retail electric rate order, unless otherwise determined by the
Compensation Committee.
Certain Business Relationships
During 1998, 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 $16 million. Mr. L. Ben Lytle is Chairman, President and Chief
Executive Officer of Anthem.
IPL engaged Rowland Design, Inc. for architectural and design services
for certain improvements to IPL's corporate offices located at One Monument
Circle. During 1998, IPL paid fees of approximately $65,000 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.
6
<PAGE>
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
1998: 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 1998 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. The
Committee approved a new base salary structure prepared by the outside
consultant based on general industry S & P 500 and S & P 400 Mid-Cap companies
with comparable market value to IPALCO. The new base salary structure is
designed for the three-year period 1998 through 2000, uses six broadbanded pay
ranges with band assignment made based on the external market and internal
role within IPALCO, and provides the ability to pay base salaries within a
40th to 75th percentile range. Another component of the new base salary
structure is the departure from annual salary increases to perhaps, and in
most cases, increases once every three years. Exception to base salary
increases once every three years would be new officers paid below median or
officers performing at a truly exceptional level.
The Committee established 1998 base salaries for officers, including the
named executive officers, between the 40th to 75th percentile for similar
positions within comparable market value S & P 500 and S & P Mid-Cap 400
general industry companies. The Committee considered both company and
individual performance in approving the range of 1998 base salary increases
and if the increase was for a one-year, two-year, or three-year period.
In 1998 twenty-two officers, including all named executive officers,
received a base salary increase which for most officers, including all named
officers, was the first base salary increase since 1996. The total 1998
officer base salaries were 1% less than the total 1997 officer base salaries
due to a reduction in the number of officers.
The comparative compensation data for electric utility industry
competitors used by the Committee was derived from an executive compensation
database maintained by the outside consultant and the annual Edison Electric
Institute Executive Compensation Survey. Data for general industry was drawn
from three 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 500 and S & P 400
Mid-Cap general industry companies with market values of between $1.5 billion
and $3.0 billion (202 companies met this criteria.)
7
<PAGE>
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 at comparable market value general industry 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 criterion; 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 3.0 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 1998.
For 1998, 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 II (1998-2000) of the Plan measures Company performance in Total
Return to Shareholders compared to companies included in the S & P 500 Index
during the three-year measuring period. Target awards are set approximately at
comparable market value general industry medians. Conditional restricted stock
grants, at target levels ranging from 20 shares per $1,000 of base
compensation to 50 shares per $1,000 of base compensation, are awarded at the
beginning of each three-year performance period. Final awards are based upon
IPALCO's ranking in Total Return to Shareholders among the S & P 500 companies
over the performance period, with one-third of the shares to be paid during
each of the fourth (2001), fifth (2002), and sixth (2003) years after the
beginning of the performance period. The performance period for Program II
will end December 31, 2000. On December 31, 1998, the end of the first year in
the three-year performance period, IPALCO ranked in the top quartile, 123rd
among the S & P 500 companies.
Program I (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 were set approximately halfway
between general industry and utility medians. Conditional restricted stock
grants, at Target levels ranging from 10% to 35% of base salary, were awarded
at the beginning of the three-year performance period. Final awards were based
upon IPALCO's ranking within the Peer Group over the performance period, with
one-third of the shares to be paid during each of the fourth (1998), fifth
(1999), and sixth (2000) years after the beginning of the performance period.
The performance period for Program I ended December 31, 1997 with IPALCO
ranked 1st in Total Return to Shareholders and 1st in Cost Effective Service.
Using the schedule specified in the Plan for the level of performance
achieved under Program I, and an IPALCO Common Stock market value on January
14, 1998 of $41.91, the named executive officers received incentive payments
for the first Program I payout totalling $1,811,727.00 in 1998.
8
<PAGE>
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 IPALCO's 1997 and 1998 proxy statements, on March
25, 1997, all named executive officers were granted stock options in varying
amounts at an exercise price of $31.375 per share, vesting immediately. No
additional stock options were granted to named executive officers during 1998;
however, during the year the Committee granted a total of 90,000 stock options
in varying amounts to two officers and four non-officers.
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 1997 and 1998 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 again in 1998.
Total 1998 compensation for the CEO (including base salary, Annual
Incentive Plan 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 above the median of comparable electric
utility industry CEOs but was below the median of CEO compensation in
comparable market value and 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 1998, approximately 69% 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 $1 million paid to certain top executives, unless that compensation
qualifies as "performance based" compensation. This limitation will have
insignificant impact on IPALCO with respect to executive compensation paid in
1998. The Committee continues to review this issue with the present intent to
limit the effect of Section 162(m) where appropriate to ensure the continued
deductibility of its executive compensation.
The Compensation Committee of the
Board of Directors of IPALCO
Enterprises, Inc.
Otto N. Frenzel III, Chairman
Robert A. Borns
Rexford C. Early
Max L. Gibson
Thomas H. Sams
9
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
Nature and Types of Compensation
The two tables that follow disclose all plan and non-plan compensation
awarded to, earned by, or paid to the Chairman of the Board and Chief
Executive Officer ("CEO") and to the five named executive officers other than
the CEO who are the most highly compensated key policy-making executive
officers of IPL. The tables include a Summary Compensation Table (Table I),
and an Aggregated Option/SAR Exercises In Last Fiscal Year and Fiscal Year-End
Option/SAR Values Table (Table II). No table is presented for Option/SAR
Grants in Last Fiscal Year since no options were granted to the named
executive officers in 1998. No table is presented for Long-Term Incentive
Plans since the issuance of restricted stock under the Long-Term Performance
and Restricted Stock Incentive Plan is included in the Summary Compensation
Table (Table I).
SUMMARY COMPENSATION TABLE
TABLE I
<TABLE>
<CAPTION>
Long-Term Compensation
------------------------------
Annual Compensation Awards Awards Payouts
--------------------------------- ---------- ---------- --------
Other Securities
Annual Restricted Underlying All Other
Compen- Stock Options/ LTIP Compen-
Name and Salary Bonus sation(2) Awards(3) SARs(4) Payouts sation(6)
Principal Position Year ($) (1) ($) ($) ($) (#) (5) ($) ($)
- ------------------ ---- ------- ----- --------- ---------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
John R. Hodowal 1996 $515,125 $272,370 $ 229,775 -0- -0- $111,333 $6,000
Chairman & President; 1997 532,958 468,125 70,087 -0- 250,000 127,550 5,831
Chairman & CEO of IPL 1998 637,897 677,250 1,693,360 $1,586,497 -0- 757,607 6,400
Ramon L. Humke 1996 $432,812 $228,935 $ 200,277 -0- -0- $ 92,296 $6,000
Vice Chairman; 1997 450,778 395,937 236,242 -0- 125,000 106,147 5,831
President & COO of IPL 1998 480,990 508,375 841,754 $1,348,452 -0- 635,481 6,400
John R. Brehm 1996 $236,394 $ 83,253 $ 7,788 -0- -0- $ 34,996 $6,698
Vice President &
Treasurer; 1997 240,781 84,595 7,512 -0- 75,000 39,858 5,630
SVP, Finance of IPL 1998 277,859 147,297 36,288 $ 518,399 -0- 199,492 6,757
Joseph A. Gustin 1996 $205,394 $ 48,195 $ 9,429 -0- -0- $ 28,979 -0-
Vice President,
Information 1997 209,206 42,000 11,390 -0- 45,000 33,768 -0-
Services of IPL 1998 209,206 55,125 4,576 $ 216,234 -0- -0- -0-
Paul S. Mannweiler 1996 -0- -0- -0- -0- -0- -0- -0-
Senior Vice President, 1997 $175,008 $ 61,250 $ 4,703 $ 34,288 30,000 -0- $6,316
External Affairs of IPL 1998 177,760 62,417 7,610 197,881 -0- $ 35,414 $6,519
Bryan G. Tabler 1996 $218,184 $ 76,907 $ 17,077 -0- -0- $ 10,652 $6,119
Vice President,
Secretary & 1997 225,742 79,310 20,053 -0- 45,000 21,197 5,081
General Counsel; 1998 234,268 82,437 58,294 $ 346,525 -0- 183,733 5,714
SVP, Secretary and
General
Counsel of IPL
</TABLE>
- --------------------------------------------------------------------------------
10
<PAGE>
FOOTNOTES TO SUMMARY COMPENSATION TABLE
(1) The named executive officers did not receive a salary increase from 1996
to 1997. Salary increases, if applicable take effect in May. 1996 figures
reflect 4 month's pay at 1995 base salary rates and 8 months at 1996 base
salary rates, while 1997 figures reflect 12 month's pay at the 1996 base
salary rates.
(2) 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, $17,783, and $38,751 earned in
above market interest on deferred compensation for Mr. Humke in 1996,
1997, and 1998, respectively.
(3) Restricted common stock awards pursuant to the IPALCO Enterprises, Inc.
Long-Term Performance and Restricted Stock Incentive Plan (the
"Restricted Stock Plan") are valued at the closing market price as of the
date of the award. Dividends on the restricted common stock are payable
to the named officers. Amounts shown for 1998 represent shares awarded in
January, 1998 under the 1995-1997 performance period (Cycle 1) as a
result of IPALCO's performance during that period and to reflect actual
salary during that period, and shares awarded in January, 1998 for the
1998-2000 performance period (Cycle 2) as follows:
<TABLE>
<CAPTION>
Cycle 1 Cycle 2
------------------------ ------------------------
<S> <C> <C> <C> <C>
John R. Hodowal 11,566 shares $ 484,731 26,750 shares $1,101,766
Ramon L. Humke 9,940 shares $ 416,585 22,625 shares $ 931,867
John R. Brehm 2,868 shares $ 120,198 9,668 shares $ 398,201
Joseph A. Gustin -0- shares -0- 5,250 shares $ 216,234
Paul S. Mannweiler 422 shares $ 17,686 4,375 shares $ 180,195
Bryan G. Tabler 2,701 shares $ 113,198 5,665 shares $ 233,327
The total shares awarded under Cycle 1 vest in one-third increments
in the years 1998, 1999 and 2000 and are paid out in cash or stock, at
the election of the named officer. Under the terms of the Restricted
Stock Plan, no additional shares will be awarded to the named officers
before 2001. Upon completion of the performance period for Cycle 2, the
total shares to be awarded will be 0-400% of the award listed. This
total will vest in one-third increments in the years 2001, 2002, and
2003 and is paid out in cash or stock, at the election of the named
officer.
Restricted common stock holdings and the values thereof based on
the closing price of the common stock at year end are as follows:
<CAPTION>
<S> <C> <C> <C> <C>
John R. Hodowal 62,905 shares $3,487,296
Ramon L. Humke 52,950 shares $2,935,416
John R. Brehm 19,188 shares $1,063,735
Joseph A. Gustin 5,250 shares $ 291,047
Paul S. Mannweiler 6,064 shares $ 336,173
Bryan G. Tabler 14,433 shares $ 800,129
</TABLE>
(4) No options have stock appreciation rights.
(5) Payouts shown for 1996 and 1997 were made pursuant to the 1990 Long-Term
Incentive Plan (the "LTIP Plan"). The LTIP Plan was replaced by the
Restricted Stock Plan and no additional payments will be made under the
LTIP Plan. Payouts shown for 1998 were made pursuant to the Restricted
Stock Plan.
(6) Represents contributions made by IPL to the Trustee of the Employees'
Thrift Plan.
- -------------------------------------------------------------------------------
11
<PAGE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs Options/SARs
Shares Value at FY-End(#) FY-End($)*
Acquired On Realized Exercisable/ Exercisable/
Name Exercise (#) ($) Unexercisable Unexercisable
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
John R. Hodowal 430,000 $9,024,002 -0-(e) -0-
-0-(u) -0-
- --------------------------------------------------------------------------------
Ramon L. Humke 38,873 $1,130,262 191,127(e) $5,017,941
-0-(u) -0-
- --------------------------------------------------------------------------------
John R. Brehm 67,500 $1,534,194 60,000(e) $1,443,750
-0-(u) -0-
- --------------------------------------------------------------------------------
Joseph A. Gustin 20,947 $ 441,672 45,000(e) $1,082,812
-0-(u) -0-
- --------------------------------------------------------------------------------
Paul S. Mannweiler 1,000 $ 21,187 29,000(e) $ 697,812
-0-(u) -0-
- --------------------------------------------------------------------------------
Bryan G. Tabler 10,000 $ 181,250 35,000(e) $ 842,188
-0-(u) -0-
</TABLE>
(e)Exercisable.
(u)Unexercisable.
*Based upon year-end closing market price of $55.4375 per share of common
stock.
TABLE II
12
<PAGE>
PERFORMANCE GRAPH
TABLE III
CUMULATIVE TOTAL RETURN ASSUMING DIVIDEND REINVESTMENT
<TABLE>
<CAPTION>
1993 1994 1995 1996 1997 1998
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
IPALCO 100 90.65 122.63 138.94 220.20 297.87
- ----------------------------------------------------------------------------
S&P 500 100 101.32 139.40 171.40 228.59 293.91
- ----------------------------------------------------------------------------
S&P 500 ELEC COMPANIES 100 86.93 113.96 113.77 143.63 165.86
</TABLE>
Source: Standard and Poor's Compustat Custom Data Services.
13
<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
period from December 31, 1993 through December 31, 1998, compared with the
total cumulative return to shareholders of companies comprising the S & P 500
Index (dash line) and the S & P Electric Companies Index (bold dash 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 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.
PENSION PLAN TABLE (1)
<TABLE>
<CAPTION>
Years of
Remuneration Service
------------------------------------------------------------------
15 20 25 30 35
-----------------------------------------
<S> <C> <C> <C> <C> <C>
$125,000 $ 75,000 $ 75,000 $ 75,000 $ 75,000 $ 75,000
150,000 90,000 90,000 90,000 90,000 90,000
175,000 105,000 105,000 105,000 105,000 105,000
200,000 120,000 120,000 120,000 120,000 120,000
225,000 135,000 135,000 135,000 135,000 135,000
250,000 150,000 150,000 150,000 150,000 150,000
300,000 180,000 180,000 180,000 180,000 180,000
400,000 240,000 240,000 240,000 240,000 240,000
450,000 270,000 270,000 270,000 270,000 270,000
500,000 300,000 300,000 300,000 300,000 300,000
</TABLE>
-------
(1) 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
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" and
"Bonus" but excludes "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--30, Mr. Humke--9, Mr. Brehm--23, Mr.
Gustin--27, Mr. Mannweiler--2, and Mr. Tabler--4.
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 1998 to the
accounts of Messrs. Hodowal, Humke, Brehm, Gustin, Mannweiler and Tabler
amounted to $2,062,000, $916,000, $41,000, $-0-, $9,000 and $68,000,
14
<PAGE>
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), the
executives 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 of Indiana, and at
December 31, 1998, the sum of $1,012,924 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 15, 1999
- -------------------------------------------------------------------------------
15
