FORM 10-Q
SECURlTlES AND EXCHANGE COMMlSSlON
WASHINGTON, D. C. 20549
Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended
June 30, 1999 Commission File Number 1-3132-2
INDIANAPOLIS POWER & LIGHT COMPANY
(Exact name of Registrant as specified in its charter)
Indiana 35-0413620
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
One Monument Circle
Indianapolis, Indiana 46204
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 317-261-8261
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to the
filing requirements for at least the past 90 days. Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class Outstanding At June 30, 1999
----- ----------------------------
Common (Without Par Value) 17,206,630 shares
<PAGE>
INDIANAPOLIS POWER & LIGHT COMPANY
----------------------------------
INDEX
-----
Page No.
--------
PART I. FINANCIAL INFORMATION
- ------- ---------------------
Statements of Income - Three Months Ended and
Six Months Ended June 30, 1999 and 1998 2
Balance Sheets - June 30, 1999 and
December 31, 1998 3
Statements of Cash Flows -
Six Months Ended June 30, 1999 and 1998 4-5
Notes to Financial Statements 6
Management's Discussion and Analysis of
Financial Condition and Results of Operations 7-14
PART II. OTHER INFORMATION 15-17
- -------- -----------------
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
INDIANAPOLIS POWER & LIGHT COMPANY
Statements of Income
(In Thousands)
(Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
1999 1998 1999 1998
----------- ------------ ------------ -----------
OPERATING REVENUES:
<S> <C> <C> <C> <C>
Electric $ 195,843 $ 198,539 $ 385,455 $ 377,448
Steam 7,167 8,167 18,386 19,579
----------- ------------ ------------ -----------
Total operating revenues 203,010 206,706 403,841 397,027
----------- ------------ ------------ -----------
OPERATING EXPENSES:
Operation:
Fuel 43,029 43,209 88,943 84,249
Other 32,762 38,425 63,520 73,346
Power purchased 3,367 2,842 4,028 3,849
Purchased steam 1,668 1,226 3,363 3,116
Maintenance 13,847 15,295 36,827 35,035
Depreciation and amortization 26,775 25,378 53,354 50,663
Taxes other than income taxes 8,685 8,636 17,621 17,458
Income taxes - net 23,443 22,497 43,500 39,971
----------- ------------ ------------ -----------
Total operating expenses 153,576 157,508 311,156 307,687
----------- ------------ ------------ -----------
OPERATING INCOME 49,434 49,198 92,685 89,340
----------- ------------ ------------ -----------
OTHER INCOME AND (DEDUCTIONS):
Allowance for equity funds used during construction 319 260 670 525
Other - net (221) 665 (58) 125
Income taxes - net 95 (285) 48 9
----------- ------------ ------------ -----------
Total other income - net 193 640 660 659
----------- ------------ ------------ -----------
INCOME BEFORE INTEREST CHARGES 49,627 49,838 93,345 89,999
----------- ------------ ------------ -----------
INTEREST CHARGES:
Interest 10,193 10,215 20,312 20,375
Allowance for borrowed funds used during construction (196) (192) (417) (396)
----------- ------------ ------------ -----------
Total interest charges 9,997 10,023 19,895 19,979
----------- ------------ ------------ -----------
NET INCOME 39,630 39,815 73,450 70,020
----------- ------------ ------------ -----------
PREFERRED DIVIDEND REQUIREMENTS 804 804 1,607 1,513
----------- ------------ ------------ -----------
INCOME APPLICABLE TO COMMON STOCK $ 38,826 $ 39,011 $ 71,843 $ 68,507
=========== ============ ============ ===========
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
INDIANAPOLIS POWER & LIGHT COMPANY
Balance Sheets
(In Thousands)
(Unaudited)
<CAPTION>
June 30 December 31
1999 1998
-------------- ---------------
ASSETS
------
UTILITY PLANT:
<S> <C> <C>
Utility plant in service $ 2,884,819 $ 2,859,899
Less accumulated depreciation 1,252,067 1,202,356
-------------- ---------------
Utility plant in service - net 1,632,752 1,657,543
Construction work in progress 87,879 80,198
Property held for future use 10,719 10,719
-------------- ---------------
Utility plant - net 1,731,350 1,748,460
-------------- ---------------
OTHER PROPERTY -
At cost, less accumulated depreciation 5,825 5,790
-------------- ---------------
CURRENT ASSETS:
Cash and cash equivalents 18,481 4,250
Accounts receivable and unbilled revenue (less allowance
for doubtful accounts 1999, $1,071 and 1998, $996) 42,210 36,692
Fuel - at average cost 39,845 38,968
Materials and supplies - at average cost 45,698 48,163
Tax refund receivable 105 7,643
Prepayments and other current assets 4,500 3,634
-------------- ---------------
Total current assets 150,839 139,350
-------------- ---------------
DEFERRED DEBITS:
Regulatory assets 112,651 116,801
Miscellaneous 12,944 12,665
-------------- ---------------
Total deferred debits 125,595 129,466
-------------- ---------------
TOTAL $ 2,013,609 $ 2,023,066
============== ===============
CAPITALIZATION AND LIABILITIES
------------------------------
CAPITALIZATION:
Common shareholder's equity:
Common stock $ 324,537 $ 324,537
Premium and net gain on preferred stock 2,642 2,642
Retained earnings 437,874 440,747
-------------- ---------------
Total common shareholder's equity 765,053 767,926
Cumulative preferred stock 59,135 59,135
Long-term debt (less current maturities
and sinking fund requirements) 627,922 627,893
-------------- ---------------
Total capitalization 1,452,110 1,454,954
-------------- ---------------
CURRENT LIABILITIES:
Notes payable - banks and commercial paper - 19,200
Accounts payable and accrued expenses 61,519 64,461
Dividends payable 17,667 13,158
Taxes accrued 33,480 18,283
Interest accrued 13,429 13,326
Other current liabilities 13,019 13,731
-------------- ---------------
Total current liabilities 139,114 142,159
-------------- ---------------
DEFERRED CREDITS AND OTHER LONG-TERM LIABILITIES:
Accumulated deferred income taxes - net 332,247 328,417
Unamortized investment tax credit 40,609 41,993
Accrued postretirement benefits 7,456 10,768
Accrued pension benefits 38,581 39,953
Miscellaneous 3,492 4,822
-------------- ---------------
Total deferred credits and other long-term liabilities 422,385 425,953
-------------- ---------------
COMMITMENTS AND CONTINGENCIES
TOTAL $ 2,013,609 $ 2,023,066
============== ===============
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
INDIANAPOLIS POWER & LIGHT COMPANY
Statements of Cash Flows
(In Thousands)
(Unaudited)
<CAPTION>
Six Months Ended
June 30
1999 1998
-------------- --------------
CASH FLOWS FROM OPERATIONS:
<S> <C> <C>
Net income $ 73,450 $ 70,020
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 52,686 49,971
Amortization of regulatory assets 5,161 5,184
Deferred income taxes and investment tax credit adjustments - net 922 (2,127)
Allowance for funds used during construction (1,087) (921)
Change in certain assets and liabilities:
Accounts receivable (5,518) 8,342
Fuel, materials and supplies 1,588 4,155
Accounts payable (2,934) (14,885)
Taxes accrued 15,196 14,769
Accrued pension benefits (1,372) 993
Other - net 1,673 793
-------------- --------------
Net cash provided by operating activities 139,765 136,294
-------------- --------------
CASH FLOWS FROM INVESTING:
Construction expenditures (33,761) (32,525)
Other (760) 328
-------------- --------------
Net cash used in investing activities (34,521) (32,197)
-------------- --------------
CASH FLOWS FROM FINANCING:
Short-term debt - net (19,200) (23,700)
Issuance of preferred stock - 50,000
Dividends paid (71,813) (115,029)
Other - (490)
-------------- --------------
Net cash used in financing activities (91,013) (89,219)
-------------- --------------
Net increase in cash and cash equivalents 14,231 14,878
Cash and cash equivalents at beginning of period 4,250 4,950
-------------- --------------
Cash and cash equivalents at end of period $ 18,481 $ 19,828
============== ==============
- ----------------------------------------------------------------------------------------------------------
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest (net of amount capitalized) $ 19,114 $ 19,372
============== ==============
Income taxes $ 22,874 $ 22,627
============== ==============
See notes to financial statements.
</TABLE>
<PAGE>
INDIANAPOLIS POWER & LIGHT COMPANY
----------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
1. GENERAL
Indianapolis Power & Light Company is a subsidiary of IPALCO
Enterprises, Inc. The preparation of financial statements in conformity
with generally accepted accounting principles requires that management
make certain estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements. The reported
amounts of revenues and expenses during the reporting period may also be
affected by the estimates and assumptions management is required to
make. Actual results may differ from those estimates.
In the opinion of management these statements reflect all adjustments,
consisting of only normal recurring accruals, which are necessary to a
fair statement of the results for the interim periods covered by such
statements. Due to the seasonal nature of the electric utility business,
the annual results are not generated evenly by quarter during the year.
Certain amounts from prior year financial statements have been
reclassified to conform to the current year presentation. These
financial statements and notes should be read in conjunction with the
audited financial statements included in IPL's 1998 Annual Report on
Form 10-K.
2. SEGMENT REPORTING
IPL has two business segments (electric and "all other"). Pretax
operating income for the electric segment was $72.3 million and $70.6
million and for the "all other" segment was $.6 million, and $1.1 million
for the second quarter ended June 30, 1999, and 1998, respectively.
Pretax operating income for the electric segment was $133.1 million and
$125.2 million and for the "all other" segment was $3.1 million, and $4.2
million for the six months ended June 30, 1999, and 1998, respectively.
Steam operations of IPL are included in the caption UTILITY OPERATING
INCOME. The cost of property and plant, excluding construction in
progress and property held for future use, is as follows:
June 30 December 31
1999 1998
---- ----
(In Thousands)
Electric plant in service................. $ 2,776,175 $ 2,752,539
All other................................. 110,479 109,195
------------ ------------
Subtotal........................... $ 2,886,654 $ 2,861,734
=========== ===========
3. NEW ACCOUNTING STANDARD
Statement of Financial Accounting Standards No. 133 (SFAS 133),
"Accounting for Derivative Instruments and Hedging Activities," was
issued in June 1998 and was to be effective for all fiscal quarters of
all fiscal years beginning after June 15, 1999. The effective date for
this standard was delayed one year by SFAS 137. The standard is now
effective for all fiscal quarters of all fiscal years beginning after
June 15, 2000. SFAS 133 establishes accounting and reporting standards
for derivative instruments and for hedging activities. It requires that
an entity recognizes all derivatives as either assets or liabilities in
the statement of financial condition and measures those instruments at
fair value. If certain conditions are met, a derivative may be
specifically designated as a fair value hedge, a cash flow hedge, or a
hedge of a foreign currency exposure. The accounting for changes in the
fair value of a derivative (that is, gains and losses) depends on the
intended use of the derivative and the resulting designation. Management
has not yet quantified the effect of the new standard on the
financial statements.
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
In connection with the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995 (the Reform Act), IPL is hereby filing cautionary
statements identifying important factors that could cause IPL's actual results
to differ materially from those projected in forward-looking statements of IPL.
This Form 10-Q, and particularly Management's Discussion and Analysis and our
discussion of the Year 2000 issues, contains forward-looking statements. The
Reform Act defines forward-looking statements as statements that express an
expectation or belief and contain a projection, plan or assumption with regard
to, among other things, future revenues, income, earnings per share or capital
structure. Such statements of future events or performance are not guarantees of
future performance and involve estimates, assumptions, and uncertainties and are
qualified in their entirety by reference to, and are accompanied by, the
following important factors that could cause IPL's actual results to differ
materially from those contained in forward-looking statements made by or on
behalf of IPL. The words "anticipate," "believe," "estimate," "expect,"
"forecast," "project," "objective," and similar expressions are intended to
identify forward-looking statements.
Some important factors that could cause IPL's actual results or outcomes
to differ materially from those discussed in the forward-looking statements
include, but are not limited to, fluctuations in customer growth and demand,
weather, fuel and purchased power costs and availability, regulatory action,
federal and state legislation, interest rates, labor strikes, maintenance and
capital expenditures and local economic conditions. In addition, IPL's ability
to have available an appropriate amount of production capacity in a timely
manner can significantly impact IPL's financial performance. The timing of
deregulation and competition, product development and introductions of
technology changes are also important potential factors.
All such factors are difficult to predict, contain uncertainties which
may materially affect actual results and are beyond the control of IPL.
IPL's ability to predict results or effects of issues related to the Year
2000 is inherently uncertain, and is subject to factors that may cause actual
results to differ materially from those projected. Factors that could affect the
actual results include the possibility that contingency plans or remediation
efforts will not operate as intended; IPL's failure to timely or completely
identify all software, hardware or embedded chip devices requiring remediation;
unexpected costs; and the uncertainty associated with the impact of Year 2000
issues on the utility industry, including other electric utilities with which
IPL in interconnected, and on IPL's customers, vendors and others with whom it
does business. See "Year 2000" for information about IPL's efforts.
LIQUIDITY AND CAPITAL RESOURCES
Overview
- --------
The Board of Directors of Indianapolis Power & Light Company (IPL)
declared dividends on common stock of $26.9 million during the second quarter of
1999. $5.0 million, $5.0 million, $4.0 million and $12.9 million was paid by IPL
to IPALCO Enterprises Inc. on May 1, 1999, June 1, 1999, July 1, 1999, and July
15, 1999, respectively.
IPL's capital requirements are primarily related to construction
expenditures needed to meet customers' needs for electricity and steam, for
environmental compliance and for the implementation of an integrated information
system. Construction expenditures (excluding allowance for funds used during
construction) totaled $18.4 million during the quarter ended June 1999,
representing a $.8 million decrease from the comparable period in 1998.
Internally generated cash provided by IPL's operations was used for construction
expenditures during the second quarter of 1999. Construction expenditures
(excluding allowance for funds used during construction) totaled $33.8 million
during the six months ended June 1999, representing a $1.2 million increase from
the comparable period in 1998. Internally generated cash provided by IPL's
operations was used for construction expenditures during six months ended June
1999.
The three-year construction program has not changed from that
previously reported in IPL's 1998 Form 10-K report. (See "Future Performance" in
Item 7 of Management's Discussion and Analysis of Financial Condition and
Results of Operations in IPL's 1998 Form 10-K report for further discussion).
OTHER
Market Risk Sensitive Instruments and Positions
- -----------------------------------------------
The primary market risk to which IPL is exposed is interest rate risk.
IPL uses long-term debt as a primary source of capital in its business. A
portion of this debt has an interest component that resets on a periodic basis
to reflect current market conditions. The following table presents the principal
cash repayments and related weighted average interest rates by maturity date for
IPL's long-term fixed-rate debt and its other types of long-term debt at June
30, 1999:
<TABLE>
<CAPTION>
Maturity Schedule
Periods Ending June 30
Fair
(Dollars in Millions) 2000 2001 2002 2003 2004 Thereafter Total Value
- --------------------------------------------------------------------------------------------------------
Long-term debt
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fixed rate - - - - $80.0 $398.8 $478.8 $487.5
Average rate - - - - 6.1% 6.9% 6.7%
Variable rate - - - - - $150.0 $150.0 $150.0
Average rate - - - - - 3.8% 3.8%
</TABLE>
To manage IPL's exposure to fluctuations in interest rates and to lower
funding costs, IPL has entered into an interest rate swap. Under this swap, IPL
agrees with counterparties to exchange, at specified intervals, the difference
between fixed-rate and floating-rate interest amounts calculated on an agreed
notional amount. This interest differential paid or received is recognized in
the consolidated statements of income as a component of interest expense.
At June 30, 1999, IPL had an interest rate swap agreement with a notional
amount of $40 million, which expires in January 2023. IPL pays interest at a
fixed rate of 5.21% to a swap counter party and receives a variable rate based
on the tax-exempt weekly rate.
Year 2000
- ---------
IPL is potentially subject to operational problems associated with the
inability of various computer hardware, software and devices containing embedded
chips to properly process the year change from 1999 to 2000. Such problems could
conceivably affect IPL's ability to deliver electricity or steam to its
customers, as well as IPL's internal operations such as billing or payroll
functions. Further, Year 2000 problems experienced by other entities, over which
IPL has no control, such as certain suppliers or other electric utilities with
which IPL is interconnected, could adversely affect IPL's operations.
In 1997, IPL established a Year 2000 Committee. IPL currently manages the
Year 2000 project through two employee committees, the Compliance Testing
Committee and the Contingency Planning Committee, each headed by corporate
officers. Each of those committees reports to a Year 2000 Steering Committee
composed of officers. The Year 2000 Steering Committee reports to the Office of
the Chairman.
The Indiana Utility Regulatory Commission has ordered all Indiana public
utilities, including IPL, to "use their best efforts to identify their mission
critical operations and conduct an inventory of all electronic devices that may
be affected by date processing logic, assess the status of these devices, take
steps to correct problems in the devices and test the devices to determine
compliance" in order to be "Year 2000 ready."
The Compliance Testing Committee is engaged in inventorying, reviewing,
analyzing, correcting and testing computer-related systems and embedded chip
devices. The Contingency Planning Committee is in the process of assessing
various operating scenarios associated with potential Year 2000 problems and
formulating plans by which to operate IPL in the event of such problems. Both
the Compliance Testing Committee and the Contingency Planning Committee are
concentrating first on systems critical to the continuity of IPL's business.
Non-critical systems have lower priorities.
IPL is participating in an Electric Power Research Institute program on
the Year 2000 issue, as well as the North American Electric Reliability Council
(NERC) system readiness assessments.
IPL's Year 2000 Plan includes attention to its generating facilities,
energy management systems, telecommunications systems, substation control and
protection systems, transmission and distribution systems, business information
systems, financial systems and business partners. It includes efforts such as
assessing Year 2000 risks to computer hardware, software and embedded systems;
identifying options and solutions; evaluating solutions; repairing, upgrading
and replacing systems; testing systems; and contingency planning.
State of Readiness
IPL has reported to NERC that it believes its mission-critical systems
used to produce and deliver electricity are ready for date changes associated
with the Year 2000. The NERC definition of "Y2K Ready" is that a system or
application has been determined to be suitable for continued use into the Year
2000.
A. Identification and Assessment
The Compliance Testing Committee is coordinating and reviewing the
enterprise-wide use of information technology and assessing potential Year 2000
problems. That effort has involved making an inventory of applications and
systems and evaluating exposures associated with, for example, vendor-provided
software and hardware, IPL-developed software, and various devices containing
embedded chips. The Committee has also been in contact with vendors to determine
product compliance and vendors' timeframes for compliance. Computer systems
reviewed include hardware, machine microcode and firmware, operating systems,
generic applications software, billing software, communications software and
financial software.
The Compliance Testing Committee has been engaged in assessing computer
systems and embedded chip devices related to IPL's:
Electricity generating stations and plants producing steam;
Energy management systems;
Substation controls, system protection, and transmission and
distribution systems;
Telecommunications systems; and
Business information systems.
IPL has completed the identification, inventory and assessment phases for
critical systems. The Compliance Testing Committee continues to be vigilant for
issues that may come to light and is also working on non-critical systems.
B. Remediation and Testing
The Compliance Testing Committee is coordinating, modifying or replacing
legacy systems which may not be Year 2000 compliant. IPL has replaced most of
its key financial software applications. Although that project was not
specifically initiated as a Year 2000 effort, it coincidentally replaced
non-compliant software.
The Compliance Testing Committee is also engaged in establishing and
operating appropriate testing environments to determine, to the extent possible,
the Year 2000 compliance of existing systems and/or devices and the compliance
of replacement or upgraded systems and devices. IPL has employed various of the
following techniques: component tests, simulations, outside testing, vendor
verifications or upgrades or change-outs. Some devices or systems, such as
satellite communication links, may not be susceptible to testing, in which cases
IPL must rely on the service providers' verifications.
IPL has inquired of its suppliers and vendors of software,
computer-related equipment, devices and services about Year 2000 compliance.
Some provided the requested information and/or assurances and some did not.
IPL's operations could be adversely affected by Year 2000-related
failures of other companies, such as telecommunication providers, that supply
IPL with mission-critical services. Similarly, Year 2000 failures of other
utilities with which IPL is interconnected could adversely affect IPL's ability
to deliver services to its customers.
With the exception of one accounting system, testing of which IPL expects
to complete before the end of August 1999, IPL has completed the remediation and
testing phases for critical systems. IPL is operating its major electricity
generating units with clocks set in year 2000. IPL also participated in a
national NERC drill, testing utilities' ability to operate facilities without
normal communication services. No major problems were encountered.
Costs to Address IPL's Year 2000 Issues
Not including the cost of replacing IPL's business software, a project
not initiated specifically for Year 2000 reasons but which provided Year 2000
benefits through replacing non-compliant software, IPL currently estimates that
its costs of the phases of identification, assessment, remediation and testing
may be approximately $4.2 million, which IPL believes is not material to its
results of operations, liquidity and financial condition. Of that figure, IPL
has currently expended approximately $2.5 million. A substantial proportion of
the costs of remediation are associated with functional areas of IPL other than
Information Services. IPL currently estimates that its costs of contingency
planning efforts may be approximately $1.5 million.
Risks of IPL's Year 2000 Issues
In light of the numerous computer-related systems and embedded chip
devices present in business and production equipment used by a utility, and the
interdependent nature of control systems, a large number of conceivable Year
2000 failure scenarios exist, potentially involving IPL's internal functions
(such as billing), as well as its steam and electricity generation and
distribution functions. Consequences could conceivably range from essentially no
operational problems to a massive disruption of steam and electric service
lasting for a significant period of time. IPL currently believes the probability
of outages caused by Year 2000 problems is small. Further, since IPL does not
stand alone but is electrically interconnected with other utilities across a
substantial portion of the nation, even if IPL experiences no significant Year
2000 problems associated with its own equipment, its ability to deliver
electricity could be adversely affected by Year 2000 failures experienced by
other interconnected utilities. The probability of such failures is believed to
be small. IPL currently expects to experience at least some, hopefully minor,
problems associated with Year 2000. Some conceivable, though unlikely, Year 2000
failure scenarios could be material to IPL's results of operations.
There are both external and internal risks associated with Year 2000 that
could affect IPL's steam and electricity generation, transmission and
distribution operations. Potential internal risk factors include, but are not
limited to, increased risk of generator trips, inability to start or restart
generators, increased risk of transmission facility trips, loss of energy
management systems, loss of Company-owned voice/data communications, system
protection (relay) failures resulting in cascading outages or facility damage,
failure of load-shedding controls to operate properly, failure of load
management systems to operate properly, loss of or incorrect critical operating
data, failure of environmental control systems, loss of distribution systems or
failure of voltage control devices to operate properly. Occurrences of those
internal problems, alone or in combination, could result in varying effects on
IPL's operations. Concerns over these occurrences are minimal based on testing
results that indicate no Year 2000-related problems with key generation and
transmission control systems. IPL's major generating units' control systems have
been tested for critical dates and are already operating in the year 2000.
External risk factors include, but are not limited to, loss of customer
load, uncharacteristic load patterns, loss of leased communication facilities,
failure of delivery systems to maintain supplies of fuel and severe or cold
weather. Occurrences of various of those events, alone or in combination, could
result in varying effects on IPL.
In view of the unprecedented nature of the Year 2000 phenomenon, it is
not clear whether insurance policy language in policies insuring IPL will be
interpreted to cover or bar claims, if any, arising out of Year 2000 events.
In light of the many adverse circumstances that could conceivably happen
to IPL associated with Year 2000, along with the speculation that some or many
of them may not happen, it is extremely difficult to hypothesize a most
reasonably likely worst case Year 2000 scenario with any degree of certainty.
With that in mind, IPL currently believes the most reasonably likely worst case
scenario would be an isolated partial reduction in generating unit capacity due
to minor systems failures with no interruption of power to IPL customers. IPL
does not believe that the worst case scenario will occur and, should it occur,
IPL believes that the consequences of that scenario, with regard to either costs
of repair or lost revenues, are not likely to have a material effect on IPL's
results of operations, liquidity and financial condition. IPL's Contingency
Plans
The Contingency Planning Committee has been engaged in reviewing
hypothetical scenarios involving various Year 2000 system or device failures and
has prepared plans by which to operate IPL in the event those failures occur.
IPL's contingency planning involves the phases of plan development, testing,
execution and recovery after Year 2000 events. As with compliance testing,
contingency planning has touched essentially every area of IPL's operations, as
well as interactions with interconnected utilities, customers, critical vendors
and emergency and other governmental authorities.
The planning phase attempts to identify and evaluate potential impacts on
business operations, life, property, and the environment; develop emergency
plans including establishing procedures for mitigation of failures and evaluate
contingency planning being done on systems that interface with IPL's systems;
identify dates of action for various contingencies; establish responsibility and
authority for various response efforts; and establish and perform a training
program with respect to responding to contingencies, including practicing and
testing the contingency plans and coordinating the efforts with governmental
functions.
Contingency planning includes consideration of potential interruptions in
the supply chain or transportation of critical fuel, water, chemicals, material
supplies etc., and acquisition of appropriate extra supplies, as well as
potential failures of or other problems associated with the interconnected
electricity grid. IPL's existing disaster recovery plans have formed bases for
some Year 2000 contingency plans.
In the testing phase, various drills will be conducted to test the plan's
effectiveness. Modifications will be made where testing indicates a need. In the
execution phase, IPL will operate its contingency plans in response to events
actually occurring.
After Year 2000 events, if any, IPL will execute its post-event
contingency plans as required. It will test its system functions, review the
results, restore and restart systems, and notify appropriate authorities of the
resolution of problems.
<PAGE>
RESULTS OF OPERATIONS
Comparison of Second Quarter and Six Months Ended June 30, 1999
---------------------------------------------------------------
With Second Quarter and Six Months Ended June 30, 1998
------------------------------------------------------
Income applicable to common stock decreased during the second quarter
of 1999 compared to the second quarter of 1998 by $.2 million. Income applicable
to common stock increased during the six months ended June 1999 compared to the
same period last year by $3.3 million. The following discussion highlights the
factors contributing to these results.
Operating Revenues
- ------------------
Operating revenues decreased $3.7 million during the second quarter
ended June 1999 compared to the similar period last year. Operating revenues for
the six months ended June 1999 increased $6.8 million from the comparable 1998
period. These results were due to the following:
Increase (Decrease) from Comparable 1998 Period
-----------------------------------------------
June 30, 1999
-------------
Three Months Ended Six Months Ended
------------------ ----------------
(Millions of Dollars)
Electric:
Change in retail KWH sales - net of fuel 0.8 8.4
Fuel revenue 1.0 1.7
Wholesale revenue (2.9) (0.2)
DSM Tracker revenue - 0.1
Steam revenue (1.0) (1.2)
Other revenue (1.6) (2.0)
--------- ---------
Total change in operating revenues $ (3.7) $ 6.8
========= =========
The second quarter increase in retail KWH sales compared to the same
period in 1998 was due to economic growth in Indianapolis. The six months ended
increase in retail KWH sales compared to the same period in 1998 was primarily
due to colder weather during the first three months of 1999. Heating degree days
increased 14% during the six months ended June 30, 1999, compared to the same
period in 1998. The changes in fuel revenues in 1999 from the prior year reflect
changes in total fuel costs billed to customers. Wholesale revenue decreased
during the second quarter of 1999, despite increased KWH sales volume, due to
lower wholesale energy prices than the unusually high prices that occurred in
second quarter 1998. Steam revenue decreased during the second quarter of 1999
primarily due to a decrease in heating degree days. During the second quarter
heating degree days decreased 11% from the similar period in 1998.
Operating Expenses
- ------------------
Fuel costs increased $4.7 million for the six months ended June 1999,
compared to the same period last year. This increase was primarily due to
increased total KWH sales.
Other operating expenses decreased $5.7 million and $9.8 million in the
second quarter and six months ended June 1999, respectively, compared to the
similar periods in 1998. The second quarter decrease was primarily due to
decreased customer service and information expense of $2.1 million, decreased
administrative and general expense of $1.4 million and increased sales of
emission allowances of $1.5 million (reduces operating expenses). The six months
ended decrease was primarily due to increased sales of emission allowances of
$4.9 million, decreased customer service and information expense of $2.3
million, decreased administrative and general expense of $1.9 million and
decreased customer accounts expense of $.9 million.
Maintenance expense increased $1.8 million during the six months ended
June 30, 1999, compared to the similar period last year. This increase was
primarily due to the overhaul of unit 1 at the Petersburg plant.
Income taxes - net, increased $.9 million and $3.5 million in the
second quarter and six months ended periods, respectively, due to an increase in
pretax operating income.
As a result of the foregoing, utility operating income increased .5%
during the second quarter of 1999 from the comparable 1998 period, to $49.4
million. Utility operating income during the six months ended June 1999
increased 3.7% from the comparable 1998 period, to $92.7 million.
Other Income and Deductions
- ---------------------------
Other - net decreased $.9 million during the second quarter of 1999
compared to the same period last year. This increase was primarily due to
decreased miscellaneous non-operating revenues. For the six months ended June
1999, other-net decreased $.2 million due to partially offsetting increased
non-operating revenues during the first quarter of 1999.
New Accounting Pronouncement
- ----------------------------
The Financial Accounting Standards Board has issued Statement of
Financial Accounting Standards No. 133, Accounting for Derivative Instruments
and Hedging Activities," that IPL will be required to adopt in 2001 (see Note 3
in the Notes to Financial Statements for further discussion).
<PAGE>
PART II - OTHER INFORMATION
- ---------------------------
Item 4. Submission of Matters to a Vote of Security Holders
- ------- ---------------------------------------------------
The Annual Meeting of shareholders of Indianapolis Power & Light Company
was held on April 21, 1999. At the meeting the following directors were elected
to terms of one year each which expire in April 2000. Each director received
17,206,630 votes of the Company's common stock: Joseph D. Barnette, Jr.; Robert
A. Borns; Daniel R. Coats; Mitchell E. Daniels, Jr.; Rexford C. Early; Otto N.
Frenzel III; Max L. Gibson; John R. Hodowal; Ramon L. Humke; Andre B. Lacy; L.
Ben Lytle; Michael S. Maurer; Andrew J. Paine, Jr.; Sallie W. Rowland; and
Thomas H. Sams.
Item 6. Exhibits and Reports on Form 8-K
- ------- --------------------------------
(a) Exhibits. Copies of documents listed below which are
identified with an asterisk (*) are incorporated herein by
reference and made a part hereof. The management contracts or
compensatory plans are marked with a double asterisk (**)
after the description of the contract or plan.
3.1* Articles of Incorporation of Indianapolis Power & Light Company, as
amended. (Form 10-K for the year ended 12-31-97.)
3.2* Bylaws of Indianapolis Power & Light Company, as amended. (Exhibit 3.2
to the Form 10-Q dated 3-31-99.)
4.1* Mortgage and Deed of Trust, dated as of May 1, 1940, between
Indianapolis Power & Light Company and American National Bank and Trust
Company of Chicago, Trustee, as supplemented and modified by 42
Supplemental Indentures.
Exhibits D in File No. 2-4396; B-1 in File No. 2-6210; 7-C
File No. 2-7944; 7-D in File No.2-72944; 7-E in File No. 2-8106; 7-F in
File No. 2-8749; 7-G in File No. 2-8749; 4-Q in File No. 2-10052;2-I in
File No. 2-12488; 2-J in File No. 2-13903; 2-K in File No. 2-22553; 2-L
in File No. 2-24581; 2-M in File No. 2-26156; 4-D in File No. 2-26884;
2-D in File No. 2-38332; Exhibit A to Form 8-K for October 1970;Exhibit
2-F in File No. 2-47162; 2-F in File No. 2-50260; 2-G in File
No.2-50260; 2-F in File No. 2-53541; 2E in File No. 2-55154; 2E in File
No. 2-60819; 2F in File No. 2-60819; 2-G in File No. 2-60819; Exhibit A
to Form 10-Q for the quarter ended 9-30-78 File No. 1-3132; 13-4 in
File No. 2-73213; Exhibit 4 in File No.2-93092. Twenty-eighth,
Twenty-ninth and Thirtieth Supplemental Indentures. (Form 10-K dated
for the year ended December 31, 1985.)
4.2* Thirty-Second Supplemental Indenture dated as of June 1, 1989.
(Form 10-K for year ended 12-31-89.)
4.3* Thirty-Third Supplemental Indenture dated as of August 1, 1989.
(Form 10-K for year ended 12-31-89.)
4.4* Thirty-Fourth Supplemental Indenture dated as of October 15, 1991.
(Form 10-K for year ended 12-31-91.)
4.5* Thirty-Fifth Supplemental Indenture dated as of August 1, 1992.
(Form 10-K for year ended 12-31-92.)
4.6* Thirty-Sixth Supplemental Indenture dated as of April 1, 1993.
(Form 10-Q for quarter ended 9-30-93.)
4.7* Thirty-Seventh Supplemental Indenture dated as of October 1, 1993.
(Form 10-Q for quarter ended 9-30-93.)
4.8* Thirty-Eighth Supplemental Indenture dated as of October 1, 1993.
(Form 10-Q for quarter ended 9-30-93.)
4.9* Thirty-Ninth Supplemental Indenture dated as of February 1, 1994.
(Form 8-K, dated 1-25-94.)
4.10* Fortieth Supplemental Indenture dated as of February 1, 1994.
(Form 8-K, dated 1-25-94.)
4.11* Forty-First Supplemental Indenture dated as of January 15, 1995.
(Exhibit 4.12 to the Form 10-K dated 12-31-94.)
4.12* Forty-Second Supplemental Indenture dated as of October 1, 1995.
(Exhibit 4.12 to the Form 10-K dated 12-31-95.)
10.1 Directors' and Officers' Liability Insurance Policy No. DO392A1A99
effective June 1, 1999 to June 1, 2000. **
10.2 Indianapolis Power & Light Co. 1999 Management Incentive Plan **
21.1* Subsidiaries of the Registrant. (Exhibit 21.1 to the Form 10-K dated
12-31-96.)
27.1 Financial Data Schedule.
(b) Reports on Form 8-K.
None
<PAGE>
Signatures
----------
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
INDIANAPOLIS POWER & LIGHT COMPANY
----------------------------------
(Registrant)
Date: August 13, 1999 /s/ John R. Brehm
------------------------- -------------------------------
John R. Brehm
Senior Vice President, Finance
Date: August 13, 1999 /s/ Stephen J. Plunkett
------------------------- --------------------------------
Stephen J. Plunkett
Controller
EXHIBIT 10.1
DIRECTORS AND OFFICERS LIABILITY
INSURANCE POLICY
THIS IS A "CLAIMS-FIRST-MADE"
INSURANCE POLICY. PLEASE READ IT CAREFULLY.
Words and phrases which appear in all capital letters have
the special
meanings set forth in
Section II. Definitions
AEGIS
ASSOCIATED ELECTRIC & GAS
INSURANCE SERVICES LIMITED
HAMILTON, BERMUDA
DECLARATIONS
POLICY NO. D0392A1A99
DECLARATIONS NO. 1
Item 1: This POLICY provides indemnification with respect to the
DIRECTORS and OFFICERS of:
IPALCO Enterprises, Inc.
One Monument Circle
Indianapolis, IN 46204
Item 2: POLICY PERIOD: from the 1st day of June, 1999, to
the 1st day of June, 2000 both days at 12:01 A.M.
Standard Time at the address of the COMPANY.
Item 3: RETROACTIVE DATE: the 1st day of January, 1926 at
12:01 A.M. Standard Time at the address of the
COMPANY.
Item 4: A. POLICY PREMIUM: $129,242.
B. MINIMUM PREMIUM: $ 51,697.
Item 5: Limits of Liability:
A. $ 35,000,000 Each WRONGFUL ACT
B. $ 35,000,000 Aggregate Limit of Liability for the
POLICY PERIOD
Item 6: UNDERLYING LIMITS:
This POLICY is written as primary Insurance
A. If this POLICY is written as Primary Insurance
with respect to Insuring Agreement I(A)(2)
only:
(1) $ 200,000 Each WRONGFUL ACT not
arising from NUCLEAR OPERATIONS
(2) $ 200,000 Each WRONGFUL ACT arising from
NUCLEAR OPERATIONS
DECLARATIONS
continued
POLICY NO. D0392A1A99
DECLARATIONS NO. 1
B. If this POLICY is written as Excess Insurance:
(1) (a) $ -------- Each WRONGFUL ACT
(b) $ -------- In the Aggregate for all
WRONGFUL ACTS
(2) $ -------- Each WRONGFUL ACT not covered
under Underlying Insurance
(3) In the Event of Exhaustion of the
UNDERLYING LIMIT stated in Item
6(B)(1)(b) above with respect to Insuring
Agreement I(A)(2) only:
(a) $ -------- Each WRONGFUL ACT not
arising from NUCLEAR
OPERATIONS
(b) $ -------- Each WRONGFUL ACT arising from
NUCLEAR OPERATIONS
Item 7: Any notice to be provided or any payment to be made
hereunder to the COMPANY shall be made to:
NAME Mr. Bruce H. Smith
TITLE Admin. Benefits & Risk Mgmt.
ENTITY Indianapolis Power & Light Company
ADDRESS One Monument Circle
P.O. Box 1595 (Zip 46206-1595)
Indianapolis, IN 46204
Item 8: Any notice to be provided or any payment to be made
hereunder to the INSURER shall be made to:
NAME AEGIS Insurance Services, Inc.
ADDRESS 10 Exchange Place
Jersey City, New Jersey 07302
ENDORSEMENTS ATTACHED AT POLICY ISSUANCE: 1-9
Countersigned at Jersey City, New Jersey
On June 15, 1999
AEGIS Insurance Services, Inc.
By /s/ Brian Madden
Authorized Representative
POLICY OF DIRECTORS AND OFFICERS LIABILITY INSURANCE EFFECTED
WITH ASSOCIATED ELECTRIC & GAS INSURANCE SERVICES LIMITED
HAMILTON, BERMUDA
(hereinafter referred to as the "POLICY")
THIS IS A "CLAIMS-FIRST-MADE" INSURANCE POLICY.
PLEASE READ IT CAREFULLY.
Words and phrases which appear in all capital letters
have the special meanings set forth in
Section II. Definitions.
In consideration of the payment of premium, and in reliance
upon all statements made and information furnished to
Associated Electric & Gas Insurance Services Limited
(hereinafter referred to as the "INSURER") by the Application
attached hereto which is hereby made a part hereof, and
subject to all the terms hereinafter provided, the INSURER
agrees as follows:
I. INSURING AGREEMENT
(A) Indemnity
(1) The INSURER shall pay on behalf of the
DIRECTORS and OFFICERS any and all sums which
they shall become legally obligated to pay as
ULTIMATE NET LOSS for which the COMPANY has
not provided reimbursement, by reason of any
WRONGFUL ACT which takes place during the
COVERAGE PERIOD and is actually or allegedly
caused, committed or attempted by the
DIRECTORS or OFFICERS while acting in their
respective capacities as DIRECTORS or
OFFICERS, provided such ULTIMATE NET LOSS
arises from a CLAIM first made against the
DIRECTORS or OFFICERS during the POLICY PERIOD
or during the DISCOVERY PERIOD, if purchased.
(2) The INSURER shall pay on behalf of the COMPANY
any and all sums it has incurred, as required
or permitted by applicable common or statutory
law or under provisions of the COMPANY's Charter
or Bylaws effected pursuant to such law, as
ULTIMATE NET LOSS, to indemnify DIRECTORS or
OFFICERS for ULTIMATE NET LOSS which they are
legally obligated to pay by reason of any WRONGFUL
ACT which takes place during the COVERAGE PERIOD
and is actually or allegedly caused, committed or
attempted by such DIRECTORS or OFFICERS while
acting in their respective capacities as DIRECTORS
or OFFICERS, provided the ULTIMATE NET LOSS arises
from a CLAIM first made against the DIRECTORS or
OFFICERS during the POLICY PERIOD or during the
DISCOVERY PERIOD, if purchased.
(B) Limits of Liability
(1) The INSURER shall only be liable hereunder for
the amount of ULTIMATE NET LOSS in excess of
the UNDERLYING LIMITS as stated in Item 6 of
the Declarations as a result of each WRONGFUL
ACT covered under Insuring Agreement I(A)(1)
or I(A)(2) or both, and then only up to the
Limit of Liability stated in Item 5A of the
Declarations and further subject to the
aggregate Limit of Liability stated in Item 5B
of the Declarations as the maximum amount
payable hereunder in the aggregate for all
CLAIMS first made against the DIRECTORS or
OFFICERS during both:
(a) the POLICY PERIOD and
(b) the DISCOVERY PERIOD, if purchased.
Notwithstanding the foregoing, in the event
that the INSURER cancels or refuses to renew
this POLICY, and a DISCOVERY PERIOD extension
is purchased by the COMPANY, then the
aggregate Limit of Liability stated in Item 5B
of the Declarations shall be reinstated but
only with respect to CLAIMS first made against
the DIRECTORS or OFFICERS during such
DISCOVERY PERIOD.
(2) Multiple CLAIMS arising out of the same
WRONGFUL ACT, even if made against different
DIRECTORS or OFFICERS, shall be deemed to be a
single CLAIM arising from a single WRONGFUL
ACT and to have been reported during the
POLICY PERIOD or, if purchased, during the
DISCOVERY PERIOD in which the first of such
multiple CLAIMS is made against any of the
DIRECTORS or OFFICERS. The Limits of
Liability and UNDERLYING LIMITS, stated in
Items 5 and 6 of the Declarations
respectively, shall apply only once regardless
of the number of CLAIMS arising out of the
same WRONGFUL ACT. All interrelated acts shall
be deemed to be a single WRONGFUL ACT.
(3) The inclusion herein of more than one DIRECTOR
or OFFICER, or the application of both
Insuring Agreements I(A)(1) and I(A)(2), shall
not operate to increase the INSURER'S Limits
of Liability as stated in Item 5 of the
Declarations.
(4) With respect to ULTIMATE NET LOSS arising out
of any WRONGFUL ACT in connection with service
for a NOT-FOR-PROFIT ORGANIZATION as provided
in Section II(E)(2), if:
(a) such WRONGFUL ACT results in liability
being imposed upon one or more DIRECTORS
and OFFICERS under this POLICY and also
upon directors and officers and general
partners under any other directors and
officers or general partner liability
insurance policies issued by the INSURER
to any organization; and
(b) the total of the ULTIMATE NET LOSS under
this POLICY and the ultimate net loss
under such other policies issued by the
INSURER equals or exceeds $35,000,000;
the maximum amount payable by the INSURER
under this POLICY in the aggregate for all
ULTIMATE NET LOSS resulting from such WRONGFUL
ACT shall be the lesser of the applicable
Limit of Liability provided by this POLICY or
the product of:
(i) the applicable Limit of Liability
provided by this POLICY divided by
the total limits of liability per
wrongful act applicable to such
wrongful act under all policies
issued by the INSURER; and
(ii) $35,000,000.
If the amount paid under this POLICY with
respect to such WRONGFUL ACT exceeds the
COMPANY'S proportionate share of the
$35,000,000 as determined above, the COMPANY
shall refund such excess to the INSURER
promptly.
(C) UNDERLYING LIMITS
(1) If this POLICY is written as Primary Insurance
with respect to Insuring Agreement I(A)(2),
the UNDERLYING LIMIT for the COMPANY for each
WRONGFUL ACT shall be as stated in Item 6A(1)
of the Declarations, unless it is based upon,
arises out of or is attributable to NUCLEAR
OPERATIONS, in which event it shall be as
stated in Item 6A(2) of the Declarations;
(2) If this POLICY is written as Excess Insurance:
(a) with respect to Insuring Agreements
I(A)(1) and I(A)(2), the UNDERLYING LIMIT
for each WRONGFUL ACT shall be as stated
in Item 6B(1)(a) of the Declarations and
the maximum UNDERLYING LIMIT for all
WRONGFUL ACTS shall be as stated in Item
6B(1)(b) of the Declarations;
(b) with respect to ULTIMATE NET LOSS covered
hereunder:
(i) in the event of reduction of the
underlying aggregate limit as stated
in Item 6B(1)(b), the UNDERLYING
LIMIT shall be such reduced
underlying aggregate limit; or
(ii) in the event of exhaustion of the
underlying aggregate limit as stated
in Item 6B(1)(b), the UNDERLYING
LIMIT shall be as stated in Item
6B(3) of the Declarations;
(c) with respect to any WRONGFUL ACT covered
hereunder but not covered under such
Underlying Insurance, the UNDERLYING
LIMIT shall be as stated in Item 6B(2) of
the Declarations; and
(d) nothing herein shall make this POLICY
subject to the terms and conditions of
any Underlying Insurance.
(3) Only payment of indemnity or defense expenses
which, except for the amount thereof, would
have been indemnifiable under this POLICY, may
reduce or exhaust an UNDERLYING LIMIT.
(4) In the event that both Insuring Agreement
I(A)(1) and I(A)(2) are applicable to
INDEMNITY and DEFENSE COST resulting from a
WRONGFUL ACT then:
(a) if this POLICY is written as Primary
Insurance, the UNDERLYING LIMIT
applicable to such WRONGFUL ACT shall be
the UNDERLYING LIMIT stated in Item 6A of
the Declarations; and
(b) if this POLICY is written as Excess
Insurance and the UNDERLYING LIMIT has
been exhausted, the UNDERLYING LIMIT
applicable to such WRONGFUL ACT shall be
the UNDERLYING LIMIT stated in Item
6B(3);
and there shall be no UNDERLYING LIMIT
applicable with respect to coverage provided
under Insuring Agreement I(A)(1).
(5) The UNDERLYING LIMITS stated in Item 6 of the
Declarations applicable to Insuring Agreement
I(A)(2) shall apply to all INDEMNITY and/or
DEFENSE COST for which indemnification of the
DIRECTORS and/or OFFICERS by the COMPANY is
legally permissible, whether or not such
indemnification is granted by the COMPANY.
II. DEFINITIONS
A. CLAIM: The term "CLAIM" shall mean:
(1) any demand, suit or proceeding against any
DIRECTORS and/or OFFICERS during the POLICY
PERIOD or during the DISCOVERY PERIOD, if
purchased, which seeks actual monetary damages
or other relief and which may result in any
DIRECTORS and/or OFFICERS becoming legally
obligated to pay ULTIMATE NET LOSS by reason
of any WRONGFUL ACT actually or allegedly
caused, committed or attempted during the
COVERAGE PERIOD by the DIRECTORS and/or
OFFICERS while acting in their capacity as
such; or
(2) written notice to the INSURER during the
POLICY PERIOD or during the DISCOVERY PERIOD,
if purchased, by the DIRECTORS, OFFICERS
and/or the COMPANY, describing with the
specificity set forth in Condition (C) hereof,
circumstances of which they are aware
involving an identifiable WRONGFUL ACT
actually or allegedly caused, committed or
attempted during the COVERAGE PERIOD by the
DIRECTORS and/or OFFICERS while acting in
their capacity as such, which circumstances
are likely to give rise to a demand, suit or
proceeding being made against such DIRECTORS
and/or OFFICERS.
A CLAIM shall be deemed to be first made
against a DIRECTOR or OFFICER at the earlier
of the time at which a demand, suit or
proceeding is first made against the DIRECTOR
or OFFICER, as set forth in section (1) of
this Definition or the time at which written
notice is given to the INSURER, as set forth
in section (2) of this Definition.
Multiple demands or suits arising out of the
same WRONGFUL ACT or interrelated acts shall
be deemed to be a single "CLAIM".
(B) COMPANY: The term "COMPANY" shall mean the
organization(s) named in Item 1 of the Declarations
and, subject to Condition (A) hereof, any
SUBSIDIARIES of such organization(s).
(C) COVERAGE PERIOD: The term "COVERAGE PERIOD" shall
mean the period of time from the RETROACTIVE DATE
to the termination of the POLICY PERIOD.
(D) DEFENSE COST: The term "DEFENSE COST" shall mean
all expense incurred by or on behalf of the
DIRECTORS, OFFICERS or, where reimbursable under
Insuring Agreement I(A)(2), the COMPANY in the
investigation, negotiation, settlement and defense
of any CLAIM except all salaries, wages and benefit
expenses of DIRECTORS, OFFICERS, or the COMPANY.
(E) DIRECTOR and OFFICER: The terms "DIRECTOR" and
"OFFICER" as used herein, either in the singular or
plural, shall mean:
(1) any person who was, is now, or shall be a
director, officer or trustee of the COMPANY
and any other employee of the COMPANY who may
be acting in the capacity of a director,
officer or trustee of the COMPANY with the
express authorization of a director, officer
or trustee of the COMPANY;
(2) any director, officer or trustee of the
COMPANY who is serving or has served at the
specific request of the COMPANY as a director,
officer or trustee of any outside NOT-FOR-
PROFIT ORGANIZATION; or
(3) the estates, heirs, legal representatives or
assigns of deceased persons who were
directors, officers or trustees of the COMPANY
at the time the WRONGFUL ACTS upon which such
CLAIMS were based were committed, and the
legal representatives or assigns of directors,
officers or trustees of the COMPANY in the
event of their incompetency, insolvency or
bankruptcy;
provided, however, that the terms "DIRECTOR" and
"OFFICER" shall not include a trustee appointed
pursuant to Title 11, United States Code, or
pursuant to the Securities Investor Protection Act,
a receiver appointed for the benefit of creditors
by Federal or State courts, an assignee for the
benefit of creditors or similar fiduciary appointed
under Federal or State laws for the protection of
creditors or the relief of debtors.
In the event that a CLAIM which is within the
coverage afforded under this POLICY is made against
any DIRECTOR or OFFICER and such CLAIM includes a
claim against the lawful spouse of such DIRECTOR or
OFFICER solely by reason of (a) such spousal status
or (b) such spouse's ownership interest in property
or assets which are sought as recovery for WRONGFUL
ACTS of a DIRECTOR or OFFICER, such spouse shall be
deemed to be a DIRECTOR or OFFICER hereunder, but
solely with respect to such claim. In no event,
however, shall the lawful spouse of a DIRECTOR or
OFFICER be deemed to be a DIRECTOR or OFFICER as
regards any CLAIM in respect of which there is a
breach of duty, neglect, error, misstatement,
misleading statement or omission actually or
allegedly caused, committed or attempted by or
claimed against such spouse, acting individually or
in his or her capacity as the spouse of a DIRECTOR
or OFFICER.
(F) DISCOVERY PERIOD: The term "DISCOVERY PERIOD"
shall mean the period of time set forth in
Condition (L).
(G) INDEMNITY: The term "INDEMNITY" shall mean all
sums which the DIRECTORS, OFFICERS or, where
reimbursable under Insuring Agreement I(A)(2), the
COMPANY shall become legally obligated to pay as
damages either by adjudication or compromise with
the consent of the INSURER, after making proper
deduction for the UNDERLYING LIMITS and all
recoveries, salvages and other valid and
collectible insurance.
(H) INSURER: The term "INSURER" shall mean Associated
Electric & Gas Insurance Services Limited,
Hamilton, Bermuda, a non-assessable mutual
insurance company.
(I) NOT-FOR-PROFIT ORGANIZATION: The term "NOT-FOR-
PROFIT ORGANIZATION" shall mean:
(1) an organization, no part of the income or
assets of which is distributable to its
owners, stockholders or members and which is
formed and operated for a purpose other than
the pecuniary profit or financial gain of its
owners, stockholders or members; or
(2) a political action committee which is defined
for these purposes as a separate segregated
fund to be utilized for political purposes as
described in the United States Federal
Election Campaign Act (2 U.S.C. 441b(2)(C)).
(J) NUCLEAR OPERATIONS: The term "NUCLEAR OPERATIONS"
shall mean the design, engineering, financing,
construction, operation, maintenance, use,
ownership, conversion or decommissioning of any
nuclear facility.
(K) POLICY: The term "POLICY" shall mean this
insurance policy, including the Application, the
Declarations and any endorsements issued by the
INSURER to the organization first named in Item 1
of the Declarations for the POLICY PERIOD listed in
Item 2 of the Declarations.
(L) POLICY PERIOD: The term "POLICY PERIOD" shall mean
the period of time stated in Item 2 of the
Declarations.
(M) RETROACTIVE DATE: The term "RETROACTIVE DATE"
shall mean the date stated in Item 3 of the
Declarations; provided, however, with respect to
any WRONGFUL ACT actually or allegedly caused,
committed or attempted by the DIRECTORS or OFFICERS
of any SUBSIDIARY formed or acquired by the COMPANY
or any of its SUBSIDIARIES after inception of the
POLICY PERIOD of this POLICY, or after inception of
any other policy issued by the INSURER to the
COMPANY for a prior policy period, the term
"RETROACTIVE DATE" shall mean the date of such
formation or acquisition.
(N) SUBSIDIARIES: The term "SUBSIDIARY" shall mean any
entity more than fifty percent (50%) of whose
outstanding securities or financial interest
representing the present right to vote for election
of directors (or the appointment of a general
partner in respect of a limited partnership or
manager in respect of a limited liability company)
are owned by the COMPANY and/or one or more of its
"SUBSIDIARIES".
(O) ULTIMATE NET LOSS: The term "ULTIMATE NET LOSS"
shall mean the total INDEMNITY and DEFENSE COST
with respect to each WRONGFUL ACT to which this
POLICY applies, provided that ULTIMATE NET LOSS
does not include any amount allocated, pursuant to
Condition (T), to CLAIMS against persons or
entities other than DIRECTORS and OFFICERS or to
non-covered matters.
(P) UNDERLYING LIMITS: The term "UNDERLYING LIMITS"
shall mean the amounts stated in Item 6 of the
Declarations.
(Q) WRONGFUL ACT: The term "WRONGFUL ACT" shall mean
any actual or alleged breach of duty, neglect,
error, misstatement, misleading statement or
omission actually or allegedly caused, committed or
attempted by any DIRECTOR or OFFICER while acting
individually or collectively in their capacity as
such, or claimed against them solely by reason of
their being DIRECTORS or OFFICERS.
All such interrelated breaches of duty, neglects,
errors, misstatements, misleading statements or
omissions actually or allegedly caused, committed
or attempted by or claimed against one or more of
the DIRECTORS or OFFICERS shall be deemed to be a
single "WRONGFUL ACT".
III. EXCLUSIONS
The INSURER shall not be liable to make any payment for
ULTIMATE NET LOSS arising from any CLAIM(S) made against
any DIRECTOR or OFFICER:
(A) (1) for any fines or penalties imposed in a
criminal suit, action or proceeding;
(2) for any fines or penalties imposed in
conjunction with political contributions,
payments, commissions or gratuities; or
(3) for any other fines or penalties imposed by
final adjudication of a court of competent
jurisdiction or any agency or commission
possessing quasi-judicial authority; or
(4) where, at inception of the POLICY PERIOD, such
DIRECTOR or OFFICER had knowledge of a fact or
circumstance which was likely to give rise to
such CLAIM(S) and which such DIRECTOR or
OFFICER failed to disclose or misrepresented
in the Application or in the process of
preparation of the Application, other than in
a Renewal Application; provided, however, that
this exclusion shall not apply to such
CLAIM(S) made against any DIRECTOR or OFFICER
other than such DIRECTOR or OFFICER who failed
to disclose or misrepresented such fact or
circumstance; provided further that this
exclusion shall not limit the INSURER'S right
to exercise any remedy available to it with
respect to such failure to disclose or
misrepresentation other than the remedy
provided for in this Exclusion.
(B) with respect to Insuring Agreement I(A)(1) only:
(1) based upon, arising out of or attributable to
such DIRECTOR or OFFICER having gained any
personal profit, advantage or remuneration to
which such DIRECTOR or OFFICER was not legally
entitled if:
(a) a judgment or other final adjudication
adverse to such DIRECTOR or OFFICER
establishes that he in fact gained such
personal profit, advantage or
remuneration; or
(b) such DIRECTOR or OFFICER has entered into
a settlement agreement to repay such
personal profit, advantage or
remuneration to the COMPANY;
(2) for an accounting of profits made from the
purchase or sale by such DIRECTOR or OFFICER
of securities of the COMPANY within the
meaning of Section 16(b) of the Securities
Exchange Act of 1934 and amendments thereto or
similar provisions of any other federal or
state statutory or common law;
(3) brought about or contributed to by the
dishonest, fraudulent, criminal or malicious
act or omission of such DIRECTOR or OFFICER if
a final adjudication establishes that acts of
active and deliberate dishonesty were
committed or attempted with actual dishonest
purpose and intent and were material to the
cause of action so adjudicated; or
(4) where such payment would be contrary to
applicable law.
(C) for bodily injury, mental anguish, mental illness,
emotional upset, sickness or disease sustained by
any person, death of any person or for physical
injury to or destruction of tangible property or
the loss of use thereof.
(D) for injury based upon, arising out of or
attributable to:
(1) false arrest, wrongful detention or wrongful
imprisonment or malicious prosecution;
(2) wrongful entry, wrongful eviction or other
invasion of the right of private occupancy;
(3) discrimination or sexual harassment;
(4) publication or utterance:
(a) of a libel or slander or other defamatory
or disparaging material; and
(b) in violation of an individual's right of
privacy; or
(5) with respect to the COMPANY'S advertising
activities: piracy, plagiarism, unfair
competition, idea misappropriation under
implied contract, or infringement of
copyright, title, slogan, registered
trademark, service mark, or trade name.
(E) for violation(s) of any responsibility, obligation
or duty imposed upon fiduciaries by the Employee
Retirement Income Security Act of 1974 or
amendments thereto or by similar common or
statutory law of the United States of America or
any state or other jurisdiction therein.
(F) based upon, arising out of or attributable to:
(1) the rendering of advice with respect to;
(2) the interpreting of; or
(3) the handling of records in connection with the
enrollment, termination or cancellation of
employees under the COMPANY'S group life
insurance, group accident or health insurance,
pension plans, employee stock subscription
plans, workers' compensation, unemployment
insurance, social security, disability
benefits and any other employee benefit
programs.
(G) based upon, arising out of or attributable to any
failure or omission on the part of the DIRECTORS,
OFFICERS and/or the COMPANY to effect and maintain
insurance(s) of the type and amount which is
customary with companies in the same or similar
business.
(H) (1) arising from any circumstances, written
notice of which has been given under "any
policy" or any discovery period thereof, which
policy expired prior to or upon the inception
of this POLICY; or
(2) which is one of a number of CLAIMS arising out
of the same WRONGFUL ACT, if any CLAIM of such
multiple CLAIMS was made against the DIRECTORS
or OFFICERS during "any policy" or any
discovery period thereof, which policy expired
prior to or upon the inception of this POLICY.
The term "any policy" refers to any Directors and
Officers Liability Insurance Policy, any General
Partners Liability Insurance Policy or any other
policy affording substantially similar coverage
(whether issued by the INSURER or any other
carrier).
(I) if any other policy or policies also afford(s)
coverage in whole or in part for such CLAIM(S);
except, this exclusion shall not apply:
(1) to the amount of ULTIMATE NET LOSS with
respect to such CLAIM(S) which is in excess of
the limit of liability of such other policy or
policies and any applicable deductible or
retention thereunder; or
(2) with respect to coverage afforded such
CLAIM(S) by any other policy or policies
purchased or issued specifically as insurance
underlying or in excess of the coverage
afforded under this POLICY;
provided always that nothing herein shall be
construed to cause this POLICY to contribute with
any other policy or policies or to make this POLICY
subject to any of the terms of any other policy or
policies.
(J) for any WRONGFUL ACT which took place in whole or
in part prior to the RETROACTIVE DATE.
(K) by, on behalf of, in the right of, at the request
of, or for the benefit of, any security holder of
the COMPANY, any DIRECTOR or OFFICER, or the
COMPANY, unless such CLAIM is:
(1) made derivatively by any shareholder of the
COMPANY for the benefit of the COMPANY and
such shareholder is:
(a) acting totally independent of, and
totally without the suggestion,
solicitation, direction, assistance,
participation or intervention of, any
DIRECTOR or OFFICER, or the COMPANY; and
(b) not any entity within the definition of
the term "COMPANY"; or
(2) made non-derivatively by a security holder who
is not:
(a) a DIRECTOR or OFFICER; or
(b) any entity within the definition of the
term "COMPANY"; or
(3) made non-derivatively by an OFFICER acting
totally independent of, and totally without
the suggestion, solicitation, direction,
assistance, participation or intervention of,
any other DIRECTOR or OFFICER, or the COMPANY
and (subject to all the other exclusions and
POLICY provisions) arising from the wrongful
termination of that OFFICER.
(L) where such CLAIM(S) arise out of such DIRECTOR'S
or OFFICER'S activities as a director, officer or
trustee of any entity other than:
(1) the COMPANY; or
(2) any outside NOT-FOR-PROFIT ORGANIZATION as
provided in Section II(E)(2).
IV. CONDITIONS
(A) Acquisition, Merger and Dissolution
(1) (a) If, after inception of the POLICY
PERIOD,
(i) the COMPANY or any of its
SUBSIDIARIES forms or acquires any
SUBSIDIARY or acquires any entity by
merger into or consolidation with
the COMPANY or any SUBSIDIARY, and
(ii) the operations of such formed or
acquired entity are related to,
arising from or associated with the
production, transmission, delivery
or furnishing of electricity, gas,
water or sewer service to the public
or the conveyance of telephone
messages for the public; and
(iii) the total assets of such formed
or acquired entity are not greater
than the lesser of $100,000,000 or
ten percent (10%) of the COMPANY'S
total assets,
coverage shall be provided for the
DIRECTORS and OFFICERS of such entity
from the date of formation, acquisition,
merger or consolidation, respectively,
but only with respect to WRONGFUL ACTS
actually or allegedly caused, committed
or attempted during that part of the
POLICY PERIOD which is subsequent to the
formation, acquisition, merger or
consolidation.
(b) In respect of any SUBSIDIARY formed or
acquired after the inception of the
POLICY PERIOD and not subject to
paragraph (a) above, or of any entity
acquired by merger into or consolidation
with the COMPANY or any SUBSIDIARY after
the inception of the POLICY PERIOD and
not subject to paragraph (a) above, the
COMPANY shall report such formation or
acquisition within ninety (90) days
thereafter and, if so reported, upon
payment of an additional premium and upon
terms as may be required by the INSURER,
such coverage shall be provided for the
DIRECTORS and OFFICERS of such newly
formed or acquired SUBSIDIARY or merged
or consolidated entity, but only with
respect to WRONGFUL ACTS actually or
allegedly caused, committed, or attempted
during that part of the COVERAGE PERIOD
which is subsequent to such acquisition,
merger or consolidation.
(2) If, prior to or after inception of the POLICY
PERIOD, the COMPANY or any of its SUBSIDIARIES
is or has been acquired by or merged into any
other entity, or is or has been dissolved,
coverage under this POLICY shall continue for
the POLICY PERIOD but only for DIRECTORS and
OFFICERS of the COMPANY or its SUBSIDIARIES
who were serving as such prior to such
acquisition, merger or dissolution and only
with respect to WRONGFUL ACTS actually or
allegedly caused, committed or attempted
during that part of the COVERAGE PERIOD which
is prior to such acquisition, merger or
dissolution.
(B) Non-Duplication of Limits
To avoid the duplication of the INSURER'S Limits of
Liability stated in Item 5 of the Declarations, the
DIRECTORS, OFFICERS and COMPANY agree that:
(1) in the event the INSURER provides INDEMNITY or
DEFENSE COSTS for any WRONGFUL ACT under this
POLICY, neither the DIRECTORS, OFFICERS nor
the COMPANY shall have any right to additional
INDEMNITY or DEFENSE COSTS for such WRONGFUL
ACT under any other policy issued by the
INSURER to the DIRECTORS, OFFICERS or COMPANY
that otherwise would apply to such WRONGFUL
ACT; and
(2) in the event the INSURER provides INDEMNITY or
DEFENSE COSTS for any WRONGFUL ACT under any
other policy issued by the INSURER to the
DIRECTORS, OFFICERS, or COMPANY, neither the
DIRECTORS, OFFICERS nor the COMPANY shall have
any right to additional INDEMNITY or DEFENSE
COSTS for such WRONGFUL ACT under this POLICY.
(C) Notice of Claim
As a condition precedent to any rights under this
POLICY, the DIRECTORS, OFFICERS and/or the COMPANY,
shall give written notice to the INSURER as soon as
practicable of any CLAIM, which notice shall
include the nature of the WRONGFUL ACT, the alleged
injury, the names of the claimants, and the manner
in which the DIRECTOR, OFFICER or COMPANY first
became aware of the CLAIM, and shall cooperate with
the INSURER and give such additional information as
the INSURER may reasonably require.
The Application or any information contained
therein for this POLICY shall not constitute a
notice of CLAIM.
(D) Cooperation and Settlements
In the event of any WRONGFUL ACT which may involve
this POLICY, the DIRECTORS, OFFICERS or COMPANY
without prejudice as to liability, may proceed
immediately with settlements which in their
aggregate do not exceed the UNDERLYING LIMITS. The
COMPANY shall notify the INSURER of any such
settlements made.
The INSURER shall not be called upon to assume
charge of the investigation, settlement or defense
of any demand, suit or proceeding, but the INSURER
shall have the right and shall be given the
opportunity to associate with the DIRECTORS,
OFFICERS and COMPANY or any underlying insurer, or
both, in the investigation, settlement, defense and
control of any demand, suit or proceeding relative
to any WRONGFUL ACT where the demand, suit or
proceeding involves or may involve the INSURER. At
all times, the DIRECTORS, OFFICERS and COMPANY and
the INSURER shall cooperate in the investigation,
settlement and defense of such demand, suit or
proceeding.
The DIRECTORS, OFFICERS and COMPANY and their
underlying insurer(s) shall, at all times, use
diligence and prudence in the investigation,
settlement and defense of demands, suits or other
proceedings.
(E) Appeals
In the event that the DIRECTORS, OFFICERS, COMPANY
or any underlying insurer elects not to appeal a
judgment in excess of the UNDERLYING LIMITS, the
INSURER may elect to conduct such appeal at its own
cost and expense and shall be liable for any
taxable court costs and interest incidental
thereto, but in no event shall the total liability
of the INSURER, exclusive of the cost and expense
of appeal, exceed its Limits of Liability stated in
Item 5 of the Declarations.
(F) Subrogation
In the event of any payment under this POLICY, the
INSURER shall be subrogated to the extent of such
payment to all rights of recovery thereof, and the
DIRECTORS, OFFICERS and COMPANY shall execute all
papers required and shall do everything that may be
necessary to enable the INSURER to bring suit in
the name of the DIRECTORS, OFFICERS or COMPANY.
(G) Bankruptcy or Insolvency
Bankruptcy or insolvency of the COMPANY shall not
relieve the INSURER of any of its obligations
hereunder.
In the event of bankruptcy or insolvency of the
COMPANY, subject to all the terms of this POLICY,
the INSURER shall pay on behalf of the DIRECTORS
and OFFICERS under Insuring Agreement I(A)(1) (in
excess of the UNDERLYING LIMITS, if any, applicable
to Insuring Agreement I(A)(1)) for ULTIMATE NET
LOSS they shall become legally obligated to pay
which would have been indemnified by the COMPANY
and reimbursable by the INSURER under Insuring
Agreement I(A)(2) but for such bankruptcy or
insolvency; provided, however, that the INSURER
shall be subrogated, to the extent of any payment,
to the rights of the DIRECTORS and OFFICERS to
receive indemnification from the COMPANY but only
up to the amount of the UNDERLYING LIMITS
applicable to Insuring Agreement I(A)(2) less the
amount of the UNDERLYING LIMITS, if any, applicable
to Insuring Agreement I(A)(1).
(H) Uncollectibility of Underlying Insurance
Notwithstanding any of the terms of this POLICY
which might be construed otherwise, if this POLICY
is written as excess over any Underlying Insurance,
it shall drop down only in the event of reduction
or exhaustion of any aggregate limits contained in
such Underlying Insurance and shall not drop down
for any other reason including, but not limited to,
uncollectibility (in whole or in part) because of
the financial impairment or insolvency of an
underlying insurer. The risk of uncollectibility of
such Underlying Insurance (in whole or in part)
whether because of financial impairment or
insolvency of an underlying insurer or for any
other reason, is expressly retained by the
DIRECTORS, OFFICERS and the COMPANY and is not in
any way or under any circumstances insured or
assumed by the INSURER.
(I) Maintenance of UNDERLYING LIMITS
If this POLICY is written as Excess Insurance, it
is a condition of this POLICY that any UNDERLYING
LIMITS stated in Item 6 of the Declarations shall
be maintained in full force and effect, except for
reduction or exhaustion of any underlying aggregate
limits of liability, during the currency of this
POLICY. Failure of the COMPANY to comply with the
foregoing shall not invalidate this POLICY but in
the event of such failure, without the agreement of
the INSURER, the INSURER shall only be liable to
the same extent as it would have been had the
COMPANY complied with this Condition.
(J) Changes and Assignment
The terms of this POLICY shall not be waived or
changed, nor shall an assignment of interest be
binding, except by an endorsement to this POLICY
issued by the INSURER.
(K) Outside NOT-FOR-PROFIT ORGANIZATION
If any DIRECTOR or OFFICER is serving or has served
at the specific request of the COMPANY as a
DIRECTOR or OFFICER of an outside NOT-FOR-PROFIT
ORGANIZATION, the coverage afforded by this POLICY:
(1) shall be specifically excess of any other
indemnity or insurance available to such
DIRECTOR or OFFICER by reason of such service;
and
(2) shall not be construed to extend to the
outside NOT-FOR-PROFIT ORGANIZATION in which
the DIRECTOR or OFFICER is serving or has
served, nor to any other director, officer or
employee of such outside NOT-FOR-PROFIT
ORGANIZATION.
(L) DISCOVERY PERIOD
(1) In the event of cancellation or nonrenewal of
this POLICY by the INSURER, the COMPANY shall
have the right, upon execution of a warranty
that all known CLAIMS and facts or
circumstances likely to give rise to a CLAIM
have been reported to the INSURER and payment
of an additional premium to be determined by
the INSURER which shall not exceed two hundred
percent (200%) of the Policy Premium stated in
Item 4 of the Declarations, to an extension of
the coverage afforded by this POLICY with
respect to any CLAIM first made against any
DIRECTOR or OFFICER during the period of
twelve (12) months after the effective date of
such cancellation or nonrenewal, but only with
respect to any WRONGFUL ACT committed during
the COVERAGE PERIOD. This right of extension
shall terminate unless written notice of such
election is received by the INSURER within
thirty (30) days after the effective date of
cancellation or nonrenewal.
The offer by the INSURER of renewal on terms,
conditions or premiums different from those in
effect during the POLICY PERIOD shall not
constitute cancellation or refusal to renew
this POLICY.
(2) In the event of cancellation or nonrenewal of
this POLICY by the COMPANY, the COMPANY shall
have the right upon payment of an additional
premium, which shall not exceed one hundred
percent (100%) of the Policy Premium stated in
Item 4 of the Declarations, to an extension of
coverage afforded by this POLICY with respect
to any CLAIM first made against any DIRECTOR
or OFFICER during the period of twelve (12)
months after the effective date of such
cancellation or nonrenewal, but only with
respect to any WRONGFUL ACT during the
COVERAGE PERIOD. This right of extension shall
terminate unless written notice of such
election is received by the INSURER within
thirty (30) days after the effective date of
cancellation or nonrenewal.
(3) In the event of renewal on terms and
conditions different from those in effect
during the POLICY PERIOD, the COMPANY shall
have the right, upon execution of a warranty
that all known CLAIMS and facts or
circumstances likely to give rise to a CLAIM
have been reported to the INSURER and payment
of an additional premium to be determined by
the INSURER which shall not exceed two hundred
percent (200%) of the Policy Premium stated in
Item 4 of the Declarations, to an extension of
the original terms and conditions with respect
to any CLAIM first made against any DIRECTOR
or OFFICER during the period of twelve (12)
months after the effective date of renewal,
but only with respect to any WRONGFUL ACT
committed during the COVERAGE PERIOD and not
covered by the renewal terms and conditions.
This right of extension shall terminate unless
written notice of such election is received by
the INSURER within thirty (30) days after the
effective date of renewal.
(M) Cancellation
This POLICY may be cancelled:
(1) at any time by the COMPANY by mailing written
notice to the INSURER stating when thereafter
cancellation shall be effective; or
(2) at any time by the INSURER by mailing written
notice to the COMPANY stating when, not less
than ninety (90) days from the date such
notice was mailed, cancellation shall be
effective, except in the event of cancellation
for nonpayment of premiums, such cancellation
shall be effective ten (10) days after the
date notice thereof is mailed.
The proof of mailing of notice to the address of
the COMPANY stated in Item 7 of the Declarations or
the address of the INSURER stated in Item 8 of the
Declarations shall be sufficient proof of notice
and the insurance under this POLICY shall end on
the effective date and hour of cancellation stated
in the notice. Delivery of such notice either by
the COMPANY or by the INSURER shall be equivalent
to mailing.
With respect to all cancellations, the premium
earned and retained by the INSURER shall be the sum
of (a) the Minimum Premium stated in Item 4B of the
Declarations plus (b) the pro-rata proportion, for
the period this POLICY has been in force, of the
difference between (i) the Policy Premium stated in
Item 4A of the Declarations and (ii) the Minimum
Premium stated in Item 4B of the Declarations.
The offer by the INSURER of renewal on terms,
conditions or premiums different from those in
effect during the POLICY PERIOD shall not
constitute cancellation or refusal to renew this
POLICY.
(N) Currency
All amounts stated herein are expressed in United
States Dollars and all amounts payable hereunder
are payable in United States Dollars.
(O) Sole Agent
The COMPANY first named in Item 1 of the
Declarations shall be deemed the sole agent of each
DIRECTOR and OFFICER for the purpose of requesting
any endorsement to this POLICY, making premium
payments and adjustments, receipting for payments
of INDEMNITY and receiving notifications, including
notice of cancellation from the INSURER.
(P) Acts, Omissions or Warranties
The acts, omissions or warranties of any DIRECTOR
or OFFICER shall not be imputed to any other
DIRECTOR or OFFICER with respect to the coverages
applicable under this POLICY.
(Q) Dispute Resolution and Service of Suit
Any controversy or dispute arising out of or
relating to this POLICY, or the breach, termination
or validity thereof, shall be resolved in
accordance with the procedures specified in this
Section IV(Q), which shall be the sole and
exclusive procedures for the resolution of any such
controversy or dispute.
(1) Negotiation. The COMPANY and the INSURER
shall attempt in good faith to resolve any
controversy or dispute arising out of or
relating to this POLICY promptly by
negotiations between executives who have
authority to settle the controversy. Any
party may give the other party written notice
of any dispute not resolved in the normal
course of business. Within fifteen (15) days
the receiving party shall submit to the other
a written response. The notice and the
response shall include (a) a statement of each
party's position and a summary of arguments
supporting that position, and (b) the name and
title of the executive who will represent that
party and of any other person who will
accompany the executive. Within thirty (30)
days after delivery of the disputing party's
notice, the executives of both parties shall
meet at a mutually acceptable time and place,
and thereafter as often as they reasonably
deem necessary, to attempt to resolve the
dispute. All reasonable requests for
information made by one party to the other
will be honored. If the matter has not been
resolved within sixty (60) days of the
disputing party's notice, or if the parties
fail to meet within thirty (30) days, either
party may initiate mediation of the
controversy or claim as provided hereinafter.
All negotiations pursuant to this clause will
be kept confidential and shall be treated as
compromise and settlement negotiations for
purposes of the Federal Rules of Evidence and
state rules of evidence.
(2) Mediation. If the dispute has not been
resolved by negotiation as provided herein,
the parties shall endeavor to settle the
dispute by mediation under the then current
CPR Institute Model Procedure for Mediation of
Business Disputes. The neutral third party
will be selected from the CPR Institute Panels
of Neutrals, with the assistance of the CPR
Institute.
(3) Arbitration. Any controversy or dispute
arising out of or relating to this POLICY, or
the breach, termination or validity thereof,
which has not been resolved by non-binding
means as provided herein within ninety (90)
days of the initiation of such procedure,
shall be settled by binding arbitration in
accordance with the CPR Institute Rules for
Non-Administered Arbitration of Business
Disputes (the "CPR Rules") by three (3)
independent and impartial arbitrators. The
COMPANY and the INSURER each shall appoint one
arbitrator; the third arbitrator, who shall
serve as the chair of the arbitration panel,
shall be appointed in accordance with the CPR
Rules. If either the COMPANY or the INSURER
has requested the other to participate in a
non-binding procedure and the other has failed
to participate, the requesting party may
initiate arbitration before expiration of the
above period. The arbitration shall be
governed by the United States Arbitration Act,
9 U.S.C. Subsection 1 et seq., and judgment
upon the award rendered by the arbitrators may
be entered by any court having jurisdiction
thereof. The terms of this POLICY are to be
construed in an evenhanded fashion as between
the COMPANY and the INSURER in accordance with
the laws of the jurisdiction in which the
situation forming the basis for the
controversy arose. Where the language of this
POLICY is deemed to be ambiguous or otherwise
unclear, the issue shall be resolved in a
manner most consistent with the relevant terms
of this POLICY without regard to authorship of
the language and without any presumption or
arbitrary interpretation or construction in
favor of either the COMPANY or the INSURER.
In reaching any decision the arbitrators shall
give due consideration for the customs and
usages of the insurance industry. The
arbitrators are not empowered to award damages
in excess of compensatory damages and each
party hereby irrevocably waives any such
damages.
In the event of a judgment being entered
against the INSURER on an arbitration award,
the INSURER at the request of the COMPANY,
shall submit to the jurisdiction of any court
of competent jurisdiction within the United
States of America, and shall comply with all
requirements necessary to give such court
jurisdiction and all matters relating to such
judgment and its enforcement shall be
determined in accordance with the law and
practice of such court.
(4) Service of Suit. Service of process in such
suit or any other suit instituted against the
INSURER under this POLICY may be made upon
Messrs. LeBoeuf, Lamb, Greene, & MacRae,
L.L.P., 125 West 55th Street, New York, New
York 10019. The INSURER will abide by the
final decision of the court in such suit or of
any appellate court in the event of any
appeal. Messrs. LeBoeuf, Lamb, Greene &
MacRae, L.L.P. are authorized and directed to
accept service of process on behalf of the
INSURER in any such suit and, upon the
COMPANY's request, to give a written
undertaking to the COMPANY's that they will
enter a general appearance upon the INSURER's
behalf in the event such suit is instituted.
Nothing in this clause constitutes or should
be understood to constitute a waiver of the
INSURER's right to commence an action in any
court of competent jurisdiction in the United
States, to remove an action to a United States
District Court, or to seek to transfer a case
to another court as permitted by the laws of
the United States or of any state in the
United States.
(R) Severability
In the event that any provision of this POLICY
shall be declared or deemed to be invalid or
unenforceable under any applicable law, such
invalidity or unenforceability shall not affect the
validity or enforceability of the remaining portion
of this POLICY.
(S) Non-assessability
The COMPANY (and, accordingly, any DIRECTOR or
OFFICER for whom the COMPANY acts as agent) shall
only be liable under this POLICY for the premium
stated in Item 4 of the Declarations. Neither the
COMPANY nor any DIRECTOR or OFFICER for whom the
COMPANY acts as agent shall be subject to any
contingent liability or be required to pay any dues
or assessments in addition to the premium described
above.
(T) Allocation
If a CLAIM is made against both the DIRECTORS and
OFFICERS and others, including the COMPANY, or if a
CLAIM against the DIRECTORS and OFFICERS includes
both covered and non-covered matters, the DIRECTORS
and OFFICERS, the COMPANY and the INSURER shall
allocate any defense costs, settlement, judgment or
other loss on account of such CLAIM between covered
ULTIMATE NET LOSS attributable to the CLAIM against
the DIRECTORS and OFFICERS and non-covered loss.
Such allocation shall be based upon the relative
exposure of each party to such CLAIM for covered
and non-covered matters and the relative benefit to
each party from the defense or settlement of such
CLAIM.
If the DIRECTORS and OFFICERS, COMPANY and the
INSURER agree on an allocation of DEFENSE COSTS,
the INSURER shall advance on a current basis
DEFENSE COSTS allocated to the covered ULTIMATE NET
LOSS. If the DIRECTORS and OFFICERS, COMPANY and
the INSURER cannot agree on an allocation:
(1) no presumption as to allocation shall exist in
any arbitration, suit or other proceeding;
(2) the INSURER shall advance on a current basis
DEFENSE COSTS which the INSURER believes to be
covered under this Policy until a different
allocation is negotiated, mediated or
arbitrated; and
(3) any disagreement on the allocation of DEFENSE
COSTS is to be settled in accordance with
Condition (Q).
Any negotiated, mediated or arbitrated allocation
of DEFENSE COSTS on account of a CLAIM shall be
applied retroactively to all DEFENSE COSTS on
account of such CLAIM, notwithstanding any prior
advancement to the contrary. Any allocation or
advancement of DEFENSE COSTS on account of a CLAIM
shall not apply to or create any presumption with
respect to the allocation of INDEMNITY on account
of such CLAIM. Advancement by the INSURER of
DEFENSE COSTS shall be conditioned upon the
DIRECTORS, OFFICERS or COMPANY, as applicable,
providing a satisfactory written undertaking to
repay the INSURER any DEFENSE COSTS finally
established not to be insured.
IN WITNESS WHEREOF, Associated Electric & Gas
Insurance Services Limited has caused this POLICY
to be signed by its Chairman at Hamilton, Bermuda.
However, this POLICY shall not be binding upon the
INSURER unless countersigned on the Declaration
Page by a duly authorized representative of the
INSURER.
/s/ Bernard J. Kennedy /s/ Alan J. Maguire
Bernard J. Kennedy, Chairman Alan J. Maguire, President
and Chief Operating Officer
ASSOCIATED ELECTRIC & GAS INSURANCE SERVICES LIMITED
Endorsement No. 1 Effective Date of Endorsement June 1, 1999
Attached to and forming part of POLICY No. D0392A1A99
COMPANY IPALCO Enterprises, Inc.
It is understood and agreed that this POLICY is hereby
amended as indicated. All other terms and conditions of this
POLICY remain unchanged.
MULTI-YEAR ENDORSEMENT - SINGLE AGGREGATE
EXPLANATORY NOTE: This is a Multi-Year Policy with a single
limit for the POLICY PERIOD.
(1) Item 2 of the Declarations is deleted in its entirety
and replaced with the following:
Item 2: POLICY PERIOD: from the 1st Day of June, 1999 UNTIL the
1st day of June, 2002 both days at 12:01 A.M. Standard Time at the
address of the COMPANY.
(2) Item 4 of the Declaration is deleted in its entirety and
replaced with the following:
Item 4: A. POLICY PREMIUM: $586,085 payable in amounts as
follows:
Year 1: Prepaid 3-year policy premium of $685,265,
less your Member's Continuity Credit
of $99,180 due Insured 6/1/1999.
Year 2: Member's Continuity Credit TBD due Insured
6/1/2000.
Year 3: Member's Continuity Credit TBD due Insured
6/1/2001.
/s/ Brian Madden
Signature of Authorized Representative
ASSOCIATED ELECTRIC & GAS INSURANCE SERVICES LIMITED
Endorsement No. 2 Effective Date of Endorsement June 1, 1999
Attached to and forming part of POLICY No. D0392A1A99
COMPANY IPALCO Enterprises, Inc.
It is understood and agreed that this POLICY is hereby
amended as indicated. All other terms and conditions of this
POLICY remain unchanged.
OUTSIDE POSITION COVERAGE - FOR-PROFIT ORGANIZATIONS
INCLUDING MANAGEMENT OR OPERATING COMMITTEE
I. Definition (E) DIRECTOR and OFFICER is amended to
include the following:
(4) (a) any director, officer, trustee or
employee of the COMPANY who is serving at the
specific written request of the COMPANY in the
position of a director, officer, trustee or
member of the Management or Operating
Committees of the outside FOR-PROFIT
ORGANIZATION, which position and FOR-PROFIT
ORGANIZATION are named in attachment OPC-FPM1,
while such director, officer, trustee or
employee is acting in such capacity; and
(b) any present or former director,
officer, trustee or employee of the COMPANY
who has served at the specific written request
of the COMPANY in the position of a director,
officer, trustee or member of the Management
or Operating Committees of an outside FOR-
PROFIT ORGANIZATION while such director,
officer, trustee or employee was acting in
such capacity; provided, however, that such
director, officer, trustee or employee, such
outside FOR-PROFIT ORGANIZATION and such
position were named in an endorsement (similar
to this Endorsement) to the Directors' and
Officers' Policy of the INSURER in force at
the time at which such director, officer,
trustee or employee was acting in such
capacity.
II. The following Definition is added to the POLICY:
(R) FOR-PROFIT ORGANIZATION: The term "FOR-PROFIT
ORGANIZATION" shall mean an organization other than
a NOT-FOR-PROFIT ORGANIZATION.
III. Exclusion (L) is hereby deleted in its entirety and
replaced with the following:
(L) where such CLAIM(S) arises out of such DIRECTOR'S or
OFFICER'S activities as a director, officer or
trustee of any entity other than:
(1) the COMPANY; or
(2) any outside NOT-FOR-PROFIT ORGANIZATION as
provided in Section II(E)(2); or
(3) any outside FOR-PROFIT ORGANIZATION as
provided in an OUTSIDE POSITION COVERAGE - FOR-
PROFIT ORGANIZATIONS Endorsement.
OUTSIDE POSITION COVERAGE - FOR-PROFIT ORGANIZATIONS
INCLUDING MANAGEMENT OR OPERATING COMMITTEE
IV. Notwithstanding any other provision of the POLICY to the
contrary, the insurance provided by this Endorsement is
specifically in excess of and shall not contribute with
any indemnification or insurance provided by an outside
FOR-PROFIT ORGANIZATION, to any director, officer,
trustee or employee of the COMPANY.
Under no circumstances shall the insurance provided by
this Endorsement apply to:
(1) any director, officer or trustee of the outside FOR-
PROFIT ORGANIZATION who is or was not a director,
officer, trustee or employee of the COMPANY and who
is not named in attachment OPC-FPM1; or
(2) the outside FOR-PROFIT ORGANIZATION
V. The Limits of Liability stated in Item 5 of the
Declarations and the UNDERLYING LIMITS stated in Item 6
of the Declarations shall apply unless a specific Limit
of Liability or UNDERLYING LIMIT is stated below:
Item 5: Limits of Liablity:
A. $ Each WRONGFUL ACT
B. $ Aggregate Limit of
Liability for the POLICY PERIOD
Item 6: UNDERLYING LIMITS:
This POLICY is written as Insurance
A. If this POLICY is written as Primary Insurance
with respect to Insuring Agreement I(A)(2)
only:
(1) $ Each WRONGFUL ACT not arising
from NUCLEAR OPERATIONS
(2) $ Each WRONGFUL ACT arising from
NUCLEAR OPERATIONS
B. If this POLICY is written as Excess Insurance:
(1) (a) $ Each WRONGFUL ACT
(b) $ In the Aggregate
for all WRONGFUL ACTS
(2) $ Each WRONGFUL ACT not covered
under Underlying Insurance
(3) In the Event of Exhaustion of the
UNDERLYING LIMIT stated in Item
6(B)(1)(b) above with respect to Insuring
Agreement I(A)(2) only:
(a) $ Each WRONGFUL ACT not arising from
NUCLEAR OPERATIONS
(b) $ Each WRONGFUL ACT arising from NUCLEAR
OPERATIONS
The Limit of Liability stated in this section is
part of and not in addition to the Limits of
Liability stated in Item 5 of the Declarations.
/s/ Brian Madden
Signature of Authorized Representative
ASSOCIATED ELECTRIC & GAS INSURANCE SERVICES LIMITED
Attachment OPC-FPM1 to Endorsement No. 2 Effective Date
of Endorsement June 1, 1999
Attached to and forming part of POLICY No. D0392A1A99
COMPANY IPALCO Enterprises, Inc.
Name, FOR-PROFIT ORGANIZATION and position of each director,
officer, trustee or employee of the COMPANY covered under
Endorsement No. 2
NAME FOR-PROFIT ORGANIZATION POSITION
John R. Hodowal Tecumseh Coal Corp. Director
Ramon L. Humke Tecumseh Coal Corp. Director
ASSOCIATED ELECTRIC & GAS INSURANCE SERVICES LIMITED
Endorsement No. 3 Effective Date of Endorsement June 1, 1999
Attached to and forming part of POLICY No. D0392A1A99
COMPANY IPALCO Enterprises, Inc.
It is understood and agreed that this POLICY is hereby
amended as indicated. All other terms and conditions of this
POLICY remain unchanged.
DELETION OF FAILURE TO MAINTAIN INSURANCE EXCLUSION
Section III, EXCLUSIONS (G) Failure to Maintain Insurance
Exclusion, is deleted in its entirety.
/s/ Brian Madden
Signature of Authorized Representative
ASSOCIATED ELECTRIC & GAS INSURANCE SERVICES LIMITED
Endorsement No. 4 Effective Date of Endorsement June 1, 1999
Attached to and forming part of POLICY No. D0392A1A99
COMPANY IPALCO Enterprises, Inc.
It is understood and agreed that this POLICY is hereby
amended as indicated. All other terms and conditions of this
POLICY remain unchanged.
WRONGFUL TERMINATION EXCLUSION ENDORSEMENT
The POLICY is amended as follows:
1. Exclusion (D)(3) is deleted in its entirety and replaced
with the following:
(3) discrimination, sexual harassment or wrongful termination
2. Exclusion (K)(3) is deleted in its entirety. The word
"or" at the end of Exclusion (K)(2) is deleted and the semi-
colon is changed to a period.
/s/ Brian Madden
Signature of Authorized Representative
ASSOCIATED ELECTRIC & GAS INSURANCE SERVICES LIMITED
Endorsement No. 5 Effective Date of Endorsement June 1, 1999
Attached to and forming part of POLICY No. D0392A1A99
COMPANY IPALCO Enterprises, Inc.
It is understood and agreed that this POLICY is hereby
amended as indicated. All other terms and conditions of this
POLICY remain unchanged.
OUTSIDE POSITION COVERAGE - FOR-PROFIT ORGANIZATIONS
INCLUDING MANAGEMENT OR OPERATING COMMITTEE (BLANKET FORM)
I. Definition (E) DIRECTOR and OFFICER is amended to
include the following:
(4) (a) any director, officer, trustee or employee of
the COMPANY who is serving consistent with COMPANY
practice and philosophy in the position of a director,
officer, trustee or member of the Management or
Operating Committees of the outside FOR-PROFIT
ORGANIZATION, which position and FOR-PROFIT ORGANIZATION
are named in attachment OPC-FPM1, while such director,
officer, trustee or employee is acting in such capacity;
and
(b) any present or former director, officer, trustee or
employee of the COMPANY who has served consistent with
COMPANY practice and philosophy in the position of a
director, officer, trustee or member of the Management or
Operating Committees of an outside FOR-PROFIT ORGANIZATION
while such director, officer, trustee or employee was acting
in such capacity; provided, however, that such director,
officer, trustee or employee, such outside FOR-PROFIT
ORGANIZATION and such position were named in an endorsement
(similar to this Endorsement) to the Directors' and Officers'
Policy of the INSURER in force at the time at which such
director, officer, trustee or employee was acting in such
capacity.
II. The following Definition is added to the POLICY:
(R) FOR-PROFIT ORGANIZATION: The term "FOR-PROFIT
ORGANIZATION" shall mean an organization other than a NOT-FOR-
PROFIT ORGANIZATION whose primary operations are not related
to, arising from or associated with any depository, insurance
or other financial type institutional operation.
III. Exclusion (L) is hereby deleted in its entirety and
replaced with the following:
(L) where such CLAIM(S) arises out of such DIRECTOR'S or
OFFICER'S activities as a director, officer or trustee of any
entity other than:
(1) the COMPANY; or
(2) any outside NOT-FOR-PROFIT ORGANIZATION as provided in
Section II(E)(2); or
(3) any outside FOR-PROFIT ORGANIZATION as provided in an
OUTSIDE POSITION COVERAGE - FOR-PROFIT ORGANIZATIONS
Endorsement.
IV. Notwithstanding any other provision of the POLICY to the
contrary, the insurance provided by this Endorsement is
specifically in excess of and shall not contribute with any
indemnification or insurance provided by an outside FOR-
PROFIT ORGANIZATION, to any director, officer, trustee or
employee of the COMPANY.
Under no circumstances shall the insurance provided by
this Endorsement apply to:
(1) any director, officer or trustee of the outside FOR-
PROFIT ORGANIZATION who is or was not a director, officer,
trustee or employee of the COMPANY; or
(2) the outside FOR-PROFIT ORGANIZATION
V. The Limits of Liability stated in Item 5 of the
Declarations and the UNDERLYING LIMITS stated in Item 6 of
the Declarations shall apply.
VI. As respects to coverage as is afforded by virtue of this
Endorsement Insuring Agreement I(B) Limits of Liability, is
amended by the addition of the following:
(5) With respect to ULTIMATE NET LOSS arising out of any
WRONGFUL ACT in connection with service for an outside FOR-
PROFIT ORGANIZATION if:
(a) such WRONGFUL ACT results in liability being imposed
upon one or more DIRECTORS and OFFICERS under this POLICY and
also upon directors and officers and general partners under
any other directors and officers or general partner liability
insurance policies issued by the INSURER to any organization;
and
(b) the total of the ULTIMATE NET LOSS under this POLICY and
the ultimate net loss under such other policies issued by the
INSURER equals or exceeds $35,000,000;
the maximum amount payable by the INSURER under this
POLICY in the aggregate for all ULTIMATE NET LOSS
resulting from such WRONGFUL ACT shall be the lesser
of the applicable Limit of Liability provided by this
POLICY or the product of:
(i) the applicable Limit of Liability provided by this
POLICY divided by the total limits of liability per wrongful
act applicable to such wrongful act under all policies issued
by the INSURER; and
(ii) $35,000,000.
If the amount paid under this POLICY with respect to
such WRONGFUL ACT exceeds the COMPANY'S proportionate
share of the $35,000,000 as determined above, the
COMPANY shall refund such excess to the INSURER
promptly.
VII. Coverage as afforded by virtue of this endorsement shall
not apply to any CLAIM(S) for any WRONGFUL ACT if as of the
effective date of the first Directors and Officers Liability
Insurance Policy which coverage as is afforded by this
endorsement was granted by the INSURER to the COMPANY and
continuously renewed and maintained in effect with the
insurer to the effective date of the POLCY, (or in the case
of a newly appointed or elected DIRECTOR or OFFICER as of the
appointment or election date of such DIRECTOR or OFFICER),
the DIRECTORS and OFFICERS as of such date, knew or could
have reasonably foreseen that such WRONGFUL ACT could lead to
a claim.
/s/ Brian Madden
Signature of Authorized Representative
ASSOCIATED ELECTRIC & GAS INSURANCE SERVICES LIMITED
Endorsement No. 6 Effective Date of Endorsement June 1, 1999
Attached to and forming part of POLICY No. D0392A1A99
COMPANY IPALCO Enterprises, Inc.
It is understood and agreed that this POLICY is hereby
amended as indicated. All other terms and conditions of this
POLICY remain unchanged.
CORPORATE ENTITY NON-SECURITIES CLAIMS ENDORSEMENT
(INCLUDED WITHIN POLICY LIMIT)
(A) Except as provided in paragraph (B) below, if the
COMPANY is made a defendant in any suit or proceeding in
which a DIRECTOR or OFFICER is also a defendant, in his
respective capacity as a DIRECTOR or OFFICER, the INSURER
shall pay on behalf of the COMPANY for ULTIMATE NET LOSS it
has incurred in connection with CLAIMS made against the
COMPANY in such suit or proceeding, provided (i) a DIRECTOR
or OFFICER is a defendant in such suit or proceeding as of
the date the COMPANY is first named as a defendant (ii) such
ULTIMATE NET LOSS of the COMPANY directly relates to a CLAIM
which, if made against a DIRECTOR or OFFICER, would be
covered by the POLICY (iii) such ULTIMATE NET LOSS arises
from a CLAIM first made against the DIRECTORS or OFFICERS
during the POLICY PERIOD or during the DISCOVERY PERIOD, if
purchased and (iv) such suit or proceeding does not arise
from a SECURITIES CLAIM.
(B) The coverage under paragraph (A) above shall not apply
to, and there shall be no coverage under this Endorsement for-
ULTIMATE NET LOSS incurred by the COMPANY in connection with
any CLAIM brought by or on behalf of the COMPANY.
(C) The maximum amount payable by the INSURER under this
Endorsement during the POLICY PERIOD for all ULTIMATE NET
LOSS arising out of all WRONGFUL ACTS shall be the amount
stated as the Aggregate Limit of Liability for the POLICY
PERIOD in Section (H) of this Endorsement.
(D) For purposes of determining and applying the UNDERLYING
LIMITS applicable to the POLICY and this Endorsement, any
ULTIMATE NET LOSS of the COMPANY for which the INSURER shall
be liable under this Endorsement shall be included within and
considered a portion of the ULTIMATE NET LOSS covered under
Insuring Agreement I (A)(2) with respect to the WRONGFUL ACT
for which a CLAIM is made against a co-defendant DIRECTOR or
OFFICER. Subject to the foregoing, the INSURER shall only be
liable under this Endorsement for the amount of ULTIMATE NET
LOSS which, together with ULTIMATE NET LOSS covered under
this POLICY without regard to this Endorsement, is in excess
of the amount stated as the UNDERLYING LIMITS applicable to
ULTIMATE NET LOSS covered under Insuring Agreement I(A)(2).
(E) For purposes of determining the INSURER'S Limits of
Liability under the POLICY and this Endorsement, all defense
costs, settlement, judgment or other loss on account of any
CLAIM shall be fairly allocated between the COMPANY and the
DIRECTORS and OFFICERS consistent with the terms of the
POLICY.
(F) All capitalized terms used in this Endorsement shall
have the same meaning as ascribed to them in the POLICY,
except that for purposes of the coverage supplied by this
Endorsement:
(1) reference to "DIRECTORS and OFFICERS" in the definitions
of the terms "CLAIM", "DEFENSE COSTS" and "INDEMNITY" shall
be deemed also to be references to the COMPANY; and
(2) "WRONGFUL ACT" shall also mean any alleged breach of
duty, neglect, error misstatement, misleading statement or
omission actually or allegedly caused, committed or attempted
by the COMPANY, but only if such breach, neglect, error,
misstatement, misleading statement or omission is
interrelated with WRONGFUL ACTS of DIRECTORS or OFFICERS that
are alleged in the same suit or proceeding. All interrelated
breaches of duty, neglects, errors, misstatements, misleading
statements or omissions actually or allegedly caused,
committed or attempted by the COMPANY shall be deemed to be a
single "WRONGFUL ACT".
(G) For the purposes of this Endorsement, the term
"SECURITIES CLAIM" shall mean any CLAIM made against the
COMPANY and/or DIRECTORS and OFFICERS which alleges a
violation of any law, regulation or rule, whether statutory
or common law, and which is:
(1) brought by any person or entity alleging, arising out
of, based upon or attributable to, in part or in whole, the
purchase or sale of, or offer or solicitation of an offer to
purchase or sell, any securities of the COMPANY, or
(2) brought by a securities holder of the COMPANY in his
capacity of a securities holder alleging any WRONGFUL ACT.
(H) (1) Except as otherwise specifically provided in Paragraph (G)(2)
below, all Conditions set forth in the POLICY shall apply to the
coverage supplied under this Endorsement.
(2) (i) The second sentence of Condition (G) shall have no
applicability to the coverage supplied under this
Endorsement, and the bankruptcy or insolvency of the COMPANY
shall not relieve the INSURER of any of its obligations under
this Endorsement.
(ii) For purposes of this Endorsement, reference in Condition
(L) to a CLAIM first made made against any DIRECTOR or
OFFICER shall be deemed to refer to CLAIMS first made against
the COMPANY.
(iii) For purposes of this Endorsement, reference in
Condition (T) to "covered ULTIMATE NET LOSS attributable to
the CLAIM against the DIRECTORS and OFFICERS" shall be deemed
to include CLAIM(S) against the COMPANY for which coverage is
supplied under this Endorsement.
(I) The maximum liability of the INSURER under this POLICY,
including this Endorsement, shall not exceed the amount set
forth in Item 5 of the DECLARATIONS of the POLICY. Nothing
contained in this Endorsement shall increase the liability of
the INSURER.
(J) The INSURER shall not be liable, under this Endorsement,
to make any payment for ULTIMATE NET LOSS arising from any
prior or pending litigation as of June 1, 1997, as well as
all future CLAIMS or litigation based upon the prior or
pending litigation or derived from the same or essentially
the same facts (actual or alleged) that gave rise to the
prior or pending litigation.
/s/ Brian Madden
Signature of Authorized Representative
ASSOCIATED ELECTRIC & GAS INSURANCE SERVICES LIMITED
Endorsement No. 7 Effective Date of Endorsement June 1, 1999
Attached to and forming part of POLICY No. D0392A1A99
COMPANY IPALCO Enterprises, Inc.
It is understood and agreed that this POLICY is hereby
amended as indicated. All other terms and conditions of this
POLICY remain unchanged.
CORPORATE ENTITY SECURITIES CLAIMS ENDORSEMENT
(INCLUDED WITHIN POLICY LIMIT)
(A) Except as provided in paragraph (B) below, if the
COMPANY is made a defendant in any suit or proceeding, the
INSURER shall pay on behalf of the COMPANY for ULTIMATE NET
LOSS it has incurred in connection with CLAIMS made against
the COMPANY in such suit or proceeding, provided both of the
following conditions are met: (i) such suite or proceeding
arises from a SECURITIES CLAIMS and (ii) such ULTIMATE NET
LOSS of the COMPANY directly relates to a CLAIM which, if
made against a DIRECTOR or OFFICER, would be covered by the
POLICY.
(B) (1) Except as otherwise specifically provided in
Paragraph (B)(2) below, all Exclusions set forth in the
POLICY shall apply to any SECURITIES CLAIMS against the
COMPANY.
(2) Exclusion (K) shall have no applicability to the
coverage supplied under this Endorsement; provided, however,
that the INSURER shall not be liable to make any payment for
ULTIMATE NET LOSS arising from any SECURITIES CLAIM(S)
against the COMPANY made by, on behalf of, in the right of,
at the request of or for the benefit of the COMPANY or any
DIRECTOR or OFFICER.
(3) For the purposes of this Endorsement, the INSURER shall
not be liable to make payments for INDEMNITY arising from any
CLAIM(s) alleging that the COMPANY paid an inadequate price
or consideration for the purchase of its own securities or
the securities of a SUBSIDIARY.
(C) For purposes of determining and applying the UNDERLYING
LIMITS applicable to this Endorsement or applicable to the
POLICY and this Endorsement, any ULTIMATE NET LOSS of the
COMPANY for which the INSURER shall be liable under this
Endorsement shall be included within and considered a portion
of the ULTIMATE NET LOSS covered under Insuring Agreement
I(A)(2).
Notwithstanding the foregoing, if the POLICY is written
as Primary Insurance, the UNDERLYING LIMITS with respect
to a SECURITIES CLAIM shall only apply to DEFENSE COSTS;
provided, however, no UNDERLYING LIMITS shall apply for
a SECURITIES CLAIM even as respects DEFENSE COSTS in the
event of:
(1) a determination of NO LIABILITY to the COMPANY and all
defendant DIRECTORS and OFFICERS; or
(2) a dismissal or a stipulation to dismiss the SECURITIES
CLAIM without prejudice and without the payment of any
consideration by the COMPANY or any DIRECTOR or OFFICER.
In the event of (2) above, the INSURER shall reimburse
the COMPANY for covered DEFENSE COSTS otherwise subject
to the UNDERLYING LIMIT ninety (90) days after the date
of the dismissal or stipulation provided that the
SECURITIES CLAIM (or any other CLAIM arising out of the
same WRONGFUL ACT as alleged in the SECURITIES CLAIM)
was not re-bought within said ninety (90) day period and
further provided that the COMPANY has provided to the
INSURER an undertaking by the COMPANY in a form
acceptable to the INSURER that such reimbursement shall
be paid back by the COMPANY to the INSURER in the event
the SECURITIES CLAIM (or any other CLAIM arising out of
the same WRONGFUL ACT as alleged in the SECURITIES
CLAIM) is brought after such ninety (90) day period and
before the expiring of the statute of limitations for
such CLAIM.
(D) For purposes of this Endorsement, all capitalized terms
shall have the same meaning as ascribed to them in the
POLICY, except that:
(1) references to "DIRECTORS and OFFICERS" in the
definitions of the terms "CLAIM", "DEFENSE COSTS" and
"INDEMNITY" shall be deemed also to be references to the
COMPANY:
(2) "NO LIABILITY" shall mean:
(a) a final judgement of no liability obtained prior to
trial by reason of a motion to dismiss or a motion for
summary judgement, after the exhaustion of all appeals, or
(b) a final judgement of no liability obtained after trail
after exhaustion of all appeals.
In no event shall the term "NO LIABILITY" apply to
a Securities CLAIM made against a defendant for
which a settlement has occurred; and
(3) "WRONGFUL ACT" shall also mean any alleged breach of
duty, neglect, error, misstatement, misleading statement or
omission actually or allegedly caused, committed or attempted
by the COMPANY. All interrelated breaches of duty, neglects,
errors, misstatements, misleading statements or omissions
actually or allegedly caused, committed or attempted by the
COMPANY shall be deemed to be a single WRONGFUL ACT.
(E) For the purposes of this Endorsement, the term
"SECURITIES CLAIMS" shall mean any CLAIM made against the
COMPANY and/or DIRECTORS and OFFICERS which alleges a
violation of any law, regulation or rule, whether statutory
or common law, and which is:
(1) brought by any person or entity alleging, arising out
of, based upon or attributable to, in part or in whole, the
purchase or sale of, or offer or solicitation of an offer to
purchase or sell, any securities of the COMPANY, or
(2) brought by a securities holder of the COMPANY in his
capacity of a securities holder alleging any WRONGFUL ACT.
(F) (1) Except as otherwise specifically provided in
Paragraph (F)(2) below, all Conditions set forth in the
POLICY shall apply to the coverage supplied under this
Endorsement.
(2) (i) The second sentence of Condition (G) shall
have no applicability to the coverage supplied under this
Endorsement, and the bankruptcy or insolvency of the COMPANY
shall not relieve the INSURER of any of its obligations under
this Endorsement.
(ii) For purposes of this Endorsement, reference in Condition
(L) to a "CLAIM first made against any DIRECTOR or OFFICER"
shall be deemed also to refer to CLAIMS first made against
the COMPANY; and
(iii) For purposes of this Endorsement, reference
Condition (T) to "covered ULTIMATE NET LOSS attributable to
the CLAIM against the DIRECTORS and OFFICERS" shall be deemed
to include SEUCRITIES CLAIMS against the COMPANY.
(G) The maximum liability of the INSURER under this POLICY,
including this Endorsement, shall not exceed the amount set
forth in Item 5 of the DECLARATIONS of the POLICY. Nothing
contained in this Endorsement shall increase the limit of
liability of the INSURER.
(H) The INSURER shall not be liable, under this Endorsement,
to make any payment of ULTIMATE NET LOSS arising from any
CLAIMS arising from any prior or pending litigation as of
6/1/1999, as well as all future CLAIMS or litigation based
upon the prior or pending litigation or derived from the same
or essentially the same facts (actual or alleged) that gave
rise to the prior or pending litigation.
(I) As respects SECURITIES CLAIMS alleging a WRONGFUL ACT
being committed by a natural person, Definition (E) "DIRECTOR
and OFFICER" is amended to include the following
subparagraph:
any past, present or future employee of the COMPANY
other than one who is already covered under subparagraph
(I) of Definition (E) while acting in the capacity of an
employee of the COMPANY, provided, however, any such
employee shall not be included as a DIRECTOR or OFFICER
for purposes of Exclusion (K) and subparagraph (B)(2) of
this Endorsement.
/s/ Brian Madden
Signature of Authorized Representative
ASSOCIATED ELECTRIC & GAS INSURANCE SERVICES LIMITED
Endorsement No. 8A Replacing Endorsement No. 8 Effective
Date of Endorsement June 1, 1999
Attached to and forming part of POLICY No. D0392A1A99
COMPANY IPALCO Enterprises, Inc.
It is understood and agreed that this POLICY is hereby
amended as indicated. All other terms and conditions of this
POLICY remain unchanged.
REINSTATEMENT OF LIMIT ENDORSEMENT
The COMPANY shall have the right to a Reinstatement of Limit
option (hereinafter the "option" or "Reinstated Limit")
described below, subject to the terms of this Endorsement.
The conditions of these reinstatements are as follows:
I. Reinstatement of Limit Options:
(1) In the event any CLAIM is reported to the INSURER during
the POLICY PERIOD, then at the written request of the
COMPANY, the INSURER shall cause to issue an excess policy
following form of this POLICY except as described in this
Endorsement. Coverage is afforded by virtue of the excess
policy shall be conditioned upon the COMPANY paying when due
the additional premium set forth in paragraph 4 of this
Endorsement.
(2) The excess policy described in paragraph (1) above shall
provide a Limit of Liability equal to the Limit of Liability
set forth in Item 5 of the Declarations and shall be
applicable to CLAIMS under both Insuring Agreement I(A)(1)
and I(A)(2) of the POLICY.
(3) The POLICY PERIOD for such excess policy shall incept on
the date the written request set forth in paragraph (1) is
received by the INSURER and shall expire on the expiration
date of the POLICY PERIOD of this POLICY.
(4) The additional premium to exercise the Full Reinstatement of
Limit Option shall be two hundred percent (200%) of the
Remaining Pro-Rata Rated Premium, but no less than $105,000
for the POLICY PERIOD. The Remaining Pro-Rata Rated Premium
shall be determined by multiplying the Daily Rated Premium
by the Remaining POLICY PERIOD. The Daily Rated Premium
means the total POLICY PERIOD Rated Premium divided by total
number of days in the POLICY PERIOD.
(5) The earliest time that the Reinstatement Option may be
exercised is the First Anniversary Date of this POLICY. The
option may only be exercised after the reporting of a CLAIM
pursuant to Definition (A)(1) and may not be exercised solely
due to the reporting of a Notice of Circumstances pursuant to
Definition (A)(2) of the POLICY.
(6) The Reinstated Limit shall apply solely to UNRELATED
CLAIMS made against the COMPANY after the inception date of
the excess policy providing the Reinstated Limit. For
purposes of this Endorsement, all capitalized terms shall
have the same meaning as ascribed to them in the POLICY,
except that:
(1) UNRELATED CLAIM shall mean any CLAIM other than a CLAIM
which was made against the COMPANY prior to such inception
date.
Any CLAIM which is reported subsequent to such inception
date but is considered made prior to such inception date
pursuant to Definition (A)(2) of the POLICY shall also
not be covered under the Reinstated Limit.
ALL OTHER TERMS, CONDITIONS AND EXCLUSIONS REMAIN UNCHANGED.
/s/ Brian Madden
Signature of Authorized Representative
ASSOCIATED ELECTRIC & GAS INSURANCE SERVICES LIMITED
Endorsement No. 9 Effective Date of Endorsement June 1, 1999
Attached to and forming part of POLICY No. D0392A1A99
COMPANY IPALCO Enterprises, Inc.
It is understood and agreed that this POLICY is hereby
amended as indicated. All other terms and conditions of this
POLICY remain unchanged.
Section IV, CONDITIONS, (M), Cancellation, is deleted in its
entirety and amended as follows:
(M) Cancellation
This POLICY may not be cancelled by the COMPANY or the
INSURER except for cancellation due to nonpayment of
premium. Such cancellation shall be effective ten (10)
days after the INSURED has mailed written notice to the
COMPANY.
The proof of mailing of notice to the address of the
COMPANY stated in Item 7 of the Declarations or the
address of the INSURER stated in Item 8 of the
Declarations shall be sufficient proof of notice and the
insurance under this POLICY shall end on the effective
date and hour of cancellation stated in the notice.
Delivery of such notice either by the COMPANY or by the
INSURER shall be equivalent to mailing.
The offer by the INSURER of renewal on terms, conditions or
premiums different from those in effect during the POLICY
PERIOD shall not constitute cancellation or refusal to renew
this POLICY.
/s/ Brian Madden
Signature of Authorized Representative
Exhibit 10.2
Indianapolis Power & Light Company
M E M O R A N D U M
DATE: April 19, 1999
TO: See Distribution Below
FROM: R.L. Humke
SUBJECT: 1999 Management Incentive Plan
DISTRIBUTION:
Officers Directors Foreman and Multi-
Foreman
Superintendents Division Other First-Line
Supervisors Supervisors
Managers Section or Shift
Supervisor
The 1999 Management Incentive Program (MIP) is established to
provide additional incentive and recognition while focusing
on the financial performance of IPL, the performance of our
Strategic Business Units (SBUs) and individual performance.
The Management Incentive Program participants for 1999, as
with the 1998 program, includes all supervision from the
section supervisor or foreman level to the manager level.
MIP awards will be based on:
- - IPL's financial performance
The measurement of IPL financial performance is Net
Income. A threshold, or minimum amount of IPL net
income must be achieved before any award will be
paid. In 1999 that threshold amount is $127.5
million.
- - SBU Performance
Each SBU has established performance goals which
can modify half of the bonus pool for employees of
the SBU. For associates who are part of the
Corporate staff (non-SBU), the actual results of
all SBU performance goals are averaged to modify
half the bonus pool. The 1999 SBU performance
goals are attached.
- - Individual Performance
The ultimate award any participant receives will be
based on merit and as such some awards will be
reduced. The measure for individual performance
will range from 0% to 100%. Participants performing
at a high level can expect to receive a full award.
Lesser amounts will be granted to those
participants where further improvement is needed.
Participants whose performance is unsatisfactory
will not receive an award.
Special requests for inclusion in the program need to be
submitted for approval to the Vice President of Human
Resources. Documentation supporting inclusion in the Plan is
required. In addition, at year-end, Organizational Heads may
recommend other associates for a 1999 award who had
assignments that significantly affected IPL's performance.
If a participant retires, becomes disabled or dies during
1999, or if a person becomes eligible after the year begins,
any award payable to such person shall be prorated.
Additionally, the Big Dollar Program is being continued. It
is designed to reward other associates who have made
extraordinary contribution toward Company performance. A
formal Big Dollar Award Program description is attached.
If you have any questions concerning these programs, please
contact the leadership of your organization.
/s/ R.L. Humke
Attachments
Program Name: Big Dollar Award Program
Purpose: The program exists to provide
an immediate cash reward to an
associate who makes significant
contribution which will have a
substantial positive impact on the
Company.
Eligibility: Any non-officer associate who is
not part of the Management Incentive
Program is potentially eligible to
receive a reward under this program.
Award Basis: Associates whose acts, or
achievements are outside their normal
work requirement should be considered
for awards. Extraordinary
contributions to Corporate Objectives
and organization assignments are the
principal criteria for these awards.
Superior work on normal work
assignments alone does not qualify an
individual for an award. More
efficient operations, greater
productivity, better customer service,
reduced costs, higher earnings, and
enhanced public image are examples of
results which would warrant
consideration for an award.
Award Amount: The amount of the award will depend
upon the significance and long-
term benefit to the Company. As a
general rule, awards should be no less
than $200.
Process: All associates and supervisors are
asked to identify acts or
achievements of other associates
which should be considered for an
award. Descriptions of such acts
should be directed to the organization
officer who will assess the achievement
and, if warranted, forward a
recommendation through the appropriate
senior officer to the President.
Recommendations should include
suggested award amounts. The President
will approve and present these special
awards as these extraordinary
contributions are identified and
evaluated throughout the year. The
intent is that an award follow these
acts or achievements as closely as
practical. Therefore, recommendations
for awards should be expedited.
Administration: The Vice President, Human Resources
will administer this program. All
checks will represent the award, less
necessary tax withholding. The
organization officer should contact
Corporate Communications to arrange
appropriate publicity.
<TABLE> <S> <C>
<ARTICLE> UT
<CIK> 0000050217
<NAME> INDIANAPOLIS POWER & LIGHT CO.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1,731,350
<OTHER-PROPERTY-AND-INVEST> 5,825
<TOTAL-CURRENT-ASSETS> 150,839
<TOTAL-DEFERRED-CHARGES> 125,595
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 2,013,609
<COMMON> 324,537
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 437,874
<TOTAL-COMMON-STOCKHOLDERS-EQ> 765,053
0
59,135
<LONG-TERM-DEBT-NET> 627,922
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 0
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 561,499
<TOT-CAPITALIZATION-AND-LIAB> 2,013,609
<GROSS-OPERATING-REVENUE> 403,841
<INCOME-TAX-EXPENSE> 43,500
<OTHER-OPERATING-EXPENSES> 267,656
<TOTAL-OPERATING-EXPENSES> 311,156
<OPERATING-INCOME-LOSS> 92,685
<OTHER-INCOME-NET> 660
<INCOME-BEFORE-INTEREST-EXPEN> 93,345
<TOTAL-INTEREST-EXPENSE> 19,895
<NET-INCOME> 73,450
1,607
<EARNINGS-AVAILABLE-FOR-COMM> 71,843
<COMMON-STOCK-DIVIDENDS> 71,813
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 139,765
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
