December 19, 1996
Securities and Exchange Commission
Operations Center
6432 General Green Way
Alexandria, VA 22312-2413
Gentlemen:
We are transmitting herewith Indiana Energy,
Inc.'s Annual Report on Form 10-K for the year ended
September 30, 1996, pursuant to the requirements of Section
13 of the Securities Exchange Act of 1934.
Very truly yours,
Douglas S. Schmidt
DSS:rs
Enclosure
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________
Commission File No. 1-9091
INDIANA ENERGY, INC.
(Exact name of Registrant as specified in its charter)
INDIANA 35-1654378
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1630 North Meridian Street, Indianapolis, Indiana 46202
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 317-926-3351
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
Indiana Energy, Inc.
Common Stock - Without Par Value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
(Title of Class)
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 such filing requirements
for the past 90 days. Yes X No
As of November 30, 1996, the aggregate market value of Common
Stock held by nonaffiliates was $481,200,819.
Indicate the number of shares outstanding of each of the
Registrant's classes of common stock, as of the latest practicable
date.
Common Stock-Without par value 22,578,339 November 30, 1996
Class Number of shares Date
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K ( 229.405 of this
chapter) is not contained herein, and will not be contained,
to the best of the Registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K. [ ]
DOCUMENTS INCORPORATED BY REFERENCE
List hereunder the following documents if incorporated by
reference and the Part of the Form 10-K into which the
document is incorporated.
PART III - Definitive Proxy Statement for Annual
Meeting of Shareholders to be held on January 22,
1997, electronically filed with the Commission on
December 6, 1996, is incorporated by reference
into Part III of this report.
Table of Contents
Page
Part I
Business
Property
Legal Proceedings
Submission of Matters to a Vote of Security Holders
Executive Officers of the Company
Part II
Market for the Registrant's Common Equity and Related
Stockholders Matters
Selected Financial Data
Management's Discussion and Analysis of Results of Operations and
Financial Condition
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants
Part III
Directors and Executive Officers of the Registrant
Executive Compensation
Securities Ownership of Certain Beneficial Owners and Management
Certain Relationships and Related Transactions
Part IV
Exhibits, Financial Statements Schedules, and Reports on Form 8-K
Part I
Item 1. Business
(a) General Development of the Business.
Indiana Energy, Inc. (Indiana Energy or the company) is
a publicly owned holding company with subsidiaries providing
natural gas distribution, gas portfolio administration
services, natural gas marketing and related services. It
was incorporated under the laws of the state of Indiana on
October 24, 1985.
Indiana Gas Company, Inc. (Indiana Gas), the principal
subsidiary and business entity of the holding company, is an
operating public utility engaged in the business of
providing gas utility service in the state of Indiana.
Indiana Energy has a wholly-owned subsidiary, IEI
Investments, Inc., which was formed to group the operations
and financing of nonregulated businesses and segregate them
from the regulated businesses. IEI Investments has two
subsidiaries, IGC Energy, Inc., and Energy Realty, Inc. On
December 29, 1992, IGC Energy, Inc. sold its majority
interest in EnTrade Corporation to Tenneco Gas. EnTrade was
a natural gas marketing and related services company with
industrial and utility customers primarily in the eastern
and midwestern United States. On November 1, 1994, IGC
Energy formed a natural gas marketing subsidiary, Indiana
Energy Services, Inc. (IES), which provided natural gas and
related services to other gas utilities and customers in
Indiana and surrounding states, and from January 1, 1996, to
March 31, 1996 to Indiana Gas. On March 15, 1996, IGC
Energy and Citizens By-Products Coal Company, a wholly owned
subsidiary of Citizens Gas and Coke Utility (Citizens Gas),
formed a jointly and equally owned limited liability company
to provide natural gas supply and related marketing
services. The new entity, ProLiance Energy, LLC
(ProLiance), assumed the business of IES and began providing
services to Indiana Gas and Citizens Gas effective April 1,
1996. The other subsidiary of IEI Investments is Energy
Realty, Inc., a real estate company that owns a warehouse
facility which is leased to Indiana Gas. Energy Realty also
is a limited partner in four affordable housing complexes.
(c) Narrative Description of the Business.
During fiscal 1996, Indiana Gas supplied gas to about
465,000 residential, commercial and industrial customers in
281 communities in 48 of the 92 counties in the state of
Indiana. The service area has a population of approximately
2 million and contains diversified manufacturing and
agriculture-related enterprises. The principal industries
served include automotive parts and accessories, feed, flour
and grain processing, metal castings, aluminum products,
gypsum products, electrical equipment, metal specialties and
glass.
The largest communities served include Muncie,
Anderson, Lafayette-West Lafayette, Bloomington, Terre
Haute, Marion, New Albany, Columbus, Jeffersonville, New
Castle and Richmond. Indiana Gas does not serve in
Indianapolis, although its general office is located in that
city.
For the fiscal year ended September 30, 1996,
residential customers provided 60 percent of revenues,
commercial 21 percent and industrial 19 percent. At such
date, approximately 99 percent of Indiana Gas' customers
used gas for space heating, and space heating revenues from
these customers for the fiscal year were 81 percent of total
operating revenues. Sales of gas are seasonal and strongly
affected by variations in weather conditions. During the
fiscal year ended September 30, 1996, Indiana Gas added
approximately 10,300 residential and commercial customers.
Indiana Gas sells gas directly to residential,
commercial and industrial customers at approved rates.
Indiana Gas also transports gas through its pipelines at
approved rates to commercial and industrial customers which
have purchased gas directly from producers, or through
brokers and marketers. The total volumes of gas provided to
both sales and transportation customers is referred to as
throughput.
Gas transported on behalf of end-use customers in
fiscal 1996 represented 27 percent (34,165 MDth) of
throughput compared to 30 percent (33,312 MDth) in 1995 and
26 percent (30,125 MDth) in 1994. Although revenues are
lower, rates for transportation generally provide the same
margins as would have been earned had the gas been sold
under normal sales tariffs.
Effective April 1, 1996, Indiana Gas purchases all of
its natural gas from ProLiance. Indiana Gas has separate
contracts with pipelines for storage of natural gas.
Prices for gas and related services purchased are
determined primarily by market conditions and rates
established by the Federal Energy Regulatory Commission.
Indiana Gas' rates and charges, terms of service, accounting
matters, issuance of securities, and other operational
matters are regulated by the Indiana Utility Regulatory
Commission (IURC).
Adjustments to Indiana Gas' rates and charges related
to the cost of gas are made through gas cost adjustment
(GCA) procedures established by Indiana law and administered
by the IURC. The IURC has applied the statute authorizing
the GCA procedures to reduce rates when necessary so as to
limit utility operating income, after adjusting to normal
weather, to the level authorized in the last general rate
order. The earnings test provides that no refund be paid to
the extent a utility has not earned its authorized utility
operating income over the previous 60 months (or during the
period since the utility's last rate order, if longer). On
November 9, 1995, the IURC approved a settlement agreement
among Indiana Gas, the Office of the Utility Consumer
Counselor and a group of large-volume users which provided
for authorized utility operating income (weather normalized)
of $54.2 million for Indiana Gas beginning in fiscal 1996.
Information regarding environmental matters affecting
the company is incorporated herein by reference to Item 7,
Environmental Matters.
Indiana Gas had 1,067 full-time employees and 37 part-
time employees as of September 30, 1996.
Item 2. Property
Indiana Energy owns no properties.
The properties of Indiana Gas are used for the
purchase, production, storage and distribution of gas and
are located primarily within the state of Indiana. As of
September 30, 1996, such properties included approximately
10,300 miles of distribution mains; 480,673 meters; seven
reservoirs currently being used for the underground storage
of purchased gas with approximately 107,074 acres of land
held under storage easements; 9,937,010 Dth of gas in
company-owned underground storage with a daily
deliverability of 144,860 Dth; 12,165,382 Dth of gas in
contract storage with a daily deliverability of 163,813 Dth;
and five liquefied petroleum (propane) air-gas manufacturing
plants with a total daily capacity of 36,700 Dth of gas.
Indiana Gas' capital expenditures during the fiscal
year ended September 30, 1996, amounted to $66.4 million.
Item 3. Legal Proceedings
See Item 8, Note 9 for litigation matters involving
insurance carriers pertaining to Indiana Gas' former
manufactured gas plants and storage facilities.
Item 4. Submission of Matters to a Vote of Security Holders
No matter was submitted during the fourth quarter of
the fiscal year ended September 30, 1996, to a vote of
security holders.
Item 4a. Executive Officers of the Company
As of September 30, 1996, the following individuals were
Executive Officers of the company:
<TABLE>
Family
Relation- Office or Date Elected
Name Age ship Position Held Or Appointed(1)
<S> <C> <C> <C> <C>
Lawrence A. Ferger 62 None Indiana Energy, Inc.
Chairman, President and
Chief Executive Officer Jan. 26, 1996
President and Chief
Executive Officer July 1, 1987
Indiana Gas Company, Inc.
Chairman, President and
Chief Executive Officer Jan. 26, 1996
President and Chief
Executive Officer July 1, 1987
IEI Investments, Inc.
President and Chief
Executive Officer July 1, 1987
Niel C. Ellerbrook 47 None Indiana Energy, Inc.
Vice President and
Treasurer and Chief
Financial Officer Oct. 25, 1985
Indiana Gas Company, Inc.
Senior Vice President and
Chief Financial Officer July 1, 1987
IEI Investments, Inc.
Vice President and
Treasurer May 5, 1986
Paul T. Baker 56 None Indiana Gas Company, Inc.
Senior Vice President
and Chief Operating
Officer Aug. 1, 1991
Anthony E. Ard 55 None Indiana Gas Company, Inc.
Senior Vice President
of Corporate Affairs Jan. 9, 1995
Vice President -
Corporate Affairs Jan. 11, 1993
Vice President and
Secretary Sep. 30, 1988
Timothy M. Hewitt 46 None Indiana Gas Company, Inc.
Vice President of Operations
and Engineering Jan. 9, 1995
Vice President of Sales
and Field Operations Jan. 14, 1991
(1) Each of the officers has served continuously since the
dates indicated.
</TABLE>
Part II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters
The common stock of the company is listed on the New
York Stock Exchange. The ranges of high and low sales prices
reported in the New York Stock Exchange composite tape and
dividends paid on these shares for fiscal 1995 and 1996 are
shown in the following table:
Fiscal Year 1995 High Low Dividend
First Quarter $21 7/8 $17 1/2 $.26 1/2
Second Quarter $20 5/8 $17 3/4 $.26 1/2
Third Quarter $20 3/4 $17 5/8 $.26 1/2
Fourth Quarter $22 $18 1/2 $.27 1/2
Fiscal Year 1996 High Low Dividend
First Quarter $24 1/8 $21 $.27 1/2
Second Quarter $26 5/8 $23 1/2 $.27 1/2
Third Quarter $29 3/8 $22 7/8 $.27 1/2
Fourth Quarter $28 1/8 $23 7/8 $.28 1/2
Cash dividends on common stock are considered quarterly
by the board of directors and historically have been paid on
March 1, June 1, September 1 and December 1 of each year. At
the end of fiscal 1996, there were 10,246 individual and
institutional investors who were shareholders of record.
Item 6. Selected Financial Data
<TABLE>
INDIANA ENERGY, INC.
AND SUBSIDIARY COMPANIES
(Thousands)
<S> <C> <C> <C> <C> <C>
Year Ended September 30 1996 1995 1994 1993(3) 1992
Utility operating revenues $530,594 $403,810 $475,297 $499,278 $411,260
Margin 210,463 185,315 194,309 185,725 160,333
Utility operating expenses 156,910 139,127 146,466 141,452 122,206
Utility operating income 53,553 46,188 47,843 44,273 38,127
Interest and other 14,923 14,079 13,247 15,739 12,384
Utility income 38,630 32,109 34,596 28,534 25,743
Nonutility income (loss) 3,571 847 (155) 6,329 (64)
Preferred dividend requirement
of subsidiary - - - 285 1,710
Net income $ 42,201 $ 32,956 $ 34,441 $ 34,578 $ 23,969
Earnings per average share
of common stock (1) $ 1.87 $ 1.46 $ 1.53 $ 1.62 $ 1.16
Dividends per share of
common stock (1) $ 1.11 $ 1.07 $ 1.03 $.99 1/2 $.95 2/3
Common shareholders' equity $296,322 $280,715 $271,245 $258,647 $212,310
Redeemable preferred
shareholder's equity - - - - 20,000
Long-term debt (2) 178,335 176,563 158,979 184,901 150,311
$474,657 $457,278 $430,224 $443,548 $382,621
Total throughput (MDth) 126,742 109,508 116,285 111,354 101,985
Annual heating degree days as
a percent of normal 108% 87% 102% 99% 90%
Utility customers served -
average 465,166 454,817 443,498 433,000 422,997
Total Assets at Year-End $682,463 $663,397 $656,645 $631,280 $627,719
(1)Adjusted to reflect the three-for-two stock split October 1, 1993.
(2)Includes current maturities, excludes sinking fund requirements.
(3)Reflects the sale by IGC Energy, Inc. of its interest in
EnTrade Corporation on December 29, 1992.
</TABLE>
Item 7. Management's Discussion and Analysis of Results of
Operations and Financial Condition
Results of Operations
The majority of Indiana Energy, Inc.'s (the company) consolidated
earnings are from the operations of its gas distribution
subsidiary, Indiana Gas Company, Inc. Nonutility operations
include IGC Energy, Inc., Energy Realty, Inc. and Indiana Energy
Services, Inc. (IES), indirect wholly owned subsidiaries of
Indiana Energy, as well as the 50-percent interest in ProLiance
Energy, LLC (see ProLiance Energy, LLC). Though Indiana Energy
will continue to consider nonutility opportunities for
investment, its principal business is expected to continue to be
gas distribution. The following discussion of operating results
relates primarily to the operations of Indiana Gas.
Earnings
Net income increased 28 percent ($9.2 million) in fiscal 1996
when compared to fiscal 1995 due to increases in utility and
nonutility income. Utility income increased primarily as a
result of weather that was 25 percent colder than last year, as
well as the addition of new residential and commercial customers.
This increase was offset somewhat by higher operation and
maintenance expenses. Nonutility income increased as a result of
the operations of Indiana Energy's gas marketing affiliates.
Net income decreased in fiscal 1995 when compared to fiscal 1994
due to weather that was 15 percent warmer than the prior year.
This decrease was partially offset by lower operation and
maintenance expenses, as well as the addition of new residential
and commercial customers.
Utility income, net income and earnings per average share of
common stock for the last three fiscal years are summarized
below:
<TABLE>
1996 1995 1994
<S> <C> <C> <C>
Utility income (millions of dollars) $ 38.6 $ 32.1 $ 34.6
Net income (millions of dollars) $ 42.2 $ 33.0 $ 34.4
Earnings per average share of common stock $ 1.87 $ 1.46 $ 1.53
</TABLE>
Dividends
On July 26, 1996, the board of directors of the company increased
the quarterly dividend on common stock to 28 1/2 cents per share
from 27 1/2 cents per share. This resulted in total dividends
paid in 1996 of $1.11 compared to $1.07 in 1995. This is the
24th consecutive year that the company's dividends paid on common
stock increased over the previous year.
Margin (Revenues Less Cost of Gas)
In 1996, margin increased 14 percent ($25.1 million) when
compared to 1995. The increase is primarily attributable to
weather that was 25 percent colder than last year and 8 percent
colder than normal. Additional residential and commercial
customers, as well as rate recovery (beginning May 1995) of
postretirement benefit costs recognized in accordance with
Statement of Financial Accounting Standards No. 106, Employers'
Accounting for Postretirement Benefits Other Than Pensions (SFAS
106), also contributed to the increase.
In 1995, margin decreased 5 percent ($9.0 million) when compared
to 1994. The decrease reflected weather that was 15 percent
warmer than the prior year and 13 percent warmer than normal,
offset somewhat by the addition of new residential and commercial
customers.
In 1996, total system throughput (combined sales and
transportation) increased 16 percent (17.2 MMDth) when compared
to last year. In 1995, throughput decreased 6 percent (6.8
MMDth) when compared to 1994. Indiana Gas' rates for
transportation generally provide the same margins as are earned
on the sale of gas under its sales tariffs. Approximately one-
half of total system throughput represents gas used for space
heating and is affected by weather.
Total average cost per dekatherm of gas purchased (average
commodity and demand) was $3.14 in 1996, $2.53 in 1995 and $2.89
in 1994. The price swings are due primarily to changing
commodity costs associated with the impacts on customer demand
during the very warm winter in 1995 and the colder winter this
fiscal year.
Operating Expenses
Operation and maintenance expenses increased approximately $8.5
million in 1996 when compared to 1995. The increase is primarily
attributable to higher performance-based compensation and the
recognition (beginning May 1995) of postretirement benefit costs
in accordance with SFAS 106. In addition, the increased margin
resulting from the very cold weather allowed for the acceleration
of certain projects that will help maintain and strengthen the
distribution system.
Operation and maintenance expenses decreased approximately $6.4
million in 1995 when compared to 1994. The decrease was
primarily attributable to lower expenses for labor and related
benefits, distribution mains and services, advertising and
outside services. The declining operation and maintenance
expenses reflected management's efforts to control costs in
response to very warm weather.
Depreciation and amortization expense increased in 1996 and 1995
as the result of additions to utility plant to serve new
customers and to maintain dependable service to existing
customers.
Federal and state income taxes increased in 1996, while
decreasing in 1995, due to changes in taxable utility income.
Taxes other than income taxes increased in 1996 due to higher
property tax expense and higher gross receipts tax expense
resulting from increased revenue. Taxes other than income taxes
decreased in 1995 due to lower gross receipts tax expense
resulting from decreased revenue. Property tax expense for 1995
remained approximately the same as compared to 1994.
Interest Expense
Interest expense increased in 1996 due to an increase in average
debt outstanding, slightly offset by a decrease in interest
rates. Interest expense decreased in 1995 due to a decrease in
average debt outstanding, slightly offset by an increase in
interest rates.
Nonutility Income
Nonutility income increased $2.7 million in 1996 when compared to
fiscal 1995 due primarily to higher earnings recognized from
Indiana Energy's gas marketing affiliates. Prior to April 1,
1996, IES provided natural gas and related services to other gas
utilities and customers in Indiana and surrounding states, and
from January 1, 1996, to March 31, 1996, to Indiana Gas.
ProLiance assumed the business of IES effective April 1, 1996,
and now is the supplier of gas and related services to both
Indiana Gas and Citizens Gas (see ProLiance Energy, LLC).
Other Operating Matters
Gas Cost Adjustment
Adjustments to Indiana Gas' rates and charges related to the cost
of gas are made through gas cost adjustment (GCA) procedures
established by Indiana law and administered by the Indiana
Utility Regulatory Commission (IURC). The GCA passes through
increases and decreases in the cost of gas to Indiana Gas'
customers dollar for dollar.
In addition, the IURC has applied the statute authorizing the GCA
procedures to reduce rates when necessary so as to limit utility
operating income, after adjusting to normal weather, to the level
authorized in the last general rate order. The earnings test
provides that no refund be paid to the extent a utility has not
earned its authorized utility operating income over the previous
60 months (or during the period since the utility's last rate
order, if longer). On November 9, 1995, the IURC approved a
settlement agreement among Indiana Gas, the Office of Utility
Consumer Counselor and a group of large-volume users which
provided for authorized utility operating income (weather
normalized) of $54.2 million for Indiana Gas beginning in fiscal
1996.
ProLiance Energy, LLC
On March 15, 1996, IGC Energy, Inc., an indirect wholly owned
subsidiary of Indiana Energy, and Citizens By-Products Coal
Company, a wholly owned subsidiary of Citizens Gas and Coke
Utility (Citizens Gas), formed a jointly and equally owned
limited liability company to provide natural gas supply and
related marketing services. The new entity, ProLiance Energy,
LLC (ProLiance), began providing services to Indiana Gas and
Citizens Gas effective April 1, 1996. ProLiance also provides
products and services to other gas utilities and customers in
Indiana and surrounding states. ProLiance has assumed the
business of IES.
Two proceedings which may affect the formation, operation or
earnings of ProLiance are currently pending before the IURC. The
first proceeding was initiated by a small group of Indiana Gas'
and Citizens Gas' large-volume customers who contend that the gas
service contracts between ProLiance and Indiana Gas and Citizens
Gas should be disapproved by the IURC or, alternatively, that the
IURC should regulate the operations of ProLiance. On September
27, 1996, the IURC issued a partial decision in that proceeding
and found that ProLiance is not subject to regulation as a public
utility. The IURC did confirm that it will continue to monitor
gas costs incurred by Indiana Gas. Hearings on the remaining
issues were concluded on October 9, 1996. A decision from the
IURC is expected during the first half of calendar 1997.
The second proceeding involves the quarterly gas cost adjustment
applications of Indiana Gas and Citizens Gas wherein these
utilities are proposing to recover the costs they have and will
incur under their gas supply and related agreements with
ProLiance. This proceeding will consider whether the recovery of
those costs is consistent with Indiana law governing gas cost
recovery. The hearing on the second proceeding has not yet been
scheduled.
As a result of the two on-going proceedings, $1.5 million of
Indiana Energy's share of its gas marketing affiliates' net
income has been reserved until the outcome of these proceedings
can be determined.
Indiana Legislative Matters
On April 26, 1995, the Indiana General Assembly enacted
legislation which provides new flexibility to the IURC for future
regulation of Indiana utilities. The new law recognizes that
competition is increasing in the provision of energy services and
that flexibility in the regulation of energy services providers
is essential to the well-being of the state, its economy and its
citizens. Under the law, an energy utility can present to the
IURC a broad range of proposals from performance-based ratemaking
to complete deregulation of a utility's operations. The law
gives the IURC the authority to adopt alternative regulatory
practices, procedures and mechanisms and establish rates and
charges that are in the public interest, and will enhance or
maintain the value of the energy utility's retail energy services
or property. It also provides authority for the IURC to
establish rates and charges based on market or average prices
that use performance-based rewards or penalties, or which are
designed to promote efficiency in the rendering of retail energy
services.
Environmental Matters
Indiana Gas is currently conducting environmental investigations
and work at certain sites that were the locations of former
manufactured gas plants. It is seeking to recover the costs of
the investigations and work from insurance carriers, other
potentially responsible parties (PRPs) and customers.
On May 3, 1995, Indiana Gas received an order from the IURC in
which the Commission concluded that the costs incurred by Indiana
Gas to investigate and, if necessary, clean-up former
manufactured gas plant sites are not utility operating expenses
necessary for the provision of service and, therefore, are not
recoverable as operating expenses from utility customers. This
order has been appealed.
On April 14, 1995, Indiana Gas filed suit in the United States
District Court for the Northern District of Indiana, Fort Wayne
Division, against a number of insurance carriers for payment of
claims for investigation and clean-up costs already incurred, as
well as for a determination that the carriers are obligated to
pay these costs in the future. On October 2, 1996, the Court
granted several motions filed by defendant insurance carriers for
summary judgment on a number of issues relating to the insurers'
obligations to Indiana Gas under insurance policies issued by
these carriers. For example, the Court held that because the
placement of residuals on the ground at the sites was done
intentionally, there was no "fortuitous accident" and therefore
no "occurrence" subject to coverage under the relevant policies.
Since the management of Indiana Gas believes that a number of the
Court's rulings are contrary to Indiana law, it intends to appeal
all adverse rulings to the United States Court of Appeals for the
Seventh Circuit. However, if these rulings are not reversed on
appeal, they would effectively eliminate coverage under most of
the policies at issue. There can be no assurance as to whether
Indiana Gas will prevail on this appeal. As of September 30,
1996, Indiana Gas has obtained cash settlements from some
insurance carriers in an aggregate amount in excess of $13.5
million.
The Court's rulings will have no immediate impact on earnings
since Indiana Gas has previously recorded all costs which it
presently expects to incur in connection with remediation
activities. It is possible that future events may require
additional remediation activities which are not presently
foreseen.
For further information regarding the status of investigation and
remediation of the sites, PRPs, recovery from insurers,
litigation, financial reporting and ratemaking, see Item 8, Note
9.
Postretirement Benefits Other Than Pensions
On May 3, 1995, the IURC issued an order authorizing Indiana Gas
to recover the costs related to postretirement benefits other
than pensions under the accrual method of accounting consistent
with Statement of Financial Accounting Standards No. 106,
Employers' Accounting for Postretirement Benefits Other Than
Pensions (SFAS 106). Amounts accrued prior to the order were
deferred as allowed by the IURC. While this order is consistent
with the IURC's rulings for other utilities within the state of
Indiana and with the ratemaking treatment of the majority of
regulatory jurisdictions outside of Indiana, the Office of
Utility Consumer Counselor is appealing the order. A decision on
the appeal by the Indiana Court of Appeals is expected early in
calendar 1997.
New Accounting Standards
In March 1995, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards No. 121,
Accounting for the Impairment of Long-Lived Assets and Long-Lived
Assets to be Disposed Of. This statement imposes stricter
criteria for regulatory assets by requiring that such assets be
probable of future recovery at each balance sheet date. Indiana
Gas will adopt this standard effective October 1, 1996, and does
not expect that the adoption will have a material impact on its
financial position or results of operations based on the current
regulatory structure in which it operates. This conclusion may
change in the future as competitive factors influence pricing in
the industry.
In October 1995, the FASB issued Statement of Financial
Accounting Standards No. 123, Accounting for Stock-Based
Compensation. Pursuant to this new standard, companies are
encouraged, but not required, to adopt a fair value method of
accounting for employee stock-based transactions. Indiana Gas
does not expect this standard to have a material impact on its
financial position or results of operations.
Liquidity and Capital Resources
New construction, normal system maintenance and improvements, and
information technology investments to provide service to a
growing customer base will continue to require substantial
capital expenditures. Indiana Gas' goal is to internally fund
approximately 75 percent of its capital expenditure program.
This will help Indiana Gas to maintain its high creditworthiness.
The long-term debt of Indiana Gas is currently rated Aa3 by
Moody's Investors Service and AA- by Standard & Poor's
Corporation.
Total capital required to fund both capital expenditures and
refinancing requirements for 1995 and 1996, along with estimated
amounts for 1997 through 1999, are as follows:
<TABLE>
THOUSANDS 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C>
Capital expenditures $ 54,900 $ 66,000 $ 70,000 $ 71,000 $ 65,000
Refinancing requirements
(including nonutility) 3,200 19,000 - 35,000 10,000
$ 58,100 $ 85,000 $ 70,000 $106,000 $ 75,000
</TABLE>
In 1996, 70 percent of Indiana Gas' capital expenditures was
provided by funds generated internally (utility income less
dividends plus charges to utility income not requiring funds).
In 1995, 77 percent of capital expenditures was provided by funds
generated internally. External funds required for the 1996
construction program were obtained primarily through short-term
borrowings.
Capitalization objectives for Indiana Gas are 55-65 percent
common equity and preferred stock and 35-45 percent long-term
debt. Consolidated capitalization ratios are generally expected
to be similar to those of Indiana Gas, but may vary from time to
time, depending on particular business opportunities. The
company's common equity component was 62 percent of total
capitalization at September 30, 1996.
During December 1995, Indiana Gas issued $20 million in aggregate
principal amount of its Medium-Term Notes, Series E (Notes) as
follows: $5 million of 6.69% Notes due June 10, 2013; $5 million
of 6.69% Notes due December 21, 2015; and $10 million of 6.69%
Notes due December 29, 2015. Indiana Gas plans to issue an
additional $15 million of the Notes by the end of fiscal 1997.
On July 15, 1996, Indiana Gas used the net proceeds from the
December issuances to redeem its remaining first mortgage bonds,
$19 million of 9 3/8% Series M First Mortgage Bonds.
On July 28, 1995, Indiana Energy's board of directors authorized
Indiana Energy to repurchase up to 700,000 shares of its
outstanding common stock. The repurchases will be made over time
in open-market transactions. Indiana Energy began repurchasing
shares in October 1995, and as of September 30, 1996, had
repurchased 92,100 shares with an associated cost of $2,116,000.
Short-term cash working capital is required primarily to finance
customer accounts receivable, unbilled utility revenues resulting
from cycle billing, gas in underground storage and capital
expenditures until permanently financed. Short-term borrowings
tend to be greatest during the heating season when accounts
receivable and unbilled utility revenues are at their highest.
Indiana Gas' commercial paper is rated P-1 by Moody's and A-1+ by
Standard & Poor's. Recently, bank lines of credit have been the
primary source of short-term financing. Long-term financial
strength and flexibility require maintaining throughput volumes,
controlling costs and, if absolutely necessary, securing timely
increases in rates to recover costs and provide a fair and
reasonable return to shareholders.
Forward-Looking Information
Certain matters discussed in Management's Discussion and Analysis
are forward-looking. These forward-looking discussions reflect
the company's current best estimates regarding future operations.
Since these are only estimates, actual results could be
materially different.
Several factors, some of which are outside of the company's
control and cannot be accurately and conclusively predicted, may
materially affect estimates of future operations. Such factors
include the effect of weather on gas consumption, particularly in
the residential market, the effect of general economic conditions
on gas consumption, particularly in industrial and commercial
markets, the direction and pace of change in state and federal
regulation on both the gas and electric industries, and the
effects of competition on markets where prices and providers have
been regulated.
Item 8. Financial Statements and Supplementary Data
Management's Responsibility for Financial Statements
The management of the company is responsible for the preparation
of the consolidated financial statements and the related
financial data contained in this report. The financial
statements are prepared in conformity with generally accepted
accounting principles and follow accounting policies and
principles applicable to regulated public utilities.
The integrity and objectivity of the data in this report,
including required estimates and judgments, are the
responsibility of management. Management maintains a system of
internal controls and utilizes an internal auditing program to
provide reasonable assurance of compliance with company policies
and procedures and the safeguard of assets.
The board of directors pursues its responsibility for these
financial statements through its audit committee, which meets
periodically with management, the internal auditors and the
independent auditors, to assure that each is carrying out its
responsibilities. Both the internal auditors and the independent
auditors meet with the audit committee, with and without
management representatives present, to discuss the scope and
results of their audits, their comments on the adequacy of
internal accounting controls and the quality of financial
reporting.
/s/Niel C. Ellerbrook
Niel C. Ellerbrook
Vice President and Treasurer
and Chief Financial Officer
Report of Independent Public Accountants
To the Shareholders and Board of Directors of Indiana Energy,
Inc.:
We have audited the accompanying consolidated balance sheets and
schedules of long-term debt of Indiana Energy, Inc. (an Indiana
corporation) and subsidiary companies as of September 30, 1996,
and 1995, and the related consolidated statements of income,
common shareholders' equity and cash flows for each of the three
years in the period ended September 30, 1996. These financial
statements are the responsibility of the company's management.
Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of Indiana Energy, Inc. and subsidiary companies, as of September
30, 1996, and 1995, and the results of their operations and their
cash flows for each of the three years in the period ended
September 30, 1996, in conformity with generally accepted
accounting principles.
/s/Arthur Andersen LLP
Arthur Andersen LLP
Indianapolis, Indiana
October 25, 1996
<TABLE>
INDIANA ENERGY, INC.
AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF INCOME
(Thousands except per share amounts)
Year Ended September 30
1996 1995 1994
<S> <C> <C> <C>
UTILITY OPERATING REVENUES $ 530,594 $ 403,810 $ 475,297
COST OF GAS 320,131 218,495 280,988
MARGIN 210,463 185,315 194,309
UTILITY OPERATING EXPENSES:
Other operation and maintenance 84,136 75,608 81,982
Depreciation and amortization 33,232 31,265 29,177
Income taxes 23,174 19,216 19,467
Taxes other than income taxes 16,368 13,038 15,840
156,910 139,127 146,466
UTILITY OPERATING INCOME 53,553 46,188 47,843
INTEREST EXPENSE 15,907 15,530 16,037
OTHER (984) (1,451) (2,790)
14,923 14,079 13,247
UTILITY INCOME 38,630 32,109 34,596
NONUTILITY INCOME (LOSS) 3,571 847 (155)
NET INCOME $ 42,201 $ 32,956 $ 34,441
AVERAGE COMMON SHARES OUTSTANDING 22,513 22,560 22,554
EARNINGS PER AVERAGE SHARE OF
COMMON STOCK $ 1.87 $ 1.46 $ 1.53
The accompanying notes are an integral part of these statements.
</TABLE>
<TABLE>
INDIANA ENERGY, INC.
AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands)
Year Ended September 30
1996 1995 1994
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 42,201 $ 32,956 $ 34,441
Adjustments to reconcile net income to cash
provided from operating activities -
Depreciation and amortization 33,441 31,485 29,404
Deferred income taxes 804 3,994 3,273
Investment tax credit (930) (930) (930)
Undistributed earnings of unconsolidated affiliates 88 (237) (81)
33,403 34,312 31,666
Changes in assets and liabilities -
Receivables - net (2,558) 3,244 1,478
Inventories 19,966 5,189 (5,093)
Accounts payable, customer deposits, advance
payments and other current liabilities (14,801) 39,396 (17,374)
Accrued taxes and interest (3,744) (12,637) (11,782)
Recoverable/refundable gas costs (7,593) (26,712) 39,048
Other - net 3,845 14,404 6,844
Total adjustments 28,518 57,196 44,787
Net cash flows from operations 70,719 90,152 79,228
CASH FLOWS REQUIRED FOR FINANCING ACTIVITIES:
Issuance of common stock - net - - (95)
Repurchase of common stock (2,116) - -
Sale of long-term debt 21,068 20,812 2,128
Reduction in long-term debt (19,296) (3,228) (28,050)
Net change in short-term borrowings 22,011 (28,325) 24,098
Dividends on common stock (24,896) (24,019) (23,086)
Net cash flows required for financing activities (3,229) (34,760) (25,005)
CASH FLOWS REQUIRED FOR INVESTING ACTIVITIES:
Capital expenditures (66,381) (54,943) (57,138)
Nonutility investments - net (1,109) (449) (2,253)
Net cash flows required for investing activities (67,490) (55,392) (59,391)
NET INCREASE (DECREASE) IN CASH - - (5,168)
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD 20 20 5,188
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 20 $ 20 $ 20
The accompanying notes are an integral part of these statements.
</TABLE>
<TABLE>
INDIANA ENERGY, INC.
AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
ASSETS
(Thousands)
September 30
1996 1995
<S> <C> <C>
UTILITY PLANT:
Original cost $931,092 $872,287
Less - accumulated depreciation and amortization 344,268 316,991
586,824 555,296
NONUTILITY PLANT AND OTHER INVESTMENTS - NET 10,338 7,117
CURRENT ASSETS:
Cash and cash equivalents 20 20
Accounts receivable, less reserves of
$1,853 and $1,662 respectively 14,598 13,793
Accrued unbilled revenues 8,158 6,405
Materials and supplies - at average cost 4,611 3,890
Liquefied petroleum gas - at average cost 507 883
Gas in underground storage - at last-in,
first-out cost 39,083 59,394
Recoverable gas costs 2,710 -
Prepayments and other 46 151
69,733 84,536
DEFERRED CHARGES:
Unamortized debt discount and expense 7,585 6,922
Other 7,983 9,526
15,568 16,448
$682,463 $663,397
The accompanying notes are an integral part of these statements.
</TABLE>
<TABLE>
INDIANA ENERGY, INC.
AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
SHAREHOLDERS' EQUITY AND LIABILITIES
(Thousands except shares)
September 30
1996 1995
<S> <C> <C>
CAPITALIZATION:
Common stock (no par value) - authorized 64,000,000
shares - issued and outstanding 22,474,402 and
22,561,605 shares, respectively $143,875 $145,872
Less unearned compensation - restricted stock grants 525 824
143,350 145,048
Retained earnings 152,972 135,667
Total common shareholders' equity 296,322 280,715
Long-term debt (see schedule) 178,063 176,296
474,385 457,011
CURRENT LIABILITIES:
Maturities and sinking fund requirements of long-term debt 272 267
Notes payable 28,036 6,025
Accounts payable 34,192 48,071
Refundable gas costs - 4,883
Customer deposits and advance payments 14,256 20,870
Accrued taxes 4,206 7,668
Accrued interest 2,552 2,834
Other current liabilities 27,356 21,664
110,870 112,282
DEFERRED CREDITS:
Deferred income taxes 66,862 65,096
Unamortized investment tax credit 11,173 12,103
Regulatory income tax liability 2,835 3,797
Other 16,338 13,108
97,208 94,104
COMMITMENTS AND CONTINGENCIES (see Notes 8, 9 and 10) - -
$682,463 $663,397
The accompanying notes are an integral part of these statements.
</TABLE>
<TABLE>
INDIANA ENERGY, INC.
AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF COMMON SHAREHOLDERS' EQUITY
(Thousands except shares)
COMMON STOCK
RESTRICTED
STOCK RETAINED
SHARES AMOUNT GRANTS EARNINGS TOTAL
<S> <C> <C> <C> <C> <C>
BALANCE AT SEPTEMBER 30, 1993 22,459,916 $143,476 $ (299) $115,470 $258,647
Net income 34,441 34,441
Common stock dividends ($1.03 per share) (23,086) (23,086)
Common stock issuances for Executives' and
Directors' stock plans net of amortization 97,502 2,301 (963) 1,338
Other (476) (95) (95)
BALANCE AT SEPTEMBER 30, 1994 22,556,942 145,777 (1,262) 126,730 271,245
Net income 32,956 32,956
Common stock dividends ($1.07 per share) (24,019) (24,019)
Common stock issuances for Executives' and
Directors' stock plans net of amortization 4,663 95 438 533
BALANCE AT SEPTEMBER 30, 1995 22,561,605 145,872 (824) 135,667 280,715
Net income 42,201 42,201
Common stock dividends ($1.11 per share) (24,896) (24,896)
Common stock issuances for Executives' and
Directors' stock plans net of amortization 4,897 119 299 418
Common stock repurchases (92,100) (2,116) (2,116)
BALANCE AT SEPTEMBER 30, 1996 22,474,402 $143,875 $ (525) $152,972 $296,322
The accompanying notes are an integral part of these statements.
</TABLE>
<TABLE>
INDIANA ENERGY, INC.
AND SUBSIDIARY COMPANIES
CONSOLIDATED SCHEDULES OF LONG-TERM DEBT
(Thousands)
September 30
1996 1995
<S> <C> <C>
LONG-TERM DEBT:
First Mortgage Bonds - Utility
9 3/8% Series M, called and due July 15, 1996 $ - $ 18,950
Unsecured Notes Payable - Utility
6 5/8% Series D, due December 1, 1997 35,000 35,000
8.90%, due July 15, 1999 10,000 10,000
6.69% Series E, due June 10, 2013 5,000 -
7.15% Series E, due March 15, 2015 5,000 5,000
6.69% Series E, due December 21, 2015 5,000 -
6.69% Series E, due December 29, 2015 10,000 -
9 3/8%, due January 15, 2021 25,000 25,000
9 1/8% Series A, due February 15, 2021 40,000 40,000
8 1/2% Series B Debentures, due September 15, 2021 24,733 24,743
6.31% Series E, due June 10, 2025 5,000 5,000
6.53% Series E, due June 27, 2025 10,000 10,000
174,733 154,743
Unsecured Notes Payable - Nonutility
Variable rate term loan, due May 10, 2004 1,845 2,058
Noninterest bearing note, due August 1, 2005 757 812
Variable rate note, due January 1, 2007 1,000 -
3,602 2,870
178,335 176,563
Less - Maturities and sinking fund requirements 272 267
$178,063 $176,296
The accompanying notes are an integral part of these statements.
</TABLE>
Notes to Consolidated Financial Statements
1. Summary of Significant Accounting Practices
A. Consolidation
The consolidated financial statements include the accounts
of Indiana Energy, Inc. (the company) and its wholly and
majority-owned subsidiaries, after elimination of
intercompany transactions. The consolidated financial
statements separate the regulated utility operations,
principally Indiana Gas Company, Inc., (Indiana Gas), from
nonutility operations. Indiana Gas provides natural gas
and transportation services to a diversified base of
customers in 281 communities in 48 of Indiana's 92
counties. The nonutility operations include IGC Energy,
Inc., Energy Realty, Inc. and Indiana Energy Services,
Inc. (IES), indirect wholly owned subsidiaries of Indiana
Energy, as well as the 50-percent interest in ProLiance
Energy, LLC (see Note 10).
Investments in limited partnerships and less than majority-
owned affiliates are accounted for on the equity method.
B. Utility Plant and Depreciation
Except as described below, utility plant is stated at the
original cost and includes allocations of payroll-related
costs and administrative and general expenses, as well as
an allowance for the cost of funds used during
construction. When a depreciable unit of property is
retired, the cost is credited to utility plant and charged
to accumulated depreciation together with the cost of
removal, less any salvage. No gain or loss is recognized
upon normal retirement.
Provisions for depreciation of utility property are
determined by applying straight-line rates to the
original cost of the various classifications of property.
The average depreciation rate was approximately 4.1
percent for all periods reported.
Cost in excess of underlying book value of acquired gas
distribution companies is reflected as a component of
utility plant and is being amortized primarily over 40
years.
C. Unamortized Debt Discount and Expense
Indiana Gas was authorized as part of an August 17, 1994,
order from the Indiana Utility Regulatory Commission
(IURC) to amortize over a 15-year period the debt discount
and expense related to new debt issues and future premiums
paid for debt reacquired in connection with refinancing.
Debt discount and expense for issues in place prior to
this order are being amortized over the lives of the
related issues. Premiums paid prior to this order for debt
reacquired in connection with refinancing are being
amortized over the life of the refunding issue.
D. Cash Flow Information
For the purposes of the Consolidated Statements of Cash
Flows, the company considers cash investments with an
original maturity of three months or less to be cash
equivalents. Cash paid during the periods reported for
interest and income taxes were as follows:
<TABLE>
THOUSANDS 1996 1995 1994
<S> <C> <C> <C>
Interest (net of amount capitalized) $15,584 $14,438 $15,310
Income taxes $30,608 $26,206 $23,880
</TABLE>
E. Revenues
To more closely match revenues and expenses, Indiana Gas
records revenues for all gas delivered to customers but
not billed at the end of the accounting period.
F. Gas in Underground Storage
Gas in underground storage as of September 30, 1996, was
$39.1 million compared to $59.4 million at September 30,
1995. This decrease, which had no impact on Indiana Gas'
results of operations, resulted from a reduction in
Indiana Gas' contract storage requirements due to its gas
supply arrangements with ProLiance (see Note 10).
Based on the cost of purchased gas during September 1996,
the cost of replacing the current portion of gas in
underground storage exceeded last-in, first-out cost at
September 30, 1996, by approximately $3,414,000.
G. Refundable or Recoverable Gas Cost
The cost of gas purchased and refunds from suppliers,
which differ from amounts recovered through rates, are
deferred and are being recovered or refunded in accordance
with procedures approved by the IURC.
H. Allowance For Funds Used During Construction
An allowance for funds used during construction (AFUDC),
which represents the cost of borrowed and equity funds
used for construction purposes, is charged to construction
work in progress during the period of construction and
included in "Other" on the Consolidated Statements of
Income. An annual AFUDC rate of 7.5 percent was used for
all periods reported.
The table below reflects the total AFUDC capitalized and
the portion of which was computed on borrowed and equity
funds for all periods reported.
THOUSANDS 1996 1995 1994
AFUDC - borrowed funds $ 283 $ 215 $ 355
AFUDC - equity funds 232 176 290
Total AFUDC capitalized $ 515 $ 391 $ 645
I. Reclassifications
Certain reclassifications have been made in the company's
financial statements of prior years to conform to the
current year presentation. These reclassifications have
no impact on previously reported net income.
J. Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires
management to make 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 and the reported amounts
of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
2. Regulatory Assets and Liabilities
Indiana Gas is subject to the provisions of Statement of
Financial Accounting Standards No. 71, Accounting for the
Effects of Certain Types of Regulation (SFAS 71).
Regulatory assets represent probable future revenue to
Indiana Gas associated with certain costs which will be
recovered from customers through the ratemaking process.
Regulatory liabilities represent probable future
reductions in revenues associated with amounts that are to
be credited to customers through the ratemaking process.
Regulatory assets and liabilities reflected in the
Consolidated Balance Sheets as of September 30 (in
thousands) relate to the following:
<TABLE>
REGULATORY ASSETS 1996 1995
<S> <C> <C>
Postretirement benefits other than pensions $ 6,283 $ 7,720
Unamortized debt discount and expense 7,477 6,800
Gas costs due from customers, net 2,710 -
Deferred acquisition costs 719 740
Rate case costs 79 203
$ 17,268 $ 15,463
REGULATORY LIABILITIES
Gas costs due to customers, net $ - $ 4,883
Amounts due to customers - income taxes, net 2,835 3,797
Pension costs 2,040 1,348
$ 4,875 $ 10,028
</TABLE>
It is Indiana Gas' policy to continually assess the
recoverability of costs recognized as regulatory assets
and the ability to continue to account for its activities
in accordance with SFAS 71, based on the criteria set
forth in SFAS 71. Based on current regulation, Indiana
Gas believes that its use of regulatory accounting is
appropriate. If all or part of Indiana Gas' operations
cease to meet the criteria of SFAS 71, a write-off of
related regulatory assets and liabilities would be
required. In addition, Indiana Gas would be required to
determine any impairment to the carrying costs of
deregulated plant and inventory assets.
3. Short-Term Borrowings
Indiana Gas has board of director approval to borrow up to
$100 million under bank lines of credit. Indiana Gas has
available committed lines of credit up to $55 million with
approximately $24 million outstanding at September 30,
1996. These lines of credit are renewable annually and
require fees based on the amounts of the lines. In
addition, Indiana Gas has available uncommitted lines of
credit with similar arrangements which allow it to borrow
up to its board-approved amount. Notes payable to banks
bore interest at rates negotiated with the bank at the
time of borrowing.
Bank loans outstanding during the reported periods were as
follows:
<TABLE>
THOUSANDS 1996 1995 1994
<S> <C> <C> <C>
Outstanding at year end $ 24,236 $ 2,225 $ 30,550
Weighted average interest rates
at year end 5.4% 6.1% 4.9%
Weighted average interest rates
during the year 5.7% 5.7% 3.3%
Weighted average total outstanding
during the year $ 5,930 $ 16,578 $ 14,891
Maximum total outstanding
during the year $ 28,150 $ 50,000 $ 56,500
</TABLE>
In addition, Energy Realty had a $3.8-million bank loan
outstanding at year end related to the purchase of a
warehouse facility that is leased to Indiana Gas.
4. Long-Term Debt
During December 1995, Indiana Gas issued $20 million in
aggregate principal amount of its Medium-Term Notes,
Series E (Notes) as follows: $5 million of 6.69% Notes
due June 10, 2013; $5 million of 6.69% Notes due December
21, 2015; and $10 million of 6.69% Notes due December 29,
2015. On July 15, 1996, Indiana Gas used those net
proceeds to redeem its remaining first mortgage bonds, $19
million of 9 3/8% Series M First Mortgage Bonds.
Consolidated maturities and sinking fund requirements on
long-term debt subject to mandatory redemption during the
five years following 1996 are $272,000 in 1997,
$35,277,000 in 1998, $10,332,000 in 1999, $393,000 in 2000
and $410,000 in 2001.
5. Fair Value of Financial Instruments
The estimated fair values of the company's financial
instruments were as follows:
<TABLE>
September 30, 1996 September 30, 1995
Carrying Fair Carrying Fair
THOUSANDS Amount Value Amount Value
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 20 $ 20 $ 20 $ 20
Notes payable $ 28,036 $ 28,036 $ 6,025 $ 6,025
Long-term debt (includes
amounts due within one year) $178,335 $182,482 $176,563 $186,265
</TABLE>
Certain methods and assumptions must be used to estimate
the fair value of financial instruments. Because of the
short maturity of cash and cash equivalents and notes
payable, the carrying amounts approximate fair values for
these financial instruments. The fair value of the
company's long-term debt was estimated based on the quoted
market prices for the same or similar issues or on the
current rates offered to the company for debt of the same
remaining maturities.
Under current regulatory treatment, call premiums on
reacquisition of long-term debt are generally recovered in
customer rates over the life of the refunding issue or
over a 15-year period (see Note 1C). Accordingly, any
reacquisition would not be expected to have a material
effect on the company's financial position or results of
operations.
6. Capital Stock
On July 28, 1995, Indiana Energy's board of directors
authorized Indiana Energy to repurchase up to 700,000
shares of its outstanding common stock. The repurchases
will be made over time in open-market transactions.
Indiana Energy began repurchasing shares in October 1995,
and as of September 30, 1996, had repurchased 92,100
shares with an associated cost of $2,116,000.
Common stock dividends of the company may be reinvested
under a Dividend Reinvestment and Stock Purchase Plan.
Common shares purchased in connection with the plan are
currently being acquired through the open market.
The company has an Executive Restricted Stock Plan for the
principal officers of the company and its subsidiary
companies. Shares issued are original issue shares of the
company, carry transferability restrictions and are
subject to forfeiture provisions according to the terms of
the plan.
The company also has a Directors' Restricted Stock Plan
through which non-employee directors receive one-third of
their combined compensation (exclusive of attendance fees)
as directors of the company and Indiana Gas in shares of
the company's common stock subject to certain restrictions
on transferability. They may also elect to receive the
remaining two-thirds of their combined compensation
(exclusive of attendance fees) in cash or in shares of the
company's common stock which are not subject to
restrictions on transferability other than those imposed
by federal and state laws.
Additionally, under the terms of Indiana Gas' retirement
savings plan (see Note 7), eligible participants may
direct a specified percentage of their compensation to be
invested in shares of the company's common stock.
At September 30, 1996, the shares of the company's common
stock reserved for issuance under each of those plans were
as follows:
Dividend Reinvestment and Stock Purchase Plan 455,879
Executive Restricted Stock Plan 375,026
Directors' Restricted Stock Plan 50,149
Indiana Gas Retirement Savings Plan 622,666
Indiana Gas and Indiana Energy also each have 4 million of
authorized and unissued shares of preferred stock.
On July 25, 1986, the board of directors of Indiana Energy
declared a dividend distribution of one common share
purchase right for each outstanding share of common stock
of Indiana Energy. The distribution was made to
shareholders of record August 11, 1986. In addition, one
right has been and will be distributed for each share
issued following August 11, 1986. On April 26, 1996, the
board of directors of Indiana Energy authorized the
amendment and restatement of the shareholder rights
agreement relating to the common share purchase rights.
If and when the rights become exercisable, each right will
entitle the registered holder to purchase from Indiana
Energy one share of common stock at a price of $60 per
share, subject to certain adjustments described in the
rights agreement. The rights become exercisable only when
a person or group acquires beneficial ownership of 15
percent or more of Indiana Energy's common stock, or
becomes the beneficial owner of an amount of Indiana
Energy's common stock (but not less than 10 percent) which
the board of directors determines to be substantial and
whose ownership the board of directors determines is
intended or may be reasonably anticipated, in general, to
cause Indiana Energy to take actions determined by the
board of directors to be not in Indiana Energy's best long-
term interests or when any person or group announces a
tender or exchange offer for 15 percent or more of Indiana
Energy's common stock.
In the event that (1) Indiana Energy is acquired in a
merger or other business combination transaction and
Indiana Energy is not the surviving corporation, or (2)
any person consolidates or merges with Indiana Energy and
all or part of Indiana Energy common shares are exchanged
for securities, cash or property of any other person, or
(3) 50 percent or more of Indiana Energy's consolidated
assets or earning power are sold, each holder of a right
will have the right to receive, upon exercise at the then-
current exercise price of the right, that number of shares
of common stock of the acquiring company having a market
value of two times the exercise price of the right. In
the event that a person (1) acquires 15 percent or more of
the outstanding common stock or (2) is declared an adverse
person (i.e., a person who becomes the owner of at least
10 percent of Indiana Energy's common stock, whose share
ownership is determined by the board of directors to be
directed towards causing Indiana Energy to take actions
determined by the board of directors not to be in Indiana
Energy's long-term best interests) by the board of
directors of Indiana Energy, each holder of a right, other
than rights beneficially owned by the acquiring person
(which will thereafter be void), will have the right to
receive upon exercise that number of common shares having
a market value of two times the exercise price of the
right.
At any time after a person becomes an acquiring person,
and prior to the acquisition by such acquiring person of
50 percent or more of the outstanding common shares, the
board of directors of Indiana Energy may exchange the
rights (other than rights owned by such person or group
which have become void), in whole or in part, at an
exchange ratio of one common share per right (subject to
adjustment).
Under the terms and conditions provided in the rights
agreement, Indiana Energy may redeem the rights in whole,
but not in part, at a price of $.01 per right at any time
prior to the time a person or group of affiliated or
associated persons becomes an acquiring person as defined
by the rights agreement. The rights agreement, as amended
and restated as of May 31, 1996, was filed with the
Securities and Exchange Commission on June 17, 1996, and
will remain in effect for an extended term of 10 years.
7. Retirement Plans and Other Postretirement Benefits
Indiana Gas has a defined contribution retirement savings
plan which is qualified under sections 401(a) and 401(k)
of the Internal Revenue Code. Under the terms of the
retirement savings plan, eligible participants may direct
a specified percentage of their compensation to be
invested in shares of the company's common stock or
various investment funds. Participants in the retirement
savings plan have, subject to prescribed limitations,
matching company contributions made to the plan on their
behalf, plus a year-end lump sum company contribution.
During 1996, 1995 and 1994, Indiana Gas made contributions
of $2,445,000, $2,335,000 and $2,386,000, respectively.
Indiana Gas also has two non-contributory defined benefit
retirement plans that cover all employees meeting certain
minimum age and service requirements. Benefits are
determined by a formula based on the employee's base
earnings, years of participation in the plan and the
employee's age at retirement.
Indiana Gas has an unfunded supplemental retirement plan
for certain management employees. Benefits are determined
by a formula based on 65 percent of the participant's
average monthly earnings, less benefits received under the
company's pension and savings plans and the participant's
primary Social Security benefits.
The Indiana Gas defined benefit retirement plan assets are
under custody of trustees and consist of actively managed
stock and bond portfolios, as well as short-term
investments. It is Indiana Gas' funding policy to maintain
the pension plans on an actuarially sound basis. Under
this policy, funding was $464,000 in 1996, $143,000 in
1995 and $1,110,000 in 1994. As permitted by the
Statement of Financial Accounting Standards No. 71,
Accounting for the Effects of Certain Types of Regulation,
the company recognizes pension expense based on funding as
allowed for ratemaking purposes.
The calculation of pension expense is as follows:
<TABLE>
THOUSANDS 1996 1995 1994
<S> <C> <C> <C>
Pension benefits earned during the period $ 1,174 $ 1,086 $ 1,436
Interest accrued on projected pension
benefit obligation 4,730 4,554 4,752
Actual return on pension plan assets (10,244) (9,632) 9
Net amortization and deferral 3,909 3,880 (6,056)
SFAS 87 pension expense (431) (112) 141
Adjustment to reflect amount included
in rates 725 818 492
Total pension expense $ 294 $ 706 $ 633
</TABLE>
The following table reconciles the plans' SFAS 87 funded
status at September 30 with amounts recorded in the
company's financial statements. Certain assets and
obligations of the plans are deferred and recognized in
the financial statements in subsequent periods.
<TABLE>
THOUSANDS 1996 1995
<S> <C> <C>
Actuarial present value of pension benefits:
Vested benefits $ 54,637 $ 52,734
Nonvested benefits 159 200
Effect of future salary increases 8,167 7,455
Projected pension benefit obligation 62,963 60,389
Plan assets at fair value 75,748 69,423
Plan assets in excess of projected
pension benefit obligation at September 30 12,785 9,034
Unrecognized adjusted prior service costs 1,966 2,051
Unrecognized net assets at date of initial application (1,776) (2,084)
Unrecognized net (gain) loss (9,984) (6,971)
Adjustment required to recognize minimum liability (1,309) (1,275)
Adjustment to reflect amount included in rates (2,040) (1,348)
Prepaid (accrued) pension cost at September 30 $ (358) $ (593)
</TABLE>
The weighted-average discount rate used in determining the
actuarial present value of the SFAS 87 projected benefit
obligation was 8 percent. The expected long-term rate of
return on assets was 9 percent. The average rate of
increase in future compensation levels used ranged from 5
to 5.5 percent. These rates were used for all years
reported. The average future service of plan participants
used to compute amortization of the net assets existing at
the date of initial application of SFAS 87 is
approximately 17 years.
In addition to providing pension benefits, Indiana Gas
presently provides postretirement health care and life
insurance benefits to full-time employees who have
completed 10 years of service and retire from the company.
The plan pays stated percentages of most reasonable and
necessary medical expenses incurred by retirees, after
subtracting payments by other providers and after a stated
deductible has been met. The plan also contains cost-
sharing provisions (added in fiscal 1995) whereby
employees retiring after January 1, 1996, are required to
make contributions to the plan when increases in Indiana
Gas' health care costs exceed the general rate of
inflation, as measured by the Consumer Price Index (CPI).
These postretirement benefits are principally self-
insured. Currently, Indiana Gas does not fund this
postretirement plan.
On May 3, 1995, the IURC issued an order authorizing
Indiana Gas to recover the costs related to postretirement
benefits other than pensions under the accrual method of
accounting consistent with Statement of Financial
Accounting Standards No. 106, Employers' Accounting for
Postretirement Benefits Other Than Pensions (SFAS 106).
Amounts accrued prior to the order were deferred as
allowed by the IURC. During 1996, Indiana Gas reduced the
amount previously deferred. While this order is
consistent with the IURC's rulings for other utilities
within the state of Indiana and with the ratemaking
treatment of the majority of regulatory jurisdictions
outside of Indiana, the Office of Utility Consumer
Counselor is appealing the order. A decision on the
appeal by the Indiana Court of Appeals is expected early
in calendar 1997.
Postretirement benefit cost, including in 1996 the impact
of rate recovery and the cost-sharing provisions,
consisted of the following components:
<TABLE>
THOUSANDS 1996 1995 1994
<S> <C> <C> <C>
Service cost - benefits attributed to service
during the period $ 806 $ 1,423 $ 1,490
Interest cost on accumulated postretirement
obligation 3,264 4,186 3,915
Amortization of transition obligation 2,280 2,772 2,772
Amortization of net (gain) loss (351) - -
SFAS 106 postretirement benefit cost 5,999 8,381 8,177
Adjustment to reflect amount included in rates 1,329 (4,543) (5,436)
Postretirement benefit cost $ 7,328 $ 3,838 $ 2,741
</TABLE>
The following table reconciles the plan's funded status to
the accrued postretirement benefit cost as reflected on
the balance sheet as of September 30, 1996, and 1995:
<TABLE>
THOUSANDS 1996 1995
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees and dependents $ 27,903 $ 25,064
Other fully eligible participants 7,194 6,561
Other active participants 9,973 10,627
Total accumulated postretirement benefit obligation 45,070 42,252
Fair value of plan assets - -
Accumulated postretirement benefit obligation
in excess of plan assets (45,070) (42,252)
Unrecognized net (gain) loss (8,599) (10,192)
Unrecognized transition obligation 38,765 41,045
Accrued postretirement benefit
cost at September 30 $(14,904) $(11,399)
</TABLE>
The assumed health care cost trend rate for medical gross
eligible charges used in measuring the accumulated
postretirement benefit obligation as of September 30,
1996, was 8.4 percent for fiscal 1997. This rate is
assumed to decrease gradually through fiscal 2003 to 5.5
percent and remain at that level thereafter. The assumed
CPI rate, relating to the plan's cost sharing provisions
for retirees, was 3.5 percent. A 1-percent increase in
the assumed health care cost trend rates for each future
year produces approximately a $1.4-million increase in the
accumulated postretirement benefit obligation as of
September 30, 1996, and approximately a $155,000 increase
in the annual aggregate of the service and interest cost
components of postretirement benefit cost. The weighted-
average discount rate used in determining the accumulated
postretirement benefit obligation was 8 percent.
8. Commitments
Estimated capital expenditures for 1997 are $70 million.
Total lease expense was $2,863,000 in 1996, $2,811,000 in
1995 and $2,595,000 in 1994.
Lease commitments are $1,478,000 in 1997, $1,016,000 in
1998, $534,000 in 1999, $424,000 in 2000, $360,000 in 2001
and $47,000 in total for all later years. Included in
these amounts is an operating lease between Indiana Gas
and Energy Realty with payments of approximately $464,000
annually that extends through August 1998. There are no
leases that extend beyond 2002. Indiana Gas has storage
and supply contracts that range from one month to seven
years.
9. Environmental Costs
In the past, Indiana Gas and others, including former
affiliates, and/or previous landowners, operated
facilities for the manufacturing of gas and storage of
manufactured gas. These facilities are no longer in
operation and have not been operated for many years. In
the manufacture and storage of such gas, various
byproducts were produced, some of which may still be
present at the sites where these manufactured gas plants
and storage facilities were located. Management believes,
and the IURC has found that, those operations were
conducted in accordance with the then-applicable industry
standards. However, under currently applicable
environmental laws and regulations, Indiana Gas, and the
others, may now be required to take remedial action if
certain byproducts are found above a regulatory threshold
at these sites.
Indiana Gas has identified the existence, location and
certain general characteristics of 26 gas manufacturing
and storage sites. Removal activities have been conducted
at two sites and a remedial investigation/feasibility
study (RI/FS) is nearing completion at one of the sites
under an agreed order between Indiana Gas and the Indiana
Department of Environmental Management. Indiana Gas and
others are assessing, on a site-by-site basis, whether any
of the remaining 24 sites require remediation, to what
extent it is required and the estimated cost. Preliminary
assessments (PAs) have been completed on all but one of
the sites. Site investigations (SIs) have been completed
at 20 sites and supplemental site investigations (SSIs)
have been conducted at 15 sites. Based upon the site work
completed to date, Indiana Gas believes that a level of
contamination that may require some level of remedial
activity may be present at a number of the 24 sites.
Although Indiana Gas has not begun an RI/FS at additional
sites, Indiana Gas is currently conducting groundwater
monitoring at certain sites where deemed appropriate and
will continue its evaluation of many of the sites.
Based upon the work performed to date, Indiana Gas has
accrued remediation and related costs for the two sites
where remedial activities are taking place. PA/SI, SSI
and groundwater monitoring costs have been accrued for the
remaining sites where appropriate. Estimated RI/FS costs
and the costs of certain remedial actions that may likely
be required have also been accrued. Costs associated with
environmental remedial activities are accrued when such
costs are probable and reasonably estimable. Indiana Gas
does not believe it can provide an estimate of the
reasonably possible total remediation costs for any site
prior to completion of an RI/FS and the development of
some sense of the timing for implementation of the
potential remedial alternatives, to the extent such
remediation is required. Accordingly, the total costs
which may be incurred in connection with the remediation
of all sites, to the extent remediation is necessary,
cannot be determined at this time.
Indiana Gas has been pursuing recovery from three separate
sources for the costs it has incurred and expects to incur
relating to the 26 sites. Those sources are insurance
carriers, potentially responsible parties (PRPs) and
recovery through rates from retail gas customers.
On April 14, 1995, Indiana Gas filed suit in the United
States District Court for the Northern District of
Indiana, Fort Wayne Division, against a number of
insurance carriers for payment of claims for investigation
and clean-up costs already incurred, as well as for a
determination that the carriers are obligated to pay these
costs in the future. On October 2, 1996, the Court
granted several motions filed by defendant insurance
carriers for summary judgment on a number of issues
relating to the insurers' obligations to Indiana Gas under
insurance policies issued by these carriers. For example,
the Court held that because the placement of residuals on
the ground at the sites was done intentionally, there was
no "fortuitous accident" and therefore no "occurrence"
subject to coverage under the relevant policies. The
Court also ruled adversely to Indiana Gas with respect to,
among other issues, applicability of the pollution
exclusion in policies containing this exclusion, the
application of an injury-in-fact trigger under the
policies at issue and the existence of a justiciable
controversy with respect to sites for which no claim has
been asserted against Indiana Gas. Since the management
of Indiana Gas believes that a number of these rulings are
contrary to Indiana law, it intends to appeal all adverse
rulings to the United States Court of Appeals for the
Seventh Circuit. However, if these rulings are not
reversed on appeal, they would effectively eliminate
coverage under most of the policies at issue. There can
be no assurance as to whether Indiana Gas will prevail on
this appeal. As of September 30, 1996, Indiana Gas has
obtained cash settlements from some insurance carriers in
an aggregate amount in excess of $13.5 million.
Indiana Gas has also completed the process of identifying
PRPs for each site. PRPs include two financially viable
utilities, PSI Energy, Inc. (PSI) and Northern Indiana
Public Service Company (NIPSCO). PSI has been identified
as a PRP at 19 of the sites. Indiana Gas has been
negotiating with PSI to determine PSI's share of
responsibility, although no agreement has been reached
between the parties. With the help of outside counsel,
Indiana Gas has prepared estimates of PSI's and other
PRP's share of environmental liabilities which may exist
at each of the sites based on equitable principles derived
from case law or applied by parties in achieving
settlements. NIPSCO has been identified as an additional
PRP at five of these 19 sites. On September 27, 1995,
Indiana Gas reached an agreement with NIPSCO which
provides for coordination of efforts and sharing of
investigation and clean-up costs incurred and to be
incurred at the five sites in which they both have an
interest. The cost sharing estimates of PSI and other
PRPs, and the NIPSCO agreement, have been utilized by
Indiana Gas to record a receivable from PRPs for their
share of the liability for work performed by Indiana Gas
to date, as well as to accrue Indiana Gas' proportionate
share of the estimated cost related to work not yet
performed. The outstanding receivable from PRPs of $1.5
million is reflected in Accounts Receivable on the
Consolidated Balance Sheet at September 30, 1996.
In January 1992, Indiana Gas filed a petition with the
IURC seeking regulatory authority for, among other
matters, recovery through rates of all costs Indiana Gas
incurs in complying with federal, state and local
environmental regulations in connection with past gas
manufacturing activities. On May 3, 1995, the IURC
concluded that the costs incurred by Indiana Gas to
investigate and, if necessary, clean-up former
manufactured gas plant sites are not utility operating
expenses necessary for the provision of utility service
and, therefore, are not recoverable as operating expenses
from utility customers. The decision was contrary to
rulings in other states where utility regulatory
commissions have issued orders on the subject. The
precedent cited by the IURC was a ruling related to a
cancelled nuclear power plant which, unlike manufactured
gas plants, never provided service to the public.
Management believes applying the nuclear power plant
decision to Indiana Gas' case was an incorrect application
of the law and has appealed the decision to the Indiana
Court of Appeals. The Commission did indicate that during
Indiana Gas' next rate case it would be appropriate to
quantify the effect of the investigation and clean-up
activities as part of the business risk to be considered
by the Commission in establishing the allowed overall rate
of return.
As of September 30, 1996, Indiana Gas has recorded in
aggregate $14.5 million, which represents all
environmental costs which it presently expects to incur in
connection with remediation activities. Presently, these
environmental costs have had no material impact on Indiana
Gas' earnings.
The impact on Indiana Gas' financial position and results
of operations of complying with federal, state and local
environmental regulations related to former manufactured
gas plant sites is contingent upon several uncertainties.
These include the costs of any compliance activities which
may occur and the timing of the actions taken, the impact
of joint and several liability upon the magnitude of the
contingency, the outcome of proceedings which challenge
the IURC ruling on recovery of costs from customers, as
well as the outcome of the appeal of the summary judgment
rulings issued in favor of the insurers in the insurance
litigation described above. Although Indiana Gas will
endeavor to manage the manufactured gas plant remediation
program so that any amounts received will be sufficient to
fund environmental costs, there can be no assurance that
in the future, environmental costs will not exceed related
recoveries.
10. Nonutility Income
Nonutility income includes the earnings recognized from
Indiana Energy's gas marketing affiliates. Prior to April
1, 1996, IES provided natural gas and related services to
other gas utilities and customers in Indiana and
surrounding states, and from January 1, 1996, to
March 31, 1996, to Indiana Gas. On March 15, 1996, IGC
Energy, Inc., an indirect wholly owned subsidiary of Indiana
Energy, and Citizens By-Products Coal Company, a wholly owned
subsidiary of Citizens Gas and Coke Utility (Citizens Gas),
formed a jointly- and equally-owned limited liability company to
provide natural gas supply and related marketing services.
The new entity, ProLiance Energy, LLC, assumed the
business of IES effective April 1, 1996, and now is the
supplier of gas and related services to both Indiana Gas
and Citizens Gas. The company's investment in ProLiance
is accounted for using the equity method. ProLiance's
fiscal year ends on August 31.
Indiana Energy's gas marketing affiliates' contribution to
nonutility income is listed below.
THOUSANDS 1996 1995 1994
Nonutility income (loss):
Gas marketing affiliates, net of reserve $ 3,265 $ 89 $ -
Other - net 306 758 (155)
$ 3,571 $ 847 $ (155)
Two proceedings which may affect the formation, operation
or earnings of ProLiance are currently pending before the
IURC. The first proceeding was initiated by a small group
of Indiana Gas' and Citizens Gas' large-volume customers
who contend that the gas service contracts between
ProLiance and Indiana Gas and Citizens Gas should be
disapproved by the IURC or, alternatively, that the IURC
should regulate the operations of ProLiance. On September
27, 1996, the IURC issued a partial decision in that
proceeding and found that ProLiance is not subject to
regulation as a public utility. The IURC did confirm that
it will continue to monitor gas costs incurred by Indiana
Gas. Hearings on the remaining issues were concluded on
October 9, 1996. A decision from the IURC is expected
during the first half of calendar 1997.
The second proceeding involves the quarterly gas cost
adjustment applications of Indiana Gas and Citizens Gas
wherein these utilities are proposing to recover the costs
they have and will incur under their gas supply and
related agreements with ProLiance. This proceeding will
consider whether the recovery of those costs is consistent
with Indiana law governing gas cost recovery. The hearing
on the second proceeding has not yet been scheduled.
As a result of the two on-going proceedings, $1.5 million
of Indiana Energy's share of its gas marketing affiliates'
net income has been reserved until the outcome of these
proceedings can be determined.
11. Income Taxes
The components of consolidated income tax expense,
including amounts in "Other" on the Consolidated
Statements of Income, were as follows:
<TABLE>
THOUSANDS 1996 1995 1994
<S> <C> <C> <C>
Current:
Federal $20,574 $12,193 $13,153
State 3,277 2,077 2,285
23,851 14,270 15,438
Deferred:
Federal 709 3,652 2,987
State 95 342 286
804 3,994 3,273
Amortization of investment tax credits (930) (930) (930)
Consolidated income tax expense $23,725 $17,334 $17,781
</TABLE>
Effective income tax rates were 35.99 percent, 34.47
percent and 34.08 percent of pretax income for 1996, 1995
and 1994, respectively. This compares with a combined
federal and state income tax statutory rate of 37.93
percent for all years reported. Individual components of
these rate differences are not significant except
investment tax credit which amounted to (1.4%) in 1996 and
(1.8%) in 1995 and 1994.
As required by the IURC, Indiana Gas uses a normalized
method of accounting for deferred income taxes. Deferred
income taxes reflect the net tax effect of temporary
differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the
amounts used for income tax purposes. Deferred income
taxes are provided for taxes not currently payable due to,
among other things, the use of various accelerated
depreciation methods, shorter depreciable lives and the
deduction of certain construction costs for tax purposes.
Taxes deferred in prior years are being charged and income
credited as these tax effects reverse over the lives of
the related assets. The provisions for the deferred tax
effects relating to the excess of tax-over-book
depreciation amounted to $3,474,000 in 1996, $4,031,000 in
1995 and $2,852,000 in 1994.
Significant components of Indiana Gas' net deferred tax
liability as of September 30, 1996, and 1995 are as
follows:
THOUSANDS 1996 1995
Deferred tax liabilities:
Accelerated depreciation $48,009 $45,902
Property basis differences 17,690 18,560
Acquisition adjustment 6,475 6,664
Other (7,406) (4,791)
Deferred tax assets:
Deferred investment tax credit (4,237) (4,590)
Regulatory income tax liability (1,075) (1,440)
Less deferred income taxes related
to current assets and liabilities 7,406 4,791
Balance as of September 30 $66,862 $65,096
Investment tax credits have been deferred and are being
credited to income over the life of the property giving
rise to the credit. The Tax Reform Act of 1986 eliminated
investment tax credits for property acquired after January
1, 1986.
12. Affiliate Transactions
ProLiance began providing natural gas supply and related
services to Indiana Gas effective April 1, 1996. Indiana
Gas' purchases from ProLiance during 1996 totaled $118
million. Amounts owed by Indiana Gas to ProLiance were
$18 million at September 30, 1996, and are included in
Accounts Payable on the Consolidated Balance Sheet.
ProLiance has an available letter of credit with a bank to
borrow up to $30 million. Borrowings are secured by a
support agreement signed by Indiana Energy and Citizens
Gas.
13. New Accounting Standards
In March 1995, the Financial Accounting Standards Board
(FASB) issued Statement of Financial Accounting Standards
No. 121, Accounting for the Impairment of Long-Lived
Assets and Long-Lived Assets to be Disposed Of. This
statement imposes stricter criteria for regulatory assets
by requiring that such assets be probable of future
recovery at each balance sheet date. Indiana Gas will
adopt this standard effective October 1, 1996, and does
not expect that the adoption will have a material impact
on its financial position or results of operations based
on the current regulatory structure in which it operates.
This conclusion may change in the future as competitive
factors influence pricing in the industry.
In October 1995, the FASB issued Statement of Financial
Accounting Standards No. 123, Accounting for Stock-Based
Compensation. Pursuant to this new standard, companies
are encouraged, but not required, to adopt a fair value
method of accounting for employee stock-based
transactions. Indiana Gas does not expect this standard
to have a material impact on its financial position or
results of operations.
14. Summarized Financial Data (Unaudited)
Summarized quarterly financial data (in thousands of
dollars except per share amounts) for 1996 and 1995 are as
follows:
<TABLE>
1996: THREE MONTHS ENDED DEC. 31 MAR. 31 JUNE 30 SEP. 30
<S> <C> <C> <C> <C>
Utility operating revenues $154,309 $222,553 $ 91,211 $ 62,521
Utility operating income (loss) 22,654 27,280 5,863 (2,244)
Nonutility income (loss) 165 2,404 529 473
Net income (loss) 19,093 26,234 2,802 (5,928)
Earnings (loss) per average
share of common stock $ .85 $ 1.16 $ .13 $ (.27)
1995: THREE MONTHS ENDED DEC. 31 MAR. 31 JUNE 30 SEP. 30
Utility operating revenues $113,062 $150,468 $ 83,081 $ 57,199
Utility operating income (loss) 14,593 24,667 7,800 (872)
Nonutility income (loss) 95 915 (103) (60)
Net income (loss) 10,874 22,076 4,224 (4,218)
Earnings (loss) per average
share of common stock $ .48 $ .98 $ .19 $ (.19)
Note: Because of the seasonal factors that significantly
affect the companies' operations, the results of
operations for interim periods within fiscal years are not
comparable.
</TABLE>
Item 9. Changes in and Disagreements with Accountants
None.
Part III
Item 10. Directors and Executive Officers of the Registrant
Except for the list of the executive officers, which can be
found in Part I, Item 4(a) of this report, and as noted below,
the information required to be shown in this part for Item 10,
Directors and Executive Officers of the Registrant is
incorporated by reference here from the registrant's definitive
proxy statement. That statement was prepared according to
Regulations 14A and S-K and filed electronically with the
Securities and Exchange Commission on December 6, 1996.
Section 16(a) Beneficial Ownership Reporting
Compliance
Based solely upon a review of Forms 3 and 4 and
amendments thereto provided to the company during
the most recent fiscal year, and Forms 5 and
amendments thereto furnished to the company with
respect to its most recent fiscal year, and written
representations from its directors, officers and
more than 10% shareholders, the following table
sets forth certain information concerning Section
16(a) reporting delinquencies by the above-
referenced persons during the company's most
recently completed fiscal year.
With respect to Section 16(a) of the Exchange Act,
the following insider filing was delinquent:
Late Failure
Person Form Report Transactions to File
Mari H. George 5 N/A * 1
*The above failure to file was not discovered until
December 18, 1996, and is in the process of being
rectified. Ms. George, who is a 10% shareholder by
attribution, is a participant in the company's
Dividend Reinvestment Plan. Her acquisitions of
the company's common shares under that plan have
not been reported for the fiscal years 1994, 1995
and 1996. In total, Ms. George has acquired
378.842 shares under the plan since she commenced
participation in the plan.
Item 11. Executive Compensation
The information required to be shown in this part for Item
11, Executive Compensation, is incorporated by reference
here from the registrant's definitive proxy statement.
That statement was prepared according to Regulations 14A
and S-K and filed electronically with the Securities and
Exchange Commission on December 6, 1996.
Item 12. Securities Ownership of Certain Beneficial Owners and
Management
The information required to be shown in this part for Item
12, Securities Ownership of Certain Beneficial Owners and
Management is incorporated by reference here from the
registrant's definitive proxy statement. That statement
was prepared according to Regulations 14A and S-K and filed
electronically with the Securities and Exchange Commission
on December 6, 1996.
Item 13. Certain Relationships and Related Transactions
The information required to be shown in this part for Item
13, Certain Relationships and Related Transactions is
incorporated by reference here from the registrant's
definitive proxy statement. That statement was prepared
according to Regulations 14A and S-K and filed
electronically with the Securities and Exchange Commission
on December 6, 1996.
Part IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K
The following documents are filed as part of this report:
(a)-1 Financial Statements
Location in 10-K
Report of Independent Public Accountants Item 8
Consolidated Statements of Income - 1996,
1995 and 1994 Item 8
Consolidated Statements of Cash Flows - 1996,
1995 and 1994 Item 8
Consolidated Balance Sheets at September 30,
1996 and 1995 Item 8
Consolidated Statements of Common Shareholders'
Equity - 1996, 1995 and 1994 Item 8
Consolidated Schedules of Long-Term Debt
as of September 30, 1996 and 1995 Item 8
Notes to Financial Statements Item 8
(a)-2 Financial Statement Schedules
Report of Independent Public Accountants on Schedules
Schedule II. Valuation and Qualifying
Accounts - 1996, 1995 and 1994
(a)-3 Exhibits
See Exhibit Index
(b) Reports on Form 8-K
On October 18, 1996, Indiana Energy and
Indiana Gas filed a Current Report on Form 8-K which
disclosed among other matters, the granting of certain
summary judgment motions filed by defendant insurance
carriers in the insurance coverage litigation pending in
federal district court with respect to environmental costs
incurred and expected to be incurred by Indiana Gas at
certain manufactured gas plant and storage facility sites.
Item 5. Other Events
Updated environmental disclosure.
EXHIBIT INDEX
Exhibit No. Description Reference
2-A Acquisition Agreement Exhibit 1 to
dated as of December Indiana
28, 1992, between Energy's
Tennessee Gas Pipeline Current Report
Company, Tenneco on Form 8-K
Merger Company, dated December
EnTrade Corporation 29, 1992, and
and the filed January
Interestholders listed 13, 1993.
on Exhibit A thereto.
3-A Amended and Restated Exhibit 3-A to
Articles of Indiana
Incorporation. Energy's 1993
Annual Report
on Form 10-K.
3-B Code of By-Laws, as Filed herewith.
amended.
4-A Applicable provisions Exhibit 3-A to
of Indiana Energy's Indiana
Amended and Restated Energy's 1993
Articles of Annual Report
Incorporation, as on Form 10-K.
amended, as set forth
as Exhibit 3-A above.
4-B Amended and Restated Exhibit 1 to
Rights Agreement Indiana
between Indiana Energy Energy's
and Continental Bank, Amendment to
N.A. (Now First its
Chicago Trust Company Registration
of New York), as Statement on
Rights Agent, Form 8-A, filed
including form of June 17, 1996.
Right Certificate,
dated as of July 30,
1986, as amended and
restated as of
December 8, 1989 and
as further amended and
restated as of May 31,
1996.
4-C Indenture dated Exhibit 4(a) to
February 1, 1991, Indiana Gas
between Indiana Gas Company, Inc.'s
and Continental Bank, Current Report
National Association. on Form 8-K
dated February
1, 1991, and
filed February
15, 1991; First
Supplemental
Indenture
thereto dated
as of February
15, 1991,
(incorporated
by reference to
Exhibit 4(b) to
Indiana Gas
Company, Inc.'s
Current Report
on Form 8-K
dated February
1, 1991, and
filed February
15, 1991);
Second
Supplemental
Indenture
thereto dated
as of September
15, 1991,
(incorporated
by reference to
Exhibit 4(b) to
Indiana Gas
Company, Inc.'s
Current Report
on Form 8-K
dated September
15, 1991, and
filed September
25, 1991);
Third
Supplemental
Indenture
thereto dated
as of September
15, 1991
(incorporated
by reference to
Exhibit 4(c) to
Indiana Gas
Company, Inc.'s
Current Report
on Form 8-K
dated September
15, 1991 and
filed September
25,
1991);Fourth
Supplemental
Indenture
thereto dated
as of December
2, 1992,
(incorporated
by reference to
Exhibit 4(b) to
Indiana Gas
Company, Inc.'s
Current Report
on Form 8-K
dated December
1, 1992, and
filed December
8, 1992); and
Officers'
Certificate
pursuant to
Section 301 of
the Indenture
dated as
of April 5,
1995,
(incorporated
by reference to
Exhibit 4(a) to
Indiana Gas
Company, Inc.'s
Current Report
on Form 8-K
dated and filed
April 5, 1995).
10-A Employment Agreement Exhibit 10-A to
among Indiana Energy, Indiana
Inc., Indiana Gas Energy's 1990
Company, Inc., and Annual Report
Lawrence A. Ferger on Form 10-K.
effective January 1,
1990.
10-B Employment Agreement Exhibit 10-C to
among Indiana Energy, Indiana
Inc., Indiana Gas Energy's 1990
Company, Inc., and Annual Report
Niel C. Ellerbrook, on Form 10-K.
effective January 1,
1990.
10-C Employment Agreement Exhibit 10-D to
between Indiana Gas Indiana
Company, Inc., and Paul T. Energy's 1990
Baker effective January 1, Annual Report
1990. on Form 10-K.
10-D Employment Agreement Exhibit 10-E to
between Indiana Gas Indiana
Company, Inc., and Energy's 1990
Anthony E. Ard Annual Report
effective January 1, on Form 10-K.
1990.
10-E Termination Benefits Exhibit 10-F to
Agreement, dated July Indiana
29, 1994, among Energy's 1994
Indiana Energy, Inc., Annual Report
Indiana Gas Company, on Form 10-K.
Inc. and Lawrence A.
Ferger.
10-F Termination Benefits Exhibit 10-G to
Agreement, dated July Indiana
29, 1994, among Energy's 1994
Indiana Energy, Inc., Annual Report
Indiana Gas Company, on Form 10-K.
Inc. and
Paul T. Baker.
10-G Termination Benefits Exhibit 10-H to
Agreement, dated July Indiana
29, 1994, among Energy's 1994
Indiana Energy, Inc., Annual Report
Indiana Gas Company, on Form 10-K.
Inc. and
Niel C. Ellerbrook.
10-H Termination Benefits Exhibit 10-I to
Agreement, dated July Indiana
29, 1994, among Energy's 1994
Indiana Energy, Inc., Annual Report
Indiana Gas Company, on Form 10-K.
Inc. and
Anthony E. Ard.
10-I Termination Benefits Filed herewith.
Agreement, dated July
29, 1994, and as
amended and restated
March 15, 1996, among
Indiana Energy, Inc.,
Indiana Gas Company,
Inc. and
Carl L. Chapman.
10-J Termination Benefits Filed herewith.
Agreement, dated July
29, 1994, among
Indiana Energy, Inc.,
Indiana Gas Company,
Inc., and Timothy M.
Hewitt.
10-K Executive Compensation Exhibit 10-K to
Deferral Plan Indiana
effective December 1, Energy's 1994
1994. Annual Report
on Form 10-K.
10-L Directors Compensation Exhibit 10-M to
Deferral Plan Indiana
effective January 1, Energy's 1994
1995. Annual Report
on Form 10-K.
10-M Executive Restricted Stock Exhibit A to
Plan effective October 1, Indiana
1987, as amended. Energy's Proxy
Statement filed
on December 4,
1987; First
Amendment to
Indiana Energy,
Inc. Executive
Restricted
Stock Plan
(incorporated
by reference to
Exhibit 10-A to
Indiana
Energy's 1991
Annual Report
on Form 10-K.)
10-N Indiana Energy, Inc. Exhibit 10-D to
Annual Management Indiana
Incentive Plan Energy's 1987
effective October 1, Annual Report
1987. on Form 10-K.
10-O Indiana Energy, Inc. Indiana
Directors' Restricted Energy's
Stock Plan, as amended Definitive
and restated on Proxy Statement
October 25, 1991. filed on
December 6,
1991.
10-P Fundamental Operating Exhibit 10-B to
Agreement of ProLiance Indiana
Energy, LLC between Energy's
IGC Energy, Inc. and Quarterly
Citizens By-Products Report on Form
Coal Company, 10-Q for the
effective March 15, quarterly
1996. period ended
March 31, 1996.
10-Q Formation Agreement Exhibit 10-C to
among Indiana Energy, Indiana
Inc., Indiana Gas Energy's
Company, Inc., IGC Quarterly
Energy, Inc., Indiana Report on Form
Energy Services, Inc., 10-Q for the
Citizens Gas & Coke quarterly
Utility, Citizens By- period ended
Products Coal Company, March 31, 1996.
Citizens Energy
Services Corporation,
and ProLiance Energy,
LLC, effective
March 15, 1996.
10-R Gas Sales and Exhibit 10-C to
Portfolio Indiana Gas'
Administration Quarterly
Agreement between Report on Form
Indiana Gas Company, 10-Q for the
Inc. and ProLiance quarterly
Energy, LLC, effective period ended
March 15, 1996, for March 31, 1996.
services to begin
April 1, 1996.
10-S Amended appendices to Exhibit 10-R to
the Gas Sales and Indiana Gas'
Portfolio 1996 Annual
Administration Report on Form
Agreement between 10-K.
Indiana Gas Company,
Inc. and ProLiance
Energy, LLC referred
to above in Exhibit 10-
R, effective October
1, 1996.
10-T Exhibit 10-T schedules material gas
contracts which are in effect between
Indiana Gas Company, Inc. and the suppliers
listed. The gas contracts within each type
are substantially identical in all material
respects and at least one of each type of
contract has been or is filed as indicated.
The schedule details all material aspects in
which a contract may differ from the
contract filed. Indiana Gas has assigned or
released many of these contracts to its
affiliate, ProLiance Energy, LLC
(ProLiance), pursuant to the Gas Sales and
Portfolio Administration Agreement between
Indiana Gas and ProLiance referred to above
in Exhibits 10-R and 10-S.
<TABLE>
Exh. Days of Effective Expir.
No. Type of Contract Supplier Contract No. Wthdrwl. MDth/Day Date Date Reference
<S> <C> <C> <C> <C> <C> <C> <C> <C>
6/30/93
Form 10Q,
File 1-6494:
10-T.1 Firm Transportation Panhandle Eastern P PLT 011715 38,572 5/1/93 3/31/98 Exh. 10-B
10-T.2 Firm Transportation Panhandle Eastern P PLT 011716 51,431 5/1/93 3/31/99 Exh. 10-A
10-T.3 Firm Transportation Panhandle Eastern P PLT 011718 51,431 5/1/93 2/28/97 Exh. 10-C
10-T.4 Firm Transportation Panhandle Eastern P PLT 011721 77,144 5/1/93 3/31/97 Exh. 10-D
10-T.5 Market Area - Panhandle Eastern P PLT 011719 50,000 5/1/93 3/31/97 1993 Form 10K, Exh.
Firm Transportation 10-I.5, File 1-6494.
10-T.6 Market Area - Panhandle Eastern P PLT 011720 50,000 5/1/93 3/31/97 See Exhibit 10-P.5
Firm Transportation
10-T.7 Market Area - Texas Gas T3780 50,000 11/1/93 10/31/98 1993 Form 10K, Exh.
Firm Transportation 10-I.7, File 1-6494.
10-T.8 No Notice Service Texas Gas N0420 41,687 11/1/93 10/31/98 1993 Form 10K, Exh.
10-I.8, File 1-6494.
10-T.9 No Notice Service Texas Gas N0325 56,793 11/1/93 10/31/02 See Exhibit 10-P.8
10-T.10 No Notice Service Texas Gas N0325 56,794 11/1/93 10/31/98 See Exhibit 10-P.8
10-T.11 No Notice Service Texas Gas N0325 56,794 11/1/93 10/31/99 See Exhibit 10-P.8
10-T.12 Firm Storage ANR T,E & S 00087 100 29,000 3/1/73 2/28/98 1991 Form 10K, Exh.
10-N, File 1-6494.
10-T.13 Firm Storage ANR T,E & S 05787 100 100,806 4/1/92 3/31/97 1992 Form 10K, Exh.
10-R, File 1-6494.
10-T.14 Firm Storage-Related ANR T,E & S 05788 100,000 4/1/92 3/31/97 1992 Form 10K, Exh.
Transportation 10-S, File 1-6494.
10-T.15 Firm Natural Gas Tenneco NGFSA 9609 20,000 11/1/95 3/31/98 1995 Form 10-K, Exh.
Supply Gas Marketing 10-P.20, File 1-6494.
10-T.16 Firm Natural Gas Tenneco NGFSA 9619 16,000 11/1/95 3/31/98 1995 Form 10-K, Exh.
Supply Gas Marketing 10-P.21, File 1-6494.
10-T.17 Firm Natural Gas Tenneco NGFSA9620 40,000 12/1/95 2/28/98 1995 Form 10-K, Exh.
Supply Gas Marketing 10-P.22, File 1-6494.
21 Subsidiaries of Indiana Energy, Inc. Filed herewith.
23 Consent of Independent Public Accountants Filed herewith.
27 Financial Data Schedule Filed herewith.
</TABLE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULES
To Indiana Energy, Inc.:
We have audited in accordance with generally accepted
auditing standards, the consolidated financial statements
included in Item 8, in this Form 10-K, and have issued our
report thereon dated October 25, 1996. Our audit was made for
the purpose of forming an opinion on those statements taken as
a whole. The schedules listed in Item 14(a)-2 are the
responsibility of the company's management and are presented
for purposes of complying with the Securities and Exchange
Commission's rules and are not part of the basic financial
statements. These schedules have been subjected to the
auditing procedures applied in the audit of the basic financial
statements and, in our opinion, fairly state in all material
respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
/s/ Arthur Andersen LLP
Arthur Andersen LLP
Indianapolis, Indiana
October 25, 1996
<TABLE>
INDIANA ENERGY, INC.
AND SUBSIDIARY COMPANIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
YEAR ENDED SEPTEMBER 30, 1996
(Thousands)
Col. A Col. B Col. C Col. D Col. E Col. F
Additions Deductions
(1) (2)
For Purposes
Balance at Charged to For Which Balance at
September 30, Costs and Reserves Other September 30,
Description 1995 Expenses Other Were Created Changes 1996
<S> <C> <C> <C> <C> <C> <C>
RESERVE DEDUCTED FROM APPLICABLE ASSETS:
Reserve for uncollectible accounts $ 1,662 $ 3,803 $ 0 $ 3,612 $ 0 $ 1,853
</TABLE>
<TABLE>
INDIANA ENERGY, INC.
AND SUBSIDIARY COMPANIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
YEAR ENDED SEPTEMBER 30, 1995
(Thousands)
Col. A Col. B Col. C Col. D Col. E Col. F
Additions Deductions
(1) (2)
For Purposes
Balance at Charged to For Which Balance at
September 30, Costs and Reserves Other September 30,
Description 1994 Expenses Other Were Created Changes 1995
<S> <C> <C> <C> <C> <C> <C>
RESERVE DEDUCTED FROM APPLICABLE ASSETS:
Reserve for uncollectible accounts $ 1,238 $ 3,690 $ 0 $ 3,266 $ 0 $ 1,662
</TABLE>
<TABLE>
INDIANA ENERGY, INC.
AND SUBSIDIARY COMPANIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
YEAR ENDED SEPTEMBER 30, 1994
(Thousands)
Col. A Col. B Col. C Col. D Col. E Col. F
Additions Deductions
(1) (2)
For Purposes
Balance at Charged to For Which Balance at
September 30, Costs and Reserves Other September 30,
Description 1993 Expenses Other Were Created Changes 1994
<S> <C> <C> <C> <C> <C> <C>
RESERVE DEDUCTED FROM APPLICABLE ASSETS:
Reserve for uncollectible accounts $ 2,055 $ 3,850 $ 0 $ 4,667 $ 0 $ 1,238
</TABLE>
SIGNATURES
Pursuant to the requirements of the Section 13 or 15(d) 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.
INDIANA ENERGY, INC.
Dated December 19, 1996 /s/Lawrence A. Ferger
Lawrence A. Ferger,
Chairman, President
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of the Registrant and in the capacities and
on the dates indicated.
Signature Title Date
/s/Lawrence A. Ferger Chairman, President and December 19, 1996
Lawrence A. Ferger Chief Executive Officer
/s/Niel C. Ellerbrook Vice President and Treasurer December 19, 1996
Niel C. Ellerbrook Chief Financial Officer and
Director
/s/Jerome A. Benkert Controller December 19, 1996
Jerome A. Benkert
/s/Paul T. Baker Director December 19, 1996
Paul T. Baker
/s/Gerald L. Bepko Director December 19, 1996
Gerald L. Bepko
/s/Loren K. Evans Director December 19, 1996
Loren K. Evans
/s/Otto N. Frenzel III Director December 19, 1996
Otto N. Frenzel III
/s/Anton H. George Director December 19, 1996
Anton H. George
Director December 19, 1996
Don E. Marsh
/s/Fred A. Poole Director December 19, 1996
Fred A. Poole
/s/Richard P. Rechter Director December 19, 1996
Richard P. Rechter
Director December 19, 1996
James C. Shook
/s/Jean L. Wojtowicz Director December 19, 1996
Jean L. Wojtowicz
CODE OF BY-LAWS
OF
INDIANA ENERGY, INC.
AS AMENDED AND RESTATED
IN FULL ON JULY 1, 1987
AS FURTHER AMENDED OCTOBER 27, 1989
AS FURTHER AMENDED AUGUST 31, 1990
AS FURTHER AMENDED JULY 26, 1991
AS FURTHER AMENDED SEPTEMBER 24, 1993
AS FURTHER AMENDED FEBRUARY 25, 1994
AS FURTHER AMENDED JULY 28, 1995
AS FURTHER AMENDED APRIL 26, 1996
AS FURTHER AMENDED JULY 26, 1996
ARTICLE I
OFFICES
SECTION 1. PRINCIPAL OFFICE. The principal office
(the "Principal Office") of INDIANA ENERGY, INC. (the
"Corporation") shall be at the registered office of the
Corporation, or such other place as shall be determined
by resolution of the Board of Directors of the
Corporation (the "Board").
SECTION 2. OTHER OFFICES. The Corporation may have
such other offices at such other places within or without
the State of Indiana as the Board may from time to time
designate, or as the business of the Corporation may
require.
ARTICLE II
SEAL
SECTION 1. CORPORATE SEAL. The corporate seal of
the Corporation (the "Seal") shall be circular in form
and shall have inscribed thereon the words "INDIANA
ENERGY, INC. -- CORPORATE SEAL -- INDIANA." Use of the
Seal or an impression thereof shall not be required, and
shall not affect the validity of any instrument
whatsoever.
ARTICLE III
SHAREHOLDERS' MEETINGS
SECTION 1. PLACE OF MEETING. Every meeting of the
shareholders of the Corporation (the "Shareholders")
shall be held at the Principal Office, unless a different
place is specified in the notice or waiver of notice of
such meeting or by resolution of the Board or the
Shareholders, in which event such meeting may be held at
the place so specified, either within or without the
State of Indiana.
SECTION 2. ANNUAL MEETING. The annual meeting of
the shareholders (the "Annual Meeting") shall be held
each year at 10:30 o'clock A.M. on the fourth Wednesday
in January, or such other time or date determined by
resolution of the Board, for the purpose of electing
directors of the Corporation ("Directors") and for the
transaction of such other business as may legally come
before the Annual Meeting. If for any reason the Annual
Meeting shall not be held at the date and time specified
or fixed as herein provided, the business to be
transacted at such Annual Meeting may be transacted at
any special meeting of the Shareholders (a "Special
Meeting") called for that purpose.
SECTION 3. NOTICE OF ANNUAL MEETING. Written or
printed notice of the Annual Meeting, stating the date,
time and place thereof, shall be delivered or mailed by
the Secretary or an Assistant Secretary to each
Shareholder of record entitled to notice of such Meeting,
at such address as appears on the records of the
Corporation, at least ten and not more than sixty days
before the date of such Meeting.
SECTION 4. SPECIAL MEETINGS. Special Meetings, for
any purpose or purposes (unless otherwise prescribed by
law), may be called by the Board or the President, and
shall be called by the President or any Vice President at
(a) the request in writing of a majority of the Board, or
(b) the written demand, delivered to the Secretary, of
Shareholders holding of record not less than a majority
of the voting power of all the shares of the Corporation
("Shares") issued and outstanding and entitled by the
Amended and Restated Articles of Incorporation of the
Corporation, as the same may, from time to time, be
amended (the "Articles"), to vote on the business
proposed to be transacted thereat; provided however that,
for purposes of calculating such majority, only shares
which have been beneficially owned or held of record by
the holders thereof for at least three (3) years shall be
included. All requests or demands for Special Meetings
shall state the purpose or purposes thereof, and the
business transacted at such Meeting shall be confined to
the purposes stated in the call and matters germane
thereto.
SECTION 5. NOTICE OF SPECIAL MEETINGS. Written or
printed notice of all Special Meetings, stating the date,
time, place and purpose or purposes thereof, shall be
delivered or mailed by the Secretary or the President or
the Vice President calling the Meeting to each
Shareholder of record entitled to notice of such Meeting,
at such address as appears on the records of the
Corporation, at least ten and not more than sixty days
before the date of such Meeting. Notice of any Special
Meeting called at the written demand of Shareholders
shall be delivered or mailed within sixty days of the
Secretary's receipt of such demand.
SECTION 6. WAIVER OF NOTICE OF MEETINGS. Notice of
any Annual or Special Meeting (a "Meeting") may be waived
in writing by any Shareholder, before or after the date
and time of the Meeting specified in the notice thereof,
by a written waiver delivered to the Corporation for
inclusion in the minutes or filing with the corporate
records. A Shareholder's attendance at any Meeting in
person or by proxy shall constitute a waiver of (a)
notice of such Meeting, unless the Shareholder at the
beginning of the Meeting objects to the holding of or the
transaction of business at the Meeting, and (b)
consideration at such Meeting of any business that is not
within the purpose or purposes described in the Meeting
notice, unless the Shareholder objects to considering the
matter when it is presented.
SECTION 7. QUORUM. At any Meeting, the holders of
a majority of the voting power of Shares issued and
outstanding and entitled to vote at such Meeting,
represented in person or by proxy, shall constitute a
quorum for the election of Directors or for the
transaction of other business, unless otherwise provided
by law, the Articles or this Code of By-Laws, as the same
may, from time to time, be amended (these "By-Laws").
If, however, a quorum shall not be present or represented
at any Meeting, the Shareholders entitled to vote
thereat, present in person or represented by proxy, shall
have power to adjourn the Meeting from time to time,
without notice other than announcement at the Meeting of
the date, time and place of the adjourned Meeting, unless
the date of the adjourned Meeting requires that the Board
fix a new record date (the "Record Date") therefor, in
which case notice of the adjourned Meeting shall be
given. At such adjourned Meeting, if a quorum shall be
present or represented, any business may be transacted
that might have been transacted at the Meeting as
originally scheduled.
SECTION 8. VOTING. At each Meeting, every
Shareholder entitled to vote shall have one vote for each
Share standing in his name on the books of the
Corporation as of the Record Date fixed by the Board for
such Meeting, except as otherwise provided by law or the
Articles, and except that no Share shall be voted at any
Meeting upon which any installment is due and unpaid.
Voting for Directors and, upon the demand of any
Shareholder, voting upon any question properly before a
Meeting, shall be by ballot. A plurality vote shall be
necessary to elect any Director, and on all other
matters, the action or a question shall be approved if
the number of votes cast thereon in favor of the action
or question exceeds the number of votes cast opposing the
action or question, except as otherwise provided by law
or the Articles.
SECTION 9. SHAREHOLDER LIST. The Secretary shall
prepare before each Meeting a complete list of the
Shareholders entitled to notice of such Meeting, arranged
in alphabetical order by class of Shares (and each series
within a class), and showing the address of, and the
number of Shares entitled to vote held by, each
Shareholder (the "Shareholder List"). Beginning five
business days before the Meeting and continuing
throughout the Meeting, the Shareholder List shall be on
file at the Principal Office or at a place identified in
the Meeting notice in the city where the Meeting will be
held, and shall be available for inspection by any
Shareholder entitled to vote at the Meeting. On written
demand, made in good faith and for a proper purpose and
describing with reasonable particularity the
Shareholder's purpose, and if the Shareholder List is
directly connected with the Shareholder's purpose, a
Shareholder (or such Shareholder's agent or attorney
authorized in writing) shall be entitled to inspect and
to copy the Shareholder List, during regular business
hours and at the Shareholder's expense, during the period
the Shareholder List is available for inspection. The
original stock register or transfer book (the "Stock
Book"), or a duplicate thereof kept in the State of
Indiana, shall be the only evidence as to who are the
Shareholders entitled to examine the Shareholder List, or
to notice of or to vote at any Meeting.
SECTION 10. PROXIES. A Shareholder may vote either
in person or by proxy executed in writing by the
Shareholder or a duly authorized attorney-in-fact. No
proxy shall be valid after eleven months from the date of
its execution, unless a longer time is expressly provided
therein.
SECTION 11. NOTICE OF SHAREHOLDER BUSINESS. At any
meeting of the shareholders, only such business may be
conducted as shall have been properly brought before the
meeting, and as shall have been determined to be lawful
and appropriate for consideration by shareholders at the
meeting. To be properly brought before a meeting,
business must be (a) specified in the notice of meeting
given in accordance with Section 3 or 5 of this Article
III, (b) otherwise properly brought before the meeting by
or at the direction of the board of directors or the
chief executive officer, or (c) otherwise properly
brought before the meeting by a shareholder. For
business to be properly brought before a meeting by a
shareholder pursuant to clause (c) above, the shareholder
must have given timely notice thereof in writing to the
secretary of the Corporation. To be timely, a
shareholder's notice must be delivered to, or mailed and
received at, the principal office of the Corporation, not
less than fifty days nor more than ninety days prior to
the meeting; provided, however, that in the event that
less than sixty days' notice of the date of the meeting
is given to shareholders, notice by the shareholder to be
timely must be so received not later than the close of
business on the tenth day following the day on which such
notice of the date of the meeting was given. A
shareholder's notice to the secretary shall set forth as
to each matter the shareholder proposes to bring before
the meeting (a) a brief description of the business
desired to be brought before the meeting, (b) the name
and address, as they appear on the Corporation's stock
records, of the shareholder proposing such business, (c)
the class and number of shares of the Corporation which
are beneficially owned by the shareholder, and (d) any
interest of the shareholder in such business.
Notwithstanding anything in these by-laws to the
contrary, no business shall be conducted at a meeting
except in accordance with the procedures set forth in
this Section 11. The person presiding at the meeting
shall, if the facts warrant, determine and declare to the
meeting that business was not properly brought before the
meeting in accordance with the by-laws, or that business
was not lawful or appropriate for consideration by
shareholders at the meeting, and if he should so
determine, he shall so declare to the meeting and any
such business shall not be transacted.
SECTION 12. NOTICE OF SHAREHOLDER NOMINEES.
Nominations of persons for election to the Board of
Directors of the Corporation may be made at any meeting
of shareholders by or at the direction of the Board of
Directors or by any shareholder of the Corporation
entitled to vote for the election of directors at the
meeting. Shareholder nominations shall be made pursuant
to timely notice given in writing to the Secretary of the
Corporation in accordance with Section 11 of this Article
III. Such shareholder's notice shall set forth, in
addition to the information required by Section 11, as to
each person whom the shareholder proposes to nominate for
election or re-election as a director, (i) the name, age,
business address and residence address of such person,
(ii) the principal occupation or employment of such
person, (iii) the class and number of shares of the
Corporation which are beneficially owned by such person,
(iv) any other information relating to such person that
is required to be disclosed in solicitation of proxies
for election of directors, or is otherwise required, in
each case pursuant to Regulation 14A under the Securities
Exchange Act of 1934, as amended (including, without
limitation, such person's written consent to being named
in the proxy statement as a nominee and to serving as a
director, if elected), and (v) the qualifications of the
nominee to serve as a director of the Corporation. No
shareholder nomination shall be effective unless made in
accordance with the procedures set forth in this Section
12. The person presiding at the meeting shall, if the
facts warrant, determine and declare to the meeting that
a shareholder nomination was not made in accordance with
the by-laws, and if he should so determine, he shall so
declare to the meeting and the defective nomination shall
be disregarded.
ARTICLE IV
BOARD OF DIRECTORS
SECTION 1. NUMBER. The business and affairs of the
Corporation shall be managed by a Board of twelve (12)
Directors, divided into three classes as provided in the
Articles. The Board may elect or appoint, from among its
members, a Chairman of the Board (the "Chairman"), who
need not be an Officer or employee of the Corporation.
The Chairman shall preside at all Shareholders Meetings
and Board Meetings and shall have such other powers and
perform such other duties as are incident to such
position and as may be assigned by the Board.
SECTION 2. VACANCIES AND REMOVAL. Any vacancy
occurring in the Board shall be filled as provided in the
Articles. Shareholders shall be notified of any increase
in the number of Directors and the name, principal
occupation and other pertinent information about any
Director elected by the Board to fill any vacancy. Any
Director, or the entire Board, may be removed from office
only as provided in the Articles.
SECTION 3. POWERS AND DUTIES. In addition to the
powers and duties expressly conferred upon it by law, the
Articles or these By-Laws, the Board may exercise all
such powers of the Corporation and do all such lawful
acts and things as are not inconsistent with the law, the
Articles or these By-Laws.
SECTION 4. ANNUAL BOARD MEETING. Unless otherwise
determined by the Board, the Board shall meet each year
immediately after the Annual Meeting, at the place where
such Meeting has been held, for the purpose of
organization, election of Officers of the Corporation
(the "Officers") and consideration of any other business
that may properly be brought before such annual meeting
of the Board (the "Annual Board Meeting"). No notice
shall be necessary for the holding of the Annual Board
Meeting. If the Annual Board Meeting is not held as
above provided, the election of Officers may be held at
any subsequent duly constituted meeting of the Board (a
"Board Meeting").
SECTION 5. REGULAR BOARD MEETINGS. Regular
meetings of the Board ("Regular Board Meetings") may be
held at stated times or from time to time, and at such
place, either within or without the State of Indiana, as
the Board may determine, without call and without notice.
SECTION 6. SPECIAL BOARD MEETINGS. Special
meetings of the Board ("Special Board Meetings") may be
called at any time or from time to time, and shall be
called on the written request of at least two Directors,
by the Chairman or the President, by causing the
Secretary or any Assistant Secretary to give to each
Director, either personally or by mail, telephone,
telegraph, teletype or other form of wire or wireless
communication at least two days' notice of the date, time
and place of such Meeting. Special Board Meetings shall
be held at the Principal Office or at such other place,
within or without the State of Indiana, as shall be
specified in the respective notices or waivers of notice
thereof.
SECTION 7. WAIVER OF NOTICE AND ASSENT. A Director
may waive notice of any Board Meeting before or after the
date and time of the Board Meeting stated in the notice
by a written waiver signed by the Director and filed with
the minutes or corporate records. A Director's
attendance at or participation in a Board Meeting shall
constitute a waiver of notice of such Meeting and assent
to any corporate action taken at such Meeting, unless (a)
the Director at the beginning of such Meeting (or
promptly upon his arrival) objects to holding of or
transacting business at the Meeting and does not
thereafter vote for or assent to action taken at the
Meeting; (b) the Director's dissent or abstention from
the action taken is entered in the minutes of such
Meeting; or (c) the Director delivers written notice of
his dissent or abstention to the presiding Director at
such Meeting before its adjournment, or to the Secretary
immediately after its adjournment. The right of dissent
or abstention is not available to a Director who votes in
favor of the action taken.
SECTION 8. QUORUM. At all Board Meetings, a
majority of the number of Directors designated for the
full Board (the "Full Board") shall be necessary to
constitute a quorum for the transaction of any business,
except (a) that for the purpose of filling of vacancies a
majority of Directors then in office shall constitute a
quorum, and (b) that a lesser number may adjourn the
Meeting from time to time until a quorum is present. The
act of a majority of the Board present at a Meeting at
which a quorum is present shall be the act of the Board,
unless the act of a greater number is required by law,
the Articles or these By-Laws.
SECTION 9. AUDIT AND OTHER COMMITTEES OF THE BOARD.
The Board shall, by resolution adopted by a majority of
the Full Board, designate an Audit Committee comprised of
two or more Directors, which shall have such authority
and exercise such duties as shall be provided by
resolution of the Board. The Board may, by resolution
adopted by such majority, also designate other regular or
special committees of the Board ("Committees"), in each
case comprised of two or more Directors and to have such
powers and exercise such duties as shall be provided by
resolution of the Board.
SECTION 10. RESIGNATIONS. Any Director may resign
at any time by giving written notice to the Board, the
Chairman, the President or the Secretary. Any such
resignation shall take effect when delivered unless the
notice specifies a later effective date. Unless
otherwise specified in the notice, the acceptance of such
resignation shall not be necessary to make it effective.
ARTICLE V
OFFICERS
SECTION 1. OFFICERS. The Officers shall be the
President, one or more Vice Presidents, the Secretary and
the Treasurer, and may include one or more Assistant
Secretaries, one or more Assistant Treasurers, a
Controller and one or more Assistant Controllers. Any
two or more offices may be held by the same person. The
Board may from time to time elect or appoint such other
Officers as it shall deem necessary, who shall exercise
such powers and perform such duties as may be prescribed
from time to time by these By-Laws or, in the absence of
a provision in these By-Laws in respect thereto, as may
be prescribed from time to time by the Board.
SECTION 2. ELECTION OF OFFICERS. The Officers
shall be elected by the Board at the Annual Board Meeting
and shall hold office for one year or until their
respective successors shall have been duly elected and
shall have qualified; provided, however, that the Board
may at any time elect one or more persons to new or
different offices and/or change the title, designation
and duties and responsibilities of any of the Officers
consistent with the law, the Articles and these By-Laws.
SECTION 3. VACANCIES; REMOVAL. Any vacancy among
the Officers may be filled for the unexpired term by the
Board. Any Officer may be removed at any time by the
affirmative vote of a majority of the Full Board.
SECTION 4. DELEGATION OF DUTIES. In the case of
the absence, disability, death, resignation or removal
from office of any Officer, or for any other reason that
the Board shall deem sufficient, the Board may delegate,
for the time being, any or all of the powers or duties of
such Officer to any other Officer or to any Director.
SECTION 5. PRESIDENT. The President shall be a
Director and, subject to the control of the Board, shall
have general charge of and supervision and authority over
the business and affairs of the Corporation, and shall
have such other powers and perform such other duties as
are incident to this office and as may be assigned to him
by the Board. In the case of the absence or disability
of the Chairman or if no Chairman shall be elected or
appointed by the Board, the President shall preside at
all Shareholders' Meetings and Board Meetings.
SECTION 6. VICE PRESIDENTS. Each of the Vice
Presidents shall have such powers and perform such duties
as may be prescribed for him by the Board or delegated to
him by the President. In the case of the absence,
disability, death, resignation or removal from office of
the President, the powers and duties of the President
shall, for the time being, devolve upon and be exercised
by the Executive Vice President, if there be one, and if
not, then by such one of the Vice Presidents as the Board
or the President may designate, or, if there be but one
Vice President, then upon such Vice President; and he
shall thereupon, during such period, exercise and perform
all of the powers and duties of the President, except as
may be otherwise provided by the Board.
SECTION 7. SECRETARY. The Secretary shall have the
custody and care of the Seal, records, minutes and the
Stock Book of the Corporation; shall attend all
Shareholders' Meetings and Board Meetings, and duly
record and keep the minutes of their proceedings in a
book or books to be kept for that purpose; shall give or
cause to be given notice of all Shareholders' Meetings
and Board Meetings when such notice shall be required;
shall file and take charge of all papers and documents
belonging to the Corporation; and shall have such other
powers and perform such other duties as are incident to
the office of secretary of a business corporation,
subject at all times to the direction and control of the
Board and the President.
SECTION 8. ASSISTANT SECRETARIES. Each of the
Assistant Secretaries shall assist the Secretary in his
duties and shall have such other powers and perform such
other duties as may be prescribed for him by the Board or
delegated to him by the President. In case of the
absence, disability, death, resignation or removal from
office of the Secretary, his powers and duties shall, for
the time being, devolve upon such one of the Assistant
Secretaries as the Board, the President or the Secretary
may designate, or, if there be but one Assistant
Secretary, then upon such Assistant Secretary; and he
shall thereupon, during such period, exercise and perform
all of the powers and duties of the Secretary, except as
may be otherwise provided by the Board.
SECTION 9. TREASURER. The Treasurer shall have
control over all records of the Corporation pertaining to
moneys and securities belonging to the Corporation; shall
have charge of, and be responsible for, the collection,
receipt, custody and disbursements of funds of the
Corporation; shall have the custody of all securities
belonging to the Corporation; shall keep full and
accurate accounts of receipts and disbursements in books
belonging to the Corporation; and shall disburse the
funds of the Corporation as may be ordered by the Board,
taking proper receipts or making proper vouchers for such
disbursements and preserving the same at all times during
his term of office. When necessary or proper, he shall
endorse on behalf of the Corporation all checks, notes or
other obligations payable to the Corporation or coming
into his possession for or on behalf of the Corporation,
and shall deposit the funds arising therefrom, together
with all other funds and valuable effects of the
Corporation coming into his possession, in the name and
the credit of the Corporation in such depositories as the
Board from time to time shall direct, or in the absence
of such action by the Board, as may be determined by the
President or any Vice President. If the Board has not
elected a Controller or an Assistant Controller, or in
the absence or disability of the Controller and each
Assistant Controller or if, for any reason, a vacancy
shall occur in such offices, then during such period the
Treasurer shall have, exercise and perform all of the
powers and duties of the Controller. The Treasurer shall
also have such other powers and perform such other duties
as are incident to the office of treasurer of a business
corporation, subject at all times to the direction and
control of the Board and the President.
If required by the Board, the Treasurer shall give
the Corporation a bond, in such an amount and with such
surety or sureties as may be ordered by the Board, for
the faithful performance of the duties of his office and
for the restoration to the Corporation, in case of his
death, resignation, retirement or removal from office, of
all books, papers, vouchers, money and other property of
whatever kind in his possession or under his control
belonging to the Corporation.
SECTION 10. ASSISTANT TREASURERS. Each of the
Assistant Treasurers shall assist the Treasurer in his
duties, and shall have such other powers and perform such
other duties as may be prescribed for him by the Board or
delegated to him by the President. In case of the
absence, disability, death, resignation or removal from
office of the Treasurer, his powers and duties shall, for
the time being, devolve upon such one of the Assistant
Treasurers as the Board, the President or the Treasurer
may designate, or, if there be but one Assistant
Treasurer, then upon such Assistant Treasurer; and he
shall thereupon, during such period, exercise and perform
all the powers and duties of the Treasurer except as may
be otherwise provided by the Board. If required by the
Board, each Assistant Treasurer shall likewise give the
Corporation a bond, in such amount and with such surety
or sureties as may be ordered by the Board, for the same
purposes as the bond that may be required to be given by
the Treasurer.
SECTION 11. CONTROLLER. The Controller shall have
direct control over all accounting records of the
Corporation pertaining to moneys, properties, materials
and supplies, including the bookkeeping and accounting
departments; shall have direct supervision over the
accounting records in all other departments pertaining to
moneys, properties, materials and supplies; shall render
to the President and the Board, at Regular Board Meetings
or whenever the same shall be required, an account of all
his transactions as Controller and of the financial
condition of the Corporation; and shall have such other
powers and perform such other duties as are incident to
the office of controller of a business corporation,
subject at all times to the direction and control of the
Board and the President.
SECTION 12. ASSISTANT CONTROLLERS. Each of the
Assistant Controllers shall assist the Controller in his
duties, and shall have such other powers and perform such
other duties as may be prescribed for him by the Board or
delegated to him by the President. In case of the
absence, disability, death, resignation or removal from
office of the Controller, his powers and duties shall,
for the time being, devolve upon such one of the
Assistant Controllers as the Board, the President or the
Controller may designate, or, if there be but one
Assistant Controller, then upon such Assistant
Controller; and he shall thereupon, during such period,
exercise and perform all the powers and duties of the
Controller, except as may be otherwise provided by the
Board.
ARTICLE VI
CERTIFICATES FOR SHARES
SECTION 1. CERTIFICATES. Certificates for Shares
("Certificates") shall be in such form, consistent with
law and the Articles, as shall be approved by the Board.
Certificates for each class, or series within a class, of
Shares, shall be numbered consecutively as issued. Each
Certificate shall state the name of the Corporation and
that it is organized under the laws of the State of
Indiana; the name of the registered holder; the number
and class and the designation of the series, if any, of
the Shares represented thereby; and a summary of the
designations, relative rights, preferences and
limitations applicable to such class and, if applicable,
the variations in rights, preferences and limitations
determined for each series and the authority of the Board
to determine such variations for future series; provided,
however, that such summary may be omitted if the
Certificate states conspicuously on its front or back
that the Corporation will furnish the Shareholder such
information upon written request and without charge.
Each Certificate shall be signed (either manually or in
facsimile) by (i) the President or a Vice President and
(ii) the Secretary or an Assistant Secretary, or by any
two or more Officers that may be designated by the Board,
and may have affixed thereto the Seal, which may be a
facsimile, engraved or printed.
SECTION 2. RECORD OF CERTIFICATES. Shares shall be
entered in the Stock Book as they are issued, and shall
be transferable on the Stock Book by the holder thereof
in person, or by his attorney duly authorized thereto in
writing, upon the surrender of the outstanding
Certificate therefor properly endorsed.
SECTION 3. LOST OR DESTROYED CERTIFICATES. Any
person claiming a Certificate to be lost or destroyed
shall make affidavit or affirmation of that fact and, if
the Board or the President shall so require, shall give
the Corporation and/or the transfer agents and
registrars, if they shall so require, a bond of
indemnity, in form and with one or more sureties
satisfactory to the Board or the President and/or the
transfer agents and registrars, in such amount as the
Board or the President may direct and/or the transfer
agents and registrars may require, whereupon a new
Certificate may be issued of the same tenor and for the
same number of Shares as the one alleged to be lost or
destroyed.
SECTION 4. SHAREHOLDER ADDRESSES. Every
Shareholder shall furnish the Secretary with an address
to which notices of Meetings and all other notices may be
served upon him or mailed to him, and in default thereof
notices may be addressed to him at his last known address
or at the Principal Office.
ARTICLE VII
CORPORATE BOOKS AND RECORDS
SECTION 1. PLACES OF KEEPING. Except as otherwise
provided by law, the Articles or these By-Laws, the books
and records of the Corporation (including the "Corporate
Records," as defined in the Articles) may be kept at such
place or places, within or without the State of Indiana,
as the Board may from time to time by resolution
determine or, in the absence of such determination by the
Board, as shall be determined by the President.
SECTION 2. STOCK BOOK. The Corporation shall keep
at the Principal Office the original Stock Book or a
duplicate thereof, or, in case the Corporation employs a
stock registrar or transfer agent within or without the
State of Indiana, another record of the Shareholders in a
form that permits preparation of a list of the names and
addresses of all the Shareholders, in alphabetical order
by class of Shares, stating the number and class of
Shares held by each Shareholder (the "Record of
Shareholders").
SECTION 3. INSPECTION OF CORPORATE RECORDS. Any
Shareholder (or the Shareholder's agent or attorney
authorized in writing) shall be entitled to inspect and
copy at his expense, after giving the Corporation at
least five business days written notice of his demand to
do so, the following Corporate Records: (1) the
Articles; (2) these By-Laws; (3) minutes of all
Shareholders' Meetings and records of all actions taken
by the Shareholders without a meeting (collectively,
"Shareholders Minutes") for the prior three years; (4)
all written communications by the Corporation to the
Shareholders including the financial statements furnished
by the Corporation to the Shareholders for the prior
three years; (5) a list of the names and business
addresses of the current Directors and the current
Officers; and (6) the most recent Annual Report of the
Corporation as filed with the Secretary of State of
Indiana. Any Shareholder (or the Shareholder's agent or
attorney authorized in writing) shall also be entitled to
inspect and copy at his expense, after giving the
Corporation at least five business days written notice of
his demand to do so, the following Corporate Records, if
his demand is made in good faith and for a proper purpose
and describes with reasonable particularity his purpose
and the records he desires to inspect, and the records
are directly connected with his purpose: (1) to the
extent not subject to inspection under the previous
sentence, Shareholders Minutes, excerpts from minutes of
Board Meetings and of Committee meetings, and records of
any actions taken by the Board or any Committee without a
meeting; (2) appropriate accounting records of the
Corporation; and (3) the Record of Shareholders.
SECTION 4. RECORD DATE. The Board may, in its
discretion, fix in advance a Record Date not more than
seventy days before the date (a) of any Shareholders'
Meeting, (b) for the payment of any dividend or the
making of any other distribution, (c) for the allotment
of rights, or (d) when any change or conversion or
exchange of Shares shall go into effect. If the Board
fixes a Record Date, then only Shareholders who are
Shareholders of record on such Record Date shall be
entitled (a) to notice of and/or to vote at any such
Meeting, (b) to receive any such dividend or other
distribution, (c) to receive any such allotment of
rights, or (d) to exercise the rights in respect of any
such change, conversion or exchange of Shares, as the
case may be, notwithstanding any transfer of Shares on
the Stock Book after such Record Date.
SECTION 5. TRANSFER AGENTS; REGISTRARS. The Board
may appoint one or more transfer agents and registrars
for its Shares and may require all Certificates to bear
the signature either of a transfer agent or of a
registrar, or both.
ARTICLE VIII
CHECKS, DRAFTS, DEEDS AND SHARES OF STOCK
SECTION 1. CHECKS, DRAFTS, NOTES, ETC. All checks,
drafts, notes or orders for the payment of money of the
Corporation shall, unless otherwise directed by the Board
or otherwise required by law, be signed by one or more
Officers as authorized in writing by the President. In
addition, the President may authorize any one or more
employees of the Corporation ("Employees") to sign
checks, drafts and orders for the payment of money not to
exceed specific maximum amounts as designated in writing
by the President for any one check, draft or order. When
so authorized by the President, the signature of any such
Officer or Employee may be a facsimile signature.
SECTION 2. DEEDS, NOTES, BONDS, MORTGAGES,
CONTRACTS, ETC. All deeds, notes, bonds and mortgages
made by the Corporation, and all other written contracts
and agreements, other than those executed in the ordinary
course of corporate business, to which the Corporation
shall be a party, shall be executed in its name by the
President, a Vice President or any other Officer so
authorized by the Board and, when necessary or required,
the Secretary or an Assistant Secretary shall attest the
execution thereof. All written contracts and agreements
into which the Corporation enters in the ordinary course
of corporate business shall be executed by any Officer or
by any other Employee designated by the President or a
Vice President to execute such contracts and agreements.
SECTION 3. SALE OR TRANSFER OF STOCK. Subject
always to the further orders and directions of the Board,
any share of stock issued by any corporation and owned by
the Corporation (including reacquired Shares of the
Corporation) may, for sale or transfer, be endorsed in
the name of the Corporation by the President or a Vice
President, and said endorsement shall be duly attested by
the Secretary or an Assistant Secretary either with or
without affixing thereto the Seal.
SECTION 4. VOTING OF STOCK OF OTHER CORPORATIONS.
Subject always to the further orders and directions of
the Board, any share of stock issued by any other
corporation and owned or controlled by the Corporation
(an "Investment Share") may be voted at any shareholders'
meeting of such other corporation by the President or by
a Vice President. Whenever, in the judgment of the
President, it is desirable for the Corporation to execute
a proxy or give a shareholder's consent in respect of any
Investment Share, such proxy or consent shall be executed
in the name of the Corporation, by the President or a
Vice President, and, when necessary or required, shall be
attested by the Secretary or an Assistant Secretary
either with or without affixing thereto the Seal. Any
person or persons designated in the manner above stated
as the proxy or proxies of the Corporation shall have
full right, power and authority to vote an Investment
Share the same as such Investment Share might be voted by
the Corporation.
ARTICLE IX
FISCAL YEAR
SECTION 1. FISCAL YEAR. The Corporation's fiscal
year shall begin on October 1 of each year and end on
September 30 of the following year.
ARTICLE X
AMENDMENTS
SECTION 1. AMENDMENTS. These By-Laws may be
altered, amended or repealed, in whole or in part, and
new By-Laws may be adopted, at any Board Meeting by the
affirmative vote of a majority of the Full Board.
AMENDED AND RESTATED
TERMINATION BENEFITS AGREEMENT
As of July 29, 1994, INDIANA ENERGY, INC., an Indiana
corporation having its principal executive offices at 1630
North Meridian Street, Indianapolis, Indiana 46202
("ENERGY"), INDIANA GAS COMPANY, INC., an Indiana
corporation having its principal executive offices at 1630
North Meridian Street, Indianapolis, Indiana 46202 ("INDIANA
GAS") (both ENERGY and INDIANA GAS being collectively
referred to herein as the "Company"), and Carl L. Chapman,
an Indiana resident whose mailing address is 1630 North
Meridian Street, Indianapolis, Indiana 46202-1496 (the
"Executive") entered into a Termination Benefits Agreement
(the "Agreement"). Pursuant to Section 4(f) of the Agreement
and effective as of March 15, 1996, the Company and
Executive amend and completely restate the Agreement to
provide, in its entirety, as follows:
R E C I T A L S
The following facts are true:
A. The Executive is serving the Company as a key
executive officer, and is expected to continue to make a
major contribution to the profitability, growth, and
financial strength of the Company;
B. The Company considers the continued services of the
Executive to be in the best interests of the Company and its
shareholders, and desires to assure itself of the
availability of such continued services in the future on an
objective and impartial basis and without distraction or
conflict of interest in the event of an attempt to obtain
control of the Company.
C. Effective as of March 15, 1996 Executive shall
become a key executive officer of PROLIANCE ENERGY, L.L.C.
("PROLIANCE"), fifty percent (50%) of which is currently
owned by IGC Energy, Inc. an indirect wholly-owned
subsidiary of Energy.
D. The Executive is willing to remain in the employ of
the Company upon the understanding that the Company will
provide him with income security upon the terms and subject
to the conditions contained herein if his employment is
terminated by the Company without cause or if he voluntarily
terminates his employment for good reason. For purposes of
this Agreement, employment with and compensation paid by
PROLIANCE shall be deemed employment with or compensation
paid by the Company unless IGC Energy, Inc., Energy or any
direct or indirect subsidiary of Energy ceases to own any
interest in PROLIANCE.
E. If, subsequent to March 15, 1996, Executive's
employment with PROLIANCE is terminated and Executive
resumes employment with the Company within thirty (30) days
following his termination of employment with PROLIANCE, this
Agreement shall continue in full force and effect for
Executive.
A G R E E M E N T
In consideration of the premises and the mutual
covenants and agreements hereinafter set forth, the Company
and the Executive agree as follows:
1. Undertaking. The Company agrees to pay to the
Executive the termination benefits specified in paragraph 2
hereof if (a) control of ENERGY is acquired (as defined in
paragraph 3(a) hereof) during the term of this Agreement (as
described in paragraph 5 hereof) and (b) within three (3)
years after the acquisition of control occurs (i) the
Company terminates the employment of the Executive for any
reason other than Cause (as defined in paragraph 3(b)
hereof), death, the Executive's attainment of age sixty-five
(65) or total and permanent disability, or (ii) the
Executive voluntarily terminates his employment with the
Company for Good Reason (as defined in paragraph 3(c)
hereof) or without reason during the Window Period (as
defined in paragraph 3(d) hereof); provided, however, that
if after an acquisition of control of Energy, Executive
ceases to be employed by PROLIANCE but within seven (7)
calendar days resumes employment with Energy, Indiana Gas or
any of their successors at approximately the same total
compensation and benefits as received from PROLIANCE,
Executive shall not be entitled to benefits under this
Agreement by reason of his termination of employment with
PROLIANCE; provided, further, that Executive may still be
entitled to benefits under this Agreement consistent with
this paragraph if his employment with the Company is
subsequently terminated.
2. Termination Benefits. If the Executive is entitled
to termination benefits pursuant to paragraph 1 hereof, the
Company agrees to pay to the Executive as termination
benefits in a lump sum payment within five (5) calendar days
of the termination of the Executive's employment an amount
to be computed by multiplying (i) the Executive's average
annual compensation (as determined consistent with the
provisions of Section 280G(d)(l) of the Internal Revenue
Code of 1986, as amended (the "Code") in effect on July 29,
1994) payable by the Company which was includable in the
gross income of the Executive for the most recent five (5)
calendar years ending coincident with or immediately before
the date on which control of the Company is acquired (or
such portion of such period during which the Executive was
an employee of the Company), by (ii) two hundred ninety-nine
and ninety-nine one hundredths percent (299.99%). For the
purposes of this Agreement, employment and compensation paid
by any direct or indirect subsidiary of the Company will be
deemed to be employment and compensation paid by the
Company.
3. Definitions.
(a) As used in this Agreement, the "acquisition of control"
means:
(i) The acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange
Act")) (a "Person") of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of
twenty percent (20%) or more of either (A) the then
outstanding shares of common stock of ENERGY (the
"Outstanding ENERGY Common Stock") or (B) the combined
voting power of the then outstanding voting securities of
ENERGY entitled to vote generally in the election of
directors (the "Outstanding ENERGY Voting Securities");
provided, however, that the following acquisitions shall not
constitute an acquisition of control: (A) any acquisition
directly from ENERGY (excluding an acquisition by virtue of
the exercise of a conversion privilege), (B) any acquisition
by ENERGY, (C) any acquisition by any employee benefit plan
(or related trust) sponsored or maintained by ENERGY,
INDIANA GAS or any corporation controlled by ENERGY or (D)
any acquisition by any corporation pursuant to a
reorganization, merger or consolidation, if, following such
reorganization, merger or consolidation, the conditions
described in clauses (A), (B) and (C) of subsection (iii) of
this paragraph 3(a) are satisfied;
(ii) Individuals who, as of the date hereof,
constitute the Board of Directors of ENERGY (the "Incumbent
Board") cease for any reason to constitute at least a
majority of the Board of Directors of ENERGY (the "Board");
provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination
for election by ENERGY's shareholders, was approved by a
vote of at least a majority of the directors then comprising
the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose
initial assumption of office occurs as a result of either an
actual or threatened election contest (as such terms are
used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act) or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than
the Board; or
(iii) Approval by the shareholders of ENERGY of a
reorganization, merger or consolidation, in each case,
unless, following such reorganization, merger or
consolidation, (A) more than sixty percent (60%) of,
respectively, the then outstanding shares of common stock of
the corporation resulting from such reorganization, merger
or consolidation and the combined voting power of the then
outstanding voting securities of such corporation entitled
to vote generally in the election of directors is then
beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were
the beneficial owners, respectively, of the Outstanding
ENERGY Common Stock and Outstanding ENERGY Voting Securities
immediately prior to such reorganization, merger or
consolidation in substantially the same proportions as their
ownership, immediately prior to such reorganization, merger
or consolidation, of the Outstanding ENERGY Stock and
Outstanding ENERGY Voting Securities, as the case may be,
(B) no Person (excluding ENERGY, any employee benefit plan
or related trust of ENERGY, INDIANA GAS or such corporation
resulting from such reorganization, merger or consolidation
and any Person beneficially owning, immediately prior to
such reorganization, merger or consolidation and any Person
beneficially owning, immediately prior to such
reorganization, merger or consolidation, directly or
indirectly, twenty percent (20%) or more of the Outstanding
ENERGY Common Stock or Outstanding Voting Securities, as the
case may be) beneficially owns, directly or indirectly,
twenty percent (20%) or more of, respectively, the then
outstanding shares of common stock of the corporation
resulting from such reorganization, merger or consolidation
or the combined voting power of the then outstanding voting
securities of such corporation entitled to vote generally in
the election of directors and (C) at least a majority of the
members of the board of directors of the corporation
resulting from such reorganization, merger or consolidation
were members of the Incumbent Board at the time of the
execution of the initial agreement providing for such
reorganization, merger or consolidation;
(iv) Approval by the shareholders of ENERGY of (A) a
complete liquidation or dissolution of ENERGY or (B) the
sale or other disposition of all or substantially all of the
assets of ENERGY, other than to a corporation, with respect
to which following such sale or other disposition (1) more
than sixty percent (60%) of, respectively, the then
outstanding shares of common stock of such corporation and
the combined voting power of the then outstanding voting
securities of such corporation entitled to vote generally in
the election of directors is then beneficially owned,
directly or indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners,
respectively, of the Outstanding ENERGY Common Stock and
Outstanding ENERGY Voting Securities immediately prior to
such sale or other disposition in substantially the same
proportion as their ownership, immediately prior to such
sale or other disposition, of the Outstanding ENERGY Common
Stock and Outstanding ENERGY Voting Securities, as the case
may be, (2) no Person (excluding ENERGY and any employee
benefit plan or related trust of ENERGY,INDIANA GAS or such
corporation and any Person beneficially owning, immediately
prior to such sale or other disposition, directly or
indirectly, twenty percent (20%) or more of the Outstanding
ENERGY Common Stock or Outstanding ENERGY Voting Securities,
as the case may be) beneficially owns, directly or
indirectly, twenty percent (20%) or more of, respectively,
the then outstanding shares of common stock of such
corporation and the combined voting power of the then
outstanding voting securities of such corporation entitled
to vote generally in the election of directors and (3) at
least a majority of the members of the board of directors of
such corporation were members of the Incumbent Board at the
time of the execution of the initial agreement or action of
the Board providing for such sale or other disposition of
assets of ENERGY; or
(v) The closing, as defined in the documents relating
to, or as evidenced by a certificate of any state or federal
governmental authority in connection with, a transaction
approval of which by the shareholders of ENERGY would
constitute an "acquisition of control" under subsection
(iii) or (iv) of this section 3(a) of this Agreement.
Notwithstanding anything contained in this Agreement
to the contrary, if the Executive's employment is terminated
before an "acquisition of control" as defined in this
section 3(a) and the Executive reasonably demonstrates that
such termination (i) was at the request of a third party who
has indicated an intention or taken steps reasonably
calculated to effect an "acquisition of control" and who
effectuates an "acquisition of control" (a "Third Party") or
(ii) otherwise occurred in connection with, or in
anticipation of, an "acquisition of control" which actually
occurs, then for all purposes of this Agreement, the date of
an "acquisition of control" with respect to the Executive
shall mean the date immediately prior to the date of such
termination of the Executive's employment.
(b) As used in this Agreement, the term "Cause" means
fraud, dishonesty, theft of corporate assets, or other gross
misconduct by the Executive. Notwithstanding the foregoing,
the Executive shall not be deemed to have been terminated
for cause unless and until there shall have been delivered
to him a copy of a resolution duly adopted by the
affirmative vote of not less than a majority of the entire
membership of the Board at a meeting of the Board called and
held for the purpose (after reasonable notice to him and an
opportunity for him, together with his counsel, to be heard
before the Board), finding that in the good faith opinion of
the Board the Executive was guilty of conduct set forth
above in the first sentence of the subsection and specifying
the particulars thereof in detail.
(c) As used in this Agreement, the term "Good Reason"
means, without the Executive's written consent, (i) a
demotion in the Executive's status, position or
responsibilities which, in his reasonable judgment, does not
represent a promotion from his status, position or
responsibilities as in effect immediately prior to the
change in control; (ii) the assignment to the Executive of
any duties or responsibilities which, in his reasonable
judgment, are inconsistent with such status, position or
responsibilities; or any removal of the Executive from or
failure to reappoint or reelect him to any of such
positions, except in connection with the termination of his
employment for total and permanent disability, death or
Cause or by him other than for Good Reason; (iii) a
reduction by the Company in the Executive's base salary as
in effect on the date hereof or as the same may be increased
from time to time during the term of this Agreement or the
Company's failure to increase (within twelve (12) months of
the Executive's last increase in base salary) the
Executive's base salary after a change in control in an
amount which at least equals, on a percentage basis, the
average percentage increase in base salary for all executive
and senior officers of the Company effected in the preceding
twelve (12) months; (iv) the relocation of the principal
executive offices of ENERGY, INDIANA GAS, or PROLIANCE,
whichever entity on behalf of which the Executive performs a
principal function of that entity as part of his employment
services, to a location outside the Indianapolis, Indiana
metropolitan area or the Company's requiring him to be based
at any place other than the location at which he performed
his duties prior to a change in control, except for required
travel on the Company's business to an extent substantially
consistent with his business travel obligations at the time
of a change in control; (v) the failure by the Company to
continue in effect any incentive, bonus or other
compensation plan in which the Executive participates
immediately prior to the change in control, including but
not limited to the Company's stock option and restricted
stock plans, if any, unless an equitable arrangement
(embodied in an ongoing substitute or alternative plan),
with which he has consented, has been made with respect to
such plan in connection with the change in control, or the
failure by the Company to continue his participation
therein, or any action by the Company which would directly
or indirectly materially reduce his participation therein;
(vi) the failure by the Company to continue to provide the
Executive with benefits substantially similar to those
enjoyed by him or to which he was entitled under any of the
Company's pension, profit sharing, life insurance, medical,
dental, health and accident, or disability plans in which he
was participating at the time of a change in control, the
taking of any action by the Company which would directly or
indirectly materially reduce any of such benefits or deprive
him of any material fringe benefit enjoyed by him or to
which he was entitled at the time of the change in control,
or the failure by the Company to provide him with the number
of paid vacation and sick leave days to which he is entitled
on the basis of years of service with the Company in
accordance with the Company's normal vacation policy in
effect on the date hereof; (vii) the failure of the Company
to obtain a satisfactory agreement from any successor or
assign of the Company to assume and agree to perform this
Agreement; (viii) any purported termination of the
Executive's employment which is not effected pursuant to a
Notice of Termination satisfying the requirements of
paragraph 4(c) hereof (and, if applicable, paragraph 3(b)
hereof); and for purposes of this Agreement, no such
purported termination shall be effective; or (ix) any
request by the Company that the Executive participate in an
unlawful act or take any action constituting a breach of the
Executive's professional standard of conduct.
Notwithstanding anything in this paragraph 3(c) to the
contrary, the Executive's right to terminate his employment
pursuant to this paragraph 3(c) shall not be affected by his
incapacity due to physical or mental illness.
(d) As used in this Agreement, the "Window Period"
shall mean the 30-day period immediately following the first
anniversary of the acquisition of control.
4. Additional Provisions.
(a) Enforcement of Agreement. The Company is aware
that upon the occurrence of a change in control the Board of
Directors or a shareholder of the Company may then cause or
attempt to cause the Company to refuse to comply with its
obligations under this Agreement, or may cause or attempt to
cause the Company to institute, or may institute, litigation
seeking to have this Agreement declared unenforceable, or
may take or attempt to take other action to deny the
Executive the benefits intended under this Agreement. In
these circumstances, the purpose of this Agreement could be
frustrated. It is the intent of the Company that the
Executive not be required to incur the expenses associated
with the enforcement of his rights under this Agreement by
litigation or other legal action, nor be bound to negotiate
any settlement of his rights hereunder, because the cost and
expense of such legal action or settlement would
substantially detract from the benefits intended to be
extended to the Executive hereunder. Accordingly, if
following a change in control it should appear to the
Executive that the Company has failed to comply with any of
its obligations under this Agreement or in the event that
the Company or any other person takes any action to declare
this Agreement void or unenforceable, or institutes any
litigation or other legal action designed to deny, diminish
or to recover from the Executive the benefits entitled to be
provided to the Executive hereunder, and that the Executive
has complied with all of his obligations under this
Agreement, the Company irrevocably authorizes the Executive
from time to time to retain counsel of his choice, at the
expense of the Company as provided in this paragraph 4(a),
to represent the Executive in connection with the initiation
or defense of any litigation or other legal action, whether
such action is by or against the Company or any director,
officer, shareholder, or other person affiliated with the
Company, in any jurisdiction. Notwithstanding any existing
or prior attorney-client relationship between the Company
and such counsel, the Company irrevocably consents to the
Executive entering into an attorney-client relationship with
such counsel, and in that connection the Company and the
Executive agree that a confidential relationship shall exist
between the Executive and such counsel. The reasonable fees
and expenses of counsel selected from time to time by the
Executive as hereinabove provided shall be paid or
reimbursed to the Executive by the Company on a regular,
periodic basis upon presentation by the Executive of a
statement or statements prepared by such counsel in
accordance with its customary practices, up to a maximum
aggregate amount of $500,000. Any legal expenses incurred by
the Company by reason of any dispute between the parties as
to enforceability of or the terms contained in this
Agreement, notwithstanding the outcome of any such dispute,
shall be the sole responsibility of the Company, and the
Company shall not take any action to seek reimbursement from
the Executive for such expenses.
(b) Severance Pay: No Duty to Mitigate. The amounts
payable to the Executive under this Agreement shall not be
treated as damages but as severance compensation to which
the Executive is entitled by reason of termination of his
employment in the circumstances contemplated by this
Agreement. The Company shall not be entitled to set off
against the amounts payable to the Executive any amounts
earned by the Executive in other employment after
termination of his employment with the Company, or any
amounts which might have been earned by the Executive in
other employment had he sought such other employment.
(c) Notice of Termination. Any purported termination by
the Company or by the Executive for Good Reason or by the
Executive without any reason during the Window Period shall
be communicated by written Notice of Termination to the
other party hereto in accordance with paragraph 4(j) hereof.
For purposes of this Agreement, a "Notice of Termination"
shall mean a notice which shall indicate the specific
termination provision in this Agreement relied upon and
shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of
his employment under the provision so indicated. For
purposes of this Agreement, no such purported termination
shall be effective without such Notice of Termination.
(d) Internal Revenue Code. Notwithstanding anything in
this Agreement to the contrary (other than this paragraph),
in the event that Arthur Andersen & Co. (or its successor)
determines that any payment by the Company to or for the
benefit of the Executive pursuant to the terms of this
Agreement would be nondeductible by the Company for federal
income tax purposes because of Section 280G of the Code,
then the amount payable to or for the benefit of the
Executive pursuant to this Agreement shall be reduced (but
not below zero) to the maximum amount payable without
causing the payment to be nondeductible by the Company
because of Section 280G of the Code; provided, however, that
notwithstanding the preceding clause of this sentence, if
Section 280G of the Code is amended after the date on which
this Agreement has been executed and if the amendment has
the effect of reducing the amount of deductible payments
that may be made by the Company to the Executive under
Section 280G of the Code to an amount less than what would
have been deductible by the Company under Section 280G of
the Code as in effect on July 29, 1994, the maximum amount
payable to the Executive under this paragraph 4(d) shall be
determined without regard to any amendment to Section 280G
of the Code; provided, further, that if solely by reason of
any amendment to Section 280G of the Code an excise tax is
imposed on the Executive under Section 4999 of the Code as a
result of payments made under this Agreement, the Company
shall increase the benefit payable to the Executive under
this Agreement by an amount ("Make Whole Payment") which,
after taking into account the additional federal, state and
local income taxes or the amount (including the Code Section
4999 excise tax that would be imposed on the Make Whole
Payment), would reimburse the Executive fully for the Code
Section 4999 tax that is imposed on the other payments made
hereunder and put the Executive in same net after-tax
position with respect to this Agreement that he would have
been but for the excise tax. Such determination by Arthur
Andersen & Co. (or its successor) shall be conclusive and
binding upon the parties.
(e) Assignment. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their
respective executors, administrators, heirs, personal
representatives, successors, and assigns, but neither this
Agreement nor any right hereunder may be assigned or
transferred by either party hereto, any beneficiary, or any
other person, nor be subject to alienation, anticipation,
sale, pledge, encumbrance, execution, levy, or other legal
process of any kind against the Executive, his beneficiary
or any other person. Notwithstanding the foregoing, the
Company shall assign this Agreement to any corporation or
other business entity succeeding to substantially all of the
business and assets of the Company by merger, consolidation,
sale of assets, or otherwise and shall obtain the assumption
of this Agreement by such successor.
(f) Amendment. This Agreement shall not be
amended, modified, or supplemented without the written
agreement of the parties at the time of such amendment,
modification, or supplement.
(g) Governing Law. This Agreement shall be governed by
and subject to the law of the state of Indiana.
(h) Severability. The invalidity or unenforceability of
any particular provision of this Agreement shall not affect
the other provisions, and this Agreement shall be construed
in all respects as if such invalid or unenforceable
provision had not been contained herein.
(i) Captions. The captions in this Agreement are for
convenience and identification purposes only, are not an
integral part of this Agreement, and are not to be
considered in the interpretation of any part hereof.
(j) Notices. Except as otherwise specifically provided
in this Agreement, all notices and other communications
hereunder shall be in writing and shall be deemed to have
been duly given if delivered in person or sent by registered
or certified mail, postage prepaid, addressed as set forth
above, or to such other address as shall be furnished in
writing by any party to the others.
(k) Waivers. Except as otherwise specifically provided
in this Agreement, no waiver by either party hereto of any
breach by the other party hereto of any condition or
provision of this Agreement to be performed by such other
party shall be deemed to be a valid waiver unless such
waiver is in writing or, even if in writing, shall be deemed
to be a waiver of a subsequent breach of such condition or
provision or a waiver of a similar or dissimilar provision
or condition at the same or at any prior or subsequent time.
5. Term of this Agreement. This Agreement shall remain
in effect until October 1, 1999 or until the expiration of
any extension thereof. The term of this Agreement shall be
automatically extended for one (1) year periods without
further action of the parties as of October 1, 1995 and each
succeeding October 1 thereafter, unless ENERGY shall have
served written notice to the Executive prior to October 1,
1995 or prior to October 1 of each succeeding year, as the
case may be, of its intention that the Agreement shall
terminate at the end of the five (5) year period that begins
with the October 1 following the date of such written
notice.
IN WITNESS WHEREOF, the parties have
executed this Amended and Restated Agreement on
this 15th day of March, 1996.
INDIANA ENERGY, INC.
By: /s/O. N. Frenzel III
O. N. Frenzel III, as
Chairman of the Compensation Committee
Attest:
/s/Ronald E. Christian
Secretary or Assistant Secretary
INDIANA GAS COMPANY, INC.
By: /s/Lawrence A. Ferger
President or Vice President
Attest:
/s/Ronald E. Christian
Secretary or Assistant Secretary
EXECUTIVE
/s/Carl L. Chapman
Carl L. Chapman
TERMINATION BENEFITS AGREEMENT
This Agreement, dated as of July 29, 1994, by and
among INDIANA ENERGY, INC., an Indiana corporation having
its principal executive offices at 1630 North Meridian
Street, Indianapolis, Indiana 46202 ("ENERGY"), INDIANA GAS
COMPANY, INC., an Indiana corporation having its principal
executive offices at 1630 North Meridian Street,
Indianapolis, Indiana 46202 ("INDIANA GAS") (both ENERGY and
INDIANA GAS being collectively referred to herein as the
"Company"), and TIMOTHY M. HEWITT, an Indiana resident whose
mailing address is 1630 North Meridian Street, Indianapolis,
Indiana 46202-1496 (the "Officer").
RECITALS
The following facts are true:
A. The Officer is serving the Company as a key
officer, and is expected to continue to make a major
contribution to the profitability, growth, and financial
strength of the Company.
B. The Company considers the continued services of the
Officer to be in the best interests of the Company and its
shareholders, and desires to assure itself of the
availability of such continued services in the future on an
objective and impartial basis and without distraction or
conflict of interest in the event of an attempt to obtain
control of the Company.
C. The Officer is willing to remain in the employ of
the Company upon the understanding that the Company will
provide him with income security upon the terms and subject
to the conditions contained herein if his employment is
terminated by the Company without cause or if he voluntarily
terminates his employment for good reason.
A G R E E M E N T
In consideration of the premises and the mutual
covenants and agreements hereinafter set forth, the Company
and the Officer agree as follows:
1. Undertaking. The Company agrees to pay to the
Officer the termination benefits specified in paragraph 2
hereof if (a) control of ENERGY is acquired (as defined in
paragraph 3(a) hereof) during the term of this Agreement (as
described in paragraph S hereof) and (b) within three (3)
years after the acquisition of control occurs (i) the
Company terminates the employment of the Officer for any
reason other than Cause (as defined in paragraph 3(b)
hereof), death, the Officer's attainment of age sixty-five
(65) or total and permanent disability, or (ii) the Officer
voluntarily terminates his employment for Good Reason (as
defined in paragraph 3(c) hereof) or without reason during
the Window Period (as defined in paragraph 3(d) hereof).
2. Termination Benefits. If the Officer is entitled to
termination benefits pursuant to paragraph 1 hereof, the
Company agrees to pay to the Officer as termination benefits
in a lump-sum payment within five (5) calendar days of the
termination of the Officer's employment an amount equal to
the Officer's annual compensation (as determined consistent
with the provisions of Section 280G(d)(l) of the Internal
Revenue Code of 1986, as amended (the "Code") in effect on
July 29, 1994) payable by the Company which was includable
in the gross income of the Officer for the most recent
calendar year ending coincident with or immediately before
the date on which control of the Company is acquired. For
the purposes of this Agreement, employment and compensation
paid by any direct or indirect subsidiary of the Company
will be deemed to be employment and compensation paid by the
Company.
3. Definitions.
(a) As used in this Agreement, the "acquisition of control"
means:
(i) The acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange
Act")) (a "Person") of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of
twenty percent (20%) or more of either (A) the then
outstanding shares of common stock of ENERGY (the
"Outstanding ENERGY Common Stock") or (B) the combined
voting power of the then outstanding voting securities of
ENERGY entitled to vote generally in the election of
directors (the "Outstanding ENERGY Voting Securities");
provided, however, that the following acquisitions shall not
constitute an acquisition of control: (A) any acquisition
directly from ENERGY (excluding an acquisition by virtue of
the exercise of a conversion privilege), (B) any acquisition
by ENERGY, (C) any acquisition by any employee benefit plan
(or related trust) sponsored or maintained by ENERGY,
INDIANA GAS or any corporation controlled by ENERGY or (D)
any acquisition by any corporation pursuant to a
reorganization, merger or consolidation, if, following such
reorganization, merger or consolidation, the conditions
described in clauses (A), (B) and (C) of subsection (iii) of
this paragraph 3(a) are satisfied;
(ii) Individuals who, as of the date hereof,
constitute the Board of Directors of ENERGY (the "Incumbent
Board") cease for any reason to constitute at least a
majority of the Board of Directors of ENERGY (the "Board");
provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination
for election by ENERGY's shareholders, was approved by a
vote of at least a majority of the directors then comprising
the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose
initial assumption of office occurs as a result of either an
actual or threatened election contest (as such terms are
used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act) or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than
the Board; or
(iii) Approval by the shareholders of ENERGY of a
reorganization, merger or consolidation, in each case,
unless, following such reorganization, merger or
consolidation, (A) more than sixty percent (60%) of,
respectively, the then outstanding shares of common stock of
the corporation resulting from such reorganization, merger
or consolidation and the combined voting power of the then
outstanding voting securities of such corporation entitled
to vote generally in the election of directors is then
beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were
the beneficial owners, respectively, of the Outstanding
ENERGY Common Stock and Outstanding ENERGY Voting Securities
immediately prior to such reorganization, merger or
consolidation in substantially the same proportions as their
ownership, immediately prior to such reorganization, merger
or consolidation, of the Outstanding ENERGY Stock and
Outstanding ENERGY Voting Securities, as the case may be,
(B) no Person (excluding ENERGY, any employee benefit plan
or related trust of ENERGY, INDIANA GAS or such corporation
resulting from such reorganization, merger or consolidation
and any Person beneficially owning, immediately prior to
such reorganization, merger or consolidation and any Person
beneficially owning, immediately prior to such
reorganization, merger or consolidation, directly or
indirectly, twenty percent (20%) or more of the Outstanding
ENERGY Common Stock or Outstanding Voting Securities, as the
case may be) beneficially owns, directly or indirectly,
twenty percent (20%) or more of, respectively, the then
outstanding shares of common stock of the corporation
resulting from such reorganization, merger or consolidation
or the combined voting power of the then outstanding voting
securities of such corporation entitled to vote generally in
the election of directors and (C) at least a majority of the
members of the board of directors of the corporation
resulting from such reorganization, merger or consolidation
were members of the Incumbent Board at the time of the
execution of the initial agreement providing for such
reorganization, merger or consolidation;
(iv) Approval by the shareholders of ENERGY of (A) a
complete liquidation or dissolution of ENERGY or (B) the
sale or other disposition of all or substantially all of the
assets of ENERGY, other than to a corporation, with respect
to which following such sale or other disposition (1) more
than sixty percent (60%) of, respectively, the then
outstanding shares of common stock of such corporation and
the combined voting power of the then outstanding voting
securities of such corporation entitled to vote generally in
the election of directors is then beneficially owned,
directly or indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners,
respectively, of the Outstanding ENERGY Common Stock and
Outstanding ENERGY Voting Securities immediately prior to
such sale or other disposition in substantially the same
proportion as their ownership, immediately prior to such
sale or other disposition, of the Outstanding ENERGY Common
Stock and Outstanding ENERGY Voting Securities, as the case
may be, (2) no Person (excluding ENERGY and any employee
benefit plan or related trust of ENERGY, INDIANA GAS or such
corporation and any Person beneficially owning, immediately
prior to such sale or other disposition, directly or
indirectly, twenty percent (20%) or more of the Outstanding
ENERGY Common Stock or Outstanding ENERGY Voting Securities,
as the case may be) beneficially owns, directly or
indirectly, twenty percent (20%) or more of, respectively,
the then outstanding shares of common stock of such
corporation and the combined voting power of the then
outstanding voting securities of such corporation entitled
to vote generally in the election of directors and (3) at
least a majority of the members of the board of directors of
such corporation were members of the Incumbent Board at the
time of the execution of the initial agreement or action of
the Board providing for such sale or other disposition of
assets of ENERGY; or
(v) The closing, as defined in the documents relating
to, or as evidenced by a certificate of any state or federal
governmental authority in connection with, a transaction
approval of which by the shareholders of ENERGY would
constitute an "acquisition of control" under subsection
(iii) or (iv) of this section 3(a) of this Agreement.
Notwithstanding anything contained in this Agreement
to the contrary, if the Officer's employment is terminated
before an "acquisition of control" as defined in this
section 3(a) and the Officer reasonably demonstrates that
such termination (i) was at the request of a third party who
has indicated an intention or taken steps reasonably
calculated to effect an "acquisition of control" and who
effectuates an "acquisition of control" (a "Third Party") or
(ii) otherwise occurred in connection with, or in
anticipation of, an "acquisition of control" which actually
occurs, then for all purposes of this Agreement, the date of
an "acquisition of control" with respect to the Officer
shall mean the date immediately prior to the date of such
termination of the Officer's employment.
(b) As used in this Agreement, the term "Cause" means
fraud, dishonesty, theft of corporate assets, or other gross
misconduct by the Officer. Notwithstanding the foregoing,
the Officer shall not be deemed to have been terminated for
cause unless and until there shall have been delivered to
him a copy of a resolution duly adopted by the affirmative
vote of not less than a majority of the entire membership of
the Board at a meeting of the Board called and held for the
purpose (after reasonable notice to him and an opportunity
for him, together with his counsel, to be heard before the
Board), finding that in the good faith opinion of the Board
the Officer was guilty of conduct set forth above in the
first sentence of the subsection and specifying the
particulars thereof in detail.
(c) As used in this Agreement, the term "Good
Reason" means, without the Officer's written consent, (i) a
demotion in the Officer's status, position or
responsibilities which, in his reasonable judgment, does not
represent a promotion from his status, position or
responsibilities as in effect immediately prior to the
change in control; (ii) the assignment to the Officer of any
duties or responsibilities which, in his reasonable
judgment, are inconsistent with such status, position or
responsibilities; or any removal of the Officer from or
failure to reappoint or reelect him to any of such
positions, except in connection with the termination of his
employment for total and permanent disability, death or
Cause or by him other than for Good Reason; (iii) a
reduction by the Company in the Officer's base salary as in
effect on the date hereof or as the same may be increased
from time to time during the term of this Agreement or the
Company's failure to increase (within twelve (12) months of
the Officer's last increase in base salary) the Officer's
base salary after a change in control in an amount which at
least equals, on a percentage basis, the average percentage
increase in base salary for all executive and senior
officers of the Company effected in the preceding twelve
(12) months; (iv) the relocation of the principal executive
offices of ENERGY or INDIANA GAS, whichever entity on behalf
of which the Officer performs a principal function of that
entity as part of his employment services, to a location
outside the Indianapolis, Indiana metropolitan area or the
Company's requiring him to be based at any place other than
the location at which he performed his duties prior to a
change in control, except for required travel on the
Company's business to an extent substantially consistent
with his business travel obligations at the time of a change
in control; (v) the failure by the Company to continue in
effect any incentive, bonus or other compensation plan in
which the Officer participates, including but not limited to
the Company's stock option and restricted stock plans, if
any, unless an equitable arrangement (embodied in an ongoing
substitute or alternative plan), with which he has
consented, has been made with respect to such plan in
connection with the change in control, or the failure by the
Company to continue his participation therein, or any action
by the Company which would directly or indirectly materially
reduce his participation therein; (vi) the failure by the
Company to continue to provide the Officer with benefits
substantially similar to those enjoyed by him or to which he
was entitled under any of the Company's pension, profit
sharing, life insurance, medical, dental, health and
accident, or disability plans in which he was participating
at the time of a change in control, the taking of any action
by the Company which would directly or indirectly materially
reduce any of such benefits or deprive him of any material
fringe benefit enjoyed by him or to which he was entitled at
the time of the change in control, or the failure by the
Company to provide him with the number of paid vacation and
sick leave days to which he is entitled on the basis of
years of service with the Company in accordance with the
Company's normal vacation policy in effect on the date
hereof; (vii) the failure of the Company to obtain a
satisfactory agreement from any successor or assign of the
Company to assume and agree to perform this Agreement;
(viii) any purported termination of the Officer's employment
which is not effected pursuant to a Notice of Termination
satisfying the requirements of paragraph 4(c) hereof (and,
if applicable, paragraph 3(b) hereof); and for purposes of
this Agreement, no such purported termination shall be
effective; or (ix) any request by the Company that the
Officer participate in an unlawful act or take any action
constituting a breach of the Officer's professional standard
of conduct.
Notwithstanding anything in this paragraph 3(c) to the
contrary, the Officer's right to terminate his employment
pursuant to this paragraph 3(c) shall not be affected by his
incapacity due to physical or mental illness.
(d) As used in this Agreement, the "Window Period"
shall mean the 30-day period immediately following the first
anniversary of the acquisition of control.
4. Additional Provisions.
(a) Enforcement of Agreement. The Company is aware
that upon the occurrence of a change in control the Board of
Directors or a shareholder of the Company may then cause or
attempt to cause the Company to refuse to comply with its
obligations under this Agreement, or may cause or attempt to
cause the Company to institute, or may institute, litigation
seeking to have this Agreement declared unenforceable, or
may take or attempt to take other action to deny the Officer
the benefits intended under this Agreement. In these
circumstances, the purpose of this Agreement could be
frustrated. It is the intent of the Company that the Officer
not be required to incur the expenses associated with the
enforcement of his rights under this Agreement by litigation
or other legal action, nor be bound to negotiate any
settlement of his rights hereunder, because the cost and
expense of such legal action or settlement would
substantially detract from the benefits intended to be
extended to the Officer hereunder. Accordingly, if following
a change in control it should appear to the Officer that the
Company has failed to comply with any of its obligations
under this Agreement or in the event that the Company or any
other person takes any action to declare this Agreement void
or unenforceable, or institutes any litigation or other
legal action designed to deny, diminish or to recover from
the Officer the benefits entitled to be provided to the
Officer hereunder, and that the Officer has complied with
all of his obligations under this Agreement, the Company
irrevocably authorizes the Officer from time to time to
retain counsel of his choice, at the expense of the Company
as provided in this paragraph 4(a), to represent the Officer
in connection with the initiation or defense of any
litigation or other legal action, whether such action is by
or against the Company or any director, officer,
shareholder, or other person affiliated with the Company, in
any jurisdiction. Notwithstanding any existing or prior
attorney-client relationship between the Company and such
counsel, the Company irrevocably consents to the Officer
entering into an attorney-client relationship with such
counsel, and in that connection the Company and the Officer
agree that a confidential relationship shall exist between
the Officer and such counsel. The reasonable fees and
expenses of counsel selected from time to time by the
Officer as hereinabove provided shall be paid or reimbursed
to the Officer by the Company on a regular, periodic basis
upon presentation by the Officer of a statement or
statements prepared by such counsel in accordance with its
customary practices, up to a maximum aggregate amount of
$500,000. Any legal expenses incurred by the Company by
reason of any dispute between the parties as to
enforceability of or the terms contained in this Agreement,
notwithstanding the outcome of any such dispute, shall be
the sole responsibility of the Company, and the Company
shall not take any action to seek reimbursement from the
Officer for such expenses.
(b) Severance Pay: No Duty to Mitigate. The amounts
payable to the Officer under this Agreement shall not be
treated as damages but as severance compensation to which
the Officer is entitled by reason of termination of his
employment in the circumstances contemplated by this
Agreement. The Company shall not be entitled to set off
against the amounts payable to the Officer any amounts
earned by the Officer in other employment after termination
of his employment with the Company, or any amounts which
might have been earned by the Officer in other employment
had he sought such other employment.
(c) Notice of Termination. Any purported termination
by the Company or by the Officer for Good Reason or by the
Officer without any reason during the Window Period shall be
communicated by written Notice of Termination to the other
party hereto in accordance with paragraph 4(j) hereof. For
purposes of this Agreement, a "Notice of Termination" shall
mean a notice which shall indicate the specific termination
provision in this Agreement relied upon and shall set forth
in reasonable detail the facts and circumstances claimed to
provide a basis for termination of his employment under the
provision so indicated. For purposes of this Agreement, no
such purported termination shall be effective without such
Notice of Termination.
(d) Internal Revenue Code. Notwithstanding anything in
this Agreement to the contrary (other than this paragraph),
in the event that Arthur Andersen & Co. (or its successor)
determines that any payment by the Company to or for the
benefit of the Officer pursuant to the terms of this
Agreement would be nondeductible by the Company for federal
income tax purposes because of Section 280G of the Code,
then the amount payable to or for the benefit of the Officer
pursuant to this Agreement shall be reduced (but not below
zero) to the maximum amount payable without causing the
payment to be nondeductible by the Company because of
Section 280G of the Code; provided, however, that
notwithstanding the preceding clause of this sentence, if
Section 280G of the Code is amended after the date on which
this Agreement has been executed and if the amendment has
the effect of reducing the amount of deductible payments
that may be made by the Company to the Executive under
Section 280G of the Code to an amount less than what would
have been deductible by the Company under Section 280G of
the Code as in effect on July 29, 1994, the maximum amount
payable to the Executive under this paragraph 1(d) shall be
determined without regard to any amendment to Section 280G
of the Code; provided, further, that if solely by reason of
any amendment to Section 280G of the Code an excise tax is
imposed on the Executive under Section 4999 of the Code as a
result of payments made under this Agreement, the Company
shall increase the benefit payable to the Executive under
this Agreement by an amount ("Make Whole Payment") which,
after taking into account the additional federal, state and
local income taxes or the amount (including the Code Section
4999 excise tax that would be imposed on the Make Whole
Payment), would reimburse the Executive fully for the Code
Section 4999 tax that is imposed on the other payments made
hereunder and put the Executive in same net after-tax
position with respect to this Agreement that he would have
been but for the excise tax. Such determination by Arthur
Andersen & Co. (or its successor) shall be conclusive and
binding upon the parties.
(e) Assignment. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their
respective executors, administrators, heirs, personal
representatives, successors, and assigns, but neither this
Agreement nor any right hereunder may be assigned or
transferred by either party hereto, any beneficiary, or any
other person, nor be subject to alienation, anticipation,
sale, pledge, encumbrance, execution, levy, or other legal
process of any kind against the Officer, his beneficiary or
any other person. Notwithstanding the foregoing, the Company
shall assign this Agreement to any corporation or other
business entity succeeding to substantially all of the
business and assets of the Company by merger, consolidation,
sale of assets, or otherwise and shall obtain the assumption
of this Agreement by such successor.
(f) Amendment. This Agreement shall not be amended,
modified, or supplemented without the written agreement of
the parties at the time of such amendment, modification, or
supplement.
(g) Governing Law. This Agreement shall be governed by
and subject to the laws of the State of Indiana.
(h) Severability. The invalidity or unenforceability
of any particular provision of this Agreement shall not
affect the other provisions, and this Agreement shall be
construed in all respects as if such invalid or
unenforceable provision had not been contained herein.
(i) Captions. The captions in this Agreement are for
convenience and identification purposes only, are not an
integral part of this Agreement, and are not to be
considered in the interpretation of any part hereof.
(j) Notices. Except as otherwise specifically provided
in this Agreement, all notices and other communications
hereunder shall be in writing and shall be deemed to have
been duly given if delivered in person or sent by registered
or certified mail, postage prepaid, addressed as set forth
above, or to such other address as shall be furnished in
writing by any party to the others.
(k) Waivers. Except as otherwise specifically provided
in this Agreement, no waiver by either party hereto of any
breach by the other party hereto of any condition or
provision of this Agreement to be performed by such other
party shall be deemed to be a valid waiver unless such
waiver is in writing or, even if in writing, shall be deemed
to be a waiver of a subsequent breach of such condition or
provision or a waiver of a similar or dissimilar provision
or condition at the same or at any prior or subsequent
time.
5. Term of this Agreement. This Agreement shall remain
in effect until October 1, 1999 or until the expiration of
any extension thereof. The term of this Agreement shall be
automatically extended for one (1) year periods without
further action of the parties as of October 1, 1995 and each
succeeding October 1 thereafter, unless ENERGY shall have
served written notice to the Officer prior to October 1,
1995 or prior to October 1 of each succeeding year, as the
case may be, of its intention that the Agreement shall
terminate at the end of the five (5) year period that begins
with the October 1 following the date of such written
notice.
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the day and year first above written.
INDIANA ENERGY, INC.
By: /s/O. N. Frenzel III
O. N. Frenzel III, as
Chairman of the Compensation Committee
Attest:
/s/Ronald E. Christian
Secretary or Assistant Secretary
INDIANA GAS COMPANY, INC.
By: /s/Lawrence A. Ferger
President or Vice President
Attest:
/s/Ronald E. Christian
Secretary or Assistant Secretary
Officer
/s/Timothy M. Hewitt
TIMOTHY M. HEWITT
EXHIBIT 21
State of Incorporation/Organization
Subsidiaries of Indiana Energy,
Inc., (Parent) -
Indiana Gas Company, Inc. Indiana
Richmond Gas Corporation,
d/b/a Indiana Gas Company, Inc. Indiana
Terre Haute Gas Corporation,
d/b/a Indiana Gas Company, Inc. Indiana
IEI Investments, Inc. Indiana
Energy Realty, Inc. Indiana
IGC Energy, Inc. Indiana
Indiana Energy Services, Inc. Indiana
ProLiance Energy, LLC Indiana
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation of our reports included in this Form 10-K into
Indiana Energy, Inc.'s previously filed Registration Statements File
Nos. 33-45046, 33-56522, 33-57148, 33-55983 and 33-62439.
/s/Arthur Andersen LLP
Arthur Andersen LLP
Indianapolis, Indiana
December 19, 1996
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
This schedule contains summary financial information extracted from Indiana
Energy, Inc.'s consolidated financial statements as of September 30, 1996, and
for the fiscal year then ended and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> SEP-30-1996
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 586,824
<OTHER-PROPERTY-AND-INVEST> 10,338
<TOTAL-CURRENT-ASSETS> 69,733
<TOTAL-DEFERRED-CHARGES> 15,568
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 682,463
<COMMON> 143,350
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 152,972
<TOTAL-COMMON-STOCKHOLDERS-EQ> 296,322
0
0
<LONG-TERM-DEBT-NET> 178,063
<SHORT-TERM-NOTES> 28,036
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 272
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 179,770
<TOT-CAPITALIZATION-AND-LIAB> 682,463
<GROSS-OPERATING-REVENUE> 530,594
<INCOME-TAX-EXPENSE> 23,174
<OTHER-OPERATING-EXPENSES> 453,867
<TOTAL-OPERATING-EXPENSES> 477,041
<OPERATING-INCOME-LOSS> 53,553
<OTHER-INCOME-NET> 4,555
<INCOME-BEFORE-INTEREST-EXPEN> 58,108
<TOTAL-INTEREST-EXPENSE> 15,907
<NET-INCOME> 42,201
0
<EARNINGS-AVAILABLE-FOR-COMM> 42,201
<COMMON-STOCK-DIVIDENDS> 24,896
<TOTAL-INTEREST-ON-BONDS> 14,882
<CASH-FLOW-OPERATIONS> 70,719
<EPS-PRIMARY> 1.87
<EPS-DILUTED> 0
</TABLE>
