December 17, 1997
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, 1997, pursuant to the requirements of Section 13
of the Securities Exchange Act of 1934.
Very truly yours,
/s/Douglas S. Schmidt
Douglas S. Schmidt
DSS:tmw
Enclosures
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, 1997
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, 1997, the aggregate market value of Common
Stock held by nonaffiliates was $550,252,603.
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 22,591,388 November 30, 1997
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 28,
1998, electronically filed with the Commission on
December 4, 1997, 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, marketing of natural gas and electric power, 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. (IGC Energy), and Energy
Realty, Inc. (Energy Realty).
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 ProLiance Energy, LLC (ProLiance), a jointly and
equally owned limited liability company, to provide natural
gas supply and related marketing services. ProLiance
assumed the business of IES and began providing services to
Indiana Gas and Citizens Gas effective April 1, 1996.
On April 1, 1997, IGC Energy and Citizens By-Products Coal
Company formed CIGMA, LLC (CIGMA), a jointly and equally
owned limited liability company. CIGMA provides materials
acquisition and related services that are used by Indiana
Gas and Citizens Gas, as well as similar services for third
parties.
On May 23, 1997, IGC Energy, Citizens By-Products Coal Company
and Energy Systems Group, Inc. (ESGI) formed Energy Systems
Group, LLC (ESG), an equally owned limited liability company.
ESG provides a package of products, services and skills to help
energy users achieve enhanced energy and operational
performance. The packages provide for improvements to be paid
for by the customers from savings generated within their
existing operating budgets. ESG has assumed the
responsibilities of ESGI, an energy related performance
contracting firm and wholly owned subsidiary of SIGCORP, Inc.
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 has
several affordable housing investments.
In October 1997, Indiana Energy formed a new business unit,
IEI Services, LLC (IEI Services), to provide support
services to Indiana Energy and its subsidiaries, as well as
to third-parties in the future. Services to be provided
include human resources functions, information technology
and various financial services. These services had been
provided by Indiana Gas in the past.
Also, in October 1997, Indiana Energy formed a new
subsidiary, IEI Capital Corp., to conduct the financing for
Indiana Energy and its subsidiaries other than Indiana Gas.
IEI Capital Corp. will provide the non-regulated businesses
with short-term financing for working capital requirements,
as well as secure permanent financing for those entities.
(c) Narrative Description of the Business.
During fiscal 1997, Indiana Gas supplied gas to about
477,000 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. While Indiana Gas does not serve in
Indianapolis, it does serve the counties and communities
which border that city.
For the fiscal year ended September 30, 1997,
residential customers provided 62 percent of revenues, small
commercial 23 percent and contract (large commercial and
industrial) 15 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 85 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, 1997, Indiana Gas added approximately
12,100 residential and commercial customers.
Indiana Gas sells gas directly to residential, small
commercial and contract customers at approved rates.
Indiana Gas also transports gas through its pipelines at
approved rates to contract 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 1997 represented 34 percent (41,874 MDth) of
throughput compared to 27 percent (34,165 MDth) in 1996 and
30 percent (33,312 MDth) in 1995. 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 by
Indiana Gas 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
certain 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 gas 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 949 full-time employees and 35 part-
time employees as of September 30, 1997.
The company is currently implementing a new growth
strategy and restructuring plan which provides for, among
other things, growing the earnings contribution from
nonutility operations and aggressively managing costs within
its utility operations. See Item 7, New Growth Strategy and
Corporate Restructuring.
Item 2. Property
Indiana Energy owns no real property.
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, 1997, such properties included 10,542 miles of
distribution mains; 484,643 meters; four reservoirs
currently being used for the underground storage of
purchased gas with approximately 72,951 acres of land held
under storage easements; 8,699,322 Dth of gas in company-
owned underground storage with a daily deliverability of
134,160 Dth; 4,941,395 Dth of gas in contract storage with a
daily deliverability of 53,563 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, 1997, amounted to $71.9 million.
Item 3. Legal Proceedings
See Item 8, Note 10 for litigation matters involving
insurance carriers pertaining to Indiana Gas' former
manufactured gas plants and storage facilities.
See Item 8, Note 11 for discussion of the IURC's
decision in the complaint proceeding relating to the gas
supply and portfolio administration agreements between
ProLiance and Indiana Gas and ProLiance and Citizens Gas,
and discussion of the subsequent appeal to that decision.
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, 1997, to a vote of
security holders.
Item 4a. Executive Officers of the Company
The Executive Officers of the company are as follows:
<TABLE>
Family
Relation- Office or Date Elected
Name Age ship Position Held Or Appointed(1)
<S> <C> <C> <C> <C>
Lawrence A. Ferger 63 None Indiana Energy, Inc.
Chairman and Chief
Executive Officer Oct. 1, 1997
Chairman, President and
Chief Executive Officer Jan. 26, 1996
President and Chief
Executive Officer July 1, 1987
Indiana Gas Company,Inc.
Chairman and Chief
Executive Officer Oct. 1, 1997
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
(through
Sep. 30, 1997)
Niel C. Ellerbrook 48 None Indiana Energy, Inc.
President and Chief
Operating Officer Oct. 1, 1997
Executive Vice President,
Treasurer and Chief
Financial Officer Jan. 22, 1997
Vice President and
Treasurer and Chief
Financial Officer Oct. 25, 1985
Indiana Gas Company, Inc.
President Oct. 1, 1997
Executive Vice President
and Chief Financial
Officer Jan. 22, 1997
Senior Vice President and
Chief Financial Officer July 1, 1987
IEI Services, LLC
President Oct. 1, 1997
IEI Capital Corp.
President Oct. 29, 1997
IEI Investments, Inc.
Vice President and
Treasurer May 5, 1986
(through
Sep. 30, 1997)
Paul T. Baker 57 None Indiana Gas Company, Inc.
Executive Vice President
and Chief Operating
Officer Oct. 1, 1997
Senior Vice President
and Chief Operating
Officer Aug. 1, 1991
Anthony E. Ard 56 None Indiana Energy, Inc.
Senior Vice President -
Corporate Affairs Oct. 1, 1997
Indiana Gas Company, Inc.
Senior Vice President
of Corporate Affairs Jan. 9, 1995
(through
Sep. 30, 1997)
Vice President -
Corporate Affairs Jan. 11, 1993
Vice President and
Secretary Sep. 30, 1988
Timothy M. Hewitt 47 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 unless otherwise noted.
</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 1996 and 1997 are
shown in the following table:
<TABLE>
Fiscal Year 1996 High Low Dividend
<S> <C> <C> <C>
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
Fiscal Year 1997 High Low Dividend
First Quarter $25 5/8 $22 5/8 $.28 1/2
Second Quarter $27 1/4 $22 7/8 $.28 1/2
Third Quarter $26 3/4 $23 1/8 $.28 1/2
Fourth Quarter $29 13/16 $24 1/4 $.29 1/2
</TABLE>
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 1997, there were 9,548 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 1997(4) 1996 1995 1994 1993(3)
Utility operating revenues $530,407 $530,594 $403,810 $475,297 $499,278
Margin 207,885 210,463 185,315 194,309 185,725
Utility operating expenses 178,874 156,910 139,127 146,466 141,452
Utility operating income 29,011 53,553 46,188 47,843 44,273
Interest and other 15,533 14,923 14,079 13,247 15,739
Utility income 13,478 38,630 32,109 34,596 28,534
Nonutility income (loss) 7,025 3,571 847 (155) 6,329
Preferred dividend requirement
of subsidiary - - - - 285
Net income $ 20,503 $ 42,201 $ 32,956 $ 34,441 $ 34,578
Earnings per average share
of common stock (1) $ 0.91 $ 1.87 $ 1.46 $ 1.53 $ 1.62
Dividends per share of
common stock (1) $ 1.15 $ 1.11 $ 1.07 $ 1.03 $.99 1/2
Common shareholders' equity $292,597 $296,322 $280,715 $271,245 $258,647
Long-term debt (2) 193,063 178,335 176,563 158,979 184,901
$485,660 $474,657 $457,278 $430,224 $443,548
Total throughput (MDth) 122,846 126,742 109,508 116,285 111,354
Annual heating degree days as
a percent of normal 100% 108% 87% 102% 99%
Utility customers served -
average 477,235 465,166 454,817 443,498 433,000
Total Assets at Year-End $690,845 $682,463 $663,397 $656,645 $631,280
(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.
(4)Reflects the recording of pre-tax restructuring costs of $39.5
million during the fourth quarter of fiscal 1997 (see Item 8,
Note 2).
</TABLE>
Item 7. Management's Discussion and Analysis of Results of
Operations and Financial Condition
Results of Operations
Indiana Energy, Inc.'s (Indiana Energy or the company) consolidated
earnings are from the operations of its gas distribution subsidiary,
Indiana Gas Company, Inc. (Indiana Gas), and its nonutility subsidiaries
and investments grouped under its nonregulated subsidiary, IEI
Investments, Inc. The nonutility operations include IGC Energy, Inc.
(IGC Energy), Energy Realty, Inc. (Energy Realty) and Indiana Energy
Services, Inc. (IES), all indirect wholly owned subsidiaries of Indiana
Energy, and interests in ProLiance Energy, LLC, CIGMA, LLC and Energy
Systems Group, LLC (see below). The company is currently implementing a
new growth strategy and restructuring plan which provides for, among
other things, growing the earnings contribution from nonutility
operations to over 20 percent of its total annual earnings within the
next five years, and aggressively managing costs within its utility
operations.
Earnings
Income and earnings per average share of common stock before 1997
restructuring costs for the last three fiscal years are provided for
comparison purposes below:
<TABLE>
(Millions except per share amounts) 1997 1996 1995
<S> <C> <C> <C>
Utility income(1) $ 38.0 $ 38.6 $ 32.1
Nonutility income $ 7.0 $ 3.6 $ .9
Net income(1) $ 45.0 $ 42.2 $ 33.0
Earnings per average share
of common stock(1) $ 1.99 $ 1.87 $ 1.46
(1) Utility income, net income and earnings per share for 1997
after restructuring costs were $13.5 million, $20.5 million
and 91 cents, respectively.
</TABLE>
Net income and earnings per average share of common stock before
restructuring costs increased approximately 6 percent ($2.8 million and
12 cents per share, respectively) in fiscal 1997 when compared to fiscal
1996. The increases are due primarily to an increase in nonutility
income as a result of higher earnings recognized from Indiana Energy's
gas marketing affiliates and a gain on the sale of certain nonutility
assets.
For fiscal 1997, the Indiana Gas Board of Directors authorized
management to undertake the actions necessary and appropriate to
restructure Indiana Gas' operations and recognize a resulting after-tax
restructuring charge of $24.5 million. These actions by Indiana Gas were
consistent with the company's growth strategy that was approved by its
board of directors during fiscal 1997. The effect on the company's
fiscal 1997 earnings is a reduction in earnings per share of $1.08 per
common share. (See New Growth Strategy and Corporate Restructuring)
Net income and earnings per share increased 28 percent ($9.2 million and
41 cents per share, respectively) 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 the prior 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.
Dividends
On July 25, 1997, the board of directors of the company increased the
quarterly dividend on common stock to 29 1/2 cents per share from 28 1/2
cents per share. This resulted in total dividends paid in 1997 of $1.15
compared to $1.11 in 1996. This is the 25th consecutive year that the
company's dividends paid on common stock increased over the previous
year.
Margin (Revenues Less Cost of Gas)
In 1997, margin decreased 1 percent ($2.6 million) when compared to
1996. The decrease is primarily attributable to normal weather which was
7 percent warmer than the same period last year, offset substantially by
the addition of new residential and commercial customers.
In 1996, margin increased 14 percent ($25.1 million) when compared to
1995. The increase was primarily attributable to weather that was 25
percent colder than the prior 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 1997, total system throughput (combined sales and transportation)
decreased 3 percent (3.9 MMDth) when compared to last year. In 1996,
throughput increased 16 percent (17.2 MMDth) when compared to 1995.
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 $3.64 in 1997, $3.14 in 1996 and $2.53 in 1995. The price
swings are due primarily to changing commodity costs in the marketplace.
Operating Expenses
Operation and maintenance expenses decreased approximately $4.6 million
in 1997 when compared to 1996. The decrease is due in part to lower
distribution system costs than in 1996 when certain projects were
accelerated because of the increased margin resulting from the very cold
weather. Lower costs for uncollectible accounts also contributed to the
decrease.
Operation and maintenance expenses increased approximately $8.5 million
in 1996 when compared to 1995. The increase was 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 to help maintain and
strengthen the distribution system.
Restructuring costs of $39.5 million (pre-tax) were recorded in 1997
related to the implementation of the company's new growth strategy (see
New Growth Strategy and Corporate Restructuring).
Depreciation and amortization expense increased in both 1997 and 1996 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 decreased in 1997 due primarily to the
recording of restructuring costs. Federal and state income taxes
increased in 1996 due to an increase in taxable utility income.
Taxes other than income taxes increased in 1997 due primarily to higher
property tax expense as the result of additions to utility plant. Taxes
other than income taxes increased in 1996 due to higher property tax
expense, and higher gross receipts tax expense resulting from increased
revenue.
Interest Expense
Interest expense increased in 1997 and 1996 due to increases in average
debt outstanding, slightly offset by decreases in interest rates.
Nonutility Income
Nonutility income increased $3.5 million in 1997 when compared to 1996
due in part to higher earnings recognized from Indiana Energy's gas
marketing affiliates ($5.7 million in 1997 versus $3.3 million in 1996).
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
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 and Coke Utility (Citizens Gas) (see ProLiance Energy,
LLC). The June 1997 sale of certain nonutility assets by IGC Energy,
which resulted in an after-tax gain of approximately $1.8 million, also
contributed to the increase.
Nonutility income increased $2.7 million in 1996 when compared to 1995
due primarily to higher earnings recognized from Indiana Energy's gas
marketing affiliates.
Other Operating Matters
New Growth Strategy and Corporate Restructuring
In April 1997, the Board of Directors of Indiana Energy approved a new
growth strategy designed to support the company's transition into a more
competitive environment. As part of this new growth strategy, Indiana
Energy will endeavor to become a leading regional provider of energy
products and services and to grow its consolidated earnings per share by
an average of 10 percent annually over the next five years. To achieve
such earnings growth, Indiana Energy's aim is to grow the earnings
contribution from nonutility operations to over 20 percent of its total
annual earnings within the next five years (see ProLiance Energy, LLC,
CIGMA, LLC and Energy Systems Group, LLC), and to aggressively manage
costs within its utility operations.
For fiscal 1997, the Indiana Gas Board of Directors authorized
management to undertake the actions necessary and appropriate to
restructure Indiana Gas' operations and recognize a resulting
restructuring charge of $39.5 million ($24.5 million after-tax) as
described below. These actions by Indiana Gas were consistent with the
company's new growth strategy. The effect on the company's fiscal 1997
earnings is a reduction in earnings per share of $1.08 per common share.
In July 1997, Indiana Gas advised its employees of its plan to reduce
its work force from about 1,025 full-time employees at June 30, 1997, to
approximately 800 employees within five years. The reductions are being
implemented through involuntary separation and attrition. As a result of
initial work force reductions during September 1997, employees totaled
approximately 950 as of September 30, 1997. Indiana Gas recorded
restructuring costs of $5.4 million related to the 1997 and planned work
force reductions. These costs include separation pay in accordance with
Indiana Gas' severance policy, and net curtailment losses related to
these employees' postretirement and pension benefits.
Further, Indiana Gas' management has committed to sell, abandon or
otherwise dispose of certain assets, including buildings, gas storage
fields and intangible plant. Indiana Gas recorded restructuring costs of
$34.1 million to adjust the carrying value of those assets to estimated
fair value.
In October 1997, Indiana Energy formed a new business unit, IEI
Services, LLC (IEI Services), to provide support services to Indiana
Energy and its subsidiaries, as well as to third-parties in the future.
Services to be provided include human resources functions, information
technology and various financial services. These services had been
provided by Indiana Gas in the past. IEI Services has been designed to
avoid duplicate business unit support costs, eliminate low-value support
activities and to assist in cost containment, which should help the
company in meeting its earnings growth targets.
As a result of the restructuring, the company expects reductions in
future operating expenses, which should help the company to be more
successful in an increasingly competitive energy marketplace.
ProLiance Energy, LLC
ProLiance Energy, LLC (ProLiance) is owned jointly and equally by IGC
Energy and Citizens By-Products Coal Company, a wholly owned subsidiary
of Citizens Gas. ProLiance is the supplier of gas and related services
to both Indiana Gas and Citizens Gas, as well as a provider of similar
services to other utilities and customers in Indiana and surrounding
states. ProLiance added power marketing in late fiscal 1997 to its
services offered. Power marketing involves buying electricity on the
wholesale market and then reselling it to other marketers, utilities and
other customers.
On September 12, 1997, the Indiana Utility Regulatory Commission (IURC)
issued the decision in the complaint proceeding relating to the gas
supply and portfolio administration agreements between ProLiance and
Indiana Gas and ProLiance and Citizens Gas. The IURC concluded that
these agreements are consistent with the public interest. The
management of Indiana Energy believes that the decision is supportive of
the utilities' relationship with ProLiance in all material respects.
This decision is particularly important because the IURC has recognized
that significant customer benefits can be achieved if utilities are
encouraged to work toward innovative customer solutions in the changing
energy marketplace. As a result of ProLiance's provision of service to
Indiana Gas and Citizens Gas, in excess of $50 million in gas costs
savings will be realized for the customers of those utilities over the
initial four and one-half year term of the utilities' agreements.
Further, the IURC has recognized that benefits for investors are
appropriate when risks are being assumed by those investors.
The IURC's decision suggests that all material provisions of the
agreements between ProLiance and the utilities are reasonable. In the
decision the IURC acknowledged that the utilities' purchases of gas
commodity from ProLiance at index prices, as compared to ProLiance's
actual cost, is not unreasonable. The IURC also acknowledged that the
amounts paid by ProLiance to the utilities for the prospect of using
pipeline entitlements if and when they are not required to serve the
utilities' firm customers, and the fees paid by the utilities to
ProLiance for portfolio administration services are not unreasonable.
Nevertheless, with respect to each of these matters, the IURC concluded
that additional findings in the gas cost adjustment (GCA) process would
be appropriate and directed that these matters be considered further in
the pending, consolidated GCA proceeding involving Indiana Gas and
Citizens Gas. The IURC has not yet established a schedule for conducting
these additional proceedings.
On October 6, 1997, counsel for Indiana Gas was served with certain
filings made with the Indiana Court of Appeals (Court) by the
Petitioners and the Indiana Office of Utility Consumer Counselor (OUCC).
The effect of these filings is to initiate an appeal of the IURC's
decision by the Petitioners and the OUCC.
Pursuant to the procedure governing appeals of IURC decisions, at this
time neither the Petitioners nor the OUCC have indicated on what basis
they will attempt to challenge the IURC's decision. The schedule for the
appeal proposed by the Petitioners and the OUCC indicates that the
earliest they will likely disclose such a basis would be on January 12,
1998, when they would be obligated to file the IURC's record of
proceedings with the Court.
As a result of the IURC's decision and notwithstanding the initiation of
the appeal, during the fourth quarter of fiscal 1997, Indiana Energy
recognized approximately $3.0 million of its share of ProLiance's
earnings which had previously been reserved. Of that amount, $700,000
related to fiscal 1996. At September 30, 1997, $600,000 continues to be
reserved pending the outcome of the consolidated GCA proceeding
involving Indiana Gas and Citizens Gas.
Although Indiana Gas' management believes that based upon applicable
Indiana law and the IURC's record of proceedings in the ProLiance case
the IURC's decision should be upheld by the Court, there can be no
assurance as to that outcome.
CIGMA, LLC
On April 1, 1997, IGC Energy and Citizens By-Products Coal Company
formed CIGMA, LLC (CIGMA), a jointly and equally owned limited liability
company. CIGMA provides materials acquisition and related services that
are used by Indiana Gas and Citizens Gas, as well as similar services
for third parties. CIGMA is generating cost savings for the utilities by
enabling purchase discounts and more efficient purchasing, warehousing
and distribution of materials and equipment.
Energy Systems Group, LLC
On May 23, 1997, IGC Energy, Citizens By-Products Coal Company and
Energy Systems Group, Inc. (ESGI) formed Energy Systems Group, LLC
(ESG), an equally owned limited liability company. ESG provides a
package of products, services and skills to help energy users achieve
enhanced energy and operational performance. The packages provide for
improvements to be paid for by the customers from savings generated
within their existing operating budgets. ESG has assumed the
responsibilities of ESGI, an energy related performance contracting firm
and wholly owned subsidiary of SIGCORP, Inc.
Environmental Matters
Indiana Gas is currently conducting environmental investigations and
work at certain sites that were the locations of former manufactured gas
plants. It has been seeking to recover the costs of the investigations
and work from insurance carriers, other potentially responsible parties
(PRPs) and customers.
During 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 ruling was affirmed by the Indiana Court of
Appeals. On August 15, 1997, the Indiana Supreme Court denied Indiana
Gas' petition for transfer and the IURC order became final.
On August 12, 1997, Indiana Gas and PSI Energy, Inc. (PSI) signed an
agreement with respect to thirteen of the nineteen sites where PSI is a
PRP, which provides for an equal sharing between Indiana Gas and PSI of
past and future response costs at the thirteen sites. Indiana Gas and
PSI must jointly approve future management of the sites and the
decisions to spend additional funds. Indiana Gas previously entered into
an agreement with PSI providing for the sharing of costs related to
another site. Five other sites are already the subject of an agreement
between Indiana Gas and Northern Indiana Public Service Company (NIPSCO)
which provides for coordination of efforts and sharing of investigation
and clean-up costs incurred and to be incurred at the sites. Indiana
Gas further expects in the near future to commence negotiations with PSI
and NIPSCO regarding these five sites for the purpose of including PSI
in the Indiana Gas-NIPSCO agreement.
On April 14, 1995, Indiana Gas filed suit in the United States District
Court for the Northern District of Indiana, Fort Wayne Division (the
Court) 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. Based on
discussions with counsel, the management of Indiana Gas believes that a
number of the Court's rulings are contrary to Indiana law and has
appealed 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. The appeal has been set for oral argument on January
6, 1998. There can be no assurance as to whether Indiana Gas will
prevail on this appeal. As of September 30, 1997, Indiana Gas has
obtained settlements from some insurance carriers in an aggregate amount
of approximately $14.7 million.
The Court's rulings have had no material impact on earnings since
Indiana Gas has previously recorded all costs (in aggregate $14.7
million) 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 and financial reporting see Note 10 of
the Notes to Consolidated Financial Statements.
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). The Office of
Utility Consumer Counselor appealed the order; however, on January 21,
1997, the Indiana Court of Appeals affirmed the IURC decision
authorizing recovery.
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 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 gas users which provided for authorized utility operating income
(weather normalized) of $54.2 million for Indiana Gas beginning in
fiscal 1996.
Liquidity and Capital Resources
Consolidated capitalization objectives for Indiana Energy are 55-65
percent common equity and preferred stock and 35-45 percent long-term
debt, but may vary from time to time, depending on particular business
opportunities. Indiana Energy's common equity component was 60 percent
of total capitalization at September 30, 1997.
Because of its current capital structure, the company does have the
ability to issue additional long-term debt, if necessary, to fund
nonutility investments or for other corporate purposes and still meet
its capitalization objectives. This is particularly important as it
relates to the company's new growth strategy, which provides for, among
other things, expansion of its nonutility operations.
In October 1997, Indiana Energy formed a new subsidiary, IEI Capital
Corp., to conduct the financing for Indiana Energy and its subsidiaries
other than Indiana Gas. IEI Capital Corp. will provide the non-
regulated businesses with short-term financing for working capital
requirements, as well as secure permanent financing for those entities.
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. During 1996, Indiana Energy repurchased 92,100 shares with an
associated cost of $2,116,000. No shares were repurchased during 1997.
While there are no immediate plans to repurchase additional shares, the
company will continue to evaluate opportunities to do so.
Indiana Gas' capitalization objectives, which are 55-65 percent common
equity and preferred stock and 35-45 percent long-term debt, remain
unchanged from prior years. Indiana Gas' common equity component was 59
percent of its total capitalization at September 30, 1997.
New construction, normal system maintenance and improvements, and
information technology investments needed to provide service to a
growing customer base will continue to require substantial expenditures.
Total capital required to fund capital expenditures and refinancing
requirements for 1996 and 1997, along with estimated amounts for 1998
through 2000, is as follows:
<TABLE>
Thousands 1996 1997 1998 1999 2000
<S> <C> <C> <C> <C> <C>
Capital expenditures $66,000 $72,000 $ 68,000 $63,000 $60,000
Refinancing requirements
(including nonutility) 19,000 - 35,000 10,000 -
$85,000 $72,000 $103,000 $73,000 $60,000
</TABLE>
The table above does not include nonutility investments. Nonutility
investments, including commitments, totaled approximately $1.1 million
and $10.5 million for 1996 and 1997, respectively. While the company
does expect to make additional nonutility investments in the future, it
cannot provide estimates at this time.
Indiana Gas' long-term goal is to internally fund at least 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. In 1997, 58 percent of Indiana Gas' capital
expenditures was funded internally (i.e. from utility income less
dividends plus charges to utility income not requiring funds). In 1996,
70 percent of capital expenditures was provided by funds generated
internally. External funds required for the 1997 construction program
were obtained primarily through a combination of short-term and long-
term debt.
During July 1997, Indiana Gas issued $15 million in aggregate principal
amount of its Medium-Term Notes, Series E as follows: $5.0 million of
6.42% Notes due July 7, 2027; $3.5 million of 6.68% Notes due July 7,
2027; and $6.5 million of 6.54% Notes due July 9, 2007.
Provisions under which certain of Indiana Gas' Series E Medium-Term
Notes were issued entitle the holders of $30 million of these notes to
put the debt back to Indiana Gas at face value at a specified date
before maturity beginning in 2000. Long-term debt subject to the put
provisions during the three years following 1997 totals $5 million.
As of September 30, 1997, Indiana Gas had IURC authority to issue up to
$95 million in additional debt securities. In October 1997, Indiana Gas
filed a registration statement with the Securities and Exchange
Commission with respect to the issuance of up to $95 million in debt
securities and in November 1997 filed a prospectus supplement with
respect to $95 million in Medium-Term Notes, Series F. In December
1997, Indiana Gas issued under this registration statement $35 million
in aggregate principal amount of its Medium-Term Notes, Series F as
follows: $20 million of 6.34% Notes due December 10, 2027; and $15
million of 6.36% Notes due December 6, 2004. The net proceeds from the
sale of these new debt securities and the July 1997 sale of Series E
Notes will be used to refinance certain of Indiana Gas' long-term debt
issues and to refinance short-term obligations incurred in connection
with Indiana Gas' ongoing construction program and other corporate
purposes.
In December 1997, Indiana Gas also retired $35 million of 6 5/8% Series
D Notes and called $24.7 million of 8 1/2% Series B Debentures. Indiana
Gas' 8.90% Notes will mature in July 1999.
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.
Forward-Looking Information
Cautionary Statement for Purposes of the "Safe Harbor" Provisions of the
Private Securities Litigation Reform Act of 1995.
A "safe harbor" for forward-looking statements is provided by the
Private Securities Litigation Reform Act of 1995 (Reform Act of 1995).
The Reform Act of 1995 was adopted to encourage such forward-looking
statements without the threat of litigation, provided those statements
are identified as forward-looking and are accompanied by meaningful
cautionary statements identifying important factors that could cause the
actual results to differ materially from those projected in the
statement. Certain matters described in Management's Discussion and
Analysis of Results of Operations and Financial Condition, including,
but not limited to, Indiana Energy's new earnings growth strategy, are
forward-looking statements. Such statements are based on management's
beliefs, as well as assumptions made by and information currently
available to management. When used in this filing the words "aim,"
"anticipate," "endeavor," "estimate," "expect," "objective,"
"projection," "forecast," "goal," and similar expressions are intended
to identify forward-looking statements. In addition to any assumptions
and other factors referred to specifically in connection with such
forward-looking statements, factors that could cause Indiana Energy's
actual results to differ materially from those contemplated in any
forward-looking statements include, among others, the following:
Factors affecting utility operations such as unusual weather
conditions; catastrophic weather-related damage; unusual
maintenance or repairs; unanticipated changes to gas supply
costs, or availability due to higher demand, shortages,
transportation problems or other developments; environmental
or pipeline incidents; or gas pipeline system constraints.
Increased competition in the energy environment, including
effects of industry restructuring and unbundling.
Regulatory factors such as unanticipated changes in rate-
setting policies or procedures; recovery of investments
made under traditional regulation, and the frequency and
timing of rate increases.
Financial or regulatory accounting principles or policies
imposed by the Financial Accounting Standards Board, the
Securities and Exchange Commission, the Federal Energy
Regulatory Commission, state public utility commissions,
state entities which regulate natural gas transmission,
gathering and processing, and similar entities with
regulatory oversight.
Economic conditions including inflation rates and monetary
fluctuations.
Changing market conditions and a variety of other factors
associated with physical energy and financial trading
activities, including, but not limited to, price, basis,
credit, liquidity, volatility, capacity, interest rate and
warranty risks.
Availability or cost of capital, resulting from changes in:
Indiana Energy, interest rates, and securities ratings or
market perceptions of the utility industry and energy-related
industries.
Employee workforce factors, including changes in key executives,
collective bargaining agreements with union employees or work
stoppages.
Legal and regulatory delays and other obstacles associated with
mergers, acquisitions and investments in joint ventures such as
the ProLiance complaint proceeding.
Costs and other effects of legal and administrative proceedings,
settlements, investigations, claims and other matters, including,
but not limited to, those described in the Other Operating Matters
section of Management's Discussion and Analysis of Results of
Operations and Financial Condition.
Changes in Federal, state or local legislative requirements, such
as changes in tax laws or rates, environmental laws and
regulations.
Indiana Energy undertakes no obligation to publicly update or revise any
forward-looking statements, whether as a result of changes in actual
results, changes in assumptions, or other factors affecting such
statements.
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 of the company's board of directors, 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
President and Chief Operating 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, 1997, and
1996, 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, 1997. 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, 1997, and
1996, and the results of their operations and their cash flows for each
of the three years in the period ended September 30, 1997, in conformity
with generally accepted accounting principles.
/s/ Arthur Andersen LLP
Arthur Andersen LLP
Indianapolis, Indiana
October 31, 1997
<TABLE>
INDIANA ENERGY, INC.
AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF INCOME
(Thousands except per share amounts)
Year Ended September 30
1997 1996 1995
<S> <C> <C> <C>
UTILITY OPERATING REVENUES $ 530,407 $ 530,594 $ 403,810
COST OF GAS (See Note 13) 322,522 320,131 218,495
MARGIN 207,885 210,463 185,315
UTILITY OPERATING EXPENSES:
Other operation and maintenance 79,567 84,136 75,608
Restructuring costs (See Note 2) 39,531 - -
Depreciation and amortization 35,054 33,232 31,265
Income taxes 7,852 23,174 19,216
Taxes other than income taxes 16,870 16,368 13,038
178,874 156,910 139,127
UTILITY OPERATING INCOME 29,011 53,553 46,188
INTEREST EXPENSE 16,774 15,907 15,530
OTHER (1,241) (984) (1,451)
15,533 14,923 14,079
UTILITY INCOME 13,478 38,630 32,109
NONUTILITY INCOME 7,025 3,571 847
NET INCOME $ 20,503 $ 42,201 $ 32,956
AVERAGE COMMON SHARES OUTSTANDING 22,580 22,513 22,560
EARNINGS PER AVERAGE SHARE OF
COMMON STOCK $ 0.91 $ 1.87 $ 1.46
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
1997 1996 1995
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 20,503 $ 42,201 $ 32,956
Adjustments to reconcile net income to cash
provided from operating activities -
Noncash restructuring costs 32,838 - -
Depreciation and amortization 35,241 33,441 31,485
Deferred income taxes (12,618) 804 3,994
Investment tax credit (930) (930) (930)
Gain on sale of nonutility assets (2,923) - -
Undistributed earnings of unconsolidated affiliates (8,712) 88 (237)
42,896 33,403 34,312
Changes in assets and liabilities -
Receivables - net (8,526) (2,558) 3,244
Inventories 24,026 19,966 5,189
Accounts payable, customer deposits, advance
payments and other current liabilities 1,941 (14,801) 39,396
Accrued taxes and interest 4,530 (3,744) (12,637)
Recoverable/refundable gas costs (3,133) (7,593) (26,712)
Accrued postretirement benefits other than pensions 8,134 3,505 5,963
Other - net (4,491) 340 8,441
Total adjustments 65,377 28,518 57,196
Net cash flows from operations 85,880 70,719 90,152
CASH FLOWS REQUIRED FOR FINANCING ACTIVITIES:
Repurchase of common stock - (2,116) -
Sale of long-term debt 15,064 21,068 20,812
Reduction in long-term debt (336) (19,296) (3,228)
Net change in short-term borrowings (4,236) 22,011 (28,325)
Dividends on common stock (25,787) (24,896) (24,019)
Net cash flows required for financing activities (15,295) (3,229) (34,760)
CASH FLOWS REQUIRED FOR INVESTING ACTIVITIES:
Capital expenditures (71,907) (66,381) (54,943)
Nonutility investments - net (1,650) (1,109) (449)
Proceeds from sale of nonutility assets 3,000 - -
Net cash flows required for investing activities (70,557) (67,490) (55,392)
NET INCREASE (DECREASE) IN CASH 28 - -
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD 20 20 20
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 48 $ 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
1997 1996
<S> <C> <C>
UTILITY PLANT:
Original cost $ 951,617 $ 931,092
Less - accumulated depreciation and amortization 361,936 344,268
589,681 586,824
NONUTILITY PLANT AND OTHER INVESTMENTS - NET 27,884 10,338
CURRENT ASSETS:
Cash and cash equivalents 48 20
Accounts receivable, less reserves of
$1,784 and $1,853 respectively (See Note 13) 22,318 14,598
Accrued unbilled revenues 8,964 8,158
Materials and supplies - at average cost 63 4,611
Liquefied petroleum gas - at average cost 872 507
Gas in underground storage - at last-in,
first-out cost 19,240 39,083
Recoverable gas costs 5,843 2,710
Prepayments and other 3,703 46
61,051 69,733
DEFERRED CHARGES:
Unamortized debt discount and expense 7,074 7,585
Other 5,155 7,983
12,229 15,568
$ 690,845 $ 682,463
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
1997 1996
<S> <C> <C>
CAPITALIZATION:
Common stock (no par value) - authorized 64,000,000
shares - issued and outstanding 22,580,543 and
22,474,402 shares, respectively $ 146,498 $ 143,875
Less unearned compensation - restricted stock grants 1,589 525
144,909 143,350
Retained earnings 147,688 152,972
Total common shareholders' equity 292,597 296,322
Long-term debt (see schedule) 157,791 178,063
450,388 474,385
CURRENT LIABILITIES:
Maturities and sinking fund requirements of long-term debt 35,272 272
Notes payable 23,800 28,036
Accounts payable (See Note 13) 25,523 34,192
Customer deposits and advance payments 20,405 14,256
Accrued taxes 8,659 4,206
Accrued interest 2,629 2,552
Other current liabilities 31,817 27,356
148,105 110,870
DEFERRED CREDITS AND OTHER LIABILITIES:
Deferred income taxes 55,205 66,862
Accrued postretirement benefits other than pensions 23,038 14,904
Unamortized investment tax credit 10,243 11,173
Regulatory income tax liability 1,874 2,835
Other 1,992 1,434
92,352 97,208
COMMITMENTS AND CONTINGENCIES (See Notes 9, 10 & 11) - -
$ 690,845 $ 682,463
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, 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
Net income 20,503 20,503
Common stock dividends ($1.15 per share) (25,787) (25,787)
Common stock issuances for Executives' and
Directors' stock plans net of amortization 106,141 2,623 (1,064) 1,559
BALANCE AT SEPTEMBER 30, 1997 22,580,543 $ 146,498 $ (1,589) $ 147,688 $ 292,597
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
1997 1996
<S> <C> <C>
LONG-TERM DEBT:
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
6.54% Series E, due July 9, 2007 6,500 -
6.69% Series E, due June 10, 2013 5,000 5,000
7.15% Series E, due March 15, 2015 5,000 5,000
6.69% Series E, due December 21, 2015 5,000 5,000
6.69% Series E, due December 29, 2015 10,000 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 24,733
6.31% Series E, due June 10, 2025 5,000 5,000
6.53% Series E, due June 27, 2025 10,000 10,000
6.42% Series E, due July 7, 2027 5,000 -
6.68% Series E, due July 7, 2027 3,500 -
189,733 174,733
Unsecured Notes Payable - Nonutility
Variable rate term loan, due May 10, 2004 1,632 1,845
Noninterest bearing note, due August 1, 2005 698 757
Variable rate note, due January 1, 2007 1,000 1,000
3,330 3,602
193,063 178,335
Less - Maturities and sinking fund requirements 35,272 272
$ 157,791 $ 178,063
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. (Indiana Energy or 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 the
nonutility operations grouped under IEI Investments, Inc.
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. (IGC Energy), Energy Realty, Inc. (Energy Realty)
and Indiana Energy Services, Inc. (IES), all indirect wholly
owned subsidiaries of Indiana Energy, and interests in
ProLiance Energy, LLC (see Note 11), CIGMA, LLC (see Note 13)
and Energy Systems Group, LLC (see Note 14).
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. Upon
normal retirement of a depreciable unit of property, 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 1997 1996 1995
<S> <C> <C> <C>
Interest (net of amount capitalized) $ 15,496 $ 15,816 $ 14,614
Income taxes $ 21,851 $ 30,608 $ 26,206
</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, 1997, was $19.2
million compared to $39.1 million at September 30, 1996. This
decrease resulted primarily from Indiana Gas' replacement of
contract storage services with city gate delivery services.
Based on the average cost of purchased gas during September
1997, the cost of replacing the current portion of gas in
underground storage exceeded last-in, first-out cost at
September 30, 1997, by approximately $11,204,000.
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.
<TABLE>
Thousands 1997 1996 1995
<S> <C> <C> <C>
AFUDC - borrowed funds $ 596 $ 283 $ 215
AFUDC - equity funds 487 232 176
Total AFUDC capitalized $1,083 $ 515 $ 391
</TABLE>
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. Corporate Restructuring
In April 1997, the Board of Directors of Indiana Energy
approved a new growth strategy designed to support the
company's transition into a more competitive environment.
For fiscal 1997, the Indiana Gas Board of Directors authorized
management to undertake the actions necessary and appropriate
to restructure Indiana Gas' operations and recognize a
resulting restructuring charge of $39.5 million ($24.5 million
after tax) as described below. These actions by Indiana Gas
were consistent with the company's new growth strategy. The
effect on the company's fiscal 1997 earnings is a reduction in
earnings per share of $1.08 per common share.
In July 1997, Indiana Gas advised its employees of its plan to
reduce its work force from about 1,025 full-time employees at
June 30, 1997, to approximately 800 employees within five
years. The reductions are being implemented through
involuntary separation and attrition. As a result of initial
work force reductions during September 1997, employees totaled
approximately 950 as of September 30, 1997. Indiana Gas
recorded restructuring costs of $5.4 million related to the
1997 and planned work force reductions. These costs include
separation pay in accordance with Indiana Gas' severance
policy, and net curtailment losses related to these employees'
postretirement and pension benefits.
Further, Indiana Gas' management has committed to sell,
abandon or otherwise dispose of certain assets, including
buildings, gas storage fields and intangible plant. Indiana
Gas recorded restructuring costs of $34.1 million to adjust
the carrying value of those assets to estimated fair value.
In October 1997, Indiana Energy formed a new business unit,
IEI Services, LLC (IEI Services), to provide support services
to Indiana Energy and its subsidiaries, as well as to third-
parties in the future. Services to be provided include human
resources functions, information technology and various
financial services. These services had been provided by
Indiana Gas in the past.
3. 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 Sheet as of
September 30 (in thousands) relate to the following:
<TABLE>
Regulatory Assets 1997
<S> <C>
Postretirement benefits other than pensions $ 4,486
Unamortized debt discount and expense 4,849
Gas costs due from customers, net 5,843
Deferred acquisition costs 698
$ 15,876
Regulatory Liabilities
Amounts due to customers - income taxes, net $ 1,874
$ 1,874
</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.
4. Short-Term Borrowings
Indiana Gas has available committed lines of credit of $60
million with approximately $20 million outstanding at
September 30, 1997. These lines of credit are renewable
annually and may be adjusted quarterly as borrowings fluctuate
with seasonal needs and other short-term funding requirements.
Indiana Gas' board of directors has authorized borrowings of
up to $150 million under bank lines of credit. Indiana Gas
has agreed to compensate the participating banks with
arrangements that vary from no commitment fees to a
combination of fees that are mutually agreeable. 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 1997 1996 1995
<S> <C> <C> <C>
Outstanding at year end $ 20,000 $ 24,236 $ 2,225
Weighted average interest rates at year end 5.7% 5.4% 6.1%
Weighted average interest rates during the year 5.5% 5.7% 5.7%
Weighted average total outstanding during the year $ 28,959 $ 5,930 $ 16,578
Maximum total outstanding during the year $ 89,725 $ 28,150 $ 50,000
</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.
5. Long-Term Debt
During July 1997, Indiana Gas issued $15 million in aggregate
principal amount of its Medium-Term Notes, Series E (Notes) as
follows: $5.0 million of 6.42% Notes due July 7, 2027; $3.5
million of 6.68% Notes due July 7, 2027; and $6.5 million of
6.54% Notes due July 9, 2007. The net proceeds from the sale
of the Notes will be used to refinance existing debt, to
finance Indiana Gas' continuing construction program and for
other corporate purposes.
Consolidated maturities and sinking fund requirements on long-
term debt subject to mandatory redemption during the five
years following 1997 are $35,277,000 in 1998, $10,332,000 in
1999, $393,000 in 2000, $410,000 in 2001 and $4,917,000 in
2002.
Provisions under which certain of Indiana Gas' Series E Medium
Term Notes were issued entitle the holders of $30 million of
these notes to put the debt back to Indiana Gas at face value
at a specified date before maturity beginning in 2000. Long-
term debt subject to the put provisions during the five years
following 1997 totals $5,000,000 in 2000 and $11,500,000 in
2002.
6. Fair Value of Financial Instruments
The estimated fair values of the company's financial
instruments were as follows:
<TABLE>
September 30, 1997 September 30, 1996
Carrying Fair Carrying Fair
Thousands Amount Value Amount Value
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 48 $ 48 $ 20 $ 20
Notes payable $ 23,800 $ 23,800 $ 28,036 $ 28,036
Long-term debt (includes
amounts due within one year)$193,063 $200,080 $178,335 $182,482
</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.
7. 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. During 1996, Indiana Energy
repurchased 92,100 shares with an associated cost of
$2,116,000. No shares were repurchased during 1997.
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 participating 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, Indiana Gas or IEI Investments, Inc.
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 the company's retirement
savings plan (see Note 8), eligible participants may direct a
specified percentage of their compensation to be invested in
shares of the company's common stock.
At September 30, 1997, the shares of the company's common
stock reserved for issuance under each of those plans were as
follows:
<TABLE>
<S> <C>
Dividend Reinvestment and Stock Purchase Plan 353,847
Executive Restricted Stock Plan 271,089
Directors' Restricted Stock Plan 47,945
Retirement Savings Plan 382,262
</TABLE>
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,
which occurred effective May 31, 1996. 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.
8. Retirement Plans and Other Postretirement Benefits
The company 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 1997, 1996 and 1995, the company made
contributions of $2,360,000, $2,445,000 and $2,335,000,
respectively.
The company 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.
The company's 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 the
company's funding policy to maintain the pension plans on an
actuarially sound basis. Under this policy, funding was
$350,000 in 1997, $464,000 in 1996 and $143,000 in 1995.
The company 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 calculation of pension expense is as follows:
<TABLE>
Thousands 1997 1996 1995
<S> <C> <C> <C>
Pension benefits earned during the period $ 1,268 $ 1,174 $ 1,086
Interest accrued on projected pension
benefit obligation 4,847 4,730 4,554
Actual return on pension plan assets (16,013) (10,244) (9,632)
Net amortization, deferral and other 9,982 4,634 4,698
Total pension expense $ 84 $ 294 $ 706
</TABLE>
The following table reconciles the plans' funded status at
September 30 with amounts recorded in the company's financial
statements. Certain assets and obligations of the plans have
been deferred and recognized in the financial statements in
subsequent periods.
<TABLE>
Thousands 1997 1996
<S> <C> <C>
Actuarial present value of pension benefits:
Vested benefits $ 57,337 $ 54,637
Nonvested benefits 164 159
Effect of future salary increases 8,476 8,167
Projected pension benefit obligation 65,977 62,963
Plan assets at fair value 87,801 75,748
Plan assets in excess of projected
pension benefit obligation at September 30 21,824 12,785
Unrecognized adjusted prior service costs 2,526 1,966
Unrecognized net assets at date of initial
application (1,515) (1,776)
Unrecognized net (gain) loss and other (19,378) (13,333)
Prepaid (accrued) pension cost at September 30 $ 3,457 $ (358)
</TABLE>
The weighted-average discount rate used in determining the
actuarial present value of the SFAS 87 projected benefit
obligation was 7.75 percent in 1997 and 8 percent in 1996. For
1997 and 1996, the expected long-term rate of return on assets
used was 9 percent and the average rate of increase in future
compensation levels used ranged from 5 to 5.5 percent. 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, the company
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 the company's 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, the company 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). The Office of the Utility
Consumer Counselor appealed the order, however, on January 21,
1997, the Indiana Court of Appeals affirmed the IURC decision
authorizing recovery. Amounts accrued prior to the order were
deferred as allowed by the IURC (see Note 3).
Postretirement benefit cost, excluding the curtailment loss in
1997, consisted of the following components:
<TABLE>
Thousands 1997 1996 1995
<S> <C> <C> <C>
Service cost - benefits attributed to service
during the period $ 770 $ 806 $ 1,423
Interest cost on accumulated postretirement
obligation 3,311 3,264 4,186
Amortization of transition obligation 2,280 2,280 2,772
Amortization of net (gain) loss and other 1,397 978 (4,543)
Total postretirement benefit cost $ 7,758 $ 7,328 $ 3,838
</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, 1997, and 1996:
<TABLE>
Thousands 1997 1996
<S> <C> <C>
Accumulated postretirement benefit
obligation:
Retirees and dependents $ 24,811 $ 27,903
Other fully eligible participants 8,599 7,194
Other active participants 9,473 9,973
Total accumulated postretirement benefit
obligation 42,883 45,070
Fair value of plan assets - -
Accumulated postretirement benefit
obligation in excess of plan assets (42,883) (45,070)
Unrecognized net (gain) loss (11,441) (8,599)
Unrecognized transition obligation 31,286 38,765
Accrued postretirement benefit
cost at September 30 $(23,038) $(14,904)
</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, 1997,
was 7.5 percent for fiscal 1998. 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 $1.0 million increase in the accumulated
postretirement benefit obligation as of September 30, 1997,
and approximately a $100,000 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 7.75 percent in 1997 and 8 percent in 1996.
9. Commitments
Estimated capital expenditures for 1998 are $68 million.
Total lease expense was $2,200,000 in 1997, $2,863,000 in 1996
and $2,811,000 in 1995.
Lease commitments are $1,121,000 in 1998, $594,000 in 1999,
$425,000 in 2000, $361,000 in 2001, $329,000 in 2002 and
$10,000 in total for all later years. There are no leases that
extend beyond 2036. Indiana Gas has storage and supply
contracts that range from one month to five years.
10. 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 several 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 continue to
assess, on a site-by-site basis, whether any of the remaining
sites require remediation, to what extent it is required and
the estimated cost. Preliminary assessments (PAs) have been
completed on all of the sites. Site investigations (SIs) and
supplemental site investigations (SSIs) have been conducted at
a number of the 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 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 the sites as
appropriate and necessary.
Based upon the work performed to date, Indiana Gas has accrued
remediation and related costs for the sites where remedial
activities have taken place. PA/SI, SSI and groundwater
monitoring costs have been accrued for the remaining sites
where appropriate. Estimated 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.
During 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 ruling was affirmed by the Indiana
Court of Appeals. On August 15, 1997, the Indiana Supreme
Court denied Indiana Gas' petition for transfer and the IURC
order became final.
Indiana Gas has also completed the process of identifying PRPs
for each site. With the help of outside counsel, Indiana Gas
has prepared estimates of the PRPs' 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. PRPs include two financially
viable utilities, PSI Energy, Inc. (PSI) and Northern Indiana
Public Service Company (NIPSCO). On August 12, 1997, Indiana
Gas and PSI signed an agreement with respect to thirteen of
the nineteen sites where PSI is a PRP, which provides for an
equal sharing between Indiana Gas and PSI of past and future
response costs at the thirteen sites. Indiana Gas and PSI must
jointly approve future management of the sites and the
decisions to spend additional funds. Indiana Gas previously
entered into an agreement with PSI providing for the sharing
of costs related to another site. Five other sites are already
the subject of an agreement between Indiana Gas and NIPSCO
which provides for coordination of efforts and sharing of
investigation and clean-up costs incurred and to be incurred
at the sites. Indiana Gas further expects in the near future
to commence negotiations with PSI and NIPSCO regarding these
five sites for the purpose of including PSI in the Indiana
Gas-NIPSCO agreement. The PSI and NIPSCO agreements, as well
as the cost sharing estimates of other PRPs, 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.
On April 14, 1995, Indiana Gas filed suit in the United States
District Court for the Northern District of Indiana, Fort
Wayne Division (the Court) 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.
Based on discussions with counsel, the management of Indiana
Gas believes that a number of the Court's rulings are contrary
to Indiana law and has appealed 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,
1997, Indiana Gas has obtained settlements from some insurance
carriers in an aggregate amount of approximately $14.7
million.
The Court's rulings have had no material impact on earnings
since Indiana Gas has previously recorded all costs (in
aggregate $14.7 million) 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.
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, 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.
11. Nonutility Income
The components of nonutility income, shown net of tax, are
listed below:
<TABLE>
Thousands 1997 1996 1995
<S> <C> <C> <C>
Nonutility income (loss):
Gas marketing affiliates, net of
reserve $ 5,726 $ 3,265 $ 89
Gain on sale of nonutility assets 1,790 - -
Other - net (491) 306 758
$ 7,025 $ 3,571 $ 847
</TABLE>
During June 1997, IGC Energy sold certain nonutility assets,
resulting in an after-tax gain of approximately $1.8 million.
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.
ProLiance Energy, LLC (ProLiance), a nonregulated marketing
affiliate, assumed the business of IES effective April 1,
1996, and is the supplier of gas and related services to both
Indiana Gas and Citizens Gas and Coke Utility (Citizens Gas).
The company's investment in ProLiance is accounted for using
the equity method. ProLiance's fiscal year ends on August 31.
On September 12, 1997, the Indiana Utility Regulatory
Commission (IURC) issued the decision in the complaint
proceeding relating to the gas supply and portfolio
administration agreements between ProLiance and Indiana Gas
and ProLiance and Citizens Gas. The IURC concluded that these
agreements are consistent with the public interest. The
management of Indiana Energy believes that the decision is
supportive of the utilities' relationship with ProLiance in
all material respects.
The IURC's decision suggests that all material provisions of
the agreements between ProLiance and the utilities are
reasonable. In the decision the IURC acknowledged that the
utilities' purchases of gas commodity from ProLiance at index
prices, as compared to ProLiance's actual cost, is not
unreasonable. The IURC also acknowledged that the amounts paid
by ProLiance to the utilities for the prospect of using
pipeline entitlements if and when they are not required to
serve the utilities' firm customers, and the fees paid by the
utilities to ProLiance for portfolio administration services
are not unreasonable. Nevertheless, with respect to each of
these matters, the IURC concluded that additional findings in
the gas cost adjustment (GCA) process would be appropriate and
directed that these matters be considered further in the
pending, consolidated GCA proceeding involving Indiana Gas and
Citizens Gas. The IURC has not yet established a schedule for
conducting these additional proceedings.
On October 6, 1997, counsel for Indiana Gas was served with
certain filings made with the Indiana Court of Appeals (Court)
by the Petitioners and the Indiana Office of Utility Consumer
Counselor (OUCC). The effect of these filings is to initiate
an appeal of the IURC's decision by the Petitioners and the
OUCC.
Pursuant to the procedure governing appeals of IURC decisions,
at this time neither the Petitioners nor the OUCC have
indicated on what basis they will attempt to challenge the
IURC's decision. The schedule for the appeal proposed by the
Petitioners and the OUCC indicates that the earliest they will
likely disclose such a basis would be on January 12, 1998,
when they would be obligated to file the IURC's record of
proceedings with the Court.
As a result of the IURC's decision and notwithstanding the
initiation of the appeal, during the fourth quarter of fiscal
1997, Indiana Energy recognized approximately $3.0 million of
its share of ProLiance's earnings which had previously been
reserved. Of that amount, $700,000 related to fiscal 1996. At
September 30, 1997, $600,000 continues to be reserved pending
the outcome of the consolidated GCA proceeding involving
Indiana Gas and Citizens Gas.
Although Indiana Gas' management believes that based upon
applicable Indiana law and the IURC's record of proceedings in
the ProLiance case the IURC's decision should be upheld by the
Court, there can be no assurance as to that outcome.
12. Income Taxes
The components of consolidated income tax expense, including
amounts in "Other" on the Consolidated Statements of Income,
were as follows:
<TABLE>
Thousands 1997 1996 1995
<S> <C> <C> <C>
Current:
Federal $21,129 $20,574 $12,193
State 3,368 3,277 2,077
24,497 23,851 14,270
Deferred:
Federal (11,678) 709 3,652
State (940) 95 342
(12,618) 804 3,994
Amortization of investment
tax credits (930) (930) (930)
Consolidated income tax
expense $10,949 $23,725 $17,334
</TABLE>
The recording of restructuring costs of $39.5 million in 1997
had the effect of decreasing deferred income tax expense by
approximately $15.0 million.
Effective income tax rates were 34.81 percent, 35.99 percent
and 34.47 percent of pretax income for 1997, 1996 and 1995,
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
(3.0%) in 1997, (1.4%) in 1996 and (1.8%) in 1995.
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.
Significant components of the company's net deferred tax
liability as of September 30, 1997, and 1996 are as follows:
<TABLE>
Thousands 1997 1996
<S> <C> <C>
Deferred tax liabilities:
Accelerated depreciation $ 51,413 $ 48,009
Property basis differences 2,101 17,690
Acquisition adjustment 6,286 6,475
Other (1,645) (7,406)
Deferred tax assets:
Deferred investment tax credit (3,884) (4,237)
Regulatory income tax liability (711) (1,075)
Less deferred income taxes related
to current assets and liabilities 1,645 7,406
Balance as of September 30 $ 55,205 $ 66,862
</TABLE>
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.
13. Affiliate Transactions
ProLiance began providing natural gas supply and related
services to Indiana Gas effective April 1, 1996. Indiana Gas'
purchases from ProLiance for resale and for injections into
storage for 1997 and 1996 totaled $306.1 million and $117.9
million, respectively.
As of September 30, 1997, ProLiance has a standby letter of
credit facility with a bank for letters up to $45 million.
This facility is secured in part by a support agreement from
Indiana Energy.
On April 1, 1997, IGC Energy and Citizens By-Products Coal
Company, a wholly owned subsidiary of Citizens Gas, formed
CIGMA, LLC (CIGMA), a jointly and equally owned limited
liability company. CIGMA provides materials acquisition and
related services that are used by Indiana Gas and Citizens
Gas, as well as similar services for third parties. Indiana
Gas' purchases of these services during 1997, totaled $9.6
million. IGC Energy made an initial capital contribution of
$3.6 million to CIGMA, and is accounting for its 50-percent
interest under the equity method.
Amounts owed to affiliates totaled $21.7 million and $18.1
million at September 30, 1997 and 1996, respectively, and are
included in Accounts Payable on the Consolidated Balance
Sheets.
Amounts due from affiliates totaled $8.7 million at September
30, 1997, and are included in Accounts Receivable on the
Consolidated Balance Sheet.
14. Energy Systems Group, LLC
On May 23, 1997, IGC Energy, Citizens By-Products Coal Company
and Energy Systems Group, Inc. (ESGI) formed Energy Systems
Group, LLC (ESG), an equally owned limited liability company.
ESG provides a package of products, services and skills to
help energy users achieve enhanced energy and operational
performance. The packages provide for improvements to be paid
for by the customers from savings generated within their
existing operating budgets. ESG has assumed the
responsibilities of ESGI, an energy related performance
contracting firm and wholly owned subsidiary of SIGCORP, Inc.
IGC Energy's initial investment in ESG was recorded at $3.3
million and is payable over the next five years. The final
investment amount may be higher depending on ESG's financial
performance over that five-year period. IGC Energy's one-third
interest in ESG is being accounted for under the equity
method.
15. Summarized Financial Data (Unaudited)
Summarized quarterly financial data (in thousands of dollars
except per share amounts) for 1997 and 1996 are as follows:
<TABLE>
1997: THREE MONTHS ENDED DEC. 31 MAR. 31 JUNE 30 SEP. 30(1)
<S> <C> <C> <C> <C>
Utility operating revenues $172,481 $215,695 $83,733 $ 58,498
Utility operating income (loss) 20,260 27,153 7,799 (26,201)
Nonutility income (loss) 866 1,210 2,157 2,792
Net income (loss) 17,285 24,349 6,466 (27,597)
Earnings (loss) per average
share of common stock $ .77 $ 1.07 $ .29 $ (1.22)
1996: THREE MONTHS ENDED DEC. 31 MAR. 31 JUNE 30 SEP. 30
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)
(1) Reflects the recording of restructuring costs of $39.5
million ($24.5 million after-tax or $1.08 per common share),
during the fourth quarter of fiscal 1997 (see Note 2).
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 4, 1997.
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 4, 1997.
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 4, 1997.
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 4, 1997.
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 - 1997,
1996 and 1995 Item 8
Consolidated Statements of Cash Flows - 1997,
1996 and 1995 Item 8
Consolidated Balance Sheets at September 30,
1997 and 1996 Item 8
Consolidated Statements of Common Shareholders'
Equity - 1997, 1996 and 1995 Item 8
Consolidated Schedules of Long-Term Debt
as of September 30, 1997 and 1996 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 - 1997, 1996 and 1995
(a)-3 Exhibits
See Exhibit Index
(b) Reports on Form 8-K
On July 31, 1997, Indiana Energy and Indiana Gas filed a
Current Report on Form 8-K to provide information related
to Indiana Energy's new growth strategy.
Items reported include:
Item 5. Other Events
Information related to Indiana Energy's new
growth strategy.
On August 11, 1997, Indiana Energy filed a Current Report on
Form 8-K in connection with the "safe harbor" provisions of
the Private Securities Litigation Reform Act of 1995. Items
reported include:
Item 5. Other Events
Filing of cautionary statements for the purpose
of the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995.
Item 7. Financial Statements and Exhibits
Exhibit 99 Cautionary Statement for Purpose of
"safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995.
On September 15, 1997, Indiana Energy and Indiana Gas filed a
Current Report on Form 8-K with respect to a press release
(dated September 15, 1997), announcing the receipt by Indiana
Gas of a ruling issued by the IURC on September 12, 1997.
The ruling addressed a proceeding initiated by a small group
of Indiana Gas' and Citizens Gas' customers who contended
that the gas service contracts between ProLiance and Indiana
Gas and Citizens Gas should be disapproved by the IURC.
Items reported include:
Item 5. Other Events
Press release dated September 15, 1997.
On October 8, 1997, Indiana Energy and Indiana Gas filed a
Current Report on Form 8-K with respect to the appeal by a
small group of Indiana Gas' and Citizens Gas' customers and
the Office of Utility Consumer Counselor of the IURC's
September 12, 1997, decision in the ProLiance complaint
proceeding. Items reported include:
Item 5. Other Events
Information related to the appeal of the IURC's
decision in the ProLiance complaint proceeding.
On October 31, 1997, Indiana Energy and Indiana Gas filed a
Current Report on Form 8-K with respect to a press release
(dated October 31, 1997), announcing the recording of a
restructuring charge by Indiana Gas. Items reported include:
Item 5. Other Events
Press release dated October 31, 1997.
On November 14, 1997, Indiana Energy and Indiana Gas filed a
Current Report on Form 8-K which included the September 30,
1997, audited Consolidated Financial Statements and Notes to
Consolidated Financial Statements of Indiana Energy and
Subsidiary Companies, as well as Management's Discussion and
Analysis of Results of Operations and Financial Condition
(MD&A). Items reported include:
Item 5. Other Events
Indiana Energy, Inc. and Subsidiary Companies'
September 30, 1997, audited Consolidated
Financial Statements and Notes, and MD&A.
On December 5, 1997, Indiana Gas filed a Current Form on
8-K to file as Exhibit 4 thereto: Officers' Certificate
with respect to the establishment of the Medium Term
Notes, Series F (including Administrative Procedures and
forms of Fixed Rate Note and Floating Rate Note).
On December 5, 1997, Indiana Gas filed a Current Form on
8-K to file as Exhibit 1 thereto: Distribution Agreement
dated November 19, 1997, among Indiana Gas Company, Inc.
and Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner &
Smith Incorporated.
EXHIBIT INDEX
Exhibit No. Description Reference
2-A Acquisition Agreement dated Exhibit 1 to Indiana
as of December 28, 1992, Energy's Current
between Tennessee Gas Report on Form 8-K
Pipeline Company, Tenneco dated December 29,
Merger Company, EnTrade 1992, and filed
Corporation and the January 13, 1993.
Interestholders listed on
Exhibit A thereto.
3-A Amended and Restated Exhibit 3-A to
Articles of Incorporation. Indiana Energy's
1993 Annual Report
on Form 10-K.
3-B Amended and Restated Code Exhibit 3-A to
of By-Laws. Indiana Energy's
Quarterly Report on
Form 10-Q for the
quarterly period
ended March 31,
1997.
4-A Applicable provisions of Exhibit 3-A to
Indiana Energy's Amended Indiana Energy's
and Restated Articles of 1993 Annual Report
Incorporation, as amended, on Form 10-K.
as set forth as Exhibit 3-A
above.
4-B Amended and Restated Rights Exhibit 1 to
Agreement between Indiana Indiana Energy's
Energy and Continental Amendment to its
Bank, N.A. (Now First Registration
Chicago Trust Company of Statement on Form
New York), as Rights Agent, 8-A, filed
including form of Right June 17, 1996.
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 February 1, Exhibit 4(a) to
1991, between Indiana Gas Indiana Gas
and Continental Bank, Company, Inc.'s
National Association. Current Report 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); 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); and Officers'
Certificate pursuant
to Section 301 of
the Indenture dated
as of November 19,
1997 (incorporated
by reference to
Exhibit 4 to Indiana
Gas Company, Inc.'s
Report on Form 8-K
dated November 19,
1997 and filed
December 5, 1997).
10-A Employment Agreement Filed herewith.
between Indiana Energy,
Inc. and Lawrence A.
Ferger, effective October
1, 1997.
10-B Employment Agreement Filed herewith.
between Indiana Energy,
Inc. and Niel C.
Ellerbrook, effective
October 1, 1997.
10-C Employment Agreement Filed herewith.
between Indiana Energy,
Inc. and Paul T. Baker,
effective October 1, 1997.
10-D Employment Agreement Filed herewith.
between Indiana Energy,
Inc. and Anthony E. Ard,
effective October 1, 1997.
10-E Termination Benefits Filed herewith.
Agreement between Indiana
Energy, Inc. and Lawrence
A. Ferger as amended and
restated effective October
1, 1997.
10-F Termination Benefits Filed herewith.
Agreement between Indiana
Energy, Inc. and Paul T.
Baker as amended and
restated effective October
1, 1997.
10-G Termination Benefits Filed herewith.
Agreement between Indiana
Energy, Inc. and Niel C.
Ellerbrook as amended and
restated effective October
1, 1997.
10-H Termination Benefits Filed herewith.
Agreement between Indiana
Energy, Inc. and Anthony E.
Ard as amended and restated
effective October 1, 1997.
10-I Termination Benefits Filed herewith.
Agreement between Indiana
Energy, Inc. and Timothy M.
Hewitt as amended and
restated effective October
1, 1997.
10-J Indiana Energy, Inc. Filed herewith.
Unfunded Supplemental
Retirement Plan for a
Select Group of Management
Employees as amended and
restated effective October
1, 1997.
10-K Indiana Energy, Inc. Filed herewith.
Executive Compensation
Deferral Plan as amended
and restated effective
October 1, 1997.
10-L Indiana Energy, Inc. Exhibit 10-A to
Directors Compensation Indiana Energy's
Deferral Plan as amended Quarterly Report on
and restated effective May Form 10-Q for the
1, 1997. quarterly period
ended June 30, 1997.
10-M Indiana Energy, Inc. Filed herewith.
Executive Restricted Stock
Plan as amended and
restated effective October
1, 1997.
10-N Indiana Energy, Inc. Annual Exhibit 10-D to
Management Incentive Plan Indiana Energy's
effective October 1, 1987. 1987 Annual Report
on Form 10-K.
10-O Indiana Energy, Inc. Exhibit 10-B to
Directors' Restricted Stock Indiana Energy's
Plan, as amended and Quarterly Report on
restated effective May 1, Form 10-Q for the
1997. quarterly period
ended June 30, 1997.
10-P Fundamental Operating Exhibit 10-B to
Agreement of ProLiance Indiana Energy's
Energy, LLC between IGC Quarterly Report on
Energy, Inc. and Citizens Form 10-Q for the
By-Products Coal Company, quarterly period
effective March 15, 1996. ended March 31,
1996.
10-Q Formation Agreement among Exhibit 10-C to
Indiana Energy, Inc., Indiana Energy's
Indiana Gas Company, Inc., Quarterly Report on
IGC Energy, Inc., Indiana Form 10-Q for the
Energy Services, Inc., quarterly period
Citizens Gas & Coke ended March 31,
Utility, Citizens By- 1996.
Products Coal Company,
Citizens Energy Services
Corporation, and ProLiance
Energy, LLC, effective
March 15, 1996.
10-R Gas Sales and Portfolio Exhibit 10-C to
Administration Agreement Indiana Gas'
between Indiana Gas Quarterly Report on
Company, Inc. and ProLiance Form 10-Q for the
Energy, LLC, effective quarterly period
March 15, 1996, for ended March 31,
services to begin April 1, 1996.
1996.
10-S Amended appendices to the Exhibit 10-R to
Gas Sales and Portfolio Indiana Gas'
Administration Agreement 1997 Annual
between Indiana Gas Report on Form
Company, Inc. and 10-K.
ProLiance Energy, LLC
referred to above in
Exhibit 10-R, effective
November 1, 1997.
10-T Exhibit 10-T schedules material gas
contracts which are in effect between
Indiana Gas Company, Inc. and suppliers
other than its affiliate, ProLiance Energy,
LLC (ProLiance). 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 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. Dth/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 PLT011715 38,572 5/1/93 3/31/98 Exh. 10-B
10-T.2 Firm Transportation Panhandle Eastern P PLT011716 51,431 5/1/93 3/31/99 Exh. 10-A
10-T.3 Market Area - Panhandle Eastern P PLT011719 30,113 5/1/93 3/31/98 1993 Form 10K, Exh.
Firm Transportation 10-I.5, File 1-6494.
10-T.4 Firm Transportation Texas Gas T3780 50,000 11/1/93 10/31/98 1993 Form 10K, Exh.
10-I.7, File 1-6494.
10-T.5 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.6 No Notice Service Texas Gas N0325 56,793 11/1/93 10/31/00 See Exhibit 10-P.8
10-T.7 No Notice Service Texas Gas N0325 56,794 11/1/93 10/31/98 See Exhibit 10-P.8
10-T.8 No Notice Service Texas Gas N0325 56,794 11/1/93 10/31/99 See Exhibit 10-P.8
10-T.9 Firm Storage ANR T,E & S 05787 100 50,000 4/1/92 3/31/02 1992 Form 10K, Exh.
10-R, File 1-6494.
10-T.10 Firm Storage-Related ANR T,E & S 05788 50,000 4/1/92 3/31/02 1992 Form 10K, Exh.
Transportation 10-S, File 1-6494.
10-T.11 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.12 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.13 Firm Natural Gas Tenneco NGFSA 9620 40,000 12/1/95 2/28/98 1995 Form 10-K, Exh.
Supply Gas Marketing 10-P.22, File 1-6494.
</TABLE>
21 Subsidiaries of Indiana Energy, Inc. Filed herewith.
23 Consent of Independent Public Accountants Filed herewith.
27 Financial Data Schedule Filed herewith.
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 31, 1997. 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 31, 1997
<TABLE>
INDIANA ENERGY, INC.
AND SUBSIDIARY COMPANIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
YEAR ENDED SEPTEMBER 30, 1997
(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 1996 Expenses Other Were Created Changes 1997
<S> <C> <C> <C> <C> <C> <C>
RESERVE DEDUCTED FROM APPLICABLE
ASSETS:
Reserve for uncollectible accounts $ 1,853 $ 2,655 $ 0 $ 2,724 $ 0 $ 1,784
</TABLE>
<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>
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 17, 1997 /s/ Lawrence A. Ferger
Lawrence A. Ferger,
Chairman
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 and
Lawrence A. Ferger Chief Executive Officer December 17, 1997
/s/ Niel C. Ellerbrook President,
Niel C. Ellerbrook Chief Operating Officer
and Director December 17, 1997
/s/ Jerome A. Benkert Vice President and
Jerome A. Benkert Controller December 17, 1997
/s/ Paul T. Baker Director December 17, 1997
Paul T. Baker
/s/ Loren K. Evans Director December 17, 1997
Loren K. Evans
/s/ Otto N. Frenzel III Director December 17, 1997
Otto N. Frenzel III
/s/ Anton H. George Director December 17, 1997
Anton H. George
/s/ Don E. Marsh Director December 17, 1997
Don E. Marsh
/s/ Richard P. Rechter Director December 17, 1997
Richard P. Rechter
/s/ James C. Shook Director December 17, 1997
James C. Shook
/s/ Jean L. Wojtowicz Director December 17, 1997
Jean L. Wojtowicz
/s/ John E. Worthen Director December 17, 1997
John E. Worthen
July 25, 1997
To the Board of Directors of
Indiana Energy, Inc.
1630 North Meridian Street
Indianapolis, Indiana 46202
Directors:
This letter amends and restates the terms and conditions of
an agreement dated December 8, 1989 ("Employment Agreement")
under which I shall continue to be employed by Indiana Energy,
Inc. ("Indiana Energy") or by any subsidiary, direct or indirect,
of Indiana Energy ("Energy Affiliate") which employment shall be
determined by the Board of Directors of Indiana Energy or an
Energy Affiliate. As used herein the term "each Company" means
and refers to Indiana Energy and each Energy Affiliate separately
and the term "Companies" means and refers to all of them. This
Employment Agreement is entered into by Indiana Energy in
consideration of the services that I will perform for Indiana
Energy or to one or more of the Energy Affiliates.
1. One or more of the Companies shall employ me
on a full time basis commencing October 1, 1997, and
continuing until three (3) years after the date either
the Companies or I shall give written notice to the
other party of the termination of this Employment
Agreement (hereinafter referred to as the "'employment
period"), provided, however, this Employment Agreement
shall be subject to earlier termination upon the first
to occur of any of the events specified in paragraphs
5, 6 and 9 hereof.
2. During the employment period, I shall serve
as Chairman and Chief Executive Officer of Indiana
Energy or such other executive position(s) appropriate
to my training, qualifications and experience, as the
Board of Directors of each Company shall from time to
time determine, and I shall devote my full time and
attention during usual business hours exclusively to
the business of the Companies and any subsidiaries
thereof, except during usual vacation periods. The
services to be performed by me hereunder shall be
primarily within the State of Indiana and my place of
employment shall be at the principal offices of the
Companies in Indianapolis, Indiana.
3. During the employment period, the Companies
shall pay to me compensation, notwithstanding the
particular executive positions held by me, consisting
of an annual aggregate base salary or salaries of at
least $405,000.00 payable in biweekly installments, plus
such additional compensation as may be determined from
time to time by the Board of Directors of Indiana
Energy. Any increases in annual base salary approved
by the Board of Directors of Indiana Energy shall be
added to the minimum annual salary provided for herein.
4. During the employment period, each Company
shall reimburse me for all expenses necessarily and
reasonably incurred by me in connection with the
business of each Company. I shall be eligible to
participate in any profit sharing plan, incentive or
bonus plan, deferred compensation plan, annuity,
pension or other retirement plan, group life insurance
or other insurance plan, medical expenses plan,
restricted stock plan, employee stock option plan and
any other benefit plan maintained and offered by each
Company to its executives.
5. In the event that during the employment
period I am unable for a continuous period of three
months (or for such longer period, not to exceed one
year, as the Board of Directors of each Company in its
sole discretion shall determine) to perform my assigned
duties for each Company because of serious illness or
other incapacity, then this Employment Agreement shall
terminate and, thereafter, I shall be entitled to the
benefits of each Company's then existing disability
program.
6. This Employment Agreement shall terminate in
the event of (a) my death, (b) my voluntary retirement
following at least six (6) months written notice
thereof by me to the Companies or (c) termination of my
employment by the Companies for cause. The term
"cause" shall mean fraud, dishonesty, theft of
corporate assets, other gross misconduct by me or my
violation of any other terms of this Employment
Agreement. Other than as provided in paragraphs 5 and
6 hereof, this Employment Agreement is not terminable
by either of the parties hereto except as provided in
paragraphs 1 and 9 hereof.
7. I shall not at any time during the employment
period acquire a financial interest in or participate
in the operation or management of a business which is
competitive with any activity of the Companies or any
subsidiaries thereof. Nothing contained herein,
however, shall prohibit me from purchasing for
investment stock or other securities of any corporation
whose securities are listed upon any recognized
securities exchange or traded on the Over-The-Counter
market or from making any investment in a non-competing
business or from becoming a director of any corporation
conducting a non-competing business.
8. In the event any of the Companies shall at
any time be merged or consolidated into any other
corporation, or if substantially all of the assets of
any of the Companies are transferred to another
corporation, the provisions of this Employment
Agreement shall be binding upon and inure to the
benefit of the successor corporation. This provision
shall also apply in the event of any subsequent merger,
consolidation or transfer of assets.
9. In the event I elect to terminate my
employment as provided in paragraph 1 of my Amended and
Restated Termination Benefits Agreement ("TBA") with
Indiana Energy within the 30-day "Window Period" as
defined in the TBA, this Employment Agreement shall
terminate and Indiana Energy and I will be fully
discharged from any and all further obligations under
this Employment Agreement, provided, however, Indiana
Energy's obligations under this Employment Agreement
shall not be discharged until such time as all amounts
due to me under the TBA have been paid. In the event
my employment is otherwise terminated and I receive
severance benefits pursuant to the TBA from the Company
as a result of such termination, such TBA benefits
shall be applied on a first dollar basis against the
payments owing to me under this Employment Agreement.
10. My rights and benefits hereunder shall not be
subject to voluntary or involuntary assignment or
transfer.
11. This Employment Agreement supersedes any and
all prior Employment Agreements with the Companies.
If this Employment Agreement is acceptable, please sign
where indicated and return an executed counterpart to me.
Very truly yours,
/s/ Lawrence A. Ferger
Lawrence A. Ferger
Agreed to and accepted for
Indiana Energy, Inc.
By: /s/ Otto N. Frenzel III
Otto N. Frenzel III
Chairman of
Compensation Committee
July 25, 1997
To the Board of Directors of
Indiana Energy, Inc.
1630 North Meridian Street
Indianapolis, Indiana 46202
Directors:
This letter amends and restates the terms and conditions of
an agreement dated December 8, 1989 ("Employment Agreement")
under which I shall continue to be employed by Indiana Energy,
Inc. ("Indiana Energy") or by any subsidiary, direct or indirect,
of Indiana Energy ("Energy Affiliate") which employment shall be
determined by the Board of Directors of Indiana Energy or an
Energy Affiliate. As used herein the term "each Company" means
and refers to Indiana Energy and each Energy Affiliate separately
and the term "Companies" means and refers to all of them. This
Employment Agreement is entered into by Indiana Energy in
consideration of the services that I will perform for Indiana
Energy or to one or more of the Energy Affiliates.
1. One or more of the Companies shall employ me
on a full time basis commencing October 1, 1997, and
continuing until three (3) years after the date either
the Companies or I shall give written notice to the
other party of the termination of this Employment
Agreement (hereinafter referred to as the "'employment
period"), provided, however, this Employment Agreement
shall be subject to earlier termination upon the first
to occur of any of the events specified in paragraphs
5, 6 and 9 hereof.
2. During the employment period, I shall serve
as President and Chief Operating Officer of Indiana
Energy or such other executive position(s) appropriate
to my training, qualifications and experience, as the
Board of Directors of each Company shall from time to
time determine, and I shall devote my full time and
attention during usual business hours exclusively to
the business of the Companies and any subsidiaries
thereof, except during usual vacation periods. The
services to be performed by me hereunder shall be
primarily within the State of Indiana and my place of
employment shall be at the principal offices of the
Companies in Indianapolis, Indiana.
3. During the employment period, the Companies
shall pay to me compensation, notwithstanding the
particular executive positions held by me, consisting
of an annual aggregate base salary or salaries of at
least $269,000.00 payable in biweekly installments, plus
such additional compensation as may be determined from
time to time by the Board of Directors of Indiana
Energy. Any increases in annual base salary approved
by the Board of Directors of Indiana Energy shall be
added to the minimum annual salary provided for herein.
4. During the employment period, each Company
shall reimburse me for all expenses necessarily and
reasonably incurred by me in connection with the
business of each Company. I shall be eligible to
participate in any profit sharing plan, incentive or
bonus plan, deferred compensation plan, annuity,
pension or other retirement plan, group life insurance
or other insurance plan, medical expenses plan,
restricted stock plan, employee stock option plan and
any other benefit plan maintained and offered by each
Company to its executives.
5. In the event that during the employment
period I am unable for a continuous period of three
months (or for such longer period, not to exceed one
year, as the Board of Directors of each Company in its
sole discretion shall determine) to perform my assigned
duties for each Company because of serious illness or
other incapacity, then this Employment Agreement shall
terminate and, thereafter, I shall be entitled to the
benefits of each Company's then existing disability
program.
6. This Employment Agreement shall terminate in
the event of (a) my death, (b) my voluntary retirement
following at least six (6) months written notice
thereof by me to the Companies or (c) termination of my
employment by the Companies for cause. The term
"cause" shall mean fraud, dishonesty, theft of
corporate assets, other gross misconduct by me or my
violation of any other terms of this Employment
Agreement. Other than as provided in paragraphs 5 and
6 hereof, this Employment Agreement is not terminable
by either of the parties hereto except as provided in
paragraphs 1 and 9 hereof.
7. I shall not at any time during the employment
period acquire a financial interest in or participate
in the operation or management of a business which is
competitive with any activity of the Companies or any
subsidiaries thereof. Nothing contained herein,
however, shall prohibit me from purchasing for
investment stock or other securities of any corporation
whose securities are listed upon any recognized
securities exchange or traded on the Over-The-Counter
market or from making any investment in a non-competing
business or from becoming a director of any corporation
conducting a non-competing business.
8. In the event any of the Companies shall at
any time be merged or consolidated into any other
corporation, or if substantially all of the assets of
any of the Companies are transferred to another
corporation, the provisions of this Employment
Agreement shall be binding upon and inure to the
benefit of the successor corporation. This provision
shall also apply in the event of any subsequent merger,
consolidation or transfer of assets.
9. In the event I elect to terminate my
employment as provided in paragraph 1 of my Amended and
Restated Termination Benefits Agreement ("TBA") with
Indiana Energy within the 30-day "Window Period" as
defined in the TBA, this Employment Agreement shall
terminate and Indiana Energy and I will be fully
discharged from any and all further obligations under
this Employment Agreement, provided, however, Indiana
Energy's obligations under this Employment Agreement
shall not be discharged until such time as all amounts
due to me under the TBA have been paid. In the event
my employment is otherwise terminated and I receive
severance benefits pursuant to the TBA from the Company
as a result of such termination, such TBA benefits
shall be applied on a first dollar basis against the
payments owing to me under this Employment Agreement.
10. My rights and benefits hereunder shall not be
subject to voluntary or involuntary assignment or
transfer.
11. This Employment Agreement supersedes any and
all prior Employment Agreements with the Companies.
If this Employment Agreement is acceptable, please sign
where indicated and return an executed counterpart to me.
Very truly yours,
/s/ Niel C. Ellerbrook
Niel C. Ellerbrook
Agreed to and accepted for
Indiana Energy, Inc.
By: /s/ Otto N. Frenzel III
Otto N. Frenzel III
Chairman of
Compensation Committee
July 25, 1997
To the Board of Directors of
Indiana Energy, Inc.
1630 North Meridian Street
Indianapolis, Indiana 46202
Directors:
This letter amends and restates the terms and conditions of
an agreement dated December 8, 1989 ("Employment Agreement")
under which I shall continue to be employed by Indiana Energy,
Inc. ("Indiana Energy") or by any subsidiary, direct or indirect,
of Indiana Energy ("Energy Affiliate") which employment shall be
determined by the Board of Directors of Indiana Energy or an
Energy Affiliate. As used herein the term "each Company" means
and refers to Indiana Energy and each Energy Affiliate separately
and the term "Companies" means and refers to all of them. This
Employment Agreement is entered into by Indiana Energy in
consideration of the services that I will perform for Indiana
Energy or to one or more of the Energy Affiliates.
1. One or more of the Companies shall employ me
on a full time basis commencing October 1, 1997, and
continuing until three (3) years after the date either
the Companies or I shall give written notice to the
other party of the termination of this Employment
Agreement (hereinafter referred to as the "'employment
period"), provided, however, this Employment Agreement
shall be subject to earlier termination upon the first
to occur of any of the events specified in paragraphs
5, 6 and 9 hereof.
2. During the employment period, I shall serve
as Executive Vice President and Chief Operating Officer
of Indiana Gas Company, Inc. or such other executive
position(s) appropriate to my training, qualifications
and experience, as the Board of Directors of each
Company shall from time to time determine, and I shall
devote my full time and attention during usual business
hours exclusively to the business of the Companies and
any subsidiaries thereof, except during usual vacation
periods. The services to be performed by me hereunder
shall be primarily within the State of Indiana and my
place of employment shall be at the principal offices
of the Companies in Indianapolis, Indiana.
3. During the employment period, the Companies
shall pay to me compensation, notwithstanding the
particular executive positions held by me, consisting
of an annual aggregate base salary or salaries of at
least $260,000.00 payable in biweekly installments, plus
such additional compensation as may be determined from
time to time by the Board of Directors of Indiana
Energy. Any increases in annual base salary approved
by the Board of Directors of Indiana Energy shall be
added to the minimum annual salary provided for herein.
4. During the employment period, each Company
shall reimburse me for all expenses necessarily and
reasonably incurred by me in connection with the
business of each Company. I shall be eligible to
participate in any profit sharing plan, incentive or
bonus plan, deferred compensation plan, annuity,
pension or other retirement plan, group life insurance
or other insurance plan, medical expenses plan,
restricted stock plan, employee stock option plan and
any other benefit plan maintained and offered by each
Company to its executives.
5. In the event that during the employment
period I am unable for a continuous period of three
months (or for such longer period, not to exceed one
year, as the Board of Directors of each Company in its
sole discretion shall determine) to perform my assigned
duties for each Company because of serious illness or
other incapacity, then this Employment Agreement shall
terminate and, thereafter, I shall be entitled to the
benefits of each Company's then existing disability
program.
6. This Employment Agreement shall terminate in
the event of (a) my death, (b) my voluntary retirement
following at least six (6) months written notice
thereof by me to the Companies or (c) termination of my
employment by the Companies for cause. The term
"cause" shall mean fraud, dishonesty, theft of
corporate assets, other gross misconduct by me or my
violation of any other terms of this Employment
Agreement. Other than as provided in paragraphs 5 and
6 hereof, this Employment Agreement is not terminable
by either of the parties hereto except as provided in
paragraphs 1 and 9 hereof.
7. I shall not at any time during the employment
period acquire a financial interest in or participate
in the operation or management of a business which is
competitive with any activity of the Companies or any
subsidiaries thereof. Nothing contained herein,
however, shall prohibit me from purchasing for
investment stock or other securities of any corporation
whose securities are listed upon any recognized
securities exchange or traded on the Over-The-Counter
market or from making any investment in a non-competing
business or from becoming a director of any corporation
conducting a non-competing business.
8. In the event any of the Companies shall at
any time be merged or consolidated into any other
corporation, or if substantially all of the assets of
any of the Companies are transferred to another
corporation, the provisions of this Employment
Agreement shall be binding upon and inure to the
benefit of the successor corporation. This provision
shall also apply in the event of any subsequent merger,
consolidation or transfer of assets.
9. In the event I elect to terminate my
employment as provided in paragraph 1 of my Amended and
Restated Termination Benefits Agreement ("TBA") with
Indiana Energy within the 30-day "Window Period" as
defined in the TBA, this Employment Agreement shall
terminate and Indiana Energy and I will be fully
discharged from any and all further obligations under
this Employment Agreement, provided, however, Indiana
Energy's obligations under this Employment Agreement
shall not be discharged until such time as all amounts
due to me under the TBA have been paid. In the event
my employment is otherwise terminated and I receive
severance benefits pursuant to the TBA from the Company
as a result of such termination, such TBA benefits
shall be applied on a first dollar basis against the
payments owing to me under this Employment Agreement.
10. My rights and benefits hereunder shall not be
subject to voluntary or involuntary assignment or
transfer.
11. This Employment Agreement supersedes any and
all prior Employment Agreements with the Companies.
If this Employment Agreement is acceptable, please sign
where indicated and return an executed counterpart to me.
Very truly yours,
/s/ Paul T. Baker
Paul T. Baker
Agreed to and accepted for
Indiana Energy, Inc.
By: /s/ Otto N. Frenzel III
Otto N. Frenzel III
Chairman of
Compensation Committee
July 25, 1997
To the Board of Directors of
Indiana Energy, Inc.
1630 North Meridian Street
Indianapolis, Indiana 46202
Directors:
This letter amends and restates the terms and conditions of
an agreement dated December 8, 1989 ("Employment Agreement")
under which I shall continue to be employed by Indiana Energy,
Inc. ("Indiana Energy") or by any subsidiary, direct or indirect,
of Indiana Energy ("Energy Affiliate") which employment shall be
determined by the Board of Directors of Indiana Energy or an
Energy Affiliate. As used herein the term "each Company" means
and refers to Indiana Energy and each Energy Affiliate separately
and the term "Companies" means and refers to all of them. This
Employment Agreement is entered into by Indiana Energy in
consideration of the services that I will perform for Indiana
Energy or to one or more of the Energy Affiliates.
1. One or more of the Companies shall employ me
on a full time basis commencing October 1, 1997, and
continuing until three (3) years after the date either
the Companies or I shall give written notice to the
other party of the termination of this Employment
Agreement (hereinafter referred to as the "'employment
period"), provided, however, this Employment Agreement
shall be subject to earlier termination upon the first
to occur of any of the events specified in paragraphs
5, 6 and 9 hereof.
2. During the employment period, I shall serve
as Senior Vice President of Corporate Affairs of
Indiana Energy or such other executive position(s)
appropriate to my training, qualifications and
experience, as the Board of Directors of each Company
shall from time to time determine, and I shall devote
my full time and attention during usual business hours
exclusively to the business of the Companies and any
subsidiaries thereof, except during usual vacation
periods. The services to be performed by me hereunder
shall be primarily within the State of Indiana and my
place of employment shall be at the principal offices
of the Companies in Indianapolis, Indiana.
3. During the employment period, the Companies
shall pay to me compensation, notwithstanding the
particular executive positions held by me, consisting
of an annual aggregate base salary or salaries of at
least $149,000.00 payable in biweekly installments, plus
such additional compensation as may be determined from
time to time by the Board of Directors of Indiana
Energy. Any increases in annual base salary approved
by the Board of Directors of Indiana Energy shall be
added to the minimum annual salary provided for herein.
4. During the employment period, each Company
shall reimburse me for all expenses necessarily and
reasonably incurred by me in connection with the
business of each Company. I shall be eligible to
participate in any profit sharing plan, incentive or
bonus plan, deferred compensation plan, annuity,
pension or other retirement plan, group life insurance
or other insurance plan, medical expenses plan,
restricted stock plan, employee stock option plan and
any other benefit plan maintained and offered by each
Company to its executives.
5. In the event that during the employment
period I am unable for a continuous period of three
months (or for such longer period, not to exceed one
year, as the Board of Directors of each Company in its
sole discretion shall determine) to perform my assigned
duties for each Company because of serious illness or
other incapacity, then this Employment Agreement shall
terminate and, thereafter, I shall be entitled to the
benefits of each Company's then existing disability
program.
6. This Employment Agreement shall terminate in
the event of (a) my death, (b) my voluntary retirement
following at least six (6) months written notice
thereof by me to the Companies or (c) termination of my
employment by the Companies for cause. The term
"cause" shall mean fraud, dishonesty, theft of
corporate assets, other gross misconduct by me or my
violation of any other terms of this Employment
Agreement. Other than as provided in paragraphs 5 and
6 hereof, this Employment Agreement is not terminable
by either of the parties hereto except as provided in
paragraphs 1 and 9 hereof.
7. I shall not at any time during the employment
period acquire a financial interest in or participate
in the operation or management of a business which is
competitive with any activity of the Companies or any
subsidiaries thereof. Nothing contained herein,
however, shall prohibit me from purchasing for
investment stock or other securities of any corporation
whose securities are listed upon any recognized
securities exchange or traded on the Over-The-Counter
market or from making any investment in a non-competing
business or from becoming a director of any corporation
conducting a non-competing business.
8. In the event any of the Companies shall at
any time be merged or consolidated into any other
corporation, or if substantially all of the assets of
any of the Companies are transferred to another
corporation, the provisions of this Employment
Agreement shall be binding upon and inure to the
benefit of the successor corporation. This provision
shall also apply in the event of any subsequent merger,
consolidation or transfer of assets.
9. In the event I elect to terminate my
employment as provided in paragraph 1 of my Amended and
Restated Termination Benefits Agreement ("TBA") with
Indiana Energy within the 30-day "Window Period" as
defined in the TBA, this Employment Agreement shall
terminate and Indiana Energy and I will be fully
discharged from any and all further obligations under
this Employment Agreement, provided, however, Indiana
Energy's obligations under this Employment Agreement
shall not be discharged until such time as all amounts
due to me under the TBA have been paid. In the event
my employment is otherwise terminated and I receive
severance benefits pursuant to the TBA from the Company
as a result of such termination, such TBA benefits
shall be applied on a first dollar basis against the
payments owing to me under this Employment Agreement.
10. My rights and benefits hereunder shall not be
subject to voluntary or involuntary assignment or
transfer.
11. This Employment Agreement supersedes any and
all prior Employment Agreements with the Companies.
If this Employment Agreement is acceptable, please sign
where indicated and return an executed counterpart to me.
Very truly yours,
/s/ Anthony E. Ard
Anthony E. Ard
Agreed to and accepted for
Indiana Energy, Inc.
By: /s/ Otto N. Frenzel III
Otto N. Frenzel III
Chairman of
Compensation Committee
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"), and Lawrence A. Ferger, an
Indiana resident whose mailing address is 5955 North Stafford
Road, Indianapolis, Indiana 46228 (the "Executive") entered into
a Termination Benefits Agreement (the "Agreement"). Pursuant to
Section 4(f) of the Agreement and effective as of October 1,
1997, ENERGY 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 Officer is serving ENERGY as a key officer or
serving as a key officer of a direct or indirect subsidiary of
ENERGY ("Affiliate") (ENERGY and each Affiliate are collectively
referred to as the "Company"), 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 5 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 to be computed by
multiplying (i) the Officer's average annual compensation (as
determined consistent with the provisions of Section 280G(d)(1)
of the Internal Revenue Code of 1986, as amended (the "Code"))
payable by the Company and by any other entity affiliated with
the Company within the meaning of Section 414(b) of the Code
which was includable in the gross income of the Officer for the
most recent five (5) calendar years ending coincident with or
immediately before the date on which control of ENERGY is
acquired or such portion of such period during which the Officer
was an employee of the Company, by (ii) two hundred and
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 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 July 25, 1997,
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 immediately prior
to the change in control; or any removal of the Officer from
or failure to reappoint or reelect him to any of such
positions that the officer had immediately prior to the
change in control, 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 Affiliate, whichever entity is the
primary employer of the Officer immediately prior to the
change in control, 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 immediately 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 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 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 October 1, 1997, 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 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.
(l) Prior Agreements. This Agreement supersedes any
and all prior termination benefits agreements providing for
benefits to the Officer upon an acquisition of control.
5. Term of this Agreement. This Agreement shall remain in
effect until October 1, 2002 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, 1998 and each succeeding
October 1 thereafter, unless ENERGY shall have served written
notice to the Officer prior to October 1, 1998 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 25th day of July, 1997.
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
EXECUTIVE
By: /s/ Lawrence A. Ferger
Lawrence A. Ferger
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"), and Paul T. Baker, an Indiana
resident whose mailing address is 8748 Otter Cove Circle,
Indianapolis, Indiana 46236 (the "Executive") entered into a
Termination Benefits Agreement (the "Agreement"). Pursuant to
Section 4(f) of the Agreement and effective as of October 1,
1997, ENERGY 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 Officer is serving ENERGY as a key officer or
serving as a key officer of a direct or indirect subsidiary of
ENERGY ("Affiliate") (ENERGY and each Affiliate are collectively
referred to as the "Company"), 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 5 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 to be computed by
multiplying (i) the Officer's average annual compensation (as
determined consistent with the provisions of Section 280G(d)(1)
of the Internal Revenue Code of 1986, as amended (the "Code"))
payable by the Company and by any other entity affiliated with
the Company within the meaning of Section 414(b) of the Code
which was includable in the gross income of the Officer for the
most recent five (5) calendar years ending coincident with or
immediately before the date on which control of ENERGY is
acquired or such portion of such period during which the Officer
was an employee of the Company, by (ii) two hundred and
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 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 July 25, 1997,
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 immediately prior
to the change in control; or any removal of the Officer from
or failure to reappoint or reelect him to any of such
positions that the officer had immediately prior to the
change in control, 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 Affiliate, whichever entity is the
primary employer of the Officer immediately prior to the
change in control, 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 immediately 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 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 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 October 1, 1997, 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 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.
(l) Prior Agreements. This Agreement supersedes any
and all prior termination benefits agreements providing for
benefits to the Officer upon an acquisition of control.
5. Term of this Agreement. This Agreement shall remain in
effect until October 1, 2002 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, 1998 and each succeeding
October 1 thereafter, unless ENERGY shall have served written
notice to the Officer prior to October 1, 1998 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 25th day of July, 1997.
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
EXECUTIVE
By: /s/ Paul T. Baker
Paul T. Baker
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"), and Niel C. Ellerbrook, an
Indiana resident whose mailing address is 12618 Shorevista Drive,
Indianapolis, Indiana 46236 (the "Executive") entered into a
Termination Benefits Agreement (the "Agreement"). Pursuant to
Section 4(f) of the Agreement and effective as of October 1,
1997, ENERGY 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 Officer is serving ENERGY as a key officer or
serving as a key officer of a direct or indirect subsidiary of
ENERGY ("Affiliate") (ENERGY and each Affiliate are collectively
referred to as the "Company"), 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 5 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 to be computed by
multiplying (i) the Officer's average annual compensation (as
determined consistent with the provisions of Section 280G(d)(1)
of the Internal Revenue Code of 1986, as amended (the "Code"))
payable by the Company and by any other entity affiliated with
the Company within the meaning of Section 414(b) of the Code
which was includable in the gross income of the Officer for the
most recent five (5) calendar years ending coincident with or
immediately before the date on which control of ENERGY is
acquired or such portion of such period during which the Officer
was an employee of the Company, by (ii) two hundred and
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 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 July 25, 1997,
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 immediately prior
to the change in control; or any removal of the Officer from
or failure to reappoint or reelect him to any of such
positions that the officer had immediately prior to the
change in control, 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 Affiliate, whichever entity is the
primary employer of the Officer immediately prior to the
change in control, 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 immediately 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 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 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 October 1, 1997, 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 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.
(l) Prior Agreements. This Agreement supersedes any
and all prior termination benefits agreements providing for
benefits to the Officer upon an acquisition of control.
5. Term of this Agreement. This Agreement shall remain in
effect until October 1, 2002 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, 1998 and each succeeding
October 1 thereafter, unless ENERGY shall have served written
notice to the Officer prior to October 1, 1998 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 25th day of July, 1997.
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
EXECUTIVE
By: /s/ Niel C. Ellerbrook
Niel C. Ellerbrook
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"), and Anthony E. Ard, an Indiana
resident whose mailing address is 4646 Graceland Avenue,
Indianapolis, Indiana 46208 (the "Executive") entered into a
Termination Benefits Agreement (the "Agreement"). Pursuant to
Section 4(f) of the Agreement and effective as of October 1,
1997, ENERGY 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 Officer is serving ENERGY as a key officer or
serving as a key officer of a direct or indirect subsidiary of
ENERGY ("Affiliate") (ENERGY and each Affiliate are collectively
referred to as the "Company"), 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 5 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 to be computed by
multiplying (i) the Officer's average annual compensation (as
determined consistent with the provisions of Section 280G(d)(1)
of the Internal Revenue Code of 1986, as amended (the "Code"))
payable by the Company and by any other entity affiliated with
the Company within the meaning of Section 414(b) of the Code
which was includable in the gross income of the Officer for the
most recent five (5) calendar years ending coincident with or
immediately before the date on which control of ENERGY is
acquired or such portion of such period during which the Officer
was an employee of the Company, by (ii) two hundred and
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 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 July 25, 1997,
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 immediately prior
to the change in control; or any removal of the Officer from
or failure to reappoint or reelect him to any of such
positions that the officer had immediately prior to the
change in control, 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 Affiliate, whichever entity is the
primary employer of the Officer immediately prior to the
change in control, 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 immediately 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 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 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 October 1, 1997, 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 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.
(l) Prior Agreements. This Agreement supersedes any
and all prior termination benefits agreements providing for
benefits to the Officer upon an acquisition of control.
5. Term of this Agreement. This Agreement shall remain in
effect until October 1, 2002 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, 1998 and each succeeding
October 1 thereafter, unless ENERGY shall have served written
notice to the Officer prior to October 1, 1998 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 25th day of July, 1997.
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
EXECUTIVE
By: /s/ Anthony E. Ard
Anthony E. Ard
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"), and Timothy M. Hewitt, an Indiana
resident whose mailing address is 1992 Inverness, Greenwood,
Indiana 46143 (the "Executive") entered into a Termination
Benefits Agreement (the "Agreement"). Pursuant to Section 4(f)
of the Agreement and effective as of October 1, 1997, ENERGY 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 Officer is serving ENERGY as a key officer or
serving as a key officer of a direct or indirect subsidiary of
ENERGY ("Affiliate") (ENERGY and each Affiliate are collectively
referred to as the "Company"), 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 5 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)(1) of the Internal Revenue Code of 1986, as
amended (the "Code")) payable by the Company and by any other
entity affiliated with the Company within the meaning of Section
414(b) of the Code 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 ENERGY is
acquired; provided, however, that subject to the limitations set
forth in paragraph 4(d), the Officer's annual compensation for
the most recent calendar year ending coincident with or
immediately before the date on which the control of ENERGY is
acquired shall include any elective deferrals made by the Officer
during such calendar year under the Indiana Energy, Inc.
Executive Compensation Deferral Plan (the "Deferral Plan") and
shall exclude any distribution to the Officer under the Deferral
Plan during such calendar year. 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 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 July 25, 1997,
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 immediately prior
to the change in control; or any removal of the Officer from
or failure to reappoint or reelect him to any of such
positions that the officer had immediately prior to the
change in control, 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 Affiliate, whichever entity is the
primary employer of the Officer immediately prior to the
change in control, 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 immediately 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 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 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 October 1, 1997, 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 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.
(l) Prior Agreements. This Agreement supersedes any
and all prior termination benefits agreements providing for
benefits to the Officer upon an acquisition of control.
5. Term of this Agreement. This Agreement shall remain in
effect until October 1, 2002 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, 1998 and each succeeding
October 1 thereafter, unless ENERGY shall have served written
notice to the Officer prior to October 1, 1998 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 25th day of July, 1997.
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
EXECUTIVE
By: /s/ Timothy M. Hewitt
Timothy M. Hewitt
INDIANA ENERGY, INC.
UNFUNDED SUPPLEMENTAL RETIREMENT PLAN
FOR A SELECT GROUP OF MANAGEMENT EMPLOYEES
(AS AMENDED AND RESTATED EFFECTIVE OCTOBER 1, 1997)
Pursuant to rights reserved under Section 5.01 of the
Indiana Gas Company, Inc. Unfunded Supplemental Retirement Plan
For a Select Group of Management Employees (the "Plan"), Indiana
Gas Company, Inc. hereby transfers sponsorship of the Plan to
Indiana Energy, Inc. (the "Company") and hereby amends and
completely restates the Plan, effective as of October 1, 1997, to
provide, in its entirety, as follows:
PREAMBLE
This Plan is an unfunded supplemental retirement plan for a
select group of management employees of the Company and
affiliates of the Company and is designed to meet applicable
exemptions under Sections 201(2), 301(a)(3), 401(a)(1) and
4021(b)(6) of the Employee Retirement Income Security Act of
1974, as amended, and under Department of Labor Regulation
Section 2520.104-23.
ARTICLE I
DEFINITIONS
Section 1.01. Acquisition of Control. The term
"Acquisition of Control" means:
(1) 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 the Company (the
"Outstanding Energy Common Stock") or (b) the combined
voting power of the then outstanding voting securities of
the Company 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: (i) any acquisition
directly from the Company (excluding an acquisition by
virtue of the exercise of a conversion privilege), (ii) any
acquisition by the Company, (iii) any acquisition by any
employee benefit plan (or related trust) sponsored or
maintained by the Company, Indiana Gas Company, Inc. or any
corporation controlled by the Company or (iv) 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 (3) of this Section 1.01 are
satisfied;
(2) Individuals who, as of July 25, 1997, constitute
the Board of Directors of the Company (the "Incumbent Energy
Board") cease for any reason to constitute at least a
majority of the Board of Directors of the Company (the
"Energy Board"); provided, however, that any individual
becoming a director subsequent to the date hereof whose
election, or nomination for election by shareholders of the
Company, was approved by a vote of at least a majority of
the directors then comprising the Incumbent Energy Board
shall be considered as though such individual were a member
of the Incumbent Energy 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 Energy Board; or
(3) Approval by the shareholders of the Company 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 the Company, Indiana Gas Company, Inc.
or such corporation resulting from 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 Energy Board at the time of the execution of
the initial agreement providing for such reorganization,
merger or consolidation;
(4) Approval by the shareholders of the Company of (a)
a complete liquidation or dissolution of the Company or (b)
the sale or other disposition of all or substantially all of
the assets of the Company, other than to a corporation, with
respect to which following such sale or other disposition
(i) 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, (ii) no Person (excluding the Company and any
employee benefit plan or related trust of the Company,
Indiana Gas Company, Inc. 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
(iii) at least a majority of the members of the board of
directors of such corporation were members of the Incumbent
Energy Board at the time of the execution of the initial
agreement or action of the Energy Board providing for such
sale or other disposition of assets of the Company; or
(5) 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 the Company would
constitute an Acquisition of Control under subsection (3) or
(4) of this Section 1.01.
Notwithstanding anything contained in this Plan, if a
Participant's employment is terminated before an Acquisition of
Control and the Participant reasonably demonstrates that such
termination (a) 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 (b) otherwise
occurred in connection with, or in anticipation of, an
Acquisition of Control which actually occurs, then for all
purposes of this Plan, the date of an Acquisition of Control with
respect to the Participant shall mean the date immediately prior
to the date of such termination of the Participant's employment.
Section 1.02. Administrator. The term "Administrator"
means the Company, which shall have the sole authority to manage
and to control the operation and administration of this Plan.
Section 1.03. Average Monthly Earnings. The term "Average
Monthly Earnings" means for a Participant an amount equal to the
total salary (inclusive of bonuses, inclusive of incentive pay,
inclusive of elective deferrals by such Participant to the
Company Savings Plan and to the Indiana Energy, Inc. Executive
Compensation Deferral Plan and inclusive of salary reductions
elected by such Participant to a plan maintained by the Company
under Section 125 of the Code but exclusive of awards made under
the Indiana Energy, Inc. Executive Restricted Stock Plan and
exclusive of distributions under the Company Savings Plan and the
Indiana Energy, Inc. Executive Compensation Deferral Plan) paid
to such Participant by the Company in the sixty (60) consecutive
calendar month period ending on the first (1st) to occur of:
(1) the date of such Participant's death, or
(2) the date of such Participant's Termination of
Employment.
divided by sixty (60).
Section 1.04. Board. The term "Board" means the Board of
Directors of the Company. Whenever the provisions of this Plan
require action by the Board, it may be taken by the Compensation
Committee of the Board with the same force and effect as though
taken by the entire Board.
Section 1.05. Cause. The term "Cause" means a
Participant's fraud, dishonesty, theft of corporate assets or
other gross misconduct.
Section 1.06. Code. The term "Code" means the Internal
Revenue Code of 1986 as now in effect or hereafter amended and
shall also include all regulations promulgated thereunder.
Section 1.07. Company. The term "Company" means Indiana
Energy, Inc. and any successors thereto; provided, however, that
for purposes of Section 1.03, Section 1.08, Section 1.09, Section
1.10, Section 1.11, Section 1.13, Section 1.16, Section 1.20,
Section 3.03 and Section 5.05, "Company" shall also include
Proliance Energy, L.L.C. and any entity affiliated with the
Company within the meaning of Section 414(b) of the Code and any
successor thereto.
Section 1.08. Company Contributions Account. The term
"Company Contributions Account" means for a Participant the
account maintained on his behalf in the Company Savings Plan to
which Company contributions (other than his elective deferrals)
are credited, including the annual Company contribution to the
Company Savings Plan and matching contributions made on his
behalf to the Company Savings Plan, as adjusted to reflect any
earnings or losses credited thereto.
Section 1.09. Company Pension Plan. The term "Company
Pension Plan" means the Indiana Energy, Inc. Combined
Non-Bargaining Plan as now in effect or as hereafter amended.
Section 1.10. Company Savings Plan. The term "Company
Savings Plan" means the Indiana Energy, Inc. Retirement Savings
Plan as now in effect or as hereafter amended. For all purposes
of this Plan (including, but not limited to, determining the
amount of reduction in a Participant's benefit applicable under
Section 3.02(2)), the term "Company Savings Plan" shall also
include the Proliance Energy, L.L.C. Retirement Savings Plan as
now in effect or as hereafter amended and any other qualified
defined contribution plan maintained by the Company.
Section 1.11. Company Savings Plan Monthly Benefit
Equivalent. The term "Company Savings Plan Monthly Benefit
Equivalent" means for a Participant the amount determined by
converting such Participant's Company Contributions Account in
the Company Savings Plan to a monthly benefit for life commencing
at the later of:
(1) the date of such Participant's Termination of
Employment or, if earlier, his death, or
(2) the date on which such Participant reaches age
sixty-five (65).
For purposes of making the conversion required by this Section,
the following actuarial assumptions shall be used:
Interest Assumption: 8% per year, compounded annually
Mortality Assumption: 1983 Group Annuity Mortality
Table (unloaded) Unisex Rates
Section 1.12. Effective Date. The term "Effective Date"
means January 1, 1990.
Section 1.13. Good Reason. The term "Good Reason" means
for a Participant, without the Participant's written consent:
(1) a demotion in the Participant'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 an
Acquisition of Control;
(2) the assignment to the Participant of any duties or
responsibilities which, in his reasonable judgment, are
inconsistent with such status, position or responsibilities;
or any removal of the Participant from or failure to
reappoint or reelect him to any of such positions, except in
connection with the termination of his employment for Total
Disability, death or Cause or by him other than for Good
Reason;
(3) a reduction by the Company in the Participant's
base salary as in effect immediately prior to an Acquisition
of Control or as the same may be increased from time to time
after the Acquisition of Control or the Company's failure to
increase (within twelve (12) months of the Participant's
last increase in base salary) the Participant's base salary
after an Acquisition of 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;
(4) the relocation of the principal executive offices
of the Company or Company affiliate, whichever entity on
behalf of which the Participant 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 an Acquisition of Control, except for required
travel on the Company's business to an extent substantially
consistent with his business travel obligations at the time
of an Acquisition of Control;
(5) the failure by the Company to continue in effect
any incentive, bonus or other compensation plan in which the
Participant 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 Acquisition of 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;
(6) the failure by the Company to continue to provide
the Participant 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 Acquisition of 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 Acquisition of
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;
(7) the failure of the Company after an Acquisition of
Control to obtain a satisfactory agreement from any
successor or assign of the Company to assume and agree to
perform any termination benefits agreement in effect for the
Participant; or
(8) any request by the Company that the Participant
participate in an unlawful act or take any action
constituting a breach of the Participant's professional
standard of conduct.
Section 1.14. Participant. The term "Participant" means
any individual who is eligible for benefits under Article II of
this Plan.
Section 1.15. Plan. The term "Plan" means the Indiana
Energy, Inc. Unfunded Supplemental Retirement Plan for a Select
Group of Management Employees.
Section 1.16. Primary Social Security Benefit. The term
"Primary Social Security Benefit" means the monthly amount of old
age insurance benefit available at age sixty-five (65) under the
provisions of Title II of the Social Security Act in effect at a
Participant's Termination of Employment. The computation of such
amount shall be made by the Company, and the fact that a
Participant does not actually receive such amount because of
failure to apply, continuance of work or for any other reason
shall be disregarded. In determining a Participant's Primary
Social Security Benefit, the Company may estimate "wages" (as
such term is interpreted for purposes of Title II of the Social
Security Act) for any calendar year beginning before the date on
which such Participant's employment with the Company commenced by
applying backwards from the earliest known complete calendar year
earnings with the Company, using the U.S. Average Wage Table or
any similar index substituted by the Social Security
Administration. For the period beginning on the date on which a
Participant terminates his employment with the Company and
ending on the date he attains age sixty-five (65), such
Participant shall be deemed to receive "wages" from the Company
at the same level in effect immediately before his Termination of
Employment.
Section 1.17. Qualified Joint and One-Half Survivor
Annuity. The term "Qualified Joint and One-Half Survivor
Annuity" means the form of payment in which a monthly income is
payable for the lifetime of a Participant and continuing
thereafter in an amount one-half (1/2) as large to such
Participant's surviving Spouse, if any, for life.
Section 1.18. Retirement Age. The term "Retirement Age"
means the date on which a Participant attains age sixty-five
(65).
Section 1.19. Spouse. The term "Spouse" means the legal
spouse of a Participant at the date of such Participant's death
or, if earlier, the date of his Termination of Employment.
Section 1.20. Termination of Employment. The term
"Termination of Employment" means the date on which a Participant
retires, resigns, incurs a Total Disability or otherwise,
voluntarily or involuntarily, terminates his full-time employment
with the Company.
Section 1.21. Total Disability. The term "Total
Disability" means a physical or mental condition arising from
bodily injury or disease which prevents a Participant from
engaging in his current position or in another position
commensurate with his current position, taking into consideration
his education, training and experience, and which is of a
character, based on the medical opinion of a licensed physician
who is not related to such Participant and who is satisfactory to
the Company, that such condition presumably will be permanent and
continuous for the remainder of such Participant's lifetime.
ARTICLE II
PARTICIPATION
The individuals eligible for benefits as Participants shall
be listed on Schedule A to this Plan. The Company may add
additional Participants by action of the Board. Subject to
Section 5.01, the Company may delete Participants by action of
the Board. Any additions or deletions of Participants shall be
listed and reflected on Schedule A to the Plan.
ARTICLE III
BENEFITS
Section 3.01. Death Benefits.
(a) Pre-Retirement Death Benefit. Upon the death of a
Participant before his Termination of Employment, the Spouse, if
any, of such Participant shall be entitled to receive monthly
death benefits under this Plan for life. The monthly death
benefits shall be paid to a deceased Participant's surviving
Spouse on the first (1st) calendar day of each month, commencing
with the first (1st) month immediately following the later of (1)
the date of such deceased Participant's death or (2) the date on
which such deceased Participant would have attained age fifty
(50) but for his death. The amount of the monthly death benefits
to be paid to the Spouse of a deceased Participant shall be an
amount equal to the monthly survivor benefit which such Spouse
would have been entitled to receive had the Participant's
Termination of Employment occurred immediately before his death
and if such Participant had commenced to receive his monthly
benefit payments in the form of a Qualified Joint and One-Half
Survivor Annuity under Section 3.02 or 3.03, whichever is
applicable, based on such deceased Participant's age at the date
of his death.
(b) Post-Retirement Death Benefit. If a Participant
dies after his Termination of Employment and such Participant was
receiving monthly benefits at the time of his death under this
Plan or was entitled to receive monthly benefits under this Plan
under any other Section of this Article but such Participant's
date of death preceded the benefit commencement date, the Spouse,
if any, of such Participant shall only be entitled to benefits
hereunder if such deceased Participant was receiving or had
elected to receive his benefits in the form of a Qualified Joint
and One-Half Survivor Annuity under Section 3.02, 3.03 or 3.04,
whichever is applicable.
Section 3.02. Retirement Benefits. Upon a Participant's
Termination of Employment on or after attainment of the
Retirement Age, such Participant shall be entitled to receive
monthly retirement benefits under this Plan for life. The
benefits shall be paid on the first (1st) calendar day of each
month, commencing with the first (1st) month subsequent to the
month in which occurs a Participant's Termination of Employment
and concluding with the month in which occurs his death. The
amount of the monthly retirement benefits for a Participant shall
be equal to sixty-five percent (65%) of such Participant's
Average Monthly Earnings, less the following:
(1) the monthly benefits which such Participant is
entitled to receive under the Company Pension Plan in effect
at the date of such Participant's Termination of Employment,
assuming he elected to have his benefit payments under the
Company Pension Plan commence at age sixty-five (65) or, if
later, the date of his Termination of Employment in the form
of a life annuity;
(2) such Participant's Company Savings Plan Monthly
Benefit Equivalent; and
(3) such Participant's Primary Social Security
Benefit.
If a Participant is married at the date his benefit payments are
to commence and notwithstanding anything contained in this Plan
to the contrary, such Participant may elect to have his monthly
benefits paid in the form of an actuarially equivalent Qualified
Joint and One-Half Survivor Annuity. For purposes of this
Article, an actuarially equivalent Qualified Joint and One-Half
Survivor Annuity shall be determined in the same manner as it is
determined under the Company Pension Plan.
Section 3.03. Other Termination of Employment Benefits.
If, before attainment of the Retirement Age and not by reason of
his incurring a Total Disability, a Participant's employment with
the Company:
(a) is involuntarily terminated by the Company without
Cause,
(b) is voluntarily terminated by such Participant for
Good Reason after an Acquisition of Control, or
(c) is voluntarily terminated by such Participant with
the consent of the Chief Executive Officer or the President
of the Company or, in the case of Energy's Chief Executive
Officer or President, with the consent of the Board,
such Participant shall be entitled to receive monthly retirement
benefits under this Plan for life. The benefits shall be paid on
the first (1st) calendar day of each month, commencing with the
first (1st) month subsequent to the month in which occurs such
Participant's Termination of Employment or, if later, the month
in which such Participant attains age fifty (50) and concluding
with the month in which occurs his death. The amount of the
early monthly retirement benefits for a Participant shall be
equal to the product of:
(1) the amount of the monthly retirement benefits
determined in accordance with Section 3.02; and
(2) a fraction (not to exceed one (1)), the numerator
of which is the number of full calendar months that such
Participant was employed by the Company and the denominator
of which is the number of full calendar months that such
Participant would have been employed by the Company had his
employment continued until the Retirement Age or, if lesser,
three hundred (300);
provided, however, that the amount of the monthly payments to a
Participant shall be further reduced to the extent and in the
same manner that such payments would be reduced if made under the
Company Pension Plan to reflect the commencement of the payments
before such Participant's Retirement Age. If a Participant is
married at the date his benefit payments are to commence and
notwithstanding anything contained in this Plan to the contrary,
such Participant may elect to have his monthly benefits paid in
the form of an actuarially equivalent Qualified Joint and
One-Half Survivor Annuity. A Participant whose employment with
the Company is terminated before attainment of Retirement Age for
Cause by the Company, voluntarily by such Participant without
consent of the Board or, if his employment is terminated after an
Acquisition of Control, without consent of the Board or Good
Reason shall not be entitled to any benefits hereunder.
Section 3.04. Disability Benefits. A Participant whose
Termination of Employment is the result of his incurring a Total
Disability before the Retirement Age shall be entitled to receive
monthly disability benefits under this Plan for life. The
benefits shall be paid on the first (1st) calendar day of each
month, commencing with the first (1st) month subsequent to the
month in which such Participant attains the Retirement Age and
concluding with the month in which occurs his death. The amount
of the monthly disability benefits for a Participant under this
Section shall be determined in the same manner as retirement
benefits are calculated under Section 3.02. If a Participant is
married at the date his benefit payments are to commence and
notwithstanding anything contained in this Plan to the contrary,
such Participant may elect to have his monthly benefits paid in
the form of an actuarially equivalent Qualified Joint and
One-Half Survivor Annuity. If a Participant who incurs a Total
Disability dies before attainment of the Retirement Age, his
surviving Spouse, if any, shall be entitled to monthly benefits
for life, commencing the first (1st) month following such
Participant's death, equal to the survivor benefits that would
have been payable to the Spouse under this Section under the
Qualified Joint and One-Half Survivor Annuity form of payment had
the Participant survived to the Retirement Age; provided,
however; that the amount of the monthly payments to his surviving
Spouse shall be further reduced to the extent and in the same
manner that such payments would be reduced if made under the
Company Pension Plan to reflect the commencement of the payments
before the date that such deceased Participant would have reached
the Retirement Age.
ARTICLE IV
ADMINISTRATION
Section 4.01. Delegation of Responsibility. The Company
may delegate its duties involved in the administration of this
Plan to such person or persons whose services are deemed by it to
be necessary or convenient. However, the ultimate responsibility
for the administration of this Plan shall remain with the
Company.
Section 4.02. Payment of Benefits. The benefits under this
Plan shall be paid solely from the general assets of the Company.
No Participant or his Spouse shall have any interest in any
specific assets of the Company under the terms of this Plan.
This Plan shall not be considered to create an escrow account,
trust fund or other funding arrangement of any kind or a
fiduciary relationship between a Participant and the Company.
Section 4.03. Construction of Plan. The Company shall have
the power to construe this Plan and to determine all questions of
fact or law arising under it. It may correct any defect, supply
any omission or reconcile any inconsistency in this Plan in such
manner and to such extent as it may deem appropriate. All acts
and determinations of the Company shall be final and conclusive
on the Company, the Participants, the Spouses of deceased
Participants and on any and all other persons who may be affected
by, or have an interest in, this Plan.
ARTICLE V
MISCELLANEOUS
Section 5.01. Amendment or Termination of Plan. This Plan
may be amended, modified or terminated by the Board; provided,
however, that no such amendment, modification or termination
shall have the effect of reducing the benefits currently in pay
status to a Participant or, if applicable, his Spouse or the
benefits that would have been payable hereunder if a
Participant's employment with the Company had been terminated
without Cause by the Company immediately before such amendment,
modification or termination.
Section 5.02. Successors. This Plan and the obligations
hereunder shall be binding on any successor of the Company.
Section 5.03. Duration of Plan. Subject to Section 5.01,
this Plan shall terminate at the date on which the final benefit
payment has been made pursuant to the terms of this Plan.
Section 5.04. Choice of Law. This Plan shall be construed
and interpreted pursuant to, and in accordance with, the laws of
the State of Indiana.
Section 5.05. No Employment Contract. This Plan shall not
be construed as an agreement, consideration or inducement of
employment or as affecting in any manner the rights or
obligations of the Company or of any Participant to continue or
to terminate the employment relationship at any time.
Section 5.06. Non-Alienation. No person shall have any
right to anticipate, pledge, alienate or assign any rights under
this Plan, and any effort to do so shall be null and void. The
benefits payable under this Plan shall be exempt from the claims
of creditors or other claimants and from all orders, decrees,
levies and executions and any other legal process to the fullest
extent that may be permitted by law.
Section 5.07. Gender and Number. Words in the one gender
shall be construed to include the other genders where
appropriate; words in the singular or plural shall be construed
as being in the plural or singular where appropriate.
Section 5.08. Headings. The headings in this Plan are
solely for convenience of reference and shall not affect its
interpretation.
This amended and restated Plan has been executed on this 1st
day of October, 1997 to be effective as of October 1, 1997.
INDIANA GAS COMPANY, INC.
By:
/s/ Lawrence A. Ferger
Its: Chairman of the Board
This Plan has been adopted on this 1st day of
October, 1997 by Indiana Energy, Inc.
INDIANA ENERGY, INC.
By:
/s/ Lawrence A. Ferger
Its: Chairman of the Board
INDIANA ENERGY, INC.
UNFUNDED SUPPLEMENTAL RETIREMENT PLAN
FOR A SELECT GROUP OF MANAGEMENT EMPLOYEES
SCHEDULE A
Revised Effective October 1, 1997
NAME
Lawrence A. Ferger
Niel C. Ellerbrook
Paul T. Baker
Anthony E. Ard
Carl L. Chapman
Timothy M. Hewitt
Steven M. Schein
Jerrold L. Ulrey
Stephen E. Williams
Thomas J. Zabor
Jerome A. Benkert, Jr.
Ronald E. Christian
Eric Schach
Christopher M. Crawford
Robert D. Stegner (Retired)
Jack L. Diley (Retired)
Kenneth J. Roberts (Retired)
Wendell L. Thaler (Retired)
FIRST AMENDMENT AND
COMPLETE RESTATEMENT OF THE
INDIANA ENERGY, INC.
EXECUTIVE COMPENSATION
DEFERRAL PLAN
As Amended and Restated Effective October 1, 1997
FIRST AMENDMENT AND
COMPLETE RESTATEMENT OF
INDIANA ENERGY, INC.
EXECUTIVE COMPENSATION
DEFERRAL PLAN
(AS AMENDED AND RESTATED EFFECTIVE OCTOBER 1, 1997)
Pursuant to rights reserved under Section 7.02 of the
Indiana Gas Company, Inc. Executive Compensation Deferral Plan
(the "Plan"), Indiana Gas Company, Inc. (the "Company"), by
action of the Board of Directors of Indiana Energy, Inc.,
transfers sponsorship of the Plan to Indiana Energy, Inc.,
renames the Plan and amends and completely restates the Plan,
effective as of October 1, 1997, to provide, in its entirety, as
follows:
PREAMBLE
The Plan is an unfunded supplemental retirement plan for a
select group of management employees of the Company and Indiana
Energy, Inc. The Plan is designed to meet applicable exemptions
under Sections 201(2), 301(a)(3), 401(a)(1) and 4021(b)(6) of the
Employee Retirement Income Security Act of 1974, as amended, (the
"Act") and under Department of Labor Regulation Section
2520.104-23.
ARTICLE I
DEFINITIONS
Section 1.01. Administrator. The term "Administrator"
means the Compensation Committee which shall have the authority
to manage and control the operation of this Plan.
Section 1.02. Beneficiary. The term "Beneficiary" means
for a Participant the individual or individuals designated by
that Participant in the last Participation Agreement executed by
that Participant to receive benefits in the event of that
Participant's death.
Section 1.03. Bonus. The term "Bonus" means for each
employee Participant the bonus, if any, which is payable for a
fiscal year of the Company under the Indiana Energy, Inc. Annual
Management Incentive Plan and which is subject to an annual
deferral election under this Plan.
Section 1.04. Company. The term "Company" means Indiana
Energy, Inc., and any successor thereto.
Section 1.05. Compensation. The term "Compensation" means
for each Participant in any Plan Year the total amount of
remuneration for employment services as paid to that Participant
by the Participating Companies in that Plan Year.
Section 1.06. Compensation Committee. The term
"Compensation Committee" means the Compensation Committee of the
Board of Directors of the Company.
Section 1.07. Effective Date. The term "Effective Date"
means December 1, 1994.
Section 1.08. Interest Fund Subaccount. The term "Interest
Fund Subaccount" means the bookkeeping account maintained for
each Participant in this Plan which is credited in each Plan
Year with a rate of return as provided in Article III of this
Plan.
Section 1.09. Interest Fund Subaccount Rate. The term
"Interest Fund Subaccount Rate" means the guaranteed rate of
return credited to amounts held in the Interest Fund Subaccounts.
The rate shall change each January 1 and shall be equal to the
mean between the high and low of the Corporate Bond Yield
Averages, Average Public Utility (aa rated), for the past twelve
(12) months as reported in Moody's Bond Survey in its first
published issue in the November preceding the January 1 on which
the rate is to come into effect.
Section 1.10. Participant. The term "Participant" means
any individual who fulfills the eligibility requirements
contained in Article II of this Plan.
Section 1.11. Participating Companies. The term
"Participating Companies" means and shall include the Company,
Indiana Gas Company, Inc. and any entity affiliated with the
Company (within the meaning of Section 414(b) of the Internal
Revenue Code of 1986, as amended) which adopts this Plan (with
the approval of the Company Board) by its Board of Directors, and
any successors thereto.
Section 1.12. Participation Account. The term
"Participation Account" means the bookkeeping account maintained
by the Company for each Participant reflecting amounts deferred
under this Plan (as adjusted from time to time) and which is
equal to the sum of the Participant's Interest Fund Subaccounts
and Phantom Unit Subaccounts.
Section 1.13. Participation Agreement. The term
"Participation Agreement" means the agreement executed by an
eligible employee each Plan Year signifying his desire to become
(or to continue to be) a Participant in this Plan and signifying
the amount of his Compensation and/or Bonus which is to be
deferred during the subsequent Plan Year pursuant to the terms of
this Plan.
Section 1.14. Phantom Unit Subaccount. The term "Phantom
Unit Subaccount" means the bookkeeping account maintained by the
Company for each Participant in this Plan for each Plan Year
during which the Participant has a deferred election in effect
which is credited with Phantom Units.
Section 1.15. Phantom Units. The term "Phantom Units"
means the phantom units allocated to a bookkeeping account under
this Plan with a per unit value equal to the value of the Company
common stock (as determined in the manner provided in Article
III).
Section 1.16. Plan. The term "Plan" means the plan
embodied by this instrument as now in effect or hereafter
amended.
Section 1.17. Plan Year. The term "Plan Year" means the
calendar year.
ARTICLE II
PARTICIPATION IN THE PLAN
Section 2.01. Eligibility. As of the Effective Date, all
officers of the Participating Companies shall be eligible to
become Participants in this Plan; provided, however, that the
Compensation Committee may, by appropriate action, expand the
group of employees eligible to defer Compensation or Bonuses
under this Plan.
Section 2.02. Deferral Amounts.
(a) Amount of Deferral. The amount of Compensation
and/or Bonus to be deferred in a Plan Year shall be designated by
each Participant in the Participation Agreement executed by that
Participant for that Plan Year prior to the beginning of that
Plan Year.
(b) Special Rules for New Officers. For the Plan Year
during which a person first becomes eligible to become a
Participant, the Participant shall be provided by the Company the
opportunity to make a special election for such Plan Year with
respect to the Compensation paid in the Plan Year for the period
in such Plan Year after the date on which he becomes an eligible
Participant.
(c) Timing of Deferral. The following rules govern the
timing of the deferral of Compensation and, if applicable,
Bonuses under this Plan:
(i) Compensation deferred by Participants
shall be effected pro-rata from each payday in the Plan
Year.
(ii) Any portion of the Bonus deferred
hereunder shall be effected from the Bonus itself.
(iii) For purposes of the allocations
described in Article III, the amount of any
Compensation or Bonus deferred hereunder shall not be
credited to a Participant's Participation Account until
the last day of the calendar month during which, but
for the deferral, the deferred Compensation or Bonus
would have been paid.
(d) Modification of Deferral Amount. A Participant
may modify the amount of his Compensation and/or Bonus to be
deferred in a Plan Year under this Plan by written notice to the
Secretary of the Company which is received by the Secretary of
the Company prior to the beginning of that Plan Year.
(e) Discontinuation of Participation. A Participant
may discontinue his participation in this Plan by written notice
to the Secretary of the Company which is received prior to the
beginning of the Plan Year in which the discontinuation is to be
effective or by failing to execute a Participation Agreement for
that Plan Year. Any amounts previously deferred shall be paid in
accordance with the provisions of this Plan and elections made by
the Participant in his Participation Agreements. If applicable,
the participation of a Participant who has made a withdrawal from
his Participation Account pursuant to Article V of this Plan
shall be discontinued as of the date of the withdrawal.
(f) Manner of Payout of a Participant's Participation
Account. The manner in which a Participant's Participation
Account attributable to deferrals in a Plan Year is to be
distributed to that Participant under the provisions of this Plan
shall be designated by that Participant in the Participation
Agreement executed by that Participant for that Plan Year.
Subject to Section 3.05, a Participant may, by establishing
hardship (as such term is defined in Article V of this Plan) to
the satisfaction of the Compensation Committee, modify the timing
or manner of payout of his Participation Account.
ARTICLE III
ACCOUNTS
Section 3.01. Purpose of Participation and Guaranteed
Accounts. The Company shall cause a Participation Account to be
established in the name of each Participant. The Company shall
cause a separate sub-account of a Participant's Participation
Account for each Plan Year during which Participant defers
Compensation or, if applicable, a portion of his Bonus (the Plan
Year Subaccount). Each Plan Year Subaccount shall be further
allocated, as directed by the Participant, between the Interest
Fund Subaccount and Phantom Stock Subaccount. The purpose of
establishing such Participation Accounts and Subaccounts is
solely to provide a mechanism for determining the Participants'
benefits under this Plan. It is the intent of the Company that
the Participants shall have no title to or beneficial ownership
in any cash or investments which the Company may set aside and
allocate to these Accounts.
Section 3.02. Investment of Deferrals. The Company shall
cause a separate Plan Year Subaccount established for each
Participant who is deferring any Compensation or Bonus in such
Plan Year. The amount of the deferral shall be allocated between
the Interest Fund Subaccount and the Phantom Stock Subaccount in
accordance with the investment directions provided by the
Participant in his Participation Agreement for such Plan Year. A
Participant may allocate deferrals between the Interest Fund
Subaccount and Phantom Stock Subaccount in twenty-five percent
(25%) increments. As of each January 1, a Participant shall be
permitted by written instructions to the Secretary of the Company
to change the investment directions of any deferrals for one (1)
or more of the previous Plan Year Subaccounts. In such
direction, the Participant needs to designate the Plan Year
Subaccounts for which the revised election or elections apply.
Changes shall be permitted in twenty-five percent (25%)
increments.
Section 3.03. Description of Interest Fund and Phantom
Stock Subaccounts.
(a) Interest Fund Subaccounts. Any monies credited
to a Participant's Interest Fund Subaccount shall be credited
with simple interest monthly at the Interest Fund Subaccount Rate
in effect for such month based on the amounts held in such
Subaccount as of the last day of the preceding calendar month.
(b) Phantom Stock Subaccount. As of the last day of
any calendar month during which amounts are credited to a
Participant's Phantom Stock Subaccount, the Company shall cause a
number of Phantom Stock Units to be credited to the Phantom Stock
Subaccount equal to a number determined by dividing the total
amount of the allocation for such month by the average of the
daily averages of the high and low sales price of shares of
Indiana Energy, Inc. common stock for each of the trading days in
such month (as reported in The Wall Street Journal). Any time
that there is a dividend paid on shares of Indiana Energy, Inc.
common stock, the Company shall cause each Participant's Phantom
Stock Subaccount to be credited with an amount equal to the
aggregate dividend which would have been payable to such
Subaccount during such month if such Subaccount was invested in
shares of Indiana Energy, Inc. common stock rather than Phantom
Shares (without regard to whether the Phantom Shares were
allocated to such Subaccount on the record date for such
dividend). Any dividend equivalent credits for a calendar month
shall be converted to Phantom Units, along with any additional
deferrals allocated in such month, in the manner described above.
(c) Special Adjustments. In the event of any change
in the outstanding common stock of Indiana Energy, Inc. by reason
of a stock dividend, stock split, recapitalization, merger,
consolidation, combination, stock rights plan or exchange of
shares or other similar corporate change, the aggregate number of
Phantom Units allocable to a Participant's Phantom Unit
Subaccount shall be appropriately adjusted by the Committee,
whose determination shall be conclusive, consistent with the
corporate transaction.
Section 3.04. Allocation of Withdrawals and Distributions.
(a) Withdrawals. Except as otherwise expressly
provided in a Participant's withdrawal request, withdrawals from
a Participant's Participation Account under Article V shall be
charged proportionately against each Plan Year Subaccount based
on the amounts allocated as such Subaccount as of the last day of
the immediately preceding month and shall be charged against the
Interest Fund Subaccount and Phantom Stock Subaccount of such
Plan Year Subaccount proportionately based on the balance
credited to such Interest Fund Subaccount and Phantom Stock
Subaccount on the last day of the month immediately preceding the
withdrawal.
(b) Distributions. Distributions under Article IV for
each Plan Year Subaccount shall be charged proportionately
against the Participant's Interest Fund Subaccount and Phantom
Stock Subaccount based on the balances credited to such
Subaccounts as of the last day of the immediately preceding
month.
(c) Conversion of Phantom Units. For purposes of
effecting withdrawals and distributions from the Phantom Stock
Subaccount, the Phantom Stock Units to be withdrawn or
distributed shall be deemed to have a per unit value equal to
average of the daily averages of the high and low sales price of
Indiana Energy, Inc. common stock for each of the trading days in
the calendar month immediately preceding the month the withdrawal
or distribution is to be effected.
ARTICLE IV
BENEFITS
Section 4.01. Death Benefits. If a Participant dies prior
to the commencement of his benefits under this Article IV, the
Beneficiary of that Participant, as determined pursuant to
Section 8.07, shall receive the balance contained in his
Participation Account. Payments under this Section 4.01 shall be
paid in a single lump sum cash payment no later than the last day
of the third (3rd) calendar month following the date of the
Participant's death.
Section 4.02. Other Distributions. A Participant's
Plan Year Subaccounts shall be paid to him on the date and
in the manner designated by that Participant in his
Participation Agreements; provided, however, that under no
circumstances shall payment commencement be deferred more
than sixty (60) calendar days after the date on which the
Participant's employment with the Participating Companies is
terminated. If any or all of the benefits of a Participant
are being paid in installments and that Participant dies
prior to receiving the final installments due hereunder, the
remaining amounts in his Participation Account shall be paid
to that Participant's Beneficiary, as determined pursuant to
the last Participation Agreement executed by that
Participant, in a single lump sum cash payment.
ARTICLE V
WITHDRAWALS
Except as provided below, a Participant may apply to
the Compensation Committee for withdrawals from his
Participation Account prior to the date on which he is
entitled to distributions under this Plan in the event of
that Participant's "hardship". For purposes of this Plan, a
withdrawal shall be deemed on account of hardship if
necessary for the purpose of alleviating extraordinary
expenses arising from the sickness or disability of that
Participant or of his spouse, children or other dependents,
or of alleviating any other extraordinary financial burden
which is caused by an act beyond the control of that
Participant. The existence of a hardship shall be
determined solely by the Compensation Committee, by applying
uniform and nondiscriminatory standards. If such
application for withdrawal is approved by the Compensation
Committee, the withdrawal shall be effective at the later of
the dates specified in the Participant's application or the
date of approval by the Compensation Committee, and the
Participant's right to defer Compensation and/or Bonuses
under this Plan for the remainder of the Plan Year during
which the withdrawal occurs shall be suspended. The
withdrawal amount shall be paid in a single lump sum cash
payment and shall be limited to amounts necessary to meet
the financial need, as determined by the Compensation
Committee in its sole discretion. The balance remaining in
his Participation Account shall be distributed as provided
in Article IV of this Plan.
ARTICLE VI
ADMINISTRATION
Section 6.01. Administration of Plan. The
Compensation Committee shall represent the Company in all
matters concerning the administration of this Plan. The
Compensation Committee shall have full power and authority
to adopt rules and regulations for the administration of
this Plan; provided, however, that such rules and
regulations are not inconsistent with the provisions of this
Plan.
Section 6.02. Delegation of Responsibility. The
Compensation Committee may delegate duties involved in the
administration of this Plan to such person or persons whose
services are deemed by it to be necessary or convenient.
Section 6.03. Payment of Benefits. The amounts
allocated to a Participant's Participation Account and
payable as benefits under this Plan shall be paid solely
from the general assets of the Participating Companies. The
payment of benefit obligations shall be allocated between
the Participating Companies based on the portion of the
Compensation and/or Bonus which would have been paid by each
Participating Company but for the deferral. No Participant
shall have any interest in any specific assets of the
Participating Companies under the terms of this Plan. This
Plan shall not be considered to create an escrow account,
trust fund or other funding arrangement of any kind or a
fiduciary relationship between any Participant and the
Participating Companies. The obligation of the
Participating Companies under this Plan is purely
contractual and shall not be funded or secured in any way.
Section 6.04. Construction of Plan. The Compensation
Committee shall have the power to construe this Plan and to
determine all questions of fact or law arising under it. It
may correct any defect, supply any omission or reconcile any
inconsistency in this Plan in such manner and to such extent
as it may deem appropriate.
ARTICLE VII
AMENDMENT OR TERMINATION OF PLAN
Section 7.01. Termination. The Company may at any
time terminate this Plan. As of the first Plan Year
beginning after the date on which this Plan is terminated,
no additional amounts shall be deferred from any
Participant's Compensation or Bonus. The Compensation
Committee shall direct the Participating Companies to pay to
each such Participant the balance contained in his
Participation Account at such time and in the manner
designated by that Participant in the Participation
Agreements executed by that Participant.
Section 7.02. Amendment. The Company may amend the
provisions of this Plan at any time; provided, however, that
no amendment shall adversely affect the rights of
Participants or their Beneficiaries with respect to the
balances contained in their Participation Accounts
immediately prior to the amendment unless the majority of
the affected Participants consent to the change.
ARTICLE VIII
MISCELLANEOUS
Section 8.01. Successors. This Plan shall be binding
upon the successors of the Participating Companies.
Section 8.02. Choice of Law. This Plan shall be
construed and interpreted pursuant to, and in accordance
with, the laws of the State of Indiana.
Section 8.03. No Employment Contract. This Plan shall
not be construed as an agreement, consideration or
inducement of employment or as affecting in any manner the
rights or obligations of the Participating Companies or of
any Participant to continue or to terminate the employment
relationship at any time.
Section 8.04. Non-Alienation. No Participant or his
Beneficiary shall have any right to anticipate, pledge,
alienate or assign any of his rights under this Plan, and
any effort to do so shall be null and void. The benefits
payable under this Plan shall be exempt from the claims of
creditors or other claimants and from all orders, decrees,
levies and executions and any other legal process to the
fullest extent that may be permitted by law.
Section 8.05. Gender and Number. Words in one (1)
gender shall be construed to include the other genders where
appropriate; words in the singular or plural shall be
construed as being in the plural or singular where
appropriate.
Section 8.06. Disclaimer. The Company makes no
representations or assurances and assumes no responsibility
as to the performance by any parties, solvency, compliance
with state and federal securities regulation or state and
federal tax consequences of this Plan or participation
therein. It shall be the responsibility of the respective
Participants to determine such issues or any other pertinent
issues to their own satisfaction.
Section 8.07. Designation of Beneficiaries. Each
Participant shall designate in his Participation Agreement
(or in any other document approved by the Chief Executive
Officer or the President of the Company) his Beneficiary and
his contingent Beneficiary to whom death benefits due
hereunder at the date of his death shall be paid; provided,
however, that the Beneficiary and contingent Beneficiary
designated by a Participant in the last Participation
Agreement (or, if applicable, other Company approved
document) executed by that Participant shall supersede all
other Beneficiary or contingent Beneficiary designations
made by that Participant in any earlier Employee's
Participation Agreement executed by that Participant. If
any Participant fails to designate a Beneficiary or if the
designated Beneficiary predeceases any Participant, death
benefits due hereunder at that Participant's death shall be
paid to his contingent Beneficiary or, if none, to the
deceased Participant's surviving spouse, if any, and if none
to the deceased Participant's estate.
This First Amendment and Complete Restatement of the
Plan has been executed on this 25th day of July, 1997, and
shall be effective as of October 1, 1997.
INDIANA GAS COMPANY, INC.
By: /s/ Lawrence A. Ferger
Lawrence A. Ferger
Chief Executive Officer
INDIANA ENERGY, INC.
By: /s/ Lawrence A. Ferger
Lawrence A. Ferger
Chief Executive Officer
INDIANA ENERGY, INC.
EXECUTIVE RESTRICTED STOCK PLAN
(AS AMENDED AND RESTATED EFFECTIVE OCTOBER 1, 1997)
Pursuant to rights reserved under Section 20 of the Indiana
Energy, Inc. Executive Restricted Stock Plan, originally
effective as of October 1, 1987, (the "Plan"), the Board of
Directors of Indiana Energy, Inc. further amends the Plan,
effective October 1, 1997, to provide in its entirety, as
follows:
Section 1. Establishment. Indiana Energy, Inc. hereby
establishes a share incentive plan for its and certain of its
subsidiaries' principal officers, as described herein, which
shall be known as the Indiana Energy, Inc. Executive Restricted
Stock Plan.
Section 2. Definitions. Whenever used herein, the
following terms shall have the meanings set forth below:
(a) "Board" means the Board of Directors of Energy.
(b) "Change in 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 a Change in 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
Section 1.01 are satisfied;
(ii) Individuals who, as of July 25, 1997, constitute
the Board of Directors of Energy (the "Incumbent
Energy Board") cease for any reason to constitute
at least a majority of the Board of Directors of
Energy (the "Energy Board"); provided, however,
that any individual becoming a director subsequent
to the date hereof whose election, or nomination
for election by shareholders of Energy, was
approved by a vote of at least a majority of the
directors then comprising the Incumbent Energy
Board shall be considered as though such
individual were a member of the Incumbent Energy
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 Energy
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,
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 Energy 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 Energy Board at the time
of the execution of the initial agreement or
action of the Energy 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 Change
in Control under subsection (iii) or (iv) of this
Section 1.01.
Notwithstanding anything contained in this Plan, if a
Participant's employment is terminated before a Change
in Control and the Grantee 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 Change in Control
and who effectuates an Change in Control (a "Third
Party") or (ii) otherwise occurred in connection with,
or in anticipation of, an Change in Control which
actually occurs, then for all purposes of this Plan,
the date of an Change in Control with respect to the
Grantee shall mean the date immediately prior to the
date of such termination of the Grantee's employment.
(c) "Effective Date" means October 1, 1987.
(d) "Energy" means Indiana Energy, Inc., an Indiana
corporation, and any successor thereof.
(e) "Grantee" means any principal officer of a
Participating Employer who shall have received a grant
of restricted Shares under the Plan.
(f) "Indiana Gas" means Indiana Gas Company, Inc., an
Indiana corporation, and any successor thereof.
(g) "Measuring Periods" mean the three (3) year periods
beginning on October 1, 1997 and each October 1
thereafter.
(h) "Participating Employers" means Energy, Indiana Gas,
any direct or indirect subsidiary of Energy which
adopts the Plan with the approval of Energy, and any
successors thereof.
(i) "Period of Restriction" means the period during which
the transfer of restricted Shares granted under the
Plan is restricted pursuant to Section 11 hereof.
(j) "Plan" means the Indiana Energy, Inc. Executive
Restricted Stock Plan as described herein or as from
time to time hereinafter amended.
(k) "Restricted Stock Target Percentage" means for any
principal officer of a Participating Employer to whom
restricted Share grants are made the percentage of his
or her aggregate annual base salary from all
Participating Employers designated by the independent
directors of the Board to be used as a basis for
determining the number of restricted Shares to be
granted to him or her during a Measuring Period.
(l) "Shares" means the common stock, without par value, of
Energy.
(m) "1934 Act" means the Securities Exchange Act of 1934,
as amended.
Section 3. Purpose. The purpose of the Plan is to enable
the Participating Employers to retain and motivate their
principal officers who provide valuable service to them, and to
provide their principal officers with a means of acquiring or
increasing a proprietary interest in Energy so that they shall
have an increased incentive to work toward the attainment of the
long term growth and profit objectives of Energy and its
affiliated companies.
Section 4. Shareholder Approval. The Plan was conditioned
upon the approval of the Plan by the holders of a majority of the
Shares present, or represented, and entitled to vote at Energy's
1988 annual shareholders' meeting.
Section 5. Eligible Persons. Any principal officer of a
Participating Employer for whom a grant of restricted Shares is
authorized by the independent directors of the Board for a
Measuring Period shall be eligible for restricted Share grants
under the Plan; provided, however, that no grant of restricted
Shares shall be made to a principal officer until such principal
officer consents in writing to abide by the restrictions imposed
on the Shares granted to him or her.
Section 6. Administration. The Plan shall be administered
by the Energy Compensation Committee, consisting of at least
three (3) members of the Board who qualify as "Non-Employee
Directors" within the meaning of Rule 16b-3(b)(3) promulgated
under the 1934 Act and who shall be designated from time to time
by the Board. The decision of a majority of the members of the
Energy Compensation Committee shall constitute the decision of
the Energy Compensation Committee, and the Energy Compensation
Committee may act either at a meeting at which a majority of its
members are present or by a written consent signed by all of its
members. The Energy Compensation Committee may appoint
individuals to act on its behalf in the administration of the
Plan; provided, however, that except as otherwise provided by the
Plan, the Energy Compensation Committee shall have the sole,
final and conclusive authority to administer, construe and
interpret the Plan.
Section 7. Number of Shares Subject to the Plan. The total
number of Shares that may be granted under the Plan may not
exceed Two Hundred Thousand (200,000) Shares, subject to
adjustment as provided in Section 9 hereof. Those Shares may
consist, in whole or in part, of authorized but unissued Shares
or Shares reacquired by Energy, including Shares purchased in the
open market, not reserved for any other purpose.
Section 8. Unused Shares. In the event any Shares subject
to grants made under the Plan are forfeited pursuant to
Section 15 hereof, such forfeited Shares shall again become
available for issuance under the Plan.
Section 9. Adjustments in Capitalization. In the event of
any change in the outstanding Shares by reason of a stock
dividend, stock split, recapitalization, merger, consolidation,
combination, stock rights plan or exchange of shares or other
similar corporate change, the aggregate number of Shares issuable
under the Plan shall be appropriately adjusted by the Board,
whose determination shall be conclusive. In such event, the
Board shall also have discretion to make appropriate adjustments
in the number and type of shares subject to restricted Share
grants then outstanding under the Plan pursuant to the terms of
such grants or otherwise.
Section 10. Grant of Restricted Shares. Before the
beginning of each Measuring Period, the independent directors of
the Board shall determine the principal officers to whom
restricted Share grants are to be made and the Restricted Stock
Target Percentages for such Measuring Period. As of the first
day of each Measuring Period, Energy shall issue to each Grantee
a number of restricted Shares determined by dividing:
(a) the product of:
(i) one (1), and
(ii) an amount equal to the Grantee's aggregate annual
base salary from all of the Participating
Employers (excluding any bonuses or incentive
compensation) in effect on such date times his or
her Restricted Stock Target Percentage,
by
(b) the average of the daily averages of the high and low
sales price of the Shares for the twenty (20)
consecutive trading days immediately preceding the
first day of each Measuring Period (as reported in The
Wall Street Journal), rounding up or down any
fractional Share to the nearest whole Share.
During the first twelve (12) months of a Measuring Period,
the independent directors of the Board may provide for additional
grants of restricted Shares to be made to other principal
officers of the Participating Employers. The number of
restricted Shares to be issued to any such principal officer
shall be determined by dividing:
(c) the product of:
(i) the number of full months remaining in the first
twelve (12) months of the Measuring Period at the
effective date of his or her Plan participation,
and
(ii) an amount equal to the principal officer's annual
aggregate base salary from all of the
Participating Employers (excluding bonuses or
incentive compensation) in effect on the effective
date of his or her restricted Share grant times
his or her Restricted Stock Target Percentage,
by
(d) the average of the daily averages of the high and low
sales price of the Shares for the twenty (20)
consecutive trading days immediately preceding the
effective date of his or her Plan participation (as
reported in The Wall Street Journal), rounding up or
down any fractional Share to the nearest whole Share.
Section 11. Restrictions on Transferability. Until the
lifting of the restrictions on the Shares granted hereunder, no
Shares granted under the Plan may be sold, transferred, pledged,
assigned, or otherwise alienated or hypothecated, otherwise than
by will or by the laws of descent and distribution until the
termination of the applicable Period of Restriction.
Section 12. Certificate Legend. Each certificate
representing restricted Shares granted pursuant to this Plan
shall bear the following legend:
"The sale or other transfer of the shares represented
by this certificate, whether voluntary, involuntary, or by
operation of law, is subject to certain restrictions on
transfer set forth in the Indiana Energy, Inc. Executive
Restricted Stock Plan and rules of administration adopted
pursuant to such Plan. A copy of the Executive Restricted
Stock Plan and the rules of such Plan may be obtained from
the Secretary of Indiana Energy, Inc."
Once the restricted Shares are released from the restrictions set
forth in Section 11 hereof and subject to Section 25, the Grantee
shall be entitled to have the legend required by this Section 12
removed from such Share certificate(s).
Section 13. Voting Rights. During the Period of
Restriction, Grantees holding restricted Shares granted hereunder
may exercise full voting rights with respect to those Shares.
Section 14. Dividends and Other Distributions. During the
Period of Restriction, Grantees holding restricted Shares granted
hereunder shall be entitled to receive all dividends and other
distributions paid with respect to those Shares while they are so
held. If any such dividends or distributions are paid in Shares,
such Shares shall be subject to the same restrictions on
transferability as the restricted Shares with respect to which
they were paid.
Section 15. Lifting of Restrictions. The restricted Share
grants under the Plan shall be subject to restrictions as to
transferability and shall also be subject to forfeiture
provisions. The lifting of the transferability restrictions and
the forfeitability provisions shall be dependent on the
shareholder value performance of the Shares during each Measuring
Period and on the continued employment of the Grantee during the
Period of Restrictions.
The shareholder value performance conditions operate in the
following manner. For each Measuring Period the shareholder
value performance of Energy shall be compared with the
shareholder value performance of a group of comparable companies
designated by the independent directors of the Board before the
beginning of such Measuring Period. Shareholder value
performance shall be determined for Energy and for each company
included as part of the group of comparable companies by
dividing:
(a) the difference between
(i) the sum of (A) the average for each company of the
monthly averages of the highest and lowest trading
price of the common stock of such company for the
last twelve (12) months of the Measuring Period,
and (B) any dividends, cash or stock, paid per
share with respect to such company's common stock
during the Measuring Period, and
(ii) the average of the monthly averages of the highest
and lowest trading price of the common stock of
such company for the twelve (12) months
immediately preceding the Measuring Period,
by
(b) (ii) above;
provided, however, that if during the period in which shareholder
value performance is determined, Energy or any of the comparable
companies incurs a change in its outstanding shares for any
reason enumerated in Section 9 hereof, the independent directors
of the Board shall appropriately modify the above shareholder
value performance determination to reflect such change in
capitalization. The independent directors of the Board shall
adopt a schedule at the beginning of the Measuring Period which,
depending on how Energy performs in relationship to the group of
comparable companies with respect to its Share value, shall
provide for additional grants of restricted Shares, forfeiture of
restricted Shares previously granted or no adjustment at all.
The restrictions in the Shares held by a Grantee at the end
of the Measuring Period (after the adjustment in the number of
Shares by reason of the shareholder value performance schedule is
completed) shall be lifted in whole as of the fourth (4th)
anniversary of the calendar day immediately preceding the first
calendar day of the Measuring Period; provided, however, that
except as provided in Section 16, 17 or 18 hereof: (1) the
restrictions shall be lifted on an anniversary date only if the
Grantee is still employed by a Participating Employer on the
anniversary date, and (2) if a Grantee ceases to be employed by a
Participating Employer before the restrictions lapse on any
Shares held by him or her, the Shares still subject to
restrictions shall be immediately forfeited. The shareholder
value performance comparisons schedule and the Restricted Stock
Target Percentages for the principal officers to whom grants are
to be made shall be established before the beginning of each
Measuring Period by the independent directors of the Board;
provided, however, that the independent directors of the Board
may modify after the beginning of the Measuring Period the
above-described schedule if, in their sole discretion, they
determine a modification is appropriate in light of unforeseen or
unusual circumstances.
Section 16. Effect of Grantee's Attainment of Age 65.
Notwithstanding anything contained in Section 15 hereof to the
contrary, if a Grantee attains age 65 after the end of a
Measuring Period but before his or her employment with the
Participating Employers is terminated and before the restrictions
lapse on the Shares granted for such Measuring Period, the
remaining restrictions on any Shares granted for such Measuring
Period held by the Grantee (after the shareholder value
performance adjustments described in Section 15 are completed for
such Measuring Period) shall immediately lapse on the date of his
or her attainment of age 65.
Notwithstanding anything contained in Section 15 hereof to
the contrary, if a Grantee attains age 65 before his or her
employment with the Participating Employers is terminated and
before the end of a Measuring Period, the remaining restrictions
on any Shares attributable to such Measuring Period held by the
Grantee (after the number of Share are adjusted pursuant to the
shareholder value performance adjustments described in Section 15
hereof are completed for such Measuring Period) shall lapse on
the last calendar day of such Measuring Period; provided,
however, that if the Grantee's employment with the Participating
Employers is terminated, voluntarily or involuntarily, on or
after his or her attainment of age 65 but before the end of the
Measuring Period, the Grantee shall be entitled only to a
pro-rata portion of the restricted Shares granted to him or her
for such Measuring Period (after the shareholder value
performance adjustments described in Section 15 hereof are
completed for such Measuring Period) based on the portion of the
Measuring Period that he or she was employed by a Participating
Employer before his or her termination of employment, rounding up
or down any fractional Share to the nearest whole Share.
Section 17. Effect of Termination of Employment Due to
Early Retirement, Death or Disability. Notwithstanding anything
contained in Section 15 hereof to the contrary, if a Grantee's
employment with the Participating Employers is terminated before
his or her attainment of age 65 by reason of his or her early
retirement with the consent of the Chief Executive Officer of
Energy, his or her death or his or her total and permanent
disability (as such term is defined in the Indiana Gas Company,
Inc. Combined Non-Bargaining Retirement Plan or in any successor
retirement plan thereto) and occurs after the end of the
Measuring Period but before the restrictions lapse on the Shares
granted for such Measuring Period, the remaining restrictions on
any Shares attributable to such Measuring Period held by the
Grantee (after the shareholder value performance adjustments
described in Section 15 hereof are completed for such Measuring
Period) shall immediately lapse on the date of his or her
approved early retirement, death or total and permanent
disability, whichever is applicable.
Notwithstanding anything contained in Section 15 hereof to
the contrary, if a Grantee's employment with the Participating
Employers is terminated before his or her attainment of age 65 by
reason of his or her approved early retirement, death or total
and permanent disability and occurs before the end of a Measuring
Period, the Grantee shall be entitled only to a pro-rata portion
of the restricted Shares granted to him or her for such Measuring
Period (after the number of Shares are adjusted pursuant to the
shareholder value performance adjustments described in Section 15
hereof are completed for such Measuring Period) based on the
portion of the Measuring Period that he or she was employed by a
Participating Employer, rounding up or down any fractional Share
to the nearest whole Share, and the restrictions in these
remaining Shares after effecting the pro-rata reduction shall
lapse on the last calendar day of the Measuring Period.
Section 18. Change in Control. In the event that Energy
incurs a Change in Control and notwithstanding anything contained
in Section 15 to the contrary, the lifting of the restrictions on
the restricted Shares held by a Grantee who was employed by a
Participating Employer on the calendar day immediately preceding
the date of the Change in Control shall immediately occur.
Moreover, no Shares may be forfeited after a Change in Control of
Energy, regardless of the shareholder value performance of the
Shares for the Measuring Period during which the Change in
Control occurs; provided, however, that additional Shares (which
Shares shall be freely transferable and non-forfeitable) may be
granted at the end of the Measuring Period in accordance with
Section 15 hereof during which the Change in Control occurs
depending on the shareholder value performance of the Shares for
the Measuring Period.
Section 19. No Employment Contract. The Plan is not and is
not intended to be an employment contract with respect to any of
the Grantees, and the Participating Employers' rights to continue
or to terminate the employment relationship of any Grantee shall
not be affected by the Plan.
Section 20. Amendment and Termination. The Board may at
any time amend, modify, alter, or terminate the Plan; provided,
however, that without the approval of the Energy shareholders:
(a) the number of Shares which may be reserved for issuance
under the Plan may not be increased except as provided
in Section 9 hereof;
(b) the class of employees to whom grants may be granted
under the Plan shall not be modified materially; and
(c) the benefits accruing to Grantees under the Plan shall
not be increased materially;
provided, further, that except for the modifications expressly
permitted by the last paragraph of Section 15 hereof, any
amendment, modification, alteration or termination to the Plan
which increases the restrictions as to transferability or
forfeitability of any restricted Shares granted hereunder to a
Grantee, including any shareholder value performance adjustments
which occur at the end of a Measuring Period, shall not become
effective until the first Measuring Period following the
Measuring Period during which such amendment, modification,
alteration or termination to the Plan is adopted without the
written consent of the Grantee.
Section 21. Indemnification. Each person who is or shall
have been a member of the Board or the Energy Compensation
Committee shall be indemnified and held harmless by Energy
against and from any loss, cost, liability, or expense that may
be imposed upon or reasonably incurred by him or her in
connection with or resulting from any claim, action, suit, or
proceeding to which he or she may be a party or in which he or
she may be involved by reason of any action taken or failure to
act under the Plan and against and from any and all amounts paid
by him or her in settlement thereof with Energy's approval, or
paid by him or her in satisfaction of a judgment in any such
action, suit or proceeding against him or her, provided he or she
shall give Energy an opportunity, at its own expense, to handle
and defend the same before he or she undertakes to handle and
defend it on his or her behalf. The foregoing right of
indemnification shall not be exclusive of any other rights of
indemnification to which such persons may be entitled under the
Energy Articles of Incorporation or Code of By-Laws, as a matter
of law, or otherwise, or any power that Energy may have to
indemnify them or hold them harmless.
Section 22. Governing Law. The Plan, and all grants and
other documents delivered hereunder, shall be construed in
accordance with and governed by the laws of Indiana.
Section 23. Expenses of Plan. The expenses of
administering the Plan shall be borne by Energy.
Section 24. Successors. The Plan shall be binding upon the
successors and assigns of the Participating Employers.
Section 25. Tax Withholding. Energy, as appropriate, shall
have the right to require the Grantee or other person receiving
Shares to pay to the Participating Employers the amount of any
federal, state or local taxes which the Participant Employers are
required to withhold with respect to such Shares. If permitted
by the Compensation Committee or the Board and pursuant to rules
established by the Compensation Committee, a Grantee may make a
written election to have Shares having an aggregate fair market
value, as determined by the Compensation Committee, sufficient to
satisfy the applicable withholding taxes, withheld from the
Shares otherwise to be received at the end of the Period of
Restriction.
This Amended and Restated Plan has been executed on this
25th day of July, 1997 to be effective as of October 1, 1997.
INDIANA ENERGY, INC.
By: /s/ O. N. Frenzel III
O. N. Frenzel III, as Chairman
of the Compensation Committee
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 Services, LLC Indiana
IEI Capital Corp. Indiana
IEI Investments, Inc. Indiana
Energy Realty, Inc. Indiana
IGC Energy, Inc. Indiana
Indiana Energy Services, Inc. Indiana
ProLiance Energy, LLC Indiana
CIGMA, LLC Indiana
Energy Systems Group, 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 17, 1997
<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, 1997, 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-30-1997
<PERIOD-END> SEP-30-1997
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 589,681
<OTHER-PROPERTY-AND-INVEST> 27,884
<TOTAL-CURRENT-ASSETS> 61,051
<TOTAL-DEFERRED-CHARGES> 12,229
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 690,845
<COMMON> 144,909
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 147,688
<TOTAL-COMMON-STOCKHOLDERS-EQ> 292,597
0
0
<LONG-TERM-DEBT-NET> 157,791
<SHORT-TERM-NOTES> 23,800
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 35,272
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 181,385
<TOT-CAPITALIZATION-AND-LIAB> 690,845
<GROSS-OPERATING-REVENUE> 530,407
<INCOME-TAX-EXPENSE> 7,852
<OTHER-OPERATING-EXPENSES> 493,544
<TOTAL-OPERATING-EXPENSES> 501,396
<OPERATING-INCOME-LOSS> 29,011
<OTHER-INCOME-NET> 8,266
<INCOME-BEFORE-INTEREST-EXPEN> 37,277
<TOTAL-INTEREST-EXPENSE> 16,774
<NET-INCOME> 20,503
0
<EARNINGS-AVAILABLE-FOR-COMM> 20,503
<COMMON-STOCK-DIVIDENDS> 25,787
<TOTAL-INTEREST-ON-BONDS> 14,194
<CASH-FLOW-OPERATIONS> 85,880
<EPS-PRIMARY> .91
<EPS-DILUTED> 0
</TABLE>
