December 3, 1998
Office of Applications and Report Services
Securities and Exchange Commission
Washington, D.C. 20549
Dear Sir or Madame:
We are transmitting herewith Indiana Energy, Inc.'s
1998 Proxy Statement.
Respectfully,
/s/Debby Baker
Debby Baker
DB:tmw
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No. )
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Check the appropriate box:
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by Rule 14a-6(e)(2)) [X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement)
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and 0-11.
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computed pursuant to Exchange Act Rule 0-11 (Set forth
the amount on which the filing fee is calculated and
state how it was determined):
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IEI
INDIANA ENERGY, INC.
1630 North Meridian Street
Indianapolis, Indiana 46202-1496
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JANUARY 27, 1999
TO THE SHAREHOLDERS OF INDIANA ENERGY, INC.
The annual meeting of shareholders of Indiana Energy, Inc.
("Company") will be held at the principal office of the Company, 1630
North Meridian Street, Indianapolis, Indiana 46202, on Wednesday,
January 27, 1999, at 10:30 a.m. (Eastern Standard Time), for the
following purposes:
1. To elect four directors of the Company to serve for a term
of three years or until their successors are duly qualified and
elected; and
2. To transact such other business as may properly come before
the meeting, or any adjournment of the meeting.
As allowed by the Company's Code of By-Laws, the board of
directors has fixed the close of business on November 23, 1998, as
the record date for determining the shareholders entitled to notice
of and to vote at the meeting and at any adjournment of the meeting.
It is important that your stock be represented at this meeting
to assure a quorum. Whether or not you now expect to be present at
the meeting, please fill in, date and sign the enclosed proxy and
return it promptly to the Company in the accompanying addressed
envelope. No stamp is required if mailed in the United States. You
have the unconditional right to revoke your proxy at any time before
the authority granted by it is exercised.
By order of the board of directors.
INDIANA ENERGY, INC.
/s/ Anthony E. Ard
By ANTHONY E. ARD
Secretary and Senior Vice
President - Corporate Affairs
Indianapolis, Indiana
December 4, 1998
CONTENTS
PURPOSES OF MEETING
VOTING SECURITIES
ELECTION OF DIRECTORS
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
1. THE AUDIT COMMITTEE
2. THE COMPENSATION COMMITTEE
3. THE NOMINATING COMMITTEE
4. THE PUBLIC AND ENVIRONMENTAL AFFAIRS COMMITTEE
DIRECTORS' COMPENSATION
COMMON STOCK OWNERSHIP BY DIRECTORS AND EXECUTIVE OFFICERS
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
EXECUTIVE COMPENSATION AND OTHER INFORMATION
COMPENSATION COMMITTEE REPORT
A. EXECUTIVE COMPENSATION POLICY
B. COMPONENTS OF EXECUTIVE COMPENSATION
C. CHIEF EXECUTIVE OFFICER COMPENSATION
D. COMPENSATION CONSULTANT, TERMINATION BENEFITS AGREEMENTS AND
DEDUCTIBILITY OF EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
COMPENSATION
SUMMARY COMPENSATION TABLE
LONG-TERM INCENTIVE PLAN AWARDS IN LAST FISCAL YEAR
CORPORATE PERFORMANCE
TOTAL RETURN TO SHAREHOLDERS
RETURN ON EQUITY
RETIREMENT SAVINGS PLAN
RETIREMENT PLANS
EMPLOYMENT AND TERMINATION BENEFITS AGREEMENTS
INDEPENDENT PUBLIC ACCOUNTANTS OF THE COMPANY
COST AND METHOD OF SOLICITATION
ANNUAL REPORT
REVOCATION RIGHTS
NOMINATION OF DIRECTORS BY SHAREHOLDERS
SHAREHOLDERS' PROPOSALS FOR 2000 ANNUAL MEETING
INDIANA ENERGY, INC.
1630 North Meridian Street
Indianapolis, Indiana 46202-1496
(317) 926-3351
PROXY STATEMENT
The following information is furnished in connection with the
solicitation of the enclosed proxy by and on behalf of the board of
directors of the Company. The proxy will be used at the annual
meeting of shareholders to be held at the principal office of the
Company, 1630 North Meridian Street, Indianapolis, Indiana, on
Wednesday, January 27, 1999, at 10:30 A.M. (Eastern Standard Time),
and at any adjournment of the meeting for the matters to be acted
upon under its authority. The proxy and this proxy statement were
first mailed to the shareholders on or about December 4, 1998.
PURPOSES OF MEETING
As of this date, the only known business to be presented at the
1999 annual meeting of shareholders is the election of four directors
of the Company to serve for a term of three years or until their
successors are duly qualified and elected. However, the enclosed
proxy authorizes the proxy holders to vote on all other matters that
may properly come before the meeting, and it is the intention of the
proxy holders to take any such action utilizing their best judgment.
VOTING SECURITIES
The Company has one class of capital stock outstanding,
consisting as of November 23, 1998, of 29,919,672 shares of Common
Stock without par value. The number of shares contained in this
proxy statement reflects adjustments for the four-for-three stock
split, which was approved by the board of directors on July 31,
1998, and became effective on October 2, 1998. The holders of the
outstanding shares of Common Stock are entitled to one vote for each
share held of record on each matter presented to a vote of the
shareholders at the meeting. Only shareholders of record at the
close of business on November 23, 1998, will be entitled to vote at
the meeting or at any adjournment of the meeting.
In connection with the Company's acquisition of Richmond Gas
Corporation ("Richmond") and Terre Haute Gas Corporation ("Terre
Haute"), shares of Common Stock of the Company were issued to certain
members of the Anton Hulman, Jr. family, certain corporations
controlled by them, certain trusts established for their benefit and
certain other persons with personal or business relationships with
the family (collectively, the "Hulman Interests"). The Company had
30,063,667 shares of Common Stock without par value outstanding as of
September 30, 1998, its fiscal year end. At September 30, 1998, the
Hulman Interests beneficially owned an aggregate of 3,666,603 shares
of the Company, which comprised 12.20 percent of the Company's
outstanding Common Stock. At September 30, 1998, the following
beneficial owners held more than 5 percent of the outstanding Common
Stock of the Company, the only class of voting securities
outstanding:
<TABLE>
Title of Name and Number of
Class Address of Shares Nature of Percent
Beneficial Beneficially Beneficial of
Owner Owned Ownership Class
<S> <C> <C> <C> <C>
Common Hulman & 2,163,247 Voting & 7.20%
Company Investment
900 Wabash
Avenue
Terre Haute,
Indiana 47807
</TABLE>
As a result of the attribution to certain persons of shares held by
Hulman & Company, the following persons are deemed to be beneficial
owners of more than 5 percent of the outstanding Common Stock of the
Company:
<TABLE>
Title of Name of Number of Percent of
Class Beneficial Owner Shares Class
Beneficially
Owned
<S> <C> <C> <C>
Common Mari H. George 2,741,469 9.12%
Common Anton H. George 2,465,603 8.20%
Common Katherine M. 2,172,133 7.23%
George
Common Laura L. George 2,465,603 8.20%
Common Nancy L. George 2,173,184 7.23%
Common M. Josephine 2,169,193 7.22%
George
</TABLE>
The number of shares held beneficially by Mari H. George, Anton H.
George, Katherine M. George, Nancy L. George and M. Josephine George
each includes 2,163,247 shares held by Hulman & Company as to which
each, as a director of Hulman & Company, may be deemed to share
voting power and investment power. The number of shares held
beneficially by Mari H. George and Anton H. George each includes
289,864 shares held by Rose-Hulman Institute of Technology ("Rose-
Hulman") as to which Anton H. George, as a member of the Investment
Management Committee of the Board of Trustees of Rose-Hulman, and as
to which Mari H. George, as a member of the Board of Trustees, may be
deemed to share voting power and investment power, and as to which
each disclaims beneficial ownership. Laura L. George is the wife of
Anton H. George, and the shares listed for her are those beneficially
owned by Mr. George. Laura L. George disclaims beneficial ownership
of all such shares. The information furnished here regarding
beneficial ownership is derived from the Schedule 13D, as amended
most recently on June 29, 1994, filed by the Hulman Interests with
the Securities and Exchange Commission, and Forms 3, 4 and 5 filed
through September 30, 1998. The filing of the Schedule 13D by the
Hulman Interests did not affirm the existence of a "group" within the
meaning of Section 13(d)(3) of the Securities Exchange Act of 1934 or
the regulations promulgated under it.
ELECTION OF DIRECTORS
In connection with the Company's acquisition of Richmond and
Terre Haute, the Company entered into a standstill agreement with the
Hulman Interests. Under this agreement, the Company agreed to cause
one designee of the Hulman Interests to be elected to the board of
directors of the Company and, until the termination of the standstill
agreement (which is dependent upon the occurrence of certain events
specified in the agreement), to include a designee of the Hulman
Interests in the slate of nominees recommended by the board at the
annual meeting of shareholders at which the term of the original
designee expires. At a regular meeting held on August 31, 1990, the
board of directors of the Company elected Anton H. George to the
board and he currently serves as a member of the board.
The board of directors of the Company consists of twelve
directors divided into three classes as follows: L. A. Ferger, Anton
H. George, James C. Shook and John E. Worthen, who are nominees for
election with terms expiring in 2002; Paul T. Baker, Otto N. Frenzel
III, Don E. Marsh and Richard P. Rechter, whose terms expire in 2001;
and Niel C. Ellerbrook, L. K. Evans, William G. Mays and Jean L.
Wojtowicz, whose terms expire in 2000. The Company is a holding
company, and, historically, each of its directors also served as a
director of Indiana Gas Company, Inc. ("Indiana Gas"), its principal
subsidiary and a regulated gas distribution company. As part of a
corporate restructuring that occurred during fiscal year 1997,
effective May 1, 1997, with the exception of Messrs. Ferger and
Ellerbrook, the Company's directors also serve either as a director
of Indiana Gas or a director of IEI Investments, Inc.
("Investments"), the Company's subsidiary that serves as the
corporate parent for non-regulated business activities. The
placement of a portion of the Company's directors on the board of
directors of Investments will ensure the participation of those
individuals in decision making with respect to non-regulated business
activities. Messrs. Ferger and Ellerbrook serve as directors of
Indiana Gas and Investments.
At each annual meeting of shareholders, directors are elected to
succeed those whose terms then expire for a term of three years or
until their successors are duly qualified and elected. Accordingly,
four directors are to be elected by a plurality of votes cast at the
annual meeting of shareholders to be held on January 27, 1999.
The board of directors intends that the enclosed proxy will be
voted by the proxy holders in favor of the election of the nominees
named below for the office of director of the Company to hold office
for a term of three years or until their respective successors are
duly qualified and elected. Each of such nominees is now serving as
a director of the Company and has signified the willingness to serve
if elected. Directors are elected by a plurality of the votes cast.
Plurality means that the individuals who receive the largest number
of votes cast are elected up to the maximum number of directors to be
chosen at the meeting. Abstentions, broker non-votes, and
instructions on the accompanying proxy card to withhold authority to
vote for one or more of the nominees might result in some nominees
receiving fewer votes. However, the number of votes otherwise
received by the nominee will not be reduced by such action. If,
however, any situation should arise under which any nominee should be
unable to serve, the authority granted in the enclosed proxy may be
exercised by the proxy holders for the purpose of voting for a
substitute nominee. Certain information concerning the nominees and
the other directors of the Company is set forth below and under the
caption "Meetings and Committees of the Board of Directors".
<TABLE>
Has Been a
Name and Principal Occupation During Director of
Business the Past 5 Years and Other Indiana Gas or
Location Age Information (1) the Company Since
Nominees For Election Whose Terms Will Expire in 2002:
<S> <C> <C> <C>
L. A. FERGER 64 Chairman and Chief Executive 1984
Indianapolis, Officer of the Company and
Indiana Indiana Gas since October
1997; prior to that time and
since January 1996,
Chairman, President and
Chief Executive Officer of
the Company and Indiana Gas;
and prior to that time and
since 1987, President and
Chief Executive Officer of
the Company and Indiana Gas.
Mr. Ferger is a Director of
Indiana Gas and Investments.
He is also a Director of
National City Bank, Indiana.
ANTON H. GEORGE 39 President since December 1990
Indianapolis, 1989, and a Director of
Indiana Indianapolis Motor Speedway
Corporation (auto racing);
and President since January
1994, Executive Vice
President since June 1989,
and a Director of Hulman &
Company (manufacturer and
distributor of baking
powder). Mr. George is an
Investments Director. He is
also a Director of First
Financial Corporation.
JAMES C. SHOOK 67 President, The Shook Agency, 1983
Lafayette, Inc. (residential,
Indiana commercial and industrial
real estate brokerage and
development). Mr. Shook is
an Investments Director. He
is also a Director of
Lafayette Life Insurance
Company (a mutual company)
and Crossmann Communities,
Inc.
JOHN E. WORTHEN 65 President, Ball State 1997
Muncie, Indiana University, Muncie, Indiana.
Mr. Worthen is an Indiana
Gas Director. He is also a
Director of First Merchants
Corp.
Directors Continuing in Office Whose Terms Will Expire in 2001
PAUL T. BAKER 58 Executive Vice President and 1991
Indianapolis, Chief Operating Officer of
Indiana Indiana Gas since October
1997; prior to October 1997
and since 1991, Senior Vice
President and Chief
Operating Officer of Indiana
Gas. Mr. Baker is also an
Indiana Gas Director.
OTTO N. FRENZEL 68 Chairman, Executive 1967
III Committee, National City
Indianapolis, Bank, Indiana, since 1996.
Indiana Prior to that time, Chairman
of the Board of National
City Bank, Indiana. Mr.
Frenzel is an Indiana Gas
Director. He is also a
Director of National City
Corporation, American United
Life Insurance Company,
Baldwin & Lyons, Inc.
(insurance brokerage firm),
Indianapolis Power and Light
Company and IPALCO
Enterprises, Inc.
DON E. MARSH 60 Chairman, President, Chief 1986
Indianapolis, Executive Officer and
Indiana Director of Marsh
Supermarkets, Inc. Mr.
Marsh is an Investments
Director. He is also a
Director of National City
Bank, Indiana.
RICHARD P. 59 Chairman of the Board of 1984
RECHTER Rogers Group, Inc.;
Bloomington, President, Chief Executive
Indiana Officer and Director of
Rogers Management, Inc.; and
President, Chief Executive
Officer and Director of Mid-
South Stone, Inc. Mr.
Rechter is an Investments
Director. He is also a
Director of Monroe County
Bank and Monroe Bancorp.
Directors Continuing in Office Whose Terms Will Expire in 2000
NIEL C. 49 President and Chief 1991
ELLERBROOK Operating Officer of the
Indianapolis, Company since October 1997;
Indiana prior to that time and since
January 1997, Executive Vice
President, Treasurer and
Chief Financial Officer; and
prior to that time and since
1986, Vice President,
Treasurer and Chief
Financial Officer. President
of Indiana Gas since October
1997; prior to that time and
since January 1997,
Executive Vice President and
Chief Financial Officer; and
prior to that time and since
1987, Senior Vice President
and Chief Financial Officer.
Mr. Ellerbrook is a Director
of Indiana Gas and
Investments. He is also a
Director of Fifth Third
Bank, Indiana.
L. K. EVANS 70 Retired. Prior to 1993 and 1988
Columbus, since 1991, Vice Chairman
Indiana and Director of Arvin
Industries, Inc. (an Indiana
company serving global
markets in more than 100
countries); and President
and Chief Operating Officer
from 1987. Mr. Evans is an
Indiana Gas Director. He
was also a Director of Irwin
Financial Corporation,
Columbus, Indiana until
April, 1994.
WILLIAM G. MAYS 52 President, Mays Chemical 1998
Indianapolis, Company. Mr. Mays is an
Indiana Indiana Gas Director. He is
also a Director of Anthem,
Inc.
1996
JEAN L. 41 President since 1983 and
WOJTOWICZ founder of Cambridge Capital
Indianapolis, Management Corp. (a
Indiana consulting and venture
capital firm). Ms.
Wojtowicz is an Investments
Director. She is also a
Director of Seaboard North
American Holdings, Inc.
</TABLE>
Other executive officers of the Company are Anthony E. Ard, age 57,
Carl L. Chapman, age 43, and Timothy M. Hewitt, age 48. In July
1998, Mr. Ard was elected as Secretary of the Company. In October
1997, Mr. Ard was made Senior Vice President-Corporate Affairs for
the Company. Prior to October 1997 and since 1995, he was Senior
Vice President-Corporate Affairs for Indiana Gas. Prior to 1995 and
since 1993, he was Vice President-Corporate Affairs for Indiana Gas.
Prior to 1993 and since 1988, Mr. Ard was Vice President and
Secretary for Indiana Gas and Secretary for the Company. Effective
October 1, 1997, Mr. Chapman was elected as President of
Investments. As of May 1, 1998, when he assumed this position full-
time, he was again considered to be a named executive officer of the
Company. Mr. Chapman served as President of ProLiance Energy, LLC
("ProLiance"), a gas supply and energy marketing joint venture
partially owned by IGC Energy, Inc. ("Energy"), an indirect, wholly
owned subsidiary of the Company, from March 15, 1996, until April
30, 1998. From 1995 until March 15, 1996, he was Senior Vice
President of Corporate Development for Indiana Gas. Prior to 1995
and since 1987, he was Vice President of Planning for Indiana Gas.
Mr. Chapman has held the position of Assistant Treasurer of the
Company since 1986. Mr. Hewitt is the Vice President - Operations
and Engineering for Indiana Gas, a position he has held since 1995.
Prior to 1995 and since 1989, he was Vice President of Sales and
Field Operations for Indiana Gas. Effective May 1, 1998, Mr. Hewitt
ceased being considered a named executive officer of the Company.
(1) Includes, but is not limited to, directorships in corporations
with a class of securities registered pursuant to Section 12 of the
Securities Exchange Act of 1934, as amended, or which are subject to
the requirements of Section 15(d) of that Act or in a company
registered as an investment company under the Investment Company Act
of 1940, as amended.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Company has the following standing committees of the board
of directors:
1. The Audit Committee.
The members of this committee are L. K. Evans, chair, Anton H.
George, William G. Mays, Jean L. Wojtowicz and John E. Worthen. The
committee makes recommendations to the board as to the selection and
retention of the independent accountants, reviews the scope, conduct
and results of audits performed, and makes inquiries as to the
differences of views, if any, between such independent accountants
and officers and employees of the Company and subsidiaries with
respect to the financial statements and records and accounting
policies, principles, methods and systems. It further determines
that services performed by the independent accountants in addition to
the annual audit examination do not impair such accountants'
independence in performing the audit examination. Finally, the
committee reviews the policies and guidelines of the Company and
subsidiaries designed to ensure the proper use and accounting for
corporate assets, and the activities of the Company's Internal Audit
department. There were two meetings of the committee during the past
fiscal year.
2. The Compensation Committee.
The members of this committee are Otto N. Frenzel III, chair,
Don E. Marsh, Richard P. Rechter and Jean L. Wojtowicz. None of the
members is an officer or employee of the Company. The committee has
the responsibility of formulating recommendations to the board as to
the compensation to be paid to the officers of the Company and its
subsidiaries. It also administers the Company's Annual Management
Incentive Plan, the Executive Restricted Stock Plan, and the
Directors Restricted Stock Plan. There were two meetings of the
committee during the past fiscal year.
3. The Nominating Committee.
The members of this committee are L. A. Ferger, chair, Don E.
Marsh and James C. Shook. The duties and powers of the committee are
to search for, evaluate and make recommendations to the board of
directors as to nominees to be submitted annually to the shareholders
for election to the board as well as to fill vacancies occurring from
time to time on the board. In that connection, the committee is
authorized to act on behalf of the Company and the board in
receiving, giving consideration to and making recommendations to the
board respecting communications submitted to the Company from
shareholders relating to nominees for directors. Such communications
must be in writing and with respect to the next annual election must
be received by the Company, addressed to the secretary, no later than
August 6, 1999. There were two meetings of the committee during the
past fiscal year.
4. The Public and Environmental Affairs Committee.
The members of this committee are Richard P. Rechter, chair,
Otto N. Frenzel III and James C. Shook. The duties and powers of the
committee are to review current policies, programs, procedures and
processes of the Company and its subsidiaries affected by public
policy and affecting the environment. It also reviews reports from
Company management on public policy and environmental matters and
monitors compliance with, and trends and emerging policy developments
in, business and environmental regulation. In addition, the
committee reports to the board of directors on public policy and
environmental issues affecting the Company and its subsidiaries.
There were two meetings of the committee during the past fiscal year.
The board of directors of the Company had five meetings during
the last fiscal year. Messrs. Evans, George, Mays and Worthen
attended fewer than 75 percent of the aggregate of board meetings and
meetings of the respective committees of the board of which they are
members. Mr. Mays was elected to the board of directors effective
July 1, 1998. He was unable to attend one of the two board meetings
held after that date due to a commitment made prior to his election.
DIRECTORS' COMPENSATION
Non-employee directors of the Company and of Indiana Gas or
Investments receive combined fees totaling $21,000 per year for
service on the boards of these companies. The fees are paid under
the Directors Restricted Stock Plan approved by the shareholders at
their January 13, 1992, meeting. Under the plan, $7,000 of the
combined directors' fees paid by the Company and Indiana Gas or
Investments to non-employee directors is in the form of restricted
shares of the Company. The restricted shares are issued to each non-
employee director at the beginning of their three-year term, and the
number of restricted shares is determined by dividing $21,000 ($7,000
for each year) by the per share market price of the Company's stock
during the period specified in the plan. To receive the restricted
shares, a director must consent to the restrictions in writing.
Directors may elect to receive the remaining $14,000 in unrestricted
shares or in cash. To elect to receive unrestricted shares instead
of cash, a director must provide an irrevocable written election to
the secretary of the Company before the beginning of the calendar
year for which the election relates. Moreover, if during the
calendar year a non-employee is elected to fill a vacancy in the
board of directors, under the plan, a one time election is permitted
to allow the director to receive the balance of that calendar year's
compensation in unrestricted shares.
Restricted shares may not be sold, transferred, pledged,
assigned, or otherwise alienated or hypothecated, other than by will
or by the laws of descent and distribution until the first to occur
of: (1) the expiration of the director's term of office for which
the grant relates; (2) the grantee's death or disability; (3) the
termination of the grantee's status as a director pursuant to the
mandatory retirement policy for directors; (4) the involuntary
termination of the grantee's status as a director; (5) approval by a
majority of the other directors of the grantee's voluntary
termination of his/her status as a director because of the relocation
of his/her principal place of residence outside of Indiana; or (6) a
change in control of the Company. In no event, however, are the
restricted shares transferable and free of restrictions before the
expiration of a six-month period beginning the first day of the
director's term of office or, if later, the date of issuance of the
shares.
All restricted shares bear a legend citing the restrictions
contained in the plan. When the restrictions lapse, the grantee is
entitled to have the legend removed from any shares or certificates.
Restrictions are lifted automatically upon the expiration of the
period to which the restrictions apply. If a director voluntarily
terminates his/her status as such before the expiration of the period
of restriction, any shares still subject to restriction are
immediately forfeited.
The Company has reserved 85,919 shares for grant under the plan.
As of September 30, 1998, 58,987 shares remain in reserve. Those
shares may consist of authorized but unissued shares or shares
reacquired by the Company, including shares purchased in the open
market. If any shares subject to the grants are forfeited, the
forfeited shares become available for reissuance under the plan.
The board may amend, modify, alter or terminate the plan at any
time. Amendments, modifications or alterations which would: (1)
increase the number of shares reserved for issuance under the plan,
(2) materially modify the class of individuals to whom grants of
shares may be made, (3) materially modify the manner in which shares
are granted, or (4) materially increase the benefits accruing to
grantees under the plan, must be approved by the Company's
shareholders.
Non-employee directors also receive a fee of $500 for each
Company board meeting attended and $500 for each board meeting of
Indiana Gas or Investments attended. Each non-employee member of a
committee of the board is paid a fee of $1,000 for each meeting of
the committee attended, and each non-employee chair of a committee is
paid an additional fee of $1,000 for each meeting attended.
There is an unfunded plan under which non-employee directors may
defer all or any part of fees received in cash until the occurrence
of certain conditions specified in the plan. Under the plan, which
has been in place since fiscal year 1995, at the election of the
participant, amounts deferred are considered for accounting purposes
to either be invested in Company Common Stock (Stock Fund) or utility
bonds (Bond Fund), with a return measured pursuant to a formula
specified in the plan. Amounts deferred under the Stock Fund are
tracked as phantom units of Company Common Stock and the account
value changes when the Company pays dividends, as well as when the
Common Stock price fluctuates. Amounts deferred under the Bond Fund
earn a return 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 reported in Moody's Bond Survey in its
published issue in the November preceding the January 1, on which the
rate is to come into effect. The rate changes each January 1.
COMMON STOCK OWNERSHIP BY DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the number of shares of Common
Stock of the Company beneficially owned by the directors, the chief
executive officer, the five additional named executive officers, and
all directors and executive officers as a group, as of September 30,
1998. Except as otherwise indicated, each individual has sole voting
and investment power with respect to the shares listed below.
<TABLE>
Name of Individuals or Identity of Group Shares Owned Beneficially(1)
<S> <C>
ANTHONY E. ARD 29,146 (2)(3)
Indianapolis, Indiana
PAUL T. BAKER 50,324 (2)
Indianapolis, Indiana
CARL L. CHAPMAN 20,646 (2)(4)
Indianapolis, Indiana
NIEL C. ELLERBROOK 45,283 (2)(5)
Indianapolis, Indiana
L. K. EVANS 6,117 (3)(6)
Columbus, Indiana
L. A. FERGER 132,076 (2)(7)
Indianapolis, Indiana
OTTO N. FRENZEL III 25,147 (6)(8)
Indianapolis, Indiana
ANTON H. GEORGE 2,465,603 (1)(6)
Indianapolis, Indiana
TIMOTHY M. HEWITT 17,967 (2)(3)(4)
Indianapolis, Indiana
DON E. MARSH 9,287 (6)
Indianapolis, Indiana
WILLIAM G. MAYS 773 (6)
Indianapolis, Indiana
RICHARD P. RECHTER 11,428 (3)(6)
Bloomington, Indiana
JAMES C. SHOOK 56,555 (6)(9)
Lafayette, Indiana
JEAN L. WOJTOWICZ 2,417 (6)
Indianapolis, Indiana
JOHN E. WORTHEN 1,209 (6)
Muncie, Indiana
All directors and executive 2,873,978 (1)
officers as a group (15
persons)
</TABLE>
(1) Except for Anton H. George, no director or executive officer
owned beneficially as of September 30, 1998, more than .44 percent
of Common Stock of the Company. Excluding Anton H. George, all
directors and executive officers owned beneficially an aggregate
of 408,375 shares or 1.36 percent of Common Stock of the Company
outstanding as of that date. The beneficial ownership by Anton H.
George of 2,465,603 shares or 8.20 percent of Common Stock of the
Company is discussed above in "Voting Securities".
(2) Includes shares awarded to Messrs. Ard, Baker, Chapman,
Ellerbrook, Ferger and Hewitt under the Company Executive Restricted
Stock Plan, which are subject to certain transferability restrictions
and forfeiture provisions.
(3) Some or all of the shares owned by Messrs. Ard, Evans, Hewitt
and Rechter are owned jointly with their wives.
(4) As of May 1, 1998, when he returned to Investments on a full-
time basis, Mr. Chapman resumed his status as a named executive
officer of Company. After May 1, 1998, Mr. Hewitt ceased being
considered a named executive officer of Company.
(5) Includes 1,122 shares held by Mr. Ellerbrook's wife, and he
disclaims beneficial interest therein.
(6) Includes shares granted to non-employee directors under the
Company Directors Restricted Stock Plan, some of which shares are
subject to certain transferability restrictions and forfeiture
provisions.
(7) Includes 77,571 shares held in a family limited partnership, in
which Mr. Ferger is a general partner and owns limited partnership
interests. Mr. Ferger shares voting and investment power over
these shares with his wife.
(8) Includes 5,032 shares held in a trust, of which Mr. Frenzel is a
co-trustee, and he disclaims beneficial interest therein.
(9) Includes 2,000 shares held by Mr. Shook's wife, and he disclaims
beneficial interest therein.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The disclosures contained in the first two paragraphs of this
Section are not required pursuant to Item 404 of Regulation S-K. On
December 29, 1995, Energy, an indirect, wholly owned subsidiary of
the Company, entered into a subscription agreement to purchase an
interest in a limited partnership known as the Cambridge Ventures,
L.P. (Partnership) ("CVLP"). CVLP is licensed by the United States
Small Business Administration as a small business investment company.
As such, CVLP operates as a venture fund and invests in equities,
debt securities with equity participation and secured short and long-
term loans; CVLP also participates in other funds. Energy has
invested a total of $275,000 in CVLP, which represents, in the
opinion of the board of directors, a fair and reasonable investment
for Energy. Energy holds ten (10) out of the two hundred and
nineteen (219) partnership units that have been sold in CVLP as of
December 31, 1997. On January 26, 1996, Jean L. Wojtowicz was
elected to the board of directors of the Company. Ms. Wojtowicz is
also an Investments Director. Ms. Wojtowicz owns six (6) units in
CVLP.
On November 25, 1997, Energy entered into a subscription
agreement to purchase an interest in an Indiana limited liability
company known as Monument Capital Partners 1, LLC ("MCP1" or the
"Fund"). MCP1 is a mezzanine fund which uses its capital for
recapitalizations, management buyouts, and growth or acquisition of
small- to middle-market companies in the Midwest. As of December 31,
1997, Energy holds four (4) out of fifty-six (56) units of the Fund.
Energy's total commitment is $1,000,000. The managing director of
MCP1 is Otto N. Frenzel, IV, son of Otto N. Frenzel, III, who is a
Director of the Company and Indiana Gas. Mr. Shook, who is a
Director of the Company and Investments, is on the board of MCP1.
On June 5, 1998, Indiana Gas closed on the sale of its service
building in Lafayette, Indiana. The Shook Agency, Inc. served as the
real estate broker for this transaction and received a three percent
(3%) commission from Indiana Gas of $75,000. Mr. Shook, who is a
Director of the Company and Investments, is the President of The
Shook Agency, Inc.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
COMPENSATION COMMITTEE REPORT
The Compensation Committee is responsible for reviewing and
approving all elements of the total compensation program for officers
of the Company and its subsidiaries and serves as the administrator
of the Company's Annual Management Incentive Plan ("Incentive Plan")
and the Executive Restricted Stock Plan ("Stock Plan"). The
committee is also responsible for monitoring the Company's executive
compensation programs to ensure that they are aligned with the
Company's business strategies and financial goals.
A. Executive Compensation Policy.
The Company's total compensation program for officers includes
base salaries, annual incentive payments, and restricted stock
grants. The committee's primary objective is to achieve above-
average performance by providing the opportunity to earn above-
average total compensation (base salary, at-risk annual and long-term
incentives) for above-average performance. Each element of total
compensation is designed to work in concert. The total program is
designed to attract, motivate, reward and retain the broad-based
management talent required to serve customer, employee, and
shareholder interests. The Company believes that the program also
motivates the Company's officers to acquire and retain appropriate
levels of stock ownership and is competitive with programs offered by
the companies that comprise the peer group ("Peer Group") included in
the performance graph on page 21. It is the opinion of the committee
that the total compensation earned by Company officers in fiscal year
1998 achieves these objectives and is fair and reasonable. Each
aspect of the total compensation program is discussed in greater
detail below.
B. Components of Executive Compensation.
Annual Compensation. The annual compensation program consists
of two components, base salary and an at-risk incentive payment.
Individual salaries are set within ranges based on comparisons to
actual pay for comparable positions within the Peer Group, and
industry in general. In determining actual salaries within these
ranges, the committee takes into consideration individual
performance, experience, potential, and changes in executive
responsibilities. Establishing industry-based salary ranges provides
an objective standard by which to judge the reasonableness of the
Company's salaries, maintains the Company's ability to compete for
and retain qualified executives, and ensures that internal
responsibilities are properly rewarded.
All of the Company's officers, but particularly the six highest
paid officers, have a significant portion of their total compensation
at risk. Participation in the Incentive Plan, which includes the
chief executive officer, is extended to those positions that play key
roles in achieving annual financial and operating objectives. Annual
incentive opportunities are also based on periodic reviews of
prevailing Peer Group practices for comparable positions. The
potential incentive award is determined annually by non-employee
directors and is based upon a percentage of each participant's base
salary. During the past fiscal year, incentive opportunities for
executive officers, excluding the chief executive officer, ranged
from 40 to 60 percent of salary.
Prior to the start of the fiscal year, the committee recommends
to the board of directors, and the non-employee directors determine,
minimum, target, and maximum corporate performance levels. The
performance that is measured is the Company's financial performance,
as determined by the Company's consolidated return on equity,
relative to the average return on equity of companies in the Peer
Group. Target performance levels are set in excess of Peer Group
performance in order to ensure the linkage between financial
performance and executive rewards. Depending upon the Company's
financial performance, the size of this component can range from zero
to the maximum level established for each participant in the
Incentive Plan.
In determining the cash payment that was received by executive
officers during the past fiscal year, the Company's consolidated
return on equity exceeded the target performance level and was at the
maximum performance level as determined by the board of directors.
Incentive payouts correspondingly were at the maximum amounts.
The second and smaller performance component is based upon each
executive's achievement of individual goals, which are consistent
with the Company's overall objectives and which are established prior
to the beginning of the fiscal year. Individual performance is
monitored and evaluated subjectively throughout the fiscal year.
Overall performance is measured after the end of the fiscal year by
the chief executive officer. Among the executive officers, during
the past fiscal year, no person had more than 30 percent of their
total potential incentive under the Incentive Plan dependent upon the
attainment of individual objectives. The Incentive Plan was amended
effective October 1, 1997, to provide that, in addition to that of
the chief executive officer, the incentive bonus of the president of
the Company would be based only on corporate performance.
Amounts actually paid under the Incentive Plan during the past
fiscal year relate to the Company's financial performance during
fiscal year 1997. The amounts payable under the Incentive Plan as a
result of the Company's financial performance for the past fiscal
year will not be determined and paid until the end of calendar year
1998, and, accordingly, will be reflected in next year's proxy
statement as part of fiscal year 1999 compensation.
During fiscal year 1997, Indiana Gas recognized, with the
approval of its board of directors, and the concurrence of the
independent members of the Company's board of directors, an after-tax
restructuring charge in the amount of $24.5 million. The charge
occurred as a result of a restructuring of Indiana Gas' operations,
including the implementation of several actions designed to both
reduce its operating costs and position it to remain a competitive
choice for energy consumers vis-a-vis other energy providers. The
Indiana Gas board of directors concluded that these actions were
necessary in light of the fundamental changes occurring in the
industry. The Company's consolidated return on equity for the past
fiscal year after the Indiana Gas restructuring charge was 7 percent
and before the Indiana Gas restructuring charge was 14.7 percent.
The Incentive Plan authorizes the independent members of the
Company's board of directors to exclude the effect of the
restructuring charge from the measurement of the Company's
consolidated return on equity if they conclude that the action is
appropriate in light of unforeseen or unusual circumstances. On
October 31, 1997, the Company's independent members of the board of
directors determined that the restructuring charge should be excluded
when measuring the Company's fiscal year 1997 consolidated return on
equity under the Incentive Plan. In making that determination, those
directors concluded that in light of the swift and fundamental
changes occurring in the energy industry, as well as the long-term
benefits that should inure to Indiana Gas and its customers from the
restructuring, management should be encouraged to undertake this
action, even though it would adversely affect the Company's short-
term financial results. This action affected payments made under the
Incentive Plan during fiscal year 1998, and is reported as
compensation in this proxy statement. Absent this determination by
the non-employee members of the board of directors, management would
have experienced a substantial reduction in their at-risk
compensation, even though their actions were determined by the board
of directors to be both necessary and appropriate.
Long-Term Incentive Compensation. The purpose of the Stock Plan
is to retain and motivate the Company's principal officers and to
increase their incentive to work toward the attainment of the
Company's long-term growth and profit objectives by providing them
with a means of acquiring or increasing their proprietary interests.
Under the Stock Plan, the committee recommends to the board of
directors, and the non-employee directors determine, the executive
officers, as well as other principal officers, to whom grants will be
made and the percentage of each officer's base salary to be used for
determining the number of shares to be granted. Like the potential
cash payment that may be received under the Incentive Plan, this
component of total compensation is also performance driven and
totally at-risk.
The Stock Plan provides for a grant to eligible officers at the
outset of each measuring period and also provides for grants of
shares to be made to newly eligible principal officers during a
measuring period. Through the end of the past fiscal year, every
three years a grant was provided for each measuring period under the
plan, with those periods consisting of consecutively running three-
year periods. Shares were allocated under the Stock Plan effective
October 1, 1987, for the "First Measuring Period," October 1, 1990,
for the "Second Measuring Period," October 1, 1993, for the "Third
Measuring Period," October 1, 1996, for the "Fourth Measuring
Period," and October 1, 1997, for the "Fifth Measuring Period." As
discussed below, effective October 1, 1997, the Stock Plan was
amended to provide for annual grants to participants rather than
grants every three years.
To be eligible for a grant, a principal must consent in writing
to observe the restrictions imposed on the shares. The shares may
not be sold, transferred, pledged, or assigned until such
restrictions are lifted. For the three-year grants that were
provided under the Stock Plan through the end of fiscal year 1997,
the restrictions are lifted in 33 1/3 percent increments on the
fourth, fifth, and sixth anniversaries of the calendar day
immediately preceding the first calendar day of the measuring period.
The granting of additional shares, if any, and the application
of forfeiture provisions, depends upon two primary criteria: (i)
certain measurements of the total return to the Company's
shareholders in comparison to the total return of shareholders of the
companies in the Peer Group; and (ii) the continued employment of the
officer during the period of restriction.
For each three-year measuring period under the Stock Plan,
depending upon the total return provided to the Company's
shareholders relative to the total return provided by each of the
companies in the Peer Group, there are three possible outcomes. If
the Company's total return places it in the bottom quartile, all of
the shares are forfeited. If the Company's total return places it in
the second or third quartiles, the original grant is vested, subject
to continuing employment by the officers during the remaining period
of restriction. If the Company's total return places it in the top
quartile, the original grant is doubled and vested, subject to
continuing employment by the officers during the remaining period of
restriction.
For the First Measuring Period ended September 30, 1990, the
Second Measuring Period ended September 30, 1993, and the Third
Measuring Period ended September 30, 1996, the number of shares
originally granted were doubled under the Stock Plan because the
Company's total return to shareholders placed it in the top quartile
compared to the total return performance of the Peer Group companies.
Among all of the companies in the Peer Group, the Company was the
only Peer Group member to perform in the top quartile for all three
measuring periods.
Effective October 1, 1997, the Stock Plan was amended to provide
that grants would be provided on an annual basis instead of every
three years. To reflect the change from three-year grants to annual
grants, the percentage of the participant's annual salary that is
used to determine the grant is no longer subject to a multiplier of
three. Although grants will still be subject to a three year total
return performance measuring period, as described above, all of the
restrictions will be lifted on the fourth anniversary of the calendar
day immediately preceding the first calendar day of the measuring
period applicable to that grant. It is the opinion of the committee
that this will better ensure that in each fiscal year the Company's
total return to shareholders will have a significant effect upon
participants' total compensation.
It is the opinion of the committee that the Stock Plan meets its
objective of providing executive officers, as well as other principal
officers, with the appropriate long-term interest in maximizing
shareholder value. A participant's increased level of equity in the
Company is contingent upon the additional enhancement of shareholder
value relative to the performance of companies in the Peer Group. In
addition, the vesting restrictions provide an incentive for all plan
participants to remain with the Company.
C. Chief Executive Officer Compensation.
The compensation of L. A. Ferger, Chairman and Chief Executive
Officer, consists of the same components as for other executive
officers, namely base salary, an at-risk payment under the Incentive
Plan, and an at-risk grant of restricted stock under the Stock Plan.
In establishing Mr. Ferger's total compensation for fiscal year
1998, the committee considered the total compensation of other chief
executive officers in the Peer Group, the financial and business
performance of the Company, and a subjective evaluation of the
leadership role provided by Mr. Ferger.
Mr. Ferger's payment received under the Incentive Plan during
fiscal year 1998 was based entirely upon the financial performance of
the Company as measured by its consolidated return on equity relative
to the average return on equity of companies in the Peer Group. This
method of measurement ensures the linkage of this aspect of Mr.
Ferger's compensation to Company performance. Under the Incentive
Plan, the maximum award Mr. Ferger was eligible to receive was an
amount equal to 70 percent of his base salary. As discussed above
with respect to other executive officers, during the past fiscal year
the Company's consolidated return on equity exceeded the target
performance level and was at the maximum performance level as
determined by the board. The incentive payout correspondingly was at
the maximum level.
Mr. Ferger's receipt of restricted shares under the Stock Plan
is likewise directly linked to the Company's performance. Whether
stock is received and, if so, in what amount, will depend upon the
measurement of the total return provided to the Company's
shareholders in comparison to the total return provided to the
shareholders of companies in the Peer Group. As discussed above with
respect to the other executive officers, fiscal year 1998 was the
second year of the fourth three year measuring period under the Stock
Plan. Whether and to what extent Mr. Ferger will be permitted to
retain the grant of restricted stock received during the past fiscal
year under the Stock Plan will depend upon the Company's financial
performance during the Fifth Measuring Period. Moreover, grants of
restricted stock after the past fiscal year will be in accordance
with the Stock Plan, as amended, which is discussed in Part B of this
Section, under "Long Term Incentive Compensation."
For the same reasons expressed above with respect to the
conclusion regarding the appropriateness of the total compensation
provided other executive officers, it is the opinion of the committee
that Mr. Ferger's total compensation is reasonable and appropriate.
D. Compensation Consultant, Termination Benefits Agreements
And Deductibility Of Executive Compensation.
To assist the committee, the services of an independent
compensation consultant are utilized. The consultant assists by
evaluating the total compensation system relative to the compensation
systems employed by companies in the Peer Group. The consultant also
provides an additional measure of assurance that the system is a
reasonable and appropriate means to achieve the Company's objectives.
As described on page 25 under the heading "Employment And
Termination Benefits Agreements," the Company has entered into
termination benefits agreements, and with the exception of Mr.
Timothy M. Hewitt, employment agreements, with each of the executive
officers. Neither form of agreement affects in any manner the
recommendations of the committee and the determinations by the non-
employee members of the board with respect to the total compensation
provided the executive officers.
In 1993, Congress enacted Section 162(m) of the Internal Revenue
Code (Code), applicable to the individual executives named in the
Summary Compensation Table, that disallows corporate deductibility
for "compensation" paid in excess of $1 million unless the
compensation is payable solely on account of achievement of an
objective performance goal. The committee does not anticipate that
in the near future the compensation paid to executive officers in the
form of base salaries and incentive compensation will be non-
deductible under Section 162(m) of the Code.
Otto N. Frenzel III, Chair
Don E. Marsh
Richard P. Rechter
Jean L. Wojtowicz
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The following are not required disclosures pursuant to Item 404
of Regulation S-K. L. A. Ferger is a director of National City Bank,
Indiana. Otto N. Frenzel III, chair of the Company's Compensation
Committee, is Chairman of the Executive Committee of National City
Bank, Indiana. During the past fiscal year, Indiana Gas had a bank
line of credit agreement with National City Bank, Indiana for
borrowing by Indiana Gas not to exceed $15,000,000 at any one time.
While funds were borrowed during the fiscal year, at September 30,
1998, there were no loans outstanding under the line of credit. The
interest on borrowings under that line of credit has been at a rate
not to exceed the prime lending rate at the bank which, in the
opinion of the board of directors, is fair. Similar bank lines of
credit agreements have been in effect between Indiana Gas and the
bank in the normal course of business for many years. During the
past fiscal year, the Company and its subsidiaries collectively paid
National City Bank, Indiana remittance processing fees, including
bank service charges, of $591,432, and interest on short-term debt in
the amount of $95,285, which payments, in the opinion of the board of
directors, were fair. On July 31, 1995, Energy Realty, Inc.
("Realty") and National City Bank, Indiana each invested $806,250 in
the Lebanon Housing Partnership, L.P. As a result of these
investments, each company owns 37.125% of the partnership. On
November 21, 1995, Realty and National City Community Development
Corp. (d/b/a National City Bank, Indiana Community Development
Assoc.) each invested $1,005,000 in Pedcor Investments XXV, L.P., a
housing project in Seymour, Indiana. As a result of these
investments, each company owns 49.50% of the limited partnership.
Niel C. Ellerbrook is a director of Fifth Third Bank, Indiana.
During the past fiscal year, the Company also had a bank line of
credit with Fifth Third Bank, Indiana for borrowing not to exceed
$15,000,000 at any one time. The interest rate on borrowings under
this line of credit was at a rate not to exceed the prime lending
rate at the bank, which rate has been deemed fair by the board of
directors. The Company paid $56,506 in interest on short-term
borrowings during the last fiscal year. As of September 30, 1998, the
Company had no loans outstanding under this line of credit.
None of the Company's executive officers is a member of the
Compensation Committee.
COMPENSATION
The following tabulation shows for the fiscal years ended
September 30, 1996, 1997 and 1998, the compensation paid by the
Company and its subsidiaries to each of the six most highly
compensated executive officers of the Company (considering for this
purpose Mr. Baker and Mr. Hewitt, who were executive officers of
Indiana Gas during the past fiscal year, to be executive officers of
the Company) in all capacities in which they served.
<TABLE>
Summary Compensation Table
(a) (b) (c) (d) (e) (h) (i)
Long-Term
Compensation All Other
Annual Compensation Payouts Compensation
Other Annual LTIP
Compensation Payouts
Name and Year Salary Bonus (1) (2) (3) (4)
Principal
Position in
Group
<S> <C> <C> <C> <C> <C> <C>
L. A. Ferger, 1996 $370,922 $173,808 $26,817 $223,592 $15,980
Chairman and 1997 $396,692 $222,577 $55,052 $297,232 $39,225
Chief 1998 $408,481 $238,015 $48,850 $313,468 $35,195
Executive
Officer
Niel C. 1996 $186,846 $ 67,617 $10,604 $ 92,235 $11,985
Ellerbrook, 1997 $217,923 $ 89,271 $21,050 $114,419 $21,117
President and 1998 $284,054 $107,508 $19,658 $ 0 $21,053
Chief
Officer
Paul T. Baker, 1996 $249,308 $ 89,709 $ 8,240 $ 59,183 $13,137
Executive V.P. 1997 $257,785 $118,561 $20,134 $ 99,068 $28,991
and Chief 1998 $260,000 $123,881 $18,668 $ 0 $26,791
Operating
Officer,
Indiana Gas
Anthony E. 1996 $142,019 $ 38,104 $ 5,727 $ 54,332 $12,067
Ard, 1997 $147,477 $ 68,485 $10,678 $ 58,102 $20,037
Sr. V.P. - 1998 $149,304 $ 71,526 $ 9,421 $ 0 $19,068
Corporate
Affairs and
Secretary
Timothy M. 1996 $131,385 $ 36,680 $ 4,317 $ 43,509 $10,721
Hewitt, 1997 $136,977 $ 50,510 $ 7,577 $ 41,739 $14,662
V.P. - 1998 $143,175 $ 53,772 $ 6,810 $ 0 $15,243
Operations and
Engineering,
Indiana Gas
Carl L. 1996 $125,596 $ 36,139 $ 6,580 $ 44,143 $ 9,857
Chapman, 1997 $ 0 $ 62,519 $12,557 $ 81,664 $ 0
Assistant 1998 $ 87,115 $ 0 $ 9,768 $ 0 $ 7,406
Treasurer and
President,
Investments
(5)
</TABLE>
(1) The amounts shown in this column are payments under the Annual
Management Incentive Plan, which was discussed above in Parts B,
relating to "Annual Compensation," and C of the Compensation
Committee Report. Amounts paid in any fiscal year are attributable
to the Company's performance in the prior fiscal year. Payments
earned in fiscal year 1998 have not been determined and approved for
distribution by the Company's Compensation Committee. The Company's
performance over the last five years is depicted on page 22.
(2) The amounts shown in this column are dividends paid on
restricted shares issued under the Stock Plan, which was discussed
above in Parts B, relating to "Long-Term Incentive Compensation,"
and C of the Compensation Committee Report.
(3) The amounts shown in this column represent the value of shares
issued under the Stock Plan and for which restrictions were lifted in
each of those fiscal years. For instance, the amounts shown for
fiscal year 1997 represent the value of one-third of the Third
Measuring Period shares, including the performance grant, issued
under the Stock Plan and for which restrictions were lifted as of
September 30, 1997. For fiscal year 1998, in contemplation of
additional changes to the Stock Plan, the board of directors approved
an amendment to the Stock Plan to postpone the lapsing of the
restrictions on shares from September 30, 1998 until February 1,
1999. With the exception of L. A. Ferger, the executive officers
consented to the postponement of the lapsing of restrictions on their
respective shares; consequently, this column only reflects a value
for the issuance of shares to Mr. Ferger under the Stock Plan. The
Company's 1999 fiscal year proxy statement will reflect the postponed
lapsing of restrictions on affected shares for the respective
executive officers. After the lifting of those restrictions, the
executive officers, as a group, held 112,956 restricted shares, with
an aggregate market value of those shares as of that date of
$2,657,996. Those shares continue to be subject to restrictions
imposed by the Stock Plan, and they represent one-third of the
initial grant of the Third Measuring Period shares, and all of the
initial grants of the Fourth and Fifth Measuring Periods. The number
and value of restricted shares held by each executive officer on
September 30, 1998 (which, consistent with all other share numbers in
this proxy statement, are adjusted for the four-for-three stock
split), follows: L. A. Ferger - 41,184 shares, $969,111; Niel C.
Ellerbrook - 21,933 shares, $516,111; Paul T. Baker - 20,829 shares,
$490,132; Anthony E. Ard - 10,512 shares, $247,361; Timothy M. Hewitt
- - 7,599 shares, $178,814; and Carl L. Chapman - 10,899 shares,
$256,467.
(4) The amounts shown in this column are Company contributions to
the Retirement Savings Plan and the dollar value of insurance
premiums paid by, or on behalf of, the Company and its subsidiaries
with respect to split-dollar life insurance for the benefit of
executive officers.
(5) As explained on page 7, Mr. Chapman was not considered to be a
named executive officer of the Company from September 1996 until May
1998. Consequently, the Company did not pay Mr. Chapman a salary or
other compensation during fiscal year 1997. The amount contained in
column (d) consists of compensation earned prior to, but paid in
fiscal year 1997; the figures in columns (e) and (h) respectively
represent dividends received on restricted stock and the lifting of
restrictions on stock previously granted. Mr. Chapman's compensation
reflected in the table for fiscal year 1998, began on May 1, 1998,
when he ceased his employment with ProLiance and commenced full-time
employment as President of Investments.
<TABLE>
LONG-TERM INCENTIVE PLAN AWARDS IN LAST FISCAL YEAR
Estimated Future Payouts
Under Non-Stock Price-Based Plans
(a) (b) (c) (d) (e) (f)
Number
of
Shares, Performance
Name and Units or Other
Principal or Periods Until Threshold Target Maximum
Position in Other Maturation or Number of Number of Number of
Group Rights(1) Payout(2) Shares(3) Shares (4) Shares(5)
<S> <C> <C> <C> <C> <C>
L. A. Ferger, 3,999 - 0 3,999 7,998
Chairman and
Chief Executive
Officer
Niel C. 2,656 - 0 2,656 5,312
Ellerbrook,
President and
Chief Operating
Officer
Paul T. Baker, 1,925 - 0 1,925 3,850
Executive V.P.
and Chief
Operating
Officer, Indiana
Gas
Anthony E. Ard, 736 - 0 736 1,472
Sr. V.P. -
Corporate
Affairs and
Secretary
Timothy M. 684 - 0 684 1,368
Hewitt,
V. P. -
Operations and
Engineering,
Indiana Gas
Carl L. Chapman, 0 - 0 0 0
Assistant
Treasurer and
President,
Investments (6)
</TABLE>
(1) This column shows the restricted shares awarded during fiscal
year 1998 under the Stock Plan. The manner for determining the
awards, and other terms and conditions of the Stock Plan, are
discussed above in Part B of the Compensation Committee Report
relating to "Long-Term Incentive Compensation." The market value of
the shares on the dates of the grants is determined according to a
formula in the Stock Plan based on an average price over a period of
time preceding the grant. Dividends are paid directly to the holders
of the stock. Included is the initial grant of shares for the Fifth
Measuring Period. Please see the explanation above in footnote (3)
to the Summary Compensation Table regarding the approval of the
postponement of the lapsing of restrictions this fiscal year by the
board of directors. Accordingly, the dollar values of the respective
shares are shown in the fiscal year 1998 data in column (h) of the
Summary Compensation Table.
(2) As discussed above in Part B of the Compensation Committee
Report relating to "Long-Term Incentive Compensation," for grants
provided on or after October 1, 1997, the restrictions are lifted in
whole as of the fourth (4th) anniversary of the calendar day
immediately preceding the first calendar day of the measuring period.
The granting of additional shares, if any, and the application of
forfeiture provisions depends upon certain measurements of the
Company's total return to shareholders in comparison to the total
return to shareholders of a predetermined group of comparable
companies.
(3) The Fifth Measuring Period initial grant shares, which are
included in the total number of shares shown in column (b) and are
also set forth in column (e), are subject to forfeiture. If the
Company's performance compared to the peer group during this
measuring period places it in the bottom quartile, the executive
officers will forfeit all of the shares granted for this period.
(4) The Fifth Measuring Period initial grant shares, which are the
same as the total number of shares in column (b), are presented in
this column. If the Company's performance compared to the peer group
during this measuring period places it in the middle two quartiles,
these shares will vest.
(5) Under the Stock Plan, if the Company's performance compared to
the peer group during the Fifth Measuring Period places it in the top
quartile, an additional performance grant equal to the original Fifth
Measuring Period grant will be made. In that event, the shares shown
in column (e) will be doubled.
(6) As explained above in footnote (5) to the Summary Compensation
Table, because Mr. Chapman was not employed by the Company on a full-
time basis on October 1, 1997, he was not issued any shares under the
Stock Plan.
CORPORATE PERFORMANCE
The following Total Return to Shareholders graph compares the
performance of the Company with that of the S&P 500 Composite, the
S&P Utilities Index and a group of peer gas distribution companies,
with the return weighted based on market capitalization. The Return
on Equity graph compares the performance of the Company with the same
peer group. For fiscal year 1998, companies in the peer group are as
follows: AGL Resources Inc., Atmos Energy Corp., Bay State Gas Co.,
Cascade Natural Gas Corp., CTG Resources, Inc., Eastern Enterprises,
Energen Corp., Laclede Gas Co., MCN Energy Group, Inc. (formerly MCN
Corp.), National Fuel Gas Co., New Jersey Resources Corp., NICOR,
Inc., NW Natural, NUI Corp., Pennsylvania Enterprises, Inc., Peoples
Energy Corp., Piedmont Natural Gas Co., Inc., Public Service Co. of
North Carolina, Inc., South Jersey Industries, Inc., SEMCO Energy,
Inc., Southern Union Co., Southwest Gas Corp., Southwestern Energy
Co., UGI Corp., Washington Gas Light Co. and WICOR, Inc. The
companies to be included in the peer group were determined by one of
the Company's investment bankers and approved by the Company's
Compensation Committee.
From year to year, the Company's investment bankers review the
composition of the peer group to ensure comparability among the
member companies. If in their judgment a company is determined not
to be comparable, it will be removed from the peer group and, if
possible, replaced with a comparable company. Companies can also be
removed if they are acquired or merged out of existence. Based upon
an assessment of the comparability of the existing peer group, the
Company's investment bankers changed the peer group used for fiscal
year 1997 (the "1997 Peer Group") by removing both Pacific
Enterprises and the former KeySpan Energy Corp., which were each
merged out of existence. The following graph reflects comparisons of
total return for the Peer Group, the S&P 500 and the S&P Utilities.
Total Return to Shareholders (1) (2)
[INSERT GRAPH A]
<TABLE>
1993 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C>
IEI 0 (10.76%) 2.63% 21.02% 54.67% 69.86%
Peers 0 (11.50%) .26% 27.00% 51.75% 55.29%
S&P 500 0 3.69% 34.53% 61.88% 127.36% 147.92%
S&P Utilities 0 (13.10%) 10.88% 19.19% 36.33% 77.27%
</TABLE>
(1) The total returns on investment (change in the year-end stock
price plus reinvested dividends) for each of the periods for the
Company, the Peer Group, the S&P 500 Composite and the S&P Utilities
Index are based on the stock price or composite index at the end of
fiscal year 1993.
(2) As discussed in the "Compensation Committee Report" above, the
Stock Plan also measures the Company's total return to shareholders.
However, the Stock Plan methodology requires a determination of the
total return to shareholders of the Company and the peer group
companies by comparing a 12-month average trading price at the end of
the measuring period with a 12-month average price preceding the
measuring period. Unlike the Stock Plan methodology, the methodology
used in preparing the above performance graph requires a measurement
of the total return to shareholders of the Company and of the peer
group companies at specific points in time--activity as of September
30, 1993, compared with activity as of September 30, 1994, 1995,
1996, 1997 and 1998. Moreover, the Stock Plan also uses a three-year
measurement period versus the five-year measurement period used in
the above performance graph. Finally, the Stock Plan's measurement
of peer group companies' performance is not weighted by the
companies' relative market capitalization, while the above
performance graph does use such weighting. Because of the differences
in these two methodologies, the measurements produced by the Stock
Plan and the above performance graph will vary.
Return on Equity (1) (2) (3) (4)
[INSERT GRAPH B]
<TABLE>
1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C>
IEI 14.68% 13.00% 11.94% 14.63% 14.69%
Peers 10.34% 11.40% 9.15% 12.05% 11.51%
</TABLE>
(1) Under the Incentive Plan, payments are awarded on the basis of
the Company's average return on equity compared to that of the peer
group in any fiscal year and are paid in the first quarter of the
succeeding fiscal year. Accordingly, payments paid to executive
officers in the first quarter of fiscal year 1998 were based on the
Company's comparative return on equity during the fiscal year 1997,
and so on, back to 1988, the first year in which payments were made.
(2) For purposes of the Incentive Plan, average return on equity for
both the Company and the peer group has been computed using the
simple average of beginning and ending common shareholders' equity as
of September 30.
(3) The peer group return on equity by fiscal year reflects the peer
group for each of those years as determined by the Company's
investment bankers and approved by the Compensation Committee. See
the discussion above under "Corporate Performance."
(4) This return on equity graph reflects a 14.7 percent return on
equity figure for the Company for fiscal year 1997. As explained in
Part B of the Compensation Committee Report relating to "Annual
Compensation", Indiana Gas recognized an after-tax restructuring
charge of $24.5 million. The board of directors, with the
concurrence of its independent members, approved the restructuring
charge as a result of the restructuring of Indiana Gas' operations
for fiscal year 1997. As permitted under the Incentive Plan, on
October 31, 1997, the independent members of the board of directors
determined that the restructuring charge should be excluded when
measuring the Company's fiscal year 1997 consolidated return on
equity under the Incentive Plan. Accordingly, the return on equity
prior to the restructuring charge is included in this graph. After
the restructuring charge, the Company's consolidated return on equity
for fiscal year 1997 was 7.0 percent. This figure is included in the
return on equity graph contained in the Company's annual report.
RETIREMENT SAVINGS PLAN
During the past fiscal year, the Company sponsored the
Retirement Savings Plan which covers both bargaining and non-
bargaining employees. In general, the Savings Plan permits
participants to elect to have not more than 15 percent of their
qualified compensation (subject to certain maximums imposed on highly
compensated employees by the Internal Revenue Code) invested on a tax-
deferred basis in shares of the Company's Common Stock or various
investment funds. Non-bargaining participants in the Savings Plan
have matching Company contributions made to the plan on their behalf
equal to 100 percent of their contributions not in excess of 3
percent of their individual redirected compensation, and 50 percent
of their contributions in excess of 3 percent, but not in excess of 8
percent of their individual redirected compensation. Also, a 2.5
percent lump sum Company contribution is made to the Savings Plan for
all eligible non-bargaining employees at the end of each year.
The Summary Compensation Table shows the value of contributions
made to the plan for executive officers in the column marked "All
Other Compensation."
RETIREMENT PLANS
During the past fiscal year, the Company and Indiana Gas each
sponsored a defined benefit pension plan covering full-time employees
of the Company and certain of its subsidiaries, and of Indiana Gas,
respectively, who meet certain age and service requirements. The
Company's plan covers salaried employees, including executive
officers, and provides fixed benefits at normal retirement age based
upon compensation and length of service, the costs of which are fully
paid by the employer and are computed on an actuarial basis. The
pension plan also provides for benefits upon death, disability and
early retirement under conditions specified therein. The
remuneration covered by this plan includes all compensation for
regular work periods (excluding overtime, bonuses and other forms of
additional compensation). As of July 1, 1991, the retirement plans
maintained by Terre Haute and Richmond were merged into, and became
part of, the Indiana Gas defined benefit pension plan.
During the past fiscal year, the Company had a supplemental
pension plan covering the principal officers of the Company and its
subsidiaries. The supplemental pension plan provides fixed benefits
at normal retirement age based upon compensation and is computed on
an actuarial basis. The supplemental pension plan also provides for
benefits upon death, disability and early retirement under conditions
specified therein, including service requirements. This supplemental
pension plan also provides a reduced benefit to a participant who
voluntarily terminates his employment with a participating employer
(which may consist of the Company or one or more of its subsidiaries)
before normal retirement age (65), but following a change in control
of the Company. The remuneration covered by the supplemental pension
plan includes all compensation for regular work periods (including
incentive payments and other forms of additional compensation).
Upon retirement at or after age 65, any participant in the
supplemental pension plan will, in general, be entitled to an annual
pension for life which, when added to primary Social Security
benefits, defined benefit pension plan benefits, described above, and
benefits under the Retirement Savings Plan attributable to
contributions by participants' employers, will equal approximately 65
percent of the participant's average annual compensation during the
60 consecutive calendar months immediately preceding the
participant's retirement date. The amounts paid under the
supplemental pension plan are unfunded and are paid from the general
assets of the Company.
The following table illustrates the estimated normal annual
retirement benefits payable to a covered participant retiring at age
65 under the supplemental pension plan and under the defined benefit
plan based on the specified remuneration and under the Retirement
Savings Plan attributable to contributions made by the Company and,
as pertinent, one or more of its subsidiaries. The compensation
included in the Summary Compensation Table under salary and payments
under the annual Incentive Plan qualifies as remuneration for
purposes of these plans. The amounts shown do not reflect
reductions, which would result from joint and survivor elections.
Pension Table
15 or More Years of Service (1)
Remuneration Amount of Benefits
Level (2)
$125,000 $ 81,250
150,000 97,500
175,000 113,750
200,000 130,000
225,000 146,250
250,000 162,500
300,000 195,000
350,000 227,500
400,000 260,000
450,000 292,500
500,000 325,000
(1) The compensation covered by the plans includes the salary and
incentive payments shown on the Summary Compensation Table.
Years of service are not used in calculating the benefit amount
under the Unfunded Supplemental Retirement Plan. The amounts
shown above are offset by Social Security and benefits under the
Retirement Savings Plan attributable to contributions made by the
Company and, as pertinent, one or more of its subsidiaries.
(2) Although the benefit attributable to the Savings Plan may be
paid in a single lump sum payment, it has been converted to an
annual benefit for purposes of this table. The estimated aggregate
annual pension plan benefit may be greater than the amounts in the
table to the extent that the Savings Plan benefit, after conversion
to an annual benefit and when added to the annual benefit under the
applicable defined benefit plan, exceeds the amount specified in the
table. Since the Savings Plan has only been in effect for a few
years, it is unlikely in the near future that the aggregated Savings
Plan benefit and defined benefit plan benefits will exceed the amount
specified in the table.
EMPLOYMENT AND TERMINATION BENEFITS AGREEMENTS
The Company, with approval of the board of directors, has
entered into employment agreements with five out of the six executive
officers listed in the Summary Compensation Table. Each agreement
continues unless notice of termination is given by either party, in
which event the agreement will terminate three years from the date of
the notice. The period between notice and termination is defined as
an "employment period" under each agreement. Each officer is
entitled to compensation consisting of the annual aggregate base
salary or salaries, and such additional compensation as the board
determines throughout the employment period. Each agreement is also
subject to termination in the event of disability, death, or
voluntary retirement by the individual or his termination for cause.
The Company, with approval of the board of directors, has
entered into termination benefits agreements with each of the
executive officers listed in the Summary Compensation Table. With
the exception of Timothy M. Hewitt, the agreements provide that if
there is an acquisition of control of the Company (as defined in the
agreements), the Company is obligated to pay the termination benefits
under the following conditions:
Within three years the Company terminates the employment of the
executive for any reason (other than cause, death, the executive's
attainment of age 65, or the executive's total and permanent
disability); or
Within three years the executive voluntarily terminates his
employment for good reason (i.e., certain material changes in the
terms of the executive's employment); or
The executive voluntarily terminates his employment without
reason during the 30-day period immediately following the first
anniversary of the acquisition of control.
The termination benefits payment is the executive's average annual
compensation for the most recent five calendar years multiplied by
299.99%. The initial term of the agreements expires on October 1,
2002 and shall be automatically extended for one year periods unless
the Company notifies the executive prior to October 1 of each
succeeding year that the Agreement will terminate at the end of the
five year period that begins with October 1 following the date of
such written notice. The agreement with Mr. Hewitt is comparable to
the agreements described above, except that the provisions of Mr.
Hewitt's agreement, including the termination benefits payment, are
predicated upon the use of one year rather than three years.
INDEPENDENT PUBLIC ACCOUNTANTS OF THE COMPANY
Arthur Andersen, L.L.P., Indianapolis, has been selected by the
board of directors as the independent public accountants of the
Company and its subsidiaries for fiscal year 1999. The selection was
made upon the recommendation of the Audit Committee of the board of
directors. See "Meetings and Committees of the Board of Directors."
Arthur Andersen, L.L.P. has served as auditors for the Company since
1986 and for Indiana Gas since its organization in 1945. A
representative of that firm will be present at the annual meeting,
will have the opportunity to make a statement and will be available
to respond to questions.
COST AND METHOD OF SOLICITATION
The cost of preparing, assembling, printing and mailing this
proxy statement, the enclosed proxy and any other material which may
be furnished to shareholders in connection with the solicitation of
proxies for the meeting will be borne by the Company. The Company
has retained Corporate Investor Communications, Inc. to assist in
soliciting proxies from shareholders, including brokers' accounts, at
an estimated fee of $5,000 plus reasonable out-of-pocket expenses.
In addition, some of the officers and regular employees of the
Company, who will receive no compensation therefor in addition to
their regular salaries, may solicit proxies by telephone, telegraph
or personal visits, and it is estimated that the cost of such
additional solicitation, if any, will not exceed $500, and will be
borne by the Company. The Company expects to reimburse banks,
brokerage houses and other custodians of stock for their reasonable
charges and expenses in forwarding proxy material to beneficial
owners.
ANNUAL REPORT
A copy of the Company's annual report, including consolidated
financial statements for the fiscal year ended September 30, 1998,
was mailed to shareholders on or about December 4, 1998.
REVOCATION RIGHTS
A shareholder executing and delivering the enclosed proxy may
revoke it by written notice delivered to the secretary of the
Company, or in person at the annual meeting, at any time before the
authority granted by it is exercised.
NOMINATION OF DIRECTORS BY SHAREHOLDERS
If a shareholder entitled to vote for the election of directors
at a shareholders' meeting desires to nominate a person for election
to the board of directors of the Company, pursuant to the Company's
By-Laws, any such nominations must be made pursuant to notice
delivered to, or mailed and received at, the principal office of the
Company, not less than 50 days nor more than 90 days prior to the
meeting. However, in the event that less than 60 days' notice of the
meeting is given, the shareholder's notice must be received not later
than the tenth day following the date of notice of the meeting. Such
shareholder's notice must set forth, in addition to the name and
address of the shareholder submitting the nomination, as to each
person whom the shareholder proposes to nominate for election or re-
election as a director: (i) the name, age, business address and
residence address of such person, (ii) the principal occupation or
employment of such person, (iii) the class and number of shares of
the Company which are beneficially owned by such person, (iv) any
other information relating to such person that is required to be
disclosed in the solicitation of proxies for election of directors,
or is otherwise required, in each case pursuant to Regulation 14A
under the Securities Exchange Act of 1934, as amended (including,
without limitation, such person's written consent to be named in the
proxy statement as a nominee and to serve as a director, if elected),
and (v) the qualifications of the nominee to serve as a director of
the Company.
SHAREHOLDERS' PROPOSALS FOR 2000 ANNUAL MEETING
Under Rule 14a-8 of the Securities Exchange Act of 1934,
shareholders of the Company may present proper proposals for
inclusion in the Company's proxy statement and for consideration at
the 2000 annual meeting of its shareholders by submitting their
proposals to the Company in a timely manner. In order to be so
included for the 2000 annual meeting, shareholder proposals must be
received at the Company's principal office, 1630 North Meridian
Street, Indianapolis, Indiana 46202-1496, Attention: Corporate
Secretary, no later than August 6, 1999, and must otherwise comply
with the requirements of Rule 14a-8.
If a shareholder desires to bring business before the meeting
which is not the subject of a proposal timely submitted for inclusion
in the proxy statement, the shareholder must follow procedures
outlined in the Company's Code of By-Laws. A copy of these
procedures is available upon request from the Corporate Secretary at
the address referenced above. One of the procedural requirements in
the Company's Code of By-Laws is timely notice in writing of the
business the shareholder proposes to bring before the meeting. To be
timely a shareholder's notice must be delivered to, or mailed and
received at, the principal office of the Company not less than 50
days nor more than 90 days prior to the meeting, provided, however,
that if less than 60 days' notice of the meeting date is given,
notice by the shareholder must be so received by the Company not
later than the tenth day following the day on which the notice is
given. In addition, if the Company does not receive the
shareholder's notice within the time period described above, the
proxies designated by the board of directors for that meeting may
vote in their discretion on any such proposal any shares for which
they have been appointed proxies without mention of such matter in
the Company's proxy statement or on the proxy card for such meeting.
By order of the board of directors.
INDIANA ENERGY, INC.
/s/ Anthony E. Ard
By ANTHONY E. ARD
Secretary and Senior Vice President-Corporate Affairs
Indianapolis, Indiana
December 4, 1998
Please fill in, date and sign the enclosed proxy and return it
in the accompanying addressed envelope. No further postage is required
if mailed in the United States. If you attend the annual meeting and
wish to vote your shares in person, you may do so. Your cooperation
in giving this matter your prompt attention will be appreciated.
