SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to __________
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Commission Registrant; State of Incorporation; IRS Employer
File Number Address and Telephone Number Identification No.
1-11603 SIGCORP, Inc. 35-1940620
(An Indiana Corporation)
20 N. W. Fourth Street
Evansville, Indiana 47741-0001
(812) 465-5300
1-3553 Southern Indiana Gas and
Electric Company 35-0672570
(An Indiana Corporation)
20 N. W. Fourth Street
Evansville, Indiana 47741-0001
(812) 465-5300
</TABLE>
Securities registered pursuant to Section 12(b) of the Act:
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Name of each exchange
Registrant Title of each class on which registered
SIGCORP, Inc. Common Stock, Without Par Value New York Stock Exchange
Rights to Purchase Common Stock New York Stock Exchange
Southern Indiana
Gas and None
Electric Company
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Securities registered pursuant to Section 12(g) of the Act:
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Name of each exchange
Registrant Title of each class on which registered
SIGCORP, Inc. None
Southern Indiana
Gas and Cumulative Preferred Stock, New York Stock Exchange
Electric Co. $100 Par Value
</TABLE>
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained
herein, and will not be contained, to the best of
registrants' 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.
Indicate by check mark whether all Registrants (1) have
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
registrants were required to file such reports), and (2)
have been subject to such filing requirements for the past
90 days: Yes X No
At February 27, 1998, the aggregate market values of
SIGCORP, Inc. Common Stock, Without Par Value, and Southern
Indiana Gas and Electric Company Cumulative Preferred Stock,
$100 Par Value, 185,895 shares, held by non-affiliates were
$682,450,804 and $16,334,756, respectively.
As of February 27, 1998, the number of shares outstanding of
each of the Registrants' classes of common stock were:
SIGCORP, Inc.: Common stock, no par value, 23,630,568
shares
Southern Indiana Gas
and Electric Company: Common stock, no par value,
23,630,568 shares outstanding and held by SIGCORP, Inc.
Documents Incorporated by Reference
The Joint Proxy Statement of SIGCORP, Inc. and Southern
Indiana Gas and Electric Company dated March 23, 1998 is
incorporated by reference into Part III of this report.
This combined Form 10-K is separately filed by SIGCORP, Inc.
and Southern Indiana Gas and Electric Company.
<PAGE> 3
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Table of Contents
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Item Page
Number Number
Part I
1 Business 4
2 Properties 15
3 Legal Proceedings 15
4 Submission of Matters to Vote of Security Holders 15
Part II
5 Market for Registrant's Common Equity
and Related Security Holder Matters 16
6 Selected Financial Data 17
7 Management's Discussion and Analysis of Results
of Operations and Financial Condition 18
8 Financial Statements and Supplementary Data 26
9 Disagreements on Accounting and Financial
Disclosure 61
Part III
10 Directors and Executive Officers of
the Registrants 61
11 Executive Compensation and Transactions 61
12 Security Ownership of Certain Beneficial
Owners and Management 61
13 Certain Relationships and Related
Transactions 62
Part IV
14 Exhibits, Financial Statement Schedules and
Reports on Form 8-K 62
15 Subsidiaries of the Registrant 68
16 Signatures 69
</TABLE>
<PAGE> 4
PART I
Item 1. BUSINESS
SIGCORP and SIGECO
ORGANIZATION
SIGCORP, Inc. (SIGCORP) is a holding company incorporated
October 19, 1994 under the laws of the State of Indiana.
SIGCORP has ten wholly-owned subsidiaries: Southern Indiana
Gas and Electric Company (SIGECO), a gas and electric
utility, and nine nonregulated subsidiaries.
On December 20, 1994, SIGECO's Board of Directors
authorized the steps required for a corporate reorganization
in which a holding company would become the parent of
SIGECO. SIGECO's shareholders approved the reorganization
at SIGECO's March 28, 1995 annual meeting, and approval by
the Federal Energy Regulatory Commission and the Securities
and Exchange Commission was granted November 7, 1995 and
December 14, 1995, respectively.
Effective January 1, 1996, the new holding company,
SIGCORP, became the parent of SIGECO, which accounts for
over 90% of SIGCORP's net income, and four of SIGECO's
former wholly-owned nonregulated subsidiaries: Energy
Systems Group, Inc., Southern Indiana Minerals, Inc.,
Southern Indiana Properties, Inc. and ComSource, Inc. All
of the shares of SIGECO's common stock were exchanged on a
one-for-one basis for shares of SIGCORP, while all of
SIGECO's debt securities and all of its outstanding shares
of preferred stock remained securities of SIGECO and were
unaffected. (See "Nonregulated Subsidiaries - General" and
Note 1 of the Notes to Consolidated Financial Statements,
page 43, for further discussion.)
The reorganization was in response to the changes created
in the electric industry by the Energy Policy Act of 1992
and the need to respond quickly to the more competitive
business environment. The new structure buffers SIGECO and
its customers from the effects of pursuing nonregulated
opportunities while allowing SIGCORP to engage in closely
related, but historically nonregulated, businesses.
Providing gas and electric utility service to customers
through SIGECO remains the core business and primary focus
of SIGCORP.
SIGECO - GENERAL
SIGECO is an operating public utility incorporated June
10, 1912, under the laws of the State of Indiana, engaged in
the generation, transmission, distribution and sale of
electric energy and the purchase of natural gas and its
transportation, distribution and sale in a service area
which covers ten counties in southwestern Indiana.
Electric service is supplied directly to Evansville and
74 other cities, towns and communities, and adjacent rural
areas. Wholesale electric service is supplied to an
additional eight communities. At December 31, 1997, SIGECO
served 122,937 electric customers and was also obligated to
provide for firm power commitments to the City of Jasper,
Indiana and to maintain spinning reserve margin requirements
under an agreement with the East Central Area Reliability
Group (ECAR).
At December 31, 1997, SIGECO supplied gas service to
107,278 customers in Evansville and 64 other nearby
communities and their environs. Since 1986, SIGECO has
purchased its natural gas supply requirements from numerous
suppliers. During 1997, forty-five suppliers were used.
Until November 1993, Texas Gas Transmission Corporation
(TGTC) was SIGECO's primary contract supplier. In November
1993, TGTC restructured its services so that its gas
supplies would be sold separately from its interstate
transportation services, and SIGECO assumed full
responsibility for the purchase of all its natural gas
supplies.
The principal industries served by SIGECO include
polycarbonate resin (Lexan) and plastic products, aluminum
smelting and recycling, aluminum sheet products, appliance
manufacturing, pharmaceutical and nutritional products,
automotive glass, gasoline and oil products and coal mining.
<PAGE> 5
The only property SIGECO owns outside of Indiana is
approximately eight miles of a 138,000 volt electric
transmission line which is located in Kentucky and which
interconnects with Louisville Gas and Electric Company's
transmission system at Cloverport, Kentucky. The original
cost of the property is less than $425,000. SIGECO does not
distribute any electric energy in Kentucky.
SIGECO - LINES OF BUSINESS
The percentages of operating revenues and operating
income before income taxes attributable to the electric and
gas operations of SIGECO for the five years ended December
31, 1997, were as follows:
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Year Ended December 31,
1993 1994 1995 1996 1997
Operating Revenues:
Electric 78.4% 79.1% 81.3% 74.2% 76.1%
Gas 21.6 20.9 18.7 25.8 23.9
Operating Income Before Income Taxes:
Electric 99.5% 90.9% 96.4% 89.0% 87.1%
Gas 0.5 9.1 3.6 11.0 12.9
</TABLE>
Reference is made to Note 11 of the Notes to Consolidated
Financial Statements, page 57, for Segments of Business
data.
SIGECO - ELECTRIC BUSINESS
SIGECO supplies electric service to 122,937 customers,
including 107,046 residential, 15,692 commercial, 176
industrial, 19 public street and highway lighting, and four
municipal customers.
SIGECO's installed generating capacity as of December 31,
1997 was rated at 1,236,000 kilowatts (Kw). Coal-fired
generating units provide 1,021,000 Kw of capacity and gas or
oil-fired turbines used for peaking or emergency conditions
provide 215,000 Kw.
In addition, SIGECO has interconnections with Louisville
Gas and Electric Company, Cinergy Services, Inc.,
Indianapolis Power & Light Company, Hoosier Energy Rural
Electric Cooperative, Inc., Big Rivers Electric
Corporation, Wabash Valley Power Association, and the City
of Jasper, providing an ability to simultaneously
interchange approximately 750,000 Kw.
Record-breaking peak conditions occurred on July 14,
1997, when SIGECO's system summer peak load reached
1,022,700 Kw. SIGECO's total load, including its firm power
commitments to the City of Jasper, Indiana, for each of the
years 1993 through 1997 at the time of the system summer
peak, and the related reserve margin, are presented below.
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Date of Summer Peak
Load 7-28-93 7-20-94 8-17-95 8-21-96 7-14-97
Company System Peak
Load (Kw) 1,012,700 992,000 1,021,000 999,800 1,022,700
Firm Power Commit-
ments at Peak 55,300 42,000 60,800 53,500 63,700
Total at Peak 1,068,000 1,034,000 1,081,800 1,053,300 1,086,400
Total Generating
Capability (Kw) 1,238,000 1,238,000 1,236,000 1,236,000 1,236,000
Reserve Margin at Peak 16% 20% 14% 17% 14%
</TABLE>
<PAGE> 6
An all-time record winter peak load of 823,700 Kw
occurred during the 1996-1997 season on January 14, 1997,
and was 5.2% greater than the previous winter peak of
783,700 Kw reached on February 2, 1996.
SIGECO, primarily as agent of Alcoa Generating
Corporation (AGC), operates the Warrick Generating Station,
a coal-fired steam electric plant which interconnects with
SIGECO's system and provides power for the Aluminum Company
of America's Warrick Operations, which includes aluminum
smelting and fabricating facilities. Of the four turbine
generators at the plant, Warrick Units 1, 2 and 3, with a
capacity of 144,000 Kw each, are owned by AGC. Warrick Unit
4, with a rated capacity of 270,000 Kw, is owned by SIGECO
and AGC as tenants in common, each having shared equally in
the cost of construction and sharing equally in the cost of
operation and in the output.
SIGECO (a summer peaking utility) has an agreement with
Hoosier Energy Rural Electric Cooperative, Inc. (Hoosier
Energy) for the sale of firm peaking power to Hoosier Energy
during the annual winter heating season (November 15-March
15). The contract made available 200 Mw during the 1997-1998
winter season, and allows for a possible increase to
250 Mw by November 15, 1998. The contract will terminate
March 15, 2000.
Electric generation for 1997 was fueled by coal (99.4%)
and natural gas (0.6%). Oil was used only for testing of
gas/oil fired peaking units.
Historically, coal for SIGECO's Culley Generating Station
and Warrick Unit 4 has been purchased from operators of
nearby Indiana strip mines pursuant to long-term contracts.
During 1991, SIGECO pursued negotiations for new contracts
with these mine operators and while doing so, purchased coal
from the respective operators under interim agreements. In
October 1992, SIGECO finalized a new supply agreement
effective through 1995 and retroactive to 1991, with one of
the operators under which coal was supplied to both
locations. Included in the agreement was a provision
whereby the contract could be reopened by SIGECO for
modification of certain coal specifications. In early 1993,
SIGECO reopened the contract for such modifications.
Effective July 1, 1993, SIGECO bought out the remainder of
its contractual obligations with the supplier, enabling
SIGECO to acquire lower-priced spot market coal. SIGECO
estimated the savings in coal costs during the 1991-1995
period, net of the total buy out costs, approximated $59
million. The net savings were passed back to SIGECO's
electric customers through the fuel adjustment clause. The
coal supplier retained the right of first refusal to supply
Warrick Unit 4 and the Culley plant during the years 1996-2000.
The coal used in these plants is blended, when
necessary, to meet specifications set in conformance with
the requirements of the Indiana State Implementation Plan
for sulfur dioxide issued under Federal laws regulating air
quality (Clean Air Act). Approximately 1,453,000 tons of
coal were used during 1997 in the generation of electricity
at the Culley Station and Warrick Unit 4. Culley Units 2
and 3 were recently equipped with flue gas desulfurization
equipment as part of the Clean Air Act Compliance Plan.
(See "Environmental Matters", page 11, for further
discussion.) SIGECO's remaining long-term contract coal
supplier supplied the A. B. Brown Generating Station. On
April 10, 1995, SIGECO reached an agreement with this coal
supplier, effective July 16, 1995, to buy out the remainder
of SIGECO's contractual obligations, enabling it to acquire
lower-priced spot market coal for all coal-fired generation.
SIGECO estimates the total savings in coal costs resulting
from the buyout, net of total buyout costs, will approximate
$58 million through December 31, 1998, the term of the
original contract. The net savings from this coal contract
renegotiation are also being passed back to SIGECO's
electric customers through the fuel adjustment clause. The
amount of coal burned at A. B. Brown Generating Station
during 1997 was approximately 1,401,000 tons. Both units at
the generating station are equipped with flue gas
desulfurization equipment so that coal with a higher sulfur
content can be used. There are substantial coal reserves in
the southern Indiana area. (See "SIGCORP Fuels, Inc." in
Item 7, MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION, page 23, for discussion
of a new coal supply initiative.) The average cost
(including contract buyout costs) of coal consumed in
generating electrical energy for the years 1993 through 1997
was as follows:
<PAGE> 7
Average Cost
Average Cost Average Cost Per Kwh
Year Per Ton Per MMBTU (In Mills)
1993 $ 32.56 $ 1.46 15.66
1994 31.86 1.42 14.91
1995 30.02 1.33 14.10
1996 26.01 1.16 12.40
1997 20.75 0.91 9.80
The Broadway Turbine Units 1 and 2, Northeast Gas
Turbines and A. B. Brown Gas Turbine, when used for peaking,
reserve or emergency purposes, use natural gas for fuel.
Number 2 fuel oil can also be used in the Broadway Turbine
Units and the Brown Gas Turbine.
All metered electric rates contain a provision for
adjustment in charges for electric energy to reflect changes
in the cost of fuel and the net energy cost of purchased
power through the operation of a fuel adjustment clause
unless certain criteria contained in the regulations are not
met. Effective April 26, 1995, the principal restriction to
recovery of fuel cost increases is that such recovery is not
allowed to the extent that total operating income for the
60-month period including the twelve-month period provided
in the fuel cost adjustment filing exceeds the total
operating income authorized by the Indiana Utility
Regulatory Commission (IURC) during the same 60-month
period. Prior to April 26, 1995, the operating income test
period was the twelve-month period provided in the fuel cost
adjustment filing. During 1995-1997, neither restriction
affected SIGECO. As prescribed by order of the IURC, the
adjustment factor is calculated based on the estimated cost
of fuel and the net energy cost of purchased power in a
designated future quarter. The order also provides that any
over- or underrecovery caused by variances between estimated
and actual cost in a given quarter will be included in the
second succeeding quarter's adjustment factor. This
continuous reconciliation of estimated incremental fuel
costs billed with actual incremental fuel costs incurred
closely matches revenues to expenses.
See "Rate and Regulatory Matters" in Item 7, MANAGEMENT'S
DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION, page 20, and Note 2 of the Notes to
Consolidated Financial Statements, page 50, for discussion
of SIGECO's general adjustments in electric rates.
SIGECO participates in research and development in which
the primary goal is cost savings through the use of new
technologies. This is accomplished, in part, through the
efforts of the Electric Power Research Institute (EPRI). In
1997, SIGECO paid $761,000 to EPRI to help fund research and
development programs such as advanced clean coal burning
technology.
SIGECO is participating with 14 other electric utility
companies through Ohio Valley Electric Corporation (OVEC) in
arrangements with the United States Department of Energy
(DOE), to supply the power requirements of the DOE plant
near Portsmouth, Ohio. The sponsoring companies are
entitled to receive from OVEC, and are obligated to pay for,
any available power in excess of the DOE contract demand.
The proceeds from the sale of power by OVEC are designed to
be sufficient to meet all of its costs and to provide for a
return on its common stock. During 1997, SIGECO's
participation in the OVEC arrangements was 1.5%.
SIGECO participates with 32 other utilities and other
affiliated groups located in eight states comprising the
east central area of the United States, in the East Central
Area Reliability group, the purpose of which is to
strengthen the area's electric power supply reliability.
SIGECO - GAS BUSINESS
SIGECO supplies natural gas service to 107,278 customers,
including 97,671 residential, 9,386 commercial and 222
industrial customers, through 2,870 miles of gas
transmission and distribution lines.
<PAGE> 8
SIGECO owns and operates three underground gas storage
fields with an estimated ready delivery from storage of 3.9
million Dth of gas. Natural gas purchased from SIGECO's
suppliers is injected into these storage fields during
periods of light demand which are typically periods of lower
prices. The injected gas is then available to supplement
the contracted volumes during periods of peak requirements.
It is estimated that approximately 119,000 Dth of gas per
day can be withdrawn from the three storage fields during
peak demand periods on the system.
The gas procurement practices of SIGECO and several of
its major customers have been altered significantly during
the past twelve years as a result of changes in the natural
gas industry. In 1985 and prior years, SIGECO purchased
nearly its entire gas requirements from TGTC compared to
1997 when a total of 45 suppliers sold gas to SIGECO. In
total, SIGECO purchased 16,262,033 Dth in 1997. In November
1993, TGTC restructured its services so that its gas
supplies would be sold separately from its interstate
transportation services, and SIGECO assumed full
responsibility for the purchase of all its natural gas
supplies. During 1997, forty-nine of SIGECO's major gas
customers utilized SIGECO's gas transportation program to
procure a portion of their gas supply needs from suppliers
other than SIGECO. A total of 14,548,909 Dth, 50% of total
gas throughput, was transported for these major customers in
1997 compared to 11,801,376 Dth transported in 1996. SIGECO
receives fees for the use of its facilities in transporting
such gas.
See "Rate and Regulatory Matters" in Item 7, MANAGEMENT'S
DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION, page 20, for discussion of SIGECO's
general adjustment in gas rates during 1996.
The all-time record send out occurred during the 1993-1994
winter season on January 18, 1994, when 247,449 Dth of
gas were delivered to SIGECO's customers. Of this amount,
97,946 Dth was purchased, 106,558 Dth was taken out of
SIGECO's three underground storage fields, and 42,945 Dth
was transported to customers under transportation
agreements. The 1996-1997 winter season peak day send out
was 193,103 Dth on December 5, 1997.
The average cost per Dth of gas purchased by SIGECO
during the past five calendar years was as follows: 1993,
$2.85; 1994, $2.54; 1995, $2.48; 1996, $3.47; and 1997,
$3.25.
The State of Indiana has established procedures which
result in SIGECO passing on to its customers the changes in
the cost of gas sold unless certain criteria contained in
the regulations are not met. Effective April 26, 1995, the
principal restriction to recovery of gas cost increases is
that such recovery is not allowed to the extent that total
operating income for the 60-month period including the
twelve-month period provided in the gas cost adjustment
filing exceeds the total operating income authorized by the
IURC during the same 60-month period. Prior to April 26,
1995, the operating income test period was the twelve-month
period provided in the gas cost adjustment filing. During
1995-1997, neither restriction affected SIGECO.
Additionally, these procedures provide for scheduled
quarterly filings and IURC hearings to establish the amount
of price adjustments for a designated future quarter. The
procedures also provide for inclusion in a later quarter of
any variances between estimated and actual costs of gas sold
in a given quarter. This reconciliation process with regard
to changes in the cost of gas sold closely matches revenues
to expenses. SIGECO's rate structure does not include a
weather normalization-type clause whereby a utility would be
authorized to recover the gross margin on sales established
in its last general rate case, regardless of actual weather
patterns.
Natural gas research is supported by SIGECO through the
Gas Research Institute in cooperation with the American Gas
Association. Since passage of the Natural Gas Act of 1978,
a major effort has gone into promoting gas exploration by
both conventional and unconventional sources. Efforts
continue through various projects to extract gas from tight
gas sands, shale and coal. Research is also directed toward
the areas of conservation, safety and the environment.
<PAGE> 9
SIGCORP
NONREGULATED SUBSIDIARIES - GENERAL
In addition to its wholly-owned utility subsidiary,
SIGECO, SIGCORP has nine wholly-owned nonutility
subsidiaries, of which eight were active by December 1997.
Southern Indiana Properties, Inc., formed in 1986, invests
in leveraged leases of real estate and equipment, real
estate partnerships and joint ventures and private placement
subordinated debt instruments. Energy Systems Group, Inc.,
incorporated in April 1994, has a one-third ownership in
Energy Systems Group, LLC, an energy-related performance
contracting firm serving industrial and commercial
customers. Southern Indiana Minerals, Inc., incorporated in
May 1994, processes and markets coal combustion by-products.
ComSource, Inc., incorporated in June 1995, markets
telecommunications services. SIGCORP Energy Services, Inc.,
incorporated in October 1996, was established to market
energy and related services and currently provides natural
gas, pipeline management, storage service and other natural
gas-related services to SIGECO and other customers. SIGCORP
Capital, Inc., also incorporated in October 1996, is the
primary financing vehicle for SIGCORP's nonregulated
subsidiaries. SIGCORP Fuels, Inc., incorporated in December
1996, was formed to provide coal and related services to
SIGECO and other customers. SIGCORP Power Marketing, Inc.,
also incorporated in December 1996, but not yet active, was
formed to procure electric power supplies for SIGECO and
other customers, and will market SIGECO's excess electric
generation capacity. SIGCORP Communications Services, Inc.,
incorporated in August 1997, was formed to undertake
telecommunications related strategic initiatives. (See Note
1 of the Notes to Consolidated Financial Statements, page
43, for further discussion.)
SIGCORP and SIGECO
PERSONNEL
The holding company, SIGCORP, had no employees as of
December 31, 1997.
SIGECO's network of gas and electric operations directly
involves 788 employees with an additional 160 employed at
Alcoa's Warrick Power Plant. Alcoa reimburses SIGECO for
the entire cost of the payroll and associated benefits at
the Warrick Plant, with the exception of one-half of the
payroll costs and benefits allocated to Warrick Unit 4,
which is jointly owned by SIGECO and Alcoa. The total
payroll and benefits for SIGECO employees in 1997 (including
all Warrick Plant employees) were $54.6 million. In 1996,
total payroll and benefits were $53.4 million.
On July 1, 1994, SIGECO signed a new four-year contract
with Local 702 of the International Brotherhood of
Electrical Workers. The contract provides for annual wage
increases of 3.5%, 3.5%, 3.75% and 4.0%. Improvements in
productivity, work practices and the pension plan are also
included, along with initiatives to increase
labor/management cooperation. Additionally, SIGECO's
Hoosier Division signed a five-year labor contract with
Local 135 of the Teamsters, Chauffeurs, Warehousemen and
Helpers. The contract provides for annual wage increases of
3.5%, 3.5%, 3.75%, 4.0% and 4.0%. Also included are
improvements in health care coverage costs and pension
benefits.
As of December 31, 1997, Southern Indiana Properties,
Inc. had 2 employees; Energy Systems Group, Inc. had 18
employees; Southern Indiana Minerals, Inc. had 8 employees;
ComSource, Inc. had 14 employees; SIGCORP Energy Services,
Inc. had 9 employees; SIGCORP Communications, Inc. had 3
employees; and SIGCORP Fuels, Inc. had 2 employees. SIGCORP
Capital, Inc. and SIGCORP Power Marketing, Inc. had no
employees as of December 31, 1997. There were no labor
organizations representing employees of the nonregulated
entities.
CONSTRUCTION PROGRAM AND FINANCING
SIGCORP's demand for capital is primarily related to
SIGECO's construction of utility plant and equipment
necessary to meet customers' electric and gas energy needs,
as well as environmental compliance requirements. See
"Liquidity and Capital Resources" in Item 7, MANAGEMENT'S
DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
<PAGE> 10
AND FINANCIAL CONDITION, page 24, for discussion of
construction expenditures and financing during 1997.
For 1998, SIGECO's construction expenditures are
presently estimated to be $70 million. Expenditures in the
power production area are expected to total $25.2 million.
The balance of the 1998 construction program consists of
$20.3 million for additions and improvements to other
electric system facilities, $10 million for additions and
improvements to the gas system, $13.3 million for several
strategic information systems and for common utility plant
buildings and equipment, and $1.2 million for demand side
management (DSM) programs.
In keeping with SIGECO's objective to bring new
facilities on line as needed, the construction program and
amount of scheduled expenditures are reviewed periodically
to factor in load growth projections, system planning
requirements, environmental compliance and other
considerations. As a result of this program of periodic
review, construction expenditures may change in the future
from the program as presented herein.
Currently it is estimated that SIGECO's construction
expenditures will total about $315 million, including
allowance for funds used during construction, for the years
1998-2002 as follows: 1998 - $70 million; 1999 - $63
million; 2000 - $60 million; 2001 - $56 million and 2002 -
$66 million. This construction program reflects
approximately $14.5 million for the design and
implementation of several comprehensive information systems
initiated in 1996 and $4.5 million for DSM programs, but
excludes construction expenditures that may be required to
comply with new federal Environmental Protection Agency
(EPA) air quality standards discussed under "Environmental
Matters." While SIGCORP expects the majority of SIGECO's
construction requirements to be provided by internally
generated funds, external financing requirements of $60-70
million are anticipated and will be used primarily to redeem
an estimated $57 million of the total $65.6 million of
SIGCORP long-term debt redemptions anticipated during the
five year period.
REGULATION
Because of its ownership of SIGECO, SIGCORP is a "Holding
Company" as defined by the Public Utility Holding Company
Act of 1935 (PUHCA). Furthermore, SIGECO is also a "Holding
Company" as defined by PUHCA due to SIGECO's ownership of
33% of Community Natural Gas Company. Both SIGCORP and
SIGECO are exempt from regulation under the PUHCA except for
the provisions of Section 9(A)(2), which pertain to
acquisitions of other utilities.
Operating as a public utility under the laws of Indiana,
SIGECO is subject to regulation by the Indiana Utility
Regulatory Commission as to its rates, services, accounts,
depreciation, issuance of securities, acquisitions and sale
of utility properties or securities, and in other respects
as provided by the laws of Indiana. See subsequent
discussion under "Competition" regarding the restructuring
of the electric utility industry and possible deregulation
of certain segments or functions of electric utility
service.
In addition, SIGECO is subject to regulation by the
Federal Energy Regulatory Commission with respect to the
sale and transmission of electric energy in interstate
commerce, its rates for sales for resale, interconnection
agreements with other utilities, the classification of its
accounts and the acquisition and sale of utility property in
certain circumstances as provided by the Federal Power Act.
See "SIGECO-Electric Business", page 5 and "SIGECO-Gas
Business", page 7 for further discussion regarding
regulatory matters.
SIGECO is subject to regulations issued pursuant to
federal and state laws, pertaining to air and water
pollution control. The economic impact of compliance with
these laws and regulations is substantial, as discussed in
detail under "Environmental Matters." SIGECO is also
subject to multiple regulations issued by both federal and
state commissions under the Federal Public Utility
Regulatory Policies Act of 1978.
<PAGE> 11
COMPETITION
As part of its efforts to develop a national energy
strategy, Congress amended PUHCA and the Federal Power Act
by enacting the National Energy Policy Act of 1992 (NEPA),
which will affect the traditional structure of the electric
utility industry. As a result of changes brought about by
NEPA, SIGECO competes with other utilities and wholesale
generators for sales of electricity to existing wholesale
customers of SIGECO and other potential wholesale customers.
SIGECO currently competes with other utilities in connection
with intersystem bulk power sales. SIGECO does not
presently compete for retail electric or gas customers with
the other utilities within its assigned service areas.
However, various federal and state legislators, including
members of the Indiana General Assembly, have introduced
proposed legislation addressing retail wheeling and other
related issues. Under the proposed legislation, the
electric generation function (and the marketing function
under some proposals) would be subject to competition and
deregulated, while other functions such as transmitting and
distributing power, would continue to be regulated. See
"Competition" in Item 7, MANAGEMENT'S DISCUSSION AND
ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION,
page 21, for discussion of the major changes effected by
NEPA and FERC Orders 888 and 889, issued during 1996; the
status of related recently proposed Indiana legislation; and
further discussion of the deregulation of the electric
industry and possible further deregulation of the natural
gas industry.
Some of SIGECO's gas customers have, or in the future
could acquire, access to energy sources other than those
available through SIGECO. (See "SIGECO-Gas Business", page
7, for discussion of gas transportation.) Although federal
statute allows for bypass of a local distribution company,
Indiana law disallows bypass in most cases and SIGECO would
likely litigate such an attempt in the Indiana courts.
There is also increasing interest in research on the
development of sources of energy other than those in general
use. Such competition from other energy sources has not
been a material factor to SIGECO in the past. SIGECO is
unable, however, to predict the extent of competition in the
future or its potential effect on SIGECO's operations.
ENVIRONMENTAL MATTERS
Testing of five of the six sites utilized for the
manufacture of gas by predecessors of SIGECO was
substantially completed in 1995. The sixth, and last, site
is currently being investigated. Under current regulations,
no remedial action is necessary or required unless the soil
is disturbed. If remediation efforts are required in the
future, SIGECO estimates the related costs would not exceed
$350,000 on a current basis. At the present time, SIGECO
does not anticipate that remediation efforts will be
required at any of these sites and therefore has not
provided for such costs. If, however, significant remedial
action is required on the sixth, or any other sites, SIGECO
will seek recovery of all related costs in excess of amounts
recovered from other potentially responsible parties or
insurance carriers, through rates. SIGECO has not been
named a potentially responsible party by the federal EPA for
these, or any other, sites.
SIGECO is subject to federal, state and local regulations
with respect to environmental matters, principally air,
solid waste and water quality. Pursuant to environmental
regulations, SIGECO is required to obtain operating permits
for the electric generating plants which it owns or operates
and construction permits for any new plants which it might
propose to build. Regulations concerning air quality
establish standards with respect to both ambient air quality
and emissions from SIGECO's facilities, including
particulate matter, sulfur dioxide and nitrogen oxides.
Regulations concerning water quality establish standards
relating to intake and discharge of water from SIGECO's
facilities, including water used for cooling purposes in
electric generating facilities. Because of the scope and
complexity of these regulations, SIGECO is unable to predict
the ultimate effect of such regulations on its future
operations, nor is it possible to predict what other
regulations may be adopted in the future. SIGECO intends to
comply with all applicable valid governmental regulations,
but will contest any regulation it deems to be unreasonable
or impossible to comply with or which is otherwise invalid.
The implementation of federal and state regulations
designed to protect the environment, including those
hereinafter referred to, involves or may involve review,
certification or issuance of permits by federal and state
agencies. Compliance with such regulations may limit or
prevent certain operations or substantially increase the
cost of operation of
<PAGE> 12
existing and future generating installations, as well as
seriously delay or increase the cost of future construction.
Such compliance may also require substantial investments
above those amounts stated under "Construction Program and
Financing", page 9.
All existing SIGECO electric generation facilities have
operating permits from the Indiana Department of
Environmental Management or other agencies having
jurisdiction. In order to secure approval for these
permits, SIGECO had installed electrostatic precipitators on
all coal-fired units and is operating flue gas
desulfurization (FGD) units to remove sulfur dioxide from
the flue gas at its A. B. Brown Units 1 and 2 generating
facilities. The FGD units at the Brown Station remove most
of the sulfur dioxide from the flue gas emissions by way of
a scrubbing process, thereby allowing SIGECO to burn high
sulfur southern Indiana coal at the station.
In October 1990, the U.S. Congress adopted major
revisions to the Federal Clean Air Act. The revisions
require reduction in emissions of sulfur dioxide (SO2) and
nitrogen oxide (NOX) from coal-burning electric generating
facilities, including those owned and operated by SIGECO.
Two of SIGECO's principal coal-fired facilities (A. B. Brown
Units 1 and 2, totaling 500 megawatts of capacity) were
equipped with sulfur dioxide removal equipment (scrubbers)
and were not severely affected by the new legislation.
However, 523 megawatts of SIGECO's coal-fired generating
capacity were significantly impacted by the lower emission
requirements. SIGECO was required to reduce total emissions
from Culley Unit 3 (250 megawatts), Warrick Unit 4 (135
megawatts) and Culley Unit 2 (92 megawatts) by approximately
50% to 2.5 lb/MMBTU by January 1995 (Phase I) and to 1.2
lb/MMBTU by January 2000 (Phase II). SIGECO met all of the
Phase I emission requirements and some of the Phase II
requirements by January 1995 with the implementation of its
Clean Air Act Compliance Plan which includes equipping
Culley Units 2 and 3 with a sulfur dioxide scrubber, among
other provisions. Unit 1 at Culley Station (46 megawatts)
is also subject to the 1.2 lb/MMBTU restriction by January
2000. Current regulatory policy allows for the recovery
through rates of all authorized and approved pollution
control expenditures. Refer to "Environmental Matters" in
Item 7, MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION, page 23, for further
discussion of SIGECO's Clean Air Act Compliance Plan, and
the associated costs. SIGECO filed Title V (of the 1990
Amendments to the Federal Clean Air Act) permit applications
for all of its applicable generation facilities during the
fourth quarter of 1996. The applications have been approved
for completeness and are being processed by the Indiana
Department of Environmental Management. Warrick Unit 4 (50%
owned by SIGECO) is covered by Title V permit applications
filed by Alcoa Generating Corporation, majority owner of the
Warrick Generating Station.
With the addition of the scrubber at the Culley
generating station, SIGECO is exceeding the minimum
compliance requirements of Phase I and intends, at this
time, to utilize resulting "overcompliance allowances" and
fuel blending (with low sulfur coal) strategies to help meet
the stricter Phase II requirements effective January 2000.
SIGECO anticipates that purchases of additional allowances
will be required to fully meet Phase II requirements. No
material capital expenditures are anticipated to meet Phase
II requirements, and thus, none are reflected in the
projected construction requirements for the years 1998-2002
discussed previously in "Construction Program and Financing"
or in "Liquidity and Capital Resources" in Item 7,
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION, page 24.
In October 1996, SIGCORP received a notice of violation
(NOV) from the federal EPA for alleged violations of Indiana
air pollution regulations regarding particulate matter
emissions in October 1995 by the Unit 1 boiler of SIGECO's
Culley Station. Subsequent analysis determined the unit
was, in fact, in full compliance with all applicable state
and federal emission standards, bringing the matter to
closure.
In December 1996 and January 1997, the federal EPA issued
proposed regulations regarding new national ambient air
quality standards for regional ozone and particulate matter
concentration levels. In July 1997, the federal EPA issued
its final rule which revised the national ambient air
quality standard for ozone by setting a lower concentration
limit and changing the averaging period from one hour to
eight hours. There remains much uncertainty as to the
extent that SIGECO would be affected by this ruling. Refer
to "Environmental Matters" in Item 7, MANAGEMENT'S
DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION, page 23, for discussion of this new
ruling and related issues and the estimated possible costs
to comply with reductions if ultimately required.
<PAGE> 13
In connection with the use of sulfur dioxide removal
equipment at the A. B. Brown Generating Station, SIGECO
operates a solid waste landfill for the disposal of
approximately 200,000 tons of residue per year from the
scrubbing process. Application for renewal of the landfill
operating permit was filed with the Indiana Department of
Environmental Management (IDEM) in August 1996. The
existing permit will remain in effect until action is taken
by IDEM on the renewal application. SIGECO also has a solid
waste landfill available for the disposal of the gypsum by-product
being produced by the new sulfur dioxide scrubber at
the Culley Generating Station. SIGECO was granted a five-year
operating permit for the landfill in June 1995, but
anticipates using this landfill only when the gypsum by-product
does not meet contract specifications for its sale
to a wallboard manufacturer. Such utilization has not been
necessary, to date.
Under the Federal Water Pollution Control Act of 1972 and
Indiana law and regulations, SIGECO is required to obtain
permits to discharge effluents from its existing generating
stations into the navigable waterways of the United States.
The State of Indiana has received authorization from the EPA
to administer the Federal discharge permits program in
Indiana. Variances from effluent limitations may be granted
by permit on a plant-by-plant basis where the utility can
establish the limitations are not necessary to assure the
protection of aquatic life and wildlife in and on the body
of water into which the discharge is to be made. SIGECO has
been granted National Pollution Discharge Elimination System
(NPDES) permits covering miscellaneous waste water and
thermal discharges for all its generating facilities to
which the NPDES is applicable, namely the Culley Station, A.
B. Brown Station and Broadway Station (gas turbines). As
majority owner of Warrick Generating Station, Alcoa
Generating Corporation has been granted an NPDES permit for
that facility, including Warrick Unit 4. Such discharge
permits are limited in time and must be renewed at five-year
intervals. During 1994, SIGECO submitted renewal
applications for these permits, which are currently pending,
as they are for most industries. The existing permits will
remain in effect until action is taken by IDEM on the
renewal applications. SIGECO anticipates renewal of the
permits by IDEM. At present, there are no known enforcement
proceedings concerning water quality pending or threatened
against SIGECO.
<PAGE> 13
EXECUTIVE OFFICERS OF SIGCORP AND SIGECO
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Age at Positions Held
Name 12/31/97 During Past Five Years Date
R.G.Reherman 62 Chairman of the Board of
Directors, President and
Chief Executive
Officer of SIGCORP Jan 1996 - Present
Chairman of the Board of
Directors of SIGECO Sept 1997 -Present
Chairman of the Board of
Directors,
President and Chief Executive
Officer of SIGECO * - Sept 1997
A.E.Goebel 50 Executive Vice President of
SIGCORP Sept 1997 - Present
Secretary and Treasurer of
SIGCORP Jan 1996 - Sept 1997
President and Chief Executive
Officer of SIGECO Sept 1997 - Present
Senior Vice President,
Chief Financial Officer
and Secretary of SIGECO Oct 1996 - Sept 1997
Senior Vice President,
Chief Financial Officer,
Secretary and Treasurer
of SIGECO * - Oct 1996
J.G.Hurst 54 Executive Vice President
and Chief Operating
Officer of SIGECO Sept 1997 - Present
Senior Vice President
and General Manager
of Operations of SIGECO * - Sept 1997
J.L.Davis 42 Vice President of Marketing
and Customer
Service of SIGECO July 1995 - Present
Director of Marketing
of SIGECO * - July 1995
R.G.Jochum 50 Vice President and Director
of Power
Production of SIGECO July 1994 - Present
Director of Power Production
of SIGECO Sept 1993 - July
1994
G.M.McManus 50 Vice President and Director
of Governmental
and Public Relations
of SIGECO * - Present
</TABLE>
* Indicates positions held at least since 1993.
<PAGE> 15
Item 2. PROPERTIES
SIGCORP and SIGECO
SIGCORP has no significant properties other than common
stock of affiliates.
SIGECO's installed generating capacity as of December 31,
1997 was rated at 1,236,000 Kw. SIGECO's coal-fired
generating facilities are: the Brown Station with 500,000
Kw of capacity, located in Posey County about eight miles
east of Mt. Vernon, Indiana; the Culley Station with 386,000
Kw of capacity, and Warrick Unit 4 with 135,000 Kw of
capacity. Both the Culley and Warrick Stations are located
in Warrick County near Yankeetown, Indiana. SIGECO's gas-fired
turbine peaking units are: the 80,000 Kw Brown Gas
Turbine located at the Brown Station; two Broadway Gas
Turbines located in Evansville, Vanderburgh County, Indiana,
with a combined capacity of 115,000 Kw; and two Northeast
Gas Turbines located northeast of Evansville in Vanderburgh
County, Indiana with a combined capacity of 20,000 Kw. The
Brown and Broadway turbines are also equipped to burn oil.
Total capacity of SIGECO's five gas turbines is 215,000 Kw
and they are generally used only for reserve, peaking or
emergency purposes due to the higher per unit cost of
generation.
SIGECO's transmission system consists of 802 circuit
miles of 138,000 and 69,000 volt lines. The transmission
system also includes 31 substations with an installed
capacity of 4,016,590 kilovolt amperes (Kva). The electric
distribution system includes 3,181 pole miles of lower
voltage overhead lines and 203 trench miles of conduit
containing 1,213 miles of underground distribution cable.
The distribution system also includes 86 distribution
substations with an installed capacity of 1,696,484 Kva and
48,182 distribution transformers with an installed capacity
of 2,131,925 Kva.
SIGECO owns and operates three underground gas storage
fields with an estimated ready delivery from storage
capability of 3.9 million Dth of gas. The Oliver Field, in
service since 1954, is located in Posey County, Indiana,
about 13 miles west of Evansville. The Midway Field is
located in Spencer County, Indiana, about 20 miles east of
Evansville near Richland, Indiana, and was placed in service
in December 1966. The third field is the Monroe City Field,
located in Knox County, about 10 miles east of Vincennes,
Indiana. The field was placed in service in 1958.
SIGECO's gas transmission system includes 359 miles of
transmission mains, and the gas distribution system includes
2,511 miles of distribution mains.
SIGECO's properties are subject to the lien of the First
Mortgage Indenture dated as of April 1, 1932 between SIGECO
and Bankers Trust Company, New York, as Trustee, as
supplemented by various supplemental indentures, all of
which are exhibits to this report and collectively referred
to as the "Mortgage".
Subsidiaries other than SIGECO have no significant
properties other than investments in real estate
partnerships, leveraged leases, private placement
subordinated debt instruments and coal mining property.
Item 3. LEGAL PROCEEDINGS
SIGCORP and SIGECO
There are no pending legal proceedings, other than
routine litigation incidental to the business, to which the
registrant is a party.
No material legal proceedings were terminated during the
fourth quarter of 1997.
Item 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
SIGCORP and SIGECO
None
>page> 16
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND
RELATED SECURITY HOLDER MATTERS
SIGCORP and SIGECO
Effective January 1, 1996, all shares of common stock of
SIGECO were exchanged for an equal number of shares of
common stock of SIGCORP. As of February 20, 1998, SIGCORP
had 8,074 holders of record of common stock. The principal
market on which SIGCORP's common stock is traded is the New
York Stock Exchange, Inc. where the common stock is listed.
The high and low sales prices for SIGCORP's stock as
reported in the consolidated transaction reporting system
for each quarterly period during the two most recent fiscal
years were:
<TABLE>
Caption>
QUARTERLY PERIOD
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 2 3 4
High Low High Low High Low High Low
1997
$24-9/16 $22-9/16 $26-15/16 $21-7/8 $26-15/16 $24-1/8 $30-1/8 $24-15/16
1996
$24-5/8 $21-7/8 $23-1/4 $21-7/8 $23-3/4 $22-1/8 $23-7/8 $22
</TABLE>
Dividends declared and paid per share of SIGCORP common
stock during the past two years were:
<TABLE>
<CAPTION>
QUARTERLY PERIOD
<S> <C> <C> <C> <C>
1 2 3 4
1997 $0.2950 $0.2950 $0.2950 $0.2950
1996 $0.2883 $0.2883 $0.2883 $0.2883
</TABLE>
The quarterly dividend on common stock was increased to 30-1/4
cents per share in January 1998, payable March 20, 1998.
DIVIDEND RESTRICTIONS
The following restrictions pertain to SIGECO but, to the
extent that the dividends of SIGCORP depend on SIGECO
earnings, may have an effect on SIGCORP.
The payment of cash dividends on SIGECO's common stock to
SIGCORP is, in effect, restricted by SIGECO's Mortgage to
accumulated surplus, available for distribution to the
common stock, earned subsequent to December 31, 1947,
subject to reduction if amounts deducted from earnings for
current repairs and maintenance and provisions for renewals,
replacements and depreciation of all the property of SIGECO
are less than amounts specified in the Mortgage. (See
Section 1.02 of the Supplemental Indenture dated as of July
1, 1948, as supplemented.) No amount was restricted against
cash dividends on common stock as of December 31, 1997 under
this restriction.
The payment of cash dividends on common stock is, in
effect, restricted by SIGECO's Amended Articles of
Incorporation to accumulated surplus, available for
distribution to the common stock, earned subsequent to
December 31, 1935. The Amended Articles of Incorporation
require that, immediately after such dividends, there shall
remain to the credit of earned surplus an amount at least
equal to two times the annual dividend requirements on all
then outstanding Preferred Stock, No Par Value. (See Art.
VI, Terms of Capital Stock, General Provisions (B)). The
amount restricted against cash dividends on common stock at
December 31, 1997 under this restriction was $2,194,121,
leaving $226,375,272 unrestricted for the payment of
dividends. In addition, the Amended Articles of
Incorporation provide that surplus otherwise available for
the payment of dividends on common stock shall be restricted
to the extent that such surplus is included in a calculation
required to permit SIGECO to issue, sell or dispose of
preferred stock or other stock senior to the common stock
(Art. VI, Terms of Capital Stock, General Provisions (E)).
<PAGE> 17
Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY
AND RELATED SECURITY HOLDER MATTERS
(Continued)
An order of the Securities and Exchange Commission dated
October 12, 1944 under the Public Utility Holding Company
Act of 1935 in effect restricts the payment of cash
dividends on common stock to 75% of net income available for
distribution to the common stock, earned subsequent to
December 31, 1943, if the percentage of common stock equity
to total capitalization and surplus, as defined, is less
than 25%. At December 31, 1997, such ratio amounted to
approximately 50%.
Item 6. SELECTED FINANCIAL DATA
SIGCORP and SIGECO
<TABLE>
<CAPTION>
SIGCORP, Inc.
<S> <C> <C> <C> <C> <C>
Year Ended December 31
(in thousands except for per share amounts)
1997 1996 1995 1994 1993
Operating Revenues $433,237 $404,738 $360,771 $330,899 $330,317
Operating Income $85,582 $82,717 $72,401 $70,779 $69,403
Net Income Before Cumulative
Effect of Accounting
Change $46,140 $43,264 $38,525 $39,920 $38,483
Net Income $46,140 $43,264 $44,819 $39,920 $38,483
Average Common Shares
Outstanding 23,631 23,631 23,631 23,631 23,631
Earnings Per Share of
Common Stock Before
Cumulative Effect
of Accounting Change $1.95 $1.83 $1.63 $1.69 $1.63
Cumulative Effect of
Accounting Change $- $- $0.27 $- $-
Basic and Diluted
Earnings Per Share $1.95 $1.83 $1.90 $1.69 $1.63
Dividends Per Share
of Common Stock $1.18 $1.15 $1.13 $1.10 $1.07
Total Assets $989,896 $952,653 $923,981 $917,416 $860,841
Redeemable Preferred
Stock $8,424 $8,424 $8,424 $8,515 $8,515
Long-Term Obligations $276,844 $266,951 $265,085 $274,467 $274,884
</TABLE>
<TABLE>
<CAPTION>
Southern Indiana Gas And Electric Company
<S> <C> <C> <C> <C> <C>
Year Ended December 31
(in thousands) 1997 1996 1995 1994 1993
Operating Revenues $358,106 $372,730 $338,698 $330,035 $329,489
Operating Income $62,912 $61,041 $53,873 $52,367 $51,565
Net Income Before
Cumulative
Effect of Accounting
Change $45,363 $42,841 $39,624 $41,025 $39,588
Net Income Applicable
to Common Stock $44,266 $41,744 $44,819 $39,920 $38,483
Total Assets $864,463 $852,325 $923,981 $917,416 $860,841
Redeemable Preferred
Stock $8,424 $8,424 $8,424 $8,515 $8,515
Long-Term Obligations $239,420 $252,114 $265,085 $274,467 $274,884
</TABLE>
<PAGE> 18
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
References to "Notes" pertain to the Notes to Consolidated
Financial Statements.
SIGCORP and SIGECO
The consolidated financial statements of SIGCORP, Inc.
(SIGCORP), an investor-owned holding company, include
SIGCORP's principal subsidiary, Southern Indiana Gas and
Electric Company (SIGECO), a regulated gas and electric
utility, and eight nonregulated subsidiaries. The following
discussion and analysis includes those factors which have,
or may, materially affect the results of operations and
financial condition of SIGCORP and its subsidiaries.
This discussion includes forward looking statements based on
information currently available to management. Such
statements are subject to certain risks and uncertainties.
These statements typically contain, but are not limited to,
the terms "anticipate", "expect", "potential", "estimate"
and similar words, and actual results may differ materially
due to the speed and nature of increased competition and
deregulation in the electric and gas utility industry,
economic or weather conditions affecting future sales and
margins, changes in markets for energy services, changing
energy market prices, legislative and regulatory changes
including revised environmental requirements, availability
and cost of capital, and other similar factors.
RESULTS OF OPERATIONS
Earnings per share were a record $1.95 in 1997, compared to
$1.83 for 1996 and $1.63 for 1995 before the cumulative
effect of an accounting change. Utility operations
contributed $1.87 of the 1997 per share earnings and
nonregulated operations contributed $.08 per share; for
1996, utility net income represented $1.77 and nonregulated
subsidiary results contributed $.06 per share of the total
earnings. The factors effecting the $.12 increase in 1997
earnings follow:
Period ended December 31, 1996 $ 1.83
Weather (.10)
Customer growth and usage .08
Electric sales to other utilities and
power marketers .06
Adjustment in base gas rates .03
Utility O&M expense .03
Nonregulated gas energy services and
nonutility operations .02
Period ended December 31, 1997 $ 1.95
Revenues The increase in electric utility revenues due to
greater nonfirm wholesale electric sales was fully offset by
the recovery of lower unit fuel costs through retail rates
and fewer sales to retail customers, resulting in a $3.9
million (1.4%) decrease in electric revenues during 1997.
In 1996, electric revenues rose slightly when revenue
increases from greater electric sales and the full year
impact of an increase in retail electric rates were offset
by the recovery of lower unit fuel costs. Although cooling
degree days were 19% below normal and 8% below 1996, sales
to retail and firm wholesale customers declined only
slightly (1%) in 1997 following a 3.4% increase in 1996, due
to continued strong economic growth in SIGECO's service
area. Excluding sales to Alcoa Generating Corporation,
which declined in 1997, nonfirm wholesale electric sales
increased 35% in 1997, after a 15% increase in 1996,
reflecting SIGECO's low electric energy costs and aggressive
marketing efforts. These sales represented approximately
19% of total 1997 electric sales.
Fewer sales to all retail gas customers, net of the impact
of an approved July 1996 increase in base gas rates,
resulted in an 11% ($10.7 million) decrease in 1997 gas
utility revenues, following 52% ($33 million) greater gas
revenues in 1996 chiefly due to stronger sales to all retail
gas customers and higher unit gas costs recovered through
retail rates. Gas sales were down 23% in 1997, after a 24%
rise in 1996, reflecting the impact of 12% milder
temperatures on weather-sensitive sales during the first
quarter of 1997 and fewer sales to commercial and industrial
transportation customers. Residential sales declined 12%
during 1997 due to the milder weather, after a
<PAGE> 19
19% increase in 1996 when weather was 17% colder than in
1995. Sales to commercial and industrial customers were
down 22% and 63%, respectively, because transportation
customers purchased more of their 1997 gas supplies from
suppliers other than SIGECO; total natural gas sold and
transported to commercial and industrial customers declined
only 2% as continued economic development in the area
partially offset the impact of weather on commercial sales.
The full year operation of SIGCORP Energy Services, Inc.
(Energy), which currently markets natural gas and related
services, added $70.2 million to SIGCORP's 1997 revenues. A
$27.1 million decrease in other revenues, which includes the
operating revenues of SIGCORP's other nonregulated
subsidiaries, reflected the absence of new performance
contracts at Energy Systems Group, Inc. (ESGI) during the
first six months of 1997; during the last half of 1997,
several major contracts, including a $15 million contract
with the Evansville-Vanderburgh School Corporation, were
awarded to Energy Systems Group, LLC, of which ESGI is a
one-third owner (see "Energy Systems Group, Inc." for
further discussion of the change of ownership). The $9.9
million increase in 1996 revenues from SIGCORP's
nonregulated operations was chiefly due to greater revenues
from ESGI.
Operating Expenses Although electric generation increased
4.2%, related fuel expenses, the most significant electric
operating cost, declined 16.3% ($12.2 million) in 1997 due
to 21% lower unit coal costs resulting from SIGECO's coal
contract reformation efforts. Average coal costs per kWh
generated were $.0098, $.0124 and $.0141 for 1997, 1996 and
1995, respectively. SIGECO will continue to aggressively
manage its fuel expenses as a key component of its strategy
to remain a low-cost provider of electricity. The 1996 fuel
for electric generation expense was 7.8% lower than 1995
expense due to 12% lower unit coal costs. Changes in the
unit costs of fuel and purchased electric energy are passed
on to electric customers through commission-approved fuel
and purchased power cost recovery mechanisms.
While the majority of SIGECO's sales of electric energy to
nonfirm wholesale customers is from excess capacity, SIGECO
increased its purchases of electricity from other utilities
24% in 1997 for resale to nonfirm electric wholesale
customers. Conversely, purchases of electric energy in 1996
were 15% lower than in 1995. Higher average market prices
also contributed to the $5.7 million increase in cost of
purchased electric energy during 1997.
The cost of gas sold, the major component of gas operating
expenses, declined 18.2% ($12 million) in 1997 due to the
decrease in gas sales. The 64% ($25.8 million) increase in
cost of gas sold in 1996 was attributed to 37% higher
average unit gas costs and 24% greater sales of gas compared
to 1995. The generally downward trend of natural gas market
prices experienced several years prior to 1996 was reversed
in 1996 when the combination of greater demand for gas
caused by colder winter temperatures nationwide and fewer
available natural gas supplies caused higher unit gas costs.
During 1997, the cost of energy services and other revenues,
which was chiefly the cost of natural gas purchased for
resale by Energy and performance contract costs at ESGI,
rose $45.1 million compared to 1996 due to the full year
operation of Energy, partially offset by significantly lower
performance contract costs at ESGI. Conversely, additional
performance contracts in 1996 caused related costs to be
greater than those incurred in 1995.
Other operation expenses for 1997 were comparable to the
$60.9 million incurred in 1996; lower expenses at SIGECO and
ESGI offset higher full year operation expenses at Energy.
In 1996, other operation expenses were up 14% ($7.4 million)
due primarily to an 11% ($5.5 million) increase in such
expenses at SIGECO, to additional performance contract sales
activity at ESGI and to higher expenses at SIGCORP's other
nonregulated subsidiaries. Additional expenses for
postretirement benefits other than pensions deferred until
1996 and full-year operating costs of the new sulfur dioxide
scrubber at SIGECO's Culley Generating Station represented
the majority of the increase in other operation expenses at
SIGECO in 1996.
<PAGE> 20
Maintenance expenses, essentially all incurred at SIGECO,
declined 1.9% ($.6 million) in 1997, following a 7.6% ($2.4
million) decrease in 1996. Higher power generation
maintenance expenditures during 1997 related to turbine
generator and boiler repairs were offset by lower
maintenance expenditures on gas and electric transmission
and distribution facilities. Maintenance expenses in 1995
reflected a major turbine generator maintenance overhaul and
system repairs caused by a devastating storm in SIGECO's
service area.
Depreciation and amortization expense increased 3.2% ($1.2
million) in 1997 due to utility plant additions for the
major refurbishment of the Culley Unit 3 turbine generator
and boiler ($16.3 million), a new $4.4 million gas
transmission line to serve a rapidly developing industrial
sector in SIGECO's service territory, and for SIGECO's
continued investment in other gas and electric utility
facilities required to serve new business development and
upgrade existing energy delivery systems. Depreciation and
amortization expense declined slightly in 1996, the result
of lower depreciation rates on electric utility plant
related to SIGECO's retail electric rate adjustment.
While inflation has a significant impact on the replacement
cost of SIGECO's facilities, only the historical cost of
electric and gas plant investment is recoverable in revenues
as depreciation under the ratemaking principles to which
SIGECO is subject. With the exception of adjustments for
changes in fuel and gas costs and margin on sales lost under
SIGECO's demand side management programs, SIGECO's electric
and gas rates remain unchanged until a rate application is
filed and a general rate order is issued by the IURC.
The favorable outcome of contested prior year property tax
assessments resulted in a $1.4 million decline in 1997
property and other taxes expense, following a 3.4% increase
in 1996.
Interest and Other Charges SIGECO's additional capitalized
interest and allowance for equity funds related to several
large construction projects during 1997 were the primary
reasons for the $1.9 million reduction in SIGCORP's total
interest and other charges in 1997. Increases in SIGCORP's
total interest expense and in interest income during 1997
reflected increased financial investment activities by
Southern Indiana Properties, Inc. and the related costs.
SIGCORP's interest and other charges declined slightly in
1996 when greater interest income more than offset SIGECO's
lower capitalized interest and the allowance for equity
funds.
Income Tax Expense SIGCORP's federal and state income taxes
rose $1.9 million during 1997 due to the increase in
SIGECO's pretax income. SIGCORP's federal and state income
taxes were $5.7 million greater during 1996 due to SIGECO's
higher pretax income and to a $1.2 million downward
adjustment to SIGECO's income tax reserves during 1995.
Rate and Regulatory Matters SIGECO complies with the
provisions of Statement of Financial Accounting Standard
(SFAS) 71, "Accounting for the Effects of Certain Types of
Regulation" that allows certain costs incurred by SIGECO
that have been, or are expected to be, approved by
regulatory authorities for recovery through rates, to be
deferred as regulatory assets until recovered by SIGECO.
Criteria that could give rise to the discontinuance of SFAS
71 include (1) increasing competition that restricts
SIGECO's ability to establish prices to recover specific
costs, and (2) a significant change in the manner in which
rates are set by regulators from cost-based regulation to
another form of regulation. SIGECO periodically reviews
these criteria to ensure the continuing application of SFAS
71 is appropriate. In the event SIGECO determines that it
no longer meets the criteria for following SFAS 71, the
accounting impact could be an extraordinary noncash charge
to operations of an amount that could be material. SFAS
121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed Of", imposes a stricter
criterion for these regulatory assets by requiring that such
assets be probable of future recovery at each balance sheet
date. Under SIGECO's present regulatory environment and
given its current competitive position in the industry,
SIGECO believes its use of regulatory accounting is
appropriate.
In September 1995, SIGECO petitioned the IURC seeking a
general increase in gas rates. On July 3, 1996, the IURC
issued its order, effective July 15, 1996, granting a 7.3%,
or $4.8 million, increase in annual revenues.
<PAGE> 21
The adjustment in rates was necessary to recover increases
in operating and maintenance costs and additional investment
in gas distribution facilities. The adjustment includes
recovery of additional costs incurred for postretirement
benefits other than pensions related to gas operations
approximating $1.1 million annually.
In June 1995, the IURC approved the third of three retail
electric rate increases related to its Clean Air Act
Compliance project, representing an increase of 2.1%, or
$4.5 million, in revenues. The final adjustment was
necessary to cover financing costs related to the balance of
the project construction expenditures, costs related to the
operation of the scrubber, and certain nonscrubber-related
operating costs such as additional costs incurred for
postretirement benefits other than pensions beginning in
1993 and the recovery of demand side management program
expenditures.
Over the past several years, SIGECO has been actively
involved in intensive contract negotiations and legal
actions to reduce coal costs and thereby lower electric
rates. In April 1995, SIGECO reached an agreement with its
remaining long-term contract coal supplier, effective July
1995, to buy out the remainder of SIGECO's contractual
obligations, enabling it to acquire lower-priced spot market
coal. In 1997, the full benefit of the contract buyout was
reflected in average coal costs per kWh generated, which
were down 21% from 1996. SIGECO estimates the total savings
in coal costs resulting from the buyout, net of total buyout
costs, will approximate $58 million through December 31,
1998, the term of the original contract. The net savings
are being passed back to SIGECO's retail and firm wholesale
electric customers through the fuel adjustment clause.
Competition SIGCORP's predominant subsidiary, SIGECO, is
presently a fully integrated provider of retail gas and
electric utility service within a franchised, monopoly
service area. The production of electricity is the most
significant functional component of the integrated SIGECO
operations, representing approximately 60% of regulated
assets and, as a result of wholesale sales of electricity, a
greater portion of the net income of the utility.
A fundamental change is occurring in the United States with
respect to the monopoly structure of the electric utility
industry. The National Energy Policy Act of 1992 (NEPA)
initiated some of the most significant changes in the
history of the electric industry. The primary purpose of
the electric provisions of NEPA is to increase competition
in electric generation by enabling virtually nonregulated
entities, such as exempt wholesale generators, to develop
power plants, and by granting the Federal Energy Regulatory
Commission (FERC) authority to require a utility to provide
transmission services, including the expansion of the
utility's transmission facilities necessary to provide such
services, to any entity selling or purchasing electricity at
wholesale. Although the FERC may not order retail wheeling
(the transmission of electricity directly to an ultimate
consumer), it may order wheeling of electricity generated by
an exempt wholesale generator or another utility to a
wholesale customer of a regulated utility.
FERC has aggressively undertaken the introduction of
competition into the wholesale electric business. On April
24, 1996, FERC issued Order 888 which finalized the key
provisions of its Notice of Proposed Rulemaking (Mega-NOPR)
on Open Access issued in March 1995. Order 888 provided for
mandatory filing of open access transmission tariffs,
provided for functional unbundling of all transmission
services, required utilities to use the tariffs for their
own bulk power transactions, and allowed recovery of
stranded costs in certain circumstances. SIGECO has filed
the mandatory tariffs to comply with Order 888.
Also on April 24, 1996, FERC issued Order 889 which required
each public utility that owns, controls or operates
facilities used for the transmission of electric energy in
interstate commerce to create or participate in an Open
Access Same-time Information System for posting information
about available transmission capacity, prices and other
information that will enable customers to obtain open access
nondiscriminatory transmission service. Order 889 required
the filing of detailed Standards of Conduct defining how a
transmission provider will functionally separate its
transmission and wholesale power merchant functions. SIGECO
has implemented the necessary changes and filed the
Standards of Conduct to comply with Order 889.
<PAGE> 22
The results of Orders 888 and 889 on SIGECO have been
generally favorable. Because SIGECO has below average
variable costs of generation, it has been an aggressive
seller of electricity to power marketers and other providers
seeking low-priced electricity to fulfill wholesale sales
contracts. The results of the increased wholesale sales are
discussed further in "Results of Operations." Conversely,
SIGECO has reduced prices to firm wholesale customers, or
offered to do so, to retain their business after the
expiration of existing contracts. These discounts in
pricing terms, when fully effective, result in gross margins
which are several million dollars below margins attainable
from such customers prior to NEPA. SIGECO cannot predict
the long-term consequences of these rules on its results of
operations or financial condition.
FERC does not have jurisdiction over the retail sales of
electricity. The various states retain jurisdiction over
the permitting of retail competition, the terms of such
competition and the recovery of any costs or other
transition charges resulting from retail competition.
To date, more than a dozen state legislatures or regulatory
agencies have adopted laws or regulations to introduce
retail electricity competition. However, most states are
continuing to evaluate the issue. In Indiana, the state
legislature must adopt appropriate legislation to amend the
Public Utility Act to provide for retail competition. In
1997, and again in 1998, such legislation was introduced in
the Indiana Senate. The 1997 proposal did not pass out of
its committee of origin in its original form. The 1998
legislation, although passed out of its committee of origin,
did not receive widespread acceptance by the legislature and
was not voted upon by the full Senate. A substitute
proposal, which addressed only the participation of Indiana
utilities in multi-state transmission pools under the
control of an Independent System Operator (or ISO), was
rejected by the Senate. The 1997 legislative proposal,
initially a comprehensive proposal to introduce retail
competition in the year 2000, was altered to only authorize
a joint Senate/House study committee, called the Regulatory
Flexibility Committee, to study the issue. That committee
met numerous times in 1997, hearing testimony from a broad
cross-section of consultants, utilities, customer groups and
regulators.
It is anticipated by SIGECO that pressure on the Indiana
legislature could intensify if other states successfully
implement retail competition for electricity. SIGECO will
continue to participate in the debate to represent the
interest of all its stakeholders. One of SIGECO's primary
concerns in the debate is that appropriate reciprocity
provisions with other utilities and power marketers are
enacted which would prevent out-of-state providers from
having an unfair advantage over Indiana utilities. In
addition, SIGECO has taken the position in the debate (and
will continue to attempt to influence the outcome of the
debate) that low-cost producers such as SIGECO should not,
as has occurred in other states, be penalized for being
historically low-cost. More specifically, the
implementation of "access charges" and "transition charges"
in other states have served to make it very difficult for
low-cost producers to economically compete for business from
the customers of high-cost producers due to the need for
those customers to pay their current provider very high
fixed charges for the privilege of "accessing" the
marketplace. At the same time, historically low-cost
producers, such as SIGECO, have lower access charges because
their "stranded costs" are low, making it economically less
difficult for high-cost producers to sell to a low-cost
producer's customer base at marginal production costs.
SIGCORP and SIGECO are unable to predict the timing or final
provisions of Indiana legislative actions on competition, if
any. Although SIGECO is uncertain of the timing and/or
final outcome of these developments, it is committed to
pursuing, and is rapidly implementing, its corporate
strategy of positioning itself as a low-cost energy producer
and the provider of high-quality service to its retail as
well as wholesale customers. Based on a recent Edison
Electric Institute survey, SIGECO industrial rates were 8th
lowest among 135 electric utilities in 1996.
SIGECO also provides retail integrated natural gas service
in Indiana. However, SIGECO does not currently earn a
margin on the direct sale of the commodity natural gas.
SIGECO simply charges its retail gas customers the cost
SIGECO incurs to purchase the gas and have it delivered to
SIGECO's metering points on the interstate pipeline network.
SIGECO does earn a return on the investment in its assets
used to deliver the gas to
<PAGE> 23
customers. As a result, SIGECO does not anticipate any
material impact on the financial results of its operations
should the right of retail customers to choose gas commodity
providers extend beyond the current level.
SIGCORP's nonutility subsidiaries are all subject to the
competitive forces existing in their respective industries,
including the gas marketing industry, the energy services
industry, telecommunications, industrial mineral products,
coal production and so on. As such, the financial results
of the nonregulated entities depend upon their ability to
successfully compete in their respective markets.
SIGCORP
Energy Systems Group, Inc. On May 23, 1997, Energy Systems
Group, Inc. (ESGI), IGC Energy and Citizens By-Products Coal
Company formed Energy Systems Group, LLC (ESG LLC) an
equally owned limited liability corporation. On June 18,
1997, ESGI, an energy- related performance contracting firm,
contributed significantly all of its assets and liabilities
to ESG LLC for a one-third interest in ESG LLC, which
assumed the operations and responsibilities of ESGI. ESGI's
results of operations through June 18, 1997 are included in
other revenues and the respective operating expense accounts
in SIGCORP's consolidated financial statements. Subsequent
to June 18, 1997, ESGI's share of the pretax earnings and
losses of ESG LLC are included in Other, net.
SIGCORP Fuels, Inc. Incorporated in December 1996, SIGCORP
Fuels, Inc. (Fuels) was formed to provide coal and related
services to SIGECO and other customers. In June 1997,
SIGECO obtained approval from the IURC to purchase coal from
Fuels under a fixed price schedule and to recover the
respective costs from SIGECO's retail and firm wholesale
electric customers. In late 1997, Fuels purchased coal
reserves located in SIGECO's service area and took delivery
of coal mining equipment. The first shipments of coal to
SIGECO were delivered in January 1998. Currently, Fuels
anticipates providing approximately 25% of SIGECO's total
coal supply requirements.
SIGCORP Communications Services, Inc. Incorporated in
August 1997, SIGCORP Communications Services, Inc. was
formed to undertake various telecommunications-related
strategic initiatives for SIGCORP. Its activities have
focused on broadband and fiber optic systems installations
for small to mid-size communities throughout the United
States.
SIGCORP and SIGECO
Environmental Matters To meet the Phase I requirements of
the Clean Air Act Amendments of 1990 (CAAA), effective 1995,
and some of the Phase II requirements (effective 2000),
SIGECO installed a single sulfur dioxide scrubber at the
Culley Generating Station to serve Culley Units 2 and 3 and
installed low nitrogen oxide (NOx) burners on the two units.
The facilities were constructed at a total cost of $103
million and began commercial operation February 1, 1995.
With the addition of the scrubber, SIGECO is exceeding the
minimum compliance requirements of Phase I of the CAAA and
has available unused allowances, called "overcompliance
allowances", for retention by SIGECO to meet stricter
post-2000 emission limitations. SIGECO anticipates that
purchases of additional allowances will be required to fully
meet Phase II requirements.
In July 1997, the United States Environmental Protection
Agency (USEPA) issued its final rule which revised the
national ambient air quality standard for ozone by setting a
lower concentration limit and changing measurement methods.
It is anticipated that the number of ozone nonattainment
counties in the United States will increase significantly as
determined by the concentration of nitrogen oxide (NOx), a
key ingredient of ozone. The USEPA has encouraged states to
target utility coal-fired boilers for the majority of the
reductions required, especially NOx emissions, because they
believe this approach is the most cost effective.
Northeastern states have claimed that ozone transport from
midwestern states (including Indiana) is the primary reason
for their ozone concentration problems. Although this
premise is challenged by others based on various air quality
modeling studies, including studies commissioned by the
USEPA, the USEPA intends to incorporate a regional
<PAGE> 24
control strategy to reduce ozone transport. In October
1997, the USEPA provided each state a proposed NOx budget of
allowed emissions. Under that budget, utilities may be
required to reduce NOx emissions to a rate of 0.15 lb/mmBtu
from levels already imposed by Phase I and Phase II of the
CAAA. There remains much uncertainty as to the extent that
SIGECO would be affected by this ruling. An alliance of
electric utilities, including SIGECO, from the midwestern
states are working together to determine the most
appropriate compliance strategy as an alternative to the
USEPA proposal. Depending on the level of system-wide
emissions reductions ultimately required, and the control
technology utilized to achieve the reductions, control
equipment expenditures ranging from estimates of $10 million
to $90 million could be required. This is in addition to
expenditures previously made to bring SIGECO in compliance
with the CAAA requirements. Under the current USEPA
implementation schedule, the emissions reductions and
required control equipment must be implemented and in place
by 2004.
Also in July 1997, the USEPA announced a new 2.5-micron
particulate matter (PM) standard while retaining the
existing 10-micron PM standard. The regulatory impacts of
this action cannot be determined until appropriate
monitoring data is collected and subsequent national ambient
air quality area designations are determined. The extent of
the impact on SIGECO, if any, is unknown.
Demand Side Management In November 1995, SIGECO filed an
update of its Integrated Resource Plan (IRP) with the IURC,
requesting approval to greatly reduce previously ordered
future DSM programs due to the anticipated changes
precipitated by NEPA. In July 1996, the IURC approved the
reduction of projected DSM program expenditures during the
1997-2012 period from a total of $138 million to $39
million. In the latest update of its IRP, filed in November
1997, SIGECO determined that certain of these programs were
not cost effective and were to be discontinued. As a
result, projected DSM expenditures for the 1998-2013 period
are expected to further decline from a total of $38 million
to $22 million. Although future DSM expenditures will be
substantially reduced, the IRP projections indicate that by
2000, approximately 52 megawatts of capacity are expected to
have been postponed or eliminated due to these programs.
SIGECO will continue to monitor the benefits of its DSM
programs and additional changes are possible. Although
SIGECO is already recognized as one of the most competitive
electric utilities in the nation, the reductions enable
SIGECO to be even more cost competitive in the future with
very low stranded investment exposure.
Year 2000 Compliance Costs SIGECO has several major
information systems projects in progress, to be completed
before 2000, that will replace applications identified that
may not have been year 2000 compliant. Based on SIGECO's
preliminary investigation, which is ongoing, all other
internal critical systems are year 2000 compliant. SIGCORP
does not expect the amounts required to be expensed for year
2000 compliance modifications to have a material effect on
its financial position or results of operations. SIGCORP
does not yet know whether the critical systems of its
suppliers and customers will be year 2000 compliant, however
it believes that non-compliance of such systems would not
have a material adverse effect on its financial position or
results of operations.
LIQUIDITY AND CAPITAL RESOURCES
In 1997, financial performance continued to be solid.
Internally generated cash (net income less dividends plus
charges to net income not requiring cash) funded 78% of
SIGECO's 1997 construction and DSM program expenditures;
these expenditures were fully funded with internally
generated cash in 1996. SIGCORP's ratio of earnings to
fixed charges (SEC method) was 4.1:1, and its embedded cost
of long-term debt and preferred stock is 6.6 % and 5.6%,
respectively. SIGCORP's financial strength is reflected in
high quality credit ratings. SIGECO's senior secured debt
continues to be rated AA, or equivalent, by major credit
rating agencies.
<PAGE> 25
Capital Requirements SIGCORP's demand for capital is
primarily related to SIGECO's construction of utility plant
and equipment necessary to meet customers' electric and gas
energy needs, environmental compliance requirements, and to
expenditures for SIGECO's DSM programs. Construction
expenditures totaled $68.4 million during 1997, including
$16.3 million expended on the major refurbishment of the F.
B. Culley Generating Station Unit 3 turbine generator and
boiler, $4.9 million for facilities under construction to
serve the new Toyota truck manufacturing plant, $4.4 million
for construction of a new gas transmission line to serve the
rapidly developing Mt. Vernon, Indiana industrial area, $5.8
million expended on the design and implementation of several
comprehensive information systems necessary to meet
expanding customer service needs and to better manage
SIGECO's resources, and $2.3 million for DSM programs. The
1997 expenditures compare to $43.9 million and $54.1 million
expended in 1996 and 1995, respectively.
Construction requirements for the years 1998-2002 are
projected to total approximately $315 million, including
approximately $15 million to complete the information
systems projects and approximately $5 million of capitalized
expenditures for DSM programs, but exclude construction
expenditures that may be required to comply with new USEPA
air quality standards discussed under "Environmental
Matters". SIGECO does not currently anticipate the need for
construction of new base-load generation.
Financing Activities SIGCORP's financing activity during
1997 included a $24.7 million increase in long-term notes
payable incurred primarily for structured financial
investments by Southern Indiana Properties, Inc. In 1996,
SIGCORP's only financing activity was an $8.5 million
increase in short-term debt. At year end, SIGCORP had $41.4
million in short-term borrowings, leaving unused lines of
credit and trust demand note arrangements totaling $39
million.
During the five-year period of 1998-2002, SIGCORP
anticipates that a total of $65.6 million of debt
securities, primarily those of SIGECO, will be redeemed.
SIGCORP expects the majority of the 1998-2002 construction
program and debt redemption requirements to be provided by
internally generated funds. External financing requirements
of $60-70 million are anticipated and will be used primarily
to redeem long-term debt.
SIGCORP is confident that its long-term financial
objectives, which include maintaining a capital structure
near 45-50% long-term debt, 3-7% preferred stock and 43-48%
common equity, will continue to be met, while providing for
future construction and other capital requirements.
<PAGE> 26
<PAGE>
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
Page
Number
<S> <C> <C>
1. Financial Statements
SIGCORP
Report of Independent Public Accountants 28
Consolidated Statements of Income for the years
ended December 31, 1997, 1996 and 1995 29
Consolidated Statements of Cash Flows for the years
ended December 31, 1997, 1996 and 1995 30
Consolidated Balance Sheets -
December 31, 1997 and 1996 31
Consolidated Statements of Capitalization -
December 31, 1997 and 1996 33
Consolidated Statements of Retained Earnings
for the years ended December 31, 1997,
1996 and 1995 34
SIGECO
Report of Independent Public Accountants 36
Statements of Income for the years
ended December 31, 1997, 1996 and 1995 37
Statements of Cash Flows for the years
ended December 31, 1997, 1996 and 1995 38
Balance Sheets - December 31, 1997 and 1996 39
Statements of Capitalization -
December 31, 1997 and 1996 41
Statements of Retained Earnings for the
years ended December 31, 1997, 1996 and 1995 42
SIGCORP and SIGECO
Notes to Consolidated Financial Statements 43
2. Supplementary Information
SIGCORP and SIGECO
Selected Quarterly Financial Data 61
3. Supplemental Schedules
SIGCORP and SIGECO
Schedule II - Valuation and Qualifying Accounts and
Reserves for the years ended December 31, 1997,
1996 and 1995 66
</TABLE>
All other schedules have been omitted as not applicable
or not required or because the
information required to be shown is included in the
Consolidated Financial Statements or
the accompanying Notes to Consolidated Financial
Statements.
<PAGE> 27
SIGCORP, Inc. and
Subsidiaries
<PAGE> 28
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO SIGCORP, Inc.:
We have audited the consolidated balance sheets and
consolidated statements of capitalization of SIGCORP, Inc.
(an Indiana corporation) and subsidiaries as of December 31,
1997 and 1996, and the related consolidated statements of
income, retained earnings and cash flows for each of the
three years in the period ended December 31, 1997. These
financial statements and the supplemental schedule referred
to below are the responsibility of SIGCORP, Inc.'s
management. Our responsibility is to express an opinion on
these financial statements and supplemental schedule 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 consolidated financial statements
referred to above present fairly, in all material respects,
the financial position of SIGCORP, Inc. as of December 31,
1997 and 1996, and the results of their operations and their
cash flows for each of the three years in the period ended
December 31, 1997, in conformity with generally accepted
accounting principles.
As discussed in Note 3, effective January 1, 1995,
SIGCORP, Inc. changed its method of accounting for unbilled
revenues.
Our audits were made for the purpose of forming an
opinion on the basic financial statements taken as a whole.
The supplemental schedule listed under Item 8 (3) is
presented for the purposes of complying with the Securities
and Exchange Commission's rules and is not part of the basic
financial statements. This supplemental schedule has been
subjected to the auditing procedures applied in the audits
of the basic financial statements and, in our opinion,
fairly states in all material respects the financial data
required to be set forth therein in relation to the basic
financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Chicago, Illinois
January 23, 1998
<PAGE> 29
<TABLE>
<CAPTION>
SIGCORP, Inc.
CONSOLIDATED STATEMENTS OF INCOME
<S> <C> <C> <C>
Year Ended December 31 (in thousands except for per share amounts) 1997 1996 1995
OPERATING REVENUES:
Electric utility $ 272,545 $ 276,479 $ 275,495
Gas utility 85,561 96,251 63,203
Energy services and other 75,131 32,008 22,073
Total operating revenues 433,237 404,738 360,771
OPERATING EXPENSES:
Fuel for electric generation 62,630 74,860 81,236
Purchased electric energy 13,985 8,295 9,332
Cost of gas sold 54,060 66,105 40,303
Cost of energy services and other 73,668 28,553 18,401
Other operation expenses 60,726 60,885 53,502
Maintenance 29,224 29,784 32,222
Depreciation and amortization 40,373 39,140 39,442
Property and other taxes 12,989 14,399 13,932
Total operating expenses 347,655 322,021 288,370
OPERATING INCOME 85,582 82,717 72,401
INTEREST AND OTHER CHARGES:
Interest expense on long-term debt 19,797 18,432 18,789
Interest expense on short-term debt 1,519 2,387 1,905
Amortization of premium, discount
and expense on debt 671 690 693
Allowance for funds used
during construction (1,378) (445) (1,001)
Preferred dividend requirements
of subsidiary 1,097 1,097 1,099
Interest income (3,003) (2,135) (1,278)
Other, net (3,122) (2,536) (2,563)
Total interest and other charges 15,581 17,490 17,644
INCOME BEFORE INCOME TAXES 70,001 65,227 54,757
Federal and state income taxes 23,861 21,963 16,232
NET INCOME BEFORE CUMULATIVE EFFECT
OF ACCOUNTING CHANGE 46,140 43,264 38,525
Cumulative effect at January 1, 1995
of adopting the unbilled revenues
method of accounting - net of
income taxes - - 6,294
NET INCOME $ 46,140 $ 43,264 $ 44,819
AVERAGE COMMON SHARES OUTSTANDING 23,631 23,631 23,631
BASIC AND DILUTED EARNINGS PER SHARE
BEFORE CUMULATIVE EFFECT OF
ACCOUNTING CHANGE $ 1.95 $ 1.83 $ 1.63
CUMULATIVE EFFECT OF
ACCOUNTING CHANGE - - 0.27
BASIC AND DILUTED EARNINGS PER SHARE $ 1.95 $ 1.83 $ 1.90
<FN>
The accompanying Notes to Consolidated Financial Statements are
an integral part of these statements.
</FN>
</TABLE>
<PAGE> 30
<TABLE>
>caption>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<S> <C> <C> <C>
Year Ended December 31 (in thousands) 1997 1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 46,140 $ 43,264 $ 44,819
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 40,373 39,140 39,442
Preferred dividend requirements
of subsidiary 1,097 1,097 1,099
Deferred income taxes and investment
tax credits, net (3,923) 11,474 9,516
Allowance for other funds used
during construction (581) - (380)
Cumulative effect of
accounting change - - (6,294)
Change in assets and liabilities:
Receivables, net (including accrued
unbilled revenues) (19,497) (17,170) (22,167)
Inventories (4,306) 3,721 11,479
Coal contract settlement - 12,928 (5,243)
Accounts payable 14,141 (4,396) 2,813
Accrued taxes (1,855) (1,098) 1,972
Refunds from gas suppliers (915) (1,213) 2,037
Refunds to customers (651) (4,961) (7,348)
Accrued coal liability - - (22,018)
Other assets and liabilities 8,103 5,120 (1,706)
Net cash provided by operating
activities 78,126 87,906 48,021
CASH FLOWS FROM INVESTING ACTIVITIES
Construction expenditures (net of allowance for
other funds used during construction) (65,501) (40,302) (44,709)
Demand side management program
expenditures (2,340) (3,633) (9,051)
Investments in leveraged leases - (6,850) -
Purchases of investments (423) - (2,034)
Sales of investments 264 700 4,211
Investments in partnerships 3,166 126 (901)
Change in nonutility property (5,572) 395 2,316
Change in notes receivable (5,592) (11,533) (1,138)
Other (1,120) (84) 4,800
Net cash used in investing
activities (77,118) (61,181) (46,506)
CASH FLOWS FROM FINANCING ACTIVITIES
First mortgage bonds (295) (8,000) (5,300)
Dividends paid (30,482) (28,353) (27,725)
Reduction in preferred stock - - (91)
Change in environmental improvement
funds held by trustee (272) (188) 6,884
Payments on partnership obligations (2,276) (2,787) (3,256)
Change in notes payable 26,980 11,432 9,127
Other 1,973 528 620
Net cash used in financing
activities (4,372) (27,368) (19,741)
NET DECREASE IN CASH AND
CASH EQUIVALENTS (3,364) (643) (18,226)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 9,191 9,834 28,060
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 5,827 $ 9,191 $ 9,834
<FN>
The accompanying Notes to Consolidated Financial Statements
are an integral part of these statements
</FN>
</TABLE>
<PAGE> 31
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
<S> <C> <C>
At December 31 (in thousands) 1997 1996
ASSETS
Utility Plant, at original cost:
Electric $ 1,091,349 $ 1,047,717
Gas 141,646 131,796
1,232,995 1,179,513
Less accumulated provision
for depreciation 557,631 524,104
675,364 655,409
Construction work in progress 32,241 25,849
Net utility plant 707,605 681,258
Other Investments and Property:
Investments in leveraged leases 42,964 42,887
Investments in partnerships and limited
liability corporations 21,197 23,983
Environmental improvement funds
held by trustee 4,102 3,830
Notes receivable 21,404 15,812
Nonutility property and other 12,503 6,931
Total other investments and property 102,170 93,443
Current Assets:
Cash and cash equivalents 5,827 9,191
Temporary investments, at market 749 565
Receivables, less allowance of $327,581
and $214,956, respectively 52,496 36,469
Accrued unbilled revenues 22,320 34,744
Inventories 32,930 31,241
Current regulatory assets 11,749 13,687
Other current assets 3,250 3,064
Total current assets 129,321 128,961
Other Assets:
Unamortized premium on reacquired debt 4,704 5,184
Postretirement benefits other
than pensions 3,263 5,541
Demand side management programs 24,467 22,757
Allowance inventory 2,093 -
Deferred charges 16,273 15,509
Total other assets 50,800 48,991
TOTAL $ 989,896 $ 952,653
<FN>
The accompanying Notes to Consolidated Financial Statements are
an integral part of these statements.
</FN>
</TABLE>
<PAGE> 32
<TABLE>
<CAPTION>
<S> <C> <C>
At December 31 (in thousands) 1997 1996
SHAREHOLDERS' EQUITY AND LIABILITIES
CAPITALIZATION:
Common Stock $ 78,258 $ 78,258
Retained Earnings 270,828 252,626
Total common shareholders' equity 349,086 330,884
Cumulative Nonredeemable Preferred
Stock of Subsidiary 11,090 11,090
Cumulative Redeemable Preferred
Stock of Subsidiary 7,500 7,500
Cumulative Special Preferred
Stock of Subsidiary 924 924
Long-Term Debt, net of current maturities 273,707 261,629
Long-Term Partnership Obligations,
net of current maturities 2,424 4,563
Total capitalization, excluding bonds
subject to tender (see Consolidated
Statements of Capitalization) 644,731 616,590
Current Liabilities:
Current Portion of Adjustable Rate
Bonds Subject to Tender 31,500 31,500
Current Maturities of Long-Term Debt,
Interim Financing
and Long-Term Partnership Obligations:
Maturing long-term debt 12,695 659
Notes payable 41,368 38,750
Partnership obligations 2,139 2,276
Total current maturities of
long-term debt, interim financing
and long-term partnership obligations 56,202 41,685
Other Current Liabilities:
Accounts payable 47,741 33,600
Dividends payable 123 123
Accrued taxes 5,868 7,723
Accrued interest 5,216 4,585
Refunds to customers 1,155 2,722
Other accrued liabilities 17,866 31,138
Total other current liabilities 77,969 79,891
Total current liabilities 165,671 153,076
Other Liabilities:
Accumulated deferred income taxes 146,218 147,070
Accumulated deferred investment
tax credits, being
amortized over lives of property 20,249 21,706
Regulatory income tax liability - 1,614
Postretirement benefits other
than pensions 11,271 10,084
Other 1,756 2,513
Total other liabilities 179,494 182,987
TOTAL $ 989,896 $ 952,653
<FN>
The accompanying Notes to Consolidated Financial Statements are
an integral part of these statements.
</FN>
</TABLE>
<PAGE> 33
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CAPITALIZATION
<S> <C> <C>
At December 31 (in thousands) 1997 1996
COMMON SHAREHOLDERS' EQUITY
Common Stock, without par value, authorized
50,000,000 shares, issued 23,630,568 $ 78,258 $ 78,258
Retained Earnings, $2,194,121 restricted as
to payment of cash dividends on common stock 270,828 252,626
Total common shareholders' equity 349,086 330,884
PREFERRED STOCK OF SUBSIDIARY
Cumulative, $100 par value, authorized
800,000 shares, issuable in series:
Nonredeemable
4.8% Series, outstanding 85,895 shares,
callable at $110 per share 8,590 8,590
4.75% Series, outstanding 25,000 shares,
callable at $101 per share 2,500 2,500
Total nonredeemable preferred
stock of subsidiary 11,090 11,090
Redeemable
6.50% Series, outstanding 75,000 shares,
redeemable at $100 per share
December 1, 2002 7,500 7,500
SPECIAL PREFERRED STOCK OF SUBSIDIARY
Cumulative, no par value, authorized 5,000,000
shares, issuable in series: 8-1/2% series, outstanding
9,237 shares redeemable at $100 per share 924 924
LONG-TERM DEBT, NET OF CURRENT MATURITIES
First mortgage bonds 238,420 251,115
Notes payable 36,000 11,273
Unamortized debt premium and discount, net (713) (759)
Total long-term debt 273,707 261,629
LONG-TERM PARTNERSHIP OBLIGATIONS,
NET OF CURRENT MATURITIES 2,424 4,563
CURRENT PORTION OF ADJUSTABLE RATE POLLUTION
CONTROL BONDS SUBJECT TO TENDER, DUE
2015, Series B, presently 4.05% 31,500 31,500
TOTAL CAPITALIZATION, including bonds
subject to tender $ 676,231 $ 648,090
<FN>
The accompanying Notes to Consolidated Financial Statements are
an integral part of these statements.
</FN>
</TABLE>
<PAGE> 34
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
<S> <C> <C> <C>
Year Ended December 31 (in thousands) 1997 1996 1995
Balance, January 1 $ 252,626 $ 236,617 $ 218,424
Net income 46,140 43,264 44,819
298,766 279,881 263,243
Common Stock Dividends ($1.18 per share in 1997,
$1.15 per share in 1996 and $1.13
per share in 1995) 27,938 27,255 26,626
Balance, December 31 (See Consolidated
Statements of Capitalization
for restriction) $ 270,828 $ 252,626 $ 236,617
<FN>
The accompanying Notes to Consolidated Financial Statements are
an integral part of these statements.
</FN>
</TABLE>
<PAGE> 35
Southern Indiana Gas
And Electric Company
<PAGE> 36
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO SOUTHERN INDIANA GAS AND ELECTRIC COMPANY:
We have audited the balance sheets and statements of
capitalization of SOUTHERN INDIANA GAS AND ELECTRIC COMPANY
(an Indiana corporation) as of December 31, 1997 and 1996,
and the related statements of income, retained earnings and
cash flows for each of the three years in the period ended
December 31, 1997. These financial statements and the
supplemental schedule referred to below are the
responsibility of Southern Indiana Gas and Electric
Company's management. Our responsibility is to express an
opinion on these financial statements and supplemental
schedule 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 Southern Indiana Gas and Electric
Company as of December 31, 1997 and 1996, and the results of
their operations and their cash flows for each of the three
years in the period ended December 31, 1997, in conformity
with generally accepted accounting principles.
As discussed in Note 3, effective January 1, 1995,
Southern Indiana Gas and Electric Company changed its method
of accounting for unbilled revenues.
Our audits were made for the purpose of forming an
opinion on the basic financial statements taken as a whole.
The supplemental schedule listed under Item 8 (3) is
presented for the purposes of complying with the Securities
and Exchange Commission's rules and is not part of the basic
financial statements. This supplemental schedule has been
subjected to the auditing procedures applied in the audits
of the basic financial statements and, in our opinion,
fairly states in all material respects the financial data
required to be set forth therein in relation to the basic
financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Chicago, Illinois
January 23, 1998
<PAGE> 37
<TABLE>
<CAPTION>
SOUTHERN INDIANA GAS AND ELECTRIC COMPANY
STATEMENTS OF INCOME
<S> <C> <C> <C>
Year Ended December 31 (in thousands) 1997 1996 1995
OPERATING REVENUES:
Electric $ 272,545 $ 276,479 $ 275,495
Gas 85,561 96,251 63,203
Total operating revenues 358,106 372,730 338,698
OPERATING EXPENSES:
Fuel for electric generation 62,630 74,860 81,236
Purchased electric energy 13,985 8,295 9,332
Cost of gas sold 54,060 66,105 40,303
Other operation expenses 55,611 56,188 50,712
Maintenance 29,086 29,641 32,158
Depreciation and amortization 40,191 38,617 39,302
Federal and state income taxes 26,844 24,034 18,093
Property and other taxes 12,787 13,949 13,689
Total operating expenses 295,194 311,689 284,825
OPERATING INCOME 62,912 61,041 53,873
OTHER INCOME:
Allowance for other funds
used during construction 581 - 380
Interest 541 1,824 1,213
Other, net 992 1,003 4,914
Total other income 2,114 2,827 6,507
INCOME BEFORE INTEREST
AND OTHER CHARGES 65,026 63,868 60,380
INTEREST AND OTHER CHARGES:
Interest on long-term debt 18,020 18,432 18,789
Amortization of premium, discount,
and expense on debt 671 690 694
Other interest 1,769 2,350 1,894
Allowance for borrowed funds
used during construction (797) (445) (621)
Total interest and other charges 19,663 21,027 20,756
NET INCOME BEFORE CUMULATIVE
EFFECT OF ACCOUNTING CHANGE 45,363 42,841 39,624
Cumulative Effect at January 1, 1995
of Adopting the Unbilled
Revenues Method of Accounting -
Net of Income Taxes - - 6,294
NET INCOME 45,363 42,841 45,918
Preferred Stock Dividends 1,097 1,097 1,099
NET INCOME APPLICABLE TO COMMON STOCK $ 44,266 $ 41,744 $ 44,819
<FN>
The accompanying Notes to Consolidated Financial Statements are
an integral part of these statements.
</FN>
</TABLE>
<PAGE> 38
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS
<S> <C> <C> <C>
Year Ended December 31 (in thousands) 1997 1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 45,363 $ 42,841 $ 45,918
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 40,191 38,617 39,302
Deferred income taxes and
investment tax credits, net (4,951) 10,558 9,516
Allowance for other funds used
during construction (581) - (380)
Cumulative effect of
accounting change - - (6,294)
Change in assets and liabilities:
Receivables, net (including accrued
unbilled revenues) (3,261) (18,128) (22,167)
Inventories (3,407) 3,772 11,479
Coal contract settlement - 12,928 (5,243)
Accounts payable (272) (4,882) 2,813
Accrued taxes (2,788) (1,682) 1,972
Refunds from gas suppliers (915) (1,213) 2,037
Refunds to customers (651) (4,961) (7,348)
Accrued coal liability - - (22,018)
Other assets and liabilities 7,950 5,194 (1,707)
Net cash provided by
operating activities 76,678 83,044 47,880
CASH FLOWS FROM INVESTING ACTIVITIES
Construction expenditures (net of
allowance for other funds used
during construction) (65,501) (40,302) (44,709)
Demand side management program
expenditures (2,340) (3,633) (9,051)
Purchases of investments - - (2,034)
Sales of investments - - 4,211
Investments in partnerships - - (901)
Change in nonutility property - 648 2,316
Change in notes receivable - - (1,138)
Other (456) (211) 4,941
Net cash used in investing
activities (68,297) (43,498) (46,365)
CASH FLOWS FROM FINANCING ACTIVITIES
First mortgage bonds (295) (8,000) (5,300)
Dividends paid (30,482) (28,353) (27,725)
Reduction in preferred stock - - (91)
Change in environmental improvement
funds held by trustee (272) (188) 6,884
Payments on partnership obligations - - (3,256)
Change in notes payable 20,129 1,900 9,127
Contribution of nonregulated
subsidiaries - (12,145) -
Other 526 533 620
Net cash used in financing
activities (10,394) (46,253) (19,741)
NET DECREASE IN CASH AND
CASH EQUIVALENTS (2,013) (6,707) (18,226)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 3,127 9,834 28,060
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 1,114 $ 3,127 $ 9,834
<FN>
The accompanying Notes to Consolidated Financial Statements are
an integral part of these statements.
</FN>
</TABLE>
<PAGE> 39
<TABLE>
<CAPTION>
BALANCE SHEETS
<S> <C> <C>
At December 31 (in thousands) 1997 1996
ASSETS
UTILITY PLANT, at original cost:
Electric $ 1,091,349 $ 1,047,717
Gas 141,646 131,796
1,232,995 1,179,513
Less accumulated provision for depreciation 557,631 524,104
675,364 655,409
Construction work in progress 32,241 25,849
Net utility plant 707,605 681,258
OTHER INVESTMENTS AND PROPERTY:
Environmental improvement funds
held by trustee 4,102 3,830
Nonutility property and other 1,552 1,552
Total other investments and property 5,654 5,382
CURRENT ASSETS:
Cash and cash equivalents 1,114 3,127
Receivables, less allowance of $327,581
and $214,956, respectively 32,281 32,491
Accrued unbilled revenues 22,320 34,744
Inventories 32,504 31,190
Current regulatory assets 11,749 13,687
Other current assets 1,443 4,975
Total current assets 101,411 120,214
Other Assets:
Unamortized premium on reacquired debt 4,704 5,184
Postretirement benefits other than pensions 3,263 5,541
Demand side management programs 24,467 22,757
Allowance inventory 2,093 -
Deferred charges 15,266 11,989
Total other assets 49,793 45,471
TOTAL $ 864,463 $ 852,325
<FN>
The accompanying Notes to Consolidated Financial Statements are
an integral part of these statements.
</FN>
</TABLE>
<PAGE> 40
<TABLE>
<CAPTION>
<S> <C> <C>
At December 31 (in thousands) 1997 1996
SHAREHOLDERS' EQUITY AND LIABILITIES
CAPITALIZATION:
Common Stock $ 78,258 $ 78,258
Retained Earnings 228,570 213,688
Total common shareholders' equity 306,828 291,946
Cumulative Nonredeemable Preferred
Stock of Subsidiary 11,090 11,090
Cumulative Redeemable Preferred
Stock of Subsidiary 7,500 7,500
Cumulative Special Preferred
Stock of Subsidiary 924 924
Long-Term Debt, net of current maturities 238,707 251,355
Total capitalization, excluding bonds
subject to tender (see Statements
of Capitalization) 565,049 562,815
CURRENT LIABILITIES:
Current Portion of Adjustable Rate Bonds
Subject to Tender 31,500 31,500
Current Maturities of Long-Term Debt and
Interim Financing:
Maturing long-term debt 12,695 295
Notes payable 31,643 32,400
Notes payable to associated company 20,886 -
Total current maturities of long-term
debt and interim financing 65,224 32,695
Other Current Liabilities:
Accounts payable 27,066 27,338
Dividends payable 123 123
Accrued taxes 5,925 8,713
Accrued interest 4,635 4,572
Refunds to customers 1,155 2,722
Other accrued liabilities 16,018 29,650
Total other current liabilities 54,922 73,118
Total current liabilities 151,646 137,313
Other Liabilities:
Accumulated deferred income taxes 114,493 116,373
Accumulated deferred investment tax
credits, being amortized over lives
of property 20,249 21,706
Regulatory income tax liability - 1,613
Postretirement benefits other
than pensions 11,271 10,084
Other 1,755 2,421
Other liabilities 147,768 152,197
TOTAL $ 864,463 $ 852,325
<FN>
The accompanying Notes to Consolidated Financial Statements are
an integral part of these statements.
</FN>
</TABLE>
<PAGE> 41
<TABLE>
<CAPTION>
STATEMENTS OF CAPITALIZATION
<S> <C> <C>
At December 31 (in thousands) 1997 1996
COMMON SHAREHOLDERS' EQUITY
Common Stock, without par value, authorized
50,000,000 shares, issued 23,630,568 $ 78,258 $ 78,258
Retained Earnings, $2,194,121 restricted as
to payment of cash dividends on common stock 228,570 213,688
Total common shareholders' equity 306,828 291,946
PREFERRED STOCK
Cumulative, $100 par value, authorized
800,000 shares, issuable in series:
Nonredeemable
4.8% Series, outstanding 85,895 shares,
callable at $110 per share 8,590 8,590
4.75% Series, outstanding 25,000 shares,
callable at $101 per share 2,500 2,500
Total nonredeemable preferred stock 11,090 11,090
Redeemable
6.50% Series, outstanding 75,000 shares,
redeemable at $100 per share
December 1, 2002 7,500 7,500
SPECIAL PREFERRED STOCK
Cumulative, no par value, authorized 5,000,000
shares, issuable in series: 8-1/2% series, outstanding
9,237 shares redeemable at $100 per share 924 924
LONG-TERM DEBT, NET OF CURRENT MATURITIES
First mortgage bonds 238,420 251,114
Notes payable 1,000 1,000
Unamortized debt premium and discount, net (713) (759)
Total long-term debt 238,707 251,355
CURRENT PORTION OF ADJUSTABLE RATE POLLUTION
CONTROL BONDS SUBJECT TO TENDER, DUE
2015, Series B, presently 4.05% 31,500 31,500
TOTAL CAPITALIZATION, including bonds
subject to tender $ 596,549 $ 594,315
<FN>
The accompanying Notes to Consolidated Financial Statements are
an integral part of these statements.
</FN>
</TABLE>
<PAGE>42
<TABLE>
<CAPTION>
STATEMENTS OF RETAINED EARNINGS
<S> <C> <C> <C>
Year Ended December 31 (in thousands) 1997 1996 1995
Balance, January 1 $ 213,688 $ 236,617 $ 218,424
Net income 45,363 42,841 45,918
259,051 279,458 264,342
Dividend of Nonregulated
Subsidiaries to Parent - 37,418 -
Preferred Stock Dividends 1,097 1,097 1,099
Common Stock Dividends 29,384 27,255 26,626
30,481 65,770 27,725
Balance, December 31 (See Statements
of Capitalization for restriction) $ 228,570 $ 213,688 $ 236,617
<FN>
The accompanying Notes to Consolidated Financial Statements are
an integral part of these statements.
</FN>
</TABLE>
<PAGE> 43
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 Summary of Significant Accounting Policies
SIGCORP AND SIGECO
PRINCIPLES OF CONSOLIDATION Effective January 1, 1996, a
new holding company, SIGCORP, Inc. (SIGCORP), became the
parent of Southern Indiana Gas and Electric Company
(SIGECO), a regulated gas and electric utility which
accounts for over 90% of SIGCORP's net income, and four of
SIGECO's former wholly-owned subsidiaries: Energy Systems
Group, Inc. (ESGI), Southern Indiana Minerals, Inc. (SIMI),
Southern Indiana Properties, Inc.(SIPI) and ComSource, Inc.
(ComSource). All of the shares of SIGECO's common stock
were exchanged on a one-for-one basis for shares of SIGCORP,
while all of SIGECO's debt securities and all of its
outstanding shares of preferred stock remain securities of
SIGECO and were unaffected. The 1995 financial statements
of SIGECO include the results of its former wholly-owned
subsidiaries. During the fourth quarter of 1996, four
additional nonregulated subsidiaries were formed: SIGCORP
Energy Services, Inc. (Energy), SIGCORP Capital, Inc.
(Capital), SIGCORP Fuels, Inc. (Fuels) and SIGCORP Power
Marketing, Inc. (Power). During the third quarter of 1997,
SIGCORP Communications Services, Inc. (Communications) was
formed.
SIGECO is a regulated gas and electric utility and engaged
principally in the production, purchase, transmission,
distribution and sale of electricity and the delivery of
natural gas. SIGECO serves 122,937 electric customers in
the city of Evansville and 74 other communities and serves
107,278 gas customers in the city of Evansville and 64 other
communities.
ESGI has a one-third ownership in Energy Systems Group, LLC,
an energy-related performance contracting firm serving
industrial and commercial customers. SIMI processes and
markets coal combustion by-products. SIPI invests in
leveraged leases of real estate and equipment, real estate
partnerships and joint ventures and private placement
subordinated debt instruments. Cash balances are invested
in marketable securities. ComSource markets
telecommunications services. Energy was established to
market energy and related services and is currently
providing natural gas, pipeline management, storage service
and other natural gas-related services to SIGECO, other
utilities and endusers. Capital is the primary financing
vehicle for SIGCORP's nonregulated subsidiaries. Fuels was
formed to provide coal and related services to SIGECO and
other customers. Power, not yet active, was formed to
procure electric power supplies for SIGECO and other
customers, and will market SIGECO's excess electric
generation capacity. Communications was formed to undertake
telecommunications related strategic initiatives. All
significant intercompany transactions are eliminated.
On May 23, 1997, Energy Systems Group, Inc. (ESGI), IGC
Energy and Citizens By-Products Coal Company formed Energy
Systems Group, LLC (ESG LLC), an equally owned limited
liability corporation. On June 18, 1997, ESGI contributed
significantly all of its assets and liabilities to ESG LLC
for a one-third interest in ESG LLC. ESGI's results of
operations through June 18, 1997 are included in other
revenues and the respective operating expense accounts in
SIGCORP's consolidated financial statements, and subsequent
to June 18, 1997, ESGI's share of the pretax earnings and
losses of ESG LLC are included in Other, net.
RECLASSIFICATION Certain amounts in the prior year
financial statements have been reclassified to conform to
the current year financial statement presentation.
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.
<PAGE> 44
REGULATION The Indiana Utility Regulatory Commission (IURC)
has jurisdiction over all investor-owned gas and electric
utilities in Indiana. The Federal Energy Regulatory
Commission (FERC) has jurisdiction over those investor-owned
utilities that make wholesale energy sales. These agencies
regulate SIGECO's utility business operations, rates,
accounts, depreciation allowances, services, security issues
and the sale and acquisition of properties. The financial
statements of SIGECO are based on generally accepted
accounting principles, which give recognition to the
ratemaking and accounting practices of these agencies.
REGULATORY ASSETS SIGECO is subject to the provisions of
Statement of Financial Accounting Standards (SFAS) No. 71,
"Accounting for the Effects of Certain Types of Regulation."
Regulatory assets represent probable future revenues to
SIGECO associated with certain incurred costs which will be
recovered from customers through the ratemaking process.
Generally accepted accounting principles for rate regulated
companies also require that regulatory assets which are no
longer probable of recovery through future revenues, at the
balance sheet date, be charged to earnings. The following
regulatory assets are reflected in the Consolidated Balance
Sheets:
<TABLE>
<CAPTION>
<S> <C> <C>
At December 31 (in thousands) 1997 1996
Regulatory Assets:
Demand side management program costs $ 25,069 $ 23,359
Postretirement benefit costs (Note 1) 5,541 7,819
Unamortized premium on reacquired debt 5,183 5,663
Regulatory study costs 337 718
Fuel and gas costs (Note 1) 9,129 13,237
45,259 50,796
Less current amounts 11,749 13,687
Total long-term regulatory assets $ 33,510 $ 37,109
</TABLE>
Refer to the individual footnotes referenced above for
discussion of specific regulatory assets. See Income Taxes
for regulatory assets and liabilities related to income
taxes.
As of December 31, 1997, the recovery of $26,200,000 of
SIGECO's total regulatory assets is reflected in rates
charged to customers over periods ranging up to 26 years.
SIGECO intends to request recovery of its remaining
regulatory assets in future general rate case filings.
If all or a separable portion of SIGECO's operation becomes
no longer subject to the provisions of SFAS No. 71, a write
off of related regulatory assets would be required, unless
some form of transition cost recovery continues through
rates established and collected for SIGECO's remaining
regulated operations. In addition, SIGECO would be required
to determine any impairment to the carrying costs of
deregulated plant and inventory assets.
CONCENTRATION OF CREDIT RISK SIGECO's customer receivables
from gas and electric sales and gas transportation services
are primarily derived from a diversified base of
residential, commercial and industrial customers located in
a southwestern region of Indiana. SIGECO continually
reviews customers' creditworthiness and requests deposits or
refunds deposits based on that review. Energy's customer
receivables from gas sales and transportation services are
primarily derived from a diversified base of commercial and
industrial customers located in the midwestern region of the
United States. Energy investigates the creditworthiness of
its potential customers. See Note 4 for a discussion of
receivables related to SIPI's leveraged lease investments.
<PAGE> 45
UTILITY PLANT Utility plant is stated at the historical
original cost of construction. The cost of repairs and
minor renewals is charged to maintenance expense as
incurred. Property unit replacements are capitalized and
the depreciation reserve is charged with the cost, less net
salvage, of units retired.
DEPRECIATION Depreciation of utility plant is provided
using the straight-line method over the estimated service
lives of the depreciable plant. Provisions for
depreciation, expressed as an annual percentage of the cost
of average depreciable plant in service, were as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1997 1996 1995
Electric 3.4% 3.4% 3.8%
Gas 3.2% 3.2% 3.3%
</TABLE>
INCOME TAXES SIGCORP utilizes the liability method of
accounting for income taxes, providing deferred taxes on
temporary differences. Investment tax credits have been
deferred and are amortized through credits to income over
the lives of the related property.
The components of the net deferred income tax liability are
as follows:
<TABLE>
<CAPTION>
SIGCORP, Inc.
<S> <C> <C>
At December 31 (in thousands) 1997 1996
Deferred Tax Liabilities:
Depreciation and cost recovery
timing differences $ 117,357 $ 115,095
Deferred fuel costs, net 1,252 4,778
Leveraged leases 31,625 30,702
Regulatory assets recoverable through
future rates 25,687 25,668
Deferred Tax Assets:
Unbilled revenue (1,593) (2,499)
Regulatory liabilities to be settled
through future rates (25,229) (27,282)
Other, net (2,881) 608
Net deferred income tax liability $ 146,218 $ 147,070
</TABLE>
The $852,000 decrease in the net deferred income tax
liability from December 31, 1996 to December 31, 1997, is
due to the current year deferred federal and state income
tax benefit of $3,030,000. This decrease was partially
offset by a $2,178,000 increase which resulted primarily
from a change in the net regulatory assets and liabilities.
<TABLE>
<CAPTION>
Southern Indiana Gas and Electric Company
<S> <C> <C>
At December 31 (in thousands) 1997 1996
Deferred Tax Liabilities:
Depreciation and cost recovery
timing differences $ 117,467 $ 115,095
Deferred fuel costs, net 1,252 4,778
Regulatory assets recoverable
through future rates 25,687 25,668
Deferred Tax Assets:
Unbilled revenue (1,593) (2,499)
Regulatory liabilities to be settled
through future rates (25,229) (27,282)
Other, net (3,091) 613
Net deferred income tax liability $ 114,493 $ 116,373
</TABLE>
The $1,880,000 decrease in SIGECO's net deferred income tax
liability from December 31, 1996 to December 31, 1997, is
due to the current year deferred federal and state income
tax benefit of $3,951,000. This decrease was partially
offset by a $2,071,000 increase which resulted from a change
in the net regulatory assets and liabilities.
<PAGE> 46
The components of current and deferred income tax expense
are as follows:
<TABLE>
<CAPTION>
SIGCORP, Inc.
<S> <C> <C> <C>
Year Ended December 31 ( in thousands) 1997 1996 1995
Current
Federal $ 24,387 $ 8,743 $ 7,031
State 3,961 1,891 1,601
Deferred, net
Federal (2,858) 10,967 7,771
State (172) 1,805 1,385
Investment tax credit, net (1,457) (1,443) (1,556)
Total income tax expense related to net income before
cumulative effect of accounting change 23,861 21,963 16,232
Current income tax expense related to
cumulative effect of accounting change - - 3,845
Total income tax expense $ 23,861 $ 21,963 $ 20,077
</TABLE>
<TABLE>
<CAPTION>
Southern Indiana Gas and Electric Company
<S> <C> <C> <C>
Year Ended December 31 ( in thousands) 1997 1996 1995
Current
Federal $ 28,055 $ 11,773 $ 9,801
State 4,198 1,934 1,861
Deferred, net
Federal (3,673) 10,081 6,719
State (278) 1,689 1,268
Investment tax credit, net (1,458) (1,443) (1,556)
Income tax expense as shown on
Statements of Income 26,844 24,034 18,093
Current income tax expense
included in Other Income 415 606 (3,030)
Deferred income tax expense
included in Other Income - - 1,169
Total income tax expense related
to net income before
cumulative effect of accounting change 27,259 24,640 16,232
Current income tax expense related to
cumulative effect of accounting change - - 3,845
Total income tax expense $ 27,259 $ 24,640 $ 20,077
</TABLE>
A reconciliation of the statutory tax rates to effective
income tax rate is as follows:
<TABLE>
<CAPTION>
SIGCORP, Inc.
<S> <C> <C> <C>
Year Ended December 31 1997 1996 1995
Statutory federal and state rate 37.9% 37.9% 37.9%
Equity portion of allowance for funds
used during construction (0.3) - (0.2)
Book depreciation over related tax
depreciation - nondeferred 1.8 1.7 2.0
Amortization of deferred investment
tax credit (2.1) (2.2) (2.4)
Low-income housing credit (4.0) (4.2) (4.3)
Preferred dividend requirements
of subsidiary 0.6 0.6 0.6
Other, net 0.2 (0.1) (2.7)
Effective tax rate 34.1% 33.7% 30.9%
</TABLE>
<PAGE> 47
<TABLE>
<CAPTION>
Southern Indiana Gas and Electric Company
<S> <C> <C> <C>
Year Ended December 31 1997 1996 1995
Statutory federal and state rate 37.9% 37.9% 37.9%
Equity portion of allowance for funds
used during construction (0.3) - (0.2)
Book depreciation over related tax
depreciation - nondeferred 1.8 1.9 2.0
Amortization of deferred investment
tax credit (2.1) (2.3) (2.4)
Low-income housing credit - - (4.3)
Preferred dividend requirements
of subsidiary - - 0.6
Other, net 0.2 (1.0) (2.7)
Effective tax rate 37.5% 36.5% 30.9%
</TABLE>
PENSION BENEFITS SIGECO has trusteed, noncontributory
defined benefit plans which cover eligible full-time regular
employees. The plans provide retirement benefits based on
years of service and the employee's highest 60 consecutive
months' compensation during the last 120 months of
employment. The funding policy of SIGECO is to contribute
amounts to the plans equal to at least the minimum funding
requirements of the Employee Retirement Income Security Act
of 1974 (ERISA) but not in excess of the maximum deductible
for federal income tax purposes. The plans' assets as of
December 31, 1997 consist of investments in interest-bearing
obligations and common stocks.
The components of net pension cost related to these plans
are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Year Ended December 31 (in thousands) 1997 1996 1995
Service cost - benefits earned
during the period $ 2,166 $ 2,288 $ 1,700
Interest cost on projected
benefit obligation 4,661 4,433 4,044
Actual return on plan assets (12,638) (7,409) (12,243)
Net amortization and deferral 7,143 2,379 8,000
Net pension cost charged to operations,
construction and other accounts $ 1,332 $ 1,691 $ 1,501
</TABLE>
The funded status of the trusteed retirement plans is as
follows:
<TABLE>
<CAPTION>
<S> <C> <C>
At December 31 (in thousands) 1997 1996
Actuarial present value of:
Vested benefit obligation $ (55,038) $ (49,098)
Accumulated benefit obligation $ (56,566) $ (50,461)
Projected benefit obligation $ (72,914) $ (63,999)
Plan assets at fair value 76,587 66,011
Excess of plan assets over projected
benefit obligation 3,673 2,012
Remaining unrecognized transitional asset (2,233) (2,651)
Prior service cost 1,412 1,560
Unrecognized net loss (8,117) (5,797)
Accrued pension liability $ (5,265) $ (4,876)
</TABLE>
The projected benefit obligation at December 31, 1997 and
1996 was determined using an assumed discount rate of 7.0%
and 7.5%, respectively. For both periods, the long-term
rate of compensation increases was assumed to be 5%, and the
long-term rate of return on plan assets was assumed to be
8%. The transitional asset is being amortized over
approximately 15, 18 and 14 years for the Salaried, Hourly
and Hoosier plans, respectively.
In addition to the trusteed pension plans discussed above,
SIGECO provides supplemental pension benefits to certain
current and former officers under nonqualified and nonfunded
plans. Annual service cost related to these benefits is
approximately $300,000.
<PAGE> 48
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS SIGECO provides
certain postretirement health care and life insurance
benefits for retired employees and their dependents through
fully insured plans. SFAS No. 106, "Employers' Accounting
for Postretirement Benefits Other Than Pensions," requires
the expected cost of these benefits be recognized during the
employees' years of service. As authorized by the IURC,
SIGECO deferred as a regulatory asset the additional SFAS
No. 106 costs accrued over the costs of benefits actually
paid after date of adoption, but prior to inclusion in
rates. Subsequently, the IURC authorized SIGECO to include
in rates SFAS No. 106 costs and to recover the amounts
previously deferred over a 60-month period.
The components of the net periodic other postretirement
benefit cost are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Year Ended December 31 (in thousands) 1997 1996 1995
Service cost - benefits earned
during the period $ 890 $ 925 $ 903
Interest cost on accumulated
benefit obligation 2,056 2,028 2,272
Actual return on assets (534) (292) (107)
Net amortization and deferral 1,172 1,267 1,259
Net periodic postretirement
benefit cost 3,584 3,928 4,327
Amortization of prior years' deferred
postretirement benefit obligation 2,278 2,569 549
5,862 6,497 4,876
Deferred postretirement benefit
obligation - 314 2,112
Total charged to operations,
construction and other accounts $ 5,862 $ 6,183 $ 2,764
</TABLE>
The net periodic cost determined under the standard includes
the amortization of the discounted present value of the
obligation at the adoption date, $29,400,000, over a 20-year
period.
Reconciliation of the accumulated postretirement benefit
obligation to the accrued liability for postretirement
benefits is as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
At December 31 (in thousands) 1997 1996
Accumulated other postretirement benefit obligation:
Retirees $ (11,090) $ (10,041)
Other fully eligible participants (5,717) (5,916)
Other active participants (14,117) (13,317)
Total accumulated benefit obligation (30,924) (29,274)
Plan assets at fair value 7,318 5,205
Excess of accumulated benefit obligation
over plan assets (23,606) (24,069)
Unrecognized transition obligation 22,076 23,547
Unrecognized net gain (9,741) (9,562)
Accrued postretirement benefit liability $ (11,271) $ (10,084)
</TABLE>
The assumptions used to develop the accumulated
postretirement benefit obligation at December 31, 1997 and
1996 included discount rates of 7.0% and 7.5%, respectively,
and a health care cost trend rate of 8% declining to 4.5% in
2006 and 9% declining to 5% in 2004 at December 31, 1997 and
1996, respectively. The estimated cost of these future
benefits could be significantly affected by future changes
in health care costs, work force demographics, interest
rates or plan changes. A 1% increase in the assumed health
care cost trend rate each year would increase the aggregate
service and interest costs for 1997 by $565,000 and the
accumulated postretirement benefit obligation by $5,196,000.
In 1995, SIGECO adopted Voluntary Employee Beneficiary
Association (VEBA) Trust Agreements for the funding of
postretirement health benefits for retirees and their
eligible dependents and beneficiaries. Annual funding is
discretionary and is based on the projected cost over time
of benefits to be provided to covered persons consistent
with acceptable actuarial methods. To the extent these
postretirement benefits are funded, the benefits will not be
shown as a liability on SIGECO's financial statements.
<PAGE> 49
CASH FLOW INFORMATION For the purposes of the Consolidated
Balance Sheets and the Consolidated Statements of Cash
Flows, SIGCORP and SIGECO consider all highly liquid debt
instruments purchased with an original maturity of three
months or less to be cash equivalents.
During 1997, 1996 and 1995, SIGCORP paid interest (net of
amounts capitalized) of $19,888,000, $20,328,000 and
$20,085,000, respectively, and income taxes of $29,552,000,
$12,237,000 and $10,334,000, respectively. SIGCORP is
involved in several partnerships which are partially
financed by partnership obligations amounting to $4,563,000
and $6,839,000 at December 31, 1997 and 1996, respectively.
During 1997, 1996 and 1995, SIGECO paid interest (net of
amounts capitalized) of $18,929,000, $19,591,000 and
$20,085,000, respectively, and income taxes of $35,239,000,
$15,746,000 and $10,334,000, respectively.
The following decreases for 1996 in SIGECO's assets and
liabilities were caused by a divide of its nonregulated
subsidiaries to SIGCORP and are noncash in nature.
Deferred income taxes (29,783)
Investments in Leveraged Leases (35,609)
Investments in Partnerships (25,307)
Partnership obligations (9,625)
Other, net (3,771)
INVENTORIES SIGECO accounts for inventories under the
average cost method except for gas in underground storage
which is accounted for under the last-in, first-out (LIFO)
method. Energy accounts for gas in underground storage under
the average cost method.
<TABLE>
<CAPTION>
SIGCORP, Inc.
<S> <C> <C>
At December 31 (in thousands) 1997 1996
Fuel (coal and oil) for electric generation $ 8,920 $ 6,539
Materials and supplies 14,103 15,614
Emission allowances 2,616 -
Gas in underground storage - at LIFO cost 9,046 9,088
- at average cost 862 -
Total inventories $ 35,547 $ 31,241
</TABLE>
<TABLE>
<CAPTION>
Southern Indiana Gas and Electric Company
<S> <C> <C>
At December 31 (in thousands) 1997 1996
Fuel (coal and oil) for electric generation $ 8,920 $ 6,539
Materials and supplies 14,014 15,614
Emission allowances 2,616 -
Gas in underground storage - at LIFO cost 9,046 9,088
Total inventories $ 34,596 $ 31,241
</TABLE>
Based on the December 1997 price of gas purchased, the cost
of replacing SIGECO's current portion of gas in underground
storage at December 31, 1997 exceeded the amount stated on a
LIFO basis by approximately $16,000,000.
OPERATING REVENUES AND FUEL COSTS SIGECO accrues an
estimate of revenues unbilled for electric and gas service
furnished from the meter reading dates to the end of each
accounting period. All metered gas rates contain a gas cost
adjustment clause which allows for adjustment in charges for
changes in the cost of purchased gas. Metered electric
rates typically contain a fuel adjustment clause which
allows for adjustment in charges for electric energy to
reflect changes in the cost of fuel and the net energy cost
of purchased power. SIGECO also collects through a
quarterly rate adjustment mechanism, the margin on electric
sales lost due to the implementation of demand side
management programs.
<PAGE> 50
SIGECO records any adjustment clause under-or overrecovery
each month in revenues. A corresponding asset or liability
is recorded until such time as the under-or overrecovery is
billed or refunded to its customers. The cost of gas sold
is charged to operating expense as delivered to customers
and the cost of fuel for electric generation is charged to
operating expense when consumed.
NEW ACCOUNTING PRONOUNCEMENTS In February 1997, the
Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards No. 128, "Earnings per
Share" (SFAS 128), and Statement of Financial Accounting
Standards No. 129, "Disclosure of Information about Capital
Structure" (SFAS 129). SFAS 128 specifies the computation,
presentation and disclosure requirements for earnings per
share for entities with publicly held common stock. SFAS
129 was issued in conjunction with the FASB's earnings per
share project and incorporated related disclosure
requirements from APB Opinion No. 10, "Disclosure of
Long-Term Obligations," and Statement of Financial Accounting
Standards No. 47, "Disclosure of Long-Term Obligations."
Both statements are effective for fiscal years ending after
December 15, 1997. SIGCORP adopted the statements for year
end 1997 (see Note 7 Capital Stock).
In June 1997, FASB issued Statements of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income," and No.
131, "Disclosures about Segments of an Enterprise and
Related Information," effective for periods beginning after
December 15, 1997. These statements do not affect the
accounting recognition or measurement of transactions, but
rather require expanded disclosures regarding financial
results. SIGCORP will adopt these standards in 1998 as
required by the FASB.
Note 2 Rate and Regulatory Matters
SIGCORP and SIGECO
GAS MATTERS On September 7, 1995, SIGECO petitioned the
IURC seeking a general increase in gas rates. On July 3,
1996, the IURC issued its order, effective July 15, 1996,
granting a 7.3%, or $4.8 million, increase in annual
revenues.
ELECTRIC MATTERS On June 21, 1995, the IURC approved the
third of three planned general electric rate increases
related to SIGECO's Clean Air Act Compliance project
(primarily the addition of a sulfur dioxide scrubber to
serve Culley Units 2 and 3), which began commercial
operation February 1995. The third adjustment also covered
certain nonscrubber-related operating costs such as
additional costs incurred for postretirement benefits other
than pensions beginning in 1993, and the recovery of demand
side management program expenditures. The effective dates
and impact on annual electric revenues of the three
adjustments are summarized below:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Additional
Effective Annual Revenue
Date Revenues Increase
Adjustment 1 October 1, 1993 $1.8 million 1.0%
Adjustment 2 June 29, 1994 4.2 million 2.3
Adjustment 3 June 26, 1995 4.5 million 2.1
</TABLE>
On April 10, 1995, SIGECO reached an agreement with its
remaining long-term contract coal supplier, to buy out the
remainder of SIGECO's contractual obligations for $45.5
million, enabling it to acquire lower-priced spot market
coal. SIGECO estimates the total savings in coal costs
resulting from the buyout, net of total buyout costs, will
approximate $58 million through December 31, 1998, the term
of the original contract. The net savings are being passed
back to SIGECO's electric customers through the fuel
adjustment clause.
<PAGE> 51
Note 3 Revenues Accounting Change
SIGCORP and SIGECO
Prior to 1995, SIGECO recognized electric and gas revenues
when customers were billed on a cycle billing basis. The
utility service rendered after monthly meter reading dates
through the end of a calendar month (unbilled revenues)
became a part of operating revenues in the following month.
To more closely match revenues with expenses, effective
January 1, 1995, SIGECO changed its method of accounting to
accrue the amount of revenue for sales unbilled at the end
of each month. The cumulative effect of the change on prior
years, net of income taxes, is included in net income for
1995. The effect of the change was to increase 1995 net
income $7.9 million ($.34 per share), of which an increase
of $1.6 million ($.07 per share), was reflected in
operations and an increase of $6.3 million ($.27 per share),
the cumulative effect of the change as of January 1, 1995,
was reported as a separate component of net income.
Note 4 Leveraged Leases
SIGCORP
Southern Indiana Properties, Inc. is a lessor in five
leveraged lease agreements under which an office building, a
part of a reservoir, an interest in a paper mill, a gas
turbine electric generating peaking unit and passenger
railroad cars are leased to third parties. The economic
lives and lease terms vary with the leases. The total
equipment and facilities cost was approximately $110,800,000
at December 31, 1997 and 1996, respectively. The cost of
the equipment and facilities was partially financed by
nonrecourse debt provided by lenders, who have been granted
an assignment of rentals due under the leases and a security
interest in the leased property, which they accepted as
their sole remedy in the event of default by the lessee.
Such debt amounted to approximately $79,100,000 and
$81,700,000 at December 31, 1997 and 1996, respectively.
SIGCORP's net investment in leveraged leases at those dates
was $11,339,000 and $12,185,000, respectively, as shown:
<TABLE>
<CAPTION>
<S> <C> <C>
At December 31 (in thousands) 1997 1996
Minimum lease payments receivable $ 63,877 $ 65,363
Estimated residual value 29,073 29,073
Less unearned income 49,986 51,549
Investment in lease financing
receivables and loan 42,964 42,887
Less deferred taxes arising from
leveraged leases 31,625 30,702
Net investment in leveraged leases $ 11,339 $ 12,185
</TABLE>
<PAGE> 52
Note 5 Short-Term Financing
SIGCORP and SIGECO
SIGECO has trust demand note arrangements totaling
$17,000,000 with several banks, of which $15,000,000 was
utilized at December 31, 1997. Funds are also borrowed
periodically from banks on a short-term basis, made
available through lines of credit. SIGCORP has available
lines of credit totaling $63,350,000 at December 31, 1997 of
which $26,368,000 was utilized at that date; included in
these amounts, SIGECO has available lines of credit totaling
$29,000,000 at December 31, 1997 of which $16,643,000 was
utilized at that date.
<TABLE>
<CAPTION>
SIGCORP, Inc.
<S> <C> <C> <C>
At December 31 (in thousands) 1997 1996 1995
Notes Payable
Balance at year end $ 41,368 $ 38,750 $ 30,500
Weighted average interest rate
on year end balance 6.21% 5.94% 6.09%
Average daily amount outstanding
during the year $ 11,510 $ 24,430 $ 16,790
Weighted average interest rate
on average daily amount
outstanding during the year 6.08% 5.74% 6.32%
</TABLE>
<TABLE>
<CAPTION>
Southern Indiana Gas and Electric Company
<S> <C> <C> <C>
At December 31 (in thousands) 1997 1996 1995
Notes Payable
Balance at year end $ 52,529 $ 32,400 $ 30,500
Weighted average interest rate
on year end balance 6.31% 5.94% 6.09%
Average daily amount outstanding
during the year $ 19,777 $ 24,428 $ 16,790
Weighted average interest rate
on average daily amount
outstanding during the year 6.13% 5.74% 6.32%
</TABLE>
Note 6 Long-Term Debt
SIGCORP and SIGECO
The annual sinking fund requirement of SIGECO's first
mortgage bonds is 1% of the greatest amount of bonds
outstanding under the Mortgage Indenture. This requirement
may be satisfied by certification to the Trustee of unfunded
property additions in the prescribed amount as provided in
the Mortgage Indenture. SIGECO intends to meet the 1998
sinking fund requirement by this means and, accordingly, the
sinking fund requirement for 1998 is excluded from current
liabilities on the balance sheet. At December 31, 1997,
$259,419,000 of SIGECO's utility plant remained unfunded
under SIGECO's Mortgage Indenture.
Several of SIGCORP's partnership investments have been
financed through obligations with such partnerships.
Additionally, SIGCORP's investments in leveraged leases have
been partially financed through notes payable to banks. Of
the amount of first mortgage bonds, notes payable and
partnership obligations outstanding at December 31, 1997,
the following amounts mature in the five years subsequent to
1997:
SIGCORP SIGECO
1998 $14,539,000 $12,400,000
1999 47,097,000 45,500,000
2000 1,054,000 500,000
2001 873,000 600,000
2002 3,000,000 3,000,000
In addition, $31,500,000 of adjustable rate pollution
control series first mortgage bonds could, at the election
of the bondholder, be tendered to SIGECO in May 1998. If
SIGECO's agent is unable to remarket any bonds tendered at
that time, SIGECO would be required to obtain additional
funds for payment to bondholders. For financial statement
presentation purposes those bonds subject to tender in 1998
are shown as current liabilities.
<PAGE> 53
First mortgage bonds, notes payable and partnership
obligations outstanding and classified as long-term are as
follows:
<TABLE>
<CAPTION>
SIGCORP, Inc.
<S> <C> <C>
At December 31 (in thousands) 1997 1996
First Mortgage Bonds due:
1998, 6-3/8% $ - $ 12,000
1999, 6% 45,000 45,000
2003, 5.60% Pollution Control Series A 3,945 4,640
2008, 6.05% Pollution Control Series A 22,000 22,000
2014, 7.25% Pollution Control Series A 22,500 22,500
2016, 8-7/8% 25,000 25,000
2023, 7.60% 45,000 45,000
2025, 7-5/8% 20,000 20,000
Adjustable Rate Pollution Control:
2015, Series A, presently 4.60% 9,975 9,975
Adjustable Rate Environmental Improvement:
2023, Series B, presently 6% 22,800 22,800
2028, Series A, presently 4.65% 22,200 22,200
Total first mortgage bonds $ 238,420 $ 251,115
Notes Payable:
Banks $ - $ 10,273
Insurance Company, due 2012, 7.43% 35,000 -
Tax Exempt, due 2003, 6.25% 1,000 1,000
Total notes payable $ 36,000 $ 11,273
Partnership Obligations, due 1999 through
2003, without interest $ 2,424 $ 4,563
</TABLE>
<TABLE>
<CAPTION>
Southern Indiana Gas and Electric Company
<S> <C> <C>
At December 31 (in thousands) 1997 1996
First Mortgage Bonds due:
1998, 6-3/8% $ - $ 12,000
1999, 6% 45,000 45,000
2003, 5.60% Pollution Control Series A 3,945 4,640
2008, 6.05% Pollution Control Series A 22,000 22,000
2014, 7.25% Pollution Control Series A 22,500 22,500
2016, 8-7/8% 25,000 25,000
2023, 7.60% 45,000 45,000
2025, 7-5/8% 20,000 20,000
Adjustable Rate Pollution Control:
2015, Series A, presently 4.60% 9,975 9,975
Adjustable Rate Environmental Improvement:
2023, Series B, presently 6% 22,800 22,800
2028, Series A, presently 4.65% 22,200 22,200
Total first mortgage bonds $ 238,420 $ 251,115
Notes Payable:
Tax Exempt, due 2003, 6.25% 1,000 1,000
Total notes payable $ 1,000 $ 1,000
</TABLE>
<PAGE> 54
Note 7 Capital Stock
SIGCORP and SIGECO
COMMON STOCK Each outstanding share of SIGCORP's common
stock contains a right which entitles registered holders to
purchase from SIGCORP one-hundredth of a share of SIGCORP's
common stock, at an initial price of $65 per share (Purchase
Price) subject to adjustment. The rights will not be
exercisable until a party acquires beneficial ownership of
10% of common shares or makes a tender offer for at least
10% of its common shares. The rights expire December 31,
2005. If not exercisable, the rights in whole may be
redeemed by SIGCORP at a price of $.01 per right at any time
prior to their expiration. If at any time after the rights
become exercisable and are not redeemed and SIGCORP is
involved in a merger or other business combination
transaction, proper provision shall be made to entitle a
holder of a right to buy common stock of the acquiring
company having a value of two times such Purchase Price.
On January 21, 1997, the Board of Directors of SIGCORP
approved a split of SIGCORP's issued shares of common stock
without par value on a three-for-two basis. The stock
split, effective March 27, 1997, increased SIGCORP's
outstanding shares from 15,754,826 to 23,630,568. Average
common shares outstanding, earnings per share of common
stock and dividends paid per share for all periods presented
reflect the stock split.
SIGECO has a common stock option plan for its key management
employees. The option price for all stock options is at
least 100% of the fair market value of SIGCORP common stock
at the grant date. Options generally vest and become
exercisable between one and three years in equal annual
installments beginning one year after the grant date, and
generally expire in 10 years. The expiration dates for
options outstanding as of December 31, 1997, ranged from
July 13, 2004 to July 14, 2007. Stock option activity for
the past three years was as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
At December 31 1997 1996 1995
Outstanding at beginning of year 327,901 282,478 230,499
Granted 139,348 46,173 54,342
Exercised (9,080) (750) (2,363)
Outstanding at end of year 458,169 327,901 282,478
Exercisable at end of year 318,821 226,044 113,132
Reserved for future grants at
end of year 279,638 418,986 465,159
Average Option Price - Exercised $18.42 $18.42 $18.42
- Outstanding
at end of year $21.58 $19.43 $18.80
</TABLE>
SIGCORP accounts for stock compensation in accordance with
Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees." Under Accounting Principles
Board Opinion No. 25, no compensation cost has been
recognized for stock options. Had compensation cost for
stock options been determined consistent with SFAS No. 123
"Accounting for Stock-based Compensation," net income would
have been reduced to the following pro forma amounts:
<TABLE>
<CAPTION>
SIGCORP, Inc.
<S> <C> <C> <C>
At December 31 1997 1996 1995
Net Income:
As reported $46,140 $43,264 $44,819
Pro forma 45,998 43,175 44,778
Basic and Diluted Earnings Per Share:
As reported $1.95 $1.83 $1.90
Pro forma 1.95 1.83 1.90
</TABLE>
<PAGE> 55
<TABLE>
<CAPTION>
Southern Indiana Gas and Electric Company
<S> <C> <C> <C>
At December 31 1997 1996 1995
Net Income Applicable to Common Stock:
As reported $44,266 $41,744 $44,819
Pro forma 44,124 41,655 44,778
</TABLE>
The fair value of each option granted used to determine pro
forma net income is estimated as of the date of grant using
the Black-Scholes option pricing model with the following
weighted average assumptions used for grants in the twelve
month periods ended December 31, 1997, 1996 and 1995: risk-free
interest rate of 5.75%, 6.50% and 6.47%, respectively;
expected option term of five years; expected volatilities of
15.65%, 14.69% and 16.25%, respectively; and dividend rates
of 4.46%, 4.96% and 5.52%, respectively.
EARNINGS PER SHARE The following table illustrates the
basic and diluted earnings per share calculations.
<TABLE>
<CAPTION>
SIGCORP, Inc.
At December 31(in thousands except for per share amounts)
1997 1996 1995
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Per Per Per
Income Shares Share Income Shares Share Income Shares Share
Amount Amount Amount
Basic EPS
Income before cumulative
effect of accounting change
$46,140 23,631 $1.95 $43,264 23,631 $1.83 $38,525 23,631 $1.63
Accounting change
- - - - - - 6,294 23,631 0.27
$46,140 23,631 $1.95 $43,264 23,631 $1.83 $44,819 23,631 $1.90
Diluted EPS
Effect of dilutive securities
56 40 21
$46,140 23,687 $1.95 $43,264 23,671 $1.83 $44,819 23,652 $1.90
</TABLE>
Basic earnings per common share were computed by dividing
net income by the weighted average number of shares of
common stock outstanding during the year. Diluted earnings
per common share were determined using the treasury stock
method for dilutive stock options. The adoption of SFAS No.
128 had no impact on prior year reported earnings per share.
Options to purchase 139,348 shares of common stock at $26.44
per share were granted in July 1997, but were not included
in the computation of diluted earnings per share because the
exercise price was greater than the average market price of
the common shares.
CUMULATIVE PREFERRED STOCK OF SIGECO The amount payable in
the event of involuntary liquidation of each series of the
$100 par value preferred stock is $100 per share, plus
accrued dividends. This nonredeemable preferred stock is
callable at the option of SIGECO as follows: the 4.8% Series
at $110 per share, plus accrued dividends; and the 4.75%
Series at $101 per share, plus accrued dividends.
CUMULATIVE REDEEMABLE PREFERRED STOCK OF SIGECO The Series
has a dividend rate of 6.50% and is redeemable at $100 per
share on December 1, 2002. In the event of involuntary
liquidation of this series of $100 par value preferred
stock, the amount payable is $100 per share, plus accrued
dividends.
CUMULATIVE SPECIAL PREFERRED STOCK OF SIGECO The Cumulative
Special Preferred Stock contains a provision which allows
the stock to be tendered on any of its dividend payment
dates. On March 8, 1995, SIGECO repurchased 913 shares of
the Cumulative Special Preferred Stock at a cost of $91,300
as a result of a tender within the provision of the
issuance.
<PAGE> 56
Note 8 Ownership of Warrick Unit 4
SIGCORP and SIGECO
SIGECO and Alcoa Generating Corporation (AGC), a subsidiary
of Aluminum Company of America, own the 270 MW Unit 4 at the
Warrick Power Plant as tenants in common. SIGECO's share of
the cost of this unit at December 31, 1997 is $31,728,000
with accumulated depreciation totaling $23,787,000. AGC and
SIGECO also share equally in the cost of operation and
output of the unit. SIGECO's share of operating costs is
included in operating expenses in the Consolidated
Statements of Income.
Note 9 Commitments and Contingencies
SIGCORP and SIGECO
SIGECO presently estimates that approximately $70,000,000
will be expended for construction purposes in 1998,
including those amounts applicable to SIGECO's demand side
management (DSM) programs. Commitments for the 1998
construction program are approximately $33,032,000 at
December 31, 1997.
Note 10 Lease Obligations
SIGCORP
In 1995, SIMI sold its manufacturing facility and related
equipment for $3,881,000 resulting in no gain or loss and
concurrently entered into an agreement to lease the property
back at $532,000 per year through 2010 under a noncancelable
operating lease. In December 1997, Fuels entered operating
lease agreements for mining equipment. The aggregate
future minimum rental payments required under the above
leases are as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
Year Ended December 31 (in thousands)
1998 $ 1,755
1999 2,896
2000 2,896
2001 2,896
2002 2,896
Thereafter 5,905
Total lease payments $19,244
</TABLE>
Total rental expense under all operating leases was
$578,454, $558,282 and $238,671 for the years ended December
31, 1997, 1996 and 1995, respectively.
<PAGE> 57
Note 11 Segments of Business
SIGCORP and SIGECO
The principal business segments of SIGCORP are the
generation, transmission, distribution and sale of electric
energy by SIGECO and the purchase, transportation,
distribution and sale of natural gas by SIGECO and Energy.
Certain financial information relating to significant
segments of business is presented below:
<TABLE>
<CAPTION>
SIGCORP, Inc.
<S> <C> <C> <C>
Year Ended December 31 (in thousands) 1997 1996 1995
Operating Information-
Operating revenues:
Electric $ 272,545 $ 276,479 $ 275,495
Gas 157,230 97,697 63,203
Total 429,775 374,176 338,698
Operating expenses:
Electric 194,462 200,788 206,071
Gas 145,010 88,355 60,661
Total 339,472 289,143 266,732
Operating income:
Electric 78,083 75,691 69,424
Gas 12,220 9,342 2,542
Total $ 90,303 $ 85,033 $ 71,966
Other Information-
Depreciation and amortization expense:
Electric $ 36,217 $ 35,018 $ 35,802
Gas 3,979 3,599 3,500
Total $ 40,196 $ 38,617 $ 39,302
Capital expenditures:
Electric<F1> $ 55,735 $ 34,836 $ 44,465
Gas 12,687 9,099 9,675
Total $ 68,422 $ 43,935 $ 54,140
Investment Information-
Identifiable assets<F2>:
Electric $ 715,593 $ 696,600 $ 708,310
Gas 156,857 139,030 115,266
Subtotal 872,450 835,630 823,576
Other assets 117,446 117,023 100,405
Total assets $ 989,896 $ 952,653 $ 923,981
<FN>
<F1> Includes $2,340,000, $3,633,000 and $9,051,000 of demand side
management program expenditures for 1997, 1996 and 1995,
respectively.
<F2> Utility plant less accumulated provision for depreciation,
inventories, receivables (less allowance), regulatory assets
and other identifiable assets.
</FN>
</TABLE>
<PAGE> 58
<TABLE>
<CAPTION>
Southern Indiana Gas and Electric Company
<S> <C> <C> <C>
Year Ended December 31 (in thousands) 1997 1996 1995
Operating Information-
Operating revenues:
Electric $ 272,545 $ 276,479 $ 275,495
Gas 85,561 96,251 63,203
Total 358,106 372,730 338,698
Operating expenses (including income taxes):
Electric 217,747 221,877 223,939
Gas 77,447 89,812 60,886
Total 295,194 311,689 284,825
Operating income:
Electric 54,798 54,602 51,556
Gas 8,114 6,439 2,317
Total $ 62,912 $ 61,041 $ 53,873
Other Information-
Depreciation and amortization expense:
Electric $ 36,217 $ 35,018 $ 35,802
Gas 3,974 3,599 3,500
Total $ 40,191 $ 38,617 $ 39,302
Capital expenditures:
Electric <F1> $ 55,735 $ 34,836 $ 44,465
Gas 12,687 9,099 9,675
Total $ 68,422 $ 43,935 $ 54,140
Investment Information-
Identifiable assets <F2>:
Electric $ 715,593 $ 696,600 $ 708,310
Gas 136,030 139,030 115,266
Subtotal 851,623 835,630 823,576
Other assets 12,840 16,695 100,405
Total assets $ 864,463 $ 852,325 $ 923,9816
<FN>
<F1> Includes $2,340,000, $3,633,000 and $9,051,000 of demand side
management program expenditures for 1997, 1996 and 1995,
respectively.
<F2> Utility plant less accumulated provision for depreciation,
inventories, receivables (less allowance), regulatory assets
and other identifiable assets.
</FN>
</TABLE>
<PAGE>59
Note 12 Disclosures About Fair Value
SIGCORP and SIGECO
Except for the following financial instruments, fair value
of SIGCORP's and SIGECO's financial instruments is
equivalent to carrying value due to their short-term nature.
<TABLE>
<CAPTION>
SIGCORP, Inc.
<S> <C> <C> <C> <C>
At December 31 (in thousands) 1997 1996
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
Long-Term Debt (including
current portion) $ 318,597 $ 381,489 $ 293,788 $ 335,771
Partnership Obligations
(including current portion) 4,563 6,163 6,839 8,231
Redeemable Preferred Stock
of Subsidiary 7,500 8,091 7,500 7,367
</TABLE>
<TABLE>
<CAPTION>
Southern Indiana gas and Electric Company
<S> <C> <C> <C> <C>
At December 31 (in thousands) 1997 1996
Carrying EstimatedCarrying Estimated
Amount Fair Value Amount Fair Value
Long-Term Debt (including
current portion) $ 283,597 $ 341,375 $ 283,151 $ 324,325
Redeemable Preferred Stock 7,500 8,091 7,500 7,367
</TABLE>
At December 31, 1997 and 1996, respectively, the fair value
of SIGCORP's debt relating to utility operations exceeded
carrying amounts by $58,000,000 and $41,000,000.
Anticipated regulatory treatment of the excess or deficiency
of fair value over carrying amounts of SIGECO's long-term
debt, if in fact settled at amounts approximating those
above, would dictate that these amounts be used to reduce or
increase SIGECO's rates over a prescribed amortization
period. Accordingly, any settlement would not result in a
material impact on SIGECO's financial position or results of
operations.
LONG-TERM DEBT The fair value of SIGECO's long-term debt
was estimated based on the current quoted market rate of
utilities with a comparable debt rating. Nonutility
long-term debt was valued based upon the most recent debt
financing.
REDEEMABLE PREFERRED STOCK OF SIGECO The fair value of
SIGECO's redeemable preferred stock was estimated based on
the current quoted market rate of utilities with a
comparable debt rating.
PARTNERSHIP OBLIGATIONS The fair value of SIGCORP's
partnership obligations was estimated based on the current
quoted market rate of comparable debt.
<PAGE> 60
Note 13 Disclosures about Market Risk
SIGCORP
COMMODITY PRICE RISK Prices of natural gas are subject to
fluctuations resulting from changes in supply and demand.
To reduce price risk caused by these market fluctuations,
Energy has established a policy to back all fixed price
sales transactions longer than one month with similar
purchase obligations. Since some sales obligations consist
of variable volumes (end user sales), Energy targets planned
consumption and purchases this amount and adds additional
margin to these sales to cover the additional risk.
<TABLE>
<CAPTION>
<S> <C> <C>
At December 31 (in thousands) 1997
Carrying
Amount Fair Value
Commodity Position
Inventory $ 862 $ 723
Fixed-price obligations to
purchase gas - 5,575
Fixed-price obligations
to sell gas - 5,428
</TABLE>
<PAGE> 61
Selected Quarterly Financial Data (Unaudited)
<TABLE>
<CAPTION>
SIGCORP, Inc.
Quarter Ended
<S><C> <C> <C> <C> <C> <C> <C> <C>
March 31, June 30, September 30, December 31,
1997 1996 1997 1996 1997 1996 1997 1996
(in thousands except for per share amounts)
Operating Revenues
$107,572 $117,154 $85,609 $92,022 $108,795 $99,247 $131,261 $96,315
Operating Income
$23,443 $23,174 $13,497 $17,554 $34,627 $29,336 $14,015 $12,653
Net Income
$13,113 $13,272 $6,263 $8,837 $19,947 $15,948 $6,817 $5,207
Basic Earnings Per Share
$0.55 $0.56 $0.27 $0.37 $0.84 $0.67 $ 0.29 $0.22
Diluted Earnings Per Share
$0.55 $ 0.56 $0.26 $0.37 $0.84 $0.67 $0.29 $0.22
Average Common Shares Outstanding
23,631 23,631 23,631 23,631 23,631 23,631 23,631 23,631
</TABLE>
<TABLE>
<CAPTION>
SOUTHERN INDIANA GAS AND ELECTRIC COMPANY
Quarter Ended
<S><C> <C> <C> <C> <C> <C> <C> <C>
March 31, June 30, September 30, December 31,
1997 1996 1997 1996 1997 1996 1997 1996
(in thousands)
Operating Revenues
$98,733 $106,476 $75,399 $83,426 $93,357 $91,095 $90,617 $91,733
Operating Income
$17,049 $16,330 $11,461 $13,256 $23,723 $20,517 $10,679 $10,938
Net Income
$12,712 $12,402 $6,617 $8,031 $19,040 $15,368 $5,897 $ 5,943
Average Common Shares Outstanding
23,631 23,631 23,631 23,631 23,631 23,631 23,631 23,631
</TABLE>
Information for any one quarterly period is not
indicative of the annual results which may be expected due
to seasonal variations common in the utility industry.
The quarterly earnings per share may not add to the
total earnings per share for the year due to rounding.
Item 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE
REGISTRANTS
(a) Identification of Directors
The information required by this item is included
in SIGCORP, Inc.'s and Southern Indiana Gas and
Electric Company's Joint Proxy Statement (the Joint
Proxy Statement), dated March 23, 1998 definitive
copies of which were filed with the Commission
pursuant to Regulation 14A.
(b) Identification of Executive Officers
The information required by this item is included
in Part I, Item 1. - BUSINESS on page 14, to which
reference is hereby made.
Item 11. EXECUTIVE COMPENSATION AND TRANSACTIONS
The information required by this item is included
in the Joint Proxy Statement, definitive copies of
which were filed with the Commission pursuant to
Regulation 14A.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The information required by this item is included
in the Joint Proxy Statement, definitive copies of
which were filed with the Commission pursuant to
Regulation 14A.
<PAGE> 62
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is included
in the Joint Proxy Statement, definitive copies of which
were filed with the Commission pursuant to Regulation 14A.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K
(a) 1 and 2) The financial statements, including supporting
schedule, are listed in the Index to Financial Statements,
page 26, filed as part of this report.
(a) 3) Exhibits:
SIGCORP and SIGECO
EX-2(a) Agreement and Plan of Exchange, of common
stock between Southern Indiana Gas and Electric Company and
SIGCORP, Inc., dated February 23, 1995. (Physically filed
and designated as Exhibit 2(a) in Amendment No. 1 to Form S-4
Registration Statement filed January 20, 1995, File No.
33-57381.)
SIGCORP
EX-3(a) Restated Articles of Incorporation of SIGCORP,
Inc. (Physically filed and designated as Exhibit 3(a) in
Amendment No. 1 to Form S-4 Registration Statement, filed
February 23, 1995, File No. 33-57381.)
EX-3(b) By-Laws of SIGCORP, Inc. . (Physically filed
and designated as Exhibit 3(b) in Amendment No. 1 to Form S-4
Registration Statement, filed February 23, 1995, File No.
33-57381.)
EX-4(a) Rights Agreement, between SIGCORP, Inc. and
Continental Stock Transfer & Trust Company, Rights Agent,
dated as of December 31, 1995. (Physically filed and
designated as Exhibit 4.1 in Form 8-B Registration Statement
filed December 15, 1995, File No. 1-11603.)
SIGECO
EX-3(a) Amended Articles of Incorporation as amended
March 26, 1985. (Physically filed and designated in Form
10-K, for the fiscal year 1985, File No. 1-3553, as Exhibit
3-A.) Articles of Amendment of the Amended Articles of
Incorporation, dated March 24, 1987. (Physically filed and
designated in Form 10-K for the fiscal year 1987, File No.
1-3553, as Exhibit 3-A.) Articles of Amendment of the
Amended Articles of Incorporation, dated November 27, 1992.
(Physically filed and designated in Form 10-K for the fiscal
year 1992, File No. 1-3553, as Exhibit 3-A).
EX-3(b) By-Laws as amended through December 18, 1990.
(Physically filed in Form 10-K for the fiscal year 1990,
File No. 1-3553, as Exhibit 3-B.) By-Laws as amended
through September 22, 1993. (Physically filed and
designated in Form 10-K for the fiscal year 1993, File No.
1-3553, as EX-3 (b).) By-Laws as amended through January 1,
1995. (Physically filed and designated in Form 10-K for the
fiscal year 1995, File No. 1-3553, as EX-3(b).)
EX-4(a)* Mortgage and Deed of Trust dated as of April
1, 1932 between Southern Indiana Gas and Electric Company
and Bankers Trust Company, as Trustee, and Supplemental
Indentures thereto dated August 31, 1936, October 1, 1937,
March 22, 1939, July 1, 1948, June 1, 1949, October 1, 1949,
January 1, 1951, April 1, 1954, March 1, 1957, October 1,
1965, September 1, 1966, August 1, 1968, May 1, 1970,
August 1, 1971, April 1, 1972, October 1, 1973, April 1,
1975, January 15, 1977, April 1, 1978, June 4, 1981, January
20, 1983, November 1, 1983, March 1, 1984, June 1, 1984,
November 1, 1984, July 1, 1985, November 1, 1985, June 1,
1986. (Physically filed and designated in Registration No.
2-2536 as Exhibits B-1 and
B-2; in Post-effective Amendment No. 1 to Registration No.
2-62032 as Exhibit (b)(4)(ii), in Registration No. 2-88923
as Exhibit 4(b)(2), in Form 8-K, File No. 1-3553, dated June
1, 1984 as Exhibit (4), File No. 1-3553, dated March 24,
1986 as Exhibit 4-A, in Form 8-K, File No. 1-3553, dated
June 3, 1986 as Exhibit (4).) July 1, 1985 and November 1,
1985 (Physically filed and designated in Form 10-K, for the
fiscal year 1985, File No. 1-3553, as Exhibit 4-A.)
November 15, 1986 and
*Pursuant to paragraph (b)(4)(iii)(a) of Item 601 of
Regulation S-K, SIGECO agrees to furnish to the Commission
on request any instrument with respect to long-term debt if
the total amount of securities authorized thereunder does
not exceed 10% of the total assets of SIGECO, and has
therefore not filed such documents as exhibits to this Form
10-K.
<PAGE> 63
EX-4(a) (Continued)
January 15, 1987. (Physically filed and
designated in Form 10-K, for the fiscal year 1986, File No.
1-3553, as Exhibit 4-A.) December 15, 1987. (Physically
filed and designated in Form 10-K, for the fiscal year 1987,
File No. 1-3553, as Exhibit 4-A.) December 13, 1990.
(Physically filed and designated in Form 10-K, for the
fiscal year 1990, File No. 1-3553, as Exhibit 4-A.) April
1, 1993. (Physically filed and designated in Form 8-K,
dated April 13, 1993, File 1-3553, as Exhibit 4.) June 1,
1993 (Physically filed and designated in Form 8-K, dated
June 14, 1993, File 1-3553, as Exhibit 4.) May 1, 1993.
(Physically filed and designated in Form 10-K, for the
fiscal year 1993, File No. 1-3553, as Exhibit 4(a).)
EX-10.1 Agreement, dated, January 30, 1968, for Unit
No. 4 at the Warrick Power Plant of Alcoa Generating
Corporation ("Alcoa"), between Alcoa and Southern Indiana
Gas and Electric Company. (Physically filed and designated
in Registration No. 2-29653 as Exhibit 4(d)-A.)
EX-10.2 Letter of Agreement, dated June 1, 1971, and
Letter Agreement, dated June 26, 1969, between Alcoa and
Southern Indiana Gas and Electric Company. (Physically
filed and designated in Registration No. 2-41209 as Exhibit
4(e)-2.)
EX-10.3 Letter Agreement, dated April 9, 1973, and
Agreement dated April 30, 1973, between Alcoa and Southern
Indiana Gas and Electric Company. (Physically filed and
designated in Registration No. 2-53005 as Exhibit 4(e)-4.)
EX-10.4 Electric Power Agreement (the "Power
Agreement"), dated May 28, 1971, between Alcoa and Southern
Indiana Gas and Electric Company. (Physically filed and
designated in Registration No. 2-41209 as Exhibit 4(e)-1.)
EX-10.5 Second Supplement, dated as of July 10, 1975,
to the Power Agreement and Letter Agreement dated April 30,
1973 - First Supplement. (Physically filed and designated
in Form 12-K for the fiscal year 1975, File No. 1-3553, as
Exhibit 1(e).)
EX-10.6 Third Supplement, dated as of May 26, 1978,
to the Power Agreement. (Physically filed and designated in
Form 10-K for the fiscal year 1978 as Exhibit A-1.)
EX-10.7 Letter Agreement dated August 22, 1978
between Southern Indiana Gas and Electric Company and Alcoa,
which amends Agreement for Sale in an Emergency of
Electrical Power and Energy Generation by Alcoa and Southern
Indiana Gas and Electric Company dated June 26, 1979.
(Physically filed and designated in Form 10-K for the fiscal
year 1978, File No. 1-3553, as Exhibit A-2.)
EX-10.8 Fifth Supplement, dated as of December 13,
1978, to the Power Agreement. (Physically filed and
designated in Form 10-K for the fiscal year 1979, File No.
1-3553, as Exhibit A-3.)
EX-10.9 Sixth Supplement, dated as of July 1, 1979,
to the Power Agreement. (Physically filed and designated in
Form 10-K for the fiscal year 1979, File No. 1-3553, as
Exhibit A-5.)
EX-10.10 Seventh Supplement, dated as of October 1,
1979, to the Power Agreement. (Physically filed and
designated in Form 10-K for the fiscal year 1979, File No.
1-3553, as Exhibit A-6.)
EX-10.11 Eighth Supplement, dated as of June 1, 1980
to the Electric Power Agreement, dated May 28, 1971, between
Alcoa and Southern Indiana Gas and Electric Company.
(Physically filed and designated in Form 10-K for the fiscal
year 1980, File No. 1-3553, as Exhibit (20)-1.)
<PAGE> 64
EX-10.13** Agreement dated July 22, 1986 between
Southern Indiana Gas and Electric Company and A. E. Goebel
regarding continuation of employment. (Physically filed and
designated in Form 10-K for the fiscal year 1992, File No.
1-3553, as Exhibit 10-A-13.)
EX-10.14** Agreement dated July 25, 1986 between
Southern Indiana Gas and Electric Company and Ronald G.
Reherman regarding continuation of employment. (Physically
filed and designated in Form 10-K for the fiscal year 1992,
File No. 1-3553, as Exhibit 10-A-14.)
EX-10.15** Agreement dated July 22, 1986 between
Southern Indiana Gas and Electric Company and James A. Van
Meter regarding continuation of employment. (Physically
filed and designated in Form 10-K for the fiscal year 1992,
File No. 1-3553, as Exhibit 10-A-15.)
EX-10.16** Agreement dated February 22, 1989 between
Southern Indiana Gas and Electric Company and J. Gordon
Hurst regarding continuation of employment. (Physically
filed and designated in Form 10-K for the fiscal year 1992,
File No. 1-3553 as Exhibit 10-A-16.)
EX-10.17** Summary description of Southern Indiana Gas
and Electric Company's nonqualified Supplemental Retirement
Plan (Physically filed and designated in Form 10-K for the
fiscal year 1992, File No. 1-3553, as Exhibit 10-A-17.)
EX-10.18** Supplemental Post Retirement Death Benefits
Plan, dated October 10, 1984. (Physically filed and
designated in Form 10-K for the fiscal year 1992, File No.
1-3553, as Exhibit 10-A-18.)
EX-10.19** Summary description of Southern Indiana Gas
and Electric Company's Corporate Performance Incentive Plan.
(Physically filed and designated in Form 10-K for the fiscal
year 1992, File No. 1-3553, as Exhibit 10-A-19.)
EX-10.20** Southern Indiana Gas and Electric Company's
Corporate Performance Incentive Plan as amended for the plan
year beginning January 1, 1994. (Physically filed and
designated in Form 10-K for the fiscal year 1993, File No.
1-3553, as Exhibit 10-A-20.)
EX-10.21** Southern Indiana Gas and Electric Company
1994 Stock Option Plan (Physically filed and designated in
Southern Indiana Gas and Electric Company's Proxy Statement
dated February 22, 1994, File No. 1-3553, as Exhibit A.)
EX-10.22** Summary description of Southern Indiana Gas
and Electric Company's Corporate Performance Incentive Plan
as amended for the plan year beginning January 1, 1997.
(Physically filed and designated in the SIGCORP, Inc. and
Southern Indiana Gas and Electric Company's Joint Proxy
Statement dated March 23, 1998, File No. 1-11603 and File
No. 1-3553, under "Compensation Committee Report On
Executive Compensation", page 9.)
EX-10.23** Agreement dated September 1, 1997 between
Southern Indiana Gas and Electric Company and Andrew E.
Goebel regarding continuation of employment, which
supercedes such agreement dated July 22, 1986. (Physically
filed herewith as Exhibit 10.23.)
EX-10.24** Agreement dated September 1, 1997 between
Southern Indiana Gas and Electric Company and J. Gordon
Hurst regarding continuation of employment, which supercedes
such agreement dated February 22, 1989. (Physically filed
herewith as Exhibit 10.24.)
EX-10.25** Agreement dated January 10, 1997 between
Ronald G. Jochum and Southern Indiana Gas and Electric
Company regarding continuation of employment. (Physically
filed herewith as Exhibit 10.25.)
EX-10.26** Agreement dated January 10, 1997 between
Southern Indiana Gas and Electric Company and Ronald G.
Reherman regarding continuation of employment, which
supercedes such agreement dated May 6, 1991. (Physically
filed herewith as Exhibit 10.26.)
** Filed pursuant to paragraph (b)(10)(iii)(A) of Item
601 of Regulation S-K.
<PAGE> 65
EX-10.27** Agreement dated April 16, 1997 between
Southern Indiana Gas and Electric Company and Ronald G.
Reherman regarding supplemental pension and disability
benefits, which supercedes such agreement dated February 1,
1995. (Physically filed herewith as Exhibit 10.27.)
EX-10.28** Agreement dated January 10, 1997 between
Southern Indiana Gas and Electric Company and Jeffrey L.
Davis regarding continuation of employment. (Physically
filed herewith as Exhibit 10.28.)
EX-10.29** Southern Indiana Gas and Electric Company's
nonqualified Supplemental Retirement Plan as amended,
effective April 16, 1997. (Physically filed herewith as
Exhibit 10.29.)
** Filed pursuant to paragraph (b)(10)(iii)(A) of Item
601 of Regulation S-K.
SIGECO
EX-12 Computation of Ratio of Earnings to Fixed
Charges
SIGCORP
EX-21 Subsidiaries of the Registrant
SIGCORP and SIGECO
EX-24 Power of Attorney
SIGCORP and SIGECO
EX-27 Financial Data Schedule
(b) Reports on Form 8-K
No Form 8-K reports were filed by SIGCORP or SIGECO
during the fourth quarter of 1997.
<PAGE> 66
SCHEDULE II
<TABLE>
<CAPTION>
SIGCORP, Inc.
and
Southern Indiana Gas And Electric Company
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
<S> <C> <C> <C> <C> <C>
Column A Column B Column C Column D Column E
Additions
Balance Charged Charged Deductions Balance
Beginning to to Other from Re- End of
Description of Year Expenses Accounts serves, Net Year
(in thousands)
VALUATION AND QUALIFYING
ACCOUNTS:
Year 1997 - Accumulated
provision for
uncollectible
accounts $215 $1,517 $- $1,404 $328
Year 1996 - Accumulated
provision for
uncollectible
accounts $138 $910 $- $833 $215
Year 1995 - Accumulated
provision for
uncollectible
accounts $231 $581 $- $675 $138
OTHER RESERVES:
Year 1997 - Reserve for
injuries and
damages $1,737 $(253) $356 $793 $1,047
Year 1996 - Reserve for
injuries and
damages $1,541 $968 $221<F1> $993 $1,737
Year 1995 - Reserve for
injuries and
damages $1,692 $712 $155<F1> $1,018 $1,541
<FN>
<F1> Charged to construction accounts
</FN>
</TABLE>
<PAGE> 69
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934, the registrants have
duly caused this report to be signed on their behalf by the
undersigned, thereunto duly authorized.
Date: March 27, 1998 SIGCORP, Inc.
By R. G. Reherman, Chairman,
President and Chief Executive
Officer
BY R. G. Reherman
R. G. Reherman
SOUTHERN INDIANA GAS AND
ELECTRIC COMPANY
By R. G. Reherman, Chairman
BY R. G. Reherman
R. G. Reherman
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 registrants and in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
<S> <C> <C>
Signatures Title Date
R. G. Reherman Chairman, President and Chief
Executive Officer
of SIGCORP, Inc.
(Principal Executive Officer)
Chairman of Southern Indiana
Gas and Electric Company March 27, 1998
A. E. Goebel* Executive Vice President of
SIGCORP, Inc. President and
Chief Executive Officer
of Southern Indiana Gas and
Electric Company
(Principal Executive Officer) March 27, 1998
T. L. Burke* Secretary and Treasurer of
SIGCORP, Inc. and
Southern Indiana Gas and
Electric Company
(Principal Financial Officer) March 27, 1998
S. M. Kerney* Controller of SIGCORP, Inc. and
Southern Indiana Gas and
Electric Company
(Principal Accounting Officer) March 27, 1998
John M. Dunn* )
)
John D. Engelbrecht* )
)
Robert L. Koch II* )
)
Donald A. Rausch* ) Directors of SIGCORP, Inc.
) and Southern Indiana March 27, 1998
) Gas and Electric
Richard W. Shymanski* ) Company
)
Donald E. Smith* )
)
James S. Vinson* )
)
</TABLE>
*By
(R. G. Reherman, Attorney-in-fact)
SIGECO
10-K
EXHIBIT INDEX
Sequential
Page Number
Exhibits incorporated by
reference are found on 62 - 65
EX-10.23 Contracts 71 - 87
.24 Contracts 88 - 104
.25 Contracts 105 - 121
.26 Contracts 122 - 138
.27 Contracts 139 - 147
.28 Contracts 148 - 164
.29 Contracts 165 - 183
EX-12 Computation of Ratio of Earnings
to Fixed Charges 67
EX-24 Power-of-Attorney 184 - 185
EX-27 Financial Data Schedule 186
<PAGE>
March 17, 1998
Mr. R. G. Reherman
Mr. T. L. Burke
Southern Indiana Gas and Electric Company
20 N.W. Fourth Street
Evansville, Indiana 47741
J. H. Byington, Jr., Esq.
Winthrop, Stimson, Putnam & Roberts
40 Wall Street
New York, New York 10005
Dear Gentlemen:
SIGCORP, Inc. and Southern Indiana Gas and Electric
Company will each file an Annual Report on Form 10-K for the
fiscal year ended December 31, 1997 ("Form 10-K") before
April 1, 1997 which will be accompanied by certain exhibits.
We hereby authorize you, or any one of you, to complete
said Forms 10-K and to remedy any deficiencies with respect
to said Forms 10-K by appropriate amendment or amendments;
and we hereby make, constitute and appoint each of you our
true and lawful attorney for each of us and in each of our
names, places and steads, both in our individual capacities
as directors and that of officers of SIGCORP, Inc. and
Southern Indiana Gas and Electric Company, to sign and cause
to be filed with the Securities and Exchange Commission said
Forms 10-K, any appropriate amendment or amendments thereto,
and any exhibits thereto.
The undersigned, SIGCORP, Inc. and Southern Indiana Gas
and Electric Company, also authorize you and any one of you
to sign said Forms 10-K and any amendment or amendments
thereto on its behalf as attorney-in-fact for its respective
officers, and to file the same as aforesaid
together with exhibits.
Very truly yours,
SIGCORP, INC. and
SOUTHERN INDIANA GAS AND
ELECTRIC COMPANY
By R. G. Reherman,
Chairman, President
and Chief Executive
Officer, SIGCORP, Inc.
Chairman, Southern Indiana Gas
and Electric Company
John M. Dunn Ronald G. Reherman
John D. Engelbrecht Richard W. Shymanski
Andrew E. Goebel Donald E. Smith
Robert L. Koch II James S. Vinson
Donald A. Rausch T. L. Burke
S. M. Kerney
<TABLE> <S> <C>
<ARTICLE> UT
<CIK> 0000092195
<NAME> SOUTHERN INDIANA GAS & ELECTRIC CO
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 707,605
<OTHER-PROPERTY-AND-INVEST> 5,654
<TOTAL-CURRENT-ASSETS> 101,411
<TOTAL-DEFERRED-CHARGES> 49,793
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 864,463
<COMMON> 78,258
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 228,570
<TOTAL-COMMON-STOCKHOLDERS-EQ> 306,828
0
19,514
<LONG-TERM-DEBT-NET> 238,707
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 52,529
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 44,195
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 202,690
<TOT-CAPITALIZATION-AND-LIAB> 864,463
<GROSS-OPERATING-REVENUE> 358,106
<INCOME-TAX-EXPENSE> 26,844
<OTHER-OPERATING-EXPENSES> 268,350
<TOTAL-OPERATING-EXPENSES> 295,194
<OPERATING-INCOME-LOSS> 62,912
<OTHER-INCOME-NET> 2,114
<INCOME-BEFORE-INTEREST-EXPEN> 65,026
<TOTAL-INTEREST-EXPENSE> 19,663
<NET-INCOME> 45,363
1,097
<EARNINGS-AVAILABLE-FOR-COMM> 44,266
<COMMON-STOCK-DIVIDENDS> 29,384
<TOTAL-INTEREST-ON-BONDS> 18,020
<CASH-FLOW-OPERATIONS> 76,678
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE>
<CAPTION>
EX-12
Southern Indiana Gas And Electric Company
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
For the Five Years Ended December 31, 1997
<S> <C> <C> <C> <C> <C>
1997 1996 1995 1994 1993
(in thousands)
Earnings as Defined
Net income <F1> $45,363 $42,841 $39,624 $41,025 $39,588
Add:
Income Taxes:
Current:
Federal 28,402 11,773 7,031 15,257 5,880
State 4,265 1,934 1,601 2,519 1,310
Deferred, net:
Federal (3,673) 10,081 7,771 (80) 9,682
State (278) 1,690 1,385 314 1,581
Deferred investment
tax credit, net (1,457) (1,443) (1,556) (1,846) (1,868)
Interest on long-term
debt, net of AFUDC
borrowed 17,223 17,987 18,168 16,546 17,012
Amortization of premium,
discount and expense
on debt 671 690 694 852 773
Interest on short-
term debt 1,769 2,350 1,894 1,589 747
Interest component of
rent expense <F2> 456 438 565 416 405
Earnings as defined $92,741 $88,341 $77,177 $76,592 $75,110
Fixed Charges as Defined
Interest on long-term
debt $18,020 $18,432 $18,789 $18,604 $18,437
Amortization of premium,
discount and expense
on debt 671 690 694 852 773
Interest on short-
term debt 1,769 2,350 1,894 1,589 747
Interest component of
rent expense <F2> 456 438 565 416 405
Fixed charges as
defined $20,916 $21,910 $21,942 $21,461 $20,362
Ratio of Earnings to
Fixed Charges <F3> 4.43 4.03 3.52 3.57 3.69
<FN>
NOTES:
<F1> Net income, as defined, is before preferred dividend requirements.
<F2> One-third of rentals represents a reasonable approximation of the
interest factor.
<F3> The ratios shown above do not reflect the fixed charge component in
SIGECO's power contract with OVEC. Inclusion of the component in the
computation would not have a significant effect on the ratios.
<FN>
</TABLE>
EXECUTIVE AGREEMENT
THIS AGREEMENT entered into between SOUTHERN INDIANA
GAS AND ELECTRIC COMPANY (hereinafter sometimes referred to
as "Company") and ANDREW E. GOEBEL (hereinafter sometimes
referred to as "Executive"), this 1st day of September,
1997.
WITNESSETH:
WHEREAS:
A. Executive is an officer of Company and important to its
management and to the well being of Company, its
stockholders and ratepayers. Effective September 1, 1997,
Executive is also an officer of SIGCORP, Inc. ("SIGCORP").
B. SIGCORP is the owner of all or a majority of the issued
and outstanding shares of Company common stock.
C. Company desires to assure both itself and Executive of
continuity of Company management and operations in the event
of a Change in Control of SIGCORP.
D. This Executive Agreement is not intended to and shall
not materially alter the compensation and benefits that
Executive could reasonably expect in the absence of a Change
in Control of SIGCORP and therefore this Agreement, though
taking effect upon execution hereof, will be operative only
upon a Change in Control of SIGCORP, as that phrase is
hereinafter defined.
E. Executive is willing to remain in the employ of Company
following a Change in Control of SIGCORP upon the terms and
conditions hereinafter set forth and such additional terms
and conditions as mutually agreed upon by Executive and
Company.
NOW, THEREFORE, in order to achieve the aforesaid purposes
it is hereby agreed by and between the parties as follows:
1. Operation of Agreement
This Agreement shall be effective immediately upon its
execution by the parties, but, anything in this Agreement to
the contrary notwithstanding, neither the Agreement nor any
provision of it shall be operative unless and until there
has been a Change in Control of SIGCORP as defined in
paragraph 2 below. Upon the occurrence of a Change in
Control of SIGCORP, this Agreement and all provisions
thereof shall become operative immediately.
2. Definitions
The following words and phrases as used herein shall have
the following meanings:
"Cause" means (i) the willful and continued failure of
Executive substantially to perform the duties commensurate
with his position (other than as a result of physical or
mental illness or injury), after the Board of Directors of
the Company (the "Company Board") delivers to the Executive
a written demand for substantial performance that
specifically identifies the manner in which the Company
Board believes that the Executive has not substantially
performed such duties; or (ii) illegal conduct or gross
misconduct by the Executive, in either case that is willful
and results in material and demonstrable damage to the
business or reputation of the Company. No act or failure to
act on the part of the Executive shall be considered
"willful" unless it is done, or omitted to be done, by the
Executive in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of
the Company. Any determination of whether Cause exists
shall be made by a resolution adopted by a vote at least two-
thirds of the Company Board after the Executive has been
notified in writing of the Company Board's intention to hold
such vote and been given an opportunity to be heard by the
Company Board (with the assistance of the Executive's
counsel, if the Executive so desires).
"Change in Control" shall mean and shall be deemed to have
occurred upon the happening of any one or more of the
following:
(a) An acquisition (other than directly from SIGCORP) of
any voting securities of SIGCORP (the "Voting Securities")
by any "Person" (as the term person is used for purposes of
Section 13(d) or 14(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")), immediately after
which such Person has "Beneficial Ownership" (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of
twenty percent (20%) or more of the combined voting power of
SIGCORP's then outstanding Voting Securities; provided,
however, that in determining whether a Change in Control has
occurred, Voting Securities which are acquired in a "Non-
Control Acquisition" (as hereinafter defined) shall not
constitute an acquisition which would cause a Change in
Control. A "Non-Control Acquisition" shall mean an
acquisition by (i) an employee benefit plan (or a trust
forming a part thereof) maintained by (A) SIGCORP or (B) any
corporation or other Person of which a majority of its
voting power or its voting equity securities or equity
interest is owned, directly or indirectly, by SIGCORP (for
purposes of this definition, a "Subsidiary") (ii) SIGCORP or
its Subsidiaries, or (iii) any Person in connection with a
"Non-Control Transaction" (as hereinafter defined);
(b) The individuals who, as of the date of this Agreement,
are members of the Board of Directors of SIGCORP (the
"Incumbent Board"), cease for any reason to constitute a
majority of the members of the Board of Directors of
SIGCORP; provided, however, that if the election, or
nomination for election by SIGCORP's common stockholders, of
any new director was approved by a vote of a majority of the
Incumbent Board, such new director shall, for purposes of
this Plan, be considered as a member of the Incumbent Board;
provided, further, however, that no individual shall be
considered a member of the Incumbent Board if such
individual initially assumed office as a result of either an
actual or threatened "Election Contest" (as described in
Rule 14a-11 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 of Directors
of SIGCORP (a "Proxy Contest") including by reason of any
agreement intended to avoid or settle any Election Contest
or Proxy Contest; or
(c) A merger, consolidation or reorganization involving
SIGCORP, unless such merger, consolidation or reorganization
is a "Non-Control Transaction." A "Non-Control Transaction"
shall mean a merger, consolidation or reorganization of
SIGCORP where:
(i) the stockholders of SIGCORP, immediately before
such merger, consolidation or reorganization, own directly
or indirectly immediately following such merger,
consolidation or reorganization, at least seventy-five
percent (75%) of the combined voting power of the
outstanding voting securities of the corporation resulting
from such merger or consolidation or reorganization (the
"Surviving Corporation") in substantially the same
proportion as their ownership of the Voting Securities
immediately before such merger, consolidation or
reorganization,
(ii) the individuals who were members of the Board of
Directors of SIGCORP immediately prior to the execution of
the agreement providing for such merger, consolidation or
reorganization constitute a majority of the members of the
board of directors of the Surviving Corporation, or a
corporation beneficially owning, directly or indirectly, a
majority of the Voting Securities of the Surviving
Corporation, and
(iii) no Person other than (1) SIGCORP, (2) any
Subsidiary, (3) any employee benefit plan (or any trust
forming a part thereof) maintained by SIGCORP, the Surviving
Corporation, or any Subsidiary, or (4) any Person who,
immediately prior to such merger, consolidation or
reorganization had Beneficial Ownership of twenty percent
(20%) or more of the then outstanding Voting Securities),
has Beneficial Ownership of twenty percent (20%) or more of
the combined voting power of the Surviving Corporation's
then outstanding voting securities.
(d) The sale or other disposition of all or substantially
all of the assets of SIGCORP to any Person (other than a
transfer to a Subsidiary).
Notwithstanding the foregoing, a Change in Control shall not
be deemed to occur solely because any Person (the "Subject
Person") acquired Beneficial Ownership of more than the
permitted amount of the then outstanding Voting Securities
as a result of the acquisition of Voting Securities by
SIGCORP or any Subsidiary which, by reducing the number of
Voting Securities then outstanding, increases the
proportional number of shares Beneficially Owned by the
Subject Persons, provided that if a Change in Control would
occur (but for the operation of this sentence) as a result
of the acquisition of Voting Securities by SIGCORP or such
Subsidiary, and after such share acquisition by the Company,
the Subject Person becomes the Beneficial Owner of any
additional Voting Securities which increases the percentage
of the then outstanding Voting Securities Beneficially Owned
by the Subject Person, then a Change in Control shall occur.
Notwithstanding anything contained in this Agreement to the
contrary, if the Executive's employment is terminated prior
to a Change in Control and the Executive reasonably
demonstrates that such termination (i) was at the request of
a third party who has indicated an intention or taken steps
reasonably calculated to effect a Change in Control and who
effectuates a Change in Control (a "Third Party") or (ii)
otherwise occurred in connection with, or in anticipation
of, a Change in Control which actually occurs, then for all
purposes of this Agreement, the date of a Change in Control
with respect to the Executive shall mean the date
immediately prior to the date of such termination of the
Executive's employment.
"Disability" shall mean and be deemed to have occurred six
(6) months after Executive shall have become totally and
permanently disabled by bodily or mental injury or disease,
so that Executive is prevented from actively engaging in any
full time executive employment for remuneration or profit,
as determined and certified by any active full time
practicing physician who is a member in good standing of the
Vanderburgh County Medical Society or any successor
organization.
"Effective Date" means the date of a Change in Control.
"Good Reason" means (i) a change in Executive's status,
title, position or responsibilities (including reporting
responsibilities) which, in Executive's reasonable judgment,
represents an adverse change from his status, title,
position or responsibilities as in effect immediately prior
thereto; (ii) the assignment to Executive of any duties or
responsibilities which are inconsistent with his status,
title, position or responsibilities; (iii) a reduction in
Executive's base salary or the aggregate amount of the other
compensation and benefits which Executive was entitled to
receive immediately prior to the Change in Control, or any
failure to pay Executive any compensation or benefits to
which he is entitled on a timely basis; (iv) Company's
requiring Executive to be based at any place outside a 30-
mile radius from Evansville, Indiana, except for reasonably
required travel on Company business which is not greater
than such travel requirements prior to the Change in
Control; (v) the insolvency or the filing (by any party,
including Company) of a petition for bankruptcy of Company
or SIGCORP; (vi) any material breach by Company of any
provision of this Agreement; (vii) any purported termination
of Executive's employment for Cause by Company which does
not comply with the terms of this Agreement; or (viii) the
failure of Company to obtain an agreement from any successor
or assign of Company to assume and agree to perform this
Agreement. A termination of employment by Executive for
Good Reason shall be effectuated by giving Company written
notice of the termination within six (6) months of the event
constituting Good Reason, setting forth in reasonable detail
the specific conduct of Company that constitutes Good
Reason. A termination of employment by Executive for Good
Reason shall be effective on the fifth (5th) business day
following the date such notice is given, unless the notice
sets forth a later date (which date shall in no event be
later than thirty (30) days after the notice is given).
"Term" means the period of time commencing on the Effective
Date and expiring on the earliest to occur of (i) the third
anniversary of the Effective Date, (ii) Executive's sixty-
fifth (65th) birthday, (iii) Executive's death, (iv)
termination of Executive's employment by Company for Cause
or Disability, or (v) termination of Executive's employment
by Executive other than for Good Reason. Notwithstanding
anything to the contrary the rights and obligations of the
parties under Sections 5, 6 and 7 shall survive the
expiration of the Term to the extent necessary to give
effect to the provisions contained therein.
3. Executive's Employment With Company
Throughout the Term, Executive shall be employed as
President and CEO of the Company or such other entity as
shall then be the principal successor to the business,
assets and properties of Company and effective as of
September 1, 1997, as Vice President of SIGCORP and shall
continue to have similar or greater responsibility and
authority in such position as he had immediately prior to
the Effective Date.
During the term:
(a) Executive shall devote his full business time and
efforts to the business and affairs of Company or the
successor to Company by which Executive is then employed
pursuant to this Agreement; provided, however, that
Executive shall not be precluded from serving as a director
or member of a committee or board of any other entity which
involves no conflict of interest with Company or its
successor.
(b) Executive shall have duties, responsibilities and
authority consistent with the position held by Executive as
of the date hereof.
(c) The business, assets and properties of Company or its
successor, by whom Executive is employed pursuant to this
Agreement, as well as the support services and facilities
available to Executive, shall not differ materially from
those of Company as existent one (1) year prior to the
Effective Date.
4. Executive's Compensation During Term
Executive shall be entitled to the following compensation
from Company throughout the Term:
(a) base salary at no less than the annual rate in effect
immediately prior to the Effective Date, but with increases
subsequent to the Effective Date as may be made from time to
time as warranted; and
(b) continuing participation in any corporate compensation
plans, pension plans, insurance, medical and hospitalization
programs, employment contracts and any other employee
benefit plans, practices or arrangements in effect
immediately prior to the Effective Date and as same may be
modified, supplemented or replaced without material
reduction in value and benefits to Executive.
5. Termination Of Executive's Employment
(a) In the event of Executive's termination of employment
during the Term by reason of his voluntary termination of
employment with Company for Good Reason, or termination of
Executive's employment by the Company for any reason other
than Cause or Disability:
(i) Company shall pay to Executive, at Executive's option,
either in annual payments or in a lump sum not later than
thirty (30) days after such termination, an amount equal to
Executive's current annual authorized base salary,
multiplied by the number of years (computed to the nearest
month) by which his age, at the time of such termination of
Executive's employment, is less than age 65; however, in no
event shall said lump sum payment or annual payments be more
than three times Executive's current annual authorized base
salary. The payment of such lump sum amount or annual
payments to Executive shall not affect the obligations of
Company, or its successor, under any plan, other agreement
or arrangement pursuant to which Executive is entitled to
any retirement, pension, stock and insurance, benefits,
payments and welfare contributions applicable to former or
retired management employees of Company, generally; and
(ii) For a period of three (3) years following such
termination of Executive's employment Company shall, at its
expense, continue on behalf of Executive and his dependents
and beneficiaries the life insurance, disability, medical,
dental and hospitalization benefits provided to other
similarly situated executives (and their dependents and
beneficiaries) who continue in the employ of Company;
provided, however, that if Executive obtains any such
benefits under the benefit plans of a subsequent employer,
Company's obligation to provide such benefits will be
reduced to the extent that the combined benefit received by
the Executive and his dependents and beneficiaries in all
events is no less favorable than the benefit that would be
received if the benefits under Company's plans and
arrangements. The period during which benefits must be
continued under Section 4980B of the Internal Revenue Code
and Section 601 of the Employee Retirement Income Security
Act of 1974 shall be reduced by the period during which
benefits are continued hereunder.
In the event of Executive's death following a termination of
employment as described in paragraph (a) above, any amounts
that would otherwise have been payable to Executive under
subparagraph (a)(i) shall be paid to Executive's estate and
the benefits under subparagraph (a)(ii) shall continue to be
provided to Executive's dependents and beneficiaries for the
specified time period.
(b) In the event that Executive's employment is terminated
by Company for Cause or Disability or by Executive without
Good Reason or by reason of Executive's death, Executive (or
his estate) will be entitled to receive only the
compensation earned but unpaid as of the date of termination
of his employment, plus such other benefits to which he or
his estate may be entitled under Company plans.
6. Non-Competition, Confidentiality and Non-Solicitation
(a) Upon Executive's receipt of a payment pursuant to
Paragraph 5 hereof, Executive shall not, prior to attaining
age 65, or within three (3) years after the Effective Date,
become an officer, director or employee of, consultant to or
majority shareholder in any entity that competes with
Company, its subsidiaries or its successor or successors
within a 150 mile radius of Evansville, Indiana.
(b) In recognition that Executive's work for the Company
has given him and will continue to give him access to trade
secrets of and confidential information concerning Company
and SIGCORP, Executive shall not, during his employment,
disclose, or after termination thereof, use or disclose to
any other person any confidential information related to the
business of Company or any affiliate, including without
limitation, trade secrets, processes, know-how, technical
data, training manuals, list of customers, prospects or
suppliers, or other business contacts, and Executive
confirms that such information is the exclusive property of
Company. Upon termination of his employment hereunder,
Executive agrees to return to Company all property of
Company and its affiliates, if any, of which he has
possession as well as all notebooks, and other data relating
to records, customers, investigations, or management studies
or inventions made by him. In addition, any confidentiality
agreements between Executive and Company (or any predecessor
thereof) are incorporated by reference into this Agreement
and shall continue to be given full force and effect.
Notwithstanding anything to the contrary contained herein,
Executive shall be under no obligation to maintain the
confidentiality of any information which (i) is or becomes
part of the public domain through no act or omission
attributable to Executive; (ii) is required by law to be
disclosed; provided, that, if required to be disclosed by
law, Executive shall provide Company with prompt notice of
such requirement so that Company may seek an appropriate
protective order; (iii) is deemed by Company not to be
confidential information; or (iv) Executive may receive from
any third party who is unaffiliated with Company and who is
not under an obligation to maintain the confidentiality of
any such information.
(c) Executive agrees that he shall not (i) during the
course of his employment and (ii) for a period of three (3)
years after the Effective Date, either voluntarily or
involuntarily, for any reason whatsoever, directly or
indirectly, individually or on behalf of persons not now
parties to this Agreement, solicit or endeavor to solicit
any other employee, employees, consultant and/or consultants
of Company or SIGCORP to leave employment with Company or
SIGCORP in order to accept employment of any kind with any
other person, firm, partnership, or corporation.
7. Remedies.
(a) Any controversy, dispute or claim arising under this
Agreement, or any breach thereof, shall be subject to
arbitration (by a single arbitrator) conducted in
Evansville, Indiana in accordance with the then existing
rules of the American Arbitration Association, and judgment
upon any award rendered by the arbitrator may be entered by
any federal or state court having jurisdiction thereof. The
parties intend that this agreement to arbitrate be valid,
enforceable and irrevocable. Notwithstanding the foregoing,
the Executive agrees that any breach of the terms of Section
6 would result in irreparable injury and damage to the
Company for which the Company would have no adequate remedy
at law; the Executive therefore also agrees that in the
event of said breach or any threat of breach, (in addition
to the right of the Company to pursue other remedies through
arbitration, including, but not limited to, damages) the
Company shall be entitled to an immediate injunction and
restraining order to prevent such breach or threatened
breach or continued breach by Executive or any and all
persons or entities acting for or with the Executive. The
Executive further agrees that the covenants of Section 6 are
reasonable. Should a court or arbitrator determine,
however, that any portion of Section 6 is unreasonable,
either in period of time, geographical area, or otherwise,
the parties hereto agree that the covenant should be
interpreted and enforced to the maximum extent which such
court or arbitrator deems reasonable. All arbitrator's fees
and all other costs of any arbitration or judicial
proceeding hereunder shall be borne by the Company.
(b) The Company shall pay all legal fees and related
expenses (including the costs of experts, evidence and
counsel) incurred by the Executive as they become due as a
result of (i) the Executive's termination of employment
(including all such fees and expenses, if any, incurred in
contesting or disputing any such termination of employment),
(ii) the Executive's hearing before the Company Board in
connection with any proposal to terminate the Executive's
employment for Cause, or (iii) the Executive's seeking to
obtain or enforce any right or benefit provided by this
Agreement.
(c) The Executive shall be under no duty to mitigate any
amounts payable by the Company under this Agreement and such
amounts shall not be reduced or set-off by any other assets
or income of the Executive. The Company's obligation to
make the payments provided for in this Agreement and
otherwise to perform its obligations hereunder shall not be
affected by any other circumstances, including, without
limitation, any set-off, counterclaim, recoupment, defense
or other right which the Company may have against the
Executive or others.
8. Binding Effect And Assignment
This Agreement shall inure to the benefit of and shall 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. Notwithstanding the foregoing, the Company
shall assign this Agreement to any person or entity
succeeding to substantially all of the business and assets
of Company upon a Change in Control and upon such a Change
in Control Company shall obtain the assumption of this
Agreement by any such successor.
9. Notices
Any notice to a party required or permitted to be given
hereunder shall be in writing and shall be deemed given when
mailed by registered or certified mail to such party at such
party's address as specified below:
If to the Company, to:
Southern Indiana Gas and Electric Company
Attention: Chief Executive Officer
20-24 N.W. Fourth Street
Evansville, Indiana 47708
If to Executive, to: His last known address shown on the
records of Company.
10. Severability
If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be
invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Agreement
shall remain in full force and effect and shall in no way be
affected, impaired or invalidated.
11. Amendments
This Agreement may not be modified, amended, altered or
supplemented except upon the execution and delivery of a
written agreement executed by the parties hereto.
12. Governing Law
This Agreement shall be construed in accordance with the law
of the State of Indiana.
13. Effect of Headings
The paragraph headings herein are for convenience only and
shall not affect the construction hereof.
14. Excise Tax Limitation
(a) Notwithstanding anything contained in this Agreement to
the contrary, to the extent that the payments and benefits
provided under this Agreement and benefits provided to, or
for the benefit of, Executive under any other plan or
agreement of Company or SIGCORP (such payments or benefits
are collectively referred to as the "Payments") would be
subject to the excise tax (the "Excise Tax") imposed under
Section 4999 of the Internal Revenue Code, the Payments
shall be reduced (but not below zero) if and to the extent
necessary so that no Payment to be made or benefit to be
provided to Executive shall be subject to the Excise Tax.
Unless Executive shall have given prior written notice
specifying a different order to Company to effectuate the
reduction of the Payments, Company shall reduce or eliminate
the Payments, by first reducing or eliminating those
payments or benefits which are not payable in cash and then
by reducing or eliminating cash payments, in each case in
reverse order beginning with payments or benefits which are
to be paid the farthest in time from the date of the
termination of Executive's employment. Any notice given by
Executive pursuant to the preceding sentence shall take
precedence over the provisions of any other plan,
arrangement or agreement governing Executive's rights and
entitlements to any benefits or compensation.
(b) An initial determination as to whether the Payments
shall be reduced and the amount of such reduction shall be
made at Company's expense by an accounting firm selected by
Company which is designated as one of the five largest
accounting firms in the United States. The accounting firm
shall provide its determination, together with detailed
supporting calculations and documentation to Company and
Executive within five (5) days of the date of the
termination of Executive's employment, or such other time as
requested by the Company or by Executive (provided Executive
reasonably believes that any of the Payments may be subject
to the Excise Tax) and if the accounting firm determines
that no Excise Tax is payable by Executive with respect to a
Payment or Payments, it shall furnish Executive with an
opinion reasonably acceptable to Executive that no Excise
Tax will be imposed with respect to any such Payment or
Payments. Within ten (10) days of the delivery of the
determination of the accounting firm to Executive, Executive
shall have the right to dispute the determination. If there
is no dispute, the determination shall be binding, final and
conclusive upon Company and Executive.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed the day and year first above
written.
SOUTHERN INDIANA GAS AND
ELECTRIC COMPANY
By: Ronald G. Reherman
Ronald G. Reherman
Chairman of the Board
of Directors of the Company
EXECUTIVE
Andrew E. Goebel
Andrew E. Goebel
AGREED TO:
SIGCORP, INC.
By: Ronald G. Reherman
Ronald G. Reherman
Chairman of the Board of
Directors of SIGCORP, Inc.
EXECUTIVE AGREEMENT
THIS AGREEMENT entered into between SOUTHERN INDIANA GAS AND
ELECTRIC COMPANY (hereinafter sometimes referred to as
"Company") and J. GORDON HURST (hereinafter sometimes
referred to as "Executive"), this 1st day of September,
1997.
WITNESSETH:
WHEREAS:
A. Executive is an officer of Company and important to its
management and to the well being of Company, its
stockholders and ratepayers.
B. SIGCORP, Inc. ("SIGCORP") is the owner of all or a
majority of the issued and outstanding shares of Company
common stock.
C. Company desires to assure both itself and Executive of
continuity of Company management and operations in the event
of a Change in Control of SIGCORP.
D. This Executive Agreement is not intended to and shall
not materially alter the compensation and benefits that
Executive could reasonably expect in the absence of a Change
in Control of SIGCORP and therefore this Agreement, though
taking effect upon execution hereof, will be operative only
upon a Change in Control of SIGCORP, as that phrase is
hereinafter defined.
E. Executive is willing to remain in the employ of Company
following a Change in Control of SIGCORP upon the terms and
conditions hereinafter set forth and such additional terms
and conditions as mutually agreed upon by Executive and
Company.
NOW, THEREFORE, in order to achieve the aforesaid purposes
it is hereby agreed by and between the parties as follows:
1. Operation of Agreement
This Agreement shall be effective immediately upon its
execution by the parties, but, anything in this Agreement to
the contrary notwithstanding, neither the Agreement nor any
provision of it shall be operative unless and until there
has been a Change in Control of SIGCORP as defined in
paragraph 2 below. Upon the occurrence of a Change in
Control of SIGCORP, this Agreement and all provisions
thereof shall become operative immediately.
2. Definitions
The following words and phrases as used herein shall have
the following meanings:
"Cause" means (i) the willful and continued failure of
Executive substantially to perform the duties commensurate
with his position (other than as a result of physical or
mental illness or injury), after the Board of Directors of
the Company (the "Company Board") delivers to the Executive
a written demand for substantial performance that
specifically identifies the manner in which the Company
Board believes that the Executive has not substantially
performed such duties; or (ii) illegal conduct or gross
misconduct by the Executive, in either case that is willful
and results in material and demonstrable damage to the
business or reputation of the Company. No act or failure to
act on the part of the Executive shall be considered
"willful" unless it is done, or omitted to be done, by the
Executive in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of
the Company. Any determination of whether Cause exists
shall be made by a resolution adopted by a vote at least two-
thirds of the Company Board after the Executive has been
notified in writing of the Company Board's intention to hold
such vote and been given an opportunity to be heard by the
Company Board (with the assistance of the Executive's
counsel, if the Executive so desires).
"Change in Control" shall mean and shall be deemed to have
occurred upon the happening of any one or more of the
following:
(a) An acquisition (other than directly from SIGCORP) of
any voting securities of SIGCORP (the "Voting Securities")
by any "Person" (as the term person is used for purposes of
Section 13(d) or 14(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")), immediately after
which such Person has "Beneficial Ownership" (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of
twenty percent (20%) or more of the combined voting power of
SIGCORP's then outstanding Voting Securities; provided,
however, that in determining whether a Change in Control has
occurred, Voting Securities which are acquired in a "Non-
Control Acquisition" (as hereinafter defined) shall not
constitute an acquisition which would cause a Change in
Control. A "Non-Control Acquisition" shall mean an
acquisition by (i) an employee benefit plan (or a trust
forming a part thereof) maintained by (A) SIGCORP or (B) any
corporation or other Person of which a majority of its
voting power or its voting equity securities or equity
interest is owned, directly or indirectly, by SIGCORP (for
purposes of this definition, a "Subsidiary") (ii) SIGCORP or
its Subsidiaries, or (iii) any Person in connection with a
"Non-Control Transaction" (as hereinafter defined);
(b) The individuals who, as of the date of this Agreement,
are members of the Board of Directors of SIGCORP (the
"Incumbent Board"), cease for any reason to constitute a
majority of the members of the Board of Directors of
SIGCORP; provided, however, that if the election, or
nomination for election by SIGCORP's common stockholders, of
any new director was approved by a vote of a majority of the
Incumbent Board, such new director shall, for purposes of
this Plan, be considered as a member of the Incumbent Board;
provided, further, however, that no individual shall be
considered a member of the Incumbent Board if such
individual initially assumed office as a result of either an
actual or threatened "Election Contest" (as described in
Rule 14a-11 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 of Directors
of SIGCORP (a "Proxy Contest") including by reason of any
agreement intended to avoid or settle any Election Contest
or Proxy Contest; or
(c) A merger, consolidation or reorganization involving
SIGCORP, unless such merger, consolidation or reorganization
is a "Non-Control Transaction." A "Non-Control Transaction"
shall mean a merger, consolidation or reorganization of
SIGCORP where:
(i) the stockholders of SIGCORP, immediately before such
merger, consolidation or reorganization, own directly or
indirectly immediately following such merger, consolidation
or reorganization, at least seventy-five percent (75%) of
the combined voting power of the outstanding voting
securities of the corporation resulting from such merger or
consolidation or reorganization (the "Surviving
Corporation") in substantially the same proportion as their
ownership of the Voting Securities immediately before such
merger, consolidation or reorganization,
(ii) the individuals who were members of the Board of
Directors of SIGCORP immediately prior to the execution of
the agreement providing for such merger, consolidation or
reorganization constitute a majority of the members of the
board of directors of the Surviving Corporation, or a
corporation beneficially owning, directly or indirectly, a
majority of the Voting Securities of the Surviving
Corporation, and
(iii) no Person other than (1) SIGCORP, (2) any Subsidiary,
(3) any employee benefit plan (or any trust forming a part
thereof) maintained by SIGCORP, the Surviving Corporation,
or any Subsidiary, or (4) any Person who, immediately prior
to such merger, consolidation or reorganization had
Beneficial Ownership of twenty percent (20%) or more of the
then outstanding Voting Securities), has Beneficial
Ownership of twenty percent (20%) or more of the combined
voting power of the Surviving Corporation's then outstanding
voting securities.
(d) The sale or other disposition of all or substantially
all of the assets of SIGCORP to any Person (other than a
transfer to a Subsidiary).
Notwithstanding the foregoing, a Change in Control shall not
be deemed to occur solely because any Person (the "Subject
Person") acquired Beneficial Ownership of more than the
permitted amount of the then outstanding Voting Securities
as a result of the acquisition of Voting Securities by
SIGCORP or any Subsidiary which, by reducing the number of
Voting Securities then outstanding, increases the
proportional number of shares Beneficially Owned by the
Subject Persons, provided that if a Change in Control would
occur (but for the operation of this sentence) as a result
of the acquisition of Voting Securities by SIGCORP or such
Subsidiary, and after such share acquisition by the Company,
the Subject Person becomes the Beneficial Owner of any
additional Voting Securities which increases the percentage
of the then outstanding Voting Securities Beneficially Owned
by the Subject Person, then a Change in Control shall occur.
Notwithstanding anything contained in this Agreement to the
contrary, if the Executive's employment is terminated prior
to a Change in Control and the Executive reasonably
demonstrates that such termination (i) was at the request of
a third party who has indicated an intention or taken steps
reasonably calculated to effect a Change in Control and who
effectuates a Change in Control (a "Third Party") or (ii)
otherwise occurred in connection with, or in anticipation
of, a Change in Control which actually occurs, then for all
purposes of this Agreement, the date of a Change in Control
with respect to the Executive shall mean the date
immediately prior to the date of such termination of the
Executive's employment.
"Disability" shall mean and be deemed to have occurred six
(6) months after Executive shall have become totally and
permanently disabled by bodily or mental injury or disease,
so that Executive is prevented from actively engaging in any
full time executive employment for remuneration or profit,
as determined and certified by any active full time
practicing physician who is a member in good standing of the
Vanderburgh County Medical Society or any successor
organization.
"Effective Date" means the date of a Change in Control.
"Good Reason" means (i) a change in Executive's status,
title, position or responsibilities (including reporting
responsibilities) which, in Executive's reasonable judgment,
represents an adverse change from his status, title,
position or responsibilities as in effect immediately prior
thereto; (ii) the assignment to Executive of any duties or
responsibilities which are inconsistent with his status,
title, position or responsibilities; (iii) a reduction in
Executive's base salary or the aggregate amount of the other
compensation and benefits which Executive was entitled to
receive immediately prior to the Change in Control, or any
failure to pay Executive any compensation or benefits to
which he is entitled on a timely basis; (iv) Company's
requiring Executive to be based at any place outside a 30-
mile radius from Evansville, Indiana, except for reasonably
required travel on Company business which is not greater
than such travel requirements prior to the Change in
Control; (v) the insolvency or the filing (by any party,
including Company) of a petition for bankruptcy of Company
or SIGCORP; (vi) any material breach by Company of any
provision of this Agreement; (vii) any purported termination
of Executive's employment for Cause by Company which does
not comply with the terms of this Agreement; or (viii) the
failure of Company to obtain an agreement from any successor
or assign of Company to assume and agree to perform this
Agreement. A termination of employment by Executive for
Good Reason shall be effectuated by giving Company written
notice of the termination within six (6) months of the event
constituting Good Reason, setting forth in reasonable detail
the specific conduct of Company that constitutes Good
Reason. A termination of employment by Executive for Good
Reason shall be effective on the fifth (5th) business day
following the date such notice is given, unless the notice
sets forth a later date (which date shall in no event be
later than thirty (30) days after the notice is given).
"Term" means the period of time commencing on the Effective
Date and expiring on the earliest to occur of (i) the third
anniversary of the Effective Date, (ii) Executive's
sixty-fifth (65th) birthday, (iii) Executive's death, (iv)
termination of Executive's employment by Company for Cause
or Disability, or (v) termination of Executive's employment
by Executive other than for Good Reason. Notwithstanding
anything to the contrary the rights and obligations of the
parties under Sections 5, 6 and 7 shall survive the
expiration of the Term to the extent necessary to give
effect to the provisions contained therein.
3. Executive's Employment With Company
Throughout the Term, Executive shall be employed as Senior
Vice President and effective September 1, 1997 as Executive
Vice President and Chief Operating Officer of Company or
such other entity as shall then be the principal successor
to the business, assets and properties of Company and shall
continue to have similar or greater responsibility and
authority in such position as he had immediately prior to
the Effective Date.
During the term:
(a) Executive shall devote his full business time and
efforts to the business and affairs of Company or the
successor to Company by which Executive is then employed
pursuant to this Agreement; provided, however, that
Executive shall not be precluded from serving as a director
or member of a committee or board of any other entity which
involves no conflict of interest with Company or its
successor.
(b) Executive shall have duties, responsibilities and
authority consistent with the position held by Executive as
of the date hereof.
(c) The business, assets and properties of Company or its
successor, by whom Executive is employed pursuant to this
Agreement, as well as the support services and facilities
available to Executive, shall not differ materially from
those of Company as existent one (1) year prior to the
Effective Date.
4. Executive's Compensation During Term
Executive shall be entitled to the following compensation
from Company throughout the Term:
(a) base salary at no less than the annual rate in effect
immediately prior to the Effective Date, but with increases
subsequent to the Effective Date as may be made from time to
time as warranted; and
(b) continuing participation in any corporate compensation
plans, pension plans, insurance, medical and hospitalization
programs, employment contracts and any other employee
benefit plans, practices or arrangements in effect
immediately prior to the Effective Date and as same may be
modified, supplemented or replaced without material
reduction in value and benefits to Executive.
5. Termination Of Executive's Employment
(a) In the event of Executive's termination of employment
during the Term by reason of his voluntary termination of
employment with Company for Good Reason, or termination of
Executive's employment by the Company for any reason other
than Cause or Disability:
(i) Company shall pay to Executive, at Executive's option,
either in annual payments or in a lump sum not later than
thirty (30) days after such termination, an amount equal to
Executive's current annual authorized base salary,
multiplied by the number of years (computed to the nearest
month) by which his age, at the time of such termination of
Executive's employment, is less than age 65; however, in no
event shall said lump sum payment or annual payments be more
than three times Executive's current annual authorized base
salary. The payment of such lump sum amount or annual
payments to Executive shall not affect the obligations of
Company, or its successor, under any plan, other agreement
or arrangement pursuant to which Executive is entitled to
any retirement, pension, stock and insurance, benefits,
payments and welfare contributions applicable to former or
retired management employees of Company, generally; and
(ii) For a period of three (3) years following such
termination of Executive's employment Company shall, at its
expense, continue on behalf of Executive and his dependents
and beneficiaries the life insurance, disability, medical,
dental and hospitalization benefits provided to other
similarly situated executives (and their dependents and
beneficiaries) who continue in the employ of Company;
provided, however, that if Executive obtains any such
benefits under the benefit plans of a subsequent employer,
Company's obligation to provide such benefits will be
reduced to the extent that the combined benefit received by
the Executive and his dependents and beneficiaries in all
events is no less favorable than the benefit that would be
received if the benefits under Company's plans and
arrangements. The period during which benefits must be
continued under Section 4980B of the Internal Revenue Code
and Section 601 of the Employee Retirement Income Security
Act of 1974 shall be reduced by the period during which
benefits are continued hereunder.
In the event of Executive's death following a termination of
employment as described in paragraph (a) above, any amounts
that would otherwise have been payable to Executive under
subparagraph (a)(i) shall be paid to Executive's estate and
the benefits under subparagraph (a)(ii) shall continue to be
provided to Executive's dependents and beneficiaries for the
specified time period.
(b) In the event that Executive's employment is terminated
by Company for Cause or Disability or by Executive without
Good Reason or by reason of Executive's death, Executive (or
his estate) will be entitled to receive only the
compensation earned but unpaid as of the date of termination
of his employment, plus such other benefits to which he or
his estate may be entitled under Company plans.
6. Non-Competition, Confidentiality and Non-Solicitation
(a) Upon Executive's receipt of a payment pursuant to
Paragraph 5 hereof, Executive
(b) shall not, prior to attaining age 65, or within three
(3) years after the Effective Date, become an officer,
director or employee of, consultant to or majority
shareholder in any entity that competes with Company, its
subsidiaries or its successor or successors within a 150
mile radius of Evansville, Indiana.
(b) In recognition that Executive's work for the Company
has given him and will continue to give him access to trade
secrets of and confidential information concerning Company
and SIGCORP, Executive shall not, during his employment,
disclose, or after termination thereof, use or disclose to
any other person any confidential information related to the
business of Company or any affiliate, including without
limitation, trade secrets, processes, know-how, technical
data, training manuals, list of customers, prospects or
suppliers, or other business contacts, and Executive
confirms that such information is the exclusive property of
Company. Upon termination of his employment hereunder,
Executive agrees to return to Company all property of
Company and its affiliates, if any, of which he has
possession as well as all notebooks, and other data relating
to records, customers, investigations, or management studies
or inventions made by him. In addition, any confidentiality
agreements between Executive and Company (or any predecessor
thereof) are incorporated by reference into this Agreement
and shall continue to be given full force and effect.
Notwithstanding anything to the contrary contained herein,
Executive shall be under no obligation to maintain the
confidentiality of any information which (i) is or becomes
part of the public domain through no act or omission
attributable to Executive; (ii) is required by law to be
disclosed; provided, that, if required to be disclosed by
law, Executive shall provide Company with prompt notice of
such requirement so that Company may seek an appropriate
protective order; (iii) is deemed by Company not to be
confidential information; or (iv) Executive may receive from
any third party who is unaffiliated with Company and who is
not under an obligation to maintain the confidentiality of
any such information.
(c) Executive agrees that he shall not (i) during the
course of his employment and (ii) for a period of three (3)
years after the Effective Date, either voluntarily or
involuntarily, for any reason whatsoever, directly or
indirectly, individually or on behalf of persons not now
parties to this Agreement, solicit or endeavor to solicit
any other employee, employees, consultant and/or consultants
of Company or SIGCORP to leave employment with Company or
SIGCORP in order to accept employment of any kind with any
other person, firm, partnership, or corporation.
7. Remedies.
(a) Any controversy, dispute or claim arising under this
Agreement, or any breach thereof, shall be subject to
arbitration (by a single arbitrator) conducted in
Evansville, Indiana in accordance with the then existing
rules of the American Arbitration Association, and judgment
upon any award rendered by the arbitrator may be entered by
any federal or state court having jurisdiction thereof. The
parties intend that this agreement to arbitrate be valid,
enforceable and irrevocable. Notwithstanding the foregoing,
the Executive agrees that any breach of the terms of Section
6 would result in irreparable injury and damage to the
Company for which the Company would have no adequate remedy
at law; the Executive therefore also agrees that in the
event of said breach or any threat of breach, (in addition
to the right of the Company to pursue other remedies through
arbitration, including, but not limited to, damages) the
Company shall be entitled to an immediate injunction and
restraining order to prevent such breach or threatened
breach or continued breach by Executive or any and all
persons or entities acting for or with the Executive. The
Executive further agrees that the covenants of Section 6 are
reasonable. Should a court or arbitrator determine,
however, that any portion of Section 6 is unreasonable,
either in period of time, geographical area, or otherwise,
the parties hereto agree that the covenant should be
interpreted and enforced to the maximum extent which such
court or arbitrator deems reasonable. All arbitrator's fees
and all other costs of any arbitration or judicial
proceeding hereunder shall be borne by the Company.
(b) The Company shall pay all legal fees and related
expenses (including the costs of experts, evidence and
counsel) incurred by the Executive as they become due as a
result of (i) the Executive's termination of employment
(including all such fees and expenses, if any, incurred in
contesting or disputing any such termination of employment),
(ii) the Executive's hearing before the Company Board in
connection with any proposal to terminate the Executive's
employment for Cause, or (iii) the Executive's seeking to
obtain or enforce any right or benefit provided by this
Agreement.
(c) The Executive shall be under no duty to mitigate any
amounts payable by the Company under this Agreement and such
amounts shall not be reduced or set-off by any other assets
or income of the Executive. The Company's obligation to
make the payments provided for in this Agreement and
otherwise to perform its obligations hereunder shall not be
affected by any other circumstances, including, without
limitation, any set-off, counterclaim, recoupment, defense
or other right which the Company may have against the
Executive or others.
8. Binding Effect And Assignment
This Agreement shall inure to the benefit of and shall 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. Notwithstanding the foregoing, the Company
shall assign this Agreement to any person or entity
succeeding to substantially all of the business and assets
of Company upon a Change in Control and upon such a Change
in Control Company shall obtain the assumption of this
Agreement by any such successor.
9. Notices
Any notice to a party required or permitted to be given
hereunder shall be in writing and shall be deemed given when
mailed by registered or certified mail to such party at such
party's address as specified below:
If to the Company, to:
Southern Indiana Gas and Electric Company
Attention: Chief Executive Officer
20-24 N.W. Fourth Street
Evansville, Indiana 47708
If to Executive, to: His last known address shown on the
records of Company.
10. Severability
If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be
invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Agreement
shall remain in full force and effect and shall in no way be
affected, impaired or invalidated.
11. Amendments
This Agreement may not be modified, amended, altered or
supplemented except upon the execution and delivery of a
written agreement executed by the parties hereto.
12. Governing Law
This Agreement shall be construed in accordance with the law
of the State of Indiana.
13. Effect of Headings
The paragraph headings herein are for convenience only and
shall not affect the construction hereof.
14. Excise Tax Limitation
(a) Notwithstanding anything contained in this Agreement to
the contrary, to the extent that the payments and benefits
provided under this Agreement and benefits provided to, or
for the benefit of, Executive under any other plan or
agreement of Company or SIGCORP (such payments or benefits
are collectively referred to as the "Payments") would be
subject to the excise tax (the "Excise Tax") imposed under
Section 4999 of the Internal Revenue Code, the Payments
shall be reduced (but not below zero) if and to the extent
necessary so that no Payment to be made or benefit to be
provided to Executive shall be subject to the Excise Tax.
Unless Executive shall have given prior written notice
specifying a different order to Company to effectuate the
reduction of the Payments, Company shall reduce or eliminate
the Payments, by first reducing or eliminating those
payments or benefits which are not payable in cash and then
by reducing or eliminating cash payments, in each case in
reverse order beginning with payments or benefits which are
to be paid the farthest in time from the date of the
termination of Executive's employment. Any notice given by
Executive pursuant to the preceding sentence shall take
precedence over the provisions of any other plan,
arrangement or agreement governing Executive's rights and
entitlements to any benefits or compensation.
(b) An initial determination as to whether the Payments
shall be reduced and the amount of such reduction shall be
made at Company's expense by an accounting firm selected by
Company which is designated as one of the five largest
accounting firms in the United States. The accounting firm
shall provide its determination, together with detailed
supporting calculations and documentation to Company and
Executive within five (5) days of the date of the
termination of Executive's employment, or such other time as
requested by the Company or by Executive (provided Executive
reasonably believes that any of the Payments may be subject
to the Excise Tax) and if the accounting firm determines
that no Excise Tax is payable by Executive with respect to a
Payment or Payments, it shall furnish Executive with an
opinion reasonably acceptable to Executive that no Excise
Tax will be imposed with respect to any such Payment or
Payments. Within ten (10) days of the delivery of the
determination of the accounting firm to Executive, Executive
shall have the right to dispute the determination. If there
is no dispute, the determination shall be binding, final and
conclusive upon Company and Executive.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed the day and year first above written.
SOUTHERN INDIANA GAS AND
ELECTRIC COMPANY
By: Ronald G. Reherman
Ronald G. Reherman
Chairman of the Board
of Directors of the Company
EXECUTIVE
J. Gordon Hurst
J. Gordon Hurst
AGREED TO:
SIGCORP, INC.
By: Ronald G. Reherman
Ronald G. Reherman
Chairman of the Board of
Directors of SIGCORP, Inc.
EXECUTIVE AGREEMENT
THIS AGREEMENT entered into between SOUTHERN INDIANA GAS AND
ELECTRIC COMPANY (hereinafter sometimes referred to as
"Company") and RONALD G. JOCHUM (hereinafter sometimes
referred to as "Executive"), this 1st day of January, 1997.
WITNESSETH:
WHEREAS:
A. Executive is an officer of Company and important to its
management and to the well being of Company, its
stockholders and ratepayers.
B. SIGCORP, Inc. ("SIGCORP") is the owner of all or a
majority of the issued and outstanding shares of Company
common stock.
C. Company desires to assure both itself and Executive of
continuity of Company management and operations in the event
of a Change in Control of SIGCORP.
D. This Executive Agreement is not intended to and shall
not materially alter the compensation and benefits that
Executive could reasonably expect in the absence of a Change
in Control of SIGCORP and therefore this Agreement, though
taking effect upon execution hereof, will be operative only
upon a Change in Control of SIGCORP, as that phrase is
hereinafter defined.
E. Executive is willing to remain in the employ of Company
following a Change in Control of SIGCORP upon the terms and
conditions hereinafter set forth and such additional terms
and conditions as mutually agreed upon by Executive and
Company.
NOW, THEREFORE, in order to achieve the aforesaid purposes
it is hereby agreed by and between the parties as follows:
1. Operation of Agreement
This Agreement shall be effective immediately upon its
execution by the parties, but, anything in this Agreement to
the contrary notwithstanding, neither the Agreement nor any
provision of it shall be operative unless and until there
has been a Change in Control of SIGCORP as defined in
paragraph 2 below. Upon the occurrence of a Change in
Control of SIGCORP, this Agreement and all provisions
thereof shall become operative immediately.
to perform
2. Definitions
The following words and phrases as used herein shall have
the following meanings:
"Cause" means (i) the willful and continued failure of
Executive substantially the duties commensurate with his
position (other than as a result of physical or mental
illness or injury), after the Board of Directors of the
Company (the "Company Board") delivers to the Executive a
written demand for substantial performance that specifically
identifies the manner in which the Company Board believes
that the Executive has not substantially performed such
duties; or (ii) illegal conduct or gross misconduct by the
Executive, in either case that is willful and results in
material and demonstrable damage to the business or
reputation of the Company. No act or failure to act on the
part of the Executive shall be considered "willful" unless
it is done, or omitted to be done, by the Executive in bad
faith or without reasonable belief that the Executive's
action or omission was in the best interests of the Company.
Any determination of whether Cause exists shall be made by a
resolution adopted by a vote at least two-thirds of the
Company Board after the Executive has been notified in
writing of the Company Board's intention to hold such vote
and been given an opportunity to be heard by the Company
Board (with the assistance of the Executive's counsel, if
the Executive so desires).
"Change in Control" shall mean and shall be deemed to have
occurred upon the happening of any one or more of the
following:
(a) An acquisition (other than directly from SIGCORP) of
any voting securities of SIGCORP (the "Voting Securities")
by any "Person" (as the term person is used for purposes of
Section 13(d) or 14(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")), immediately after
which such Person has "Beneficial Ownership" (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of
twenty percent (20%) or more of the combined voting power of
SIGCORP's then outstanding Voting Securities; provided,
however, that in determining whether a Change in Control has
occurred, Voting Securities which are acquired in a "Non-
Control Acquisition" (as hereinafter defined) shall not
constitute an acquisition which would cause a Change in
Control. A "Non-Control Acquisition" shall mean an
acquisition by (i) an employee benefit plan (or a trust
forming a part thereof) maintained by (A) SIGCORP or (B) any
corporation or other Person of which a majority of its
voting power or its voting equity securities or equity
interest is owned, directly or indirectly, by SIGCORP (for
purposes of this definition, a "Subsidiary") (ii) SIGCORP or
its Subsidiaries, or (iii) any Person in connection with a
"Non-Control Transaction" (as hereinafter defined);
(b) The individuals who, as of the date of this Agreement,
are members of the Board of Directors of SIGCORP (the
"Incumbent Board"), cease for any reason to constitute a
majority of the members of the Board of Directors of
SIGCORP; provided, however, that if the election, or
nomination for election by SIGCORP's common stockholders, of
any new director was approved by a vote of a majority of the
Incumbent Board, such new director shall, for purposes of
this Plan, be considered as a member of the Incumbent Board;
provided, further, however, that no individual shall be
considered a member of the Incumbent Board if such
individual initially assumed office as a result of either an
actual or threatened "Election Contest" (as described in
Rule 14a-11 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 of Directors
of SIGCORP (a "Proxy Contest") including by reason of any
agreement intended to avoid or settle any Election Contest
or Proxy Contest; or
(c) A merger, consolidation or reorganization involving
SIGCORP, unless such merger, consolidation or reorganization
is a "Non-Control Transaction." A "Non-Control Transaction"
shall mean a merger, consolidation or reorganization of
SIGCORP where:
(i) the stockholders of SIGCORP, immediately before such
merger, consolidation or reorganization, own directly or
indirectly immediately following such merger, consolidation
or reorganization, at least seventy-five percent (75%) of
the combined voting power of the outstanding voting
securities of the corporation resulting from such merger or
consolidation or reorganization (the "Surviving
Corporation") in substantially the same proportion as their
ownership of the Voting Securities immediately before such
merger, consolidation or reorganization,
(ii) the individuals who were members of the Board of
Directors of SIGCORP immediately prior to the execution of
the agreement providing for such merger, consolidation or
reorganization constitute a majority of the members of the
board of directors of the Surviving Corporation, or a
corporation beneficially owning, directly or indirectly, a
majority of the Voting Securities of the Surviving
Corporation, and
(iii) no Person other than (1) SIGCORP, (2) any Subsidiary,
(3) any employee benefit plan (or any trust forming a part
thereof) maintained by SIGCORP, the Surviving Corporation,
or any Subsidiary, or (4) any Person who, immediately prior
to such merger, consolidation or reorganization had
Beneficial Ownership of twenty percent (20%) or more of the
then outstanding Voting Securities), has Beneficial
Ownership of twenty percent (20%) or more of the combined
voting power of the Surviving Corporation's then outstanding
voting securities.
(d) The sale or other disposition of all or substantially
all of the assets of SIGCORP to any Person (other than a
transfer to a Subsidiary).
Notwithstanding the foregoing, a Change in Control shall not
be deemed to occur solely because any Person (the "Subject
Person") acquired Beneficial Ownership of more than the
permitted amount of the then outstanding Voting Securities
as a result of the acquisition of Voting Securities by
SIGCORP or any Subsidiary which, by reducing the number of
Voting Securities then outstanding, increases the
proportional number of shares Beneficially Owned by the
Subject Persons, provided that if a Change in Control would
occur (but for the operation of this sentence) as a result
of the acquisition of Voting Securities by SIGCORP or such
Subsidiary, and after such share acquisition by the Company,
the Subject Person becomes the Beneficial Owner of any
additional Voting Securities which increases the percentage
of the then outstanding Voting Securities Beneficially Owned
by the Subject Person, then a Change in Control shall occur.
Notwithstanding anything contained in this Agreement to the
contrary, if the Executive's employment is terminated prior
to a Change in Control and the Executive reasonably
demonstrates that such termination (i) was at the request of
a third party who has indicated an intention or taken steps
reasonably calculated to effect a Change in Control and who
effectuates a Change in Control (a "Third Party") or (ii)
otherwise occurred in connection with, or in anticipation
of, a Change in Control which actually occurs, then for all
purposes of this Agreement, the date of a Change in Control
with respect to the Executive shall mean the date
immediately prior to the date of such termination of the
Executive's employment.
"Disability" shall mean and be deemed to have occurred six
(6) months after Executive shall have become totally and
permanently disabled by bodily or mental injury or disease,
so that Executive is prevented from actively engaging in any
full time executive employment for remuneration or profit,
as determined and certified by any active full time
practicing physician who is a member in good standing of the
Vanderburgh County Medical Society or any successor
organization.
"Effective Date" means the date of a Change in Control.
"Good Reason" means (i) a change in Executive's status,
title, position or responsibilities (including reporting
responsibilities) which, in Executive's reasonable judgment,
represents an adverse change from his status, title,
position or responsibilities as in effect immediately prior
thereto; (ii) the assignment to Executive of any duties or
responsibilities which are inconsistent with his status,
title, position or responsibilities; (iii) a reduction in
Executive's base salary or the aggregate amount of the other
compensation and benefits which Executive was entitled to
receive immediately prior to the Change in Control, or any
failure to pay Executive any compensation or benefits to
which he is entitled on a timely basis; (iv) Company's
requiring Executive to be based at any place outside a 30-
mile radius from Evansville, Indiana, except for reasonably
required travel on Company business which is not greater
than such travel requirements prior to the Change in
Control; (v) the insolvency or the filing (by any party,
including Company) of a petition for bankruptcy of Company
or SIGCORP; (vi) any material breach by Company of any
provision of this Agreement; (vii) any purported termination
of Executive's employment for Cause by Company which does
not comply with the terms of this Agreement; or (viii) the
failure of Company to obtain an agreement from any successor
or assign of Company to assume and agree to perform this
Agreement. A termination of employment by Executive for
Good Reason shall be effectuated by giving Company written
notice of the termination within six (6) months of the event
constituting Good Reason, setting forth in reasonable detail
the specific conduct of Company that constitutes Good
Reason. A termination of employment by Executive for Good
Reason shall be effective on the fifth (5th) business day
following the date such notice is given, unless the notice
sets forth a later date (which date shall in no event be
later than thirty (30) days after the notice is given).
"Term" means the period of time commencing on the Effective
Date and expiring on the earliest to occur of (i) the third
anniversary of the Effective Date, (ii) Executive's
sixty-fifth (65th) birthday, (iii) Executive's death, (iv)
termination of Executive's employment by Company for Cause
or Disability, or (v) termination of Executive's employment
by Executive other than for Good Reason. Notwithstanding
anything to the contrary the rights and obligations of the
parties under Sections 5, 6 and 7 shall survive the
expiration of the Term to the extent necessary to give
effect to the provisions contained therein.
3. Executive's Employment With Company
Throughout the Term, Executive shall be employed as Vice
President of Company or such other entity as shall then be
the principal successor to the business, assets and
properties of Company and shall continue to have similar or
greater responsibility and authority in such position as he
had immediately prior to the Effective Date.
During the term:
(a) Executive shall devote his full business time and
efforts to the business and affairs of Company or the
successor to Company by which Executive is then employed
pursuant to this Agreement; provided, however, that
Executive shall not be precluded from serving as a director
or member of a committee or board of any other entity which
involves no conflict of interest with Company or its
successor.
(b) Executive shall have duties, responsibilities and
authority consistent with the position held by Executive as
of the date hereof.
(c) The business, assets and properties of Company or its
successor, by whom Executive is employed pursuant to this
Agreement, as well as the support services and facilities
available to Executive, shall not differ materially from
those of Company as existent one (1) year prior to the
Effective Date.
4. Executive's Compensation During Term
Executive shall be entitled to the following compensation
from Company throughout the Term:
(a) base salary at no less than the annual rate in effect
immediately prior to the Effective Date, but with increases
subsequent to the Effective Date as may be made from time to
time as warranted; and
(b) continuing participation in any corporate compensation
plans, pension plans, insurance, medical and hospitalization
programs, employment contracts and any other employee
benefit plans, practices or arrangements in effect
immediately prior to the Effective Date and as same may be
modified, supplemented or replaced without material
reduction in value and benefits to Executive.
5. Termination Of Executive's Employment
(a) In the event of Executive's termination of employment
during the Term by reason of his voluntary termination of
employment with Company for Good Reason, or termination of
Executive's employment by the Company for any reason other
than Cause or Disability:
(i) Company shall pay to Executive, at Executive's option,
either in annual payments or in a lump sum not later than
thirty (30) days after such termination, an amount equal to
Executive's current annual authorized base salary,
multiplied by the number of years (computed to the nearest
month) by which his age, at the time of such termination of
Executive's employment, is less than age 65; however, in no
event shall said lump sum payment or annual payments be more
than three times Executive's current annual authorized base
salary. The payment of such lump sum amount or annual
payments to Executive shall not affect the obligations of
Company, or its successor, under any plan, other agreement
or arrangement pursuant to which Executive is entitled to
any retirement, pension, stock and insurance, benefits,
payments and welfare contributions applicable to former or
retired management employees of Company, generally; and
(ii) For a period of three (3) years following such
termination of Executive's employment Company shall, at its
expense, continue on behalf of Executive and his dependents
and beneficiaries the life insurance, disability, medical,
dental and hospitalization benefits provided to other
similarly situated executives (and their dependents and
beneficiaries) who continue in the employ of Company;
provided, however, that if Executive obtains any such
benefits under the benefit plans of a subsequent employer,
Company's obligation to provide such benefits will be
reduced to the extent that the combined benefit received by
the Executive and his dependents and beneficiaries in all
events is no less favorable than the benefit that would be
received if the benefits under Company's plans and
arrangements. The period during which benefits must be
continued under Section 4980B of the Internal Revenue Code
and Section 601 of the Employee Retirement Income Security
Act of 1974 shall be reduced by the period during which
benefits are continued hereunder.
In the event of Executive's death following a termination of
employment as described in paragraph (a) above, any amounts
that would otherwise have been payable to Executive under
subparagraph (a)(i) shall be paid to Executive's estate and
the benefits under subparagraph (a)(ii) shall continue to be
provided to Executive's dependents and beneficiaries for the
specified time period.
(b) In the event that Executive's employment is terminated
by Company for Cause or Disability or by Executive without
Good Reason or by reason of Executive's death, Executive (or
his estate) will be entitled to receive only the
compensation earned but unpaid as of the date of termination
of his employment, plus such other benefits to which he or
his estate may be entitled under Company plans.
6. Non-Competition, Confidentiality and Non-Solicitation
(a) Upon Executive's receipt of a payment pursuant to
Paragraph 5 hereof, Executive shall not, prior to attaining
age 65, or within three (3) years after the Effective Date,
become an officer, director or employee of, consultant to or
majority shareholder in any entity that competes with
Company, its subsidiaries or its successor or successors
within a 150 mile radius of Evansville, Indiana.
(_)(b) In recognition that Executive's work for the
Company has given him and will continue to give him access
to trade secrets of and confidential information concerning
Company and SIGCORP, Executive shall not, during his
employment, disclose, or after termination thereof, use or
disclose to any other person any confidential information
related to the business of Company or any affiliate,
including without limitation, trade secrets, processes, know-
how, technical data, training manuals, list of customers,
prospects or suppliers, or other business contacts, and
Executive confirms that such information is the exclusive
property of Company. Upon termination of his employment
hereunder, Executive agrees to return to Company all
property of Company and its affiliates, if any, of which he
has possession as well as all notebooks, and other data
relating to records, customers, investigations, or
management studies or inventions made by him. In addition,
any confidentiality agreements between Executive and Company
(or any predecessor thereof) are incorporated by reference
into this Agreement and shall continue to be given full
force and effect. Notwithstanding anything to the contrary
contained herein, Executive shall be under no obligation to
maintain the confidentiality of any information which (i) is
or becomes part of the public domain through no act or
omission attributable to Executive; (ii) is required by law
to be disclosed; provided, that, if required to be disclosed
by law, Executive shall provide Company with prompt notice
of such requirement so that Company may seek an appropriate
protective order; (iii) is deemed by Company not to be
confidential information; or (iv) Executive may receive from
any third party who is unaffiliated with Company and who is
not under an obligation to maintain the confidentiality of
any such information.
(c) Executive agrees that he shall not (i) during the
course of his employment and (ii) for a period of three (3)
years after the Effective Date, either voluntarily or
involuntarily, for any reason whatsoever, directly or
indirectly, individually or on behalf of persons not now
parties to this Agreement, solicit or endeavor to solicit
any other employee, employees, consultant and/or consultants
of Company or SIGCORP to leave employment with Company or
SIGCORP in order to accept employment of any kind with any
other person, firm, partnership, or corporation.
7. Remedies.
(a) Any controversy, dispute or claim arising under this
Agreement, or any breach thereof, shall be subject to
arbitration (by a single arbitrator) conducted in
Evansville, Indiana in accordance with the then existing
rules of the American Arbitration Association, and judgment
upon any award rendered by the arbitrator may be entered by
any federal or state court having jurisdiction thereof. The
parties intend that this agreement to arbitrate be valid,
enforceable and irrevocable. Notwithstanding the foregoing,
the Executive agrees that any breach of the terms of Section
6 would result in irreparable injury and damage to the
Company for which the Company would have no adequate remedy
at law; the Executive therefore also agrees that in the
event of said breach or any threat of breach, (in addition
to the right of the Company to pursue other remedies through
arbitration, including, but not limited to, damages) the
Company shall be entitled to an immediate injunction and
restraining order to prevent such breach or threatened
breach or continued breach by Executive or any and all
persons or entities acting for or with the Executive. The
Executive further agrees that the covenants of Section 6 are
reasonable. Should a court or arbitrator determine,
however, that any portion of Section 6 is unreasonable,
either in period of time, geographical area, or otherwise,
the parties hereto agree that the covenant should be
interpreted and enforced to the maximum extent which such
court or arbitrator deems reasonable. All arbitrator's fees
and all other costs of any arbitration or judicial
proceeding hereunder shall be borne by the Company.
(b) The Company shall pay all legal fees and related
expenses (including the costs of experts, evidence and
counsel) incurred by the Executive as they become due as a
result of (i) the Executive's termination of employment
(including all such fees and expenses, if any, incurred in
contesting or disputing any such termination of employment),
(ii) the Executive's hearing before the Company Board in
connection with any proposal to terminate the Executive's
employment for Cause, or (iii) the Executive's seeking to
obtain or enforce any right or benefit provided by this
Agreement.
(c) The Executive shall be under no duty to mitigate any
amounts payable by the Company under this Agreement and such
amounts shall not be reduced or set-off by any other assets
or income of the Executive. The Company's obligation to
make the payments provided for in this Agreement and
otherwise to perform its obligations hereunder shall not be
affected by any other circumstances, including, without
limitation, any set-off, counterclaim, recoupment, defense
or other right which the Company may have against the
Executive or others.
8. Binding Effect And Assignment
This Agreement shall inure to the benefit of and shall 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. Notwithstanding the foregoing, the Company
shall assign this Agreement to any person or entity
succeeding to substantially all of the business and assets
of Company upon a Change in Control and upon such a Change
in Control Company shall obtain the assumption of this
Agreement by any such successor.
9. Notices
Any notice to a party required or permitted to be given
hereunder shall be in writing and shall be deemed given when
mailed by registered or certified mail to such party at such
party's address as specified below:
If to the Company, to:
Southern Indiana Gas and Electric Company
Attention: Chief Executive Officer
20-24 N.W. Fourth Street
Evansville, Indiana 47708
If to Executive, to: His last known address shown on the
records of Company.
10. Severability
If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be
invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Agreement
shall remain in full force and effect and shall in no way be
affected, impaired or invalidated.
11. Amendments
This Agreement may not be modified, amended, altered or
supplemented except upon the execution and delivery of a
written agreement executed by the parties hereto.
12. Governing Law
This Agreement shall be construed in accordance with the law
of the State of Indiana.
13. Effect of Headings
The paragraph headings herein are for convenience only and
shall not affect the construction hereof.
14. Excise Tax Limitation
(a) Notwithstanding anything contained in this Agreement to
the contrary, to the extent that the payments and benefits
provided under this Agreement and benefits provided to, or
for the benefit of, Executive under any other plan or
agreement of Company or SIGCORP (such payments or benefits
are collectively referred to as the "Payments") would be
subject to the excise tax (the "Excise Tax") imposed under
Section 4999 of the Internal Revenue Code, the Payments
shall be reduced (but not below zero) if and to the extent
necessary so that no Payment to be made or benefit to be
provided to Executive shall be subject to the Excise Tax.
Unless Executive shall have given prior written notice
specifying a different order to Company to effectuate the
reduction of the Payments, Company shall reduce or eliminate
the Payments, by first reducing or eliminating those
payments or benefits which are not payable in cash and then
by reducing or eliminating cash payments, in each case in
reverse order beginning with payments or benefits which are
to be paid the farthest in time from the date of the
termination of Executive's employment. Any notice given by
Executive pursuant to the preceding sentence shall take
precedence over the provisions of any other plan,
arrangement or agreement governing Executive's rights and
entitlements to any benefits or compensation.
(b) An initial determination as to whether the Payments
shall be reduced and the amount of such reduction shall be
made at Company's expense by an accounting firm selected by
Company which is designated as one of the five largest
accounting firms in the United States. The accounting firm
shall provide its determination, together with detailed
supporting calculations and documentation to Company and
Executive within five (5) days of the date of the
termination of Executive's employment, or such other time as
requested by the Company or by Executive (provided Executive
reasonably believes that any of the Payments may be subject
to the Excise Tax) and if the accounting firm determines
that no Excise Tax is payable by Executive with respect to a
Payment or Payments, it shall furnish Executive with an
opinion reasonably acceptable to Executive that no Excise
Tax will be imposed with respect to any such Payment or
Payments. Within ten (10) days of the delivery of the
determination of the accounting firm to Executive, Executive
shall have the right to dispute the determination. If there
is no dispute, the determination shall be binding, final and
conclusive upon Company and Executive.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed the day and year first above
written.
SOUTHERN INDIANA GAS AND
ELECTRIC COMPANY
By: Ronald G. Reherman
Ronald G. Reherman
Chairman of the Board
of Directors of the Company
EXECUTIVE
Ronald G. Jochum
Ronald G. Jochum
AGREED TO:
SIGCORP, INC.
By: Ronald G. Reherman
Ronald G. Reherman
Chairman of the Board of
Directors of SIGCORP, Inc.
EXECUTIVE AGREEMENT
THIS AGREEMENT entered into between SOUTHERN INDIANA GAS AND
ELECTRIC COMPANY (hereinafter sometimes referred to as
"Company") and RONALD G. REHERMAN (hereinafter sometimes
referred to as "Executive"), this 1st day of January, 1997.
WITNESSETH:
WHEREAS:
A. Executive is an officer of Company and important to its
management and to the well being of Company, its
stockholders and ratepayers.
B. SIGCORP, Inc. ("SIGCORP") is the owner of all or a
majority of the issued and outstanding shares of Company
common stock.
C. Company desires to assure both itself and Executive of
continuity of Company management and operations in the event
of a Change in Control of SIGCORP.
D. This Executive Agreement is not intended to and shall
not materially alter the compensation and benefits that
Executive could reasonably expect in the absence of a Change
in Control of SIGCORP and therefore this Agreement, though
taking effect upon execution hereof, will be operative only
upon a Change in Control of SIGCORP, as that phrase is
hereinafter defined.
E. Executive is willing to remain in the employ of Company
following a Change in Control of SIGCORP upon the terms and
conditions hereinafter set forth and such additional terms
and conditions as mutually agreed upon by Executive and
Company.
NOW, THEREFORE, in order to achieve the aforesaid purposes
it is hereby agreed by and between the parties as follows:
1. Operation of Agreement
This Agreement shall be effective immediately upon its
execution by the parties, but, anything in this Agreement to
the contrary notwithstanding, neither the Agreement nor any
provision of it shall be operative unless and until there
has been a Change in Control of SIGCORP as defined in
paragraph 2 below. Upon the occurrence of a Change in
Control of SIGCORP, this Agreement and all provisions
thereof shall become operative immediately.
2. Definitions
The following words and phrases as used herein shall have
the following meanings:
"Cause" means (i) the willful and continued failure of
Executive substantially to perform the duties commensurate
with his position (other than as a result of physical or
mental illness or injury), after the Board of Directors of
the Company (the "Company Board") delivers to the Executive
a written demand for substantial performance that
specifically identifies the manner in which the Company
Board believes that the Executive has not substantially
performed such duties; or (ii) illegal conduct or gross
misconduct by the Executive, in either case that is willful
and results in material and demonstrable damage to the
business or reputation of the Company. No act or failure to
act on the part of the Executive shall be considered
"willful" unless it is done, or omitted to be done, by the
Executive in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of
the Company. Any determination of whether Cause exists
shall be made by a resolution adopted by a vote at least two-
thirds of the Company Board after the Executive has been
notified in writing of the Company Board's intention to hold
such vote and been given an opportunity to be heard by the
Company Board (with the assistance of the Executive's
counsel, if the Executive so desires).
"Change in Control" shall mean and shall be deemed to have
occurred upon the happening of any one or more of the
following:
(a) An acquisition (other than directly from SIGCORP) of
any voting securities of SIGCORP (the "Voting Securities")
by any "Person" (as the term person is used for purposes of
Section 13(d) or 14(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")), immediately after
which such Person has "Beneficial Ownership" (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of
twenty percent (20%) or more of the combined voting power of
SIGCORP's then outstanding Voting Securities; provided,
however, that in determining whether a Change in Control has
occurred, Voting Securities which are acquired in a "Non-
Control Acquisition" (as hereinafter defined) shall not
constitute an acquisition which would cause a Change in
Control. A "Non-Control Acquisition" shall mean an
acquisition by (i) an employee benefit plan (or a trust
forming a part thereof) maintained by (A) SIGCORP or (B) any
corporation or other Person of which a majority of its
voting power or its voting equity securities or equity
interest is owned, directly or indirectly, by SIGCORP (for
purposes of this definition, a "Subsidiary") (ii) SIGCORP or
its Subsidiaries, or (iii) any Person in connection with a
"Non-Control Transaction" (as hereinafter defined);
(b) The individuals who, as of the date of this Agreement,
are members of the Board of Directors of SIGCORP (the
"Incumbent Board"), cease for any reason to constitute a
majority of the members of the Board of Directors of
SIGCORP; provided, however, that if the election, or
nomination for election by SIGCORP's common stockholders, of
any new director was approved by a vote of a majority of the
Incumbent Board, such new director shall, for purposes of
this Plan, be considered as a member of the Incumbent Board;
provided, further, however, that no individual shall be
considered a member of the Incumbent Board if such
individual initially assumed office as a result of either an
actual or threatened "Election Contest" (as described in
Rule 14a-11 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 of Directors
of SIGCORP (a "Proxy Contest") including by reason of any
agreement intended to avoid or settle any Election Contest
or Proxy Contest; or
(c) A merger, consolidation or reorganization involving
SIGCORP, unless such merger, consolidation or reorganization
is a "Non-Control Transaction." A "Non-Control Transaction"
shall mean a merger, consolidation or reorganization of
SIGCORP where:
(i) the stockholders of SIGCORP, immediately before such
merger, consolidation or reorganization, own directly or
indirectly immediately following such merger, consolidation
or reorganization, at least seventy-five percent (75%) of
the combined voting power of the outstanding voting
securities of the corporation resulting from such merger or
consolidation or reorganization (the "Surviving
Corporation") in substantially the same proportion as their
ownership of the Voting Securities immediately before such
merger, consolidation or reorganization,
(ii) the individuals who were members of the Board of
Directors of SIGCORP immediately prior to the execution of
the agreement providing for such merger, consolidation or
reorganization constitute a majority of the members of the
board of directors of the Surviving Corporation, or a
corporation beneficially owning, directly or indirectly, a
majority of the Voting Securities of the Surviving
Corporation, and
(iii) no Person other than (1) SIGCORP, (2) any
Subsidiary, (3) any employee benefit plan (or any trust
forming a part thereof) maintained by SIGCORP, the Surviving
Corporation, or any Subsidiary, or (4) any Person who,
immediately prior to such merger, consolidation or
reorganization had Beneficial Ownership of twenty percent
(20%) or more of the then outstanding Voting Securities),
has Beneficial Ownership of twenty percent (20%) or more of
the combined voting power of the Surviving Corporation's
then outstanding voting securities.
(d) The sale or other disposition of all or substantially
all of the assets of SIGCORP to any Person (other than a
transfer to a Subsidiary).
Notwithstanding the foregoing, a Change in Control shall not
be deemed to occur solely because any Person (the "Subject
Person") acquired Beneficial Ownership of more than the
permitted amount of the then outstanding Voting Securities
as a result of the acquisition of Voting Securities by
SIGCORP or any Subsidiary which, by reducing the number of
Voting Securities then outstanding, increases the
proportional number of shares Beneficially Owned by the
Subject Persons, provided that if a Change in Control would
occur (but for the operation of this sentence) as a result
of the acquisition of Voting Securities by SIGCORP or such
Subsidiary, and after such share acquisition by the Company,
the Subject Person becomes the Beneficial Owner of any
additional Voting Securities which increases the percentage
of the then outstanding Voting Securities Beneficially Owned
by the Subject Person, then a Change in Control shall occur.
Notwithstanding anything contained in this Agreement to the
contrary, if the Executive's employment is terminated prior
to a Change in Control and the Executive reasonably
demonstrates that such termination (i) was at the request of
a third party who has indicated an intention or taken steps
reasonably calculated to effect a Change in Control and who
effectuates a Change in Control (a "Third Party") or (ii)
otherwise occurred in connection with, or in anticipation
of, a Change in Control which actually occurs, then for all
purposes of this Agreement, the date of a Change in Control
with respect to the Executive shall mean the date
immediately prior to the date of such termination of the
Executive's employment.
"Disability" shall mean and be deemed to have occurred six
(6) months after Executive shall have become totally and
permanently disabled by bodily or mental injury or disease,
so that Executive is prevented from actively engaging in any
full time executive employment or remuneration or profit, as
determined and certified by any active full time practicing
physician who is a member in good standing of the
Vanderburgh County Medical Society or any successor
organization.
"Effective Date" means the date of a Change in Control.
"Good Reason" means (i) Executive's ceasing to serve as
Chairman of either of SIGCORP or the Company, without the
consent of Executive, or a change in Executive's status,
title, position or responsibilities (including reporting
responsibilities) with either of SIGCORP or the Company,
without the consent of the Executive, which, in Executive's
reasonable judgment, represents an adverse change from his
status, title, position or responsibilities as in effect
immediately prior thereto; (ii) the assignment to Executive
of any duties or responsibilities which are inconsistent
with his status, title, position or responsibilities; (iii)
a reduction in Executive's base salary or the aggregate
amount of the other compensation and benefits which
Executive was entitled to receive immediately prior to the
Change in Control, or any failure to pay Executive any
compensation or benefits to which he is entitled on a timely
basis; (iv) Company's requiring Executive to be based at any
place outside a 30-mile radius from Evansville, Indiana,
except for reasonably required travel on Company business
which is not greater than such travel requirements prior to
the Change in Control; (v) the insolvency or the filing (by
any party, including Company) of a petition for bankruptcy
of Company or SIGCORP; (vi) any material breach by Company
of any provision of this Agreement; (vii) any purported
termination of Executive's employment for Cause by Company
which does not comply with the terms of this Agreement; or
(viii) the failure of Company to obtain an agreement from
any successor or assign of Company to assume and agree to
perform this Agreement. A termination of employment by
Executive for Good Reason shall be effectuated by giving
Company written notice of the termination within six (6)
months of the event constituting Good Reason, setting forth
in reasonable detail the specific conduct of Company that
constitutes Good Reason. A termination of employment by
Executive for Good Reason shall be effective on the fifth
(5th) business day following the date such notice is given,
unless the notice sets forth a later date (which date shall
in no event be later than thirty (30) days after the notice
is given).
"Term" means the period of time commencing on the Effective
Date and expiring on the earliest to occur of (i) the third
anniversary of the Effective Date, (ii) Executive's
sixty-fifth (65th) birthday, (iii) Executive's death, (iv)
termination of Executive's employment by Company for Cause
or Disability, or (v) termination of Executive's employment
by Executive other than for Good Reason. Notwithstanding
anything to the contrary the rights and obligations of the
parties under Sections 5, 6 and 7 shall survive the
expiration of the Term to the extent necessary to give
effect to the provisions contained therein.
3. Executive's Employment With Company
Throughout the Term, Executive shall be employed as
President and Chief Executive Officer of Company or such
other entity as shall then be the principal successor to the
business, assets and properties of Company and shall
continue to have similar or greater responsibility and
authority in such position as he had immediately prior to
the Effective Date.
During the term:
(a) Executive shall devote his full business time and
efforts to the business and affairs of Company or the
successor to Company by which Executive is then employed
pursuant to this Agreement; provided, however, that
Executive shall not be precluded from serving as a director
or member of a committee or board of any other entity which
involves no conflict of interest with Company or its
successor.
(b) Executive shall have duties, responsibilities and
authority consistent with the position held by Executive as
of the date hereof.
(c) The business, assets and properties of Company or its
successor, by whom Executive is employed pursuant to this
Agreement, as well as the support services and facilities
available to Executive, shall not differ materially from
those of Company as existent one (1) year prior to the
Effective Date.
4. Executive's Compensation During Term
Executive shall be entitled to the following compensation
from Company throughout the Term:
(a) base salary at no less than the annual rate in effect
immediately prior to the Effective Date, but with increases
subsequent to the Effective Date as may be made from time to
time as warranted; and
(b) continuing participation in any corporate compensation
plans, pension plans, insurance, medical and hospitalization
programs, employment contracts and any other employee
benefit plans, practices or arrangements in effect
immediately prior to the Effective Date and as same may be
modified, supplemented or replaced without material
reduction in value and benefits to Executive.
5. Termination Of Executive's Employment
(a) In the event of Executive's termination of employment
during the Term by reason of his voluntary termination of
employment with Company for Good Reason, or termination of
Executive's employment by the Company for any reason other
than Cause or Disability:
(i) Company shall pay to Executive, at Executive's option,
either in annual payments or in a lump sum not later than
thirty (30) days after such termination, an amount equal to
Executive's current annual authorized base salary,
multiplied by the number of years (computed to the nearest
month) by which his age, at the time of such termination of
Executive's employment, is less than age 65; however, in no
event shall said lump sum payment or annual payments be more
than three times Executive's current annual authorized base
salary. The payment of such lump sum amount or annual
payments to Executive shall not affect the obligations of
Company, or its successor, under any plan, other agreement
or arrangement pursuant to which Executive is entitled to
any retirement, pension, stock and insurance, benefits,
payments and welfare contributions applicable to former or
retired management employees of Company, generally; and
(ii) For a period of three (3) years following such
termination of Executive's employment Company shall, at its
expense, continue on behalf of Executive and his dependents
and beneficiaries the life insurance, disability, medical,
dental and hospitalization benefits provided to other
similarly situated executives (and their dependents and
beneficiaries) who continue in the employ of Company;
provided, however, that if Executive obtains any such
benefits under the benefit plans of a subsequent employer,
Company's obligation to provide such benefits will be
reduced to the extent that the combined benefit received by
the Executive and his dependents and beneficiaries in all
events is no less favorable than the benefit that would be
received if the benefits under Company's plans and
arrangements. The period during which benefits must be
continued under Section 4980B of the Internal Revenue Code
and Section 601 of the Employee Retirement Income Security
Act of 1974 shall be reduced by the period during which
benefits are continued hereunder.
In the event of Executive's death following a termination of
employment as described in paragraph (a) above, any amounts
that would otherwise have been payable to Executive under
subparagraph (a)(i) shall be paid to Executive's estate and
the benefits under subparagraph (a)(ii) shall continue to be
provided to Executive's dependents and beneficiaries for the
specified time period.
(b) In the event that Executive's employment is terminated
by Company for Cause or Disability or by Executive without
Good Reason or by reason of Executive's death, Executive (or
his estate) will be entitled to receive only the
compensation earned but unpaid as of the date of termination
of his employment, plus such other benefits to which he or
his estate may be entitled under Company plans.
6. Non-Competition, Confidentiality and Non-Solicitation
(a) Upon Executive's receipt of a payment pursuant to
Paragraph 5 hereof, Executive shall not, prior to attaining
age 65, or within three (3) years after the Effective Date,
become an officer, director or employee of, consultant to or
majority shareholder in any entity that competes with
Company, its subsidiaries or its successor or successors
within a 150 mile radius of Evansville, Indiana.
(b) In recognition that Executive's work for the Company
has given him and will continue to give him access to trade
secrets of and confidential information concerning Company
and SIGCORP, Executive shall not, during his employment,
disclose, or after termination thereof, use or disclose to
any other person any confidential information related to the
business of Company or any affiliate, including without
limitation, trade secrets, processes, know-how, technical
data, training manuals, list of customers, prospects or
suppliers, or other business contacts, and Executive
confirms that such information is the exclusive property of
Company. Upon termination of his employment hereunder,
Executive agrees to return to Company all property of
Company and its affiliates, if any, of which he has
possession as well as all notebooks, and other data relating
to records, customers, investigations, or management studies
or inventions made by him. In addition, any confidentiality
agreements between Executive and Company (or any predecessor
thereof) are incorporated by reference into this Agreement
and shall continue to be given full force and effect.
Notwithstanding anything to the contrary contained herein,
Executive shall be under no obligation to maintain the
confidentiality of any information which (i) is or becomes
part of the public domain through no act or omission
attributable to Executive; (ii) is required by law to be
disclosed; provided, that, if required to be disclosed by
law, Executive shall provide Company with prompt notice of
such requirement so that Company may seek an appropriate
protective order; (iii) is deemed by Company not to be
confidential information; or (iv) Executive may receive from
any third party who is unaffiliated with Company and who is
not under an obligation to maintain the confidentiality of
any such information.
(c) Executive agrees that he shall not (i) during the
course of his employment and (ii) for a period of three (3)
years after the Effective Date, either voluntarily or
involuntarily, for any reason whatsoever, directly or
indirectly, individually or on behalf of persons not now
parties to this Agreement, solicit or endeavor to solicit
any other employee, employees, consultant and/or consultants
of Company or SIGCORP to leave employment with Company or
SIGCORP in order to accept employment of any kind with any
other person, firm, partnership, or corporation.
7. Remedies.
(a) Any controversy, dispute or claim arising under this
Agreement, or any breach thereof, shall be subject to
arbitration (by a single arbitrator) conducted in
Evansville, Indiana in accordance with the then existing
rules of the American Arbitration Association, and judgment
upon any award rendered by the arbitrator may be entered by
any federal or state court having jurisdiction thereof. The
parties intend that this agreement to arbitrate be valid,
enforceable and irrevocable. Notwithstanding the foregoing,
the Executive agrees that any breach of the terms of Section
6 would result in irreparable injury and damage to the
Company for which the Company would have no adequate remedy
at law; the Executive therefore also agrees that in the
event of said breach or any threat of breach, (in addition
to the right of the Company to pursue other remedies through
arbitration, including, but not limited to, damages) the
Company shall be entitled to an immediate injunction and
restraining order to prevent such breach or threatened
breach or continued breach by Executive or any and all
persons or entities acting for or with the Executive. The
Executive further agrees that the covenants of Section 6 are
reasonable. Should a court or arbitrator determine,
however, that any portion of Section 6 is unreasonable,
either in period of time, geographical area, or otherwise,
the parties hereto agree that the covenant should be
interpreted and enforced to the maximum extent which such
court or arbitrator deems reasonable. All arbitrator's fees
and all other costs of any arbitration or judicial
proceeding hereunder shall be borne by the Company.
(b) The Company shall pay all legal fees and related
expenses (including the costs of experts, evidence and
counsel) incurred by the Executive as they become due as a
result of (i) the Executive's termination of employment
(including all such fees and expenses, if any, incurred in
contesting or disputing any such termination of employment),
(ii) the Executive's hearing before the Company Board in
connection with any proposal to terminate the Executive's
employment for Cause, or (iii) the Executive's seeking to
obtain or enforce any right or benefit provided by this
Agreement.
(c) The Executive shall be under no duty to mitigate any
amounts payable by the Company under this Agreement and such
amounts shall not be reduced or set-off by any other assets
or income of the Executive. The Company's obligation to
make the payments provided for in this Agreement and
otherwise to perform its obligations hereunder shall not be
affected by any other circumstances, including, without
limitation, any set-off, counterclaim, recoupment, defense
or other right which the Company may have against the
Executive or others.
8. Binding Effect And Assignment
This Agreement shall inure to the benefit of and shall 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. Notwithstanding the foregoing, the Company
shall assign this Agreement to any person or entity
succeeding to substantially all of the business and assets
of Company upon a Change in Control and upon such a Change
in Control Company shall obtain the assumption of this
Agreement by any such successor.
9. Notices
Any notice to a party required or permitted to be given
hereunder shall be in writing and shall be deemed given when
mailed by registered or certified mail to such party at such
party's address as specified below:
If to the Company, to:
Southern Indiana Gas and Electric Company
Attention: Chief Executive Officer
20-24 N.W. Fourth Street
Evansville, Indiana 47708
If to Executive, to: His last known address shown on the
records of Company.
10. Severability
If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be
invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Agreement
shall remain in full force and effect and shall in no way be
affected, impaired or invalidated.
11. Amendments
This Agreement may not be modified, amended, altered or
supplemented except upon the execution and delivery of a
written agreement executed by the parties hereto.
12. Governing Law
This Agreement shall be construed in accordance with the law
of the State of Indiana.
13. Effect of Headings
The paragraph headings herein are for convenience only and
shall not affect the construction hereof.
14. Excise Tax Limitation
(a) Notwithstanding anything contained in this Agreement to
the contrary, to the extent that the payments and benefits
provided under this Agreement and benefits provided to, or
for the benefit of, Executive under any other plan or
agreement of Company or SIGCORP (such payments or benefits
are collectively referred to as the "Payments") would be
subject to the excise tax (the "Excise Tax") imposed under
Section 4999 of the Internal Revenue Code, the Payments
shall be reduced (but not below zero) if and to the extent
necessary so that no Payment to be made or benefit to be
provided to Executive shall be subject to the Excise Tax.
Unless Executive shall have given prior written notice
specifying a different order to Company to effectuate the
reduction of the Payments, Company shall reduce or eliminate
the Payments, by first reducing or eliminating those
payments or benefits which are not payable in cash and then
by reducing or eliminating cash payments, in each case in
reverse order beginning with payments or benefits which are
to be paid the farthest in time from the date of the
termination of Executive's employment. Any notice given by
Executive pursuant to the preceding sentence shall take
precedence over the provisions of any other plan,
arrangement or agreement governing Executive's rights and
entitlements to any benefits or compensation.
(b) An initial determination as to whether the Payments
shall be reduced and the amount of such reduction shall be
made at Company's expense by an accounting firm selected by
Company which is designated as one of the five largest
accounting firms in the United States. The accounting firm
shall provide its determination, together with detailed
supporting calculations and documentation to Company and
Executive within five (5) days of the date of the
termination of Executive's employment, or such other time as
requested by the Company or by Executive (provided Executive
reasonably believes that any of the Payments may be subject
to the Excise Tax) and if the accounting firm determines
that no Excise Tax is payable by Executive with respect to a
Payment or Payments, it shall furnish Executive with an
opinion reasonably acceptable to Executive that no Excise
Tax will be imposed with respect to any such Payment or
Payments. Within ten (10) days of the delivery of the
determination of the accounting firm to Executive, Executive
shall have the right to dispute the determination. If there
is no dispute, the determination shall be binding, final and
conclusive upon Company and Executive.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed the day and year first above
written.
SOUTHERN INDIANA GAS AND
ELECTRIC COMPANY
By: A. E. Goebel
A. E. Goebel
Senior Vice President
EXECUTIVE
Ronald G. Reherman
Ronald G. Reherman
AGREED TO:
SIGCORP, INC.
By: A. E. Geobel
A. E. Goebel
Secretary & Treasurer
SUPPLEMENTAL PENSION AND DISABILITY AGREEMENT
SOUTHERN INDIANA GAS AND ELECTRIC COMPANY
AND
RONALD G. REHERMAN
THIS AGREEMENT, made and entered into this 4th day of April,
by and between SOUTHERN INDIANA GAS AND ELECTRIC COMPANY, a
corporation, of Evansville, Indiana, hereinafter referred to
as "COMPANY" and RONALD G. REHERMAN, of Evansville, Indiana,
hereinafter referred to as "REHERMAN",
WITNESSETH, THAT:
WHEREAS, the said REHERMAN is the Chief Executive Officer of
the COMPANY and it is the mutual desire of the parties that
the said REHERMAN continue to serve the COMPANY in an
official capacity as its Chief Executive Officer, or (if the
parties agree) as its Chairman and/or President but not its
Chief Executive Officer, until his retirement pursuant to
the terms of the COMPANY's Salaried Employees Pension Plan
("retirement") or earlier disability (as hereinafter
determined) or death and, as an inducement to the said
REHERMAN to continue in the employment of the COMPANY as
such officer until his retirement or earlier disability or
death;
WHEREAS, the said REHERMAN and the COMPANY are parties to a
certain Supplemental Pension and Disability Agreement dated
February 1, 1995 (the "1995 Agreement");
WHEREAS, said REHERMAN and the COMPANY wish that the 1995
Agreement be terminated and superseded by this Agreement and
the parties agree that ROSALYNN REHERMAN is a third party
beneficiary to this agreement.
NOW, THEREFORE, KNOW ALL MEN BY THESE PRESENTS: That for
valuable and sufficient consideration the parties hereby
mutually stipulate, covenant and agree as follows:
1. Upon voluntary retirement as an active employee of the
COMPANY and continuing until his death, the COMPANY will pay
unto REHERMAN, as a supplemental retirement income, an
annual sum of 70% of his highest authorized level of annual
compensation, attained at any time while serving as an
employee of the COMPANY, reduced by the annual pension
earned by said REHERMAN under the COMPANY's Salaried
Employees Pension Plan. If as of the date of a Change in
Control (as defined in the Appendix hereto) said REHERMAN is
actively serving as Chief Executive Officer or a member or
advisory member of the Board of Directors of the COMPANY,
then from and after the date of such Change in Control, the
amount of the supplemental retirement income payable to said
REHERMAN under this Paragraph 1 shall be increased by an
amount equal to the annual maximum stipend portion of the
fee payable to a serving non-employee director of the
COMPANY from time to time (but in no event less than the
annual stipend that was payable to such a director
immediately prior to the Change in Control), minus the
amount, if any, actually received by said REHERMAN in
respect of his continuing service as a member or advisory
member of the Board of Directors of the COMPANY. The
supplemental retirement income payable to said REHERMAN
shall be payable in equal monthly installments and be
separate and distinct from income from any other source
including any pension, retirement or other plan. The
payment unto the said REHERMAN of the annual sum shall be in
recognition of past services as an employee of the COMPANY
and, except as required by law, said REHERMAN shall be
solely responsible for the payment of any and all taxes
accruing or payable on account of the remuneration herein
provided for. REHERMAN agrees that he will not voluntarily
retire prior to attaining the age of 62 years, and that he
will not remain an active employee of the COMPANY beyond
attainment of the age of 65 years.
2. If before the retirement of said REHERMAN as an active
employee of the COMPANY, the Board of Directors of the
COMPANY shall at any time determine on the basis of
sufficient and competent medical advice, that because of
mental or physical disability the said REHERMAN has become
permanently and totally incapacitated to perform the duties
of Chief Executive Officer of the COMPANY (or if he has
previously relinquished the duties of Chief Executive
Officer, the duties of the office that he is then filling),
commencing with the occurrence thereof and continuing
thereafter during the remainder of his life, the said
REHERMAN shall be relieved from performing any duties, and
placed on a retired status, but shall nevertheless be
entitled to receive, and the COMPANY shall pay to him, as
supplemental disability income, in recognition of his past
services, an annual sum, which when combined with other
periodic income received under the COMPANY's Salaried
Employees Pension Plan or representing Long-Term Disability
benefits, will equal, but not be greater than, 70% of his
highest authorized level of annual compensation, attained at
any time while serving as an employee of COMPANY. This
annual sum shall be payable in monthly installments and be
separate and distinct from income paid from any other
source, including any pension, retirement or insurance plan.
Except as required by law, REHERMAN shall be solely
responsible for the payment of any and all taxes accruing or
payable on account of the remuneration herein provided for.
3. In the event that said REHERMAN should die before the
commencement of retirement referred to in Paragraph 1, or
while on disability as provided for in Paragraph 2, hereof,
the COMPANY, in recognition of the services rendered by the
said REHERMAN, shall pay unto ROSALYNN REHERMAN, his wife, a
monthly payment equal to (i) during the period commencing
with (and including) the calendar month of said REHERMAN'S
death until (and including) the calendar month in which
ROSALYNN REHERMAN attains age 65, one-twelfth of the amount
which is 70% of said REHERMAN'S highest authorized level of
annual compensation attained at any time while serving as an
employee of the COMPANY and (ii) during the period
commencing with the calendar month following ROSALYNN
REHERMAN'S attainment of age 65 and ending on her death, one-
twelfth of the amount which is 56% of said REHERMAN'S
highest authorized level of annual compensation attained at
any time while serving as an employee of the COMPANY, in
each case reduced by the amount of spouse pension received
by ROSALYNN REHERMAN under COMPANY's Salaried Employees
Pension Plan. The foregoing monthly payments shall be
separate and distinct from income paid from any other
source, including any pension, retirement or insurance plan.
4. In the event that said REHERMAN should die after the
commencement of retirement referred to in Paragraph 1, or
while on disability as provided in Paragraph 2, hereof, the
COMPANY, in recognition of the services rendered by said
REHERMAN, shall pay unto ROSALYNN REHERMAN, in the event she
survives him, for the remaining lifetime period of said
ROSALYNN REHERMAN, an annual sum equal to 56% of said
REHERMAN's highest authorized level of annual compensation
attained at any time while serving as an employee of
COMPANY, reduced by the amount of spouse pension received by
ROSALYNN REHERMAN under the COMPANY's Salaried Employees
Pension Plan. This annual sum shall be payable in monthly
installments and be separate and distinct from income paid
to ROSALYNN REHERMAN from any other source, including any
pension, retirement or insurance plan.
5. Attached and made a part hereof as Exhibit A is a
computation of the entitlements of REHERMAN which is based,
for illustrative purposes, on REHERMAN's highest authorized
level of annual compensation attained as of the date of this
agreement. The parties stipulate to the methodology of
Exhibit A and that the computations shall change as REHERMAN
attains higher levels of authorized annual income with
COMPANY. The terms and provisions hereof shall extend to
and be binding upon the successors and assigns of the
COMPANY.
6. The parties agree that the cost and expense of
enforcement of this Agreement in the event of any breach,
contest or challenge to said Agreement should in fairness
and equity be borne by COMPANY or its successor, and that:
A. COMPANY or its successor will defend, protect, indemnify
and hold REHERMAN and ROSALYNN REHERMAN harmless against any
and all damages, claims, demands and litigation growing out
of or related to the said Agreement.
B. COMPANY or its successor will pay or reimburse REHERMAN
and ROSALYNN REHERMAN for all costs and expenses including
but not limited to any and all attorneys' fees of any and
all attorneys selected and retained by REHERMAN or ROSALYNN
REHERMAN as a result of any claim, demand, investigation,
litigation or other activity arising in any manner, way or
means out of the said Agreement brought or undertaken by
COMPANY, REHERMAN or ROSALYNN REHERMAN or any other person
or entity, for which an attorney is reasonably necessary or
desirable to enforce or protect the rights of REHERMAN or
ROSALYNN REHERMAN or to protect them from and against any
action of any kind whatsoever brought by COMPANY or any
other person or entity against them or affecting any of
their rights, entitlements or benefits under the said
Agreement. The obligations of COMPANY or its successor, as
the case may be, herein shall also extend and apply to the
successors, heirs and beneficiaries of REHERMAN.
C. REHERMAN shall fully cooperate with COMPANY, to the
extent reasonably possible, in assisting it with expertise,
testimony and documents in the defense of COMPANY, its
officers and employees against any claim, demand or
litigation brought by any person or entity against COMPANY,
its officers or employees, as a result of said Agreement,
provided, however, that REHERMAN shall have no obligation to
cooperate with COMPANY under any circumstances where there
is an actual or potential conflict of interest between
REHERMAN and COMPANY.
D. The parties further agree that there can be no exact
measure of the damage which would occur to REHERMAN or
ROSALYNN REHERMAN in the event of a denial or diminution of
their rights under this Agreement by change of control,
breach, delay, litigation, court decision, unilateral action
or otherwise. Therefore in the event of any actual or
threatened denial or diminution of said rights, REHERMAN and
ROSALYNN REHERMAN shall be entitled to receive, upon their
sole election, a lump sum payment from COMPANY or its
successor, calculated pursuant to the procedure illustrated
in the attached Exhibit B, payable within thirty (30) days
of REHERMAN's or ROSALYNN REHERMAN's written notice to the
COMPANY of their election to accept said lump sum payment in
lieu of the supplemental retirement income and supplemental
disability income payable under this Agreement. Such
payment shall be considered as liquidated damages and not as
a penalty to COMPANY. The numbers used in the attached
Exhibit B, are provided merely as an illustration with
actual numbers to be used as determined on the date of any
election hereunder by REHERMAN or ROSALYNN REHERMAN. All
obligations of COMPANY or its successor pursuant to this
Paragraph shall also extend and apply to ROSALYNN REHERMAN.
E. The parties agree that notwithstanding anything to the
contrary contained herein, at anytime after said REHERMAN or
ROSALYNN REHERMAN become entitled to receive payments under
the applicable provisions of Paragraph 1, 2, 3 or 4 hereof,
said REHERMAN or, after said REHERMAN's death or incapacity
ROSALYNN REHERMAN, may elect to receive an immediate lump
sum payment in lieu of the monthly installments prescribed
by the provisions of the applicable Paragraph, in which case
such lump sum amount shall be calculated pursuant to the
procedure illustrated in the attached Exhibit B and shall be
reduced by a ten percent (10%) penalty.
7. Except as provided in Paragraph 2, 3, and 6D, REHERMAN
shall not receive any benefits under this agreement, absent
approval of the Board of Directors of the COMPANY, in the
event that he voluntarily retires before age 62; provided,
however, REHERMAN shall not be deemed to have voluntarily
retired within the meaning of the foregoing if he retires
after the Board of Directors of the COMPANY, without his
approval, has reduced the scope of his authority or the
level of his compensation, or threatens to do so, other than
as a result of REHERMAN's wilful and material misconduct.
All benefits under this Agreement shall be forfeited in the
event said REHERMAN remains as an active employee of the
COMPANY beyond the age of 65. However, the portion of the
supplemental executive retirement benefit that represents
restoration of benefits that cannot otherwise be funded
through the COMPANY's Salaried Employees Pension Plan due to
Internal Revenue Service limits shall vest under the same
terms as provided in that Plan. In addition, any income
from a pension restoration plan for highly paid employees,
should such plan be enacted by the COMPANY, shall be an
offset to the supplemental pension benefit described herein.
8. This Agreement is unfunded and not tax-qualified. The
parties acknowledge and agree that the COMPANY's obligation
to pay the benefits provided herein is an unfunded
contractual obligation and said REHERMAN and ROSALYNN
REHERMAN shall have only the rights of general unsecured
creditors of the COMPANY with respect to such benefits.
Except as provided herein, or as otherwise expressly
consented to by the COMPANY in writing, REHERMAN may not
transfer his rights to receive payments hereunder, whether
by sale, assignment, pledge or otherwise.
9. Nothing in this Agreement shall be deemed to constitute
a contract of employment between the COMPANY and said
REHERMAN or an agreement to continue the services of
REHERMAN on the Board of Directors of the COMPANY. The
parties acknowledge and agree that said REHERMAN's
employment with the COMPANY is and shall continue to be "at
will" and may be terminated at any time for any reason, or
without reason, subject to the terms of any written
employment agreement that may exist from time to time
between the parties.
10. This Agreement shall supersede the 1995 Agreement and
the 1995 Agreement shall terminate and be of no further
force or effect from and after the date hereof.
11. The COMPANY's performance under this Agreement,
including the obligation to pay the benefits provided
hereunder to said REHERMAN and ROSALYNN REHERMAN is
guaranteed by SIGCORP, Inc. In the event that the COMPANY
fails, for any reason, to perform its obligations hereunder,
including its obligation to make timely payment of any
amounts hereunder, SIGCORP, Inc. shall be required to pay
such amounts immediately and to otherwise perform the
obligations of Company hereunder. The undertaking of
SIGCORP, Inc. hereunder is a guaranty of payment and
performance, and not a guaranty of collection. In the event
of a default of COMPANY hereunder, REHERMAN and ROSALYNN
REHERMAN shall be entitled to seek payment and performance
from SIGCORP, Inc. without notice to or demand upon COMPANY
or SIGCORP, Inc., and without attempting first to seek
performance and payment from COMPANY. REHERMAN and ROSALYNN
REHERMAN shall be entitled to recover from SIGCORP, Inc.
their attorney fees, court costs and expenses in the event
of the initiation of any claim, suit, action, proceeding or
investigation to enforce, protect or interpret their rights,
entitlements or benefits hereunder. The obligations of the
COMPANY and SIGCORP, Inc. under this Agreement shall be
binding upon successors and assigns of the COMPANY and
SIGCORP, Inc., respectively, including any party acquiring
substantially all of the assets or business of the COMPANY
and SIGCORP, Inc. (as the case may be). Each of the COMPANY
and SIGCORP, Inc. shall require any such successor or assign
to expressly assume and agree to perform its obligations
hereunder.
IN WITNESS WHEREOF, the COMPANY has caused the execution
hereof and the affixing hereto of its corporate seal by its
duly authorized officers and REHERMAN has hereunto set his
hand and seal on the day and date first above written.
SOUTHERN INDIANA GAS AND ELECTRIC COMPANY
By Andrew E. Goebel
Andrew E. Goebel, Vice President,
Secretary and Treasurer
"COMPANY"
ATTEST:
L. K. Tiemann
L. K. Tiemann
Assistant Secretary
Ronald G. Reherman
Ronald G. Reherman
"REHERMAN"
SIGCORP, INC.
By A. E. Goebel
A. E. Goebel, Secretary and Treasurer
GUARANTOR
ATTEST:
L. K. Tiemann
Linda K. Tiemann, Assistant Secretary
APPENDIX
"Change in Control" shall mean and shall be deemed to have
occurred upon the happening of any one or more of the
following:
(a) An acquisition (other than directly from SIGCORP) of
any voting securities of SIGCORP, Inc. ("SIGCORP") (the
"Voting Securities") by any "Person" (as the term person is
used for purposes of Section 13(d) or 14(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange
Act")), immediately after which such Person has "Beneficial
Ownership" (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of twenty percent (20%) or more of
the combined voting power of SIGCORP's then outstanding
Voting Securities; provided, however, that in determining
whether a Change in Control has occurred, Voting Securities
which are acquired in a "Non-Control Acquisition" (as
hereinafter defined) shall not constitute an acquisition
which would cause a Change in Control. A "Non-Control
Acquisition" shall mean an acquisition by (i) an employee
benefit plan (or a trust forming a part thereof) maintained
by (A) SIGCORP or (B) any corporation or other Person of
which a majority of its voting power or its voting equity
securities or equity interest is owned, directly or
indirectly, by SIGCORP (for purposes of this definition, a
"Subsidiary") (ii) SIGCORP or its Subsidiaries, or (iii) any
Person in connection with a "Non-Control Transaction" (as
hereinafter defined);
(b) The individuals who, as of the date of this Agreement,
are members of the Board of Directors of SIGCORP (the
"Incumbent Board"), cease for any reason to constitute a
majority of the members of the Board of Directors of
SIGCORP; provided, however, that if the election, or
nomination for election by SIGCORP's common stockholders, of
any new director was approved by a vote of a majority of the
Incumbent Board, such new director shall, for purposes of
this Plan, be considered as a member of the Incumbent Board;
provided, further, however, that no individual shall be
considered a member of the Incumbent Board if such
individual initially assumed office as a result of either an
actual or threatened "Election Contest" (as described in
Rule 14a-11 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 of Directors
of SIGCORP (a "Proxy Contest") including by reason of any
agreement intended to avoid or settle any Election Contest
or Proxy Contest; or
(c) A merger, consolidation or reorganization involving
SIGCORP, unless such merger, consolidation or reorganization
is a "Non-Control Transaction." A "Non-Control Transaction"
shall mean a merger, consolidation or reorganization of
SIGCORP where:
(i) the stockholders of SIGCORP, immediately before such
merger, consolidation or reorganization, own directly or
indirectly immediately following such merger, consolidation
or reorganization, at least seventy-five percent (75%) of
the combined voting power of the outstanding voting
securities of the corporation resulting from such merger or
consolidation or reorganization (the "Surviving
Corporation") in substantially the same proportion as their
ownership of the Voting Securities immediately before such
merger, consolidation or reorganization,
(ii) the individuals who were members of the Board of
Directors of SIGCORP immediately prior to the execution of
the agreement providing for such merger, consolidation or
reorganization constitute a majority of the members of the
board of directors of the Surviving Corporation, or a
corporation beneficially owning, directly or indirectly, a
majority of the Voting Securities of the Surviving
Corporation, and
(iii) no Person other than (1) SIGCORP, (2) any Subsidiary,
(3) any employee benefit plan (or any trust forming a part
thereof) maintained by SIGCORP, the Surviving Corporation,
or any Subsidiary, or (4) any Person who, immediately prior
to such merger, consolidation or reorganization had
Beneficial Ownership of twenty percent (20%) or more of the
then outstanding Voting Securities), has Beneficial
Ownership of twenty percent (20%) or more of the combined
voting power of the Surviving Corporation's then outstanding
voting securities.
(d) The sale or other disposition of all or substantially
all of the assets of SIGCORP to any Person (other than a
transfer to a Subsidiary).
Notwithstanding the foregoing, a Change in Control shall not
be deemed to occur solely because any Person (the "Subject
Person") acquired Beneficial Ownership of twenty percent
(20%) or more of the Voting Securities as a result of the
acquisition of Voting Securities by SIGCORP or any
Subsidiary which, by reducing the number of Voting
Securities then outstanding, increases the proportional
number of shares Beneficially Owned by the Subject Persons,
provided that if a Change in Control would occur (but for
the operation of this sentence) as a result of the
acquisition of Voting Securities by SIGCORP or such
Subsidiary, and after such share acquisition by the Company,
the Subject Person becomes the Beneficial Owner of any
additional Voting Securities which increases the percentage
of the then outstanding Voting Securities Beneficially Owned
by the Subject Person, then a Change in Control shall occur.
EXECUTIVE AGREEMENT
THIS AGREEMENT entered into between SOUTHERN INDIANA GAS AND
ELECTRIC COMPANY (hereinafter sometimes referred to as
"Company") and JEFFERY L. DAVIS (hereinafter sometimes
referred to as "Executive"), this 10th day of January, 1997.
WITNESSETH:
WHEREAS:
A. Executive is an officer of Company and important to its
management and to the well being of Company, its
stockholders and ratepayers.
B. SIGCORP, Inc. ("SIGCORP") is the owner of all or a
majority of the issued and outstanding shares of Company
common stock.
C. Company desires to assure both itself and Executive of
continuity of Company management and operations in the event
of a Change in Control of SIGCORP.
D. This Executive Agreement is not intended to and shall
not materially alter the compensation and benefits that
Executive could reasonably expect in the absence of a Change
in Control of SIGCORP and therefore this Agreement, though
taking effect upon execution hereof, will be operative only
upon a Change in Control of SIGCORP, as that phrase is
hereinafter defined.
E. Executive is willing to remain in the employ of Company
following a Change in Control of SIGCORP upon the terms and
conditions hereinafter set forth and such additional terms
and conditions as mutually agreed upon by Executive and
Company.
NOW, THEREFORE, in order to achieve the aforesaid purposes
it is hereby agreed by and between the parties as follows:
1. Operation of Agreement
This Agreement shall be effective immediately upon its
execution by the parties, but, anything in this Agreement to
the contrary notwithstanding, neither the Agreement nor any
provision of it shall be operative unless and until there
has been a Change in Control of SIGCORP as defined in
paragraph 2 below. Upon the occurrence of a Change in
Control of SIGCORP, this Agreement and all provisions
thereof shall become operative immediately.
2. Definitions
The following words and phrases as used herein shall have
the following meanings:
"Cause" means (i) the willful and continued failure of
Executive substantially to perform the duties commensurate
with his position (other than as a result of physical or
mental illness or injury), after the Board of Directors of
the Company (the "Company Board") delivers to the Executive
a written demand for substantial performance that
specifically identifies the manner in which the Company
Board believes that the Executive has not substantially
performed such duties; or (ii) illegal conduct or gross
misconduct by the Executive, in either case that is willful
and results in material and demonstrable damage to the
business or reputation of the Company. No act or failure to
act on the part of the Executive shall be considered
"willful" unless it is done, or omitted to be done, by the
Executive in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of
the Company. Any determination of whether Cause exists
shall be made by a resolution adopted by a vote at least two-
thirds of the Company Board after the Executive has been
notified in writing of the Company Board's intention to hold
such vote and been given an opportunity to be heard by the
Company Board (with the assistance of the Executive's
counsel, if the Executive so desires).
"Change in Control" shall mean and shall be deemed to have
occurred upon the happening of any one or more of the
following:
(a) An acquisition (other than directly from SIGCORP) of
any voting securities of SIGCORP (the "Voting Securities")
by any "Person" (as the term person is used for purposes of
Section 13(d) or 14(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")), immediately after
which such Person has "Beneficial Ownership" (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of
twenty percent (20%) or more of the combined voting power of
SIGCORP's then outstanding Voting Securities; provided,
however, that in determining whether a Change in Control has
occurred, Voting Securities which are acquired in a "Non-
Control Acquisition" (as hereinafter defined) shall not
constitute an acquisition which would cause a Change in
Control. A "Non-Control Acquisition" shall mean an
acquisition by (i) an employee benefit plan (or a trust
forming a part thereof) maintained by (A) SIGCORP or (B) any
corporation or other Person of which a majority of its
voting power or its voting equity securities or equity
interest is owned, directly or indirectly, by SIGCORP (for
purposes of this definition, a "Subsidiary") (ii) SIGCORP or
its Subsidiaries, or (iii) any Person in connection with a
"Non-Control Transaction" (as hereinafter defined);
(b) The individuals who, as of the date of this Agreement,
are members of the Board of Directors of SIGCORP (the
"Incumbent Board"), cease for any reason to constitute a
majority of the members of the Board of Directors of
SIGCORP; provided, however, that if the election, or
nomination for election by SIGCORP's common stockholders, of
any new director was approved by a vote of a majority of the
Incumbent Board, such new director shall, for purposes of
this Plan, be considered as a member of the Incumbent Board;
provided, further, however, that no individual shall be
considered a member of the Incumbent Board if such
individual initially assumed office as a result of either an
actual or threatened "Election Contest" (as described in
Rule 14a-11 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 of Directors
of SIGCORP (a "Proxy Contest") including by reason of any
agreement intended to avoid or settle any Election Contest
or Proxy Contest; or
(c) A merger, consolidation or reorganization involving
SIGCORP, unless such merger, consolidation or reorganization
is a "Non-Control Transaction." A "Non-Control Transaction"
shall mean a merger, consolidation or reorganization of
SIGCORP where:
(i) the stockholders of SIGCORP, immediately before such
merger, consolidation or reorganization, own directly or
indirectly immediately following such merger, consolidation
or reorganization, at least seventy-five percent (75%) of
the combined voting power of the outstanding voting
securities of the corporation resulting from such merger or
consolidation or reorganization (the "Surviving
Corporation") in substantially the same proportion as their
ownership of the Voting Securities immediately before such
merger, consolidation or reorganization,
(ii) the individuals who were members of the Board of
Directors of SIGCORP immediately prior to the execution of
the agreement providing for such merger, consolidation or
reorganization constitute a majority of the members of the
board of directors of the Surviving Corporation, or a
corporation beneficially owning, directly or indirectly, a
majority of the Voting Securities of the Surviving
Corporation, and
(iii) no Person other than (1) SIGCORP, (2) any
Subsidiary, (3) any employee benefit plan (or any trust
forming a part thereof) maintained by SIGCORP, the Surviving
Corporation, or any Subsidiary, or (4) any Person who,
immediately prior to such merger, consolidation or
reorganization had Beneficial Ownership of twenty percent
(20%) or more of the then outstanding Voting Securities),
has Beneficial Ownership of twenty percent (20%) or more of
the combined voting power of the Surviving Corporation's
then outstanding voting securities.
(d) The sale or other disposition of all or substantially
all of the assets of SIGCORP to any Person (other than a
transfer to a Subsidiary).
Notwithstanding the foregoing, a Change in Control shall not
be deemed to occur solely because any Person (the "Subject
Person") acquired Beneficial Ownership of more than the
permitted amount of the then outstanding Voting Securities
as a result of the acquisition of Voting Securities by
SIGCORP or any Subsidiary which, by reducing the number of
Voting Securities then outstanding, increases the
proportional number of shares Beneficially Owned by the
Subject Persons, provided that if a Change in Control would
occur (but for the operation of this sentence) as a result
of the acquisition of Voting Securities by SIGCORP or such
Subsidiary, and after such share acquisition by the Company,
the Subject Person becomes the Beneficial Owner of any
additional Voting Securities which increases the percentage
of the then outstanding Voting Securities Beneficially Owned
by the Subject Person, then a Change in Control shall occur.
Notwithstanding anything contained in this Agreement to the
contrary, if the Executive's employment is terminated prior
to a Change in Control and the Executive reasonably
demonstrates that such termination (i) was at the request of
a third party who has indicated an intention or taken steps
reasonably calculated to effect a Change in Control and who
effectuates a Change in Control (a "Third Party") or (ii)
otherwise occurred in connection with, or in anticipation
of, a Change in Control which actually occurs, then for all
purposes of this Agreement, the date of a Change in Control
with respect to the Executive shall mean the date
immediately prior to the date of such termination of the
Executive's employment.
"Disability" shall mean and be deemed to have occurred six
(6) months after Executive shall have become totally and
permanently disabled by bodily or mental injury or disease,
so that Executive is prevented from actively engaging in any
full time executive employment for remuneration or profit,
as determined and certified by any active full time
practicing physician who is a member in good standing of the
Vanderburgh County Medical Society or any successor
organization.
"Effective Date" means the date of a Change in Control.
"Good Reason" means (i) a change in Executive's status,
title, position or responsibilities (including reporting
responsibilities) which, in Executive's reasonable judgment,
represents an adverse change from his status, title,
position or responsibilities as in effect immediately prior
thereto; (ii) the assignment to Executive of any duties or
responsibilities which are inconsistent with his status,
title, position or responsibilities; (iii) a reduction in
Executive's base salary or the aggregate amount of the other
compensation and benefits which Executive was entitled to
receive immediately prior to the Change in Control, or any
failure to pay Executive any compensation or benefits to
which he is entitled on a timely basis; (iv) Company's
requiring Executive to be based at any place outside a 30-
mile radius from Evansville, Indiana, except for reasonably
required travel on Company business which is not greater
than such travel requirements prior to the Change in
Control; (v) the insolvency or the filing (by any party,
including Company) of a petition for bankruptcy of Company
or SIGCORP; (vi) any material breach by Company of any
provision of this Agreement; (vii) any purported termination
of Executive's employment for Cause by Company which does
not comply with the terms of this Agreement; or (viii) the
failure of Company to obtain an agreement from any successor
or assign of Company to assume and agree to perform this
Agreement. A termination of employment by Executive for
Good Reason shall be effectuated by giving Company written
notice of the termination within six (6) months of the event
constituting Good Reason, setting forth in reasonable detail
the specific conduct of Company that constitutes Good
Reason. A termination of employment by Executive for Good
Reason shall be effective on the fifth (5th) business day
following the date such notice is given, unless the notice
sets forth a later date (which date shall in no event be
later than thirty (30) days after the notice is given).
"Term" means the period of time commencing on the Effective
Date and expiring on the earliest to occur of (i) the third
anniversary of the Effective Date, (ii) Executive's
sixty-fifth (65th) birthday, (iii) Executive's death, (iv)
termination of Executive's employment by Company for Cause
or Disability, or (v) termination of Executive's employment
by Executive other than for Good Reason. Notwithstanding
anything to the contrary the rights and obligations of the
parties under Sections 5, 6 and 7 shall survive the
expiration of the Term to the extent necessary to give
effect to the provisions contained therein.
3. Executive's Employment With Company
Throughout the Term, Executive shall be employed as Vice
President of Company or such other entity as shall then be
the principal successor to the business, assets and
properties of Company and shall continue to have similar or
greater responsibility and authority in such position as he
had immediately prior to the Effective Date.
During the term:
(a) Executive shall devote his full business time and
efforts to the business and affairs of Company or the
successor to Company by which Executive is then employed
pursuant to this Agreement; provided, however, that
Executive shall not be precluded from serving as a director
or member of a committee or board of any other entity which
involves no conflict of interest with Company or its
successor.
(b) Executive shall have duties, responsibilities and
authority consistent with the position held by Executive as
of the date hereof.
(c) The business, assets and properties of Company or its
successor, by whom Executive is employed pursuant to this
Agreement, as well as the support services and facilities
available to Executive, shall not differ materially from
those of Company as existent one (1) year prior to the
Effective Date.
4. Executive's Compensation During Term
Executive shall be entitled to the following compensation
from Company throughout the Term:
(a) base salary at no less than the annual rate in effect
immediately prior to the Effective Date, but with increases
subsequent to the Effective Date as may be made from time to
time as warranted; and
(b) continuing participation in any corporate compensation
plans, pension plans, insurance, medical and hospitalization
programs, employment contracts and any other employee
benefit plans, practices or arrangements in effect
immediately prior to the Effective Date and as same may be
modified, supplemented or replaced without material
reduction in value and benefits to Executive.
5. Termination Of Executive's Employment
(a) In the event of Executive's termination of employment
during the Term by reason of his voluntary termination of
employment with Company for Good Reason, or termination of
Executive's employment by the Company for any reason other
than Cause or Disability:
(i) Company shall pay to Executive, at Executive's option,
either in annual payments or in a lump sum not later than
thirty (30) days after such termination, an amount equal to
Executive's current annual authorized base salary,
multiplied by the number of years (computed to the nearest
month) by which his age, at the time of such termination of
Executive's employment, is less than age 65; however, in no
event shall said lump sum payment or annual payments be more
than three times Executive's current annual authorized base
salary. The payment of such lump sum amount or annual
payments to Executive shall not affect the obligations of
Company, or its successor, under any plan, other agreement
or arrangement pursuant to which Executive is entitled to
any retirement, pension, stock and insurance, benefits,
payments and welfare contributions applicable to former or
retired management employees of Company, generally; and
(ii) For a period of three (3) years following such
termination of Executive's employment Company shall, at its
expense, continue on behalf of Executive and his dependents
and beneficiaries the life insurance, disability, medical,
dental and hospitalization benefits provided to other
similarly situated executives (and their dependents and
beneficiaries) who continue in the employ of Company;
provided, however, that if Executive obtains any such
benefits under the benefit plans of a subsequent employer,
Company's obligation to provide such benefits will be
reduced to the extent that the combined benefit received by
the Executive and his dependents and beneficiaries in all
events is no less favorable than the benefit that would be
received if the benefits under Company's plans and
arrangements. The period during which benefits must be
continued under Section 4980B of the Internal Revenue Code
and Section 601 of the Employee Retirement Income Security
Act of 1974 shall be reduced by the period during which
benefits are continued hereunder.
In the event of Executive's death following a termination of
employment as described in paragraph (a) above, any amounts
that would otherwise have been payable to Executive under
subparagraph (a)(i) shall be paid to Executive's estate and
the benefits under subparagraph (a)(ii) shall continue to be
provided to Executive's dependents and beneficiaries for the
specified time period.
(b) In the event that Executive's employment is terminated
by Company for Cause or Disability or by Executive without
Good Reason or by reason of Executive's death, Executive (or
his estate) will be entitled to receive only the
compensation earned but unpaid as of the date of termination
of his employment, plus such other benefits to which he or
his estate may be entitled under Company plans.
6. Non-Competition, Confidentiality and Non-Solicitation
(a) Upon Executive's receipt of a payment pursuant to
Paragraph 5 hereof, Executive shall not, prior to attaining
age 65, or within three (3) years after the Effective Date,
become an officer, director or employee of, consultant to or
majority shareholder in any entity that competes with
Company, its subsidiaries or its successor or successors
within a 150 mile radius of Evansville, Indiana.
(b) In recognition that Executive's work for the Company
has given him and will continue to give him access to trade
secrets of and confidential information concerning Company
and SIGCORP, Executive shall not, during his employment,
disclose, or after termination thereof, use or disclose to
any other person any confidential information related to the
business of Company or any affiliate, including without
limitation, trade secrets, processes, know-how, technical
data, training manuals, list of customers, prospects or
suppliers, or other business contacts, and Executive
confirms that such information is the exclusive property of
Company. Upon termination of his employment hereunder,
Executive agrees to return to Company all property of
Company and its affiliates, if any, of which he has
possession as well as all notebooks, and other data relating
to records, customers, investigations, or management studies
or inventions made by him. In addition, any confidentiality
agreements between Executive and Company (or any predecessor
thereof) are incorporated by reference into this Agreement
and shall continue to be given full force and effect.
Notwithstanding anything to the contrary contained herein,
Executive shall be under no obligation to maintain the
confidentiality of any information which (i) is or becomes
part of the public domain through no act or omission
attributable to Executive; (ii) is required by law to be
disclosed; provided, that, if required to be disclosed by
law, Executive shall provide Company with prompt notice of
such requirement so that Company may seek an appropriate
protective order; (iii) is deemed by Company not to be
confidential information; or (iv) Executive may receive from
any third party who is unaffiliated with Company and who is
not under an obligation to maintain the confidentiality of
any such information.
(c) Executive agrees that he shall not (i) during the
course of his employment and (ii) for a period of three (3)
years after the Effective Date, either voluntarily or
involuntarily, for any reason whatsoever, directly or
indirectly, individually or on behalf of persons not now
parties to this Agreement, solicit or endeavor to solicit
any other employee, employees, consultant and/or consultants
of Company or SIGCORP to leave employment with Company or
SIGCORP in order to accept employment of any kind with any
other person, firm, partnership, or corporation.
7. Remedies.
(a) Any controversy, dispute or claim arising under this
Agreement, or any breach thereof, shall be subject to
arbitration (by a single arbitrator) conducted in
Evansville, Indiana in accordance with the then existing
rules of the American Arbitration Association, and judgment
upon any award rendered by the arbitrator may be entered by
any federal or state court having jurisdiction thereof. The
parties intend that this agreement to arbitrate be valid,
enforceable and irrevocable. Notwithstanding the foregoing,
the Executive agrees that any breach of the terms of Section
6 would result in irreparable injury and damage to the
Company for which the Company would have no adequate remedy
at law; the Executive therefore also agrees that in the
event of said breach or any threat of breach, (in addition
to the right of the Company to pursue other remedies through
arbitration, including, but not limited to, damages) the
Company shall be entitled to an immediate injunction and
restraining order to prevent such breach or threatened
breach or continued breach by Executive or any and all
persons or entities acting for or with the Executive. The
Executive further agrees that the covenants of Section 6 are
reasonable. Should a court or arbitrator determine,
however, that any portion of Section 6 is unreasonable,
either in period of time, geographical area, or otherwise,
the parties hereto agree that the covenant should be
interpreted and enforced to the maximum extent which such
court or arbitrator deems reasonable. All arbitrator's fees
and all other costs of any arbitration or judicial
proceeding hereunder shall be borne by the Company.
(b) The Company shall pay all legal fees and related
expenses (including the costs of experts, evidence and
counsel) incurred by the Executive as they become due as a
result of (i) the Executive's termination of employment
(including all such fees and expenses, if any, incurred in
contesting or disputing any such termination of employment),
(ii) the Executive's hearing before the Company Board in
connection with any proposal to terminate the Executive's
employment for Cause, or (iii) the Executive's seeking to
obtain or enforce any right or benefit provided by this
Agreement.
(c) The Executive shall be under no duty to mitigate any
amounts payable by the Company under this Agreement and such
amounts shall not be reduced or set-off by any other assets
or income of the Executive. The Company's obligation to
make the payments provided for in this Agreement and
otherwise to perform its obligations hereunder shall not be
affected by any other circumstances, including, without
limitation, any set-off, counterclaim, recoupment, defense
or other right which the Company may have against the
Executive or others.
8. Binding Effect And Assignment
This Agreement shall inure to the benefit of and shall 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. Notwithstanding the foregoing, the Company
shall assign this Agreement to any person or entity
succeeding to substantially all of the business and assets
of Company upon a Change in Control and upon such a Change
in Control Company shall obtain the assumption of this
Agreement by any such successor.
9. Notices
Any notice to a party required or permitted to be given
hereunder shall be in writing and shall be deemed given when
mailed by registered or certified mail to such party at such
party's address as specified below:
If to the Company, to:
Southern Indiana Gas and Electric Company
Attention: Chief Executive Officer
20-24 N.W. Fourth Street
Evansville, Indiana 47708
If to Executive, to: His last known address shown on the
records of Company.
10. Severability
If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be
invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Agreement
shall remain in full force and effect and shall in no way be
affected, impaired or invalidated.
11. Amendments
This Agreement may not be modified, amended, altered or
supplemented except upon the execution and delivery of a
written agreement executed by the parties hereto.
12. Governing Law
This Agreement shall be construed in accordance with the law
of the State of Indiana.
13. Effect of Headings
The paragraph headings herein are for convenience only and
shall not affect the construction hereof.
14. Excise Tax Limitation
(a) Notwithstanding anything contained in this Agreement to
the contrary, to the extent that the payments and benefits
provided under this Agreement and benefits provided to, or
for the benefit of, Executive under any other plan or
agreement of Company or SIGCORP (such payments or benefits
are collectively referred to as the "Payments") would be
subject to the excise tax (the "Excise Tax") imposed under
Section 4999 of the Internal Revenue Code, the Payments
shall be reduced (but not below zero) if and to the extent
necessary so that no Payment to be made or benefit to be
provided to Executive shall be subject to the Excise Tax.
Unless Executive shall have given prior written notice
specifying a different order to Company to effectuate the
reduction of the Payments, Company shall reduce or eliminate
the Payments, by first reducing or eliminating those
payments or benefits which are not payable in cash and then
by reducing or eliminating cash payments, in each case in
reverse order beginning with payments or benefits which are
to be paid the farthest in time from the date of the
termination of Executive's employment. Any notice given by
Executive pursuant to the preceding sentence shall take
precedence over the provisions of any other plan,
arrangement or agreement governing Executive's rights and
entitlements to any benefits or compensation.
(b) An initial determination as to whether the Payments
shall be reduced and the amount of such reduction shall be
made at Company's expense by an accounting firm selected by
Company which is designated as one of the five largest
accounting firms in the United States. The accounting firm
shall provide its determination, together with detailed
supporting calculations and documentation to Company and
Executive within five (5) days of the date of the
termination of Executive's employment, or such other time as
requested by the Company or by Executive (provided Executive
reasonably believes that any of the Payments may be subject
to the Excise Tax) and if the accounting firm determines
that no Excise Tax is payable by Executive with respect to a
Payment or Payments, it shall furnish Executive with an
opinion reasonably acceptable to Executive that no Excise
Tax will be imposed with respect to any such Payment or
Payments. Within ten (10) days of the delivery of the
determination of the accounting firm to Executive, Executive
shall have the right to dispute the determination. If there
is no dispute, the determination shall be binding, final and
conclusive upon Company and Executive.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed the day and year first above
written.
SOUTHERN INDIANA GAS AND
ELECTRIC COMPANY
By: Ronald G. Reherman
Ronald G. Reherman
Chairman of the Board
of Directors of the Company
EXECUTIVE
Jeffery L. Davis
Jeffery L. Davis
AGREED TO:
SIGCORP, INC.
By: Ronald G. Reherman
Ronald G. Reherman
Chairman of the Board of
Directors of SIGCORP, Inc.
SUPPLEMENTAL RETIREMENT PROGRAM FOR SENIOR OFFICERS
OF SOUTHERN INDIANA GAS AND ELECTRIC COMPANY
AND ITS PARTICIPATING SUBSIDIARIES
Effective April 16, 1997
Purpose
The purpose of this Plan is to provide specified benefits to
a select group of management and highly compensated
employees of Southern Indiana Gas and Electric Company, an
Indiana corporation, and its subsidiaries, if any, that
sponsor this Plan. This Plan shall be unfunded for tax
purposes and for purposes of Title I of ERISA.
ARTICLE 1
Definitions
For purposes hereof, unless otherwise clearly apparent from
the context, the following phrases or terms shall have the
following indicated meanings:
"Actuarial Equivalent" shall mean an actuarial equivalent
value of an amount payable in a different form or at a
different date computed on the basis of the following
actuarial assumptions:
Mortality: 1983 Group Annuity Table
Interest Rate: 7%
As the Plan Administrator deems necessary, in its sole
discretion, the above actuarial assumptions may be adjusted
from time to time, and no Participant shall be deemed to
have any right, vested or nonvested, regarding the continued
use of any previously adopted actuarial assumption.
"Beneficiary" shall mean the individual designated, in
accordance with Article 9, who is entitled to receive
benefits under this Plan upon the death of a Participant.
"Beneficiary Designation Form" shall mean the form
established from time to time by the Plan Administrator that
a Participant completes, signs and returns to the Plan
Administrator to designate a Beneficiary.
"Board" shall mean the board of directors of the Company.
"Cause" shall mean that the Company, acting in good faith
based upon the information then known to the Company, after
due inquiry, and upon reasonable grounds, determines that
the employee (i) has been convicted of a felony or
misdemeanor, which misdemeanor materially impairs the
employee's ability to perform his duties, or (ii) has acted
or failed to act in connection with his employment in such
manner as would constitute gross negligence or willful
misconduct.
"Change in Control" shall mean the first to occur of any of
the following events:
(i)(_) An acquisition (other than directly from SIGCORP)
of any voting securities of SIGCORP, Inc. ("SIGCORP") (the
"Voting Securities") by any "Person" (as the term person is
used for purposes of Section 13(d) or 14(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange
Act")), immediately after which such Person has "Beneficial
Ownership" (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of twenty percent (20%) or more of
the combined voting power of SIGCORP's then outstanding
Voting Securities; provided, however, that in determining
whether a Change in Control has occurred, Voting Securities
which are acquired in a "Non-Control Acquisition" (as
hereinafter defined) shall not constitute an acquisition
which would cause a Change in Control. A "Non-Control
Acquisition" shall mean an acquisition by (1) an employee
benefit plan (or a trust forming a part thereof) maintained
by (A) SIGCORP or (B) any corporation or other Person of
which a majority of its voting power or its voting equity
securities or equity interest is owned, directly or
indirectly, by SIGCORP (for purposes of this definition, a
"Subsidiary") (2) SIGCORP or its Subsidiaries, or (3) any
Person in connection with a "Non-Control Transaction" (as
hereinafter defined);
(ii)(_) The individuals who, as of the effective date of
this Plan, are members of the Board of Directors of SIGCORP
(the "Incumbent Board"), cease for any reason to constitute
a majority of the members of the Board of Directors of
SIGCORP; provided, however, that if the election, or
nomination for election by SIGCORP's common stockholders, of
any new director was approved by a vote of a majority of the
Incumbent Board, such new director shall, for purposes of
this Master Trust Agreement, be considered as a member of
the Incumbent Board; provided, further, however, that no
individual shall be considered a member of the Incumbent
Board if such individual initially assumed office as a
result of either an actual or threatened "Election Contest"
(as described in Rule 14a-11 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
of Directors of SIGCORP (a "Proxy Contest") including by
reason of any agreement intended to avoid or settle any
Election Contest or Proxy Contest; or
(iii) A merger, consolidation or reorganization involving
SIGCORP, unless such merger, consolidation or reorganization
is a "Non-Control Transaction." A "Non-Control Transaction"
shall mean a merger, consolidation or reorganization of
SIGCORP where:
(A) the stockholders of SIGCORP, immediately before such
merger, consolidation or reorganization, own directly or
indirectly immediately following such merger, consolidation
or reorganization, at least seventy-five percent (75%) of
the combined voting power of the outstanding voting
securities of the corporation resulting from such merger or
consolidation or reorganization (the "Surviving
Corporation") in substantially the same proportion as their
ownership of the Voting Securities immediately before such
merger, consolidation or reorganization,
(B) the individuals who were members of the Board of
Directors of SIGCORP immediately prior to the execution of
the agreement providing for such merger, consolidation or
reorganization constitute a majority of the members of the
board of directors of the Surviving Corporation, or a
corporation beneficially owning, directly or indirectly, a
majority of the Voting Securities of the Surviving
Corporation, and
(C) no Person other than (1) SIGCORP, (2) any Subsidiary,
(3) any employee benefit plan (or any trust forming a part
thereof) maintained by SIGCORP, the Surviving Corporation,
or any Subsidiary, or (4) any Person who, immediately prior
to such merger, consolidation or reorganization had
Beneficial Ownership of twenty percent (20%) or more of the
then outstanding Voting Securities), has Beneficial
Ownership of twenty percent (20%) or more of the combined
voting power of the Surviving Corporation's then outstanding
voting securities.
(_)(iv) The sale or other disposition of all or
substantially all of the assets of SIGCORP to any Person
(other than a transfer to a Subsidiary).
Notwithstanding the foregoing, a Change in Control shall not
be deemed to occur solely because any Person (the "Subject
Person") acquired Beneficial Ownership of more than the
permitted amount of the then outstanding Voting Securities
as a result of the acquisition of Voting Securities by
SIGCORP or any Subsidiary which, by reducing the number of
Voting Securities then outstanding, increases the
proportional number of shares Beneficially Owned by the
Subject Persons, provided that if a Change in Control would
occur (but for the operation of this sentence) as a result
of the acquisition of Voting Securities by SIGCORP or such
Subsidiary, and after such share acquisition by the Company,
the Subject Person becomes the Beneficial Owner of any
additional Voting Securities which increases the percentage
of the then outstanding Voting Securities Beneficially Owned
by the Subject Person, then a Change in Control shall occur.
"Chief Executive Officer" shall mean the chief executive
officer of the Company.
"Claimant" shall have the meaning set forth in Section 8.1.
"Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
"Company" shall mean Southern Indiana Gas and Electric
Company, an Indiana corporation.
"Death Benefit Only Plan" shall mean the Southern Indiana
Gas and Electric Company Supplemental Post Retirement Death
Benefits Plan for a Select Group of Management Employees,
effective October 1, 1984, as it may be amended from time to
time.
"Disability" shall mean a period of disability: (i) prior to
the date a Participant first attains age sixty-five (65);
and (ii) during which a Participant qualifies for benefits
under the Participant's Employer's Executive Group
Disability Plan or, if a Participant does not participate in
such a plan, a period of disability during which the
Participant would have qualified for benefits under such a
plan had the Participant been a participant in such a plan,
as determined in the sole discretion of the Plan
Administrator. If the Participant's Employer does not
sponsor such a plan or discontinues to sponsor such a plan,
Disability shall be determined by the Plan Administrator in
its sole discretion.
"Employer(s)" shall mean the Company and any subsidiaries of
the Company that have been selected by the Board to
participate in the Plan.
"ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as amended from time to time.
"Final Average Compensation" shall mean the average of a
Participant's Compensation for his or her last five calendar
years of employment prior to the payment (or commencement of
payment) of benefits to the Participant or his or her
Beneficiary hereunder (including the annualized compensation
for the calendar year in which the event that entitled the
Participant to a distribution of benefits under this Plan
occurred). For purposes of the preceding definition,
"Compensation" shall mean the annual compensation, excluding
bonuses, commissions, overtime, relocation expenses,
incentive payments, non-monetary awards, directors fees and
other fees, and including automobile allowances paid to a
Participant for employment services rendered to any
Employer, before reduction for compensation deferred
pursuant to all qualified, non-qualified and Code Section
125 plans of any Employer.
"Life Annuity" shall mean a benefit that is the Actuarial
Equivalent of the Participant's SERP Benefit and that is
payable monthly in the form of an annuity for the life of
the Participant.
"Participant" shall mean any employee: (i) who is selected
to participate in the Plan; (ii) who elects to participate
in the Plan; (iii) who signs a Plan Agreement and a
Beneficiary Designation Form; (iv) whose signed Plan
Agreement Form and Beneficiary Designation Form are accepted
by the Plan Administrator; (v) who commences participation
in the Plan; and (vi) whose Plan Agreement has not
terminated.
"Plan" shall mean the Supplemental Retirement Program for
Senior Officers of Southern Indiana Gas and Electric Company
and its Paericipating Subsidiaries, which shall be evidenced
by this instrument and by each Plan Agreement, as amended
from time to time.
"Plan Administrator" shall mean the plan administrator
described in Article 7.
"Plan Agreement" shall mean a written agreement, as may be
amended from time to time, which is entered into by and
between an Employer and a Participant. Each Plan Agreement
executed by a Participant shall provide for the entire
benefit to which such Participant is entitled under the
Plan, and the Plan Agreement bearing the latest date of
acceptance by the Plan Administrator shall govern such
entitlement.
"Plan Year" shall, for the first Plan Year, begin on
[___________], 1997, and end on December 31, 1997. For each
Plan Year thereafter, the Plan Year shall begin on January 1
of each year and continue through December 31.
"Preretirement Survivor Annuity" shall mean a benefit that
is the Actuarial Equivalent of the Participant's SERP
Benefit as of the date of such Participant's death and that
is payable monthly to such Participant's Beneficiary in the
form of an annuity for the life of such Beneficiary.
"Retirement" shall mean a Participant ceasing to be an
employee of all Employers during the limited period
beginning on the day the Participant first attains age sixty-
five (65) and ending 31 days thereafter, for any reason
other than a leave of absence, or death.
"Salaried Employees' Pension Plan" shall mean the Pension
Plan for Salaried Employees of Southern Indiana Gas and
Electric Company, effective July 1, 1944, as it may be
amended from time to time.
"SERP Benefit" shall mean a single life annuity, payable
monthly and commencing at age sixty-five (65), that is equal
in monthly amount to:
(a) fifty percent (50%) of the Participant's Final Average
Compensation, multiplied by 1/12; less
(b) the annual pension benefit earned under the Company's
Salaried Employees' Pension Plan multiplied by 1/12.
"Termination of Employment" shall mean a Participant ceasing
to be an employee of all Employers, voluntarily or
involuntarily, for any reason other than the Participant's
Retirement, death or Disability.
"Trust" shall mean the trust established pursuant to that
certain Master Trust Agreement for the Supplemental
Retirement Program of Southern Indiana Gas and Electric
Company and its Participating Subsidiaries, dated as of
[__________], 1997, between the Company and the trustee
named therein, as amended from time to time.
"Waiting Period Requirement" shall mean both: (i) a
Participant's continued employment for an Employer for
twenty Years of Service, commencing with the Participant's
date of hire; and (ii) a Participant's continued employment
for an Employer in the capacity of Vice President or above
for five Years of Service. A Year of Service during which a
Participant is employed by an Employer in the capacity of
Vice President or above may be counted toward satisfaction
of both prongs of the Waiting Period Requirement.
"Years of Service" shall mean the total number of full years
in which a Participant has been employed by one or more
Employers. For purposes of this definition, a year of
employment shall be a 365 day period (or 366 day period in
the case of a leap year) that, for the first year of
employment, commences on the Employee's date of hiring and
that, for any subsequent year, commences on an anniversary
of that hiring date. Any partial year of employment shall
not be counted.
ARTICLE 1
Eligibility
1.1 Selection by Plan Administrator. Participation in the
Plan shall be limited to a select group of management and
highly compensated employees of the Employers who have met
the Waiting Period Requirements. From that group, the Plan
Administrator may select, in its sole discretion, employees
to participate in the Plan. Despite the foregoing: (i) the
Plan Administrator may not select Mr. Norman P. Wagner to
participate in the Plan; and (ii) the Plan Administrator may
not select the Chief Executive Officer to participate in the
Plan at any time any similar supplementary retirement
arrangement or contract between the Chief Executive Officer
and the Company is in effect, as determined by the Plan
Administrator in its sole discretion.
1.2 Enrollment Requirements. As a condition of his or her
participation in the Plan, each selected employee must
complete, execute and return to the Plan Administrator a
Plan Agreement and a Beneficiary Designation Form. In
addition: (i) as a condition of his or her participation in
the Plan, any employee of the Employers who, as of January
1, 1989, was a participant in the Death Benefit Only Plan
must complete, execute and return to the Plan Administrator
an endorsement, in a form satisfactory to the Plan
Administrator in its sole discretion, which makes the
Company the sole beneficiary of all insurance policies
issued with respect to such employee under the Death Benefit
Only Plan; and (ii) the Plan Administrator may establish
from time to time such other enrollment requirements as it
determines in its sole discretion are necessary.
1.3 Commencement of Participation. Provided an employee
selected to participate in the Plan has met all enrollment
requirements set forth in this Plan and required by the Plan
Administrator, that employee shall commence participation in
the Plan on the date specified by the Plan Administrator.
If a selected employee fails to meet all such requirements
prior to that date, that employee shall not be eligible to
participate in the Plan until the completion of those
requirements.
ARTICLE 2
Vesting/Forfeiture of Benefits
2.1 Vesting/ Forfeiture of Benefits.
(a) General. Except as provided in Sections 3.1(b) or 9.4
below, each Participant shall have a nonforfeitable right or
vested interest in his or her SERP Benefit.
(b) Forfeiture of Benefits. Notwithstanding Section 3.1(a)
above, and subject to Section 4.1(d) and Section 9.4 below,
all benefits under this Plan shall be automatically
forfeited: (i) in the event a Participant in the Plan
experiences a Termination of Employment; or (ii) in the
event a Participant in the Plan is employed or reemployed by
any Employer at any time more than thirty-one (31) days
after the day the Participant first attains age sixty-five
(65).
ARTICLE 3
Benefits
3.1 Eligibility for Benefits.
(a) Retirement Benefit. If a Participant Retires, he or
she shall be entitled to his or her SERP Benefit paid in the
form of a Life Annuity.
(b) Disability Benefit. If a Participant suffers a
Disability, he or she shall be entitled to his or her SERP
Benefit paid in the form of a Life Annuity. The Life
Annuity shall be decreased, on an Actuarial Equivalent
basis, to reflect the commencement of such payments prior to
the Participant's attainment of age sixty-five (65).
(c) Survivor's Benefit. If a Participant dies prior to his
or her Termination of Employment, Disability or Retirement,
the Participant's Beneficiary shall be entitled to receive
the Participant's SERP Benefit in the form of a
Preretirement Survivor Annuity. The Preretirement Survivor
Annuity shall be decreased, on an Actuarial Equivalent
basis, to reflect the form of benefit payments and the
commencement of such payments prior to the Participant's
attainment of age sixty-five (65).
(d) Change in Control Benefit. If, prior to a
Participant's attainment of age sixty five (65), the
Participant experiences an involuntary Termination of
Employment without Cause after the Company experiences a
Change in Control, the Participant shall be entitled to
receive his or her SERP Benefit paid in the form of a Life
Annuity. The Life Annuity shall be decreased, on an
Actuarial Equivalent basis, to reflect the commencement of
such payments prior to the Participant's attainment of age
sixty-five (65).
(e) No Other Benefits Upon Termination of Employment.
Except as provided in Section 4.1(d) above, no benefits
shall be payable under this Plan if a Participant
experiences a Termination of Employment prior to his or her
death, Disability or Retirement.
(f) No Benefits Upon Failure to Retire. No benefits shall
be payable under this Plan if a Participant is employed or
reemployed by any Employer at any time more than thirty-one
(31) days after the date the Participant first attains age
sixty-five (65).
3.2 Payment of Benefits. Payments of benefits shall be
made in the following manner:
(a) Retirement. If a Participant's benefits become payable
because of his or her Retirement, such Participant's benefit
payments shall commence as soon as is administratively
practical after the date on which such Participant Retired.
(b) Disability or Death. If a Participant's benefits
become payable because of his or her death or Disability,
such benefit payments shall commence as soon as is
administratively practical following the Plan
Administrator's receipt of written proof or determination of
such Participant's death or Disability.
(c) Change in Control. If a Participant's benefits become
payable because of his or her involuntary Termination of
Employment without Cause after a Change in Control, such
Participant's benefit payments shall commence as soon as is
administratively practical after the date on which such
Participant experiences the Termination of Employment.
(d) Reasonable Time. For purposes of this Section 4.2, "as
soon as is administratively practical" shall not exceed 120
days from the date of the specified event, except in
extraordinary circumstances, as determined in the sole
discretion of the Plan Administrator.
3.3 Alternative Forms of Payment; Elections.
(a) Withdrawal Election. A Participant or his or her
Beneficiary, as the case may be, may elect, at any time
after he or she commences to receive benefits payments under
this Plan, to receive those payments in a lump sum, based on
the Actuarial Equivalent of his or her remaining SERP
Benefit less a 10% penalty (as described below) (the net
amount shall be referred to as the "Benefit Amount"). No
election to partially accelerate benefits shall be allowed.
The Participant shall make this election by giving the Plan
Administrator advance written notice of the election in a
form determined from time to time by the Plan Administrator.
The penalty shall be equal to 10% of the Participant's
remaining SERP Benefit, determined on an Actuarial
Equivalent basis. The Participant shall be paid the Benefit
Amount within 60 days of his or her election. Once the
Benefit Amount is paid, the Participant's participation in
the Plan shall terminate and the Participant shall not be
eligible to participate in the Plan in the future.
(b) Plan Administrator Discretion. Upon the request of a
Participant, the Plan Administrator, in its sole discretion
and consistent with its established procedures and rules,
may consider other forms of benefit payments, or the timing
of benefit payments, as it deems necessary and prudent under
the circumstances.
3.4 Limitation on Benefits. Notwithstanding the foregoing
provisions of this Article 4, in no event shall a
Participant or his or her Beneficiary receive more than one
form of benefit under this Article 4, except as provided
under Section 4.3 (a).
3.5 Withholding and Payroll Taxes. The Employers or their
designees shall withhold from any and all benefits paid
under this Articles 4 or 5, all federal, state and local
income, employment and other taxes required to be withheld
by the Employer in connection with the benefits hereunder,
in amounts to be determined in the sole discretion of the
Employers.
ARTICLE 4
Termination, Amendment or Modification of the Plan
4.1 Termination. Each Employer reserves the right to
terminate the Plan at any time with respect to its
participating employees by the actions of its board of
directors. The termination of the Plan shall not adversely
affect any Participant or his or her Beneficiary who has
become entitled to the payment of any benefits under the
Plan as of the date of termination; provided, however, that
the Employer shall have the right to accelerate payments by
paying the Actuarial Equivalent value of such payments. For
all other Participants, upon the termination of the Plan,
all Plan Agreements shall terminate and the Actuarial
Equivalent of a Participant's SERP Benefit shall be paid out
in a lump sum.
4.2 Amendment. Any Employer may, at any time, amend or
modify the Plan in whole or in part with respect to its
participating employees by the actions of its board of
directors; provided, however, that no amendment or
modification shall be effective to decrease or restrict a
Participant's then SERP Benefit, determined on an Actuarial
Equivalent basis. The amendment or modification of the Plan
shall not affect any Participant or his or her Beneficiary
who has become entitled to the payment of benefits under the
Plan as of the date of the amendment or modification;
provided, however, that the Employer shall have the right to
accelerate installment payments by paying the Actuarial
Equivalent value of such payments either in a lump sum or in
some other accelerated form of payment.
4.3 Termination of Plan Agreement. Absent the earlier
termination, modification or amendment of the Plan, the Plan
Agreement of any Participant shall terminate upon the full
payment of the applicable SERP Benefit as provided under
Articles 4 or 5.
ARTICLE 5
Other Benefits and Agreements
5.1 Coordination with Other Benefits. The benefits
provided for a Participant under this Plan are in addition
to any other benefits available to such Participant under
any other plan or program for employees of the Employers.
The Plan shall supplement and shall not supersede, modify or
amend any other such plan or program except as may otherwise
be expressly provided.
ARTICLE 6
Administration of the Plan
6.1 Plan Administrator Duties. This Plan shall be
administered by a Plan Administrator which shall consist of
the Board, or such committee as the Board shall appoint.
Members of the Plan Administrator may be Participants under
this Plan. The Plan Administrator shall also have the
discretion and authority to: (i) make, amend, interpret and
enforce all appropriate rules and regulations for the
administration of this Plan; and (ii) decide or resolve any
and all questions including interpretations of this Plan, as
may arise in connection with the Plan.
6.2 Agents. In the administration of this Plan, the Plan
Administrator may employ agents and delegate to them such
administrative duties as it sees fit, (including acting
through a duly appointed representative), and may from time
to time consult with counsel who may be counsel to any
Employer.
6.3 Binding Effect of Decisions. The decision or action of
the Plan Administrator with respect to any question arising
out of or in connection with the administration,
interpretation and application of the Plan and the rules and
regulations promulgated hereunder shall be final and
conclusive and binding upon all persons having any interest
in the Plan.
6.4 Indemnity of Plan Administrator. All Employers shall
indemnify and hold harmless the members of the Plan
Administrator against any and all claims, losses, damages,
expenses or liabilities arising from any action or failure
to act with respect to this Plan, except in the case of
willful misconduct by the Plan Administrator or any of its
members.
6.5 Employer Information. To enable the Plan Administrator
to perform its functions, each Employer shall supply full
and timely information to the Plan Administrator on all
matters relating to the compensation of its Participants,
the date and circumstances of the retirement, Disability,
death or Termination of Employment of its Participants, and
such other pertinent information as the Plan Administrator
may reasonably require.
ARTICLE 7
Claims Procedures
7.1 Presentation of Claim. Any Participant or Beneficiary
of a deceased Participant (such Participant or Beneficiary
being referred to below as a "Claimant") may deliver to the
Plan Administrator a written claim for a determination with
respect to the amounts distributable to such Claimant from
the Plan. If such a claim relates to the contents of a
notice received by the Claimant, the claim must be made
within 60 days after such notice was received by the
Claimant. The claim must state with particularity the
determination desired by the Claimant. All other claims
must be made within 180 days of the date on which the event
that caused the claim to arise occurred. The claim must
state with particularity the determination desired by the
Claimant.
7.2 Notification of Decision. The Plan Administrator shall
consider a Claimant's claim within a reasonable time, and
shall notify the Claimant in writing:
(a) that the Claimant's requested determination has been
made, and that the claim has been allowed in full; or
(b) that the Plan Administrator has reached a conclusion
contrary, in whole or in part, to the Claimant's requested
determination, and such notice must set forth in a manner
calculated to be understood by the Claimant:
(i) the specific reason(s) for the denial of the claim,
or any part of it;
(ii) specific reference(s) to pertinent provisions of the
Plan upon which such denial was based;
(iii) a description of any additional material or
information necessary for the Claimant to perfect the claim,
and an explanation of why such material or information is
necessary; and
(iv) an explanation of the claim review procedure set
forth in Section 8.3 below.
7.3 Review of a Denied Claim. Within 60 days after
receiving a notice from the Plan Administrator that a claim
has been denied, in whole or in part, a Claimant (or the
Claimant's duly authorized representative) may file with the
Plan Administrator a written request for a review of the
denial of the claim. Thereafter, but not later than 30 days
after the review procedure began, the Claimant (or the
Claimant's duly authorized representative):
(a) may review pertinent documents;
(b) may submit written comments or other documents; and/or
(c) may request a hearing, which the Plan Administrator, in
its sole discretion, may grant.
7.4 Decision on Review. The Plan Administrator shall
render its decision on review promptly, and not later than
60 days after the filing of a written request for review of
the denial, unless a hearing is held or other special
circumstances require additional time, in which case the
Plan Administrator's decision must be rendered within 120
days after such date. Such decision must be written in a
manner calculated to be understood by the Claimant, and it
must contain:
(a) specific reasons for the decision;
(b) specific reference(s) to the pertinent Plan provisions
upon which the decision was based; and
(c) such other matters as the Plan Administrator deems
relevant.
7.5 Legal Action. A Claimant's compliance with the
foregoing provisions of this Article 8 is a mandatory
prerequisite to a Claimant's right to commence any legal
action with respect to any claim for benefits under this
Plan.
ARTICLE 8
Beneficiary Designation
8.1 Beneficiary. Each Participant shall have the right, at
any time, to designate his or her Beneficiary(ies) (both
primary as well as contingent) to receive any benefits
payable under the Plan to a beneficiary upon the death of a
Participant. The Beneficiary designated under this Plan may
be the same as or different from the Beneficiary designation
under any other plan of an Employer in which the Participant
participates.
8.2 Beneficiary Designation; Change; Spousal Consent. A
Participant shall designate his or her Beneficiary by
completing and signing the Beneficiary Designation Form, and
returning it to the Plan Administrator or its designated
agent. A Participant shall have the right to change a
Beneficiary by completing, signing and otherwise complying
with the terms of the Beneficiary Designation Form and the
Plan Administrator's rules and procedures, as in effect from
time to time. If the Participant names someone other than
his or her spouse as a Beneficiary, a spousal consent, in
the form designated by the Plan Administrator, must be
signed by that Participant's spouse and returned to the Plan
Administrator. Upon the acceptance by the Plan
Administrator of a new Beneficiary Designation Form, all
Beneficiary designations previously filed shall be canceled.
The Plan Administrator shall be entitled to rely on the last
Beneficiary Designation Form filed by the Participant and
accepted by the Plan Administrator prior to his or her
death.
8.3 Acknowledgment. No designation or change in
designation of a Beneficiary shall be effective until
received, accepted and acknowledged in writing by the Plan
Administrator or its designated agent.
8.4 No Beneficiary Designation. If a Participant fails to
designate a Beneficiary as provided in Sections 9.1, 9.2 and
9.3 above or, if all designated Beneficiaries predecease the
Participant or die prior to complete distribution of the
Participant's benefits, then the Participant's spouse shall
be the designated Beneficiary. If the Participant has no
surviving spouse, the benefits remaining under the Plan
shall be forfeited.
8.5 Doubt as to Beneficiary. If the Plan Administrator has
any doubt as to the proper Beneficiary to receive payments
pursuant to this Plan, the Plan Administrator shall have the
right, exercisable in its discretion, to cause the
Participant's Employer to withhold such payments until this
matter is resolved to the Plan Administrator's satisfaction.
8.6 Discharge of Obligations. The payment of benefits
under the Plan to a Beneficiary shall fully and completely
discharge all Employers and the Plan Administrator from all
further obligations under this Plan with respect to the
Participant, and that Participant's Plan Agreement shall
terminate upon such full payment of benefits.
ARTICLE 9
Trust
9.1 Establishment of the Trust. The Company shall
establish the Trust. The Employers shall transfer over to
the Trust such assets, if any, as the Employers determine,
in their sole discretion.
9.2 Interrelationship of the Plan and the Trust. The
provisions of the Plan and the Plan Agreement shall govern
the rights of a Participant to receive distributions
pursuant to the Plan. The provisions of the Trust shall
govern the rights of the Employers, Participants and the
creditors of the Employers to the assets transferred to the
Trust. Each Employer shall at all times remain liable to
carry out its obligations under the Plan. Each Employer's
obligations under the Plan may be satisfied with Trust
assets distributed pursuant to the terms of the Trust, and
any such distribution shall reduce the Employer's
obligations under this Agreement.
ARTICLE 10
Miscellaneous
10.1 Unsecured General Creditor. Participants and their
Beneficiaries successors and assigns shall have no legal or
equitable rights, interests or claims in any property or
assets of an Employer. Any and all of an Employer's assets
shall be, and remain, the general, unpledged unrestricted
assets of the Employer. An Employer's obligation under the
Plan shall be merely that of an unfunded and unsecured
promise to pay money in the future.
10.2 Employer's Liability. An Employer's liability for the
payment of benefits shall be defined only by the Plan and
the Plan Agreement, as entered into between the Employer and
a Participant. An Employer shall have no obligation to a
Participant under the Plan except as expressly provided in
the Plan and his or her Plan Agreement.
10.3 Nonassignability. Neither a Participant nor any other
person shall have any right to commute, sell, assign,
transfer, pledge, anticipate, mortgage or otherwise
encumber, transfer, hypothecate or convey in advance of
actual receipt, the amounts, if any, payable hereunder, or
any part thereof, which are, and all rights to which are,
expressly declared to be, unassignable and non-transferable.
No part of the amounts payable shall, prior to actual
payment, be subject to seizure or sequestration for the
payment of any debts, judgments, alimony or separate
maintenance owed by a Participant or any other person, nor
be transferable by operation of law in the event of a
Participant's or any other person's bankruptcy or
insolvency.
10.4 Not a Contract of Employment. The terms and
conditions of this Plan shall not be deemed to constitute a
contract of employment between any Employer and the
Participant. Such employment is hereby acknowledged to be
an "at will" employment relationship that can be terminated
at any time for any reason, with or without cause, unless
expressly provided in a written employment agreement.
Nothing in this Plan shall be deemed to give a Participant
the right to be retained in the service of any Employer or
to interfere with the right of any Employer to discipline or
discharge the Participant at any time.
10.5 Furnishing Information. A Participant or his or her
Beneficiary will cooperate with the Plan Administrator by
furnishing any and all information requested by the Plan
Administrator and take such other actions as may be
requested in order to facilitate the administration of the
Plan and the payments of benefits hereunder, including but
not limited to taking such physical examinations as the Plan
Administrator may deem necessary.
10.6 Terms. Whenever any words are used herein in the
masculine, they shall be construed as though they were in
the feminine in all cases where they would so apply; and
wherever any words are used herein in the singular or in the
plural, they shall be construed as though they were used in
the plural or the singular, as the case may be, in all cases
where they would so apply.
10.7 Captions. The captions of the articles, sections and
paragraphs of this Plan are for convenience only and shall
not control or affect the meaning or construction of any of
its provisions.
10.8 Governing Law. Subject to ERISA, the provisions of
this Plan shall be construed and interpreted according to
the internal laws of the State of Indiana without regard to
its conflict of laws principles.
10.9 Validity. In case any provision of this Plan shall be
illegal or invalid for any reason, said illegality or
invalidity shall not affect the remaining parts hereof, but
this Plan shall be construed and enforced as if such illegal
and invalid provision had never been inserted herein.
10.10 Notice. Any notice or filing required or permitted
to be given to the Plan Administrator under this Plan shall
be sufficient if in writing and hand-delivered, or sent by
registered or certified mail, to the address below:
__________________________
_________________________
_________________________
_________________________
Such notice shall be deemed given as of the date of delivery
or, if delivery is made by mail, as of the date shown on the
postmark on the receipt for registration or certification.
Any notice or filing required or permitted to be given to a
Participant under this Plan shall be sufficient if in
writing and hand delivered, or sent by mail, to the last
known address of the Participant.
10.11 Successors. The provisions of this Plan shall bind
and inure to the benefit of the Participant's Employer and
its successors and assigns and the Participant and the
Participant's Beneficiary.
10.12 Spouse's Interest. The interest in the benefits
hereunder of a spouse of a Participant who has predeceased
the Participant shall automatically pass to the Participant
and shall not be transferable by such spouse in any manner,
including but not limited to such spouse's will, nor shall
such interest pass under the laws of intestate succession.
10.13 Incompetent. If the Plan Administrator determines in
its discretion that a benefit under this Plan is to be paid
to a minor, a person declared incompetent or to a person
incapable of handling the disposition of that person's
property, the Plan Administrator may direct payment of such
benefit to the guardian, legal representative or person
having the care and custody of such minor, incompetent or
incapable person. The Plan Administrator may require proof
of minority, incompetency, incapacity or guardianship, as it
may deem appropriate prior to distribution of the benefit.
Any payment of a benefit shall be a payment for the account
of the Participant and the Participant's Beneficiary, as the
case may be, and shall be a complete discharge of any
liability under the Plan for such payment amount.
10.14 Court Order. The Plan Administrator is authorized to
make any payments directed by court order in any action in
which the Plan or Plan Administrator has been named as a
party.
10.15 Distribution in the Event of Taxation. If, for any
reason, all or any portion of a Participant's benefit under
this Plan becomes taxable to the Participant prior to
receipt, a Participant may petition the Plan Administrator
for a distribution of that portion of his or her benefit
that has become taxable. Upon the grant of such a petition,
which grant shall not be unreasonably withheld, a
Participant's Employer shall distribute to the Participant
immediately available funds in an amount equal to the
taxable portion of his or her benefit (which amount shall
not exceed a Participant's unpaid Account Balance under the
Plan). If the petition is granted, the tax liability
distribution shall be made within 90 days of the date when
the Participant's petition is granted. Such a distribution
shall affect and reduce the benefits to be paid under this
Plan.
IN WITNESS WHEREOF, Andrew E. Goebel has signed this Plan
document on May 20, 1997.
Southern Indiana Gas and Electric Company,
an Indiana corporation
By: Andrew E. Goebel
Andrew E. Goebel
Title: Senior Vice President
TABLE OF CONTENTS
Page
ARTICLE 1
Definitions
Definitions 1
ARTICLE 2
Eligibility
2.1 Selection by Plan Administrator 5
2.2 Enrollment Requirements 5
2.3 Commencement of Participation 6
ARTICLE 3
Vesting/Forfeiture of Benefits
3.1 Vesting/Forfeiture of Benefits 6
ARTICLE 4
Benefits
4.1 Eligibility for Benefits 6
4.2 Payment of Benefits 7
4.3 Alternative Forms of Payment; Elections 8
4.4 Limitation on Benefits 8
4.5 Withholding and Payroll Taxes 8
ARTICLE 5
Termination, Amendment or Modification of the Plan
5.1 Termination 9
5.2 Amendment 9
5.3 Termination of Plan Agreement 9
ARTICLE 6
Other Benefits and Agreements
6.1 Coordination with Other Benefits 9
ARTICLE 7
Administration of the Plan
7.1 Plan Administrator Duties 10
7.2 Agents 10
7.3 Binding Effect of Decisions 10
7.4 Indemnity of Plan Administrator 10
7.5 Employer Information 10
ARTICLE 8
Claims Procedures
8.1 Presentation of Claim 10
8.2 Notification of Decision 11
8.3 Review of a Denied Claim 11
8.4 Decision on Review 11
8.5 Legal Action 12
ARTICLE 9
Beneficiary Designation
9.1 Beneficiary 12
9.2 Beneficiary Designation; Change; Spousal Consent 12
9.3 Acknowledgment 12
9.4 No Beneficiary Designation 13
9.5 Doubt as to Beneficiary 13
9.6 Discharge of Obligations 13
ARTICLE 10
Trust
10.1 Establishment of the Trust 13
10.2 Interrelationship of the Plan and the Trust 13
ARTICLE 11
Miscellaneous
11.1 Unsecured General Creditor 13
11.2 Employer's Liability 14
11.3 Nonassignability 14
11.4 Not a Contract of Employment 14
11.5 Furnishing Information 14
11.6 Terms 14
11.7 Captions 15
11.8 Governing Law 15
11.9 Validity 15
11.10 Notice 15
11.11 Successors 15
11.12 Spouse's Interest 15
11.13 Incompetent 15
11.14 Court Order 16
11.15 Distribution in the Event of Taxation 16
DRAFT FOR DISCUSSION
PURPOSES ONLY
SUPPLEMENTAL RETIREMENT PROGRAM
FOR SENIOR OFFICERS OF
SOUTHERN INDIANA GAS AND ELECTRIC COMPANY
AND ITS PARTICIPATING SUBSIDIARIES
