SCHEDULE 14A INFORMATION

              Proxy Statement Pursuant to Section 14(a) of the
                       Securities Exchange Act of 1934


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        Section 240.14a-12

                               IPALCO ENTERPRISES, INC.
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                      (Name of Registrant AAs Specified In Its Charter)

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(Name of Person(s) Filing Proxy Statement if other than the Registrant)

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                         PRELIMINARY COPIES

                              IPALCO ENTERPRISES, INC.
                                 One Monument Circle
                                   P. O. Box 1595
                           Indianapolis, Indiana 46206-1595

                      NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
                            TO BE HELD MAY 21, 1997APRIL 15, 1998

TO THE SHAREHOLDERS OF
IPALCO ENTERPRISES, INC.

        NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of
IPALCO Enterprises, Inc. will be held at the office of the corporation, One
Monument Circle, Indianapolis, Indiana on Wednesday, May 21, 1997,April 15, 1998, at
11
o'clock11:00 A.M. (Eastern Standard Time), for the following purposes:

        1.   To elect fivefour directors in Class IIIII to hold office for
             terms of three years each and until their successors are
             duly elected and qualified;

        2.   To approve an amendment to Section 5.01 of Article 5 of the
          Amended Articles of Incorporation to increase the authorized
          number of shares of IPALCO's common stock from 145 million to 290
          million;
   
     3.   To approve the adoption ofadopt the IPALCO Enterprises, Inc. 1997Long-Term Performance
             and Restricted Stock Option Plan;Incentive Plan (As Amended and 4.Restated
             Effective January 1, 1998); and

        3.   To transact such other business as may properly come before the
             meeting or any adjournment thereof.

        The Board of Directors fixed the close of business on Thursday, April
10, 1997Wednesday,
February 25, 1998 as the record date for determining the shareholders
entitled to notice of, and to vote at, the Annual Meeting and at any
adjournment thereof.

        IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THIS MEETING.
Whether or not you expect to be present at the meeting, you are urged to
fill in, date and sign the enclosed proxy and return it immediately in the
accompanying postage guaranteed envelope.

        By order of the Board of Directors.

                                          IPALCO ENTERPRISES, INC.
                                          By: BRYAN G. TABLER, Secretary

Indianapolis, Indiana
April 15, 1997March 9, 1998


                             TABLE OF CONTENTS

ANNUAL MEETING INFORMATION. . . . . . . . . . . . . . . . . . .           1
   Date, Time and Place of Annual Meeting . . . . . . . . . . .           1
   Solicitation of Proxies. . . . . . . . . . . . . . . . . . .           1
   Other Business . . . . . . . . . . . . . . . . . . . . . . .           2
   Shareholder Proposals for 19981999 Annual Meeting. . . . . . . .           2

RELATIONSHIP WITH AUDITOR . . . . . . . . . . . . . . . . . . .           2

VOTING SECURITIES AND BENEFICIAL OWNERS . . . . . . . . . . . .           2
   Beneficial Owners of 5% or More of Common Stock. . . . . . .           3
   Beneficial Ownership of Common Stock By Directors,
   Nominees and Executive Officers . . . . .Officers. . . . . . . . . . . . . . .           3

PROPOSAL 1 - ELECTION OF FIVEFOUR DIRECTORS . . . . . . . . . . . .           5
   Nominees For Directors To Be Elected At the 19971998 Annual
   Meeting. . . . . . . . . . . . . . . . . . . . . . . . . . .           5
          CLASS II.III . . . . . . . . . . . . . . . . . . . . . .           5
   Current Directors Whose Terms Expire in 19981999 (Class III)I)
   and in 19992000 (Class I).II) . . . . . . . . . . . . . . . . . . .           6
          CLASS IIII . . . . . . . . . . . . . . . . . . . . . . .           6
          CLASS I .II. . . . . . . . . . . . . . . . . . . . . . .           7

INFORMATION REGARDING THE BOARD OF DIRECTORS. . . . . . . . . .           8
   Procedure To Propose Nominees For Director . . . . . . . . .           8
   Number Of Board Meetings and Attendance. . . . . . . . . . .           98
   Committees of the Board. . . . . . . . . . . . . . . . . . .           98
   Section 16(a) Beneficial Ownership Reporting Compliance. . .           109
   Compensation Committee Interlocks and Insider Participation.          10
   Compensation of Directors. . . . . . . . . . . . . . . . . .          10
   Certain Business Relationships . . . . . . . . . . . . . . .          10

PROPOSAL 2 - APPROVALAPPROVING ADOPTION OF AMENDMENT TO AMENDED ARTICLES OF
   INCORPORATION TO INCREASE THE AUTHORIZED NUMBER OF SHARES
   OF IPALCO'S COMMONIPALCO ENTERPRISES, INC.
LONG-TERM PERFORMANCE AND RESTRICTED STOCK INCENTIVE PLAN
(As Amended and Restated Effective January 1, 1998) . . . . . .          . . . . . . . . . . . .      12
   The Proposed Amendment . . . . . . . . . . . . . . . . . . .      12
   Purpose and Effect of Proposed Amendment . . . . . . . . . .      12
   
PROPOSAL 3 - APPROVAL OF THE IPALCO ENTERPRISES, INC. 1997 STOCK 
   OPTION PLAN. . . . . . . . . . . . . . . . . . . . . . . . .      1411
   Introduction . . . . . . . . . . . . . . . . . . . . . . . .          1411
   Summary of the Plan. . . . . . . . . . . . . . . . . . . . .          14
     Administration12
   Federal Income Tax Consequences of Grants Under the Plan . .          . . . . . . . . . . . . . . . . . . . .      14
     Eligibility. . . . . . . . . . . . . . . . . . . . . . . .      14
     Stock Subject15
   Vote Required to Approve the Plan. . . . . . . . . . . . . .          . . . . .      14
     Terms of Options . . . . . . . . . . . . . . . . . . . . .      15
     Adjustment of Shares . . . . . . . . . . . . . . . . . . .      16
     Tax Withholding. . . . . . . . . . . . . . . . . . . . . .      16
     Amendment. . . . . . . . . . . . . . . . . . . . . . . . .      16
     Termination. . . . . . . . . . . . . . . . . . . . . . . .      17
   Agreements Evidencing Incentive and Non-Qualified Stock 
   Options. . . . . . . . . . . . . . . . . . . . . . . . . . .      17
   Federal Income Tax Consequences of Stock Options . . . . . .      17
   New Plan Benefits Chart. . . . . . . . . . . . . . . . . . .      18
       



BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE
   COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . .          1915
   Compensation Policies Relating Generally to Executive
   Officers . . . . . . . . . . . . . . . . . . . . . . . . . .          1915
   Base SalarySalary. . . . . . . . . . . . . . . . . . . . . . 19
          Annual Incentive Plan . . .          . . . . . . . . . . . . .      20
          Long-Term Performance and Restricted Stock16
   Annual Incentive Plan. . . . . . . . . . . . . . . . . . . .          2017
   Long-Term Performance and Restricted Stock Incentive Plan. .          17
   Stock Options. . . . . . . . . . . . . . . . . . . . . . . .          18
   Basis for Chief Executive Officer's Compensation . . . . . .          2118
   Deductibility of Executive Compensation. . . . . . . . . . .          2119

COMPENSATION OF EXECUTIVE OFFICERS. . . . . . . . . . . . . . .          2219
   Nature and Types of Compensation . . . . . . . . . . . . . .          2219
   Subsidiary Incentive Plan. . . . . . . . . . . . . . . . . .          2219
   Summary Compensation - Table I . . . . . . . . . . . . . . .          23
   Option Exercises20
   Option/SAR Grants in Last Fiscal Year - Table II.II . . . . . .          21
   Option/SAR Exercises in Last Fiscal Year - Table III . . . .          22
   Performance Graph - Table IV . . . . . . . . . . . . . . . .          24
   Performance Graph - Table III. . . . . . . . . . . . . . . .      2523
   Performance Graph. . . . . . . . . . . . . . . . . . . . . .          2624
   Pension Plans. . . . . . . . . . . . . . . . . . . . . . . .          2624
          Pension Plan Table - Table IVV. . . . . . . . . . . . .          2624
   Employment Contracts and Termination of Employment and
   Change-in-Control Arrangements . . . . . . . . . . . . . . .          27
   
APPENDIX A - Text of IPALCO Enterprises, Inc.
   1997 Stock Option Plan25

Appendix A. . . . . . . . . . . . . . . . . . . . . . . . . . .         A-1

                            IPALCO ENTERPRISES, INC.
                      One Monument Circle * P. O. Box 1595
                        Indianapolis, Indiana 46206-1595


                               PROXY STATEMENT
                    For the Annual Meeting of Shareholders
                         To Be Held May 21, 1997April 15, 1998
                     (Mailed on or about April 15, 1997)March 9, 1998)

                          ANNUAL MEETING INFORMATION

Date, Time and Place of Annual Meeting

        The information set forth in this Proxy Statement is furnished in
connection with the solicitation of the enclosed proxy by and on behalf of
the Board of Directors of IPALCO Enterprises, Inc. ("IPALCO") for use at its
Annual Meeting of Shareholders to be held May 21, 1997,April 15, 1998, at 11:00 o'clock A.M. (EST)
at the principal office of IPALCO, One Monument Circle, Indianapolis, Indiana
46204, pursuant to the foregoing Notice of Annual Meeting, and at any
adjournment of such meeting.

Solicitation of Proxies

        The presence in person or by proxy of the holders of a majority of
the outstanding shares entitled to vote at the Annual Meeting is necessary to
constitute a quorum.  Shares represented for any purpose are deemed present
for quorum purposes.  If the enclosed form of proxy is properly executed and
returned in time for the meeting, the named proxies will vote the shares
represented by the proxy in accordance with the instructions marked.  Proxies
returned unmarked will be voted in favor of the proposed nominees for
director, in favor of the proposed
amendment to IPALCO's Amended Articles of Incorporation and in favor of the adoption of the 1997IPALCO Enterprises, Inc. Long-Term Performance
and Restricted Stock Option Plan.Incentive Plan (the "1998 Restricted Stock Plan").  If
other matters are properly brought before the meeting, or any adjournment
thereof, the enclosed proxy gives discretionary authority to the persons
named therein to vote in accordance with their best judgment on such matters.
A shareholder executing and delivering the enclosed proxy has the
unconditional right to revoke it at any time before the authority granted
therein is exercised.

        Under Indiana law, the election of directors will be determined by
plurality vote at a meeting where a quorum is present.  As a result, the fivefour
nominees who receive the greatest number of votes cast for election as
directors will be elected as directors of IPALCO.  Broker non-votes and
withheld votes will not affect the outcome of the election of directors.

        Action on any matter, other thanAdoption of Proposal 2 requires the electionaffirmative vote of directors,
will be approved if the votes cast in favora majority of
the proposal
exceedshares present in person or by proxy and entitled to vote at the votes castAnnual
Meeting. Abstentions will have the same effect as a vote against the proposal.
Abstentions from
voting or brokerBroker non-votes will have no effect since such actions
do not represent votes castbe voted for or against the proposal.proposal and will not
be counted as entitled to vote.

        This solicitation of proxies is being made by IPALCO and the expenses
thereof will be borne by IPALCO. The principal solicitation is being made by
mail. However, additional solicitation may be made by telephone, telegraph or
personal contact by officers and other employees of IPALCO and its
subsidiaries, who will not be additionally compensated therefor. IPALCO
expects to reimburse broker-dealers and others for reasonable expenses of
forwarding proxy material to beneficial owners.

Other Business

        Management is not aware of any business to be presented at the 19971998
Annual Meeting other than the election of fivefour directors, the proposed amendment to the Amended Articles of
Incorporation, and the proposed
approval of the 19971998 Restricted Stock Option Plan. The minutes of the Annual Meeting
of Shareholders held April 17, 1996,May 21, 1997, will be presented for approval at the 19971998
Annual Meeting; however, such action is not intended to constitute approval
or disapproval of any matter referred to in such minutes.

Shareholder Proposals for 19981999 Annual Meeting

        If a shareholder intends to present a proposal at the Annual Meeting
of Shareholders to be held April 15, 1998,21, 1999, the proposal must be received by
the Corporate Secretary for inclusion in IPALCO's proxy statement and form of
proxy not later than December 16, 1997.November 9, 1998.


                        RELATIONSHIP WITH AUDITOR

        Deloitte & Touche LLP, with offices at Market Tower, Suite 3000, 10
West Market Street, Indianapolis, Indiana, has been the auditor of IPALCO
since its inception. Upon the recommendation of the Audit Committee, that
firm was again appointed by IPALCO's Board of Directors to serve as auditor
for IPALCO and its subsidiaries for the current year. A representative of
Deloitte & Touche LLP will be present at the Annual Meeting of Shareholders
to be held May 21, 1997,April 15, 1998, and will be given the opportunity to make a
statement and to respond to appropriate questions from shareholders.


                   VOTING SECURITIES AND BENEFICIAL OWNERS

        On April 10,December 31, 1997, IPALCO had outstanding 44,499,61244,649,844 shares of
common stock. Each share of common stock entitles its owner to one (1) vote
upon each matter to come before the meeting. Only shareholders of record at
the close of business on Thursday, April 10, 1997,Wednesday, February 25, 1998, will be entitled
to vote at the meeting or at any adjournment thereof.

Beneficial Owners of 5% or More of Common Stock


        On April 10,December 31, 1997, the following beneficial owners held
more than 5% of IPALCO's voting securities:
- --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- Name and Address of Amount and Nature of Percent Title of Class Beneficial Owner of Beneficial Ownership of Class - --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- Common Stock Employees' Thrift Plan 4,711,8694,687,611 shares 10.59%10.15% of Indianapolis Power & Light Company c/o Merrill Lynch Trust Company of America, Trustee 265 Davidson Avenue, 4th Floor Somerset, NJ 08873 _________________________________ Trustee, under a continuing agreement, has discretion to vote shares as to which no voting instructions are received. - ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Beneficial Ownership of Common Stock By Directors, Nominees and Executive Officers On March 15,December 31, 1997, the following named directors, nominees and executive officers of IPALCO and its subsidiaries, individually and as a group, beneficially owned equity securities of IPALCO as follows: - --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- Name of Amount and Nature Percent Title of Class Beneficial Owner of Beneficial Ownership of Class - --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- Common Stock Joseph D. Barnette, Jr. 16,00019,000 shares Robert A. Borns 44,64448,968 shares John R. Brehm 72,802148,317 shares Mitchell E. Daniels, Jr. 18,30021,300 shares Rexford C. Early 11,64214,686 shares Otto N. Frenzel III 31,20034,200 shares Max L. Gibson 11,10014,100 shares Edwin J. Goss 14,407 shares Earl B. Herr, Jr. 13,86016,903 shares John R. Hodowal 247,639498,759 shares 1.08% Ramon L. Humke 174,662301,235 shares Sam H. Jones 18,36021,360 shares Andre B. Lacy 37,80640,884 shares L. Ben Lytle 12,74815,765 shares Michael S. Maurer 11,07214,119 shares Andrew J. Paine, Jr. 0340 shares Sallie W. Rowland 19,24422,273 shares Thomas H. Sams 23,00126,082 shares , Bryan G. Tabler 15,36360,731 shares , Gerald D. Waltz 105,245118,557 shares Other Executive Officers 275,873507,905 shares , 1.09% All 27 directors, nominees, and executive officers, as a group 1,174,9681,945,484 shares (3), 2.64%(4) 4.21% - ------------------------------------------------------------------------- Except as otherwise noted below, each person named in the table has sole voting and investment power with respect to all shares of common stock listed as owned by such person. Shares beneficially owned include shares that may be acquired pursuant to exercise of outstanding options that are exercisable within 60 days as follows: Mr. Barnette-9,000;Barnette-12,000; Mr. Borns-12,000;Borns-15,000; Mr. Brehm-52,500;Brehm-127,500; Mr. Daniels-18,000;Daniels-21,000; Mr. Early-6,000;Early-9,000; Mr. Frenzel-18,000;Frenzel-21,000; Mr. Gibson-6,000;Gibson-9,000; Dr. Herr-15,000; Mr. Goss-12,000; Dr. Herr-12,000;Hodowal-430,000; Mr. Hodowal-180,000;Humke-230,000; Mr. Humke-105,000;Jones-21,000; Mr. Jones-18,000;Lacy-21,000; Mr. Lacy-18,000;Lytle-15,000; Mr. Lytle-12,000;Maurer-12,000; Mrs. Rowland-21,000; Mr. Maurer-9,000; Mrs. Rowland-18,000;Sams-21,000; Mr. Sams-18,000;Tabler-45,000; Mr. Waltz-55,320;Waltz-56,839; other executive officers-201,750;officers-429,552; directors and executive officers as a group-780,570.group-1,531,891. Percentages less than 1% of total common stock outstanding are not indicated. Includes 43,54747,870 shares owned by or with family members sharing their home and shares held in trust or other arrangements with family members. Includes vested and contingent interests in shares of common stock held by the Trustee in the Thrift Plan (stated in whole shares) of: Mr. Brehm-13,650;Brehm-14,165; Mr. Hodowal-29,774;Hodowal-30,894; Mr. Humke-7,747;Humke-8,361; Mr. Tabler-1,066;Tabler-1,368; Mr. Waltz-36,349;Waltz-37,822; other executive officers-57,198;officers-60,474; and all executive officers as a group-145,784.group-153,084. Includes 12,000 shares owned by LDI, Ltd. and 2,700 shares owned by LDI, Ltd. and 2,700 shares owned by the Lacy Foundation of which Mr. Lacy is a partner and a director, respectively, and 600 shares representing his vested interest in a self-employment retirement plan, totaling 15,300 shares, 11,700 of which he disclaims beneficial ownership. Mr. Lacy is a partner and a director, respectively, and 600 shares representing his vested interest in a self-employment retirement plan, totaling 15,300 shares, 11,700 of which heSams disclaims beneficial ownership. Mr. Sams disclaims beneficial ownership of 1,500 shares of 1,500the total shares of the total shares shown opposite his name.
PROPOSAL 1 - ELECTION OF FIVEFOUR DIRECTORS At a meeting held January 28, 1997,27, 1998, the Executive Committee of IPALCO's Board of Directors nominated fivefour directors to stand for election as Class IIIII directors of IPALCO at its Annual Meeting of Shareholders to be held May 21, 1997,April 15, 1998, for terms of three years each and until their successors are duly elected and qualified. Proxies representing shares held on the record date which are returned duly executed, will be voted, unless otherwise specified, in favor of the fivefour nominees for the Board of Directors named below in Class II.III. All such nominees except Andrew J. Paine, Jr., are members of IPALCO's present Board of Directors and all nominees have consented to serve if elected. However, if any nominee becomes unavailable to serve, the persons named as proxies may exercise their discretion to vote for a substitute nominee. The nominees for directors in Class II,III, the current directors in Class IIII and Class I,II, as assigned by the Board of Directors, and the names, ages (as of May 21, 1997)April 15, 1998), business experience and directorships of such nominees and directors are as follows: Nominees For Directors To Be Elected At The 19971998 Annual Meeting: CLASS II Joseph D. Barnette, Jr.III Robert A. Borns, 62, Chairman of Borns Management Corporation (real estate owners and managers), 57, Chairman and Chief Executive Officer of Bank One,Indianapolis, Indiana NA (a bank holding company) since January, 1993. Prior to that, Mr. Barnette was President and Chief Executive Officer of Banc One Indiana Corporation (July, 1990 - January, 1993), President and Chief Executive Officer of Bank One, Indianapolis, NA (January, 1990 - October, 1994)1961, and Chairman of Correctional Management Company L.L.C. since 1996. Mr. Borns serves on numerous boards, including the Board of Trustees of Indianapolis Museum of Art, Indianapolis Symphony Orchestra, Indiana University Foundation and Chief Executive Officer of Bank One, Indianapolis, NA (October, 1994 - March, 1997).St. Vincent Hospital Advisory Board. He is also a director of IPL, Standard Management Corporation, and Meridian Insurance Group, Inc.of Artistic Media Partners. He has been a director of IPALCO since January, 1993. Max L. Gibson, 56, President of Majax Corporation (waste consulting firm), Terre Haute, Indiana forApril, 1987 (excluding the past five years. For more than five years priorperiod March 15 to his consulting work, Mr. Gibson was President of Victory Services Corporation (waste disposal), Terre Haute, Indiana. He is a director of IPL, First Financial Corporation, Terre Haute First National Bank and First State Bank, Brazil, Indiana. He has been a director of IPALCO since August 1993. Ramon L. Humke, 64, Vice Chairman of IPALCO and President and Chief Operating Officer of IPL. Prior to February, 1990 when he assumed his present position with IPL, Mr. Humke was President and Chief Executive Officer of Ameritech Services and Senior Vice President of Ameritech Bell Group (September, 1989 - February, 1990) and President and Chief Executive Officer of Indiana Bell Telephone Company (October, 1983 - September, 1989)23, 1993). He is a director of IPL, NBD Bank, N.A., LDI Management, Inc. and is Chairman of the Boards of Meridian Mutual Insurance Company and Meridian Insurance Group, Inc. He has been a director of IPALCO since February, 1990. Andrew J. Paine Jr., 59, President and Chief Executive Officer of NBD Indiana, Inc. and Executive Vice President of First Chicago NBD Corporation. In his position with NBD Indiana, Inc. he directs the operation of all NBD banks in Indiana. In 1981, Mr. Paine was named Vice Chairman of Indiana National Bank, and was elected Executive Vice President of NBD Bancorp after it acquired INB in 1992. Mr. Paine was named Chief Executive Officer of NBD Indiana, Inc. in June, 1994, and Executive Vice President of First Chicago NBD Corporation in 1995. He is a director of Indianapolis Life Insurance Company and Bankers Life Insurance Company of New York. Sallie W. Rowland, 64, Chairman and Chief Executive Officer of Rowland Design, Inc. (an architectural, interiors and graphic design firm), Indianapolis, Indiana, positions she has held for more than 5 years. Mrs. Rowland serves on various community boards including The Indianapolis Chamber of Commerce. She is a director of IPL, NBD Bank, N.A., Meridian Insurance Group, Inc. and Meridian Mutual Insurance Company. She has been a director of IPALCO since April, 1988. Current Directors Whose Terms Expire in 1998 (Class III) and in 1999 (Class I): CLASS III Otto N. Frenzel III, 66,67, Chairman, Executive Committee, National City Bank of Indiana, Indianapolis, Indiana. Mr. Frenzel has held his present position since January, 1996. For more than 3 years prior to that time, Mr. Frenzel was Chairman of the Board of National City Bank, Indiana. Prior to May, 1992, Mr. Frenzel was Chairman of the Board of Merchants National Bank & Trust Company of Indianapolis and Chairman of the Board of Merchants National Corporation. He is a director of IPL, National City Corporation, American United Life Insurance Company, Indiana Energy, Inc., Indiana Gas Company, Inc., and Baldwin & Lyons, Inc. He has been a director of IPALCO since September, 1983. Dr. Earl B. Herr, Jr., 69, Retired. For more than five years prior to his retirement in December, 1992, Dr. Herr was Executive Vice President of Eli Lilly and Company (pharmaceuticals manufacturer), Indianapolis, Indiana. He is a director of IPL and Lilly Endowment and has been a director of IPALCO since April, 1986 (excluding the period March 15 to August 23, 1993). Sam H. Jones, 69, President, Indianapolis Urban League, Inc., Indianapolis, Indiana. Mr. Jones has held his present position for more than 5 years and serves on numerous educational, social and cultural boards, including the Advisory Board of Indiana University-Purdue University at Indianapolis, Methodist Health Foundation, Board of One Hundred Black Men of Indianapolis and the Administrative Board of Northwest United Methodist Church. He is a director of IPL and has been a director of IPALCO since September, 1983. Andre B. Lacy, 57,58, General Partner and Chief Executive of LDI, Ltd. (an industrial and investment limited partnership), Chairman of the Board, Chief Executive Officer and President of LDI Management, Inc., the managing general partner of LDI, Ltd., and Chairman and Chief Executive Officer of all subsidiaries and divisions thereof. He has held his present positions for more than 5 years. He is a director of IPL, Tredegar Industries, Inc., Albemarle Corporation, FinishMaster, Inc., Herff Jones, Patterson Dental Co., Herff Jones and The National Bank of Indianapolis. He has been a director of IPALCO since April, 1985. L. Ben Lytle, 50,51, President and Chief Executive Officer, Anthem Insurance Companies, Inc. (insurance and financial services), Indianapolis, Indiana. He served as Chairman from March, 1994 to March, 1996, and has held the remaining positions for more than five years. He is a director of IPL, Bank One, Indiana, NA, and Anthem Insurance Companies, Inc. and its subsidiaries. He has been a director of IPALCO since April, 1992. Current Directors Whose Terms Expire in 1999 (Class I) and in 2000 (Class II): CLASS I Robert A. Borns, 61, Chairman of Borns Management Corporation (real estate owners and managers), Indianapolis, Indiana since 1961, and Chairman of Correctional Management Company L.L.C. since 1996. Mr. Borns serves on numerous boards, including the Board of Trustees of Indianapolis Museum of Art, Indianapolis Symphony Orchestra, Indiana University Foundation and St. Vincent Hospital Advisory Board. He is also a director of IPL, Standard Management Corporation, and of Heritage Partners Management, Inc. He has been a director of IPALCO since April, 1987 (excluding the period March 15 to August 23, 1993). Mitchell E. Daniels, Jr., 48,49, Vice President, Corporate Strategy and Policy, Eli Lilly and Company, (pharmaceuticals manufacturer). During the period April 1, 1993 to January 6, 1996, Mr. Daniels was President, North American Pharmaceutical Operations of Eli Lilly and Company. Prior to that time, he was Vice President, Corporate Affairs of Eli Lilly and Company and President and Chief Executive Officer of Hudson Institute, Inc. (March, 1987 to August, 1990). He is a director of IPL Acordia, Inc. and NBD Bank, N.A.NA and has been a director of IPALCO since November, 1989. Rexford C. Early, 62,63, President of Carlisle Insurance Agency, Inc., Indianapolis, Indiana, a position he has held for more than five years. Mr. Early was Chairman of the Indiana Republican Party from March, 1991 to March, 1993. He is a trustee of the Indianapolis Foundation and currently serves as its Chairman. He is a director of IPL and has been a director of IPALCO since August, 1993. John R. Hodowal, 52,53, Chairman of the Board and President of IPALCO and Chairman of the Board and Chief Executive Officer of IPL. Except for the Chairmanship of IPL which he assumed in February, 1990, Mr. Hodowal has held his current positions since May, 1989. For some years prior to that time, he was Vice President and Treasurer of IPALCO and Executive Vice President of IPL. He is a director of IPL, Bank One, Indiana, NA and Anthem Insurance Companies, Inc. He has been a director of IPALCO since April, 1984. Michael S. Maurer, 54,55, Chairman of the Board of The National Bank of Indianapolis since December, 1993. Mr. Maurer is Chairman of the Board of MyStar Communications Corporation (radio station operations), a position he has held for more than five years; and Chairman of the Board of IBJ Corporation (newspaper publisher), since December, 1990; Chairman of the Board of The National Bank of Indianapolis since December, 1993.1990. Mr. Maurer is Chair, United Way of Central Indiana. He has been a director of IPL and IPALCO since January, 1993. Thomas H. Sams, 55,56, President and Chief Executive Officer, Waldemar Industries, Inc. (an investment holding company), Indianapolis, Indiana and an officer of various subsidiary and affiliated corporations thereof. Mr. Sams has held these positions since 1966. He is a director of IPL, NBD Bank, N.A.,NA, and Meridian Insurance Group, Inc. He has been a director of IPALCO since April, 1987. CLASS II Joseph D. Barnette, Jr., 58, Chairman and Chief Executive Officer of Bank One, Indiana, NA since March, 1997 and Chairman and Chief Executive Officer of Banc One Indiana Corporation (a bank holding company) since January, 1993. Prior to that, Mr. Barnette was Chairman and Chief Executive Officer of Bank One, Indianapolis, NA (October, 1994 - March, 1997), President and Chief Executive Officer of Banc One Indiana Corporation (July, 1990 - January, 1993), and President and Chief Executive Officer of Bank One, Indianapolis, NA (January, 1990 - October, 1994). He is a director of IPL and Meridian Insurance Group, Inc. He has been a director of IPALCO since January, 1993. Max L. Gibson, 57, President of Majax Corporation (waste consulting firm), Terre Haute, Indiana for the past five years. For more than five years prior to his consulting work, Mr. Gibson was President of Victory Services Corporation (waste disposal), Terre Haute, Indiana. He is a director of IPL, First Financial Corporation, Terre Haute First National Bank and First State Bank, Brazil, Indiana. He has been a director of IPALCO since August, 1993. Ramon L. Humke, 65, Vice Chairman of IPALCO and President and Chief Operating Officer of IPL. Prior to February, 1990 when he assumed his present position with IPL, Mr. Humke was President and Chief Executive Officer of Ameritech Services and Senior Vice President of Ameritech Bell Group (September, 1989 - February, 1990) and President and Chief Executive Officer of Indiana Bell Telephone Company (October, 1983 - September, 1989). He is a director of IPL, NBD Bank, NA, LDI Management, Inc. and is Chairman of the Boards of Meridian Mutual Insurance Company and Meridian Insurance Group, Inc. He has been a director of IPALCO since February, 1990. Andrew J. Paine, Jr., 60, President and Chief Executive Officer of NBD Bank, NA and Executive Vice President of First Chicago NBD Corporation. In his position with NBD Bank, NA he directs the operation of all NBD banks in Indiana. In 1981, Mr. Paine was named Vice Chairman of Indiana National Bank, and was elected Executive Vice President of NBD Bancorp after it acquired INB in 1992. Mr. Paine was named Chief Executive Officer of NBD Indiana, Inc. in June, 1994, and Executive Vice President of First Chicago NBD Corporation in 1995. He is a director of IPL, Indianapolis Life Insurance Company and Bankers Life Insurance Company of New York. He has been a director of IPALCO since May, 1997. Sallie W. Rowland, 65, Chairman and Chief Executive Officer of Rowland Design, Inc. (an architectural, interiors and graphic design firm), Indianapolis, Indiana, positions she has held for more than 5 years. Mrs. Rowland serves on various community boards including The Indianapolis Chamber of Commerce and Indianapolis Project. She is a director of IPL, NBD Bank, NA, Meridian Insurance Group, Inc. and Meridian Mutual Insurance Company. She has been a director of IPALCO since April, 1988. INFORMATION REGARDING THE BOARD OF DIRECTORS Procedure To Propose Nominees For Director IPALCO will accept timely notice by shareholders of proposed nominees for directors. Any such notice must be received by the Corporate Secretary of IPALCO not less than 60 days nor more than 90 days prior to the date of each annual meeting. Such shareholder's notice shall set forth (a) as to each proposed nominee for director (i) the name, age, business address and residence address of such nominee, (ii) the principal occupation or employment of such nominee, (iii) the class and/or series and number of shares that are beneficially owned by such nominee on the date of such shareholder notice and (iv) any other information relating to such nominee that is required to be disclosed pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended, and (b) as to the shareholder giving the notice (i) the name and address, as they appear on IPALCO's books, of such shareholder and any shareholders known to be supporting such nominee and (ii) the class and/or series and number of shares beneficially owned by such shareholder and by any shareholders known to be supporting such nominee on the date of such shareholder notice. The Board of Directors may reject any nomination for director not made in accordance with the foregoing provisions. Number of Board Meetings and Attendance During 1996,1997, the Board of Directors of IPALCO held 11 meetings and committees of the Board held a total of 1620 meetings. Each director attended more than 75%85% of the aggregate of Board meetings and assigned committee meetings.meetings except for Mr. Robert A. Borns who attended more than 70%, and Mr. L. Ben Lytle who attended more than 71%. All directors, on average, attended over 92%91% of the Board meetings and assigned committee meetings held in 1996.1997. Committees of the Board The Board of Directors of IPALCO has four standing committees, the Executive Committee, the Audit Committee, the Compensation Committee, and the Committee on Strategies. The Board does not have a nominating committee as such, but the Executive Committee performs the functions of such committee. It reviews, among other things, the qualifications and suitability of candidates to stand for election to IPALCO's Board of Directors and makes specific recommendations with respect thereto. In addition, the Executive Committee considers and recommends the declaration of dividends and acts on matters when the full Board is not in session. The Executive Committee held six meetings in 1996.1997. Currently, Mr. John R. Hodowal is Chairman and Messrs. Robert A. Borns, Otto N. Frenzel III, Earl B. Herr, Jr., Ramon L. Humke, and Sam H. Jones are members. The Audit Committee recommends the appointment of the auditor for the ensuing year for IPALCO and its subsidiaries, reviews the scope of the audit, examines the auditor's reports, makes appropriate recommendations to the Board of Directors as a result of such review and examination, and inquires into the effectiveness of the financial and accounting functions and controls. The Audit Committee first approves all non-audit services and gives appropriate consideration to the effect, if any, such services may have on the independence of the auditor, except that management advisory and tax services which do not exceed $50,000 per project or $150,000 in the aggregate per calendar year may be approved by the Chairman of the Board without such Committee's consent. The Audit Committee held threefour meetings in 1996.1997. Currently, Mrs. Sallie W. Rowland is Chairman and its members are Messrs. Rexford C. Early, Edwin J. Goss, Sam H. Jones, and Andre B. Lacy.Lacy, and Andrew J. Paine, Jr. The Compensation Committee reviews current and proposed compensation levels of all officers of IPALCO and its subsidiaries, obtains advice of independent consultants, and makes specific recommendations as to the compensation each officer should receive on an annual basis. It also reviews and makes recommendations with respect to other forms of compensation for such officers, including supplemental pension benefits, bonuses, stock options and restricted stock. (See ``Board"Board Compensation Committee Report on Executive Compensation''Compensation" below.) The Compensation Committee held fourseven meetings in 1996.1997. Currently, Mr. Otto N. Frenzel III is Chairman and Messrs. Robert A. Borns, Rexford C. Early, Earl B. Herr, Jr., and Thomas H. Sams are members. The Committee on Strategies considers and makes recommendations with respect to issues and processes involving dynamic planning, matters affecting the allocation of corporate resources among regulated and non-regulated subsidiaries, and other components of overall corporate strategy. The Committee on Strategies held three meetings in 1996.1997. Currently, Mr. Joseph D. Barnette, Jr. is Chairman and Messrs. Mitchell E. Daniels, Jr., Max L. Gibson, L. Ben Lytle, and Michael S. Maurer are members. Section 16(a) Beneficial Ownership Reporting Compliance Under the federal securities laws, IPALCO's directors, certain officers, and 10% shareholders are required to report to the Securities and Exchange Commission, by specific due dates, transactions and holdings in IPALCO's stock. During 1996, Mr. Robert W. Rawlings and Mr. Joseph D. Barnette, Jr. each had one late report with regard to one transaction.All reports were made on a timely basis in 1997. Compensation Committee Interlocks and Insider Participation Mr. Frenzel is Chairman, and Messrs. Borns, Early, Herr and Sams are the members of the Compensation Committee. IPALCO's Vice Chairman, Mr. Ramon L. Humke, is a member of the Compensation Committee of the Board of Directors of LDI Management, Inc. Mr. Andre B. Lacy is Chairman of the Board, Chief Executive Officer and President of LDI Management, Inc. and is also a director of IPALCO. Compensation of Directors Non-employee directors serving on the Board of IPALCO are paid an annual fee of $8,500 plus $450$500 for each meeting attended; however, directors of IPALCO and its subsidiaries are limited to two annual fees. Non-employee members of the Executive Committee of the Board are paid annual fees of $10,000, but no meeting fees. Members of the Audit Committee, Compensation Committee and the Committee on Strategies of the Board, all of whom are non-employee directors, are paid annual fees of $4,000 plus $450$500 for each meeting attended. The Chairman of each of the latter three committees receives an additional fee of $1,500 annually. Members of the Executive and Audit Committees of both IPALCO and IPL are limited to one annual fee. Directors who are also officers of IPALCO or one of its subsidiaries receive no director fees. Certain Business Relationships During 1996,1997, companies associated with Anthem Insurance Companies, Inc. ("Anthem") administered health care programs for IPALCO and its subsidiaries under contracts that involve payments to Anthem aggregating approximately $15$17 million. Mr. L. Ben Lytle is President and Chief Executive Officer of Anthem. IPALCO subsidiaries Indianapolis Power & Light Company ("IPL") and Mid-America Capital Resources, Inc. ("Mid-America") each maintained a line of credit during 19961997 with National City Bank, Indiana ("NCB") of which Mr. Otto N. Frenzel III is Chairman of the Executive Committee. During 1996,1997, the maximum principal amount outstanding at any time on IPL's $30 million line of credit with NCB was approximately $11$16.5 million, and IPL had noan outstanding balance with NCB as of December 31, 1996.1997 of $13.7 million. Mid-America's $7.5 million line of credit with NCB had a maximum principal amount of $3.0$2.5 million outstanding at any time, and a principal balance of $3.0$2.5 million outstanding as of December 31, 1996.1997. IPL maintained a long-term revolving credit facility during 19961997 with Bank One, Indianapolis, NA, ("Bank One") of which Mr. Joseph D. Barnette, Jr., is Chairman and Chief Executive Officer. IPL did not utilize the credit facility during 1996.1997. Mid-America maintained a $7.5 million line of credit with Bank One during 19961997 and had a maximum principal amount of $3.0$2.5 million outstanding at any time, and an outstanding principal balance of $3.0$2.5 million as of December 31, 1996.1997. An unutilized credit line and an unutilized long-term revolving credit facility were also maintained by IPL with First Chicago NBD ("NBD"), of which Mr. Ramon L. Humke is a director and Mr. Andrew J. Paine, Jr., is an executive officer. Mr. Ramon L. Humke is a director of NBD Bank, NA. IPALCO subsidiary Mid-America maintained a $7.5$30 million line of credit during 1996 with NBD,participating banks including NCB and Bank One, had a maximum principal amount outstanding of $3.0$10 million, and a principal balance of $3.0$10 million outstanding as of December 31, 1996.1997. IPALCO entered into a Credit Agreement with Bank One, Indiana, NA, NCB, and The First National Bank of Chicago on April 4, 1997 for the purpose of borrowing $401 million. The proceeds of the loan will bewere used for the repurchase of 12,539,428 of the outstanding shares of IPALCO Enterprises, Inc. common stock pursuant to the terms of the tender offer announced by IPALCO on February 25, 1997. The outstanding balance on December 31, 1997 was $323 million. IPL engaged Rowland Design, Inc. for architectural and design services for certain improvements to the corporate offices located at One Monument Circle. During 1996,1997, IPL paid fees of approximately $93,000$97,000 under such agreements. Mrs. Sallie W. Rowland is Chairman and CEO of Rowland Design, Inc. IPL engaged Schenkel & Associates, LLC, for consulting services in the areas of community affairs, public relations,PROPOSAL 2 -- APPROVING ADOPTION OF IPALCO ENTERPRISES, INC. LONG-TERM PERFORMANCE AND RESTRICTED STOCK INCENTIVE PLAN (As Amended and communication, and paid fees of approximately $25,000 during 1996. Mr. Thomas M. Miller, a member ofRestated Effective January 1, 1998) Introduction At its meeting held January 27, 1998, the Board of Directors ofapproved the IPALCO prior to his death on July 5, 1996, was a majority owner of Schenkel & Associates, LLC. PROPOSAL 2 - APPROVAL OF AMENDMENT TO AMENDED ARTICLES OF INCORPORATION TO INCREASE THE AUTHORIZED NUMBER OF SHARES OF IPALCO'S COMMON STOCK The Proposed Amendment At a regular meeting of the Board of Directors of IPALCO held January 28, 1997, a resolution was adopted by unanimous vote of the 16 directors present directing that an amendment be submitted to a vote of the shareholders at the 1997 Annual Meeting to amend Section 5.01 of Article 5 of the Amended Articles of Incorporation to read as follows: "Section 5.01. Amount and Par Value. The total number of shares which the Corporation shall have the authority to issue is two hundred ninety million (290,000,000) shares, without par value." Section 5.01 of IPALCO's Amended Articles of Incorporation currently authorizes the issuance of 145,000,000 shares of common stock, without par value. No other class of capital stock is authorized. As of April 10, 1997, there were 44,499,612 shares of IPALCO's common stock issued and outstanding after giving effect to the repurchase of 12,539,428 shares of IPALCO common stock pursuant to the terms of the tender offer announced by IPALCO on February 25, 1997. Of the 100,500,388 authorized shares that remain available for issuance, 61,758,065 shares are reserved for issuance in accordance with the provisions of IPALCO's Shareholder Rights Plan, 1991 Directors Stock Option Plan, 1990 (Officers) Stock Option Plan andEnterprises, Inc. Long-Term Performance and Restricted Stock Incentive Plan. An additional 2,000,000 shares will be reserved for issuance pursuant to the 1997 Stock Option Plan if such plan is approved at the Annual Meeting. The 12,539,428 shares repurchased pursuant to the tender offer will be held as treasury shares. The balance of shares available after taking into consideration the shares reserved for issuance, including those to be reserved in connection with the 1997 Stock Option Plan,(As Amended and treasury shares, is 24,202,895. In addition, each time IPALCO issues shares of its common stock, an additional share is reserved for issuance under the terms of the Shareholder Rights Plan. As a result, IPALCO only has one-half of the 24,202,895 shares available for issuance, or 12,101,448. Purpose and Effect of Proposed Amendment The proposed amendment would increase from 145,000,000 shares to 290,000,000 shares the amount of IPALCO common stock authorized for issuance, but it would have no effect upon the terms of such stock or the rights of the holders thereof. IPALCO does not have any present plans, understandings or agreements to issue additional shares of common stock. The Board of Directors believes that the proposed increase in authorized common stock is desirable to enhance IPALCO's flexibility in connection with possible future actions, such as stock splits, stock dividends, financings, corporate mergers, acquisitions of property, use in employee benefit plans or other corporate purposes. Having such authorized shares available for issuance in the future would allow shares of common stock to be issued without the expense and delay of a special shareholders' meeting. Once authorized, such common stock would be available for issuance from time to time to such persons and for such consideration and on such terms as the Board of Directors determines. No further action or authorization by IPALCO's shareholders would be necessary prior to the issuance of the additional shares of common stock unless required by applicable law or by the rules of any stock exchange on which IPALCO's securities may then be listed. The holders of any of the additional shares of common stock issued in the future would have the same rights and privileges as the holders of the shares of common stock currently authorized and outstanding. Those rights do not include preemptive rights with respect to the future issuance of any additional shares. As stated above, IPALCO has no immediate plans, understandings or agreements with respect to the issuance of any additional shares of common stock which would be authorized by the proposed amendment. However, shareholders should be aware that the authority of the Board to issue common stock might be considered as having the effect of discouraging an attempt by another person or entity to effect a takeover or otherwise gain control of IPALCO, because the issuance of additional common stock would dilute the voting power of the common stock then outstanding. As of this date, the Board is not aware of any pending or threatened effort to accumulate IPALCO's shares or to obtain control of IPALCO by means of a merger, tender offer, solicitation in opposition to management or otherwise. Other provisions of IPALCO's Amended Articles could also be viewed as potential impediments to efforts to acquire control of IPALCO. Specifically, those provisions of the Articles requiring the election of only one-third of the directors of IPALCO every year, and the super-majority vote requirement applicable to certain business transactions (such as mergers or sales of assets) could be used in a manner calculated to prevent the removal of management and make more difficult or discourage a change in control of IPALCO. The Articles also provide that the Board, when evaluating such transactions, shall, in connection with the exercise of its judgment in determining what is in the best interests of IPALCO and its shareholders, give due consideration to all relevant factors including the social and economic effects on employees, customers, suppliers, and other constituents of IPALCO and on the communities in which IPALCO operates or is located. In addition, directors may be removed only for cause and only upon the affirmative vote of the holders of 80% of the outstanding voting power of IPALCO. IPALCO's Shareholder Rights Plan could be used with the intent to make more difficult or discourage a change in control. IPALCO has no present intention of soliciting the vote of shareholders on any other proposal, or series of proposals, to deter changes in control of IPALCO. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 2 PROPOSAL 3 - APPROVAL OF ADOPTION OF IPALCO ENTERPRISES, INC. 1997 STOCK OPTION PLAN Introduction At its meeting held March 25, 1997, the Board of Directors adopted the 1997 Stock Option PlanRestated Effective January 1, 1998) (the "Plan"). The Plan is a performance based incentive compensation and restricted stock plan for officers (two of whom are also directors) and other key executive employees of IPALCO and its subsidiaries, subjectsubsidiaries. The Plan was originally adopted in 1995 and approved by the shareholders at the Annual Meeting held April 19, 1995, and was amended in 1998 to shareholder approval. Failure to obtain shareholder approval terminatesmake changes in the peer group and in the performance measures applicable in determining the amount of incentive compensation. If the Plan and all options granted thereunder. The Plan is designed to provideperformance goals are met, participants with a favorable opportunity to acquire IPALCO'swill earn IPALCO common stock (the "Stock"). The Board of Directors believes that optionsrestricted Stock grants have been and will continue to purchase the Stock will be a significant benefit to IPALCO and its subsidiaries in attracting and retaining key executive employees and in providing a long range incentive to work for the continued success of these companies. The 1997 Stock Option Plan is set forth in Appendix A to this Proxy Statement, to which reference is made for a full and complete statement of its terms and conditions. A summary of the principal features of the Plan follows. (See also "Compensation of Executive Officers" and "Board Compensation Committee Report on Executive Compensation" below.) Summary of the Plan Administration. The Plan is administered by the Compensation Committee of IPALCO's Board of Directors, which is made up of 4five disinterested outside directors (the "Committee"). The Committee has sole authority to (a) select planPlan participants, (b) decide on the timing of option grants, (c) determine the number of shares of the Stock covered by each option, (d) set the option price, (e)grant, (c) establish the period for exercising options, (f) determine which options are to be incentive optionsappropriate performance goals, and which are to be non-qualified options, (g) determine the terms and conditions of option agreements, and (h) make(d) makes rules, regulations and other necessary determinations in the course of administering the Plan. Eligibility. Officers and other key employees who in the opinion of the Committee are materially responsible for, the management and operationcontribute to, strategic and long-term growth of IPALCO orand its subsidiaries are eligible to participate in the Plan. Ten percent (10%) owners of the Stock are excluded unless the exercise price of the stock option is at least 110% of the fair market value of the Stock on the date the option is granted and the exercise period does not exceed 5 years. Eligible employees may be granted more than one stock option. As indicated, the Committee has sole authority to select Plan participants. Stock Subject to Plan. TwoOne Million Five Hundred Thousand shares of the Stock (representing 4.49%3.35% of currently outstanding shares) are reserved for option grants. Unpurchased shares from expired optionsrestricted Stock grants during the expected duration of the Plan. Forfeited Stock may again become available for additional optionStock grants. Terms(a) The first grants were made as of Options. OptionJanuary 1, 1995. Additional grants arewere made as of January 1, 1996 and 1997 to new Plan participants. The next grants were made as of January 27, 1998, subject to shareholder approval at the following termsApril 15, 1998 Annual Meeting and conditions: (a)on each January 1 thereafter. (b) The exercise price isCommittee will establish targets for the participants expressed as a number of shares for each $1,000 of annual compensation paid to be determined bya participant. The targeted number of shares for the Committee when options are granted. In1998 grants range from 50 shares per $1,000 of compensation to 20 shares per $1,000 of compensation. The initial grant made at the case of incentive stock options, the price may not be less than the fair market valuebeginning of the Stock. (b) Themeasuring period allowed for exercising an option may not exceed 10 years and 1is based on the average annual salary in effect on the first calendar day after the date granted; provided that incentive stock options shall have terms not exceeding 10 years. Options are not exercisable before shareholders approve the Plan. (c) Upon exercise of an option, the price shall be paid in full either (i) in cash, (ii) subject to the terms of the Plan, with an exercise note with irrevocable instructions to a broker to deliver the option price in cash, or (iii) subject to approval by the Committee, with other shares of the Stock having a fair market value, as determined by the Committee, equal to the cash exercise price. The Committee may determine whether options are exercisable in full or in quotas. Options may be exercised at any time during their term. (d) An option terminates if a participant's employment ceasesmeasuring period for reasons other than death, disability or retirement. If employment ceases due to disability, any option granted must be exercised within 1 year after employment ceases whether or not the option was otherwise exercisable at the date of such termination of employment. A participant who retires may exercise his or her option any time during its term provided that the option was otherwise exercisable at the date of such termination of employment.each participant. However, an incentive stock option must be exercised within 3 months after retirement or it will be treated for tax purposes as a non-qualified option. Personal representatives of participants who die while employed or who die within 1 year after being disabled or retiring, may exercise an option in whole or in part at any time after the date of such death until the expiration of the option term as fixed by the Committee whether or not the option was otherwise exercisable at the date of death. (e) An option is not transferable except upon a participant's death. (f) Participants are deemed to have agreed that the Stock purchased through the exercise of an option was, in good faith, acquired for investment and not for sale or other distribution. (g) The aggregate fair market value (as determined by the Committee at date of grant) of the Stock subject to an incentive stock option that is exercisable for the first time by a participant shall not exceed $100,000 for any calendar year. If, due to immediate exercisability of an incentive stock option, the aggregate fair market value exceeds the $100,000 limitation, the Committee shall convert so much of the option that is in excess of such limitation to a non-qualified stock option. Except as noted in paragraph (m) below and except for the number of shares reserved for option grants, the is no limit on non-qualified options. (h) An agreement between IPALCO and the participant shall evidence each stock option and shall contain a requirement to notify IPALCO of any sale or transfer of option Stock that occurs 2 years from date of grant or 1 year from date of exercise. (i) The Committee may provide an additional cash payment to a non- qualified stock option participant equal to all or a part of the tax benefit realized by IPALCO from the exercise of such option. (j) Certificates for the Stock shallawarded will be issuedadjusted as soon as practicable after an optionthe end of the program based on the actual base salary paid to the participant. The Plan does contain a maximum number of shares which may be allocated to any participant during a measuring period which is exercised, withoutthe lesser of: (1) the number determined by dividing the participant's annualized base salary in effect on the first day of the performance measuring period by 4, or (2) the number determined by dividing the participant's actual annual base salary paid to the participant during the entire measuring period by 5. (c) The 1998 grants are conditioned upon the approval of the Amended and Restated Plan by the shareholders of IPALCO. Restrictions and Lifting of Restrictions. The Stock awarded is subject to financial performance restrictions and employment restrictions, which restrictions are described below: (a) The financial performance restrictions relate to the performance of IPALCO versus companies included as part of the S&P 500 Index during the three-year measuring period. The performance measure utilized by the Plan is Total Return to Shareholders (as defined in the Plan). At the end of the three-year measuring period, IPALCO's performance is compared with the performance of the companies included as part of the S&P 500 Index as to this measure. Depending on IPALCO's performance, the Stock award for the measuring period for the 1998 grant is adjusted upward to a maximum of 400% of the initial grant or downward to no shares being issued. If shares of Stock are forfeited, the shares will become eligible for subsequent grants under the Plan. (b) After the performance restrictions are lifted, the shares are still subject to continuing employment restrictions which lapse in 1/3 increments beginning on the July 1 following the end of the measuring period or such earlier day after the measuring period as established by the Committee, with the other 1/3 increments lapsing on the first business day of each of the two calendar years following the calendar year during which the restrictions on the first 1/3 increment are lifted. If the participant's employment is terminated before the lifting of the employment restrictions, the shares that are still restricted are forfeited. At such time that the continuing employment restrictions are lifted as to each 1/3 increment, the participant will be permitted to elect to receive cash of up to 50% of the value of the non-restricted shares, based on their fair market value. (c) If during the period in which the shares of Stock are subject to financial performance and employment restrictions, a participant dies or becomes disabled, employment restrictions will no longer be applicable. If a participant becomes disabled or dies during a performance period, the number of shares awarded will be proportionately reduced to reflect the portion of the measuring period during which the participant was not an active participant in the Plan, and the reduced number of shares will not be subject to the financial adjustments at the end of the measuring period. If a participant's employment terminates on or after reaching early or normal retirement requirements, the Committee has no rightsthe discretion to lift all or a portion of the employment restrictions at its sole discretion. (d) If there is a change in control of IPALCO, the employment restrictions will immediately lapse. Upon the change in control, the measuring period will be deemed terminated as a shareholder. Cashof the date of the change in control and financial performance of IPALCO shall be paid in lieumeasured against the performance of fractional shares. (k)the companies included as part of the S&P 500 Index based on the abbreviated measuring period, and the Committee shall effect the financial adjustments as soon as practicable thereafter. No Employment Rights. No right to continue in the employ of IPALCO or its subsidiaries is conferred by the Plan or any agreement thereunder. (l) Options shall be clearly identified as either incentive stock options or non-qualified stock options, both of which may be granted to the same participant. The exercise of an incentive stock option shall not affect the exercise of a non-qualified stock option and vice versa. (m) The maximum number of option shares which may be granted to a participant in any calendar year may not exceed 250,000.Plan. Adjustment of Shares. AUpon a reorganization, recapitalization, stock split, stock dividend, combination of shares, exchange of shares, merger or consolidation, liquidation or other changessimilar corporate change after the Plan becomes effective, authorizes the Committee shall make appropriate adjustments in share grants, as to conclusively determine what changes may be appropriatewhich adjustments in the number and kind of shares, and in the option price of outstanding options.Committee's determination is conclusive. Tax Withholding. Whenever the Stock is issued or transferred under the Plan, IPALCO has the right to withhold federal, state or local tax as dictated by applicable requirements or to require payments sufficient to satisfy such requirements. Amendment. IPALCO's Board of Directors may amend the Plan and, with consent of the participant, may amend an option; however,Plan. However, shareholder approval is required (a) to increase the number of shares reserved for issuance; or (b) to extend beyond 10 years and 1 day the exercise period for an option; (c) to modify materially the class of eligible participants; and (d) to materially increase the benefits accruing to participants. Termination. IPALCO's Board of Directors may terminate the Plan at any time, but optionsawards theretofore granted will not be affected. No incentive stock options may be granted after 10 years. Agreements Evidencing Incentive and Non-Qualified Stock Options The Plan requires that each option be evidenced by an agreement between IPALCO and the participant. On March 25, 1997, 27 such agreements, covering an aggregate of 1,067,500 shares of the Stock and representing 2.4% of total shares currently outstanding, were entered into with officers and key employees of IPALCO and its subsidiaries as selected by the Committee, subject to shareholder approval of the Plan. These agreements, in principal part, (a) establish the total number of shares of the Stock for which each participant has been granted incentive and/or non-qualified stock options; (b) set the option price at the higher of the average of the high and low price of the Stock on March 25, 1997 or April 8, 1997; (c) limit the term of an incentive option to 10 years and of a non-qualified option to 10 years and 1 day; and (d) authorize the Committee to approve the manner in which the option can be exercised. Federal Income Tax Consequences of Stock Options The grant of an incentive or a non-qualified stock option has no federal tax consequences to IPALCO or a subsidiary. Moreover, the exercise of an incentive stock option will ordinarily have no federal income tax consequences to IPALCO or a subsidiary, if the option is exercised (a) while a participant is employed, (b) within 3 months after a participant retires, (c) after participant's death, or (d) within 1 year after participant ceases to be an employee due to a disability within the meaning of Section 105(d)(4) of the Internal Revenue Code (the "Code"). However, the amount by which the fair market value at the time of exercise exceeds the option price of the Stock constitutes an alternative taxable income and may subject a participant to alternative minimum tax. At the time a non-qualified stock option is exercised, the amount by which the fair market value of the Stock at the time of exercise exceeds the option price is ordinary income to a participant, but is generally deductible by IPALCO or a subsidiary for federal income tax purposes. Any capital gain realized from a sale of the Stock acquired upon exercise of an incentive stock option will be taxed at long-term rates if the sale was made more than 2 years after grant and 1 year after receipt of the Stock. A sale of option-acquired Stock made before either of such periods will be taxed as ordinary income. The amount of such ordinary income will be deductible by IPALCO or a subsidiary, if income taxes were appropriately withheld. NEW PLAN BENEFITS - -------------------------------------------------------------------------------------------- IPALCO ENTERPRISES, INC. 1997LONG-TERM PERFORMANCE AND RESTRICTED STOCK OPTIONINCENTIVE PLAN (As Amended and Restated Effective January 1, 1998) - -------------------------------------------------------------------------------------------- Number of Shares Name and Position Dollar Value($) NumberValue of UnitsRestricted Stock - -------------------------------------------------------------------------------------------- John R. Hodowal 250,000$1,114,305 26,750 Chairman of the Board and Chief Executive OfficerPresident Ramon L. Humke 125,000$ 942,473 22,625 Vice Chairman John R. Brehm 75,000$ 402,733 9,668 Vice President and Treasurer Bryan G. Tabler 45,000$ 235,983 5,665 Vice President, Secretary and General Counsel Gerald D. Waltz 45,000$ 223,402 5,363 Senior Vice President, Electric Delivery of IPL Other Executive Officers as a Group 240,000$1,070,982 25,710 Non-Executive DirectorOfficer Employee Group -0- Non-Executive Officer/ 287,500 Employee Group$ 704,407 16,910 ------- Total $4,694,285 112,691 These shares of restricted stock were issued on January 27, 1998, subject to shareholder approval at the Annual Meeting held April 15, 1998. The dollar value is based on the average of the high and low price for IPALCO's Common Stock on the date of issuance, without regard to the restrictions.
Federal Income Tax Consequences of Grants Under the Plan At the time on which the restrictions lapse (both the financial performance and employment restrictions), the fair market value of the non-restricted shares will be ordinary income to a participant and deductible by IPALCO and its subsidiaries for federal income taxes as long as withholding requirements are met. However, a participant may accelerate the tax recognition of a restricted share grant by making an election under Section 83(b) of the Internal Revenue Code of 1986 (the "Code") within thirty days from the date of grant. In such case, the deduction available to IPALCO or a subsidiary is also accelerated as long as withholding requirements are met. Since the Plan is intended to be a performance-based plan, the value of benefits should therefore be exempt from the deductibility limitations of Section 162(m) of the Code. Vote Required to Approve the Plan Adoption of Proposal 2 requires the affirmative vote of a majority of the shares present in person or by proxy and entitled to vote at the Annual Meeting. Abstentions will have the same effect as a vote against the proposal. Broker non-votes will not be voted for or against the proposal and will not be counted as entitled to vote. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 3. 2. BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION Compensation Policies Relating Generally to Executive Officers The Compensation Committee (``Committee''("Committee") of the Board of Directors ("Board"), in consultation with its outside advisor, establishes the compensation policies of IPALCO Enterprises, Inc. and its subsidiaries (``IPALCO''("IPALCO") with regard to all officers. The Committee recommends to the Board the adoption or amendment of compensation plans for officers, including the named executive officers. On authority of the full Board, the Committee administers all such plans, including establishing officers' base salary levels, reviewing and approving performance measures and goals for both annual and long-term incentive plans, and approving incentive awards. The Committee is made up of fourfive non-employee directors whose philosophy is to attract, retain, and motivate a high quality management team by providing a strong and direct link between IPALCO performance and officer compensation, with a significant portion of total compensation being dependent upon measurable performance objectives. The compensation program for named executive officers and other selected officers had threefour basic components in 1996:1997: base salary, a performance-based annual incentive plan, and a long-term performance and restricted stock incentive plan and a stock option plan. It is the policy of the Committee that the compensation program should directly link executive and shareholder interests. Base Salary During 1997 the Committee thoroughly reviewed base salary of officers, including the named executive officers, in light of IPALCO's transformation from a more traditional utility to a more general industry company following the leveraged recapitalization, dividend reduction and stock buy back in April, 1997. The Committee agreed to continue its practice of tying a greater percentage of total compensation to IPALCO's performance. As such, no named executive officer received a 1997 base salary increase. The Committee targeted 19961997 base salaries for officers, including the named executive officers, at the median level75th percentile for similar positions within comparably performing utilities, and where such positions are also found in general industry, at a level approximately one-half the difference between the utility industry and general industry medians. The Committee considered the analysis which was provided by the outside advisor that IPALCO salaries are withinat the median75th percentile range of comparable utilities and below those of general industry. The Committee also considered both company and individual performance in approving the range of salary increases, if any, and the salary for each officer, including the named executive officers. In 1997 nineteen officers, including all named executive officers, received the same base salary as in 1996 while eleven officers received base salary increases. Total base salary increases for all officers averaged 4.5%, slightly ahead of the utility industry average, but aligned with IPALCO performance.2.1%. The comparative compensation data for electric utilities used by the Committee were derived from companies with comparable revenues as reported in the annual Edison Electric Institute Executive Compensation Survey. Data for general industry were drawn from five national executive compensation surveys provided by the outside consultant. consultant and from an analysis prepared by the outside consultant on comparable executive position compensation within the S&P 400 MidCap general industry companies. Annual Incentive Plan The IPALCO Annual Incentive Plan is a performance-based plan which measures company performance in four equally weighted criteria: Net Income, Customer Satisfaction, Productivity, and Budget Compliance. For 1996 only, the Committee amended the Annual Incentive Plan to remove Customer Satisfaction and weigh the remaining performance measures one-third each. The customer survey being used was incapable of measuring management's efforts to improve customer service. For 1997 and beyond, Customer Satisfaction will be measured by an independent broad-based customer survey focusing on service characteristics which customers have stated are important. Target awards are set approximately halfway between general industry and utility medians. Participants in the Plan are approved in advance of the plan year by the Committee. All participants, including the named executive officers, are measured against performance goals which are established by the Committee and announced at the beginning of the year. Goals are set at Threshold, Target, and Maximum levels, with Threshold performance required for any award in each criteria; however, if the Threshold goal for Net Income is not met, no payout is made regardless of the performance in any other criteria. Each performance level is assigned an award value, with interpolation for performance between levels. For named executive officers, performance at Threshold, Target, and Maximum levels respectively warrants a payout of 10%, 22.5%, and 35% of base salary. Factors ranging from .75 to 1.52.5 are applied to the award percentage based upon the participant's position. The Plan permits the reduction or elimination of an award should an individual participant's performance be below expectations. No awards were reduced in 1996.1997. For 1996,1997, the Company met the Maximum performance goals in all threefour performance measures: Net Income, Customer Satisfaction, Productivity and Budget Compliance. Long-Term Performance and Restricted Stock Incentive Plan The performance-based restricted stock plan is designed to focus the attention of prospective participants on long-term company objectives and performance. Participation is subject to Committee approval and is limited to key employees (including non-officers) who contribute on a continuing basis to the strategic and long-term growth of the company. TheCompany. Program 1 (1995-1997) of the Plan continues to measure companymeasured Company performance in Total Return to Shareholders and in Cost Effective Service (net income as a percentage of utility revenues) compared with the performance of a Peer Group of 15 comparable utilities. Criteria for selection of peer companies included revenue size and sources, market-to-book ratio, fuel source, and dividend yield among other criteria. Target awards are set approximately halfway between general industry and utility medians. Conditional restricted stock grants, at Target levels, ranging from 10% to 35% of base salary, are awarded at the beginning of each three-year performance period. Final awards are based upon IPALCO's ranking within the Peer Group over the performance period, with one-third of the shares to be vested during each of the fourth, fifth, and sixth years after the beginning of the performance period. The performance period for Program 1 covers 1995-1997,ended December 31, 1997 and in January, 1998 the Committee reviewed Program 1 performance with final restricted stock awards made July 1, 1998.IPALCO ranked 1st in Total Return to Shareholders and 1st in Cost Effective Service. Performance in Total Return to Shareholders and Cost Effective Service continues also to be measured over the four-year performance periods specified in the original Long-Term Incentive Plan for those programs begun prior to 1995. ForIn the final Program 5,6 (replaced by the performance based restricted stock plan discussed above), for the years 1992-1995,1993-1996, IPALCO ranked first among peers in Cost Effective Service and sixthfourth among peers in Total Return to Shareholders. Using the schedule specified in the Plan for thatthe level of performance, the named executive officers received incentive payments totaling $282,249$331,336.34 in 1996.1997. Stock Options The Compensation Committee strongly believes management is in a position to exert the greatest influence on those strategic decisions which affect IPALCO's long-term financial success and the creation of shareholder value. Thus, the Compensation Committee has maintained a posture that particularly senior officers, including the named executive officers, should have a portion of their long-term incentive compensation tied directly to the stock price performance. As reported in IPALCO's 1997 proxy statement in March, 1997, the Compensation Committee assessed the competitiveness of IPALCO's total compensation (base salary + annual incentive + long-term incentives) relative to the electric utility industry and general industry, focusing expressly on the relative value of IPALCO's long-term incentive levels (performance based restricted stock plan described above + stock options). Based upon the Compensation Committee's desire to maintain long-term incentive compensation opportunities at competitive levels, officers, including the named executive officers, were granted stock options on March 25, 1997, in varying amounts at the exercise price of $31.375 per share, vesting immediately. Basis Forfor Chief Executive Officer's Compensation The Chief Executive Officer's (``CEO''("CEO") compensation continues to be directly and explicitly linked to IPALCO performance with consideration given to the Committee's assessment of his individual performance. The Committee thoroughly reviews the CEO's performance, including strategic direction, leadership and management team development, as well as overall company performance. The Committee's review is both subjective and objective. IPALCO performance data used in the incentive plans plus other financial, operational,operations, service, and administrative data are considered. The Committee closely followed IPALCO's performance during the three-year period 1995-1997 and calendar year 1997 compared to the S&P 500 Index and the S&P Electric Companies Index. IPALCO substantially outperformed both of these market measurements in 1997 and during the three-year period 1995-1997. Total 19961997 compensation for the CEO (including base salary, Annual Incentive Plan payment, and Long-Term Incentive payment and stock associated with the Long-Term Performance and Restricted Stock Incentive Plan)Plan and stock options), is shown in Table I.Tables I and II. His total compensation was slightly above the median of Peer Groupcomparable electric utility industry CEOs, but was slightly below the median of CEO compensation in comparablycomparable high-performing peergeneral industry companies. At Target performance, under the current compensation program, approximately 37%56% of the CEO's total direct compensation is variable and at risk. During 1996,1997, approximately 43%53% of the CEO's actual total direct compensation was at risk. Deductibility of Executive Compensation Section 162(m) of the Internal Revenue Code will not permit a public corporation to deduct, for federal income tax purposes, annual compensation in excess of $1 million paid to certain top executives, unless that compensation qualifies as "performance based" compensation. This limitation will nothave insignificant impact on IPALCO with respect to executive compensation paid in 1996, nor does the Committee believe that this will have an impact in 1997. The Committee continues to review this issue with the present intent to takelimit Section 162(m) where appropriate steps to ensure the continued deductibility of its executive compensation. The Compensation Committee of the Board of Directors of IPALCO Enterprises, Inc. Otto N. Frenzel III, Chairman Robert A. Borns Rexford C. Early Earl B. Herr, Jr. Thomas H. Sams COMPENSATION OF EXECUTIVE OFFICERS Nature and Types of Compensation The twothree tables that follow on succeeding pages disclose all plan and non- plannon-plan compensation awarded to, earned by, or paid to the Chairman of the Board and President of IPALCO, who is its chief executive officer (``CEO''("CEO") and to the four named executive officers other than the CEO who are the most highly compensated key policy-making executive officers of IPALCO and its subsidiaries. The tables include a Summary Compensation Table (Table I) and, a table showing Option/SAR Grants in Last Fiscal Year (Table II), an Aggregated Option/SAR Exercises In Last Fiscal Year and Fiscal Year-End Option/SAR Values Table (Table II)III). No table is presented for Option/SAR Grants in last fiscal year since no stock options were granted during 1996. No table is presented for Long-Term Incentive Plans since the issuance of restricted stock under the Long-Term Performance and Restricted Stock Incentive Plan is included in the Summary Compensation Table (Table I). Subsidiary Incentive Plan In early 1995, the Board of Directors of Mid-America Capital Resources, Inc. (``Mid-America''("Mid-America"), a wholly owned subsidiary of IPALCO, approved the implementation of an incentive compensation plan that will provide for payment of incentive compensation in the year 2000 or later to key employees of Mid-America, its subsidiaries, and certain executive employees of IPALCO if certain objective performance measures are met. SUMMARY COMPENSATION TABLE Long-Term Compensation ----------------------------------------------------------------------------------- Annual Compensation Awards Awards Payouts --------------------------------------- ------------------------------------------------------------------------------------------------------------------------ Other Securities Annual Restricted Underlying All Other Compen- Stock Options/ LTIP Compen- Name and Salary sation Awards SARs PayoutsAwards SARs Payoutssation Principal Position Year Salary ($) Bonus ($) ($) ($) (#) ($) ($) - ------------------------------------------- ---- ------------------ --------- ---------- ---------- ----------- ------ --------- ----------------- ---------- John R. Hodowal 1994 $461,051 $214,5661995 $476,012 $206,425 $ 41,471 -0- -0- $ 76,250 $8,955 Chairman & President; 1995 476,012 206,425 43,721 $491,790 -0- $ 75,488 $ 8,310 Chairman & CEO of IPLPresident; 1996 515,125 272,370 229,775 -0- -0- 111,333 6,000 Chairman & CEO of IPL 1997 532,958 468,125 70,087 -0- 250,000 127,550 5,831 Ramon L. Humke 1994 $382,221 $177,881 $130,141 -0- -0-1995 $394,591 $171,120 $ 63,646 $8,955 Vice Chairman; 1995 394,591 171,120 157,606 $407,700 -0- $ 62,975 $ 8,310 President & COOVice Chairman; 1996 432,812 228,935 200,277 -0- -0- 92,296 6,000 President & COO of IPL 1997 450,778 395,937 236,242 -0- 125,000 106,147 5,831 John R. Brehm 1994 $218,3041995 $225,315 $ 67,72889,513 $ 3,678 -0- -0- $ 25,781 $8,199 Vice President & 1995 225,315 89,513 6,301 $133,050 -0- $ 24,228 $ 8,310 Treasurer;Vice President 1996 236,394 83,253 7,788 -0- -0- 34,996 6,698 & Treasurer; SVP, 1997 240,781 84,595 7,512 -0- 75,000 39,858 5,630 Finance & Information Services of IPL Bryan G. Tabler 1994 1995 $202,931 $ 46,15758,650 $ 15,785 $ 1,360 -0- -0- -0- -0- Vice President, 1995 202,931 58,650 14,471 $121,350 -0- -0- $5,589 Secretary & General$ 5,589 Vice President, 1996 218,184 76,907 17,077 -0- -0- $ 10,652 6,119 Counsel;Secretary & General 1997 225,742 79,310 20,053 -0- 45,000 21,197 5,081 Counse; SVP, Secretary and General Counsel of IPL Gerald D. Waltz 1994 $202,9551995 $201,930 $ 62,88758,353 $ 4,465 -0- -0- $ 26,042 $7,731 SVP, Electric 1995 201,930 58,353 11,178 $121,530 -0- $ 24,228 $ 8,310 Delivery of IPLSVP, Electric 1996 209,792 73,885 12,355 -0- -0- 32,972 6,000 Delivery of IPL 1997 213,678 75,075 12,000 -0- 45,000 36,584 5,831 - ------------------------------------------------------------- The named executive officers did not receive a base salary increase from 1996 to 1997. Salary increases, if applicable take effect in May. 1996 figures reflect 4 months pay at 1995 base salary rates and 8 months at 1996 base salary rates , while 1997 figures reflect 12 months pay at the 1996 base salary rates. Represents taxes paid by IPALCO and/or IPL on accrued interest and contributions of principal under the Funded Supplemental Retirement Plan (See ``Pension Plans''"Pension Plans"). Includes $10,227 and $17,783 earned in above market interest on deferred compensation for Mr. Humke in 1996. 1996 and 1997, respectively. Restricted common stock awards are valued at the closing market price as of the date of grant. Restricted common stock holdings and the value thereof based on the closing price of the common stock at year end are as follows: Mr. Hodowal - 24,589 shares ($670,050)1,031,201); Mr. Humke - 20,385 shares ($555,491)854,896); Mr. Brehm - 6,652 shares ($181,267)278,968); Mr. Tabler - 6,067 shares ($165,326)254,435); and Mr. Waltz - 6,076 shares ($165,571)254,812). Dividends on the restricted common stock are payable to the named officers. Shares awarded in 1995 represent a cumulative 3-year award for years 1995, 1996, and 1997. Under the terms of the Plan, no additional shares will be awarded to the named officers before 1998. No options have stock appreciation rights. Payouts shown were made in 1996 forpursuant to the 4-year1990 Long-Term Incentive Plan (the "LTIP Plan"). The LTIP Program ended December 31, 1995. Plan was replaced by the IPALCO Enterprises, Inc. Long-Term Performance and Restricted Stock Incentive Plan and no additional payments will be made under the LTIP Plan. Represents 1996 contributions made by IPL to the Trustee of the Employees' Thrift Plan. Mr. Tabler started his employment on October 1, 1994, and became an officer of both IPALCO and IPL on January 1, 1995. TABLE I
OPTION/SAR GRANTS IN LAST FISCAL YEAR Potential Realizable Value at Assumed Annual Rates of Stock Price Appreciation Individual Grants for Option Term ------------------------------------------------------------- ----------------------- % of Total Number of Options/ Securities SARs Underlying Granted to Exercise Options/ Employees or Base Expira- SARs in Fiscal Price tion Name Granted (#) Year ($/Sh) Date 5% ($) 10%($) - --------------------------------------------------------------------------------------------------------------------- John R. Hodowal 250,000 23.4 $31.375 03/25/07 $4,932,892 $12,500,918 Ramon L. Humke 125,000 11.7 $31.375 03/25/07 $2,466,446 $ 6,250,459 John R. Brehm 75,000 7.0 $31.375 03/25/07 $1,479,868 $ 3,750,275 Bryan G. Tabler 45,000 4.2 $31.375 03/25/07 $ 887,921 $ 2,250,165 Gerald D. Waltz 45,000 4.2 $31.375 03/25/07 $ 887,921 $ 2,250,165 _________________________ 3,187 underlying securities out of the amount shown for each officer relate to incentive stock options, the balance relate to non-qualified stock options. All options are exercisable immediately; however, incentive stock options expire one day before the expiration date shown. None of the stock options contain stock appreciation rights. Equal to market price on grant date. These values are not a prediction of what IPALCO believes the market value of its common stock will be in the next 10 years. IPALCO does not know and cannot determine whether its common stock will increase (or decrease) in value over that period. The values shown in these columns are merely assumed values required by, and calculated in accordance with, Securities and Exchange Commission Rules. TABLE II
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES Number of Securities Value of Underlying Unexercised Unexercised In-the-Money Options/SARs at Options/SARs FY-End(#) FY-End ($)* Shares Acquired Exercisable/ Exercisable/ Name On Exercise (#) Value Realized ($) Unexercisable Unexercisable - ------------------------------------ --------------- ------------------ ------------------ ----------------------------- ------------- John R. Hodowal 35,000 $542,485 180,000(e) $401,701(e)-0- -0- 430,000 (e) $5,686,076 -0- (u) -0- (u) Ramon L. Humke 82,500 $921,385 105,000(e) $239,013(e)-0- -0- 230,000 (e) $3,101,513 -0- (u) -0- (u) John R. Brehm -0- -0- 52,500(e) $119,506(e)127,500 (e) $1,682,788 -0- (u) -0- (u) Bryan G. Tabler -0- -0- ---- ---- ---- ----45,000 (e) $ 475,312 -0- (u) -0- Gerald D. Waltz 18,120 $267,208 55,320(e) $193,880(e)43,481 $462,401 56,839 (e) $ 671,919 -0- (u) -0- (u) - ---------------------------------------------------- (e) Exercisable. (u) Unexercisable. * Based upon year-end closing market price of $27.25$41.9375 per share of common stock. TABLE IIIII
Performance Graph The Performance Graph on this page, Table III,IV, plots the total cumulative return that shareholders of IPALCO received (solid line) during the period December 31, 19911992 through MarchDecember 31, 1997, compared with the total cumulative return to shareholders of companies comprising the Standards and Poor's 500 Index (solid line with dash)(dotted line) and the Standard & Poor's Electric Companies Index (wavy(dash/dotted line). The Graph shows the cumulative total return assuming dividend reinvestment and based upon an initial investment of $100. The vertical portion of the Graph indicates the dollar value ranging from $90.00 to $210.00,$260.00, and the horizontal portion of the Graph is the year, beginning in 19911992 and contuingcontinuing through MarchDecember 31, 1997. The points on the Performance Graph are as follows: [solid line] IPALCO [dotted line] S & P 500 [dash/dotted line] S & P Electric Companies CUMULATIVE TOTAL RETURN ASSUMING DIVIDEND REINVESTMENT
1991 1992 1993 1994 1995 1996 3/31/971997 IPALCO 100 114 119 108 146 165 186104.16 94.42 127.74 144.72 229.37 S & P 500 100 108 118 120 165 203 208110.08 111.53 153.45 188.68 251.63 S & P ELEC COMPANIES 100 106 119 104 136 136 131112.60 97.89 128.32 128.11 161.74 Source: Standard and Poor's Compustat Services, Inc. TABLE IIIIV
Performance Graph The Performance Graph (Table III)IV) on the preceding page plots the total cumulative return that shareholders of IPALCO received (solid line) during the period from December 31, 19911992 through MarchDecember 31, 1997, compared with the total cumulative return to shareholders of companies comprising the Standard and Poor's 500 Index (solid line with dash)(dotted line) and the Standard & Poor's Electric Companies Index (wavy)(dash/dotted line). The Graph reflects IPALCO's superior return as compared to the electric utility industry and is one of the bases for the Chief Executive Officer's compensation disclosed in the Compensation Committee Report set forth in this Proxy Statement. Pension Plans Table IVV below illustrates the combined annual retirement benefits computed on a straight-life annuity basis that are payable under the Base Retirement Plan and the Funded Supplemental Retirement Plan (assuming continuous employment to age 65) to named executive officers having the remuneration and years of service shown. - -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- PENSION PLAN TABLE Remuneration Years of Service - ---------------- ----------------------------------------------------------------------------------------------- 15 20 25 30 35 -------- -------- -------- -------- --------- -------------------------------------------------------------------- $125,000 $ 81,250 $ 81,250 $ 81,250 $ 81,250 $ 81,250 150,000 97,500 97,500 97,500 97,500 97,500 175,000 113,750 113,750 113,750 113,750 113,750 200,000 130,000 130,000 130,000 130,000 130,000 225,000 146,250 146,250 146,250 146,250 146,250 250,000 162,500 162,500 162,500 162,500 162,500 300,000 195,000 195,000 195,000 195,000 195,000 400,000 260,000 260,000 260,000 260,000 260,000 450,000 292,500 292,500 292,500 292,500 292,500 500,000 325,000 325,000 325,000 325,000 325,000 ___________________________________ This table takes into account the latest Internal Revenue Code Section 415 benefit limitations and Internal Revenue Code Section 401(a)(17) compensation limitation applicable to the Base Retirement Plan. Benefits for both the Base Retirement Plan portion and Funded Supplemental Retirement Plan portion of the combined amounts have been shown without adjustment for income taxes. TABLE IVV - ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
IPL's Employees' Retirement Plan (the ``Base"Base Retirement Plan''Plan") covers all permanent employees with one (1) year of service but excludes directors unless they are also officers. It provides fixed benefits at normal retirement age based upon compensation and length of service, the costs of which are computed actuarially. The remuneration covered by the Plan includes ``Salary''"Salary" but excludes ``Bonus''"Bonus" and ``Other"Other Compensation,''" annual or otherwise, as those terms are used in the Summary Compensation Table (Table I). Benefits are calculated on the basis of the highest average annual salary in any 60 consecutive months of employment. Years of service for Pension Plan purposes of named executive officers are as follows: Mr. Hodowal - 28,29, Mr. Humke - 7,8, Mr. Brehm - 21,22, Mr. Tabler - 2,3, and Mr. Waltz - 36.37. The Funded Supplemental Retirement Plan referred to above is applicable to the named executive officers and, at reduced benefits, to all other officers of IPALCO and IPL. In addition to the Base Retirement Plan and Funded Supplemental Retirement Plan benefits described above, the Funded Supplemental Retirement Plan also provides Mr. Hodowal with a straight-life annuity of $130,000 per year commencing at age 65, which benefit is reduced for early retirement. Contributions and accrued interest credited during 19961997 to the accounts of Messrs. Hodowal, Humke, Brehm, Tabler and Waltz amounted to $271,745, $196,824, $7,256, $20,466$46,676, $208,285, $5,895, $22,176 and $9,987,$7,842, respectively (in addition to the federal, state and local income tax payments reflected in Table I above). Contributions are based on actuarial assessments of benefits projected to accrue to such officers under the Funded Supplemental Retirement Plan upon termination of employment at normal retirement age and at current salary levels. Employment Contracts and Termination of Employment and Change-in-Control Arrangements IPALCO has an employment contract with Mr. Hodowal which provides for an indefinite term that is convertible into a fixed 3-year term upon notice. IPL has an employment contract with Mr. Humke which provides for a 3-year term expiring on December 31, 1999. Such contracts terminate upon death, total disability or retirement. Should they be terminated without ``cause''"cause" or resign for ``good reason''"good reason" (as those terms are defined in the contract--see below), they would continue to receive their Salary, as that term is used in Table I above, for up to 3 years thereafter, less any severance payments received from other agreements. All Officersofficers of IPALCO and its subsidiaries have Termination Benefits Agreements, dated on or after January 1, 1993. These Agreements provide for payment of severance benefits equal to 299.99% of the last 5 years' average annual Salary (but not exceedingcompensation (as defined in Section 280G of the limits of Internal Revenue Code 280G),Code) payable by IPALCO and its subsidiaries which was includable in the gross income of the officer, if IPALCO undergoes an ``acquisition"acquisition of control''control" while the agreement is in effect and if, within 3 years after an acquisition of control, any such officer is terminated without ``cause''"cause" or resigns for ``good"good reason,''" as those terms are therein defined (see below). The term ``without `cause'''"without 'cause'" is defined in the employment contracts and Termination Benefits Agreements discussed above to mean in the absence of fraud, dishonesty, theft of corporate assets or other gross misconduct, as set out in a good faith determination of the Board of Directors. The term ``resign"resign for `good'good reason'''" is defined in the same agreements to mean generally, and subject to lengthy qualifications and amplification, demotion; assignment of duties inconsistent with the officer's status, position or responsibilities; reduction in base salary or failure to grant annual increases commensurate with increases of other officers; relocation of the headquarters of IPALCO or IPL to a location outside Greater Indianapolis; or termination of the executive's participation in, or the existence of, an incentive compensation, insurance or pension program. The term ``acquisition"acquisition of control''control" in such contracts means, generally and subject to lengthy amplification and qualifications therein, acquisition by any person, entity, or group of 20% or more of the combined voting power of the outstanding securities of IPALCO entitled to vote in the election of directors, excluding acquisitions by or from IPALCO or any acquisition by any employee benefit plan of IPALCO or IPL; change in majority membership of the Board of Directors other than by normal succession; certain reorganizations, mergers or consolidations resulting in control of the reorganized, merged, or consolidated entity by persons not previously in control of IPALCO; approval by the shareholders of complete liquidation or dissolution of IPALCO, or of a sale of all or substantially all of its assets to an entity not controlled by directors and holders of voting securities who were directors and holders of voting securities of IPALCO prior to the transaction. A Benefit Protection Fund and Trust Agreement (``Fund''("Fund") is also in effect to pay litigation expenses in the event it becomes necessary for any officer to enforce the employment contracts and Termination Benefits Agreements above described. The Fund is held in trust by National City Bank, Indianapolis, and at December 31, 1996,1997, the sum of $887,580$945,439 was reserved in trust for such expenses. By order of the Board of Directors. IPALCO ENTERPRISES, INC. By: BRYAN G. TABLER, Secretary Indianapolis, Indiana April 15, 1997 - -------------------------------------------------------------------------- APPENDIXMarch 9, 1998 Appendix A IPALCO ENTERPRISES, INC. 1997LONG-TERM PERFORMANCE AND RESTRICTED STOCK OPTIONINCENTIVE PLAN 1. Purpose. The purposeAs Amended and Restated Effective January 1, 1998) Pursuant to Section 22 of the IPALCO Enterprises, Inc. 1997Long- Term Performance and Restricted Stock OptionIncentive Plan (the "Plan"), IPALCO Enterprises, Inc. ("IPALCO") amends the Plan, effective as of January 1, 1998, to provide, in its entirety, as follows: SECTION 1 PURPOSE The purpose of the amended Plan (as such term is described below) is to provide an incentive to certain officers (including officers who are membersselected key executives of the BoardCompany (as such term is described below), by providing an opportunity to earn long-term incentive compensation, based upon the attainment of Directors) and other key executive employees of IPALCO Enterprises, Inc. (the "Corporation") and of anyCompany performance goals. In addition, the restricted stock component of the eighty percent (80%)Plan is intended to provide the key executives with a means of acquiring or greater owned, direct or indirect, subsidiaries of the Corporation (individuallyincreasing a "Subsidiary and collectively the "Subsidiaries") who are materially responsible for the management or operation of the business of the Corporation or a Subsidiary, a favorable opportunity to acquire Common Stock, without par value, of the Corporation ("Common Stock"), thereby providing them withproprietary interest in IPALCO so that they shall have an increased incentive to work fortoward the successattainment of the Corporationlong term growth and profit objectives of IPALCO and its affiliated companies. Specifically, the SubsidiariesPlan is designed to: A. Link, directly and better enabling the Corporationindirectly, executive and the Subsidiaries to attractshareholder interests. B. Attract and retain capable executive personnel. 2. Administrationindividuals of outstanding ability. C. Encourage key Company officers to render superior performance. SECTION 2 DEFINITIONS The terms defined in this Section 2 shall, for purposes of this Plan, have the Plan.meanings herein specified, unless the context expressly or by necessary implication otherwise requires: A. Acquisition of Control: An "Acquisition of Control" means: (1) The Plan shall be administered, construed and interpretedacquisition by the Compensation Committee (the "Committee") of the Board of Directors of the Corporation. The Committee must be composed of twoany individual, entity or more persons who qualify as "Non-Employee Directors" withingroup (within the meaning of Rule 16b-3(b)Section 13(d)(3) promulgated underor 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "1934"Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of twenty percent (20%) or more of either (A) the then outstanding shares of common stock of IPALCO (the "Outstanding IPALCO Common Stock") or (B) the combined voting power of the then outstanding voting securities of IPALCO entitled to vote generally in the election of directors (the "Outstanding IPALCO Voting Securities"); provided, however, that the following acquisitions shall not constitute an Acquisition of Control: (i) any acquisition directly from IPALCO (excluding an acquisition by virtue of the exercise of a conversion privilege), (ii) any acquisition by IPALCO, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by IPALCO, IPL or any corporation controlled by IPALCO or (iv) any acquisition by any corporation pursuant to a reorganization, merger or consolidation, if, following such reorganization, merger or consolidation, the conditions described in clauses (A), (B) and (C) of subsection (3) of this Section 2.A. are satisfied; (2) Individuals who, as "outside directors"of the date hereof, constitute the Board of Directors of IPALCO (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board of Directors of IPALCO; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by IPALCO's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board of Directors; or (3) Approval by the shareholders of IPALCO of a reorganization, merger or consolidation, in each case, unless, following such reorganization, merger or consolidation, (A) more than sixty percent (60%) of, respectively, the then outstanding shares of common stock of the corporation resulting from such reorganization, merger or consolidation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding IPALCO Common Stock and Outstanding IPALCO Voting Securities immediately prior to such reorganization, merger or consolidation in substantially the same proportions as their ownership, immediately prior to such reorganization, merger or consolidation, of the Outstanding IPALCO Stock and Outstanding IPALCO Voting Securities, as the case may be, (B) no Person (excluding IPALCO, any employee benefit plan or related trust of IPALCO, IPL or such corporation resulting from such reorganization, merger or consolidation and any Person beneficially owning, immediately prior to such reorganization, merger or consolidation, directly or indirectly, twenty percent (20%) or more of the Outstanding IPALCO Common Stock or Outstanding IPALCO Voting Securities, as the case may be) beneficially owns, directly or indirectly, twenty percent (20%) or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such reorganization, merger or consolidation or the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors and (C) at least a majority of the members of the board of directors of the corporation resulting from such reorganization, merger or consolidation were members of the Incumbent Board at the time of the execution of the initial agreement providing for such reorganization, merger or consolidation; (4) Approval by the shareholders of IPALCO of (A) a complete liquidation or dissolution of IPALCO or (B) the sale or other disposition of all or substantially all of the assets of IPALCO, other than to a corporation, with respect to which following such sale or other disposition (i) more than sixty percent (60%) of, respectively, the then outstanding shares of common stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding IPALCO Common Stock and Outstanding IPALCO Voting Securities immediately prior to such sale or other disposition in substantially the same proportion as their ownership, immediately prior to such sale or other disposition, of the Outstanding IPALCO Common Stock and Outstanding IPALCO Voting Securities, as the case may be, (ii) no Person (excluding IPALCO and any employee benefit plan or related trust of IPALCO, IPL or such corporation and any Person beneficially owning, immediately prior to such sale or other disposition, directly or indirectly, twenty percent (20%) or more of the Outstanding IPALCO Common Stock or Outstanding IPALCO Voting Securities, as the case may be) beneficially owns, directly or indirectly, twenty percent (20%) or more of, respectively, the then outstanding shares of common stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors and (iii) at least a majority of the members of the board of directors of such corporation were members of the Incumbent Board at the time of the execution of the initial agreement or action of the Board of Directors providing for such sale or other disposition of assets of IPALCO; or (5) The closing, as defined in Treasury Reg.the documents relating to, or as evidenced by a certificate of any state or federal governmental authority in connection with, a transaction approval of which by the shareholders of IPALCO would constitute an "acquisition of control" under subsection (3) or (4) of this Section 1.162-27(e)2.A. of this Plan. Notwithstanding anything contained in this Plan to the contrary, if a Participant's employment is terminated before an "Acquisition of Control" as defined in this subsection (A) and the Participant reasonably demonstrates that such termination (i) was at the request of a third party who has indicated an intention or taken steps reasonably calculated to effect an Acquisition of Control and who effectuates an "Acquisition of Control" or (ii) otherwise occurred in connection with, or in anticipation of, an Acquisition of Control which actually occurs, then for all purposes of this Plan, the date of an Acquisition of Control with respect to such Participant shall mean the date immediately prior to the date of such termination of the Participant's employment. B. Administrative Guidelines: The guidelines established for each Program used to administer this Plan as now in effect or as modified from time to time by the Committee. C. Base Salary: The aggregate base salary paid to a Participant in a Fiscal Year. D. Board of Directors: The Board of Directors of IPALCO. E. Committee: The Compensation Committee of the Board of Directors. F. Company: IPALCO and its subsidiaries, or successors. G. Cost Effective Service: The three (3) year average, as applicable, of net income of the Company as a percentage of the sum of the Company's total operating revenues and other income. The Company's net income, total operating revenues and other income shall be as reported in the Company's Uniform Statistical Report; provided, however, that the total operating revenues and other income shall include gross IPL revenues but, with respect to the non-utility businesses, shall only include their net income. Cost Effective Service shall cease to be a Performance Measure effective January 1, 1998. H. Fiscal Year: The calendar year. I. IPALCO: IPALCO Enterprises, Inc. or its successor. J. IPL: Indianapolis Power & Light Company or its successor. K. Market Price: For a Fiscal Year, the prices of a company's common stock on the New York Stock Exchange, or other appropriate exchange, if the company's common stock is not traded on the New York Stock Exchange, as published in The Wall Street Journal, at the close of trading on the last trading date in such Fiscal Year. L. Participant: The employees of the Company designated by the Committee to receive an award under the Plan. The employees eligible for designation include officers of the Company and other employees who the Committee expect to contribute to the strategic growth of the Company. M. Peer Group: The entities included as part of the S&P 500 Index. N. Performance Incentive Award: The incentive award amount for a Performance Period established by the Committee and expressed as a number of Shares determined in relation to a Participant's average annual Base Salary for the entire three (3) year period or, if lesser, the portion of such three (3) year period that he was employed; provided, however, that for purposes of making the Share grants at the beginning of each Performance Period, the Share grants shall be based on the Participant's rate of base compensation in effect on the first (1st) calendar day of the Performance Period; provided, further, that the number of Shares awarded shall be increased or decreased as soon as practicable after the end of the Performance Period to reflect the actual annual Base Salary paid to the Participant in such Performance Period. The maximum number of Shares (including any additional Shares awarded in accordance with Section 16 based on Performance Period Performance Measure results) shall not exceed the lesser of: (1) the annualized Base Salary of a Participant in effect on the first (1st) calendar day of the Performance Period divided by four (4), or (2) the average annual Base Salary of the Participant during the Performance Period divided by five (5); provided, however, that in applying these share limits, dividends paid on restricted Shares shall be disregarded. Notwithstanding anything contained in this Paragraph to the contrary, the Committee may establish the Performance Incentive Awards for various groups of Participants by job title or officer class. To the extent the Committee establishes Performance Incentive Awards by job title or officer groups and a Participant's job title or officer group provides for a lower or higher number of Shares as the Participant's Performance Incentive Award, the Participant's Performance Incentive Award shall be automatically adjusted at the end of the Performance Period to reflect the different number of Shares applicable for such new job title or officer class based on the number of full calendar months remaining in the Performance Period at the effective date on which such Participant's job title or officer class is modified. For example, if a Participant's job title is changed to a title which results in an increase of the number of Shares to be included as the Participant's Performance Incentive Award from twenty (20) to twenty-five (25) Shares with eighteen (18) full calendar months remaining in the Performance Period at the time of the change, the Participant shall have the number of Shares included as his Performance Incentive Award adjusted at the end of the Performance Period to twenty-two and one-half (22 1/2). O. Performance Incentive Award Schedule: The schedule, attached hereto as Appendix A, containing the ranking of Total Return to Shareholders versus the Peer Group, and a percent of the Performance Incentive Award for each of the levels of achievement listed. P. Performance Measures: The measures used in determining the amount of any Program Incentive Payment. Effective January 1, 1998, Total Return to Shareholders shall be the only Performance Measure. Q. Performance Period: A period of three (3) consecutive Fiscal Years, commencing on the first (1st) day of the first (1st) Fiscal Year of a Program, over which the Performance Measures are to be taken. A new Performance Period shall begin on January 1, 2001 and January 1, 2004. Performance Periods shall not overlap. R. Period of Restriction: The period during which the transfer of shares are restricted pursuant to the Plan. S. Plan: This Long-Term Performance and Restricted Stock Incentive Plan, as now in effect and as amended from time to time. T. President: The President of IPALCO. U. Program: One (1) Performance Period with its respective Performance Incentive Awards, Performance Incentive Award Schedule, and Participants. V. Shares: Shares of common stock of IPALCO. W. Total Return to Shareholders: The average return on investment to shareholders from stock price appreciation and dividends paid during each Fiscal Year of the Performance Period. SECTION 3 ADMINISTRATION The Plan shall be administered by the Committee. No member of the Committee shall be eligible, at any time when he or she is such a member or within one (1) year prior to his or her appointment to the Committee, to be granted Shares under the Plan; provided, however, that notwithstanding the preceding clause of this sentence, a member of the Committee shall not be precluded from participating in, the IPALCO Enterprises, Inc. 1991 Directors' Stock Option Plan. The decision of a majority of the members of the Committee shall constitute the decision of the Committee, and the Committee may act (a)either at a meeting at which a majority of theits members of the Committee isare present (b) unless prohibited by the Corporation's Articles of Incorporation or Bylaws, by simultaneous telephonic communication as authorized by IND. CODE Section 23-1-34-1, or (c) by a written consent signed by all membersof its members. The Committee may appoint individuals to act on its behalf in the administration of the Committee. ThePlan; provided, however, that except as otherwise provided by the Plan, the Committee shall have the sole, final and conclusive authority to determine, consistent withadminister, construe and subject tointerpret the provisionsPlan. SECTION 4 NUMBER OF SHARES SUBJECT TO THE PLAN The total number of the Plan: (a) the individuals (the "Optionees") to whom options or successive options shallShares that may be granted under the Plan; (b)Plan may not exceed One Million and Five Hundred Thousand (1,500,000) Shares subject to adjustment as provided in Section 6 hereof. Those Shares may consist, in whole or in part, of authorized but unissued Shares or Shares reacquired by IPALCO, including Shares purchased in the time when optionsopen market, not reserved for any other purpose; provided, however, that the Shares granted hereunder shall be granted hereunder; (c)authorized and unissued unless the Committee, in its sole discretion, takes action to utilize open market Shares. SECTION 5 UNUSED SHARES In the event any Shares subject to grants made under the Plan are forfeited pursuant to Section 16 hereof, such forfeited Shares shall again become available for issuance under the Plan. SECTION 6 ADJUSTMENTS IN CAPITALIZATION In the event of any change in the outstanding Shares by reason of a stock dividend, stock split, recapitalization, merger, consolidation, combination, stock rights plan or exchange of shares or other similar corporate change, the aggregate number of shares of Common Stock ofShares issuable under the Corporation to be covered under each option; (d) the option price to be paid upon the exercise of each option; (e) the period within which each option may be exercised; (f) the extent to which an option is an incentive stock option or a non-qualified stock option; and (g) the terms and conditions of the respective agreements by which options grantedPlan shall be evidenced. Theappropriately adjusted by the Committee, whose determination shall be conclusive. In such event, the Committee shall also have authoritydiscretion to prescribe, amendmake appropriate adjustments in the number and rescind rules and regulations relatingtype of shares subject to restricted Share grants then outstanding under the Plan pursuant to the Plan,terms of such grants or otherwise. SECTION 7 PARTICIPATION A. Prior to the commencement of each Fiscal Year, Participants shall be recommended by the President and approved by the Committee. Participants are to make all other determinations necessary or advisable in the administration of the Plan. 3. Eligibility. The Committee may, consistent with the purposes of the Plan, grant options to officers and otherbe those key employees of the Corporation or of a Subsidiary who, in the opinion of the Committee, are from timein a position to time materially responsiblemake a significant contribution to the long-term success of the Company. Participants for each Program shall be notified of their participation prior to the beginning of the first (1st) Fiscal Year of a Program. Participation in one (1) Program does not guarantee participation in subsequent Programs. B. The Committee, in its sole discretion, may select additional Participants to participate in the final one (1) or two (2) Fiscal Years of a Program. The Committee approval shall include the establishment of the Performance Incentive Award for any new Participant. If a Participant is added during a Program, the first (1st) Fiscal Year of his participation shall be substituted for the managementfirst (1st) Fiscal Year of the Performance Period for purposes of determining the number of Shares awarded under Section 9. C. The Committee, in its sole discretion, may discontinue the participation of a Participant for the final one (1) or operationtwo (2) Fiscal Years of a Program. If a Participant's participation is discontinued during a Program, he shall forfeit, as soon as practicable after the effective date of his participation termination, two-thirds (2/3) of the Shares granted to him for such Program if his participation is discontinued for the final two (2) Fiscal Years of the Program or one-third (1/3) of the Shares granted to him for such Program if his participation is discontinued for the final Fiscal Year of the Program. At the end of a Program, the reduced share grant shall be adjusted in accordance with Section 16. SECTION 8 PERFORMANCE INCENTIVE AWARD GRANTS A. Each Program shall be subject to the limitations and terms provided in the Plan. A new Program shall commence on the third (3rd) annual anniversary date of the preceding Program. These Programs shall be of three (3) year duration. B. The Committee shall determine for each Participant his Performance Incentive Award for each Program. Only one (1) grant shall be made to each Participant during each Program. Participants shall generally be notified of their individual Performance Incentive Award before the beginning of each Program. SECTION 9 GRANT OF SHARES Concurrently with the beginning of each Performance Period and subject to the limits established by Section 2.N., the Committee shall cause the Secretary of IPALCO to issue to each Participant a number of restricted Shares based on the Participant's Performance Incentive Award for such Performance Period. Notwithstanding anything contained herein to the contrary, the Share grants for the Performance Period beginning on January 1, 1998 are conditioned upon the amended and restated Plan being approved by IPALCO's shareholders in accordance with Section 28 hereof. At the end of each Performance Period, the Share grants shall be adjusted, upward or downward, based on the Participant's actual Base Salary and, if applicable, change in job title or officer class. SECTION 10 ESTABLISHMENT OF PERFORMANCE MEASURES A. The Performance Measure to be used is IPALCO's ranking versus the Peer Group on Total Return to Shareholders. B. A Performance Incentive Award Schedule shall contain various levels of performance and corresponding Performance Incentive Award values. C. If the Company disposes of a significant part of the business of IPL, or acquires through purchase, merger, or otherwise the Corporation orcapital assets of any other company, the Committee may, in its sole and absolute discretion, adjust the Total Return to Shareholder targets of a Subsidiary;Performance Incentive Award Schedule for a Performance Period so as to reflect the financial impact of the acquisition or disposition. SECTION 11 DETERMINATION OF PERFORMANCE RESULTS A. Upon the completion of a Performance Period, the Shares awarded for each Participant shall be adjusted based upon the Performance Incentive Award Schedule. B. For each Performance Period, the Total Return to Shareholders of IPALCO shall be compared with the Total Return to Shareholders of the members of the Peer Group. Total Return to Shareholders for IPALCO and each member of the Peer Group shall be measured by the following formula (with appropriate adjustments for changes in capital structure due to stock dividends, stock splits, recapitalization, mergers, or other events having significant distorting effect on IPALCO or on any member of the Peer Group): 1. For each Fiscal Year of the Performance Period: (a) Subtract the Market Price of each company's common stock for the prior Fiscal Year from the Market Price of the company's common stock for the current Fiscal Year. (b) Add to the result obtained in Step (a) the amount of all cash dividends paid by the company with respect to its common stock during the current Fiscal Year. (c) Divide the result obtained in Step (b) by the Market Price of the company's common stock for the prior Fiscal Year. 2. The calculated values from Step 1 for the Fiscal Years in the Performance Period shall then be converted to an annual average for the Performance Period. IPALCO's ranking shall be determined by its performance ranking versus the Peer Group. SECTION 12 RESTRICTIONS ON TRANSFERABILITY Until the lifting of the restrictions on the Shares granted hereunder, no Shares granted under the Plan may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, otherwise than by will or by the laws of descent and distribution until the termination of the applicable Period of Restriction. SECTION 13 CERTIFICATE LEGEND Each certificate representing restricted Shares granted pursuant to this Plan shall bear the following legend: "The sale or other transfer of the shares represented by this certificate, whether voluntary, involuntary, or by operation of law, is subject to certain restrictions on transfer set forth in the IPALCO Enterprises, Inc. Long-Term Performance and Restricted Stock Plan and rules of administration adopted pursuant to such Plan. A copy of the Restricted Stock Plan and the rules of such Plan may be obtained from the Secretary of IPALCO Enterprises, Inc." Once the restricted Shares are released from the restrictions, the Participant shall be entitled to have the legend required by this Section 13 removed from such Share certificate(s). SECTION 14 VOTING RIGHTS During the Period of Restriction, Participants holding restricted Shares granted hereunder may exercise full voting rights with respect to those Shares. SECTION 15 DIVIDENDS AND OTHER DISTRIBUTIONS During the Period of Restriction, Participants holding restricted Shares granted hereunder shall be entitled to receive all dividends and other distributions paid with respect to those Shares while they are so held. If any such dividends or distributions are paid in Shares, such Shares shall be subject to the same restrictions on transferability as the restricted Shares with respect to which they were paid. SECTION 16 LIFTING OF RESTRICTIONS The restricted Share grants under the Plan shall be subject to restrictions as to transferability and shall also be subject to forfeiture provisions. The lifting of the transferability restrictions and the forfeitability provisions shall be dependent on the Performance Measures during each Performance Period and on the continued employment of the Participant during the Period of Restriction. As soon as practicable after the end of a Performance Period, the Committee shall determine the adjustments, if any, that are required to be made to the Share grants for the Performance Period based on actual results of IPALCO under the Performance Measures for such Performance Period. This evaluation shall be completed no later than the July 1 immediately following the end of the Performance Period or such earlier date established by the Committee after it completes the required grant adjustments for the Performance Period (the July 1 or earlier date established by the Committee shall for each Performance Period be referred to as the "Initial Vesting Date"). After the adjustments are made in the Share grants consistent with the Performance Incentive Award Schedule for the Performance Period and after effectuating the adjustments described above rounding up or down any fractional share to the nearest whole share, the restrictions on the Shares held by a Participant at the end of the Performance Period (after adjusted as described above) shall be lifted on one-third (1/3) of the Shares as of the Initial Vesting Date for the Performance Period and shall be lifted in additional one-third (1/3) increments on the first business day of each of the next two calendar years immediately following the Initial Vesting Date for the Performance Period; provided, however, that except as provided in no event may any employee who owns (after applicationSection 17, 18 or 19 hereof: (1) the restriction shall be lifted on an Initial Vesting Date or, if applicable for the other one-third (1/3) increments, the first business day in January only if the Participant is still employed by the Company on such date, and (2) if a Participant ceases to be employed by the Company before the restrictions lapse on the Shares held by him, the Shares still subject to restrictions shall be immediately forfeited. Notwithstanding anything contained in this Plan to the contrary, the Committee shall have the complete discretion to delay the lifting of the ownership rules inrestrictions on Shares under this Plan (including restrictions that lapse under Sections 17 and 18) for a Participant to the extent it determines such delay is necessary to avoid the non-deductibility of the awards under Section 424(d)162(m) of the Internal Revenue Code of 1986, as amended (the "Code")) shares of stock possessing more than 10% of the total combined voting power of all classes of stock of the Corporation be granted an incentive stock option hereunder unless at the time such option is granted the option price is at least 110% of the fair market value of the Common Stock subject to the option and such incentive stock option by its terms is not exercisable after the expiration of five (5) years from the date such option is granted. Subject to the provisions of Section 4 hereof, an individual who has been granted an option under the Plan, if he is otherwise eligible, may be granted an additional option or options if the Committee shall so determine. The maximum number of shares of the Corporation's Common Stock with respect to which options may be granted in any calendar year to any individual shall not exceed two hundred and fifty thousand (250,000). 4. Stock Subject to the Plan. There shall be reserved for issuance upon the exercise of options granted under the Plan, two million (2,000,000) shares of the Corporation's Common Stock which may be authorized but unissued shares of the Corporation. Subject to Section 6 hereof, the shares for which options may be granted under the Plan shall not exceed that number. If any option shall expire or terminate for any reason without having been exercised in full, the unpurchased shares subject thereto shall (unless the Plan shall have terminated) become available for other options under the Plan. 5. Terms of Option. Each option granted under the Plan shall be subject to the following terms and conditions and to such other terms and conditions not inconsistent therewith as the Committee may deem appropriate in each case: (a) Option Price. The price to be paid for shares of Common Stock upon the exercise of each option shall be determined by the Committee at the time such option is granted, but such price in the case of an incentive stock option in no event shall be less than the fair market value, as determined by the Committee consistent with the requirements of Section 422 of the Code, of such Common Stock on the date on which such option is granted. (b) Period for Exercise of Option. An option shall not be exercisable after the expiration of such period as shall be fixed by the Committee at the time such option is granted, but such period in no event shall exceed ten (10) years and one day from the date on which such option is granted;amended; provided, however, that incentive stock options shall have terms not in excessany decision to delay the lifting of ten (10) years; provided, further, that no optionthe restrictions shall be exercisable priorrequired to be made and communicated to the date onaffected Participant in writing before the beginning of the calendar year during which the Planrestrictions would have been lifted but for the delay. SECTION 17 EFFECT OF PARTICIPANT'S RETIREMENT Except as provided in the next paragraph, for Performance Periods beginning before January 1, 1998 and notwithstanding anything contained in Section 16 hereof to the contrary, if a Participant attains age 65 before his employment with the Company is approvedterminated and before the end of a Performance Period but after completing at least one (1) full Fiscal Year of employment during such Performance Period, the remaining restrictions on any Shares attributable to such Performance Period held by the shareholdersParticipant (after the number of the Corporation as required by Section 422 of the Code. (c) Exercise of Options. The option price of each share of Common Stock purchased upon exercise of an option shall be paid in full (1) in cash at the time of such exercise, (2) if the Optionee may do so in conformity with Regulation T (12 C.F.R. Section 220.3(e)(4)) and without violating Section 16(b) or (c) of the 1934 Act (to the extent applicable) and subject to approval by the Committee, by delivering a properly executed exercise note together with irrevocable instructions to a broker to deliver promptly to the Corporation the total option price in cash and, if desired, the amount of any taxes to be withheld from the Optionee's compensation as a result of any withholding tax obligation of the Corporation or any of its Subsidiaries, as specified in such notice, or (3) subject to the approval of the Committee, by tendering to the Corporation whole shares of Common Stock owned by him or any combination of whole shares of Common Stock owned by him and cash, having a fair market value equal to the cash exercise price of the shares with respect to which the option is being exercised. For this purpose, the fair market value of the shares tendered by the Optionee shall be computed as of the exercise date in such manner as determined by the Committee, consistent with the requirements of Section 422 of the Code. The Committee shall have the authority to grant options exercisable in full at any time during their term, or exercisable in such quotas as the Committee shall determine. An option may be exercised at any time or from time to time during the term of the option as to any or all whole shares which have become subject to purchaseShares are adjusted pursuant to the termsPerformance Measure adjustments described in Section 16 and Base Salary adjustment described in Section 2.N. and Section 9 hereof are completed for such Performance Period) shall lapse on the last calendar day of such Performance Period; provided, however, that if a Participant's employment with the Company is terminated, voluntarily or involuntarily, before his completion of at least two (2) Fiscal Years of employment, the Participant shall only be entitled to two-thirds (2/3) of the option (including, without limitation, any quotas with respect to option exercise) or the Plan. (d) Termination of Option. If an Optionee ceases to be an employee of the Corporation or one of the Subsidiaries for any reason other than retirement, permanent and total disability (within the meaning of Section 105(d)(4) of the Code), or death, any optionrestricted Shares granted to him for such Performance Period (after the Performance Measure adjustments described in Section 16 and Base Salary adjustment described in Section 2.N. and Section 9 hereof are completed for such Performance Period), rounding up or down any fractional Share to the nearest whole Share, and the remaining one-third (1/3) of the Shares shall forthwith terminate. Leavebe forfeited as soon as practicable after the end of absencethe Performance Period. Notwithstanding anything contained in Section 16 hereof to the contrary but only to the extent expressly approved by the Committee, the provisions contained in the preceding paragraph of this Section 17 shall not constitute cessation of employment. If an Optionee ceases to be an employee of the Corporation or one of the Subsidiaries by reason of permanent and total disability (within the meaning of Section 105(d)(4) of the Code), any option granted to him may be exercised by himalso apply, in whole or in part, within one (1) year after the date of his termination ofwith respect to a Participant whose employment by reason of such disability whether or not the option was otherwise exercisable at the date of such termination of employment. If an Optionee ceases to be an employee of the Corporation or one of the Subsidiaries by reason of retirement, any option granted to him may be exercised by him in whole or in part during the period fixed by the Committee under subsection (b) of this Section 5, provided that the option was otherwise exercisable at the date of such termination of employment. The term "retirement" as used herein means an Optionee's termination of employment on oris terminated after meeting the requirements for early or normal retirement benefits under any then existingthe Employees' Retirement Plan of Indianapolis Power & Light Company pension plan.(or any successor plan) to the extent the Committee waives the continued employment requirements; provided, however, that under no circumstances shall the waiver affect the Performance Measures adjustments provided in Section 11; provided, further, that until such time, if ever, that the Committee waives the restrictions, the retired Participant shall cease to have voting or dividend rights with respect to the restricted Shares. SECTION 18 EFFECT OF TERMINATION OF EMPLOYMENT DUE TO DEATH OR DISABILITY Notwithstanding anything contained in Section 16 hereof to the contrary, if a Participant's employment with the Company is terminated by reason of his death or total and permanent disability (as such term is defined in the Employees' Retirement Plan of Indianapolis Power & Light Company or in any successor retirement plan thereto) that occurs after the end of the Performance Period but before the restrictions lapse on the Shares granted for such Performance Period, the remaining restrictions on any Shares attributable to such Performance Period held by the Participant (after the Performance Measure adjustments described in Section 16 hereof are completed for such Performance Period) shall immediately lapse on the date of his death or total and permanent disability, whichever is applicable. Notwithstanding anything contained in Section 16 hereof to the contrary, if a Participant's employment with the Company is terminated by reason of his death or total and permanent disability that occurs before the end of the Performance Period, the Participant shall be entitled to a pro rata number of Shares (as determined below) granted to him at the beginning of the Performance Period (as adjusted for Performance Periods to reflect the actual Base Salary paid to such Participant during the Performance Period that he was employed), no further adjustments shall be effected with respect to such Shares, and such Shares shall be fully vested and transferable by such Participant or, if deceased, his legal representative. The number of Shares that the disabled or deceased Participant is entitled shall be determined by multiplying the number of Shares granted to the Participant at the beginning of the Performance Period or, if later, at the date as of which his participation in the Performance Period commenced (as adjusted to reflect the actual Base Salary paid to such Participant during the Performance Period) by a fraction, the numerator of which is the number of full calendar months of the Performance Period during which he was a Participant and employed by the Company and the denominator of which is thirty-six (36) or, if the Participant became a Participant after the beginning of a Performance Period, the number of months remaining in the Performance Period beginning with the month during which his participation commenced. SECTION 19 ACQUISITION OF CONTROL In the event that there is an Acquisition of Control and notwithstanding anything contained in Section 16 to the contrary, the lifting of the death of an Optionee while inrestrictions based on continued employment on the employ ofrestricted Shares held by a Participant who was employed by the Corporation or the Subsidiaries or within one (1) year after the termination of his employment by reason of retirement or permanent and total disability (within the meaning of Section 105(d)(4) of the Code), any option granted to him may be exercised in whole or in part at any time afterCompany immediately preceding the date of such death by the executor or administratorAcquisition of his estate or byControl shall immediately occur. In addition, the person or persons entitled toPerformance Period during which the option by will or by applicable lawsAcquisition of descent and distribution until the expiration of the option term as fixed by the Committee, whether or not the option was otherwise exercisableControl occurs shall be deemed terminated at the date of his death. Notwithstanding the foregoing provisionsAcquisition of this subsection (d), no option shall in any event be exercisable after the expiration of the period fixed by the Committee in accordance with subsection (b) above. An option shall also terminate if this Plan is not approved by the shareholders of the Corporation within the requisite time period set forth in Section 422 of the Code. (e) Nontransferability of Option. An Option may not be transferred by the Optionee otherwise than by will or the laws of descent and distribution, and during the lifetime of the OptioneeControl, IPALCO performance for such Performance Period shall be exercisable only by him. (f) Investment Representations. Unless the shares of Common Stock subject to an option are registered under applicable federal and state securities laws, each Optionee by accepting an option shall be deemed to agree for himself and his legal representatives that any option granted to him and any and all shares of Common Stock purchased upon the exercise of the option shall be acquired for investment and not with a view to, or for the sale in connection with, any distribution thereof, and each notice of the exercise of any portion of an option shall be accompanied by a representation in writing, signed by the Optionee or his legal representatives, as the case may be, that the shares of Common Stock are being acquired in good faith for investment and not with a view to, or for sale in connection with, any distribution thereof (except in case of the Optionee's legal representatives for distribution, but not for sale, to his legal heirs, legatees and other testamentary beneficiaries). Any shares issued pursuant to an exercise of an option may, but need not, bear a legend evidencing such representations and restrictions. In addition, if the options and shares of Common Stock issued pursuant to this Plan are issued in reliance upon Rule 147, promulgated under the Securities Act of 1933, as amended, the written representations required by such rule shall be obtained from the Optionees prior to or at the time they are granted options, any and all legends required by Rule 147 shall be set forth on the certificates representing shares of Common Stock issued pursuant to the exercise of such options, and stop transfer instructions shall be issued to the Corporation's recordkeeping transfer agent with respect to such shares. (g) Maximum Incentive Stock Options. The aggregate fair market value (determined as of the time the option is granted) of Common Stock subject to incentive stock options that are exercisable for the first time by an employee during any calendar year under the Plan or any other plan of the Corporation or any Subsidiary shall not exceed $100,000. For this purpose, the fair market value of such shares shall be determinedmeasured as of the date the option is granted and shall be computed in such manner as shall be determined by the Committee, consistent with the requirements of Section 422 of the Code. If the immediate exercisabilityAcquisition of incentive stock options arising from the death or permanentControl, and total disability of an Optionee pursuant to Section 5(d) above or arising from any change of control of the Corporation would cause this $100,000 limitation to be exceeded for an Optionee, the Committee shall convert as ofeffect the date on which such incentive stock options become exercisable all or a portion of the outstanding incentive stock options heldadjustments required by such Optionee to non-qualified stock options to the extent necessary to comply with the $100,000 limitation. (h) Agreement. Each option shall be evidenced by an agreement between the optionee and the Corporation which shall provide, among other things, that, with respect to incentive stock options, the optionee shall advise the Corporation immediately upon any sale or transfer of the shares of Common Stock received upon exercise of the option to the extent such sale or transfer takes place prior to the later of (a) two (2) years from the date of grant or (b) one (1) year from the date of exercise. (i) Tax Benefit. The Committee may, in its sole discretion, include a provision in any non-qualified stock option agreement that provides for an additional cash payment from the Corporation to the grantee of such non- qualified optionSection 16 as soon as practicable after the exercise dateAcquisition of such non-qualified stock option equalControl. The restrictions on all Shares provided to all or a portionthe Participants after completing the adjustments described above shall be lifted immediately. SECTION 20 ELECTIVE SALE OF SHARES Participants shall also be permitted to cash-in up to fifty percent (50%) of the tax benefitShares (after the adjustments required by Section 16 are completed) that cease to be receivedsubject to the continued employment requirements under Section 16 (the "Eligible Shares") by following the procedures established by the Corporation attributableCommittee. SECTION 21 NO EMPLOYMENT CONTRACT The Plan is not and is not intended to its federal income tax deduction resulting from the exercise of such non-qualified stock option. (j) Certificates. The certificate or certificates for the shares issuable uponbe an exercise of an option shall be issued as promptly as practicable after such exercise. An Optionee shall not have any rights of a shareholder inemployment contract with respect to any of the shares of Common Stock subject to an option until the date of issuance of a stock certificate to him for such shares. In no case may a fraction of a share be purchased or issued under the Plan, but if, upon the exercise of an option, a fractional share would otherwise be issuable, the Corporation shall pay cash in lieu thereof. (k) No Right to Continued Service. Nothing in this Plan or in any agreement entered into pursuant hereto shall confer on any person any rightParticipants, and IPALCO's and IPL's rights to continue in the employ of the Corporation or its Subsidiaries or affect any rights of the Corporation, a Subsidiary, or the shareholders of the Corporation may have to terminate his service at any time. (l) Incentive Stock Options and Non-Qualified Stock Options. Options granted under the Plan may be incentive stock options under Section 422 of the Code or non-qualified stock options. All options granted hereunder shall be clearly identified as either incentive stock options or non-qualified stock options. In no event shall the exercise of an incentive stock option affect the right to exercise any non-qualified stock option, nor shall the exerciseemployment relationship of any non-qualified stock option affect the right to exercise any incentive stock option. Nothing in this Plan shall be construed to prohibit the grant of incentive stock options and non-qualified stock options to the same person; provided, however, that incentive stock options and non- qualified stock optionsParticipant shall not be granted in a manner whereby the exercise of one non-qualified stock option or incentive stock option affects the exercisability of the other. 6. Adjustment of Shares. In the event of any change after the effective date of the Plan in the outstanding stock of the Corporationaffected by reason of any reorganization, recapitalization, stock split, stock dividend, combination of shares, exchange of shares, merger or consolidation, liquidation, or any other change after the effective date of the Plan in the nature of the shares of stock of the Corporation, the Committee shall determine what changes, if any, are appropriate in the number and kind of shares reserved under the Plan, and in the option price under and the number and kind of shares covered by outstanding options granted under the Plan. Any determination of the Committee hereunder shall be conclusive. 7. Tax Withholding. Whenever the Corporation proposes or is required to issue or transfer shares of Common Stock under the Plan, the Corporation shall have the right to require the Optionee or his or her legal representative to remit to the Corporation an amount sufficient to satisfy any federal, state and/or local withholding tax requirements prior to the delivery of any certificate or certificates for such shares, and whenever under the Plan payments are to be made in cash, such payments shall be net of an amount sufficient to satisfy any federal, state and/or local withholding tax requirements. 8. Amendment.SECTION 22 AMENDMENT AND TERMINATION The Board of Directors ofmay at any time amend, modify, alter, or terminate the Corporation may amend the Plan from time to time and, with the consent of the Optionee, the terms and provisions of his option, exceptPlan; provided, however, that without the approval of the Corporation'sIPALCO shareholders: (a) the number of shares of Common StockShares which may be reserved for issuance under the Plan may not be increased except as provided in Section 6 hereof; (b) the period during which an option may be exercised may not be extended beyond ten (10) years and one (1) day from the date on which such option was granted; (c)(b) the class of employees to whom optionsgrants may be granted under the Plan shall not be modified materially; and (d) no otherprovided, further, that except for the modifications expressly permitted by the last paragraph of Section 16 hereof, any amendment, modification, alteration or termination to the Plan may be made which requiresincreases the approvalrestrictions as to transferability or forfeitability of any restricted Shares granted hereunder to a Participant, including any Performance Measure adjustments which occur at the Corporation's shareholders under applicable law or under the rules and regulationsend of the New York Stock Exchange. No amendment of the Plan, however, may, without the consent of the Optionees, make any changes in any outstanding options theretofore granted under the Plan which would adversely affect the rights of such Optionees. 9. Termination. The Board of Directors of the Corporation may terminate the Plan at any time and no option shall be granted thereafter. Such termination, however,a Performance Period, shall not affectbecome effective until the validity of any option theretofore granted underfirst (1st) Performance Period following the Plan. In any event, no incentive stock option may be granted after the conclusion of a ten (10) year period commencing on the datePerformance Period during which such amendment, modification, alteration or termination to the Plan is adopted without the written consent of the majority of the Participants adversely affected by the change. SECTION 23 INDEMNIFICATION Each person who is or if earlier,shall have been a member of the dateBoard of Directors or the Committee shall be indemnified and held harmless by IPALCO against and from any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by him in connection with or resulting from any claim, action, suit, or proceeding to which he may be a party or in which he may be involved by reason of any action taken or failure to act under the Plan is approvedand against and from any and all amounts paid by him in settlement thereof with IPALCO's approval, or paid by him in satisfaction of a judgment in any such action, suit or proceeding against him, provided he shall give IPALCO an opportunity, at its own expense, to handle and defend the same before he undertakes to handle and defend it on his behalf. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled under the IPALCO Articles of Incorporation or Code of By-Laws, as a matter of law, or otherwise, or any power that IPALCO may have to indemnify them or hold them harmless. SECTION 24 GOVERNING LAW The Plan, and all grants and other documents delivered hereunder, shall be construed in accordance with and governed by the Corporation's shareholders. 10. Successors.laws of Indiana. SECTION 25 EXPENSES OF PLAN The expenses of administering the Plan shall be borne by IPALCO. SECTION 26 SUCCESSORS The Plan shall be binding upon the successors and assigns of the Corporation. 11. Governing Law. The termsparticipating Employers. SECTION 27 TAX WITHHOLDING IPALCO or IPL, as appropriate, shall have the right to require the Participant or other person receiving Shares to pay to IPALCO or IPL the amount of any options granted hereunderfederal, state or local taxes which IPALCO or IPL are required to withhold with respect to such Shares. If permitted by the Committee and pursuant to rules established by the rights and obligations hereunderCommittee, a Participant may make a written election to have Shares having an aggregate fair market value, as determined by the Committee, sufficient to satisfy the applicable withholding taxes, withheld from the Shares otherwise to be received at the end of the Corporation, the OptioneesPeriod of Restriction. SECTION 28 EFFECTIVE DATE AND DURATION OF PLAN This amended and their successors in interest shall, except to the extent governed by federal law, be governed by Indiana law. 12. Government and Other Regulations. The obligations of the Corporation to issue or transfer and deliver shares under options granted under therestated Plan shall be subject to compliance with all applicable laws, governmental rules and regulations, and administrative action. 13. Effective Date. The Plan shall become effective when it shall have been approved by the Corporation's Board of Directors;January 1, 1998; provided, however, that the granting of any options under the Plan is conditionalShares are conditioned upon the approval of the Plan by the Corporation's shareholders within twelve (12) months afterholders of a majority of the adoptionShares present, or represented, and entitled to vote at IPALCO's 1998 annual shareholder meeting. Except for the provisions set forth in Section 16 which are also applicable for the January 1, 1995 grants, the Performance Periods beginning before January 1, 1998 shall be governed by the provisions of the Plan by the Corporation's Board of Directors and the options granted pursuantin effect before January 1, 1998. APPENDIX A PERFORMANCE INCENTIVE AWARD SCHEDULE AWARD AS A PERCENT OF TARGET S&P 500 Index Ranking: 3 year cumulative Total Return to the Plan may not be exercised until the Board of Directors of the Corporation has been advised by counsel that such approval has been obtained and all other applicable legal requirements have been met; provided, further, that if shareholder approval does not occur within the required twelve (12) month period, the Plan and all outstanding options shall be deemed terminated.Shareholder (TRS) IPALCO Award Ranking: TRS Percentage ------------ ---------- 1-31 400% 32-62 375% 63-93 350% 94-125 325% 126-156 300% 157-187 275% 188-218 250% 219-250 225% 251-281 200% 282-312 175% 313-343 150% 344-375 125% 376-406 100% 407-437 75% 438-468 50% 469-500 0% [form of proxy/instruction card] IPALCO ENTERPRISES, INC. This Proxy/Instruction Card is Solicited on Behalf of the Board of Directors The undersigned hereby appoints John R. Hodowal and Bryan G. Tabler as Proxies, each with the power of substitution, and authorizes them to represent and vote and/or, in the case of shares held in IPALCO PowerInvest, the dividend reinvestment and direct stock purchase plan, instructs the agent for such Plan to execute a proxy empowering the above-named persons to vote, as designated below, all the shares of IPALCO Enterprises, Inc. common stock held of record by the undersigned and/or credited to the undersigned's account in such Plan on April 10, 1997,February 25, 1998, at the annual meeting of the shareholders to be held May 21, 1997,April 15, 1998, or at any adjournment thereof, with respect to the matter(s) set forth below. 1. Election of FiveFour Nominees For Directors, namely: Joseph D. Barnette, Jr., MaxRobert A. Borns, Otto N. Frenzel III, Andre B. Lacy, L. Gibson, Ramon L. Humke, Andrew J. Paine, Jr., Sallie W. RowlandBen Lytle [ ] Vote For All Nominees [ ] Withhold Vote from All Nominees [ ] Vote For All Nominees, Except Nominees written below: -------------------------------------------------------------------- (Please write name(s) of Nominee(s) from whom vote is withheld) 2. Approval of an amendment to the Amended Articles of Incorporation increasing to 290 million shares the amount of common stock authorized for issuance. [ ] For [ ] Against [ ] Abstain 3. Approval of the adoption of the IPALCO Enterprises, Inc. 1997Long-Term Performance and Restricted Stock Option Plan.Incentive Plan (as Amended and Restated January 1, 1998). [ ] For [ ] Against [ ] Abstain (FOLD HERE - DO NOT TEAR) This Proxy/Instruction Card when properly executed will be voted in the manner directed by the undersigned shareholder. If not otherwise indicated, this Proxy/Instruction Card will be voted FOR the five nominees for Director listed above, FOR the amendment to the Amended Articles of Incorporation,Proposals 1 and FOR the adoption of the Stock Option Plan2 and confers discretionary authority to vote on currently unknown matters properly presented to the meeting. This Proxy/Instruction Card shall be voted on those matters properly presented in accordance with the best judgment of the named Proxies. Receipt of the Notice of Annual Meeting and Proxy Statement dated April 15, 1997,March 9, 1998, and the 19961997 Annual Report is hereby acknowledged. Dated ______________________, 1997.__________________, 1998. Your signature must be exactly _______________________________________________________________________ as your name appears below. (SIGNATURE) When signing as attorney-in-fact, executor, administrator, trustee, guardian or corporate officer, _______________________________________________________________________ please give full title as such. (SIGNATURE IF HELD JOINTLY) Please complete 19971998 Proxy at right. Then date, sign, detach it from this form at perforations, fold it and return immediately in accompanying postage guaranteed envelope. Account ID: ADDRESS CHANGE ________________________________________________ STREET ________________________________________________ APT. NO./P.O. BOX ________________________________________________ CITY ________________________________________________ STATE ________________________________________________ ZIP CODE ________________________________________________ SIGNATURE [at perforation] (DETACH HERE) [letter soliciting voting instructions from participants in Employees' Thrift Plan]Plan. IPL INDIANAPOLIS POWER & LIGHT COMPANY April 15, 1997March 9, 1998 TO PARTICIPANTS IN THE EMPLOYEES' THRIFT PLAN: As a participant in the Employees' Thrift Plan, you are entitled to direct the manner in which shares of stock of IPALCO Enterprises, Inc., ("IPALCO") in which you have an interest, shall be voted by the Trustee at the forthcoming Annual Meeting of Shareholders of IPALCO to be held May 21, 1997.April 15, 1998. This right is given to you by Section 305.90 of the Thrift Plan. Enclosed is a copy of the Notice of the Annual Meeting and Proxy Statement dated April 15, 1997March 9, 1998 and an Instruction Card indicating the number of shares with respect to which you may give voting instructions to the Trustee. You may instruct the Trustee how you wish such shares to be voted by placing a mark in the box which expresses your choice. The only business to be acted upon at the meeting of which Management is presently aware, is (1) the election of fivefour directors to hold office for terms of three years each and until their successors are duly elected and qualified; (2) an amendment to the Amended Articles of Incorporation to increase the authorized number of shares of IPALCO's common stock from 145 million to 290 million;qualified, and (3) the approval of the adoption of the IPALCO Enterprises, Inc. 1997Long-Term Performance and Restricted Stock Option Plan.Incentive Plan (as Amended and Restated effective January 1, 1998). It is important that you instruct the Trustee as to the voting of the shares in which you have an interest. After designating how you wish such shares to be voted, sign the instruction form and return it via intra company mailin the accompanying interoffice envelope to the Secretary of IPALCO, Room 729, IPALCO Corporate Center, on or before May 15, 1997.April 8, 1998. Shares with respect to which no voting instructions are given will be voted by the Trustee in its discretion. /s/ John D. Wilson John D. Wilson, Secretary Employees' Pension Committee [form to be executed by Thrift Plan participants] IPALCO ENTERPRISES, INC. Instructions toTo Thrift Plan Trustee For Annual Meeting ofOf Shareholders - May 21, 1997April 15, 1998 TO THE EMPLOYEE PENSION COMMITTEE: I understand that in accordance with Section 305.90 of the Thrift Plan, I may instruct the voting of the number of shares shown on this form. Will you please direct the Trustee to execute a proxy empowering the persons appointed therein to vote as follows: 1. Election of FiveFour Nominees For Director, namely: Joseph D. Barnette, Jr., MaxRobert A. Borns, Otto N. Frenzel III, Andre B. Lacy, L. Gibson, Ramon L. Humke, Andrew J. Paine, Jr., Sallie W. RowlandBen Lytle [ ] Vote For All Nominees [ ] Withhold Vote from All Nominees [ ] Vote For All Nominees, Except Nominees written below: -------------------------------------------------------------------- (Please----------------------------------------------------------------- Please write name(s) of Nominee(s) from whom vote is withheld) 2. Approval of an amendment to the Amended Articles of Incorporation increasing to 290 million shares the amount of common stock authorized for issuance. [ ] For [ ] Against [ ] Abstain 3. Approval of the adoption of the IPALCO Enterprises, Inc. 1997Long-Term Performance and Restricted Stock Option Plan.Incentive Plan (as Amended and Restated effective January 1, 1998). [ ] For [ ] Against [ ] Abstain (FOLD HERE - DO NOT TEAR) The Trustee will execute the proxy as above directed, or, if no choice is indicated, the proxy will be voted by the Trustee in its discretion. This instruction cardInstruction Card confers discretionary authority to vote on currently unknown matters properly presented to the meeting. Receipt of the Notice of Annual Meeting and Proxy Statement dated April 15, 1997,March 9, 1998, and the 19961997 Annual Report is hereby acknowledged. Dated ______________________, 1997._______________________, 1998. Your signature must be exactly ____________________________________ as your name appears below. (SIGNATURE) Please complete 19971998 Instruction Card at right. Then date, sign, detach it from this form at perforations,performations, fold it and return immediately in accompanying interoffice envelope. [at perforation] (DETACH HERE)