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Indianapolis Power & Light Company
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Indianapolis Power & Light Company
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IPL
INDIANAPOLIS POWER & LIGHT COMPANY
25 Monument Circle
P.O. Box 1595
Indianapolis, Indiana 46206-1595
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 20, 1994
TO THE SHAREHOLDERS OF
INDIANAPOLIS POWER & LIGHT COMPANY
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of
Indianapolis Power & Light Company will be held at the office of the
Company, 25 Monument Circle, Indianapolis, Indiana on Wednesday, April 20,
1994, at 10 o'clock A.M. (Eastern Standard Time), for the following
purposes:
1. To elect seventeen (17) directors to hold office for terms of one
year each and until their successors are duly elected and
qualified; and
2. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on Tuesday,
March 8, 1994, as the record date for determining the shareholders entitled
to notice of, and to vote at, the meeting and at any adjournment thereof.
Proxies will not be solicited for this meeting and you are requested
not to send us a proxy. Shareholders are welcome to attend the meeting in
person and cast their votes by ballot on the issues presented at the
meeting.
By order of the Board of Directors.
INDIANAPOLIS POWER & LIGHT COMPANY
By: MARCUS E. WOODS, Secretary
Indianapolis, Indiana
March 17, 1994
INDIANAPOLIS POWER & LIGHT COMPANY
INFORMATION STATEMENT
TABLE OF CONTENTS
GENERAL INFORMATION ................................................... 1
OTHER BUSINESS ........................................................ 1
RELATIONSHIP WITH AUDITOR ............................................. 1
VOTING SECURITIES AND BENEFICIAL OWNERS ............................... 2
DIRECTORS AND NOMINEES ................................................ 2
Election of Seventeen Directors .................................... 2
Vote Required For Election of Directors ............................ 5
Procedure To Propose Nominees For Director ......................... 5
Number Of Board Meetings and Attendance ............................ 5
Committees of the Board ............................................ 5
Certain Business Relationships ..................................... 6
COMPENSATION OF EXECUTIVE OFFICERS .................................... 6
Nature and Types of Compensation ................................... 6
Summary Compensation - Table I .................................. 7
Option Grants - Table II ........................................ 8
Option Exercises - Table III .................................... 9
Long-Term Incentive Plans - Table IV ............................ 10
COMPENSATION OF DIRECTORS ............................................. 11
Standard Arrangements .............................................. 11
Other Arrangements ................................................. 11
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE
COMPENSATION ....................................................... 11
Compensation Policies Relating Generally to Executive Officers ..... 11
Base Salary ..................................................... 12
Annual Incentive Plan ........................................... 12
Long-Term Incentive Plan ........................................ 12
Stock Options ................................................... 13
Basis for Chief Executive Officer's Compensation ................... 13
Performance Graph - Table V ........................................ 14
Performance Graph .................................................. 15
Pension Plans ...................................................... 15
Pension Plan Table - Table VI ................................... 15
Employment Contracts and Termination of Employment and Change-in-
Control Arrangements ............................................ 16
INDIANAPOLIS POWER & LIGHT COMPANY
INFORMATION STATEMENT
Relating to the
Annual Meeting of Shareholders
April 20, 1994
(Mailed on or about March 18, 1994)
GENERAL INFORMATION
The following information is furnished in connection with the Annual
Meeting of Shareholders of Indianapolis Power & Light Company (``IPL'') to
be held pursuant to the accompanying Notice of Annual Meeting and at any
adjournment of such meeting.
At the close of business on December 31, 1983, IPL became a subsidiary
of IPALCO Enterprises, Inc. (``IPALCO'') and, at that time, all outstanding
shares of IPL Common Stock were exchanged for Common Stock of IPALCO and
all Common shareholders of IPL became Common shareholders of IPALCO. As a
result, IPALCO owns all 17,206,630 outstanding shares of IPL's Common
Stock. However, there remains outstanding 518,985 shares of IPL's
Cumulative Preferred Stock.
Since IPALCO's ownership represents more than 94% of the total votes
that could be cast for the election of directors and shareholders do not
have cumulative voting rights, the Board of Directors considered it
inappropriate to solicit proxies for IPL's Annual Meeting of Shareholders
to be held April 20, 1994. Please be advised, therefore, that this is only
an Information Statement. WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE
REQUESTED NOT TO SEND US A PROXY. However, if you wish to vote your shares
of Cumulative Preferred Stock, you may do so by attending the meeting in
person and casting your vote by a ballot which will be provided for that
purpose.
OTHER BUSINESS
Management is not presently aware of any business to be presented at
the Annual Meeting other than the election of directors. The minutes of the
Annual Meeting of Shareholders held April 21, 1993 will be presented for
approval at the 1994 Annual Meeting; however, such action is not intended
to constitute approval or disapproval of any matter referred to in such
minutes.
RELATIONSHIP WITH AUDITOR
Deloitte & Touche (the ``Auditor'') with offices at Market Tower,
Suite 3000, 10 West Market Street, Indianapolis, Indiana, has been the
auditor for IPL since the year 1952, and was appointed by the Board of
IPALCO upon recommendation of the Audit Committee to serve as such during
the current year. A representative of the Auditor will be present at the
Annual Meeting of Shareholders on April 20, 1994, and will be given an
opportunity to make a statement and to respond to appropriate questions
from shareholders.
VOTING SECURITIES AND BENEFICIAL OWNERS
On February 10, 1994, IPL had outstanding 17,206,630 shares of Common
Stock and 518,985 shares of Cumulative Preferred Stock issued in six (6)
separate series. Each share of Cumulative Preferred Stock entitles its
owner to two (2) votes, and 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 Tuesday, March 8, 1994,
will be entitled to vote at the meeting or at any adjournment thereof.
At February 10, 1994, the following beneficial owners held more than
5% of a class of IPL's voting securities:
- ------------------------------------------------------------------------------------
Name and Address of Amount and Nature Percent
Title of Class Beneficial Owner of Beneficial Ownership of Class
- ------------------------------------------------------------------------------------
Common Stock IPALCO Enterprises, Inc. 17,206,630 shares 100
25 Monument Circle
Indianapolis, IN 46204
At February 10, 1994, none of the directors, executive officers or
nominees for director of IPL beneficially owned equity securities of IPL.
DIRECTORS AND NOMINEES
Election of Seventeen Directors
At a meeting of the Board held January 25, 1994 the By-Laws were
amended effective April 20, 1994 to reduce Board membership from 18 to 17
and to approve 17 nominees for election as directors of IPL at its Annual
Meeting of Shareholders to be held April 20, 1994 for terms of one year
each and until their successors are duly elected and qualified. All
nominees currently are members of the Board and all nominees have consented
to serve if elected. The nominees for director and the names, ages, (as of
April 20, 1994), job experience and directorships of such nominees are as
follows:
Joseph D. Barnette, Jr., 54, Chairman and Chief Executive Officer of Banc
One Indiana Corporation (a bank holding company) since January, 1993
and President and Chief Executive Officer of Bank One, Indianapolis,
NA since July, 1990. Prior to that, Mr. Barnette was President and
Chief Executive Officer of Banc One Indiana Corporation (January, 1990
- July, 1990) and President and Chief Operating Officer of Bank One,
Indianapolis, NA (January, 1982 - January, 1990). He is a director of
IPALCO, IWC Resources Corporation, Indianapolis Water Company and
Meridian Insurance Group, Inc. He has been a director of IPL since
January, 1993.
Robert A. Borns, 58, Chairman of Borns Management Corporation (real estate
management), Indianapolis, Indiana. Mr. Borns has held his present
position since 1961 and serves on numerous social and cultural boards,
including the Board of Trustees of Indianapolis Museum of Art. He is
also a director of IPALCO and of Heritage Partners Management, Inc. He
has been a director of IPL since April, 1986 (excluding the period
March 15 to August 23, 1993).
Mitchell E. Daniels, Jr., 45, President, North American Pharmaceutical
Operations, Eli Lilly and Company (pharmaceutical manufacturers),
Indianapolis, Indiana since April 1, 1993. 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 IPALCO and NBD
Bank, N.A. and has been a director of IPL since November, 1989).
Rexford C. Early, 59, 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 director of IPALCO and has been a
director of IPL since August, 1993.
Otto N. Frenzel III, 63, Chairman of the Board of National City Bank, Indiana
Indianapolis, Indiana. Mr. Frenzel has held his present position since
1992. For more than 5 years prior to that time, Mr. Frenzel was Chairman
of the Board of Merchants National Corporation and Vice Chairman of
Merchants National Bank & Trust Company of Indianapolis, Indiana. He is
a director of IPALCO, National City Corporation, American United Life
Insurance Company, Indiana Energy, Inc., Indiana Gas Company, Inc.,
Indianapolis Water Company, Baldwin & Lyons, Inc. and IWC Resources, Inc.
He has been a director of IPL since April, 1977.
Max L. Gibson, 53, Retired July, 1989. For more than five years prior to
retirement, Mr. Gibson was President of Victory Services Corporation
(waste disposal), Terre Haute, Indiana. He is a director of IPALCO, First
Financial Corporation, Terre Haute First National Bank and First State
Bank of Clay County. He has been a director of IPL since August, 1993.
Edwin J. Goss, 67, For more than five years prior to his retirement in
March, 1990, Mr. Goss was the Chairman and Chief Executive Officer of
American States Insurance Company and its subsidiaries, Indianapolis,
Indiana. Mr. Goss continues as a director of these companies. He also
is a director of IPALCO, National City Bank, Indiana and has been a
director of IPL since April, 1985 (excluding the period March 15 to
August 23, 1993).
Dr. Earl B. Herr, Jr., 66, For more than five years prior to his retirement
in December, 1992, Dr. Herr was Executive Vice President of Eli Lilly
and Company (pharmaceutical manufacturers), Indianapolis, Indiana. He
is a director of IPALCO and Lilly Endowment and has been a director of
IPL since April, 1986 (excluding the period March 15 to August 23, 1993).
John R. Hodowal, 49, 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 IPALCO, Bank One,
Indianapolis, NA and Associated Insurance Companies, Inc. He has been
a director of IPL since April, 1984.
Ramon L. Humke, 61, 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 IPALCO, 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 IPL since February, 1990.
Sam H. Jones, 66, 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-Purdue University at
Indianapolis, Methodist Health Foundation, Board of One Hundred Black
Men of Indianapolis and the Administrative Board of Riverside Park
United Methodist Church. He is a director of IPALCO and has been a
director of IPL since June, 1983.
Andre B. Lacy, 54, 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
IPALCO, Ethyl Corporation, Tredegar Industries, Inc., First Colony
Corporation, Patterson Dental Co. and The National Bank of
Indianapolis. He has been a director of IPL since April, 1987.
L. Ben Lytle, 47, President and Chief Executive Officer, Associated Insurance
Companies, Inc. (insurance and financial services), Indianapolis, Indiana.
He assumed his present position in March, 1989. He is a director of
IPALCO, Bank One, Indianapolis, NA and Associated Insurance Companies,
Inc. and its subsidiaries. He has been a director of IPL since April 1992.
Michael S. Maurer, 51, Chairman of the Board of MyStar Communications
Corporation (radio station operations), a position he has held for
more than five years. He is also President and Chief Executive Officer
of Maurer/Shaw Productions, Inc. (theatrical film producer) since
January, 1989 and of IBJ Corporation (newspaper publisher) since
December, 1990. He is also Chairman of the Board of The National Bank
of Indianapolis since December, 1993. Mr. Maurer is President of the
Indianapolis Zoo and is on the boards of various organizations
including the Jewish Community Relations Council, University of
Indianapolis and United Way of Central Indiana. He has been a director
of IPALCO and IPL since January, 1993.
Thomas M. Miller, 64, Chairman of the Board and Chief Executive Officer of
NBD Indiana, Inc. (a bank holding company) and NBD, N.A.,
Indianapolis, Indiana, positions he has held in these and predecessor
companies for more than 5 years. Mr. Miller is a director of IPALCO,
NBD Indiana, Inc., NBD Bancorp, Inc., NBD Bank, N.A., State Life
Insurance Company, Indianapolis Water Company and IWC Resources, Inc.
He has been a director of IPL since April, 1992.
Sallie W. Rowland, 61, Chairman and Chief Executive Officer of The Rowland
Associates, Inc. (a design and space planning 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 of which she is Vice Chairman. She is a director of
IPALCO, NBD Bank, N.A. and Meridian Mutual Insurance Company and is a
member of the Advisory Board of Walker Research. She has been a
director of IPL since April, 1988.
Thomas H. Sams, 52, 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 IPALCO, NBD Bank, N.A. and State Life Insurance
Company. He has been a director of IPL since April, 1986.
Vote Required For Election of Directors
Under Indiana law, directors are elected by plurality vote at a
meeting where a quorum (a majority of shares issued and outstanding) is
present. Shares represented for any purpose are deemed present for quorum
purposes; thus, withheld votes are counted for quorum purposes but
abstentions and broker non-votes are not counted for any purpose.
Procedure To Propose Nominees For Director
IPL will accept timely recommendations by shareholders of proposed
nominees for director who reside in IPL's service area. All such proposals
must be received by IPL's Corporate Secretary not later than January 2 of
any year for consideration at that year's Annual Meeting of Shareholders.
The Executive Committee will review nominees proposed by shareholders in
the same manner as other proposed nominees.
Number of Board Meetings and Attendance
Each director of IPL is elected for a term of one year and until his
or her successor is duly elected and qualified. During the year 1993, the
Board of Directors of IPL held 12 meetings. Its Executive Committee and
Audit Committee held a total of 7 meetings. All directors attended, in the
aggregate, Board meetings and assigned Committee meetings more than 75% of
the time except Mr. Lytle who attended such meetings 73.3% of the time. On
average, directors attended Board and Committee meetings more than 92% of
the time.
Committees of the Board
The Board of Directors of IPL has two standing committees, the
Executive Committee and the Audit Committee. There is no nominating
committee, as such; however, the Executive Committee substantially performs
the functions of such committee. It reviews the qualifications and
suitability of candidates to stand for election to IPL's Board of Directors
and recommends nominees to the Board. 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 4
meetings in 1993 and is currently composed of Mr. Zane G. Todd, Chairman,
and Messrs. Otto N. Frenzel III, Earl B. Herr, Jr., John R. Hodowal, Ramon
L. Humke and Sam H. Jones, members.
The Audit Committee 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, they 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 3 meetings in 1993 and is currently made
up of Mr. Edwin J. Goss, Chairman, and Mrs. Sallie W. Rowland and Messrs.
Joseph D. Barnette, Jr., Robert A. Borns, Rexford C. Early, Andre B. Lacy,
L. Ben Lytle and Thomas M. Miller, members.
Certain Business Relationships
During the year 1993, Acordia, Inc. (``Acordia'') and Anthem
Companies, Inc. (``Anthem'') administered health care programs for IPALCO
and its subsidiaries, including IPL, under contracts that involve payments
to Acordia and Anthem aggregating approximately $14 Million. Mr. Lytle is
Chairman and Chief Executive Officer of Acordia and Anthem, which are
subsidiaries of Associated Insurance Companies, Inc. of which Mr. Lytle
also is President and Chief Executive Officer.
IPL maintained a line of credit during 1993 with National City Bank,
Indiana (``NCB'') of which Mr. Frenzel is Chairman of the Board.
(Unutilized credit lines also were maintained by IPL with Bank One,
Indianapolis, NA and NBD Bank, N.A.) During the year 1993, IPL utilized $13
Million of its $30 Million line of credit with NCB.
COMPENSATION OF EXECUTIVE OFFICERS
Nature and Types of Compensation
The series of tables that follow on succeeding pages disclose all plan
and non-plan compensation awarded to, earned by, or paid to the Chairman of
the Board and Chief Executive Officer (``CEO'') and to the four named
executive officers other than the CEO who are the most highly compensated
key policy-making executive officers of IPL, each of whose total annual
salary and bonus exceeded $100,000 for the year 1993. The tables include a
Summary Compensation Table (Table I), a table showing Option/SAR Grants in
Last Fiscal Year (Table II), an Aggregate Option/SAR Exercises and Fiscal
Year-End Option/SAR Value Tables (Table III) and a table concerning Long-
Term Incentive Plans - Awards in Last Fiscal Year (Table IV).
SUMMARY COMPENSATION TABLE
Long-Term Compensation
Annual Compensation Awards Payouts
------------------------------------ --------------------------
Other Securities
Annual Underlying All Other
Compen- Options/ LTIP Compen-
Name and sation<F1> SARs<F2> Payouts<F3> sation<F4>
Principal Position Year Salary ($) Bonus ($) ($) (#) ($) ($)
- ------------------------------ ---- ---------- --------- --------- ---------- ---------- ----------
John R. Hodowal 1991 $ 362,500 $ 172,112 $ 19,225 -0- -0- $ 8,455
Chairman & CEO 1992 420,907<F5> 165,994 24,134 15,000 $48,800 9,389
1993 424,459 209,672 45,851 105,000 82,350 8,624
Ramon L. Humke 1991 $ 302,917 $ 143,583 $ 42,938 -0- -0- $ 8,303
President & COO 1992 348,925<F5> 137,607 53,617 10,000 $39,867 8,771
1993 351,889 173,827 112,425 60,000 68,250 8,624
John R. Brehm 1991 $ 175,425 $ 55,239 $ 3,205 -0- -0- $ 7,017
Senior Vice President 1992 196,983<F5> 51,748 2,364 5,000 $16,500 7,879
1993 199,822 65,839 6,717 30,000 27,844 7,993
Robert W. Rawlings 1991 $ 124,417 $ 36,309 $ 9,729 6,000 -0- $ 4,977
Senior Vice President 1992 142,052<F5> 37,298 2,633 5,000 -0- 5,682
1993 143,161 47,159 20,483 30,000 $10,725 5,727
Gerald D. Waltz 1991 $ 175,425 $ 55,239 $ 1,850 -0- -0- $ 7,017
Senior Vice President 1992 194,628<F5> 51,069 965 -0- $16,667 7,785
1993 193,415 63,684 23,757 30,000 28,125 7,735
<FN>
<F1> Represents taxes paid by IPALCO and/or IPL on accrued interest and contributions of principal under the Funded
Supplemental Plan. (See ``Pension Plans'')
<F2> No options have stock appreciation rights.
<F3> Payouts shown were made in 1993 for the 3-year LTIP Program ended December 31, 1992.
<F4> Represents 1993 contributions made by company to Trustee of Employees' Thrift Plan.
<F5> Pay periods were changed December 1, 1992 from monthly to bi-weekly resulting in 1992 payouts being greater than
annual salary rates.
TABLE I
OPTION/SAR GRANTS IN LAST FISCAL YEAR
Potential
Realizable Value at
Assumed Annual
Rates of Stock Price
Appreciation
Individual Grants for Option Term
- ------------------------------------------------------------------------------------ ---------------------------
% of
Total
Number of Options/
Securities SARs
Underlying Granted to Exercise
Options/ Employees or Base Expira-
SARs in Fiscal Price<F2> tion
Name Granted<F1> Year ($/Sh) Date <F3> 5% ($) <F3> 10% ($) <F3>
- ---- ---------- ---------- -------- -------- ---------- ------------
John R. Hodowal 105,000 23.6 $38.00 04/26/03 $2,509,290 $6,359,032
Ramon L. Humke 60,000 13.5 38.00 04/26/03 1,433,879 3,113,732
John R. Brehm 30,000 6.8 38.00 04/26/03 716,940 1,816,866
Robert W. Rawlings 30,000 6.8 38.00 04/26/03 716,940 1,816,866
Gerald D. Waltz 30,000 6.8 38.00 04/26/03 716,940 1,816,866
- ------------------------------
<F1> 7,893 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 12 months after the grant date of April
27, 1993; however, incentive stock options expire one day later than expiration date shown. None of the stock
options contains stock appreciation rights.
<F2> Equal to market price on grant date.
<F3> 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. In reality, at February 10, 1994 common stock value had
declined $6.125 per share since grant date resulting in the depreciation of the 105,000-share, the 60,000-share
and the 30,000-share grants of $643,125, $367,500 and $183,750, respectively.
TABLE II
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs at Options/SARs at
FY-End FY-End ($) *
Shares Acquired Exercisable/ Exercisable/
Name On Exercise (#) Value Realized ($) Unexercisable Unexercisable
- ---- --------------- ------------------ --------------- ---------------
John R. Hodowal -0- -0- 50,000(e) $377,500(e)
105,000(u) ----
Ramon L. Humke -0- -0- 70,000(e) $627,500(e)
60,000(u) ----
John R. Brehm -0- -0- 35,000(e) $313,750(e)
30,000(u) ----
Robert W. Rawlings -0- -0- 17,000(e) $105,750(e)
30,000(u) ----
Gerald D. Waltz -0- -0- 30,000(e) $307,500(e)
30,000(u) ----
(e) Exercisable.
(u) Unexercisable.
* Based upon year-end closing market price of $35.50 per share of common stock.
TABLE III
LONG-TERM INCENTIVE PLANS <F1> - AWARDS IN LAST FISCAL YEAR
Estimated Future Payouts
Under Non-Stock Price-Based Plans
-----------------------------------------------------------
Performance
or Other
Period Until
Maturation or Threshold Target <F2><F3> Maximum <F2>
Name Payout ($ or #) ($ or #) ($ or #)
- ---------------- ------------- ----------- --------------- ------------
John R. Hodowal 1994 - 1997 $ -0- $76,403 $152,806
Ramon L. Humke 1994 - 1997 $ -0- 63,340 126,680
John R. Brehm 1994 - 1997 $ -0- 23,979 47,958
Robert W. Rawlings 1994 - 1997 $ -0- 17,179 34,359
Gerald D. Waltz 1994 - 1997 $ -0- 23,210 46,420
- -----------------------------------------
<FN>
<F1> IPALCO's Long-Term Incentive Plan became effective January 1, 1990. Under the Plan, Performance Incentive
Awards (``PI Awards'') amounting to 15% of average base salary over a Performance Period may be earned by
the Chairman, Vice Chairman and the President (10% for other participants) payable after the end of each
Program. (Performance Periods are typically 4-year periods called ``Programs'', although Programs 1 and 2
have 2-year and 3-year Performance Periods, respectively.) The amount of a PI Award, however, may be
increased or decreased by a multiple ranging from 0% to 200% depending upon the quartile ranking for cost
effective service and total return to shareholders that IPALCO has achieved at the end of each Program in
relation to other companies within a pre-determined peer group. Program grants are made each year. The
second Program spanned the 3-year period ended December 31, 1992 for which PI Awards were paid out in 1993
(See Table I). Payouts have not yet been determined for Program 3 that ended December 31, 1993. Program 6
reported in this Table was granted in 1993.
<F2> Based upon 120% of 1993 salary reported in Table I.
<F3> There is no targeted payout under the LTIP. The multiple of 100% was used to calculate the values shown in
this column.
TABLE IV
COMPENSATION OF DIRECTORS
Standard Arrangements
Non-employee directors serving on the Board of IPL are paid an annual
fee of $8,100 plus $450 for each meeting attended; however, those who are
directors of IPALCO and two or more of its subsidiaries, are limited to two
annual fees and two meeting 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 of the Board, all of whom are non-employee
directors, each are paid an annual fee of $3,000 plus $450 for each meeting
attended. The Chairman of this committee receives an additional fee of
$1,500 annually. Members of the Executive and Audit Committees of IPL are
limited to one annual fee and only one meeting fee is paid to Audit
Committee members of two or more companies when meetings are held jointly
or follow one another. Directors who are also officers of IPL receive no
director fees.
Other Arrangements
After his retirement as an officer on May 1, 1989, Mr. Zane G. Todd,
Chairman of the Executive Committee of IPL, entered into a Consulting
Services Agreement with IPALCO and its subsidiaries under which he is
required to confer with, supply information to, and cooperate with the
management of such companies in respect of any matter he handled or had
supervisory control over while he was an employee. During the year ended
December 31, 1993, Mr. Todd received fees in the aggregate amount of
$57,000 and expense reimbursements totaling $27,142 in consideration for
the consulting services he provided under such Agreement. In addition,
contributions to principal, accrued interest on principal and taxes
assessed on such contributions and accrued interest were paid to Mr. Todd
or to the Trust Fund of the Supplemental Retirement Plan and Trust
Agreement for a Select Group of Management Employees (the ``Funded
Supplemental Plan'') in the aggregate amount of $32,295 for the year ended
December 31, 1993.
BOARD COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
Compensation Policies Relating Generally to Executive Officers
The Compensation Committee of the Board of Directors (the
``Compensation Committee''), in consultation with its outside advisor,
establishes the compensation policies of IPALCO Enterprises, Inc. and its
subsidiaries (``IPALCO'') with regard to all officers. The Compensation
Committee establishes executive officers' base salary levels; makes stock
option grants; and reviews and approves the annual and long-term cash
incentive plans. The Compensation Committee also recommends to the Board of
Directors the adoption or amendment of compensation plans for officers,
including the named executive officers. The Compensation Committee is made
up of six 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 pay, with a significant
portion of total direct compensation being dependent upon measurable
performance objectives. The compensation program for executive and certain
other officers has four basic components: base salary, annual incentive
plan, long-term incentive plan, and stock options.
Base Salary
The Compensation Committee targeted and established the 1993 base
salary for officers, including the named executive officers, at the median
levels for similar positions within the utility industry, and where such
positions are also found commonly in general industry, at a level
approximating one-half the difference between the utility industry and
general industry. These levels of base salary are based on companies with
comparable revenues and costs (the ``Peer Group'') and on the Committee's
subjective evaluations of each executive officer's performance against
established individual expectations and objectives. For 1993, base salary
increases for all officers, recognizing individual performance, averaged 4.7%.
The Peer Group, which also reflects general industry, has a broader
representation of electric power utilities than the Dow Jones Electric
Utilities Index used in the Performance Graph. The Committee believes the
Peer Group represents an appropriate Comparative Framework for
compensation, since the competition for executive talent is not limited to
companies included in the Dow Index. All of the Companies comprising the
Dow Jones Electric Utilities Index are also in the Peer Group.
Annual Incentive Plan
The IPALCO Annual Incentive Plan, designed to achieve improvement and
attain higher performance, is dependent upon performance in four equally
weighted performance measures: net income, customer service, budget
compliance, and productivity. All participants, including the named
executive officers, are measured against target goals which are established
by the Compensation Committee and announced to participants at the
beginning of each year. Performance above or below target goals results in
proportionately higher or lower awards; however, if a threshold net income
goal is not reached, no payout is made. Of the four performance measures
previously mentioned, one exceeded the maximum goal, and three exceeded the
target goal. As a result, payouts to the named executive officers amounted
to $567,268 for 1993. (See Table I above)
Long-Term Incentive Plan
The Long-Term Incentive Plan, which was adopted January 1, 1990, is
designed to focus the attention of designated officers', including the
named executive officers', on key long-term corporate objectives. The long-
term plan measures total return to shareholders and cost effective service
(defined as net income as a percent of operating revenues plus other
income). Awards are based upon IPALCO's ranking among a predetermined group
of 17 investor owned utility companies (the ``LTIP Group'') over a four-
year performance period which began in 1990 (two-year and three-year
programs were utilized in the past two years).
The Committee believes the LTIP Group companies are similar to IPALCO
in terms of revenue size and mix, power generation sources, regulatory
environment, and value of market capitalization, and thus represent an
appropriate comparator group for this purpose. IPALCO continues to perform
within the top quartile of this group in measuring cost effective service
and in the second quartile in measuring total return to shareholders. Thus,
long-term awards for the three-year period 1990-1992 resulted in payouts in
1993 to the named executive officers totaling $220,969. Payouts for the
four-year period 1990-1993 have not yet been determined.
The Committee also made awards under the Stock Option Plan, as
described below. The ``mix'' between stock options and long-term cash
awards is subjectively determined by the Committee, based on the comparable
mix of awards in the Peer Group.
Stock Options
The Compensation Committee strongly believes management is in 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.
In early 1993, the Compensation Committee assessed the competitiveness
of IPALCO's total compensation (base salary + annual incentive + long-term
incentives) relative to the Peer Group, focusing expressly on the relative
value of IPALCO's long-term incentive levels (Long-Term Incentive Plan
described above + stock options). Based upon the Compensation Committee's
consideration of previous stock option grants and its desire to maintain
long-term incentive compensation opportunities at competitive levels,
officers, including the named executive officers, were granted stock
options on April 27, 1993, in varying amounts at the exercise price of
$38.00 per share, vesting in substantially equal installments over the next
three (3) years.
Basis For Chief Executive Officer's Compensation
The Chief Executive Officer's compensation is specifically designed to
provide a strong and direct link between IPALCO performance and pay. The
Chief Executive Officer's total compensation is set in relation to the
median total compensation of chief executive officers in the Peer Group and
the Compensation Committee's assessment of his individual performance.
During the first quarter of each year, the Compensation Committee
thoroughly reviews the Chief Executive Officer's individual performance in
the preceding year, including management team development and IPALCO's
Strategic Plan.
Based upon his performance and that of IPALCO in 1992, the Chief
Executive Officer's base salary was increased to $432,900 effective May 1,
1993. The CEO also received an annual bonus for 1993 of $209,672. As
discussed above, this bonus was based on the fact that, as to one of the
performance goals, the maximum was exceeded and, as to the other three, the
targets were exceeded.
In addition, the Committee granted the Chief Executive Officer stock
options at the exercise price of $38.00 per share, vesting in three 35,000-
share installments over the next three years and an LTIP award, as
described in the LTIP award table.
In total, approximately 38 percent of the Chief Executive Officer's
1993 total direct compensation was variable. Prospectively, it is expected
that the relationship between fixed and variable portions of the Chief
Executive Officer's total compensation will remain relatively the same.
The Compensation Committee of the Board of
Directors of IPALCO Enterprises, Inc.
Otto N. Frenzel III, Chairman;
Mitchell E. Daniels, Jr.
Max L. Gibson
Dr. Earl B. Herr, Jr.
Michael S. Maurer
Thomas H. Sams, members.
PERFORMANCE GRAPH
-----------------
(graph illustrating cumulative total returns as listed below)
CUMULATIVE TOTAL RETURN ASSUMING DIVIDEND REINVESTMENT
- ------------------------------------------------------------------------
1988 1989 1990 1991 1992 1993
--------------------------------------------------
IPALCO <F1> 100 124 136 180 206 214
DJ ELEC UTIL <F1> 100 131 133 173 185 206
S & P 500 <F2> 100 132 128 166 179 197
<FN>
Source:
<F1> Dow Jones Total Return Indexes
<F2> Standard and Poors Compustat Services, Inc.
TABLE V
Performance Graph
The Performance Graph (Table V) on the preceding page plots the total
cumulative return that shareholders of IPALCO received (solid line) during
the 5-year period ended December 31, 1993, compared with the total
cumulative return to shareholders of companies comprising the Dow Jones
Electric Utilities Index (broken line) and the Standard and Poors 500 Index
(wavy line). The Graph reflects IPALCO's superior return in years 1991,
1992 and 1993 referenced in the foregoing Compensation Committee Report as
one of the bases for the Chief Executive Officer's compensation disclosed
in preceeding sections of this statement.
Pension Plans
Table VI below illustrates the combined annual retirement benefits
computed on a straight-life annuity basis (less Social Security) that is
payable under the Base Retirement Plan and the Funded Supplemental Plan
(assuming continuous employment to age 65) to named executive officers
having the remuneration and years of service shown.
PENSION PLAN TABLE <F1>
Remuneration Years of Service
- ------------ --------------------------------------------------------------------
15 20 25 30 35 40
-------- -------- -------- -------- -------- --------
$150,000 $ 97,500 $ 97,500 $ 97,500 $ 97,500 $ 97,500 $ 97,500
200,000 130,000 130,000 130,000 130,000 130,000 130,000
250,000 162,500 162,500 162,500 162,500 162,500 162,500
300,000 195,000 195,000 195,000 195,000 195,000 195,000
350,000 227,500 227,500 227,500 227,500 227,500 227,500
400,000 260,000 260,000 260,000 260,000 260,000 260,000
450,000 292,500 292,500 292,500 292,500 292,500 292,500
500,000 325,000 325,000 325,000 325,000 325,000 325,000
<FN>
<F1>) 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 Plan portion of the combined
amounts have been shown without adjustment for income taxes. The Funded
Supplemental Plan portion reflects the change in that Plan in 1993 to eliminate
the offset for Social Security.
TABLE VI
IPL's Employees' Retirement Plan (the ``Base Retirement 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'' but excludes ``Bonus'' and ``Other Compensation'', annual or
otherwise, as those terms are used in 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 - 25, Mr. Humke - 4, Mr. Brehm - 18,
Mr. Rawlings - 29, and Mr. Waltz - 33.
The Funded Supplemental Plan referred to above is applicable to the
named executive officers and, at reduced benefits, to all other officers of
IPL. Contributions and accrued interest credited during 1993 to the
accounts of Messrs. Hodowal, Humke, Brehm, Rawlings and Waltz amounted to
$51,206, $134,629, $7,554, $27,820 and $28,676, respectively (in addition
to the federal, state and local income tax payments reflected in Table I).
Contributions are based on actuarial assessments of benefits projected to
accrue to such officers under the Funded Supplemental 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
IPL has employment contracts with Messrs. Hodowal and Humke which
provide for an indefinite term that is convertible into a fixed 3-year term
upon notice. Such contracts terminate upon death, total disability or
retirement. Should they be terminated without ``cause'' or resign for
``good reason'' (as those terms are defined in the contract), they would
continue to receive their Salary as that term is used in Table I for up to
3 years thereafter, less any severance payments received from other
agreements.
All Officers of IPL have Termination Benefits Agreements, dated as of
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
exceeding limits of Internal Revenue Code 280G), if IPL or IPALCO undergoes
an ``acquisition of control'' while the agreement is in effect and if,
within 3 years after an acquisition of control, any such officer is
terminated without ``cause'' or resigns for ``good reason'', as those terms
are therein defined.
A Benefit Protection Fund and Trust Agreement 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.
By order of the Board of Directors.
INDIANAPOLIS POWER & LIGHT COMPANY
By: MARCUS E. WOODS, Secretary
Indianapolis, Indiana
March 17, 1994
- ---------------------------------------------------------------------------
A copy of the 1993 Annual Report to Shareholders of IPALCO and its
subsidiaries, including IPL, was sent Third Class mail on or about March 8,
1994 to each IPL Shareholder of record at the close of business on the
record date for the 1994 Annual Meeting of Shareholders.