Item 11. Executive Compensation
EXECUTIVE COMPENSATION AND OTHER INFORMATION
COMPENSATION
The following tabulation shows for the fiscal years ended September 30, 1997,
1998 and 1999, the compensation paid by the Company and its subsidiaries to each
of the six most highly compensated executive officers of the Company
(considering for this purpose Mr. Baker and Mr. Hewitt, who were executive
officers of Indiana Gas during the past fiscal year, to be executive officers of
the Company) in all capacities in which they served.
Summary Compensation Table
(a) (b) (c) (d) (e) (h) (i)
Long-Term
Compensation All Other
Annual Compensation Payouts Compensation
----------------------------------------------------------- ------------------- ---------------
Other Annual
Name and Principal Position in Compensation (2) LTIP Payouts (3)
Group Year Salary Bonus (1) (4)
- ---------------------------------- ---------------------- -------------------------------- ------------------- -------------------
L. A. Ferger, 1997 $396,692 $ 222,577 $ 55,052 $ 297,232 $39,225
Chairman and Chief Executive 1998 408,481 238,015 48,850 313,468 35,195
Officer (5) 1999 323,961 293,569 42,157 267,257 37,016
Niel C. Ellerbrook, President 1997 217,923 89,271 21,050 114,419 21,117
and Chief Operating Officer (6) 1998 284,054 107,508 19,658 0 21,053
1999 339,715 174,132 19,421 215,699 23,112
Paul T. Baker, 1997 257,785 118,561 20,134 99,068 28,991
Executive V.P. and Chief 1998 260,000 123,881 18,668 0 26,791
Operating Officer, Indiana Gas 1999 263,577 125,663 18,018 186,760 26,457
Anthony E. Ard, 1997 147,477 68,485 10,678 20,037
Sr. V.P. - Corporate Affairs 1998 149,304 71,526 9,421 58,102 19,068
and Secretary 1999 161,881 71,206 8,667 0 20,409
109,551
Timothy M. Hewitt, 1997 136,977 50,510 7,577 14,662
V.P. - Operations and 1998 143,175 53,772 6,810 41,739 15,243
Engineering, Indiana Gas 1999 152,154 54,853 6,407 0 16,871
78,667
Carl L. Chapman, 1997 0 62,519 12,557 81,664 0
Sr. V.P. & CFO 1998 87,115 0 9,768 0 7,406
President, Investments (7) 1999 207,885 28,500 9,965 153,932 18,695
(1) The amounts shown in this column are payments under the Annual Management
Incentive Plan. Amounts paid in any fiscal year are attributable to the
Company's performance in the prior fiscal year. The following payments (in
thousands) were earned in fiscal year 1999 and have been determined and
approved for distribution by the Company's compensation committee: L.A.
Ferger ($ 227);N. C. Ellerbrook ($204); Paul T. Baker ($ 123); Anthony E.
Ard ($ 77); Timothy M. Hewitt ($ 56) and, Carl L. Chapman ($ 120). These
payments will be shown in next year's summary compensation tables as fiscal
year 2000 Bonus. With the exception of the Chief Executive Officer, these
payments were determined based upon the company's financial performance as
determined by the consolidated return on equity relative to a peer group of
companies, and, with the exception of the Chief Executive Officer, the
achievement of individual performance objectives.
(2) The amounts shown in this column are dividends paid on restricted shares
issued under the Stock Plan relating to "Long-Term Incentive Compensation".
(3) The amounts shown in this column represent the value of shares issued under
the Executive Restricted Stock Plan (Stock Plan) and for which restrictions
were lifted in each of those fiscal years. For instance, the amounts shown
for fiscal year 1997 represent the value of one-third of the Third
Measuring Period shares, including the performance grant, issued under the
Stock Plan and for which restrictions were lifted as of September 30, 1997.
For fiscal year 1998, in contemplation of additional changes to the Stock
Plan, the board of directors approved an amendment to the Stock Plan to
postpone the lapsing of the restrictions on shares from September 30, 1998
until February 1, 1999. With the exception of L. A. Ferger, the executive
officers consented to the postponement of the lapsing of restrictions on
their respective shares; consequently, after 1998 this column only reflects
a value for the issuance of shares to Mr. Ferger under the Stock Plan.
After the lifting of those restrictions, the executive officers, as a
group, held 75,914 restricted shares, with an aggregate market value of
those shares as of that date of $1,522,835. Those shares continue to be
subject to restrictions imposed by the Stock Plan, and they represent
one-third of the initial grant of the Fourth Measuring Period shares, and
all of the initial grants of the Fifth and Sixth Measuring Periods. The
number and value of restricted shares held by each executive officer on
September 30, 1999, follows: L. A. Ferger - 31,528 shares, $632,452; Niel
C. Ellerbrook - 14,264 shares, $286,136; Paul T. Baker - 13,630 shares,
$273,418; Anthony E. Ard - 5,971 shares, $119,778; Timothy M. Hewitt -
4,484 shares, $89,949; and Carl L. Chapman - 6,037 shares, $121,102.
(4) The amounts shown in this column are Company contributions to the
Retirement Savings Plan and the dollar value of insurance premiums paid by,
or on behalf of, the Company and its subsidiaries with respect to
split-dollar life insurance for the benefit of executive officers.
(5) Mr. Ferger retired as Chief Executive Officer of the company and Indiana
Gas on May 31, 1999. He continues in his position as Chairman of the Board
of Directors Indiana Energy, Inc., Indiana Gas Company, Inc. and IEI
Investments, Inc..
(6) Mr. Ellerbrook was elected President and Chief Executive Officer of the
Company and Indiana Gas effective June 1, 1999.
(7) Mr. Chapman's compensation reflected in the table for fiscal year 1997
consists of compensation earned prior to, but paid in fiscal year 1997
(column d), dividends received on restricted stock (column e) and the
lifting of restrictions on stock previously granted (column h). Mr.
Chapman's compensation reflected in the table for fiscal year 1998, began
on May 1, 1998, when he ceased his employment with ProLiance and commenced
full-time employment as President of Investments.
LONG-TERM INCENTIVE PLAN AWARDS IN LAST FISCAL YEAR
Estimated Future Payouts Under Non-Stock
Price-Based Plans
--------------------------------------------------
(a) (b) (c) (d) (e) (f)
Performance or Other
Periods Until Target
Number of Shares, Maturation or Payout Threshold Number of Maximum Number of
Name and Principal Position in Units or Other (2) Number of Shares Shares (5)
Group Rights (1) Shares (3) (4)
- ------------------------------------ --------------------- ---------------------- -------------- -------------- --------------------
L. A. Ferger,
Chairman and Chief Executive
Officer 3,664 - 0 3,664 7,328
Niel C. Ellerbrook,
President and Chief Executive
Officer 2,587 - 0 2,587 5,174
Paul T. Baker,
Executive V.P. and Chief Operating
Officer, Indiana Gas 1,681 - 0 1,681 3,362
Anthony E. Ard,
Sr. V.P. - Corporate Affairs and
Secretary 668 - 0 668 1,336
Timothy M. Hewitt,
V. P. - Operations and
Engineering, Indiana Gas 625 - 0 625 1,250
Carl L. Chapman,
Sr. V.P. & CFO,
President, Investments 2,457 - 0 2,457 4,914
(1) This column shows the restricted shares awarded during fiscal year 1999
under the Stock Plan. The market value of the shares on the dates of the
grants is determined according to a formula in the Stock Plan based on an
average price over a period of time preceding the grant. Dividends are paid
directly to the holders of the stock. Included is the initial grant of
shares for the Sixth Measuring Period.
(2) The granting of additional shares, if any, and the application of
forfeiture provisions depends upon certain measurements of the Company's
total return to shareholders in comparison to the total return to
shareholders of a predetermined group of comparable companies.
(3) The Sixth Measuring Period initial grant shares, which are included in the
total number of shares shown in column (b) and are also set forth in column
(e), are subject to forfeiture. If the Company's performance compared to
the peer group (peer group) during this measuring period places it in the
bottom quartile, the executive officers will forfeit all of the shares
granted for this period. For fiscal year, 1999, companies in the peer group
were as follows: AGL Resources Inc., Atmos Energy Corp., Cascade Natural
Gas Corp., CTG Resources, Inc., Eastern Enterprises, Energen Corp., Laclede
Gas Co., MCN Energy Group, Inc. (formerly MCN Corp.), National Fuel gas
Co., New Jersey Resources Corp., NICOR, Inc., NW Natural, NUI Corp.,
Pennsylvania Enterprises, Inc., Peoples Energy Corp., Piedmont Natural Gas
Co. Inc., Public Service Co. of North Carolina, Inc., South Jersey
Industries, Inc., SEMCO Energy, Inc., Southern Union Co., Southwest Gas
Corp., Southwestern Energy Co., UGI Corp., Washington Gas Light Co. and
WICOR, Inc. In fiscal year 1999, Bay State Gas Co. was removed from the
peer group, as it was merged out of existence. The companies to be included
in the peer group were determined by one of the company's investment
bankers and approved by the company's Compensation Committee.
(4) The Sixth Measuring Period initial grant shares, which are the same as the
total number of shares in column (b) are presented in this column. If the
Company's performance compared to the peer group during this measuring
period places it in the middle two quartiles, these shares will vest.
(5) Under the Stock Plan, if the Company's performance compared to the peer
group during the Sixth Measuring Period places it in the top quartile, an
additional performance grant equal to the original Sixth Measuring Period
grant will be made. In that event, the shares shown in column (e) will be
doubled.
LONG TERM INCENTIVE COMPENSATION
The purpose of the Stock Plan is to retain and motivate the Company's principal
officers and to increase their incentive to work toward the attainment of the
Company's long-term growth and profit objectives by providing them with a means
of acquiring or increasing their proprietary interests. Under the Stock Plan,
the compensation committee recommends to the board of directors, and the
non-employee directors determine the executive officers, as well as other
principal officers, to whom grants will be made and the percentage of each
officers base salary to be used for determining the number of shares to be
granted.
To be eligible for a grant, a principal must consent in writing to observe the
restrictions imposed on the shares. The shares may not be sold, transferred,
pledged, or assigned until restrictions are lifted. For the three-year grants
that were provided under the Stock Plan through the end of fiscal year 1997, the
restrictions are lifted in 33 1/3 percent increments on the fourth, fifth and
sixth anniversaries of the calendar day immediately preceding the first calendar
day of the measuring period. On the completion of the merger with SIGCORP, as
discussed in Note 2 to the Consolidated Financial Statements, restrictions on
shares granted under the Stock Plan will lift.
The granting of additional shares, if any, and the application of the forfeiture
provisions, depends upon two primary criteria: (i) certain measurements of the
total return of the Company's shareholders in comparison to the total return of
shareholders of the companies in the peer group: and (ii) the continued
employment of the officer during the period of the restriction.
Effective October 1, 1997, the Stock Plan was amended to provide that grants
would be provided on an annual basis instead of every three years. To reflect
the change from three-year grants, the percentage of the participant's annual
salary that is used to determine the grant is no longer subject to a multiplier
of three. Although grants will still be subject to a three year total return
performance measuring period, all of the restrictions will be lifted on the
fourth anniversary of the calendar day immediately preceding the first calendar
day of the measuring period applicable to that grant.
RETIREMENT SAVINGS PLAN
During the past fiscal year, the Company sponsored the Retirement Savings Plan,
which covers both bargaining and non-bargaining employees. In general, the
Savings Plan permits participants to elect to have not more than 19 percent of
their qualified compensation (subject to certain maximums imposed on highly
compensated employees by the Internal Revenue Code) invested on a tax-deferred
basis in shares of the Company's Common Stock or various investment funds.
Non-bargaining participants in the Savings Plan have matching Company
contributions made to the plan on their behalf equal to 100 percent of their
contributions not in excess of 6 percent of their individual redirected
compensation.
The Summary Compensation Table shows the value of contributions made to the plan
for executive officers in the column marked "All Other Compensation."
RETIREMENT PLANS
During the past fiscal year, the Company and Indiana Gas each sponsored a
defined benefit pension plan covering full-time employees of the Company and
certain of its subsidiaries, and of Indiana Gas, respectively, who meet certain
age and service requirements. The Company's plan covers salaried employees,
including executive officers, and provides fixed benefits at normal retirement
age based upon compensation and length of service, the costs of which are fully
paid by the employer and are computed on an actuarial basis. The pension plan
also provides for benefits upon death, disability and early retirement under
conditions specified therein. The remuneration covered by this plan includes all
compensation for regular work periods (excluding overtime, bonuses and other
forms of additional compensation).
On January 1, 1999, this plan was converted to a cash balance pension plan which
provides participants the opportunity to receive lump sum benefits in lieu of
fixed monthly benefits. The amount of the lump sum benefit is based on annual
accruals which relate to the participant's compensation. In order to ease the
transition of the plan conversion, the plan has special grandfather rules
applicable to participants at certain service levels and ages to avoid any
reduction in their benefits under the plan.
During the past fiscal year, the Company had a supplemental pension plan
covering the principal officers of the Company and its subsidiaries. The
supplemental pension plan provides fixed benefits at normal retirement age based
upon compensation and is computed on an actuarial basis. The supplemental
pension plan also provides for benefits upon death, disability and early
retirement under conditions specified therein, including service requirements.
This supplemental pension plan also provides a reduced benefit to a participant
who voluntarily terminates his employment with a participating employer (which
may consist of the Company or one or more of its subsidiaries) before normal
retirement age (65), but following a change in control of the Company. The
remuneration covered by the supplemental pension plan includes all compensation
for regular work periods (including incentive payments and other forms of
additional compensation).
Upon retirement at or after age 65, any participant in the supplemental pension
plan will, in general, be entitled to an annual pension for life which, when
added to primary Social Security benefits, defined benefit pension plan
benefits, described above, and benefits under the Retirement Savings Plan
attributable to contributions by participants' employers, will equal
approximately 65 percent of the participant's average annual compensation during
the 60 consecutive calendar months immediately preceding the participant's
retirement date. The amounts paid under the supplemental pension plan are
unfunded and are paid from the general assets of the Company.
The following table illustrates the estimated normal annual retirement benefits
payable to a covered participant retiring at age 65 under the supplemental
pension plan and under the defined benefit plan based on the specified
remuneration and under the Retirement Savings Plan attributable to contributions
made by the Company and, as pertinent, one or more of its subsidiaries. The
compensation included in the Summary Compensation Table under salary and
payments under the annual Incentive Plan qualifies as remuneration for purposes
of these plans. The amounts shown do not reflect reductions, which would result
from joint and survivor elections.
Pension Table
15 or More Years of Service (1)
Remuneration Level Amount of Benefits (2)
$125,000 $ 81,250
150,000 97,500
175,000 113,750
200,000 130,000
225,000 146,250
250,000 162,500
300,000 195,000
350,000 227,500
400,000 260,000
450,000 292,500
500,000 325,000
(1) The compensation covered by the plans includes the salary and incentive
payments shown on the Summary Compensation Table. Years of service are not
used in calculating the benefit amount under the Unfunded Supplemental
Retirement Plan. The amounts shown above are offset by Social Security and
benefits under the Retirement Savings Plan attributable to contributions
made by the Company and, as pertinent, one or more of its subsidiaries.
(2) Although the benefit attributable to the Savings Plan may be paid in a
single lump sum payment, it has been converted to an annual benefit for
purposes of this table. The estimated aggregate annual pension plan benefit
may be greater than the amounts in the table to the extent that the Savings
Plan benefit, after conversion to an annual benefit and when added to the
annual benefit under the applicable defined benefit plan, exceeds the
amount specified in the table. Since the Savings Plan has only been in
effect for a few years, it is unlikely in the near future that the
aggregated Savings Plan benefit and defined benefit plan benefits will
exceed the amount specified in the table.
EMPLOYMENT AND TERMINATION BENEFITS AGREEMENTS
The Company, with approval of the board of directors, has entered into three
year employment agreements with the executive officers listed in the Summary
Compensation Table. Each agreement continues unless notice of termination is
given be either party, in which event the agreement will terminate approximately
three years from the date of notice. The period between notice and termination
is defined as an "employment period" under each agreement. Each officer is
entitled to compensation consisting of the annual aggregate base salary or
salaries, and such additional compensation as the board determines throughout
the employment period. Each agreement is also subject to termination in the
event of disability, death, or voluntary retirement by the individual or his
termination for cause.
There is also additional termination benefits payable to the executives in the
event of their termination for reasons other than disability, death, voluntary
retirement or termination for cause. These termination benefits are payable
under the following conditions if the employment of an executive is terminated
during the employment period:
The Company terminates the employment of the executive for any
reason (other than for cause, death, the executive's attainment of
age 65, or the executive's disability): or
The executive voluntary terminates his employment for good reason
(as defined below): or
The executive voluntarily terminates his employment without reason
during the thirty day period immediately following the first
anniversary of an acquisition of control of the Company.
For purposes of the employment agreements, the term "good reason" before an
acquisition of control means a material breach of the employment agreement by
the Company. After an acquisition of control, the term "good reason" means any
material change in the terms of the executive's employment with the Company.
The benefits payable to the executive upon the early termination of the
employment period include a lump sum payment of the remaining salary payable to
the executive if he continued his employment for the duration of the employment
period, a minimum bonus or bonuses (determined based on his highest bonus
payable to the executive during the immediately preceding three years) for each
of the years, or portion thereof, remaining in the employment period and the
actuarial equivalent of any benefits which will not be earned by the executive
as a result of his termination before the completion of the employment period,
including benefits under nonqualified retirement and welfare plans maintained by
the Company. In addition, any restricted stock held by the executive will become
fully vested. Finally to the extent that payment of the benefits would result in
an excise tax payable by the executive under Section 280G of the Internal
Revenue Code, the Company will make an additional payment to the executive to
offset completely the effect of the excise tax.
The benefits described above apply to all executive officers listed in the
Summary Compensation Table other than Timothy M. Hewitt. Mr. Hewitt's benefits
are predicated upon a 24 month employment period versus a 36 month period. In
addition, Mr. Hewitt is not entitled to the gross-up payment, if applicable, for
any excise tax payable under the Internal revenue Code Section 280G.