<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[X] Preliminary proxy statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
ILLINOIS POWER COMPANY
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
ILLINOIS POWER COMPANY
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- --------------------------------------------------------------------------------
(3) Filing party:
- --------------------------------------------------------------------------------
(4) Date filed:
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<PAGE> 2
OFFER TO PURCHASE AND PROXY STATEMENT
ILLINOVA CORPORATION
OFFER TO PURCHASE FOR CASH
ANY AND ALL OUTSTANDING SHARES OF THE FOLLOWING SERIES OF
CUMULATIVE PREFERRED STOCK OF
ILLINOIS POWER COMPANY
283,290 SHARES, CUMULATIVE PREFERRED STOCK, 4.08% SERIES AT A PURCHASE PRICE OF
$ PER SHARE, CUSIP NUMBER 452092 20 8
167,720 SHARES, CUMULATIVE PREFERRED STOCK, 4.20% SERIES AT A PURCHASE PRICE OF
$ PER SHARE, CUSIP NUMBER 452092 30 7
136,000 SHARES, CUMULATIVE PREFERRED STOCK, 4.26% SERIES AT A PURCHASE PRICE OF
$ PER SHARE, CUSIP NUMBER 452092 40 6
134,400 SHARES, CUMULATIVE PREFERRED STOCK, 4.42% SERIES AT A PURCHASE PRICE OF
$ PER SHARE, CUSIP NUMBER 452092 50 5
176,000 SHARES, CUMULATIVE PREFERRED STOCK, 4.70% SERIES AT A PURCHASE PRICE OF
$ PER SHARE, CUSIP NUMBER 452092 60 4
241,700 SHARES, CUMULATIVE PREFERRED STOCK, 7.75% SERIES AT A PURCHASE PRICE OF
$ PER SHARE, CUSIP NUMBER 452092 79 4
-------------------------------------
ILLINOIS POWER COMPANY
PROXY STATEMENT
WITH RESPECT TO ITS COMMON STOCK AND CUMULATIVE PREFERRED STOCK
-------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY
TIME, ON [EXPIRATION DATE], UNLESS THE OFFER IS EXTENDED (THE "EXPIRATION
DATE").
Illinova Corporation, an Illinois corporation ("ILN"), invites the holders
of each series of cumulative preferred stock (par value $50 per share) listed
above (each a "Series of Preferred," and the holder thereof a "Preferred
Shareholder") of Illinois Power Company, an Illinois corporation and direct
utility subsidiary of ILN ("IPC"), to tender any and all of their shares of a
Series of Preferred ("Shares") for purchase at the purchase price per Share
listed above (the "Purchase Price"), net to the seller in cash, upon the terms
and subject to the conditions set forth in this Offer to Purchase and Proxy
Statement and in the accompanying Letter of Transmittal and Proxy (which
together constitute the "Offer"). ILN will purchase any and all Shares validly
tendered and not withdrawn, upon the terms and subject to the conditions of the
Offer. See "Terms of the Offer -- Certain Conditions of the Offer" and "Terms of
the Offer -- Extension of Tender Period; Termination; Amendments."
THE OFFER FOR A SERIES OF PREFERRED IS NOT CONDITIONED UPON ANY MINIMUM
NUMBER OF SHARES OF SUCH SERIES OF PREFERRED BEING TENDERED AND IS INDEPENDENT
OF THE OFFER FOR ANY OTHER SERIES OF PREFERRED. THE OFFER, HOWEVER, IS
CONDITIONED UPON, AMONG OTHER THINGS, THE PROPOSED AMENDMENT, AS DESCRIBED
BELOW, BEING ADOPTED AT THE SPECIAL MEETING (AS DEFINED BELOW). SEE "TERMS OF
THE OFFER -- CERTAIN CONDITIONS OF THE OFFER."
Concurrently with the Offer, the Board of Directors of IPC is soliciting
proxies for use at a special meeting of shareholders of IPC to be held at IPC's
principal office, 500 South 27th Street, Decatur, Illinois 62525, on [EXPIRATION
DATE] at 4:30 p.m., New York City time, or any adjournment or postponement of
such meeting (the "Special Meeting"). The purpose of the Special Meeting is to
consider an amendment (the "Proposed Amendment") to IPC's Amended and Restated
Articles of Incorporation (the "Articles") which would remove a provision of the
Articles that limits IPC's ability to issue or assume unsecured indebtedness
(the "Debt Limitation Provision"). WHILE PREFERRED SHAREHOLDERS WHO WISH TO
TENDER THEIR SHARES PURSUANT TO THE OFFER ARE NOT REQUIRED TO VOTE IN FAVOR OF
THE PROPOSED AMENDMENT, THE OFFER IS CONDITIONED UPON THE PROPOSED AMENDMENT
BEING ADOPTED AT THE SPECIAL MEETING. IN ADDITION, PREFERRED SHAREHOLDERS HAVE
THE RIGHT TO VOTE FOR THE PROPOSED AMENDMENT REGARDLESS OF WHETHER THEY TENDER
THEIR SHARES. IF THE PROPOSED AMENDMENT IS ADOPTED AT THE SPECIAL MEETING, IPC
WILL MAKE A SPECIAL CASH PAYMENT (AS DEFINED HEREIN) IN THE AMOUNT OF $ PER
SHARE TO EACH PREFERRED SHAREHOLDER WHO VOTED IN FAVOR OF THE PROPOSED
AMENDMENT, PROVIDED THAT SUCH SHARES HAVE NOT BEEN TENDERED PURSUANT TO THE
OFFER. THOSE PREFERRED SHAREHOLDERS WHO VALIDLY TENDER THEIR SHARES WILL BE
ENTITLED ONLY TO THE PURCHASE PRICE PER SHARE LISTED ABOVE.
-------------------------------------
ILN will pay to a Soliciting Dealer (as defined herein) a solicitation fee
for Shares tendered, accepted for payment and paid for pursuant to the Offer,
subject to certain conditions. See "Fees and Expenses Associated with the
Offer."
-------------------------------------
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION (THE "SEC") NOR HAS THE SEC PASSED UPON THE FAIRNESS OR
MERITS OF THIS TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION
CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
-------------------------------------
NEITHER ILN, IPC, THEIR RESPECTIVE BOARDS OF DIRECTORS, NOR ANY OF THEIR
RESPECTIVE OFFICERS MAKES ANY RECOMMENDATION TO ANY PREFERRED SHAREHOLDER AS TO
WHETHER TO TENDER ANY OR ALL SHARES. EACH PREFERRED SHAREHOLDER MUST MAKE HIS OR
HER OWN DECISION AS TO WHETHER TO TENDER SHARES AND, IF SO, HOW MANY SHARES TO
TENDER.
-------------------------------------
IPC'S BOARD OF DIRECTORS RECOMMENDS VOTING FOR THE PROPOSED AMENDMENT.
-------------------------------------
This Offer to Purchase and Proxy Statement is first being mailed on or about
[STATEMENT DATE] to Preferred Shareholders of record on [RECORD DATE].
IPC has declared the regular quarterly dividend on each Series of Preferred
to be paid on May 1, 1998 (the "May 1998 Dividend") to holders of record as of
the close of business on April 9, 1998. A tender and purchase of Shares pursuant
to the Offer will not deprive a Preferred Shareholder of his or her right to
receive the May 1998 Dividend on his or her Shares held of record as of the
close of business on April 9, 1998, regardless of whether such Preferred
Shareholder tenders his or her Shares in the Offer prior to that date. Tendering
Preferred Shareholders will not be entitled to any dividends in respect of any
dividend period (or any portion thereof) after May 1, 1998.
Each Series of Preferred is traded on the New York Stock Exchange, Inc. (the
"NYSE"), except the 7.75% Series which trades in the over-the-counter market
(the "OTC"). On [LAST SALE DATE REFERENCE], the last reported sales prices on
the NYSE were $ for the 4.08% Series of Preferred (on ); $ for the
4.20% Series of Preferred (on ); $ for the 4.26% Series of Preferred
(on ); $
for the 4.42% Series of Preferred (on ); and $ for the 4.70% Series
of Preferred (on ). On [LAST SALE DATE REFERENCE], the last reported
sales price as reported by the National Quotation Bureau, Inc. was $ for the
7.75% Series of Preferred (on ). Preferred Shareholders are urged to
obtain a current market quotation, if available, for their Shares.
-------------------------------------
THE DEALER MANAGER FOR THE OFFER IS:
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
The date of this Offer to Purchase and Proxy Statement is [STATEMENT DATE].
<PAGE> 3
NO PERSON HAS BEEN AUTHORIZED TO MAKE ANY RECOMMENDATION ON BEHALF OF ILN
OR IPC AS TO WHETHER PREFERRED SHAREHOLDERS SHOULD TENDER OR REFRAIN FROM
TENDERING SHARES OF ANY SERIES OF PREFERRED PURSUANT TO THE OFFER. NO PERSON HAS
BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN
CONNECTION WITH THE OFFER OTHER THAN THOSE CONTAINED HEREIN, IN THE RELATED
LETTER OF TRANSMITTAL AND PROXY OR IN THE SEPARATE PROXY. IF GIVEN OR MADE, SUCH
RECOMMENDATION AND SUCH INFORMATION AND REPRESENTATIONS MUST NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED BY ILN OR IPC.
IMPORTANT
Any Preferred Shareholder desiring to accept the Offer and tender all or
any portion of his or her Shares should either (i) request his or her broker,
dealer, commercial bank, trust company or nominee to effect the transaction for
him or her, (ii) complete and sign the applicable Letter of Transmittal and
Proxy enclosed herewith (the "Letter of Transmittal and Proxy") in accordance
with the instructions in such Letter of Transmittal and Proxy, mail or deliver
the same and any other required documents to First Chicago Trust Company of New
York (the "Depositary"), and deliver the certificates for such Shares, together
with the Letter of Transmittal and Proxy, to the Depositary, or (iii) tender
such Shares pursuant to the procedure for book-entry transfer set forth below
under "Terms of the Offer -- Procedure for Tendering Shares," in each case on or
prior to the Expiration Date (as defined below). A Preferred Shareholder whose
Shares are registered in the name of a broker, dealer, commercial bank, trust
company or nominee must contact such broker, dealer, commercial bank, trust
company or nominee if he or she desires to tender such Shares. Any Preferred
Shareholder who desires to tender Shares and whose certificates for such Shares
are not immediately available, or who cannot comply in a timely manner with the
procedure for book-entry transfer, should tender such Shares by following the
procedures for guaranteed delivery set forth below under "Terms of the Offer --
Procedure for Tendering Shares."
EACH SERIES OF PREFERRED HAS ITS OWN LETTER OF TRANSMITTAL AND PROXY AND
ITS OWN SEPARATE PROXY. ONLY THE APPLICABLE LETTER OF TRANSMITTAL AND PROXY FOR
SUCH SERIES OF PREFERRED OR A NOTICE OF GUARANTEED DELIVERY MAY BE USED TO
TENDER SHARES OF SUCH SERIES OF PREFERRED. A PROXY (WHETHER INCLUDED AS PART OF
THE LETTER OF TRANSMITTAL AND PROXY OR AS A SEPARATE DOCUMENT ENCLOSED HEREWITH)
MAY BE USED TO VOTE IN FAVOR OF THE PROPOSED AMENDMENT EVEN IF NO SHARES ARE
BEING TENDERED.
-------------------------
Questions or requests for assistance may be directed to MacKenzie Partners,
Inc. ("MacKenzie" or the "Information Agent") or to Donaldson, Lufkin & Jenrette
Securities Corporation ("DLJ" or the "Dealer Manager") at their respective
telephone numbers and addresses set forth on the back cover of this Offer to
Purchase and Proxy Statement. Requests for additional copies of this Offer to
Purchase and Proxy Statement, the Letter of Transmittal and Proxy, the separate
Proxy or other related tender offer or proxy materials may be directed to the
Information Agent, and such copies will be furnished promptly at ILN's or IPC's
expense, as applicable. Preferred Shareholders may also contact their local
broker, dealer, commercial bank or trust company for assistance concerning the
Offer.
2
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<S> <C>
SUMMARY..................................................... 4
SPECIAL FACTORS............................................. 7
Purpose of the Offer; Certain Effects of the Offer........ 7
Liquidity of Trading Market............................... 8
Potential Effects of the Proposed Amendment on
Non-Tendering Preferred Shareholders................... 8
Plans of ILN and IPC After the Offer...................... 9
Certain Legal Matters; Regulatory Approvals............... 10
Dissenters' Rights........................................ 10
TERMS OF THE OFFER.......................................... 10
Number of Shares; Purchase Prices; Expiration Date;
Dividends.............................................. 10
Procedure for Tendering Shares............................ 11
Withdrawal Rights......................................... 13
Acceptance of Shares for Payment and Payment of Purchase
Price.................................................. 14
Certain Conditions of the Offer........................... 15
Extension of Tender Period; Termination; Amendments....... 16
PROPOSED AMENDMENT AND PROXY SOLICITATION................... 17
Introduction.............................................. 17
Voting Securities, Rights and Procedures.................. 17
Dissenters' Rights........................................ 18
Proxies................................................... 19
Special Cash Payments..................................... 19
Security Ownership of Certain Beneficial Owners and
Management............................................. 20
Business to Come Before the Special Meeting............... 21
Explanation of the Proposed Amendment..................... 21
Reasons for the Proposed Amendment........................ 21
Relationship with Independent Accountants................. 23
PRICE RANGE OF SHARES; DIVIDENDS............................ 23
CERTAIN FEDERAL INCOME TAX CONSEQUENCES..................... 25
SOURCE AND AMOUNT OF FUNDS.................................. 27
TRANSACTIONS AND AGREEMENTS CONCERNING THE SHARES........... 27
FEES AND EXPENSES ASSOCIATED WITH THE OFFER................. 27
CERTAIN INFORMATION REGARDING ILN AND IPC; INCORPORATION BY
REFERENCE................................................. 29
SUMMARY OF CONSOLIDATED FINANCIAL INFORMATION; INCORPORATION
BY REFERENCE.............................................. 30
MISCELLANEOUS............................................... 32
ATTACHMENT A................................................ A-1
</TABLE>
3
<PAGE> 5
SUMMARY
The following summary is provided solely for the convenience of the
Preferred Shareholders. This summary is not intended to be complete and is
qualified in its entirety by reference to the full text and more specific
details contained in this Offer to Purchase and Proxy Statement, the Letter of
Transmittal and Proxy and the separate Proxy and any amendments hereto or
thereto. Preferred Shareholders are urged to read this Offer to Purchase and
Proxy Statement, the Letter of Transmittal and Proxy and the separate Proxy in
their entirety. Each of the capitalized terms used in this summary and not
defined herein has the meaning set forth elsewhere in this Offer to Purchase and
Proxy Statement.
The Companies................. Illinova Corporation ("ILN"), 500 South 27th
Street, Decatur, Illinois 62525, is an exempt
holding company under the Public Utility
Holding Company Act of 1935, as amended (the
"Holding Company Act"). ILN has three principal
operating subsidiaries: Illinois Power Company
("IPC"), a combination electric and gas
utility; Illinova Generating Company, an
independent power supply company; and Illinova
Energy Partners, Inc., an energy broker and
services company. IPC is engaged in the
generation, transmission, distribution and sale
of electric energy and the distribution,
transportation and sale of natural gas in the
State of Illinois. Its service area is a widely
diversified industrial and agricultural area
comprising approximately 15,000 square miles in
northern, central and southern Illinois.
Electric service is provided at retail to 310
incorporated municipalities, adjacent suburban
and rural areas and numerous unincorporated
municipalities. Gas service is provided to 257
incorporated municipalities, adjacent suburban
areas and numerous unincorporated
municipalities.
The Shares.................... 4.08% Series, Cumulative Preferred Stock (par
value $50 per share)
4.20% Series, Cumulative Preferred Stock (par
value $50 per share)
4.26% Series, Cumulative Preferred Stock (par
value $50 per share)
4.42% Series, Cumulative Preferred Stock (par
value $50 per share)
4.70% Series, Cumulative Preferred Stock (par
value $50 per share)
7.75% Series, Cumulative Preferred Stock (par
value $50 per share)
The Offer and Purchase
Price......................... Offer to purchase any or all Shares of each
Series of Preferred at the prices set forth
below, which prices shall be the "Purchase
Price" with respect to the applicable Series of
Preferred.
$ per Share of the 4.08% Series
$ per Share of the 4.20% Series
$ per Share of the 4.26% Series
$ per Share of the 4.42% Series
$ per Share of the 4.70% Series
$ per Share of the 7.75% Series
Independent Offer............. The Offer for one Series of Preferred is
independent of the Offer for any other Series
of Preferred. The Offer is not conditioned upon
any minimum number of Shares of the applicable
Series of Preferred being tendered. Preferred
Shareholders who wish to tender their Shares
are not required to vote in favor of the
Proposed Amendment. The Offer is subject,
however, to adoption of the Proposed Amendment
at the Special Meeting and certain other
conditions described herein. See "Terms of the
Offer -- Certain Conditions of the Offer."
4
<PAGE> 6
Expiration Date of the
Offer......................... The Offer expires at 5:00 p.m., New York City
time on [Expiration Date], unless extended (the
"Expiration Date").
How to Tender Shares.......... See "Terms of the Offer -- Procedure for
Tendering Shares." For further information,
call the Information Agent or the Dealer
Manager or consult your broker for assistance.
Withdrawal Rights............. Tendered Shares of any Series of Preferred may
be withdrawn at any time until the Expiration
Date with respect to such Series of Preferred
and, unless previously accepted for payment,
may also be withdrawn after
, 1998. See "Terms of the
Offer -- Withdrawal Rights." Any proxy
accompanying any tendered Shares that are
withdrawn will not be considered revoked unless
the Preferred Shareholder specifically revokes
such proxy as described herein. See "Proposed
Amendment and Proxy Solicitation -- Proxies."
Purpose of the Offer.......... ILN is making the Offer because ILN believes
that the purchase of Shares is economically
attractive to ILN, its shareholders and IPC. In
addition, the Offer gives Preferred
Shareholders the opportunity to sell their
Shares at a price which ILN believes to be a
premium over the current market price on the
date of the announcement of the Offer and
without the usual transaction costs associated
with a market sale. See "Special Factors."
Dividends..................... IPC has declared the regular quarterly dividend
on each Series of Preferred to be paid on May
1, 1998 (the "May 1998 Dividend") to holders of
record as of the close of business on April 9,
1998. A tender and purchase of Shares pursuant
to the Offer will not deprive a Preferred
Shareholder of his or her right to receive the
May 1998 Dividend on his or her Shares held of
record as of the close of business on April 9,
1998. Tendering Preferred Shareholders will not
be entitled to any dividends in respect of any
dividend period (or any portion thereof) after
May 1, 1998.
Brokerage Commissions......... Not payable by Preferred Shareholders.
Solicitation Fee.............. ILN will pay a solicitation fee of
$ per Share that is tendered,
accepted for payment and paid for pursuant to
the Offer in transactions for beneficial owners
of fewer than Shares and a solicitation
fee of $ per Share for transactions
for beneficial owners of or more Shares;
provided that solicitation fees payable in
transactions for beneficial owners of or
more Shares shall be paid 80% to the Dealer
Manager and 20% to any designated Soliciting
Dealer (as defined herein) (which may be the
Dealer Manager). If the Proposed Amendment is
adopted at the Special Meeting, IPC will pay to
each designated Soliciting Dealer a separate
fee of $ per Share for Shares that
are not tendered pursuant to the Offer but
which are voted in favor of the Proposed
Amendment in transactions for beneficial owners
of fewer than Shares and a separate fee
of $ per Share for Shares that are
not tendered pursuant to the Offer but which
are voted in favor of the Proposed Amendment in
transactions for beneficial owners of or
more Shares; provided that the separate fee
payable in transactions for beneficial owners
of or more Shares shall be paid 80% to
the Dealer Manager
5
<PAGE> 7
and 20% to any designated Soliciting Dealer
(which may be the Dealer Manager). A Soliciting
Dealer will not be entitled to a solicitation
fee or a separate fee for Shares beneficially
owned by such Soliciting Dealer.
Proposed Amendment............ Concurrently with the Offer, the Board of
Directors of IPC is soliciting proxies for use
at the Special Meeting. The purpose of the
Special Meeting is to consider an amendment to
IPC's Articles which would remove a provision
that limits IPC's ability to issue or assume
unsecured indebtedness. If the Proposed
Amendment is adopted at the Special Meeting,
the clause of the Articles that places
restrictions on IPC's ability to issue or
assume unsecured indebtedness will be
eliminated with respect to any Shares that
remain outstanding after the consummation of
the Offer. See "Special Factors." Preferred
Shareholders may be entitled to dissenters'
rights in connection with the adoption of the
Proposed Amendment. See "Proposed Amendment and
Proxy Solicitation -- Dissenters' Rights."
Special Meeting............... IPC will consider the Proposed Amendment at the
Special Meeting to be held at its principal
office, 500 South 27th Street, Decatur,
Illinois 62525, on [Expiration Date] at 4:30
p.m., New York City time. Only holders of
record of IPC's voting securities at the close
of business on the Record Date will be entitled
to vote at the Special Meeting.
Record Date................... [Record Date].
Special Cash Payment.......... If the Proposed Amendment is adopted at the
Special Meeting by IPC's shareholders, IPC will
make a special cash payment of $ per Share
to each Preferred Shareholder who voted in
favor of the Proposed Amendment but who did not
tender his or her Shares (the "Special Cash
Payment"). Preferred Shareholders who validly
tender their Shares will be entitled only to
the purchase price per Share listed on the
front cover of this Offer to Purchase and Proxy
Statement.
Payment Date.................. Promptly after the Expiration Date or any
extension thereof (the "Payment Date").
Stock Transfer Tax............ Except as described herein, ILN will pay or
cause to be paid any stock transfer taxes with
respect to the sale and transfer of any Shares
to it or its order pursuant to the Offer. Each
Preferred Shareholder will be responsible for
paying any income or gross receipts taxes
imposed by any jurisdiction by reason of the
Special Cash Payment and/or the sale of the
Shares. See Instruction 6 of the applicable
Letter of Transmittal and Proxy. See also
"Terms of the Offer -- Acceptance of Shares for
Payment and Payment of Purchase Price" and
"Certain Federal Income Tax Consequences."
Further Information........... Additional copies of this Offer to Purchase and
Proxy Statement, the applicable Letter of
Transmittal and Proxy, and the applicable
separate Proxy may be obtained by contacting
MacKenzie Partners, Inc., at (800) 322-2885
(toll free) or (212) 929-5500 (brokers and
dealers). Questions about the Offer should be
directed to DLJ at (800) 334-1604 (toll free).
6
<PAGE> 8
SPECIAL FACTORS
PURPOSE OF THE OFFER; CERTAIN EFFECTS OF THE OFFER
ILN believes that the purchase of the Shares at this time represents an
attractive economic opportunity that will benefit ILN, its shareholders and IPC.
In addition, the Offer gives Preferred Shareholders the opportunity to sell
their Shares at a price which ILN believes to be a premium to the respective
market prices of Shares of each Series of Preferred on the date of the
announcement of the Offer and without the usual transaction costs associated
with a sale. ILN did not find it practicable to, and did not, quantify or
otherwise assign relative weights to these considerations. Trading of the Shares
of each Series of Preferred has been limited and sporadic. Therefore, ILN
determined the Purchase Price for each Series of Preferred with reference to
certain objective factors, including, but not limited to, historical and recent
market prices, yields on U.S. Treasury and municipal securities, yields on
comparable preferred securities, the prior trading characteristics of each
Series of Preferred, and the current and future redemption price of each Series
of Preferred, as well as certain subjective factors, including, but not limited
to, general industry outlook, general market supply of securities of similar
type, and supply and demand factors in the securities markets generally.
Although the weighing of these factors is subjective, ILN gave relatively more
weight to objective factors, such as yields on U.S. Treasury and municipal
securities, yields on comparable preferred securities, and current and future
redemption prices of the Series of Preferred.
Neither ILN, IPC nor their respective boards of directors (individually, a
"Board of Directors" and collectively, the "Boards of Directors") received any
report, opinion or appraisal from an outside party which is related to the
Offer, including, but not limited to, any report, opinion or appraisal relating
to the consideration or the fairness of the consideration to be offered to the
holders of the Shares or the fairness of such Offer to ILN, IPC or the
unaffiliated holders of Shares. Neither of the Boards of Directors nor any
individual director of ILN or IPC has retained an unaffiliated representative to
act solely on behalf of unaffiliated holders of Shares for the purposes of
negotiating the terms of the Offer or preparing a report concerning the fairness
of the Offer. Neither ILN, IPC nor their respective Boards of Directors believed
these measures were necessary to ensure fairness in light of the fact that the
Offer will not result in a liquidation or change in control in ILN, IPC or any
of their affiliates.
Preferred Shareholders are not under any obligation to tender Shares
pursuant to the Offer. The Offer does not constitute notice of redemption of any
Series of Preferred pursuant to IPC's Articles, nor does ILN or IPC intend to
effect any such redemption by making the Offer. Further, the Offer does not
constitute a waiver by IPC of any option it has to redeem Shares. The 4.08%
Series, 4.20% Series, 4.26% Series, 4.42% Series and 4.70% Series of cumulative
preferred stock are not subject to mandatory redemption, but presently are
redeemable at the option of IPC at $51.50 per Share, $52.00 per Share, $51.50
per Share, $51.50 per Share and $51.50 per Share respectively. The 7.75% Series
is also not subject to mandatory redemption and is not redeemable until July 1,
2003. On or after July 1, 2003, the 7.75% Series is redeemable at the option of
IPC at $50.00 per Share. The Shares of each Series of Preferred have no
preemptive or conversion rights. Upon liquidation or dissolution of IPC, owners
of the Shares would be entitled to receive an amount equal to the liquidation
preference of $50.00 per share plus all accrued and unpaid dividends (whether or
not earned or declared) thereon to the date of payment, prior to the payment of
any amounts to the holders of IPC's common stock (currently, ILN is the only
holder of IPC's common stock).
Shares validly tendered to the Depositary pursuant to the Offer and not
withdrawn in accordance with the procedures set forth herein shall be held until
the Expiration Date (or returned to the extent the Offer is terminated in
accordance herewith). To the extent that the Proposed Amendment is adopted at
the Special Meeting and the Shares tendered are accepted for payment and paid
for in accordance with the terms hereof, ILN presently intends to sell or
otherwise transfer Shares to IPC and, at that time, it is expected that IPC
would retire and cancel the Shares. However, in the event the Proposed Amendment
is not adopted at the Special Meeting, ILN may elect to, but is not obligated
to, waive, subject to applicable law, such condition. In that case, subsequent
to ILN's waiver and purchase of the Shares, IPC anticipates, as promptly as
practicable thereafter, that it would call another special meeting of its
shareholders and solicit proxies therefrom for an amendment substantially
similar to the Proposed Amendment. At that meeting, ILN would vote any Shares
7
<PAGE> 9
purchased by it pursuant to the Offer or otherwise (together with its shares of
IPC's common stock) in favor of such amendment, thereby maximizing the prospects
for the adoption of the amendment.
The purchase of Shares of each Series of Preferred pursuant to the Offer
will reduce the number of holders of Shares and the number of such Shares that
might otherwise trade publicly, and, depending upon the number of Shares so
purchased, such reduction could adversely affect the ratings, liquidity and
market value of the remaining Shares of each such Series of Preferred held by
the public. The extent of the public market for such Shares and the availability
of price quotations would, however, depend upon such factors as the number of
shareholders remaining at such time, the interest in maintaining a market in the
Shares on the part of securities firms and other factors. As of [RECORD DATE],
there were registered holders of the 4.08% Series,
registered holders of the 4.20% Series, registered holders of the
4.26% Series, registered holders of the 4.42% Series,
registered holders of the 4.70% Series and registered holders of the
7.75% Series. Depending on the number of Shares tendered and purchased pursuant
to the Offer, the Series of Preferred listed and trading on the NYSE may no
longer meet the requirements of the NYSE for continued listing, which could
adversely affect the market for such Shares. In addition, each Series of
Preferred (other than the 7.75% Series) is currently registered under Section
12(b) of the Securities Exchange Act of 1934, as amended (the "Exchange Act").
Registration of such Shares under the Exchange Act may be terminated upon the
application by IPC to the SEC if such Shares are neither listed on a national
securities exchange nor held by more than 300 holders of record. Termination of
registration of such Shares under the Exchange Act would substantially reduce
the information required to be furnished to Preferred Shareholders and could
make certain provisions of the Exchange Act, such as the requirement of Rule
13e-3 thereunder with respect to "going private transactions," no longer
applicable to IPC.
As of the date of this Offer to Purchase and Proxy Statement, each Series
of Preferred was rated Baa2, BBB- and BBB-, by Moody's Investors Service, Inc.
("Moody's), Standard & Poor's Rating Services ("S&P") and Duff & Phelps, Inc.
(D&P"), respectively.
LIQUIDITY OF TRADING MARKET
To the extent that Shares of any Series of Preferred are tendered, accepted
for payment and paid for in the Offer, the trading market for Shares of such
Series of Preferred that remain outstanding may be significantly more limited,
which might adversely affect the liquidity, market value and price volatility of
such Shares. Equity securities with a smaller outstanding market value available
for trading (the "float") may command a lower price than would comparable equity
securities with a greater float. Therefore, the market price for Shares that are
not tendered in the Offer may be affected adversely to the extent that the
number of Shares purchased pursuant to the Offer reduces the float. A reduced
float may also make the trading price of the Shares that are not tendered,
accepted for payment and paid for in the Offer more volatile. Preferred
Shareholders of the remaining Shares may attempt to obtain quotations for the
Shares from their brokers; however, there can be no assurance that any trading
market will exist for such Shares following consummation of the Offer. To the
extent a market continues to exist for the Shares after the Offer, the Shares
may trade at a discount compared to present trading depending on the market for
shares with similar features, the performance of IPC and other factors. There is
no assurance that an active market in the Shares will exist and no assurance as
to the prices at which the Shares may trade.
POTENTIAL EFFECTS OF THE PROPOSED AMENDMENT ON NON-TENDERING PREFERRED
SHAREHOLDERS
If the Proposed Amendment is adopted at the Special Meeting, Preferred
Shareholders of Shares that are not tendered and purchased pursuant to the Offer
will no longer be entitled to the benefits of the Debt Limitation Provision,
which will have been removed by the Proposed Amendment. As discussed above, the
Debt Limitation Provision places restrictions on IPC's ability to issue or
assume unsecured indebtedness. Although IPC's debt instruments may contain
certain restrictions on IPC's ability to issue or assume debt, any such
restrictions may be waived and the increased flexibility afforded IPC by the
removal of the Debt Limitation Provision may permit IPC to take certain actions
that may increase the credit risks with respect to IPC, adversely affecting the
market price and credit rating of the remaining Shares or otherwise be
materially adverse to the interests of the remaining Preferred Shareholders. In
addition, to the extent that IPC elects to
8
<PAGE> 10
issue or assume additional unsecured indebtedness, the remaining Preferred
Shareholders' relative position in IPC's capital structure could be perceived to
decline, which in turn could adversely affect the market prices and credit
ratings of the remaining Shares.
PLANS OF ILN AND IPC AFTER THE OFFER
Following the consummation of the Offer, the business and operations of IPC
are expected to be continued substantially as they are currently being
conducted. Except as disclosed herein, ILN and IPC currently have no plans or
proposals that relate to or would result in: (i) the acquisition by any person
or entity of additional securities of IPC or the disposition of securities of
IPC, other than in the ordinary course of business; (ii) an extraordinary
corporate transaction, such as a merger, reorganization or liquidation,
involving IPC or any of its subsidiaries; (iii) a sale or transfer of a material
amount of assets of IPC or any of its subsidiaries; (iv) any change in the
present Board of Directors or management of IPC; (v) any material change in the
present dividend rate or policy, or indebtedness or capitalization of IPC; (vi)
any other material change in IPC's corporate structure or business; (vii) any
change in IPC's Articles or by-laws ("By-laws") or any actions that may impede
the acquisition of control of IPC by any person; (viii) a class of equity
securities of IPC being delisted from a national securities exchange or no
longer authorized to be quoted on the OTC; (ix) a class of equity securities of
IPC becoming eligible for termination of registration pursuant to Section
12(g)(4) of the Exchange Act; or (x) the suspension of IPC's obligation to file
reports pursuant to Section 15(d) of the Exchange Act. However, ILN and IPC have
from time to time considered, and expect to consider in the future, various
strategies designed to enhance IPC's ability to anticipate and adapt to changes
in the increasingly competitive utility industry. ILN and IPC are currently
developing strategies responsive to the enactment of Public Act 90-561 ("PA
90-561") in Illinois on December 16, 1997. PA 90-561 amends the Illinois Public
Utilities Act in numerous respects and provides a comprehensive framework for
restructuring the electric utility industry in Illinois, including a managed
transition to a competitive industry. PA 90-561 permits electric utilities in
Illinois, including IPC, upon approval of the Illinois Commerce Commission
("ICC"), to issue, directly or indirectly, securitization bonds on or after
August 1, 1998 in an aggregate amount not to exceed, among certain other
restrictions, 50% of the electric utility's total capitalization as of December
31, 1996, with the proceeds of such issuance generally limited to the
refinancing of debt or equity of the electric utility. IPC intends to file an
application with the ICC seeking the approvals required for such issuance of
securitization bonds and may determine to proceed with such issuance in 1998. In
addition, ILN and IPC may pursue other business strategies, including business
combinations with other companies, internal restructurings involving the
complete or partial separation of IPC's generation, transmission and
distribution businesses, acquisitions or dispositions of assets or lines of
business, and additions to or reductions of franchised service territories. ILN
and IPC may from time to time engage in discussions, either internally or with
third parties, regarding one or more of these potential strategies. Those
discussions may be subject to confidentiality agreements and the policy of ILN
and IPC is generally not to comment on such activities. No assurances can be
given that any potential transaction of the types described above may actually
occur, or if one does occur, no assurances can be given with respect to the
ultimate effect of any such transaction on ILN's or IPC's results or operations,
financial condition or competitive position.
After the consummation of the Offer, ILN or IPC, in its sole discretion,
may purchase additional Shares on the open market, in privately negotiated
transactions, through one or more tender offers or otherwise. Any such purchases
may be on the same terms as, or on terms which are more or less favorable to
holders of Shares than, the terms of the Offer. However, Rule 13e-4(f)(6) under
the Exchange Act, prohibits ILN and its affiliates (including IPC) from
purchasing any Shares of a Series of Preferred, other than pursuant to the
Offer, until at least ten business days after the Expiration Date with respect
to that Series of Preferred. Any future purchases of Shares by ILN or IPC would
depend on many factors, including the success of the Offer, the market price of
the Shares, ILN's business and financial position, legal restrictions on ILN's
ability to purchase Shares as well as general economic and market conditions.
NEITHER ILN, IPC, THEIR RESPECTIVE BOARDS OF DIRECTORS, NOR ANY OF THEIR
RESPECTIVE OFFICERS MAKES ANY RECOMMENDATION TO ANY PREFERRED SHAREHOLDER AS TO
WHETHER TO TENDER ANY OR ALL SHARES. EACH PREFERRED
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<PAGE> 11
SHAREHOLDER MUST MAKE HIS OR HER OWN DECISION AS TO WHETHER TO TENDER
SHARES AND, IF SO, HOW MANY SHARES TO TENDER.
CERTAIN LEGAL MATTERS; REGULATORY APPROVALS
Neither ILN nor IPC needs to obtain approval from the ICC to undertake the
Offer or the proxy solicitation. ILN is not aware of any license or regulatory
permit that would be material to ILN's or IPC's business that might be adversely
affected by ILN's acquisition of Shares as contemplated in the Offer or of any
other approval or other action by any government or governmental, administrative
or regulatory authority or agency, domestic or foreign, that would be required
for ILN's acquisition of Shares pursuant to the Offer. Should any approval or
other action be required, ILN currently contemplates that it will seek such
approval or other action. ILN cannot predict whether it could be required to
delay the acceptance for payment of, or payment for, Shares tendered pursuant to
the Offer pending the outcome of any such matter. There can be no assurance that
any such approval or other action, if needed, would be obtained, or would be
obtained without substantial conditions or that the failure to obtain any such
approval or other action might not result in adverse consequences to ILN's or
IPC's business. ILN intends to make all required filings under the Exchange Act.
ILN's obligation under the Offer to accept for payment, or make payment for,
Shares is subject to certain conditions. See "Terms of the Offer -- Certain
Conditions of the Offer."
Except for adoption of the Proposed Amendment, which condition can be
waived by ILN, no approval of the holders of any Shares or the holders of any of
IPC's other securities or the holders of ILN's securities is required in
connection with the Offer. See "Proposed Amendment and Proxy Solicitation."
DISSENTERS' RIGHTS
No dissenters' rights are available to holders of Shares in connection with
the Offer. However, holders of Shares may be entitled to dissenters' rights in
connection with the adoption of the Proposed Amendment. See "Proposed Amendment
and Proxy Solicitation -- Dissenters' Rights."
TERMS OF THE OFFER
NUMBER OF SHARES; PURCHASE PRICES; EXPIRATION DATE; DIVIDENDS
Upon the terms and subject to the conditions described herein and in the
applicable Letter of Transmittal, ILN will purchase any and all Shares that are
validly tendered on or prior to the Expiration Date (and not properly withdrawn
in accordance with "Terms of the Offer -- Withdrawal Rights") at the purchase
price per Share listed on the front cover of this Offer to Purchase and Proxy
Statement for the Shares tendered, net to the seller in cash. See "Terms of the
Offer -- Certain Conditions of the Offer" and "Terms of the Offer -- Extension
of Tender Period; Termination; Amendments." On , there were issued
and outstanding 283,290 Shares of the 4.08% Series of Preferred; 167,720 Shares
of the 4.20% Series of Preferred; 136,000 Shares of the 4.26% Series of
Preferred; 134,400 Shares of the 4.42% Series of Preferred; 176,000 Shares of
the 4.70% Series of Preferred; and 241,700 Shares of the 7.75% Series of
Preferred.
THE OFFER FOR A SERIES OF PREFERRED IS NOT CONDITIONED UPON ANY MINIMUM
NUMBER OF SHARES OF SUCH SERIES OF PREFERRED BEING TENDERED AND IS INDEPENDENT
OF THE OFFER FOR ANY OTHER SERIES OF PREFERRED. THE OFFER, HOWEVER, IS
CONDITIONED UPON, AMONG OTHER THINGS, THE PROPOSED AMENDMENT, AS DESCRIBED
HEREIN, BEING ADOPTED AT THE SPECIAL MEETING. SEE "TERMS OF THE OFFER -- CERTAIN
CONDITIONS OF THE OFFER."
The Offer is being sent to all persons in whose names Shares are registered
on the books of IPC as of the close of business on [RECORD DATE] and transferees
of such persons. Only a record holder of Shares on the Record Date may vote in
person or by proxy at the Special Meeting. No record date is fixed for
determining which persons are permitted to tender Shares. Any person who is the
beneficial owner but not the record holder of Shares must arrange for the record
transfer of such Shares prior to tendering.
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<PAGE> 12
With respect to each Series of Preferred, the Expiration Date is the later
of 5:00 p.m. New York City time, on [EXPIRATION DATE] or the latest time and
date to which the Offer with respect to such Series of Preferred is extended.
ILN expressly reserves the right, in its sole discretion, and at any time and/or
from time to time, to extend the period of time during which the Offer for any
Series of Preferred is open, by giving oral or written notice of such extension
to the Depositary and making a public announcement thereof, without extending
the period of time during which the Offer for any other Series of Preferred is
open. There is no assurance whatsoever that ILN will exercise its right to
extend the Offer for any Series of Preferred. If ILN decides, in its sole
discretion, to (i) decrease the number of Shares of any Series of Preferred
being sought, (ii) increase or decrease the consideration offered in the Offer
to holders of any Series of Preferred or (iii) increase or decrease the
Soliciting Dealers' fees and, at the time that notice of such increase or
decrease is first published, sent or given to holders of such Series of
Preferred in the manner specified herein, the Offer for such Series of Preferred
is scheduled to expire at any time earlier than the tenth business day from the
date that such notice is first so published, sent or given, such Offer will be
extended until the expiration of such ten-business-day period. For purposes of
the Offer, a "business day" means any day other than a Saturday, Sunday or
federal holiday and consists of the time period from 12:01 a.m. through 12:00
midnight, New York City time.
NO ALTERNATIVE, CONDITIONAL OR CONTINGENT TENDERS WILL BE ACCEPTED.
The May 1998 Dividend has been declared on each Series of Preferred,
payable May 1, 1998 to holders of record as of the close of business on April 9,
1998. A tender and purchase of Shares pursuant to the Offer will not deprive
such Preferred Shareholder of his or her right to receive the May 1998 Dividend
on his or her Shares held of record on April 9, 1998, regardless of when such
tender is made. Tendering Preferred Shareholders will not be entitled to any
dividends in respect of any dividend period (or any portion thereof) after May
1, 1998. The payment of the May 1998 Dividend will be made separately from
payments for Shares tendered in the Offer or the payment of any Special Cash
Payments.
PROCEDURE FOR TENDERING SHARES
To tender Shares pursuant to the Offer, the tendering owner of Shares must
either:
(i) send to the Depositary (at one of its addresses set forth on the
back cover of this Offer to Purchase and Proxy Statement) a properly
completed and duly executed Letter of Transmittal and Proxy, or facsimile
thereof, together with any required signature guarantees and any other
documents required by the Letter of Transmittal and Proxy and either (a)
certificates for the Shares to be tendered must be received by the
Depositary at one of such addresses or (b) such Shares must be delivered
pursuant to the procedures for book-entry transfer described herein (and a
confirmation of such delivery must be received by the Depositary), in each
case by 5:00 p.m., New York City time, on the Expiration Date; or
(ii) comply with the guaranteed delivery procedure described under
"Guaranteed Delivery Procedure" below.
A tender of Shares made pursuant to any method of delivery set forth herein or
in the Letter of Transmittal and Proxy will constitute a binding agreement
between the tendering holder and ILN upon the terms and subject to the
conditions of the Offer.
The Depositary will establish an account with respect to the Shares at The
Depository Trust Company (the "Book-Entry Transfer Facility") for purposes of
the Offer within two business days after the date of this Offer to Purchase and
Proxy Statement, and any financial institution that is a participant in the
system of a Book-Entry Transfer Facility may make delivery of Shares by causing
the Book-Entry Transfer Facility to transfer such Shares into the Depositary's
account in accordance with the procedures of the Book-Entry Transfer Facility.
Although delivery of Shares may be effected through book-entry transfer, such
delivery must be accompanied by either (i) a properly completed and duly
executed Letter of Transmittal and Proxy, together with any required signature
guarantees and any other required documents or (ii) an Agent's Message
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<PAGE> 13
(as hereinafter defined) and, in any case, must be received by the Depositary at
one of its addresses set forth on the back cover of this Offer to Purchase and
Proxy Statement on or prior to the Expiration Date. The confirmation of a book
entry transfer of Shares into the Depositary's account at the Book-Entry
Transfer Facility as described above is referred to as a "Book-Entry
Confirmation."
DELIVERY OF THE LETTER OF TRANSMITTAL AND PROXY AND ANY OTHER REQUIRED
DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY OR TO ILN DOES NOT CONSTITUTE
DELIVERY TO THE DEPOSITARY.
The term "Agent's Message" means a message, transmitted by the Book-Entry
Transfer Facility, received by the Depositary and forming a part of the
book-entry transfer when a tender is initiated, which states that the Book-Entry
Transfer Facility has received an express acknowledgment from a participant
tendering Shares, that such participant has received and agrees to be bound by
the terms of the Letter of Transmittal and Proxy and that ILN may enforce such
agreement against such participant.
Signature Guarantees. Except as otherwise provided below, all signatures on
a Letter of Transmittal and Proxy must be guaranteed by a firm that is a member
in good standing of a registered national securities exchange or the National
Association of Securities Dealers, Inc. ("NASD"), or by a commercial bank or
trust company having an office or correspondent in the United States that is a
participant in an approved Signature Guarantee Medallion Program (each of the
foregoing being referred to as an "Eligible Institution"). Signatures on a
Letter of Transmittal and Proxy need not be guaranteed if (i) the Letter of
Transmittal and Proxy is signed by the registered owner of the Shares tendered
therewith and such owner has not completed the box entitled "Special Payment
Instructions" or the box entitled "Special Delivery Instructions" on the Letter
of Transmittal and Proxy or (ii) such Shares are tendered for the account of an
Eligible Institution. See Instructions 1 and 5 of the Letter of Transmittal and
Proxy. If Shares are registered in the name of a person other than the signatory
on the Letter of Transmittal and Proxy, or if unpurchased Shares are to be
issued to a person other than the registered holder(s), the certificates must be
endorsed or accompanied by appropriate stock powers, in either case signed
exactly as the name or names of the registered holder(s) appear on the Shares
with the signature(s) on the Shares or stock powers guaranteed as stated above.
See Instructions 4, 6 and 7 to the Letter of Transmittal and Proxy.
Guaranteed Delivery Procedure. If a Preferred Shareholder desires to tender
Shares pursuant to the Offer and such Preferred Shareholder's certificates are
not immediately available or the procedures for book-entry transfer cannot be
completed on a timely basis or time will not permit all required documents to
reach the Depositary prior to the Expiration Date, such Shares may nevertheless
be tendered if all of the following guaranteed delivery procedures are complied
with:
(i) such tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by ILN and IPC herewith, is
received (with any required signatures or signature guarantees) by the
Depositary as provided below on or prior to 5:00 p.m., New York City time,
on the Expiration Date; and
(iii) the certificates for all tendered Shares in proper form for
transfer or a Book-Entry Confirmation with respect to all tendered Shares,
together with a properly completed and duly executed Letter of Transmittal
and Proxy, or a manually signed facsimile thereof, and any other documents
required by the Letter of Transmittal and Proxy, are received by the
Depositary no later than 5:00 p.m., New York City time, within three
business days after the date of execution of such Notice of Guaranteed
Delivery.
THE NOTICE OF GUARANTEED DELIVERY MAY BE DELIVERED BY HAND OR MAILED OR
TRANSMITTED BY FACSIMILE TO THE DEPOSITARY AND MUST INCLUDE AN ENDORSEMENT BY AN
ELIGIBLE INSTITUTION IN THE FORM SET FORTH IN SUCH NOTICE OF GUARANTEED
DELIVERY.
In all cases, Shares shall not be deemed validly tendered unless a properly
completed and duly executed Letter of Transmittal and Proxy, a manually signed
facsimile thereof, or, if applicable, an Agent's Message, is received by the
Depositary.
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<PAGE> 14
Notwithstanding any other provision hereof, payment for Shares accepted for
payment pursuant to the Offer in all cases will be made only after timely
receipt by the Depositary of certificates for (or an Agent's Message with
respect to) such Shares, a Letter of Transmittal and Proxy, properly completed
and duly executed, or a manually signed facsimile thereof, with any required
signature guarantees and all other documents required by the Letter of
Transmittal and Proxy. Accordingly, tendering Preferred Shareholders may be paid
at different times depending upon when certificates for Shares or Book-Entry
Confirmations are actually received by the Depositary. Under no circumstances
will interest be paid on the Purchase Price for Shares tendered to ILN pursuant
to the Offer, regardless of any extension of the Offer or any delay in making
such payment.
THE METHOD OF DELIVERY OF SHARES AND ALL OTHER REQUIRED DOCUMENTS IS AT THE
OPTION AND RISK OF THE TENDERING PREFERRED SHAREHOLDER. IF DELIVERY IS BY MAIL,
REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED.
BECAUSE IT IS THE TIME OF RECEIPT, NOT THE TIME OF MAILING, WHICH DETERMINES
WHETHER A TENDER HAS BEEN MADE PRIOR TO THE EXPIRATION DATE, SUFFICIENT TIME
SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY.
TO AVOID FEDERAL INCOME TAX BACKUP WITHHOLDING EQUAL TO 31% OF THE GROSS
PAYMENTS MADE PURSUANT TO THE OFFER, EACH TENDERING PREFERRED SHAREHOLDER WHO IS
A UNITED STATES PERSON MUST NOTIFY THE DEPOSITARY OF SUCH PREFERRED
SHAREHOLDER'S CORRECT TAXPAYER IDENTIFICATION NUMBER AND PROVIDE CERTAIN OTHER
INFORMATION BY PROPERLY COMPLETING AND EXECUTING THE SUBSTITUTE FORM W-9
INCLUDED IN THE LETTER OF TRANSMITTAL AND PROXY OR IN THE SEPARATE PROXY (OR, IN
THE CASE OF A FOREIGN PREFERRED SHAREHOLDER, FORM W-8 OBTAINABLE FROM THE
DEPOSITARY). SEE "CERTAIN FEDERAL INCOME TAX CONSEQUENCES."
EACH PREFERRED SHAREHOLDER IS URGED TO CONSULT WITH HIS OR HER OWN TAX
ADVISOR REGARDING THE TAX CONSEQUENCES OF THE OFFER.
Determinations of Validity. All questions as to the form of documents and
the validity, eligibility (including the time of receipt) and acceptance for
payment of any tender of Shares will be determined by ILN, in its sole
discretion, and its determination will be final and binding. ILN reserves the
absolute right to reject any or all tenders of Shares that (i) it determines are
not in proper form or (ii) the acceptance for payment of or payment for which
may, in the opinion of ILN's counsel, be unlawful. ILN also reserves the
absolute right to waive any defect or irregularity in any tender of Shares. No
tender of Shares will be deemed to be properly made until all defects or
irregularities have been cured or waived. None of ILN, IPC, the Dealer Manager,
the Depositary, the Information Agent or any other person will be under any duty
to give notice of any defect or irregularity in tenders, nor shall any of them
incur any liability for failure to give any such notice.
WITHDRAWAL RIGHTS
Tenders of Shares made pursuant to the Offer may be withdrawn at any time
prior to the Expiration Date. Thereafter, such tenders are irrevocable, except
that they may be withdrawn after , 1998 unless previously
accepted for payment as provided in this Offer to Purchase and Proxy Statement.
The proxy accompanying any tendered Shares that are withdrawn will not be
considered revoked unless the Preferred Shareholder specifically revokes such
proxy as described herein. See "Proposed Amendment and Proxy Solicitation --
Proxies."
To be effective, a written or facsimile notice of withdrawal must be timely
received by the Depositary, at one of its addresses set forth on the back cover
of this Offer to Purchase and Proxy Statement, and must specify the name of the
person who tendered the Shares to be withdrawn and the number of Shares to be
withdrawn. If the Shares to be withdrawn have been delivered to the Depositary,
a signed notice of withdrawal
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<PAGE> 15
with signatures guaranteed by an Eligible Institution (except in the case of
Shares tendered by an Eligible Institution) must be submitted prior to the
release of such Shares. In addition, such notice must specify, in the case of
Shares tendered by delivery of certificates, the name of the registered owner
(if different from that of the tendering Preferred Shareholder) and the serial
numbers shown on the particular certificates evidencing the Shares to be
withdrawn or, in the case of Shares tendered by book-entry transfer, the name
and number of the account at the Book-Entry Transfer Facility to be credited
with the withdrawn Shares and the name of the registered holder (if different
from the name of such account). Withdrawals may not be rescinded, and Shares
withdrawn will thereafter be deemed not validly tendered for purposes of the
Offer. However, withdrawn Shares may be re-tendered by again following one of
the procedures described in "Terms of the Offer -- Procedure for Tendering
Shares" at any time prior to the Expiration Date.
All questions as to the form and validity (including time of receipt) of
any notice of withdrawal will be determined by ILN, in its sole discretion, and
its determination will be final and binding. None of ILN, IPC, the Dealer
Manager, the Depositary, the Information Agent or any other person will be under
any duty to give notification of any defect or irregularity in any notice of
withdrawal or will incur any liability for failure to give any such
notification.
ACCEPTANCE OF SHARES FOR PAYMENT AND PAYMENT OF PURCHASE PRICE
Upon the terms and subject to the conditions of the Offer, and as promptly
as practicable after the Expiration Date, ILN will accept for payment (and
thereby purchase) and pay for Shares validly tendered and not withdrawn as
permitted in "Terms of the Offer -- Withdrawal Rights." Thereafter, payment for
all Shares validly tendered on or prior to the Expiration Date and accepted
pursuant to the Offer will be made by the Depositary as promptly as practicable
after the Expiration Date. In all cases, payment for Shares accepted for payment
pursuant to the Offer will be made promptly but only after timely receipt by the
Depositary of certificates for such Shares (or of an Agent's Message), a
properly completed and duly executed Letter of Transmittal and Proxy (or in the
case of an Eligible Institution, a facsimile thereof) and any other required
documents. Accordingly, tendering Preferred Shareholders may be paid at
different times depending upon when Share certificates or Book-Entry
Confirmations are actually received by the Depositary.
For purposes of the Offer, ILN will be deemed to have accepted for payment
(and thereby purchased) Shares that are validly tendered and not withdrawn as,
if and when it gives oral or written notice to the Depositary of its acceptance
for payment of such Shares. ILN will pay for Shares that it has purchased
pursuant to the Offer by depositing the purchase price therefor thereon with the
Depositary, which will act as agent for tendering Preferred Shareholders for the
purpose of receiving payment from ILN and transmitting payment to tendering
Preferred Shareholders. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON AMOUNTS
TO BE PAID TO TENDERING PREFERRED SHAREHOLDERS, REGARDLESS OF ANY DELAY IN
MAKING SUCH PAYMENT.
Certificates for all Shares not validly tendered will be returned or, in
the case of Shares tendered by book-entry transfer, such Shares will be credited
to an account maintained with the Book-Entry Transfer Facility, as promptly as
practicable, without expense to the tendering Preferred Shareholder.
Payment for Shares may be delayed in the event of difficulty in determining
the number of Shares properly tendered. If certain events occur, ILN may not be
obligated to purchase Shares pursuant to the Offer. See "Terms of the Offer --
Certain Conditions of the Offer."
ILN will pay or cause to be paid any stock transfer taxes with respect to
the sale and transfer of any Shares to it or its order pursuant to the Offer.
If, however, payment of the purchase price is to be made to, or Shares not
tendered or not purchased are to be registered in the name of, any person other
than the registered owner, or if tendered Shares are registered in the name of
any person other than the person signing the Letter of Transmittal and Proxy,
the amount of any stock transfer taxes (whether imposed on the registered owner,
such other person or otherwise) payable on account of the transfer to such
person will be deducted from the purchase price unless satisfactory evidence of
the payment of such taxes, or exemption therefrom, is submitted. Each Preferred
Shareholder will be responsible for paying any income or gross receipts taxes
imposed by any jurisdiction by reason of the sale of the Shares or the Special
Cash Payment, as described
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<PAGE> 16
herein. See Instruction 6 of the accompanying Letter of Transmittal and Proxy.
See also "Proposed Amendment and Proxy Solicitation -- Special Cash Payments"
and "Certain Federal Income Tax Consequences."
CERTAIN CONDITIONS OF THE OFFER
ILN WILL NOT BE REQUIRED TO ACCEPT FOR PAYMENT OR PAY FOR ANY SHARES
TENDERED IF THE PROPOSED AMENDMENT IS NOT ADOPTED AT THE SPECIAL MEETING.
PREFERRED SHAREHOLDERS OF RECORD HAVE THE RIGHT TO VOTE FOR OR AGAINST THE
PROPOSED AMENDMENT REGARDLESS OF WHETHER THEY TENDER THEIR SHARES. IF THE
PROPOSED AMENDMENT IS ADOPTED AT THE SPECIAL MEETING, IPC WILL MAKE A SPECIAL
CASH PAYMENT TO EACH PREFERRED SHAREHOLDER WHO VOTED IN FAVOR OF THE PROPOSED
AMENDMENT, PROVIDED THAT THEIR SHARES HAVE NOT BEEN TENDERED PURSUANT TO THE
OFFER. PREFERRED SHAREHOLDERS WHO TENDER THEIR SHARES WILL ONLY BE ENTITLED TO
THE PURCHASE PRICE PER SHARE LISTED ON THE FRONT COVER OF THIS OFFER TO PURCHASE
AND PROXY STATEMENT.
In addition, notwithstanding any other provision of the Offer, ILN will not
be required to accept for payment or pay for any Shares tendered, and may
terminate or amend the Offer (by oral or written notice to the Depositary and
timely public announcement) or may postpone (subject to the requirements of the
Exchange Act for prompt payment for or return of Shares) the acceptance for
payment of, or payment for, Shares tendered, if at any time on or after [DAY
BEFORE STATEMENT DATE], and at or before the Expiration Date, any of the
following shall have occurred (which shall not have been waived by ILN):
(i) there shall have been threatened, instituted or pending any action
or proceeding by any government or governmental, regulatory or
administrative agency, authority or tribunal or any other person, domestic
or foreign, or before any court, authority, agency or tribunal that (a)
challenges the acquisition of Shares pursuant to the Offer or otherwise in
any manner relates to or affects the Offer or (b) in the reasonable
judgment of ILN, would or might materially and adversely affect the
business, condition (financial or otherwise), income, operations or
prospects of ILN and its subsidiaries taken as a whole, or otherwise
materially impair in any way the contemplated future conduct of the
business of ILN or any of its subsidiaries or materially impair the Offer's
contemplated benefits to ILN;
(ii) there shall have been any action threatened, pending or taken, or
approval withheld, or any statute, rule, regulation, judgment, order or
injunction threatened, proposed, sought, promulgated, enacted, entered,
amended, enforced or deemed to be applicable to the Offer or ILN or any of
its subsidiaries, by any legislative body, court, authority, agency or
tribunal that, in ILN's reasonable judgment, would or might directly or
indirectly (a) make the acceptance for payment of, or payment for, some or
all of the Shares illegal or otherwise restrict or prohibit consummation of
the Offer; (b) delay or restrict the ability of ILN, or render ILN unable,
to accept for payment or pay for some or all of the Shares; (c) materially
impair the contemplated benefits of the Offer to ILN or IPC (including
materially increasing the effective interest cost of certain types of
unsecured indebtedness); or (d) materially affect the business, condition
(financial or otherwise), income, operations or prospects of ILN and its
subsidiaries taken as a whole, or otherwise materially impair in any way
the contemplated future conduct of the business of ILN or any of its
subsidiaries;
(iii) there shall have occurred (a) any significant decrease in the
market price of the Shares, (b) any change in the general political,
market, economic or financial conditions in the United States or abroad
that, in the reasonable judgment of ILN, would or might have a material
adverse effect on ILN's business, operations, prospects or ability to
obtain financing generally or the trading in the Shares or other equity
securities of ILN; (c) the declaration of a banking moratorium or any
suspension of payments in respect of banks in the United States or any
limitation on, or any event that, in ILN's reasonable judgment, would or
might affect the extension of credit by lending institutions in the United
States; (d) the commencement of war, armed hostilities or other
international or national calamity directly or
15
<PAGE> 17
indirectly involving the United States; (e) any general suspension of
trading in, or limitation on prices for, securities on any national
securities exchange or in the over-the-counter market; (f) in the case of
any of the foregoing existing at the time of the commencement of the Offer,
in ILN's reasonable judgment, a material acceleration or worsening thereof,
(g) any decline in either the Dow Jones Industrial Average or the Standard
and Poor's Composite 500 Stock Index by an amount in excess of 15% measured
from the close of business on [DAY BEFORE STATEMENT DATE]; or (h) a decline
in the ratings accorded any of ILN's securities or the Shares by Moody's,
S&P or D&P, or that S&P, Moody's or D&P has announced that it has placed
any such rating under surveillance or review with negative implications;
(iv) any tender or exchange offer with respect to some or all of the
Shares (other than the Offer) or other equity securities of ILN, or a
merger, acquisition or other business combination proposal for ILN, shall
have been proposed, announced or made by any person or entity; or
(v) there shall have occurred any event or events that have resulted,
or, in ILN's reasonable judgment, may result, in an actual or threatened
change in the business, condition (financial or otherwise), income,
operations, stock ownership or prospects of ILN and its subsidiaries;
and in the sole judgment of ILN, such event or events make it undesirable or
inadvisable to proceed with the Offer or with such acceptance for payment or
payment.
The foregoing conditions (including the condition that the Proposed
Amendment be adopted at the Special Meeting) are for the sole benefit of ILN and
may be asserted by ILN regardless of the circumstances (including any action or
inaction by ILN) giving rise to any such condition, and any such condition may
be waived by ILN, in whole or in part, at any time and from time to time in its
sole discretion. A decision by ILN to terminate or otherwise amend any Offer,
following the occurrence of any of the foregoing, with respect to one Series of
Preferred will not create an obligation on behalf of ILN to terminate or
otherwise amend in a similar manner the Offer with respect to any other Series
of Preferred. The failure by ILN at any time to exercise any of the foregoing
rights shall not be deemed a waiver of any such right and each such right shall
be deemed an ongoing right which may be asserted at any time and from time to
time. Any determination by ILN concerning the events described above will be
final and binding on all parties.
EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENTS
ILN expressly reserves the right, in its sole discretion, and at any time
and/or from time to time prior to the Expiration Date, to extend the period of
time during which the Offer for any Series of Preferred is open by giving oral
or written notice of such extension to the Depositary, without extending the
period of time during which the Offer for any other Series of Preferred is open.
There can be no assurance, however, that ILN will exercise its right to extend
the Offer for any Series of Preferred. During any such extension, all Shares of
the subject Series of Preferred previously tendered will remain subject to the
Offer, except to the extent that such Shares may be withdrawn as set forth in
"Terms of the Offer -- Withdrawal Rights."
ILN also expressly reserves the right, in its sole discretion, to, among
other things, terminate the Offer and not accept for payment or pay for any
Shares tendered, subject to Rule 13e-4(f) (5) under the Exchange Act, which
requires ILN either to pay the consideration offered or to return the Shares
tendered promptly after the termination or withdrawal of the Offer upon the
occurrence of any of the conditions specified in "Terms of the Offer -- Certain
Conditions of the Offer" by giving oral or written notice of such termination to
the Depositary, and making a public announcement thereof.
Subject to compliance with applicable law, ILN further reserves the right,
in its sole discretion, to amend the Offer in any respect. Amendments to the
Offer may be made at any time and/or from time to time effected by public
announcement thereof, such announcement, in the case of an extension, to be
issued no later than 9:00 a.m., New York City time, on the next business day
after the previously scheduled Expiration Date. Any public announcement made
pursuant to the Offer will be disseminated promptly to Preferred Shareholders
affected thereby in a manner reasonably designed to inform such Preferred
Shareholders of such change. Without limiting the manner in which ILN may choose
to make a public announcement, except as
16
<PAGE> 18
required by applicable law, ILN shall have no obligation to publish, advertise
or otherwise communicate any such public announcement other than by making a
release to the Dow Jones News Service.
If ILN materially changes the terms of the Offer or the information
concerning the Offer, or if it waives a material condition of the Offer, ILN
will extend the Offer to the extent required by Rules 13e-4(d) (2) and 13e-4(e)
(2) under the Exchange Act. Those rules require that the minimum period during
which the Offer must remain open following material changes in the terms of the
Offer or information concerning the Offer (other than a change in price, a
change in percentage of securities sought or a change in the dealerIs
solicitation fee) will depend on the facts and circumstances, including the
relative materiality of such terms or information. The SEC has stated that, in
its view, an offer should remain open for a minimum of five business days from
the date that a notice of such a material change is first published, sent or
given. If the Offer is scheduled to expire at any time earlier than the
expiration of a period ending on the tenth business day from, and including, the
date that ILN publishes, sends or gives to Preferred Shareholders a notice that
it will (i) increase or decrease the price it will pay for Shares, (ii) decrease
the percentage of Shares it seeks or (iii) increase or decrease the Soliciting
Dealers' Fees, the Offer will be extended until the expiration of such period of
ten business days. THE OFFER FOR EACH SERIES OF PREFERRED IS INDEPENDENT OF THE
OFFER FOR ANY OTHER SERIES OF PREFERRED. IF ILN EXTENDS OR AMENDS ANY OFFER WITH
RESPECT TO ONE SERIES OF PREFERRED FOR ANY REASON, ILN WILL HAVE NO OBLIGATION
TO EXTEND THE OFFER FOR ANY OTHER SERIES OF PREFERRED.
PROPOSED AMENDMENT AND PROXY SOLICITATION
INTRODUCTION
This Offer to Purchase and Proxy Statement is first being mailed on or
about [STATEMENT DATE] to the Preferred Shareholders of IPC in connection with
the solicitation of proxies by the Board of Directors of IPC (the "Board") for
use at the Special Meeting. At the Special Meeting, the shareholders of record
of IPC will vote upon the Proposed Amendment to the Articles.
While Preferred Shareholders who wish to tender their Shares pursuant to
the Offer are not required to vote in favor of the Proposed Amendment, the Offer
is conditioned upon the Proposed Amendment being adopted at the Special Meeting.
In addition, Preferred Shareholders have the right to vote for the Proposed
Amendment regardless of whether they tender their Shares. If the Proposed
Amendment is adopted at the Special Meeting, IPC will make a special cash
payment in the amount of $ per Share (the "Special Cash Payment") to each
Preferred Shareholder who voted in favor of the Proposed Amendment, provided
that such Shares have not been tendered pursuant to the Offer. If a Preferred
Shareholder votes against the Proposed Amendment or abstains, such Preferred
Shareholder shall not be entitled to the Special Cash Payment (regardless of
whether the Proposed Amendment is adopted). Those Preferred Shareholders who
validly tender their Shares will be entitled only to the purchase price per
Share listed on the front cover of this Offer to Purchase and Proxy Statement.
See "-- Special Cash Payments."
VOTING SECURITIES, RIGHTS AND PROCEDURES
Only holders of record of IPC's voting securities at the close of business
on [RECORD DATE] (the "Record Date") will be entitled to vote in person or by
proxy at the Special Meeting. The outstanding voting securities of IPC are
divided into two classes: common stock and cumulative preferred stock (par value
$50 per Share). The class of cumulative preferred stock has been issued in the
six Series of Preferred with the record holders of all Shares of the cumulative
preferred stock voting together as one class. The shares outstanding as of the
Record Date, and the vote to which each share is entitled in consideration of
the Proposed Amendment, are as follows:
<TABLE>
<CAPTION>
SHARES VOTES PER
CLASS OUTSTANDING SHARE
----- ----------- ---------
<S> <C> <C>
Common Stock (No Par Value)............................. 66,215,292 1 vote
Cumulative Preferred Stock (Par Value $50 Per Share).... 1,139,110 1 vote
</TABLE>
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<PAGE> 19
The affirmative votes of the holders of at least two-thirds of the
outstanding shares of IPC's (i) common stock and all Series of Cumulative
Preferred Stock, voting together as one class, and (ii) Cumulative Preferred
Stock, all Series voting together as one class, are required to approve the
Proposed Amendment to be presented at the Special Meeting. Abstentions and
broker non-votes will have the effect of votes against the Proposed Amendment.
ILN, WHICH OWNS ALL OF THE OUTSTANDING SHARES OF COMMON STOCK OF IPC, HAS
ADVISED IPC THAT IT INTENDS TO VOTE ALL OF THE OUTSTANDING SHARES OF COMMON
STOCK OF IPC IN FAVOR OF THE PROPOSED AMENDMENT.
Votes at the Special Meeting will be tabulated preliminarily by the
Depositary. Inspectors of Election, duly appointed by the presiding officer of
the Special Meeting, will definitively count and tabulate the votes and
determine and announce the results at the Special Meeting. IPC has no
established procedure for confidential voting.
DISSENTERS' RIGHTS
Section 11.65 of the Illinois Business Corporation Act of 1983, as amended
(the "Business Corporation Act"), provides that a shareholder of an Illinois
corporation is entitled to dissent from, and obtain payment for his or her
shares in the event of, among other things, an amendment of the corporation's
articles of incorporation that materially and adversely affects rights in
respect of a dissenter's shares because it alters or abolishes a preferential
right of such shares. As described herein, the Proposed Amendment would amend
the Articles to remove a covenant which provides that the issuance or assumption
of unsecured indebtedness for certain purposes above a certain threshold
requires the consent of the holders of at least a majority of the total number
of Shares then outstanding. To the extent that the Proposed Amendment is deemed
to alter or abolish a "preferential right" of the Shares within the meaning of
Section 11.65 of the Business Corporation Act, the Preferred Shareholders would
have the right to dissent from the Proposed Amendment and obtain payment of the
fair value of their Shares. Pursuant to Section 11.70 of the Business
Corporation Act, a Preferred Shareholder who elects to dissent from the Proposed
Amendment (a "Dissenter"), must deliver to IPC before , 1998
a written demand for payment of his or her Shares if the Proposed Amendment is
adopted at the Special Meeting. If a written demand is not received by that
date, the Dissenter will lose the right to dissent and thereby obtain payment
for his or her Shares. A Dissenter also will lose the right to dissent if the
Dissenter votes in favor of the Proposed Amendment at the Special Meeting.
If the Proposed Amendment gives rise to dissenters' rights under Section
11.65 of the Business Corporation Act and is adopted at the Special Meeting, IPC
will advise any Dissenter meeting the foregoing eligibility requirements of its
opinion as to the estimated fair value of the Shares owned by the Dissenter,
together with supporting information and a commitment to pay for such Shares at
the estimated fair value. A Dissenter who does not agree with IPC's estimated
fair value of the Shares must notify IPC, within 30 days thereafter, of the
Dissenter's estimate of fair value. If, within 60 days thereafter, IPC and the
Dissenter have not agreed upon the fair value of the Shares and the interest
due, IPC must either pay the Dissenter the difference in value demanded by the
Dissenter or file a petition in circuit court requesting the court to determine
the fair value of the Shares and the interest due.
The foregoing summary does not purport to be a complete statement of the
provisions of Sections 11.65 and 11.70 of the Business Corporation Act and is
qualified in its entirety by reference to the relevant portions of such
Sections, copies of which are attached hereto as Attachment A.
A Dissenter who receives payment for his or her Shares upon exercise of the
right of dissent will, subject to the provisions of the Section 302(b) of the
Internal Revenue Code, recognize gain or loss for Federal income tax purposes,
measured by the difference between the cost basis for his or her Shares and the
amount of payment received.
PREFERRED SHAREHOLDERS WHO WISH TO RESERVE THE RIGHT TO EXERCISE
DISSENTERS' RIGHTS SHOULD REVIEW CAREFULLY THE FOREGOING DISCUSSION AND THE
PROVISIONS OF THE BUSINESS CORPORATION ACT SET FORTH IN ATTACHMENT A. THE
FAILURE TO COMPLY STRICTLY WITH THE DESCRIBED PROCEDURES WILL RESULT IN THE LOSS
OF ANY SUCH DISSENTERS' RIGHTS. ANY PREFERRED SHAREHOLDER WHO
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<PAGE> 20
CONTEMPLATES THE ASSERTION OF DISSENTERS' RIGHTS IS URGED TO CONSULT HIS OR HER
OWN COUNSEL.
PROXIES
THE ENCLOSED PROXY (WHICH IS INCLUDED AS PART OF THE LETTER OF TRANSMITTAL
AND PROXY AND WHICH IS ALSO ENCLOSED SEPARATELY HEREWITH) IS SOLICITED BY IPC'S
BOARD, WHICH RECOMMENDS VOTING IN FAVOR OF THE PROPOSED AMENDMENT. ALL SHARES OF
IPC'S COMMON STOCK WILL BE VOTED IN FAVOR OF THE PROPOSED AMENDMENT. Shares of
IPC's cumulative preferred stock represented by properly executed proxies
received at or prior to the Special Meeting will be voted in accordance with the
instructions thereon. If no instructions are indicated, duly executed proxies
will be voted in accordance with the recommendation of the Board. It is not
anticipated that any other matters will be brought before the Special Meeting.
However, the enclosed proxy gives discretionary authority to the proxy holders
named therein should any other matters be presented at the Special Meeting, and
it is the intention of the proxy holders to act on any other matters in
accordance with their best judgment.
Execution of a proxy will not prevent a shareholder from attending the
Special Meeting and voting in person. Any shareholder giving a proxy may revoke
it at any time before it is voted by delivering to the Secretary of IPC written
notice of revocation bearing a later date than the proxy, by delivering a duly
executed proxy bearing a later date, or by voting in person by ballot at the
Special Meeting. Withdrawal of Shares tendered pursuant to the Offer will not
revoke a properly executed proxy.
IPC will bear the cost of the solicitation of proxies by the Board. IPC has
engaged MacKenzie Partners, Inc. to act as Information Agent in connection with
the solicitation of proxies for a fee of $ , plus reimbursement of
reasonable out-of-pocket expenses. Proxies will be solicited by mail, telephone
or other electronic means. In addition, officers and employees of IPC may also
solicit proxies personally or by telephone; such persons will receive no
additional compensation for these services. The Information Agent has not been
retained to make, and will not make, solicitations or recommendations in
connection with the Proposed Amendment. The Dealer Manager has not been retained
to act in any capacity in connection with the solicitation of proxies.
IPC has requested that brokerage firms and other custodians, nominees and
fiduciaries forward solicitation materials to the beneficial owners of shares of
IPC's cumulative preferred stock held of record by such persons and will
reimburse such brokers and other fiduciaries for their reasonable out-of-pocket
expenses incurred in connection therewith.
SPECIAL CASH PAYMENTS
Subject to the terms and conditions set forth in this Offer to Purchase and
Proxy Statement, if (but only if) the Proposed Amendment is adopted at the
Special Meeting, IPC will make a Special Cash Payment to each Preferred
Shareholder who voted at the Special Meeting in favor of the Proposed Amendment
either in person by ballot or by proxy, in the amount of $ for each Share held
by such Preferred Shareholder on the Record Date which is so voted, provided
that such Shares have not been tendered pursuant to the Offer. SPECIAL CASH
PAYMENTS WILL BE MADE TO PREFERRED SHAREHOLDERS AS OF THE RECORD DATE (IF SUCH
SHARES HAVE NOT BEEN TENDERED PURSUANT TO THE OFFER) ONLY IN RESPECT OF EACH
SHARE WHICH IS VOTED IN FAVOR OF THE PROPOSED AMENDMENT; PROVIDED, HOWEVER, THAT
THOSE PREFERRED SHAREHOLDERS WHO VALIDLY TENDER THEIR SHARES WILL BE ENTITLED
ONLY TO THE PURCHASE PRICE PER SHARE LISTED ON THE FRONT COVER OF THIS OFFER TO
PURCHASE AND PROXY STATEMENT. IPC has been advised that there is uncertainty
under state law, due to the lack of controlling precedent, as to the
permissibility of making Special Cash Payments. While IPC cannot predict how a
court would rule on the issue, IPC believes that ILN's Offer is fair to
Preferred Shareholders, that the Proposed Amendment is in the best interests of
IPC and its shareholders, and, accordingly, has decided to make the Special Cash
Payments. If the Proposed Amendment is adopted at the Special Meeting, Special
Cash Payments will be paid out of IPC's general funds, promptly after the
Proposed Amendment shall have become effective. However, no accrued interest
will be paid on the Special Cash Payments regardless of any delay in making such
payments.
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<PAGE> 21
Only Preferred Shareholders on the Record Date (or their legal
representatives or attorneys-in-fact) are entitled to vote at the Special
Meeting and, if the Proposed Amendment is adopted at the Special Meeting, to
receive Special Cash Payments from IPC. Any beneficial holder of Shares who is
not the registered holder of such Shares as of the Record Date (as would be the
case for any beneficial holder whose Shares are registered in the name of such
holder's broker, dealer, commercial bank, trust company or other nominee) must
arrange with the record Preferred Shareholder to execute and deliver a proxy
form on such beneficial owner's behalf. If a beneficial holder of Shares intends
to attend the Special Meeting and vote in person, such beneficial holder must
obtain a legal proxy form from his or her broker, dealer, commercial bank, trust
company or other nominee.
TO AVOID FEDERAL INCOME TAX BACKUP WITHHOLDING EQUAL TO 31% OF THE SPECIAL
CASH PAYMENT, EACH PREFERRED SHAREHOLDER VOTING IN FAVOR OF THE PROPOSED
AMENDMENT MUST NOTIFY THE DEPOSITARY OF SUCH PREFERRED SHAREHOLDER'S CORRECT
TAXPAYER IDENTIFICATION NUMBER AND PROVIDE CERTAIN OTHER INFORMATION BY PROPERLY
COMPLETING AND EXECUTING THE SUBSTITUTE FORM W-9 INCLUDED IN THE LETTER OF
TRANSMITTAL AND PROXY OR THE SUBSTITUTE FORM W-9 INCLUDED IN THE PROXY. FOREIGN
PREFERRED SHAREHOLDERS MUST SUBMIT A PROPERLY COMPLETED FORM W-8 IN ORDER TO
AVOID THE APPLICABLE BACKUP WITHHOLDING; PROVIDED, HOWEVER, THAT BACKUP
WITHHOLDING WILL NOT APPLY TO FOREIGN PREFERRED SHAREHOLDERS SUBJECT TO 30% (OR
LOWER TREATY RATE) WITHHOLDING ON SPECIAL CASH PAYMENTS. SEE "CERTAIN FEDERAL
INCOME TAX CONSEQUENCES."
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
IPC Securities. As noted above, ILN owns all the outstanding common stock
of IPC. ILN, IPC and their subsidiaries and affiliates do not beneficially own
any Shares as of January 31, 1998. None of the pension, profit sharing or other
retirement plans of such entities beneficially own any Shares as of January 31,
1998. In addition, IPC's and ILN's directors and executive officers do not
beneficially own any Shares as of January 31, 1998. There is no person or group
known by management of IPC to be the beneficial owner of more than 5% of the
Shares as of January 31, 1998.
ILN Securities. The beneficial ownership of ILN's common stock held by each
director of ILN and IPC, the five most highly compensated executive officers of
ILN and IPC in 1997, and all directors and executive officers as a group of ILN
and IPC, as of January 31, 1998, is set forth in the following table.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) PERCENT OF CLASS
------------------------ ----------------------- ----------------
<S> <C> <C>
Larry F. Altenbaumer....................................... 13,092(2) *
John G. Cook............................................... 11,894(2) *
Larry D. Haab.............................................. 68,250(2) *
Paul L. Lang............................................... 21,216(2) *
Robert A. Schultz.......................................... 8,551(2) *
J. Joe Adorjan............................................. 0 *
C. Steven McMillan......................................... 1,300 *
Robert M. Powers........................................... 8,550 *
Sheli Z. Rosenberg......................................... 0 *
Walter D. Scott............................................ 5,150 *
Joe J. Stewart............................................. 0 *
Ronald L. Thompson......................................... 3,677 *
Walter M. Vannoy........................................... 5,010 *
Marilou von Ferstel........................................ 4,420 *
John D. Zeglis............................................. 2,626 *
All directors and executive officers as a group............ 187,021 *
</TABLE>
- -------------------------
* Less than 1%.
20
<PAGE> 22
(1) Each person named in the table has sole voting and investment power with
respect to shares of ILN's common stock listed as owned by each person.
(2) Includes the following Shares issuable pursuant to stock options exercisable
on or before March 31, 1998; Mr. Haab, 56,900; Mr. Lang, 17,800; Mr.
Altenbaumer, 17,800; Mr. Cook, 9,900; and Mr. Schultz, 6,750.
BUSINESS TO COME BEFORE THE SPECIAL MEETING
The following Proposed Amendment to the Articles is the only item of
business expected to be presented at the Special Meeting:
To remove in its entirety ARTICLE V, Section 1, Clause (f)(1), limiting
IPC's ability to issue or assume unsecured indebtedness (the "Debt
Limitation Provision").
THE FOLLOWING STATEMENTS, UNLESS THE CONTEXT OTHERWISE REQUIRES, ARE
SUMMARIES OF THE SUBSTANCE OR GENERAL EFFECT OF PROVISIONS OF THE ARTICLES, AND
ARE QUALIFIED IN THEIR ENTIRETY BY THE ARTICLES, INCLUDING ARTICLE V SECTION 1,
CLAUSE (F)(1) (AS DESCRIBED BELOW).
EXPLANATION OF THE PROPOSED AMENDMENT
The Debt Limitation Provision in the Articles currently prohibits, without
the consent of the holders of a majority of the outstanding Shares, the issuance
or assumption by IPC of any unsecured notes, debentures or other securities
representing unsecured indebtedness (other than for the purpose of refunding
outstanding unsecured indebtedness or for the redemption or retirement of all
outstanding Shares) if, immediately after such issuance or assumption, the total
outstanding principal amount of all securities representing unsecured
indebtedness (including unsecured securities then to be issued or assumed) would
exceed 20% of the aggregate of (i) the total principal amount of all outstanding
secured indebtedness issued or assumed by IPC at the time of such issuance or
assumption and (ii) the capital and surplus of IPC, as then stated on IPC's
books of account. The Proposed Amendment, if adopted, would eliminate in its
entirety the Debt Limitation Provision, as set forth below, from the Articles:
(f)(1) The Corporation shall not, without the consent (given by vote
at a meeting called for that purpose) of the holders of at least a majority
of the total number of shares of Preferred Stock then outstanding, issue
any unsecured notes, debentures or other securities representing unsecured
indebtedness, or assume any such unsecured indebtedness, for purposes other
than (A) the refunding of outstanding unsecured indebtedness theretofore
issued or assumed by the Corporation, (B) the reacquisition, redemption or
other retirement of any indebtedness which reacquisition, redemption or
other retirement has been approved by any regulatory authority having
jurisdiction in the premises, or (C) the reacquisition, redemption or other
retirement of all outstanding shares of Preferred Stock or of any other
class of stock ranking prior to, or on a parity with, Preferred Stock as to
dividends or other distributions, if immediately after such issue or
assumption the total principal amount of all unsecured notes, debentures or
other securities representing unsecured indebtedness issued or assumed by
the Corporation including unsecured indebtedness then to be issued or
assumed would exceed twenty percent (20%) of the aggregate of (a) the total
principal amount of all bonds or other securities representing secured
indebtedness issued or assumed by the Corporation and then to be
outstanding, and (b) the capital and surplus of the Corporation as then to
be stated on the books of account of the Corporation.
REASONS FOR THE PROPOSED AMENDMENT
General. IPC believes that legislative, regulatory, technological and
market developments will lead to a more competitive environment in the electric
utility industry. As competition intensifies, flexibility and cost reduction
will be even more crucial to success. Because the electric utility industry is
extremely capital intensive, control and minimization of financing costs are of
particular importance. In response to the competitive forces and regulatory
changes faced by IPC, IPC has from time to time considered, and expects to
continue to consider, various strategies designed to enhance its competitive
position and to increase its ability to adapt to and anticipate changes in its
utility business.
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<PAGE> 23
IPC believes that adoption of the Proposed Amendment is critical to
financial flexibility and capital cost reduction. If the Proposed Amendment is
adopted, the Debt Limitation Provision will be eliminated. Historically, IPC's
debt financing generally has been accomplished through the issuance of long-term
mortgage bonds, unsecured indebtedness and pollution control bonds. IPC has
mortgage bonds outstanding under two mortgages: (i) the 1943 Mortgage and Deed
of Trust, between IPC and Harris Trust and Savings Bank (the "1943 Mortgage"),
and (ii) the 1992 General Mortgage and Deed of Trust, between IPC and Harris
Trust and Savings Bank (the "1992 Mortgage"). Mortgage bonds issued under the
1943 Mortgage represent secured indebtedness placing a first priority lien on
substantially all of IPC's assets. While subject to the prior lien of the 1943
Mortgage, IPC's utility assets are also subject to the junior lien of the 1992
Mortgage. IPC's mortgage bonds issued under both the 1943 Mortgage and the 1992
Mortgage contain certain restrictive covenants with respect to, among other
things, the disposition of assets and the ability to issue additional mortgage
bonds. Unsecured indebtedness generally has fewer restrictions than mortgage
bonds. Short-term indebtedness, a lower cost form of debt available to IPC,
represents one type of unsecured indebtedness. Pollution control bond financing,
a more favorable type of financing due to its tax-exempt status, is available
only for very limited purposes.
The Proposed Amendment will not only allow IPC to issue a greater amount of
unsecured indebtedness, but also will allow IPC to issue a greater amount of
total indebtedness. IPC, however, presently has no intention of issuing a
greater amount of unsecured debt or total debt than it would have issued absent
the adoption of the Proposed Amendment, except that (i) IPC may issue additional
unsecured debt in the event it determines to purchase the Shares from ILN and
(ii) IPC may issue debt in connection with a securitization financing authorized
under PA 90-561. Rather, it is IPC's intention to retain flexibility in the mix
of its outstanding debt and therefore have the option to use more short-term and
other unsecured debt and fewer mortgage bonds. In addition, as a regulated
utility, the issuance of any securities by IPC would continue to be subject to
the prior approval of the ICC (with respect to securities maturing in more than
one year) or the Federal Energy Regulatory Commission (with respect to
securities maturing in one year or less).
Inasmuch as the Debt Limitation Provision contained in the Articles limits
IPC's flexibility in planning and financing its business activities, IPC
believes it ultimately will be at a competitive disadvantage if the Debt
Limitation Provision is not eliminated. The industry's new competitors (for
example, power marketers, exempt wholesale generators, independent power
producers and cogeneration facilities) generally are not subject to the type of
financing restrictions the Articles impose on IPC. Recently, several other
utilities with the same or similar charter restrictions have successfully
eliminated such provisions by soliciting their shareholders for the same or
similar amendments. In addition, some potential utility competitors have no
comparable provision restricting the issuance of unsecured debt. Given the onset
of competition in the utility industry, IPC must continue to explore new ways of
reducing costs and enhancing flexibility. IPC believes that the adoption of the
Proposed Amendment will be in the best long-term competitive interests of its
shareholders.
Financial Flexibility. If the Proposed Amendment is adopted, IPC will have
increased flexibility (i) to choose among different types of debt financing and
(ii) to finance projects using the most cost effective means. IPC believes that
various types of unsecured debt alternatives may increase in importance as a
financing option. The availability and flexibility of unsecured debt is
necessary to take full advantage of changing conditions in securities markets.
In addition, although IPC's earnings currently are sufficient to meet the
earnings coverage tests that must be satisfied before issuing additional
mortgage bonds and preferred stock, there is no guarantee that this will be true
in the future. Other utilities have been unable to issue mortgage bonds during
certain periods because of restrictive covenants in their mortgages. IPC's
inability to issue mortgage bonds or preferred stock in the future, combined
with the inability to issue additional unsecured debt, would limit IPC's
financing options to more costly options, including additional common equity.
Moreover, continued reliance on the issuance of mortgage bonds could limit IPC's
ability in the future to strategically redeploy its assets.
22
<PAGE> 24
Under the Debt Limitation Provision, IPC's use of unsecured short-term
indebtedness is presently restricted. However, IPC believes that the prudent use
of such indebtedness in excess of this provision is vital to effective financial
management of its business. Not only is unsecured short-term indebtedness
generally one of the least expensive forms of capital, it also provides
flexibility in meeting seasonal and business cycle fluctuations in cash
requirements, acts as a bridge between issues of permanent capital and can be
used when unfavorable conditions prevail in the market for long-term capital.
However, because of the Debt Limitation Provision, as of December 31, 1997, the
maximum amount of unsecured indebtedness that IPC would be authorized under its
Articles to issue or assume would be approximately $612.7 million. As of
December 31, 1997, IPC had approximately $444.8 million of unsecured
indebtedness outstanding, thus leaving an additional $167.9 million of capacity
available.
Lower Costs. As previously mentioned, IPC's short-term debt issuances
generally represent one of its lowest-cost forms of financing. By increasing its
use of short-term debt, IPC may be able to lower its cost structure further,
thereby making its products more competitive and reducing its business risks.
However, with the Debt Limitation Provision in place, the availability and
corresponding benefits of short-term debt diminish. And although short-term debt
may expose the borrower to more volatility in interest rates, it should be noted
that the cost of short-term debt seldom exceeds the cost of other forms of
capital available at the same time.
FOR ALL THE ABOVE REASONS, IPC'S BOARD BELIEVES THE BEST LONG-TERM
INTERESTS OF SHAREHOLDERS ARE SERVED BY, AND ENCOURAGES SHAREHOLDERS TO VOTE IN
FAVOR OF, THE ADOPTION OF THE PROPOSED AMENDMENT.
RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS
ILN's Board of Directors has selected Price Waterhouse LLP as independent
accountants for ILN and its subsidiaries, including IPC, for the year 1998. A
representative of Price Waterhouse LLP is expected to be present at the Special
Meeting with the opportunity to make a statement and to respond to appropriate
questions from shareholders.
PRICE RANGE OF SHARES; DIVIDENDS
Shares of the 4.08% Series, 4.20% Series, 4.26% Series, 4.42% Series and
4.70% Series are listed and traded on the NYSE under the symbols "IPCprA,"
"IPCprB," "IPCprC," "IPCprD" and "IPCprE," respectively. The last reported sales
price on the NYSE, as of the close of business on [DAY BEFORE STATEMENT DATE],
for each of these Series of Preferred is shown on the front cover of this Offer
to Purchase and Proxy Statement.
Shares of the 7.75% Series trade in the over-the-counter market under the
symbol "ILLNP". The last reported sales price in the over-the-counter market, as
of the close of business on [DAY BEFORE STATEMENT DATE], for the 7.75% Series of
Preferred is shown on the front cover of this Offer to Purchase and Proxy
Statement. However, Preferred Shareholders should be aware that there is no
established trading market for these Shares and that the Shares of the Series of
Preferred only trade sporadically and on a limited basis and, therefore, the
last reported sales price may not necessarily reflect the current market value
of such Shares.
On , 1998, there were issued and outstanding 283,290 shares
of the 4.08% Series of Preferred held by shareholders of record; 167,720 shares
of the 4.20% Series of Preferred held by shareholders of record; 136,000 shares
of the 4.26% Series of Preferred held by shareholders of record; 134,400 shares
of the 4.42% Series of Preferred held by shareholders of record; 176,000 shares
of the 4.70% Series of Preferred held by shareholders of record; and 241,700
shares of the 7.75% Series of Preferred held by shareholders of record.
PREFERRED SHAREHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS, IF
AVAILABLE, FOR THE SHARES.
23
<PAGE> 25
The following table sets forth the high and low sales prices of each Series
of Preferred on the NYSE or in the over-the-counter market as reported by the
National Quotation Bureau, Inc., as applicable, and the cash dividends paid
thereon for the fiscal quarters indicated.
DIVIDENDS AND PRICE RANGES OF CUMULATIVE PREFERRED STOCK
BY QUARTERS (1997 AND 1996)
<TABLE>
<CAPTION>
1997 -- QUARTERS 1996 -- QUARTERS
-------------------------------------------------- --------------------------------------------------
1ST 2ND 3RD 4TH 1ST 2ND 3RD 4TH
--- --- --- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CUMULATIVE PREFERRED
STOCK ($50 Par
Value)
4.08% Series
Dividends Paid Per
Share............. $0.51 $0.51 $0.51 $0.51 $0.51 $0.51 $0.51 $0.51
Market Price -- $
Per Share (NYSE)
(High/Low)........ 30.00/25.50 29.00/25.50 28.50/25.38 31.00/27.25 31.50/27.00 31.00/27.88 33.53/29.13 36.00/30.44
4.20% Series
Dividends Paid Per
Share............. $0.52 1/2 $0.52 1/2 $0.52 1/2 $0.52 1/2 $0.52 1/2 $0.52 1/2 $0.52 1/2 $0.52 1/2
Market Price -- $
Per Share (NYSE)
(High/Low)........ 30.00/27.00 29.00/27.38 30.00/26.88 32.00/28.50 32.00/28.00 32.00/27.00 34.52/30.50 37.00/32.00
4.26% Series
Dividends Paid Per
Share............. $0.53 1/4 $0.53 1/4 $0.53 1/4 $0.53 1/4 $0.53 1/4 $0.53 1/4 $0.53 1/4 $0.53 1/4
Market Price -- $
Per Share (NYSE)
(High/Low)........ 31.00/27.38 29.50/27.38 32.00/26.75 32.13/28.00 33.00/28.25 32.50/29.88 34.50/30.94 37.50/32.50
4.42% Series
Dividends Paid Per
Share............. $0.55 1/4 $0.55 1/4 $0.55 1/4 $0.55 1/4 $0.55 1/4 $0.55 1/4 $0.55 1/4 $0.55 1/4
Market Price -- $
Per Share (NYSE)
(High/Low)........ 32.00/29.00 31.50/27.75 32.00/27.13 34.00/29.00 33.50/29.50 34.00/29.50 35.50/32.00 39.00/33.25
4.70% Series
Dividends Paid Per
Share............. $0.58 3/4 $0.58 3/4 $0.58 3/4 $0.58 3/4 $0.58 3/4 $0.58 3/4 $0.58 3/4 $0.58 3/4
Market Price -- $
Per Share (NYSE)
(High/Low)........ 34.00/30.38 33.00/29.38 33.00/29.63 36.00/31.13 35.50/31.00 36.00/33.00 38.63/33.50 41.00/36.00
7.75% Series
Dividends Paid Per
Share............. $0.96 7/8 $0.96 7/8 $0.96 7/8 $0.968 7/8 $0.96 7/8 $0.96 7/8 $0.96 7/8 $0.96 7/8
Market Price -- $
Per Share (OTC)
(High/Low)........ 52.50/52.50 51.75/50.50 53.13/53.13 54.50/52.50 48.25/47.50 50.63/48.50 52.63/52.63 52.50/52.50
</TABLE>
- -------------------------
NYSE -- New York Stock Exchange
OTC -- Over-the-Counter market quotations provided by National Quotation Bureau,
Inc. High and low bid quotations are not available for the 7.75% Series.
Dividends for a Series of Preferred are payable when, as and if declared by
IPC's Board of Directors at the rate per annum included in such title of the
Series of Preferred listed on the front cover of this Offer to Purchase and
Proxy Statement. The May 1998 Dividend has been declared on each Series of
Preferred, payable May 1, 1998 to holders of record as of the close of business
on April 9, 1998. A tender and purchase of Shares pursuant to the Offer will not
deprive such Preferred Shareholder of his or her right to receive the May 1998
Dividend on his or her Shares, regardless of when such tender is made. Tendering
Preferred Shareholders will not be entitled to any dividends in respect of any
dividend period (or any portion thereof)
24
<PAGE> 26
after May 1, 1998. The payment of the May 1998 Dividend will be made separately
from payments for Shares tendered in the Offer or the payment of any Special
Cash Payments.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
In the opinion of Schiff Hardin & Waite, counsel to ILN and IPC, the
following summary describes the principal United States federal income tax
consequences of sales of Shares pursuant to the Offer and the receipt of Special
Cash Payments in connection with the adoption of the Proposed Amendment. This
summary is based on the Internal Revenue Code of 1986, as amended to the date
hereof (the "Code"), administrative pronouncements, judicial decisions and
existing and proposed Treasury Regulations, changes to any of which subsequent
to the date of this Offer to Purchase and Proxy Statement may adversely affect
the tax consequences described herein, possibly on a retroactive basis. This
summary is addressed to Preferred Shareholders who hold Shares as capital assets
within the meaning of Section 1221 of the Code. This summary does not discuss
all of the tax consequences that may be relevant to a Preferred Shareholder in
light of such Preferred Shareholder's particular circumstances or to Preferred
Shareholders subject to special rules (including certain financial institutions,
tax-exempt organizations, insurance companies, dealers in securities or
currencies, and Preferred Shareholders who are not citizens or residents of the
United States). Preferred Shareholders should consult their tax advisors with
regard to the application of the United States federal income tax laws to their
particular situations as well as any tax consequences arising under the laws of
any state, local or foreign taxing jurisdiction.
As used herein, the term "United States Holder" means an owner of a Share
that is (i) for United States federal income tax purposes a citizen or resident
of the United States; (ii) a corporation, partnership or other entity created or
organized in or under the laws of the United States or of any political
subdivision thereof; (iii) an estate, or for taxable years beginning on or
before December 31, 1996, in general, any trust, the income of which is subject
to United States federal income taxation regardless of its source; or (iv) for
taxable years beginning after December 31, 1996, any trust if a court within the
United States is able to exercise primary supervision over the administration of
such trust and one or more United States fiduciaries have the authority to
control all substantial decisions of such trust. A "Non-United States Holder" is
a Preferred Shareholder that is not a United States Holder.
TAX CONSIDERATIONS FOR TENDERING PREFERRED SHAREHOLDERS
Characterization of the Sale. A sale of Shares by a Preferred Shareholder
pursuant to the Offer will be a taxable transaction for Federal income tax
purposes.
United States Holders. A United States Holder will recognize gain or loss
equal to the difference between the tax basis of such Holder's Shares and the
amount of cash received in exchange therefor. A United States Holder's gain or
loss will be long-term capital gain or loss if the holding period for the Shares
is more than one year as of the date of the sale of such Shares. The excess of
net long-term capital gains over net short-term capital losses is taxed at a
lower rate than ordinary income for certain non-corporate taxpayers. Capital
gain on Shares held by non-corporate taxpayers for more than eighteen months on
the date of the sale of such Shares will be subject to a reduced tax rate. The
distinction between capital gain or loss and ordinary income or loss is also
relevant for purposes of, among other things, limitations on the deductibility
of capital losses.
Non-United States Holders. Any gain realized upon the sale of Shares by a
Non-United States Holder pursuant to the Offer generally will not be subject to
United States Federal income tax unless (i) such gain is effectively connected
with a trade or business in the United States of the Non-United States Holder,
or (ii) in the case of a Non-United States Holder who is an individual, such
individual is present in the United States for 183 days or more in the taxable
year of such sale and certain other conditions are met.
A Non-United States Holder described in clause (i) above will be taxed on
the net gain derived from the sale at regular graduated United States Federal
income tax rates. If a Non-United States Holder that is a foreign corporation
falls under clause (i) above, it may also be subject to an additional "branch
profits tax" at a 30% rate (or such lower rate as may be specified by an
applicable income tax treaty). Unless an applicable
25
<PAGE> 27
tax treaty provides otherwise, an individual Non-United States Holder described
in clause (ii) above will be subject to a flat 30% tax on the gain derived from
the sale, which may be offset by United States capital losses (notwithstanding
the fact that the individual is not considered a resident of the United States).
TAX CONSIDERATIONS FOR NON-TENDERING PREFERRED SHAREHOLDERS
Preferred Shareholders, whether or not they receive Special Cash Payments,
will not recognize any taxable gain or loss with respect to the Shares as a
result of the modification of the Articles by the Proposed Amendment.
United States Holders. There is no direct authority concerning the Federal
income tax consequences of the receipt of Special Cash Payments. IPC will, for
information reporting purposes, treat Special Cash Payments as ordinary
non-dividend income to recipient United States Holders.
Non-United States Holders. IPC will treat Special Cash Payments paid to a
Non-United States Holder of Shares as subject to withholding of United States
Federal income tax at a 30% rate. However, Special Cash Payments that are
effectively connected with the conduct of a trade or business by the Non-United
States Holder within the United States are not subject to the withholding tax
(provided such Non-United States Holder provides two originals of Internal
Revenue Service ("IRS") Form 4224 stating that such Special Cash Payments are so
effectively connected), but instead are subject to United States Federal income
tax on a net income basis at applicable graduated individual or corporate rates.
Any such effectively connected Special Cash Payments received by a foreign
corporation may, under certain circumstances, be subject to an additional
"branch profits tax" at a 30% rate (or such lower rate as may be specified by an
applicable income tax treaty). A Non-United States Holder of Shares eligible for
a reduced rate of United States withholding tax pursuant to an income tax treaty
may obtain a refund of any excess amounts withheld by filing an appropriate
claim for refund with the IRS.
BACKUP WITHHOLDING
ANY TENDERING PREFERRED SHAREHOLDER OR PREFERRED SHAREHOLDER WHO VOTES IN
FAVOR OF THE PROPOSED AMENDMENT BUT DOES NOT TENDER WHO FAILS TO COMPLETE AND
SIGN THE SUBSTITUTE FORM W-9 THAT IS INCLUDED IN THE APPLICABLE LETTER OF
TRANSMITTAL AND PROXY (OR, IN THE CASE OF A FOREIGN PREFERRED SHAREHOLDER, FORM
W-8 OBTAINABLE FROM THE DEPOSITARY) MAY BE SUBJECT TO A REQUIRED FEDERAL INCOME
TAX BACKUP WITHHOLDING OF 31% OF (1) IN THE CASE OF A TENDERING PREFERRED
SHAREHOLDER, THE GROSS AMOUNT PAYABLE TO SUCH PREFERRED SHAREHOLDER IN EXCHANGE
FOR THE SHARES OR (2) IN THE CASE OF A NON-TENDERING PREFERRED SHAREHOLDER WHO
VOTES IN FAVOR OF THE PROPOSED AMENDMENT, THE SPECIAL CASH PAYMENT. To prevent
backup United States Federal income tax withholding with respect to the purchase
price of Shares purchased pursuant to the Offer or the Special Cash Payment, a
United States Holder must provide the Depositary with the Preferred
Shareholder's correct taxpayer identification number and certify that the
Preferred Shareholder is not subject to backup withholding of Federal income tax
by completing the Substitute Form W-9 included in the applicable Letter of
Transmittal and Proxy. Certain Preferred Shareholders (including, among others,
all corporations and certain foreign shareholders) are exempt from backup
withholding. For a corporate United States Holder to qualify for such exemption,
such Preferred Shareholder must provide the Depositary with a properly completed
and executed Substitute Form W-9 attesting to its exempt status. In order for a
foreign Preferred Shareholder to qualify as an exempt recipient, the foreign
holder must submit a Form W-8, Certificate of Foreign Status, signed under
penalties of perjury, attesting to that Preferred Shareholder's exempt status. A
copy of Form W-8 may be obtained from the Depositary.
Unless a Preferred Shareholder provides the appropriate certification,
under the applicable law and regulations concerning "backup withholding" of
Federal United States income tax, the Depositary will be required to withhold,
and will withhold, 31% of the gross proceeds otherwise payable to such Preferred
Shareholder or other payee. The amount of any backup withholding from a payment
to a Preferred
26
<PAGE> 28
Shareholder will be allowed as a credit against such Preferred Shareholder's
United States federal income tax liability and may entitle such Preferred
Shareholder to a refund, provided that the required information is furnished to
the IRS. However, backup withholding is not required for amounts subject to
withholding discussed above under "Tax Consideration for Tendering Preferred
Shareholders -- Non-United States Holders" and "Tax Considerations for
Non-Tendering Preferred Shareholders -- Non-United States Holders."
SOURCE AND AMOUNT OF FUNDS
Assuming that ILN purchases all outstanding Shares pursuant to the Offer,
the total amount required by ILN to purchase such Shares will be approximately
$ million, exclusive of the May 1, 1998 Dividend, fees and other expenses. ILN
intends to fund the Offer through borrowings under its $150 million Credit
Agreement, dated as of June 12, 1996, as amended on June 28, 1996, with various
financial institutions and CIBC Inc. as Administrative Agent (the "Credit
Agreement"). The Credit Agreement terminates, unless extended, on June 11, 1998.
The Credit Agreement permits ILN to borrow funds at floating interest rates
determined by reference to the federal funds rate published by the Federal
Reserve Bank of New York or, for certain fixed periods, at fixed interest rates
determined by the interbank Eurodollar market. ILN's borrowings under the Credit
Agreement are expected to be repaid through funds received from IPC, which
expects to derive its funds from internally generated funds or the issuance of
short-term debt.
TRANSACTIONS AND AGREEMENTS CONCERNING THE SHARES
Each of ILN and IPC has been advised by its directors and executive
officers that no directors or executive officers of the respective companies own
any Shares. Based upon the companies' records and upon information provided to
each company by its directors and executive officers, neither company nor, to
the knowledge of either, any of their subsidiaries, affiliates, directors or
executive officers, or associates of the foregoing, or any of their pension,
profit-sharing or retirement plans, has engaged in any transactions involving
Shares during the 60 business days preceding the date hereof. Neither company
nor, to the knowledge of either, any of its directors or executive officers or
an associate of the foregoing is a party to any contract, arrangement,
understanding or relationship relating directly or indirectly to the Offer with
any other person or entity with respect to any securities of IPC.
IPC purchased Shares on the open market on the dates and at the prices
shown below in fiscal 1996 and 1997.
<TABLE>
<CAPTION>
NUMBER OF RANGE OF PURCHASE PRICES AVERAGE PURCHASE
SERIES FISCAL QUARTER SHARES (HIGH/LOW) PRICE PER SHARE
- ------ -------------- --------- ------------------------ ----------------
<C> <S> <C> <C> <C>
4.08% 3rd Quarter 1997 16,710 $36.520/$35.000 $35.606
4.20% 3rd Quarter 1997 12,280 37.590/34.841 35.762
4.26% 3rd Quarter 1997 14,000 36.059/36.059 36.059
4.42% 3rd Quarter 1997 15,600 37.413/37.413 37.413
4.70% 3rd Quarter 1997 24,000 38.989/38.989 38.989
7.75% 3rd Quarter 1996 135,100 52.750/52.125 52.421
</TABLE>
FEES AND EXPENSES ASSOCIATED WITH THE OFFER
Dealer Manager, Depositary and Information Agent Fees. Donaldson, Lufkin &
Jenrette Securities Corporation will act as the Dealer Manager for ILN in
connection with the Offer. ILN has agreed to pay the Dealer Manager a fee of
$ per Share for any Shares tendered, accepted for payment and paid for
pursuant to the Offer and to pay the Dealer Manager a fee of $ per Share for
any Shares that are not tendered pursuant to the Offer but which vote in favor
of the Proposed Amendment, provided that the Proposed Amendment is adopted at
the Special Meeting. The Dealer Manager will also be reimbursed by ILN for its
reasonable out-of-pocket expenses, including attorneys' fees, and will be
indemnified against certain liabilities,
27
<PAGE> 29
including certain liabilities under the federal securities laws, in connection
with the Offer. The Dealer Manager has rendered, is currently rendering and is
expected to continue to render various investment banking and other advisory
services to ILN and IPC. The Dealer Manager has received, and will continue to
receive, customary compensation from ILN and IPC for such services. ILN has
retained First Chicago Trust Company of New York as Depositary and MacKenzie
Partners, Inc. as Information Agent in connection with the Offer. The Depositary
and Information Agent will receive reasonable and customary compensation for
their services and will also be reimbursed for reasonable out-of-pocket
expenses, including attorney fees. ILN has agreed to indemnify the Depositary
and Information Agent against certain liabilities, including certain liabilities
under the federal securities law, in connection with the Offer. Neither the
Depositary nor the Information Agent has been retained to make solicitations or
recommendations in connection with the Offer.
Solicited Tender Fees; Separate Fees. Pursuant to Instruction 10 of the
accompanying Letter of Transmittal and Proxy, ILN will pay a solicitation fee of
$ per Share that is tendered, accepted for payment and paid for pursuant to
the Offer in transactions for beneficial owners of fewer than Shares
and a solicitation fee of $ per Share for transactions for beneficial owners
of or more Shares; provided that solicitation fees payable in
transactions for beneficial owners of or more Shares shall be paid 80%
to the Dealer Manager and 20% to any designated Soliciting Dealer (which may be
the Dealer Manager). If the Proposed Amendment is adopted at the Special
Meeting, IPC will pay to each designated Soliciting Dealer a separate fee of
$ per Share for Shares that are not tendered pursuant to the Offer but which
are voted in favor of the Proposed Amendment in transactions for beneficial
owners of fewer than Shares and a separate fee of $ per Share for
Shares that are not tendered pursuant to the Offer but which are voted in favor
of the Proposed Amendment in transactions for beneficial owners of or
more Shares; provided that the separate fee payable in transactions for
beneficial owners of or more Shares shall be paid 80% to the Dealer
Manager and 20% to any designated Soliciting Dealer (which may be the Dealer
Manager). A designated Soliciting Dealer is an entity obtaining the tender or
proxy, if the Letter of Transmittal and Proxy or the separate Proxy, as the case
may be, shall include its name and it is (i) any broker or dealer in securities,
including a Dealer Manager in its capacity as a dealer or broker, which is a
member in good standing of any national securities exchange or of the NASD, (ii)
any foreign broker or dealer not eligible for membership in the NASD which
agrees to conform to the
NASD's Rules of Fair Practice in soliciting tenders outside the United States to
the same extent as though it were an NASD member, or (iii) any bank or trust
company.
No solicitation fee or separate fee (other than solicitation fees payable
to the Dealer Manager as provided above) shall be payable to a Soliciting Dealer
with respect to the tender of Shares or the vote of Shares by a holder unless
the Letter of Transmittal and Proxy or the separate Proxy accompanying such
tender or vote, as the case may be, designates such Soliciting Dealer. No
solicitation fee or separate fee shall be payable to a Soliciting Dealer in
respect of Shares registered in the name of such Soliciting Dealer unless such
Shares are held by such Soliciting Dealer as nominee and such Shares are being
tendered or voted for the benefit of one or more beneficial owners identified on
the Letter of Transmittal and Proxy or on the Notice of Solicited Tenders. No
solicitation fee or separate fee shall be payable to a Soliciting Dealer if such
Soliciting Dealer is required for any reason to transfer the amount of such fee
to a depositing holder (other than itself). No solicitation fee shall be paid to
a Soliciting Dealer with respect to Shares tendered for such Soliciting Dealer's
own account and no separate fee shall be paid to a Soliciting Dealer with
respect to Shares voted for such Soliciting Dealer's own account. A Soliciting
Dealer shall not be entitled to a solicitation fee or a separate fee for Shares
beneficially owned by such Soliciting Dealer. No broker, dealer, bank, trust
company or fiduciary shall be deemed to be the agent of ILN, IPC, the
Depositary, the Dealer Manager or the Information Agent for purposes of the
Offer.
Soliciting Dealers will include any of the organizations described in
clauses (i), (ii) and (iii) above even when the activities of such organizations
in connection with the Offer consist solely of forwarding to clients materials
relating to the Offer, including the Letter of Transmittal and Proxy and
tendering Shares as directed by beneficial owners thereof. No Soliciting Dealer
is required to make any recommendation to holders of Shares as to whether to
tender or refrain from tendering in the Offer. No assumption is made, in making
payment to any Soliciting Dealer, that its activities in connection with the
Offer included any activities other
28
<PAGE> 30
than those described above, and for all purposes noted in all materials relating
to the Offer, the term "solicit" shall be deemed to mean no more than
"processing shares tendered" or "forwarding to customers materials regarding the
Offer."
Stock Transfer Taxes. ILN will pay all stock transfer taxes, if any,
payable on account of the acquisition of Shares by ILN pursuant to the Offer,
except in certain circumstances where special payment or delivery procedures are
utilized pursuant to Instruction 6 of the accompanying Letter of Transmittal and
Proxy.
Estimated Expenses. Assuming that all Shares of each Series of Preferred
are tendered and purchased by ILN pursuant to the Offer, it is estimated that
the expenses incurred by ILN in connection with the Offer will be as
approximately set forth below. ILN will be responsible for paying all such
expenses.
<TABLE>
<S> <C>
Dealer Manager Fees......................................... $
Depositary and Information Agent Fees....................... $
Solicitation Fees........................................... $
Printing and Mailing Fees................................... $
Filing Fees................................................. $
Legal and Miscellaneous..................................... $
-----------
Total.................................................. $
===========
</TABLE>
CERTAIN INFORMATION REGARDING ILN AND IPC;
INCORPORATION BY REFERENCE
ILN is a holding company organized in Illinois in May 1994, which conducts
substantially all of its business through its subsidiaries. It has three
principal operating subsidiaries: IPC, organized in May 1923, is a combination
electric and gas utility; Illinova Generating Company, organized in October
1992, is an independent power company which invests in energy supply projects
and competes in the independent power market worldwide; and Illinova Energy
Partners, Inc., organized in July 1994, is in the business of (i) developing and
marketing energy-related services to the unregulated energy market in the United
States and (ii) brokering and marketing electric power and gas to various
customers. IPC's financial position and results of operations are currently the
principal factors affecting ILN's consolidated financial position and results of
operation.
IPC is engaged in the generation, transmission, distribution and sale of
electric energy and the distribution, transportation and sale of natural gas in
the State of Illinois. Its service area is a widely diversified industrial and
agricultural area comprising approximately 15,000 square miles in northern,
central and southern Illinois. Electric service is provided at retail to 310
incorporated municipalities, adjacent suburban and rural areas and numerous
unincorporated municipalities. Gas service is provided to 257 incorporated
municipalities, adjacent suburban areas and numerous unincorporated
municipalities. The larger cities served include Decatur, East St. Louis (gas
only), Champaign, Danville, Belleville, Granite City, Bloomington (electric
only), Galesburg, Urbana and Normal (electric only).
ILN and IPC are subject to the informational requirements of the Exchange
Act and in accordance therewith file reports and other information with the SEC.
Such reports and other information may be inspected and copied at the public
reference facilities maintained by the SEC at 450 Fifth Street, N.W.,
Washington, D.C. 20549; 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511; and Seven World Trade Center, Suite 1300, New York, New York 10048.
Copies of such material can be obtained from the Public Reference Section of the
SEC, 450 Fifth Street, N.W., Washington D.C. 20549 at prescribed rates. The SEC
maintains a Web site at http://www.sec.gov containing reports, proxy and
information statements and other information regarding registrants that file
electronically with the SEC, including ILN and IPC. Reports, proxy materials and
other information about ILN and IPC are also available at the offices of the
NYSE, 20 Broad Street, New York, New York 10005. In connection with the Offer,
ILN has filed an Issuer Tender Offer Statement on Schedule 13E-4 and a Rule
13e-3 Transaction Statement on Schedule 13E-3 with the SEC that includes certain
additional information relating to the Offer. ILN's Schedule 13E-4 and
29
<PAGE> 31
Schedule 13E-3 will not be available at the SEC's regional offices. IPC has
filed this Offer to Purchase and Proxy Statement (and related documents) with
the SEC pursuant to Rule 14a-6 of the Exchange Act.
SUMMARY OF CONSOLIDATED FINANCIAL INFORMATION;
INCORPORATION BY REFERENCE
Set forth below is certain consolidated historical financial information of
IPC and its subsidiaries. The historical financial information (other than the
ratios of earnings to fixed charges) was derived from the audited consolidated
financial statements included in IPC's Annual Report on Form 10-K for the year
ended December 31, 1997.
CONDENSED INCOME STATEMENT DATA:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1997 1996
---- ----
(THOUSANDS, EXCEPT RATIOS)
<S> <C> <C>
Operating Revenues.......................................... $ 1,773.9 $ 1,688.7
Operating Income............................................ 278.7 361.4
Allowance for Borrowed Funds Use During Construction........ (5.0) (6.5)
Interest Expense............................................ 128.7 133.0
Net Income (Loss)........................................... (44.2) 228.6
Less-Preferred Dividend Requirement....................... 21.5 22.3
Plus -- Carrying Amount Over (Under) Consideration Paid
for Redeemed Preferred Stock of Subsidiary............. 0.2 (0.7)
Net Income (Loss) Applicable to Common Stock................ (65.5) 205.6
Ratio of Earnings to Fixed Charges.......................... 1.24 3.40
</TABLE>
30
<PAGE> 32
CONDENSED BALANCE SHEET DATA (AT END OF PERIOD):
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1997 1996
---- ----
(MILLIONS)
<S> <C> <C>
Assets
Plant and property........................................ $7,353.4 $6,981.5
Less -- accumulated depreciation.......................... 2,808.1 2,419.7
-------- --------
Net utility plant...................................... 4,545.3 4,561.8
Nuclear fuel under capital lease.......................... 133.0 101.7
Investments and other assets.............................. 5.9 14.5
Current assets............................................ 414.8 444.3
Deferred charges.......................................... 192.5 446.2
-------- --------
Total................................................ $5,291.5 $5,568.5
======== ========
Capital and Liabilities
Common stock.............................................. $1,417.3 $1,416.4
Treasury stock............................................ (207.7) (86.2)
Retained earnings......................................... 89.5 245.9
Preferred stock........................................... 57.1 96.2
Mandatorily redeemable preferred stock.................... 197.0 197.0
Long-term debt............................................ 1,617.5 1,636.4
-------- --------
Total capitalization................................. 3,170.7 3,505.7
Current liabilities....................................... 729.1 655.5
Deferred credits and other noncurrent liabilities......... 1,391.7 1,407.3
-------- --------
Total................................................ $5,291.5 $5,568.5
======== ========
</TABLE>
The financial statements of IPC and related information included in its
Annual Report on Form 10-K for the year ended December 31, 1997, and its Current
Reports on Form 8-K, dated February 13, 1998 and January 21, 1998, each as filed
with the SEC, are hereby incorporated by reference. All documents subsequently
filed by IPC pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act
after the date of this Offer to Purchase and Proxy Statement and prior to the
Expiration Date (or any extension thereof) shall be deemed to be incorporated by
reference in this Offer to Purchase and Proxy Statement and to be a part hereof
from the date of filing of such documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Offer to Purchase and Proxy
Statement to the extent that a statement contained herein or in any other
subsequently filed documents which is deemed to be incorporated by reference
herein modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Offer to Purchase and Proxy Statement.
IPC will provide without charge to each person to whom a copy of this Offer
to Purchase and Proxy Statement has been delivered, on the written or oral
request of any such person, a copy of any or all of the documents described
above which have been incorporated by reference in this Offer to Purchase and
Proxy Statement, other than exhibits to such documents. Written requests for
copies of such documents should be addressed to the Shareholder Services
Department, Illinova Corporation at 500 South 27th Street, Decatur, Illinois
62525 (telephone (800) 800-8220) or at its Website on the World Wide Web at
http://www.illinova.com. The information relating to ILN and IPC contained in
this Offer to Purchase and Proxy Statement does not purport to be comprehensive
and should be read together with the information contained in the documents
incorporated by reference.
31
<PAGE> 33
SHAREHOLDER PROPOSALS
If a shareholder intends to present a proposal at the 1999 Annual Meeting
of Shareholders of IPC, the proposal must be received by the Corporate Secretary
of IPC not later than November 12, 1998 for inclusion in IPC's proxy or
information statement and form of proxy, if applicable.
MISCELLANEOUS
The Offer is not being made to, nor will ILN accept tenders from, owners of
Shares in any jurisdiction in which the Offer or its acceptance would not be in
compliance with the laws of such jurisdiction. ILN is not aware of any
jurisdiction where the making of the Offer or the tender of Shares would not be
in compliance with applicable law. If ILN becomes aware of any jurisdiction
where the making of the Offer or the tender of Shares is not in compliance with
any applicable law, ILN will make a good faith effort to comply with such law.
If, after such good faith effort, ILN cannot comply with such law, the Offer
will not be made to (nor will tenders be accepted from or on behalf of) the
owners of Shares residing in such jurisdiction. In any jurisdiction in which the
securities, blue sky or other laws require the Offer to be made by a licensed
broker or dealer, the Offer will be deemed to be made on ILN's behalf by one or
more registered brokers or dealers licensed under the laws of such jurisdiction.
ILLINOVA CORPORATION
ILLINOIS POWER COMPANY
, 1998
32
<PAGE> 34
ATTACHMENT A
ILLINOIS DISSENTERS' RIGHTS
SECTION 11.65. RIGHT TO DISSENT.
(a) A shareholder of a corporation is entitled to dissent from, and obtain
payment for his or her shares in the event of any of the following corporate
actions:
(1) consummation of a plan of merger or consolidation or a plan of
share exchange to which the corporation is a party if
(i) shareholder authorization is required for the merger or
consolidation or the share exchange by Section 11.20 or the articles of
incorporation or
(ii) the corporation is a subsidiary that is merged with its parent
or another subsidiary under Section 11.30;
(2) consummation of sale, lease or exchange of all, or substantially
all, of the property and assets of the corporation other than in the usual
and regular course of business;
(3) an amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it:
(i) alters or abolishes a preferential right of such shares;
(ii) alters or abolishes a right in respect of redemption,
including a provision respecting a sinking fund for the redemption or
repurchase, of such shares;
(iii) in the case of a corporation incorporated prior to January 1,
1982, limits or eliminates cumulative voting rights with respect to such
shares; or
(4) any other corporate action taken pursuant to a shareholder vote if
the articles of incorporation, by-laws, or a resolution of the board of
directors provide that shareholders are entitled to dissent and obtain
payment for their shares in accordance with the procedures set forth in
Section 11.70 or as may be otherwise provided in the articles, by-laws or
resolution.
(b) A shareholder entitled to dissent and obtain payment for his or her
shares under this Section may not challenge the corporate action creating his or
her entitlement unless the action is fraudulent with respect to the shareholder
or the corporation or constitutes a breach of a fiduciary duty owed to the
shareholder.
(c) A record owner of shares may assert dissenters' rights as to fewer than
all the shares recorded in such person's name only if such person dissents with
respect to all shares beneficially owned by any one person and notifies the
corporation in writing of the name and address of each person on whose behalf
the record owner asserts dissenters' rights. The rights of a partial dissenter
are determined as if the shares as to which dissent is made and other shares
were recorded in the names of different shareholders. A beneficial owner of
shares who is not the record owner may assert dissenters' rights as to shares
held on such person's behalf only if the beneficial owner submits to the
corporation the record owner's written consent to the dissent before or at the
same time the beneficial owner asserts dissenters' rights.
SECTION 11.70. PROCEDURE TO DISSENT.
(a) If the corporate action giving rise to the right to dissent is to be
approved at a meeting of shareholders, the notice of meeting shall inform the
shareholders of their right to dissent and the procedure to dissent. If, prior
to the meeting, the corporation furnishes to the shareholders material
information with respect to the transaction that will objectively enable a
shareholder to vote on the transaction and to determine whether or not to
exercise dissenters' rights, a shareholder may assert dissenters' rights only if
the shareholder delivers to the corporation before the vote is taken a written
demand for payment for his or her shares if the proposed action is consummated,
and the shareholder does not vote in favor of the proposed action.
A-1
<PAGE> 35
(b) If the corporate action giving rise to the right to dissent is not to
be approved at a meeting of shareholders, the notice to shareholders describing
the action taken under Section 11.30 or Section 7.10 shall inform the
shareholders of their right to dissent and the procedure to dissent. If, prior
to or concurrently with the notice, the corporation furnishes to the
shareholders material information with respect to the transaction that will
objectively enable a shareholder to determine whether or not to exercise
dissenters' rights, a shareholder may assert dissenters' rights only if he or
she delivers to the corporation within 30 days from the date of mailing the
notice a written demand for payment for his or her shares.
(c) Within 10 days after the date on which the corporate action giving rise
to the right to dissent is effective or 30 days after the shareholder delivers
to the corporation the written demand for payment, whichever is later, the
corporation shall send each shareholder who has delivered a written demand for
payment a statement setting forth the opinion of the corporation as to the
estimated fair value of the shares, the corporation's latest balance sheet as of
the end of a fiscal year ending not earlier than 16 months before the delivery
of the statement, together with the statement of income for that year and the
latest available interim financial statements, and either a commitment to pay
for the shares of the dissenting shareholder at the estimated fair value thereof
upon transmittal to the corporation of the certificate or certificates, or other
evidence of ownership, with respect to the shares, or instructions to the
dissenting shareholder to sell his or her shares within 10 days after delivery
of the corporation's statement to the shareholder. The corporation may instruct
the shareholder to sell only if there is public market for the shares at which
the shares may be readily sold. If the shareholder does not sell within that 10
day period after being so instructed by the corporation, for purposes of this
Section the shareholder shall be deemed to have sold his or her shares at the
average closing price of the shares, if listed on a national exchange, or the
average of the bid and asked price with respect to the shares quoted by a
principal market maker, if not listed on a national exchange, during that 10 day
period.
(d) A shareholder who makes written demand for payment under this Section
retains all other rights of a shareholder until those rights are canceled or
modified by the consummation of the proposed corporate action. Upon consummation
of that action, the corporation shall pay to each dissenter who transmits to the
corporation the certificate or other evidence of ownership of the shares the
amount the corporation estimates to be the fair value of the shares, plus
accrued interest, accompanied by a written explanation of how the interest was
calculated.
(e) If the shareholder does not agree with the opinion of the corporation
as to the estimated fair value of the shares or the amount of interest due, the
shareholder, within 30 days from the delivery of the corporation's statement of
value, shall notify the corporation in writing of the shareholder's estimated
fair value and amount of interest due and demand payment for the difference
between the shareholder's estimate of fair value and interest due and the amount
of the payment by the corporation or the proceeds of sale by the shareholder,
whichever is applicable because of the procedure for which the corporation opted
pursuant to subsection (c).
(f) If, within 60 days from delivery to the corporation of the shareholder
notification of estimate of fair value of the shares and interest due, the
corporation and the dissenting shareholder have not agreed in writing upon the
fair value of the shares and interest due, the corporation shall either pay the
difference in value demanded by the shareholder, with interest, or file a
petition in the circuit court of the county in which either the registered
office or the principal office of the corporation is located, requesting the
court to determine the fair value of the shares and interest due. The
corporation shall make all dissenters, whether or not residents of this State,
whose demands remain unsettled parties to the proceeding as an action against
their shares and all parties shall be served with a copy of the petition.
Nonresidents may be served by registered or certified mail or by publication as
provided by law. Failure of the corporation to commence an action pursuant to
this Section shall not limit or affect the right of the dissenting shareholders
to otherwise commence an action as permitted by law.
(g) The jurisdiction of the court in which the proceeding is commenced
under subsection (f) by a corporation is plenary and exclusive. The court may
appoint one or more persons as appraisers to receive evidence and recommend
decision of the question of fair value. The appraisers have the power described
in the order appointing them, or in any amendment to it.
A-2
<PAGE> 36
(h) Each dissenter made a party to the proceeding is entitled to judgment
for the amount, if any, by which the court finds that the fair value of his or
her shares, plus interest, exceeds the amount paid by the corporation or the
proceeds of sale by the shareholder, whichever amount is applicable.
(i) The court, in a proceeding commenced under subsection (f), shall
determine all costs of the proceeding, including the reasonable compensation and
expenses of the appraisers, if any, appointed by the court under subsection (g),
but shall exclude the fees and expenses of counsel and experts for the
respective parties. If the fair value of the shares as determined by the court
materially exceeds the amount which the corporation estimated to be the fair
value of the shares or if no estimate was made in accordance with subsection
(c), then all or any part of the costs may be assessed against the corporation.
If the amount which any dissenter estimated to be the fair value of the shares
materially exceeds the fair value of the shares as determined by the court, then
all or any part of the costs may be assessed against that dissenter. The court
may also assess the fees and expenses of counsel and experts for the respective
parties, in amounts the court finds equitable, as follows:
(1) Against the corporation and in favor of any or all dissenters if
the court finds that the corporation did not substantially comply with the
requirements of subsections (a), (b), (c), (d), or (f).
(2) Against either the corporation or a dissenter and in favor of any
other party if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously, or not in good faith
with respect to the rights provided by this Section.
If the court finds that the services of counsel for any dissenter were of
substantial benefit to other dissenters similarly situated and that the fees for
those services should not be assessed against the corporation, the court may
award to that counsel reasonable fees to be paid out of the amounts awarded to
the dissenters who are benefitted. Except as otherwise provided in this Section,
the practice, procedure, judgment and costs shall be governed by the Code of
Civil Procedure.
(j) As used in this Section:
(1) "Fair value", with respect to a dissenter's shares, means the
value of the shares immediately before the consummation of the corporate
action to which the dissenter objects excluding any appreciation or
depreciation in anticipation of the corporate action, unless exclusion
would be inequitable.
(2) "Interest" means interest from the effective date of the corporate
action until the date of payment, at the average rate currently paid by the
corporation on its principal bank loans or, if none, at a rate that is fair
and equitable under all the circumstances.
A-3
<PAGE> 37
Facsimile copies of the Letter of Transmittal and Proxy will only be
accepted from Eligible Institutions. Facsimile copies of the separate Proxy will
be accepted from any holder. The Letter of Transmittal and Proxy and, if
applicable, certificates for Shares should be sent or delivered by each
tendering or voting Preferred Shareholder of IPC or his or her broker, dealer,
bank or trust company to the Depositary at one of its addresses set forth below.
The Depositary is:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
<TABLE>
<CAPTION>
By Mail: By Hand: By Overnight Courier:
-------- -------- ---------------------
<S> <C> <C>
First Chicago Trust Company First Chicago Trust Company First Chicago Trust Company
of New York of New York of New York
Attn: Tenders & Exchanges Attn: Tenders & Exchanges Attn: Tenders & Exchanges
P.O. Box 2565 c/o The Depository Trust Suite 4680-CBE
Suite 4660 Company 55 Water Street, DTC 14 Wall Street
Jersey City, NJ 07303-2565 TAD 8th Floor
Vietnam Veterans Memorial Plaza New York, NY 10005
New York, NY 10041
</TABLE>
By Facsimile:
(201) 222-4720
or (201) 222-4721
Confirm by Telephone:
(201) 222-4707
Any questions or requests for assistance may be directed to the Information
Agent or the Dealer Manager at their respective telephone numbers and addresses
listed below. Requests for additional copies of this Offer to Purchase and Proxy
Statement, the Letter of Transmittal and Proxy, the separate Proxy or other
tender offer or proxy materials may be directed to the Information Agent, and
such copies will be furnished promptly at the companies' expense. Preferred
Shareholders may also contact their local broker, dealer, commercial bank or
trust company for assistance concerning the Offer.
The Information Agent:
MACKENZIE PARTNERS, INC.
156 Fifth Avenue
New York, New York 10010
(800) 322-2885 (Toll Free)
(212) 929-5500 (Call Collect)
The Dealer Manager:
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
277 Park Avenue
New York, New York 10172
(800) 334-1604 (Toll Free)
(212) 892-3351 (Call Collect)
Attn: Paul Galant or Jeff Dorst
<PAGE> 38
TO BE COMPLETED ONLY BY THOSE PREFERRED SHAREHOLDERS
WHO ARE NOT TENDERING THEIR SHARES IN THE OFFER
PROXY
The undersigned hereby appoints , and , or any of
them, as proxies, each with the power to appoint his substitute, and hereby
authorizes them to represent and to vote as designated hereunder and in their
discretion with respect to any other business properly brought before the
Special Meeting, all the shares of cumulative preferred stock of Illinois Power
Company ("IPC") which the undersigned is entitled to vote at the Special Meeting
of Shareholders to be held on , 1998, or any adjournment(s) or
postponement(s) thereof.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF IPC. When
properly executed, this Proxy will be voted in the manner directed herein by the
undersigned shareholder(s). If no direction is made, the Proxy will be voted for
Item 1.
INDICATE YOUR VOTE BY AN (X). THE BOARD OF DIRECTORS OF IPC RECOMMENDS
VOTING FOR ITEM 1.
ITEM 1.
To remove in its entirety ARTICLE V, Section 1, Clause (f)(1) from the
Amended and Restated Articles of Incorporation of IPC (the "Articles"), which
limits IPC's ability to issue or assume unsecured indebtedness.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
NOTE: IF SHARES ARE BEING VOTED "FOR" THE PROPOSED AMENDMENT, THE SUBSTITUTE
FORM W-9 BELOW SHOULD BE COMPLETED TO AVOID BACK-UP WITHHOLDING ON THE SPECIAL
CASH PAYMENT.
SHARES REPRESENTED BY ALL PROPERLY EXECUTED PROXIES WILL BE VOTED IN
ACCORDANCE WITH INSTRUCTIONS APPEARING ON THIS PROXY. IN THE ABSENCE OF SPECIFIC
INSTRUCTIONS, PROXIES WILL BE VOTED IN ACCORDANCE WITH THE RECOMMENDATIONS OF
THE BOARD OF DIRECTORS OF IPC AND IN THE DISCRETION OF THE PROXY HOLDERS AS TO
ANY OTHER MATTERS THAT MAY PROPERLY COME BEFORE THE SPECIAL MEETING.
Any holder of Shares held of record on the Record Date in the name of
another holder must establish to the satisfaction of IPC his or her entitlement
to exercise or transfer this Proxy. This will ordinarily require an assignment
by such record holder in blank, or if not in blank, to and from each successive
transferee, including the holder, with each signature guaranteed by an Eligible
Institution.
Please check box if you plan to attend the Special Meeting. [ ]
Signature Date: , 1998
-------------------- -------------
Print Name:
------------------
<PAGE> 39
NOTICE OF SOLICITED VOTES
If the Proposed Amendment is adopted at the Special Meeting, IPC will pay
to each designated Soliciting Dealer a separate fee of $ per Share for
Shares that are not tendered pursuant to the Offer but which are voted in favor
of the Proposed Amendment in transactions for beneficial owners of fewer than
Shares and a separate fee of $ per Share for Shares that are not tendered
pursuant to the Offer but which are voted in favor of the Proposed Amendment in
transactions for beneficial owners of or more Shares; provided that the
separate fee payable in transactions for beneficial owners of or more
Shares shall be paid 80% to the Dealer Manager and 20% to any designated
Soliciting Dealer (which may be the Dealer Manager). However, Soliciting Dealers
will not be entitled to a fee for Shares beneficially owned by such Soliciting
Dealer. For purposes of this paragraph, a "Soliciting Dealer" shall include: (a)
any broker or dealer in securities, including a Dealer Manager in its capacity
as a dealer or broker, which is a member of any national securities exchange or
of the NASD, (b) any foreign broker or dealer not eligible for membership in the
NASD which agrees to conform to the NASD's Rules of Fair Practice in soliciting
votes outside the United States to the same extent as though it were an NASD
member, or (c) any bank or trust company. No fee shall be payable to a
Soliciting Dealer with respect to the vote of Shares in favor of the Proposed
Amendment by a holder unless the Proxy relating to such Shares designates such
Soliciting Dealer. No such fee shall be payable to a Soliciting Dealer in
respect of Shares registered in the name of such Soliciting Dealer unless such
Shares are held by such Soliciting Dealer as nominee and such Shares are being
voted for the benefit of one or more beneficial owners identified on the Proxy.
No such fee shall be payable to a Soliciting Dealer with respect to the vote of
Shares by the holder of record, for the benefit of the beneficial owner, unless
the beneficial owner has designated such Soliciting Dealer in the Letter from
the Dealer Manager to Brokers, Dealers, Commercial Banks, Trust Companies and
Other Nominees (the "Broker Letter").
The above signed represents that the Soliciting Dealer which solicited and
obtained this vote in favor of the Proposed Amendment is:
Name of Firm:
- --------------------------------------------------------------------------------
(Please Print)
Name of Individual Broker
or Financial Consultant:
- --------------------------------------------------------------------------------
(Please Print)
Telephone Number of Broker
or Financial Consultant:
- --------------------------------------------------------------------------------
Identification Number (if known):
- ---------------------------------------------------------------------------
Address:
- --------------------------------------------------------------------------------
(Include Zip Code)
The following to be completed ONLY if customer's Shares held in nominee
name are tendered.
NAME OF BENEFICIAL OWNER
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
NUMBER OF SHARES VOTED FOR THE
PROPOSED AMENDMENT
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
(ATTACH ADDITIONAL LIST IF NECESSARY)
The acceptance of compensation by such Soliciting Dealer will constitute a
representation by it that (a) it has complied with the applicable requirements
of the Securities Exchange Act of 1934, as amended, and the applicable rules and
regulations thereunder, in connection with such solicitation; (b) it is entitled
to such compensation for such solicitation under the terms and conditions of the
Offer to Purchase and Proxy
<PAGE> 40
Statement; (c) in soliciting votes in favor of the Proposed Amendment, it has
used no solicitation materials other than those furnished by IPC; and (d) if it
is a foreign broker or dealer not eligible for membership in the National
Association of Securities Dealers, Inc. (the "NASD"), it has agreed to conform
to the NASD's Rules of Fair Practice in making solicitations.
The payment of compensation to any Soliciting Dealer is dependent on such
Soliciting Dealer returning a Notice of Solicited Votes to the Depositary.
