<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 27, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13E-4
ISSUER TENDER OFFER STATEMENT
(Pursuant to Section 13(e)(1) of the Securities Exchange Act of 1934)
IPALCO ENTERPRISES, INC.
(Name of Issuer)
IPALCO ENTERPRISES, INC.
(Name of Person(s) Filing Statement)
COMMON STOCK, NO PAR VALUE PER SHARE
(Title of Class of Securities)
462613100
(CUSIP Number of Class of Securities)
JOHN R. BREHM
Vice President and Treasurer
IPALCO Enterprises, Inc.
One Monument Circle
Indianapolis, IN 46204
(317) 261-8261
(Name, Address and Telephone Number of Person Authorized to Receive Notices
and Communications on Behalf of the Person(s) Filing Statement)
COPIES TO:
BRYAN G. TABLER
Vice President, Secretary and General Counsel
IPALCO Enterprises, Inc.
One Monument Circle
P.O. Box 1595
Indianapolis, IN 46206-1595
FEBRUARY 28, 1997
(Date Tender Offer First Published, Sent or Given to Security Holders)
CALCULATION OF FILING FEE
<TABLE>
<CAPTION>
TRANSACTION VALUATION* AMOUNT OF FILING FEE
<S> <C>
$408,000,000 $81,600
</TABLE>
* Calculated solely for purposes of determining the filing fee, based upon the
purchase of 12,000,000 shares at the maximum tender offer price per share of
$34.00
/ / Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
<TABLE>
<S> <C> <C> <C>
Amount Previously Paid: N/A Filing Party: N/A
Form or Registration N/A Date Filed: N/A
No.:
</TABLE>
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<PAGE>
ITEM 1. SECURITY AND ISSUER.
(a) The issuer of the securities to which this Schedule 13E-4 relates is
IPALCO Enterprises, Inc., an Indiana corporation (the "Company"), and the
address of its principal executive office is One Monument Circle, Indianapolis,
Indiana 46204.
(b) This Schedule 13E-4 relates to the offer by the Company to purchase up
to 12,000,000 shares (or such lesser number of shares as are properly tendered)
of its Common Stock, no par value per share (the "Shares"), (including the
associated common stock purchase rights issued pursuant to the Rights Agreement,
dated as of June 28, 1990, between the Company and First Chicago Trust Company
of New York, as Rights Agent) 57,036,540 of which Shares were outstanding as of
February 28, 1997, at prices not in excess of $34 nor less than $29 net per
Share in cash upon the terms and subject to the conditions set forth in the
Offer to Purchase, dated February 28, 1997 (the "Offer to Purchase"), and in the
related Letter of Transmittal (which together constitute the "Offer"), copies of
which are attached as Exhibits (a)(1) and (a)(2), respectively, and incorporated
herein by reference. Officers, directors and affiliates of the Company may
participate in the Offer on the same basis as the Company's other shareholders,
although the Company has been advised that no director or officer of the Company
intends to tender any shares pursuant to the Offer. The information set forth in
"Introduction" and Section 1, "Number of Shares; Proration" of the Offer to
Purchase is incorporated herein by reference.
(c) The information set forth in "Introduction" and Section 7, "Price Range
of Shares; Dividends; Rights Plan" of the Offer to Purchase is incorporated
herein by reference.
(d) Not applicable. This Statement is being filed by the Issuer.
ITEM 2. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a)-(b) The information set forth in Section 9, "Source and Amount of Funds"
of the Offer to Purchase is incorporated herein by reference.
ITEM 3. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE ISSUER OR
AFFILIATE.
(a)-(j) The information set forth in "Introduction" and Section 8,
"Background and Purpose of the Offer," Section 9, "Source and Amount of Funds,"
Section 10, "Transactions and Agreements Concerning Shares" and Section 12,
"Effects of the Offer on the Market for Shares; Registration under the Exchange
Act" of the Offer to Purchase is incorporated herein by reference.
ITEM 4. INTEREST IN SECURITIES OF THE ISSUER.
The information set forth in Section 10, "Transactions and Agreements
Concerning Shares" is incorporated herein by reference.
ITEM 5. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO
THE ISSUER'S SECURITIES.
The information set forth in "Introduction" and Section 8, "Background and
Purpose of the Offer," Section 9, "Source and Amount of Funds" and Section 10,
"Transactions and Agreements Concerning Shares" of the Offer to Purchase is
incorporated herein by reference.
ITEM 6. PERSONS RETAINED, EMPLOYED, OR TO BE COMPENSATED.
The information set forth in "Introduction" and Section 15, "Fees and
Expenses" of the Offer to Purchase is incorporated herein by reference.
ITEM 7. FINANCIAL INFORMATION.
(a)-(b) The information set forth in Section 11, "Financial Information
Concerning the Company" of the Offer to Purchase is incorporated herein by
reference.
<PAGE>
ITEM 8. ADDITIONAL INFORMATION.
(a)-(e) Not Applicable.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<CAPTION>
(a)-(1) -- Form of Offer to Purchase dated February 28, 1997.
<C> <C> <S>
(2) -- Form of Letter of Transmittal (including Certification of Taxpayer Identification
Number on Substitute Form W-9).
(3) -- Form of Notice of Guaranteed Delivery.
(4) -- Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other
Nominees.
(5) -- Form of Letter to Clients for Use by Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees.
(6) -- Guidelines for Certification of Taxpayer Identification Number on Substitute Form
W-9.
(7) -- Text of Press Release issued by the Company dated February 25, 1997 (incorporated
by reference to the Company's Current Report on Form 8-K filed on February 25,
1997).
(8) -- Form of Summary Advertisement dated February 28, 1997.
(9) -- Form of Letter to Shareholders of the Company, dated February 28, 1997 from J.R.
Hodowal, Chairman of the Board and President of the Company.
(10) -- Form of Thrift Plan Instruction Letter.
(b)-(1) -- Commitment Letter dated February 21, 1997.
(c) -- Not Applicable.
(d) -- Not Applicable.
(e) -- Not Applicable.
(f) -- Not Applicable.
(g) -- Pages II-13 through II-34 of the Company's Annual Report on Form 10-K for the
year ended December 31, 1996.
</TABLE>
<PAGE>
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify that
the information set forth in this Schedule 13E-4 is true, complete and correct.
IPALCO ENTERPRISES, INC.
By: /s/ JOHN R. BREHM
-----------------------------------------
Name: John R. Brehm
Title: Vice President and Treasurer
February 27, 1997
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------- ----------------------------------------------------------------------------------------------
<C> <C> <S> <C>
<CAPTION>
-(a)(1) -- Form of Offer to Purchase dated February 28, 1997.
<C> <C> <S> <C>
(2) -- Form of Letter of Transmittal (including Certification of Taxpayer Identification Number on
Substitute Form W-9).
(3) -- Form of Notice of Guaranteed Delivery.
(4) -- Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees.
(5) -- Form of Letter to Clients for Use by Brokers, Dealers, Commercial Banks, Trust Companies and
Other Nominees.
(6) -- Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9.
(7) -- Text of Press Release issued by the Company dated February 25, 1997 (incorporated by reference
to the Company's Current Report on Form 8-K filed on February 25, 1997).
(8) -- Form of Summary Advertisement dated February 28, 1997.
(9) -- Form of Letter to Shareholders of the Company, dated February 28, 1997 from J.R. Hodowal,
Chairman of the Board and President of the Company.
(10) -- Form of Thrift Plan Instruction Letter.
(b)-(1) -- Commitment Letter dated February 21, 1997.
(c) -- Not Applicable.
(d) -- Not Applicable.
(e) -- Not Applicable.
(f) -- Not Applicable.
(g) -- Pages II-13 through II-34 of the Company's Annual Report on Form 10-K for the year ended
December 31, 1996.
</TABLE>
<PAGE>
IPALCO ENTERPRISES, INC.
OFFER TO PURCHASE FOR CASH
UP TO 12,000,000 SHARES OF ITS COMMON STOCK
(INCLUDING THE ASSOCIATED COMMON STOCK PURCHASE RIGHTS)
AT A PURCHASE PRICE NOT GREATER THAN $34.00
NOR LESS THAN $29.00 PER SHARE
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT,
EASTERN STANDARD TIME, ON THURSDAY, MARCH 27, 1997, UNLESS THE OFFER IS
EXTENDED.
IPALCO Enterprises, Inc., an Indiana corporation (the "Company"), invites
its shareholders to tender shares of its Common Stock, no par value, (the
"Shares") (including the associated common stock purchase rights (the "Rights")
issued pursuant to the Rights Agreement dated as of June 28, 1990, between the
Company and First Chicago Trust Company of New York, as the Rights Agent), at
prices not greater than $34.00 nor less than $29.00 per Share, net to the seller
in cash, specified by such shareholders, upon the terms and subject to the
conditions set forth herein and in the related Letter of Transmittal (which
together constitute the "Offer"). Unless the context otherwise requires, all
references to Shares shall include the associated Rights. The Company will
determine a single per Share price (not greater than $34.00 nor less that
$29.00) (the "Purchase Price") that it will pay for the Shares validly tendered
pursuant to the Offer and not withdrawn, taking into account the number of
Shares so tendered and the prices specified by the tendering shareholders. The
Company will select the Purchase Price that will enable it to purchase
12,000,000 Shares (or such lesser number of Shares as are validly tendered at
prices not greater than $34.00 nor less than $29.00 per Share) pursuant to the
Offer. The Company will purchase all Shares validly tendered at prices at or
below the Purchase Price and not withdrawn, upon the terms and subject to the
conditions of the Offer, including the provisions thereof relating to proration
described herein. Shares tendered at prices in excess of the Purchase Price and
Shares not purchased because of proration will be returned. Shareholders must
complete the section of the Letter of Transmittal relating to the price at which
they are tendering Shares in order to validly tender Shares.
--------------------------
Shares tendered and purchased by the Company will be entitled to the regular
quarterly cash dividend of $0.25 per Share to be paid by the Company on April
15, 1997, to holders of record on March 21, 1997, regardless of whether or when
such tender is made. Shares tendered and purchased by the Company will not be
entitled to any dividends in respect of any later dividend periods.
--------------------------
THE OFFER IS NOT CONDITIONED UPON ANY MINIMUM NUMBER OF SHARES BEING TENDERED.
THE OFFER IS, HOWEVER, SUBJECT TO CERTAIN OTHER CONDITIONS. SEE SECTION 6.
--------------------------
IMPORTANT
Any shareholder desiring to tender all or any portion of his or her Shares
should either (1) complete and sign the Letter of Transmittal or a photocopy
thereof in accordance with the instructions in the Letter of Transmittal, mail
or deliver it and any other required documents to IBJ Schroder Bank & Trust
Company (the "Depositary") and either deliver the certificates for Shares to the
Depositary along with the Letter of Transmittal or deliver such Shares pursuant
to the procedure for book-entry transfer set forth in Section 3 hereof or (2)
request his or her broker, dealer, commercial bank, trust company or nominee to
effect the transaction for him or her. A 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 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 in Section 3 hereof. Shareholders who are participants in the
Indianapolis Power & Light Company Employees' Thrift Plan (the "Thrift Plan")
cannot use the Letter of Transmittal to tender Shares held in accounts under
such plan, but must instruct the Thrift Plan Trustee pursuant to the "Thrift
Plan Instruction Letter," to tender Shares held in the Thrift Plan. See
discussion set forth under "Thrift Plan" in Section 3 hereof.
--------------------------
NEITHER THE COMPANY NOR ANY OF ITS DIRECTORS, OFFICERS OR EMPLOYEES MAKES
ANY RECOMMENDATION TO ANY SHAREHOLDER AS TO WHETHER TO TENDER ALL
OR ANY SHARES. EACH SHAREHOLDER MUST MAKE HIS OR HER OWN DECISION AS TO
WHETHER TO TENDER SHARES AND, IF SO, HOW MANY SHARES TO TENDER AND AT WHAT
PRICE.
THE COMPANY HAS BEEN ADVISED THAT NO DIRECTOR OR OFFICER OF
THE COMPANY INTENDS TO TENDER SHARES PURSUANT TO THE OFFER.
--------------------------
The Shares are listed and traded principally on the New York Stock Exchange
(the "NYSE") and also on the Chicago Stock Exchange ("CSE"). On February 25,
1997, the last full trading day prior to the announcement of the Offer, the last
reported sale price of the Shares on the NYSE Composite Tape in THE WALL STREET
JOURNAL was $28.125 per Share. Shareholders are urged to obtain current market
quotations for the Shares.
Questions or requests for assistance or for additional copies of this Offer
to Purchase, the Letter of Transmittal or other tender offer materials may be
directed to the Information Agent at the address and telephone number set forth
on the back cover of this Offer to Purchase.
--------------------------
THE DEALER MANAGER FOR THE OFFER IS:
DILLON, READ & CO. INC.
--------------------------
FEBRUARY 28, 1997
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO MAKE ANY RECOMMENDATION ON BEHALF OF THE
COMPANY AS TO WHETHER SHAREHOLDERS SHOULD TENDER SHARES 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
OR IN THE LETTER OF TRANSMITTAL. IF GIVEN OR MADE, SUCH RECOMMENDATION AND SUCH
INFORMATION AND REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
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<S> <C>
SUMMARY................................................................................................... i
INTRODUCTION.............................................................................................. 1
THE OFFER................................................................................................. 2
1. Number of Shares; Proration.......................................................................... 2
2. Tenders by Holders of Fewer Than 100 Shares.......................................................... 4
3. Procedure for Tendering Shares....................................................................... 4
4. Withdrawal Rights.................................................................................... 7
5. Acceptance for Payment of Shares and Payment of Purchase Price....................................... 8
6. Certain Conditions of the Offer...................................................................... 8
7. Price Range of Shares; Dividends; Rights Plan........................................................ 10
8. Background and Purpose of the Offer.................................................................. 13
9. Source and Amount of Funds........................................................................... 15
10. Transactions and Agreements Concerning Shares........................................................ 16
11. Financial Information Concerning the Company......................................................... 16
12. Effects of the Offer on the Market for Shares; Registration Under the Exchange Act................... 21
13. Certain Federal Income Tax Consequences.............................................................. 22
14. Extension of Tender Period; Termination; Amendments.................................................. 25
15. Fees and Expenses.................................................................................... 26
16. Miscellaneous........................................................................................ 27
</TABLE>
<PAGE>
SUMMARY
This general summary is provided solely for the convenience of holders of
Shares and is qualified in its entirety by reference to the full text of and the
more specific details contained in this Offer to Purchase and the related Letter
of Transmittal and any amendments hereto and thereto. Capitalized terms used in
this summary without definition shall have the meaning ascribed to such terms in
this Offer to Purchase.
<TABLE>
<S> <C>
The Company.................. IPALCO Enterprises, Inc., an Indiana corporation with
principal executive offices at One Monument Circle,
Indianapolis, Indiana 46204.
The Shares................... Shares of the Company's Common Stock, no par value.
Number of Shares Sought...... 12,000,000 of the 57,036,540 Shares outstanding as of
February 28, 1997.
Purchase Price............... The Company will select a single Purchase Price which will
be not greater than $34.00 nor less than $29.00 per Share.
All Shares purchased by the Company will be purchased at the
Purchase Price even if tendered below the Purchase Price.
Each shareholder desiring to tender Shares must specify in
the Letter of Transmittal the minimum price (not greater
than $34.00 nor less than $29.00 per Share) at which such
shareholder is willing to have his or her Shares purchased
by the Company. Shareholders wishing to maximize the
possibility that their Shares will be purchased at the
Purchase Price may check the box on the Letter of
Transmittal marked "Shares Tendered At Price Determined By
Dutch Auction." Checking this box may result in a purchase
of the Shares so tendered at the minimum price of $29.00.
Expiration Date of Offer..... Thursday, March 27, 1997, at 12:00 Midnight, Eastern
Standard Time, unless extended by the Company.
How to Tender Shares......... See Section 3. For further information, call the Information
Agent or consult your broker for assistance.
Proration.................... In the event more than 12,000,000 Shares have been validly
tendered at or below the Purchase Price and not withdrawn on
or prior to the Expiration Date, the purchase of Shares will
be subject to proration. After the purchase of "Odd Lot"
Shares as described below, Shares will be purchased on a pro
rata basis. Proration of Shares will be based on the ratio
of the number of Shares to be purchased by the Company
pursuant to the Offer (less Odd Lot Shares tendered at or
below the Purchase Price) to the total number of Shares
tendered by all shareholders at or below the Purchase Price
(less Odd Lot Shares tendered at or below the Purchase
Price). This ratio will be applied to all Shares tendered by
each shareholder to determine the number of Shares that will
be purchased from each shareholder pursuant to the Offer.
Preliminary results of proration will be announced by press
release as promptly as practicable after the Expiration
Date.
Odd Lot Owners............... There will be no proration of Shares tendered by any
shareholder beneficially owning less than 100 Shares as of
the close of business on February 28, 1997, and as of the
Expiration Date, who tenders all such Shares at or below the
Purchase Price and completes the box
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
captioned "Odd Lots" on the Letter of Transmittal and, if
applicable, the Notice of Guaranteed Delivery. Shares
allocated to a Thrift Plan account will not be included in
the aggregate number of Shares beneficially owned by any
shareholder for purposes of determining who beneficially
owns less than 100 Shares. Shareholders tendering Odd Lots
will avoid the payment of brokerage commissions and the
applicable odd lot discount payable in a sale of Shares in a
transaction effected on a securities exchange.
Withdrawal Rights............ Tendered Shares may be withdrawn at any time until the
Expiration Date of the Offer and, unless previously
purchased, after April 24, 1997. See Section 4.
Purpose of Offer............. The Company is adopting a new financial strategy designed to
maximize shareholder value, to make greater use of financial
leverage, to distribute cash to shareholders through a
potentially more tax efficient method than cash dividends
exclusively, and to increase the Company's financial
flexibility. The strategy includes: (a) a recapitalization
of the Company to employ more leverage in the capital
structure; (b) a reduction in the quarterly dividend to
$0.25 per share ($1.00 annually) from the previous $0.37 per
share ($1.48 annually); and (c) a target consolidated
debt-to-capital ratio of 45 percent which the Company
estimates can be achieved within the next five years. The
recapitalization will be accomplished by incurring up to
$410 Million of additional debt and using the proceeds to
purchase up to 12,000,000 Shares of its outstanding common
stock. The dividend is payable April 15, 1997 to
shareholders of record on March 21, 1997 regardless of
whether or when such Shares are tendered. Future dividend
action will be guided by, among other factors, a policy of
paying out 45 to 50 percent of the prior year's earnings. By
repurchasing Common Stock at a premium to its recent market
value the Company can accelerate and increase the amount of
cash received by shareholders. Reducing the dividend rate
improves the Company's financial flexibility going forward.
Market Price of Shares....... On February 25, 1997, the last reported sale price of the
Shares on the NYSE Composite Tape was $28.125 per Share. See
Section 7.
Dividends.................... Shares tendered and purchased by the Company will be
entitled to the regular quarterly cash dividend of $0.25 per
Share to be paid by the Company on April 15, 1997, to
holders of record on March 21, 1997, regardless of whether
or when such Shares are tendered. Shares tendered and
purchased by the Company will not be entitled to any
dividends in respect of any later dividend periods. See
Section 7.
Brokerage Commissions........ Not payable by shareholders.
Stock Transfer Tax........... None, except as provided in Instruction 7 of the Letter of
Transmittal.
Payment Date................. As promptly as practicable after the Expiration Date of the
Offer.
Further Information.......... Any questions, requests for assistance or requests for
additional copies of this Offer to Purchase, the Letter of
Transmittal or other tender offer materials may be directed
to D.F. King & Co., Inc., 77 Water Street, New York, New
York 10005, Tel: (800) 848-2998 (toll free).
</TABLE>
ii
<PAGE>
To the Holders of Common Stock of
IPALCO Enterprises, Inc.:
INTRODUCTION
IPALCO Enterprises, Inc., an Indiana corporation (the "Company"), invites
its shareholders to tender shares of its Common Stock, no par value, (the
"Shares") (including the associated common stock purchase rights (the "Rights")
issued pursuant to the Rights Agreement, dated as of June 28, 1990, between the
Company and First Chicago Trust Company of New York, as the Rights Agent), at
prices not greater than $34.00 nor less than $29.00 per Share, net to the seller
in cash, specified by such shareholders, upon the terms and subject to the
conditions set forth herein and in the related Letter of Transmittal (which
together constitute the "Offer"). Unless the context otherwise requires, all
references to Shares shall include the associated Rights.
The Company will determine a single per Share price (not greater than $34.00
nor less than $29.00 per Share) (the "Purchase Price") that it will pay for the
Shares validly tendered pursuant to the Offer and not withdrawn, taking into
account the number of Shares so tendered and the prices specified by tendering
shareholders. The Company will select the Purchase Price that will enable it to
purchase 12,000,000 Shares (or such lesser number of Shares as are validly
tendered at prices not greater than $34.00 nor less than $29.00 per Share)
pursuant to the Offer. All Shares validly tendered at prices at or below the
Purchase Price and not withdrawn on or prior to the Expiration Date (as defined
in Section 1) will be purchased by the Company, upon the terms and subject to
the conditions of the Offer, including the provisions relating to proration
described below. The Purchase Price will be paid in cash, net to the seller,
with respect to all Shares purchased. Shares tendered at prices in excess of the
Purchase Price and Shares not purchased because of proration or invalid tender
will be returned to shareholders.
THE OFFER IS NOT CONDITIONED UPON ANY MINIMUM NUMBER OF SHARES BEING
TENDERED. THE OFFER IS, HOWEVER, SUBJECT TO CERTAIN OTHER CONDITIONS. SEE
SECTION 6.
Tendering shareholders will not be obligated to pay brokerage commissions,
solicitation fees or, subject to Instruction 7 of the Letter of Transmittal,
stock transfer taxes on the purchase of Shares by the Company. The Company will
pay all charges and expenses of Dillon, Read & Co. Inc. (the "Dealer Manager"),
IBJ Schroder Bank & Trust Company (the "Depositary") and D.F. King & Co., Inc.
(the "Information Agent") incurred in connection with the Offer. See Section 15.
HOWEVER, ANY TENDERING SHAREHOLDER OR OTHER PAYEE WHO FAILS TO COMPLETE AND SIGN
THE SUBSTITUTE FORM W-9 THAT IS INCLUDED IN THE LETTER OF TRANSMITTAL MAY BE
SUBJECT TO A REQUIRED FEDERAL INCOME TAX BACKUP WITHHOLDING OF 31% OF THE GROSS
PAYMENTS PAYABLE TO SUCH SHAREHOLDER OR OTHER PAYEE PURSUANT TO THE OFFER. SEE
SECTIONS 3 AND 13.
Shareholders who are participants in IPALCO POWERINVEST, the Company's
Dividend Reinvestment and Direct Stock Purchase Plan, (the "Dividend
Reinvestment Plan") may tender part or all of the Shares attributed to such
participant's account and in each case must specify the price or prices at which
such Shares are to be tendered. See Section 3. Shares held in a Dividend
Reinvestment Plan account as to which the Depositary has not received timely
instructions shall not be tendered. See Section 3. Shares held in a Dividend
Reinvestment Plan account will be included in the calculation of the aggregate
number of Shares beneficially owned by any shareholder for purposes of
determining Odd Lot Owners (as defined in Section 1).
The Indianapolis Power & Light Company Employees' Thrift Plan (the "Thrift
Plan") holds Shares (approximately 9.71% of the outstanding Shares) in accounts
for participants in the Thrift Plan. Merrill Lynch Trust Company of America,
Trustee (the "Thrift Plan Trustee") serves as trustee for the Thrift Plan. Under
the terms of the Thrift Plan, a participant may instruct the Thrift Plan Trustee
to tender all or part
1
<PAGE>
of the Shares allocated to the participant's accounts in Fund B, IPALCO Common
Stock which are eligible for tender. See Section 3. Shares allocated to a
participant's account as to which the Thrift Plan Trustee has not received
timely instructions from such participant shall not be tendered. Shares
allocated to a participant's account in the Thrift Plan may or may not be
eligible for tender depending upon the following factors: (1) whether or not the
participant's terms of employment are covered by a collective bargaining
agreement with the International Brotherhood of Electrical Workers ("IBEW"); (2)
whether the Shares are attributable to an employer matching contribution; (3)
whether the Shares are attributable to earnings on employer matching
contributions; and (4) when any of such Shares were contributed to the
participant's account. Please refer to the Prospectus for the Thrift Plan or
contact the Thrift Plan Trustee for more specific information regarding which
Shares are eligible for tender. Shares allocated to a Thrift Plan account will
not be included in the calculation of the aggregate number of Shares
beneficially owned by any shareholder for purposes of determining Odd Lot
Owners. See Sections 1 and 2.
NEITHER THE COMPANY NOR ANY OF ITS DIRECTORS, OFFICERS OR EMPLOYEES MAKES
ANY RECOMMENDATION TO ANY SHAREHOLDER AS TO WHETHER TO TENDER ALL OR ANY SHARES.
EACH SHAREHOLDER MUST MAKE HIS OR HER OWN DECISION AS TO WHETHER TO TENDER
SHARES AND, IF SO, HOW MANY SHARES TO TENDER AND AT WHAT PRICE. THE COMPANY HAS
BEEN ADVISED THAT NO DIRECTOR OR OFFICER OF THE COMPANY INTENDS TO TENDER SHARES
PURSUANT TO THE OFFER.
As of February 28, 1997, the Company had issued and outstanding 57,036,540
Shares and had reserved for issuance upon exercise of outstanding stock options
1,023,570 Shares. As of February 28, 1997, there were approximately 23,957
holders of record of Shares. The 12,000,000 Shares that the Company is offering
to purchase represent approximately 21.0% of the Shares outstanding on February
28, 1997, or approximately 20.7% on a fully diluted basis (assuming the exercise
of all outstanding stock options).
A tender of Shares pursuant to the Offer will include a tender of the
associated Rights. No separate consideration will be paid for such Rights. See
Section 7.
The Shares are listed and traded principally on the New York Stock Exchange
("NYSE") and are also traded on the Chicago Stock Exchange ("CSE"). The Shares
trade under the symbol "IPL." See Section 7. SHAREHOLDERS ARE URGED TO OBTAIN
CURRENT MARKET QUOTATIONS FOR THE SHARES.
THE OFFER
1. NUMBER OF SHARES; PRORATION.
Upon the terms and subject to the conditions described herein and in the
Letter of Transmittal, the Company will purchase up to 12,000,000 Shares that
are validly tendered on or prior to the Expiration Date (and not properly
withdrawn in accordance with Section 4) at a price (determined in the manner set
forth below) not greater than $34.00 nor less than $29.00 per Share. The later
of 12:00 Midnight, Eastern Standard Time, on Thursday, March 27, 1997, or the
latest time and date to which the Offer is extended, is referred to herein as
the "Expiration Date." If the Offer is oversubscribed as described below, only
Shares validly tendered at or below the Purchase Price on or prior to the
Expiration Date will be eligible for proration.
The Company will determine the Purchase Price taking into account the number
of Shares so tendered and the prices specified by tendering shareholders. The
Company will select the Purchase Price that will enable it to purchase
12,000,000 Shares (or such lesser number of Shares as are validly tendered and
not withdrawn at prices not greater than $34.00 nor less than $29.00 per Share)
pursuant to the Offer. The Company reserves the right to purchase more than
12,000,000 Shares pursuant to the Offer, but does not currently plan to do so.
The Offer is not conditioned on any minimum number of Shares being tendered.
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Shares tendered and purchased by the Company will be entitled to the regular
quarterly cash dividend of $0.25 per Share to be paid by the Company on April
15, 1997, to holders of record on March 21, 1997, regardless of whether or when
such Shares are tendered. Shares tendered and purchased by the Company will not
be entitled to any dividends in respect of any later dividend periods.
In accordance with Instruction 5 of the Letter of Transmittal, each
shareholder who wishes to tender Shares must specify the price (not greater than
$34.00 nor less than $29.00 per Share) at which such shareholder is willing to
have the Company purchase such Shares. As promptly as practicable following the
Expiration Date, the Company will determine the Purchase Price (not greater than
$34.00 nor less than $29.00 per Share) that it will pay for Shares validly
tendered pursuant to the Offer, taking into account the number of Shares so
tendered and the prices specified by tendering shareholders. All Shares not
purchased pursuant to the Offer, including Shares tendered at prices greater
than the Purchase Price and Shares not purchased because of proration, will be
returned to the tendering shareholders at the Company's expense as promptly as
practicable following the Expiration Date.
Upon the terms and subject to the conditions of the Offer, if 12,000,000 or
fewer Shares have been validly tendered at or below the Purchase Price and not
withdrawn on or prior to the Expiration Date, the Company will purchase all such
Shares (including fractional Shares held in the Dividend Reinvestment Plan or
the Thrift Plan). Upon the terms and subject to the conditions of the Offer, if
more than 12,000,000 Shares have been validly tendered at or below the Purchase
Price and not withdrawn on or prior to the Expiration Date, the Company will
purchase Shares in the following order of priority:
(a) first, all Shares validly tendered at or below the Purchase Price
and not withdrawn on or prior to the Expiration Date by any shareholder (an
"Odd Lot Owner") who was as of the close of business on February 28, 1997,
and will continue to be at the Expiration Date, the record or beneficial
owner of an aggregate of fewer than 100 Shares (including any Shares held in
the Dividend Reinvestment Plan, but excluding Shares held in the Thrift
Plan), all of which are being tendered (partial tenders will not qualify for
this preference) and completes the box captioned "Odd Lots" on the Letter of
Transmittal and, if applicable, the Notice of Guaranteed Delivery; and
(b) then, after purchase of all of the foregoing Shares, all Shares
validly tendered at or below the Purchase Price and not withdrawn on or
prior to the Expiration Date on a pro rata basis, if necessary (with
appropriate adjustments to avoid purchases of fractional Shares, other than
Shares held in the Dividend Reinvestment Plan or the Thrift Plan).
Notwithstanding clause (b) above, the Company reserves the right, but is not
obligated, to purchase prior to purchasing any other Shares referred to in
clause (b), all Shares tendered by a shareholder who has validly tendered at or
below the Purchase Price all Shares owned, beneficially or of record, and as a
result of the proration contemplated by clause (b) would then own, beneficially
or of record, an aggregate of fewer than 100 Shares. If the Company exercises
this right, it will increase the number of Shares that are purchased pursuant to
the Offer in an amount sufficient to allow the exercise of the right (i.e., the
number of Shares that would be owned by all shareholders who would become Odd
Lot holders as a result of the proration contemplated by clause (b)).
If proration of tendered Shares is required, because of the difficulty in
determining the number of Shares validly tendered (including Shares tendered by
the guaranteed delivery procedure described in Section 3) and as a result of the
"odd lot" procedure described in Section 2 (the "Odd Lot Procedure"), the
Company does not expect that it will be able to announce the final proration
factor or to commence payment for any Shares purchased pursuant to the Offer
until approximately seven NYSE trading days after the Expiration Date. Proration
of Shares, other than Shares tendered pursuant to the Odd Lot Procedure, will be
based on the ratio of the number of Shares to be purchased by the Company
pursuant to the Offer (less Odd Lot Shares tendered at or below the Purchase
Price) to the total number of Shares tendered by all shareholders at or below
the Purchase Price (less Odd Lot Shares tendered at or below the Purchase
Price). This ratio will be applied to all Shares tendered by each shareholder to
determine the
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number of Shares that will be purchased from each shareholder pursuant to the
Offer. Preliminary results of proration will be announced by press release as
promptly as practicable after the Expiration Date. Holders of Shares may obtain
such preliminary information from the Dealer Manager or the Information Agent
and may also be able to obtain such information from their brokers. For a
discussion of certain federal income tax consequences to shareholders, see
Section 13.
THE COMPANY EXPRESSLY RESERVES THE RIGHT, IN ITS SOLE DISCRETION, TO
PURCHASE ADDITIONAL SHARES PURSUANT TO THE OFFER OR TO DECREASE THE NUMBER OF
SHARES BEING SOUGHT PURSUANT TO THE OFFER. If (i) the Company increases or
decreases the price to be paid for Shares, increases the number of Shares being
sought and such increase in the number of Shares being sought exceeds 2% of the
outstanding Shares or decreases the number of Shares being sought and (ii) 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 notice of
such increase or decrease is first published, sent or given in the manner
described in Section 14, the Offer will be extended until the expiration of ten
business days from the date of publication of such notice.
The Company also expressly reserves the right, in its sole discretion, at
any time or from time to time, to extend the period of time during which the
Offer is open by giving oral or written notice of such extension to the
Depositary. See Section 14. There can be no assurance, however, that the Company
will exercise its right to extend the Offer.
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, Eastern Standard Time.
Copies of this Offer to Purchase and the Letter of Transmittal are being
mailed to record holders of Shares and will be furnished to brokers, banks and
similar persons whose names, or the names of whose nominees, appear on the
Company's shareholder list or, if applicable, who are listed as participants in
a clearing agency's security position listing for subsequent transmittal to
beneficial owners of Shares.
2. TENDERS BY HOLDERS OF FEWER THAN 100 SHARES.
All Shares validly tendered at or below the Purchase Price and not withdrawn
on or prior to the Expiration Date by or on behalf of any shareholder who was as
of the close of business on February 28, 1997, and will continue to be at the
Expiration Date, the record or beneficial owner of an aggregate of fewer than
100 Shares (including Shares held in the Dividend Reinvestment Plan but
excluding Shares allocated to your account in the Thrift Plan) all of which are
being tendered will be accepted without proration. See Section 1. Partial
tenders will not qualify for this preference, and it is not available to
beneficial holders of 100 or more Shares, even if such holders have separate
stock certificates for fewer than 100 Shares. By accepting the Offer, an Odd Lot
Owner will avoid the payment of brokerage commissions and the applicable odd lot
discount payable in a sale of such Shares in a transaction effected on a
securities exchange.
As of February 28, 1997, there were approximately 23,957 holders of record
of Shares. Approximately 25% of these holders of record held individually fewer
than 100 Shares and held in the aggregate approximately 208,000 Shares. Because
of the large number of Shares held in the names of brokers and nominees, the
Company is unable to estimate the number of beneficial owners of fewer than 100
Shares or the aggregate number of Shares they own. Any Odd Lot Owner wishing to
tender all of his or her Shares free of proration must complete the box
captioned "Odd Lots" on the Letter of Transmittal and, if applicable, on the
Notice of Guaranteed Delivery.
3. PROCEDURE FOR TENDERING SHARES.
PROPER TENDER OF SHARES. To tender Shares validly pursuant to the Offer,
either (a) a properly completed and duly executed Letter of Transmittal or
photocopy thereof, together with any required signature guarantees and any other
documents required by the Letter of Transmittal, must be received by
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the Depositary at one of its addresses set forth on the back cover of this Offer
to Purchase and either (i) certificates for the Shares to be tendered must be
received by the Depositary at one of such addresses or (ii) such Shares must be
delivered pursuant to the procedures for book-entry transfer described below
(and a confirmation of such delivery received by the Depositary including an
Agent's Message if the tendering shareholder has not delivered a Letter of
Transmittal), in each case on or prior to the Expiration Date, or (b) the
tendering holder of Shares must comply with the guaranteed delivery procedure
described below. The term "Agent's Message" means a message, transmitted by a
Book-Entry Transfer Facility to, and received by, the Depositary and forming a
part of a book-entry confirmation, which states that such Book-Entry Transfer
Facility has received an express acknowledgement from the participant in such
Book-Entry Transfer Facility tendering the Shares, that such participant has
received and agrees to be bound by the terms of the Letter of Transmittal and
that the Purchaser may enforce such agreement against the participant.
IN ACCORDANCE WITH INSTRUCTION 5 OF THE LETTER OF TRANSMITTAL, IN ORDER TO
TENDER SHARES PURSUANT TO THE OFFER, A SHAREHOLDER MUST INDICATE IN THE SECTION
CAPTIONED "PRICE (IN DOLLARS) PER SHARE AT WHICH SHARES ARE BEING TENDERED" ON
THE LETTER OF TRANSMITTAL THE PRICE (IN MULTIPLES OF $0.25) AT WHICH SUCH SHARES
ARE BEING TENDERED. Shareholders wishing to tender Shares at more than one price
must complete separate Letters of Transmittal for each price at which such
Shares are being tendered. The same Shares cannot be tendered at more than one
price. FOR A TENDER OF SHARES TO BE VALID, A PRICE BOX, BUT ONLY ONE PRICE BOX,
ON EACH LETTER OF TRANSMITTAL MUST BE CHECKED. Shareholders wishing to maximize
the possibility that their Shares will be purchased at the Purchase Price may
check the box on the Letter of Transmittal marked "Shares Tendered at Price
Determined by Dutch Auction." Checking this box may result in a purchase of the
Shares so tendered at the minimum price of $29.00.
BOOK-ENTRY TRANSFER. The Depositary will establish an account with respect
to the Shares at The Depository Trust Company and the Philadelphia Depository
Trust Company (collectively referred to as the "Book-Entry Transfer Facilities")
for purposes of the Offer within two business days after the date of this Offer
to Purchase, and any financial institution that is a participant in the system
of any Book-Entry Transfer Facility may make delivery of Shares by causing such
Book-Entry Transfer Facility to transfer such Shares into the Depositary's
account in accordance with the procedures of such Book-Entry Transfer Facility.
Although delivery of Shares may be effected through book-entry transfer, a
properly completed and duly executed Letter of Transmittal or photocopy thereof,
together with any required signature guarantees or an Agent's Message in lieu of
the Letter of Transmittal and any other required documents, must, in any case,
be received by the Depositary at one of its addresses set forth on the back
cover of this Offer to Purchase on or prior to the Expiration Date, or the
tendering holder of Shares must comply with the guaranteed delivery procedure
described below. Delivery of the Letter of Transmittal and any other required
documents to a Book-Entry Transfer Facility does not constitute delivery to the
Depositary.
SIGNATURE GUARANTEES. Except as otherwise provided below, all signatures on
a Letter of Transmittal must be guaranteed by a firm that is a member of a
registered national securities exchange or the National Association of
Securities Dealers, Inc., or by a commercial bank or trust company having an
office or correspondent in the United States which 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
need not be guaranteed if (a) the Letter of Transmittal is signed by the
registered holder of the Shares tendered therewith and such holder has not
completed the box entitled "Special Payment Instructions" or the box entitled
"Special Delivery Instructions" in the Letter of Transmittal or (b) such Shares
are tendered for the account of an Eligible Institution. See Instructions 1 and
6 of the Letter of Transmittal.
GUARANTEED DELIVERY. If a shareholder desires to tender Shares pursuant to
the Offer and cannot deliver certificates for such Shares and all other required
documents to the Depositary on or prior to the
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Expiration Date or the procedure for book-entry transfer cannot be complied with
in a timely manner, such Shares may nevertheless be tendered if all of the
following conditions are met:
(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 the Company (with any
required signature guarantees) is received by the Depositary as provided
below on or prior to the Expiration Date; and
(iii) the certificates for such Shares (or a confirmation of a book-entry
transfer of such Shares into the Depositary's account at one of the
Book-Entry Transfer Facilities), together with a properly completed and duly
executed Letter of Transmittal (or photocopy thereof or, in the case of a
book-entry transfer, an Agent's Message in lieu of the Letter of
Transmittal) and any other documents required by the Letter of Transmittal,
are received by the Depositary no later than 12:00 Midnight, Eastern
Standard Time, on the third NYSE trading day after the date of execution of
the Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted by
facsimile transmission or mail to the Depositary and must include a guarantee by
an Eligible Institution in the form set forth in such Notice.
The method of delivery of Shares and all other required documents is at the
option and risk of the tendering shareholder. If delivery is by mail, registered
mail with return receipt requested, properly insured, is recommended. In all
cases sufficient time should be allowed to assure timely delivery.
FEDERAL BACKUP WITHHOLDING. To avoid federal income tax backup withholding
equal to 31% of the gross payments made pursuant to the Offer, each shareholder
must notify the Depositary of such shareholder's correct taxpayer identification
number and provide certain other information by properly completing the
Substitute Form W-9 included in the Letter of Transmittal. Foreign shareholders
(as defined in Section 13) may be required to submit a properly completed Form
W-8, certifying non-United States status, in order to avoid backup withholding.
In addition, foreign shareholders may be subject to 30% (or lower treaty rate)
withholding on gross payments received pursuant to the Offer (as discussed in
Section 13). For a discussion of certain federal income tax consequences to
tendering shareholders, see Section 13. Each shareholder is urged to consult
with his or her own tax adviser.
DETERMINATION OF VALIDITY. All questions as to the Purchase Price, the form
of documents and the validity, eligibility (including time of receipt) and
acceptance for payment of any tender of Shares will be determined by the
Company, in its sole discretion, and its determination shall be final and
binding. The Company reserves the absolute right to reject any or all tenders of
Shares that it determines are not in proper form or the acceptance for payment
of or payment for Shares that may, in the opinion of the Company's counsel, be
unlawful. The Company also reserves the absolute right to waive any defect or
irregularity in any tender of Shares. None of the Company, the Dealer Manager,
the Depositary, the Information Agent, IPL's Shareholder Services Division or
the Thrift Plan Trustee 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.
RULE 14E-4. It is a violation of Rule 14e-4 promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), for a person
to tender Shares for his or her own account unless, at the time of tender and at
the end of the proration period or period during which Shares are accepted by
lot (including any extensions thereof), the person so tendering (i) has a net
long position equal to or greater than the amount of (x) Shares tendered or (y)
other securities immediately convertible into, exercisable, or exchangeable for
the amount of Shares tendered and will acquire such Shares for tender by
conversion, exercise or exchange of such other securities and (ii) will cause
such Shares to be delivered in accordance with the terms of the Offer. Rule
14e-4 provides a similar restriction applicable to the tender or guarantee
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of a tender on behalf of another person. The tender of Shares pursuant to any
one of the procedures described above will constitute the tendering
shareholder's representation and warranty that (i) such shareholder has a net
long position in the Shares being tendered within the meaning of Rule 14e-4
promulgated under the Exchange Act, and (ii) the tender of such Shares complies
with Rule 14e-4. The Company's acceptance for payment of Shares tendered
pursuant to the Offer will constitute a binding agreement between the tendering
shareholder and the Company upon the terms and subject to the conditions of the
Offer.
IPALCO POWERINVEST-DIVIDEND REINVESTMENT PLAN. A shareholder participating
in IPALCO PowerInvest, the Dividend Reinvestment Plan, who wishes to tender
Shares held in such participant's account in this plan should complete the
Dividend Reinvestment Plan Shares section of the Letter of Transmittal. Any
Dividend Reinvestment Plan Shares tendered but not purchased will be returned to
the participant's Dividend Reinvestment Plan account. If a participant tenders
all of his or her Shares held in a Dividend Reinvestment Plan account and all
such Shares are purchased by the Company pursuant to the Offer, such tender will
be deemed to be authorization and written notice to IPL's Shareholder Services
Division to terminate such shareholder's participation in the Dividend
Reinvestment Plan, subject to a shareholder's right to recommence participation
in accordance with the terms of the Dividend Reinvestment Plan.
THRIFT PLAN. A participant in the Employees' Thrift Plan who wishes to have
Merrill Lynch Trust Company of America, the Thrift Plan Trustee, tender shares
allocated to such participant's Thrift Plan account should contact the Thrift
Plan Trustee pursuant to the Thrift Plan Instruction Letter distributed to such
participants by the Thrift Plan Trustee together with this Offer to Purchase. To
ensure that a tender of Shares allocated to a shareholder's Thrift Plan account
will be effective, a tendering shareholder should instruct the Thrift Plan
Trustee in ample time for the Thrift Plan Trustee to submit a tender on such
shareholder's behalf on or prior to the Expiration Date. Any Thrift Plan Shares
tendered but not purchased will be returned to the participant's Thrift Plan
account.
4. 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 April 24, 1997, unless theretofore accepted for
payment as provided in this Offer to Purchase. If the Company extends the period
of time during which the Offer is open, is delayed in accepting for payment or
paying for Shares or is unable to accept for payment or pay for Shares pursuant
to the Offer for any reason, then, without prejudice to the Company's rights
under the Offer, the Depositary may, on behalf of the Company, retain all Shares
tendered, and such Shares may not be withdrawn except as otherwise provided in
this Section 4, subject to Rule 13e-4(f)(5) under the Exchange Act, which
provides that the issuer making the tender offer shall either pay the
consideration offered, or return the tendered securities promptly after the
termination or withdrawal of the tender offer.
To be effective, a written or facsimile transmission 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. Shareholders must contact the Thrift
Plan Trustee in ample time for withdrawals of tenders of Shares held in a Thrift
Plan account. Any notice of withdrawal 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 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 holder (if different from that of the tendering 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 one of the Book-Entry Transfer Facilities to be
credited with the withdrawn Shares. 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 retendered by again following one of the
procedures described in Section 3 at any time prior to the Expiration Date.
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All questions as to the form and validity (including time of receipt) of any
notice of withdrawal will be determined by the Company, in its sole discretion,
which determination shall be final and binding. None of the Company, the Dealer
Manager, the Depositary, the Information Agent, IPL's Shareholder Services
Division or the Thrift Plan Trustee or any other person will be under any duty
to give notification of any defect or irregularity in any notice of withdrawal
or incur any liability for failure to give any such notification.
5. ACCEPTANCE FOR PAYMENT OF SHARES 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, the Company will determine the Purchase
Price, taking into account the number of Shares tendered and the prices
specified by tendering shareholders, announce the Purchase Price, and will
(subject to the proration provisions of the Offer) accept for payment and pay
for Shares validly tendered at or below the Purchase Price. Thereafter, payment
for all Shares validly tendered on or prior to the Expiration Date and accepted
for payment pursuant to the Offer will be made by the Depositary by check as
promptly as practicable. In all cases, payment for Shares accepted for payment
pursuant to the Offer will be made only after timely receipt by the Depositary
of certificates for Shares (or of a confirmation of a book-entry transfer of
such Shares into the Depositary's account at one of the Book-Entry Transfer
Facilities), a properly completed and duly executed Letter of Transmittal or
manually signed photocopy thereof, and any other required documents.
For purposes of the Offer, the Company 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. The Company will pay for Shares that
it has purchased pursuant to the Offer by depositing the Purchase Price therefor
with the Depositary. The Depositary will act as agent for tendering shareholders
for the purpose of receiving payment from the Company and transmitting payment
to tendering shareholders. Under no circumstances will interest be paid on
amounts to be paid to tendering shareholders, regardless of any delay in making
such payment.
Certificates for all Shares not purchased will be returned (or, in the case
of Shares tendered by book-entry transfer, such Shares will be credited to an
account maintained with a Book-Entry Transfer Facility) as promptly as
practicable without expense to the tendering shareholder.
Payment for Shares may be delayed in the event of difficulty in determining
the number of Shares properly tendered or if proration is required. See Section
1. In addition, if certain events occur, the Company may not be obligated to
purchase Shares pursuant to the Offer. See Section 6.
The Company 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 holder, or if tendered Shares are registered in
the name of any person other than the person signing the Letter of Transmittal,
the amount of any stock transfer taxes (whether imposed on the registered
holder, 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. See
Instruction 7 of the Letter of Transmittal.
6. CERTAIN CONDITIONS OF THE OFFER.
Notwithstanding any other provisions of the Offer, the Company will not be
required to accept for payment or pay for any Shares tendered, and may terminate
or amend the Offer 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 the purchase of and payment for, Shares tendered, if at any time on or after
February 28, 1997, and before the time of payment for any such Shares (whether
any Shares have theretofore been accepted for payment, purchased or paid for
pursuant to the Offer) any of the following events shall have
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occurred (or shall have been determined by the Company in its sole judgment to
have occurred) regardless of the circumstances giving rise thereto (including
any action or omission to act by the Company):
(a) there shall have been threatened, instituted or pending any action
or proceeding by any government or governmental, regulatory or
administrative agency or authority or tribunal or any other person, domestic
or foreign, or before any court, authority, agency or tribunal or any other
person, domestic or foreign, or any judgment, order or injunction entered,
enforced or deemed applicable by any such authority, agency, tribunal or
other person, that (i) challenges the acquisition of Shares pursuant to the
Offer or otherwise in any manner relates to or affects the Offer, or (ii) in
the sole judgment of the Company, could materially and adversely affect the
business, condition (financial or other), income, operations or prospects of
the Company and its subsidiaries, taken as a whole, or otherwise materially
impair in any way the contemplated future conduct of the business of the
Company or any of its subsidiaries or materially impair the contemplated
benefits of the Offer to the Company;
(b) there shall have been any action threatened, pending or taken, or
approval withheld, withdrawn or abrogated 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 to the Company or any of its subsidiaries, by any legislative body,
court, authority, agency or tribunal, domestic or foreign, which, in the
Company's sole judgment, would or might directly or indirectly (i) 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, (ii)
delay or restrict the ability of the Company, or render the Company unable,
to accept for payment or pay for some or all of the Shares, as the case may
be, (iii) materially impair the contemplated benefits of the Offer to the
Company or (iv) materially affect the business, condition (financial or
other), income, operations or prospects of the Company or any of its
subsidiaries or otherwise materially impair in any way the contemplated
future conduct of the business of the Company or any of its subsidiaries;
(c) it shall have been publicly disclosed or the Company shall have
learned that (i) any person or "group" (within the meaning of Section
13(d)(3) of the Exchange Act) has acquired or proposes to acquire beneficial
ownership of more than 5% of the outstanding Shares whether through the
acquisition of stock, the formation of a group, the grant of any option or
right, or otherwise (other than as disclosed in a Schedule 13D or 13G (or an
amendment thereto) on file with the Securities and Exchange Commission (the
"Commission") on February 28, 1997), (ii) any such person or group that on
or prior to February 28, 1997, had filed such a Schedule with the Commission
thereafter shall have acquired or shall propose to acquire whether through
the acquisition of stock, the formation of a group, the grant of any option
or right, or otherwise, beneficial ownership of additional Shares
representing 2% or more of the outstanding Shares, (iii) any new group shall
have been formed which beneficially owns more than 5% of the outstanding
Shares, or (iv) any person, entity or group shall have filed a Notification
and Report Form under the Hart-Scott-Rodino Antitrust Improvements Act of
1976 or made a public announcement reflecting an intent to acquire the
Company or any or its subsidiaries or any of their respective assets or
securities;
(d) there shall have occurred (i) any general suspension of trading in,
or limitation on prices for, securities on any national securities exchange
or in the over-the-counter market, (ii) any significant decline in the
market price of the Shares or in the general level of market prices of
equity securities in the United States or abroad, (iii) any change in the
general political, market, economic or financial condition in the United
States or abroad that could have a material adverse effect on the Company's
business, condition (financial or other), income, operations, prospects or
ability to obtain financing generally or the trading in the Shares, (iv) 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 which, in
the Company's sole judgment, might affect the extension of credit by lending
institutions in the United States, (v) the commencement of a war, armed
hostilities or other international or national crisis
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directly or indirectly involving the United States or (vi) in the case of
any of the foregoing existing at the time of the commencement of the Offer,
in the Company's sole judgment, a material acceleration or worsening
thereof;
(e) a tender or exchange offer with respect to some or all of the Shares
(other than the Offer), or a merger, acquisition or other business
combination proposal for the Company or any subsidiary, shall have been
proposed, announced or made by a person other than the Company; or
(f) there shall have occurred any event or events that have resulted in,
or may in the sole judgment of the Company result in, an actual or
threatened change in the business, condition (financial or other), income,
operations, stock ownership or prospects of the Company or any of its
subsidiaries, or materially impair the contemplated benefits of the Offer to
the Company;
and, in the sole judgment of the Company, such event or events make it
undesirable or inadvisable to proceed with the Offer or with such acceptance for
payment or payment.
Any of the foregoing conditions may be waived by the Company, in whole or in
part, at any time and from time to time in its sole discretion. The failure by
the Company 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 the Company concerning the events described above will be final and binding
on all parties.
7. PRICE RANGE OF SHARES; DIVIDENDS; RIGHTS PLAN.
The Shares are listed and traded principally on the NYSE and are also traded
on the CSE. The following table sets forth for the periods indicated the high
and low closing sales prices of the Shares on the NYSE Composite Tape as
reported in the WALL STREET JOURNAL.
<TABLE>
<CAPTION>
1996 1995
------------------------ ------------------------
<S> <C> <C> <C> <C>
HIGH LOW HIGH LOW
SALE PRICE SALE PRICE SALE PRICE SALE PRICE
----------- ----------- ----------- -----------
First Quarter.................................. $ 27 3/8 $ 25 $ 22 1/2 $ 19 7/8
Second Quarter................................. 26 3/4 24 5/8 22 20 5/8
Third Quarter.................................. 27 5/8 25 1/8 24 1/8 21
Fourth Quarter................................. 28 1/4 26 1/8 25 3/4 23 5/8
</TABLE>
The high and low sale prices for IPALCO's Common Stock as reported on the
NYSE Composite Tape in THE WALL STREET JOURNAL for the period January 1, 1997,
through February 25, 1997, were: High--$28.375, Low--$26.50.
On February 25, 1997, the last trading day prior to the announcement of the
Offer, the last reported sale price of the Shares on the NYSE Composite Tape was
$28.125 per Share. Shareholders are urged to obtain current market quotations
for the Shares.
Quarterly dividends paid on each Share during 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
First Quarter................................................................. $ .36 $ .353
Second Quarter................................................................ .37 .36
Third Quarter................................................................. .37 .36
Fourth Quarter................................................................ .37 .36
</TABLE>
On January 15, 1997, the Company paid a dividend of $0.37 per Share as
declared by the Board of Directors on November 26, 1996. On February 25, 1997,
the Company declared a dividend of $0.25 per Share for the first quarter of
1997. The dividend is to be paid on April 15, 1997, to holders of record on
10
<PAGE>
March 21, 1997. This represents a reduction in the regular quarterly dividend
from the previous level of $0.37 per share ($1.48 annually). Shares tendered and
purchased by the Company will be entitled to the quarterly cash dividend to be
paid on April 15, 1997 regardless of when such tender is made. Shares tendered
and purchased by the Company will not be entitled to any dividends in respect of
any later dividends periods. Future dividend action will be guided by, among
other factors, a policy of paying out 45 to 50 percent of the prior year's
earnings. The declaration and payment of future dividends will be dependent on
the Company's earnings and financial condition, economic and market conditions
and other factors deemed relevant by the Company's Board of Directors.
SUMMARY OF RIGHTS TO PURCHASE COMMON SHARES. On June 26, 1990, the Board of
Directors of the Company declared a dividend of one common share purchase right
(a "Right" or "Rights") for each outstanding Share. The dividend was payable on
July 11, 1990 (the "Record Date") to the shareholders of record as of that date.
If and when the Rights become exercisable, each Right will entitle the
registered holder to purchase from the Company one Share at a purchase price of
$33.33 (the "Purchase Price"), although the price may be adjusted as described
below. The description and terms of the Rights are set forth in a Rights
Agreement (the "Rights Agreement") between the Company and First Chicago Trust
Company of New York, as Rights Agent (the "Rights Agent").
TRADING AND DISTRIBUTION OF RIGHTS. The Rights cannot be bought, sold or
otherwise traded separately from the Shares. Certificates for Shares carry a
notation that indicates that Rights are attached to the Shares and that the
terms of the Rights Agreement are incorporated therein.
Separate certificates representing the Rights will be distributed as soon as
practicable after the "Distribution Date," which is the earliest to occur of:
(a) 10 calendar days following a public announcement that a person or
group of affiliated or associated persons (an "Acquiring Person") has (a)
acquired beneficial ownership of 20% or more of the outstanding Shares or
(b) become the beneficial owner of an amount of the outstanding Shares (but
not less than 15%) which the Board of Directors determines to be substantial
and which ownership the Board of Directors determines is intended or may be
reasonably anticipated, in general, to cause the Company to take actions
determined by the Board of Directors to be not in the Company's best
long-term interests (an "Adverse Person"), or
(b) 10 business days (or such later date as may be determined by action
of the Board of Directors prior to the time any person or group becomes an
Acquiring Person) following the commencement or announcement of an intention
to make a tender offer or exchange offer the consummation of which would
result in the beneficial ownership by a person or group of 30% or more of
such outstanding Shares.
Until the Distribution Date (or earlier exchange, redemption or expiration
of the Rights), the surrender for transfer of any certificates for Shares
outstanding as of the Record Date, even without such notation or a copy of this
Summary of Rights being attached thereto, will also constitute the transfer of
the Rights associated with the Shares represented by such certificate. As soon
as practicable following the Distribution Date, separate certificates evidencing
the Rights ("Right Certificates") will be mailed to holder of record of the
Shares as of the close of business on the Distribution Date and, thereafter,
such separate Right Certificates alone will evidence the Rights.
EXERCISABILITY AND EXPIRATION. The holders of the Rights are not required
to take any action until the Rights become exercisable. As described above, the
Rights are not exercisable until the Distribution Date. Holders of the Rights
will be notified that the Rights have become exercisable when the Rights Agent
mails the Rights Certificates. The Rights will expire on July 11, 2000 (the
"Final Expiration Date"), unless the Final Expiration Date is extended or unless
the Rights are earlier redeemed by the Company, in each case, as described
below.
11
<PAGE>
ADJUSTMENTS. In order to protect the value of the Rights to the holders,
the Purchase Price payable, and the number of Shares or other securities or
property issuable, upon exercise of the Rights are subject to adjustment from
time to time (1) in the event of a stock dividend on, or a subdivision,
combination or reclassification of, the Shares, (2) upon the grant to holders of
the Shares of certain rights or warrants to subscribe for or purchase Shares at
a price, or securities convertible into Shares with a conversion price less than
the then current market price of Shares, or (3) upon the distribution to holders
of the Shares of evidences of indebtedness or assets (excluding regular periodic
cash dividends paid out of earnings or retained earnings or dividends payable in
Shares) or of subscription rights or warrants, other than those referred to
above.
These adjustments are called anti-dilution provisions and are intended to
ensure that a holder of Rights will not be adversely affected by the occurrence
of such events. With certain exceptions, the Company is not required to adjust
the Purchase Price until cumulative adjustments require a change of at least 1%
in the Purchase Price. No fractional Shares will be issued and in lieu thereof,
an adjustment in cash will be made based on the market price of the Shares on
the last trading day prior to the date of exercise.
FLIP-OVER EVENTS AND FLIP-IN EVENTS. In the event that (1) the Company is
acquired in a merger or other business combination transaction and the Company
is not the surviving corporation, or (2) any person consolidates or merges with
the Company and all or part of the Company's Shares are exchanged for
securities, cash or property of any other person, or (3) 50% or more of the
Company's consolidated assets or earning power are sold (collectively,
"Flip-Over Events"), proper provision will be made so that each holder of a
Right will thereafter have the right to receive, upon the exercise thereof at
the then current exercise price of the Right, that number of shares of Common
Stock of the acquiring company which at the time of such transaction will have a
market value of two times the exercise price of the Right. In the event that (1)
an Acquiring Person engages in certain self-dealing transactions, or (2) a
person is declared an Adverse Person by the Board of Directors of the Company,
or (3) a person acquires 20% or more of the outstanding Shares (collectively,
"Flip-In Events"), proper provision shall be made so that each holder of a
Right, other than Rights beneficially owned by the Acquiring Person (which will
thereafter be void), will thereafter have the right to receive upon exercise
that number of Shares having a market value of two times the exercise price of
the Right.
EXCHANGE OPTION. At any time after a person becomes an Acquiring Person,
and prior to the acquisition by such Acquiring Person of 50% or more of the
outstanding Shares, the Board of Directors of the Company may exchange the
Rights (other than Rights owned by such person or group which have become void),
in whole or in part, at an exchange ratio of one Share per Right (subject to
adjustment).
REDEMPTION. At any time prior to the tenth calendar day following the date
of a public announcement that a person or group has become an Acquiring Person,
the Board of Directors of the Company may redeem the Rights in whole, but not in
part, at a price of $.01 per Right (the "Redemption Price"). The redemption of
the Rights may be made effective at such time, on such basis and with such
conditions as the Board of Directors in its sole discretion may establish.
Immediately upon any redemption of the Rights, the right to exercise the Rights
will terminate and the only right of the holders of Rights will be to receive
the Redemption Price.
If the Board of Directors' ability to redeem the Rights pursuant to the
Rights Agreement has expired because a person or group has become an Acquiring
Person, but a Flip-Over Event or certain Flip-In Events have not yet occurred,
the redemption right will be reinstated if the Acquiring Person disposes of a
sufficient number of the Company's Shares so that such person then owns only 10%
or less of the outstanding Company's Shares and if certain other conditions are
met.
OTHER PROVISIONS. The terms of the Rights may be amended by the Board of
Directors of the Company without the consent of the holders of the Rights,
except that from and after such time as any person becomes an Acquiring Person
no such amendment may adversely affect the interests of the holders of the
Rights.
12
<PAGE>
Until a Right is exercised, the holder thereof, as such, will have no rights
as a shareholder of the Company, including, without limitation, the right to
vote or to receive dividends.
A copy of the Rights Agreement has been filed with the Securities and
Exchange Commission as an Exhibit to a Registration Statement on Form 8-A dated
June 29, 1990. A copy of the Rights Agreement is available from the Company at
no charge upon written request. This summary description of the Rights does not
purport to be complete and is qualified in its entirety by reference to the
Rights Agreement, which is incorporated herein by this reference.
8. BACKGROUND AND PURPOSE OF THE OFFER.
It is expected that a substantial portion of the electric utility industry
will become deregulated and subject to competition in the future. A steady
evolution away from a regulated monopoly structure toward a more competitive
structure has impacted the electric utility industry for nearly two decades,
beginning with the Public Utilities Regulatory Policy Act of 1978 and continuing
through the National Energy Policy Act of 1992 and the Federal Energy Regulatory
Commission's Orders 888 and 889 in 1996. Both in the last session and in this
session, a number of bills to open portions of the electric utility industry to
competition have been introduced in Congress and a handful of states have
already passed legislation to introduce electric utility competition. Several
other states, including Indiana, are considering legislation or regulatory
action to introduce greater competition to the industry. A common element thus
far of most legislative initiatives is an extended transition period of several
years until the date of genuine effective competition in the industry, where the
retail price of electricity is actually determined by market forces. It is in
the context of such a progression to competition that the Board of Directors on
February 25, 1997 approved a new financial strategy that is intended to maximize
shareholder value and position the Company for the expected future competitive
environment.
The new financial strategy includes (a) a recapitalization of the Company to
employ a higher degree of leverage in the capital structure while the electric
utility industry is in a transition period between regulation and competition,
(b) Common Stock dividend action that will be guided by, among other factors, a
policy of paying out 45 to 50 percent of prior year's earnings, and (c)
achievement of a consolidated debt-to-total capital ratio of 45 percent by the
time effective competition comes to the electric utility industry. The
recapitalization is being effected by the parent company, IPALCO Enterprises,
Inc., and will not affect the capitalization of its subsidiary, Indianapolis
Power & Light Company.
The recapitalization is being effected through the Offer to purchase
approximately 21% of the Company's outstanding Common Stock. The potential $410
million transaction is being financed with a five-year bank loan. The Board of
Directors also announced on February 25, 1997 a reduction in the Company's
quarterly Common Stock dividend rate to $0.25 per share ($1.00 annually) from
the previous $0.37 per share ($1.48 annually). Such dividend is payable April
15, 1997 to shareholders of record on March 21, 1997, regardless of whether or
when such Shares are tendered. See Section 7.
Purchasing Common Stock at a premium to its market value prior to
announcement of the Offer enables the Company to increase and accelerate the
receipt of cash by shareholders. In fact, a $410 million repurchase equals
nearly five years of dividends based on the previous dividend rate. Reducing the
dividend rate improves the Company's financial flexibility going forward. A
dividend policy guided by, among other factors, a payout ratio of 45 to 50
percent of prior year's earnings is more consistent with companies operating
today in a competitive environment than the traditional utility payout ratio of
70 percent or more.
The dividend action positions the Company's Common Stock for market value
growth and a slightly lower income orientation than in the past. This means that
a higher proportion of the total return to shareholders will need to come from
capital gains as compared to dividend income. From the standpoint of most
individual investors, current federal tax law makes capital gains more
attractive than dividend income. The current marginal federal income tax rate on
capital gains (28%) is substantially lower than the
13
<PAGE>
highest marginal federal income tax rate on dividend income (39.6%). However,
capital gains are not as predictable as dividend income and are dependent on
factors including, but not limited to, the Company's ability to increase its
earnings and cash flow. Moreover, capital gains can be impacted by factors
outside the control of management such as the general level of inflation,
interest rates in the economy and stockmarket fluctuations.
The price range established for the tender offer will allow those
shareholders who desire a more income-oriented investment to exit their
investment in the Company on favorable terms. However, shareholders who choose
not to tender their Shares are also in a position to benefit from this
transaction. Such non-tendering shareholders will own a greater interest in a
highly competitive company with a stronger earnings per share growth rate.
The Offer will afford to shareholders who are considering the sale of all or
a portion of their Shares the opportunity to determine the price at which they
are willing to sell their Shares and, in the event the Company accepts such
Shares for purchase, to dispose of Shares without the usual transaction costs
associated with an open market sale, including brokerage commissions. The Offer
will also allow qualifying shareholders owning beneficially fewer than 100
Shares to avoid the applicable odd lot discount payable on a sale of Shares in a
transaction effected on a securities exchange. Correspondingly, the costs to the
Company for servicing the accounts of Odd Lot Owners will be reduced. See
Section 2.
The Company expects to incur up to $410 million of debt in connection with
the Offer. A reduction in common shareholders' equity will result from
purchasing the Shares according to the Offer and, when combined with the newly
incurred debt, will increase the Company's debt-to-total capital ratio from
42.6% at December 31, 1996 to a pro forma level of 68.4% (See Section 11). The
Company believes that in a competitive environment a target debt-to-total
capital ratio of 45% is appropriate. The Company believes its earnings and cash
flow will be sufficient to allow it to retain earnings and reduce debt so that
such a 45% target ratio can be achieved within five years. There can be no
assurances, however, that such target ratio can be achieved or that economic or
industry factors will not make achieving such ratio impracticable or
undesirable.
The Company believes its financial strategy will enable it to raise
sufficient funds to replace existing assets and undertake investments in new
growth while maintaining a prudent balance between debt and equity in the
capital structure. The Company believes its actions preserve the financial
flexibility necessary to accommodate unexpected future cash needs. The increased
use of debt is a tangible expression of the Board's and management's confidence
in the Company.
Shares the Company acquires pursuant to the Offer will be retained as
treasury stock by the Company (unless and until the Company determines to retire
such Shares or cancel their status as treasury shares and return them to the
status of authorized but unissued Shares) and will be available for the Company
to issue without further shareholder action (except as required by applicable
law or the rules of any securities exchange on which Shares are listed) for
purposes including, but not limited to, the acquisition of other businesses, the
raising of additional capital for use in the Company's business and the
satisfaction of obligations under existing or future employee benefit plans. The
Company has no current plans for issuance of the Shares repurchased pursuant to
the Offer.
As of February 28, 1997, the Company had issued and outstanding 57,036,540
Shares and had reserved for issuance upon exercise of outstanding stock options
1,023,570 Shares. The 12,000,000 Shares that the Company is offering to purchase
represent approximately 21% of the Shares then outstanding. As of January 15,
1997, all directors and executive officers of the Company as a group owned
beneficially an aggregate of 1,174,421 Shares (including an aggregate of 780,570
Shares that may be acquired pursuant to the exercise of outstanding stock
options exercisable within 60 days of the date hereof). The Company has been
advised that no director or officer of the Company intends to tender Shares
pursuant to the Offer. If the Company purchases 12,000,000 Shares pursuant to
the Offer and no director or executive officer of the Company tenders Shares,
the percentage of outstanding Shares owned beneficially by all of the Company's
14
<PAGE>
directors and executive officers as a group would increase to approximately
2.61% of the Shares then outstanding (including for this purpose, Shares that
may be acquired by such directors and executive officers pursuant to the
exercise of outstanding stock options exercisable within 60 days of the date
hereof).
On January 26, 1997, the Board of Directors amended the By-Laws of the
Company to reduce to 16 from 17 the number of directors, and on February 25,
1997, the Board amended the By-Laws to allow the annual meeting of shareholders
to be held on the third Wednesday of April or at such other date as the Board of
Directors may determine. The Company plans to propose for Shareholder approval
at the Annual Meeting of Shareholders to be held May 21, 1997 that its Amended
Articles of Incorporation be amended to increase the number of authorized shares
of Common Stock from 145 million to 290 million.
Except as disclosed in this Offer to Purchase (see "The Offer-Financial
Information Concerning the Company-Summary Unaudited Pro Forma Consolidated
Financial Information"), the Company has no plans or proposals which relate to
or would result in: (a) the acquisition by any person of additional securities
of the Company or the disposition of securities of the Company (b) an
extraordinary corporate transaction, such as a merger, reorganization or
liquidation, involving the Company or any of its subsidiaries; (c) a sale or
transfer of a material amount of assets of the Company or any of its
subsidiaries; (d) any change in the present Board of Directors or management of
the Company outside the ordinary course; (e) any other material change in the
Company's corporate structure or business; (f) any change in the Company's
Amended Articles of Incorporation or By-Laws or any actions which may impede the
acquisition of control of the Company by any person; (g) a class of equity
security of the Company being delisted from a national securities exchange; (h)
a class of equity security of the Company becoming eligible for termination of
registration pursuant to Section 12(g)(4) of the Exchange Act; or (i) the
suspension of the Company's obligation to file reports pursuant to Section 15(d)
of the Exchange Act.
Statements contained in this Offer to Purchase and particularly in this
Section 8, Background and Purpose of the Offer, regarding the future earnings
prospects, growth in earnings per share, dividend growth and debt-to-capital
ratio of the Company are not historical facts and are forward looking statements
made pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. Each of these items is dependent on the earnings of the
Company. A number of important factors could cause actual results to differ
materially from those expressed in any forward-looking statements made by or on
behalf of the Company. Some of the most important factors which will impact the
Company's earnings, primarily through its wholly-owned subsidiary, Indianapolis
Power & Light Company ("IPL"), include, but are not limited to, fluctuations in
customer growth and demand, weather, fuel costs and availability, regulatory
action, federal and state legislation, interest rates, labor strikes,
maintenance and capital expenditures and local economic conditions. In addition,
IPL's ability to have available an appropriate amount of production capacity in
a timely manner can significantly impact IPL's financial performance. The timing
of deregulation and competition, product development and introductions and
technology changes are also important potential factors.
9. SOURCE AND AMOUNT OF FUNDS.
The Company estimates that its maximum cost of purchasing 12,000,000 Shares
pursuant to the Offer (including all fees and expenses relating to the Offer,
but excluding interest on funds borrowed to finance such purchase of Shares)
will approximate $410,000,000. The funds to pay all such costs will be obtained
under a five-year Revolving Credit Facility to be supplied by Bank One,
Indianapolis, National Association; National City Bank of Indiana; and The First
National Bank of Chicago, pursuant to a Commitment Letter from those
institutions dated February 21, 1997. These initial lenders intend to syndicate
a portion of their aggregate commitment to one or more other financial
institutions
The Revolving Credit Facility will provide an initial maximum principal
availability of $410,000,000, which will decline by equal amounts on March 31 of
each year until the loan must be repaid in full on
15
<PAGE>
March 31, 2002. Outstanding principal under the unsecured Revolving Credit
Facility will bear interest at LIBOR plus an applicable margin based on the
rating of the Company's senior unsecured debt by Moody's Investors Service, Inc.
or Standard & Poor's Corporation.
The Commitment Letter provides that the definitive agreement for the
Revolving Credit Facility will obligate the Company to pay certain facility
fees, acceptance fees, underwriting fees, annual administrative fees, and to
reimburse the Lenders for certain fees and expenses they incur in making the
loan. The Commitment Letter also provides that the definitive loan agreement
will contain certain financial covenants related to the Company's ratios of debt
to capital and earnings to interest expense. The Commitment Letter provides that
the definitive loan agreement will contain usual and customary (a) affirmative
and negative covenants, including restrictions on the Company's ability, and the
ability of certain of its subsidiaries upon the happening of certain events and
subject to certain exceptions, to incur debt, pay dividends, and enter into
mergers, acquisitions, divestitures, or stock redemptions and (b) events of
default, including failure to pay principal or interest, breaches of
representations or covenants, certain events of bankruptcy or insolvency and a
change in control (as defined therein).
The Company intends to repay borrowings under the Revolving Credit Facility
with its operating cash flow.
The Company may enter into an interest rate swap agreement pursuant to which
the Company will assume an obligation to pay a fixed interest rate in exchange
for the payment by a counterparty to the swap agreement of the floating rate
interest obligation on the Revolving Credit Facility. The Company has made no
specific arrangements with respect to such an interest rate swap agreement.
10. TRANSACTIONS AND AGREEMENTS CONCERNING SHARES.
Based upon the Company's records and upon information provided to the
Company by its directors and executive officers, neither the Company nor, to the
Company's knowledge, any of its associates, subsidiaries, directors, executive
officers or any associate of any such director or executive officer, or any
director or executive officer of its subsidiaries, has engaged in any
transactions involving the Shares during the 40 business days preceding the date
hereof, except as set forth on Schedule A attached hereto and except for
transactions in Shares for the accounts of directors and officers pursuant to
the Dividend Reinvestment Plan and the Thrift Plan. The Company expects that the
Dividend Reinvestment Plan and the Thrift Plan will, in accordance with the
terms of such plans, elections in effect and present patterns of contribution,
continue to purchase shares prior to the expiration of the Offer. Except for
outstanding options to purchase Shares, neither the Company nor, to the
Company's knowledge, any of its directors or officers is a party to any
contract, arrangement, understanding or relationship relating directly or
indirectly to the Offer with any other person with respect to the Shares.
11. FINANCIAL INFORMATION CONCERNING THE COMPANY.
IPALCO Enterprises, Inc. ("IPALCO" or the "Holding Company") is a holding
company and owns all of the outstanding common stock of its subsidiaries
(collectively referred to as the "Company"). The consolidated financial
statements include the accounts of IPALCO, its regulated utility subsidiary,
Indianapolis Power & Light Company ("IPL"), and its unregulated subsidiary,
Mid-America Capital Resources, Inc. ("Mid-America").
IPL is engaged principally in providing electric and steam service to the
Indianapolis metropolitan area. Mid-America operates energy related businesses
in Indianapolis, Indiana and Cleveland, Ohio.
16
<PAGE>
HISTORICAL FINANCIAL INFORMATION
The tables below set forth summary historical consolidated financial
information of the Company and its subsidiaries. The historical financial
information for the years 1996 and 1995 (other than the ratios of earnings to
fixed charges) have been derived from, and should be read in conjunction with,
the audited consolidated financial statements of the Company as reported in the
Company's Annual Report on Form 10K for the year ended December 31, 1996 the
relevant pages of which are hereby incorporated herein by reference. The summary
historical financial information should be read in conjunction with, and is
qualified in its entirety by reference to, the audited financial statements and
the related notes thereto from which it has been derived.
SUMMARY CONSOLIDATED HISTORICAL FINANCIAL INFORMATION
(IN THOUSANDS EXCEPT RATIOS AND PER SHARE AMOUNTS)
BALANCE SHEET DATA:
<TABLE>
<CAPTION>
DECEMBER 31
--------------------------
<S> <C> <C>
1996 1995
------------ ------------
ASSETS:
Utility Plant-Net................................................................... $ 1,787,969 $ 1,792,007
Other Assets-Net.................................................................... 113,661 114,587
Current Assets...................................................................... 123,699 162,894
Deferred Debits..................................................................... 157,740 161,709
------------ ------------
Total Assets.................................................................... $ 2,183,069 $ 2,231,197
------------ ------------
------------ ------------
CAPITALIZATION AND LIABILITIES:
Capitalization:
Total Common Shareholders' Equity................................................. $ 857,726 $ 822,803
Preferred Stock................................................................... 51,898 51,898
Long-Term Debt.................................................................... 662,591 698,600
------------ ------------
Total Capitalization............................................................ 1,572,215 1,573,301
------------ ------------
Current Liabilities:
Notes Payable..................................................................... 46,000 69,122
Current Maturities................................................................ 11,250 17,500
Other............................................................................. 135,466 155,587
------------ ------------
Total Current Liabilities....................................................... 192,716 242,209
Deferred Credits and Other Long-term Liabilities.................................... 418,138 415,687
------------ ------------
Total Capitalization and Liabilities............................................ $ 2,183,069 $ 2,231,197
------------ ------------
------------ ------------
Capitalization Ratios:(1)
Common Shareholders' Equity....................................................... 54.17% 51.72%
Preferred Stock................................................................... 3.28% 3.26%
Long-Term Debt.................................................................... 42.55% 45.02%
------------ ------------
Total Capitalization............................................................ 100.00% 100.00%
------------ ------------
------------ ------------
</TABLE>
17
<PAGE>
INCOME STATEMENT DATA:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31
----------------------
<S> <C> <C>
1996 1995
---------- ----------
Utility Operating Revenues................................................................ $762,503 $709,206
---------- ----------
Utility Operating Expenses................................................................ 599,284 561,618
---------- ----------
Utility Operating Income.............................................................. 163,219 147,588
---------- ----------
Total Other Income and Deductions--Net.................................................... 1,556 1,693
---------- ----------
Total Interest and Other Charges--Net..................................................... 50,500 50,503
---------- ----------
Net Income................................................................................ $114,275 $98,778
---------- ----------
---------- ----------
Weighted Average Common Shares Outstanding................................................ 56,924 56,745
Earnings Per Common Share(2).............................................................. $2.01 $1.74
Common Shares Outstanding................................................................. 57,035 56,802
Dividends Declared Per Share.............................................................. $1.48 $1.44
Book Value Per Share(3)................................................................... $15.04 $14.49
Ratio of Earnings to Fixed Charges(4)..................................................... 4.58x 3.90x
Interest and Dividend Coverage(5)......................................................... 1.15 1.04
</TABLE>
NOTES TO SUMMARY HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
(1) Capitalization ratios have been calculated including the current maturities
of long-term debt.
(2) All earnings per share data are based on the weighted average shares
outstanding during the applicable periods. The potential dilution from the
exercise of common stock options is not material.
(3) Book value per share is calculated as the total shareholders' equity divided
by the number of shares outstanding at the end of the period.
(4) The ratios of earnings to fixed charges were calculated by dividing the sum
of pre-tax income and fixed charges by fixed charges. Fixed charges include
all interest expense (before allowance for borrowed funds used during
construction), one-third of rent expense (which approximates the interest
component of such expense) and amortization of debt expense.
(5) Interest and dividend coverage ratios were calculated by dividing the sum of
net income, interest expense, preferred dividends of subsidiary less AFUDC
(allowance for funds used during construction) by the sum of interest
expense, preferred dividends of subsidiary and common dividends declared.
18
<PAGE>
SUMMARY UNAUDITED PRO FORMA
CONSOLIDATED FINANCIAL INFORMATION
The following Summary Unaudited Pro Forma Consolidated Balance Sheet and
Summary Unaudited Pro Forma Statement of Consolidated Income have been prepared
based on the Company's consolidated balance sheet as of December 31, 1996 and
the related statement of consolidated income for the year then ended. The pro
forma adjustments assume the issuance of $410 million of additional long-term
debt by the Holding Company, the acquisition by the Holding Company of
12,000,000 shares of Common Stock at $34.00 per share, the payment of related
debt issuance and stock reacquisition costs and first year's interest and debt
amortization expense.
SUMMARY UNAUDITED PRO FORMA CONSOLIDATED
BALANCE SHEETS AS OF DECEMBER 31, 1996
(IN THOUSANDS EXCEPT RATIOS AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
------------ ----------- ------------
<S> <C> <C> <C>
ASSETS:
Utility Plant-Net................................................ $ 1,787,969 $ 1,787,969
Other Assets-Net................................................. 113,661 113,661
Current Assets:
Cash and Cash Equivalents........................................ 19,317 $ 410,000 (1a
(408,000) 2b)
(2,000) 3c) 19,317
Other Current Assets............................................. 104,382 104,382
Deferred Debits.................................................. 157,740 1,000 (3b 158,740
------------ ----------- ------------
Total Assets..................................................... $ 2,183,069 $ 1,000 $ 2,184,069
------------ ----------- ------------
------------ ----------- ------------
CAPITALIZATION AND LIABILITIES:
Capitalization:
Common Stock................................................... $ 389,966 $ 0 $ 389,966
Premium on 4% Preferred Stock.................................. 1,363 1,363
Retained Earnings.............................................. 466,397 466,397
Treasury Stock................................................. $ (1,000) 3a)
(408,000) 2a) (409,000)
------------ ----------- ------------
Total Common Shareholders' Equity.......................... 857,726 (409,000) 448,726
Preferred Stock................................................ 51,898 51,898
Long-Term Debt................................................. 662,591 328,000 (1b 990,591
------------ ----------- ------------
Total Capitalization....................................... 1,572,215 (81,000) 1,491,215
------------ ----------- ------------
Current Liabilities:
Notes Payable.................................................. 46,000 46,000
Current Maturities............................................. 11,250 82,000 (1c 93,250
Other.......................................................... 135,466 135,466
------------ ----------- ------------
Total Current Liabilities.................................. 192,716 82,000 274,716
Deferred Credits and Other....................................... 418,138 418,138
------------ ----------- ------------
Total Capitalization and Liabilities........................... $ 2,183,069 $ 1,000 $ 2,184,069
------------ ----------- ------------
------------ ----------- ------------
Capitalization Ratios:(10)
Common Shareholders' Equity.................................... 54.17% 28.32%
Preferred Stock................................................ 3.28% 3.28%
Long-Term Debt................................................. 42.55% 68.40%
------------ ------------
Total Capitalization............................................. 100.00% 100.00%
------------ ------------
------------ ------------
</TABLE>
19
<PAGE>
SUMMARY UNAUDITED PRO FORMA
STATEMENT OF CONSOLIDATED INCOME
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1996
(IN THOUSANDS EXCEPT RATIOS AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- -----------
<S> <C> <C> <C>
Utility Operating Revenues........................................ $762,503 $ 762,503
Utility Operating Expenses........................................ 599,284 599,284
---------- -----------
Utility Operating Income.................................... 163,219 163,219
---------- -----------
---------- -----------
Other Income and (Deductions):
IPALCO Enterprises, Inc. ("Holding Company").................... (1,551) $ 10,263(4)
126 (5b 8,838
Other........................................................... 3,107 3,107
---------- ----------- -----------
Total Other Income and Deductions........................... 1,556 10,389 11,945
---------- ----------- -----------
Interest and Other Charges:
Interest on Long-Term Debt...................................... 45,110 27,060(6) 72,170
Other........................................................... 2,208 333 (5a 2,541
Preferred Dividend Requirement of IPL........................... 3,182 3,182
---------- ----------- -----------
Total Interest and Other Charges-Net........................ 50,500 27,393 77,893
---------- ----------- -----------
Net Income........................................................ $114,275 $ (17,004) $ 97,271
---------- ----------- -----------
---------- ----------- -----------
Weighted Average Common Shares Outstanding........................ 56,924 (12,000)(7) 44,924
Earnings Per Common Share......................................... $2.01 $2.17(9)
Common Shares Outstanding......................................... 57,035 (12,000 (7) 45,035
Dividends Declared Per Share...................................... $1.48 $1.00 (8)
Book Value Per Share.............................................. $15.04 $9.96 (9)
Ratio of Earnings to Fixed Charges................................ 4.58x 2.98 x(9)
Interest and Dividend Coverage (11)............................... 1.15 1.34 (9)
</TABLE>
NOTES TO SUMMARY UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEETS
AND STATEMENTS OF CONSOLIDATED INCOME:
(1) Represents the (1a) proceeds of $410 million from the issuance of a $410
million five-year bank debt facility by the Holding Company at an assumed
annual interest rate of 6.6%. The pro forma assumes (1b) $328 million
classified as long-term and (1c) current maturities of long-term debt of $82
million.
(2) Represents the Holding Company (2a) reacquisition of 12,000,000 Shares of
IPALCO Enterprises, Inc. common stock (Treasury Stock) assumed at the
maximum price of $34.00 per share for (2b) cash. There can be no assurance
that the Holding Company will repurchase 12,000,000 Shares or that the
Shares will be repurchased at a price of $34.00.
(3) Represents the payment by the Holding Company of (3a) treasury stock
acquisition costs and (3b) debt issuance expense for (3c) cash.
(4) Represents the tax benefit of the additional pro forma interest expense
calculated using IPALCO's effective income tax rate of 37.925%.
(5) Represents (5a) one year amortization of the pro forma debt issuance expense
and (5b) the related tax benefit.
20
<PAGE>
(6) Represents the pro forma additional interest expense for a full year at the
Holding Company calculated at an assumed 6.6% annual fixed rate on the bank
loan proceeds of $410 million.
(7) Represents the pro forma reduction in weighted average common shares
outstanding for the year 1996 and in common shares outstanding at December
31, 1996.
(8) Reflects the pro forma annualized dividend authorized by the IPALCO
Enterprises, Inc. Board of Directors on February 25, 1997.
(9) All ratios and per share amounts listed in the "Pro Forma" column have been
adjusted to reflect the transactions reflected in the "Pro Forma
Adjustments" column.
(10) Capitalization ratios have been calculated including the current maturities
of long-term debt.
(11) Interest and dividend coverage ratios were calculated by dividing the sum
of net income, interest expense, preferred dividends of subsidiary less
AFUDC (allowance for funds used during construction) by the sum of interest
expense, preferred dividends of subsidiary and common dividends declared.
12. EFFECTS OF THE OFFER ON THE MARKET FOR SHARES; REGISTRATION UNDER THE
EXCHANGE ACT.
The Company's purchase of Shares pursuant to the Offer will reduce the
number of Shares that might otherwise trade publicly and is likely to reduce the
number of holders of Shares. Nonetheless, the Company anticipates that there
will still be a sufficient number of Shares outstanding and publicly traded
following the Offer to ensure a continued trading market in the Shares. Based on
the published guidelines of the New York Stock Exchange and the Chicago Stock
Exchange, the Company does not believe that its purchase of Shares pursuant to
the Offer will cause its remaining Shares to be delisted from such exchanges.
The Shares are currently "margin securities" under the rules of the Federal
Reserve Board. This has the effect, among other things, of allowing brokers to
extend credit on the collateral of the Shares. The Company believes that,
following the repurchase of Shares pursuant to the Offer, the Shares will
continue to be "margin securities" for purposes of the Federal Reserve Board's
margin regulations.
The Shares are registered under the Exchange Act, which requires, among
other things, that the Company furnish certain information to its shareholders
and the Commission and comply with the Commission's proxy rules in connection
with meetings of the Company's shareholders. The Company believes that its
purchase of Shares pursuant to the Offer will not result in the Shares becoming
eligible for deregistration under the Exchange Act.
Shareholders who determine not to accept the Offer or whose Shares are not
purchased in the Offer will realize an increase in their percentage ownership
interest in the common equity of the Company and thus, in the Company's future
earnings and assets. Because of the smaller number of Shares outstanding after
consummation of the Offer, increases or decreases in net earnings will result in
proportionately greater increases or decreases in earnings per Share. See
Section 8.
NEITHER THE COMPANY NOR ANY OF ITS DIRECTORS, OFFICERS, OR EMPLOYEES MAKES
ANY RECOMMENDATION TO ANY SHAREHOLDER AS TO WHETHER TO TENDER ALL OR ANY SHARES.
EACH SHAREHOLDER MUST MAKE HIS OR HER OWN DECISION AS TO WHETHER TO TENDER
SHARES AND, IF SO, HOW MANY SHARES TO TENDER AND AT WHAT PRICE. THE COMPANY HAS
BEEN ADVISED THAT NO DIRECTOR OR OFFICER OF THE COMPANY INTENDS TO TENDER SHARES
PURSUANT TO THE OFFER.
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<PAGE>
13. CERTAIN FEDERAL INCOME TAX CONSEQUENCES.
IN GENERAL. The following summary is a general discussion of certain United
States federal income tax consequences relating to the Offer. This summary does
not discuss any aspects of state, local, foreign or other tax laws. The summary
is based on the Internal Revenue Code of 1986, as amended (the "Code"), and
existing final, temporary and proposed Treasury Regulations, Revenue Rulings and
judicial decisions, all of which are subject to prospective and retroactive
changes. The summary deals only with Shares held as capital assets within the
meaning of Section 1221 of the Code and does not address tax consequences that
may be relevant to investors in special tax situations, such as certain
financial institutions, tax-exempt organizations, insurance companies, dealers
in securities or currencies, shareholders who have acquired their Shares upon
the exercise of options or otherwise as compensation, or shareholders holding
the Shares as part of a conversion transaction, as part of a hedge or hedging
transaction, or as a position in a straddle for tax purposes. The Company will
not seek a ruling from the Internal Revenue Service (the "IRS") with regard to
the tax matters discussed below. Accordingly, each shareholder should consult
its own tax adviser with regard to the Offer and the application of United
States federal income tax laws, as well as the laws of any state, local or
foreign taxing jurisdiction, to its particular situation.
CHARACTERIZATION OF THE SALE. A sale of Shares by a shareholder of the
Company pursuant to the Offer will be a taxable transaction for United States
federal income tax purposes and may also be a taxable transaction under
applicable state, local and foreign tax laws. The United States federal income
tax consequences to a shareholder may vary depending upon the shareholder's
particular facts and circumstances. Under Section 302 of the Code, a sale of
Shares by a shareholder to the Company pursuant to the Offer will be treated as
a "sale or exchange" of such Shares for United States federal income tax
purposes (rather than as a distribution by the Company with respect to the
Shares held by the tendering shareholder) if the receipt of cash upon such sale
(i) is "substantially disproportionate" with respect to the shareholder, (ii)
results in a "complete termination" of the shareholder's interest in the
Company, or (iii) is "not essentially equivalent to a dividend" with respect to
the shareholder. These tests (the "Section 302 tests") are explained more fully
below.
If any of the Section 302 tests is satisfied, and the sale of the Shares is
therefore treated as a "sale or exchange" of such Shares for United States
federal income tax purposes, the tendering shareholder will recognize capital
gain or loss equal to the difference between the amount of cash received by the
shareholder pursuant to the Offer and the shareholder's tax basis in the Shares
sold pursuant to the Offer. Any such gain or loss will be long-term capital gain
or loss if the Shares have been held for more than one year.
If none of the Section 302 tests is satisfied and the Company has sufficient
current and accumulated earnings and profits, the tendering shareholder will be
treated as having received a dividend includible in gross income in an amount
equal to the entire amount of cash received by the shareholder pursuant to the
Offer (without reduction for the tax basis of the Shares sold pursuant to the
Offer), no loss will be recognized, and (subject to reduction as described below
for corporate shareholders eligible for the dividends-received deduction) the
tendering shareholder's basis in the Shares sold pursuant to the Offer will be
added to such shareholder's basis in its remaining Shares, if any. No assurance
can be given that any of the Section 302 tests will be satisfied as to any
particular shareholder, and thus no assurance can be given that any particular
shareholder will not be treated as having received a dividend taxable as
ordinary income. If the sale of Shares is not treated as a sale or exchange for
federal income tax purposes, any cash received for Shares pursuant to the Offer
in excess of the Company's earnings and profits will be treated, first, as a
nontaxable return of capital to the extent of the shareholder's basis for such
shareholder's Shares, and, thereafter, as capital gain, to the extent it exceeds
such basis.
CONSTRUCTIVE OWNERSHIP OF STOCK. In determining whether any of the Section
302 tests is satisfied, shareholders must take into account not only the Shares
which are actually owned by the shareholder, but also Shares which are
constructively owned by the shareholder within the meaning of Section 318 of the
22
<PAGE>
Code. Under Section 318 of the Code, a shareholder may constructively own Shares
actually owned, and in some cases constructively owned, by certain related
individuals or entities in which the shareholder has an interest, or, in the
case of shareholders that are entities, by certain individuals or entities that
have an interest in the shareholder, and Shares which the shareholder has the
right to acquire by exercise of an option or by conversion. Contemporaneous
dispositions or acquisitions of Shares by a shareholder or related individuals
or entities may be deemed to be part of a single integrated transaction which
will be taken into account in determining whether any of the Section 302 tests
has been satisfied. EACH SHAREHOLDER SHOULD BE AWARE THAT BECAUSE PRORATION MAY
OCCUR IN THE OFFER, EVEN IF ALL THE SHARES ACTUALLY AND CONSTRUCTIVELY OWNED BY
A SHAREHOLDER ARE TENDERED PURSUANT TO THE OFFER, FEWER THAN ALL OF SUCH SHARES
MAY BE PURCHASED BY THE COMPANY. THUS, PRORATION MAY AFFECT WHETHER A SALE BY A
SHAREHOLDER PURSUANT TO THE OFFER WILL MEET ANY OF THE SECTION 302 TESTS.
SECTION 302 TESTS. One of the following tests must be satisfied in order
for the sale of Shares pursuant to the Offer to be treated as a sale or exchange
for federal income tax purposes.
a. Substantially Disproportionate Test. The receipt of cash by a
shareholder will be "substantially disproportionate" if the percentage of
the outstanding Shares actually and constructively owned by the shareholder
immediately following the sale of Shares pursuant to the Offer (treating as
not outstanding all Shares purchased pursuant to the Offer) is less than 80%
of the percentage of the outstanding Shares actually and constructively
owned by such shareholder immediately before the sale of Shares pursuant to
the Offer (treating as outstanding all Shares purchased pursuant to the
Offer). Shareholders should consult their tax advisers with respect to the
application of the "substantially disproportionate" test to their particular
situation.
b. Complete Termination Test. The receipt of cash by a shareholder will
be a "complete termination" of the shareholder's interest if either (i) all
of the Shares actually and constructively owned by the shareholder are sold
pursuant to the Offer, or (ii) all of the Shares actually owned by the
shareholder are sold pursuant to the Offer and, with respect to the Shares
constructively owned by the shareholder which are not sold pursuant to the
Offer, the shareholder is eligible to waive (and effectively waives)
constructive ownership of all such Shares under procedures described in
Section 302(c) of the Code. Shareholders considering making such a waiver
should do so in consultation with their tax advisers.
c. Not Essentially Equivalent to a Dividend Test. Even if the receipt
of cash by a shareholder fails to satisfy the "substantially
disproportionate" test or the "complete termination" test, a shareholder may
nevertheless satisfy the "not essentially equivalent to a dividend" test if
the shareholder's sale of Shares pursuant to the Offer results in a
"meaningful reduction" in the shareholder's proportionate interest in the
Company. Whether the receipt of cash by a shareholder will be "not
essentially equivalent to a dividend" will depend upon the shareholder's
particular facts and circumstances. The IRS has indicated in published
rulings that even a small reduction in the proportionate interest of a small
minority shareholder in a publicly held corporation who exercises no control
over corporate affairs may constitute such a "meaningful reduction." The IRS
held in Rev. Rul. 76-385, 1976-2 C.B. 92, that a reduction in the percentage
ownership interest of a shareholder in a publicly held corporation from
.0001118% to .0001081% (a reduction to 96.7% of the shareholder's prior
percentage ownership interest) would constitute a "meaningful reduction."
Shareholders expecting to rely on the "not essentially equivalent to a
dividend" test should consult their own tax advisers as to its application
in their particular situation.
CORPORATE SHAREHOLDER DIVIDEND TREATMENT. Under current law, if a sale of
Shares by a corporate shareholder is treated as a dividend, the corporate
shareholder may be entitled to claim a deduction equal to 70% of the dividend
under Section 243 of the Code, subject to applicable limitations. Corporate
shareholders should consider the effect of Section 246(c) of the Code, which
disallows the 70% dividends-
23
<PAGE>
received deduction with respect to stock that is held for 45 days or less. For
this purpose, the length of time a taxpayer is deemed to have held stock may be
reduced by periods during which the taxpayer's risk of loss with respect to the
stock is diminished by reason of the existence of certain options or other
transactions. Moreover, under Section 246A of the Code, if a corporate
shareholder has incurred indebtedness directly attributable to an investment in
Shares, the 70% dividends-received deduction may be reduced by a percentage
generally computed based on the amount of such indebtedness and the total
adjusted tax basis in the Shares. In addition, because it is expected that the
redemption of Shares will not be pro rata with respect to all shareholders, any
amount received by a corporate shareholder pursuant to the Offer that is treated
as a dividend will likely constitute an "extraordinary dividend" under Section
1059 of the Code (except as may otherwise be provided in regulations yet to be
promulgated by the Treasury Department). Accordingly, a corporate shareholder
would be required under Section 1059(a) of the Code to reduce its basis (but not
below zero) in its Shares by the non-taxed portion of the extraordinary dividend
(i.e., the portion of the dividend for which a deduction is allowed), and, if
such portion exceeds the shareholder's tax basis for its Shares, to treat the
excess as gain from the sale of such Shares in the year in which a sale or
disposition of such Shares occurs. The basis reduction rules of Section 1059
also generally apply to dividends which exceed a threshold percentage of a
shareholder's basis in its stock, unless the shareholder has held its stock for
more than two years before the announcement date of such dividend. For purposes
of applying Section 1059, all dividends received by a shareholder and having
their ex-dividend dates within an 85-day period (expanded to a 365-day period,
in the case of dividends received in such period that in the aggregate exceed
20% of the shareholder's adjusted tax basis in the Shares) are aggregated.
Corporate shareholders should consult their own tax advisers as to the
application of Section 1059 of the Code to the Offer, and to any dividends which
may be paid with respect to the Shares, as well as the effect of pending
legislation discussed below.
FOREIGN SHAREHOLDERS. The Company will withhold United States federal
income tax at a rate of 30% from the gross proceeds paid pursuant to the Offer
to a foreign shareholder or his agent, unless the Company determines that a
reduced rate of withholding is applicable pursuant to a tax treaty or that an
exemption from withholding is applicable because such gross proceeds are
effectively connected with the conduct of a trade or business by the foreign
shareholder within the United States. For this purpose, a foreign shareholder is
any shareholder that is not (i) 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 any political subdivision thereof, (iii) any estate
the income of which is subject to United States federal income taxation
regardless of its source, or (iv) any trust if a court within the United States
is able to exercise primary supervision over the administration of the trust,
and one or more United States trustees have the authority to control all
substantial decisions relating to the trust.
Generally, the determination of whether a reduced rate of withholding is
applicable is made by reference to a foreign shareholder's address or to a
properly completed Form 1001 furnished by the shareholder, and the determination
of whether an exemption from withholding is available on the grounds that gross
proceeds paid to a foreign shareholder are effectively connected with a United
States trade or business is made on the basis of a properly completed Form 4224
furnished by the shareholder. The Company will determine a foreign shareholder's
eligibility for a reduced rate of, or exemption from, withholding by reference
to the shareholder's address and any Forms 1001 or 4224 submitted to the Company
by a foreign shareholder unless facts and circumstances indicate that such
reliance is not warranted or unless applicable law requires some other method
for determining whether a reduced rate of withholding is applicable. These forms
can be obtained from the Company.
A foreign shareholder with respect to whom tax has been withheld may be
eligible to obtain a refund of all or a portion of the withheld tax if the
shareholder satisfied one of the Section 302 tests for capital gain treatment or
is otherwise able to establish that no tax or a reduced amount of tax was due.
Foreign shareholders are urged to consult their own tax advisers regarding the
application of United States federal income tax withholding, including
eligibility for a withholding tax reduction or exemption and the refund
procedure.
24
<PAGE>
BACKUP WITHHOLDING. See Section 3 with respect to the application of United
States federal income tax backup withholding.
PENDING TAX LEGISLATION. Corporate shareholders should be aware that in
recent years legislation has been proposed in Congress and by the President
which, if enacted in its proposed form, would affect the above summary of the
federal income tax consequences. For example, on February 6, 1997, President
Clinton's budget proposals (the "Proposals") were released. The Proposals
include, among other things, a provision that would reduce the corporate
dividends-received deduction from 70% to 50% where the corporate holder owns
less than 20% (by vote and value) of the stock of the issuer. In addition, the
Proposals would deny a dividends-received deduction if certain holding period
requirements are not satisfied over a 46-day period immediately before or
immediately after the holder becomes entitled to receive the dividend. The
Proposals would also amend Section 1059 of the Code to require immediate gain
recognition whenever, and to the extent that, the non-taxed portion of an
extraordinary dividend exceeds the holder's tax basis in the stock with respect
to which the extraordinary dividend is received. The Proposals would further
amend Section 1059 of the Code to provide that a corporate shareholder will
recognize gain immediately with respect to any redemption transaction treated in
whole or in part as a dividend when the non-taxed portion of the dividend
exceeds the basis of the stock surrendered, if the redemption transaction is
treated as a dividend due to options of the Company being counted as stock
ownership under the constructive ownership rules of Section 318 of the Code. The
Company cannot predict whether these proposals or other legislation will
ultimately be enacted or, if enacted, will be enacted as currently proposed.
Holders should consult their tax advisers concerning these proposals and other
possible changes to the tax laws.
THE TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL INFORMATION ONLY.
THE TAX CONSEQUENCES OF A SALE PURSUANT TO THE OFFER MAY VARY DEPENDING UPON,
AMONG OTHER THINGS, THE PARTICULAR CIRCUMSTANCES OF THE TENDERING SHAREHOLDER.
NO INFORMATION IS PROVIDED HEREIN AS TO THE STATE, LOCAL OR FOREIGN TAX
CONSEQUENCES OF THE TRANSACTION CONTEMPLATED BY THE OFFER. SHAREHOLDERS ARE
URGED TO CONSULT THEIR OWN TAX ADVISERS TO DETERMINE THE PARTICULAR FEDERAL,
STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF SALES MADE BY THEM PURSUANT TO THE
OFFER, THE EFFECT OF THE STOCK OWNERSHIP ATTRIBUTION RULES MENTIONED ABOVE AND
THE EFFECT OF TAX LEGISLATIVE PROPOSALS.
14. EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENTS.
The Company expressly reserves the right, in its sole discretion and at any
time or from time to time, to extend the period of time during which the Offer
is open by giving oral or written notice of such extension to the Depositary and
making a public announcement thereof. There can be no assurance, however, that
the Company will exercise its right to extend the Offer. During any such
extension, all Shares previously tendered will remain subject to the Offer,
except to the extent that such Shares may be withdrawn as set forth in Section
4. The Company also expressly reserves the right, in its sole discretion, (i) to
terminate the Offer and not accept for payment any Shares not theretofore
accepted for payment or, subject to Rule 13e-4(f)(5) under the Exchange Act,
which requires the Company either to pay the consideration offered or to return
the Shares tendered promptly after the termination or withdrawal of the Offer,
to postpone payment for Shares upon the occurrence of any of the conditions
specified in Section 6 hereof by giving oral or written notice of such
termination to the Depositary and making a public announcement thereof and (ii)
at any time or from time to time, to amend the Offer in any respect. Amendments
to the Offer may be effected by public announcement. Without limiting the manner
in which the Company may choose to make public announcement of any termination
or amendment, the Company shall have no obligation (except as otherwise required
by applicable law) to publish, advertise or otherwise communicate any such
public announcement, other than by making a release to the Dow Jones News
Service, except in the case of an announcement of an extension of the Offer, in
which case the Company
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<PAGE>
shall have no obligation to publish, advertise or otherwise communicate such
announcement other than by issuing a notice of such extension by press release
or other public announcement, which notice shall be issued no later than 9:00
a.m., Eastern Standard Time, on the next business day after the previously
scheduled Expiration Date. Material changes to information previously provided
to holders of the Shares in this Offer or in documents furnished subsequent
thereto will be disseminated to holders of Shares in compliance with Rule
13e-4(e)(2) promulgated under the Exchange Act.
If the Company materially changes the terms of the Offer or the information
concerning the Offer, or if it waives a material condition of the Offer, the
Company will extend the Offer to the extent required by Rules 13e-4(d)(2) and
13e-4(e)(2) under the Exchange Act. The minimum period during which an offer
must remain open following material changes in the terms of the Offer or
information concerning the Offer (other than a change in price, change in
dealer's soliciting fee or change in percentage of securities sought) will
depend on the facts and circumstances, including the relative materiality of
such terms or information. In a published release, the Commission has stated
that in its view, an Offer should remain open for a minimum of five business
days from the date that notice of such a material change is first published,
sent or given. Pursuant to Rule 13e-4(f)(1), the Offer will continue or be
extended for at least ten business days from the time the Company publishes,
sends or gives to holders of Shares a notice that it will (a) increase or
decrease the price it will pay for Shares or the amount of the dealer's
soliciting fee or (b) increase (except for an increase not exceeding 2% of the
outstanding Shares) or decrease the number of Shares it seeks.
15. FEES AND EXPENSES.
Dillon, Read & Co. Inc. will act as Dealer Manager for the Company in
connection with the Offer. The Company has agreed to pay the Dealer Manager,
upon acceptance for payment of Shares pursuant to the Offer, a fee of $0.10 per
Share purchased by the Company pursuant to the Offer. The Dealer Manager will
also be reimbursed by the Company for its reasonable out-of-pocket expenses,
including the reasonable fees and expenses of its counsel, and will be
indemnified against certain liabilities and expenses, including 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 the
Company. It has received, and will continue to receive, customary compensation
from the Company for such services.
The Company has retained IBJ Schroder Bank & Trust Company as Depositary and
D.F. King & Co., Inc. as Information Agent in connection with the Offer. The
Information Agent may contact shareholders by mail, telephone, facsimile
transmission and personal interviews, and may request brokers, dealers and other
nominee shareholders to forward materials relating to the Offer to beneficial
owners. The Depositary and the Information Agent will receive reasonable and
customary compensation for their services and will also be reimbursed for
certain out-of-pocket expenses. The Company has agreed to indemnify the
Depositary and the Information Agent against certain liabilities, including
certain liabilities under the federal securities laws, in connection with the
Offer. Neither the Information Agent nor the Depositary has been retained to
make solicitations or recommendations in connection with the Offer.
Certain directors, officers, or employees of the Company may, from time to
time, contact shareholders to provide them with information regarding the Offer.
Such directors, officers or employees will not make any recommendation to any
shareholder as to whether to tender all or any Shares and will not solicit the
tender of any Shares. The Company will not compensate any director, officer or
employee for this service.
The Company will not pay any solicitation fees to any broker, dealer, bank,
trust company or other person for any Shares purchased in connection with the
Offer. The Company will reimburse such persons for customary handling and
mailing expenses incurred in connection with the Offer.
26
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The Company will pay all stock transfer taxes, if any, payable on account of
the acquisition of the Shares by the Company pursuant to the Offer, except in
certain circumstances where special payment or delivery procedures are utilized
pursuant to Instruction 7 of the Letter of Transmittal.
16. MISCELLANEOUS.
The Company is subject to the informational requirements of the Exchange Act
and in accordance therewith files reports, proxy statements and other
information with the Commission relating to its business, financial condition
and other matters. Certain information as of particular dates concerning the
Company's directors and officers, their remuneration, options granted to them,
the principal holders of the Company's securities and any material interest of
such persons in transactions with the Company is filed with the Commission. The
Company has also filed an Issuer Tender Offer Statement on Schedule 13E-4 with
the Commission, which includes certain additional information relating to the
Offer. Such reports, as well as such other material, may be inspected and copies
may be obtained at the Commission's public reference facilities at 450 Fifth
Street, N.W., Washington, D.C. 20549, and should also be available for
inspection and copying at the regional offices of the Commission located at 7
World Trade Center, 13th Floor, New York, New York 10048, and Suite 1400,
Northwestern Atrium Center, 500 West Madison Street, Chicago, Illinois 60661.
The Commission maintains a Web site that contains such reports, and other
information regarding registrants that file electronically with the Commission.
The address of such site is http://www.sec.gov. Copies of such material may be
obtained by mail, upon payment of the Commission's customary fees, from the
Commission's Public Reference Section at 450 Fifth Street, N.W., Washington,
D.C. 20549. Such reports, proxy statements and other information also should be
available for inspection at the office of the New York Stock Exchange, 20 Broad
Street, New York, New York 10005. The Company's Schedule 13E-4 may not be
available at the Commission's regional offices.
The Offer is being made to all holders of Shares. The Company is not aware
of any state where the making of the Offer is prohibited by administrative or
judicial action pursuant to a valid state statute. If the Company becomes aware
of any valid state statute prohibiting the making of the Offer, the Company will
make a good faith effort to comply with such statute. If, after such good faith
effort, the Company cannot comply with such statute, the Offer will not be made
to, nor will tenders be accepted from or on behalf of, holders of Shares in such
state. In those jurisdictions whose securities, blue sky or other laws require
the Offer to be made by a licensed broker or dealer, the Offer shall be deemed
to be made on behalf of the Company by the Dealer Manager or one or more
registered brokers or dealers licensed under the laws of such jurisdictions.
IPALCO ENTERPRISES, INC.
February 28, 1997
27
<PAGE>
SCHEDULE A
CERTAIN TRANSACTIONS INVOLVING SHARES
During the 40 business days prior to February 18, 1997, the following
executive officers and directors effected transactions in the Shares as follows:
<TABLE>
<CAPTION>
PERSON WHO
EFFECTED NUMBER OF
DATE TRANSACTION SHARES NATURE OF TRANSACTION
- ---------------------- ------------------------- ----------- --------------------------------------------------
<S> <C> <C> <C>
February 3, 1997 Robert A. Borns 125.1293 Purchased shares in the open market (NYSE) at a
Director price per share of
$27.9350 pursuant to a longstanding election that
his fees as a director of the Company and its
subsidiaries be deposited into his Dividend
Reinvestment account and used for stock purchases.
January 6, 1997 Bryan G. Tabler 445 Open market purchase (NYSE) in an Individual
Vice President, Secretary Retirement Account at a
and General Counsel price per share of $27.00.
</TABLE>
Executive officers and directors of the Company purchased an aggregate of
633.53 Shares in the Thrift Plan, and an aggregate of 1,282.22 Shares through
the reinvestment of dividends in the Dividend Reinvestment Plan.
<PAGE>
Facsimile copies of the Letter of Transmittal will be accepted from Eligible
Institutions. The Letter of Transmittal and certificates for Shares should be
sent or delivered by each shareholder of the Company or his or her broker,
dealer, bank or trust company to the Depositary at one of its addresses set
forth below.
THE DEPOSITARY:
IBJ SCHRODER BANK & TRUST COMPANY
TO: IBJ SCHRODER BANK & TRUST COMPANY, DEPOSITARY
<TABLE>
<CAPTION>
BY HAND OR
BY MAIL: BY FACSIMILE TRANSMISSION: OVERNIGHT COURIER:
(For Eligible Institutions
Only)
<S> <C> <C>
P.O. Box 9 (212) 858-2891 1 State Street
Bowling Green Station New York, NY 10004
New York, NY 10274-0009 ATTN: Reorganization Department
ATTN: Reorganization Department Securities Processing Window SC-1
CONFIRMATION BY TELEPHONE:
(212) 858-2660
</TABLE>
Any questions or requests for assistance may be directed to the Dealer
Manager or the Information Agent at the telephone numbers and addresses listed
below. Requests for additional copies of this Offer to Purchase, the Letter of
Transmittal or other tender offer materials may be directed to the Information
Agent and such copies will be furnished promptly at the Company's expense.
Shareholders may also contact their local broker, dealer, commercial bank or
trust company for assistance concerning the Offer.
THE INFORMATION AGENT:
D.F. KING & CO., INC.
77 Water Street
New York, New York 10005
(800) 848-2998
THE DEALER MANAGER:
DILLON, READ & CO. INC.
535 Madison Avenue
New York, New York 10022
(212) 906-7525
<PAGE>
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
OF
IPALCO ENTERPRISES, INC.
PURSUANT TO THE OFFER TO PURCHASE
DATED FEBRUARY 28, 1997
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE AT
12:00 MIDNIGHT EASTERN STANDARD TIME, ON THURSDAY, MARCH 27, 1997,
UNLESS THE OFFER IS EXTENDED.
TO: IBJ SCHRODER BANK & TRUST COMPANY
<TABLE>
<CAPTION>
BY FACSIMILE BY HAND OR
BY MAIL: TRANSMISSION: OVERNIGHT COURIER:
<S> <C> <C>
P.O. Box 9 (212) 858-2891 1 State Street
Bowling Green Station New York, NY 10004
New York, NY 10274-0009 ATTN: Reorganization Department
ATTN: Reorganization Department Securities Processing Window SC-1
CONFIRM BY TELEPHONE:
(212) 858-2660
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
DESCRIPTION OF SHARES TENDERED
(See Instructions 3 and 4)
<CAPTION>
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S)
(PLEASE USE PREADDRESSED LABEL OR FILL IN TENDERED CERTIFICATES
EXACTLY AS NAME(S) APPEAR(S) ON CERTIFICATE(S)) (ATTACH SIGNED ADDITIONAL LIST IF NECESSARY)
<S> <C> <C> <C>
<CAPTION>
NO. OF
CERTIFICATE SHARES
NUMBER(S)* NO. OF SHARES* TENDERED**
<S> <C> <C> <C>
TOTAL SHARES
TENDERED
</TABLE>
Indicate in this box order (by certificate number) which Shares are to be
purchased in the event of proration.
(Attach additional list if necessary.) *** See Instruction 9.
1st: 2nd: 3rd: 4th: 5th: 6th:
<TABLE>
<S> <C> <C> <C>
*Need not be completed if Shares are tendered by Book-Entry transfer.
**If you desire to tender fewer than all Shares evidenced by any certificates
listed above, please indicate in this column the number of Shares you wish
to tender. Otherwise, all Shares evidenced by such certificates will be
deemed to have been tendered. See Instruction 4.
***If you do not designate an order, in the event less than all Shares
tendered are purchased due to proration, Shares will be selected for
purchase by the Depositary.
</TABLE>
<PAGE>
PLEASE READ THE ENTIRE LETTER
OF TRANSMITTAL, INCLUDING THE ACCOMPANYING INSTRUCTIONS,
CAREFULLY BEFORE CHECKING ANY BOX BELOW.
Delivery of this instrument and all other documents to an address or
transmission of instructions to a facsimile number other than as set forth above
does not constitute a valid delivery.
This Letter of Transmittal is to be used only if (a) certificates for Shares
(as defined below) are to be forwarded herewith or (b) unless an Agent's Message
(as defined in Section 3 of the Offer to Purchase (as defined below) is
utilized), a tender of Shares is being made concurrently by book-entry transfer
to the account maintained by the Depositary at The Depository Trust Company
("DTC") or Philadelphia Depository Trust Company ("PDTC") (hereinafter,
collectively referred to as the "Book-Entry Transfer Facilities") pursuant to
Section 3 of the Offer to Purchase. See Instruction 2. This Letter of
Transmittal may be used for Shares credited to accounts in IPALCO PowerInvest,
the Company's Dividend Reinvestment Plan (the "Dividend Reinvestment Plan") (see
box entitled "Dividend Reinvestment Plan Shares").
SHARES HELD IN THE INDIANAPOLIS POWER & LIGHT COMPANY EMPLOYEES' THRIFT PLAN
(THE "THRIFT PLAN") MAY BE TENDERED ONLY BY INSTRUCTING THE THRIFT PLAN TRUSTEE
PURSUANT TO THE THRIFT PLAN INSTRUCTION LETTER. IF YOU HOLD SHARES IN THE THRIFT
PLAN AND OUTSIDE OF THE THRIFT PLAN, SUCH SHARES MUST BE TENDERED SEPARATELY.
THIS LETTER OF TRANSMITTAL MAY BE USED ONLY FOR TENDERING SHARES NOT HELD IN A
THRIFT PLAN ACCOUNT.
Shareholders who cannot deliver the certificates for their Shares to the
Depositary prior to the Expiration Date (as defined in the Offer to Purchase) or
who cannot complete the procedure for book-entry transfer on a timely basis or
who cannot deliver a Letter of Transmittal and all other required documents to
the Depositary prior to the Expiration Date must, in each case, tender their
Shares pursuant to the guaranteed delivery procedure set forth in Section 3 of
the Offer to Purchase. See Instruction 2. Delivery of documents to a Book-Entry
Transfer Facility does not constitute a valid delivery.
(BOXES BELOW FOR USE BY ELIGIBLE INSTITUTIONS ONLY)
/ / CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
TO THE DEPOSITARY'S ACCOUNT AT ONE OF THE BOOK-ENTRY TRANSFER FACILITIES
AND COMPLETE THE FOLLOWING:
Name of Tendering Institution: ___________________________________________
Check Applicable Box: / / DTC / / PDTC
Account number: ____________________________________________________________
Transaction Code Number: ___________________________________________________
/ / CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE
FOLLOWING:
Name(s) of Registered Holder(s): _________________________________________
Date of Execution of Notice of Guaranteed Delivery: ________________________
Name of Institution which Guaranteed Delivery: _____________________________
If Delivery is by Book-Entry Transfer:
Name of Tendering Institution: ___________________________________________
Account number: _________________ / / DTC / / PDTC
Transaction Code Number:
--------------------------------------------------------------------------
2
<PAGE>
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY.
LADIES AND GENTLEMEN:
The undersigned hereby tenders to IPALCO Enterprises, Inc., an Indiana
corporation (the "Company"), the above described shares of the Company's Common
Stock, no par value (the "Shares"), (including the associated Common Stock
Purchase Rights (the "Rights") issued pursuant to the Rights Agreement, dated as
of June 28, 1990 between the Company and First Chicago Trust Company of New
York, as Rights Agent), pursuant to the Company's offer to purchase up to
12,000,000 Shares, at the price per Share indicated in this Letter of
Transmittal, net to the seller in cash, upon the terms and subject to the
conditions set forth in the Company's Offer to Purchase, dated February 28, 1997
(the "Offer to Purchase"), receipt of which is hereby acknowledged, and in this
Letter of Transmittal (which together constitute the "Offer"). Unless the
context otherwise requires, all references to Shares shall include the
associated Rights.
Subject to and effective upon acceptance for payment of the Shares tendered
hereby in accordance with the terms and subject to the conditions of the Offer
(including, if the Offer is extended or amended, the terms and conditions of
such extension or amendment), the undersigned hereby sells, assigns and
transfers to, or upon the order of, the Company all right, title and interest in
and to all the Shares that are being tendered hereby and orders the registration
of all such Shares if tendered by book-entry transfer and hereby irrevocably
constitutes and appoints the Depositary as the true and lawful agent and
attorney-in-fact of the undersigned (with full knowledge that said Depositary
also acts as the agent of the Company) with respect to such Shares with full
power of substitution (such power of attorney being deemed to be an irrevocable
power coupled with an interest), to:
(a) deliver certificate(s) for such Shares or transfer ownership of such
Shares on the account books maintained by any of the Book-Entry Transfer
Facilities, together in either such case with all accompanying evidence of
transfer and authenticity, to, or upon the order of, the Company upon
receipt by the Depositary, as the undersigned's agent, of the aggregate
Purchase Price (as defined below) with respect to such Shares;
(b) present certificates for such Shares for cancellation and transfer
on the Company's books; and
(c) receive all benefits and otherwise exercise all rights of beneficial
ownership of such Shares, subject to the following representations and
warranties, all in accordance with the terms of the Offer.
The undersigned hereby represents and warrants to the Company that:
(a) the undersigned has full power and authority to tender, sell, assign
and transfer the Shares tendered hereby;
(b) when and to the extent the Company accepts such Shares for purchase,
the Company will acquire good, marketable and unencumbered title to them,
free and clear of all security interests, liens, restrictions, charges,
encumbrances, conditional sales agreements or other obligations relating to
their sale or transfer, and not subject to any adverse claim;
(c) on request, the undersigned will execute and deliver any additional
documents the Depositary or the Company deems necessary or desirable to
complete the assignment, transfer and purchase of the Shares tendered
hereby;
(d) the undersigned understands that tenders of Shares pursuant to any
one of the procedures described in Section 3 of the Offer to Purchase and in
the instructions hereto will constitute the undersigned's acceptance of the
terms and conditions of the Offer, including the undersigned's
representation and warranty that:
(i) the undersigned has a net long position in Shares or equivalent
securities at least equal to the Shares tendered within the meaning of
Rule 14e-4 under the Securities Exchange Act of 1934, as amended, and
(ii) such tender of Shares complies with Rule 14e-4; and
(e) the undersigned has read and agrees to all of the terms of the
Offer.
All authorities conferred or agreed to be conferred in this Letter of
Transmittal shall survive the death or incapacity of the undersigned, and any
obligation of the undersigned hereunder shall be binding upon the heirs,
personal representatives, executors, administrators, successors, assigns,
trustees in bankruptcy, and legal representatives of the undersigned. Except as
stated in the Offer to Purchase, this tender is irrevocable.
The name(s) and address(es) of the registered holder(s) should be printed
above, if they are not already printed above, exactly as they appear on the
certificates representing Shares tendered hereby. The certificate numbers, the
number of Shares represented by such certificates, and the number of Shares that
the undersigned wishes to tender, should be set forth in the appropriate boxes
above. The price at which such Shares are being tendered should be indicated in
the box below.
3
<PAGE>
The undersigned understands that the Company will, upon the terms and
subject to the conditions of the Offer, determine a single per Share price (not
greater than $34 nor less than $29 per Share) net to the seller in cash (the
"Purchase Price") that it will pay for Shares properly tendered and not
withdrawn prior to the Expiration Date pursuant to the Offer, taking into
account the number of Shares so tendered and the prices (in multiples of $.25)
specified by tendering shareholders. The undersigned understands that the
Company will select the lowest Purchase Price which will allow it to buy
12,000,000 Shares (or such lesser number of Shares as are properly tendered at
prices not greater than $34 nor less than $29 per Share) pursuant to the Offer.
The undersigned understands that all Shares properly tendered at prices at or
below the Purchase Price and not withdrawn prior to the Expiration Date will be
purchased at the Purchase Price, upon the terms and subject to the conditions of
the Offer, including its proration provisions, and that the Company will return
all other Shares not purchased pursuant to the Offer, including Shares tendered
and not withdrawn prior to the Expiration Date at prices greater than the
Purchase Price and Shares not purchased because of proration. The undersigned
also understands that unless the Rights are redeemed or become separately
transferable in accordance with their terms, by tendering Shares the undersigned
will also be tendering the associated Rights and that no separate consideration
will be paid for such Rights.
Unless otherwise indicated under "Special Payment Instructions," please
issue the check for the Purchase Price of any Shares purchased, and/or return
any Shares not tendered or not purchased, in the name(s) of the undersigned
(and, in the case of Shares tendered by book-entry transfer, by credit to the
account at the Book-Entry Transfer Facility designated above). Similarly, unless
otherwise indicated under "Special Delivery Instructions," please mail the check
for the Purchase Price of any Shares purchased and/or any certificates for
Shares not tendered or not purchased (and accompanying documents, as
appropriate) to the undersigned at the address shown below the undersigned's
signature(s). In the event that both "Special Payment Instructions" and "Special
Delivery Instructions" are completed, please issue the check for the Purchase
Price of any Shares purchased and/or return any Shares not tendered or not
purchased in the name(s) of, and mail said check and/or any certificates to, the
person(s) so indicated. The undersigned recognizes that the Company has no
obligation, pursuant to the "Special Payment Instructions," to transfer any
Shares from the name of the registered holder(s) thereof if the Company does not
accept for payment any of the Shares so tendered.
THE UNDERSIGNED UNDERSTANDS THAT ACCEPTANCE OF SHARES BY THE COMPANY FOR
PAYMENT WILL CONSTITUTE A BINDING AGREEMENT BETWEEN THE UNDERSIGNED AND THE
COMPANY UPON THE TERMS AND SUBJECT TO THE CONDITIONS OF THE OFFER.
NOTE: SIGNATURES MUST BE PROVIDED BELOW.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY.
PRICE (IN DOLLARS) PER SHARE AT
WHICH SHARES ARE BEING TENDERED
(SEE INSTRUCTION 5)
CHECK ONLY ONE BOX.
IF MORE THAN ONE BOX IS CHECKED
OR IF NO BOX IS CHECKED, THERE IS
NO VALID TENDER OF SHARES
SHARES TENDERED AT PRICE
DETERMINED BY DUTCH AUCTION
/ / The undersigned wants to maximize the chance of having the Company
purchase all the Shares the undersigned is tendering (subject to the
possibility of proration). Accordingly, by checking this one box INSTEAD
OF ONE OF THE PRICE BOXES BELOW, the undersigned hereby tenders Shares at,
and is willing to accept, the Purchase Price resulting from the Dutch
auction tender process. This action could result in receiving a price per
Share as low as $29.00 or as high as $34.00.
*** CHECK EITHER THE BOX ABOVE OR CHECK ONE BOX BELOW ***
SHARES TENDERED AT PRICE
DETERMINED BY SHAREHOLDER
<TABLE>
<S> <C> <C> <C> <C> <C>
/ / $29.00 / / $30.00 / / $31.00 / / $32.00 / / $33.00 / / $34.00
/ / $29.25 / / $30.25 / / $31.25 / / $32.25 / / $33.25
/ / $29.50 / / $30.50 / / $31.50 / / $32.50 / / $33.50
/ / $29.75 / / $30.75 / / $31.75 / / $32.75 / / $33.75
</TABLE>
IF SHARES ARE BEING TENDERED AT MORE THAN ONE PRICE,
YOU MUST USE A SEPARATE LETTER OF TRANSMITTAL FOR EACH PRICE TO BE SPECIFIED.
4
<PAGE>
ODD LOTS
(SEE INSTRUCTION 8)
To be completed ONLY if the SHARES are being tendered by or on behalf of a
person owning of record or beneficially, as of the close of business on February
28, 1997, an aggregate of fewer than 100 Shares*. The undersigned either (check
one box):
/ / was as of the close of business on February 28, 1997, and will continue to
be at the Expiration Date, the record or beneficial owner, of an aggregate
of fewer than 100 Shares,* all of which are being tendered, or
/ / is a broker, dealer, commercial bank, trust company, or other nominee that
(a) is tendering for the beneficial owner(s) thereof, Shares with respect to
which it is the record holder, and (b) believes, based upon representations
made to it by such beneficial owner(s), that each such person was as of the
close of business on February 28, 1997, and will continue to be at the
Expiration Date, the beneficial owner of an aggregate of fewer than 100
Shares* and is tendering all of such Shares.
* In calculating the number of Shares you own, you must aggregate Shares held
in the Dividend Reinvestment Plan with those held outside such plan. Do not
include Shares allocated to your account under the Thrift Plan.
DIVIDEND REINVESTMENT PLAN SHARES
(SEE INSTRUCTION 13)
This section is to be completed ONLY if Shares held in the Dividend Reinvestment
Plan are to be tendered.
/ / By checking this box, the undersigned represents that the undersigned is a
participant in the Dividend Reinvestment Plan and hereby instructs the
Depositary to tender on behalf of the undersigned the following number of
Shares credited to the Dividend Reinvestment Plan account of the undersigned
at the Purchase Price per Share indicated in the box entitled "Price (In
Dollars) Per Share At Which Shares Are Being Tendered" in this Letter of
Transmittal:
Number of Shares ______________________*
* The undersigned understands and agrees that all Shares held in the Dividend
Reinvestment Plan account(s) of the undersigned will be tendered if the
above box is checked and the space above is left blank. If the box captioned
"Odd Lots" in this Letter of Transmittal is completed, all Shares held in
the Odd Lot Owner's account(s) will be tendered regardless of whether this
section is otherwise completed.
<TABLE>
<S> <C>
SPECIAL PAYMENT INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 4, 6, 7 AND 10) (SEE INSTRUCTIONS 1, 4, 6, 7 AND 10)
To be completed ONLY if certificates for To be completed ONLY if certificates for Shares
Shares not tendered or not purchased and/or any not tendered or not purchased and/or any check
check for the aggregate Purchase Price of for the Purchase Price of Shares purchased,
Shares purchased are to be issued in the name issued in the name of the undersigned, are to
of and sent to someone other than the be mailed to someone other than the
undersigned. undersigned, or to the undersigned at an
Issue / / Check / / Certificates to: address other than that shown above.
Name(s) Issue / / Check / / Certificates to:
(Please Print) Name(s)
Address (Please Print)
(Zip Code) Address
(Tax Identification or Social Security Number) (Zip Code)
</TABLE>
5
<PAGE>
PLEASE SIGN HERE
(TO BE COMPLETED BY ALL SHAREHOLDERS)
Signature(s) of Owner(s)__--_______________________________________________--_
________________________________________________________________________________
Signature(s) of Owner(s)
Dated:___________________________________________________________________, 1997.
Name(s):________________________________________________________________________
________________________________________________________________________________
(Please Print)
________________________________________________________________________________
Capacity (full title):__________________________________________________________
Address:________________________________________________________________________
________________________________________________________________________________
(Include Zip Code)
Area Code and Telephone Number:_________________________________________________
________________________________________________________________________________
(Must be signed by the registered holder(s) exactly as name(s) appear(s) on
certificate(s) or on a security position or by person(s) authorized to become
registered holder(s) by certificate(s) and documents transmitted with this
Letter of Transmittal. If signature is by a trustee, executor, administrator,
guardian, attorney-in-fact, officer of a corporation or another person acting in
a fiduciary or representative capacity, please set forth full title and see
Instruction 6.)
GUARANTEE OF SIGNATURES(S)
(SEE INSTRUCTIONS 1 AND 6)
Name of Firm:___________________________________________________________________
Authorized Signature:___________________________________________________________
Name:___________________________________________________________________________
________________________________________________________________________________
(Please Print)
________________________________________________________________________________
Title:__________________________________________________________________________
Address:________________________________________________________________________
(Include Zip Code)
Area Code and Telephone Number:_________________________________________________
Dated:__________________________________________________________________ , 1997
6
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURE. No signature guarantee is required if either:
(a) this Letter of Transmittal is signed by the registered holder of the
Shares (which term, for purposes of this document, shall include any
participant in a Book-Entry Transfer Facility whose name appears on a
security position listing as the owner of such Shares) exactly as the name
of the registered holder appears on the certificate tendered with this
Letter of Transmittal and payment and delivery are to be made directly to
such owner unless such owner has completed either the box entitled "Special
Payment Instructions" or "Special Delivery Instructions" above; or
(b) such Shares are tendered for the account of a member firm of a
registered national securities exchange, a member of the National
Association of Securities Dealers, Inc. or a commercial bank or trust
company (not a savings bank or savings and loan association) having an
office, branch or agency in the United States which is a participant in an
approval Signature Guarantee Medallion Program (each such entity, an
"Eligible Institution").
In all other cases, an Eligible Institution must guarantee all signatures on
this Letter of Transmittal. See Instruction 6.
2. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES; GUARANTEED DELIVERY
PROCEDURES. This Letter of Transmittal is to be used only if certificates for
Shares are delivered with it to the Depositary (or such certificates will be
delivered pursuant to a Notice of Guaranteed Delivery previously sent to the
Depositary) or if a tender for Shares is being made concurrently pursuant to the
procedure for tender by book-entry transfer set forth in Section 3 of the Offer
to Purchase. Certificates for all physically tendered Shares or confirmation of
a book-entry transfer into the Depositary's account at a Book-Entry Transfer
Facility of Shares tendered electronically, together in each case with a
properly completed and duly executed Letter of Transmittal or duly executed and
manually signed photocopy of the Letter of Transmittal, and any other documents
required by this Letter of Transmittal, should be mailed or delivered to the
Depositary at the appropriate address set forth on the front page of this Letter
of Transmittal and must be delivered to the Depositary on or before the
Expiration Date (as defined in the Offer to Purchase). DELIVERY OF DOCUMENTS TO
ONE OF THE BOOK-ENTRY TRANSFER FACILITIES DOES NOT CONSTITUTE DELIVERY TO THE
DEPOSITARY.
Shareholders whose certificates are not immediately available or who cannot
deliver certificates for their Shares and all other required documents to the
Depositary before the Expiration Date, or whose Shares cannot be delivered on a
timely basis pursuant to the procedures for book-entry transfer, must, in any
such case, tender their Shares by or through any Eligible Institution by
properly completing and duly executing and delivering a Notice of Guaranteed
Delivery (or photocopy of it (with any required signature guarantee)) and by
otherwise complying with the guaranteed delivery procedures set forth in Section
3 of the Offer to Purchase. Pursuant to such procedure, certificates for all
physically tendered Shares or book-entry confirmations, as the case may be, as
well as a properly completed and duly executed Letter of Transmittal (or
photocopy of it) and all other documents required by this Letter of Transmittal,
must be received by the Depositary within three New York Stock Exchange trading
days after receipt by the Depositary of such Notice of Guaranteed Delivery, all
as provided in Section 3 of the Offer to Purchase.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted by
telegram, facsimile transmission or mail to the Depositary and must include a
signature guarantee by an Eligible Institution in the form set forth in such
Notice. For Shares to be tendered validly pursuant to the guaranteed delivery
procedure, the Depositary must receive the Notice of Guaranteed Delivery on or
before the Expiration Date.
THE METHOD OF DELIVERY OF ALL DOCUMENTS, INCLUDING CERTIFICATES FOR SHARES,
IS AT THE OPTION AND RISK OF THE TENDERING SHAREHOLDER. IF DELIVERY IS BY MAIL,
REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED.
IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY.
The Company will not accept any alternative, conditional or contingent
tenders, except as expressly provided in the Offer to Purchase. Fractional
shares will be purchased, unless proration of tendered Shares is required (in
which case fractional Shares held by participants in the Dividend Reinvestment
Plan and the Thrift Plan (as such terms are defined in the Offer to Purchase)
will be purchased). All tendering shareholders, by execution of this Letter of
Transmittal (or a photocopy of it), waive any right to receive any notice of the
acceptance of their tender.
3. INADEQUATE SPACE. If the space provided in the box captioned
"Description of Shares Tendered" is inadequate, the certificate numbers and/or
the number of Shares should be listed on a separate signed schedule and attached
to this Letter of Transmittal.
7
<PAGE>
4. PARTIAL TENDERS AND UNPURCHASED SHARES. (Not applicable to shareholders
who tender by book-entry transfer.) If fewer than all of the Shares evidenced by
any certificate are to be tendered, fill in the number of Shares that are to be
tendered in the column entitled "Number of Shares Tendered," in the box
captioned "Description of Shares Tendered." In such case, if any tendered Shares
are purchased, a new certificate for the remainder of the Shares (including any
Shares not purchased) evidenced by the old certificate(s) will be issued and
sent to the registered holder(s), unless otherwise specified in either the
"Special Payment Instructions" or "Special Delivery Instructions" box on this
Letter of Transmittal, as soon as practicable after the Expiration Date. Unless
otherwise indicated, all Shares represented by the certificate(s) listed and
delivered to the Depositary will be deemed to have been tendered.
5. INDICATION OF PRICE AT WHICH SHARES ARE BEING TENDERED. For Shares to
be properly tendered, the shareholder MUST check the box indicating the price
per Share at which he or she is tendering Shares under "Price (In Dollars) Per
Share at Which Shares Are Being Tendered" on this Letter of Transmittal. ONLY
ONE BOX MAY BE CHECKED. IF MORE THAN ONE BOX IS CHECKED OR IF NO BOX IS CHECKED,
THERE IS NO PROPER TENDER OF SHARES. A shareholder wishing to tender portions of
his or her Share holdings at different prices must complete a separate Letter of
Transmittal for each price at which he or she wishes to tender each such portion
of his or her Shares. The same Shares cannot be tendered (unless previously
properly withdrawn as provided in Section 4 of the Offer to Purchase) at more
than one price. Shareholders wishing to maximize the possibility that their
Shares will be purchased at the relevant Purchase Price may check the box on the
Letter of Transmittal marked "Shares Tendered at Purchase Price Determined by
Dutch Auction." Checking this box may result in a purchase price of the Shares
so tendered at the minimum price of $29.00.
6. SIGNATURES ON LETTER OF TRANSMITTAL, STOCK POWERS AND ENDORSEMENTS.
(a) If this Letter of Transmittal is signed by the registered holder(s)
of the Shares tendered hereby, the signature(s) must correspond exactly with
name(s) as written on the face of the certificate(s) without any change
whatsoever.
(b) If the Shares are held of record by two or more persons or holders,
all such persons or holders must sign this Letter of Transmittal.
(c) If any tendered Shares are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many
separate Letters of Transmittal (or photocopies of it) as there are
different registrations of certificates.
(d) When this Letter of Transmittal is signed by the registered
holder(s) of the Shares listed and transmitted hereby, no endorsement(s) of
certificate(s) representing such Shares or separate stock power(s) are
required unless payment is to be made or the certificate(s) for Shares not
tendered or not purchased are to be issued to a person other than the
registered holder(s). SIGNATURE(S) ON SUCH CERTIFICATE(S) MUST BE GUARANTEED
BY AN ELIGIBLE INSTITUTION. If this Letter of Transmittal is signed by a
person other than the registered holder(s) of the certificate(s) listed, or
if payment is to be made or their certificate(s) for Shares not tendered or
not purchased are to be issued to a person other than the registered
holder(s), the certificate(s) must be endorsed or accompanied by appropriate
stock power(s), in either case signed exactly as the name(s) of the
registered holder(s) appears on the certificate(s), and the signature(s) on
such certificate(s) or stock power(s) must be guaranteed by an Eligible
Institution. See Instruction 1.
(e) If this Letter of Transmittal or any certificate(s) or stock
power(s) are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a fiduciary
or representative capacity, such persons should so indicate when signing and
must submit proper evidence satisfactory to the Company of their authority
so to act. If the certificate has been issued in the fiduciary or
representative capacity, no additional documentation will be required.
7. STOCK TRANSFER TAXES. Except as provided in this Instruction 7, no
stock transfer tax stamps or funds to cover such stamps need accompany this
Letter of Transmittal. The Company will pay or cause to be paid any stock
transfer taxes payable on the transfer to it of Shares purchased pursuant to the
Offer. If, however:
(a) payment of the aggregate Purchase Price for Shares tendered hereby
and accepted for purchase is to be made to any person other than the
registered holder(s);
(b) Shares not tendered or not accepted for purchase are to be
registered in the name(s) of any person(s) other than the registered
holder(s); or
(c) tendered certificates are registered in the name(s) of any person(s)
other than the person(s) signing this Letter of Transmittal,
then the Depositary will deduct from such aggregate Purchase Price the amount of
any stock transfer taxes (whether imposed on the registered holder, such other
person or otherwise) payable on account of the transfer to such person, unless
satisfactory evidence of the payment of such taxes or any exemption from them is
submitted. See Section 15 of the Offer to Purchase.
8
<PAGE>
8. ODD LOTS. As described in Sections 1 and 2 of the Offer to Purchase, if
the Company is to purchase fewer than all Shares tendered before the Expiration
Date and not withdrawn, the Shares purchased first will consist of all Shares
tendered by any shareholder who owned of record or owned beneficially, as of the
close of business on February 28, 1997 and will continue to own at the
Expiration Date, an aggregate of fewer than 100 Shares, including any Shares
held in the Company's Dividend Reinvestment Plan, and who tenders all of his or
her Shares at or below the Purchase Price (an "Odd Lot Owner"). However, in
calculating whether you own an aggregate of fewer than 100 Shares, do not
include Shares allocated to your account, if any, in the Thrift Plan. This
preference will not be available unless the box captioned "Odd Lots" is
completed.
Notwithstanding clause (b) above, the Company reserves the right, but is not
obligated, to purchase prior to purchasing any other Shares referred to in
clause (b), all Shares tendered by a shareholder who has tendered at or below
the Purchase Price all Shares owned, beneficially or of record, and as a result
of the proration contemplated by clause (b) would then own, beneficially or of
record, an aggregate of fewer than 100 Shares. If the Company exercises this
right, it will increase the number of Shares that are purchased pursuant to the
Offer in an amount sufficient to allow the exercise of the right (i.e., the
number of Shares that would be owned by all shareholders who would become Odd
Lot holders as a result of the proration contemplated by clause (b)).
9. ORDER OF PURCHASE IN EVENT OF PRORATION. As described in Section 1 of
the Offer to Purchase, shareholders may designate the order in which their
Shares are to be purchased in the event of proration. The order of purchase may
have an effect on the federal income tax classification of any gain or loss on
the Shares purchased. See Section 13 of the Offer to Purchase.
10. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If certificate(s) for
Shares not tendered or not purchased and/ or check(s) are to be issued in the
name of a person other than the signer of the Letter of Transmittal or if such
certificates and/or checks are to be sent to someone other than the person
signing the Letter of Transmittal or to the signer at a different address, the
boxes captioned "Special Payment Instructions" and/or "Special Delivery
Instructions" on this Letter of Transmittal should be completed as applicable
and signatures must be guaranteed as described in Instruction 1. Shareholders
tendering Shares by book-entry transfer will have any Shares not accepted for
payment returned by crediting the account maintained by such Shareholder at the
Book-Entry Transfer Facility from which such transfer was made.
11. IRREGULARITIES. All questions as to the number of Shares to be
accepted, the price to be paid therefor and the validity, form, eligibility
(including time of receipt) and acceptance for payment of any tender of Shares
will be determined by the Company in its sole discretion, which determinations
shall be final and binding on all parties. The Company reserves the absolute
right to reject any or all tenders of Shares it determines not to be in proper
form or the acceptance of which or payment for which may, in the opinion of the
Company's counsel, be unlawful. The Company also reserves the absolute right to
waive any of the conditions of the Offer and any defect or irregularity in the
tender of any particular Shares, and the Company's interpretation of the terms
of the Offer (including these instructions) will be final and binding on all
parties. No tender of Shares will be deemed to be properly made until all
defects and irregularities have been cured or waived. Unless waived, any defects
or irregularities in connection with tenders must be cured within such time as
the Company shall determine. None of the Company, the Dealer Manager, the
Depositary, the Information Agent, the Dividend Reinvestment Plan Administrator
or the Thrift Plan Trustee (all as defined in the Offer to Purchase) or any
other person is or will be obligated to give notice of any defects or
irregularities in tenders and none of them will incur any liability for failure
to give any such notice.
12. QUESTIONS AND REQUESTS FOR ASSISTANCE AND ADDITIONAL COPIES. Questions
and requests for assistance may be directed to, or additional copies of the
Offer to Purchase, the Notice of Guaranteed Delivery and this Letter of
Transmittal may be obtained from, the Information Agent at the addresses and
telephone numbers set forth at the end of this Letter of Transmittal or from
your broker, dealer, commercial bank or trust company.
13. DIVIDEND REINVESTMENT PLAN. If a tendering shareholder desires to have
tendered pursuant to the Offer Shares credited to the shareholder's account
under the Dividend Reinvestment Plan, the box captioned "Dividend Reinvestment
Plan Shares" should be completed. A participant in the Dividend Reinvestment
plan may complete such box on only one Letter of Transmittal submitted by such
participant. If a participant submits more than one Letter of Transmittal and
completes such box on more than one Letter of Transmittal, the participant will
be deemed to have elected to tender all shares credited to the shareholder's
account under the Dividend Reinvestment Plan at the lowest of the prices
specified in such Letters of Transmittal.
If a shareholder authorizes a tender of Shares held in the Dividend
Reinvestment Plan, all such Shares credited to such shareholder's account,
including fractional Shares, will be tendered, unless otherwise specified in the
appropriate space in the box entitled "Dividend Reinvestment Plan Shares." In
the event that the box captioned "Dividend Reinvestment Plan Shares" is not
completed, no Shares held in the tendering shareholder's account will be
tendered (unless the stockholder has otherwise completed the box captioned "Odd
Lots" in this Letter of Transmittal, in which case all Shares held in the Odd
Lot Owner's account will be tendered regardless of whether the box captioned
"Dividend Reinvestment Plan Shares" is completed).
9
<PAGE>
14. THRIFT PLAN. Participants in the Thrift Plan may not use this Letter
of Transmittal to direct the tender of Shares held in their Thrift Plan Account.
Such shares may be tendered only by instructing the Thrift Plan Trustee pursuant
to the Thrift Plan Instruction Letter in ample time for the Thrift Plan Trustee
to tender such shares. See Section 3 of the Offer to Purchase.
15. SUBSTITUTE FORM W-9 AND FORM W-8. Under the United States federal
income tax backup withholding rules, unless an exemption applies under the
applicable law and regulations, 31% of the gross proceeds payable to a
shareholder or other payee pursuant to the Offer must be withheld and remitted
to the United States Treasury, unless the shareholder or other payee provides
such person's taxpayer identification number (employer identification number or
social security number) to the Depositary and certifies that such number is
correct. Therefore, each tendering shareholder should complete and sign the
Substitute Form W-9 included as part of the Letter of Transmittal so as to
provide the information and certification necessary to avoid backup withholding,
unless such shareholder otherwise establishes to the satisfaction of the
Depositary that it is not subject to backup withholding. Certain shareholders
(including, among others, all corporations and certain foreign shareholders (in
addition to foreign corporations)) are not subject to these backup withholding
and reporting requirements. In order for a foreign shareholder to qualify as an
exempt recipient, that shareholder must submit an IRS Form W-8 or a Substitute
Form W-8, signed under penalties of perjury, attesting to that shareholder's
exempt status. Such statements may be obtained from the Depositary.
16. WITHHOLDING ON FOREIGN SHAREHOLDERS. Even if a foreign shareholder has
provided the required certification to avoid backup withholding, the Depositary
will withhold United States federal income taxes equal to 30% of the gross
payments payable to a foreign shareholder or his or her agent unless the
Depositary determines that a reduced rate of withholding is available pursuant
to a tax treaty or that an exemption from withholding is applicable because such
gross proceeds are effectively connected with the conduct of a trade or business
in the United States. For this purpose, a foreign shareholder is any shareholder
that is not (i) 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, any State or any political subdivision thereof or (iii) an estate
or trust, the income of which is subject to United States federal income
taxation regardless of the source of such income. In order to obtain a reduced
rate of withholding pursuant to a tax treaty, a foreign shareholder must deliver
to the Depositary a properly completed IRS Form 1001. In order to obtain an
exemption from withholding on the grounds that the gross proceeds paid pursuant
to the Offer are effectively connected with the conduct of a trade or business
within the United States, a foreign shareholder must deliver to the Depositary a
properly completed IRS Form 4224. The Depositary will determine a shareholder's
status as a foreign shareholder and eligibility for a reduced rate of, or an
exemption from, withholding by reference to outstanding certificates or
statements concerning eligibility for a reduced rate of, or exemption from,
withholding (e.g., IRS Form 1001 or IRS Form 4224) unless facts and
circumstances indicate that such reliance is not warranted. A foreign
shareholder may be eligible to obtain a refund of all or a portion of any tax
withheld if such shareholder meets the "complete redemption," "substantially
disproportionate" or "not essentially equivalent to a dividend" test described
in Section 14 of the Offer to Purchase or is otherwise able to establish that no
tax or a reduced amount of tax is due. Backup withholding generally will not
apply to amounts subject to the 30% or treaty-reduced rate of withholding.
Foreign shareholders are urged to consult their tax advisers regarding the
application of United States federal income tax withholding, including
eligibility for a withholding tax reduction or exemption and refund procedures.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A PHOTOCOPY THEREOF) TOGETHER WITH
SHARE CERTIFICATES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL OTHER REQUIRED
DOCUMENTS MUST BE RECEIVED BY THE DEPOSITARY, OR THE NOTICE OF GUARANTEED
DELIVERY MUST BE RECEIVED BY THE DEPOSITARY, ON OR PRIOR TO THE EXPIRATION DATE
(AS DEFINED IN THE OFFER TO PURCHASE). SHAREHOLDERS ARE ENCOURAGED TO RETURN A
COMPLETED SUBSTITUTE FORM W-9 WITH THEIR LETTER OF TRANSMITTAL.
10
<PAGE>
<TABLE>
<CAPTION>
PAYER'S NAME: IBJ SCHRODER BANK & TRUST COMPANY, DEPOSITORY
<S> <C> <C>
SUBSTITUTE PART 1: PLEASE PROVIDE YOUR TIN Social Security Number
FORM W-9 IN THE BOX AT RIGHT AND OR ------------------------
CERTIFY BY SIGNING AND DATING Employer Identification Number
BELOW.
Department of the Treasury PART 2: For Payees exempt from backup withholding, see the
Internal Revenue Service enclosed Guidelines for Certification of Taxpayer Identification
PAYER'S REQUEST FOR TAXPAYER Number on Substitute Form W-9 and complete as instructed
IDENTIFICATION NUMBER (TIN) therein.
PART 3: Awaiting TIN / /
CERTIFICATION--Under the penalties of perjury, I certify that (i) the number shown on this form
is my correct Taxpayer Identification Number (or I am waiting for a number to be issued to me)
and either (a) I have mailed or delivered an application to receive a taxpayer identification
number to the appropriate IRS center or Social Security Administration office or (b) I intend to
mail or deliver an application in the near future) and (ii) I am not subject to backup
withholding because: (a) I am exempt from backup withholding; or (b) I have not been notified by
the IRS that I am subject to backup withholding as a result of a failure to report all interest
or dividends; or (c) the IRS has notified me that I am no longer subject to backup withholding.
Certification Instructions--You must cross out Item (ii) above if you have been notified by the
IRS that you are currently subject to backup withholding because of underreporting interest or
dividends on your tax return.
SIGNATURE DATE , 1997
NAME (Please Print
ADDRESS (Include Zip Code)
</TABLE>
FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF
31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THIS OFFER. PLEASE REVIEW THE
ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON
SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
11
<PAGE>
THE INFORMATION AGENT FOR THE OFFER IS:
D.F. KING & CO., INC.
77 Water Street
New York, New York 10005
(800) 848-2998
THE DEPOSITARY FOR THE OFFER IS:
IBJ SCHRODER BANK & TRUST COMPANY
<TABLE>
<S> <C> <C>
BY MAIL: BY FACSIMILE TRANSMISSION: BY HAND/OVERNIGHT DELIVERY:
P.O. Box 9 (212) 858-2891 1 State Street
Bowling Green Station New York, NY 10004
New York, NY 10274-0009 ATTN: Reorganization Department
ATTN: Reorganization Department Securities Processing Window
SC-1
CONFIRM BY TELEPHONE:
(212) 858-2660
</TABLE>
THE DEALER MANAGER FOR THE OFFER IS:
DILLON, READ & CO. INC.
535 Madison Avenue
New York, New York 10022
(212) 906-7525
Important: This Letter of Transmittal or a photocopy hereof or, in the case of a
book-entry transfer, an Agent's Message in lieu of the Letter of
Transmittal (together with certificates for the Shares being tendered
and all other required documents), or a Notice of Guaranteed Delivery
must be received by the Depositary prior to 12:00 Midnight, Eastern
Standard Time, on the Expiration Date.
<PAGE>
IPALCO ENTERPRISES, INC.
NOTICE OF GUARANTEED DELIVERY OF SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED COMMON STOCK PURCHASE RIGHTS)
This form or a photocopy hereof must be used to accept the Offer (as defined
below) if:
(a) certificates for shares of Common Stock, no par value per share (the
"Shares"), of IPALCO Enterprises, Inc., an Indiana corporation (the
"Company"), cannot be delivered to the Depositary prior to the Expiration
Date (as defined in Section 1 of the Company's Offer to Purchase dated
February 28, 1997 (the "Offer to Purchase")); or
(b) the procedures for book-entry transfer (set forth in Section 3 of
the Offer to Purchase) cannot be completed on a timely basis; or
(c) the Letter of Transmittal (or a photocopy thereof) and all other
required documents cannot be delivered to the Depositary prior to the
Expiration Date.
This form, properly completed and duly executed, may be delivered by hand,
mail or overnight courier or (for Eligible Institutions only) by facsimile
transmission to the Depositary. See Section 3 of the Offer to Purchase.
THE ELIGIBLE INSTITUTION WHICH COMPLETES THIS FORM MUST COMMUNICATE THE
GUARANTEE TO THE DEPOSITARY AND MUST DELIVER THE LETTER OF TRANSMITTAL AND
CERTIFICATES FOR SHARES TO THE DEPOSITARY WITHIN THE TIME SHOWN HEREIN. FAILURE
TO DO SO COULD RESULT IN A FINANCIAL LOSS TO SUCH ELIGIBLE INSTITUTION.
TO: IBJ SCHRODER BANK & TRUST COMPANY, DEPOSITARY
<TABLE>
<CAPTION>
BY FACSIMILE BY HAND OR
BY MAIL: TRANSMISSION: OVERNIGHT DELIVERY:
<S> <C> <C>
P.O. Box 9 (Eligible Institutions 1 State Street
Bowling Green Station Only) New York, NY 10004
New York, NY 10274-0009 (212) 858-2891 ATTN: Reorganization Department
ATTN: Reorganization Department Securities Processing Window
SC-1
CONFIRM BY TELEPHONE:
(212) 858-2660
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN AS SET FORTH
ABOVE DOES NOT CONSTITUTE A VALID DELIVERY.
THIS FORM IS NOT TO BE USED TO GUARANTEE SIGNATURES. IF A SIGNATURE ON A
LETTER OF TRANSMITTAL IS REQUIRED TO BE GUARANTEED BY AN "ELIGIBLE INSTITUTION"
UNDER THE INSTRUCTIONS THERETO, SUCH SIGNATURE GUARANTEE MUST APPEAR IN THE
APPLICABLE SPACE PROVIDED IN THE SIGNATURE BOX ON THE LETTER OF TRANSMITTAL.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to IPALCO Enterprises, Inc. (the "Company")
at the price per Share indicated in this Notice of Guaranteed Delivery, upon the
terms and subject to the conditions set forth in the Offer to Purchase dated
February 28, 1997, and the related Letter of Transmittal (which together
constitute the "Offer"), receipt of both of which is hereby acknowledged, the
number of shares of common stock, no par value (including the associated common
stock purchase rights (the "Rights") issued pursuant to the Rights Agreement,
dated as of June 28, 1990, between the Company and First Chicago Trust Company
of New York as Rights Agent) (the "Shares") of the Company listed below,
pursuant to the guaranteed delivery procedures set forth in Section 3 of the
Offer to Purchase.
PRICE (IN DOLLARS) PER SHARE AT
WHICH SHARES ARE BEING TENDERED
CHECK ONLY ONE BOX
IF MORE THAN ONE BOX IS CHECKED OR IF NO BOX IS CHECKED,
THERE IS NO PROPER TENDER OF SHARES. SHAREHOLDERS WHO DESIRE
TO TENDER SHARES AT MORE THAN ONE PRICE MUST COMPLETE A
SEPARATE ELECTION FORM FOR EACH PRICE AT
WHICH SHARES ARE TENDERED.
SHARES TENDERED AT PRICE
DETERMINED BY DUTCH AUCTION
/ / The undersigned wants to maximize the chance of having the Company
purchase all the Shares the undersigned is tendering (subject to the
possibility of proration). Accordingly, by checking this one box INSTEAD
OF ONE OF THE PRICE BOXES BELOW, the undersigned hereby tenders Shares
at, and is willing to accept, the Purchase Price resulting from the Dutch
auction tender process. This action could result in receiving a price per
Share as low as $29.00 or as high as $34.00.
*** CHECK EITHER THE BOX ABOVE OR CHECK ONE BOX BELOW ***
SHARES TENDERED AT PRICE DETERMINED BY SHAREHOLDER
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
/ / $ 29.00 / / $ 30.00 / / $ 31.00 / / $ 32.00 / / $ 33.00 / / $ 34.00
/ / $ 29.25 / / $ 30.25 / / $ 31.25 / / $ 32.25 / / $ 33.25
/ / $ 29.50 / / $ 30.50 / / $ 31.50 / / $ 32.50 / / $ 33.50
/ / $ 29.75 / / $ 30.75 / / $ 31.75 / / $ 32.75 / / $ 33.75
</TABLE>
2
<PAGE>
ODD LOTS
To be completed ONLY if the Shares are being tendered by or on behalf of a
person owning of record or beneficially, as of the close of business on February
28, 1997, an aggregate of fewer than 100 Shares.*
The undersigned either (check one):
/ / was as of the close of business on February 28, 1997, and will continue
to be at the Expiration Date, the record or beneficial owner, of an
aggregate of fewer than 100 Shares,* all of which are being tendered, or
/ / is a broker, dealer, commercial bank, trust company, or other nominee
that (a) is tendering for the beneficial owner(s) thereof, Shares with
respect to which it is the record holder, and (b) believes, based upon
representations made to it by such beneficial owner(s), that each such
person was as of the close of business on February 28, 1997, and will
continue to be at the Expiration Date, the beneficial owner of an
aggregate of fewer than 100 Shares* and is tendering all of such Shares.
* In calculating the number of Shares you own, you must aggregate Shares held
in the Dividend Reinvestment Plan with those held outside such plan. Do not
include Shares allocated to your account under the Thrift Plan.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
(Please type or print) SIGN HERE
NUMBER OF SHARES: ------------------------------------------
Certificate Nos. (if available): Signature(s)
- ------------------------------------------ ------------------------------------------
- ------------------------------------------ Signature(s)
Name(s) ------------------------------------------
- ------------------------------------------ Name(s)
Name(s) Dated: ----------------------------------
- ------------------------------------------ If Shares will be tendered by book-entry
Address(s) transfer, check one box:
- ------------------------------------------ / / The Depositary Trust Company
- ------------------------------------------ / / The Philadelphia Depositary Company
Area Code(s) and Telephone Number(s) Account
Number --------------------------------
</TABLE>
3
<PAGE>
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned is a member firm of a registered national securities
exchange, a member of the National Association of Securities Dealers, Inc., or a
commercial bank or trust company having an office, branch, or agency in the
United States and guarantees: (a) that the above-named person(s) has a net long
position in the Shares (and associated Rights) tendered hereby within the
meaning of Rule 14e-4 promulgated under the Securities Exchange Act of 1934, as
amended, (b) that such tender of Shares complies with such Rule 14e-4, and (c)
guarantees that the Depositary will receive (i) certificates of the Shares
tendered hereby in proper form for transfer, or (ii) confirmation that the
Shares tendered hereby have been delivered pursuant to the procedure for
book-entry transfer (set forth in Section 3 of the Offer to Purchase) into the
Depositary's account at The Depository Trust Company or The Philadelphia
Depository Company, in each case, together with a properly completed and duly
executed Letter of Transmittal (or photocopy thereof) and any other documents
required by the Letter of Transmittal, all within three New York Stock Exchange
trading days after the date the Depositary receives this Notice of Guaranteed
Delivery.
<TABLE>
<S> <C>
Address: ----------------------------------
Authorized Signature: -------------------------------------------
- ---------------------------------- (Including Zip Code)
Name: ------------------------------------ Area Code and
(Please Print) Telephone Number: ------------------------
Title: ------------------------------------- -------------------------------------------
Name of Firm: Date: ------------------------------------
- -------------------------------------
</TABLE>
DO NOT SEND STOCK CERTIFICATES WITH THIS FORM, YOUR STOCK CERTIFICATES MUST BE
SENT WITH THE LETTER OF TRANSMITTAL.
4
<PAGE>
DILLON, READ & CO. INC.
535 MADISON AVENUE
NEW YORK, NEW YORK 10022
IPALCO ENTERPRISES, INC.
OFFER TO PURCHASE FOR CASH
UP TO 12,000,000 SHARES OF ITS COMMON STOCK
(INCLUDING THE ASSOCIATED COMMON STOCK PURCHASE RIGHTS)
AT A PURCHASE PRICE NOT GREATER THAN $34.00
NOR LESS THAN $29.00 PER SHARE
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT
12:00 MIDNIGHT, EASTERN STANDARD TIME, ON THURSDAY, MARCH 27, 1997,
UNLESS THE OFFER IS EXTENDED.
February 28, 1997
TO BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES AND OTHER NOMINEES:
We have been appointed by IPALCO Enterprises, Inc. (the "Company") to act as
Dealer Manager (the "Dealer Manager") in connection with the Company's offer to
purchase up to 12,000,000 shares of the Company's Common Stock, no par value per
share (the "Shares") (including the associated common stock purchase rights
issued pursuant to the Rights Agreement, dated as of June 28, 1990, between the
Company and First Chicago Trust Company of New York, as the Rights Agent), upon
the terms and subject to the conditions set forth in the Offer to Purchase,
dated February 28, 1997 (the "Offer to Purchase"), and in the related Letter of
Transmittal (which together constitute the "Offer"). We are asking you to
contact your clients for whom you hold Shares registered in your name (or in the
name of your nominee) or who hold Shares registered in their own names. Please
bring the Offer to their attention as promptly as possible. Please furnish
copies of the enclosed materials to those of your clients for whom you hold
Shares registered in your name.
The Company invites its shareholders to tender up to 12,000,000 Shares at
prices not in excess of $34.00 nor less than $29.00 net per share in cash,
specified by shareholders tendering their Shares upon the terms and subject to
the conditions set forth in the Offer. The Company will determine a single price
(not greater than $34.00 nor less than $29.00 per Share) that it will pay for
Shares validly tendered pursuant to the Offer (the "Purchase Price"), taking
into account the number of Shares so tendered and the prices specified by
tendering shareholders. The Company will select the lowest Purchase Price that
will enable it to purchase 12,000,000 Shares (or such lesser number of Shares as
are validly tendered) pursuant to the Offer. The Company will purchase all
Shares validly tendered at prices at or below the Purchase Price and not
withdrawn, upon the terms and subject to the conditions of the Offer, including
the provisions relating to proration described in the Offer to Purchase.
The Purchase Price will be paid in cash, net to the seller, with respect to
all Shares purchased. Shares tendered at prices in excess of the Purchase Price
and Shares not purchased because of proration or invalid tenders will be
returned to the tendering shareholder at the Company's expense as promptly as
practicable following the Expiration Date (as defined in the Offer to Purchase).
See Section 1 of the Offer to Purchase.
THE OFFER IS NOT CONDITIONED UPON ANY MINIMUM NUMBER OF SHARES BEING
TENDERED. The Offer is, however, subject to other conditions. See Section 6 of
the Offer to Purchase.
<PAGE>
For your information and for forwarding to your clients for whom you hold
Shares registered in your name or in the name of your nominee, we are enclosing
the following documents:
1. The Offer to Purchase, dated February 28, 1997.
2. The Letter of Transmittal for your use and for the information of your
clients.
3. A letter to shareholders of the Company from the Chairman of the Board
and President of the Company.
4. The Notice of Guaranteed Delivery to be used to accept the Offer if
certificates for the Shares are not immediately available or the procedure for
book-entry transfer cannot be completed on a timely basis or if time will not
permit all required documents to be delivered to the Depositary by the
Expiration Date (as defined in the Offer to Purchase).
5. A letter which may be sent to your clients for whose accounts you hold
Shares registered in your name or in the name of your nominee, with space for
obtaining such clients' instructions with regard to the Offer.
6. Guidelines of the Internal Revenue Service for Certification of Taxpayer
Identification Number on Substitute Form W-9 providing information relating to
backup federal income tax withholding.
7. A return envelope addressed to IBJ Schroder Bank & Trust Company, the
Depositary.
WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE. PLEASE NOTE THAT
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT,
EASTERN STANDARD TIME, ON THURSDAY, MARCH 27, 1997, UNLESS THE OFFER IS
EXTENDED.
The Company will not pay any fees or commissions to any broker or dealer or
any other person (other than the Dealer Manager, the Information Agent and the
Depositary as described in the Offer to Purchase) in connection with the
solicitation of tenders of Shares pursuant to the Offer. The Company will
however, upon request, reimburse brokers, dealers, commercial banks and trust
companies for reasonable and necessary costs incurred by them in forwarding the
Offer to Purchase and related documents to the beneficial owners of Shares held
by them as nominee or in a fiduciary capacity. The Company will pay all stock
transfer taxes applicable to its purchase of Shares pursuant to the Offer,
subject to Instruction 7 of the Letter of Transmittal.
As described in the Offer to Purchase, if more than 12,000,000 Shares have
been validly tendered at or below the Purchase Price and not withdrawn on or
prior to the Expiration Date, as defined in Section 1 of the Offer to Purchase,
the Company will purchase Shares in the following order of priority: (a) all
Shares validly tendered at or below the Purchase Price and not withdrawn on or
prior to the Expiration Date by any shareholder who was as of the close of
business on February 28, 1997, and will continue to be at the Expiration Date,
the beneficial owner of an aggregate of fewer than 100 Shares (an "Odd Lot
Owner") (including any Shares held in the Dividend Reinvestment Plan but
excluding Shares held in the Thrift Plan) all of which are being tendered
(partial tenders will not qualify for this preference) and completes the box
captioned "Odd Lots" on the Letter of Transmittal and, if applicable, the Notice
of Guaranteed Delivery; and (b) after purchase of all the foregoing Shares, all
other Shares validly tendered at or below the Purchase Price and not withdrawn
on or prior to the Expiration Date on a pro rata basis, if necessary (with
appropriate adjustments to avoid purchases of fractional Shares, other than
Shares held in the Dividend Reinvestment Plan or the Thrift Plan).
Notwithstanding clause (b) above, the Company reserves the right, but is not
obligated, to purchase prior to purchasing any other Shares referred to in
clause (b), all Shares tendered by a shareholder who has tendered at or below
the Purchase Price all Shares owned, beneficially or of record, and as a result
of the proration contemplated by clause (b) would then own, beneficially or of
record, an aggregate of fewer
2
<PAGE>
than 100 Shares. If the Company exercises this right, it will increase the
number of Shares that are purchased pursuant to the Offer in an amount
sufficient to allow the exercise of the right (i.e., the number of Shares that
would be owned by all shareholders who would become Odd Lot holders as a result
of the proration contemplated by clause (b)).
THE BOARD OF DIRECTORS HAS APPROVED THE OFFER. HOWEVER, NEITHER THE COMPANY
NOR ANY OF ITS DIRECTORS, OFFICERS OR EMPLOYEES MAKES ANY RECOMMENDATION TO ANY
SHAREHOLDER AS TO WHETHER TO TENDER ALL OR ANY SHARES. EACH SHAREHOLDER MUST
MAKE HIS OR HER OWN DECISION AS TO WHETHER TO TENDER SHARES AND, IF SO, HOW MANY
SHARES TO TENDER AND AT WHAT PRICE. THE COMPANY HAS BEEN ADVISED THAT NO
DIRECTOR OR OFFICER OF THE COMPANY INTENDS TO TENDER SHARES PURSUANT TO THE
OFFER.
The Company is not aware of any jurisdiction where the making of the Offer
is not in compliance with applicable law. If the Company becomes aware of any
jurisdiction where the making of the Offer is not in compliance with any valid
applicable law, the Company will make a good faith effort to comply with such
law. If after such good faith effort, the Company cannot comply with such law,
the Offer will not be made to (nor will tenders be accepted from or on behalf
of) the holders of Shares residing in such jurisdictions.
Any questions, requests for assistance or requests for additional copies of
the enclosed materials may be directed to D.F. King & Co., Inc. (the
"Information Agent") or the undersigned at the addresses and telephone numbers
set forth on the back cover of the enclosed Offer to Purchase.
Very truly yours,
DILLON, READ & CO. INC.
Dealer Manager
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
THE AGENT OF THE COMPANY, THE DEALER MANAGER, THE INFORMATION AGENT OR THE
DEPOSITARY, OR AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY
STATEMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE
DOCUMENTS ENCLOSED HEREWITH AND THE STATEMENTS CONTAINED THEREIN.
3
<PAGE>
IPALCO ENTERPRISES, INC.
OFFER TO PURCHASE FOR CASH
UP TO 12,000,000 SHARES OF ITS COMMON STOCK
(INCLUDING THE ASSOCIATED COMMON STOCK PURCHASE RIGHTS)
AT A PURCHASE PRICE NOT GREATER THAN $34.00
PER SHARE NOR LESS THAN $29.00 PER SHARE
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT
12:00 MIDNIGHT, EASTERN STANDARD TIME, ON THURSDAY, MARCH 27, 1997,
UNLESS THE OFFER IS EXTENDED.
TO OUR CLIENTS:
Enclosed for your consideration is the Offer to Purchase, dated February 28,
1997 (the "Offer to Purchase"), and the related Letter of Transmittal (which
together constitute the "Offer") setting forth an offer by IPALCO Enterprises,
Inc., an Indiana corporation (the "Company"), to purchase up to 12,000,000
shares of its Common Stock, no par value per share (the "Shares") (including the
associated common stock purchase rights issued pursuant to the Rights Agreement,
dated as of June 28, 1990, between the Company and First Chicago Trust Company
of New York, as the Rights Agent), at prices not greater than $34.00 nor less
than $29.00 per Share, net to the seller in cash, specified by tendering
shareholders, upon the terms and subject to the conditions of the Offer. Also
enclosed herewith is certain other material related to the Offer, including a
letter to shareholders from John R. Hodowal, Chairman of the Board and President
of the Company.
The Company will determine a single per Share price (not greater than $34.00
nor less than $29.00 per Share) (the "Purchase Price") that it will pay for the
Shares validly tendered pursuant to the Offer and not withdrawn, taking into
account the number of Shares so tendered and the prices specified by tendering
shareholders. The Company will select the lowest Purchase Price that will enable
it to purchase 12,000,000 Shares (or such lesser number of Shares as are validly
tendered) pursuant to the Offer. The Company will purchase all Shares validly
tendered at prices at or below the Purchase Price and not withdrawn prior to the
Expiration Date, upon the terms and subject to the conditions of the Offer,
including the provisions thereof relating to proration. The Purchase Price will
be paid net to the tendering shareholders in cash with respect to all Shares
purchased. All Shares tendered and not purchased pursuant to the Offer,
including Shares tendered at prices in excess of the Purchase Price and Shares
not purchased because of proration or invalid tenders will be returned to the
tendering shareholders at the Company's expense as promptly as practicable
following the Expiration Date (as defined in the Offer to Purchase). See Section
1 of the Offer to Purchase.
WE ARE THE HOLDER OF RECORD OF SHARES HELD FOR YOUR ACCOUNT. A TENDER OF
SUCH SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF RECORD AND PURSUANT TO YOUR
INSTRUCTIONS. THE SPECIMEN LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR YOUR
INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER SHARES HELD BY US FOR YOUR
ACCOUNT.
We request instructions as to whether you wish us to tender any or all of
the Shares held by us for your account, upon the terms and subject to the
conditions set forth in the Offer to Purchase and the Letter of Transmittal, and
if so, at what price.
Your attention is called to the following:
(1) You may tender Shares at prices (in multiples of $0.25), not greater
than $34.00 nor less than $29.00 per Share, as indicated in the attached
instruction form, net to you in cash.
(2) The Offer is for up to 12,000,000 Shares, constituting approximately 21%
of the total Shares outstanding as of February 28, 1997. Although it has no
present intention of so doing, the Company reserves the right to purchase more
than 12,000,000 Shares pursuant to the Offer. The Offer is not conditioned upon
any minimum number of Shares being tendered, but is subject to certain other
conditions.
<PAGE>
(3) The Offer, proration period and withdrawal rights will expire at 12:00
Midnight, Eastern Standard Time, on Thursday, March 27, 1997, unless the Offer
is extended. Your instructions to us should be forwarded to us in ample time to
permit us to submit a tender on your behalf. If you would like to withdraw your
Shares that we have tendered, you can withdraw them so long as the Offer remains
open or at any time after April 24, 1997, if they have not been accepted for
payment.
(4) As described in the Offer to Purchase, if more than 12,000,000 Shares
have been validly tendered at or below the Purchase Price and not withdrawn on
or prior to the Expiration Date, as defined in Section 1 of the Offer to
Purchase, the Company will purchase Shares in the following order of priority:
(a) all Shares validly tendered at or below the Purchase Price and not
withdrawn on or prior to the Expiration Date by any shareholder who was as
of the close of business on February 28, 1997, and will continue to be at
the Expiration Date, the beneficial owner of an aggregate of fewer than 100
Shares (an "Odd Lot Owner") (including any Shares held in the Dividend
Reinvestment Plan but excluding Shares held in a Thrift Plan account) all of
which are being tendered (partial tenders will not qualify for this
preference) and completes the box captioned "Odd Lots" on the Letter of
Transmittal and, if applicable, the Notice of Guaranteed Delivery; and
(b) after purchase of all of the foregoing Shares, all Shares validly
tendered at or below the Purchase Price and not withdrawn on or prior to the
Expiration Date on a PRO RATA basis, if necessary (with appropriate
adjustments to avoid purchases of fractional Shares, other than Shares held
in the Dividend Reinvestment Plan or the Thrift Plan).
Notwithstanding clause (b) above, the Company reserves the right, but is not
obligated, to purchase prior to purchasing any other Shares referred to in
clause (b), all Shares tendered by a shareholder who has tendered at or below
the Purchase Price all Shares owned, beneficially or of record, and as a result
of the proration contemplated by clause (b) would then own, beneficially or of
record, an aggregate of fewer than 100 Shares. If the Company exercises this
right, it will increase the number of Shares that are purchased pursuant to the
Offer in an amount sufficient to allow the exercise of the right (i.e., the
number of Shares that would be owned by all shareholders who would become Odd
Lot holders as a result of the proration contemplated by clause (b)).
(5) You will not be obligated to pay any brokerage commissions or
solicitation fees on the purchase of Shares by the Company pursuant to the
Offer. Any stock transfer taxes applicable to the sale of Shares to the Company
pursuant to the Offer will be paid by the Company, except as otherwise provided
in Instruction 7 of the Letter of Transmittal.
(6) If you owned beneficially an aggregate of fewer than 100 Shares
(including Shares held in the Dividend Reinvestment Plan but excluding Shares
allocated to your account in the Thrift Plan) as of the close of business on
February 28, 1997, and expect to continue to own fewer than 100 Shares as of the
Expiration Date, and you instruct us to tender at or below the Purchase Price on
your behalf all such Shares on or prior to the Expiration Date and check the box
captioned "Odd Lots" in the instruction form, all such Shares will be accepted
for purchase before proration, if any, of the purchase of other tendered Shares.
(7) If you wish to tender some Shares at one price and other Shares at
another price, you must complete a separate Instruction Form for each price at
which you wish to tender each portion of your Shares. We must submit separate
Letters of Transmittal on your behalf for each price you will accept, although
the same Shares cannot be tendered at more than one price.
THE BOARD OF DIRECTORS HAS APPROVED THE OFFER. HOWEVER, NEITHER THE COMPANY
NOR ANY OF ITS DIRECTORS, OFFICERS OR EMPLOYEES MAKES ANY RECOMMENDATION TO ANY
SHAREHOLDER AS TO WHETHER TO TENDER ALL OR ANY SHARES. EACH SHAREHOLDER MUST
MAKE HIS OR HER OWN DECISION AS TO WHETHER TO TENDER SHARES AND, IF SO, HOW MANY
SHARES TO TENDER AND AT WHAT PRICE. THE COMPANY HAS BEEN ADVISED THAT NO
DIRECTOR OR OFFICER OF THE COMPANY INTENDS TO TENDER SHARES PURSUANT TO THE
OFFER.
2
<PAGE>
If you wish to have us tender any or all of your Shares held by us for your
account upon the terms and subject to the conditions set forth in the Offer,
please so instruct us by completing, executing, detaching and returning to us
the instruction form on the detachable part hereof. An envelope to return your
instructions to us is enclosed. If you authorize tender of your Shares, all such
Shares will be tendered unless otherwise specified on the detachable part
hereof.
YOUR INSTRUCTIONS SHOULD BE FORWARDED TO US IN AMPLE TIME TO PERMIT US TO
SUBMIT A TENDER ON YOUR BEHALF BY THE EXPIRATION OF THE OFFER.
THE OFFER IS BEING MADE TO ALL HOLDERS OF SHARES. The Company is not aware
of any state where the making of the Offer is prohibited by administrative or
judicial action pursuant to a valid state statute. If the Company becomes aware
of any valid state statute prohibiting the making of the Offer, the Company will
make a good faith effort to comply with such statute. If, after such good faith
effort, the Company cannot comply with such statute, the Offer will not be made
to, nor will tenders be accepted from or on behalf of, holders of Shares in such
state. In those jurisdictions whose securities, blue sky or other laws require
the Offer to be made by a licensed broker or dealer, the Offer shall be deemed
to be made on behalf of the Company by Dillon, Read & Co. Inc., as the Dealer
Manager, or one or more registered brokers or dealers licensed under the laws of
such jurisdictions.
INSTRUCTIONS
WITH RESPECT TO OFFER TO PURCHASE FOR CASH
UP TO 12,000,000 SHARES OF ITS COMMON STOCK
(INCLUDING THE ASSOCIATED COMMON STOCK PURCHASE RIGHTS)
OF
IPALCO ENTERPRISES, INC.
The undersigned acknowledge(s) receipt of your letter and the enclosed Offer
to Purchase, dated February 28, 1997, and the related Letter of Transmittal
(which together constitute the "Offer") in connection with the Offer by IPALCO
Enterprises, Inc., an Indiana corporation (the "Company"), to purchase up to
12,000,000 shares of its Common Stock, no par value per share (the "Shares")
(including the associated common stock purchase rights), at prices not greater
than $34.00 nor less than $29.00 per Share, net to the undersigned in cash, upon
the terms and subject to the conditions of the Offer.
This will instruct you to tender to the Company the number of Shares
indicated below (or, if no number is indicated below, all Shares) which are held
by you for the account of the undersigned, at the price per Share indicated
below, upon the terms and subject to the conditions of the Offer.
PRICE (IN DOLLARS) PER SHARE
AT WHICH SHARES ARE BEING TENDERED
CHECK ONLY ONE BOX. IF MORE THAN ONE BOX IS CHECKED, OR
IF NO BOX IS CHECKED, THERE IS NO VALID TENDER OF SHARES.
SHARES TENDERED AT PRICE DETERMINED BY DUTCH AUCTION
/ / The undersigned wants to maximize the chance of having the Company
purchase all the Shares the undersigned is tendering (subject to the
possibility of proration). Accordingly, by checking this one box INSTEAD
OF ONE OF THE PRICE BOXES BELOW, the undersigned hereby tenders Shares at,
and is willing to accept, the Purchase Price resulting from the Dutch
auction tender process. This action could result in receiving a price per
Share as low as $29.00 or as high as $34.00.
*** CHECK EITHER THE BOX ABOVE OR CHECK ONE BOX BELOW ***
SHARES TENDERED AT PRICE DETERMINED BY SHAREHOLDER
<TABLE>
<S> <C> <C> <C> <C> <C>
/ / $29.00 / / $30.00 / / $31.00 / / $32.00 / / $33.00 / / $34.00
/ / $29.25 / / $30.25 / / $31.25 / / $32.25 / / $33.25
/ / $29.50 / / $30.50 / / $31.50 / / $32.50 / / $33.50
/ / $29.75 / / $30.75 / / $31.75 / / $32.75 / / $33.75
</TABLE>
3
<PAGE>
ODD LOTS
Check this box ONLY if Shares are being tendered by or on behalf of a person
owning beneficially an aggregate of fewer than 100 Shares (including Shares held
in the Dividend Reinvestment Plan but excluding Shares allocated to your account
in the Thrift Plan) as of the close of business on February 28, 1997.
/ / By checking this box, the undersigned represents that the undersigned
beneficially owned on February 28, 1997, and will continue to beneficially
own at the Expiration Date, an aggregate of fewer than 100 Shares (including
Shares held in the Dividend Reinvestment Plan but excluding Shares allocated
to your account in the Thrift Plan) and is tendering all of such Shares.
<TABLE>
<S> <C>
Number of Shares to be Tendered: SIGN HERE
Shares*
Signature(s)
Signature(s)
Name:
(Taxpayer Identification or
Social Security Number)
Name:
Address:
(Area Code and Telephone Number)
(Zip Code)
Date:, 1997
</TABLE>
- ------------------------
* Unless otherwise indicated, it will be assumed that all Shares held by us
for your account are to be tendered.
4
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER.--Social Security numbers have nine digits separated by two hyphens: i.e.,
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: i.e., 00-0000000. The table below will help determine the number to
give the payer.
<TABLE>
<CAPTION>
- -------------------------------------------------------
<C> <S> <C> <C>
GIVE THE
FOR THIS TYPE OF ACCOUNT: SOCIAL SECURITY
NUMBER OF:
<CAPTION>
- -------------------------------------------------------
- -------------------------------------------------------
GIVE THE EMPLOYER
FOR THIS TYPE OF ACCOUNT: IDENTIFICATION
NUMBER OF:
- -------------------------------------------------------
</TABLE>
<TABLE>
<C> <S> <C> <C>
1. An individual's account The individual
2. Two or more individuals The actual owner of the
(joint account) account or, if combined
funds, the first
individual on the
account(1)
3. Husband and wife The actual owner of the
(joint account) account or, if joint
funds, the first
individual on the
account(1)
4. Custodian account of a minor The minor(2)
(Uniform Gift to Minors Act)
5. Adult and minor The adult or, if the
(joint account) minor is the only
contributor, the
minor(1)
6. Account in the name of guardian or The ward, minor, or
committee for a designated ward, incompetent person(3)
minor, or incompetent person
7. a. The usual revocable The grantor-trustee(1)
savings trust account
(grantor is also
trustee)
b. So-called trust account The actual owner(1)
that is not a legal or
valid trust under State
law
8. Sole proprietorship account The owner(4)
9. A valid trust, estate, or pension The legal entity (Do not
trust furnish the identifying
number of the personal
representative or
trustee unless the legal
entity itself is not
designated in the
account title.)(5)
10. Corporate account The corporation
11. Religious, charitable, or The organization
educational organization account
12. Partnership account held in the The partnership
name of the business
13. Association, club or other tax- The organization
exempt organization
14. A broker or registered nominee The broker or nominee
15. Account with the Department of The public entity
Agriculture in the name of a public
entity (such as a State or local
government, school district, or
prison) that receives agricultural
program payments
</TABLE>
<TABLE>
<C> <S> <C> <C>
- -------------------------------------------------------
- -------------------------------------------------------
</TABLE>
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) Show the name of the owner.
(5) List first and circle the name of the legal trust, estate or pension trust.
NOTE: If no name is circled when there is more than one name, the number will be
considered to that of the first name listed.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card (for
individuals), or Form SS-4, Application for Employer Identification Number (for
business and all other entities), at the local office of the Social Security
Administration or the Internal Revenue Service and apply for a number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include the
following (Section references are to the Internal Revenue Code):
- A corporation.
- A financial institution.
- An organization exempt from tax under section 501(a), an individual
retirement plan or a custodial account under Section 403(b)(7).
- The United States or any agency or instrumentality thereof.
- A State, the District of Columbia, a possession of the United States, or any
subdivision or instrumentality thereof.
- A foreign government, a political subdivision of a foreign government, or any
agency or instrumentality thereof.
- An international organization or any agency or instrumentality thereof.
- A registered dealer in securities or commodities registered in the U.S. or a
possession of the U.S.
- A real estate investment trust.
- A common trust fund operated by a bank under section 584(a).
- An exempt charitable remainder trust, or a non-exempt trust described in
section 4947(a)(1).
- An entity registered at all times under the Investment Company Act of 1940.
- A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
- Payments to nonresident aliens subject to withholding under section 1441.
- Payments to partnerships not engaged in a trade or business in the U.S. and
which have at least one nonresident partner.
- Payments of patronage dividends where the amount received is not paid in
money.
- Payments made by certain foreign organizations.
- Payments made to a nominee.
Payments of interest not generally subject to backup withholding include the
following:
- Payments of interest on obligations issued by individuals. Note: You may be
subject to backup withholding if this interest is $600 or more and is paid
in the course of the payer's trade or business and you have not provided
your correct taxpayer identification number to the payer.
- Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
- Payments described in section 6049(b)(5) to non-resident aliens.
- Payments on tax-free government bonds under section 1451.
- Payments made by certain foreign organizations.
- Payments made to a nominee.
Exempt payees described above should file Form W-9 to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER
IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, SIGN AND DATE THE
FORM AND RETURN IT TO THE PAYER.
Certain payments, other than interest, dividends and patronage dividends,
that are not subject to information reporting are also not subject to backup
withholding. For details, see sections 6041, 6041A(a), 6042, 6044, 6045, 6049,
6050A and 6050N, and the regulations under those sections.
PRIVACY ACT NOTICE.--Section 6109 requires most recipients of dividend,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to IRS. IRS uses the numbers for identification
purposes and to help verify the accuracy of tax returns. Payers must be given
the numbers whether or not recipients are required to file a tax return. Payers
must generally withhold 31% of taxable interest, dividend, and certain other
payments to a payee who does not furnish a taxpayer identification number to a
payer. Certain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you fail
to furnish your taxpayer identification number to a payer, you are subject to a
penalty of $50 for each such failure unless your failure is due to reasonable
cause and not to willful neglect.
(2) FAILURE TO REPORT CERTAIN DIVIDEND AND INTEREST PAYMENTS.--If you fail to
include any portion of an includible payment for interest, dividends or
patronage dividends in gross income, such failure is strong evidence of
negligence. If negligence is shown, you will be subject to a penalty of 20% on
any portion of an underpayment attributable to that failure.
(3) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(4) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.
<PAGE>
THIS ANNOUNCEMENT IS NEITHER AN OFFER TO PURCHASE NOR A SOLICITATION OF AN OFFER
TO SELL SHARES.
THE OFFER IS MADE SOLELY BY THE OFFER TO PURCHASE DATED FEBRUARY 28, 1997 AND
THE RELATED
LETTER OF TRANSMITTAL. CAPITALIZED TERMS NOT DEFINED IN THIS ANNOUNCEMENT HAVE
THE
RESPECTIVE MEANINGS ASCRIBED TO SUCH TERMS IN THE OFFER TO PURCHASE. THE COMPANY
IS NOT AWARE OF ANY JURISDICTION IN WHICH THE MAKING OF THE OFFER IS PROHIBITED
BY ADMINISTRATIVE OR JUDICIAL ACTION PURSUANT TO A VALID STATE STATUTE. IF
THE COMPANY BECOMES AWARE OF ANY VALID STATE STATUTE PROHIBITING THE MAKING
OF THE OFFER, THE COMPANY WILL MAKE A GOOD FAITH EFFORT TO COMPLY
WITH SUCH STATUTE. IF, AFTER SUCH GOOD FAITH EFFORT, THE COMPANY CANNOT COMPLY
WITH SUCH STATUTE, THE OFFER WILL NOT BE MADE TO, NOR WILL TENDERS BE
ACCEPTED FROM OR ON BEHALF OF, HOLDERS OF SHARES IN SUCH STATE. IN
THOSE JURISDICTIONS WHOSE SECURITIES, BLUE SKY OR OTHER LAWS REQUIRE
THE OFFER BE MADE BY A LICENSED BROKER OR DEALER, THE OFFER SHALL BE
DEEMED TO BE MADE ON BEHALF OF THE COMPANY BY DILLON, READ & CO.
INC. AS DEALER MANAGER OR ONE OR MORE REGISTERED BROKERS OR
DEALERS LICENSED UNDER THE LAWS OF SUCH JURISDICTION.
NOTICE OF OFFER TO PURCHASE FOR CASH
BY
IPALCO ENTERPRISES, INC.
(NYSE: IPL)
UP TO 12,000,000 SHARES OF ITS COMMON STOCK
(INCLUDING THE ASSOCIATED COMMON STOCK PURCHASE RIGHTS)
AT A PURCHASE PRICE NOT GREATER THAN $34.00
NOR LESS THAN $29.00 PER SHARE
IPALCO Enterprises, Inc., an Indiana corporation (the "Company"), invites
its shareholders to tender up to 12,000,000 shares of its Common Stock, no par
value per share, (the "Shares") (including the associated common stock purchase
rights (the "Rights") issued pursuant to the Rights Agreement, dated as of June
28, 1990, between the Company and First Chicago Trust Company of New York, as
the Rights Agent), to the Company at prices not greater than $34.00 nor less
than $29.00 per Share, net to the seller in cash, specified by such
shareholders, upon the terms and subject to the conditions set forth in the
Offer to Purchase dated February 28, 1997 (the "Offer to Purchase"), and the
related Letter of Transmittal (which together constitute the "Offer"). Unless
the context otherwise requires, all references to Shares shall include the
associated Rights.
The Offer is not conditioned upon any minimum number of Shares being
tendered. The Offer is, however, subject to certain other conditions set forth
in the Offer to Purchase.
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT,
EASTERN STANDARD TIME, ON THURSDAY, MARCH 27, 1997, UNLESS THE OFFER IS
EXTENDED.
The Board of Directors of the Company has approved the Offer. However,
neither the Company nor any of its directors, officers, or employees makes any
recommendation to shareholders as to whether to tender or refrain from tendering
their Shares. Each shareholder must make the decision whether to tender Shares
and, if so, how many Shares to tender and at what price or prices Shares should
be tendered. The Company has been advised that no director or officer of the
Company intends to tender any Shares pursuant to the Offer.
As promptly as practicable following 12:00 Midnight, Eastern Standard Time,
on Thursday, March 27, 1997, or such later time and date to which the Offer may
be extended by the Company in its sole discretion (the "Expiration Date"), the
Company will, in its sole discretion, determine a single per Share price (not
<PAGE>
greater than $34.00 nor less than $29.00 per Share) (the "Purchase Price") that
it will pay for the Shares validly tendered pursuant to the Offer and not
withdrawn, taking into account the number of Shares so tendered and the prices
specified by the tendering shareholders. The Company intends to select the
lowest single per share Purchase Price that will enable it to purchase
12,000,000 Shares (or such lesser number of Shares as are validly tendered)
pursuant to the Offer. The Company reserves the right, in its sole discretion,
to purchase more than 12,000,000 Shares pursuant to the Offer. The Company will
purchase all Shares validly tendered at prices at or below the Purchase Price
and not withdrawn, upon the terms and subject to the conditions of the Offer,
including the provisions thereof relating to proration. All shares tendered and
not purchased pursuant to the Offer, including Shares tendered at prices in
excess of the Purchase Price and Shares not purchased because of proration, will
be returned to the tendering shareholders at the Company's expense as promptly
as practicable following the Expiration Date.
Subject to the terms and conditions of the Offer, if 12,000,000 or fewer
Shares have been validly tendered at or below the Purchase Price and not
withdrawn on or prior to the Expiration Date, the Company will purchase all such
Shares (including fractional Shares in the Dividend Reinvestment Plan and the
Thrift Plan). Upon the terms and subject to the conditions of the Offer, if more
than 12,000,000 Shares have been validly tendered at or below the Purchase Price
and not withdrawn on or prior to the Expiration Date, the Company will purchase
Shares in the following order of priority: (a) first, all Shares validly
tendered at or below the Purchase Price and not withdrawn on or prior to the
Expiration Date by any Odd Lot Owner who validly tenders all of such Shares
(partial tenders will not qualify for this preference) and completes the box
captioned "Odd Lots" on the Letter of Transmittal and, if applicable, the Notice
of Guaranteed Delivery; and (b) second, after purchase of all of the foregoing
Shares, all Shares validly tendered in accordance with the Offer at or below the
Purchase Price and not withdrawn on or prior to the Expiration Date on a pro
rata basis, if necessary (with appropriate adjustments to avoid purchases of
fractional Shares, other than Shares held in the Dividend Reinvestment Plan and
the Thrift Plan). Notwithstanding clause (b) above, the Company reserves the
right, but is not obligated, to purchase prior to purchasing any other Shares
referred to in clause (b), all Shares tendered by a shareholder who has tendered
at or below the Purchase Price all Shares owned and as a result of the proration
contemplated by clause (b) would then own an aggregate of fewer than 100 Shares.
If the Company exercises this right, it will increase the number of Shares that
are purchased pursuant to the Offer in an amount sufficient to allow the
exercise of the right (i.e., the number of Shares that would be owned by all
shareholders who would become Odd Lot holders as a result of the proration
contemplated by clause (b)). For purposes of this Offer, the Company will be
deemed to have purchased Shares which are tendered at or below the Purchase
Price and not withdrawn (subject to the proration provisions of the Offer) when,
as and if it gives oral or written notice to the Depositary of its acceptance of
such Shares for payment pursuant to the Offer. The Company will pay for Shares
purchased pursuant to the Offer by depositing the aggregate Purchase Price
therefor with the Depositary, which will act as agent for tendering shareholders
for purpose of receiving payment from the Company and transmitting payment to
the tendering shareholders.
The later of 12:00 Midnight, Eastern Standard Time, on Thursday, March 27,
1997, or the latest time and date to which the Offer is extended, is referred to
herein as the "Expiration Date."
The Offer is part of a new financial strategy for the Company that will
establish a capital structure that makes greater use of financial leverage and
provides flexibility in decisions regarding the amount, timing and form of
future shareholder distributions. The Board of Directors also declared a
quarterly dividend of $0.25 per share ($1.00 annually) payable on April 15, 1997
to shareholders of record on March 21, 1997. This represents a reduction in the
quarterly dividend from the previous $0.37 per share ($1.48 annually). Future
dividend action will be guided by, among other factors, a policy of paying out
45 to 50 percent of the prior year's earnings. The Company has also established
a target consolidated debt-to-total capital ratio of 45 percent which it
estimates can be achieved within the next five years. Since the Expiration Date
will occur after March 21, 1997, holders of record on such date are entitled to
the dividend declared regardless of whether or when such Shares are tendered or
accepted for payment pursuant to the Offer.
2
<PAGE>
The Offer also provides those shareholders who are considering a sale of all or
a portion of their Shares the opportunity to determine the price or prices (not
in excess of $34.00 nor less than $29.00) at which they are willing to sell
their Shares and, if any such shares are purchased pursuant to the Offer, to
sell those Shares for cash at prices that may be greater than market prices
prevailing immediately prior to the announcement of the Offer without the usual
transaction costs associated with open market sales.
The Company expressly reserves the right, in its sole discretion, and at any
time and from time to time, to extend the period of time during which the Offer
is open by giving oral or written notice of such extension to the Depositary and
making a public announcement thereof no later than 9:00 a.m., Eastern Standard
Time, on the next business day after the previously scheduled Expiration Date.
The Company also expressly reserves the right in its sole discretion, (i) to
terminate the Offer and not accept for payment any Shares not theretofore
accepted for payment or, subject to Rule 13e-4(f)(5) under the Exchange Act,
which requires the Company either to pay the consideration offered or to return
the Shares tendered promptly after the termination or withdrawal of the Offer,
to postpone payment for Shares upon the occurrence of any of the conditions
specified in Section 6 hereof by giving oral or written notice of such
termination to the Depositary and making a public announcement thereof and (ii)
to amend the Offer in any respect (including, without limitation, by increasing
or decreasing the price to be paid for Shares or the number of Shares being
sought in the Offer) by giving oral or written notice of such amendments to the
Depositary and, as promptly as practicable thereafter, making a public
announcement thereof. In the event the Company amends the Offer as described,
the Company may be required to extend the Offer. See Section 14 of the Offer to
Purchase.
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 April 24, 1997 unless theretofore accepted for
payment as provided in the Offer to Purchase. To be effective, a written or
facsimile transmission notice of withdrawal must be timely received by the
Depositary at one of its addresses set forth on the back cover of the Offer to
Purchase 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
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 holder
(if different from that of the tendering 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 one of the Book-Entry Transfer Facilities to be credited with the
withdrawn Shares. 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 retendered by again following one of the procedures
described in the Offer to Purchase at any time prior to the Expiration Date. All
questions as to the form and validity (including time of receipt) of notices of
withdrawal will be determined by the Company, in its sole discretion, which
determination shall be final and binding.
Shareholders who are participants in the Employees' Thrift Plan cannot use
the Letter of Transmittal to tender Shares held in such account, but must use
the instruction forms attached to the Thrift Plan Instruction Letter as a
substitute for the Letter of Transmittal to tender Shares held in such account.
THE OFFER TO PURCHASE AND THE LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION, WHICH SHOULD BE READ BEFORE SHAREHOLDERS DECIDE WHETHER TO ACCEPT
OR REJECT THE OFFER AND, IF ACCEPTED, AT WHICH PRICE OR PRICES TO TENDER THEIR
SHARES. THE INFORMATION REQUIRED TO BE DISCLOSED BY RULE 13E-4(D)(1) OF THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, IS CONTAINED IN THE OFFER TO
PURCHASE AND IS INCORPORATED IN THIS NOTICE BY REFERENCE. The Offer to Purchase
and the related Letter of Transmittal are being mailed to record holders of
Shares and will be furnished to brokers, banks and similar persons whose names,
or the names of whose nominees, appear on the
3
<PAGE>
Company's shareholder list or, if applicable, who are listed as participants in
a clearing agency's security position listing for subsequent transmittal to
beneficial owners of Shares.
Any questions or requests for assistance may be directed to the Information
Agent or the Dealer Manager at the telephone numbers and addresses listed below.
Requests for additional copies of the Offer to Purchase, the Letter of
Transmittal or other tender offer materials may be directed to the Information
Agent and such copies will be furnished promptly at the Company's expense.
Shareholders may also contact their local broker, dealer, commercial bank or
trust company for assistance concerning the Offer.
THE INFORMATION AGENT:
D.F. KING & CO., INC.
77 Water Street
New York, New York 10005
BANKS AND BROKERS CALL COLLECT: (212) 425-1685
(800) 848-2998 (TOLL-FREE)
THE DEALER MANAGER:
DILLON, READ & CO. INC.
535 Madison Avenue
New York, New York 10022
(212) 906-7525
February 28, 1997
4
<PAGE>
IPALCO ENTERPRISES, INC.
One Monument Circle - P.O. Box 1595
Indianapolis, Indiana 46206-1595
February 28, 1997
Dear Fellow Shareholder:
The Board of Directors of IPALCO Enterprises, Inc., on February 25, 1997,
approved a new financial strategy designed to maximize shareholder value and
position your Company for an increasingly competitive business environment.
The plan includes:
- A recapitalization of IPALCO to employ a higher degree of leverage in its
capital structure while the electric utility industry is in a transition
period between regulation and competition. The leveraged recapitalization
will be accomplished through a self tender offer to purchase up to 12
million shares, or 21 percent, of IPALCO's outstanding common stock. The
tender, which commences February 28, 1997, will be effected through a
"Dutch auction" at a price of not less than $29.00 nor more than $34 per
share. The potential $410 million transaction will be financed with a five
year bank loan facility.
- A reduction in the quarterly dividend to $0.25 per share ($1.00 annually)
from the previous $0.37 per share ($1.48 annually), effective with the
payment of the next quarterly dividend. That dividend is payable April 15,
1997 to shareholders of record on March 21, 1997, regardless of whether or
when such shares are tendered. Future dividend action will be guided by,
among other factors, a policy of paying out 45 to 50 percent of the prior
year's earnings.
- A target consolidated debt-to-capital ratio of 45 percent which IPALCO
believes can be achieved within the next five years.
Eighteen months ago IPALCO embraced a strategy of pushing for genuine
effective competition in the electric utility industry. Since then we have
worked not only to influence the national debate over how competition in our
industry should be achieved, but also to transform the Company from a regulated
to a competitive enterprise. Our new financial strategy represents another
important step in that progression. With our strong cash flow, IPALCO intends to
create additional shareholder value and provide the financial resources to
implement our growth strategy.
By purchasing common stock at a premium to its market value prior to the
announcement of the Offer, we will accelerate and increase the cash received by
our shareholders. In fact, the payment of cash through a $410 million repurchase
equals nearly five years of dividends at the previous dividend rate. Reducing
the dividend rate improves our financial flexibility going forward. A dividend
payout ratio of 45 to 50 percent of prior year earnings is more consistent with
companies operating today in a competitive environment than the traditional
utility payout ratio of 70 percent or more.
With our solid underlying earnings prospects, combined with the effect of
reduced shares outstanding, the Company is positioned to achieve strong growth
in earnings per share in 1997. This will be further enhanced in the future as
our cash flow enables the transaction debt to be repaid and interest expense to
decline.
By targeting a constant payout ratio, dividend growth in the future is
positioned to be equally strong.
We recognize that our dividend action was a break with the historical
pattern of increases. We believe, however, there are several significant
shareholder advantages to receiving cash through a stock purchase rather than
exclusively through dividends.
<PAGE>
We are positioning IPALCO's stock for market value growth and slightly less
income orientation than in the past. This recognizes that for most individual
investors, current laws tax capital gains at rates lower than dividend income.
The price range established for our tender offer will allow those
shareholders who desire a more income-oriented investment to exit their
investment in the Company on favorable terms. However, we believe that
shareholders who choose not to tender their shares also will benefit from this
transaction. They will own a greater interest in a highly competitive company
with a stronger earnings per share growth rate.
With respect to the tender offer, the Company is offering to purchase up to
12 million shares of its common stock from its shareholders. The number of
shares that the Company seeks to repurchase represents approximately 21% of the
shares outstanding. The Company is conducting the offer through a procedure
known as a "Dutch auction." This procedure allows you to decide, first, whether
to sell all or a part of the shares you own, if any. If you decide to sell any
of your shares, then you must select the price within the range of not less than
$29 nor more than $34 per share at which you are willing to sell all or a
portion of your shares to the Company.
Based upon the number of shares tendered and the prices specified by the
tendering shareholders, the Company will determine the single per-share price
(the "Purchase Price") within that range that will allow it to buy 12 million
shares (or such lesser number of shares that are properly tendered). ALL
SHAREHOLDERS WHOSE SHARES ARE PURCHASED WILL RECEIVE THE SAME PRICE PER SHARE.
The Company will pay the Purchase Price for all shares properly tendered at or
below the Purchase Price, and not withdrawn, subject to possible proration and
provisions relating to "odd lot" tenders. For all "odd lot" shares tendered at
or below the Purchase Price, there will be no proration of shares tendered. All
other shares that have been tendered and not purchased will be returned to the
shareholder.
IF YOU DO NOT WISH TO PARTICIPATE IN THE OFFER, YOU DO NOT NEED TO TAKE ANY
ACTION. If you do not participate in the offer, and you decide to retain your
shares, you will own a proportionately larger portion of the Company after the
repurchase has been completed.
IF YOU WANT TO TENDER YOUR SHARES, THE INSTRUCTIONS ON HOW TO DO SO ARE
EXPLAINED IN THE ENCLOSED MATERIALS. If you decide to participate and the
Company accepts your tender, you will promptly receive cash for your shares in
the amount of the Purchase Price times the number of shares you have tendered,
again, subject to possible proration of shares.
The offer is explained in detail in the enclosed Offer to Purchase and
Letter of Transmittal. Included in the Offer to Purchase at Section 8,
"Background and Purpose of the Offer," is a detailed discussion of management's
purpose in conducting the tender offer and the Company's recent change in
dividend policy. As indicated, the Company's basic objective in this financial
transaction is to enhance long-term shareholder value. I encourage you to read
these materials carefully before making any decision with respect to the offer.
Neither the Company nor its Board of Directors makes any recommendation to
any shareholder whether to tender all or any shares. Neither I nor any other
director or officer intends to tender shares pursuant to the offer.
Please note that the tender offer will expire at 12:00 Midnight, Eastern
Standard Time, on Thursday, March 27, 1997, unless extended by the Company. IF
YOU HAVE ANY QUESTIONS REGARDING THE OFFER OR REQUIRE ASSISTANCE, PLEASE CONTACT
THE INFORMATION AGENT, D.F. KING & CO., INC. TOLL-FREE AT 1-800-848-2998.
On behalf of your Board of Directors, thank you for your continued support.
Sincerely,
[LOGO]
John R. Hodowal
Chairman of the Board and President
<PAGE>
THRIFT PLAN INSTRUCTION LETTER
February 28, 1997
<TABLE>
<S> <C> <C>
Soc. Sec. No. 999-99-9999 ANDREW GORMAN CPB/01
MERRILL LYNCH SECURITIES INC. 00022-01
265 DAVIDSON AVE.; 3RD FLOOR
SOMERSET, NJ 08873
</TABLE>
We have been advised that IPALCO Enterprises, Inc. (the "Company") is
offering to purchase for cash, up to 12,000,000 shares of its Common Stock at a
price to be specified by the shareholder not greater than $34.00 nor less than
$29.00 per share.
The Company will determine a single per share purchase price that will allow
it to purchase 12,000,000 shares (or such lesser number of shares as are validly
tendered), taking into account the number of shares tendered and the prices
specified by tendering shareholders. The Company will first purchase shares
tendered by any holder of less than 100 shares who tenders all shares owned. The
Company will then purchase all other shares validly tendered at or below the
determined purchase price on a pro-rata basis, if necessary.
The offer is not conditioned upon any minimum number of shares being
tendered. The offer is, however, subject to certain other conditions. The shares
are sold without any brokerage fees or commissions. Please note that this offer
is subject to proration if more than 12,000,000 shares are tendered at or below
the determined purchase price.
The above offer, proration period, and withdrawal rights will expire at
12:00 Midnight (Eastern Standard Time) on Thursday, March 27, 1997, unless
extended.
If you wish to tender into the Offer your Shares of Company Common Stock
allocated to your thrift plan account, please contact a Client Service
Representative at our toll-free Client Services number 1-800-228-4015 by 3:30
p.m. (Eastern Standard Time), Wednesday, March 26, 1997.
A TENDER OF SUCH SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF RECORD AND
PURSUANT TO YOUR INSTRUCTIONS.
In the event you choose to withdraw from this offer, after having tendered
your holdings, we must receive your withdrawal instructions by 3:30 p.m.
(Eastern Standard Time), Wednesday, March 26, 1997. Our representatives are
available Monday through Friday 8:00 a.m. to 7:00 p.m. (Eastern Standard Time).
Sincerely,
Merrill Lynch Group Employee Services
<PAGE>
February 21, 1997
IPALCO Enterprises, Inc.
One Monument Circle, Room 729
Indianapolis, IN 46206
Attention: John R. Brehm, Vice President & Treasurer
Re: RECAPITALIZATION
Ladies and Gentlemen:
You have advised Bank One, Indianapolis, National Association ("Bank One"),
National City Bank of Indiana ("NCB"), and The First National Bank of Chicago
("First Chicago"; Bank One, NCB and First Chicago being sometimes referred to
collectively herein as the "Initial Lenders" and individually as an "Initial
Lender") that IPALCO Enterprises, Inc., an Indiana corporation (the "Borrower"),
subject to the prior approval of its Board of Directors, intends to undertake a
recapitalization through a self tender offer to purchase up to 12 million shares
of the Borrower's outstanding common capital stock, which tender will be
conducted over a period ending March 27, 1997 (or such later date, as the same
may be extended by the Borrower), through a "Dutch auction" at a price of not
more than $34.00, per share (the "Transaction").
Subject to the terms and conditions set forth below, the Initial Lenders
hereby agree with you as follows:
1. COMMITMENT. Each of the Initial Lenders severally hereby commits
to provide one-third of the Aggregate Revolving Loan Commitment for the
Revolving Credit Facility, in each case upon the terms and subject to the
conditions set forth or referred to herein (this letter being sometimes
referred to as the "Commitment Letter"), in the fee letter (the "Fee
Letter") dated the date hereof and delivered to the Borrower and in the
Summary of Terms and Conditions attached hereto as EXHIBIT A (the "Term
Sheet"). Except as otherwise defined herein, terms which are defined in
the Term Sheet (including "Aggregate Revolving Loan Commitment" and
"Revolving Credit Facility") shall have the same meanings when used in
this letter as are ascribed to them in the Term Sheet.
2. SYNDICATION. The Initial Lenders reserve the right and intend,
prior to or after the execution of definitive documentation for the
Revolving Credit Facility, to syndicate a portion of the Aggregate
Revolving Loan Commitment to one or more other financial institutions
(the Initial Lenders and all of such financial institutions being
referred to collectively herein as the "Lenders") that will become
parties to the definitive credit documentation for the Revolving Credit
Facility. In that connection, promptly following your acceptance of the
commitments of each of the Initial Lenders hereunder and your public
announcement of the Transaction, the Initial Lenders will commence the
syndication of the Revolving Credit Facility to such other Lenders. The
Borrower agrees that no Lender will receive compensation outside the
terms contained herein and in the Fee Letter referred to below in order
to obtain its commitment to participate in the Revolving Credit Facility.
It is understood and agreed that the amount and distribution of the fees
referred to herein among the Lenders and to the Agents, as identified in
the Term Sheet, will be as described in the Fee Letter. The Syndication
Agent, as identified in the Term Sheet, will manage all aspects of the
syndication, including, without limitation, decisions as to the selection
of potential Lenders to be approached and when they will be approached,
when their commitments will be accepted, which Lenders will participate
(which decisions will be made after consultation with the Borrower), and
the final allocations of the Aggregate Revolving Loan Commitment among
all Lenders (which are likely not to be pro rata among all Lenders).
You agree actively to assist the Initial Lenders in achieving a
timely syndication that is satisfactory to the Initial Lenders. The
syndication efforts will be accomplished by a variety of means, including
direct contact during the syndication between senior management
(including,
<PAGE>
but not limited to, the chief executive officer, treasurer and assistant
treasurer of the Borrower) and advisors and affiliates of the Borrower,
on the one hand, and the proposed syndicate Lenders on the other hand.
(Information provided to a proposed Lender will be provided only after
such proposed Lender has executed a confidentiality agreement reasonably
satisfactory to the Borrower). To assist the Initial Lenders and the
Syndication Agent in their syndication efforts, you agree that you will,
promptly, upon request by the Syndication Agent or any of the Initial
Lenders, (a) provide, and cause your affiliates and advisors to provide,
to the Syndication Agent all information reasonably deemed necessary by
the Syndication Agent to complete successfully the syndication, including
but not limited to, information and projections (including, without
limitation, any updated projections requested by the Initial Lenders),
prepared by you or on your behalf relating to the Transaction and the
credit transactions contemplated hereby, and (b) to assist, and to cause
your affiliates and advisors to assist, the Syndication Agent in the
preparation of a confidential information memorandum and other marketing
materials to be used in connection with the syndication, including making
available representatives of the Borrower and its subsidiaries.
3. FEES. As consideration for the commitment of each of the Initial
Lenders hereunder and the agreement by the Initial Lenders to arrange,
manage, structure and syndicate the Revolving Credit Facility, you agree
to pay the fees as set forth in the Term Sheet and in the Fee Letter. You
agree that, once paid, such fees and any part thereof shall be
nonrefundable under any and all circumstances and regardless of whether
the transactions or borrowings contemplated hereby are consummated.
4. CONDITIONS. The commitment by each of the Initial Lenders
hereunder is subject to the negotiation, execution and delivery of
definitive documentation with respect to the Revolving Credit Facility
satisfactory in all respects to each of the Initial Lenders and their
respective counsel. Such definitive documentation shall reflect the terms
and conditions set forth herein and in the Term Sheet and contain such
other terms as are satisfactory to each of the Initial Lenders and the
Borrower. Those matters that are not covered by or made clear under the
provisions hereof or of the Term Sheet are subject to the approval and
agreement of each of the Initial Lenders and the Borrower (it being
understood that the terms and conditions of the definitive documentation
with respect to the Revolving Credit Facility shall not be inconsistent
with the terms and conditions set forth herein or in the Term Sheet).
The commitment by each of the Initial Lenders hereunder is also
subject to (a) there not having occurred or becoming known any material
adverse change or prospective material adverse change in the business,
assets, liabilities (contingent or otherwise), operations, condition
(financial or otherwise), solvency, prospects or material agreements of
the Borrower and its subsidiaries, taken as a whole, since December 31,
1996, and (b) the satisfaction of the other terms and conditions set
forth or referred to herein (including, without limitation, those set
forth in paragraphs 2 and 5) and in the Term Sheet.
5. INFORMATION AND INVESTIGATIONS. You hereby represent and
covenant that (a) all information and data (excluding financial
projections) concerning the Borrower, its subsidiaries, the Transaction
and the credit transactions contemplated hereby (the "INFORMATION") that
have been made or will be prepared by or on behalf of you or any of your
affiliates or authorized representatives or advisors and that have been
or will be made available to the Lenders by you or on your behalf in
connection with the transactions contemplated hereby is and will be
complete and correct in all material respects and does not and will not,
taken as a whole, contain any untrue statement of a material fact or omit
to state any material fact necessary in order to make the statements
contained therein not misleading in light of the circumstances under
which such statements are made and (b) all financial projections
concerning the Borrower, its subsidiaries, the Transaction and the credit
transactions contemplated hereby (the "Projections") that have been
prepared by or on behalf of you or any of your affiliates or authorized
representatives and
2
<PAGE>
that have been or will be made available to the Lenders by you or on
behalf of you or any of your affiliates or authorized representatives or
advisors in connection with the transactions contemplated hereby have
been and will be prepared in good faith based upon assumptions believed
by you to be reasonable. You agree to supplement the Information and the
Projections from time to time until the closing of the Revolving Credit
Facility and, if requested by any of the Initial Lenders, for a
reasonable period thereafter necessary to complete the syndication of the
Revolving Credit Facility so that the representation and covenant in the
preceding sentence remains correct. In arranging the Revolving Credit
Facility, including the syndication of the Revolving Credit Facility, the
Initial Lenders will be using and relying primarily on the Information
and the Projections without independent check or verification thereof.
The commitment of each of the Initial Lenders hereunder is based upon
the accuracy and completeness of the financial and other information
provided to each Initial Lender by or on behalf of the Borrower and is
subject to each Initial Lender being afforded the opportunity to complete
the remainder of its customary due diligence investigation. If any
Initial Lender's ongoing due diligence investigation discloses
information, or any Initial Lender otherwise discovers information not
previously disclosed to it, that such believes has had or could have,
individually or in the aggregate, a materially adverse impact on the
business, assets, liabilities (contingent or otherwise) operations,
condition (financial or otherwise), solvency, prospects or material
agreements of the Borrower and its subsidiaries, taken as a whole, then
each of the Initial Lenders (a) shall be entitled to decline to
participate in the financing contemplated herein or (b) may, in its sole
discretion, suggest alternative financing amounts or structures that
ensure adequate protection for the Lenders.
6. INDEMNIFICATION. By executing this Commitment Letter, you agree
to indemnify and hold harmless, jointly and severally, each of the
Initial Lenders and each of the other Lenders and their respective
officers, directors, employees, affiliates, agents and controlling
persons (each of the Lenders and such other persons being an "Indemnified
Party") from and against any and all losses, claims, damages and
liabilities, joint or several, to which any such Indemnified Party may
become subject arising out of or in connection with or relating to this
Commitment Letter, the Fee Letter, the Term Sheet, the Revolving Credit
Facility, the loans under the Revolving Credit Facility, the use of
proceeds of any such loan, the Transaction or any related transaction and
the performance by each of the Initial Lenders, for itself or as an
Agent, of the services contemplated by this Commitment Letter and the
Term Sheet and will reimburse any Indemnified Party for any and all
expenses (including reasonable attorneys' fees and expenses) as they are
incurred in connection with the investigation of or preparation for or
defense of any pending or threatened claim or any action or proceeding
arising therefrom, whether or not such Indemnified Party is a party and
whether or not such claim, action or proceeding is initiated or brought
by or on behalf of the Borrower. The Borrower will not be liable under
the foregoing indemnification provision to an Indemnified Party to the
extent that any loss, claim, damage, liability or expense is found in a
final judgment by a court of competent jurisdiction to have resulted
solely from such Indemnified Party's bad faith or gross negligence.
In the event that an Indemnified Party is requested or required to
appear as a witness in any action brought by or on behalf of or against
the Borrower or any affiliate of the Borrower in which such Indemnified
Party is not named as a defendant, the Borrower agrees to reimburse such
Indemnified Party for all expenses incurred by it in connection with such
Indemnified Party's appearing and preparing to appear as such a witness,
including, without limitation, the fees and disbursements of its legal
counsel.
7. COSTS AND EXPENSES. By executing this Commitment Letter, you
agree to reimburse each of the Initial Lenders from time to time upon
demand for all reasonable out-of-pocket expenses (including, without
limitation, expenses of due diligence investigation, syndication
expenses, valuation fees and expenses, travel expenses and the reasonable
fees, disbursements
3
<PAGE>
and other charges of counsel) incurred in connection with the extension
and closing of the Revolving Credit Facility, including the preparation
of this Commitment Letter, the Term Sheet, the Fee Letter, and the
negotiation and preparation of the definitive documentation for the
Revolving Credit Facility.
8. TERMINATION. This Commitment shall expire automatically on
February 27, 1997, unless extended in writing by all of the Initial
Lenders or accepted on or prior to that date by the Borrower or closing
has occurred on or prior to that date. Notwithstanding the foregoing, the
compensation, reimbursement, indemnification and confidentiality
provisions hereof and of the Term Sheet and the Fee Letter shall survive
any termination of this Commitment Letter or the respective commitment of
the Initial Lenders hereunder.
9. GOVERNING LAW. This Commitment Letter shall be governed by, and
construed in accordance with, the laws of the State of Indiana (without
regard to principles of conflicts of law).
10. WAIVER OF JURY TRIAL. The Borrower and each of the Initial
Lenders waives all right to trial by jury in any action, proceeding or
counterclaim (whether based upon contract, tort or otherwise) related to
or arising out of any of the transactions contemplated by this Commitment
Letter, or the performance and satisfaction by any of the Initial Lenders
or other Lenders of any of the commitments extended to Borrower by this
Commitment Letter.
Please indicate your acceptance of the terms hereof and of the Fee Letter by
signing in the appropriate space below and in the Fee Letter and returning to
the Administrative Agent the enclosed duplicate original of this Commitment
Letter and the Fee Letter not later than the close of business on February 27,
1997, at which time the respective commitments of each of the Initial Lenders
hereunder will expire in the event the Administrative Agent has not received
such executed duplicate originals.
Very truly yours,
<TABLE>
<S> <C>
BANK ONE, INDIANAPOLIS, NATIONAL ASSOCIATION
By: /s/ J. ALBERT SMITH, JR.
-------------------------------------------
Name: J. Albert Smith, Jr.
Title: President
THE FIRST NATIONAL BANK OF CHICAGO
By: /s/ GARY S. GAGE
-------------------------------------------
Name: Gary S. Gage
Title: Senior Vice President
NATIONAL CITY BANK OF INDIANA
By: /s/ MICHAEL C. RECHIN
-------------------------------------------
Name: Michael C. Rechin
Title: Executive Vice President
ACCEPTED AND AGREED TO AS OF THE DATE FIRST ABOVE WRITTEN:
IPALCO ENTERPRISES, INC.
By: /s/ JOHN R. BREHM
-------------------------------------------
Name: John R. Brehm
Title: Vice President and Treasurer
</TABLE>
4
<PAGE>
SUMMARY OF TERMS AND CONDITIONS
Terms defined in the Commitment Letter to which this Summary of Terms and
Conditions is attached shall have the same meanings herein as ascribed to such
terms in the Commitment Letter.
<TABLE>
<S> <C>
BORROWER: IPALCO Enterprises, Inc., an Indiana corporation
("Borrower").
ADMINISTRATIVE AGENT: Bank One, Indianapolis, National Association (as such agent,
the "Administrative Agent").
DOCUMENTATION AGENT: National City Bank of Indiana (as such agent, the
"Documentation Agent").
SYNDICATION AGENT: First Chicago Capital Markets, Inc. (as such agent, the
"Syndication Agent"). (The Administrative Agent,
Documentation Agent and Syndication Agent are collectively
referred to as the "Agents").
AGGREGATE AMOUNT OF FACILITY: Not to exceed $410,000,000 (the "Aggregate Revolving Loan
Commitment"), with the exact amount, subject to such
maximum, to be selected by the Borrower pursuant to the
Transaction prior to closing.
COMMITMENT OF EACH INITIAL
LENDER: One-third of the Aggregate Revolving Loan Commitment.
FACILITY STRUCTURE: Revolving Credit Facility (the "Revolving Credit Facility")
with an initial maximum principal availability equal to the
Aggregate Revolving Loan Commitment and thereafter equal to
the Adjusted Commitment, as in effect from time to time,
which shall terminate on March 31, 2002 ("Revolver
Termination Date"). The Adjusted Commitment, as in effect
from time to time, shall be determined as follows: Aggre-
gate Revolving Loan Commitment LESS the amounts shown below
as at the dates stated: *
</TABLE>
<TABLE>
<CAPTION>
DATE AMOUNT
-------------- -----------------------------------------------------------
<S> <C> <C>
3/31/1998 20% of the Aggregate Revolving Loan Commitment
3/31/1999 40% of the Aggregate Revolving Loan Commitment
3/31/2000 60% of the Aggregate Revolving Loan Commitment
3/31/2001 80% of the Aggregate Revolving Loan Commitment
Revolver 100% of Aggregate Revolving Loan Commitment
Termination
Date
</TABLE>
- ------------------------
* These amounts and the maximum amount of the Aggregate Revolving Loan
Commitment assume that the Borrower will modify its financial policies per
page 4 of the Projections and may be modified if that assumption is not
correct.
<PAGE>
<TABLE>
<S> <C>
USE OF PROCEEDS: Initial Funding: To fund the Transaction and, to the extent
such funding does not fully utilize the Aggregate Revolving
Loan Commitment, to purchase shares of the currently
outstanding common capital stock of the Borrower in open
market transactions.
Subsequent Advances: The Borrower may reborrow for general
corporate purposes any principal amounts which have been
borrowed and repaid.
INTEREST RATES: Adjusted LIBOR plus the Applicable Margin.
APPLICABLE MARGINS: The Applicable Margin shall be a variable per annum amount
determined from time to time as described on Schedule One
hereto.
INTEREST PERIODS: Interest periods for each LIBOR Rate Advance shall be 1, 2,
3 or 6 months, as selected and established by the Borrower
from time to time (the "Interest Periods"). There may be no
more than four Interest Periods in effect at any one time.
INTEREST PAYMENTS: Interest shall be payable on the last day of each Interest
Period for each LIBOR Rate Advance. If the Interest Period
is 6 months, interest shall be payable on the 90th day and
on the last day of the Interest Period.
FACILITY FEES: On the last Banking Day of each successive March, June,
September, and December and on the Revolver Termination
Date, the Borrower shall pay to the Lenders for their PRO
RATA account a Facility Fee for the Revolving Credit
Facility equal to the Facility Fee percentage per annum (as
established and determined from time to time as provided in
Schedule One hereof) on the average Adjusted Commitment
outstanding during the three month period which closes on
the date each such Facility Fee is due.
MINIMUM ADVANCES: Advances shall be in minimum amounts of $2,000,000.
OPTIONAL PREPAYMENT: LIBOR Rate Advances may be prepaid prior to the end of their
respective Interest Periods, upon payment of normal breakage
costs/ prepayment premiums.
MANDATORY PAYMENTS: At any time the balance of the Revolving Credit Facility
exceeds the Adjusted Commitment, a principal payment must be
made to reduce the principal balance to the Adjusted
Commitment then in effect.
REPRESENTATIONS AND
WARRANTIES: Customary for transactions of this type, including but not
limited to each of the following with respect to the
Borrower and each of its Material Subsidiaries:
</TABLE>
<TABLE>
<S> <C> <C>
a. Corporate Existence and Authority;
b. Binding Effect;
c. Financial Information;
d. No Material Adverse Change;
</TABLE>
2
<PAGE>
<TABLE>
<S> <C> <C>
e. Compliance with Laws, including securities,
environmental, ERISA and Public Utility Holding Company
Act;
f. Payment of Taxes;
g. Absence of Litigation and Adverse Agreements;
h. Absence of Default;
i. Title to Assets;
j. Investment Company Act; and
k. PARI PASSU Indebtedness (Borrower only).
As used in this Term Sheet, "Material Subsidiaries" are all
subsidiaries of the Borrower, excluding, so long as the aggregate
amount of their assets is at all times less than $100,000,000, the
following subsidiaries: Store Heat and Produce Energy, Inc., an
Indiana corporation; American Energy Service Corp., an Indiana
corporation; Cleveland Thermal Energy Corporation, an Ohio
corporation; and Cleveland District Cooling Corporation, an Ohio
corporation.
CONDITIONS PRECEDENT: Customary for unsecured credit facilities of this nature, including
but not limited to:
FIRST ADVANCE: a. Receipt of financial projections for five (5)
consolidated years, beginning with 1997, which are
satisfactory in all respects to the Agents and Initial
Lenders;
b. Accuracy of representations and warranties;
c. Absence of any Event of Default or Unmatured Event of
Default;
d. Negotiation and execution of documentation for the
Revolving Credit Facility (the "Credit Documents")
satisfactory to the Agents and the Initial Lenders;
e. Determination to the satisfaction of the Agents and
Initial Lenders that there are no material restrictions
or limitations on, or covenants which materially
prohibit or otherwise limit, any Material Subsidiary of
the Borrower from declaring or paying cash dividends to
the Borrower which are otherwise permitted by applicable
law; and
f. No material adverse change in the financial condition,
assets, nature of the assets, operations or prospects of
the Borrower and its subsidiaries, taken on a whole.
SUBSEQUENT ADVANCES: a. Absence of any Event of Default or Unmatured Event of
Default;
b. No Material Adverse Change;
c. Continued accuracy of representations and warranties of
the Borrower; and
d. Notice of Borrowing.
</TABLE>
3
<PAGE>
<TABLE>
<S> <C> <C>
COVENANTS: The commitment of each Initial Lender is subject to negotiation of
covenants satisfactory to the Agent and the Initial Lenders. These
shall be customary for unsecured credit facilities of this type,
including but not limited to each of the following (which shall be
as respects Borrower and each of its subsidiaries):
AFFIRMATIVE COVENANTS: a. Financial Reporting (including compliance certificates
and all SEC reports and filings);
b. Payment of Taxes;
c. Corporate Existence (the Borrower and Material
Subsidiaries only);
d. Maintenance of Properties (the Borrower and Material
Subsidiaries only);
e. Compliance with laws, including securities,
environmental, ERISA and Public Utility Holding Company
Act;
f. Maintenance of ownership of 100% of the common capital
stock of Indianapolis Power & Light Company and any
Disaggregation Subsidiaries;
g. Payment of Debt (to the extent required to avoid an
Event of Default);
h. Maintenance of Insurance (the Borrower and Material
Subsidiaries only);
i. Use of Proceeds;
j. Compliance with Mortgage and Deed of Trust and other
Debt agreements; and
k. PARI PASSU indebtedness (the Borrower only).
The term "Disaggregation Subsidiaries" means any corporation or
other business entity or organization to which all or any
significant part of the operating assets of Indianapolis Power &
Light Company or any of its four primary business components
(Generation; Access; Marketing; and Steam ) are assigned or
transferred.
FINANCIAL COVENANTS: a. Quarterly Debt to Capital Ratio, with "Capital" being
calculated and determined as in the Borrower's
projections delivered to the Initial Lenders on February
12, 1997 (the "Projections"). The maximum Debt to
Capital Ratio permitted for the quarter ending
immediately prior to the closing shall be .73:1 and for
each of the quarters closing thereafter shall be as
stated on Schedule Two attached hereto.
</TABLE>
4
<PAGE>
<TABLE>
<S> <C> <C>
b. EBIT to Interest Expense Ratio of not less than 2.5:1.
The required EBIT to Interest Expense Ratio shall be
measured on a rolling four quarter basis on and after
the close of the first four quarters following the
closing date. Prior thereto, such Ratio shall be
measured on a rolling four quarter basis, with EBIT
being determined on the basis of the actual quarters
closing after the closing date, plus the EBIT for the
applicable additional quarters closing before the
closing date, but with Interest Expense being measured
and annualized on the basis of the actual quarters
closing after the closing date.
NEGATIVE COVENANTS: a. Prohibition of the incurring of any new Debt which, upon
being incurred, would result in a violation by the
Borrower of the Debt to Capital Ratio (with new Debt
incurred prior to the closing date of any quarter being
deemed for purposes of this covenant as having been
incurred as at the close of the immediately preceding
quarter);
b. Prohibition of restrictions or any limitations of any
kind on cash dividends by any subsidiary to the
Borrower, excepting therefrom: (i) existing limitations
and restrictions in the Articles of Incorporation of
Indianapolis Power & Light Company or the Mortgage and
Deed of Trust of Indianapolis Power & Light Company; and
(ii) restrictions and limitations in credit or debt
agreements with third party creditors which preclude
payment of dividends by the obligor-subsidiary upon the
occurrence of default under the agreement;
c. Negative Pledge (the Borrower only);
d. Limitation on Mergers, Acquisitions, Divestitures and
Stock Redemptions to the extent that, upon closing or
consummation thereof, there would exist an Event of
Default or Unmatured Event of Default;
e. Judgments;
f. Restriction of cash dividends by the Borrower in the
event any Event of Default or Unmatured Event of Default
exists or would be created by cash dividend payment; and
g. Dissolution of the Borrower or any Material Subsidiary.
EVENTS OF DEFAULT: Customary for these types of facilities and as reasonably required
by the Initial Lenders, including but not limited to:
a. Failure to pay principal, interest, or Facility Fees
when due;
b. Noncompliance with covenants;
c. Any representation or warranty shall prove to be
incorrect, false or misleading in a material respect
when made;
d. Insolvency against the Borrower or any Material
Subsidiary; Bankruptcy of the Borrower or any Material
Subsidiary;
</TABLE>
5
<PAGE>
<TABLE>
<S> <C> <C>
e. Default on other Debt, including any default on the Debt
of any subsidiary of the Borrower (excepting Debt of
Mid-America Capital Resources, Inc. or any of its
subsidiaries, if such Debt is not Debt of the Borrower),
when such Debt exceeds $5,000,000 or, excluding
Mid-America Capital Resources, Inc, and its sub-
sidiaries, which results in the actual restriction of
payment of dividends by that subsidiary;
f. Judgments against the Borrower or any Material
Subsidiary; and
g. Change of Control of the Borrower (with the definition
of a "change of control" being the definition provided
to the Borrower on February 19, 1997 by Bank One).
</TABLE>
<TABLE>
<S> <C>
INCREASED COST/CHANGE OF
CIRCUMSTANCES: The Credit Documents will contain customary provisions
protecting the Lenders in the event of unavailability of
funding, illegality, capital adequacy requirements,
increased costs, and funding losses.
INDEMNIFICATIONS: The Borrower will indemnify each of the Lenders and the
Agents against all losses, liabilities, claims, damages, or
expenses relative to their loans, the Borrower's use of loan
proceeds, or the commitments, including but not limited to
legal fees and settlement costs whether or not the
transaction contemplated hereby is consummated.
TRANSFERS AND ASSIGNMENTS: From and after public announcement by the Borrower of the
Transaction, each of the Initial Lenders may sell and assign
their respective Commitments and loans, provided that any
single assignment is of not less than $10,000,000, the
assignee is approved by the Administrative Agent and the
Borrower (which approvals shall not be unreasonably withheld
or delayed), and the assignee shall have paid an assignment
fee to the Administrative Agent, for such agent's account,
in the amount of $2,500. Participations may be granted in
any amount.
REQUIRED BANKS: Excepting approvals of changes which customarily require
unanimous approval, the Required Bank Percentage for
approvals and waivers will be 50.1%.
EXPENSES: The Borrower will pay all reasonable legal and other
reasonable out-of-pocket expenses of the Administrative
Agent related to this transaction and any subsequent waivers
or amendments and all reasonable attorneys' fees and
expenses of the Lenders upon any Event of Default and
enforcement of the Revolving Credit Facility obligations.
GOVERNING LAW: State of Indiana.
</TABLE>
6
<PAGE>
<TABLE>
<S> <C>
DEFINITIONS: As used in this Term Sheet, the term "Interest Expense"
means, for any period and any person, the interest expense
of such person for that period determined in accordance with
generally accepted accounting principles ("GAAP"), plus the
aggregate amount due and payable during such period to the
holders of any preferred stock or other equity of such
person, excepting only dividends payable on the common
capital stock of such person. As used in this Term Sheet,
the term "Debt" means, with reference to any person, as of
any date, without duplication: (a) all indebtedness,
liabilities and obligations of such person for borrowed
money; (b) all obligations of such person as lessee under
any lease which has been (or which in accordance with GAAP
should be) capitalized on the books of the lessee; (c) all
obligations, indebtedness and liabilities which are secured
by any Lien on any asset of such person, whether or not the
obligation, indebtedness or liability secured thereby shall
have been assumed by such person; and (d) all obligations,
indebtedness and liabilities of others similar in character
to those described in clauses (a) through (c) of this
definition for which such person is liable, contingently or
otherwise, as obligor, guarantor or in any other capacity,
or in respect of which obligations, indebtedness or
liabilities such person assures a creditor against loss or
agrees to take any action to prevent any such loss (other
than endorsements of negotiable instruments for collection
in the ordinary course of business), including without
limitation all reimbursement obligations of such person in
respect of letters of credit, surety bonds or similar
obligations and all obligations of such person to advance
funds to, or to purchase assets, property or services from,
any other person in order to maintain the financial
condition of such other person.
ANTICIPATED CLOSING DATE: No later than March 31, 1997.
</TABLE>
7
<PAGE>
SCHEDULE ONE
From the closing date of the Revolving Credit Facility until the earlier of
60 days and the obtaining of a rating by either Moody's Investors Service, Inc.
("Moody's") or Standard & Poor's Corporation ("S&P") of the Borrower's senior
unsecured debt (which rating the Borrower agrees to promptly seek upon
acceptance of the Commitment Letter), the Applicable Margin shall be .25% per
annum and the Facility Fee shall be .10% per annum for the first thirty days of
such period and .125% per annum for the balance of such period. Thereafter,
prior to maturity the Applicable Margin and the Facility Fee shall be the
specific percentage rates per annum shown in the following table, using at any
time the higher of the Moody's and the S&P ratings of the Borrower's senior
unsecured debt, as in effect from time to time (except that, if there is a
difference between the ratings of more than one level, then it shall be the
higher rating less one rating level):
<TABLE>
<CAPTION>
EQUAL TO OR
HIGHER THAN LESS THAN
RATING A+/A1 A/A2 A-/A3 BBB+/BAA1 BBB+/BAA1
<S> <C> <C> <C> <C> <C>
Applicable
Margin..... 0.00225 0.25 0.25 0.3 0.4
Facility
Fee........ 0.1 0.1 0.125 0.15 0.2
</TABLE>
<PAGE>
SCHEDULE TWO
<TABLE>
<CAPTION>
RATIO IF INITIAL
AGGREGATE REVOLVING RATIO IF INITIAL
LOAN COMMITMENT IS AGGREGATE REVOLVING
IN EXCESS OF LOAN COMMITMENT IS
QUARTER ENDING $307,000,000 $307,000,000 OR LESS
- ----------------------------------------------------------------------- --------------------- ---------------------
<S> <C> <C>
3/31/97................................................................ .73:1 .66:1
6/30/97................................................................ .73:1 .66:1
9/30/97................................................................ .73:1 .66:1
12/31/97............................................................... .69:1 .63:1
3/31/98................................................................ .69:1 .63:1
6/30/98................................................................ .69:1 .63:1
9/30/98................................................................ .69:1 .63:1
12/31/98............................................................... .64:1 .59:1
3/31/99................................................................ .64:1 .59:1
6/30/99................................................................ .64:1 .59:1
9/30/99................................................................ .64:1 .59:1
12/31/99............................................................... .59:1 .57:1
3/3/2000............................................................... .59:1 .57:1
6/30/2000.............................................................. .59:1 .57:1
9/30/2000.............................................................. .59:1 .57:1
12/31/2000............................................................. .58:1 .57:1
3/31/2001.............................................................. .58:1 .57:1
6/30/2001.............................................................. .58:1 .57:1
9/30/2001.............................................................. .58:1 .57:1
12/31/2001............................................................. .57:1 .57:1
3/31/2002.............................................................. .57:1 .57:1
</TABLE>
<PAGE>
Item 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
--------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of IPALCO Enterprises, Inc.:
We have audited the accompanying consolidated balance sheets of
IPALCO Enterprises, Inc. and its subsidiaries as of December 31,
1996 and 1995, and the related statements of consolidated income,
common shareholders' equity and cash flows for each of the three
years in the period ended December 31, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present
fairly, in all material respects, the financial position of IPALCO
Enterprises, Inc. and its subsidiaries as of December 31, 1996 and
1995, and the results of their operations and their cash flows for
each of the three years in the period ended December 31, 1996 in
conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Indianapolis, Indiana
January 24, 1997
(February 25, 1997 as to Note 14)
II-13
<PAGE>
IPALCO ENTERPRISES, INC. AND SUBSIDIARIES
Statements of Consolidated Income
For the Years Ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
1996 1995 1994
------------- ------------- -------------
(In Thousands Except Per Share Amounts)
<S> <C> <C> <C>
UTILITY OPERATING REVENUES (Note 9):
Electric $ 724,764 $ 673,388 $ 649,767
Steam 37,739 35,818 36,309
------------- ------------- -------------
Total operating revenues 762,503 709,206 686,076
------------- ------------- -------------
UTILITY OPERATING EXPENSES:
Operation:
Fuel 164,339 169,206 169,756
Other 137,192 116,428 104,273
Power purchased 18,365 19,102 19,060
Purchased steam 7,240 6,680 7,653
Maintenance 67,768 63,013 68,562
Depreciation and amortization 102,769 100,984 87,028
Taxes other than income taxes 33,363 31,706 30,891
Income taxes - net (Note 8) 68,248 54,499 55,543
------------- ------------- -------------
Total operating expenses 599,284 561,618 542,766
------------- ------------- -------------
UTILITY OPERATING INCOME 163,219 147,588 143,310
------------- ------------- -------------
OTHER INCOME AND (DEDUCTIONS):
Allowance for equity funds used during construction 5,967 6,003 4,672
Other - net (8,056) (7,407) (12,005)
Income taxes - net (Note 8) 3,645 3,097 4,536
------------- ------------- -------------
Total other income and (deductions) - net 1,556 1,693 (2,797)
------------- ------------- -------------
INCOME BEFORE INTEREST AND OTHER CHARGES 164,775 149,281 140,513
------------- ------------- -------------
INTEREST AND OTHER CHARGES:
Interest on long-term debt 45,110 46,170 46,248
Other interest 4,202 5,293 1,685
Allowance for borrowed funds used during construction (3,354) (5,367) (4,709)
Amortization of redemption premiums and expenses on
debt - net 1,360 1,225 1,113
Preferred dividend requirements of subsidiary 3,182 3,182 3,182
------------- ------------- -------------
Total interest and other charges - net 50,500 50,503 47,519
------------- ------------- -------------
NET INCOME $ 114,275 $ 98,778 $ 92,994
============= ============= =============
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 56,924 56,745 56,611
(Note 5) ============= ============= =============
EARNINGS PER SHARE OF COMMON STOCK $ 2.01 $ 1.74 $ 1.64
(Note 5) ============= ============= =============
</TABLE>
See notes to consolidated financial statements.
II-14
<PAGE>
IPALCO ENTERPRISES, INC. and SUBSIDIARIES
Consolidated Balance Sheets
December 31, 1996 and 1995
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
ASSETS 1996 1995
- ---------------------------------------------------------------------------------------------------------
(In Thousands)
<S> <C> <C>
UTILITY PLANT:
Utility plant in service (Note 2) $ 2,763,305 $ 2,517,790
Less accumulated depreciation 1,048,492 984,910
----------------- -----------------
Utility plant in service - net 1,714,813 1,532,880
Construction work in progress 63,243 249,249
Property held for future use 9,913 9,878
----------------- -----------------
Utility plant - net 1,787,969 1,792,007
OTHER ASSETS:
Nonutility property (Note 2) 121,443 117,215
Less accumulated depreciation 13,153 8,884
----------------- -----------------
Nonutility property - net 108,290 108,331
Other investments 5,371 6,256
----------------- -----------------
Other assets - net 113,661 114,587
----------------- -----------------
CURRENT ASSETS:
Cash and cash equivalents 19,317 11,554
Accounts receivable (less allowance for doubtful
accounts - 1996, $1,159,000 and 1995, $851,000) 11,099 59,073
Fuel - at average cost 30,625 30,250
Materials and supplies - at average cost 52,727 57,605
Prepayments and other current assets 9,931 4,412
----------------- -----------------
Total current assets 123,699 162,894
DEFERRED DEBITS:
Regulatory assets (Note 4) 137,974 142,711
Miscellaneous 19,766 18,998
----------------- -----------------
Total deferred debits 157,740 161,709
----------------- -----------------
TOTAL $ 2,183,069 $ 2,231,197
================= =================
</TABLE>
II-15
See notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
CAPITALIZATION AND LIABILITIES 1996 1995
- ---------------------------------------------------------------------------------------------------------
(In Thousands)
<S> <C> <C>
CAPITALIZATION:
Common shareholders' equity (Note 5):
Common stock, no par, authorized - 145,000,000 shares,
issued and outstanding - 57,034,912 shares in 1996,
56,802,256 shares in 1995 (Note 5) $ 389,966 $ 385,032
Premium on 4% cumulative preferred stock 1,363 1,363
----------------- -----------------
Retained earnings 466,397 436,408
Total common shareholders' equity 857,726 822,803
Cumulative preferred stock of subsidiary (Note 5) 51,898 51,898
Long-term debt of subsidiaries (Notes 2 and 6) 662,591 698,600
----------------- -----------------
Total capitalization 1,572,215 1,573,301
----------------- -----------------
CURRENT LIABILITIES:
Notes payable - banks and commercial paper (Note 7) 46,000 69,122
Current maturities and sinking fund requirements (Note 6) 11,250 17,500
Accounts payable and accrued expenses 62,222 81,984
Dividends payable 22,212 21,567
Taxes accrued 23,159 21,225
Interest accrued 13,354 14,719
Other current liabilities 14,519 16,092
----------------- -----------------
Total current liabilities 192,716 242,209
----------------- -----------------
DEFERRED CREDITS AND OTHER LONG-TERM LIABILITIES:
Accumulated deferred income taxes - net (Note 8) 303,473 292,417
Unamortized investment tax credit 47,722 50,636
Accrued postretirement benefits (Note 11) 23,635 30,517
Accrued pension benefits (Note 10) 37,283 31,834
Miscellaneous 6,025 10,283
----------------- -----------------
Total deferred credits and other long-term liabilities 418,138 415,687
----------------- -----------------
COMMITMENTS AND CONTINGENCIES (Note 13)
TOTAL $ 2,183,069 $ 2,231,197
================= =================
</TABLE>
II-16
See notes to consolidated financial statements.
<PAGE>
IPALCO ENTERPRISES, INC. and SUBSIDIARIES
Statements of Consolidated Cash Flows
For the Years Ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
1996 1995 1994
-------------- -------------- --------------
(In Thousands)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATIONS:
Net income before preferred dividend requirements
of subsidiary $ 117,457 $ 101,960 $ 96,176
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 102,677 103,045 91,713
Amortization of regulatory assets 17,680 6,748 -
Deferred income taxes and investment tax credit adjustments 3,145 (4,517) 2,685
Allowance for funds used during construction (9,321) (11,370) (9,381)
Premiums on redemptions of debt (3,128) (2,506) (1,363)
Change in certain assets and liabilities:
Accounts receivable 47,974 (10,414) 1,107
Fuel, materials and supplies 4,503 7,130 (2,205)
Accounts payable (19,762) 6,727 20,296
Taxes accrued 1,934 2,656 (4,484)
Accrued pension benefits 5,449 4,731 4,563
Other - net (17,484) 4,684 20,612
-------------- -------------- --------------
Net cash provided by operating activities 251,124 208,874 219,719
-------------- -------------- --------------
CASH FLOWS FROM INVESTING:
Proceeds from maturities of marketable securities 3,810 7,984 -
Construction expenditures - utility (78,543) (166,874) (178,295)
Construction expenditures - nonutility (4,187) (34,745) (9,402)
Other (16,607) (19,416) (7,657)
-------------- -------------- --------------
Net cash used in investing activities (95,527) (213,051) (195,354)
-------------- -------------- --------------
CASH FLOWS FROM FINANCING:
Issuance of long-term debt 36,000 130,100 202,350
Retirement of long-term debt (78,300) (80,350) (85,928)
Short-term debt - net (23,122) 39,369 (60,247)
Dividends paid (86,811) (84,471) (82,421)
Issuance of common stock related to incentive compensation plans 4,524 1,549 1,768
Other (125) 1,386 (2,452)
-------------- -------------- --------------
Net cash provided by (used in) financing activities (147,834) 7,583 (26,930)
-------------- -------------- --------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 7,763 3,406 (2,565)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 11,554 8,148 10,713
-------------- -------------- --------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 19,317 $ 11,554 $ 8,148
============== ============== ==============
- -----------------------------------------------------------------------------------------------------------------
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest (net of amount capitalized) $ 47,857 $ 47,310 $ 41,429
============== ============== ==============
Income taxes $ 64,650 $ 50,557 $ 54,103
============== ============== ==============
</TABLE>
See notes to consolidated financial statements.
II-17
<PAGE>
IPALCO ENTERPRISES, INC. and SUBSIDIARIES
Statements of Consolidated Common Shareholders' Equity
For the Years Ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Common Stock Premium on 4%
-------------------- Cumulative Retained
Shares Amount Preferred Stock Earnings Total
- ----------------------------------------------------------------------------------------------------------------------
(In Thousands)
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1994 56,539 $ 379,460 $ 1,363 $ 406,388 $ 787,211
Net income 92,994 92,994
Cash dividends declared ($1.41 per share) (80,028) (80,028)
Exercise of stock options 95 1,768 1,768
------- ------------ ------------ ------------- -------------
Balance at December 31, 1994 56,634 381,228 1,363 419,354 801,945
Net income 98,778 98,778
Cash dividends declared ($1.44 per share) (81,724) (81,724)
Exercise of stock options 81 1,549 1,549
Restricted stock grants 87 2,255 2,255
------- ------------ ------------ ------------- -------------
Balance at December 31, 1995 56,802 385,032 1,363 436,408 822,803
Net income 114,275 114,275
Cash dividends declared ($1.48 per share) (84,286) (84,286)
Post-split fractional shares (1) (36) (36)
Exercise of stock options 227 4,560 4,560
Restricted stock grants 7 410 410
------- ------------ ------------ ------------- -------------
Balance at December 31, 1996 57,035 $ 389,966 $ 1,363 $ 466,397 $ 857,726
======= ============ ============ ============= =============
</TABLE>
See notes to consolidated financial statements.
Per share amounts and the number of shares have been adjusted for 1994 and
1995 to reflect the three-for-two no par value common stock split issued in
March 1996.
II-18
<PAGE>
IPALCO ENTERPRISES, INC. and SUBSIDIARIES
=========================================
Notes to Consolidated Financial Statements
For the Years Ended December 31, 1996, 1995 and 1994
- --------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation: IPALCO Enterprises, Inc. (IPALCO) owns
all of the outstanding common stock of its subsidiaries (collectively
referred to as Enterprises). The consolidated financial statements
include the accounts of IPALCO, its regulated utility subsidiary,
Indianapolis Power & Light Company (IPL), and its unregulated subsidiary,
Mid-America Capital Resources, Inc. (Mid-America). Mid-America conducts
its businesses through various wholly-owned subsidiaries, including Mid-
America Energy Resources, Inc. (Energy Resources), Indianapolis Campus
Energy, Inc. (ICE) and Store Heat and Produce Energy, Inc. (SHAPE), an 80%-
owned subsidiary. All significant intercompany items have been eliminated
in consolidation.
The operating components of all subsidiaries other than IPL which had
revenue of $33.6 million, $23.0 million and $16.5 million for 1996, 1995
and 1994, respectively, are included under the captions OTHER INCOME AND
(DEDUCTIONS), "Other-net" and "Income taxes-net" and INTEREST AND OTHER
CHARGES, "Interest on long-term debt," "Other Interest" and "Amortization
of redemption premiums and expenses on debt-net" in the Statements of
Consolidated Income.
Nature of Operations: IPL is engaged principally in providing electric
and steam service to the Indianapolis metropolitan area. Mid-America
operates energy-related businesses in Indianapolis, Indiana, and
Cleveland, Ohio.
Concentrations of Risk: Substantially all of Enterprises' business
activity is with customers located within the Indianapolis area. In
addition, approximately 65% of Enterprises' employees are covered by
collective bargaining agreements.
Regulation: The retail utility operations of IPL are subject to the
jurisdiction of the Indiana Utility Regulatory Commission (IURC). IPL's
wholesale power transactions are subject to the jurisdiction of the
Federal Energy Regulatory Commission. These agencies regulate IPL's
utility business operations, tariffs, accounting, depreciation allowances,
services, security issues and the sale and acquisition of utility
properties. The financial statements of IPL are based on generally
accepted accounting principles, including the provisions of Statement of
Financial Accounting Standards No. 71, "Accounting for the Effects of
Certain Types of Regulation," which gives recognition to the ratemaking
and accounting practices of these agencies.
Revenues: Utility operating revenues are recorded as billed to
customers on a monthly cycle billing basis. Revenue is not accrued for
energy delivered but unbilled at the end of the year. A fuel adjustment
charge provision, which is established after public hearing, is applicable
to substantially all the rate schedules of IPL, and permits the billing or
crediting of estimated fuel costs above or below the levels included in
such rate schedules. Actual fuel costs in excess of or under estimated
fuel costs billed are deferred or accrued, respectively.
Authorized Annual Operating Income: Indiana law requires electric
utilities under the jurisdiction of the IURC to meet operating expense and
income requirements as a condition for approval of requested changes in
fuel adjustment charges. Additionally, customer refunds may result if the
utilities' rolling 12-month operating income, determined at quarterly
measurement dates, exceeds the utilities' authorized annual operating
income and cannot be offset by applicable cumulative net operating income
deficiencies.
II-19
<PAGE>
In such a circumstance, the required customer refund for the quarterly
measurement period is calculated to be one-fourth of the excess annual
operating income grossed up for federal and state taxes.
Effective July 1, 1996, IPL's authorized annual electric operating
income, for purposes of quarterly operating income tests, is $163 million,
as established in an IURC order dated August 24, 1995. This level will be
maintained until changed by an IURC order. During 1996, IPL's rolling
annual electric operating income was less than the authorized annual
operating income at each of the quarterly measurement dates (January,
April, July and October). At October 31, 1996, IPL's most recent
quarterly measurement date, IPL had a cumulative net operating deficiency
of $93 million, of which $63.5 million expires at varying amounts during
the five-year period ending September 1, 2000. The operating deficiency
is calculated by summing the 20 most recent quarterly measurement period
annual results. As a consequence IPL could, for a period of time, earn
above $163 million of electric net operating income without being required
to make a customer refund.
Through the date of IPL's next general electric rate order, IPL is
required to file upward and downward adjustments in fuel cost credits and
charges on a quarterly basis, based on changes in the cost of fuel,
irrespective of its level of earnings.
Pursuant to an order of the IURC, IPL's authorized annual steam net
operating income is $6.2 million, plus any cumulative annual underearnings
occurring during the five-year period subsequent to the implementation of
the new rate tariffs.
Allowance For Funds Used During Construction: In accordance with the
prescribed uniform system of accounts, IPL capitalizes an allowance for
the net cost of funds (interest on borrowed funds and a reasonable rate on
equity funds) used for construction purposes during the period of
construction with a corresponding credit to income. IPL capitalized
amounts using pretax composite rates of 7.3%, 8.5% and 9.5% during 1996,
1995 and 1994, respectively.
Utility Plant and Depreciation: Utility plant is stated at original
cost as defined for regulatory purposes. The cost of additions to utility
plant and replacements of retirement units of property, as distinct from
renewals of minor items which are charged to maintenance, are charged to
plant accounts. Units of property replaced or abandoned in the ordinary
course of business are retired from the plant accounts at cost; such
amounts plus removal costs, less salvage, are charged to accumulated
depreciation. Depreciation is computed by the straight-line method based
on functional rates approved by the IURC and averaged 3.4% during 1996 and
3.5% during 1995 and 1994. Depreciation expense for 1996 includes an
adjustment to spare parts inventory of $4.5 million resulting from
recognition of the impairment in value of excess spare parts.
Depreciation expense for 1995 and 1994 includes adjustments to property
held for future use of approximately $12.3 million and $3.9 million,
respectively. The adjustments in 1995 and 1994 reflect incurred costs of
expired regulatory permits and for designing and engineering a future
generating station in Patriot, Indiana.
Nonutility property is recorded at cost, and depreciation is calculated
by the straight-line method over the estimated service lives of the
related property. Nonutility depreciation expense was $4.5 million, $3.1
million and $2.3 million for 1996, 1995 and 1994, respectively.
Sale of Accounts Receivable: In late December 1996, IPL entered into
an agreement to sell, on a revolving basis, undivided percentage interests
in certain of its accounts receivable, including accounts receivable for
KWH delivered but not billed, up to an aggregate maximum at any one time
of $50 million. Accounts receivable on the Consolidated Balance Sheets
are net of the $50 million interest sold under the IPL agreement at
December 31, 1996. The gross amount of receivables sold was $55.6
million, of which $5.6 million was replaced with a receivable from the
purchasing party.
II-20
<PAGE>>
The Financial Accounting Standards Board has issued Statement No. 125
relating to the accounting for transfers of financial assets. Enterprises
anticipates adopting this standard on its effective date of January 1,
1997, and does not expect that it will have a material effect on its
financial position or results of operations.
Regulatory Assets: Regulatory assets represent deferred costs that
have been, or that are expected to be, included as allowable costs for
ratemaking purposes. IPL has recorded regulatory assets relating to
certain costs as authorized by the IURC. Specific regulatory assets are
disclosed in Note 4. As of December 31, 1996, all nontax-related
regulatory assets have been included as allowable costs in orders of the
IURC authorizing IPL to increase customer tariffs except for approximately
$10 million in costs for Demand Side Management (DSM) incurred subsequent
to January 1995 (see Note 9). IPL is amortizing such regulatory assets to
expense over periods authorized by these orders. Tax-related regulatory
assets represent the net income tax liability for deferred costs and
revenues to be considered in future regulatory proceedings.
In accordance with regulatory treatment, IPL deferred as a regulatory
asset certain post in-service date carrying charges and certain other
costs related to its investment in Petersburg Unit 4. As authorized in
the 1995 Electric Rate Settlement (see Note 9), IPL, effective September
1, 1995, is amortizing this deferral to expense over a life which
generally approximates the useful life of the related facility.
Also in accordance with regulatory treatment, IPL defers as regulatory
assets nonsinking fund debt and preferred stock redemption premiums and
expenses, and amortizes such costs over the life of the original debt or,
in the case of preferred stock redemption premiums, over 20 years.
Derivatives: IPL has limited involvement with derivative financial
instruments, and these financial instruments are not used for trading
purposes. They are used to manage well-defined interest rate risks as
more fully discussed in Note 6.
Income Taxes: Deferred taxes are provided for all significant
temporary differences between book and taxable income. The effects of
income taxes are measured based on enacted laws and rates. Such
differences include the use of accelerated depreciation methods for tax
purposes, the use of different book and tax depreciable lives, rates and
in-service dates and the accelerated tax amortization of pollution control
facilities. Deferred tax assets and liabilities are recognized for the
expected future tax consequences of existing differences between the
financial reporting and tax reporting basis of assets and liabilities.
IPL has recorded as regulatory assets and net deferred tax liabilities,
income taxes payable and includable in allowable costs for ratemaking
purposes in future years.
Investment tax credits which reduced federal income taxes in the years
they arose have been deferred and are being amortized to income over the
useful lives of the properties in accordance with regulatory treatment.
Statements of Cash Flows - Cash Equivalents: Enterprises considers all
highly liquid investments purchased with original maturities of 90 days or
less to be cash equivalents.
Employee Benefit Plans: Substantially all employees of IPALCO and IPL
and certain management employees of Mid-America are covered by a defined
benefit pension plan, a defined contribution plan and a postretirement
benefit plan.
The defined benefit pension plan is noncontributory and is funded
through two trusts. Additionally, a select group of management employees
of IPALCO, IPL and Mid-America are covered under a funded
II-21
<PAGE>
supplemental retirement plan. Collectively, these two plans are referred to
as Plans. Benefits are based on each individual employee's years of service
and compensation. IPL's funding policy is to contribute annually not less
than the minimum required by applicable law, nor more than the maximum amount
which can be deducted for federal income tax purposes.
The defined contribution plan is sponsored by IPL as the Employees'
Thrift Plan of Indianapolis Power & Light Company (Thrift Plan).
Employees elect to make contributions to the Thrift Plan based on a
percentage of their annual base compensation. IPL matches each employee's
contributions in amounts up to, but not exceeding, 4% of the employee's
annual base compensation.
The postretirement benefit plan is sponsored by IPL and provides
certain health-care and life insurance benefits to employees who retire
from active service on or after attaining age 55 and have rendered at
least 10 years of service. This plan is funded through a Voluntary
Employee Beneficiary Association (VEBA) Trust. IPL's policy is to fund
the annual actuarially determined postretirement benefit cost.
Substantially all non-management employees of Mid-America and its
subsidiaries are covered by a contributory 401(k) plan.
Long-Lived Assets: Effective January 1, 1996, Enterprises adopted the
provision of Financial Accounting Standards Board, Statement of Financial
Accounting Standards No. 121 (SFAS 121), "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." The
adoption of this new standard did not have a material impact on
Enterprises' financial position or results of operations. As competitive
factors influence pricing in the utility industry, this opinion may change
in the future. The general requirements of SFAS 121 apply to property,
plant and equipment of Enterprises and require impairment to be considered
whenever evidence suggests that it is no longer probable that future cash
flows are at least equal to the carrying amount of the asset.
Stock-Based Compensation: Effective January 1, 1996, Enterprises
adopted the provisions of Financial Accounting Standards Board, Statement
of Financial Accounting Standards No. 123 (SFAS 123), "Accounting for
Stock-Based Compensation." The accounting requirements of this
pronouncement are applicable to all new employee awards granted after the
adoption of SFAS 123. The new standard provides for the adoption, at the
option of IPALCO, of a fair value method of accounting for stock options
and similar equity instruments. IPALCO has elected to continue to account
for such transactions under Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees." The adoption of SFAS 123 has
no effect on the net income, earnings per share or the cash flows of
IPALCO.
Use of Management Estimates: The preparation of financial statements
in conformity with generally accepted accounting principles requires that
management make certain estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements. The reported amounts
of revenues and expenses during the reporting period may also be affected
by the estimates and assumptions management is required to make. Actual
results may differ from those estimates.
Reclassification: Certain amounts from prior years' financial
statements have been reclassified to conform to the current year
presentation.
II-22
<PAGE>
2. PLANT IN SERVICE AND OTHER PROPERTY
Utility Plant in Service
------------------------
The original cost of utility plant in service at December 31,
segregated by functional classifications, follows:
1996 1995
- --------------------------------------------------------------------------
(In Thousands)
Production $1,684,705 $1,490,958
Transmission 235,218 231,410
Distribution 712,391 676,240
General 130,991 119,182
---------- ----------
Total utility plant in service $2,763,305 $2,517,790
========== ==========
Substantially all of IPL's property is subject to the lien of the
indentures securing IPL's First Mortgage Bonds.
Nonutility Property
-------------------
The original cost of nonutility property at December 31 follows:
1996 1995
- --------------------------------------------------------------------------
(In Thousands)
District Cooling $100,294 $ 97,537
District Heating 16,984 15,884
General 4,165 3,794
-------- --------
Total nonutility property $121,443 $117,215
======== ========
Substantially all the District Cooling and Heating property is subject
to the lien of existing debt and/or credit agreements.
3. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair value amounts of financial instruments have been
determined by Enterprises using available market information and
appropriate valuation methodologies. However, considerable judgment is
required in interpreting market data to develop the estimates of fair
value. Accordingly, the estimates presented herein are not necessarily
indicative of the amounts that Enterprises could realize in a current
market exchange. The use of different market assumptions and/or
estimation methodologies may have an effect on the estimated fair value
amounts.
Cash, Cash Equivalents, Marketable Securities and Notes Payable: The
carrying amount approximates fair value due to the short maturity of these
instruments.
Long-Term Debt, Including Current Maturities and Sinking Fund
Requirements: Interest rates that are currently available to IPL and Mid-
America for issuance of debt with similar terms and remaining maturities
are used to estimate fair value. The variable rate debt has been included
at the face amount for both carrying amount and fair value. The fair
value of the interest rate swap agreement has been estimated to be $1.2
million and $3.6 million, which represents the amount IPL would have to
pay to enter into an equivalent agreement at December 31, 1996 and 1995,
respectively, with a swap counter party. The fair value of the debt
outstanding has been determined on the basis of
II-23
<PAGE>
the specific securities issued and outstanding. Accordingly, the purpose of
this disclosure is not to approximate the value on the basis of how the debt
might be refinanced. At December 31, 1996 and 1995, the consolidated
carrying amount of Enterprises' long-term debt, including current maturities
and sinking fund requirements, and the approximate fair value are as follows:
1996 1995
--------------------------------------------
(In Thousands)
Carrying amount $673,841 $716,100
Approximate fair value $680,532 $751,100
4. REGULATORY ASSETS
The amounts of regulatory assets at December 31, 1996 and 1995, are as
follows:
1996 1995
- ----------------------------------------------------------------------------
(In Thousands)
Related to Deferred Taxes (Note 1) $ 39,175 $ 34,178
Postretirement Benefit Costs in Excess of Cash Payments
and Amounts Capitalized (Note 11) 23,584 30,016
Unamortized Reacquisition Premium on Debt (Note 1) 25,151 22,600
Unamortized Petersburg Unit 4 Carrying Charges
and Certain Other Costs (Note 1) 34,005 39,143
Demand Side Management Costs (Note 9) 13,841 10,853
Other 2,218 5,921
--------- ---------
Total Regulatory Assets $ 137,974 $ 142,711
========= =========
5. CAPITAL STOCK
Stock Split: In February 1996, the IPALCO Board of Directors
authorized a 3-for-2 stock split of IPALCO's common stock issued to
shareholders in March 1996. All references to share amounts of common
stock and per share information have been restated to reflect the stock
split.
Common Stock: IPALCO has a Rights Agreement designed to protect
IPALCO's shareholders against unsolicited attempts to acquire control of
IPALCO that do not offer what the Board believes is a fair and adequate
price to all shareholders. The Board declared a dividend of one Right for
each share of common stock to shareholders of record on July 11, 1990.
The Rights will expire at the time of redemption or exchange, or on July
11, 2000, whichever occurs earliest. At this time, the Rights are
attached to and trade with the common stock. The Rights are not taxable
to shareholders or to IPALCO, and they do not affect reported earnings per
share. Under the Rights Agreement, IPALCO has authorized and reserved 60
million shares for issuance.
IPALCO PowerInvest, IPALCO's Dividend Reinvestment and Direct Stock
Purchase Plan, allows participants to purchase shares of common stock and
to reinvest dividends. The plan provides that such shares may be
purchased on the open market or directly from IPALCO at the option of
IPALCO. IPALCO is authorized to issue 1,396,208 additional shares as of
December 31, 1996, pursuant to this plan. All purchases in 1996 were made
on the open market.
Under the Thrift Plan, shares may be purchased either on the open
market or, if available, as original issue shares directly from IPALCO.
There are 1,573,093 additional shares available for issue under the Thrift
Plan as of December 31, 1996. All purchases in 1996 were made on the open
market.
II-24
<PAGE>
IPALCO is authorized to issue 123,731 additional shares of common stock
pursuant to the Energy Resources 401(k) plan. All purchases in 1996 were
made on the open market.
IPALCO has a stock option plan (1990 Plan) for key employees under
which options to acquire shares of common stock may be granted. One and
one-half million shares of common stock were authorized for issuance under
the 1990 Plan and 65,250 shares are available for future grants. The
maximum period for exercising an option may not exceed 10 years and one
day after grant or 10 years for incentive stock options. Upon the first
anniversary date after the grant, and each anniversary date thereafter,
these options are exercisable in proportion to the number of years expired
in a three-year period.
During 1991, the 1991 Directors' Stock Option Plan (1991 Plan) was
established. This plan provides to the nonemployee Directors of IPALCO
options to acquire shares of common stock. These options are exercisable
for the period beginning on the six-month anniversary of, and ending on
the 10-year anniversary of, the grant date. Under the 1991 Plan, 375,000
shares of common stock were authorized for issuance and 168,000 are
available for future grants.
A summary of options issued under both plans is as follows:
Weighted Average Range of Option Number of
Price per Share Price per Share Shares
- ----------------------------------------------------------------------------
Outstanding, January 1, 1994 $22.08 $16.8317 - $25.3725 1,305,750
Granted 21.29 21.2895 30,000
Canceled 16.83 16.8317 (15,000)
Exercised 17.14 16.8317 - 18.7481 (94,500)
---------
Outstanding, December 31, 1994 22.51 16.8317 - 25.3725 1,226,250
Granted 20.91 20.9146 45,000
Reinstated 16.83 16.8317 15,000
Exercised 17.19 16.8317 - 18.7481 (81,000)
---------
Outstanding, December 31, 1995 22.74 16.8317 - 25.3725 1,205,250
Granted 25.25 25.25 45,000
Exercised 17.02 16.8317 - 25.3308 (226,680)
---------
Outstanding, December 31, 1996 24.12 16.8317 - 25.3725 1,023,570
=========
The number of shares exercisable at December 31, 1996, 1995 and 1994
were: 1,023,570, 983,012 and 781,767, respectively and had a weighted
average exercised price of $24.12, $22.15 and $20.91, respectively. The
weighted average remaining contractual life of the options outstanding at
December 31, 1996 and 1995 was 6.3 years and 6.7 years, respectively.
As approved by the Board of Directors on October 25, 1994, and approved
by the shareholders at the April 19, 1995, Annual Meeting, the 1990 Long-
Term Performance Incentive Plan was amended and restated effective January
1, 1995, as the IPALCO Enterprises, Inc. Long-Term Performance and
Restricted Stock Incentive Plan (1995 Plan). Pursuant to the 1995 Plan,
600,000 shares of common stock of IPALCO have been authorized and reserved
for issuance, and initial awards of 87,304 shares of restricted common
stock were made to participating employees on January 1, 1995. On January
1, 1997 and 1996, an additional 1,628 and 7,319 shares were issued under
this plan. Under the 1995 Plan, shares of restricted common stock with
value equal to a stated percentage of participants' base salary are
initially awarded at the beginning of a three-year performance period,
subject to adjustment to reflect the participants' actual base salary for
the first year of each performance period (except for the first
performance period for which the average of the three years is used). The
shares remain restricted and nontransferable throughout each three-year
performance period, vesting in one-third increments on July 1 of each of
the three years following the end of the performance period. The first
performance period is from January 1, 1995, to December 31, 1997, with
subsequent three-year performance periods
II-25
<PAGE>
commencing annually on January 1 of each year from 1998 to 2004. At the end
of a performance period, awards are subject to adjustment to reflect
Enterprises' performance compared to peer companies under two performance
criteria, cost-effective service and total return to shareholders. Depending
on Enterprises' performance under these criteria, final awards may range from
200% of the initial awards to zero.
APB Opinion No. 25, "Accounting for Stock Issued to Employees," and
related interpretations in accounting for the stock based plans have been
applied by Enterprises. No compensation cost has been recognized for the
1990 and 1991 option plans because the stock option price is equal to the
fair value of the underlying common stock at the date of grant.
Compensation expense of $1.2 million and $1.1 million for 1996 and 1995,
respectively, as measured by the market value of the common stock at the
balance sheet date, has been recognized in accordance with the vesting
period for the 1995 Plan.
IPALCO estimated the SFAS 123 fair value by utilizing the binomial
options pricing model with estimated values for risk-free rate of 6.75%,
volatility rate of 15.02%, dividend rates of 6.88% and 5.86% and life
ranges from May 1, 1995 to May 1, 2006. The pro forma compensation
effects of this calculation were insignificant.
Restrictions on the payment of cash dividends or other distributions of
IPL common stock held by IPALCO and on the purchase or redemption of such
shares by IPL are contained in the indentures securing IPL's First
Mortgage Bonds. In addition, pursuant to IPL's Articles of Incorporation,
no dividends may be paid or accrued and no other distribution may be made
on IPL's common stock unless dividends on all outstanding shares of IPL's
preferred stock have been paid or declared and set apart for payment. All
of IPL's retained earnings at December 31, 1996, were free of such
restrictions. There are no other restrictions on the retained earnings of
IPALCO.
Cumulative Preferred Stock of Subsidiary: Preferred stock shareholders
are entitled to two votes per share for IPL matters, and if four full
quarterly dividends are in default on all shares of the preferred stock
then outstanding, they are entitled to elect the smallest number of IPL
Directors to constitute a majority. Preferred stock is redeemable solely
at the option of IPL and can be redeemed in whole or in part at any time
at the call prices stated below.
Preferred stock consists of the following:
December 31, 1996
-----------------
Shares Call December 31,
Outstanding Price 1996 1995
----------- ------- ------- -------
(Thousands of Dollars)
Cumulative - IPL, $100 Par Value,
authorized 2,000,000 shares
4% Series 100,000 $118.00 $10,000 $10,000
4.20% Series 39,000 103.00 3,900 3,900
4.60% Series 30,000 103.00 3,000 3,000
4.80% Series 50,000 101.00 5,000 5,000
6% Series 100,000 102.00 10,000 10,000
8.20% Series 199,985 101.00 19,998 19,998
------- ------- -------
Total cumulative preferred stock 518,985 $51,898 $51,898
======= ======= =======
Variable class - IPL, Par Value undetermined,
authorized 3,000,000 shares, none issued
II-26
<PAGE>
6. LONG-TERM DEBT
Long-term debt consists of the following:
December 31,
----------------
1996 1995
-------- --------
Series Due (Thousands of Dollars)
------ -----
IPL First Mortgage Bonds:
5 1/8% April 1996 (redeemed April 1996) $ - $ 15,000
5 5/8% May 1997 11,250 11,400
6.05% February 2004 (issued February 1994) 80,000 80,000
8% October 2006 58,800 58,800
7 3/8% August 2007 80,000 80,000
6.10% * January 2016 41,850 41,850
5.40% * August 2017 24,650 24,650
9 5/8% June 2019 (redeemed December 1996) - 50,000
7.45% August 2019 23,500 23,500
5.50% * October 2023 30,000 30,000
7.05% February 2024 (issued February 1994) 100,000 100,000
6 5/8% * December 2024 (issued February 1995) 40,000 40,000
Unamortized discount - net (1,009) (1,050)
-------- --------
Total first mortgage bonds 489,041 554,150
IPL Variable Series Notes * Due
--------------------------- -----
1991 August 2021 40,000 40,000
1994A December 2024 (issued December 1994) 20,000 20,000
1995B January 2023 (issued October 1995) 40,000 40,000
1995C December 2029 (issued December 1995) 30,000 30,000
1996 November 2029 (issued November 1996) 20,000 -
Current maturities and sinking fund requirements (11,250) (15,150)
-------- --------
Total long-term debt - IPL 627,791 669,000
Long-Term Debt - Other:
Energy Resources-7.25% note, due December 2011 9,500 9,500
Energy Resources-variable note,due September 2030
(issued September 1995) 9,300 9,300
ICE-project loan (redeemed December 1996) - 13,150
ICE-7.59% note, due February 2016
(issued December 1996) 16,000 -
Current maturities - (2,350)
-------- --------
Total long-term debt - other 34,800 29,600
Total long-term debt $662,591 $698,600
======== ========
* Notes are issued to the city of Petersburg, Indiana (City), by IPL to
secure the loan of proceeds from various tax-exempt instruments issued by
the City.
IPL redeemed the $33.2 million, 7.4% Series, the $19.75 million, 7 1/8%
Series and the $25.2 million, 7.65% Series First Mortgage Bonds in March
1994; the $40.0 million, 10 5/8% Series in March 1995; and the $40.0
million, 9 5/8% Series in December 1995.
The Series 1991 note provides for an interest rate which varies with
the tax-exempt commercial paper rate. The 1994A, 1995B, 1995C and 1996
notes provide for an interest rate which varies with the tax-exempt weekly
rate. IPL, at its option, can change the interest rate mode for these
notes to be based on
II-27
<PAGE>
other short-term rates. Additionally, the IPL variable rate notes can be
converted into long-term fixed interest rate instruments by the issuance of
an IPL First Mortgage Bond. The notes are classified as long-term
liabilities because IPL maintains long-term credit facilities supporting
these agreements, which were unused at December 31, 1996. Energy Resources'
1995 variable long-term note due 2030 was issued to the Indiana Development
Finance Authority and bears interest which varies with the tax-exempt weekly
rate.
The average interest rates and the year-end interest rates for the
variable rate notes are as follows:
Average Interest Rate for Interest Rate at
the Year Ended December 31, December 31,
1996 1995 1996 1995
- ---------------------------------------------------------------
Series 1991 3.53% 3.91% 3.47% 3.72%
Series 1994A 3.53% 3.94% 4.10% 5.10%
Series 1995B 5.21% 5.14% 5.21% 5.21%
Series 1995C 3.52% 4.41% 4.10% 5.10%
Series 1996 3.72% -- 4.05% --
Energy Resources
variable note 3.64% 4.20% 4.35% 5.80%
In conjunction with the issuance of the 1995B note, IPL entered into an
interest rate swap agreement. Pursuant to the swap agreement, IPL will
pay interest at a fixed rate of 5.21% to a swap counter party and will
receive a variable rate of interest in return, which is identical to the
variable rate payment made on the 1995B note. The result is to
effectively establish a fixed rate of interest on the 1995B note of 5.21%.
On October 7, 1994, ICE entered into an $18 million project loan which
was converted to a $11.3 million fully amortizing 15-year secured term
loan on July 1, 1996. On December 31, 1996, a 7.59% long-term note was
used to redeem the project loan. The net proceeds from the project loan
provided funds to construct a chilled water facility. The facility is
used to provide chilled water for delivery to a customer under a long-term
contract.
There are no maturities or sinking fund requirements on long-term debt
for the five years subsequent to December 31, 1996, other than as shown in
the balance sheet for December 31, 1996.
7. LINES OF CREDIT
IPL has committed lines of credit with banks of $100 million at
December 31, 1996, to provide loans for interim financing and also require
the payment of commitment fees. These lines of credit, based on separate
formal and informal agreements, have expiration dates ranging from January
31, 1997, to December 31, 1997. Lines of credit used to support
commercial paper were $20 million at December 31, 1996. IPL has a
Liquidity facility in the amount of $150 million to support certain
floating rate tax-exempt facilities (see Note 6).
IPL has an uncommitted line of credit with a bank in the amount of $25
million which does not require the payment of a commitment fee. At
December 31, 1996, $11 million was unused.
Mid-America has a line of credit of $30 million which requires the
payment of a commitment fee. At December 31, 1996, $18 million was
unused.
IPALCO has a line of credit of $2 million, of which $2 million was
unused at December 31, 1996. The line of credit requires the payment of a
commitment fee and expires July 1, 1997.
II-28
<PAGE>
The weighted average interest rate on notes payable and commercial
paper outstanding was 6.08% and 5.82% at December 31, 1996 and 1995,
respectively.
8. INCOME TAXES
Federal and state income taxes charged to income are as follows:
1996 1995 1994
- ---------------------------------------------------------------------------
(In Thousands)
Utility Operating Expenses:
Current income taxes:
Federal $56,676 $51,331 $45,919
State 8,378 7,732 6,919
------- ------- -------
Total current taxes 65,054 59,063 52,838
------- ------- -------
Deferred federal income taxes 6,507 (1,748) 4,896
Deferred state income taxes (398) 309 1,077
------- ------- -------
Total deferred income taxes 6,109 (1,439) 5,973
Net amortization of investment credit (2,915) (3,125) (3,268)
------- ------- -------
Total charge to utility operating expenses 68,248 54,499 55,543
Net credit to other income and deductions (3,645) (3,097) (4,536)
------- ------- -------
Total federal and state income tax provisions $64,603 $51,402 $51,007
======= ======= =======
The provision for federal income taxes (including net investment tax
credit adjustments) is less than the amount computed by applying the
statutory tax rate to pretax income. The reasons for the difference,
stated as a percentage of pretax income, are as follows:
1996 1995 1994
- ----------------------------------------------------------------------------
Federal statutory tax rate 35.0% 35.0% 35.0%
Effect of state income taxes (1.5) (1.8) (1.9)
Amortization of investment tax credits (1.6) (2.0) (2.2)
Removal cost adjustments - (1.8) (0.8)
Preferred dividends of subsidiary 0.6 0.7 0.8
Other - net (1.4) (1.8) (1.6)
---- ---- ----
Effective tax rate 31.1% 28.3% 29.3%
==== ==== ====
II-29
<PAGE>
The significant items comprising Enterprises' net deferred tax
liability recognized in the consolidated balance sheets as of December 31,
1996 and 1995, are as follows:
1996 1995
- ------------------------------------------------------------------
(In Thousands)
Deferred tax liabilities:
Relating to utility property $376,121 $366,801
Other 21,070 16,335
-------- --------
Total deferred tax liabilities 397,191 383,136
Deferred tax assets: -------- --------
Relating to utility property 28,298 24,934
Investment tax credit 29,156 30,936
Employee benefit plans 15,388 14,734
Unbilled revenue 10,517 11,157
Other 10,359 8,958
-------- --------
Total deferred tax assets 93,718 90,719
-------- --------
Net deferred tax liability $303,473 $292,417
======== ========
9. RATE MATTERS
Electric Rate Settlement Agreement: On August 24, 1995, the IURC
issued an order approving without amendment a Stipulation and Settlement
Agreement (Settlement Agreement) resolving all issues in IPL's then
pending electric general rate proceeding.
As provided for by the Settlement Agreement, IPL increased its basic
rates and charges for retail electric service in two steps. It is
estimated that these rate increases will provide the following additional
annual revenues:
Step 1 - $35,000,000 on September 1, 1995
Step 2 - $25,000,000 on July 1, 1996
Effective with the implementation of new tariffs in Step 1, IPL was
authorized to begin amortization of certain regulatory assets.
Additionally, IPL's existing depreciation rates were reapproved.
Under terms of the Settlement Agreement, IPL will not seek another
general increase in its basic rates and charges until after July 1, 1997,
except in the event of an emergency. IPL also has agreed not to file a
request to build any large, base-load generating capacity before January
1, 2000. This provision can be waived in extreme circumstances. In
addition, the parties agreed to, and subsequently resolved, pending
litigation involving IPL's Clean Air Act compliance plan.
Steam Rate Order: By an order dated January 13, 1993, the IURC
authorized IPL to increase its steam system rates and charges over a six-
year period. Accordingly, IPL will implement new steam tariffs designed
to produce estimated additional annual steam operating revenues as
follows:
Additional
Annual
Year Revenues
---- -----------
January 13, 1997 $ 2,384,000
January 13, 1998 370,000
II-30
<PAGE>
Demand Side Management Program: In compliance with an order dated
September 8, 1993, IPL is deferring certain approved DSM costs and
carrying charges. In the Settlement Agreement approved by the IURC on
August 24, 1995, IPL was authorized to amortize $5.3 million of such costs
deferred prior to February 1995, over a four-year period beginning
September 1, 1995. On December 19, 1996, IPL filed a petition with the
IURC requesting review, modification and/or termination of, and related
regulatory treatment for, DSM programs approved in the order dated
September 8, 1993.
10. EMPLOYEE PENSION BENEFIT PLANS
Pension expense is comprised of the following components:
1996 1995 1994
- ----------------------------------------------------------------------------
(In Thousands)
Service cost-benefits earned during the period $ 6,482 $ 6,375 $ 7,832
Interest cost on projected benefit obligation 16,335 15,348 15,358
Actual (return) loss on plan assets (23,307) (29,529) 10,366
Net amortization and deferral 5,758 13,499 (27,297)
------- ------- -------
Net periodic pension cost 5,268 5,693 6,259
Less amount capitalized 1,061 1,199 1,365
------- ------- -------
Amount charged to expense $ 4,207 $ 4,494 $ 4,894
======= ======= =======
A summary of the Plans' funding status at its October 31, 1996 plan
year-end, evaluation date and the amount recognized in the consolidated
balance sheets at December 31, 1996 and 1995, follows:
1996 1995
- -----------------------------------------------------------------------------
(In Thousands)
Actuarial present value of benefit obligations:
Vested benefit obligation $(173,654) $(148,124)
Nonvested benefit obligation (32,705) (27,883)
--------- ---------
Accumulated benefit obligation $(206,359) $(176,007)
========= =========
Projected benefit obligation $(229,937) $(223,137)
Plan assets at fair value 235,250 220,978
Funded status--plan assets less than projected --------- ---------
benefit obligation 5,313 (2,159)
Unrecognized net gain from past experience
different from that assumed (36,126) (30,174)
Unrecognized past service costs 8,132 14,495
Unrecognized net asset at January 1, 1987, being
amortized over an original life of 18.9 years (12,583) (13,996)
Adjustment required to recognize minimum liability (2,019) -
--------- --------
Net accrued pension benefits included in other
long-term liabilities at December 31 $ (37,283) $(31,834)
========= ========
Approximately 41% of the Plans' assets were in equity securities at
October 31, 1996, with the remainder in fixed income securities.
Assumptions used in determining the information presented were:
1996 1995 1994
- ------------------------------------------------------------------------
Discount rate 7.50% 7.50% 8.00%
Rate of increase in future compensation levels 5.10% 5.10% 6.10%
Expected long-term rate of return on assets 8.00% 8.00% 8.00%
II-31
<PAGE>
11. EMPLOYEE POSTRETIREMENT BENEFIT PLAN
Postretirement benefit expense is comprised of the following components:
<TABLE>
<CAPTION>
1996 1995 1994
- --------------------------------------------------------------------------------------------
(In Thousands)
<S> <C> <C> <C>
Service cost -- benefits earned during the period $ 3,969 $ 3,941 $ 5,144
Interest cost on accumulated postretirement benefit obligation 10,494 10,838 11,097
Actual (return) loss on plan assets 1,280 (319) (435)
Net amortization and deferral 2,220 4,665 5,767
------- ------- ------
Net periodic postretirement benefit cost 17,963 19,125 21,573
Less:
Amount capitalized 3,511 3,891 4,464
Regulatory asset deferral - 6,978 12,289
------- ------- -------
Amount charged to expense $14,452 $ 8,256 $ 4,820
======= ======= =======
</TABLE>
Also, during 1996 and 1995, IPL expensed postretirement regulatory
asset amortization of $6.4 million and $2.1 million, respectively.
A summary of the retiree health-care and life insurance plan's funding
status, and the amount recognized in the consolidated balance sheets at
December 31, 1996 and 1995, follows:
<TABLE>
<CAPTION>
1996 1995
- -------------------------------------------------------------------------------------------
(In Thousands)
<S> <C> <C>
Actuarial present value of accumulated postretirement
benefit obligation:
Retirees $ (62,856) $ (60,442)
Fully eligible active plan participants (21,486) (20,802)
Other active plan participants (62,702) (62,134)
--------- ---------
Total (147,044) (143,378)
Plan assets at fair value 49,852 30,269
--------- ---------
Funded status--accumulated postretirement benefit obligation in excess
of plan assets (97,192) (113,109)
Unrecognized net gain from past experience different from that assumed (24,363) (21,447)
Unrecognized net obligation at January 1, 1993, being amortized over
an original life of 20 years 97,920 104,039
--------- ---------
Net accrued postretirement benefit cost included in deferred
liabilities at December 31 $ (23,635) $ (30,517)
========= =========
</TABLE>
Enterprises has expensed its nonconstruction related postretirement
benefits costs associated with its unregulated and regulated steam
businesses and, subsequent to August 1995, with its regulated electric
business. IPL's electric business postretirement benefit costs incurred
prior to September 1, 1995, net of amounts capitalized for construction
and benefits paid to participants, were deferred as a regulatory asset on
the consolidated balance sheets. The Settlement Agreement approved the
amortization to operating expense of this regulatory asset over five years
beginning September 1, 1995. The annual amortization is $6.4 million.
IPL funds its annual postretirement benefit costs in excess of actual
benefits paid to participants to an irrevocable VEBA Trust. Annual
funding is discretionary and is based on the projected cost over time of
benefits to be provided to covered persons consistent with acceptable
actuarial methods. The VEBA Trust provides for full funding of
Enterprises' accumulated postretirement benefit obligation in the event of
certain change of control transactions. During 1996 and 1995, Enterprises
contributed $20.9 million and $19.0 million, respectively, of these costs
to the VEBA.
II-32
<PAGE>
Plan assets consist of the cash surrender value of life insurance
policies on certain active and retired IPL employees.
The assumed health-care cost trend rate used in measuring the
accumulated postretirement benefit obligation is 8.8% for 1997, gradually
declining to 4.5% in 2003. A 1% increase in the assumed health-care cost
trend rate for each year would increase the accumulated postretirement
benefit obligation, as of December 31, 1996, by approximately $21.0
million and the combined service cost and interest cost for 1996 by
approximately $2.5 million.
Assumptions used in determining the information above were:
1996 1995 1994
- ----------------------------------------------------------------------------
Discount rate 7.50% 7.25% 8.00%
Rate of increase in future compensation levels 5.10% 5.10% 6.10%
Expected long-term rate of return on assets 8.00% 8.00% 8.00%
12. OTHER EMPLOYEE BENEFIT PLANS
Enterprises' contributions to the Thrift Plan were $3.4 million, $3.2
million and $3.3 million in 1996, 1995 and 1994, respectively.
On December 14, 1994, Mid-America's Board of Directors approved a Long-
Term Incentive Plan (the Incentive Plan) that covers key executives of Mid-
America and certain officers of IPALCO effective January 1, 1995.
Pursuant to the Incentive Plan, whole or fractions of eight shares of an
award pool are available to be granted. The value of such shares is zero
at the inception of the Incentive Plan and can grow in value during the
performance period (January 1, 1995 - December 31, 1999). The reward pool
to be distributed to the holders of such shares on December 31, 1999, will
be determined based upon the increase in the valuation of the respective
Mid-America businesses during the performance period and can amount to
.85% up to 15% of the total increase during the performance period. A
minimum increase in value above $34 million is required before any reward
is payable.
Participation in the Incentive Plan will be reviewed on an annual basis
and during the performance period as necessary. The Compensation
Committee of IPALCO's Board of Directors may add or delete participants
from the Incentive Plan and may make modifications to the distribution of
shares during the performance period.
13. COMMITMENTS AND CONTINGENCIES
In 1997, Enterprises anticipates the cost of its subsidiaries'
construction programs to be approximately $88 million.
Enterprises is involved in litigation arising in the normal course of
business. While the results of such litigation cannot be predicted with
certainty, management, based upon advice of counsel, believes that the
final outcome will not have a material adverse effect on the consolidated
financial position and results of operations. With respect to
environmental issues, IPL has ongoing discussions with various regulatory
authorities and continues to believe that IPL is in compliance with its
various permits.
II-33
<PAGE>
14. SUBSEQUENT EVENT
On February 25, 1997, the Board of Directors authorized the repurchase
of up to 12 million shares of IPALCO's common stock for approximately $410
million through a "Dutch auction" self-tender offer. The Board of Directors
also: (a) Approved the borrowing of up to $410 million to finance the stock
repurchase, and (b) declared a quarterly dividend in the amount of 25 cents
per share of common stock compared to a dividend of 37 cents per share of
common stock paid in the previous quarter.
15. QUARTERLY RESULTS (UNAUDITED)
Operating results for the years ended December 31, 1996 and 1995, by
quarter, are as follows (in thousands except per share amounts):
<TABLE>
<CAPTION>
1996
- ------------------------------------------------------------------------------------------
March 31 June 30 September 30 December 31
-------- ------- ------------ -----------
<S> <C> <C> <C> <C>
Utility operating revenues $196,446 $177,621 $205,672 $182,764
Utility operating income $ 44,844 $ 36,122 $ 51,163 $ 31,090
Net income $ 35,548 $ 24,459 $ 37,168 $ 17,100
Weighted average common shares 56,863 56,906 56,930 56,999
Earnings per share of common stock $ .63 $ .43 $ .65 $ .30
1995
- ------------------------------------------------------------------------------------------
<CAPTION>
March 31 June 30 September 30 December 31
-------- ------- ------------ -----------
<S> <C> <C> <C> <C>
Utility operating revenues $175,518 $159,652 $199,873 $174,163
Utility operating income $ 38,278 $ 30,405 $ 50,802 $ 28,103
Net income $ 25,903 $ 17,884 $ 39,543 $ 15,448
Weighted average common shares 56,721 56,728 56,745 56,784
Earnings per share of common stock $ .46 $ .32 $ .70 $ .27
</TABLE>
The quarterly figures reflect seasonal and weather-related fluctuations
which are normal to IPL's operations. Colder weather was experienced in
the first and second quarters of 1996 as compared to the same periods in
1995. In addition, during the fourth quarter of 1995, IPL expensed
approximately $12.3 million of property held for future use. See Note 9
regarding rate increases.
Earnings per share are computed independently for each of the quarters
presented. Therefore, the sum of the quarterly earnings per share may not
equal the total for the year.
II-34
