<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 16, 2000
REGISTRATION NO. 333-
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------------
THE AES CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 4991 54-1163725
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
------------------------------
1001 NORTH 19TH STREET
ARLINGTON, VIRGINIA 22209
(703) 522-1315
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
------------------------------
BARRY J. SHARP
SENIOR VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
THE AES CORPORATION
1001 NORTH 19TH STREET
ARLINGTON, VIRGINIA 22209
(703) 522-1315
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------------
COPIES TO:
<TABLE>
<S> <C>
RONALD C. BARUSCH, ESQ. RICHARD HALL, ESQ.
PANKAJ K. SINHA, ESQ. CRAVATH, SWAINE & MOORE
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP 825 EIGHTH AVENUE
1440 NEW YORK AVENUE, N.W. NEW YORK, NEW YORK 10019
WASHINGTON, D.C. 20005 (212) 474-1000
(202) 371-7000
</TABLE>
------------------------------
APPROXIMATE DATE OF COMMENCEMENT OF THE PROPOSED SALE OF THE SECURITIES TO
THE PUBLIC: As soon as practicable following the effectiveness of this
Registration Statement and after all other conditions under the share exchange
agreement are satisfied or waived.
If the securities being registered on this form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, as amended (the
"Securities Act"), check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
------------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) SHARE PRICE REGISTRATION FEE(2)
<S> <C> <C> <C> <C>
Common Stock, par value $0.01 per
share 71,861,583 N/A N/A $524,447
</TABLE>
(1) This Registration Statement relates to common stock, par value $0.01 per
share, of The AES Corporation ("AES") issuable to holders of common stock,
no par value, of IPALCO Enterprises, Inc. ("IPALCO") in the proposed share
exchange described herein. Under the share exchange agreement the final
exchange ratio will vary, subject to a maximum of 0.794. The amount of AES
common stock to be registered has been determined by multiplying an assumed
maximum exchange ratio of 0.794 for each share of IPALCO common stock by the
maximum aggregate number of shares of IPALCO common stock outstanding prior
to the share exchange, assuming the exercise of all outstanding IPALCO
options (whether or not currently exercisable). The actual exchange ratio
will not be determined until just prior to the closing date.
(2) The registration fee was calculated pursuant to Rules 457(f)(1) and 457(c)
based upon the per share market value of the shares of IPALCO common stock
to be cancelled in the share exchange which is the average of the high and
low sales prices of IPALCO common stock on the New York Stock
Exchange, Inc. Composite Tape on August 15, 2000 multiplied by 85,904,469
shares.
------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>
[LOGO OF IPALCO] [LOGO OF AES]
SPECIAL MEETING OF IPALCO SHAREHOLDERS
To the shareholders of IPALCO Enterprises, Inc.:
We invite you to attend a special meeting of the shareholders of IPALCO
Enterprises, Inc., which will be held at 11:00 a.m., Indianapolis time on
/ /, 2000 at One Monument Circle, Indianapolis, Indiana.
At this important meeting, you will be asked to approve an Agreement and
Plan of Share Exchange between IPALCO Enterprises, Inc. and The AES Corporation.
Pursuant to the share exchange agreement, IPALCO and AES will effect a share
exchange in which IPALCO will become a wholly-owned subsidiary of AES.
In the share exchange, your IPALCO common shares will be exchanged for AES
common stock. Under the terms of the share exchange agreement, the final
exchange ratio will be determined five business days prior to the closing, based
on the average daily closing prices of AES common stock for the preceding twenty
trading days. Upon closing, each share of IPALCO common stock will be exchanged
for AES shares with a market value of $25.00, subject to adjustment as described
below, so long as the average price of AES common stock (determined as described
above) is not below $31.50. If the average price of AES common stock is below
$31.50, you will receive a fixed ratio of 0.794 (subject to adjustment) shares
of AES common stock per share of IPALCO common stock. Subject to adjustment, if
the average price of AES common stock is below $26.45 (an effective price to you
of $21.00 per share of IPALCO common stock), IPALCO has the right to terminate
the transaction. If the closing is delayed beyond March 31, 2001, because of
delay in receiving certain regulatory approvals, and all other conditions are
satisfied, then the purchase price per IPALCO share will be increased by $0.15,
plus a daily increase equal to $0.375 per calendar quarter (equivalent to
$0.00411 per day). AES will pay you cash in lieu of issuing any fractional
shares.
Approval by our shareholders and certain regulatory bodies is necessary
before we can complete the share exchange. We currently expect that those
conditions will be met and the share exchange will close in early 2001.
THE ACCOMPANYING PROXY STATEMENT/PROSPECTUS INCLUDES A SUMMARY OF THE TERMS
OF THE SHARE EXCHANGE AGREEMENT AND CERTAIN RELATED INFORMATION. WE ENCOURAGE
YOU TO READ THIS ENTIRE DOCUMENT CAREFULLY.
YOUR BOARD OF DIRECTORS HAS CAREFULLY REVIEWED AND CONSIDERED THE TERMS AND
CONDITIONS OF THE SHARE EXCHANGE AGREEMENT, AND HAS DETERMINED THAT IT IS FAIR
TO AND IN THE BEST INTERESTS OF IPALCO AND ITS SHAREHOLDERS FOR IPALCO TO BE
ACQUIRED BY AES PURSUANT TO THE TERMS OF THE SHARE EXCHANGE AGREEMENT. YOUR
BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE SHARE EXCHANGE AGREEMENT, AND
RECOMMENDS A VOTE FOR APPROVAL OF THE SHARE EXCHANGE AGREEMENT.
If you have any questions concerning the proposed transaction, please call
our proxy solicitors, D.F. King & Co., Inc., toll-free at 1-800-758-5378. Please
do not send in your stock certificates with your proxy card.
Sincerely,
John R. Hodowal
Chairman of the Board and President
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the securities to be issued in
connection with the share exchange or determined if this proxy
statement/prospectus is accurate or complete. Any representation to the contrary
is a criminal offense.
This proxy statement/prospectus is dated / /, 2000 and is first being
mailed to shareholders of IPALCO on or about / /, 2000.
<PAGE>
ADDITIONAL INFORMATION
This proxy statement/prospectus incorporates important business and
financial information about AES and IPALCO from other documents that are not
included in or delivered with the proxy statement/prospectus. This information
is available to you without charge upon your written or oral request. You can
obtain the documents incorporated by reference in this proxy
statement/prospectus by requesting them in writing or by telephone from the
appropriate company at one of the following addresses:
<TABLE>
<S> <C>
The AES Corporation IPALCO Enterprises, Inc.
1001 North 19th Street One Monument Circle
Arlington, Virginia 22209 Indianapolis, Indiana 46204
(703) 522-1315 (317) 261-8261
</TABLE>
If you would like to request any documents, please do so by / /,
2000 in order to receive them before the special meeting.
See "Where You Can Find More Information" on page 66.
<PAGE>
IPALCO ENTERPRISES, INC.
ONE MONUMENT CIRCLE
INDIANAPOLIS, IN 46204
------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON / /, 2000
------------------------
Dear IPALCO Shareholder:
A special meeting of the shareholders of IPALCO Enterprises, Inc. ("IPALCO")
will be held on
/ /, 2000 at 11:00 a.m., Indianapolis time, at One Monument Circle,
Indianapolis, Indiana for the following purposes:
1. To consider and vote upon a proposal to approve an Agreement and
Plan of Share Exchange, dated as of July 15, 2000, attached as Annex A to
the accompanying proxy statement/ prospectus, providing for the share
exchange between IPALCO and The AES Corporation ("AES"), pursuant to which
IPALCO will become a wholly-owned subsidiary of AES. As a result of the
share exchange, each outstanding share of IPALCO common stock will be
exchanged for AES common stock with a market value of $25.00 per IPALCO
share, as more fully described in the accompanying proxy
statement/prospectus.
2. To transact such other business as may properly come before the
special meeting or any adjournment or postponement thereof.
Shareholders of record at the close of business on / /, 2000 will
be entitled to notice of and to vote at the special meeting or at any
adjournment or postponement thereof. It is very important that your shares be
represented at the special meeting. Approval of the share exchange agreement
will require the affirmative vote of at least a majority of IPALCO's outstanding
common shares. Failure to return a properly executed proxy card or to vote at
the special meeting will have the same effect as a vote against the share
exchange agreement.
YOUR BOARD OF DIRECTORS HAS CAREFULLY REVIEWED AND CONSIDERED THE TERMS AND
CONDITIONS OF THE SHARE EXCHANGE AGREEMENT, AND HAS DETERMINED THAT IT IS FAIR
TO AND IN THE BEST INTERESTS OF IPALCO AND ITS SHAREHOLDERS FOR IPALCO TO BE
ACQUIRED BY AES PURSUANT TO THE TERMS OF THE SHARE EXCHANGE AGREEMENT. YOUR
BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE SHARE EXCHANGE AGREEMENT, AND
RECOMMENDS A VOTE FOR APPROVAL OF THE SHARE EXCHANGE AGREEMENT.
ALL IPALCO SHAREHOLDERS ARE CORDIALLY INVITED TO ATTEND THE SPECIAL MEETING.
HOWEVER, TO ENSURE YOUR REPRESENTATION AT THE SPECIAL MEETING, YOU ARE REQUESTED
TO COMPLETE, DATE, SIGN AND MAIL THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE. A
PRE-ADDRESSED ENVELOPE IS ENCLOSED FOR THAT PURPOSE.
By order of the Board of Directors,
John R. Hodowal
Chairman of the Board and President
/ /, 2000
Indianapolis, Indiana
<PAGE>
TABLE OF CONTENTS
PROXY STATEMENT PROSPECTUS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
QUESTIONS AND ANSWERS ABOUT THE SHARE EXCHANGE BETWEEN AES
AND IPALCO................................................ 1
SUMMARY..................................................... 3
THE COMPANIES............................................... 15
AES....................................................... 15
IPALCO.................................................... 15
THE SPECIAL MEETING OF IPALCO SHAREHOLDERS.................. 16
Proxy Statement/Prospectus................................ 16
Date, Time and Place of the Special Meeting............... 16
Record Date and Voting Power.............................. 16
Required Vote............................................. 16
Voting; Proxies........................................... 16
THE SHARE EXCHANGE.......................................... 18
General Description of the Share Exchange................. 18
Background................................................ 18
AES's Reasons for the Share Exchange...................... 21
IPALCO's Reasons for the Share Exchange................... 21
Recommendation of IPALCO's Board of Directors............. 23
Opinion of IPALCO's Financial Advisor..................... 23
Interests of IPALCO's Officers and Directors in the Share
Exchange................................................ 30
Management and Operation of IPALCO After the Share
Exchange................................................ 33
Description of Exchange of Stock.......................... 34
Certain United States Federal Income Tax Consequences of
the Share Exchange...................................... 34
No Dissenters' or Appraisal Rights........................ 35
Anticipated Accounting Treatment.......................... 36
Governmental Approvals and Regulatory Matters............. 36
Securities Laws Matters................................... 38
New York Stock Exchange Matters........................... 38
CERTAIN TERMS OF THE AGREEMENT AND PLAN OF SHARE EXCHANGE... 39
The Share Exchange........................................ 39
Effective Time of the Share Exchange...................... 39
Manner and Basis of Effecting the Share Exchange.......... 39
Treatment of Stock Options and Restricted Stock........... 39
Representations and Warranties............................ 40
Covenants; Conduct of Business Prior to the Share
Exchange................................................ 40
Limitation on Considering Other Acquisition Proposals..... 44
Conditions to the Share Exchange.......................... 45
Termination of the Share Exchange Agreement............... 47
Expenses and Termination Fees............................. 47
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS....... 48
DESCRIPTION OF AES CAPITAL STOCK............................ 57
General................................................... 57
Transfer Agent and Registrar.............................. 57
COMPARATIVE RIGHTS OF IPALCO SHAREHOLDERS AND AES
SHAREHOLDERS.............................................. 58
INDEPENDENT ACCOUNTANTS..................................... 66
LEGAL MATTERS............................................... 66
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
EXPERTS..................................................... 66
WHERE YOU CAN FIND MORE INFORMATION......................... 66
Annexes:
Annex A: Agreement and Plan of Share Exchange............... A-1
Annex B: Opinion of UBS Warburg LLC......................... B-1
</TABLE>
ii
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE SHARE EXCHANGE BETWEEN AES AND IPALCO
Q: WHY IS IPALCO EFFECTING A SHARE EXCHANGE WITH AES? WHAT WILL HAPPEN TO
IPALCO AFTER THE SHARE EXCHANGE?
A: IPALCO is effecting a share exchange with AES in order to become part of a
larger, more diversified company with significantly greater financial resources
and a greater ability to respond to utility industry pressures such as
deregulation, new regulatory compliance costs and increasing competition for
customers. AES will acquire IPALCO through the share exchange and, as described
below, IPALCO shareholders will receive AES common stock in exchange for their
IPALCO common stock. IPALCO will then become a wholly-owned subsidiary of AES.
Q: WHAT WILL I RECEIVE IN THE EXCHANGE?
A: Under the terms of the share exchange agreement, the final exchange ratio
will be determined five business days prior to the closing, based on the average
daily closing prices of AES common stock for the preceding twenty trading days.
Upon closing, each share of IPALCO common stock will be exchanged for AES shares
with a market value of $25.00, subject to adjustment as described below, so long
as the average price of AES common stock (determined as described above) is not
below $31.50. If the average price of AES common stock is below $31.50, you will
receive a fixed ratio of 0.794 (subject to adjustment) shares of AES common
stock per share of IPALCO common stock. Subject to adjustment, if the average
price of AES common stock is below $26.45 (an effective price to you of $21.00
per share of IPALCO common stock), IPALCO has the right to terminate the
transaction. If the closing is delayed beyond March 31, 2001, because of delay
in receiving certain regulatory approvals, and all other conditions are
satisfied, then the purchase price per IPALCO share will be increased by $0.15,
plus a daily increase equal to $0.375 per calendar quarter (equivalent to
$0.00411 per day). AES will pay you cash in lieu of issuing any fractional
shares. We encourage you to obtain current market quotations for AES and IPALCO
common stock.
Q: WILL I RECEIVE DIVIDENDS ON MY AES SHARES?
A: AES does not currently pay or intend to pay dividends on its common stock.
Q: WHEN DO YOU EXPECT TO COMPLETE THE SHARE EXCHANGE?
A: We are working to complete the share exchange as quickly as possible and
expect to do so in early 2001 following receipt of necessary regulatory
approvals.
Q: WHO CAN VOTE ON THE SHARE EXCHANGE AGREEMENT? WHAT VOTE IS REQUIRED TO
APPROVE THE SHARE EXCHANGE AGREEMENT?
A: All IPALCO common shareholders of record at the close of business on
/ /, 2000 are entitled to vote on the share exchange agreement. An
affirmative vote of at least a majority of the total outstanding shares of
IPALCO common stock is required to approve the share exchange agreement.
Q: WHAT DO I NEED TO DO NOW?
A: We urge you to read this proxy statement/prospectus carefully, including its
attachments, and to consider how the share exchange affects you. Then, mail your
completed and signed proxy card in the enclosed return envelope as soon as
possible so that your shares can be voted at the special meeting of IPALCO
shareholders.
Q: WHAT HAPPENS IF I DO NOT RETURN A PROXY CARD?
A: Failure to return your proxy card will have the same effect as voting
against the share exchange.
<PAGE>
Q: MAY I VOTE IN PERSON?
A: Yes. You may attend the special meeting of IPALCO shareholders and vote your
shares in person, rather than, or in addition to, signing and returning your
proxy card.
Q: MAY I CHANGE MY VOTE AFTER I HAVE MAILED MY SIGNED PROXY CARD?
A: Yes. You may change your vote at any time before your proxy card is voted at
the special meeting. You can do this in one of three ways. First, you can send a
written notice stating that you would like to revoke your proxy. Second, you can
complete and submit a new proxy card. Third, you can attend the meeting and vote
in person. Your attendance alone will not revoke your proxy. If you have
instructed a broker to vote your shares, you must follow directions received
from your broker to change those instructions.
Q: IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE MY
SHARES FOR ME?
A: Your broker will not be able to vote your shares without instructions from
you. You should instruct your broker to vote your shares, following the
procedure provided by your broker.
Q: SHOULD I SEND IN MY STOCK CERTIFICATES NOW?
A: No. After the closing is completed, you will receive written instructions
for exchanging your shares of IPALCO common stock for shares of AES common stock
and a cash payment for any fractional shares of AES common stock to which you
would otherwise be entitled.
Q: WHAT ARE THE UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE SHARE
EXCHANGE?
A: AES and IPALCO have structured the share exchange so that, in general,
IPALCO shareholders will not recognize gain or loss for United States federal
income tax purposes in the share exchange on the exchange of their IPALCO stock,
except that IPALCO shareholders will generally be taxed on any cash they receive
in lieu of any fractional shares. IPALCO and AES will not be obligated to
complete the share exchange unless each receives legal opinions to this effect.
After receipt of shareholder approval, neither IPALCO nor AES may waive the
requirement that legal opinions be provided unless further shareholder approval
is obtained with appropriate disclosure.
Because tax matters are complicated, we encourage you to contact your tax
advisors to determine the particular tax consequences of the share exchange to
you. To review the tax consequences to IPALCO shareholders in greater detail,
see pages 34 through 35 of this proxy statement/prospectus.
Q: AM I ENTITLED TO DISSENTERS' RIGHTS OR APPRAISAL RIGHTS?
A: No. Indiana law does not provide for dissenters' rights or appraisal rights
in connection with the share exchange.
Q: WHO CAN HELP ANSWER MY QUESTIONS?
A: If you would like additional copies, without charge, of this proxy
statement/prospectus, or if you have questions about the share exchange,
including the procedures for voting your shares, you should contact:
D.F. King & Co., Inc.
77 Water Street, 20th Floor
New York, NY 10005
Banks and Brokers call: (212) 269-5550
All others call toll-free: (800) 758-5378
Facsimile: (212) 509-6052
2
<PAGE>
SUMMARY
THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS PROXY
STATEMENT/PROSPECTUS AND MAY NOT CONTAIN ALL THE INFORMATION THAT IS IMPORTANT
TO YOU. FOR A MORE COMPLETE UNDERSTANDING OF THE SHARE EXCHANGE, YOU SHOULD
CAREFULLY READ THIS ENTIRE DOCUMENT AND THE DOCUMENTS TO WHICH WE REFER. IN
ADDITION, YOU SHOULD READ THE DOCUMENTS ATTACHED TO THIS PROXY
STATEMENT/PROSPECTUS, INCLUDING THE SHARE EXCHANGE AGREEMENT WHICH IS ATTACHED
AS ANNEX A. IN ADDITION, WE INCORPORATE BY REFERENCE IMPORTANT INFORMATION ABOUT
IPALCO AND AES INTO THIS PROXY STATEMENT/PROSPECTUS. YOU MAY OBTAIN THE
INFORMATION INCORPORATED BY REFERENCE INTO THIS PROXY STATEMENT/PROSPECTUS BY
FOLLOWING THE INSTRUCTIONS IN THE SECTION OF THIS PROXY STATEMENT/PROSPECTUS
ENTITLED "WHERE YOU CAN FIND MORE INFORMATION" ON PAGE 66. WE HAVE INCLUDED PAGE
REFERENCES IN PARENTHESES AT VARIOUS POINTS IN THIS SUMMARY TO DIRECT YOU TO A
MORE DETAILED DESCRIPTION OF THE TOPICS PRESENTED.
THE COMPANIES (PAGE 15)
The AES Corporation
1001 North 19th Street
Arlington, Virginia 22209
(703) 522-1315
The AES Corporation, a Delaware corporation, is a global power company
committed to serving the world's needs for electricity in a socially responsible
way. AES's electricity generation business consists of sales to wholesale
customers (generally, electric utilities, regional electric companies or
wholesale commodity markets known as "power pools") for further resale to end
users. AES also sells electricity directly to end users such as commercial,
industrial, governmental and residential customers through its distribution
business. The company's generating assets include interests in over 140 electric
generation facilities totaling over 48 gigawatts of capacity. AES's electricity
distribution network has over 957,000 km of conductor and associated rights of
way and sells over 135,000 gigawatt hours per year to over 19 million end-use
customers. In addition, through its various retail electricity supply
businesses, AES sells electricity to over 154,000 end-use customers. Revenues
during 1999 were approximately $3.25 billion and total assets at the end of 1999
were approximately $20.9 billion.
IPALCO Enterprises, Inc.
One Monument Circle
Indianapolis, Indiana 46204
(317) 261-8261
IPALCO Enterprises, Inc. is a holding company incorporated in Indiana.
IPALCO's main subsidiary is Indianapolis Power & Light Company, also an Indiana
corporation. Indianapolis Power & Light Company is engaged primarily in
generating, transmitting, distributing and selling electric energy in the city
of Indianapolis and its surrounding and adjacent rural areas. IPALCO's total
electric revenues during 1999 were approximately $800.4 million and total assets
at the end of 1999 were approximately $2.3 billion.
GENERAL DESCRIPTION OF THE SHARE EXCHANGE (PAGE 18)
Pursuant to the share exchange, each share of IPALCO common stock
outstanding at the effective time will be exchanged automatically for a number
of shares of AES common stock as described below, and IPALCO will become a
wholly-owned subsidiary of AES.
The exchange ratio will be determined by dividing $25.00 (the "Per Share
Amount") by the average of the daily closing prices per share of AES common
stock as reported on the New York Stock Exchange Composite Tape on each of the
twenty trading days ending on the date immediately prior to the fifth trading
day before the closing of the share exchange if such average trading price is
greater
3
<PAGE>
than or equal to $31.50; however, if the average closing price is below $31.50,
the exchange ratio will be determined by dividing the Per Share Amount by
$31.50. Accordingly, subject to adjustment as described below, as an IPALCO
shareholder you will receive a maximum of 0.794 shares of AES common stock in
exchange for each share of IPALCO common stock you own. As a result, the method
of determining the exchange ratio presents some risk to IPALCO shareholders that
the value of AES common stock received in the share exchange will be less than
$25.00. If the value of AES common stock to be received by IPALCO shareholders
would be below $21.00, IPALCO has the right to terminate the share exchange
agreement. As an example of the method of determining the exchange ratio, if the
average closing price of AES common stock, determined as described above, were
$50.00, you would receive 0.5 shares of AES common stock for each share of
IPALCO common stock you own.
The Per Share Amount may increase. If the closing of the share exchange
occurs after the Trigger Date (as defined below), the Per Share Amount will be
increased by $0.15, plus a daily increase equal to $0.375 per calendar quarter
(equivalent to $0.00411 per day). The Trigger Date is defined as the latest of
(i) March 31, 2001, (ii) the date which is 30 days after the certification
required by the Indiana Utility Regulatory Commission (the "IURC") is issued,
and (iii) the date on which all the conditions (other than the receipt of
approval of the share exchange from the SEC and the exemption of AES from
registration as a holding company under the Public Utility Holding Company Act
of 1935, as amended ("PUHCA")) have been satisfied or waived by AES.
Notwithstanding the foregoing, the Trigger Date will not occur if the approval
required by the Federal Energy Regulatory Commission (the "FERC") is not
received until after the receipt of the SEC approvals referred to above.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE SHARE EXCHANGE
(PAGE 34)
AES and IPALCO have structured the share exchange so that, in general,
IPALCO shareholders will not recognize gain or loss for United States federal
income tax purposes as a result of the share exchange, except for taxes payable
because of cash received by IPALCO shareholders in lieu of fractional shares. It
is a condition to the share exchange that the parties receive legal opinions to
this effect.
REASONS FOR THE SHARE EXCHANGE
AES (PAGE 21)
AES's board of directors has identified several potential benefits of the
share exchange that it believes will contribute to the success of the combined
company. These potential benefits include:
- strengthening AES's ability to take advantage of changes in the electric
utility industry by serving customers in IPALCO's service territories; and
- adding some of the most efficient coal-powered, low-cost generating plants
in the Midwest and a highly respected brand name to the AES family.
For the strategic reasons set forth above, the AES board of directors has
unanimously determined that the share exchange agreement and the share exchange
are in the best interests of AES and its shareholders and that AES should
proceed with the share exchange agreement and the share exchange.
IPALCO (PAGE 21)
The IPALCO board of directors believes that IPALCO and its shareholders will
realize a number of benefits from the share exchange, including, among other
benefits, the following:
- IPALCO believes that a business combination is its best strategic
alternative and will enhance its ability to compete and to provide greater
value to you;
4
<PAGE>
- AES's purchase price represents a significant premium over the historical
price of IPALCO common stock; and
- AES has significant resources, a strong reputation and past success in
completing transactions.
RECOMMENDATION OF IPALCO'S BOARD OF DIRECTORS (PAGE 23)
After careful consideration, IPALCO's board of directors has unanimously
determined that the share exchange and the share exchange agreement are fair to
you and in your best interests and the best interests of IPALCO. IPALCO's board
of directors has approved the share exchange agreement and unanimously
recommends that you vote FOR approval of the share exchange agreement.
OPINION OF IPALCO'S FINANCIAL ADVISOR (PAGE 23)
In deciding to approve the share exchange, one of the factors that the
IPALCO board of directors considered was the opinion of its financial advisor,
UBS Warburg LLC, that, as of the date of the opinion, and based on the
procedures followed, factors considered and assumptions made by UBS Warburg, and
subject to the limitations set forth in the opinion, the exchange ratio in the
share exchange agreement and the consideration to be received by the holders of
IPALCO common stock in the share exchange is fair to the holders from a
financial point of view. The complete UBS Warburg opinion describes the basis
for its opinion and is attached as Annex B to this proxy statement/prospectus.
WE URGE YOU TO READ THE ENTIRE OPINION CAREFULLY.
THE SPECIAL MEETING OF IPALCO SHAREHOLDERS (PAGE 16)
TIME, DATE AND PLACE. A special meeting of the shareholders of IPALCO will
be held on / /, 2000 at the principal executive offices of IPALCO located
at One Monument Circle, Indianapolis, Indiana at 11:00 a.m., Indianapolis time,
to consider and approve the share exchange agreement.
RECORD DATE AND VOTING POWER FOR IPALCO. You are entitled to vote at the
special meeting if you owned shares of IPALCO common stock at the close of
business on / /, 2000, which is the record date for the special
meeting. You will have one vote at the special meeting for each share of IPALCO
common stock you owned at the close of business on the record date. On the
record date, there were / / shares of IPALCO common stock entitled to
be voted at the special meeting.
IPALCO REQUIRED VOTE. The approval of the share exchange agreement requires
the affirmative vote of holders of a majority of the shares of IPALCO common
stock outstanding at the close of business on the record date.
SHARE OWNERSHIP OF MANAGEMENT. The directors and executive officers of
IPALCO owned approximately / /% of the shares of IPALCO common stock
outstanding at the close of business on the record date. The directors and
executive officers of AES held no shares of IPALCO common stock outstanding at
the close of business on the record date.
INTERESTS OF IPALCO'S OFFICERS AND DIRECTORS IN THE SHARE EXCHANGE (PAGE 30)
When considering the recommendation of IPALCO's board of directors that you
vote for approval of the share exchange agreement, you should be aware that a
number of IPALCO's officers and directors have interests in the share exchange
that are different from, or in addition to, yours. These interests include
acceleration of vesting of restricted stock as a result of the share exchange,
the payment of deferred compensation upon consummation of the share exchange,
and the right to severance payments in the event of their termination without
cause or resignation with good reason within three years of the completion of
the share exchange.
5
<PAGE>
In determining the fairness of the share exchange to IPALCO shareholders,
IPALCO's board of directors took into account these interests.
LIMITATION ON CONSIDERING OTHER ACQUISITION PROPOSALS (PAGE 44)
IPALCO has agreed not to approve a business combination or other similar
transaction with another party while the share exchange is pending, unless the
other party has made an unsolicited acquisition proposal, IPALCO's board of
directors has given notice of the acquisition proposal to AES, IPALCO's board of
directors has determined that the acquisition proposal is a superior proposal
(as defined in the share exchange agreement) and IPALCO pays a fee of
$60.0 million to AES and reimburses AES for certain reasonable fees and expenses
up to $10.0 million.
CONDITIONS TO THE SHARE EXCHANGE (PAGE 45)
CONDITIONS TO THE OBLIGATIONS OF EACH PARTY. The obligations of AES and
IPALCO to complete the share exchange are subject to the satisfaction of certain
conditions, including the following:
- IPALCO shareholders must approve the share exchange agreement;
- the registration statement on Form S-4, of which this proxy
statement/prospectus is a part, must become effective;
- no law, injunction or order preventing the consummation of the share
exchange may be in effect;
- the waiting period applicable to the share exchange under the United
States antitrust laws must expire or be terminated;
- the parties must obtain a final order of the FERC under the Federal Power
Act; and
- the shares of AES common stock to be issued to IPALCO shareholders in the
share exchange must be authorized for listing on the New York Stock
Exchange.
CONDITIONS TO THE OBLIGATION OF AES. The obligation of AES to complete the
share exchange is subject to the satisfaction of additional conditions,
including the following:
- IPALCO's representations and warranties in the share exchange agreement
must be true and correct, subject to certain materiality qualifiers, and
IPALCO must perform in all material respects its obligations under the
share exchange agreement;
- AES must receive an SEC order granting AES an exemption from registration
as a holding company pursuant to Section 3(a)(5) of PUHCA, and SEC
approval of the share exchange pursuant to Section 9(a)(2) of PUHCA;
- there must not occur anything that would have a material adverse effect on
IPALCO;
- the IURC must issue a certification under PUHCA; and
- AES must receive an opinion of special tax counsel to the effect that the
share exchange will qualify as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code.
CONDITIONS TO THE OBLIGATION OF IPALCO. The obligation of IPALCO to
complete the share exchange is subject to the satisfaction of additional
conditions, including the following:
- AES's representations and warranties in the share exchange agreement must
be true and correct, subject to certain materiality qualifiers;
- AES must perform in all material respects its obligations under the share
exchange agreement; and
6
<PAGE>
- IPALCO must receive an opinion of special tax counsel to the effect that
the share exchange will qualify as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code.
TERMINATION OF THE SHARE EXCHANGE AGREEMENT (PAGE 47)
AES and IPALCO may jointly agree to terminate the share exchange agreement
at any time before the share exchange is completed. In addition, either company
may terminate the share exchange agreement if:
- the share exchange is not completed on or before October 15, 2001,
provided that this date will be extended for three additional months if
regulatory approvals have not been obtained, and so long as the failure to
consummate the share exchange is not the result of a breach of the share
exchange agreement by the party seeking to terminate the share exchange
agreement;
- a court or government entity issues a final order prohibiting the share
exchange;
- IPALCO shareholders do not approve the share exchange agreement; or
- the other company materially or wilfully breaches the share exchange
agreement and the breach is not remedied within 30 days.
In addition, AES may terminate the share exchange agreement if IPALCO's
board of directors withdraws or modifies its recommendation that IPALCO
shareholders approve the share exchange agreement in a manner adverse to AES,
approves or recommends another acquisition proposal, or fails to reaffirm its
recommendation to approve the share exchange after requested to do so by AES.
IPALCO may terminate the share exchange agreement if its board of directors
approves a superior proposal or if the value to be received by IPALCO
shareholders is less than $21.00 per share of IPALCO common stock.
EXPENSES AND TERMINATION FEES (PAGE 47)
The share exchange agreement provides that, in several circumstances, IPALCO
or AES may be required to pay termination fees and reimburse expenses to the
other party as described on page 47.
ANTICIPATED ACCOUNTING TREATMENT (PAGE 36)
The share exchange is expected to be accounted for as a pooling of
interests, which means that AES and IPALCO will be treated as if they had always
been combined for accounting and financial reporting purposes.
NO DISSENTERS' OR APPRAISAL RIGHTS (PAGE 35)
IPALCO shareholders are not entitled to dissenters' rights as a result of
the share exchange or to demand payment for their shares under Indiana law. See
pages 16 to 17 for a description of the special meeting and voting procedures.
GOVERNMENTAL APPROVALS AND REGULATORY MATTERS (PAGE 36)
The share exchange requires approvals under the Federal Power Act and PUHCA
as described on pages 36 to 37. AES and IPALCO will file an application with the
FERC requesting it to approve the share exchange. The FERC will approve the
share exchange if it finds it to be consistent with public interest.
AES will also seek approval from the SEC pursuant to Section 9(a)(2) of
PUHCA. Section 9(a)(2) of PUHCA requires an entity owning 5% or more of the
outstanding voting securities of a public utility company to obtain the approval
of the SEC prior to acquiring 5% or more of the voting securities of
7
<PAGE>
any additional public utility company. AES will also file an application with
the SEC for an order exempting AES, pursuant to Section 3(a)(5) of PUHCA, from
the provisions of PUHCA with respect to the share exchange.
The IURC must issue a certification pursuant to Section 33(a) of PUHCA
relating to AES's investments in foreign utility companies.
FORWARD-LOOKING INFORMATION
All statements included or incorporated by reference in this proxy
statement/prospectus or made by management of AES or IPALCO, other than
statements of historical fact regarding AES or IPALCO, are forward-looking
statements. Examples of forward-looking statements include statements regarding
AES's or IPALCO's future financial results, operating results, product
successes, business strategies, projected costs, future products, competitive
positions and plans and objectives of management for future operations. In some
cases, you can identify forward-looking statements by words such as "may,"
"will," "should," "would," "expects," "plans," "anticipates," "believes,"
"estimates," "predicts," "projects," "projection," "potential" or "continue," or
the negative of these or other comparable words. These forward-looking
statements are not guarantees of future performance and are subject to risks and
uncertainties and other important factors, including those that could cause
actual results to differ materially from expectations based on forward-looking
statements made in this document or elsewhere by or on behalf of AES or IPALCO.
For a description of certain of these risks, please refer to AES's and IPALCO's
filings with the SEC pursuant to the Securities Exchange Act of 1934.
8
<PAGE>
COMPARATIVE PER COMMON SHARE
MARKET PRICE AND DIVIDEND INFORMATION
Shares of IPALCO common stock and AES common stock are traded on the New
York Stock Exchange under the symbols "IPL" and "AES", respectively. On
July 14, 2000, the last full trading day prior to the public announcement of the
proposed share exchange, IPALCO common stock closed at $21.50 and AES common
stock closed at $50.375. On August 15, 2000, IPALCO common stock closed at
$23.125 and AES common stock closed at $56.875. This table sets forth, for the
periods indicated, the range of high and low per share sales prices for AES
common stock and IPALCO common stock as reported on the NYSE, and quarterly
dividends paid on IPALCO common stock.
<TABLE>
<CAPTION>
AES IPALCO
COMMON STOCK(1) COMMON STOCK(2)
--------------------------------------------------- ------------------------
HIGH LOW HIGH
------------------------ ------------------------ ------------------------
<S> <C> <C> <C>
FISCAL YEAR 1998
First quarter............................. $ 27.16 $ 19.69 $ 22.69
Second quarter............................ $ 29.00 $ 22.81 $ 23.06
Third quarter............................. $ 27.69 $ 11.50 $ 23.88
Fourth quarter............................ $ 23.69 $ 16.00 $ 27.81
FISCAL YEAR 1999
First quarter............................. $ 24.63 $ 16.41 $ 28.59
Second quarter............................ $ 29.88 $ 18.38 $ 24.75
Third quarter............................. $ 33.34 $ 26.53 $ 22.88
Fourth quarter............................ $ 38.19 $ 25.22 $ 21.00
FISCAL YEAR 2000
First quarter............................. $ 44.72 $ 34.25 $ 20.94
Second quarter............................ $ 49.63 $ 35.56 $ 21.25
Third Quarter (through August 15, 2000)... $ 59.69 $ 45.13 $ 23.56
<CAPTION>
IPALCO
COMMON STOCK(2)
------------------------------------
DIVIDENDS
LOW PAID
------------------------ ---------
<S> <C> <C>
FISCAL YEAR 1998
First quarter............................. $ 19.91 $0.1250
Second quarter............................ $ 20.09 $0.1375
Third quarter............................. $ 20.72 $0.1375
Fourth quarter............................ $ 22.75 $0.1375
FISCAL YEAR 1999
First quarter............................. $ 21.81 $0.1375
Second quarter............................ $ 21.00 $0.1500
Third quarter............................. $ 18.94 $0.1500
Fourth quarter............................ $ 15.63 $0.1500
FISCAL YEAR 2000
First quarter............................. $ 15.81 $0.1500
Second quarter............................ $ 18.94 $0.1625
Third Quarter (through August 15, 2000)... $ 20.13 $0.1625
</TABLE>
(1) Adjusted to reflect a two-for-one stock split of AES's common stock effected
in June 2000.
(2) Adjusted to reflect a two-for-one stock split of IPALCO's common stock
effected in March 1999.
The following table sets forth the per share closing price of AES common
stock and IPALCO common stock as reported on the NYSE on July 14, 2000, the last
full trading day before the public announcement of the proposed share exchange,
and on August 15, 2000, and the equivalent per share price of IPALCO common
stock on these dates:
<TABLE>
<CAPTION>
AES IPALCO EQUIVALENT PER
COMMON STOCK COMMON STOCK SHARE PRICE
-------------- -------------- ---------------
<S> <C> <C> <C>
July 14, 2000............................. 50.375 21.50 $25.00
August 15, 2000........................... 56.875 23.125 $25.00
</TABLE>
AES has not paid cash dividends on its common stock since December 1993. AES
policy is to retain earnings for use in its equity investments in projects.
Following the share exchange, AES common stock will continue to be listed on the
New York Stock Exchange and there will be no further market for IPALCO common
stock.
9
<PAGE>
AES SUMMARY SELECTED CONSOLIDATED FINANCIAL DATA
Set forth below are summary selected financial data for AES as of
December 31, 1999 and June 30, 2000 and for the five year period ended
December 31, 1999 and for the six month periods ended June 30, 1999 and
June 30, 2000. The summary selected financial data for the five year period
ended December 31, 1999 have been extracted from AES's audited consolidated
financial statements which are incorporated by reference in this proxy
statement/prospectus. The unaudited data for the six month periods ended
June 30, 1999 and June 30, 2000 have been extracted from AES's quarterly
unaudited reports filed on Form 10-Q, which are incorporated by reference in
this proxy statement/ prospectus.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
YEARS ENDED DECEMBER 31, (UNAUDITED)
---------------------------------------------------- -----------------------
1995 1996 1997 1998 1999 1999 2000
-------- -------- -------- -------- -------- -------- --------
(IN MILLIONS OF DOLLARS, EXCEPT PER SHARE (IN MILLIONS OF
AMOUNTS) DOLLARS, EXCEPT PER
SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues...................................... $ 679 $ 835 $ 1,411 $ 2,398 $ 3,253 $ 1,278 $ 3,014
Income before extraordinary item.............. 107 125 188 307 245 58 292
Net income.................................... 107 125 185 311 228 58 285
BALANCE SHEET DATA:
Total assets.................................. $2,341 $ 3,622 $ 8,909 $10,781 $20,880 $11,237 $29,020
Long-term debt................................ 1,307 2,118 5,731 7,196 13,017 7,886 17,248
Short-term borrowings......................... 50 88 -- 8 335 -- --
Stockholders' equity.......................... 549 721 1,481 1,794 2,637 1,514 3,990
CASH FLOW DATA:
Cash flows from operations.................... $ 200 $ 195 $ 193 $ 528 $ 197 $ 159 $ 611
Cash flows from financing activities.......... 127 886 3,723 1,503 6,369 1,106 2,728
Cash flows (used in) investing activities..... (343) (1,135) (3,799) (1,842) (6,388) (1,365) (2,808)
EARNINGS PER SHARE DATA:
Basic earnings per share:
Before extraordinary item..................... $ 0.36 $ 0.41 $ 0.57 $ 0.87 $ 0.64 $ 0.16 $ 0.69
Extraordinary item............................ -- -- (0.01) 0.01 (0.04) -- (0.02)
------ ------- ------- ------- ------- ------- -------
Basic earnings per share...................... $ 0.36 $ 0.41 $ 0.56 $ 0.88 $ 0.60 $ 0.16 $ 0.67
====== ======= ======= ======= ======= ======= =======
Diluted earnings per share:
Before extraordinary item..................... $ 0.35 $ 0.40 $ 0.56 $ 0.84 $ 0.62 $ 0.16 $ 0.66
Extraordinary item............................ -- -- (0.01) 0.01 (0.04) -- (0.02)
------ ------- ------- ------- ------- ------- -------
Diluted earnings per share.................... $ 0.35 $ 0.40 $ 0.55 $ 0.85 $ 0.58 $ 0.16 $ 0.64
====== ======= ======= ======= ======= ======= =======
</TABLE>
10
<PAGE>
IPALCO SUMMARY SELECTED CONSOLIDATED FINANCIAL DATA
Set forth below are summary selected financial data for IPALCO as of
December 31, 1999 and June 30, 2000 and for the five year period ended
December 31, 1999 and for the six month periods ending June 30, 1999 and
June 30, 2000. The summary financial data for the five year period ended
December 31, 1999 have been extracted from IPALCO's consolidated audited
financial statements which are incorporated by reference in this proxy
statement/prospectus. The unaudited data for the six month periods ended
June 30, 1999 and June 30, 2000 have been extracted from IPALCO's quarterly
unaudited reports filed on Form 10-Q, which are incorporated by reference in
this proxy statement/ prospectus.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
YEARS ENDED DECEMBER 31, (UNAUDITED)
-------------------------------------------------------------- -----------------------
1995 1996 1997 1998 1999 1999 2000
---------- ---------- ---------- ---------- ---------- ---------- ----------
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS) (IN THOUSANDS OF
DOLLARS, EXCEPT PER
SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues............................... $ 709,206 $ 762,503 $ 776,427 $ 821,256 $ 834,652 $ 403,841 $ 415,789
Income from operations before
cumulative effect of change in
accounting principle................. 98,778 114,275 95,699 130,119 128,947 64,249 121,307
Net income............................. 98,778 114,275 114,046 130,119 128,947 64,249 121,307
BALANCE SHEET DATA:
Total assets........................... $2,230,029 $2,182,701 $2,155,558 $2,118,945 $2,315,837 $2,103,437 $2,105,502
Long-term debt......................... 716,100 673,841 1,035,940 909,399 922,527 956,428 823,963
Short-term borrowings.................. 69,122 46,000 33,700 25,200 57,578 6,623 6,000
Preferred stock of subsidiary.......... 51,898 51,898 9,135 59,135 59,135 59,135 59,135
Shareholders' equity................... 821,109 856,186 524,546 574,191 677,746 532,055 665,486
CASH FLOW DATA:
Cash flows from operations............. $ 206,217 $ 247,141 $ 229,627 $ 235,407 $ 213,788 $ 131,937 $ 103,957
Cash flows from (used in) financing
activities........................... 9,071 (143,851) (149,581) (164,385) (86,587) (77,618) (176,051)
Cash flows from (used in) investing
activities........................... (211,882) (95,527) (82,070) (79,240) (112,341) (38,195) 69,410
EARNINGS PER SHARE DATA:
Basic earnings per share:
Before cumulative effect of change in
accounting principle................. $ 0.87 $ 1.00 $ 1.00 $ 1.45 $ 1.50 $ 0.74 $ 1.42
Cumulative effect of change in
accounting principle................. -- -- 0.19 -- -- -- --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Basic earnings per share............... $ 0.87 $ 1.00 $ 1.19 $ 1.45 $ 1.50 $ 0.74 $ 1.42
========== ========== ========== ========== ========== ========== ==========
Diluted earnings per share:
Before cumulative effect of change in
accounting principle................. $ 0.87 $ 1.00 $ 0.99 $ 1.43 $ 1.49 $ 0.74 $ 1.40
Cumulative effect of change in
accounting principle................. -- -- 0.19 -- -- -- --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Diluted earnings per share............. $ 0.87 $ 1.00 $ 1.18 $ 1.43 $ 1.49 $ 0.74 $ 1.40
========== ========== ========== ========== ========== ========== ==========
Cash dividends per common share........ $ 0.72 $ 0.74 $ 0.56 $ 0.54 $ 0.59 $ 0.29 $ 0.31
========== ========== ========== ========== ========== ========== ==========
</TABLE>
11
<PAGE>
AES AND SUBSIDIARY COMPANIES SUMMARY UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL
INFORMATION
The summary unaudited pro forma consolidated financial information of AES
presented below has been derived from the unaudited pro forma consolidated
financial statements of AES included elsewhere in this proxy
statement/prospectus. You should read the information below in conjunction with
the unaudited pro forma consolidated financial statements and related notes
thereto.
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED SIX MONTHS SIX MONTHS
DECEMBER 31, DECEMBER 31, DECEMBER 31, ENDED JUNE 30, ENDED JUNE 30,
1997 1998 1999 1999 2000
------------ ------------ ------------ -------------- --------------
(IN MILLIONS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues............................ $2,187 $3,219 $4,088 $1,682 $3,430
Income before extraordinary item.... 283 446 383 128 414
Net income.......................... 298 450 366 128 407
EARNINGS PER SHARE DATA:
Basic earnings per share - excluding
extraordinary item................ $ 0.74 $ 1.11 $ 0.90 $ 0.31 $ 0.89
Diluted earnings per share -
excluding extraordinary item...... $ 0.73 $ 1.07 $ 0.88 $ 0.31 $ 0.84
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
BALANCE SHEET DATA:
Total assets................................................ $31,142
Long-term debt.............................................. 18,078
Short-term borrowings....................................... --
Stockholders' equity........................................ 4,602
</TABLE>
12
<PAGE>
COMPARATIVE PER SHARE DATA
The information below presents:
- the historical earnings from continuing operations, book value and cash
dividends per share of AES common stock and the historical earnings from
continuing operations, book value and cash dividends per share of IPALCO
common stock; and
- the unaudited combined pro forma earnings from continuing operations, book
value and cash dividends per share of AES common stock after giving effect
to the proposed share exchange using the pooling of interests method of
accounting for business combinations and the unaudited equivalent pro
forma earnings from continuing operations, book value and cash dividends
per share of IPALCO common stock, in both cases, attributable to an
assumed ratio of 0.50 shares of AES common stock received for each share
of IPALCO common stock.
You should read the table below in conjunction with the respective audited
and unaudited consolidated financial statements and notes thereto of AES and
IPALCO incorporated by reference in this proxy statement/prospectus and the
unaudited consolidated pro forma financial information and notes thereto
included elsewhere in this proxy statement/prospectus.
AES
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 2000
1997 1998 1999 (UNAUDITED)
-------- -------- -------- ----------------
<S> <C> <C> <C> <C>
HISTORICAL PER SHARE DATA:
Earnings from continuing operations: (1)
Basic earnings per share........................ $ 0.57 $ 0.87 $ 0.64 $ 0.69
Diluted earnings per share...................... $ 0.56 $ 0.84 $ 0.62 $ 0.66
Cash dividends per share.......................... -- -- -- --
Book value per share (2)............................................... $ 6.89 $ 9.42
</TABLE>
IPALCO
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 2000
1997 1998 1999 (UNAUDITED)
-------- -------- -------- ----------------
<S> <C> <C> <C> <C>
HISTORICAL PER SHARE DATA:
Earnings from continuing operations: (1)
Basic earnings per share........................ $ 1.00 $ 1.45 $ 1.50 $ 1.42
Diluted earnings per share...................... $ 0.99 $ 1.43 $ 1.49 $ 1.40
Cash dividends per share.......................... $0.5600 $0.5375 $0.5875 $0.3125
Book value per share (2)............................................... $ 7.91 $ 7.76
</TABLE>
AES UNAUDITED PRO FORMA CONSOLIDATED DATA
<TABLE>
<CAPTION>
SIX MONTHS ENDED
1997 1998 1999 JUNE 30, 2000
-------- -------- -------- ----------------
<S> <C> <C> <C> <C>
AES UNAUDITED PRO FORMA CONSOLIDATED PER SHARE
DATA:
Earnings from continuing operations: (1)
Basic earnings per share........................ $ 0.74 $ 1.11 $ 0.90 $ 0.89
Diluted earnings per share...................... $ 0.73 $ 1.07 $ 0.88 $ 0.84
Cash dividends per share.......................... $0.1384 $0.1208 $0.1187 $0.0574
Book value per share (2)............................................... $ 7.71 $ 9.87
</TABLE>
13
<PAGE>
IPALCO EQUIVALENT UNAUDITED PRO FORMA DATA
<TABLE>
<CAPTION>
SIX MONTHS ENDED
1997 1998 1999 JUNE 30, 2000
-------- -------- -------- ----------------
<S> <C> <C> <C> <C>
IPALCO EQUIVALENT UNAUDITED PRO FORMA PER SHARE
DATA: (3)
Earnings from continuing operations: (1)
Basic earnings per share........................ $ 1.48 $ 2.22 $ 1.80 $ 1.78
Diluted earnings per share...................... $ 1.46 $ 2.14 $ 1.76 $ 1.68
Cash dividends per share.......................... $0.2767 $0.2416 $0.2374 $0.1148
Book value per share................................................... $ 15.42 $ 19.74
</TABLE>
------------------------
(1) Basic earnings per share is computed using the weighted average number of
common shares outstanding during the period. Diluted earnings per share is
computed using the weighted average number of common and common equivalent
shares outstanding during the period. Earnings are adjusted to include the
effects of interest savings from convertible securities for diluted earnings
per share calculations. Common equivalent shares consist of the shares
issuable upon the exercise of stock options and warrants as well as
convertible securities. Common equivalent shares are excluded from the
computations if their effect is antidilutive. All earnings per share data
exclude the effects of extraordinary items and cumulative effect of change
in accounting principle.
(2) The historical book value per AES share is computed by dividing
stockholders' equity by the number of shares of common stock outstanding as
of June 30, 2000 and December 31, 1999. The historical book value per IPALCO
share is computed by dividing shareholders' equity by the number of shares
of common stock outstanding as of June 30, 2000 and December 31, 1999. The
unaudited pro forma combined book value per AES share is computed by
dividing pro forma stockholders' equity by the pro forma number of shares of
AES common stock outstanding as of June 30, 2000 and December 31, 1999,
assuming the share exchange had occurred as of that date at an assumed ratio
of 0.50 shares of AES common stock issued for each IPALCO share of common
stock.
(3) The equivalent combined pro forma earnings, book value and cash dividends
per IPALCO share is calculated by dividing the unaudited consolidated pro
forma share amounts by an assumed ratio of 0.50 shares of AES common stock
for each share of IPALCO common stock.
14
<PAGE>
THE COMPANIES
AES
AES is a global power company committed to serving the world's needs for
electricity in a socially responsible way. AES's electricity generation business
consists of sales to wholesale customers (generally, electric utilities,
regional electric companies or wholesale commodity markets known as "power
pools") for further resale to end users. AES also sells electricity directly to
end users such as commercial, industrial, governmental and residential customers
through its distribution business.
Sales by AES's generation business are made under long-term contracts from
power plants owned by AES subsidiaries and affiliates, as well as directly into
power pools. AES owns new plants constructed for such purposes ("greenfield"
plants) as well as older power plants acquired through competitively bid
privatization initiatives or negotiated acquisitions.
Electricity sales by AES's distribution businesses, including affiliates,
are generally made pursuant to the provisions of long-term electricity sale
concessions granted by the appropriate governmental authorities. In certain
cases, these distribution companies are "integrated," in that they also own
electric power plants for the purpose of generating a portion of the electricity
they sell.
The company's generating assets include interests in over 140 electric
generation facilities totaling over 48 gigawatts of capacity. AES's electricity
distribution network has over 957,000 km of conductor and associated rights of
way and sells over 135,000 gigawatt hours per year to over 19 million end-use
customers. In addition, through its various retail electricity supply
businesses, the company sells electricity to over 154,000 end-use customers.
Revenues during 1999 were approximately $3.25 billion and total assets at the
end of 1999 were approximately $20.9 billion.
AES was incorporated in Delaware in 1981.
IPALCO
IPALCO is a holding company and its principal subsidiaries are Indianapolis
Power & Light Company ("IPL") and Mid-America Capital Resources, Inc.
IPL is engaged primarily in generating, transmitting, distributing and
selling electric energy in the City of Indianapolis and neighboring cities,
towns and communities, and adjacent rural areas all within the State of Indiana,
the most distant point being about forty miles from Indianapolis. It also
produces, distributes and sells steam within a limited area in Indianapolis.
IPL owns and operates three primarily coal-fired generating plants that are
used for electric generation. IPL also operates one coal and gas-fired plant.
For electric generation, the total gross nameplate rating is 3,024 megawatts,
winter capability is 3,036 megawatts and summer capability is 2,956 megawatts.
Mid-America Capital Resources, Inc., the holding company for the unregulated
activities of IPALCO, has as subsidiaries Mid-America Energy Resources, Inc.,
Indianapolis Campus Energy, Inc., Cleveland Thermal Energy Corporation and
Cleveland District Cooling Corporation. Cleveland Thermal owns and operates a
district heating system in Cleveland, Ohio. Cleveland Cooling owns and operates
a district cooling system also located in Cleveland. Cleveland Thermal and
Cleveland Cooling conduct business jointly under the name Cleveland Energy
Resources.
IPALCO has previously entered into agreements to sell certain assets,
including the Perry K steam plant and downtown steam distribution system
operated by IPL, the central city chilled water cooling and distribution system
owned by Mid-America Energy Resources, Inc., and the chilled water cooling
system ownded by Indianapolis Campus Energy, Inc. This sale is expected to be
completed during 2000.
IPALCO's total electric revenues during 1999 were approximately
$800.4 million and total assets at the end of 1999 were approximately
$2.3 billion.
IPALCO was incorporated in Indiana in 1983.
15
<PAGE>
THE SPECIAL MEETING OF IPALCO SHAREHOLDERS
PROXY STATEMENT/PROSPECTUS
This proxy statement/prospectus is being furnished to you in connection with
the solicitation of proxies by IPALCO's board of directors with respect to the
proposed share exchange.
DATE, TIME AND PLACE OF THE SPECIAL MEETING
The special meeting of shareholders of IPALCO is scheduled to be held as
follows:
/ /, 2000
11:00 a.m. Indianapolis time
One Monument Circle
Indianapolis, Indiana
RECORD DATE AND VOTING POWER
IPALCO's board of directors has fixed the close of business on
/ /, 2000 as the record date for determination of IPALCO shareholders
entitled to notice of and entitled to vote at the special meeting. On the record
date, there were / / shares of IPALCO common stock outstanding held
by approximately / / holders of record. Each holder of IPALCO common
stock is entitled to one vote for each share of IPALCO common stock held on the
record date.
REQUIRED VOTE
A majority of the outstanding shares of IPALCO common stock entitled to vote
at the special meeting, represented in person or by proxy, constitutes a quorum
at the special meeting. The affirmative vote of the holders of at least a
majority of IPALCO's common stock outstanding and entitled to vote at the
special meeting is required to approve the share exchange agreement.
As of the record date for the special meeting, IPALCO directors and
executive officers beneficially owned approximately / / shares of
IPALCO common stock, which represented approximately / /% of all
outstanding shares of IPALCO common stock entitled to vote at the special
meeting.
VOTING; PROXIES
All shares of IPALCO common stock represented by properly executed proxy
cards received before or at the special meeting will, unless revoked, be voted
in accordance with the instructions indicated on the proxy cards. If no
instructions are indicated on a properly executed proxy card, the shares will be
voted FOR approval of the share exchange agreement. You are urged to mark the
box on the proxy card to indicate how to vote your shares. If a properly
executed proxy card is returned and the shareholder has abstained from voting on
approval of the share exchange agreement, the IPALCO common stock represented by
the proxy will be considered present at the special meeting for the purposes of
determining a quorum but will not be considered to have been voted in favor of
approval of the share exchange agreement. Similarly, if an executed proxy card
is returned by a broker holding shares of IPALCO common stock in street name
that indicates the broker does not have discretionary authority to vote for
approval of the share exchange agreement, the shares will be considered present
at the meeting for purposes of determining the presence of a quorum but will not
be considered to have been voted in favor of approval of the share exchange
agreement. Your broker will vote your shares only if you indicate how you want
the broker to vote by following the instructions provided to you by your broker.
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Because approval of the share exchange agreement requires the affirmative
vote of holders of at least a majority of IPALCO's common stock outstanding as
of the record date, abstentions, failures to vote and broker non-votes all will
have the same effect as votes against approval of the share exchange agreement.
If any other matters properly come before the special meeting, the proxy
will vote the shares represented by the enclosed proxy card in accordance with
his best judgment, unless authority to do so is withheld by you in your proxy.
You may revoke your proxy at any time prior to its exercise at the special
meeting by:
- notifying in writing the Secretary of IPALCO at One Monument Circle,
Indianapolis, Indiana 46204;
- granting a subsequent proxy; or
- appearing in person and voting at the special meeting.
Attendance at the special meeting will not in and of itself constitute
revocation of a proxy.
IPALCO and AES will equally share the expenses incurred in connection with
the printing and mailing of this proxy statement/prospectus. IPALCO has retained
D.F. King & Co., Inc. at an estimated cost of $15,000 plus reimbursement of
expenses to assist in the solicitation of proxies. IPALCO also will request
banks, brokers and other intermediaries holding shares beneficially owned by
others to send this proxy statement/prospectus and related materials to and
obtain voting instructions from the beneficial owners and will reimburse the
holders for their reasonable expenses in so doing.
YOU SHOULD NOT SEND IN ANY STOCK CERTIFICATES WITH YOUR PROXY CARD.
INSTRUCTIONS FOR THE EXCHANGE OF YOUR SHARES WILL BE MAILED TO YOU AS SOON AS
PRACTICABLE AFTER COMPLETION OF THE SHARE EXCHANGE.
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THE SHARE EXCHANGE
THIS SECTION OF THE PROXY STATEMENT/PROSPECTUS DESCRIBES MATERIAL ASPECTS OF
THE PROPOSED SHARE EXCHANGE AND THE RELATED TRANSACTIONS, BUT IT MAY NOT CONTAIN
ALL OF THE INFORMATION THAT IS IMPORTANT FOR YOU TO KNOW. FOR A MORE COMPLETE
UNDERSTANDING OF THE SHARE EXCHANGE, YOU SHOULD CAREFULLY READ THIS ENTIRE PROXY
STATEMENT/PROSPECTUS AND THE OTHER DOCUMENTS TO WHICH WE REFER.
GENERAL DESCRIPTION OF THE SHARE EXCHANGE
At the effective time, IPALCO will become a wholly-owned subsidiary of AES.
Pursuant to the share exchange, each share of IPALCO common stock outstanding at
the effective time will be exchanged automatically for a number of shares of AES
common stock as described below. The exchange ratio will be determined by
dividing $25.00 (the "Per Share Amount") by the average of the daily closing
prices per share of AES common stock as reported on the New York Stock Exchange
Composite Tape on each of the twenty trading days ending on the date immediately
prior to the fifth trading day before the closing of the share exchange if such
average trading price is greater than or equal to $31.50; however, if the
average closing price is below $31.50, the exchange ratio will be determined by
dividing the Per Share Amount by $31.50. Accordingly, subject to adjustment as
described below, as an IPALCO shareholder you will receive a maximum of 0.794
shares of AES common stock in exchange for each share of IPALCO common stock you
own. As a result, the method of determining the exchange ratio presents some
risk to IPALCO shareholders that the value of AES common stock received in the
share exchange will be less than $25.00. If the value of AES common stock to be
received by IPALCO shareholders would be below $21.00, IPALCO has the right to
terminate the share exchange agreement.
The Per Share Amount may increase. If the closing of the share exchange
occurs after the Trigger Date (as defined below), the Per Share Amount will be
increased by $0.15, plus a daily increase equal to $0.375 per calendar quarter
(equivalent to $0.00411 per day). The Trigger Date is defined as the latest of
(i) March 31, 2001, (ii) the date which is 30 days after the certification
required by the Indiana Utility Regulatory Commission is issued, and (iii) the
date on which all the conditions (other than the receipt of approval of the
share exchange from the SEC and the exemption of AES from registration as a
holding company under PUHCA) have been satisfied or waived by AES.
Notwithstanding the foregoing, the Trigger Date will not occur if the approval
required by the FERC is not received until after the receipt of the SEC
approvals referred to above.
Based on the number of shares of IPALCO common stock and AES common stock
outstanding as of the record date, and the market price of AES common stock as
of that date, shares of AES common stock will be issuable pursuant to the share
exchange agreement representing approximately / /% of the total AES common
stock expected to be outstanding after such issuance. This assumes that no
IPALCO or AES stock options or warrants are exercised prior to the share
exchange.
BACKGROUND
In 1999, IPALCO's stock price, as well as the stock prices of most other
companies in the regulated utility industry, significantly underperformed those
of the broader market. Utility companies have struggled to create value for
their shareholders in an environment of regulatory uncertainty, declining power
prices, rising interest rates and increasing consolidation. Business
combinations involving power companies in the midwestern United States announced
or completed since the beginning of 1999 include the purchase of Columbia Energy
Group by Nisource, the purchase of Illinova by Dynegy, the combination of Unicom
and Peco Energy, the acquisition of CILCORP by AES, the acquisition of Central
and South West Corporation by AEP and the acquisition of LG&E Corporation by
PowerGen. As a result of these and other business combinations, IPALCO has
become a relatively smaller company in the shrinking universe of utility
companies. IPALCO occasionally received informal expressions of interest from
potential acquirors, none of which led to serious discussions or firm proposals.
As
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IPALCO assessed this challenging new environment and its strategy for the
future, management noted these trends and began to consider the possibility of a
transforming transaction such as a business combination.
In late 1999, John R. Hodowal, Chairman and President of IPALCO, was
approached by a financial sponsor (Acquiror No. 1) who indicated an interest in
taking IPALCO "private" through a leveraged acquisition at a potential cash
purchase price of approximately $23 per share of IPALCO common stock. In
response, IPALCO retained UBS Warburg as its financial advisor and began to
consider Acquiror No. 1's proposal, as well as other potential alternatives.
On February 29, 2000, at a regular meeting of the IPALCO board, the IPALCO
board discussed the indication of interest of Acquiror No. 1. The IPALCO board
discussed and evaluated the factors that would be necessary to create additional
shareholder value over the next several years, including a reversal of
macroeconomic trends, a reduction in regulatory uncertainty and management of
environmental risk. The IPALCO board also discussed its alternatives in light of
these factors, including stock repurchases, a management buyout and continued
execution of IPALCO's core business plan. After discussing these and other
alternatives, as well as IPALCO's future prospects for growth, the IPALCO board
determined to proceed with consideration of a business combination. In addition,
the IPALCO board authorized IPALCO management and its advisors to continue to
negotiate with Acquiror No. 1.
Pursuant to the authorization of the IPALCO board, IPALCO management
directed UBS Warburg to make initial contacts with a number of other potential
acquirors to determine whether they had an interest in exploring a possible
business combination with IPALCO. UBS Warburg contacted six major financial
sponsors based upon their interest in the energy industry and their ability to
lead a large transaction. UBS Warburg also contacted certain potential foreign
acquirors, none of whom expressed an interest in acquiring IPALCO. In addition,
IPALCO management and UBS Warburg conducted an analysis of potential domestic
strategic acquirors, considering the strategic direction of these companies, the
price these companies might be willing and able to pay and the regulatory issues
that would be raised by a business combination with each.
Four of the six financial sponsors contacted by UBS Warburg indicated that
they were not prepared to make a proposal to acquire IPALCO. One financial
sponsor suggested a price of approximately $20.00 per share of IPALCO common
stock, and another (Acquiror No. 2) indicated a price in the range of $22.00 to
$23.00 per share of IPALCO common stock. During March, Acquiror No. 1 conducted
extensive due diligence with respect to IPALCO.
At a meeting of the IPALCO board on March 28, the IPALCO board, together
with IPALCO management and outside industry consultants, reviewed the current
state of the power industry and the alternatives available to IPALCO. In
addition, UBS Warburg and IPALCO management reviewed with the IPALCO board the
discussions with Acquiror No. 1 and Acquiror No. 2, and the IPALCO board
instructed IPALCO management and its advisors to continue to pursue negotiations
with these parties.
In late March and early April, IPALCO conducted negotiations with Acquiror
No. 1 and Acquiror No. 2 with respect to price, regulatory issues, contractual
issues and financing issues. In early April, each of Acquiror No. 1 and Acquiror
No. 2 indicated a willingness to acquire IPALCO in an all cash transaction at a
price of $23.50 per share of IPALCO common stock. At a meeting of the IPALCO
board on April 19, the IPALCO board reviewed and discussed each of these
proposals.
In late April, Thomas A. Tribone, Executive Vice President of AES, contacted
Mr. Hodowal and proposed a business combination of IPALCO and AES. Mr. Hodowal
informed Mr. Tribone that other potential acquirors had begun discussions and
due diligence with IPALCO. Mr. Tribone expressed a willingness to move quickly
in an effort to catch up with these other potential acquirors.
At a meeting held on April 25, the IPALCO board discussed its alternatives
with IPALCO management and outside consultants, reviewed the status of
negotiations with each of Acquiror No. 1 and Acquiror No. 2 and discussed and
determined to pursue the indication of interest from AES. Over the
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course of late April and early May, AES and Acquiror No. 2 conducted extensive
due diligence investigations and AES, Acquiror No. 1 and Acquiror No. 2 engaged
in detailed discussions with respect to regulatory and contractual issues.
On May 19, AES presented a proposal to acquire IPALCO in an all cash
transaction at a purchase price of $25.00 per share of IPALCO common stock.
Pursuant to the terms of this offer, AES anticipated obtaining assurances from
the SEC that SEC approval of the business combination would not be necessary
under Section 9(a)(2) of PUHCA.
In late May, Acquiror No. 1 withdrew its proposal to purchase IPALCO, citing
concerns relating to its ability to finance the transaction. Also in late May, a
domestic utility (Acquiror No. 3) approached UBS Warburg and expressed an
interest in acquiring IPALCO at a cash purchase price of approximately $25.00
per share of IPALCO common stock.
On May 23, the IPALCO board received an update from IPALCO management and
its advisors as to the status of the discussions with AES, Acquiror No. 2 and
Acquiror No. 3. The IPALCO board instructed IPALCO management to continue
negotiations with each of these parties. In early June, after conducting initial
due diligence, Acquiror No. 3 advised IPALCO that it was no longer interested in
pursuing an acquisition of IPALCO. Also in early June, Acquiror No. 1 again
expressed interest in a transaction with IPALCO, with different debt and equity
investors, and indicated a preliminary price of $23.50 per share of IPALCO
common stock. This price indication, however, was subject to conducting
additional due diligence and securing additional financing.
On June 16, at a meeting of the IPALCO board, IPALCO management and its
advisors discussed the status of negotiations with each of AES, Acquiror No. 1
and Acquiror No. 2, and outlined the major issues presented by a potential
business combination with each.
On June 20, Acquiror No. 2 presented a proposal to acquire IPALCO in an all
cash transaction for $23.50 per share of IPALCO common stock. On June 22, AES
informed IPALCO that it was no longer willing to offer a cash purchase price of
$25.00 per share of IPALCO common stock, but would be willing to offer this
amount in the form of AES common stock. AES also informed IPALCO at this time
that the consummation of a business combination with IPALCO would likely require
the approval of the SEC under Section 9(a)(2) of PUHCA.
On June 23 and June 25, IPALCO management and its advisors met with AES
management and its advisors and discussed the terms and structure of the AES
proposal, including the terms of any "collar" and any increase in the purchase
price for delay in closing the share exchange. The parties also discussed the
regulatory issues presented by the contemplated structure.
On June 27, the IPALCO board met to consider the proposals of AES and
Acquiror No. 2. After discussing the ability of each of AES and Acquiror No. 2
to successfully complete a business combination, the implications of AES's shift
from cash to stock, including the tax treatment of the transaction as a tax-free
reorganization, and the benefits to shareholders, prospects for growth and
effects on customers and employees presented by each proposal, the IPALCO board
determined that the proposed business combination with AES presented the more
attractive alternative for IPALCO. At the direction of the IPALCO board,
Mr. Hodowal contacted Mr. Tribone and informed him that, subject to favorable
resolution of the open financial issues, IPALCO would be willing to negotiate
exclusively with AES in an effort to reach prompt agreement on the structure and
other terms of a business combination.
From June 28 until July 13, IPALCO and AES negotiated the terms and
structure of the business combination. IPALCO management and its representatives
conducted a due diligence investigation of AES, and examined the regulatory
issues raised by a business combination with AES. On July 12, Mr. Hodowal and
Mr. Tribone met, together with IPALCO's regulatory counsel and AES's regulatory
counsel, with representatives of the SEC staff to discuss the contemplated
structure of the proposed business combination and the regulatory issues posed
by such a structure.
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On July 14, the IPALCO board met to consider the share exchange agreement
and the transactions contemplated thereby. Representatives of UBS Warburg and
Cravath, Swaine & Moore made presentations to the IPALCO board and discussed
with the IPALCO board their views and analyses of various aspects of the
proposed share exchange. UBS Warburg delivered its oral opinion (subsequently
confirmed in writing) to the IPALCO board to the effect that as of such date the
consideration to be received by IPALCO shareholders pursuant to the share
exchange agreement is fair from a financial point of view to such holders. The
IPALCO board reviewed and considered, among other things, the matters described
under "IPALCO's Reasons for the Share Exchange." After a full discussion, the
IPALCO board, by the unanimous vote of all directors, resolved that the share
exchange agreement is fair to and in the best interests of IPALCO and its
shareholders, approved the share exchange agreement and resolved to recommend
that the shareholders of IPALCO vote to approve the share exchange agreement.
IPALCO and AES executed the share exchange agreement on July 15, 2000.
AES'S REASONS FOR THE SHARE EXCHANGE
AES's board of directors has identified several potential benefits of the
share exchange that it believes will contribute to the success of the combined
company. These potential benefits include:
- strengthening AES's ability to take advantage of changes in the electric
utility industry by serving customers in IPALCO's service territories; and
- adding some of the most efficient coal-powered, low-cost generating plants
in the Midwest and a highly respected brand name to the AES family.
For the strategic reasons set forth above, the AES board of directors
unanimously determined that the share exchange agreement and the share exchange
are in the best interests of AES and its shareholders and that AES should
proceed with the share exchange agreement and the share exchange.
IPALCO'S REASONS FOR THE SHARE EXCHANGE
IPALCO is combining with AES in order to become part of a larger and more
diversified company that will enable IPALCO to continue to grow and respond to
emerging competitive pressures. IPALCO's board of directors has concluded that
the terms of the share exchange agreement are in the best interest of IPALCO's
shareholders, customers and employees, and are more attractive than the terms of
other alternatives available to IPALCO. The IPALCO board's conclusion was based
upon a number of factors, including the financial presentation and opinion of
UBS Warburg, the overall price and premium offered, and the reputation and
resources offered by AES. The IPALCO board's analysis in reaching this
conclusion is described in more detail below:
- IPALCO BELIEVES THAT A BUSINESS COMBINATION IS ITS BEST STRATEGIC ALTERNATIVE.
The IPALCO board believes that a business combination represents the best
strategic alternative currently available and is in the best interests of
IPALCO's shareholders, customers and employees. Without the share exchange, or
an equally attractive alternative transaction, the IPALCO board believes there
is a significant risk that IPALCO's limited size and resources will inhibit its
ability to compete in a deregulated utility industry and eventually cause an
unacceptable erosion of shareholder value. In addition, the IPALCO board
believes that macroeconomic trends, regulatory uncertainty and environmental
risk will, absent the share exchange or an equally attractive alternative
transaction, combine to limit IPALCO's prospects for significant growth in
shareholder value. The IPALCO board reviewed a number of possible alternatives
to the share exchange, including continuing to operate IPALCO as an independent
public entity, restructuring IPALCO through a share repurchase or
recapitalization, acquiring one or more other companies in the power industry,
selling specific assets of IPALCO and selling IPALCO to other financial or
strategic buyers. In addition, in previous years IPALCO has pursued various
growth initiatives, including extensive consideration of possible acquisitions
of neighboring utilities to expand IPALCO's geographic reach, and investments in
unregulated businesses such as cable
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television, radio, energy storage, energy management, thermal energy production
and distribution, energy brokering and e-commerce. While some of these
initiatives were successful, IPALCO remains primarily a regulated regional
utility. Based on a variety of factors, including presentations by management,
UBS Warburg and outside industry consultants as to IPALCO's alternatives and as
to various valuation matters and the factors relating to IPALCO's alternatives,
the IPALCO board concluded that none of the alternatives considered was likely
to provide greater value to IPALCO's shareholders than the share exchange.
- AES'S PURCHASE PRICE REPRESENTS A SIGNIFICANT PREMIUM.
The purchase price of $25.00 per share represents a premium of 16.3% over
the closing price of IPALCO common stock on the last trading day prior to the
announcement of the share exchange agreement, a premium of 22.3% over the
average closing price of IPALCO common stock for the one month prior to the
announcement of the share exchange agreement and a premium of 29.7% over the
average closing price of IPALCO common stock for the one year prior to the
announcement of the share exchange agreement.
- AES HAS SIGNIFICANT RESOURCES AND A STRONG REPUTATION.
The IPALCO board looked closely at AES's business reputation, corporate
culture and its past successes in completing other transactions. IPALCO believes
that AES has significant financial and operational resources at its disposal and
an excellent reputation for the quality and efficiency of its services
throughout the world. AES also brings superior and varied management experience
to the transaction. IPALCO believes that as a result of these factors, the
transaction will enable IPALCO to develop, grow and compete in ways not
currently possible. In addition, AES is well known in the power industry for
successfully bringing its transactions to closure without undue delay or
complication.
In addition to the reasons described above, the IPALCO board considered the
following factors in evaluating the share exchange:
- The expected tax treatment of the share exchange as a tax-free
reorganization for United States federal income tax purposes.
- The analyses and presentation of UBS Warburg on the financial aspects of
the share exchange, and its written opinion to the effect that, as of
July 15, 2000, and based on and subject to the various considerations set
forth in its opinion, the exchange ratio is fair, from a financial point
of view, to IPALCO shareholders.
- The interests of the officers and directors of IPALCO in the share
exchange, including the matters described under "Interests of IPALCO's
Officers and Directors in the Share Exchange."
- The terms and conditions of the share exchange agreement, including the
right of IPALCO, under certain circumstances, to respond to, evaluate and
negotiate with respect to other business combination proposals.
- The accounting treatment of the transaction using the pooling of interests
method of accounting for business combinations.
The IPALCO board believes that each of the above factors generally supported
its determination and recommendation. The IPALCO board, did, however, consider
the following potentially negative factors in its deliberations concerning the
share exchange:
- The fact that the market price of AES common stock has been relatively
volatile, presenting some risk to IPALCO shareholders that the value of
AES common stock received in the share exchange will be less than $25.00.
The IPALCO board also considered the fact that the share exchange
agreement provides that the value of the exchange ratio to IPALCO
shareholders is
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fixed at $25.00 per share of IPALCO common stock unless the average
trading price (as determined in accordance with the share exchange
agreement) of the AES common stock is below $31.50, as well as the fact
that IPALCO may terminate the share exchange agreement in the event that
the value of the exchange ratio to IPALCO shareholders falls below $21.00
per share of IPALCO common stock.
- The fact that the share exchange presents some degree of regulatory
complexity, and that this complexity could delay the consummation of the
share exchange. The IPALCO board also considered the fact that the share
exchange agreement provides that the value of the exchange ratio to IPALCO
shareholders increases in the event that consummation of the share
exchange is significantly delayed due to the absence of PUHCA regulatory
approvals. See "Governmental Approvals and Regulatory Matters."
RECOMMENDATION OF IPALCO'S BOARD OF DIRECTORS
AFTER CAREFUL CONSIDERATION, IPALCO'S BOARD OF DIRECTORS HAS UNANIMOUSLY
DETERMINED THAT THE SHARE EXCHANGE AND THE SHARE EXCHANGE AGREEMENT ARE FAIR TO
YOU AND IN YOUR BEST INTERESTS AND IN THE BEST INTERESTS OF IPALCO. IPALCO'S
BOARD OF DIRECTORS HAS APPROVED THE SHARE EXCHANGE AGREEMENT AND UNANIMOUSLY
RECOMMENDS THAT YOU VOTE FOR APPROVAL OF THE SHARE EXCHANGE AGREEMENT.
In considering the recommendation of the IPALCO board with respect to the
share exchange agreement, you should be aware that certain directors and
officers of IPALCO have interests in the share exchange that are different from,
or are in addition to, the interests of IPALCO shareholders. Please see the
section entitled "Interests of IPALCO's Officers and Directors in the Share
Exchange" that begins on page 30 of this proxy statement/prospectus.
OPINION OF IPALCO'S FINANCIAL ADVISOR
On July 14, 2000, at a meeting of the IPALCO board of directors held to
evaluate the proposed share exchange, UBS Warburg delivered its oral opinion,
subsequently confirmed in writing, to the effect that, as of that date and based
on and subject to various assumptions, matters considered and limitations
described in the opinion, the consideration, as defined in the fairness opinion
letter, provided for in the share exchange was fair, from a financial point of
view, to the holders of IPALCO common stock.
The full text of UBS Warburg's opinion describes the assumptions made,
procedures followed, matters considered and limitations on the review undertaken
by UBS Warburg. This opinion is attached as Annex B and is incorporated into
this proxy statement/prospectus by reference. UBS WARBURG'S OPINION IS DIRECTED
ONLY TO THE FAIRNESS, FROM A FINANCIAL POINT OF VIEW, OF THE CONSIDERATION
PROVIDED FOR IN THE SHARE EXCHANGE AND DOES NOT ADDRESS ANY OTHER ASPECT OF THE
SHARE EXCHANGE OR ANY RELATED TRANSACTION. THE OPINION DOES NOT ADDRESS THE
UNDERLYING BUSINESS DECISION OF IPALCO TO EFFECT THE SHARE EXCHANGE OR
CONSTITUTE A RECOMMENDATION TO ANY HOLDER OF IPALCO COMMON STOCK AS TO HOW TO
VOTE OR OTHERWISE ACT WITH RESPECT TO ANY MATTERS RELATING TO THE PROPOSED SHARE
EXCHANGE. HOLDERS OF IPALCO COMMON STOCK ARE ENCOURAGED TO READ UBS WARBURG'S
OPINION CAREFULLY IN ITS ENTIRETY. The summary of UBS Warburg's opinion
described below is qualified in its entirety by reference to the full text of
its opinion.
In arriving at its opinion, UBS Warburg:
- reviewed certain publicly available business and historical financial
information relating to IPALCO and AES;
- reviewed certain internal financial information and other data relating to
the business and financial prospects of IPALCO and AES, including
estimates and financial forecasts prepared by the managements of IPALCO
and AES that were provided to UBS Warburg by the managements of IPALCO and
AES, and not publicly available;
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- conducted discussions with members of the senior managements of IPALCO and
AES;
- reviewed publicly available financial and stock market data with respect
to certain other companies in lines of business UBS Warburg believed to be
generally comparable to those of IPALCO and AES;
- compared the financial terms of the share exchange with the publicly
available financial terms of certain other transactions which UBS Warburg
believed to be generally relevant;
- reviewed the share exchange agreement; and
- conducted such other financial studies, analyses, and investigations, and
considered such other information as UBS Warburg deemed necessary or
appropriate.
In connection with its review, UBS Warburg did not assume any responsibility
for independent verification of any of the information that UBS Warburg was
provided or reviewed for the purposes of its opinion and UBS Warburg relied on
that information being complete and accurate in all material respects. In
addition, UBS Warburg did not make any independent evaluation or appraisal of
any of the assets or liabilities (contingent or otherwise) of IPALCO or AES, and
was not furnished with any such evaluation or appraisal.
With respect to the financial forecasts and estimates related thereto that
it reviewed, UBS Warburg assumed that they were reasonably prepared on a basis
reflecting the best currently available estimates and judgments of the
managements of IPALCO and AES as to the future financial performance of their
respective companies. UBS Warburg also assumed that the share exchange will be
treated as a tax-free reorganization for United States federal income tax
purposes. UBS Warburg's opinion is necessarily based on economic, monetary,
market and other conditions existing, and information made available to UBS
Warburg, on the date of its opinion.
UBS Warburg was not asked to, and it did not, offer any opinion as to the
material terms of the share exchange agreement (other than the consideration),
the form of the share exchange, or any related agreement to be entered into by
IPALCO. In rendering its opinion, UBS Warburg assumed that IPALCO and AES will
comply with all the material terms of the share exchange agreement and that the
share exchange will be validly consummated in accordance with its terms. UBS
Warburg expressed no opinion as to the value of AES common stock when issued or
the prices at which AES common stock will trade or otherwise be transferable
after the announcement or consummation of the share exchange.
In connection with rendering its opinion to the IPALCO board of directors,
UBS Warburg performed a variety of financial analyses which are summarized
below. The following summary is not a complete description of all of the
analyses performed and factors considered by UBS Warburg in connection with its
opinion. The preparation of a fairness opinion is a complex process involving
subjective judgments and is not necessarily susceptible to partial analysis or
summary description. With respect to the analysis of selected publicly traded
companies and the analysis of selected transactions summarized below, no company
or transaction used as a comparison is either identical or directly comparable
to IPALCO, AES or the share exchange. These analyses necessarily involve complex
considerations and judgments concerning financial and operating characteristics
and other factors that could affect the public trading or acquisition values of
the companies concerned.
UBS Warburg believes that its analyses and the summary below must be
considered as a whole and that selecting portions of its analyses and factors or
focusing on information presented in tabular format, without considering all
analyses and factors or the narrative description of the analyses, could create
a misleading or incomplete view of the processes underlying UBS Warburg's
analyses and opinion. UBS Warburg arrived at its ultimate opinion based on the
results of all the analyses undertaken by it and assessed them as a whole. UBS
Warburg did not draw, in isolation, conclusions from or with regard to any one
factor or method of analysis.
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The estimates of IPALCO's and AES's future performance provided by these
companies' respective managements in or underlying UBS Warburg's analyses are
not necessarily indicative of future results or values, which may be
significantly more or less favorable than those estimates. In performing its
analyses, UBS Warburg considered industry performance, general business and
economic conditions and other matters, many of which are beyond IPALCO's and
AES's control. Estimates of the financial value of companies do not necessarily
purport to be appraisals or reflect the prices at which companies actually may
be sold.
The consideration provided for in the share exchange was determined through
negotiations between IPALCO and AES and the decision to enter into the share
exchange was solely that of IPALCO's board of directors. UBS Warburg's opinion
and financial analyses were only one of many factors considered by IPALCO's
board of directors in its evaluation of the share exchange and should not be
viewed as determinative of the views of IPALCO's board of directors or
management with respect to the share exchange or the consideration provided for
in the share exchange.
The following is a brief summary of the material financial analyses
performed by UBS Warburg and reviewed with IPALCO's board of directors in
connection with its opinion. The financial analyses summarized below include
information presented in tabular format. In order to fully understand UBS
Warburg's financial analyses, the tables must be read together with the text of
each summary. The tables alone do not constitute a complete description of the
financial analyses. Considering the data below without considering the full
narrative description of the financial analyses, including the methodologies and
assumptions underlying the analyses, could create a misleading or incomplete
view of UBS Warburg's financial analyses.
ANALYSIS OF SELECTED PUBLIC COMPANIES
UBS Warburg compared selected financial information and operating statistics
for IPALCO with corresponding financial information and operating statistics of
selected publicly held companies in the electricity utility industry.
COMPARABLE ELECTRIC UTILITY COMPANIES
Allegheny Energy, Incorporated
Alliant Energy Corporation
Cinergy Corp.
Vectren Corporation
Wisconsin Energy Corporation
WPS Resources Corporation
UBS Warburg reviewed common equity market prices per share as multiples of
latest twelve months earnings per share and estimated calendar years 2000 and
2001 earnings per share. UBS Warburg also reviewed enterprise values, calculated
as equity value, plus debt and preferred stock, less cash, as multiples of
latest twelve months operating cash flow ("EBITDA") and operating income
("EBIT"). UBS Warburg then compared the multiples derived from the selected
electric utility companies with corresponding multiples for IPALCO based on the
closing prices of their common stock on July 12, 2000, as well as the multiples
implied for IPALCO based on the consideration provided for in the share
exchange. Multiples for the selected companies also were based on closing stock
prices on July 12, 2000. Estimated financial data for the selected companies
were based on publicly available consensus research analyst estimates, and
estimated financial data for IPALCO were based on publicly available consensus
research estimates. This analysis indicated the following implied low, mean,
median and high equity value and enterprise value multiples for the selected
electric utility companies, as compared to the multiples implied for IPALCO
based on the closing price of their common stock on
25
<PAGE>
July 12, 2000 and the multiples implied for IPALCO based on the consideration
provided for in the share exchange:
<TABLE>
<CAPTION>
IMPLIED MULTIPLES OF
SELECTED
ELECTRIC UTILITY
COMPANIES IMPLIED IMPLIED MULTIPLES OF
----------------------------------------- MULTIPLES IPALCO BASED ON
LOW MEAN MEDIAN HIGH OF IPALCO CONSIDERATION
-------- -------- -------- -------- ---------- --------------------
<S> <C> <C> <C> <C> <C> <C>
EQUITY VALUE AS A MULTIPLE OF:
Latest 12 months EPS................ 11.3 12.3 12.4 13.4 14.5 17.2
Estimated 2000 EPS.................. 10.0 11.0 10.7 12.3 13.4 15.9
Estimated 2001 EPS.................. 9.5 10.4 10.1 12.0 12.2 14.5
ENTERPRISE VALUE AS A MULTIPLE OF:
Latest 12 months EBITDA............. 6.5 7.0 6.9 7.5 6.8 7.9
Latest 12 months EBIT............... 9.6 11.4 12.0 12.7 10.0 11.6
</TABLE>
UBS Warburg also compared selected financial information and operating
statistics for AES with corresponding financial information and operating
statistics of selected publicly held companies in the power generation industry.
COMPARABLE POWER GENERATION COMPANIES
Calpine Corporation
Dynegy Incorporated
NRG Energy, Incorporated
UBS Warburg reviewed common equity market prices per share as multiples of
latest twelve months earnings per share and estimated calendar years 2000 and
2001 earnings per share. UBS Warburg also reviewed enterprise values as
multiples of latest twelve months EBITDA and EBIT. UBS Warburg then compared the
multiples derived from the selected power generation companies with
corresponding multiples for AES based on the closing price of their common stock
on July 12, 2000. Multiples for the selected companies also were based on
closing stock prices on July 12, 2000. Estimated financial data for the selected
companies were based on publicly available consensus research analyst estimates,
and estimated financial data for AES were based on publicly available research
estimates. This analysis indicated the following implied mean equity value and
enterprise value multiples for the selected power generation companies, as
compared to the multiples implied for AES based on the closing price of their
common stock on July 12, 2000:
<TABLE>
<CAPTION>
IMPLIED MEAN
MULTIPLE OF IMPLIED
SELECTED POWER MULTIPLES
GENERATION COMPANIES OF AES
--------------------- ----------
<S> <C> <C>
EQUITY VALUE AS A MULTIPLE OF:
Latest 12 months EPS..................................... 57.2 39.8
Estimated 2000 EPS....................................... 37.0 34.4
Estimated 2001 EPS....................................... 29.0 26.5
ENTERPRISE VALUE AS A MULTIPLE OF:
Latest 12 months EBITDA.................................. 31.9 26.4
Latest 12 months EBIT.................................... 44.8 32.9
</TABLE>
26
<PAGE>
ANALYSIS OF SELECTED PRECEDENT TRANSACTIONS
UBS Warburg reviewed implied equity and enterprise values in the following
fourteen selected transactions since the beginning of 1998 in the electric
utility industry:
<TABLE>
<CAPTION>
ACQUIROR TARGET
-------- ------
<S> <C>
PowerGen Plc LG&E Energy
Sierra Pacific Resources Portland General Electric
Berkshire Hathaway MidAmerican Energy Holdings Company
Consolidated Edison, Inc. Northeast Utilities
Carolina Power & Light Company Florida Progress Corporation
Energy East Corporation CMP Group, Inc.
Laurel Hill Partners TNP Enterprises, Inc.
New England Electric System Eastern Utilities Associates
National Grid Group Plc New England Electric System
Scottish Power PLC PacifiCorp
BEC Energy Commonwealth Energy Corporation
AES CILCORP, Inc.
CalEnergy Co., Inc. MidAmerican
Consolidated Edison, Inc. Orange and Rockland Utilities, Inc.
</TABLE>
UBS Warburg reviewed equity values as multiples of latest twelve months
earnings per share, estimated fiscal year earnings per share and the estimated
coming fiscal year earnings per share. UBS Warburg then compared the implied
multiples derived from the selected transactions with corresponding multiples
for IPALCO based on the consideration provided for in the share exchange. UBS
Warburg also reviewed enterprise values as multiples of latest twelve months
EBITDA and latest twelve months EBIT. UBS Warburg then compared the implied
multiples derived from the selected transactions with corresponding multiples
for IPALCO based on the consideration provided for in the share exchange.
<TABLE>
<CAPTION>
IMPLIED MULTIPLES OF IMPLIED
SELECTED ELECTRIC UTILITY MULTIPLES
TRANSACTIONS OF IPALCO
----------------------------------------- BASED ON
LOW MEAN MEDIAN HIGH CONSIDERATION
-------- -------- -------- -------- --------------
<S> <C> <C> <C> <C> <C>
EQUITY VALUE AS A MULTIPLE OF:
Latest 12 months EPS........................... 13.8 19.3 17.9 34.7 17.2
Estimated fiscal year EPS...................... 14.2 18.7 18.0 34.8 15.9
Estimated coming fiscal year EPS............... 13.4 17.0 17.3 19.9 14.5
ENTERPRISE VALUE AS A MULTIPLE OF:
Latest 12 months EBITDA........................ 5.4 8.0 8.1 9.7 7.9
Latest 12 months EBIT.......................... 7.7 13.4 13.3 20.6 11.6
</TABLE>
UBS Warburg also analyzed the premium to be paid in the share exchange per
share of IPALCO common stock based upon the closing price of IPALCO on July 12,
2000, and the closing price of
27
<PAGE>
IPALCO one month prior based on the consideration to be received in the share
exchange and compared it to the premiums paid in the selected precedent
transactions over similar time periods. The following table summarizes the
results of this analysis:
PREMIUM BASED ON STOCK PRICES
PRIOR TO ANNOUNCEMENT
<TABLE>
<CAPTION>
ONE MONTH PRIOR CURRENT
--------------- --------
<S> <C> <C>
Low......................................................... 15.7% 4.9%
Mean........................................................ 32.2% 27.8%
Median...................................................... 29.3% 25.0%
High........................................................ 54.7% 57.8%
IPALCO...................................................... 27.0% 18.7%
</TABLE>
UBS Warburg believed that recent electric utility transactions were more
relevant and therefore focused on the implied equity and enterprise values in
the following eight selected transactions since the beginning of 1999:
<TABLE>
<CAPTION>
ACQUIROR TARGET
-------- ------
<S> <C>
PowerGen Plc LG&E Energy
Sierra Pacific Resources Portland General Electric
Berkshire Hathaway MidAmerican Energy Holdings Company
Consolidated Edison, Inc. Northeast Utilities
Carolina Power & Light Company Florida Progress Corporation
Energy East Corporation CMP Group, Inc.
Laurel Hill Partners TNP Enterprises, Inc.
New England Electric System Eastern Utilities Associates
</TABLE>
UBS Warburg reviewed equity values as multiples of latest twelve months
earnings per share, estimated fiscal year earnings per share and the estimated
coming fiscal year earnings per share. UBS Warburg then compared the implied
multiples derived from the selected transactions with corresponding multiples
for IPALCO based on the consideration provided for in the share exchange. UBS
Warburg also reviewed enterprise values as multiples of latest twelve months
EBITDA and latest twelve months EBIT. UBS Warburg then compared the implied
multiples derived from the selected transactions with corresponding multiples
for IPALCO based on the consideration provided for in the share exchange.
<TABLE>
<CAPTION>
IMPLIED MULTIPLES OF IMPLIED
SELECTED ELECTRIC UTILITY MULTIPLES
TRANSACTIONS OF IPALCO
----------------------------------------- BASED ON
LOW MEAN MEDIAN HIGH CONSIDERATION
-------- -------- -------- -------- --------------
<S> <C> <C> <C> <C> <C>
EQUITY VALUE AS A MULTIPLE OF:
Latest 12 months EPS........................... 13.8 17.3 17.9 21.9 17.2
Estimated fiscal year EPS...................... 14.2 16.6 16.9 34.8 15.9
Estimated coming fiscal year EPS............... 13.4 16.1 16.8 18.4 14.5
ENTERPRISE VALUE AS A MULTIPLE OF:
Latest 12 months EBITDA........................ 5.9 7.6 7.7 8.6 7.9
Latest 12 months EBIT.......................... 8.8 13.1 13.1 20.6 11.6
</TABLE>
UBS Warburg also analyzed the premium to be paid in the share exchange per
share of IPALCO common stock based upon the closing price of IPALCO on July 12,
2000, and the closing price of
28
<PAGE>
IPALCO one month prior based on the consideration to be received in the share
exchange and compared it to the premiums paid in the selected precedent
transactions over similar time periods. The following table summarizes the
results of this analysis:
PREMIUM BASED ON STOCK PRICES
PRIOR TO ANNOUNCEMENT
<TABLE>
<CAPTION>
ONE MONTH PRIOR CURRENT
--------------- --------
<S> <C> <C>
Low......................................................... 21.6% 4.9%
Mean........................................................ 37.0% 29.0%
Median...................................................... 40.8% 25.9%
High........................................................ 54.7% 57.8%
IPALCO...................................................... 27.0% 18.7%
</TABLE>
DISCOUNTED CASH FLOW ANALYSIS
UBS Warburg performed a discounted cash flow valuation based upon
projections furnished by the management of IPALCO. With respect to projections
for IPALCO, UBS Warburg assumed that such projections were reasonably prepared
upon bases reflecting the best available estimates and judgments of the
management of IPALCO. Utilizing these projections, UBS Warburg discounted to
present value, under assumed discount rates ranging from 8.0% to 9.0%, the free
unleveraged cash flows through the year 2004 for IPALCO. UBS Warburg added to
this amount the present value, under assumed discount rates ranging from 8.0% to
9.0%, of the terminal value, calculated by applying multiples ranging from 6.0x
to 8.0x to EBITDA in year 2004. This analysis indicated that the net after-tax
present value of the future cash flows ranged from $20.88 to $28.73 per share of
IPALCO common stock on a stand-alone basis.
OTHER FACTORS
In rendering its opinion, UBS Warburg also reviewed and considered other
factors, including:
- that, based upon the internal estimates of the managements of IPALCO and
AES, the share exchange is expected to be accretive to AES's earning per
share for calendar year 2001; and
- historical market prices and volumes for IPALCO common stock and AES
common stock.
MISCELLANEOUS
Pursuant to the engagement letter between IPALCO and UBS Warburg, IPALCO
paid UBS Warburg for its services in connection with its rendering of a fairness
opinion (i) $250,000 upon IPALCO's engagement of UBS Warburg and
(ii) $2,000,000 upon the date that the board of directors orally requested UBS
Warburg's fairness opinion and UBS Warburg advised the board of directors that
it was prepared to render the opinion. IPALCO has also agreed to pay UBS Warburg
a transaction fee upon the consummation of a transaction equal to 0.4% of the
aggregate amount of consideration paid to IPALCO and its shareholders, against
which the fees payable in (i) and (ii) are creditable. In addition, IPALCO has
agreed to reimburse UBS Warburg for its reasonable expenses, including
reasonable fees and disbursements of its counsel, and to indemnify UBS Warburg
and related parties against liabilities, including liabilities under federal
securities laws, relating to, or arising out of, its engagement.
29
<PAGE>
IPALCO selected UBS Warburg as its financial advisor in connection with the
share exchange because UBS Warburg is an internationally recognized investment
banking firm with substantial experience in similar transactions. UBS Warburg is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, leveraged buyouts, negotiated
underwritings, competitive bids, secondary distributions of listed and unlisted
securities and private placements.
In the ordinary course of business, UBS Warburg, its successors and
affiliates may actively trade the securities of IPALCO and AES for their own
accounts and the accounts of their customers and, accordingly, may at any time
hold a long or short position in these securities.
INTERESTS OF IPALCO'S OFFICERS AND DIRECTORS IN THE SHARE EXCHANGE
In considering the recommendation of the IPALCO board to vote for the
proposal to adopt the share exchange agreement, shareholders of IPALCO should be
aware that members of the IPALCO board and members of IPALCO's management have
agreements or arrangements that provide them with interests in the share
exchange that differ from those of IPALCO's shareholders. The IPALCO board was
aware of these agreements and arrangements during its deliberations of the
merits of the share exchange and in determining to recommend to the shareholders
of IPALCO that they vote for the proposal to adopt the share exchange agreement.
TERMINATION BENEFIT AGREEMENTS
Since 1989, IPALCO has had a policy of entering into termination benefit
agreements with all its officers. These agreements provide for payment of
severance benefits equal to 299.99% of the last five years' average compensation
(as defined in Section 280G of the Tax Code) payable by IPALCO and its
subsidiaries which was includable in the gross income of the officers, if IPALCO
undergoes an "acquisition of control" while the agreement is in effect and if,
within three years after an acquisition of control, any such officer is
terminated "without cause" or "resigns for 'good reason'."
The term "resign for 'good reason"' is defined in these agreements to mean,
generally, and subject to lengthy qualifications and amplification: demotion;
assignment of duties inconsistent with the officer's status, position or
responsibilities; reduction in base salary or failure to grant annual increases
commensurate with increases of the officers; relocation of the headquarters of
IPALCO or IPL to a location outside Greater Indianapolis; or termination of the
executive's participation in, or the existence of, an incentive compensation,
insurance or pension program.
Consummation of the share exchange will constitute an "acquisition of
control" under the termination benefit agreements. In addition, AES's
compensation approach differs from that of IPALCO and thus AES has indicated
that it does not intend to offer compensation plans to IPALCO officers that are
comparable to those historically available to these officers. In this event,
these officers will have "good reason" to resign upon consummation of the share
exchange, and would then be entitled to receive from and be paid by IPALCO the
amounts provided for in the termination benefit agreements.
The following table sets forth the name, position and expected cash amount
payable under the IPALCO termination benefit agreements to the chief executive
officer of IPALCO, the four other most highly-compensated officers of IPALCO and
its subsidiaries, and the officers who are parties to termination benefit
agreements as a group. The expected cash amount payable has been calculated
based on the assumptions that the share exchange is consummated on January 1,
2001, that, prior to such date, IPALCO does not increase the base compensation
of and does not grant any additional compensation items to any such officers,
and that IPALCO pays bonuses in late 2000 to such officers which are
commensurate with prior years. The calculation includes the effect of income
received by certain of these officers upon payment of bonuses in February 2000
in connection with the sale by IPALCO of its interest in Internet Capital
Group, Inc., and also includes the effect of income received by these officers
from stock options exercised between January 1, 2000, and August 15, 2000.
Income received
30
<PAGE>
by these officers from the exercise of additional stock options between
August 15, 2000 and December 31, 2000, would serve to increase the amounts from
those set forth below. In addition, in certain instances the calculation of
severance benefits under the termination benefit agreements described above,
together with other payments and benefits which will occur as a result of the
consummation of the share exchange (which payments and benefits are described
below under "IPALCO Deferred Compensation" and "IPALCO Stock Options and
Restricted Stock") could result in an excise tax under Section 280G of the Tax
Code. Therefore, pursuant to the termination benefit agreements, the expected
cash amounts payable under these agreements have been reduced to eliminate any
such excise tax. The amount of such reduction has been calculated based upon the
assumption that all outstanding payments under the IPALCO Long-Term Performance
and Restricted Stock Incentive Plan that would not otherwise be payable on or
prior to January 1, 2001, are accelerated to January 1, 2001. Payments under the
termination benefit agreements are therefore correspondingly reduced to avoid
taxation under Section 280G of the Tax Code.
AMOUNTS PAYABLE UNDER TERMINATION
BENEFIT AGREEMENTS
<TABLE>
<CAPTION>
AMOUNT
(AFTER SECTION 280G
NAME POSITION REDUCTION)
---- ------------------------------------- -------------------
<S> <C> <C>
John R. Hodowal...................... Chairman & President;
Chairman & CEO of IPL $15,730,000
Ramon L. Humke....................... Vice Chairman;
President & COO of IPL $ 7,921,000
John R. Brehm........................ Vice President & Treasurer;
SVP, Finance of IPL $ 4,157,000
Bryan G. Tabler...................... Vice President, Secretary &
General Counsel; SVP, Secretary
& General Counsel of IPL $ 1,424,000
Joseph A. Gustin..................... Vice President, Information
Services of IPL $ 1,220,000
Officers with Termination Benefit
Agreements as a group (including
above amounts)..................... N/A $43,905,000
</TABLE>
IPALCO DEFERRED COMPENSATION
Certain directors and officers of IPALCO have deferred compensation under
IPALCO's Deferred Compensation Plan. All amounts of deferred compensation will
be due and payable upon consummation of the share exchange. The following table
sets forth, as of August 15, 2000, for the chief executive officer of IPALCO and
the four other most highly-compensated officers of IPALCO and its subsidiaries,
the amounts, if any, of such deferred compensation to be paid to each such
officer, as well as the total amount of deferred compensation to be paid.
31
<PAGE>
DEFERRED COMPENSATION TO
BE PAID AT THE EFFECTIVE TIME
<TABLE>
<CAPTION>
NAME POSITION AMOUNT
---- --------------------------------------- ----------
<S> <C> <C>
John R. Hodowal........................ Chairman & President;
Chairman & CEO of IPL $1,323,801
Ramon L. Humke......................... Vice Chairman;
President & COO of IPL $ 159,752
John R. Brehm.......................... Vice President & Treasurer;
SVP, Finance of IPL $ 0
Bryan G. Tabler........................ Vice President, Secretary &
General Counsel; SVP, Secretary
& General Counsel of IPL $ 70,462
Joseph A. Gustin....................... Vice President, Information
Services of IPL $ 0
All directors and officers as a N/A
group................................ $3,116,966
</TABLE>
IPALCO STOCK OPTIONS AND RESTRICTED STOCK
Pursuant to the terms of the share exchange agreement, each IPALCO stock
option outstanding immediately prior to the completion of the share exchange
will be converted, upon completion of the share exchange, into an option to
acquire, on the same terms and conditions, the number of shares of AES common
stock that is equal to the product of the number of shares of IPALCO common
stock that could have been acquired upon exercise of the option immediately
before completion of the share exchange multiplied by the exchange ratio,
rounded to the nearest whole share. The exercise price of these AES stock
options will be the exercise price for the IPALCO stock options immediately
before completion of the share exchange divided by the exchange ratio. With the
exception of 20,000 IPALCO stock options granted to non-officers of the Company,
all IPALCO stock options held by employees of IPALCO are already fully vested.
Of the 606,000 IPALCO stock options held by current and former IPALCO directors,
528,000 are already fully vested, and the remainder of such IPALCO stock options
will fully vest through the passage of time in November 2000.
Certain executive officers of IPALCO hold restricted shares of IPALCO common
stock and/or restricted stock grants representing the right to receive, upon
vesting, restricted shares of IPALCO common stock. The following table sets
forth, for the chief executive officer of IPALCO and the four other most
highly-compensated officers of IPALCO and its subsidiaries, as well as the total
amount of, the restricted shares of IPALCO common stock that are held by such
officers or are subject to restricted stock grants and that, at the effective
time, by virtue of the share exchange and without any further action on the part
of any holder thereof, will be converted into the right to receive unrestricted
shares of AES common stock. In each case, the number of shares subject to
restricted stock grants has been calculated based upon the assumption that
IPALCO's year 2000 stock price performance would rank among the highest 25% of
companies comprising the Standard & Poor's 500 stock index. A lower ranking
would result in numbers which are lower than those presented below.
32
<PAGE>
SHARES OF IPALCO RESTRICTED STOCK
<TABLE>
<CAPTION>
NUMBER OF RESTRICTED SHARES
HELD OR SUBJECT TO RESTRICTED
NAME POSITION STOCK GRANTS
---- --------------------------------- -----------------------------
<S> <C> <C>
John R. Hodowal.................. Chairman & President;
Chairman & CEO of IPL 113,617
Ramon L. Humke................... Vice Chairman;
President & COO of IPL 82,450
John R. Brehm.................... Vice President & Treasurer;
SVP, Finance of IPL 39,133
Bryan G. Tabler.................. Vice President Secretary &
General Counsel; SVP, Secretary
& General Counsel of IPL 19,875
Joseph A. Gustin................. Vice President, Information
Services of IPL 17,500
All officers and employees as a
group.......................... N/A 454,545
</TABLE>
INDEMNIFICATION AND INSURANCE
The share exchange agreement provides that, upon completion of the share
exchange, AES and IPALCO will indemnify and hold harmless, and provide
advancement of expenses to, all past and present directors, officers and
employees of IPALCO and its subsidiaries in all of their capacities:
- to the extent they were indemnified or had the right to advancement of
expenses as of July 15, 2000, which is the date of the share exchange
agreement, pursuant to IPALCO's articles of incorporation, by-laws and
indemnification agreements with any directors, officers and employees of
IPALCO and its subsidiaries; and
- to the fullest extent permitted by law, in each case for acts or omissions
occurring at or prior to the completion of the share exchange.
The share exchange agreement also provides that, upon completion of the
share exchange, AES and IPALCO will cause to be maintained, for a period of six
years after completion of the share exchange, the current policies of directors'
and officers' liability insurance maintained by IPALCO, or policies of at least
the same coverage and amounts containing terms and conditions which are, in the
aggregate, no less advantageous to the insured, with respect to claims arising
from facts or events that occurred on or before the completion of the share
exchange, although AES and IPALCO will not be required to expend in any one year
an amount in excess of 300% of the annual premiums currently paid by IPALCO for
directors' and officers' liability insurance.
MANAGEMENT AND OPERATION OF IPALCO AFTER THE SHARE EXCHANGE
Following the share exchange, IPALCO will continue its operations as a
wholly-owned subsidiary of AES. Upon consummation of the share exchange, the
members of IPALCO's board of directors prior to the share exchange will resign
from their positions and a new board of directors will be appointed by AES and
is expected to consist of AES officers. The membership of the AES board of
directors will remain unchanged as a result of the share exchange. Shareholders
of IPALCO will become shareholders of AES, and their rights as shareholders will
be governed by AES's articles of incorporation and by-laws and the laws of the
State of Delaware. For more information on the comparison of the rights of
shareholders of IPALCO and AES, see "Comparative Rights of IPALCO Shareholders
and AES Shareholders."
33
<PAGE>
DESCRIPTION OF EXCHANGE OF STOCK
When the share exchange is completed, the exchange agent will mail to you a
letter of transmittal and instructions for use in surrendering your IPALCO stock
certificates in exchange for AES stock certificates. When you deliver your
IPALCO stock certificates to the exchange agent along with a properly executed
letter of transmittal and any other required documents, your IPALCO stock
certificates will be canceled and you will receive AES stock certificates
representing the number of full shares of AES common stock to which you are
entitled under the share exchange agreement (and cash in lieu of fractional
shares).
YOU SHOULD NOT SUBMIT YOUR STOCK CERTIFICATES FOR EXCHANGE UNTIL YOU HAVE
RECEIVED THE LETTER OF TRANSMITTAL AND INSTRUCTIONS REFERRED TO ABOVE.
You are not entitled to receive any dividends or other distributions on AES
common stock with a record date after the share exchange is completed until you
have surrendered your IPALCO stock certificates in exchange for AES stock
certificates.
If there is any dividend or other distribution on AES common stock with a
record date after the share exchange and a payment date prior to the date you
surrender your IPALCO stock certificates in exchange for AES stock certificates,
you will receive it with respect to the whole shares of AES common stock issued
to you promptly after your IPALCO stock certificates are surrendered. If there
is any dividend or other distribution on AES common stock with a record date
after the share exchange and a payment date after the date you surrender your
IPALCO stock certificates in exchange for AES stock certificates, you will
receive it with respect to the whole shares of AES common stock issued to you
promptly after the payment date.
AES will only issue an AES stock certificate or a check in lieu of
fractional shares in a name other than the name in which a surrendered IPALCO
stock certificate is registered if you present the exchange agent with all
documents required to show and effect the unrecorded transfer of ownership and
show that you paid any applicable stock transfer taxes.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE SHARE EXCHANGE
The following general discussion summarizes the anticipated material United
States federal income tax consequences of the share exchange to holders of
IPALCO common stock who exchange their IPALCO common stock for AES common stock
in the share exchange. This discussion addresses only those shareholders who
hold their IPALCO stock as a capital asset and does not address all of the
United States federal income tax consequences that may be relevant to particular
shareholders in light of their individual circumstances or to shareholders who
are subject to special rules, such as:
- financial institutions;
- mutual funds;
- tax-exempt organizations;
- insurance companies;
- dealers in securities or foreign currencies;
- traders in securities who elect to apply a mark-to-market method of
accounting;
- foreign holders;
- persons who hold such shares as a hedge against currency risk or as part
of a straddle, constructive sale or conversion transaction; or
34
<PAGE>
- holders who acquired their shares upon the exercise of employee stock
options or similar derivative securities or otherwise as compensation.
The following discussion is not binding on the Internal Revenue Service. It
is based upon the Internal Revenue Code, laws, regulations, rulings and
decisions in effect as of the date of this proxy statement/prospectus, all of
which are subject to change, possibly with retroactive effect. Tax consequences
under state, local and foreign laws, and federal laws other than federal income
tax laws, are not addressed.
IPALCO SHAREHOLDERS ARE STRONGLY URGED TO CONSULT THEIR TAX ADVISORS AS TO
THE SPECIFIC TAX CONSEQUENCES TO THEM OF THE SHARE EXCHANGE, INCLUDING THE
APPLICABILITY AND EFFECT OF FEDERAL, STATE, LOCAL AND FOREIGN INCOME AND OTHER
TAX LAWS IN THEIR PARTICULAR CIRCUMSTANCES.
It is a condition to the consummation of the share exchange that (i) AES
receive an opinion from Skadden, Arps, Slate, Meagher & Flom LLP, special tax
counsel to AES, dated as of the effective date of the share exchange, to the
effect that the share exchange will qualify as a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code and (ii) IPALCO receive
an opinion from Cravath, Swaine & Moore, special tax counsel to IPALCO, dated as
of the effective date of the share exchange, to the effect that the share
exchange will qualify as a reorganization within the meaning of Section 368(a)
of the Internal Revenue Code. The conditions relating to the tax opinions may
not be waived by AES or IPALCO after receipt of the IPALCO shareholder approval
unless further shareholder approval is obtained with appropriate disclosure. The
opinions will be based on customary assumptions and customary representations
made by AES and IPALCO. An opinion of counsel represents counsel's best legal
judgment and is not binding on the Internal Revenue Service or any court. No
ruling has been, or will be, sought from the Internal Revenue Service as to the
United States federal income tax consequences of the share exchange.
Assuming the share exchange qualifies as a reorganization within the meaning
of Section 368(a) of the Internal Revenue Code, holders of IPALCO stock who
exchange their IPALCO stock solely for AES common stock in the share exchange
will not recognize gain or loss for United States federal income tax purposes,
except with respect to cash, if any, they receive in lieu of a fractional share
of AES common stock. Each holder's tax basis in the AES common stock received in
the share exchange will be the same as his or her aggregate tax basis in the
IPALCO stock surrendered in the share exchange, decreased by the amount of any
tax basis allocable to any fractional share interest for which cash is received.
The holding period of the AES common stock received in the share exchange by an
IPALCO shareholder will include the holding period of the IPALCO stock that he
or she surrendered in the share exchange.
An IPALCO shareholder who receives cash in lieu of a fractional share of AES
common stock will recognize gain or loss equal to the difference between the
amount of cash received and his or her tax basis in the AES common stock that is
allocable to the fractional share. That gain or loss generally will constitute
capital gain or loss. In the case of an individual shareholder, any such capital
gain generally will be subject to a maximum United States federal income tax
rate of 20% if the individual has held his or her IPALCO stock for more than one
year on the date of the share exchange. The deductibility of capital losses is
subject to limitations for both individuals and corporations.
NO DISSENTERS' OR APPRAISAL RIGHTS
As a holder of IPALCO common stock you are not entitled to dissenters'
rights or to demand payment for your shares under Indiana law.
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ANTICIPATED ACCOUNTING TREATMENT
The share exchange is expected to be accounted for as a pooling of
interests. However, accounting for the share exchange as a pooling of interests
is not a condition to completion of the share exchange. Under this method of
accounting, the recorded assets and liabilities of AES and IPALCO will be
carried forward to the books of the combined company at their historical
recorded amounts, subject to any adjustments and reclassifications required to
conform the accounting policies of the two companies. In addition, results of
operations of the combined company will include results of AES and IPALCO for
the entire fiscal year in which the share exchange occurs. The historical
reported net income or loss of AES and IPALCO for prior periods will be combined
and restated as net income or loss of AES after addressing any accounting
conformity issues. See "Unaudited Pro Forma Consolidated Financial Statements"
on page 48.
GOVERNMENTAL APPROVALS AND REGULATORY MATTERS
HART-SCOTT-RODINO ACT
Transactions such as the share exchange are subject to review by the
Department of Justice and the Federal Trade Commission to determine whether they
comply with applicable antitrust laws. Under the provisions of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended ("HSR"), the
share exchange may not be consummated until the specified waiting period
requirements of that act have been satisfied. AES and IPALCO will file
notification reports, together with requests for early termination of the
waiting period, with the Department of Justice and the Federal Trade Commission
under the HSR.
FEDERAL POWER ACT
Section 203 of the Federal Power Act provides that no public utility shall
sell or otherwise dispose of the whole of its jurisdictional facilities or
directly or indirectly merge or consolidate such facilities with those of any
other person or acquire any security of any other public utility without first
having obtained authorization from the FERC. The FERC approval is therefore
required to consummate the share exchange. Under Section 203, the FERC will
approve a share exchange if it finds it to be "consistent with the public
interest." The FERC has stated in a Policy Statement that, in analyzing a share
exchange under Section 203, it will evaluate the following criteria: (i) the
effect of the share exchange on competition in electric power markets, utilizing
an initial screening approach derived from the Department of Justice/Federal
Trade Commission Horizontal Mergers Guidelines, to determine if the share
exchange will result in an unacceptable increase in the applicants' market
power; (ii) the effect of the share exchange on the applicants' wholesale sales
and transmission customers; and (iii) the effect of the share exchange on state
and federal regulation of the applicants. AES and IPALCO will file, at the
earliest practicable date, an application with the FERC requesting that the FERC
approve the share exchange under Section 203. No assurance can be given that the
FERC will grant AES's and IPALCO's application.
PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
AES is required to obtain approval of the share exchange from the SEC
pursuant to Section 9(a)(2) of PUHCA. AES is also seeking an order from the SEC
under Section 3(a)(5) of PUHCA granting it an exemption from PUHCA's provisions
(other than Section 9(a)(2)) so that AES will not be subject to regulation as a
registered holding company under PUHCA.
Section 9(a)(2) of PUHCA requires an entity owning, directly or indirectly,
5% or more of the outstanding voting securities of a public utility company (as
defined in PUHCA), to obtain the approval of the SEC under Section 10 of PUHCA
prior to acquiring a direct or indirect interest in 5% or more of the voting
securities of any additional public utility company. AES currently holds
indirectly in excess
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of 5% of the voting securities of a public utility company, Central Illinois
Light Company ("CILCO"), and in acquiring IPALCO, AES will be acquiring
indirectly 5% or more of the voting securities of a second public utility
company.
Under the standards contained in Section 10, the SEC is directed to approve
AES's acquisition of IPALCO unless it finds that (i) the acquisition would tend
towards detrimental interlocking relations or a detrimental concentration of
control, (ii) the consideration to be paid in connection with the acquisition is
not reasonable, (iii) the acquisition would unduly complicate the capital
structure of AES's holding company system or would be detrimental to the proper
functioning of AES's holding company system, or (iv) the acquisition would
violate applicable state law. To approve the acquisition, the SEC must also find
that the acquisition would tend towards the economical and efficient development
of an integrated public utility system and that the acquisition would not be
detrimental to the carrying out of the provisions of Section 11 of PUHCA, which
generally limit the operations of a registered holding company system to a
single integrated public utility system and other businesses reasonably
incidental thereto. Although AES believes that SEC approval of the acquisition
under PUHCA will be obtained on acceptable terms, it is not possible to predict
with certainty the timing of such approval and whether the approval will be on
acceptable terms.
Under the applicable standards of Section 3(a)(5), unless the SEC finds an
exemption to be detrimental to the interests of the public, investors or
consumers, the SEC will exempt a holding company and its subsidiaries from the
provisions of PUHCA (other than Section 9(a)(2)) if the SEC determines that the
holding company is not, and derives no material part of its income, directly or
indirectly, from one or more subsidiary companies the principal business of
which within the United States is that of a "public utility company" (as defined
in PUHCA). This exemption traditionally has been available to a holding company
system with significant foreign operations whose United States utility
operations do not account for a material part of the holding company's income on
a relative basis and are small in size on an absolute basis. On August 20, 1999,
AES obtained an order from the SEC exempting AES from the provisions of PUHCA
(other than Section 9(a)(2)) pursuant to Section 3(a)(5) with respect to its
acquisition of CILCORP, Inc., the parent company of CILCO. AES will file an
application with the SEC for an order exempting AES, pursuant to
Section 3(a)(5), from the provisions of PUHCA (other than 9(a)(2)) with respect
to its acquisition of IPALCO. The SEC's determination will be based, in part, on
the specific facts of the share exchange, including the characteristics of
IPALCO and AES. The share exchange agreement requires AES to include in its
application a commitment, if required by regulatory order of the SEC, to divest
its interests in CILCORP that are subject to the jurisdiction of the SEC under
PUHCA if necessary to obtain the exemption. No assurance can be given that the
SEC will grant AES's application.
STATE UTILITY REGULATION
Under Indiana law, as interpreted by the Indiana Supreme Court in a recent
case, INDIANA BELL TEL. CO. V. INDIANA UTIL. REGULATORY COMM'N, 715 N.E.2d 351
(Ind. 1999), the IURC does not have jurisdiction to approve the acquisition of a
public utility holding company such as IPALCO. The IURC must issue a
certification pursuant to Section 33(a) of PUHCA, relating to AES's exemption
from PUHCA for investments in foreign utility companies. Obtaining this
certification is a condition to closing the share exchange. The Illinois
Commerce Commission does not have jurisdiction over the share exchange.
FEDERAL COMMUNICATIONS COMMISSION LICENSES
IPALCO has certain radio licenses from the Federal Communications Commission
which it utilizes in connection with its utility operations. The transfer of
control of these licenses as a result of the share exchange will require
approval of the FCC. IPALCO will make application for such approval.
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SECURITIES LAWS MATTERS
The shares of AES common stock to be received by IPALCO shareholders in the
share exchange will be registered under the Securities Act and will be freely
transferable without restriction, except for shares issued to any AES or IPALCO
shareholder who is, or is expected to be, an "affiliate" of AES or IPALCO for
purposes of Rule 145 under the Securities Act. An affiliate of AES or IPALCO is
a person who directly, or indirectly through one or more intermediaries,
controls, is controlled by or is under common control with AES or IPALCO. Any
subsequent transfer of AES common stock issued in the share exchange by any
IPALCO affiliate will, under existing law, require one of the following:
- registration of the transfer under the Securities Act;
- compliance with Rule 145 under the Securities Act, which allows limited
sales under specified circumstances; or
- availability of another exemption from registration.
The foregoing restrictions are expected to apply to, among other persons,
directors and executive officers of IPALCO and any holders of 10% or more of the
IPALCO common stock exchanged in the share exchange.
SEC guidelines regarding qualifying for the pooling of interests method of
accounting also limit sales of shares of the acquiring and acquired companies by
affiliates of either company. SEC guidelines indicate further that the pooling
of interests method of accounting generally will not be challenged on the basis
of sales by affiliates of the acquiring or acquired company if the affiliates do
not dispose of any of the shares of the corporation they own or shares of a
corporation they receive in connection with a business combination during the
period beginning 30 days before the completion of the business combination and
ending when financial results covering at least 30 days of post-share exchange
operations of the combined entity have been published in accordance with SEC
Accounting Release No. 135.
AES has agreed in the share exchange agreement to use its reasonable best
efforts to cause each person who is an affiliate of AES, for purposes of
qualifying the exchange for pooling of interests accounting treatment, to
deliver to IPALCO on or prior to the closing of the share exchange a written
agreement intended to preserve the ability to treat the share exchange as a
pooling of interests and to ensure compliance with the Securities Act. IPALCO
has agreed to the same undertaking with respect to its affiliates.
This proxy statement/prospectus does not cover any resales of AES common
stock, including AES common stock issuable upon the exercise of any assumed
options, to be received by IPALCO shareholders upon completion of the share
exchange. No person is authorized to make use of this proxy statement/prospectus
in connection with any resale.
NEW YORK STOCK EXCHANGE MATTERS
It is a condition to the completion of the share exchange that the shares of
AES common stock to be issued in connection with the share exchange be approved
for listing on the New York Stock Exchange at or before the closing of the share
exchange.
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CERTAIN TERMS OF THE AGREEMENT AND PLAN OF SHARE EXCHANGE
THE FOLLOWING SUMMARY DESCRIBES THE MATERIAL TERMS OF THE AGREEMENT AND PLAN
OF SHARE EXCHANGE, DATED AS OF JULY 15, 2000, BETWEEN AES AND IPALCO. THE FULL
TEXT OF THE SHARE EXCHANGE AGREEMENT IS ATTACHED AS ANNEX A TO THIS PROXY
STATEMENT/PROSPECTUS AND IS INCORPORATED BY REFERENCE HEREIN. WE ENCOURAGE YOU
TO READ THE ENTIRE SHARE EXCHANGE AGREEMENT.
THE SHARE EXCHANGE
The share exchange agreement provides that at the effective time, IPALCO
will become a wholly-owned subsidiary of AES.
EFFECTIVE TIME OF THE SHARE EXCHANGE
The closing of the share exchange will take place on or prior to the fifth
business day following the date on which the conditions described in the share
exchange agreement are satisfied or waived, or at any other time AES and IPALCO
may mutually agree. The share exchange will become effective when the articles
of share exchange are filed with the Secretary of State of the State of Indiana.
MANNER AND BASIS OF EFFECTING THE SHARE EXCHANGE
As soon as reasonably practicable following the effective time, the exchange
agent, as selected by AES, will mail a transmittal letter to each record holder
of IPALCO common stock to exchange their IPALCO common stock certificates for
AES common stock certificates and cash for any fractional share. Transmittal
letters also will be available following completion of the share exchange at the
offices of the exchange agent, / /. Additionally, holders of IPALCO common
stock may, at their option, after the effective time, physically surrender in
person at the offices of the exchange agent their IPALCO stock certificates for
AES common stock certificates. IPALCO shareholders should not exchange their
stock certificates before the effective time. After the effective time,
transfers of IPALCO common stock will not be registered on the stock transfer
books of IPALCO.
No fractional shares of AES common stock will be issued in the share
exchange. Instead of any fractional share, you will receive a cash amount,
rounded to the nearest whole cent, without interest, based on the average price
of AES common stock determined as described on page 18.
After the effective time, and until it is surrendered and exchanged, each
certificate that previously evidenced IPALCO common stock will be deemed to
evidence shares of AES common stock and the right to receive cash instead of any
fractional shares. AES will not pay dividends or other distributions on any
shares of AES common stock to be issued in exchange for any unsurrendered IPALCO
common stock certificate until the IPALCO common stock certificate is
surrendered as provided in the share exchange agreement.
TREATMENT OF STOCK OPTIONS AND RESTRICTED STOCK
IPALCO STOCK OPTIONS. Each option to purchase a share of IPALCO common
stock that is outstanding and unexercised at the effective time will be assumed
by AES and will thereafter be deemed to constitute an option to acquire shares
of AES common stock. The number of shares of AES common stock that will be
subject to the assumed stock options will be determined by multiplying the
number of shares of IPALCO common stock subject to the stock option by the
exchange ratio, rounded to the nearest whole share. The exercise price of such
assumed stock options will be the exercise price per share of IPALCO common
stock under the original stock option divided by the exchange ratio. The assumed
stock options will otherwise be subject to the same terms as the existing stock
options. As of August 15, 2000, options to purchase a total of 4,360,980 shares
of IPALCO common stock, at exercise prices ranging from $9.38 to $23.38, were
held by approximately 59 current and former IPALCO
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employees, officers and directors. As of August 15, 2000, options to purchase a
total of 3,275,254 shares of IPALCO common stock, at exercise prices ranging
from $9.38 to $23.38, were held by current executive officers and directors of
IPALCO.
IPALCO RESTRICTED STOCK. Upon completion of the share exchange, each
restricted stock grant under IPALCO's equity-based compensation plans will be
exchangeable for that number of shares of restricted stock subject to such
restricted stock grant. Following such exchange, all restrictions with respect
to each share of IPALCO restricted stock will lapse. The unrestricted shares of
IPALCO common stock resulting from the lapse of restrictions on the restricted
stock will be exchanged for AES common stock in the same manner as other shares
of IPALCO common stock. As of August 15, 2000, 239,495 shares of restricted
stock were held by all IPALCO employees, officers and directors, of which
194,479 shares were held by executive officers and directors of IPALCO.
Additionally, as of August 15, 2000, 434,823 shares subject to restricted stock
grants were held by all IPALCO employees, officers and directors, of which
370,451 shares subject to restricted stock grants were held by executive
officers and directors of IPALCO.
Based on the IPALCO stock options outstanding at the record date, and
assuming no IPALCO stock options are exercised prior to the effective time, AES
will be required at the effective time to reserve / / shares of AES common
stock for issuance upon exercise of the IPALCO stock options assumed by AES.
REPRESENTATIONS AND WARRANTIES
The share exchange agreement contains customary representations and
warranties of IPALCO and AES relating to, among other things, certain aspects of
their respective businesses and assets and other matters. The representations
and warranties expire at the effective time of the share exchange.
COVENANTS; CONDUCT OF BUSINESS PRIOR TO THE SHARE EXCHANGE
AFFIRMATIVE COVENANTS OF IPALCO
IPALCO has agreed that prior to the effective time it will:
- conduct its business and operations only in the ordinary course in
substantially the same manner as previously conducted, use all reasonable
efforts to preserve intact its current business organization, maintain or
renew or cause to be renewed its current rates and rates schedules, keep
available the services of its current officers and employees and maintain
its relationships with customers, suppliers, licensors, licensees,
distributors and others having business dealings with it, including
regulators, so that its goodwill and ongoing business will be unimpaired
at the effective time;
- provide AES with reasonable access to its properties, books, contracts,
personnel, records, tax returns and other documents and reasonable access
to all information concerning IPALCO, its subsidiaries, directors,
officers, shareholders and properties owned or operated by IPALCO;
- deliver to AES certain financial statements and reports, filed with or
sent to the SEC, the FERC or the public utility commission of any state;
- promptly notify AES of any representation or warranty made by IPALCO that
is qualified as to materiality becoming untrue or inaccurate or any
representation or warranty that is not so qualified becoming untrue or
inaccurate in any material respect, a material breach of any covenant or
obligation of IPALCO and any change or event that could have a material
adverse effect on IPALCO;
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- use all commercially reasonable efforts to file all notices, reports and
other documents required to be filed with any governmental entities with
respect to the share exchange, including the notifications required under
the HSR and the certification from the IURC;
- use all commercially reasonable efforts to obtain all necessary consents,
approvals or waivers from third parties, defend any lawsuits or legal
proceedings challenging the share exchange or the share exchange
agreement, and execute and deliver any additional instruments necessary to
consummate the share exchange;
- use its reasonable best efforts to develop jointly with AES, by no later
than October 15, 2000, a plan for IPALCO to comply with emission limits
imposed by governmental entities regarding NO(x) emissions;
- maintain insurance, as customary in all material respects for companies
engaged in the electric and gas utility industry;
- use reasonable best efforts to maintain in effect all existing
governmental permits which are material to the operations of IPALCO;
- call and hold a meeting of its shareholders to vote on a proposal to
approve the share exchange agreement; and
- use all commercially reasonable efforts to take, or cause to be taken, all
actions necessary to consummate the share exchange.
IPALCO's board of directors has agreed to recommend that the IPALCO
shareholders vote for approval of the share exchange agreement. However, at any
time before the IPALCO special meeting, IPALCO's board of directors is entitled
to withdraw or modify its recommendation that the IPALCO shareholders vote to
approve the share exchange agreement if certain requirements, including the
following, are satisfied:
- an unsolicited proposal or offer to purchase a business that constitutes
15% or more of net revenues, net income or net assets of IPALCO or 15% or
more of voting securities of IPALCO or any merger, consolidation or
business combination proposal is made and is not withdrawn;
- IPALCO satisfies certain notice requirements;
- IPALCO's board of directors reasonably believes in good faith, after
consultation with its financial advisors, that the offer constitutes a
superior offer; and
- IPALCO reimburses AES for up to $10.0 million in reasonable fees and
expenses and pays a fee of $60.0 million to AES.
For purposes of the share exchange agreement, the term "superior proposal" means
any proposal made by a third party to acquire more than 50% of the voting power
of the outstanding shares of IPALCO common stock or all or substantially all the
assets of IPALCO on terms that IPALCO's board of directors determines, in its
good faith judgment and based upon advice of its financial advisors and outside
counsel, to be clearly and materially more favorable to IPALCO shareholders than
the share exchange, taking into account any changes to the financial or other
terms proposed by AES in response to the proposal, all financial, commercial and
regulatory considerations of the proposal, the third party making the proposal,
and the conditions and the prospects for completion of the proposal.
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NEGATIVE COVENANTS OF IPALCO
IPALCO has agreed, subject to certain exceptions, that, before the effective
time, except as otherwise agreed to in writing by AES, it will not, will not
agree to and will not permit any of its subsidiaries to:
- declare, set aside or pay any dividend on, or make any other distribution
with respect to, any shares of capital stock or, subject to exceptions
under certain IPALCO plans, purchase, redeem or otherwise acquire any
shares of capital stock or other securities other than dividends and
distributions between IPALCO and any of its wholly-owned subsidiaries and
dividends and distributions declared and paid by partially-owned
subsidiaries, except for certain splits or reclassifications and the
payment of a fixed amount of regular quarterly dividends;
- sell, issue, deliver or grant any capital stock, any voting security, or
any securities convertible into, or any option or right to acquire, any
capital stock or other security;
- amend its articles of organization or by-laws or the articles of
incorporation or by-laws of IPL;
- acquire, publicly propose to acquire or agree to acquire by merging or
consolidating with any business, corporation or other business
organization or acquire any assets, except for purchases of inventory in
the ordinary course of business and except for purchases consistent with
past practices with a value of less than $10,000,000;
- make capital expenditures exceeding 110% of currently contemplated capital
expenditures;
- enter into, become bound by, amend or terminate any material contract or
any contract with a term longer than 24 months or a contract in excess of
$10,000,000, other than in the ordinary course of business and in
accordance with past practice if such contracts relate to the sale of
energy to certain customers, the sale of transmission capacity or certain
purchases, or contracts otherwise permitted by the share exchange
agreement, or waive or exercise any material right or remedy under any
material contract;
- incur or guarantee any indebtedness;
- except as contemplated by collective bargaining agreements, make any
increases in compensation payable to any of its directors, officers or
employees;
- increase staffing beyond certain levels;
- subject to discussion with AES, change any of its rates or charges,
standards of service or accounting standards;
- make any material tax election not required to be made under applicable
laws or amend any tax sharing agreement;
- enter into any agreement with its affiliates, other than agreements
entered into in the usual ordinary course of business and negotiated on an
arm's length basis;
- discharge material liabilities, other than a payment, discharge or
settlement of a liability in accordance with its terms or, in the ordinary
course of business consistent with past practice, of liabilities
reflected, or reserved against, in IPALCO's most recent financial
statements, or incurred in the ordinary course of business consistent with
past practice;
- take any action that would jeopardize the qualification of any material
amount of outstanding IPALCO revenue bonds as exempt facility bonds;
- make any change in accounting methods;
- enter into a collective bargaining agreement;
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- take any action that would give rise to a claim under the WARN Act;
- enter into a new line of business or make any change in the line of
business in which it engages;
- buy or sell any energy futures or forward contracts or energy
transportation futures or forward contracts, other than as incidental to
the business of generating, purchasing and selling energy to firm
customers and other than sales required by law; or
- take any action that would result in any of the representations qualified
as to materiality becoming untrue, or any of the representations not so
qualified becoming untrue in any material respect.
AFFIRMATIVE COVENANTS OF AES
AES has agreed that, prior to the effective time, it will:
- conduct its business and operations only in the ordinary course in
substantially the same manner as previously conducted, use all reasonable
efforts to preserve intact its current business organization, keep
available the services of its current officers and employees and maintain
its relationships with customers, suppliers, licensors, licensees,
distributors and others having business dealings with it, including
regulators, to the end that its goodwill and ongoing business will be
unimpaired at the effective time;
- promptly notify IPALCO of any representation or warranty made by AES that
is qualified as to materiality becoming untrue or inaccurate or any
representation or warranty that is not so qualified becoming untrue or
inaccurate in any material respect, a material breach of any covenant or
obligation of AES or any change or event that could have a material
adverse effect;
- provide IPALCO with reasonable access to its properties, books, contracts,
personnel, records, tax returns and other documents;
- register under the Securities Act the issuance of shares of AES common
stock in the share exchange and, subject to exceptions, prepare the joint
registration/proxy statement;
- use all commercially reasonable efforts to file all notices, reports and
other documents required to be filed with any governmental entities with
respect to the share exchange, including the notifications required under
the HSR, the filing and approval required by the FERC, and approval of the
exchange by the SEC, and the exemption for AES from registration as a
holding company, under PUHCA;
- use all commercially reasonable efforts to obtain all necessary consents,
approvals or waivers from third parties, defend any lawsuits or legal
proceedings challenging the share exchange or the share exchange
agreement, and execute and deliver any additional instruments necessary to
consummate the share exchange; and
- use its reasonable best efforts to develop jointly with IPALCO, by no
later than October 15, 2000, a plan for IPALCO to comply with emission
limits imposed by governmental entities regarding NO(x) emissions.
OTHER AFFIRMATIVE COVENANTS OF AES
AES has also agreed that it will:
- honor and cause IPALCO to honor each existing employment, change of
control, severance and termination agreement between IPALCO or any
subsidiary and an officer, director or employee of IPALCO or such
subsidiary; and
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- file an application with the SEC which commits AES, if required by a
regulatory order of the SEC, to enter into an agreement within three years
of the effective time to divest its ownership interest in the PUHCA
jurisdictional business of CILCORP under certain circumstances.
NEGATIVE COVENANTS OF AES
AES has agreed that it will not, will not agree to and will not permit any
of its subsidiaries to:
- acquire significant electric generation assets of clearly sufficient
magnitude in the relevant market, for purposes of the FERC analysis of the
share exchange, so as to significantly impair the ability of the parties
to obtain the FERC's approval of the share exchange; or
- engage in any activity that would cause a change of status under PUHCA for
AES or any equity owner or affiliate of AES or subject any of them to the
jurisdiction of PUHCA following the share exchange, or acquire such voting
securities in a "public utility company" so as to become an affiliate of
such public utility within the meaning of PUHCA.
LIMITATION ON CONSIDERING OTHER ACQUISITION PROPOSALS
As an inducement to AES's execution and delivery of the share exchange
agreement, IPALCO has agreed that it will not and that it will not authorize or
permit any of its representatives to:
- solicit, initiate or encourage or take any other action knowingly to
facilitate any inquiries or the making of any proposal relating to any of
the following, each of which is referred to as an acquisition proposal:
- any merger, consolidation, business combination, recapitalization,
tender offer, exchange offer or other similar transaction involving
IPALCO or any of its subsidiaries;
- any inquiry, proposal or offer in which a person directly or
indirectly would acquire ownership of, or if a tender offer or
exchange offer would be consummated, such person would own
securities representing, more than 15% of the outstanding
securities of any class of voting securities of IPALCO or any of
its subsidiaries;
- any inquiry, proposal or offer in which a person directly or
indirectly would acquire any business or assets that account for
15% or more of the net revenues, net income or assets of IPALCO or
any of its subsidiaries; or
- any liquidation or dissolution of IPALCO or any of its
subsidiaries; or
- engage in discussions or negotiations with any person with respect to any
acquisition proposal.
In addition, the IPALCO board of directors may not:
- approve, endorse or recommend any acquisition proposal; or
- enter into any letter of intent or similar agreement contemplating or
relating to any acquisition proposal.
However, at any time prior to the approval of the share exchange by the
shareholders of IPALCO, the foregoing restrictions will not prohibit IPALCO
from:
- furnishing nonpublic information to, or entering into discussions with, a
third party if:
- in response to an acquisition proposal, IPALCO's board of directors
reasonably believes in good faith, after consultation with its
financial advisors, that an acquisition proposal could reasonably lead
to a transaction meeting the requirements of a superior proposal; and
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- prior to furnishing any nonpublic information to, or entering into
discussions with, the third party, IPALCO gives AES written notice of
its decision to take such actions; or
- approving or recommending any merger, consolidation, business combination
or similar transaction, if:
- IPALCO's board of directors reasonably believes in good faith that the
acquisition proposal is a superior proposal; and
- IPALCO provides AES with at least three business days prior written
notice advising AES that IPALCO is prepared to accept a superior
proposal.
In that event, IPALCO may terminate the share exchange agreement and IPALCO
will be required to reimburse AES for up to $10.0 million in reasonable fees and
expenses and pay a termination fee of $60.0 million to AES.
If IPALCO's board of directors receives an acquisition proposal or any
inquiry that could lead to an acquisition proposal, then IPALCO must promptly
inform AES orally and in writing of the identity of the person making the
acquisition proposal or inquiry and of the material terms of such proposal and
of any material changes thereto.
CONDITIONS TO THE SHARE EXCHANGE
CONDITIONS TO THE OBLIGATIONS OF EACH PARTY. The obligations of AES and
IPALCO to complete the share exchange are subject to the satisfaction of certain
conditions, including the following:
- IPALCO shareholders must approve the share exchange agreement;
- the shares of AES common stock to be issued to IPALCO shareholders in the
share exchange must have been authorized for listing on the New York Stock
Exchange;
- the registration statement on Form S-4, of which this proxy
statement/prospectus is a part, must have become effective in accordance
with the provisions of the Securities Act and no stop order shall have
been issued and remain in effect;
- all waiting periods applicable to the share exchange under the United
States antitrust laws must expire or be terminated;
- no law, injunction or order preventing the consummation of the share
exchange may be in effect;
- the parties must obtain a final order of the FERC under the Federal Power
Act. AES must reasonably believe that the final order would not have a
material adverse effect on IPALCO or an adverse effect on AES which is
material in the context of the share exchange; and
- the parties must obtain any other government approvals the absence of
which would have a material adverse effect on IPALCO or a material adverse
effect on AES in the context of the share exchange.
CONDITIONS TO THE OBLIGATION OF AES. The obligation of AES to complete the
share exchange is subject to the satisfaction of the following conditions:
- IPALCO's representations and warranties in the share exchange agreement
that are qualified as to materiality must be true and correct, and those
not so qualified must be true and correct in all material respects, as of
the date of the share exchange agreement and as of the closing date as if
made on the closing date;
- IPALCO must perform in all material respects all obligations required to
be performed by it under the share exchange agreement at or prior to the
closing date;
45
<PAGE>
- IPALCO must receive all third-party consents required by IPALCO's
contracts in connection with the share exchange, except for consents that,
if not obtained, would not have a material adverse effect on IPALCO;
- AES must receive:
- an opinion of special tax counsel to the effect that the share exchange
will qualify as a reorganization within the meaning of Section 368(a)
of the Internal Revenue Code; and
- the written resignations of the directors of IPALCO effective as of
completion of the share exchange;
- there must not occur anything that would have a material adverse effect on
IPALCO;
- no event shall occur that would result in triggering of any right of
IPALCO shareholders under IPALCO's rights agreement;
- the IURC must issue the Indiana certification under PUHCA, any order of,
approval or result of any filing or proceeding required by the IURC, or
any other Indiana state authority, must not have had a material adverse
effect on IPALCO or an adverse effect on AES which is material in the
context of the share exchange, and there must not be any proceeding or
investigation pending or conducted before the IURC or any other Indiana
state authority the outcome of which would result in such an adverse
effect; and
- the SEC must issue an order granting AES an exemption from registration as
a holding company under Section 3(a)(5) of PUHCA and approving the share
exchange under Section 9(a)(2) of PUHCA, and each order shall be in full
force and effect on the closing date and AES shall be reasonably satisfied
that neither approval would have a material adverse effect on IPALCO or an
adverse effect on AES which is material in the context of the share
exchange.
As used in the share exchange agreement, "material adverse effect" means,
with respect to IPALCO, any event, change, cause or effect which is materially
adverse to the business, operations, properties, assets, liabilities, prospects,
condition (financial or otherwise) or results of operations of IPALCO and its
subsidiaries taken as a whole or to the consummation of the share exchange.
CONDITIONS TO THE OBLIGATION OF IPALCO. The obligation of IPALCO to
complete the share exchange is subject to the satisfaction of the following
conditions:
- AES's representations and warranties in the share exchange agreement that
are qualified as to materiality must be true and correct, and those not so
qualified must be true and correct in all material respects, as of the
date of the share exchange agreement and as of the closing date as if made
on the closing date;
- AES must perform in all material respects all obligations required to be
performed by it under the share exchange agreement at or prior to the
closing date; and
- IPALCO must receive an opinion of special tax counsel to the effect that
the share exchange will qualify as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code.
As used in the share exchange agreement, "material adverse effect" means,
with respect to AES, any event, change, cause or effect which is materially
adverse to the business, operations, properties, assets, liabilities, prospects,
condition (financial or otherwise) or results of operations of AES or the
ability of AES to consummate the share exchange.
46
<PAGE>
TERMINATION OF THE SHARE EXCHANGE AGREEMENT
AES and IPALCO may jointly agree to terminate the share exchange agreement
at any time before the share exchange is completed. In addition, either company
may terminate the share exchange agreement if:
- the share exchange is not completed on or before October 15, 2001,
provided that the date will be extended for three additional months if any
approval to be granted by the SEC, the FERC, the IURC or any other
governmental entity has not been obtained, and so long as the failure to
consummate the share exchange is not the result of a breach of the share
exchange agreement by the party seeking to terminate the share exchange
agreement;
- a court or government entity issues a final order prohibiting the share
exchange;
- the IPALCO shareholders do not approve the share exchange agreement; or
- the other company materially or wilfully breaches the share exchange
agreement and the breach is not remedied within 30 days.
In addition, AES may terminate the share exchange agreement if any of the
following occur, each of which is referred to as a "triggering event":
- IPALCO's board of directors withdraws or modifies in a manner adverse to
AES its recommendation of the share exchange agreement or its
recommendation that the shareholders approve the share exchange agreement,
or approves or recommends another acquisition proposal;
- IPALCO's board of directors fails to reaffirm its recommendation of the
proposal to approve the share exchange agreement within five business days
after AES requests that reaffirmation; or
- IPALCO resolves to take any of the actions specified above.
IPALCO may terminate the share exchange agreement in the event the effective
price of the share exchange to IPALCO shareholders is less than $21.00. In
addition, IPALCO may terminate the share exchange agreement if its board of
directors approves a superior proposal in compliance with the terms of the share
exchange agreement.
Subject to limited exceptions, including the survival of any obligations to
pay a termination fee, if the share exchange agreement is terminated, then it is
void. Except as otherwise provided, there will be no liability on the part of
AES or IPALCO to the other, and all rights and obligations of the parties will
cease. However, no party will be relieved from its obligations with respect to
any wilful breach of the share exchange agreement.
EXPENSES AND TERMINATION FEES
If the share exchange is abandoned because the share exchange agreement is
terminated, all expenses will be paid by the party incurring them, except as
follows:
- IPALCO will reimburse AES for up to $10.0 million in reasonable fees and
expenses and will pay AES a termination fee of $60.0 million if:
- the share exchange agreement is terminated by AES because a triggering
event has occurred;
- IPALCO terminates the share exchange agreement in connection with
IPALCO's approval or recommendation of a superior proposal; or
- the share exchange agreement is terminated because the IPALCO
shareholders do not approve the share exchange agreement and at the
time of the special meeting an acquisition proposal has been previously
disclosed, and within 12 months from the special meeting, IPALCO enters
into any agreement relating to that acquisition proposal.
In addition, if either party terminates the share exchange agreement because
of a breach of the agreement by the other party, the breaching party shall
reimburse the non-breaching party for up to $10.0 million in reasonable fees and
expenses. If either party terminates the share exchange agreement because of a
wilful breach of the agreement by the other party, the non-breaching party may
pursue other damages.
47
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The share exchange is expected to be accounted for in accordance with the
pooling of interests method of accounting pursuant to APB Opinion No. 16.
Accordingly, the accompanying unaudited pro forma consolidated financial
information gives effect to the transaction in accordance with the
pooling-of-interests method of accounting. The unaudited pro forma consolidated
financial information should be read in conjunction with (i) AES's audited
consolidated financial statements and notes thereto, included in AES's 1999
Form 10-K, and AES's unaudited interim financial information included in AES's
Form 10-Q, and (ii) IPALCO's audited consolidated financial statements and notes
thereto, included in its 1999 Form 10-K, and IPALCO's unaudited interim
financial information included in IPALCO's Form 10-Q, each of which is
incorporated by reference in this proxy statement/ prospectus. See "Where You
Can Find More Information." The unaudited pro forma consolidated financial
information has been prepared in accordance with generally accepted accounting
principles. These principles require management to make use of estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities as of the date of the
consolidated financial statements and the reported amounts of revenue and
expenses during the reporting period. Actual results could differ from those
estimates. The unaudited pro forma consolidated income statements are not
necessarily indicative of future operating results. The unaudited pro forma
consolidated balance sheet gives effect to the share exchange as if it had
occurred on December 31, 1999, combining the balance sheets of AES and IPALCO as
of December 31, 1999. The unaudited pro forma consolidated income statements
give effect to the share exchange as if it had occurred on January 1, 1997. The
unaudited pro forma consolidated financial statements are presented for
informational purposes only and are not necessarily indicative of actual or
future financial position or results of operations that would have or will occur
upon consummation of the share exchange.
48
<PAGE>
AES AND SUBSIDIARY COMPANIES
UNAUDITED PRO FORMA CONSOLIDATED INCOME STATEMENT
JUNE 30, 2000
(IN MILLIONS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
SIX MONTHS ENDED JUNE 30, 2000
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
AES IPALCO ADJUSTMENTS CONSOLIDATED
---------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
Revenues..................................... $3,014 $ 416 $ -- $3,430
Cost of sales................................ (2,260) (224) -- (2,484)
Selling, general, and administrative......... (48) (60) -- (108)
Interest expense............................. (582) (30) -- (612)
Interest income.............................. 100 -- -- 100
Equity in pre-tax earnings of affiliates..... 217 -- -- 217
Other expenses............................... -- 99 (I) -- 99
------ ------ ------ ------
INCOME BEFORE INCOME TAXES, MINORITY INTEREST
AND EXTRAORDINARY ITEM..................... 441 201 -- 642
Income taxes................................. 114 80 (1)(H) 193
Minority interest............................ 35 -- -- 35
------ ------ ------ ------
INCOME BEFORE EXTRAORDINARY ITEM............. 292 121 1 414
Extraordinary Item--loss on early
extinguishment of debt--net of applicable
income taxes............................... (7) -- -- (7)
------ ------ ------ ------
NET INCOME................................... $ 285 $ 121 $ 1 $ 407
====== ====== ====== ======
Weighted Average Number of Shares Outstanding
(Basic).................................... 423.4 85.7 (42.9)(C) 466.3
Weighted Average Number of Shares Outstanding
(Diluted).................................. 461.6 86.4 (43.2)(C) 504.9
------ ------ ------ ------
EARNINGS PER SHARE (BASIC)............... (J) $ 0.69 $ 1.42 $ 0.89
====== ====== ======
EARNINGS PER SHARE (DILUTED)............. (J) $ 0.66 $ 1.40 $ 0.84
====== ====== ======
</TABLE>
49
<PAGE>
AES AND SUBSIDIARY COMPANIES
UNAUDITED PRO FORMA CONSOLIDATED INCOME STATEMENT
JUNE 30, 1999
(IN MILLIONS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
SIX MONTHS ENDED JUNE 30, 1999
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
AES IPALCO ADJUSTMENTS CONSOLIDATED
---------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
Revenue..................................... $1,278 $ 404 $ -- $1,682
Cost of sales............................... (830) (206) -- (1,036)
Selling, general and administrative......... (31) (61) -- (92)
Interest expense............................ (276) (33) -- (309)
Interest income............................. 31 -- -- 31
Equity in pre-tax earnings of affiliates.... (54) -- -- (54)
Other expenses.............................. -- (1) -- (1)
------ ----- ----- ------
INCOME BEFORE INCOME TAXES AND MINORITY
INTEREST.................................. 118 103 -- 221
Income taxes................................ 28 39 (6)(H) 61
Minority interest........................... 32 -- -- 32
------ ----- ----- ------
NET INCOME.................................. $ 58 $ 64 $ 6 $ 129
====== ===== ===== ======
Weighted Average Number of Shares
Outstanding (Basic)....................... 368.2 86.5 (43.3)(C) 411.5
Weighted Average Number of Shares
Outstanding (Diluted)..................... 377.2 87.3 (43.7)(C) 420.9
------ ----- ----- ------
EARNINGS PER SHARE (BASIC).............. (J) $ 0.16 $0.74 $ 0.31
====== ===== ======
EARNINGS PER SHARE (DILUTED)............ (J) $ 0.16 $0.74 $ 0.31
====== ===== ======
</TABLE>
50
<PAGE>
AES AND SUBSIDIARY COMPANIES
UNAUDITED PRO FORMA CONSOLIDATED INCOME STATEMENT
DECEMBER 31, 1999
(IN MILLIONS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
AES IPALCO ADJUSTMENTS CONSOLIDATED
---------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
Revenues..................................... $3,253 $ 835 $ -- $ 4,088
Cost of sales................................ (2,257) (440) -- (2,697)
Selling, general, and administrative......... (71) (126) -- (197)
Interest expense............................. (641) (66) -- (707)
Interest income.............................. 86 -- -- 86
Gain on contract buyout...................... 91 -- -- 91
Impairment loss.............................. (62) -- -- (62)
Equity in pre-tax earnings of affiliates..... 21 -- -- 21
Other expenses............................... -- 4 -- 4
------ ------ ------ -------
INCOME BEFORE INCOME TAXES, MINORITY INTEREST
AND EXTRAORDINARY ITEM..................... 420 207 -- 627
Income taxes................................. 111 78 (9)(H) 180
Minority interest............................ 64 -- -- 64
------ ------ ------ -------
INCOME BEFORE EXTRAORDINARY ITEM............. 245 129 9 383
Extraordinary Item--loss on early
extinguishment of debt--net of applicable
income taxes............................... (17) -- -- (17)
------ ------ ------ -------
NET INCOME................................... $ 228 $ 129 $ 9 $ 366
====== ====== ====== =======
Weighted Average Number of Shares Outstanding
(Basic).................................... 383.0 86.1 (43.1)(C) 426.1
Weighted Average Number of Shares Outstanding
(Diluted).................................. 392.4 86.8 (43.4)(C) 435.8
------ ------ ------ -------
EARNINGS PER SHARE (BASIC)............... (J) $ 0.64 $ 1.50 $ 0.90
====== ====== =======
EARNINGS PER SHARE (DILUTED)............. (J) $ 0.62 $ 1.49 $ 0.88
====== ====== =======
</TABLE>
51
<PAGE>
AES AND SUBSIDIARY COMPANIES
UNAUDITED PRO FORMA CONSOLIDATED INCOME STATEMENT
DECEMBER 31, 1998
(IN MILLIONS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
AES IPALCO ADJUSTMENTS CONSOLIDATED
---------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
Revenues..................................... $2,398 $ 821 $ -- $3,219
Cost of sales................................ (1,609) (423) -- (2,032)
Selling, general, and administrative......... (56) (136) -- (192)
Interest expense............................. (485) (66) -- (551)
Interest income.............................. 66 -- -- 66
Equity in pre-tax earnings of affiliates..... 232 -- -- 232
Other expenses............................... -- 8 -- 8
------ ------ ------ ------
INCOME BEFORE INCOME TAXES, MINORITY INTEREST
AND EXTRAORDINARY ITEM..................... 546 204 -- 750
Income taxes................................. 145 75 (10)(H) 210
Minority interest............................ 94 -- -- 94
------ ------ ------ ------
INCOME BEFORE EXTRAORDINARY ITEM............. 307 129 10 446
Extraordinary Item--gain on extinguishment of
debt--net of applicable income taxes....... 4 -- -- 4
------ ------ ------ ------
NET INCOME................................... $ 311 $ 129 $ 10 $ 450
====== ====== ====== ======
Weighted Average Number of Shares Outstanding
(Basic).................................... 355.0 89.9 (45.0)(C) 400.0
Weighted Average Number of Shares Oustanding
(Diluted).................................. 378.0 91.2 (45.6)(C) 423.6
------ ------ ------ ------
EARNINGS PER SHARE (BASIC)............... (J) $ 0.87 $ 1.45 $ 1.11
====== ====== ======
EARNINGS PER SHARE (DILUTED)............. (J) $ 0.84 $ 1.43 $ 1.07
====== ====== ======
</TABLE>
52
<PAGE>
AES AND SUBSIDIARY COMPANIES
UNAUDITED PRO FORMA CONSOLIDATED INCOME STATEMENT
DECEMBER 31, 1997
(IN MILLIONS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
AES IPALCO ADJUSTMENTS CONSOLIDATED
---------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
Revenues........................................ $1,411 $ 776 $ -- $2,187
Cost of sales................................... (998) (405) -- (1,403)
Selling, general, and administrative............ (45) (126) -- (171)
Interest expense................................ (244) (64) -- (308)
Interest income................................. 34 -- -- 34
Impairment loss................................. -- (32) -- (32)
Equity in pre-tax earnings of affiliates........ 126 -- -- 126
Other expense................................... -- 2 -- 2
------ ------ ----- ------
INCOME BEFORE INCOME TAXES, MINORITY INTEREST,
EXTRAORDINARY ITEM AND CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING PRINCIPLE................ 284 151 -- 435
Income taxes.................................... 77 54 2 (H) 133
Minority interest............................... 19 -- -- 19
------ ------ ----- ------
INCOME BEFORE EXTRAORDINARY ITEM AND CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE...... 188 97 (2) 283
Extraordinary Item--loss on extinguishment of
debt--net of applicable income taxes.......... (3) -- -- (3)
Cumulative effect of change in accounting
principle--net of applicable income taxes..... -- 18 -- 18
------ ------ ----- ------
NET INCOME...................................... $ 185 $ 115 $ (2) $ 298
====== ====== ===== ======
Weighted Average Number of Shares Outstanding
(Basic)....................................... 333.2 95.9 (48.0)(C) 381.2
Weighted Average Number of Shares Outstanding
(Diluted)..................................... 355.6 96.5 (48.3)(C) 403.9
------ ------ ----- ------
EARNINGS PER SHARE (BASIC).................. (J) $ 0.57 $ 1.00 $ 0.74
====== ====== ======
EARNINGS PER SHARE (DILUTED)................ (J) $ 0.56 $ 0.99 $ 0.73
====== ====== ======
</TABLE>
53
<PAGE>
AES AND SUBSIDIARY COMPANIES
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
JUNE 30, 2000
(IN MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
AES IPALCO ADJUSTMENTS CONSOLIDATED
------------- --------------- ------------ -------------
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................ $ 1,200 $ 21 $ -- $ 1,221
Short-term investments................................... 190 -- -- 190
Accounts receivable--net................................. 1,331 49 -- 1,380
Inventory................................................ 437 93 -- 530
Receivable from affiliates............................... 33 -- -- 33
Deferred income taxes.................................... 289 -- 16(G) 305
Prepaid expenses and other current assets................ 1,002 4 -- 1,006
------- ------- ----- -------
TOTAL CURRENT ASSETS..................................... 4,482 167 16 4,665
------- ------- ----- -------
PROPERTY PLANT AND EQUIPMENT:
Land..................................................... 276 20 -- 296
Electric generation and distribution assets.............. 16,001 2,953 -- 18,954
Accumulated depreciation and amortization................ (952) (1,350) -- (2,302)
Construction in progress................................. 1,903 120 -- 2,023
Other property net....................................... -- 68 -- 68
------- ------- ----- -------
PROPERTY, PLANT, AND EQUIPMENT--NET...................... 17,228 1,811 -- 19,039
------- ------- ----- -------
OTHER ASSETS
Deferred financing costs--net............................ 276 -- -- 276
Project development costs................................ 93 -- -- 93
Investments in and advances to affiliates................ 3,504 -- -- 3,504
Debt service reserves and other deposits................. 441 -- -- 441
Electricity sales concessions and contracts--net......... 1,158 -- -- 1,158
Goodwill--net............................................ 802 -- -- 802
Other assets............................................. 1,036 128(F) -- 1,164
------- ------- ----- -------
TOTAL OTHER ASSETS....................................... 7,310 128 -- 7,438
------- ------- ----- -------
TOTAL ASSETS............................................. $29,020 $ 2,106 $ 16 $31,142
======= ======= ===== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable......................................... $ 398 $ 57 -- 455
Accrued interest......................................... 257 14 -- 271
Accrued and other liabilities............................ 1,379 81 70(G)(H) 1,530
Other notes payable--current portion..................... -- -- -- --
Project financing debt--current portion.................. 2,192 40 -- 2,232
------- ------- ----- -------
TOTAL CURRENT LIABILITIES................................ 4,226 192 70 4,488
------- ------- ----- -------
LONG-TERM LIABILITIES
Project financing debt................................... 10,911 790 -- 11,701
Other notes payable...................................... 2,617 -- -- 2,617
Deferred income taxes.................................... 2,619 367 -- 2,986
Other long-term liabilities.............................. 1,409 5 -- 1,414
Accrued post-retirement and pension benefits............. -- 28 -- 28
------- ------- ----- -------
TOTAL LONG-TERM LIABILITIES.............................. 17,556 1,190 -- 18,746
------- ------- ----- -------
MINORITY INTEREST........................................ 1,720 -- 58(E) 1,778
COMPANY-OBLIGATED CONVERTIBLE MANDATORILY REDEEMABLE
PREFERRED SECURITIES OF SUBSIDIARY TRUSTS HOLDING
SOLELY JUNIOR SUBORDINATED DEBENTURES OF AES........... 1,528 -- -- 1,528
PREFERRED STOCK OF SUBSIDIARY............................ -- 58 (58)(E) --
STOCKHOLDERS' EQUITY
Common stock............................................. 5 439 (439)(B)(D) 5
Additional paid-in capital............................... 3,781 -- -- 3,781
Retained earnings........................................ 1,406 784 (172)(B)(D)(G)(H) 2,018
Unearned compensation on restricted stock................ -- (1) 1 --
Accumulated other comprehensive loss..................... (1,202) -- --(B)(D) (1,202)
Treasury shares.......................................... -- (556) 556(B)(D) --
------- ------- ----- -------
TOTAL STOCKHOLDERS' EQUITY............................... 3,990 666 (54) 4,602
------- ------- ----- -------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY............... $29,020 $ 2,106 $ 16 $31,142
======= ======= ===== =======
</TABLE>
54
<PAGE>
NOTES AND ADJUSTMENTS TO UNAUDITED PRO FORMA
CONSOLIDATED FINANCIAL STATEMENTS
A. There were no material intercompany transactions between AES, including its
subsidiaries, and IPALCO, including its subsidiaries, during the periods
presented.
B. The unaudited pro forma consolidated financial statements reflect the
exchange of each outstanding share of IPALCO common stock for 0.5 shares of
AES common stock, as provided in the share exchange agreement, based on a
per share price of $25.00 per share of IPALCO common stock and $50.00 per
share of AES common stock, and are presented as if the companies were
combined during all periods presented herein.
C. The pro forma basic and diluted weighted average number of outstanding
shares of AES common stock was calculated by multiplying the applicable
weighted average number of outstanding shares of IPALCO common stock during
the year by the assumed exchange ratio of 0.5 and adding the result to the
applicable weighted average number of outstanding shares of AES common stock
during the year.
D. The pro forma adjustment to common stock represents the effects of recording
the share exchange as of the balance sheet date using the pooling of
interests method of accounting whereby common stock, treasury stock,
unearned compensation on restricted stock and additional paid-in capital
amounts are adjusted to reflect the difference in par value of AES common
stock, with a par value of $.01 per share, compared to IPALCO common stock,
without par value, and the assumed exchange ratio of 0.5 shares of AES
common stock for each share of IPALCO common stock.
E. Preferred stock of subsidiary has been reclassified to Minority Interest, on
the Unaudited Pro Forma Consolidated Balance Sheet, which is consistent with
AES accounting policies for preferred shares of subsidiaries. For
presentation of the Unaudited Pro Forma Consolidated Income Statements, all
amounts of preferred dividends related to the preferred stock of subsidiary
have been classified as interest expense.
F. Other Assets of IPALCO consist of regulatory assets of $108 million and
$102 million, unamortized deferred financing costs of $7 million and
$7 million, available for sale securities of $175 million and $0.2 million,
and other assets of $20 million and $18.8 million, as of December 31, 1999
and June 30, 2000, respectively. These amounts have been reclassified to
Other Assets in accordance with AES accounting policies as part of the
Unaudited Pro Forma Consolidated Balance Sheet.
G. The companies expect to record a charge in 2000 to cover the direct costs of
the share exchange (to include fees of financial advisors, legal counsel and
independent auditors), the cost associated with employment agreements, and
the costs associated with integration. The direct costs of the share
exchange are estimated to be approximately $22 million, and have been
charged to retained earnings in the Unaudited Pro Forma Consolidated Balance
Sheet as if they occurred as of June 30, 2000 and will be charged against
income in 2000. No provision has been made for a tax benefit, as AES
believes these costs are not deductible for tax purposes. These charges were
not considered in the Unaudited Pro Forma Consolidated Income Statements.
The estimated charges and nature of costs included therein are subject to
change, as more accurate information and estimates become available.
The unaudited pro forma consolidated financial statements do not reflect the
non-recurring costs and expenses associated with integrating the operations
of the two companies, nor any of the anticipated recurring expense savings
arising from the integration. Costs of the integration will result in
significant non-recurring charges to the combined results of operations
after consummation of the share exchange; however, the actual amount of such
charges cannot be determined until the transition plan relating to the
integration of operations is completed. Based on current
55
<PAGE>
NOTES AND ADJUSTMENTS TO UNAUDITED PRO FORMA
CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
estimates, the pre-tax cost to the combined company relating to the
employment agreements would range from approximately $48 million to
$65 million, depending on the amounts paid under the termination benefits
agreements and other factors related to the calculation of amounts due under
the agreements.
H. The unaudited pro forma consolidated tax rate has taken into effect the
inclusion of IPALCO as part of AES's consolidated tax return. As such, based
on the effective rates of both companies, the tax rate has been restated to
reflect the merger using a rate of 32% for all periods presented.
I. Included in the results of operations for the six months ended June 30, 2000
for IPALCO is the non-recurring impact of the sale of 1.026 million shares
of Internet Capital Group, Inc. which resulted in an after tax gain of
approximately $60.1 million, net of all applicable taxes and related
expenses.
J. Basic and diluted earnings per share are presented before giving effect to
extraordinary items and early extinguishment of debt for AES and the
cumulative effect of change in accounting principle for IPALCO. The
unaudited pro forma basic and diluted earnings per share for the
consolidated company do not include the effects of extraordinary items or
the cumulative effect of change in accounting principle.
56
<PAGE>
DESCRIPTION OF AES CAPITAL STOCK
GENERAL
Under AES's certificate of incorporation and by-laws, AES is authorized to
issue 1,200,000,000 shares of common stock, par value $0.01 per share, and
50,000,000 shares of preferred stock, no par value.
The following summary contains a description of certain general terms of the
common stock. The description of certain provisions of the common stock is
subject to and qualified by reference to the provisions of our certificate of
incorporation.
As of July 31, 2000, there were 456,774,338 shares of common stock
outstanding. The holders of common stock are entitled to one vote per share on
all matters to be voted upon by the stockholders. Subject to preferences that
may be applicable to any outstanding preferred stock, the holders of common
stock are entitled to receive ratably dividends as may be declared from time to
time by the board of directors out of funds legally available to pay dividends.
If the corporation liquidates its business, the holders of common stock are
entitled to share ratably in all assets after the corporation pays its
liabilities and the liquidation preference of any outstanding preferred stock.
The common stock has no preemptive or conversion rights or other subscription
rights. There are no redemption or sinking fund provisions applicable to the
common stock. All outstanding shares of common stock are fully paid and
non-assessable, and any shares of common stock in respect of which this
prospectus is being delivered will be fully paid and non-assessable.
TRANSFER AGENT AND REGISTRAR
AES has appointed EquiServe as its transfer agent and registrar for the
common stock.
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COMPARATIVE RIGHTS OF IPALCO SHAREHOLDERS
AND AES SHAREHOLDERS
GENERAL
If the shareholders of IPALCO approve the share exchange agreement, and the
share exchange is subsequently consummated, all shareholders of IPALCO will
become shareholders of AES. AES is a corporation organized under, and governed
by, the Delaware General Corporation Law (the "DGCL"), whereas IPALCO is a
corporation organized under, and governed by, the Indiana Business Corporation
Law (the "IBCL").
The following is a brief summary of certain differences between the Delaware
corporate laws applicable to AES and the Indiana corporate laws applicable to
IPALCO and certain differences between AES's Certificate of Incorporation
("Certificate") and By-laws and IPALCO's Articles of Incorporation ("Articles")
and By-laws. The purpose of this summary is to briefly indicate the differences
between holding AES capital stock and IPALCO capital stock to the extent such
differences are created by the state corporation laws applicable to AES and
IPALCO or arise because of differences between AES's Certificate and By-laws and
IPALCO's Articles and By-laws. THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE DGCL, THE IBCL, AES'S CERTIFICATE AND BY-LAWS AND IPALCO'S
ARTICLES AND BY-LAWS.
DIRECTORS
AES's By-laws provide that the number of directors of AES shall be nine or
such other number as shall be determined by resolution of the board of
directors, that such directors shall be elected at the annual meeting of the
shareholders of AES, and that each director elected shall hold office until his
or her successor is duly elected and shall qualify. The number of directors is
currently nine. Section 141 of the DGCL provides that any director or the entire
board of directors may be removed, with or without cause, by the holders of a
majority of shares then entitled to vote at an election of directors, except
that for classified boards, shareholder removal may only be for cause unless the
corporation's Certificate of Incorporation provides otherwise. The AES
Certificate provides that directors may be removed for cause by a majority vote
of shareholders. The AES Certificate provides that newly created directorships
resulting from any increase in the number of directors and any vacancy in the
board of directors resulting from death, resignation, or removal from office
shall be filled by a majority vote of the remaining directors.
IPALCO's Articles provide that the size of the board shall be not less than
nine directors, with the exact number to be fixed by amendment to the By-laws of
IPALCO. IPALCO currently has 15 directors. The IPALCO board is divided into
three classes, with directors in each class elected for three-year staggered
terms. Directors are assigned to classes by resolution adopted by a majority of
the directors of IPALCO and by 2/3 of those directors who are Continuing
Directors. Continuing Directors are defined in the Articles as members of the
board of directors unaffiliated with a 10% or greater shareholder who became
directors before a person or entity became a 10% or greater shareholder of
IPALCO, and certain successors to such board members. Directors may be removed
only for cause and only by the affirmative vote of 80% of the shares eligible to
vote for directors. IPALCO's Articles provide that any vacancy occurring in the
board of directors, including a vacancy created by an increase in the number of
directors, shall be filled for the remainder of the unexpired term only by a
majority vote of the directors then in office and at least 2/3 of the Continuing
Directors.
LIMITATION OF DIRECTOR LIABILITY IN CERTAIN CIRCUMSTANCES
As permitted by the DGCL, Article X of AES's Certificate provides that
directors of AES shall not be liable personally to AES or its shareholders for
monetary damages for breach of fiduciary duty as a director except for liability
arising out of (a) any breach of the director's duty of loyalty to AES or
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its shareholders, (b) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (c) payment of a dividend
or approval of a stock repurchase in violation of Section 174 of the DGCL or
(d) any transaction from which the director derived an improper personal
benefit. This provision protects AES directors against personal liability for
monetary damages from breaches of their duty of care. Article X has no effect on
the availability of equitable remedies, such as an injunction, based upon a
director's breach of his or her duty of care. Article X does not apply to
officers of AES who are not directors of AES.
Section 23-1-35-1 of the IBCL provides that directors of IPALCO shall not be
liable for any action taken or not taken as a director unless such directors
(a) breach or fail to perform the duties of the director's office in good faith,
with the care an ordinarily prudent person in a like position would exercise
under similar circumstances and in a manner reasonably believed to be in the
best interests of the corporation, and (b) any such breach or failure to perform
constitutes willful misconduct or recklessness.
INDEMNIFICATION AND INSURANCE
AES. Under Section 145 of the DGCL, directors, officers, employees and
agents may be indemnified against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement in connection with specified
actions, suits or proceedings, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation--a
"derivative action") if they acted in good faith and in a manner they reasonably
believed to be in, or not opposed to, the best interests of the corporation,
and, regarding any criminal action or proceeding, had no reasonable cause to
believe their conduct was unlawful. A similar standard is applicable in the case
of derivative actions, except that indemnification only extends to expenses
(including attorneys' fees) incurred in connection with the defense or
settlement of such actions. The DGCL requires court approval before there can be
any indemnification where the person seeking indemnification has been found
liable to the corporation. To the extent that a person otherwise eligible to be
indemnified is successful on the merits of any claim or defense described above,
indemnification for expenses (including attorneys' fees) actually and reasonably
incurred is mandated by the DGCL. This indemnification is not deemed exclusive
of any rights to which an indemnified party may be entitled under any by-law,
agreement, shareholder or disinterested director vote, or otherwise.
Under AES's By-laws, and in accordance with Section 145 of the DGCL, AES
must indemnify to the fullest extent permitted by the DGCL any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding. These include civil, criminal,
administrative or investigative proceedings by reason of the fact that the
person is or was a director or officer of or employed by us, or is or was
serving in that capacity or as an agent at the request of us for another entity.
This indemnification covers expenses, judgments, fines and amounts paid in
settlement actually and reasonably incurred in connection with the defense or
settlement of an action, suit or proceeding if the person acted in good faith
and in a manner the person reasonably believed to be in or not opposed to AES's
best interests and, with respect to any criminal action or proceeding, had no
reasonable cause to believe was unlawful. AES will indemnify persons in a
derivative action under the same conditions, except that no indemnification is
permitted without judicial approval if the person is adjudged to be liable to
AES in the performance of his or her duty. Agents of AES may be similarly
indemnified at the discretion of the board of directors.
Pursuant to AES's By-laws, a person eligible for indemnification may have
the expenses incurred in connection with any matter described above paid in
advance of a final disposition by AES. However, these advances will only be made
if the indemnified person undertakes to repay all advanced amounts if it is
determined that the person is not entitled to indemnification.
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In addition, under AES's By-laws, AES may purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee, or agent of
AES or of another corporation against any liability arising out of the person's
status as a director, officer, employee or agent of AES whether or not AES would
have the power to indemnify such person against such liability under the
provisions of its By-laws. AES maintains directors' and officers' insurance.
IPALCO. Chapter 37 of the IBCL provides for both mandatory and permissive
indemnification of IPALCO's directors, officers, employees and agents who are
made parties to proceedings as a result of conduct in their official capacity.
Chapter 37 requires IPALCO to indemnify any director or officer against
reasonable expenses incurred in the defense of such a proceeding generally if
the individual is wholly successful on the merits or otherwise. Chapter 37
authorizes IPALCO to indemnify any director, officer, employee or agent against
liability incurred in such a proceeding generally if the individual's conduct
was in good faith and the individual reasonably believed his conduct was in
IPALCO's best interests (or, in the case of criminal proceeding, lawful).
Chapter 37 further authorizes any court of competent jurisdiction to order
indemnification generally if the court determines a director or officer is
entitled to mandatory indemnification or is otherwise fairly and reasonably
entitled to indemnification in view of all the relevant circumstances. Chapter
37 authorizes indemnification to reimburse reasonable expenses in advance of
final disposition of a proceeding generally if the individual affirms in writing
a good faith belief that he satisfies the standard of conduct for permissive
indemnification, the individual undertakes in a signed writing to repay the
advance if it is determined he does not satisfy the standard of conduct for
permissive indemnification and IPALCO determines that the facts then known do
not preclude indemnification. Lastly, Chapter 37 authorizes further
indemnification to the extent that IPALCO may provide in its Articles, By-laws,
board of directors or shareholder resolution, or other authorization adopted by
a majority vote of its voting shares then issued and outstanding.
Section 9.05 of IPALCO's Articles generally provides for indemnification of
any person who is or was a director, officer, or employee of IPALCO, or who
served at IPALCO's request as a director, officer, or employee of another
corporation, employee benefit plan, or other entity. To qualify for
indemnification, such a person generally must have been wholly successful on the
merits or otherwise, or (i) must have acted in good faith and in a manner he
reasonably believed was in or not opposed to the best interests of IPALCO, and
(ii) in any criminal proceeding, had no reasonable cause to believe that his
conduct was unlawful; provided, further, that no indemnification may be provided
to someone adjudged to be liable for reckless disregard or willful misconduct in
the performance of duty. A person who qualifies for indemnification generally is
entitled to indemnity for any obligation to pay any judgments, settlements,
penalties, fines and expenses reasonably incurred in any actual or threatened
claim, action, suit or proceeding, whether civil, criminal, or administrative,
in which he or she was made a party as a result of his or her service on behalf
of IPALCO.
To the extent that a director, officer, employee or agent of IPALCO has been
wholly successful, on the merits or otherwise, in the defense of any action,
suit or proceeding, or in the defense of any claim, issue or matter therein,
IPALCO will indemnify such person against expenses (including counsel fees)
actually and reasonably incurred by such person in connection therewith. Any
other indemnification (unless ordered by a court) will be made by IPALCO only as
authorized in the specific case, upon the determination that indemnification of
the director, officer, or employee is permissible in the circumstances because
he has met the applicable standard of conduct. Such determination shall be made
(1) by the board of directors by a majority vote of a quorum consisting of
directors who were not at the time parties to such action, suit or proceeding;
or (2) by special legal counsel.
IPALCO may advance expenses which must be repaid by the indemnitee if it is
ultimately determined he or she is not entitled to indemnification. IPALCO may
also maintain insurance to protect itself and its directors, officers, or
employees against these potential liabilities, whether or not IPALCO has the
power to indemnify such persons against such liabilities. IPALCO maintains
directors' and officers' insurance.
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ANTITAKEOVER STATUTES
DELAWARE BUSINESS COMBINATION STATUTE. Section 203 of the DGCL
("Section 203"), which applies to AES, regulates transactions with major
shareholders after they become major shareholders. Section 203 prohibits a
Delaware corporation from engaging in mergers, dispositions of 10% or more of
its assets, issuances of stock and other transactions ("business combinations")
with a person or group that owns 15% or more of the voting stock of the
corporation (an "interested shareholder"), for a period of three years after the
interested shareholder crosses the 15% threshold. These restrictions on
transactions involving an interested shareholder do not apply if (a) before the
interested shareholder owned 15% or more of the voting stock, the board of
directors approved the business combination or the transaction that resulted in
the person or group becoming an interested shareholder; (b) in the transaction
that resulted in the person or group becoming an interested shareholder, the
person or group acquired at least 85% of the voting stock other than stock owned
by inside directors and certain employee stock plans; or (c) after the person or
group became an interested shareholder, the board of directors and at least
two-thirds of the voting stock other than stock owned by the interested
shareholder approves the business combination.
INDIANA CONTROL SHARE ACQUISITIONS STATUTE. Chapter 42 of the IBCL, the
Indiana Control Share Acquisitions Statute, restricts the voting rights of
certain shares ("control shares") that, except for Chapter 42, would have voting
power with respect to shares of an issuing public corporation and that, when
added to all other shares of such corporation owned by a person, would entitle
that person, immediately after the acquisition of such shares, to exercise or
direct the exercise of the voting power of such corporation in the election of
directors within any of the following ranges of voting power: (a) one-fifth or
more but less than one-third of all voting power; (b) one-third or more but less
than a majority of a voting power; and (c) a majority or more of all voting
power (a "control share acquisition"). The voting rights of such control shares
are restricted to those rights granted by a resolution approved by the holders
of a majority of the outstanding voting shares, excluding the voting shares
owned by the acquiring shareholder and certain other "interested shares," which
includes shares owned by officers of the issuing corporation and employees of
the issuing corporation that are also directors of the issuing corporation.
Chapter 42 does not apply to the acquisition of shares of an issuing public
corporation if the acquisition is consummated pursuant to a merger or plan of
share exchange effected in compliance with IBCL Section 23-1-40 if the issuing
public corporation is a party to the agreement of merger or plan of share
exchange. Because IPALCO, as the issuing corporation, is a party to the share
exchange, which is being effected in compliance with IBCL Section 23-1-40, AES's
acquisition of IPALCO shares in connection with the share exchange will not be
considered a control share acquisition.
INDIANA BUSINESS COMBINATION STATUTE. Chapter 43 of the IBCL is similar,
but not identical, to Section 203 of the DGCL. Chapter 43 prohibits Indiana
corporations from engaging in certain transactions (including mergers,
consolidations, asset sales, liquidations or dissolutions, reclassifications,
recapitalizations, disproportionate share conversions, loans, advances, other
financial assistance, or tax benefits not received proportionately by all
shareholders) (each, a "business combination") with a person that is the
beneficial owner, directly or indirectly, of 10% or more of the voting power of
the outstanding voting shares of the Indiana corporation (an "interested
shareholder") for a period of five years after such person becomes an interested
shareholder unless, prior to the date the interested shareholder becomes an
interested shareholder, the board of directors of the Indiana corporation
approves either the transaction in which such person becomes an interested
shareholder or such business combination. Following the five-year moratorium
period, the Indiana corporation may engage in certain business combinations with
an interested shareholder only if, among other things, (a) the business
combination is approved by the affirmative vote of the holders of a majority of
the outstanding voting shares not beneficially owned by the interested
shareholder proposing the business combination or (b) the business combination
meets certain criteria designed to ensure that the remaining shareholders
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receive fair consideration for their shares. AES was not an interested
shareholder of IPALCO prior to approval of the share exchange by IPALCO's board
of directors, so Chapter 43 will not apply to the share exchange.
OTHER PROVISIONS. The IBCL also specifically authorizes directors, in
considering the best interests of an Indiana corporation, to consider the
effects of any action on shareholders, employees, suppliers, and customers of
the corporation, and communities in which offices or other facilities of the
corporation are located, and any other factors the directors consider pertinent.
Under the IBCL, directors are not required to approve a proposed business
combination or other corporate action if the directors determine in good faith
that such approval is not in the best interest of the corporation. In addition,
the IBCL states that directors are not required to redeem any rights under, or
render inapplicable, a shareholder rights plan or to take or decline to take any
other action solely because of the effect such action might have on a proposed
change of control of the corporation or the amounts to be paid to shareholders
upon such change of control. The IBCL explicitly provides that the different or
higher degree of scrutiny imposed in Delaware and certain other jurisdictions
upon director's actions taken in response to potential changes in control will
not apply. The Delaware Supreme Court has held that defensive measures in
response to a potential takeover must be "reasonable in relation to the threat
posed."
In taking or declining to take any action or in making any recommendation to
a corporation's shareholders with respect to any matter, directors are
authorized under the IBCL to consider both the short-term and long-term
interests of the corporation as well as interests of other constituencies and
other relevant factors. Any determination made with respect to the foregoing by
a majority of the disinterested directors shall conclusively be presumed to be
valid unless it can be demonstrated that such determination was not made in good
faith after reasonable investigation.
Because of the foregoing provisions of the IBCL, the board of directors of
an Indiana corporation has significant flexibility in responding to unsolicited
acquisition proposals, and accordingly it may be more difficult for an acquiror
to gain control of an Indiana corporation in a transaction not approved by the
board.
ISSUANCE OF PREFERRED STOCK
As of August 15, 2000, AES had 50,000,000 authorized shares of preferred
stock with no par value, none of which are outstanding. IPALCO has no authorized
shares of preferred stock.
AES's board of directors has the authority to issue preferred stock in one
or more classes or series and to fix the rights, preferences, privileges and
restrictions thereof, including dividend rights, dividend rates, conversion
rights, exchange rights, voting rights, terms of redemption, redemption prices,
liquidation preferences and the number of shares constituting any class or
series or the designation of such class or series, without any further action by
the shareholders. Preferred stock, if issued, will not be entitled to any
preemptive or similar rights.
Generally, the issuance of preferred stock by AES could (a) result in a
class of securities outstanding which will have certain preferences regarding
dividends and distributions in a liquidation over AES common stock and might
provide for certain rights (whether general, special, conditional or limited)
that could dilute the voting rights of AES common stock and (b) result in
dilution of the net income per share and net book value per share relating to
AES common stock. Further, the issuance of any additional shares of AES common
stock, pursuant to any conversion rights granted holders of any preferred stock,
may also result in dilution of the voting rights, net income per share and net
book value of AES common stock.
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RIGHTS AGREEMENT
IPALCO has entered into a rights agreement pursuant to which IPALCO has
issued rights to its shareholders to purchase shares of IPALCO common stock. The
rights are exercisable in limited circumstances and are intended to encourage a
person seeking to acquire control of IPALCO to negotiate with its board of
directors. The rights agreement has been amended by IPALCO to expressly permit
the share exchange. AES does not have a comparable rights agreement.
VOTING RIGHTS/CUMULATIVE VOTING
The holders of AES common stock and IPALCO common stock are entitled to one
vote per share on all matters to be voted upon by the holders of such shares.
Section 214 of the DGCL provides that no cumulative voting rights, in
respect of elections of directors, exist under Delaware Law, unless a
corporation's certificate of incorporation provides for such cumulative voting.
AES's Certificate does not provide for cumulative voting in elections of
directors.
Section 23-1-30-9 of the IBCL also provides that shareholders do not have
the right to cumulate their votes for directors unless a corporation's articles
of incorporation so provide. IPALCO's Articles do not provide for cumulative
voting in elections of directors.
ACTION WITHOUT A MEETING
Section 228 of the DGCL permits any action required or permitted to be taken
at a shareholders' meeting to be taken by written consent signed by the holders
of the number of shares that would have been required to effect the action at an
actual meeting of the shareholders. Generally, holders of a majority of
outstanding shares can effect such an action. The DGCL also provides that a
corporation's certificate of incorporation may restrict or even prohibit
shareholders' action without a meeting. AES's Certificate does not restrict or
prohibit shareholders' action without a meeting.
Under Section 23-1-29-4 of the IBCL, any action required or permitted to be
taken at a shareholders' meeting may be taken without a meeting by written
consent signed by all of the shareholders entitled to vote on such action.
SPECIAL MEETINGS
Under Section 211(d) of the DGCL, the board of directors or those persons
authorized by the corporation's certificate of incorporation or by-laws may call
a special meeting of the corporation's shareholders. AES's By-laws provide that
a special meeting may be called by the Chairman of the Board, by the President
or by a majority of the board of directors.
In comparison, Section 23-1-29-2 of the IBCL requires a corporation of 50 or
more shareholders to hold a special meeting on call of its board of directors or
the person or persons (including, but not limited to, shareholders or officers)
specifically authorized to do so by the articles of incorporation or by-laws.
IPALCO's By-laws provide that a special meeting may only be called by the
Chairman of the Board of IPALCO, the President of IPALCO, or by a majority of
the total number of directors of IPALCO.
Thus, for both AES and IPALCO, shareholders are not authorized to call
special meetings.
VOTING AND APPRAISAL RIGHTS WITH RESPECT TO CORPORATE REORGANIZATIONS
The DGCL generally requires a majority vote of shareholders to approve a
merger, sale of assets or similar reorganization transaction. Under
Section 251(f) of the DGCL, however, no vote of the shareholders of a
corporation surviving the merger is required if the number of shares to be
issued in the merger does not exceed 20% of the shares of the surviving
corporation outstanding immediately
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prior to the date of the merger and if certain other conditions are met. The
adoption and approval of the share exchange agreement by the shareholders of AES
is not required under the DGCL.
Section 262 of the DGCL does not provide for dissenters' rights of appraisal
for (a) the sale, lease or exchange of all or substantially all of the assets of
a corporation, (b) a merger by a corporation, the shares of which are either
listed on a national securities exchange or held by more than 2,000 shareholders
if such shareholders receive shares of the surviving corporation or of a listed
or widely held corporation or (c) shareholders of a corporation surviving a
merger if no vote of such shareholders is required to approve the merger.
The IBCL also requires a majority vote of shareholders to approve a plan of
merger or share exchange. This requirement is modified by IPALCO's Articles in
one significant respect. IPALCO's Articles require that certain business
combinations between IPALCO (or any subsidiary thereof) and a 10% or greater
shareholder (or affiliate thereof) either (i) be approved by at least 80% of the
total number of outstanding voting shares of IPALCO, or (ii) be approved by a
majority of IPALCO's directors and 2/3 of IPALCO's Continuing Directors after
considering the social, legal and economic effects the business combination may
have on shareholders, employees, customers and supplies of IPALCO and its
subsidiaries and on the communities in which IPALCO conducts business or
(iii) satisfy certain fair price, disclosure, and prohibitions relating to
self-dealing transactions involving the 10% or greater shareholder. The approval
of the share exchange agreement will not be subject to this 80% vote
requirement.
Section 23-1-44-8 of the IBCL does not provide for dissenters' rights for a
merger or plan of share exchange by a corporation the shares of which are
(a) registered on a United States securities exchange registered under the
Exchange Act, or (b) traded on the NASDAQ National Market System or a similar
market.
AMENDMENTS TO CHARTER DOCUMENTS
The DGCL requires approval of shareholders holding a majority of the voting
power of AES in order to amend AES's Certificate. Significant amendments to
IPALCO's Articles must be approved by a majority vote of IPALCO's board of
directors and also by a vote of more shares voting in favor of those amendments
than voting against the amendments; provided, however, that approval by at least
80% of the outstanding voting shares is required for certain amendments (I.E.,
amendments to provisions relating to number, classification, vacancies and
removal of directors and certain business combinations).
BY-LAWS
Section 109 of the DGCL places the power to adopt, amend or repeal by-laws
in the corporation's shareholders, but permits the corporation, in its
certificate of incorporation, also to vest such power with the board of
directors. AES's Certificate contains such a provision. Although the board of
directors of AES has been vested with such authority, AES's shareholders also
have the power to adopt, amend or repeal By-laws by majority vote. IPALCO's
Articles provide that its By-laws may be amended by a majority vote of the total
number of directors of IPALCO. This is consistent with IBCL Section 23-1-39-1,
which provides that the a board of directors has the sole power to amend the
by-laws, unless the articles of incorporation provide otherwise.
PREEMPTIVE RIGHTS
Under Section 102 of the DGCL, no preemptive rights will exist, unless a
corporation's certificate of incorporation specifies otherwise. AES's
Certificate does not provide for any such preemptive rights.
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IBCL Section 23-1-27-1 provides that the shareholders of a corporation do
not have a preemptive right to acquire a corporation's unissued shares except to
the extent the articles of incorporation so provide. IPALCO's Articles do not
provide for any such preemptive rights.
DIVIDENDS
The holders of common stock of AES and IPALCO are entitled to receive
ratably dividends as may be declared from time to time by their boards of
directors out of funds legally available to pay dividends, subject in AES's case
to any preferential rights of any holders of AES preferred stock.
Delaware corporations may pay dividends out of surplus or, if there is no
surplus, out of net profits for the fiscal year in which declared and for the
preceding fiscal year. Section 170 of the DGCL also provides that dividends may
not be paid out of net profits if, after the payment of the dividend, capital is
less than the capital represented by the outstanding stock of all classes having
a preference upon the distribution of assets.
In comparison, the IBCL does not permit dividend distributions if, after
giving effect to the proposed dividend, (a) the corporation would be unable to
pay its debts as they become due in the ordinary course of business, or (b) the
corporation's total assets would be less than the sum of its total liabilities
plus (unless the articles of incorporation permit otherwise) the amount that
would be needed, if the corporation were to be dissolved at the time of
distribution, to satisfy the preferential rights (if any) of shareholders whose
preferential rights are superior to those shareholders receiving the
distribution.
LIQUIDATION
Subject to any preferences that might be applicable to outstanding AES
preferred stock, the holders of common stock of AES and IPALCO are entitled to
share ratably in all net assets paid to shareholders upon liquidation of the
corporation, after payment or provision for payment of the debts and other
liabilities of the corporation.
DIRECTOR NOMINATIONS/SHAREHOLDER PROPOSALS
The By-laws of both AES and IPALCO impose certain notice and information
requirements in connection with the nomination by shareholders of candidates for
election to the board of directors or the proposal by shareholders of business
to be acted upon at an annual meeting of shareholders.
THIS SUMMARY OF THE MATERIAL DIFFERENCES IN THE CORPORATION LAWS OF INDIANA
AND DELAWARE, THE IPALCO ARTICLES, THE AES CERTIFICATE, THE IPALCO BY-LAWS AND
THE AES BY-LAWS DOES NOT PURPORT TO BE A COMPLETE LISTING OF DIFFERENCES IN THE
RIGHTS AND REMEDIES OF HOLDERS OF SHARES OF INDIANA AS OPPOSED TO DELAWARE
CORPORATIONS AND SHAREHOLDERS OF IPALCO AND SHAREHOLDERS OF AES IN PARTICULAR.
THE DIFFERENCES CAN BE DETERMINED IN FULL BY REFERENCE TO INDIANA LAW, DELAWARE
LAW, THE IPALCO ARTICLES, THE AES CERTIFICATE, THE IPALCO BY-LAWS AND THE AES
BY-LAWS. THE LAWS OF INDIANA AND DELAWARE PROVIDE THAT SOME OF THE STATUTORY
PROVISIONS AS THEY AFFECT VARIOUS RIGHTS OF HOLDERS OF SHARES MAY BE MODIFIED BY
PROVISIONS IN THE ARTICLES OF INCORPORATION FOR INDIANA CORPORATIONS, THE
CERTIFICATE OF INCORPORATION FOR DELAWARE CORPORATIONS OR THE BY-LAWS OF A
CORPORATION.
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INDEPENDENT ACCOUNTANTS
It is expected that representatives of Deloitte & Touche LLP will be present
at the special meeting to respond to appropriate questions of shareholders and
to make a statement if they so desire.
LEGAL MATTERS
The validity of the AES common stock to be issued in the share exchange has
been passed upon for AES by Skadden, Arps, Slate, Meagher & Flom LLP. Certain
tax consequences of the share exchange have been passed upon for AES by Skadden,
Arps, Slate, Meagher & Flom LLP and for IPALCO by Cravath, Swaine & Moore.
EXPERTS
The financial statements and the related financial statement schedules
incorporated in this proxy statement/prospectus by reference from AES's Annual
Report on Form 10-K for the year ended December 31, 1999 have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their report, which is
incorporated herein by reference, and has been so incorporated in reliance upon
the report of such firm given upon their authority as experts in accounting and
auditing.
The financial statements and the related financial statement schedules
incorporated in this proxy statement/prospectus by reference to IPALCO's Annual
Report on Form 10-K for the year ended December 31, 1999 have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their report, which is
incorporated herein by reference, and has been so incorporated in reliance upon
the report of such firm given upon their authority as experts in accounting and
auditing.
WHERE YOU CAN FIND MORE INFORMATION
AES and IPALCO each file annual, quarterly and current reports, proxy
statements and other information with the Securities and Exchange Commission.
You may read and copy any reports, statements or other information that the
companies file at the Securities and Exchange Commission's public reference room
at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call the Securities
and Exchange Commission at 1-800-SEC-0330 for further information on the public
reference room. AES's and IPALCO's public filings also are available to the
public from commercial document retrieval services and at the Internet Web site
maintained by the Securities and Exchange Commission at http://www.sec.gov.
Reports, proxy statements and other information concerning AES and IPALCO also
may be inspected at the offices of the National Association of Securities
Dealers, Inc., Listing Section, 1735 K Street, Washington, D.C. 20006.
AES has filed a Form S-4 registration statement to register with the
Securities and Exchange Commission the offering and sale of the shares of AES
common stock to be issued to IPALCO shareholders in the share exchange. This
proxy statement/prospectus is a part of the registration statement and
constitutes a prospectus of AES and a proxy statement of IPALCO for the special
meeting.
As allowed by Securities and Exchange Commission rules, this proxy
statement/prospectus does not contain all the information that shareholders can
find in the registration statement or the exhibits to the registration
statement.
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<PAGE>
The Securities and Exchange Commission allows AES and IPALCO to incorporate
information into this proxy statement/prospectus "by reference," which means
that the companies can disclose important information to you by referring you to
another document filed separately with the Securities and Exchange Commission.
This proxy statement/prospectus incorporates by reference the documents set
forth below that AES and IPALCO have previously filed with the Securities and
Exchange Commission. These documents contain important information about the
companies and their respective financial conditions. The information
incorporated by reference is deemed to be part of this proxy
statement/prospectus, except for any information superseded by information
contained directly in this proxy statement/prospectus.
AES FILINGS (FILE NO. 001-12291):
- Annual Report on Form 10-K for fiscal year ended December 31, 1999, filed
on March 30, 2000;
- Quarterly Report on Form 10-Q for fiscal quarter ended June 30, 2000,
filed on August 11, 2000;
- Quarterly Report on Form 10-Q for fiscal quarter ended March 31, 2000,
filed on May 15, 2000;
- Current Report on Form 8-K filed on July 28, 2000;
- Current Report on Form 8-K filed on July 27, 2000;
- Current Report on Form 8-K filed on June 21, 2000;
- Current Report on Form 8-K filed on May 12, 2000;
- Current Report on Form 8-K filed on May 8, 2000;
- Amended Current Report on Form 8-K/A filed on February 11, 2000; and
- The description of the AES common stock set forth in AES's Registration
Statement on Form 8-A filed October 9, 1996, including all amendments and
reports filed for the purpose of updating such description.
IPALCO FILINGS (FILE NO. 001-08644):
- Annual Report on Form 10-K for fiscal year ended December 31, 1999, filed
on March 1, 2000;
- Quarterly Report on Form 10-Q for fiscal quarter ended June 30, 2000,
filed on August 11, 2000;
- Quarterly Report on Form 10-Q for fiscal quarter ended March 31, 2000,
filed on May 12, 2000;
- Current Report on Form 8-K filed on July 17, 2000;
- Current Report on Form 8-K filed on March 23, 2000;
- Current Report on Form 8-K filed on February 23, 2000;
- Current Report on Form 8-K filed on February 3, 2000; and
- The description of the IPALCO common stock set forth in IPALCO's
Registration Statement on Form 8-B filed December 21, 1983, including all
amendments and reports filed for the purpose of updating such description.
AES and IPALCO each hereby incorporates by reference additional documents
that it may file with the Securities and Exchange Commission between the date of
this proxy statement/prospectus and the date of the IPALCO special meeting.
These include periodic reports, such as annual reports on Form 10-K, quarterly
reports on Form 10-Q and current reports on Form 8-K, as well as proxy
statements.
AES has supplied all information contained or incorporated by reference in
this proxy statement/ prospectus relating to AES, and IPALCO has supplied all
information relating to IPALCO.
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If you are a shareholder, you may have received some of the documents
incorporated by reference. You also may obtain any of these documents from the
appropriate company or the Securities and Exchange Commission or the Securities
and Exchange Commission's Internet Web site described above. Shareholders may
obtain, without charge, documents incorporated by reference in this proxy
statement/ prospectus, except exhibits, unless those exhibits are specifically
incorporated by reference into this proxy statement/prospectus. Requests for
these documents should be made in writing or by telephone from the appropriate
company at the following addresses:
<TABLE>
<S> <C>
THE AES CORPORATION IPALCO ENTERPRISES, INC.
1001 North 19th Street One Monument Circle
Arlington, VA 22209 Indianapolis, Indiana 46204
Tel: (703) 522-1315 Tel: (317) 261-8261
</TABLE>
IF YOU WOULD LIKE TO REQUEST DOCUMENTS, PLEASE DO SO BY / /, 2000
TO RECEIVE THEM BEFORE THE SPECIAL MEETING. If you request any incorporated
documents, the appropriate company will mail them to you by first-class mail, or
other equally prompt means, within one business day of receipt of your request.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROXY STATEMENT/PROSPECTUS TO VOTE YOUR SHARES AT THE SPECIAL
MEETING. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT
DIFFERS FROM THAT CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS. THIS PROXY
STATEMENT/PROSPECTUS IS DATED / /, 2000. YOU SHOULD NOT ASSUME THAT
THE INFORMATION CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS IS ACCURATE AS OF
ANY DATE OTHER THAN THAT DATE, AND NEITHER THE MAILING OF THIS PROXY
STATEMENT/PROSPECTUS TO SHAREHOLDERS NOR THE ISSUANCE OF SHARES OF AES COMMON
STOCK IN THE SHARE EXCHANGE SHALL CREATE ANY IMPLICATION TO THE CONTRARY.
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ANNEX A
--------------------------------------------------------------------------------
AGREEMENT AND PLAN OF SHARE EXCHANGE
DATED AS OF JULY 15, 2000
BETWEEN
THE AES CORPORATION
AND
IPALCO ENTERPRISES, INC.
--------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE I
THE EXCHANGE................................................................. A-1
Section 1.1 The Exchange................................................ A-1
Section 1.2 Closing..................................................... A-1
Section 1.3 Effective Time.............................................. A-1
Section 1.4 Effects..................................................... A-2
Section 1.5 Articles of Incorporation and By-laws....................... A-2
Section 1.6 Directors................................................... A-2
ARTICLE II
EFFECT ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS; EXCHANGE OF A-2
CERTIFICATES...............................................................
Section 2.1 Effect on Capital Stock..................................... A-2
Section 2.2 Per Share Amount Adjustments................................ A-3
Section 2.3 Exchange of Certificates.................................... A-3
Section 2.4 Stock Option Plans.......................................... A-5
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY................................ A-6
Section 3.1 Organization, Standing and Power............................ A-6
Section 3.2 Capital Structure........................................... A-7
Section 3.3 Authority; Execution and Delivery; Enforceability........... A-8
Section 3.4 No Conflicts; Consents...................................... A-8
Section 3.5 SEC Documents............................................... A-9
Section 3.6 Absence of Certain Changes or Events........................ A-10
Section 3.7 Absence of Undisclosed Liabilities.......................... A-10
Section 3.8 Litigation.................................................. A-10
Section 3.9 Compliance with Applicable Laws............................. A-10
Section 3.10 Company Rights Agreement.................................... A-11
Section 3.11 Taxes....................................................... A-11
Section 3.12 Employee Matters; ERISA..................................... A-13
Section 3.13 Environmental Matters....................................... A-17
Section 3.14 Title to Real Property...................................... A-19
Section 3.15 Assets Other than Real Property Interests................... A-19
Section 3.16 Intellectual Property....................................... A-20
Section 3.17 Transactions with Affiliates................................ A-20
Section 3.18 Brokers; Schedule of Fees and Expenses...................... A-20
Section 3.19 Opinion of Financial Advisor................................ A-20
Section 3.20 Capacity to Serve Peak Demand............................... A-20
Section 3.21 Accounting Matters.......................................... A-20
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT..................................... A-21
Section 4.1 Organization, Standing and Power............................ A-21
Section 4.2 Certificate of Incorporation and By-laws.................... A-21
Section 4.3 Capital Structure........................................... A-21
Section 4.4 Authority; Execution and Delivery; Enforceability........... A-22
Section 4.5 SEC Documents............................................... A-22
Section 4.6 No Conflicts; Consents...................................... A-22
Section 4.7 Compliance with Applicable Laws............................. A-23
Section 4.8 Absence of Undisclosed Liabilities.......................... A-23
</TABLE>
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<TABLE>
<S> <C> <C>
Section 4.9 Stockholder Approval........................................ A-23
Section 4.10 Litigation.................................................. A-23
Section 4.11 Absence of Certain Changes or Events........................ A-23
Section 4.12 Brokers..................................................... A-24
Section 4.13 Ownership of Company Common Stock........................... A-24
Section 4.14 Regulatory Status........................................... A-24
Section 4.15 Tax-Free Reorganization..................................... A-24
Section 4.16 Accounting Matters.......................................... A-24
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS.................................... A-24
Section 5.1 Conduct of Business......................................... A-24
Section 5.2 No Solicitations............................................ A-29
Section 5.3 Conduct of Business by Parent............................... A-30
ARTICLE VI
ADDITIONAL AGREEMENTS...................................................... A-31
Section 6.1 Preparation of Joint Registration/Proxy Statement;
Shareholders Meeting........................................ A-31
Section 6.2 Access to Information; Confidentiality...................... A-31
Section 6.3 Reasonable Efforts; Notification; Filings................... A-32
Section 6.4 Employee Benefit Plans...................................... A-33
Section 6.5 Directors' and Officers' Indemnification and Insurance...... A-34
Section 6.6 Expenses.................................................... A-35
Section 6.7 Public Announcements........................................ A-35
Section 6.8 Transfer Taxes.............................................. A-35
Section 6.9 Restructuring............................................... A-36
Section 6.10 Rights Agreement; Consequences if Rights Triggered.......... A-36
Section 6.11 Conduct of Business of Parent............................... A-36
Section 6.12 Certain Employee Matters; Headquarters...................... A-36
Section 6.13 Charitable Giving........................................... A-36
Section 6.14 Asset Sale.................................................. A-36
Section 6.15 Tax Treatment............................................... A-37
Section 6.16 Regional Transmission Organization.......................... A-37
Section 6.17 Pooling-of-Interest......................................... A-37
Section 6.18 Affiliate Letters........................................... A-37
ARTICLE VII
CONDITIONS PRECEDENT......................................................... A-37
Section 7.1 Conditions to Each Party's Obligation to Effect the
Exchange.................................................... A-37
Section 7.2 Conditions to Obligation of Parent.......................... A-38
Section 7.3 Conditions to Obligation of the Company..................... A-39
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER............................................ A-40
Section 8.1 Termination................................................. A-40
Section 8.2 Effect of Termination....................................... A-41
Section 8.3 Expenses and Fees........................................... A-42
Section 8.4 Amendment................................................... A-42
Section 8.5 Extension; Waiver........................................... A-42
Section 8.6 Procedure for Termination, Amendment, Extension or Waiver... A-42
ARTICLE IX
GENERAL PROVISIONS........................................................... A-43
</TABLE>
iii
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<TABLE>
<S> <C> <C>
Section 9.1 Nonsurvival of Representations and Warranties............... A-43
Section 9.2 Notices..................................................... A-43
Section 9.3 Definitions................................................. A-44
Section 9.4 Interpretation.............................................. A-44
Section 9.5 Severability................................................ A-44
Section 9.6 Counterparts................................................ A-44
Section 9.7 Entire Agreement; No Third-Party Beneficiaries.............. A-44
Section 9.8 Governing Law............................................... A-44
Section 9.9 Assignment.................................................. A-45
Section 9.10 Enforcement................................................. A-45
Section 9.11 Further Assurances.......................................... A-45
</TABLE>
EXHIBITS
<TABLE>
<S> <C>
Exhibit A................... Form of Tax Opinion Representation Letter of Parent
Exhibit B................... Form of Tax Opinion Representation Letter of the Company
Exhibit C................... Form of Indiana Certification
Exhibit D................... Form of Affiliate Letters
</TABLE>
iv
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AGREEMENT AND PLAN OF SHARE EXCHANGE
AGREEMENT AND PLAN OF SHARE EXCHANGE, dated as of July 15, 2000, by and
between The AES Corporation, a Delaware corporation ("PARENT"), and IPALCO
Enterprises, Inc., an Indiana corporation (the "COMPANY").
W I T N E S S E T H:
WHEREAS, the respective Boards of Directors of Parent and the Company have
approved the acquisition of the Company by Parent on the terms and subject to
the conditions set forth in this Agreement;
WHEREAS, the respective Boards of Directors of Parent and the Company have
approved the mandatory share exchange (the "EXCHANGE") whereby all of the issued
and outstanding shares of Common Stock, no par value, of the Company ("COMPANY
COMMON STOCK") shall be acquired by Parent in exchange for shares of validly
issued, fully paid and nonassessable common stock, par value $0.01 per share, of
Parent ("PARENT COMMON STOCK") on the terms and subject to the conditions set
forth in this Agreement;
WHEREAS, for accounting purposes, it is intended that the transactions
contemplated hereby be accounted for as a pooling-of-interests under United
States generally accepted accounting principles ("GAAP") and the rules and
regulations of the Securities and Exchange Commission ("SEC");
WHEREAS, for United States federal income tax purposes, it is intended that
the transactions contemplated hereby qualify as a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the
"CODE"), and that this Agreement shall be, and is hereby, adopted as a plan of
reorganization for purposes of Section 368 of the Code; and
WHEREAS, Parent and the Company desire to make certain representations,
warranties, covenants and agreements in connection with the Exchange and also to
prescribe various conditions to the Exchange.
NOW, THEREFORE, in consideration of the premises and the representations,
warranties, covenants and agreements contained herein the parties hereto agree
as follows:
ARTICLE I
THE EXCHANGE
Section 1.1 THE EXCHANGE. On the terms and subject to the conditions set
forth in this Agreement, and in accordance with the Business Corporation Law of
the State of Indiana (the "BCL"), at the Effective Time (as defined in
Section 1.3), (i) Parent and the Company shall effect the Exchange, and
(ii) the Company shall become a wholly owned Subsidiary of Parent.
Section 1.2 CLOSING. The closing (the "CLOSING") of the Exchange shall
take place at the offices of Skadden, Arps, Slate, Meagher & Flom LLP, 1440 New
York Avenue, N.W., Washington, D.C. 20005 at 10:00 a.m., local time, on or prior
to the fifth business day following the satisfaction (or, to the extent
permitted by Law (as defined in Section 3.4), waiver by all parties) of the
conditions set forth in Section 7.1, or, if on such day any condition set forth
in Section 7.2 or 7.3 has not been satisfied (or, to the extent permitted by
Law, waived by the party or parties entitled to the benefits thereof), as soon
as practicable after all the conditions set forth in Article VII have been
satisfied (or, to the extent permitted by Law, waived by the parties entitled to
the benefits thereof), or at such other place, time and date as shall be agreed
in writing between Parent and the Company. The date on which the Closing occurs
is referred to in this Agreement as the "CLOSING DATE."
Section 1.3 EFFECTIVE TIME. Prior to the Closing, Parent and the Company
shall prepare and, on the Closing Date or as soon as practicable thereafter,
shall file with the Secretary of State of the State
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of Indiana, the articles of share exchange or other appropriate documents (in
any such case, the "ARTICLES OF SHARE EXCHANGE") executed in accordance with the
relevant provisions of the BCL and shall make all other filings or recordings
required under the BCL. The Exchange shall become effective at such time as the
Articles of Share Exchange are duly filed with the Secretary of State of the
State of Indiana, or at such other time as Parent and the Company shall agree
and specify in the Articles of Share Exchange (the time the Exchange becomes
effective being the "EFFECTIVE TIME").
Section 1.4 EFFECTS.
(a) The Exchange shall have the effects set forth in Section 23-1-40-6 of
the BCL.
(b) The parties hereto acknowledge and agree that the consummation of the
Exchange and no other event in connection with this Agreement constitutes "an
acquisition of control" or a "change in control."
Section 1.5 ARTICLES OF INCORPORATION AND BY-LAWS. The Articles of
Incorporation and By-laws of the Company as in effect immediately prior to the
Effective Time shall continue to be the Articles of Incorporation and By-laws of
the Company until thereafter changed or amended as provided therein or by
applicable Law.
Section 1.6 DIRECTORS. All of the directors of the Company as of
immediately prior to the Effective Time shall resign effective as of the
Effective Time and Parent shall thereafter have the right to appoint directors
in accordance with the BCL.
ARTICLE II
EFFECT ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
Section 2.1 EFFECT ON CAPITAL STOCK. At the Effective Time, by virtue of
the Exchange and without any action on the part of the holder of any shares of
Company Common Stock:
(a) CANCELLATION OF TREASURY STOCK. Each share of Company Common Stock
that is owned immediately prior to the Effective Time by the Company or Parent
shall automatically be canceled and retired and shall cease to exist, and no
cash or other consideration shall be delivered or deliverable in exchange
therefor.
(b) EXCHANGE OF COMPANY COMMON STOCK. Subject to Section 2.1(a), each
issued share of Company Common Stock outstanding immediately prior to the
Effective Time shall be exchanged for such number (the "EXCHANGE RATIO") of
shares of Parent Common Stock calculated as follows:
(i) if the Average Trading Price (as defined below) of a share of
Parent Common Stock is greater than or equal to $31.50, the Exchange Ratio
shall equal a quotient (rounded to the third decimal place) determined by
dividing (x) $25.00 (the "PER SHARE AMOUNT"), subject to adjustment in
accordance with Section 2.2 (as adjusted, the "ADJUSTED PER SHARE AMOUNT"),
by (y) the Average Trading Price of a share of Parent Common Stock; and
(ii) if the Average Trading Price of a share of Parent Common Stock is
less than $31.50, the Exchange Ratio shall equal a quotient (rounded to the
third decimal place) determined by dividing (x) the Per Share Amount or
Adjusted Per Share Amount, as applicable, by (y) $31.50.
"AVERAGE TRADING PRICE" shall be equal to the average of the daily closing
prices per share of Parent Common Stock on the New York Stock Exchange ("NYSE")
Composite Transactions Reporting System, as reported in THE WALL STREET JOURNAL,
for the twenty trading days ending on the date immediately prior to the fifth
full NYSE trading day immediately preceding the Closing Date.
The Exchange Ratio shall be subject to appropriate adjustment in the event
of any stock split, stock dividend or recapitalization after the date of this
Agreement applicable to shares of Parent
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<PAGE>
Common Stock or Company Common Stock. The number of shares of Parent Common
Stock issuable by Parent upon consummation of the Exchange in accordance with
this Article II, together with any cash payable in lieu of fractional shares in
accordance with Section 2.3(h), is referred to collectively as the "EXCHANGE
CONSIDERATION."
(c) Parent shall acquire and become the sole holder and owner of each
issued and outstanding share of Company Common Stock so exchanged.
Section 2.2 Per Share Amount Adjustments.
(a) In the event the Closing occurs after the Trigger Date (as defined
below), then the Per Share Amount shall be increased by an amount equal to
$0.00411 per share per day from the date after the Trigger Date through the
earliest of (but not including) (x) the Closing Date and (y) the Termination
Date (as defined in Section 8.1(b)(i)). In addition, on the Trigger Date, if the
Closing has not yet occurred, the Per Share Amount shall be increased, on a
one-time basis, by an amount equal to $0.15 per share.
(b) For purposes of this Agreement, the "TRIGGER DATE" shall be the latest
of (x) March 31, 2001, (y) the date which is 30 days after the Indiana
Certification (as defined in Section 6.3(a)) has been issued and (z) the date on
which all the conditions set forth in Section 7.1 and in Sections 7.2(c),
7.2(d), 7.2(h), and clauses (i), (ii) and (iii) of Section 7.2(i) have been
satisfied or waived by Parent and the conditions set forth in Sections 7.2(a)
and 7.2(b) would have been satisfied if the Closing had occurred on such date.
Notwithstanding the foregoing the Trigger Date shall not occur in the event the
condition set forth in Section 7.1(d) is not satisfied until following the
satisfaction of the condition set forth in Section 7.2(e). For purposes of
determining the Trigger Date, the Company shall deliver, as promptly as
reasonably practicable, a certificate of an executive officer of the Company
setting forth the date of the proposed Trigger Date. In the event Parent
disagrees with the date set forth in such certificate, Parent shall notify the
Company in writing within five business days of receipt of such certificate,
specifying the reason for the nature of such disagreement. The parties agree to
negotiate in good faith to promptly resolve any differences with respect to the
date of the Trigger Date as set forth in the certificate of the Company's
executive officer.
Section 2.3 EXCHANGE OF CERTIFICATES.
(a) EXCHANGE AGENT. Prior to the Effective Time, Parent shall select a
bank or trust company, which shall be reasonably satisfactory to the Company, to
act as exchange agent (the "EXCHANGE AGENT") for exchange in accordance with
this Article II of the Exchange Consideration upon surrender of certificates
representing Company Common Stock. Immediately prior to or at the Effective
Time, Parent shall deposit with the Exchange Agent, for the benefit of the
holders of shares of Company Common Stock, for exchange in accordance with this
Article II, (i) certificates representing the shares of Parent Common Stock
issuable upon consummation of the Exchange and (ii) cash funds estimated to be
sufficient to make payment for any fractional shares pursuant to Section 2.3(h)
(such shares of Parent Common Stock and cash funds together being hereinafter
referred to as the "EXCHANGE FUND").
(b) EXCHANGE PROCEDURE. As soon as reasonably practicable after the
Effective Time, the Exchange Agent shall mail to each holder of record of a
certificate or certificates (the "CERTIFICATES") that immediately prior to the
Effective Time represented outstanding shares of Company Common Stock whose
shares were exchanged for the Exchange Consideration pursuant to Section 2.1,
(i) a letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only upon
delivery of the Certificates to the Exchange Agent and shall be in such form and
have such other provisions as Parent may reasonably specify) and
(ii) instructions for use in effecting the surrender of the Certificates in
exchange for the Exchange Consideration. Upon surrender of a Certificate for
cancellation to the Exchange Agent, together with such letter of transmittal,
duly executed, and such other documents as may reasonably be required by the
Exchange Agent, the
A-3
<PAGE>
holder of such Certificate shall be entitled to receive in exchange therefor a
certificate or certificates representing that whole number of shares of Parent
Common Stock which such holder has the right to receive pursuant to the
provisions of this Article II, and the Certificate so surrendered shall
forthwith be canceled. In the event of a transfer of ownership of Company Common
Stock that is not registered in the transfer records of the Company, exchange
may be made to a person other than the person in whose name the Certificate so
surrendered is registered, if such Certificate shall be properly endorsed or
otherwise be in proper form for transfer and shall be accompanied by evidence
satisfactory to the Exchange Agent that any transfer or other Taxes (as defined
in Section 3.11(a)) required by reason of such payment in a name other than that
of the registered holder of such Certificate or instrument either has been paid
or is not payable. Until surrendered as contemplated by this Section 2.3, each
Certificate shall be deemed at any time after the Effective Time to represent
only the right to receive upon such surrender the Exchange Consideration.
(c) NO FURTHER OWNERSHIP RIGHTS IN COMPANY COMMON STOCK. The Exchange
Consideration delivered in accordance with the terms of this Article II upon
exchange of any shares of Company Common Stock shall be deemed to have been
delivered in full satisfaction of all rights pertaining to such shares of
Company Common Stock, SUBJECT, HOWEVER, to the Company's obligation to pay any
dividends or make any other distributions with a record date prior to the
Effective Time that may have been declared or made by the Company on such shares
of Company Common Stock in accordance with the terms of this Agreement or prior
to the date of this Agreement and which remain unpaid at the Effective Time. At
the Effective Time, the stock transfer books of the Company shall be closed and
there shall be no further registration of transfers on the stock transfer books
of the Company of shares of Company Common Stock that were outstanding
immediately prior to the Effective Time. If, after the Effective Time, any
certificates formerly representing shares of Company Common Stock are presented
to the Company or the Exchange Agent for any reason, they shall be canceled and
exchanged as provided in this Article II.
(d) TERMINATION OF EXCHANGE FUND. Promptly after the date which is six
months after the Effective Time, the Exchange Agent shall deliver to Parent
certificates, cash and other documents in its possession relating to the
transactions contemplated hereby, and the Exchange Agent's duties shall
terminate, and any holder of Company Common Stock who has not theretofore
complied with this Article II shall thereafter look only to the Company (subject
to applicable abandoned property, escheat and similar laws) for payment of its
claim for the Exchange Consideration but only as general creditors thereof.
(e) NO LIABILITY. None of Parent, the Company or the Exchange Agent shall
be liable to any person in respect of any shares or funds delivered to a public
official pursuant to any applicable abandoned property, escheat or similar Law.
(f) INVESTMENT OF EXCHANGE FUND. The Exchange Agent shall invest any cash
included in the Exchange Fund, as directed by Parent, on a daily basis. Any
interest and other income resulting from such investments shall be paid to
Parent.
(g) WITHHOLDING RIGHTS. Parent, the Company and the Exchange Agent shall
be entitled to deduct and withhold from the consideration otherwise payable
pursuant to this Agreement to any holder of shares of Company Common Stock such
amounts as Parent, the Company or the Exchange Agent is required to deduct and
withhold with respect to the making of such payment under the Code or any
provision of state, local or foreign Tax law. To the extent that amounts are so
withheld and paid over to the appropriate Taxing Authority by Parent, the
Company or the Exchange Agent, such withheld amounts shall be treated for all
purposes of this Agreement as having been paid to the holder of the shares of
Company Common Stock in respect of which such deduction and withholding was made
by Parent, the Company or the Exchange Agent.
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(h) NO FRACTIONAL SHARES. No fractional shares of Parent Common Stock will
be issued to holders of Company Common Stock upon surrender of shares of Company
Common Stock in exchange for the Exchange Consideration and any such fractional
share interests shall not entitle the owner thereof to vote or to any other
rights of a holder of Company Common Stock. In lieu thereof, Parent shall pay to
such holders otherwise entitled to a fractional share cash in an amount equal to
the product of such fraction and the Average Trading Price. For purposes of this
Section 2.3(h), all fractional shares to which a single record holder would be
entitled shall be aggregated.
Section 2.4 STOCK OPTION PLANS.
(a) Immediately prior to the Effective Time, the Company shall have adopted
such resolutions, taken such actions and obtained any necessary consents
(including the consent of individual option holders, if necessary) as may be
required to provide that each option to acquire shares of Company Common Stock
(the "COMPANY STOCK OPTIONS") shall be assumed by Parent as of the Effective
Time and shall thereafter be deemed to constitute an option to acquire, on the
same terms and conditions as were applicable under such Company Stock Option
immediately prior to the Effective Time, the number (rounded to the nearest
whole number) of shares of Parent Common Stock determined by multiplying the
number of shares of Company Common Stock subject to such Company Stock Option
immediately prior to the Effective Time by the Exchange Ratio, at a price per
share (rounded to the nearest whole cent) equal to the exercise price per share
of Company Common Stock otherwise purchasable pursuant to such Company Stock
Option divided by the Exchange Ratio; PROVIDED, HOWEVER, that with respect to
any Company Stock Option that is an incentive stock option within the meaning of
the Code, such substitution shall be effected in accordance with Section 424(a)
of the Code.
(b) The Company and, to the extent applicable, Parent shall take all
actions necessary (including obtaining the consent of individual award holders,
if necessary) to provide that (i) each award or account (including each share of
restricted or performance stock granted under the Company Option Plans, stock
equivalents and stock units, but excluding Company Stock Options) outstanding as
of the date of this Agreement (a "COMPANY STOCK AWARD") that has been
established, made or granted under any employee incentive or benefit plans,
programs or arrangements and non-employee director plans maintained by the
Company on or prior to the date hereof which provide for grants of equity-based
awards or equity-based accounts shall be amended or converted into a similar
instrument of and assumed by Parent as of the Effective Time in accordance with
its terms and conditions as in effect immediately prior to the Effective Time,
in each case with such adjustments to the terms and conditions of such Company
Stock Awards as are appropriate to preserve the value inherent in such Company
Stock Awards with no detrimental effects on the holders thereof, and (ii) any
holder of a Company Stock Award may elect to authorize the Company to retain a
number of shares of Company Common Stock from such grant having an aggregate
fair market value equal to any withholding taxes applicable to the vesting of
such grant, in lieu of the payment of such amount in cash.
(c) Except as otherwise agreed to by the parties, (i) the Company shall
take all actions necessary to provide that the provisions in any other plan,
program or arrangement providing for the issuance or grant by the Company or any
of its Subsidiaries of any interest in respect of the capital stock of the
Company or any of its Subsidiaries shall be deleted, and (ii) the Company shall
ensure that following the Effective Time no holder of Company Stock Options or
any participant in the Company Option Plans or any other such plan, program or
arrangement providing for the issuance or grant by the Company or any of its
Subsidiaries of any interest in respect of the capital stock of the Company or
any of its Subsidiaries shall have any right thereunder to acquire any equity
securities of the Company or any Subsidiary thereof unless otherwise agreed by
Parent and such holder or participant.
(d) Parent shall take all actions necessary to reserve for issuance, from
and after the Effective Time, a sufficient number of shares of Parent Common
Stock for delivery pursuant to the terms set forth in this Section 2.4. On or
before the Effective Time, Parent shall cause to be filed with the SEC a
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registration statement on an appropriate form or a post-effective amendment to a
previously filed registration statement under the Securities Act of 1933, as
amended (the "SECURITIES ACT"), with respect to shares of Parent Common Stock
subject to options and other equity-based awards issued pursuant to this
Section 2.4, and shall use reasonable efforts to maintain the current status of
the prospectus contained therein, as well as to comply with any applicable state
securities or "blue sky" laws, for so long as such options or other equity-based
awards remain outstanding.
(e) By adopting or approving this Agreement, the Board of Directors of the
Company (the "COMPANY BOARD") shall be deemed to have approved and authorized,
and the shareholders of the Company shall be deemed to have approved and
ratified, each and every amendment to any of the Company Option Plans, Company
Stock Options or Company Stock Awards as the officers of the Company may deem
necessary or appropriate to give effect to the provisions of Sections 2.4(a) and
2.4(b).
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent that except as set forth in
the Company SEC Documents (as defined in Section 3.5) filed and publicly
available prior to the date of this Agreement and except as set forth in the
disclosure schedule delivered by the Company to Parent concurrent with the
execution of this Agreement (the "COMPANY DISCLOSURE SCHEDULE"):
Section 3.1 ORGANIZATION, STANDING AND POWER.
(a) Each of the Company, each Subsidiary of the Company (a "COMPANY
SUBSIDIARY") and each Company Joint Venture (as defined in Section 9.3) is a
corporation or other entity duly organized, validly existing and, if applicable,
in good standing under the laws of the jurisdiction in which it is incorporated
or organized and has full corporate power and authority and has been duly
authorized by all necessary approvals and orders, including possessing all
governmental franchises, licenses, permits, authorizations and approvals
necessary to enable it to own, operate, lease or otherwise hold its properties
and assets and to conduct its businesses as presently conducted, other than such
franchises, licenses, permits, authorizations and approvals the lack of which,
individually or in the aggregate, have not had and would not have a Company
Material Adverse Effect (as defined below). The term "COMPANY MATERIAL ADVERSE
EFFECT" means an event, change, cause or effect which is materially adverse to
the business, operations, properties, assets, liabilities, prospects, condition
(financial or otherwise) or results of operations of the Company and its
Subsidiaries, taken as a whole or of the consummation of the transactions
contemplated hereby. The Company and each Company Subsidiary is duly qualified
and, if applicable, in good standing, to do business in each jurisdiction where
the nature of its business or their ownership or leasing of its assets and
properties make such qualification necessary, other than the failure to so
qualify and be in good standing, which together with all other such failures,
has not had and would not have a Company Material Adverse Effect. The Company
has made available to Parent true and complete copies of the articles of
incorporation of the Company, as amended to the date of this Agreement (as so
amended, the "COMPANY CHARTER"), and the By-laws of the Company, as amended to
the date of this Agreement (as so amended, the "COMPANY BYLAWS"), and the
comparable charter and organizational documents of each Company Subsidiary, in
each case as amended through the date of this Agreement.
(b) Section 3.1(b) of the Company Disclosure Schedule sets forth a list of
all the Company Subsidiaries and the Company Joint Ventures, as of the date of
this Agreement, including the name of each such entity, a brief description of
the principal line or lines of business conducted by each such entity and the
interest of the Company and the Company Subsidiaries therein and the authorized,
issued and outstanding capital stock of each of the Company Subsidiaries. The
Company is a "holding company" (as defined in the Public Utility Holding Company
Act of 1935, as amended ("PUHCA"))
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exempt from all provisions (other than Section 9(a)(2)) of PUHCA, pursuant to
Section 3(a)(1) of PUHCA in accordance with Rule 2 under PUHCA. The Company is
not a "public utility company" within the meaning of Section 2(a)(5) of PUHCA.
With the exception of Entity I, no Company Subsidiary or Company Joint Venture
is a "holding company" or a "public utility company" within the meaning of
Sections 2(a)(7) and 2(a)(5) of PUHCA, respectively, nor, except with respect to
their relationship with the Company, are any of such entities an "affiliate" or
a "subsidiary company" of a holding company within the meaning of Sections
2(a)(11) and 2(a)(8) of PUHCA, respectively. All of the issued and outstanding
shares of capital stock of each Company Subsidiary are validly issued, fully
paid, nonassessable and free of preemptive rights and to the extent owned,
directly or indirectly, by the Company, are owned free and clear of any liens,
claims, encumbrances, security interests, charges and options of any nature
whatsoever ("LIENS"), and there are no outstanding subscriptions, options,
calls, contracts, voting trusts, proxies or other pledges, security interests,
commitments, understandings, restrictions, arrangements, rights or warrants
(including any right of conversion or exchange under any outstanding security,
instrument or other agreement), obligating the Company or any Company Subsidiary
to issue, deliver or sell, pledge, grant a security interest on or encumber, or
cause to be issued, delivered or sold, pledged or encumbered or a security
interest to be granted on, shares of capital stock of any Company Subsidiary or
obligating the Company or any Company Subsidiary to grant, extend or enter into
any such agreement or commitment.
Section 3.2 CAPITAL STRUCTURE.
(a) The authorized capital stock of the Company consists solely of
290,000,000 shares of Company Common Stock, no par value, and no shares of
preferred stock. As of the date of this Agreement, 85,722,469 shares of Company
Common Stock were issued and outstanding, 31,056,356 shares were held in the
treasury of the Company, and the only shares reserved for issuance as of such
date consisted of 120,000,000 shares which were reserved for issuance under the
Rights Agreement dated as of June 28, 1998, by and between the Company and First
Chicago Trust Company of New York, as Rights Agent (the "COMPANY RIGHTS
AGREEMENT"), pursuant to which the Company has issued 116,778,825 rights (the
"COMPANY RIGHTS") to purchase 116,778,825 shares of Company Common Stock;
2,785,952 shares which were reserved or held for issuance under the Company's
1997 Stock Option Plan; 636,000 shares which were reserved or held for issuance
under the Company's 1991 Directors' Stock Option Plan; 584,528 shares which were
reserved or held for issuance under the Company's 1990 Stock Option Plan;
1,477,500 shares which were reserved or held for issuance under the Company's
1999 Stock Incentive Plan; and 2,456,141 shares which were reserved or held for
issuance under the Company's Long-Term Performance and Restricted Stock
Incentive Plan (such plans, the "COMPANY OPTION PLANS"). The total number of
shares of Company Common Stock subject to outstanding options granted under any
Company Option Plan (whether or not the option is exercisable) equals 4,360,980,
with a weighted average exercise of $15.83 per share. Except as set forth above,
as of the date of this Agreement, no shares of capital stock or other voting
securities of the Company were issued, reserved for issuance or outstanding. All
outstanding shares of Company Common Stock are, and all such shares that may be
issued prior to the Effective Time will be when issued, duly authorized, validly
issued, fully paid and nonassessable and not subject to or issued in violation
of any purchase option, call option, right of first refusal, preemptive right,
subscription right or any similar right under any provision of the BCL, the
Company Charter, the Company By-laws or any Contract (as defined in
Section 3.4) to which the Company is a party or otherwise bound. There are not
issued or outstanding bonds, debentures, notes or other indebtedness of the
Company having the right to vote (or convertible into, or exchangeable for,
securities having the right to vote) on any matters on which holders of Company
Common Stock may vote ("VOTING COMPANY DEBT"). Except as set forth above and in
the Company Benefit Plans (as defined in Section 3.12(a)), as of the date of
this Agreement, there are not issued or outstanding options, calls, voting
trusts, proxies, warrants, rights, convertible or exchangeable securities,
"phantom" stock rights, stock appreciation rights, stock-based performance
units, commitments, Contracts, other
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pledges, security interests, encumbrances, arrangements or undertakings of any
kind to which the Company or any Company Subsidiary is a party or by which any
of them is bound (i) obligating the Company or any Company Subsidiary to issue,
deliver or sell, pledge, grant a security interest on or encumber or cause to be
issued, delivered or sold, pledged or encumbered or a security interest to be
granted on shares of capital stock or other equity interests in, or any security
convertible or exercisable for or exchangeable into any capital stock of or
other equity interest in, the Company or of any Company Subsidiary or any Voting
Company Debt or (ii) obligating the Company or any Company Subsidiary to issue,
grant, extend or enter into any such option, warrant, call, right, security,
commitment, Contract, arrangement or undertaking. As of the date of this
Agreement, there are not any outstanding contractual obligations of the Company
or any Company Subsidiary to repurchase, redeem or otherwise acquire any shares
of capital stock of the Company or any Company Subsidiary or to make any
investment in (in the form of a loan, capital contribution or otherwise) or
purchase any equity interest or make contributions to, or otherwise fund the
operations, expenses or capital of, any Company Subsidiary or any other person.
(b) INDEBTEDNESS. Section 3.2(b) of the Company Disclosure Schedule sets
forth a true and complete statement of the borrowing limit as of June 30, 2000
under all loan agreements (including indentures) of the Company and its
Subsidiaries existing on June 30, 2000, and Section 3.2(b) of the Company
Disclosure Schedule sets forth a true and complete statement of the total
indebtedness of the Company and its Subsidiaries outstanding on June 30, 2000
under such agreements.
Section 3.3 AUTHORITY; EXECUTION AND DELIVERY; ENFORCEABILITY.
(a) The Company has all requisite corporate power and authority to execute
and deliver this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery by the Company of this Agreement and the
consummation by the Company of the transactions contemplated hereby have been
duly authorized by all necessary corporate action on the part of the Company,
subject to receipt of the Company Shareholder Approval (as defined in
Section 3.3(c)). The Company has duly executed and delivered this Agreement and
this Agreement constitutes its legal, valid and binding obligation, enforceable
against it in accordance with its terms, except as enforceability may be limited
by bankruptcy, insolvency, reorganization, moratorium or other similar Laws
affecting the enforcement of creditors' rights generally and by general
equitable principles (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
(b) The Company Board, at a meeting duly called and held, duly and
unanimously adopted resolutions (i) approving this Agreement and the Exchange,
(ii) determining that the terms of the Exchange are fair to and in the best
interests of the shareholders of the Company and (iii) recommending that the
Company's shareholders adopt this Agreement. The Company has taken all necessary
actions so that neither the supermajority voting provisions of Article X of the
Company Charter nor the provisions of Chapter 42 and Chapter 43 of the BCL will,
before the termination of this Agreement, apply to this Agreement or the
Exchange.
(c) The only vote of holders of any class or series of Company Common Stock
necessary to approve and adopt this Agreement and the Exchange is the adoption
of this Agreement by the holders of a majority of the outstanding Company Common
Stock (the "COMPANY SHAREHOLDER APPROVAL"). The shareholders of the Company are
not entitled to dissenters' or appraisal rights under applicable Law.
Section 3.4 NO CONFLICTS; CONSENTS.
(a) The execution and delivery by the Company of this Agreement do not, and
the consummation of the Exchange and compliance with the terms hereof and the
consummation of the other transactions contemplated hereby will not, conflict
with, or result in any violation of, or breach of any provisions of, or
constitute a default (with or without notice or lapse of time, or both) under,
or give rise to a right of termination, cancellation or acceleration of any
obligation or to loss of a material
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benefit under, or result in the creation of any Lien upon any of the properties
or assets of the Company or any Company Subsidiary or the imposition of any
other penalty or fee or result in any obligation by the Company or any Company
Subsidiary to pay money to, or guarantee the performance or obligations of, any
person, including in connection with obtaining the Company Required Consents (as
defined below) under, any provision of (i) the Company Charter, the Company
By-laws or the comparable charter or organizational documents of any Company
Subsidiary, (ii) subject to obtaining the third party consents set forth in
Section 3.4 of the Company Disclosure Schedule for the Exchange and other
transactions contemplated hereby (the "COMPANY REQUIRED CONSENTS"), any
contract, lease, license, indenture or deed of trust, note, mortgage, bond,
agreement of any kind, permit, concession, franchise or other instrument (a
"CONTRACT") to which the Company, any Company Subsidiary or Company Joint
Venture is a party or by which any of their respective properties or assets is
bound, or (iii) subject to the filings and other matters referred to in
Section 3.4(b), and subject to obtaining the Company Shareholder Approval, any
judgment, order, decree, injunction, writ, permit or license of any court,
federal, state, local or foreign governmental or regulatory body ("JUDGMENT") or
statute, law, ordinance, rule or regulation ("LAW") existing on the date of this
Agreement applicable to the Company or any Company Subsidiary or their
respective properties or assets, other than, in the case of clauses (ii) and
(iii) above, any such items that have not had and would not in the aggregate
have a Company Material Adverse Effect.
(b) Assuming the accuracy of the representation of Parent contained in
Section 4.14, and assuming compliance by Parent with its agreement contained in
Section 6.9, no consent, approval, license, permit, order or authorization
("CONSENT") of, or registration, declaration or filing with, or permit from, any
federal, state, local or foreign government or any court of competent
jurisdiction, administrative agency or commission or other governmental
authority or instrumentality, domestic or foreign (a "GOVERNMENTAL ENTITY") is
required to be obtained or made by or with respect to the Company or any Company
Subsidiary in connection with the execution, delivery and performance of this
Agreement or the consummation of the Exchange and the transactions contemplated
hereby, other than (i) compliance with and filings under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR ACT"), (ii) the filing
with the SEC of (A) a proxy or information statement relating to the adoption of
this Agreement by the Company's shareholders (together with amendments thereof
and supplements thereto, the "PROXY STATEMENT"), and (B) such reports under
Section 13 of the Securities Exchange Act of 1934, as amended (the "EXCHANGE
ACT"), as may be required in connection with this Agreement and the Exchange,
(iii) the filing of the Articles of Share Exchange with the Secretary of State
of the State of Indiana and appropriate documents with the relevant authorities
of the other jurisdictions in which the Company is qualified to do business,
(iv) the approval of the Federal Energy Regulatory Commission (the "FERC") under
Section 203 and any directly related section of or regulation under, the Federal
Power Act (the "POWER ACT") for the sale or disposition of jurisdictional
facilities of the Company, or an order under the Power Act disclaiming
jurisdiction over the Exchange, (v) the filing with the Federal Communications
Commission (the "FCC") of the applications required under Section 310(d) of the
Communications Act of 1934, as amended, and approval by the FCC thereof,
(vi) such filings as may be required in connection with the Taxes described in
Section 6.8, (vii) filings under any applicable state takeover Law and
(viii) such other items (A) required solely by reason of the participation of
Parent (as opposed to any third party) in the Exchange or (B) that, individually
or in the aggregate, would not prevent the consummation of the transactions
contemplated hereby and that, individually or in the aggregate, would not have a
Company Material Adverse Effect.
Section 3.5 SEC DOCUMENTS. The filings required to be made by the Company
and the Company Subsidiaries under the Securities Act and the Exchange Act, as
the case may be, have been filed and complied, as of their respective dates, in
all material respects with all applicable requirements of the Securities Act or
the Exchange Act, as the case may be, and the rules and regulations thereunder.
The Company has made available to Parent a true and complete copy of each
report, schedule, registration
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statement and definitive proxy statement and all amendments thereto filed with
the SEC by the Company or the Company Subsidiaries (or their predecessors)
pursuant to the requirements of the Securities Act or the Exchange Act since
January 1, 1998 (as such documents have since the time of their filing been
amended, the "COMPANY SEC DOCUMENTS"). As of its respective date, each Company
SEC Document complied in all material respects with the requirements of the
Securities Act or the Exchange Act, as the case may be, and did not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading. The audited
consolidated financial statements of the Company and the unaudited interim
financial statements included in the Company SEC Documents complied as to form
in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto, were prepared
in accordance with GAAP applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto) and fairly presented
the consolidated financial position of the Company and its consolidated
Subsidiaries as of the dates thereof and the consolidated results of their
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments).
Section 3.6 ABSENCE OF CERTAIN CHANGES OR EVENTS. From December 31, 1999
to the date of this Agreement, the Company has conducted its business only in
the ordinary course consistent with past practice, and during such period
(i) there has not been any event, change, effect or development that,
individually or in the aggregate, has had or would have a Company Material
Adverse Effect, (ii) there has not been any material election with respect to
Taxes by the Company or any of the Company Subsidiaries or any settlement or
compromise of any material Tax liability or refund of the Company or any of the
Company Subsidiaries, and (iii) there has not been any material change in
accounting methods, principles or practices by the Company or any of the Company
Subsidiaries, except insofar as may have been required by a change in GAAP or
SEC accounting regulations or guidelines or applicable Law.
Section 3.7 ABSENCE OF UNDISCLOSED LIABILITIES. Except for liabilities,
obligations or contingencies which would not, in the aggregate, have a Company
Material Adverse Effect, or which are accrued or reserved against in the
consolidated financial statements of the Company or reflected in the notes
thereto for the year ended December 31, 1999, or the quarter ended March 31,
2000, or which were incurred after December 31, 1999 in the ordinary course of
business, neither the Company nor any Company Subsidiary, nor, to the knowledge
of Company, any Company Joint Venture, has any liabilities or obligations
(whether absolute, accrued, contingent or otherwise and including margin loans)
which are material to the Company and the Company Subsidiaries taken as a whole.
Section 3.8 LITIGATION. As of the date of this Agreement, there is no
suit, claim, action, investigation or proceeding pending, or to the knowledge of
the Company threatened, from any governmental authority, including any
regulatory body or commission, against the Company or any Company Subsidiary
that, individually or in the aggregate, has had or would have a Company Material
Adverse Effect, nor is there any Judgment of any governmental authority or any
arbitrator outstanding against the Company or any Company Subsidiary that has
had or would have a Company Material Adverse Effect.
Section 3.9 COMPLIANCE WITH APPLICABLE LAWS. Neither the Company nor any
of the Company Subsidiaries is in violation of, or to the knowledge of the
Company under investigation with respect to any violation of, or has been given
written notice of or been formally charged with any violation of, any law,
statute, order, rule, regulation, ordinance or judgment, permit, license,
concession or franchise of any Governmental Entity, including PUHCA, the Power
Act and applicable state, municipal, local and other laws, including franchise
and public utility laws and regulations, and all documents, exhibits, amendments
and supplements pertaining thereto have been filed by the Company and the
Company Subsidiaries with the SEC, the FERC and the appropriate Indiana or other
appropriate Governmental Entities, except for violations or failures to comply
with Environmental Laws (which are the subject of
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Section 3.13) or with respect to Taxes (which are the subject of Section 3.11)
and except for violations and failures to file which individually or in the
aggregate have not had and would not have a Company Material Adverse Effect. The
Company and each of the Company Subsidiaries is not in breach or violation of or
in default in the performance or observance of any term or provision of, and no
event has occurred which, with lapse of time or action by a third party, could
result in a default by the Company or the Company Subsidiary under (i) the
Company Charter, the Company By-laws or other organizational documents or
(ii) any contract, commitment, agreement, indenture, mortgage, loan agreement,
note, lease, bond, license, approval or other instrument to which it is a party
or by which the Company or the Company Subsidiary is bound or to which any of
its property is subject, except, in the case of clause (ii) above, for
violations, breaches or defaults which individually or in the aggregate have not
had and would not have a Company Material Adverse Effect.
Section 3.10 COMPANY RIGHTS AGREEMENT. The Company and the Company Board
have taken all action necessary to (i) render the Company Rights Agreement
inapplicable to this Agreement and the Exchange and (ii) ensure that
(A) neither Parent nor any of its affiliates or associates is or will become an
"Acquiring Person" (as defined in the Company Rights Agreement) by reason of
this Agreement or the Exchange, (B) a "Distribution Date" (as defined in the
Company Rights Agreement) shall not occur by reason of this Agreement or the
Exchange, and (C) all outstanding Company Rights shall be canceled upon the
Effective Time.
Section 3.11 TAXES.
(a) For purposes of this Agreement: (i) "TAXES" (including, with
correlative meaning, the word "TAX") shall include any and all (x) federal,
state, county, local, foreign or other taxes, charges, imposts, rates, fees,
levies or other assessments, including, all net income, gross income, sales and
use, ad valorem, transfer, gains, profits, excise, franchise, real and personal
property, gross receipt, capital stock, production, business and occupation,
disability, employment, payroll, license, estimated, stamp, custom duties,
severance, withholding or other taxes, fees, assessments or charges of any kind
whatsoever, together with any interest and penalties (civil or criminal) on or
additions to any such taxes, (y) liability for the payment of any of the amounts
of the type described in clause (x) as a result of being a member of an
affiliated, consolidated, combined or unitary group, and (z) liability for the
payment of any amounts as a result of being a party to any Tax sharing agreement
or as a result of any express or implied obligation to indemnify any other
person with respect to the payment of any amounts of the types described in
clause (x) or (y), (ii) "TAXING AUTHORITY" means any Governmental Entity or any
subdivision, agency, court, commission, instrumentality or official thereof or
any quasi-governmental body having jurisdiction over the assessment,
determination, collection, imposition or administration of any Tax (including
the Internal Revenue Service (the "IRS")) and (iii) "TAX RETURN" means any
return, report, information return, schedule, certificate, statement or other
document (including any related or supporting information) required to be filed
with or supplied to, or, where none is required to be filed with or supplied to
a Taxing Authority, the statement or other document issued by, a Taxing
Authority in connection with any Tax (including any combined, consolidated or
unitary returns for any group of entities that includes the Company or any
Company Subsidiary).
(b) FILING OF TIMELY TAX RETURNS. The Company and each of the Company
Subsidiaries have timely filed (or there has been timely filed on their behalf)
all Tax Returns required to be filed by or on behalf of each of them under
applicable law and all such Tax Returns were and are in all material respects
true, complete and correct, except to the extent that any failure to file or any
inaccuracies in any filed Tax Returns, individually or in the aggregate, have
not had and would not have a Company Material Adverse Effect.
(c) PAYMENT OF TAXES. The Company and each of the Company Subsidiaries
have, within the time and in the manner prescribed by law, paid or adequately
reserved for all Taxes that are due and
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payable from them, except to the extent that any failure to pay or reserve,
individually or in the aggregate, has not had and would not have a Company
Material Adverse Effect.
(d) TAX RESERVES. The accrual for Taxes on the most recent Company SEC
Documents reflects an adequate reserve in accordance with GAAP for all Taxes
payable by the Company and the Company Subsidiaries for all Tax periods (and
portions thereof) accrued on or before the date of such financial statements
except to the extent that any failure to have an adequate reserve, individually
or in the aggregate, has not had and would not have a Company Material Adverse
Effect.
(e) TAX LIENS. There are no Tax liens upon the assets, properties or
business of the Company or any of the Company Subsidiaries except liens for
Taxes not yet due or being contested in good faith through appropriate
proceedings and for which adequate reserves have been established in the Company
SEC Documents or liens for Taxes that, individually or in the aggregate, have
not had and would not have a Company Material Adverse Effect.
(f) WITHHOLDING TAXES. The Company and each of the Company Subsidiaries
have complied in all material respects with the provisions of the Code and all
other applicable laws relating to the payment and withholding of Taxes,
including, the withholding and reporting requirements under Code Sections 1441
through 1464, 3401 through 3406 and 6041 through 6049, as well as similar
provisions under any other laws, and have, within the time and in the manner
prescribed by law, withheld from employee wages and paid over to the proper
Taxing Authorities all amounts required, except to the extent that a failure to
comply, withhold or pay, individually or in the aggregate, has not had and would
not have a Company Material Adverse Effect.
(g) EXTENSIONS OF TIME FOR FILING TAX RETURNS. Neither the Company nor any
of the Company Subsidiaries has requested any extension of time within which to
file any Tax Return, which Tax Return has not since been timely filed unless
such extension has not expired.
(h) WAIVERS OF STATUTE OF LIMITATIONS. Neither the Company nor any of the
Company Subsidiaries has executed any outstanding waivers or comparable consents
regarding the application of the statute of limitations with respect to any
Taxes or Tax Returns, except for waivers or comparable consents for any Taxes or
Tax Returns that, individually or in the aggregate, have not had and would not
have a Company Material Adverse Effect.
(i) EXPIRATION OF STATUTE OF LIMITATIONS. The statutes of limitations for
the assessment of all Taxes with respect to all Tax Returns of the Company and
the Company Subsidiaries for all Tax periods have expired. To the knowledge of
the Company, no deficiency for any Taxes has been proposed, asserted or assessed
against the Company or any of the Company Subsidiaries that has not been
resolved and paid in full, except for any deficiency that, individually or in
the aggregate, has not had and would not have a Company Material Adverse Effect.
(j) AUDIT, ADMINISTRATIVE AND COURT PROCEEDINGS. No audits or other
proceedings by any Taxing Authority are presently pending, or to the knowledge
of the Company, have been threatened with regard to any Taxes or Tax Returns of
the Company or any of the Company Subsidiaries that are not adequately reserved
for except to the extent that any audits or other proceedings, individually or
in the aggregate, have not had and would not have a Company Material Adverse
Effect.
(k) CONSOLIDATED TAX RETURNS. Neither the Company nor any of the Company
Subsidiaries has ever been a member of an affiliated group of corporations
(within the meaning of Code Section 1504(a)) filing consolidated Tax Returns,
other than the affiliated group of which the Company is the common parent.
(l) CODE SECTION 355. Neither the Company nor any of the Company
Subsidiaries has constituted either a "distributing corporation" or a
"controlled corporation" in a distribution of stock outside of the affiliated
group of which the Company is the common parent qualifying or intended to
qualify for
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tax-free treatment under Section 355(a) of the Code (A) in the two years prior
to the date of this Agreement or (B) in a distribution that could otherwise
constitute part of a "plan" or "series of related transactions" (within the
meaning of Section 355(e) of the Code) in conjunction with the Exchange.
(m) AVAILABILITY OF TAX RETURNS. Upon request the Company has made
available to Parent complete and accurate copies of (i) all Tax Returns for open
years, and any amendments thereto, filed by or on behalf of the Company or any
of the Company Subsidiaries, (ii) all audit reports or written proposed
adjustments (whether formal or informal) received from any Taxing Authority
relating to any Tax Return filed by or on behalf of the Company or any of the
Company Subsidiaries, and (iii) any Tax ruling or request for a Tax ruling
applicable to the Company or any of the Company Subsidiaries entered into by the
Company or any of the Company Subsidiaries.
(n) TAX TREATMENT. As of the date of this Agreement, neither the Company
nor any of the Company Subsidiaries knows of any fact that is reasonably likely
to prevent the Exchange, if consummated as of the date of this Agreement, from
qualifying as a reorganization within the meaning of Section 368(a) of the Code.
Section 3.12 EMPLOYEE MATTERS; ERISA.
(a) Section 3.12(a) of the Company Disclosure Schedule contains a true and
complete list of each deferred compensation and each bonus or other incentive
compensation, stock purchase, stock option and other equity compensation plan,
program, agreement or arrangement; each severance or termination pay, medical,
surgical, hospitalization, life insurance and other "welfare" plan, fund or
program (within the meaning of Section 3(1) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")); each profit-sharing, stock bonus or
other "pension" plan, fund or program (within the meaning of Section 3(2) of
ERISA); each employment, termination or severance agreement; and each other
employee benefit plan, fund, program, agreement or arrangement, in each case,
that is sponsored, maintained or contributed to or required to be contributed to
by the Company or a Company Subsidiary or by any trade or business, whether or
not incorporated (an "ERISA AFFILIATE"), that together with the Company or a
Company Subsidiary would be deemed a "single employer" within the meaning of
Section 4001(b) of ERISA, or to which the Company or a Company Subsidiary or an
ERISA Affiliate is party, whether written or oral, for the benefit of any
employee or former employee of the Company or any Company Subsidiary (the
"COMPANY BENEFIT PLANS"). Section 3.12(a) of the Company Disclosure Schedule
identifies each of the Plans of the Company or any Company Subsidiary or any
ERISA Affiliate (a "TITLE IV PLAN") that is subject to Section 302 or Title IV
of ERISA or Section 412 of the Code. Neither the Company, any Company Subsidiary
nor any ERISA Affiliate has any commitment or formal plan, whether legally
binding or not, to create any additional employee benefit plan or modify or
change any existing Company Benefit Plan that would affect any employee or
former employee of the Company or any Company Subsidiary.
(b) With respect to each Company Benefit Plan, the Company has heretofore
delivered or made available to Parent true and complete copies of each of the
following documents:
(i) a copy of the Company Benefit Plan and any amendments thereto (or
if the Company Benefit Plan is not a written plan, a description thereof);
(ii) a copy of the two most recent annual reports and actuarial
reports, if required under ERISA, and the most recent report prepared with
respect thereto in accordance with Statement of Financial Accounting
Standards No. 87;
(iii) a copy of the most recent Summary Plan Description required under
ERISA with respect thereto;
(iv) if the Company Benefit Plan is funded through a trust or any third
party funding vehicle, a copy of the trust or other funding agreement and
the latest financial statements thereof; and
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(v) the most recent determination letter received from the IRS with
respect to each Company Benefit Plan intended to qualify under Section 401
of the Code.
(c) No material liability under Title IV or Section 302 of ERISA has been
incurred by the Company, a Company Subsidiary or any ERISA Affiliate that has
not been satisfied in full, and to the knowledge of the Company no condition
exists that presents a material risk to the Company, a Company Subsidiary or any
ERISA Affiliate of incurring any such liability, other than liability for
premiums due the Pension Benefit Guaranty Corporation ("PBGC") (which premiums
have been paid when due). Insofar as the representation made in this
Section 3.12(c) applies to Sections 4064, 4069 or 4204 of Title IV of ERISA, it
is made with respect to any employee benefit plan, program, agreement or
arrangement subject to Title IV of ERISA to which the Company, a Company
Subsidiary or any ERISA Affiliate made, or was required to make, contributions
during the eight-year period ending on the last day of the most recent plan year
ended prior to the Effective Time.
(d) The PBGC has not instituted proceedings to terminate any Title IV Plan
and to the knowledge of the Company no condition exists that presents a material
risk that such proceedings will be instituted.
(e) With respect to each Title IV Plan, the present value of accrued
benefits under such plan, based upon the actuarial assumptions used for funding
purposes in the most recent actuarial report prepared by such plan's actuary
with respect to such plan did not exceed, as of its latest valuation date, the
then current value of the assets of such plan allocable to such accrued
benefits.
(f) No Title IV Plan or any trust established thereunder has incurred any
"accumulated funding deficiency" (as defined in Section 302 of ERISA and
Section 412 of the Code), whether or not waived, as of the last day of the most
recent fiscal year of each Title IV Plan ended prior to the Effective Time.
(g) All contributions required to be made with respect to any Company
Benefit Plan on or prior to the Closing Date have been timely made or are
reflected on the balance sheet of the Company. There has been no amendment to,
written interpretation of or announcement (whether or not written) by the
Company, any Company Subsidiary, or any ERISA Affiliate relating to, or change
in employee participation or coverage under, any Company Benefit Plan that would
increase materially the expense of maintaining such Company Benefit Plan above
the level or expense incurred in respect thereof for the most recent fiscal year
ended prior to the date hereof.
(h) No Title IV Plan is a "multiemployer pension plan," as defined in
Section 3(37) of ERISA, nor is any Title IV Plan a plan described in
Section 4063(a) of ERISA. If any Title IV Plan is a "multiemployer pension
plan," except as it has not had and would not have a Company Material Adverse
Effect, (i) neither the Company, a Company Subsidiary nor any ERISA Affiliate
has made or suffered a "complete withdrawal" or a "partial withdrawal," as such
terms are respectively defined in Sections 4203 and 4205 of ERISA (or any
liability resulting therefrom has been satisfied in full), (ii) no event has
occurred that presents a material risk of a partial withdrawal, (iii) neither
the Company, a Company Subsidiary nor any ERISA Affiliate has any contingent
liability under Section 4204 of ERISA, and (iv) no circumstances exist that
present a material risk that any such plan will go into reorganization. If any
Title IV Plan is a "multiemployer pension plan," the aggregate withdrawal
liability of the Company, the Company Subsidiaries and their ERISA Affiliates,
computed as if a complete withdrawal by the Company, the Company Subsidiaries
and the ERISA Affiliates had occurred under each such Plan on the date hereof,
would not cause a Company Material Adverse Effect.
(i) Neither the Company or any Company Subsidiary, any ERISA Affiliate, any
Company Benefit Plan, any trust created thereunder, nor any trustee or
administrator thereof has engaged in a transaction in connection with which the
Company or any Company Subsidiary, any Company Benefit Plan, any such trust, or
any trustee or administrator thereof, or any party dealing with any Company
Benefit
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Plan or any such trust would be subject to either a material civil penalty
assessed pursuant to Section 409 or 502(i) of ERISA or a material tax imposed
pursuant to Section 4975 or 4976 of the Code.
(j) Each Company Benefit Plan has been operated and administered in all
material respects in accordance with its terms and applicable law, including
ERISA and the Code, other than any noncompliance that has not had and would not
have a Company Material Adverse Effect.
(k) Each Company Benefit Plan intended to be "qualified" within the meaning
of Section 401(a) of the Code has received a determination letter from the IRS
to the effect that it is so qualified and the trusts maintained thereunder are
exempt from taxation under Section 501(a) of the Code. Each Company Benefit Plan
intended to satisfy the requirements of Section 501(c)(9) has satisfied such
requirements.
(l) No Company Benefit Plan provides medical, surgical, hospitalization,
death or similar benefits (whether or not insured) for employees or former
employees of the Company or any Company Subsidiary for periods extending beyond
their retirement or other termination of service, other than (i) coverage
mandated by applicable law, (ii) death benefits under any "pension plan," or
(iii) benefits the full cost of which is borne by the current or former employee
(or his beneficiary). No condition exists that would prevent the Company, any
Company Subsidiary or any ERISA Affiliate from amending or terminating any
Company Benefit Plan providing health or medical benefits in respect of any
active employee of the Company or any Company Subsidiary other than limitations
imposed under the terms of collective bargaining agreements.
(m) No amounts payable under the Company Benefit Plans will fail to be
deductible for federal income tax purposes by virtue of Section 162(a)(1),
162(m) or 280G of the Code.
(n) (i) (A) Section 3.12(n) of the Company Disclosure Schedule sets forth
the estimated maximum sum of the change in control payments and entitlements
(including accelerated vesting of the Company Stock Options or other
equity-based awards and increased benefits which are summarized) which any
employee, former employee, or other person who is party to a Termination
Benefits Agreement with the Company and its Subsidiaries, may be entitled to
receive now or in the future (including upon termination of such person's
employment) in connection with the Exchange or any of the other transactions
contemplated by this Agreement (whether alone or in combination with some other
event) based on the assumptions specified therein; and (B) Section 3.12(n) of
the Company Disclosure Schedule sets forth, in the aggregate with respect to
current or former employees or officers of the Company, any Company Subsidiary
or any ERISA Affiliate, the estimated maximum sum of severance pay, unemployment
compensation or any other payment, acceleration in the time of payment or
vesting, or increase in the amount of compensation to which any such employees
or officers will become entitled upon the announcement or consummation of the
transactions contemplated by this Agreement, either alone or in combination with
some other event (other than the Company's involuntary termination of an
employee's employment after the Closing);
(ii) No payment (including any cash payment or accelerated vesting of
the Company Stock Options or other equity-based awards) which would
reasonably be expected to constitute "excess parachute payments" within the
meaning of Section 280G of the Code will be payable in connection with the
Exchange or the other transactions contemplated by this Agreement (whether
alone or in combination with some other event) to any employee, former
employee or other person who is or was providing services to the Company or
any of the Company Subsidiaries;
(iii) Neither the Company nor any of the Company Subsidiaries is a
party to any consulting contract with any person who prior to entering into
such contract was a director or officer of the Company or any of the Company
Subsidiaries or any similar material plan, agreement, arrangement or
understanding;
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(iv) There have occurred no events since January 1, 1999, that have had
(or are reasonably expected to have in the future) a material adverse effect
on the funded status of the Employees' Retirement Plan of Entity I;
(v) Section 3.12(n) of the Company Disclosure Schedule sets forth the
maximum amount of benefits that will become payable under the Company's
Unfunded Deferred Compensation Plan for Officers and Directors by reason of
the Exchange, or any of the other transactions contemplated by this
Agreement (whether alone or in combination with some other event); and
(vi) Section 3.12(n) of the Company Disclosure Schedule sets forth the
maximum amount which represents the excess of (x) the total amount of
payments that would be due as of the date of this Agreement under
Section 4.01 of the Company's Supplemental Retirement Plan and Trust
Agreement for a Select Group of Management Employees assuming all
participants in such plan terminated employment as of the date of this
Agreement and elected immediate payment, in the form of a lump-sum
distribution (if the participant is eligible thereof) as of the date of this
Agreement over (y) the assets held as of the date of this Agreement in the
trust fund established under such plan, and the aggregate amount of any Tax
Distribution (as defined in such plan) that would be payable under
Section 4.03 of such plan if a contribution of $4,600,000 were made to such
plan as of the date of this Agreement (and allocated so as to fund benefits
under the plan on the basis described in the foregoing clause (n)(vii)(x))
would not exceed $8,100,000.
(o)(i) There has been no material failure of a Company Benefit Plan that is
a group health plan (as defined in Section 5000(b)(1) of the Code) to meet the
requirements of Section 4980B(f) of the Code with respect to a qualified
beneficiary (as defined in Section 4980B(g) of the Code). Neither the Company
nor any Company Subsidiary or ERISA Affiliate has contributed to a nonconforming
group health plan (as defined in Section 5000(c) of the Code). Neither the
Company nor any Company Subsidiary or ERISA Affiliate has incurred a tax under
Section 5000(e) of the Code which is or could become a liability of the Company
or a Company Subsidiary;
(ii) The Company will not be required after the Closing to make any
contribution to the IPALCO Enterprises, Inc. Voluntary Employees Beneficiary
Association;
(iii) After the Closing, the Company will have no obligation (other
than any it first establishes after the Closing or that may be mandated
pursuant to Part 6 of Subtitle B of Title I of ERISA) to provide medical,
surgical, hospitalization, death or similar benefits (whether or not
insured) for employees or former employees of the Company or any Company
Subsidiary for periods extending beyond their retirement or other
termination of service in excess of such benefits that can be funded with
assets held from time to time in the IPALCO Enterprises, Inc. Voluntary
Employees Beneficiary Association; and
(iv) The Company believes, after consultation with its independent
accountants and actuaries, that there is no material financial statement
effect with respect to the IPALCO Enterprises, Inc. Voluntary Employees
Beneficiary Association resulting from the attainment of the Company
Shareholder Approval beyond the contribution of $7.5 million within thirty
days of obtaining the Company Shareholder Approval.
(p) To the knowledge of the Company, there are no pending, threatened or
anticipated claims by or on behalf of or against any Company Benefit Plan, by
any employee or beneficiary covered under any such Company Benefit Plan, or
otherwise involving any such Company Benefit Plan (other than routine claims for
benefits).
(q) LABOR AGREEMENTS. As of the date of this Agreement, neither the
Company nor any of the Company Subsidiaries is a party to or bound by any
collective bargaining agreement or other labor agreement with any union or labor
organization, or work rules or practices agreed to with any labor organization
or employee association applicable to employees of the Company or any of the
Company
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Subsidiaries. To the knowledge of the Company, as of the date of this Agreement,
there is no current union representation question involving employees of the
Company or any of the Company Subsidiaries, nor does the Company know of any
activity or proceeding of any labor organization (or representative thereof) or
employee group to organize any such employees. There is no (i) grievance pending
or, to the knowledge of the Company, threatened, arising out of any collective
bargaining agreement or other grievance procedure, unfair labor practice,
employment discrimination or other investigation, charge or complaint against
the Company or any of the Company Subsidiaries, which has or would have a
Company Material Adverse Effect, (ii) strike, dispute, slowdown, work stoppage
or lockout pending, or, to the knowledge of the Company, threatened, against or
involving the Company or any of the Company Subsidiaries which has or would have
a Company Material Adverse Effect and during the past five years there has not
been any such action, (iii) as of the date of this Agreement, proceeding, claim,
suit, action or governmental investigation pending or, to the knowledge of the
Company, threatened, in respect of which any director, officer, employee or
agent of the Company or any of the Company Subsidiaries is or may be entitled to
claim indemnification from the Company pursuant to the Company Charter or the
Company By-laws (or such other organizational documents) or as provided in the
Indemnification Agreements listed in Section 3.12(q) of the Company Disclosure
Schedule. The Company and the Company Subsidiaries have complied in all material
respects with all laws relating to the employment of labor, including any
provisions thereof relating to wages, hours, collective bargaining and the
payment of social security and similar Taxes, and no person has, to the
knowledge of the Company, asserted that the Company or any of the Company
Subsidiaries is liable in any material amount for any arrears of wages or any
Taxes or penalties for failure to comply with any of the foregoing, other than
any noncompliance that has not had and would not have a Company Material Adverse
Effect. Since the enactment of the Worker Adjustment and Retraining Notification
Act (the "WARN ACT"), neither the Company nor any of the Company Subsidiaries
has effectuated, without complying with the applicable requirements of the WARN
Act, (a) a "plant closing" (as defined in the WARN Act) affecting any site of
employment or one or more facilities or operating units within any site of
employment or facility of the Company or any of the Company Subsidiaries; or
(b) a "mass layoff" (as defined in the WARN Act) affecting any site of
employment or facility of the Company or any of the Company Subsidiaries; nor
has the Company or any of the Company Subsidiaries been affected by any
transaction or engaged in layoffs or employment terminations sufficient in
number to trigger application of any similar state, local or foreign law or
regulation without complying with the applicable requirements of such law or
regulation. From the date of the most recent audited financial statements
included in the Company SEC Documents to the date of this Agreement, there has
not been any adoption or amendment in any material respect by the Company or any
Company Subsidiary of any collective bargaining agreement or any Company Benefit
Plan.
Section 3.13 ENVIRONMENTAL MATTERS.
(a) The Company and each Company Subsidiary is and has been in compliance
with all applicable Environmental Laws (as defined below) except where the
failure to be in such compliance, individually or in the aggregate, would not
have a Company Material Adverse Effect. Neither the Company nor any Company
Subsidiary has received any written communication from any person or
Governmental Entity that alleges that the Company or any Company Subsidiary is
not or has not been in compliance with applicable Environmental Laws, except for
communications with respect to such matters which, if adversely determined
against the Company or any Company Subsidiary, individually or in the aggregate,
have not had and would not have a Company Material Adverse Effect.
(b) The Company and each Company Subsidiary have obtained all permits and
other governmental authorizations (collectively, the "ENVIRONMENTAL PERMITS")
necessary under applicable Environmental Laws for the construction of its
facilities and the conduct of its operations as currently conducted, as
applicable, and all such Environmental Permits are in good standing or, where
applicable, a renewal application has been timely filed and is pending agency
approval, and the Company and each Company
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Subsidiary are in compliance with all terms and conditions of the Environmental
Permits except where the failure to be in such compliance, individually or in
the aggregate, would not have a Company Material Adverse Effect.
(c) There is no Environmental Claim (as defined below) pending, or, to the
knowledge of the Company, threatened:
(i) against the Company or any Company Subsidiary;
(ii) to the knowledge of the Company, against any person or entity
whose liability for any such Environmental Claim the Company or any Company
Subsidiary has retained or assumed either contractually or by operation of
law; or
(iii) against any real or personal property or operations which the
Company or any Company Subsidiary owns, leases or manages, in whole or in
part;
in each case, except for such Environmental Claims that, individually or in
the aggregate, would not have a Company Material Adverse Effect.
(d) To the knowledge of the Company, there have not been any Releases (as
defined below) of any Hazardous Material (as defined below) that would be
reasonably likely to form the basis of any Environmental Claim against the
Company or any Company Subsidiary, or against any person whose liability for any
Environmental Claim the Company or any Company Subsidiary has retained or
assumed by contract or by operation of law in each case, except for such
Releases that, individually or in the aggregate, would not have a Company
Material Adverse Effect.
(e) Neither the Company nor any of the Company Subsidiaries has entered
into any agreements with any non-governmental persons requiring the Company or
any Company Subsidiary to indemnify, reimburse or provide contribution to such
other person for any matter related to Environmental Laws, Hazardous Materials,
or the environment, except for such matters that (i) have been fully resolved
and where the Company or any Company Subsidiary has no further monetary or
non-monetary obligation or (ii) the enforcement of which, individually or in the
aggregate, would not have a Company Material Adverse Effect.
(f) To the knowledge of the Company, compliance with all applicable
Environmental Laws (including proposed regulations) will not require the Company
or any Company Subsidiary to incur material expenditures beyond that currently
budgeted in the five Company fiscal years beginning with January 1, 2000 (as
disclosed in Section 3.13(f) or Section 5.1 of the Company Disclosure Schedule),
including the costs of pollution control equipment required or reasonably
contemplated to be required in the future.
(g) From January 1, 1997, to the date of this Agreement, the Company and
the Company Subsidiaries have not received any written requests for information
pursuant to Section 114(a) of the federal Clean Air Act or any state analogue to
the federal Clean Air Act, from any Governmental Entity with respect to the
Company's or any Company Subsidiary's compliance with the new source review
requirements under the federal Clean Air Act, any state analogue to the federal
Clean Air Act, or any regulations promulgated thereunder.
(h) In this Agreement:
"ENVIRONMENTAL CLAIMS" means any and all administrative, regulatory or
judicial actions, suits, demand letters, directives, claims, liens,
investigations or written notices by any person or entity (including any
Governmental Entity) alleging potential liability (including potential
responsibility for or liability for enforcement, investigatory costs, cleanup
costs, spent fuel or waste disposal costs, decommissioning costs, governmental
response costs, removal costs, remediation costs, natural resources damages,
property damages, personal injuries or civil or criminal penalties) arising out
of, based on or resulting
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from (A) the presence, Release or threatened Release into the environment of any
Hazardous Materials at any location or (B) circumstances forming the basis of
any violation or alleged violation of any Environmental Law or (C) any and all
claims by any third party seeking damages, contribution, indemnification, cost
recovery, compensation or injunctive relief resulting from the presence or
Release of any Hazardous Materials.
"ENVIRONMENTAL LAWS" means all federal, state and local laws, principles of
common laws, rules, regulations, ordinances, orders and directives, relating to
pollution or protection of the environment (including indoor or ambient air,
surface water, groundwater, land surface or subsurface strata) or protection of
human health as it relates to the environment, including laws and regulations
relating to Releases or threatened Releases of Hazardous Materials, or otherwise
relating to the manufacture, processing, generation, use, treatment, storage,
disposal, transport or handling of Hazardous Materials.
"HAZARDOUS MATERIALS" means any petroleum or petroleum products, radioactive
materials, asbestos, polychlorinated biphenyls, and any other chemical,
material, substance or waste, regulated under any applicable Environmental Law.
"RELEASE" means any release, spill, emission, leaking, injection, deposit,
disposal, discharge, dispersal or leaching or migration into or through the
environment.
Section 3.14 TITLE TO REAL PROPERTY. Section 3.14 of the Company
Disclosure Schedule lists all real property owned or leased by the Company or
the Company Subsidiaries as of the date of this Agreement, with a book value in
excess of $2,000,000. Except as has not had and would not have a Company
Material Adverse Effect, the Company and each Company Subsidiary: (i) owns and
has good, valid and marketable title in fee simple to the real property owned by
such party, free and clear of Liens, except for (A) minor imperfections of
title, easements and rights of way, none of which, individually or in the
aggregate, materially detracts from the value of or materially impairs the use
of the affected property or materially impairs the operations of the Company or
any Company Subsidiary, (B) Liens for current Taxes not yet due and payable and
(C) Liens disclosed on the Company Disclosure Schedule ((A), (B) and (C) are
collectively referred to as "PERMITTED COMPANY LIENS"); (ii) is in peaceful and
undisturbed possession of the space and/or estate under each lease under which
it is a tenant, and there are no material defaults by it as tenant thereunder;
and (iii) has good and valid rights of ingress and egress to and from all the
real property owned or leased by such party from and to the public street
systems for all usual street, road and utility purposes. The failure to hold any
easements or rights of way will not have a Company Material Adverse Effect.
Section 3.15 ASSETS OTHER THAN REAL PROPERTY INTERESTS. Other than as
would not have a Company Material Adverse Effect, the Company or a Company
Subsidiary has good and valid title to all material assets reflected on the most
recent balance sheet included in the Company SEC Reports (the "BALANCE SHEET")
or thereafter acquired, except those sold or otherwise disposed of for fair
value since the date of the Balance Sheet in the ordinary course of business
consistent with past practice and not in violation of this Agreement, in each
case free and clear of all mortgages, liens, security interests or encumbrances
of any kind except (i) mechanics', carriers', workmen's, repairmen's or other
like liens arising or incurred in the ordinary course of business, liens arising
under original purchase price conditional sales contracts and equipment leases
with third parties entered into in the ordinary course of business and that may
thereafter be paid without penalty, (ii) mortgages, liens, security interests
and encumbrances which secure debt that is reflected as a liability on the
Balance Sheet and the existence of which is indicated in the notes thereto, and
(iii) other imperfections of title or encumbrances, if any, which do not,
individually or in the aggregate, materially impair the continued use and
operation of the assets to which they relate in the business of the Company and
each of the Company Subsidiaries as presently conducted or which, individually
or in the aggregate, would not have a Company Material Adverse Effect. Each item
of material tangible personal property of the Company and the Company
Subsidiaries is in all material respects in good working order and is adequate
and sufficient for the
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Company's current use, ordinary wear and tear excepted and except for any
failures which, individually or in the aggregate, would not have a Company
Material Adverse Effect. All leased personal property of the Company and its
Subsidiaries is in the condition required of such property by the terms of the
lease applicable thereto during the term of the lease and upon the expiration
thereof, except for any failures which, individually or in the aggregate, would
not have a Company Material Adverse Effect.
Section 3.16 INTELLECTUAL PROPERTY. The Company and each of the Company
Subsidiaries own, or possess licenses or other valid rights to use, all patents,
patent rights, trademarks, trademark rights, trade names, trade name rights,
copyrights, service marks, service mark rights, trade secrets, applications to
register, and registrations for, the foregoing trademarks, service marks,
know-how and other proprietary rights and information (collectively,
"INTELLECTUAL PROPERTY") necessary in connection with the business of the
Company and the Company Subsidiaries as currently conducted, except where the
failure to possess such rights or licenses or valid rights to use would not have
a Company Material Adverse Effect. The conduct of the business of the Company
and each of the Company Subsidiaries as currently conducted does not infringe
upon any Intellectual Property of any third party except where such infringement
would not result in a Company Material Adverse Effect, and no person is
infringing upon any Intellectual Property of the Company or any Company
Subsidiary except where such infringement would not have a Company Material
Adverse Effect.
Section 3.17 TRANSACTIONS WITH AFFILIATES. Other than contracts with
respect to the provision of steam or electricity which have been approved by the
IURC (as defined in Section 6.3), Section 3.17 of the Company Disclosure
Schedule lists, as of the date of this Agreement, all the agreements, contracts
or other arrangements between the Company and any Company Subsidiary, on the one
hand, and any affiliate (other than the Company or such Company Subsidiary), on
the other hand, the amount of which exceeds $60,000 annually, or in the
aggregate. Each such agreement or arrangement was negotiated on an arms-length
basis and is no less favorable to the Company or such Company Subsidiary than
the Company or such Company Subsidiary could have obtained from an unaffiliated
third party.
Section 3.18 BROKERS; SCHEDULE OF FEES AND EXPENSES. No broker, investment
banker, financial advisor or other person, other than UBS Warburg LLC and
Goldman, Sachs & Co., the fees and expenses of which will be paid by the
Company, is entitled to any broker's, finder's, financial advisor's or other
similar fee or commission in connection with the transactions contemplated
hereby based upon arrangements made by or on behalf of the Company. The
estimated fees to be paid pursuant to this Section 3.18 are set forth in
Section 3.18 of the Company Disclosure Schedule.
Section 3.19 OPINION OF FINANCIAL ADVISOR. The Company has received the
opinion of UBS Warburg LLC, dated the date of this Agreement, to the effect
that, as of such date, the consideration to be received in the Exchange by the
holders of Company Common Stock is fair from a financial point of view, a signed
copy of which opinion has been delivered to Parent promptly following the
execution of this Agreement.
Section 3.20 CAPACITY TO SERVE PEAK DEMAND. Section 3.20 of the Company
Disclosure Schedule sets forth a schedule of the purchase power contracts or
commitments entered by the Company prior to the date of this Agreement for the
summer of the year 2000. The Company believes, as of the date of this Agreement,
that these contracts, commitments and its own generation capacity are adequate
to meet its expected peak demand for such period.
Section 3.21 ACCOUNTING MATTERS. As of the date of this Agreement, the
Company, after consultation with its independent public accountants, believes
that no conditions exist that would preclude the Company from being a party to a
transaction accounted for as a pooling-of-interests for accounting purposes in
accordance with GAAP and applicable SEC regulations, including the transactions
contemplated hereby.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent represents and warrants to the Company that, except as set forth in
the Parent SEC Documents (as defined in Section 4.5) and except as set forth in
the disclosure schedule delivered by Parent to the Company concurrent with the
execution of this Agreement (the "PARENT DISCLOSURE SCHEDULE"):
Section 4.1 ORGANIZATION, STANDING AND POWER. Parent is duly organized,
validly existing and in good standing under the laws of the jurisdiction in
which it is incorporated or organized and has all requisite power and authority
and possesses all governmental franchises, licenses, permits, authorizations and
approvals necessary to enable it to own, lease or otherwise hold its properties
and assets and to conduct its businesses as presently conducted, other than such
franchises, licenses, permits, authorizations and approvals the lack of which,
individually or in the aggregate, has not had and would not have a Parent
Material Adverse Effect. The term "PARENT MATERIAL ADVERSE EFFECT" means an
event, change, cause or effect which is materially adverse to the business,
operations, properties, assets, liabilities, prospects, condition (financial or
otherwise) or results of operations of Parent or the ability of Parent to
consummate the Exchange and the transactions contemplated hereby.
Section 4.2 CERTIFICATE OF INCORPORATION AND BY-LAWS. The copies of
Parent's Certificate of Incorporation (the "PARENT CHARTER") and By-laws (the
"PARENT BY-LAWS") that are referenced as exhibits to Parent's Form 10-K for the
year ended December 31, 1999, are complete and correct copies thereof. The
Parent Charter and the Parent By-laws are in full force and effect.
Section 4.3 CAPITAL STRUCTURE. The authorized capital stock of Parent
consists of (a) 1,200,000,000 shares of Parent Common Stock par value one cent
and (b) 50,000,000 shares of preferred stock with no par value, none of which is
outstanding. As of July 12, 2000, (i) 453,725,231 shares of Parent Common Stock
were issued and outstanding, (ii) no shares of Parent Common Stock were held in
the treasury of Parent, and (iii) 1,200,000 shares of Parent Common Stock were
reserved for issuance under Parent's various option and benefit plans. Except as
set forth above, as of the date of this Agreement, no shares of capital stock or
other voting securities of Parent were issued, reserved for issuance or
outstanding. All outstanding shares of Parent Common Stock are, and all such
shares that may be issued prior to the Effective Time and that will be issued in
connection with payment of the Exchange Consideration will be when issued, duly
authorized, validly issued, fully paid and nonassessable and not subject to or
issued in violation of any purchase option, call option, right of first refusal,
preemptive right, subscription right or any similar right under any provision of
the General Corporation Law of the State of Delaware, the Parent Charter, the
Parent By-laws or any Contract to which Parent is a party or otherwise bound.
There are no issued or outstanding bonds, debentures, notes or other
indebtedness of Parent having the right to vote (or convertible into, or
exchangeable for, securities having the right to vote) on any matters on which
holders of Parent Common Stock may vote ("VOTING PARENT DEBT"). Except as set
forth above and in the Parent benefit plans, as of the date of this Agreement,
there are not issued or outstanding options, calls, voting trusts, proxies,
warrants, rights, convertible or exchangeable securities, "phantom" stock
rights, stock appreciation rights, stock-based performance units, commitments,
Contracts, other pledges, security interests, encumbrances, arrangements or
undertakings of any kind to which Parent is a party or by which any of them is
bound (i) obligating Parent to issue, deliver or sell, pledge, grant a security
interest on or encumber or cause to be issued, delivered or sold, pledged or
encumbered or a security interest to be granted on shares of capital stock or
other equity interests in, or any security convertible or exercisable for or
exchangeable into any capital stock of or other equity interest in Parent or any
Voting Parent Debt or (ii) obligating Parent to issue, grant, extend or enter
into any such option, warrant, call, right, security, commitment, Contract,
arrangement or undertaking. As of the date of this Agreement, there are not any
contractual obligations of Parent to repurchase, redeem or otherwise acquire any
shares of capital stock of Parent or to make any investment (in the form of a
loan, capital contribution or otherwise) in any other person.
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Section 4.4 AUTHORITY; EXECUTION AND DELIVERY; ENFORCEABILITY. Parent has
all requisite corporate power and authority to execute and deliver this
Agreement and to consummate the Exchange. The execution and delivery by Parent
of this Agreement and the consummation by it of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the part
of Parent. Parent has adopted this Agreement. Parent has duly executed and
delivered this Agreement, and assuming the due authorization and delivery
thereof by the Company, this Agreement constitutes its legal, valid and binding
obligation, enforceable against it in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium, or other similar laws affecting the enforcement of creditors' rights
generally and by general equitable principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
Section 4.5 SEC DOCUMENTS. The filings required to be made by Parent under
the Securities Act and the Exchange Act, as the case may be, have been filed and
complied, as of their respective dates, in all material respects with all
applicable requirements of the Securities Act or the Exchange Act, as the case
may be, and the rules and regulations thereunder. Parent has made available to
the Company a true and complete copy of each report, schedule, registration
statement and definitive proxy statement and all amendments thereto filed with
the SEC by Parent pursuant to the requirements of the Securities Act or the
Exchange Act since January 1, 1998 (as such documents have since the time of
their filing been amended, the "PARENT SEC DOCUMENTS"). As of its respective
date, each Parent SEC Document complied in all material respects with its
requirements, and did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The audited consolidated financial statements of
Parent and the unaudited interim financial statements included in the Parent SEC
Documents comply as to form in all material respects with applicable accounting
requirements and the published rules, and regulations of the SEC with respect
thereto, have been prepared in accordance with GAAP applied on a consistent
basis during the periods involved (except as may be indicated in the notes
thereto) and fairly present the consolidated financial position of Parent and
its consolidated Subsidiaries as of the dates thereof and the consolidated
results of their operations and cash flows for the periods then ended (subject,
in the case of unaudited statements, to normal year-end audit adjustments).
Section 4.6 NO CONFLICTS; CONSENTS.
(a) The execution and delivery by Parent of this Agreement does not, and
the consummation of the Exchange and compliance with the terms hereof will not,
conflict with, or result in any violation of or default (with or without notice
or lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or to loss of a material benefit
under, or result in the creation of any Lien upon any of the properties or
assets of Parent or any of its Subsidiaries under, any provision of (i) the
charter or organizational documents of Parent or any of its Subsidiaries,
(ii) subject to obtaining the third party consents (the "PARENT REQUIRED
CONSENTS") set forth in Section 4.6(a) of the Parent Disclosure Schedule, any
Contract to which Parent or any of its Subsidiaries is a party or by which any
of their respective properties or assets is bound, or (iii) subject to the
filings and other matters referred to in Section 4.6(b), any Judgment or Law
existing on the date hereof applicable to Parent or any of its Subsidiaries or
their respective properties or assets, other than, in the case of clauses
(ii) and (iii) above, any such items that, individually or in the aggregate,
have not had and would not have a Parent Material Adverse Effect.
(b) No Consent of, or registration, declaration or filing with, any
Governmental Entity is required to be obtained or made by or with respect to
Parent or any of its Subsidiaries in connection with the execution, delivery and
performance of this Agreement or the consummation of the Exchange, other than
(i) compliance with and filings by Parent under the HSR Act, (ii) the filing
with the SEC of such reports under Section 13 of the Exchange Act as may be
required in connection with this Agreement and the Exchange, (iii) the filing of
the Articles of Share Exchange with the Secretary of State of the
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State of Indiana, (iv) the approval of the FERC under Section 203 and any
directly related section of or regulation under the Power Act for the sale or
disposition of jurisdictional facilities of the Company, or an order under the
Power Act disclaiming jurisdiction over the Exchange, (v) the approval by the
SEC pursuant to Section 9(a)(2) of PUHCA, (vi) the filing with the FCC of the
applications required under Section 310(d) of the Communications Act of 1934, as
amended, and approval by the FCC thereof, (vii) such filings as may be required
in connection with the taxes described in Section 6.8, (viii) filings under any
applicable state takeover Law, (ix) the filing of the Joint Registration/Proxy
Statement (as defined below) with the SEC on Form S-4, (x) the listing of Parent
Common Stock with the NYSE, (xi) the filing of a registration statement with the
SEC as contemplated by Section 2.4(d), (xii) compliance with state blue sky
laws, and (xiii) such other items (A) required solely by reason of the
participation of the Company (as opposed to any third party) in the Exchange or
(B) that, individually or in the aggregate, would not prevent the consummation
of the transactions hereby and have not had and would not have a Parent Material
Adverse Effect.
Section 4.7 COMPLIANCE WITH APPLICABLE LAWS. Parent is not in violation
of, or to its knowledge, under investigation with respect to any violation of,
or has been given written notice of or been formally charged with any violation
of, any law, statute, order, rule, regulation, ordinance or judgment, permit,
license, concession or franchise of any Governmental Entity, except for
violations which individually or in the aggregate have not had and would not
have a Parent Material Adverse Effect. Parent is not in breach or violation of
or in default in the performance or observance of any term or provision of, and
no event has occurred which, with lapse of time or action by a third party,
could result in a default by Parent under (i) the Parent Charter or the Parent
By-laws or (ii) any contract, commitment, agreement, indenture, mortgage, loan
agreement, note, lease, bond, license, approval or other instrument to which it
is a party or by which Parent is bound or to which any of its property is
subject, except, in the case of clause (ii) above, for violations, breaches or
defaults which individually or in the aggregate have not had and would not have
a Parent Material Adverse Effect.
Section 4.8 ABSENCE OF UNDISCLOSED LIABILITIES. Except for liabilities,
obligations or contingencies which would not, in the aggregate, have a Parent
Material Adverse Effect, or which are accrued or reserved against in the
consolidated financial statements of Parent or reflected in the notes thereto
for the year ended December 31, 1999, or the quarter ended March 31, 2000, or
which were incurred after December 31, 1999 in the ordinary course of business,
Parent has no liabilities or obligations (whether absolute, accrued, contingent
or otherwise and including margin loans) which are material to Parent and its
Subsidiaries taken as a whole.
Section 4.9 STOCKHOLDER APPROVAL. As long as Parent is not required to
issue 20% or more of the number of shares of Parent Common Stock outstanding as
of the Effective Time in connection with the Exchange, the issuance of shares of
Parent Common Stock in connection with the Exchange does not, and the
transactions contemplated hereby do not, require approval by the stockholders of
Parent.
Section 4.10 LITIGATION. As of the date of this Agreement, there is no
suit, action or proceeding pending or, to the knowledge of Parent, threatened
against Parent, any of its Subsidiaries or any of their affiliated entities
that, individually or in the aggregate, has had or would have a Parent Material
Adverse Effect, nor is there any Judgment outstanding against Parent, any of its
Subsidiaries or any of their affiliated entities that has had or would have a
Parent Material Adverse Effect.
Section 4.11 ABSENCE OF CERTAIN CHANGES OR EVENTS. From December 31, 1999
to the date of this Agreement, Parent has conducted its business only in the
ordinary course consistent with past practice, and during such period (i) there
has not been any event, change, effect or development that, individually or in
the aggregate, has had or would have a Parent Material Adverse Effect,
(ii) there has not been any material election with respect to Taxes by Parent or
any settlement or compromise of any
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material Tax liability or refund of Parent, and (iii) there has not been any
material change in accounting methods, principles or practices by Parent, except
insofar as may have been required by a change in GAAP or SEC accounting
regulations or guidelines or applicable law.
Section 4.12 BROKERS. No broker, investment banker, financial advisor or
other person, other than Lehman Brothers Inc., is entitled to any broker's,
finder's, financial advisor's or other similar fee or commission in connection
with the Exchange based upon arrangements made by or on behalf of Parent.
Section 4.13 OWNERSHIP OF COMPANY COMMON STOCK. As of the date of this
Agreement, none of Parent or any of Parent's Subsidiaries or other affiliates,
either individually or as part of a group for purposes of Rule 13d-3 under the
Exchange Act, beneficially owns such number of shares of Company Common Stock so
as to constitute an "interested shareholder" within the meaning of
Section 23-1-43-10 for purposes of Section 23-1-43-18 under the BCL or Art. 10
of the Company Charter. Parent is not an "Acquiring Person" within the meaning
of the Company Rights Plan.
Section 4.14 REGULATORY STATUS. Neither Parent nor any "subsidiary
company" or "affiliate" (as such terms are defined in PUHCA) of Parent is a
"public utility company" within the meaning of PUHCA, other than, as of the date
of this Agreement, Entity C.
Section 4.15 TAX-FREE REORGANIZATION. As of the date of this Agreement,
Parent knows of no fact that is reasonably likely to prevent the Exchange, if
consummated as of the date of this Agreement, from qualifying as a
reorganization within the meaning of Section 368(a) of the Code.
Section 4.16 ACCOUNTING MATTERS. As of the date of this Agreement, Parent,
after consultation with its independent public accountants, believes that no
conditions exist that would preclude Parent from being a party to a transaction
accounted for as a pooling-of-interests for accounting purposes in accordance
with GAAP and applicable SEC regulations including the transactions contemplated
hereby.
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
Section 5.1 CONDUCT OF BUSINESS.
(a) CONDUCT OF BUSINESS BY THE COMPANY. Except for matters set forth in
the Company Disclosure Schedule or otherwise contemplated by this Agreement,
from the date of this Agreement to the Effective Time or earlier termination of
this Agreement the Company shall, and shall cause each Company Subsidiary to,
conduct its business in the usual, regular and ordinary course in substantially
the same manner as previously conducted and use all reasonable efforts to
preserve intact, its current business organization, maintain or renew or cause
to be renewed the current rates and rate schedules, keep available the services
of its current officers and employees and keep its relationships with customers,
suppliers, licensors, licensees, distributors and others having business
dealings with them, including regulators, to the end that its goodwill and
ongoing business shall be unimpaired at the Effective Time. In addition, and
without limiting the generality of the foregoing, except for matters set forth
in Section 5.1(a) of the Company Disclosure Schedule, or as otherwise required
by Law (including Environmental Law) and in such event by giving prior notice to
Parent, or otherwise contemplated by this Agreement, from the date of this
Agreement to the Effective Time, the Company shall not, and shall not permit any
Company Subsidiary to, do any of the following without the prior written consent
of Parent:
(i) (A) declare, set aside or pay any dividends on, or make any other
distributions in respect of, any of its capital stock, other than
(1) dividends and distributions by a direct or indirect wholly owned
Subsidiary of the Company to its parent, (2) regular quarterly cash
dividends of not more than $0.163 on the Company Common Stock, with usual
declaration,
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record and payment dates and in accordance with the Company's past
dividend policy, and (3) dividends and distributions declared and paid by
partially owned Subsidiaries, (B) split, combine or reclassify any of its
capital stock or issue or authorize the issuance of any other securities
in respect of, in lieu of or in substitution for shares of its capital
stock, or (C) purchase, redeem or otherwise acquire any shares of capital
stock of the Company or any Company Subsidiary or any other securities
thereof or any rights, warrants or options to acquire any such shares or
other securities except for open market purchases under the Company's
Power Invest Dividend Reinvestment and Direct Stock Purchase Plan or the
Employees' Thrift Plan of the Company;
(ii) issue, deliver, sell or grant (A) any shares of its capital
stock, (B) any Voting Company Debt or other voting securities, (C) any
securities convertible into or exchangeable for, or any options, warrants
or rights to acquire, any such shares, Voting Company Debt, voting
securities or convertible or exchangeable securities or (D) any "phantom"
stock, "phantom" stock rights, stock appreciation rights or stock-based
performance units, other than (1) the issuance of Company Common Stock
(and associated Company Rights) upon the exercise of Company Stock
Options outstanding on the date of this Agreement and in accordance with
their present terms, (2) the issuance of up to an additional 30,000
Company Stock Options at an exercise price no less than the fair market
value of the Company Common Stock as of the date of the grant and
pursuant to the Company Option Plans existing as of the date of this
Agreement and in accordance with their present terms and in the ordinary
course of the Company's business consistent with its past practice, and
the issuance of Company Common Stock (and associated Company Rights) upon
the exercise of such Company Stock Options, and (3) the issuance of
Company Common Stock upon the exercise of Company Rights;
(iii) amend the articles of incorporation, by-laws or other
comparable charter or organizational documents of the Company or Entity
I;
(iv) acquire, publicly propose to acquire, or agree to acquire
(A) by merging or consolidating with, or by purchasing a substantial
equity interest in or portion of the assets of, or by any other manner,
any business or any corporation, partnership, joint venture, association
or other business organization or division thereof, or (B) any assets
that are material, individually or in the aggregate, to the Company and
the Company Subsidiaries, taken as a whole, except purchases of inventory
in the ordinary course of business consistent with past practice, which
in any case has a fair market value of less than $10,000,000 and except
for capital expenditures if such capital expenditures would be permitted
under Section 5.1(a)(ix) or Section 6.3(f);
(v) (A) grant to any officer, director or employee of the Company or
any Company Subsidiary any increases in compensation, except in the
ordinary course of business consistent with prior practice, that do not,
individually or in the aggregate for all officers, directors and
employees, exceed $3,000,000 per annum, excluding any increases
consistent with the terms of existing collective bargaining agreements
and the Company Benefit Plans, (B) grant to any officer or director of
the Company or any Company Subsidiary any increase in severance or
termination pay, except to the extent required under any agreement in
effect as of the date of the most recent audited financial statements
included in the Company SEC Documents, (C) enter into or amend any
severance or termination agreement with any officer or director of the
Company or Company Subsidiary, (D) establish, adopt, enter into or amend
in any material respect any collective bargaining agreement or Company
Benefit Plan or (E) take any action to accelerate any rights or benefits,
or make any material determinations not in the ordinary course of
business consistent with prior practice, under any collective bargaining
agreement or Company Benefit Plan, in any such case except for such new
contracts, adoptions, amendments, terminations or increases that, in the
aggregate, do not result in a material
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increase in benefits or compensation expense to the Company and its
Subsidiaries, taken as a whole;
(vi) make any change in accounting methods, principles or practices
materially affecting the reported consolidated assets, liabilities or
results of operations of the Company, except insofar as may have been
required by a change in GAAP or by order of a competent regulatory
authority;
(vii) sell, lease (as lessor), license or otherwise dispose of or
subject to any Lien any properties or assets of the Company or the
Company Subsidiaries, except for (A) excess or obsolete assets sold or
otherwise disposed in the ordinary course of business consistent with
past practice with a fair market value of not more than $100,000 per
transaction (not to exceed $5,000,000 in the aggregate) in sales price
and indebtedness assumed by the acquiring party and its affiliates, or
(B) other sales or dispositions at fair market value of not more than
$2,000,000 per transaction (not to exceed $8,000,000 in the aggregate) in
sales price, and (C) except as set forth in Section 6.14;
(viii) incur any indebtedness for borrowed money or guarantee any
such indebtedness of another person, issue or sell any debt securities or
warrants or other rights to acquire any debt securities of the Company or
any Company Subsidiary, guarantee any debt securities of another person,
enter into any "keep well" or other agreement to maintain any financial
statement condition of another person or enter into any arrangement
having the economic effect of any of the foregoing, except for
(A) drawings under credit lines existing at the date of this Agreement,
or renewals or replacements thereof that do not increase the maximum
available borrowings thereunder, (B) obligations evidenced by debt
securities issued by a Company Subsidiary for the purpose of financing
investments or capital expenditures permitted under this Agreement or
refinancing existing indebtedness or preferred stock obligations of such
Company Subsidiary on terms no less favorable to such Company Subsidiary,
or (C) any incurrences in an aggregate principal amount not exceeding
$20,000,000 outstanding at any time;
(ix) make or agree to make any capital expenditure or expenditures
that, in the aggregate, are in excess of 110% of the currently
contemplated capital expenditures as provided in Section 5.1(a)(ix) of
the Company Disclosure Schedule; PROVIDED, HOWEVER, that any additional
capital expenditure in excess of $10,000,000 shall not be commenced or
committed without prior consultation with Parent; PROVIDED, FURTHER,
that, notwithstanding the foregoing, the Company shall not make, without
the consent of Parent, which consent shall not be unreasonably withheld,
any capital expenditures related to (i) the compliance obligations of the
Company or any of its Subsidiaries related to NOx emissions (subject to
Section 6.3(f)) or (ii) the refurbishment of the Petersburg turbine
generating station; PROVIDED, FURTHER, that, notwithstanding the
foregoing, the Company may make any emergency capital expenditure or
expenditures it deems necessary in its reasonable judgment to restore or
maintain the provision of energy to firm wholesale and retail customers;
(x) enter into a collective bargaining agreement or other labor
agreement with any union or labor organization, or work rules or
practices agreed to with any labor organization or employee association
applicable to employees of the Company or any of the Company
Subsidiaries; or
(xi) authorize any of, or commit or agree to take any of, the
foregoing actions.
(b) TAX MATTERS. The Company shall, and shall cause each of the Company
Subsidiaries to (i)(A) promptly notify Parent upon the earlier of (x) receipt of
notice of any suit, claim, action, investigation, proceeding or audit
(collectively, "ACTIONS") pending against or with respect to the Company or any
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Company Subsidiary in respect of any material Tax (which is material at the time
of such notice) and (y) any such Action becoming material to the Company and the
Company Subsidiaries and (B) not settle or compromise any such material Action
without Parent's consent; (ii) not make any material Tax election without
Parent's consent; (iii) provide Parent with draft consolidated federal income
Tax Returns at least ten days before such Tax Returns are due; and (iv) not make
any material change in tax accounting methods, principles or practices except
insofar as may have been required by a change in GAAP or SEC accounting
regulations or guidelines or applicable law. The Company shall not, and shall
not permit any Company Subsidiary to, enter into, amend or modify any Tax
sharing agreement.
(c) TRANSACTIONS WITH AFFILIATES. The Company shall not, and shall cause
the Company Subsidiaries not to, enter into any agreement or arrangement with
any of their respective affiliates (other than intra-company agreements) other
than such agreements and arrangements as are entered into in the usual, ordinary
and regular course of business and which have been negotiated on an arms'-length
basis and are no less favorable to the Company or a Company Subsidiary than the
Company or such Company Subsidiary would have obtained from an unaffiliated
third party, and provided that the Company shall have notified Parent in writing
prior to entering into any such affiliate transaction with respect to
transactions where the amount involved exceeds $60,000 (other than power sale
and distributions to customers in the ordinary course of the Company's
business).
(d) RATE MATTERS. The Company shall, and shall cause the Company
Subsidiaries to, discuss with Parent any changes and proposed changes in its or
the Company Subsidiaries' rates or charges (including those with respect to fuel
adjustment charges), standards of service or accounting from those in effect on
the date hereof and consult with Parent prior to making any filing (or any
amendment thereto), or effecting any agreement, commitment, arrangement or
consent, whether written or oral, formal or informal, with respect thereto;
PROVIDED, HOWEVER, that in no event shall the Company be obligated to discuss or
consult with Parent with respect to any of the foregoing if, in the opinion of
the Company's outside counsel, to do so would be inconsistent with applicable
Law. Except as provided in Section 5.1(d) of the Company Disclosure Schedule,
the Company shall not, and shall cause the Company Subsidiaries not to, make any
filing to change its rates on file with the FERC or any applicable state utility
commission, except as may be required by applicable law, that would have a
Company Material Adverse Effect.
(e) CONTRACTS. Except as set forth in Section 5.1(e) of the Company
Disclosure Schedule, the Company shall not, and the Company shall not permit any
Company Subsidiary to (i) enter into, modify, amend, terminate or renew any
contract or agreement to which the Company or any Company Subsidiary is a party
(or waive, release or assign any material rights or claims therein) if such
contract or contracts are material to the Company and the Company Subsidiaries
taken as a whole or if the term of such new contract or agreement, or the
existing contract following and as a result of such amendment, modification or
renewal, is or would exceed twenty-four months, or (ii) enter into, modify,
amend or renew any contract or agreement to which the Company or any Company
Subsidiary is a party (or waive, release or assign any material rights or claims
therein) if the dollar amount of such new contract or agreement, or the existing
contract or agreement following and as a result of such amendment, modification
or renewal is or would be in excess of $10,000,000, except, in the case of
clauses (i) and (ii) above, for (A) contracts entered into in the ordinary
course of business consistent with past practice if such contracts relate to the
sale of energy to firm wholesale and retail customers, the sale of transmission
capacity, or the purchase of limestone, coal, gas or oil, (B) contracts for
acquisitions if such contracts would be permitted under Section 5.1(a)(iv),
contracts for sales, leases or dispositions if such contracts would be permitted
under Section 5.1(a)(vii), contracts for incurrences of indebtedness if such
incurrences would be permitted under Section 5.1(a)(viii), contracts for capital
expenditures if such contracts would be permitted under Section 5.1(a)(ix) or
Section 6.3(f) and contracts to buy or sell energy, energy futures or forward
contracts or energy transportation futures or
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forward contracts, or options on any of the foregoing, if such contracts would
be permitted under Section 5.1(m), and (C) contracts required by Law.
(f) INSURANCE. The Company shall, and shall cause each Company Subsidiary
to, self-insure in accordance with customary industry practices or maintain with
financially responsible insurance companies insurance in such amounts and
against such risks and losses as are customary in all material respects for
companies engaged in the electric and gas utility industry and employing such
methods of generating electric power and fuel sources similar to the methods
employed and fuels used by the Company or the Company Subsidiaries.
(g) PERMITS. The Company shall, and shall cause each Company Subsidiary
to, use reasonable best efforts to maintain in effect all existing governmental
permits which are material to the operations of the Company or any of the
Company Subsidiaries.
(h) DISCHARGE OF LIABILITIES. The Company shall not, and the Company shall
not permit any Company Subsidiary to, pay, discharge, settle, compromise or
satisfy any claims, liabilities or obligations (absolute, accrued, asserted or
unasserted, contingent or otherwise) material to the Company and the Company
Subsidiaries, taken as a whole, other than any such payment, discharge,
settlement, compromise or satisfaction (i) of the applicable claim, liability or
obligation in accordance with its terms or, (ii) in the ordinary course of
business consistent with past practice (which includes the payment of final and
unappealable judgments), of liabilities reflected or reserved against in, or
contemplated by, the most recent consolidated financial statements or the notes
thereto of the Company SEC Documents filed prior to the date hereof, or incurred
in the ordinary course of business consistent with past practice.
(i) STAFFING. Except as set forth in Sections 5.1(i) and 5.1(l) of the
Company Disclosure Schedule, the Company shall not, and shall not permit any the
Company Subsidiary to, make any increase in staffing levels over those in effect
on the date hereof other than increases in staffing levels such that the
aggregate number of employees of Entity I is no greater than 1900 and the
aggregate number of employees of the Company and the Company Subsidiaries (other
than Entity I) is no greater than 100.
(j) TAX-EXEMPT STATUS. The Company shall not, nor shall the Company permit
any Company Subsidiary to, take any action that, to the knowledge of the Company
would likely jeopardize the qualification of any material amount of the
Company's outstanding revenue bonds which qualify as of the date of this
Agreement under Section 142(a) of the Code as "exempt facility bonds" or as
tax-exempt industrial development bonds under Section 103(b)(4) of the Internal
Revenue Code of 1954, as amended, prior to the Tax Reform Act of 1986.
(k) WARN ACT. The Company shall not take any action that would give rise
to a claim under the WARN Act or any similar state law or regulation because of
a "plant closing" or "mass layoff" (each as defined in the WARN Act).
(l) NEW LINES OF BUSINESS. Except as disclosed in Section 5.1(l) of the
Company Disclosure Schedule, the Company shall not, nor shall the Company permit
any Company Subsidiary to, enter into a new line of business or make any change
in the line of business in which it engages as of the date of this Agreement,
except that the Company may establish a new wholly owned Subsidiary to take over
the operation and maintenance of a steam plant, as disclosed on Section 5.1(l)
of the Company Disclosure Schedule, but shall not in connection therewith hire
any personnel.
(m) HEDGING. Except as set forth in Section 5.1(m) of the Company
Disclosure Schedule, the Company shall not, and shall not permit any Company
Subsidiary to, buy or sell any energy futures or forward contracts or energy
transportation futures or forward contracts, or options on any of the foregoing,
other than as incidental to the business of generating, purchasing and selling
energy to firm wholesale and retail customers and other than sales of
transmission capacity as required by law.
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(n) OTHER ACTIONS. The Company and Parent shall not, and shall not permit
any of their respective Subsidiaries to, take any action that would, or that
would reasonably be expected to, result in (i) any of the representations and
warranties of such party set forth in this Agreement that is qualified as to
materiality becoming untrue, (ii) any of such representations and warranties
that is not so qualified becoming untrue in any material respect, or
(iii) except as otherwise permitted by Section 5.2, any condition to the
Exchange set forth in Article VII not being satisfied.
Section 5.2 NO SOLICITATIONS.
(a) From and after the date hereof, (i) the Company will not, and will not
authorize or permit any of its Representatives to, directly or indirectly,
solicit, initiate or encourage (including by way of furnishing information) or
take any other action knowingly to facilitate any inquiries or the making of any
proposal which constitutes or may reasonably be expected to lead to an
Acquisition Proposal (as defined in Section 5.2(b)) from any person, or engage
in any discussion or negotiations relating thereto and (ii) neither the Company
Board nor any committee thereof shall (A) withdraw or modify, or propose
publicly to withdraw or modify, in a manner adverse to Parent, the approval or
recommendation by the Company Board or such committee of the Exchange or this
Agreement, (B) approve or recommend, or propose publicly to approve or
recommend, any Acquisition Proposal, or (C) cause the Company or any Company
Subsidiary to enter into any letter of intent, agreement in principle,
acquisition agreement or other similar agreement (each, an "ACQUISITION
AGREEMENT") related to any Acquisition Proposal; PROVIDED, HOWEVER, that the
Company may, at any time prior to receipt of the Company Shareholders' Approval
(the "COMPANY APPLICABLE PERIOD"), (i) in response to an Acquisition Proposal
which was not solicited by it or its Representatives and which did not otherwise
result from a breach of this Section 5.2, if the Company Board reasonably
believes in good faith, after consultation with its financial advisors, that an
Acquisition Proposal could reasonably lead to a transaction meeting the
requirements of a Superior Proposal (as defined in Section 5.2(b)), and subject
to providing Parent with prior written notice of its decision to take such
action (the "COMPANY NOTICE") and compliance with Section 5.2(c), (1) furnish
information with respect to the Company and the Company Subsidiaries to any
person making such Acquisition Proposal (pursuant to a customary confidentiality
agreement) and (2) participate in discussions or negotiations regarding such
Acquisition Proposal, (ii) comply with Rule 14e-2 promulgated under the Exchange
Act with regard to a tender or exchange offer (PROVIDED that, except in
connection with a termination of this Agreement pursuant to clause (iii) of this
proviso, neither the Company nor the Company Board nor any committee thereof
shall withdraw or modify, or propose publicly to withdraw or modify, its
position with respect to this Agreement or the Exchange or approve or recommend,
or propose publicly to approve or recommend, an Acquisition Proposal), and/or
(iii) in the event that during the Company Applicable Period the Company Board
reasonably believes in good faith, after consultation with its financial
advisors and outside counsel, that it has received an Acquisition Proposal that
constitutes a Superior Proposal, by action of the Company Board (subject to this
sentence and Section 8.1(d)(ii)), the Company may terminate this Agreement (and,
following the exercise of such termination right, the Company Board may withdraw
or modify in any adverse manner its approval or recommendation of this Agreement
or the Exchange, and approve or recommend any merger, consolidation, business
combination, recapitalization, liquidation, dissolution or similar transaction
involving the Company or any such Company Subsidiary, other than the
transactions contemplated by this Agreement), but only at a time that is during
the Company Applicable Period and is after the third business day following
Parent's receipt of written notice advising Parent that the Company Board is
prepared to accept a Superior Proposal, specifying the material terms and
conditions of such Superior Proposal and identifying the person making such
Superior Proposal. The Company shall immediately cease and terminate any
existing solicitation, initiation, encouragement, activity, discussion or
negotiation with any persons conducted heretofore by the Company or its
Representatives with respect to any of the foregoing.
(b) As used herein, (i) "ACQUISITION PROPOSAL" shall mean any inquiry,
proposal or offer from any person relating to any direct or indirect acquisition
or purchase of a business (a "MATERIAL BUSINESS")
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that constitutes 15% or more of the net revenues, net income or the assets
(including equity securities) of the Company and the Company Subsidiaries, taken
as a whole, or 15% or more of any class of voting securities of the Company or
any Company Subsidiary owning, operating or controlling a Material Business, any
tender offer or exchange offer that if consummated would result in any person
beneficially owning 15% or more of any class of voting securities of the Company
or any such Company Subsidiary, or any merger, consolidation, business
combination, recapitalization, liquidation, dissolution or similar transaction
involving the Company or any such Company Subsidiary, other than the
transactions contemplated by this Agreement; PROVIDED, HOWEVER, that no
transaction permitted pursuant to Section 5.1(a)(vii) or a transaction
contemplated in Section 6.14 shall be deemed an Acquisition Proposal for any
purpose, (ii) a "SUPERIOR PROPOSAL" shall mean any proposal made by a third
party to acquire, directly or indirectly, including pursuant to a tender offer,
exchange offer, merger, consolidation, business combination, recapitalization,
liquidation, dissolution or similar transaction, more than 50% of the combined
voting power of the shares of the Company Common Stock then outstanding or all
or substantially all the assets of the Company which the Company Board
determines in its good faith judgment, after consultation with its financial
advisors and outside counsel, to be clearly and materially more favorable to the
Company's shareholders (taking into account any changes to the financial terms
of this Agreement proposed by Parent in response to such proposal and all
financial and commercial considerations, including relevant regulatory and other
aspects of the proposal and the third party making such proposal and the
conditions and the prospects for completion of such proposal, and any changes to
this Agreement proposed by Parent in response to such proposal) than the
Exchange and the other transactions contemplated by this Agreement, and
(iii) "REPRESENTATIVE" shall mean any officer, director, employee, financial
advisor, investment banker, attorney, accountant, agent, consultant or other
representative of the Company or Company Subsidiaries.
(c) The Company shall promptly advise Parent orally and in writing of the
receipt of any Acquisition Proposal or Superior Proposal and of the receipt of
any inquiry with respect to or which the Company reasonably believes could lead
to any Acquisition Proposal or Superior Proposal. The Company shall promptly
advise Parent orally and in writing of the identity of the person making any
such Acquisition Proposal or Superior Proposal or inquiry and of the material
terms of any such Acquisition Proposal or Superior Proposal and of any material
changes thereto.
Section 5.3 CONDUCT OF BUSINESS BY PARENT. Except for matters set forth in
the Parent Disclosure Schedule or otherwise contemplated by this Agreement, from
the date of this Agreement to the Effective Time or earlier termination of this
Agreement, Parent shall conduct its business in the usual, regular and ordinary
course in substantially the same manner as previously conducted and use all
reasonable efforts to preserve intact, its current business organization, keep
available the services of its current officers and employees and keep its
relationships with customers, suppliers, licensors, licensees, distributors and
others having business dealings with them, including regulators, to the end that
its goodwill and ongoing business shall be unimpaired at the Effective Time. In
addition, and without limiting the generality of the foregoing, except for
matters set forth in Section 5.3 of the Parent Disclosure Schedule, or as
otherwise required by Law (including Environmental Law), or otherwise
contemplated by this Agreement, from the date of this Agreement to the Effective
Time, Parent shall not do any of the following:
(i) declare, set aside or pay any dividends on, or make any other
distributions in respect of, any of its capital stock; or
(ii) amend the Parent Charter or the Parent By-laws in a manner that
adversely would affect the rights of the holders of Parent Common Stock.
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ARTICLE VI
ADDITIONAL AGREEMENTS
Section 6.1 PREPARATION OF JOINT REGISTRATION/PROXY STATEMENT; SHAREHOLDERS
MEETING.
(a) As soon as possible after the date of this Agreement, (i) the Company
shall prepare and file with the SEC the Proxy Statement and (ii) Parent shall
prepare and file with the SEC a registration statement on Form S-4 (together
with all amendments thereto, the "REGISTRATION STATEMENT") in which the Proxy
Statement shall be included as a prospectus (the "PROSPECTUS"), in connection
with the registration under the Securities Act of shares of Parent Common Stock
to be issued in the Exchange. The parties shall cooperate and consult with each
other in the preparation of the Proxy Statement and the Prospectus (together,
the "JOINT REGISTRATION/PROXY STATEMENT"). Parent shall have the lead drafting
role with respect to the preparation of the Joint Registration/Proxy Statement.
Each of the Company and Parent shall use its reasonable best efforts to respond
as promptly as practicable to any comments of the SEC with respect thereto. Each
party shall notify the other promptly of the receipt of any comments from the
SEC or its staff and of any request by the SEC or its staff for amendments or
supplements to the Joint Registration/Proxy Statement or for additional
information and shall supply the other with copies of all correspondence between
such party or any of its representatives, on the one hand, and the SEC or its
staff, on the other hand, with respect to the Joint Registration/Proxy
Statement. If at any time prior to the Effective Time, there shall occur any
event with respect to Parent or the Company that should be set forth in an
amendment or supplement to the Joint Registration/Proxy Statement, Parent or the
Company, as the case may be, shall promptly notify the other, and Parent and the
Company shall cooperate in preparing and mailing to the Company's shareholders
such an amendment or supplement. The Company shall not mail any Joint
Registration/Proxy Statement, or any amendment or supplement thereto, to which
Parent reasonably objects. The Company shall, as soon as practicable after the
date of this Agreement, (i) distribute to its shareholders the Joint
Registration/ Proxy Statement as promptly as practicable after filing with the
SEC in accordance with applicable federal and state law and with the Company
Charter and the Company By-laws; (ii) duly call, give notice of, convene and
hold a meeting of its shareholders (the "COMPANY SHAREHOLDERS MEETING") for the
purpose of seeking the Company Shareholder Approval; (iii) subject to compliance
with Section 5.2, recommend to its shareholders the approval of the Exchange,
this Agreement and the transactions contemplated hereby, and (iv) cooperate and
consult with Parent with respect to each of the foregoing matters. Each of the
parties shall use its respective best efforts to take such steps as are
necessary to hold the Company Shareholders Meeting within ninety days of the
date of this Agreement. Without limiting the generality of the foregoing, the
Company agrees that its obligations pursuant to this Section 6.1 shall not be
affected by the commencement, public proposal, public disclosure or
communication to the Company of any Acquisition Proposal.
(b) Each of the parties hereto shall furnish all information concerning
itself which is required as customary for inclusion in the Joint
Registration/Proxy Statement. The information provided by any party for use in
the Joint Registration/Proxy Statement shall be true and correct in all material
respects without omission of any material fact which is required to make such
information not false or misleading. The Joint Registration/Proxy Statement will
comply as to form in all material respects with the requirements of the Exchange
Act and the rules and regulations thereunder, except that as of the date the
Joint Registration/Proxy Statement is declared effective, no representation,
covenant or agreement is made by any party with respect to information supplied
by the other party for inclusion in the Joint Registration/Proxy Statement.
Section 6.2 ACCESS TO INFORMATION; CONFIDENTIALITY. Each party shall, and
shall cause each of its Subsidiaries to, afford to the other party, and, at the
other party's request, to the other party's officers, directors, employees,
accountants, counsel, financial advisors and other representatives,
(i) reasonable access during normal business hours during the period prior to
the Effective Time to all its respective
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properties (including access to its facilities, office space and information
system), books, contracts, commitments, personnel and records, budgets,
forecasts and other information (including, but not limited to Tax Returns) and,
during such period, each party shall, and shall cause each of its Subsidiaries
to, except as prohibited by law, furnish promptly to the other party (a) a copy
of each report, schedule, registration statement and other document filed by it
during such period pursuant to the requirements of federal or state securities
laws, or filed with or sent to the SEC, the FERC, the public utility commission
of any state, (ii) reasonable access to all information concerning the Company,
the Company Subsidiaries, directors, officers and shareholders, properties,
facilities or operations owned, operated or otherwise controlled by the Company,
(iii) such additional information relating to Taxes as either party shall from
time to time reasonably request (or, where applicable, to cooperate with Parent
in collecting such information), including, with respect to the Company,
information relating to (a) Tax basis of the stock of the Company Subsidiaries,
(b) earnings and profits, (c) material Tax elections, (d) net operating loss
carryovers and Tax credit carryovers, (e) intercompany transactions,
(f) reconciliation of book and Tax items, (g) the rollout of any deferred Tax
items, (h) ongoing audits (including copies of any IRS 4564 or other similar
information document requests), and (i) the Tax years for which examinations
have been completed, are being conducted, and have not yet been initiated and
(iv) with respect to the Company, reasonable office space and equipment at the
Company's headquarters for the purposes of designing a transition plan in
conjunction with the Company's Representatives. All information exchanged
pursuant to this Section 6.2 shall be subject to the confidentiality agreements
dated April 24, 2000, and July 5, 2000, between the Company and Parent (together
the "CONFIDENTIALITY AGREEMENT").
Section 6.3 REASONABLE EFFORTS; NOTIFICATION; FILINGS.
(a) Upon the terms and subject to the conditions set forth in this
Agreement, unless and to the extent permitted by Section 5.2, the Company Board
approves or recommends a Superior Proposal, each of the parties shall use all
commercially reasonable efforts to take, or cause to be taken, all actions, and
to do, or cause to be done, and to assist and cooperate with the other parties
in doing, all things necessary, proper or advisable to consummate and make
effective, in the most expeditious manner practicable, the Exchange including
(i) the obtaining of all necessary actions or nonactions, waivers, consents and
approvals from Governmental Entities and the making of all necessary
registrations and filings, including filings with Governmental Entities
(including complying with the filing and approval requirements of the FERC, the
SEC Exemption Order, the SEC Approval Order and the certification from the
Indiana Utility Regulatory Commission (the "IURC") addressed to the SEC pursuant
to Section 33(a)(2) of PUHCA (the "INDIANA CERTIFICATION") substantially in the
form as attached as Exhibit C hereto or in a form otherwise reasonably
satisfactory to Parent), and the taking of all reasonable steps as may be
necessary to obtain the Company Required Consents, the Parent Required Consents
and an approval or waiver from, or to avoid an action or proceeding by, any
Governmental Entity and that may be necessary to consummate the transactions
contemplated hereby, (ii) the obtaining of all necessary consents, approvals or
waivers from third parties, (iii) the defending of any lawsuits or other legal
proceedings, whether judicial or administrative, challenging this Agreement or
the consummation of the Exchange, including seeking to have any stay or
temporary restraining order entered by any court or other Governmental Entity
vacated or reversed, and (iv) the execution and delivery of any additional
instruments necessary to consummate the Exchange and to fully carry out the
purposes of this Agreement.
(b) Each party hereto shall file or cause to be filed with the Federal
Trade Commission and the Department of Justice any notifications required to be
filed under the HSR Act, and the rules and regulations promulgated thereunder
with respect to the transactions contemplated hereby.
(c) Parent and the Company will use commercially reasonable efforts to
coordinate such filings and any responses thereto, to make such filings promptly
and to respond promptly to any requests for additional information made by
either of such agencies. Parent and the Company agree that they will
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consult with each other with respect to the obtaining of all such necessary or
advisable permits, consents, approvals and authorizations of Governmental
Entities; PROVIDED, HOWEVER, that it is agreed that (x) the Company shall have
primary responsibility for the preparation and filing of any applications with
or notifications to applicable Indiana regulatory authorities and (y) Parent
shall have primary responsibility for the preparation and filing of any
applications with or notifications to applicable state regulatory authorities
for states other than Indiana and applicable federal regulatory authorities for
approval of the Exchange. Each of Parent and the Company shall have the right to
review and approve in advance drafts of all such necessary applications,
notices, petitions, filings and other documents made or prepared in connection
with the transactions contemplated by this Agreement, which approval shall not
be unreasonably withheld or delayed. In connection with and without limiting the
foregoing, the Company and the Company Board shall (i) take all action necessary
to ensure that no state takeover statute or similar statute or regulation is or
becomes applicable to the Exchange or this Agreement and (ii) if any state
takeover statute or similar statute or regulation becomes applicable to this
Agreement, take all action necessary to ensure that the Exchange may be
consummated as promptly as practicable on the terms contemplated by this
Agreement and otherwise to minimize the effect of such statute or regulation on
the Exchange. Nothing in this Agreement shall be deemed to require any party to
waive any substantial rights or agree to any substantial limitation on its
operations or to dispose of any significant asset or collection of assets.
Notwithstanding the foregoing, the Company and its Representatives shall not be
prohibited under this Section 6.3 from taking any action permitted by
Section 5.2.
(d) The Company shall give prompt notice to Parent, and Parent shall give
prompt notice to the Company, of (i) any representation or warranty made by it
contained in this Agreement that is qualified as to materiality becoming untrue
or inaccurate in any respect or any such representation or warranty that is not
so qualified becoming untrue or inaccurate in any material respect, (ii) the
failure by it to comply with or satisfy in any material respect any covenant,
condition or agreement to be complied with or satisfied by it under this
Agreement, and (iii) any change or event which, individually or in the
aggregate, has had or would have a Company Material Adverse Effect; PROVIDED,
HOWEVER, that no such notification shall affect the representations, warranties,
covenants or agreements of the parties or the conditions to the obligations of
the parties under this Agreement.
(e) Parent agrees that, prior to the Closing, Parent shall not, and shall
cause its Subsidiaries not to, acquire significant electric generation assets of
clearly sufficient magnitude in the relevant market, for purposes of FERC's
analysis of the Exchange, so as to directly and significantly impair the ability
of the parties to obtain the Required Approval (as defined in Section 7.1(d)).
(f) Parent and the Company shall use their reasonable best efforts to
develop jointly by no later than October 15, 2000, a plan for the Company to
comply with emission limits that may be imposed as a result of the United States
Environmental Protection Agency's NOx SIP Call, which plan may include capital
expenditure outlays in addition to those contemplated by this Agreement and the
Company Disclosure Schedule. The Company may make any such capital expenditures
in accordance with such plan.
Section 6.4 EMPLOYEE BENEFIT PLANS.
(a) Parent shall cause individuals who were employed by the Company or any
Company Subsidiary immediately before the Effective Time and who continue
employment with the Company or such Company Subsidiary after the Effective Time
("COVERED EMPLOYEES") to be provided employee benefits that are substantially
equivalent in the aggregate, at Parent's discretion, to either (i) those
provided under the Company Benefit Plans immediately before the Effective Time,
or (ii) those provided by Parent or its Subsidiaries to their similarly situated
employees from time to time; PROVIDED, HOWEVER, that nothing contained herein
shall be construed as requiring Parent or the Company after the Closing
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to continue any specific plan or as preventing Parent or the Company after the
Closing from establishing and, if necessary, seeking shareholder approval to
establish, any other benefit plans in respect of all or any Covered Employee or
any other employee, or amending the Company Benefit Plans. After the Closing,
Parent does not intend to offer compensation plans to officers of the Company
and its Subsidiaries that are comparable to those historically available to such
persons.
(b) Parent shall credit, or cause to be credited, to the Covered Employees
all service with the Company and/or its Subsidiaries (and all service credited
to such Covered Employees by the Company and/or its Subsidiaries or under the
Company Benefit Plans) for all purposes, under any and all benefit plans,
programs or arrangements in which the Covered Employees may participate or from
which the Covered Employees may receive benefits from and after the Effective
Time, to the same extent as if rendered to Parent, the Company or any of their
Subsidiaries, PROVIDED that no such service credited shall require the Company
and/or its Subsidiaries to provide for duplication of benefits. Parent shall
cause to be waived any waiting period or pre-existing condition limitation under
its (or, after the Closing, the Company's or their Subsidiaries') welfare plans
that might otherwise apply to any Covered Employee (to the extent that such
Covered Employee was not affected by the waiting period or pre-existing
condition limitation under the applicable Company Benefit Plans as of the
Effective Time). Parent agrees to recognize, or cause to be recognized, the
dollar amount of all expenses incurred by the Covered Employees during the
calendar year in which the Effective Time occurs for purposes of satisfying such
calendar year deductibles and co-payments limitations under the Company Benefit
Plans and/or any relevant benefit plans, programs or arrangements of Parent, the
Company or their Subsidiaries.
(c) From and after the Effective Time, Parent shall and shall cause the
Company to honor, in accordance with its express terms, each then existing
employment, change of control, severance and termination agreement between the
Company or any of its Subsidiaries and an officer, director or employee of such
Company or Subsidiary.
Section 6.5 DIRECTORS' AND OFFICERS' INDEMNIFICATION AND INSURANCE.
(a) From and after the Effective Time, Parent and the Company shall
indemnify, defend and hold harmless each person who is now, or has been at any
time prior to the date hereof or who becomes prior to the Effective Time, a
director or officer of the Company or any of its Subsidiaries (the "INDEMNIFIED
PARTIES") against all losses, claims, damages, costs and expenses (including
reasonable attorneys' fees), liabilities, judgments and, subject to the proviso
of this sentence, settlement amounts that are paid or incurred in connection
with any claim, action, suit, proceeding or investigation (whether civil,
criminal, administrative or investigative and whether asserted or claimed prior
to, at or after the Effective Time) that is (i) based on, or arises out of, the
fact that such Indemnified Party is or was a director or officer of the Company
or any of its Subsidiaries, and (ii) based on, or arising out of, or pertaining
to this Agreement or the transactions contemplated hereby, in each case to the
fullest extent a corporation is permitted under applicable law to indemnify its
own directors or officers, as the case may be ("INDEMNIFIED LIABILITIES");
PROVIDED, HOWEVER, that neither Parent nor the Company shall be liable for any
settlement of any claim effected without its written consent. Without limiting
the foregoing, in the event that any such claim, action, suit, proceeding or
investigation is brought against any Indemnified Party (whether arising prior to
or after the Effective Time), (w) the Company following the Effective Time will
pay expenses of the final disposition of any such claim, action, suit,
proceeding or investigation to each Indemnified Party to the full extent
permitted by applicable law promptly after statements therefor are received and
otherwise advance to such Indemnified Party upon request reimbursement of
documented expenses reasonably incurred, in either case to the extent not
prohibited by the BCL; PROVIDED, HOWEVER, that the person to whom expenses are
advanced provides any undertaking required by applicable law to repay such
advance if it is ultimately determined that such person is not entitled to
indemnification; (x) the Indemnified Parties shall retain counsel reasonably
satisfactory to the Company; (y) the Company following the Effective Time shall
pay all reasonable fees and expenses
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of such counsel for the Indemnified Parties (subject to the final sentence of
this paragraph) promptly as statements therefor are received; and (z) the
Company following the Effective Time shall use all commercially reasonable
efforts to assist in the defense of any such matter. In the event of any dispute
as to whether an Indemnified Party's conduct complies with the standards set
forth under the BCL and the Company Charter or Company By-laws, a determination
shall be made by independent counsel mutually acceptable to the Company
following the Effective Time and the Indemnified Party (the "INDEPENDENT
COUNSEL"); PROVIDED, HOWEVER, that the Company following the Effective Time
shall not be liable for any settlement effected without its written consent
(which consent shall not be unreasonably withheld). The Indemnified Parties as a
group seeking indemnification with respect to the same or a substantially
related matter may retain only one law firm with respect to such matter except
to the extent that under applicable standards of professional conduct, such
counsel would have conflict representing such Indemnified Party and any other
Indemnified Party or Indemnified Parties.
(b) Except to the extent required by Law, the Company following the
Effective Time shall not take any action so as to amend, modify, limit or repeal
the provisions for indemnification of Indemnified Parties contained in the
certificates or articles of incorporation or by-laws (or other comparable
charter documents) of the Company following the Effective Time and its
Subsidiaries (which as of the Effective Time shall be no more favorable to such
individuals than those maintained by the Company and its Subsidiaries on the
date hereof) in such a manner as would adversely affect the rights of any
Indemnified Party to be indemnified by such corporations in respect of their
serving in such capacities prior to the Effective Time. The Company following
the Effective Time shall honor all of its indemnification obligations existing
as of the Effective Time.
(c) For a period of six years after the Effective Time, the Company shall
cause to be maintained in effect policies of directors' and officers' liability
insurance maintained by the Company as of the date of this Agreement; PROVIDED,
HOWEVER, that the Company may substitute therefor policies of at least the same
coverage containing terms that are no less advantageous with respect to matters
occurring prior to or at the Effective Time to the extent such liability
insurance can be maintained annually at a cost to the Company not greater than
300% for annual premiums for such directors' and officers' liability insurance,
which existing premium costs are set forth in Section 6.5(c) of the Company
Disclosure Schedule; PROVIDED, FURTHER, that if such insurance cannot be so
maintained or obtained at such cost, the Company shall maintain or obtain as
much of such insurance as can be so maintained or obtained at a cost equal to
300% of the current annual premiums of Company for its directors' and officers'
liability insurance.
(d) The provisions of this Section are intended to be for the benefit of,
and shall be enforceable by, each Indemnified Party and each party entitled to
insurance coverage under Section 6.5(c), respectively, and his or her heirs and
legal representatives, and shall be in addition to, and shall not impair, any
other rights an Indemnified Party may have under the Company Charter or the
comparable organization documents of the Company or any of its Subsidiaries,
under the BCL or otherwise.
Section 6.6 EXPENSES. Except as provided in Article VIII, all fees and
expenses incurred in connection with the Exchange shall be paid by the party
incurring such fees or expenses, whether or not the Exchange is consummated.
Section 6.7 PUBLIC ANNOUNCEMENTS. Parent and the Company shall consult
with each other before issuing, and provide each other the opportunity to review
and comment upon, any press release or other public statements with respect to
the Exchange and shall not issue any such press release or make any such public
statement prior to such consultation, except as may be required by applicable
Law, court process or by obligations pursuant to any listing agreement with any
national securities exchange.
Section 6.8 TRANSFER TAXES. Subject to Section 2.3(b), all stock transfer,
real estate transfer, documentary, stamp, recording and other similar Taxes
(including interest, penalties and additions to any
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such Taxes) ("TRANSFER TAXES") incurred in connection with the Exchange shall be
paid by the Company, and the Company shall cooperate with Parent in preparing,
executing and filing any Tax Returns with respect to such Transfer Taxes. In no
case will Parent pay directly or indirectly any Transfer Tax incurred in
connection with the Exchange.
Section 6.9 RESTRUCTURING. Parent shall file an application with the SEC
which commits Parent, if required by a regulatory order of the SEC, to enter
into an agreement with a third party within three years of the Effective Time to
divest its ownership interest in the PUHCA jurisdictional business of Entity C
or comply with such other conditions as may be imposed by the SEC; PROVIDED,
HOWEVER, that Parent shall not be required to comply with any such condition
that Parent reasonably believes would have a Company Material Adverse Effect or
an adverse effect on Parent which is material in the context of the transactions
contemplated hereby.
Section 6.10 RIGHTS AGREEMENT; CONSEQUENCES IF RIGHTS TRIGGERED. The
Company Board shall take all action requested in writing by Parent in order to
render the Company Rights inapplicable to the Exchange. Except as approved in
writing by Parent, the Company Board shall not (i) amend the Company Rights
Agreement, (ii) redeem the Company Rights or (iii) take any action with respect
to, or make any determination under, the Company Rights Agreement, except for
any of the foregoing actions which the Company Board, after consultation with
outside counsel, determines in good faith is required for the Company Board to
comply with its fiduciary duties imposed by law. If any Distribution Date, Share
Acquisition Date or Triggering Event occurs under the Company Rights Agreement
at any time during the period from the date of this Agreement to the Effective
Time, the Company and Parent shall make such adjustment to the Exchange
Consideration as the Company and Parent shall mutually agree so as to preserve
the economic benefits that the Company and Parent each reasonably expected on
the date of this Agreement to receive as a result of the consummation of the
Exchange.
Section 6.11 CONDUCT OF BUSINESS OF PARENT. Except as may be required by
applicable law or as contemplated by Section 6.9, Parent and any Subsidiary of
Parent shall not engage in any activities (including allowing or causing a
change in the equity or other ownership of Parent) which would cause a change in
Parent's or any equity owner's or affiliate's status under PUHCA or that would
impair the ability of the Company, Parent, any Subsidiary of Parent or any
equity owner or affiliate of Parent to claim any exemption under PUHCA or
subject Parent, any Subsidiary of Parent or any equity owner or affiliate of
Parent to regulation under PUHCA (other than Section 9(a)(2) or as an exempt
holding company under PUHCA) following the Exchange or acquire such voting
securities in a "public utility company" as defined under Section 2(a)(5) of
PUHCA so as to become an affiliate of such public utility company within the
meaning of Section 2(a)(11) of PUHCA.
Section 6.12 CERTAIN EMPLOYEE MATTERS; HEADQUARTERS.
(a) After the Closing, Parent will make available to employees of the
Company employment opportunities within the domestic and international Parent
group substantially equivalent to opportunities as are made available to other
employees of Parent and its Subsidiaries.
(b) After the Closing, the Company shall, and shall cause Entity I to,
maintain for a period of at least three years following the Effective Time
(i) its corporate headquarters in Indianapolis, Indiana, (ii) the name of Entity
I and (iii) local decision-making authority.
Section 6.13 CHARITABLE GIVING. After the Closing, Parent shall cause the
Company to maintain a commitment to local social responsibility, community
involvement and charitable giving at its current levels in accordance with its
current practices.
Section 6.14 ASSET SALE. The Company shall use commercially reasonable
efforts to take all actions necessary, including obtaining the required
regulatory approvals, to sell (i) Cleveland District Cooling Corporation,
Cleveland Thermal Energy Corporation, Mid America Energy Resources and
Indianapolis Campus Energy, or the assets of each, each a direct or indirect
Subsidiary of Mid America
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Capital Resources, and (ii) the steam generating and steam distribution assets
of Entity I, prior to the Effective Time on terms and conditions reasonably
acceptable to Parent. The terms and conditions of the Asset Sales Agreements,
dated as of March 21, 2000, between the Company and Citizens Gas & Coke Utility
are acceptable to Parent.
Section 6.15 TAX TREATMENT. Parent and the Company intend that the
Exchange will qualify as a reorganization within the meaning of Section 368(a)
of the Code. Parent and the Company shall each use reasonable efforts to cause
the Exchange to qualify, and shall not knowingly take actions or cause actions
to be taken that could reasonably be expected to prevent the Exchange from
qualifying as a reorganization within the meaning of Section 368(a) of the Code.
Section 6.16 REGIONAL TRANSMISSION ORGANIZATION. The Company shall not,
and shall cause its Subsidiaries not to, join any regional transmission
organization unless required by applicable law, otherwise consented to by Parent
or necessary to avoid a Company Material Adverse Effect.
Section 6.17 POOLING-OF-INTEREST. The Company shall use its reasonable
best efforts, and shall cause each of its Subsidiaries to use its reasonable
best efforts, to take such actions as may be necessary to permit the parties to
account for the Exchange, and shall not permit any of its Subsidiaries to take
any actions that would, or would be reasonably likely to, prevent the parties
from accounting for the Exchange, as a pooling-of-interests in accordance with
GAAP and applicable SEC regulations. This section shall be null and void in the
event (i) Parent determines to not seek such accounting treatment for the
Exchange or (ii) Parent determines that such accounting treatment is not
available, and, in either event Parent shall promptly notify the Company.
Section 6.18 AFFILIATE LETTERS. Each party shall identify in a letter to
the other all persons who are, as of the Closing Date, "affiliates" of such
party as such term is used in Rule 145 under the Securities Act. Each party
shall use reasonable best efforts to cause its respective affiliates to deliver
to the other party on or prior to the Closing Date a written agreement
substantially in the form attached as Exhibit D.
ARTICLE VII
CONDITIONS PRECEDENT
Section 7.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE
EXCHANGE. The respective obligation of each party to effect the Exchange is
subject to the satisfaction or waiver on or prior to the Closing Date of the
following conditions:
(a) SHAREHOLDER APPROVAL. The Company shall have obtained the Company
Shareholder Approval.
(b) ANTITRUST. The waiting period (and any extension thereof) applicable
to the Exchange under the HSR Act shall have been terminated or shall have
expired. Any consents, approvals and filings under any foreign antitrust Law,
the absence of which would prohibit the consummation of Exchange, shall have
been obtained or made.
(c) NO INJUNCTIONS OR RESTRAINTS. No judgment, decree, statute, law,
ordinance, rule, regulation, temporary restraining order, preliminary or
permanent injunctions or other order enacted, entered, promulgated, enforced or
issued by any court of competent jurisdiction or other legal restraint or
prohibition preventing the consummation of the Exchange shall be in effect;
PROVIDED, HOWEVER, that prior to asserting this condition, subject to
Section 6.3, each of the parties shall have used all reasonable efforts to
prevent the entry of any such injunction or other order and to appeal as
promptly as possible any such judgment that may be entered.
(d) FERC APPROVAL. A Final Order of the FERC under the Power Act approving
the disposition by the Company of facilities subject to the jurisdiction of the
FERC (the "REQUIRED APPROVAL") shall
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have been obtained. Parent shall reasonably believe that such Required Approval
would not have a Company Material Adverse Effect or an adverse effect on Parent
which is material in the context of the transactions contemplated hereby;
PROVIDED, HOWEVER, that neither of the following shall be deemed to have a
Company Material Adverse Effect or an adverse effect on Parent which is material
in the context of the transactions contemplated hereby: (i) any condition that
affects the rates, terms or conditions of existing or future power sales
transactions between Entity I or Parent or any Subsidiary of Parent (including
Entity C), or which imposes a code of conduct on Entity I or Parent or any
Subsidiary of Parent (including Entity C) similar to that imposed by FERC on
regulated public utilities and their power marketer affiliates, or (ii) a
condition that requires Entity I or Parent or any Subsidiary of Parent
(including Entity C) to join a regional transmission organization. A "FINAL
ORDER" means an action by the relevant Governmental Entity that has not been
reversed, stayed, enjoined, set aside, annulled or suspended, with respect to
which any waiting period prescribed by applicable law before the transactions
contemplated hereby may be consummated has expired or been terminated, and as to
which all conditions to the consummation of such transactions prescribed by
applicable law, regulation or order have been satisfied.
(e) CONSENTS AND APPROVALS. All consents, approvals and authorizations
shall have been obtained from all Governmental Entities except for the approvals
and authorizations contemplated by Sections 7.1(d), 7.2(e) and 7.2(i), except
where the failure to obtain any such consents, approvals and authorizations
would not cause a Company Material Adverse Effect or an adverse effect on Parent
which is material in the context of the transactions contemplated hereby.
(f) REGISTRATION STATEMENT. The Registration Statement shall have become
effective in accordance with the provisions of the Securities Act, and no stop
order suspending such effectiveness shall have been issued and remain in effect.
(g) LISTING OF SHARES. The shares of Parent Common Stock issuable pursuant
to Article II shall have been approved for listing on the NYSE upon official
notice of issuance.
Section 7.2 CONDITIONS TO OBLIGATION OF PARENT. The obligation of Parent
to effect the Exchange is further subject to the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties of
the Company in this Agreement that are qualified as to materiality shall be true
and correct and those not so qualified shall be true and correct in all material
respects, as of the date of this Agreement and as of the Closing Date as though
made on the Closing Date, except to the extent such representations and
warranties expressly relate to an earlier date (in which case such
representations and warranties qualified as to materiality shall be true and
correct, and those not so qualified shall be true and correct in all material
respects, on and as of such earlier date). Parent shall have received a
certificate signed on behalf of the Company by the chief executive officer and
the chief financial officer of the Company to such effect.
(b) PERFORMANCE OF OBLIGATIONS OF THE COMPANY. The Company shall have
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Closing Date.
(c) ABSENCE OF A COMPANY MATERIAL ADVERSE EFFECT. Except as disclosed in
Section 7.2(c) of the Company Disclosure Schedule, since the date of this
Agreement there shall not have been any event, change, effect or development
that, individually or in the aggregate, has had or would reasonably be expected
to have a Company Material Adverse Effect.
(d) COMPANY REQUIRED CONSENTS. The Company Required Consents shall have
been obtained.
(e) PUHCA EXEMPTION, SECTION 9(A)(2) APPROVAL. The SEC shall have issued
an order (i) granting Parent an exemption from registration as a holding company
under PUHCA pursuant to Section 3(a)(5) of PUHCA (the "SEC EXEMPTION ORDER"),
and (ii) approving the Exchange under
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Section 9(a)(2) of PUHCA (the "SEC APPROVAL ORDER"), and each such order shall
be in full force and effect on the Closing Date. Parent shall be reasonably
satisfied that neither the SEC Exemption Order nor the SEC Approval Order shall
have a Company Material Adverse Effect or an adverse effect on Parent which is
material in the context of the transactions contemplated hereby.
(f) CLOSING CERTIFICATES. Parent shall have received a certificate signed
by an executive officer of the Company, dated the Closing Date, to the effect
that, to the best of such officer's knowledge, the conditions set forth in
Sections 7.2(a), (b), (c), (d), (h) and (i) have been satisfied.
(g) PARENT REQUIRED CONSENTS. The Parent Required Consents shall have been
obtained.
(h) TRIGGER OF THE COMPANY RIGHTS. No event has occurred or could occur
pursuant to this Agreement or otherwise that would result in the triggering of
any right or entitlement of the Company shareholders under the Company Rights
Agreement, including a "flip-in" or "flip-over" or similar event commonly
described in such rights plans which, in the reasonable judgment of Parent,
would have or be reasonably likely to result in a Company Material Adverse
Effect or materially change the number of outstanding equity securities of the
Company, and the Company Rights shall not have become nonredeemable by the
Company Board.
(i) INDIANA UTILITY REGULATORY COMMISSION. (i) The IURC shall have issued
the Indiana Certification, (ii) any order of, approval by or result of any
filing, hearing, proceeding, investigation or notice with, or required by the
IURC, or any other Indiana state authority, does not have a Regulatory Adverse
Effect (as defined below), (iii) no hearing, proceeding or investigation shall
have been conducted or shall be currently pending before the IURC, or any other
Indiana state authority, that was initiated by the IURC, or any other Indiana
state authority, the outcome of which is reasonably likely to result in a
Regulatory Adverse Effect, and (iv) no hearing, proceeding or investigation
shall have been conducted or shall be currently pending before the IURC, or any
other Indiana state authority, which was initiated by a party other than the
IURC, or any other Indiana state authority, and the outcome of which is
reasonably likely to result in a Regulatory Adverse Effect. For purposes of this
Agreement, a "REGULATORY ADVERSE EFFECT" shall mean an effect that is reasonably
likely to have a Company Material Adverse Effect or an adverse effect on Parent
which is material in the context of the transactions contemplated hereby.
(j) TAX OPINION. Parent shall have received an opinion of Skadden, Arps,
Slate, Meagher & Flom LLP, special tax counsel to Parent, dated as of the
Closing Date, and in form and substance reasonably satisfactory to Parent to the
effect that the Exchange will qualify as a reorganization within the meaning of
Section 368(a) of the Code. The issuance of such opinion shall be conditioned
upon the receipt by such special tax counsel of customary representation letters
dated as of the Closing Date from each of Parent and the Company, in each case,
in substantially the form and substance attached hereto as Exhibit A and
Exhibit B and in form and substance reasonably satisfactory to such counsel,
which letters shall not have been modified or withdrawn. The opinion referred to
in this Section 7.2(j) shall not be waivable after receipt of the Company
Shareholder Approval referred to in Section 7.1(a), unless further shareholder
approval is obtained with appropriate disclosure.
(k) DIRECTOR RESIGNATIONS. Parent shall have received duly executed
resignation letters from each of the directors of the Company in accordance with
Section 1.6.
Section 7.3 CONDITIONS TO OBLIGATION OF THE COMPANY. The obligation of the
Company to effect the Exchange is further subject to the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties of
Parent in this Agreement that are qualified as to materiality shall be true and
correct and those not so qualified shall be true and correct in all material
respects, as of the date of this Agreement and as of the Closing Date as though
made on the Closing Date, except to the extent such representations and
warranties expressly relate to an earlier date (in which case such
representations and warranties qualified as to materiality
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shall be true and correct, and those not so qualified shall be true and correct
in all material respects, on and as of such earlier date). The Company shall
have received a certificate on behalf of Parent executed by its chief executive
officer to such effect.
(b) PERFORMANCE OF OBLIGATIONS OF PARENT. Parent shall have performed in
all material respects all obligations required to be performed by it under this
Agreement at or prior to the Closing Date, and the Company shall have received a
certificate signed on behalf of Parent executed by its chief executive officer
to such effect.
(c) CLOSING CERTIFICATES. The Company shall have received a certificate
signed by an executive officer of Parent, dated the Closing Date, to the effect
that, to the best of such officer's knowledge, the conditions set forth in
Section 7.3(a) and Section 7.3(b) have been satisfied.
(d) TAX OPINION. The Company shall have received an opinion of Cravath,
Swaine & Moore, special tax counsel to the Company, dated as of the Closing
Date, and in form and substance reasonably satisfactory to the Company to the
effect that the Exchange will qualify as a reorganization within the meaning of
Section 368(a) of the Code. The issuance of such opinion shall be conditioned
upon the receipt by such special tax counsel of customary representation letters
dated as of the Closing Date from each of Parent and the Company, in each case,
in substantially the form and substance attached hereto as Exhibit A and
Exhibit B and in form and substance reasonably satisfactory to such counsel,
which letters shall not have been modified or withdrawn. The opinion referred to
in this Section 7.3(d) shall not be waivable after receipt of the Company
Shareholder Approval referred to in Section 7.1(a), unless further shareholder
approval is obtained with appropriate disclosure.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
Section 8.1 TERMINATION. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after receipt of Company
Shareholder Approval:
(a) without payment of a termination fee by mutual written consent of
Parent and the Company;
(b) by either Parent or the Company:
(i) if the Exchange is not consummated by the fifteen-month anniversary
of the date of this Agreement (the "TERMINATION DATE") without payment of a
termination fee; PROVIDED, HOWEVER that the Termination Date shall
automatically be extended for three additional months if any of the
conditions set forth in Section 7.1(d), 7.1(e), 7.2(e) or 7.2(i) have not
been satisfied; and PROVIDED, FURTHER, that the failure to consummate the
Exchange shall not be the result of a breach of this Agreement by the party
seeking to terminate this Agreement;
(ii) if, upon a vote at a duly held meeting to obtain the Company
Shareholder Approval, the Company Shareholder Approval is not obtained. In
the event this Agreement is terminated pursuant to this
Section 8.1(b)(ii) and if an Acquisition Proposal has been publicly proposed
during the Company Applicable Period and at or within twelve months of the
date of the Company Shareholders Meeting, the Company enters into any
agreement with respect to such Acquisition Proposal then, within ten
business days after the execution of such agreement, the Company shall
immediately pay in cash to Parent by wire transfer of same day funds a
termination fee in an amount equal to $60 million (the "ACQUISITION
TERMINATION FEE"). In addition, the Company shall reimburse Parent of up to
$10 million in reasonable fees and expenses incurred by Parent in connection
with the transactions contemplated hereby from June 22, 2000, which fees and
expenses shall be documented and which documentation shall be provided to
the Company (the "PARENT EXPENSES"); and
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(iii) if any court of competent jurisdiction or other competent
Governmental Entity shall have issued an order, which has the effect as
supported by the written opinion of outside counsel, of making illegal or
otherwise restricting, preventing or prohibiting the Exchange and such order
shall have become final and nonappealable.
(c) by Parent under any of the following circumstances:
(i) by written notice to the Company, if (x) there shall have been a
material breach of this Agreement by the Company or (y) there shall have
been a wilful breach of this Agreement by the Company and such breaches,
described in clauses (x) and (y) hereof shall not have been remedied within
thirty days after receipt by the Company of notice in writing from Parent,
specifying the nature of such breach and requesting that it be remedied;
PROVIDED, HOWEVER, that the Company shall not be entitled to expend more
than $10 million to cure any and all such breaches without the prior written
approval of Parent or (z) if the Company Board (or any committee thereof)
(A) shall have withdrawn or modified in a manner adverse to Parent its
approval or recommendation of this Agreement and the transactions
contemplated hereby or its recommendation to its shareholders regarding the
approval of this Agreement, (B) shall fail to reaffirm such approval or
recommendation upon the request of Parent within five full business days of
receipt of written request to do so by Parent, (C) shall approve or
recommend any Acquisition Proposal or (D) shall resolve to take any of the
actions specified in clauses (A), (B) or (C). In the event this Agreement is
terminated pursuant to clause (x) of this Section 8.1(c)(i), the Company
shall reimburse the Parent Expenses. In the event this Agreement is
terminated pursuant to clause (z) of this Section 8.1(c)(i), the Company
shall pay Parent a termination fee in an amount equal to $60 million, plus
reimbursement of the Parent Expenses. All such payments referred to above
shall be made in cash by wire transfer of same day funds within ten business
days of such termination notice.
(d) by the Company under any of the following circumstances:
(i) by written notice to Parent, if (x) there shall have been any
material breach of this Agreement by Parent or (y) there shall have been a
wilful breach of this Agreement by Parent and such breaches described in
clauses (x) and (y) hereof shall not have been remedied within thirty days
after receipt by Parent of notice in writing from the Company, specifying
the nature of such breach and requesting that it be remedied. In the event
this Agreement is terminated pursuant to clause (x) of this
Section 8.1(d)(i), Parent shall reimburse the Company up to $10 million in
reasonable fees and expenses incurred by the Company in connection with the
transactions contemplated hereby from June 22, 2000, which fees and expenses
shall be documented and which documentation shall be provided to Parent (the
"COMPANY EXPENSES");
(ii) in accordance with clause (iii) of the proviso to the first
sentence of Section 5.2(a), by written notice to Parent; PROVIDED that, in
order for the termination of this Agreement pursuant to this subparagraph
(ii) to be deemed effective, the Company shall have complied with all
provisions of Section 5.2. In the event this Agreement is terminated
pursuant to this Section 8.1(d)(ii), the Company shall pay Parent within ten
days in cash by wire transfer of same day funds a termination fee in an
amount equal to the Acquisition Termination Fee. In addition, the Company
shall reimburse Parent the Parent Expenses; and
(iii) by written notice to Parent, if the Average Trading Price of a
share of Parent Common Stock as determined in accordance with
Section 2.1(b) multiplied by the Exchange Ratio results in an amount which
is less than $21.00.
Section 8.2 EFFECT OF TERMINATION. In the event of termination of this
Agreement by either the Company or Parent as provided in Section 8.1, this
Agreement shall forthwith become void and have no effect, without any liability
or obligation on the part of Parent or the Company, other than Section 5.2, the
last sentence of Section 6.2, Section 8.1, this Section 8.2, Section 8.3 and
Article IX which
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provisions shall survive such termination; PROVIDED, HOWEVER, that nothing
herein shall relieve any party from liability for a wilful breach of its
representations, warranties or covenants set forth in this Agreement (including
liability of the Company if this Agreement is terminated by Parent under
Section 8.1(c)(i)(y) and liability of Parent if this Agreement is terminated by
the Company under Section 8.1(d)(i)(y)).
Section 8.3 EXPENSES AND FEES. Notwithstanding anything to the contrary
contained in this Agreement, if one party fails to promptly pay to the other any
fee or expense due under Article VIII, in addition to any amounts paid or
payable pursuant to such Section, the party shall pay the costs and expenses
(including legal fees and expenses) in connection with any action, including the
filing of any lawsuit or other legal action, taken to collect payment, together
with interest on the amount of any unpaid fee at the publicly announced prime
rate of Citibank, N.A. from the date such fee was required to be paid.
Section 8.4 AMENDMENT. This Agreement may be amended by the Board of
Directors of the parties at any time before or after receipt of the Company
Shareholder Approval; PROVIDED, HOWEVER, that after receipt of the Company
Shareholder Approval, there shall be made no amendment that by Law requires
further approval by the shareholders of the Company or Parent, without further
approval of such shareholders. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties.
Section 8.5 EXTENSION; WAIVER. At any time prior to the Effective Time,
the parties may (a) extend the time for the performance of any of the
obligations or other acts of the other parties, (b) waive any inaccuracies in
the representations and warranties contained in this Agreement or in any
document delivered pursuant to this Agreement or (c) subject to the proviso of
Section 8.4, waive compliance with any of the agreements or conditions contained
in this Agreement. Any agreement on the part of a party to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party. The failure of any party to this Agreement to assert any
of its rights under this Agreement or otherwise shall not constitute a waiver of
such rights.
Section 8.6 PROCEDURE FOR TERMINATION, AMENDMENT, EXTENSION OR WAIVER. A
termination of this Agreement pursuant to Section 8.1, an amendment of this
Agreement pursuant to Section 8.4 or an extension or waiver pursuant to
Section 8.5 shall, in order to be effective, require in the case of Parent or
the Company, action by its Board of Directors or the duly authorized designee of
its Board of Directors.
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ARTICLE IX
GENERAL PROVISIONS
Section 9.1 NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES. None of the
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Effective Time, except as otherwise
provided in this Agreement. Section 1.4(b) shall survive the Effective Time.
Section 9.2 NOTICES. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be deemed
given upon receipt by the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
(a) if to Parent, to
The AES Corporation
1001 N. 19th Street
20th Floor
Arlington, VA 22209
Attention: Paul D. Stinson
Vice President
Telephone: 603-253-8048
Facsimile: 603-387-6043
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
1440 New York Avenue, N.W.
Washington, DC 20005
Attention: Ronald C. Barusch, Esq.
Pankaj K. Sinha, Esq.
Telephone: 202-371-7000
Facsimile: 202-393-5760
(b) if to the Company, to
IPALCO Enterprises, Inc.
One Monument Circle
Indianapolis, IN 46204
Attention: Bryan G. Tabler, Esq.
Vice President, Secretary and General Counsel
Telephone: 317-261-5134
Facsimile: 317-261-8288
with a copy to:
Cravath, Swaine & Moore
825 Eighth Avenue
New York, NY 10019
Attention: Richard Hall, Esq.
Telephone: 212-474-1000
Facsimile: 212-474-3700
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Section 9.3 DEFINITIONS. For purposes of this Agreement:
An "AFFILIATE" of any person means another person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, such first person.
"ENTITY C" shall mean Central Illinois Light Company, an indirect Subsidiary
of Parent.
"ENTITY I" shall mean Indianapolis Power & Light Company, a direct
Subsidiary of the Company.
A "PERSON" means any individual, firm, corporation, partnership, company,
limited liability company, trust, joint venture, association, Governmental
Entity or other entity.
A "SUBSIDIARY" of any person means another person, an amount of the voting
securities, other voting ownership or voting partnership interests of which is
sufficient to elect at least a majority of its Board of Directors or other
governing body (or, if there are no such voting interests, 50% or more of the
equity interests of which) is owned directly or indirectly by such first person.
A "JOINT VENTURE" of any person shall mean any corporation or other entity
(including partnerships and other business associations and joint ventures) in
which such person directly or indirectly owns an equity interest that is less
than a majority of any class of the outstanding voting securities or equity of
any such entity, other than equity interests held for passive investment
purposes which are less than 5% of any class of the outstanding voting
securities or equity of any such entity, and the term "COMPANY JOINT VENTURE"
shall mean a Joint Venture of the Company.
Section 9.4 INTERPRETATION. When a reference is made in this Agreement to
a Section, such reference shall be to a Section of this Agreement unless
otherwise indicated. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Whenever the words "include,"
"includes" or "including" are used in this Agreement, they shall be deemed to be
followed by the words "without limitation."
Section 9.5 SEVERABILITY. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule or Law, or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that transactions contemplated hereby are fulfilled to the extent possible.
Section 9.6 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties.
Section 9.7 ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES. This
Agreement, taken together with the Company Disclosure Schedule and the Parent
Disclosure Schedule, constitutes the entire agreement and supersedes all prior
agreements and understandings, both written and oral, among the parties with
respect to the Exchange, other than the Confidentiality Agreement, and, except
for the provisions of Article II, Section 6.4(c) and Section 6.5, is not
intended to, and shall not, confer upon any person other than the parties any
rights, claims or remedies.
Section 9.8 GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof and except to the extent the provisions of this Agreement
(including the documents or instruments referred to herein) are expressly
governed by or derive their authority from the BCL.
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Section 9.9 ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement shall be assigned, in whole or in
part, by operation of law or otherwise by any of the parties without the prior
written consent of the other parties, except that Parent may assign, in its sole
discretion, any of or all its rights, interests and obligations under this
Agreement to any direct or indirect wholly owned Subsidiary of Parent, but no
such assignment shall relieve Parent of any of its obligations under this
Agreement. Any purported assignment without such consent shall be void. Subject
to the preceding sentences, this Agreement will be binding upon, inure to the
benefit of, and be enforceable by, the parties and their respective successors
and assigns.
Section 9.10 ENFORCEMENT. Each of the parties agrees that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions of this Agreement in any New York state
court or any federal court in the state of New York, this being in addition to
any other remedy to which they are entitled at law or at equity. In addition,
each of the parties hereto (a) consents to submit itself to the personal
jurisdiction of any federal court located in the State of New York or any New
York State court in the County of New York in the event any dispute arises out
of this Agreement or the Exchange, (b) agrees that it will not attempt to deny
or defeat such personal jurisdiction by motion or other request for leave from
any such court, (c) agrees that it will not bring any action relating to this
Agreement or the Exchange in any court other than any New York state court or
any federal court sitting in the State of New York or any New York State court
sitting in the County of New York, and (d) waives any right to trial by jury
with respect to any action related to or arising out of this Agreement or the
Exchange.
Section 9.11 FURTHER ASSURANCES. Each party will execute such further
documents and instruments and take such further actions as may reasonably be
requested by any other party in order to consummate the Exchange in accordance
with the terms hereof.
IN WITNESS WHEREOF, Parent and the Company have duly executed this
Agreement, all as of the date first written above.
<TABLE>
<S> <C> <C>
THE AES CORPORATION
By: /s/ PAUL STINSON
-----------------------------------------
Name: Paul D. Stinson
Title: Vice President
IPALCO ENTERPRISES, INC.
By: /s/ JOHN R. HODOWAL
-----------------------------------------
Name: John R. Hodowal
Title: Chairman of the Board
</TABLE>
A-45
<PAGE>
EXHIBIT A
TO ANNEX A
[LETTERHEAD OF PARENT]
[Closing Date]
Skadden, Arps, Slate, Meagher & Flom LLP
1440 New York Avenue, N.W.
Washington, D.C. 20005-2111
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019-7475
Ladies and Gentlemen:
In connection with the opinions to be delivered pursuant to Sections 7.2(j)
and 7.3(d) of the Agreement and Plan of Share Exchange (the "EXCHANGE
AGREEMENT"), dated as of July 15, 2000, among The AES Corporation, a Delaware
corporation ("PARENT"), and IPALCO Enterprises, Inc., an Indiana corporation
(the "COMPANY"), whereby all the issued and outstanding shares of common stock
of the Company will be acquired by Parent in exchange for shares of common stock
of the Parent (the "EXCHANGE"), and in connection with the filing with the
Securities and Exchange Commission (the "SEC") of the registration statement on
Form S-4 (the "REGISTRATION STATEMENT"), which includes the Joint Proxy
Statement of Parent and the Company, each as amended or supplemented through the
date hereof, the undersigned certifies and represents on behalf of the Parent,
after due inquiry and investigation, as follows (any capitalized term used but
not defined herein having the meaning given to such term in the Exchange
Agreement):
1. The facts, representations and covenants relating to the Exchange and
related transactions as described in the Exchange Agreement, Registration
Statement and the other documents described in the Registration Statement
(including all exhibits and attachments thereto) are, insofar as such facts
pertain to the Parent, true, correct and complete in all material respects. The
Exchange will be consummated in accordance with the Exchange Agreement.
2. The formula set forth in the Exchange Agreement pursuant to which each
issued and outstanding share of Company Common Stock will be converted into
fully paid and nonassessable shares of Parent Common Stock is the result of
arm's length bargaining.
3. The fair market value of the Parent Common Stock received by the
shareholders of the Company will be, at the Effective Time, approximately equal
to the fair market value of the Company Common Stock surrendered in the
Exchange.
4. In the Exchange, all of the Company Common Stock will be exchanged
solely for Parent Common Stock (except for cash paid in lieu of fractional
shares of Parent Common Stock). The Company has no class of stock outstanding
other than the Company Common Stock. No shares or other securities of the
Company will be issued to the shareholders of the Company pursuant to the
A-46
<PAGE>
Exchange. For purposes of this representation, any share of the Company Common
Stock redeemed or exchanged in the Exchange for cash or other property
originating, directly or indirectly, with the Parent or any of its subsidiaries
will not be considered as exchanged solely for Parent Common Stock. Further, no
liabilities of the Company or any shareholder of the Company will be assumed by
the Parent in the Exchange, nor will any of the Company Common Stock acquired by
Parent in the Exchange be subject to any liabilities.
5. Following the Exchange, Parent has no plan or intention to sell,
transfer or dispose of any stock of the Company or to cause the Company to issue
additional shares of its stock that would in either case result in Parent
failing to own after the Exchange, directly or indirectly, at least 80 percent
of the total combined voting power of all classes of Company stock entitled to
vote and at least 80 percent of the total number of shares of all other classes
of Company stock.
6. If cash payments are made to holders of Company Common Stock in lieu of
fractional shares of Parent Common Stock that would otherwise be issued to such
holders in the Exchange, such payments will be made for the purpose of saving
Parent the expense and inconvenience of issuing and transferring fractional
shares of Parent Common Stock, and will not represent separately bargained for
consideration. The total cash consideration that will be paid in the Exchange to
holders of Company Common Stock in lieu of fractional shares of Parent Common
Stock will not exceed one percent of the total consideration that will be issued
in the Exchange to shareholders of Company in exchange for their shares of
Company Stock.
7. (i) To the knowledge of Parent, neither the Company nor any corporation
related to the Company (as defined in Treasury Regulation Section 1.368-1(e))
has purchased, exchanged, redeemed, or otherwise acquired or has any plan or
intention to purchase, exchange, redeem, or otherwise acquire any Company stock
in contemplation of the Exchange, or otherwise as part of a plan of which the
Exchange is a part.
(ii) Neither Parent nor any corporation related to Parent (as defined in
Treasury Regulation Section 1.368-1(e)) has any plan or intent to purchase,
exchange, redeem, or otherwise acquire any of the Parent stock issued in the
Exchange, either directly or through any transaction, agreement or arrangement
with any other person (excluding any fractional shares of the Parent Common
Stock exchanged for cash in the Exchange). To the knowledge of Parent, neither
the Company nor any corporation related to the Company (as defined in Treasury
Regulation Section 1.368-1(e)) has any plan or intention to purchase, exchange,
redeem, or otherwise acquire any of the Parent stock issued in the Exchange,
either directly or through any transaction, agreement or arrangement with any
other person. For purposes of this representation letter, a person is considered
to own or acquire stock owned or acquired (as the case may be) by a partnership
in which such person is a partner in proportion to such person's interest in the
partnership.
8. The Company has not made, and does not have any plan or intention to
make, any distributions prior to, in contemplation of or otherwise in connection
with, the Exchange (other than dividends made in the ordinary course of
business).
9. Parent has no plan or intention to, following the Exchange, liquidate
the Company, merge the Company with or into another corporation in which the
Company is not the survivor, sell or otherwise dispose of shares of the Company,
cause the Company to distribute to Parent or any of its subsidiaries any assets
of the Company or the proceeds of any borrowings incurred by the Company, or
cause the Company to sell or otherwise dispose of any of its assets, except for
dispositions made in the ordinary course of business transfers of assets
permitted under Section 368(a)(2)(C) of the Code or Treasury Regulation
Section 1.368-1(d) or 1.368-2(k), and the sale of Cleveland District Cooling
Corporation, Cleveland Thermal Energy Corporation, Mid America Energy Resources
and Indianapolis Campus Energy, or the assets of each, for an amount of cash or
other consideration with a fair market value equal to that of the assets sold in
exchange therefor.
A-47
<PAGE>
10. Parent will pay its expenses, if any, incurred in connection with the
Exchange. Parent has not paid (directly or indirectly) or agreed to assume any
expense or other liability, whether fixed or contingent, of the Company or any
of its subsidiaries or any holder of Company Stock.
11. The Company shall pay all transfer taxes attributable to the Exchange
out of the Company's own funds (and not out of funds provided, directly or
indirectly, by Parent).
12. Except as specifically set forth in Section 3.2 of the Exchange
Agreement, immediately prior to the time of the Exchange, the Company will not
have outstanding any warrants, options, convertible securities or any other type
of right pursuant to which any person could acquire Company stock.
Simultaneously with the Exchange, all outstanding warrants, options, convertible
securities, and related stock appreciation rights, if any, to purchase or
acquire a share of Company stock granted under employee incentive or benefits
plans, programs or arrangements and non-employee director plans presently
maintained by the Company, together with all other outstanding awards granted
under such plans, will be canceled or converted into similar instruments of
Parent. Immediately following the Exchange, the only class of Company stock
outstanding will be the Company Common Stock held by Parent.
13. Following the Exchange, Parent intends to cause the Company to continue
its "historic business" or to use a significant portion of its "historic
business assets" in a business (as such terms are defined in Treasury Regulation
Section 1.368-1(d)). To the knowledge of Parent, the Company has not sold,
transferred, or otherwise disposed of any of its assets so as to prevent the
Parent or members of its "qualified group" from continuing the "historic
business" of the Company or using a significant portion of the Company's
"historic business assets" in a business after the Exchange (within the meaning
of such terms in Treasury Regulation Section 1.368-1(d)).
14. Parent is not an investment company as defined in
Section 368(a)(2)(F)(iii) and (iv) of the Code.
15. The Parent will not take, and will not cause Company to take, any
position on any Federal, state or local income or franchise tax return, or take
any other tax reporting position, that is inconsistent with the treatment of the
Exchange as a reorganization within the meaning of Section 368(a) of the Code,
unless otherwise required by a "determination" (as defined in
Section 1313(a)(1) of the Code) or by applicable state or local tax law (and
then only to the extent required by such applicable state or local tax law).
16. None of the compensation received (or to be received) by any
stockholder-employee or stockholder-independent contractor of the Company is (or
will be) separate consideration for, or is (or will be) allocable to, any of
such person's Company Common Stock surrendered in the Exchange. None of the
Parent Stock that will be received by any stockholder-employee or
stockholder-independent contractor of the Company in the Exchange represents
separately bargained-for consideration which is allocable to any employment
agreement or arrangement. The compensation paid to any stockholder-employee or
stockholder-independent contractor pursuant to any agreement entered into in
connection with the Exchange will be for services actually rendered, will be
commensurate with amounts paid to third parties bargaining at arm's length for
similar services or covenants, and will be determined independent of the
determination of the consideration to be paid for the Company Common Stock.
17. There is no intercorporate indebtedness existing between Parent (or any
of its subsidiaries) and the Company (or any of its subsidiaries) that was
issued, acquired or will be settled at a discount.
18. Parent is not under the jurisdiction of a court in a Title 11 or
similar case within the meaning of Section 368(a)(3)(A) of the Code.
19. Neither Parent nor any person related to the Parent (within the meaning
of Treasury Regulation Section 1.368-1(e)(3)) owns, directly or indirectly, nor
have they owned during the past five years, directly or indirectly, any shares
of the stock of the Company.
A-48
<PAGE>
20. Parent shall satisfy the information reporting requirements of Treasury
Regulation Section 1.368-3 with respect to the Exchange.
21. Parent Common Stock entitles the holder to vote for the board of
directors of Parent.
22. The Exchange Agreement, the Registration Statement and the other
documents described in the Registration Statement (including all exhibits and
attachments thereto) represents the entire understanding between the Parent and
the Company regarding the Exchange, and there are no other written or oral
agreements between the Parent and the Company regarding the Exchange.
23. The Exchange is being undertaken for purposes of enhancing the business
of the Company and for other good and valid business purposes of the Company.
24. On the date of the Exchange, the fair market value of the assets of the
Company will exceed the sum of its liabilities, plus the amount of liabilities,
if any, to which such assets are subject.
25. No holders of Company stock have appraisal or dissenters' rights with
respect to the Exchange under any applicable law.
26. The undersigned is authorized to make all the representations set forth
herein on behalf of Parent.
The undersigned acknowledges that (i) the opinions to be delivered pursuant
to Sections 7.2(j) and 7.3(d) of the Exchange Agreement will be based on the
accuracy and completeness of the representations set forth herein and on the
accuracy and completeness of the representations and warranties and the
satisfaction of the covenants and obligations contained in the Exchange
Agreement and the various other documents related thereto, and (ii) such
opinions will be subject to certain limitations and qualifications including
that it may not be relied upon if any such representations or warranties are not
accurate and complete or if any of such covenants or obligations are not
satisfied in all material respects. Parent understands that Skadden, Arps,
Slate, Meagher & Flom LLP and Cravath, Swaine & Moore have not undertaken to
independently verify the facts providing the basis of this letter nor have they
been asked to do so.
The undersigned acknowledges that such opinions will not address any tax
consequences of the Exchange or any action taken in connection therewith except
as expressly set forth in such opinions.
Very truly yours,
THE AES CORPORATION
By:
Name:
Title:
A-49
<PAGE>
EXHIBIT B
TO ANNEX A
[Letterhead of Company]
[Closing Date]
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019-7475
Skadden, Arps, Slate, Meagher & Flom LLP
1440 New York Avenue, N.W.
Washington, D.C. 20005-2111
Ladies and Gentlemen:
In connection with the opinions to be delivered pursuant to Sections 7.2(j)
and 7.3(d) of the Agreement and Plan of Share Exchange (the "EXCHANGE
AGREEMENT"), dated as of July 15, 2000, among The AES Corporation, a Delaware
corporation ("PARENT"), and IPALCO Enterprises, Inc., an Indiana corporation
(the "COMPANY"), whereby all the issued and outstanding shares of common stock
of the Company will be acquired by Parent in exchange for shares of common stock
of the Parent (the "EXCHANGE"), and in connection with the filing with the
Securities and Exchange Commission (the "SEC") of the registration statement on
Form S-4 (the "REGISTRATION STATEMENT"), which includes the Joint Proxy
Statement of Parent and the Company, each as amended or supplemented through the
date hereof, the undersigned certifies and represents on behalf of the Company,
after due inquiry and investigation, as follows (any capitalized term used but
not defined herein having the meaning given to such term in the Exchange
Agreement):
1. The facts, representations, and covenants relating to the Exchange and
related transactions as described in the Exchange Agreement, Registration
Statement and the other documents described in the Registration Statement
(including all exhibits and attachments thereto) are, insofar as such facts
pertain to the Company, true, correct and complete in all material respects. The
Exchange will be consummated in accordance with the Exchange Agreement.
2. The formula set forth in the Exchange Agreement pursuant to which each
issued and outstanding share of Company Common Stock will be converted into
fully paid and nonassessable shares of Parent Common Stock, is the result of
arm's length bargaining.
3. The fair market value of the Parent Common Stock received by the
shareholders of the Company will be, at the Effective Time, approximately equal
to the fair market value of the Company Common Stock surrendered in the
Exchange.
4. In the Exchange, all of the Company Common Stock will be exchanged solely
for Parent Common Stock (except for cash paid in lieu of fractional shares of
Parent Common Stock). The Company has no class of stock outstanding other than
the Company Common Stock. No shares or other securities of the Company will be
issued to the shareholders of the Company pursuant to the Exchange. For purposes
of this representation, any share of the Company Common Stock redeemed or
exchanged in the Exchange for cash or other property originating, directly or
indirectly, with the Parent or any of its subsidiaries will not be considered as
exchanged solely for Parent Common Stock. Further, no liabilities of the Company
or any shareholder of the Company will be assumed by the Parent in the Exchange,
nor will any of the Company Common Stock acquired by Parent in the Exchange be
subject to any liabilities.
A-50
<PAGE>
5. Following the Exchange, the Company has no plan or intention to issue
additional shares of its stock that would result in Parent failing to own after
the Exchange, directly or indirectly, at least 80 percent of the total combined
voting power of all classes of Company stock entitled to vote and at least
80 percent of the total number of shares of all other classes of Company stock.
To the best knowledge of the Company, Parent has no plan or intention to sell,
transfer or dispose of any stock of the Company or to cause the Company to issue
additional shares of its stock that would in either case result in Parent
failing to own after the Exchange, directly or indirectly, at least 80 percent
of the total combined voting power of all classes of Company stock entitled to
vote and at least 80 percent of the total number of shares of all other classes
of Company stock.
6. If cash payments are made to holders of Company Common Stock in lieu of
fractional shares of Parent Common Stock that would otherwise be issued to such
holders in the Exchange, such payments will be made for the purpose of saving
Parent the expense and inconvenience of issuing and transferring fractional
shares of Parent Common Stock, and will not represent separately bargained for
consideration. The total cash consideration that will be paid in the Exchange to
holders of Company Common Stock in lieu of fractional shares of Parent Common
Stock will not exceed one percent of the total consideration that will be issued
in the Exchange to shareholders of Company in exchange for their shares of
Company Stock.
7. (i) Neither the Company nor any corporation related to the Company (as
defined in Treasury Regulation Section 1.368-1(e)) has purchased, exchanged,
redeemed, or otherwise acquired or has any plan or intention to purchase,
exchange, redeem, or otherwise acquire any Company stock in contemplation of the
Exchange, or otherwise as part of a plan of which the Exchange is a part.
(ii) The Company is not aware of any plan or intention on the part of
Parent or any corporation related to Parent (as defined in Treasury Regulation
Section 1.368-1(e)) to purchase, exchange, redeem, or otherwise acquire any of
the Parent stock issued in the Exchange, either directly or through any
transaction, agreement or arrangement with any other person (excluding any
fractional shares of the Parent Common Stock exchanged for cash in the
Exchange). The Company has no plan or intention, nor is the Company aware of any
plan or intention on the part of any person related to the Company (as defined
in Treasury Regulation Section 1.368-1(e)) to acquire or redeem any of the
Parent stock issued in the Exchange, either directly or through any transaction,
agreement or arrangement with any other person. For purposes of this
representation letter, a person is considered to own or acquire stock owned or
acquired (as the case may be) by a partnership in which such person is a partner
in proportion to such person's interest in the partnership.
8. The Company has not made, and does not have any plan or intention to
make, any distributions prior to, in contemplation of or otherwise in connection
with, the Exchange (other than dividends made in the ordinary course of
business).
9. The Company is not aware of any plan or intention on the part of Parent
to, following the Exchange, liquidate the Company, merge the Company with or
into another corporation in which the Company is not the survivor, sell or
otherwise dispose of shares of the Company, cause the Company to distribute to
Parent or any of its subsidiaries any assets of the Company or the proceeds of
any borrowings incurred by the Company or cause the Company to sell or otherwise
dispose of any of its assets, except for dispositions made in the ordinary
course of business, transfers of assets permitted under Section 368(a)(2)(C) of
the Code or Treasury Regulation Section 1.368-1(d) or 1.368-2(k), and the sale
of Cleveland District Cooling Corporation, Cleveland Thermal Energy Corporation,
Mid America Energy Resources and Indianapolis Campus Energy, or the assets of
each, for an amount of cash or other consideration with a fair market value
equal to that of the assets sold in exchange therefor.
10. Except as specifically contemplated under Section 6.8 of the Exchange
Agreement, the Company and its shareholders will pay their respective expenses,
if any, incurred in connection with the
A-51
<PAGE>
Exchange. The Company has neither paid (directly or indirectly) nor agreed to
assume any expense or other liability, whether fixed or contingent, incurred or
to be incurred by any holder of Company Stock in connection with or as part of
the Exchange or any related transactions.
11. The Company shall pay all Transfer Taxes attributable to the Exchange
out of the Company's own funds (and not out of funds provided, directly or
indirectly, by Parent).
12. Except as specifically set forth in Section 3.2 of the Exchange
Agreement, immediately prior to the time of the Exchange, the Company will not
have outstanding any warrants, options, convertible securities or any other type
of right pursuant to which any person could acquire Company stock.
Simultaneously with the Exchange, all outstanding warrants, options, convertible
securities, and related stock appreciation rights, if any, to purchase or
acquire a share of Company stock granted under employee incentive or benefits
plans, programs or arrangements and non-employee director plans presently
maintained by the Company, together with all other outstanding awards granted
under such plans, will be canceled or converted into similar instruments of
Parent. Immediately following the Exchange, the only class of Company stock
outstanding will be the Company Common Stock held by Parent.
13. No assets of the Company have been sold, transferred or otherwise
disposed of which would prevent Parent or members of its "qualified group" from
continuing the "historic business" of the Company or from using a significant
portion of the "historic business assets" of the Company in a business following
the Exchange (as such terms are defined in Treasury Regulation
Section 1.368-1(d)).
14. The Company is not an investment Company as defined in
Section 368(a)(2)(F)(iii) and (iv) of the Code.
15. The Company will not take, and, to the knowledge of the Company, there
is no plan or intention by stockholders of Company to take, any position on any
Federal, state or local income or franchise tax return, or take any other tax
reporting position, that is inconsistent with the treatment of the Exchange as a
reorganization within the meaning of Section 368(a) of the Code, unless
otherwise required by a "determination" (as defined in Section 1313(a)(1) of the
Code) or by applicable state or local tax law (and then only to the extent
required by such applicable state or local tax law).
16. None of the compensation received (or to be received) by any
stockholder-employee or stockholder-independent contractor of the Company is (or
will be) separate consideration for, or is (or will be) allocable to, any of
such person's Company Common Stock surrendered in the Exchange. None of the
Parent Stock that will be received by any stockholder-employee or
stockholder-independent contractor of the Company in the Exchange represents
separately bargained for consideration which is allocable to any employment
agreement or arrangement. The compensation paid to any stockholder-employee or
stockholder-independent contractor pursuant to any agreement entered into in
connection with the Exchange will be for services actually rendered, will be
commensurate with amounts paid to third parties bargaining at arm's length for
similar services or covenants, and will be determined independent of the
determination of the consideration to be paid for the Company Common Stock.
17. There is no intercorporate indebtedness existing between Parent (or any
of its subsidiaries) and the Company (or any of its subsidiaries) that was
issued, acquired or will be settled at a discount.
18. The Company is not under the jurisdiction of a court in a Title 11 or
similar case within the meaning of Section 368(a)(3)(A) of the Code.
19. To the knowledge of the Company, neither Parent nor any person related
to the Parent (within the meaning of Treasury Regulation Section 1.368-1(e)(3))
owns, directly or indirectly, nor have they owned during the past five years,
directly or indirectly, any shares of the stock of the Company.
20. The Company will satisfy the information reporting requirements of
Treasury Regulation Section 1.368-3 with respect to the Exchange.
A-52
<PAGE>
21. The Exchange Agreement, the Registration Statement and the other
documents described in the Registration Statement (including all exhibits and
attachments thereto) represents the entire understanding between the Parent and
the Company regarding the Exchange, and there are no other written or oral
agreements between the Parent and the Company regarding the Exchange.
22. The Exchange is being undertaken for purposes of enhancing the business
of the Company and for other good and valid business purposes of the Company.
23. On the date of the Exchange, the fair market value of the assets of the
Company will exceed the sum of its liabilities, plus the amount of liabilities,
if any, to which such assets are subject.
24. No holders of Company stock have appraisal or dissenters' rights with
respect to the Exchange under any applicable law.
25. The undersigned is authorized to make all the representations set forth
herein on behalf of the Company.
The undersigned acknowledges that (i) the opinions to be delivered pursuant
to Sections 7.2(j) and 7.3(d) of the Exchange Agreement will be based on the
accuracy and completeness of the representations set forth herein and on the
accuracy and completeness of the representations and warranties and the
satisfaction of the covenants and obligations contained in the Exchange
Agreement and the various other documents related thereto, and (ii) such
opinions will be subject to certain limitations and qualifications including
that it may not be relied upon if any such representations or warranties are not
accurate and complete or if any of such covenants or obligations are not
satisfied in all material respects. The Company understands that Cravath,
Swaine & Moore and Skadden, Arps, Slate,
Meagher & Flom LLP have not undertaken to independently verify the facts
providing the basis of this letter nor have they been asked to do so.
The undersigned acknowledges that such opinions will not address any tax
consequences of the Exchange or any action taken in connection therewith except
as expressly set forth in such opinions.
<TABLE>
<S> <C> <C>
Very truly yours,
IPALCO ENTERPRISES, Inc.
By:
-----------------------------------------
Name:
Title:
</TABLE>
A-53
<PAGE>
EXHIBIT C
TO ANNEX A
, 2000
Securities and Exchange Commission
450 Fifth Street, NW
Washington, DC 20549
Ladies and Gentlemen:
We are writing with respect to Indianapolis Power & Light Company, its
parent, IPALCO Enterprises, Inc., and the pending transaction involving IPALCO
Enterprises, Inc. and The AES Corporation.
We have been advised that The AES Corporation, through its subsidiaries
(other than IPALCO Enterprises, Inc. and its subsidiaries), affiliates, or
through other entities, currently holds, and intends to continue to hold and
acquire ownership interests in electric and natural gas facilities in one or
more foreign countries. We submit this letter pursuant to the requirements of
Section 33(a)(2) of the Public Utility Holding Company Act of 1935, as amended.
The Indiana Utility Regulatory Commission hereby certifies to you that it
has the authority and resources to protect ratepayers subject to its
jurisdiction and that it intends to exercise that authority.
Sincerely,
William D. McCarty
Chairman
A-54
<PAGE>
EXHIBIT D-1
TO ANNEX A
FORM OF PARENT AFFILIATE LETTER
Dear Sirs:
The undersigned refers to the Agreement and Plan of Share Exchange (the
"SHARE EXCHANGE AGREEMENT") dated as of July 15, 2000, between The AES
Corporation, a Delaware corporation, and IPALCO Enterprises, Inc., an Indiana
corporation. Capitalized terms used but not defined in this letter have the
meanings given to such terms in the Share Exchange Agreement.
The undersigned, a holder of shares of Parent Common Stock, acknowledges
that the undersigned may be deemed an "affiliate" of Parent within the meaning
of Rule 145 ("RULE 145") promulgated under the Securities Act or Accounting
Series Releases 130 and 135, as amended, of the SEC (the "RELEASES"), although
nothing contained herein should be construed as an admission of such fact.
The undersigned hereby represents to and covenants with Parent that the
undersigned will not, from the date hereof, reduce its risk (within the meaning
of the Releases) with respect to any Parent Common Stock held by it until after
such time as a report (the "REPORT") including results covering at least
30 days of combined operations of the Company and Parent has been published by
Parent. Parent will publish the Report as promptly as practicable following the
Share Exchange and in any event within 30 days following the end of the first
full calendar month following the Share Exchange.
The undersigned acknowledges that (i) the undersigned has carefully read
this letter and understands the requirements hereof and the limitations imposed
upon the distribution, sale, transfer or other disposition of Parent Common
Stock and (ii) the receipt by Parent of this letter is an inducement and a
condition to Parent's obligations to consummate the Share Exchange.
Very truly yours,
Dated:
A-55
<PAGE>
EXHIBIT D-2
TO ANNEX A
FORM OF COMPANY AFFILIATE LETTER
Dear Sirs:
The undersigned refers to the Agreement and Plan of Share Exchange (the
"SHARE EXCHANGE AGREEMENT") dated as of July 15, 2000, among The AES
Corporation, a Delaware corporation, and IPALCO Enterprises, Inc., an Indiana
corporation. Capitalized terms used but not defined in this letter have the
meanings given to such terms in the Share Exchange Agreement.
The undersigned, a holder of shares of Company Common Stock, is entitled to
receive in connection with the Share Exchange shares of Parent Common Stock. The
undersigned acknowledges that the undersigned may be deemed an "affiliate" of
the Company within the meaning of Rule 145 ("RULE 145") promulgated under the
Securities Act or Accounting Series Releases 130 and 135, as amended, of the SEC
(the "RELEASES"), although nothing contained herein should be construed as an
admission of such fact.
If in fact the undersigned were an affiliate under the Securities Act, the
undersigned's ability to sell, assign or transfer the Parent Common Stock
received by the undersigned in exchange for any shares of Company Common Stock
pursuant to the Share Exchange may be restricted unless such transaction is
registered under the Securities Act or an exemption from such registration is
available. The undersigned (i) understands that such exemptions are limited and
(ii) has obtained advice of counsel as to the nature and conditions of such
exemptions, including information with respect to the applicability to the sale
of such securities of Rules 144 and 145(d) promulgated under the Securities Act.
The undersigned hereby represents to and covenants with Parent that the
undersigned will not sell, assign or transfer any of the Parent Common Stock
received by the undersigned in exchange for shares of Company Common Stock
pursuant to the Share Exchange except (i) pursuant to an effective registration
statement under the Securities Act or (ii) in a transaction that, in the opinion
of counsel (the reasonable fees of which counsel will be paid by Parent) or as
described in a "no-action" or interpretive letter from the Staff of the SEC, is
not required to be registered under the Securities Act.
The undersigned further represents to and covenants with Parent that
(i) the undersigned will not, between the date hereof and the Closing Date,
reduce its risk (within the meaning of the Releases) with respect to any shares
of Company Common Stock held by it and (ii) the undersigned will not reduce its
risk (within the meaning of the Releases) with respect to, any Parent Common
Stock received by it in the Share Exchange until after such time as a report
(the "REPORT") including results covering at least 30 days of combined
operations of the Company and Parent have been published by Parent. Parent will
publish the Report as promptly as practicable following the Share Exchange and
in any event within 30 days following the end of the first full calendar month
following the Share Exchange.
In the event of a sale or other disposition by the undersigned pursuant to
Rule 145 of Parent Common Stock received by the undersigned in the Share
Exchange, the undersigned will supply Parent with evidence of compliance with
such Rule, in the form of a letter in the form of Annex I hereto and the opinion
of counsel or no-action letter referred to above. The undersigned understands
that Parent may instruct its transfer agent to withhold the transfer of any
Parent Common Stock disposed of by the undersigned, but that upon receipt of
such evidence of compliance the transfer agent shall effectuate the transfer of
the Parent Common Stock sold as indicated in the letter.
A-56
<PAGE>
The undersigned acknowledges and agrees that appropriate legends will be
placed on certificates representing Parent Common Stock received by the
undersigned in the Share Exchange or held by a transferee thereof, which legends
will be removed by delivery of substitute certificates upon receipt of an
opinion in form and substance reasonably satisfactory to Parent from counsel
(the reasonable fees of which counsel will be paid by Parent) to the effect that
such legends are no longer required for purposes of the Securities Act.
The undersigned acknowledges that (i) the undersigned has carefully read
this letter and understands the requirements hereof and the limitations imposed
upon the distribution, sale, transfer or other disposition of Parent Common
Stock and (ii) the receipt by Parent of this letter is an inducement and a
condition to Parent's obligations to consummate the Share Exchange.
Very truly yours,
Dated:
A-57
<PAGE>
ANNEX I
TO EXHIBIT D
TO ANNEX A
The AES Corporation
On , the undersigned sold the securities of The AES Corporation
("PARENT") described below in the space provided for that purpose (the
"SECURITIES"). The Securities were received by the undersigned in connection
with the Share Exchange between Parent and the Company.
Based upon the most recent report or statement filed by Parent with the
Securities and Exchange Commission, the Securities sold by the undersigned were
within the prescribed limitations set forth in Rule 144(e) promulgated under the
Securities Act of 1933, as amended (the "SECURITIES ACT").
The undersigned hereby represents that the Securities were sold in "brokers'
transactions" within the meaning of Section 4(4) of the Securities Act or in
transactions directly with a "market maker" as that term is defined in
Section 3(a)(38) of the Securities Exchange Act of 1934, as amended. The
undersigned further represents that the undersigned has not solicited or
arranged for the solicitation of orders to buy the Securities, and that the
undersigned has not made any payment in connection with the offer or sale of the
Securities to any person other than to the broker who executed the order in
respect of such sale.
Very truly yours,
Dated:
[Space to be provided for description of securities.]
A-58
<PAGE>
ANNEX B
UBS WARBURG LLC
2001 Ross Avenue
Suite 3950
Dallas, TX 75201
Tel. -214-969-4000
July 15, 2000
The Board of Directors
IPALCO Enterprises, Inc.
One Monument Circle
Indianapolis, Indiana 46204
Dear Members of the Board:
We understand that IPALCO Enterprises, Inc., an Indiana corporation
("IPALCO" or the "Company"), is considering a transaction whereby The AES
Corporation, a Delaware corporation ("AES"), will conduct a mandatory share
exchange with the Company. Pursuant to the terms of the Agreement and Plan of
Share Exchange (the "Purchase Agreement"), AES will undertake a series of
transactions whereby the Company will become a wholly owned subsidiary of AES
(the "Transaction"). Pursuant to the terms of the Purchase Agreement, each of
the issued and outstanding shares of the common stock of the Company, without
par value (the "Company Common Stock"), will be exchanged for such number (the
"Exchange Ratio") of shares of common stock, par value $0.01 per share ("AES
Common Stock"), of AES, calculated as follows:
(a) if the Average Trading Price, as defined in the Purchase Agreement, of a
share of AES Common Stock is greater than or equal to $31.50, the
Exchange Ratio shall equal a quotient determined by dividing $25.00 (the
"Per Share Amount") by the Average Trading Price of a share of AES Common
Stock; and (b) if the Average Trading Price of a share of AES Common
Stock is less than $31.50, the Exchange Ratio shall equal 0.794 (the
"Consideration").
In the event the Closing, as defined in the Purchase Agreement, occurs after
the Trigger Date, as defined in the Purchase Agreement, then (i) if the Exchange
Ratio is calculated pursuant to clause (a) above, the Per Share Amount shall be
increased by an amount equal to $0.15 plus $0.00411 per day from the date after
the Trigger Date through the earliest of (but not including) the Closing Date
and the Termination Date, as defined in the Purchase Agreement and (ii) if the
Exchange Ratio is calculated pursuant to clause (b) above, such Exchange Ratio
shall be proportionately increased by the same percentage as the Per Share
Amount would be increased.
You have requested our opinion as to the fairness to the holders of the
Company Common Stock from a financial point of view of the Consideration to be
paid by AES in the Transaction.
UBS Warburg LLC ("UBSW") has acted as financial advisor to the Board of
Directors of the Company in connection with the Transaction and will receive a
fee upon the consummation thereof. UBSW has also been paid a fee in connection
with the issuance of this opinion. At your request, we have contacted third
parties to solicit indications of interest in a possible transaction with the
Company and held discussions with certain of these parties prior to the date
hereof. In the past, UBSW and its predecessors have provided investment banking
services to the Company and received customary compensation for the rendering of
such services. In the ordinary course of business, UBSW, its successors and
affiliates may trade securities of the Company or AES, for their own accounts
and, accordingly, may at any time hold a long or short position in such
securities.
Our opinion does not address the Company's underlying business decision to
effect the Transaction or constitute a recommendation to any shareholder of the
Company as to how such shareholder should vote with respect to the Transaction.
We do not offer any opinion as to the material terms of the Purchase Agreement
(other than the Exchange Ratio) or the form of the Transaction. In rendering
this
<PAGE>
opinion, we have assumed that AES and the Company will comply with all the
material terms of the Purchase Agreement.
In arriving at our opinion, we have, among other things: (i) reviewed
certain publicly available business and historical financial information
relating to the Company and AES, (ii) reviewed certain internal financial
information and other data relating to the business and financial prospects of
the Company, including estimates and financial forecasts prepared by management
of the Company, that were provided to us by the Company and not publicly
available, (iii) reviewed certain internal financial information and other data
relating to the business and financial prospects of AES, including estimates and
financial forecasts prepared by the management of AES and not publicly
available, (iv) conducted discussions with members of the senior management of
the Company and AES, (v) reviewed publicly available financial and stock market
data with respect to certain other companies in lines of business we believe to
be generally comparable to those of AES and the Company, (vi) compared the
financial terms of the Transaction with the publicly available financial terms
of certain other transactions which we believe to be generally relevant,
(vii) reviewed the Purchase Agreement, and (viii) conducted such other financial
studies, analyses, and investigations, and considered such other information as
we deemed necessary or appropriate.
In connection with our review we have not assumed any responsibility for
independent verification for any of the information reviewed by us for the
purpose of this opinion and have relied on its being complete and accurate in
all material respects. In addition, we have not made any independent evaluation
or appraisal of any of the assets or liabilities (contingent or otherwise) of
the Company or AES, nor have we been furnished with any such evaluation or
appraisal. With respect to the financial forecasts referred to above, we have
assumed that they have been reasonably prepared on a basis reflecting the best
currently available estimates and judgments of the management of each company as
to the future performance of their respective companies. Our opinion is
necessarily based on economic, monetary, market and other conditions as in
effect on, and the information made available to us as of, the date hereof.
In rendering our opinion, we have assumed that the Transaction will qualify
as a tax-free reorganization.
Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the Consideration to be paid by AES to the holders of the Company
Common Stock in the Transaction is fair, from a financial point of view, to the
holders of the Company Common Stock.
Very truly yours,
UBS WARBURG LLC
<TABLE>
<S> <C> <C> <C>
By: /s/ KENNETH S. CREWS By: /s/ JASON D. SWEET
---------------------------------------- ----------------------------------------
Kenneth S. Crews: Jason D. Sweet:
Managing Director Managing Director
Global Head--Power and Pipelines
</TABLE>
B-2
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROXY STATEMENT/PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law, Article VIII of AES's
by-laws, as amended, and indemnification agreements entered into by AES with its
directors provide for the exculpation of directors and the indemnification of
officers, directors, employees and agents under certain circumstances.
Set forth below is Article VIII of AES's by-laws pertaining to
indemnification of officers, directors, employees and agents and insurance:
Section 8.01. (A) Any person who was or is a party or is threatened to be
made a party to or was or is involved (as a witness or otherwise) in any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than any action or suit by or
in the right of the Corporation to procure a judgment in its favor (a
"derivative action")) by reason of the fact that he or she is or was a director,
officer or employee of the Corporation, or is or was serving at the request of
the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, including
service with respect to employee benefit plans, shall be indemnified by the
Corporation, to the extent authorized by the laws of the State of Delaware as
the same exists or may hereafter be amended (but, in the case of any such
amendment, only to the extent that such amendment permits the Corporation to
provide broader indemnification rights than such laws permitted prior to such
amendment), against all expenses (including, but not limited to, attorneys'
fees, judgments, fines, penalties and amounts paid in settlement) actually and
reasonably incurred by him or her in connection with the defense or settlement
of such action, suit or proceeding. In the event of any derivative action, such
persons shall be indemnified by the Corporation under the same conditions and to
the same extent as specified above, except that no indemnification is permitted
in respect of any claim, issue or matter as to which such persons shall have
been adjudged to be liable to the Corporation unless and only to the extent that
the Court of Chancery or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Court of Chancery
or such other court shall deem proper. The indemnification expressly provided by
statute in a specific case shall not be deemed exclusive of any other rights to
which any person indemnified may be entitled under any lawful agreement, vote of
the stockholders or disinterested directors or otherwise, both as to action in
his or her official capacity and as to action in another capacity while hold in
such office, and shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
(B) The right to indemnification conferred in this Article VIII is and
shall be a contract right. The right to indemnification conferred in this
Article VIII shall include the right to be paid by the Corporation the expenses
(including attorneys' fees and retainers therefor) reasonably incurred in
connection with any such proceeding in advance of its final disposition, such
advances to be paid by the Corporation within 20 days after the receipt by the
Corporation of a statement or statements from a director, officer or employee of
the Corporation requesting such advance or advances from time to time; provided,
however, the payment of such expenses incurred by a director, officer or
employee in his or her capacity as a director, officer or employee in advance of
the final disposition of a proceeding shall be made only upon delivery to the
employee to repay all amounts so advanced if it shall ultimately be determined
that such director, officer or employee is not entitled to be indemnified under
this Article VIII or otherwise.
II-1
<PAGE>
(C) To obtain indemnification under this Article VIII, an indemnitee shall
submit to the Corporation a written request, including therein or therewith such
documentation and information as is reasonably available to such person and is
reasonably necessary to determine whether and to what extent the indemnitee is
entitled to indemnification.
(D) The Corporation may maintain insurance, at its expense, to protect
itself and any director, officer, employee or agent of the Corporation or
another corporation, partnership, joint venture; trust or other enterprise
including service with respect to employee benefit plans, against any expense,
liability or loss, whether or not the Corporation would have the power to
indemnify such person against such expense, liability or loss under the General
Corporation Law of the State of Delaware. To the extent that the Corporation
maintains any policy or policies providing such insurance, each such director,
officer or employee, and each such agent to which rights to indemnification have
been granted as provided in paragraph (E) of this Article VIII, shall be covered
by such policy or policies in accordance with its or their terms to the maximum
extent of the coverage thereunder for any such director, officer, employee or
agent.
(E) The Corporation may, to the extent authorized from time to time by the
board of directors, grant rights to indemnification, and rights to be paid by
the Corporation the expenses incurred in connection with any proceeding in
advance of its final disposition to any agent of the Corporation to the fullest
extent of the provisions of this Article VIII with respect to the
indemnification and advancement of expenses of directors, officers and employees
of the Corporation.
In addition, AES has entered into indemnification agreements with its
directors and officers pursuant to which AES has agreed to indemnify such
directors and officers in accordance with, and to the fullest extent permitted
by, the Delaware General Corporation Law against any and all expenses,
judgments, fines and amounts paid in settlement actually and reasonably incurred
by the indemnitee in connection with any proceeding in which the indemnitee was
or is made a party or was or is involved by reason of the fact that the
indemnitee is or was a director or an officer.
AES has also purchased liability insurance policies covering certain
directors and officers of AES.
II-2
<PAGE>
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
--------------------- -----------
<C> <S>
2.1 Agreement and Plan of Share Exchange dated as of July 15,
2000, between The AES Corporation and IPALCO Enterprises,
Inc. (included as Annex A to the proxy statement/
prospectus).
2.2 Opinion of UBS Warburg LLC (included as Annex B to the proxy
statement/prospectus).
3.1 Sixth Amended and Restated Certificate of Incorporation of
The AES Corporation (incorporated by reference to Exhibit
3.1 to The AES Corporation Quarterly Report on Form 10-Q
filed May 15, 2000).
3.2 The AES Corporation By-laws, as amended (incorporated by
reference to Exhibit 3.2 to The AES Corporation Quarterly
Report on Form 10-Q filed August 14, 1998).
5.1* Opinion of Skadden, Arps, Slate, Meagher & Flom LLP
regarding the legality of the securities.
8.1* Opinion of Skadden, Arps, Slate, Meagher & Flom LLP
regarding tax matters.
8.2* Opinion of Cravath, Swaine & Moore regarding tax matters.
23.1* Consent of Skadden, Arps, Slate, Meagher & Flom LLP (set
forth in Exhibit 5.1).
23.2* Consent of Skadden, Arps, Slate, Meagher & Flom LLP (set
forth in Exhibit 8.1).
23.3* Consent of Cravath, Swaine & Moore (set forth in Exhibit
8.2).
23.4 Consent of Deloitte & Touche LLP (AES).
23.5 Consent of Deloitte & Touche LLP (IPALCO).
23.6 Consent of UBS Warburg LLC (set forth in Annex B to the
proxy statement/prospectus).
24.1 Powers of Attorney (set forth on signature page).
99.1* Form of IPALCO Enterprises, Inc. Proxy.
</TABLE>
------------------------
* To be filed by amendment
FINANCIAL STATEMENT SCHEDULES:
The Financial Statement Schedules have previously been filed as part of
AES's Form 10-K for the fiscal year ended December 31, 1999.
ITEM 22. UNDERTAKINGS.
(A) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required in Section 10(a) (3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth
II-3
<PAGE>
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) under
the Securities Act, if, in the aggregate, the changes in volume and
price represent no more than a 20% change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee"
table in the effective registration statement; and;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be
the initial BONA FIDE offering thereof;
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination
of the offering.
(B) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of
the registrant's annual report pursuant to Section 13(a) or Section 15(d) of
the Securities Exchange Act of 1934 (and, where appropriate, each filing of
an employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial BONA FIDE offering
thereof.
(C) The undersigned registrant hereby undertakes:
(1) that, prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this
registration statement, by any person or party who is deemed to be an
underwriter within the meaning of Rule 145(c), the issuer undertakes that
such reoffering prospectus will contain the information called for by the
applicable registration form with respect to reofferings by persons who
may be deemed underwriters, in addition to the information called for by
the other items of the applicable form;
(2) that every prospectus (i) that is filed pursuant to paragraph (1)
immediately preceding, or (ii) that purports to meet the requirements of
Section 10(a)(3) of the Securities Act and is used in connection with an
offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any
liability under the Securities Act, each such post-effective amendment
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial BONA FIDE offering thereof.
(D) Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being
II-4
<PAGE>
registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
(E) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant
to Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt
of such request, and to send the incorporated documents by first class mail
or other equally prompt means. This includes information contained in
documents filed subsequent to the effective date of the registration
statement through the date of responding to the request.
(F) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this registration statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in Arlington,
Virginia, on the 15th day of August, 2000.
<TABLE>
<S> <C> <C>
THE AES CORPORATION
By:
/s/ DENNIS W. BAKKE
-----------------------------------------
Dennis W. Bakke
President and Chief Executive Officer
</TABLE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Dennis W. Bakke and William R. Luraschi, and each
of them, his true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in connection therewith,
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any of
them, or their or his substitutes or substitute, may lawfully do or cause to be
done by virtue hereof.
II-6
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ ROGER W. SANT
------------------------------------------- Chairman of the Board August 15, 2000
Roger W. Sant
President, Chief Executive
/s/ DENNIS W. BAKKE Officer (principal
------------------------------------------- executive officer) and August 15, 2000
Dennis W. Bakke Director
/s/ ALICE F. EMERSON
------------------------------------------- Director August 15, 2000
Dr. Alice F. Emerson
/s/ ROBERT F. HEMPHILL, JR.
------------------------------------------- Director August 15, 2000
Robert F. Hemphill, Jr.
/s/ FRANK JUNGERS
------------------------------------------- Director August 15, 2000
Frank Jungers
/s/ JOHN H. MCARTHUR
------------------------------------------- Director August 15, 2000
John H. McArthur
/s/ HAZEL R. O'LEARY
------------------------------------------- Director August 15, 2000
Hazel R. O'Leary
/s/ THOMAS I. UNTERBERG
------------------------------------------- Director August 15, 2000
Thomas I. Unterberg
/s/ ROBERT H. WATERMAN, JR.
------------------------------------------- Director August 15, 2000
Robert H. Waterman, Jr.
Senior Vice President and
/s/ BARRY J. SHARP Chief Financial Officer
------------------------------------------- (principal financial and August 15, 2000
Barry J. Sharp accounting officer)
</TABLE>
II-7
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
--------------------- -----------
<C> <S>
2.1 Agreement and Plan of Share Exchange dated as of July 15,
2000, between The AES Corporation and IPALCO Enterprises,
Inc. (included as Annex A to the proxy statement/
prospectus).
2.2 Opinion of UBS Warburg LLC (included as Annex B to the proxy
statement/prospectus).
3.1 Sixth Amended and Restated Certificate of Incorporation of
The AES Corporation (incorporated by reference to Exhibit
3.1 to The AES Corporation Quarterly Report on Form 10-Q
filed May 15, 2000).
3.2 The AES Corporation By-laws, as amended (incorporated by
reference to Exhibit 3.2 to The AES Corporation Quarterly
Report on Form 10-Q filed August 14, 1998).
5.1* Opinion of Skadden, Arps, Slate, Meagher & Flom LLP
regarding the legality of the securities.
8.1* Opinion of Skadden, Arps, Slate, Meagher & Flom LLP
regarding tax matters.
8.2* Opinion of Cravath, Swaine & Moore regarding tax matters.
23.1* Consent of Skadden, Arps, Slate, Meagher & Flom LLP (set
forth in Exhibit 5.1).
23.2* Consent of Skadden, Arps, Slate, Meagher & Flom LLP (set
forth in Exhibit 8.1).
23.3* Consent of Cravath, Swaine & Moore (set forth in Exhibit
8.2).
23.4 Consent of Deloitte & Touche LLP (AES).
23.5 Consent of Deloitte & Touche LLP (IPALCO).
23.6 Consent of UBS Warburg LLC (set forth in Annex B to the
proxy statement/prospectus).
24.1 Powers of Attorney (set forth on signature page).
99.1* Form of IPALCO Enterprises, Inc. Proxy.
</TABLE>
------------------------
* To be filed by amendment
