AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 16,NOVEMBER 9, 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)(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 4991 54-1163725
(State or other jurisdiction (Primary Standard Industrial(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification No.)EMPLOYER
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
-------------------------------------------
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)
------------------------------(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:
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
------------------------------(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
-------------
Copies to:
MICHAEL E. GIZANG, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
FOUR TIMES SQUARE
NEW YORK, NY 10036
(212) 735-3000
-------------
APPROXIMATE DATE OF COMMENCEMENT OF THE PROPOSED SALE OF THE SECURITIES TO
THE PUBLIC: As soon as practicable following the effectiveness ofafter this Registration Statement becomes
effective and after all other conditions underupon consummation of the share exchange
agreement are satisfied or waived.transactions described in the enclosed
prospectus.
If the securities being registered on this form are to bebeing 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
- --------------------------------------------------------------------------------
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) SHAREPER UNIT PRICE REGISTRATION FEE(2)
Common Stock, par value $0.01 per share 71,861,583share......... 3,736,023 N/A N/A $524,447$ 36,327.00
- --------------------------------------------------------------------------------
(1) This Registration Statement relates to common stock, par value $0.01 per
share, of The AES Corporation ("AES") issuable to holders of ADSs of Gener
S.A. ("Gener"), each representing 68 shares of common stock no par value, of IPALCO Enterprises, Inc. ("IPALCO")Gener, in
the proposed share
exchange offer (the "U.S. Offer") described herein. UnderFor purposes of
calculating the share exchange agreementregistration fee, the final
exchange ratio will vary, subject to a maximum of 0.794. The amount of AES
common stock to be registeredProposed Maximum Aggregate Offering
Price has been determined by multiplying an assumed maximum exchange ratio
of 0.7940.2519685 for each share of IPALCO common stockGener ADS by 14,827,343, the
maximum aggregate number of
shares of IPALCO common stockGener ADSs outstanding on September 30, 2000, the last practicable date
prior to commencement of the share exchange, assuming the exercise of all outstanding IPALCO
options (whether or not currently exercisable).U.S. Offer for which this information is
available. The actual exchange ratio will not be determined until just
prior to the closingexpiration date.
(2) The registration fee was calculated pursuant to Rules 457(f)(1) and 457(c)
based upon the per shareADS market value of the shares of IPALCO common stockGener ADSs to be cancelledexchanged in
the share exchangeU.S. Offer which is the average of the high and low sales prices of
IPALCO common stockGener ADSs, as reported on the New York Stock Exchange Inc. Composite
Transaction Tape on August 15,November 2, 2000, multiplied by 85,904,469
shares.
------------------------------the 14,827,343 ADSs
outstanding as of September 30, 2000, the last practicable date prior to
commencement of the U.S. Offer.
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 SECURITIES AND EXCHANGE COMMISSION (THE
"COMMISSION"), ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[LOGOTHE INFORMATION IN THIS PROSPECTUS MAY BE CHANGED. WE MAY NOT SELL THESE
SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
Offer to Exchange Each Outstanding American Depositary Share
(Each American Depositary Share Represents 68 Shares of Common Stock)
of
GENER S.A.
For Common Stock of The AES Corporation
Having A Value Of $16
by
MERCURY CAYMAN CO. III, LTD.
a wholly owned subsidiary of
THE AES CORPORATION
OUR OFFER AND THE WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON MONDAY,
DECEMBER 11, 2000, UNLESS EXTENDED. GENER AMERICAN DEPOSITARY SHARES TENDERED
PURSUANT
TO OUR OFFER MAY BE WITHDRAWN AT ANY TIME PRIOR TO THE EXPIRATION OF IPALCO] [LOGO OF AES]
SPECIAL MEETING OF IPALCO SHAREHOLDERS
ToOUR OFFER.
Through Mercury Cayman Co. III, Ltd., the Purchaser, we are offering to
exchange, for each outstanding American Depositary Share, ADS, of Gener S.A.,
that is validly tendered and not withdrawn prior to the expiration of our
offer, a fraction of an AES share having a value of $16 as more fully described
in the sections captioned "SUMMARY--The Proposed Transaction; The Offers" and
"THE PROPOSED TRANSACTIONS; OUR OFFERS". This value, after adjusting for the
fact that each ADS represents 68 Gener shares, is equal to the price we are
offering in our simultaneous offer to purchase 3,466,600,000 shares of Gener
common stock in the Republic of Chile, the Chilean offer.
Our offer will not proceed unless Gener shareholders approve the
amendments to Gener's Bylaws by the affirmative vote of IPALCO Enterprises, Inc.:
We invite you to attend a specialholders of at least 75%
of the outstanding Gener shares (including Gener shares represented by Gener
ADSs) at an extraordinary meeting of Gener shareholders. Most significantly,
these amendments will eliminate the shareholdersrestriction currently contained in Gener's
Bylaws that limits to 20% the percentage of IPALCO
Enterprises, Inc.Gener shares that may be owned and
voted by one shareholder, directly or through related persons and which
otherwise require Gener to comply with the provisions of Decree Law 3,500.
We urge all holders of Gener ADSs to vote their gener ADSs in favor of the
Amendments to Gener's bylaws, whether or not they intend to tender their Gener
ADSs in our Offer.
On October 22, 2000, Gener announced a proposed transaction with the
TotalFinaElf Group. This proposed transaction is subject to negotiation and
execution of definitive documentation, completion by TotalFinaElf of due
diligence, Gener shareholder approval and other conditions. We do not believe
that the TotalFinaElf transaction is in the best interests of Gener and its
shareholders.
Our Offer will not proceed unless we are satisfied, in our sole
discretion, that the proposed transaction with the Totalfinaelf Group has been
terminated or will not proceed. we urge all holders of Gener ADSs to vote their
Gener ADSs against the proposed transaction with the Totalfinaelf Group.
We entered into a letter agreement dated November 3, 2000, the Copec
Letter, with Compania de Petroleos de Chile S.A., whichcommonly called by the
acronym Copec, a Chilean publicly traded stock corporation and the holder of
approximately .0006% of the outstanding Gener shares and Servicios de
Combustibles Limitada, Servicios, a Chilean company, wholly owned subsidiary of
Copec and the holder of approximately 19.7% of the outstanding Gener shares.
When we refer to Copec in this prospectus, we mean Copec and Servicios
together. Copec has stated it intends to tender all its Gener shares pursuant
to the Chilean offer.
The Chilean offer will be held at 11:00 a.m., Indianapolis timeeffected pursuant to an auction transaction on
/ /, 2000 at One Monument Circle, Indianapolis, Indiana.
At this important meeting, youthe Santiago Stock Exchange, commonly referred to as a "remate". We will
be asked to approve an Agreement and
Planpurchase Gener shares during, but outside of, Share Exchange between IPALCO Enterprises, Inc. and The AES Corporation.
Pursuantour offer pursuant to the share exchange agreement, IPALCO andChilean
offer. These purchases may be made at prices which, when adjusted for the fact
that each Gener ADS represents 68 shares, are higher than the value of the 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 willstock to be exchanged for AES
common stock. Undereach Gener ADS in our offer. However, if we make
purchases in the terms of the share exchange agreement, the final
exchange ratio will be determined five business daysChilean offer at such higher prices, then, prior to the
closing, based
onexpiration of our offer, we will increase the average daily closing pricesamount of AES common stock for the preceding twenty
trading days. Upon closing, each share of IPALCO common stock willto be
exchanged for each ADS in our offer so that its value equals the highest price
paid by us in the Chilean offer. The Chilean offer will be scheduled to occur
as soon as practicable, and in any event within 12 Chilean trading days, after
the effectiveness of the amendments to Gener's Bylaws.
Our obligation to exchange AES shares with a market value of $25.00,for Gener ADSs is subject to
adjustment assignificant conditions which are more fully described below, so long asunder the average price of AESsection
captioned "OUR OFFER--Conditions to Our Offer".
AES's common stock (determined as described
above) is not below $31.50. Iftrades on the average price of AESNew York Stock Exchange under the symbol
"AES", Gener's ADSs trade on the New York Stock Exchange under the symbol "CHR"
and Gener's 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, iftrades on 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 hasSantiago Stock Exchange under 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)symbol
"GENER".
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.FOR A DISCUSSION OF CERTAIN FACTORS THAT YOU SHOULD CONSIDER IN CONNECTION
WITH OUR OFFER PLEASE CAREFULLY READ 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 PresidentSECTION CAPTIONED "RISK FACTORS" on
page 18.
Neither the Securities and Exchange Commission nor any state securities
commission nor the Superintendencia de Valores y Seguros has approved or
disapproved of these securities or passed upon the securities to be issued in
connection with the share exchangeadequacy or determined ifaccuracy of this
proxy
statement/prospectus is accurate or complete.prospectus. Any representation to the contrary is a criminal offense.
This proxy statement/----------
THE DEALER MANAGER FOR OUR OFFER IS:
DEUTSCHE BANC ALEX. BROWN
The date of this preliminary prospectus is dated / /,November 9, 2000 and is first being
mailed to shareholders of IPALCO on or about / /, 2000.
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:
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
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.
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
TABLE OF CONTENTS
PROXY STATEMENT PROSPECTUS
PAGE
-------------
QUESTIONS AND ANSWERS ABOUT THE SHARE EXCHANGE BETWEEN AES
AND IPALCO................................................TRANSACTION ..................................... 1
SUMMARY..................................................... 3WHERE YOU CAN FIND MORE INFORMATION ............................................. 7
RELIEF GRANTED BY THE COMPANIES............................................... 15
AES....................................................... 15
IPALCO.................................................... 15
THE SPECIAL MEETING OF IPALCO SHAREHOLDERS.................. 16
Proxy Statement/Prospectus................................ 16
Date, Time and Place ofSEC ....................................................... 8
AMENDMENTS TO GENER'S BYLAWS .................................................... 10
SUMMARY ......................................................................... 12
The Proposed Transaction; The Offers ........................................... 12
Information Concerning 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'sTotalFinaElf Group Proposal ......................... 12
Reasons for the Share Exchange...................... 21
IPALCO's Reasons forOffers ......................................................... 12
Our Offer ...................................................................... 13
Risk Factors ................................................................... 15
Certain Tax Considerations ..................................................... 15
Market Prices of AES Shares and Gener ADSs and Shares .......................... 16
The Companies .................................................................. 16
RISK FACTORS .................................................................... 18
Risks Relating to the Share Exchange................... 21
RecommendationProposed Offers .......................................... 18
Risks Relating to AES's Business ............................................... 19
THE COMPANIES ................................................................... 24
The AES Corporation ............................................................ 24
Gener S.A. ..................................................................... 24
Mercury Cayman Co. III, Ltd. ................................................... 25
THE PROPOSED TRANSACTION; THE OFFERS ............................................ 25
BACKGROUND AND REASONS FOR OUR OFFER ............................................ 26
OUR OFFER ....................................................................... 27
Terms of IPALCO's Board of Directors............. 23
Opinion of IPALCO's Financial Advisor..................... 23
Interests of IPALCO's OfficersOur Offer; Expiration Date ............................................ 27
Extension, Termination and Directors in the Share
Exchange................................................ 30
Management and Operation of IPALCO After the Share
Exchange................................................ 33
Description ofAmendment ........................................... 28
Exchange of Stock.......................... 34Gener ADSs; Delivery of AES Shares ................................. 28
Cash Instead of Fractional AES Shares .......................................... 29
Withdrawal Rights .............................................................. 29
Procedure for Accepting Our Offer .............................................. 30
Certain United StatesTax Considerations ..................................................... 32
U.S. Federal Income Tax Consequences of Our Offer ............................ 32
Chilean Income Tax Consequences of Our Offer ................................. 33
Purpose of the Share Exchange......................................Offers; Plans for Gener ......................................... 34
No Dissenters' or Appraisal Rights........................ 35
AnticipatedEffect of Our Offer and the Chilean Offer on the Market for Gener ADSs and Gener
Shares; Registration of Gener ADSs under the Exchange Act; Margin Regulations 38
Conditions of Our Offer ........................................................ 38
Certain Legal Matters; Regulatory Approvals .................................... 43
Relationships with Gener ....................................................... 45
Source and Amount of Funds ..................................................... 45
Fees and Expenses .............................................................. 46
Accounting Treatment.......................... 36
Governmental Approvals and Regulatory Matters............. 36
Securities Laws Matters................................... 38
New YorkTreatment ........................................................... 46
Stock Exchange Matters........................... 38
CERTAIN TERMS OFListing ......................................................... 46
THE AGREEMENTCHILEAN OFFER ............................................................... 47
MARKET PRICES 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 FORMADIVIDENDS ..................................................... 48
AES SUMMARY SELECTED CONSOLIDATED FINANCIAL STATEMENTS....... 48
DESCRIPTION OF AES CAPITAL STOCK............................ 57
General................................................... 57
Transfer Agent and Registrar.............................. 57DATA ................................ 51
GENER SUMMARY SELECTED CONSOLIDATED FINANCIAL DATA .............................. 52
COMPARATIVE RIGHTS OF IPALCO SHAREHOLDERS AND AES
SHAREHOLDERS.............................................. 58
INDEPENDENT ACCOUNTANTS..................................... 66
LEGAL MATTERS............................................... 66PER SHARE DATA ...................................................... 54
i
PAGE
-------------
EXPERTS..................................................... 66
WHERE YOU CAN FIND MORE INFORMATION......................... 66
Annexes:
Annex A: AgreementDESCRIPTION OF AES COMMON STOCK ...................................................... 55
General ............................................................................. 55
Transfer Agent and PlanRegistrar ........................................................ 55
COMPARATIVE RIGHTS OF GENER STOCKHOLDERS AND AES STOCKHOLDERS 55
General ............................................................................. 55
Directors ........................................................................... 56
Limitation of Share Exchange............... A-1
Annex B: OpinionDirector Liability in Certain Circumstances ........................... 56
Indemnification and Insurance ....................................................... 57
Antitakeover Provisions ............................................................. 57
Issuance of UBS Warburg LLC......................... B-1Preferred Stock ......................................................... 58
Voting Rights; Cumulative Voting .................................................... 58
Action Without a Meeting ............................................................ 59
Special Meetings .................................................................... 59
Voting and Appraisal Rights With Respect to Corporate Reorganizations ............... 59
Amendments to Charter Documents ..................................................... 59
Bylaws .............................................................................. 60
Preemptive Rights ................................................................... 60
Dividends ........................................................................... 61
Liquidation ......................................................................... 61
Director Nominations/Shareholder Proposals .......................................... 61
FORWARD-LOOKING STATEMENTS ........................................................... 62
LEGAL MATTERS ........................................................................ 62
EXPERTS .............................................................................. 62
MISCELLANEOUS ........................................................................ 62
Schedule I--Information Concerning the Directors and Executive Officers of AES and the
Purchaser
Schedule II--Purchases of Gener ADSs
ii
All references to "dollars" or "$" in this prospectus are to U.S. dollars,
and all references to "Pesos" or "Ch$" are to Chilean Pesos. On November 8,
2000, the daily observed exchange rate between the Ch$ and the dollar, as
reported by the Central Bank of Chile, was Ch$576.58 to $1.00. Except as
otherwise noted in this prospectus, all references to Peso amounts are stated
in nominal Pesos, meaning Pesos which have not been adjusted in any way to
reflect the effects of inflation.
THE INFORMATION CONCERNING GENER IN THIS PROSPECTUS IS TAKEN FROM PUBLICLY
AVAILABLE INFORMATION CONCERNING GENER FILED WITH THE SEC. ALTHOUGH WE HAVE NO
KNOWLEDGE THAT WOULD INDICATE THAT ANY STATEMENTS CONTAINED HEREIN BASED UPON
SUCH REPORTS AND DOCUMENTS ARE UNTRUE, WE TAKE NO RESPONSIBILITY FOR THE
ACCURACY OR COMPLETENESS OF THE INFORMATION CONTAINED IN SUCH REPORTS AND OTHER
DOCUMENTS OR FOR ANY FAILURE BY GENER TO DISCLOSE EVENTS THAT MAY HAVE OCCURRED
AND MAY AFFECT THE SIGNIFICANCE OR ACCURACY OF ANY SUCH INFORMATION BUT THAT
ARE UNKNOWN TO US.
THIS DOCUMENT INCORPORATES IMPORTANT BUSINESS AND FINANCIAL INFORMATION
ABOUT AES AND GENER FROM DOCUMENTS FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION, THE SEC, THAT HAVE NOT BEEN INCLUDED IN OR DELIVERED WITH THIS
DOCUMENT. THIS INFORMATION IS AVAILABLE AT THE INTERNET WEB SITE THE SEC
MAINTAINS AT HTTP:// WWW.SEC.GOV, AS WELL AS FROM OTHER SOURCES. SEE THE SECTION
CAPTIONED "WHERE YOU CAN FIND MORE INFORMATION".
YOU ALSO MAY REQUEST COPIES OF THESE DOCUMENTS FROM US, WITHOUT CHARGE,
UPON WRITTEN OR ORAL REQUEST TO OUR INFORMATION AGENT AT ITS ADDRESS OR
TELEPHONE NUMBER SET FORTH ON THE BACK COVER OF THIS PROSPECTUS. IN ORDER TO
RECEIVE TIMELY DELIVERY OF THE DOCUMENTS, YOU MUST MAKE YOUR REQUEST NO LATER
THAN DECEMBER 1, 2000.
iii
QUESTIONS AND ANSWERS ABOUT THE SHARE EXCHANGE BETWEENTRANSACTION
We are offering, through Mercury Cayman Co. III, Ltd., our wholly owned
subsidiary, to exchange AES AND IPALCO
Q: WHY IS IPALCO EFFECTINGshares for Gener ADSs. We are also offering pursuant
to our simultaneous offer in Chile, the Chilean offer, to purchase for cash
3,466,600,000 Gener shares. According to Gener's ownership description provided
on Gener's Internet site at http://www.gener.com, as of September 30, 2000, the
Gener ADSs and Gener shares we seek to acquire pursuant to our offer and the
Chilean offer, together with the 659,900 Gener ADSs and 6,800 Gener shares
currently owned by us, represent approximately 80% of the outstanding Gener
shares. The following are some of the questions that you as a holder of Gener
ADSs may have and answers to those questions. The information in this summary is
not complete and we urge you to read carefully the remainder of this document
and the accompanying ADS Letter of Transmittal.
WHAT ARE THE MOST IMPORTANT FEATURES OF YOUR OFFER?
o A SHARE EXCHANGE WITH AES? WHAT WILL HAPPEN TO
IPALCO AFTER THE SHARE EXCHANGE?
A: IPALCO is effecting a share exchange withSIGNIFICANT PREMIUM FOR YOUR ADSs. The $16 value of the AES in orderstock we
are offering 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 each Gener ADS pursuant to our offer
represents approximately a 39.2% premium on the average closing price of
Gener ADSs for the ten consecutive trading days prior to the day we
announced the offers.
o AN OPPORTUNITY TO SELL. Our offer provides holders of Gener ADSs an
opportunity to sell their IPALCO common stock. IPALCOGener ADSs in return for AES shares. AES shares
trade in large volume on the NYSE and provide an investment with far
greater liquidity than Gener ADSs.
o GREATER UPSIDE POTENTIAL. Holders of Gener ADSs will then become a wholly-owned subsidiaryenjoy an
opportunity to participate in the greater upside potential resulting from
our offer through ownership of AES.
Q:AES shares, which have generated
substantially better shareholder returns than Gener ADSs over the past
two years.
IF THE TOTALFINAELF PROPOSAL IS APPROVED, YOU WILL NOT HAVE THE
OPPORTUNITY TO ACCEPT OUR OFFER. WE URGE YOU TO VOTE AGAINST THE
TOTALFINAELF PROPOSAL.
WHAT WILL I RECEIVE IN THE EXCHANGE?
A: UnderEXCHANGE FOR MY GENER ADSs?
In exchange for each Gener ADS you validly tender and do not withdraw
before the termsexpiration of theour offer, you will receive a fraction of an AES
share exchange agreement, the final exchange ratio
will behaving a value, determined five business days priorover a measuring period, that is equal to
the closing, basedprice per share we are offering in the Chilean offer, after adjusting
for the fact that each Gener ADS represents 68 shares of Gener common
stock. Based on the average
daily closing pricesChilean Peso equivalent of $0.235294118 per Gener
share we are currently offering in the Chilean offer and adjusting for the
68 Gener shares represented by each Gener ADS, you would receive $16 worth
of AES common stock for each Gener ADS you tender and do not withdraw
prior to the preceding twenty trading days.
Upon closing, eachexpiration of our offer. You will not receive any fractional
AES shares in the offer. Instead, you will receive cash in an amount equal
to the value of any fractional AES shares you would otherwise have been
entitled to receive.
HOW IS THE EXCHANGE RATIO OF AES SHARES FOR GENER ADSs DETERMINED?
We will determine the exchange ratio -- that is, the fraction of an AES
share of IPALCO common stock willto be exchanged for AES shares
with a market value of $25.00, subject to adjustment as described below, so long
aseach Gener ADS -- by dividing the highest price
paid in the Chilean offer by the average share price of AES common stock (determinedshares
over the measuring period and multiplying this amount by 68, the number
of Gener shares represented by each Gener ADS.
The average share price of AES shares will be calculated by taking the
average of the high and low selling prices of AES shares, as described above) is not
below $31.50. Ifreported on
the averageNew York Stock Exchange Composite Transaction Tape, for each of the
ten New York Stock Exchange trading days ending on the second New York
Stock Exchange trading day immediately prior to the date on which our
offer expires, including any extensions of the expiration of our offer.
1
The closing price of AES common shares on the New York Stock Exchange on
November 2, 2000, the last practicable trading day before the
announcement of our offer was $60.875. If this were the average AES share
price over the ten New York Stock Exchange trading day measuring period,
the exchange ratio would be 0.2628337, based on the price of the Chilean
Peso equivalent of $0.235294118 per share we are offering in the Chilean
offer and adjusting for the fact that each Gener ADS represents 68 Gener
shares.
Because the market prices of AES shares change, the market value of the
AES stock is below $31.50, you receive, on the date you receive it, may be more or less
than the price, after adjusting for the 68 Gener shares represented by
each Gener ADS, we are offering in the Chilean offer.
HOW WILL I KNOW WHAT THE ACTUAL EXCHANGE RATIO IS?
No later than two business days before our offer expires, we will receivenotify
you by issuing a fixedpress release announcing the final exchange ratio and
filing that press release with the SEC. You can also call our Dealer
Manager, Deutsche Bank Securities Inc. toll-free at 877-305-4920 to
request information about the exchange ratio.
WHAT IS THE MARKET VALUE OF MY GENER ADSs AS OF A RECENT DATE?
On November 2, 2000, the last trading day before we announced the offers,
the closing price of 0.794 (subject to adjustment) sharesGener ADSs reported on the New York Stock Exchange
Composite Transaction Tape was $12.125 per Gener ADS. The $16 worth of
AES common stock per shareyou would receive for each Gener ADS pursuant to our
offer represents an approximate 32% premium over the closing price of IPALCO common stock. Subjectthe
Gener ADS on November 2, 2000, the last New York Stock Exchange trading
day prior to adjustment, ifthe announcement of the offers and an approximate 39.2%
premium over the average closing price of AES common stock is below $26.45 (an effective pricethe Gener ADS for the ten
consecutive trading days prior 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.such announcement. We encourageadvise you to
obtain current market quotationsa recent quotation for the Gener ADSs in deciding whether to
tender your Gener ADSs.
WILL I BE TAXED ON THE AES SHARES I RECEIVE?
The receipt of AES shares for Gener ADSs by a U.S. Holder pursuant to our
offer will be a taxable transaction for United States federal income tax
purposes and possibly for state, local and foreign income tax purposes as
well.
The receipt of AES shares for Gener ADSs by a Non-U.S. Holder pursuant to
our offer will generally not be a taxable transaction for United States
federal income tax purposes.
The receipt of AES shares for Gener ADSs by a Chilean holder pursuant to
our offer will be a taxable transaction for Chilean income tax purposes.
The receipt of AES shares for Gener ADSs by a non-Chilean holder pursuant
to our offer will generally not be a taxable transaction for Chilean
income tax purposes.
BECAUSE TAX MATTERS ARE COMPLICATED, WE ENCOURAGE YOU TO CONTACT YOUR TAX
ADVISOR TO DETERMINE THE PARTICULAR TAX CONSEQUENCES OF OUR OFFER TO YOU.
FOR A MORE DETAILED DISCUSSION OF THE U.S. FEDERAL AND CHILEAN INCOME TAX
CONSEQUENCES OF OUR OFFER, SEE THE SECTION CAPTIONED "OUR OFFER--CERTAIN
TAX CONSIDERATIONS".
2
WILL I HAVE TO PAY ANY FEES OR COMMISSIONS?
Tendering holders of Gener ADSs will not be obligated to pay transfer
taxes on the exchange of their Gener ADSs pursuant to our offer, except
as set forth in Instruction 6 of the ADS Letter of Transmittal. Holders
of Gener ADSs will bear all costs and expenses associated with any
deposit or withdrawal of Gener shares with Citibank, N.A., as Depositary.
If you are the record owner of your ADSs and you tender your ADSs to us
in the offer, you will not have to pay brokerage fees or similar
expenses. If you own your ADSs through a broker or other nominee, and
your broker or other nominee tenders your ADSs on your behalf, your
broker or nominee may charge you a fee and we will not be responsible for
paying that fee. You should consult your broker or nominee to determine
whether any charges will apply.
WHERE CAN I FIND MORE INFORMATION ON YOU?
You can find more information about us from various sources described in
the section captioned "WHERE YOU CAN FIND MORE INFORMATION".
WHAT ARE THE SECURITIES SOUGHT IN YOUR OFFERS?
In our offer, we are seeking to exchange each outstanding Gener ADS for a
fraction of an AES share having a value, over the measuring period, of
$16. In the Chilean offer, we are seeking to purchase 3,466,600,000
Gener shares for the Chilean Peso equivalent of $0.235294118, in cash, per
Gener share. According to Gener's ownership description provided on
Gener's Internet site at http://www.gener.com, as of September 30, 2000,
Gener ADSs represented approximately 17.91% of the total Gener shares
outstanding. The 3,466,600,000 Gener shares sought in the Chilean offer
represent approximately 75% of Gener shares that were outstanding as of
the date of such report, excluding the Gener shares represented by Gener
ADSs. THE NUMBER OF GENER ADSs AVAILABLE FOR TENDER INTO OUR OFFER IS
SUBJECT TO CHANGE ON A DAILY BASIS AS A RESULT OF DEPOSITS AND WITHDRAWALS
OF GENER SHARES UNDER THE GENER DEPOSIT AGREEMENT WITH CITIBANK, N.A., AS
DEPOSITARY.
CAN YOU INCREASE OR DECREASE THE NUMBER OF GENER ADSs AND/OR SHARES YOU ARE
OFFERING TO EXCHANGE AND PURCHASE UNDER YOUR OFFERS?
Upon the terms and subject to the conditions of our offer, we will accept
all Gener ADSs properly tendered and will exchange them for AES shares.
Upon the terms and IPALCO
common stock.
Q: WILL I RECEIVE DIVIDENDS ON MY AES SHARES?
A: AES does not currently paysubject to the conditions of the Chilean offer, if
more than 3,466,600,000 Gener shares are tendered pursuant to the Chilean
offer, we will accept all Gener shares properly tendered in the Chilean
offer on a pro rata basis.
If the Gener shares tendered in the Chilean offer represent less than a
majority of the outstanding Gener shares, including shares represented by
ADSs, we may elect, in our sole discretion and subject to applicable law,
including applicable law relating to possible extensions of the
expiration of our offer, to waive the minimum condition relating to the
number of Gener shares tendered, to increase the number of Gener shares
to be purchased pursuant to the Chilean offer, to extend our offer and
the Chilean offer or intendterminate our offer and the Chilean offer without
the purchase of any Gener ADSs or Gener shares.
HOW MUCH ARE YOU OFFERING TO PAY FOR GENER SHARES IN THE CHILEAN OFFER?
In the Chilean offer we are offering to pay dividends on its common stock.
Q: WHEN DO YOU EXPECT TO COMPLETE THE SHARE EXCHANGE?
A: We are workingthe Chilean Peso equivalent
of $0.235294118 per Gener share, net to completeeach seller in cash and without
interest. The purchase price of the Chilean Peso equivalent of
$0.235294118 per Gener share exchange as quickly as possible and
expectbeing offered pursuant 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 voteChilean offer
represents an approximate 30.6% premium on the closing price of the Gener
shares on November 2, 2000, the last Santiago Stock Exchange trading day
prior to the announcement of
3
the offers and an approximate 39.8% premium on the average closing price
of the Gener shares for the ten consecutive trading days prior to such
announcement. The Chilean offer will be effected through an auction
procedure on the Santiago Stock Exchange commonly referred to as a
"remate".
There is a possibility that other bidders will choose to participate in
the remate and that we will increase the price we pay for the Gener
shares we acquire in the Chilean offer in order to be successful against
such other bidders. If this occurs, we will increase the amount of AES
stock to be exchanged for each Gener ADS in our offer so that its value,
after adjusting for the fact that each Gener ADS represents 68 Gener
shares, is equal to the highest price per share paid by us in the Chilean
offer and we will extend our offer in compliance with applicable U.S.
securities laws so that you will receive the increased amount of AES
stock in exchange agreement. Anfor your Gener ADSs.
WHAT ARE THE CONDITIONS TO YOUR OFFER?
Our offer is subject to the following conditions:
-- Gener shareholders having approved the amendments to Gener's Bylaws by
the affirmative vote of at least 75% of the outstanding Gener shares,
including Gener shares represented by Gener ADSs, and the effectiveness
of these amendments under Chilean law;
-- Our being satisfied, in our sole discretion, that the proposed
TotalFinaElf transaction has been terminated or will not proceed;
-- Our having made purchases of Gener shares in the Chilean offer;
-- The low per share selling price of the AES shares on the New York Stock
Exchange on any New York Stock Exchange trading day between the date of
our offer and the expiration of our offer, including any extensions
thereof, not having been less than $50;
-- The Registration Statement of which this prospectus is a part having
been declared effective by the SEC;
-- The waiting period and any extension thereof applicable to our offer
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, the HSR Act, having expired or having been terminated and our
having received clearance or approval under any other applicable
antitrust law of any foreign or domestic jurisdiction;
-- Our having received approval to acquire the Gener shares and the Gener
ADSs in the offers from the United States Federal Energy Regulatory
Commission; and
-- the other customary conditions more fully described in the section
captioned "OUR OFFER-- Conditions of Our Offer".
These conditions to our offer are discussed in the section captioned
"OUR OFFER--Conditions of Our Offer."
WHAT ARE THE CONDITIONS TO YOUR CHILEAN OFFER?
The Chilean offer is subject to the following conditions:
-- All of the conditions to our offer having been satisfied or waived by us
for purposes of the Chilean offer even if we have not waived these
conditions for purposes of our offer;
-- Our having received tenders of a number of Gener shares in the Chilean
offer which represents at least a majority of the total number of
outstanding Gener shares, including Gener shares represented by Gener
ADSs; and
-- Our having obtained funds sufficient to pay for the 3,466,600,000 Gener
shares we seek in the Chilean offer and to pay all fees and expenses
incurred in connection with our offers.
4
IS AES'S FINANCIAL CONDITION RELEVANT TO MY DECISION TO TENDER IN YOUR OFFER?
Yes. Gener ADSs accepted in our offer will be exchanged for AES shares;
you should consider AES's financial condition before you decide to become
one of AES's stockholders through our offer. Also, because our offer is
conditioned upon our having made purchases in the Chilean offer which
will require us to obtain funds which we do not currently have available
or committed to us, you should consider our financial condition in order
to evaluate the likelihood that we will obtain these funds.
WHAT PERCENTAGE OF YOUR SHARES WILL GENER SHAREHOLDERS OWN AFTER YOUR OFFER?
Assuming an exchange ratio of 0.2519685, using the AES closing share price
on November 8, 2000, if we exchange all of the Gener shares represented by
Gener ADSs reported to be outstanding on September 30, 2000, former Gener
shareholders would own approximately 0.8% of the outstanding AES shares.
DOES GENER SUPPORT YOUR OFFER?
As of the date of this prospectus, the board of directors of Gener has
not reviewed our offer and has not taken a position with respect to our
offer. Pursuant to Rule 14e-3 under the Securities Exchange Act of 1934,
Gener is required within 10 days of the date of this prospectus to
provide its security holders with a statement of Gener's position with
respect to our offer.
DO THE STATEMENTS ON THE COVER PAGE REGARDING THE POSSIBILITY THAT THE
INFORMATION IN THIS PROSPECTUS MAY BE CHANGED AND THE REGISTRATION STATEMENT
FILED WITH THE SEC NOT YET BEING EFFECTIVE MEAN THAT YOUR OFFER HAS NOT
COMMENCED?
No. Our offer has commenced and completion of this prospectus and
effectiveness of the Registration Statement are not necessary for you to
tender your Gener ADSs. The SEC recently changed its rules to permit
exchange offers to begin before the related Registration Statement has
become effective, and we are taking advantage of the rule changes with
the goal of completing our offer faster than similar share exchanges
could previously be accomplished. We cannot, however, accept any Gener
ADSs tendered in our offer until the Registration Statement is declared
effective by the SEC.
HOW LONG DO I HAVE TO DECIDE WHETHER TO TENDER IN YOUR OFFER?
You will have at least until 12:00 midnight, New York City time, on
Monday, December 11, 2000 to decide whether to tender your Gener ADSs
pursuant to our offer. If you cannot deliver everything that is required
in order to make a valid tender by that time, you may be able to use a
guaranteed delivery procedure which is described later in this prospectus
under the section captioned "OUR OFFER--Exchange of Gener ADSs; Delivery
of AES shares".
UNDER WHAT CIRCUMSTANCES CAN YOUR OFFER BE EXTENDED?
We expressly reserve the right, in our sole discretion but subject to
applicable law, to extend the period of time during which our offer
remains open.
HOW WILL I BE NOTIFIED IF YOUR OFFER IS EXTENDED?
If we extend our offer, we will inform ChaseMellon Shareholder Services
L.L.C. and D.F. King & Co., Inc., the Exchange Agent and the Information
Agent, respectively, for our offer, of that fact, and will make a public
announcement of the extension, not later than 9:00 a.m., New York City
time, on the business day after the day on which our offer was previously
scheduled to expire.
5
HOW DO I PARTICIPATE IN YOUR OFFER?
To tender your Gener ADSs, prior to 12:00 midnight, New York City time,
on Monday, December 11, 2000, unless our offer is extended:
o you must deliver your ADRs representing Gener ADSs and a properly
completed and duly executed ADS Letter of Transmittal to the Exchange
Agent at the address appearing on the back cover page of this prospectus;
or
o the Exchange Agent must receive a confirmation of receipt of your Gener
ADSs by book-entry transfer and a properly completed and duly executed
ADS Letter of Transmittal; or
o you must comply with the guaranteed delivery procedure.
If you have any questions about our offer or the proposed transaction,
please call the Information Agent or the Dealer Manager for assistance at
their respective addresses and telephone numbers set forth on the back
cover of this prospectus.
UNTIL WHAT TIME CAN I WITHDRAW PREVIOUSLY TENDERED GENER ADSs?
You can withdraw previously tendered Gener ADSs at any time until our
offer has expired and, if we have not agreed to accept your Gener ADSs
and exchange them for AES shares by January 11, 2001, you can withdraw
them at any time until we do accept your Gener ADSs.
HOW DO I WITHDRAW PREVIOUSLY TENDERED GENER ADSs?
To withdraw Gener ADSs, you must deliver a written or facsimile notice of
withdrawal with the required information to the Exchange Agent while you
still have the right to withdraw the Gener ADSs.
WILL YOUR OFFER BE FOLLOWED BY A MERGER?
We do not have any present plans to effect a merger following the
completion of the offers. However, we may decide to purchase, directly or
indirectly through affiliates, additional Gener ADSs or Gener shares
following completion of the offers, through open market purchases,
privately negotiated transactions, additional tender offers or otherwise,
at prices that may be more or less than the value of the AES stock to be
exchanged for Gener ADSs in our offer and the price to be paid pursuant
to the Chilean offer and/or for different consideration.
WILL GENER CONTINUE AS A PUBLIC COMPANY?
Yes. Gener shares will continue to be listed and traded on the Santiago
Stock Exchange. Following the exchange of Gener ADSs pursuant to our
offer, it is unlikely that the Gener ADSs will continue to meet the
listing requirements of the New York Stock Exchange.
IF I DECIDE NOT TO TENDER, HOW WILL YOUR OFFERS AFFECT THE GENER SHARES OR
GENER ADSs?
The exchange of Gener ADSs pursuant to our offer and the purchase of
Gener shares pursuant to the Chilean offer will substantially reduce the
number of Gener ADSs and Gener shares that might otherwise trade and will
reduce the number of holders of both the Gener ADSs and the Gener shares.
The reduction in publicly traded Gener ADSs and Gener shares will
adversely affect liquidity and will adversely affect market value of the
Gener ADSs and could also adversely affect the liquidity, marketability
and market value of the Gener shares.
Holders of Gener ADSs do not have appraisal rights in connection with our
offer.
WHOM CAN I TALK TO IF I HAVE QUESTIONS ABOUT YOUR EXCHANGE OFFER?
You can call either D.F. King & Co., Inc., the Information Agent, toll
free at (800) 755-3105 or Deutsche Bank Securities Inc., the Dealer
Manager, toll free at (877) 305-4920.
6
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and other
information with the Securities and Exchange Commission, the SEC. Gener files
annual and current reports with the SEC. You may read and copy any reports,
statements or other information that we and Gener file at the SEC's public
reference room at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call
the SEC at 1-800-SEC-0330 for further information on the public reference room.
Our and Gener's public filings are also available to the public from commercial
document retrieval services and at the Internet Web site maintained by the SEC
at http://www.sec.gov.
We have filed a Form S-4 Registration Statement to register with the SEC
the offering and sale of our shares to be issued to holders of Gener ADSs. This
prospectus is a part of that Registration Statement. As allowed by SEC rules,
this prospectus does not contain all the information that stockholders can find
in the Registration Statement or the exhibits to the Registration Statement.
We also filed with the SEC a statement on Schedule TO pursuant to rule
14d-3 under the Securities Exchange Act of 1934, as amended, the Exchange Act,
furnishing certain information about our offer. You may read and copy the
Schedule TO and any amendments to it at the SEC's public reference room
referred to above.
The SEC allows us to incorporate information into this prospectus "by
reference," which means that we can disclose important information to you by
referring you to another document filed separately with the SEC. The
information incorporated by reference is deemed to be part of this prospectus,
except for any information superseded by information contained directly in this
prospectus. This prospectus incorporates by reference the documents set forth
below that AES and Gener have previously filed with the SEC. These documents
contain important information about AES and Gener and their financial
condition.
AES FILINGS (FILE NO. 001-12291):
o Amended Annual Report on Form 10-K/A for fiscal year ended December 31,
1999, filed on September 7, 2000;
o Annual Report on Form 10-K for fiscal year ended December 31, 1999,
filed on March 30, 2000;
o Quarterly Report on Form 10-Q for fiscal quarter ended June 30, 2000,
filed on August 11, 2000;
o Quarterly Report on Form 10-Q for fiscal quarter ended March 31, 2000,
filed on May 15, 2000;
o Current Report on Form 8-K filed on November 8, 2000;
o Current Report on Form 8-K filed on October 31, 2000;
o Current Report on Form 8-K filed on September 1, 2000;
o Amended Current Report on Form 8-K/A filed on August 18, 2000;
o Current Report on Form 8-K filed on July 28, 2000;
o Current Report on Form 8-K filed on July 27, 2000;
o Current Report on Form 8-K filed on June 21, 2000;
o Current Report on Form 8-K filed on May 12, 2000;
o Current Report on Form 8-K filed on May 8, 2000;
o Amended Current Report on Form 8-K/A filed on February 11, 2000; and
o The description of our common stock set forth in our Registration
Statement on Form 8-A filed on October 9, 1996, including all amendments
and reports filed for the purpose of updating such description.
7
GENER FILINGS (FILE NO. 001-13210):
o Annual Report on Form 20-F for fiscal year ended December 31, 1999,
filed on April 26, 2000 (except for the report of Gener's independent
accountants contained therein which is not incorporated herein by
reference because the consent of Gener's independent accountants has not
yet been obtained nor has exemptive relief under Rule 437 promulgated
under the Securities Act of 1933, as amended been granted to us by the
SEC).
o Report by Foreign Issuer on Form 6-K dated October 30, 2000;
o Report by Foreign Issuer on Form 6-K dated October 24, 2000;
o Report by Foreign Issuer on Form 6-K for fiscal quarter ended March 31,
2000, filed on May 18, 2000;
o Report by Foreign Issuer on Form 6-K for fiscal quarter ended June 30,
2000, filed on August 16, 2000;
o Report by Foreign Issuer on Form 6-K dated April 26, 2000;
o Report by Foreign Issuer on Form 6-K dated April 25, 2000; and
o The description of the Gener ADRs set forth in Chilgener's (Gener's
previous name) Registration Statement on Form F-6 filed on June 28, 1994,
including all amendments and reports filed for the purpose of updating
such description.
We hereby incorporate by reference additional documents that either we or
Gener may file with the SEC between the date of this prospectus and the
expiration date of our offer. These include periodic reports, such as annual
reports on Form 10-K or 20-F, quarterly reports on Form 10-Q, current reports
on Form 8-K and Reports by Foreign Issuer on Form 6-K, as well as proxy
statements.
If you are a stockholder, you may have received some of the documents
incorporated by reference. You also may obtain any of these documents upon
request to: D.F. King & Co., Inc. or from the SEC at the SEC's Internet Web
site described above.
IF YOU WOULD LIKE TO REQUEST DOCUMENTS FROM US, PLEASE CONTACT THE
INFORMATION AGENT NO LATER THAN DECEMBER 1, 2000 TO RECEIVE THEM BEFORE THE
EXPIRATION DATE OF OUR OFFER. If you request any incorporated documents, the
Information Agent 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 PROSPECTUS IN MAKING YOUR DECISION WHETHER TO TENDER YOUR
GENER ADSs INTO OUR OFFER. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT DIFFERS FROM THAT CONTAINED IN THIS PROSPECTUS. THIS
PROSPECTUS IS DATED NOVEMBER 9, 2000. YOU SHOULD NOT ASSUME THAT THE
INFORMATION CONTAINED IN THIS PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER THAN
THAT DATE, AND NEITHER THE MAILING OF THIS PROSPECTUS TO SHAREHOLDERS NOR THE
ISSUANCE OF AES SHARES IN OUR OFFER SHALL CREATE ANY IMPLICATION TO THE
CONTRARY.
RELIEF GRANTED BY THE SEC
In order to facilitate the making of our offer, in a letter dated November
6, 2000, the SEC has issued an order granting us and our subsidiaries,
including the Purchaser, relief with respect to certain rules under the
Exchange Act. Specifically, the SEC order confirms that (1) the Chilean offer
may be conducted without compliance with Section 14(d) of the Exchange Act and
the rules promulgated thereunder and (2) we may offer to purchase Gener shares
in the Chilean offer for the Chilean Peso equivalent of $0.235294118 while
offering to exchange AES shares having a value of $16, determined over the
measuring period, for Gener ADSs in our offer. The SEC has also granted us,
Deutsche Bank Securities Inc., our Dealer Manager and its affiliates, our
Chilean stockbroker and other nominees or brokers, in each case acting as our
agents, exemptive relief from the provisions of Rule 14e-5 under the Exchange
Act which permit us to conduct the Chilean offer and purchase Gener shares
thereunder while simultaneously conducting our offer for Gener ADSs.
8
In connection with receiving this relief, we have agreed to the following
conditions:
-- In the United States we will not purchase Gener ADSs or Gener shares
except pursuant to our offer;
-- Outside of the United States, prior to the expiration of our offer, we
will not purchase Gener ADSs or Gener shares except pursuant to the
Chilean offer;
-- We will disclose in the United States and Chile the purchase of Gener
shares pursuant to the Chilean offer;
-- If we increase the price paid in the Chilean offer for Gener shares, we
will make a corresponding increase in the amount of the AES shares to be
exchanged for Gener ADSs in our offer; and
-- Other customary conditions.
In addition, we have made a request to Gener that it deliver to us a
consent from Gener's independent accountants to the incorporation by reference,
in our Registration Statement on Form S-4 of which this prospectus is a part
and in any future amendment thereto, of Gener's independent accountants' report
dated February 4, 2000, previously filed in Gener's 20-F for the fiscal year
ended December 31, 1999 and to the inclusion of a reference to Gener's
independent accountants' in the section captioned "Experts" in our Registration
Statement so that we may file such consent with the SEC as part of the
Registration Statement in accordance with Rule 439 promulgated under the
Securities Act. To date, Gener has yet to respond to our request. If we do not
receive a consent from Gener's independent accountants prior to the date our
Registration Statement becomes effective, we will request the SEC to exempt us
from filing Gener's independent accountants' consent with the Registration
Statement pursuant to Rule 437 of the Securities Act.
9
AMENDMENTS TO GENER'S BYLAWS
Gener's Bylaws currently provide that no person may own or vote, directly
or indirectly through related parties, more than 20% of the voting capital
stock of Gener and that Gener shall otherwise comply with the provisions of
Decree Law 3,500, including Chapter XII thereof, Chapter XII. Among other
things, Chapter XII provides that no shareholder, directly or through related
persons, may own or vote more than 65% of the voting capital stock of a company
or such lesser amount as may be specified in the company's bylaws. Our offer is
subject to the satisfaction of the Gener Bylaw Condition set forth in the
section captioned, "OUR OFFER--Conditions of Our Offer". In order for this
condition to be satisfied, the holders of at least 75% of the outstanding Gener
shares, including Gener shares represented by Gener ADSs, must approve the
amendments to Gener's Bylaws.
Under Chilean law, holders of at least 10% of the outstanding capital
stock have the right to require a company to convene a meeting of its
shareholders. Under Chilean law, shareholders must be notified of such a
meeting at least 15 days prior to the date of the meeting and the meeting must
be held within 30 days of the date on which a company receives notice of such a
demand from a 10% or more shareholder. Copec has agreed in the Copec Letter, at
our request, to exercise its right as a 10% or more Gener shareholder to make a
shareholder's demand for Gener to hold a shareholders' meeting in order to
approve the amendments to Gener's Bylaws. We are requesting that Copec take the
action necessary to require the Gener board of directors to convene the Gener
shareholder's meeting and we expect that such a request will be made by Copec
promptly.
The Gener shareholders' meeting will consider amending Gener's Bylaws to
eliminate Articles 1 bis, 5 bis, 9 bis, 17 bis, 20 bis, 21 bis, 24, 27 bis and
29 bis and to amend Article 35 to eliminate the reference to Decree Law 3,500.
Articles 1 bis and 35 provide that Gener is subject to Decree Law 3,500.
Articles 5 bis and 27 bis of Gener's Bylaws provide that no one person, or
group of related persons, may own or be entitled to vote, more than 20% of the
outstanding capital stock of Gener. Article 9 bis requires maintenance of
certain asset ratios set forth in Decree Law 3,500. Article 17 bis provides
that in exercising its duties the board of directors shall act within the
limits set forth in the investment and financing policies approved by the
shareholders pursuant to Article 20 bis. Article 21 bis requires shareholder
approval to sell assets identified by the investment and financing policies as
essential for the conduct of Gener's business, as well as any change to the
investment and financing policies approved by shareholders. Article 29 bis
requires shareholders to receive prior to the annual meeting the report issued
by the inspector of accounts pursuant to Article 20 and the board of directors'
proposal with respect to Gener's investment and financing policies. Finally,
Article 24 provides that the vote of shareholders representing at least 75% of
the outstanding shares of IPALCO common stockGener is required to amend, Articles 1 bis, 5 bis, 9
bis, 14 bis, 17 bis, 20 bis, 21 bis, 24, 27 bis and 29 bis. OUR OFFER AND THE
CHILEAN OFFER WILL NOT PROCEED UNLESS GENER SHAREHOLDERS APPROVE THE AMENDMENTS
TO GENER'S BYLAWS BY THE AFFIRMATIVE VOTE OF HOLDERS OF AT LEAST 75% OF THE
OUTSTANDING GENER SHARES, INCLUDING GENER SHARES REPRESENTED BY GENER ADSs, AND
THE AMENDMENTS BECOME EFFECTIVE UNDER CHILEAN LAW. WE URGE YOU TO VOTE FOR THE
AMENDMENTS TO GENER'S BYLAWS REGARDLESS OF WHETHER YOU INTEND TO TENDER YOUR
GENER ADSs IN OUR OFFER.
Pursuant to Chilean law, the amendments to Gener's Bylaws, even if adopted
by the holders of 75% of the outstanding Gener shares as required by Gener's
Bylaws, will not become effective until they are published and recorded. While
we cannot give any assurance as to this timing, our Chilean counsel has advised
us that these actions could be accomplished within 10 business days of the
Gener shareholders' meeting approving the amendments to Gener's Bylaws. The
Gener Bylaw Condition to the offers will not be satisfied until the amendments
to Gener's Bylaws are effective under Chilean law.
Chapter XII. If a company complies with Chapter XII, Chilean pension funds
may invest a larger portion of their assets in such companies than in companies
that are not subject to Chapter XII. Generally, companies that elect to comply
with Chapter XII are required to include in their bylaws the following
provisions: (a) no person, directly or indirectly through a related party, may
own or vote more than a specified percentage of the outstanding voting capital
stock of the company, which percentage may not exceed 65%; (b) minority
shareholders must hold at least 10% of the outstanding voting capital stock of
the company; and (c) at least 15% of the voting capital stock of the company
shall be owned by more than
10
100 shareholders, each owning shares with a value of at least a specified
amount. The company's bylaws must also provide that the company maintain a
minimum ratio relating to the company's adjusted assets to total assets, as
determined in accordance with Decree Law 3,500, and that the shareholders shall
approve investment and financing policies and the share exchange agreement.
Q: WHAT DO I NEEDsale of assets identified by
the company's investment and financing policies as essential to the conduct of
the company's business. If Gener shareholders approve such amendments to Gener's
Bylaws, under Chilean law, Gener will no longer be subject to Decree Law 3,500.
As a result, the amount of the investments the Chilean pension funds are
permitted to maintain will be less than if Gener continued to be subject to such
laws. However, we believe that if these Chilean pension funds sell their full
pro rata portion of Gener shares in the Chilean offer, they will sufficiently
decrease their ownership of Gener shares to fall within allowable limits under
Chilean law and will not be required to sell their remaining Gener shares.
VOTING INSTRUCTIONS--HOLDERS OF GENER ADSs. HOLDERS OF GENER ADSs WHO
DESIRE TO DO NOW?
A: We urgeVOTE IN FAVOR OF THE AMENDMENTS TO GENER'S BYLAWS AND WHO HAVE
QUESTIONS AS TO VOTING PROCEDURES SHOULD CONTACT THE INFORMATION AGENT OR THE
DEALER MANAGER AT THEIR RESPECTIVE ADDRESSES AND TELEPHONE NUMBERS SET FORTH ON
THE BACK COVER OF THIS PROSPECTUS.
The Gener Deposit Agreement pursuant to which the Gener ADSs are issued
provides that, upon receipt of any notice of any meeting of holders of Gener
shares, the Depositary will provide to the Gener ADS holders copies of all
materials received by it and request from such holders voting instructions.
Upon receipt of any such instructions, the Depositary is required to vote or
cause to be voted, or to grant a proxy to a person designated by Gener to vote,
the shares represented by the Gener ADSs in accordance with the instructions
set forth in such request. The Depositary shall not, under any circumstance,
exercise any voting discretion over the Gener ADSs. If no voting instructions
are received by the Depositary on or before the voting cut-off date with
respect to any vote of shareholders, then a holder shall be deemed to have
instructed the Depositary to give a discretionary proxy with full powers of
substitution to the Chairman of Gener's board of directors, or a person
designated by him, on any matters other than matters as to which the Chairman
of Gener's board of directors directs the Depositary that he does not wish such
proxy to be given. Currently, Citibank, N.A. is the Depositary.
VOTING PROCEDURES--HOLDERS OF GENER SHARES. IN ORDER TO VOTE GENER SHARES
IN FAVOR OF THE AMENDMENTS TO GENER'S BYLAWS, HOLDERS OF GENER SHARES MUST
EITHER (1) APPEAR IN PERSON AT THE MEETING OF GENER SHAREHOLDERS TO CONSIDER
THE AMENDMENTS TO GENER'S BYLAWS WHEN IT IS SCHEDULED BY GENER AND VOTE THEIR
GENER SHARES OR (2) COMPLETE AND DELIVER THE POWER OF ATTORNEY DELIVERED WITH
THE CHILEAN OFFER MATERIALS OR WITH GENER'S NOTICE OF THE SHAREHOLDERS MEETING,
IN ACCORDANCE WITH THE INSTRUCTIONS SET FORTH THEREIN.
11
SUMMARY
This summary highlights selected information from this prospectus, and may
not contain all the information that is important to you. To better understand
the proposed transaction and the separate offers to holders of Gener ADSs and
Gener shares, you toshould read this proxy statement/entire document carefully, as well as those
additional documents to which we refer you. You may obtain the information
incorporated by reference into this prospectus carefully, includingby following the instructions in
the section captioned "WHERE YOU CAN FIND MORE INFORMATION".
THE PROPOSED TRANSACTION; THE OFFERS
We are proposing to acquire control of, and at least a majority of the
equity interest in, Gener. We are offering to exchange a fraction of an AES
share having a value of $16, calculated over the ten New York Stock Exchange
trading day measuring period ending on the second New York Stock Exchange
trading day immediately prior to the date on which our offer expires, for each
Gener ADS that is validly tendered and not properly withdrawn prior to the
expiration of our offer. Simultaneously, in Chile, we are making a separate
offer to purchase 3,466,600,000 Gener shares for the Chilean Peso equivalent of
$0.235294118, in cash, per Gener share. The $16 value we are offering for each
Gener ADS is equal to the Chilean Peso equivalent of $0.235294118 we are
offering for each Gener share in the Chilean offer after adjusting for the fact
that each Gener ADS represents 68 Gener shares.
INFORMATION CONCERNING THE TOTALFINAELF GROUP PROPOSAL
On October 22, 2000, Gener announced a proposal from the TotalFinaElf
Group, a major French oil company. Under this proposal TotalFinaElf would
acquire new Gener shares to be issued as part of a capital increase, subject to
the preemptive rights of current Gener shareholders. The TotalFinaElf proposal
is subject to approval by Gener shareholders, negotiation and execution of
definitive agreements, completion by TotalFinaElf of due diligence, receipt of
all required regulatory and other approvals and other conditions. If the
conditions to such proposal were satisfied, it is expected that TotalFinaElf
would become one of Gener's largest shareholders, with an approximate 20%
interest. The proposal provides for TotalFinaElf to invest approximately $330
million to purchase the newly issued Gener shares.
The TotalFinaElf proposal also provides for TotalFinaElf to purchase 80%
of a new company that would be formed to hold Gener's interest in its attachments,Argentine
power business. As a result, Gener would retain only a 20% interest in this
business. TotalFinaElf would pay Gener $450 million for this interest and Gener
would use these funds to repay all existing debt related to the Argentine power
business.
Finally, the TotalFinaElf proposal provides that all future opportunities
in the power generation and trading business in Chile would be pursued by
Gener, but that all such opportunities in Argentina would be pursued by the new
company owned 80% by TotalFinaElf. Opportunities in the power generation and
trading business elsewhere in Latin America would be pursued by TotalFinaElf
and Gener on an equal basis.
Our offer provides holders of Gener ADS the opportunity to sell their
Gener ADS in return for AES shares. The TotalFinaElf proposal does not offer
current holders of Gener shares and ADSs the option to sell their Gener
securities.
YOUR VOTE IS ESSENTIAL. IF YOU WANT THE OPPORTUNITY TO PARTICIPATE IN OUR
OFFER, YOU SHOULD VOTE AGAINST THE TOTALFINAELF PROPOSAL.
REASONS FOR THE OFFERS
We believe that our offers will provide Gener with the long-term strategic
partner that Gener originally announced it was seeking to provide the financial
resources, technology and business opportunities that would allow Gener to
continue growing. In addition, we believe our proposed
12
transaction presents a unique opportunity to improve the efficiency and
productivity of Gener and to consider howreduce costs and enhance the share exchange affects you. Then, mail your
completedquality of Gener's
services in order to benefit its shareholders, customers and signed proxy cardthe communities it
serves. We believe that the proposed transaction will produce the following
benefits:
o An opportunity for Gener shareholders to sell their shares
o Increased competitiveness
o Substantial cost savings
o Increased management strength and expertise with significant experience
in the enclosed return envelopeLatin American and global energy industries
o Financial strength
o Increased diversification into new markets
o Increased market presence and opportunities
OUR OFFER
SUMMARY OF OUR OFFER.
We are offering, upon the terms and subject to the conditions set forth in
this prospectus and in the related ADS Letter of Transmittal, to exchange a
fraction of an AES share having a value of $16, measured over the ten New York
Stock Exchange Trading days ending on the second New York Stock Exchange
Trading day immediately prior to the date on which our offer expires, for each
Gener ADS you validly tender and do not properly withdraw prior to the
expiration of our offer. The actual fraction of an AES share you will receive
for each Gener ADS you validly tender and do not withdraw prior to the
expiration of our offer will be equal to $16 divided by the average of the high
and low selling prices per share of AES common stock, as reported on the New
York Stock Exchange Composite Transaction Tape, for each of the ten New York
Stock Exchange trading days ending on the second New York Stock Exchange
trading day immediately preceding the date on which our offer expires. We are
making our offer through the Purchaser, our wholly owned subsidiary. The term
"expiration of our offer" means 12:00 midnight, New York City time, on Monday,
December 11, 2000, unless we extend the period of time for which our offer is
open, in which case the term "expiration of our offer" means the latest time
and date on which our offer, as so extended, expires. Simultaneously, we are
making, in Chile, a separate offer to purchase 3,466,600,000 Gener shares for
the Chilean Peso equivalent of $0.235294118, in cash, per Gener share.
CONDITIONS OF OUR OFFER.
Our offer is subject to the following:
o Gener shareholders having approved the amendments to Gener's Bylaws by
the affirmative vote of at least 75% of the outstanding Gener shares,
including Gener shares represented by Gener ADSs, and these amendments
having become effective under Chilean law;
o Our being satisfied, in our sole discretion, that the proposed
TotalFinaElf transaction has been terminated or will not proceed;
o Our having made purchases of Gener shares in the Chilean offer;
o The low per share selling price of the AES shares on the New York Stock
Exchange from the date of our offer through the date on which our offer
expires not having been less than $50;
o The Registration Statement of which this prospectus is a part having
been declared effective by the SEC;
13
o The waiting period and any extension thereof applicable to our offer
under the HSR Act having expired or having been terminated and our having
received clearance or approval under any other applicable antitrust law
of any foreign or domestic jurisdiction;
o Our having received approval to acquire the Gener shares and the Gener
ADSs in the offers from the United States Federal Energy Regulatory
Commission; and
o the other customary conditions more fully described in the section
captioned "OUR OFFER--Conditions of Our Offer".
These conditions to our offer are discussed in greater detail in the section
captioned "OUR OFFER--Conditions of Our Offer."
TIMING OF OUR OFFER.
Our offer is currently scheduled to expire on Monday, December 11, 2000;
however, we reserve the right, at any time or from time to time, in our sole
discretion and regardless of whether or not any of the conditions specified in
the section captioned, "OUR OFFER--Conditions of Our Offer" shall have been
satisfied, to extend, for any reason, the period of time during which our offer
is open and to amend our offer in any respect by giving oral or written notice
of such extension or amendment to the Exchange Agent followed as promptly as
practicable by public announcement thereof. For more information you should
read the discussion in the section captioned, "OUR OFFER--Extension,
Termination and Amendment".
The Chilean offer will be scheduled to occur as soon as possible so that your shares canpracticable, and
in any event within 12 Chilean trading days, after the effectiveness of the
amendments to Gener's Bylaws. Subject to applicable law and to the extent
practicable, our offer will be voted atextended as necessary to cause our offer to
expire no later than the special meetingnext business day after the completion 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
againstChilean
offer.
EXTENSION, TERMINATION AND AMENDMENT.
We reserve the share exchange.
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 voteright, at any time before your proxy card is voted ator from time to time, in our sole
discretion and regardless of whether or not any of the special meeting. You can do thisconditions specified in
onethe section captioned, "OUR OFFER--Conditions of three ways. First, you can send aOur Offer" have been
satisfied, to extend for any reason the period of time during which our offer
remains open and to amend our offer in any respect by giving oral or written
notice statingof such extension or amendment to the Exchange Agent followed as
promptly as practicable by public announcement thereof. If we decide to extend
our offer, we will make our announcement to that effect no later than 9:00
a.m., New York City time, on the next business day after the previously
scheduled expiration date. During any such extension, all Gener ADSs previously
tendered and not withdrawn will remain subject to our offer, subject to your
right to withdraw your Gener ADSs in accordance with the procedures set forth
in the section captioned, "OUR OFFER--Withdrawal Rights". We can give no
assurance that we will exercise our right to extend or amend our offer.
Subject to applicable rules and regulations, we also reserve the right, in
our sole discretion, at any time or from time to time, (a) to delay acceptance
for exchange or, regardless of whether we previously accepted Gener ADSs for
exchange, our exchange of any Gener ADSs pursuant to our offer or to terminate
our offer and not accept or exchange any Gener ADSs not previously accepted or
exchanged, upon the failure of any of the conditions of our offer to be
satisfied and (b) to waive any condition, other than the condition relating to
the effectiveness of the Registration Statement for the AES shares to be issued
in our offer, or otherwise to amend our offer in any respect, by giving oral or
written notice of such delay, termination or amendment to the exchange agent
and by making a public announcement thereof. In the case of an extension, any
such announcement will be issued no later than 9:00 A.M., New York City time,
on the next business day after the previously scheduled expiration date.
Subject to applicable law, including Rules 14d-4(c) and 14d-6(d) under the
Exchange Act, which require that any material change in the information
published, sent or given to you would likein connection with our offer be promptly sent
promptly and in a manner reasonably designed to revokeinform you of such change, and
without limiting the manner in
14
which we may choose to make any public announcement, we assume no obligation to
publish, advertise or otherwise communicate any such public announcement other
than by making a release to the Dow Jones News Service.
EXCHANGE OF GENER ADSs; DELIVERY OF AES SHARES.
Upon the terms and subject to the conditions of our offer, including, if
our offer is extended or amended, the terms and conditions of any such
extension or amendment, we will accept for exchange, and will exchange, all
Gener ADSs validly tendered by the expiration date and not properly withdrawn
as promptly as practicable after the later of the expiration date and the
satisfaction or waiver of the conditions of our offer.
WITHDRAWAL RIGHTS.
Your tender of Gener ADSs pursuant to our offer is irrevocable, except
that Gener ADSs tendered pursuant to our offer may be withdrawn at any time
prior to the expiration of our offer, and, unless we previously accepted them
pursuant to our offer, may also be withdrawn at any time after January 11,
2001.
PROCEDURE FOR TENDERING SHARES.
For you validly to tender Gener ADSs pursuant to our offer, (a) a properly
completed and duly executed ADS Letter of Transmittal, or manually executed
facsimile of that document, along with any required signature guarantees, or an
agent's message, which is explained below, in connection with a book-entry
transfer, and any other required documents must be transmitted to and received
by the Exchange Agent at its address set forth on the back cover of this
prospectus and either Gener ADRs for the Gener ADSs to be tendered must be
transmitted to and received by the Exchange Agent at such address or such Gener
ADSs must be tendered pursuant to the procedures for book-entry transfer
described below, and a confirmation of such delivery received by the Exchange
Agent including an agent's message (which is explained below) if the tendering
shareholder has not delivered an ADS Letter of Transmittal, in each case before
the expiration date, or (b) the guaranteed delivery procedure described below
must be complied with.
RISK FACTORS
In deciding whether to tender your proxy. Second,Gener ADSs pursuant to our offer, you
can
completeshould carefully read this prospectus and submit a new proxy card. Third, you can attend the meeting and vote
in person. Your attendance alonedocuments to which we refer you.
You should also carefully consider the following factors:
o the risk that the AES stock Gener ADS holders will receive will be worth
less than $16 per Gener ADS;
o the risks that we will not revoke your proxy. If you have
instructed a broker to vote your shares, you must follow directions receivedachieve the benefits we expect 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 brokerthe
transaction, including the risk that the amount and timing of the cost
savings and other expected benefits from the transaction may be different
from what we expect;
o our high degree of leverage and our financial flexibility and the risk
that we will not be able to vote your shares without instructions from
you. You should instruct your brokerraise sufficient capital to vote your shares, followingfund future
projects and future acquisitions;
o the procedure provided by your broker.
Q: SHOULD I SEND IN MY STOCK CERTIFICATES NOW?
A: No. Afterrisk associated with conducting operations outside of the closing is completed, you will receive written instructionsU.S.,
especially in less developed countries;
o the increasing global competition in our industry;
o the uncertainties associated with project development; and
o the extensive governmental regulations, including regulations relating
to environmental matters, to which we and Gener are subject.
See the description in the section captioned "RISK FACTORS" for exchanging your sharesa more
complete discussion of IPALCO common stock for sharesthese factors and others.
15
CERTAIN TAX CONSIDERATIONS
The receipt of AES common stock
andshares for Gener ADSs by a cash payment for any fractional shares of AES common stockU.S. Holder pursuant to which you
would otherwiseour
offer will 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 lossa taxable transaction for United States federal income tax
purposes in the share exchange on the exchangeand possibly for state, local and foreign income tax purposes as well.
The receipt of their IPALCO stock,
except that IPALCO shareholders willAES shares for Gener ADSs by a non-U.S. Holder pursuant to
our offer 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.
Aftera taxable transaction for United States federal
income tax purposes.
The receipt of shareholder approval, neither IPALCO nor AES may waive the
requirement that legal opinionsshares for Gener ADSs by a Chilean Holder pursuant to
our offer generally will be provided unless further shareholder approval
is obtained with appropriate disclosure.
Becausea taxable transaction for Chilean income tax
matters are complicated, we encourage youpurposes.
The receipt of AES shares for Gener ADSs by a non-Chilean Holder pursuant
to contact yourour offer will generally not be a taxable transaction for Chilean income 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 ENTITLEDpurposes.
BECAUSE TAX MATTERS ARE COMPLICATED, WE ENCOURAGE YOU 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
SUMMARY
THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS PROXY
STATEMENT/PROSPECTUS AND MAY NOT CONTAIN ALLCONTACT YOUR TAX
ADVISOR TO DETERMINE THE INFORMATION THAT IS IMPORTANTPARTICULAR TAX CONSEQUENCES OF OUR OFFER TO YOU. FOR A
MORE COMPLETE UNDERSTANDINGDETAILED DISCUSSION OF THE SHARE EXCHANGE, YOU SHOULD
CAREFULLY READ THIS ENTIRE DOCUMENTU.S. FEDERAL AND CHILEAN INCOME TAX
CONSEQUENCES OF OUR OFFER SEE 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 INSTRUCTIONSDESCRIPTION IN THE SECTION CAPTIONED, "OUR
OFFER--CERTAIN TAX CONSIDERATIONS".
MARKET PRICES 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.AES SHARES AND GENER ADSs AND SHARES
The following table presents:
o the closing price of AES shares, as reported on the New York Stock
Exchange Composite Transaction Tape; and
o the closing price of Gener ADSs, as reported on the New York Stock
Exchange Composite Transaction Tape, and the closing price of Gener
shares, as reported on the Santiago Stock Exchange.
in each case, the last day for which such information could practicably be
calculated prior to the date of this prospectus.
AES GENER GENER
DATE SHARES ADSs SHARES
- ------------------ ----------- ------------ -------
November 8, 2000 $ 63.50 $ 16.375 Ch$138
We urge you to obtain current market quotations before making any decision
with respect to the offer.
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"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"distribution" business. The company'sAES'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 endas of December 31, 1999 were approximately $20.9 billion.
IPALCO Enterprises, Inc.
One Monument Circle
Indianapolis, Indiana 46204
(317) 261-8261
IPALCO Enterprises, Inc.16
Gener S.A.
Miraflores 222, 4th Floor
Santiago, Chile
Gener is the second largest electricity generation group in Chile in terms
of operating revenue and generating capacity. Gener is also engaged in the
following businesses: electricity generation in Colombia, Argentina and Peru;
shipping and port services in Chile; coal mining in Colombia; coal sales to
third parties in Chile and Colombia; natural gas transportation in Chile and
Argentina; electricity distribution in Argentina; and energy trading in the
United States and Canada. Gener also has expanded its activities to include
electricity generation in the Dominican Republic; a joint venture for the
operation and maintenance of thermal generation plants; oil and gas exploration
and production in Argentina and Chile; and water treatment for industrial
customers in Chile. At December 31, 1999, Gener's consolidated total assets
were Ch$ 1,960,612 million (about $3,699 million). In 1999, Gener reported
consolidated operating income of Ch$ 77,555 million (about $146.4 million) and
consolidated net income of Ch$ 6,423 million (about $12.1 million).
Mercury Cayman Co. III, Ltd.
c/o The AES Corporation
1001 North 19th Street
Arlington, Virginia 22209
The Purchaser is a holdingnewly formed limited 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, distributingorganized under the laws
of the Cayman Islands 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-ownedwholly owned subsidiary of AES. The Purchaser was
organized to facilitate our offer and has not carried on any material business
activities other than in connection with our offer.
17
RISK FACTORS
In deciding whether to tender your Gener ADSs pursuant to our offer, you
should carefully read this prospectus and the documents to which we refer you.
You should also carefully consider the following factors:
RISKS RELATING TO THE PROPOSED OFFERS
WE MAY NOT ACHIEVE THE BENEFITS WE EXPECT FROM THE ACQUISITION OF GENER. THIS
MAY HAVE AN ADVERSE EFFECT ON OUR OVERALL BUSINESS, FINANCIAL AND OPERATING
RESULTS.
We decided to pursue the acquisition of Gener with the expectation that
the acquisition will result in benefits to our overall company arising out of
combining Gener's operations with our existing operations. To realize any
benefits or synergies from the acquisition of Gener, we will face the following
post-acquisition challenges:
o increasing the competitiveness of Gener's operations;
o implementing cost savings;
o retaining and assimilating the management and employees of Gener with
our management and employees;
o retaining Gener's customers, suppliers and strategic partners;
o achieving full utilization of Gener's assets and resources;
o developing and maintaining uniform standards, controls, procedures,
policies and information systems;
o responding to any adverse changes in the economic, political or other
conditions in the market in which Gener operates; and
o completing in a timely manner certain sales of Gener assets in order to
comply with regulations in jurisdictions which limit the energy
generation and distribution capacity we may own or otherwise.
If we are not successful in addressing these and other challenges, then
the expected benefits of the acquisition of Gener will not be realized and, as
a result, our operating results and the market price of our common stock may be
adversely affected. Further, we cannot assure you that our growth rate
following the acquisition and the integration of Gener's operations with our
existing operations will equal the historical growth rates we have experienced.
More generally, our views about the expected benefits of our proposed
transaction are based on publicly available information about Gener. Gener may
have other information, not available to us, that would significantly affect
our estimates or views.
SUBSTANTIALLY ALL OF GENER'S OPERATIONS ARE OUTSIDE THE UNITED STATES.
Because substantially all of Gener's operations are outside the United
States, the development of Gener's business is subject to substantial risk. See
the section captioned "--Risks Relating to AES Business--We already do a
significant amount of our business outside the United States, which presents
significant risks."
THE VALUE OF THE AES STOCK GENER ADS HOLDERS RECEIVE MAY BE LESS THAN $16 PER
GENER ADS.
The AES stock received by Gener ADS holders in exchange for their Gener
ADSs may be worth less than $16 per Gener ADS because the market price of AES
shares on the date Gener ADS holders receive them in exchange for their ADSs
may be less than the average of the high and low selling prices over the
measuring period used to calculate the fraction of an AES share to be exchanged
for each ADS.
18
RISKS RELATING TO AES'S BUSINESS
OUR HIGH DEGREE OF LEVERAGE COULD AFFECT OUR FINANCIAL FLEXIBILITY.
We had approximately $19,728 million of outstanding indebtedness
(including trade payables and other liabilities) as of September 30, 2000. As
of September 30, 2000, we had a consolidated ratio of total debt to total book
capitalization (including current debt) of approximately 74%. As a result of
our leverage, we might be significantly limited in our ability to meet our debt
service obligations, to finance the acquisition, development or completion of
additional projects, to compete effectively or to operate successfully under
adverse economic conditions.
WE DO A SIGNIFICANT AMOUNT OF OUR BUSINESS OUTSIDE THE UNITED STATES, WHICH
PRESENTS SIGNIFICANT RISKS.
Our involvement in the development of new projects and the acquisition of
existing plants in locations outside the United States is increasing and a
large portion of our current development and acquisition activities are for
projects and plants outside the United States.
The financing, development and operation of projects outside the United
States entail significant political and financial uncertainties (including,
without limitation, uncertainties associated with first-time privatization
efforts in the countries involved, currency exchange rate fluctuations,
currency repatriation restrictions, regulation of the electricity business,
currency inconvertibility, tax law, political instability, civil unrest, and
expropriation) and other credit quality, liquidity or structuring issues that
have the potential to cause substantial delays in respect of or material
impairment of the value of the project being developed or operated, which we
may not be capable of fully insuring or hedging against. The ability to obtain
financing on a commercially acceptable non-recourse basis in developing nations
has become more difficult. Even when such non-recourse financing is available,
lenders may require us to make higher equity investments than historically have
been the case. In addition, financing in countries with less than
investment-grade sovereign credit ratings may also require substantial
participation by multilateral financing agencies. There can be no assurance
that such financing can be obtained when needed.
The uncertainty of the legal environment in certain countries in which we
are or in the future may be developing, constructing or operating could make it
more difficult for us to enforce our respective rights under agreements
relating to such businesses. In addition, the laws and regulations of certain
countries may limit our ability to hold a majority interest in some of the
businesses that we may develop or acquire. International businesses we own may,
in certain cases, be expropriated by applicable governments. Although we may
have legal recourse in enforcing our rights under agreements and recovering
damages for breaches thereof, there can be no assurance that any such legal
proceedings will be successful.
GLOBAL COMPETITION IS INCREASING AND COULD ADVERSELY AFFECT US.
The global power production market is characterized by numerous strong and
capable competitors, many of whom may have extensive and diversified
developmental or operating experience (including both domestic and
international experience) and financial resources similar to or greater than
ours. Furthermore, in recent years, the power production industry has been
characterized by strong and increasing competition with respect to both
obtaining power sales agreements and acquiring existing power generation
assets. In certain markets, these factors have caused reductions in prices
contained in new power sales agreements and, in many cases, have caused higher
acquisition prices for existing assets through competitive bidding practices.
The evolution of competitive electricity markets and the development of highly
efficient gas-fired power plants have also caused, or are anticipated to cause,
price pressure in certain power markets where we sell or intend to sell power.
We can give no assurance that the foregoing competitive factors will not have a
material adverse effect on us.
DEVELOPMENT UNCERTAINTIES.
The majority of the projects that we develop are large and complex and the
completion of any such project is subject to substantial risks. Development can
require us to expend significant sums for preliminary engineering, permitting,
legal and other expenses in preparation for competitive bids which we may not
win or before it can be determined whether a project is feasible, economically
attractive or
19
capable of being financed. Successful development and construction is
contingent upon, among other things, negotiation of satisfactory engineering,
construction, fuel supply and power sales contracts with other project
participants, receipt of required governmental permits and consents and timely
implementation and satisfactory completion of construction. There can be no
assurance that we will be able to obtain new power sales contracts, overcome
local opposition, if any, obtain the necessary site agreements, fuel supply and
ash disposal agreements, construction contracts, steam sales contracts,
licenses and certifications, environmental and other permits and financing
commitments necessary for the successful development of our projects. There can
be no assurance that development efforts on any particular project, or our
efforts generally, will be successful. If these development efforts are not
successful, we may abandon a project under development. At the time of
abandonment, we would expense all capitalized development costs incurred in
connection therewith and could incur additional losses associated with any
related contingent liabilities. Our future growth is dependent, in part, upon
the demand for significant amounts of additional electrical generating capacity
and our ability to obtain contracts to supply portions of this capacity. Any
material unremedied delay in, or unsatisfactory completion of, construction of
our projects could, under certain circumstances, have an adverse effect on our
ability to meet our obligations. We may also be faced with certain development
uncertainties arising out of doing business outside of the United States. See
the section captioned "--Risks Relating to AES Business--We do a significant
amount of our business outside the United States, which presents significant
risks."
OUR ACQUISITIONS MAY NOT PERFORM AS EXPECTED.
We have achieved a majority of our growth through acquisitions and expect
that we will continue to grow, in part, through acquisitions. Although each of
the acquired businesses had a significant operating history at the time we
acquired them, we have a limited history of owning and operating many of these
businesses. In addition, most of these businesses were government owned and
some were operated as part of a larger integrated utility prior to their
acquisition. There can be no assurances that we will be successful in
transitioning these businesses to private ownership, and that such businesses
will perform as expected or that the returns from such businesses will support
the indebtedness incurred to acquire them or the capital expenditures needed to
develop them.
WE MAY NOT BE ABLE TO RAISE SUFFICIENT CAPITAL TO FUND FUTURE PROJECTS AND
FUTURE ACQUISITIONS AND GREENFIELD PROJECTS.
Each of our projects under development and those independent power
facilities we have acquired, committed to acquire or may seek to acquire may
require substantial capital investment. Continued access to capital with
acceptable terms is necessary to assure the success of these projects. We have
utilized project financing loans to fund the capital expenditures associated
with constructing and acquiring our electric power plants and related assets to
the extent possible. Project financing borrowings have been substantially
non-recourse to our other subsidiaries and affiliates and to us as the parent
company and are generally secured by the capital stock, physical assets,
contracts and cash flow of the related project subsidiary or affiliate. We
intend to continue to seek, where possible, such non-recourse project
financing. However, depending on market conditions and the unique
characteristics of individual projects, such financing may not be available or
our traditional providers of project financing, particularly multinational
commercial banks, may seek higher borrowing spreads and increased equity
contributions.
Furthermore, because of the reluctance of commercial lending institutions
to provide non-recourse project financing (including financial guarantees) in
certain less developed economies, we have sought and will continue to seek, in
such locations, direct or indirect (through credit support or guarantees)
project financing from a limited number of multilateral or bilateral
international financial institutions or agencies. As a precondition to making
such project financing available, these institutions may also require
governmental guarantees of certain project and sovereign related risks.
Depending on the policies of specific governments, such guarantees may not be
offered and as a result, we may determine that sufficient financing will
ultimately not be available to fund the related project. In addition, we are
frequently required to provide more sponsor equity for projects that sell their
electricity into the merchant market than for projects that sell their
electricity under long term contracts.
20
In addition to the project financing loans, if available, we provide a
portion, or in certain instances all, of the remaining long-term financing
required to fund development, construction, or acquisition. These investments
have generally taken the form of equity investments or loans, which are
subordinated to the project financing loans. The funds for these investments
have been provided by cash flows from operations and by the proceeds from
borrowings under our short-term credit facilities and issuances of senior
subordinated notes, convertible debentures, convertible trust preferred
securities and common stock.
Our ability to arrange for financing on either a fully recourse or a
substantially non-recourse basis and the costs of such capital are dependent on
numerous factors, including general economic and capital market conditions, the
availability of bank credit, rating agency ratings, investor confidence, the
continued success of current projects and provisions of tax and securities laws
which are conducive to raising capital in this manner. Should future access to
capital not be available, we may decide not to build new plants or acquire
existing facilities. While a decision not to build new plants or acquire
existing facilities would not affect the results of operations of our currently
operating facilities or facilities under construction, such a decision would
affect our future growth.
THE PERFORMANCE OF OUR GENERATION BUSINESS IS DEPENDENT TO A LARGE DEGREE ON
CERTAIN OF OUR LARGER PROJECTS AND THEIR CUSTOMERS.
The nature of most of our generation plants (based on revenues) is such
that each facility generally relies on one power sales contract with a single
customer for the majority, if not all, of its revenues over the life of the
power sales contract. The prolonged failure of any significant customer to
fulfill its contractual obligations could have a substantial negative impact on
these revenues. We have sought to reduce this risk, in part, by entering into
power sales contracts with utilities or other customers of strong credit
quality and by locating its plants in different geographic areas in order to
mitigate the effects of regional economic downturns.
OUR REVENUES ARE BECOMING LESS PREDICTABLE.
Our business primarily consists of businesses with long-term contracts or
retail concessions, and we expect the contract-based portfolio to be an
effective hedge against future energy and electricity market price risks.
However, an increasing proportion of our current and expected future revenues
are derived from businesses without significant long-term revenue contracts.
Our increasing reliance on non-contract businesses could cause our results of
operations to become more volatile.
OUR DISTRIBUTION BUSINESSES ARE SUBJECT TO GREATER REGULATORY SCRUTINY THAN OUR
GENERATION BUSINESS.
Our distribution businesses face increased regulatory and political
scrutiny in the normal conduct of their operations. This scrutiny may adversely
impact our results of operations, to the extent that such scrutiny or pressure
prevents us from reducing losses as quickly as we planned or denies us a rate
increase called for by our concession agreements. In general, these businesses
have lower margins and are more dependent on regulation to ensure expected
annual rate increases for inflation and increased power costs, among other
things. There can be no assurance that these rate reviews will be granted, or
occur in a timely manner.
WE ARE SUBJECT TO SIGNIFICANT GOVERNMENT REGULATION.
Our generation business in the United States is subject to the provisions
of various laws and regulations, including the Public Utility Regulatory
Policies Act of 1978, as amended, often called the PURPA, and the Public
Utility Holding Company Act, as amended, often called the PUHCA. PURPA provides
to qualifying facilities, commonly referred to as QFs, certain exemptions from
substantial federal and state legislation, including regulation as public
utilities. PUHCA regulates public utility holding companies and their
subsidiaries. It is necessary for us to obtain approval under PUHCA in order to
maintain majority ownership in our domestic power plants that are QFs.
Currently a material portion of our domestic revenues are received from QFs.
Moreover, all of our domestic non-QF plants are Exempt Wholesale Generators,
often referred to as the EWG. An EWG is a facility that has been authorized by
the U.S. Federal Energy Regulatory Commission, often called the FERC, to sell
wholesale power at
21
market-based rates. We enjoy exemptions under PUHCA related to our foreign
utility acquisitions and holdings. We cannot ensure that we will be able to
maintain appropriate PUHCA exemptions for all of our businesses. If we decide
to acquire another U.S. utility or utility assets, we may be required to divest
either all or part of CILCORP, an integrated electric and gas distribution
company owned and operated by AES serving Central Illinois, or take other steps
resulting in a loss of control or as may be required by the SEC. We believe
that, upon the occurrence of an event that would threaten the QF status of one
of our domestic plants, we would be able to react in a manner that would avoid
the loss of QF status (such as by replacing the steam customer). In the event
we were unable to avoid the loss of such status for one of our plants, to avoid
public utility holding company status, we could apply to the FERC to obtain
status as an EWG, or could restructure the ownership of the project subsidiary.
EWGs, however, are subject to broader regulation by FERC and may be subject to
state public utility commissions regulation regarding non-rate matters. In
addition, any restructuring of a project subsidiary could result in, among
other things, a reduced financial interest in such subsidiary, which could
result in a gain or loss on the sale of the interest in such subsidiary, the
removal of such subsidiary from our consolidated income tax group or our
consolidated financial statements, or an increase or decrease in our results of
operations. AES's businesses outside the United States are also subject to
various laws and regulations.
PENDING ELECTRIC UTILITY INDUSTRY RESTRUCTURING PROPOSALS COULD HAVE AN ADVERSE
EFFECT ON US.
Several states have passed legislation that allows electricity customers
to choose their electricity supplier in a competitive electricity market,
so-called "retail access" or "customer choice" laws, and all but two of the
remaining states are considering such legislation. In addition to state
restructuring legislation, some members of Congress have proposed new Federal
legislation to encourage customer choice and recovery of stranded assets.
Several bills have been submitted to Congress on electricity restructuring. In
anticipation of restructuring legislation, many U.S. utilities are seeking ways
to lower their costs in order to become more competitive. These include the
costs that utilities are required to pay under QF contracts. Many utilities are
therefore seeking ways to lower these contract prices by renegotiating the
contracts, or in some cases by litigation. In 1999, we renegotiated contracts
for two of our QFs--Thames (a partial prepayment) and Placerita (a complete
buyout). The Thames transaction has been approved by the Connecticut Department
of Public Utilities Commission.
The FERC and many state utility commissions are currently studying a
number of proposals to restructure the electric utility industry in the United
States. Such restructuring would permit utility customers to choose their
utility supplier in a competitive electric energy market. The FERC issued a
final rule in April 1996 which requires utilities to offer wholesale customers
and suppliers open access to utility transmission lines, on a comparable basis
to the utilities' own use of the lines. The final rule is subject to rehearing
and may become the subject of court litigation. Many utilities have already
filed "open access" tariffs. The utilities contend that they should recover
from departing customers their fixed costs that will be "stranded" by the
ability of their wholesale customers (and perhaps eventually, their retail
customers) to choose new electric power suppliers. The FERC final rule endorses
the recovery of legitimate and verifiable "stranded costs." These may include
the costs utilities are required to pay under many QF contracts which the
utilities view as excessive when compared with current market prices. Many
utilities are therefore seeking ways to lower these contract prices or rescind
the contracts altogether, out of concern that their shareholders will be
required to bear all or part of such "stranded" costs. Some utilities have
engaged in litigation against QFs to achieve these ends.
In addition, future United States electric rates may be deregulated in a
restructured United States electric utility industry. This increase in
competition may result in lower rates and less profit margin for United States
electricity sellers. Falling electricity prices, the introduction of commodity
markets for electricity and uncertainty as to the future structure of the
industry has rendered the long-term power purchase contracts obsolete. As a
result, in the generation business we are increasingly dependent upon prices
for electricity determined in electricity spot markets. Such prices can be very
volatile and the effect on us of this volatility cannot be predicted.
The United States Congress is considering proposed legislation which would
repeal PURPA entirely, or at least repeal the obligation of utilities to
purchase from QFs. There is strong support for
22
grandfathering existing QF contracts if such legislation is passed, and also
support for requiring utilities to conduct competitive bidding for new electric
generation if the PURPA purchase obligation is eliminated. Various bills have
also proposed a repeal of PUHCA. Repeal of PUHCA would allow power generators
and vertically integrated utilities to acquire retail utilities in the United
States that are geographically widespread, as opposed to the current
limitations of PUHCA which requires that retail electric systems be capable of
physical interconnection. In addition, registered holding companies would be
free to acquire non-utility businesses, which they may not do now, with certain
limited exceptions. In the event that PUHCA is repealed, competition would
likely increase. Repeal of PURPA and/or PUHCA may or may not be part of
comprehensive legislation to restructure the electric utility industry, allow
retail competition, and deregulate most electric rates. The effect of any such
repeal cannot be predicted, although any such repeal could have a material
adverse effect on us.
FROM TIME TO TIME WE ARE SUBJECT TO MATERIAL LITIGATION AND REGULATORY
PROCEEDINGS.
From time to time, we and our affiliates are parties to litigation and
regulatory proceedings. You should review the descriptions of such matters
contained in our Annual, Quarterly and Current Reports filed with the SEC and
incorporated by reference herein. There can be no assurances that the outcome
of such matters will not have a material adverse effect on our consolidated
financial position.
OUR BUSINESS IS SUBJECT TO STRINGENT ENVIRONMENTAL REGULATIONS.
Our activities are subject to stringent environmental regulation by
federal, state, local and foreign governmental authorities. These regulations
generally involve effluents into the water, emissions into the air, the use of
water, wetlands preservation, waste disposal, endangered species, and noise
regulation, among others. Congress and other foreign governmental authorities
also may consider proposals to restrict or tax certain emissions. These
proposals, if adopted, could impose additional costs on the operation of our
power plants. There can be no assurance that we would be able to recover all or
any increased costs from our customers or that our business, financial
condition or results of operations would not be materially and adversely
affected by future changes in domestic or foreign environmental laws and
regulations. We have made and will continue to make capital and other
expenditures to comply with environmental laws and regulations. There can be no
assurance that such expenditures will not have a material adverse effect on our
financial condition or results of operations.
OUR DIRECTORS AND OFFICERS HAVE SIGNIFICANT OWNERSHIP INTERESTS IN US AND CAN
EXERT SIGNIFICANT INFLUENCE OR CONTROL OVER MATTERS REQUIRING STOCKHOLDER
APPROVAL.
As of February 4, 2000, our two founders, Roger W. Sant and Dennis W.
Bakke, and their immediate families, together owned beneficially approximately
18.4% of our outstanding common stock. As a result of their ownership
interests, Messrs. Sant and Bakke may be able to significantly influence or
exert control over our affairs, including the election of our directors. As of
February 4, 2000, all of our officers and directors and their immediate
families together owned beneficially approximately 24.9% of our outstanding
common stock. To the extent that they decide to vote together, these
stockholders would be able to significantly influence or control the election
of our directors, our management and policies and any action requiring
stockholder approval, including significant corporate transactions.
OUR ADHERENCE TO OUR "SHARED PRINCIPLES" COULD HAVE AN ADVERSE IMPACT ON OUR
RESULTS OF OPERATIONS.
A core part of our corporate culture is a commitment to "shared
principles": to act with integrity, to be fair, to have fun and to be socially
responsible. We seek to adhere to these principles not as a means to achieve
economic success, but because adherence is a worthwhile goal in and of itself.
However, if we perceive a conflict between these principles and profits, we
will try to adhere to our principles--even though doing so might result in
diminished or foregone opportunities or financial benefits.
SHARES ELIGIBLE FOR FUTURE SALE.
From time to time, our subsidiaries incur indebtedness that is secured by
a pledge of shares of our common stock held by that subsidiary. The sale of a
substantial number of such shares in the public market upon any foreclosure or
otherwise could have an adverse effect on the market price of our common stock.
See the section captioned "OUR OFFER--Purpose of the Offers; Plans for Gener".
23
THE COMPANIES
THE AES CORPORATION
We are a global power company committed to serving the world's needs for
electricity in a socially responsible way. Our 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. We also sell electricity
directly to end users such as commercial, industrial, governmental and
residential customers through our "distribution" business.
Sales by our generation business are made under long-term contracts from
power plants owned by our subsidiaries and affiliates, as well as directly into
power pools. We own new plants constructed for such purposes, commonly called
"greenfield" plants, as well as older power plants acquired through
competitively bid privatization initiatives or negotiated acquisitions.
Electricity sales by our distribution businesses, including our
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.
Our generating assets include interests in over 140 facilities totaling
over 48 gigawatts of capacity. Our 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 our various retail electricity supply businesses, we sell electricity
to over 154,000 end-use customers. Revenues during 1999 were $3.25 billion and
total assets were $20.9 billion as of December 31, 1999.
We were incorporated in Delaware in 1981.
We have our principal executive offices at 1001 North 19th Street,
Arlington, Virginia 22209 (telephone number (703) 522-1315).
GENER S.A.
THE FOLLOWING AND OTHER INFORMATION CONTAINED IN THIS PROSPECTUS
CONCERNING GENER IS TAKEN FROM PUBLICLY AVAILABLE INFORMATION CONCERNING GENER
FILED WITH THE SEC. SUCH INFORMATION MAY BE EXAMINED AND COPIES MAY BE OBTAINED
AT THE PLACES AND IN THE MANNER SET FORTH UNDER THE SECTION CAPTIONED "WHERE
YOU CAN FIND MORE INFORMATION". ALTHOUGH WE HAVE NO KNOWLEDGE THAT WOULD
INDICATE THAT ANY STATEMENTS CONTAINED HEREIN BASED UPON SUCH REPORTS AND
DOCUMENTS ARE UNTRUE, WE TAKE NO RESPONSIBILITY FOR THE ACCURACY OR
COMPLETENESS OF THE INFORMATION CONTAINED IN SUCH REPORTS AND OTHER DOCUMENTS
OR FOR ANY FAILURE BY GENER TO DISCLOSE EVENTS THAT MAY HAVE OCCURRED AND MAY
AFFECT THE SIGNIFICANCE OR ACCURACY OF ANY SUCH INFORMATION BUT THAT ARE
UNKNOWN TO US.
Gener is the second largest electricity generation group in Chile in terms
of operating revenue and generating capacity. As of December 31, 1999, Gener
and its 50%-owned related company, Guacolda, accounted for approximately 23.5%
of Chile's total generating capacity. Gener is also engaged, directly or
through subsidiaries and related companies, in:
o electricity generation in Colombia, Argentina and the Dominican
Republic;
o shipping and port services in Chile;
o coal mining in Colombia;
o coal sales to third parties in Chile and Colombia;
o natural gas transportation in Chile and Argentina; and
o energy trading in the United States and Canada.
24
Recently, Gener expanded its activities to include:
o a joint venture for the operation and maintenance of thermal
generation plants;
o oil and gas exploration and production in Argentina and Chile; and
o water and distribution treatment for industrial customers in Chile.
Gener recently increased its stake in several core generation facilities,
including:
o the purchase of an additional 31.97% in Central Puerto from
Sempra/PSE&G, doubling Gener's ownership interest and causing Central
Puerto to become a consolidated subsidiary; and
o the acquisition of an additional interest in Hidroelectrica Piedra
del Aguila, HPDA, increasing Gener's ownership interest to 29.5%.
Gener also recently sold its minority stake in Egenor (Peruvian
generator) and in Energia San Juan (Argentine distributor), and
acquired generation assets in the Dominican Republic.
On April 19, 2000, Gener announced that it had decided to seek a long term
partnership with a first class company that would contribute financial
resources, technology and business opportunities that would allow Gener to
continue growing. Gener's board of directors decided to engage the services of
Warburg Dillon Read, a subsidiary of the Union Bank of Switzerland, to obtain
their advice in the analysis and search of options for strategic alliance.
MERCURY CAYMAN CO. III, LTD.
Mercury Cayman Co. III, Ltd., the Purchaser, is a newly formed limited
company organized under the laws of the Cayman Islands and a wholly owned
subsidiary of us organized to facilitate the acquisition of Gener. The
Purchaser has not carried on any material business activities other than in
connection with the acquisition of Gener. We own directly all of the
outstanding equity interest in the Purchaser. Until immediately prior to the
time that the Purchaser exchanges AES shares for Gener ADSs pursuant to our
offer, it is not expected that the Purchaser will have any significant assets
or liabilities or engage in material business activities other than those
incident to the transactions contemplated by our offer.
THE PROPOSED TRANSACTION; THE OFFERS
We intend to acquire, through the offers, control of, and a majority of
the equity interest in, Gener. We intend, as soon as practicable after
completion of our offer, to seek majority representation on Gener's board of
directors. Although we have not made any firm decision with respect to the
remaining members of Gener's board of directors, we believe that such other
members could include current members of Gener's board of directors and other
individuals not affiliated with us.
We are offering to exchange each Gener ADS for a fraction of an AES share
having a value of $16. This fraction of an AES share will be determined by
dividing $25.00 (the "Per Share
Amount")$16 by the average of the daily closinghigh and low selling prices perof one AES share
of AES common
stockon the New York Stock Exchange, as reported on the New York Stock Exchange
Composite Transaction Tape, onfor each of the twentyten New York Stock Exchange trading
days ending on the datesecond New York Stock Exchange trading day immediately prior
to the fifth trading
day beforeexpiration of our offer. Our offer is subject to significant conditions
more fully described in the closingsection captioned, "OUR OFFER--Conditions of Our
Offer". Based upon Gener's ownership description provided in Gener's Internet
site at http://www.gener.com, as of September 30, 2000, Gener ADSs represented
approximately 17.91% of the outstanding Gener shares. Simultaneously with our
offer, we are also making through a wholly owned subsidiary the Chilean offer
to purchase for cash 3,466,600,000 Gener shares, representing according to
Gener's 20-F approximately 75% of the outstanding Gener shares, excluding Gener
shares represented by Gener ADSs, at the Chilean Peso equivalent of
$0.235294118 per Gener share. The cash payment per Gener share exchange if such average trading pricein the Chilean
offer is
greater
3
than or equal to $31.50; however,the value, over the measuring period, of the fraction of an
AES share offered in exchange for each Gener ADS pursuant to our offer, after
adjusting for the fact each Gener ADS represents 68 Gener shares.
Based upon the number of Gener ADSs outstanding according to Gener's
ownership description provided in Gener's Internet site at
http://www.gener.com, if we purchase all outstanding Gener ADSs
25
pursuant to our offer and the average closing price3,466,600,000 Gener shares sought pursuant to the
Chilean offer, when added to the Gener shares and Gener ADSs we already own, we
would own approximately 80% of the outstanding Gener shares, including Gener
shares represented by Gener ADSs.
BACKGROUND AND REASONS FOR OUR OFFER
We have considered the possible acquisition of Gener in connection with
our overall investment in electric generation and distribution in Latin
America. In April 2000, following Gener's announcement that it was seeking a
strategic partner, we studied in greater detail an acquisition of a significant
interest in Gener. We also approached Copec regarding the possible acquisition
of the Gener shares held by Copec. On October 22, 2000, Gener announced the
proposal from the TotalFinaElf Group. On October 27, 2000, Copec publicly
announced its opposition to the TotalFinaElf proposal and announced its
intention to call a meeting of Gener shareholders to consider and vote upon the
amendments to Gener's Bylaws. Thereafter, we and our representatives met with
Copec to discuss Copec's view of the TotalFinaElf proposal and other matters.
On November 4, 2000, we entered into the Copec Letter and announced our
intention to make our offer and made the Chilean offer.
We believe that our offers will provide Gener with the long-term strategic
partner that Gener originally announced it was seeking to provide financial
resources, technology and business opportunities that would allow Gener to
continue growing. In addition, we believe our proposed transaction presents a
unique opportunity to improve the efficiency and productivity of Gener and to
reduce costs and enhance the quality of Gener's services in order to benefit
its shareholders, customers and communities it serves. We believe that the
proposed transaction will produce the following benefits:
o an opportunity for Gener shareholders to sell their shares;
o increased competitiveness;
o substantial cost savings;
o management strength with significant expertise in the Latin American
and global energy industries;
o financial strength;
o increased diversification into new markets; and
o increased market presence and opportunities.
26
OUR OFFER
TERMS OF OUR OFFER; EXPIRATION DATE
We are offering, upon the terms and subject to the conditions set forth in
this prospectus, to exchange a fraction of an AES share having a value of $16
for each Gener ADS that is below $31.50,validly tendered and not properly withdrawn prior to
the exchange ratioexpiration of our offer. This fraction of an AES share will be determined
by dividing $16 by the Per Share Amount by
$31.50. Accordingly, subjectaverage of the high and low selling prices per AES share
on the New York Stock Exchange, as reported on the New York Stock Exchange
Composite Transaction Tape, for each of the ten New York Stock Exchange trading
days ending on the second New York Stock Exchange trading day immediately prior
to adjustment as described below, as an IPALCO
shareholderthe date on which our offer expires. We are making our offer through our
wholly owned subsidiary, the Purchaser, a limited company organized under the
laws of the Cayman Islands. You will not receive any fractional AES shares.
Instead, after taking into account all Gener ADSs you validly tender and do not
withdraw prior to the expiration of our offer, you will receive cash in an
amount equal to any fractional AES shares you would otherwise be entitled to
receive, expressed as a maximumdecimal and rounded to the nearest 0.01 of 0.794 sharesa share,
multiplied by the average of the high and low selling prices of AES common stock in
exchangeshares as
reported on the New York Stock Exchange Composite Transaction Tape for each share of
IPALCO common stock you own. As a result, the methodten New York Stock Exchange trading days ending on the second New York
Stock Exchange trading day immediately prior to the date on which our offer
expires, including any extensions of determining the exchange ratio presents some risk to IPALCO shareholders that
the valueexpiration 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 hasour offer.
We have the right to terminate our offer if at any time on or prior to the
expiration of our offer the low per share exchange
agreement. As an example of the method of determining the exchange ratio, if the
average closingselling price of AES common stock, determinedshares on the
New York Stock Exchange is less than $50.
The term "expiration of our offer" shall mean 12:00 midnight, New York
City time, on Monday, November 11, 2000, unless we shall have extended the
period of time for which our offer is open, in which event the term "expiration
of our offer" shall mean the latest time and date at which our offer, as described above, were
$50.00, you would receive 0.5 sharesso
extended by us, shall expire.
Our offer is also subject to the conditions set forth in the section
captioned, "--Conditions of AES common stock for each shareOur Offer". If any of IPALCO common stock you own.
The Per Share Amountthese conditions is not
satisfied, we may increase. Ifterminate our offer and return all tendered Gener ADSs to
tendering ADS holders, extend our offer and, subject to withdrawal rights as
set forth in the closingsection captioned "--Withdrawal Rights", retain all such Gener
ADSs until the expiration of our offer as so extended, waive such conditions
and, subject to any requirement to extend the period of time during which our
offer is open, accept all Gener ADSs validly tendered by the expiration date
and not withdrawn, or delay acceptance of Gener ADSs, subject to applicable
law, until the satisfaction or waiver of the share exchange
occurs afterconditions of our offer. For a
description of our right to extend the Trigger Date (as defined below)period of time during which our offer is
open and to amend, delay or terminate our offer, see the description in the
sections captioned "--Extension, Termination and Amendment" and "--Certain
Legal Matters; Regulatory Approvals".
We have delivered our offer materials to Citibank, N.A., as Depositary
under the Per Share AmountGener Deposit Agreement, and have requested Gener to make a request
to the Depositary to distribute our offer materials to beneficial holders of
Gener ADSs. We have also requested from the Gener a list of all holders of
Gener ADSs. Under the Gener Deposit Agreement, the Depositary has agreed to
distribute to holders of Gener ADSs materials as requested by Gener and to
provide Gener with a list of holders of Gener ADSs upon request. We intend to
use the list of holders of Gener ADSs to transmit our offer materials to
holders of Gener ADSs and to solicit their vote in favor of amendments to
Gener's Bylaws and against the TotalFinaElf proposal. We believe that Gener
should take such actions under the Gener Deposit Agreement to enable holders of
Gener ADSs to receive directly our offer materials.
EXTENSION, TERMINATION AND AMENDMENT
We reserve the right, at any time or from time to time, in our sole
discretion and regardless of whether or not any of the conditions specified in
the section captioned "--Conditions of Our Offer" shall have been satisfied,
to extend, for any reason, the period of time during which our offer is open
and to amend our offer in any respect by giving oral or written notice of such
extension or amendment to the Exchange Agent followed as promptly as
practicable by public announcement thereof. During any such
27
extension, all Gener ADSs previously tendered and not withdrawn will remain
subject to our offer, subject to the rights of a tendering holder to withdraw
its Gener ADSs in accordance with the procedures set forth in the section
captioned "--Withdrawal Rights". We can give no assurance that we will exercise
our right to extend or amend our offer.
The Chilean offer will be increased by $0.15, plus a daily increase equalscheduled to $0.375 per calendar quarter
(equivalent to $0.00411 per day). The Trigger Date is definedoccur as the latest of
(i) March 31, 2001, (ii) the date which is 30soon as practicable, and
in any event, within 12 Chilean trading days, after the certificationeffectiveness of the
amendments to Gener's Bylaws. Subject to applicable law and to the extent
practicable, our offer will be extended as necessary to cause our offer to
expire no later than 24 hours after the completion of the Chilean offer.
Subject to the SEC's applicable rules and regulations, we also reserve the
right, in our sole discretion, at any time or from time to time, (a) to delay
acceptance for exchange of or, regardless of whether we previously accepted
Gener ADSs for exchange, exchange of any Gener ADSs pursuant to our offer or to
terminate our offer and not accept or exchange any Gener ADSs not previously
accepted, or exchanged, upon the failure of any of the conditions of our offer
to be satisfied and (b) to waive any condition or otherwise amend our offer in
any respect, by giving oral or written notice of such delay, termination or
amendment to the Exchange Agent and followed as promptly as practicable by
public announcement thereof. In the case of an extension, any such announcement
will be issued no later than 9:00 A.M., New York City time, on the next
business day after the previously scheduled expiration date. Subject to
applicable law (including Rules 14d-4(c) and 14d-6(d) under the Exchange Act,
which require that any material change in the information published, sent or
given to stockholders in connection with the offer be promptly sent to
stockholders in a manner reasonably designed to inform stockholders of such
change) and without limiting the manner in which we may choose to make any
public announcement, we assume no obligation to publish, advertise or otherwise
communicate any such public announcement other than by making a release to the
Dow Jones News Service.
If we will make a material change in the terms of our offer or the
information concerning our offer, or if we will waive a material condition of
our offer, we will extend our offer to the extent required under the Exchange
Act. If, prior to the expiration date, we change the percentage of Gener ADSs
being sought or the consideration offered to you, that change will apply to all
holders whose Gener ADSs are accepted for exchange pursuant to our offer. If at
the time notice of that change is first published, sent or given to you, our
offer is scheduled to expire at any time earlier than the tenth business day
from and including the date that such notice is first so published, sent or
given, we will extend our offer until the expiration of that ten business-day
period. For purposes of our offer, a "business day" means any day other than a
Saturday, Sunday or federal holiday and consists of the time period from 12:01
A.M. through 12:00 midnight, New York City time.
EXCHANGE OF GENER ADSs; DELIVERY OF AES SHARES
Upon the terms and subject to the conditions of our offer, including, if
our offer is extended or amended, the terms and conditions of any such
extension or amendment, we will accept for exchange, and will exchange, Gener
ADSs validly tendered by the Indiana Utility Regulatory Commission (the "IURC")expiration date and not withdrawn as soon as
practicable after the later of the expiration date and the satisfaction or
waiver of the conditions set forth in the section captioned "--Terms of Our
Offer; Expiration of Our Offer". In addition, we reserve the right, in our sole
discretion and subject to applicable law, to delay the acceptance for exchange
or the exchange of Gener ADSs in order to comply in whole or in part with any
applicable law. For a description of our right to terminate our offer and not
accept the Gener ADSs for exchange or to delay acceptance of the Gener ADSs for
exchange. See the section captioned "--Extension; Termination and Amendment".
For purposes of our offer, we shall be deemed to have accepted for
exchange tendered Gener ADSs when, as and if we shall give oral or written
notice to the Exchange Agent of our acceptance of the tender of such Gener
ADSs. The Exchange Agent will deliver AES shares in exchange for Gener ADSs
pursuant to our offer and cash instead of fractional AES shares as soon as
practicable after receipt of such notice. The Exchange Agent will act as agent
for the tendering shareholders for the purpose of receiving AES shares and cash
to be paid instead of fractional AES shares from us and transmitting such stock
and cash to tendering shareholders. In all cases, exchange of Gener ADSs
tendered and accepted for exchange pursuant to our offer will be made only after
timely receipt by the Exchange Agent of Gener ADRs for
28
such Gener ADSs (or of a confirmation of a book-entry transfer of such Gener
ADSs, into the exchange agent's account at the Book-Entry Transfer Facility, as
defined in the section captioned "--Procedures for Accepting Our Offer", a
properly completed and duly executed ADS Letter of Transmittal, or facsimiles
thereof, and all other required documents. Accordingly, delivery of the AES
shares and payment of cash instead of fractional AES shares may be made to
tendering shareholders at different times if delivery of the Gener ADSs and
other required documents occurs at different times. For a description of the
procedure for tendering Gener ADSs pursuant to our offer, see the section
captioned "--Procedures for Accepting Our Offer". Under no circumstances will
interest be paid by us on the cash paid for fractional shares, even if there is
issued,a delay in making the exchange and (iii)payment.
If we increase the value of the consideration to be paid for Gener ADSs
pursuant to our offer, we will pay such increased consideration for all Gener
ADSs exchanged pursuant to our offer.
If any tendered Gener ADSs are not accepted for exchange pursuant to our
offer for any reason, or if certificates are submitted for more Gener ADSs than
are tendered, certificates for such unexchanged or untendered Gener ADSs will
be returned (or, in the case of Gener ADSs tendered by book-entry transfer,
such Gener ADSs will be credited to an account maintained at the Book-Entry
Transfer Facility), without expense to the tendering shareholder, as promptly
as practicable following the expiration or termination of our offer.
CASH INSTEAD OF FRACTIONAL AES SHARES
We will not issue certificates representing fractional AES shares pursuant
to our offer. Instead, each tendering Gener ADS holder who would otherwise be
entitled to a fractional AES share will receive cash in an amount equal to such
fraction (expressed as a decimal and rounded to the nearest 0.01 of a share)
multiplied by the average of the high and low selling prices of AES shares as
reported on the New York Stock Exchange Composite Transaction Tape for each of
the ten New York Stock Exchange trading days ending on the second New York
Stock Exchange trading day immediately prior to the date on which all the conditions (other than the receipt of
approvalour offer
expires, including any extensions of the shareexpiration of our offer. You will not
receive any interest on the cash to be given for fractional AES shares, even if
there is a delay in making the exchange fromand payment.
WITHDRAWAL RIGHTS
Your tender of Gener ADSs pursuant to our offer is irrevocable, except
that Gener ADSs tendered pursuant to our offer may be withdrawn at any time
prior to the SECexpiration of our offer, and, unless we previously accepted them
pursuant to our offer, may also be withdrawn at any time after January 11,
2001. If we extend the period of time during which our offer is open, are
delayed in accepting for exchange the Gener ADSs or are unable to exchange the
Gener ADSs pursuant to our offer for any reason, then, without prejudice to our
rights under our offer, the Exchange Agent may, on our behalf, retain all Gener
ADSs tendered and such Gener ADSs may not be withdrawn except as otherwise
provided in this section. Any such delay will be an extension of our offer to
the extent required by law.
For a withdrawal to be effective, a written, telegraphic, telex or
facsimile transmission notice of withdrawal must be timely received by the
Exchange Agent at its address set forth on the back cover of this prospectus
and must specify the name of the person who tendered the Gener ADSs to be
withdrawn and the exemptionnumber of AESGener ADSs to be withdrawn and the name of the
registered holder of Gener ADSs, if different from registration as a holding company underthat of the Public Utility Holding Company Act
of 1935, as amended ("PUHCA"))person who
tendered such Gener ADSs. If the Gener ADSs to be withdrawn have been satisfieddelivered
to the Exchange Agent, a signed notice of withdrawal with (except in the case
of Gener ADSs tendered by an Eligible Institution) signatures guaranteed by an
Eligible Institution must be submitted prior to the release of such Gener ADSs.
In addition, such notice must specify, in the case of Gener ADSs tendered by
delivery of certificates, the name of the registered holder (if different from
that of the tendering shareholder) and the serial numbers shown on the
particular Gener ADRs evidencing the Gener ADSs to be withdrawn or, waivedin the case
of Gener ADSs tendered by AES.
Notwithstandingbook-entry transfer, the foregoing,name and number of the
Trigger Dateaccount at the Book-Entry Transfer Facility to be credited with the withdrawn
Gener ADSs. Withdrawals may not be rescinded, and Gener ADSs withdrawn will
thereafter be deemed not
occur if29
validly tendered for purposes of our offer. However, withdrawn Gener ADSs may be
tendered again by following one of the approvalprocedures described in the section
captioned "--Procedure for Accepting Our Offer" at any time prior to the
expiration of our offer.
All questions as to the form and validity (including time of receipt) of
any notice of withdrawal will be determined by us, in our sole discretion,
which determination shall be final and binding. Neither we, the Purchaser, the
Dealer Manager, the Exchange Agent, the Information Agent nor any other person
will be under any duty to give notification of any defect or irregularity in
any notice of withdrawal or incur any liability for failure to give any such
notification.
PROCEDURE FOR ACCEPTING OUR OFFER
To tender Gener ADSs pursuant to our offer, either (a) a properly
completed and duly executed ADS Letter of Transmittal (or facsimile thereof)
and all other documents required by the Federal Energy Regulatory Commission (the "FERC"ADS Letter of Transmittal must be
received by the Exchange Agent at its address set forth on the back cover of
this prospectus and either Gener ADRs for the Gener ADSs to be tendered must be
received by the Exchange Agent at such address or such Gener ADSs must be
delivered pursuant to the procedures for book-entry transfer described below
(and a confirmation of such delivery received by the Exchange Agent, including
an Agent's Message (as defined below) if the tendering shareholder has not
delivered an ADS Letter of Transmittal), in each case by the expiration date,
or (b) the guaranteed delivery procedure described below must be complied with.
The term "Agent's Message" means a message transmitted by the Book-Entry
Transfer Facility (as hereinafter defined) to and received by the Exchange
Agent and forming a part of a Book-Entry Confirmation which states that the
Book-Entry Transfer Facility has received an express acknowledgment from the
participant tendering the Gener ADSs which are the subject of such Book-Entry
Confirmation that such participant has received and agrees to be bound by the
terms of the ADS Letter of Transmittal and that we may enforce such agreement
against such participant.
Book-Entry Delivery. The Exchange Agent will establish an account with
respect to the Gener ADSs at The Depository Trust Company ("Book-Entry Transfer
Facility") is not
received untilfor purposes of our offer within two business days after the date of
our offer, and any financial institution that is a participant in the system of
the Book-Entry Transfer Facility may make delivery of Gener ADSs by causing the
Book-Entry Transfer Facility to transfer such Gener ADSs into the Exchange
Agent's account in accordance with the procedures of the Book-Entry Transfer
Facility. However, although delivery of Gener ADSs may be effected through
book-entry transfer, the ADS Letter of Transmittal (or facsimile thereof)
properly completed and duly executed, together with any required signature
guarantees or an Agent's Message and any other required documents must, in any
case, be received by the Exchange Agent at one of its addresses set forth on
the back cover of this prospectus by the expiration date, or the guaranteed
delivery procedure described below must be complied with. DELIVERY OF THE ADS
LETTER OF TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS TO THE BOOK-ENTRY
TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
Partial Tenders. If fewer than all of the Gener ADSs delivered to the
Exchange Agent are to be tendered, the holder thereof should so indicate in the
ADS Letter of Transmittal by filling in the number of Gener ADSs which are to
be tendered in the box entitled "Number of ADSs Tendered" in the ADS Letter of
Transmittal. In such case, a new ADR for the untendered Gener ADSs represented
by the old ADR will be sent to the person(s) signing such ADS Letter of
Transmittal (or delivered as such person properly indicates thereon) as
promptly as practicable following the date the tendered Gener ADSs are
purchased.
ALL GENER ADSs DELIVERED TO THE EXCHANGE AGENT WILL BE DEEMED TO HAVE BEEN
TENDERED UNLESS OTHERWISE INDICATED. SEE INSTRUCTION 4 OF THE ADS LETTER OF
TRANSMITTAL.
Signature Guarantees. Except as otherwise provided in the next sentence,
all signatures on an ADS Letter of Transmittal must be guaranteed by a
financial institution (including most banks, savings and loan associations and
brokerage houses) which is a participant in the Securities Transfer Agents
Medallion Program (STAMP), the Stock Exchanges Medallion Program (SEMP) or the
New York Stock Exchange Medallion Program (MSP) (an "Eligible Institution").
Signatures on an ADS Letter of Transmittal need
30
not be guaranteed (a) if the ADS Letter of Transmittal is signed by the
registered holder of the ADSs tendered therewith and such holder has not
completed the box entitled "Special Issuance Instructions" on the ADS Letter of
Transmittal or (b) if such Gener ADSs are tendered for the account of an
Eligible Institution. See Instructions 1 and 5 of the ADS Letter of Transmittal.
IF THE GENER ADSs ARE REGISTERED IN THE NAME OF A PERSON OTHER THAN THE
SIGNER OF THE ADS LETTER OF TRANSMITTAL, THEN THE TENDERED GENER ADRs MUST BE
ENDORSED OR ACCOMPANIED BY APPROPRIATE STOCK POWERS, SIGNED EXACTLY AS THE NAME
OR NAMES OF THE REGISTERED OWNER OR OWNERS APPEAR ON THE GENER ADRs, WITH THE
SIGNATURES ON THE GENER ADRs OR STOCK POWERS GUARANTEED AS AFORESAID. SEE
INSTRUCTIONS 1 AND 5 OF THE ADS LETTER OF TRANSMITTAL.
Guaranteed Delivery. If you desire to tender your Gener ADSs pursuant to
our offer and cannot deliver such Gener ADSs and all other required documents
to the Exchange Agent by the expiration date, or you cannot complete the
procedure for delivery by book-entry transfer on a timely basis, such Gener
ADSs may nevertheless be tendered if all of the following conditions are met:
o such tender is made by or through an Eligible Institution;
o a properly completed and duly executed Notice of Guaranteed Delivery
substantially in the form provided by us is received by the Exchange
Agent by the expiration date; and
o the ADRs for such Gener ADSs (or a confirmation of a book-entry transfer
of such Gener ADSs into the Exchange Agent's account at the Book-Entry
Transfer Facility), together with a properly completed and duly executed
ADS Letter of Transmittal (or facsimile thereof) with any required
signature guarantee or an Agent's Message and any other documents
required by the ADS Letter of Transmittal, are received by the Exchange
Agent within six New York Stock Exchange trading days after the date of
execution of the Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand, mail,
telegram, telex or facsimile transmission to the Exchange Agent and must
include a guarantee by an Eligible Institution in the form set forth in such
Notice.
In all cases, exchange of Gener ADSs tendered and accepted for exchange
pursuant to our offer will be made only after timely receipt by the Exchange
Agent of Gener ADRs for such Gener ADSs (or of a confirmation of a book-entry
transfer of such Gener ADSs, into the Exchange Agent's account at the
Book-Entry Transfer Facility, a properly completed and duly executed ADS Letter
of Transmittal (or facsimiles thereof) and all other required documents.
Accordingly, delivery of the AES shares and payment of cash instead of
fractional AES shares may be made to tendering shareholders at different times
if delivery of the Gener ADSs and other required documents occur at different
times.
THE METHOD OF DELIVERY OF GENER ADSs AND ALL OTHER REQUIRED DOCUMENTS,
INCLUDING THROUGH THE BOOK-ENTRY TRANSFER FACILITY, IS AT THE OPTION AND RISK
OF THE TENDERING SHAREHOLDER AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN
ACTUALLY RECEIVED BY THE EXCHANGE AGENT. IN ALL CASES, SUFFICIENT TIME SHOULD
BE ALLOWED TO ENSURE A TIMELY DELIVERY. IF CERTIFICATES FOR GENER ADSs ARE
SENT BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED,
IS RECOMMENDED.
Backup Withholding. Under the "backup-withholding" provisions of U.S.
federal income tax law, unless a tendering Gener ADS holder satisfies the
conditions described in Instruction 11 of the ADS Letter of Transmittal or is
otherwise exempt, the gross proceeds from the disposition of the Gener ADSs may
be subject to backup withholding tax at a rate of 31%. To prevent backup
withholding, each holder should complete, sign and deliver the Substitute Form
W-9 provided in the ADS Letter of Transmittal prior to receipt of any payment
or, if such holder is a Non-U.S. Holder (as defined below) not subject to
backup withholding under U.S. federal income tax law, such holder should
complete, sign and deliver an Internal Revenue Service Form W-8BEN (or other
applicable form) prior to receipt of any payment. See Instruction 11 of the SEC approvals referredADS
Letter of Transmittal.
Tender of Gener ADSs and Representations by Holder. The tender of Gener
ADSs pursuant to above.any one of the procedures described above will constitute your
representation and warranty that (a) you own the Gener ADSs being tendered
within the meaning of Rule 14e-4 promulgated under the Exchange Act,
31
(b) the tender of such Gener ADSs complies with Rule 14e-4 and (c) you have the
full power and authority to tender and assign the Gener ADSs tendered, as
specified in the ADS Letter of Transmittal. Our acceptance to exchange the Gener
ADSs tendered pursuant to our offer will constitute a binding agreement between
you and us upon the terms and subject to the conditions of our offer.
Matters Concerning Validity, Eligibility and Acceptance. We will determine
all questions as to the form of documents and the validity, eligibility
(including time of receipt) and acceptance for exchange of any tender of Gener
ADSs in our sole discretion. All our determinations in these matters will be
final and binding. We reserve the absolute right to reject any or all tenders
of Gener ADSs determined by us not to be in proper form or the acceptance for
exchange of or exchange for which may, in the opinion of our counsel, be
unlawful. We also reserve the absolute right to waive any defect or
irregularity in any tender of Gener ADSs. Neither we, the Purchaser, the Dealer
Manager, the Exchange Agent, the Information Agent nor any other person will be
under any duty to give notification of any defect or irregularity in tenders or
incur any liability for failure to give any such notification.
IF YOU HAVE ANY QUESTIONS ABOUT THE PROCEDURE FOR TENDERING GENER ADSs,
PLEASE CONTACT THE INFORMATION AGENT OR THE DEALER MANAGER AT THEIR RESPECTIVE
ADDRESSES AND TELEPHONE NUMBERS SET FORTH ON THE BACK COVER OF THIS PROSPECTUS.
CERTAIN UNITED STATESTAX CONSIDERATIONS
The following is a summary of certain U.S. federal income tax and Chilean
income tax consequences of the exchange of Gener ADSs pursuant to our offer.
U.S. FEDERAL INCOME TAX CONSEQUENCES OF OUR OFFER
The following is a summary of certain U.S. federal income tax consequences
of our offer to holders of Gener ADSs whose Gener ADSs are tendered and
exchanged for AES shares pursuant to our offer. The discussion is for general
information only and does not purport to consider all aspects of U.S. federal
income taxation that might be relevant to holders of Gener ADSs. This
discussion is based on current law which is subject to change, possibly with
retroactive effect. The discussion applies only to persons who hold Gener ADSs
as capital assets and may not apply to Gener ADSs received pursuant to the
exercise of employee stock options or otherwise as compensation. The discussion
is not intended to address the U.S. federal income tax consequences of our
offer to certain categories of investors (such as banks, insurance companies,
tax-exempt organizations, dealers in securities or foreign currency, persons
holding Gener ADSs as part of a "straddle," "hedging" or "conversion
transaction," persons owning directly, indirectly or by attribution, currently
or during the past five years, Gener shares and/or Gener ADSs representing in
the aggregate 10% or more (by voting power or value) of the outstanding Gener
shares and certain expatriates or former long-term residents of the United
States) that may be subject to special treatment under the U.S. federal income
tax laws. The discussion does not address any aspect of state, local or foreign
tax law.
For purposes of this discussion, a "U.S. Holder" is a holder of Gener ADSs
that is for U.S. federal income tax purposes (i) a citizen or resident of the
United States, (ii) a corporation or other entity taxable as a corporation
created or organized in or under the laws of the United States, any state
thereof or the District of Columbia, (iii) an estate the income of which is
subject to U.S. federal income taxation regardless of its source or (iv) a
trust if (a) a U.S. court can exercise primary supervision over the
administration of such trust and (b) one or more U.S. persons have the
authority to control all of the substantial decisions of such trust. In the
case of a partnership or other entity taxable as a partnership, any partner
described in any of (i) through (iv) of this paragraph is also generally
treated as a U.S. Holder. A "Non-U.S. Holder" is a holder of Gener ADSs that is
not a U.S. Holder.
BECAUSE INDIVIDUAL CIRCUMSTANCES MAY DIFFER, YOU SHOULD CONSULT YOUR TAX
ADVISOR REGARDING THE SHARE EXCHANGE
(PAGE 34)APPLICABILITY OF THE RULES DISCUSSED BELOW TO YOU AND THE
PARTICULAR TAX EFFECTS TO YOU OF OUR OFFER, INCLUDING THE APPLICATION AND EFFECT
OF STATE, LOCAL AND FOREIGN TAX LAWS AND SUCH HOLDER'S ABILITY TO CLAIM FOREIGN
TAX CREDITS, IF ANY.
32
Ownership of Gener ADSs in General. For U.S. federal income tax purposes,
holders of Gener ADSs generally will be treated as the owners of Gener shares
represented by such Gener ADSs.
Exchange of Gener ADSs for AES and IPALCO have structuredShares by U.S. Holders. The receipt of AES
shares in exchange of Gener ADSs pursuant to our offer will be a taxable
transaction for U.S. federal income tax purposes. Therefore, a U.S. Holder may
be liable for the share exchange so that,payment of U.S. federal income tax in general,
IPALCO shareholdersconnection with our
offer without receiving cash with which to pay such tax. A U.S. Holder will not
recognize gain or loss on the exchange of Gener ADSs for United StatesAES shares equal to
the difference, if any, between (i) the fair market value of the AES shares
received and any cash received in lieu of fractional AES shares by such U.S.
Holder and (ii) such U.S. Holder's tax basis in the Gener ADSs surrendered. YOU
ARE URGED TO CONSULT YOUR TAX ADVISOR WITH RESPECT TO DETERMINING YOUR GAIN,
LOSS, AMOUNT REALIZED, TAX BASIS AND HOLDING PERIOD IN CONNECTION WITH GENER
ADSs TENDERED AND EXCHANGED FOR AES SHARES PURSUANT TO OUR OFFER.
In general, any gain or loss recognized upon the exchange will be treated
as long-term capital gain or loss if the Gener ADSs (or Gener shares
represented by such Gener ADSs) have been held for more than one year and
otherwise as short-term capital gain or loss. Long-term capital gain recognized
by individuals generally will be subject to a maximum U.S. federal income tax
rate of 20%. Certain limitations may apply to the use of capital losses.
Gain recognized by a U.S. Holder generally will be treated as U.S. source
income. Consequently, in the event that, contrary to the discussion below in
the section captioned, "--Certain Tax Considerations-- Chilean Income Tax
Consequences of Our Offer", a sale of the Gener ADSs is subject to Chilean
income tax, a U.S. Holder will not be permitted to use the foreign tax credit
for Chilean income tax imposed on the gain unless it can apply the credit
against U.S. federal income tax due on other income from foreign sources in the
appropriate foreign tax credit category or, alternatively, such holder may
deduct such Chilean income tax on its U.S. federal income tax return.
Exchange of Gener ADSs for AES Shares by Non-U.S. Holders. A Non-U.S.
Holder generally will not be subject to U.S. federal income or withholding tax
with respect to any gain realized on an exchange of Gener ADSs pursuant to our
offer unless (i) the gain is effectively connected with a trade or business (or
attributable to a permanent establishment under an applicable tax treaty) of
such holder within the United States or (ii) the gain is realized by an
individual Non-U.S. Holder who is present in the United States for at least 183
days in the taxable year of the sale and certain other conditions are met.
For a discussion of backup withholding tax consequences, see the section
captioned, "--Procedures for Accepting Our Offer-Backup Withholding" above.
CHILEAN INCOME TAX CONSEQUENCES OF OUR OFFER
The discussion set out below is based upon Chilean income tax laws
presently in force, including Ruling No. 324 of January 29, 1990 of the Chilean
Internal Revenue Service and other applicable regulations and rulings in force
on the date of our offer. The discussion is not intended as tax advice to any
particular holder, which can be rendered only in light of that holder's
particular tax situation. You are urged to consult your tax advisor with
respect to the specific tax consequences of our offer to you.
Under Chilean law, provisions contained in statutes such as tax rates
applicable to non-Chilean investors, the computation of taxable income for
Chilean purposes and the manner in which Chilean taxes are imposed and
collected may be amended only by another statute. In addition, the Chilean tax
authorities enact rulings and regulations of either general or specific
application and interpret the provisions of Chilean tax law. A Chilean tax may
not be assessed retroactively against taxpayers who act in good faith relying
on such rulings, regulations and interpretations, but Chilean tax authorities
may change said rulings, regulations and interpretations prospectively,
provided that a newly enacted statute introducing changes to existing law may
provide that one or more of such changes apply retroactively. There is no
income tax treaty in force between Chile and the United States of America.
Exchange of Gener ADSs by Non-Chilean Holders. Any gain recognized by an
individual who is not domiciled or resident in Chile or any legal entity that
is not organized under the laws of Chile and does not have a permanent
establishment in Chile (a "Non-Chilean Holder") upon the exchange of the Gener
ADSs for AES shares pursuant to our offer will not be subject to Chilean
taxation.
33
Exchange of Gener ADSs by Chilean Holders. Any gain recognized by any
person other than a Non-Chilean Holder (a "Chilean Holder") upon the exchange
of the Gener ADSs for AES shares pursuant to our offer will be subject to
Chilean income taxes by adding such gain to the net income of such Chilean
Holder and applying to such income the tax rate which would otherwise be
applicable on such Chilean Holder's income under Chilean law.
No Chilean stamp, issue, registration or similar taxes or duties will
apply to the sale of Gener ADSs pursuant to our offer.
BECAUSE INDIVIDUAL CIRCUMSTANCES MAY DIFFER, YOU SHOULD CONSULT YOUR TAX
ADVISOR REGARDING THE APPLICABILITY OF THE RULES DISCUSSED ABOVE TO YOU AND THE
PARTICULAR TAX EFFECTS TO YOU OF OUR OFFER.
PURPOSE OF THE OFFERS; PLANS FOR GENER
Purpose. The purpose of the offers is to enable us to acquire control of,
and at least a majority of the equity interest in, Gener. According to Gener's
20-F, the Gener ADSs and the Gener shares to be purchased pursuant to our offer
and the Chilean offer, together with the 659,900 Gener ADS and the 6,800 Gener
shares currently owned by us, represent approximately 80% of the outstanding
Gener shares, including Gener shares represented by Gener ADSs. We believe that
the acquisition of the majority equity interest in Gener is consistent with our
strategy in helping meet the world's need for electricity by participating in
competitive power markets as they develop by constructing new plants or by
acquiring and operating existing generation facilities or distribution systems
in these markets.
Gener's Bylaws currently provide that no person may own or vote, directly
or indirectly through related parties, more than 20% of the voting capital
stock of Gener and that Gener shall otherwise comply with the provisions of
Decree Law 3,500, including Chapter XII thereof. Our offer will not proceed
unless Gener shareholders approve the amendments to Gener's Bylaws to eliminate
the provisions of Articles 1 bis, 5 bis, 9 bis, 17 bis, 20 bis, 21 bis, 24, 27
bis and 29 bis and amend Article 35 to eliminate the reference to Decree Law
3,500.
The Gener shareholders' meeting will consider amending Gener's Bylaws to
eliminate Articles 1 bis, 5 bis, 9 bis, 17 bis, 20 bis, 21 bis, 24, 27 bis and
29 bis and to amend Article 35 to eliminate the reference to Decree Law 3,500.
Articles 1 bis and 35 provide that Gener is subject to Decree Law 3,500.
Articles 5 bis and 27 bis of Gener's Bylaws provide that no one person, or
group of related persons, may own or be entitled to vote, more than 20% of the
outstanding capital stock of Gener. Article 9 bis requires maintenance of
certain asset ratios set forth in Decree Law 3,500. Article 17 bis provides
that in exercising its duties the board of directors shall act within the
limits set forth in the investment and financing policies approved by the
shareholders pursuant to Article 20 bis. Article 21 bis requires shareholder
approval to sell assets identified by such investment and financing policies as
essential for the conduct of Gener's business as well as any change to the
investment and financing policies approved by shareholders. Article 29 bis
requires shareholders to receive prior to the annual meeting the report issued
by the inspector of accounts pursuant to Article 20 and the board of directors'
proposal with respect to Gener's investment and financing policies. Finally,
Article 24 provides that the vote of shareholders representing at least 75% of
the outstanding shares of Gener is required to amend Articles 1 bis, 5 bis, 9
bis, 14 bis, 17 bis, 20 bis, 21 bis, 24, 27 bis and 29 bis.
If Gener shareholders approve such amendments to Gener's Bylaws, under
Chilean law, Gener will no longer be subject to Decree law 3,500. As a result,
the size of the investments Chilean pension funds are permitted to maintain
will be less than if Gener contained to be subject to such laws. However, we
believe that in the event these Chilean pension funds sell their maximum pro
rata portion of Gener shares in the Chilean offer, the number of Gener shares
held by these Chilean pension funds will be sufficiently reduced to comply with
the ownership limits imposed by Chilean law and they will not be required to
sell their remaining Gener shares. The holders of at least 75% of the
outstanding Gener shares, including Gener shares represented by Gener ADSs, must
approve these amendments at a meeting of Gener shareholders.
34
Under Chilean law, holders of at least 10% of the outstanding capital
stock have the right to require a company to convene a meeting of its
stockholders. Under Chilean law, shareholders must be notified of such a
meeting at least 15 days prior to the date of the meeting and the meeting must
be held within 30 days of such request. In the Copec Letter, Copec has agreed
at our request to make a shareholder's request to call a Gener shareholders'
meeting in order to approve the amendments to Gener's Bylaws. We intend to
request that Copec take the action necessary to require the Gener board of
directors to convene the Gener shareholders' meeting shortly.
Pursuant to Chilean law, the amendments to Gener's Bylaws, even if adopted
by the holders of 75% of the outstanding Gener shares as required by Gener's
Bylaws, will not become effective until they are published and recorded. While
we can give no assurance as to this timing, our Chilean counsel has advised us
that these actions could be accomplished within 10 business days of the Gener
shareholders' meeting approving the amendments to Gener's Bylaws.
We intend, as soon as practicable after consummation of the offers, to
seek majority representation on Gener's board of directors. Under Chilean law
and Gener's Bylaws, the directors of Gener serve at the pleasure of
shareholders and may be removed and new directors may be elected by
shareholders. Under Chilean law and Gener's Bylaws, at least a majority of the
Gener shares present or represented is required to remove the current directors
and elect new directors. Based on Chilean law and Gener's Bylaws, we believe
that upon the exchange and purchase of Gener ADSs and Gener shares pursuant to
the offers, we will have the ability to appoint all the members of Gener's
board of directors. We intend that a majority of our designees would be AES
people. Although we have not made any firm decision with respect to the
remaining members of Gener's board of directors, we believe that such other
members could include current members of Gener's board of directors and other
individuals not affiliated with us.
Pursuant to Chilean law and Gener's Bylaws, subject to the matters
reserved to shareholders discussed below, Gener's board of directors is
empowered to manage the business and affairs of Gener. Among others, Gener's
board of directors has the power to call shareholders' meetings, propose
dividend policies, allow the subscription of authorized but unissued shares and
authorize actions regarding the assets of Gener.
Under Chilean law, if we acquire more than 66 2/3% of Gener's outstanding
shares, including Gener shares represented by Gener ADSs, we would be able to
make certain fundamental changes regarding Gener by ourselves. More
particularly, Chilean law and Gener's Bylaws provide that a vote of the holders
of at least 66 2/3% of the outstanding shares would be required to take any of
the following actions: (i) transformation, division or merger of Gener; (ii)
the amendment of its duration, currently Gener is a corporation of indefinite
duration, or the early dissolution; (iii) change of the domicile of Gener; (iv)
reduction in Gener's capital; (v) approval and valuation of capital
contributions made to Gener in property other than cash; (vi) amendment of the
provisions of Gener's Bylaws prescribing actions to be taken at shareholders'
meetings and limits on the powers of the board of directors; (vii) reduction of
the number of members of the board of directors of Gener; (viii) transfer of
all of Gener's assets and liabilities or all Gener's assets; (ix) changes in
the manner of distributing Gener's profits; and (x) the curing of technical
defects in Gener's organizational documents or any amendment thereto.
Chilean law provides for statutory withdrawal rights for minority Gener
shareholders where holders of at least 662/3% of the total shares outstanding
adopt resolutions at a shareholders' meeting authorizing certain of the
fundamental changes set forth above. Following the adoption of such a
resolution relating to a fundamental change by a majority of at least 662/3% of
total shares outstanding, Gener shareholders who opposed the adoption of such
resolution or who did not attend the shareholders' meeting at which such
resolution was adopted and who notified Gener of their opposition to the
adoption of the resolution would be considered dissenting shareholders entitled
to statutory withdrawal rights. Dissenting shareholders would have thirty days
from the date of the shareholders' meeting at which the resolution authorizing
a fundamental change was adopted to notify Gener of their dissent and their
intention to exercise their statutory withdrawal rights 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'ssuch
action. The board of directors has identified several potential benefitsof Gener would then have an additional thirty
days, measured from the expiration 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
- 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 oforiginal thirty day period beginning
on the date of the opinion, and based onshareholders' meeting at which the procedures followed, factors considered and assumptions made by UBS Warburg, and
subjectresolution was adopted, to
hold another
35
shareholders' meeting to consider the limitations set forth inrevocation of the opinion,resolution that
triggered the exchange ratio inwithdrawal right. If the share exchange agreement and the consideration to be received by the holdersboard of IPALCO common stock in the share exchange is fair to the holders fromdirectors did not call 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 specialsecond
meeting of the shareholders or the resolution were not revoked at such meeting,
all dissenting shareholders who previously notified Gener of IPALCOtheir dissent would
have the right to compel Gener to purchase their Gener shares. Such purchases
would have to be made within sixty days of the original shareholders' meeting at
which the resolution was adopted at a price equal to the weighted average
trading price of Gener shares on stock exchanges in Chile during the two months
preceding the date of the original shareholders' meeting at which the resolution
authorizing the fundamental change was adopted.
Presently pending in Chile is a bill approved by the Chilean legislature
on November 7, 2000 which, if adopted in its current form, would require any
person, after acquiring control of 662/3% or more of the voting power as we are
planning to do in the offers, to conduct a tender offer for all remaining
shares of the company within 30 days following the acquisition of such control
at a price per share equal to the weighted average trading price of the
company's shares on stock exchanges in Chile during the two months preceding
the acquisition of such control. If the acquiring person failed to hold such a
tender offer, holders of remaining shares would be entitled to the statutory
withdrawal rights described above which, essentially, would allow them to sell
their stock to the company, then controlled by the acquiring person at a price
per share equal to the weighted average trading price of Gener shares on stock
exchanges in Chile during the two months preceeding the expiration of the
30-day period referred to above. We do not know if and when the pending bill
will be heldbecome law. We also cannot predict whether the provisions of such law
would apply to the offers.
Plans for Gener. In connection with the offers, we have reviewed, and will
continue to review, on / /, 2000 at the principal executive officesbasis of IPALCO located
at One Monument Circle, Indianapolis, Indiana at 11:00 a.m., Indianapolis time,publicly available information relating to
Gener, various possible business strategies that we might consider in the event
that we acquire majority control of pursuant to the offers. In addition, if and
to the extent that we acquire control of Gener pursuant to the offers or we
otherwise obtain access to the books and records of Gener, we intend to conduct
a detailed review of Gener and its assets, corporate structure, dividend
policy, capitalization, operations, properties, policies, management and
personnel and, subject to applicable regulatory rules and regulations, to
consider and approvedetermine what, if any, changes would be desirable in light of the
share exchange agreement.
RECORD DATE AND VOTING POWER FOR IPALCO. Youcircumstances which then exist. Although no firm decision has been made, we
anticipate the possibility that in connection with such review we will consider
possible sales of Gener assets which are entitlednot directly related to vote at the special meeting if you owned sharesgeneration
and transmission of IPALCO common stock atelectricity. In addition, because of AES's ownership of
generation and distribution assets in the closeDominican Republic and local
regulatory constraints, we expect to seek to sell Gener's generation assets
located in the Dominican Republic.
Further, we intend to review the existing capital structure of business on / /, 2000,Gener in
order to determine whether changes could be made which iscould benefit Gener's
shareholders. Following completion of the record date foroffers and completion of our review
of the special
meeting. You will have one vote atmatters set forth above and such other matters as we deem appropriate,
we intend over 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 entitlednext several years to seek to distribute to all Gener
shareholders any amounts that are determined to be voted atin excess of Gener's then
current and reasonable anticipated future capital requirements. Any amounts to
be distributed will be determined by reference to such requirements, the
special meeting.
IPALCO REQUIRED VOTE.results of our review, the financial condition of Gener and the availability of
sufficient reserves and funds to effect such distributions. However, we can
give no assurance as to the amounts, if any, of any such distribution or the
timing thereof.
We intend following the purchase of Gener ADSs and Gener shares pursuant
to the offers to provide certain services to Gener under services agreements
that would be entered into between our affiliates and Gener. We have entered
into agreements of this type in connection with other international investments
made by us in other companies and businesses. Pursuant to these services
agreements, Gener would be provided with technical advice and assistance in
connection with, among others, operating and maintenance services for Gener's
electric distribution activity and capital improvements to Gener's facilities,
industrial and consumer safety measures, compliance with international
technical standards, strategic and financial planning, internal auditing
policies and accounting, invoicing and other automated systems. 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 differentservices
agreements would enable Gener to benefit from or in addition to, yours. These interests include
acceleration of vesting of restricted stockour expertise as a result of our
36
operation of more than 80 electric distribution and industrial facilities in 14
countries. Such services would be rendered in exchange for a fee based on
Gener's revenues. The services agreements would be subject to applicable laws
and regulations. We believe these services will benefit Gener and all holders of
Gener ADSs and Gener shares.
Gener shareholders and holders of Gener ADSs do not have statutory
appraisal rights as a result of our offer and the share exchange,
the payment of deferred compensation upon consummationChilean offer. We currently
do not have any plans or intentions following completion of the share exchange,
andoffers to
propose any "second-step" merger or other business combination, but we reserve
the right to severance paymentsdo so in the eventfuture.
Except as otherwise disclosed in this prospectus, we do not have any
present plans or proposals that relate to or would result in any extraordinary
corporate transaction, such as a merger, reorganization, liquidation, or
similar transaction involving Gener or any of their termination without
causeits subsidiaries, or resignation with good reason within three yearsa sale or
transfer of a material amount of assets of Gener or any of its subsidiaries or
any material changes in Gener's capitalization or dividend policy or any other
material changes in Gener's corporate structure or business or the completioncomposition
of the share exchange.
5
In determining the fairness of the share exchange to IPALCO shareholders,
IPALCO'sGener'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 exchangemanagement.
The Copec Letter. The Copec Letter is pending, unless the
other party has madefiled as 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 subjectexhibit to the
satisfaction of certain
conditions, including the following:
- IPALCO shareholders must approve the share exchange agreement;
- the registration statementRegistration Statement on Form S-4 of which this proxy
statement/prospectus is a part and is
incorporated by reference in this prospectus. We believe the following summary
describes the material terms of the Copec Letter. However, we recommend that
you read carefully the complete Copec Letter for its terms and other
information that may be important to you.
No Solicitation. Copec has agreed in the Copec Letter:
o not directly or indirectly to request, initiate or encourage any
proposal relating to an alternative offer;
o not to participate in any discussions or negotiations or assist any
person with regard to an alternative offer; and
o to inform us immediately if Copec has learned about any alternative
offer.
Call of Gener Shareholders' Meeting; Voting. Copec has agreed to exercise
its right as a 10% or more Gener shareholder to demand that Gener's board of
directors call a meeting of Gener's shareholders to consider and take action on
the amendments to Gener's Bylaws to allow our offer and the Chilean offer to
take place. Copec has also agreed to vote the Gener shares held by it in favor
of the amendments to Gener's Bylaws.
Tender Into Our Chilean Offer. Copec has stated that it is willing to
tender its Gener shares pursuant to our Chilean offer.
Termination of Copec Letter.
o The Copec Letter has a term of 120 days and may be terminated if we
terminate our U.S. or Chilean offer.
o The Copec Letter may also be terminated by Copec if another more
advantageous offer for the purchase of Gener shares has been made and
we have not matched or improved upon the terms of such offer.
37
EFFECT OF OUR OFFER AND THE CHILEAN OFFER ON THE MARKET FOR GENER ADSs AND
GENER SHARES; REGISTRATION OF GENER ADSs UNDER THE EXCHANGE ACT; MARGIN
REGULATIONS
Effects on Market for Gener ADSs. The exchange of Gener ADSs pursuant to
our offer will reduce substantially the number of Gener ADSs that might
otherwise trade publicly and will reduce the number of holders of Gener ADSs.
In view of the number and value of the Gener ADSs and Gener shares that would
remain outstanding after completion of our offer and the Chilean offer and of
the number of Gener shares that would be available for deposit following the
completion of the Chilean offer, we do not believe that there will continue to
be a liquid market for the Gener ADSs.
The Gener ADSs are currently listed on the New York Stock Exchange. We do
not believe that the New York Stock Exchange listing for the Gener ADSs will be
maintained following the purchase of Gener ADSs pursuant to our offer.
The Gener ADSs are currently "margin securities" under the regulations of
the Board of Governors of the Federal Reserve System, Federal Reserve Board,
which has the effect, among other things, of allowing brokers to extend credit
on the collateral of such securities. If the New York Stock Exchange listing
for the Gener ADSs is terminated following our purchase of Gener ADSs pursuant
to our offer as we anticipate, the Gener ADSs will no longer constitute
margin securities for the purposes of the Federal Reserve Board's margin
regulations and, therefore, could no longer be used as collateral for loans
made by brokers.
Effects on Market for Gener Shares. The purchase of Gener shares pursuant
to the Chilean offer will substantially reduce the number of Gener shares that
might otherwise trade publicly and may also reduce the number of holders of
Gener shares. In view of the number and value of the Gener shares that would
remain outstanding after completion of our offer and the Chilean offer, we
believe that there will continue to be a market for the Gener shares. However,
a reduction in publicly traded Gener shares could adversely affect the
liquidity and market value of the Gener shares.
The Gener shares are traded on the Santiago Stock Exchange. We recognize
that the existence of a liquid trading market for the Gener shares in Chile is
important to the holders of Gener shares. Consequently, our current strategy is
to cause Gener to maintain the listing of those Gener shares on the Santiago
Stock Exchange.
Registration of Gener ADSs under the Exchange Act. Gener ADSs are
currently registered under the Exchange Act. Such registration may be
terminated upon application of Gener to the SEC if the Gener ADSs are not
listed on a national securities exchange and there are fewer than 300 record
holders of the Gener ADSs resident in the United States. Termination of the
registration of the Gener ADSs under the Exchange Act would substantially
reduce the information required to be furnished by Gener to holders of Gener
ADSs and to the SEC and would make certain of the provisions of the Exchange
Act, such as the requirements of Rules 13e-3 and 13e-4 under the Exchange Act
with respect to "going private" transactions, no longer applicable to the Gener
ADSs. Furthermore, "affiliates" of Gener and persons holding restricted
securities of Gener may be deprived of the ability to dispose of such
securities pursuant to Rule 144 promulgated under the Securities Act. Following
the purchase of Gener ADSs pursuant to our offer, we expect to seek to
terminate the registration of the Gener ADSs as we expect there will then be
fewer than 300 record holders of the Gener ADSs resident in the United States.
CONDITIONS OF OUR OFFER
Notwithstanding any other provisions of our offer, we shall not be
required to accept for exchange and, subject to any applicable rules and
regulations of the SEC, including Rule 14e-1(c) under the Exchange Act
(relating to our obligation to exchange for or return tendered securities
promptly after termination or withdrawal of our offer), we may postpone the
acceptance for exchange of, or exchange for, tendered Gener ADSs, and may, in
our sole judgment, extend, terminate or amend our offer as to any Gener ADSs
not then accepted for exchange if in our sole judgment the following conditions
have not been satisfied:
38
BYLAW CONDITION
The amendments to Gener's Bylaws must have been approved and must have
become effective under Chilean law.
TOTALFINAELF TRANSACTION CONDITION
We, in our sole discretion, must be satisfied that the proposed
TotalFinaElf transaction has been terminated or will not proceed.
PURCHASE OF GENER SHARES IN THE CHILEAN OFFER CONDITION
We must have made purchases of Gener shares in the Chilean offer.
MINIMUM AES SHARE PRICE CONDITION
The low per share selling price of AES shares on the New York Stock
Exchange on any New York Stock Exchange trading day between the date of our
offer and the expiration of our offer, including any extensions thereof, will
be no less than $50.
HSR CONDITION
The waiting period, and any extension thereof, applicable to our offer
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and
any other applicable antitrust law must have expired or been terminated.
FERC CONDITION
We must have received an approval from the Federal Energy Regulatory
Commission prior to the acquisition of control of, and a majority of the equity
interest in, Gener under the Federal Power Act.
REGISTRATION STATEMENT EFFECTIVENESS CONDITION
The Registration Statement on Form S-4 of which this prospectus is a part
must have 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 exchangeeffective under the United
States antitrust lawsSecurities Act and not be the subject of
any stop order or proceedings seeking a stop order.
NYSE LISTING CONDITION
The AES shares issuable to you in our offer 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 authorizedhave been approved for
listing on the New York Stock Exchange.
CONDITIONS TO THE OBLIGATION OF AES. The obligation of AES to complete the
share exchange isExchange, subject to official notice of issuance.
GOVERNMENTAL ACTIONS CONDITION
o There shall not have been threatened, instituted or pending any
action, proceeding, application or claim before any court,
governmental, regulatory or administrative agency or commission,
authority or tribunal, domestic, foreign or supranational, or by any
government, governmental authority or other regulatory or
administrative agency or commission, domestic, foreign or
supranational, or by any other person, domestic or foreign, whether
brought by Gener, an affiliate of Gener or any other person, which:
o challenges or seeks to challenge the satisfactionacquisition by us of additional conditions,the
Gener shares or Gener ADSs;
o restrains, delays or prohibits or seeks to restrain, delay or
prohibit us from making our offer or the Chilean offer;
o prohibits the performance by us or by anyone else of any of the
contracts or other arrangements entered into or proposed to be
entered into by us in connection with our offer or the Chilean
offer;
o obtains or seeks to obtain any material damages or otherwise
adversely seeks to affect adversely the transactions
contemplated by our offer or the Chilean offer;
o prohibits or limits or seeks to prohibit or limit our ownership
or operation of all or any portion of our businesses or assets
or Gener's businesses or assets, including, without limitation,
the following:
- IPALCO's representationsbusinesses or assets of our respective affiliates and
warrantiessubsidiaries;
39
o compels us or seeks to compel us to dispose of or hold separate
all or any portion of our own businesses or assets or Gener's
businesses or assets, including, without limitation, the
businesses or assets of our respective affiliates and
subsidiaries;
o imposes or seeks to impose any limitation on our ability to
conduct our own business or own our assets as a result of the
transactions contemplated by our offer or the Chilean offer;
o makes or seeks to make the acceptance for exchange or payment,
purchase of, or exchange or payment for, some or all of the
Gener ADSs or Gener shares pursuant to our offer or the Chilean
offer, illegal or delays our ability to accept for exchange or
payment, purchase of, or exchange or payment for, some or all of
the Gener ADSs or Gener shares pursuant to our offer or the
Chilean offer;
o restricts our ability, or renders us unable, to accept for
exchange or payment, exchange or purchase or pay for some or all
of the Gener ADSs or Gener shares pursuant to our offer or the
Chilean offer;
o imposes or seeks to impose limitations on our ability or the
ability of any affiliate of ours effectively to acquire or hold
or to exercise full rights of ownership of the Gener ADSs or the
Gener shares, including, without limitation, the right to vote
the Gener shares purchased by us on an equal basis with all
other Gener shares on all matters properly presented to the
shareholders of Gener;
o adversely affects Gener or its subsidiaries or affiliates or us,
or our affiliates or subsidiaries;
o might result in a diminution in the share exchange agreement
mustvalue of the Gener ADSs or
Gener shares or of the benefits expected to 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 registrationderived by us as
a holding company pursuant to Section 3(a)(5) of PUHCA, and SEC
approvalresult of the sharetransactions contemplated by our offer or the
Chilean offer; or
o in our opinion and sole discretion, imposes or seeks to impose
any material condition which makes our offer or the Chilean
offer, more onerous, burdensome or disadvantageous to us.
CHANGE OF LAW CONDITION
o There shall not be any action taken, or any statute, rule,
regulation, order, decree or injunction shall be sought, proposed,
enacted, promulgated, entered, enforced or deemed or become
applicable to our offer or the Chilean offer, or, any other action
shall not have been taken, proposed or threatened, by any government,
governmental authority or other regulatory or administrative agency
or commission or court, domestic, foreign or supranational, that, in
our judgment, might, directly or indirectly, result in any of the
consequences referred to in the Governmental Actions Condition.
GENER ADVERSE CHANGE CONDITIONS
o No change, or any condition, event or development involving a
prospective change, shall have occurred or been threatened in the
business, properties, assets, liabilities, capitalization,
shareholders' equity, financial or other condition, operations,
licenses, franchises, permits, permit applications, tariffs or tariff
structure, results of operations or prospects of Gener or any of its
subsidiaries or affiliates which, in our sole judgment, is or may be
adverse to Gener or any of its subsidiaries or affiliates and we
shall not have become aware of any fact which, in our sole judgment,
has or may have adverse significance with respect to either the value
of Gener or any of its subsidiaries or affiliates or the value to us
of the Gener shares or Gener ADSs.
o We shall not have become aware:
o that any material contractual right of Gener or any of its
subsidiaries or affiliates shall be impaired or otherwise
adversely affected or that any material amount of indebtedness
of Gener or any of its subsidiaries shall become accelerated or
otherwise become due prior to its stated due date, in either
case with or without notice or the lapse of time or both, as a
result of the transactions contemplated by our offer or the
Chilean offer;
40
o of any covenant, term or condition in any of Gener's or any of
its subsidiaries' instruments or agreements that are or may be
materially adverse to the value of the Gener shares or Gener
ADSs in our hands; or
o of any material fact not previously disclosed publicly by Gener
that might adversely affect Gener or any of its respective
subsidiaries or us that might result in a diminution in the
value of the Gener ADSs or Gener shares or of the benefits
expected to be derived by us as a result of the transactions
contemplated by our offer or the Chilean offer.
ADVERSE MARKET AND NATIONAL AND INTERNATIONAL CHANGES CONDITION
o There shall not have occurred:
o any general suspension of trading in, or limitation on prices
for, securities on any United States national securities
exchange, pursuantChilean securities exchange or the United States
Over-the-Counter market;
o a declaration of a banking moratorium or any suspension of
payment in respect of banks in the United States or Chile,
whether mandatory or not mandatory;
o any limitation, whether or not mandatory, by any United States
or Chilean governmental authority or agency on, or other event
which, in our sole judgment, might affect the extension of
credit by banks or other lending institutions;
o commencement of a war, armed hostilities or other national or
international crisis directly or indirectly involving Chile or
the United States;
o a change or development involving a prospective change in:
o the valuation of the Chilean Peso relative to Section 9(a)(2)the U.S.
dollar; or
o exchange controls, currency exchange rates or any
suspension of, PUHCA;
- there must not occur anythingor limitation on, the markets for currency;
o any change in taxation, including any stock transfer duty or
withholding affecting the Gener ADSs or Gener shares;
o any change or development in foreign investment regulation in
Chile, the effect of which change or development is to make it,
in our sole judgment, impracticable to proceed with our offer or
the Chilean offer on the terms and in the manner contemplated;
o any adverse change in the market price of the Gener shares or
Gener ADSs or in the general political, market, economic,
regulatory or financial conditions in Chile that wouldcould have a
material adverse effect on IPALCO;
-Gener's businesses, operations or
prospects or the IURC must issuetrading in or the value of the Gener shares or
Gener ADSs; or
o in our sole judgment, a certification under PUHCA;material acceleration or worsening of
any of the economic, political or other national or
international conditions existing at the time of the
commencement of our offer or the Chilean offer.
CHANGES IN GENER CAPITAL STOCK CONDITION
o Gener or any subsidiary of Gener shall not have, at any time after
the announcement of our offer or the Chilean offer:
o issued, distributed, pledged, sold or authorized, proposed or
announced the issuance of or sale, distribution or pledge to any
person of :
o any shares of its capital stock;
o the capital stock of any of its subsidiaries;
o securities convertible into any such capital stock;
41
o any rights, warrants or options to acquire any such
securities or any other securities of Gener or its
subsidiaries; or
o any other securities in respect of, in lieu of, or in
substitution for, Gener shares outstanding on November 3,
2000;
o declared, paid or proposed to declare or pay any dividend or
distribution on any Gener shares, other than the regular
dividends on the Gener shares not in excess of the amount per
share, and - AES must receive an opinionwith record and payment dates, in accordance with
recent practice, or on any other security;
o issued, authorized, recommended or proposed the issuance or
payment of special tax counselany other distribution in respect of the Gener
shares, whether payable in cash, securities or other property;
o altered or proposed to alter any material term of any
outstanding security;
o incurred or announced its intention to incur any debt other than
in the effectordinary course of business and consistent with past
practice or any debt containing covenants, which are unusual for
Gener or more onerous, burdensome or disadvantageous than those
customarily agreed by Gener;
o issued, sold or authorized or announced or proposed the issuance
of or sale to any person of:
o any debt securities;
o any securities convertible into or exchangeable for debt
securities; or
o any rights, warrants or options entitling the holder
thereof to purchase or otherwise acquire any debt
securities;
o split, combined or otherwise changed, or authorized or proposed
the split, combination or other change of the Gener shares or
its capitalization;
o authorized, recommended, proposed or entered into or publicly
announced its intent to enter into any merger, consolidation,
liquidation, dissolution, business combination, joint venture,
strategic alliance or similar arrangement, acquisition or
disposition of a material amount of assets or securities, any
material change in its capitalization, any waiver, release or
relinquishment of any material contract rights or comparable
rights of Gener or any of its subsidiaries or affiliates or any
agreement contemplating any of the foregoing or any comparable
event not in the ordinary course of business, or taken any
action to implement any such transaction previously authorized,
recommended, proposed or publicly announced;
o amended or proposed or authorized any amendments to Gener's
Bylaws, other than as contemplated by the amendments to Gener's
Bylaws on which our offer is conditioned; or
o agreed in writing or otherwise to take any of the foregoing
actions or we shall have learned about any such action which has
not previously been publicly disclosed by Gener.
ALTERNATIVE PROPOSAL CONDITION
o There shall not have been publicly proposed to be made nor shall we
have learned that the
share exchange will qualify as a reorganizationany other person or entity (including Gener or any
of its subsidiaries or affiliates) or "group," within the meaning of
Section 368(a)13(d)(3) of the Internal Revenue Code.
CONDITIONS TO THE OBLIGATION OF IPALCO. The obligationExchange Act:
o has made or intends to make a tender offer or exchange offer for
Gener shares or Gener ADSs representing in the aggregate at
least fifteen percent of IPALCOthe outstanding Gener shares;
o shall have acquired or proposed to complete the share exchange is subject to the satisfactionacquire beneficial ownership
of additional
conditions,more than ten percent of any class or series of capital stock
of Gener, including the following:
- AES's representations and warranties inGener shares, through the share exchange agreement must
be true and correct, subjectacquisition of
stock, the formation of a group or otherwise;
o shall have been granted any option, right or warrant,
conditional or otherwise, to certain materiality qualifiers;
- AES must perform in all material respectsacquire beneficial ownership of
more than ten percent of any class or series of capital stock of
Gener, including the Gener shares, other than acquisitions for
bona fide arbitrage purposes only;
42
o No person or entity (including Gener or any of its obligations under the share
exchange agreement; and
6
- IPALCO must receive an opinion of special tax counsel to the effect that
the share exchange will qualify as a reorganizationsubsidiaries or
affiliates) or "group" within the meaning of Section 368(a)13(d)(3) of the
Internal Revenue Code.Exchange Act who owns 5% or more as of the date of our offer or the
Chilean offer:
o shall have acquired an additional two percent or more of any
class or series of capital stock of Gener, including the Gener
shares;
o shall have entered into a definitive agreement or an agreement
in principle or made a proposal with respect to a tender or
exchange offer for some or all the Gener shares or a merger,
consolidation or other business combination or joint venture,
strategic alliance or similar arrangement with or involving
Gener or any of its subsidiaries or affiliates; or
o shall have formed or become a member of a group with the purpose
or effect of influencing the management or operations of Gener
or to elect a number of directors of Gener equal to their
proportionate ownership in Gener.
AGREEMENT WITH GENER CONDITION
o We shall not have:
o reached an agreement or understanding with Gener that our offer
or the Chilean offer shall be terminated or amended; or
o entered into a definitive agreement or an agreement in principle
with Gener relating to a business combination or joint venture,
strategic alliance or similar arrangement or a purchase of Gener
shares, Gener ADSs or assets of Gener.
TERMINATION OF THE SHARE EXCHANGE AGREEMENT (PAGE 47)
AESCHILEAN OFFER CONDITION
o The Chilean offer shall not have been terminated in accordance
with its terms.
These conditions are for our sole benefit and IPALCO may jointly agreebe asserted by us in our
sole judgment regardless of the circumstances, including any action or omission
by us, giving rise to terminate the share exchange agreementany such conditions or may be waived by us in our sole
discretion in whole or in part at any time beforeand from time to time. No failure by
us at any time to exercise any of the share exchangeforegoing rights shall be deemed a waiver
of any of these rights. Any determination by us concerning any condition or
event described in this section shall be final and binding.
CERTAIN LEGAL MATTERS; REGULATORY APPROVALS
Hart-Scott-Rodino. Under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, the HSR Act, and the rules that have been promulgated thereunder, some
acquisitions may not be consummated unless information has been furnished to
the Antitrust Division of the Department of Justice and the Federal Trade
Commission and some waiting period requirements have been satisfied. The
acquisition of Gener shares pursuant to the offers is completed. In addition, either company
may terminatesubject to the share exchange agreement if:
-HSR Act.
On November 6, 2000, we filed with the share exchange is not completed onAntitrust Division and the Federal Trade
Commission a Notification and Report Form under the HSR Act with respect to the
offers. Under the applicable provisions of the HSR Act, the purchase of Gener
shares under the offers cannot be consummated until the expiration 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 resultearly
termination of a breach ofwaiting period that began on November 6, 2000. The initial
waiting period under 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 breachHSR Act is not remedied within 30 days. In addition,Either the Federal Trade
Commission or the Antitrust Division may issue a request for additional
information or documentary material, which would extend the waiting period
until 20 days after we substantially comply with such request.
Some large Gener stockholders, those that would receive more than $15
million in 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 AESshares, may be required to pay termination feesmake separate filings with the
Federal Trade Commission and reimburse expensesAntitrust Division under the HSR Act and the
related rules in conjunction with the receipt of AES shares. If you must make
such a filing, you will then be required to observe applicable waiting periods
under the HSR Act and the related rules before receiving AES shares. If you are
obligated to make such a filing, we will deposit the AES shares to be
exchanged, pursuant to the applicable rules, pending expiration or early
termination of the waiting period. Although we cannot give any assurance, we
anticipate that we will obtain HSR Act clearance on a timely basis.
43
The acquisition of Gener shares may also require notification to the
competition and other partyregulatory authorities of various countries in which both
we and Gener conduct business, depending on the requirements in such countries.
Although we can give no assurance, except as describedotherwise set forth in our offer
we anticipate receiving all required clearances under foreign competition laws
on page 47.
ANTICIPATED ACCOUNTING TREATMENT (PAGE 36)a timely basis.
Federal Power Act. Section 203 of the Federal Power Act provides that no
public utility shall sell or otherwise dispose 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 Federal Energy Regulatory
Commission. The share exchangeapproval of the FERC is expectedrequired in order to complete our
acquisition of Gener shares in the offers because of Gener's 50% interest in
MEGA, a U.S. power marketer. Under Section 203 of the Federal Power Act, the
FERC will approve an acquisition if it finds such acquisition "consistent with
the public interest." In reviewing an acquisition, the FERC generally
evaluates: (i) whether the acquisition will adversely affect competition, (ii)
whether the acquisition will adversely affect customer rates and (iii) whether
the acquisition will impair the effectiveness of regulation. AES has filed the
appropriate application with the FERC requesting that the FERC approve the
acquisition under Section 203 of the Federal Power Act. Although we cannot give
any assurances, we anticipate that we will receive FERC clearance on a timely
basis.
Chilean Corporate Law. Under Article 54 of the Chilean Securities Market
Law, any person or group of persons intending to take control of a publicly
traded Chilean company must announce such intent to the public by publishing in
a Chilean national newspaper a notice of intention to acquire control that
contains the information prescribed by Article 54 and duly notifying the
Superintendencia de Valores y Seguros, SVS, and the stock exchanges in Chile on
which the securities of such company are traded. In accordance with Article 54,
on November 4, 2000 we published in the El Mercurio of Santiago a notice of
intention to acquire control of Gener as required by Chilean law, and we also
notified the SVS, the Santiago Stock Exchange and the other stock exchanges in
Chile on November 3, 2000.
In accordance with Article 12 of the Securities Market Law, we must report
the results of the offers to the SVS and the Santiago Stock Exchange within
five days of the date of each of our offer and the Chilean offer. In addition,
we must give notice of the acquisition of shares representing 10% or more of
the ownership interest in Gener and any shares in excess of 10% within five
days after the acquisition. We intend to take, or cause to be accountedtaken, all steps
necessary to comply with Article 12 of the Chilean Securities Market Law.
Chilean Antitrust and Competition Law. We are not required under Chilean
law to notify the Chilean Antitrust Authority, the CAA, of the offers. The CAA
does, however, have broad authority to investigate any intended transaction
that the CAA determines is likely to cause an adverse effect on, or lessen,
competition. Although we do not believe that the CAA will investigate, we
cannot give any assurance that the CAA will not determine that our offer and
the Chilean offer are anticompetitive and subject to the scrutiny of the CAA.
Other. Based upon our examination of publicly available information
concerning Gener, it appears that Gener and its subsidiaries own property and
conduct business in a number of foreign countries in addition to those
described above. In connection with the acquisition of Gener shares and Gener
ADSs pursuant to our offer and the Chilean offer, the laws of certain of those
foreign countries may require the filing of information with, or the obtaining
of the approval of, governmental authorities therein. We intend to seek further
information regarding the applicability of any such laws and currently intend
to take such action as they may require, but we cannot give any assurance that
such approvals will be obtained. If any action is taken prior to completion of
our offer by any such government or governmental authority, we may not be
obligated to accept for payment or pay for any tendered Gener shares or ADSs.
General. Based on our examination of publicly available information filed
by Gener with the SEC and other publicly available information concerning
Gener, except as discussed in this section and elsewhere in this prospectus, we
are not aware of:
o any governmental license or regulatory permit that appears to be
material to Gener's business that might be adversely affected by our
acquisition of Gener ADSs or shares as contemplated in our offer or
the Chilean offer;
44
o any approval or other action by any government or governmental
administrative or regulatory authority or agency, domestic or
foreign, that would be required for the acquisition or ownership of
Gener ADSs or shares by us as contemplated in our offer and the
Chilean offer;
o any approval or other action by any government or governmental
administrative regulatory authority or agency, domestic or foreign;
or
o any consent, waiver or other approval that would be required as a
poolingresult of interests, which meansor in connection with our offer and the Chilean offer.
Should any such approval or other action be required, we currently intend
to seek such approval or take such other action. We cannot predict whether we
would be required to delay the acceptance for payment of or payment for Gener
ADSs tendered pursuant to our offer pending the outcome of any such matter. We
can give no assurance that AESwe would be able to obtain any such approval or take
such other action, if needed.
RELATIONSHIPS WITH GENER
Ownership of Gener Shares and IPALCO will be treatedOther Transactions. As of the date of our
offer, we beneficially own 659,900 Gener ADSs and 6,800 Gener shares,
representing less than 0.8% of the outstanding Gener shares 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' rightsreported in
Gener's 20-F. All such Gener ADSs were acquired in open market transactions on
the New York Stock Exchange. The 6,800 Gener shares were acquired as a result
of the share exchangewithdrawal of Gener shares from the Depositary. Except as set forth on
Schedule II, neither AES nor any of its directors, executive officers or
affiliates is the beneficial owner of any Gener ADSs or Gener shares. See
Schedule II of this prospectus for further information with respect to demand paymentour
purchases of Gener ADSs.
In May 1999, through two of our subsidiaries, we entered into an
agreement, negotiated at arms-length, with Merchant Energy Company of the
Americas, Inc., or MEGA, a subsidiary of Gener in the U.S. Pursuant to this
agreement we agreed to pay MEGA consistent with customary industry practice an
annual fee of $1 million for its services in assisting us in locating customers
for our natural gas and electricity on "spot" or other short-term sales. Under
the agreement we are obligated to pay MEGA additional fees, subject to a $1
million minimum, for arranging certain long-term agreements with customers. As
a result of two such long-term agreements we achieved with the assistance of
MEGA, we have agreed to pay MEGA a total bonus of $2.5 million over the next
five years. MEGA has exercised its right to terminate the agreement as of
November 26, 2000. Except as described above, we have had no other
relationships with MEGA.
Except as otherwise described in this prospectus, neither we nor the
Purchaser, nor, to the best of our knowledge, any of the persons listed in
Schedule I to this prospectus, has any contract, arrangement, understanding or
relationship with any other person with respect to any securities of Gener,
including, but not limited to, any contract, arrangement, understanding or
relationship concerning the transfer or voting of such securities, finder's
fees, joint ventures, loan or option arrangements, puts or calls, guarantees of
loans, guarantees of profits, division of profits or loss or the giving or
withholding of proxies. Except as set forth in this prospectus, since January
1, 1998, neither we nor Purchaser nor, to the best of our knowledge, any of the
persons listed in Schedule I hereto, has had any business relationship or
transaction with Gener or any of its executive officers, directors, or
affiliates that is required to be reported under the rules and regulations of
the SEC applicable to our offer.
SOURCE AND AMOUNT OF FUNDS
We estimate that the total amount of funds required to purchase the Gener
shares pursuant to the Chilean offer and to pay costs and expenses related to
the offers will be approximately $845 million.
We plan to obtain the funds to purchase the Gener shares pursuant to the
Chilean offer and to pay related fees and expenses by the time Gener shares are
purchased in the Chilean offer. We are considering a variety of alternatives to
obtain such funds, including borrowings and issuances of debt, equity and
convertible securities by us and our subsidiaries. We believe that such funds
can be obtained on a timely basis.
45
FEES AND EXPENSES
Except as set forth in this section, we will not pay any fees or
commissions to any broker, dealer or other person for soliciting tenders of
Gener ADSs pursuant to our offer.
Deutsche Bank Securities Inc. is acting as Dealer Manager in connection
with our offer and as financial advisor to us in connection with the proposed
acquisition of a controlling interest in Gener. Deutsche Securities Corredores
de Bolsa Limitada, an affiliate of Deutsche Bank Securities Inc., is acting as
Dealer Manager in connection with our Chilean offer, and as Chilean proxy
solicitation coordinator in connection with our solicitation of Gener
shareholder votes in favor of the amendments to Gener's Bylaws and against the
TotalFinaElf proposal. Deutsche Bank Securities Inc. will receive customary
compensation for acting in the foregoing capacities. Such compensation will not
exceed $5.5 million in the aggregate. We also have agreed to reimburse Deutsche
Bank Securities Inc. for its out-of-pocket expenses, including the fees and
expenses of legal counsel and other advisors, incurred in connection with its
engagement, and to indemnify Deutsche Bank Securities Inc. and certain related
persons against certain liabilities and expenses in connection with its
engagement, including certain liabilities under the federal securities laws. In
the ordinary course of business, Deutsche Bank Securities Inc. and its
affiliates may actively trade the debt and equity securities of Gener for their
sharesown account and for the accounts of customers, and accordingly, may at any time
hold a long or short position in such securities.
We have retained ChaseMellon Shareholder Services, LLC to act as the
Exchange Agent in connection with our offer. The Exchange Agent has not been
retained to make solicitations or recommendations in its role as Exchange
Agent. The Exchange Agent will receive reasonable and customary compensation
for its services, will be reimbursed for certain reasonable out-of-pocket
expenses and will be indemnified against certain liabilities in connection
therewith, including certain liabilities under Indiana law. See
pages 16the U.S. federal securities
laws.
We have retained D.F. King & Co., Inc. to 17 for a descriptionact as the Information Agent in
connection with our offer. The Information Agent may contact holders of Gener
ADSs by mail, telephone, telex, telegraph and personal interviews and may
request brokers, dealers and other nominee shareholders to forward materials
relating to our offer to beneficial owners. The Information Agent will also
assist us in soliciting the votes of Gener ADS holders and shareholders in
favor of the special meetingamendments to Gener's Bylaws and voting procedures.
GOVERNMENTAL APPROVALS AND REGULATORY MATTERS (PAGE 36)against the proposed TotalFinaElf
transaction. The share exchange requires approvalsInformation Agent will receive reasonable and customary
compensation for its services, will be reimbursed for certain reasonable
out-of-pocket expenses and will be indemnified against certain liabilities in
connection therewith, including certain liabilities under the Federal Power ActU.S. federal
securities laws.
ACCOUNTING TREATMENT
The acquisition of Gener shares by AES in the Chilean offer and PUHCA
as describedthe Gener
shares represented by Gener ADSs acquired in our offer will be accounted for
under the purchase method of accounting under U.S. generally accepted
accounting principles, which means that Gener's results of operations will be
included with ours from the closing date and its consolidated assets and
liabilities will be recorded at their fair values at the same time except for
the minority interest in the assets and liabilities which will remain at
historical cost.
STOCK EXCHANGE LISTING
AES shares are listed on pages 36 to 37. AES and IPALCOthe New York Stock Exchange. We will filemake an
application as necessary to list on the New York Stock Exchange the shares that
we will issue and exchange pursuant to our offer.
46
THE CHILEAN OFFER
Simultaneously with the FERC requesting itcommencement of our offer, we are conducting an
auction transaction on the Santiago Stock Exchange in Chile known as a "remate"
that we refer to approveas the share exchange. The FERC will approveChilean offer. In the share exchange if it finds itChilean offer we are offering 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 morepurchase 3,466,600,000 Gener shares representing approximately 75% of the
outstanding voting securitiesGener shares, excluding Gener shares represented by ADSs, at the
Chilean Peso equivalent of a public utility company$0.235294118, payable in cash, per Gener share. The
cash payment per Gener share in the Chilean offer is the same, after adjusting
for the 68 Gener shares represented by each Gener ADS, as the value of the
fraction of an AES share offered in exchange for each Gener ADS pursuant to obtainour
offer. Although stated in U.S. dollars, this price will be paid to tendering
Gener shareholders in Chilean Pesos at the average daily observed exchange rate
between the Ch$ and the dollar, as reported by the Central Bank of Chile for
each of the ten business days immediately prior to the third trading day
preceding the date on which the "remate" occurs.
The Chilean offer is conditioned upon (i) all of the conditions to our
offer having been satisfied or waived by us for purposes of the Chilean offer,
even if we do not waive such conditions for purposes of our offer, (ii) Gener
shareholder approval of the SECamendments to Gener's Bylaws, (iii) the number of
Gener shares we are able to purchase in the Chilean offer, representing at
least a majority of the outstanding Gener shares and (iv) that we have obtained
funds sufficient to purchase the maximum number of shares we are offering to
purchase in the Chilean offer and pay all fees and expenses incurred in
connection with the offers.
In general, Gener shareholders who wish to sell their Gener shares in a
stock "remate" must deliver to a Chilean broker eligible to participate in the
Chilean offer their shares and instructions as to the price at which the Gener
shares may be sold. In the Chilean offer:
o all Gener shares will be required to be tendered through a single
Chilean broker;
o the scheduled time for the Chilean offer will be the opening of
business on the designated day;
o tender rights will be terminated for all holders of Gener shares
(other than stock brokers as to which tender rights will terminate as
of 18:00 Santiago, Chile time) as of 14:00, Santiago Chile time on
the third trading day and withdrawal rights will be terminated for
all holders of Gener shares at 18:00 Santiago, Chile time on the
third trading day prior to acquiring 5% or morethe Chilean auction; and
o we will agree not to purchase Gener shares at a price lower than that
specified in the Chilean offer.
The single Chilean broker requirement will result in de facto prorationing
in the Chilean offer because the tendering Chilean broker will tender, as the
first allotment, the maximum number of Gener shares sought by us in the Chilean
offer. We will then buy the first allotment of Gener shares and will not
purchase additional Gener shares in the Chilean offer. As all Gener shares will
have been tendered by the same Chilean broker at the same price, the Chilean
broker will divide the proceeds of the voting securities of
7
any additional public utility company. AESsale pro-rata among the tendering Gener
shareholders. We will also file an application withnot purchase Gener shares in the SEC for an order exempting AES, pursuantChilean offer in a
manner that would fail 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 referenceresult in this proxy
statement/prospectus or made by management ofeffective prorationing among the
tendering Chilean holders.
47
MARKET PRICES AND DIVIDENDS
AES or IPALCO, other than
statements of historical fact regarding AES or IPALCO,shares 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
COMPARATIVE PER COMMON SHARE
MARKET PRICE AND DIVIDEND INFORMATION
Shares of IPALCO common stock and AES common stock arecurrently traded on the New York Stock Exchange under the
symbols "IPL"symbol "AES". Shares of Gener's common stock are traded in the New York Stock
Exchange in the form of Gener ADSs, where each Gener ADS represents 68 shares
of Gener common stock. The Gener ADSs are evidenced by ADRs and "AES", respectively.Gener's trading
symbol on the New York Stock Exchange is "CHR". Shares of Gener's common stock
are also traded on the Santiago Stock Exchange under the symbol "GENER". The
following tables set forth, for the periods indicated, (1) the high and low
closing sales prices for AES common stock as reported by the New York Stock
Exchange, (2) the high and low closing sales prices of Gener's common stock as
reported on the Santiago Stock Exchange and (3) the quarterly high and low
daily closing prices of Gener ADS on the New York Stock Exchange for the
indicated periods, all as reported by Bloomberg L.P. The following Chilean
Pesos information reflects historical amounts at the trade dates and has not
been restated in constant Pesos.
Price Range of AES and Gener Common Stock and Gener ADSs
GENER AES
------------------------------------------------- -----------------------
SANTIAGO STOCK
EXCHANGE PER SHARE NYSE PER GENER ADS NYSE PER SHARE
----------------------- ----------------------- -----------------------
CH$ $ $
LOW HIGH LOW HIGH LOW HIGH
---------- ---------- ---------- ---------- ---------- ----------
1998
First Quarter .......... 125.0 158.0 18.94 24.50 19.94 26.94
Second Quarter ......... 121.0 158.0 18.06 23.94 23.13 28.84
Third Quarter .......... 75.1 138.0 10.81 20.56 12.13 27.13
Fourth Quarter ......... 96.5 138.0 13.94 19.25 16.25 23.69
1999
First Quarter .......... 92.0 130.5 13.00 18.38 16.25 24.47
Second Quarter ......... 132.5 158.0 17.50 22.25 18.78 29.44
Third Quarter .......... 120.0 158.0 15.25 20.63 26.97 33.19
Fourth Quarter ......... 108.0 127.0 13.75 16.06 25.63 37.38
2000
First Quarter .......... 99.0 126.0 13.06 16.69 34.81 44.09
Second Quarter ......... 99.0 115.5 12.81 15.00 36.81 48.88
Third Quarter .......... 104.5 119.5 12.56 15.25 46.19 69.14
Fourth Quarter (through
October 30) .......... 90.0 108.0 10.63 13.13 51.00 70.63
On July 14,November 2, 2000, the last full day of trading dayon the New York Stock
Exchange prior to the public announcement of our offers, 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 sharereported closing
sales prices for AES
common stock and IPALCO common stock as reported on the NYSE, and quarterly
dividends paid on IPALCO common stock.
AES IPALCO
COMMON STOCK(1) COMMON STOCK(2)
--------------------------------------------------- ------------------------
HIGH LOW HIGH
------------------------ ------------------------ ------------------------
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
IPALCO
COMMON STOCK(2)
------------------------------------
DIVIDENDS
LOW PAID
------------------------ ---------
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
(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 the AES common
stockshares 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:
AES IPALCO EQUIVALENT PER
COMMON STOCK COMMON STOCK SHARE PRICE
-------------- -------------- ---------------
July 14, 2000............................. 50.375 21.50 $25.00
August 15, 2000........................... 56.875 23.125 $25.00
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 listedGener ADSs on the New York Stock Exchange and
the Gener shares on Santiago Stock Exchange were $60.875, $12.125 and Ch$103,
respectively.
AES Share Dividends. No cash dividends have been declared or paid on AES
common stock since December 22, 1993, in order to preserve capital for AES
equity investments in projects.
The ability of AES to declare and pay dividends is dependent, among other
things, on:
o the ability of AES's project subsidiaries to declare and pay
dividends and otherwise distribute cash to AES;
o the ability to service its debt; and
o the ability to meet certain criteria for paying dividends under its
corporate credit facility and under existing indentures related to
its debt securities.
48
The ability of the AES's project subsidiaries to declare and pay cash
dividends to AES is subject to certain limitations in the project loans,
governmental provisions and other agreements entered into by such project
subsidiaries. Such limitations permit the payment of cash dividends out of
current cash flow for quarterly, semiannual or annual periods only at the end
of such periods and only after payment of principal and interest on project
loans due at the end of such periods, and in certain cases after providing for
debt services reserves.
Gener Share Dividends. The dividend information set forth below has been
obtained from publicly available information and is set forth in nominal
amounts which have not been restated in constant Chilean Pesos.
The table below sets forth the amounts of annual dividends, on a per share
basis in nominal Chilean Pesos, for each of the calendar years indicated, as
reported in the Gener's 20-F. Per ADS amounts are shown without deduction of
Chilean withholding taxes.
PER SHARE PER GENER ADS
--------------------- --------------
(CH$) ($) ($)
1998 ......... 4.70 0.10 0.67
1999 ......... 0 0 0
Gener's board of directors has determined that Gener will pay dividends
equal to 66% of consolidated net income after taxes, having consideration for
Gener's financial condition and prospects, and will retain the balance of net
income as retained earnings. Gener's dividend policy for each year is announced
to their shareholders at their annual shareholders' meeting, including the
policy intended to be followed by the Gener board of directors for interim
dividends for that year. At their meeting, shareholders consider and approve
the final dividend proposed by the Gener board of directors in respect of the
prior year's results, and ratify the interim dividends previously declared and
paid. As requested by local law, unless otherwise decided by all shareholders,
Gener must distribute a cash dividend in an amount equal to at least 30% of
Gener's consolidated net income for that year, determined on a Chilean GAAP
basis, unless and except to the extent that Gener has accumulated losses.
Gener typically pays three provisional dividends and a final dividend for
each fiscal year. Under this arrangement:
o a provisional dividend of approximately 30% of the consolidated net
income for the first five months of the year is paid in July or
August;
o a second provisional dividend of approximately 55% of the
consolidated net income for the months of June, July and August is
paid in November;
o a third provisional dividend of approximately 60% of the consolidated
net income for the months of September, October and November is paid
at the end of January of the following year; and
o a fourth and final dividend is paid in April or May of the following
year in a amount to ensure that the aggregate annual dividend is
equal to approximately 66% of the consolidated net income for the
year taxes.
In the first three quarters of 1999, Gener incurred a net loss on a
consolidated basis. Consequently, Gener's Board decided not to declare
provisionals dividends for 1999 called for Gener's policy. On April, 2000, the
Ordinary Shareholders Meeting approved to pay on April 26, 2000 a final
dividend of Ch$0.66 per share or Ch$44.88 per Gener ADS.
Dividends are not price-level adjusted between the end of the preceding
year and the date of the declaration of the final dividend.
49
It is expected that Gener's board of directors will recommend dividends
for the 2000 fiscal year consistent with Gener's general practice as described
above. Gener's board of directors reviews the dividend policy annually, and
although there willare no current plans to recommend a change in the dividend
policy, the amount and timing of a dividend payment is subject to revision from
time to time, depending upon:
o revenues;
o costs;
o cash flow;
o capital requirements; and
o market conditions.
Accordingly, there can be no further marketassurance as to the amount, if any, or timing
of dividend payments in the future. Any change in dividend policy would
ordinarily be effective for IPALCO common
stock.
9dividends declared in the year following the
adoption of the change. In addition, Gener must file a notice as to any such
change of policy with the Chilean authorities. Accordingly, a change in policy
would become publicly available information.
According to Gener's publicly filed documents, Gener expects that
dividends received from subsidiaries and related companies will become an
increasingly significant portion of its cash flow. Some of these subsidiaries
and related companies are or may become parties to credit agreements containing
restrictions on the payment of dividends. Gener has given no assurances that
these contractual restrictions will not limit its ability to maintain its
current dividend policy in the future.
50
AES SUMMARY SELECTED
CONSOLIDATED FINANCIAL DATA
Set forth below are summary selected financial data for The AES
Corporation 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.
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) AMOUNTS)
INCOME STATEMENT DATA:
Revenues......................................Revenues ................................. $ 679 $ 835 $ 1,411 $ 2,398 $ 3,253 $ 1,278 $ 3,014
Income before extraordinary item..............item ......... 107 125 188 307 245 58 292
Net income....................................income ............................... 107 125 185 311 228 58 285
BALANCE SHEET DATA:
Total assets..................................assets ............................. $2,341 $ 3,622 $ 8,909 $10,781 $20,880 $11,237 $29,020$ 10,781 $ 20,880 $ 11,237 $ 29,020
Long-term debt................................debt ........................... 1,307 2,118 5,731 7,196 13,017 7,886 17,248
Short-term borrowings.........................borrowings .................... 50 88 -- 8 335 -- --
Stockholders' equity..........................equity ..................... 549 721 1,481 1,794 2,637 1,514 3,990
CASH FLOW DATA:
Cash flows from operations....................operations ............... $ 200 $ 195 $ 193 $ 528 $ 197 $ 159 $ 611
Cash flows from financing activities..........activities ..... 127 886 3,723 1,503 6,369 1,106 2,728
Cash flows (used in) investing
activities.....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.....................item ................ $ 0.36 $ 0.41 $ 0.57 $ 0.87 $ 0.64 $ 0.16 $ 0.69
Extraordinary item............................item ....................... -- -- (0.01) 0.01 (0.04) -- (0.02)
------ ------- ------- ------- ------- ------- --------------- -------- -------- -------- -------- --------
Basic earnings per share......................share ................. $ 0.36 $ 0.41 $ 0.56 $ 0.88 $ 0.60 $ 0.16 $ 0.67
====== ======= ======= ======= ======= ======= =============== ======== ======== ======== ======== ========
Diluted earnings per share:
Before extraordinary item.....................item ................ $ 0.35 $ 0.40 $ 0.56 $ 0.84 $ 0.62 $ 0.16 $ 0.66
Extraordinary item............................item ....................... -- -- (0.01) 0.01 (0.04) -- (0.02)
------ ------- ------- ------- ------- ------- --------------- -------- -------- -------- -------- --------
Diluted earnings per share....................share ............... $ 0.35 $ 0.40 $ 0.55 $ 0.85 $ 0.58 $ 0.16 $ 0.64
====== ======= ======= ======= ======= ======= =============== ======== ======== ======== ======== ========
1051
IPALCOGENER SUMMARY SELECTED CONSOLIDATED FINANCIAL DATA
Set forth below areThe following selected summary selectedconsolidated financial data relating to
Gener S.A. and its subsidiaries has been taken or derived from the audited
financial statements contained in Gener's 20-F and the unaudited financial
statements contained in Gener's Report by Foreign Issuer on Form 6-K for IPALCO as of
December 31, 1999 andfiscal
quarter ended 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.
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)
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
========== ========== ========== ========== ========== ========== ==========
11
AES AND SUBSIDIARY COMPANIES SUMMARY UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL
INFORMATION
The summary unaudited pro forma consolidatedAugust 16, 2000. More comprehensive
financial information of AES
presented below has been derived from the unaudited pro forma consolidated
financial statements of AESis 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.
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)
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
BALANCE SHEET DATA:
Total assets................................................ $31,142
Long-term debt.............................................. 18,078
Short-term borrowings....................................... --
Stockholders' equity........................................ 4,602
12
COMPARATIVE PER SHARE DATA
The information below presents:
- the historical earnings from continuing operations, book value and cash
dividends per share of AES common stocksuch reports 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 conjunctionother documents filed
by Gener 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
SIX MONTHS ENDED
JUNE 30, 2000
1997 1998 1999 (UNAUDITED)
-------- -------- -------- ----------------
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
IPALCO
SIX MONTHS ENDED
JUNE 30, 2000
1997 1998 1999 (UNAUDITED)
-------- -------- -------- ----------------
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
AES UNAUDITED PRO FORMA CONSOLIDATED DATA
SIX MONTHS ENDED
1997 1998 1999 JUNE 30, 2000
-------- -------- -------- ----------------
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
13
IPALCO EQUIVALENT UNAUDITED PRO FORMA DATA
SIX MONTHS ENDED
1997 1998 1999 JUNE 30, 2000
-------- -------- -------- ----------------
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
- ------------------------
(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
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
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.
16
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.
17
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
18
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
19
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.
20
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 reasonsdata 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
21
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
22
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;
23
- 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.
24
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
July 12, 2000 and the multiples implied for IPALCO based on the consideration
provided for in the share exchange:
IMPLIED MULTIPLES OF
SELECTED
ELECTRIC UTILITY
COMPANIES IMPLIED IMPLIED MULTIPLES OF
----------------------------------------- MULTIPLES IPALCO BASED ON
LOW MEAN MEDIAN HIGH OF IPALCO CONSIDERATION
-------- -------- -------- -------- ---------- --------------------
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
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:
IMPLIED MEAN
MULTIPLE OF IMPLIED
SELECTED POWER MULTIPLES
GENERATION COMPANIES OF AES
--------------------- ----------
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
26
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:
ACQUIROR TARGET
- -------- ------
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.
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.
IMPLIED MULTIPLES OF IMPLIED
SELECTED ELECTRIC UTILITY MULTIPLES
TRANSACTIONS OF IPALCO
----------------------------------------- BASED ON
LOW MEAN MEDIAN HIGH CONSIDERATION
-------- -------- -------- -------- --------------
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
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
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
ONE MONTH PRIOR CURRENT
--------------- --------
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%
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:
ACQUIROR TARGET
- -------- ------
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
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.
IMPLIED MULTIPLES OF IMPLIED
SELECTED ELECTRIC UTILITY MULTIPLES
TRANSACTIONS OF IPALCO
----------------------------------------- BASED ON
LOW MEAN MEDIAN HIGH CONSIDERATION
-------- -------- -------- -------- --------------
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
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
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
ONE MONTH PRIOR CURRENT
--------------- --------
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%
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
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
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
AMOUNT
(AFTER SECTION 280G
NAME POSITION REDUCTION)
- ---- ------------------------------------- -------------------
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
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
DEFERRED COMPENSATION TO
BE PAID AT THE EFFECTIVE TIME
NAME POSITION AMOUNT
- ---- --------------------------------------- ----------
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
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
SHARES OF IPALCO RESTRICTED STOCK
NUMBER OF RESTRICTED SHARES
HELD OR SUBJECT TO RESTRICTED
NAME POSITION STOCK GRANTS
- ---- --------------------------------- -----------------------------
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
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
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
- 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.
35
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
36
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.
37
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.
38
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
39
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;
40
- 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.
41
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;
42
- 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,related notes contained therein. Such reports and
other documents required tomay 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 registrationobtained 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
43
- 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 interestdescribed 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
44
- 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
- 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
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
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. Seesection captioned "Where
You Can Find More Information."Information" in this prospectus. The unaudited pro forma consolidated financial information has beenstatements of
Gener are presented in Chilean Pesos and are prepared in accordance with
generally accepted accounting principles. These principles require management to make use of estimatesin Chile, Chilean GAAP, and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities asrules
of the dateSVS relating thereto, both of which differ in certain respects from
generally accepted accounting principles in the United States, U.S. GAAP. Note
30 to Gener's consolidated financial statements provides a description of the
principal differences between Chilean GAAP and U.S. GAAP and a reconciliation
to U.S. GAAP of Gener's net income for the reported amountsyears ended 1997, 1998 and 1999.
The financial data of revenueGener as of and expenses duringfor 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 onyears ended December 31,
1995, 1996, 1997, 1998 and 1999 combining the balance sheets of AES and IPALCOhave been restated in constant Chilean Pesos as
of December 31, 1999. The unaudited pro forma consolidated income statements
give effect tofinancial data of Gener as of and for the share exchangesix months
ended June 30, 1999 and 2000 have been restated in constant Chilean Pesos as if it had occurred on January 1, 1997.of
June 30, 2000. The unaudited pro forma consolidated financial statements are presentedinformation for informational purposes onlythe year ended December 31, 1999
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
AES AND SUBSIDIARY COMPANIES
UNAUDITED PRO FORMA CONSOLIDATED INCOME STATEMENT
JUNEsix months ended June 30, 2000 (IN MILLIONS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
SIX MONTHS ENDED JUNEis presented also in U.S. dollars
translated from constant Chilean Pesos as of December 31, 1999 and as of June
30, 2000, respectively, at an exchange rate of Ch $530.07 to $1.00 and Ch
$536.90 to $1.00, respectively.
PRO FORMA PRO FORMA
AES IPALCO ADJUSTMENTS CONSOLIDATED
----------1995 1996 1997 1998
------------- ------------- ------------- -------------
MILLIONS MILLIONS MILLIONS MILLIONS
OF OF OF OF
CONSTANT CONSTANT CONSTANT CONSTANT
CH$ CH$ CH$ CH$
------------- ------------- ------------- -------------
Income Statement Data:
Chilean GAAP:
Operating Revenue ...................... 144,098 176,936 288,563 290,447
Operating expense ...................... (65,882) (93,255) (143,181) (159,284)
Depreciation (5) ....................... (17,686) (19,750) (28,920) (32,440)
Administrative and selling expense ..... (17,829) (14,142) (19,838) (21,073)
Operating Income ....................... 42,701 49,789 96,624 77,650
Share of net income and losses of
related companies ..................... 4,623 6,396 10,164 13,199
Financial income ....................... 6,927 6,965 13,926 20,303
Financial expense ...................... (14,487) (16,693) (39,275) (47,253)
Other non-operating income
(expense), net ........................ 15,845 3,530 3,988 (7,829)
Income taxes ........................... 938 (1,345) (7,425) (998)
Minority interest ...................... (629) (1,027) (1,721) (10,231)
Net income ............................. 55,918 47,615 76,282 44,841
Consolidated ratio of earnings to
fixed charges (unaudited) (5) ......... 3.90 3.39 2.93 2.07
Net income per share ................... 13.27 11.30 13.65 8.03
Net income per ADS ..................... 902.40 768.13 928.47 545.78
Dividends per share (5) ................ 7.0676 8.1589 7.6932 5.4699
Shares outstanding at end of period
(000s) (5) ............................ 4,215,380 4,215,380 5,586,821 5,586,821
Dividends per ADS (5) .................. 469.38 601.17 563.21 371.96
SIX MONTHS ENDED
JUNE 30,
---------------------------------------
1999 1999 1999 2000 2000
------------- ------------- ------------- ------------- -----------
MILLIONS MILLIONS MILLIONS
OF MILLIONS OF OF MILLIONS
CONSTANT OF CONSTANT CONSTANT OF
CH$ $(1) CH$ CH$ $
------------- ------------- ------------- ------------- -----------
Income Statement Data:
Chilean GAAP:
Operating Revenue ...................... 441,689 833.3 245,425 207,469 385.2
Operating expense ...................... (275,269) (519.3) (169,120) (161,026) (299.0)
Depreciation (5) ....................... (49,587) (93.5) -- -- --
Administrative and selling expense ..... (39,278) (74.1) (20,510) (11,690) (21.7)
Operating Income ....................... 77,555 146.4 55,795 34,753 64.5
Share of net income and losses of
related companies ..................... 3,899 7.4 (2,515) (874) (1.6)
Financial income ....................... 6,813 12.9 3,708 4,361 8.1
Financial expense ...................... (53,188) (100.3) (25,544) (31,128) (57.8)
Other non-operating income
(expense), net ........................ (2,507) (4.7) (15,731) 5,567 10.3
Income taxes ........................... (9,990) (18.8) (4,163) (614) (1.1)
Minority interest ...................... (16,160) (30.5) (10,154) (3,728) (6.9)
Net income ............................. 6,423 12.1 1,396 8,337 15.5
Consolidated ratio of earnings to
fixed charges (unaudited) (5) ......... 1.48 1.48 -- -- --
Net income per share ................... 1.14 0.0 10.08 2.40 0.0
Net income per ADS ..................... 77.57 0.1 685.11 163.25 0.30
Dividends per share (5) ................ 2.2272 0.0 -- -- --
Shares outstanding at end of period
(000s) (5) ............................ 5,630,563 5,630,563 -- -- --
Dividends per ADS (5) .................. 151.45 0.3 -- -- --
52
1995 1996 1997 1998
------------- ------------- ------------- -------------
MILLIONS MILLIONS MILLIONS MILLIONS
OF OF OF OF
CONSTANT CONSTANT CONSTANT CONSTANT
CH$ CH$ CH$ CH$
------------- ------------- ------------- -------------
U.S. GAAP (4):
Operating Revenue .......................... 144,098 176,936 288,563 290,447
Operating income ........................... 44,609 51,323 98,085 79,178
Depreciation ............................... (15,769) (18,207) (27,459) (30,912)
Financial income ........................... 6,927 6,965 13,926 20,303
Financial expense .......................... (14,487) (16,693) (39,275) (47,253)
Share of net income and loss of
related companies ......................... 4,904 7,574 11,875 13,060
Other non operating income
(expense), net ............................ 18,648 3,406 865 (8,561)
Net income ................................. 36,400 47,974 74,343 37,630
Consolidated ratio of earnings to
fixed charges (unaudited) ................. 4.16 3.52 2.93 2.09
Net income per share ....................... 8.63 11.38 13.31 6.74
Net income per ADS ......................... 587.18 773.89 904.87 458.01
Weighted average shares
outstanding (000s) ........................ 4,215,380 4,215,380 5,586,821 5,586,821
Balance Sheet Data:
Chilean GAAP:
Total assets ............................... 774,630 1,182,011 1,472,283 1,685,220
Long term liabilities ...................... 189,785 549,664 471,538 706,269
Total interest bearing liabilities (5) ..... 191,433 516,651 522,293 637,374
Total shareholders equity .................. 518,682 531,200 787,508 796,602
Ratio of total shareholders equity to
total capitalization (3) (5) .............. 0.73 0.51 0.60 0.56
U.S. GAAP (4):
Total assets ............................... 758,170 1,168,241 1,461,100 1,679,879
Long term liabilities ...................... 214,209 576,318 500,179 2,800,778
Total interest bearing liabilities ......... 191,433 516,651 522,293 637,374
Total shareholders equity .................. 477,799 490,775 747,683 751,905
Ratio of total shareholders equity to
total capitalization (3) .................. 0.71 0.49 0.59 0.54
SIX MONTHS ENDED
JUNE 30,
--------------------------------------
1999 1999 1999 2000 2000
------------- ------------- ------------ ----------------------- ------------
MILLIONS MILLIONS MILLIONS
OF MILLIONS OF OF MILLIONS
CONSTANT OF CONSTANT CONSTANT OF
CH$ $(1) CH$ CH$ $
------------- ------------- ------------ ------------ ------------
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
====== ====== ======
49
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
PRO FORMA PRO FORMA
AES IPALCO ADJUSTMENTS CONSOLIDATED
---------- ------------ ----------- ------------
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
====== ===== ======
50
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
PRO FORMA PRO FORMA
AES IPALCO ADJUSTMENTS CONSOLIDATED
---------- ------------ ----------- ------------
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
====== ====== =======
51
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
PRO FORMA PRO FORMA
AES IPALCO ADJUSTMENTS CONSOLIDATED
---------- ------------ ----------- ------------
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
====== ====== ======
52
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
PRO FORMA PRO FORMA
AES IPALCO ADJUSTMENTS CONSOLIDATED
---------- ------------ ----------- ------------
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
====== ====== ======
53
AES AND SUBSIDIARY COMPANIES
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
JUNE 30, 2000
(IN MILLIONS OF DOLLARS)
PRO FORMA PRO FORMA
AES IPALCO ADJUSTMENTS CONSOLIDATED
------------- --------------- ------------ -------------
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.....................U.S. GAAP (4):
Operating Revenue .......................... 441,689 833.3 -- -- --
--
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...................................... 2,617Operating income ........................... 79,062 149.2 -- -- 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........... 1,528Depreciation ............................... (48,080) ( 90.7) -- -- 1,528
PREFERRED STOCK OF SUBSIDIARY............................ --
58 (58)(E) --
STOCKHOLDERS' EQUITY
Common stock............................................. 5 439 (439)(B)(D) 5
Additional paid-in capital............................... 3,781Financial income ........................... 6,813 12.9 -- -- 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)Financial expense .......................... (53,188) ( 100.3) -- --(B)(D) (1,202)
Treasury shares.......................................... --
(556) 556(B)(D)Share of net income and loss of
related companies ......................... (1,749) ( 3.3) -- ------- ------- ----- -------
TOTAL STOCKHOLDERS' EQUITY............................... 3,990 666 (54) 4,602
------- ------- ----- -------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY............... $29,020 $ 2,106 $ 16 $31,142
======= ======= ===== =======-- --
Other non operating income
(expense), net ............................ 6,546 12.3 -- -- --
Net income ................................. (2,826) ( 5.3) -- -- --
Consolidated ratio of earnings to
fixed charges (unaudited) ................. 1.63 1.63 -- -- --
Net income per share ....................... ( 0.50) 0.00 -- -- --
Net income per ADS ......................... (34.21) 0.00 -- -- --
Weighted average shares
outstanding (000s) ........................ 5,617,952 5,617,952 -- -- --
Balance Sheet Data:
Chilean GAAP:
Total assets ............................... 1,960,612 3,698.8 2,005,406 1,915,529 3,556.4
Long term liabilities ...................... 826,043 1,558.4 949,760 807,544 1,499.3
Total interest bearing liabilities (5) ..... 825,477 1,557.3 -- -- --
Total shareholders equity .................. 794,355 1,498.6 808,796 812,147 1,507.8
Ratio of total shareholders equity to
total capitalization (3) (5) .............. 0.49 0.49 -- -- --
U.S. GAAP (4):
Total assets ............................... 1,968,788 3,714.2 -- -- --
Long term liabilities ...................... 893,690 1,686.0 -- -- --
Total interest bearing liabilities ......... 825,477 1,557.3 -- -- --
Total shareholders equity .................. 741,159 1,398.2 -- -- --
Ratio of total shareholders equity to
total capitalization (3) .................. 0.47 0.47 -- -- --
54
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- ---------
(1) Chilean Peso 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 Assetstranslated into U.S. dollars at the rate
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 ofCh$530.07 = $1.00, the observed exchange rate on December 31, 1999
(the rate used by Gener for December 31, 1999 financial reporting
purposes).
(2) For purposes of computing the ratio of consolidated earnings to fixed
charges, consolidated earnings consist of earnings before income taxes
plus fixed charges, and June 30, 2000, respectively. These amounts have been reclassified to
Other Assets in accordance with AES accounting policies as partexcluding any loss recognized on equity
investments. Fixed charges consist of the
Unaudited Pro Forma Consolidated Balance Sheet.
G. The companies expect to record a charge in 2000 to cover the direct costsinterest expense, including
capitalized interest, and amortization of the share exchange (to include fees ofcapitalized debt expense and
discount.
(3) Total capitalization equals total interest bearing liabilities, excluding
short-term debt, plus total shareholders equity.
(4) U.S. GAAP 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
exchangestatements for Gener 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 occurrednot available as of June 30,
2000 and will be charged against
income in 2000. No provision has been made1999 as Gener is not required to file a U.S. GAAP
reconciliation footnote for a tax benefit, as AES
believes these costsinterim periods.
(5) Depreciation, consolidated ratio of earnings to fixed charges, shares
outstanding at end of period (000s), dividends per share, dividends per
ADS, total interest bearing liabilities and ratio of total shareholders
equity to total capitalization are not deductible for tax purposes. These charges were
not considered in the Unaudited Pro Forma Consolidated Income Statements.
The estimated charges and natureavailable as 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
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 operationsor for the six
months ended June 30, 2000 for IPALCO isand 1999 as they are not included in 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 earningsJune
30, 2000 Gener 6-K filing.
53
COMPARATIVE PER SHARE DATA
The following table presents historical per share are presented before giving effect to
extraordinary items and early extinguishment of debtinformation for AES and
Gener for the cumulative effectyear ended December 31, 1999. The information in the table below
should be read in conjunction with the historical financial statements of changethe
corporations incorporated by reference in accounting principle for IPALCO.this Registration Statement in the
section captioned, "Selected Consolidated Financial Data" of AES and Gener.
YEAR ENDED
DECEMBER 31, 1999
------------------
AES Historical Per Share
Earnings from continuing operations
Basic earnings per share ........................................ $ 0.64
Diluted earnings per share ...................................... 0.62
Cash Dividends ................................................... --
Book Value ....................................................... 6.89
Gener Historical Per Share
Earnings from continuing operations
Basic earnings per share ........................................ 0.00
Diluted earnings per share ...................................... 0.00
Cash dividends ................................................... 0.00
Book Value ....................................................... 0.25
AES/Gener Pro Forma Per Share
Earnings from continuing operations
Basic earnings per share ........................................ 0.42
Diluted earnings per share ...................................... 0.41
Cash dividends ................................................... --
Book Value ....................................................... 7.42
Equivalent Pro Forma Per Share for Gener ADS Holders (1)
Earnings from continuing operations
Basic earnings per share ........................................ 0.11
Diluted earnings per share ...................................... 0.11
Cash Dividends ................................................... --
Book Value ....................................................... 1.95
- ---------
(1) The unauditedequivalent pro forma basic and diluted earningsper share data is calculated by multiplying the
AES/Gener pro forma per share data by the exchange ratio for Gener ADS so
that the pro forma per share amounts are equated to the respective values
of one ADS. Each ADS represents 68 Gener shares.
(2) Comparative per share for the consolidated company doperiod ended June 30, 2000, is not include the effects of extraordinary items or
the cumulative effect of change in accounting principle.
56included
herein as Gener is not required to file a U.S. GAAP reconciliation
footnote for interim periods.
54
DESCRIPTION OF AES CAPITALCOMMON STOCK
GENERAL
Under AES's certificate of incorporation and by-laws, AES is authorized to
issue 1,200,000,000500,000,000 shares of common stock, par value $0.01$.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
theAES common stock. The description of certain provisions of theAES common stock is
subject to and qualified by reference to the provisions of our certificate of
incorporation.
As of July 31,September 30, 2000, there were 456,774,338457,742,582 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 EquiServeFirst Chicago Trust Company, a Division of Equiserve, as
its transfer agentTransfer Agent and registrar for theits common stock. 57
The Transfer Agent's
telephone number in the United States is 800-519-3111.
COMPARATIVE RIGHTS OF IPALCO SHAREHOLDERSGENER STOCKHOLDERS
AND AES SHAREHOLDERSSTOCKHOLDERS
GENERAL
If the shareholdersconditions to our offer are satisfied, holders of IPALCO approve the shareGener ADSs who
tendered their Gener ADSs into our offer and whose Gener ADSs were accepted for
exchange agreement, and the
share exchange is subsequently consummated, all shareholders of IPALCO will become shareholdersstockholders of AES. AES is a corporation organized under,
and governed by, the Delaware General Corporation Law, (the "DGCL"),the DGCL, whereas IPALCOGener
is a corporation organized under, and governed by, the Indiana Business CorporationChilean Ley de
Sociedades Anonimas No. 18,046, the Chilean Corporations Act, and the
Reglamento de Sociedades Anonimas, the Regulations. In addition, Gener is
currently subject to the provisions of Decree Law (the "IBCL")No. 3,500, as amended. As
described in the section captioned "AMENDMENTS TO GENER'S BYLAWS", if the
amendment to Gener's Bylaws are approved Gener will no longer be subject to
these provisions.
Holders of Gener ADSs are not holders of Gener shares and as such may not
have all the rights of holders of Gener shares. Holders of Gener ADSs have only
the rights specified in the Gener Deposit Agreement. Reference is made to the
Gener Deposit Agreement which has been filed with the SEC and may be inspected
and copies of it may be obtained in the manner set forth under the section
captioned "WHERE YOU CAN FIND MORE INFORMATION". However, under the Gener
Deposit Agreement, holders of Gener ADSs have the right to withdraw and obtain
directly the Gener shares represented by such Gener ADSs.
The following is a brief summary of certain differences between the Delaware
corporate lawsDGCL
applicable to AES and the Indiana corporate lawsChilean Corporations Act and Regulations applicable
to IPALCO andGener. This summary also explains certain differences between AES's
certificate of incorporation, AES's Certificate and Bylaws, AES's Bylaws, and
Gener's estatutos, Gener's Bylaws, which effectively serve the purpose of Incorporation
("Certificate")both
the articles of incorporation and By-laws and IPALCO's Articlesbylaws of Incorporation ("Articles")
and By-laws.a company incorporated in Delaware.
The purpose of this summary is to briefly indicate the differences between
holding AES capital stock and IPALCOGener capital stock to the extent such
differences are
55
created by the state corporation laws applicable to AES and IPALCOthe Chilean
Corporations Act and the Regulations applicable to Gener, or that arise because
of differences between AES's Certificate and By-lawsBylaws and IPALCO's Articles and By-laws.Gener's Bylaws. THIS
SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE DGCL, THE IBCL,CHILEAN CORPORATIONS ACT, THE
REGULATIONS, AES'S CERTIFICATE AND BY-LAWSBYLAWS AND IPALCO'S
ARTICLES AND BY-LAWS.GENER'S BYLAWS.
DIRECTORS
AES. AES's By-lawsBylaws provide that the number of directors of AES shall be
nine or such other number as shallto be determined by a resolution of the board of
directors. These directors that such directors shall beare elected at the annual meetingannually by stockholders of the
shareholders of AES, and that eachAES. Each
director elected shall holdholds office until his or her successor is duly elected and shall
qualify. The number of directors of AES is currently nine. Section 141 of the
DGCL provides that unless otherwise specified or in the case of a board whose
directors are elected in staggered terms, 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 AESshares. AES's Certificate provides that directors may be removed for cause
by a majority vote of shareholders. The AES Certificate providesAES's Bylaws also provide 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 sizeProvided a quorum is present, a resolution of the board shallBoard may 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 members voting.
Gener. Gener's Bylaws provide that Gener shall be administered by a board
of directors made up of IPALCO and by 2/3seven members. Under the Chilean Corporations Act, the
entire board of those directors who are Continuing
Directors. Continuing Directors are defined in the Articles as membersis elected at an ordinary general shareholders'
meeting. Staggered elections of the board of directors unaffiliated withare not permitted under
the Chilean Corporations Act. Directors hold office for a 10% or greater shareholder who becameterm of three years,
at the end of which a new election of the board of directors before a person or entity became a 10% or greater shareholder of
IPALCO, and certain successors to such board members. Directorstakes place, at
which previous members may be removed only for cause and onlyor re-elected. The Chilean Corporations
Act provides that a director cannot be individually removed but rather the
entire board of directors may be removed by the affirmative votean ordinary or special
shareholders' meeting with or without cause. The Chilean Corporations Act also
provides that in case of 80% of the shares eligible to
vote for directors. IPALCO's Articles provide that anya vacancy occurring in the board of directors, includingthe board of
directors may appoint a vacancy created by an increase inreplacement director, but a new election of the numberentire
board of directors shall be filled fortake place at the remaindernext ordinary shareholders' meeting.
Provided a quorum is present, a resolution of the unexpired term onlyboard of directors may
be adopted by a
majoritythe vote of the directors then in office and at least 2/3majority of the Continuing
Directors.members voting. In the case of a
tie, the chairman of the meeting shall have a casting vote.
LIMITATION OF DIRECTOR LIABILITY IN CERTAIN CIRCUMSTANCES
AES. As permitted by the DGCL, Article X of AES's Certificate provides that directors
of AES shall not be personally liable personally to AES or its shareholdersstockholders for monetary
damages forresulting from a 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 58
its shareholders,stockholders, (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 AESAES's directors against any 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
or rescission, 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 23-1-35-1Gener. The Chilean Corporations Act provides, in general terms, that the
directors shall be jointly and severally liable for the damages caused to the
corporation or its shareholders by wilful misconduct or negligence. Any
stipulation in the bylaws or agreement by the shareholders exempting or
limiting the legal liability of directors shall be deemed null and void. In
addition, the directors shall be jointly and severally liable among and with
the corporation for damages and fines arising from a breach of the IBCL provides thatChilean
Corporations Act, the Regulations, the bylaws or the rulings of the SVS. In
addition, the Chilean Corporations Act prohibits directors from engaging in
conduct not in furtherance of IPALCO shall not be
liable for any action takenthe corporate interest but made in the interest
of the directors or not taken asrelated third parties. The culpability of a director unlessis
presumed, among other circumstances, when such directors
(a) breachdirector is unduly benefitted,
directly or fail to performindirectly, from a corporate transaction which damages 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.corporation.
56
INDEMNIFICATION AND INSURANCE
AES. Under Section 145 of the DGCL, directors, officers, employees and
agents of a corporation 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,bylaw, agreement, shareholder or disinterested director
vote, or otherwise.
Under AES's By-laws,Bylaws, and in accordance with Section 145 of the DGCL, AES
mustshall 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 willshall indemnify personsthe
covered people 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,Bylaws, 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.
59
In addition, under AES's By-laws,Bylaws, 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.Bylaws. 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 knownGener. Gener's Bylaws do not preclude indemnification. Lastly, Chapter 37 authorizes further
indemnification tocontain any stipulation exempting or limiting
the extent that IPALCO may provide in its Articles, By-laws,
boardlegal liability 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.
60
Gener's directors.
ANTITAKEOVER STATUTES
DELAWARE BUSINESS COMBINATION STATUTE.PROVISIONS
AES. Section 203 of the DGCL ("Section 203"), which applies to AES,
regulates all transactions with major shareholdersstockholders after they become major
shareholders.stockholders. 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"stockholder"), for a period of three years after the interested shareholderstockholder
crosses the 15% threshold. These restrictions on transactions involving an
interested shareholderstockholder do not apply if (a) before the interested shareholderstockholder
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;stockholder; (b) in the transaction that resulted in the
person or group
57
becoming an interested shareholder,stockholder, 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,stockholder, the board of directors and at least two-thirds of the voting stock
other than stock owned by the interested shareholderstockholder approves the business
combination.
INDIANA CONTROL SHARE ACQUISITIONS STATUTE. Chapter 42Gener. Article five bis of Gener's Bylaws provides that no individual or
entity, public or private, directly or through other persons, shall concentrate
more than 20% of the IBCL, the
Indiana Control Share Acquisitions Statute, restricts thecapital with 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").Gener common stock. 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 42foregoing restriction does not apply to the acquisitionDepositary as record owner of the
Gener shares represented by Gener ADSs, but it does apply to Gener ADS holders.
Further, Article 27 bis of Gener's Bylaws provides that no person may itself or
on behalf of other shareholders vote more than 20% of Gener's outstanding
shares of an issuing public
corporation if the acquisition is consummated pursuant to a merger or planvoting capital stock. In calculating such percentage, any Gener
shares of share exchange effected in compliance with IBCL Section 23-1-40 if the issuing
public corporation is a partyrelated persons shall be added to the agreementGener shares of merger or plansuch
shareholder. Moreover, no person can represent shareholders who jointly hold
more that 20% of share
exchange. Because IPALCO, as the issuing corporation, is a partysubscribed shares of voting capital stock of Gener.
Pursuant to Article 14 bis of Gener's Bylaws, notwithstanding any other
provision in the Chilean Corporations Act to the share
exchange, which is being effected in compliancecontrary, all acts and
contracts that Gener enters into with IBCL Section 23-1-40, AES's
acquisitionits majority shareholders, directors or
officers, or any person related to them, require the preliminary approval of
IPALCO shares in connection with the share exchange will not be
considered a control share acquisition.
INDIANA BUSINESS COMBINATION STATUTE. Chapter 43two thirds 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. In addition, transactions with directors
must be on terms no more favorable to such directors than those generally
available through arms length negotiations and such transactions must be
reported at the next shareholders' meeting. One of the Indiana corporation
approves eitherconditions to our offer
and the transaction in which such person becomes an interested
shareholder or such business combination. FollowingChilean offer is 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
61
receive fair consideration for their shares. AES was not an interested
shareholder of IPALCO prior to approval of Gener's shareholders of amendments to
Gener's Bylaws, to eliminate; among others, the share exchange by IPALCO's boardprovisions which limit the
right of directors, so Chapter 43 will not applyshareholders to the share exchange.
OTHER PROVISIONS. The IBCL also specifically authorizes directors, in
considering the best interestsown or vote more than 20% 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.Gener's voting capital
stock.
ISSUANCE OF PREFERRED STOCK
AES. As of August 15,November 8, 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.stockholders. 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.
62
RIGHTS AGREEMENT
IPALCO has entered into aGener. The Chilean Corporations Act vests in shareholders the authority to
issue preferred stock in one or more classes or series and to fix the rights,
agreement pursuant to which IPALCO has
issued rights to its shareholders to purchasepreferences, privileges and restrictions thereof. Any such issuance must be
approved by the vote of the holders of two thirds of the shares of IPALCO common stock.the affected
classes or series at a special shareholders meeting. The Chilean Corporations
Act provides that dissenting shareholders of the affected classes or series
have appraisal rights are exercisable in limited circumstancesupon approval of the creation or amendment of the
preferences of other classes or series. See "Voting and are intendedAppraisal Rights With
Respect to encourage a
person seeking to acquire controlCorporate Reorganizations" below. Gener currently has no shares 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.preferred stock authorized or outstanding.
VOTING RIGHTS/RIGHTS; CUMULATIVE VOTING
AES. The holders of AES common stock and IPALCOGener common stock are entitled
to one vote per share on all matters to be voted upon by the holders of such
shares.
58
Section 214 of the DGCL provides that no cumulative voting rights, in
respect of elections of directors, exist under Delaware Law,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 23-1-30-9Gener. Pursuant to Article 66 of the IBCL also provides that shareholders do not have
the right to cumulate theirChilean Corporations Act and under
Article 27 of Gener's Bylaws, directors are elected using cumulative voting.
Each shareholder has one vote per share and may cast all of his votes for directors unless a corporation's articlesin favor
of incorporation so provide. IPALCO's Articles do not provide for cumulative
voting in electionsone nominee or may apportion his votes among any number of directors.nominees.
ACTION WITHOUT A MEETING
Section 228 ofAES. Under the DGCL permitsunless otherwise provided in a company's certificate
of incorporation, any action required or permitted to be taken at a
shareholders'stockholder's meeting tomay 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.stockholders. The DGCL also provides that a
corporation'sAES certificate of incorporation is
silent on this matter so that AES shareholders may restrict or even prohibit
shareholders'take action by written
consent.
Gener. The Chilean Corporations Act does not allow 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
AES. Under Section 211(d) of the DGCL, the board of directors or those
persons authorized by the corporation's certificate of incorporation or by-lawsBylaws
may call a special meeting of the corporation's shareholders.stockholders. AES's By-lawsBylaws
provide that a special meeting may be called by the Chairman of the Board,board of
directors, 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 meetingGener. Special shareholders' meetings may only be called by the Chairmanboard of
directors, at any time, when deemed appropriate and must be called by the board
of directors when requested by shareholders representing at least 10% of the
Board of IPALCO, the President of IPALCO,issued and outstanding voting capital stock or by the SVS. In the event of a
majorityrequest by shareholders representing at least 10% of the total numberissued and outstanding
voting capital stock, the Gener board of directors of IPALCO.
Thus, for both AES and IPALCO, shareholders are not authorizedis required to call special meetings.such a
meeting within 30 days from the request.
VOTING AND APPRAISAL RIGHTS WITH RESPECT TO CORPORATE REORGANIZATIONS
TheAES. Unless a greater percentage is specified in a corporation's
certificate of incorporation, the DGCL generally requires a majority vote of shareholdersstockholders
to approve a merger, sale of assets or similar reorganization transaction.
Under Section 251(f) of the DGCL, however, no vote of the shareholdersstockholders 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 63
prior to the date of the merger and if
other 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, thein which stockholders receive shares
of the surviving corporation 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 corporationstockholders or (c) shareholdersstockholders of a
corporation surviving a merger if no vote of such shareholdersstockholders is required to
approve the merger.
Gener. The IBCL also requires a majority voteChilean Corporations Act provides that mergers, sales 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 thatall
assets and certain business
combinations between IPALCO (or any subsidiary thereof) and a 10% or greater
shareholder (or affiliate thereof) either (i)similar reorganization transactions must be approved at a
special shareholders meeting by at least 80%two thirds of the total number ofissued and outstanding voting
sharescapital stock 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 effectsrelevant corporation. Moreover, the business combination mayChilean Corporations
Act provides that dissenting shareholders 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. Theappraisal rights upon approval
of the share exchange agreement will not be subject to this 80% vote
requirement.
Section 23-1-44-8a merger of the IBCL does not provide for dissenters' rights for a
mergercorporation with another entity or planthe sale of share exchange by aall the
assets and liabilities or all the assets of the corporation and in certain
other circumstances the shares of which are
(a) registered on a United States securities exchange registered under the Exchange Act,affected classes or (b) traded onseries. Holders of
Gener shares do not have appraisal rights in connection with the NASDAQ National Market System or a similar
market.offers.
AMENDMENTS TO CHARTER DOCUMENTS
AES. The DGCL requires approval of shareholdersstockholders holding a majority of the
voting power of AES in order to amend AES's Certificate.
Significant59
Gener. Under Article 23 the bylaws can only be amended in a special
shareholders' meeting with the affirmative vote of a majority of the voting
shares present or represented at a duly convened meeting of shareholders.
However, certain matters require the vote of two thirds of the shares of voting
capital stock. These matters are:
(1) the transformation of the corporation, its division and its merger
with another company;
(2) the amendment of its duration, if any;
(3) the dissolution of the corporation;
(4) the change of domicile of the corporation;
(5) the reduction of its capital;
(6) the approval and valuation of capital contributions made in property
other than cash;
(7) the amendment of the powers bestowed on a shareholders meeting and
the limits on the powers of the board of directors;
(8) the reduction of the number of members of the board of directors;
(9) the transfer of all assets and liabilities of the corporation or the
totality of its assets;
(10) the manner of distributing corporate profits;
(11) others provided in the bylaws (Gener's Bylaws do not provide any
other matters requiring two thirds majority vote); and
(12) the curing of annulment arising out of formal vices in the
incorporation of the company or any amendments of the bylaws including
any of the above matters.
Amendments to IPALCO's Articles mustthe bylaws, the purpose of which is to create, amend or
suppress preferences, shall be approved by a majoritytwo thirds of the shareholders of
the affected classes or series.
Article 24 of Gener's Bylaws provides that the amendment of articles 1
bis, 5 bis, 9 bis, 14 bis, 17 bis, 20 bis, 21 bis, 24, 27 bis and 29 bis of
Gener's Bylaws which among other things, limit to 20% the number of Gener
shares which may be voted and/or owned by any stockholder or persons related to
such stockholder and subject Gener to the provisions of Decree Law 3,500 may
only be amended by the vote of IPALCO's boardholders 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%75% of the issued and
outstanding voting shares is required for certainshares. Most of these articles are within the amendments
(I.E.,
amendmentswhich must be adopted and become effective under Chilean law to provisions relatingallow our offer
to number, classification, vacancies and
removal of directors and certain business combinations).
BY-LAWSproceed.
BYLAWS
Section 109 of the DGCL places the power to adopt, amend or repeal by-lawsbylaws
in the corporation's shareholders, but permits the corporation, in its
certificate of incorporation, to 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 shareholdersstockholders also
have the power to adopt, amend or repeal By-lawsthe Bylaws by majority vote. IPALCO's
Articles provide that its By-lawsGener's
Bylaws may only 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.special shareholders' meeting.
PREEMPTIVE RIGHTS
AES. Under Section 102 of the DGCL, no preemptive rights will exist,are not available
unless otherwise provided in a corporation's certificate of incorporation specifies otherwise.incorporation.
AES's Certificate does not provide for any such preemptive rights.
64
IBCL Section 23-1-27-1 provides thatGener. Article 25 of the shareholders ofChilean Corporations Act requires a corporation
do
not have a preemptiveto offer existing shareholders the right to acquirepurchase a corporation's unissuedsufficient number of
shares exceptor convertible securities to maintain their existing percentage of
ownership in the corporation whenever it issues new shares or convertible
securities. Preemptive rights are offered to Citibank, N.A., as the Depositary
as registered owner of the
60
Gener shares underlying the Gener ADSs. However, under the Gener Deposit
Agreement United States holders of Gener ADSs are not entitled to exercise
their preemptive rights, unless a Registration Statement under the Securities
Act is effective with respect to the extentunderlying shares or an exemption from the
articlesregistration requirements is available. In the absence of incorporation so provide. IPALCO's Articles do not
providean effective
Registration Statement under the Securities Act or an available exemption from
the registration thereunder, the Depositary will sell such rights at public or
private sale and shall allocate the proceeds to the accounts of the Gener ADSs
holders otherwise entitled to such rights.
Under the Chilean Corporations Act, shareholders can waive, transfer or
exercise their preemptive rights during a period of 30 days following the
publication by Gener of an advertisement informing of such rights. During such
period and for an additional 30-day period, Gener cannot offer any unsubscribed
shares to third parties on terms which are more favorable to those third
parties than to those offered to its shareholders. At the end of such preemptive rights.periods,
the corporation can offer the unsubscribed shares to third parties on different
terms and at a different price than those offered to shareholders, provided
that such unsubscribed shares are sold on a Chilean stock exchange.
DIVIDENDS
AES. The holders of common stockshares of AES and IPALCOcommon stock are entitled to receive
ratably dividends as may be declared from time to time by their boardsits board 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.
Gener. In comparison,accordance with Article 79 of the IBCL doesChilean Corporations Act and
Gener's Bylaws, Gener must distribute an annual cash dividend equal to at least
30% of Gener's annual consolidated net income calculated in accordance with
Chilean GAAP, unless otherwise decided by a unanimous vote of the holders of
the issued shares and provided there are no accumulated losses. If there is no
net income in a given year, Gener can elect, but is not permitlegally obligated, to
distribute dividends out of retained earnings. Gener may grant an option to its
shareholders to receive any dividend distributions if, after
giving effectin excess of 30% of net income in cash, in
Gener shares or in shares of public corporations that Gener holds. Shareholders
who do not expressly elect to receive a dividend other than in cash are legally
presumed to have decided to receive the proposed dividend (a) the corporation would be unable to
pay its debts as they become duein cash. A United States
holder of Gener ADSs may, in the ordinary courseabsence of business,an effective Registration Statement
under the Securities Act or (b)an available exemption from the corporation's total assets wouldregistration
thereunder, effectively 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 wererequired 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.receive a dividend in cash.
LIQUIDATION
Subject to any preferences that might be applicable to outstanding AES or
Gener preferred stock, the holders of common stock of AES and IPALCOGener,
respectively, 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. According to
the Chilean Corporations Act, holders of shares which have not been fully paid
are only entitled to share in a liquidation with respect to such portion of the
shares which have been paid.
DIRECTOR NOMINATIONS/SHAREHOLDER PROPOSALS
The By-laws of both AES and IPALCOAES's Bylaws 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. Gener's Bylaws contain no such
requirements.
THIS SUMMARY OF THE MATERIAL DIFFERENCES INBETWEEN THE CORPORATION LAWS OF
INDIANADELAWARE AND DELAWARE, THE IPALCO ARTICLES, THE AESCHILE, GENER'S BYLAWS AND AES'S CERTIFICATE THE IPALCO BY-LAWS AND THE AES BY-LAWSBYLAWS DOES NOT
PURPORT TO BE A COMPLETE LISTING OF DIFFERENCES
61
IN THE RIGHTS AND REMEDIES OF HOLDERS OF SHARES OF INDIANACHILEAN CORPORATIONS AS
OPPOSED TO DELAWARE CORPORATIONS AND SHAREHOLDERSSTOCKHOLDERS OF IPALCOGENER AND SHAREHOLDERSSTOCKHOLDERS OF
AES IN PARTICULAR. THE DIFFERENCES CAN BE DETERMINED IN FULL BY REFERENCE TO
INDIANA LAW, DELAWARE
LAW, THE IPALCO ARTICLES,CHILEAN CORPORATIONS ACT, THE AESREGULATIONS, THE DGCL, GENER'S BYLAWS AND
AES'S CERTIFICATE AND BYLAWS. THE IPALCO BY-LAWSDGCL AND THE AES
BY-LAWS. THE LAWS OF INDIANA AND DELAWARECHILEAN CORPORATIONS ACT PROVIDE
THAT SOME OF THE STATUTORY PROVISIONS AS THEY AFFECT VARIOUS RIGHTS OF HOLDERS
OF SHARES MAY BE MODIFIED BY PROVISIONS IN THE ARTICLESCERTIFICATE OF INCORPORATION FOR INDIANA CORPORATIONS, THE
CERTIFICATE OF INCORPORATIONAND
BYLAWS FOR DELAWARE CORPORATIONS OR THE BY-LAWS OF A
CORPORATION.
65
INDEPENDENT ACCOUNTANTS
ItBYLAWS FOR CHILEAN CORPORATIONS.
FORWARD-LOOKING STATEMENTS
All statements included or incorporated by reference in this prospectus or
made by our management, other than statements of historical fact regarding U.S.
or Gener, are "forward-looking" statements. Examples of forward-looking
statements include statements regarding our or Gener's future financial
results, operating results, service successes, business strategies, projected
costs, future service offerings, competitive positions and plans and objectives
of our 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, projects, predicts, projection,
potential or continue or the negative of these or other comparable words. These
forward-looking statements are subject to known and unknown risks,
uncertainties and other factors. Actual developments could differ significantly
from those contemplated in these forward-looking statements. The
forward-looking information is expected that representativesbased on various factors and was derived using
numerous assumptions. Forward-looking statements made by us and Purchaser speak
only as of Deloitte & Touche LLP will be present
at the special meetingdate they are made, and neither we nor the Purchaser have any
obligation to respond to appropriate questionsupdate or revise them, whether as a result of shareholders and
to make a statement if they so desire.new information,
future events or otherwise.
LEGAL MATTERS
The validity of the AES common stock toshares offered hereby will be issued in the share exchange has
been passed upon for The
AES Corporation 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, 1999and from AES's Current Report on Form 8-K/A filed February
11, 2000, relating to The AES Drax, Ltd., have been audited by Deloitte & Touche
LLP, independent auditors, as stated in their report,reports, which isare incorporated
herein by reference, and hashave been so incorporated in reliance upon the reportreports
of such firm given upon their authority as experts in accounting and auditing.
The financial statementsMISCELLANEOUS
Our offer is not being made to, nor will tenders be accepted from or on
behalf of, holders of Gener ADSs in any jurisdiction in which the making of our
offer or acceptance thereof would not be in compliance with the laws of such
jurisdiction. However, we may, in our discretion, take such action as we may
deem necessary to make our offer in any such jurisdiction and extend our offer
to holders of Gener ADSs in such jurisdiction.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ON BEHALF OF US, THE PURCHASER NOT CONTAINED IN THIS PROSPECTUS
OR IN THE ADS LETTER OF TRANSMITTAL OR THE NOTICE OF GUARANTEED DELIVERY AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED.
We have filed with the related financial statement schedules
incorporated in this proxy statement/prospectus by reference to IPALCO's Annual
ReportSEC a Registration Statement on Form 10-K forS-4 and a
Tender Offer Statement on Schedule TO, together with exhibits, pursuant to Rule
14d-3 of 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,General Rules and has been so incorporated in reliance uponRegulations under 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 otherExchange Act, furnishing
certain additional information with the Securitiesrespect to our offer. The Registration
Statement on Form S-4 and Exchange Commission.
You may readSchedule TO 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 alsoamendments thereto, including
exhibits, may be inspected atexamined and copies may be obtained from 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 shareholdersSEC 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.
66
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 stockmanner 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 updatingsection captioned, "Where You Can Find More
Information" (except that 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 descriptioninformation will not be available at the
regional offices 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.
67SEC).
62
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:
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
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 THESCHEDULE I
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 ASCONCERNING DIRECTORS AND EXECUTIVE
OFFICERS 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.
68
ANNEX A
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF SHARE EXCHANGE
DATED AS OF JULY 15, 2000
BETWEEN THE AES CORPORATION AND IPALCO ENTERPRISES, INC.
- --------------------------------------------------------------------------------
TABLEMERCURY CAYMAN CO. III, LTD.
1. DIRECTORS AND EXECUTIVE OFFICERS OF CONTENTSTHE AES CORPORATION
The name, business address, present principal occupation or employment and
five-year employment history of each director and executive officer of AES and
certain other information are set forth below. The principal business address
of AES and, unless otherwise indicated, the business address of each person
identified below is 1001 North 19th Street, Suite 2000, Arlington, Virginia
22209. Its telephone number is (703) 522-1315. Where no date is shown, the
individual has occupied the position indicated for the past five years. Unless
otherwise indicated, each occupation set forth opposite an individual's name
refers to employment with AES. All directors and executive officers listed
below are United States citizens. Directors are identified by an asterisk.
PRESENT PRINCIPAL OCCUPATION OR
NAME EMPLOYMENT AND FIVE-YEAR EMPLOYMENT HISTORY
- -------------------------- -----------------------------------------------------------------------
ARTICLE I
THE EXCHANGE................................................................. A-1
Section 1.1Dennis W. Bakke* Co-founder of AES with Roger Sant in 1981 and director of AES since
1986. He has been President of AES since 1987 and Chief Executive
Officer since January 1994. He is a trustee of Rivendell School and a
member of the Board of Directors of MacroSonix Corporation in
Richmond, Virginia.
Alice F. Emerson* Director of AES since 1993. She is a Senior Advisor at 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 ArticlesAndrew W.
Mellon Foundation. She is a member of Incorporationthe Boards of Directors of the
World Resources Institute, the FleetBoston Financial Corporation,
Champion International Corporation, Eastman Kodak Company,
Salzburg Seminar, 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 Effectthe MGH Institute of Health Professions.
Mark S. Fitzpatrick Appointed Executive Vice President in February 2000, was Senior Vice
President until February 2000, and was appointed Vice President of
AES in 1987. Mr. Fitzpatrick became Managing Director of Applied
Energy Services Electric Limited for the United Kingdom and Western
Europe operations in 1990.
Paul T. Hanrahan Senior Vice President of AES since 1997, and was appointed Vice
President of AES effective January 1994. Since May 1, 1998, Mr.
Hanrahan has been Managing Director of AES Americas, a business
group within AES responsible for all of AES's activities in South
America. From February 1995 until 1998 he was President and Chief
Executive Officer of AES Chigen, where he served as Executive Vice
President, Chief Operating Officer and Secretary from December 1993
until February 1995.
Robert F. Hemphill, Jr.* Director of AES since June 1996. He served as Executive Vice President
of AES from 1982 to June 1996. He currently is the Managing Director
of Toucan Capital Corporation (an international venture capital firm).
He also serves on Capital Stock..................................... A-2
Section 2.2 Per Share Amount Adjustments................................ A-3
Section 2.3 Exchangethe Boards 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, Standingthe National Museum of American
History and Power............................ A-6
Section 3.2 Capital Structure........................................... A-7
Section 3.3 Authority; Executionthe Pacific International Center for High Technology
Research, and Delivery; Enforceability........... A-8
Section 3.4 No Conflicts; Consents...................................... A-8
Section 3.5 SEC Documents............................................... A-9
Section 3.6 Absenceis a member of Certain Changes or Events........................ A-10
Section 3.7 Absencethe Advisory Board 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-23Venture House, an
internet investment company.
iiSI-1
PRESENT PRINCIPAL OCCUPATION OR
NAME EMPLOYMENT AND FIVE-YEAR EMPLOYMENT HISTORY
- --------------------- ----------------------------------------------------------------------------
Section 4.9 Stockholder Approval........................................ A-23
Section 4.10 Litigation.................................................. A-23
Section 4.11 AbsenceFrank Jungers* Director 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 AccessAES since 1983. He has been consultant 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 Conditionsvarious
companies since prior to Each Party's Obligation to Effect1994. Mr. Jungers is the Exchange.................................................... A-37
Section 7.2 Conditions to Obligation of Parent.......................... A-38
Section 7.3 Conditions to Obligationretired Chairman of the
Company..................... A-39
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER............................................ A-40
Section 8.1 Termination................................................. A-40
Section 8.2 EffectBoard and Chief Executive Officer of Termination....................................... A-41
Section 8.3 Expensesthe Arabian American Oil
Company. He currently serves on the Boards of Directors of Thermo
Electron Corporation, Esco Corporation and Fees........................................... A-42
Section 8.4 Amendment................................................... A-42
Section 8.5 Extension; Waiver........................................... A-42
Section 8.6 ProcedureStatia Terminals. He is
also Chairman of the Advisory Board of Common Sense Partners, L.P.
He is also Trustee of the Board of Trustees of the American University
in Cairo and serves as a Trustee to the High Desert Museum and Oregon
Health Sciences University Foundation.
Lenny M. Lee Vice President of AES since February 2000 and has served as Managing
Director of AES Transpower since June 1998. As Managing Director of
AES Transpower, Mr. Lee leads the AES group responsible for Termination, Amendment, Extension or Waiver... A-42
ARTICLE IX
GENERAL PROVISIONS........................................................... A-43all of
AES's business, including project development and plant operations, in
Australia, New Zealand, portions of Southeast Asia (Thailand, Indonesia,
Malaysia and Vietnam) Hawaii and Southern China. Prior to his
appointment, Mr. Lee developed various projects within the same
group. Mr. Lee has been with AES since August 1987.
William R. Luraschi Vice President of AES since January 1998, Secretary since February 1996
and General Counsel of AES since January 1994. Prior to that, Mr.
Luraschi was an Attorney with the law firm of Chadbourne & Parke
L.L.P.
John H. McArthur* Director of AES since January 1997. He is the retired Dean of the
Harvard Business School, and has been a private business consultant
and active investor in various companies since prior to 1994. He serves
as Senior Advisor to the President of the World Bank Group. He is also
a member of the Boards of Directors of BCE Inc., Cabot Corporation,
the Columbia/HCA Healthcare Corporation, Glaxo Wellcome plc,
Rohm & Haas Corporation, Springs Industries, Inc., and KOC Holdings,
A.S. Istanbul. He also serves in various capacities with non-profit health,
government, and education organizations in America, Canada, Europe
and Asia.
David G. McMillen Vice President of AES since December 1991. He was appointed
President of AES Shady Point in 1995 and is currently plant manager of
the AES Shady Point facility. He was President of AES Thames from
1989 to 1995.
Roger F. Naill Vice President at AES since 1981. Mr. Naill's group provides advice on
long-term financial forecasts, tracks accountability measures for safety,
environment, reliability, new energy legislation and AES values, and is
a special advisor to the President.
Hazel R. O'Leary* Director of AES since April 1997. Mrs. O'Leary was the seventh
Secretary of the United States Department of Energy from 1993 to 1997.
She is consultant and Attorney to a diverse group of domestic and
international energy and sustainable development firms. She also serves
on the Board of the Kaiser Group International and UAL, Corporation,
the parent company of United Airlines. In addition, Mrs. O'Leary serves
on the non-profit Boards of Morehouse College, the Andrew Young
Center of International Development, the World Wildlife Fund and the
Keystone Center.
iiiSI-2
PRESENT PRINCIPAL OCCUPATION OR
NAME EMPLOYMENT AND FIVE-YEAR EMPLOYMENT HISTORY
- ------------------ ----------------------------------------------------------------------------
Section 9.1 NonsurvivalShahzad S. Qasim Vice President of RepresentationsAES since February 2000 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-45has served as Managing
Director of AES Oasis since April 1998. As Managing Director of AES
Oasis, Mr. Qasim leads the AES group responsible for all of AES's
business, including project development and plant operations, in Pakistan,
India, portions of South Asia and the Middle East. Prior to his
appointment, Mr. Qasim had been developing various projects within
the same geographical region for AES. Mr. Qasim has been with AES
since November 1992.
William Ruccius Vice President of AES since February 2000 and has served as Managing
Director of AES Orient since June 1998. As Managing Director of AES
Orient, Mr. Ruccius leads the AES group responsible for all of AES's
business, including project development and plant operations, in
Northern China and most of North and East Asia including the
Philippines. From June 1996 until his appointment as Managing Director,
he was President and CEO of AES Lal Pir and AES Pak Gen, AES's
duel Pakistani generating facilities. Prior to that Mr. Ruccius was Plant
Manager at AES Hawaii from April 1995 to June 1996 and worked at
AES Deepwater from June 1993 to April 1995.
John Ruggirello Executive Vice President of AES since February 2000, was Senior Vice
President until February 2000 and was appointed Vice President in
January 1997. Mr. Ruggirello heads an AES group responsible for
project development, construction and plant operations in much of the
United States and Canada. He served as President of AES Beaver
Valley from 1990 to 1996.
J. Stuart Ryan Executive Vice President of AES since February 2000, was Senior Vice
President until February 2000 and is Managing Director of the AES
Pacific group which is responsible for AES's business in the western
United States. Between 1994 and 1998, Mr. Ryan lead the AES
Transpower group responsible for AES's activities in Asia (excluding
China). From 1994 through 1997, he served as Vice President of AES.
Roger W. Sant* Co-founder of AES with Dennis Bakke in 1981. He has been Chairman
of the Board and a director of AES since its inception, and he held the
office of Chief Executive Officer through December 31, 1993. He
currently is Chairman of the Boards of Directors of The Summit
Foundation and The World Wildlife Fund U.S., and serves on the
Boards of Directors of The World Resources Institute, the World Wide
Fund for Nature and Marriott International, Inc.
Barry J. Sharp Senior Vice President and Chief Financial Officer of AES since
January 1998 and had been Vice President and Chief Financial Officer
since 1987. He also served as Secretary of AES until February 1996. Mr.
Sharp is a certified public accountant.
Sarah Slusser Vice President of AES since January 1999, and was appointed President
of AES Aurora, Inc., effective April 1997. AES Aurora is a wholly
owned subsidiary of AES and a group of AES which is responsible for
business development, construction and operations of facilities and
projects in Mexico, Central America, the Caribbean and the Gulf States
in the United States. Prior to that, Ms. Slusser served as Project Director
for various AES projects in the same region from 1993 to 1997.
EXHIBITSSI-3
PRESENT PRINCIPAL OCCUPATION OR
NAME EMPLOYMENT AND FIVE-YEAR EMPLOYMENT HISTORY
- -------------------------- --------------------------------------------------------------------------
Exhibit A................... FormPaul D. Stinson Vice President of Tax Opinion Representation LetterAES since January 1998. Since July 1999, Mr. Stinson
has been Managing Director of Parent
Exhibit B................... FormAES Great Plains, Ltd., a wholly owned
subsidiary of Tax Opinion Representation LetterAES, which is a group of AES responsible for business
development, construction and operations of facilities and projects in
the U.S. Mid-West. From April 1997 to July 1999, Mr. Stinson served as
Managing Director of AES Silk Road, Ltd. Mr. Stinson served as
Managing Director of Medway Power Ltd. from 1994 until 1997 and was
Plant Manager of the Company
Exhibit C................... FormMedway Power Station owned by Medway Power
Ltd. from 1992 to 1997.
Thomas A. Tribone Executive Vice President since January 1998, and Senior Vice President
of Indiana Certification
Exhibit D................... FormAES from 1990 to January 1998. Mr. Tribone leads AES Think, a
group involved in energy, telecom and internet businesses in South
America and the U.S.
Thomas I. Unterberg* Director of Affiliate LettersAES since 1984. He has been a Managing Director of C.E.
Unterberg, Towbin (an investment banking firm) since 1989. He currently
serves on the Boards of Directors of Electronics for Imaging, Inc.,
Systems and Computer Technology Corporation, ECCS, Inc., Centrax
Corporation, Inc. and Club One, LLC. During 1999, Unterberg Harris,
an affiliate of C.E. Unterberg, Towbin, the investment banking firm in
which Mr. Unterberg is a Managing Director, acted as a co-managing
underwriter for a financial offering of AES which included the October 7,
1999 offering of 14 million shares of Common Stock, par value $0.01 per
share.
Robert H. Waterman, Jr.* Director of AES since 1985. He is the founder and has been the Chief
Executive Officer of The Waterman Group, Inc. (a business consulting
firm) since 1985. His business includes research and writing, consulting
and venture management. He currently is Chairman of the Board of
University ProNet, Inc. and serves on the boards of several non-profit
organizations including the World Wildlife Fund and the Restless Legs
Syndrome Foundation.
Kenneth R. Woodcock Senior Vice President of AES since 1987. Mr. Woodcock is responsible
for coordinating AES's relationships with the investment community,
and he provides support for AES's business development activities
worldwide.
ivSI-4
AGREEMENT2. DIRECTORS AND PLANEXECUTIVE OFFICERS OF SHARE EXCHANGE
AGREEMENT AND PLAN OF SHARE EXCHANGE, dated asMERCURY CAYMAN CO. III, LTD.
The name, business address, present principal occupation or employment and
five-year employment history of July 15, 2000, byeach director and betweenexecutive officer of the
Purchaser and certain other information are set forth below. The principal
business address of the Purchaser and, unless otherwise indicated, the business
address of each person identified below is c/o 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,1001 North
19th Street, Arlington, Virginia 22209. Purchaser's telephone number at this
address is (703) 522-1315. Where no date is shown, except in the respective Boardscase of
Directors of Parent andpositions with the Company have
approvedPurchaser, the acquisition ofindividual has occupied the Company by Parent onposition
indicated for the terms and subject to
the conditionspast five years. Unless otherwise indicated, each occupation
set forth in this Agreement;
WHEREAS, the respective Boards of Directors of Parentopposite an individual's name refers to position with Purchaser.
Other than as indicated, all directors 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 conditionsexecutive officers listed below are
United States citizens.
PRESENT PRINCIPAL OCCUPATION OR
NAME EMPLOYMENT AND FIVE-YEAR EMPLOYMENT HISTORY
- -------------------------- ----------------------------------------------------------------------
James A. Abbott Vice President and Chief Financial Officer of Mercury Cayman Co.
III, Ltd. since October 2000. Since August 2000 Mr. Abbott has been
Project Development Manager for the AES Americas and AES
Andes groups. Prior to joining AES Mr. Abbott worked for
PriceWaterhouseCoopers for approximately 5 years.
Steven P. Clancy Vice President of Mercury Cayman Co. III, Ltd. since October 2000.
Vice President of Tax for AES Americas since 1998. Prior to joining
AES, Mr. Clancy was Senior Tax Manager for Deloitte & Touche in
the Washington, DC office since 1993.
Victor Galleguillo Vice President of Mercury Cayman Co. III, Ltd. since October 2000.
Chief Financial Officer of AES Andes since March 2000. Director
Financial Accounting of AES Americas since June 1999, and Director
Financial Accounting of AES Americas since February 1998. Prior to
February 1998, he was Audit Manager for Arthur Andersen in
Buenos Aires, Argentina for three years. Mr. Galleguillo is a citizen
of Argentina.
Paul T. Hanrahan Director and Vice President of Mercury Cayman Co. III, Ltd. since
October 2000. Senior Vice President of AES since 1997, and was
appointed Vice President of AES effective January 1994. Since
May 1, 1998, Mr. Hanrahan has been Managing Director of AES
Americas, a business group within AES responsible for all of AES's
activities in South America. From February 1995 until 1998 he was
President and Chief Executive Officer of AES Chigen, where he
served as Executive Vice President, Chief Operating Officer and
Secretary from December 1993 until February 1995.
Willard C. Hoagland, III Treasurer of Mercury Cayman Co. III, Ltd. since October 2000. Mr.
Hoagland is currently Director of Finance and Administration of
AES and has held that position since 1994.
SI-5
PRESENT PRINCIPAL OCCUPATION OR
NAME EMPLOYMENT AND FIVE-YEAR EMPLOYMENT HISTORY
- --------------------- ----------------------------------------------------------------------
Naveed Ismail Director and President of Mercury Cayman Co. III, Ltd. since
October 2000. Since May 2000 Mr. Ismail has been President of AES
Andes, a business group within AES responsible for all of AES's
activities in Argentina, Uruguay and Chile. From August 1998 to
March 2000 he was President and Chief Executive Officer of AES
Ekibastuz in Kazakhstan. Prior to August 1998 Mr. Ismail was
involved in the development, construction and operation of AES Lal
Pir and Pak Gen power plants in Pakistan. Mr. Ismail has been with
AES since 1994. Mr. Ismail is a citizen of the Republic of Pakistan.
William R. Luraschi Vice President of Mercury Cayman Co. III, Ltd. since October 2000.
Vice President of AES since January 1998, Secretary since February
1996 and General Counsel of AES since January 1994. Prior to that,
Mr. Luraschi was an Attorney with the law firm of Chadbourne &
Parke L.L.P.
Leith Mann Assistant Secretary of Mercury Cayman Co. III, Ltd. since October
2000. Assistant Secretary for AES since February 2000. Ms. Mann has
been with AES since 1981.
Kevin L. Polchow Vice President of Mercury Cayman Co. III, Ltd. since October 2000.
Mr. Polchow is currently the Tax Director of AES. He assumed that
position in 1994.
Jeffrey A. Safford Director of Mercury Cayman Co. III, Ltd. since October 2000. Vice
President and Chief Financial Officer of AES Americas, a business
group within AES responsible for all of AES's activities in South
America. From April 1994 until Mr. Safford's appointment to such
offices in September 1998, he served as Vice President and Chief
Financial Officer and Secretary of AES China Generating Co., Ltd.,
and performed the function of principal accounting officer. He is a
Certified Public Accountant.
Maureen B. Shearer Secretary of Mercury Cayman Co. III, Ltd. since October 2000. She is
currently Assistant Secretary of AES and has held that position since
February 2000. Ms. Shearer has been with AES since 1989.
SI-6
SCHEDULE II
PURCHASES OF GENER ADSs
The following tables set forth in this Agreement;
WHEREAS, for accounting purposes, it is intended thatinformation concerning purchases of Gener
ADSs and shares during the transactions
contemplated hereby be accounted for as a pooling-of-interests under United
States generally accepted accounting principles ("GAAP") and the rules and
regulationspast 60 days by AES. All purchases 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
A-1
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 StockGener ADSs
were effected 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.Exchange. 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
A-2
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 whoseGener 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
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.
A-4
(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
A-5
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"))
A-6
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
A-7
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
A-8
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
A-9
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
A-10
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
A-11
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
A-12
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
A-13
(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
A-14
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;
A-15
(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
A-16
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
A-17
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
A-18
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
A-19
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.
A-20
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.
A-21
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
A-22
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
A-23
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,
A-24
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
A-25
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
A-26
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
A-27
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.
A-28
(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")
A-29
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.
A-30
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
A-31
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
A-32
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 andwithdrawal of Gener shares from 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
A-33Depositary.
PURCHASE DATE AMOUNT PRICE PER GENER ADS
- ----------------------- --------- --------------------
October 23, 2000 100,000 $ 11.00
October 30, 2000 60,000 11.73
October 31, 2000 500,000 12.00
SII-1
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 officersFacsimile copies of the CompanyADS Letter of Transmittal, properly completed and
its Subsidiaries that are comparable to those historically available to such
persons.
(b) Parent shall credit, or cause toduly signed, will 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 anyaccepted. The ADS Letter 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
A-34
of such counselTransmittal, ADRs 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 PartyGener ADSs and any other Indemnified Party or Indemnified Parties.
(b) Except to the extent required documents should be sent 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)each holder 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 toGener ADSs 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 releasebroker, dealer, commercial bank, trust company or
other public statements with respectnominee 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
A-35
such Taxes) ("TRANSFER TAXES") incurred in connection withexchange agent at 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
A-36
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
A-37
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
A-38
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 conditionsaddresses 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 OFbelow.
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
A-39
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
A-40
(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
A-41
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 PROCEDUREEXCHANGE AGENT 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.
A-42
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
A-43
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.
A-44
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.OUR OFFER IS:
CHASEMELLON SHAREHOLDER SERVICES L.L.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: ChairmanBy Mail: Facsimile Transmission: By Hand:
Reorganization Department (for Eligible Institutions Only) Reorganization Department
PO Box 3301 (201) 296-4293 120 Broadway
South Hackensack, NJ 07606 13th Floor
Confirmation of the BoardFax: New York, NY 10271
(201) 296-4860
By Overnight Courier:
Reorganization Department
85 Challenger Road
Mail Stop-Reorg
Ridgefield Park, NJ 07660
A-45
EXHIBITQuestions or requests for assistance or additional copies of our
prospectus, the ADS Letter of Transmittal and the ADS Notice of Guaranteed
Delivery may be directed to the information agent or the dealer manager at
their respective addresses and telephone numbers set forth below. A TO ANNEX A
[LETTERHEAD OF PARENT]
[Closing Date]
Skadden, Arps, Slate, Meagherholder of
Gener ADSs also may contact his or her broker, dealer, commercial bank, trust
company or other nominee for assistance concerning our offer.
The Information Agent for our offer is:
D.F. KING & Flom LLP
1440CO., INC.
77 Water Street
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, among10005
Call Toll Free: (800) 755-3105
The AES Corporation, a Delaware
corporation ("PARENT"), and IPALCO Enterprises,Dealer Manager for our offer is:
DEUTSCHE BANC ALEX. BROWN
Deutsche Bank Securities 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
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
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
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
EXHIBIT B
TO ANNEX A
[Letterhead of Company]
[Closing Date]
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
130 Liberty Street
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
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
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
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.
Very truly yours,
IPALCO ENTERPRISES, Inc.
By:
-----------------------------------------
Name:
Title:
A-53
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
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
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
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
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
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
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
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
B-210006
Call Toll Free (877) 305-4920
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,Bylaws, 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.
Section 145 of the Delaware General Corporation Law provides that a
corporation may indemnify directors and officers as well as other employees and
individuals 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, with respect to
any criminal action or proceedings, 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)
actually and reasonably incurred in connection with the defense or settlement
of such action, and the statute requires court approval before there can be any
indemnification where the person seeking indemnification has been found liable
to the corporation. The statute provides that it is not exclusive of other
indemnification that may be granted by a corporation's charter, Bylaws,
disinterested director vote, stockholder vote, agreement or otherwise.
Set forth below is Article VIII of AES's by-lawsBylaws pertaining to
indemnification of officers, directors, employees and agents and insurance:insurance,
which is in full compliance with Section 145 of the Delaware General Corporate
Law:
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
II-1
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
(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
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
EXHIBIT
NUMBER DESCRIPTION
- --------------------- --------------------- -------------------------------------------------------------------------------
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,Bylaws, as amended (incorporated by reference to
Exhibit 3.2 to Thethe AES Corporation Quarterly Report on Form 10-Q filed on
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 &and 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).LLP.
24.1 Powers of Attorney (set forth on signature page).
99.1*99.1 Form of IPALCO Enterprises, Inc. Proxy.ADS Letter of Transmittal.
99.2 Form of Notice of Guaranteed Delivery.
99.3 Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and
Other Nominees.
99.4 Form of Letter to Clients for use by Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees.
99.5 Form of Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
99.6 Summary Advertisement scheduled for publication in The Wall Street
Journal on November 13, 2000.
99.7 Press Release issued by AES on November 3, 2000 (incorporated by reference
to the filing by AES pursuant to Rule 425 on November 3, 2000).
- ----------------------------------
* To be filed by amendment
FINANCIAL STATEMENT SCHEDULES:(b) 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.
(c) None
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: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 statementRegistration Statement (or
the most recent post-effective amendment thereof) which,
II-3
individually or in the aggregate, represent a fundamental change
in the information set forth II-3
in the registration statement.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;Registration Statement; and;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statementRegistration
Statement or any material change to such information in the
registration
statement;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 FIDEbona 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,applicable, 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 statementRegistration
Statement relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial BONA FIDEbona 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,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 statementRegistration 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 statementRegistration
Statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the
initial BONA FIDEbona 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
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.
II-4
(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
statementRegistration 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
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 the City of Arlington,
State of Virginia, on the 15th9 day of August,November, 2000.
THE AES CORPORATION
By: /s/ DENNIS W. BAKKE
----------------------------------------- Dennis W. Bakke
----------------------------------
Name: Dennis W. Bakke
----------------------------
Title: President and Chief
Executive Officer
-----------------------------
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-factattorneys-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
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.
SIGNATURE TITLE DATE
--------- ----- ----- --------------------------- ------------------------------------ -----------------
/s/ ROGERRoger W. SANT
- -------------------------------------------Sant Chairman of the Board August 15,November 9, 2000
- -------------------------
Roger W. Sant
/s/ Dennis W. Bakke President, Chief Executive /s/ DENNIS W. BAKKE Officer (principalNovember 9, 2000
- -------------------------------------------------------------------- (principal executive officer) and
August 15,Dennis W. Bakke Director
II-6
SIGNATURE TITLE DATE
- --------------------------- --------------------------------------- -----------------
/s/ Alice F. Emerson Director November 9, 2000
Dennis W. Bakke Director
/s/ ALICE F. EMERSON
- ------------------------------------------- Director August 15, 2000-------------------------
Dr. Alice F. Emerson
/s/ ROBERTRobert F. HEMPHILL, JR.Hemphill, Jr. Director November 9, 2000
- ------------------------------------------- Director August 15, 2000-------------------------
Robert F. Hemphill, Jr.
/s/ FRANK JUNGERSFrank Jungers Director November 9, 2000
- ------------------------------------------- Director August 15, 2000-------------------------
Frank Jungers
/s/ JOHNJohn H. MCARTHURMcArthur Director November 9, 2000
- ------------------------------------------- Director August 15, 2000-------------------------
John H. McArthur
/s/ HAZELHazel R. O'LEARYO'Leary Director November 9, 2000
- ------------------------------------------- Director August 15, 2000-------------------------
Hazel R. O'Leary
/s/ THOMASThomas I. UNTERBERGUnterberg Director November 9, 2000
- ------------------------------------------- Director August 15, 2000-------------------------
Thomas I. Unterberg
/s/ ROBERT H. WATERMAN, JR.
- ------------------------------------------- Director August 15, 2000
Robert H. Waterman, Jr. Director November 9, 2000
- -------------------------
Robert H. Waterman, Jr.
/s/ Barry J. Sharp Senior Vice President and /s/ BARRY J. SHARP Chief November 9, 2000
- ------------------------- Financial Officer - ------------------------------------------- (principal financial and August 15, 2000(Principal Financial
Barry J. Sharp accounting officer)and Accounting Officer)
II-7
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
- --------------------- --------------------- -------------------------------------------------------------------------------
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,Bylaws, as amended (incorporated by reference to
Exhibit 3.2 to Thethe AES Corporation Quarterly Report on Form 10-Q filed on
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 &and 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).LLP.
24.1 Powers of Attorney (set forth on signature page).
99.1*99.1 Form of IPALCO Enterprises, Inc. Proxy.ADS Letter of Transmittal.
99.2 Form of Notice of Guaranteed Delivery.
99.3 Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and
Other Nominees.
99.4 Form of Letter to Clients for use by Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees.
99.5 Form of Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
99.6 Summary Advertisement scheduled for publication in The Wall Street
Journal on November 13, 2000.
99.7 Press Release issued by AES on November 3, 2000 (incorporated by reference
to the filing by AES of Form 425 on November 3, 2000).
- ----------------------------------
* To be filed by amendment