EX. 10.1
STRICTLY CONFIDENTIAL
AGREEMENT AND PLAN OF MERGER
among
THE AES CORPORATION,
CILCORP INC.,
and
MIDWEST ENERGY, INC.
-----------------------------
Dated as of November 22, 1998
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TABLE OF CONTENTS
Page
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ARTICLE I. THE MERGER....................................................................2
Section 1.1 The Merger....................................................................2
Section 1.2 Effective Time................................................................3
Section 1.3 Effect of the Merger..........................................................3
Section 1.4 Subsequent Actions............................................................3
Section 1.5 Articles of Incorporation; By-Laws; Directors; Officers. .....................3
ARTICLE II. TREATMENT OF SHARES...........................................................4
Section 2.1 Conversion of Securities......................................................4
Section 2.2 Per Share Amount Adjustments..................................................5
Section 2.3 Dissenting Shares.............................................................5
Section 2.4 Surrender of Shares; Stock Transfer Books.....................................6
Section 2.5 CILCORP Options...............................................................8
ARTICLE III. THE CLOSING...................................................................8
Section 3.1 Closing.......................................................................8
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF CILCORP.....................................8
Section 4.1 Organization and Qualification................................................8
Section 4.2 Subsidiaries..................................................................9
Section 4.3 Capitalization...............................................................10
Section 4.4 Authority; Non-Contravention; Statutory Approvals;
Compliance...................................................................12
Section 4.5 Reports and Financial Statements.............................................14
Section 4.6 Absence of Certain Changes or Events; Absence of
Undisclosed Liabilities......................................................15
Section 4.7 Litigation...................................................................16
Section 4.8 Proxy Statement..............................................................16
Section 4.9 Tax Matters..................................................................16
Section 4.10 Employee Matters; ERISA......................................................20
Section 4.11 Environmental Protection.....................................................25
Section 4.12 Regulation as a Utility......................................................28
Section 4.13 Vote Required................................................................29
Section 4.14 Insurance....................................................................29
Section 4.15 Opinion of Financial Advisor.................................................29
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Section 4.16 Brokers......................................................................29
Section 4.17 Non-Applicability of Certain Provisions of Illinois Act......................29
Section 4.18 CILCORP Rights Agreement.....................................................30
Section 4.19 Year 2000 Compliance.........................................................30
Section 4.20 Title to Real Property.......................................................30
Section 4.21 Assets Other than Real Property Interests....................................31
Section 4.22 Intellectual Property........................................................31
Section 4.23 Transactions with Affiliates.................................................32
Section 4.24 Discontinued Business........................................................32
Section 4.25 Captive Insurance Business...................................................33
Section 4.26 Contractual Obligations......................................................33
Section 4.27 Disclosure...................................................................33
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF AES AND
MERGER SUB...................................................................34
Section 5.1 Organization and Qualification...............................................34
Section 5.2 Authority; Non-Contravention; Statutory Approvals............................34
Section 5.3 Compliance...................................................................35
Section 5.4 Reports and Financial Statements.............................................36
Section 5.5 Proxy Statement Information..................................................37
Section 5.6 Financing....................................................................37
Section 5.7 Regulatory Status............................................................37
Section 5.8 Regulatory Approval..........................................................37
ARTICLE VI. CONDUCT OF BUSINESS PENDING THE MERGER;
COVENANTS OF THE PARTIES.....................................................38
Section 6.1 Conduct of Business by CILCORP Pending the Merger............................38
Section 6.2 Covenants of AES ............................................................46
ARTICLE VII. ADDITIONAL AGREEMENTS........................................................48
Section 7.1 Access to Information........................................................48
Section 7.2 Proxy Statement..............................................................49
Section 7.3 Regulatory Approvals and Other Matters.......................................50
Section 7.4 Approval of CILCORP Stockholders.............................................51
Section 7.5 Directors' and Officers' Indemnification.....................................51
Section 7.6 Disclosure Schedules.........................................................53
Section 7.7 Public Announcements.........................................................53
Section 7.8 No Solicitations.............................................................53
Section 7.9 Expenses.....................................................................56
Section 7.10 Board of Directors...........................................................56
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Section 7.11 Illinois Responsible Property Transfer Act...................................56
Section 7.12 Signature Authority..........................................................56
Section 7.13 Termination of Existing Tax Sharing Agreements...............................56
Section 7.14 Deferred Compensation Plans..................................................56
ARTICLE VIII. CONDITIONS...................................................................57
Section 8.1 Conditions to Each Party's Obligation to Effect the Merger...................57
Section 8.2 Conditions to Obligation of CILCORP to Effect the Merger.....................58
Section 8.3 Conditions to Obligation of AES and Merger Sub to
Effect the Merger............................................................58
ARTICLE IX. TERMINATION, AMENDMENT AND WAIVER............................................60
Section 9.1 Termination..................................................................60
Section 9.2 Effect of Termination........................................................64
Section 9.3 Termination Fees; Expenses...................................................64
Section 9.4 Amendment....................................................................64
Section 9.5 Waiver.......................................................................64
ARTICLE X. GENERAL PROVISIONS...........................................................65
Section 10.1 Non-Survival; Effect of Representations and Warranties.......................65
Section 10.2 Notices......................................................................65
Section 10.3 Miscellaneous................................................................66
Section 10.4 Interpretation...............................................................66
Section 10.5 Counterparts; Effect.........................................................66
Section 10.6 Enforcement..................................................................67
Section 10.7 Parties in Interest..........................................................67
Section 10.8 Further Assurances...........................................................67
Section 10.9 Waiver Of Jury Trial.........................................................67
Section 10.10 Certain Definitions..........................................................67
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of November 22, 1998 (this
"Agreement"), among The AES Corporation, a Delaware corporation ("AES"), CILCORP
Inc., an Illinois corporation ("CILCORP"), and Midwest Energy, Inc., an Illinois
corporation and wholly-owned subsidiary of AES ("Merger Sub").
W I T N E S S E T H :
WHEREAS, the respective Boards of Directors of AES and CILCORP each have
determined that the acquisition of CILCORP by AES is in the best interests of
their respective stockholders; and
WHEREAS, in furtherance thereof, the respective Boards of Directors of AES,
CILCORP and Merger Sub have approved the merger of Merger Sub with and into
CILCORP, pursuant to the terms and subject to the conditions set forth in this
Agreement (the "Merger"); and
WHEREAS, the Board of Directors of AES has determined that it may be
desirable for AES to merge CILCORP with and into AES following but substantially
contemporaneously with the Merger (the "Second Merger" which, for purposes of
this Agreement, if it occurs, shall be deemed to occur immediately after the
Merger).
NOW, THEREFORE, in consideration of the premises and the representations,
warranties, covenants and agreements contained herein, the parties hereto,
intending to be legally bound hereby, agree as follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. At the Effective Time (as defined in Section 1.2
hereof) and upon the terms and subject to the conditions of this Agreement and
the Illinois Business Corporation Act (the "Illinois Act"), Merger Sub shall be
merged with and into CILCORP, the separate corporate existence of Merger Sub
shall cease, and CILCORP shall continue as the surviving corporation (sometimes
hereinafter referred to as the "Surviving Corporation").
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Section 1.2 Effective Time. On the Closing Date (as defined in Section 3.1
hereof), Articles of Merger complying with the requirements of the Illinois Act
shall be executed and filed by CILCORP and Merger Sub with the Secretary of
State of the State of Illinois. The Merger shall become effective on the date on
which the Certificate of Merger is issued by the Secretary of State of the State
of Illinois (the "Effective Time").
Section 1.3 Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided in the applicable provisions of the Illinois Act.
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Time all the property, rights, privileges, powers and franchises of
CILCORP and Merger Sub shall vest in the Surviving Corporation, and all debts,
liabilities and duties of CILCORP and Merger Sub shall become the debts,
liabilities and duties of the Surviving Corporation.
Section 1.4 Subsequent Actions. If, at any time after the Effective Time,
the Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments, assurances or any other actions or things are necessary or
desirable to vest, perfect or confirm of record or otherwise in the Surviving
Corporation its right, title or interest in, to or under any of the rights,
properties or assets of either of CILCORP or Merger Sub acquired or to be
acquired by the Surviving Corporation as a result of, or in connection with, the
Merger or otherwise to carry out this Agreement, the officers and directors of
the Surviving Corporation shall be authorized to execute and deliver, in the
name and on behalf of either CILCORP or Merger Sub, all such deeds, bills of
sale, assignments and assurances and to take and do, in the name and on behalf
of each of such corporations or otherwise, all such other actions and things as
may be necessary or desirable to vest, perfect or confirm any and all right,
title and interest in, to and under such rights, properties or assets in the
Surviving Corporation or otherwise to carry out this Agreement.
Section 1.5 Articles of Incorporation; By-Laws; Directors; Officers. Unless
otherwise determined by AES prior to the Effective Time, at the Effective Time:
(a) The Articles of Merger shall provide that the Articles of
Incorporation of Merger Sub, as in effect immediately prior to the Effective
Time, shall be the Articles of Incorporation of the Surviving Corporation until
thereafter amended as provided by law and such Articles of Incorporation.
(b) The By-Laws of Merger Sub, as in effect immediately prior to the
Effective Time, shall be the By-Laws of the Surviving Corporation until
thereafter
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amended as provided by law, the Articles of Incorporation of the Surviving
Corporation and such By-Laws.
(c) The members of the Board of Directors of Merger Sub immediately
prior to the Effective Time shall be the members of the Board of Directors of
the Surviving Corporation, to hold office from the Effective Time until their
respective successors are duly elected or appointed and shall have qualified in
the manner provided in the Articles of Incorporation and By-Laws of the
Surviving Corporation or as other wise provided by law.
(d) The officers of CILCORP in office immediately prior to the
Effective Time shall be the officers of the Surviving Corporation, to hold
office from the Effective Time until their respective successors are duly
elected or appointed and shall be qualified in the manner provided in the
Articles of Incorporation and By-Laws of the Surviving Corporation or as
otherwise provided by law.
ARTICLE II
TREATMENT OF SHARES
Section 2.1 Conversion of Securities. At the Effective Time, by virtue of
the Merger and without any action on the part of Merger Sub, CILCORP or the
holder of any of the following securities:
(a) Each share of common stock, no par value, of CILCORP (a "Share"),
together with the associated purchase rights ("CILCORP Rights") under the
CILCORP Rights Agreement (as defined in Section 4.18 hereof), issued and
outstanding immediately prior to the Effective Time (other than any Shares to be
canceled pursuant to Section 2.1(b) hereof and any Dissenting Shares (as defined
in Section 2.3(a) hereof) shall be canceled and extinguished and be converted
into the right to receive $65.00, subject to adjustment in accordance with
Section 2.2 hereof (the "Per Share Amount"), in cash payable to the holder
thereof, without interest, upon surrender of the certificate representing such
Share in accordance with Section 2.4 hereof. Throughout this Agreement, the term
"Shares" refers to the Shares together with the associated CILCORP Rights and
the term "Aggregate Consideration Amount" shall mean an amount equal to the
product of (x) the Per Share Amount as adjusted in accordance with Section 2.2
hereof and (y) the number of Shares outstanding on the Closing Date.
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(b) Each Share held in the treasury of CILCORP and each Share owned by
AES or any direct or indirect Subsidiary (as defined in Section 4.1 hereof) of
AES or of CILCORP immediately prior to the Effective Time shall be canceled and
extinguished, and no consideration shall be paid with respect thereto.
(c) Each share of common stock, no par value, of Merger Sub issued and
outstanding immediately prior to the Effective Time shall thereafter be
converted into and become one validly issued, fully paid and nonassessable share
of common stock, no par value, of the Surviving Corporation.
Section 2.2 Per Share Amount Adjustments. Subject to AES' right of
termination set forth in Section 9.1(c)(ii) hereof, in the event the SEC
Exemption Order (as defined in Section 8.3(e) hereof) is issued by the
Securities and Exchange Commission (the "SEC") after the date which is the
nine-month anniversary of the date hereof, and provided that CILCORP shall have
delivered to AES the CILCORP Certificate pursuant to Section 6.2(d) hereof, then
the Per Share Amount shall be increased to $66.00 on the later to occur of (i)
the day following the nine-month anniversary of the date hereof and (ii) the day
after the date on which CILCORP delivers to AES the CILCORP Certificate.
Throughout this Agreement, the date on which the Per Share Amount is increased
to $66.00 pursuant to this Section 2.2 is referred to as the "First Adjustment
Period." If the CILCORP Certificate is delivered after the nine-month
anniversary but prior to the SEC Exemption Order being issued, then, following
the First Adjustment Period, the Per Share Amount shall be increased from $66.00
by $0.00546448 per day for each day until the SEC Exemption Order is issued up
to a maximum Per Share Amount of $68.00. Notwithstanding the above, in no event
shall the Per Share Amount be increased for any period after which AES has
irrevocably waived the condition set forth in Section 9.1(c)(ii) hereof.
Section 2.3 Dissenting Shares.
(a) Notwithstanding anything to the contrary contained in this
Agreement, to the extent appraisal rights are available to CILCORP stockholders
pursuant to the Illinois Act, any Shares held by a person who objects to the
Merger, whose Shares either were not entitled to vote or were not voted in favor
of the Merger and who complies with all of the provisions of the Illinois Act
concerning the rights of such person to dissent from the Merger and to require
appraisal of such person's Shares and who has not withdrawn such objection or
waived such rights prior to the Closing Date (as defined in Section 3.1 hereof)
("Dissenting Shares") shall not be converted into or represent a right to
receive cash pursuant to Section 2.1 hereof, but shall become the right
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to receive such consideration as may be determined to be due to the holder of
such Dissenting Shares pursuant to the Illinois Act.
(b) Notwithstanding the provisions of subsection (a) of this Section,
each Dissenting Share held by a person at the Effective Time who shall, after
the Effective Time, withdraw the demand for appraisal or lose the right of
appraisal, in either case pursuant to the Illinois Act, shall be deemed to be
converted, as of the Effective Time, into the right to receive cash as provided
in Section 2.1(a) hereof, without interest thereon, upon surrender of the
certificate or certificates representing such Shares in accordance with Section
2.4 hereof.
(c) CILCORP shall give AES (i) prompt notice of any written demands
for appraisal or payment of the fair value of any Shares, withdrawals of such
demands, and any other instruments served pursuant to the Illinois Act received
by CILCORP in respect of demands for appraisal or payment of the fair value of
any Shares and (ii) the opportunity to direct all negotiations and proceedings
with respect to demands for appraisal under the Illinois Act. CILCORP shall not
voluntarily make any payment with respect to any demands for appraisal and shall
not, except with the prior written consent of AES, settle or offer to settle any
such demands.
Section 2.4 Surrender of Shares; Stock Transfer Books.
(a) Prior to the Effective Time, CILCORP shall designate a bank or
trust company to act as paying agent (the "Paying Agent") for purposes of paying
the amounts contemplated by Section 2.1 hereof. At the Effective Time, AES shall
deposit, or cause to be deposited, with the Paying Agent for the benefit of
holders of Shares, the aggregate consideration to which such holders shall be
entitled when and as required pursuant to Section 2.1 hereof.
(b) As soon as practicable after the Effective Time, AES shall cause
the Paying Agent to mail to each holder of record as of the Effective Time of a
certificate or certificates that have been converted pursuant to Section 2.1
hereof: (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
actual delivery of the certificates to the Paying Agent) and (ii) instructions
for effecting the surrender of the certificates and receiving the aggregate
consideration to which such holder shall be entitled therefor pursuant to
Section 2.1 hereof. Upon surrender of a certificate to the Paying Agent for
cancellation, together with a duly executed letter of transmittal and such other
documents as the Paying Agent may reasonably require, the holder of such
certificate shall be entitled to receive in exchange therefor cash in an amount
equal to the Per Share Amount
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multiplied by the number of Shares represented by such certificate. Until so
surrendered, each such certificate (other than certificates representing
Dissenting Shares and certificates representing Shares canceled pursuant to
Section 2.1(b) hereof) shall be deemed at any time after the Effective Time to
represent solely the right to receive upon such surrender the aggregate Per
Share Amount relating thereto. No interest shall accrue or be paid on any cash
payable upon the surrender of a certificate or certificates which immediately
prior to the Effective Time represented outstanding Shares.
(c) If payment of cash in respect of canceled Shares is to be made to
a person other than the person in whose name a surrendered certificate or
instrument is registered in the transfer records of CILCORP, it shall be a
condition to such payment that the certificate or instrument so surrendered
shall be properly endorsed or shall be otherwise in proper form for transfer and
shall be accompanied by evidence satisfactory to the Paying Agent that any
transfer or other Taxes (as defined in Section 4.9 hereof) required by reason of
such payment in a name other than that of the registered holder of the
certificate or instrument either has been paid or is not payable.
(d) At the Effective Time, the stock transfer books of CILCORP shall
be closed and there shall not be any further registration of transfer of any
shares of capital stock thereafter on the records of CILCORP. If, after the
Effective Time, certificates for Shares are presented to the Surviving
Corporation or AES, they shall be canceled and exchanged for cash as provided in
Section 2.1(a) hereof and in this Section 2.4.
(e) Promptly following the date which is six months after the
Effective Time, the Paying Agent shall deliver to AES all cash (including any
interest received with respect thereto), certificates and other documents in its
possession relating to the transactions contemplated hereby, and the Paying
Agent's duties shall terminate. Thereafter, each holder of a certificate
representing Shares (other than certificates representing Dissenting Shares and
certificates representing Shares canceled pursuant to Section 2.1(b) hereof)
shall be entitled to look to the Surviving Corporation (subject to applicable
abandoned property, escheat and similar laws) only as general creditors thereof
with respect to the aggregate Per Share Amount payable upon due surrender of
their certificates, without any interest or dividends thereon. Notwithstanding
the foregoing, neither AES, the Surviving Corporation nor the Paying Agent shall
be liable to any holder of a certificate representing Shares for the Per Share
Amount delivered to a public official pursuant to any applicable abandoned
property, escheat or similar law.
(f) The Per Share Amount paid in the Merger shall be net to the holder
of Shares in cash, subject to reduction only for (i) such amounts as AES or the
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Paying Agent are required to withhold or deduct under the Code (as defined in
Section 4.9(e) of this Agreement) or any provision of state, local or foreign
Tax law with respect to the making of such payment, and (ii) as set forth in
Section 2.4(c) hereof, any stock transfer or other Taxes payable by reason of
such payment being made in a name other than that of the registered holder of
the certificate or instrument.
Section 2.5 CILCORP Options. Two business days prior to the Closing Date,
the CILCORP Shareholder Return Incentive Compensation Plan (the "CILCORP Option
Plan") shall be amended (which such amendment shall be conditioned on the
Closing occurring) to provide (i) as to all performance shares that have been
granted under the CILCORP Option Plan and that have not been exercised prior to
the date of such amendment (the "Performance Shares"), that such Performance
Shares shall be cancelled as of the Closing Date and (ii) at the Closing CILCORP
shall pay to each holder of Performance Shares a cash payment equal to the
number of Performance Shares held immediately prior to such amendment multiplied
by the excess of the Per Share Amount over $36.00 less the amount of all
applicable federal, state and local withholding Taxes in connection with such
payment. CILCORP shall take all actions necessary to ensure that such payment
extinguishes all rights of such participants under the CILCORP Option Plan to
receive either Shares or shares of common stock of AES at or after the Effective
Time.
ARTICLE III
THE CLOSING
Section 3.1 Closing. The closing of the Merger (the "Closing") shall take
place at the offices of Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ at 10:00 A.M., New York time, on the
second business day immediately following the date on which the last of the
conditions set forth in Article VIII hereof is fulfilled or waived, or at such
other time, date and place as AES and CILCORP shall mutually agree (the "Closing
Date").
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF CILCORP
CILCORP hereby represents and warrants to AES and Merger Sub as follows:
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Section 4.1 Organization and Qualification. CILCORP and each of the CILCORP
Subsidiaries (as defined below) and, to the knowledge of CILCORP, each of the
CILCORP Joint Ventures (as defined below) is a corporation or other entity duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation or organization, has all requisite power and
authority and has been duly authorized by all necessary approvals and orders to
own, lease and operate its assets and properties and to carry on its business as
it is now being conducted and is duly qualified and in good standing to do
business in each jurisdiction in which the nature of its business or the
ownership or leasing of its assets and properties makes such qualification
necessary, other than in such jurisdictions where the failure to so qualify and
be in good standing, when taken together with all other such failures, would not
have a material adverse effect on the business, operations, properties, assets,
condition (financial or other), prospects or the results of operations of
CILCORP and the CILCORP Subsidiaries taken as a whole or on the consummation of
the transactions contemplated by this Agreement and the Second Merger (any such
material adverse effect, a "CILCORP Material Adverse Effect"). The term
"Subsidiary" of a 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 at least a majority of the voting power
represented by the outstanding capital stock or other voting securities or
interests having voting power under ordinary circumstances to elect a majority
of the directors or similar members of the governing body, or otherwise to
direct the management and policies, of such corporation or entity and the term
"CILCORP Subsidiary" shall mean a Subsidiary of CILCORP. The term "Joint
Venture" of a 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 "CILCORP Joint Venture" shall mean a Joint Venture
of CILCORP.
Section 4.2 Subsidiaries. Section 4.2 of the disclosure schedule delivered
by CILCORP to AES concurrent with the execution of this Agreement (the "CILCORP
Disclosure Schedule") sets forth a list of all the CILCORP Subsidiaries and the
CILCORP Joint Ventures, 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 CILCORP and the CILCORP Subsidiaries therein. CILCORP
is a "public-utility holding company" (as defined in the Public Utility Holding
Company Act of 1935, as amended ("PUHCA")) exempt from all provisions (other
than Section 9(a)(2)) of PUHCA, pursuant to Section 3(a)(1) in accordance with
Rule 2 of PUHCA, and Central Illinois Light Company ("CILCO") is a
"public-utility company" within the meaning of Section
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2(a)(5) of PUHCA. With the exception of CILCO, no CILCORP Subsidiary or CILCORP
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 CILCORP, 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. Except as set forth in
Section 4.2 of the CILCORP Disclosure Schedule, (i) all of the issued and
outstanding shares of capital stock of each CILCORP Subsidiary are validly
issued, fully paid, nonassessable and free of preemptive rights and to the
extent owned, directly or indirectly, by CILCORP, are owned free and clear of
any liens, claims, encumbrances, security interests, charges and options of any
nature whatsoever ("Liens"), and (ii) there are no outstanding subscriptions,
options, calls, contracts, voting trusts, proxies or other pledges, security
interests, claims, equities, charges, encumbrances, commitments, understandings,
restrictions, arrangements, rights or warrants, including any right of
conversion or exchange under any outstanding security, instrument or other
agreement, obligating CILCORP or any CILCORP Subsidiary to issue, deliver or
sell, pledge, grant a security interest 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 CILCORP Subsidiary or obligating CILCORP or
any CILCORP Subsidiary to grant, extend or enter into any such agreement or
commitment.
Section 4.3 Capitalization.
(a) CILCORP. The authorized capital stock of CILCORP consists of
50,000,000 shares of common stock, no par value ( the "CILCORP Common Stock"),
and 4,000,000 shares of preferred stock, no par value, none of which preferred
stock is outstanding. As of the close of business on November 20, 1998, (i)
13,610,680 shares of CILCORP Common Stock were issued and outstanding (such
number of shares is hereinafter referred to as the "Outstanding Shares"), (ii)
125,000 shares of CILCORP Common Stock were reserved for issuance pursuant to
the CILCORP Option Plan, and (iii) no shares of CILCORP Common Stock were held
by CILCORP in its treasury or by its wholly owned Subsidiaries. No bonds,
debentures, notes or other indebtedness having the right to vote (or convertible
into securities having the right to vote) on any matters on which stockholders
may vote ("Voting Debt") are issued or outstanding. All of the issued and
outstanding shares of CILCORP Common Stock are validly issued, fully paid,
nonassessable and free of preemptive rights. Since December 17, 1996, CILCORP
has not issued any shares of capital stock of any class of CILCORP other than
issuances of shares of CILCORP Common Stock pursuant to awards under the CILCORP
Option Plan. As of the date of this Agreement, except as set forth in Section
4.3(a) of the CILCORP Disclosure Schedule, there are no outstanding
subscriptions, options, calls, contracts, voting trusts, proxies or other
pledges, security interests, encumbrances,
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commitments, understandings, restrictions, arrangements, rights or warrants,
including any right of conversion or exchange under any outstanding security,
instrument or other agreement, obligating CILCORP or any CILCORP Subsidiary to
issue, deliver or sell, pledge, grant a security interest 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 any Voting Debt of CILCORP or
obligating CILCORP or any CILCORP Subsidiary to grant, extend or enter into any
such agreement or commitment. Except as set forth in Section 4.3(a) of the
CILCORP Disclosure Schedule, there is no outstanding contractual commitment or
obligation of CILCORP or any CILCORP Subsidiary to make any investment (in the
form of a loan, capital contribution or otherwise) in any CILCORP Subsidiary or
in any other person.
(b) CILCO. The authorized capital stock of CILCO consists of
20,000,000 shares of common stock, no par value; 1,500,000 shares of preferred
stock, par value $100 per share ("CILCO Preferred Stock"), consisting of 111,264
shares of 4.50 percent Series CILCO Preferred Stock ("4.50% Series Preferred"),
79,940 shares of 4.64 percent Series CILCO Preferred Stock ("4.64% Series
Preferred"), and 1,308,796 shares of Undesignated Series CILCO Preferred Stock
("Undesignated Series Preferred"); 3,500,000 shares of Class A preferred stock,
no par value ("CILCO Class A Preferred Stock"), consisting of 220,000 shares of
5.85 percent Series CILCO Class A Preferred Stock ("5.85% Series Class A
Preferred"), 250,000 shares of Flexible Auction Rate Series CILCO Class A
Preferred Stock ("Flexible Auction Rate Series Class A Preferred"); and
3,030,000 shares of Undesignated Series CILCO Class A Preferred Stock
("Undesignated Series Class A Preferred"); and 2,000,000 shares of Undesignated
Series CILCO Preference Stock, no par value ("CILCO Preference Stock"). With
respect to the capital stock of CILCO, (i) 13,563,871 shares of CILCO Common
Stock are issued and out standing, all of which are owned by CILCORP free and
clear of any Liens and (ii) 111,264 shares of 4.50% Series Preferred, 79,940
shares of 4.64% Series Preferred, no shares of Undesignated Series Preferred,
220,000 shares of 5.85% Class A Series Preferred, 250,000 shares of Flexible
Auction Rate Series Class A Preferred, 250,000 shares of Undesignated Series
Class A Preferred and no shares of CILCO Preference Stock are issued and
outstanding. No Voting Debt is issued or outstanding. All of the issued and
outstanding shares of CILCO capital stock are validly issued, fully paid,
nonassessable and free of preemptive rights. Since the date hereof, CILCO has
not issued any shares of capital stock of any class of CILCO. As of the date of
this Agreement, except as set forth in Section 4.3(b) of the CILCORP Disclosure
Schedule, there are no outstanding subscriptions, options, calls, contracts,
voting trusts, proxies or other pledges, security interests, encumbrances,
commitments, understandings, restrictions, arrangements, rights or warrants,
including any right of conversion or exchange under any outstanding security,
instrument or other agreement, obligating CILCORP or any
11
CILCORP Subsidiary to issue, deliver or sell, pledge, grant a security interest
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 any Voting Debt
of CILCO or obligating CILCORP or any CILCORP Subsidiary to grant, extend or
enter into any such agreement or commitment.
(c) Indebtedness. Section 4.3(c)(i) of the CILCORP Disclosure Schedule
sets forth a true and complete statement of the borrowing limit under all loan
agreements (including indentures) of CILCORP and its Subsidiaries existing on
the date hereof and Section 4.3(c)(ii) of the CILCORP Disclosure Schedule sets
forth a true and complete statement of the total indebtedness of CILCORP and its
Subsidiaries outstanding on the date hereof under such agreements.
Section 4.4 Authority; Non-Contravention; Statutory Approvals; Compliance.
(a) Authority. CILCORP has all requisite power and authority to enter
into this Agreement and, subject to the receipt of the CILCORP Stockholders'
Approval (as defined in Section 4.13 hereof) and the CILCORP Required Statutory
Approvals (as defined in Section 4.4(c) hereof), to consummate the transactions
contemplated hereby and, subject to receipt of the Second Merger Statutory
Approvals (as defined in Section 4.4(c) hereof), to consummate the Second Merger
if such were to be consummated. The execution and delivery of this Agreement and
the consummation by CILCORP of the transactions contemplated hereby have been
duly authorized by all necessary corporate action on the part of CILCORP,
subject to obtaining the CILCORP Stockholders' Approval. This Agreement has been
duly and validly executed and delivered by CILCORP, and, assuming the due
authorization, execution and delivery hereof by the other signatories hereto,
this Agreement constitutes the valid and binding obligation of CILCORP
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) Non-Contravention. The execution and delivery of this Agreement by
CILCORP do not, and the consummation of the Merger and the other transactions
contemplated hereby and if such were consummated, the Second Merger, will not,
in any respect, violate, conflict with or result in a breach of any provision
of, or constitute a default (with or without notice or lapse of time or both)
under, or result in the termination or modification of, or accelerate the
performance required by, or result in a
12
right of termination, cancellation or acceleration of any obligation or the loss
of a benefit under, or result in the creation of any lien, security interest,
charge or encumbrance upon any of the properties or assets of CILCORP or any of
the CILCORP Subsidiaries or the imposition or administration of any other
penalty or fee (any such violation, conflict, breach, default, right of
termination, modification, cancellation or acceleration, loss, creation or
imposition, is referred to herein as a "Violation" with respect to CILCORP, the
CILCORP Subsidiaries and the CILCORP Joint Ventures, and such term when used in
Article V shall have a correlative meaning with respect to AES) pursuant to any
provisions of (i) the Articles of Incorporation, By-Laws or similar governing
documents of CILCORP or any of the CILCORP Subsidiaries or the CILCORP Joint
Ventures, (ii) subject to obtaining the CILCORP Required Statutory Approvals (as
defined in Section 4.4(c) hereof), the Second Merger Statutory Approvals (as
defined in Section 4.4(c) hereof) and the receipt of the CILCORP Stockholders'
Approval, any statute, law, ordinance, rule, regulation, judgment, decree,
order, injunction, writ, permit or license of any court, federal, state, local
or foreign governmental or regulatory body (including a stock exchange or other
self-regulatory body) or authority (each, a "Governmental Authority") applicable
to CILCORP or any of the CILCORP Subsidiaries or the CILCORP Joint Ventures or
any of their respective properties or assets or (iii) subject to obtaining the
third-party consents set forth in Section 4.4(b)(i) of the CILCORP Disclosure
Schedule for the Second Merger (the "CILCORP Second Merger Required Consents"),
and set forth in Section 4.4(b)(ii) of the CILCORP Disclosure Schedule for the
Merger and the other transactions contemplated hereby (the "CILCORP Required
Consents"), any note, bond, mortgage, indenture, deed of trust, license,
franchise, permit, concession, contract, lease or other instrument, obligation
or agreement of any kind to which CILCORP or any of the CILCORP Subsidiaries or
the CILCORP Joint Ventures is a party or by which it or any of its properties or
assets may be bound or affected, excluding from the foregoing clauses (ii) and
(iii) such Violations which would not, in the aggregate, have a CILCORP Material
Adverse Effect.
(c) Statutory Approvals. No declaration, filing or registration with,
or notice to or authorization, consent or approval of, any Governmental
Authority is necessary for the execution and delivery of this Agreement by
CILCORP or the consummation by CILCORP of the Merger and the other transactions
contemplated hereby, except as described in Section 4.4(c)(i) of the CILCORP
Disclosure Schedule, (the "CILCORP Required Statutory Approvals") and except as
described in Section 4.4(c)(ii) of the CILCORP Disclosure Schedule with respect
to the Second Merger (the "Second Merger Statutory Approvals"), it being
understood that references in this Agreement to "obtaining" such CILCORP
Required Statutory Approvals and Second Merger Statutory Approvals shall mean
making such declarations, filings or registrations;
13
giving such notices; obtaining such authorizations, consents or approvals; and
having such waiting periods expire as are necessary to avoid a violation of law.
(d) Compliance. Except as set forth in Section 4.4(d) of the CILCORP
Disclosure Schedule or in Section 4.11 hereof, or as disclosed in the CILCORP
SEC Reports (as defined in Section 4.5 hereof) filed on or prior to the date of
this Agreement, neither CILCORP nor any of the CILCORP Subsidiaries nor, to the
knowledge of CILCORP, any CILCORP Joint Venture is in violation of, is, to the
knowledge of CILCORP, under investigation with respect to any violation of, or
has been given notice of or been charged with any violation of, any law,
statute, order, rule, regulation, ordinance or judgment, permit, license,
concession or franchise (including, without limitation, any applicable
environmental law, ordinance or regulation) of any Governmental Authority,
except for violations or failures to comply with Environmental Laws (which are
the subject of Section 4.11 hereof) and except for violations which individually
or in the aggregate do not, and insofar as reasonably can be foreseen will not,
have a CILCORP Material Adverse Effect. Except as set forth in Section 4.4(d) or
4.11 of the CILCORP Disclosure Schedule, CILCORP and the CILCORP Subsidiaries
and, to the knowledge of CILCORP, the CILCORP Joint Ventures have all permits,
licenses, franchises and other governmental authorizations, consents, approvals
and exemptions necessary to conduct their businesses as presently conducted
which are material to the operation of the businesses of CILCORP and the CILCORP
Subsidiaries. Except as set forth in Section 4.4(d) of the CILCORP Disclosure
Schedule and Section 4.11 hereof, CILCORP and each of the CILCORP Subsidiaries
and, to the knowledge of CILCORP, each of the CILCORP Joint Ventures 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 CILCORP or any CILCORP
Subsidiary or, to the knowledge of CILCORP, any CILCORP Joint Venture under (i)
its Articles of Incorporation, 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 CILCORP or any CILCORP Subsidiary or any CILCORP Joint Venture 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 do not, and insofar as reasonably can be foreseen will not, have a
CILCORP Material Adverse Effect.
Section 4.5 Reports and Financial Statements. The filings required to be
made by CILCORP and the CILCORP Subsidiaries under the Securities Act of 1933,
as amended (the "Securities Act"), the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), PUHCA, the Federal Power Act (the "Power Act") and
applicable state, municipal, local and other laws, including franchise and
public utility laws and
14
regulations, including all forms, statements, reports, agreements (oral or
written) and all documents, exhibits, amendments and supplements appertaining
thereto, have been filed with the SEC, the Federal Energy Regulatory Commission
(the "FERC") and the appropriate Illinois or other appropriate Governmental
Authorities, as the case may be, and complied, as of their respective dates, in
all material respects with all applicable requirements of the appropriate
statutes and the rules and regulations thereunder. CILCORP has made available to
AES a true and complete copy of each report, schedule, registration statement
and definitive proxy statement and all amendments thereto filed with the SEC by
CILCORP or any CILCORP Subsidiary (or their predecessors) pursuant to the
requirements of the Securities Act or Exchange Act since January 1, 1996 (as
such documents have since the time of their filing been amended, the "CILCORP
SEC Reports"). As of their respective dates, the CILCORP SEC Reports did not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. The
audited consolidated financial statements and unaudited interim financial
statements of CILCORP and CILCO included in the CILCORP SEC Reports
(collectively, the "CILCORP Financial Statements") have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis ("GAAP") (except as may be indicated therein or in the notes thereto) and
fairly present the financial position of CILCORP and CILCO, as the case may be,
as of the dates thereof and the results of their operations and cash flows for
the periods then ended, subject, in the case of the unaudited interim financial
statements, to normal, recurring audit adjustments. True, accurate and complete
copies of the Articles of Incorporation and By-Laws of CILCORP and CILCO, as in
effect on the date of this Agreement, are included (or incorporated by
reference) in the CILCORP SEC Reports.
Section 4.6 Absence of Certain Changes or Events; Absence of Undisclosed
Liabilities.
(a) Absence of Certain Changes or Events. Except as set forth in
Section 4.6(a) of the CILCORP Disclosure Schedule or as disclosed in the CILCORP
SEC Reports filed prior to the date of this Agreement, since December 31, 1997,
CILCORP and each of the CILCORP Subsidiaries and, to the knowledge of CILCORP,
each of the CILCORP Joint Ventures, have conducted their business only in the
ordinary course of business consistent with past practice and there has not
been, and no fact or condition exists which would have or, insofar as reasonably
can be foreseen, could have, a CILCORP Material Adverse Effect.
(b) Absence of Undisclosed Liabilities. Except as set forth in Section
4.6(b) of the CILCORP Disclosure Schedule or as disclosed in the CILCORP
15
SEC Reports filed prior to the date of this Agreement, and except for
liabilities, obligations or contingencies which are accrued or reserved against
in the consolidated financial statements of CILCORP and CILCO or reflected in
the notes thereto for the year ended December 31, 1997, or which were incurred
after December 31, 1997 in the ordinary course of business and would not, in the
aggregate, have a CILCORP Material Adverse Effect, neither CILCORP nor any
CILCORP Subsidiary, nor, to the knowledge of CILCORP, any CILCORP Joint Venture,
has any liabilities or obligations (whether absolute, accrued, contingent or
otherwise and including, without limitation, margin loans) which are material to
CILCORP and the CILCORP Subsidiaries taken as a whole.
Section 4.7 Litigation. Except as set forth in Section 4.7 of the CILCORP
Disclosure Schedule or as disclosed in the CILCORP SEC Reports filed prior to
the date of this Agreement, (a) there are no claims, suits, actions or
proceedings pending before any court, Governmental Authority or any arbitrator
or, to the knowledge of CILCORP, threatened, nor are there, to the knowledge of
CILCORP, any investigations or reviews by any court, Governmental Authority or
any arbitrator pending or threatened against, relating to or affecting CILCORP
or any of the CILCORP Subsidiaries or, to the knowledge of CILCORP, the CILCORP
Joint Ventures, (b) there have not been any significant developments since
December 31, 1997 with respect to such disclosed claims, suits, actions,
proceedings, investigations or reviews and (c) there are no judgments, decrees,
injunctions, rules or orders of any Governmental Authority or any arbitrator
applicable to CILCORP or any of the CILCORP Subsidiaries or, to the knowledge of
CILCORP, applicable to any of the CILCORP Joint Ventures, which, when taken
together with any other nondisclosures described in clauses (a), (b) or (c),
could, if determined adversely to CILCORP, any CILCORP Subsidiary or any CILCORP
Joint Venture, have a CILCORP Material Adverse Effect.
Section 4.8 Proxy Statement. At the dates mailed to stockholders of CILCORP
and at the time of the meeting of such stockholders to be held in connection
with the Merger and the other transactions contemplated hereby, the Proxy
Statement (as defined in Section 7.2(a) hereof), (i) will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading and (ii) will comply
as to form in all material respects with the provisions of the Exchange Act and
the rules and regulations thereunder, provided, however, CILCORP makes no
representation or warranty as to any information provided by AES pursuant to
Section 5.5 hereof.
16
Section 4.9 Tax Matters. For purposes of this Agreement: (i) "Taxes"
(including, with correlative meaning, the word "Tax") shall include any and all
federal, state, county, local, foreign or other taxes, charges, imposts, rates,
fees, levies or other assessments, including, without limitation, 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 and any expenses
incurred in connection with the determination, settlement or litigation of any
tax liability, (ii) "Taxing Authority" means any Governmental Authority or any
subdivision, agency, court, commission, instrumentality or official thereof or
any quasi-governmental or private 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, without limitation, any
combined, consolidated or unitary returns for any group of entities that
includes CILCORP or any CILCORP Subsidiary). Except as specifically identified
in the relevant section of the CILCORP Disclosure Schedule:
(a) Filing of Timely Tax Returns. CILCORP and each of the CILCORP
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. All such Tax Returns were and are in all material respects true,
complete and correct.
(b) Payment of Taxes. CILCORP and each of the CILCORP Subsidiaries
have, within the time and in the manner prescribed by law, paid all Taxes that
are due and payable from them.
(c) Tax Reserves. The accrual for Taxes on the most recent CILCORP
Financial Statements is in an amount at least equal to the sum of CILCORP' and
the CILCORP Subsidiaries' liability for Taxes (other than Taxes previously paid
over to the appropriate Taxing Authority) for all Tax periods (and portions
thereof) ending on or before the date of such financial statements plus their
deferred Tax liability.
(d) Tax Liens. There are no Tax liens upon the assets, properties or
business of CILCORP or any of the CILCORP Subsidiaries except liens for Taxes
not
17
yet due or being contested in good faith through appropriate proceedings and for
which adequate reserves have been established in the CILCORP Financial
Statements.
(e) Withholding Taxes. CILCORP and each of the CILCORP Subsidiaries
have complied in all material respects with the provisions of the Internal
Revenue Code of 1986, as amended (the "Code") and all other applicable laws
relating to the payment and withholding of Taxes, including, without limitation,
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.
(f) Extensions of Time for Filing Tax Returns. Neither CILCORP nor any
of the CILCORP Subsidiaries has requested any extension of time within which to
file any Tax Return, which Tax Return has not since been timely filed.
(g) Waivers of Statute of Limitations. Neither CILCORP nor any of the
CILCORP 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.
(h) Expiration of Statute of Limitations. The statutes of limitations
for the assessment of all Taxes with respect to all Tax Returns of CILCORP and
the CILCORP Subsidiaries for all Tax periods have expired. Prior to the date of
this Agreement, CILCORP has provided AES with written schedules of (i) the Tax
years of CILCORP and each CILCORP Subsidiary for which any statute of limitation
with respect to any Tax has not expired and (ii) with respect to any franchise
Tax and any Tax based on net income, gross receipts or gross income, for all Tax
years of CILCORP and each CILCORP Subsidiary for which the statutes of
limitations have not yet expired, those years for which examinations have been
completed, those years for which examinations are presently being conducted, and
those years for which examinations have not yet been initiated. No deficiency
for any Taxes has been proposed, asserted or assessed against CILCORP or any of
the CILCORP Subsidiaries that has not been resolved and paid in full.
(i) Audit, Administrative and Court Proceedings. No audits or other
proceedings by any Taxing Authority are presently pending, or, to the knowledge
of CILCORP or any of the CILCORP Subsidiaries, threatened, with regard to any
Taxes or Tax Returns of CILCORP or any of the CILCORP Subsidiaries.
18
(j) Powers of Attorney. No power of attorney currently in force has
been granted by CILCORP or any of the CILCORP Subsidiaries concerning any Tax
matter.
(k) Tax Rulings. Neither CILCORP nor any of the CILCORP Subsidiaries
has received or requested a Tax Ruling or entered into a Closing Agreement with
any taxing authority that would have a continuing adverse effect after the
Closing Date. "Tax Ruling," as used in this Agreement, shall mean any written
ruling of (or other written guidance from) a Taxing Authority relating to Taxes.
"Closing Agreement," as used in this Agreement, shall mean a written and legally
binding agreement with a Taxing Authority relating to Taxes.
(l) Availability of Tax Returns. CILCORP has made available to AES
complete and accurate copies of (i) all Tax Returns for open years, and any
amendments thereto, filed by or on behalf of CILCORP or any of the CILCORP
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 CILCORP or any of the CILCORP Subsidiaries and
(iii) any Tax Ruling or request for a Tax Ruling applicable to CILCORP or any of
the CILCORP Subsidiaries and Closing Agreements entered into by CILCORP or any
of the CILCORP Subsidiaries.
(m) Tax Sharing Agreements. Neither CILCORP nor any CILCORP Subsidiary
is a party to, is bound by, or has any obligation under, any agreement relating
to the allocation or sharing of Taxes or has any liability for the Taxes of any
person other than CILCORP or the CILCORP Subsidiaries, as a transferee, or
successor or otherwise (including, without limitation, any liability under
Treasury Regulation Section 1.1502-6 or any similar provision of state, local or
foreign law).
(n) Code Section 341(f). Neither CILCORP nor any of the CILCORP
Subsidiaries has filed (or will file prior to the Closing) a consent pursuant to
Code Section 341(f) or has agreed to have Code Section 341(f)(2) apply to any
disposition of a subsection (f) asset (as that term is defined in Code Section
341(f)(4)) owned by CILCORP or any of the CILCORP Subsidiaries.
(o) Code Section 168. No property of CILCORP or any of the CILCORP
Subsidiaries is property that CILCORP or any CILCORP Subsidiary or any party to
this transaction is or will be required to treat as being owned by another
person pursuant to the provisions of Code Section 168(f)(8) (as in effect prior
to its amendment by the Tax Reform Act of 1986) or is "tax-exempt use property"
within the meaning of Code Section 168(h).
19
(p) Code Section 481 Adjustments. Neither CILCORP nor any of the
CILCORP Subsidiaries is required to include in income for any Tax period ending
after the date hereof any adjustment pursuant to Code Section 481(a) by reason
of a voluntary change in accounting method of CILCORP or any of the CILCORP
Subsidiaries, nor has the IRS proposed any such adjustment or change in
accounting method.
(q) Acquisition Indebtedness. No indebtedness of CILCORP or any of the
CILCORP Subsidiaries is "corporate acquisition indebtedness" within the meaning
of Code Section 279(b) or an "applicable high yield discount obligation" within
the meaning of Code Section 163(i).
(r) Consolidated Tax Returns. Neither CILCORP nor any of the CILCORP
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 CILCORP is the common parent.
(s) 5% Foreign Stockholders. Based on any Schedule 13D and 13G filings
with the SEC with respect to CILCORP and any other relevant information within
CILCORP's knowledge, no foreign person has owned 5% or more of the outstanding
shares of CILCORP Common Stock at any time during the five year period ending on
the Closing Date.
Section 4.10 Employee Matters; ERISA.
(a) Benefit Plans. Section 4.10(a) of the CILCORP Disclosure Schedule
contains a true and complete list of each employee benefit plan, practice,
program or arrangement currently sponsored, maintained or contributed to by
CILCORP or any of the CILCORP Subsidiaries for the benefit of employees, former
employees or directors and their beneficiaries in respect of services provided
to any such entity, including, but not limited to, any employee benefit plans
within the meaning of Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), any employee pension benefit plan, program,
arrangement or agreement, any health, medical, welfare, disability, life
insurance, bonus, option, stock appreciation plan, performance stock plan,
restricted stock plan, deferred compensation plan, retiree benefits plan,
severance pay and other employee benefit or fringe benefit plan and any
employment, consulting, non-compete, severance or change in control agreement
(collectively, the "CILCORP Benefit Plans"), together with, for any option,
stock appreciation plan, performance stock plan, restricted stock plan, deferred
compensation
20
plan and supple mental retirement plan, the current amounts or benefits granted
or payable under each and reasonable details (including exercise prices)
regarding the outstanding options to purchase shares of CILCORP Common Stock
(the "CILCORP Options") or other securities which represent the right
(contingent or other) to purchase or receive shares of CILCORP Common Stock or,
following the Merger, of the common stock, no par value, of the Surviving
Corporation or of the common stock, par value $.01 per share, of AES ("AES
Common Stock"). For the purposes of this Section 4.10, the term "CILCORP" shall
be deemed to include predecessors thereof.
(b) Contributions. Except as set forth in Section 4.10(a) of the
CILCORP Disclosure Schedule, all material contributions and other payments
required to be made by CILCORP or any of the CILCORP Subsidiaries to any CILCORP
Benefit Plan (or to any person pursuant to the terms thereof) have been timely
made or the amount of such payment or contribution obligation has been reflected
in the CILCORP Financial Statements. Except as set forth in Section 4.10(a) of
the CILCORP Disclosure Schedule, (i) the current value of all accrued benefits
under any CILCORP Benefit Plan does not exceed the current value of the assets
of such plan and (ii) neither CILCORP nor any entity which is or ever has been
considered as a single employer together with CILCORP or CILCO pursuant to
Section 414 of the Code contributes or has contributed, during the eight-year
period immediately prior to the date of this Agreement, to a multiemployer plan
(as defined in Section 3(37) of ERISA), or has any liability under ERISA Section
4203 or Section 4205 in respect of any such plan.
(c) Qualification; Compliance. Except as set forth in Section 4.10(c)
of the CILCORP Disclosure Schedule, each of the CILCORP Benefit Plans intended
to be "qualified" within the meaning of Section 401(a) of the Code has been
determined by the IRS to be so qualified, and no circumstances exist that are
reasonably expected by CILCORP to result in the revocation of any such
determination. CILCORP and each of the CILCORP Subsidiaries are in compliance in
all material respects with, and each CILCORP Benefit Plan is and has been
operated in all material respects in compliance with the terms thereof and all
applicable laws, rules and regulations governing such plan, including, without
limitation, ERISA and the Code. Each CILCORP Benefit Plan intended to provide
for the deferral of income, the reduction of salary or other compensation or to
afford other income Tax benefits complies in all material respects with the
requirements of the applicable provisions of the Code or other laws, rules and
regulations required to provide such income Tax benefits.
(d) Liabilities. With respect to the CILCORP Benefit Plans
individually and in the aggregate, there are no actions, suits, claims (other
than claims for benefits in the ordinary course) pending or, to the knowledge of
CILCORP, threatened
21
and no event has occurred, and, there exists no condition or set of
circumstances that could subject CILCORP or any of the CILCORP Subsidiaries to
any liability arising under the Code, ERISA or any other applicable law
including, without limitation, any liability of any kind whatsoever, whether
direct or indirect, contingent, inchoate or otherwise, to any such plan or the
Pension Benefit Guaranty Corporation (the "PBGC"), or under any indemnity
agreement to which CILCORP or any of the CILCORP Subsidiaries is a party, in
each such case, which liability, individually or in the aggregate, could
reasonably be expected to have a CILCORP Material Adverse Effect.
(e) Welfare Plans. Except as set forth in Section 4.10(e) of the
CILCORP Disclosure Schedule, none of the CILCORP Benefit Plans that are "welfare
plans", within the meaning of Section 3(1) of ERISA, provides for any benefits
payable to or on behalf of any employee or director after termination of
employment or service, or after retirement, as the case may be, other than
elective continuation required pursuant to Code Section 4980B or coverage which
expires at the end of the calendar month following such event. Each such plan
that is a "group health plan" (as defined in Code Section 4980B(g)) has been
operated in compliance with Code Section 4980B in all material respects at all
times.
(f) Documents Made Available. CILCORP has made available to AES a true
and correct copy of each collective bargaining agreement to which CILCORP or any
of the CILCORP Subsidiaries is a party or under which CILCORP or any of the
CILCORP Subsidiaries has obligations, and with respect to each CILCORP Benefit
Plan, to the extent applicable, (i) such plan and summary plan description
(including all amendments to each such document), (ii) the most recent annual
report filed with the IRS, (iii) each related trust agreement, insurance
contract, service provider or investment management agreement (including all
amendments to each such document), (iv) the most recent determination of the IRS
with respect to the qualified status of such plan, (v) the most recent actuarial
report or valuation and (vi) all material employee communications.
(g) Payments Resulting from Merger and Other Severance Payments.
Except as set forth in Section 4.10(g) of the CILCORP Disclosure Schedule or as
specifically provided for in this Agreement, (i) the announcement or
consummation of the Merger or any other transaction contemplated by this
Agreement or the Second Merger will not (either alone or upon the occurrence of
any additional or further acts or events, including, without limitation,
termination of employment) result in any (A) payment (whether of severance pay
or otherwise) becoming due from CILCORP or any of the CILCORP Subsidiaries to
any officer, employee, former employee or director thereof or to the trustee
under any "rabbi trust" or similar arrangement or (B) benefit being established
or becoming accelerated, vested or payable under any CILCORP Benefit Plan
22
and (ii) neither CILCORP nor any of the CILCORP Subsidiaries is a party to (A)
any management, employment, deferred compensation, severance (including any
payment, right or benefit resulting from a change in control), bonus or other
contract for personal services with any officer, director or employee, (B) any
consulting contract with any person who prior to entering into such contract was
a director or officer of CILCORP or any of the CILCORP Subsidiaries or (C) any
material plan, agreement, arrangement or understanding similar to the foregoing.
(h) Labor Agreements. As of the date hereof, except as set forth in
Section 4.10(h) of the CILCORP Disclosure Schedule, neither CILCORP nor any of
the CILCORP 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 CILCORP or any of the CILCORP Subsidiaries. To the
knowledge of CILCORP, as of the date hereof, there is no current union
representation question involving employees of CILCORP or any of the CILCORP
Subsidiaries, nor does CILCORP know of any activity or proceeding of any labor
organization (or representative thereof) or employee group to organize any such
employees. There are no written personnel policies, rules or procedures
applicable to employees of CILCORP or any of the CILCORP Subsidiaries, other
than those set forth in Section 4.10(h) of the CILCORP Disclosure Schedule, true
and correct copies of which have heretofore been delivered to AES. Except as set
forth in Section 4.10(h) of the CILCORP Disclosure Schedule, (i) there is no
grievance arising out of any collective bargaining agreement or other grievance
procedure, unfair labor practice, employment discrimination or other
investigation, charge or complaint against CILCORP or any of the CILCORP
Subsidiaries pending or, to the knowledge of CILCORP, threatened, which has or
could reasonably be expected to have a CILCORP Material Adverse Effect, (ii)
there is no strike, dispute, slowdown, work stoppage or lockout pending, or, to
the knowledge of CILCORP, threatened, against or involving CILCORP or any of the
CILCORP Subsidiaries which has or could reasonably be expected to have, a
CILCORP Material Adverse Effect and during the past five years there has not
been any such action, (iii) there is no proceeding, claim, suit, action or
governmental investigation pending or, to the knowledge of CILCORP, threatened,
in respect of which any director, officer, employee or agent of CILCORP or any
of the CILCORP Subsidiaries is or may be entitled to claim indemnification from
CILCORP pursuant to their respective Articles of Incorporation or By-Laws or as
provided in the Indemnification Agreements listed in Section 4.10(h) of the
CILCORP Disclosure Schedule. Except as set forth in Section 4.10(h) of the
CILCORP Disclosure Schedule, CILCORP and the CILCORP Subsidiaries have complied
in all material respects with all laws relating to the employment of labor,
including without limitation any provisions thereof relating to wages, hours,
collective bargaining and the payment of social security
23
and similar Taxes, and no person has, to the knowledge of CILCORP, asserted that
CILCORP or any of the CILCORP 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. Since the enactment of the Worker Adjustment and Retraining
Notification Act (the "WARN Act"), neither CILCORP nor any of the CILCORP
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 CILCORP or any of the CILCORP Subsidiaries; or
(b) a "mass layoff" (as defined in the WARN Act) affecting any site of
employment or facility of CILCORP or any of the CILCORP Subsidiaries; nor has
CILCORP or any of the CILCORP 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.
(i) Parachute Payments. Section 4.10(i)(a) of the CILCORP Disclosure
Schedule sets forth (i) the name of each employee, former employee or other
person who is or was providing services to CILCORP or any of the CILCORP
Subsidiaries and who, in connection with the Merger, the other transactions
contemplated by this Agreement or the Second Merger, will receive, or will or
may become entitled to receive in the future or upon termination of such
person's employment, any payments (including, without limitation, accelerated
vesting of CILCORP Options or other equity-based awards) which could reasonably
be expected to constitute "excess parachute payments" with respect to such
person within the meaning of Section 280G of the Code ("Excess Parachute
Payments") and (ii) a description of the arrangements that could give rise to
such Excess Parachute Payments. Section 4.10(i)(b) of the CILCORP Disclosure
Schedule sets forth the maximum sum of the aggregate change in control payments
and entitlements (including, without limitation, accelerated vesting of CILCORP
Options or other equity-based awards) which any employee, former employee, or
other person who is or was providing services to CILCORP or any of the CILCORP
Subsidiaries may be entitled to receive now or in the future (including upon
termination of such person's employment) in connection with the Merger, the
other transactions contemplated by this Agreement and the Second Merger. Section
4.10(i)(c) of the CILCORP Disclosure Schedule sets forth the maximum sum of (i)
the Tax cost associated with the loss of deductions under Section 280G with
respect to such Excess Parachute Payments and (ii) the amount of any excise
taxes that may be imposed with respect to such Excess Parachute Payments and any
gross-ups on such amounts.
(j) Section 162(m). Except as set forth in Section 4.10(j) of the
CILCORP Disclosure Schedule, no payments to any executive officer of CILCORP or
24
any of the CILCORP Subsidiaries will fail to be deductible for federal income
Tax purposes by reason of the deduction limit imposed under Section 162(m) of
the Code. Section 4.10(j) of the CILCORP Disclosure Schedule sets forth the name
of each executive officer who will receive compensation which may not be fully
deductible by reason of the application of Section 162(m), and a reasonable
estimate of the amount of such potentially nondeductible compensation.
Section 4.11 Environmental Protection.
(a) Definitions. As used in this Agreement:
(i) "Environmental Claim" means any and all written
administrative, regulatory or judicial actions, suits, demands, demand letters,
directives, claims, liens, investigations, proceedings or notices of
noncompliance or violation by any person or entity (including any Governmental
Authority) alleging potential liability (including, without limitation,
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 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.
(ii) "Environmental Laws" means all applicable federal, state and
local laws, rules, regulations, ordinances, orders, directives and any binding
judicial or administrative interpretation thereof, and common law and equitable
doctrines relating to pollution, the environment (including, without limitation,
indoor or ambient air, surface water, groundwater, land surface or subsurface
strata) or protection of human health or safety as it relates to the environment
including, without limitation, those relating to Releases or threatened Releases
of Hazardous Materials, or otherwise relating to the manufacture, generation,
processing, distribution, use, treatment, storage, disposal, transport or
handling of Hazardous Materials.
(iii) "Hazardous Materials" means (A) any petroleum or petroleum
products, radioactive materials, asbestos in any form that is or could become
friable, urea formaldehyde foam insulation and transformers or other equipment
that contain dielectric fluid containing polychlorinated biphenyls; (B) any
chemicals,
25
materials or substances which are now defined as or included in the definition
of "hazardous substances," "hazardous wastes," "hazardous materials," "extremely
hazardous wastes," "restricted hazardous wastes," "toxic substances," "toxic
pollutants" or words of similar import under any Environmental Law; and (C) any
other chemical, material, substance or waste, exposure to which is now
prohibited or regulated under any Environmental Law.
(iv) "Release" means any release, spill, emission, leaking,
injection, deposit, disposal, discharge, dispersal, leaching or migration into
the atmosphere, soil, sediments, surface water, groundwater or property.
(b) Compliance. Except as set forth in Section 4.11(b)(i) of the
CILCORP Disclosure Schedule, CILCORP and each of the CILCORP Subsidiaries and,
to the knowledge of CILCORP, the CILCORP Joint Ventures, are in compliance with
all applicable Environmental Laws except where the failure to so comply would
not have a CILCORP Material Adverse Effect, and neither CILCORP nor any of the
CILCORP Subsidiaries has received any written communication from any person or
Governmental Authority that alleges that CILCORP or any of the CILCORP
Subsidiaries or, to the knowledge of CILCORP, the CILCORP Joint Ventures is not
in such compliance with applicable Environmental Laws. Except as set forth in
Section 4.11(b)(ii) of the CILCORP Disclosure Schedule, to the knowledge of
CILCORP, compliance with all applicable Environmental Laws will not require
CILCORP or any CILCORP Subsidiary or, to the knowledge of CILCORP, any CILCORP
Joint Venture to incur material expenditures beyond that currently budgeted in
the five CILCORP fiscal years beginning with January 1, 1998 (as disclosed to
AES prior to the date of this Agreement), including but not limited to the costs
of CILCORP and CILCORP Subsidiary and CILCORP Joint Venture pollution control
equipment required or reasonably contemplated to be required in the future.
(c) Environmental Permits. Except as set forth in Section 4.11(c) of
the CILCORP Disclosure Schedule, CILCORP and each of the CILCORP Subsidiaries
and, to the knowledge of CILCORP, the CILCORP Joint Ventures, have obtained or
have applied for all permits, licenses, registrations, consents, and other
governmental authorizations required under any Environmental Law ("Environmental
Permits") necessary for the construction of its facilities or the conduct of its
operations except where the failure to so obtain would not have a CILCORP
Material Adverse Effect, 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 CILCORP and the CILCORP Subsidiaries and, to the knowledge
of CILCORP, the CILCORP Joint Ventures are in compliance with all terms and
conditions of all Environmental Permits
26
necessary for the construction of its facilities or the conduct of its
operations, except where the failure to so comply, in the aggregate, would not
have a CILCORP Material Adverse Effect.
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(d) Environmental Claims. Except as set forth in Section 4.11(d) of
the CILCORP Disclosure Schedule, there is no Environmental Claim pending (or, to
the knowledge of CILCORP, threatened) (A) against CILCORP or any of the CILCORP
Subsidiaries or, to the knowledge of CILCORP, any of the CILCORP Joint Ventures,
(B) to the knowledge of CILCORP, against any person or entity whose liability
for any Environmental Claim CILCORP, any of the CILCORP Subsidiaries or CILCORP
Joint Ventures has or may have retained or assumed either contractually or by
operation of law, or (C) against any real or personal property or operations
which CILCORP or any of the CILCORP Subsidiaries or, to the knowledge of
CILCORP, any of the CILCORP Joint Ventures owns, leases or manages, in whole or
in part, which, if adversely determined, would have, individually or in the
aggregate, a CILCORP Material Adverse Effect.
(e) Releases. Except as set forth in Section 4.11(e) of the CILCORP
Disclosure Schedule, CILCORP has no knowledge of any Releases of any Hazardous
Material that would be reasonably likely to form the basis of any Environmental
Claim against CILCORP or any of the CILCORP Subsidiaries or the CILCORP Joint
Ventures, or against any person or entity whose liability for any Environmental
Claim CILCORP or any of the CILCORP Subsidiaries or the CILCORP Joint Ventures
has or may have retained or assumed either contractually or by operation of law
except for any Environmental Claim which would not have, individually or in the
aggregate, a CILCORP Material Adverse Effect.
(f) Predecessors. Except as set forth in Section 4.11(f) of the
CILCORP Disclosure Schedule, CILCORP has no knowledge, with respect to any
predecessor of CILCORP or any of the CILCORP Subsidiaries or the CILCORP Joint
Ventures, of any Environmental Claim pending or threatened, or of any Release of
Hazardous Materials that would be reasonably likely to form the basis of any
Environmental Claim, which, if determined adversely, could reasonably be
expected to require payments of $500,000 or more or which could reasonably be
expected to have a CILCORP Material Adverse Effect.
(g) Disclosure. CILCORP has disclosed in writing to AES all material
facts which CILCORP reasonably believes could have a CILCORP Material Adverse
Effect arising from (i) the cost of CILCORP pollution control equipment
(including, without limitation, upgrades and other modifications to existing
equipment) currently required or reasonably contemplated to be required in the
future, (ii) current remediation costs or costs to CILCORP or any of the CILCORP
Subsidiaries for remediation reasonably contemplated to be required in the
future or (iii) any other environmental matter affecting CILCORP or any of the
CILCORP Subsidiaries.
28
(h) Cost Estimates. To CILCORP's knowledge, no environmental matter
set forth in the CILCORP SEC Reports or the CILCORP Disclosure Schedule could
reasonably be expected to exceed the cost estimates provided in the CILCORP SEC
Reports by an amount that individually or in the aggregate could reasonably be
expected to have a CILCORP Material Adverse Effect.
(i) Orders; Environmental Indemnification. Except as set forth in
Section 4.11(i) of the CILCORP Disclosure Schedule, neither CILCORP nor any of
the CILCORP Subsidiaries nor, to the knowledge of CILCORP, any CILCORP Joint
Ventures, are or have been subject to any administrative or judicial orders
relating to Environmental Laws or Hazardous Materials, including, but not
limited to, Hazardous Materials that have been Released at locations that are
not currently owned or operated by CILCORP, the CILCORP Subsidiaries or any
CILCORP Joint Ventures, except for such orders where CILCORP or any CILCORP
Subsidiary or any CILCORP Joint Ventures completed all obligations under said
orders (and where there are no outstanding potential obligations or penalties
that could arise from said orders) more than five years prior to the date of
this Agreement. Except as set forth in Section 4.11(i) of the CILCORP Disclosure
Schedule, neither CILCORP nor any of the CILCORP Subsidiaries nor, to the
knowledge of CILCORP, any CILCORP Joint Ventures, have entered into any
agreements with any non-governmental persons requiring CILCORP, any CILCORP
Subsidiary or, to the knowledge of CILCORP, any CILCORP Joint Venture 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 have been fully resolved and where CILCORP, any CILCORP
Subsidiary or any CILCORP Joint Venture has no further monetary or non-monetary
obligation.
(j) NOx Emissions. Section 4.11(j) of the CILCORP Disclosure Schedule
is a true and correct description of (i) CILCORP current plan to comply with
current or reasonably anticipated requirements relating to the control of
atmospheric emissions of oxides of nitrogen (NOx), including, but not limited
to, costs and expenses related to compliance with a rule issued by the EPA,
published in the Federal Register on October 27, 1998, that requires ▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇ to submit State implementation plan revisions to
prohibit specified amounts of NOx ("NOx SIP Call"), and compliance with state
statutes, regulations and policies promulgated or issued to implement the NOx
SIP Call, and (ii) CILCORP best judgment as to the estimated capital costs and
operating costs associated with such plan.
Section 4.12 Regulation as a Utility. CILCO is regulated as a public
utility by the FERC and in the State of Illinois and in no other state. Except
as set forth in the preceding sentence or Section 4.12 of the CILCORP Disclosure
Schedule, neither
29
CILCORP nor any "subsidiary company" or "affiliate" (as each such term is
defined in PUHCA) of CILCORP (other than CILCO) is subject to regulation as a
public utility or public service company (or similar designation) by the FERC or
any municipality, locality, state in the United States or any foreign country.
Section 4.13 Vote Required. The approval of the Merger by the affirmative
vote of two-thirds of the votes entitled to be cast by holders of CILCORP Common
Stock (the "CILCORP Stockholders' Approval") is the only vote of the holders of
any class or series of the capital stock of CILCORP or any of the CILCORP
Subsidiaries required to approve this Agreement, the Merger, the other
transactions contemplated hereby and the Second Merger.
Section 4.14 Insurance. Except as set forth in Section 4.14 of the CILCORP
Disclosure Schedule, CILCORP and each of the CILCORP Subsidiaries is, and has
been continuously since January 1, 1996, insured with financially responsible
insurers in such amounts and against such risks and losses as are customary for
companies conducting the business as conducted by CILCORP and the CILCORP
Subsidiaries during such time period. Neither CILCORP nor any of the CILCORP
Subsidiaries is in default under or has received any notice of cancellation or
termination with respect to any material insurance policy of CILCORP or any of
the CILCORP Subsidiaries. The insurance policies of CILCORP and each of the
CILCORP Subsidiaries are valid and enforceable policies and will remain in
effect following the Merger and the Second Merger.
Section 4.15 Opinion of Financial Advisor. The Board of Directors of
CILCORP has received the opinion of ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ("Salomon"), dated the
date of this Agreement, to the effect that, as of the date thereof, the Per
Share Amount to be received by the holders of CILCORP Common Stock in the Merger
is fair from a financial point of view to the holders of CILCORP Common Stock.
Section 4.16 Brokers. No broker, finder or investment banker (other than
Salomon) is entitled to any brokerage, finder's or other fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of CILCORP or any CILCORP Subsidiary. CILCORP
has heretofore furnished to AES a complete and correct copy of all agreements
between CILCORP and Salomon, pursuant to which such firm would be entitled to
any payment relating to the Merger.
Section 4.17 Non-Applicability of Certain Provisions of Illinois Act. None
of the business combination provisions of Section 5/7.85 and Section 5/11.75 of
the
30
Illinois Act or any similar provisions of the Illinois Act, the Articles of
Incorporation or By-Laws of CILCORP are applicable to the transactions
contemplated by this Agreement because such provisions do not apply by their
terms or because any required approvals of the Board of Directors of CILCORP
have been obtained.
Section 4.18 CILCORP Rights Agreement. Prior to the date of this Agreement,
CILCORP has delivered to AES and its counsel a true and complete copy of the
Rights Agreement, dated as of October 29, 1996, between Continental Stock
Transfer and Trust Company and CILCORP (the "CILCORP Rights Agreement"), in
effect as of the date hereof. As promptly as practicable on or after the date
hereof, but in no event later than the date of delivery of the CILCORP
Certificate, CILCORP will amend the CILCORP Rights Agreement, as necessary (the
"Rights Amendment"), (i) to prevent the Merger, the other transactions
contemplated hereby and the Second Merger from resulting in the distribution of
separate rights certificates or the occurrence of a Distribution Date (as
defined in the CILCORP Rights Agreement) or being deemed a Triggering Event (as
defined in the CILCORP Rights Agreement) and (ii) to provide that neither AES
nor any AES Subsidiary shall be deemed to be an Acquiring Person (as defined in
the CILCORP Rights Agreement) by reason of the Merger, the other transactions
contemplated by this Agreement and the Second Merger. CILCORP represents that
the Rights Amendment will be sufficient to render the Preferred Stock Purchase
Rights (the "Rights") inoperative with respect to any acquisition of Shares by
AES, any AES Subsidiary or any of their affiliates pursuant to this Agreement.
CILCORP represents that as a result of the Rights Amendment, the Rights will not
be exercisable upon or at any time after the Merger or the Second Merger by
reason of the transactions contemplated hereby.
Section 4.19 Year 2000 Compliance. The computer software operated by
CILCORP and its Subsidiaries which is used in the conduct of their business is
capable of providing or being adapted to provide uninterrupted millennium
functionality to record, store, process and present calendar dates falling on or
after January 1, 2000 in substantially the same manner and with the same
functionality as such software records, stores, processes and presents such
calendar dates falling on or before December 31, 1999. CILCORP reasonably
believes as of the date hereof that the remaining cost of adaptions referred to
in the foregoing sentence will not exceed $22.0 million, and all such costs have
been included in CILCORP's budget for capital expenditures set forth in Section
6.1(k) of the CILCORP Disclosure Schedule.
Section 4.20 Title to Real Property. Except as set forth in Section 4.20 of
the CILCORP Disclosure Schedule or except as is not reasonably likely to result
in a CILCORP Material Adverse Effect, CILCORP and each CILCORP Subsidiary: (i)
owns and has good, valid and marketable title in fee simple to the real property
owned by such
31
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 impairs the use of the affected
property or impairs the operations of CILCORP or any CILCORP Subsidiary and (B)
Liens for current Taxes not yet due and payable ((A) and (B) are collectively
referred to as "Permitted CILCORP 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 CILCORP Material Adverse Effect.
Section 4.21 Assets Other than Real Property Interests. CILCORP or a
CILCORP Subsidiary has good and valid title to all material assets reflected on
the most recent balance sheet included in the CILCORP 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 CILCORP and each of the CILCORP Subsidiaries as presently conducted.
All the material tangible personal property of CILCORP and the CILCORP
Subsidiaries has been maintained in all material respects in accordance with the
past practice of CILCORP and the CILCORP Subsidiaries and generally accepted
industry practice. Each item of material tangible personal property of CILCORP
and the CILCORP Subsidiaries is in all material respects in good working order
and is adequate and sufficient for CILCORP' intended purposes, ordinary wear and
tear excepted. All leased personal property of CILCORP and its subsidiaries is
in all material respects 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.
Section 4.22 Intellectual Property. CILCORP and each of the CILCORP
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,
32
service ▇▇▇▇ 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 CILCORP and the CILCORP Subsidiaries as
currently conducted, except where the failure to possess such rights or licenses
or valid rights to use would not have a CILCORP Material Adverse Effect, and (i)
the conduct of the business of CILCORP and each of the CILCORP Subsidiaries as
currently conducted does not infringe upon any Intellectual Property of any
third party except where such infringement would not result in a CILCORP
Material Adverse Effect and (ii) no person is infringing upon any Intellectual
Property of CILCORP or any CILCORP Subsidiary except where such infringement
would not result in a CILCORP Material Adverse Effect. The execution and
delivery of this Agreement and the consummation of the Merger, the other
transactions contemplated hereby and the Second Merger will not result in the
loss of, or any encumbrance on, the rights of CILCORP or any CILCORP Subsidiary
with respect to the Intellectual Property owned or used by them, except where
such loss or encumbrance would not have a CILCORP Material Adverse Effect.
Section 4.23 Transactions with Affiliates. Except as set forth in Section
4.23 of the CILCORP Disclosure Schedule or in the CILCORP SEC Reports, there is
no agreement, contract or other arrangement between CILCORP and any CILCORP
Subsidiary, on the one hand, and any affiliate (other than CILCORP or a CILCORP
Subsidiary), on the other hand, that will continue in effect subsequent to the
Closing Date. After the Closing Date no affiliate of CILCORP or any CILCORP
Subsidiary (other than CILCORP or any CILCORP Subsidiary) will have any material
interest in any property (real or personal, tangible or intangible) or contract
used in or pertaining to the business of CILCORP or any CILCORP Subsidiary. No
affiliate of CILCORP or any CILCORP Subsidiary (other than CILCORP or any
CILCORP Subsidiary) has any direct or indirect ownership interest in any person
(other than the ownership of 5% or less of the stock of any person held as a
passive investment) in which CILCORP or any CILCORP Subsidiary has any direct or
indirect ownership interest or with which CILCORP or any CILCORP Subsidiary
competes or has a business relationship.
Section 4.24 Discontinued Business. Section 4.24(i) of the CILCORP
Disclosure Schedule contains a true and complete list of each CILCORP Subsidiary
which has ceased operations or discontinued any business (the "Discontinued
Business") since January 1, 1997. Except for liabilities, contingent or
otherwise, disclosed in Section 4.24(ii) of the CILCORP Disclosure Schedule,
neither CILCORP nor any CILCORP Subsidiary has any liabilities or obligations,
contingent or otherwise, with respect to a Discontinued Business and no creditor
of any Discontinued Business has any recourse against CILCORP or any CILCORP
Subsidiary.
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Section 4.25 Captive Insurance Business. National Professional Casualty
Company is licensed as a pure captive insurance company within the meaning of
Section 6001 of the Vermont Insurance Laws, and has all insurance licenses,
permits and authorizations required to operate its business as currently
conducted. At no time has National Professional Casualty Company insured any
risks other than those of QST Environmental Inc. and its Subsidiaries. The loss
and loss adjustment expense reserves reflected on National Professional Casualty
Company's most recently filed statutory statement were established in accordance
with generally accepted actuarial standards consistently applied and are
adequate to meet all liabilities on insurance policies issued by National
Professional Casualty Company. CILCORP has previously delivered to AES the most
recent market conduct and financial examinations report of National Professional
Casualty Company issued by any insurance regulatory authority, and all material
deficiencies or violations in such reports have been resolved to the
satisfaction of the insurance regulatory authorities. Except as set forth in
Section 4.25 of the CILCORP Disclosure Schedule, there are no pending market
conduct examinations or inquiries by any insurance regulatory authority with
respect to National Professional Casualty Company.
Section 4.26 Contractual Obligations. Section 4.26 of the CILCORP
Disclosure Schedule sets forth a true and complete list of all contractual
commitments or other contractual obligations of CILCORP and the CILCORP
Subsidiaries to make investments or purchase an equity interest in, make
contributions to, or otherwise fund the operations, expenses or capital of, any
person. The execution and delivery of this Agreement by CILCORP do not, and the
consummation of the Merger and the other transactions contemplated hereby and if
such were consummated, the Second Merger, will not result in any obligation on
the part of CILCORP or any CILCORP Subsidiaries to pay money to, guarantee the
performance or obligations of, or cause AES to guarantee the performance or
obligations of, any person, including in connection with obtaining the CILCORP
Required Consents and the CILCORP Second Merger Required Consents, under any
note, bond, mortgage, indenture or deed of trust or any material contract, lease
or other agreement of any kind to which CILCORP or any of the CILCORP
Subsidiaries or the CILCORP Joint Ventures is a party or by which any of them or
any of their respective properties or assets may be bound.
Section 4.27 Disclosure. CILCORP has not failed to disclose to AES any
facts known to CILCORP or which CILCORP could reasonably be expected to know
pertaining to CILCORP, any CILCORP Subsidiary, any CILCORP Joint Venture, or its
or their business or operations that may materially and adversely affect the
business, assets,
34
operations, or prospects of CILCORP, any CILCORP Subsidiary or any CILCORP Joint
Venture taken as a whole.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF AES AND MERGER SUB
AES and Merger Sub hereby represent and warrant to CILCORP as follows:
Section 5.1 Organization and Qualification. Each of AES and Merger Sub is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation or organization, has all requisite power
and authority and has been duly authorized by all necessary approvals and orders
to own, lease and operate its assets and properties and to carry on its business
as it is now being conducted and is duly qualified and in good standing to do
business in each jurisdiction in which the nature of its business or the
ownership or leasing of its assets and properties makes such qualification
necessary, other than in such jurisdictions where the failure to so qualify and
be in good standing, when taken together with all other such failures, would not
have a material adverse effect on the business, operations, properties, assets,
condition (financial or other), prospects or the results of operations of AES
and its subsidiaries taken as a whole or on the consummation of the transactions
contemplated by this Agreement (any such material adverse effect, an "AES
Material Adverse Effect").
Section 5.2 Authority; Non-Contravention; Statutory Approvals.
(a) Authority. AES and Merger Sub have all requisite power and
authority to enter into this Agreement and, subject to the receipt of the AES
Required Statutory Approvals (as defined in Section 5.2(c) hereof), to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation by AES and Merger Sub of the Merger and the
other transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of AES and Merger Sub. This Agreement has
been duly and validly executed and delivered by AES and Merger Sub, and,
assuming the due authorization, execution and delivery hereof by CILCORP, this
Agreement constitutes the valid and binding obligation of each of AES and Merger
Sub, enforceable against each of them 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).
35
(b) Non-Contravention. The execution and delivery of this Agreement by
AES and Merger Sub do not, and the consummation of the Merger and the other
transactions contemplated hereby will not, result in a Violation pursuant to any
provisions of (i) the Certificate or Articles of Incorporation, By-Laws or
similar governing documents of AES or Merger Sub, (ii) subject to obtaining the
AES Required Statutory Approvals (as defined below), any statute, law,
ordinance, rule, regulation, judgment, decree, order, injunction, writ, permit
or license of any Governmental Authority (as defined in Section 4.4(b) hereof)
applicable to AES or Merger Sub or any of their respective properties or assets
or (iii) subject to obtaining the third-party consents (the "AES Required
Consents") set forth in Section 5.2(b) of the disclosure schedule delivered by
AES to CILCORP concurrent with the execution of this Agreement (the "AES
Disclosure Schedule"), any material note, bond, mortgage, indenture, deed of
trust, license, franchise, permit, concession, contract, lease or other
instrument, obligation or agreement of any kind to which AES or Merger Sub is a
party or by which it or any of its properties or assets may be bound or
affected, excluding from the foregoing clauses (ii) and (iii) such Violations
which would not, in the aggregate, have an AES Material Adverse Effect.
(c) Statutory Approvals. Except as described in Section 5.2(c) of the
AES Disclosure Schedule, no declaration, filing or registration with, or notice
to or authorization, consent or approval of, any Governmental Authority is
necessary for the execution and delivery of this Agreement by AES and Merger Sub
or the consummation by AES and Merger Sub of the Merger and the other
transactions contemplated hereby (the "AES Required Statutory Approvals"), other
than such AES Required Statutory Approvals the failure of which to be obtained
or made would not prevent the consummation by AES of the Merger and the other
transactions contemplated hereby, it being understood that references in this
Agreement to "obtaining" such AES Required Statutory Approvals shall mean making
such declarations, filings or registrations; giving such notices; obtaining such
authorizations, consents or approvals; and having such waiting periods expire as
are necessary to avoid a violation of law.
Section 5.3 Compliance. Except as set forth in Section 5.3 of the AES
Disclosure Schedule or as disclosed in any report, schedule, registration
statement and definitive proxy statement and all amendments thereto filed with
the SEC by AES or Merger Sub (or their predecessors) pursuant to the
requirements of the Securities Act or Exchange Act since January 1, 1996 and
prior to the date hereof (as such documents have since the time of their filing
been amended, the "AES SEC Reports"), true and complete copies of which have
been provided to CILCORP concurrent with the execution of this Agreement,
neither AES nor Merger Sub is in violation of, is, to the knowledge of AES,
36
under investigation with respect to any violation of, or has been given notice
or been charged with any violation of, any law, statute, order, rule,
regulation, ordinance or judgment (including, without limitation, any applicable
environmental law, ordinance or regulation) of any Governmental Authority,
except for violations which individually or in the aggregate do not, and insofar
as reasonably can be foreseen will not, have an AES Material Adverse Effect.
Except as set forth in Section 5.3 of the AES Disclosure Schedule, AES and
Merger Sub have all permits, licenses, franchises and other govern mental
authorizations, consents, approvals and exemptions necessary to conduct their
businesses as presently conducted which are material to the operation of the
businesses of AES and Merger Sub, except for such permits, licenses, franchises
and other governmental authorizations, consents, approvals and exemptions the
failure of which to have would not result in an AES Material Adverse Effect.
Except as set forth in Section 5.3 of the AES Disclosure Schedule, each of AES
and Merger Sub 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 AES or
Merger Sub under (i) its Articles of Incorporation, By-Laws or other
organizational document or (ii) any material contract, commitment, agreement,
indenture, mortgage, loan agreement, note, lease, bond, license, approval or
other instrument to which it is a party or by which AES or Merger Sub 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 do not, and insofar as reasonably can be foreseen will not, have an
AES Material Adverse Effect.
Section 5.4 Reports and Financial Statements. The filings required to be
made by AES and Merger Sub under the Securities Act, the Exchange Act, the
Public Utility Regulatory Policies Act of 1978 ("PURPA"), PUHCA and applicable
state, municipal, local and other laws, including all forms, statements,
reports, agreements (oral or written) and all documents, exhibits, amendments
and supplements appertaining thereto, have been filed with the SEC or the FERC,
or other appropriate Governmental Authorities, as the case may be, and complied,
as of their respective dates, in all material respects with all applicable
requirements of the appropriate statutes and the rules and regulations
thereunder. As of their respective dates, the AES SEC Reports did not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. The
audited consolidated financial statements and unaudited interim financial
statements of AES included in the AES SEC Reports (collectively, the "AES
Financial Statements") have been prepared in accordance with GAAP (except as may
be indicated therein or in the notes thereto) and fairly present the financial
position of AES, as of the dates thereof and the results of their operations and
cash flows for the periods then ended, subject, in the case of the unaudited
interim
37
financial statements, to normal, recurring audit adjustments. True, accurate and
complete copies of the Articles of Incorporation and By-Laws of AES, as in
effect on the date of this Agreement, are included (or incorporated by
reference) in the AES SEC Reports.
Section 5.5 Proxy Statement Information. None of the information supplied
in writing by AES, Merger Sub or any AES Subsidiary for inclusion in the Proxy
Statement (as defined in Section 7.2(a) hereof), at the dates mailed to
stockholders of CILCORP and at the time of the meeting of such stockholders to
be held in connection with the Merger and the other transactions contemplated
hereby, will contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they are made,
not misleading.
Section 5.6 Financing. As of the date of this Agreement and assuming that
CILCORP delivers the CILCORP Certificate, AES believes in its reasonable good
faith judgment that it will be able to obtain the funds, through financing or
otherwise, in an amount sufficient to pay the Aggregate Consideration Amount
upon consummation of the Merger.
Section 5.7 Regulatory Status.
(a) Except as set forth in Section 5.7 of the AES Disclosure Schedule,
as of the date of this Agreement, neither AES nor any "subsidiary company" or
"affiliate" (as such terms are defined in PUHCA) of AES is subject to regulation
as a public utility or public service company (or similar designation) by the
FERC or any municipality, locality or state in the United States.
(b) As soon as reasonably practicable after the date hereof, AES will
not be a "holding company" (as such term is defined in PUHCA) nor will it be a
"subsidiary company" of a "holding company" or an "affiliate" of any "public
utility company" (as such terms are defined in PUHCA), and therefore, prior
approval of the SEC pursuant to Section 9(a)(2) of PUHCA will not be required
for consummation of the Merger and the other transactions consummated hereby.
Section 5.8 Regulatory Approval. As of the date of this Agreement, AES
believes in its reasonable good faith judgment that it will be able to obtain
the SEC Exemption Order.
38
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER; COVENANTS OF THE
PARTIES
Section 6.1 Conduct of Business by CILCORP Pending the Merger. CILCORP
covenants and agrees, as to itself and each of the CILCORP Subsidiaries, that
after the date of this Agreement and prior to the Effective Time or earlier
termination of this Agreement, except as expressly contemplated or permitted in
this Agreement, or to the extent AES shall have otherwise consented in writing,
which decision regarding consent shall be made as soon as reasonably practicable
and which consent shall not be unreasonably withheld:
(a) Ordinary Course of Business. CILCORP shall, and shall cause the
CILCORP Subsidiaries to, carry on their respective businesses in the usual,
regular and ordinary course in substantially the same manner as heretofore
conducted and use all commercially reasonable efforts to preserve intact their
present business organizations and goodwill, preserve the goodwill and
relationships with customers, suppliers and others having business dealings with
them, including regulators, and, subject to prudent management of workforce
needs and ongoing or planned programs relating to downsizing, re-engineering and
similar matters, keep available the services of their present officers and
employees to the end that their goodwill and ongoing businesses shall not be
impaired in any material respect at the Effective Time.
(b) Dividends. CILCORP shall not, nor shall CILCORP permit any of the
CILCORP Subsidiaries to, (i) declare or pay any dividends on or make other
distributions in respect of any of their capital stock other than (A) to CILCORP
or its wholly-owned Subsidiaries, (B) dividends required to be paid on any CILCO
Preferred Stock, CILCO Class A Preferred Stock or CILCO Preference Stock in
accordance with the terms thereof, (C) regular quarterly dividends of $.615 on
CILCORP Common Stock with respect to the fiscal quarters ending prior to the
Effective Date, with usual record and payment dates not in excess of the average
quarterly dividend for the four quarterly dividend payments immediately
preceding the date hereof with respect thereto, and (D) a special dividend on
CILCORP Common Stock with respect to the quarter in which the Effective Time
occurs with a record date on or prior to the Effective Time, which does not
exceed an amount equal to $.615 multiplied by a fraction, the numerator of which
is the number of days in such quarter prior to the Effective Time, and the
denominator of which is the total number of days in such fiscal quarter; (ii)
split, combine or reclassify any of their capital stock or issue or authorize or
propose the issuance of any other securities in respect of, in lieu of, or in
substitution for, shares of their capital stock; or
39
(iii) redeem, repurchase or otherwise acquire any shares of their capital stock,
other than redemptions, purchases or acquisitions required by the respective
terms of any series of CILCO Preferred Stock, CILCO Class A Preferred Stock or
CILCO Preference Stock.
(c) Issuance of Securities. Except as described in Section 6.1(c) of
the CILCORP Disclosure Schedule, CILCORP shall not, nor shall CILCORP permit any
of the CILCORP Subsidiaries to, issue, agree to issue, deliver, sell, award,
pledge, dispose of or otherwise encumber or authorize or propose the issuance,
delivery, sale, award, pledge, grant of a security interest, disposal or other
encumbrance of, any shares of their capital stock of any class or any securities
convertible into or exchangeable for, or any rights, warrants or options to
acquire, any such shares or convertible or exchangeable securities, other than
(i) issuances by a wholly owned Subsidiary of its capital stock to its direct or
indirect parent and (ii) issuances of shares of CILCORP Common Stock after the
date of this Agreement pursuant to CILCORP Options existing as of the date
hereof, as identified in Section 4.10(a) of the CILCORP Disclosure Schedule.
(d) Charter Documents. CILCORP shall not, nor shall CILCORP permit any
CILCORP Subsidiary to, amend or propose to amend the Articles of Incorporation
or By-Laws of CILCORP or such comparable organizational documents of any CILCORP
Subsidiary.
(e) No Acquisitions. Except as provided in Section 6.1(aa) hereof,
CILCORP shall not, nor shall CILCORP permit any CILCORP Subsidiary to: (i)
acquire, or publicly propose to acquire, or agree to acquire, by merger or
consolidation with, or by purchase or otherwise, an equity interest in or a
substantial portion of the assets of, any business or corporation, partnership,
association or other business organization or division thereof, (ii) otherwise
acquire or agree to acquire a material amount of assets, other than fuel used
for the production of electricity and limestone used for its SO2 scrubber, or
natural gas for send-out or storage or (iii) alter (through merger, liquidation,
reorganization, restructuring or in any other fashion) the corporate structures
or owner ship of CILCORP or any of the CILCORP Subsidiaries, other than the
transfer of ownership of QST Environmental Inc. from an indirect CILCORP
Subsidiary to CILCORP.
(f) No Dispositions. Except as disclosed in Section 6.1(f)(i) of the
CILCORP Disclosure Schedule or with respect to CILCORP or the CILCORP
Subsidiaries making dispositions in the ordinary course of business consistent
with past practice at fair market value of less than $2 million per transaction
(not to exceed $10 million in the aggregate) in sales price and indebtedness
assumed by the acquiring party and its affiliates, or making dispositions not in
the ordinary course of business at fair
40
market value of less than $50,000 per transaction (not to exceed $1 million in
the aggregate) in sales price, CILCORP shall not, nor shall CILCORP permit any
of the CILCORP Subsidiaries to, sell or dispose of any of their respective
assets, provided, however, that no consent shall be required of AES for CILCORP
or any Pacer Subsidiary to sell or dispose of (i) the stock or assets of QST
Environmental Inc. and/or its Subsidiaries (or enter into any agreement for the
sale or disposition of QST Environmental Inc. and/or its Subsidiaries) for a
cash purchase price of at least $25 million, net of fees and expenses, if such
sale or agreement includes as a term thereof, the release of CILCORP and the
CILCORP Subsidiaries of all liabilities and obligations, contingent or
otherwise, arising out of the operations of QST Environmental Inc. and its
Subsidiaries prior to the date the sale is to be consummated, and whether or not
known prior to the date of sale, and does not impose any liability on AES or any
of the AES Subsidiaries with respect to such operations, or (ii) the assets
listed in Section 6.1(f)(ii) of the CILCORP Disclosure Schedule if the purchase
price for any such asset is less than $2,000,000 individually (not to exceed
$5,000,000 in the aggregate) and if the price to be received for such asset
after taking into account fees and expenses and on-going indemnification
obligations and other post-closing liabilities is more than book value of such
asset.
(g) Cooperation, Notification. CILCORP shall (i) confer on a regular
and frequent basis with one or more representatives of AES to discuss, subject
to applicable law, material operational matters and the general status of
CILCORP's ongoing operations, (ii) promptly notify AES of any significant
changes in its business, properties, assets, condition (financial or other),
results of operations or prospects, (iii) promptly notify AES of any sales of
assets by CILCORP or any CILCORP Subsidiary in excess of $1 million and shall
discuss with AES use of proceeds from such sales to the extent that such
proceeds exceed $1 million, (iv) promptly advise AES of (A) any representation
or warranty made by it contained in this Agreement that is qualified as to
materiality becoming untrue or inaccurate as so qualified in any respect or any
such representation or warranty that is not so qualified becoming untrue or
inaccurate in any material respect, (B) the failure by it to comply in any
material respect with or satisfy in any material respect any covenant, condition
or agreement to be complied with or satisfied by it under this Agreement and (C)
any change or event which, individually or in the aggregate, has had or would
have a CILCORP Material Adverse Effect (provided, however, that no such
notification shall affect the representations, warranties, covenants or
agreements of the parties (or remedies with respect thereto) or the conditions
to the obligations of the parties under this Agreement) and (v) promptly provide
AES with copies of all filings made by CILCORP or any CILCORP Subsidiary with
any state or federal court, administrative agency, commission or other
Governmental Authority in connection with this Agreement and the transactions
contemplated hereby. AES shall designate one or more of its
41
Representatives (as defined in Section 7.1 hereof), by name, for purposes of
this subsection (g), who will make themselves reasonably available by telephone,
electronic mail and in person.
(h) Third-Party Consents. CILCORP shall, and shall cause the CILCORP
Subsidiaries to, use all reasonable best efforts to obtain all CILCORP Required
Consents. CILCORP shall promptly notify AES of any failure or prospective
failure to obtain any such consents and shall provide copies of all CILCORP
Required Consents obtained by CILCORP to AES.
(i) No Breach, Etc. CILCORP shall not, and CILCORP shall not permit
any CILCORP Subsidiary to, take any action that would or is reasonably likely to
result in a material breach of any provision of this Agreement or in any of its
representations and warranties set forth in this Agreement being untrue on and
as of the Closing Date.
(j) Tax Matters. CILCORP shall not, nor shall it permit any CILCORP
Subsidiary to, (i) make or rescind any material express or deemed election
relating to Taxes, (ii) except as set forth in Section 6.1(j)(ii) of the CILCORP
Disclosure Schedule, settle or compromise any material claim, action, suit,
litigation, proceeding, arbitration, investigation, audit or controversy
relating to Taxes, (iii) except as set forth in Section 6.1(j)(iii) of the
CILCORP Disclosure Schedule or as required by applicable law, change in any
material respect any of its methods of reporting income or deductions for
federal income Tax purposes from those employed in the preparation of its
federal income Tax return for the taxable year ending December 31, 1997 or (iv)
except as set forth in Section 6.1(j)(iv) of the CILCORP Disclosure Schedule,
make any change in its method of accounting for Taxes as reflected on or used in
preparing its Form 10-Q, dated as of November 10, 1998 (including any change in
the amount of its reserve for contingent Tax liabilities).
(k) Capital Expenditures. CILCORP shall, and CILCORP shall permit the
CILCORP Subsidiaries to, make capital expenditures during any six-month fiscal
period only up to and not in excess of 110% of the amount budgeted for such
six-month fiscal period by CILCORP for capital expenditures and then only as set
forth in Section 6.1(k) of the CILCORP Disclosure Schedule, except for unplanned
capital expenditures due to emergency conditions, unanticipated catastrophic
events, extreme weather, and unscheduled unit outages.
(l) Indebtedness. CILCORP shall not, and CILCORP shall not permit any
CILCORP Subsidiary to, incur or guarantee any indebtedness (including any
42
debt borrowed or guaranteed or otherwise assumed including, without limitation,
the issuance of debt securities or warrants or rights to acquire debt) or enter
into any "keep well" or other agreement to maintain any financial statement
condition of another person or entity or enter into any arrangement having the
economic effect of any of the foregoing other than short-term indebtedness in
the ordinary course of business consistent with past practice (such as the
issuance of commercial paper, the use of credit facilities existing as of the
date hereof or hedging activities undertaken in order to hedge a balance sheet
asset or liability and not for speculative purposes); provided however in no
event shall CILCORP and the CILCORP Subsidiaries, taken together, have
outstanding at any time, $428 million in the aggregate of indebtedness,
guarantees and keep-well obligations.
(m) Compensation, Benefits. Except as set forth in Section 6.1(m) of
the CILCORP Disclosure Schedule, as may be required by applicable law or as
contemplated by this Agreement, CILCORP shall not, nor shall CILCORP permit any
of the CILCORP Subsidiaries to, (i) enter into, adopt or amend or increase the
amount or accelerate the payment or vesting of any benefit or amount payable
under, any employee benefit plan or other contract, agreement, commitment,
arrangement, plan, trust, fund or policy maintained by, contributed to or
entered into by CILCORP or any of the CILCORP Subsidiaries (including, without
limitation, the CILCORP Benefit Plans set forth in Section 4.10(a) of the
CILCORP Disclosure Schedule) or increase, or enter into any contract, agreement,
commitment or arrangement to increase in any manner, the compensation or fringe
benefits, or otherwise to extend, expand or enhance the engagement, employment,
compensation or any related rights, of any director, officer or other employee
of CILCORP or any of the CILCORP Subsidiaries, except pursuant to binding legal
commitments existing on the date of this Agreement and specifically identified
in Section 4.10(a) of the CILCORP Disclosure Schedule.
(n) PUHCA. CILCORP shall not, nor shall CILCORP permit any of the
CILCORP Subsidiaries to, except as required or contemplated by this Agreement,
engage in any activities which would cause a change in its status, or that of
the CILCORP Subsidiaries, under PUHCA, or that would impair the ability of
CILCORP or AES or any AES Subsidiary to claim any exemption under PUHCA or that
would subject AES or any AES Subsidiary to regulation under PUHCA (other than
under Section 9(a)(2) or as an exempt holding company under PUHCA) following the
Merger.
(o) Accounting. CILCORP shall not, and CILCORP shall not permit any
CILCORP Subsidiary to, make any changes in their accounting methods, except as
required by law, rule, regulation or GAAP.
43
(p) Affiliate Transactions. Subject to the other restrictions set
forth in this Section 6.1, CILCORP shall not, and CILCORP shall not permit any
CILCORP Subsidiary to, enter into any agreement or arrangement with any of their
respective affiliates 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 CILCORP or a
CILCORP Subsidiary than CILCORP or such CILCORP Subsidiary would have obtained
from an unaffiliated third party, and provided that CILCORP shall have notified
AES in writing prior to entering into any such affiliate transaction.
(q) Rate Matters. CILCORP shall, and shall cause the CILCORP
Subsidiaries to, discuss with AES any changes and proposed changes in its or the
CILCORP Subsidiaries' rates or charges (including those with respect to fuel
adjustment charges and purchased gas adjustments), standards of service or
accounting from those in effect on the date hereof and consult with AES 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, and except as provided in Section 6.1(q) of the CILCORP
Disclosure Schedule, CILCORP shall not, and shall cause the CILCORP 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 CILCORP Material Adverse Effect.
(r) Contracts. CILCORP shall not, and CILCORP shall not permit any
CILCORP Subsidiary to, (i) except in the ordinary course of business consistent
with past practice, enter into new contracts, modify, amend, terminate, renew or
fail to use reasonable business efforts to renew any contract or agreement to
which CILCORP or any CILCORP Subsidiary is a party, which is material to CILCORP
and the CILCORP Subsidiaries taken as a whole and provided that the term of any
new contract or any contract modification, amendment or renewal does not exceed
twelve months, or waive, release or assign any material rights or claims
therein, or (ii) enter into, modify, amend, or renew any contract or agreement
outside the ordinary course of business or on a basis not consistent with past
practice if the dollar value of such new contract or agreement, or existing
contract or agreement as so amended, modified, or renewed, is or would be in
excess of $2,000,000 (not to exceed $20,000,000 in the aggregate) or have an
initial term (or a renewal or extension term) greater than twelve months.
(s) Insurance. Section 6.1(s) of the CILCORP Disclosure Schedule is a
true and correct list of the specific types of losses as to which CILCORP and
the CILCORP Subsidiaries self-insure and the dollar amounts of each such type of
coverage. CILCORP shall, and shall cause each CILCORP Subsidiary to, maintain
with
44
financially responsible insurance companies insurance in such amounts and
against such risks and losses as are customary 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 CILCORP or the CILCORP Subsidiaries, except that CILCORP may continue to
self-insure for the type of losses and in the dollar amounts as provided in
Section 6.1(s) of the CILCORP Disclosure Schedule.
(t) Permits. CILCORP shall, and shall cause each CILCORP Subsidiary
to, use reasonable best efforts to maintain in effect all existing governmental
permits which are material to the operations of CILCORP or any of the CILCORP
Subsidiaries.
(u) Discharge of Liabilities. CILCORP shall not, and CILCORP shall not
permit any CILCORP Subsidiary to, pay, discharge, settle, compromise or satisfy
any claims, liabilities or obligations (absolute, accrued, asserted or
unasserted, contingent or otherwise) material to CILCORP and the CILCORP
Subsidiaries, taken as a whole, other than the payment, discharge, settlement,
compromise or satisfaction, in the ordinary course of business consistent with
past practice (which includes the payment of final and unappealable judgments)
or in accordance with their terms, of liabilities reflected or reserved against
in, or contemplated by, the most recent consolidated financial statements (or
the notes thereto of the CILCORP SEC Reports filed prior to the date hereof), or
incurred in the ordinary course of business consistent with past practice.
(v) Staffing. Except as set forth in Sections 6.1(v) and 6.1(aa) of
the CILCORP Disclosure Schedule, CILCORP shall not, and shall not permit any
CILCORP Subsidiary to, make any increase in staffing levels over those in effect
on the date hereof.
(w) Tax-Exempt Status. CILCORP shall not, nor shall CILCORP permit any
CILCORP Subsidiary to, take any action that would likely jeopardize the
qualification of CILCORP's outstanding revenue bonds which qualify as of the
date hereof 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.
(x) CILCORP Certificate. As promptly as practicable after all
conditions to Closing set forth in Section 8.1 hereof have been satisfied and
the conditions set forth in Section 8.3(a), (b), (c) and (d) have been satisfied
or waived, CILCORP shall deliver to AES the CILCORP Certificate (as defined in
Section 6.2(d) hereof).
45
(y) QST Environmental Inc.. CILCORP shall, and shall cause the CILCORP
Subsidiaries to, use commercially reasonable efforts to pursue the sale of QST
Environmental Inc. prior to the Closing on the most favorable commercial terms
available.
(z) WARN Act. CILCORP shall (i) notify AES of all employees of CILCORP
and the CILCORP Subsidiaries who suffer an "employment loss" (as defined in the
WARN Act) during the 90 day period prior to the Closing Date and (ii) provide,
or cause the CILCORP Subsidiaries to provide, all written notices required by
the WARN Act to all employees which AES designates.
(aa) New Lines of Business. CILCORP shall not, nor shall CILCORP
permit any CILCORP 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 CILCORP may establish a new wholly-owned subsidiary to
take over the operation and maintenance of a steam plant, as disclosed on
Section 6.1(aa) of the CILCORP Disclosure Schedule, but shall not in connection
therewith hire any personnel, except as disclosed in Section 6.1(aa) of the
CILCORP Disclosure Schedule.
(bb) Rights Agreement. Except for the amendments contemplated by
Section 4.18 hereof or amendments approved in writing by AES or any AES
Subsidiary, CILCORP will not, following the date hereof, amend the CILCORP
Rights Agreement in any manner. In addition, CILCORP covenants and agrees that
it will not redeem the Rights unless such redemption is consented to in writing
by AES prior to such redemption.
(cc) Illinois Commerce Commission Certification. CILCORP shall use its
commercially reasonable efforts to obtain from the Illinois Commerce Commission
the certification addressed to the SEC pursuant to Section 33(a)(2) of PUHCA in
the form of Exhibit A hereto or in a form otherwise reasonably satisfactory to
AES (the "Illinois Certification").
(dd) Hedging. CILCORP shall not, and shall not permit any CILCORP
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 for purposes of hedging contracts to buy or sell physical energy or
energy transportation. In addition, in transacting business outside of the
native load service territory of CILCO, CILCORP shall not, and shall not permit
any CILCORP Subsidiary to, enter into any
46
energy-related sales or purchase contracts that would create an unhedged
position of more than $100,000 for any single contract, or $1,000,000 on a
cumulative basis.
Section 6.2 Covenants of AES. AES covenants and agrees, as to itself and
each of the AES Subsidiaries, that after the date of this Agreement and prior to
the Effective Time or earlier termination of this Agreement, except as expressly
contemplated or permitted in this Agreement, or to the extent CILCORP shall have
otherwise consented in writing, which decision regarding consent shall be made
as soon as reason ably practicable and which consent shall not be unreasonably
withheld:
(a) Cooperation, Notification. AES shall (i) promptly advise CILCORP
of (A) 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 and (B) the failure by it to comply in any
material respect with or satisfy in any material respect any covenant, condition
or agreement to be complied with or satisfied by it under this Agreement
(provided, however, that no such notification shall affect the representations,
warranties, covenants or agreements of the parties (or remedies with respect
thereto) or the conditions to the obligations of the parties under this
Agreement) and (ii) promptly provide CILCORP with copies of all filings made by
AES or any AES Subsidiary with any state or federal court, administrative
agency, commission or other Governmental Authority in connection with this
Agreement and the transactions contemplated hereby.
(b) No Breach, Etc. AES shall not, and AES shall not permit any AES
Subsidiary to, take any action that would or is reasonably likely to result in a
material breach of any provision of this Agreement or in any of its
representations and warranties set forth in this Agreement being untrue on and
as of the Closing Date.
(c) PUHCA Application. Subject to AES' determination not to seek an
exemption under PUHCA Section 3(a)(5), as promptly as practicable following the
date hereof, AES shall file with the SEC an application (the "PUHCA
Application") pursuant to PUHCA for an exemption from the requirement that it
register as a holding company under PUHCA Section 3(a)(5). AES shall promptly
notify CILCORP upon issuance of the SEC Exemption Order (as defined in Section
8.3(e) hereof).
(d) Financing. AES shall diligently pursue and use commercially
reasonable efforts to arrange financing or obtain funds sufficient to pay the
Aggregate Consideration Amount in the Merger (the "Financing"). The Financing
may consist of (i) non-recourse borrowings and (ii) general corporate funding
from the capital reserves,
47
working capital and other sources of AES, in each case, in such proportions to
the Aggregate Consideration Amount as AES shall determine in its sole
discretion. AES covenants and agrees that if the proceeds from the sources
specified in clauses (i) and (ii) of this Section 6.2(d) are less than the
Aggregate Consideration Amount, AES shall use commercially reasonable efforts to
sell a number of shares of AES Common Stock (the "AES Common Stock Sale") so
that the aggregate proceeds from clauses (i) and (ii) of this Section 6.2(d) and
the AES Common Stock Sale shall be an amount equal to the Aggregate
Consideration Amount. Notwithstanding the foregoing, AES shall have no
obligation to undertake any action to arrange financing, obtain funds or sell
AES Common Stock in the AES Common Stock Sale until CILCORP shall have delivered
to AES a certificate signed by an executive officer of CILCORP to the effect
that, to the best of such officer's knowledge as of the date of the delivery of
such certificate, the conditions set forth in Section 8.1 hereof have been
satisfied by CILCORP and the conditions set forth in Sections 8.3(a) (as of the
date of such certificate), 8.3(b) (as of the date hereof and as of the date of
such certificate), 8.3(c), 8.3(d) and 8.3(k) hereof have been satisfied by
CILCORP or waived by AES, which certificate must be delivered by CILCORP within
five business days of all such conditions being satisfied or waived, as the case
may be (the "CILCORP Certificate") and AES shall have satisfied or waived the
condition set forth in Section 8.3(e) hereof, and provided further, that in no
event shall AES be required to arrange financing, obtain funds or sell AES
Common Stock in the AES Common Stock Sale if there shall have occurred (or, in
the case of clauses (i) through (iv) below, been threatened) (i) any general
suspension of trading in, or limitation on prices for, securities on any
national securities exchange or in the over-the-counter market in the United
States, (ii) a declaration of a banking moratorium or any suspension of payments
in respect of banks in the United States, (iii) any limitation (whether or not
mandatory) by any government, domestic, foreign or supranational, or
governmental entity on the extension of credit by banks or other lending
institutions in the United States, (iv) a commencement of a war or armed
hostilities or other national or international calamity involving the United
States, (v) any significant disruption or material adverse change in the market
for new issues of senior debt securities, credit facilities or common or
preferred equity securities (or equity-linked securities) by a company having
financial characteristics similar to those of AES, (vi) any significant
disruption or material adverse change in the financial or capital markets in
general which make it impracticable for a company having financial
characteristics similar to those of AES to finance a transaction of the size and
nature as that contemplated hereunder on commercially reasonable financing terms
or (vii) in the case of any of the foregoing existing at the time of the
proposed AES Common Stock Sale, a material acceleration or worsening thereof;
and provided, further, that in no event shall AES be required to sell AES Common
Stock in the AES Common Stock Sale if during any five trading days following the
date of delivery of the CILCORP Certificate, there shall have occurred a
48
decline of twenty percent or more in the average closing price of AES Common
Stock from the average closing price over the five trading days preceding the
date hereof. The sole remedy for failure to obtain the Financing shall be as
provided in Section 9.1(b)(iv) hereof, except in the case of intentional and
willful breach by AES of its obligations (as qualified herein) under this
Section 6.2(d).
ARTICLE VII
ADDITIONAL AGREEMENTS
Section 7.1 Access to Information. Upon reasonable notice, CILCORP shall,
and shall cause the CILCORP Subsidiaries to, afford to the officers, directors,
employees, accountants, counsel, investment bankers, financial advisors and
other representatives (collectively, "Representatives") of AES reasonable
access, during normal business hours throughout the period prior to the
Effective Time, to all of their respective properties, books, contracts,
commitments, records, budgets, forecasts and other information (including, but
not limited to, Tax Returns) and, during such period, CILCORP shall, and shall
cause the CILCORP Subsidiaries to, furnish promptly to AES (i) access to each
report, schedule and other document filed or received by it or any of the
CILCORP Subsidiaries 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, the Department of Labor, the Immigration and Naturalization
Service, the Environmental Protection Agency (state, local and federal), the
IRS, the Department of Justice, the Federal Trade Commission, or any other
federal or state regulatory agency or commission or other Governmental
Authority, (ii) access to all information concerning CILCORP, the CILCORP
Subsidiaries, directors, officers and stockholders, properties, facilities or
operations owned, operated or otherwise controlled by CILCORP, or if not so
owned, operated or controlled, which properties, facilities or operations that
CILCORP may nonetheless obtain access to through the exercise of reasonable
diligence, and such other matters as may be reasonably requested by AES in
connection with any filings, applications or approvals required or contemplated
by this Agreement or for any other reason related to the transactions
contemplated by this Agreement; (iii) such additional information relating to
Taxes as AES shall from time to time reasonably request (or, where applicable,
to cooperate with AES in collecting such information), including information
relating to (a) Tax basis of the stock of the CILCORP 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 and (h) ongoing audits
(including copies of any Internal Revenue Service Forms 4564 or other similar
information document requests)
49
and (iv) office space and equipment at CILCORP's headquarters for the purposes
of designing a transition plan in conjunction with CILCORP's Representatives.
Subject to the following sentence, such information provided to AES may be shown
to AES' investment bankers and financial advisors. Each party shall, and shall
cause its Subsidiaries and Representatives to, hold in strict confidence all
documents and information concerning the other furnished to it in connection
with the transactions contemplated by this Agreement in accordance with the
Confidentiality Agreement, dated as of July 8, 1998, between AES and CILCORP
(the "Confidentiality Agreement"). Notwithstanding the foregoing, nothing herein
shall require CILCORP to disclose system information that it is precluded from
sharing with others pursuant to FERC Orders 888 and 889 (as amended) without
simultaneous disclosure to all parties on its electronic bulletin board.
Section 7.2 Proxy Statement.
(a) As soon as reasonably practicable after the date of this
Agreement, CILCORP shall prepare and file with the SEC, and AES shall cooperate
with CILCORP in such preparation and filing, a preliminary proxy statement or
information statement relating to this Agreement and the transactions
contemplated hereby and use its commercially reasonable efforts to furnish the
information required to be included by the SEC in the Proxy Statement (as
hereinafter defined) and, after consultation with and approval of AES, to
respond promptly to any comments made by the SEC with respect to the preliminary
proxy statement and, promptly after the completion of any SEC review or
notification from the SEC that the preliminary proxy materials will not be
subject to comment, cause a definitive proxy statement or information statement
(the "Proxy Statement") to be mailed to its stockholders. Subject to the
fiduciary obligations of the Board of Directors under applicable law, CILCORP
shall include in the Proxy Statement the recommendation of the Board of
Directors of CILCORP that the stockholders of CILCORP approve and adopt this
Agreement and the transactions contemplated hereby.
(b) AES agrees that (i) it will provide CILCORP with all information
concerning AES necessary or appropriate to be included in the Proxy Statement
and (ii) at the meeting of CILCORP stockholders to be held in connection with
the Merger and the other transactions contemplated hereby, it will vote, or
cause to be voted, all of the Shares then owned by, or with respect to which
proxies are held by it or any of the AES Subsidiaries, if any, in favor of the
approval and adoption of this Agreement.
(c) CILCORP and AES shall cooperate with one another in the
preparation and filing of the Proxy Statement and shall use their reasonable
best efforts to
50
promptly obtain and furnish the information required to be included in the Proxy
Statement and to respond promptly to any comments or requests made by the SEC
with respect to the Proxy Statement. Each party hereto shall promptly notify the
other parties of the receipt of comments of, or any requests by, the SEC with
respect to the Proxy Statement, and shall promptly supply the other parties with
copies of all correspondence between such party (or its Representatives) and the
SEC (or its staff) relating thereto. CILCORP and AES each agree to correct any
information provided by it for use in the Proxy Statement which shall have
become, or is, false or misleading.
Section 7.3 Regulatory Approvals and Other Matters.
(a) HSR Filings. 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 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), and the rules and
regulations promulgated thereunder with respect to the transactions contemplated
hereby. Such parties will use all 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.
(b) Other Approvals. Each party hereto shall cooperate with the others
and use its commercially reasonable efforts to promptly prepare and file all
necessary documentation, to effect all necessary applications, notices,
petitions, filings and other documents, and to use reasonable best efforts to
obtain all necessary permits, consents, approvals and authorizations of all
Governmental Authorities and all other persons necessary or advisable to
consummate (i) the transactions contemplated hereby, including, without
limitation, the SEC Exemption Order (as defined in Section 8.3(e) hereof), the
AES Required Statutory Approvals, the CILCORP Required Statutory Approvals, the
AES Required Consents and the CILCORP Required Consents (and any concurrent or
related rate filings, if any), and (ii) if AES determines to proceed with the
Second Merger and so notifies CILCORP, the Second Merger Statutory Approvals and
the CILCORP Second Merger Required Consents. AES and CILCORP agree that they
will consult with each other with respect to the obtaining of all such necessary
or advisable permits, consents, approvals and authorizations of Governmental
Authorities; provided, however, that it is agreed that CILCORP shall have
primary responsibility for the preparation and filing of any applications with
or notifications to applicable state regulatory authorities for approval of the
Merger. Each of AES and CILCORP 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
51
transactions contemplated by this Agreement, which approval shall not be
unreasonably withheld or delayed.
Section 7.4 Approval of CILCORP Stockholders. CILCORP shall, as soon as
reasonably practicable after the date of this Agreement, (i) take all steps
necessary to duly call, give notice of, convene and hold a meeting of its
stockholders (the "CILCORP Meeting") for the purpose of securing the CILCORP
Stockholders' Approval, (ii) distribute to its stockholders the Proxy Statement
in accordance with applicable federal and state law and with its Articles of
Incorporation and By-Laws, (iii) subject to the fiduciary duties of its Board of
Directors, recommend to its stockholders the approval of the Merger, this
Agreement and the transactions contemplated hereby and (iv) cooperate and
consult with AES with respect to each of the foregoing matters. Without limiting
the generality of the foregoing, CILCORP agrees that its obligations pursuant to
the first sentence of this Section 7.4 shall not be affected by the
commencement, public proposal, public disclosure or communication to CILCORP of
any Acquisition Proposal (as defined in Section 7.8(b) hereof).
Section 7.5 Directors' and Officers' Indemnification.
(a) Indemnification. From and after the Effective Time, the Surviving
Corporation shall, to the fullest extent permitted by applicable law, indemnify,
defend and hold harmless each person who is now, or has been at any time prior
to the date hereof, an officer or director of CILCORP or any of the CILCORP
Subsidiaries (each an "Indemnified Party" and collectively, the "Indemnified
Parties") against all losses, expenses (including reasonable attorney's fees and
expenses), claims, damages or liabilities or, subject to the proviso of the next
succeeding sentence, amounts paid in settlement, arising out of actions or
omissions occurring at or prior to the Effective Time that are, in whole or in
part, (x) based on or arising out of the fact that such person is or was a
director or officer of CILCORP or any CILCORP Subsidiary or (y) arising out of
or pertaining to the transactions contemplated by this Agreement (the
"Indemnified Liabilities"). In the event of any such loss, expense, claim,
damage or liability (whether or not arising prior to the Effective Time), (i)
the Surviving Corporation shall pay the reasonable fees and expenses of counsel
for the Indemnified Parties selected by the Surviving Corporation, which counsel
may also serve as counsel to the Surviving Corporation and which counsel shall
be reasonably satisfactory to the Indemnified Parties (whose consent shall not
be unreasonably withheld), 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 Illinois Act subject to the provision by such Indemnified
Party of an undertaking to reimburse the amounts so advanced in the event of a
final determination
52
by a court of competent jurisdiction that such Indemnified Party is not entitled
thereto, (ii) the Surviving Corporation will cooperate in the defense of any
such matter and (iii) any determination required to be made with respect to
whether an Indemnified Party's conduct complies with the standards set forth
under the Illinois Act and the Articles of Incorporation or By-Laws of CILCORP
shall be made by independent counsel mutually acceptable to the Surviving
Corporation and the Indemnified Party (the "Independent Counsel"); provided,
however, that the Surviving Corporation 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 may retain only one law firm with
respect to each related matter except to the extent there is, in the written
opinion of the Independent Counsel, under applicable standards of professional
conduct, a conflict on any significant issue between positions of such
Indemnified Party and any other Indemnified Party or Indemnified Parties.
(b) Insurance. For a period of six years after the Effective Time, the
Surviving Corporation shall cause to be maintained in effect existing policies
of directors' and officers' liability insurance maintained by CILCORP; provided,
that the Surviving Corporation may substitute therefor policies of substantially
similar coverage and amounts containing terms that are no less advantageous with
respect to matters occurring prior to the Effective Time to the extent such
liability insurance can be maintained annually at a commercially reasonable cost
to the Surviving Corporation for annual premiums for such directors' and
officers' liability insurance, which existing premium costs are disclosed on
Section 7.5(b) of the CILCORP Disclosure Schedule; provided, further, that if
such insurance cannot be so maintained or obtained at such cost, the Surviving
Corporation shall maintain or obtain as much of such insurance for CILCORP as
can be so maintained or obtained at a commercially reasonable cost for annual
premiums for directors' and officers' liability insurance.
(c) Successors. In the event the Surviving Corporation or any of its
successors or assigns (i) consolidates with or merges into any other person or
entity and shall not be the continuing or surviving corporation or entity of
such consolidation or merger or (ii) transfers all or substantially all of its
properties and assets to any person or entity, then and in either such case,
proper provisions shall be made so that the successors and assigns of the
Surviving Corporation shall assume the obligations set forth in this Section
7.5.
(d) Survival of Indemnification. To the fullest extent permitted by
applicable law, from and after the Effective Time, all rights to indemnification
existing as of the date hereof in favor of any Indemnified Party, as provided in
their respective Articles of Incorporation and By-Laws in effect on the date
thereof, shall survive the
53
Merger and shall continue in full force and effect for a period of six years
from the Effective Time.
Section 7.6 Disclosure Schedules. On or before the date hereof, (i) AES has
delivered to CILCORP the AES Disclosure Schedule, accompanied by a certificate
signed by an executive officer of AES stating the AES Disclosure Schedule has
been delivered pursuant to this Section 7.6 and (ii) CILCORP has delivered to
AES the CILCORP Disclosure Schedule, accompanied by a certificate signed by an
executive officer of CILCORP stating the CILCORP Disclosure Schedule has been
delivered pursuant to this Section 7.6. The AES Disclosure Schedule and the
CILCORP Disclosure Schedule are collectively referred to herein as the
"Disclosure Schedules." The Disclosure Schedules shall be deemed to constitute
an integral part of this Agreement and to modify the respective representations,
warranties, covenants or agreements of the parties hereto contained herein to
the extent that such representations, warranties, covenants or agreements
expressly refer to the Disclosure Schedules. Anything to the contrary contained
herein or in the Disclosure Schedules notwithstanding, any and all statements,
representations, warranties or disclosures set forth in the Disclosure Schedules
delivered on or before the date hereof shall be deemed to have been made on and
as of the date hereof. From time to time prior to the Closing, the parties shall
promptly supplement or amend the Disclosure Schedules with respect to any
matter, condition or occurrence hereafter arising which, if existing or
occurring at the date of this Agreement, would have been required to be set
forth or described in the Disclosure Schedules. No supplement or amendment shall
be deemed to cure any breach of any representation or warranty made in this
Agreement or have any effect for the purpose of determining satisfaction of the
conditions set forth in Section 8.2(b) hereof or Section 8.3(b) hereof.
Section 7.7 Public Announcements. Subject to each party's disclosure
obligations imposed by applicable law, court process or by obligations pursuant
to any listing agreement with any national securities exchange, AES and CILCORP
will cooperate with each other in the development and distribution of all news
releases and other public information disclosures with respect to this Agreement
or any of the transactions contemplated hereby and shall not issue any public
announcement or statement with respect hereto or thereto without the consent of
the other party (which consent shall not be unreasonably withheld and which
decision regarding consent shall be made as soon as reasonably practicable).
Section 7.8 No Solicitations.
54
(a) From and after the date hereof, (i) CILCORP 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 to facilitate knowingly 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 7.8(b) hereof) from any person, or
engage in any discussion or negotiations relating thereto and (ii) neither the
Board of Directors of CILCORP nor any committee thereof shall (A) withdraw or
modify, or propose publicly to withdraw or modify, in a manner adverse to AES,
the approval or recommendation by such Board of Directors or such committee of
the Merger or this Agreement, (B) approve or recommend, or propose publicly to
approve or recommend, any Acquisition Proposal, or (C) cause CILCORP or any
CILCORP 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 CILCORP
may, at any time prior to receipt of CILCORP Stockholders' Approval (the
"CILCORP 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 7.8, if the Board of Directors of CILCORP
(x) reasonably believes in good faith, after consultation with its financial
advisors, that an Acquisition Proposal may be a Superior Proposal (as defined in
Section 7.8(b) hereof) and (y) determines in good faith, after consultation with
its financial advisors and outside counsel, that failing to take such action
could reasonably be expected to be a breach of its fiduciary duties to CILCORP's
stockholders under applicable law, and subject to providing AES with prior
written notice of its decision to take such action (the "CILCORP Notice") and
compliance with Section 7.8(c) hereof, (1) furnish information with respect to
CILCORP and the CILCORP Subsidiaries to any person making a Superior Proposal
pursuant to a customary confidentiality agreement and (2) participate in
discussions or negotiations regarding such Superior 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 CILCORP nor its
Board of Directors nor any committee thereof shall withdraw or modify, or
propose publicly to withdraw or modify, its position with respect to this
Agreement or the Merger or approve or recommend, or propose publicly to approve
or recommend, an Acquisition Proposal), and/or (iii) in the event that during
the CILCORP Applicable Period the Board of Directors of CILCORP reasonably
believes in good faith, after consultation with its financial advisors and
outside counsel, (x) that it has received an Acquisition Proposal that
constitutes a Superior Proposal and (y) that failure to terminate this Agreement
and accept such Superior Proposal could reasonably be expected to be a breach of
its fiduciary duties to CILCORP's stockholders under applicable law, by action
of the Board of Directors of CILCORP (subject to this sentence and Section
9.1(d)(ii) hereof), terminate
55
this Agreement (and, following the exercise of such termination right, withdraw
or modify in any adverse manner its approval or recommendation of this Agreement
or the Merger, and approve or recommend any merger, consolidation, business
combination, recapitalization, liquidation, dissolution or similar transaction
involving CILCORP or any such CILCORP Subsidiary, other than the transactions
contemplated by this Agreement), but only at a time that is during the CILCORP
Applicable Period and is after the third business day following AES' receipt of
written notice advising AES that the Board of Directors of CILCORP 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.
CILCORP shall immediately cease and terminate any existing solicitation,
initiation, encouragement, activity, discussion or negotiation with any persons
conducted heretofore by CILCORP 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") that constitutes 15% or more
of the net revenues, net income or the assets (including equity securities) of
CILCORP and the CILCORP Subsidiaries, taken as a whole, or 15% or more of any
class of voting securities of CILCORP or any CILCORP Subsidiary owning,
operating or controlling a Material Business, any tender offer or exchange offer
that it consummated would result in any person beneficially owing 15% or more of
any class of voting securities of CILCORP or any such CILCORP Subsidiary, or any
merger, consolidation, business combination, recapitalization, liquidation,
dissolution or similar transaction involving CILCORP or any such CILCORP
Subsidiary, other than the transactions contemplated by this Agreement;
provided, however, that no transaction permitted pursuant to Section 6.1(f)
hereof shall be deemed an Acquisition Proposal for any purpose and (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, for consideration consisting of cash and/or
securities, more than 50% of the combined voting power of the shares of CILCORP
Common Stock then outstanding or all or substantially all the assets of CILCORP
which the Board of Directors of CILCORP determines in its good faith judgment,
after consultation with its financial advisors and outside counsel, to be more
favorable to CILCORP's Stockholders (taking into account any changes to the
financial terms of this Agreement proposed by AES in response to such proposal
and all financial and strategic considerations, including relevant legal,
financial, 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, the strategic direction and benefits sought
56
by CILCORP and any changes to this Agreement proposed by AES in response to such
proposal) than the Merger and the other transactions contemplated by this
Agreement.
(c) CILCORP shall promptly advise AES 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 CILCORP reasonably believes could lead to
any Acquisition Proposal or Superior Proposal. CILCORP shall promptly advise AES
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 7.9 Expenses. All costs and expenses incurred in connection with
this Agreement and the transactions contemplated hereby shall be paid by the
party incurring such expenses.
Section 7.10 Board of Directors. At or prior to the Effective Time, CILCORP
shall obtain the resignation as of the Effective Time of each director of
CILCORP and, if so requested by AES, of any director or officer of any CILCORP
Subsidiary or officer of CILCORP.
Section 7.11 Illinois Responsible Property Transfer Act. If, as a result of
the transactions contemplated by this Agreement or as a result of any debt
financing undertaken by AES or an affiliate of AES or a AES Subsidiary in order
to complete the transactions contemplated by this Agreement, the requirements of
the Illinois Responsible Property Transfer Act (the "Property Transfer Act") are
triggered with respect to any of the real property owned or operated by CILCORP,
any CILCORP Subsidiary or any CILCORP Joint Venture, CILCORP shall be
responsible, at its own cost and expense, for compliance with all of the
obligations of the Property Transfer Act, including, without limitation, the
preparation of any disclosure document required to be provided to AES or any
lender.
Section 7.12 Signature Authority. Effective as of the Closing, at the
request of AES, CILCORP shall prepare and deliver to AES a list of all persons
with signature authority on the bank accounts of CILCORP and the CILCORP
Subsidiaries and all persons with authority to bind CILCORP and any CILCORP
Subsidiary to an agreement with an amount in excess of $100,000 or a term longer
than one year. CILCORP shall revoke such authority of any person designated by
AES, effective as of the morning of the Closing Date.
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Section 7.13 Termination of Existing Tax Sharing Agreements. CILCORP shall
take or cause to be taken all actions necessary such that after the Closing
Date, neither CILCORP nor any CILCORP Subsidiary shall have any further rights
or liabilities under any agreement existing on or before the Closing Date which
relates to the allocation or sharing of Taxes.
Section 7.14 Deferred Compensation Plans. Prior to the Effective Time,
CILCORP will take all actions necessary or appropriate to establish a so-called
"rabbi trust" (in form and substance reasonably satisfactory to AES) which shall
be used to fund the CILCO Executive Deferral Plan (the "EDP I Plan"). Upon the
establishment of the rabbi trust for the EDP I Plan, CILCORP shall transfer
ownership of the CILCORP life insurance policies that currently are intended to
fund the EDP I Plan to such trust. After the Effective Time, AES shall cause
CILCO to remain the primary obligor of and to honor, in accordance with its
terms, the EDP I Plan and the related rabbi trust. Nothing in this Section 7.14
shall require AES or CILCO to allow participants in such plan to defer
compensation income that will be earned by the participants on or after the
Effective Time.
ARTICLE VIII
CONDITIONS
Section 8.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligations of each party to effect the Merger shall be subject to
the satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(a) Stockholder Approvals. The CILCORP Stockholders' Approval shall
have been obtained.
(b) No Injunctions or Restraints. No judgment, decree, statute, law,
ordinance, rule, regulation, temporary restraining order, preliminary or
permanent injunction or other order enacted, entered, promulgated, enforced or
issued by any court of competent jurisdiction or other Governmental Authority or
other legal restraint or prohibition (collectively, "Restraints") preventing the
consummation of the Merger shall be in effect; provided, however, that each of
the parties shall have used all reasonable efforts to prevent the entry of any
such Restraints and to appeal as promptly as possible any such Restraints that
may be entered.
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(c) Statutory Approvals. The AES Required Statutory Approvals and the
CILCORP Required Statutory Approvals shall have been obtained, such approvals
shall have become Final Orders (as defined below) and such Final Orders shall
not impose terms or conditions which, in the aggregate, would have, or insofar
as reasonably can be foreseen, could have, a AES Material Adverse Effect or a
CILCORP Material Adverse Effect, or which would be inconsistent with the
agreements of the parties contained herein. The term "Final Order" shall mean
action by the relevant regulatory authority which has not been reversed, stayed,
enjoined, set aside, annulled or suspended, with respect to which any waiting
period prescribed by law before the transactions contemplated hereby may be
consummated has expired, and as to which all conditions to the consummation of
such transactions prescribed by law, regulation or order have been satisfied.
(d) HSR Act. All applicable waiting periods under the HSR Act shall
have expired or been terminated.
Section 8.2 Conditions to Obligation of CILCORP to Effect the Merger. The
obligation of CILCORP to effect the Merger shall be further subject to the
satisfaction or waiver, on or prior to the Closing Date, of the following
conditions:
(a) Performance of Obligations of AES. AES and Merger Sub each shall
have performed in all material respects their respective agreements and
covenants contained in or contemplated by this Agreement, which are required to
be performed by it at or prior to the Closing Date.
(b) Representations and Warranties. The representations and warranties
of AES set forth in this Agreement shall be true and correct in all material
respects (or where any statement in a representation or warranty expressly
includes a standard of materiality, such statement shall be true and correct in
all respects as so qualified) as of the date hereof (except to the extent such
representations and warranties speak as of an earlier or later date) and as of
the Closing Date as if made on and as of the Closing Date, except as otherwise
contemplated by this Agreement.
(c) Closing Certificates. CILCORP shall have received a certificate
signed by an executive officer of AES, dated the Closing Date, to the effect
that, to the best of such officer's knowledge, the conditions set forth in
Section 8.2(a) hereof and Section 8.2(b) hereof have been satisfied.
Section 8.3 Conditions to Obligation of AES and Merger Sub to Effect the
Merger. The obligation of AES and Merger Sub to effect the Merger shall be
further
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subject to the satisfaction or waiver, on or prior to the Closing Date, of the
following conditions:
(a) Performance of Obligations of CILCORP. CILCORP (and/or appropriate
CILCORP Subsidiaries) shall have performed in all material respects its
agreements and covenants contained in or contemplated by this Agreement which
are required to be performed by it at or prior to the Closing Date.
(b) Representations and Warranties. The representations and warranties
of CILCORP set forth in this Agreement shall be true and correct in all material
respects (or where any statement in a representation or warranty expressly
includes a standard of materiality, such statement shall be true and correct in
all respects as so qualified) as of the date hereof (except to the extent such
representations and warranties speak as of an earlier or later date) and as of
the Closing Date as if made on and as of the Closing Date, except as otherwise
contemplated by this Agreement.
(c) CILCORP Material Adverse Effect. Subject to Section 8.3(c) of the
CILCORP Disclosure Schedule, no CILCORP Material Adverse Effect shall have
occurred and there shall exist no fact or circumstance that would or, insofar as
reasonably can be foreseen, could have a CILCORP Material Adverse Effect.
(d) CILCORP Required Consents. The CILCORP Required Consents shall
have been obtained.
(e) PUHCA Exemption. The SEC shall have issued an order in form and
substance reasonably satisfactory to AES (the "SEC Exemption Order") granting
AES an exemption from registration as a holding company under PUHCA pursuant to
PUHCA Section 3(a)(5), and the SEC Exemption Order shall be in full force and
effect on the Closing Date.
(f) Financing. AES shall have the proceeds available pursuant to the
Financing sufficient to pay the Aggregate Consideration Amount.
(g) Closing Certificates. AES shall have received a certificate signed
by an executive officer of CILCORP, dated the Closing Date, to the effect that,
to the best of such officer's knowledge, the conditions set forth in Sections
8.3(a), (b), (c), (d) and (k) hereof have been satisfied.
(h) AES Required Consents. The AES Required Consents shall have been
obtained.
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(i) No Injunctions or Restraints as to Second Merger. No Restraints
preventing the consummation of the Second Merger shall be in effect; provided,
however, that each of the parties shall have used all reasonable efforts to
prevent the entry of any such Restraints and to appeal as promptly as possible
any such Restraints that may be entered.
(j) Trigger of CILCORP 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 CILCORP stockholders under the CILCORP Rights
Agreement, including a "flip-in" or "flip-over" or similar event commonly
described in such rights plans which, in the reasonable judgment of AES, would
have or be reasonably likely to result in a CILCORP Material Adverse Effect or
materially change the number of outstanding equity securities of CILCORP, and
the CILCORP Rights shall not have become nonredeemable by the CILCORP Board of
Directors.
(k) Illinois Commerce Commission. (i) The Illinois Commerce Commission
shall have issued the Illinois Certification and (ii) AES shall reasonably
believe that any order of, approval by or result of any filing, proceeding or
notice with the Illinois Commerce Commission required under the Illinois Public
Utilities Act in connection with the Merger could not be expected to have an
adverse effect on AES' ability to obtain the Financing or on AES, CILCORP or any
of the CILCORP Subsidiaries after the Effective Time (the "AES Reasonable Belief
Standard").
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
Section 9.1 Termination. This Agreement may be terminated at any time prior
to the Closing Date:
(a) without payment of a termination fee by mutual written consent of
CILCORP and AES.
(b) by AES or CILCORP under any of the following circumstances:
(i) without payment of a termination fee, if any state or federal
law, order, rule or regulation is adopted or issued, which has the effect, as
61
supported by the written opinion of outside counsel for such party, of
prohibiting the Merger, or by any party hereto if any court of competent
jurisdiction in the United States or any state shall have issued an order,
judgment or decree permanently restraining, enjoining or otherwise prohibiting
the Merger, and such order, judgment or decree shall have become final and
nonappealable.
(ii) after the eighteen-month anniversary of the date of this
Agreement without payment of a termination fee, by written notice to the other
party, if the Merger shall not have been consummated on or before the
eighteen-month anniversary of the date of this Agreement; provided, however,
that the right to terminate the Agreement under this Section 9.1(b)(ii) shall
not be available to any party whose failure to fulfill any obligation under this
Agreement has been the cause of, or resulted in, the failure of the Merger to
have been consummated, and provided further, that if after the fifteen-month
anniversary of the date hereof and prior to the eighteen-month anniversary,
CILCORP shall have delivered to AES the CILCORP Certificate as provided in
Section 6.2(d), then neither AES nor CILCORP shall be entitled to terminate
under this Section 9.1(b)(ii) until a period of 90 days shall have elapsed from
the receipt of the CILCORP Certificate.
(iii) by written notice to the other party, if the CILCORP
Shareholders' Approval shall not have been obtained at the CILCORP Meeting,
including any adjournments thereof. In the event this Agreement is terminated
pursuant to this Section 9.1(b)(iii) and at or within twelve months of the date
of the CILCORP Meeting, CILCORP enters into any agreement with respect to an
Alternative Transaction (as defined below), then within ten business days after
the execution of such agreement, CILCORP shall immediately pay in cash to AES by
wire transfer of same day funds a termination fee in an amount equal to 3.0% of
the Aggregate Consideration Amount (the "Acquisition Termination Fee"). As used
herein, "Alternative Transaction" means any of (i) a transaction or series of
transactions pursuant to which any person (or group of persons) other than AES
or the AES Subsidiaries and other than CILCORP and the CILCORP Subsidiaries (a
"Third Party") acquires or would acquire, directly or indirectly, beneficial
ownership (as defined in Rule 13d-3 under the Exchange Act) of more than 50% of
the outstanding Shares of CILCORP or CILCO, as the case may be, whether from
CILCORP or CILCO or pursuant to a tender offer or exchange offer or otherwise,
(ii) any acquisition or proposed acquisition of CILCORP or CILCO by a merger or
other business combination (including any so-called "merger of equals" and
whether or not CILCORP or CILCO is the entity surviving any such merger or
business combination) or (iii) any other transaction pursuant to which any Third
Party acquires or would acquire, directly or indirectly, all or substantially
all of the assets (including for this purpose the outstanding
62
equity securities of CILCORP or CILCO, and any entity surviving any merger or
combination including any of them) of CILCORP or CILCO.
(iv) by written notice to the other party after the Financing Due
Date (as defined below), if the financing condition set forth in Section 8.3(f)
has not been satisfied but all conditions to Closing have been satisfied on or
prior to such date. The "Financing Due Date" shall mean that date which is the
90th day after all conditions to Closing set forth in Article VIII have been
satisfied other than Section 8.3(f), it being agreed that the 90 days shall not
begin to run until all such conditions have been satisfied and AES has received
a certificate signed by an executive officer of CILCORP attesting to the
satisfaction by CILCORP of the conditions in Sections 8.1 and 8.3(a), (b), (c),
(d) and (k), which certificate shall be dated no earlier than the date on which
the last of the conditions set forth in Article VIII has been satisfied. In the
event that this Agreement is terminated pursuant to this Section 9.1(b)(iv), AES
shall pay CILCORP in cash by wire transfer of same day funds within ten business
days of such termination notice a termination fee in an amount equal to the
product of (x) the Out standing Shares and (y) $5.00 (the "Financing Termination
Fee").
(c) by AES under any of the following circumstances:
(i) by written notice to CILCORP, if (x) there shall have been
any material breach of any representation or warranty, or any material breach of
any covenant or agreement, of CILCORP hereunder, and such breach shall not have
been remedied within thirty days after receipt by CILCORP of notice in writing
from AES, specifying the nature of such breach and requesting that it be
remedied; provided, however that CILCORP shall not be entitled to expend more
than $10 million to cure any and all such breaches without the prior written
approval of AES; or (y) the Board of Directors of CILCORP (A) shall withdraw or
modify in any manner adverse to AES its approval of this Agreement and the
transactions contemplated hereby or its recommendation to its stockholders
regarding the approval of this Agreement, (B) shall fail to reaffirm such
approval or recommendation upon the request of AES, (C) shall approve or
recommend any Acquisition Proposal or (D) shall resolve to take any of the
actions specified in clause (A), (B) or (C); provided, however, that AES and
CILCORP acknowledge and affirm that notwithstanding anything in this Section
9.1(c)(i) to the contrary, the parties hereto intend this Agreement to be an
exclusive agreement and, accordingly, nothing in this Agreement is intended to
constitute a solicitation of an Acquisition Proposal, it being acknowledged and
agreed that any such offer or proposal would interfere with the strategic
advantages and benefits which the parties expect to derive from the Merger. In
the event this Agreement is terminated pursuant to this Section 9.1(c)(i),
CILCORP shall pay AES in cash by wire transfer of same day funds
63
within ten business days of such termination notice a termination fee in an
amount equal to 3.0% of the Aggregate Consideration Amount (the "CILCORP Breach
Termination Fee").
(ii) by written notice to CILCORP after the nine-month
anniversary of the date hereof if the SEC Exemption Order shall not have been
issued or irrevocably waived by AES prior to the time such notice is given. In
the event this Agreement is terminated pursuant to this Section 9.1(c)(ii), then
AES shall pay CILCORP in cash by wire transfer of same day funds within ten
business days of such termination notice a termination fee in an amount equal to
the product of (x) the Out standing Shares and (y) $1.00, together with an
additional $0.00546448 per day for each day beginning on the later of (A) the
day after the nine-month anniversary of the date hereof or (B) five days after
the date of any order, approval or result, as the case may be, contemplated by
clause (ii) of Section 8.3(k) hereof, unless AES shall have notified CILCORP
within such five-day period that the condition in clause (ii) of Section 8.3(k)
hereof has not been satisfied, until the date of termination (up to a maximum of
$3.00 under this clause (y)) (the "Regulatory Termination Fee"); provided,
however, that the Regulatory Termination Fee shall not be payable to CILCORP if
the failure to obtain the SEC Exemption Order by the nine-month anniversary of
the date hereof has been caused by breach of this Agreement by CILCORP or by any
action or omission by CILCORP after the date hereof unless taken at the
direction of AES.
(iii) without payment of a termination fee by AES or CILCORP by
written notice to CILCORP after the one-year anniversary of the date hereof if
any approvals or other actions of the Illinois Commerce Commission required
under the Illinois Public Utilities Act have either not been issued, or if
issued or taken, such order, approval or other actions shall not meet the AES
Reasonable Belief Standard set forth in clause (ii) of Section 8.3(k) hereof,
provided however that AES may terminate this Agreement (without payment of a
termination fee by AES or CILCORP) by written notice to CILCORP after the
eighth-month anniversary of the date hereof if AES does not reasonably believe
that within the above-referenced one-year period the AES Reasonable Belief
Standard set forth in the clause (ii) of Section 8.3 (k) hereof will be
satisfied with respect to such approvals or other actions.
(d) by CILCORP under any of the following circumstances:
(i) by written notice to AES, if there shall have been any
material breach of any representation or warranty contained in Sections 5.1, 5.2
and 5.5 hereof, or any material breach of any covenant or agreement of AES
hereunder, and such breach shall not have been remedied within thirty days after
receipt by AES of
64
notice in writing from CILCORP, specifying the nature of such breach and
requesting that it be remedied. In the event this Agreement is terminated
pursuant to this Section 9.1(d)(i), AES shall pay CILCORP in cash by wire
transfer of same day funds within ten business days of such termination notice a
termination fee in an amount equal to 3.0% of the Aggregate Consideration Amount
(the "AES Breach Termination Fee").
(ii) in accordance with clause (iii) of the proviso to the first
sentence of Section 7.8(a) hereof, by written notice to AES; provided that, in
order for the termination of this Agreement pursuant to this subparagraph (ii)
to be deemed effective, CILCORP shall have complied with all provisions of
Section 7.8 hereof. In the event this Agreement is terminated pursuant to this
Section 9.1(d)(ii), CILCORP shall pay AES within ten days in cash by wire
transfer of same day funds a termination fee in an amount equal to the
Acquisition Termination Fee.
(iii) by written notice to AES after the 18-month anniversary of
the date hereof, if all conditions to Closing have been satisfied, other than
the issuance of the SEC Exemption Order and CILCORP delivers to AES a
certificate signed by an executive officer of CILCORP attesting to the
satisfaction by CILCORP of the conditions in Sections 8.1 and 8.3(a), (b), (c),
(d) and (k) (the "Section 9.1(d) Certificate") then within 10 business days of
the receipt of the Section 9.1(d) Certificate, AES shall pay to CILCORP in cash
by wire transfer of same day funds within ten business days of such termination
notice a termination fee in an amount equal to the Regulatory Termination Fee.
(iv) without payment of a termination fee by AES or CILCORP, upon
two business days' written notice to AES after the six-month anniversary of the
date hereof if the Illinois Certification shall not have been issued or waived
by AES prior to or within two business days after the time such notice is given.
Section 9.2 Effect of Termination. In the event of termination of this
Agreement by either CILCORP or AES pursuant to Section 9.1, there shall be no
liability on the part of either CILCORP or AES or their respective officers or
directors hereunder, except that Section 7.8, Section 9.1, Section 9.2 and
Section 9.3, the agreement contained in the last sentence of Section 7.1 and in
Section 10.6 shall survive the termination.
Section 9.3 Termination Fees; Expenses.
(a) Expenses. The parties agree that the termination fees contained in
Article IX are an integral part of the transactions contemplated by this
Agreement and constitute liquidated damages and not a penalty. Notwithstanding
65
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 IX, 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.
(b) Limitation Of Fees. Notwithstanding anything herein to the
contrary, AES shall in no event be liable or required to pay to CILCORP more
than one of (A) the Regulatory Termination Fee, (B) the Financing Termination
Fee or (C) the AES Breach Termination Fee.
Section 9.4 Amendment. This Agreement may be amended by the Boards of
Directors of the parties hereto, at any time before or after approval hereof by
the stockholders of CILCORP and prior to the Effective Time, but after such
approval, no such amendment shall (a) alter or change the Per Share Amount under
Article II or (b) alter or change any of the terms and conditions of this
Agreement if any of the alterations or changes, alone or in the aggregate, would
materially adversely affect the rights of holders of CILCORP Common Stock,
except for alterations or changes that could otherwise be adopted by the Board
of Directors of CILCORP or AES, without the further approval of CILCORP
stockholders. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto.
Section 9.5 Waiver. At any time prior to the Effective Time, the parties
hereto may (a) extend the time for the performance of any of the obligations or
other acts of the other parties hereto, (b) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto and (c) waive compliance with any of the agreements or
conditions contained herein, to the extent permitted by applicable law. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid if set forth in an instrument in writing signed on behalf of such party.
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ARTICLE X
GENERAL PROVISIONS
Section 10.1 Non-Survival; Effect of Representations and Warranties. No
representations or warranties in this Agreement shall survive the Effective
Time, except as otherwise provided in this Agreement.
Section 10.2 Notices. All notices and other communications hereunder shall
be in writing and shall be deemed given (a) when delivered personally, (b) when
sent by reputable overnight courier service or (c) when telecopied (which is
confirmed by copy sent within one business day by a reputable overnight courier
service) to the parties at the following addresses (or at such other address for
a party as shall be specified by like notice):
(i) If to AES or Merger Sub, to:
The AES Corporation
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to:
Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, Esq.
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
and
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(ii) if to CILCORP, to:
CILCORP Inc.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇, Esq.
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to:
Winthrop, Stimson, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Section 10.3 Miscellaneous. This Agreement (a) constitutes the entire
agreement and supersedes all other prior agreements and understandings, both
written and oral, among the parties, or any of them, with respect to the subject
matter hereof (other than the Confidentiality Agreement), (b) shall not be
assigned by operation of law or otherwise and (c) shall be governed by and
construed in accordance with the laws of the State of New York applicable to
contracts executed in and to be fully performed in such State, without giving
effect to its conflicts of law rules or principles 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 Illinois
Act.
Section 10.4 Interpretation. When a reference is made in this Agreement to
Sections or Exhibits, such reference shall be to a Section or Exhibit of this
Agreement, respectively, 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 10.5 Counterparts; Effect. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original, but all of
which shall constitute one and the same agreement.
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Section 10.6 Enforcement. The parties agree 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 court of the United States
located in the State of New York or any New York state court in the County of
New York, this being in addition to any other remedy to which they are entitled
at law or in 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 any of the transactions
contemplated by this Agreement, (b) agrees that it will not attempt to deny such
personal jurisdiction by motion or other request for leave from any such court
and (c) agrees that it will not bring any action relating to this Agreement or
any of the transactions contemplated by this Agreement in any court other than a
federal court sitting in the State of New York or a New York state court sitting
in the County of New York.
Section 10.7 Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and, except for rights of
Indemnified Parties as set forth in Section 7.5, nothing in this Agreement,
express or implied, is intended to confer upon any other person any rights or
remedies of any nature whatsoever under or by reason of this Agreement.
Section 10.8 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 Merger in accordance
with the terms hereof.
Section 10.9 Waiver Of Jury Trial. Each party to this Agreement waives, to
the fullest extent permitted by applicable law, any right it may have to a trial
by jury in respect of any action, suit or proceeding arising out of or relating
to this Agreement.
Section 10.10 Certain Definitions. The term "affiliate," except where
otherwise defined herein, shall mean, as to any person, any other person which
directly or indirectly controls, or is under common control with, or is
controlled by, such person. The term "control" (including, with its correlative
meanings, "controlled by" and "under common control with") shall mean
possession, directly or indirectly, of power to direct or cause the direction of
management or policies (whether through ownership of securities or partnership
or other ownership interests, by contract or otherwise).
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IN WITNESS WHEREOF, AES, CILCORP and Merger Sub have caused this Agreement
as of the date first written above to be signed by their respective officers
thereunto duly authorized.
THE AES CORPORATION
By:
----------------------------
Name:
Title:
CILCORP INC.
By:
----------------------------
Name:
Title:
MIDWEST ENERGY, INC.
By:
----------------------------
Name:
Title:
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