UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) December 3, 1998
CILCORP Inc.
(Exact name of registrant as specified in its charter)
Illinois 1-8946 37-1169387
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
300 Hamilton Blvd., Suite 300, Peoria, Illinois 61602
(Address of principal executive offices)
Registrant's telephone number, including area code (309) 675-8810
Item 5. Other Events
Acquisition of CILCORP Inc. by The AES Corporation
On November 22, 1998, CILCORP Inc., an Illinois corporation (the
"Company"), entered into an Agreement and Plan of Merger (the
"Merger Agreement") with The AES Corporation, a Delaware
corporation ("AES") and Midwest Energy, Inc., an Illinois
corporation and wholly owned subsidiary of AES ("Midwest"),
pursuant to which Midwest will be merged with and into the
Company, with the Company as the surviving corporation (the
"Merger"). Thereafter, at the discretion of AES, the Company may
be merged with and into AES with AES as the surviving corporation
(the "Second Merger"). As a result of the Merger, each
outstanding share of the Company's common stock, no par value
("Company Common Stock"), will be converted into the right to
receive $65 in cash. In addition, if the Company has satisfied
all other conditions to consummation of the Merger and AES has not
received an order from the Securities and Exchange Commission
("SEC Order") granting an exemption from registration under the
Public Utility Holding Company Act of 1935 (the "PUHCA") within 9
months from the date of the Merger Agreement (unless AES waives such
condition), then the per share consideration will be increased to $66
per share, and will increase by $0.00546448 per day for each day following
the 9 month anniversary of the Merger Agreement until the SEC Order has been
obtained or waived by AES.
If after 9 months, the SEC Order has not been obtained or
waived, but the Company has not yet satisfied all other closing conditions,
no pricing adjustment will occur if AES obtains or waives the SEC Order
before the Company satisfies its closing conditions. If,
however, the Company satisfies its closing conditions first, but
after 9 months from the date of the Merger Agreement, then the
pricing adjustment to $66 per share along with the per day increase will
come into effect at such time as the conditions are satisified. In no event
will the price per share exceed $68.
The Merger is conditioned upon, among other things, approval by
the shareholders of the Company, the completion of regulatory
procedures at the Illinois Commerce Commission and the Federal
Energy Regulatory Commission and AES obtaining financing for the
transaction.
In the event that the transaction has not been consummated within
18 months (or later if all conditions other than financing are satisified
after the 15 month anniversary of the Merger Agreement)
from the date of the Merger Agreement,
either side may terminate the Merger Agreement without any
termination fee. The Merger Agreement may also be terminated
without a termination fee if CILCORP is unable to obtain certain
approvals from the Illinois Commerce Commission within one year
from the date of the Merger Agreement. If AES is unable to
obtain financing within 90 days following the date that all other conditions
under the agreement have been satisfied or waived,
either party may terminate the agreement, and AES will pay to the
Company a termination fee equal to $5.00 per outstanding share of
Company Common Stock. If AES has not obtained its
PUHCA exemption within 18 months following the date of the Merger
Agreement and the Company has otherwise complied with all of its
obligations under the Merger Agreement, the Company may terminate
the Merger Agreement and receive a termination fee from AES equal
to $1 per outstanding share of Company Common Stock, plus
$0.00546448 per share for each day beginning on the later of the
day after the 9 month anniversary of the Merger Agreement and
five days after the date upon which the Company has obtained
certain orders or approvals from the Illinois Commerce
Commission. The Company may also terminate the Merger Agreement
if, at any time prior to the shareholder's approval of the
transaction, the Company receives an unsolicited offer from a
third party which the Company's board of directors believes in
good faith to be superior to the terms of the Merger Agreement
and for which the failure to agree to that superior offer could
constitute a breach of the board's fiduciary duties under applicable law.
However, if the Company does terminate the Merger Agreement under those
circumstances, the Company must pay AES a termination fee equal
to 3.0% of the aggregate consideration of the Merger.
Correspondingly, if the Company's shareholders do not approve the
transaction and the Company enters into any agreement for an
alternative transaction within 12 months following the date of
the shareholders meeting, then the Company is similarly obligated
to pay AES an amount equal to 3.0% of the aggregate consideration
of the Merger.
Attached (as Exhibit A) is a copy of the Agreement and Plan of
Merger among The AES Corporation, CILCORP Inc., and Midwest
Energy, Inc. dated as of November 22, 1998, under which The AES
Corporation will acquire all of the common shares of CILCORP
Inc., as well as a press release (Exhibit B) issued by CILCORP
Inc. on November 23, 1998, related to this Agreement.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the
registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
CILCORP Inc.
(Registrant)
Date December 3, 1998 R. O. Viets
R. O. Viets
President and Chief Executive Officer
Date December 3, 1998 T. D. Hutchinson
T. D. Hutchinson
Controller
(Exhibit A)
AGREEMENT AND PLAN OF MERGER
among
THE AES CORPORATION,
CILCORP INC.,
and
MIDWEST ENERGY, INC.
__________________________
Dated as of November 22, 1998
__________________________
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").
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 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
otherwise 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.
(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 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 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 other
wise 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 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, Meagher & Flom LLP, 919 Third Avenue, New York,
New York 10022-3897 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:
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 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, 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
outstanding, 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 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 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; 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 busi
nesses 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
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 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 knowl
edge 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.
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 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.
(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 disposi
tion 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).
(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 plan and
supplemental 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 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 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 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 de
fined 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 termina
tions sufficient in number to trigger application of any simi
lar 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 Subsidiar
ies 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 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, 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 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.
(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.
(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 22 States and the
District of Columbia 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 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 Smith Barney ("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
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 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, service mark rights, trade secrets,
applications to register, and registrations for, the foregoing
trademarks, service marks, know-how and other proprietary
rights and information (collectively, "Intellectual Property")
necessary in connection with the business of 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.
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, 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).
(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 consumma
tion 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, 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 governmental
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
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.
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 (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 ownership 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 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 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 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.
(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 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).
(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 Agree
ment 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 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
reasonably 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, 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 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 Commis
sion, 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) 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 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 Hart-Scott-Rodino 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 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 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 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.
(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 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 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.
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.
(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 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.
(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 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
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 Outstanding 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 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
Outstanding 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 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 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.
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
1001 North 19th Street, 20th Floor
Arlington, Virginia 22209
Attention: General Counsel
Telephone: 703-522-1315
Facsimile: 703-528-4510
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
1440 New York Avenue, N.W.
Washington, DC 20005
Attention: Michael P. Rogan, Esq.
Marcia R. Nirenstein, Esq.
Telephone: 202-371-7000
Facsimile: 202-393-5760
and
(ii) if to CILCORP, to:
CILCORP Inc.
300 Hamilton Boulevard, Suite 300
Peoria, Illinois 61602
Attention: John G. Sahn, Esq.
Telephone: 309-675-8822
Facsimile: 309-675-8888
with a copy to:
Winthrop, Stimson, Putnam & Roberts
One Battery Park Plaza
New York, New York 10004
Attention: Stephen R. Rusmisel, Esq.
Telephone: 212-858-1000
Facsimile: 212-858-1500
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.
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).
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: Thomas A. Tribone
Name: Thomas A. Tribone
Title: Executive Vice President
CILCORP INC.
By: Robert O. Viets
Name: Robert O. Viets
Title: President and Chief
Executive Officer
MIDWEST ENERGY, INC.
By: Thomas A. Tribone
Name: Thomas A. Tribone
Title: Executive Vice President
(Exhibit B)
AES TO ACQUIRE CILCORP
Establishes Midwest Base in Competitive Electricity Market
For Immediate Release
PEORIA, IL.November 23, 1998.The AES Corporation (NYSE: AES)
and CILCORP Inc. (NYSE: CER) announced today that they have
agreed to terms of a definitive agreement under which AES will
acquire all of CILCORP's 13,610,680 common shares at a price of
$65 per share, or approximately $885 million.
CILCORP, formed in 1985 and headquartered in Peoria, IL, is
an energy services company whose largest subsidiary, CILCO, is an
85-year-old gas and electric utility serving approximately a
quarter of a million retail customers in Central Illinois. In
1997, CILCORP had consolidated revenues of $976 million and net
assets of $1.3 billion. CILCORP and its subsidiaries currently
employ approximately 1,800 people.
The transaction, under which CILCORP will become a wholly-
owned subsidiary of AES, requires the approval of CILCORP
shareholders and is subject to regulatory approvals by the
Federal Energy Regulatory Commission (FERC), the Illinois
Commerce Commission (ICC) and the Securities and Exchange
Commission (SEC). The United States Department of Justice and
the Federal Trade Commission will also review the acquisition.
The parties expect the transaction to be completed by mid
1999, subject to the previously mentioned approvals.
Commenting on the rapid completion of the transaction and
benefits of AES as a partner, CILCORP President and CEO, Robert
O. Viets said, "The people of AES are committed to grow; they
have a business philosophy and ethics that are totally consistent
with ours. This transaction brings our company the opportunities
of growth far more quickly than it could do on its own. From an
investor perspective, the price offered represents a significant
premium to shareholders based upon recent market trading and
comparable utility acquisition transactions."
Mr. Tom Tribone, Executive Vice President of AES, said,
"This combination brings together CILCORP, the most competitive
electric and gas supplier in Illinois, and AES, the largest
global power company. It is important to note that Illinois has
enacted a far-sighted restructuring plan that embodies a vision
for the industry that is shared by both companies. We believe
that the combined company, operating under this first-of-a-kind
structure, will be a model of how the electric and gas business
will be conducted in the United States in the 21st century."
Mr. Dennis Bakke, President and CEO of AES, stated, "AES is
very pleased to become involved in the Illinois market. We look
forward to working with the people of CILCORP, the local
communities, the ICC and CILCO's customers. This transaction
gives us a strong base of operations in the midwestern United
States."
For Additional Information, Contact:
Gary Ebeling Ken Woodcock
Director- Investor or Senior Vice
Relations President
CILCORP Inc. AES Corporation
(309) 675-8810 (703) 522-1315
